-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FLIgiwzN6rf5KClzd3vRMTk6HO94/zenqQtYb7cYK9S3PiGkGLCJbyAVoK5ufQnr 8sgUe5Z+hZrNO68qxief0g== 0000913364-01-500003.txt : 20010815 0000913364-01-500003.hdr.sgml : 20010815 ACCESSION NUMBER: 0000913364-01-500003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ABC NACO INC CENTRAL INDEX KEY: 0000913364 STANDARD INDUSTRIAL CLASSIFICATION: METAL FORGING & STAMPINGS [3460] IRS NUMBER: 363498749 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-22906 FILM NUMBER: 1713144 BUSINESS ADDRESS: STREET 1: 2001 BUTTERFIELD RD STREET 2: SUITE 502 CITY: DOWNERS GROVE STATE: IL ZIP: 60515 BUSINESS PHONE: 6308521300 MAIL ADDRESS: STREET 1: 2001 BUTTERFIELD RD STREET 2: SUITE 502 CITY: DOWNERS GROVE STATE: IL ZIP: 60515 FORMER COMPANY: FORMER CONFORMED NAME: ABC RAIL PRODUCTS CORP DATE OF NAME CHANGE: 19931014 10-Q 1 doc1.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 JUNE 30, 2001 0-22906 - ---------------------- ----------- For the Quarterly Period Ended` Commission File Number ABC-NACO INC. (Exact name of registrant as specified in its charter) Delaware 36-3498749 - ------------------ ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 335 Eisenhower Lane South, Lombard, IL 60148 -------------------------------------------- (Address of principal executive offices, including zip code) Registrant's telephone number, including area code (630) 792-2010 ---------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at August 7, 2001 - ---------------------- ------------------------------- COMMON STOCK, $.01 PAR VALUE 19,872,242 SHARES
ABC-NACO INC. CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands, except share data) As of As of June 30, December 31, ASSETS 2001 2000 - ----------------------------------------------------------------------------------------------------- ---------- --------- CURRENT ASSETS: Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,260 $ 2,211 Accounts receivable, less allowance of $7,730 and $8,322, respectively . . . . . . . . . . . . . . 51,663 66,467 Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79,000 97,494 Prepaid expenses and other current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,474 3,686 ---------- --------- Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 136,397 169,858 ---------- --------- PROPERTY, PLANT AND EQUIPMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . 208,324 218,367 INVESTMENT IN UNCONSOLIDATED JOINT VENTURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,485 9,148 NET ASSETS OF DISCONTINUED OPERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 21,814 OTHER NONCURRENT ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 38,607 44,184 ---------- --------- Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 393,813 $463,371 ========== ========= LIABILITIES AND STOCKHOLDERS' EQUITY - ---------------------------------------------------------------------------------------------------------- CURRENT LIABILITIES: Cash overdrafts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 270 $ 3,117 Current maturities of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227,565 258,164 Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,088 71,205 Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,717 40,421 ---------- --------- Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332,640 372,907 ---------- --------- LONG-TERM DEBT, less current maturities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,166 10,599 OTHER NONCURRENT LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,265 17,756 REDEEMABLE CONVERTIBLE PREFERRED STOCK, Series C, $1.00 par value, 1,000,000 shares authorized; 150,000 shares issued and outstanding as of June 30, 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,176 - REDEEMABLE WARRANTS OUTSTANDING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,068 - STOCKHOLDERS' EQUITY: Redeemable convertible preferred stock, Series B-1, $1.00 par value, 1,000,000 shares authorized; 317,098 and 300,000 shares issued and outstanding as of June 30, 2001 and December 31, 2000. . . . . . . . . . . . . . . . 30,135 28,425 Common stock, $.01 par value; 100,000,000 shares authorized; 19,872,242 shares issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199 199 Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,731 96,197 Non-redeemable warrants outstanding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,506 - Retained deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (106,903) (62,109) Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,170) (603) ---------- --------- Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,498 62,109 ---------- --------- Total liabilities and stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 393,813 $463,371 ========== ========= The accompanying notes to consolidated financial statements are an intergral part of these balance sheets.
ABC-NACO INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share data) For the For the Three Months Ended Six Months Ended June 30, June 30, -------------------- -------------------- 2001 2000 2001 2000 --------- --------- --------- --------- NET SALES $ 97,426 $134,321 $200,139 $268,143 COST OF SALES 98,720 117,562 200,899 234,960 --------- --------- --------- --------- Gross profit (loss) (1,294) 16,759 (760) 33,183 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 10,833 13,485 22,661 26,090 NONRECURRING LOSSES 8,560 - 8,560 1,589 --------- --------- --------- --------- Operating income (loss) from continuing operations (20,687) 3,274 (31,981) 5,504 EQUITY INCOME FROM UNCONSOLIDATED JOINT VENTURES 705 854 1,348 1,307 OTHER NON-OPERATING EXPENSE (26) - (26) - INTEREST EXPENSE (7,728) (6,355) (15,711) (12,772) --------- --------- --------- --------- Loss from continuing operations before income taxes (27,736) (2,227) (46,370) (5,961) BENEFIT FOR INCOME TAXES 1,263 802 1,463 2,029 --------- --------- --------- --------- Loss from continuing operations (26,473) (1,425) (44,907) (3,932) DISCONTINUED OPERATIONS: Income from Discontinued Operations, net of income taxes of $68, $1,001, $268 and $2,271, respectively 107 1,579 422 3,582 Gain on disposal of Discontinued Operations, net of income taxes of $1,195 1,886 - 1,886 - --------- --------- --------- --------- NET INCOME (LOSS) $(24,480) $ 154 $(42,599) $ (350) ========= ========= ========= ========= EARNINGS PER SHARE DATA: Loss from continuing operations $(26,473) $ (1,425) $(44,907) $ (3,932) Adjustment related to preferred stock - - - (11,877) Preferred stock dividends (1,559) (600) (2,195) (753) --------- --------- --------- --------- Adjusted loss from continuing operations (28,032) (2,025) (47,102) (16,562) Income from discontinued operations 107 1,579 422 3,582 Gain on disposal of Discontinued Operations 1,886 - 1,886 - --------- --------- --------- --------- Net loss available to common stockholders $(26,039) $ (446) $(44,794) $(12,980) ========= ========= ========= ========= DILUTED AND BASIC EARNINGS PER SHARE: Adjusted loss from continuing operations $ (1.41) $ (0.10) $ (2.37) $ (0.85) Income from discontinued operations 0.01 0.08 0.03 0.18 Gain on disposal of Discontinued Operations 0.09 - 0.09 - --------- --------- --------- --------- Net loss available to common stockholders $ (1.31) $ (0.02) $ (2.25) $ (0.67) ========= ========= ========= ========= Weighted average shares outstanding 19,872 19,375 19,872 19,374 ========= ========= ========= =========
The accompanying notes to consolidated financial statements are an integral part of these statements.
ABC-NACO INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) (In thousands) Accumulated Other Comprehensive loss -------------------------- ---------- Convertible Additional Nonredeemable Retained Unrealized Cumulative Preferred Common Paid-in Warrants Earnings Derivative Translation Stock Stock Capital Outstanding (Deficit) Losses Adjustment ----- ----- --------- --------- ------- --------- ------- ------ ---------- Total BALANCE, December 31, 1999. . . . . $ - $194 $79,240 $ - $ 7,954 $ - $ (709) $ 86,679 Comprehensive loss. . . . . . . - - - - (350) - (567) (917) Preferred stock issued. . . . . . . 28,425 - 11,877 - (11,877) - - 28,425 Preferred stock dividends earned. - - 753 - (753) - - - Shares issued in business acquisition - 5 3,095 - - - - 3,100 ------- ---- -------- ------ ---------- -------- -------- --------- BALANCE, June 30, 2000. . . . . . . $28,425 $199 $94,965 $ - $ (5,026) $ - $(1,276) $117,287 ======= ==== ======== ====== ========== ======== ======= ========= BALANCE, December 31, 2000. . . . . . $28,425 $199 $96,197 $ - $ (62,109) $ - $ (603) $ 62,109 Comprehensive loss. . . . . . . . . . . . - - - (42,599) (1,561) (1,006) (45,166) Preferred stock dividends: Earned and payable in common stock . - - 1,384 - (1,384) - - - Earned and payable in cash . . . . . - - - - (38) - - (38) Convert into shares of pref.stock 1,710 - (1,710) - - - - - Paid in cash . . . . . . . . . . . - - (1,140) - - - - (1,140) Additional warrants earned . . . . - - - 773 (773) - - - Warrants issued with preferred stock. - - - 5,733 - - - 5,733 ------- ---- -------- ------ ---------- -------- -------- --------- BALANCE, June 30, 2001. . . . . . . . $30,135 $199 $94,731 $6,506 $(106,903) $(1,561) $(1,609) $ 21,498 ======= ==== ======== ====== ========== ======== ======== =========
The accompanying notes to consolidated financial statements are an integral part of these statements.
ABC-NACO INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the For the Three Months Ended Six Months Ended June 30, June 30, -------------------- -------------------- 2001 2000 2001 2000 --------- --------- --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $(24,480) $ 154 $(42,599) $ (350) Adjustments to reconcile net loss to net cash used in operating activities Nonrecurring losses 8,560 - 8,560 1,589 Gain from sale of discontinued operation, net of tax (1,886) - (1,886) - Equity income of unconsolidated joint ventures (705) (854) (1,348) (1,307) Depreciation and amortization 9,129 8,683 18,461 17,057 Deferred income taxes - (28) - (9) Changes in certain assets and liabilities, net of effect of disposed businesses Accounts receivable 8,529 2,705 1,282 (19,938) Inventories 4,281 (12,479) 15,151 (17,019) Prepaid expenses and other current assets (759) (847) (1,030) (1,307) Other noncurrent assets 613 (237) 525 (1,320) Accounts payable and accrued expenses (11,560) (3,936) (9,152) (9,496) Other noncurrent liabilities 1,630 80 3,088 (160) --------- --------- --------- --------- Net cash used in operating activities (6,648) (6,759) (8,948) (32,260) --------- --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (1,773) (4,284) (5,251) (10,760) Dividends from unconsolidated joint venture - 658 - 658 Cost of business acquisition - (2,000) - (2,000) Net proceeds from sale of assets and businesses 18,690 - 38,620 - --------- --------- --------- --------- Net cash provided by (used in) investing activities 16,917 (5,626) 33,369 (12,102) --------- --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings (payments) under revolving lines of credit (17,687) 14,517 (30,392) 17,274 Change in cash overdrafts (1,130) (2,138) (2,847) - Borrowings of term debt 15,158 44 15,158 - Payment of term debt (15,494) - (16,031) (959) Payment of financing costs (3,279) (3) (4,029) (694) Payment of cash dividend (1,140) - (1,140) - Net proceeds from sale of redeemable preferred stock and warrants 13,909 - 13,909 28,425 --------- --------- --------- --------- Net cash provided by (used in) financing activities (9,663) 12,420 (25,372) 44,046 --------- --------- --------- --------- Net increase (decrease) in cash and cash equivalents 606 35 (951) (316) CASH AND CASH EQUIVALENTS, beginning of period 654 - 2,211 351 --------- --------- --------- --------- CASH AND CASH EQUIVALENTS, end of period $ 1,260 $ 35 $ 1,260 $ 35 ========= ========= ========= =========
The accompanying notes to consolidated financial statements are an intergral part of these statements. ABC-NACO INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION ABC-NACO is one of the world's leading suppliers of technologically advanced products to the rail industry. With four technology centers around the world, ABC-NACO holds market positions in the design, engineering and manufacture of high-performance freight car, locomotive and passenger suspension and coupling systems, wheels and mounted wheel sets. The Company also supplies railroad and transit infrastructure products and services and technology-driven specialty track products. It has offices and facilities in the United States, Canada, Mexico, Scotland, Portugal and China. The accompanying unaudited consolidated financial statements include, in the opinion of management, all adjustments (consisting of only normal recurring adjustments) necessary for a fair presentation of the results of operations and financial condition of the Company for and as of the interim dates. Results for the interim periods are not necessarily indicative of results for the entire year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The Company believes that the disclosures contained herein are adequate to make the information presented not misleading. These unaudited consolidated financial statements should be read in conjunction with the information and the consolidated financial statements and notes thereto included in the Company's Amended Annual Report on Form 10-K/A-1 for the year ended December 31, 2000. 2. CURRENT BUSINESS SITUATION The Company has incurred large operating losses in 2000 and through June 30, 2001, and has experienced increasing cash flow constraints since the second half of 2000. Some of the Company's businesses have been adversely impacted by several industry issues, including, among other things, a dramatic decline in the new freight railcar and locomotive building industry, higher fuel costs and general decline in the overall United States economy. Due to these and other conditions, the Company's financial strength has deteriorated leading to a reduction in the Company's operating flexibility. The Company responded to these conditions during 2000 and early 2001 by initiating or completing several restructuring and new financing plans, selling non-core business operations and assets and negotiating and amending various terms under its major lending agreements. However, the especially difficult operating environment during the fourth quarter of 2000 and first six months of 2001, and the resulting pressure on the Company's financial covenants and liquidity, has led to the Company taking additional actions in order to improve its overall viability as a business concern. Some of those actions included: The Company accepted the resignation of its Chairman and Chief Executive Officer on April 3, 2001. A non-executive director, Mr. Daniel W. Duval, has assumed the responsibility of Chairman of the Board and Vaughn W. Makary, the Chief Operating Officer and President, has been appointed as the new Chief Executive Officer. The Board of Directors, which approved the management change, has charged the new CEO with a mission to quickly implement additional changes within the organization that will return the Company to profitability. As further described in Note 4, on February 23, 2001, the Company sold its freight, railcar and transit signaling systems and services business for approximately $21.1 million and, on May 2, 2001, sold its Flow and Specialty Products business for $24.0 million. A significant portion of the proceeds from these sales were used to permanently reduce outstanding borrowing commitments under the Company's primary bank credit facility (the "Credit Facility"). The Company and FS Private Investments LLC ("FS") entered into a short term secured note for $15.0 million on May 2, 2001 which was repaid with proceeds from the issuance of Series C preferred stock on June 26, 2001. The proceeds ($13.0 million net of fees paid) of the loan were used for general corporate purposes, primarily for working capital needs. See Note 5 for a complete description of the short-term note agreement and Note 7 for the provisions of the Series C preferred stock and the exchange of Series B preferred stock for a new Series B-1 preferred stock. On May 2, 2001, the Company and its senior bank lenders entered into the Fourth Amended and Restated Credit Facility. See Note 5 for a description of the major amendment provisions and issuance of common stock warrants to the lenders. In June 2001, the Company and holders of the Senior Subordinated Notes entered into an agreement that waived certain defaults and amended certain terms of the notes. See Note 5 for a description of the major changes in this agreement. In addition, the Company has taken steps to further reduce operating costs. Such actions include, among other things: The sale or extended mothballing of its wheel making facility. The additional consolidation of production plants and/or particular product lines to take advantage of utilizing available capacity in certain plants with lower labor and other production costs. Idled plants or manufacturing lines will be sold or held for future use. A significant reduction in selling, general and administrative costs through headcount reductions, in certain cases as a result of the plant consolidations and sales, strict control over variable administrative costs, including certain incentive compensation, and simplification of production processes. In addition, the Company has relocated its corporate headquarters into an existing administration building. A significant reduction in capital spending. Capital spending over the recent years was increased over normal levels for a variety of reasons, most substantially due to the Company investing in new technologies to improve its manufacturing processes and products. As many of those capital programs are now complete, including the new rail milling facility in Illinois and the technology driven process changes at several North American plants, capital spending will decrease to significantly lower levels in 2001 and beyond. On July 25, 2001, the Company's Cicero, Illinois foundry experienced a partial roof collapse. Operations have since started after an approximately two-week interruption. The Company believes all costs to repair the facility, damaged equipment and related business interruption costs will be recovered under its insurance policies. Recently released U.S. freight car statistics for the second quarter of 2001 show the lowest levels of orders, deliveries and backlog of new freight cars in over a decade. This trend has resulted in excess capacity that is having a negative impact on the Company. The Company has responded to this severe market downturn by reducing the number of operating facilities and employees. While the financial arrangements completed on May 2, 2001 have provided some financial flexibility, there is only a small amount of unused availability under the U.S. senior bank revolving credit agreement at this point in time ($1.9 million as of August 10, 2001). The Company has met its obligations to date by managing the collection of its receivables, reducing inventory levels, significantly reducing capital expenditures and controlling operating expenses. The ability of the Company to continue as a going concern in the near term is dependent upon having available financing and in the longer term is dependent upon generating positive cash flow. While management has taken a number of actions to reduce costs and conserve cash, certain economic and other future conditions are not in the Company's control; and as such, no assurance can be given that the Company will be successful in its efforts to generate positive cash flow. Accordingly, the Company is exploring a number of alternatives, which include, among others, one or more transactions of a financing or operating nature or a sale of assets in a further attempt to reduce debt and/or to provide additional cash resources during this downturn. However, there can be no assurances that any of these alternatives, including possible asset dispositions and cost cutting initiatives, will be successful or that such alternatives will not result in significant impairment or other changes in the near term future. 3. BUSINESS ACQUISITION On June 23, 2000, the Company acquired certain assets of Donovan Demolition, Inc. ("Donovan") located in Danvers, Illinois. In addition, the Company acquired a patent from a shareholder of Donovan. The total purchase price of $7.6 million for these assets included $2.0 million in cash, a $2.5 million note and 500,000 shares of the Company's common stock valued at $3.1 million. 4. BUSINESS AND MAJOR ASSET DISPOSITIONS In 2000, the Company adopted a formal plan to sell its Flow and Specialty Products assets and businesses, which produced and sold steel and high alloy valve and related castings. Accordingly, the results of the Flow and Specialty segment have been reflected as Discontinued Operations in the accompanying financial statements. Net sales from discontinued operations for the first six months of 2001 and 2000 were $23.8 million and $43.9 million, respectively. Discontinued operations results do not include an allocation of general corporate or interest expense. On May 2, 2001, the Company sold this business to Matrix Metals LLC (a new company formed by members of the management of the business and FS) for $24.0 million subject to a purchase price adjustment for any decrease from net assets as defined. The sales price was in excess of the carrying value of the net assets sold and includes a seven year $4.0 million junior subordinated note bearing interest at 8% per annum. The Company realized a $1.9 million after-tax gain on this sale. Assets and liabilities of the Flow and Specialty segment consisted of the following at December 31, 2000 (in thousands):
DEC. 31, 2000 -------------- Accounts receivable, net. . . . . . $ 9,955 Inventories . . . . . . . . . . . . 3,976 Prepaid expenses. . . . . . . . . . 67 Property, plant, and equipment, net 18,568 -------------- Total assets. . . . . . . . . . . . 32,566 Accounts payable. . . . . . . . . . 9,150 Accrued expenses. . . . . . . . . . 1,369 Term debt . . . . . . . . . . . . . 233 -------------- Net assets to be disposed of. . . . $ 21,814 ==============
On December 28, 2000, the Company sold its 50% ownership in Anchor Brake Shoe, L.L.C. ("Anchor"). Anchor designed, manufactured, marketed and sold railcar composite brake shoes. Proceeds received from the sale were $10.4 million which were used to reduce borrowings under the Credit Facility. The Company realized a $3.6 million gain on this sale. In February 2001, the Company sold its freight railroad and transit signaling systems and services business for a cash sales price of $21.1 million, subject to a purchase price adjustment based on final net assets purchased. Of the net proceeds, $18.5 million was used to permanently reduce outstanding borrowing commitments under the Credit Facility. As sale proceeds were insufficient to completely cover non deductible goodwill related to the business, the Company recorded in December 2000 an impairment charge of $1.8 million. Additionally, the Company recorded a December 2000 deferred income tax charge of $2.5 million related to the estimated taxable gain incurred upon the sale. The Company is currently in discussions with the buyer over the determination of the final net assets acquired. The buyer has asserted claims aggregating approximately $5.7 million on the purchase balance sheet. The Company believes that the purchase balance sheet was prepared in accordance with the terms of the purchase agreement. No assurances, however, can be given on this outcome, nor can the Company reasonably estimate if any adjustment to the net acquired assets may be required. Any such adjustment to the net assets acquired will result in an adjustment to the Company's recorded after-tax loss on the sale of this business. The Company believes this issue will be resolved during 2001. The Company also retained certain contracts and other receivables of the signaling business, primarily related to various completed contracts and other projects in progress. Retained receivables aggregated $18.4 million as of the sale date. Because the Company no longer has a continuing interest in the signaling business, collection of these receivables is expected to be hampered. Accordingly, the Company recorded a $6.0 million reserve in December 2000 reflecting management's best estimate of the collectibility of these amounts. As of June 30, 2001 the net book value of the retained receivables is $10.6 million, reflecting ongoing collection efforts. 5. DEBT CREDIT FACILITY - ----------------- At the merger date on February 19, 1999, the Company entered into a senior secured loan agreement (the "Credit Facility") with a group of banks to finance North American operations. Substantially all of the Company's North American assets, including the stock of certain subsidiaries, have been pledged as security for the Credit Facility. During late 1999 and 2000, the Company entered into a number of amendments, restatements and waivers of the Credit Facility. The primary results of those changes included a) the modification of several financial covenants that the Company otherwise would not have been in compliance with as of October 31, 1999, December 31, 1999 or September 30, 2000; b) the modification of the pricing grid which had the effect of increasing the applicable interest rates and lender fees; c) the establishment of scheduled commitment reductions and d) the release of certain collateral related to the Company's Mexican subsidiary. The Company was not in compliance with several of the financial covenants under the Credit Facility as of December 31, 2000 and March 31, 2001. Accordingly, on May 2, 2001, the Company negotiated a further amendment of the Credit Facility with its senior lenders. The primary terms of this amendment include a) a waiver for all financial covenant and other provision violations as of December 31, 2000 through May 2, 2001, b) acceleration of the final maturity date of the facility from July 31, 2003 to January 5, 2003, c) approval of the FS Bridge Note, d) maximum aggregate commitments and outstanding borrowings permanently reduced to $152 million on December 31, 2001 and $150 million by April 2002 e) mandatory prepayments and further permanent reductions of maximum commitments required upon qualifying assets sales, tax refund, collections, equity and debt issuances (excluding FS Series C preferred stock and FS Bridge Note) and upon incurrence of Excess Cash Flow, as defined, f) interest rates increased, for all borrowings, to Prime plus 2.75%, g) certain additional collateral required, h) default provisions were modified, including additional provisions regarding the FS Bridge Note, and i) existing covenants were replaced by a rolling, quarterly minimum EBITDA covenant, a maximum capital expenditure covenant, and a loan to value covenant, all as defined. An amendment fee of $0.8 million was paid on the date of the amendment and a similar amount is due at final maturity. The weighted average interest rate on the $146.2 million of debt outstanding as of June 30, 2001 under the Credit Facility was 9.5%. The amount of availability under the Credit Facility as of June 30, 2001 was $4.1 million. The rolling minimum EBITDA covenant applies for the first time for the two month period ending June 30, 2001 and requires EBITDA to be no less than $2.2 million for that two month period. Actual EBITDA for covenant compliance purposes was $3.6 million. The loan to value covenant requires a minimum ratio of 1.24 of eligible receivables, inventories and property values to maximum loan commitment. The actual ratio at June 30, 2001 was 1.30. As such, the Company was in compliance with these and all other covenants under the Credit Facility as of June 30, 2001. However, as existing weak market conditions continue in the rail industry, there can be no assurance that the Company will continue to meet these financial covenants in future periods. Accordingly, the Company has reflected all current borrowings as short-term obligations. A failure to meet future covenants could in turn result in the Company's lenders accelerating payment of borrowings under the Credit Facility. If accelerated, the Company will be required to further refinance its existing indebtedness, seek additional financing, or issue common stock or other securities to raise cash to assist in financing its operations. The Company has no current commitments or arrangements for such financing alternatives, and there can be no assurances that such financing alternatives will be available on acceptable terms, or at all. The Company's inability to make any payments when due or to satisfy its financial covenants under its existing borrowing facilities could have a material adverse effect on the Company. The senior lenders also received in connection with the May 2, 2001 amendment of the Credit Facility warrants to purchase up to two percent, on a fully diluted basis, of the Company's common stock at $0.01 per share. The warrants and resulting common shares are redeemable by the Company at the holder's option after five years at a per share price equal to the greater of a pre-determined fixed price or the market value per share of the Company's common stock. The value of these warrants, $1.0 million upon issuance, is reflected in the accompanying balance sheets as additional deferred financing costs within other non-current assets. Changes in the value of these warrants are reflected as non-operating gains or losses in the period of change. SENIOR SUBORDINATED NOTES - --------------------------- On February 1, 1997 and December 23, 1997 the Company issued $50 million of 9 1/8% Senior Subordinated Notes and $25 million of 8 3/4 % Senior Subordinated Notes (the "Notes") respectively. As a result of an amendment in 2000, the interest rate on all Notes was increased to 10 1/2% effective October 1, 2000. The Notes are general unsecured obligations of the Company and are subordinated in right of payment to all existing and future senior indebtedness of the Company. The Notes will mature in 2004, unless repurchased earlier at the option of the Company at 100% of face value. The Notes are subject to mandatory repurchase or redemption prior to maturity upon a Change of Control, as defined. The indenture under which the Notes were issued limits the Company's ability to (i) incur additional indebtedness, (ii) complete certain mergers, consolidations and sales of assets, and (iii) pay dividends or other distributions. Pursuant to the Notes indentures, the Company was required to meet certain financial covenants including minimum operating coverage, minimum consolidated net worth and, upon issuance of certain new indebtedness, maximum funded debt to capitalization, all as defined. The 2000 amendment reduced the minimum interest coverage ratio from 2.4:1.0 to 1.8:1.0 effective September 30, 2000. For purposes of the covenant calculations, various adjustments are made to reported balances. In June 2001, the Company successfully completed an amendment of its Notes. Holders of the Notes approved, among other things, a) an increase of the interest rate to 11 1/2% effective January 1, 2001 b) suspension of the Operating Coverage Ratio covenant, as defined, until March 31, 2002 and then gradually increase the minimum required ratio back to 1.8:1.0 and c) deletion of the Consolidated Net Worth covenant, as defined. Additionally, the Company was granted a waiver of all defaults under the Notes as of December 31, 2000 and through June 30, 2001. The Company paid each consenting holder a fee of $10 for each $1,000 principal amount of the holder's Notes, which totaled $0.6 million. Additional amendment fees of $0.6 million were reflected as additional interest expense in the second quarter. FS BRIDGE NOTE - ---------------- On May 2, 2001, the Company received a $15 million secured, short-term loan due in January 2002 from certain investment funds managed by FS (the "FS Bridge Note"). There were no requirements to use any portion of the net $13.0 million of proceeds from this borrowing to further reduce outstanding borrowings under the Credit Facility. As such, the Company retained these funds for general corporate purposes, primarily to fund its current working capital needs. The FS Bridge Note was repaid on June 26, 2001 with proceeds from the issuance of a new series of redeemable, convertible preferred stock purchased by funds managed by FS. Accrued interest ($0.2 million) on these notes was rolled into a new non-interest bearing note due in January 2003. 6. INVENTORIES Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out method for substantially all inventories. Inventory costs include material, labor and manufacturing overhead. Inventories at June 30, 2001, and December 31, 2000, consisted of the following (in thousands):
June 30, Dec. 31, 2001 2000 --------- --------- Raw materials. . . . . . . . . . . $ 36,207 $ 39,476 Supplies and spare parts . . . . . 7,662 7,966 Work in process and finished goods 35,131 50,052 --------- --------- $ 79,000 $ 97,494 ========= =========
7. PREFERRED STOCK On March 8, 2000, the Company issued 300,000 shares of Series B cumulative convertible preferred stock ($1 par value) to private equity funds managed by FS for $30 million. The preferred stock had certain voting rights and paid dividends at the rate of 8% per annum accrued semi-annually to be paid in the form of common stock or cash, at the discretion of the Company. The preferred stock was convertible into common stock at the average closing price of the Company's common stock for the thirty trading days ending February 17, 2000, which was $9.00 per share. The preferred stock could have been converted into common shares at the Company's option under certain conditions at any time three years after issuance. The net proceeds received from the sale of preferred stock were applied to reduce the outstanding indebtedness under the Credit Facility. While the conversion price could have changed under specific conditions, the $9.00 per share price on the date that the Company and the preferred stock holders were committed to completing the transaction represented a discount from the market value of the underlying common stock on that date by an aggregate $11.9 million. This discount represents the value of the beneficial conversion feature of the preferred stock. Accordingly, the Company initially recorded the value of the preferred stock as $18.1 million with the $11.9 million credited to Additional Paid-In Capital, offset by $1.6 million in fees paid to ING Furman Selz Investments. Since the preferred stock is convertible at any time at the holders' option, this discount also represents an immediate deemed dividend to those holders at the date of issuance. Accordingly, upon issuance, the Company also recorded a $11.9 million dividend to these holders. As part of the May 2, 2001 transactions, the Company paid 40% of the outstanding accumulated Series B dividends ($1.1 million) in cash. The Company then exchanged the outstanding shares of Series B preferred stock and remaining accumulated dividends for 317,098 shares of Series B-1 preferred stock. The Series B-1 preferred stock has terms similar to the Series B preferred stock except that the Series B-1 stock has an annual dividend rate of 10% and becomes redeemable at the holder's option under certain change of control conditions at a premium conversion price payable in common stock. Dividend payments can be deferred until April 2003. Such deferrals (in the form of common stock) as of June 30, 2001 were $0.5 million. On June 26, 2001 the Company issued 150,000 shares of Series C redeemable, convertible preferred stock ($1.00 par value) to private equity funds managed by FS for $15 million. The Series C preferred stock; a) pays dividends at a rate of 10% per annum payable semi-annually in cash except that the first two years of dividends can be deferred and paid in April 2003, b) is convertible at a price equal to $2.50 per share of the Company's common stock, c) is callable at the Company's option upon certain events and d) is redeemable at the holder's option at $200 per share plus any accumulated dividends, if any, in the event of a change in control, as defined. Also upon issuance of the preferred stock, FS received immediately exercisable warrants to purchase 6.0 million shares of the Company's common stock at a price of $0.01 per share. These warrants were valued at $5.7 million (net of issuance costs of $0.4 million) and are reflected as a separate line item within Stockholders' Equity. Additional warrants to purchase 750,000 shares of common stock at a price of $0.01 per share will become exercisable for every quarter beginning July 1, 2001 if earnings before interest, taxes, depreciation and amortization ("EBITDA"), as defined, for the preceding twelve month period is less than $70.0 million and no sale of the Company has occurred by the end of such quarters. In any event, the holders of the additional warrants will not receive more than 6.0 million shares pursuant to the additional warrants. The value of these additional warrants will be accounted for as special preferred stock dividends as they become exercisable. As of June 30, 2001, the Company's EBITDA for the preceding twelve month period was less than $70 million and 750,000 additional warrants valued at $0.8 million, became exercisable on July 1, 2001. The warrants also contain anti-dilution provisions for certain changes in the Company's equity securities. 8. NONRECURRING LOSSES (GAINS) Nonrecurring losses (gains) for the three and six months ended June 30, 2000 and 2001 consisted of the following (in thousands):
Three Months Ending Six Months Ending June 30, June 30, ---------------------- ------------------ 2001 2000 2001 2000 --------------------- -------------------- Restructuring charges. $9,169 $ - $9,169 $1,589 Insurance proceeds in excess of fire losses (609) - (609) - -------------------- ------- ------ $ 8,560 $ - $8,560 $1,589 ======= ======= ======= ======
All of the restructuring charges recorded by the Company were computed based on actual cash payouts, management's estimate of realizable value of the affected tangible and intangible assets and estimated exit costs including severance and other employee benefits based on existing severance policies. The Company expects that these restructuring efforts will result in reduced operating costs, including lower salary and hourly payroll costs and depreciation/amortization. The Company recorded restructuring charges of $9.2 million during the six months ending June 30, 2001 consisting of $6.8 million of severance and related benefit costs for salaried and hourly workforce reductions, $0.7 million in ongoing facility costs associated with the relocation of the corporate headquarters and $1.7 million of additional costs associated with prior restructuring initiatives. Planned permanent reductions in employment levels resulted in a charge of $6.8 million, representing cash severance and related benefit costs for approximately 100 salaried employees and approximately 200 hourly plant employees throughout the Company. As of June 30, 2001, $1.5 million of costs have been paid. Approximately 97% of the remaining payments will occur in the next six months, with some payments continuing through 2005 for certain severed employees. An additional $1.7 million provision was recorded in 2001 related to prior restructuring initiatives, primarily related to the Company's closed facility in Melrose Park, Illinois which was not sold as quickly as initially expected. The Company estimates that the Melrose Park facility will be sold in the third quarter of 2001. The following table is a summary roll forward of the restructuring reserves recorded in 2001 (in millions):
Aggregate Charge Payments Balance ---------- ---------- -------- Cash provisions: Employee severance & benefits . . . . . . $ 7.1 $ (1.5) $ 5.6 Idle facility and property disposal costs 2.1 (0.7) 1.4 ---------- ---------- -------- Total cash costs . . . . . . . . . . . $ 9.2 $ (2.2) $ 7.0 ========== ========== ========
The Company recorded restructuring charges of $10.8 million during 2000, of which $1.6 million was recorded in the six months ending June 30, 2000. The restructuring charges consisted of costs associated with the planned closing of its Melrose Park, Illinois plant ($2.8 million), additional costs associated with prior restructuring initiatives ($1.1 million), and severance and related benefit costs for permanent salaried and hourly workforce reductions ($6.9 million). Due largely to the implementation of improved manufacturing processes in some of its other production facilities, the Company announced the closure of its Melrose Park, Illinois Rail Products facility, and recorded a $2.8 million restructuring charge for related closure costs. Total cash costs associated with the Melrose Park closure include $0.4 million of severance and related benefit costs for approximately 242 hourly and 42 salaried employees (substantially all of whom were terminated during the first quarter of 2001) and $1.1 million of idle facility and property disposal costs expected to be incurred from the time of vacancy through the estimated sale date of the property. An additional $1.3 million of non-cash costs were recorded for the expected write-off of equipment to be scrapped or sold. An additional $1.1 million provision was recorded in 2000 related to prior restructuring initiatives, primarily related to the Company's idled facilities in Anderson, Indiana and Cincinnati, Ohio which were not sold as quickly as initially expected. The Cincinnati facility was sold in February 2001. Planned permanent reductions in employment levels resulted in a charge of $6.9 million, representing cash severance and related benefit costs for approximately 90 salaried employees and 30 hourly plant employees throughout the Company, including its closed Verona, Wisconsin offices, and required cash severance payments made to approximately 340 production employees at the Company's Sahagun, Mexico facility. As of June 30, 2001, $4.8 million of costs have been paid. The majority of the remaining payments will occur in 2001, with some payments continuing through 2002 for certain severed employees. The following table is a summary roll forward of the restructuring reserves recorded in 2000 (in millions):
Aggregate Charge Payments Balance ---------- ---------- -------- Cash provisions: Employee severance & benefits . . . . . . $ 7.3 $ (4.8) $ 2.5 Idle facility and property disposal costs 2.2 (2.2) 0.0 ---------- ---------- -------- Total cash costs . . . . . . . . . . . 9.5 $ (7.0) $ 2.5 ========== ======== Non-cash asset write-downs . . . . . . . . . 1.3 ---------- Total. . . . . . . . . . . . . . . . . $ 10.8 ==========
On June 29, 2001, the Company experienced a fire at a storage facility located on its Leven, Scotland property. The building damaged by the fire was used mainly to store equipment maintenance parts and tooling and some patterns. The Company recorded a $0.6 million gain on insurance proceeds in the second quarter of 2001. Additional insurance proceeds over and above the carrying values of lost parts, tooling and patterns may be forthcoming. The Company experienced some business interruption in the weeks following the fire, but the main production facility was not affected. 9. BUSINESS SEGMENT INFORMATION On April 3, 2001, the Board of Directors approved a management change that appointed the Company's former Chief Operating Officer and President as the new Chief Executive Officer. With that management change, the Company reevaluated its operations and business segment reporting. In the second quarter of 2001, a change was made from the previous two continuing business segments to three in order to more properly evaluate and manage the Company's operations. All comparable results from previous periods have been restated to conform to the new segment reporting. The Company currently conducts its operations through three business segments: Rail Products, Rail Services and Track Products. In late 2000, the Company decided to discontinue the operations of its Flow and Specialty Products segment which was sold on May 2, 2001. The Company's three distinct business segments generally serve the rail market. They are managed separately since each business requires different technology, servicing and marketing strategies. The following describes the types of products and services from which each segment derives its revenues: Rail Products Freight car and locomotive castings Rail Services Wheel set mounting and assembly Track Products Specialty trackwork To evaluate the performance of these segments, the Chief Executive Officer examines operating income or loss before interest and income taxes, as well as operating cash flow. Operating cash flow is defined as operating income or loss plus depreciation and amortization. The accounting policies for the operating segments are the same as those for the consolidated company. Intersegment sales and transfers are accounted for on a cost plus stipulated mark-up which the Company believes approximates arm's length prices. Corporate headquarters primarily provides support services to the operating segments. The costs associated with these services include interest expense, income tax expense (benefit), and non-recurring losses and gains, among other costs. These costs are not allocated to the segments and are included within ''Other'' below. The following tables present a summary of operating results by segment and a reconciliation to the Company's consolidated totals (in thousands):
Three Months Ending Six Months Ending June 30, June 30, --------------------- ----------------- 2001 2000 2001 2000 ------- ------ ------ ------ REVENUES - ---------------------------- Rail Products. . . . . . . . $ 40,013 $ 71,312 $ 89,912 $150,467 Rail Services. . . . . . . . 32,686 38,257 65,538 73,598 Track Products . . . . . . . 26,703 29,972 48,379 53,781 Elimination and Other. . . . (1,976) (5,220) (3,690) (9,703) --------------------- -------------- --------- --------- Continuing Operations. . . . 97,426 134,321 200,139 268,143 Flow and Specialty Products. 4,733 20,733 23,753 43,889 --------------------- ---- --------- --------- --------- Total. . . . . . . . . . . $ 102,159 $ 155,054 $223,892 $312,032 ===================== ============== ========= ========= Three Months Ending. . . Six Months Ending June 30, . . . . . . . . June 30, ---------------------------- -------------- 2001 2000 2001 2000 -------- ------ ------ ------ OPERATING INCOME (LOSS) - ---------------------------- Rail Products. . . . . . . . $ (9,178) $ 3,582 $(16,168) $ 7,820 Rail Services. . . . . . . . 3,116 4,580 5,946 9,342 Track Products . . . . . . . 249 897 (1,186) 651 Nonrecurring losses. . . . . (8,560) - (8,560) (1,589) Other. . . . . . . . . . . . (6,314) (5,785) (12,013) (10,720) --------------------- ------------- --------- --------- Continuing Operations. . . . (20,687) 3,274 (31,981) 5,504 Flow and Specialty Products. 1,993 1,579 2,308 3,582 --------------------- ------------- --------- --------- Total. . . . . . . . . . . $ (18,694) $ 4,853 $(29,673) $ 9,086 ===================== ============= ========= =========
10. NEW ACCOUNTING PRONOUNCEMENT In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes new and revises several existing standards for derivative instruments and hedging activities. It requires an entity to recognize all derivatives as either assets or liabilities on the balance sheet and measure those instruments at fair value. If certain conditions are met, a derivative may be designated as a cash flow hedge, a fair value hedge or a foreign currency hedge. An entity that elects to apply hedge accounting is required to establish at the inception of the hedge the method it will use for assessing the effectiveness of the hedge and the measurement method to be used. Changes in the fair value of derivatives are either recognized in earnings in the period of change or as a component of other comprehensive income (loss) in the case of certain hedges. On June 30, 2001, the Company's financial statements reflect liabilities of $1.6 million with an offset to Other Comprehensive Income to reflect adoption of SFAS No.133 for certain interest rate swap contracts. On July 20, 2001, the FASB issued statement No. 141, "Business Combinations" and statement No. 142, "Goodwill and Other Intangible Assets". Statement No. 141 requires all business combinations initiated after June 30, 2001, to be accounted for using the purchase method. This has no immediate effect on the Company. With the adoption of statement No. 142 as of January 1, 2002, existing goodwill on the Company's books will no longer be amortized. Rather, goodwill will be subject to at least an annual assessment for impairment by applying a fair-value based test. Net goodwill carrying value for the Company as of June 30, 2001 is $7.7 million. Amortization of goodwill for the three and six month periods ended June 30, 2001 was $0.1 million and $0.3 million, respectively. 11. UNCONSOLIDATED JOINT VENTURE In May 1996, the Company entered into a joint venture with China's Ministry of Railroads to establish the Datong ABC Castings Company, Ltd ("Datong"). The joint venture manufactures wheels in China primarily for the Chinese railway markets. The Company's contribution of its 40% share in Datong consists of technical know-how, expertise and cash. The cash funding was used to construct a manufacturing facility, which became operational in early 1999. The intangible component of the Company's contribution was valued at $1.8 million and such amount is ratably being recognized as additional equity earnings. The Company earns royalties on certain sales from this venture. The Company's investment in Datong was $10.5 million as of June 30, 2001. Summarized financial information for Datong for the three and six months ended June 30, 2001, and 2000 is as follows (in thousands):
Three Months Ending Six Months Ending June 30, June 30, -------------------- -------------- 2001 2000 2001 2000 --------- ---------- ------- ------- Net sales. . $ 7,906 $ 6,216 $16,782 $11,513 Gross profit 2,236 1,426 4,570 2,224 Net income . 1,576 720 3,288 877
12. SUPPLEMENTAL CASH FLOW A summary of supplemental cash flow information follows (in thousands):
Three Months Ended Six Months Ended June 30, June 30, ----------------- ----------------- 2001 2000 2001 2000 ----------- ------------ ------- -------- Interest paid in cash. . . . . . . . $ 7,683 $ 5,033 $15,191 $11,580 =================== ========== ======= ======== Income taxes paid (refunds received) in cash . . . . . . . . . $ 376 $ 89 $ 334 $(1,409) =============== ============= ======= ======== Proceeds from the sale of Cincinnati facility. . . . . $ - $ - $ 581 $ - =============== ============= ======= ======== Disposition of Businesses (Note 4): Working capital . . . . . . . . . . $ 4,151 - $11,729 - Property, plant and . . . . . . . . - equipment. . . . . . . . . . . . . 14,061 - 16,055 - Other noncurrent assets . . . . . . 1,397 - 11,174 - --------------- ------------- ------- -------- Net assets sold . . . . . . . . . 19,609 - 38,958 - Consideration: Note receivable. . . . . . . . . . 4,000 - 4,000 - Cash, net of selling expense. . . . . . . . . . . . . . 18,690 - 38,039 - --------------- ------------- ------- -------- Gain (loss). . . . . . . . . . . $ 3,081 $ - $ 3,081 $ - =============== ============= ======= ========
ITEM 2 ABC-NACO INC. Management's Discussion and Analysis of Financial Condition and Results of Operations The following is management's discussion and analysis of certain significant factors which have affected the Company's financial condition and results of operations during the interim periods included in the accompanying unaudited Consolidated Financial Statements. ABC-NACO is one of the world's leading suppliers of technologically advanced products to the rail industry. With four technology centers around the world, ABC-NACO holds market positions in the design, engineering and manufacture of high-performance freight car, locomotive and passenger suspension and coupling systems, wheels and mounted wheel sets. The Company also supplies railroad and transit infrastructure products and services and technology-driven specialty track products. It has offices and facilities in the United States, Canada, Mexico, Scotland, Portugal and China. In December 2000, the Company sold its 50% interest in Anchor Brake Shoe LLC. In February 2001, the Company sold its freight railroad and transit signaling systems and services business. Also, in late 2000, the Company decided to discontinue the operations of its Flow and Specialty Products segment. On May 2, 2001, this segment was sold to Matrix Metals LLC, a new company formed by members of the Division's management and investment funds managed by Furman Selz Private Investments ("FS"). This segment primarily supplied steel and high alloy valve and related castings for industrial flow control systems. The operating results of this segment have been reflected as discontinued operations in the accompanying statements of operations. On June 23, 2000, the Company acquired certain assets of Donovan Demolition, Inc. ("Donovan") located in Danvers, Illinois. In addition, the Company acquired a patent from a shareholder of Donovan. The total purchase price of $7.6 million for these assets included $2.0 million in cash, a $2.5 million note and 500,000 shares of the Company's common stock valued at $3.1 million. The Donovan bargain purchase amount of $2.6 million has been deducted from the appraised value of property, plant and equipment. CURRENT BUSINESS SITUATION The Company has incurred large operating losses in 2000 and through June 30, 2001, and has experienced increasing cash flow constraints since the second half of 2000. Some of the Company's businesses have been adversely impacted by several industry issues, including, among other things, a dramatic decline in the new freight railcar and locomotive building industry, higher fuel costs and general decline in the overall United States economy. Due to these and other conditions, the Company's financial strength has deteriorated leading to a reduction in the Company's operating flexibility. The Company responded to these conditions during 2000 and early 2001 by initiating or completing several restructuring and new financing plans, selling non-core business operations and assets and negotiating and amending various terms under its major lending agreements. However, the especially difficult operating environment during the fourth quarter of 2000 and first six months of 2001, and the resulting pressure on the Company's financial covenants and liquidity, has led to the Company taking additional actions in order to improve its overall viability as a business concern. Some of those actions included: The Company accepted the resignation of its Chairman and Chief Executive Officer on April 3, 2001. A non-executive director, Mr. Daniel W. Duval, has assumed the responsibility of Chairman of the Board and Vaughn W. Makary, the Chief Operating Officer and President, has been appointed as the new Chief Executive Officer. The Board of Directors, which approved the management change, has charged the new CEO with a mission to quickly implement additional changes within the organization that will return the Company to profitability. As further described in Note 4 to the Consolidated Financial Statements, on February 23, 2001, the Company sold its freight, railcar and transit signaling systems and services business for approximately $21.1 million and, on May 2, 2001, sold its Flow and Specialty Products business for $24.0 million. A significant portion of the proceeds from these sales were used to permanently reduce outstanding borrowing commitments under the Company's primary bank credit facility (the "Credit Facility"). The Company and FS Private Investments LLC ("FS") entered into a short term secured note for $15.0 million on May 2, 2001 which was repaid with proceeds from the issuance of Series C preferred stock on June 26, 2001. The proceeds ($13.0 million net of fees paid) of the loan were used for general corporate purposes, primarily for working capital needs. See Note 5 to the Consolidated Financial Statements for a complete description of the short-term note agreement and Note 7 to the Consolidated Financial Statements for the provisions of the Series C preferred stock and the exchange of Series B preferred stock for a new Series B-1 preferred stock. On May 2, 2001, the Company and its senior bank lenders entered into the Fourth Amended and Restated Credit Facility. See Note 5 to the Consolidated Financial Statements for a description of the major amendment provisions and issuance of common stock warrants to the lenders. In June 2001, the Company and holders of the Senior Subordinated Notes entered into an agreement that waived certain defaults and amended certain terms of the notes. See Note 5 to the Consolidated Financial Statements for a description of the major changes in this agreement. In addition, the Company has taken steps to further reduce operating costs. Such actions include, among other things: The sale or extended mothballing of its wheel making facility. The additional consolidation of production plants and/or particular product lines to take advantage of utilizing available capacity in certain plants with lower labor and other production costs. Idled plants or manufacturing lines will be sold or held for future use. A significant reduction in selling, general and administrative costs through headcount reductions, in certain cases as a result of the plant consolidations and sales, strict control over variable administrative costs, including certain incentive compensation, and simplification of production processes. In addition, the Company has relocated its corporate headquarters into an existing administration building. A significant reduction in capital spending. Capital spending over the recent years was increased over normal levels for a variety of reasons, most substantially due to the Company investing in new technologies to improve its manufacturing processes and products. As many of those capital programs are now complete, including the new rail milling facility in Illinois and the technology driven process changes at several North American plants, capital spending will decrease to significantly lower levels in 2001 and beyond. On July 25, 2001, the Company's Cicero, Illinois foundry experienced a partial roof collapse. Operations have since started after an approximately two-week interruption. The Company believes all costs to repair the facility, damaged equipment and related business interruption costs will be recovered under its insurance policies. Recently released U.S. freight car statistics for the second quarter of 2001 show the lowest levels of orders, deliveries and backlog of new freight cars in over a decade. This trend has resulted in excess capacity that is having a negative impact on the Company. The Company has responded to this severe market downturn by reducing the number of operating facilities and employees. While the financial arrangements completed on May 2, 2001 have provided some financial flexibility, there is only a small amount of unused availability under the U.S. senior bank revolving credit agreement at this point in time ($1.9 million as of August 10, 2001). The Company has met its obligations to date by managing the collection of its receivables, reducing inventory levels, significantly reducing capital expenditures and controlling operating expenses. The ability of the Company to continue as a going concern in the near term is dependent upon having available financing and in the longer term is dependent upon generating positive cash flow. While management has taken a number of actions to reduce costs and conserve cash, certain economic and other future conditions are not in the Company's control; and as such, no assurance can be given that the Company will be successful in its efforts to generate positive cash flow. Accordingly, the Company is exploring a number of alternatives, which include, among others, one or more transactions of a financing or operating nature or a sale of assets in a further attempt to reduce debt and/or to provide additional cash resources during this downturn. However, there can be no assurances that any of these alternatives, including possible asset dispositions and cost cutting initiatives, will be successful or that such alternatives will not result in significant impairment or other changes in the near term future. RESULTS OF OPERATIONS - ----------------------- THREE MONTHS ENDED JUNE 30, 2001 COMPARED TO THREE MONTHS JUNE 30, 2000 Net Sales. Consolidated net sales from continuing operations decreased $36.9 million or 27.5% to $97.4 million in the second quarter of 2001. New freight car orders and deliveries for the rail industry in the quarter were at their lowest levels in over a decade, significantly and adversely impacting sales for the Company's Rail Products segment, which manufactures side frames, bolsters, wheels and other components primarily sold to this market. Competitive pressure on selling prices and an unfavorable product mix also negatively impacted sales levels for the 2001 quarter. Sales in the Rail Products segment of $40.0 million in the quarter were $31.3 million or 43.9% lower than the corresponding period in 2000, accounting for almost 85% of the Company's consolidated sales shortfall versus last year. This segment was also impacted by a labor stoppage at the Company's Sahagun, Mexico facility that started at the end of May 2001 and is continuing. The Company estimates that $3.0 million of sales in June 2001 were delayed or lost due to the disruption of the work stoppage. The Company has shifted production requirements to its other foundries to accommodate the majority of customer requirements. Rail Services sales of $32.7 million were $5.6 million or 14.6% lower than last year for the second quarter. The low new freight car build rate in the industry also impacts this segment which supplies wheel sets for new cars as well as servicing used wheel sets on a continuing replacement basis. Track Products sales of $26.7 million in 2001 were 10.9% or $3.3 million below prior year partly due to lower volumes of track repair activity. A further reason for the decline in sales was the sale of the Company's former Rail Systems Division in the first quarter of 2001, which had sales of $5.1 million in the second quarter of the prior year. Gross Profit. Consolidated gross loss from continuing operations of $1.3 million compares to a gross profit of $16.8 million in the corresponding quarter of 2000. Results for the second quarter of 2001 have been dramatically affected by the low sales levels resulting from the market decline. In addition, competitive pricing pressure has been intense, driving down the selling price and margin of a number of the Company's products. The low order volume and the results of inventory reductions did not allow the Company to absorb all of its fixed costs. Another factor is that the current order product mix is comprised of a lower percentage of the higher margin items than in the prior year quarter. The Company has closed or temporary idled a number of facilities in order to reduce costs. The costs of maintaining idled facilities amounted to approximately $3.0 million in the 2001 quarter. Rail Products lost $5.4 million in the 2001 quarter versus a profit of $8.9 million last year, due largely to depressed sales levels and some effect from the Sahagun, Mexico labor stoppage. Rail Services gross margin of $4.0 million was $1.4 million less than one year ago, largely due to a $1.2 million vendor rebate received in the second quarter of 2000. Track Products margin of $1.2 million was $0.9 million short of prior year, partly due to lower sales and the effect of moving production out of the Company's Superior, Wisconsin facility which has been idled as of mid-July 2001. Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased $2.7 million or 19.7% versus 2000, as a result of the Company's salaried workforce reduction programs initiated in late 2000 and continuing into 2001. Nonrecurring losses. The Company recorded a restructuring charge of $9.2 million in the quarter ended June 30, 2001 consisting of $6.8 million of severance and related employee benefit costs, $0.7 million in ongoing lease costs for the Company's former corporate office and $1.7 million of additional costs associated with prior restructuring initiatives. The added costs for prior restructure initiatives are primarily for the Company's closed Melrose Park, Illinois facility which was not sold as quickly as initially planned. The restructuring charge was offset by a $0.6 million gain from insurance proceeds in excess of losses from a fire at its Leven, Scotland facility. Equity Income of Unconsolidated Joint Ventures. The Company's income from its equity investments in joint ventures of $0.7 million in 2001 is slightly lower than the $0.9 million realized in 2000. Second quarter 2001 earnings from the China wheel business of $0.9 million were partially offset by a $0.2 million write-off of the Company's investment interest in a small joint venture in Mexico that was dissolved during the quarter. Interest Expense. Interest expense increased $1.4 million to $7.7 million in 2001. This increase was primarily attributable to costs associated with the new and revised financing facilities entered into on May 2, 2001. Income Tax Benefit. The 2001 income tax benefit of $1.3 million is an offset to the income tax provision associated with earnings from the discontinued Flow and Specialty Products segment. The Company continues to recognize a full valuation allowance on its deferred income tax assets as of June 30, 2001 and has not recorded a tax benefit on its losses in the income statement due to the uncertainty of the Company to generate sufficient taxable income in the future to fully utilize the prior losses. Discontinued Operations The discontinued Flow and Specialty Products business was sold on May 2, 2001 and as such, second quarter 2001 sales and corresponding results of operations reflect only one month of activity prior to the sale versus a full quarter in 2000. The Company recorded a $1.9 million after tax gain on the sale of the business in the 2001 quarter as part of the discontinued operations. Net Loss. The net loss of $24.5 million or $1.31 per share in 2001 compares to the 2000 net income of $0.2 million or $0.02 per share (including the effect of the issuance of the Series B preferred stock and related dividends in 2000), due to the factors described above. SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO SIX MONTHS JUNE 30, 2000 Net Sales. Consolidated net sales from continuing operations of $200.1 million decreased $68.0 million or 25.4% versus the first half of 2000. Low market volumes, principally in the Rail Products segment and competitive pricing continues to impact sales comparisons year-to-year. Rail Products sales of $89.9 million were $60.6 million or 40.2%, lower than the prior year and accounted for 89% of the total consolidated shortfall to prior year, reflecting the impact of depressed new car build rates in the industry and an estimated $3.0 million of delayed or lost sales due to the work stoppage at the Company's Sahagun, Mexico facility which is continuing since late May 2001. Rail Services sales of $65.5 million were $8.1 million or 11.0% down from last year. The low new car build rate has also impacted this segment which supplies new wheel sets as well as refurbished wheel sets to the industry. Track Products sales of $48.4 million were $5.4 million or 10.0% less than prior year. In the first half of 2000, the former Rail Systems group had $11.2 million in sales versus $1.8 million in 2001 prior to the sale of this business on February 23, 2001. Gross Profit. Consolidated gross loss from continuing operations of $0.8 million was $33.9 million below prior year. Reduced sales levels and the effect on the Company's ability to absorb fixed overhead costs, the Sahagun, Mexico strike, competitive pricing, unfavorable product mix and idle facility costs in the second quarter of 2001 have impacted overall margins for the Company. Rail Products lost $8.5 million on the gross profit line versus a profit of $18.2 million in 2000. Reduced selling prices in combination with significantly lower volume and unfavorable product mix account for approximately $17.0 to $20.0 million of the variance. In addition, the Company has absorbed over $3.0 million of idle facility costs in its results for 2001 and the Sahagun, Mexico work stoppage resulted in approximately $1.5 million of the margin shortfall. Rail Services gross profit of $7.8 million was $3.1 million below last year, due mainly to reduced sales levels. Also in the comparable period of 2000, the Company recorded a $1.2 million vendor rebate. Track Products margin of $0.9 million was $2.1 million lower than last year, due to reduced sales and the shifting of production requirements out of a facility that was idled in July 2001. Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased $3.4 million or 13.1% versus 2000 due to planned headcount reductions and cost controls initiated by the Company in late 2000 and into 2001. Nonrecurring losses. The Company recorded a restructuring charge of $9.2 million in the quarter ended June 30, 2001 consisting of $6.8 million of severance and related employee benefit costs, $0.7 million in ongoing lease costs for the Company's former corporate office and $1.7 million of additional costs associated with prior restructuring initiatives. The added costs for prior restructure initiatives are primarily for the Company's idled Melrose Park, Illinois facility, which was not sold as quickly as initially planned. The 2001 restructuring charge was offset by a $0.6 million gain from insurance proceeds in excess of losses from a fire at its Leven, Scotland facility. In the first quarter of 2000, the Company recorded a $1.6 million charge for merger and other restructuring related actions. Equity Income of Unconsolidated Joint Ventures. The Company's income from its equity investments in joint ventures of $1.3 million in 2001 is equal to the prior year investment earnings. Interest Expense. Interest expense in 2001 of $15.7 million increased $2.9 million versus the first half of 2000. This increase was attributable to costs associated with the new and revised financing facilities entered into on May 2, 2001 and higher borrowing levels prior to the reduction of debt from proceeds received as part of the Company's sale of non-core assets. Income Tax Benefit. The 2001 income tax benefit of $1.5 million is an offset to the income tax provision associated with earnings from the discontinued Flow and Specialty Products segment. The Company continues to recognize a full valuation allowance on its deferred income tax assets as of June 30, 2001 and has not recorded a tax benefit on its losses in the income statement due to the uncertainty of the Company to generate sufficient taxable income in the future to fully utilize the prior losses. Discontinued Operations The discontinued Flow and Specialty Products business was sold on May 2, 2001 and as such, first half 2001 sales and corresponding results of operations reflect only four months of activity prior to the sale versus a full six months in 2000. The Company recorded a $1.9 million after tax gain on the sale of the business in the second quarter of 2001 as part of the discontinued operations. Net Loss. The net loss of $42.6 million or $2.25 per share in 2001 compares to the 2000 net loss of $0.4 million or $0.67 per share (including the effect of the issuance of the Series B convertible preferred stock and related dividends in 2000), due to the factors described above. LIQUIDITY AND CAPITAL RESOURCES - ---------------------------------- For the six months ended June 30, 2001, net cash used in operating activities totaled $8.9 million compared to net cash used in operating activities of $32.3 million in 2000. The decrease in operating cash outflows is due primarily to lower working capital levels. The Company's efforts to reduce inventory levels resulted in a $15.2 million source of cash in 2001 versus a $17.0 million use of cash in 2000. Capital expenditures during the six months ended June 30, 2001 and 2000 were $5.3 million and $10.8 million, respectively. Capital spending for the balance of 2001 will remain at reduced levels versus last year as most of the major initiatives started in 1999 to improve operating processes are completed. In total, capital spending should be less than $12 million for 2001. In February 2001, the Company sold its freight railroad and transit signaling systems and services business. Net proceeds received were $19.3 million of which $18.5 million was used to permanently reduce outstanding borrowings under the Credit Facility. In May 2001, the Company sold its discontinued Flow and Specialty Products business. Net proceeds received were $18.7 million of which $17.0 million was used to permanently reduce outstanding borrowings under the Credit Facility. DEBT CREDIT FACILITY - ---------------- At the merger date on February 19, 1999, the Company entered into a senior secured loan agreement (the "Credit Facility") with a group of banks to finance North American operations. Substantially all of the Company's North American assets, including the stock of certain subsidiaries, have been pledged as security for the Credit Facility. During late 1999 and 2000, the Company entered into a number of amendments, restatements and waivers of the Credit Facility. The primary results of those changes included a) the modification of several financial covenants that the Company otherwise would not have been in compliance with as of October 31, 1999, December 31, 1999 or September 30, 2000; b) the modification of the pricing grid which had the effect of increasing the applicable interest rates and lender fees; c) the establishment of scheduled commitment reductions and d) the release of certain collateral related to the Company's Mexican subsidiary. The Company was not in compliance with several of the financial covenants under the Credit Facility as of December 31, 2000 and March 31, 2001. Accordingly, on May 2, 2001, the Company negotiated a further amendment of the Credit Facility with its senior lenders. The primary terms of this amendment include a) a waiver for all financial covenant and other provision violations as of December 31, 2000 through May 2, 2001, b) acceleration of the final maturity date of the facility from July 31, 2003 to January 5, 2003, c) approval of the FS Bridge Note, d) maximum aggregate commitments and outstanding borrowings permanently reduced to $152 million on December 31, 2001 and $150 million by April 2002 e) mandatory prepayments and further permanent reductions of maximum commitments required upon qualifying assets sales, tax refund, collections, equity and debt issuances (excluding FS Series C preferred stock and FS Bridge Note) and upon incurrence of Excess Cash Flow, as defined, f) interest rates increased, for all borrowings, to Prime plus 2.75%, g) certain additional collateral required, h) default provisions were modified, including additional provisions regarding the FS Bridge Note, and i) existing covenants were replaced by a rolling, quarterly minimum EBITDA covenant, a maximum capital expenditure covenant, and a loan to value covenant, all as defined. An amendment fee of $0.8 million was paid on the date of the amendment and a similar amount is due at final maturity. The weighted average interest rate on the $146.2 million of debt outstanding as of June 30, 2001 under the Credit Facility was 9.5%. The amount of availability under the Credit Facility as of June 30, 2001 was $4.1 million. The rolling minimum EBITDA covenant applies for the first time for the two month period ending June 30, 2001 and requires EBITDA to be no less than $2.2 million for that two month period. Actual EBITDA for covenant compliance purposes was $3.6 million. The loan to value covenant requires a minimum ratio of 1.24 of eligible receivables, inventories and property values to maximum loan commitment. The actual ratio at June 30, 2001 was 1.30. As such, the Company was in compliance with these and all other covenants under the Credit Facility as of June 30, 2001. However, as existing weak market conditions continue in the rail industry, there can be no assurance that the Company will continue to meet these financial covenants in future periods. Accordingly, the Company has reflected all current borrowings as short-term obligations. A failure to meet future covenants could in turn result in the Company's lenders accelerating payment of borrowings under the Credit Facility. If accelerated, the Company will be required to further refinance its existing indebtedness, seek additional financing, or issue common stock or other securities to raise cash to assist in financing its operations. The Company has no current commitments or arrangements for such financing alternatives, and there can be no assurances that such financing alternatives will be available on acceptable terms, or at all. The Company's inability to make any payments when due or to satisfy its financial covenants under its existing borrowing facilities could have a material adverse effect on the Company. The senior lenders also received in connection with the May 2, 2001 amendment of the Credit Facility warrants to purchase up to two percent, on a fully diluted basis, of the Company's common stock at $0.01 per share. The warrants and resulting common shares are redeemable by the Company at the holder's option after five years at a per share price equal to the greater of a pre-determined fixed price or the market value per share of the Company's common stock. The value of these warrants, $1.0 million upon issuance, is reflected in the accompanying balance sheets as additional deferred financing costs within other non-current assets. Changes in the value of these warrants are reflected as non-operating gains or losses in the period of change. SENIOR SUBORDINATED NOTES - --------------------------- On February 1, 1997 and December 23, 1997 the Company issued $50 million of 9 1/8% Senior Subordinated Notes and $25 million of 8 3/4 % Senior Subordinated Notes (the "Notes") respectively. As a result of an amendment in 2000, the interest rate on all Notes was increased to 10 1/2% effective October 1, 2000. The Notes are general unsecured obligations of the Company and are subordinated in right of payment to all existing and future senior indebtedness of the Company. The Notes will mature in 2004, unless repurchased earlier at the option of the Company at 100% of face value. The Notes are subject to mandatory repurchase or redemption prior to maturity upon a Change of Control, as defined. The indenture under which the Notes were issued limits the Company's ability to (i) incur additional indebtedness, (ii) complete certain mergers, consolidations and sales of assets, and (iii) pay dividends or other distributions. Pursuant to the Notes indentures, the Company was required to meet certain financial covenants including minimum operating coverage, minimum consolidated net worth and, upon issuance of certain new indebtedness, maximum funded debt to capitalization, all as defined. The 2000 amendment reduced the minimum interest coverage ratio from 2.4:1.0 to 1.8:1.0 effective September 30, 2000. For purposes of the covenant calculations, various adjustments are made to reported balances. In June 2001, the Company successfully completed an amendment of its Notes. Holders of the Notes approved, among other things, a) an increase of the interest rate to 11 1/2% effective January 1, 2001 b) suspension of the Operating Coverage Ratio covenant, as defined, until March 31, 2002 and then gradually increase the minimum required ratio back to 1.8:1.0 and c) deletion of the Consolidated Net Worth covenant, as defined. Additionally, the Company was granted a waiver of all defaults under the Notes as of December 31, 2000 and through June 30, 2001. The Company paid each consenting holder a fee of $10 for each $1,000 principal amount of the holder's Notes, which totaled $0.6 million. Additional amendment fees of $0.6 million were reflected as additional interest expense in the second quarter. FS BRIDGE NOTE - ---------------- On May 2, 2001, the Company received a $15 million secured, short-term loan due in January 2002 from certain investment funds managed by FS (the "FS Bridge Note"). There were no requirements to use any portion of the net $13.0 million of proceeds from this borrowing to further reduce outstanding borrowings under the Credit Facility. As such, the Company retained these funds for general corporate purposes, primarily to fund its current working capital needs. The FS Bridge Note was repaid on June 26, 2001 with proceeds from the issuance of a new series of redeemable, convertible preferred stock purchased by funds managed by FS. Accrued interest ($0.2 million) on these notes was rolled into a new non-interest bearing note due in January 2003. REDEEMABLE SECURITIES - ---------------------- On March 8, 2000, the Company issued 300,000 shares of Series B cumulative convertible preferred stock ($1 par value) to private equity funds managed by FS for $30 million. As part of the May 2, 2001 transactions, the Company paid 40% of the outstanding accumulated Series B dividends ($1.1 million) in cash. The Company then exchanged the outstanding shares of Series B preferred stock and remaining accumulated dividends for 317,098 shares of Series B-1 preferred stock. The Series B-1 preferred stock has terms similar to the Series B preferred stock except that the Series B-1 stock has an annual dividend rate of 10% and becomes redeemable at the holder's option under certain change of control conditions at a premium conversion price payable in common stock. Dividend payments can be deferred until April 2003. Such deferrals (in the form of common stock) as of June 30, 2001 were $0.5 million. On June 26, 2001 the Company issued 150,000 shares of Series C redeemable, convertible preferred stock ($1.00 par value) to private equity funds managed by FS for $15 million. The Series C preferred stock; a) pays dividends at a rate of 10% per annum payable semi-annually in cash except that the first two years of dividends can be deferred and paid in April 2003, b) is convertible at a price equal to $2.50 per share of the Company's common stock, c) is callable at the Company's option upon certain events and d) is redeemable at the holder's option at $200 per share plus any accumulated dividends, if any, in the event of a change in control, as defined. Also upon issuance of the preferred stock, FS received immediately exercisable warrants to purchase 6.0 million shares of the Company's common stock at a price of $0.01 per share. These warrants were valued at $5.7 million (net of issuance costs of $0.4 million) and are reflected as a separate line item within Stockholders' Equity. Additional warrants to purchase 750,000 shares of common stock at a price of $0.01 per share will become exercisable for every quarter beginning July 1, 2001 if earnings before interest, taxes, depreciation and amortization ("EBITDA"), as defined, for the preceding twelve month period is less than $70.0 million and no sale of the Company has occurred by the end of such quarters. In any event, the holders of the additional warrants will not receive more than 6.0 million shares pursuant to the additional warrants. The value of these additional warrants will be accounted for as special preferred stock dividends as they become exercisable. As of June 30, 2001, the Company's EBITDA for the preceding twelve month period was less than $70 million and 750,000 additional warrants, valued at $0.8 million, became exercisable on July 1, 2001. The warrants also contain anti-dilution provisions for certain changes in the Company's equity securities. OTHER The ongoing reduction in new freight car and locomotive build activity and weak economic factors within the rail industry continue to affect the Company's financial condition. As a result, the Company's loose wheel making facility significantly reduced production in late 2000 and has not produced new wheels since mid-February 2001. The Company is currently exploring options for the facility including an extended mothballing of the operation, a potential sale of the plant or a restart of production depending on certain market factors and volume levels. Absent a successful sale of this facility, ultimate realization of the related $31.7 million of net assets (as of June 30, 2001) is dependent upon (among other things) a return to more historically normal order levels. However, there can be no assurances that such transactions or conditions will occur or that they will allow for full realization of the assets at this facility. The most significant component of construction in progress is the Company's investment in a rail hardening project. The machinery and equipment which has been built for this project is being stored pending completion of a revised business plan. The total investment to date for this project is $11.5 million, including $2.0 million of patents. The Company has recently increased its efforts on this project, but needs a partner to assist in the financing of the balance of the project in order to bring it into production. However, no assurances can be given that the project will reach successful completion on the anticipated time frame or at all. NEW ACCOUNTING PRONOUNCEMENT In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes new and revises several existing standards for derivative instruments and hedging activities. It requires an entity to recognize all derivatives as either assets or liabilities on the balance sheet and measure those instruments at fair value. If certain conditions are met, a derivative may be designated as a cash flow hedge, a fair value hedge or a foreign currency hedge. An entity that elects to apply hedge accounting is required to establish at the inception of the hedge the method it will use for assessing the effectiveness of the hedge and the measurement method to be used. Changes in the fair value of derivatives are either recognized in earnings in the period of change or as a component of other comprehensive income (loss) in the case of certain hedges. On June 30, 2001, the Company's financial statements reflect liabilities of $1.6 million with an offset to Other Comprehensive Income to reflect adoption of SFAS No.133 for certain interest rate swap contracts. On July 20, 2001, the FASB issued statement No. 141, "Business Combinations" and statement No. 142, "Goodwill and Other Intangible Assets". Statement No. 141 requires all business combinations initiated after June 30, 2001, to be accounted for using the purchase method. This has no immediate effect on the Company. With the adoption of statement No. 142 as of January 1, 2002, existing goodwill on the Company's books will no longer be amortized. Rather, goodwill will be subject to at least an annual assessment for impairment by applying a fair-value based test. Net goodwill carrying value for the Company as of June 30, 2001 is $7.7 million. Amortization of goodwill for the three and six month periods ended June 30, 2001 was $0.1 million and $0.3 million, respectively. REGARDING FORWARD-LOOKING STATEMENTS - -------------------------------------- This report contains forward-looking statements that are based on current expectations and are subject to a number of risks and uncertainties. Actual results could differ materially from current expectations due to a number of factors, including general economic conditions; competitive factors and pricing pressures; shifts in market demand; the performance and needs of industries served by the Company's businesses; actual future costs of operating expenses such as rail and scrap steel, self-insurance claims and employee wages and benefits; actual costs of continuing investments in technology; the availability of capital to finance possible acquisitions and to refinance debt; the ability of management to implement the Company's long-term business strategy of acquisitions; and the risks described from time to time in the Company's SEC reports. Some of the uncertainties that may affect future results are discussed in more detail in the Company's Amended Annual Report on Form 10-K for the year ending December 31, 2000. All forward-looking statements included in this document are based upon information presently available, and the Company assumes no obligation to update any forward looking statements. ITEM 3A--QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's market risk sensitive instruments do not subject the Company to material market risk exposures, except as such risks relate to interest rate and foreign exchange rate fluctuations. As of June 30, 2001, the Company has long-term debt outstanding with a carrying value of $237.7 million (including current maturities of long-term debt). As described in Note 5 to Consolidated Financial Statements, certain of this indebtedness is classified at June 30, 2001 as a current obligation at the Company's discretion due to the difficult market conditions and their resulting impact on recent and future near term operating results. From time to time, the Company enters into various interest rate swap and cap transactions for purposes of managing exposures to fluctuations in interest rates. Currently, the Company hedges a portion of its exposure to fluctuations in Prime interest rates through the use of a LIBOR based interest rate reversion swap. This swap effectively converts a portion of the Company's outstanding Credit Facility borrowings from a floating Prime rate to a fixed LIBOR rate of interest, up to a maximum trigger point, at which time these borrowings revert back to the floating Prime rate of interest. Variable rates are based on the 3 month Prime rate plus 2.75% and are reset on a quarterly basis. The differential between fixed and variable rates to be paid or received is accrued as interest rates change in accordance with the agreements and recognized over the life of the agreements as an adjustment to interest expense. Maturity dates of interest rate swap and cap generally match those of the underlying debt agreements. At June 30, 2001, the Company had one interest rate protection agreement outstanding which expires in 2003, and covers a notional principal amount of $25 million. The fair value of this contract was an aggregate of $1.4 million liability at June 30, 2001. As a Company with multi-national operations, many of its transactions are denominated in foreign currencies. The Company uses financial instruments to mitigate its overall exposure to the effects of currency fluctuations on its cash flows. The Company's policy is not to speculate in such financial instruments for profit or gain. Instruments used as hedges must be highly effective at reducing the risk associated with the exposure being hedged and must be designated as a hedge at the inception of the hedging contract. Currently, the Company hedges forecasted transactions relating to its manufacturing operations for its Cometna subsidiary located in Lisbon, Portugal. At June 30, 2001, the Company had approximately $1.6 million notional value of foreign currency option collar contracts outstanding with expiration dates through August, 2001, hedging U.S. dollar transactions within its Cometna, Portugal subsidiary. The fair value of these contracts was an aggregate of $1.4 million liability at June 30, 2001. PART II OTHER INFORMATION Item 1 Legal Proceedings The Company is subject to a variety of environmental laws and regulations governing discharges to air and water, the handling, storage and disposal of hazardous waste materials and the remediation of contamination associated with the releases of hazardous substances. Although the Company believes it is in material compliance with all of the various regulations applicable to its business, there can be no assurance that requirements will not change in the future or that the Company will not incur significant cost to comply with such requirements. The Company employs responsible personnel at each facility, along with various environmental engineering consultants form time to time to assist with ongoing management of environmental, health and safety requirements. The Company is also a party to various other legal proceedings arising in the ordinary course of business, none of which is expected in management's opinion, after consultation with legal counsel, to have a material adverse effect, either individually or in the aggregate, on the Company's consolidated financial position or results of operations. The Company is a defendant in a lawsuit filed in November 2000 by Amsted Industries, Inc. in the U.S. District Court for the Northern District of Illinois seeking unspecified damages for infringement of U.S. patents 5,724,564 and 5,954,114 which disclose methods for casting sideframes and bolsters for railtrucks. The Company denied those claims and filed counterclaims contesting, among other things, the patents' validity and enforceability and that alleging Amsted is guilty of inequitable conduct before the U.S. Patent Office. While the Company cannot predict with certainty the outcome of this lawsuit, management believes, after consultation with legal counsel, that the claims are without merit and intends to vigorously defend the case and pursue its separate counterclaims. Discovery is in process and a trial is scheduled in January 2002. Item 4 - Submission of Matters to a Vote of Security - Holders On June 21, 2001, the Company held the 2001 Annual Meeting of the Shareholders (for the year ended December 31, 2000). The following matters were approved by shareholder: 1) Election to the Board of Directors for a three-year term one class of directors, consisting of Daniel W. Duval, Jean-Pierre M. Ergas, James L. Luikart and Vaughn W. Makary. The vote totals were as follows: For Withheld - --- -------- 20,296,503 0 2) Ratification of the appointment of Arthur Andersen LLP as the Company's independent public accountants. The votes cast for, votes cast against and abstentions were as follows: For Against Abstain - --- ------- ------- 17,771,354 1,950 10,150 3) Approval of the issuance and sale of 150,000 shares of Series C Preferred Stock and Warrants to purchase up to 12,000,000 shares of common stock, as well as the issuance of the underlying shares of common stock issuable upon the conversion of the Series C Preferred Stock and upon the exercise of the Warrants. The votes cast for, votes cast against and abstentions were as follows: For Against Abstain --- ------- ------- Common Stock 13,802,076 1,524,835 93,152 Preferred Stock 316,040 0 0 4) Approval of amendment to the restated certificate of incorporation to increase the number of authorized common stock from 25,000,000 to 100,000,000. The votes cast for, votes cast against and abstentions were as follows: For Against Abstain --- ------- ------- Common Stock 12,474,986 2,934,365 10,712 Item 6 - (a) Exhibits EXHIBIT INDEX 3.1 Certificate of Designation, Preferences and Rights of Series B-1 Cumulative Convertible Participating Preferred Stock 3.2 Certificate of Designation, Preferences and Rights of Series C Cumulative Convertible Participating Preferred Stock 3.3 Certificate of Amendment to Certificate of Incorporation of ABC-NACO Inc. 4.1 Amendment No. 4 to the Rights Agreement 4.2 Amended and Restated Investors Rights Agreement by and among ABC-NACO Inc. and the Investors set forth therein dated as of June 25, 2001 4.3 Form of Closing Common Stock Purchase Warrant of ABC-NACO Inc. 4.4 Form of Additional Common Stock Purchase Warrant of ABC-NACO Inc. 4.5 Form of Bank Warrant to Purchase Common Stock of ABC-NACO Inc. 4.6 Registration Rights Agreement dated as of May 2, 2001 among ABC-NACO Inc. and the Holders of Registerable Securities 4.7 Fourth Supplemental Indenture dated as of May 18, 2001 Item 6 - (b) Reports on Form 8-K SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ABC-NACO Inc. /s/ Wayne R. Rockenbach -------------------------- Wayne R. Rockenbach Senior Vice President and Chief Financial Officer /s/ Larry A. Boik -------------------- Larry A. Boik Vice President and Corporate Controller (Chief Accounting Officer) Date: August 14, 2001 ------------------ EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION OF DOCUMENT - ------ ------------------------- 3.1 Certificate of Designation, Preferences and Rights of Series B-1 Cumulative Convertible Participating Preferred Stock 3.2 Certificate of Designation, Preferences and Rights of Series C Cumulative Convertible Participating Preferred Stock 3.3 Certificate of Amendment to Certificate of Incorporation of ABC-NACO Inc. 4.1 Amendment No. 4 to the Rights Agreement 4.2 Amended and Restated Investors Rights Agreement by and among ABC-NACO Inc. and the Investors Set Forth dated as of June 25, 2001 4.3 Form of Closing Common Stock Purchase Warrant of ABC-NACO Inc. 4.4 Form of Additional Common Stock Purchase Warrant of ABC-NACO Inc. 4.5 Form of Bank Warrant to Purchase Common Stock of ABC-NACO Inc. 4.6 Registration Rights Agreement dated as of May 2, 2001 among ABC-NACO Inc. and the Holders of Registerable Securities 4.7 Fourth Supplemental Indenture dated as of May 18, 2001 EX-3.1 3 doc2.txt CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF SERIES B-1 CUMULATIVE CONVERTIBLE PARTICIPATING 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 (the "Certificate") 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 Restated 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 restated (which authorizes one million (1,000,000) shares of Preferred Stock, par value $1.00 per share ("Preferred Stock"), of which (i) one hundred thousand (100,000) are designated as Series A Preferred Stock ("Series A Preferred Stock"), none of which are issued or outstanding and (ii) three hundred thousand (300,000) are designated as Series B Cumulative Convertible Preferred Stock, none of which are 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 the Series B-1 Cumulative Convertible Participating Preferred Stock. Series B-1 Cumulative Convertible Participating Preferred Stock RESOLVED, that the holders of Series B-1 Cumulative Convertible Participating Preferred Stock, except as otherwise provided by law and this Certificate, shall have and possess the following rights and preferences. A. Series B-1 Cumulative Convertible Participating Preferred Stock. 1. Designation, Number of Shares. This series of preferred stock shall be designated as the Series B-1 Cumulative Convertible Participating Preferred Stock ("Series B-1 Preferred Stock"), and the number of shares that shall constitute such series shall be Three Hundred Twenty-Five Thousand (325,000). The par value of Series B-1 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-1 Preferred Stock shall rank senior to: (a) the Common Stock, par value $0.01 per share ("Common Stock"), of the Corporation; and (b) the Series A Preferred Stock and each other class of capital stock or class or series of Preferred Stock issued by the Corporation on or after the date hereof (in accordance with Paragraph A.7.(a)(ii) hereof), the terms of which, other than the Series A Preferred Stock, shall specifically provide that such class or series shall rank junior to Series B-1 Preferred Stock as to dividend rights or rights on liquidation, winding up and dissolution of the Corporation (each of the securities in clauses (a) and (b) above collectively referred to as "Junior Securities"). 3. Dividend Provisions. (a) Each holder of Series B-1 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-1 Preferred Stock after the date of the original issuance of the Series B-1 Preferred Stock at a rate equal to ten percent (10.0%) 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-1 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-1 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 daily basis beginning on the date of the original issuance of Series B-1 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-1 Preferred Stock. Each dividend on Series B-1 Preferred Stock shall be payable to the holders of record of Series B-1 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-1 Preferred Stock, the Corporation shall be entitled to defer payment of dividends on shares of Series B-1 Preferred Stock; provided, that during such two-year period, dividends on shares of Series B-1 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-1 Preferred Stock. (c) Dividends shall cease to accrue in respect of any shares of Series B-1 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-1 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-1 Preferred Stock pursuant to Paragraph A.3.(a) shall be paid pro rata to the holders of Series B-1 Preferred Stock of record entitled thereto. (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-1 Preferred Stock as set forth above in Paragraph A.3.(a) shall be increased to a rate of fifteen percent (15%) per share per annum on the Series B-1 Liquidation Preference (the "Default Dividends"), which Default Dividends shall be payable in cash 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-1 Preferred Stock then outstanding: (i) in the event that the Corporation does not (A) declare the dividend payable on the shares of Series B-1 Preferred Stock within (30) calendar days of the Dividend Declaration Date, (B) fulfill its dividend payment obligation in full for the Series B-1 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 Exchange 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 Exchange 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-1 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, 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-1 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. (h) So long as any shares of Series B-1 Preferred Stock remain outstanding, the Corporation shall not declare, pay or set apart any amounts for dividends on, or make any other distribution in cash or other property in respect, of the Junior Securities for any period, nor shall the Corporation or any of its Subsidiaries redeem, repurchase, or otherwise acquire for value any of the Junior Securities (either pursuant to any applicable sinking fund requirement or otherwise) without first obtaining the prior written consent of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the then outstanding shares of Series B-1 Preferred Stock. (i) Dividends payable on Series B-1 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. Liquidation Preference. Upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of all shares of Series B-1 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 Two Hundred Dollars ($200.00) in cash per share, plus an amount equal to full Accumulated Dividends (with such dollar amount to be adjusted for any stock dividend, stock spilt, subdivision, combination, reclassification or similar event made or taken with respect to the Series B-1 Preferred Stock) (such amount, as so determined, is referred to herein as the "Series B-1 Liquidation Preference"), to the date of final distribution and no more, before any payment or distribution is made on account of any Junior Securities. Upon any liquidation, dissolution or winding up of the Corporation, whether voluntarily or involuntarily, after the holders of Series B-1 Preferred Stock shall have been paid in full the aggregate amount of the Series B-1 Liquidation Preference, the remaining net assets of the Corporation available for distribution shall be distributed ratably among the holders of Series B-1 Preferred Stock and Common Stock on an as-converted to Common Stock basis. Whenever the distribution provided for in this Paragraph A.4. shall be payable in property other than cash, the value of such distribution shall be the fair market value of such property as determined in good faith by the Board of Directors of the Corporation. 5. Conversion. (a) Right of Conversion. Each share of Series B-1 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-1 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) (with such dollar amount to be adjusted for any stock dividend, stock spilt, subdivision, combination, reclassification or similar event made or taken with respect to the Series B-1 Preferred Stock) plus an amount equal to full Accumulated Dividends by (ii) the Conversion Price. The "Conversion Price" for the Series B-1 Preferred Stock shall be nine dollars ($9.00). The Conversion Price for the Series B-1 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-1 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-1 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-1 Preferred Stock, the certificate or certificates for shares of the Series B-1 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-1 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-1 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-1 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-1 Preferred Stock shall not be deemed to have converted such Series B-1 Preferred Stock until immediately prior to the effectiveness of such offering and the Corporation shall deliver to such holders tendering Series B-1 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-1 Preferred Stock are outstanding, the Conversion Price of the Series B-1 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 March 8, 2000, 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-1 Preferred Stock in effect immediately prior to the issuance (or deemed issuance) of such Additional Stock, then the Conversion Price for the Series B-1 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 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-1 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-1 Preferred Stock pursuant to this Paragraph A.5.(c)(i) shall have the effect of increasing such Conversion Price for the Series B-1 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-1 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 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-1 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-1 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-1 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-1 Preferred Stock. (iii) In the event the Corporation at any time or from time to time after the date of issuance of Series B-1 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-1 Preferred Stock shall be appropriately decreased so that the number of shares of Common Stock issuable on conversion of each share of Series B-1 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-1 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-1 Preferred Stock shall be appropriately increased so that the number of shares of Common Stock issuable on conversion of each share of Series B-1 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-1 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-1 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-1 Preferred Stock shall thereafter be entitled to receive, upon conversion of the Series B-1 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-1 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-1 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 and the number of shares purchasable upon conversion of the Series B-1 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-1 Preferred Stock against impairment. (g) No Fractional Shares. No fractional shares shall be issued upon conversion of the Series B-1 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-1 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-1 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-1 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-1 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-1 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-1 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-1 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-1 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 Series B-1 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-1 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-1 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-1 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) Optional Conversion. (i) At any time after the third (3rd) anniversary of the date of the original issuance of the Series B-1 Preferred Stock, all or a portion of the shares of Series B-1 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 (each to be adjusted in the event of a combination, stock split or subdivision, as the case may be): (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 beginning after the third anniversary of the date of the original issuance of the Series B-1 Preferred Stock 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-1 Preferred Stock. (ii) If the Corporation has elected to convert Series B-1 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-1 Preferred Stock to each holder of record of Series B-1 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-1 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-1 Preferred Stock, each outstanding share of Series B-1 Preferred Stock plus an amount equal to full 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-1 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-1 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. Redemption. (a) Holder Optional Redemption. Prior to the occurrence of an event or transaction that could result in a Change of Control (the "Change of Control Event"), the Corporation shall send written notice to each holder of Series B-1 Preferred Stock, which notice shall explain in reasonable detail the Change of Control Event (the "Change of Control Notice"). The Change of Control Notice shall be sent by first class mail at least forty-five (45) Business Days prior to the anticipated consummation of the Change of Control Event. Upon receipt of a Change of Control Notice from the Corporation, each holder of shares of Series B-1 Preferred Stock shall have the right, by giving written notice to the Corporation (the "Holder Optional Redemption Notice"), to cause the Corporation to redeem all of such holder's then outstanding shares of Series B-1 Preferred Stock, immediately prior to the consummation of the Change in Control, in exchange for such number of shares of Common Stock as shall be equal to the quotient of (i) the product of (A) the Holder Optional Redemption Price referred to below, times (B) the number of shares of Series B-1 Preferred Stock being exchanged by such holder divided by (ii) the Value Per Common Share (as defined below) in connection with the Change of Control; provided, however, that if the Corporation does not then have sufficient shares of Common Stock authorized, unissued and available to be issued to each holders, who has delivered a Holder Optional Redemption Notice to the Corporation, or the Value Per Common Share either (x) is less than One Dollar ($1.00) or (y) cannot be readily determined, the Corporation shall pay to each such holder cash in an amount equal to the product obtained in clause (i) above in respect of such holder's shares of Series B-1 Preferred Stock. In the event the Change of Control does not result in the holders of Common Stock receiving solely cash or solely Marketable Securities or a combination solely of cash and Marketable Securities, the Value Per Common Share shall be deemed to be zero and in that event the Corporation shall pay to each such holder cash in an amount equal to the product obtained in clause (i) above in respect of such holder's shares of Series B-1 Preferred Stock. All holders electing to redeem shares of Series B-1 Preferred Stock shall deliver to the Corporation during regular business hours, at the office of any transfer agent of the Corporation for the Series B-1 Preferred Stock, at the principal office of the Corporation or at such other place as may be designated by the Corporation, the certificate or certificates for the Series B-1 Preferred Stock to be redeemed, duly endorsed for transfer to the Corporation (if required by it) on or before the date of the Change of Control Event (the "Holder Optional Redemption Date"). (b) Holder Optional Redemption Price. All shares of Series B-1 Preferred Stock to be redeemed shall be redeemed by paying for each such share an amount equal to (A) Two Hundred Dollars ($200.00) per share (with such dollar amount to be adjusted for any stock dividend, stock spilt, subdivision, combination, reclassification or similar event made or taken with respect to the Series B-1 Preferred Stock), plus (B) an amount equal to all Accumulated Dividends to the Holder Optional Redemption Date, the sum of clauses (A) and (B) in each case being referred to as the "Holder Optional Redemption Price." All payments of the Holder Optional Redemption Price shall be made in accordance with Paragraph A.7.(a) hereof. (c) Payment of the Holder Optional Redemption Price. On the Holder Optional Redemption Date the Corporation shall pay the Holder Optional Redemption Price, by delivery of stock certificates representing the aggregate number of shares of Common Stock determined in accordance with Paragraph A.7.(a), or if applicable, in full, in cash, by wire transfer of immediately available funds, in respect of the shares of Series B-1 Preferred Stock outstanding on the Holder Optional Redemption Date to accounts specified by the holders of the Series B-1 Preferred Stock so redeemed. (d) Condition Precedent to Change of Control. The Corporation shall be prohibited from consummating the Change of Control Event (i) unless and until the Corporation has paid the Holder Optional Redemption Price in accordance with Paragraph A.7.(c) above, and (ii) the holder of Series B-1 Preferred Stock has received any shares of Common Stock to be received as part of the Holder Optional Redemption Price a sufficient time in advance of the consummation of the Change of Control Event to allow such holder a reasonable opportunity to participate in such Change of Control. (e) Certain Defined Terms. For purposes of Paragraph A.7.(a), the certain terms are defined as follows: (i) "Fair Market Value" shall mean the average of the closing prices per share of the of the Marketable Securities to be issued in the Change of Control as reported by the NASDAQ (or on any national exchange on which Common Stock is listed) as published in the Eastern Edition of The Wall Street Journal for the twenty (20) trading days immediately prior to the consummation of the Change of Control. (ii) "Marketable Securities" shall mean that (A) such securities are listed for trading on the NYSE, the American Stock Exchange or the NASDAQ; (B) the average closing price per share of such securities is at least Ten Dollars ($10.00) per share (determined during the twenty (20) trading days immediately preceding the first public announcement of the Change of Control); and (C) the average trading volume of such securities is at least One Hundred Thousand (100,000) shares per trading day, as reported by Bloomberg, during the sixty (60) trading day period immediately preceding the first public announcement of the Change of Control. (iii) "Outstanding Common Stock" shall mean the maximum aggregate number of shares of Common Stock of the Corporation outstanding, determined on a fully diluted and fully converted basis, giving effect for purposes of such determination, to the exercise of any and all options, warrants and other rights exercisable for or exchangeable into shares of Common Stock and the conversion or exchange of all Convertible Securities into shares of Common Stock and the exchange of all outstanding shares of Series B-1 Preferred Stock for Common Stock pursuant to Paragraph A.7.(a) hereof. (iv) "Value Per Common Share" shall mean the aggregate amount of cash paid or the aggregate Fair Market Value of securities issuable in connection with a Change of Control divided by the Outstanding Common Stock. 8. 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-1 Preferred Stock then outstanding shall be sufficient to take any action requiring the vote of the Series B-1 Preferred Stock as a separate class. At any meeting where the Series B-1 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-1 Preferred Stock shall constitute a quorum of such class. (ii) So long as any Series B-1 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-1 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-1 Preferred Stock, the relative rights, preferences, qualifications, limitations or restrictions of the Series B-1 Preferred Stock; or (B) increase the authorized number of shares of Series B-1 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-1 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-1 Preferred Stock are outstanding. (b) Board of Directors. Notwithstanding the foregoing, each share of Series B-1 Preferred Stock shall be entitled to vote for the election of Directors to the Corporation's Board of Directors whether by annual or special meeting or otherwise. For purposes of determining the number of votes that each share of Series B-1 Preferred Stock is entitled to cast for the election of Directors, each such share of Series B-1 Preferred Stock shall be treated as if it had been converted into that number of shares of Common Stock determined in accordance with Paragraph A.5. hereof, immediately prior to the occurrence of such election. The holders of shares of Series B-1 Preferred Stock shall vote together with the holders of shares of Common Stock as a single class for the purpose of the election of Directors pursuant to this Paragraph A.8.(b). 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-1 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) "Business Day" shall mean any day other than Saturday, Sunday or other day in which commercial money center banks in New York City, New York are closed for business. (e) "Change of Control" shall mean the occurrence of any one of the following: (1) the consolidation or merger of the Corporation with or into any other Person and as a result of the transaction the stockholders of the Corporation immediately prior to such transaction own fifty percent (50%) or less of the voting power or voting securities of the surviving entity after giving effect to such transaction; (2) the sale, conveyance or disposition of a majority of the assets of the Corporation and its Subsidiaries on a consolidated basis (other than to a wholly owned Subsidiary of the Corporation or a pledge or grant of a security interest to a bona fide lender); (3) any acquisition in a transaction or series of related transactions by a Person or "group" (as defined in Rule 13-d(5) promulgated under the Exchange Act) of Persons the result of which is that such Person of group of Persons owns beneficially fifty percent (50%) or more of either (x) the voting securities then outstanding or (y) the then outstanding voting power, of the Corporation; or (4) the liquidation, dissolution or winding up of the Corporation. (f) "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 on NASDAQ, NYSE or any other national securities market as reported by Bloomberg. (g) "Common Stock Equivalents" has the meaning set forth in Paragraph A.5.(c)(iii) hereof. (h) "Conversion Price" has the meaning set forth in Paragraph A.5.(a) hereof. (i) "Convertible Securities" means any indebtedness or shares of stock convertible into or exchangeable for Common Stock. (j) "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-1 Preferred Stock are outstanding. (k) "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). (l) "Dividend Period" means the Initial Dividend Period and, thereafter, each Semi-Annual Dividend Period. (m) "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. (n) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended and the rules and regulations promulgated thereunder. (o) "Exchange Agreement" means the Exchange Agreement dated as of April 17, 2001, 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. (p) "Initial Dividend Period" means the dividend period commencing on the date of issuance of the Series B-1 Preferred Stock and ending on the first Dividend Payment Date to occur thereafter. (q) "Investors" shall have the meaning set forth in the Exchange Agreement. (r) "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. (s) "Junior Securities" has the meaning set forth in Paragraph A.2. hereof. (t) "NASDAQ" shall have the meaning set forth in Paragraph A.3.(a) hereof. (u) "NYSE" shall mean the New York Stock Exchange. (v) "Option" means rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities. (w) "Permitted Options" has the meaning set forth in Paragraph A.5.(c)(ii)(B) hereof. (x) "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. (y) "Securities Act" shall mean the Securities Act of 1933, as amended and the rules and regulations promulgated thereunder. (z) "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. (aa) "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 2nd day of May, 2001. ABC-NACO INC. By: _________________________ Name: J.P. Singsank Title: Senior Vice President and Chief Financial Officer 488063.3 ANNEX A Example of Application of Formula for Adjustment of Conversion Price. If, twelve (12) months after the original issuance of the Series B-1 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-1 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 EX-3.2 4 doc3.txt CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF SERIES C CUMULATIVE CONVERTIBLE PARTICIPATING 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 (the "Certificate") 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 restated (which authorizes one million (1,000,000) shares of Preferred Stock, par value $1.00 per share ("Preferred Stock"), of which (i) one hundred thousand (100,000) are designated as Series A Preferred Stock ("Series A Preferred Stock"), none of which are issued or outstanding, (ii) three hundred thousand (300,000) are designated as Series B Cumulative Convertible Preferred Stock ("Series B Preferred Stock"), none of which are issued or outstanding, and (iii) three hundred and twenty-five thousand (325,000) shares are designated as Series B-1 Cumulative Convertible Participating Preferred Stock ("Series B-1 Preferred Stock"), 317,097.61 of which are 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 C Cumulative Convertible Participating Preferred Stock. Series C Cumulative Convertible Participating Preferred Stock RESOLVED, that the holders of Series C Cumulative Convertible Participating Preferred Stock, except as otherwise provided by law and this Certificate, shall have and possess the following rights and preferences. A. Series C Cumulative Convertible Participating Preferred Stock. 1. Designation, Number of Shares. This series of preferred stock shall be designated as Series C Cumulative Convertible Participating Preferred Stock ("Series C Preferred Stock"), and the number of shares that shall constitute such series shall be one hundred fifty thousand (150,000). The par value of Series C 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, (a) Series C 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 Preferred Stock 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 Preferred Stock, shall specifically provide that such class or series shall rank junior to Series C 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"); and (b) Series C Preferred Stock shall rank junior to the Series B-1 Preferred Stock. 3. Dividend Provisions. (a) Each holder of Series C 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 C Preferred Stock after the date of the original issuance of the Series C Preferred Stock at a rate equal to ten percent (10.0%) per share per annum on One Hundred Dollars ($100) per share, in cash. In addition, if 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 C 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 holders (assuming conversion of all such shares of Series C 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 C Preferred Stock set forth in this Paragraph A.3(a) or Paragraph A.3.(g) hereof. (b) All dividends, shall be cumulative, whether or not earned or declared, and shall accrue on a daily basis beginning on the date of the original issuance of Series C 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 C Preferred Stock. Each dividend on Series C Preferred Stock shall be payable to the holders of record of Series C 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, dividends on the shares of Series C Preferred Stock shall be deferred until the second anniversary of the date of original issuance of the Series C Preferred Stock; provided, that during such two-year period, dividends on shares of Series C 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 C Preferred Stock. (c) Dividends shall cease to accrue in respect of any shares of Series C 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 C 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 C Preferred Stock pursuant to Paragraph A.3.(a) shall be paid pro rata to the holders of Series C Preferred Stock of record entitled thereto. (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 Series C 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 C Preferred Stock as set forth above in Paragraph A.3.(a) shall be increased to a rate of fifteen percent (15%) per share per annum on the Series C Liquidation Preference (the "Default Dividends"), which Default Dividends shall be payable in cash 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 C Preferred Stock then outstanding: (i) except, as set forth in Paragraph A.3(b) hereof, in the event that the Corporation does not (A) declare the dividend payable on the shares of Series C Preferred Stock within (30) calendar days of each Dividend Declaration Date, (B) fulfill its dividend payment obligation in full for the Series C 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 as required herein; or (ii) in the event that the Corporation shall have materially breached any of the representations and warranties contained in either the Stock Purchase Agreement or the Amended and Restated Investors Rights Agreement; or (iii) in the event that the Corporation shall have materially breached any of the covenants or agreements contained in either the Stock Purchase Agreement or the Amended and Restated 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 C 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, 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 C 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. (h) So long as any shares of Series B Preferred Stock or Series C Preferred Stock remain outstanding, the Corporation shall not declare, pay or set apart any amounts for dividends on, or make any other distribution in cash or other property in respect of, the Junior Securities for any period, nor shall the Corporation or any of its Subsidiaries redeem, repurchase, or otherwise acquire for value any of the Junior Securities (either pursuant to any applicable sinking fund requirement or otherwise) without first obtaining the prior written consent of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the then outstanding shares of Series B Preferred Stock and Series C Preferred Stock. (i) Dividends payable on Series C 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. Liquidation Preference. Upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of all shares of Series C 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 Two Hundred Dollars ($200.00) in cash per share (with such dollar amount to be adjusted for any stock dividend, stock spilt, subdivision, combination, reclassification or similar event made or taken with respect to the Series C Preferred Stock), plus an amount equal to full Accumulated Dividends (such amount, as so determined, is referred to herein as the "Series C Liquidation Preference"), to the date of final distribution, before any payment or distribution is made on account of any Junior Securities. Upon any liquidation, dissolution or winding up of the Corporation, whether voluntarily or involuntarily, after the holders of Series C Preferred Stock shall have been paid in full the aggregate amount of the Series C Liquidation Preference, the remaining net assets of the Corporation available for distribution shall be distributed ratably among the holders of Series B Preferred Stock, Series C Preferred Stock and Common Stock on an as-converted to Common Stock basis. Whenever the distribution provided for in this Paragraph A.4. shall be payable in property other than cash, the value of such distribution shall be the fair market value of such property as determined in good faith by the Board of Directors of the Corporation. 5. Conversion. (a) Right of Conversion. Each share of Series C 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 C 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) (with such dollar amount to be adjusted for any stock dividend, stock spilt, subdivision, combination, reclassification or similar event made or taken with respect to the Series C Preferred Stock) plus an amount equal to full Accumulated Dividends by (ii) the Conversion Price. The "Conversion Price" for the Series C Preferred Stock shall initially be Two Dollars and Fifty Cents ($2.50) per share. The Conversion Price for the Series C 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 C 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 C 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 C Preferred Stock, the certificate or certificates for shares of the Series C 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 C 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 C 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 C 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 C Preferred Stock shall not be deemed to have converted such Series C Preferred Stock until immediately prior to the effectiveness of such offering and the Corporation shall deliver to such holders tendering Series C 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 C Preferred Stock are outstanding, the Conversion Price of the Series C 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 original issuance of Series C Preferred Stock, without consideration or for an Effective Price (as defined in Paragraph B hereof) per share, or, in the case of Convertible Securities, a conversion price per share, less than the Conversion Price for the Series C Preferred Stock in effect immediately prior to the issuance (or deemed issuance) of such Additional Stock, then the Conversion Price for the Series C 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 with such financing, immediately after such issuance or sale. See Annex A hereto for an example of the formula set forth herein. (A) hidden level (B) No adjustment of the Conversion Price for Series C 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 C Preferred Stock pursuant to this Paragraph A.5.(c)(i) shall have the effect of increasing such Conversion Price for the Series C 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 C 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: 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 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 C 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 C 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 all shares of Common Stock issued (or deemed to have been issued pursuant to Paragraph A.5.(c)(i)(E) hereof) by the Corporation after the date of original issuance of Series C 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-1 Preferred Stock, Series C Preferred Stock and any warrants issued in connection with the Stock Purchase Agreement. (iii) In the event the Corporation at any time or from time to time after the date of original issuance of Series C 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 C Preferred Stock shall be appropriately decreased so that the number of shares of Common Stock issuable on conversion of each share of Series C 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 original issuance of Series C 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 C Preferred Stock shall be appropriately increased so that the number of shares of Common Stock issuable on conversion of each share of Series C 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 C 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 C 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 C Preferred Stock shall thereafter be entitled to receive, upon conversion of the Series C 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 C 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 C 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 and the number of shares purchasable upon conversion of the Series C 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 its Certificate of Incorporation or this Certificate of Designation 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 C Preferred Stock against impairment. (g) No Fractional Shares. No fractional shares shall be issued upon conversion of the Series C 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 C 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 C 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 C 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 C 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 C 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 C 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 C 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 C 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 Series C Preferred Stock, and (ii) the payment of dividends as contemplated in Paragraph A.3.(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 C 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 C 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 C 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. 6. Status of Converted Stock. In the event any shares of Series C Preferred Stock are converted into 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. Redemption. (a) Corporation Optional Redemption. (i) At any time after the third (3rd) anniversary of the date of the original issuance of the Series C Preferred Stock, all of the shares of Series C Preferred Stock shall, at the option of the Corporation (as determined by the Board of Directors), be redeemed out of the assets of the Corporation legally available for such redemption in an amount equal to the Series C Liquidation Preference as of the date fixed for redemption (the "Optional Redemption Price"), only if each of the following two conditions are met (each to be adjusted in the event of a combination, stock split or subdivision, as the case may be): (A) the average Closing Common Stock Market Price (as defined in Paragraph B.(g) hereof) for sixty (60) consecutive trading days beginning after the third anniversary of the date of the original issuance of the Series C Preferred Stock and ending no more than fifteen (15) trading days prior to the date fixed for such optional redemption, shall be greater than Seven Dollars and Fifty Cents ($7.50); and (B) the average trading volume, as reported by Bloomberg, during such sixty (60) trading day period shall be at least 75,000 shares per trading day. (ii) At least ten (10) Business Days prior to the date fixed for the Optional Redemption of Series C Preferred Stock, written notice (the "Optional Redemption Notice") shall be given by first class mail, postage prepaid, to each Holder of record of Series C Preferred Stock on the record date fixed for such redemption of Series C Preferred Stock at such Holder's address as set forth on the stock register of the Corporation on such record, which Optional Redemption Notice shall specify the record date fixed for such redemption of Series C Preferred Stock (the "Optional Redemption Date"). Upon the mailing of any such Optional Redemption Notice, the Corporation shall become obligated to redeem, on the Optional Redemption Date specified therein, all of the outstanding shares of Series C Preferred Stock. (iii) If an Optional Redemption Notice has been mailed in accordance with paragraph A.7.(a) above, unless the Corporation defaults in the payment in full of the Optional Redemption Price, dividends on Series C Preferred Stock called for redemption shall cease to accumulate on the Optional Redemption Date, and the Holders of such redemption shares shall cease to have any further rights with respect thereto on the Redemption Date, other than the right to receive the redemption price without interest. (iv) On the Optional Redemption Date the Corporation shall pay the Optional Redemption Price in full, in cash, by wire transfer of immediately available funds, in respect of the shares of Series C Preferred Stock outstanding on the Optional Redemption Date to accounts specified by the holders of the Series C Preferred Stock so redeemed. (v) If the Corporation exercises its right to redeem the Series C Preferred Stock pursuant to this Paragraph A.7.(a), each holder of Series C Preferred Stock may elect to convert such holder's shares of Series C Preferred Stock into Common Stock of the Corporation, in accordance with the terms and conditions set forth in Paragraph A.5. herein, by providing the Corporation with written notice of such conversion at any time prior to the Optional Redemption Date. (b) Holder Optional Redemption. (i) Holder Optional Redemption. Except as set forth in Paragraph A.7.(a), the Corporation shall not have the right to call or redeem at any time all or any shares of Series C Preferred Stock. Prior to the occurrence of an event or transaction that could result in a Change of Control (the "Change of Control Event"), the Corporation shall send written notice to each holder of Series C Preferred Stock, which notice shall explain in reasonable detail the Change of Control Event (the "Change of Control Notice"). The Change of Control Notice shall be sent by first class mail at least forty-five (45) Business Days prior to the anticipated occurrence of the Change of Control Event. Upon receipt of a Change of Control Notice from the Corporation, each holder of shares of Series C Preferred Stock shall have the right, by giving written notice to the Corporation (the "Holder Optional Redemption Notice") to cause the Corporation to redeem all of such holder's then outstanding shares of Series C Preferred Stock at the Mandatory Redemption Price referred to below, at the closing of the Change of Control Event. All holders electing to redeem shares of Series C Preferred Stock shall deliver to the Corporation during regular business hours, at the office of any transfer agent of the Corporation for the Series C Preferred Stock, at the principal office of the Corporation or at such other place as may be designated by the Corporation, the certificate or certificates for the Series C Preferred Stock to be redeemed, duly endorsed for transfer to the Corporation (if required by it) on or before the date of the Change of Control Event (the "Holder Optional Redemption Date"). (ii) Holder Optional Redemption Price. All shares of Series C Preferred Stock to be redeemed shall be redeemed by paying for each such share an amount equal to (A) Two Hundred Dollars ($200.00) per share (with such dollar amount to be adjusted for any stock dividend, stock spilt, subdivision, combination, reclassification or similar event made or taken with respect to the Series C Preferred Stock), plus (B) an amount equal to all Accumulated Dividends to the Holder Optional Redemption Date, the sum of clauses (A) and (B) in each case being referred to as the "Holder Optional Redemption Price." All payments of the Holder Optional Redemption Price shall be made in cash. (iii) On the Holder Optional Redemption Date the Corporation shall pay the Holder Optional Redemption Price in full, in cash, by wire transfer of immediately available funds, in respect of the shares of Series C Preferred Stock outstanding on the Holder Optional Redemption Date to accounts specified by the holders of the Series C Preferred Stock so redeemed. (iv) The Corporation shall be prohibited from consummating the Change of Control Event unless and until the Corporation has paid the Holder Optional Redemption Price in accordance with Paragraph A.7.(b)(iii) above. (c) Redeemed or Otherwise Acquired Shares to be Retired. Any shares of Series C Preferred Stock redeemed pursuant to this Paragraph A.7. or otherwise acquired by the Corporation in any manner whatsoever shall be canceled and shall not under any circumstances be reissued; and the Corporation may from time to time take such appropriate corporate action as may be necessary to reduce accordingly the number or authorized shares of Series C Preferred Stock. 8. 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 C Preferred Stock then outstanding shall be sufficient to take any action requiring the vote of the Series C Preferred Stock as a separate class. At any meeting where the Series C 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 C Preferred Stock shall constitute a quorum of such class. (ii) So long as any Series C 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 C 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 Restated Certificate of Incorporation, as amended by the Certificate of Amendment or By-laws of the Corporation, each as amended, so as to affect, in any manner adverse to the holders of Series C Preferred Stock, the relative rights, preferences, qualifications, limitations or restrictions of the Series C Preferred Stock; (B) increase the authorized number of shares of Series C 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 C 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 C Preferred Stock are outstanding. (b) Election of Directors. Notwithstanding the foregoing, each share of Series C Preferred Stock shall be entitled to vote for the election of Directors to the Corporation's Board of Directors whether by annual or special meeting or otherwise. For purposes of determining the number of votes that each share of Series C Preferred Stock is entitled to cast for the election of Directors, each such share of Series C Preferred Stock shall be treated as if it had been converted into that number of shares of Common Stock determined in accordance with Paragraph A.5. hereof, immediately prior to the occurrence of such election. The holders of shares of Series C Preferred Stock shall vote together with the holders of shares of Common Stock as a single class for the purpose of the election of Directors pursuant to this Paragraph A.8.(b). B. Definitions. As used herein, the following terms shall have the following definitions: (a) "Accumulated Dividends" means with respect to any share of Series C 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) "Amended and Restated Investors Rights Agreement" means the Amended and Restated Investors Rights Agreement dated as of June 25, 2001, 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. (e) "Business Day" shall mean any day other than Saturday, Sunday or other day in which commercial money center banks in New York City, New York are closed for business. (f) "Change of Control" shall mean the occurrence of any one of the following: (1) the consolidation or merger of the Corporation with or into any other Person and as a result of the transaction the stockholders of the Corporation, immediately prior to such transaction, own fifty percent (50%) or less of the voting power or voting securities of the surviving entity after giving effect to such transaction; (2) the sale, conveyance or disposition of a majority of the assets of the Corporation and its Subsidiaries on a consolidated basis (other than to a wholly owned Subsidiary of the Corporation or a pledge or grant of a security interest to a bona fide lender); (3) any acquisition in a transaction or series of related transactions by a Person or "group" (as defined in Rule 13d-5 promulgated under the Exchange Act) of Persons the result of which is that such Person of group of Persons owns beneficially fifty percent (50%) or more of either (x) the voting securities then outstanding or (y) the then outstanding voting power, of the Corporation; or (4) the liquidation, dissolution or winding up of the Corporation. (g) "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 on NASDAQ, NYSE or any other national securities market as reported by Bloomberg. (h) "Common Stock Equivalents" has the meaning set forth in Paragraph A.5.(c)(iii) hereof. (i) "Conversion Price" has the meaning set forth in Paragraph A.5.(a) hereof. (j) "Convertible Securities" means any indebtedness or shares of stock convertible into or exchangeable for Common Stock. (k) "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 C Preferred Stock are outstanding. (l) "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); (m) "Dividend Period" means the Initial Dividend Period and, thereafter, each Semi-Annual Dividend Period. (n) "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. (o) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended and the rules and regulations promulgated thereunder. (p) "Initial Dividend Period" means the dividend period commencing on the date of issuance of the Series C Preferred Stock and ending on the first Dividend Payment Date to occur thereafter. (q) "Investors" shall have the meaning set forth in the Stock Purchase Agreement. (r) "Junior Securities" has the meaning set forth in Paragraph A.2. hereof. (s) "NASDAQ" shall mean the Nasdaq National Market. (t) "NYSE" shall mean the New York Stock Exchange. (u) "Option" means rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities. (v) "Permitted Options" has the meaning set forth in Paragraph A.5.(c)(ii)(B) hereof. (w) "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. (x) "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. (y) "Securities Act" shall mean the Securities Act of 1933, as amended and the rules and regulations promulgated thereunder. (z) "Series B-1 Preferred Stock" shall mean the Series B-1 Cumulative Convertible Participating Preferred Stock par value, $1.00 per share, of the Corporation. (aa) "Stock Purchase Agreement" means the Series C Preferred Stock and Common Stock Warrant Purchase Agreement dated as of April 17, 2001, 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. (bb) "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 22nd day of June, 2001. ABC-NACO INC. By: /s/ WAYNE R. ROCKENBACH Name: Wayne R. Rockenbach Title: Senior Vice President and Chief Financial Officer ANNEX A Example of Application of Formula for Adjustment of Conversion Price. If, twelve (12) months after the original issuance of the Series C 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 $2.00 per share (and thus, less than the Conversion Price for Series C Preferred Stock then in effect), the Conversion Price would be adjusted as follows: (A+B) (C +D) (9,000,000 x $2.50) + (100,000 x $2.00) (9,000,000) +(100,000) (22,500,000)+($200,000) (9,100,000) (22,700,000) (9,100,000) = $2.4945 EX-3.3 5 doc4.txt CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF ABC-NACO INC. ABC-NACO Inc. (the "Corporation"), a corporation organized and existing under and by virtue of the General Corporation Laws of the State of Delaware (the "DGCL"), DOES HEREBY CERTIFY: WHEREAS, the Board of Directors (the "Board") of the Corporation has determined that it is in the best interests of the Corporation to increase the number of authorized shares of the Corporation's common stock, par value $.01 per share ("Common Stock") from 25,000,000 to 100,000,000; WHEREAS, the Board of Directors of the Corporation, by unanimous approval at a meeting of the Directors evidenced by board resolutions, has duly adopted the following resolution proposing and declaring necessary, advisable and appropriate an amendment to the Restated Certificate of Incorporation of the Corporation increasing the authorized shares of Common Stock; WHEREAS, the Directors submitted to the stockholders of the Corporation to be considered at an annual meeting of the stockholders a proposal to amend the Restated Certificate of Incorporation of the Corporation increasing the authorized shares of Common Stock; WHEREAS, at an annual meeting of the stockholders of the Corporation, the necessary number of shares as required by DGCL and the Corporation's Restated Certificate of Incorporation were voted in favor of the proposal to amend the Restated Certificate of Incorporation of the Corporation increasing the authorized shares of Common Stock; BE IT RESOLVED, that Article Fourth of the Restated Certificate of Incorporation of the Corporation, as amended to date, be restated to replace "25,000,000" with "100,000,000" for the total number of shares of Common Stock that the Corporation is authorized to issue. The aforesaid amendment has been duly adopted in accordance with the applicable provisions of Section 242 of the DGCL . The capital of the Corporation shall not be reduced under or by reason of the amendment. IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed by its duly authorized officer as of this 21st day of June, 2001. ABC-NACO Inc. By: /s/ VAUGHN W. MAKARY ----------------------- Name: Vaughn W. Makary Title: Chief Executive Officer and President Attest: By: /s/ MARK F. BAGGIO --------------------- Mark F. Baggio Vice President, General Counsel and Secretary EX-4.1 6 doc5.txt AMENDMENT NO. 4 TO THE RIGHTS AGREEMENT This Amendment No. 4, dated as of June 25, 2001 (this "Amendment No. 4"), is to the Rights Agreement, dated as of September 29, 1995, between ABC-NACO, Inc., a Delaware corporation (the "Company"), and LaSalle National Trust, N.A., a national banking association (the "Rights Agent"). WITNESSETH: WHEREAS, the Company and the Rights Agent are parties to that certain Rights Agreement dated as of September 29, 1995, and amended on November 18, 1996, September 18, 1998 and March 8, 2000 (as so amended, the "Rights Agreement"); and WHEREAS, the Company intends to issue and sell a series of its Preferred Stock to certain investors affiliated with Furman Selz (the "Investors") pursuant that certain Series C Preferred Stock and Common Stock Warrant Purchase Agreement dated as of April 17, 2001 (the "Series C Purchase Agreement"), by and among the Company and the Investors; and WHEREAS, the Company and the Investors are parties to a certain Exchange Agreement dated as of April 17, 2001 (the "Exchange Agreement"), pursuant to which the Company has offered to exchange and the Investors have agreed to exchange, all of the outstanding shares of the Company's Series B Cumulative Convertible Preferred Stock, par value $1.00 per share, for a new series of the Company's preferred stock, to be designated Series B-1 Cumulative Convertible Participating Preferred Stock, par value $1.00 per share; and WHEREAS, the Company and the Investors desire that the Rights Agreement not be applicable to any current or future acquisitions of shares of the Company's Common Stock by the Investors and their transferees, including without limitation, such acquisitions as may relate to, be in connection with or occur as a result of the Series C Purchase Agreement or the Exchange Agreement ; and WHEREAS, pursuant to and in compliance with the provisions of Section 27 of the Rights Agreement, the Company and the Rights Agent desire to amend the Rights Agreement as hereinafter set forth. NOW, THEREFORE, in consideration of the premises and agreements herein contained, the Company and the Rights Agent agrees as follows: SECTION I. Defined Terms. Capitalized terms used but not defined herein shall have the meanings given to such terms in the Rights Agreement. SECTION II. Amendment to the Rights Agreement. 2.01. The definition of "Acquiring Person" in Section 1 of the Rights Agreement is amended by deleting such definition in its entirety and substituting in lieu thereof the following new defined term: "Acquiring Person" shall mean any Person (as such term is hereinafter defined) who or which, together with all Affiliates and Associates (as such terms are hereinafter defined) of such Person, shall be the Beneficial Owner (as such term is hereinafter defined) of 15% or more of the Common Shares of the Company then outstanding, but shall not include the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company, any person or entity holding Common Shares for or pursuant to the terms of any such plan or any of the ING Holders; provided that for purposes of the definition of Acquiring Person, the terms Affiliates and Associates shall not include the ING Holders. Notwithstanding the foregoing, no Person shall become an "Acquiring Person" as the result of (i) an acquisition of Common Shares by the Company which, by reducing the number of shares outstanding, increases the proportionate number of shares beneficially owned by such Person to 15% or more of the Common Shares of the Company then outstanding, (ii) the acquisition by such Person of Common Shares solely as a result of its market making activities in the Company's securities undertaken solely in its capacity as a market-maker in accordance with the rules of the National Association of Securities Dealers, Inc., or (iii) the acquisition by such Person of newly-issued Common Shares directly from the Company (it being understood that a purchase from an underwriter or other intermediary is not deemed for purposes hereof to be a purchase directly from the Company); provided, however, that if a Person shall become the Beneficial Owner of 15% or more of the Common Shares of the Company then outstanding by reason of share purchases by the Company or the receipt of newly-issued shares directly from the Company and shall, after such share purchases or direct issuance by the Company, become the Beneficial Owner of any additional Common Shares of the Company (and thereafter remains a Beneficial Owner of 15% or more of the Common Shares of the Company), then such Person shall be deemed to be an "Acquiring Person"; provided further, however, that any transferee from such Person who becomes the Beneficial Owner of 15% or more of the Common Shares of the Company then outstanding shall nevertheless be deemed to be an "Acquiring Person." Notwithstanding the foregoing, if the Board of Directors of the Company determines in good faith that a Person who would otherwise be an "Acquiring Person," as defined pursuant to the foregoing provisions of this paragraph, has become such inadvertently, and such Person divests as promptly as practicable (and in any event within ten business days after notification by the Company) a sufficient number of Common Shares so that such Person would no longer be an Acquiring Person, as defined pursuant to the foregoing provisions of this paragraph, then such Person shall not be deemed to be an "Acquiring Person" for any purposes of this Agreement. Notwithstanding anything in this Agreement to the contrary, (i) none of NACO or any of its permitted assignees or transferees shall be deemed an Acquiring Person, and none of a Distribution Date, a Shares Acquisition Date, a Triggering Event or an event described in the first clause (i) or the first clause (ii) of Section 34(b) shall be deemed to occur or to have occurred, in each such case, by reason of the approval, execution or delivery of the Merger Agreement, the consummation of the Merger (as defined in the Merger Agreement) or the consummation of the other transactions contemplated by the Merger Agreement and (ii) any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company, or any Person for or pursuant to the terms of any such plan) who or which, together with all Affiliates and Associates of such Person, is, as of the Effective Time (as defined in the Merger Agreement), the Beneficial Owner of 15% or more of the then- outstanding Common Shares, shall not be deemed to have become an Acquiring Person unless and until such time as (A) such Person or any Affiliate or Associate of such Person thereafter becomes the Beneficial Owner of additional Common Shares representing 1% or more of the then-outstanding Common Shares other than as a result of a stock dividend, stock split or similar transaction effected by the Company in which all holders of Common Shares are treated equally or (B) any other Person who is the Beneficial Owner of Common Shares representing 1% or more of the then-outstanding Common Shares thereafter becomes an Affiliate or Associate of such Person." 2.02. Section 1 of the Rights Agreement is hereby amended by adding the following new defined term: "ING Holders" shall mean those persons and entities listed on Exhibit A to the Series C Preferred Stock and Common Stock Warrant Purchase Agreement dated April 17, 2001 by and among the Company and the Investors set forth therein and any of their transferees." SECTION III. Miscellaneous. 3.01. Governing Law. This Amendment No. 4 shall be deemed to be made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws o the State of Delaware applicable to contracts to be made and performed entirely within the State of Delaware. 3.02. Counterparts. This Amendment No. 4 may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. 3.03. Descriptive Headings. Descriptive heading of several Sections of this Amendment No. 4 have been inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. 3.04. Ratification. This Amendment No. 4 is limited as specified and shall not constitute a modification, acceptance, consent or waiver of any other provision of the Rights Agreement. The Rights Agreement, including the Exhibits thereto as hereby amended, is in all respects ratified and confirmed, and all rights and powers created thereby or thereunder shall be and remain in full force and effect. From and after the date hereof, all references in the Rights Agreement, the Exhibits thereto and all other documents related to the Rights Agreement shall be deemed to be references to the Rights Agreement after giving effect to this Amendment No. 4. 3.05. Effectiveness. This Amendment No. 4 shall be effective as of the day and year first above written. IN WITNESS WHEREOF, the parties have caused this Amendment No. 4 to be duly executed and attested as of the day and year first above written. ABC-NACO INC. By: ______________________ Name: Wayne R. Rockenbach Title: Chief Financial Officer ATTEST: By: _______________________ Name: Mark F. Baggio Title: Vice President, General Counsel and Secretary LASALLE BANK NATIONAL ASSOCIATION By: __________________________________ Name: __________________________________ Title: __________________________________ ATTEST: By: ________________________ Name: ________________________ Title: ________________________ EX-4.2 7 doc6.txt AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT BY AND AMONG ABC-NACO INC., AND THE INVESTORS SET FORTH HEREIN DATED AS OF JUNE 25, 2001 i TABLE OF CONTENTS Section 1. Definitions. 3 Section 2. Covenants of the Corporation Not Surviving Conversion. 7 Section 3. Covenants of the Corporation Surviving Conversion. 8 Section 4. Registration Rights. 8 Section 5. Management Rights. 24 Section 6. Severability; Governing Law. 25 Section 7. Benefits of Agreement. 26 Section 8. Notices. 26 Section 9. Changes. 27 Section 10. Captions. 28 Section 11. Nouns and Pronouns. 28 Section 12. Merger Provision. 28 Section 13. Counterparts. 28 35 AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT THIS IS AN AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT, (this "Agreement"), dated as of this 25th day of June, 2001, by and among ABC-NACO INC., a Delaware corporation (the "Corporation"), having its principal office at 2001 Butterfield Road, Suite 502, Downers Grove, Illinois 60515, and the investors set forth on Schedule I hereto (individually referred to as an "Investor" and collectively as the "Investors"). BACKGROUND A. The Corporation is a corporation duly organized and existing under the laws of the State of Delaware with an authorized capitalization of 101,000,000 shares of which (i) 1,000,000 shares are authorized as Preferred Stock (as defined below), of which (a) 100,000 shares have been designated Series A Preferred Stock, none of which are issued and outstanding; (b) 300,000 shares have been designated Series B Preferred Stock (as defined below), none of which are issued and outstanding; (c) 325,000 shares have been designated Series B-1 Preferred Stock (as defined below) 317,097.62 are issued and outstanding as of this date and (c) 150,000 shares have been designated Series C Preferred Stock (as defined below) all of which are issued and outstanding as of this date; and (ii) 100,000,000 shares are authorized as Common Stock (as defined below). All of the shares of Series B Preferred Stock were retired upon consummation of the exchange of the Series B Preferred Stock for shares of Series B-1 Preferred Stock pursuant to the Exchange Agreement. B. The Corporation and the Investors have entered into the Series C Stock Purchase Agreement (as defined below). C. The Investors currently own 317,097.62 shares of Series B-1 Preferred Stock and, in connection with the Closing of the Series C Stock Purchase Agreement, that number of shares of the Corporation's Series C Preferred Stock (including any shares hereafter acquired by the Investors, and their successors or assigns from any person by any means, including without limitation, any acquisition by gift, purchase, dividend, conversion, stock split, recapitalization or otherwise, collectively, the "Shares") set forth opposite the name of each Investor on Schedule I attached hereto. It is deemed to be in the best interest of the Corporation that provision be made for the continuity and stability of the business and policies of the Corporation and, to that end, the Corporation and each of the Investors hereby set forth their agreement with respect to the Shares. NOW, THEREFORE, in consideration of the premises and of the mutual consents and obligations hereinafter set forth, the parties hereto hereby further agree as follows: Section 1. Definitions. All capitalized terms used in this Agreement shall have the meaning assigned to them elsewhere in this Agreement or as specified below: "Additional Warrant" means the Additional Closing Common Stock Purchase Warrant of the Company issued pursuant to the Series C Purchase Agreement, in the form attached hereto as Exhibit D-1 hereto. "Affiliate" of a person means (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) "associate", as the term is defined in Rule 12b-2 promulgated under the Exchange Act as in effect as of the date of this Agreement. "Amended Restated Certificate of Incorporation" means the Corporation's Restated Certificate of Incorporation, as amended to date and as amended by the Certificate of Amendment thereto, filed in the Office of the Secretary of State of the State of Delaware, a copy of which is attached hereto as Exhibit A. "Closing" means the closing of the transactions contemplated under the Series C Stock Purchase Agreement. "Closing Date" means the date on which the Closing under the Series C Stock Purchase Agreement occurs. "Closing Warrant" means the Closing Common Stock Purchase Warrant of the Company issued pursuant to the Series C Purchase Agreement, in the form attached hereto as Exhibit D-2 hereto. "Commission" means the United States Securities and Exchange Commission. "Common Stock" means (a) the Corporation's Common Stock, par value $.0l per share, as authorized on the date of this Agreement, (b) any other capital stock of any class or classes (however designated) of the Corporation, authorized on or after the date hereof, the holders of which shall have the right, without limitation as to amount, either to all or to a share of the balance of current dividends and liquidating distributions after the payment of dividends and distributions on any shares entitled to preference under the Amended Restated Certificate of Incorporation (as the same may be amended from time to time after the Closing), and (c) any other securities into which or for which any of the securities described in clause (a) or (b) of this definition may be converted or exchanged pursuant to a plan of recapitalization, reorganization, merger, sale of assets or otherwise. "Conversion Price" means (a) with respect to the conversion of the Series B-1 Preferred Stock to Common Stock, $9.00, as may be adjusted from time to time in accordance with the provisions of the Series B-1 Certificate of Designation, and (b) with respect to the conversion of the Series C Preferred Stock to Common Stock, $2.50, as may be adjusted from time to time in accordance with the provisions of the Series C Certificate of Designation. "Default Dividends" shall have the meaning set forth in the Series C Certificate of Designation. "Documents" means this Agreement, the Series C Stock Purchase Agreement, the Series B-1 Certificate of Designation, the Series C Certificate of Designation and the Exchange Agreement. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect at the time. "Exchange Act Registration Statement" means a registration statement filed pursuant to the Exchange Act, relating to any class of equity securities of the Corporation. "Exchange Agreement" shall mean the Exchange Agreement dated as of April 17th, 2001, between the Company and the holders of Series B Preferred Stock named therein. "Excluded Form" means a registration statement filed pursuant to the Securities Act on Form S-8, S-4 or any similar or successor forms. "Form S-3" shall mean the form under the Securities Act as is in effect on the date hereof or any successor registration forms under the Securities Act subsequently adopted by the Commission which permit inclusion or incorporation of substantial information by reference to other documents filed by the Corporation with the Commission. "Holder" shall mean any holder of Series B-1 Preferred Stock or Series C Preferred Stock owning of record Registrable Securities that have not been sold to the public and, for purposes of this Agreement, a record holder of the Series B-1 Preferred Stock or Series C Preferred Stock convertible into such Registrable Securities shall be deemed to be the Holder of such Registrable Securities; provided, however, that the Corporation shall in no event be obligated to register the Series B-1 Preferred Stock or Series C Preferred Stock, and that Holders of Registrable Securities shall not be required to convert their shares of Series B-1 Preferred Stock or Series C Preferred Stock into Common Stock in order to exercise the registration rights granted under Section 4 hereof, until immediately before the effectiveness of the offering to which the registration relates. "Initiating Holders" shall have the meaning set forth in Section 4(d)(ii) hereof. "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. "NASD" shall have the meaning set forth in Section 4(c)(xiv) hereof. "NASDAQ" means the NASDAQ National Market. "NYSE" means the New York Stock Exchange. "Person" means and includes an individual, a corporation, a partnership, a trust, an unincorporated organization and a government or any department, agency or political subdivision thereof. "Preferred Stock" shall mean the Corporation's Series B-1 Preferred Stock and Series C Preferred Stock. "Register," "registered" and "registration" shall refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of effectiveness of such registration statement. "Registrable Securities" means: (a) all the shares of Common Stock of the Corporation issued or issuable upon the conversion of the shares of Series B-1 Preferred Stock or Series C Preferred Stock that are now owned or may hereafter be acquired by any Holder or its permitted successors and assigns; (b) all shares of Common Stock of the Corporation issued or issuable upon the exercise of the Closing Warrant or the Additional Warrant that are now owned or may hereafter be acquired by any Holder or its permitted successors and assigns; and (c) any shares of Common Stock of the Corporation issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of all such shares of Common Stock described in clause (a) of this definition; excluding in all cases, however, (i) any Registrable Securities sold pursuant to registration under the Securities Act or (ii) any Registrable Securities publicly sold, subsequent to the Corporation's initial public offering of securities registered under the Securities Act, pursuant to Rule 144 (or similar or successor rule) promulgated under the Securities Act. "Registrable Securities then outstanding" means the number of shares of Registrable Securities that are then issued and outstanding or are then issuable pursuant to the exercise or conversion of then outstanding and then exercisable options, warrants or convertible securities. "Registration Expenses" shall have the meaning set forth in Section 4(d) hereof. "Securities Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect at the time. "Series B Preferred Stock" shall mean the Corporation's authorized 300,000 shares of Series B Preferred Stock, par value $1.00 per share, all of which were retired upon consummation of the exchange of shares of Series B Preferred Stock for shares of Series B-1 Preferred Stock pursuant to the Exchange Agreement. "Series B-1 Certificate of Designation" shall mean the Certificate of Designation of Series B-1 Cumulative Convertible Participating Preferred Stock of the Corporation. A copy of the Series B-1 Certificate of Designation is attached hereto as Exhibit B. "Series B-1 Preferred Stock" shall mean the Corporation's authorized 325,000 shares of Series B Cumulative Convertible Preferred Stock, par value $ 1.00 per share, having the designations, rights, preferences and privileges and qualifications, limitations and restrictions of preferred stock set forth in the Series B-1 Certificate of Designation. "Series B Stock Purchase Agreement" shall mean the Preferred Stock Purchase Agreement dated as of February 18, 2000, by and among the Corporation and certain of the Investors, as the same may be amended from time to time. "Series C Certificate of Designation" shall mean the Certificate of Designation of Series C Cumulative Convertible Participating Preferred Stock of the Corporation. A copy of the Series C Certificate of Designation is attached hereto as Exhibit C. "Series C Preferred Stock" shall mean the Corporation's authorized 150,000 shares of Series C Cumulative Convertible Preferred Stock, par value $ 1.00 per share, having the designations, rights, preferences and privileges and qualifications, limitations and restrictions of preferred stock set forth in the Series C Certificate of Designation. "Series C Stock Purchase Agreement" shall mean the Series C Preferred Stock and Common Stock Warrant Purchase Agreement dated as of April 17, 2001 by and among the Corporation and certain of the Investors, as the same may be amended from time to time. "Subsidiaries" shall mean, when used with reference to a person, means 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. "Violation" shall have the meaning set forth in Section 4(i)(i) hereof. Section 2. Covenants of the Corporation Not Surviving Conversion. So long as any shares of the Preferred Stock are outstanding, the Corporation hereby covenants and agrees as follows: (a) Reserve for Reserved Shares. The Corporation currently has reserved an aggregate of 22 Million (22,000,000) shares of its authorized but unissued Common Stock for purposes of effecting the conversion of the shares of Preferred Stock and paying the Investors dividends in Common Stock. The Corporation shall at all times take appropriate steps to reserve and keep available out of its authorized but unissued shares of Common Stock, for the purpose of effecting the conversion of the shares of Preferred Stock, paying the Investors dividends in Common Stock and paying Default Dividends in respect to the Preferred Stock in accordance with the Series B-1 Certificate of Designation and Series C Certificate of Designation, and otherwise complying with the terms of this Agreement, such additional number of its duly authorized but unissued shares of Common Stock as shall be sufficient to effect the conversion of the shares of Preferred Stock from time to time outstanding, or otherwise to comply with the terms of this Agreement. If at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of the shares of Preferred Stock, or otherwise to comply with the terms of this Agreement or either the Series B-1 Certificate of Designation or the Series C Certificate of Designation, the Corporation shall forthwith take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes. The Corporation shall obtain any authorization, consent, approval or other action by or make any filing with any court or administrative body that may be required under applicable state securities laws in connection with the issuance of shares of Common Stock upon conversion of the shares of Preferred Stock. (b) Rule 144. As set forth in Section 4(k) hereto, the Corporation shall take all necessary action to comply with the requirements of Rule 144 under the Securities Act. Section 3. Covenants of the Corporation Surviving Conversion. At all times from the date of this Agreement the Corporation hereby agrees to the following covenants: (a) NASDAQ Listing. The Corporation shall take all actions necessary or appropriate to ensure that the shares of stock issuable upon conversion of the Series B-1 Preferred Stock and Series C Preferred Stock are listed or authorized to be quoted on the NASDAQ or listed on any national securities exchange on which shares of Common Stock are then listed. The Corporation will take all actions necessary or appropriate to ensure that it maintains a public market for its Common Stock on NASDAQ or the NYSE. (b) Meetings with Management. The Corporation shall arrange for and make available members of its executive management to meet with the Investors and their representatives, at such times as the Investors shall reasonably request, but no less frequently than on a quarterly basis (if so requested), to discuss with the Investors and their representatives the Corporation's business, results of operations, financial statements, prospects and any other topics or issues that the Investors may reasonably request to be reviewed and discussed at such meetings. (c) Registration Rights. The Corporation shall take all necessary action to give effect to the registration rights set forth in Section 4 hereto. (d) Securities Filings. The Corporation shall take all necessary or appropriate actions requested by the Investors to assist the Investors in complying with the Investors' obligations to make any and all securities filings under the Exchange Act, the Securities Act or the applicable state securities laws of any state required in connection with the transactions contemplated herein. Section 4. Registration Rights. (a) Restrictive Legend. Each certificate for the Preferred Stock and each certificate for any such securities issued to subsequent transferees of any such certificate shall be stamped or otherwise imprinted with the following legend and shall not be transferable except in compliance with or a valid exception from the Securities Act and applicable state "blue sky" laws: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW." (b) Shelf Registration. (i) The Corporation shall, at its sole cost and expense, file with the Commission and thereafter shall use its best efforts to cause to be declared effective, not later than ninety (90) calendar days after the Closing Date, a registration statement (the "Shelf Registration Statement"), on a Form S-3 or any successor form thereto, if the Company is then eligible, relating to the offer and sale of the shares of Common Stock issuable upon conversion of the shares of Preferred Stock and Common Stock issuable in respect of any dividends described in the Series B-1 Certificate of Designation on the shares of Preferred Stock (the "Securities") by the Holders thereof, from time to time, in accordance with the methods of distribution set forth in the Shelf Registration Statement and Rule 415 under the Securities Act (hereinafter, the "Shelf Registration"); provided, however, that no Holder of Securities (other than the Investors) shall be entitled to have the Securities covered by such Shelf Registration Statement unless such Holder of Securities agrees in writing to be bound by all the provisions of this Agreement applicable to such Holder of Securities. (ii) The Corporation shall use its best efforts to keep the Shelf Registration Statement continuously effective in order to permit the prospectus included therein to be lawfully delivered by the Holders of Securities until all the shares of Securities covered by the Shelf Registration Statement have been sold pursuant thereto. The Corporation shall be deemed not to have used its best efforts to keep the Shelf Registration Statement effective during the requisite period if it voluntarily takes any action that would result in Holders of the Securities covered thereby not being able to offer and sell such Securities during that period, unless such action is required by applicable law. (iii) Notwithstanding any other provisions of this Agreement to the contrary, the Corporation shall cause the Shelf Registration Statement and the related prospectus and any amendment or supplement thereto, as of the effective date of the Shelf Registration Statement, amendment or supplement, (A) to comply in all material respects with the applicable requirements of the Securities Act and the rules and regulations of the Commission and (B) not to contain any untrue statement of a material fact or omit 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. (c) Shelf Registration Procedures. In connection with any Shelf Registration contemplated by Section 4(b) hereof, the following provisions shall apply: (i) The Corporation shall (A) furnish to the Investors and each Holder of Securities, if applicable, prior to the filing thereof with the Commission, a copy of the Shelf Registration Statement and each amendment thereof and each supplement, if any, to the prospectus included therein and, in the event that the Investors or any Holder of Securities, if applicable, is participating in the Shelf Registration Statement, shall use its best efforts to reflect in each such document, when so filed with the Commission, such comments as such Investors or any Holder of Securities, if applicable, reasonably may propose; and (B) include the names of the Holders of Securities who propose to sell Securities pursuant to the Shelf Registration Statement as selling security holders. (ii) The Corporation shall advise (and confirm such advice in writing if requested by the recipient of the advice) the Investors and the Holders of Securities, if applicable: (A) when the Shelf Registration Statement or any amendment thereto has been filed with the Commission and when the Shelf Registration Statement or any post-effective amendment thereto has become effective; (B) of any request by the Commission for amendments or supplements to the Shelf Registration Statement or the prospectus included therein or for additional information; (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Shelf Registration Statement or the initiation of any proceedings for that purpose; (D) of the receipt of the Corporation or its legal counsel of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and (E) of the happening of any event that requires the Corporation to make changes in the Shelf Registration Statement or the prospectus in order that the Shelf Registration Statement or the prospectus does not contain an untrue statement of a material fact nor omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (iii) The Corporation shall use its best efforts to obtain the withdrawal at the earliest possible time of any order suspending the effectiveness of the Shelf Registration Statement. (iv) The Corporation shall furnish to each Holder of Securities included within the coverage of the Shelf Registration, without charge, at least one copy of the Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if the Holder of Securities so requests in writing, all exhibits thereto (including those, if any, incorporated by reference). (v) The Corporation shall deliver to each Holder of Securities included within the coverage of the Shelf Registration, without charge, as many copies of the prospectus (including each preliminary prospectus) included in the Shelf Registration Statement and any amendment or supplement thereto as such person may reasonably request. The Corporation consents, subject to the provisions of this Agreement, to the use of the prospectus or any amendment or supplement thereto included in the Shelf Registration Statement by each of the selling Holders of the Securities in connection with the offering and sale of the Securities covered by such prospectus or any such amendment or supplement. (vi) Prior to any public offering of the shares of Securities, pursuant to any Shelf Registration Statement, the Corporation shall register or qualify or cooperate with the Holders of Securities included therein and their respective counsel in connection with the registration or qualification of the Securities for offer and sale under the securities or "blue sky" laws of such states of the United States as any Holder of Securities covered by such Shelf Registration Statement; provided, however, that the Corporation shall not be required to (A) qualify generally to do business in any jurisdiction where it is not then so qualified or (B) take any action which would subject it to general service of process or to taxation in any jurisdiction where it is not then so subject. (vii) The Corporation shall cooperate with the Holders of Securities to facilitate the timely preparation and delivery of certificates representing the Securities to be sold pursuant to any Shelf Registration Statement free of any restrictive legends and in such denominations and registered in such names as the Holders of Securities may request a reasonable period of time prior to sales of the Securities pursuant to such Shelf Registration Statement. (viii) Upon the occurrence of any event contemplated by paragraphs (B) through (E) of Section 4(c)(ii) above during the period for which the Corporation is required to maintain an effective Shelf Registration Statement, the Corporation shall promptly prepare and file a post-effective amendment to the Shelf Registration Statement or a supplement to the related prospectus and any other required document so that, as thereafter delivered to Holders of Securities, the prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Corporation notifies the Investors and the Holders of Securities then Investors, and the Holders of Securities shall suspend use of such prospectus, and the period of effectiveness of the Shelf Registration Statement provided for in Section 4(b) above shall be extended by the number of days from and including the date of the giving of such notice to and including the date when the Investors and the Holders of Securities shall have received such amended or supplemented prospectus pursuant to this Section 4(c)(viii). (ix) The Corporation will comply with all rules and regulations of the Commission to the extent and so long as they are applicable to the Shelf Registration and will make generally available to its security holders (or otherwise provide in accordance with Section 11(a) of the Securities Act) an earnings statement (which need not be audited) satisfying the provisions of Section 11(a) of the Securities Act, no later than forty-five (45) calendar days after the end of a 12-month period (or ninety (90) calendar days, if such period is a fiscal year) beginning with the first month of the Corporation's first fiscal quarter commencing after the effective date of the Registration Statement, which statement shall cover such 12-month period. (x) Each Holder of Securities to be sold pursuant to the Shelf Registration Statement shall furnish to the Corporation such information regarding the Holder and the distribution of the Securities as the Corporation may from time to time reasonably require and request for inclusion in the Shelf Registration Statement (and shall promptly correct any information previously furnished if the inclusion of such information in such Shelf Registration Statement would be materially misleading), and the Securities of any Holder that unreasonably fails to furnish such information that unreasonably fails to furnish such information within a reasonable time after receiving such request. (xi) The Corporation shall enter into such customary agreements (including if requested an underwriting agreement in customary form) and take all such other action, if any, as any Holder of Securities shall reasonably request in order to facilitate the disposition of the Securities pursuant to any Shelf Registration. If an underwriting agreement is entered into pursuant to this paragraph, the Corporation shall cause any such agreement to contain indemnification provisions and procedures substantially similar to those set forth in Section 4(i) hereof (or such other procedures acceptable to the Holders of a majority of the aggregate principal amount of the Securities registered under the applicable Shelf Registration Statement and the managing underwriters, if any) with respect to all parties to be indemnified pursuant to Section 4(i) hereof. (xii) In the case of any Shelf Registration, the Corporation shall (A) make reasonably available for inspection by the Holders of Securities, any underwriter participating in any disposition pursuant to the Shelf Registration Statement and any attorney, accountant or other agent retained by the Holders of Securities or any such underwriter all relevant financial and other records, pertinent corporate documents and properties of the Corporation and (B) cause the Corporation's officers, directors, employees, accountants and auditors to supply all relevant information reasonably requested by the Holders of Securities or any such underwriter, attorney, accountant or agent in connection with the Shelf Registration Statement, in each case as shall be reasonably necessary, in the judgment of the Holder or any such underwriter, attorney, accountant or agent referred to in this paragraph, to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act; provided, however, that the foregoing inspection and information gathering shall be coordinated on behalf of the Investors and Holders of Securities by one counsel designated by and on behalf of such other parties; and provided, further, that as to any information that is designated in writing by the Corporation, in good faith, as confidential at the time of delivery, such information shall be kept confidential by the Holders of Securities or by any such underwriter, attorney, accountant or other agent. (xiii) In the case of any Shelf Registration, (A) the Corporation, if reasonably requested by Holders of a majority of the Securities covered by such Shelf Registration, which request shall not be more frequent than once per fiscal quarter, shall cause its counsel to deliver an opinion and updates thereof relating to the Securities in customary form addressed to such Holders of Securities and dated, in the case of the initial opinion, the effective date of such Shelf Registration Statement, provided such opinion is requested prior to the effective date (it being agreed that the matters to be covered by such opinion shall include such matters as are customarily included in opinions requested in underwritten offerings); and (B) the Corporation, if requested by any majority of Holders of Securities covered by such Shelf Registration, shall cause its officers to execute and deliver all customary documents and certificates and updates thereof reasonably requested. (xiv) In the event that any broker-dealer registered under the Exchange Act shall underwrite any Securities or participate as a member of an underwriting syndicate or selling group or "assist in the distribution" (within the meaning of the Rules of Fair Practice and the By-Laws of the National Association of Securities Dealers, Inc. ("NASD")) thereof, whether as a Holder of such Securities or as an underwriter, a placement or sales agent or a broker or dealer in respect thereof, or otherwise, the Corporation shall use its best efforts to assist such broker-dealer in complying with the requirements of such Rules and By-Laws, including, without limitation, by (A) if such Rules or By-Laws shall so require, engaging a "qualified independent underwriter" (as defined in Section 2720 thereof) to participate in the preparation of the Registration Statement relating to such Securities, to exercise usual standards of due diligence in respect thereto and, if any portion of the offering contemplated by such Shelf Registration Statement is an underwritten offering or is made through a placement or sales agent, to recommend the yield of such Securities, (B) indemnifying any such qualified independent underwriter to the extent of the indemnification of underwriters provided in Section 4(i) hereof, and (C) providing such information to such broker-dealer as may be required in order for such broker-dealer to comply with the requirements of the Rules of Fair Practice of the NASD. (xv) The Corporation shall use its best efforts to take all other steps necessary to effect the registration of the Securities covered by a Shelf Registration Statement contemplated hereby. (d) Demand Registration. In addition to the Shelf Registration referred to in Section 4(b) hereof, the Holders of at least thirty-three (33%) of the Registrable Securities then outstanding may elect to require the Corporation to effect, at the Corporation's sole cost and expense, a registration of Registrable Securities under this Section 4(d) (the "Holders' Demand Request"): (i) If the Corporation receives the Holders' Demand Request that the Corporation file a registration statement on Form S-1 or S-3 (or similar successor forms) under the Securities Act covering the registration of the Registrable Securities, then the Corporation shall, within ten (10) business days after the receipt thereof, give written notice of such request to all Holders, and effect, as soon as practicable, the registration under the Securities Act of all Registrable Securities which the Holders request to be registered and included in such registration, subject only to the limitations of this Section 4(d). (ii) If the Holders initiating the registration request under this Section 4(d) ("Initiating Holders") intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Corporation as a part of their request made pursuant to this Section 4(d) and the Corporation shall include such information in the written notice referred to in Section 4(d)(i) hereof. In such event, the right of any Holder to include such Holder's Registrable Securities in such registration shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder) to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall enter into an underwriting agreement in customary form with the managing underwriter or underwriters selected for such underwriting. (iii) The Corporation is obligated to effect only one (1) such registration unless the Shelf Registration Statement referred to in Section 4(b) is not declared, or if declared, does not remain effective then the Corporation shall be obligated to effect two (2) such registrations one of which shall be exercisable by the holders of Series B-1 Preferred Stock and one which shall be exercisable by the holders of Series C Preferred Stock, each of which shall be pursuant to the terms of this Section 4(d) set forth above. (iv) All expenses incurred in connection with a demand registration effected pursuant to this Section 4(d), including without limitation all federal and "blue sky" registration and qualification fees, printers' and accounting fees, fees and disbursements of counsel for the Corporation, and of one counsel for the participating Holders together (the "Registration Expenses") shall be borne by the Corporation. (e) Piggyback Registrations. (i) The Corporation shall notify all Holders of Registrable Securities in writing at least forty-five (45) calendar days prior to filing any registration statement under the Securities Act for purposes of effecting a public offering of securities of the Corporation (including, but not limited to, registration statements relating to secondary offerings of securities of the Corporation, but excluding registration statements on an Excluded Form or relating to any employee benefit plan or a corporate reorganization) and shall afford each such Holder an opportunity to include in such registration statement all or any part of the Registrable Securities then held by such Holder. Each Holder desiring to include in any such registration statement all or any part of the Registrable Securities held by such Holder shall, within twenty (20) calendar days after receipt of the above-described notice from the Corporation, so notify the Corporation in writing, and in such notice shall inform the Corporation of the number of Registrable Securities such Holder wishes to include in such registration statement. If a Holder decides not to include all of its Registrable Securities in any registration statement thereafter filed by the Corporation, such Holder shall nevertheless continue to have the right to include any Registrable Securities in any subsequent registration statement or registration statements as may be filed by the Corporation with respect to offerings of its securities, all upon the terms and conditions set forth herein. (ii) If the registration statement under which the Corporation gives notice under this Section 4(e) (the "Piggyback Registration") is for an underwritten offering, the Corporation shall so advise the Holders of Registrable Securities. In such event, the right of any such Holder's Registrable Securities to be included in a registration pursuant to this Section 4(e) shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their Registrable Securities through such underwriting shall enter into an underwriting agreement in such customary form with the managing underwriter or underwriters selected for such underwriting. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Corporation and the underwriter, delivered at least five (5) business days prior to the effective date of the registration statement. Any Registrable Securities excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration. (iii) If any of the Registrable Securities registered pursuant to any Piggyback Registration are to be sold in one or more firm commitment underwritten offerings, and the managing underwriters advise in writing the Corporation and the holders of such Registrable Securities that in its or their opinion or, in the case of a Piggyback Registration not being underwritten, the Corporation shall reasonably determine (and notify the holders of Registrable Securities of such determination), after consultation with an investment banker of nationally recognized standing, that the number of shares of Common Stock (including Registrable Securities) proposed to be sold in such offering exceeds the maximum number of shares of Common Stock that can be sold in such offering, the Corporation shall include in such registration only such maximum number of shares of Common Stock (including Registrable Securities) which, in the opinion of such underwriter or underwriters, or the Corporation, as the case may be, selected in the following order of priority: (A) first, all of the shares of Common Stock that the Corporation proposes to sell for its own account, if any, and (B) second, the securities requested to be included therein, and which the managing underwriters shall in their reasonable discretion deem advisable, allocated pro rata, based upon the number of shares of Common Stock that each such person shall have requested to be included therein. (iv) All Registration Expenses incurred in connection with a registration pursuant to this Section 4(e) shall be borne by the Corporation. (f) Additional Registration Rights. If the Corporation grants registration rights to holders of any security of the Corporation which are more favorable to such holders than the registration rights granted hereunder, then such more favorable registration rights shall also be deemed to be granted to the Holders of the Registrable Securities hereunder, and the Corporation covenants and agrees to take any and all steps necessary to modify the terms of this Agreement to so provide. (g) Obligations of the Corporation. Whenever required to effect the registration of any Registrable Securities under this Agreement, the Corporation shall, as expeditiously as reasonably possible: (i) Except as otherwise provided in Section 4(b), prepare and file with the Commission a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become and remain effective within one hundred fifty (150) calendar days of notice from the Holders of the Registrable Securities provided, however, that before filing a registration statement or prospectus or any amendments or supplements thereto pursuant to Section 4(e), including documents incorporated by reference after the initial filing of the registration statement and prior to effectiveness thereof, the Corporation shall furnish to one firm of counsel for the Holders (selected by a majority of the Holders) copies of all such documents in the form substantially as proposed to be filed with the Commission at least four (4) business days prior to filing for review and comment by such counsel, which opportunity to comment shall include an absolute right to control or contest disclosure if the applicable Holder reasonably believes that it may be subject to controlling person liability under applicable securities laws with respect thereto; (ii) Except as otherwise provided in Section 4(b), prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement and to keep such registration statement effective, in the case of a firm commitment underwriting, until each underwriter has completed the distribution of all securities purchased by it and, in the case of any other offering, until the earlier of the sale of all Registrable Securities covered thereby or one hundred eighty (180) calendar days after the effective date thereof; provided, however, that such 180-day period shall be extended for a period of time equal to the period the Holder refrains from selling any Registrable Securities included in such registration at the request of an underwriter of the Common Stock or if the Corporation has provided the notice described in subparagraph (vii) below; (iii) In connection with a registration pursuant to Section 4(e), promptly notify each Holder of any stop order issued or threatened to be issued by the Commission in connection therewith (and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered); (iv) Furnish to the Holders such number of copies of a prospectus, including a preliminary prospectus, in conformity with her documents as they may reasonably request in order to facilitate the disposition of the Registrable Securities owned by them that are included in such registration; (v) Use its best efforts (i) to register and qualify the securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as shall be reasonably requested by the Holders, and (ii) in connection with a registration pursuant to Section 4(e), to obtain the withdrawal of any order suspending the effectiveness of a registration statement, or the lifting of any suspension of the qualification (or exemption from qualification) of the offer and transfer of any of the Registrable Securities in any jurisdiction, at the earliest possible moment; provided, that the Corporation shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions; (vi) Use its best efforts to list the securities covered by such registration statement with any securities exchange, if any, on which the Common Stock of the Corporation is then listed; (vii) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter(s) of such offering. Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement; (viii) Notify each Holder of Registrable Securities and each underwriter under such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and promptly thereafter, prepare and furnish to all Holders a reasonable number of copies of an amended to or supplemental prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not include an untrue statement of stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; (ix) Furnish, at the request of any Holder requesting registration of Registrable Securities, on the date that such Registrable Securities are delivered to the underwriters for sale, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, (A) an opinion, dated as of such date, of the counsel representing the Corporation for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering and reasonably satisfactory to a majority in interest of the Holders requesting registration, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities, and (B) a "comfort" letter dated as of such date, from the independent certified public accountants of the Corporation, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering and reasonably satisfactory to a majority in interest of the Holders requesting registration, addressed to the underwriters, if any, and to the Holders requesting registration of the Registrable Securities; (x) In connection with a registration pursuant to Section 4(e), provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by such registration statement from and after a date note later than the effective date of such registration statement; (xi) Make available for inspection by each seller of Registrable Securities, any underwriter participating in any registration statement, and any attorney, accountant by such seller or underwriter, all financial and other records, pertinent corporate documents and properties of the Corporation, and cause the Corporation's officers, directors and employees to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement; (xii) In connection with a registration pursuant to Section 4(e), use the Corporation's reasonable efforts to provide a CUSIP number for the Registrable Securities prior to the effective date of the first registration statement including Registrable Securities; and (xiii) In connection with a registration pursuant to Section 4(e), take such other actions as are reasonably required in order to expedite or facilitate the disposition of Registrable Securities included in each such registration. (h) Furnish Information. It shall be a condition precedent to the obligations of the Corporation to take any action pursuant to Sections 4(b), 4(d) and 4(e) that the selling Holders shall furnish to the Corporation such information regarding themselves, the Registrable Securities held by them, and the intended method of disposition of such securities as shall be required to effect the registration of their Registrable Securities. (i) Indemnification. In the event any Registrable Securities are included in a registration statement under Sections 4(b), 4(d) or 4(e): (i) To the extent permitted by law, the Corporation shall indemnify and hold harmless each Holder, the partners, officers and directors of each Holder, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages, or liabilities (joint or several), and, in connection with a registration pursuant to Sections 4(b) or 4(e), including attorneys' fees and disbursements and expenses of investigation, incurred by such party pursuant to any actual or threatened action, suit, proceeding or investigation, to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof arise out of or are based upon any of the following statements, omissions or violations (collectively, a "Violation")): (A) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (B) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (C) any violation or alleged violation by the Corporation of the Securities Act, the Exchange Act, any federal or state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any federal or state securities law in connection with the offering covered by such registration statement, and the Corporation shall reimburse each such Holder, or a partner, officer or director, underwriter or controlling person of such Holder for any legal or other expenses reasonably incurred by them, as incurred, in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this Section 4(i) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Corporation (which consent shall not be unreasonably withheld or delayed), nor shall the Corporation be liable in any case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by such Holder, or a partner, officer, director, underwriter or controlling person of such Holder; provided, further, that the indemnity agreement contained in this Section 4(i) shall not apply to any underwriter to the extent that any such loss is based on or arises out of an untrue statement or alleged untrue statement of a material fact, or an omission or alleged omission to state a material fact, contained in or omitted from any preliminary prospectus if the final prospectus shall correct such untrue statement or alleged untrue statement, or such omission or alleged omission, and a copy of the final prospectus has not been sent or given to such person at or prior to the confirmation of sale to such person if such underwriter was under an obligation to deliver such final prospectus and failed to do so. With respect to registrations pursuant to Sections 4(b) and 4(e), the Corporation also shall indemnify underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, their officers, directors, agents and employees and each person who controls such persons (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) to the same extent as provided above with respect to the indemnification of the Holders. (ii) To the extent permitted by law, each selling Holder shall indemnify and hold harmless the Corporation, each of its directors and officers who have signed the registration statement, each person, if any, who controls the Corporation within the meaning of the Securities Act, any underwriter and any other Holder selling securities under such registration statement or any of such other Holder's partners, directors or officers or any person who controls such Holder within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages or liabilities (joint or several) to which the Corporation or any such director, officer, controlling person, underwriter or other such Holder, or a partner, director, officer or controlling person of such other Holder may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with such registration; and each such Holder shall reimburse any legal or other expenses reasonably incurred by the Corporation or any such director, officer, controlling person, underwriter or other Holder, partner, officer, director or controlling person of such other Holder in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this Section 5(j) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; and provided, further, that the total amounts payable in indemnity by a Holder under this Section 4(i)(ii) in respect of any Violation shall not exceed the net proceeds received by such Holder in the registered offering out of which such Violation arises. (iii) Promptly after receipt by an indemnified party under this Section 4(i) of notice of the commencement of any action (including any governmental action), such indemnified party shall, if a claim in respect thereof is to be made against any indemnifying party under this Section 4(i), deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 4(i), but the omission so to deliver written notice to the indemnifying party shall not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 4(i). (iv) With respect to registrations pursuant to Sections 4(b) and 4(e), any fees and expenses incurred by the indemnified party (including any fees and expenses incurred in connection with investigating or preparing to defend such action or proceeding) shall be paid to the indemnified party, as incurred, within thirty (30) days of written notice thereof to the indemnifying party (regardless of whether it is ultimately determined that an indemnified party is not entitled to indemnification hereunder). Any such indemnified party shall have the right to employ separate counsel in any such action, claim or proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be the expenses of such indemnified party unless (A) the indemnifying party has agreed to pay such fees and expenses or (B) the indemnifying party shall have failed to promptly assume the defense of such action, claim or proceeding or (C) the named parties to any such action, claim or proceeding (including any impleaded parties) include both such indemnified party and the indemnifying party, and such indemnified party shall have been advised by counsel that there may be one or more legal defenses available to it which are different from or in addition to those available to the indemnifying party and that the assertion of such defenses would create a conflict of interest such that counsel employed by the indemnifying party could not faithfully represent the indemnified party (in which case, if such indemnified party notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such action, claim or proceeding on behalf of such indemnified party, it being understood, however, that the indemnifying party shall not, in connection with any one such action, claim or proceeding or separate but substantially similar or related actions, claims or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (together with appropriate local counsel) at any time for all such indemnified parties, unless in the reasonable judgment of such indemnified parties with respect to such action, claim or proceeding, in which event the indemnifying party shall be obligated to pay the fees and expenses of such additional counsel or counsels). No indemnifying party shall be liable to an indemnified party for any settlement of any action, proceeding or claim without the written consent of the indemnifying party, which consent shall not be unreasonably withheld or delayed. (v) In order to provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (A) any Holder exercising rights under this Agreement, or any controlling person of any such Holder, makes a claim for indemnification pursuant to this Section 4(i) but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 4(i) provides for indemnification in such case, or (B) contribution under the Securities Act may be required on the part of any such selling Holder or any such controlling person in circumstances for which indemnification is provided under this Section 4(i), then, and in each such case, the Corporation or such Holder shall contribute to the aggregate losses, claims, damages or liabilities as is appropriate to reflect not only the relative benefits received by the indemnified party and the indemnifying party, but also the relative fault of the indemnified party and the indemnifying party, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action; provided, however, that, in any such case, (1) no such Holder shall be required to contribute any amount in excess of the public offering price of all such Registrable Securities offered and sold by such Holder pursuant to such registration statement; and (2) no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. (vi) The obligations of the Corporation and Holders under this Section 4(i) shall survive the completion of any offering of Registrable Securities in a registration statement, and the termination of this Agreement. (j) "Market Stand-Off' Agreement. Each Holder hereby agrees that it shall not, to the extent requested by the Corporation and an underwriter of Common Stock of the Corporation, sell or otherwise transfer or dispose of any Registrable Securities (other than Registrable Securities being registered in such offering) for up to that period of time following the effective date of a registration statement of the Corporation filed under the Securities Act as is requested by the managing underwriter(s) of such offering, not to exceed one hundred twenty (120) calendar days; provided, however, that: (i) such agreement shall be applicable only to the first such registration statement of the Corporation which covers securities to be sold on its behalf to the public in an underwritten offering but not to Registrable Securities sold pursuant to such registration statement; and (ii) all officers, directors and ten percent (10%) or greater stockholders of the Corporation, provided such stockholders have acquired such securities directly from the Corporation, then holding Common Stock of the Corporation, shall enter into similar agreements. In order to enforce the foregoing covenant, the Corporation may impose stop transfer instructions with respect to the then-remaining Registrable Securities of each Holder (and the shares or securities of every other person subject to the foregoing restriction) until the end of such period. (k) Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the Commission which may at any time permit the sale of the Registrable Securities to the public without registration, the Corporation agrees to: (i) Make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act; (ii) File with the Commission in a timely manner all reports and other documents required of the Corporation under the Securities Act and the Exchange Act; and (iii) So long as a Holder owns any Registrable Securities, furnish to the Holder forthwith upon request a written statement by the Corporation as to its compliance with the reporting requirements of said Rule 144, and of the Securities Act and the Exchange Act, a copy of the most recent annual or quarterly report of the Corporation, and such other reports and documents of the Corporation as a Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing a Holder to sell any such securities without registration. (l) Removal of Legends, Etc. Notwithstanding the foregoing provisions of this Section 4, the restrictions imposed by this Section 4 upon the transferability of any Registrable Securities shall cease and terminate when any such Registrable Securities are sold or otherwise disposed of in accordance with the intended method of disposition by the seller or sellers thereof set forth in the registration statement which does not require that the securities transferred bear the legend set forth in Section 4(a). Whenever the restrictions imposed by this Section 4 shall terminate as herein provided, the Holder of any Registrable Securities as to which such restrictions have terminated shall be entitled to receive from the Corporation, without expense, one or more new certificates not bearing the restrictive legend set forth in Section 4(a) and not containing any other reference to the restrictions imposed by this Section 4. (m) Filing of Reports Under the Exchange Act. The Corporation shall give prompt notice to the Investor of: (i) the filing of an Exchange Act Registration Statement; and (ii) the effectiveness of such Exchange Act Registration Statement and the number of shares of such class of equity securities outstanding as reported in such Exchange Act Registration Statement, in order to enable the parties to this Agreement to comply with any reporting requirements under the Exchange Act or the Securities Act. The Corporation shall, at any time after the Corporation shall register any shares of Common Stock under the Securities Act and upon the written request of any Investor, file an Exchange Act Registration Statement relating to any class of Equity Securities of the Corporation then held by the Investors, whether or not the class of equity securities with respect to which such request is made shall be held by at least the number of persons which would require the filing of a registration statement under Section 12(g)(1) of the Exchange Act. The Corporation shall comply with all the reporting requirements of the Exchange Act, and shall comply with all other public information reporting requirements of the Commission as a condition to the availability of an exemption from the Securities Act (under Rule 144 thereof, as amended from time to time, or successor rule thereto or otherwise) for the sale of Common Stock by the Investors. The Corporation shall cooperate with Investor in supplying such information as may be necessary for the Investors to complete and file any information reporting forms presently or hereafter required by the Commission as a condition to the availability of an exemption from the Securities Act (under Rule 144 thereof or otherwise) for the sale of Common Stock by any Investor. (n) Underwritten Registration. Except in the case of an offering under a registration under Section 4(d), if any of the Registrable Securities are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by the Corporation and, in the case of a registration effected under Sections 4(b) or 4(e), approved in writing by the Holders of at least thirty-three (33%) percent of the Registrable Securities requesting inclusion of their Registrable Securities in such registration statement. In the event of underwritten offering of Registrable Securities in connection with a Holders' Demand Request, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by the Holders of at least thirty-three (33%) percent of the Registrable Securities requesting inclusion of their Registrable Securities in such registration statement under Section 4(d). Section 5. Management Rights. (a) Board of Directors. So long as not less than twenty-five percent (25%) of the originally issued shares of Series B-1 Preferred Stock and Series C Preferred Stock, collectively, are held by the Investors, the holders of shares of Series B-1 Preferred Stock and Series C Preferred Stock shall be entitled to nominate three (3) persons to the Corporation's Board of Directors (the "Preferred Nominee") whether by annual meeting, special meeting, written consent or otherwise of which one (1) Preferred Nominee shall be a designee of Furman Selz Private Investments LLC (in its capacity as manager of Furman Selz Investors II L.P.) and one (1) Preferred Nominee shall be a designee of Furman Selz Private Investments III LLC (in its capacity as manager of ING Furman Selz Investors III LP). A vacancy in any directorship entitled to be elected by the holders of record of shares of Series B-1 Preferred Stock and Series C Preferred Stock (including without limitation, a vacancy resulting from the decision during an earlier election by the holders of the Series B-1 Preferred Stock and the Series C Preferred Stock not to fill the directorship to be held by the Preferred Nominee) shall be filled only by vote or written consent of the holders of record of shares of Series B-1 Preferred Stock and Series C Preferred Stock, in the manner set forth in the Series B-1 Certificate of Designation and the Series C Certificate of Designation. Each Preferred Nominee who shall have been elected as provided in Paragraph A.8.(b) of the Series B-1 Certificate of Designation and the Series C Certificate of Designation 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-1 Preferred Stock and Series C Preferred Stock then outstanding. The holders of record of a majority of the shares of Series B-1 Preferred Stock and Series C 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. The Board of Directors shall not be permitted to establish any committees unless one (1) elected Preferred Nominee is invited to serve on such committee, including any special committee created by the Board of Directors not in the ordinary course of business, and the Corporation shall cause such elected Preferred Nominee to be so appointed. (b) Observer Rights. In the event that the Investors no longer have the right to nominate directors pursuant to Section 5(a) above, the Investors shall have the observer and inspection rights set forth below. (i) The Corporation shall give to each Investor notice of each meeting of the Board of Directors of the Corporation at the same time and in the same manner as notice is given to the directors of the Corporation. One (1) designee of each of Furman Selz Private Investments LLC (in its capacity as manager of Furman Selz Investors II L.P.) and Furman Selz Private Investments III LLC (in its capacity as manager of ING Furman Selz Investors III LP) shall be entitled to attend in person, as an observer, all meetings held in person and to listen to telephone meetings of the Board of Directors of the Corporation solely for the purpose of allowing the Investors to have current information with respect to the affairs of the Corporation. The Corporation shall provide to such parties in connection with each meeting their respective observer designee is entitled to attend, whether or not present at such meeting, copies of all notices, minutes, consents, and all other materials or information that it provides to the directors of the Corporation with respect to such meeting, at the same time such materials and information are given to the directors of the Corporation (except that materials and information provided to directors of the Corporation at meetings at which a designee of such parties is not present shall be provided to such parties promptly after the meeting). The observer rights afforded by this Section 3(c) shall apply for so long as the Investors and their affiliates own any shares of either Series B-1 Preferred Stock or Series C Preferred Stock; provided, however, that such rights shall not apply upon the filing of a registration statement under the Securities Act by the Corporation in which all of the Registrable Securities of the Investors are included. (ii) The Corporation and its Subsidiaries will upon reasonable notice (A) give each of the Investors and their authorized representatives access during regular business hours to all of the Corporation's and its Subsidiaries' offices and to all books and records of each, (B) permit each of the Investors to make such inspections as it may require (and the Corporation shall cooperate with such Investor in any inspections), and (C) cause its officers and those of its Subsidiaries to furnish each of the Investors with such financial and operating data and other information with respect to the business and properties of the Corporation and its Subsidiaries as such Investor 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 each of the Investors or such authorized representatives to disclose any such information concerning the Corporation or its Subsidiaries which such Investor may be required to disclose (x) to such Investor's partners, board members or stockholders, to the extent required to satisfy such Investor's fiduciary obligations to such Persons, or (y) otherwise pursuant to or as required by law; provided further, that, to the extent legally permitted, the Investors will notify the Corporation of such disclosure and afford the Corporation an opportunity promptly to oppose such disclosure. Section 6. Severability; Governing Law. If any provisions of this Agreement is determined to be illegal and unenforceable by any court of law, the remaining provisions shall be severable and enforceable in accordance with their terms. 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 Corporation. 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 Corporation 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, and, if an Investor is successful on the merits in any such action, that the costs and expenses (including reasonable attorneys' fees) incurred by Investor in seeking enforcement of this Agreement or the Certificate of Designation shall be the sole and exclusive responsibility of the Corporation. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York as to matters within the scope thereof, and as to all other matters shall be governed by and construed in accordance with the internal law of the State of Delaware. Section 7. Benefits of Agreement. This Agreement shall be binding upon and inure benefit of the parties and their respective successors and assigns, legal representatives and heirs. Subject to the terms of this Agreement, including the five percent (5%) limitation set forth below, the Investor may transfer any or all of its rights hereunder to any purchaser or transferee of all or a portion of the currently outstanding shares of Series B Preferred Stock, including any right or interest therein, without the prior written consent of the Corporation or any stockholder of the Corporation. In the event that a transfer involves at least five percent (5%) of the currently outstanding shares of Series B Preferred Stock, including any right or interest therein, such transferee shall be deemed to be "Investor," and a "Holder", as appropriate, for purposes of this Agreement, and may again transfer such rights in accordance with, and subject to, the terms of this Agreement. Section 8. Notices. All notices, requests, claims, demands and other communication 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: c/o FS Private Investments LLC, Manager c/o FS Private Investments III LLC, Manager 55 East 52nd Street, 37th Floor New York, New York 10055-0002 Attention: James L. Luikart Phone: (212) 284-1700 Fax: (212)284-1717 with a required copy to: Dechert 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, Illinois 60515 Attention: Wayne R. Rockenbach Senior Vice President and Chief Financial Officer Phone: (630) 792-2010 Fax: (630) 916-6429 with required copies to: ABC-NACO Inc. 335 Eisenhower Lane South Lombard, IL 60148 Attention: Mark F. Baggio, Esq. Vice President, General Counsel and Secretary Phone: (630) 792-2010 Fax: (630) 916-6429 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). Section 9. Changes. The terms and provisions of this Agreement may not be modified, amended, or any of the provisions hereof waived, temporarily or permanently, except pursuant to the written consent of the parties hereto; except that any rights applicable to Investor may be waived by Investor without the consent of the Corporation, or the other stockholders of the Corporation. Section 10. Captions. The captions herein are inserted for convenience only and are not intended to define, limit, extend or describe the scope of this Agreement or affect the construction hereof. Section 11. Nouns and Pronouns. Whenever the context may require, any pronoun herein shall include the corresponding masculine, feminine or neuter forms and the singular form of names and pronouns shall include the plural and vice-versa. Section 12. Merger Provision. This Agreement (as the same may be amended from time), the Series B Stock Purchase Agreement, the Exchange Agreement and the Series C Stock Purchase Agreement, constitute the entire agreement and understanding among the parties pertaining to the subject matter hereof and supersede all prior and contemporaneous agreements therewith. Section 13. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed on their behalf ABC-NACO INC. By:_________________________________ Name: Wayne R. Rockenbach Title: 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:_________________________________ Name: James L. Luikart Title: Managing Member ING FURMAN SELZ INVESTORS III L.P. ING BARINGS U.S. LEVERAGED EQUITY PLAN LLC ING BARINGS GLOBAL LEVERAGED EQUITY PLAN LTD. By: FS PRIVATE INVESTMENTS III, LLC, Manager By: Name: Title [signatures continued on next page] INVESTORS: By: James Dowling SCHEDULE I Investors Series B Preferred Stock Series B-1 Preferred Stock Series C Preferred Stock FURMAN SELZ INVESTORS II L.P. 0 139,303.54 65,895 FS EMPLOYEE INVESTORS LLC 0 11,938.43 5,640 FS PARALLEL FUND L.P. 0 6,777.77 3,210 ING FURMAN SELZ INVESTORS III L.P. 0 110,107.15 52,080 ING BARINGS U.S. LEVERAGED EQUITY PLAN LLC 0 33,484.93 15,840 ING BARINGS GLOBAL LEVERAGED EQUITY PLAN LTD. 0 14,427.66 6,825 JAMES DOWLING 0 1,058.13 510 EXHIBIT A Amended Restated Certificate of Incorporation EXHIBIT B Series B-1 Certificate of Designation EXHIBIT C Series C Certificate of Designation EXHIBIT D-1 Additional Warrant EXHIBIT D-2 Closing Warrant EX-4.3 8 doc7.txt THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED WITHOUT REGISTRATION UNDER THE ACT OR STATE SECURITIES LAWS OR AN EXEMPTION THEREFROM. FORM OF CLOSING COMMON STOCK PURCHASE WARRANT OF ABC-NACO INC. No. _____ Certificate for _________ Warrant Shares ABC-NACO INC., a Delaware corporation (the "Company"), hereby certifies that ___________________, or assigns, is the holder of the warrant set forth above (the "Warrant"). The Warrant entitles the holder thereof (a "Holder"), subject to the provisions contained herein, to purchase from the Company the aggregate number of shares of common stock, par value $.01 per share, of the Company ("Common Stock") set forth above (the "Warrant Shares"), at the exercise price of $.01 per share (the "Exercise Price"), subject to adjustment upon the occurrence of certain events described hereinafter. The Warrant shall terminate and become void as of 5:00 p.m., Chicago time, on June 25, 2011 (the "Expiration Date"). 1. Do not Remove. This Warrant is issued under and in accordance with the Series C Preferred Stock and Common Stock Warrant Purchase Agreement, dated as of April 17, 2001 (the "Stock Purchase Agreement"), between the Company and the Investors named therein. The Exercise Price and the number of shares of Common Stock issuable upon the exercise of the Warrant are subject to adjustment as provided hereinafter in Section 2. All shares of Common Stock issuable by the Company upon the exercise of the Warrant shall, upon such issuance, be duly and validly issued, fully paid and non-assessable. 1.1. Exercise Period. This Warrant may be exercised, by the Holder, at any time and from time to time, commencing on the date of the original issuance of this Warrant up to and including the Expiration Date. 1.2. Exercise Procedure. In order to exercise the Warrant, the Holder hereof must surrender the Warrant at the office of the Company, at 2001 Butterfield Road, Suite 502, Downers Grove, Illinois 60515, Attention: Secretary, or such other address as the Company may specify by written notice to the Holder hereof, with the Exercise Subscription Form attached hereto as Exhibit A duly executed by the Holder hereof, together with any required payment in full of the Exercise Price then in effect for the Warrant Shares, as to which the Warrant is submitted for exercise, all subject to the terms and conditions hereof. Any such payment of the Exercise Price shall be in cash (except as provided in Section 1.4 hereof), payable to the order of the Company, by bank check or wire transfer of an amount equal to the applicable Exercise Price. 1.3. Partial Exercise. This Warrant may be exercised for less than the aggregate number of Warrant Shares, in which case the number of Warrant Shares receivable upon the exercise of this Warrant as a whole, and the sum payable upon the exercise of this Warrant as a whole, shall be proportionately reduced. Upon any such partial exercise, the Company, at is expense shall forthwith issue to the Holder hereof a new Warrant or Warrants of like tenor calling for the number of remaining Warrant Shares as to which rights have not been exercised, such Warrant or Warrants to be issued in the name of the holder hereof or its nominee (upon payment by such holder of any applicable transfer taxes). 1.4. Net Issue Exercise. (a) In lieu of paying the Exercise Price in cash, the Holder may elect to pay the Exercise Price with Warrant Shares by surrender of this Warrant at the principal office of the Company together with notice of such election, in which event the Company shall issue to the Holder that number of Warrant Shares computed using the following formula: [GRAPHIC OMITED] Where X is the number of Warrant Shares to be issued to Holder pursuant to this Section 1.4; Y is the number of Warrant Shares as to which Holder is exercising this Warrant; A is the Fair Market Value Price (as hereinafter defined) of the Company's Common Stock in effect under this Warrant as of the date of exercise of this Warrant; and B is the Exercise Price in effect under this Warrant as of the date of exercise of this Warrant. (b) As used herein, the "Fair Market Value Price" of the Company's Common Stock shall be the average of the closing prices per share of the Company's Common Stock as reported by the Nasdaq National Market ("NASDAQ") (or on any exchange on which Common Stock is listed) or, if there is no such closing price, the average of the closing bid and asked prices quoted in the Over-The-Counter Market Summary, whichever is applicable, as published in the Eastern Edition of The Wall Street Journal for the ten (10) trading days immediately prior to the date of determination of such price. If the Company's Common Stock is not traded on NASDAQ (or other exchange) or Over-The-Counter, the "Fair Market Value Price" of the Company's Common Stock shall be the price per share as determined in good faith by the Company's Board of Directors. 1.5. Expenses in Connection with Exercise. The Company shall pay all taxes and other governmental charges that may be imposed on the Company or on the Warrant or on the Warrant Shares or any other securities deliverable upon exercise of the Warrant. The Company shall not be required, however, to pay any tax or other charge imposed in connection with any transfer involved in the issue of any certificate for shares of Common Stock or other securities underlying the Warrant or payment of cash to any person other than the Holder of the Warrant surrendered upon the exercise of a Warrant, and in case of such transfer or payment, the Company shall not be required to issue any stock certificate or pay any cash until such tax or other charge has been paid or it has been established to the Company's satisfaction that no such tax or other charge is due. 2. Do not Remove. 2.1. Adjustments. The number of Warrant Shares issuable upon exercise of the Warrant and the Exercise Price shall be subject to adjustment from time to time as follows: (a) Adjustment for Dividends in Other Stock, Property, etc.; Reclassification, etc. In case the holders of Common Stock (or any Other Securities, as defined below) have received, or (on or after the record date fixed for the determination of stockholders eligible to receive) have become entitled to receive, without payment therefor, (i) other or additional stock or other securities or property (other than cash) by way of dividend, or (ii) any cash (excluding cash dividends payable solely out of earnings or earned surplus of the Company), or (iii) other or additional stock or other securities or property (including cash) by way of spin-off, split-up, reclassification, recapitalization, combination of shares or similar corporate rearrangement, or any merger or consolidation or the sale, conveyance or disposition of a majority of the assets of the Company and its Subsidiaries on a consolidated basis (other than to a wholly owned Subsidiary of the Company), other than additional shares of Common Stock (or Other Securities) issued as a stock dividend or in a stock-split (adjustments in respect of which are provided for in Section 2.1(b)), then and in each such case the Holder, on the exercise hereof as provided in Section 1, will be entitled to receive the amount of stock and other securities and property (including cash in the cases referred to in subdivisions (ii) and (iii) of this Section 2.1(a)) that such Holder would be entitled to receive on the date of such exercise if on the date hereof, such Holder had been the holder of record of the number of shares of Common Stock called for on the face of this Warrant and had thereafter, during the period from the date hereof up to and including the date of such exercise, retained such shares and all such other or additional stock and other securities and property (including cash in the cases referred to in clauses (ii) and (iii) of this Section 2.1(a)) receivable by such Holder as aforesaid during such period, giving effect to all adjustments called for during such period by Section 2.1(b). The term "Other Securities" means stock or other securities of the Company or any other Person (i) which the Holder at any time shall be entitled to receive, or shall have received, on the exercise of this Warrant, in lieu of or in addition to Common Stock, or (ii) which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock or such other stock or securities pursuant to the terms hereof. (b) Adjustment for Stock Dividend, Stock Split, etc. If the Company (i) issues additional shares of Common Stock as a dividend or other distribution on outstanding shares of Common Stock, (ii) subdivides its outstanding shares of Common Stock, (iii) combines its outstanding shares of Common Stock into a smaller number of shares of Common Stock, and then, in each such event, the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to the record date for such dividend or distribution or the effective date of such subdivision or combination shall be adjusted, and thereafter simultaneously with such event, The Exercise Price shall be adjusted by multiplying the current Exercise Price by a fraction, the numerator of which will be the number of shares of Common Stock outstanding immediately prior to such event and the denominator of which will be the number of shares of Common Stock outstanding immediately after such event, and the product so obtained will thereafter be the Exercise Price then in effect ; provided, however, that in no event shall the Exercise Price of this Warrant be adjusted downward to an amount that is below the then current par value of the Common Stock. An adjustment made pursuant to this Section 2.1(b) shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event. (c) Notices of Record Date, etc. In the event of: (i) any taking by the Company 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 or other distribution, or 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, or (ii) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any sale of the Company (whether by sale of stock, merger, consolidation or sale of all or substantially all the assets of the Company or otherwise), or (iii) any voluntary or involuntary dissolution, liquidation or winding-up of the Company, then and in each such event the Company will mail or cause to be mailed to the Holder a notice specifying (A) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, and (B) the date on which any such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or Other Securities) will be entitled to exchange their shares of Common Stock (or Other Securities) for securities or other property deliverable on such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding-up. Such notice will be mailed at least ten (10) Business Days prior to the date specified in such notice on which any such action is to be taken. For purposes of this Warrant, the term "Other Securities" shall mean stock or other securities of the Company or any other entity (corporate or otherwise) (i) which the Holder at any time shall be entitled to receive, or shall have received, on the exercise of this Warrant, in lieu of or in addition to Common Stock, or (ii) which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock or such other stock or securities pursuant to the terms hereof; and the term "Business Day" shall mean any day other than Saturday, Sunday or other day in which commercial money center banks in New York City, New York are closed for business. (d) De Minimis Adjustments. No adjustment in the number of shares of Common Stock issuable hereunder shall be required unless such adjustment would require an increase or decrease of at least one-tenth of one percent (.1%) in the number of shares of Common Stock purchasable upon an exercise of each Warrant; provided, however, that any adjustments which by reason of this Section 2.1(d) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations shall be made to the nearest one one-thousandth (1/1,000) of a share. 2.2. Officers' Statement as to Adjustments. Whenever the number of Warrant Shares or other stock or property issuable upon the exercise of this Warrant or the Exercise Price shall be adjusted as provided in Section 2.1(a) and Section 2.1(b) hereof, respectively, the Company shall forthwith (i) file at each office designated for the exercise of this Warrant a statement, signed by the Chairman of the Board, the President, or any Vice President or Treasurer of the Company, and (ii) provide written notice, sent by mail, first class, postage prepaid, to the record Holder of this Warrant at its address appearing on the stock register, in each case showing in reasonable detail the facts requiring such adjustment and the computation by which such adjustments were made. 2.3. Fractional Interest. The Company may, but shall not be required to, issue fractional shares of Common Stock on the exercise of Warrants. If more than one Warrant shall be presented for exercise in full at the same time by the same Holder, the number of full shares of Common Stock which shall be issuable upon such exercise thereof shall be computed on the basis of the aggregate number of shares of Common Stock acquirable on exercise of the Warrants so presented. If any fraction of a share of Common Stock would, except for the provisions of this Section 2.3 be issuable on the exercise of any Warrant (or specified portion thereof), the Company may, in lieu thereof, pay an amount in cash calculated by it to be equal to the then current market value per share of Common Stock (as determined by the Board of Directors) multiplied by such fraction computed to the nearest whole cent; provided, however, that in the event the Company is unable or is not permitted under applicable law or under any applicable financing agreements to pay such amount in cash, the Company shall issue fractional shares rounded to the nearest one one-hundredth (1/100) of a share. 2.4. Adjustment by Board of Directors. If any event occurs as to which the provisions of Section 2.1 are not strictly applicable or if strictly applicable would not fairly protect the rights of the Holder of this Warrant in accordance with the essential intent and principles of such provisions, then the Board of Directors shall make an adjustment in the application of such provisions, in accordance with such essential intent and principles, so as to protect such rights as aforesaid, but in no event shall any adjustment have the effect of increasing the Exercise Price as otherwise determined pursuant to any of the provisions of Section 2.1 except in the case of a combination of shares of a type contemplated in Section 2.1(a) and then in no event to an amount larger than the Exercise Price as adjusted pursuant to Section 2.1(b). 3. Do not Remove. 3.1. Exchange of Warrant. At the option of the Holder, the Warrant may be exchanged at such office, and upon payment of the charges hereinafter provided. Whenever the Warrant is so surrendered for exchange, the Company shall execute and deliver the Warrant that the Holder making the exchange is entitled to receive. 3.2. Company's Obligations. A Warrant issued upon any registration of transfer or exchange of the Warrant shall be the valid obligations of the Company, evidencing the same obligations, and entitled to the same benefits under this Warrant, as the Warrant surrendered for such registration of transfer or exchange. 3.3. Evidence of Transfer or Assignment. This Warrant, if surrendered for registration of transfer or exchange shall (if so required by the Company) be duly endorsed, or be accompanied by a written instrument of transfer in form attached hereto as Exhibit B, duly executed by the Holder thereof or such Holder's attorney duly authorized in writing. 3.4. Delivery of Stock Certificates on Exercise. As soon as practicable after the exercise of this Warrant and payment of the Exercise Price, and in any event within ten (10) Business Days thereafter, the Company, at its expense, will cause to be issued in the name of and delivered to the holder hereof a certificate or certificates for the number of fully paid and non-assessable shares or other securities or property to which such holder shall be entitled upon such exercise, plus, in lieu of any fractional share to which such holder would otherwise be entitled, cash in an amount determined in accordance with Section 2.3 hereof. The Company agrees that the shares so purchased shall be deemed to be issued to the holder hereof as the record owner of such shares as of the close of business on the date on which this Warrant shall have been surrendered and payment made for such shares as aforesaid. 3.5. No Charges. No service charge shall be made for any registration of transfer or exchange of the Warrant. 4. Do not Remove. 4.1. No Voting Rights. Prior to the exercise of the Warrant, no Holder of this Warrant, as such, shall be entitled to any rights of a stockholder of the Company, including, without limitation, the right to vote, to consent, to exercise any preemptive right, to receive any notice of meetings of stockholders for the election of directors of the Company or any other matter or to receive any notice of any proceedings of the Company, except as may be specifically provided for herein. 4.2. Right of Action and Remedies. All rights of action in respect of this Warrant are vested in the Holder of the Warrant, and any Holder of the Warrant or the Holder of any other Warrant, may, in such Holder's own behalf and for such Holder's own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company suitable to enforce, or otherwise in respect of, such Holder's right to exercise, exchange or tender for purchase such Holder's Warrant in the manner provided herein. The Company stipulates that the remedies at law of the holder of this Warrant in the event of any default by the Company in the performance of or compliance with any of the terms of this Warrant are not and will not be adequate, and that the same may be specifically enforced. 5. Do not Remove. 5.1. Surrender of Warrant. A Warrant surrendered for exercise or redemption shall, if surrendered to the Company shall be promptly canceled by the Company and shall not be reissued by the Company. The Company shall destroy such each canceled Warrant. 5.2. Mutilated, Destroyed, Lost and Stolen Warrants. (a) If (i) a mutilated Warrant is surrendered to the Company or (ii) the Company receives evidence to its reasonable satisfaction of the destruction, loss or theft of the Warrant, and there is delivered to the Company such security or indemnity as may be required by it to save it harmless, then, in the absence of notice to the Company that such Warrant has been acquired by a bona fide purchaser, the Company shall execute and deliver, in exchange for any such mutilated Warrant or in lieu of any such destroyed, lost or stolen Warrant, a new Warrant of like tenor and for a like aggregate number of Warrant Shares. (b) Upon the issuance of any new Warrant under this Section 5.2, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and other expenses (including the reasonable fees and expenses of the Company and of counsel to the Company) in connection therewith. (c) A new Warrant executed and delivered pursuant to this Section 5.2 in lieu of any destroyed, lost or stolen Warrant shall constitute an original contractual obligation of the Company, whether or not the destroyed, lost or stolen Warrant shall be at any time enforceable by anyone, and shall be entitled to the benefits of this Warrant equally and proportionately with any and all other Warrants duly executed and delivered hereunder. (d) The provisions of this Section 5.2 are exclusive and shall preclude (to the extent lawful) all other rights or remedies with respect to the replacement of mutilated, destroyed, lost or stolen Warrants. 5.3. Notices. (a) Except as otherwise provided in Section 5.3(b), any notice, demand or delivery authorized by this Warrant shall be sufficiently given or made when mailed if sent by first-class mail, postage prepaid, or by facsimile, addressed to any Holder of the Warrant at such Holder's address or facsimile number shown on the register of the Company and to the Company as follows: If to the Company: ABC-NACO INC. 2001 Butterfield Road Suite 502 Downers Grove, Illinois 60515 Attention: Secretary or such other address as shall have been furnished to the party giving or making such notice, demand or delivery. (a) Hidden text do not remove (b) Any notice required to be given by the Company to the Holder shall be made by mailing by registered mail, return receipt requested, or by facsimile to the Holders at their respective addresses shown on the register of the Company. Any notice that is mailed or sent via facsimile in the manner herein provided shall be conclusively presumed to have been duly given when mailed or transmitted, whether or not the Holder receives the notice. 5.4. Persons Benefiting. This Warrant shall be binding upon and inure to the benefit of the Company, and its respective successors and assigns, and the Holder, from time to time, of the Warrant. Nothing in this Warrant is intended or shall be construed to confer upon any Person, other than the Company, and the Holder of the Warrant any right, remedy or claim under or by reason of this Warrant or any part hereof. 5.5. Counterparts. This Warrant may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together constitute one and the same instrument. 5.6. Headings. The descriptive headings of the several Sections of this Warrant are inserted for convenience and shall not control or affect the meaning or construction of any of the provisions hereof. 5.7. Amendments. The Company shall not, without the prior written consent of the Holder of the Warrant, by supplemental agreement or otherwise, make any changes, modifications or amendments to this Warrant. 5.8. Applicable Law. THIS WARRANT AND ALL RIGHTS ARISING HEREUNDER SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS AND INSTRUMENTS EXECUTED AND TO BE PERFORMED ENTIRELY IN SUCH STATE. 5.9. Waiver of Jury Trial. EACH PARTY TO THIS WARRANT, AND EACH HOLDER BY ACCEPTANCE OF THE WARRANT, HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS WARRANT OR THE TRANSACTIONS CONTEMPLATED HEREBY. This Warrant shall not be valid for any purpose until it shall have been signed by the Company. Dated: June __, 2001 ABC-NACO INC. By: Name: Title: ACCEPTED AS OF THE DATE HEREOF: HOLDER _______________________________ Exhibit B --------- Exhibit A --------- [To be signed only upon exercise of Warrant] EXERCISE SUBSCRIPTION FORM To: ABC-NACO INC. 2001 Butterfield Road Suite 502 Downers Grove, Illinois 60515 Attn: Secretary The undersigned, the holder of the within Warrant, hereby irrevocably elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder, ______ shares of Common Stock of _____________ and herewith makes payment of $_____ therefor, and requests that the certificates for such shares be issued in the name of, and be delivered to ____________, whose address is _____________. Dated: _____________ By Address: [To be signed only upon transfer of Warrant] FORM OF ASSIGNMENT AND TRANSFER FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ___________ the right represented by the within Warrant to purchase the ______ shares of the Common Stock of ____________________ to which the within Warrant relates, and appoints _____________ attorney to transfer said right on the books of _____________________ with full power of substitution in the premises. Dated: _____________ By Address: Exhibit C --------- 748927.1.01 08/10/01 5:58 PM [NET ISSUE EXERCISE OF WARRANT] FORM OF NET ISSUE EXERCISE To: ABC-NACO INC. 2001 Butterfield Road Suite 502 Downers Grove, Illinois 60515 Attn: Secretary The undersigned, the holder of the attached Warrant number W ______, hereby irrevocably elects to exercise the purchase right represented by such Warrant pursuant to Section 1.4 (Net Issue Exercise) thereof, and requests that the certificates for such shares be issued in the name of, and be delivered to ____________________________, whose address is _____________________________. Dated: _____________________ ___________________________________ By: ________________________________ Address: ____________________________________ ____________________________________ EX-4.4 9 doc8.txt THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED WITHOUT REGISTRATION UNDER THE ACT OR STATE SECURITIES LAWS OR AN EXEMPTION THEREFROM. FORM OF ADDITIONAL COMMON STOCK PURCHASE WARRANT OF ABC-NACO INC. No. _____ Certificate for _____________ Warrant Shares ABC-NACO INC., a Delaware corporation (the "Company"), hereby certifies that ______________________, or assigns, is the holder of the warrant set forth above (the "Warrant"). The Warrant entitles the holder thereof (a "Holder"), subject to the provisions contained herein, to purchase from the Company up to the aggregate number of shares of common stock, par value $.01 per share, of the Company ("Common Stock") set forth above (the "Warrant Shares"), at the exercise price of $.01 per share (the "Exercise Price"), subject to adjustment upon the occurrence of certain events described hereinafter. The Warrant shall terminate and become void as of 5:00 p.m., Chicago time, on June 25, 2011 (the "Expiration Date"). 1. Do not Remove. This Warrant is issued under and in accordance with the Series C Preferred Stock and Common Stock Warrant Purchase Agreement, dated as of April 17, 2001 (the "Stock Purchase Agreement"), between the Company and the Investors named therein. The Exercise Price and the number of shares of Common Stock issuable upon the exercise of the Warrant are subject to adjustment as provided hereinafter in Section 2. All shares of Common Stock issuable by the Company upon the exercise of the Warrant shall, upon such issuance, be duly and validly issued and fully paid and non-assessable. 1.1. Exercise Period. (a) This Warrant shall become exercisable for such number of Warrant Shares as follows: (i) On July 1, 2001, for ______________ Warrant Shares, if EBITDA for the twelve (12) months ended June 30, 2001, is less than Seventy Million Dollars ($70,000,000) and no Sale of the Company has occurred on or before June 30, 2001; (ii) On October 1, 2001, for an additional _________ Warrant Shares, if EBITDA for the twelve (12) months ended September 30, 2001, is less than Seventy Million Dollars ($70,000,000) and no Sale of the Company has occurred on or before September 30, 2001; (iii) On January 1, 2002, for an additional ____________ Warrant Shares, if EBITDA for the twelve (12) months ended December 31, 2001, is less than Seventy Million Dollars ($70,000,000) and no Sale of the Company has occurred on or before December 31, 2001; (iv) On April 1, 2002, for an additional ____________ Warrant Shares, if EBITDA for the twelve (12) months ended March 31, 2002, is less than Seventy Million Dollars ($70,000,000) and no Sale of the Company has occurred on or before March 31, 2002; (v) On July 1, 2002, for an additional _________ Warrant Shares, if EBITDA for the twelve (12) months ended June 30 2002, is less than Seventy Million Dollars ($70,000,000) and no Sale of the Company has occurred on or before June 30, 2002; (vi) On October 1, 2002, for an additional ____________ Warrant Shares, if EBITDA for the twelve (12) months ended September 30, 2002, is less than Seventy Million Dollars ($70,000,000) and no Sale of the Company has occurred on or before September 30, 2002; (vii) On January 1, 2003, for an additional __________ Warrant Shares, if EBITDA for the twelve (12) months ended December 31, 2002, is less than Seventy Million Dollars ($70,000,000) and no Sale of the Company has occurred on or before December 31, 2002; and (viii) On April 1, 2003, for an additional _____________ Warrant Shares, if EBITDA for the twelve (12) months ended March 31, 2003, is less than Seventy Million Dollars ($70,000,000) and no Sale of the Company has occurred on or before March 31, 2003. (b) For purposes of this Section 1.1, the following terms are defined as set forth below: (i) "EBITDA" of a period shall mean the sum of (a) consolidated net income for such period, plus (b) provision for income taxes of the Company during such period, plus (c) depreciation and amortization expense of the Company accrued during such period (but only to the extent not included in interest expense), plus (d) net interest expense during such period, determined in accordance with U.S. generally accepted accounting principles in effect of the date of original issuance of this Warrant, as reflected on the Company's financial statements filed periodically with the Securities and Exchange Commission in accordance with the Exchange Act. (ii) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended and the rules and regulations promulgated thereunder. (iii) "Marketable Securities" shall mean that (A) such securities are listed for trading on the New York Stock Exchange, the American Stock Exchange or the NASDAQ (as defined in Section 1.4 below); (B) the average closing price per share of such securities is at least Ten Dollars ($10.00) per share (determined during the twenty (20) trading days immediately preceding the first public announcement of the Sale of the Company); and (C) the average trading volume of such securities is at least 100,000 shares per trading day, as reported by Bloomberg, during the sixty (60) trading day period immediately preceding the first public announcement of the Sale of the Company. (iv) "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. (v) "Sale of the Company" shall mean (A) the sale, conveyance or disposition of all of the equity interests in the Company or (B) the sale, conveyance or disposition of all or substantially all of the assets of the Company and its Subsidiaries on a consolidated basis (other than to a wholly owned Subsidiary of the Company or a pledge or grant of a security interest to a bona fide lender), in either case for cash or Marketable Securities. (vi) "Subsidiaries" shall mean, 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. (c) Within 30 days of the end of each calendar quarter referred to above in Section 1.1(a), the Company shall deliver to the Holder of this Warrant a written statement setting forth in reasonable detail the actual EBITDA of the Company for the twelve month period ending on the date that such calendar quarter ends. 1.2. Exercise Procedure. In order to exercise the Warrant, the Holder hereof must surrender the Warrant at the office of the Company, at 335 Eisenhower Lane South, Lombard, Illinois 60148, Attention: Secretary, or such other address as the Company may specify by written notice to the Holder hereof, with the Exercise Subscription Form attached hereto as Exhibit A duly executed by the Holder hereof, together with any required payment in full of the Exercise Price then in effect for the Warrant Shares, as to which the Warrant is submitted for exercise, all subject to the terms and conditions hereof. Any such payment of the Exercise Price shall be in cash (except as provided in Section 1.4 hereof), payable to the order of the Company, by bank check or wire transfer of an amount equal to the applicable Exercise Price. 1.3. Partial Exercise. This Warrant may be exercised for less than the aggregate number of Warrant Shares, in which case the number of Warrant Shares receivable upon the exercise of this Warrant as a whole, and the sum payable upon the exercise of this Warrant as a whole, shall be proportionately reduced. Upon any such partial exercise, the Company, at is expense shall forthwith issue to the Holder hereof a new Warrant or Warrants of like tenor calling for the number of remaining Warrant Shares as to which rights have not been exercised, such Warrant or Warrants to be issued in the name of the holder hereof or its nominee (upon payment by such holder of any applicable transfer taxes). 1.4. Net Issue Exercise. (a) In lieu of paying the Exercise Price in cash, the Holder may elect to pay the Exercise Price with Warrant Shares by surrender of this Warrant at the principal office of the Company together with notice of such election, in which event the Company shall issue to the Holder that number of Warrant Shares computed using the following formula: [GRAPHIC OMITED] Where X is the number of Warrant Shares to be issued to Holder pursuant to this Section 1.4; Y is the number of Warrant Shares as to which Holder is exercising this Warrant; A is the Fair Market Value Price (as hereinafter defined) of the Company's Common Stock in effect under this Warrant as of the date of exercise of this Warrant; and B is the Exercise Price in effect under this Warrant as of the date of exercise of this Warrant. (b) As used herein, the "Fair Market Value Price" of the Company's Common Stock shall be the average of the closing prices per share of the Company's Common Stock as reported by the Nasdaq National Market ("NASDAQ") (or on any exchange on which Common Stock is listed) or, if there is no such closing price, the average of the closing bid and asked prices quoted in the Over-The-Counter Market Summary, whichever is applicable, as published in the Eastern Edition of The Wall Street Journal for the ten (10) trading days immediately prior to the date of determination of such price. If the Company's Common Stock is not traded on NASDAQ (or other exchange) or Over-The-Counter, the "Fair Market Value Price" of the Company's Common Stock shall be the price per share as determined in good faith by the Company's Board of Directors. 1.5. Expenses in Connection with Exercise. The Company shall pay all taxes and other governmental charges that may be imposed on the Company or on the Warrant or on the Warrant Shares or any other securities deliverable upon exercise of the Warrant. The Company shall not be required, however, to pay any tax or other charge imposed in connection with any transfer involved in the issue of any certificate for shares of Common Stock or other securities underlying the Warrant or payment of cash to any person other than the Holder of the Warrant surrendered upon the exercise of a Warrant, and in case of such transfer or payment, the Company shall not be required to issue any stock certificate or pay any cash until such tax or other charge has been paid or it has been established to the Company's satisfaction that no such tax or other charge is due. 2. Do not Remove. 2.1. Adjustments. The number of Warrant Shares issuable upon exercise of the Warrant and the Exercise Price shall be subject to adjustment from time to time as follows: (a) Adjustment for Dividends in Other Stock, Property, etc.; Reclassification, etc. In case the holders of Common Stock (or any Other Securities, as defined below) have received, or (on or after the record date fixed for the determination of stockholders eligible to receive) have become entitled to receive, without payment therefor, (i) other or additional stock or other securities or property (other than cash) by way of dividend, or (ii) any cash (excluding cash dividends payable solely out of earnings or earned surplus of the Company), or (iii) other or additional stock or other securities or property (including cash) by way of spin-off, split-up, reclassification, recapitalization, combination of shares or similar corporate rearrangement, or any merger or consolidation or the sale, conveyance or disposition of a majority of the assets of the Company and its Subsidiaries on a consolidated basis (other than to a wholly owned Subsidiary of the Company), other than additional shares of Common Stock (or Other Securities) issued as a stock dividend or in a stock-split (adjustments in respect of which are provided for in Section 2.1(b)), then and in each such case the Holder will be entitled to receive the amount of stock and other securities and property (including cash in the cases referred to in subdivisions (ii) and (iii) of this Section 2.1(a)) that such Holder would be entitled to receive on the date of such exercise if on the date hereof, such Holder had been the holder of record of the number of shares of Common Stock called for on the face of this Warrant and had thereafter, during the period from the date hereof up to and including the date of such exercise, retained such shares and all such other or additional stock and other securities and property (including cash in the cases referred to in clauses (ii) and (iii) of this Section 2.1(a)) receivable by such Holder as aforesaid during such period, giving effect to all adjustments called for during such period by Section 2.1(b). The term "Other Securities" means stock or other securities of the Company or any other Person (i) which the Holder at any time shall be entitled to receive, or shall have received, on the exercise of this Warrant, in lieu of or in addition to Common Stock, or (ii) which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock or such other stock or securities pursuant to the terms hereof. (b) Adjustment for Stock Dividend, Stock Split, etc. If the Company (i) issues additional shares of Common Stock as a dividend or other distribution on outstanding shares of Common Stock, (ii) subdivides its outstanding shares of Common Stock, (iii) combines its outstanding shares of Common Stock into a smaller number of shares of Common Stock, and then, in each such event, the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to the record date for such dividend or distribution or the effective date of such subdivision or combination shall be adjusted, and thereafter simultaneously with such event, the Exercise Price shall be adjusted by multiplying the current Exercise Price by a fraction, the numerator of which will be the number of shares of Common Stock outstanding immediately prior to such event and the denominator of which will be the number of shares of Common Stock outstanding immediately after such event, and the product so obtained will thereafter be the Exercise Price then in effect; provided, however, that in no event shall the Exercise Price of this Warrant be adjusted downward to an amount that is below the then current par value of the Common Stock. An adjustment made pursuant to this Section 2.1(b) shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event. (c) Notices of Record Date, etc. In the event of: (i) any taking by the Company 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 or other distribution, or 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, or (ii) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any sale of the Company (whether by sale of stock, merger, consolidation or sale of all or substantially all the assets of the Company or otherwise), or (iii) any voluntary or involuntary dissolution, liquidation or winding-up of the Company, then and in each such event the Company will mail or cause to be mailed to the Holder a notice specifying (A) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, and (B) the date on which any such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or Other Securities) will be entitled to exchange their shares of Common Stock (or Other Securities) for securities or other property deliverable on such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding-up. Such notice will be mailed at least ten (10) Business Days prior to the date specified in such notice on which any such action is to be taken. For purposes of this Warrant, the term "Other Securities" shall mean stock or other securities of the Company or any other entity (corporate or otherwise) (i) which the Holder at any time shall be entitled to receive, or shall have received, on the exercise of this Warrant, in lieu of or in addition to Common Stock, or (ii) which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock or such other stock or securities pursuant to the terms hereof; and the term "Business Day" shall mean any day other than Saturday, Sunday or other day in which commercial money center banks in New York City, New York are closed for business. (d) De Minimis Adjustments. No adjustment in the number of shares of Common Stock issuable hereunder shall be required unless such adjustment would require an increase or decrease of at least one-tenth of one percent (.1%) in the number of shares of Common Stock purchasable upon an exercise of each Warrant; provided, however, that any adjustments which by reason of this Section 2.1(d) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations shall be made to the nearest one one-thousandth (1/1,000) of a share. (e) Effective Date for Adjustment. For purposes of any adjustment to the number of Warrant Shares issuable to the Holder, the exercise of the Warrant shall be deemed to have occurred on the first day immediately following the conclusion of each quarterly exercise period ending on March 31, June 30, September 30 and December 31 as set forth in Section 1. 2.2. Officers' Statement as to Adjustments. Whenever the number of Warrant Shares or other stock or property issuable upon the exercise of this Warrant or the Exercise Price shall be adjusted as provided in Section 2.1(a) and Section 2.1(b) hereof, respectively, the Company shall forthwith (i) file at each office designated for the exercise of this Warrant a statement, signed by the Chairman of the Board, the President, or any Vice President or Treasurer of the Company, and (ii) provide written notice, sent by mail, first class, postage prepaid, to the record Holder of this Warrant at its address appearing on the stock register, in each case showing in reasonable detail the facts requiring such adjustment and the computation by which such adjustments were made. 2.3. Fractional Interest. The Company may, but shall not be required to, issue fractional shares of Common Stock on the exercise of Warrants. If more than one Warrant shall be presented for exercise in full at the same time by the same Holder, the number of full shares of Common Stock which shall be issuable upon such exercise thereof shall be computed on the basis of the aggregate number of shares of Common Stock acquirable on exercise of the Warrants so presented. If any fraction of a share of Common Stock would, except for the provisions of this Section 2.3 be issuable on the exercise of any Warrant (or specified portion thereof), the Company may, in lieu thereof, pay an amount in cash calculated by it to be equal to the then current market value per share of Common Stock (as determined by the Board of Directors) multiplied by such fraction computed to the nearest whole cent; provided, however, that in the event the Company is unable or is not permitted under applicable law or under any applicable financing agreements to pay such amount in cash, the Company shall issue fractional shares rounded to the nearest one one-hundredth (1/100) of a share. 2.4. Adjustment by Board of Directors. If any event occurs as to which the provisions of Section 2.1 are not strictly applicable or if strictly applicable would not fairly protect the rights of the Holder of this Warrant in accordance with the essential intent and principles of such provisions, then the Board of Directors shall make an adjustment in the application of such provisions, in accordance with such essential intent and principles, so as to protect such rights as aforesaid, but in no event shall any adjustment have the effect of increasing the Exercise Price as otherwise determined pursuant to any of the provisions of Section 2.1 except in the case of a combination of shares of a type contemplated in Section 2.1(a) and then in no event to an amount larger than the Exercise Price as adjusted pursuant to Section 2.1(b). 3. Do not Remove. 3.1. Exchange of Warrant. At the option of the Holder, the Warrant may be exchanged at such office, and upon payment of the charges hereinafter provided. Whenever the Warrant is so surrendered for exchange, the Company shall execute and deliver the Warrant that the Holder making the exchange is entitled to receive. 3.2. Company's Obligations. A Warrant issued upon any registration of transfer or exchange of the Warrant shall be the valid obligations of the Company, evidencing the same obligations, and entitled to the same benefits under this Warrant, as the Warrant surrendered for such registration of transfer or exchange. 3.3. Evidence of Transfer or Assignment. This Warrant, if surrendered for registration of transfer or exchange shall (if so required by the Company) be duly endorsed, or be accompanied by a written instrument of transfer in form attached hereto as Exhibit B, duly executed by the Holder thereof or such Holder's attorney duly authorized in writing. 3.4. Delivery of Stock Certificates on Exercise. As soon as practicable after the exercise of this Warrant and payment of the Exercise Price, and in any event within ten (10) Business Days thereafter, the Company, at its expense, will cause to be issued in the name of and delivered to the holder hereof a certificate or certificates for the number of fully paid and non-assessable shares or other securities or property to which such holder shall be entitled upon such exercise, plus, in lieu of any fractional share to which such holder would otherwise be entitled, cash in an amount determined in accordance with Section 2.3 hereof. The Company agrees that the shares so purchased shall be deemed to be issued to the holder hereof as the record owner of such shares as of the close of business on the date on which this Warrant shall have been surrendered and payment made for such shares as aforesaid. 3.5. No Charges. No service charge shall be made for any registration of transfer or exchange of the Warrant. 4. Do not Remove. 4.1. No Voting Rights. Prior to the exercise of the Warrant, no Holder of this Warrant, as such, shall be entitled to any rights of a stockholder of the Company, including, without limitation, the right to vote, to consent, to exercise any preemptive right, to receive any notice of meetings of stockholders for the election of directors of the Company or any other matter or to receive any notice of any proceedings of the Company, except as may be specifically provided for herein. 4.2. Right of Action and Remedies. All rights of action in respect of this Warrant are vested in the Holder of the Warrant, and any Holder of the Warrant or the Holder of any other Warrant, may, in such Holder's own behalf and for such Holder's own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company suitable to enforce, or otherwise in respect of, such Holder's right to exercise, exchange or tender for purchase such Holder's Warrant in the manner provided herein. The Company stipulates that the remedies at law of the holder of this Warrant in the event of any default by the Company in the performance of or compliance with any of the terms of this Warrant are not and will not be adequate, and that the same may be specifically enforced. 5. Do not Remove. 5.1. Surrender of Warrant. A Warrant surrendered for exercise or redemption shall, if surrendered to the Company shall be promptly canceled by the Company and shall not be reissued by the Company. The Company shall destroy such each canceled Warrant. 5.2. Mutilated, Destroyed, Lost and Stolen Warrants. (a) If (i) a mutilated Warrant is surrendered to the Company or (ii) the Company receives evidence to its reasonable satisfaction of the destruction, loss or theft of the Warrant, and there is delivered to the Company such security or indemnity as may be required by it to save it harmless, then, in the absence of notice to the Company that such Warrant has been acquired by a bona fide purchaser, the Company shall execute and deliver, in exchange for any such mutilated Warrant or in lieu of any such destroyed, lost or stolen Warrant, a new Warrant of like tenor and for a like aggregate number of Warrant Shares. (b) Upon the issuance of any new Warrant under this Section 5.2, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and other expenses (including the reasonable fees and expenses of the Company and of counsel to the Company) in connection therewith. (c) A new Warrant executed and delivered pursuant to this Section 5.2 in lieu of any destroyed, lost or stolen Warrant shall constitute an original contractual obligation of the Company, whether or not the destroyed, lost or stolen Warrant shall be at any time enforceable by anyone, and shall be entitled to the benefits of this Warrant equally and proportionately with any and all other Warrants duly executed and delivered hereunder. (d) The provisions of this Section 5.2 are exclusive and shall preclude (to the extent lawful) all other rights or remedies with respect to the replacement of mutilated, destroyed, lost or stolen Warrants. 5.3. Notices. (a) Except as otherwise provided in Section 5.3(b), any notice, demand or delivery authorized by this Warrant shall be sufficiently given or made when mailed if sent by first-class mail, postage prepaid, or by facsimile, addressed to any Holder of the Warrant at such Holder's address or facsimile number shown on the register of the Company and to the Company as follows: If to the Company: ABC-NACO INC. 335 Eisenhower Lane South Lombard, IL 60148 Attention: Secretary or such other address as shall have been furnished to the party giving or making such notice, demand or delivery. (a) Hidden text do not remove (b) Any notice required to be given by the Company to the Holder shall be made by mailing by registered mail, return receipt requested, or by facsimile to the Holders at their respective addresses shown on the register of the Company. Any notice that is mailed or sent via facsimile in the manner herein provided shall be conclusively presumed to have been duly given when mailed or transmitted, whether or not the Holder receives the notice. 5.4. Persons Benefiting. This Warrant shall be binding upon and inure to the benefit of the Company, and its respective successors and assigns, and the Holder, from time to time, of the Warrant. Nothing in this Warrant is intended or shall be construed to confer upon any Person, other than the Company, and the Holder of the Warrant any right, remedy or claim under or by reason of this Warrant or any part hereof. 5.5. Counterparts. This Warrant may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together constitute one and the same instrument. 5.6. Headings. The descriptive headings of the several Sections of this Warrant are inserted for convenience and shall not control or affect the meaning or construction of any of the provisions hereof. 5.7. Amendments. The Company shall not, without the prior written consent of the Holder of the Warrant, by supplemental agreement or otherwise, make any changes, modifications or amendments to this Warrant. 5.8. Applicable Law. THIS WARRANT AND ALL RIGHTS ARISING HEREUNDER SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS AND INSTRUMENTS EXECUTED AND TO BE PERFORMED ENTIRELY IN SUCH STATE. 5.9. Waiver of Jury Trial. EACH PARTY TO THIS WARRANT, AND EACH HOLDER BY ACCEPTANCE OF THE WARRANT, HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS WARRANT OR THE TRANSACTIONS CONTEMPLATED HEREBY. This Warrant shall not be valid for any purpose until it shall have been signed by the Company. Dated: June __, 2001 ABC-NACO INC. By: Name: Title: ACCEPTED AS OF THE DATE HEREOF: HOLDER By: By: Name: Title: Exhibit B --------- Exhibit A --------- [To be signed only upon exercise of Warrant] EXERCISE SUBSCRIPTION FORM To: ABC-NACO INC. 335 Eisenhower Lane South Lombard, Illinois 60148 Attn: Secretary The undersigned, the holder of the within Warrant, hereby irrevocably elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder, ______ shares of Common Stock of _____________ and herewith makes payment of $_____ therefor, and requests that the certificates for such shares be issued in the name of, and be delivered to ____________, whose address is _____________. Dated: _____________ By Address: [To be signed only upon transfer of Warrant] FORM OF ASSIGNMENT AND TRANSFER FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ___________ the right represented by the within Warrant to purchase the ______ shares of the Common Stock of ____________________ to which the within Warrant relates, and appoints _____________ attorney to transfer said right on the books of _____________________ with full power of substitution in the premises. Dated: _____________ By Address: Exhibit C --------- [NET ISSUE EXERCISE OF WARRANT] FORM OF NET ISSUE EXERCISE To: ABC-NACO INC. 335 Eisenhower Lane South Lombard, Illinois 60148 Attn: Secretary The undersigned, the holder of the attached Warrant number W ______, hereby irrevocably elects to exercise the purchase right represented by such Warrant pursuant to Section 1.4 (Net Issue Exercise) thereof, and requests that the certificates for such shares be issued in the name of, and be delivered to ____________________________, whose address is _____________________________. Dated: _____________________ ___________________________________ By: ________________________________ Address: ____________________________________ ____________________________________ EX-4.5 10 doc9.txt FORM OF WARRANT to Purchase Common Stock of ABC-NACO INC. Warrant No. _______ Original Issue Date: May 2, 2001 19 NY1 2070209v2 NY1 2070209v2 NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE OR OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL (WHO MAY BE AN EMPLOYEE OF SUCH HOLDER) EXPERIENCED IN SECURITIES MATTERS TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER. Warrant No. _______ WARRANT ABC- NACO Inc. THIS IS TO CERTIFY THAT _______________, or registered assigns, is entitled, at any time prior to the Expiration Date (such term, and certain other capitalized terms used herein being hereinafter defined), to purchase from ABC-NACO Inc., a Delaware corporation (the "Company"), _____________ shares of the Common Stock of the Company (subject to adjustment as provided herein), at a purchase price of $.01 per share (the initial "Exercise Price", subject to adjustment as provided herein), all on the terms and conditions and pursuant to the provisions hereinafter set forth. 1. DEFINITIONS ----------- As used in this Warrant, the following terms have the respective meanings set forth below: "Additional ING Warrants" has the meaning ascribed to such term in the ING Agreement. "Affiliate" of any Person means a Person (a) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with such Person, (b) which beneficially owns or holds more than five percent (5.0%) of the outstanding shares of any class of voting stock of such Person or (c) more than five percent (5.0%) of the outstanding shares of any class of voting stock (or, in the case of a Person which is not a corporation, more than five percent (5.0%) of the equity interest) of which is beneficially owned or held by such Person. The term "control" as used with respect to any Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "After-Tax Basis" when referring to a payment that is required hereunder (the "target amount"), shall mean a total payment (the "total amount") that, after deduction of all federal, state and local taxes that are required to be paid by the recipient in respect of the receipt or accrual of such total amount, is equal to the target amount. "Agreed Rate" shall mean an interest rate which, with respect to each determination, shall be equal to the Base Rate as defined under the Credit Agreement for such determination. "Appraised Value" per share of Common Stock as of a date specified herein shall mean the value of such a share as of such date as determined by an investment bank of nationally recognized standing selected by the Majority Warrant Holders and reasonably acceptable to the Company. If the investment bank selected by the Majority Warrant Holders is not reasonably acceptable to the Company, and the Company and the Majority Warrant Holders cannot agree on a mutually acceptable investment bank, then the Company and the Majority Warrant Holders shall each choose one such investment bank and the respective chosen firms shall jointly select a third investment bank, which shall make the determination. The Company shall pay the costs and fees of each such investment bank (including any such investment bank selected by the Majority Warrant Holders), and the decision of the investment bank making such determination of Appraised Value shall be final and binding on the Company and all affected holders of Warrants or Warrant Stock. Such Appraised Value shall be determined as a pro rata portion of the value of the Company taken as a whole, based on the higher of (A) the value derived from a hypothetical sale of the entire Company as a going concern by a willing seller to a willing buyer (neither acting under any compulsion) and (B) the liquidation value of the entire Company. No discount shall be applied on account of (i) any Warrants or Warrant Stock representing a minority interest, (ii) any lack of liquidity of the Common Stock or the Warrants, (iii) the fact that the Warrants or Warrant Stock may constitute "restricted securities" for securities law purposes, (iv) the existence of any call option or (v) any other grounds. "Borrowers" the borrowers under the Credit Agreement. "Business Day" shall mean any day that is not a Saturday or Sunday or a day on which banks are required or permitted to be closed in the State of New York. "Closing ING Warrants" has the meaning ascribed to such term in the ING Agreement. "Commission" shall mean the Securities and Exchange Commission or any other federal agency then administering the Securities Act and other federal securities laws. "Common Stock" shall mean (except where the context otherwise indicates) the Common Stock of the Company, par value $.01 per share, as constituted on the Original Issue Date, and any capital stock into which such Common Stock may thereafter be changed, and shall also include (i) capital stock of the Company of any other class (regardless of how denominated) issued to the holders of shares of any Common Stock upon any reclassification thereof which is also not preferred as to dividends or liquidation over any other class of stock of the Company and which is not subject to redemption and (ii) shares of common stock of any successor or acquiring corporation (as defined in Section 4.5 hereof) received by or distributed to the holders of Common Stock of the Company in the circumstances contemplated by Section 4.5 hereof. "Company" means ABC-NACO, Inc., a Delaware corporation, and any successor corporation. "Company Default" means (a) the material breach of any warranty or the material inaccuracy at the time when made of any representation made by the Company herein or (b) the material failure by the Company to comply with any covenant of the Company contained herein. "Conversion Price" as of a specified date with respect to either series of ING Preferred Stock shall mean the "Conversion Price" per share applicable to such series as of such date under the Certificate of Designation, Preferences and Rights establishing such series. "Convertible Securities" shall mean evidences of indebtedness, shares of stock or other securities that are convertible into or exchangeable for, with or without payment of additional consideration in cash or property, shares of Common Stock, either immediately or upon the occurrence of a specified date or a specified event. "Credit Agreement" means Fourth Amended and Restated Credit Agreement dated as of May 2, 2001 among ABC-NACO Inc., ABC-NACO de Latino America S.A. de C.V., Dominion Castings Limited, Bank of America, N.A., as lender and agent, and the other financial institutions listed on the signature pages thereto. "Current Market Price" shall mean as of any specified date the average of the daily market prices of the Common Stock of the Company for the shorter of (x) the twenty (20) consecutive Business Days immediately preceding such date or (y) the period commencing on the Business Day next following the first public announcement of any event giving rise to an adjustment of the Exercise Price pursuant to Section 4 below or described in clause (ii) or (iii) of the definition of Repurchase Period and ending on such date. The "daily market price" for each such Business Day shall be: (i) if the Common Stock is then listed on a national securities exchange or is listed on NASDAQ and is designated as a National Market System security, the last sale price, regular way, on such day on the principal stock exchange or market system on which such Common Stock is then listed or admitted to trading, or, if no such sale takes place on such day, the average of the closing bid and asked prices for the Common Stock on such day as reported on such stock exchange or market system or (ii) if the Common Stock is not then listed or admitted to trading on any national securities exchange or designated as a National Market System security on NASDAQ but is traded over-the-counter, the average of the closing bid and asked prices for the Common Stock as reported on NASDAQ or the Electronic Bulletin Board or in the National Daily Quotation Sheets, as applicable. ---------------------------------- "Designated Office" shall have the meaning set forth in Section 10 hereof. "Dilution Fee" shall have the meaning set forth in Section 13 hereof. "Disabling Condition" shall have the meaning set forth in Section 12.1(b) hereof. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time. "Exercise Notice" shall have the meaning set forth in Section 2.1 hereof. "Exercise Period" shall mean the period during which this Warrant is exercisable pursuant to Section 2.1 hereof. "Exercise Price" shall mean, in respect of a share of Common Stock at any date herein specified, the initial Exercise Price set forth in the preamble of this Warrant as adjusted from time to time pursuant to Section 4 hereof. "Expiration Date" shall mean the later of (i) the tenth anniversary of the Original Issue Date and (ii) the date on which all of the "Obligations" under the Credit Agreement shall have been indefeasibly repaid in full and all financing arrangements thereunder shall have been terminated. "Fair Value" per share of Common Stock as of any specified date shall mean (A) if the Common Stock is publicly traded on such date, the Current Market Price per share or (B) if the Common Stock is not publicly traded on such date, (1) the fair market value per share of Common Stock as determined in good faith by the Board of Directors of the Company and set forth in a written notice to each Holder or (2) if any such Holder objects in writing to such price as determined by the Board of Directors within thirty (30) days after receiving notice of same, the Appraised Value per share as of such date. "Floor Value" per share of Common Stock shall initially mean $4.6077, which value shall be subject to adjustment from time to time pursuant to Article IV. "GAAP" shall mean generally accepted accounting principles in the United States of America as from time to time in effect. "Holder" shall mean (a) with respect to this Warrant, the Person in whose name the Warrant set forth herein is registered on the books of the Company maintained for such purpose and (b) with respect to any other Warrant or shares of Warrant Stock, the Person in whose name such Warrant or Warrant Stock is registered on the books of the Company maintained for such purpose. "ING Agreement" shall mean the Series C Preferred Stock and Common Stock Warrant Purchase Agreement dated as of April 17, 2001 among the Company and the investors set forth therein. "ING Holders" shall mean (i) Furman Selz Investors II LP ("FS II"), (ii) ING Furman Selz Investors III LP ("FS III"), (iii) any parallel investment funds of FS II or FS III the manager, general partner or managing member of which is either FS Private Investments LLC or FS Private Investments III LLC, and (iv) any affiliate of any of the foregoing. "Lien" shall mean any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the Uniform Commercial Code or comparable law of any jurisdiction). "Majority Warrant Holders", with respect to a given determination, shall mean the Holders of Warrants and/or Warrant Stock representing more than fifty percent (50%) of all Warrants and/or Warrant Stock (with any such Warrants being deemed to represent, for the purposes of such calculation, the shares of Warrant Stock then issuable upon exercise thereof) directly affected by such determination. For example: (a) for the purpose of determining the application of the antidilution provisions of Article 4, all Warrants would be deemed to be directly affected by such determination but no issued Warrant Stock would be deemed to be affected thereby and (b) for the purpose of determining the Put Price, all Warrants and/or Warrant Stock with respect to which a Put Notice was then pending would be deemed to be affected by such determination. "NASDAQ" shall mean the NASDAQ quotation system, or any successor reporting system. "Opinion of Counsel" means a written opinion of counsel (who may be an employee of a Holder) experienced in Securities Act chosen by the Holder of this Warrant or Warrant Stock issued upon the exercise hereof and reasonably acceptable to the Company. "Option" shall mean any stock option granted by the Company that is outstanding as of the Original Issue Date. "Original Issue Date" shall mean the date on which the Original Warrants were issued, as set forth on the cover page of this Warrant. "Original Warrants" shall mean the Warrants originally issued by the Company on the Original Issue Date to B of A and to the financial institutions under the Warrant Purchase Agreement. "Other Property" shall have the meaning set forth in Section 4.4 hereof. "Outstanding" shall mean, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all issued shares of Common Stock, except shares then owned or held by or for the account of the Company or any Subsidiary thereof, and shall include all shares issuable in respect of outstanding scrip or any certificates representing fractional interests in shares of Common Stock. "Person" shall mean any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, incorporated organization, association, corporation, institution, public benefit corporation, entity or government (whether federal, state, county, city, municipal or otherwise, including, without limitation, any instrumentality, division, agency, body or department thereof). "Put" shall mean the right of the Holder of a Warrant or any shares of Warrant Stock to require the Company to repurchase such Warrant or Warrant Stock in whole or in part pursuant to Section 12.1 hereof. "Put Notice" shall have the meaning set forth in Section 12.1(a) hereof. "Put Price" shall have the meaning set forth in Section 12.1(a) hereof. "Put Value" per share of Common Stock shall mean with respect to each determination date, the higher of (i) the Fair Value per share and (ii) Floor Value per share on such date. "Repurchase Period" shall mean the period ending on the tenth anniversary of the Original Issue Date and beginning on the earliest to occur of (i) the fifth anniversary of the Original Issue Date, (ii) the date of any Board approval of (A) any merger or consolidation in which either (1) the Company is not the surviving corporation and the holders of Common Stock immediately prior to such transaction do not hold more than fifty percent (50%) of the common stock of the surviving corporation immediately after such transaction or (2) the Company is the surviving corporation and the holders of Common Stock immediately prior to such transaction do not hold at least fifty percent (50%) of the outstanding Common Stock immediately after such transaction, (B) the sale or other disposition (including by merger or consolidation) by the Company or any Subsidiary of assets (including the stock of any Subsidiary) representing more than fifty percent (50%) of either (x) the aggregate fair market value of the consolidated total assets of the Company and its Subsidiaries, (y) the consolidated gross revenues of the Company and its Subsidiaries or (z) the consolidated net operating income of the Company and its Subsidiaries (provided -------- that in the case of any transaction described in this clause (ii), any Put Notice given prior to the effective date of such transaction shall be deemed to be conditioned on such transaction becoming effective), (iii) any Person or group of Persons (other than the ING Holders) directly or indirectly acquires more than fifty percent (50%) of the voting rights associated with all outstanding voting securities of the Company at any time or (iv) repayment of all of the indebtedness of the Borrowers under the Credit Agreement. "Restricted Common Stock" shall mean shares of Common Stock which are, or which upon their issuance on the exercise of this Warrant would be, evidenced by a certificate bearing the restrictive legend set forth in Section 8.2(a) hereof. "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Series C Preferred Stock" shall mean the Series C Cumulative Convertible Participating Preferred Stock of the Company. "Share Withholding Option" has the meaning set forth in Section 2.1 hereof. "Stock Purchase Rights" shall mean any options, warrants or other securities or rights to subscribe to or exercisable for the purchase of shares of Common Stock or Convertible Securities, whether or not immediately exercisable. "Subsidiary" means any corporation or association (a) more than 50% (by number of votes) of the voting stock of which is at the time owned by the Company or by one or more Subsidiaries or by the Company and one or more Subsidiaries, or any other business entity in which the Company or one or more Subsidiaries or the Company and one or more Subsidiaries own more than a 50% interest either in the profits or capital of such business entity or (b) whose net earnings, or portions thereof, are consolidated with the net earnings of the Company and are recorded on the books of the Company for financial reporting purposes in accordance with GAAP. "Transfer" shall mean any disposition of any Warrant or Warrant Stock or of any interest in either thereof, which would constitute a "sale" thereof within the meaning of the Securities Act. "Warrant Price" shall mean an amount equal to (i) the number of shares of Common Stock being purchased upon exercise of this Warrant pursuant to Section 2.1 hereof, multiplied by (ii) the higher of (A) $0.01 per share (as such amount shall hereafter be proportionately adjusted to reflect any event requiring an adjustment to the Exercise Price pursuant to Section 4.1 hereof which event also results in an equivalent change in the par value of the Common Stock) and (B) the Exercise Price as of the date of such exercise. "Warrant Purchase Agreement" shall mean the Warrant Purchase Agreement dated as of May 2, 2001 among the Company, Bank of America, N.A. and the financial institutions listed on the signature pages thereto. "Warrants" shall mean the Original Warrants and all warrants issued upon transfer, division or combination of, or in substitution for, such Original Warrants or any other such Warrant. All Warrants shall at all times be identical as to terms and conditions and date, except as to the number of shares of Common Stock for which they may be exercised. "Warrant Stock" generally shall mean the shares of Common Stock issued, issuable or both (as the context may require) upon the exercise or Warrants until such time as such shares of Common Stock have either been (i) Transferred in a public offering pursuant to a registration statement filed under the Securities Act or (ii) Transferred in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof with all transfer restrictions and restrictive legends with respect to such Common Stock being removed in connection with such transaction. 2. EXERCISE OF WARRANT --------------------- Section 2.1 Manner of Exercise. (a) From and after the Original Issue Date ------------------ and until 5:00 P.M., New York time, on the Expiration Date, the Holder of this Warrant may from time to time exercise this Warrant, on any Business Day, for all or any part of the number of shares of Common Stock purchasable hereunder (as determined pursuant to Section 2.1(b) below). In order to exercise this Warrant, in whole or in part, the Holder shall (i) deliver to the Company at the Designated Office a written notice of the Holder's election to exercise this Warrant (an "Exercise Notice"), which Exercise Notice shall be irrevocable and specify the number of shares of Common Stock to be purchased, together with this Warrant and (ii) pay to the Company the Warrant Price (the date on which both such delivery and payment shall have first taken place being hereinafter sometimes referred to as the "Exercise Date"). Such Exercise Notice shall be in the form of the subscription form appearing at the end of this Warrant as Annex ----- A, duly executed by the Holder or its duly authorized agent or attorney. (b) Upon receipt of such Exercise Notice, Warrant and payment, the Company shall, as promptly as practicable, and in any event within ten (10) Business Days thereafter, execute (or cause to be executed) and deliver (or cause to be delivered) to the Holder a certificate or certificates representing the aggregate number of full shares of Common Stock issuable upon such exercise, together with cash in lieu of any fraction of a share, as hereafter provided. The stock certificate or certificates so delivered shall be, to the extent possible, in such denomination or denominations as the exercising Holder shall reasonably request in the Exercise Notice and shall be registered in the name of the Holder or such other name as shall be designated in the Exercise Notice. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and the Holder or any other Person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the Exercise Date. (c) Payment of the Warrant Price shall be made at the option of the Holder by one or more of the following methods: (i) by delivery of a certified or official bank check in the amount of such Warrant Price, (ii) by instructing the Company to withhold a number of shares of Warrant Stock then issuable upon exercise of this Warrant with an aggregate Fair Value equal to such Warrant Price (the "Share Withholding Option") or (iii) by surrendering to the Company shares of Common Stock previously acquired by the Holder with an aggregate Fair Value equal to such Warrant Price. In the event of any withholding of Warrant Stock or surrender of Common Stock pursuant to clause (ii) or (iii) above where the number of shares whose Fair Value is equal to the Warrant Price is not a whole number, the number of shares withheld by or surrendered to the Company shall be rounded up to the nearest whole share and the Company shall make a cash payment to the Holder based on the incremental fraction of a share being so withheld by or surrendered to the Company in an amount determined in accordance with Section 2.3 hereof. (d) If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing the shares of Common Stock being issued, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased shares of Common Stock called for by this Warrant. Such new Warrant shall in all other respects be identical with this Warrant. Section 2.2 Payment of Taxes . All shares of Common Stock issuable upon the ---------------- exercise of this Warrant pursuant to the terms hereof shall be validly issued, fully paid and nonassessable, issued without violation of any preemptive rights and free and clear of all Liens (other than any created by actions of the Holder). The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to, the issue or delivery thereof (other than income taxes imposed on the Holder), unless such tax or charge is imposed by law upon the Holder, in which case such taxes or charges shall be paid by the Holder and the Company shall reimburse the Holder therefor on an After-Tax Basis. Section 2.3 Fractional Shares . The Company shall not be required to issue ----------------- a fractional share of Common Stock upon exercise of any Warrant. As to any fraction of a share that the Holder of one or more Warrants, the rights under which are exercised in the same transaction, would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to the same fraction of the Current Market Price of one share of Common Stock on the Exercise Date. Section 2.4 Continued Validity and Application . (a) A Holder of shares of ---------------------------------- Warrant Stock issued upon the exercise of this Warrant, in whole or in part, including any transferee of such shares (other than a transferee in whose hands such shares no longer constitute Warrant Stock as defined herein), shall continue, with respect to such shares, to be entitled to all rights and to be subject to all obligations that are applicable to such Holder by the terms of this Warrant. The Company shall, at the time of any exercise of this Warrant or any transfer of Warrant Stock, upon the request of the Holder of the shares of Warrant Stock issued in connection with such exercise or transfer, acknowledge in writing, in a form reasonably satisfactory to such Holder, its continuing obligation to afford to such Holder such rights referred to in this Section 2.4; provided, however, that if such Holder shall fail to make any such request, such - -------- ------- failure shall not affect the continuing obligation of the Company to afford to such Holder all such rights. 3. TRANSFER, DIVISION AND COMBINATION ------------------------------------- Section 3.1 Transfer . Subject to compliance with Section 8 hereof, each -------- transfer of this Warrant and all rights hereunder, in whole or in part, shall be registered on the books of the Company to be maintained for such purpose, upon surrender of this Warrant at the Designated Office, together with a written assignment of this Warrant in the form of Annex B hereto duly executed by the ------- Holder or its agent or attorney. Upon such surrender and delivery, the Company shall, subject to Section 8, execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned and this Warrant shall promptly be cancelled. A Warrant, if properly assigned in compliance with Section 8, may be exercised by the new Holder for the purchase of shares of Common Stock without having a new Warrant issued. Section 3.2 Division and Combination. Subject to compliance with the -------------------------- applicable provisions of this Warrant, this Warrant may be divided or combined with other Warrants upon presentation hereof at the Designated Office, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with the applicable provisions of this Warrant as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. Section 3.3 Expenses. The Company shall prepare, issue and deliver at its -------- own expense any new Warrant or Warrants required to be issued under this Section 3. Section 3.4 Maintenance of Books . The Company agrees to maintain, at the --------------------- Designated Office, books for the registration and transfer of the Warrants. 4. ANTIDILUTION PROVISIONS ------------------------ The number of shares of Common Stock for which this Warrant is exercisable and the Exercise Price shall be subject to adjustment from time to time as set forth in this Section 4. Section 4.1 Stock Dividends, Subdivisions and Combinations . If at any time ---------------------------------------------- the Company shall: (i) take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend payable in, or other distribution of, additional shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock into a larger number of shares of such Common Stock, or (iii) combine its outstanding shares of Common Stock into a smaller number of shares of such Common Stock, then the Exercise Price shall be adjusted to equal the product of the Exercise Price in effect immediately prior to such event multiplied by a fraction the numerator of which is equal to the number of shares of Common Stock Outstanding immediately prior to the adjustment and the denominator of which is equal to the number of shares of Common Stock Outstanding immediately after such adjustment. Section 4.2 Adjustments for ING Securities and Options. ----------------------------------------------- (a) Upon the issuance of any Closing ING Warrants pursuant to the ING Agreement, the Exercise Price then in effect shall be adjusted pursuant to Section 4.1 in the same manner as if the Company had declared and paid a stock dividend consisting of a number of shares of Common Stock equal to the number of shares of Common Stock initially issuable upon exercise of such Closing Warrants. (b) No adjustment shall be made to the Exercise Price upon the issuance of the Additional ING Warrants pursuant to the ING Agreement. However, at such time as any of such Additional ING Warrants become exercisable for the purchase of additional shares of Common Stock, the Exercise Price then in effect shall be adjusted pursuant to Section 4.1 in the same manner as if the Company had declared and paid a stock dividend consisting of a number of shares of Common Stock equal to the number of such additional shares of Common Stock. (c) Upon the issuance of any shares of Series C Preferred Stock, the Exercise Price shall thereupon be adjusted to be equal to the product of (x) the Exercise Price in effect immediately prior to the date of such issuance multiplied by (y) a fraction, the numerator of which is equal to the number of shares of Common Stock Outstanding at such time and the denominator of which is equal to the sum of (1) such number of shares of Common Stock Outstanding and (2) the number of shares of Common Stock issuable upon conversion of the such Shares of Series C Preferred Stock at such time assuming conversion in full (and without giving effect to any limitations on the exercise of the related conversion right). (d) It is acknowledged that, as of the Original Issue Date, the exercise prices under the outstanding Options are less than the Fair Value of the shares of Common Stock subject to such Options and, accordingly, such Options have not been taken into account in determining the number of shares of Common Stock initially issuable upon exercise of the Warrants. However, if at time following the Original Issue Date, the Fair Value of the shares of Common Stock subject to any such Options exceeds the related exercise price ("In-the-Money Options"), the Exercise Price shall thereupon be adjusted to be equal to the product of (x) the Exercise Price in effect immediately prior to occurrence multiplied by (y) a fraction, the numerator of which is equal to the number of shares of Common Stock Outstanding at such time and the denominator of which is equal to the sum of (1) such number of shares of Common Stock Outstanding and (2) the number of shares of Common Stock then issuable upon exercise of such In-the-Money Options. If the number of shares of Common Stock issuable upon any such In-the-Money Options shall thereafter increase (other than as a result of an event requiring an independent adjustment of the Exercise Price pursuant to Section 4.1), the Exercise Price shall thereupon be recalculated substituting such increased number of shares of Common Stock in clause (2) of the preceding formula, but only to the extent that such Options remain In-the-Money Options at the time of such increase. Section 4.3 Adjustment of Number of Shares Purchasable and Floor Value. -------------------------------------------------------------- Upon any adjustment of the Exercise Price as provided in Section 4.1 or 4.2 hereof: (a) the Holder hereof shall thereafter be entitled to purchase upon the exercise of this Warrant, at the Exercise Price resulting from such adjustment, the number of shares of Common Stock (calculated to the nearest 1/100th of a share) obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable on the exercise hereof immediately prior to such adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment and (b) the Floor Value per share shall be adjusted to be equal to the quotient obtained by dividing (1) the product of (x) Floor Value per share immediately prior to such adjustment multiplied by (y) a number of shares issuable upon exercise of this Warrant at such time by (2) the number of shares of Common Stock issuable upon exercise of this Warrant after giving effect to such adjustment. Section 4.4 Reorganization, Reclassification, Merger, Consolidation or -------------------------------------------------------------- Disposition of Assets . In case the Company shall reorganize its capital, ------------------ reclassify its capital stock, consolidate or merge with or into another corporation (where the Company is not the surviving corporation or where there is any change whatsoever in, or distribution with respect to, the Outstanding Common Stock of the Company), or sell, transfer or otherwise dispose of all or substantially all of its property, assets or business to another corporation and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or disposition of assets, (i) shares of common stock of the successor or acquiring corporation or of the Company (if it is the surviving corporation) or (ii) any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation ("Other Property") are to be received by or distributed to the holders of Common Stock of the Company who are holders immediately prior to such transaction, then the Holder of this Warrant shall have the right thereafter to receive, upon exercise of this Warrant, the number of shares of common stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event. In such event, the aggregate Exercise Price otherwise payable for the shares of Common Stock issuable upon exercise of this Warrant shall be allocated among the shares of common stock and Other Property receivable as a result of such reorganization, reclassification, merger, consolidation or disposition of assets in proportion to the respective fair market values of such shares of common stock and Other Property as determined in good faith by the Board of Directors of the Company. In case of any such reorganization, reclassification, merger, consolidation or disposition of assets, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Warrant to be performed and observed by the Company and all the obligations and liabilities hereunder, subject to such modifications as may be reasonably deemed appropriate (as determined by resolution of the Board of Directors of the Company) in order to provide for adjustments of any shares of the common stock of such successor or acquiring corporation for which this Warrant thus becomes exercisable, which modifications shall be as equivalent as practicable to the adjustments provided for in this Section 4. For purposes of this Section 4.4, "common stock of the successor or acquiring corporation" shall include stock of such corporation of any class that is not preferred as to dividends or assets over any other class of stock of such corporation and that is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities that are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe for or purchase any such stock. The foregoing provisions of this Section 4.4 shall similarly apply to successive reorganizations, reclassification, mergers, consolidations or disposition of assets. Section 4.5 Other Provisions Applicable to Adjustments Under this Section . ------------------------------------------------------------- The following provisions shall be applicable to the adjustments provided for pursuant to this Section 4: (a) When Adjustments To Be Made. The adjustments required by this Section 4 --------------------------- shall be made whenever and as often as any specified event requiring such an adjustment shall occur. For the purpose of any such adjustment, any specified event shall be deemed to have occurred at the close of business on the date of its occurrence. (b) Record Date. In case the Company shall take a record of the holders of ------------ the Common Stock for the purpose of entitling them (i) to receive a dividend or other distribution payable in Common Stock, Convertible Securities or Stock Purchase Rights or (ii) to subscribe for or purchase Common Stock, Convertible Securities or Stock Purchase Rights, then all references in this Section 4 to the date of the issuance or sale of such shares of Common Stock, Convertible Securities or Stock Purchase Rights shall be deemed to be references to such record date. (c) Fractional Interests. In computing adjustments under this Section 4, --------------------- fractional interests in Common Stock shall be taken into account to the nearest 1/100th of a share. (d) When Adjustment Not Required. If the Company shall take a record of the ---------------------------- holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution to which the provisions of Section 4.1 would apply, but shall, thereafter and before the distribution to stockholders thereof, legally abandon its plan to pay or deliver such dividend or distribution, then thereafter no adjustment shall be required by reason of the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled. (e) Maximum Exercise Price. Except as provided in Section 4.1 above, at no ----------------------- time shall the Exercise Price per share of Common Stock exceed the amount set forth in the first paragraph of the preamble of this Warrant. (f) Certain Limitations. The Company agrees not increase the par value of -------------------- the Common Stock at any time other than pursuant to a reverse stock split or other combination of outstanding shares of Common Stock that would give rise to an adjustment to the Exercise Price pursuant to Section 4.1. (g) Notice of Adjustments. Whenever the number of shares of Common Stock ----------------------- for which this Warrant is exercisable or the Exercise Price shall be adjusted pursuant to this Section 4, the Company shall forthwith prepare a certificate to be executed by the chief financial officer of the Company setting forth, in reasonable detail, the event requiring the adjustment and the method by which such adjustment was calculated, specifying the number of shares of Common Stock for which this Warrant is exercisable and (if such adjustment was made pursuant to Section 4.4) describing the number and kind of any other shares of stock or Other Property for which this Warrant is exercisable, and any related change in the Exercise Price, after giving effect to such adjustment or change. The Company shall promptly cause a signed copy of such certificate to be delivered to each Holder in accordance with Section 14.2. The Company shall keep at its principal office or at the Designated Office, if different, copies of all such certificates and cause the same to be available for inspection at said office during normal business hours by any Holder or any prospective transferee of a Warrant designated by a Holder thereof. (h) Independent Application. Except as otherwise provided herein, all ------------------------ subsections of this Section 4 are intended to operate independently of one another (but without duplication). If an event occurs that requires the application of more than one subsection, all applicable subsections shall be given independent effect without duplication. 5. NO IMPAIRMENT; REGULATORY COMPLIANCE AND COOPERATION --------------------------------------------------------- The Company shall not by any action, including, without limitation, amending its charter documents or through any reorganization, reclassification, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other similar voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Holder against impairment. Without limiting the generality of the foregoing, the Company shall take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant, free and clear of all Liens, and shall use its best efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant. 6. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR ------------------------------------------------------------------------- APPROVAL OF ANY GOVERNMENTAL AUTHORITY ------------------------------------- From and after the Original Issue Date, the Company shall at all times reserve and keep available for issuance upon the exercise of the Warrants such number of its authorized but unissued shares of Common Stock as will be sufficient to permit the exercise in full of all outstanding Warrants. All shares of Common Stock issuable pursuant to the terms hereof, when issued upon exercise of this Warrant with payment therefor in accordance with the terms hereof, shall be duly and validly issued and fully paid and nonassessable, not subject to preemptive rights and shall be free and clear of all Liens. Before taking any action that would result in an adjustment in the number of shares of Common Stock for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction over such action. If any shares of Common Stock required to be reserved for issuance upon exercise of Warrants require registration or qualification with any governmental authority under any federal or state law (other than under the Securities Act or any state securities law) before such shares may be so issued, the Company will in good faith and as expeditiously as possible and at its expense endeavor to cause such shares to be duly registered. 7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS --------------------------------------------------------------------- Section 7.1 Notices of Corporate Actions. In the event of: (a) any taking ---------------------------- by the Company 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 or distribution, or any right to subscribe for, purchase or otherwise acquire any shares of capital stock of any class or any other securities, (b) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger involving the Company and any other Person or any transfer or other disposition of all or substantially all the assets of the Company to another Person or (c) any voluntary or involuntary dissolution, liquidation or winding-up of the Company, the Company shall mail to each Holder of a Warrant in accordance with the provisions of Section 14.2 hereof a notice specifying (i) the date or expected 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 and (ii) the date or expected date on which any such reorganization, reclassification, recapitalization, consolidation, merger, transfer, disposition, dissolution, liquidation or winding-up is to take place, the time, if any such time is to be fixed, as of which the holders of record of Common Stock shall be entitled to exchange their shares of Common Stock for the securities or Other Property deliverable upon such reorganization, reclassification, recapitalization, consolidation, merger, transfer, disposition, dissolution, liquidation or winding-up and a description in reasonable detail of the transaction. Such notice shall be mailed to the extent practicable at least thirty (30), but not more than ninety (90) days prior to the date therein specified, but failure to give any such notice shall not affect the validity of any such action taken. In the event that the Company at any time sends any other notice to the holders of its Common Stock, it shall concurrently send a copy of such notice to each Holder of a Warrant. Section 7.2 Taking of Record. In the case of all dividends or other ------------------ distributions by the Company to the holders of its Common Stock with respect to which any provision of any Section hereof refers to the taking of a record of such holders, the Company will in each such case take such a record and will take such record as of the close of business on a Business Day. Section 7.3 Closing of Transfer Books. The Company shall not at any time, ------------------------- except upon dissolution, liquidation or winding up of the Company, close its stock transfer books or Warrant transfer books so as to result in preventing or delaying the exercise or transfer of any Warrant. 8. TRANSFER RESTRICTIONS ---------------------- The Holder, by acceptance of this Warrant, agrees to be bound by the provisions of this Section 8. Section 8.1 Restrictions on Transfers . Neither this Warrant nor any shares ------------------------- of Restricted Common Stock issued upon the exercise hereof shall be Transferred other than pursuant to an effective registration statement under the Securities Act or an exemption from the registration provisions thereof. No Transfer of this Warrant or any such shares of Restricted Stock other than pursuant to such an effective registration statement shall be valid or effective unless (a) the holder of the securities proposed to be transferred shall have delivered to the Company either a no-action letter from the Commission or an Opinion of Counsel to the effect that such proposed Transfer is exempt from the registration requirements of the Securities Act or (b) such Transfer is being made pursuant to Rule 144 or Rule 144A under the Securities Act and such holder shall have delivered to the Company a certificate setting forth the basis for applying such Rule to the proposed Transfer. Each certificate, if any, evidencing such shares of Restricted Common Stock issued upon any such Transfer, other than in a public offering pursuant to an effective registration statement shall bear the restrictive legend set forth in Section 8.2(a), and each Warrant issued upon such Transfer shall bear the restrictive legend set forth in Section 8.2(b), unless the Holder delivers to the Company an Opinion of Counsel to the effect that such legend is not required for the purposes of compliance with the Securities Act. Holders of the Warrants or the Restricted Common Stock, as the case may be, shall not be entitled to Transfer such Warrants or such Restricted Common Stock except in accordance with this Section 8.1. Section 8.2 Restrictive Legends . (a) Except as otherwise provided in this ------------------- Section 8, each certificate for Warrant Stock initially issued upon the exercise of this Warrant, and each certificate for Warrant Stock issued to any subsequent transferee of any such certificate, shall be stamped or otherwise imprinted with two legends in substantially the following forms: "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY AN OPINION OF COUNSEL (WHO MAY BE AN EMPLOYEE OF SUCH HOLDER) EXPERIENCED IN SECURITIES MATTERS TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER." "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ENTITLED TO THE BENEFIT OF AND ARE SUBJECT TO CERTAIN OBLIGATIONS SET FORTH IN THE WARRANT PURSUANT TO THE EXERCISE OF WHICH SUCH SHARES WERE ISSUED. A COPY OF SUCH WARRANT IS AVAILABLE AT THE EXECUTIVE OFFICES OF THE COMPANY." (b) Except as otherwise provided in this Section 8, each Warrant shall be stamped or otherwise imprinted with a legend in substantially the following form: "NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE OR OF THE STOCK ISSUABLE UPON EXERCISE THEREOF SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL (WHO MAY BE AN EMPLOYEE OF SUCH HOLDER) EXPERIENCED IN SECURITIES MATTERS TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER." Section 8.3 Termination of Securities Law Restrictions . Notwithstanding -------------------------------------------- the foregoing provisions of this Section 8, the restrictions imposed by Section 8.1 upon the transferability of the Warrants and the Restricted Common Stock and the legend requirements of Section 8.2 shall terminate as to any particular Warrant or shares of Restricted Common Stock when the Company shall have received from the Holder thereof an Opinion of Counsel to the effect that such legend is not required in order to ensure compliance with the Securities Act. Whenever the restrictions imposed by Sections 8.1(b) and 8.2 shall terminate as to this Warrant, as hereinabove provided, the Holder hereof shall be entitled to receive from the Company, at the expense of the Company, a new Warrant bearing the following legend in place of the restrictive legend set forth hereon: "THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT CONTAINED IN SECTIONS 8.1(b) AND 8.2 HEREOF TERMINATED ON ______________, 20__, AND ARE OF NO FURTHER FORCE AND EFFECT." All Warrants issued upon registration of transfer, division or combination of, or in substitution for, any Warrant or Warrants entitled to bear such legend shall have a similar legend endorsed thereon. Wherever the restrictions imposed by this Section shall terminate as to any share of Restricted Common Stock, as hereinabove provided, the Holder thereof shall be entitled to receive from the Company, at the Company's expense, a new certificate representing such Common Stock not bearing the restrictive legend set forth in Section 8.2(a). 9. LOSS OR MUTILATION -------------------- Upon receipt by the Company from any Holder of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of this Warrant and an indemnity reasonably satisfactory to it (it being understood that the written indemnification agreement of or affidavit of loss of U.S. Bank National Association shall be a sufficient indemnity) and, in case of mutilation, upon surrender and cancellation hereof, the Company will execute and deliver in lieu hereof a new Warrant of like tenor to such Holder; provided, however, in the case of mutilation, no indemnity shall be required if ------- ------- this Warrant in identifiable form is surrendered to the Company for cancellation. 10. OFFICE OF THE COMPANY ------------------------ As long as any of the Warrants remain outstanding, the Company shall maintain an office or agency, which may be the principal executive offices of the Company (the "Designated Office"), where the Warrants may be presented for exercise, registration of transfer, division or combination as provided in this Warrant. Such Designated Office shall initially be the office of the Company at 2001 Butterfield Road, Suite 502, Downers Grove, Illinois 60515. The Company may from time to time change the Designated Office to another office of the Company or its agent within the United States by notice given to all registered holders of Warrants at least ten (10) Business Days prior to the effective date of such change. 11. FINANCIAL AND BUSINESS INFORMATION ------------------------------------- Until the Expiration Date, the Company shall deliver to each Holder of Warrants or of Warrant Stock one copy of each of the following items (provided -------- that, at any time that the Company files periodic reports with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, the Company may discharge its obligations under this Section 11 by delivering to each Holder promptly upon the filing thereof a copy of each such periodic filing): (i) as soon as available, and in any event within forty-five (45) days after the end of each of the first three quarters of each fiscal year, unaudited interim consolidated balance sheets of the Company and its Subsidiaries as at the end of such quarter and the related consolidated statements of income, cash flow, stockholders equity and changes in financial position of the Company and its Subsidiaries as at the end of and for such quarter, setting forth in each case in comparative form the corresponding figures for and as at the end of the corresponding quarter of the preceding fiscal year, all in reasonable detail and certified by a principal financial officer of the Company, as prepared in accordance with GAAP consistently applied (subject to year end adjustments and the absence of footnotes), and fairly presenting the consolidated financial position and results of operations of the Company and its Subsidiaries for such periods; (ii) within ninety (90) days after the end of each fiscal year of the Company, consolidated balance sheets of the Company and its Subsidiaries as at the end of such year and the related consolidated statements of income, stockholders' equity and changes in financial position of the Company and its Subsidiaries for such fiscal year, setting forth in each case in comparative form the consolidated figures for the previous fiscal year, all in reasonable detail and accompanied by a report thereon of independent public accountants of recognized national standing selected by the Company, which report shall state that such consolidated financial statements present fairly the financial position of the Company and its Subsidiaries as at the dates indicated and the results of their operations and changes in their financial position for the periods indicated in conformity with GAAP applied on a basis consistent with prior years (except as otherwise specified in such report) and that the audit by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards; (iii) promptly upon their becoming available, copies of all financial statements, reports, notices and proxy statements sent or made available by the Company to the holders of any class of its securities generally or by any Subsidiary of the Company to the holders of any class of its securities generally; and (iv) with reasonable promptness, such other information relating to the Company and its Subsidiaries as the Holder may, from time to time, reasonably request. 12. REPURCHASE BY THE COMPANY OF WARRANTS AND WARRANT STOCK --------------------------------------------------------------- Section 12.1 Obligation to Repurchase Warrants or Warrant Stock . (a) From -------------------------------------------------- time to time during the Repurchase Period, the Company shall, upon written notice (a "Put Notice") from the Holder of this Warrant or any Holder of Warrant Stock issued upon exercise hereof, repurchase (subject to the provisions of Section 12.1(b) below), on the date and in the manner set forth in Section 12.2 below, from such Holder, all or the portion of such Warrant or the number of shares of Warrant Stock (as applicable) designated in such Put Notice. The purchase price for such Warrant or shares of Warrant Stock (as applicable) shall be equal to an amount (the "Put Price"), determined (A) in the case of a repurchase of this Warrant of any portion thereof, by multiplying (1) the number of shares of Warrant Stock then issuable upon exercise of such Warrant (or the portion thereof designated by the Holder to be repurchased in such Put Notice) by (2) the difference between the Put Value per share of Common Stock as of the date of such Put Notice and the Exercise Price per share of Common Stock as of the date of such Put Notice and (B) in the case of a repurchase of Warrant Stock, by multiplying (1) the number of shares of Warrant Stock to be repurchased by (B) the Put Value per share of Common Stock as of the date of such Put Notice. (b) The Company shall not be obligated to repurchase any portion of this Warrant or any such Warrant Stock to the extent that either of the following conditions (a "Disabling Condition") would exist: (i) if such repurchase would be unlawful under the corporation laws of the State of Delaware and no steps can be reasonably taken by the Company (including, without limitation, a revaluation of assets, a reduction in the stated capital of the Company, causing the Subsidiaries of the Company to pay dividends to the Company or other similar restructuring actions) that would permit such repurchase; or (ii) if such repurchase would create a default or event of default under the Credit Agreement (unless waived). In the event that, notwithstanding the Company's efforts, any Disabling Condition remains with respect to any repurchase requested pursuant to Section 12.1(a), the Company shall promptly give the Holder written notice thereof. Such notice shall be accompanied by an opinion of counsel to the Company confirming the existence of such Disabling Condition, and if the Disabling Condition would not fully prohibit the Company from repurchasing the portion of the Warrant or Warrant Stock requested to be repurchased, such notice shall indicate the portion of the Warrant that may be repurchased by the Company without being subject to any such Disabling Condition. Within thirty (30) days after receipt of any such notice indicating that the Company is able to repurchase a portion but not all of such Warrant or Warrant Stock, the Holder may elect to require the Company to repurchase such portion, and the Holder's prior request pursuant to Section 12.1(a) shall be deemed to have been withdrawn with respect to any portion of such Warrant or Warrant Stock not covered by such an election. In any case in which the Company is released from its obligation to repurchase any portion of such Warrant or Warrant Stock under this Section 12.1(d) because of the existence of a Disabling Condition, the Company shall promptly notify the Holder of any subsequent abatement of such Disabling Condition that would permit the Company to make such repurchase in whole or in part. Within thirty (30) days of receipt of any such notice, and without limiting any other right of the Holder to cause the Company to repurchase all or any portion of this Warrant or Warrant Stock pursuant to Section 12.1(a) above, the Holder may reinstate its prior request for a repurchase of such Warrant in whole or in part to the extent then permitted, which repurchase, however, shall be at the higher of (x) the Put Price that would have applied to a repurchase pursuant to such original request (together with interest thereon at the Agreed Rate) and (y) the Put Price that would apply if a new request for repurchase had been made at the time of the reinstatement of such prior request. Section 12.2 Determination and Payment of Put Price. (a) The Put Price for -------------------------------------- any repurchase of this Warrant pursuant to Section 12.1 shall be determined as promptly as practicable (and in any event within thirty (30) days) after the date of the Put Notice given to the Company pursuant to Section 12.1, and shall be payable in cash within thirty (30) days following the date of such determination. On the date of any repurchase of any portion of this Warrant pursuant to this Section 12, the Holder shall assign to the Company such Warrant or portion thereof being repurchased, as the case may be, without any representation or warranty (except as to title), by the surrender of this Warrant at the Designated Office against payment of the Put Price therefor. Payment of the Put Price shall be made, subject to Section 12.2(b) below, at the option of the Holder of this Warrant by (i) wire transfer to an account in a bank located in the United States designated by such Holder for such purpose or (ii) a certified or official bank check drawn on a member of the [New York Clearing House] payable to the order of such Holder. If less than all of this Warrant is being repurchased, the Company shall, pursuant to Section 3 above, cancel such Warrant and issue in the name of, and deliver to, the Holder hereof a new Warrant for the portion not being repurchased. (b) In the event of a delay or dispute relating to the determination of the amount of the Fair Value per share of Common Stock, the Company shall nonetheless repurchase any Warrants to be repurchased pursuant to this Section 12 within the time period set forth in Section 12.2(a), calculating the Put Price on the basis of the Company's good faith determination of such Fair Value. After the resolution of such delay or dispute, the Put Price shall be recalculated using the finally determined amount for such price, and, within ten (10) days of the resolution of such delay or dispute, the Company shall pay to the Holders of the repurchased Warrants the amount, if any, by which such recalculated Put Price exceeds the Put Price previously paid by the Company, together with interest on such excess from the date of repurchase to the date of such payment at the Agreed Rate. In the event that the repurchase of the Warrant takes place more than thirty (30) days after the date of the related Put Notice, the Company shall also pay to the Holders of the Repurchased Warrants interest at the Agreed Rate on the Put Price from the thirtieth day after the date of such Put Notice until the date of repurchase. 13. DILUTION FEE ------------- In the event that the Company at any time after the Original Issue Date shall pay a dividend or make any other distribution with respect to its Common Stock (or any other shares of the capital stock of the Company for which this Warrant becomes exercisable pursuant to Section 4 above) whether in the form of cash, evidences of indebtedness, securities or other property (other than a stock dividend subject to the provisions of Section 4.1 above), then the Holder of this Warrant shall be entitled to receive a dilution fee (a "Dilution Fee") payable in cash on the date of payment of such dividend or other distribution equal to the number of shares of Common Stock (or such other shares of stock) issuable upon exercise of this Warrant on such date multiplied by the sum of (x) the amount of cash and (y) the fair value of any evidences of indebtedness, securities or other property distributed with respect to each share of Common Stock (or such other stock). The "fair value" of any such evidences of indebtedness, securities or other property shall mean the fair market value thereof, as determined by the Board of Directors of the Company in good faith and supported, upon the request of the Majority Warrant Holders, by an opinion of an investment banking firm or appraisal firm of recognized national standing selected by the Company and acceptable to such Majority Warrant Holders. The fees and expenses of such investment banking firm or appraisal firm shall be paid by the Company. 14. MISCELLANEOUS ------------- Section 14.1 Nonwaiver. No course of dealing or any delay or failure to --------- exercise any right hereunder on the part of the Company or the Holder shall operate as a waiver of such right or otherwise prejudice the rights, powers or remedies of such Person. Section 14.2 Notice Generally . Any notice, demand, request, consent, ----------------- approval, declaration, delivery or communication hereunder to be made pursuant to the provisions of this Warrant shall be sufficiently given or made if in writing and either delivered in person with receipt acknowledged or sent by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: (a) if to any Holder of this Warrant or of Warrant Stock issued upon the exercise hereof, at its last known address appearing on the books of the Company maintained for such purpose; (b) if to the Company, at its Designated Office; or at such other address as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Every notice, demand, request, consent, approval, declaration, delivery or other communication hereunder shall be deemed to have been duly given or served on the date on which personally delivered, with receipt acknowledged, or three (3) Business Days after the same shall have been deposited in the United States mail, or one (1) Business Day after the same shall have been delivered to Federal Express or another overnight courier service. Section 14.3 Indemnification . If the Company fails to make, when due, any --------------- payments provided for in this Warrant, the Company shall pay to the Holder hereof (a) interest at the Agreed Rate on any amounts due and owing to such Holder and (b) such further amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys' fees and expenses incurred by such Holder in collecting any amounts due hereunder. The Company shall indemnify, save and hold harmless the Holder hereof and the Holders of any Warrant Stock issued upon the exercise hereof from and against any and all liability, loss, cost, damage, reasonable attorneys' and accountants' fees and expenses, court costs and all other out-of-pocket expenses incurred in connection with or arising from a Company Default. This indemnification provision shall be in addition to the rights of such Holder or Holders to bring an action against the Company for breach of contract based on such Company Default. Section 14.4 Limitation of Liability. No provision hereof, in the absence ----------------------- of affirmative action by the Holder to purchase shares of Common Stock, and no enumeration herein of the rights or privileges of the Holder hereof, shall give rise to any liability of such Holder to pay the Exercise Price for any Warrant Stock other than pursuant to an exercise of this Warrant or any liability as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. Section 14.5 Remedies . Each Holder of Warrants and/or Warrant Stock, in -------- addition to being entitled to exercise its rights granted by law, including recovery of damages, shall be entitled to specific performance of its rights provided under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees, in an action for specific performance, to waive the defense that a remedy at law would be adequate. Section 14.6 Successors and Assigns . Subject to the provisions of Sections ---------------------- 3.1, 8.1 and 8.2, this Warrant and the rights evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the permitted successors and assigns of the Holder hereof. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and to the extent applicable, all Holders of shares of Warrant Stock issued upon the exercise hereof (including transferees), and shall be enforceable by any such Holder. Section 14.7 Amendment. This Warrant and all other Warrants may be --------- modified or amended or the provisions hereof waived with the written consent of the Company and the Majority Warrant Holders, provided that no such Warrant may -------- be modified or amended to reduce the number of shares of Common Stock for which such Warrant is exercisable or to increase the price at which such shares may be purchased upon exercise of such Warrant (before giving effect to any adjustment as provided therein) without the written consent of the Holder thereof. Section 14.8 Severability . Wherever possible, each provision of this ------------ Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Warrant. Section 14.9 Headings. The headings used in this Warrant are for the -------- convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant. Section 14.10 GOVERNING LAW; JURISDICTION. IN ALL RESPECTS, INCLUDING ALL ---------------------------- MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS WARRANT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, EXCEPT WITH RESPECT TO THE VALIDITY OF THIS WARRANT, THE ISSUANCE OF WARRANT STOCK UPON EXERCISE HEREOF AND THE RIGHTS AND DUTIES OF THE COMPANY WITH RESPECT TO REGISTRATION OF TRANSFER, WHICH SHALL BE GOVERNED BY THE LAWS OF DELAWARE. THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN COOK COUNTY, ILLINOIS, SHALL HAVE, EXCEPT AS SET FORTH BELOW, EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY AND THE HOLDER OF THIS WARRANT PERTAINING TO THIS WARRANT OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT, PROVIDED, -------- THAT IT IS ACKNOWLEDGED THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF COOK COUNTY, ILLINOIS. IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and its corporate seal to be impressed hereon and attested by its Secretary or an Assistant Secretary. ABC-NACO INC. By:_________________________ Name: Title: [SEAL] Attest: By:___________________________ Name: Title: ------ 33 NY1 2070209v2 NY1 2070209v2 ANNEX ASUBSCRIPTION FORM ------------------------ [To be executed only upon exercise of Warrant] The undersigned registered owner of this Warrant irrevocably exercises this Warrant for the purchase of ______ shares Common Stock of ABC-NACO Inc., and herewith makes payment therefor, all at the price and on the terms and conditions specified in this Warrant and requests that certificates for the shares of Common Stock hereby purchased (and any securities or other property issuable upon such exercise) be issued in the name of and delivered to _______________________________________ whose address is ______________________ _________________________________________________________________________ and, if such shares of Common Stock shall not include all of the shares of Common Stock issuable as provided in this Warrant, that a new Warrant of like tenor and date for the balance of the shares of Common Stock issuable hereunder be delivered to the undersigned. _______________________________ (Name of Registered Owner) _______________________________ (Signature of Registered Owner) _______________________________ (Street Address) _______________________________ (City) (State) (Zip Code) NOTICE: The signature on this subscription must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatsoever. Table of Contents ----------------- Page ---- NY1 2070209v2 ANNEX BASSIGNMENT FORM ---------------------- FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under this Warrant, with respect to the number of shares of Common Stock set forth below: No. of Shares of Name and Address of Assignee Common Stock -------------------------------- ------------- and does hereby irrevocably constitute and appoint ________ _____________ attorney-in-fact to register such transfer onto the books of ABC-NACO Inc. maintained for the purpose, with full power of substitution in the premises. Dated:___________________ Print Name:___________________ Signature:____________________ Witness:______________________ NOTICE: The signature on this assignment must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatsoever. EX-4.6 11 doc10.txt REGISTRATION RIGHTS AGREEMENT dated as of May 2, 2001 among ABC-NACO Inc. and THE HOLDERS OF REGISTRABLE SECURITIES REFERRED TO HEREIN 21 NY1 2068814v8 NY1 2068814v8 REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as of May 2, 2001 among ABC-NACO, INC., a Delaware corporation (the "Company"), and the Persons named on Schedule 1 as Holders (each a "Holder" and collectively, the "Holders"). RECITALS WHEREAS, pursuant to that certain Warrant Purchase Agreement dated as of May 2, 2001 ("Warrant Purchase Agreement") by and among the Company and the Holders, Holders purchased warrants exercisable for the purchase of shares of Common Stock of the Company (as further defined below, the "Warrants"), and the Company has agreed to provide certain rights to Holders to cause such shares (as further defined below, the "Registrable Securities") to be registered under the Securities Act; and WHEREAS, the parties hereto hereby desire to set forth the Holders' rights and the Company's obligations to cause the registration of the Registrable Securities under the Securities Act; NOW, THEREFORE, in consideration of these premises, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: Section 1. Definitions and Usage. As used in this Agreement: 1.1. Definitions. Agent. "Agent" shall mean the principal placement agent on an agented placement of Registrable Securities. Commission. "Commission" shall mean the Securities and Exchange Commission. Common Stock. "Common Stock" shall mean (i) the common stock, par value $.01 per share, of the Company, and (ii) shares of capital stock of the Company issued by the Company in respect of or in exchange for shares of such common stock in connection with any stock dividend or distribution, stock split-up, recapitalization, recombination or exchange by the Company generally of shares of such common stock. Continuously Effective. "Continuously Effective", with respect to a specified registration statement, shall mean that it shall not cease to be effective and available for Transfers of Registrable Securities thereunder for longer than either (i) any ten (10) consecutive business days, or (ii) an aggregate of fifteen (15) business days during the period specified in the relevant provision of this Agreement. Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of 1934. Excluded Form. "Excluded Form" shall mean a registration statement filed pursuant to the Securities Act on Form S-8, S-4 or any similar or successor forms. Holders. "Holders" shall mean the Persons named on Schedule 1 as Holders of Registrable Securities and Transferees of such Persons' Registrable Securities with respect to the rights that such Transferees shall have acquired in accordance with Section 10, at such times as such Persons shall own Registrable Securities. Initial Public Offering. "Initial Public Offering" shall mean first offering of shares of Common Stock registered pursuant to the Securities Act. Majority Selling Holders. "Majority Selling Holders" shall mean those Selling Holders whose Registrable Securities included in such registration represent a majority of the Registrable Securities of all Selling Holders included therein. Person. "Person" shall mean any individual, corporation, partnership, joint venture, association, joint-stock company, limited liability company, trust, unincorporated organization or government or other agency or political subdivision thereof. Piggyback Registration. "Piggyback Registration" shall have the meaning set forth in Section 4. Register, Registered and Registration. "Register", "registered", and "registration" shall refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act, and the declaration or ordering by the Commission of effectiveness of such registration statement or document. Registrable Securities. "Registrable Securities" shall mean, subject to Section 10 and Section 12.3: any shares of Warrant Stock. For purposes of this Agreement, a Person will be deemed to be a Holder of Registrable Securities whenever such Person has the then-existing right to acquire such Registrable Securities (by conversion, purchase or otherwise), whether or not such acquisition has actually been effected. Registrable Securities then outstanding. "Registrable Securities then outstanding" shall mean, with respect to a specified determination date, the Registrable Securities owned by all Holders on such date. Registration Expenses. "Registration Expenses" shall have the meaning set forth in Section 8.1. Securities Act. "Securities Act" shall mean the Securities Act of 1933. Selling Holders. "Selling Holders" shall mean, with respect to a specified registration pursuant to this Agreement, Holders whose Registrable Securities are included in such registration. Shelf Registration. "Shelf Registration" shall have the meaning set forth in Section 2.1. Shelf Registration Statement. "Shelf Registration Statement" shall mean the registration statement filed with the Commission with respect to the Shelf Registration. Transfer. "Transfer" shall mean and include the act of selling, giving, transferring, creating a trust (voting or otherwise), assigning or otherwise disposing of (other than pledging, hypothecating or otherwise transferring as security) (and correlative words shall have correlative meanings); provided however, that any transfer or other disposition upon foreclosure or other exercise of remedies of a secured creditor after an event of default under or with respect to a pledge, hypothecation or other transfer as security shall constitute a "Transfer". Underwriters' Representative. "Underwriters' Representative shall mean the managing underwriter, or, in the case of a co-managed underwriting, the managing underwriter designated as the Underwriters' Representative by the co-managers. Violation. "Violation" shall have the meaning set forth in Section 9.1. Warrants. "Warrants" shall mean the Warrants issued to the initial Holders pursuant to the Warrant Purchase Agreement, and all Warrants issued upon transfer, division or combination of, or in substitution for such Warrant or Warrants. Warrant Purchase Agreement. "Warrant Purchase Agreement" shall have the meaning set forth in the Recitals. Warrant Stock. "Warrant Stock" generally shall mean the shares of Common Stock issued, issuable or both (as the context may require) upon the exercise of Warrants until such time as such shares of Common Stock have either been (i) Transferred in a public offering pursuant to a registration statement filed under the Securities Act or (ii) Transferred in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof with all transfer restrictions and restrictive legends with respect to such Common Stock being removed in connection with such transaction. 1.2. Usage. (i) References to a Person are also references to its assigns and successors in interest (by means of merger, consolidation or sale of all or substantially all the assets of such Person or otherwise, as the case may be). (ii) References to Registrable Securities "owned" by a Holder shall include Registrable Securities beneficially owned by such Person but which are held of record in the name of a nominee, trustee, custodian, or other agent, but shall exclude shares of Common Stock held by a Holder in a fiduciary capacity for customers of such Person. (iii) References to a document are to it as amended, waived and otherwise modified from time to time and references to a statute or other governmental rule are to it as amended and otherwise modified from time to time (and references to any provision thereof shall include references to any successor provision). (iv) References to Sections or to Schedules or Exhibits are to sections hereof or schedules or exhibits hereto, unless the context otherwise requires. (v) The definitions set forth herein are equally applicable both to the singular and plural forms and the feminine, masculine and neuter forms of the terms defined. (vi) The term "including" and correlative terms shall be deemed to be followed by "without limitation" whether or not followed by such words or words of like import. (vii) The term "hereof" and similar terms refer to this Agreement as a whole. (viii) The "date of" any notice or request given pursuant to this Agreement shall be determined in accordance with Section 16. Section 2. Shelf Registration. 2.1. The Company shall, at its sole cost and expense, file with the Commission and thereafter shall use its best efforts to cause to be declared effective, not later than the earlier of (i) ninety (90) calendar days after the issuance of Series C Cumulative Convertible Participating Preferred Stock, par value $1.00, of the Company and (ii) one hundred and eighty (180) calendar days after the date of this Agreement, a registration statement (the "Shelf Registration Statement"), on a Form S-3 or any successor form thereto, if the Company is then eligible to use such form, relating to the offer and sale of Registrable Securities by the Holders thereof, from time to time, in accordance with the methods of distribution set forth in the Shelf Registration Statement and Rule 415 under the Securities Act (hereinafter, the "Shelf Registration"); provided, however, that no Holder of Registrable Securities shall be entitled to have its Registrable Securities covered by such Shelf Registration Statement unless such Holder agrees in writing to be bound by all the provisions of this Agreement applicable to such Holder. 2.2. The Company shall use its best efforts to keep the Shelf Registration Statement Continuously Effective in order to permit the prospectus included therein to be lawfully delivered by the Holders of Registrable Securities until all the Registrable Securities covered by the Shelf Registration Statement have been sold pursuant thereto. The Company shall be deemed not to have used its best efforts to keep the Shelf Registration Statement Continuously Effective during the requisite period if it voluntarily takes any action that would result in Holders of Registrable Securities covered thereby not being able to offer and sell such Registrable Securities during that period, unless such action is required by applicable law. 2.3. Notwithstanding any other provisions of this Agreement to the contrary, the Company shall cause the Shelf Registration Statement and the related prospectus and any amendment or supplement thereto, as of the effective date of the Shelf Registration Statement, amendment or supplement, (A) to comply in all material respects with the applicable requirements of the Securities Act and the rules and regulations of the Commission and (B) not to contain any untrue statement of a material fact or omit 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. Section 3. Shelf Registration Procedures. In connection with any Shelf Registration contemplated by Section 2 hereof, the following provisions shall apply: 3.1. The Company shall (A) furnish to each Holder of Registrable Securities, if applicable, prior to the filing thereof with the Commission, a copy of the Shelf Registration Statement and each amendment thereof and each supplement, if any, to the prospectus included therein and, in the event that any Holder of Registrable Securities, if applicable, is participating in the Shelf Registration Statement, shall use its best efforts to reflect in each such document, when so filed with the Commission, such comments as such Holder of Registrable Securities, if applicable, reasonably may propose; and (B) include the names of the Holders of Registrable Securities who propose to sell Registrable Securities pursuant to the Shelf Registration Statement as selling security holders. 3.2. The Company shall advise (and confirm such advice in writing if requested by the recipient of the advice) the Holders of Registrable Securities, if applicable: (A) when the Shelf Registration Statement or any amendment thereto has been filed with the Commission and when the Shelf Registration Statement or any post-effective amendment thereto has become effective; (B) of any request by the Commission for amendments or supplements to the Shelf Registration Statement or the prospectus included therein or for additional information; (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Shelf Registration Statement or the initiation of any proceedings for that purpose; (D) of the receipt of the Company or its legal counsel of any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and (E) of the happening of any event that requires the Company to make changes in the Shelf Registration Statement or the prospectus in order that the Shelf Registration Statement or the prospectus does not contain an untrue statement of a material fact nor omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. 3.3. The Company shall use its best efforts to obtain the withdrawal at the earliest possible time of any order suspending the effectiveness of the Shelf Registration Statement. 3.4. The Company shall furnish to each Holder of Registrable Securities included within the coverage of the Shelf Registration, without charge, at least one copy of the Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if the Holder of Securities so requests in writing, all exhibits thereto (including those, if any, incorporated by reference). 3.5. The Company shall deliver to each Holder of Registrable Securities included within the coverage of the Shelf Registration, without charge, as many copies of the prospectus (including each preliminary prospectus) included in the Shelf Registration Statement and any amendment or supplement thereto as such person may reasonably request. The Company consents, subject to the provisions of this Agreement, to the use of the prospectus or any amendment or supplement thereto included in the Shelf Registration Statement by each of the Selling Holders of the Registrable Securities in connection with the offering and sale of the Securities covered by such prospectus or any such amendment or supplement. 3.6. Prior to any public offering of the shares of Securities, pursuant to any Shelf Registration Statement, the Company shall register or qualify or cooperate with the Holders of Registrable Securities included therein and their respective counsel in connection with the registration or qualification of the Registrable Securities for offer and sale under the securities or "blue sky" laws of such states of the United States as any Holder of Registrable Securities covered by such Shelf Registration Statement; provided, however, that the Company shall not be required to (A) qualify generally to do business in any jurisdiction where it is not then so qualified or (B) take any action which would subject it to general service of process or to taxation in any jurisdiction where it is not then so subject. 3.7. The Company shall cooperate with the Holders of Registrable Securities to facilitate the timely preparation and delivery of certificates representing such Registrable Securities free of any restrictive legends and in such denominations and registered in such names as the Holders of Registrable Securities may request a reasonable period of time prior to sales of the Registrable Securities pursuant to such Shelf Registration Statement. 3.8. Upon the occurrence of any event contemplated by paragraphs (B) through (E) of Section 3.2 above during the period for which the Company is required to maintain an effective Shelf Registration Statement, the Company shall promptly prepare and file a post-effective amendment to the Shelf Registration Statement or a supplement to the related prospectus and any other required document so that, as thereafter delivered to Holders of Registrable Securities, the prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Company notifies the Holders of Registrable Securities then the Holders of Registrable Securities shall suspend use of such prospectus, and the period of effectiveness of the Shelf Registration Statement provided for in Section 2 above shall be extended by the number of days from and including the date of the giving of such notice to and including the date when the Holders of Registrable Securities shall have received such amended or supplemented prospectus pursuant to this Section 3.8. 3.9. The Company will comply with all rules and regulations of the Commission to the extent and so long as they are applicable to the Shelf Registration and will make generally available to its security holders (or otherwise provide in accordance with Section 11(a) of the Securities Act) an earnings statement (which need not be audited) satisfying the provisions of Section 11(a) of the Securities Act, no later than forty-five (45) calendar days after the end of a 12-month period (or ninety (90) calendar days, if such period is a fiscal year) beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the Registration Statement, which statement shall cover such 12-month period. 3.10. Each Holder of Registrable Securities to be sold pursuant to the Shelf Registration Statement shall furnish to the Company such information regarding such Holder and the distribution of the Registrable Securities as the Company may from time to time reasonably require and request for inclusion in the Shelf Registration Statement (and shall promptly correct any information previously furnished if the inclusion of such information in such Shelf Registration Statement would be materially misleading), and the Company may exclude from the Shelf Registration the Registrable Securities of any Holder that unreasonably fails to furnish such information within a reasonable time after receiving such request. 3.11. The Company shall enter into such customary agreements (including if requested an underwriting agreement in customary form) and take all such other action, if any, as any Holder of Registrable Securities shall reasonably request in order to facilitate the disposition of the Registrable Securities pursuant to any Shelf Registration. If an underwriting agreement is entered into pursuant to this paragraph, the Company shall cause any such agreement to contain indemnification provisions and procedures substantially similar to those set forth in Section 9 hereof (or such other procedures acceptable to the Holders of a majority of the aggregate principal amount of the Registrable Securities registered under the applicable Shelf Registration Statement and the managing underwriters, if any) with respect to all parties to be indemnified pursuant to Section 9 hereof. 3.12. In the case of any Shelf Registration, the Company shall (A) make reasonably available for inspection by the Holders of Registrable Securities covered by such Shelf Registration Statements, any attorney, accountant or other agent retained by such Holders or any such underwriters all relevant financial and other records, pertinent corporate documents and properties of the Company and (B) cause the Company's officers, directors, employees, accountants and auditors to supply all relevant information reasonably requested by any such Holders of Registrable Securities or any such underwriter, attorney, accountant or agent in connection with the Shelf Registration Statement, in each case as shall be reasonably necessary, in the judgment of any such Holder or any such underwriter, attorney, accountant or agent referred to in this paragraph, to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act; provided, however, that the foregoing inspection and information gathering shall be coordinated on behalf of Holders of Registrable Securities by one counsel designated by and on behalf of such other parties; and provided, further, that as to any information that is designated in writing by the Company, in good faith, as confidential at the time of delivery, such information shall be kept confidential by such Holders or by any such underwriter, attorney, accountant or other agent. 3.13. In the case of any Shelf Registration, (A) the Company, if reasonably requested by Holders of a majority of the Registrable Securities covered by such Shelf Registration, which request shall not be more frequent than once per fiscal quarter, shall cause its counsel to deliver an opinion and updates thereof relating to the Securities in customary form addressed to such Holders of Registrable Securities and dated, in the case of the initial opinion, the effective date of such Shelf Registration Statement, provided such opinion is requested prior to the effective date (it being agreed that the matters to be covered by such opinion shall include such matters as are customarily included in opinions requested in underwritten offerings); and (B) the Company, if requested by any majority of Holders of Registrable Securities covered by such Shelf Registration, shall cause its officers to execute and deliver all customary documents and certificates and updates thereof reasonably requested. 3.14. In the event that any broker-dealer registered under the Exchange Act shall underwrite any Registrable Securities or participate as a member of an underwriting syndicate or selling group or "assist in the distribution" (within the meaning of the Rules of Fair Practice and the By-Laws of the National Association of Securities Dealers, Inc. ("NASD")) thereof, whether as a Holder of such Registrable Securities or as an underwriter, a placement or sales agent or a broker or dealer in respect thereof, or otherwise, the Company shall use its best efforts to assist such broker-dealer in complying with the requirements of such Rules and By-Laws, including, without limitation, by (A) if such Rules or By-Laws shall so require, engaging a "qualified independent underwriter" (as defined in Section 2720 thereof) to participate in the preparation of the Registration Statement relating to such Registrable Securities, to exercise usual standards of due diligence in respect thereto and, if any portion of the offering contemplated by such Shelf Registration Statement is an underwritten offering or is made through a placement or sales agent, to recommend the yield of such Securities, (B) indemnifying any such qualified independent underwriter to the extent of the indemnification of underwriters provided in Section 9 hereof, and (C) providing such information to such broker-dealer as may be required in order for such broker-dealer to comply with the requirements of the Rules of Fair Practice of the NASD. 3.15. The Company shall use its best efforts to take all other steps necessary to effect the registration of the Registrable Securities covered by a Shelf Registration Statement contemplated hereby. Section 4. Piggyback Registrations. 4.1. The Company shall notify all Holders of Registrable Securities in writing at least forty-five (45) calendar days prior to filing any registration statement under the Securities Act for purposes of effecting a public offering of securities of the Company (including, but not limited to, registration statements relating to secondary offerings of securities of the Company, but excluding registration statements on an Excluded Form or relating to any employee benefit plan or a corporate reorganization) and shall afford each such Holder an opportunity to include in such registration statement all or any part of the Registrable Securities then held by such Holder. Each Holder desiring to include in any such registration statement all or any part of the Registrable Securities held by such Holder shall, within twenty (20) calendar days after receipt of the above-described notice from the Corporation, so notify the Corporation in writing, and in such notice shall inform the Corporation of the number of Registrable Securities such Holder wishes to include in such registration statement. If a Holder decides not to include all of its Registrable Securities in any registration statement thereafter filed by the Company, such Holder shall nevertheless continue to have the right to include any Registrable Securities in any subsequent registration statement or registration statements as may be filed by the Company with respect to offerings of its securities, all upon the terms and conditions set forth herein. 4.2. If the registration statement under which the Company gives notice under this Section 4 (the "Piggyback Registration") is for an underwritten offering, the Company shall so advise the Holders of Registrable Securities. In such event, the right of any such Holder's Registrable Securities to be included in a registration pursuant to this Section 4 shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their Registrable Securities through such underwriting shall enter into an underwriting agreement in such customary form with the managing underwriter or underwriters selected for such underwriting. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the underwriter, delivered at least five (5) business days prior to the effective date of the registration statement. Any Registrable Securities excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration. 4.3. If any of the Registrable Securities registered pursuant to any Piggyback Registration are to be sold in one or more firm commitment underwritten offerings, and the managing underwriters advise in writing the Company and the holders of such Registrable Securities that in its or their opinion or, in the case of a Piggyback Registration not being underwritten, the Company shall reasonably determine (and notify the holders of Registrable Securities of such determination), after consultation with an investment banker of nationally recognized standing, that the number of shares of Common Stock (including Registrable Securities) proposed to be sold in such offering exceeds the maximum number of shares of Common Stock that can be sold in such offering, the Company shall include in such registration only such maximum number of shares of Common Stock (including Registrable Securities) which, in the opinion of such underwriter or underwriters, or the Company, as the case may be, selected in the following order of priority: (A) first, all of the shares of Common Stock that the Company proposes to sell for its own account, if any, and (B) second, the securities requested to be included therein, and which the managing underwriters shall in their reasonable discretion deem advisable, allocated pro rata, based upon the number of shares of Common Stock that each such person shall have requested to be included therein. Section 5. Additional Registration Rights. Except for registration rights disclosed in Schedule 12.3, if the Company grants registration rights to holders of any security of the Company which are more favorable to such holders than the registration rights granted hereunder, then such more favorable registration rights shall also be deemed to be granted to the Holders of the Registrable Securities hereunder, and the Company covenants and agrees to take any and all steps necessary to modify the terms of this Agreement to so provide. Section 6. Registration Procedures. Whenever required under Section 4 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as practicable: (i) Prepare and file with the Commission a registration statement with respect to such Registrable Securities and use the Company's best efforts to cause such registration statement to become effective; provided, however, that before filing a registration statement or prospectus or any amendments or supplements thereto, including documents incorporated by reference after the initial filing of the registration statement and prior to effectiveness thereof, the Company shall furnish to one firm of counsel for the Selling Holders (selected by Majority Selling Holders) copies of all such documents in the form substantially as proposed to be filed with the Commission at least four (4) business days prior to filing for review and comment by such counsel, which opportunity to comment shall include an absolute right to control or contest disclosure if the applicable Selling Holder reasonably believes that it may be subject to controlling person liability under applicable securities laws with respect thereto. (ii) Prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act and rules thereunder with respect to the disposition of all securities covered by such registration statement. If the registration is for an underwritten offering, the Company shall amend the registration statement or supplement the prospectus whenever required by the terms of the underwriting agreement entered into pursuant to Section 4.2. (iii) Furnish to each Selling Holder of Registrable Securities, without charge, such numbers of copies of the registration statement, any pre-effective or post-effective amendment thereto, the prospectus, including each preliminary prospectus and any amendments or supplements thereto, in each case in conformity with the requirements of the Securities Act and the rules thereunder, and such other related documents as any such Selling Holder may reasonably request in order to facilitate the disposition of Registrable Securities owned by such Selling Holder. (iv) Use the Company's best efforts (i) to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such states or jurisdictions as shall be reasonably requested by the Underwriters' Representative or Agent (as applicable, or if inapplicable, the Majority Selling Holders), and (ii) to obtain the withdrawal of any order suspending the effectiveness of a registration statement, or the lifting of any suspension of the qualification (or exemption from qualification) of the offer and transfer of any of the Registrable Securities in any jurisdiction, at the earliest possible moment; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. (v) In the event of any underwritten or agented offering, enter into and perform the Company's obligations under an underwriting or agency agreement (including indemnification and contribution obligations of underwriters or agents), in usual and customary form, with the managing underwriter or underwriters of or agents for such offering. The Company shall also cooperate with the Majority Selling Holders and the Underwriters' Representative or Agent for such offering in the marketing of the Registrable Shares, including making available the Company's officers, accountants, counsel, premises, books and records for such purpose, but the Company shall not be required to incur any material out-of-pocket expense pursuant to this sentence. (vi) Promptly notify each Selling Holder of any stop order issued or threatened to be issued by the Commission in connection therewith (and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered. (vii) Make generally available to the Company's security holders copies of all periodic reports, proxy statements, and other information referred to in Section 12.1 and an earnings statement satisfying the provisions of Section 11(a) of the Securities Act no later than 90 days following the end of the 12-month period beginning with the first month of the Company's first fiscal quarter commencing after the effective date of each registration statement filed pursuant to this Agreement. (viii) Make available for inspection by any Selling Holder, any underwriter participating in such offering and the representatives of such Selling Holder and Underwriter (but not more than one firm of counsel to such Selling Holders), all financial and other information as shall be reasonably requested by them, and provide the Selling Holder, any underwriter participating in such offering and the representatives of such Selling Holder and Underwriter the opportunity to discuss the business affairs of the Company with its principal executives and independent public accountants who have certified the audited financial statements included in such registration statement, in each case all as necessary to enable them to exercise their due diligence responsibility under the Securities Act; provided, however, that information that the Company determines, in good faith, to be confidential and which the Company advises such Person in writing, is confidential shall not be disclosed unless such Person signs a confidentiality agreement reasonably satisfactory to the Company or the related Selling Holder of Registrable Securities agrees to be responsible for such Person's breach of confidentiality on terms reasonably satisfactory to the Company. (ix) Use the Company's best efforts to obtain a so-called "comfort letter" from its independent public accountants, and legal opinions of counsel to the Company addressed to the Selling Holders, in customary form and covering such matters of the type customarily covered by such letters, and in a form that shall be reasonably satisfactory to Majority Selling Holders. The Company shall furnish to each Selling Holder a signed counterpart of any such comfort letter or legal opinion. Delivery of any such opinion or comfort letter shall be subject to the recipient furnishing such written representations or acknowledgements as are customarily provided by selling shareholders who receive such comfort letters or opinions. (x) Provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by such registration statement from and after a date not later than the effective date of such registration statement. (xi) Use all reasonable efforts to cause the Registrable Securities covered by such registration statement (i) if the Common Stock is then listed on a securities exchange or included for quotation in a recognized trading market, to continue to be so listed or included for a reasonable period of time after the offering, and (ii) to be registered with or approved by such other United States or state governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the Selling Holders of Registrable Securities to consummate the disposition of such Registrable Securities. (xii) Use the Company's reasonable efforts to provide a CUSIP number for the Registrable Securities prior to the effective date of the first registration statement including Registrable Securities. (xiii) Take such other actions as are reasonably required in order to expedite or facilitate the disposition of Registrable Securities included in each such registration. Section 7. Holders' Obligations. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Agreement with respect to the Registrable Securities of any Selling Holder of Registrable Securities that such Selling Holder shall: (i) Furnish to the Company such information regarding such Selling Holder, the number of the Registrable Securities owned by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Selling Holder's Registrable Securities, and to cooperate with the Company in preparing such registration; (ii) Agree to sell their Registrable Securities to the underwriters at the same price and on substantially the same terms and conditions as the Company or the other Persons on whose behalf the registration statement was being filed have agreed to sell their securities, and to execute the underwriting agreement agreed to by the Majority Selling Holders, as the case may be pursuant to this Agreement or the Company and the Majority Selling Holders. Section 8. Expenses of Registration. Expenses in connection with registrations pursuant to this Agreement shall be allocated and paid as follows: 8.1. With respect to each Shelf Registration, the Company shall bear and pay all expenses incurred in connection with any registration, filing, or qualification of Registrable Securities with respect to such Registrations for each Selling Holder (which right may be assigned to any Person to whom Registrable Securities are Transferred as permitted by Section 10), including all registration, filing and National Association of Securities Dealers, Inc. fees, all fees and expenses of complying with securities or blue sky laws, all word processing, duplicating and printing expenses, messenger and delivery expenses, the reasonable fees and disbursements of counsel for the Company, and of the Company's independent public accountants, including the expenses of "cold comfort" letters required by or incident to such performance and compliance, and the reasonable fees and disbursements of one firm of counsel for the Selling Holders of Registrable Securities (selected by Holders of a majority of the Registrable Securities covered by such Shelf Registration) (the "Registration Expenses"), but excluding underwriting discounts and commissions relating to Registrable Securities (which shall be paid on a pro rata basis by the Selling Holders). 8.2. The Company shall bear and pay all Registration Expenses incurred in connection with any Piggyback Registrations pursuant to Section 4 for each Selling Holder (which right may be Transferred to any Person to whom Registrable Securities are Transferred as permitted by Section 10), but excluding underwriting discounts and commissions relating to Registrable Securities (which shall be paid on a pro rata basis by the Selling Holders of Registrable Securities). 8.3. Any failure of the Company to pay any Registration Expenses as required by this Section 8 shall not relieve the Company of its obligations under this Agreement. Section 9. Indemnification; Contribution. If any Registrable Securities are included in a registration statement under this Agreement: 9.1. To the extent permitted by applicable law, the Company shall indemnify and hold harmless each Selling Holder, each Person, if any, who controls such Selling Holder within the meaning of the Securities Act, and each officer, director, partner, and employee of such Selling Holder and such controlling Person, against any and all losses, claims, damages, liabilities and expenses (joint or several), including attorneys' fees and disbursements and expenses of investigation, incurred by such party pursuant to any actual or threatened action, suit, proceeding or investigation, or to which any of the foregoing Persons may become subject under the Securities Act, the Exchange Act or other federal or state laws, insofar as such losses, claims, damages, liabilities and expenses arise out of or are based upon any of the following statements, omissions or violations (collectively a "Violation"): (i) Any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein, or any amendments or supplements thereto; (ii) The omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) Any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any applicable state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any applicable state securities law; provided, however, that the indemnification required by this Section 9.1 shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or expense if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or expense to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished to the Company by the indemnified party expressly for use in connection with such registration; provided, further, that the indemnity agreement contained in this Section 9 shall not apply to any underwriter to the extent that any such loss is based on or arises out of an untrue statement or alleged untrue statement of a material fact, or an omission or alleged omission to state a material fact, contained in or omitted from any preliminary prospectus if the final prospectus shall correct such untrue statement or alleged untrue statement, or such omission or alleged omission, and a copy of the final prospectus has not been sent or given to such person at or prior to the confirmation of sale to such person if such underwriter was under an obligation to deliver such final prospectus and failed to do so. The Company shall also indemnify underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, their officers, directors, agents and employees and each person who controls such persons (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) to the same extent as provided above with respect to the indemnification of the Selling Holders. 9.2. To the extent permitted by applicable law, each Selling Holder shall indemnify and hold harmless the Company, each of its directors, each of its officers who shall have signed the registration statement, each Person, if any, who controls the Company within the meaning of the Securities Act, any other Selling Holder, any controlling Person of any such other Selling Holder and each officer, director, partner, and employee of such other Selling Holder and such controlling Person, against any and all losses, claims, damages, liabilities and expenses (joint and several), including attorneys' fees and disbursements and expenses of investigation, incurred by such party pursuant to any actual or threatened action, suit, proceeding or investigation, or to which any of the foregoing Persons may otherwise become subject under the Securities Act, the Exchange Act or other federal or state laws, insofar as such losses, claims, damages, liabilities and expenses arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Selling Holder expressly for use in connection with such registration; provided, however, that (x) the indemnification required by this Section 9.2 shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or expense if settlement is effected without the consent of the relevant Selling Holder of Registrable Securities, which consent shall not be unreasonably withheld, and (y) in no event shall the amount of any indemnity under this Section 9.2 exceed the gross proceeds from the applicable offering received by such Selling Holder. 9.3. Promptly after receipt by an indemnified party under this Section 9 of notice of the commencement of any action, suit, proceeding, investigation or threat thereof made in writing for which such indemnified party may make a claim under this Section 9, such indemnified party shall deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and disbursements and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time following the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 9 but shall not relieve the indemnifying party of any liability that it may have to any indemnified party otherwise than pursuant to this Section 9. Any fees and expenses incurred by the indemnified party (including any fees and expenses incurred in connection with investigating or preparing to defend such action or proceeding) shall be paid to the indemnified party, as incurred, within thirty (30) days of written notice thereof to the indemnifying party (regardless of whether it is ultimately determined that an indemnified party is not entitled to indemnification hereunder). Any such indemnified party shall have the right to employ separate counsel in any such action, claim or proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be the expenses of such indemnified party unless (i) the indemnifying party has agreed to pay such fees and expenses or (ii) the indemnifying party shall have failed to promptly assume the defense of such action, claim or proceeding or (iii) the named parties to any such action, claim or proceeding (including any impleaded parties) include both such indemnified party and the indemnifying party, and such indemnified party shall have been advised by counsel that there may be one or more legal defenses available to it which are different from or in addition to those available to the indemnifying party and that the assertion of such defenses would create a conflict of interest such that counsel employed by the indemnifying party could not faithfully represent the indemnified party (in which case, if such indemnified party notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such action, claim or proceeding on behalf of such indemnified party, it being understood, however, that the indemnifying party shall not, in connection with any one such action, claim or proceeding or separate but substantially similar or related actions, claims or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (together with appropriate local counsel) at any time for all such indemnified parties, unless in the reasonable judgment of such indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such action, claim or proceeding, in which event the indemnifying party shall be obligated to pay the fees and expenses of such additional counsel or counsels). No indemnifying party shall be liable to an indemnified party for any settlement of any action, proceeding or claim without the written consent of the indemnifying party, which consent shall not be unreasonably withheld. 9.4. If the indemnification required by this Section 9 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to in this Section 9: (i) The indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any Violation has been committed by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such Violation. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 9.1 and Section 9.2, any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. (ii) The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 9.4 were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to in Section 9.4(i). No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. 9.5. If indemnification is available under this Section 9, the indemnifying parties shall indemnify each indemnified party to the full extent provided in this Section 9 without regard to the relative fault of such indemnifying party or indemnified party or any other equitable consideration referred to in Section 9.4. 9.6. The obligations of the Company and the Selling Holders of Registrable Securities under this Section 9 shall survive the completion of any offering of Registrable Securities pursuant to a registration statement under this Agreement, and otherwise. Section 10. Transfer of Registration Rights. Rights with respect to Registrable Securities may be Transferred as follows: all rights of a Holder with respect to Registrable Securities pursuant to this Agreement may be Transferred by such Holder to any of its Person in connection with the Transfer of Registrable Securities to such Person, in all cases, if (x) any such Transferee that is not a party to this Agreement shall have executed and delivered to the Secretary of the Company a properly completed agreement substantially in the form of Exhibit A, and (y) the Transferor shall have delivered to the Secretary of the Company, no later than 15 days following the date of the Transfer, written notification of such Transfer setting forth the name of the Transferor, name and address of the Transferee, and the number of Registrable Securities which shall have been so Transferred. Section 11. Holdback. Each Holder entitled pursuant to this Agreement to have Registrable Securities included in a registration statement prepared pursuant to this Agreement, if so requested by the Underwriters' Representative or Agent in connection with an offering of any Registrable Securities, shall not effect any public sale or distribution of shares of Common Stock or any securities convertible into or exchangeable or exercisable for shares of Common Stock, including a sale pursuant to Rule 144 under the Securities Act (except as part of such underwritten or agented registration), during the 15-day period prior to, and during the 180-day period beginning on, the date such registration statement is declared effective under the Securities Act by the Commission, provided that such Holder is timely notified of such effective date in writing by the Company or such Underwriters' Representative or Agent. In order to enforce the foregoing covenant, the Company shall be entitled to impose stop-transfer instructions with respect to the Registrable Securities of each Holder until the end of such period. Section 12. Covenants of the Company. The Company hereby agrees and covenants as follows: 12.1. (i) The Company shall file as and when applicable, on a timely basis, all reports required to be filed by it under the Exchange Act. If the Company is not required to file reports pursuant to the Exchange Act, upon the request of any Holder of Registrable Securities, the Company shall make publicly available the information specified in subparagraph (c)(2) of Rule 144 of the Securities Act, and take such further action as may be reasonably required from time to time and as may be within the reasonable control of the Company, to enable the Holders to Transfer Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 under the Securities Act or any similar rule or regulation hereafter adopted by the Commission. (ii) The Company shall not, and shall not permit its majority owned subsidiaries to, effect any public sale or distribution of any shares of Common Stock or any securities convertible into or exchangeable or exercisable for shares of Common Stock, during the five business days prior to, and during the 90-day period beginning on, the commencement of a public distribution of the Registrable Securities pursuant to any registration statement prepared pursuant to this Agreement (other than by the Company pursuant to such registration if the registration is pursuant to Section 4). (iii) Any agreement entered into after the date of this Agreement pursuant to which the Company or any of its majority owned subsidiaries issues or agrees to issue any privately placed securities similar to any issue of the Registrable Securities (other than (x) shares of Common Stock pursuant to a stock incentive, stock option, stock bonus, stock purchase or other employee benefit plan of the Company approved by its Board of Directors, and (y) securities issued to Persons in exchange for ownership interests in any Person in connection with a business combination in which the Company or any of its majority owned subsidiaries is a party) shall contain a provision whereby holders of such securities agree not to effect any public sale or distribution of any such securities during the periods described in the first sentence of Section 12.1(ii), in each case including a sale pursuant to Rule 144 under the Securities Act (unless such Person is prevented by applicable statute or regulation from entering into such an agreement). 12.2. The Company shall not, directly or indirectly, (x) enter into any merger, consolidation or reorganization in which the Company shall not be the surviving corporation or (y) Transfer or agree to Transfer all or substantially all the Company's assets, unless prior to such merger, consolidation, reorganization or asset Transfer, the surviving corporation or the Transferee, respectively, shall have agreed in writing to assume the obligations of the Company under this Agreement, and for that purpose references hereunder to "Registrable Securities" shall be deemed to include the securities which the Holders of Registrable Securities would be entitled to receive in exchange for Registrable Securities pursuant to any such merger, consolidation or reorganization. 12.3. Except as disclosed in Schedule 12.3, the Company shall not grant to any Person (other than a Holder of Registrable Securities) any registration rights with respect to securities of the Company, or enter into any agreement, that would entitle the holder thereof to have securities owned by it included in a Shelf Registration. Section 13. "Market Stand-Off' Agreement. Each Holder hereby agrees that it shall not, to the extent requested by the Company and an underwriter of Common Stock of the Company, sell or otherwise transfer or dispose of any Registrable Securities (other than Registrable Securities being registered in such offering) for up to that period of time following the effective date of a registration statement of the Company filed under the Securities Act as is requested by the managing underwriter(s) of such offering, not to exceed one hundred twenty (120) calendar days; provided, however, that: (i) such agreement shall be applicable only to the first such registration statement of the Company which covers securities to be sold on its behalf to the public in an underwritten offering but not to Registrable Securities sold pursuant to such registration statement; and (ii) all officers, directors and ten percent (10%) or greater stockholders of the Company, provided such stockholders have acquired such securities directly from the Company, then holding Common Stock of the Company, shall enter into similar agreements. In order to enforce the foregoing covenant, the Company may impose stop transfer instructions with respect to the then-remaining Registrable Securities of each Holder (and the shares or securities of every other person subject to the foregoing restriction) until the end of such period. Section 14. Amendment, Modification and Waivers; Further Assurances. (i) This Agreement may be amended with the consent of the Company and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company shall have obtained the written consent of Holders owning Registrable Securities possessing a majority in number of the Registrable Securities then outstanding to such amendment, action or omission to act. (ii) No waiver of any terms or conditions of this Agreement shall operate as a waiver of any other breach of such terms and conditions or any other term or condition, nor shall any failure to enforce any provision hereof operate as a waiver of such provision or of any other provision hereof. No written waiver hereunder, unless it by its own terms explicitly provides to the contrary, shall be construed to effect a continuing waiver of the provisions being waived and no such waiver in any instance shall constitute a waiver in any other instance or for any other purpose or impair the right of the party against whom such waiver is claimed in all other instances or for all other purposes to require full compliance with such provision. (iii) Each of the parties hereto shall execute all such further instruments and documents and take all such further action as any other party hereto may reasonably require in order to effectuate the terms and purposes of this Agreement. Section 15. Assignment; Benefit. This Agreement and all of the provisions hereof shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, assigns, executors, administrators or successors; provided, however, that except as specifically provided herein with respect to certain matters, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned or delegated by the Company without the prior written consent of Holders owning Registrable Securities possessing a majority in number of the Registrable Securities outstanding on the date as of which such delegation or assignment is to become effective. A Holder may Transfer its rights hereunder to a successor in interest to the Registrable Securities owned by such assignor only as permitted by Section 10. Section 16. Miscellaneous. 16.1. Governing Law and Jurisdiction. (i) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS WITHOUT GIVING REGARD TO THE CONFLICT OF LAWS PRINCIPLES THEREOF. (ii) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF ILLINOIS, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES TO THIS AGREEMENT CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE PARTIES TO THIS AGREEMENT IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. EACH OF THE PARTIES TO THIS AGREEMENT WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPALINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY ILLINOIS LAW. 16.2. Notices. All notices and requests given pursuant to this Agreement shall be in writing and shall be made by hand-delivery, first-class mail (registered or certified, return receipt requested), confirmed facsimile or overnight air courier guaranteeing next business day delivery to (i) in case of any of the Holders, the relevant address specified on Schedule 1 to this Agreement or in the relevant agreement in the form of Exhibit A whereby such party became bound by the provisions of this Agreement, and (ii) in case of the Company, to ABC-NACO Inc., 2001 Butterfield Road, Suite 502,Downers Grove, Illinois 60515, attn: Brian Greenburg, Vice President and Treasurer, Tel: 630-852-1300, Fax: 630-852-2264, with copies to (X) ABC-NACO Inc., 335 Eisenhower Lane South, Lombard, Illinois 60148, attn: Vaughn Makary, Chief Executive Officer, Tel: 630-792-2010, Fax: 630-916-6496, and (Y) D'Ancona & Pflaum, 111 East Wacker, suite 2800, Chicago, IL 60601, attn: Suzanne Saxman, Tel: (312) 602-2075, Fax: (312) 602-3075. Except as otherwise provided in this Agreement, the date of each such notice and request shall be deemed to be, and the date on which each such notice and request shall be deemed given shall be: at the time delivered, if personally delivered or mailed; when receipt is acknowledged, if sent by facsimile; and the next business day after timely delivery to the courier, if sent by overnight air courier guaranteeing next business day delivery. 16.3. Entire Agreement; Integration. This Agreement supersedes all prior agreements between or among any of the parties hereto with respect to the subject matter contained herein and therein, and such agreements embody the entire understanding among the parties relating to such subject matter. 16.4. Injunctive Relief. Each of the parties hereto acknowledges that in the event of a breach by any of them of any material provision of this Agreement, the aggrieved party may be without an adequate remedy at law. Each of the parties therefore agrees that in the event of such a breach hereof the aggrieved party may elect to institute and prosecute proceedings in any court of competent jurisdiction to enforce specific performance or to enjoin the continuing breach hereof. By seeking or obtaining any such relief, the aggrieved party shall not be precluded from seeking or obtaining any other relief to which it may be entitled. 16.5. Section Headings. Section headings are for convenience of reference only and shall not affect the meaning of any provision of this Agreement. 16.6. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, and all of which shall together constitute one and the same instrument. All signatures need not be on the same counterpart. 16.7. Severability. If any provision of this Agreement shall be invalid or unenforceable, such invalidity or unenforceability shall not affect the validity and enforceability of the remaining provisions of this Agreement, unless the result thereof would be unreasonable, in which case the parties hereto shall negotiate in good faith as to appropriate amendments hereto. 16.8. Filing. A copy of this Agreement and of all amendments thereto shall be filed at the principal executive office of the Company with the corporate recorder of the Company. 16.9. Termination. This Agreement may be terminated at any time by a written instrument signed by the parties hereto. Unless sooner terminated in accordance with the preceding sentence, this Agreement (other than Section 9 hereof) shall terminate in its entirety on such date as there shall be no Registrable Securities outstanding, provided that any shares of Common Stock previously subject to this Agreement shall not be Registrable Securities following the sale of any such shares in an offering registered pursuant to this Agreement. 16.10. Attorneys' Fees. In any action or proceeding brought to enforce any provision of this Agreement, or where any provision hereof is validly asserted as a defense, the successful party shall be entitled to recover reasonable attorneys' fees (including any fees incurred in any appeal) in addition to its costs and expenses and any other available remedy. 16.11. No Third Party Beneficiaries. Nothing herein expressed or implied is intended to confer upon any person, other than the parties hereto or their respective permitted assigns, successors, heirs and legal representatives, any rights, remedies, obligations or liabilities under or by reason of this Agreement. IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto as of the date first written above. 2 NY1 2068814v8 NY1 2068814v8 ABC-NACO INC. By: ___________________________ Name: Title: BANK OF AMERICA, N.A. FLEET NATIONAL BANK By: By: Name: Name: Title Title BANK OF AMERICA CANADA BANK ONE, NA (Main Chicago Office) By: By: Name: Name: Title Title ABN AMRO BANK N.V. FIRSTAR BANK, N.A. By: By: Name: Name: Title Title PNC BANK NATIONAL ASSOCIATION HARRIS TRUST AND SAVINGS BANK By: By: Name: Name: Title Title THE NORTHERN TRUST COMPANY LASALLE BANK NATIONAL ASSOCIATION By: By: Name: Name: Title Title US BANK NATIONAL ASSOCIATION By: Name: Title A-3 NY1 2068814v8 SCHEDULE 1 To Registration Rights Agreement LIST OF HOLDERS BANK OF AMERICA, N.A., PNC BANK NATIONAL ASSOCIATION Attn: Tel: Attn: Fax: Tel: Fax: FLEET NATIONAL BANK BANK OF AMERICA, N.A., BANK ONE, NA (MAIN CHICAGO OFFICE) Attn: Attn: Tel: Tel: Fax: Fax: BANK OF AMERICA, N.A. FIRSTAR BANK, N.A. Attn: Attn: Tel: Tel: Fax: Fax: BANK OF AMERICA CANADA HARRIS TRUST AND SAVINGS BANK Attn: Attn: Tel: Tel: Fax: Fax: ABN AMRO BANK N.V. LASALLE BANK NATIONAL ASSOCIATION Attn: Attn: Tel: Tel: Fax: Fax: THE NORTHERN TRUST COMPANY US BANK NATIONAL ASSOCIATION Attn: Attn: Tel: Tel: Fax: Fax: EXHIBIT A to Registration Rights Agreement AGREEMENT TO BE BOUND BY THE REGISTRATION RIGHTS AGREEMENT The undersigned, being the transferee of ______ shares of the common stock, $.01 par value per share [or describe other capital stock received in exchange for such common stock] (the "Registrable Securities"), of ________________________, a Delaware corporation (the "Company"), as a condition to the receipt of such Registrable Securities, acknowledges that matters pertaining to the registration of such Registrable Securities is governed by the Registration Rights Agreement dated as of May 2, 2001 initially among the Company and the Holders referred to therein (the "Agreement"), and the undersigned hereby (1) acknowledges receipt of a copy of the Agreement, and (2) agrees to be bound as a Holder by the terms of the Agreement, as the same has been or may be amended from time to time. Agreed to this __ day of ______________, ____________. _________________________________ _________________________________* _________________________________* *Include address for notices. EX-4.7 12 doc11.txt ABC-NACO INC. (formerly known as ABC Rail Products Corporation) AND U.S. BANK NATIONAL ASSOCIATION (as successor trustee to First Trust National Association) FOURTH SUPPLEMENTAL INDENTURE Dated as of May 18, 2001 Supplementing that certain Indenture Dated as of January 15, 1997 by and between ABC Rail Products Corporation and First Trust National Association FOURTH'SUPPLEMENTAL INDENTURE THIS FOURTH SUPPLEMENTAL INDENTURE (this "Supplemental Indenture") is made and entered into as of May 18, 2001, between ABC-NACO Inc., a Delaware corporation (the "Company"), and U.S. Bank National Association, a national banking association, as successor trustee to First Trust National Association, a national banking association (the "Trustee"). RECITALS WHEREAS, pursuant to that certain Indenture dated as of January 15, 1997 (as amended, supplemented or modified from time to time, the "indenture"), between the Company (formerly ABC Rail Products Corporation); and U.S. Bank National Association (successor trustee to First Trust National Association), the Company executed (i) an officer's certificate dated January 23, 1997 (the "Series A 10 % Officer's Certificate"), establishing a series of securities now known as the 10 % Senior Subordinated Notes, Series A, Due 2004 in the original principal amount of $50,000,000 (the "Series A 10 % Notes") and (ii) an officer's certificate dated December 17, 1997 (the "Series B 10 % Officer's Certificate") (the Series A 10 % Officer's Certificate and the Series B 10 % Officer's Certificate each, an "Officer's Certificate" and together, the "Officer's Certificates"), establishing a series of securities now known as the 10 % Senior Subordinated Notes, Series B, Due 2004 in the original principal amount of $25,000,000 (the "Series B 10 % Notes" and, together with the Series A 10 % Notes, the "Notes"); WHEREAS, the Company requested that the holders of the Notes consent to the modification of certain covenants under each Officer's Certificate and established pursuant to Section 301(17) of the Indenture; WHEREAS, pursuant to Section 902 of the Indenture, the holders of not less than a majority of the aggregate principal amount of the outstanding Notes (voting as one class) have consented to the modification of certain covenants under each Officer's Certificate and established pursuant to Section 301(17) of the Indenture; WHEREAS, the Company requested that the holders of the Notes consent to the amendment of the interest rate under Paragraph 4(a) of each Officer's Certificate and established pursuant to Section 301 (5) of the Indenture; WHEREAS, pursuant to Section 902 of the Indenture, the holders of not less than a majority of the aggregate principal amount of the outstanding Notes (voting as one class) have consented to the amendment of the interest rate under Paragraph 4(a) of each Officer's Certificate and established pursuant to Section 301(5) of the Indenture; WHEREAS, the Company desires to change the titles of the Series A 10 % Notes and the Series B 10 % Notes, respectively, to reflect the amendment to the interest rate provision; WHEREAS, pursuant to Sections 901(4) and 901(8) of the Indenture, the Company and the Trustee may, without the consent of any holders of the Notes, change any provision of the Indenture or correct any provision that may be inconsistent with any other provision of the Notes, provided that such action does not adversely affect the rights of the holders of the Notes or any other security in any material respect; and WHEREAS, in order to effectuate and formalize the aforementioned amendments, the parties hereto desire to amend the Indenture and each Officer's Certificate as set forth below and to enter into this Supplemental Indenture. NOW THEREFORE, the parties hereto, intending to be legally bound, and in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, do hereby amend the Indenture and the Officer's Certificates and further agree as set forth below: SECTION 1. DEFINITIONS. All terms capitalized but not otherwise defined in this Supplemental Indenture shall have the meanings assigned to such terms in the Indenture. SECTION 2. EFFECT OF THIS SUPPLEMENTAL INDENTURE. (A) Except as expressly supplemented or amended by this Supplemental Indenture, all of the terms and provisions of the Indenture and the Officer's Certificates shall remain in full force and effect. (B) To the extent of any inconsistency between the terms and provisions of this Supplemental Indenture and the terms and provisions of the Indenture and the Officer's Certificates, this Supplemental Indenture shall control. (C) The rules of construction stated in Section 1.01 of the Indenture shall apply to this Supplemental Indenture. SECTION 3. AMENDMENT TO PARAGRAPH 10(B) OF EACH OFFICER'S CERTIFICATE. Subparagraph (b) of Paragraph 10 of each Officer's Certificate is hereby amended, effective immediately, in its entirety to read as follows: "[intentionally omitted]" SECTION 4. AMENDMENT TO PARAGRAPH 10(C) OF EACH OFFICER'S CERTIFICATE. Subparagraph (c) of Paragraph 10 of each Officer's Certificate is hereby amended, effective immediately, in its entirety to read as follows: "The Company will not, and will not permit any Subsidiary to, Incur any Funded Debt if, immediately after giving effect to any such creation, incurrence, assumption or guarantee (including the retirement of any existing Indebtedness from the proceeds of such additional Funded Debt), the aggregate amount of Funded Debt outstanding would exceed 75% of Consolidated Capitalization, provided, however, that the Company may Incur any Funded Debt on or prior to December 31, 2002, as long as such Incurrence is permitted under the Credit Facility." SECTION 5. AMENDMENT TO PARAGRAPH 10(D) OF EACH OFFICER'S CERTIFICATE. Subparagraph (d) of Paragraph I0 of each Officer's Certificate is hereby amended, effective immediately, in its entirety to read as follows: "The Company is not required to maintain any Operating Coverage Ratio at the end of any fiscal quarter in 2001. Thereafter, it will maintain(i) at the end of the fiscal quarter ended March 3 l, 2002, an Operating Coverage Ratio with respect to the four consecutive fiscal quarters then ended taken as a whole of at least 1.2:1.0, (ii) AT the end of the fiscal quarter ended June 30, 2002, an Operating Coverage Ratio with respect to the four consecutive fiscal quarters then ended taken as a whole of at least 1.4:1.0, (iii) at the end of the fiscal quarter ended September 30, 2002, an Operating Coverage Ratio with respect to the four consecutive fiscal quarters then ended taken as a whole of at least 1.6:1.0, and (iv) at the end of each of its fiscal quarters thereafter, an Operating Coverage Ratio with respect to the four consecutive fiscal quarters then ended taken as a whole of at least 1.8:1.0." SECTION 6. ADDITIONS TO DEFINITIONS CONTAINED IN PARAGRAPH 10 OF EACH OFFICER'S CERTIFICATE. The definitions contained in Paragraph 10 of each Officer's Certificate are hereby amended, effective immediately, to add the following additional definitions: "'Credit Facility' means the Company's Third Amended and Restated Credit Agreement dated as of October 30, 2000, as amended from time to time by the parties thereto." "'ING Holders' means (i) Furman Selz Investors H LP ("FS 11'3, (ii) ING Furman Selz Investors IH LP ("FS Ill"), (iii) any parallel investment funds of FS II or FS III the manager, general partner or managing member of which is either FS Private Investments LLC or FS Private Investments Ill LLC, (iv) any Affiliate of any of the foregoing and (v) the successors and assigns of the foregoing." SECTION 7. AMENDMENT TO DEFINITION OF "CHANGE OF CONTROL" CONTAINED IN PARAGRAPH 7 OF EACH OFFICER'S CERTIFICATE. The definition of "Change of Control" contained in Paragraph 7 of each Officer's Certificate is hereby amended, effective immediately, in its entirety to read as follows: "'Change of Control' means the occurrence of one or more of the following events, whether or not approved by the Board of Directors: (1) any Person or Persons acting together that would constitute a "group" for purposes of Section 13(d) of the Securities Exchange Act, as amended (a "Group"), together with any Affiliates thereof, other than any employee stock ownership plan of the Company or the trusts for any other employee stock ownership, benefit or pension plans of the Company or any Subsidiary, and other than the ING Holders, shall beneficially own (as defined in Rule 13d-3 of the Commission) at least 50% of the Voting Stock of the Company; (2) other than the ING Holders, any one Person or Group (other than the Board of Directors as it may be constituted from time to time), or any Affiliates thereof, shall succeed in having sufficient of its or their nominees elected to the Board of Directors such that such nominees, when added to any existing director remaining on the Board of Directors after such election who is an Affiliate of such Group, shall constitute a majority of the Board of Directors; (3) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, the assets of the Company to any Person or Group; (4) the shareholders of the Company shall approve any plan for the liquidation or dissolution of the Company; or (5) the merger or consolidation of the Company with or into another corporation or the merger of another corporation into the Company with the effect that immediately alter such transaction any Person or Group, other than the ING Holders, holds more than 50% of the Voting Stock of the surviving corporation of such merger or consolidation." SECTION 8. AMENDMENT TO PARAGRAPH 4(A) OF EACH OFFICER'S CERTIFICATE. Subparagraph (a) of Paragraph 4 of each Officer's Certificate is hereby amended, effective January 1, 2002, in its entirety to read as follows: "(a) the rate at which the Notes shall bear interest is 11 1/2%;" SECTION 9. AMENDMENT TO PARAGRAPH 1 OF THE SERIES A 10% OFFICER'S CERTIFICATE. Paragraph 1 of the Series A 10% Officer's Certificate is hereby amended, effective January 1, 2002, in its entirety to read as follows: "Pursuant to Section 301(1) of the Indenture, the title of the Securities of the series established by this Officer's Certificate is '11~% Senior Subordinated Notes, Series A, Due 2004.'" SECTION 10. AMENDMENT TO PARAGRAPH 1 OF THE SERIES B 10 % OFFICER'S CERTIFICATE. Paragraph I of the Series B 10 % Officer's Certificate is hereby amended, effective January 1, 2002, in its entirety to read as follows: "Pursuant to Section 301(1) of the Indenture, the title of the Securities of the series established by this Officer's Certificate is '11~% Senior Subordinated Notes, Series B, Due 2004.'" SECTION 11. REFERENCES TO INDENTURE. All references in the Indenture to the Indenture shall hereafter be deemed to refer to the Indenture as amended by this Supplemental Indenture and as may be further amended, modified, restated or replaced from time to time. SECTION 12. OTHER TERMS-IN FULL FORCE AND EFFECT. Except as expressly so amended, the Indenture and the Officer's Certificates shall remain u-modified and in full force and effect. SECTION 13. COUNTERPARTS. This Supplemental Indenture may be executed in any number of counterparts with the same effect as if all parties hereto had signed the same document. All such counterparts shall bc construed together and shall constitute one instrument, but in making proof hereof it shall only be necessary to produce one such counterpart. IN WITNESS WHEREOF, thc parties hereto have caused this Supplemental Indenture to be executed as of thc day and year first above written. ABC-NACO Inc. Name: James P. Singsank Title: Senior Vice President and Chief Financial Officer ATTEST: Name: Mark F. Baggio Title: Vice President, General Counsel and Secretary U.S. BANK NATIONAL ASSOCIATION, as successor trustee Name: Michael T. Goodwin Title: Assistant Vice President ATTEST: Name: Melissa A. Rosal Vice President -----END PRIVACY-ENHANCED MESSAGE-----