<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO
13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO 13d-2(a)
ABC-NACO Inc.
(Name of Issuer)
COMMON STOCK, $.01 PAR VALUE
(Title of Class of Securities)
000752105
(CUSIP Number)
Brian P. Friedman Robert Miller
FS Private Investments LLC ING Furman Selz Asset Management
55 East 52/nd/ Street, 37/th/ Floor 230 Park Avenue
New York, New York 10055-0002 New York, New York 10169
(212) 409-5600 (212) 309-8200
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
With a Copy to:
Carmen J. Romano, Esquire
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, Pennsylvania 19103
(215) 994-4000
March 8, 2000
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box [_].
Note: Schedules filed in paper format shall include a signed original
and five copies of the schedule, including all exhibits. See Rule 13d-7 for
other parties to whom copies are to be sent.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
SCHEDULE 13D
- ------------------------------------------------------------------------------
CUSIP NO. 000752105 Page 2
- ------------------------------------------------------------------------------
NAMES OF REPORTING PERSONS
1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY).
FS Private Investments LLC 13-3940694
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [_]
(b) [X]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS
4
AF
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
- ------------------------------------------------------------------------------
NUMBER OF SOLE VOTING POWER
7
SHARES
0
BENEFICIALLY -----------------------------------------------------------
SHARED VOTING POWER
OWNED BY 8
1,661,111 shares of Common Stock issuable upon the
EACH conversion of 149,500 shares of Series B Cumulative
Convertible Preferred Stock
REPORTING -----------------------------------------------------------
SOLE DISPOSITIVE POWER
PERSON 9
0
WITH
-----------------------------------------------------------
SHARED DISPOSITIVE POWER
10
1,661,111 shares of Common Stock issuable upon the
conversion of 149,500 shares of Series B Cumulative
Convertible Preferred Stock
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
1,661,111 shares of Common Stock issuable upon the conversion of 149,500
shares of Series B Cumulative Convertible Preferred Stock
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
7.3%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
14
OO
- ------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D
- ------------------------------------------------------------------------------
CUSIP NO. 000752105 Page 3
- ------------------------------------------------------------------------------
NAMES OF REPORTING PERSONS
1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Furman Selz Investors II L.P. 13-3937561
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [_]
(b) [X]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS
4
OO
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 0
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
1,464,356 shares of Common Stock issuable upon the
OWNED BY conversion of 131,792 shares of Series B Cumulative
Convertible Preferred Stock
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING
0
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
1,464,356 shares of Common Stock issuable upon the
conversion of 131,792 shares of Series B Cumulative
Convertible Preferred Stock
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
1,464,356 shares of Common Stock issuable upon the conversion of
131,792 shares of Series B Cumulative Convertible Preferred Stock
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
6.4%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
14
PN
- ------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D
- ------------------------------------------------------------------------------
CUSIP NO. 000752105 Page 4
- ------------------------------------------------------------------------------
NAMES OF REPORTING PERSONS
1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
FS Employee Investors LLC 13-3937563
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [_]
(b) [X]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS
4
OO
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF
0
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
125,511 shares of Common Stock issuable upon the
OWNED BY conversion of 11,296 shares of Series B Cumulative
Convertible Preferred Stock
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING
0
PERSON -----------------------------------------------------------
WITH
10 SHARED DISPOSITIVE POWER
125,511 shares of Common Stock issuable upon the
conversion of 11,296 shares of Series B Cumulative
Convertible Preferred Stock
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
125,511 shares of Common Stock issuable upon the conversion of 11,296
shares of Series B Cumulative Convertible Preferred Stock
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
.6%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
14
OO
- ------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D
- ------------------------------------------------------------------------------
CUSIP NO. 000752105 Page 5
- ------------------------------------------------------------------------------
NAMES OF REPORTING PERSONS
1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
FS Parallel Fund L.P. 13-3974766
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [_]
(b) [X]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS
4
OO
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF
0
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY 71,244 shares of Common Stock issuable upon the
conversion of 6,412 shares of Series B Cumulative
Convertible Preferred Stock
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING
0
PERSON -----------------------------------------------------------
WITH
10 SHARED DISPOSITIVE POWER
71,244 shares of Common Stock issuable upon the
conversion of 6,412 shares of Series B Cumulative
Convertible Preferred Stock
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
71,244 shares of Common Stock issuable upon the conversion of 6,412
shares of Series B Cumulative Convertible Preferred Stock
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
.3%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
14
PN
- ------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D
- --------------------------------------------------------------------------------
CUSIP NO. 000752105 Page 6
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
NAMES OF REPORTING PERSONS
1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Furman Selz Investments II LLC 13-3937560
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [_]
(b) [X]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS
4
AF
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
5 TO ITEMS 2(d) or 2(e) [_]
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
- ------------------------------------------------------------------------------
NUMBER OF SOLE VOTING POWER
7
SHARES 0
BENEFICIALLY -----------------------------------------------------------
SHARED VOTING POWER
OWNED BY 8
1,661,111 shares of Common Stock issuable upon the
EACH conversion of 149,500 shares of Series B Cumulative
Convertible Preferred Stock
REPORTING -----------------------------------------------------------
SOLE DISPOSITIVE POWER
PERSON 9
0
WITH -----------------------------------------------------------
SHARED DISPOSITIVE POWER
10
1,661,111 shares of Common Stock issuable upon the
conversion of 149,500 shares of Series B Cumulative
Convertible Preferred Stock
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
1,661,111 shares of Common Stock issuable upon the conversion of 149,500
shares of Series B Cumulative Convertible Preferred Stock
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
7.3%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
14
OO
- ------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D
- --------------------------------------------------------------------------------
CUSIP NO. 000752105 Page 7
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
NAMES OF REPORTING PERSONS
1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
ING Furman Selz Asset Management LLC 13-4038444
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [_]
(b) [X]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS
4
WC
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
- ------------------------------------------------------------------------------
NUMBER OF SOLE VOTING POWER
7
SHARES 0
BENEFICIALLY -----------------------------------------------------------
SHARED VOTING POWER
OWNED BY 8
3,322,222 shares of Common Stock issuable upon the
EACH conversion of 299,000 shares of Series B Cumulative
Convertible Preferred Stock
REPORTING -----------------------------------------------------------
SOLE DISPOSITIVE POWER
PERSON 9
0
WITH -----------------------------------------------------------
SHARED DISPOSITIVE POWER
10
3,322,222 shares of Common Stock issuable upon the
conversion of 299,000 shares of Series B Cumulative
Convertible Preferred Stock
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
3,322,222 shares of Common Stock issuable upon the conversion of 299,000
shares of Series B Cumulative Convertible Preferred Stock
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
14.6%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
14
OO
- ------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D
- --------------------------------------------------------------------------------
CUSIP NO. 000752105 Page 8
- --------------------------------------------------------------------------------
NAMES OF REPORTING PERSONS
1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
ING (U.S.) Financial Holdings Corporation 51-0262561
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [_]
(b) [X]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS
4
AF
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
- ------------------------------------------------------------------------------
NUMBER OF SOLE VOTING POWER
7
SHARES 0
BENEFICIALLY -----------------------------------------------------------
SHARED VOTING POWER
OWNED BY 8
3,322,222 shares of Common Stock issuable upon the
EACH conversion of 299,000 shares of Series B Cumulative
Convertible Preferred Stock
REPORTING -----------------------------------------------------------
SOLE DISPOSITIVE POWER
PERSON 9
0
WITH -----------------------------------------------------------
SHARED DISPOSITIVE POWER
10
3,322,222 shares of Common Stock issuable upon the
conversion of 299,000 shares of Series B Cumulative
Convertible Preferred Stock
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
3,322,222 shares of Common Stock issuable upon the conversion of 299,000
shares of Series B Cumulative Convertible Preferred Stock
- ------------------------------------------------------------------------------
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
14.6%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
14
CO
- ------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------
CUSIP NO. 000752105 Page 9
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
NAMES OF REPORTING PERSONS
1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
ING Bank N.V.
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [_]
(b) [X]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS
4
AF
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
The Netherlands
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 0
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
3,322,222 shares of Common Stock issuable upon the
conversion of 299,000 shares of Series B Cumulative
Convertible Preferred Stock
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 0
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
3,322,222 shares of Common Stock issuable upon the
conversion of 299,000 shares of Series B Cumulative
Convertible Preferred Stock
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
3,322,222 shares of Common Stock issuable upon the conversion of 299,000
shares of Series B Cumulative Convertible Preferred Stock
- ------------------------------------------------------------------------------
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
14.6%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
14
BK
- ------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D
- ------------------------------------------------------------------------------
CUSIP NO. 000752105 Page 10
- ------------------------------------------------------------------------------
NAMES OF REPORTING PERSONS
1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
ING Groep N.V.
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [_]
(b) [X]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS
4
AF
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
The Netherlands
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF
0
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY 3,322,222 shares of Common Stock issuable upon the
conversion of 299,000 shares of Series B Cumulative
Convertible Preferred Stock
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING
0
PERSON -----------------------------------------------------------
WITH
SHARED DISPOSITIVE POWER
10
3,322,222 shares of Common Stock issuable upon the
conversion of 299,000 shares of Series B Cumulative
Convertible Preferred Stock
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
3,322,222 shares of Common Stock issuable upon the conversion of 299,000
shares of Series B Cumulative Convertible Preferred Stock
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
14.6%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
14
IC
- ------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D
- ------------------------------------------------------------------------------
CUSIP NO. 000752105 Page 11
- ------------------------------------------------------------------------------
NAMES OF REPORTING PERSONS
1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Brian P. Friedman ###-##-####
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [_]
(b) [X]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS
4
AF
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
United States
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF
0
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY 1,661,111 shares of Common Stock issuable upon the
conversion of 149,500 shares of Series B Cumulative
Convertible Preferred Stock
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING
0
PERSON -----------------------------------------------------------
WITH
SHARED DISPOSITIVE POWER
10
1,661,111 shares of Common Stock issuable upon the
conversion of 149,500 shares of Series B Cumulative
Convertible Preferred Stock
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
1,661,111 shares of Common Stock issuable upon the conversion of
149,500 shares of Series B Cumulative Convertible Preferred Stock
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
7.3%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
14
IN
- ------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D
- ------------------------------------------------------------------------------
CUSIP NO. 000752105 Page 12
- ------------------------------------------------------------------------------
NAMES OF REPORTING PERSONS
1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
James L. Luikart ###-##-####
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [_]
(b) [X]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS
4
AF
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
United States
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF
0
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY 1,661,111 shares of Common Stock issuable upon the
conversion of 149,500 shares of Series B Cumulative
Convertible Preferred Stock
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING
0
PERSON -----------------------------------------------------------
WITH
SHARED DISPOSITIVE POWER
10
1,661,111 shares of Common Stock issuable upon the
conversion of 149,500 shares of Series B Cumulative
Convertible Preferred Stock
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
1,661,111 shares of Common Stock issuable upon the conversion of
149,500 shares of Series B Cumulative Convertible Preferred Stock
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
7.3%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
14
IN
- ------------------------------------------------------------------------------
<PAGE>
ITEM 1. SECURITY AND ISSUER.
This statement on Schedule 13D relates to shares of common stock, par
value $.01 per share (the "Common Stock"), of ABC-NACO Inc., a Delaware
corporation (the "Company") which has its principal executive offices at 2001
Butterfield Road, Suite 502, Downers Grove, Illinois 60515.
Furman Selz Investors II L.P., FS Employee Investors LLC, FS Parallel
Fund L.P. and ING Furman Selz Asset Management LLC have acquired shares of
Series B Cumulative Convertible Preferred Stock, par value $1.00 per share (the
"Series B Preferred Stock") of the Company, which is convertible into shares of
Common Stock.
ITEM 2. IDENTITY AND BACKGROUND.
The following table provides certain information about each of the
reporting persons.
CITIZENSHIP OR STATE OF
NAME AND ADDRESS INCORPORATION/ORGANIZATION
- ---------------- --------------------------
Furman Selz Investors II L.P. ("Investors") Delaware
55 East 52/nd/ Street, 37/th/ Floor
New York, New York 10055-0002
FS Employee Investors LLC ("Employee Investors") Delaware
55 East 52/nd/ Street, 37/th/ Floor
New York, New York 10055-0002
FS Parallel Fund L.P. ("Parallel Fund") Delaware
55 East 52/nd/ Street, 37/th/ Floor
New York, New York 10055-0002
FS Private Investments LLC ("Private Investments") Delaware
55 East 52/nd/ Street, 37/th/ Floor
New York, New York 10055-0002
Furman Selz Investments II LLC Delaware
("FS Investments II")
55 East 52/nd/ Street, 37/th/ Floor
New York, New York 10055-0002
-13-
<PAGE>
ING Furman Selz Asset Management LLC Delaware
("ING FS Management")
230 Park Avenue
New York, New York 10169
ING (U.S.) Financial Holdings Corporation Delaware
("ING U.S.")
135 East 57/th/ Street
New York, New York 10022
ING Bank N.V. The Netherlands
("ING Bank")
P.O. Box 810
1000 AV
Amsterdam, The Netherlands
ING Groep N.V. The Netherlands
("ING Groep")
Strawinskylaan 2631
1077 ZZ Amsterdam
Brian P. Friedman USA
55 East 52/nd/ Street, 37/th/ Floor
New York, New York 10055-0002
James L. Luikart USA
55 East 52/nd/ Street, 37/th/ Floor
New York, New York 10055-0002
The Executive Board of the ING Groep is the following:
E. Kist (Chairman)
F.S. Hubbell (as of May 2, 2000)
J.H.M. Lindenbergh
C. Maas
A.H.G. Rinnooy Kan
D. Robins (as of May 2, 2000)
M. Tilmant
The Executive Board of ING Bank is the following:
E. Kist (Chairman)
F.S. Hubbell (as of May 2, 2000)
J.H.M. Lindenbergh
C. Maas
A.H.G. Rinnooy Kan
D. Robins (as of May 2, 2000)
M. Tilmant
-14-
<PAGE>
The directors and executive officers of ING U.S. are the following:
Directors:
Michael Petrycki
Wietze Prinsen
Bart Staal
Officers:
Fernando Gentil President
Bart Staal Executive Vice President
Joseph Kaminsky Senior Vice President
Benjamin Emanuel Vice President
David Rutkin Vice President
Andrew W. Druch General Counsel, Secretary
and Managing Director
Edward Chow Assistant Secretary
Patrick Murphy Assistant Secretary
Mark Seffinger Assistant Secretary
The officers of ING FS Management are the following:
Timothy Schantz President
Edmund A. Hajim CEO
Robert Miller Executive Vice President
and CFO
Kevin Cassidy Executive Vice President
Gerald Lins General Counsel
Joseph Kaminsky Senior Vice President
Wendy Prager Vice President and Assistant
Secretary
Benjamin Emanuel Vice President
David Rutkin Vice President
ING Groep owns 100% of ING Bank, which owns 100% of ING U.S., which is
the sole managing member and owner of 100% of the interests of ING FS
Management, which is the sole managing member and owner of 81.5% of the
interests of FS Investments II, which is the sole managing member of Employee
Investors. FS Investments II is the sole general partner of Investors and the
sole general partner of Parallel Fund.
As a result of its role as manager of Investors, Employee Investors
and Parallel Fund (the "Funds"), Private Investments may be deemed to be the
beneficial owner of the shares beneficially owned by the Funds.
-15-
<PAGE>
As a result of their positions as managing members of Private
Investments, Brian P. Friedman and James L. Luikart may be deemed to be the
beneficial owners of the shares beneficially owned by Private Investments and
therefore deemed to be the beneficial owners of the shares held by the Funds.
(d) and (e). None of the reporting persons, and to the knowledge of
the reporting persons, none of the other individuals named have, within the last
five years, been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors), or have been a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction and as a result
of such proceeding been or are subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violations with respect to
such laws.
(f) Brian P. Friedman and James L. Luikart are United States citizens.
The filing of this statement shall not be construed as an admission
that Private Investments, FS Investments II, ING U.S., ING Bank, ING Groep,
Brian P. Friedman or James L. Luikart are, for purposes of Sections 13(d) or
13(g) of the Securities Exchange Act of 1934, the beneficial owner of any shares
covered by this statement.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The funds for the purchase of Series B Preferred Stock were provided
out of capital contributions made to Investors, Employee Investors and Parallel
Fund and the working capital of ING FS Management. Pursuant to the Preferred
Stock Purchase Agreement (as defined in Item 6), Investors, Employee Investors
and Parallel Fund paid the Company $13,223,333, $1,133,333 and $643,333,
respectively, for the Series B Preferred Stock. ING FS Management paid
$15,000,000 for the Series B Preferred Stock. Further information about the
purchase of the Series B Preferred Stock is contained in Item 6.
ITEM 4. PURPOSE OF TRANSACTION.
The Series B Preferred Stock was acquired for investment purposes.
The reporting persons intend to review on a continuing basis their investment in
the Company and the Company's business, prospects and financial condition.
Based on such continuing review, alternative investment opportunities available
to the reporting persons and all other factors deemed relevant (including,
without limitation the market for and price of Common Stock, offers for shares
of the Common Stock, general economic conditions and other future developments),
the reporting persons may decide to convert all or part of the Series B
Preferred Stock, or sell or seek the sale of all or part of the Series B
Preferred Stock.
Pursuant to a letter agreement dated March 8, 2000 between ING FS
Management and FS Private Investments III LLC, a Delaware limited liability
company ("Private Investments III"), ING FS Management has agreed that in the
event Private Investments III forms a new private investment fund named ING
Furman Selz Investors III L.P., ING FS Management shall sell 149,500 shares of
Series B Preferred Stock to such new fund.
-16-
<PAGE>
The Preferred Stock Purchase Agreement (as defined in Item 6) requires
the Company to increase the number of directors permitted to comprise the Board
of Directors from eight to nine. The Purchasers (as defined in Item 6) may only
designate a director, however, if there has occurred an Event of Default as
defined in the Certificate of Designation, Preferences and Rights of Series B
Preferred Stock.
The issuance of the Preferred Stock constitutes a material change in
the capitalization of the Company. If the Preferred Stock is converted, in
whole or in part, there could be a material change in the capitalization of the
Company.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) - (b)
<TABLE>
<CAPTION>
NUMBER OF
SHARES TO BE PERCENT OF SHARED SHARED
BENEFICIALLY COMMON VOTING INVESTMENT
NAME OWNED STOCK POWER POWER
- ---- ------------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Private Investments 1,661,111 7.3 1,661,111 1,661,111
Investors 1,464,356 6.4 1,464,356 1,464,356
Employee Investors 125,511 .6 125,511 125,511
Parallel Fund 71,244 .3 71,244 71,244
FS Investments II 1,661,111 7.3 1,661,111 1,661,111
ING FS Management 3,322,222 14.6 3,322,222 3,322,222
ING U.S. 3,322,222 14.6 3,322,222 3,322,222
ING Bank 3,322,222 14.6 3,322,222 3,322,222
ING Groep 3,322,222 14.6 3,322,222 3,322,222
Brian P. Friedman 1,661,111 7.3 1,661,111 1,661,111
James L. Luikart 1,661,111 7.3 1,661,111 1,661,111
</TABLE>
As of February 17, 2000, the Company had 19,382,000 shares of Common
Stock outstanding.
(b) See the answer to Item 2 hereof.
(c) Other than the transactions described herein, no transactions by
any of the reporting persons required to be reported by this Item have taken
place in the last sixty (60) days.
(d) The limited partners of the Investors and Parallel Fund and the
members of Employee Investors and ING FS Management have the right to receive
dividends from, or
-17-
<PAGE>
proceeds from the sale of, all or some of the Series B Preferred Stock or all or
some of the Common Stock after conversion of the Preferred Stock.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
Pursuant to a Preferred Stock Purchase Agreement dated as of February
18, 2000 (the "Preferred Stock Purchase Agreement") by and among the Investors,
the Employee Investors, the Parallel Fund (each a "Purchaser" and, collectively,
the "Purchasers") and the Company, the Investors, the Employee Investors and the
Parallel Fund agreed to purchase, subject to the conditions set forth in the
Preferred Stock Purchase Agreement, 264,467, 22,667, and 12,866 shares,
respectively, of Series B Preferred Stock for an aggregate purchase price of
$30,000,000. On March 8, 2000, the Purchasers assigned the right to buy 150,000
shares of Series B Preferred Stock to ING FS Management (along with the
Investors, Employee Investors and Parallel Fund, a "Purchaser"). On March 8,
2000, pursuant to the Preferred Stock Purchase Agreement, the Company sold the
shares of Series B Preferred Stock to the Purchasers.
Immediately following the sale of the shares of Series B Preferred
Stock to the Purchasers, the Purchasers sold an aggregate of 1,000 shares of
Series B Preferred Stock to James Dowling, who is employed by ING FS Asset
Management, for an aggregate purchase price of $100,000. James Dowling
individually owns and has sole power to vote and dispose of 11,111 shares of
Common Stock issuable upon the conversion of the 1,000 shares of Series B
Preferred Stock. The securities owned by Mr. Dowling in his capacity as an
individual are not covered by this Schedule 13D.
As contemplated by the Preferred Stock Purchase Agreement, the Board
of Directors of the Company approved and adopted a Certificate of Designation,
Preferences and Rights (the "Certificate") to create the Series B Preferred
Stock. The Certificate provides that dividends shall be cumulative at a rate of
8% per annum. Dividends shall accrue and be payable semi-annually, except that
the Company is entitled to defer the first two years' dividends and pay such
deferred dividends on the second anniversary of the date of original issuance of
the Series B Preferred Stock. If the Company fails to pay a dividend when due,
the dividend rate will increase to 12% per annum.
The Series B Preferred Stock is convertible into shares of Common
Stock of the Company at a conversion price of the average closing price of the
Company's Common Stock for the thirty trading days ending February 17, 2000 as
reported by Bloomberg rounded up to the nearest dollar. At any time after the
third anniversary of the date of the original issuance of the Series B Preferred
Stock, all or a portion of the shares of Series B Preferred Stock shall, at the
option of the Company, automatically be converted into shares of Common Stock if
certain conditions are met.
The Investors, the Employee Investors, the Parallel Fund and the
Company are parties to an Investors Rights Agreement dated as of March 8, 2000
(the "Investors Rights Agreement"). Pursuant to the Investors Rights Agreement,
and subject to its terms and
-18-
<PAGE>
conditions, the Purchasers may request that a shelf registration statement or a
demand registration statement be filed by the Company. In addition, the
Purchasers have certain piggyback registration rights under the Investors Rights
Agreement in connection with registrations by the Company under the Securities
Act of 1933.
Private Investments is the manager of each of Investors, Employee
Investors and Parallel Fund. The general partner of each of Investors and
Parallel Fund and the managing member of Employee Investors have delegated all
relevant rights to Private Investments. Brian P. Friedman and James L. Luikart
are the managing members of Private Investments.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
A. Joint Reporting Agreement and Power of Attorney on Behalf of Each
Reporting Person
B. Preferred Stock Purchase Agreement dated February 18, 2000
C. Certificate of Designation, Preferences and Rights of Series B
Cumulative Convertible Preferred Stock
D. Letter Agreement between ING FS Management and Private
Investments III dated March 8, 2000
-19-
<PAGE>
SIGNATURES
After reasonable inquiry and to the best of their knowledge and
belief, the undersigned certify that the information set forth in this statement
is true, complete and correct.
Dated: March 20, 2000
FURMAN SELZ INVESTORS II L.P.
FS EMPLOYEE INVESTORS LLC
FS PARALLEL FUND L.P.
By: FS PRIVATE INVESTMENTS LLC
By: /s/ Brian P. Friedman
--------------------------------
Name: Brian P. Friedman
Title: Managing Member
FS PRIVATE INVESTMENTS LLC
By: /s/ Brian P. Friedman
--------------------------------
Name: Brian P. Friedman
Title: Managing Member
FURMAN SELZ INVESTMENTS II LLC
By: /s/ Brian P. Friedman
--------------------------------
Name: Brian P. Friedman
Title: President
-20-
<PAGE>
ING FURMAN SELZ ASSET
MANAGEMENT LLC
By: /s/ Robert J. Miller
--------------------------------------
Name: Robert J. Miller
Title: Executive Vice President
ING (U.S.) FINANCIAL HOLDINGS
CORPORATION
By: /s/ Andrew Druch
--------------------------------------
Name: Andrew Druch
Title: Secretary
ING BANK N.V.
By: /s/ J.H.J. Houben
--------------------------------------
Name: J.H.J. Houben
Title: Managing Principal
By: /s/ P.F.M. Van Lierop
--------------------------------------
Name: P.F.M. Van Lierop
Title: Senior Legal Advisor
ING GROEP N.V.
By: /s/ J.H.J. Houben
--------------------------------------
Name: J.H.J. Houben
Title: Managing Principal
By: /s/ Brian P. Friedman
--------------------------------------
Name: Brian P. Friedman
By: /s/ James L. Luikart
--------------------------------------
Name: James L. Luikart
-21-
<PAGE>
EXHIBIT INDEX
No. Description
- --- -----------
(1) Joint Reporting Agreement and Power of Attorney on Behalf of Each Reporting
Person.
(2) Preferred Stock Purchase Agreement dated February 18, 2000
(3) Certificate of Designation, Preferences and Rights of Series B Cumulative
Convertible Preferred Stock
(4) Letter Agreement between ING FS Management and Private Investments III
dated March 8, 2000
-22-
<PAGE>
EXHIBIT 1
JOINT REPORTING AGREEMENT
AND
POWER OF ATTORNEY
WHEREAS, the statement or amended statement of Schedule 13D (the
"Joint Statement") to which this joint reporting agreement and power of attorney
(the "Agreement") is an exhibit is being filed on behalf of two or more persons
(collectively, the "Reporting Persons"); and
WHEREAS, the Reporting Persons prefer to file the Joint Statement on
behalf of all of the Reporting Persons rather than individual statements on
Schedule 13D on behalf of each of the Reporting Persons;
NOW, THEREFORE, the undersigned hereby agrees as follows with each of
the other Reporting Persons:
1. Each of the Reporting Persons is responsible for the timely
filing of the Joint Statement and any amendments thereto.
2. Each of the Reporting Persons is responsible for the
completeness and accuracy of the information concerning such Reporting Person
contained in the Joint Statement.
3. None of the Reporting Persons is responsible for the
completeness or accuracy of the information concerning the other Reporting
Persons contained in the Joint Statement, unless such Reporting Person knows or
has reason to believe that such information is inaccurate.
4. The undersigned agrees that the Joint Statement is, and any
amendment thereto will be, filed on behalf of each of the Reporting Persons.
5. Each of Furman Selz Investments II LLC, ING Furman Selz Asset
Management LLC, ING (U.S.) Financial Holdings Corporation, ING Bank N.V., ING
Groep N.V. hereby appoints Robert Miller as attorney-in-fact with authority to
execute and deliver on behalf of it any and all documents (including any
amendments thereto) required to be filed or otherwise executed and delivered by
it pursuant to the Securities Exchange Act of 1934, as amended, the Securities
Act of 1933, as amended, all other federal, state and local securities and
corporation laws, and all regulations promulgated thereunder. Each of Furman
Selz Investments II LLC, ING Furman Selz Asset Management LLC, ING (U.S.)
Financial Holdings Corporation, ING Bank N.V., ING Groep N.V. further grant
Robert Miller authority, as attorney-in-fact, to execute, deliver, or file on
behalf of it any document necessary to amend this Joint Reporting Agreement and
Power of Attorney for the purpose of adding additional parties thereto at such
time or times as he should, in his discretion, deem appropriate.
6. Each of Furman Selz Investors II L.P., FS Employee Investors
LLC, FS Private Parallel Fund, L.P., Brian P. Friedman and James L. Luikart
hereby appoints Brian P. Friedman and James L. Luikart, and each of them, as
attorney-in-fact with authority to execute
<PAGE>
and deliver on his behalf any and all documents (including any amendments
thereto) required to be filed or otherwise executed and delivered by him
pursuant to the Securities Exchange Act of 1934, as amended, the Securities Act
of 1933, as amended, all other federal, state and local securities and
corporation laws, and all regulations promulgated thereunder. Each of Furman
Selz Investors II L.P., FS Employee Investors LLC, FS Private Parallel Fund,
L.P., Brian P. Friedman and James L. Luikart further grant Brian P. Friedman and
James L. Luikart, and each of them, authority, as attorney-in-fact, to execute,
deliver, or file on behalf of it any document necessary to amend this Joint
Reporting Agreement and Power of Attorney for the purpose of adding additional
parties thereto at such time or times as he should, in his discretion, deem
appropriate.
7. This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same document.
Dated: March 20, 2000
FURMAN SELZ INVESTORS II L.P.
FS EMPLOYEE INVESTORS LLC
FS PRIVATE PARALLEL FUND, L.P.
By: FS PRIVATE INVESTMENTS LLC
By: /s/ James L. Luikart
---------------------------
Name: James L. Luikart
Title: Managing Member
FS PRIVATE INVESTMENTS LLC
By: /s/ James L. Luikart
---------------------------
Name: James L. Luikart
Title: Managing Member
<PAGE>
FURMAN SELZ INVESTMENTS II LLC
By: /s/ Brian P. Friedman
---------------------------------------
Name: Brian P. Friedman
Title: President
ING FURMAN SELZ ASSET MANAGEMENT LLC
By: /s/ Robert J. Miller
---------------------------------------
Name: Robert J. Miller
Title: Vice President
ING (U.S.) FINANCIAL HOLDINGS CORPORATION
By: /s/ Andrew Druch
---------------------------------------
Name: Andrew Druch
Title: Secretary
ING BANK N.V.
By: /s/ J.H.J. Houben
---------------------------------------
Name: J.H.J. Houben
Title:
By: /s/ P.F.M. Van Lierop
---------------------------------------
Name: P.F.M. Van Lierop
Title: Senior Legal Advisor
ING GROEP N.V.
By: /s/ J.H.J. Houben
---------------------------------------
Name: J.H.J. Houben
Title:
/s/ Brian P. Friedman
-------------------------------------------
Brian P. Friedman
/s/ James L. Luikart
-------------------------------------------
James L. Luikart
<PAGE>
EXHIBIT 2
PREFERRED STOCK PURCHASE AGREEMENT
by and among
ABC-NACO INC.,
FURMAN SELZ INVESTORS II L.P.,
FS EMPLOYEE INVESTORS LLC,
and
FS PARALLEL FUND L.P.
Dated as of February 18, 2000
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I SALE AND PURCHASE OF SECURITIES................................................... 1
1.1. Sale and Purchase of Series B Preferred Stock................................... 1
1.2. Closing......................................................................... 2
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................... 2
2.1. Issuance of Series B Preferred Stock and Reservation of Common Shares........... 2
2.2. Organization and Qualification.................................................. 3
2.3. Capitalization.................................................................. 3
2.4. Authorization and Enforceability................................................ 4
2.5. Absence of Certain Changes...................................................... 4
2.6. Reports; Financial Statements................................................... 5
2.7. Absence of Undisclosed or Contingent Liabilities................................ 6
2.8. Compliance with Laws; No Violation; Consents and Approvals...................... 6
2.9. Litigation...................................................................... 7
2.10. ERISA Compliance................................................................ 7
2.11. Taxes........................................................................... 8
2.12. Environmental Matters........................................................... 9
2.13. Title to Properties............................................................. 9
2.14. Intellectual Property........................................................... 9
2.15. Certain Agreements.............................................................. 10
2.16. Related Transactions............................................................ 10
2.17. Offering of Shares of Series B Preferred Stock.................................. 10
2.18. Disclosure...................................................................... 10
2.19. Broker's Fees................................................................... 10
2.20. Rights Agreement................................................................ 11
ARTICLE III REPRESENTATIONS AND WARRANTIES OF EACH INVESTOR................................. 11
3.1. Organization.................................................................... 11
3.2. Authority Relative to this Agreement; No Conflict............................... 11
3.3. Investment Intent............................................................... 11
3.4. Economic Risk................................................................... 11
3.5. Litigation...................................................................... 12
3.6. Additional Representations...................................................... 12
3.7. Rule 144........................................................................ 12
3.8. Broker's Fees................................................................... 12
ARTICLE IV COVENANTS........................................................................ 13
4.1. Conduct of Business of the Company.............................................. 13
4.2. Access to Information........................................................... 13
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
4.3. Reasonable Best Efforts......................................................... 13
4.4. Amendment to Certificate of Incorporation....................................... 14
4.5. Ratification of the Agreement................................................... 14
4.6. Public Announcements............................................................ 14
4.7. Sale of Stock................................................................... 14
4.8. Amendment to Certificate of Incorporation....................................... 14
ARTICLE V CONDITIONS TO CLOSING............................................................. 15
5.1. Conditions to Investors' Obligations for Closing................................ 15
5.2. Conditions to the Company's Obligations for the Closing......................... 16
ARTICLE VI INDEMNIFICATION.................................................................. 17
6.1. Indemnification by the Company.................................................. 17
6.2. Indemnification by the Investors................................................ 18
6.3. Procedure for Indemnification................................................... 18
6.4. Period of Indemnity............................................................. 19
ARTICLE VII MISCELLANEOUS................................................................... 20
7.1. Termination; Effect of Termination; Expenses.................................... 20
7.2. Extension; Waiver............................................................... 20
7.3. Entire Agreement; Assignment.................................................... 20
7.4. Enforcement of the Agreement; Governing Law; Jurisdiction....................... 21
7.5. Validity........................................................................ 21
7.6. Notices......................................................................... 21
7.7. Descriptive Headings............................................................ 23
7.8. Parties in Interest............................................................. 23
7.9. Counterparts.................................................................... 23
7.10. Amendment....................................................................... 23
7.11. Survival........................................................................ 23
7.12. Strategic Plan.................................................................. 23
7.13. Certain Definitions............................................................. 24
</TABLE>
-ii-
<PAGE>
EXHIBITS
Exhibit A Investors and Shares of Series B Preferred Stock
Exhibit B Certificate of Designation, Preferences and Rights of Series B
Cumulative Convertible Preferred Stock
Exhibit C Opinion of Counsel to the Company
Exhibit D Investors Rights Agreement
-iii-
<PAGE>
DEFINED TERMS
-------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
affiliate..................................................................... 24
Agreement..................................................................... 1
associate..................................................................... 24
Authority..................................................................... 7
Certificate of Designation.................................................... 14
Closing....................................................................... 2
Closing Date.................................................................. 2
Code.......................................................................... 8
Common Stock.................................................................. 1
Company....................................................................... 1
control....................................................................... 24
DGCL.......................................................................... 7
Documents..................................................................... 24
Employee Benefit Plans........................................................ 7
ERISA......................................................................... 7, 8
ERISA Affiliate............................................................... 8
Exchange Act.................................................................. 24
FSE........................................................................... 1
FSI-II........................................................................ 1
FSP........................................................................... 1
GAAP.......................................................................... 5
indemnified party............................................................. 18
Intellectual Property......................................................... 9
Interim Financial Statements.................................................. 6
Investor...................................................................... 1
Investors..................................................................... 1
Investors Rights Agreement.................................................... 24
Laws.......................................................................... 6
Liens......................................................................... 3
Loss.......................................................................... 17
Material Adverse Effect....................................................... 24
NASDAQ........................................................................ 1
person........................................................................ 24
Preferred Stock............................................................... 1
Purchase Price................................................................ 2
Related Transaction........................................................... 10
SEC Documents................................................................. 5
Securities Act................................................................ 24
Series B Preferred Stock...................................................... 1
Strategic Plan................................................................ 23
Subsidiaries.................................................................. 25
</TABLE>
-iv-
<PAGE>
<TABLE>
<S> <C>
Taxes......................................................................... 8
Third Party Claim............................................................. 18
</TABLE>
-v-
<PAGE>
PREFERRED STOCK PURCHASE AGREEMENT
THIS IS A PREFERRED STOCK PURCHASE AGREEMENT, dated as of February 18, 2000 (the
"Agreement"), by and among ABC-NACO INC., a Delaware corporation, having its
---------
principal office at 2001 Butterfield Road, Suite 502, Downers Grove, Illinois
60515 (the "Company"), FURMAN SELZ INVESTORS II L.P., a Delaware limited
-------
partnership, having its principal office at 55 East 52nd Street, New York, New
York 10055-0002 ("FSI-II"), FS EMPLOYEE INVESTORS LLC, a Delaware limited
------
liability company, having its principal office at 55 East 52nd Street, New York,
New York 10055-0002 ("FSE"), and FS PARALLEL FUND L.P., a Delaware limited
---
partnership, having its principal office at 55 East 52nd Street, New York, New
York 10055-0002 ("FSP", and together with FSI-II, and FSE individually referred
---
to as an "Investor" and collectively as the "Investors").
-------- ---------
BACKGROUND
----------
A. The Company has (i) as of February 17, 2000, issued and outstanding
19,382,000 shares of Common Stock, par value one cent ($0.01) per share (the
"Common Stock"), and (ii) authorized 1,000,000 shares of preferred stock, par
------------
value one dollar ($1.00) per share (the "Preferred Stock"), no shares of which
---------------
are outstanding. The Company's Common Stock is currently traded on the Nasdaq
National Market ("NASDAQ").
------
B. The Company is engaged in the business of design, engineering and
manufacture of high performance freight railcar, locomotive and passenger rail
suspension and coupler systems, wheels and mounted wheel sets, and specialty
track products, and supplying freight, railroad signaling systems and services
as well as highly engineered valve bodies and components for industrial flow
control systems worldwide.
C. The Company desires to designate and issue a series of its Preferred
Stock, to be known as the Series B Cumulative Convertible Preferred Stock, par
value one dollar ($1.00) per share (the "Series B Preferred Stock"), and the
------------------------
Investors desire to purchase all of the shares of the Series B Preferred Stock,
subject to the terms and conditions contained herein.
TERMS
-----
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
SALE AND PURCHASE OF SECURITIES
1.1. Sale and Purchase of Series B Preferred Stock.
---------------------------------------------
(a) Subject to the terms and conditions set forth herein, at the
Closing (as defined in Section 1.2(a)), the Company shall issue and sell to each
Investor, and each
<PAGE>
Investor shall purchase from the Company, the number of shares of Series B
Preferred Stock set forth opposite such Investor's name on Exhibit A hereto. The
---------
aggregate purchase price for all 300,000 of the shares of Series B Preferred
Stock being purchased hereunder is Thirty Million Dollars ($30,000,000.00) (the
"Purchase Price"). The per share purchase price for the Series B Preferred Stock
--------------
to be paid by each Investor pursuant to this Section 1.1 is One Hundred Dollars
($100) per share.
(b) At the Closing, each Investor shall pay such Investor's
portion of the Purchase Price for the shares of Series B Preferred Stock being
purchased by Investor hereunder, by wire transfer of immediately available funds
to an account designated by the Company, not less than two (2) business days
prior to Closing.
1.2. Closing.
-------
(a) The closing of the purchase and sale of shares of the Series
B Preferred Stock referred to in Section 1.1 above (the "Closing") will take
-------
place on the twelfth business day after the date hereof, at the offices of
Dechert Price & Rhoads, 4000 Bell Atlantic Tower, 1717 Arch Street,
Philadelphia, Pennsylvania 19103-2793, or on such other date to be mutually
agreed by the parties hereto (the "Closing Date").
------------
(b) At Closing, the Company will deliver to each Investor a
stock certificate representing the number of shares of Series B Preferred Stock
set forth opposite such Investor's name on Exhibit A hereto, registered in the
---------
name of such Investor, or an affiliate or associate of such Investor, as such
Investor may designate in writing to the Company.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
--------------
The Company hereby represents and warrants to the Investors as
follows:
2.1. Issuance of Series B Preferred Stock and Reservation of Common
--------------------------------------------------------------
Shares.
- ------
Subject to the approval of the Company's Board of Directors, the
issuance, sale and delivery of the shares of Series B Preferred Stock have been
duly authorized by all requisite corporate action of the Company and the shares
of Series B Preferred Stock to be issued to the Investors in accordance with the
terms of this Agreement and the Certificate of Designation (as defined in
Section 4.4), when issued and delivered in accordance with the terms of this
Agreement will be validly issued, fully paid and non-assessable, free and clear
of any Liens (as defined in Section 2.2(b)) and not subject to preemptive or
other similar rights of the stockholders of the Company. Subject to the terms
and conditions hereof, the Company has authorized the reservation of and the
issuance of the shares of Common Stock reserved for issuance upon conversion of
the Series B Preferred Stock and as payment for dividends with respect to the
shares of Series B Preferred Stock, in accordance with the Certificate of
-2-
<PAGE>
Designation, and when issued and delivered in accordance with the terms of this
Agreement will be validly issued, fully paid and non-assessable, free and clear
of any Liens (as defined in Section 2.2(b)) and not subject to preemptive or
other similar rights of the stockholders of the Company.
2.2. Organization and Qualification.
------------------------------
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the requisite corporate power to carry on its business as it is now being
conducted. The Company is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned or leased or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified reasonably
could not be expected to have a Material Adverse Effect.
(b) Each of the Company's Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has the requisite corporate power to carry on
its business as it is now being conducted. Each of the Subsidiaries is duly
qualified as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned or leased or the
nature of its activities make such qualification necessary, except where the
failure to be so qualified reasonably could not be expected to have in a
Material Adverse Effect. All of the outstanding shares of capital stock of each
of the Subsidiaries have been validly issued, are fully paid and non-assessable
and, except as set forth on Schedule 2.2(b), are owned by the Company free and
clear of all pledges, claims, equities, options, liens, charges, rights of first
refusal, "tag" or "drag" along rights, encumbrances and security interests of
any kind or nature whatsoever (collectively, "Liens"). Except for the capital
-----
stock of each of the Subsidiaries and except as set forth on Schedule 2.2(b),
the Company does not have any other subsidiaries, nor does it own any capital
stock or other proprietary interest or other voting control, directly or
indirectly, in any corporation, association, trust, partnership, limited
liability company, joint venture or other entity.
2.3. Capitalization.
--------------
(a) As of February 17, 2000, the authorized capital stock of the
Company consists of 25,000,000 shares of Common Stock, 19,382,000 of which are
issued and outstanding, and 1,000,000 shares of Preferred Stock. All of the
outstanding shares of Common Stock are duly authorized, validly issued, fully
paid and non-assessable, and (i) have not been issued in violation of any
preemptive rights, rights of first refusal or offer or similar rights of any
person, and (ii) have been offered and sold in compliance with the Securities
Act and applicable state securities laws. As of the date of this Agreement, no
shares of Preferred Stock are issued and outstanding. No shares of Preferred
Stock are held in the treasury of the Company and there are no options,
warrants, or other rights are outstanding to acquire Preferred Stock, nor are
such
-3-
<PAGE>
rights authorized to be issued with the exception of rights related to Series A
junior participating preferred stock pursuant to the Rights Agreement defined in
Section 2.20 below.
(b) Other than as disclosed in the SEC Documents (as defined in
Section 2.6 below), there are no outstanding (i) securities of the Company or
any of its Subsidiaries convertible into or exchangeable for any shares of
capital stock of the Company or any of its Subsidiaries, or (ii) options,
warrants, calls or other rights to acquire from the Company or any of its
Subsidiaries, or other obligations or understandings or arrangements of the
Company or any of its Subsidiaries to issue, any shares of capital stock of the
Company or any of its Subsidiaries or securities convertible into or
exchangeable for shares of capital stock of the Company or any Subsidiaries.
There are no outstanding obligations of the Company or any Subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock of the
Company or any of its Subsidiaries (or any of the other securities set forth in
the previous sentence). Except as pursuant to this Agreement, neither the
Company nor any of its Subsidiaries is a party to, or bound by, any arrangement,
agreement, instrument or order (i) relating to the transfer of any shares of
capital stock of the Company or any of its Subsidiaries, (ii) relating to the
dividend or voting rights of any shares of capital stock of the Company or any
of its Subsidiaries, (iii) granting, or obligating the Company or any of its
Subsidiaries to grant, to any person any preemptive right, (iv) relating to
rights to registration under the Securities Act or any other securities laws of
any shares of capital stock of the Company or any of its Subsidiaries, or (v)
limiting or restricting the ability of the Company (A) from issuing the Series B
Preferred Stock as contemplated herein, or (B) from declaring and/or paying
dividends as set forth in the Certificate of Designation. Neither the Company
nor any of its Subsidiaries has outstanding any loans to any person (as defined
in Section 7.13(g)) in respect of the purchase of securities issued by the
Company or any of its Subsidiaries.
2.4. Authorization and Enforceability. The Company has all requisite
--------------------------------
corporate power and authority to execute and deliver this Agreement and each
other Document, agreement or instrument contemplated hereby, to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
by the Company and each other Document, agreement or instrument executed or to
be executed by the Company in connection herewith and the consummation by the
Company of the transactions contemplated hereby and thereby, have been or will
be duly and validly authorized by the Board of Directors of the Company. This
Agreement and each other Document, agreement or instrument contemplated hereby,
has been or will be duly and validly executed and delivered by the Company and,
assuming this Agreement and each other Document, agreement or instrument
executed, or to be executed, by the Company in connection herewith, constitutes
a valid and binding obligation of the Investors, this Agreement and each other
Document, agreement or instrument contemplated hereby, constitutes or will
constitute a valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms.
2.5. Absence of Certain Changes. Except as disclosed in the SEC
--------------------------
Documents (as defined in Section 2.6 below) or as contemplated by this
Agreement, since October 31, 1999,
-4-
<PAGE>
the Company has operated in the ordinary course and no event has occurred, and
no circumstance exists, that reasonably could be expected to have a Material
Adverse Effect. Except as disclosed in the Company's filings and reports under
the Exchange Act, since October 31, 1999, there has not been (a) any
declaration, setting aside or payment of any dividend or other distribution in
respect of the capital stock of the Company or any of its Subsidiaries or any
redemption or other acquisition by the Company or any of its Subsidiaries of any
shares of Common Stock or other equity securities of the Company or any of its
Subsidiaries, (b) any entry into any agreement, commitment or transaction by the
Company or any of Subsidiaries, which is material to the Company and any of its
Subsidiaries taken as a whole, except agreements, commitments or transactions in
the ordinary course of business, consistent with prior practice; (c) any split,
combination or reclassification of the Company's capital stock or any issuance
or the authorization of any issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock; (d) any damage,
destruction or loss, whether or not covered by insurance, that could reasonably
be expected to have a Material Adverse Effect; or (e) any change in accounting
methods, principles or practices by the Company materially affecting its assets,
liabilities or business, except insofar as may have been required by a change in
United States generally accepted accounting principles ("GAAP"), consistently
----
applied.
2.6. Reports; Financial Statements.
-----------------------------
(a) Since February 19, 1999, the Company, and to the best of the
Company's knowledge, from January 1, 1997 until February 19, 1999, the Company's
predecessor ABC Rail Products Corporation, have filed all required forms,
reports and documents with the SEC required to be filed by it pursuant to the
federal securities laws and the rules and regulations promulgated thereunder
(collectively, the "SEC Documents"), all of which have complied as of their
-------------
respective filing dates in all material respects with all applicable
requirements of the Securities Act and the Exchange Act. None of such forms,
reports or documents at the time filed contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Except to the extent
that information contained in any SEC Document has been revised or superseded by
a later-filed SEC Document filed and publicly available prior to the date
hereof, none of the SEC Documents contains any untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial statements of the
Company included in the SEC Documents comply as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with GAAP
(except, in the case of unaudited statements, as permitted by Form 10-Q of the
SEC), applied on a consistent basis during the periods involved (except as may
be indicated in the notes thereto) and fairly present the consolidated financial
position of the Company and its Subsidiaries, as of the dates thereof and the
consolidated results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments that, individually or in the aggregate are not
-5-
<PAGE>
material to a fair presentation of the consolidated financial position of the
Company and its Subsidiaries).
(b) The unaudited financial statements for the Company and its
Subsidiaries for the five (5) month period ended December 31, 1999, and the
unaudited consolidated pro forma financial statements for the calendar year
ended December 31, 1999 (such unaudited financial statements, together with the
unaudited quarterly financial statements for the quarter ended October 31, 1999
are referred to as the "Interim Financial Statements"), provided to Investors
----------------------------
comply as to form in all material respects with applicable accounting
requirements, have been prepared in accordance with GAAP applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present the consolidated financial position of the Company
and its Subsidiaries as of the date thereof and the consolidated results of
their operations and cash flows for the periods then ended (subject to normal
year end audit adjustments that that, individually or in the aggregate are not
material to a fair presentation of the consolidated financial position of the
Company and its Subsidiaries).
2.7. Absence of Undisclosed or Contingent Liabilities. Except as and
------------------------------------------------
to the extent disclosed in the SEC Documents or accrued on the balance sheet
included in the Interim Financial Statements, and except for liabilities
incurred in the ordinary course of business consistent with past practice and
otherwise not in contravention of this Agreement (including but not limited to
the representations and warranties of the Company contained herein) which
individually and in the aggregate are not material, the Company and its
Subsidiaries do not have any liabilities or obligations of any nature (whether
absolute, contingent, liquidated, unliquidated or otherwise) that reasonably
could be expected to have a Material Adverse Effect. Since the date of the
Interim Financial Statements, the Company has operated in the ordinary course
and there has not been any Material Adverse Effect or any change or occurrence
which reasonably could be expected to have a Material Adverse Effect.
2.8. Compliance with Laws; No Violation; Consents and Approvals.
----------------------------------------------------------
(a) Each of the Company and its Subsidiaries is in compliance,
in all material respects, with all treaties, statutes, laws, rules, regulations,
ordinances, orders, and decrees, whether federal, state, local, or foreign
("Laws") applicable to any of them.
----
(b) Neither the execution and delivery of this Agreement or any
Document, agreement or instrument contemplated hereby by the Company nor the
consummation of the transactions contemplated hereby or thereby will conflict
with, or result in any violation or breach of, or constitute a default (or give
rise to any right of termination, modification (including, in the case of
leases, any change in the amount of rent), cancellation or acceleration or
result in the creation or imposition of (with or without notice or lapse of
time, or both), of any Liens upon any of the properties or assets or the Company
or its Subsidiaries) under, (a) the Restated Certificate of Incorporation or
Bylaws of the Company or similar organizational and governance documents of any
of its Subsidiaries, each as amended, (b) the terms, conditions or provisions of
any loan or credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise or license applicable to
the
-6-
<PAGE>
Company or any of its Subsidiaries or to their properties or assets, or (c) any
permit, license, approval, franchise, or other governmental or regulatory
authorization held or used by or binding upon the Company or any of its
Subsidiaries or their properties or assets, other than, in the case of clauses
(b) or (c), any such conflicts, violations, breaches, defaults, rights or Liens
that, individually or in the aggregate, reasonably could not be expected to have
a Material Adverse Effect.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, (x) any Federal, state, local or
-
foreign governmental or regulatory entity (or any department, agency, authority
or political subdivision thereof) or court or arbitrator, domestic or foreign
(an "Authority"), (y) NASDAQ, or (z) any third party, is required by the
--------- - -
Company or any of its Subsidiaries in connection with the execution and delivery
of this Agreement or each other Document, agreement or instrument contemplated
hereby by the Company or the consummation by the Company of the transactions
contemplated by this Agreement, except for (i) the filing with the SEC of a
notice on Form D or such reports under Section 13(a) of the Exchange Act as may
be required in connection with this Agreement or any other Document or
instrument contemplated hereby and the transactions contemplated hereby or
thereby, (ii) the filing of the Certificate of Designation (as such term is
defined in Section 4.4) with the Secretary of State of the State of Delaware
pursuant to the Delaware General Corporation Law (the "DGCL"), (iii) applicable
----
state "blue sky" filings, if any, and (iv) such other consents, approvals,
orders, authorizations, registrations, declarations and filings, which have been
obtained or made or the failure of which to be obtained or made, individually or
in the aggregate, reasonably could not be expected to have a Material Adverse
Effect.
2.9. Litigation. There is no pending or, to the knowledge of the
----------
Company, threatened claim, arbitration proceeding, action, suit, investigation
or other proceeding against or involving the Company or any of its Subsidiaries,
or any of the property or rights of the Company or any of its Subsidiaries, the
outcome of which if adverse to the Company or any of its Subsidiaries reasonably
could be expected to have a Material Adverse Effect. Neither the Company nor any
Subsidiaries is subject to or bound by any order, judgment, writ, injunction or
decree of any Authority.
2.10. ERISA Compliance.
----------------
(a) Except as set forth in the SEC Documents, each employee
benefit plan, as defined in ERISA (including any "multiemployer plan" as defined
in Section 3(37) of ERISA), and all other arrangements maintained, contributed
to, or required to be contributed to, by the Company or any ERISA Affiliate for
the benefit of any employee, former employee, director or officer of the Company
or under which the Company or any ERISA Affiliate has any liability with respect
to any employee, former employee, director or officer of the Company ("Employee
--------
Benefit Plans") (including any related trust) complies in form with, and has at
- -------------
all times been maintained and operated in compliance, in all material respects,
with its terms and, the requirements of all applicable laws, including, without
limitation, ERISA, and the Internal
-7-
<PAGE>
Revenue Code of 1986, as amended (the "Code") and the Consolidated Omnibus
----
Budget Reconciliation Act.
(b) As used herein, the capitalized terms below have the
following meanings:
(i) "ERISA" means the Employee Retirement Income Security
-----
Act of 1974, as amended.
(ii) "ERISA Affiliate" means (A) any corporation included
---------------
with the Company in a controlled group of corporations within the meaning of
Section 414(b) of the Code; (B) any trade or business (whether or not
incorporated) which is under common control with the Company within the meaning
of Section 414(c) of the Code; (C) any member of an affiliated service group of
which the Company is a member within the meaning of Section 414(m) of the Code;
or (D) any other person treated as an affiliate of the Company under Section
414(o) of the Code.
2.11. Taxes.
----
(a) The Company and each of its Subsidiaries have filed all
Federal income tax returns and all other tax returns and reports (whether
foreign, state or local) required to be filed by them, the failure of which to
file reasonably could be expected to have, individually or in the aggregate, a
Material Adverse Effect. All such returns are complete and correct in all
material respects. Except for payment of taxes being contested in good faith and
in accordance with the applicable procedures, the Company and each of its
Subsidiaries have paid all taxes due for the periods for which such returns were
filed and all material taxes for which no return was required to be filed, and
the Interim Financial Statements reflect an adequate reserve for all Taxes
payable by the Company and each of its Subsidiaries for all taxable periods and
portions thereof through the date of such financial statements. The Federal
income tax returns of the Company and its Subsidiaries have been properly and
timely filed with the Internal Revenue Service for all years through March 31,
1999 and the Company is not aware of any material deficiency being proposed,
asserted or assessed against the Company or any of its Subsidiaries. As used in
this Agreement, "Taxes" shall include all Federal, state, local and foreign
-----
income, property, sales, excise and other taxes, tariffs or governmental charges
of any nature whatsoever.
-8-
<PAGE>
2.12. Environmental Matters. To the Company's knowledge, the business,
---------------------
assets and properties of the Company and each Subsidiary are and have been
operated and maintained in compliance, in all material respects, with all
applicable federal, state, city, county and local environmental protection laws
and regulations (collectively, "Environmental Laws"). To the Company's
------------------
knowledge, no event has occurred which, with or without the passage of time or
the giving of notice, or both, would constitute non-compliance by either the
Company or any Subsidiary with, or a violation by either the Company or any
Subsidiary of, the Environmental Laws. Neither the Company or any Subsidiary
nor, to the Company's knowledge, any of their respective predecessor companies
has caused or permitted to exist, as a result of an intentional or unintentional
act or omission, a disposal, discharge or release (as defined in the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended) of wastes, pollutants, contaminants or hazardous or toxic substances,
on or from any site which currently is or formerly was owned, leased, occupied
or used by either the Company or any Subsidiary or any predecessor company,
except where such disposal, discharge or release was in material compliance with
the Environmental Laws. There is no site (a) which is listed, or proposed for
listing on a registry or inventory of inactive hazardous waste sites or sites
potentially requiring investigation or response maintained by any Governmental
Authority and which is currently is or formerly was owned, leased, occupied or
used by either the Company, any Subsidiary or, to the Company's knowledge, any
predecessor company, or (b) with respect to which either the Company, any
Subsidiary or, to the Company's knowledge, any predecessor company has received
written notice that such Company is considered to be a potentially responsible
person for cleanup or other liability in respect of Environmental Laws or about
which information has been requested from the Company or any Subsidiary or any
of their predecessor companies; and with respect to (b) which reasonably could
be expected to have a Material Adverse Effect.
2.13. Title to Properties. The Company and its Subsidiaries have good,
-------------------
valid and marketable title to, or valid leasehold interests in, all their
material properties and assets free and clear of all Liens, except as disclosed
in the SEC Documents and except for defects in title, easements, restrictive
covenants and similar encumbrances or impediments that do not materially impair
the value or use of the affected properties. The Company and each of its
Subsidiaries have complied in all material respects with the terms of all leases
to which they are a party and under which they are in occupancy, and all such
leases are in full force and effect. The Company and each of its Subsidiaries
enjoy, in all material respects, peaceful and undisturbed possession under all
such leases.
2.14. Intellectual Property. For purposes of this Agreement,
---------------------
"Intellectual Property" shall mean all industrial and intellectual property
---------------------
rights, including without limitation, patents, patent applications, patent
rights, trademarks, trademark applications, trade names, service marks, service
mark applications, trade mark registrations, copyrights, copyright applications,
copyright registrations, technology, know-how, licenses, trade secrets,
proprietary processes and formulae owned or licensed by the Company or its
Subsidiaries. The Company or its Subsidiaries owns, is licensed by the owner or
otherwise holds the right to use and enjoy the rights under the Intellectual
Property, except where the lack of ownership, license or right to use or enjoy
the rights under the Intellectual Property reasonably could not be expected to
have a
-9-
<PAGE>
Material Adverse Effect, and the consummation of the transactions contemplated
by this Agreement will not alter or impair any such rights. No claims have been
asserted by any person or Authority alleging that any of the current or
contemplated activities of the Company or any of its Subsidiaries infringe upon
or violate any patent, copyright, trademark, trade name, trade secret or other
proprietary right of any third party, which if determined adversely to the
Company or any Subsidiaries reasonably could be expected to have a Material
Adverse Effect. No person or Authority has undertaken a judicial challenge or
judicially questioned the validity of the Intellectual Property or the
effectiveness of any license or agreement relating thereto to which the Company
or any of its Subsidiaries is a party and which reasonably could be expected to
have a Material Adverse Effect.
2.15. Certain Agreements. Neither the Company nor any of its
------------------
Subsidiaries is a party to, or bound by, any contract or agreement that
materially limits the ability of the Company or any of its Subsidiaries directly
or indirectly to compete in any line of business or with any person in any
geographic area during any period of time.
2.16. Related Transactions. Except as disclosed in the Company's most
--------------------
recent proxy statement, no current or former stockholder, director, officer or
employee of the Company or any of its Subsidiaries (other than the Investors)
nor any relative or "associate" of any such person, is presently, directly or
indirectly through his or its affiliation with any other person or entity, a
party to any transaction with the Company or any of its Subsidiaries providing
for the furnishing of services (other than employment of such individuals by the
Company or its Subsidiaries) by or to, or the sale of products by or to, or
rental of real or personal property from or to, or otherwise requiring cash
payments by or to, any such person. For purposes of this Agreement, a
transaction of the type described in this Section 2.16 is sometimes herein
referred to as a "Related Transaction."
-------------------
2.17. Offering of Shares of Series B Preferred Stock. Neither the
----------------------------------------------
Company nor any person acting on its behalf has taken or will take any action
(including, without limitation, any offering of any securities of the Company
under circumstances that would require, under the Securities Act, the
integration of such offering with the offering and sale of the shares of Series
B Preferred Stock), which might subject the offering, issuance and sale of the
shares of Series B Preferred Stock to the registration requirements of Section 5
of the Securities Act.
2.18. Disclosure. To the Company's knowledge, none of the documents or
----------
written information furnished or to be furnished by the Company to the Investors
in connection with the transactions contemplated hereby contains or will contain
any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements or facts contained therein not
misleading.
2.19. Broker's Fees. The Company has not employed any broker or finder
-------------
or incurred any liability for any broker's fees, commissions or finder's fees in
connection with any of the transactions contemplated hereby.
-10-
<PAGE>
2.20. Rights Agreement. The Investors, and any of their permitted
----------------
assignees, shall not be deemed an Acquiring Person pursuant to the Rights
Agreement, dated as of September 29, 1995 (the "Rights Agreement"), between the
Company and La Salle National Trust, N.A., as amended. The execution, delivery
or performance of this Agreement or the transactions contemplated hereby shall
not constitute an event triggering the rights afforded under the Rights
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF EACH INVESTOR
----------------
Each Investor hereby represents and warrants to the Company, severally
and not jointly, as follows:
3.1. Organization. The Investor is a limited partnership in the case
------------
of FS-II and FFP, or a limited liability company, in the case of FSE, duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite power to carry on its business as it is now being
conducted.
3.2. Authority Relative to this Agreement; No Conflict. The Investor
-------------------------------------------------
has the requisite power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby without the consent of any other person (except for such
consents as have heretofore been obtained). This Agreement has been duly and
validly executed and delivered by the Investor and, assuming this Agreement
constitutes a valid and binding obligation of the Company, this Agreement
constitutes a valid and binding agreement of the Investor enforceable against
the Investor in accordance with its terms, and will not conflict with any other
agreement to which the Investor is a party.
3.3. Investment Intent. The shares of Series B Preferred Stock being
-----------------
purchased by the Investor and are being purchased by the Investor for investment
for its own account, and not with a view to any resale, distribution or other
transfer thereof that would violate the Securities Act, or the applicable state
securities laws of any state. The Investor will not distribute the shares of
Series B Preferred Stock in violation of the Securities Act or the applicable
securities laws of any state.
3.4. Economic Risk. The Investor is well versed in financial matters,
-------------
has had extensive dealings over the years in securities and is fully familiar
with the operating history and financial results of the Company and is fully
capable of understanding the type of investment being made pursuant to this
Agreement and the risks involved in connection therewith. The Investor is
financially able to hold the Series B Preferred Stock for long-term investment,
believes that the nature and amount of the Series B Preferred Stock being
acquired by the Investor are consistent with the Investor's overall investment
program and financial position, and recognizes that there are substantial risks
involved in the acquisition of the Series B Preferred Stock.
-11-
<PAGE>
3.5. Litigation. There is no action, suit, investigation or
----------
proceeding pending against, or to the knowledge of the Investor, threatened
against or affecting, such Investor before any Authority that in any manner
challenges or seeks to prevent, enjoin, alter or materiality delay the
transactions contemplated this Agreement.
3.6. Additional Representations. The Investor: (i) is an accredited
--------------------------
investor within the meaning of Rule 501(a) under the Securities Act, (ii) is
aware of the limits on resale imposed by virtue of the nature of the
transactions contemplated by this Agreement and is aware that the certificates
representing the Investor's respective ownership of Series B Preferred Stock
will bear related restrictive legends; (iii) is acquiring the shares of the
Company hereunder without registration under the Securities Act in reliance on
the exemption from registration contained in Section 4(2) of the Securities Act;
(iv) has been given the opportunity to ask questions of, and receive answers
from, the officers of the Company regarding the Company, its current and
proposed business operations and the Series B Preferred Stock, and the officers
of the Company have made available to the Investor all documents and information
that the Investor has requested relating to an investment in the Company; (v)
has access to all of the Company's public filings with the SEC; (vi)
acknowledges that the Company is entering into this Agreement in reliance upon
the Investor's representations and warranties and other covenants and agreements
contained herein; and (vii) acknowledges that Investor is entering into this
Agreement in reliance upon the Company's representations and warranties and
other covenants and agreements contained herein.
3.7. Rule 144. Each Investor acknowledges that the Series B Preferred
--------
Stock must be held indefinitely unless registered under the Securities Act or
unless an exemption for such registration is available. Each Investor is aware
of the provisions of Rule 144 promulgated under the Securities Act which permit
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, which may include, among other things, the
existence of a public market for the shares, the availability of certain current
public information about the Company, the resale occurring not less than one
year after a party has purchased and paid for the security to be sold, the sale
being effected through a "broker's transaction" or in transactions directly with
a "market maker" and the number of shares being sold during any three-month
period not exceeding specified limitations. Each Investor agrees that prior to
any proposed transfer of the Series B Preferred Stock, such Investor shall give
notice to the Company describing the manner and circumstances of the proposed
transfer and, if reasonably requested by the Company, such Investor shall
deliver an opinion of legal counsel, addressed to the Company, to the effect
that the proposed transfer may be effected without registration under the
Securities Act.
3.8. Broker's Fees. None of the Investors has employed any broker or
-------------
finder or incurred any liability for any broker's fees, commissions or finder's
fees in connection with any of the transactions contemplated hereby.
-12-
<PAGE>
ARTICLE IV
COVENANTS
---------
4.1. Conduct of Business of the Company. During the period from the
----------------------------------
date of execution of this Agreement up to and including the Closing Date, the
Company and each of its Subsidiaries will each conduct its business and
operations according to its ordinary and usual course of business and consistent
with past practice.
4.2. Access to Information. Between the date of execution of this
---------------------
Agreement and the Closing Date, the Company will upon reasonable notice (i) give
the Investors and their authorized representatives access during regular
business hours to all of the Company's and its Subsidiaries' offices and to all
books and records of it, (ii) permit the Investors to make such inspections as
it may require (and the Company shall cooperate with Investor in any
inspections), and (iii) cause its officers and those of its Subsidiaries to
furnish the Investor with such financial and operating data and other
information with respect to the business and properties of the Company and its
Subsidiaries as the Investors may from time to time request. The Investors shall
maintain the confidentiality of any confidential and proprietary information so
obtained by it which is not otherwise available from other sources that are free
from similar restrictions; provided, however, that the foregoing shall in no way
-------- -------
limit or otherwise restrict the ability of the Investors or such authorized
representatives to disclose any such information concerning the Company or its
Subsidiaries which it may be required to disclose (a) to its partners, board
members or stockholders, to the extent required to satisfy its fiduciary
obligations to such persons, or (b) otherwise pursuant to or as required by law;
provided that, to the extent legally permitted, the Investors will notify the
- -------
Company of such disclosure and afford the Company an opportunity to oppose said
disclosure at its sole cost and expense.
4.3. Reasonable Best Efforts. Subject to the terms and conditions
-----------------------
herein, each of the parties hereto agrees to use its reasonable best efforts to
take, or cause to be taken, all appropriate action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement. In case at any time after the Closing Date any further action is
necessary or desirable to carry out the purposes of this Agreement, the proper
officers and directors of each party to this Agreement shall take all such
necessary action. Such reasonable best efforts shall include, without
limitation, (i) the obtaining of all necessary consents, approvals or waivers
from third parties and governmental authorities necessary to the consummation of
the transactions contemplated by this Agreement, and (ii) opposing vigorously,
to the extent commercially reasonable, any litigation or administrative
proceeding relating to this Agreement or the transactions contemplated hereby,
including, without limitation, to the extent commercially reasonable, promptly
appealing any adverse court or agency order. Notwithstanding the foregoing or
any other provisions contained in this Agreement to the contrary, neither the
Investors nor any of their affiliates shall be under any obligation of any kind
to enter into any negotiations or to otherwise agree with any Authority,
including but not limited to any governmental or regulatory authority with
jurisdiction over the enforcement of any applicable
-13-
<PAGE>
federal, state, local and foreign antitrust, competition or other similar laws,
or any other party to sell or otherwise dispose of, hold separate (through the
establishment of a trust or otherwise) particular assets or categories of assets
or businesses of any of the Company, the Investors or any of the Investors'
affiliates.
4.4. Amendment to Certificate of Incorporation. On or before the
-----------------------------------------
Closing, the Board of Directors of the Company will have taken all actions
necessary to adopt the resolutions set forth in Exhibit B to this Agreement, and
---------
the Company will have filed a Certificate of Designation, Preferences and Rights
of Series B Cumulative Convertible Preferred Stock in the form of Exhibit B
---------
hereto (the "Certificate of Designation") with the Secretary of State of the
--------------------------
State of Delaware.
4.5. Ratification of the Agreement. Prior to Closing, the Board of
-----------------------------
Directors of the Company shall have taken all actions necessary or appropriate
to authorize and to ratify the execution of this Agreement and each other
Document, other agreement or instrument contemplated herein and the transactions
contemplated hereby, including authorization of the issuance, sale and delivery
of the shares of Series B Preferred Stock and authorization of the reservation
of and the issuance of shares of Common Stock reserved for issuance upon
conversion of the Series B Preferred Stock and as payment for dividends with
respect to the shares of Series B Preferred Stock.
4.6. Public Announcements. The Company and its Subsidiaries shall
--------------------
consult with the Investor and obtain the prior approval and consent of the
Investors before issuing any press release or otherwise making any public
statement with respect to the transactions contemplated hereby, except as may be
required by law, in which case the Company and its Subsidiaries shall use its
good faith efforts to review the contents of any such announcement with the
Investors and obtain the approval and consent of the Investors reasonably in
advance of the public release of such announcement.
4.7. Sale of Stock. The Investors and their successors and assigns
-------------
shall not engage in any short selling of the Company's securities, other than in
the process of an orderly liquidation of the Investors' holdings of shares of
Series B Preferred Stock, which shall not exceed five percent on a daily basis
of the Investors' holdings of such stock as of the date of this Agreement.
4.8. Amendment to Certificate of Incorporation. Unless there shall
-----------------------------------------
have occurred an Event of Default as defined in the Certificate of Designation
prior to the annual meeting of the Company's stockholders to be held in April
2001 and as a result thereof, a Series B Director (as defined in the Certificate
of Designation) shall have been duly elected to the Board of Directors, at the
annual meeting of its stockholders to be held in April 2001, the Company shall
cause to be put to the vote of the stockholders of the Company and recommend
that the stockholders approve, a resolution increasing the number of directors
comprising the Board of Directors to nine and authorizing an amendment to the
Company's Certificate of Incorporation to effect such change.
-14-
<PAGE>
ARTICLE V
CONDITIONS TO CLOSING
---------------------
5.1. Conditions to Investors' Obligations for Closing. The obligation
------------------------------------------------
of each Investor to effect the purchase of shares of Series B Preferred Stock
contemplated by Section 1.1(a) of this Agreement is subject to the satisfaction
or written waiver of the following conditions in the Investor's sole discretion:
(a) the representations and warranties of the Company contained
in this Agreement that are not qualified by materiality shall be true and
correct in all material respects on and as of the Closing Date with the same
effect as if made on and as of the Closing Date, and the representations and
warranties of the Company that are qualified by materiality shall be true and
correct on and as of the Closing Date with the same effect as if made on and as
of the Closing Date (except, in either case, to the extent any such
representation and warranty specifically refers to a particular date, in which
case such representation and warranty shall be true and correct as of such
date), and the Company shall have performed, in all material respects, all of
its obligations under this Agreement required to be performed by the Company
prior to the Closing Date;
(b) there shall not have occurred any Material Adverse Effect
or any violation of Law by the Company or its Subsidiaries that reasonably could
be expected to have a Material Adverse Effect;
(c) each Investor shall have received a certificate of the
President, Chief Executive Officer or Chief Financial Officer of the Company, on
behalf of the Company, certifying as to the fulfillment of the conditions set
forth in clauses (a) and (b) above;
(d) no statute, rule, regulation, judgment, order or injunction
shall be enacted, entered, promulgated or enforced (i) challenging the
transactions contemplated hereby, seeking to restrain or prohibit the
transactions contemplated hereby or seeking any damages material in relation to
the Company or any Investor, (ii) seeking to impose limitations on the ability
of each Investor to acquire or hold, or exercise full rights of ownership of any
shares of Series B Preferred Stock, including the right to vote such shares or
(iii) that otherwise reasonably could be expected to have a Material Adverse
Effect;
(e) each Investor shall have been provided with evidence
satisfactory to the Investor in its reasonable discretion that the Board of
Directors of the Company has approved the transactions contemplated by this
Agreement for purposes of Section 203 of the DGCL;
(f) each Investor shall have received a certificate, dated the
Closing Date, duly executed by the Secretary of the Company certifying as to (i)
the attached copy of resolutions of the Board of Directors of the Company
authorizing and approving or ratifying the
-15-
<PAGE>
execution, delivery and performance of this Agreement and the other documents
and instruments contemplated hereby and the consummation of the transactions
contemplated hereby and stating that such resolutions have not been modified,
amended, revoked or rescinded, and (ii) the incumbency, authority and specimen
signature of each officer of the Company executing this Agreement and any other
document or instrument contemplated hereby;
(g) each Investor shall have received a copy of a certificate
of the Secretary of State of the State of Delaware certifying as to the
Company's due organization, valid existence and good standing as a domestic
corporation in the State of Delaware as of a date not more than two (2) business
days prior to the Closing Date;
(h) each Investor shall have received an opinion of counsel to
the Company, dated the Closing Date, in the form attached hereto as Exhibit C;
---------
(i) the Company shall have received (and furnished to each
Investor evidence thereof reasonably satisfactory to each Investor) any
necessary or required approvals or consents from all Authorities and other third
parties necessary or required to complete the transactions contemplated hereby,
and such approvals and consents shall not have been withdrawn or expired as of
the Closing Date and the Certificate of Designation shall have been duly filed
with the Secretary of State of the State of Delaware;
(j) the Company shall have executed and delivered to each
Investor the Investors Rights Agreement in the form attached hereto as Exhibit
-------
D; and
- -
(k) the Company shall have paid, up to a maximum amount equal
to Eighty Five Thousand Dollars ($85,000), the Investors' reasonable costs and
expenses in connection with the transactions contemplated hereby, including, but
not limited to: (i) Investors' out-of-pocket costs and expenses related to
Investors' business due diligence; and (ii) the reasonable fees and expenses of
Investors' outside counsel incurred in connection with the transactions
contemplated hereby, including Investors' due diligence (the costs and expenses
described to in clauses (i) and (ii) are referred to collectively as the
"Investors' Expenses").
-------------------
(l) each Investor shall have been provided with evidence
satisfactory to each Investor in its reasonable discretion that the Board of
Directors of the Company has taken all necessary action in accordance with the
Rights Agreement to provide that the Investors' affiliates shall be able to
continue to engage in market making activities in the Company's securities in
accordance with the National Association of Securities Dealers, Inc.'s rules and
that such activities shall not cause the rights afforded pursuant to the Rights
Agreement to become exercisable as a result thereof.
5.2. Conditions to the Company's Obligations for the Closing. The
-------------------------------------------------------
obligations of the Company to effect the sale of shares of Series B Preferred
Stock contemplated by Section 1.1(a) of this Agreement are subject to the
satisfaction or written waiver of the following conditions:
-16-
<PAGE>
(a) the representations and warranties of each Investor
contained in this Agreement that are not qualified by materiality shall be true
and correct in all material respects on and as of the Closing Date with the same
effect as if made on and as of the Closing Date, and the representations and
warranties of each Investor that are qualified by materiality shall be true and
correct on and as of the Closing Date with the same effect as if made on and as
of the Closing Date (except, in either case, to the extent any such
representation and warranty specifically refers to a particular date, in which
case such representation and warranty shall be true and correct as of such
date), and each Investor shall have performed, in all material respects, all of
its obligations under this Agreement required to be performed by each Investor
prior to the Closing Date;
(b) the Company shall have received certificates from the
authorized officer of each Investor, certifying as to the fulfillment of the
condition set forth in clause (a) above;
(c) the Company shall have received payment of the Purchase
Price by wire transfer of immediate available funds;
(d) each Investor shall have executed and delivered to the
Company the Investors Rights Agreement in the form attached hereto as Exhibit D;
---------
and
(e) the Board of Directors of the Company shall have taken all
actions necessary to authorize and to ratify the execution of this Agreement and
each other Document, other agreement or instrument contemplated herein and the
transactions contemplated hereby.
ARTICLE VI
INDEMNIFICATION
---------------
6.1. Indemnification by the Company. The Company shall indemnify,
------------------------------
defend and hold harmless each of the Investors and their respective affiliates
and its respective members, partners, shareholders, directors, officers,
employees and agents from and against any loss, liability, claim, damage or
expense (including court and arbitration fees and costs, and reasonable fees and
expenses of legal counsel, investigators, expert witnesses, consultants,
accountants and other professionals) (a "Loss") suffered or incurred by any such
----
indemnified party resulting from or arising out of (i) any untruth, inaccuracy
or breach of any representation or warranty of the Company contained in this
Agreement, or (ii) any breach of any covenant or obligation of the Company
contained in this Agreement; provided that (i) the Investors shall not be
-------- ----
permitted to seek indemnification from the Company under this Section 6.1 unless
the aggregate amount of Losses with respect to all matters referred to in this
Section 6.1 exceeds Two Hundred and Fifty Thousand Dollars ($250,000), in which
event the Investors shall be entitled to seek indemnity against the Company for
the full amount of such Losses, and (ii) the Company's maximum liability under
this Section 6.1 shall not exceed Thirty Million Dollars ($30,000,000).
-17-
<PAGE>
6.2. Indemnification by the Investors. Each of the Investors shall
--------------------------------
severally indemnify, defend and hold harmless the Company from and against any
Loss suffered or incurred by the Company resulting from or arising out of a
breach by such Investor of Section 4.7 of this Agreement; provided that (i) the
-------- ----
Company shall not be permitted to seek indemnification from the Investor under
this Section 6.2 unless the aggregate amount of Losses with respect to the
matters referred to in this Section 6.2 exceeds Two Hundred and Fifty Thousand
Dollars ($250,000), in which event the Company shall be entitled to seek
indemnity against the Investor for the full amount of such Losses, and (ii) each
Investor's maximum liability under this Section 6.2 shall not exceed the amount
of its investment hereunder.
6.3. Procedure for Indemnification.
-----------------------------
(a) In order for a party (the "indemnified party") to be
-----------------
entitled to any indemnification provided for under this Agreement in respect of,
arising out of or involving a claim or demand, made by any person against the
indemnified party (a "Third Party Claim"), such indemnified party must notify
-----------------
the indemnifying party in writing of the Third Party Claim within thirty (30)
calendar days after receipt by such indemnified party of written notice of the
Third Party Claim; provided, however, that failure to give such notification
-------- -------
shall not affect the indemnification provided hereunder except to the extent the
indemnifying party shall have been actually prejudiced as a result of such
failure (except that the indemnifying party shall not be liable for any expenses
incurred during the period in which the indemnified party failed to give such
notice). Thereafter, the indemnified party shall deliver to the indemnifying
party, within five (5) business days after the indemnified party's receipt
thereof, copies of all notices and documents (including court papers) received
by the indemnified party relating to the Third Party Claim.
(i) If a Third Party Claim is made against an indemnified
party, the indemnifying party will be entitled to participate in the defense
thereof and, if it so chooses, to assume the defense thereof with counsel
selected by the indemnifying party; provided, that such counsel reasonably is
--------
not objected to by the indemnified party; and provided, further, that the
-------- -------
indemnifying party first notifies the indemnified party of its intention to
assume such defense within thirty (30) calendar days of receipt of notice of a
Third Party Claim. Should the indemnifying party so elect to assume the defense
of a Third Party Claim, the indemnifying party will not be liable to the
indemnified party for any legal expenses subsequently incurred by the
indemnified party in connection with the defense thereof. If the indemnifying
party elects to assume the defense of a Third Party Claim, the indemnified party
(x) will cooperate in all reasonable respects with the indemnifying party in
-
connection with such defense, (y) will not admit any liability with respect to,
-
or settle, compromise or discharge, any Third Party Claim without the
indemnifying party's prior written consent and (z) will agree to any settlement,
-
compromise or discharge of a Third Party Claim which the indemnifying party may
recommend and which by its terms obligates the indemnifying party to pay the
full amount of the liability in connection with such Third Party Claim, which
releases the indemnified party completely in connection with such Third Party
Claim, which does not obligate the indemnified party to take or
-18-
<PAGE>
forbear to take any action, and which would not adversely affect the business,
operations or properties of the Company.
(ii) In the event the indemnifying party shall assume the
defense of any Third Party Claim as provided above, the indemnified party shall
be entitled to participate in (but not control) such defense with its own
counsel at its own expense. If the indemnifying party does not so assume the
defense of any such Third Party Claim, the indemnified party may defend the same
in such manner as it may deem appropriate including, but not limited to,
settling such claim or litigation after giving notice of same to the
indemnifying party on such terms as the indemnified party may deem appropriate,
and the indemnifying party promptly will reimburse the indemnified party upon
written request.
(iii) Anything contained in this Agreement to the contrary
notwithstanding, the indemnifying party shall not be entitled to assume the
defense of any Third Party Claim (and shall be liable for attorneys' fees and
expenses incurred by the indemnified party in defending such Third Party Claim)
if the Third Party Claim seeks an order, injunction or other equitable relief or
relief for other than money damages against the indemnified party that the
indemnified party reasonably determines, after conferring with its outside
counsel, cannot be separated from any related claim for money damages and which,
if successful, would adversely affect the business, operations or properties of
the indemnified party; provided, however, that if such equitable relief portion
-------- -------
of the Third Party Claim can be so separated from that for money damages, the
indemnifying party shall be entitled to assume the defense of the portion
relating to money damages.
6.4. Period of Indemnity.
-------------------
(a) The obligations to indemnify and hold harmless any
indemnified party (i) pursuant to Section 6.1(i) hereof shall terminate when the
applicable representation or warranty terminates pursuant to Section 6.4(b)
below, (ii) pursuant to Section 6.1(ii) shall not terminate, and (iii) pursuant
to Section 6.2 shall not terminate during such time as the Investors hold more
than five percent of the shares of Series B Preferred Stock originally issued;
provided, however, that the indemnity obligations shall not terminate with
- -------- -------
respect to any item as to which the indemnified party shall have, before the
expiration of the applicable period, previously made a claim by delivering a
notice of such claim to the indemnifying party.
(b) The representations and warranties of the Company contained
herein shall expire two (2) years from the Closing Date, except for the
representations or warranties contained in (i) Sections 2.10 (ERISA Compliance)
2.11 (Taxes) and 2.12 (Environmental Matters), which shall survive until the
running of the applicable statute of limitations; and (ii) Sections 2.2
(Organization and Qualification), 2.3 (Capitalization) and 2.4 (Authorization
and Enforceability), which shall not expire.
-19-
<PAGE>
ARTICLE VII
MISCELLANEOUS
-------------
7.1. Termination; Effect of Termination; Expenses.
--------------------------------------------
(a) This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing Date:
(i) by mutual written consent of the Company and the
Investors; or
(ii) by the Investors, if the Closing does not occur by
May 1, 2000; provided, however, that the right to terminate this Agreement
-------- -------
pursuant to this Section 7.1(a) shall not be available to an Investor whose
failure to fulfill any of its obligations under this Agreement results in the
failure of any such condition; or
(iii) by either party if any court of competent
jurisdiction or any other governmental body shall have issued an order, decree
or ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the transactions contemplated hereby and such order,
decree, ruling or other action shall have become final and nonappealable.
(b) In the event of termination and abandonment of this
Agreement pursuant to Section 7.1(a), this Agreement, except for the provisions
of Section 4.2 (only with respect to confidentiality), Article VI and Section
7.1(c), shall forthwith become void and have no effect, without any liability on
the part of any party or its respective members, partners, shareholders,
directors, officers or shareholders; provided, that nothing in this Section
--------
7.1(b) shall relieve any party to this Agreement of liability for breach of
this Agreement.
(c) In the event of termination or abandonment of this Agreement
pursuant to Section 7.1(a) above, the Company shall pay Investors' Expenses up
to a maximum of Eighty Five Thousand Dollars ($85,000.00), in the aggregate.
7.2. Extension; Waiver. The parties hereto, may (a) extend the time
-----------------
for the performance of any of the obligations or other acts of the other parties
hereto, (b) waive any inaccuracies in the representations and warranties
contained herein by any other applicable party or in any document, certificate
or writing delivered pursuant hereto by any other applicable party or (c) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
7.3. Entire Agreement; Assignment. This Agreement (including the
----------------------------
Schedules and Exhibits hereto) and the other documents and instruments
contemplated hereby, (a) constitute the entire agreement among the parties with
respect to the subject matter hereof, and supersedes all other prior agreements
and understandings, both written and oral, among the
-20-
<PAGE>
parties or any of them with respect to the subject matter hereof, and (b) shall
not be assigned by operation of law or otherwise; provided, that each Investor
--------
may assign any of its rights and obligations hereunder to any affiliate of such
Investor prior to Closing and after Closing to any person, but no such
assignment shall relieve Investor of its obligations hereunder unless such
assignee or transferee agrees in writing to be bound by the terms hereof as
though an original signatory hereto. Either an Investor or any affiliate or
associate of such Investor may purchase shares of Series B Preferred Stock under
this Agreement.
7.4. Enforcement of the Agreement; Governing Law; Jurisdiction. The
---------------------------------------------------------
parties hereto agree that Investor would suffer irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached by the Company.
It is accordingly agreed that Investor shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any state court located in the State of New
York, or the United States District Court for the Southern District of New York
or any federal court in the State of New York (as to which the Company agrees to
submit to jurisdiction for the purposes of such or any other action), this being
in addition to any other remedy to which Investor is entitled at law or in
equity. This Agreement shall be governed by and construed in accordance with the
substantive laws of the State of New York regardless of the laws that might
otherwise govern under principles of conflicts of laws applicable thereto.
7.5. Validity. The invalidity or unenforceability of any provision of
--------
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
7.6. Notices. All notices, requests, claims, demands and other
-------
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by cable, telegram, facsimile transmission
with confirmation of receipt, or telex, or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties as
follows:
if to Investors:
---------------
Furman Selz Investors II L.P.
FS Employee Investors LLC
FS Parallel Fund L.P.
c/o FS Private Investments LLC
c/o ING Furman Selz Investments
55 East 52nd Street, 37th Floor
New York, NY 10055-0002
Attention: James L. Luikart
Phone: (212) 409-5600
Fax: (212) 409-5874
-21-
<PAGE>
with a required copy to:
-----------------------
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103-2793
Attention: Carmen J. Romano, Esq.
Phone: (215) 994-4000
Fax: (215) 994-2222
if to the Company:
-----------------
ABC-NACO Inc.
2001 Butterfield Road
Suite 502
Downers Grove, IL 60515
Attention: Vincent V. Rea,
VP and Corp. Treasurer
Phone: (630) 852-1300
Fax: (630) 737-0162
with required copies to:
-----------------------
ABC-NACO Inc.
2001 Butterfield Road
Suite 502
Downers Grove, IL 60515
Attention: Mark F. Baggio, Esq.,
VP, General Counsel and Secretary
Phone: (630) 852-1300
Fax: (630) 737-0167
Schiff Hardin & Waite
6600 Sears Tower
Chicago, Illinois 60606
Attention: Robert J. Regan, Esq.
Phone: (312) 258-5606
Fax: (312) 258-5700
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
-22-
<PAGE>
7.7. Descriptive Headings. The descriptive headings herein are
--------------------
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
7.8. Parties in Interest. This Agreement shall be binding upon and
-------------------
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
7.9. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
7.10. Amendment. This Agreement may not be amended except by an
---------
instrument in writing signed on behalf of all the parties.
7.11. Survival. The representations, warranties, covenants and
--------
agreements of the Company and Investors contained in this Agreement, and all
statements contained in this Agreement or any exhibit, attachment or Schedule
hereto or any certificate, financial statement or SEC Documents delivered
pursuant to this Agreement or in connection with the transactions contemplated
hereby, shall be deemed incorporated in this Agreement and shall constitute
representations, warranties, covenants and agreements of the respective party
delivering the same. All such representations, warranties, covenants and
agreements shall survive the Closing as provided in Section 6.4. The Company
acknowledges that its representations and warranties in this Agreement shall not
be affected or mitigated by any investigation conducted by Investor or its
representatives prior to the Closing or any knowledge of any Investor. Each
Investor shall use reasonable efforts to notify the Company in the event it
discovers information which constitutes a breach of the Company's
representations or warranties set forth in Article 2 hereof; provided, however,
that the failure of any Investor in any way to provide such notification shall
not subject the Investor to any penalty or liability and shall not change the
Company's liability with respect to any breach of such representation or
warranty.
7.12. Strategic Plan. The Company currently is developing a strategic
--------------
plan (the "Strategic Plan") for its businesses and operations and as soon as
--------------
such plan is available, the Company will provide copies of the Strategic Plan to
each of the Investors. The Investors acknowledge that the Strategic Plan will
contain the Company's future expectations, including projections of its results
of operations or financial condition, and that the Company's actual results may
differ materially from those expressed in the Strategic Plan.
-23-
<PAGE>
7.13. Certain Definitions. For purposes of this Agreement, the
-------------------
following terms shall have the meanings ascribed to them below:
(a) "affiliate" of a person shall mean (i) a person that
---------
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the first-mentioned person and
(ii) an "associate" as that term is defined in Rule 12b-2 promulgated under the
---------
Exchange Act as in effect on the date of execution of this Agreement.
(b) "control" (including the terms "controlling", "controlled
------- ----------- ----------
by" and "under common control with" or correlative terms) shall mean the
- -- -------------------------
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a person, whether through ownership of voting
securities, by contract, or otherwise.
(c) "Documents" means this Agreement, the Investors Agreement,
---------
and the Certificate of Designation.
(d) "Exchange Act" means the Securities Exchange Act of 1934,
------------
as amended and the rules and regulations promulgated thereunder all as the same
shall be as in effect at the time.
(e) "Investors Rights Agreement" means the Investors Rights
--------------------------
Agreement by and among the Company and the Investors named therein.
(f) "Material Adverse Effect" shall mean (i) any adverse change
-----------------------
in the condition (financial or otherwise), assets (including without limitation
tangible and intangible assets), liabilities, business, or results of operations
or prospects of the Company or any of its Subsidiaries, which change,
individually or in the aggregate, is material to the Company and its
Subsidiaries taken as a whole, or (ii) any event, matter, condition or effect
which materially adversely impairs the ability of the Company to perform on a
timely basis its obligations under this Agreement or the Company to consummate
the transactions contemplated by this Agreement.
(g) "person" shall mean and include an individual, a
------
corporation, a partnership, a trust, an unincorporated organization and a
government or any department, agency or political subdivision thereof.
(h) "Securities Act" shall mean Securities Act of 1933, as
--------------
amended, and all other applicable securities laws and the rules and regulations
thereunder as in effect from time to time.
-24-
<PAGE>
(i) "Subsidiaries" means when used with reference to a person,
------------
a corporation or limited liability company, the majority of the outstanding
voting securities or membership interests of which are owned directly or
indirectly by such person.
-25-
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, on the day
and year first above written.
ABC-NACO INC.
By: /s/ J.P. Singsank
-------------------------------------------
Name: J.P. Singsank
Title: Senior Vice President and Chief
Financial Officer
INVESTORS:
FURMAN SELZ INVESTORS II L.P.
FS EMPLOYEE INVESTORS LLC
FS PARALLEL FUND L.P.
By: FS PRIVATE INVESTMENTS LLC, Manager
By: /s/ James L. Luikart
-------------------------------------------
Name: James L. Luikart
Title: Managing Member
-26-
<PAGE>
EXHIBIT A
Investors and Series B Preferred Stock
<TABLE>
<CAPTION>
Number of Shares of Prorata Aggregate
-----------------
Investors Series B Preferred Stock Purchase Price
--------- ------------------------ --------------
<S> <C> <C>
Furman Selz Investors II L.P. 264,466.6666 $26,446,666.67
FS Employee Investors LLC 22,666.6666 $ 2,266,666.67
FS Parallel Fund L.P. 12,866.6666 $ 1,286,666.66
</TABLE>
<PAGE>
EXHIBIT 3
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF
ABC-NACO INC.
ABC-NACO Inc., a Delaware corporation (the "Corporation"), pursuant to
-----------
the provisions of Section 151 of the General Corporation Law of the State of
Delaware (the "DGCL"), does hereby make this Certificate of Designation under
----
the corporate seal of the Corporation and does hereby state and certify that
pursuant to the authority vested in the Board of Directors of the Corporation by
the Certificate of Incorporation, the Board of Directors has duly adopted the
following resolutions:
RESOLVED, that pursuant to Article Fourth of the Certificate of
Incorporation, as amended (which authorizes one million (1,000,000) shares of
preferred stock, par value $1.00 per share ("Preferred Stock"), none of which is
---------------
presently issued and outstanding), the Board of Directors hereby fixes the
designations and preferences and relative participating, optional and other
special rights and qualifications, limitations and restrictions of a new series
of Preferred Stock consisting of shares to be designated as Series B Cumulative
Convertible Preferred Stock.
Series B Cumulative Convertible Preferred Stock
- -----------------------------------------------
RESOLVED, that the holders of Series B Cumulative Convertible
Preferred Stock, except as otherwise provided by law, shall have and possess the
following rights and preferences.
A. Series B Cumulative Convertible Preferred Stock.
-----------------------------------------------
1. Designation, Number of Shares. This series of preferred stock
-----------------------------
shall be designated as Series B Cumulative Convertible Preferred Stock ("Series
------
B Preferred Stock"), and the number of shares that shall constitute such series
- -----------------
shall be Three Hundred Thousand (300,000). The par value of Series B Preferred
Stock shall be $1.00 per share.
2. Rank. With respect to dividend rights and rights on liquidation,
----
winding up and dissolution of the Corporation, Series B Preferred Stock shall
rank senior to:
(i) the Common Stock, par value $0.01 per share ("Common
------
Stock"), of the Corporation; and
- -----
(ii) the Series A and each other class of capital stock or class
or series of Preferred Stock issued by the Corporation after the date hereof (in
accordance with Paragraph A.7.(a)(ii) hereof), the terms of which, other than
the Series A, shall specifically provide that such class or series shall rank
junior to Series B Preferred Stock as to dividend rights or rights on
liquidation, winding up and dissolution of the Corporation (each of the
securities in clauses (i) and (ii) above collectively referred to as "Junior
------
Securities").
- ----------
<PAGE>
3. Dividend Provisions.
-------------------
(a) Each holder of Series B Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors, out of funds
legally available therefor, dividends on each share of Series B Preferred Stock
after the date of the original issuance of the Series B Preferred Stock at a
rate equal to eight percent (8.0%) per share per annum on One Hundred Dollars
($100) per share in cash, or at the Corporation's election, in fully paid, non-
restricted, fully tradable, non-assessable shares of Common Stock, which shares
of such Common Stock shall be valued at one hundred percent (100%) of the
average closing price on the NASDAQ National Market ("NASDAQ") for the sixty
------
(60) consecutive trading days immediately prior to the Dividend Declaration Date
(as defined in Paragraph B. hereof). With respect to any dividend on the Series
B Preferred Stock paid by the Corporation in shares of Common Stock, such shares
of Common Stock when issued shall be (i) registered for sale by the holder of
the Series B Preferred Stock under the Securities Act of 1933, as amended (and
applicable state securities laws), and (ii) listed on NASDAQ or the NYSE.
(b) All dividends, whether payable in cash or in shares of
Common Stock, shall be cumulative, whether or not earned or declared, and shall
accrue on a semi-annual basis beginning on the date of the original issuance of
Series B Preferred Stock (whether or not funds are legally available for the
declaration and/or payment of such dividends), and shall be payable semi-
annually in arrears on each Dividend Payment Date (as defined in Paragraph B.
hereof), commencing on the first Dividend Payment Date after the date of the
original issuance of such Series B Preferred Stock. Each dividend on Series B
Preferred Stock shall be payable to the holders of record of Series B Preferred
Stock as they appear on the stock register of the Corporation on such record
date as may be fixed by the Board of Directors, which record date shall not be
less than ten (10) nor more than sixty (60) calendar days prior to the
applicable Dividend Payment Date. Notwithstanding the foregoing, during the
first two (2) years after the date of original issuance of the Series B
Preferred Stock, the Corporation shall be entitled to defer payment of dividends
on shares of Series B Preferred Stock; provided, that during such two-year
--------
period, dividends on shares of Series B Preferred Stock shall cumulate and
compound and any so deferred dividends shall be payable in full upon the second
anniversary of the date of original issuance of the Series B Preferred Stock.
(c) Dividends shall cease to accrue in respect of any shares of
Series B Preferred Stock on the date such shares are converted into shares of
Common Stock in accordance with Paragraph A.5. hereof.
(d) Accrued dividends on the Series B Preferred Stock, if not
paid on the first or any subsequent Dividend Payment Date following accrual,
shall thereafter accrue additional dividends ("Additional Dividends") in respect
--------------------
thereof, compounded semi-annually, at the rate specified hereinabove in
Paragraph A.3.(a) hereof or as specified hereinbelow in Paragraph A.3.(g)
hereof.
(e) All dividends paid with respect to shares of Series B
Preferred Stock pursuant to Paragraph A.3.(a) shall be paid pro rata to the
holders of Series B Preferred Stock of record entitled thereto.
-2-
<PAGE>
(f) Dividends on account of arrears for any past Dividend Period
may be declared and paid at any time, without reference to any regular Dividend
Payment Date, to the holders of Preferred Stock of record on any date as may be
fixed by the Board of Directors, which date is not more than thirty (30)
calendar days prior to the payment of such dividends.
(g) The dividend payable to holders of Series B Preferred Stock
as set forth above in Paragraph A.3.(a) shall be increased to a rate of twelve
percent (12%) per share per annum on the Series B Liquidation Preference (the
"Default Dividends"), which Default Dividends shall be payable in either cash,
-----------------
unless prohibited by the Credit Agreement dated as of February 19, 1999 among
the Company, ABC-NACO de MEXICO, S.A. de C.V., Dominion Castings Limited, Bank
of America Canada, Bank of America National Trust and Savings Association and
the other financial institutions party thereto, as amended and restated, or
Common Stock at the choosing of each holder of Series B Preferred Stock, upon
the occurrence and during the continuance of any of the following events (each
an "Event of Default" and collectively the "Events of Default"), upon the giving
---------------- -----------------
of written notice thereof to the Corporation by the holders of a majority of the
shares of Series B Preferred Stock then outstanding:
(i) in the event that the Corporation does not (A)
declare the dividend payable on the shares of Series B Preferred Stock within
(30) calendar days of the Dividend Declaration Date, (B) fulfill its dividend
payment obligation in full for the Series B Preferred Stock, as set forth
herein, within thirty (30) calendar days after said dividend payment is due and
payable, or (C) fulfill its dividend payment obligation in the form of either
cash or stock as required herein; or
(ii) in the event that the Corporation shall have
materially breached any of the representations and warranties contained in any
of the Stock Purchase Agreement or the Investors Rights Agreement; or
(iii) in the event that the Corporation shall have
materially breached any of the covenants or agreements contained in any of the
Stock Purchase Agreement or the Investors Rights Agreement and such breach shall
not have been cured to the satisfaction of the holders of record of a majority
of the shares of Series B Preferred Stock then outstanding within forty-five
(45) calendar days after the date of giving of notice of such breach to the
Corporation; or
(iv) in the event that the Corporation shall (A) apply for
or consent to the appointment of a receiver, trustee or liquidator for the
Corporation or any of its property; (B) admit in writing its inability to pay
debts as they mature; (C) make a general assignment for the benefit of
creditors; (D) be adjudicated bankrupt or insolvent; (E) file a voluntary
petition in bankruptcy, a petition or answer seeking reorganization or an
arrangement with creditors to take advantage of any bankruptcy, reorganization,
insolvency, readjustment of debt, dissolution or liquidation law or statute, or
an answer admitting the material allegations of a petition filed against it in
any proceeding under any such law; or (F) have failed to have an involuntary
petition in bankruptcy filed against it dismissed and discharged within sixty
(60) calendar days after the date of such filing; corporate actions shall be
taken for the purpose of effecting any of the foregoing; or an order, judgment
or decree shall be entered without the application, approval or consent of the
Corporation, by any court of competent jurisdiction,
-3-
<PAGE>
approving a petition seeking reorganization of the Corporation or of all or a
substantial part of its assets, and such order, judgment or decree shall
continue unstayed and in effect for sixty (60) calendar days (a "Bankruptcy");
----------
or
(v) if at any time after the date of original issuance of
the first share of Series B Preferred Stock, shares of Common Stock are not
publicly traded on NASDAQ or NYSE, or fail to satisfy the then current
requirements for listing on such market or exchange.
Notwithstanding the foregoing, in the event that the Corporation is
unable to meet its obligation to pay cash dividends in the form of cash because
of (a) a deficiency in the cash position of the Corporation such that the
payment of such dividends in cash would have a Material Adverse Effect on the
Corporation, or (b) a prohibition by the DGCL, then the Corporation shall be
permitted to pay Default Dividends in shares of Common Stock during such time
the condition described in this paragraph continues; provided, however, that the
-------- -------
Corporation shall not be entitled to satisfy its dividend payment obligations by
paying dividends in shares of Common Stock upon the occurrence or during the
continuance of an Event of Default set forth in Paragraph A.3.(g)(iv) hereof.
(h) The holders of Series B Preferred Stock shall be entitled to
receive the dividends provided for in Paragraphs A.3.(a) and (g) hereof in
preference to and in priority over any dividends upon any of the Junior
Securities. Such dividends on the Series B Preferred Stock shall be cumulative,
whether or not earned or declared, so that if at any time full Accumulated
Dividends (as defined in Paragraph B. below) on all shares of Preferred Stock
then outstanding have not been paid for all Dividend Periods then elapsed and a
prorated dividend on the Series B Preferred Stock at the rate aforesaid from the
Dividend Payment Date immediately preceding the Junior Payment Date (as defined
below) to the Junior Payment Date have not been paid or set aside for payment,
the amount of such unpaid dividends shall be paid before any sum shall be set
aside for or applied by the Corporation to the purchase, redemption or other
acquisition for value of any shares of Junior Securities (either pursuant to any
applicable sinking fund requirement or otherwise) or any dividend or other
distribution shall be paid or declared and set apart for payment on any Junior
Securities (the date of any such actions to be referred to as the "Junior
------
Payment Date"). In the event that the Corporation shall pay or declare any
- ------------
dividend, or make any distribution, on account of any Junior Securities
(including Common Stock), the holders of Series B Preferred Stock shall
participate with the holders of Common Stock or other Junior Securities on a pro
rata basis, based upon the number of shares of Common Stock or other Junior
Securities held by each such holder (assuming conversion of all such shares of
Series B Preferred Stock into Common Stock on the terms set forth herein), in
receipt of such dividends when, as and if declared by the Board of Directors
(other than a dividend payable in shares of Common Stock or other securities or
rights convertible into or entitling the holder thereof to receive, directly or
indirectly, additional shares of Common Stock), which dividends shall be in
addition to and not in lieu of the dividends on shares of Series B Preferred
Stock set forth in Paragraphs A.3.(a) or A.3.(g) hereof.
(i) Dividends payable on Series B Preferred Stock for any period
less than one (1) year shall be computed on the basis of a 360-day year
consisting of twelve 30-day months plus the actual number of calendar days
elapsed in the month for which such dividends are payable.
-4-
<PAGE>
4. Liquidation Preference.
----------------------
(a) Upon any voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, the holders of all shares of Series B
Preferred Stock then outstanding shall be entitled to be paid out of the assets
of the Corporation available for distribution to its stockholders an amount in
cash equal to One Hundred Dollars ($100.00) in cash per share, plus an amount
equal to full cumulative dividends (whether or not earned or declared) accrued
and unpaid thereon, including Default Dividends and Additional Dividends (such
amount, as so determined, is referred to herein as the "Series B Liquidation
--------------------
Preference"), to the date of final distribution and no more, before any payment
- ----------
or distribution is made on account of any Junior Securities. After payment in
full pursuant to this Paragraph A.4., the holders of Series B Preferred Stock
shall not be entitled to any further participation in any distribution in the
event of liquidation, dissolution or winding up of the affairs of the
Corporation.
(b) Certain Transactions Treated as Liquidation. For purposes of
-------------------------------------------
this Paragraph A.4., at the election of the holders of record of a majority of
the then outstanding shares of Series B Preferred Stock, (A) any acquisition of
the Corporation by means of merger or other form of corporate reorganization
with or into another corporation in which outstanding shares of the Corporation
are exchanged for securities or other consideration issued, or caused to be
issued, by the other corporation or its subsidiary, in which transaction this
Corporation is not the surviving entity, and, as a result of which transaction,
the stockholders of the Corporation own fifty percent (50%) or less of the
voting power of the surviving entity, (B) any acquisition in a transaction or
series of transactions by a person or group (as defined below) of persons the
result of which is that such person or group of persons owns beneficially fifty
percent (50%) or more of the voting securities then outstanding of the
Corporation, or (C) a sale, transfer or lease (other than a pledge or grant of a
security interest to a bona fide lender) of all or substantially all of the
assets of the Corporation and its Subsidiaries on a consolidated basis (other
than to a wholly-owned subsidiary of the Corporation), shall be treated as a
liquidation, dissolution or winding up of the Corporation and shall entitle the
holders of Series B Preferred Stock to receive at the closing of any such
transactions the amount that would be received in a liquidation, dissolution or
winding up pursuant to Paragraph A.4.(a). hereof. For purposes hereof, the term
"group" means two or more persons who act as a partnership, syndicate, or
pursuant to any other arrangement or understanding, for the purpose of
acquiring, holding, or disposing of securities of the Company including without
limitation pursuant to Rule 13d-5 promulgated under the Exchange Act .
5. Conversion.
----------
(a) Right of Conversion. Each share of Series B Preferred Stock
-------------------
shall be convertible, at the option of the holder thereof, at any time, and from
time to time, after the date of issuance of such share, at the office of the
Corporation or any transfer agent for the Series B Preferred Stock, into such
number of fully paid, registered, non-assessable shares of Common Stock as is
determined by dividing (i) One Hundred Dollars ($100.00) plus an amount equal to
full cumulative dividends (whether or not earned or declared) accrued and unpaid
thereon, including Default Dividends and Additional Dividends by (ii) the
Conversion Price. The "Conversion Price" for the Series B Preferred Stock shall
----------------
be the average closing price of the
-5-
<PAGE>
Company's Common Stock for the thirty trading days ending February 17, 2000 as
reported by Bloomberg rounded up to the nearest dollar. The Conversion Price for
the Series B Preferred Stock shall be subject to adjustment as set forth in
Paragraph A.5.(c) hereof.
(b) Procedures for Voluntary Conversion. Before any holder of
-----------------------------------
shares of Series B Preferred Stock shall be entitled to convert any of such
shares into shares of Common Stock, such holder shall surrender the certificate
or certificates therefor, duly endorsed, at the office of the Corporation or of
any transfer agent for the Series B Preferred Stock, and shall give written
notice by mail, postage prepaid, or hand delivery, to the Corporation at its
principal corporate office, of the election to convert the same and shall state
therein the name or names in which the certificate or certificates for shares of
Common Stock are to be issued, and in the case of a partial conversion of the
Series B Preferred Stock, the certificate or certificates for shares of the
Series B Preferred Stock not converted. The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such holders of
shares of Series B Preferred Stock, or to the nominee or nominees of such
holders, a certificate or certificates for the number of shares of Common Stock
to which such holder shall be entitled as aforesaid. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Series B Preferred Stock to be converted, and
the person or persons entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock as of such date. If the conversion is in
connection with an underwritten offering of securities registered pursuant to
the Securities Act, the conversion may, at the option of any holder tendering
the Series B Preferred Stock for conversion, be conditioned upon the
effectiveness of such offering, in which event the person(s) entitled to receive
Common Stock issuable upon such conversion of the Series B Preferred Stock shall
not be deemed to have converted such Series B Preferred Stock until immediately
prior to the effectiveness of such offering and the Corporation shall deliver to
such holders tendering Series B Preferred Stock for conversion written notice of
the anticipated date of such effectiveness no less than ten (10) calendar days
prior thereto.
(c) Adjustments of Conversion Price. So long as any shares of
-------------------------------
Series B Preferred Stock are outstanding, the Conversion Price of the Series B
Preferred Stock shall be subject to adjustment from time to time as follows:
(i) (A) Upon issuance (or deemed issuance pursuant to the
provisions hereof) by the Corporation of any Additional Stock (as defined below)
after the date of issuance of Series B Preferred Stock, without consideration or
for an Effective Price per share, or, in the case of Convertible Securities, a
conversion price per share, less than the Conversion Price for the Series B
Preferred Stock in effect immediately prior to the issuance (or deemed issuance)
of such Additional Stock, then the Conversion Price for the Series B Preferred
Stock in effect immediately prior to each (such issuance or deemed issuance)
shall be adjusted to a price determined by the following formula: (A + B) / (C +
D), where "A" equals the number of shares of Common Stock outstanding
immediately prior to such issuance or sale multiplied by the then applicable
Conversion Price, where "B" equals the consideration, if any, received by the
Corporation upon such issuance or sale, where "C" equals the total number of
shares of Common Stock outstanding prior to issuance of the additional shares
and where "D" equals any Additional Stock or any conversion shares, or any other
shares reserved for issuance which are associated
-6-
<PAGE>
with such financing, immediately after such issuance or sale. See Annex A hereto
for an example of the formula set forth herein.
(B) No adjustment of the Conversion Price for Series B
Preferred Stock shall be made in an amount less than one-half of One Cent
($0.005) per share, provided that any adjustments which are not required to be
made by reason of this sentence shall be carried forward and shall be taken into
account in any subsequent adjustment to the Conversion Price. No adjustment of
the Conversion Price for the Series B Preferred Stock pursuant to this Paragraph
A.5.(c)(i) shall have the effect of increasing such Conversion Price for the
Series B Preferred Stock above the Conversion Price in effect immediately prior
to such adjustment.
(C) In the case of the issuance of securities of the
Corporation for cash, the amount of consideration received by the Corporation
for such securities shall be deemed to be the amount of cash paid therefor
before deducting any discounts, commissions or other expenses allowed, paid or
incurred by the Corporation for any underwriting or otherwise in connection with
the issuance and sale thereof.
(D) In the case of the issuance of securities of the
Corporation for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to have a dollar value equal to
the fair market value as determined by the Board of Directors in accordance with
generally accepted accounting principles of such non-cash consideration,
irrespective of any accounting treatment thereof.
(E) In the case of the issuance (whether before, on or
after the date of issuance of Series B Preferred Stock) of Options or
Convertible Securities, the following provisions shall apply for all purposes of
this Paragraph A.5.(c)(i) and Paragraph A.5.(c)(ii) hereof:
(1) With respect to Options to purchase Common Stock, the aggregate
maximum number of shares of Common Stock deliverable upon exercise of
such Options shall be deemed to have been issued at the time such
Options were issued and for a consideration equal to the consideration
(determined in the manner provided in Subparagraph A.5.(c)(i)(C) and
Subparagraph A.5.(c)(i)(D) hereof), if any, received by the
Corporation for such Options plus the minimum exercise price provided
in such Options for Common Stock issuable thereunder.
(2) With respect to Convertible Securities and Options to purchase
Convertible Securities, the aggregate maximum number of shares of
Common Stock deliverable upon the conversion or exchange of any such
Convertible Securities and the aggregate maximum number of shares of
Common Stock issuable upon the exercise of such Options to purchase
Convertible Securities and the subsequent conversion or exchange of
such Convertible Securities shall be deemed to have been issued at the
time such Convertible Securities or such Options were issued and for a
consideration equal to the consideration, if any, received by the
Corporation for any such Convertible Securities and Options, plus the
minimum additional consideration, if any, to be received by the
Corporation
-7-
<PAGE>
upon the conversion or exchange of such Convertible Securities or the
exercise of such Options and the conversion or exchange of the
Convertible Securities issuable upon exercise of such Options (the
consideration in each case to be determined in the manner provided in
Subparagraphs A.5.(c)(i)(C) and A.5.(c)(i)(D) hereof).
(3) In the event of any change in the number of shares of Common
Stock deliverable, or in the consideration payable to the Corporation,
upon exercise of such Options or upon conversion or exchange of such
Convertible Securities, including, but not limited to, a change
resulting from the antidilution provisions thereof, the Conversion
Price of the Series B Preferred Stock, to the extent in any way
affected by or computed using such Options or Convertible Securities,
shall be recomputed to reflect such change, but no further adjustment
shall be made for the actual issuance of Common Stock or any payment
of such consideration upon the exercise of any such Options or the
conversion or exchange of such Convertible Securities.
(4) Upon the expiration or termination of any such Options or any
such rights to convert or exchange Convertible Securities, the
Conversion Price of the Series B Preferred Stock, to the extent in any
way affected by or computed using such Options or Convertible
Securities, shall be recomputed to reflect the issuance of only the
number of shares of Common Stock (and Options and Convertible
Securities which remain in effect) that were actually issued upon the
exercise of such Options or upon the conversion or exchange of such
Convertible Securities.
(5) The number of shares of Common Stock deemed issued and the
consideration deemed paid therefor pursuant to Subparagraphs
A.5.(c)(i)(E)(1) and (2) hereof shall be appropriately adjusted to
reflect any change, termination or expiration of the type described in
either Subparagraph A.5.(c)(i)(E)(3) or (4) hereof.
(ii) "Additional Stock" shall mean any shares of Common
----------------
Stock or shares of Common Stock issuable pursuant to Convertible Securities
issued or Options (or deemed to have been issued pursuant to Paragraph
A.5.(c)(i)(E) hereof) by the Corporation after the date of issuance of Series B
Preferred Stock, except:
(A) Common Stock issued pursuant to a transaction
described in Paragraph A.5.(c)(iii) hereof;
(B) Common Stock or options to purchase such Common
Stock issued to officers, employees or directors of, or consultants to, the
Corporation, pursuant to any agreement, plan or arrangement approved by the
Board of Directors of the Corporation (the "Permitted Options"); and
-----------------
(C) Common Stock issued or issuable upon conversion of
shares of Series B Preferred Stock.
-8-
<PAGE>
(iii) In the event the Corporation at any time or from time to
time after the date of issuance of Series B Preferred Stock fixes a record date
for the effectuation of a split or subdivision of the outstanding shares of
Common Stock or the determination of holders of shares of Common Stock entitled
to receive a dividend or other distribution payable in additional shares of
Common Stock or other securities or rights convertible into, or entitling the
holder thereof to receive directly or indirectly, additional shares of Common
Stock (hereinafter referred to as "Common Stock Equivalents") without payment of
------------------------
any consideration by such holder for the additional shares of Common Stock or
Common Stock Equivalents (including the additional shares of Common Stock
issuable upon conversion or exercise thereof), then, as of such record date (or
the date of such dividend, distribution, split or subdivision if no record date
is fixed), the Conversion Price of the Series B Preferred Stock shall be
appropriately decreased so that the number of shares of Common Stock issuable on
conversion of each share of Series B Preferred Stock shall be increased in
proportion to such increase in the aggregate number of shares issuable with
respect to Common Stock Equivalents, with the number of shares issuable with
respect to Common Stock Equivalents determined from time to time in the manner
provided for deemed issuances in Subparagraph A.5.(c)(i)(E) hereof.
(iv) If the number of shares of Common Stock outstanding at any
time after the date of issuance of Series B Preferred Stock is decreased by a
combination of the outstanding shares of Common Stock, then, following the
record date of such combination, the Conversion Price for the Series B Preferred
Stock shall be appropriately increased so that the number of shares of Common
Stock issuable on conversion of each share of Series B Preferred Stock shall be
decreased in proportion to such decrease in the outstanding shares of Common
Stock.
(d) Other Distributions. In the event the Corporation shall declare a
-------------------
distribution payable in securities of other persons, evidences of indebtedness
issued by the Corporation or other persons, assets (excluding cash dividends) or
options or rights not referred to in Paragraph A.5.(c)(iii) hereof, then, in
each such case for the purpose of this Paragraph A.5.(d), the holders of shares
of Series B Preferred Stock shall be entitled to a proportionate share of any
such distribution as though they were holders of the number of shares of Common
Stock into which their shares of Series B Preferred Stock are convertible as of
the record date fixed for the determination of the holders of shares of Common
Stock entitled to receive such distribution.
(e) Recapitalization. If at any time or from time to time there shall
----------------
be a recapitalization or reclassification of Common Stock (other than a
subdivision, combination or consolidation, merger or sale of assets or stock
transaction provided for in Paragraph A.4.(b) hereof), provision shall be made
so that each holder of shares of Series B Preferred Stock shall thereafter be
entitled to receive, upon conversion of the Series B Preferred Stock, the number
of shares of stock or other securities or property of the Corporation or
otherwise, receivable upon such recapitalization or reclassification by a holder
of the number of shares of Common Stock into which such shares of Series B
Preferred Stock could have been converted immediately prior to such
recapitalization. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Paragraph A.5. with respect to the rights
of the holders of shares of Series B Preferred Stock after the recapitalization
or reclassification to the end that the provisions of this Paragraph A.5.
(including adjustments of the Conversion Price then in effect
-9-
<PAGE>
and the number of shares purchasable upon conversion of the Series B Preferred
Stock) shall be applicable after that event as nearly equivalent as may be
practicable.
(f) No Impairment. The Corporation will not, by amendment of this
-------------
Certificate of Incorporation or through any reorganization, recapitalization or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms to be observed or performed hereunder by the Corporation,
but will at all times in good faith assist in the carrying out of all the
provisions of this Paragraph A.5. and in the taking of all such action as may be
necessary or appropriate in order to protect the conversion rights of the
holders of shares of Series B Preferred Stock against impairment.
(g) No Fractional Shares. No fractional shares shall be issued upon
--------------------
conversion of the Series B Preferred Stock, and the number of shares of Common
Stock to be issued shall be rounded upward to the nearest whole share, and there
shall be no payment to a holder of shares of Series B Preferred Stock for any
such rounded fractional share. Whether or not fractional shares result from such
conversion shall be determined on the basis of the total number of shares of
Series B Preferred Stock the holder is at the time converting into Common Stock
and the number of shares of Common Stock issuable upon such aggregate
conversion.
(h) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Conversion Price of the Series B Preferred
Stock pursuant to this Paragraph A.5., the Corporation, at its expense, shall
promptly compute such adjustment or readjustment in accordance with the terms
hereof and prepare and furnish to each holder of shares of Series B Preferred
Stock a certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based, certified
by the Corporation's Chief Executive Officer or Chief Financial Officer. The
Corporation shall, upon the written request at any time of any holder of shares
of Series B Preferred Stock, furnish or cause to be furnished to such holder a
like certificate setting forth (i) such adjustment and readjustment, (ii) the
Conversion Price at the time in effect, and (iii) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of a share of Series B Preferred Stock.
(i) Notices of Record Date. In the event of any taking by the
----------------------
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of shares of Series B Preferred Stock, at least twenty
(20) calendar days prior to the date specified therein, a notice specifying the
date on which any such record is to be taken for the purpose of such dividend,
distribution or right, and the amount and character of such dividend,
distribution or right.
(j) Reservation of Stock Issuable Upon Conversion, Dividends. The
--------------------------------------------------------
Corporation shall at all times take appropriate steps to reserve and keep
available out of its authorized but unissued shares of Common Stock, solely for
the purpose of (i) effecting the conversion of the shares of Series B Preferred
Stock, such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of
-10-
<PAGE>
Series B Preferred Stock, and (ii) the payment of dividends as contemplated in
Paragraphs A.3.(a) and (g). If at any time the number of authorized but unissued
shares of Common Stock shall not be sufficient to effect the conversion of all
then outstanding shares of Series B Preferred Stock or the payment of dividends,
then in addition to such other remedies as shall be available to the holder of
such shares of Series B Preferred Stock, the Corporation will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purposes.
(k) Notices. Any notice required by the provisions of this Paragraph
-------
A.5. to be given to the holders of shares of Series B Preferred Stock shall be
deemed given when received if delivered via courier or sent by facsimile, or by
United States mail, postage prepaid, and addressed to each holder of record at
its address appearing on the books of the Corporation.
(l) Mandatory Conversion.
--------------------
(i) At any time after the third (3rd) anniversary of the date of
the original issuance of the Series B Preferred Stock, all or a portion of the
shares of Series B Preferred Stock shall, at the option of the Corporation (as
determined by the Board of Directors), automatically be converted into fully
paid, registered and non-assessable shares of Common Stock in accordance with
Paragraph A.5.(a) above, if the following three conditions are met:
(A) the Closing Common Stock Market Price (as defined in
Paragraph B.(d) hereof) for sixty (60) consecutive trading days ending no more
than fifteen (15) trading days prior to such mandatory conversion, shall be the
greater of (1) $18.00 or (2) not less than two hundred percent (200%) of the
Conversion Price then in effect;
(B) the average trading volume during such sixty (60)
trading day period shall be at least 45,000 shares per trading day; and
(C) an effective shelf registration (in accordance with
Section 4(b) of the Investors Rights Agreement) is then in effect for the shares
of Common Stock to be issued upon conversion of the shares of Series B Preferred
Stock.
(ii) If the Corporation has elected to convert Series B Preferred
Stock into Common Stock pursuant to Paragraph A.5.(l)(i) above, the Corporation
will provide written notice of mandatory conversion of shares of Series B
Preferred Stock to each holder of record of Series B Preferred Stock no less
than ten (10) nor more than twenty (20) calendar days prior to the date fixed
for conversion by prepaid overnight delivery service, to each holder at such
holder's address as it appears on the stock register of the Corporation. The
Corporation's obligation to deliver shares of Common Stock shall be deemed
fulfilled if, on the mandatory conversion date, the Corporation shall deposit
with a bank or trust company in New York, New York having capital of at least
One Hundred Million Dollars ($100,000,000), such number of shares of Common
Stock as are required to be delivered by the Corporation upon the conversion of
the shares of Series B Preferred Stock so called for conversion. Provided the
Corporation has fulfilled its obligation to deposit shares as provided in the
foregoing sentence, effective on the mandatory conversion date fixed by the
Corporation and notified to the holders of Series B Preferred Stock, each
outstanding share of Series B Preferred Stock plus an amount equal to full
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<PAGE>
cumulative dividends (whether or not earned or declared) accrued and unpaid
thereon, including Default Dividends and Accumulated Dividends, shall be
converted into a fully paid, registered, and non-assessable share of Common
Stock at the Conversion Price then in effect, automatically and without any
action on the part of any holder of shares of Series B Preferred Stock, and each
such share of Common Stock shall be deemed outstanding from and after the
mandatory conversion date.
6. Status of Converted Stock. In the event any shares of Series B
-------------------------
Preferred Stock are converted to Common Stock pursuant to Paragraph A.5. hereof,
the shares so converted or so redeemed shall be canceled, retired and eliminated
and shall not be reissued by the Corporation.
7. Voting Rights.
-------------
(a) Class Voting Rights.
-------------------
(i) Except as otherwise provided below, a vote of at least
a majority of the shares of the Series B Preferred Stock then outstanding shall
be sufficient to take any action requiring the vote of the Series B Preferred
Stock as a separate class. At any meeting where the Series B Preferred Stock
shall have the right to vote as a separate class, the presence, in person or by
proxy, of a majority of the then outstanding shares of Series B Preferred Stock
shall constitute a quorum of such class.
(ii) So long as any Series B Preferred Stock is outstanding,
the Corporation shall not, without the affirmative vote of the holders of at
least sixty-six and two-thirds percent (66 2/3%) of all outstanding shares of
Series B Preferred Stock voting separately as a class, given in person or by
proxy, either in writing or by resolution adopted at an annual or special
meeting called for this purpose (A) amend, alter or repeal any provision of the
Certificate of Incorporation or By-laws of the Corporation, each as amended, so
as to affect, in any manner adverse to the holders of Series B Preferred Stock,
the relative rights, preferences, qualifications, limitations or restrictions of
the Series B Preferred Stock; or (B) increase the authorized number of shares of
Series B Preferred Stock or create, authorize, designate or reclassify any
authorized stock of the Corporation into, or increase the authorized amount of,
or issue any capital stock or any securities convertible into or exchangeable or
exercisable for any securities of the Corporation, ranking, either as to payment
of dividends, distributions of assets upon liquidation or otherwise or
redemption, prior or senior to or pari passu with the Series B Preferred Stock,
or (C) create, authorize or issue any Junior Securities, which are required to
be redeemed by the Corporation at any time that any shares of Series B Preferred
Stock are outstanding.
(b) Board of Directors. Until the occurrence of an Event of
------------------
Default, the holders of shares of Series B Preferred Stock shall not be entitled
to elect any director to the Corporation's Board of Directors. Upon the
occurrence of an Event of Default and the expiration of any cure period
specified in Paragraph A.3(g), the holders of record of shares of Series B
Preferred Stock shall be entitled to elect, voting separately as a class one (1)
director to the Corporation's Board of Directors (the "Series B Director") and
-----------------
the Corporation shall immediately upon such occurrence and the expiration of any
such cure period, and in no event later than two (2) business days thereafter
arrange for the election of the Series B Director
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<PAGE>
whether by special meeting or otherwise. At any such meeting called for the
purpose of electing the Series B Director, the presence in person or by proxy of
the holders of record of a majority of the shares of Series B Preferred Stock
then outstanding, shall constitute a quorum for the election of the Series B
Director to be elected by such holders. A vacancy in any directorship entitled
to be elected by the holders of record of shares of Series B Preferred Stock
(including without limitation, a vacancy resulting from the decision during an
earlier election by the holders of the Series B Preferred Stock not to fill the
directorship to be held by the Series B Director) shall be filled only by vote
or written consent of the holders of record of shares of Series B Preferred
Stock, in the manner set forth herein. Each Series B Director who shall have
been elected as provided in this Paragraph A.7.(b) may be removed during his or
her term of office, whether with or without cause, by the holders of record of a
majority of the shares of Series B Preferred Stock then outstanding. The Series
B Director shall be entitled to one (1) vote on all matters which directors are
entitled to vote on. The holders of record of a majority of the shares of Series
B Preferred Stock then outstanding shall have the right to call meetings of the
Board of Directors and management of the Corporation, upon no less than ten (10)
calendar days' prior written notice; provided, that such meetings are called no
--------
more frequently than once per fiscal quarter.
B. Definitions. As used herein, the following terms shall have the
-----------
following definitions:
(a) "Accumulated Dividends" means with respect to any share of
---------------------
Series B Preferred Stock, the dividends that have accrued on such shares as of
such specific date for Dividend Periods ending on or prior to such date and that
have not previously been paid in cash, including Additional Dividends and
Default Dividends.
(b) "Additional Dividends" has the meaning given to such term in
--------------------
Paragraph A.3.(d).
(c) "Additional Stock" has the meaning set forth in Paragraph
----------------
A.5.(c)(ii).
(d) "Closing Common Stock Market Price" for any day means the
---------------------------------
last sale price regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices regular way, in either case as
reported NASDAQ, NYSE or any other national securities market.
(e) "Common Stock Equivalents" has the meaning set forth in
------------------------
Paragraph A.5.(c)(iii) hereof.
(f) "Conversion Price" has the meaning set forth in Paragraph
----------------
A.5.(a) hereof.
(g) "Convertible Securities" means any indebtedness or shares of
----------------------
stock convertible into or exchangeable for Common Stock.
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<PAGE>
(h) "Dividend Declaration Date" means the last trading day on
-------------------------
NASDAQ immediately prior to June 30 and December 31 of each year in which any
shares of the Series B Preferred Stock are outstanding.
(i) "Dividend Payment Dates" means July 31 and January 31 of
----------------------
each year (or, if such day is not a business day, the next succeeding day that
is a business day);
(j) "Dividend Period" means the Initial Dividend Period and,
---------------
thereafter, each Semi-Annual Dividend Period.
(k) "Effective Price" of shares of Additional Stock means the
---------------
quotient determined by dividing (i) the total number of such shares of
Additional Stock issued or sold, or deemed to have been issued or sold, by the
Corporation under Paragraph A.5.(c) hereof, into (ii) the consideration received
by the Corporation under Paragraph A.5.(c) hereof for the issuance of such
shares of Additional Stock.
(l) "Initial Dividend Period" means the dividend period
-----------------------
commencing on the date of issuance of the Series B Preferred Stock and ending on
the first Dividend Payment Date to occur thereafter.
(m) "Investors" shall have the meaning set forth in the Stock
---------
Purchase Agreement.
(n) "Investors Rights Agreement" means the Investors Rights
--------------------------
Agreement dated as of March 8, 2000, by and among the Corporation and the
Investors named therein, the Schedules and Exhibits thereto, and any certificate
or other document required thereby, as the same may be amended from time to
time.
(o) "Junior Payment Date" has the meaning set forth in Paragraph
-------------------
A.3.(h) hereof.
(p) "Junior Securities" has the meaning set forth in Paragraph
-----------------
A.2. hereof.
(q) "Material Adverse Effect" shall mean (i) any adverse change
-----------------------
in the condition (financial or otherwise), assets (including without limitation
tangible and intangible assets), liabilities, business, or results of operations
or prospects of the Company or any of its Subsidiaries, which change,
individually or in the aggregate, is material to the Company and its
Subsidiaries taken as a whole, or (ii) any event, matter, condition or effect
which materially adversely impairs the ability of the Company to perform on a
timely basis its obligations under this Agreement or the Company to consummate
the transactions contemplated by this Agreement.
(r) "NASDAQ" shall have the meaning set forth in Paragraph
------
A.3.(a) hereof.
(s) "NYSE" shall mean the New York Stock Exchange.
----
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<PAGE>
(t) "Option" means rights, options or warrants to subscribe for,
------
purchase or otherwise acquire Common Stock or Convertible Securities.
(u) "Permitted Options" has the meaning set forth in Paragraph
-----------------
A.5.(c)(ii)(B) hereof.
(v) "person" shall mean and include an individual, a
------
corporation, a partnership, a trust, an unincorporated organization and a
government or any department, agency or political subdivision thereof.
(w) "Semi-Annual Dividend Periods" means the semi-annual periods
----------------------------
(1) commencing on each January 1 and ending on each June 30 and (2) commencing
on July 1 and ending on each December 31.
(x) "Stock Purchase Agreement" means the Preferred Stock
------------------------
Purchase Agreement dated as of February 18, 2000, by and among the Corporation
and the Investors named therein, the Schedules and Exhibits thereto, and any
certificate or other document required thereby, as the same may be amended from
time to time.
(y) "Subsidiaries" means when used with reference to a person, a
------------
corporation or limited liability company, the majority of the outstanding voting
securities or membership interests of which are owned directly or indirectly by
such person.
IN WITNESS WHEREOF, the undersigned has caused this Certificate to be
signed on the 8 day of March, 2000.
ABC-NACO INC.
By: /s/ J.P. Singsank
-----------------------
Name: J.P. Singsank
Title: Senior Vice President and
Chief Financial Officer
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<PAGE>
ANNEX A
Example of Application of Formula for Adjustment of Conversion Price.
If, twelve (12) months after the original issuance of the Series B
Preferred Stock, 9,000,000 shares of Common Stock were then outstanding and the
Corporation were to issue 100,000 shares of Common Stock (the Additional Stock)
for $8.00 per share (and thus, less than the $9 Conversion Price for Series B
Preferred Stock then in effect), the Conversion Price would be adjusted as
follows:
[(A+B)] + [(C +D)]
[(9,000,000 x $9) + (100,000 x $8)] + [(9,000,000) +(100,000)]
[(81,000,000)+($800,000 )] + [(9,100,000)]
[(81,800,000)] + [(9,100,000)]
= $8.989
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<PAGE>
EXHIBIT 4
ING FURMAN SELZ ASSET MANAGEMENT LLC
230 Park Avenue
New York, New York 10169
March 8, 2000
FS Private Investments III LLC
55 East 52/nd/ Street
New York, New York 10055
Attn: Mr. Brian P. Friedman
Dear Sir:
We understand that you are in the process of forming and raising capital for a
new private investment fund, ING Furman Selz Investors III L.P., a Delaware
limited partnership ("Fund III"). We have today purchased 150,000 Shares of
Series B Cumulative Convertible Preferred Stock of ABC-NACO INC., a Delaware
corporation (the "Shares"), at a purchase price equal to $15,000,000. This is
to confirm that, if and when Fund III is formed, ING Furman Selz Asset
Management LLC ("FSAM") shall sell to Fund III (or other related entities
managed by FS Private Investments III LLC), and FS Private Investments III LLC,
the Manager of Fund III, shall cause Fund III to purchase from FSAM, 149,500
Shares at a purchase price equal to $14,950,000, plus interest thereon at the
rate of interest publicly announced from time to time by Citibank, N.A. in New
York City as its prime rate plus two percent per annum. The closing for such
sale and purchase shall take place promptly following the initial closing of
Fund III.
Very truly yours,
/s/ Timothy Schantz
Timothy Schantz
President
ACCEPTED AND AGREED:
By: FS Private Investments III LLC
By: /s/ Brian P. Friedman
-------------------------------
Name: Brian P. Friedman
Title: Managing Member
