-----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, J2NhQaW8U8GOkyqK8xiSHg3Ew0EjC0uw9miaSASHvivQTqXITT37afnxqUHyCwse DR8Iy6XOb3q4WpXloT8bAA== 0000950131-01-500765.txt : 20010421 0000950131-01-500765.hdr.sgml : 20010421 ACCESSION NUMBER: 0000950131-01-500765 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20010417 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20010419 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: 8-K SEC ACT: SEC FILE NUMBER: 000-22906 FILM NUMBER: 1606373 BUSINESS ADDRESS: STREET 1: 2001 BUTTERFIELD ROAD STREET 2: SUITE 502 CITY: DOWNES GROVE STATE: IL ZIP: 60515 BUSINESS PHONE: 3123224614 MAIL ADDRESS: STREET 1: 200 S MICHIGAN AVE STREET 2: SUITE 1300 CITY: CHICAGO STATE: IL ZIP: 60604 FORMER COMPANY: FORMER CONFORMED NAME: ABC RAIL PRODUCTS CORP DATE OF NAME CHANGE: 19931014 8-K 1 d8k.txt FORM 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _________________________ FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): April 17, 2001 ABC-NACO INC. ------------- (Exact Name of Registrant as Specified in Charter) Delaware 0-22906 36-3498749 - -------- ------- ---------- (State or Other (Commission File Number) (IRS Employer Jurisdiction of Incorporation) Identification No.)
335 Eisenhower Lane South, Lombard, IL 60148 -------------------------------------------- (Address of Principal Executive Offices) (Zip Code) (630) 792-2010 -------------- (Registrant's Telephone Number, including area code) Item 5. Other Events. ------------ On April 18, 2001, ABC-NACO Inc. (the "Company") announced that it had entered into the following agreements: . A Series C Preferred Stock and Common Stock Warrant Purchase Agreement with funds managed by ING Furman Selz Investment; . An Exchange Agreement with the holders of its Series B Cumulative Convertible Preferred Stock; . A Commitment Letter from its bank group with respect to the restructuring of the terms of the Company's Senior Secured Revolving Credit Facility; . A Commitment Letter from funds managed by ING Furman Selz with respect to $15 million in new financing; and . An Asset Purchase Agreement for the sale of the Company's Flow and Specialty Division to a new company formed by the Division's management and ING Furman Selz Investments. The closings of the transactions contemplated by these agreements are subject to various conditions, including stockholder approval in the case of the issuance of the Series C Preferred Stock and Common Stock Purchase Warrants. On April 18, 2001, the Company issued a press release describing these agreements. The text of the press release and copies of each agreement are filed as exhibits to this report. On April 18, 2001, the Company also issued a press release reporting its year-end results. The text of that press release is filed as an exhibit to this report. Item 7. Financial Statements and Exhibits. --------------------------------- (c) Exhibits Exhibit 2.1 Asset Purchase Agreement dated as of April 17, 2001 by and among ABC-NACO Inc., NACO, Inc., National Castings Inc., NACO Flow Products, Inc., National Engineered Products Company, Inc. and Matrix Metals LLC. Exhibit 4.1 Senior Debt Restructuring Amendment Letter dated April 17, 2001 and related Restructuring Terms by and among ABC-NACO Inc. and certain of its affiliates and the Lenders named therein. Exhibit 4.2 Senior Second Secured Financing Letter dated April 17, 2001 by and among ABC-NACO Inc. and the Investors named therein. Exhibit 10.1 Series C Preferred Stock and Common Stock Warrant Purchase Agreement dated as of April 17, 2001 by and among ABC-NACO Inc. and the Investors named therein. Exhibit 10.2 Exchange Agreement dated as of April 17, 2001 by and among ABC-NACO Inc. and the individuals and entities listed on Exhibit A thereto. Exhibit 99.1 April 18, 2001 Press Release captioned "ABC-NACO Arranges $15 Million in New Financing, Sale of Flow and Specialty Products Division and Amended Long-Term Bank Facility; Company Announces Year-End Results." Exhibit 99.2 April 18, 2001 Press Release captioned "ABC-NACO Reports Year-End Results; Announces New Financing, Division Sale and Amended Bank Agreement." SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Current Report on Form 8-K to be signed on its behalf by the undersigned hereunto duly authorized. ABC-NACO INC. By: /s/ J. P. Singsank ---------------------------------- J. P. Singsank Senior Vice President and Chief Financial Officer Dated: April 19, 2001 EXHIBIT INDEX Exhibit 2.1 Asset Purchase Agreement dated as of April 17, 2001 by and among ABC-NACO Inc., NACO, Inc., National Castings Inc., NACO Flow Products, Inc., National Engineered Products Company, Inc. and Matrix Metals LLC. Exhibit 4.1 Senior Debt Restructuring Amendment Letter dated April 17, 2001 and related Restructuring Terms by and among ABC-NACO Inc. and certain of its affiliates and the Lenders named therein. Exhibit 4.2 Senior Second Secured Financing Letter dated April 17, 2001 by and among ABC-NACO Inc. and the Investors named therein. Exhibit 10.1 Series C Preferred Stock and Common Stock Warrant Purchase Agreement dated as of April 17, 2001 by and among ABC-NACO Inc. and the Investors named therein. Exhibit 10.2 Exchange Agreement dated as of April 17, 2001 by and among ABC-NACO Inc. and the individuals and entities listed on Exhibit A thereto. Exhibit 99.1 April 18, 2001 Press Release captioned "ABC-NACO Arranges $15 Million in New Financing, Sale of Flow and Specialty Products Division and Amended Long-Term Bank Facility; Company Announces Year-End Results." Exhibit 99.2 April 18, 2001 Press Release captioned "ABC-NACO Reports Year-End Results; Announces New Financing, Division Sale and Amended Bank Agreement." EX-2.1 2 dex21.txt ASSET PURCHASE AGREEMENT Exhibit 2.1 Execution Copy ASSET PURCHASE AGREEMENT by and among ABC-NACO Inc. NACO, Inc. National Castings Inc. NACO Flow Products, Inc. BuyMetalCastings, Inc. National Engineered Products Company, Inc. and Matrix Metals LLC Dated as of April 17, 2001 TABLE OF CONTENTS
PAGE ---- ARTICLE I THE TRANSACTION................................................ 1 1.1. Sale and Purchase of Assets.................................. 1 1.2. Assumption of Certain Liabilities............................ 3 1.3. Consent of Third Parties..................................... 6 1.4. Closing...................................................... 6 1.5. Purchase Price............................................... 6 1.6. Post-Closing Adjustment to Purchase Price.................... 7 1.7. Deliveries and Proceedings at Closing........................ 8 1.8. Allocation of Consideration.................................. 10 ARTICLE II Representations And Warranties of Seller...................... 10 2.1. Organization; Subsidiaries................................... 10 2.2. Authorization and Enforceability............................. 11 2.3. [Intentionally omitted.]..................................... 11 2.4. No Violation of Laws or Agreements........................... 11 2.5. Financial Statements......................................... 11 2.6. No Changes................................................... 12 2.7. Contracts.................................................... 14 2.8. Permits and Compliance With Laws............................. 15 2.9. Environmental Matters........................................ 16 2.10. Consents..................................................... 18 2.11. Title........................................................ 18 2.12. Real Estate.................................................. 18 2.13. Taxes........................................................ 20 2.14. Intellectual Property Rights................................. 21 2.15. Inventory.................................................... 23 2.16. Accounts Receivable.......................................... 23 2.17. Labor Relations.............................................. 24 2.18. Employee Benefit Plans....................................... 24 2.19. Absence of Undisclosed Liabilities........................... 27 2.20. No Pending Litigation or Proceedings......................... 28 2.21. Products Liability........................................... 28 2.22. Projections.................................................. 28 2.23. Insurance.................................................... 28 2.24. Relationship with Customers and Suppliers.................... 28 2.25. WARN Act..................................................... 29 2.26. Condition of Assets.......................................... 29 2.27. Transactions with Related Parties............................ 29 2.28. Brokerage.................................................... 29 2.29. All Assets................................................... 30 2.30. Restrictions................................................. 30
-i- 2.31. Process of Sale.............................................. 30 2.32. Solvency..................................................... 30 2.33. Bank Approval................................................ 30 2.34. Opinion of the Sellers' Financial Advisor.................... 30 2.35. Disclosures.................................................. 31 ARTICLE III Representations and Warranties of Buyer...................... 31 3.1. Organization................................................. 31 3.2. Authorization and Enforceability............................. 31 3.3. No Violation of Laws or Agreements........................... 31 3.4. Brokerage.................................................... 32 ARTICLE IV Covenants..................................................... 32 4.1. Public Announcement.......................................... 32 4.2. Further Assurances........................................... 32 4.3. Cooperation.................................................. 32 4.4. Use of Names and Logos....................................... 33 4.5. Employees.................................................... 33 4.6. Taxes........................................................ 37 4.7. Confidentiality.............................................. 38 4.8. Non-Competition.............................................. 39 4.9. Consolidation of Keokuk...................................... 40 4.10. Conduct of Business.......................................... 40 4.11. Access, Information and Documents............................ 40 4.12. Negotiations................................................. 40 4.13 Supplements to Disclosure Schedules.......................... 41 4.14 Mutual Covenants............................................. 41 4.15 Filings and Authorizations................................... 41 ARTICLE V Conditions Precedent........................................... 42 5.1. Conditions Precedent to Obligations of Buyer................. 42 5.2. Conditions Precedent to Obligations of Sellers............... 43 5.3. Termination.................................................. 43 ARTICLE VI Certain Additional Covenants.................................. 44 6.1. Certain Taxes and Expenses................................... 44 6.2. [Intentionally omitted.]..................................... 44 6.3. Maintenance of Books and Records............................. 44 6.4. Collection of Receivables.................................... 45 6.5. Product Returns.............................................. 45 6.6. Product Warranty Claims...................................... 46 6.7. Indemnification.............................................. 47 6.8. Discharge of Business Obligations............................ 50 6.9. UCC Matters.................................................. 50 6.10. Title Insurance/Survey/Estoppels............................. 50 6.11. Financial Statements......................................... 52
-ii- 6.12. Bulk Transfer................................................ 52 6.13. ROI License.................................................. 52 6.14. Insurance Proceeds........................................... 52 ARTICLE VII Miscellaneous................................................ 52 7.1. Construction................................................. 52 7.2. Nature and Survival of Covenants and Representations......... 52 7.3. Notices...................................................... 53 7.4. Successors and Assigns....................................... 54 7.5. Exhibits and Schedules....................................... 54 7.6. Governing Law................................................ 54 7.7. Consent to Jurisdiction...................................... 54 7.8. Severability................................................. 55 7.9. No Third Party Beneficiaries................................. 55 7.10. Entire Agreement............................................. 55 7.11. Amendment and Waiver......................................... 55 7.12. Knowledge of Sellers......................................... 55 7.13. Counterparts................................................. 55 7.14. Headings..................................................... 56 7.15. Certain Defined Terms........................................ 56
TABLE OF DEFINED TERMS
ABC..................................................................... 1 Acquired Assets......................................................... 1 Adjustment Amount....................................................... 6 Affiliate............................................................... 48 Agreement............................................................... 1 Assignment and Assumption Agreement..................................... 7 Associate............................................................... 13 Assumed Liabilities..................................................... 3 Authority............................................................... 48 Bank Approval........................................................... 30 Benefit Plans........................................................... 24 Bill of Sale............................................................ 7 Business................................................................ 1 Business Day............................................................ 48 Buyer................................................................... 1 Buyer Breach............................................................ 37 Buyer's Accountants..................................................... 6 Cap..................................................................... 42 Cash Consideration...................................................... 6 CERCLA.................................................................. 17
-iii- CERCLIS................................................................. 17 Closing................................................................. 5 Closing Balance Sheet................................................... 6 Closing Date............................................................ 5 Closing Net Worth....................................................... 6 Code.................................................................... 9 Confidential Information................................................ 33 Contracts............................................................... 2 Damages................................................................. 40 Employees............................................................... 24 Environmental Laws...................................................... 16 Environmental Liability................................................. 48 Environmental Permits................................................... 16 Equipment and Other Tangible Personal Property.......................... 2 ERISA................................................................... 26 Estoppel Certificates................................................... 44 Fairness Opinion........................................................ 30 Financial Statements.................................................... 11 FIRPTA Affidavit........................................................ 8 Flow.................................................................... 1 Former Customer......................................................... 39 Former Employees........................................................ 26 GAAP.................................................................... 49 General Survival Period................................................. 45 Hazardous Substances.................................................... 16 Indemnified Party....................................................... 41 Indemnifying Party...................................................... 41 Intellectual Property................................................... 22 Intercompany Payables................................................... 5 Interim Balance Sheet................................................... 11 Inventory............................................................... 2 IRS..................................................................... 24 Leasehold Property...................................................... 17 Leasehold Property Leases............................................... 18 Letter.................................................................. 38 Liabilities............................................................. 6 Lien.................................................................... 10, 49 Litigation Conditions................................................... 41 Lockbox Account......................................................... 38 Management.............................................................. 16 Material Adverse Effect................................................. 49 NACO.................................................................... 1 NCI..................................................................... 1 NEPCO................................................................... 1 Newco LLC............................................................... 1
-iv- OSHA.................................................................. 15 PBGC.................................................................. 24 PCBs.................................................................. 16 Pension Plan.......................................................... 25 Permits............................................................... 2 Permitted Exceptions.................................................. 18 Person................................................................ 49 Prime Rate............................................................ 7 Purchase Price........................................................ 6 Purchased Product..................................................... 39 Qualifying Returned Products.......................................... 39 Real Estate........................................................... 2 Receivable Product.................................................... 39 Reference Amount...................................................... 6 Released.............................................................. 17 Restricted Period..................................................... 33 Retained Liabilities.................................................. 4 Review Period......................................................... 6 Securities Laws....................................................... 11 Seller................................................................ 1 Sellers Account Parties............................................... 38 Sellers Breach........................................................ 37 Sellers' Accountants.................................................. 6 Sellers............................................................... 1 Specified Contracts................................................... 35 Surveys............................................................... 44 Tax................................................................... 20 Taxes................................................................. 20 Third Accounting Firm................................................. 7 Third Party Claim..................................................... 41 Threshold Amount...................................................... 42 Title Commitment...................................................... 43 Title Commitments..................................................... 43 Title Company......................................................... 43 Title Policies........................................................ 43 Transaction Documents................................................. 9 WARN Act.............................................................. 28 Working Capital....................................................... 28
-v- TABLE OF EXHIBITS Exhibit A - Form of Junior Subordinated Note Exhibit B - Assignment and Assumption Agreement Exhibit C - Bill of Sale and Assignment Agreement Exhibit D - Form of Transition Services Agreement Exhibit E - Form of General Warranty Deeds Exhibit F - Form of Lease Assignments Exhibit G - Form of Sahagun Supply Agreement Exhibit H - Form of Manganese Track Castings Supply Agreement Exhibit I - FIRPTA Affidavit of Seller Exhibit J - Form of Opinion of General Counsel of Sellers Exhibit K - Form of Opinion of Schiff Hardin & Waite
-vi- ASSET PURCHASE AGREEMENT THIS IS AN ASSET PURCHASE AGREEMENT (the "Agreement"), dated as of --------- April 17, 2001 by and among ABC-NACO Inc., a Delaware corporation ("ABC"), NACO, --- Inc., a Delaware corporation and direct wholly owned subsidiary of ABC ("NACO"), ---- National Castings Inc., a Delaware corporation and direct wholly owned subsidiary of NACO ("NCI"), NACO Flow Products, Inc., a Delaware corporation and --- direct wholly owned subsidiary of NCI ("Flow"), BuyMetalCastings, Inc., a ---- Delaware corporation ("BMC"), National Engineered Products Company, Inc., an Iowa corporation and direct wholly owned subsidiary of NCI ("NEPCO"), and Matrix ----- Metals LLC, a Delaware limited liability company ("Buyer"). As used herein, ----- ABC, NACO, NCI, Flow, BMC and NEPCO are hereafter sometimes referred to individually as a "Seller" and collectively as the "Sellers." Background ---------- Sellers are engaged in the business of supplying, through their own manufacturing at their facilities in Baltimore, Maryland (the "Baltimore --------- Facility"), Keokuk, Iowa, and Richmond, Texas, and third-party sourcing, - -------- traditional order processing and electronic order processing, metal castings of all sizes and alloys to customers in a wide variety of industries, such as flow control, locomotive (except main truck frame castings over 4,000 lbs.), mining, farm equipment, heavy construction, over the road trucks, cast iron brake shoes, container support castings, container corner castings, flanges and skid protectors as well as associated services related to the foregoing, including, among other things, product engineering and design, fab to cast conversion, source inspection, technology transfer, warehousing and machining (the "Business"). The Business shall not include such rail and wheel products and -------- services manufactured, engineered or marketed by ABC and not currently produced or sold by Flow, BMC, NEPCO and the Baltimore Facility. Buyer desires to purchase substantially all of the assets, properties and rights of the Business, and Sellers desire to sell such assets, properties and rights, on the terms and subject to the conditions set forth in this Agreement. Terms ----- THEREFORE, in consideration of the mutual covenants contained herein, and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I THE TRANSACTION --------------- 1.1. Sale and Purchase of Assets. (a) Subject to the terms and conditions --------------------------- of this Agreement and in reliance upon the representations and warranties contained herein, on the Closing Date, Sellers will sell, assign, transfer, deliver and convey to Buyer the Acquired Assets (as defined below), free and clear of all Liens (as defined in Section 7.15) of every kind, nature and description (except for the Permitted Exceptions referred to in Section 2.11) for the Purchase Price specified below in Section 1.5. -1- (b) As used herein, the term "Acquired Assets" means all of Sellers' --------------- or any of their Affiliates' (as defined in Section 7.15) right, title, and interest in, under and to all of the assets, properties and rights constituting, or used or held for use in, the Business of every kind, nature and description existing on the Closing Date, wherever such assets, properties and rights are located and whether such assets, properties and rights are real, personal or mixed, tangible or intangible, and whether or not any of such assets, properties and rights have any value for accounting purposes or are carried or reflected on or specifically referred to in Sellers' or any of their Affiliates' respective books or financial statements, including, without limitation, all of the assets, properties and rights of the Business enumerated below: (i) owned and leased real property, leaseholds and subleaseholds therein, together with all fixtures, fittings, buildings, structures and other improvements erected thereon, and easements, rights of way, water lines, uses, licenses, hereditaments, tenements, privileges and other appurtenances thereto (such as appurtenant rights in and to public streets), as more particularly described in Schedule 1.1(b)(i) hereto (the "Real Estate"); ------------------ ----------- (ii) all machinery, equipment, motor vehicles (including trucks, tractors and trailers), goods, furnishings, jigs, tools, dies, furniture, fixtures, office equipment, office supplies, production and other supplies and spare and repair parts, tools, stores, rolling stock and other tangible personal property, whether located at or on the Real Estate, in transit or otherwise (including, but not limited to, certain machinery and patterns located at Seller's facility in Melrose Park, Illinois and the property more particularly described in Schedule 1.1(b)(ii) hereto (the "Equipment and Other Tangible ------------------- ---------------------------- Personal Property"), other than the Equipment and Other Tangible Personal - ----------------- Property used solely for the production of manganese track castings at Seller's facility in Richmond, Texas and specifically listed on Schedule 1.1(b)(ii) ------------------- hereto. (iii) all inventory, whether located at or on the Real Estate, in transit or otherwise, including finished goods and consigned goods, work-in- process, supplies, storehouse stocks, raw materials, scrap, containers, and spare parts (collectively, the "Inventory"); --------- (iv) accounts, notes, and other receivables relating to the Business; (v) all cash and cash equivalents, in transit, in hand or in bank accounts and all prepaid items, unbilled costs and fees relating to the Business; (vi) Intellectual Property (as defined in Section 2.14), goodwill, licenses and sublicenses granted and obtained with respect thereto, and rights and remedies against infringements thereof, and rights to protection of interests therein under the laws of all jurisdictions, including the property more particularly described on Schedule 1.1(b)(vi) hereto; ------------------- (vii) subject to Sections 1.2 and 1.3 hereof, all rights under (i) contracts, agreements and instruments (written or oral) relating to the sale of any assets, services, properties, materials or products, including all customer, operating, distribution and sales representative contracts to the extent relating to, or otherwise material to the conduct of, the Business; (ii) orders, contracts, supply agreements, manufacturing agreements and other agreements relating to the purchase of any assets, services, properties, materials, or products; (iii) -2- all leases affecting real property and (iv) all other contracts, agreements, and instruments (written or oral), including in each case the contracts, agreements and instruments more specifically listed or described in Schedule 2.7 hereto ------------ (the "Contracts"), except for those contracts listed on Schedule 1.1(b)(vii); --------- ------------------- (viii) franchises, approvals, permits, authorizations (including Environmental Permits (as defined in Section 2.9)), applications, licenses, orders, registrations, certificates, variances, and other similar permits or rights obtained from any Authority and all pending applications therefor, including the permits and rights more specifically listed or described in Schedule 1.1(b)(viii) hereto (the "Permits"); - --------------------- ------- (ix) books, records, ledgers, files, documents (including originally executed copies of all Contracts), correspondence, Tax returns, memoranda, forms, lists, plats, architectural plans, drawings, and specifications, new product development materials, creative materials, marketing, advertising, sales and promotional materials, studies, reports, whether in hard copy or magnetic format, in each instance, to the extent relating to, or otherwise material to the conduct of, or separable from the documents of ABC and relating to the Business or the Employees. Copies of such documents shall be provided to ABC to the extent they relate to the Retained Liabilities; (x) all rights or chooses in action whether arising out of occurrences before or after the Closing Date, including third party warranties and guarantees and other similar contractual rights as to third parties held by or in favor of Sellers or any of their Affiliates with respect to any of the Acquired Assets; (xi) all rights to insurance and condemnation proceeds relating to the damage, destruction or impairment of assets, properties or other rights described in this Section 1.1(b), which damage, destruction or impairment occurs on, prior to or after the Closing, and all such rights to the extent they relate to Damages indemnifiable pursuant to Section 6.7, and all such rights to insurance and condemnation proceeds related to the February 14, 2001, fire and related damages at Seller's Baltimore Facility; (xii) all assets and properties reflected on the Interim Balance Sheet (as defined in Section 2.5); (xiii) all the good will of the Business; and (xiv) all the going concern value of the Business. 1.2. Assumption of Certain Liabilities. (a) Subject to the terms and --------------------------------- conditions of this Agreement, except as otherwise specifically provided in this Section 1.2 (including in respect of the Retained Liabilities, as set forth in paragraph (b) below), on the Closing Date, Buyer will assume and agree to pay, discharge or perform, as appropriate, the following specific liabilities and obligations of Sellers (the "Assumed Liabilities"): ------------------- -3- (i) all executory liabilities and obligations of Sellers in respect of the Contracts arising after Closing, except that Buyer shall not assume or agree to pay, discharge or perform any (1) liabilities or obligations of the aforesaid character existing as of the Closing Date and which under GAAP should have been accrued or reserved for on a balance sheet as a liability or obligation; and (2) liabilities or obligations arising out of any breach or default (including for this purpose any event which, with notice or lapse of time would constitute such a breach or default) by Sellers or any of their Affiliates of any provision of any Contract, including liabilities or obligations arising out of Sellers' or any of their Affiliates' failure to perform any agreement, contract, commitment or lease in accordance with its terms prior to the Closing; (ii) the trade payables of the Business set forth in detail on Schedule 1.2(a)(ii) and reflected on the Closing Balance Sheet or if no Closing - ------------------- Balance Sheet is prepared, on the Interim Balance Sheet; and (iii) accruals for payroll, payroll taxes, vacation and holiday pay, and bonuses for calendar 2000 for Transferred Employees made in accordance with GAAP and consistent with past practices and reflected on the Closing Balance Sheet or if no Closing Balance Sheet is prepared, on the Interim Balance Sheet. (b) Buyer will not assume any liabilities, commitments or obligations (known or unknown, contingent or absolute and whether or not determinable as of the Closing) of Sellers or any of their Affiliates except for the Assumed Liabilities as specifically and expressly provided for above, whether such liabilities or obligations relate to payment, performance or otherwise, and all liabilities, commitments or obligations (known or unknown, contingent or absolute and whether or not determinable as of the Closing) not expressly transferred to Buyer hereunder as Assumed Liabilities are being retained by Sellers or their Affiliates (the "Retained Liabilities"), who shall remain -------------------- liable therefor unconditionally and without right of set-off; Sellers, on behalf of themselves and their Affiliates, hereby irrevocably and unconditionally waive and release Buyer from all Retained Liabilities, including any Retained Liabilities created by statute or common law. Without limitation to the foregoing, all of the following shall be considered Retained Liabilities and not Assumed Liabilities for the purposes of this Agreement (whether or not accrued or reserved for on the Interim Balance Sheet): (i) any product liability or similar claim for injury to person or property, regardless of when made or asserted, which arises out of or is based upon a theory of strict liability under Section 402A of the Restatement (2nd) of Torts, negligence, gross negligence or any analogous or similar provision of statutory or common law, or any express or implied representation, warranty, agreement or guarantee made by Sellers or their Affiliates or alleged to have been made by Sellers or their Affiliates or which is imposed or asserted to be imposed by operation of law, in connection with any service performed or product manufactured, sold or -4- leased by or on behalf of Sellers or their Affiliates, including any such claim relating to any product delivered in connection with the performance of such service and any such claim seeking recovery for consequential damages, lost revenue or income; (ii) any federal, state, foreign or local Tax (as defined in Section 2.13(c)) (A) payable with respect to the business, assets, properties or operations of Sellers, any predecessor of Sellers or any member of any affiliated group of which any of them is a member, for any period (1) ending prior to the Closing Date or (2) beginning before and ending after the Closing Date, (B) incident to or arising as a consequence of the negotiation or consummation by Sellers (or, any predecessor of Sellers or any member of any affiliated group of which any of them is a member) of this Agreement and the transactions contemplated hereby or (C) payable with respect to any business, assets, properties, or operations of Sellers, any predecessor of Sellers or any of their Affiliates other than the Business, for any taxable period; (iii) except as set forth in Section 1.2(a)(iii) and Section 4.5, any liability or obligation with respect to compensation or employee benefits of any nature owed to any employees, former employees, agents or independent contractors of Sellers or any of their Affiliates, whether or not employed by Buyer after the Closing, that (A) arises out of or relates to the employment or service provider relationship between such Sellers, or such Affiliates and any such individuals, (B) arises out of or relates to any Benefit Plan or (C) arises out of or relates to events or conditions occurring on or before the Closing Date; (iv) any liability or obligation of Sellers or their Affiliates, arising or incurred in connection with the negotiation, preparation and execution of this Agreement and the transactions contemplated hereby, and fees and expenses of counsel, accountants, brokers, finders and other experts; (v) any liability or obligation of Sellers or any of their Affiliates existing as a result of any act, failure to act or other state of facts or occurrence which constitutes a breach or violation of Sellers' representations, warranties and covenants contained in this Agreement or the other Transaction Documents (as defined in Section 1.7); (vi) any Environmental Liability (as defined in Section 7.15); (vii) any liability of Sellers or the Business to Sellers or any of Sellers' Affiliates incurred prior to the Closing, including any intercompany payables or receivable credits specified in the Interim Balance Sheet (the "Intercompany Payables"); --------------------- (viii) any liability under applicable bulk transfer laws, or similar statutes, laws or regulations, including without limitation, state or local tax laws or creditor related laws, arising as a result of the transactions contemplated by this Agreement; or (ix) any other liability of Sellers or their Affiliates whatsoever, including any liability arising out of or relating to the ownership or operation of the Acquired Assets (including any liability or indebtedness associated with the Community Economic Betterment Account Agreement, among the Iowa Department of Economic Development, the -5- City of Keokuk and Keokuk Steel Castings, Inc. dated June 20, 1991) and the Business on or prior to the Closing Date (including any predecessor operations), including any claims, obligations or litigation arising out of or relating to events or conditions occurring on or before the Closing Date (including the threatened or pending litigation set forth on Schedule 2.20 hereto), regardless ------------- of when made or asserted, except for the Assumed Liabilities as specifically and expressly set forth herein. 1.3. Consent of Third Parties. On the Closing Date, Sellers shall ------------------------ assign to Buyer, and Buyer will assume, the Contracts which are to be transferred to Buyer as and to the extent provided in this Agreement by means of the Assignment and Assumption Agreement referred to in Section 1.7. To the extent that the assignment of all or any portion of any Contract shall require the consent of the other party thereto or any other third party, this Agreement and the Assignment and Assumption Agreement shall not constitute an agreement to assign any such Contract included in the Acquired Assets if an attempted assignment without any such consent would constitute a breach or violation thereof. In order, however, to provide Buyer the full realization and value of every Contract of the character described in the immediately preceding sentence, Sellers agree that on and after the Closing, they will, at the request and under the direction of Buyer, in the name of Sellers or otherwise as Buyer shall specify, take all reasonable actions (including the appointment of Buyer as attorney-in-fact for Sellers) and do or cause to be done all such things as shall in the reasonable opinion of Buyer or its counsel be necessary or proper (a) to assure that the rights of Sellers under such Contracts shall be preserved for the benefit of or transferred or issued to Buyer and (b) to facilitate receipt of the consideration to be received by Sellers in and under every such Contract, which consideration shall be held for the benefit of, and shall be delivered to, Buyer. Nothing in this Section 1.3 shall in any way diminish Sellers' obligations hereunder to obtain all consents and approvals and to take all such other actions prior to or at Closing as are necessary to enable Sellers to convey or assign good and marketable title free and clear of Liens (other than Permitted Exceptions) to all the Acquired Assets to Buyer. 1.4. Closing. The closing of the sale and purchase of the Acquired ------- Assets (the "Closing") will take place on the second (2/nd/) business day after ------- satisfaction or waiver of the conditions set forth in Article V of this Agreement, at 10 a.m., local time, at the offices of Schiff Hardin & Waite, Chicago, Illinois. The date such Closing occurs is referred to herein as the "Closing Date." ------------- 1.5. Purchase Price. -------------- (a) Purchase Price. The aggregate purchase price to be paid by Buyer -------------- for the purchase of the Acquired Assets (the "Purchase Price") is (i) -------------- $20,000,000, payable in cash at the Closing (the "Cash Consideration"), plus ------------------ (ii) a $4,000,000 Junior Subordinated Note in the form of Exhibit A (the "Junior --------- ------ Subordinated Note") plus (iii) the assumption by Buyer of the Assumed - ----------------- ---- Liabilities. (b) Payment of Cash Consideration. Subject to the terms and ----------------------------- conditions hereof, the Cash Consideration will be paid on the Closing Date by federal or other wire transfer -6- to the account designated by Sellers in writing at least two (2) business days prior to the Closing Date. 1.6. Post-Closing Adjustment to Purchase Price. (a) Within 45 days after the Closing, Buyer may, at its sole discretion, prepare and deliver to Sellers a statement (the "Closing Balance --------------- Sheet") of the Closing Net Worth of the Business, immediately prior to the - ----- Closing Date, determined in accordance with GAAP and on a basis consistent with Sellers' past practices to the extent such past practices are in accordance with GAAP and this Agreement, together with a calculation of the Adjustment Amount. For purposes hereof, (i) "Closing Net Worth" with respect to the Business means ----------------- (1) the net accounting book value of all "assets" constituting Acquired Assets, minus (2) all "liabilities" constituting Assumed Liabilities, in each case as such assets and liabilities are accrued and reflected on the Closing Balance Sheet; and (ii) "Adjustment Amount" means the dollar amount by which the Closing ----------------- Net Worth, as set forth on the Closing Balance Sheet, is less than $18,000,000 (the "Reference Amount"). Buyer shall pay the fees and expenses of ---------------- PricewaterhouseCoopers LLP ("Buyer's Accountants'") incurred in connection with ------------------- this Section 1.6(a). (b) Subject to this Section 1.6(b) and (c), the Closing Net Worth Statement, Closing Balance Sheet and Adjustment Amount calculation delivered by Buyer to Sellers shall be deemed to be and shall be final, binding and conclusive on the parties hereto. Following receipt of such Closing Net Worth Statement, Sellers and Buyer shall at Sellers' request discuss in good faith and attempt in good faith to resolve any disagreements Sellers have therewith for a period of 15 days. If the parties cannot resolve their dispute during such 15- day period, Arthur Andersen LLP ("Sellers' Accountants'") may dispute any -------------------- amounts reflected on the Closing Balance Sheet or in the statement of Closing Net Worth or the Adjustment Amount calculation, but only on the basis that such amounts were not presented in accordance with GAAP and on a basis consistent with Seller's past practices to the extent such past practices are in accordance with GAAP; provided, however, that Sellers' Accountants shall notify Buyer's -------- ------- Accountants and Buyer in writing of each disputed amount, and specify the amount thereof in dispute, within 45 days of Sellers' receipt of the Closing Balance Sheet and the Adjustment Amount (such 45 day period hereinafter referred to as the "Review Period"). Any and all portions of the Adjustment Amount which are ------------- not subject to dispute shall be paid by Sellers in accordance with paragraph (d) below. In the event of a dispute with respect to the Closing Balance Sheet or the Adjustment Amount, Buyer's Accountants and Sellers' Accountants shall attempt to reconcile their differences and any resolution by them as to any disputed amounts shall be final, binding and conclusive on the parties. (c) If Buyer's Accountants and Sellers' Accountants are unable to reach a resolution to such effect within 30 days of receipt of Sellers' Accountants written notice of dispute to Buyer's Accountants, Sellers shall cause Sellers' Accountants, and Buyer shall cause Buyer's Accountants, to submit the amounts remaining in dispute for resolution to an independent accountant firm of national reputation mutually appointed by Sellers and Buyer (such independent accounting firm being herein referred to as the "Third Accounting ---------------- Firm"), which shall, within 30 days after such submission, determine and report - ---- to the parties upon such -7- remaining disputed amounts, and such report shall be final, binding and conclusive on the parties hereto with respect to the amounts disputed. In the event the Buyer and Sellers do not reach agreement on the Third Accounting Firm within 15 days following the above 30 day resolution period, the Third Accounting Firm shall be Deloitte & Touche, LLP (provided they are then independent of the parties). The fees and disbursements of the Third Accounting Firm shall be allocated between Buyer and Sellers so that Sellers' share of such fees and disbursements shall be in the same proportion that the aggregate amount of such remaining disputed amounts so submitted by Sellers to the Third Accounting Firm that is unsuccessfully disputed by Sellers (as finally determined by the Third Accounting Firm) bears to the total amount of such remaining disputed amounts so submitted by Sellers to the Third Accounting Firm. Sellers shall pay the fees and expenses of Sellers' Accountants incurred in connection with this Section 1.6(c). Buyer shall pay the fees and expenses of Buyer's Accountants. (d) If the Adjustment Amount is negative (i.e., the Reference Amount exceeds the Closing Net Worth), then the Purchase Price shall be decreased, on a dollar for dollar basis, by the absolute value of such Adjustment Amount, and Sellers shall pay Buyer the Adjustment Amount in cash by wire transfer of immediately available funds. Any payment required as a result of an adjustment to the Purchase Price pursuant to this Section 1.6(d) shall be made within 10 business days after the Adjustment Amount has been finally determined in accordance with this Section 1.6(d) (it being understood that with respect to any portion of the Adjustment Amount which is not subject to dispute, the phrase "finally determined" shall mean the expiration of the Review Period), together with interest thereon for the period commencing on the Closing Date through the date on which all of the Adjustment Amount is paid, calculated at the rate announced by CitiBank, N.A. from time to time as its prime or base interest rate for commercial loans (the "Prime Rate"). ---------- 1.7. Deliveries and Proceedings at Closing. Subject to the terms and ------------------------------------- conditions of this Agreement, at the Closing: (a) Deliveries to Buyer. Sellers will deliver or cause to be ------------------- delivered to Buyer: (i) assignments of all transferable or assignable Contracts, Intellectual Property, Permits (including Environmental Permits), and warranties relating to the Acquired Assets, each duly executed and, where necessary or desirable, in recordable form substantially in the form of Exhibit B hereto (the --------- "Assignment and Assumption Agreement") ----------------------------------- (ii) a bill of sale and instrument of assignment to the Acquired Assets, duly executed by Seller, substantially in the form of Exhibit C hereto --------- (the "Bill of Sale"); ------------ (iii) a Transition Services Agreement, in the form attached hereto as Exhibit D, duly executed by Seller; --------- (iv) title certificates to any motor vehicles or other certificated assets included in the Acquired Assets, duly executed by Sellers (together with any other transfer forms necessary to transfer title to such vehicles); -8- (v) general warranty deeds for the Real Estate owned by Sellers, duly executed and acknowledged by Sellers and in recordable form, each substantially in the form of Exhibit E hereto; --------- (vi) general warranty assignments for all Leasehold Property Leases (as defined in Section 2.11) duly executed and acknowledged by Sellers and in recordable form, each substantially in the form of Exhibit F hereto; --------- (vii) a Sahagun Supply Agreement, in the form attached as Exhibit G hereto, duly executed by Sellers; - --------- (viii) a Manganese Track Castings Supply Agreement, in the form attached as Exhibit H hereto, duly executed by Sellers; --------- (ix) the Estoppel Certificates and consents and/or waivers described in Section 6.10(c), duly executed by the lessor(s) under the Leasehold Property Leases; (x) a duly endorsed power of attorney from Sellers as contemplated by Section 6.4 hereof; (xi) the Foreign Investment in Real Property Tax Act Certification and Affidavit, duly executed by Sellers, substantially in the form of Exhibit I hereto (the "FIRPTA Affidavit"); --------- ---------------- (xii) the certificates, opinions and other documents required to be delivered by Sellers pursuant to Section 5.1 hereof and certified resolutions evidencing the authority of Sellers as set forth in Section 2.2 hereof; (xiii) all agreements, records and other documents required by this Agreement; (xiv) a receipt for the payment of the Cash Consideration duly executed by Sellers; and (xv) all such other instruments of conveyance as shall, in the reasonable opinion of Buyer and its counsel, be necessary to vest in Buyer good, valid and marketable title to the Acquired Assets in accordance with Section 1.1 hereof, including time-stamped instruments and releases, in form and substance satisfactory to Buyer, evidencing release and removal of all Liens on the Acquired Assets other than Permitted Exceptions, standard owner's affidavits required by Buyer's title insurance company, and any required transfer tax documents. -9- (b) Deliveries By Buyer to Sellers. Buyer will deliver to Sellers: ------------------------------ (i) wire transfer of immediately available funds in an amount equal to the Cash Consideration; (ii) the Junior Subordinated Note, in the form attached as Exhibit A hereto, duly executed by Buyer; (iii) the Transition Services Agreement, duly executed by Buyer; (iv) the Supply Agreement, duly executed by Buyer; (v) the Track Supply Agreement, duly executed by Buyer; and (vi) the certificates, opinions and other documents required to be delivered by Buyer pursuant to Section 5.2 hereof. (c) The agreements, instruments and certificates set forth in this Section 1.7 are collectively referred to herein as the "Transaction Documents." --------------------- 1.8. Allocation of Consideration. The consideration paid by Buyer to --------------------------- Sellers shall be allocated among the Acquired Assets as set forth in a schedule to be prepared and agreed to mutually by Sellers and Buyer within 90 days following the Closing Date. Buyer and Sellers shall each report the federal, state and local income and other tax consequences of the transactions contemplated by this Agreement (which for purposes of this Agreement includes the Transaction Documents) in a manner consistent with such allocation, including the preparation and filing of Form 8594 under Section 1060 of the Internal Revenue Code of 1986, as amended (the "Code") (or any successor form or successor provision of any future tax law, or any comparable provision of state, or local tax law) with their respective federal, state and local income tax returns for the taxable year that includes the Closing Date and shall not take any position contrary thereto in connection with any amended return. ARTICLE II Representations And Warranties of Seller ---------------------------------------- Each of the Sellers, on a joint and several basis, represents and warrants to Buyer as follows: 2.1. Organization; Subsidiaries. -------------------------- (a) Each Seller is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation and has all requisite corporate power and authority to own, lease and operate the Acquired Assets and the Business as and where currently being conducted. Each Seller is qualified to do business and is in good standing in the jurisdictions in which the nature of the business conducted by it or the ownership or use of the assets and properties constituting its business make such qualification necessary, except for such -10- jurisdictions the failure to qualify in which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect (as defined in Section 7.15). Schedule 2.1(a) sets forth the jurisdictions in which each --------------- Seller is qualified to do business. (b) No shares of any corporation or any ownership or other investment or equity interest, either of record, beneficially or equitably, in any Person are included in the Acquired Assets. 2.2. Authorization and Enforceability. Each Seller has full power and -------------------------------- authority to execute, deliver and perform this Agreement and the Transaction Documents to which it is a party, and the execution, delivery and performance of this Agreement and the Transaction Documents to which it is a party by such party have been duly authorized by all necessary action on the part of such party. This Agreement and the Transaction Documents have been duly executed and delivered by such party. This Agreement is a legal, valid and binding obligation of Seller, enforceable in accordance with its terms. As of the Closing Date, the Transaction Documents to be executed by each Seller will be the legal, valid and binding obligations of such party, enforceable in accordance with their respective terms. 2.3. [Intentionally omitted.] 2.4. No Violation of Laws or Agreements. Except at set forth on Schedule ---------------------------------- -------- 2.4, the execution, delivery, and performance of this Agreement and the - --- Transaction Documents do not, and the consummation of the transactions contemplated by this Agreement and the Transaction Documents, will not (a) contravene any provision of the Certificate of Incorporation or Bylaws (or analogous organizational documents) of any Seller or (b) violate, conflict with, result in a breach of, or constitute a default (or an event which might, with the passage of time or the giving of notice, or both, constitute a default) under, or result in or permit the termination, modification, acceleration, or cancellation of, or result in the creation or imposition of any Lien of any nature whatsoever upon any of the Acquired Assets or give to others any interests or rights therein under, (i) any material contract, agreement, indenture, mortgage, loan or credit agreement, license, instrument, lease, contract, plan, permit, or other instrument, oral or written, to which Sellers or any of their Affiliates is a party, or by which Sellers or any of their Affiliates may have rights or by which the Business or any of the Acquired Assets may be bound or affected, or (ii) any judgment, injunction, writ, award, decree, restriction, ruling, or order of any court, arbitrator or Authority (domestic or foreign) or any applicable constitution, law, ordinance, rule or regulation. 2.5. Financial Statements. The books of account and related records of -------------------- Sellers for the Business fairly reflect in reasonable detail all assets, liabilities and transactions relating to the Business and, except as set forth in Schedule 2.5, are in accordance with GAAP and the Financial Statements. ------------ Schedule 2.5 contains the following unaudited financial statements: (a) the - ------------ fiscal year -end financial statements for the Business as of and for the annual period ended December 31, 2000, (b) the financial statements for the Business as of and for the fiscal periods ended July 31, 1998, July 31, 1999 and December 31, 1999 and (c) the interim financial statements for the Business as of and for the interim period ended March 31, 2001, including the interim balance sheet (the "Interim Balance Sheet") for the Business as of the date hereof. The --------------------- -11- foregoing financial statements are collectively referred to herein as the "Financial Statements". The Financial Statements (a) are correct and complete - --------------------- and in accordance with the books and records of Sellers; (b) fairly present the results of operations, financial position, assets and liabilities of the Business as of their respective dates or for the periods covered thereby; (c) except as set forth in Schedule 2.5, have been prepared in accordance with GAAP ------------ on a basis consistent with past practice; and (d) except as set forth in Schedule 2.5, reflect accurately all costs and expenses of the Business as if - ------------ Sellers were independent and not affiliated with any other Person. 2.6. No Changes. Since December 31, 2000, Sellers have conducted the ---------- Business only in the ordinary course of business consistent with past practice. Without limiting the foregoing, since such date, except as disclosed in Schedule -------- 2.6 hereto, with respect to the Business there has not been: - --- (a) any change in the business, assets, liabilities, condition (financial or otherwise), results of operations or prospects of the Business (other than changes in the ordinary course of business consistent with past practice, none of which changes, individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect); (b) any change in the salaries or other compensation payable or to become payable to, or any advance (excluding advances for ordinary business expenses) or loan to, any Employee (other than normal merit increases made in the ordinary course of business and consistent with past practice), or change or addition to, or modification of, other benefits (including any bonus, profit- sharing, pension or other plan) to which any of the Employees may be entitled, or any payments to any pension, retirement, profit-sharing, bonus or similar plan except payments in the ordinary course of business and consistent with past practice, or any other payment of any kind to or on behalf of any Employee other than payment of base compensation and reimbursement for reasonable expenses in the ordinary course of business consistent with past practice; (c) any incurrence, assumption or guarantee of any obligation or liability (absolute, accrued, contingent or otherwise) other than any of the foregoing in the ordinary course of business consistent with past practice and which has not had and could not reasonably be expected to have a Material Adverse Effect; (d) any discharge or satisfaction of any Liens against or in favor of the Business, or payment or satisfaction of any obligation or liability of or relating to the Business, (whether absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Interim Balance Sheet, or (ii) liabilities incurred since the Interim Balance Sheet Date in the ordinary course of business consistent with past practice which have not had or could not reasonably be expected to have a Material Adverse Effect; (e) any change or any threat of any change in any of its relations with, or any loss or threat of loss of any of the suppliers, clients, customers or employees of the Business which, individually or in the aggregate, has had, or could reasonably be expected to have, a Material Adverse Effect, or any alteration in any material respect of the customary practices with -12- respect to the collection of accounts receivable of the Business or payment of accounts payable of the Business or the provision of discounts, rebates or allowances; (f) any disposition of or failure to keep in effect any rights in, to or for the use of any Permit of the Business; (g) any modification, amendment or termination of any, or the entering into of any new, material contract, agreement, lease, plan or commitment to which Sellers are a party or by which they are bound or any cancellation, modification or waiver of any material debts or claims held by Sellers (including any such debts or claims of an Affiliate of Sellers) or any waiver of any other rights of Sellers, in each case in respect of a Contract or other Acquired Asset or Assumed Liability, or otherwise related to the Business; (h) any damage, destruction or loss affecting the Business in excess of $10,000, whether or not covered by insurance; (i) any change by Sellers in their method of accounting or keeping its books of account or accounting practice that relates to the Business, including any change in any assumptions underlying or methods of calculating, any bad debt, contingency, tax or other reserves or any change in estimates or valuations; (j) any disposition of or failure to keep in effect any rights in, to or for the use of any of the Intellectual Property or any disclosure of any trade secret, process or know-how other than in the ordinary course of business (except to representations of Buyer); (k) any sale, transfer or other disposition of any assets, properties or rights of the Business, except sales of inventory in the ordinary course of business consistent with past practice; (l) any dividend, distribution or payment (including the declaration or setting aside therefor, or agreement with respect thereto) in respect of its partnership units or equity securities or redemption, repurchase or acquisition (or agreement with respect thereto) of any of its partnership units or equity securities, or the payment of any Intercompany Payables, in each case, relating to the Acquired Assets; (m) any commitments or agreements for capital expenditures or capital additions or betterments relating to the Business exceeding in the aggregate $10,000, except such as may be involved in the ordinary repair, maintenance or replacement of its assets not exceeding in the aggregate $20,000; (n) any payment, distribution, loan or advance of any amount to, or sale, transfer or lease of properties or assets (real, personal, or mixed, tangible or intangible) to, or the entering into of any agreement or arrangement with, any officers or directors of Sellers or any other Affiliate of Sellers (or any of its officers or directors), or any "Associate" (as such term is defined --------- in Rule 405 under the Securities Act of 1933, as amended) of any of the foregoing Persons; -13- (o) any mortgage, pledge or subjection to Lien of any kind of any assets, tangible or intangible, of the Business; or (p) any material transaction, agreement or event outside the ordinary course of the conduct of the Business, including any agreement by Sellers or any Affiliate of Sellers to compensate any Employee in any manner upon or with respect to the consummation of the transactions contemplated at Closing. 2.7. Contracts. Schedule 2.7 hereto contains a list of the following --------- ------------ contracts and other agreements (written or oral) relating to the Business or by which Sellers or any assets or properties of the Business (including any Acquired Assets or Assumed Liabilities) are bound or affected: (a) any agreement (or group of related agreements) for the purchase or sale of raw materials, commodities, supplies, inventory, products, or other personal property, or for the furnishing or receipt of services, the performance of which (i) will extend over a period of more than one year, (ii) has resulted in a loss to the Business in excess of $20,000 or (iii) will involve aggregate consideration in excess of $40,000; (b) any agreement (or group of related agreements) for the lease of (i) personal property to or from any Person providing for lease payments in excess of $40,000 per annum or (ii) real property to or from any Person; (c) any agreement concerning a partnership, joint venture, franchising or similar arrangement; (d) any agreement (or group of related agreements) under which the Business has created, incurred, assumed, or guaranteed any indebtedness for borrowed money, or any capitalized lease obligation or other agreement under which any of the assets or properties of the Business (tangible or intangible) are subject to a Lien; (e) any agreement which restricts by its terms Sellers or the Business from carrying out their business anywhere in the world or from competing with any Person; (f) any profit sharing, deferred compensation, severance, termination, retention or other similar plan, agreement or arrangement for the benefit any Employee or Former Employee (other than the Benefit Plans); (g) any agreement for the employment of any individual on a part- time, consulting, or other similar basis providing annual compensation in excess of $50,000 or any consulting agreement with a term greater than three months or any agreement providing severance benefits; (h) any agreement otherwise material to the Business, or under which the consequences of a default or termination could reasonably be expected to have a Material Adverse Effect; -14- (i) any license or similar agreement for Intellectual Property, whether as licensee or licensor (or both); (j) any agreement with any Affiliate of Sellers or any of the other Persons referred to in Section 2.6(n); (k) any labor agreement (including any side agreements thereto) with any union or recognized collective bargaining agent relating to the Business; (l) any agreement to indemnify or hold harmless; (m) any agreement which requires the consent of any contracting party as a condition of their valid assignment to Buyer; and (n) any other agreement (or group of related agreements) not otherwise described in paragraphs (a) - (m) above and continuing over a period of more than six months from the date hereof or exceeding $40,000 in value, or entered into outside of the ordinary course of business or where the consequences of a breach or default, or the termination, expiration or cancellation thereof, could reasonably be expected to have a Material Adverse Effect. Sellers have delivered or made available to Buyer a correct and complete copy of each written agreement listed in Schedule 2.7 and a written summary setting ------------ forth the terms and conditions of each oral agreement referred to therein. With respect to each Contract (whether or not disclosed, or required to be disclosed, in Schedule 2.7): (i) the agreement is legal, valid, binding, enforceable, and ------------ in full force and effect; (ii) neither any Sellers, nor, to Sellers' knowledge, any other party thereto, is in breach or default, and no event has occurred (or is likely to occur) which with notice or lapse of time (or both) would constitute a breach or default, or permit termination, modification, or acceleration, under the agreement; and (iii) no party has repudiated or, to Sellers' knowledge, threatened to repudiate any provision of the Contract. 2.8. Permits and Compliance With Laws. -------------------------------- (a) Sellers possess and are in compliance in all material respects with all Permits required to operate the Business and own, lease or otherwise hold the Acquired Assets under all applicable laws, rules, regulations, ordinances and codes. Sellers have conducted the Business and are now doing so in compliance with all applicable laws, zoning, building and similar laws, rules, regulations, ordinances, codes, judgments and orders (including the Occupational Safety and Health Act and the rules and regulations thereunder ("OSHA") and the Americans with Disabilities Act and the rules and regulations - -------- thereunder. All such Permits are listed on Schedule 1.1(b)(viii) hereto. All --------------------- operation of the Business are in full force and effect, and there are no proceedings pending or, to Sellers' knowledge, threatened that seek the revocation, cancellation, suspension or any adverse modification of any such Permits presently possessed by Sellers. Except as set forth on Schedule 2.8(a), on the Closing Date, the Permits in full force and effect which will be transferred to Buyer will constitute all of the Permits required under applicable law and -15- regulation for Buyer's possession, ownership and use of the Acquired Assets and operation of the Business. (b) Other than as disclosed on Schedule 2.8(b), no notice, citation, --------------- summons or order has been issued, no complaint has been filed, no penalty has been assessed and no investigation or review is pending or, to Sellers' knowledge, threatened, by any Authority or other Person with respect to any alleged (i) violation by Sellers, any Affiliate of Sellers or any other Person relating to the Business of any law, ordinance, rule, regulation, code or order of any Authority; or (ii) failure by Sellers, any Affiliate of Sellers or any other Person to have any Permit required in connection with the conduct of the Business or otherwise applicable to the Business. Except as may be otherwise disclosed on Schedule 2.8(b), Sellers have no knowledge of any claims or --------------- violations of any such law, regulation, ordinance, order, covenant, condition, restriction or easement. Except as may be otherwise disclosed on Schedule -------- 2.8(b), there is no proceeding pending or, to Sellers' knowledge, threatened - ------ which is reasonably likely to adversely affect, the Acquired Assets, the zoning classification in effect or Sellers' right to own, operate and occupy the Real Estate and use and possess the other Acquired Assets in the manner in which they currently own, operate and occupy the Real Estate and use and possess the other Acquired Assets, and no zoning, building or similar law, regulation, ordinance or order is, or on the Closing Date will be, violated in any material respect. 2.9. Environmental Matters. --------------------- (a) (i) Except as disclosed on Schedule 2.9(a), Sellers hold and are --------------- in compliance with all environmental permits, certificates, licenses, approvals, registrations and authorizations ("Environmental Permits") required under all --------------------- Environmental Laws in connection with the Business (which shall include for purposes of this Section 2.9 and the definition of Environmental Liability, any ----------- predecessor operations), and all of such Environmental Permits are in full force and effect. All such Environmental Permits are listed on Schedule 2.9(a) and any --------------- that are not transferable are so designated. Sellers have complied with, and are not in violation of, the applicable environmental statutes, laws, rules, regulations, ordinances, notices, orders and decrees of any Authority, including those relating to Hazardous Substances and health and safety as in effect as of the time hereof ("Environmental Laws") in connection with the Business. ------------------ (ii) Sellers have made timely application for renewals of all such Environmental Permits as are to expire, such that all Environmental Permits will remain in full force and effect and no Environmental Permit will be permitted to lapse prior to Closing. Sellers have or will prepare and file all applications for the transfer of Environmental Permits in adequate time for transfer to occur at Closing. (b) In connection with the Business or the Acquired Assets: (i) Except as set forth on Schedule 2.9(b)(i), no notice, citation, ------------------ summons or order has been issued, no complaint has been filed, no penalty has been assessed no judgment, decree or order is outstanding and no investigation or review is pending or to Sellers' knowledge threatened by any Authority or other entity: (A) with respect to any alleged violation of any Environmental Law; or (B) with respect to any alleged failure to have any required -16- Environmental Permit; or (C) with respect to any use, possession, generation, treatment, storage, recycling, transportation or disposal or arrangement for disposal (collectively "Management") of any hazardous or toxic or polluting ---------- substance or waste, contaminant or pollutant, including petroleum products, PCBs, asbestos containing materials and radioactive materials ("Hazardous --------- Substances"). - ---------- (ii) Except as set forth on Schedule 2.9(b)(ii), Sellers (including for ------------------ purposes of this Section 2.9(b), Affiliates of Sellers) have not received any request for information, notice of claim, demand or notification that they are or may be potentially responsible with respect to any investigation or clean-up of any threatened or actual Release (as defined below) of any Hazardous Substance. (iii) Except as set forth on Schedule 2.9(b)(iii), no polychlorinated -------------------- biphenyls ("PCBs") or asbestos-containing materials are present at any property ---- owned, operated or leased by Sellers, nor are there any underground storage tanks, active or abandoned, at any property now or when owned, operated or leased by Sellers. (iv) Except as set forth on Schedule 2.9(b)(iv), no Hazardous Substance ------------------- Managed by Sellers has come to be located at any site which is listed or proposed for listing under the Comprehensive Environmental Response, Compensation and Liability of Act of 1980, as amended, ("CERCLA"), on the ------ Comprehensive Environmental Response Compensation Liability Information System list, as established under CERCLA ("CERCLIS"), or on any similar state list, or ------- which is the subject of federal, state or local enforcement actions or other investigations which may lead to claims against Sellers or Buyer for clean-up costs, remedial work, damages to natural resources or for personal injury claims, including, but not limited to, claims under CERCLA. (v) Except as set forth on Schedule 2.9(b)(v), no Hazardous Substance has ------------------ been released, spilled, leaked, discharged, disposed of, pumped, emitted, emptied, injected, leached, dumped or allowed to escape ("Released") at, on, -------- about or under any property now or when owned, operated or leased by Sellers nor, in the case of property formerly owned, operated or leased, to the knowledge of Sellers, at any other time; nor, to the knowledge of Sellers, has any Hazardous Substance been Released at any property adjacent to any of the Real Estate. No such property is listed or proposed for listing on the National Priority List promulgated pursuant to CERCLA, on CERCLIS or on any similar state list of sites requiring investigation or clean-up. (vi) Except as set forth on Schedule 2.9(b)(vi), Sellers are not required ------------------- to place any notice or restriction relating to the presence of Hazardous Substance in the deed to any property owned by them or in any written instrument accompanying this Agreement, and no property now or previously owned by any Sellers has such notice or restriction in its deed or any other written instrument relating to the purchase, lease or rental of such property. (vii) Except as listed in Schedule 2.9(b)(vii), and heretofore provided to -------------------- Buyer, there have been no environmental inspections, investigations, studies, audits, tests, reviews or other analyses conducted in relation to any Business property or facility, including the Real Estate, which are in the possession or control of Sellers. -17- (viii) Sellers know of no facts or circumstances related to environmental matters concerning their properties, the Real Estate or the Business that could lead to any future environmental claims, liabilities or responsibilities for any Sellers or Buyer. Sellers have not assumed by contract or operation of law any environmental liabilities of any person relating to the Business, Acquired Assets or Real Estate. 2.10. Consents. Except as specified in Schedule 2.10, no consent, approval -------- ------------- or authorization of, or registration or filing with, any Authority or other Person is required in connection with the execution, delivery and performance of this Agreement or the Transaction Documents, or the consummation of the transactions contemplated hereby or thereby. 2.11. Title. Sellers have and will convey to Buyer at Closing (by general ----- warranty deed in the case of real property owned in fee by Sellers and general warranty assignments in the case of leasehold real property interests held by Sellers ("Leasehold Property")) indefeasible, good and valid title to all of the ------------------ Acquired Assets constituting personal property and good, valid and marketable fee simple absolute title and interest to all of the Acquired Assets constituting real property (other than Leasehold Property) and a good, valid and marketable leasehold interest in all Leasehold Property, subject only to the Permitted Exceptions. None of the Acquired Assets is subject to any Lien (including any restriction, encumbrance, tenancy, license, encroachment, covenant, right of way, easement, or any other matter affecting title), except (a) in the case of real property, minor imperfections of title, none of which, individually or in the aggregate, materially detracts from the value of or impairs the use of the affected parcel or impairs any operations of the Business or the ability of Buyer to obtain direct or indirect financing for the Acquired Assets, and all of which are disclosed on Schedule 2.11 hereto, (b) in the case ------------- of real property, Liens for current real estate Taxes not yet due and payable, (c) as to the Leasehold Property only, the terms and conditions of the leases (the "Leasehold Property Leases") with respect thereto, all of which Leasehold ------------------------- Property Leases are identified on Schedule 1.1(b)(i) hereto, and (d) with ------------------ respect to leased or licensed personal property, the terms and conditions of the lease or license applicable thereto, (collectively, the "Permitted Exceptions"). -------------------- Sellers have prior to the date of this Agreement delivered to Buyer, to the extent possessed by Sellers or any of their Affiliates, true, correct and complete copies of all existing title reports, title insurance policies and commitments therefor, surveys, licenses, certificates of occupancy, plans, specifications and permits, leases and subleases, and all other documents, instruments and agreements affecting title to or pertaining to the Real Estate. 2.12. Real Estate. ----------- (a) Schedule 1.1(b)(i) hereto sets forth a correct list and summary ------------------ descriptions of all real property (including the Real Estate) constituting any part of the Acquired Assets or otherwise owned (beneficially or of record), operated or leased now or previously by Sellers in the conduct of the Business, and identifies the current zoning of such real property, all surveys and title insurance policies in Sellers' possession covering any of, and all leases (whether as tenant or landlord) relating to, such properties (including the Leasehold Property Leases). All structures and other improvements on such properties are within the lot lines and do not encroach on the properties of any other Person. At Closing, Sellers will provide Buyer with originals of all available certificates of occupancy and certificates of zoning compliance for the Real Estate. -18- Sellers have not received any notice for assessments for public improvements against any real property (including the Real Estate) constituting any part of the Acquired Assets or otherwise owned or needed in the conduct of the Business which remains unpaid, and no such assessment has been proposed. There is no pending condemnation, expropriation, eminent domain or similar proceeding affecting all or any portion of any of such properties and, to Sellers' knowledge, no such proceeding is contemplated or threatened. None of the Real Estate is located within or abuts a 100-year floodplain or body of water, tideland, wetland, marshland or other area subject to state, federal or local regulation, control or protection. The water, gas, electricity and other utilities serving the Real Estate are adequate to service the normal operations of the Real Estate and are not subject to any pending or, to Sellers' knowledge, threatened suspension, reduction or moratorium. (b) Sellers have obtained all authorizations, Permits and rights of way, including proof of dedication, which are necessary to ensure vehicular and restrictions on entrance to or exit from the Real Estate to adjacent public streets and, to Sellers' knowledge, no conditions which will result in the termination of the present access from the Real Estate to existing highways and roads. (c) Sellers have not received notice from any Authority that the assessed value of the Real Estate has been determined to be greater than that upon which county, township or school tax was paid for the 2000 tax year applicable to each such tax, or from any insurance carrier of Sellers or their Affiliates of fire hazards with respect to the Real Estate. (d) Except as set forth in Schedule 2.12(d), Sellers are in actual, exclusive possession of the Real Estate. (e) No portion of any of the owned real property constituting any part of the Real Estate is subject to a special ad valorem tax valuation or rate that will be lost as a result of the transfer to Buyer pursuant to the provisions hereof. (f) The Real Estate and the use thereof by Sellers in connection with the Business as currently used and consistent with past practice complies with all covenants, easements and restrictions of record affecting such Real Estate. (g) Sellers are lessee under Leasehold Property Leases, and no party other than Sellers has any right to possession, occupancy or use of any of the leased real property. Except as set forth in Schedule 2.12(g), the basic rent, --------------- all additional rent and all other charges and amounts payable under the Leasehold Property Leases by the lessee thereunder have been paid to date. All work required to be performed under the Leasehold Property Leases by the lessors thereunder or by Sellers has been performed in all material respects, and, to the extent that Sellers are responsible for payment of such work, has been fully paid for, whether directly to the contractor performing such work or to such lessor as reimbursement therefor, except for items which Sellers are disputing in good faith (which items are set forth on Schedule 2.12(g)). ---------------- (h) Except as set forth on Schedule 2.12(h), there are no brokerage ---------------- commissions or finder's fees due from Sellers which are unpaid with regard to any of the -19- Leasehold Property Leases or the Leasehold Property, or which will become due at any time in the future with regard to the Leasehold Property Leases or the Leasehold Property. (i) Except as set forth on Schedule 2.12(i), there have been no ---------------- casualties which could result in the termination of any of the Leasehold Property Leases. (j) Except as set forth on Schedule 2.12(j), (i) no consent of any ---------------- of the lessors under any of the Leasehold Property Leases is required by reason of any of the transactions contemplated by this Agreement, and (ii) none of the rights of Sellers under any of the Leasehold Property Leases will be impaired by the consummation of the transactions contemplated by this Agreement and all of such rights will be enforceable by the Buyer after the Closing Date, to the same degree as by Sellers prior to the Closing Date without the consent or agreement of any other party. (k) Except as set forth on Schedule 2.12(k) Sellers have not received any written or, to the Sellers' knowledge, oral notice or order from any governmental authority, insurance company which has issued a policy with respect to any of the Real Estate or any board of fire underwriters or other body performing similar functions or any other Person which (a) relates to or alleges a violation of or nonconformity with any zoning, building, safety, subdivision, wetlands or other similar law, code, rule, regulation, ordinance, permit, license, certificate, covenant, restriction or condition with respect to any of the Real Estate or the use thereof which violation of nonconformity could reasonably be expected to have a material adverse effect upon the value of, or a material impairment of the use of, or the conduct of business at, any one or more of the individual parcels of Real Estate so affected, or (b) requests the performance of any material repairs, alterations or other work that have not yet been cured or performed, as applicable. (l) Other than the Real Estate, no other real estate or rights, titles, estates or interest therein is necessary to the conduct of the Business as currently conducted and consistent with past practice. (m) Other than the Cellco Lease (as defined herein), there are no leases affecting any owned real property of the Business that contain purchase rights or rights of first refusal in favor of the lessees thereunder or any other third parties. 2.13. Taxes. ----- (a) All of Sellers and their Affiliates have (i) filed all returns and reports for Taxes, including information returns, that are required to have been filed, (ii) paid all Taxes that are required to be paid with respect to such returns or reports and (iii) paid all other Taxes for which a notice of assessment or demand for payment has been received. All such returns or reports have been prepared in accordance with all applicable laws and requirements and accurately reflect the taxable income (or other measure of Tax) of Sellers, or, if applicable, the Affiliate of Sellers or any group of which such Sellers or any such Affiliate is a member. None of the assets of the Business or constituting any of the Acquired Assets (i) is property that is required to be treated as owned by another person pursuant to the "safe harbor lease" provisions -20- of former Section 168(f)(8) of the Code, (ii) is "tax-exempt use property" within the meaning of Section 168(h) of the Code or (iii) directly or indirectly secures any debt the interest of which is tax-exempt under Section 103(a) of the Code. Schedule 2.13 lists all jurisdictions in which Sellers have filed income, ------------- employment, sales and use and personal and real property tax returns with respect to the Business during the past three fiscal years. Sellers have delivered to Buyer copies of all notices of proposed adjustment, audit reports and similar communications received by Sellers or any of their Affiliates since January 1, 1998 that pertain to taxes related to the Business or the Acquired Assets. Except as set forth on Schedule 2.13, there are no Liens for Taxes on any of the Acquired Assets. There are no ongoing or, to Sellers' knowledge, threatened tax disputes with respect to the Business or Acquired Assets that could affect Buyer's responsibility for Taxes related to the Business or Acquired Assets following the Closing Date. (b) Sellers and their Affiliates have withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other person. (c) As used herein "Taxes" and "Tax" mean any federal, state, ----- --- local and foreign income, payroll, withholding, excise, sales, use, personal property, use and occupancy, business and occupation, mercantile, real estate, gross receipts, license, employment, severance, stamp, premium, windfall profits, social security (or similar unemployment), disability, transfer, registration, value added, alternative, or add-on minimum, estimated, or capital stock and franchise and other tax of any kind whatsoever, including any interest, penalty or addition thereto, whether disputed or not. 2.14. Intellectual Property Rights. ---------------------------- (a) Schedule 1.1(b)(vi) contains a complete and accurate list of ------------------- all patents and patent applications, trademarks, service marks, trade names, and registrations and applications for registration of industrial designs, copyrights, mask works, trademarks, service marks, trade dress and domain names used or held for use by the Sellers in the conduct of the Business, specifying as to each such item, as applicable: (i) the owner of the item, (ii) the jurisdictions in which the item is issued or registered or in which any application for issuance or registration has been filed, (iii) the respective issuance, registration, or application number of the item, (iv) the date of application and issuance or registration of the item, and (v) expiration of such items. (b) Schedule 1.1(b)(vi) also contains a complete and accurate ------------------- list of all material licenses, sublicenses, consents and other agreements (whether written or otherwise) (i) pertaining to any Intellectual Property used by Sellers in the conduct of the Business, and (ii) by which Sellers license or otherwise authorize a third party to use such Intellectual Property. Neither the Sellers, nor to Sellers' knowledge, any other party are in breach of or default under any such license or other agreement and each such license or other agreement is now, and immediately following the Closing shall be, valid and in full force and effect. No Intellectual Property is used pursuant to a license from a third party or licensed to a third party except as indicated in Schedule -------- 1.1(b)(vi). - ---------- -21- (c) Except as explicitly indicated in Schedule 1.1(b)(vi), the ------------------- Sellers own or are licensed or otherwise have the right to use all Intellectual Property necessary for the operation of Business as currently conducted. No Intellectual Property other than the Intellectual Property comprising part of the Acquired Assets is required to conduct the Business in the ordinary course consistent with past practices. (d) All of the patents and all of the registrations of trademarks, service marks, industrial designs, mask works, domain names and copyrights listed in Schedule 1.1(b)(vi) are valid and in full force and effect ------------------- and are held of record in Sellers' names free and clear of Liens and are not the subject of any cancellation or reexamination proceeding or any other proceeding challenging their extent or validity. Except as indicated in Schedule -------- 1.1(b)(vi), Sellers are the applicant of record in all applications listed in - ---------- Schedule 1.1(b)(vi), and no opposition, extension of time to oppose, - ------------------- interference, rejection or refusal to register has been received in connection with any such application. Except as set forth in Schedule 1.1(b)(vi), (i) there ------------------- is no pending or to Sellers' knowledge threatened litigation with respect to any Intellectual Property owned by Sellers or used in the Business, and (ii) no order, holding, decision or judgment has been rendered by any Authority, and no agreement, consent or stipulation exists to which Sellers or any of their Affiliates are a party or of which Sellers have knowledge, which would prevent Sellers or Buyer from using any Intellectual Property. Except as set forth in Schedule 1.1(b)(vi), there is no pending or, to Sellers' knowledge, threatened - ------------------- objection or claim being asserted against Sellers or any of their Affiliates in any administrative or judicial proceeding or by any person with respect to the ownership, validity, enforceability or use of any Intellectual Property owned by Sellers or used in the Business or challenging or questioning the validity or effectiveness of any such ownership or license. Except as set forth in Schedule -------- 1.1(b)(vi), Sellers have not infringed, diluted, misappropriated or otherwise - ---------- violated any rights of any other Person with respect to any United States or foreign patents, industrial design rights, trademarks, trade names, service marks, copyrights, mask works, trade dress, trade secrets or any other Intellectual Property rights in its operation of the Business, nor are Sellers aware of any infringement, dilution, misappropriation or other violation which will occur as a result of the continued operation of the Business as now conducted. Except as set forth in Schedule 1.1(b)(vi), Sellers are not aware of ------------------- any material infringement, dilution, misappropriation or other violation by any Person of any Intellectual Property owned by Sellers or used in the Business. (e) Except as set forth in Schedule 2.14(e), to the knowledge of ---------------- Sellers, none of the material trade secrets, know-how or other confidential or proprietary information of the Business has been disclosed to any person unless such disclosure was necessary and done in a reasonable manner to protect the confidential nature of such disclosure. (f) Sellers warrant that, except as otherwise disclosed on Schedule 1.1(b)(vi), if Buyer operates the Business after the Closing in the - ------------------- same manner as Sellers operated the Business before the Closing, Buyer will not be required to pay any royalties or other fees (other than normal maintenance and filing fees) to third parties or be subject to any other obligations or restrictions on or for the use of Intellectual Property or other know-how related to the Business. -22- (g) Except as set forth on Schedule 2.14(g), all computer ---------------- software used in the Business (i) is capable of accurately processing, calculating, manipulating, storing and exchanging date/time data, and, to the Sellers' knowledge, (ii) contains no viruses, disabling code, trap doors, "worms," cancelbots or other anomalies that would or could reasonably be expected to impair the operations of the Business. (h) As used herein, the term "Intellectual Property" means with --------------------- respect to the Business (i) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents, patent applications, and patent disclosures, together with all reissuances, continuations, continuations-in-part, revisions, extensions, and reexaminations thereof, (ii) all trademarks, service marks, trade dress, logos, domain names, trade names, and corporate names, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith, (iii) all material copyrightable works, all copyrights, and all applications, registrations, and renewals in connection therewith, (iv) all mask works and all applications, registrations and renewals in connection therewith, (v) all industrial designs and all applications, registrations and renewals therewith, (vi) all trade secrets and confidential business information (including ideas, research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals), (vii) all computer software and electronic files owned or licensed by Sellers and used in the Business (including all content and scripts used in the website BUYMETALCASTINGS.com, and all data and related documentation and object and source code to the extent that Sellers own or have rights to such source code), (viii) all other proprietary intellectual property rights, (ix) all copies, whether in magnetic format or hard copy, and tangible embodiments thereof (in whatever form or medium) and (x) all rights of action arising therefrom, all claims by reason of infringement thereof, and the right to sue and collect damages for such infringement. 2.15. Inventory. The inventory of Sellers relating to the Business and --------- reflected on the Interim Balance Sheet (including the Inventory) is carried at not in excess of the lower of cost or net accounting book value, the cost thereof being determined on the basis of standard cost as set forth on Schedule -------- 2.15; was acquired and maintained in the ordinary course of business; and is of - ---- good and merchantable quality. Except as set forth on Schedule 2.15, to Sellers' ------------- knowledge, Sellers have not received notice of any liability or obligation with respect to the return of inventory in the possession of wholesalers, retailers or other customers. Schedule 2.15 contains a copy of Sellers' standard warranty ------------- and return policy in respect of the Business. 2.16. Accounts Receivable. The accounts receivable of Sellers arising from ------------------- the Business as set forth on the Financial Statements or arising since the Interim Balance Sheet Date are valid and genuine; have arisen solely out of bona fide sales and deliveries of goods, performance of services and other business transactions in the ordinary course of business consistent with past practice; are not subject to valid defenses, set-offs or counterclaims; and will be collected within 90 days after the billing at the full recorded amount thereof less, in the case of accounts receivable appearing on the Interim Balance Sheet, the recorded allowance for collection losses on the Interim Balance Sheet. The allowance for collection losses on the -23- balance sheets included in the Financial Statements has been determined in accordance with GAAP consistent with past practice. Buyer shall use its best efforts consistent with past practices of the Business' efforts to collect such accounts receivable. 2.17. Labor Relations. --------------- (a) Except as disclosed on Schedule 2.17(a) hereto: (i) no ---------------- Employee is or has been for the last three years represented by any union or other labor organization; (ii) in the past three years there has been no unfair labor practice charge pending or, to Sellers' knowledge, threatened against Sellers relating to any of the Employees or Former Employees; (iii) in the past three years there have been no negotiations or strikes, disputes, slow downs or stoppages relating to any of the Employees or the Business pending or, to Sellers' knowledge, threatened against or involving Employees or the Business; (iv) for the past three years there has been no labor grievance relating to any of the Employees or Former Employees in any material respect and in excess of $500.00 and there is none pending; and (v) Sellers have not in the past three years experienced any work stoppage or other labor difficulty or organizational activity relating to any of the Employees or the Business. (b) There are no pending claims and for the past three years there has not been any claims against Sellers or the Business (whether under federal or state law, employment agreements or otherwise) asserted by any Employee or Former Employee as relates to the Business on account of or for (i) overtime pay, other than overtime pay for work done during the current payroll period; (ii) wages or salary for any period other than the current payroll period; (iii) any amount of vacation or sabbatical pay or pay in lieu of vacation or time off; or (iv) any violation of any statute, ordinance or regulation relating to minimum wages or maximum hours at work. To Sellers' knowledge, there are no such claims which have not been so asserted. 2.18. Employee Benefit Plans. ---------------------- (a) Schedule 2.18(a) lists the name, job title, current base ---------------- salary or hourly wage, date of hire, 2001 vacation entitlement, social security number and assigned location of all salaried and hourly employees actively employed as of the Closing Date by Sellers or any of their Affiliates whose primary responsibilities relate to the Business, including any such individual on short-term disability or approved leave of absence who was so employed immediately before such disability or absence. All individuals included on Schedule 2.18(a) are herein referred to as the "Employees." With respect to any - ---------------- --------- Employee who is not actively employed due to short-term disability or approved leave of absence, Schedule 2.18(a) indicates the reason for such absence and the ---------------- date such individual is reasonably expected to return to active employment. In the event that an Employee who is not actively employed at the time of Closing due to short-term disability or approved leave of absence, is, in the reasonable opinion of Buyer, unfit to return to active employment with Buyer within 30 days of the expected return date indicated on Schedule 2.18(a) or otherwise does not ---------------- commence active employment with Buyer within such 30 day period, such individual shall be considered a Former Employee for all purposes under this Agreement. -24- (b) Set forth on Schedule 2.18(b) is a true and complete list ---------------- (designated on a salary and hourly basis) of each (i) "employee benefit plan," as defined in Section 3(3) of ERISA (including any "multiemployer plan" as defined in Section 3(37) of ERISA) and (ii) all other pension, retirement, supplemental retirement, deferred compensation, excess benefit, profit sharing, employment, bonus, incentive, stock purchase, stock ownership, stock option, stock appreciation right, severance, salary continuation, termination, change- of-control, health, life, disability, group insurance, vacation, holiday, sick- day, sabbatical and fringe benefit plan, program, contract, or arrangement (whether written or unwritten, qualified or nonqualified, funded or unfunded, foreign or domestic and including any that have been frozen) maintained, contributed to, or required to be contributed to, by any Sellers or any of their Affiliates in respect of any Employee or Former Employee, or under which any Sellers or any of their Affiliates have any liability with respect to any Employee or Former Employee (the "Benefit Plans"). ------------- (c) As applicable with respect to each Benefit Plan, Sellers have delivered to Buyer, true and complete copies of (i) each Benefit Plan, including all amendments thereto, and in the case of an unwritten Benefit Plan, a written description thereof, (ii) all trust documents and insurance contracts relating thereto, (iii) the current summary plan description and each summary of material modifications thereto, (iv) the most recent annual report (Form 5500 and all schedules thereto) filed with the Internal Revenue Service ("IRS"), (v) --- the most recent IRS determination letter and each currently pending application to the IRS for a determination letter, (vi) the most recent summary annual report, actuarial report, financial statement and trustee report, (vii) the most recent annual premium payment forms filed with the Pension Benefit Guaranty Corporation ("PBGC") and (viii) all records, notices and filings concerning IRS ---- or Department of Labor audits or investigations, "prohibited transactions" within the meaning of Section 406 of ERISA or Section 4975 of the Code and "reportable events" within the meaning of Section 4043 of ERISA. (d) Except as otherwise disclosed with particularity on Schedule -------- 2.18(d): - ------- (i) Sellers and each of their Affiliates are in material compliance with all laws applicable to the Benefit Plans including ERISA and the Code. Each Benefit Plan has been maintained, operated and administered in material compliance in all respects with its terms and any related documents or agreements and the applicable provisions of all laws including ERISA and the Code. (ii) No Benefit Plan is now or at any time has been a "multiemployer plan" within the meaning of Section 3(37) of ERISA. (iii) The Benefit Plans which are "employee pension benefit plans" within the meaning of Section 3(2) of ERISA and which are intended to meet the qualification requirements of Section 401(a) of the Code (each a "Pension Plan") now meet, and at all times since their inception have met the ------------ requirements for such qualification, and the related trusts are now, and at all times since their inception have been, exempt from taxation under Section 501(a) of the Code. All Pension Plans have received determination letters from the IRS to the effect that such Pension Plans are qualified and the related trust are exempt from federal income taxes and no determination letter with respect to any Pension Plan has been revoked nor, to the -25- knowledge of Sellers, is there any reason for such revocation, nor has any Pension Plan been amended, or failed to be amended, since the date of its most recent determination letter in any respect which would adversely affect its qualification. (iv) All contributions to, and payments from, any Benefit Plan which may have been required in accordance with the terms of such Benefit Plan or any related document and, when applicable, Section 302 of ERISA or Section 412 of the Code, have been timely made. No Benefit Plan has incurred an "accumulated funding deficiency" within the meaning of Section 302 of ERISA or Section 412 of the Code, nor has any waiver of the minimum funding standards of Section 302 of ERISA or Section 412 of the Code been requested, or granted, with respect to any Benefit Plan. (v) Each Benefit Plan subject to Title IV of ERISA has assets sufficient on a plan termination basis to be eligible on the Closing Date for standard termination pursuant to Section 4041 of ERISA without any additional contributions being made thereto. The PBGC has not instituted proceedings to terminate any Benefit Plan or to appoint a trustee or administrator of any such Benefit Plan, and no circumstances exist that constitute grounds under Title IV of ERISA for any such proceeding. There has been no "reportable event" within the meaning of Section 4043 of ERISA that has not been fully and accurately reported in a timely fashion, as required, or which, whether or not reported, would authorize the PBGC to institute termination proceedings with respect to any Benefit Plan. No liability under Title IV of ERISA has been incurred or is expected to be incurred that could result in liability to any Benefit Plan, Sellers or Buyer, other than for premiums pursuant to Section 4007 of ERISA that are not yet due. (vi) There are no pending audits or investigations by any governmental agency involving the Benefit Plans, and to Sellers' knowledge no threatened or pending claims (except for individual claims for benefits payable in the normal operation of the Benefit Plans), suits or proceedings involving any Benefit Plan, any fiduciary thereof or service provider thereto, nor to the knowledge of Sellers is there any reasonable basis for any such claim, suit or proceeding. (vii) Neither Sellers nor any of their Affiliates, nor any fiduciary, trustee or administrator of any Benefit Plan, have engaged in or, in connection with the transactions contemplated by this Agreement, will engage in any transaction with respect to any Benefit Plan which would subject any such Benefit Plan, Sellers, any of their Affiliates or Buyer to a tax, penalty or liability for a "prohibited transaction" under Section 406 of ERISA or Section 4975 of the Code. None of the assets of any Benefit Plan is invested in any property constituting "employer real property" or an "employer security" within the meaning of Section 407 of ERISA. (viii) With respect to each Benefit Plan that is a "group health plan" within the meaning of Section 607 of ERISA and that is subject to Section 4980B of the Code, Sellers and their Affiliates comply in all material respects with the continuation coverage requirements of the Code and ERISA. -26- (ix) Except as set forth on Schedule 2.18(d)(ix), no Benefit Plan provides benefits, including death or medical benefits, beyond termination of service or retirement other than (A) coverage mandated by law or (B) death or retirement benefits under a Benefit Plan qualified under Section 401(a) of the Code. Neither Sellers nor any of their Affiliates have made a written or oral representation to any Employee or Former Employee promising or guaranteeing any employer paid continuation of medical, dental, life or disability coverage for any period of time beyond retirement or termination of employment. (x) Sellers' execution of, and performance of the transactions contemplated by this Agreement will not constitute an event under any Benefit Plan that will result in any payment (whether as severance pay or otherwise), acceleration, vesting or increase in benefits with respect to any employee. No Benefit Plan provides for "parachute payments" within the meaning of Section 280G of the Code. (e) As used herein, (i) "ERISA" means the Employee Retirement Income Security ----- Act of 1974, as amended. (ii) "Former Employees" means all salaried and hourly ---------------- employees previously employed by Sellers or any of their Affiliates whose primary responsibilities related to the Business but who are no longer so employed on the Closing Date, including any such individual receiving long term disability benefits. (f) Contract Service Providers. Any individual who has provided -------------------------- services to the Sellers or any of their Affiliates in connection with the Business and been classified for either payroll tax or employee benefit coverage purposes as an independent contractor has been properly so classified by Sellers to the extent required by applicable law. No taxing authority has any reasonable basis to assert that any withholding or payroll taxes are due but unpaid by Sellers or any of their Affiliates with respect to any such service provider, nor is there any reasonable basis for the US Internal Revenue Service, the US Department of Labor, any other governmental agency, or for any such service provider, or any beneficiary or dependent of any such service provider, to assert that any such service provider, is or at any relevant time was, a common law employee of Sellers or any of their Affiliates, or that any such service provider or any beneficiary or dependent of any such service provider, is entitled to participate in or receive benefits from, any Benefit Plan. 2.19. Absence of Undisclosed Liabilities. Except as disclosed in Schedule ---------------------------------- -------- 2.19 hereto, Sellers have no liabilities, either direct or indirect, matured or - ---- unmatured or absolute, contingent or liquidated with respect to the Business, except: (a) those liabilities set forth on the Interim Balance Sheet and not heretofore paid or discharged; and (b) liabilities arising in the ordinary course of business under any Contract. -27- (c) those liabilities that individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect. 2.20. No Pending Litigation or Proceedings. Except as set forth on ------------------------------------ Schedule 2.20, there are no actions, suits, investigations or proceedings - ------------- pending against or, to Sellers' knowledge, threatened against Sellers or affecting the Business or any of the Acquired Assets before any court or arbitrator or Authority. Except as disclosed in Schedule 2.20 hereto, there are ------------- currently no outstanding judgments, decrees or orders of any court or Authority against Sellers, or any Affiliate of Sellers, which relate to or arise out of the conduct of the Business or the ownership, condition or operation of the Business or the Acquired Assets. 2.21. Products Liability. Except as set forth on Schedule 2.21, there are ------------------ ------------- no (a) liabilities, known or unknown, fixed or contingent, with respect to any products of Sellers or the Business that are based on a theory of strict product liability, negligence or other tort theories (as distinct from product warranty claims described in clause (b) below), or (b) liabilities of Sellers, known or unknown, fixed or contingent, which have been asserted, for the breach of any express or implied product warranty or any other similar claim with respect to any product manufactured or sold by Sellers (other than any claim based on standard warranty obligations made by Sellers in the ordinary course of the conduct of the Business to purchasers of Sellers' products). Schedule 2.21 sets ------------- forth Sellers' standard warranty and return policies. 2.22. Projections. The forecasts and projections of future financial ----------- results supplied by Sellers to Buyer were prepared by Sellers in good faith based upon expectations and assumptions that Sellers believed, as of the date such forecasts and projections, were prepared to be reasonable. 2.23. Insurance. Except as set forth in Schedule 2.23, Sellers have been --------- ------------- fully covered at all times in the last five years by insurance in scope and amount customary and reasonable for the business in which it is engaged and the liabilities it has incurred during such five year period. Schedule 2.23(a) ---------------- contains a complete and correct list of all policies of insurance covering any of the Acquired Assets or the Business, true, correct and complete copies of which have been delivered or made available to Buyer. All such policies are in full force and effect. All premiums due on such policies have been paid in full. There is no default with respect to any provision contained in any such policy which could have an adverse affect upon the ability of the insured to collect insurance proceeds under such policy, nor has there been any failure by the insured to give any notice or present any claim under any such policy in a timely fashion or in the manner or detail required by the policy. No notice of cancellation or non-renewal with respect to, or disallowance of any claim under, any such policy has been received by any Seller. Schedule 2.23(b) sets forth ---------------- the terms of the insurance settlement with respect to the February 14, 2001, fire and related damages at Seller's facility located in Baltimore, Maryland. 2.24. Relationship with Customers and Suppliers. Except as set forth on ----------------------------------------- Schedule 2.24, Sellers know of no written or oral communication, fact, event or - ------------- action which exists or has occurred within six months prior to the date of this Agreement, which would lead Sellers reasonably to believe that any current customer which accounted for more than 5% of the net sales of the Business for the immediately preceding 12-month period (including, for this purpose, -28- any Affiliate of Seller) or any current supplier to Sellers of items material to the Business, which items cannot be replaced at comparable cost and the loss of which would likely have a Material Adverse Effect, will terminate or materially and adversely modify its business relationship with Sellers. 2.25. WARN Act. -------- (a) Since the enactment of the WARN Act, Sellers have not effectuated (a) a "plant closing" (as defined in the WARN Act) affecting any site of employment or one or more facilities or operating units within any site of employment or facility of the Business; or (b) a "mass layoff" (as defined in the WARN Act) affecting any site of employment or one or more facilities or operating units within any site of employment or facility of the Business; nor have Sellers been affected by any transaction or engaged in layoffs or employment terminations with respect to the Business sufficient in number to trigger application of any similar state or local law. Except as set forth in Schedule 2.25, none of Sellers' employees who are employed in connection with - ------------- the Business has suffered an "employment loss" (as defined in the WARN Act) within six months prior to date hereof. (b) As used herein, "WARN Act" means the Worker Adjustment and -------- Retraining Notification Act, as codified at 29 U.S.C. (S)(S) 2102 - 2109, as amended. 2.26. Condition of Assets. The buildings, machinery, equipment, tools, ------------------- furniture, improvements and other tangible assets of the Business included in the Acquired Assets are in good operating condition and fit for the purposes for which they are used in the Business, subject to normal maintenance requirements and normal wear and tear reasonably expected in the ordinary course of business, and shall be maintained by Sellers in such good operating condition and repair as of the Closing Date so as to have the capacity to permit the operation of the Business. 2.27. Transactions with Related Parties. Except as described in Schedule --------------------------------- -------- 2.27 since January 1, 2001, none of the Persons described in Section 2.6(n) has - ---- or has had: (a) any contractual or other claims, express or implied, or of any kind whatsoever against Sellers or relating to the Business or the Acquired Assets or the Assumed Liabilities; (b) any interest in the Acquired Assets or any property or assets used by Sellers or in the Business; or (c) engaged in any other transaction with Sellers or the Acquired Assets (other than employment relationships at the salaries disclosed in Schedule 2.18(a) hereto). ---------------- 2.28. Brokerage. Neither Sellers nor their Affiliates have made any --------- agreement or taken any other action which might cause any Person to become entitled to a broker's or finder's fee or commission as a result of the transactions contemplated hereunder, except Robert W. Baird & Co, who shall be paid by Sellers. -29- 2.29. All Assets. Except as set forth in Schedule 2.29, the Acquired ---------- ------------- Assets include all assets, rights, properties and contracts the use of which is necessary to the continued conduct of the Business by Buyer substantially in the manner as it was conducted prior to the Closing Date, including, without limitation, all patterns and molds used in the conduct of the Business prior to the Closing Date. 2.30. Restrictions. Except as set forth in Schedule 2.30, Sellers are not ------------ ------------- a party to any indenture, agreement, contract, commitment, lease, plan, license, Permit, authorization or other instrument, document or other understanding, oral or written, or subject to any charter or other restriction or any judgment, order, writ, injunction, decree or award which materially adversely affects or materially restricts or, to Sellers' knowledge, may in the future materially adversely affect or materially restrict, the business, operations, assets, properties, rights, prospects or condition (financial or otherwise) of the Business after consummation of the transactions contemplated hereby. 2.31. Process of Sale. Sellers solicited potential buyers of the Business --------------- through an offering memorandum and related auction process coordinated by Sellers' financial advisor and the Sellers have used commercially reasonable efforts to obtain maximum commercial value for the Business. Sellers hereby confirm that Buyer submitted the highest final bid for the Business in connection with the process described in the preceding sentence. Schedule 2.31 ------------- sets forth the names of such potential buyers and the materials supplied to each such potential buyer. Each potential buyer executed and delivered a confidentiality agreement in the form set forth in Schedule 2.31, and the ------------- Sellers' and Sellers' financial advisor have used their best efforts to cause such potential buyers to return all materials furnished to them by Sellers, their representatives and financial advisor, or destroy such materials and provide Sellers a written confirmation of destruction. 2.32. Solvency. As of the date hereof and immediately following the -------- Closing, (i) the fair value of the assets of the Sellers, at a fair valuation, exceeds their respective debts and liabilities, subordinated, contingent or otherwise; (ii) the present fair saleable value of the property of the Sellers is greater than the amount that will be required to pay the probable liability of their respective debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (iii) the Sellers are able to pay their respective debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (iv) the Sellers do not have unreasonably small capital with which to conduct the business in which they are engaged as such business is now conducted and is proposed to be conducted. 2.33. Bank Approval. Sellers have provided to Buyer a true and correct ------------- copy of the agreement of Bank of America National Association and the other lenders under the Third Amended and Restated Credit Agreement dated as of October 30, 2000 consenting and approving of the execution of this Agreement and the consummation of the transactions contemplated hereby and releasing all the Acquired Assets (the "Bank Approval"). ------------- 2.34. Opinion of the Sellers' Financial Advisor. The Board of Directors of ----------------------------------------- each Seller has received a written opinion of Robert W. Baird & Co., financial advisor to Sellers, dated the -30- date of this Agreement to the effect that, as of such date, the Purchase Price to be received by the Sellers pursuant to this Agreement is fair to the shareholders of such Sellers from a financial point of view and such opinion has not been withdrawn, amended or modified in any material respect ("Fairness -------- Opinion"). A signed copy of such opinion shall be delivered to Buyer promptly - ------- after receipt thereof by the Sellers. 2.35. Disclosures. ----------- (a) No representation or warranty made by Sellers in this Agreement, nor any statement, record, Disclosure Schedule pertaining to Article II of this Agreement or certificate furnished by Sellers to Buyer pursuant to this Agreement or the Transaction Documents contains any untrue statement of a material fact or omits any material fact necessary to make the statements contained herein or therein not misleading. (b) There is no fact, development or threatened development with respect to the markets, products, services, clients, customers, facilities, computer software, data bases, personnel, vendors, suppliers, operations, assets or prospects of the Business (i) which is actually known to Sellers and (ii) which could reasonably be expected to materially adversely affect the Business, other than such conditions as may affect as a whole the economy generally, and (iii) which is not disclosed in this Agreement. Sellers have no reason to believe that any loss of any employee, agent, customer or supplier or other advantageous arrangement will result because of the consummation of the transactions contemplated hereby. ARTICLE III Representations and Warranties of Buyer --------------------------------------- Buyer represents and warrants to Sellers, as of the date hereof, as follows: 3.1. Organization. Buyer is a limited liability company duly organized, ------------ validly existing and in good standing under the laws of the State of Delaware. 3.2. Authorization and Enforceability. Buyer has full corporate power and -------------------------------- authority to execute, deliver and perform this Agreement and the Transaction Documents to which Buyer is a party. The execution, delivery and performance by Buyer of this Agreement and the Transaction Documents to which Buyer is a party have been duly authorized by all necessary corporate action on the part of Buyer. This Agreement has been, and as of the Closing Date the other Transaction Documents to which Buyer is a party will be, duly executed and delivered by Buyer. This Agreement is a legal, valid and binding obligation of Buyer, enforceable against it in accordance with its terms. As of the Closing Date, the Transaction Documents to be executed by Buyer hereunder will be legal, valid and binding obligations of Buyer, enforceable against it in accordance with their respective terms 3.3. No Violation of Laws or Agreements. The execution, delivery and ---------------------------------- performance of this Agreement and the Transaction Documents do not, and the consummation of the transactions contemplated hereby and thereby will not, (a) contravene any provision of the -31- Operating Agreement of Buyer; (b) violate, conflict with, result in a breach of, or constitute a default (or an event which might, with the passage of time or the giving of notice, or both, constitute a default) under, or result in or permit the termination, modification, acceleration, or cancellation of, or result in the creation of any Lien of any nature whatsoever upon any assets of Buyer or give any other interests or rights therein under (i) any contract, agreement, indenture, mortgage, loan or credit agreement, license, instrument, lease, contract, plan, permit, or other instrument (written or oral) to which Buyer is a party, or by which Buyer may have rights or by which any of its assets may be bound or affected, or (ii) any judgment, injunction, writ, award, decree, restriction, ruling or order of any court, arbitrator or Authority, domestic or foreign, that is binding on Buyer or any constitution, law, ordinance, rule or regulation applicable to Buyer. 3.4. Brokerage. Neither Buyer nor its Affiliates has made any agreement --------- or taken any other action which might cause any Person to become entitled to a broker's or finder's fee or commission as a result of the transactions contemplated hereby. ARTICLE IV Covenants --------- 4.1. Public Announcement. No party hereto shall make or issue, or cause ------------------- to be made or issued, any public announcement or written statement concerning this Agreement or the transactions contemplated hereby (except to the respective directors and officers of Buyer and Sellers) without the prior written consent of the other party (which will not be unreasonably withheld or delayed), unless counsel to such party advises that such announcement or statement may be required by law, in which case the other parties shall be advised and all parties shall use their good faith efforts to cause a mutually agreeable release or announcement to be issued. 4.2. Further Assurances. Sellers acknowledge that Buyer was provided ------------------ limited opportunity to perform diligence on the Business and in recognition of this, Sellers shall take such actions as are reasonably requested by Buyer in order to cure any reasonable errors or omissions which may occur in connection with Buyer's purchase of the Business pursuant to this Agreement and the Transaction Documents. Each Seller shall from time to time after the Closing, at Buyer's request, execute, acknowledge and deliver to Buyer such other instruments of conveyance and transfer and will take such other actions and execute such other documents, certifications, and further assurances as Buyer may reasonably require in order to vest more effectively in Buyer or to put Buyer more fully in possession of any of the Acquired Assets or better to enable Buyer to complete, perform and discharge any of the Assumed Liabilities. Each party shall cooperate and deliver such instruments and take such action as may be reasonably requested by the other party in order to carry out the provisions and purposes of this Agreement and the transactions contemplated hereby, including any reasonable action reasonably requested by the other party to assign and transfer the Permits and Environmental Permits to Buyer in accordance with Section 2.9. 4.3. Cooperation. Buyer, on the one hand, and Sellers, on the other ----------- hand, shall cooperate with each other and shall cause their Affiliates, officers, employees, agents and representatives to cooperate with each other to ensure the orderly transition of the Business from -32- Sellers to Buyer and to minimize the disruption to the Business resulting from the transactions contemplated hereby. 4.4. Use of Names and Logos. After the Closing, Buyer shall have the ---------------------- right to: (a) sell the finished goods inventory purchased from Sellers; (b) use in the operation of the Business all labels and packaging materials purchased by Buyer; and (c) all such other logos, trademarks and trade identification of Sellers as are located at the Real Estate or on the Acquired Assets, provided, however, that Buyer shall not have the right to use any logo, trademarks or trade identification of "ABC-NACO," "ABC Rail," "NACO" or "National Castings," or any derivation thereof beyond 90 days after the Closing. 4.5. Employees. --------- (a) Buyer shall offer employment (at the base compensation and wage levels and on other terms and conditions as Buyer shall determine, subject to any applicable collective bargaining agreements) to each of the employees listed on Schedule 4.5(a) who are actively at work as of the Closing Date. All --------------- such employees who accept Buyer's offer of employment and actually perform services for Buyer on or after the Closing Date are hereinafter referred to as the "Transferring Employees." The employment of the Transferring Employees with ---------------------- Buyer shall be considered effective and their employment by Sellers shall terminate and transfer to Buyer on the Closing Date, provided they first perform services for Buyer on that date or their first scheduled working day thereafter . Notwithstanding anything set forth below or herein to the contrary, (i) nothing in this Agreement shall create any obligation on the part of Buyer to continue the employment of any employee for any definite period following the Closing Date, and (ii) nothing in this Agreement shall preclude Buyer from altering, amending, or terminating any of its employee benefit plans, or the participation of any employees in such plans, at any time. (b) Except as otherwise required by the terms of any such plan or applicable law, or as provided under subsection (c) below, as of the Closing Date all Transferring Employees shall cease active participation in any employee benefit plan sponsored or maintained by Sellers. (c) Buyer will honor all accrued but unused vacation and sick days credited to each Transferring Employee under Sellers' applicable vacation and sick day plan(s), but only to the extent that such accrued but unused vacation and sick days are disclosed on Schedule 4.5(c) and on the understanding that the --------------- amount of such accrued but unused vacation and sick days will be reflected as an Assumed Liability on the Closing Balance Sheet prepared in accordance with Section 1.6 hereof. -33- (d) Retirement Plans. ---------------- (i) Effective as of the Closing or at such later time as is provided by by the Transition Services Agreement, Employees and Former Employees shall cease active participation in and accruing benefits under the Keokuk Steel Castings Inc. - National Castings, Inc. Merged Pension Plan For Hourly Employees and the ABC Rail Corporation Retirement and Disability Pension Plan (each a "Seller Defined Benefit Plan") and Seller will take, or cause to be taken, all such action as may be necessary to effect such cessation under each Seller Defined Benefit Plan as of the Closing. As soon as practicable after the Closing but not more than 30 days after the Closing, Buyer will take, or cause to be taken, all action as may be necessary to cause the Transferring Employees and with mutual agreement by Buyer and Sellers the former employees who are participants in any Seller Defined Benefit Plan as of the Closing (collectively, the "Transferred Participants") to become participants in a defined benefit pension plan or plans which meets the requirements for qualification under Section 401(a) of the Code to be established by Buyer or one of its Affiliates (each a "Buyer Defined Benefit Plan") as of the Closing and which provides each of the Transferred Participants benefits which are substantially equivalent to those provided under the Seller Defined Benefit Plan(s) as of the Closing. Each of the Transferred Participants shall be granted as of the Closing under the Buyer Defined Benefit Plan credit for such Transferred Participant's service which was recognized under the terms of the applicable Seller Defined Benefit Plan as of the Closing for purposes of eligibility, vesting, retirement eligibility and, subject to the transfer of assets and liabilities contemplated by Subsection (ii) below, benefit accrual. (ii) Within 90 days after Closing, Buyer will determine whether a Buyer Defined Benefit Plan will accept a transfer of assets and liabilities from either Seller Defined Benefit Plan in respect of the Transferred Participants (the "Pension Transfer"). If Buyer agrees to such a transfer, then, upon satisfaction of the requirements of Subsection (iii) and (iv) are fulfilled, Seller shall cause the Seller Defined Benefit Plan to transfer to the Buyer Defined Benefit Plan an amount (the "Pension Transfer Amount") in cash or in securities to be mutually agreed on by Seller and Buyer, in respect of the pension liabilities determined with respect to the Transferred Participants under the Seller Defined Benefit Plan as of the Closing. Such pension liabilities shall be determined as of the Closing as the present value of accumulated plan benefits as defined in Statement of Financial Accounting Standards No. 35, based on plan provisions in effect at Closing and applying assumptions used by Sellers which were used to determine the minimum funding requirements for the plan year ended June 30, 2,000, as described in the actuarial report for the Seller Defined Benefit Plan dated May, 2000; provided, however, that the Pension Transfer Amount will be not less than the greater of (i) a total amount of assets equal to the amount required to make the transfer compliant in all respects with requirements of Section 414(l) of the Code or a percentage of the assets of each Seller Defined Benefit Plan equal to the percentage of the liabilities of such Seller Defined Benefit Plan assumed by a Buyer Defined Benefit Plan, determined on the basis of actuarial methods and assumptions mutually agreeable to Buyer and Sellers. Interest on the Pension Transfer Amount from the Closing Date to the date of transfer at a rate of 8.50% compounded annually shall be transferred along with the Pension Transfer Amount. The amount necessary to comply with -34- Section 414(l) of the Code shall be determined using actuarial assumptions mutually agreeable to Buyer and Sellers. (iii) Prior to any transfer of assets and liabilities, Buyer shall present Sellers with an opinion of counsel reasonably satisfactory to Sellers to the effect that each Buyer Defined Benefit Plan is in full force and effect, the Buyer Defined Benefit Plan complies with the applicable requirements set forth in Subsection (i) above, and the terms of the Buyer Defined Benefit Plan meet in all material respects the requirements of Section 401(a) of the Code (or can be timely amended to meet such requirements). (iv) Seller shall cause Seller's actuary to provide to Buyer, not more than 45 days after the Closing, a report with the Pension Transfer Amount determination, together with all information reasonably necessary to verify the accuracy of the determination of such amount. Buyer shall have the right to have Buyer's actuary review the determination of the Pension Transfer Amount and Buyer shall reply to Seller within 30 days of receiving Seller's report as to Buyer's opinion as to the accuracy of the calculations. If any differences between Buyer's and Seller's actuaries exist, Seller and Buyer shall work in good faith to resolve such differences. If any dispute cannot be resolved within 30 days of Buyer's reply to Seller, Buyer may decline to accept the Pension Transfer or Buyer and Seller shall within five days thereafter appoint a mutually acceptable actuary who shall review the calculations of Seller's and Buyer's actuaries and within 45 days after appointment render a final binding decision on the amount of the Pension Transfer Amount and who shall, in making such decision, be limited to either the position of Seller or Buyer. The cost of the mutually acceptable actuary shall be borne equally by Seller and Buyer. In connection with the procedure referred to herein, Seller and Buyer shall provide each other and the actuaries referred to herein access to the relevant business records and other relevant documents and shall permit the other party to consult with its employees and the employees of its Affiliates. (v) In transferring the assets and liabilities from any Seller Defined Benefit Plan to any Buyer Defined Benefit Plan, Buyer and its Affiliates and Seller and its Affiliates shall comply with all applicable requirements of Section 411(d)(6), 414(l) and 401(a)(12) of the Code. Buyer and its Affiliates shall, in the administration of each Buyer Defined Benefit Plan, comply with Section 411(d)(6), 414(l) and 401(a)(12) of the Code and regulations thereunder with regard to accrued benefits transferred from any Seller Defined Benefit Plan. Further, the applicable Buyer Defined Benefit Plan shall honor the provisions of the domestic relations orders that are contained in the personnel and pension files of the Employees and Former Employees which are delivered to Buyer and which previously have been determined qualified by Seller pursuant to Section 206(d)(3) of ERISA and Section 414(p) of the Code, and shall administer such orders in accordance with the terms thereof. Notwithstanding anything to the contrary in this Subsection (v), Buyer reserves the right to amend, modify or suspend any Buyer Defined Benefit Plan at any time or from time to time or terminate the plan at any time. (vi) In connection with the implementation of this Section 4.5, Buyer and its Affiliates and Seller and its Affiliates shall cooperate in the exchange of information, the -35- notification of affected employees and in the preparation of any documentation required to be filed with the IRS, Department of Labor, PBGC or any other applicable governmental agency. (vii) During the period from and after the Closing and prior to the date of the Pension Transfer any Seller Defined Benefit Plan may pay to Transferred Participants or their beneficiaries any benefits to which such persons are then entitled under that Seller Defined Benefit Plan and which were accrued under that plan prior to the Closing. In the event that any such payments are made, the Pension Transfer Amount and the liabilities related thereto shall be reduced by the amount of such payments. (viii) Except with respect to the liabilities that have been actually transferred to the Buyer pursuant to this Section 4.5, Seller shall retain all liability for the administration, management and funding of each Seller Defined Benefit Plan, and Purchaser shall have no such liability with respect to such Seller Defined Benefit Plan. (e) Buyer will cause the appropriate defined contribution plan maintained or adopted by Buyer to accept a transfer, by direct rollover within the meaning of section 401(a)(31) of the Code of the account balances held under any such Sellers plan for the benefit of Transferring Employees. Such transfer shall be made in cash, and notes evidencing loans from any such Sellers plan to a Transferring Employee, or such other assets as the trustee of Buyer's defined contribution plan shall agree to accept. (f) Health and Welfare Plans. Buyer will provide health and welfare ------------------------ benefits to Transferring Employees and their dependents that are reasonably comparable, in the aggregate, to those provided to such Transferring Employees under Sellers' health and welfare plans on the Closing Date. Any Transferring Employee, or dependent thereof, shall become eligible to participate in Buyer's health and welfare plans without regard to any pre-existing condition limitation that did not apply to such Transferring Employee or dependent under Sellers' health and welfare plans. In addition, to the extent that Sellers provide the necessary information on a timely basis, Buyer will credit the Transferring Employees and their dependents with any amounts paid toward annual deductibles or co-pay or out of pocket limitations during the portion of the year preceding the Closing Date. (g) Sellers shall be liable for, and indemnify and hold Buyer harmless from, all claims, demands, costs or other liabilities, including reasonable attorneys' fees: (i) related to the employees of Sellers who do not become Transferring Employees; (ii) to the extent such liability arises from any action, event or course of conduct (except for any action, event or course of conduct by Buyer) that occurs prior to the Closing Date; or (iii) to the extent such liability arises under or relates to any employee benefit plan, program or arrangement of Sellers, or in the case of a plan assumed by Buyer under subsection (e) above, to the extent such liability arises out of any action, inaction or event occurring on or before the Closing Date, or conduct by Sellers. (h) Sellers shall be responsible for providing continuation coverage to employees (and their covered dependents) who do not become Transferring Employees and to Transferring Employees (and their covered dependents) under each of its applicable health plans -36- with respect to all qualifying events under COBRA and comparable state law which occur before the Closing Date. (i) With respect to each Transferring Employee, Sellers shall retain the obligation and liability for any workers' compensation or similar workers' protection claims with respect to any such individual, whether incurred prior to, on or after the Closing Date which are the direct result of an injury or illness originating prior to or on the Closing Date. (j) Complete copies of the personnel records of Transferring Employees shall be transferred to Buyer on the Closing Date. In addition, Sellers shall provide all such additional information as Buyer shall reasonably request to implement the provisions of subsection (e) and (f) hereof, and will cooperate with Buyer, as Buyer shall reasonably request, to enable Buyer to provide the benefits described in those subsections. (k) No Transferring Employee or other current or former employee of Sellers, including any beneficiary or dependent thereof, or any other person not a party to this Agreement, shall be entitled to assert any claim hereunder. (l) Subject to any applicable legal restrictions, Buyer shall assume the Collective Bargaining Agreements listed on Schedule 4.5(k) hereto. Buyer --------------- shall not be responsible, however, for any liabilities under such agreements arising from or relating to acts or omissions occurring prior to the Closing Date; such liabilities shall be solely Sellers' responsibility; and Sellers hereby agree to indemnify Buyer for and hold it harmless from any such liabilities (including Buyer's reasonable attorneys' fees). (m) Buyer shall have the right, in its sole discretion, subject only to compliance with applicable law and any applicable collective bargaining agreement, to amend, discontinue or terminate any employee benefit plan assumed, adopted or provided by Buyer for the benefit of any of Buyer's employees, including the Transferring Employees. 4.6. Taxes. ----- (a) No election with respect to Taxes relating to or in any way affecting the Acquired Assets may be made or changed by Sellers after the date of this Agreement without the prior written consent of Buyer. (b) Sellers shall provide Buyer with a clearance certificate or other similar document or documents which may be required by any state or local taxing Authority in order to relieve Buyer of any obligation to withhold any portion of the Purchase Price or to relieve Buyer of any tax liability of Sellers. (c) Sellers and Buyer shall (i) each provide the other with such assistance as may reasonably be requested by either of them in connection with the preparation of any Tax return, any audit or other examination by any taxing authority or any judicial or administrative proceeding with respect to Taxes; (ii) each retain and provide the other with any records or other information which may be relevant to such return, audit, examination or proceeding, and (iii) -37- each provide the other with any final determination of any such audit or examination, proceeding or determination that affects any amount required to be shown on any Tax return of the other for any period (which shall be maintained confidentially). Without limiting the generality of the foregoing (and, without limiting the generality of Section 2.13 hereof), Buyer and Sellers shall retain, until the applicable statutes of limitations (including all extensions) have expired, copies of all Tax returns, supporting workpapers, and other books and records or information which may be relevant to such returns for all Tax periods or portions thereof ending before or including the Closing Date, and shall not destroy or dispose of such records or information without first providing the other party with a reasonable opportunity to review and copy the same. (d) Buyer and Sellers agree, with respect to persons who may be employed by both of them during the calendar year that includes the Closing Date, to follow the Standard Procedure set forth in Rev. Proc. 96-60, 1996-2 C.B. 399, whereby Buyer and Sellers shall be separately responsible for employment tax reporting for the portion of the year that such persons are employed by each of them. Sellers agree to provide Buyer with all employment tax information reasonably requested by Buyer in connection with Buyer's preparation and filing of employment tax returns for persons who are employed by both Buyer and Sellers for the calendar year that includes the Closing Date. 4.7. Confidentiality. --------------- (a) From and after the Closing, each Seller shall, and shall use their best efforts to cause each of their Affiliates and representatives to, keep confidential and not disclose to any other Person or use for his, her or its own benefit or the benefit of any other Person any Confidential Information. The obligations of Sellers under this Section 4.7 shall not apply to information which (i) is or becomes generally available to the public without breach of the commitment provided for in this Section; or (ii) is required to be disclosed by law, order or regulation of a court or tribunal or governmental authority; provided, however, in any such case, that Sellers subject to such requirement - -------- ------- shall notify Buyer as early as practicable prior to disclosure to allow Buyer to take appropriate measures to preserve the confidentiality of such information. (b) For purposes of this Agreement, "Confidential Information" means ------------------------ all trade secrets, information, data, know-how, systems and procedures of a technical, sensitive or confidential nature in any form relating to the Business or customers of the Business, including without limitation, all business and marketing plans, marketing and financial information, pricing, profit margin, cost and sales information, operations information, forms, contracts, bids, agreements, legal matters, unpublished written materials, names and addresses of customers and prospective customers, information about employees, suppliers and other companies with which the Business has a commercial relationship, plans, methods, concepts, technical information, computer programs or software in various stages of development, passwords, source code listings and object codes. -38- 4.8. Non-Competition. --------------- (a) Each Seller covenants and agrees that on and after the Closing until the fifth anniversary of the Closing Date (the "Restricted Period"), such Seller shall not, and shall cause their respective Affiliates to not, on a worldwide basis, engage, directly or indirectly, in the ownership, management, operation or control of, or be connected as an officer, director, employee, stockholder, consultant, advisor, partner, or otherwise, whether or not compensated for any of the foregoing with, any business which directly or indirectly competes with the Business as it exists as of the Closing Date. Ownership of stock of not more than 2% of the outstanding stock of any other publicly traded company shall not, in and of itself, be a violation of this Section 4.8. (b) During the Restricted Period, neither Sellers nor their Affiliates shall (i) solicit, employ, retain as a consultant, interfere with or attempt to entice away from Buyer, any individual who is, has agreed to be or within one year of such solicitation, employment, retention, interference or enticement has been, employed or retained by Buyer, its Affiliates or any successor to any of the foregoing, or (ii) engage or participate in any effort or act to induce any customers, suppliers, associates, or independent contractors of Buyer, its Affiliates or any successor to any of the foregoing to cease doing business or their association or employment with Buyer, its Affiliates or any successor to the foregoing. (c) During the Restricted Period, Sellers shall refer all business inquiries Sellers receive related to the Business to Buyer. (d) The Restricted Period shall be tolled with respect to the Sellers and their respective Affiliates during any period of violation of this covenant not to compete by any of them and during any other period required for litigation during which Buyer seeks to enforce this covenant against any of Sellers or their Affiliates. (e) In the event that any of the covenants contained in this Section 4.8 shall be determined by any court of competent jurisdiction to be unenforceable by reason of its extending for too long a period of time or over too large a geographical area or by reason of its being too extensive in any other respect, it shall be interpreted to extend only over the longest period of time for which it may be enforceable, and/or over the largest geographical area as to which it may be enforceable and/or to the maximum extent in all other aspects as to which it may be enforceable, all as determined by such court in such action. (f) The restrictive covenants contained in this Section 4.8 are each covenants independent of any other provision of this Agreement, and the existence of any claim which Sellers may allege against any other party to this Agreement, whether based on this Agreement or otherwise, shall not prevent the enforcement of these covenants. Each Seller acknowledges that Buyer is purchasing the goodwill of the Business and the covenants contained in this Section 4.8 are essential to the protection of Buyer's investment in the Business and that Buyer would not purchase the Business but for these covenants. Each Seller agrees that a breach by any Seller of this Section 4.8 shall cause irreparable harm to Buyer and the Business and that Buyer's remedies at law for any breach or threat of breach of the provisions of this Section 4.8 shall be -39- inadequate, and that Buyer shall be entitled to an injunction or injunctions to prevent breaches of this Section 4.8 and to enforce specifically the terms and provisions hereof, in addition to any other remedy to which Buyer may be entitled at law. 4.9. Consolidation of Keokuk. Sellers shall cooperate and assist Buyer ----------------------- with the consolidation and related construction in connection with moving the operations of the Business' facilities located at or around Keokuk, Iowa, into the Hawkeye and Stonecontainer Facilities. In addition, Sellers shall cooperate and assist Buyer with moving all Acquired Assets located at facilities other than those in Keokuk, Iowa, Richmond, Texas, and Baltimore, Maryland. 4.10. Conduct of Business. From the date of this Agreement to the Closing ------------------- Date: (a) Sellers shall conduct, carry on and maintain and preserve the Business intact, maintain the inventory and insurance of the Business at adequate levels, comply with all material laws, preserve the goodwill of suppliers, customers and others having business relations with Sellers and maintain the Business, as well as Sellers' books of account, records and files related to the conduct of the Business and the Employees, all in the ordinary course of business and consistent with prior practice to make the same available to Buyer as of the Closing. (b) Sellers shall inform Buyer in writing of any event or circumstance that has or could reasonably be expected to have a Material Adverse Effect immediately and in no event later than three days after Sellers or any of their Affiliates has knowledge of such an event or circumstance. (c) None of Sellers, any Stockholder nor their respective Affiliates shall, without the prior written consent of Buyer, take or omit to take any action which if taken or omitted prior to the date hereof would constitute a breach of any representations or warranties set forth in this Agreement, or which would result in any of the occurrences or events set forth in Section 2.6 hereof. 4.11. Access, Information and Documents. Sellers shall allow Buyer and --------------------------------- its representatives full and complete access during normal business hours and upon reasonable notice to the books, records, documents and facilities of Sellers, and will on the same condition use best efforts to endeavor to (a) make the officers, employees, contract employees, consultants, attorneys, agents, independent accounts and actuaries of the Sellers available to discuss such aspects of the business, financial condition or prospects of the Sellers as may be reasonably necessary and (b) provide full and complete access during normal business hours and upon reasonable notice to the facilities of third parties where manufacturing, warehousing or distributing of products or inventories of Sellers, or supplying of raw materials to the Sellers, is conducted. Sellers authorize Buyer to, and will cooperate so that Buyer may, obtain information concerning the Business, Acquired Assets and the Real Estate from all government agencies or Authorities having enforcement responsibility for environmental, health, safety, building and zoning and other laws and regulations. 4.12 Negotiations. Neither Sellers nor any of their affiliates, nor any ------------ of their respective officers, directors, employees, agents or representatives, will (i) solicit, initiate, -40- participate in or encourage in any manner any discussions or negotiations regarding a possible sale of the Business with any party other than Buyer, (ii) provide any information regarding Sellers in connection with a sale of the Business with any party other than Buyer; or (iii) enter into any agreement with respect to a sale of the Business with a party other than Buyer, provided, -------- however, that the foregoing will not be deemed to preclude Sellers from sharing information with legal counsel, accountants and other representatives in connection with a sale of the Business with Buyer. Sellers confirm that they have terminated any discussions, arrangements or agreements with any other parties other than Buyer that were pending regarding a sale of the Business. 4.13 Supplements to Disclosure Schedules. As promptly as practicable ----------------------------------- after any event described below, Sellers will provide Buyer with a supplement or amendment to the Disclosure Schedules with respect to any matter, condition or occurrence hereafter arising which, if existing or occurring on the date of this Agreement, would have been required to be set forth or described in such Disclosure Schedules. No supplement or amendment of such Disclosure Schedules shall be deemed to cure any breach of or alter any representation or warranty made in this Agreement so as to (a) permit the Closing to occur unless Buyer specifically agrees thereto in writing or (b) affect Buyer's rights to indemnification hereunder. Without limiting the foregoing, each Seller shall promptly inform Buyer, and Buyer will promptly inform Sellers, of any fact or event which comes to its attention, the existence of which constitutes or likely will constitute a breach of any of its representations or warranties in this Agreement. 4.14 Mutual Covenants. The parties mutually covenant from the date of ---------------- this Agreement to the Closing Date (and subject to the other terms of this Agreement, including Section 6.7 hereof): (a) to cooperate with each other in determining whether filings are required to be made or consents required to be obtained in any jurisdiction in connection with the consummation of the transactions contemplated by this Agreement and in making or causing to be made any such filings promptly and in seeking to obtain timely any such consents; (b) to use all reasonable efforts to obtain promptly the satisfaction (but not waiver) of the conditions to the Closing of the transactions contemplated herein (each party hereto shall furnish to the other and to the other's counsel all such information as may be reasonably required in order to effectuate the foregoing action); and (c) to advise the other party promptly if such party determines that any condition precedent to its obligations hereunder will not be satisfied in a timely manner. 4.15 Filings and Authorizations. Each of Sellers and Buyer will as -------------------------- promptly as practicable, make or cause to be made all such filings and submissions under laws, rules and regulations applicable to them or their Affiliates as may be required to consummate the terms of this Agreement. -41- ARTICLE V Conditions Precedent -------------------- 5.1. Conditions Precedent to Obligations of Buyer. The obligations of -------------------------------------------- Buyer to purchase the Acquired Assets and assume the Assumed Liabilities are subject to the satisfaction, on or prior to the Closing Date, of each of the following conditions (any one or more of which may be waived in writing in whole or in part by Buyer in its sole discretion): (a) Performance of Agreements; Representations and Warranties. --------------------------------------------------------- shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it at or prior to the Closing, and the representations and warranties set forth in this Agreement made by each Seller shall be true and correct in all material respects on and as of the Closing Date (irrespective of any notice delivered to Buyer after the date hereof) with the same force and effect as though such representations and warranties had been made on, as of and with reference to the Closing Date (it being understood that, without limiting the generality of the foregoing, a breach in any respect of Section 2.6(a) hereof shall be deemed material). Buyer shall have been furnished with a certificate of Seller's President or Vice President, dated the Closing Date, certifying to the foregoing. (b) Required Consents; Notice. All statutory and regulatory consents and ------------------------- approvals which are required under the laws or regulations of the United States and other Authorities shall have been obtained and all other necessary and material consents and approvals of third parties or Affiliates of Sellers to the transactions contemplated hereby shall have been obtained. (c) Licenses and Permits. The Permits set forth in Schedule 1.1(b)(viii) -------------------- -------------------- shall have been renewed or be in effect and, if required, transferred or reissued to Buyer. (d) Injunction; Litigation. (i) No statute, rule, regulation or order ---------------------- court or Authority shall be in effect which restrains or prohibits the transactions contemplated by this Agreement or which would limit or adversely affect Buyer's ownership of all or any portion of the Acquired Assets, nor (ii) shall there be pending or threatened any litigation, suit, action or proceeding by any party which could reasonably be expected to limit or adversely affect Buyer's ownership of the Acquired Assets. (e) Documents. Sellers shall have delivered all of the certificates, --------- instruments, contracts and other documents specified to be delivered by them hereunder (including applicable Transaction Documents), in form and substance reasonably satisfactory to Buyer. (f) No Material Adverse Effect. No Material Adverse Effect shall have -------------------------- occurred, nor shall any event or circumstance which could reasonably be expected to have a Material Adverse Effect have occurred. -42- (g) Third-Party Consents. Sellers shall have delivered to Buyer all -------------------- third-party consents required in connection with the transactions contemplated by this Agreement to assign to Buyer the Contracts listed on Schedule 2.7(h), the Contracts listed on Schedules 2.7(a), (b) and (d) (to the extent they are required to be so listed) and any other Contracts material to the Business or under which the consequences of a default or termination could reasonably be expected to have a Material Adverse Effect. (h) Lenders' Consent. The lenders to the Sellers shall have ---------------- consented to the transactions contemplated hereby (i) Cellco Waiver. Sellers shall have delivered to Buyer pursuant ------------- to the Land Lease Agreement dated July 31, 1998, between ABC Rail Products Corporation and Cellco Partnership (the "Cellco Lease") a written waiver of such lessee's right of first refusal under the Cellco Lease. (j) Opinion of Counsel. Buyer shall have received from General ------------------ Counsel to Sellers an opinion dated as of the Closing Date, in form and substance satisfactory to Buyer, to the effect set forth in Exhibit J hereto. Buyer shall have received from Schiff Hardin & Waite, counsel to Sellers, in a form and substance satisfactory to Buyer, to the effect set forth on Exhibit K --------- hereto. 5.2. Conditions Precedent to Obligations of Sellers. The obligations of ---------------------------------------------- Sellers to sell the Acquired Assets are subject to the satisfaction on or prior to the Closing Date, of each of the following conditions (any one or more of which may be waived in writing in whole or in part by Sellers in its sole discretion): (a) Performance of Agreements; Representations and Warranties. --------------------------------------------------------- Buyer shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it at or prior to the Closing, and the representations and warranties set forth in this Agreement made by Buyer shall be true and correct in all material respects on and as of the Closing Date, with the same force and effect as though such representations and warranties had been made on, as of and with reference to the Closing Date. Sellers shall have been furnished with a certificate of the President or a Vice President of Buyer, dated the Closing Date, certifying to the foregoing. (b) Injunction. No statute, rule, regulation or order of any court ---------- or Authority shall be in effect which restrains or prohibits the transactions contemplated by this Agreement. (c) Documents. Buyer shall have delivered all the certificates, --------- instruments, contracts and other documents specified to be delivered by it hereunder (including applicable Transaction Documents), in form and substance reasonably satisfactory to Sellers. 5.3. Termination. ----------- (a) When Agreement May Be Terminated. This Agreement may be -------------------------------- terminated at any time prior to Closing: -43- (i) By mutual consent of Buyer and Sellers; (ii) By Buyer if there has been a material breach by Sellers of any of their respective representations, warranties or covenants, or if any of the conditions specified in Section 5.1 hereof shall not have been fulfilled by the time required and shall not have been waived by Buyer; (iii) By Sellers if there has been a material breach by Buyer of any of its warranties or covenants, or if any of the conditions specified in Section 5.2 hereof shall not have been fulfilled by the time required and shall not have been waived by Sellers; or (iv) By Buyer or Sellers if the Closing shall not have occurred prior to May 31, 2001 (the "Termination Date"). ---------------- (b) Effect of Termination. In the event of termination of this --------------------- Agreement by Sellers or Buyer, as provided above, this Agreement shall forthwith terminate and there shall be no liability on the part of Sellers or Buyer or their respective officers or directors, except for liabilities arising from a breach of this Agreement prior to such termination; provided, however, that -------- ------- the obligations of the parties set forth in Section 5.3(b), Section 6.7 and Article VII hereof shall survive such termination. ARTICLE VI Certain Additional Covenants ---------------------------- 6.1. Certain Taxes and Expenses. Buyer and Sellers shall share -------------------------- equally all state and local sales, use, transfer, real property transfer, documentary stamp, recording and other similar taxes arising from and with respect to the sale and purchase of the Acquired Assets. Whether or not the transactions contemplated by this Agreement are consummated, Sellers and Buyer shall bear their respective accounting, legal and other expenses incurred in connection with the transactions contemplated by this Agreement. 6.2. [Intentionally omitted.] 6.3. Maintenance of Books and Records. Sellers and Buyer shall -------------------------------- cooperate fully with each other after the Closing so that (subject to any limitations that are reasonably required to preserve any applicable attorney- client privilege) each party has access to the business records, contracts and other information existing at the Closing Date and relating in any manner to the Acquired Assets or the conduct of the Business (whether in the possession of Sellers or Buyer). No files, books or records existing at the Closing Date and relating in any manner to the Acquired Assets or the conduct of the Business shall be destroyed by any party for a period of six years after the Closing Date without giving the other party at least 30 days prior written notice, during which time such other party shall have the right (subject to the provisions hereof) to examine and to remove any such files, books and records prior to their destruction. The access to files, books and records contemplated by this Section 6.3 shall be during normal business hours and upon not less than two days prior written request, shall be subject to such -44- reasonable limitations as the party having custody or control thereof may impose to preserve the confidentiality of information contained therein, and shall not extend to material subject to a claim of privilege unless expressly waived by the party entitled to claim the same. 6.4. Collection of Receivables. Sellers shall, by letter prepared by ------------------------- Buyer (the "Letter"), irrevocably authorize, instruct and direct that the ------ account parties of all accounts, notes and receivables (including insurance proceeds except as provided in Section 1.1(b)(xi)) constituting Acquired Assets (such parties, the "Sellers Account Parties") shall make and deliver all ----------------------- payments relating thereto on or after the Closing to such location, bank and account (the "Lockbox Account") as Buyer shall specify. The Letter shall --------------- cover all such matters as Buyer shall reasonably determine. If, notwithstanding such Letter, any of the Sellers Account Parties remit payments on or after the Closing directly or indirectly to Sellers or their Affiliates instead of to the Lockbox Account, Sellers agree that they shall promptly (and in any event no later than two Business Days following receipt) deliver all such payments (including but not limited to negotiable instruments which shall be duly endorsed by such Sellers to the order of Buyer) to Buyer. Sellers hereby irrevocably designate, make, constitute and appoint Buyer (and all persons designated by Buyer) as their true and lawful attorney-in-fact to do any of the following in the sole discretion of Buyer: to receive, give receipts for, take, endorse, assign, deliver, deposit, demand, collect, sue on, compound, and give acquittance for any and all information, documents, payments forms (including negotiable and non-negotiable instruments) and proceeds received by Buyer via the Lockbox Account or from Sellers that relate to the accounts, notes and receivables (including insurance proceeds) of the Sellers Account Parties constituting Acquired Assets. Sellers shall use their best efforts to assist Buyer in collecting in full from Sellers Account Parties all amounts owed pursuant to all accounts, notes and receivables constituting Acquired Assets. 6.5. Product Returns. --------------- (a) Sellers shall remain responsible in full for the 120 days following Closing (the "Returns Period"), and Buyer shall assume no financial, legal or other responsibility during the Returns Period for (i) any returns of products sold or manufactured by Sellers prior to the Closing Date and (ii) non- merchantability due to defective quality of products manufactured by Sellers prior to the Closing Date (including inventory held for inspection), unless the products so manufactured are returned or defective solely because of defects caused by Buyer's acts or omissions after the Closing Date, it being understood that Buyer shall have no obligation to inspect any products manufactured by Sellers prior to the Closing Date (such returns and defective products, including inventory held for inspection, hereinafter referred to as "Qualifying ---------- Returned Products"). During the Returns Period, Buyer shall promptly notify - ----------------- Sellers of any proposed returns of which Buyer is aware prior to such return and of the relevant details, including, if known to Buyer, the price paid by the customer. During the Returns Period, Buyer shall deliver to Sellers within 15 days after the end of each two-week period beginning on the Closing Date a written report setting forth the details of all Qualifying Returned Products returned or identified during the calendar month. Sellers shall have the right, and may be accompanied by representatives of Buyer, to visit the customer to assist in resolving any returns of any Qualifying Returned Products. -45- (b) If a Qualifying Returned Product was included in the Inventory or other Acquired Assets paid for by Buyer at the Closing (a "Purchased Product"), ----------------- Buyer may (in addition to its other rights or remedies) accept for return or instruct the customer to dispose of any Purchased Products which are determined to be defective. Buyer will notify Sellers as to the relevant details, and Sellers will promptly (but in no event later than 10 Business Days thereafter) reimburse Buyer in an amount equal to (i) Sellers' standard cost for the Purchased Product, plus (ii) interest thereon from the Closing Date to the date of payment calculated at the Prime Rate, plus (iii) any freight charges, handling costs, travel and other out-of-pocket costs directly related to such Purchased Product that Buyer incurs or is required to reimburse to the customer. (c) If a Qualifying Returned Product was sold by Sellers prior to the Closing and the sales proceeds or account receivable with respect thereto is reflected as an Acquired Asset paid for by Buyer at the Closing (a "Receivable ---------- Product"), Buyer may (in addition to its other rights or remedies) accept for - ------- return or instruct the customer to dispose of any Purchased Products which are determined to be defective. Buyer will notify Sellers as to the relevant details, and Sellers will promptly (but in no event later than 10 Business Days thereafter) reimburse Buyer in an amount equal to (i) the aggregate purchase price paid by the customer for the Receivable Product, plus (ii) interest thereon from the Closing Date to the date of payment calculated at the Prime Rate, plus (iii) any freight charges, handling costs, travel and other out-of- pocket costs directly related to such Purchased Product that Buyer incurs or is required to reimburse to the customer. (d) Notwithstanding the foregoing, Sellers shall have the right to inspect the Qualifying Returned Products and any documentation relating thereto within ten (10) Business Days of Buyer's notice to Sellers pursuant to Section 6.5(c) above. 6.6. Product Warranty Claims. In the event that after the Closing, Sellers ----------------------- obtain knowledge that they are obligated to perform services or supply replacement products pursuant to a claim under a product warranty relating to a product of the Business sold or delivered to a direct or indirect customer of the Business (a "Former Customer") (which liability constitutes a Retained --------------- Liability), Sellers shall promptly notify Buyer of such Retained Liability owed to a Former Customer. Buyer shall use its reasonable efforts to perform services or supply replacements as in its reasonable judgment are required under the applicable product warranty. Sellers shall promptly (and in any event no later than 30 days following request by Buyer) compensate Buyer, at Buyer's fully- burdened factory costs then in effect together with a service charge of 5% on all materials procured by Buyer, for all services performed and products and parts supplied pursuant to this Section 6.6. As promptly as practicable after Closing, Buyer shall mark or otherwise identify all products manufactured by Buyer, which are identical to products relating to the Business and manufactured by Sellers prior to Closing, in order to distinguish such Buyer's products from those which were manufactured by Sellers prior to Closing. -46- 6.7. Indemnification. Sellers and Buyer agree as follows: --------------- (a) General Indemnification Obligations. ----------------------------------- (i) Each Seller, on a joint and several basis, shall indemnify Buyer and its directors, officers and other Affiliates and hold Buyer and its directors, officers and other Affiliates harmless from and against any and all Damages arising out of or resulting from (A) any breach or inaccuracy of any representation or warranty made by the Sellers in this Agreement or in any document or certificate required to be furnished to Buyer by the Sellers or their Affiliates pursuant to this Agreement (including the Transaction Documents); (B) any breach or violation of any covenant or agreement of the Sellers contained in this Agreement or any other Transaction Document; (C) any liability arising under any bulk sales law in connection with the transfer of the Acquired Assets; (D) any Retained Liabilities; (E) Sellers' conduct of the Business at or prior to the Closing, including, without limitation, any liabilities based upon, arising out of, relating to or otherwise in respect of any events, actions, occurrences, omissions, circumstances or conditions whatsoever occurring or existing at or prior to the Closing, whether asserted prior to, at or after the Closing (except to the extent the same constitutes an Assumed Liability); and (F) any claim of damages brought or sought against Buyer by third parties that alleges that the Intellectual Property or Buyer's use of the Intellectual Property in the Business infringes any patent, copyright, trade secret or other proprietary right of any third party. (ii) Buyer shall indemnify Sellers and their directors, officers and other Affiliates and hold Sellers and their directors, officers and other Affiliates harmless from and against any and all Damages arising out of or resulting from (A) any falsity, breach or inaccuracy of any representation or warranty made by Buyer in this Agreement or in any document or certificate required to be furnished to Sellers by Buyer pursuant to this Agreement (including the Transaction Documents); (B) any breach or violation of any covenant or agreement of Buyer contained in this Agreement or any other Document; (C) any Assumed Liabilities, (D) the failure of Sellers to comply with applicable bulk transfer laws or similar statutes, laws or regulations, and (E) Buyer's conduct of the Business after the Closing. (iii) For purposes of this Agreement, "Damages" shall mean ------- any and all losses, liabilities, obligations, damages, fines, penalties, deficiencies, interest, costs and expenses and any claims, actions, demands, causes of action, judgments, costs and expenses (including attorneys' fees and all other expenses incurred in investigating, preparing or defending any litigation or proceeding, commenced or threatened incident to the successful enforcement of this Agreement). (b) General Indemnification Procedures. ---------------------------------- (i) A party seeking indemnification pursuant to this Section 6.7 (an "Indemnified Party") shall give prompt notice to the party from whom such ----------------- indemnification is sought (the "Indemnifying Party") of the assertion of ------------------ any claim, the incurrence of any Damages, or the commencement of any action, suit or proceeding, of which it has knowledge and in respect of which indemnity may be sought hereunder, and will give the Indemnifying Party such information with respect thereto as the Indemnifying Party may reasonably request, but failure to -47- give such required notice shall relieve the Indemnifying Party of any liability hereunder only to the extent that the Indemnifying Party has suffered actual prejudice thereby. The Indemnifying Party shall have the right, exercisable by written notice to the Indemnified Party within 10 days of receipt of notice from the Indemnified Party of the commencement of or assertion of any claim or action, suit or proceeding by a third party in respect of which indemnity may be sought hereunder (a "Third Party Claim"), to assume the defense of such Third ----------------- Party Claim which involves (and continues to involve) solely monetary damages; provided that (A) the Indemnifying Party expressly agrees in such notice that, - -------- as between the Indemnifying Party and the Indemnified Party, the Indemnifying Party shall be solely obligated to satisfy and discharge the Third Party Claim; (B) the defense of such Third Party Claim by the Indemnifying Party will not, in the reasonable judgment of the Indemnified Party, have any continuing material adverse effect on the Indemnified Party's business; and (C) the Indemnifying Party makes reasonably adequate provision to ensure the Indemnified Party of the ability of the Indemnifying Party to satisfy the full amount of any adverse monetary judgment that may result (the conditions set forth in clauses (A), (B) and (C) are collectively referred to as the "Litigation Conditions"). (ii) Within ten (10) days after the Indemnifying Party has given notice to the Indemnified Party of its intended exercise of its right to defend a Third Party Claim, the Indemnified Party shall give notice to the Indemnifying Party of any objection thereto based upon the Litigation Conditions. If the Indemnified Party so objects, the Indemnified Party shall continue to defend the Third Party Claim until such time as such objection is withdrawn. If no such notice is given, or if any such objection is withdrawn, the Indemnifying Party shall be entitled to assume and conduct such defense, with counsel selected by the Indemnifying Party and reasonably acceptable to the Indemnified Party, until such time as the Indemnified Party shall give notice that any of the Litigation Conditions, in its reasonable judgment, are no longer satisfied. (iii) The Indemnifying Party or the Indemnified Party, as the case may be, shall have the right to participate in (but not control), at its own expense, the defense of any Third Party Claim which the other party is defending as provided in this Agreement. (iv) The Indemnifying Party, if it shall have assumed the defense of any Third Party Claim as provided in this Agreement, shall not consent to a settlement of, or the entry of any judgment arising from, any such Third Party Claim without the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld or delayed). The Indemnifying Party shall not, without the prior written consent of the Indemnified Party, enter into any compromise or settlement which commits the Indemnified Party to take, or to forbear to take, any action. The Indemnified Party shall have the sole and exclusive right to settle any Third Party Claim, on such terms and conditions as it deems reasonably appropriate, to the extent such Third Party Claim involves equitable or other non-monetary relief, and shall have the right to settle any Third Party Claim involving monetary damages with the written consent of the Indemnifying Party, which consent shall not be unreasonably withheld or delayed. (v) Amounts paid in respect of indemnification obligations of the parties shall be treated as an adjustment to the Purchase Price. Whether or not the Indemnifying Party chooses to defend or prosecute any claim involving a third party, all the parties hereto shall -48- cooperate in the defense or prosecution thereof and shall furnish such records, information and testimony, and attend such conferences, discovery proceedings, hearings, trials and appeals, as may be reasonably requested in connection therewith. (vi) An action or claim for Damages arising out of or resulting from a breach of representation or warranty shall not be brought or made after the expiration of the applicable period set forth in Section 7.2; provided, however, that the foregoing time limitations shall not apply to any - -------- ------- such claims which have been the subject of a written notice from Buyer to Sellers or from Sellers to Buyer, as the case may be, prior to such period, which notice specifies in reasonable detail the nature and basis for such claim. Neither Buyer nor Sellers shall be entitled to indemnification for Damages incurred as a result of any breach of representations or warranties in this Agreement unless the aggregate amount of Damages incurred by Buyer (and the other Persons for which it can claim indemnification) or Sellers (and the other Persons for which it can claim indemnification), as the case may be, in connection with breaches of representations and warranties exceeds (on a one- time basis only) $150,000 in the aggregate (the "Threshold Amount"), in which ---------------- case the Indemnified Party will have the right to indemnification for all Damages incurred, including the Damages incurred by the Indemnified Party prior to the amount of Damages exceeding the Threshold Amount; provided, however, that -------- ------- in no event shall the party be liable for breaches of representations and warranties under Section 6.7(a)(i)(A) to the other party for Damages in an aggregate amount in excess of $24,000,000 (the "Cap"). For purposes of determining any breach of, and calculating the amount of Damages incurred by the Indemnified Party arising out of or resulting from, any breach of a representation, covenant or agreement by Sellers or their Affiliates or Buyer, the references to "knowledge," "to Sellers' knowledge," "Material Adverse Effect" or materiality or other correlative terms shall be disregarded. The parties acknowledge that any limitation or condition of liability contained in this Section 6.7(b)(vi) is not applicable to breaches of covenants or agreements in this Agreement, Sellers' conduct of the Business at or prior to the Closing, the Retained Liabilities and the Assumed Liabilities. (vii) Notwithstanding anything to the contrary in this Section 6.7, (A) no limitation or condition of liability provided in Section 6.7(b)(vi) shall apply to the breach of any of the representations and warranties contained herein if such representation or warranty was made with actual knowledge that it contained an untrue statement of a material fact or omitted to state a material fact necessary to make the statements or facts contained therein not misleading and (B), Buyer shall be entitled to indemnification for Damages in respect of a breach of Sections 2.1, 2.2, 2.3, 2.4, 2.9, 2.11, 2.13, 2.18(f), 2.27 and 2.28 irrespective of the Threshold Amount and the Cap. (viii) The indemnification rights of the parties under this Section 6.7 are independent of and in addition to such rights and remedies as the parties may have at law or in equity or otherwise, including, without limitation, for any breach of representation, warranty, agreement or covenant hereunder on the part of any party hereto, including the right to seek rescission or restitution, none of which rights or remedies shall be affected or diminished hereby. The parties hereto specifically acknowledge and agree that the remedy at law for breach of this Agreement by Sellers will be inadequate and that Buyer, in addition to any other relief available -49- to it, shall be entitled to injunctive relief and specific performance of the terms and provisions hereof. (ix) No right to indemnification under this Section 6.7 shall be limited by reason of any investigation or audit conducted before or after the Closing of any party hereto or the knowledge of such party of any breach of any representation, warranty, agreement or covenant by the other party at any time, or the decision by such party to complete the Closing. (c) Environmental Indemnification. In addition to the foregoing, ----------------------------- Buyer agree to as follows: (i) Sellers hereby jointly and severally agree to indemnify, defend and hold Buyer, its respective officers, directors and other Affiliates harmless from and against, and to reimburse Buyer for any and all Environmental Liabilities, irrespective of the Threshold Amount, asserted against or incurred by Buyer. (1) Sellers shall respond on Buyer's behalf and defend any claims arising from Environmental Liabilities or, at Buyer's election, to pay the costs of Buyer's response and defense. (2) Sellers hereby waive and release Buyer from any and all claims arising from Environmental Liabilities, known or unknown, foreseen and unforeseen, which exist or may arise in the future under Environmental Laws, including CERCLA or any other statutes now or hereafter in effect in relation to Pre-Closing Environmental Conditions. 6.8. Discharge of Business Obligations. From and after the Closing, --------------------------------- Sellers shall pay and discharge, in accordance with past practice but not less than on a timely basis, all obligations and liabilities incurred prior to the Closing in respect of the Business, its operations or the assets and properties used therein (except for the Assumed Liabilities), including any liabilities or obligations to employees, any Authority, trade creditors and clients and customers of the Business. 6.9. UCC Matters. From and after the Closing Date, Sellers will promptly ----------- refer all inquiries with respect to ownership of the Acquired Assets or the Business to Buyer. In addition, Sellers will execute such documents and financing statements as Buyer may request from time to time to evidence transfer of the Acquired Assets to Buyer, including any necessary assignment of financing statements. 6.10. Title Insurance/Survey/Estoppels -------------------------------- (a) The Sellers shall cooperate with Buyer and use their commercially reasonable efforts to assist Buyer in obtaining, good and valid, irrevocable ALTA title insurance commitments (collectively, the "Title Commitments," and each a "Title Commitment"), in final form, from one or more title insurance companies reasonably acceptable to Buyer (collectively, the "Title Company"), irrevocably committing the Title Company (subject only to the satisfaction of any industry standard requirements contained in the Title Commitment and -50- reasonably acceptable to Buyer) to issuing ALTA form of title insurance policies insuring good, valid, indefeasible fee simple title to the owned real property in Buyer, in all cases, in the respective amounts that Buyer requests prior to Closing, subject to no Liens or other exceptions to title other than Permitted Exceptions (collectively the "Title Policies") and insuring pedestrian and vehicular access to and from one or more legally and physically open public rights of way satisfactory to Buyer, in its sole but reasonable discretion. Each of the Title Commitments shall be effective as of a date occurring not earlier than the date of this Agreement and the effective dates of each of them shall be brought down to the time of the Closing. Each such Title Policy shall include such endorsements thereto as may reasonably be requested by Buyer. On or prior to the Closing Date (and, if necessary, after the Closing Date), the Sellers shall execute and deliver, or cause to be executed and delivered, to the Title Company any affidavits, standard gap indemnities and similar documents reasonably requested by the Title Company in connection with the issuance of the Title Commitments or the Title Policies. The Sellers and Buyer shall each pay at Closing one half (1/2) of all premiums and other fees, costs and expenses necessary for the issuance of the Title Policies. (b) The Sellers shall cooperate with Buyer and use their commercially reasonable efforts to cause to be delivered to Buyer promptly following Closing, as-built surveys of each parcel of the owned real property (collectively, the "Surveys") in accordance with (i) the 1997 minimum standard detail requirements for ALTA/ACSM Land Title Surveys, including, without limitation, Table A items 2,3,4,6,7,8,9,10,11 and 13 and such additional or different Table A Items as Buyer may, in its discretion, require, (ii) with the Accuracy Standards (as adopted by ALTA and ACSM) of an Urban Survey, and (iii) local standards required by Buyer, in its discretion, dated after the date hereof, and showing, without limiting the foregoing, with respect to each parcel of the owned real property, all easements and other appurtenances benefiting and all easements and other encumbrances burdening such parcel. Each Survey shall be certified to any lender providing financing to Buyer for the transactions contemplated hereby, the Buyer, the Title Company and any other person reasonably requested by Buyer and shall comply with any requirements imposed by the Title Company as a condition to the removal of any survey exception from the general exceptions to the Title Policy covering the owned real property shown on such survey. (c) Immediately upon its execution of this Agreement, the Sellers shall cooperate with Buyer and shall use commercially reasonable efforts to have delivered to Buyer prior to the Closing estoppel certificates and lessor waivers (such estoppel certificates and consents and/or waivers not to be conditioned on any increased rental, other payment, reduced term, or other change of lease terms), in a form acceptable to Buyer and its lender, if any (the "Estoppel Certificates"), from each lessor under the Leasehold Property Leases. (d) The Sellers shall, at the request of Buyer, reasonably cooperate with Buyer in obtaining building code and zoning code compliance letters stating that each parcel of owned real property complies with the building and zoning codes applicable thereto and otherwise in form and substance satisfactory to Buyer from the governmental authorities having jurisdiction over such matters. In the event such letters are unavailable, Sellers shall reasonably cooperate with Buyer in obtaining alternative forms of assurance of zoning and building code compliance. -51- 6.11. Financial Statements. Sellers shall cooperate and assist in -------------------- providing Buyer the following financial statements: (a) audited year-end financial statements as of and for the Business as of the annual period ended December 31, 2000 and (b) audited year-end financial statements for the Business as of and for the annual period ended December 31, 1999 (the "Audited Financial ----------------- Statements"). Sellers shall cooperate and assist Buyer in efforts to assure - ---------- that the Audited Financial Statements (a) be correct and complete and in accordance with the books and records of Sellers; (b) fairly present the results of operations, financial position, assets and liabilities of the Business as of their respective dates or for the periods covered thereby; (c) be prepared in accordance with GAAP on a basis consistent with past practice; and (d) except as set forth in Schedule 2.5, reflect accurately all costs and expenses of the ------------ Business as if Sellers were independent and not affiliated with any other Person. 6.12. Bulk Transfer. Seller shall take all necessary steps prior to ------------- Closing to comply with all applicable bulk transfer laws, or similar statutes, laws or regulations, including without limitation, state or local tax laws or creditor related laws, arising as a result of the transactions contemplated by this Agreement. 6.13. ROI License. Seller shall prior to Closing procure for Buyer a ----------- license, in a form acceptable to the Buyer, to use the Manage 2000 software of ROI Systems, Inc. that is currently used in the Business at no additional cost to the Buyer. 6.14. Insurance Proceeds. Seller shall take all necessary steps in order ------------------ for Buyer to receive the insurance proceeds set forth on Schedule 2.23(b) hereto, including, among other things, execute, deliver and acknowledge to Buyer or the insurance provider or its agent such other instruments of conveyance and transfer of such proceeds. ARTICLE VII Miscellaneous ------------- 7.1. Construction. Buyer and Sellers have participated jointly in the ------------ negotiation and drafting of this Agreement and the Transaction Documents. In the event any ambiguity or question of intent or interpretation arises, this Agreement and the Transaction Documents shall be construed as if drafted jointly by Buyer and Sellers, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word "including" in this Agreement shall mean including without limitation. Nothing in the Disclosure Schedules hereto shall be deemed adequate to disclose an exception to a representation or warranty made herein unless the exception is described on the Disclosure Schedule with reasonable particularity and expressly refers to the applicable Section of this Agreement. Section references refer to this Agreement unless otherwise specified. 7.2. Nature and Survival of Covenants and Representations. With ---------------------------------------------------- respect to the several covenants, agreements, representations and warranties of the parties hereto in this Agreement or in any Disclosure Schedule or Exhibit hereto or any certificate or other document -52- delivered pursuant to this Agreement: (a) the covenants and agreements (including in respect of Retained Liabilities and Assumed Liabilities) shall survive the Closing indefinitely; and (b) the representations and warranties shall survive until the date two years after the Closing Date (the "General -------- Survival Period"), except that the representations and warranties of Sellers set - --------------- forth in Sections 2.1, 2.2, 2.3, 2.4, 2.9, 2.11, 2.13, 2.14, 2.18, 2.31, 2.32, 2.33 and 2.34 and of Buyer set forth in Sections 3.1, 3.2 and 3.3 shall survive indefinitely. All rights to indemnification contained in this Agreement shall not terminate or expire but shall continue indefinitely, subject to the terms hereof. 7.3. Notices. Any notice, request, demand, waiver, consent, approval or ------- other communication which is required or permitted to be given to any party hereunder shall be in writing and shall be deemed given only if delivered to the party personally or sent to the party by telecopy, telegram or by registered or certified mail (return receipt requested) with postage and registration or certification fees thereon prepaid, addressed to the party at its address set forth below: If to Buyer: Matrix Metals LLC c/o ING Furman Selz Investments 55 East 52/nd/ Street 37/th/ Floor New York, NY 10055-0002 Fax: 212.409.5874 Attention: James L. Luikart with a copy to: Dechert 4000 Bell Atlantic Tower 1717 Arch Street Philadelphia, PA 19103-2793 Fax: (215) 994-2222 Attention: Carmen J. Romano -53- If to Sellers: ABC-NACO Inc. 2001 Butterfield Road, Suite 502 Downers Grove, IL 60515 Attention: Corporate Secretary Telephone: (630) 852-1300 Telecopy: (630) 737-0167 with a copy to: Schiff Hardin & Waite 6600 Sears Tower Chicago, IL 60606 Attention: Robert J. Regan Telephone: (312) 258-5606 Telecopy: (312) 258-5700 7.4. Successors and Assigns. The provisions of this Agreement shall be ---------------------- binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other party hereto, except that Buyer may (a) assign its rights under this Agreement to any Affiliate or require Sellers to transfer the Acquired Assets directly to a subsidiary of Buyer and (b) assign its rights under this Agreement as collateral security to any entity providing direct or indirect financing to Buyer or any of its Affiliates. Without limiting the foregoing, Buyer shall have the right to assign after the Closing its rights in whole or in part as to Sellers' covenants, representations and warranties hereunder to any successor in interest to Buyer of any of the Acquired Assets. 7.5. Exhibits and Schedules. All Exhibits and Disclosure Schedules ---------------------- annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. 7.6. Governing Law. This Agreement shall be governed by and construed in ------------- accordance with the laws of the State of New York, without giving effect to the conflicts of laws principles thereof. 7.7. Consent to Jurisdiction. Each of Buyer and Seller irrevocably ----------------------- submits to the exclusive jurisdiction of the State of New York, for purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby (and agrees not to commence any action, suit or proceeding relating hereto except in such courts). Each of Buyer and Seller further agrees that service of any process, summons, notice or document by U.S. registered mail to such party's respective address set forth in Section 7.3 shall be effective service of process for any action, suit or proceeding with respect to any matters to which it has submitted to jurisdiction as set forth in the immediately preceding sentence. Each of Buyer and Seller irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in the -54- State of New York, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. 7.8. Severability. The parties agree that (a) the provisions of this ------------ Agreement shall be severable in the event that any provision hereof is held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, (b) such invalid, void or otherwise unenforceable provision shall be automatically replaced by another provision which is as similar as possible in terms to such invalid, void or otherwise unenforceable provision but which is valid and enforceable and (c) the remaining provisions shall remain enforceable to the fullest extent permitted by law. 7.9. No Third Party Beneficiaries. Nothing herein expressed or implied ---------------------------- is intended or should be construed to confer upon or give to any Person other than the parties hereto and their successors and assigns any rights or remedies under or by reason of this Agreement. 7.10. Entire Agreement. This Agreement, together with the Disclosure ---------------- Schedules and Exhibits hereto and the other Transaction Documents, constitutes the entire understanding of the parties with respect to the subject matter hereof, supersedes any prior agreements or understandings, written or oral, between the parties with respect to the subject matter hereof (including, without limitation, the letter of intent, dated March 27, 2001 (as amended), between Buyer and Sellers, and is not intended to confer upon any Person other than the parties hereto any benefit, right or remedy. 7.11. Amendment and Waiver. (a) The parties may, by mutual agreement, -------------------- amend this Agreement in any respect, and any party, as to such party, may (i) extend the time for the performance of any of the obligations of the other party; (ii) waive any inaccuracies in representations and warranties by the other party; (iii) waive compliance by the other party with any of the covenants or agreements contained herein and performance of any obligations by the other party; and (iv) waive the fulfillment of any condition that is precedent to the performance by such party of any of its obligations under this Agreement. To be effective, any such amendment or waiver must be in writing and be signed by the party providing such waiver or extension, as the case may be. The rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies which any party may otherwise have at law or in equity. The waiver by any party hereto of any breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach, whether or not similar. 7.12. Knowledge of Sellers. The terms "Sellers' knowledge", "knowledge of -------------------- Sellers" or correlative meanings shall be deemed to include actual knowledge of each Seller and any matters, occurrences or events as to which each Seller should have known upon due inquiry. 7.13. Counterparts. This Agreement may be executed in two or more ------------ counterparts, each of which shall be deemed an original, but which together shall constitute one and the same instrument. -55- 7.14. Headings. The headings preceding the text of the sections and -------- subsections hereof are inserted solely for convenience of reference, and shall not constitute a part of this Agreement nor shall they affect its meaning, construction or effect. 7.15. Certain Defined Terms. As used herein, the terms below have the --------------------- following definitions: (a) "Affiliate" of any Person means any Person, directly or --------- indirectly controlling, controlled by or under common control with such Person. (b) "Authority" means any federal, state, local or foreign --------- governmental or regulatory entity (or any department, agency, authority or political subdivision thereof). (c) "Business Day" means any day other than a Saturday, Sunday, ------------ or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. (d) "Environmental Liability" means, regardless of whether any of ------------------------ the following are contained in any disclosure schedule to this Agreement or otherwise disclosed to Buyer prior to the Closing Date, any and all Damages known or unknown, foreseen or unforeseen, whether contingent or otherwise, fixed or absolute, present or arising in the future, asserted against or reasonably incurred by Buyer arising out of or related to (1) environmental conditions, including without limitation, the presence, Release, threat of Release, Management of or exposure to Hazardous Substances first occurring prior to the Closing Date at, on, in, or under any property now or previously owned, operated or leased by the Sellers or any affiliate of the Sellers in connection with the Business or Acquired Assets, whether into the air, soil, ground or surface waters on-site or off-site; or (2) the off-site transportation, storage, treatment, recycling, disposal or arrangement for disposal of Hazardous Substances Managed or Released by or on behalf of the Sellers or any affiliate of the Sellers or any of the respective predecessors in interest with respect to the Business, the Real Estate or Acquired Assets or at or from any property now or previously owned, operated or leased by the Sellers and any affiliate of the Sellers in connection with the Business or Acquired Assets; or (3) any violation of any Environmental Law by Sellers or the Business first existing prior to the Closing Date (including, without limitation, cost and expenses for pollution control or monitoring equipment required to bring the Business in to compliance with Environmental Laws and fines, penalties and defense costs incurred for such reasonable time after the Closing as it takes the Buyer to come into compliance with Environmental Laws). (e) "GAAP" means United States generally accepted accounting ---- principles consistently applied. (f) "Lien" means any lien, charge, claim, pledge, security ---- interest, conditional sale agreement or other title retention agreement, lease, mortgage, security agreement, right of first refusal, option, restriction, tenancy, license, covenant, right of way, easement or other encumbrance (including the filing of, or agreement to give, any financing statement under the Uniform Commercial Code or statute or law of any jurisdiction). -56- (g) "Material Adverse Effect" means a material adverse effect upon ----------------------- the business (including the current and prospective possession, use, occupancy or operation of the Business and the Acquired Assets), assets, liabilities, condition (financial or otherwise), results of operations or prospects of the Business, the Acquired Assets or the Assumed Liabilities. (h) "Person" means an individual, a corporation, a partnership, an ------ association, an Authority, a trust or other entity or organization. -57- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the day and year first written above. ABC-NACO INC. By _____________________________________ Name: Title: NACO INC. By _____________________________________ Name: Title: NATIONAL CASTINGS INC. By _____________________________________ Name: Title: NACO FLOW PRODUCTS, INC. By _____________________________________ Name: Title: -58- BUYMETALCASTINGS, INC. By _____________________________________ Name: Title: NATIONAL ENGINEERED PRODUCTS COMPANY, INC. By _____________________________________ Name: Title: MATRIX METALS LLC By its Members ING FURMAN-SELZ INVESTORS III LP ING BARINGS U.S. LEVERAGED EQUITY PLAN LLC ING BARINGS GLOBAL LEVERAGED EQUITY PLAN LTD. By: FS Private Investments III LLC, Manager By:___________________________________________ Name: James L. Luikart Title: Managing Member -59- EX-4.1 3 dex41.txt SENIOR DEBT LETTER FROM BANK Exhibit 4.1 EXECUTION COPY BANK OF AMERICA, N.A. 231 South LaSalle Street Chicago, Illinois 60697 April 17, 2001 ABC NACO Inc. 2001 Butterfield Road Suite 502 Downers Grove, Illinois 60515 Attn: Vaughn W. Makary Re: Senior Debt Restructuring Amendment ----------------------------------- Ladies and Gentlemen: ABC-NACO Inc., a Delaware corporation (the "Company" or "ABC"), ABC-NACO de ------- --- Mexico, S.A. de C.V., a Mexican corporation (the "Mexican Borrower"), Dominion ---------------- Castings Limited, an Ontario corporation (the "Canadian Borrower", together with ----------------- the Company and the Mexican Borrower, the "Borrowers"), the financial --------- institutions named as signatories hereto (collectively, the "Lenders") and Bank ------- of America, N.A. in its capacities as "Agent" and "Collateral Agent" for the Lenders (collectively, the "Agent") are parties to that certain Third Amended ----- and Restated Credit Agreement dated as of October 30, 2000, as modified by that certain letter agreement dated as of January 31, 2001 among such parties (the "Credit Agreement"), pursuant to which the Lenders have agreed, subject to the ---------------- terms and conditions set forth therein, to extend credit to the Borrowers. Undefined capitalized terms which are used herein shall have the meanings ascribed to such terms in the Credit Agreement. The Company has requested that the Agent and the Lenders agree to a restructuring (the "Restructuring") of its obligations under the Credit ------------- Agreement and related Loan Documents, and the Lenders hereby commit and agree to enter into a definitive amendment to the Credit Agreement and certain other related definitive agreements necessary or desirable to effect such Restructuring, pursuant to the terms and conditions of this letter and the attached term sheet (the "Term Sheet" and, collectively with this letter, the ---------- "Commitment Letter"). - ------------------ The commitment of the Agent and the Lenders hereunder is subject to the satisfaction of each of the following conditions precedent: (a) each of the terms and conditions set forth herein and in the Term Sheet; (b) the negotiation, execution and delivery of a definitive amendment to the Credit Agreement and other definitive documentation for the Restructuring consistent with the Term Sheet and otherwise satisfactory to the Agent and the Lenders, including, without limitation, opinions, certificates, resolutions, lien searches, title insurance and other customary documentation with respect to such transactions; (c) no change, occurrence or development after the date hereof that could reasonably be expected to have Material Adverse Effect; (d) the Lenders and the Agent not becoming aware after the date hereof of any information or other matter which in their judgment is inconsistent in a material and adverse manner with any information or other matter disclosed to them prior to the date hereof and (e) no "Default" or "Event of Default" (as such terms are defined in the Credit Agreement), other than "Existing Defaults" referred to and defined in the Term Sheet, shall have occurred and be continuing. Each of the Borrowers hereby represent, warrant and covenant that (a) all information, other than the "Projections" (defined below), which has been or is hereafter made available to the Agent or the Lenders by the Borrowers or any of their advisors or representatives in connection with the Restructuring or any of the transactions contemplated in connection therewith and described or referred to in the Term Sheet (the "Information") is and will be complete and correct in ----------- all material respects and does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein not misleading, and (b) all financial projections concerning the Borrowers and their respective Subsidiaries that have been or are hereafter made available to the Agent or the Lenders by the Borrowers or any of their advisors or representatives (the "Projections") have been or will be ----------- prepared in good faith based upon assumptions the Borrowers believe to be reasonable. The Borrowers agree to furnish the Agent and the Lenders with such Information and Projections as the Agent or any Lender may reasonably request and to supplement the Information and the Projections from time to time until the closing date for the Restructuring so that the representation, warranty and covenant in the preceding sentence is correct on such closing date. Without limiting the obligations of the Borrowers under the Credit Agreement, by acceptance of this Commitment Letter, the Borrowers jointly and severally agree to pay all reasonable out-of-pocket fees and expenses (including reasonable attorneys' and advisors' fees and expenses) incurred before or after the date hereof by the Agent and each Lender in connection with the Restructuring and the other transactions contemplated hereby. Without limiting the obligations of the Borrowers under the Credit Agreement, the Borrowers jointly and severally agree to indemnify and hold harmless the Agent, each Lender and each of their affiliates, directors, officers, employees, attorneys, advisors and agents (each, an "Indemnified Party") from and against ----------------- (and will reimburse each Indemnified Party as the same are incurred) any and all losses, claims, damages, liabilities, and expenses (including, without limitation, the reasonable fees and expenses of counsel and the allocated cost of internal counsel) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation or proceeding or preparation of a defense in connection therewith) the Restructuring or any of the other transactions contemplated hereby, unless and only to the extent that, as to any Indemnified Party, it shall be determined in a final, non-appealable judgment by a court of competent jurisdiction that such losses, claims, damages, liabilities or expenses resulted primarily from the gross negligence or willful misconduct of such Indemnified Party. No Indemnified Party shall be liable for any damages arising from the use by others of Information or other materials obtained through the Internet or other similar information transmission systems in connection with the Restructuring. In the case of any investigation, litigation or proceeding to which the indemnity in this paragraph applies, such 2 indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by the Borrowers, their shareholders or creditors or an Indemnified Party and whether or not the Restructuring is consummated. The Borrowers jointly and severally agree that no Indemnified Party shall have any liability to any Borrower, or any of their Subsidiaries, affiliates, security holders or creditors, for any indirect or consequential damages arising out of, related to or in connection with the Restructuring or any of the other transactions contemplated hereby. The terms of this Commitment Letter are confidential and, except for disclosure on a confidential basis to your accountants, attorneys and other professional advisors retained by you in connection with the Restructuring or as may be required by law, may not be disclosed in whole or in part to any other person or entity without our prior written consent. Without limiting the foregoing, in the event that you disclose the contents of this Commitment Letter in contravention of the preceding sentence, you shall be deemed to have accepted the terms of this Commitment Letter. The provisions of the immediately preceding three paragraphs shall remain in full force and effect regardless of whether any definitive documentation for the Restructuring shall be executed and notwithstanding the termination of this Commitment Letter or any commitment or undertaking by the Agent or the Lenders hereunder. This Commitment Letter shall be governed by laws of the State of Illinois. Each of the Agent, the Lenders and the Borrowers hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Commitment Letter, the transactions contemplated hereby or the actions of the Agent or any Lender in the negotiation, performance or enforcement hereof. This Commitment Letter is the only agreement that have been entered into among us with respect to the Restructuring and set forth the entire understanding of the parties with respect thereto. This letter may be modified or amended only by the written agreement of all of us. This letter is not assignable by you without the prior written consent of the Agent and each Lender and is intended to be solely for the benefit of the parties hereto and the Indemnified Parties. This Commitment Letter shall constitute a "Loan Document" under and as defined in the Credit Agreement. The Credit Agreement and other Loan Documents are hereby ratified in all respect by all of the parties hereto. This offer will expire, and the commitment contemplated hereby shall not become effective, at 5:00 p.m. Central Standard Time on April 20, 2001, unless each Borrower and Lender executes and delivers this Commitment Letter and return it to the Agent prior to that time (which may be by facsimile transmission), whereupon this Commitment Letter (which may be signed in one or more counterparts) shall become binding upon each of the parties hereto. Thereafter, the Commitment Letter and the Lenders' undertakings and commitments hereunder will expire on the earliest to occur of (a) the closing of the Restructuring, (b) May 1, 2001, unless definitive 3 documentation for the Restructuring is executed and delivered prior to such date and (c) and breach by any Borrower of any of its representations, warranties or covenants set forth herein. Very truly yours, BANK OF AMERICA, N.A., as Agent By: ___________________________ Name: Title: BANK OF AMERICA, N.A., as Lender and Issuing Lender By: ___________________________ Name: Title: 4 ABN AMRO BANK N.V., as Lender By: ___________________________ Name: Title: By: ___________________________ Name: Title: 5 FLEET NATIONAL BANK, as Lender By: ___________________________ Name: Title: 6 BANK ONE, NA (Main Chicago Office), as a Lender By: ___________________________ Name: Title: 7 FIRSTAR BANK, N.A., as Lender By: ___________________________ Name: Title: 8 HARRIS TRUST AND SAVINGS BANK, as Lender By: ___________________________ Name: Title: 9 LASALLE BANK NATIONAL ASSOCIATION, as Lender By: ___________________________ Name: Title: 10 THE NORTHERN TRUST COMPANY, as Lender By: ___________________________ Name: Title: 11 PNC BANK NATIONAL ASSOCIATION, as Lender By: ____________________________ Name: Title: 12 US BANK NATIONAL ASSOCIATION, as Lender By: ___________________________ Name: 13 Agreed and accepted as of this __ day of April, 2001: ABC-NACO INC. ABC-NACO de MEXICO, S.A. de C.V. DOMINION CASTINGS LIMITED By: ___________________________ Name: Title: 14 FINAL Restructuring Terms for ABC-NACO Inc. Senior Secured Revolving Credit Facility - -------------------------------------------------------------------------------- The Credit Agreement will be modified pursuant to an amendment and waiver agreement substantially on the terms and conditions described below (the "Restructuring"); all references herein to the "closing" shall mean and refer to - -------------- the consummation and effectiveness of the Restructuring. All other terms and conditions of the Credit Agreement and related Loan Documents will remain unchanged and shall be ratified and confirmed. Maturity/Mandatory Commitment Reductions - ---------------------------------------- . The final maturity date and commitment termination date will be shortened from 7/31/03 to 1/5/03. . The interim, mandatory, scheduled commitment reductions and related mandatory prepayments shall be modified so that the aggregate commitments and outstandings shall be permanently reduced to $156.5MM as of the closing date of the Restructuring, to $152MM as of 12/31/01, and to $150MM as of 4/15/02. Except as provided below, no other mandatory reductions shall be required. . All asset sales (other than with respect to the Flow Sale described below which will occur concurrently with or prior to the closing) and proceeds of all tax refunds will result in mandatory prepayments and permanent, mandatory commitment reductions in amounts equal to 100% of the net cash proceeds of such sales and refunds ("applied" toward and in the order of the scheduled commitment reductions described in the immediately preceding paragraph); provided, however, that (i) no prepayment or commitment -------- ------- ---- reductions shall be required with respect to sales of inventory in the ordinary course of business (other than bulks sales of inventory or sales of scrap or obsolete inventory), (ii) no prepayment or commitment reductions shall be required with respect to up to $1,500,000, in gross consideration after the closing date, for sales and other dispositions of obsolete equipment and scrap inventory and (iii) the Signal division receivables collections, all proceeds from the Signal sale escrow, and any other Signal proceeds, will result in prepayments and commitment reductions in the manner and amounts currently provided in the Credit Agreement. The Credit Agreement reporting covenants would be modified to provide the Lenders with quarterly calculations by ABC as to the status of sales and related amounts under clause (ii) above and collections under clause (iii). ----------- ------------ . All equity and funded debt issuances (excluding, the "ING Equity Issuance" and "ING Bridge Notes" defined below, and other de minimus carve-outs to be determined) will result in mandatory prepayments and permanent, mandatory commitment reductions in amounts equal to 100% of the net cash proceeds of such issuances; provided, however, that in the event that ABC is able to -------- ------- ---- obtain the "Bancomer Financing" (as defined below), prepayment and commitment reductions shall be required in an amount equal to the greater of $7.5MM and 50% of the net cash proceeds of such financing (subject to further due diligence by the Lenders). . A mandatory prepayment and commitment reduction shall be required 105 days following the close of ABC's fiscal year 2001, and mandatory prepayments and commitment reductions shall occur on the forty-fifth (45th) day following the close of ABC's first fiscal quarter during 2002 and following each fiscal quarter thereafter, in each case in amounts equal to 70% of "Excess Cash Flow" (as defined in Annex A hereto) for such fiscal period. ------- Pricing - ------- . Interest rates on all outstanding loans will be increased to Prime + 2.75%. Consistent pricing increases shall be made with respect to letters of credit and other financial accommodations. All accrued interest and L/C fees shall be payable monthly. The LIBOR pricing option will no longer be available other than with respect to interest periods pending as of the closing date. . A restructuring fee of $1.5MM will be payable to the Lenders in cash, half of which would be due at the closing of the Restructuring and half would be due on the earlier of maturity or acceleration. All such fees shall be deemed fully-earned and non-refundable at closing. . ABC will issue a stock purchase warrant to the Lenders for 2% of the fully- diluted equity of ABC (giving effect to the exercise of all warrants and options and the conversion of all convertible securities, in each case whether or not then presently exercisable, convertible, vested or "in-the- money"). The warrant will have a nominal exercise price, contain antidilution provisions, include put provisions (priced at the greater of the enterprise value of ABC and an agreed upon fixed amount) demand and piggy-back registration rights and tag along rights, and include other customary provisions for senior secured lenders' warrants. . Agent's fee to payable to the Agent, for its sole account, in the amount of $150,000 in cash at closing and $200,000 in cash on 2/1/02, provided that such fees shall be deemed fully-earned and non-refundable at closing. Additional Collateral - --------------------- . Liens and mortgages will be granted in favor of the Agent, for the benefit of the Lenders, on all existing unencumbered domestic real property owned in fee simple, on 65% of the outstanding equity of all first tier foreign subsidiaries, and, to the extent not in conflict with existing organizational documents, on ABC's interest in foreign joint ventures. In addition, ABC shall deliver, or cause to be delivered, any additional documentation reasonably required by the Agent to perfect its lien and security interest on the existing collateral, including, without limitation, with respect 16 to inventory on consignment, goods held by third parties, instruments and securities, and intellectual property. . ABC and its domestic subsidiaries shall maintain all of their deposit and other bank accounts with institutions constituting Lenders (or affiliates thereof) (except with respect to accounts with aggregate balances which do not exceed a de minimus aggregate amount to be determined). With respect to accounts at such Lender institutions or affiliates at which ABC and such subsidiaries maintain significant balances (in excess of an amount to be determined), ABC and such subsidiaries, as applicable, shall use their good faith reasonable efforts, as a condition to the Restructuring and as an ongoing covenant, to enter into blocked account agreements with such institutions substantially in the form of the existing blocked account agreements currently in place with LaSalle Bank, N.A. Convertible Bridge Loan; Preferred Stock - ---------------------------------------- . At closing, ABC shall have received not less than $13MM of the net cash proceeds of the sale to funds sponsored by ING Furman Selz Investments of $15MM in aggregate initial principal amount of ABC's notes (the "ING Bridge ---------- Notes") due in full 11 1/2 months from closing. No other principal payments ----- shall be required with respect to such notes (including, without limitation, by right of setoff), and interest accrued thereon shall only be payable at the earlier of 1/6/03 and the payment in full of the Credit Agreement obligations. All of the indebtedness evidenced by such notes shall constitute "Senior Indebtedness" under the terms of ABC's existing subordinated debt indenture (the "SubDebt Indenture"), shall not be ----------------- subordinated in right of payment to the Credit Agreement debt and shall be in form and substance as described in the "ING Commitment" referred to below and otherwise in form and substance acceptable to the Lenders. ABC shall be permitted to retain the proceeds of the ING Bridge Notes for working capital purposes. . The ING Bridge Notes shall be secured by junior liens and security interests on the same properties which secure the Credit Agreement and related obligations, subject to an intercreditor agreement in form and substance acceptable to the Lenders. Without limiting the foregoing, the holders of the ING Bridge Notes shall agree, as a condition to the Restructuring and pursuant to such intercreditor agreement: (i) to an absolute standstill, prior to any insolvency proceeding of ABC or any of its subsidiaries, with respect to remedies relating to the enforcement of their liens and security interests for so long as any Credit Agreement and related obligations remain outstanding, (ii) to release their liens and security interests and subsidiary guaranties with respect to any and all collateral or subsidiaries disposed by ABC and or its subsidiaries if such disposition has been permitted by the Credit Agreement or the Majority Lenders, (iii) to release their liens and security interests in the event of any refinancing or recapitalization of the Credit Agreement and related obligations, or the sale of all or substantially all of the assets or equity of ABC and its subsidiaries and (iv) to permit the Agent, upon 30 days' prior written notice to a representative of such holders, to release all such liens and security interests on behalf of such holders following the commencement of an insolvency proceeding with respect to ABC or any of its subsidiaries unless such holders purchase all of the then outstanding Credit Agreement and related obligations prior to the expiration of such 30-day period (and such holders shall provide the Agent, at the closing of the Restructuring, with lien and security interest release instruments sufficient to effect such release). . The ING Bridge Notes shall have no financial covenants and minimal restrictive covenants, and shall have defaults limited to payment, breach of representation, breach of covenant (with customary grace periods), insolvency, and a cross acceleration to each of the Credit Agreement debt and the SubDebt Indenture notes. The ING Bridge Noes shall be subject to the commitment letter and term sheet of even date herewith issued by certain ING Furman Selz funds to ABC (the "ING Commitment") and otherwise -------------- subject to a definitive loan agreement and related documents in form and substance acceptable to the Lenders. . Upon the fulfillment of the following conditions (the "Conversion ---------- Condition"): (i) the successful completion of the "SubDebt Consent" (as --------- defined below), (ii) ABC's common shareholders approving an increase in the number of authorized shares of capital stock of ABC sufficient to permit the issuance of ABC's Class C Convertible Preferred Stock and the maximum number of shares necessary for the exercise of warrants with respect thereto, and (iii) certain other conditions, in each case as provided in a Series C Preferred Stock and Common Stock Warrant Purchase Agreement among ABC and certain ING Furman Selz funds, in form and substance acceptable to the Lenders (the "Equity Purchase Agreement"), all of the ING Bridge Notes ------------------------- shall be repaid from the proceeds of the sale to the ING Furman Selz funds of ABC's Class C Convertible Preferred Stock and warrants pursuant to such Equity Purchase Agreement (the "ING Equity Issuance"). No cash payments ------------------- with respect to accrued interest on the ING Bridge Notes shall be required of ABC at the time of such conversion. ABC's payment, in cash, of any termination fees required by the Equity Purchase Agreement upon the termination of such agreement shall be prohibited by the terms of the Credit Agreement. . It shall not be a condition precedent to the making of the loan to be evidenced by the ING Bridge Notes, or to the ING Equity Issuance, that ABC's auditors shall have issued an unqualified opinion with respect to ABC's year 2000 financial statements. . The resulting ownership of ABC's outstanding equity shall be consistent with Annex B and the membership of ABC's resulting board of directors shall ------- be acceptable to the Lenders, in each case both before and after giving effect to the ING Equity Issuance. . The Credit Agreement's cross default provision shall be modified to provide specifically that it shall be an Event of Default under the Credit Agreement if any default shall have occurred under or with respect to the ING Bridge Notes. It shall be an additional Event of Default under the Credit Agreement if the Conversion Condition shall not have been satisfied on or before 7/15/01. 18 Mexican Refinancing - ------------------- . ABC shall exert its good faith reasonable efforts to close, as soon as practicable, the financing proposed by Bancomer, S.A. and described in its January 30, 2001 proposal letter and term sheets (the "Bancomer -------- Financing"), which financing shall be provided substantially on the terms --------- described in such letter and shall be otherwise on terms and conditions acceptable to the Lenders. Flow Sale - --------- . As a condition precedent to the Restructuring, ABC shall have consummated a sale of ABC's Locomotive, Flow and Specialty Products Group, buymetalcastings.com, Baltimore Brake Shoe facility and Melrose Park mine and mill operations (the "Flow Sale") pursuant to the terms of an Asset --------- Purchase Agreement in form and substance acceptable to the Lenders among ABC, certain of its subsidiaries and Matrix Metals LLC, and the Lenders shall have received for application to the Credit Agreement obligations not less than $15.5MM in net cash proceeds from such transaction. It shall be an additional conditions precedent to the Restructuring that (i) the Lenders shall have received a copy of favorable fairness opinion of Baird with respect to such sale and (ii) ABC shall have pledged to the Agent, for the benefit of the Lenders, and as additional security for the Credit Agreement and related obligations any and all promissory notes issued to ABC as part of the consideration payable to ABC for the Flow Sale. Covenants; Disclosures - ---------------------- . A quarterly rolling minimum EBITDA covenant will be added to the Credit Agreement (which will build into a cumulative 12-month roll commencing May 1, 2001), as set forth in Annex C hereto. "EBITDA" shall be defined as ------- currently provided in the Credit Agreement, provided, that the exclusion for "above-the-line" non-cash, non-recurring losses or special charges set forth shall be limited to only those charges and losses which are caused by the impairment of long term assets of ABC's Calera, Permatrack, Cicero and Deco operations. . A loan-to-value covenant will be added to the Credit Agreement testing, on a monthly basis, the ratio of outstanding loans and letters of credit to values of categories of collateral, as set forth in Annex C hereto. ------- Collateral values for these purposes will be based upon receivables and inventory determined in accordance with GAAP, and appraised fair market values of real property and orderly liquidation values of machinery and equipment existing at closing (as recently appraised in early 2001). Maximum ratios and/or asset and loan amounts shall be adjusted to reflect the impairment of long term assets with respect to Calera and the Bancomer Financing. . A new covenant will be added to the Credit Agreement and tested quarterly, as set forth in Annex C hereto, which will limit the aggregate amount of ------- net losses related to irregular items (i.e., after EBITDA) to the maximum cumulative amounts indicated in such annex for each period beginning 4/1/01 and ending as of the dates set forth therein. . The capital expenditure covenant of the Credit Agreement will be modified as set forth in Annex C hereto to limit the incurrence or payment of ------- capital expenditures. . All other financial covenants (i.e., leverage ratios, interest coverage ---- ratio, minimum net worth and operating coverage ratio tests) will be eliminated. . The restrictive covenant regarding asset dispositions shall be revised to prohibit all dispositions (other than sales of inventory and equipment described in clauses (i) and (ii) of the proviso contained in the asset ----------- ---- ------- sale mandatory commitment reduction provision set forth above) without the prior written consent of the Majority Lenders. . Disclosure schedules of the Credit Agreement will be updated as of the closing of the Restructuring. . Reporting covenants will be expanded to require (i) monthly historical income statements, balance sheets (including divisional inventory levels), cash flow statements, and divisional accounts receivable and accounts payable agings and (ii) monthly projected 13-week cash flows. Majority Lenders - ---------------- . The definition of "Majority Lenders" shall be revised to mean Lenders holding at least 66-2/3% of outstandings. The mandatory, scheduled prepayment and commitment reduction schedule described above, and the asset sale mandatory prepayment and commitment reduction provision described above, may not be waived or modified without the approval of all of the Lenders, and the other mandatory prepayment and commitment reductions relating to equity and debt issuances and excess cash flow may not be modified or waived without the approval of the Majority Lenders. Consultants - ----------- . ABC shall continue to employ the services of DSI (or another comparable consultant acceptable to the Lenders) in a manner and scope acceptable to the Agent. . E&Y Capital Advisors, LLC, the Lenders' consultants (engaged by Sidley & Austin), shall continue to be provided access to such financial and operation information of ABC as the Lenders deem reasonably necessary. Subordinated Notes - ------------------ . It shall be a condition to the Restructuring that, as of 12/31/00, no "Event of Default" or unmatured "Event of Default" shall have occurred or be continuing under the SubDebt Indenture, no noncompliance with any provision thereof shall have occurred and be continuing; and, as of the closing date, no notice of any such noncompliance shall have been given by the trustee or any noteholder thereunder to ABC, and no enforcement action shall have been taken by such trustee or noteholders. It shall be an additional condition precedent that the Lenders have received a copy of ABC's certificate to the trustee with respect to its compliance with such indenture as of 12/31/00. . It shall be a condition to the Restructuring that ABC shall have commenced material actions and good faith reasonable efforts to commence (and shall covenant to exert such efforts to successfully complete thereafter) a consent solicitation, in form and substance acceptable to the Agent (the "SubDebt Consent"), to the holders of notes issued pursuant to the SubDebt --------------- Indenture requesting a waiver of any noncompliance by ABC of the financial covenants under the SubDebt Indenture with respect to the period ending 3/31/01, and an amendment with respect thereto for the remaining quarters of 2001 and for 2002 to extent ABC's existing projections indicate that a material risk of noncompliance with any such financial covenants during any such remaining periods may occur. It shall be an additional condition that the Lenders receive a copy of any comfort letters provided by Baird to ABC's auditors with respect to Baird's confidence of the success of such SubDebt Consent. . The Credit Agreement's existing cross-default provision shall be modified, to the extent pertaining to the SubDebt Indenture and related notes, such that during the period commencing with the Restructuring closing and ending on the earlier of 7/15/01 and the successful completion of the SubDebt Consent, it shall only be a cross default if the trustee or noteholders thereunder shall have taken any action to accelerate or otherwise commence any enforcement action or remedy provided for in the SubDebt Indenture (other than the delivery of a notice of such noncompliance by the trustee to ABC), or commence a legal proceeding to enforce any of ABC's obligations thereunder, in any case with respect to any non-compliance or alleged non- compliance by ABC under the SubDebt Indenture. It shall be a condition to the Restructuring that the Lenders receive a copy of any letter prepared by ABC for its auditors summarizing the comments of the trustee during the 4/12/01 conference call with such auditors regarding the remote likelihood of enforcement actions being commenced or recommended by the trustee in the event of a financial covenant default so long as interest payments under the SubDebt Indenture are being paid currently. 2000 Audit; Projections - ----------------------- . As a condition precedent to the Restructuring, ABC's independent auditor shall have completed its audit of ABC's year 2000 financial statements. It shall not be a condition precedent that such auditors shall have issued an unqualified opinion with respect thereto (as to going concern). . At closing, the Lenders shall receive a 13-week rolling cash flow forecast, and quarterly projected cash flow statements, income statements, balance sheets (including inventory levels by division), loan outstandings, accounts receivable and accounts payables agings, in each case through 2002, in form and scope, and based upon assumptions, acceptable to the Lenders. Assignments - ----------- . The assignment provision of the Credit Agreement shall be modified to remove any requirement that ABC's consent would be necessary for any assignments by the Lenders of their interests in the Credit Agreement and related obligations. No Additional Defaults or MAC - ----------------------------- . As a condition precedent to the Restructuring, (i) except with respect to the existing defaults described in Annex D (collectively, the "Existing ------- -------- Defaults"), no Event of Default or Default shall have occurred and be -------- continuing, and no event or condition shall exist or occur and be continuing which could reasonably result in Material Adverse Effect since 12/31/00 (including, without limitation, any materially adverse change in ABC's trade credit support or customer support) and (ii) no litigation or governmental proceedings shall have been commenced or threatened with respect to any of the transactions contemplated by this term sheet. Waivers - ------- . Upon the effectiveness of the Restructuring, the Existing Defaults will be waived by the Lenders. Release - ------- . As a condition precedent to the Restructuring, ABC and its subsidiaries party to any loan document shall release, hold harmless and indemnify the Agent, the Lenders and their respective agents, advisors and employees with respect to any and all claims and causes of actions arising prior to the closing date with respect to all actions, omissions and alleged actions and omissions, by any such parties with respect to, or in any way related to, the Credit Agreement, this term sheet, or the transactions contemplated thereby or hereby. Professional Expenses - --------------------- . Agent's out-of-pocket expenses incurred in connection with the Restructuring, including professional fees, shall be paid at closing. * * * * 22 ANNEX A ------- A. Excess Cash Flow Definitions "Excess Cash Flow" means, with respect to any fiscal period of the ---------------- Company: (a) the Company's Adjusted Net Earnings from Operations for such period; minus (b) the sum of (i) all regularly scheduled installments of ----- Indebtedness (and, without duplication, mandatory reductions to the Lender's Commitments) which were actually paid in cash (or made effective, in the case of commitment reductions) by the Company during such fiscal period; (ii) bank charges and deferred financing fees and bank agency fees paid in cash during such period, (iii) Capital Expenditures which were actually paid in cash by the Company and its Subsidiaries during such fiscal period to the extent permitted hereunder, other than any such payments already deducted in the computation of the Company's Adjusted Net Earnings from Operations or pursuant to clause (i) ---------- above; plus (c) the sum of (i) any depreciation and amortization expense ---- deducted in determining net income for such fiscal period; (ii) other non-cash charges deducted in computing such net income; (iii) any decrease in the Company's current assets other than cash during such period; and (iv) any increase in the Company's current liabilities during such period; minus (d) the ----- sum of (i) any increase in such Company's current assets other than cash during such period; and (ii) any decrease in such Company's current liabilities during such period. "Adjusted Net Earnings from Operations" means, with respect to any ------------------------------------- fiscal period of the Company, the net income of such Company and its Subsidiaries on a consolidated basis after provision for income taxes for such fiscal period, as determined in accordance with GAAP and reported on its financial statements for such fiscal period, less any and all of the following ---- included in such net income: (a) gain or loss arising from the sale of any capital asset; (b) gain arising from any write-up in the book value of any asset; (c) earnings of any business entity, substantially all the assets of which have been acquired in any manner, or which has merged or otherwise consolidated with and into the Company or any Subsidiary to the extent realized by such other business entity prior to the date of such acquisition, merger or consolidation; (d) earnings of any business entity (other than a Subsidiary) in which the Company or any Subsidiary has an ownership interest unless (and only to the extent) such earnings shall actually have been received by the Company or such Subsidiary in the form of cash distributions; (e) earnings of any Person to which assets of the Company or any Subsidiary shall have been sold, transferred or disposed of, or into which the Company or any Subsidiary shall have been merged, or which has been a party with the Company or any Subsidiary to any consolidation or other form of reorganization in which the Company or such Subsidiary is not the surviving entity, after the date of such transaction; (f) gain arising from the acquisition of debt or equity securities of the Company or any Subsidiary or from cancellation or forgiveness of Indebtedness; and (g) gain arising from extraordinary items including restructuring charges, as determined in accordance with GAAP, or from any other non-recurring transaction. 23 EX-4.2 4 dex42.txt COMITMENT LETTER Exhibit 4.2 ING Furman Investments 55 East 52/nd/ Street New York, NY 10055 April 17, 2001 ABC-NACO Inc. 2001 Butterfield Road, Suite 502 Downers Grove, Illinois 60515 Senior Second Secured Financing ------------------------------- Ladies and Gentlemen: You have requested that ING Furman Selz Investors III LP, ING Barings U.S. Leveraged Equity Plan LLC, ING Barings Global Leveraged Equity Plan Ltd., Furman Selz Investors II LP, FS Employee Investors LLC and FS Parallel Fund LP ("the Investors") provide you with their financing commitment for $15 million of Senior Second Secured Financing as described in this letter and in the summary of terms and conditions attached as Exhibit A (the "Summary of Terms" and, --------- together with this letter, this "Commitment Letter). We understand that you are negotiating with your lenders (the "Lenders") under the Third Amended and Restated Credit Agreement dated as of October 30, 2000 (the "Credit Agreement") among ABC-NACO Inc. (referred to herein as "you" or the "Borrower"), ABC-NACO de Mexico S.A. de C.V., Dominion Castings Limited, Bank of America Canada, Bank of America National Trust and Savings Association, as agent ("Agent") and the Lenders with respect to certain defaults under the Credit Agreement and have requested certain amendments to the Credit Agreement from the Lenders to cure such defaults and provide other changes to the Credit Agreement (the "Proposed Credit Agreement Amendments") which amendments are described in a commitment letter and term sheet dated as of April 17, 2001 from the Agent and the Lenders (the "Lender Commitment Letter") in the form attached hereto as Exhibit B. We further understand that you intend --------- to request certain amendments from U.S. Bank National Association (the "Trustee") as trustee under the Indenture dated as of January 15, 1997 pursuant to which you have issued your 10 1/2% Senior Subordinated Notes, Series A due 2004 in the original principal amount of $50,000,000 (the "Series A Notes") and your 10 1/2% Senior Subordinated Notes, Series B, due 2004 in the original principal amount of $25,000,000 (the "Series B Notes" and, together with the Series A Notes, the "Subordinated Notes") with respect to your obligations under the Subordinated Notes and the transactions contemplated hereby. 2 We are pleased to commit to provide, subject to and upon the terms and conditions set forth herein and in the Summary of Terms, $15 million of second secured senior financing (the "Financing") on the terms and conditions set forth herein and in the Summary of Terms. Fees payable to the Investors shall be payable as described in the fee letter (the "Fee Letter") executed simultaneously herewith and may be deducted from the principal amount of the Financing. The obligations of the Investors shall be several and not joint and shall be in the amounts set forth on Schedule 1 attached hereto. As a part of the transactions contemplated by this letter Matrix Metals LLC ("Matrix") is entering into an Asset Purchase Agreement dated as of April 17, 2001 (the "Asset Purchase Agreement") among the Borrower, NACO, Inc., National Castings, Inc., BuyMetal Castings, Inc., National Engineered Products Company, Inc. and Matrix providing for the purchase of certain assets by Matrix from the parties thereto The Asset Purchase Agreement will be signed at the time of the execution of this Commitment Letter. Please note that the terms and conditions of this commitment are not limited to those set forth in this Commitment Letter. Those matters that are not covered or made clear herein or in the attached Summary of Terms are subject to mutual agreement of the parties. The terms and conditions of this commitment may be modified only in writing. In addition, this commitment is subject to (a) the preparation, execution and delivery of mutually acceptable loan documentation, including a loan agreement incorporating substantially the terms and conditions outlined herein and in the Summary of Terms, and (b) the absence of a material adverse change in the business, financial condition, operations, performance, prospects, properties, assets, liabilities (contingent or otherwise) or value (a "Material Adverse Change") of the Borrower and its subsidiaries, taken as a whole since December 31, 2000 except as previously disclosed in writing to the Investors. The Investors' commitments set forth in this Commitment Letter will terminate on July 15, 2001 unless the transactions contemplated hereby (including the Proposed Credit Agreement Amendments set forth in the Lender Commitment Letter, the acquisition contemplated in the Asset Purchase Agreement and the purchase of the equity securities as set forth in the next succeeding paragraph) close on or before such date. Furthermore, if the Investors discover information not known to them on the date of this letter which the Investors reasonably believe constitutes or will constitute a Material Adverse Change (including any information that the holders of Subordinated Notes are not likely to approve the amendments to the Subordinated Notes required to prevent an event of default from occurring thereunder as a result of the violation of the financial covenants set forth therein and other amendments necessary to permit the transactions contemplated thereby or that the other conditions under the Stock Purchase Agreement (as defined below) will not be timely satisfied or that the Borrower's shareholders are unlikely to approve the issuance of additional equity contemplated hereby), the Investors may, in their sole discretion suggest alternative financing amounts or structures that assure adequate protection for their investment or decline to provide or participate in the proposed financing. The Investors shall not be responsible or liable for any consequential damages which may be alleged as a result of their failure to provide the Financing. 3 Pursuant to, and in accordance with and subject to the terms and conditions contained in the Preferred Stock and Common Stock Warrant Purchase Agreement dated as of April 17, 2001 among the Borrower, the Investors and the other parties thereto (the "Stock Purchase Agreement"), the Investors have agreed that following the consummation of the Financing, they will agree to purchase certain equity securities of the Borrower and the proceeds of such securities will be used to repay the Financing subject to the terms and conditions set forth therein. Such conditions include (a) appropriate approvals of shareholders of the Borrower, and (b) amendments to the Subordinated Notes to waive any financial covenant defaults and to amend the financial covenants as to future periods and such further amendments as are necessary for the equity transactions contemplated in the Stock Purchase Agreement to take place as more fully set forth in the Stock Purchase Agreement. To induce the Investors to issue this letter and to continue with their efforts to close the transactions described herein, you hereby agree that all reasonable out-of-pocket fees and expenses (including the reasonable fees and expenses of counsel and consultants) of the Investors and their affiliates arising in connection with this letter and in connection with the Financing and the other transactions described herein shall be for your account. In addition, you hereby agree to pay when and as due the fees described in the Fee Letter. You further agree to indemnify and hold harmless the Investors and each director, officer, employee and affiliate thereof (each an "Indemnified Person") from and against any and all actions, suits, proceedings (including any investigations or inquiries), claims, losses, damages, liabilities or expenses of any kind or nature whatsoever which may be incurred by or asserted against or involve any such Indemnified Person as a result of or arising out of or in any way related to or resulting from this letter, the transactions described herein or the extension of the Financing contemplated by this letter, or in any way arising from any use or intended use of this letter or the proceeds of the Financing contemplated by this letter, and you agree to reimburse each Indemnified Person upon demand for any legal or other out-of-pocket expenses incurred in connection with investigating, defending or preparing to defend any such action, suit, proceeding (including any inquiry or investigation) or claim (whether or not any Investors or any such other Indemnified Person is a party to any action or proceeding out of which any such expenses arise) (collectively, an "Action"); provided, however, that you shall not have to indemnify any Indemnified Person against any loss, claim, damage, expense or liability to the extent finally determined by a court of competent jurisdiction to have resulted directly and primarily from the gross negligence or willful misconduct of such Indemnified Person. The Investors reserve the right to employ the services of their affiliates in providing services contemplated by this letter and to allocate, in whole or in part, to such affiliates certain fees payable to the Investors in such manner as the Investors and such affiliates may agree in their sole discretion. You acknowledge that the Investors may share with any of its affiliates, and such affiliates may share with the Investors, any information related to you, any of your subsidiaries or any of the matters contemplated hereby in connection with the transactions contemplated hereby on a confidential basis. 4 The provisions of the immediately preceding two paragraphs shall survive any termination of this letter. You represent and warrant (to the best of your knowledge) that (a) all information (other than financial projections) that has been or will hereafter be made available by or on behalf of you or by any of your representatives in connection with the transactions contemplated hereby to the Investors or any of their affiliates is and will be complete and correct in all material respects and does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not misleading in light of the circumstances under which such statements were or are made and (b) all financial projections, if any, that have been or will be prepared by you or on your behalf or by any of your representatives and made available to the Investors or any of their affiliates or representatives in connection with the transactions contemplated hereby have been or will be prepared in good faith based upon reasonable assumptions (it being understood that such projections are subject to significant uncertainties and contingencies, many of which are beyond your control, and that no assurance can be given that any particular projections will be realized). You agree to supplement the information and projections from time to time so that the representations and warranties contained in this paragraph remain complete and correct. In issuing this commitment, the Investors are relying on the accuracy of the information furnished to it by you or on your behalf (collectively, the "Pre-Commitment Information"). The obligations of the Investors under this Commitment Letter are made solely for your benefit and may not be relied upon or enforced by any other person or entity. You are not authorized to show or circulate this letter to any other person or entity (other than (i) your legal, accounting and financial advisors in connection with your evaluation hereof, (ii) the Agent and the Lenders (iii) the Trustee and (iv) as required by law or stock exchange requirements) until such time as you have accepted this letter as provided in the immediately succeeding paragraph. If this letter is not accepted by you as provided in the immediately succeeding paragraph, you are to immediately return this letter (and any copies hereof) to the undersigned. This letter may be executed in any number of counterparts, and by the different parties hereto on separate counterparts, each of which counterpart shall be an original, but all of which shall together constitute one and the same instrument. If you are in agreement with the foregoing, please sign and return to the Investor (including by way of facsimile transmission) the enclosed copy of this letter, together with the Fee Letter, no later than 5:00 p.m., New York time, on April 17, 2001. Our commitment set forth in this letter shall terminate at the time and on the date referenced in the immediately preceding sentence unless this letter and the Fee Letter are executed and returned by you as provided in such sentence. This letter and the Fee Letter shall be governed by, and construed in accordance with the laws of the state of New York, and any right to trial by jury with respect to any claim, 5 action, suit or proceeding arising out of or contemplated by this letter and/or the related Fee Letter is hereby waived. The parties hereto hereby submit to the non-exclusive jurisdiction of the federal and New York State courts located in the City of New York in connection with any dispute related to this letter or the Fee Letter or any matters contemplated hereby or thereby. Delivery of an executed counterpart of this Commitment Letter by telecopier shall be effective as delivery of a manually executed counterpart of this Commitment Letter. Very truly yours, ING Furman Selz Investors III LP ING Barings U.S. Leveraged Equity Plan LLC ING Barings Global Leveraged Equity Plan Ltd. BY: FS Private Investments III LLC By________________________ Name: Title: Furman Selz Investors II LP FS Employee Investors LLC FS Parallel Fund LP BY: FS Private Investments LLC By________________________ Name: Title: Agreed to and Accepted this 17th day of April, 2001 ABC-NACO Inc. By________________________ Name: Title: EXHIBIT A --------- SUMMARY OF CERTAIN TERMS AND CONDITIONS/1/ ------------------------------------------ I. The Parties ----------- Borrower: ABC-NACO Inc. Investors: ING Furman Selz Investors III LP ING Baring U.S. Leveraged Equity Plan LLC ING Barings Global Leveraged Equity Plan Furman Selz Investors II LP FS Employee Investors LLC FS Parallel Fund LP Guarantors: All obligations under the Financing shall be unconditionally guaranteed by each of the Borrower's direct and indirect wholly-owned subsidiaries (other than any entity that is a controlled foreign corporation ("CFC") under Section 957 of the Internal Revenue Code (all of such subsidiaries being, collectively, the "Guarantors"), subject to customary exceptions and exclusions and release mechanics for transactions of this type. II. Description of the Financing ---------------------------- III. Senior Notes $15 million Senior Second Secured Notes (the "Senior Notes"), to be issued pursuant to a loan agreement (the "Loan Agreement") acceptable to the Investors and the Borrower including the terms of this Summary of Terms and the Commitment Letter. Maturity: The final maturity of the Senior Notes (the "Maturity Date") shall be the earlier of 350 days after the Closing Date and the day of the closing under the Stock Purchase Agreement. Use of Proceeds: The proceeds of the Senior Notes shall be utilized (a) to pay fees and expenses incurred in connection with the transactions contemplated hereby and (b) to finance the Borrower's and its subsidiaries' working capital ______________________ /1/ Capitalized terms used herein and not defined herein shall have the meanings provided in the commitment letter (the "COMMITMENT LETTER") to which this summary is attached. requirements and other general corporate purposes. III. Terms Applicable to the Financing Closing Date for the On or before May 1, 2001. Fianacing Security: The Borrower and its Domestic Subsidiaries shall grant to ING Furman Selz Investors III LP as agent for the Investors (the "Investor Agent") a valid and perfected second priority lien and security interest in all of the following (subject to the liens of the Agent and the Lenders and to certain exceptions to be set forth in the loan documentation): a. All shares of capital stock of (or other ownership interests in) and intercompany debt of each present and future subsidiary of the Borrower or such Guarantor, limited, in the case of each CFC, to 66% of the voting stock of such entity. b. All present and future property and assets, real and personal, of the Borrower or such Guarantor, including, but not limited to, machinery and equipment, inventory and other goods, accounts receivable, owned real estate, leaseholds, fixtures, bank accounts, general intangibles, license rights, patents, trademarks, tradenames, copyrights, chattel paper, insurance proceeds, contract rights, hedge agreements, documents, instruments, indemnification rights, tax refunds and cash. c. All proceeds and products of the property and assets described in clauses (a) and (b) above. At the reasonable request of the Borrower made prior to the Closing Date, assets will be excluded from the collateral in circumstances where the Investors and the Borrower determine that the economic detriment to the Borrower of entering into such guarantee or security arrangement or taking security interests in such assets would be excessive in view of the related benefits to be received by the Investors or the consent of third parties thereto cannot be obtained through reasonably commercial efforts. The Borrower and its Subsidiaries shall not be required to grant a security interest to the Investor Agent in any property which is not pledged to the Agent to secure the obligations under the Credit Agreement Interest Rates: The Senior Notes will bear interest at the rate of 7% per annum (based on a 360 days year) for the first 90 days and 18% per annum thereafter which interest will be payable on January 6, 2003 or such earlier date as all amounts payable under the Credit Agreement have been paid in full. Fees: The Investors shall receive such fees as have been separately agreed upon with the Borrower which fees and all expenses incurred by the Investors in connection with the transactions contemplated hereby shall be deducted from the proceeds of the Senior Notes. Mandatory Proceeds from the sale of the equity interests Prepayment: contemplated by the Stock Purchase Agreement shall be applied by the Borrower as set forth in the Commitment Letter to repay the Senior Notes and not to pay the obligations under the Credit Agreement. Documentation: The Investors' commitment will be subject to the negotiation, execution and delivery of definitive financing agreements (and related security documentation, guaranties, etc.) consistent with the terms of this letter, in each case prepared by counsel to the Investor. Conditions Precedent Those customarily found in credit agreements for to Initial Extension similar secured financings and others appropriate of Credit in the judgment of the Investors, including without limitation, the following: a. The final terms and conditions of the transactions, including, without limitation, the documentation relating thereto and all legal aspects thereof, shall be (i) as described in the Commitment Letter and the exhibits hereto and otherwise consistent with the description thereof received in writing as part of the Pre-Commitment Information and (ii) otherwise reasonably satisfactory to the Investor. b. The Proposed Credit Agreement Amendments to the Credit Agreement shall have been completed substantially as contemplated by the Lender Commitment Letter in form and substance reasonably satisfactory to the Investors and following such amendments no event of default shall have occurred and be continuing under the Credit Agreement. c. The acquisition contemplated by the Asset Purchase Agreement shall be completed on or prior to the closing date of the Financing. d. There shall exist no action, suit, investigation, litigation or proceeding pending or, to the Borrower's knowledge, as applicable, threatened in any court or before any arbitrator or governmental or regulatory agency or authority that (i) could reasonably be expected to (A) have a material adverse effect on the business, financial condition, operations, performance, prospects, properties, assets, liabilities (contingent or otherwise) or value of the Borrower and its subsidiaries, taken as a whole, (B) adversely affect the ability of the Borrower or any Guarantor to perform its obligations under the loan documentation or (C) adversely affect the rights and remedies of the Investor under the loan documentation (collectively, a "Material Adverse Effect") or (ii) purports to adversely affect the transactions contemplated hereby. e. All governmental and third party consents and approvals necessary in connection with the transactions contemplated hereby shall have been obtained (without the imposition of any conditions that are not acceptable to the Investor) and shall remain in effect (other than any such consents and approvals the absence of which, either individually or in the aggregate, would not be reasonably likely to result in a Material Adverse Effect); and no law or regulation shall be applicable in the judgment of the Investors that restrains, prevents or imposes materially adverse conditions upon the transactions contemplated hereby. f. The Investors shall have received (i) reasonably satisfactory opinions of counsel for the Borrower and the Guarantors and of local counsel for the Investors as to the transactions contemplated hereby (including, without limitation, the tax aspects thereof and compliance with all applicable securities laws) and (ii) such corporate resolutions, certificates and other documents as the Investors shall reasonably request. g. There shall exist no default under any of the loan documentation, and the representations and warranties of the Borrower, each of the Guarantors and each of their respective subsidiaries therein shall be true and correct in all material respects immediately prior to, and after giving effect to, the initial extension of credit under the loan documentation. h. No event shall have occurred which makes it unlikely in the Investors' reasonable judgement that (i) the holders of the Subordinated Notes will not consent to amendments to the Indentures relating thereto which would cure events of default relating to the financial covenants set forth therein and other modifications necessary to permit the transactions contemplated hereby, (ii) that Borrower's shareholders will not consent to the transactions relating to Borrower's capital stock contemplated by the Stock Purchase Agreement or (iii) the other conditions set forth in the Stock Purchase Agreement for the purchase of the equity interests will not be timely satisfied. i. Concurrently with the execution of this Commitment Letter the Borrower will enter into an Exchange Agreement with the Investors providing for the exchange of its Series B Preferred Stock for its Series B-1 Preferred Stock. j. The Lenders will permit the Borrower to pay an $1,100,000 dividend to the holders of its Series B Preferred Stock on the closing date for the Financing so long as the total of amount the Financing less such dividend and all of the Investor's fees and expenses of the financing paid by the Borrower exceeds $13 million. k. All accrued fees and expenses of the Investors (including the reasonable fees and expenses of counsel for the Investors) shall have been paid. l. The Investors and the Lenders shall have entered into an intercreditor agreement reasonably acceptable to the Investors. m. A voting agreement between the Borrower and the Seher Family Limited Partnership shall have been executed and shall be in full force and effect. Those customarily found in credit agreements for similar secured financings and others appropriate in the judgment of the Investors for the transactions contemplated hereby (with exceptions and caveats similar to those in the Credit Agreement to be agreed upon such that such representations and warranties are not more restrictive to the Borrower and its Subsidiaries than those set forth in the Credit Agreement), including, without limitation, absence of any material adverse change in the business, financial condition, operations, performance or properties of the Borrower and its subsidiaries, taken as a whole. Covenants: Those affirmative and negative covenants (applicable to the Borrower and its subsidiaries) customarily found in credit agreements for similar secured financings and others appropriate in the judgment of the Investors for the Finanacing (with exceptions, thresholds and caveats similar to those in the Credit Agreement to be agreed upon such that such covenants are no more restrictive to the Borrower and its Subsidiaries than those set forth in the Credit Agreement), including, without limitation, the following: a. Affirmative Covenants - (i) Compliance --------------------- with laws and regulations (including, without limitation, ERISA and environmental laws); (ii) payment of taxes and other obligations; (iii) maintenance of appropriate and adequate insurance; (iv) preservation of corporate existence, rights (charter and statutory), franchises, permits, licenses and approvals; (v) visitation and inspection rights; (vi) keeping of proper books in accordance with generally accepted accounting principles; (vii) maintenance of properties; (viii) performance of leases, related documents and other material agreements; (ix) further assurances as to perfection and priority of security interests; and (x) customary financial and other reporting requirements (including, without limitation, audited annual financial statements and quarterly unaudited financial statements, in each case prepared on a consolidated and a consolidating basis, notices of defaults, compliance certificates, annual business plans and forecasts, reports to shareholders and other creditors and other business and financial information as the Investors shall reasonably request). b. Negative Covenants - Restrictions on (i) ------------------ loans, acquisitions, joint ventures and other investments; (ii) dividends share repurchases and other distributions to stockholders; (iii) creating new subsidiaries; (iv) prepaying, redeeming or repurchasing any debt subordinated to the Senior Notes; (v) changing the nature of its business; (vi) amending organizational documents, or amending or otherwise modifying any subordinated debt, any related document or any other material agreement; and (vii) transactions with affiliates. c. Financial Covenants - None ------------------- Events of Default Those customarily found in credit agreements for similar secured financings and others appropriate in the judgment of the Investors for the transactions contemplated hereby (but no more restrictive to the Borrower and its subsidiaries than those set forth in the Credit Agreement), including, without limitation, (a) failure to pay principal when due, or to pay interest or other amounts within five business days after the same becomes due, under the loan documentation; (b) any representation or warranty proving to have been materially incorrect when made or confirmed; (c) failure to perform or observe covenants set forth in the loan documentation within a specified period of time, where customary and appropriate, after notice or knowledge of such failure; (d) cross-accelerations to other indebtedness in an amount to be agreed in the loan documentation; (e) bankruptcy and insolvency defaults (with grace period for involuntary proceedings); (f) monetary judgment defaults in an amount to be agreed in the loan documentation; (g) impairment of loan documentation or security; (h) change of ownership control; and (i) standard ERISA defaults. Expenses: The Borrower shall pay Investors' reasonable out- of-pocket expenses (including the fees and expenses of counsel for the Investors), whether or not any of the transactions contemplated hereby are consummated. The Borrower shall also pay the expenses of the Investors in connection with the enforcement of any of the loan documentation. Indemnity: The Borrower will indemnify and hold harmless the Investors, and each of their affiliates and their officers, directors, employees, agents and advisors from claims and losses relating to transactions contemplated hereby. Governing Law: New York. Counsel for the Dechert. Investors: EX-10.1 5 dex101.txt SERIES C PURCHASE AGREEMENT Exhibit 10.1 SERIES C PREFERRED STOCK AND COMMON STOCK WARRANT PURCHASE AGREEMENT by and among ABC-NACO INC., and THE INVESTORS SET FORTH HEREIN Dated as of April 17, 2001 TABLE OF CONTENTS -----------------
Page ---- ARTICLE I SALE AND PURCHASE OF SECURITIES......................................................... 2 1.1. Sale and Purchase of Series C Preferred Stock....................................... 2 1.2. Issuance of Warrants................................................................ 2 1.3. Closing............................................................................. 3 ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................................... 3 2.1. Approval of the Board of Directors.................................................. 3 2.2. Issuance of Preferred Stock and Warrants and Reservation of Common Shares........... 3 2.3. Organization and Qualification...................................................... 4 2.4. Capitalization...................................................................... 5 2.5. Authorization and Enforceability.................................................... 6 2.6. Absence of Certain Changes.......................................................... 6 2.7. Reports; Financial Statements....................................................... 7 2.8. Absence of Undisclosed or Contingent Liabilities.................................... 8 2.9. Compliance with Laws; No Violation; Consents and Approvals.......................... 8 2.10. Litigation......................................................................... 9 2.11. Employment Agreements.............................................................. 9 2.12. ERISA Compliance................................................................... 9 2.13. Taxes.............................................................................. 10 2.14. Environmental Matters.............................................................. 10 2.15. Title to Properties................................................................ 11 2.16. Intellectual Property.............................................................. 11 2.17. Certain Agreements................................................................. 11 2.18. Related Transactions............................................................... 12 2.19. Offering of Shares of Series C Preferred Stock..................................... 12 2.20. Disclosure......................................................................... 12 2.21. Broker's Fees...................................................................... 12 2.22. Rights Agreement................................................................... 12 ARTICLE III REPRESENTATIONS AND WARRANTIES OF EACH INVESTOR....................................... 13 3.1. Organization........................................................................ 13 3.2. Authority Relative to this Agreement; No Conflict................................... 13 3.3. Investment Intent................................................................... 13 3.4. Economic Risk....................................................................... 13 3.5. Litigation.......................................................................... 13 3.6. Additional Representations.......................................................... 14 3.7. Rule 144............................................................................ 14 3.8. Broker's Fees....................................................................... 14
-2- ARTICLE IV COVENANTS............................................................................. 14 4.1. Conduct of Business of the Company................................................. 14 4.2. Access to Information.............................................................. 15 4.3. Reasonable Best Efforts............................................................ 15 4.4. Amendments to the Restated Certificate of Incorporation............................ 16 4.5. Public Announcements............................................................... 16 4.6. Responsibilities of Company; Consent of Stockholders............................... 16 4.7. Sale of Stock...................................................................... 17 4.8. Payment of Investors' Fees and Expenses............................................ 17 4.9. Advisory Fee Letter................................................................ 17 ARTICLE V CONDITIONS TO CLOSING.................................................................. 18 5.1. Conditions to Investors' Obligations for Closing................................... 18 5.2. Conditions to the Company's Obligations for the Closing............................ 21 ARTICLE VI INDEMNIFICATION....................................................................... 21 6.1. Indemnification by the Company..................................................... 21 6.2. Indemnification by the Investors................................................... 22 6.3. Procedure for Indemnification...................................................... 22 6.4. Period of Indemnity................................................................ 23 ARTICLE VII MISCELLANEOUS........................................................................ 24 7.1. Termination; Effect of Termination; Expenses; Fees................................. 24 7.2. Extension; Waiver.................................................................. 25 7.3. Entire Agreement; Assignment....................................................... 25 7.4. Enforcement of the Agreement; Governing Law; Jurisdiction.......................... 25 7.5. Validity........................................................................... 25 7.6. Notices............................................................................ 25 7.7. Descriptive Headings............................................................... 27 7.8. Parties in Interest................................................................ 27 7.9. Counterparts....................................................................... 27 7.10. Amendment......................................................................... 27 7.11. Survival.......................................................................... 27 7.12. Certain Definitions............................................................... 28
-3- EXHIBITS Exhibit A Investors and Shares of Series C Preferred Stock and Warrants Exhibit B Resolutions of the Company's Board of Directors Exhibit B-1 Certificate of Designation, Preferences and Rights of Series C Cumulative Convertible Participating Preferred Stock Exhibit B-2 Certificate of Designation, Preferences and Rights of Series B-1 Cumulative Convertible Participating Preferred Stock Exhibit B-3 Amended and Restated Certificate of Incorporation of the Company Exhibit C-1 Closing Common Stock Purchase Warrant Exhibit C-2 Additional Common Stock Purchase Warrant Exhibit D Voting Agreement Exhibit E Advisory Fee Letter Exhibit F-1 Opinion of Outside Counsel to the Company Exhibit F-2 Opinion of Company Counsel Exhibit G Lender Commitment Letter Exhibit H Amended and Restated Investors Rights Agreement Exhibit I Senior Second Secured Financing Commitment Letter Exhibit J Exchange Agreement -4-
DEFINED TERMS ------------- Page ---- Additional Warrant......................................................................................... 2 Advisory Fee Letter........................................................................................ 17 affiliate.................................................................................................. 27 Agreement.................................................................................................. 2 Amended Restated Certificate of Incorporation.............................................................. 3 associate.................................................................................................. 27 Authority.................................................................................................. 8 Certificate of Designation................................................................................. 15 Closing.................................................................................................... 3 Closing Date............................................................................................... 3 Closing Warrant............................................................................................ 2 Code....................................................................................................... 9 Common Stock............................................................................................... 2 Company.................................................................................................... 2 control.................................................................................................... 28 DGCL....................................................................................................... 9 Documents.................................................................................................. 28 Employee Benefit Plans..................................................................................... 9 ERISA...................................................................................................... 9,10 ERISA Affiliate............................................................................................ 10 Exchange Act............................................................................................... 28 Flow Purchase Agreement.................................................................................... 19 GAAP....................................................................................................... 7 indemnified party.......................................................................................... 22 Intellectual Property...................................................................................... 11 Investor................................................................................................... 2 Investors.................................................................................................. 2 Investors' Expenses........................................................................................ 17 Investors Rights Agreement................................................................................. 27 Laws....................................................................................................... 8 Liens...................................................................................................... 5 Loss....................................................................................................... 21 Material Adverse Effect.................................................................................... 28 NASDAQ..................................................................................................... 2 person..................................................................................................... 28 Preferred Stock............................................................................................ 2 Purchase Price............................................................................................. 2 Related Transaction........................................................................................ 12 Restated Certificate of Incorporation...................................................................... 28 Rights Agreement........................................................................................... 12 SEC Documents.............................................................................................. 7
-5- Securities Act................................................................................................ 28 Series A Preferred Stock...................................................................................... 2 Series B Preferred Stock...................................................................................... 2 Series B-1 Certificate of Designation......................................................................... 4 Series C Preferred Stock...................................................................................... 2 Stockholder Approval.......................................................................................... 3 Subordinated Debt............................................................................................. 20 Subsidiaries.................................................................................................. 28 Taxes......................................................................................................... 10 Termination Fee............................................................................................... 24 Third Party Claim............................................................................................. 22 Unaudited Financial Statements................................................................................ 7 Warrants...................................................................................................... 2
SERIES C PREFERRED STOCK AND COMMON STOCK WARRANT PURCHASE AGREEMENT THIS IS A SERIES C PREFERRED STOCK AND COMMON STOCK WARRANT PURCHASE AGREEMENT, dated as of April 17, 2001 (the "Agreement"), by and among ABC-NACO INC., a --------- Delaware corporation, having its principal office at 2001 Butterfield Road, Suite 502, Downers Grove, Illinois 60515 (the "Company") and the individuals and ------- entities listed on Exhibit A hereto (individually referred to as an "Investor" --------- -------- and collectively as the "Investors"). --------- BACKGROUND ---------- A. The Company has (i) as of April 16, 2001, issued and outstanding 19,872,242 shares of Common Stock, par value one cent ($0.01) per share (the "Common Stock"), and (ii) authorized 1,000,000 shares of preferred stock, par ------------ value one dollar ($1.00) per share (the "Preferred Stock"), of which 100,000 --------------- shares are designated as Series A Junior Participating Preferred Stock ("Series ------ A Preferred Stock") and 300,000 shares are designated as Series B Cumulative - ----------------- Convertible Preferred Stock all of which are issued and outstanding ("Series B -------- Preferred Stock"). The Company's Common Stock is currently traded on the Nasdaq - --------------- National Market ("NASDAQ"). ------ B. The Company is engaged in the business of design, engineering and manufacture of high performance freight railcar, locomotive and passenger rail suspension and coupler systems, wheels and mounted wheel sets, and specialty track products, and supplying freight as well as highly engineered valve bodies and components for industrial flow control systems worldwide. C. Company desires to designate and issue a series of its Preferred Stock, to be known as the Series C Cumulative Convertible Participating Preferred Stock, par value one dollar ($1.00) per share (the "Series C Preferred ------------------ Stock"), and the Investors desire to purchase all - ----- -2- of the shares of the Series C Preferred Stock, subject to the terms and conditions contained herein. TERMS ----- NOW, THEREFORE, in consideration of the mutual covenants contained herein, and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I SALE AND PURCHASE OF SECURITIES 1.1. Sale and Purchase of Series C Preferred Stock. --------------------------------------------- (a) Subject to the terms and conditions set forth herein, at the Closing (as defined in Section 1.3(a)), the Company shall issue and sell to each Investor, and each Investor shall purchase from the Company, the number of shares of Series C Preferred Stock set forth opposite such Investor's name on Exhibit A hereto. The aggregate purchase price for all 150,000 of the shares of - --------- Series C Preferred Stock being purchased hereunder is Fifteen Million Dollars ($15,000,000.00) (the "Purchase Price"). The per share purchase price for the -------------- Series C Preferred Stock to be paid by each Investor pursuant to this Section 1.1 is One Hundred Dollars ($100.00) per share. (b) At the Closing, each Investor shall pay such Investor's portion of the Purchase Price for the shares of Series C Preferred Stock being purchased by Investor hereunder, by wire transfer of immediately available funds to an account designated by the Company, not less than two (2) business days prior to Closing. 1.2. Issuance of Warrants. -------------------- (a) In connection with the sale of the Series C Preferred Stock, at the Closing, the Company shall issue and deliver to the Investors (i) immediately exercisable warrants to purchase an aggregate of 6,000,000 shares of Common Stock of the Company at an exercise price of $0.01 per share in the form of Exhibit C-1 hereto (the "Closing Warrant"); and (ii) Additional Warrant to ----------- --------------- purchase up to 6,000,000 shares of Common Stock of the Company at an exercise price of $0.01 per share exercisable in accordance with the terms thereof in the form of Exhibit C-2 hereto (the "Additional Warrant" and, together with the ----------- ------------------ Closing Warrant, the "Warrants"). -------- (b) The Closing Warrant and the Additional Warrant shall be allocated among the Investors as set forth on Exhibit A hereto. --------- -2- 1.3. Closing. ------- (a) Subject to the terms and conditions of this Agreement, the closing of the purchase and sale of shares of the Series C Preferred Stock and the issuance of the Warrants referred to in Sections 1.1 and 1.2 above (the "Closing") will take place on the first business day after all conditions to ------- closing (as set forth in Article V herein) are satisfied, at the offices of Dechert, 4000 Bell Atlantic Tower, 1717 Arch Street, Philadelphia, Pennsylvania 19103-2793, or on such other date to be mutually agreed by the parties hereto (the "Closing Date"). ------------ (b) At Closing, the Company will deliver to each Investor (i) a stock certificate representing the number of shares of Series C Preferred Stock set forth opposite such Investor's name on Exhibit A hereto and (ii) a Closing --------- Warrant and an Additional Warrant exercisable for the number of shares of Common Stock set forth opposite such Investor's name on Exhibit A, registered in the --------- name of such Investor, or an affiliate or associate of such Investor, as such Investor may designate in writing to the Company. ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY -------------- The Company hereby represents and warrants to the Investors as follows: 2.1. Approval of the Board of Directors. The Board of Directors of the ---------------------------------- Company has taken all actions necessary or appropriate to authorize and to ratify the execution, delivery and performance of this Agreement and each other Document, other agreement or instrument contemplated herein and the transactions contemplated hereby, including authorization of the issuance, sale and delivery of the shares of Series C Preferred Stock and the Warrants, and declared advisable and submitted to the stockholders for approval and recommended that the stockholders approve (a) the amendment to the Company's Restated Certificate of Incorporation increasing the Company's authorized shares of Common Stock (the "Amended Restated Certificate of Incorporation"), and (b) the transactions --------------------------------------------- contemplated herein (the approvals referred to in clauses (a) and (b) hereof, referred to hereinafter as the "Stockholder Approval"). -------------------- 2.2. Issuance of Preferred Stock and Warrants and Reservation of ----------------------------------------------------------- Common Shares. - ------------- (a) Subject to Stockholder Approval, the issuance, sale and delivery of the shares of Series C Preferred Stock have been duly authorized by all requisite corporate action of the Company and the shares of Series C Preferred Stock to be issued to the Investors in accordance with the terms of this Agreement and the Certificate of Designation (as defined in Section 4.4), when issued and delivered in accordance with the terms of this Agreement will be validly issued, fully paid and non-assessable, free and clear of any Liens (as defined in Section -3- 2.2(b)) and not subject to preemptive or other similar rights of the stockholders of the Company. Subject to Stockholder Approval and the terms and conditions hereof, the Company shall authorize the reservation of and the issuance of the shares of Common Stock reserved for issuance upon conversion of the Series C Preferred Stock and as otherwise set forth in the Certificate of Designation, in accordance with the Certificate of Designation, and when issued and delivered in accordance with the terms of this Agreement will be validly issued, fully paid and non-assessable, free and clear of any Liens (as defined in Section 2.3(b)) and not subject to preemptive or other similar rights of the stockholders of the Company. (b) Subject to Stockholder Approval, the issuance and delivery of the Warrants have been duly authorized by all requisite corporate action of the Company and the Warrants to be issued to the Investors in accordance with the terms of this Agreement and the terms of the Warrants (attached hereto as Exhibit C-1 and Exhibit C-2), when issued and delivered in accordance with the - ----------- ----------- terms of this Agreement will be validly issued, fully paid and non-assessable, free and clear of any Liens (as defined in Section 2.3(b)) and not subject to preemptive or other similar rights of the stockholders of the Company. Subject to Stockholder Approval and the terms and conditions hereof, the Company shall authorize the reservation of and the issuance of the shares of Common Stock reserved for issuance upon exercise of the Warrants, in accordance with the Warrants, and when issued and delivered in accordance with the terms of this Agreement will be validly issued, fully paid and non-assessable, free and clear of any Liens (as defined in Section 2.3(b)) and not subject to preemptive or other similar rights of the stockholders of the Company. (c) The Series B Preferred Stock Certificate of Designation, Preferences and Rights (the "Series B Certificate of Designation") has been duly ----------------------------------- authorized by all requisite corporate action of the Company and has been filed with the Secretary of State of the State of Delaware and the shares of Series B Preferred Stock are validly issued, fully paid and non-assessable, free and clear of any Liens (as defined in Section 2.2(b)) and not subject to preemptive or other similar rights of the stockholders of the Company. The Company has authorized the reservation of and the issuance of the shares of Common Stock reserved for issuance upon conversion of the Series B Preferred Stock and as otherwise set forth in the Certificate of Designation, in accordance with the Certificate of Designation. 2.3. Organization and Qualification. ------------------------------ (a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power to carry on its business as it is now being conducted. The Company is duly qualified as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of its properties owned or leased or the nature of its activities makes such qualification necessary, except where the failure to be so qualified reasonably could not be expected to have a Material Adverse Effect. (b) Each of the Company's Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of -4- incorporation and has the requisite corporate power to carry on its business as it is now being conducted. Each of the Subsidiaries is duly qualified as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of its properties owned or leased or the nature of its activities make such qualification necessary, except where the failure to be so qualified reasonably could not be expected to have in a Material Adverse Effect. All of the outstanding shares of capital stock of each of the Subsidiaries have been validly issued, are fully paid and non-assessable and, except as set forth on Schedule 2.3(b), are owned by the Company free and clear of all pledges, claims, equities, options, liens, charges, rights of first refusal, "tag" or "drag" along rights, encumbrances and security interests of any kind or nature whatsoever (collectively, "Liens"). Except for the capital ----- stock of each of the Subsidiaries and except as set forth on Schedule 2.3(b), the Company does not have any other subsidiaries, nor does it own any capital stock or other proprietary interest or other voting control, directly or indirectly, in any corporation, association, trust, partnership, limited liability company, joint venture or other entity. 2.4. Capitalization. -------------- (a) As of April 16, 2001, the authorized capital stock of the Company consists of 25,000,000 shares of Common Stock, 19,872,242 of which are issued and outstanding, and 1,000,000 shares of Preferred Stock, of which (i) 100,000 are designated as Series A Preferred Stock, none of which are issued or outstanding, and (ii) 300,000 are designated as Series B Preferred Stock, all of which are issued and outstanding. All of the outstanding shares of Common Stock are duly authorized, validly issued, fully paid and non-assessable, and (x) have not been issued in violation of any preemptive rights, rights of first refusal or offer or similar rights of any person, and (y) have been offered and sold in compliance with the Securities Act and applicable state securities laws. As of the date of this Agreement, the shares of Series B Preferred Stock are duly authorized, validly issued, fully paid and non-assessable, and have not been issued in violation of any preemptive rights, rights of first refusal or offer or similar rights of any person. No shares of Preferred Stock are held in the treasury of the Company and there are no options, warrants, or other rights are outstanding to acquire Preferred Stock, nor are such rights authorized to be issued with the exception of rights related to Series A Preferred Stock pursuant to the Rights Agreement referred to in Section 2.22 below. (b) Other than as disclosed in the SEC Documents (as defined in Section 2.7 below), there are no outstanding (i) securities of the Company or any of its Subsidiaries convertible into or exchangeable for any shares of capital stock of the Company or any of its Subsidiaries, or (ii) options, warrants, calls or other rights to acquire from the Company or any of its Subsidiaries, or other obligations or understandings or arrangements of the Company or any of its Subsidiaries to issue, any shares of capital stock of the Company or any of its Subsidiaries or securities convertible into or exchangeable for shares of capital stock of the Company or any of its Subsidiaries. There are no outstanding obligations of the Company or any Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock of the Company or any of its Subsidiaries (or any of the other securities set forth in the previous sentence). Except as pursuant to this Agreement, neither the Company nor any of its -5- Subsidiaries is a party to, or bound by, any arrangement, agreement, instrument or order (i) relating to the transfer of any shares of capital stock of the Company or any of its Subsidiaries, (ii) relating to the dividend or voting rights of any shares of capital stock of the Company or any of its Subsidiaries, (iii) granting, or obligating the Company or any of its Subsidiaries to grant, to any person any preemptive right, (iv) relating to rights to registration under the Securities Act or any other securities laws of any shares of capital stock of the Company or any of its Subsidiaries, or (v) limiting or restricting the ability of the Company (A) from issuing the Series C Preferred Stock and Warrants as contemplated herein, or (B) from declaring and/or paying dividends as set forth in the Certificate of Designation. Neither the Company nor any of its Subsidiaries has outstanding any loans to any person (as defined in Section 7.12(g)) in respect of the purchase of securities issued by the Company or any of its Subsidiaries. 2.5. Authorization and Enforceability. Subject to Stockholder -------------------------------- Approval, the Company has all requisite corporate power and authority to execute and deliver this Agreement and each other Document, agreement or instrument contemplated hereby, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement by the Company and each other Document, agreement or instrument executed or to be executed by the Company in connection herewith and the consummation by the Company of the transactions contemplated hereby and thereby, have been duly and validly authorized by the Board of Directors of the Company. This Agreement and each other Document, agreement or instrument contemplated hereby, has been or will be duly and validly executed and delivered by the Company and, assuming this Agreement and each other Document, agreement or instrument executed, or to be executed, by the Company in connection herewith and subject to Stockholder Approval, constitutes a valid and binding obligation of the Investors, this Agreement and each other Document, agreement or instrument contemplated hereby, constitutes or will constitute a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms. 2.6. Absence of Certain Changes. Except as disclosed in the SEC -------------------------- Documents (as defined in Section 2.7 below) or as contemplated by this Agreement, since September 30, 2000, the Company has operated in the ordinary course and no event has occurred, and no circumstance exists, that reasonably could be expected to have a Material Adverse Effect. Except as disclosed in the Company's SEC Documents, since September 30, 2000, there has not been (a) any declaration, setting aside or payment of any dividend or other distribution in respect of the capital stock of the Company or any of its Subsidiaries or any redemption or other acquisition by the Company or any of its Subsidiaries of any shares of Common Stock or other equity securities of the Company or any of its Subsidiaries, (b) any entry into any agreement, commitment or transaction by the Company or any of Subsidiaries, which is material to the Company and any of its Subsidiaries taken as a whole, except agreements, commitments or transactions in the ordinary course of business, consistent with prior practice, other than the sale of the Company's Locomotive, Flow and Specialty Products Group and its wholly-owned subsidiary, ABC-NACO Rail Systems Inc.; (c) any split, combination or reclassification of the Company's capital stock or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock; (d) any damage, -6- destruction or loss, whether or not covered by insurance, that could reasonably be expected to have a Material Adverse Effect; or (e) any change in accounting methods, principles or practices by the Company materially affecting its assets, liabilities or business, except insofar as may have been required by a change in United States generally accepted accounting principles ("GAAP"), consistently ---- applied. 2.7. Reports; Financial Statements. ----------------------------- (a) Since February 19, 1999, the Company, and to the best of the Company's knowledge, from January 1, 1997 until February 19, 1999, the Company's predecessor ABC Rail Products Corporation, have filed all required forms, reports and documents with the SEC required to be filed by it pursuant to the federal securities laws and the rules and regulations promulgated thereunder (collectively (together with the Form 10-K for the year ending December 31, 2000, to be filed with the SEC within two days of the date hereof in the form previously provided to the Investors), the "SEC Documents"), all of which have ------------- complied as of their respective filing dates in all material respects with all applicable requirements of the Securities Act and the Exchange Act. None of such forms, reports or documents at the time filed contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Except to the extent that information contained in any SEC Document has been revised or superseded by a later-filed SEC Document filed and publicly available prior to the date hereof, none of the SEC Documents contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Documents comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with GAAP (except, in the case of unaudited statements, as permitted by Form 10-Q of the SEC), applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present the consolidated financial position of the Company and its Subsidiaries, as of the dates thereof and the consolidated results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments that, individually or in the aggregate are not material to a fair presentation of the consolidated financial position of the Company and its Subsidiaries). (b) The unaudited financial statements for the Company and its Subsidiaries for the two month period ended February 28, 2001 (all such unaudited financial statements are referred to as the "Unaudited Financial ------------------- Statements"), provided to the Investors comply as to form in all material - ---------- respects with applicable accounting requirements, have been prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present the consolidated financial position of the Company and its Subsidiaries as of the date thereof and the consolidated results of their operations and cash flows for the periods then ended (subject to normal year end audit -7- adjustments that that, individually or in the aggregate are not material to a fair presentation of the consolidated financial position of the Company and its Subsidiaries). 2.8. Absence of Undisclosed or Contingent Liabilities. Except as and ------------------------------------------------ to the extent disclosed in the SEC Documents or accrued on the balance sheet included in the Unaudited Financial Statements, and except for liabilities incurred since the date of the latest balance sheet included in the Company's Unaudited Financial Statements in the ordinary course of business consistent with past practice and otherwise not in contravention of this Agreement (including but not limited to the representations and warranties of the Company contained herein) which individually and in the aggregate are not material, the Company and its Subsidiaries do not have any liabilities or obligations of any nature (whether absolute, contingent, liquidated, unliquidated or otherwise) that reasonably could be expected to have a Material Adverse Effect. Since the date of the Unaudited Financial Statements, the Company has operated in the ordinary course and there has not been any Material Adverse Effect or any change or occurrence which reasonably could be expected to have a Material Adverse Effect. 2.9. Compliance with Laws; No Violation; Consents and Approvals. ---------------------------------------------------------- (a) Each of the Company and its Subsidiaries is in compliance, in all material respects, with all treaties, statutes, laws, rules, regulations, ordinances, orders, and decrees, whether federal, state, local, or foreign ("Laws") applicable to any of them. ---- (b) Neither the execution and delivery of this Agreement or any Document, agreement or instrument contemplated hereby by the Company nor the consummation of the transactions contemplated hereby or thereby will conflict with, or result in any violation or breach of, or constitute a default (or give rise to any right of termination, modification (including, in the case of leases, any change in the amount of rent), cancellation or acceleration or result in the creation or imposition of (with or without notice or lapse of time, or both), any Liens upon any of the properties or assets or the Company or its Subsidiaries) under, (i) the Restated Certificate of Incorporation (subject to the filing of the Amended Restated Certificate of Incorporation) or bylaws of the Company (the "Bylaws") or similar organizational and governance documents of ------ any of its Subsidiaries, each as amended, (ii) the terms, conditions or provisions of any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise or license applicable to the Company or any of its Subsidiaries or to their properties or assets, or (iii) any permit, license, approval, franchise, or other governmental or regulatory authorization held or used by or binding upon the Company or any of its Subsidiaries or their properties or assets, other than, in the case of clauses (ii) or (iii), any such conflicts, violations, breaches, defaults, rights or Liens that, individually or in the aggregate, reasonably could not be expected to have a Material Adverse Effect. (c) No consent, approval, order or authorization of, or registration, declaration or filing with, (w) the stockholders of the Company, (x) any Federal, state, local or foreign governmental or regulatory entity (or any department, agency, authority or political subdivision thereof) or court or arbitrator, domestic or foreign (an "Authority"), (y) NASDAQ, --------- -8- or (z) any third party, is required by the Company or any of its Subsidiaries in connection with the execution and delivery of this Agreement or each other Document, agreement or instrument contemplated hereby by the Company or the consummation by the Company of the transactions contemplated by this Agreement, except for (i) the filing with the SEC of a notice on Form D or such reports under Section 13(a) of the Exchange Act as may be required in connection with this Agreement or any other Document or instrument contemplated hereby and the transactions contemplated hereby or thereby, (ii) Stockholder Approval, (iii) the filing of the Certificate of Designation (as such term is defined in Section 4.4) with the Secretary of State of the State of Delaware pursuant to the Delaware General Corporation Law (the "DGCL"), (iv) applicable state "blue sky" ---- filings, if any, and (v) such other consents, approvals, orders, authorizations, registrations, declarations and filings, which have been obtained or made or the failure of which to be obtained or made, individually or in the aggregate, reasonably could not be expected to have a Material Adverse Effect. 2.10. Litigation. There are no pending or, to the knowledge of the ---------- Company, threatened claims, arbitration proceedings, actions, suits, investigations or other proceedings against or involving the Company or any of its Subsidiaries, individually or in the aggregate, or any of the property or rights of the Company or any of its Subsidiaries, the outcome of which if adverse to the Company or any of its Subsidiaries reasonably could be expected to have a Material Adverse Effect. Neither the Company nor any Subsidiaries is subject to or bound by any order, judgment, writ, injunction or decree of any Authority. 2.11. Employment Agreements. Except as set forth on Schedule 2.11, the --------------------- Company has no (a) consulting or similar agreements having a term of greater than three months, (b) employment agreements or an agreements which calls for the payment of compensation to any employee or former employee (including any bonus) or (c) agreements which call for severance payments or any payments in connection with a "change in control" of the Company. 2.12. ERISA Compliance. ---------------- (a) Except as set forth in the SEC Documents, each employee benefit plan, as defined in ERISA (including any "multiemployer plan" as defined in Section 3(37) of ERISA), and all other arrangements maintained, contributed to, or required to be contributed to, by the Company or any ERISA Affiliate for the benefit of any employee, former employee, director or officer of the Company or under which the Company or any ERISA Affiliate has any liability with respect to any employee, former employee, director or officer of the Company ("Employee -------- Benefit Plans") (including any related trust) complies in form with, and has at - ------------- all times been maintained and operated in compliance, in all material respects, with its terms and, the requirements of all applicable laws, including, without limitation, ERISA, and the Internal Revenue Code of 1986, as amended (the "Code") and the Consolidated Omnibus Budget Reconciliation Act. No condition or ---- circumstance exists that would prevent the amendment or termination of any Employee Benefit Plan. -9- (b) As used herein, the capitalized terms below have the following meanings: (i) "ERISA" means the Employee Retirement Income Security ----- Act of 1974, as amended. (ii) "ERISA Affiliate" means (A) any corporation included --------------- with the Company in a controlled group of corporations within the meaning of Section 414(b) of the Code; (B) any trade or business (whether or not incorporated) which is under common control with the Company within the meaning of Section 414(c) of the Code; (C) any member of an affiliated service group of which the Company is a member within the meaning of Section 414(m) of the Code; or (D) any other person treated as an affiliate of the Company under Section 414(o) of the Code. 2.13. Taxes. The Company and each of its Subsidiaries have filed all ----- Federal income tax returns and all other tax returns and reports (whether foreign, state or local) required to be filed by them, the failure of which to file reasonably could be expected to have, individually or in the aggregate, a Material Adverse Effect. All such returns are complete and correct in all material respects except for payment of taxes being contested in good faith and in accordance with applicable procedures. The Company and each of its Subsidiaries have paid all taxes due for the periods for which such returns were filed and all material taxes for which no return was required to be filed, and the Financial Statements reflect an adequate reserve for all Taxes payable by the Company and each of its Subsidiaries for all taxable periods and portions thereof through the date of such financial statements. The Federal income tax returns of the Company and its Subsidiaries have been properly and timely filed with the Internal Revenue Service for all years through December 31, 1999 and the Company is not aware of any material deficiency being proposed, asserted or assessed against the Company or any of its Subsidiaries. As used in this Agreement, "Taxes" shall include all Federal, state, local and foreign income, ----- property, sales, excise and other taxes, tariffs or governmental charges of any nature whatsoever. 2.14. Environmental Matters. To the Company's knowledge, the business, --------------------- assets and properties of the Company and each Subsidiary are and have been operated and maintained in compliance, in all material respects, with all applicable federal, state, city, county and local environmental protection laws and regulations (collectively, "Environmental Laws"). To the Company's ------------------ knowledge, no event has occurred which, with or without the passage of time or the giving of notice, or both, would constitute non-compliance by either the Company or any Subsidiary with, or a violation by either the Company or any Subsidiary of, the Environmental Laws. Neither the Company or any Subsidiary nor any of their respective predecessor companies has caused or permitted to exist, as a result of an intentional or unintentional act or omission, a disposal, discharge or release (as defined in the Comprehensive Environmental Response, Compensation and Liability Act, as amended) of wastes, pollutants, contaminants or hazardous or toxic substances, on or from any site which currently is or formerly was owned, leased, occupied or used by either the Company or any Subsidiary or any predecessor company, except where such disposal, discharge or release was in compliance with the Environmental -10- Laws. There is no site (a) which is listed, or proposed for listing on a registry or inventory of inactive hazardous waste sites or sites potentially requiring investigation or response maintained by any Governmental Authority and which is currently is or formerly was owned, leased, occupied or used by either the Company, any Subsidiary or any predecessor company, or (b) with respect to which either the Company, any Subsidiary or, to the Company's knowledge, any predecessor company has received written notice that such Company is considered to be a potentially responsible person for cleanup or other liability in respect of Environmental Laws or about which information has been requested from the Company or any Subsidiary or any of their predecessor companies; and with respect to (b) which reasonably could be expected to have an Material Adverse Effect. 2.15. Title to Properties. The Company and its Subsidiaries have good, ------------------- valid and marketable title to, or valid leasehold interests in, all their material properties and assets free and clear of all Liens, except as disclosed in the SEC Documents and except for defects in title, easements, restrictive covenants and similar encumbrances or impediments that do not materially impair the value or use of the affected properties. The Company and each of its Subsidiaries have complied in all material respects with the terms of all leases to which they are a party and under which they are in occupancy, and all such leases are in full force and effect. The Company and each of its Subsidiaries enjoy, in all material respects, peaceful and undisturbed possession under all such leases. 2.16. Intellectual Property. For purposes of this Agreement, --------------------- "Intellectual Property" shall mean all industrial and intellectual property --------------------- rights, including without limitation, patents, patent applications, patent rights, trademarks, trademark applications, trade names, service marks, service mark applications, trade mark registrations, copyrights, copyright applications, copyright registrations, technology, know-how, licenses, trade secrets, proprietary processes and formulae owned or licensed by the Company or its Subsidiaries. The Company or its Subsidiaries owns, is licensed by the owner or otherwise holds the right to use and enjoy the rights under the Intellectual Property, except where the lack of ownership, license or right to use or enjoy the rights under the Intellectual Property reasonably could not be expected to have a Material Adverse Effect, and the consummation of the transactions contemplated by this Agreement will not alter or impair any such rights. No claims have been asserted by any person or Authority alleging that any of the current or contemplated activities of the Company or any of its Subsidiaries infringe upon or violate any patent, copyright, trademark, trade name, trade secret or other proprietary right of any third party, which if determined adversely to the Company or any Subsidiaries reasonably could be expected to have an Material Adverse Effect. No person or Authority has undertaken a judicial challenge or judicially questioned the validity of the Intellectual Property or the effectiveness of any license or agreement relating thereto to which the Company or any of its Subsidiaries is a party and which reasonably could be expected to have a Material Adverse Effect. 2.17. Certain Agreements. Except as set forth in the Flow Purchase ------------------ Agreement (as defined below), neither the Company nor any of its Subsidiaries is a party to, or bound by, any contract or agreement that materially limits the ability of the Company or any of its -11- Subsidiaries directly or indirectly to compete in any line of business or with any person in any geographic area during any period of time. 2.18. Related Transactions. Except as disclosed in the Company's most -------------------- recent proxy statement, no current or former stockholder, director, officer or employee of the Company or any of its Subsidiaries (other than the Investors) nor any relative or "associate" of any such person, is presently, directly or indirectly through his or its affiliation with any other person or entity, a party to any transaction with the Company or any of its Subsidiaries providing for the furnishing of services (other than employment of such individuals by the Company or its Subsidiaries) by or to, or the sale of products by or to, or rental of real or personal property from or to, or otherwise requiring cash payments by or to, any such person. For purposes of this Agreement, a transaction of the type described in this Section 2.18 is sometimes herein referred to as a "Related Transaction." ------------------- 2.19. Offering of Shares of Series C Preferred Stock. Neither the ---------------------------------------------- Company nor any person acting on its behalf has taken or will take any action (including, without limitation, any offering of any securities of the Company under circumstances that would require, under the Securities Act, the integration of such offering with the offering and sale of the shares of Series C Preferred Stock), which might subject the offering, issuance and sale of the shares of Series C Preferred Stock to the registration requirements of Section 5 of the Securities Act. 2.20. Disclosure. To the Company's knowledge, no representation or ---------- warranty made by the Company, nor any of the documents or written information furnished or to be furnished by or on behalf of the Company to the Investors in connection with the transactions contemplated hereby contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.21. Broker's Fees. The Company has not employed any broker or ------------- finder or incurred any liability for any broker's fees, commissions or finder's fees in connection with any of the transactions contemplated hereby. 2.22. Rights Agreement. The Investors, and any of their permitted ---------------- assignees, shall not be deemed an Acquiring Person pursuant to the Rights Agreement, dated as of September 29, 1995, as amended, up to the date hereof (the "Rights Agreement"), between the Company and La Salle National Trust, N.A. ---------------- The execution, delivery or performance of this Agreement or the transactions contemplated hereby shall not constitute an event triggering the rights afforded under the Rights Agreement. -12- ARTICLE III REPRESENTATIONS AND WARRANTIES OF EACH INVESTOR ---------------- Each Investor hereby represents and warrants to the Company, severally and not jointly, as follows: 3.1. Organization. Each Investor, who is not an individual, is duly ------------ organized or formed, validly existing and in good standing under the laws of the State of Delaware and have the requisite corporate or other power to carry on its business as it is now being conducted. 3.2. Authority Relative to this Agreement; No Conflict. Each Investor ------------------------------------------------- has the requisite corporate or other power, capacity and authority to execute and deliver this Agreement, to perform such Investor's obligations hereunder and to consummate the transactions contemplated hereby without the consent of any other person (except for such consents as have heretofore been obtained). This Agreement has been duly and validly executed and delivered by each Investor and, assuming this Agreement constitutes a valid and binding obligation of the Company, this Agreement constitutes a valid and binding agreement of each Investor enforceable against such Investor in accordance with its terms, and will not conflict with any other agreement to which such Investor is a party. 3.3. Investment Intent. The shares of Series C Preferred Stock and the ----------------- Warrants being acquired hereunder are being purchased by each Investor for investment for such Investor's own account, and not with a view to any resale, distribution or other transfer thereof that would violate the Securities Act, or the applicable state securities laws of any state. None of the Investors will distribute the shares of Series C Preferred Stock in violation of the Securities Act or the applicable securities laws of any state. 3.4. Economic Risk. Each Investor is well versed in financial matters, ------------- has had extensive dealings over the years in securities and is fully familiar with the operating history and financial results of the Company and is fully capable of understanding the type of investment being made pursuant to this Agreement and the risks involved in connection therewith. Each Investor is financially able to hold the Series C Preferred Stock for long-term investment, believes that the nature and amount of the Series C Preferred Stock being acquired by the Investor are consistent with the Investor's overall investment program and financial position, and recognizes that there are substantial risks involved in the acquisition of the Series C Preferred Stock. 3.5. Litigation. There is no action, suit, investigation or proceeding ---------- pending against, or to the knowledge of the Investor, threatened against or affecting, such Investor before any Authority that in any manner challenges or seeks to prevent, enjoin, alter or materiality delay the transactions contemplated this Agreement. -13- 3.6. Additional Representations. Each Investor: (a) is an accredited -------------------------- investor within the meaning of Rule 501(a) under the Securities Act; (b) is aware of the limits on resale imposed by virtue of the nature of the transactions contemplated by this Agreement and is aware that the certificates representing the Investor's respective ownership of Series C Preferred Stock will bear related restrictive legends; (c) is acquiring the shares of the Company hereunder without registration under the Securities Act in reliance on the exemption from registration contained in Section 4(2) of the Securities Act; (d) has been given the opportunity to ask questions of, and receive answers from, the officers of the Company regarding the Company, its current and proposed business operations and the Series C Preferred Stock, and the officers of the Company have made available to each Investor all documents and information that the Investor has requested relating to an investment in the Company; (e) has access to all of the Company's public filings with the SEC; (f) acknowledges that the Company is entering into this Agreement in reliance upon the Investor's representations and warranties and other covenants and agreements contained herein; and (g) acknowledges that each Investor is entering into this Agreement in reliance upon the Company's representations and warranties and other covenants and agreements contained herein. 3.7. Rule 144. Each Investor acknowledges that the Series C Preferred -------- Stock must be held indefinitely unless registered under the Securities Act or unless an exemption for such registration is available. Each Investor is aware of the provisions of Rule 144 promulgated under the Securities Act which permit limited resale of shares purchased in a private placement subject to the satisfaction of certain conditions, which may include, among other things, the existence of a public market for the shares, the availability of certain current public information about the Company, the resale occurring not less than one year after a party has purchased and paid for the security to be sold, the sale being effected through a "broker's transaction" or in transactions directly with a "market maker" and the number of shares being sold during any three-month period not exceeding specified limitations. Each Investor agrees that prior to any proposed transfer of the Series C Preferred Stock, such Investor shall give notice to the Company describing the manner and circumstances of the proposed transfer and, if reasonably requested by the Company, such Investor shall deliver an opinion of legal counsel, addressed to the Company, to the effect that the proposed transfer may be effected without registration under the Securities Act. 3.8. Broker's Fees. None of the Investors has employed any broker or ------------- finder or incurred any liability for any broker's fees, commissions or finder's fees in connection with any of the transactions contemplated hereby. ARTICLE IV COVENANTS --------- 4.1. Conduct of Business of the Company. During the period from the ---------------------------------- date of execution of this Agreement up to and including the Closing Date, the Company and each of its Subsidiaries will each conduct its business and operations according to its ordinary and usual course of business and consistent with past practice. -14- 4.2. Access to Information. --------------------- (a) Between the date of execution of this Agreement and the Closing Date, the Company will upon reasonable notice (i) give the Investors and their authorized representatives access during regular business hours to all of the Company's and its Subsidiaries' offices and to all books and records of it, (ii) permit the Investors to make such inspections as it may require (and the Company shall cooperate with Investor in any inspections), and (iii) cause its officers and those of its Subsidiaries to furnish the Investors with such financial and operating data and other information with respect to the business and properties of the Company and its Subsidiaries as the Investors may from time to time request. The Investors shall maintain the confidentiality of any confidential and proprietary information so obtained by it which is not otherwise available from other sources that are free from similar restrictions; provided, however, that the foregoing shall in no way limit or otherwise - -------- ------- restrict the ability of the Investors or such authorized representatives to disclose any such information concerning the Company or its Subsidiaries which it may be required to disclose (x) to its partners, board members or stockholders, to the extent required to satisfy its fiduciary obligations to such persons, or (y) otherwise pursuant to or as required by law; provided that, -------- to the extent legally permitted, the Investors will notify the Company of such disclosure and afford the Company an opportunity to oppose promptly such disclosure. (b) The Company will provide Investors with copies of the Form 10-K for the year ended December 31, 2000 as filed with the SEC, immediately upon the Company's completion of such Form 10-K. 4.3. Reasonable Best Efforts. Subject to the terms and conditions ----------------------- herein, each of the parties hereto agrees to use its reasonable best efforts to take, or cause to be taken, all appropriate action, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement. In case at any time after the Closing Date any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers and directors of each party to this Agreement shall take all such necessary action. Such reasonable best efforts shall include, without limitation, (a) the obtaining of all necessary consents, approvals or waivers from third parties and governmental authorities necessary to the consummation of the transactions contemplated by this Agreement, and (b) opposing vigorously, to the extent commercially reasonable, any litigation or administrative proceeding relating to this Agreement or the transactions contemplated hereby, including, without limitation, to the extent commercially reasonable, promptly appealing any adverse court or agency order. Notwithstanding the foregoing or any other provisions contained in this Agreement to the contrary, neither the Investors nor any of their affiliates shall be under any obligation of any kind to enter into any negotiations or to otherwise agree with any Authority, including but not limited to any governmental or regulatory authority with jurisdiction over the enforcement of any applicable federal, state, local and foreign antitrust, competition or other similar laws, or any other party to sell or otherwise dispose of, hold separate (through the establishment of a trust or otherwise) -15- particular assets or categories of assets or businesses of any of the Company, the Investors or any of the Investors' affiliates. 4.4. Amendments to the Restated Certificate of Incorporation. On or ------------------------------------------------------- before the Closing, the Board of Directors of the Company will have adopted the resolutions set forth in Exhibit B to this Agreement, and the Company will have --------- filed (i) a Certificate of Designation, Preferences and Rights of Series C Cumulative Convertible Participating Preferred Stock in the form of Exhibit B-1 ----------- hereto (the "Certificate of Designation" ), (ii) a Certificate of Designation, -------------------------- Preferences and Rights of Series B-1 Cumulative Convertible Participating Preferred Stock in the form of Exhibit B-2 hereof, and (iii) the amendment to ----------- the Company's Restated Certificate of Incorporation to increase the number of authorized shares of Common Stock in the form of Exhibit B-3 hereto; each with ----------- the Secretary of State of the State of Delaware. 4.5. Public Announcements. The Company and its Subsidiaries shall -------------------- consult with the Investors and obtain the prior approval and consent of the Investors before issuing any press release or otherwise making any public statement with respect to the transactions contemplated hereby, except as may be required by law, in which case the Company and its Subsidiaries shall use its good faith efforts to review the contents of any such announcement with the Investors and obtain the approval and consent of the Investors reasonably in advance of the public release of such announcement. 4.6. Responsibilities of Company; Consent of Stockholders. ---------------------------------------------------- (a) On or before the Closing, so long as twenty-five percent (25%) of the originally issued shares of Series B-1 Cumulative Convertible Participating Preferred Stock ("Series B-1 Preferred Stock") are held by the Investors, the holders of shares of Series B-1 Preferred Stock shall be entitled to nominate three (3) persons to the Company's Board of Directors (the "Investors Nominees") whether by annual meeting, special meeting, written ------------------ consent or otherwise. A vacancy in any directorship entitled to be elected by the holders of record of shares of Series B-1 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 not to fill the directorship to be held by the Investors Nominees 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. Each Investors Nominee who shall have been elected as provided in Paragraph A.8(b) of the Series B-1 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 then outstanding. The holders of records of a majority of the shares of Series B-1 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 -16- shall cause such elected Preferred Nominee to be so appointed. Upon the execution and delivery of the Amended and Restated Investors Rights Agreement, all rights of the Series B-1 Preferred Stockholders in this Section 4.6(a) shall be terminated. (b) On or before Closing, in accordance with the relevant provisions of the NASD Manual - The NASDAQ Stock Market, the DGCL, the Restated Certificate of Incorporation and Bylaws, the Common Stockholders and the Series B-1 Preferred Stockholders of the Company shall have approved and authored (i) the execution of this Agreement and each other Document, other agreement or instrument contemplated herein and the transactions contemplated hereby, including authorization of the issuance, sale and delivery of the shares of Series C Preferred Stock and the Warrants, (ii) an amendment to the Company's Restated Certificate of Incorporation increasing the authorized number of shares of Common Stock, (iii) elected of the Investors' Nominees to the Company's Board of Directors and (iv) any other matters necessary to effectuate the closing of the transactions contemplated herein. (c) The Company will deliver to the Investors an accurate listing of all Common Stockholders that have indicated that they will agree to vote all of their shares of Common Stock in favor of the terms set forth in Section 4.6(b). In addition to such list, the Company will deliver to the Investors evidence that a voting agreement in the form of Exhibit D has been --------- executed by the parties thereto and is in full force and effect. 4.7. Sale of Stock. The Investors and their successors and assigns ------------- shall not engage in any short selling of the Company's securities, other than in the process of an orderly liquidation of the Investor's holdings of shares of Series C Preferred Stock, which shall not exceed five percent on a daily basis of the Investors' holdings of such stock as of the date of this Agreement. 4.8. Payment of Investors' Fees and Expenses. The Company shall pay --------------------------------------- the Investors' reasonable costs and expenses in connection with the transactions contemplated hereby, including, but not limited to: (i) Investors' out-of-pocket costs and expenses related to (A) Investors' business due diligence and (B) any filings that are required by the Exchange Act, the Securities Act or any state "blue sky" laws; and (ii) the reasonable fees and expenses of Investors' outside counsel incurred in connection with the transactions contemplated hereby, including Investors' due diligence (the costs and expenses described to in clauses (i) and (ii) are referred to collectively as the "Investors' Expenses"). ------------------- 4.9. Advisory Fee Letter. On or before the Closing Date, the Company ------------------- will execute and deliver to FS Private Investors III LLC an advisory fee letter in the form attached hereto as Exhibit E (the "Advisory Fee Letter"). --------- ------------------- -17- ARTICLE V CONDITIONS TO CLOSING --------------------- 5.1. Conditions to Investors' Obligations for Closing. The obligation ------------------------------------------------ of each Investor to effect the purchase of shares of Series C Preferred Stock and the Warrants contemplated by Sections 1.1(a) and 1.2(a) of this Agreement is subject to the satisfaction or written waiver of the following conditions in the Investor's sole discretion: (a) the representations and warranties of the Company contained in this Agreement that are not qualified by materiality shall be true and correct in all material respects as of the date hereof and on and as of the Closing Date with the same effect as if made on and as of the Closing Date, and the representations and warranties of the Company that are qualified by materiality shall be true and correct on and as of the Closing Date with the same effect as if made on and as of the Closing Date (except, in either case, to the extent any such representation and warranty specifically refers to a particular date, in which case such representation and warranty shall be true and correct as of such date), and the Company shall have performed, in all material respects, all of its obligations under this Agreement required to be performed by the Company prior to the Closing Date; (b) there shall not have occurred any Material Adverse Effect or any violation of Law by the Company or its Subsidiaries that reasonably could be expected to have a Material Adverse Effect; (c) there shall not have occurred any event which has resulted in or may result in the Company seeking protection from its creditors under any chapter or provision of the United States Bankruptcy Code; (d) each Investor shall have received a certificate of the President, Chief Executive Officer or Chief Financial Officer of the Company, on behalf of the Company, certifying as to the fulfillment of the conditions set forth in clauses (a) through (c) above; (e) no statute, rule, regulation, judgment, order or injunction shall be enacted, entered, promulgated or enforced (i) challenging the transactions contemplated hereby, seeking to restrain or prohibit the transactions contemplated hereby or seeking any damages material in relation to the Company or any Investor, (ii) seeking to impose limitations on the ability of each Investor to acquire or hold, or exercise full rights of ownership of any shares of Series B Preferred Stock, Series C Preferred Stock or the Warrants, including the right to vote such shares or (iii) that otherwise reasonably could be expected to have a Material Adverse Effect; (f) each Investor shall have been provided with evidence satisfactory to the Investor in such Investor's reasonable discretion that the Board of Directors of the Company has approved the transactions contemplated by this Agreement for purposes of Section 203 of the DGCL; -18- (g) each Investor shall have received a certificate, dated the Closing Date, duly executed by the Secretary of the Company certifying as to (i) the attached copy of resolutions of the Board of Directors of the Company authorizing and approving or ratifying the execution, delivery and performance of this Agreement and the other documents and instruments contemplated hereby and the consummation of the transactions contemplated hereby and stating that such resolutions have not been modified, amended, revoked or rescinded, and (ii) the incumbency, authority and specimen signature of each officer of the Company executing this Agreement and any other document or instrument contemplated hereby; (h) each Investor shall have received a certificate signed by the President, Chief Executive Officer or Chief Financial Officer certifying to the Stockholders Approval; (i) each Investor shall have received a copy of a certificate of the Secretary of State of the State of Delaware certifying as to the Company's due organization, valid existence and good standing as a domestic corporation in the State of Delaware as of a date not more than two (2) business days prior to the Closing Date; (j) each Investor shall have received an opinion of Schiff Hardin & Waite, outside counsel to the Company, dated as of the Closing Date, in the form attached hereto as Exhibit F-1; ----------- (k) each Investor shall have received an opinion of Company counsel, dated as of the Closing Date, in the form attached hereto as Exhibit ------- F-2; - --- (l) the Company shall have received (and furnished to each Investor evidence thereof reasonably satisfactory to each Investor) any necessary or required approvals or consents from all Authorities and other third parties necessary or required to complete the transactions contemplated hereby, and such approvals and consents shall not have been withdrawn or expired as of the Closing Date and the Certificate of Designation shall have been duly filed with the Secretary of State of the State of Delaware; (m) the Company and its lenders shall have amended (and furnished to each Investor evidence thereof reasonably satisfactory to each Investor) its Credit Agreement in accordance with the terms of the Lender Commitment Letter attached hereto as Exhibit G; --------- (n) the Company shall have executed and delivered to each Investor the Amended and Restated Investors Rights Agreement in the form attached hereto as Exhibit H; --------- (o) each Investor shall have received evidence satisfactory to such Investor of the Closing of the asset purchase agreement by and among the Company, NACO, Inc., National Castings Inc., NACO Flow Products, Inc., National Engineered Products Company, Inc. and Matrix Metals LLC (the "Flow Purchase ------------- Agreement"); - --------- -19- (p) each Investor shall have received evidence satisfactory to such Investor that the Company has obtained all stockholder approvals required by NASDAQ in connection with the transactions contemplated herein; (q) each Investor shall have received a copy of the Company's Form 10-K along with a signed copy of its report of independent auditors for the year ended December 31, 2000, which report shall be unqualified in all material respects; (r) the Company shall have taken all steps necessary to ensure that, effective upon the Closing, the three Series B-1 Preferred Stock Nominees and the Company's Chief Executive Officer are elected to the Board of Directors of the Company; (s) the Company shall have paid the Investors' reasonable costs and expenses in connection with the transactions contemplated hereby, including, but not limited to the Investors' Expenses; (t) each Investor shall have been provided with evidence satisfactory to each Investor in its reasonable discretion that the Rights Agreement shall have been amended in a manner reasonably satisfactory to the Investors to provide among other things (i) that an acquisition of shares by the Investors and its transferees will be excluded from the provisions of the Rights Agreement, (ii) that the Investors' affiliates shall be able to continue to engage in market making activities in the Company's securities in accordance with the National Association of Securities Dealers, Inc.'s rules and (iii) that such activities and the consummation of the transactions contemplated hereby and the conversion of the Series C Preferred Stock and the exercise of the Common Stock Warrants shall not cause the rights afforded pursuant to the Rights Agreement to become exercisable; (u) each Investor shall have been provided with evidence satisfactory to the Investor that the Company's Indenture dated as of January 15, 1997 (as supplemented, amended or modified) between ABC Rail Products Corporation and First Trust National Association (the "Subordinated Debt") has ----------------- been amended in a manner reasonably satisfactory to the Investors to, among other things, waive any financial covenant defaults or any other defaults and to amend the financial covenants as to future periods in a fashion reasonably satisfactory to the Investors and such further amendments to permit the transactions contemplated hereby, including compliance with the terms of the Series C Preferred Stock and Common Stock Warrants and includes, without limitation, a waiver of any change of control that may result from a conversion of the Series C Preferred Stock or the exercise of the Common Stock Warrants and such further amendments as are necessary; (v) each Investor shall have been provided with evidence satisfactory to the Investor that the Company has paid, in full, the Series B Dividend to the holders of the Series B Preferred Stock as required by the terms of the Senior Second Secured Financing Commitment Letter (attached hereto as Exhibit I); - --------- -20- (w) each Investor shall have been provided with evidence satisfactory to the Investor that the Advisory Fee Letter has been duly and validly executed and delivered by the Company and that all obligations thereunder have been fulfilled; and (x) all shares of Series B Preferred Stock shall have been exchanged for shares of Series B-1 Preferred Stock in accordance with the terms of the Exchange Agreement dated as of April 17, 2001 between the Company and the persons named therein. 5.2. Conditions to the Company's Obligations for the Closing.The ------------------------------------------------------- obligations of the Company to effect the sale of shares of Series C Preferred Stock and the Warrants contemplated by Sections 1.1(a) and 1.2(a) of this Agreement are subject to the satisfaction or written waiver of the following conditions: (a) the representations and warranties of each Investor contained in this Agreement that are not qualified by materiality shall be true and correct in all material respects as of the date hereof and on and as of the Closing Date with the same effect as if made on and as of the Closing Date, and the representations and warranties of each Investor that are qualified by materiality shall be true and correct on and as of the Closing Date with the same effect as if made on and as of the Closing Date (except, in either case, to the extent any such representation and warranty specifically refers to a particular date, in which case such representation and warranty shall be true and correct as of such date), and each Investor shall have performed, in all material respects, all of its obligations under this Agreement required to be performed by each Investor prior to the Closing Date; (b) the Company shall have received certificates from the authorized officer of each Investor, certifying as to the fulfillment of the condition set forth in clause (a) above; (c) the Company shall have received payment of the Purchase Price by wire transfer of immediate available funds; and (d) each Investor shall have executed and delivered to the Company the Amended and Restated Investors Rights Agreement in the form attached hereto as Exhibit E. --------- ARTICLE VI INDEMNIFICATION --------------- 6.1. Indemnification by the Company. The Company shall indemnify, ------------------------------ defend and hold harmless each of the Investors and their respective affiliates and its respective members, partners, shareholders, directors, officers, employees and agents from and against any loss, liability, claim, damage or expense (including court and arbitration fees and costs, and reasonable fees and expenses of legal counsel, investigators, expert witnesses, consultants, accountants and other professionals) (a "Loss") suffered or incurred by any such indemnified party resulting from or arising out of (a) any untruth, inaccuracy or breach of any representation -21- or warranty of the Company contained in this Agreement, or (b) any breach of any covenant or obligation of the Company contained in this Agreement; provided that -------- ---- (i) the Investors shall not be permitted to seek indemnification under this section 6.1 unless the aggregate amount of Losses with respect to all matters referred to in this Section 6.1 exceeds One Hundred and Twenty-Five Thousand Dollars ($125,000), in which event the Investors shall be entitled to seek indemnity against the Company for the full amount of such Losses, and (ii) the Company's maximum liability under this Section 6.1 shall not exceed Fifteen Million Dollars ($15,000,000). 6.2. Indemnification by the Investors. Each of the Investors shall -------------------------------- severally indemnify, defend and hold harmless the Company from and against any Loss suffered or incurred by the Company resulting from or arising out of a breach by such Investor of Section 4.7 of this Agreement; provided that (i) the -------- Company shall not be permitted to seek indemnification from the Investor under this Section 6.2 unless the aggregate amount of Losses with respect to the matters referred to in this Section 6.2 exceeds One Hundred and Twenty-Five Thousand Dollars ($125,000), in which event the Company shall be entitled to seek indemnity against the Investor for the full amount of such Losses, and (ii) each Investor's maximum liability under this Section 6.2 shall not exceed the amount of its investment hereunder. 6.3. Procedure for Indemnification. ----------------------------- (a) In order for a party (the "indemnified party") to be ----------------- entitled to any indemnification provided for under this Agreement in respect of, arising out of or involving a claim or demand, made by any person against the indemnified party (a "Third Party Claim"), such indemnified party must notify ----------------- the indemnifying party in writing of the Third Party Claim within thirty (30) calendar days after receipt by such indemnified party of written notice of the Third Party Claim; provided, however, that failure to give such notification -------- ------- shall not affect the indemnification provided hereunder except to the extent the indemnifying party shall have been actually prejudiced as a result of such failure (except that the indemnifying party shall not be liable for any expenses incurred during the period in which the indemnified party failed to give such notice). Thereafter, the indemnified party shall deliver to the indemnifying party, within five (5) business days after the indemnified party's receipt thereof, copies of all notices and documents (including court papers) received by the indemnified party relating to the Third Party Claim. (i) If a Third Party Claim is made against an indemnified party, the indemnifying party will be entitled to participate in the defense thereof and, if it so chooses, to assume the defense thereof with counsel selected by the indemnifying party; provided, that such counsel reasonably is -------- not objected to by the indemnified party; and provided, further, that the -------- ------- indemnifying party first notifies the indemnified party of its intention to assume such defense within thirty (30) calendar days of receipt of notice of a Third Party Claim. Should the indemnifying party so elect to assume the defense of a Third Party Claim, the indemnifying party will not be liable to the indemnified party for any legal expenses subsequently incurred by the indemnified party in connection with the defense thereof. If the indemnifying party elects to assume the defense of a Third Party Claim, the indemnified party (A) will cooperate in all -22- reasonable respects with the indemnifying party in connection with such defense, (B) will not admit any liability with respect to, or settle, compromise or discharge, any Third Party Claim without the indemnifying party's prior written consent and (C) will agree to any settlement, compromise or discharge of a Third Party Claim which the indemnifying party may recommend and which by its terms obligates the indemnifying party to pay the full amount of the liability in connection with such Third Party Claim, which releases the indemnified party completely in connection with such Third Party Claim, which does not obligate the indemnified party to take or forbear to take any action, and which would not adversely affect the business, operations or properties of the Company. (ii) In the event the indemnifying party shall assume the defense of any Third Party Claim as provided above, the indemnified party shall be entitled to participate in (but not control) such defense with its own counsel at its own expense. If the indemnifying party does not so assume the defense of any such Third Party Claim, the indemnified party may defend the same in such manner as it may deem appropriate including, but not limited to, settling such claim or litigation after giving notice of same to the indemnifying party on such terms as the indemnified party may deem appropriate, and the indemnifying party promptly will reimburse the indemnified party upon written request. (iii) Anything contained in this Agreement to the contrary notwithstanding, the indemnifying party shall not be entitled to assume the defense of any Third Party Claim (and shall be liable for attorneys' fees and expenses incurred by the indemnified party in defending such Third Party Claim) if the Third Party Claim seeks an order, injunction or other equitable relief or relief for other than money damages against the indemnified party that the indemnified party reasonably determines, after conferring with its outside counsel, cannot be separated from any related claim for money damages and which, if successful, would adversely affect the business, operations or properties of the indemnified party; provided, however, that if such equitable relief portion of the Third Party Claim can be so separated from that for money damages, the indemnifying party shall be entitled to assume the defense of the portion relating to money damages. 6.4. Period of Indemnity. ------------------- (a) The obligations to indemnify and hold harmless any indemnified party (i) pursuant to Section 6.1(a) hereof shall terminate when the applicable representation or warranty terminates pursuant to Section 6.4(b) below, (ii) pursuant to Section 6.1(b) shall not terminate, and (iii) pursuant to Section 6.2 shall not terminate during such time as the Investors hold more than five percent of the shares of Series C Preferred Stock and Warrants originally issued; provided, however, that the indemnity obligations shall not -------- ------- terminate with respect to any item as to which the indemnified party shall have, before the expiration of the applicable period, previously made a claim by delivering a notice of such claim to the indemnifying party. (b) The representations and warranties of the Company contained herein shall expire two (2) years from the Closing Date, except for the representations or warranties contained in (i) Sections 2.12 (ERISA Compliance) 2.13 (Taxes) and 2.14 -23- (Environmental Matters), which shall survive until the running of the applicable statute of limitations; and (ii) Sections 2.1 (Approval of the Board of Directors), 2.2 (Issuance of Preferred Stock and Warrants and Reservation of Common Shares), 2.3 (Organization and Qualification), 2.4 (Capitalization) and 2.5 (Authorization and Enforceability), which shall not expire. ARTICLE VII MISCELLANEOUS ------------- 7.1. Termination; Effect of Termination; Expenses; Fees. -------------------------------------------------- (a) This Agreement may be terminated and the transactions contemplated hereby may be abandoned at any time prior to the Closing Date: (i) by mutual written consent of the Company and the Investors; or (ii) by the Investors, if the Closing does not occur by July 15, 2001; provided, however, that the right to terminate this Agreement -------- ------- pursuant to this Section 7.1(a) shall not be available to an Investor whose failure to fulfill any of its obligations under this Agreement results in the failure of any such condition; or (iii) by either party if any court of competent jurisdiction or any other governmental body shall have issued an order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the transactions contemplated hereby and such order, decree, ruling or other action shall have become final and nonappealable; or (iv) by the Investors, if the Company fails to satisfy any of its conditions to Closing set forth in Section 5.1. (b) In the event of termination and abandonment of this Agreement pursuant to Section 7.1(a), this Agreement, except for the provisions of Section 4.2 (only with respect to confidentiality), Article VI and Section 7.1(c), shall forthwith become void and have no effect, without any liability on the part of any party or its respective members, partners, shareholders, directors, officers or shareholders; provided, that nothing in this Section -------- 7.1(b) shall relieve any party to this Agreement of liability for breach of this Agreement. (c) In the event of termination or abandonment of this Agreement pursuant to Section 7.1(a) above, the Company shall pay Investors' Expenses up to a maximum of Two Hundred and Fifty Thousand Dollars ($250,000), in the aggregate. (d) In the event of termination or abandonment of this Agreement pursuant to Section 7.1(a)(ii)-(iv), the Company shall pay to the Investors a termination fee of Three Million Dollars ($3,000,000) (the "Termination Fee") payable to the Investors in a single --------------- -24- installment, which shall be paid to the Investors not more than three (3) months after the termination or abandonment of this Agreement. 7.2. Extension; Waiver. The parties hereto, may (a) extend the ----------------- time for the performance of any of the obligations or other acts of the other parties hereto, (b) waive any inaccuracies in the representations and warranties contained herein by any other applicable party or in any document, certificate or writing delivered pursuant hereto by any other applicable party or (c) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of any party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. 7.3. Entire Agreement; Assignment. This Agreement (including ---------------------------- the Schedules and Exhibits hereto) and the other documents and instruments contemplated hereby, (a) constitute the entire agreement among the parties with respect to the subject matter hereof, and supersedes all other prior agreements and understandings, both written and oral, among the parties or any of them with respect to the subject matter hereof, and (b) shall not be assigned by operation of law or otherwise; provided, that each Investor may assign any of its rights -------- and obligations hereunder to any affiliate of such Investor prior to Closing and after Closing to any person, but no such assignment shall relieve Investor of its obligations hereunder unless such assignee or transferee agrees in writing to be bound by the terms hereof as though an original signatory hereto. Either an Investor or any affiliate or associate of such Investor may purchase shares of Series C Preferred Stock under this Agreement. 7.4. Enforcement of the Agreement; Governing Law; ------------------------------------------- Jurisdiction. The parties hereto agree that Investor would suffer irreparable - ------------ damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached by the Company. It is accordingly agreed that Investor shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any state court located in the State of New York, or the United States District Court for the Southern District of New York or any federal court in the State of New York (as to which the Company agrees to submit to jurisdiction for the purposes of such or any other action), this being in addition to any other remedy to which Investor is entitled at law or in equity. This Agreement shall be governed by and construed in accordance with the substantive laws of the State of New York regardless of the laws that might otherwise govern under principles of conflicts of laws applicable thereto. 7.5. Validity. The invalidity or unenforceability of any -------- provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect. 7.6. Notices. All notices, requests, claims, demands and ------- other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered in person, by cable, telegram, facsimile transmission with confirmation of receipt, or telex, or by -25- registered or certified mail (postage prepaid, return receipt requested) to the respective parties as follows: if to Investors: --------------- 55 East 52nd Street, 37/th/ Floor New York, NY 10055-0002 Attention: James L. Luikart Phone: (212) 409-5600 Fax: (212) 409-5874 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, IL 60515 Attention: Vaughn Makary VP and Corp. Treasurer Phone: (630) 852-1300 Fax: (630) 737-0162 -26- with required copies to: ----------------------- ABC-NACO Inc. 2001 Butterfield Road Suite 502 Downers Grove, IL 60515 Attention: Mark F. Baggio, Esq., VP, General Counsel and Secretary Phone: (630) 852-1300 Fax: (630) 737-0167 Schiff Hardin & Waite 6600 Sears Tower Chicago, Illinois 60606 Attention: Robert J. Regan, Esq. Phone: (312) 258-5606 Fax: (312) 258-5700 or to such other address as the person to whom notice is given may have previously furnished to the others in writing in the manner set forth above (provided that notice of any change of address shall be effective only upon receipt thereof). 7.7. Descriptive Headings. The descriptive headings herein are -------------------- inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. 7.8. Parties in Interest. This Agreement shall be binding upon and ------------------- inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement. 7.9. Counterparts. This Agreement may be executed in two or more ------------ counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement. 7.10. Amendment. This Agreement may not be amended except by an --------- instrument in writing signed on behalf of all the parties. 7.11. Survival. The representations, warranties, covenants and -------- agreements of the Company and Investors contained in this Agreement, and all statements contained in this Agreement or any exhibit, attachment or Schedule hereto or any certificate, financial statement or SEC Documents delivered pursuant to this Agreement or in connection with the transactions contemplated hereby, shall be deemed incorporated in this Agreement and shall constitute representations, warranties, covenants and agreements of the respective party delivering the -27- same. All such representations, warranties, covenants and agreements shall survive the Closing as provided in Section 6.4. The Company acknowledges that its representations and warranties in this Agreement shall not be affected or mitigated by any investigation conducted by Investor or its representatives prior to the Closing or any knowledge of any Investor. Each Investor shall use reasonable efforts to notify the Company in the event it discovers information which constitutes a breach of the Company's representations or warranties set forth in Article 2 hereof; provided, however, that the failure of any Investor in any way to provide such notification shall not subject the Investor to any penalty or liability and shall not change the Company's liability with respect to any breach of such representation or warranty. 7.12. Certain Definitions. For purposes of this Agreement, the ------------------- following terms shall have the meanings ascribed to them below: (a) "affiliate" of a person shall mean (i) a person that --------- directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the first-mentioned person and (ii) an "associate" as that term is defined in Rule 12b-2 promulgated under the --------- Exchange Act as in effect on the date of execution of this Agreement. (b) "Amended and Restated Investors Rights Agreement" means ----------------------------------------------- the Amended and Restated Investors Rights Agreement by and among the Company and the Investors named therein and attached hereto as Exhibit H. --------- (c) "control" (including the terms "controlling", "controlled ------- ----------- ---------- by" and "under common control with" or correlative terms) shall mean the - -- ------------------------- possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through ownership of voting securities, by contract, or otherwise. (d) "Documents" means this Agreement, the Amended and Restated --------- Investors Rights Agreement, the Certificate of Designation, the Closing Warrant and the Additional Warrant. (e) "Exchange Act" means the Securities Exchange Act of 1934, ------------ as amended and the rules and regulations promulgated thereunder all as the same shall be as in effect at the time. (f) "Material Adverse Effect" shall mean (i) any adverse ----------------------- change in the condition (financial or otherwise), assets (including without limitation tangible and intangible assets), liabilities, business, or results of operations or prospects of the Company or any of its Subsidiaries, which change, individually or in the aggregate, is material to the Company and its Subsidiaries taken as a whole, or (ii) any event, matter, condition or effect which materially adversely impairs the ability of the Company to perform on a timely basis its obligations under this Agreement or the Company to consummate the transactions contemplated by this Agreement. -28- (g) "person" shall mean and include an individual, a corporation, a ------ partnership, a trust, an unincorporated organization and a government or any department, agency or political subdivision thereof. (h) "Restated Certificate of Incorporation" means the Company's ------------------------------------- Restated Certificate of Incorporation on file with the Secretary of State of the State of Delaware as of the date hereof. (i) "Securities Act" shall mean Securities Act of 1933, as amended, -------------- and all other applicable securities laws and the rules and regulations thereunder as in effect from time to time. (j) "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. -29- IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its officers thereunto duly authorized, on the day and year first above written. ABC-NACO INC. By: _________________________________________________ Name: Mark F. Baggio Title: Vice President, General Counsel and Secretary INVESTORS: FURMAN SELZ INVESTORS II L.P. FS EMPLOYEE INVESTORS LLC FS PARALLEL FUND L.P. By: FS Private Investments III LLC, Manager By: _________________________________________________ Name: James L. Luikart Title: Managing Member ING FURMAN-SELZ INVESTORS III LP ING BARINGS U.S. LEVERAGED EQUITY PLAN LLC ING BARINGS GLOBAL LEVERAGED EQUITY PLAN LTD. By: FS Private Investments III LLC, Manager By: _________________________________________________ Name: James L. Luikart Title: Managing Member -30- EXHIBIT A Investors and Series C Preferred Stock and Warrants
- ------------------------------------------------------------------------------------------------------ Number of Shares of Prorata Number of Number of Series C Aggregate Closing Additional Investors Preferred Stock Purchase Price Warrant Shares Warrant Shares --------- --------------- -------------- -------------- -------------- - ------------------------------------------------------------------------------------------------------ Furman Selz Investors L.P. 65,895 $6,589,500.00 2,635,800 2,635,800 - ------------------------------------------------------------------------------------------------------ FS Employee Investors LLC 5,640 $ 564,000.00 225,600 225,600 - ------------------------------------------------------------------------------------------------------ FS Parallel Fund L.P. 3,210 $ 321,000.00 128,400 128,400 - ------------------------------------------------------------------------------------------------------ James Dowling 510 $ 51,000.00 20,400 20,400 - ------------------------------------------------------------------------------------------------------ ING Furman Selz Investors III LP 52,080 $5,208,000.00 2,083,200 2,083,200 - ------------------------------------------------------------------------------------------------------ ING Barings U.S. Leveraged Equity Plan LLC 15,840 $1,584,000.00 633,600 633,600 - ------------------------------------------------------------------------------------------------------ ING Barings Global Leveraged Equity Plan Ltd. 6,825 $ 682,500.00 273,000 273,000 - ------------------------------------------------------------------------------------------------------
EX-10.2 6 dex102.txt EXCHANGE AGREEMENT EXHIBIT 10.2 Execution Copy -------------- EXCHANGE AGREEMENT THIS IS AN EXCHANGE AGREEMENT, dated as of April 17, 2001 (the "Agreement"), by --------- and among ABC-NACO INC., a Delaware corporation, having its principal office at 2001 Butterfield Road, Suite 502, Downers Grove, Illinois 60515 (the "Company") ------- and the individual and entities listed on Exhibit A hereto (individually --------- referred to as an "Investor" and collectively as the "Investors"). -------- --------- BACKGROUND ---------- A. The Company has (i) twenty-five million shares of common stock, par value $0.01 per share, of which 19,872,242 were issued and outstanding on April 16, 2001, and (ii) as of the date hereof (x) authorized 1,000,000 shares of preferred stock, par value one dollar ($1.00) per share (the "Preferred Stock"), --------------- of which 100,000 shares are designated as Series A Junior Participating Preferred Stock ("Series A Preferred Stock") and (y) 300,000 shares are issued ------------------------- and outstanding and are designated as Series B Cumulative Convertible Preferred Stock ("Series B Preferred Stock"). The Company's Common Stock is currently ------------------------ traded on the Nasdaq National Market ("NASDAQ"). ------ B. The Company is engaged in the business of design, engineering and manufacture of high performance freight railcar, locomotive and passenger rail suspension and coupler systems, wheels and mounted wheel sets, and specialty track products, and supplying freight as well as highly engineered valve bodies and components for industrial flow control systems worldwide. C. Concurrently with the execution hereof, the Investors and other funds sponsored by ING Furman Selz Investments have entered into a Commitment Letter (the "Senior Notes Commitment Letter") with the Company pursuant to which, ------------------------------ subject to the terms and conditions thereof, the Company shall issue to and sell to such parties, and such parties shall purchase, $15 million in initial principal amount of the Company's Senior Second Secured Notes (the "Senior ------ Second Secured Notes"). - -------------------- D. The Company desires to designate a new series of its Preferred Stock, to be known as the Series B-1 Cumulative Convertible Participating Preferred Stock, par value one dollar ($1.00) per share (the "Series B-1 Preferred -------------------- Stock"). Concurrently with the closing of the sale of the Senior Second Secured - ----- Notes pursuant to the Commitment Letter, the Company desires to issue shares of Series B-1 Preferred Stock in exchange for all of the outstanding shares of Series B Preferred Stock, and the Investors desire to exchange all of their shares of Series B Preferred Stock for shares of the Series B-1 Preferred Stock, subject to the terms and conditions contained herein (the foregoing transactions hereinafter referred to as the "Exchange"). TERMS ----- NOW, THEREFORE, in consideration of the mutual covenants contained herein, and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I EXCHANGE OF SECURITIES Section 1.1. Dividend; Exchange of Series B Preferred Stock. ----------------------------------------------- (a) At or before the Closing (as defined in Section 1.2) the Company shall declare and pay in cash a dividend equal to 40% of the accrued but unpaid dividends (calculated on a daily basis) on the outstanding shares of Series B Preferred Stock (the "Series B Dividend"). ----------------- (b) Subject to the terms and conditions set forth herein, at the Closing the Company shall issue and deliver to each Investor, and each Investor shall receive from the Company, in exchange for the shares of Series B Preferred Stock held by such Investor as set forth on Exhibit A, a number of --------- shares of Series B-1 Preferred Stock equal to the sum of (i) the number of shares of Series B Preferred Stock set forth opposite such Investors name on Exhibit A hereto, plus (ii) the amount of accrued but unpaid dividends on such - --------- number of shares of Series B Preferred Stock (accrued on a daily basis) to the date of Closing, divided by $100. Section 1.2. Closing. (a) Subject to the terms and conditions of this ------- Agreement, the closing of the Exchange (the "Closing") will take place ------- concurrently with the closing of the sale of the Senior Second Secured Notes pursuant to the Commitment Letter, but in no event later than June 1, 2001, at the offices of Dechert, 4000 Bell Atlantic Tower, 1717 Arch Street, Philadelphia, Pennsylvania 19103-2793, or on such other date to be mutually agreed by the parties hereto (the "Closing Date"). ------------ (b) At Closing, (i) the Company will deliver to each Investor a stock certificate representing the number of shares of Series B-1 Preferred Stock to which such Investor is entitled, registered in the name of such Investor, or an affiliate or associate of such Investor, as such Investor may designate in writing to the Company and (ii) each Investor shall deliver to the Company such Investor's shares of Series B Preferred Stock, by surrender of the number of shares of Series B Preferred Stock set forth opposite such investor's name on Exhibit A hereto, accompanied by stock powers or other documents of transfer duly endorsed in blank. ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY -------------- The Company hereby represents and warrants to the Investors as follows: Section 2.1. Approval of the Board of Directors. The Board of Directors ---------------------------------- of the Company has taken all actions necessary or appropriate to authorize and to ratify the execution, delivery and performance of this Agreement and each other Document, other agreement or -2- instrument contemplated herein and the transactions contemplated hereby, including authorization of the issuance, sale and delivery of the shares of Series B-1 Preferred Stock. Section 2.2. Issuance of Series B-1 Preferred Stock and Reservation of --------------------------------------------------------- Common Shares. The issuance, sale and delivery of the shares of Series B-1 - ------------- Preferred Stock have been duly authorized by all requisite corporate action of the Company and the shares of Series B-1 Preferred Stock to be issued to the Investors in accordance with the terms of this Agreement and the Certificate of Designation (as defined in Section 4.4), when issued and delivered in accordance with the terms of this Agreement will be validly issued, fully paid and non- assessable, free and clear of any liens, claims and encumbrances of any kind or nature ("Liens") and not subject to preemptive or other similar rights of the ----- stockholders of the Company. The Company has authorized the reservation of and the issuance of the shares of Common Stock reserved for issuance upon conversion of the Series B-1 Preferred Stock and as otherwise set forth in the Certificate of Designation, in accordance with the Certificate of Designation, and when issued and delivered in accordance with the terms of this Agreement will be validly issued, fully paid and non-assessable, free and clear of any Liens) and not subject to preemptive or other similar rights of the stockholders of the Company. Section 2.3. Organization and Qualification. The Company is a corporation ------------------------------ duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power to carry on its business as it is now being conducted. (a) Capitalization. -------------- (i) As of April 16, 2001, the authorized capital stock of the Company consists of 25,000,000 shares of Common Stock, 19,872,242 of which are issued and outstanding, and 1,000,000 shares of Preferred Stock, of which (i) 100,000 are designated as Series A Preferred Stock, none of which are issued or outstanding and (ii) 300,000 are designated as Series B Preferred Stock, all of which are issued and outstanding. Section 2.4. Authorization and Enforceability. The Company has all -------------------------------- requisite corporate power and authority to execute and deliver this Agreement and each other Document, agreement or instrument contemplated hereby, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement by the Company and each other Document, agreement or instrument executed or to be executed by the Company in connection herewith and the consummation by the Company of the transactions contemplated hereby and thereby, have been duly and validly authorized by the Board of Directors of the Company. This Agreement and each other Document, agreement or instrument contemplated hereby, has been or will be duly and validly executed and delivered by the Company and, assuming this Agreement and each other Document, agreement or instrument executed, or to be executed, by the Company in connection herewith, constitutes a valid and binding obligation of the Investors, this Agreement and each other Document, agreement or instrument contemplated hereby, constitutes or will constitute a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms. -3- Section 2.5. No Violation; Consents and Approvals. (a) Neither the ------------------------------------ execution and delivery of this Agreement or any Document, agreement or instrument contemplated hereby by the Company nor the consummation of the transactions contemplated hereby or thereby will conflict with, or result in any violation or breach of, or constitute a default (or give rise to any right of termination, modification (including, in the case of leases, any change in the amount of rent), cancellation or acceleration or result in the creation or imposition of (with or without notice or lapse of time, or both), of any Liens upon any of the properties or assets or the Company or its Subsidiaries) under, (i) the Restated Certificate of Incorporation or Bylaws of the Company or similar organizational and governance documents of any of its Subsidiaries, each as amended, (ii) the terms, conditions or provisions of any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise or license applicable to the Company or any of its Subsidiaries or to their properties or assets, or (iii) any permit, license, approval, franchise, or other governmental or regulatory authorization held or used by or binding upon the Company or any of its Subsidiaries or their properties or assets, other than, in the case of clauses (ii) or (iii), any such conflicts, violations, breaches, defaults, rights or Liens that, individually or in the aggregate, reasonably could not be expected to have a Material Adverse Effect. (b) No consent, approval, order or authorization of, or registration, declaration or filing with, (w) the stockholders of the Company, (x) any Federal, state, local or foreign governmental or regulatory entity (or any department, agency, authority or political subdivision thereof) or court or arbitrator, domestic or foreign (an "Authority"), (y) the Nasdaq National Market --------- ("NASDAQ"), or (z) any third party, is required by the Company or any of its Subsidiaries in connection with the execution and delivery of this Agreement or each other Document, agreement or instrument contemplated hereby by the Company or the consummation by the Company of the transactions contemplated by this Agreement, except for (i) the filing with the Securities and Exchange Commission ("SEC") of a notice on Form D or such reports under Section 13(a) of the Exchange Act as may be required in connection with this Agreement or any other Document or instrument contemplated hereby and the transactions contemplated hereby or thereby, (ii) the filing of the Certificate of Designation with the Secretary of State of the State of Delaware pursuant to the Delaware General Corporation Law (the "DGCL"), (iii) applicable state "blue sky" filings, if any, ---- and (iv) such other consents, approvals, orders, authorizations, registrations, declarations and filings, which have been obtained or made or the failure of which to be obtained or made, individually or in the aggregate, reasonably could not be expected to have a Material Adverse Effect. Section 2.6. Offering of Shares of Series B-1 Preferred Stock. Neither ------------------------------------------------ the Company nor any person acting on its behalf has taken or will take any action (including, without limitation, any offering of any securities of the Company under circumstances that would require, under the Securities Act, the integration of such offering with the offering and sale of the shares of Series B-1 Preferred Stock), which might subject the offering, issuance and sale of the shares of Series B-1 Preferred Stock to the registration requirements of Section 5 of the Securities Act. -4- Section 2.7. Disclosure. To the Company's knowledge, no representation or ---------- warranty made by the Company, nor any of the documents or written information furnished or to be furnished by or on behalf of the Company to the Investors in connection with the transactions contemplated hereby contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. Section 2.8. Broker's Fees. The Company has not employed any broker or ------------- finder or incurred any liability for any broker's fees, commissions or finder's fees in connection with any of the transactions contemplated hereby. Section 2.9. Rights Agreement. The Investors, and any of their permitted ---------------- assignees, shall not be deemed an Acquiring Person pursuant to the Rights Agreement, dated as of September 29, 1995, as amended, up to the date hereof (the "Rights Agreement"), between the Company and La Salle National Trust, N.A. ---------------- The execution, delivery or performance of this Agreement or the transactions contemplated hereby shall not constitute an event triggering the rights afforded under the Rights Agreement. ARTICLE III REPRESENTATIONS AND WARRANTIES OF EACH INVESTOR ---------------- Each Investor hereby represents and warrants to the Company, severally and not jointly, as follows: Section 3.1. Organization. Each Investor, who is not an individual, is ------------ duly organized or formed, validly existing and in good standing under the laws of the State of Delaware and have the requisite corporate or other power to carry on its business as it is now being conducted. Section 3.2. Authority Relative to this Agreement; No Conflict. Each ------------------------------------------------- Investor has the requisite corporate or other power, capacity and authority to execute and deliver this Agreement, to perform such Investor's obligations hereunder and to consummate the transactions contemplated hereby without the consent of any other person (except for such consents as have heretofore been obtained). This Agreement has been duly and validly executed and delivered by each Investor and, assuming this Agreement constitutes a valid and binding obligation of the Company, this Agreement constitutes a valid and binding agreement of each Investor enforceable against such Investor in accordance with its terms, and will not conflict with any other agreement to which such Investor is a party. Section 3.3. Investment Intent. The shares of Series B-1 Preferred Stock ----------------- being acquired hereunder are being purchased by each Investor for investment for such Investor's own account, and not with a view to any resale, distribution or other transfer thereof that would violate the Securities Act, or the applicable state securities laws of any state. None of the -5- Investors will distribute the shares of Series B-1 Preferred Stock in violation of the Securities Act or the applicable securities laws of any state. Section 3.4. Economic Risk. Each Investor is well versed in financial ------------- matters, has had extensive dealings over the years in securities and is fully familiar with the operating history and financial results of the Company and is fully capable of understanding the type of investment being made pursuant to this Agreement and the risks involved in connection therewith. Each Investor is financially able to hold the Series B-1 Preferred Stock for long-term investment, believes that the nature and amount of the Series B-1 Preferred Stock being acquired by the Investor are consistent with the Investor's overall investment program and financial position, and recognizes that there are substantial risks involved in the acquisition of the Series B-1 Preferred Stock. Section 3.5. Litigation. There is no action, suit, investigation or ---------- proceeding pending against, or to the knowledge of the Investor, threatened against or affecting, such Investor before any Authority that in any manner challenges or seeks to prevent, enjoin, alter or materiality delay the transactions contemplated this Agreement. Section 3.6. Additional Representations. Each Investor: (a) is an -------------------------- accredited investor within the meaning of Rule 501(a) under the Securities Act; (b) is aware of the limits on resale imposed by virtue of the nature of the transactions contemplated by this Agreement and is aware that the certificates representing the Investor's respective ownership of Series B-1 Preferred Stock will bear related restrictive legends; (c) is acquiring the shares of the Company hereunder without registration under the Securities Act in reliance on the exemption from registration contained in Section 4(2) of the Securities Act; (d) has been given the opportunity to ask questions of, and receive answers from, the officers of the Company regarding the Company, its current and proposed business operations and the Series B-1 Preferred Stock, and the officers of the Company have made available to each Investor all documents and information that the Investor has requested relating to an investment in the Company; (e) has access to all of the Company's public filings with the SEC; (f) acknowledges that the Company is entering into this Agreement in reliance upon the Investor's representations and warranties and other covenants and agreements contained herein; and (g) acknowledges that each Investor is entering into this Agreement in reliance upon the Company's representations and warranties and other covenants and agreements contained herein. Section 3.7. Rule 144. Each Investor acknowledges that the Series B-1 -------- Preferred Stock must be held indefinitely unless registered under the Securities Act or unless an exemption for such registration is available. Each Investor is aware of the provisions of Rule 144 promulgated under the Securities Act which permit limited resale of shares purchased in a private placement subject to the satisfaction of certain conditions, which may include, among other things, the existence of a public market for the shares, the availability of certain current public information about the Company, the resale occurring not less than one year after a party has purchased and paid for the security to be sold, the sale being effected through a "broker's transaction" or in transactions directly with a "market maker" and the number of shares being sold during any -6- three-month period not exceeding specified limitations. Each Investor agrees that prior to any proposed transfer of the Series B-1 Preferred Stock, such Investor shall give notice to the Company describing the manner and circumstances of the proposed transfer and, if reasonably requested by the Company, such Investor shall deliver an opinion of legal counsel, addressed to the Company, to the effect that the proposed transfer may be effected without registration under the Securities Act. Section 3.8. Broker's Fees. None of the Investors has employed any broker ------------- or finder or incurred any liability for any broker's fees, commissions or finder's fees in connection with any of the transactions contemplated hereby. ARTICLE IV COVENANTS --------- Section 4.1. Conduct of Business of the Company. During the period from ---------------------------------- the date of execution of this Agreement up to and including the Closing Date, the Company and each of its Subsidiaries will each conduct its business and operations according to its ordinary and usual course of business and consistent with past practice. Section 4.2. Access to Information. --------------------- (a) Between the date of execution of this Agreement and the Closing Date, the Company will upon reasonable notice (i) give the Investors and their authorized representatives access during regular business hours to all of the Company's and its Subsidiaries' offices and to all books and records of it, (ii) permit the Investors to make such inspections as it may require (and the Company shall cooperate with Investor in any inspections), and (iii) cause its officers and those of its Subsidiaries to furnish the Investors with such financial and operating data and other information with respect to the business and properties of the Company and its Subsidiaries as the Investors may from time to time request. The Investors shall maintain the confidentiality of any confidential and proprietary information so obtained by it which is not otherwise available from other sources that are free from similar restrictions; provided, however, that the foregoing shall in no way limit or otherwise - -------- ------- restrict the ability of the Investors or such authorized representatives to disclose any such information concerning the Company or its Subsidiaries which it may be required to disclose (x) to its partners, board members or stockholders, to the extent required to satisfy its fiduciary obligations to such persons, or (y) otherwise pursuant to or as required by law; provided that, -------- to the extent legally permitted, the Investors will notify the Company of such disclosure and afford the Company an opportunity to oppose promptly such disclosure. (b) The Company will provide Investors with copies of the Form 10-K for the year ended December 31, 2000 as filed with the SEC, immediately upon the Company's completion of such Form 10-K. -7- Section 4.3. Reasonable Best Efforts. Subject to the terms and conditions ----------------------- herein, each of the parties hereto agrees to use its reasonable best efforts to take, or cause to be taken, all appropriate action, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement. In case at any time after the Closing Date any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers and directors of each party to this Agreement shall take all such necessary action. Such reasonable best efforts shall include, without limitation, (a) the obtaining of all necessary consents, approvals or waivers from third parties and governmental authorities necessary to the consummation of the transactions contemplated by this Agreement, and (b) opposing vigorously, to the extent commercially reasonable, any litigation or administrative proceeding relating to this Agreement or the transactions contemplated hereby, including, without limitation, to the extent commercially reasonable, promptly appealing any adverse court or agency order. Notwithstanding the foregoing or any other provisions contained in this Agreement to the contrary, neither the Investors nor any of their affiliates shall be under any obligation of any kind to enter into any negotiations or to otherwise agree with any Authority, including but not limited to any governmental or regulatory authority with jurisdiction over the enforcement of any applicable federal, state, local and foreign antitrust, competition or other similar laws, or any other party to sell or otherwise dispose of, hold separate (through the establishment of a trust or otherwise) particular assets or categories of assets or businesses of any of the Company, the Investors or any of the Investors' affiliates. Section 4.4. Certificate of Designation; Investors Rights Agreement. On ------------------------------------------------------ or before the Closing, the Company shall file a Certificate of Designation, Preferences and Rights of Series B-1 Cumulative Convertible Participating Preferred Stock in the form of Exhibit B hereto (the "Certificate of --------- -------------- Designation" ) with the Secretary of State of the State of Delaware. On or - ----------- before the Closing Date, the Company and the Investors shall amend the Investors Rights Agreement dated as of March 8, 2000 to provide that it shall be applicable to the Series B-1 Preferred Stock in the same fashion that it applied to the Series B Preferred Stock. ARTICLE V CONDITIONS TO CLOSING --------------------- Section 5.1. Conditions to Investors' Obligations for Closing. The ------------------------------------------------ obligation of each Investor to effect the exchange of Series B Preferred Stock for shares of Series B-1 Preferred Stock contemplated hereby is subject to the satisfaction or written waiver of the following conditions in the Investor's sole discretion: (a) the representations and warranties of the Company contained in this Agreement that are not qualified by materiality shall be true and correct in all material respects as of the date hereof and on and as of the Closing Date with the same effect as if made on and as of the Closing Date, and the representations and warranties of the Company that are qualified by materiality shall be true and correct on and as of the Closing Date with the same -8- effect as if made on and as of the Closing Date (except, in either case, to the extent any such representation and warranty specifically refers to a particular date, in which case such representation and warranty shall be true and correct as of such date), and the Company shall have performed, in all material respects, all of its obligations under this Agreement required to be performed by the Company prior to the Closing Date; (b) there shall not have occurred any Material Adverse Effect or any violation of Law by the Company or its Subsidiaries that reasonably could be expected to have a Material Adverse Effect; (c) there shall not have occurred any event which has resulted in or may result in the Company seeking protection from its creditors under any chapter or provision of the United States Bankruptcy Code; (d) each Investor shall have received a certificate of the President, Chief Executive Officer or Chief Financial Officer of the Company, on behalf of the Company, certifying as to the fulfillment of the conditions set forth in clauses (a) through (c) above; (e) no statute, rule, regulation, judgment, order or injunction shall be enacted, entered, promulgated or enforced (i) challenging the transactions contemplated hereby, seeking to restrain or prohibit the transactions contemplated hereby or seeking any damages material in relation to the Company or any Investor, (ii) seeking to impose limitations on the ability of each Investor to acquire or hold, or exercise full rights of ownership of any shares of Series B-1 Preferred Stock, including the right to vote such shares or (iii) that otherwise reasonably could be expected to have a Material Adverse Effect; (f) each Investor shall have been provided with evidence satisfactory to the Investor in such Investor's reasonable discretion that the Board of Directors of the Company has approved the transactions contemplated by this Agreement for purposes of Section 203 of the DGCL; (g) each Investor shall have received a certificate, dated the Closing Date, duly executed by the Secretary of the Company certifying as to (i) the attached copy of resolutions of the Board of Directors of the Company authorizing and approving or ratifying the execution, delivery and performance of this Agreement and the other documents and instruments contemplated hereby and the consummation of the transactions contemplated hereby and stating that such resolutions have not been modified, amended, revoked or rescinded, and (ii) the incumbency, authority and specimen signature of each officer of the Company executing this Agreement and any other document or instrument contemplated hereby; (h) each Investor shall have received a copy of a certificate of the Secretary of State of the State of Delaware certifying as to the Company's due organization, valid existence and good standing as a domestic corporation in the State of Delaware as of a date not more than two (2) business days prior to the Closing Date; -9- (i) each Investor shall have received an opinion of Schiff Hardin & Waite, outside counsel to the Company, dated as of the Closing Date, as to the matters set forth in Sections 2.1, 2.2, 2.4, 2.5(a) (clause (i)), 2.5 (b) and 2.5(c), and such opinion shall be in form and substance reasonably acceptable to the Investors. (j) the Company shall have received (and furnished to each Investor evidence thereof reasonably satisfactory to each Investor) any necessary or required approvals or consents from all Authorities and other third parties necessary or required to complete the transactions contemplated hereby, and such approvals and consents shall not have been withdrawn or expired as of the Closing Date and the Certificate of Designation shall have been duly filed with the Secretary of State of the State of Delaware; (k) the Company shall have executed and delivered to each Investor the Amended and Restated Investors Rights Agreement; and (l) each Investor shall have been provided with evidence satisfactory to the Investor that the Company has paid, in full, the Series B Dividend to the holders of the Series B Preferred Stock. Section 5.2. Conditions to the Company's Obligations for the Closing. The ------------------------------------------------------- obligations of the Company to issue the shares of Series B-1 Preferred Stock in exchange for the Series B Preferred Stock contemplated hereby is subject to the satisfaction or written waiver of the following conditions: (a) the representations and warranties of each Investor contained in this Agreement that are not qualified by materiality shall be true and correct in all material respects as of the date hereof and on and as of the Closing Date with the same effect as if made on and as of the Closing Date, and the representations and warranties of each Investor that are qualified by materiality shall be true and correct on and as of the Closing Date with the same effect as if made on and as of the Closing Date (except, in either case, to the extent any such representation and warranty specifically refers to a particular date, in which case such representation and warranty shall be true and correct as of such date), and each Investor shall have performed, in all material respects, all of its obligations under this Agreement required to be performed by each Investor prior to the Closing Date; (b) the Company shall have received certificates from the authorized officer of each Investor, certifying as to the fulfillment of the condition set forth in clause (a) above; (c) each Investor shall have executed and delivered to the Company the Amended and Restated Investors Rights Agreement. -10- ARTICLE VI MISCELLANEOUS ------------- Section 6.1. Termination; Effect of Termination; Expenses; Fees. -------------------------------------------------- (a) This Agreement may be terminated and the transactions contemplated hereby may be abandoned at any time prior to the Closing Date: (i) by mutual written consent of the Company and the Investors; or (ii) by either party, if the Closing does not occur by June 1, 2001; provided, however, that the right to terminate this Agreement pursuant -------- ------- to this Section 6.1(a) shall not be available to any party whose failure to fulfill any of its obligations under this Agreement results in the failure of any such condition; or (iii) by either party if any court of competent jurisdiction or any other governmental body shall have issued an order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the transactions contemplated hereby and such order, decree, ruling or other action shall have become final and nonappealable; or (b) In the event of termination and abandonment of this Agreement pursuant to Section 6.1(a), this Agreement, except for the provisions of Section 4.2 (only with respect to confidentiality), shall forthwith become void and have no effect, without any liability on the part of any party or its respective members, partners, shareholders, directors, officers or shareholders; provided, that nothing in this Section 6.1(b) shall relieve any party to this - -------- Agreement of liability for breach of this Agreement. Section 6.2. Extension; Waiver. The parties hereto, may (a) extend the ----------------- time for the performance of any of the obligations or other acts of the other parties hereto, (b) waive any inaccuracies in the representations and warranties contained herein by any other applicable party or in any document, certificate or writing delivered pursuant hereto by any other applicable party or (c) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of any party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. Section 6.3. Entire Agreement; Assignment. This Agreement (including the ---------------------------- Schedules and Exhibits hereto) and the other documents and instruments contemplated hereby, (a) constitute the entire agreement among the parties with respect to the subject matter hereof, and supersedes all other prior agreements and understandings, both written and oral, among the parties or any of them with respect to the subject matter hereof, and (b) shall not be assigned by operation of law or otherwise; provided, that each Investor may assign any of its rights -------- and obligations hereunder to any affiliate of such Investor prior to Closing and after Closing to any person, but no such assignment shall relieve Investor of its obligations hereunder unless such -11- assignee or transferee agrees in writing to be bound by the terms hereof as though an original signatory hereto. Section 6.4. Enforcement of the Agreement; Governing Law; Jurisdiction. --------------------------------------------------------- The parties hereto agree that Investor would suffer irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached by the Company. It is accordingly agreed that Investor shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any state court located in the State of New York, or the United States District Court for the Southern District of New York or any federal court in the State of New York (as to which the Company agrees to submit to jurisdiction for the purposes of such or any other action), this being in addition to any other remedy to which Investor is entitled at law or in equity. This Agreement shall be governed by and construed in accordance with the substantive laws of the State of New York regardless of the laws that might otherwise govern under principles of conflicts of laws applicable thereto. Section 6.5. Validity. The invalidity or unenforceability of any provision -------- of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect. Section 6.6. Notices. All notices, requests, claims, demands and other ------- communications hereunder shall be in writing and shall be deemed to have been duly given when delivered in person, by cable, telegram, facsimile transmission with confirmation of receipt, or telex, or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties as follows: if to Investors: --------------- 55 East 52nd Street, 37/th/ Floor New York, NY 10055-0002 Attention: James L. Luikart Phone: (212) 409-5600 Fax: (212) 409-5874 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 -12- if to the Company: ----------------- ABC-NACO Inc. 2001 Butterfield Road Suite 502 Downers Grove, IL 60515 Attention: Vaughn Makary VP and Corp. Treasurer Phone: (630) 852-1300 Fax: (630) 737-0162 with required copies to: ----------------------- ABC-NACO Inc. 2001 Butterfield Road Suite 502 Downers Grove, IL 60515 Attention: Mark F. Baggio, Esq., VP, General Counsel and Secretary Phone: (630) 852-1300 Fax: (630) 737-0167 Schiff Hardin & Waite 6600 Sears Tower Chicago, Illinois 60606 Attention: Robert J. Regan, Esq. Phone: (312) 258-5606 Fax: (312) 258-5700 or to such other address as the person to whom notice is given may have previously furnished to the others in writing in the manner set forth above (provided that notice of any change of address shall be effective only upon receipt thereof). Section 6.7. Descriptive Headings. The descriptive headings herein are -------------------- inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. Section 6.8. Parties in Interest. This Agreement shall be binding upon ------------------- and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement. Section 6.9. Counterparts. This Agreement may be executed in two or more ------------ counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement. -13- Section 6.10. Amendment. This Agreement may not be amended except by an --------- instrument in writing signed on behalf of all the parties. Section 6.11. Survival. The representations, warranties, covenants and -------- agreements of the Company and Investors contained in this Agreement, and all statements contained in this Agreement or any exhibit, attachment or Schedule hereto or any certificate, financial statement or SEC Documents delivered pursuant to this Agreement or in connection with the transactions contemplated hereby, shall be deemed incorporated in this Agreement and shall constitute representations, warranties, covenants and agreements of the respective party delivering the same. All such representations, warranties, covenants and agreements shall survive the Closing. The Company acknowledges that its representations and warranties in this Agreement shall not be affected or mitigated by any investigation conducted by Investor or its representatives prior to the Closing or any knowledge of any Investor. Each Investor shall use reasonable efforts to notify the Company in the event it discovers information which constitutes a breach of the Company's representations or warranties set forth in Article 2 hereof; provided, however, that the failure of any Investor in any way to provide such notification shall not subject the Investor to any penalty or liability and shall not change the Company's liability with respect to any breach of such representation or warranty. Section 6.12. Certain Definitions. For purposes of this Agreement, the ------------------- following terms shall have the meanings ascribed to them below: (a) "affiliate" of a person shall mean (i) a person that --------- directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the first-mentioned person and (ii) an "associate" as that term is defined in Rule 12b-2 promulgated under the ---------- Exchange Act as in effect on the date of execution of this Agreement. (b) "Investors Rights Agreement" means the Investors Rights -------------------------- Agreement dated as of March 8, 2000, as amended through the date hereof, by and among the Company and the Investors. (c) "control" (including the terms "controlling", "controlled ------- ----------- ---------- by" and "under common control with" or correlative terms) shall mean the - -- ------------------- possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through ownership of voting securities, by contract, or otherwise. (d) "Documents" means this Agreement, the Amended and Restated -------- Investors Rights Agreement and the Certificate of Designation. (e) "Exchange Act" means the Securities Exchange Act of 1934, as ----------- amended and the rules and regulations promulgated thereunder all as the same shall be as in effect at the time. -14- (f) "Material Adverse Effect" shall mean (i) any adverse change ---------------------- in the condition (financial or otherwise), assets (including without limitation tangible and intangible assets), liabilities, business, or results of operations or prospects of the Company or any of its Subsidiaries, which change, individually or in the aggregate, is material to the Company and its Subsidiaries taken as a whole, or (ii) any event, matter, condition or effect which materially adversely impairs the ability of the Company to perform on a timely basis its obligations under this Agreement or the Company to consummate the transactions contemplated by this Agreement. (g) "person" shall mean and include an individual, a ------ corporation, a partnership, a trust, an unincorporated organization and a government or any department, agency or political subdivision thereof. (h) "Securities Act" shall mean Securities Act of 1933, as -------------- amended, and all other applicable securities laws and the rules and regulations thereunder as in effect from time to time. (i) "Subsidiaries" means when used with reference to a person, a ------------ corporation or limited liability company, the majority of the outstanding voting securities or membership interests of which are owned directly or indirectly by such person. -15- IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its officers thereunto duly authorized, on the day and year first above written. ABC-NACO INC. By:____________________________________ Name: Mark F. Baggio Title: Vice President, General Counsel and Secretary INVESTORS: FURMAN SELZ INVESTORS II L.P. FS EMPLOYEE INVESTORS LLC FS PARALLEL FUND L.P. By: FS Private Investments III LLC, Manager By:____________________________________ Name: James L. Luikart Title: Managing Member ING FURMAN-SELZ INVESTORS III LP ING BARINGS U.S. LEVERAGED EQUITY PLAN LLC ING BARINGS GLOBAL LEVERAGED EQUITY PLAN LTD. By: FS Private Investments III LLC, Manager By:____________________________________ Name: James L. Luikart Title: Managing Member -16- By:____________________________________ James Dowling -17- EXHIBIT A Investors and Series B Preferred Stock
- ------------------------------------------------------------------------------------------------- Number of Shares of Series B Preferred Stock to be Exchanged Investors for Series B-1 Preferred Stock - --------- ------------------------------ - ------------------------------------------------------------------------------------------------- ING Furman Selz Investors III LP 104,170.85 - ------------------------------------------------------------------------------------------------- ING Barings U.S. Leveraged Equity Plan LLC 31,679.42 - ------------------------------------------------------------------------------------------------- ING Barings U.S. Global Leveraged Equity Plan Ltd. 13,649.72 - ------------------------------------------------------------------------------------------------- Furman Selz Investors II LP 131,792.56 - ------------------------------------------------------------------------------------------------- FS Employee Investors LLC 11,295.56 - ------------------------------------------------------------------------------------------------- FS Parallel Fund LP 6,411.88 - ------------------------------------------------------------------------------------------------- James Dowling 1,000 - -------------------------------------------------------------------------------------------------
1 EX-99.1 7 dex991.txt PRESS RELEASE Exhibit 99.1 [LOGO ABC-NACO] NEWS For Immediate Release --------------------- Contact: James P. Singsank Senior Vice President & CFO 630-792-2010 ABC-NACO ARRANGES $15 MILLION IN NEW FINANCING, SALE OF FLOW AND SPECIALTY PRODUCTS DIVISION AND AMENDED LONG-TERM BANK FACILITY; COMPANY ANNOUNCES YEAR-END RESULTS Lombard, Illinois - APRIL 18, 2001, ABC-NACO Inc. (ABCR) announced today a series of agreements that provide the Company the financing and support to pursue its operating plan for the foreseeable future. The agreements include $15 million in new financing from funds managed by ING Furman Selz Investments, the sale of ABC-NACO's Flow and Specialty Products Division for $24 million to a new company formed by the Division's management and ING Furman Selz Investments, and an amendment to the Company's Bank Credit Agreement. The closings of these transactions are expected to occur within thirty days. The Company separately announced today its financial results for the year ended December 31, 2000 and that it has filed its Annual Report on Form 10-K with the Securities and Exchange Commission. The Company intends to file a Form 8-K later this week which will include copies of all these agreements. "We are gratified by this show of support for ABC-NACO by ING Furman Selz Investments and our senior bank group," said Vaughn Makary, who was elected President and CEO of ABC-NACO earlier this month. "The closing of these transactions will provide us the opportunity and flexibility to realize the benefits of our previous plant consolidations and recent productivity improvements, as well as continuing reductions in ABC-NACO's selling, general and administrative expenses. The financial impact of these benefits, together with the ongoing growth of our rail services businesses, should allow ABC-NACO to return to profitability later this year." ABC-NACO and ING agreed today that the ING funds will provide $15 million in financing to the Company, initially in the form of senior secured debt. Upon receipt of certain stockholder approvals described below and the amendment of certain provisions of the Company's outstanding Senior Subordinated notes, the debt issued to ING will be replaced by $15 million stated value of 10% convertible preferred stock, convertible into common stock at a conversion price of $2.50 per share, and six million common stock purchase warrants exercisable at $0.01 per share. Further, up to six million similar stock purchase warrants may be issued to the ING funds over the next two years. The number of additional warrants would be less than six million should there be a change in control of ABC-NACO prior to January 1, 2003, or if the Company's EBITDA for any four consecutive quarters during the period prior to January 1, 2003 exceeds $70 million. Substantially all the proceeds of the ING financing will be available for working capital and other corporate purposes. Separately, ABC-NACO also agreed today to sell the business and assets of its Flow and Specialty Products Division to a new company formed by the Division's management and ING Furman Selz Investments for a price of $24 million, payable $20 million in cash at closing and $4 million in 8% seven-year subordinated note of the acquiring company. $15.5 million of the cash proceeds will be applied to reduce the outstanding balance under the Company's Bank Credit Agreement and the remainder will be available for working capital requirements. With the completion of this transaction, the Company will have reduced its bank credit line by over $43 million in the 2 past four months. The sale transaction is expected to result in a small gain to ABC-NACO. ABC-NACO also received a commitment from its senior bank group to amend the Company's existing Bank Credit Agreement to adjust certain covenants and other provisions consistent with the Company's current financial condition and the Company's projection of future results. In addition, various past defaults will be waived and the maturity of the facility will be changed to January 5, 2003. ABC-NACO filed its Form 10-K with the SEC yesterday. The Form 10-K includes the Company's financial statements for the year ended December 31, 2000. The Company's accounting firm, Arthur Andersen LLP, issued an opinion on the Company's financial statements that states that the current circumstances of the Company raise substantial doubt about the Company's ability to continue as a going concern. The Company believes any such doubt would be removed by the closing of the transactions announced today and the approval of certain indenture amendments by the holders of a majority of the Company's outstanding Senior Subordinated Notes. In preparing its year-end financial statements for 2000, ABC-NACO determined that it failed to meet one of the financial covenants contained in the indenture with respect to its Senior Subordinated Notes. The Company, therefore, intends to seek an amendment of certain provisions of this indenture during the second quarter of 2001. Based upon its past experience and the advice of its financial advisors, ABC-NACO believes it will be successful in obtaining approval for this amendment. Certain of the transactions announced today, including the issuance of the preferred securities and warrants to the ING funds, require stockholder approval. The Company expects to commence a consent solicitation or convene a meeting of its stockholders in June 2001 to obtain this approval. 3 ABC-NACO is one of the world's leading suppliers of technologically advanced products to the railroad and flow control industries through its three business groups: Rail Products, Rail Services, and Flow and Specialty Products. With four technology centers around the world, ABC-NACO holds pre-eminent market positions in the design, engineering, and manufacture of high-performance freight rail car, locomotive and passenger rail suspension and coupler systems, wheels and mounted wheel sets. The Company also supplies railroad and transit infrastructure products and services, technology-driven specialty track products, as well as highly engineered valve bodies and components for industrial flow control systems worldwide. It has 32 offices and facilities in the United States, Canada, Mexico, Scotland, Portugal, and China. Safe Harbor Statement Under The Private Securities Litigation Reform -------------------------------------------------------------------- Act of 1995: The statements contained in this release which are not historical - ----------- facts, may be deemed to be forward-looking statements that are subject to change based on various factors which may be beyond the control of ABC-NACO Inc. Accordingly, actual results could differ materially from those expressed or implied in any such forward-looking statement. Factors that could affect actual results are described more fully in the Company's Annual Report on 10-K for the period ended December 31, 2000, under the caption "Cautionary Statement Concerning Forward Looking Statements," and other risks described from time to time in the Company's filings with the Securities and Exchange Commission. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made. 4 EX-99.2 8 dex992.txt PRESS RELEASE (PART A) Exhibit 99.2 [LETTERHEAD OF ABC-NACO] Contact: James P. Singsank Senior Vice President & CFO 630-792-2010 ABC-NACO REPORTS YEAR-END RESULTS; ANNOUNCES NEW FINANCING, DIVISION SALE AND AMENDED BANK AGREEMENT Lombard, IL - April 18, 2001, ABC-NACO Inc. (ABCR) announced today its financial results for the quarter and year ended December 31, 2000. The Company has also filed its Annual Report on Form 10-K with the Securities and Exchange Commission. ABC-NACO separately announced today a series of agreements that provide the Company the financing and support to pursue its operating plan for the foreseeable future. The agreements include $15 million in new financing from funds managed by ING Furman Selz Investments, the sale of ABC-NACO's Flow and Specialty Products Division for $24 million to a new company formed by the Division's management and ING Furman Selz Investments, and an amendment to the Company's Bank Credit Agreement. The closings of these transactions are expected to occur within thirty days. "Results for last year and the first half of this year do not and will not reflect the full benefit of our recent plant consolidations and productivity improvements, as well as continuing reductions in ABC-NACO's selling, general and administrative expenses," said Vaughn Makary, who was elected President and CEO of ABC-NACO earlier this month. "The full financial impact of these actions, together with ongoing growth of our rail services businesses, should allow ABC-NACO to return to profitability later this year." For the quarter ended December 31, 2000, ABC-NACO reported a net loss of $42.7 million, or $2.18 per share, compared to a net loss of $3.6 million, or $0.19 per share, for the fourth quarter of last year. The current quarter includes a pre-tax gain of $3.6 million related to the sale of its brakeshoe joint venture, offset by the pre-tax loss of $1.8 million associated with the write-down in asset realization associated with the February 2001 sale of the Rail Systems Division. The 1999 quarter included a pre-tax restructuring gain of $0.9 million. Fourth quarter net sales were $102.9 million, down $33.2 million from the prior year fourth quarter. The Rail Products Group, which manufactures suspension systems, couplers and wheels, accounted for the majority of the sales decline. Sales from the Rail Services Group were up 4.8%. For the full year, the Company had a net loss of $56.2 million or $3.57 per share, compared to a net loss of $20.9 million, or $1.15 per share, for the year 1999. The current year includes an pre-tax gain of $3.6 million related to the sale of its brakeshoe joint venture, the pre-tax loss of $1.8 million associated with the write-down in asset realization associated with the February 2001 sale of the Rail Systems Division and a pre-tax restructuring charge of $7.2 million. The prior year net loss included an pre-tax merger and restructuring charge of $20.7 million and an after-tax extraordinary charge of $3.2 million related to the refinancing of debt following the February 1999 merger. Net sales for 2000 were $482.2 million, a decrease of $76.8 million from 1999. As with the fourth quarter, sales in the Rail Products Group were down $125.9 million from the prior year, while activity in the Rail Services Group was up $35.9 million. ABC-NACO is one of the world's leading suppliers of technologically advanced products to the railroad and flow control industries through its three business groups: Rail Products, Rail Services, and Flow and Specialty Products. With four technology centers around the world, ABC-NACO holds pre-eminent market positions in the design, engineering, and manufacture of high-performance freight rail car, locomotive and passenger rail suspension and coupler systems, wheels and mounted wheel sets. The Company also supplies railroad and transit infrastructure products and services, technology-driven specialty track products, as well as highly engineered valve bodies and components for industrial flow control systems worldwide. It has 32 offices and facilities in the United States, Canada, Mexico, Scotland, Portugal, and China. Safe Harbor Statement Under The Private Securities Litigation Reform Act of --------------------------------------------------------------------------- 1995: The statements contained in this release which are not historical facts, - ----- may be deemed to be forward-looking statements that are subject to change based on various factors which may be beyond the control of ABC-NACO Inc. Accordingly, actual results could differ materially from those expressed or implied in any such forward-looking statement. Factors that could affect actual results are described more fully in the Company's Annual Report on 10-K for the transition period ended December 31, 1999, under the caption "Cautionary Statement Concerning Forward Looking Statements," and other risks described from time to time in the Company's filings with the Securities and Exchange Commission. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made. ABC-NACO INC. CONSOLIDATED STATEMENTS OF OPERATIONS For the Three and Twelve Months Ended December 31, 2000 and 1999 (In thousands, except per share data)
Three Months Ended Twelve Months Ended December 31, December 31, ------------------------------- ----------------------------- 2000 1999 2000 1999 ------------- -------------- ------------- ------------- (Unaudited) (Unaudited) NET SALES Rail Products $ 46,762 $ 89,772 $ 252,129 $378,063 Rail Services & Systems 62,100 59,264 265,450 229,568 Intercompany (6,011) (12,950) (35,349) (48,585) ------------- -------------- ------------- ------------- 102,851 136,086 482,230 559,046 ------------- -------------- ------------- ------------- GROSS PROFIT Rail Products $ (6,880) $ 8,673 $ 13,212 $ 49,834 Rail Services & Systems 4,065 6,281 23,709 22,352 ------------- -------------- ------------- ------------- (2,815) 14,954 36,921 72,186 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 22,113 14,604 61,702 55,595 NONRECURRING LOSSES (GAINS) (1,754) (915) 9,002 20,715 ------------- -------------- ------------- ------------- Operating income (loss) from continuing operations (23,174) 1,265 (33,783) (4,124) EQUITY INCOME (LOSS) OF UNCONSOLIDATED JOINT VENTURES 300 (120) 2,557 (444) INTEREST EXPENSE 7,512 5,944 26,395 19,056 AMORTIZATION OF DEFERRED FINANCING COSTS 925 424 1,933 1,166 ------------- -------------- ------------- ------------- Income (loss) from continuing operations before extraordinary item (31,311) (5,223) (59,554) (24,790) PROVISION (BENEFIT) FOR INCOME TAXES 11,444 (3,157) 480 (5,688) ------------- -------------- ------------- ------------- Income (loss) from continuing operations before extraordinary item (42,755) (2,066) (60,034) (19,102) DISCONTINUED OPERATIONS, net of income tax of $17, ($977), $2,430 and $841, respectively 26 (1,540) 3,833 1,327 EXTRAORDINARY ITEM, net of income tax of $2,062 - - - (3,158) ------------- -------------- ------------- ------------- Net income (loss) $ (42,729) $ (3,606) $ (56,201) $ (20,933) ============= ============== ============= ============= EARNINGS PER SHARE DATA: Income (loss) from continuing operations before extraordinary item $ (42,755) $ (2,066) $ (60,034) $ (19,102) Adjustment related to preferred stock - - (11,877) - Preferred stock dividend (632) - (1,985) - ------------- -------------- ------------- ------------- Adjusted income (loss) from continuing operations before extraordinary item (43,387) (2,066) (73,896) (19,102) Discontinued operations 26 (1,540) 3,833 1,327 Extraordinary item - - - (3,158) ------------- -------------- ------------- ------------- Net income (loss) available to common stockholders $ (43,361) $ (3,606) $ (70,063) $ (20,933) ============= ============== ============= ============= BASIC AND DILUTED EARNINGS PER SHARE: Adjusted income (loss) from continuing operations before extraordinary item $ (2.18) $ (0.11) $ (3.77) $ (1.05) Discontinued operations 0.00 (0.08) 0.20 0.07 Extraordinary item - - - (0.17) ------------- -------------- ------------- ------------- Net income (loss) available to common stockholders $ (2.18) $ (0.19) $ (3.57) $ (1.15) ============= ============== ============= ============= WEIGHTED AVERAGE SHARES OUTSTANDING 19,872 18,742 19,641 18,318 ============= ============== ============= =============
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