-----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, VgAUU0vfOJHsPK1wRNA5yZrpfU8J1vriWTx//4OrkXz1tCpe1frDdJ0J9CJq1VnL IFvFTsvw6/l3mXoFnEDrzg== 0001036050-00-000380.txt : 20000321 0001036050-00-000380.hdr.sgml : 20000321 ACCESSION NUMBER: 0001036050-00-000380 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20000320 GROUP MEMBERS: BRIAN P. FRIEDMAN GROUP MEMBERS: FS EMPLOYEE INVESTORS LLC GROUP MEMBERS: FS PARALLEL FUND L.P. GROUP MEMBERS: FS PRIVATE INVESTMENTS LLC GROUP MEMBERS: FURMAN SELZ INVESTMENTS II LLC GROUP MEMBERS: FURMAN SELZ INVESTORS II L.P. GROUP MEMBERS: ING (U.S.) FINANCIAL HOLDINGS CORPORATION GROUP MEMBERS: ING BANK N.V. GROUP MEMBERS: ING FURMAN SELZ ASSET MANAGEMENT LLC GROUP MEMBERS: ING GROEP N.V. GROUP MEMBERS: JAMES L. LUIKART SUBJECT COMPANY: 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: SC 13D SEC ACT: SEC FILE NUMBER: 005-44085 FILM NUMBER: 573830 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 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: FS PRIVATE INVESTMENTS LLC CENTRAL INDEX KEY: 0001062492 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 230 PARK AVE CITY: NEW YORK STATE: NY ZIP: 10138 MAIL ADDRESS: STREET 1: 230 PARK AVE CITY: NEW YORK STATE: NY ZIP: 10138 SC 13D 1 SCHEDULE 13D (RULE 13D-101) SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D (Rule 13d-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO 13d-2(a) ABC-NACO Inc. (Name of Issuer) COMMON STOCK, $.01 PAR VALUE (Title of Class of Securities) 000752105 (CUSIP Number) Brian P. Friedman Robert Miller FS Private Investments LLC ING Furman Selz Asset Management 55 East 52/nd/ Street, 37/th/ Floor 230 Park Avenue New York, New York 10055-0002 New York, New York 10169 (212) 409-5600 (212) 309-8200 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) With a Copy to: Carmen J. Romano, Esquire Dechert Price & Rhoads 4000 Bell Atlantic Tower 1717 Arch Street Philadelphia, Pennsylvania 19103 (215) 994-4000 March 8, 2000 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box [_]. Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). SCHEDULE 13D - ------------------------------------------------------------------------------ CUSIP NO. 000752105 Page 2 - ------------------------------------------------------------------------------ NAMES OF REPORTING PERSONS 1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY). FS Private Investments LLC 13-3940694 - ------------------------------------------------------------------------------ CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP 2 (a) [_] (b) [X] - ------------------------------------------------------------------------------ SEC USE ONLY 3 - ------------------------------------------------------------------------------ SOURCE OF FUNDS 4 AF - ------------------------------------------------------------------------------ CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [_] 5 - ------------------------------------------------------------------------------ CITIZENSHIP OR PLACE OF ORGANIZATION 6 Delaware - ------------------------------------------------------------------------------ NUMBER OF SOLE VOTING POWER 7 SHARES 0 BENEFICIALLY ----------------------------------------------------------- SHARED VOTING POWER OWNED BY 8 1,661,111 shares of Common Stock issuable upon the EACH conversion of 149,500 shares of Series B Cumulative Convertible Preferred Stock REPORTING ----------------------------------------------------------- SOLE DISPOSITIVE POWER PERSON 9 0 WITH ----------------------------------------------------------- SHARED DISPOSITIVE POWER 10 1,661,111 shares of Common Stock issuable upon the conversion of 149,500 shares of Series B Cumulative Convertible Preferred Stock - ------------------------------------------------------------------------------ AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 11 1,661,111 shares of Common Stock issuable upon the conversion of 149,500 shares of Series B Cumulative Convertible Preferred Stock - ------------------------------------------------------------------------------ CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES 12 [_] - ------------------------------------------------------------------------------ PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13 7.3% - ------------------------------------------------------------------------------ TYPE OF REPORTING PERSON 14 OO - ------------------------------------------------------------------------------ SCHEDULE 13D - ------------------------------------------------------------------------------ CUSIP NO. 000752105 Page 3 - ------------------------------------------------------------------------------ NAMES OF REPORTING PERSONS 1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Furman Selz Investors II L.P. 13-3937561 - ------------------------------------------------------------------------------ CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* 2 (a) [_] (b) [X] - ------------------------------------------------------------------------------ SEC USE ONLY 3 - ------------------------------------------------------------------------------ SOURCE OF FUNDS 4 OO - ------------------------------------------------------------------------------ CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [_] 5 - ------------------------------------------------------------------------------ CITIZENSHIP OR PLACE OF ORGANIZATION 6 Delaware - ------------------------------------------------------------------------------ SOLE VOTING POWER 7 NUMBER OF 0 SHARES ----------------------------------------------------------- SHARED VOTING POWER BENEFICIALLY 8 1,464,356 shares of Common Stock issuable upon the OWNED BY conversion of 131,792 shares of Series B Cumulative Convertible Preferred Stock ----------------------------------------------------------- EACH SOLE DISPOSITIVE POWER 9 REPORTING 0 PERSON ----------------------------------------------------------- SHARED DISPOSITIVE POWER WITH 10 1,464,356 shares of Common Stock issuable upon the conversion of 131,792 shares of Series B Cumulative Convertible Preferred Stock - ------------------------------------------------------------------------------ AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 11 1,464,356 shares of Common Stock issuable upon the conversion of 131,792 shares of Series B Cumulative Convertible Preferred Stock - ------------------------------------------------------------------------------ CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES 12 [_] - ------------------------------------------------------------------------------ PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13 6.4% - ------------------------------------------------------------------------------ TYPE OF REPORTING PERSON 14 PN - ------------------------------------------------------------------------------ SCHEDULE 13D - ------------------------------------------------------------------------------ CUSIP NO. 000752105 Page 4 - ------------------------------------------------------------------------------ NAMES OF REPORTING PERSONS 1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) FS Employee Investors LLC 13-3937563 - ------------------------------------------------------------------------------ CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP 2 (a) [_] (b) [X] - ------------------------------------------------------------------------------ SEC USE ONLY 3 - ------------------------------------------------------------------------------ SOURCE OF FUNDS 4 OO - ------------------------------------------------------------------------------ CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [_] 5 - ------------------------------------------------------------------------------ CITIZENSHIP OR PLACE OF ORGANIZATION 6 Delaware - ------------------------------------------------------------------------------ SOLE VOTING POWER 7 NUMBER OF 0 SHARES ----------------------------------------------------------- SHARED VOTING POWER BENEFICIALLY 8 125,511 shares of Common Stock issuable upon the OWNED BY conversion of 11,296 shares of Series B Cumulative Convertible Preferred Stock ----------------------------------------------------------- EACH SOLE DISPOSITIVE POWER 9 REPORTING 0 PERSON ----------------------------------------------------------- WITH 10 SHARED DISPOSITIVE POWER 125,511 shares of Common Stock issuable upon the conversion of 11,296 shares of Series B Cumulative Convertible Preferred Stock - ------------------------------------------------------------------------------ AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 11 125,511 shares of Common Stock issuable upon the conversion of 11,296 shares of Series B Cumulative Convertible Preferred Stock - ------------------------------------------------------------------------------ CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES 12 [_] - ------------------------------------------------------------------------------ PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13 .6% - ------------------------------------------------------------------------------ TYPE OF REPORTING PERSON 14 OO - ------------------------------------------------------------------------------ SCHEDULE 13D - ------------------------------------------------------------------------------ CUSIP NO. 000752105 Page 5 - ------------------------------------------------------------------------------ NAMES OF REPORTING PERSONS 1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) FS Parallel Fund L.P. 13-3974766 - ------------------------------------------------------------------------------ CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP 2 (a) [_] (b) [X] - ------------------------------------------------------------------------------ SEC USE ONLY 3 - ------------------------------------------------------------------------------ SOURCE OF FUNDS 4 OO - ------------------------------------------------------------------------------ CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [_] 5 - ------------------------------------------------------------------------------ CITIZENSHIP OR PLACE OF ORGANIZATION 6 Delaware - ------------------------------------------------------------------------------ SOLE VOTING POWER 7 NUMBER OF 0 SHARES ----------------------------------------------------------- SHARED VOTING POWER BENEFICIALLY 8 OWNED BY 71,244 shares of Common Stock issuable upon the conversion of 6,412 shares of Series B Cumulative Convertible Preferred Stock ----------------------------------------------------------- EACH SOLE DISPOSITIVE POWER 9 REPORTING 0 PERSON ----------------------------------------------------------- WITH 10 SHARED DISPOSITIVE POWER 71,244 shares of Common Stock issuable upon the conversion of 6,412 shares of Series B Cumulative Convertible Preferred Stock - ------------------------------------------------------------------------------ AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 11 71,244 shares of Common Stock issuable upon the conversion of 6,412 shares of Series B Cumulative Convertible Preferred Stock - ------------------------------------------------------------------------------ CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES 12 [_] - ------------------------------------------------------------------------------ PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13 .3% - ------------------------------------------------------------------------------ TYPE OF REPORTING PERSON 14 PN - ------------------------------------------------------------------------------ SCHEDULE 13D - -------------------------------------------------------------------------------- CUSIP NO. 000752105 Page 6 - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------ NAMES OF REPORTING PERSONS 1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Furman Selz Investments II LLC 13-3937560 - ------------------------------------------------------------------------------ CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP 2 (a) [_] (b) [X] - ------------------------------------------------------------------------------ SEC USE ONLY 3 - ------------------------------------------------------------------------------ SOURCE OF FUNDS 4 AF - ------------------------------------------------------------------------------ CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT 5 TO ITEMS 2(d) or 2(e) [_] - ------------------------------------------------------------------------------ CITIZENSHIP OR PLACE OF ORGANIZATION 6 Delaware - ------------------------------------------------------------------------------ NUMBER OF SOLE VOTING POWER 7 SHARES 0 BENEFICIALLY ----------------------------------------------------------- SHARED VOTING POWER OWNED BY 8 1,661,111 shares of Common Stock issuable upon the EACH conversion of 149,500 shares of Series B Cumulative Convertible Preferred Stock REPORTING ----------------------------------------------------------- SOLE DISPOSITIVE POWER PERSON 9 0 WITH ----------------------------------------------------------- SHARED DISPOSITIVE POWER 10 1,661,111 shares of Common Stock issuable upon the conversion of 149,500 shares of Series B Cumulative Convertible Preferred Stock - ------------------------------------------------------------------------------ AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 11 1,661,111 shares of Common Stock issuable upon the conversion of 149,500 shares of Series B Cumulative Convertible Preferred Stock - ------------------------------------------------------------------------------ CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES 12 [_] - ------------------------------------------------------------------------------ PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13 7.3% - ------------------------------------------------------------------------------ TYPE OF REPORTING PERSON 14 OO - ------------------------------------------------------------------------------ SCHEDULE 13D - -------------------------------------------------------------------------------- CUSIP NO. 000752105 Page 7 - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------ NAMES OF REPORTING PERSONS 1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) ING Furman Selz Asset Management LLC 13-4038444 - ------------------------------------------------------------------------------ CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP 2 (a) [_] (b) [X] - ------------------------------------------------------------------------------ SEC USE ONLY 3 - ------------------------------------------------------------------------------ SOURCE OF FUNDS 4 WC - ------------------------------------------------------------------------------ CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [_] 5 - ------------------------------------------------------------------------------ CITIZENSHIP OR PLACE OF ORGANIZATION 6 Delaware - ------------------------------------------------------------------------------ NUMBER OF SOLE VOTING POWER 7 SHARES 0 BENEFICIALLY ----------------------------------------------------------- SHARED VOTING POWER OWNED BY 8 3,322,222 shares of Common Stock issuable upon the EACH conversion of 299,000 shares of Series B Cumulative Convertible Preferred Stock REPORTING ----------------------------------------------------------- SOLE DISPOSITIVE POWER PERSON 9 0 WITH ----------------------------------------------------------- SHARED DISPOSITIVE POWER 10 3,322,222 shares of Common Stock issuable upon the conversion of 299,000 shares of Series B Cumulative Convertible Preferred Stock - ------------------------------------------------------------------------------ AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 11 3,322,222 shares of Common Stock issuable upon the conversion of 299,000 shares of Series B Cumulative Convertible Preferred Stock - ------------------------------------------------------------------------------ CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES 12 [_] - ------------------------------------------------------------------------------ PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13 14.6% - ------------------------------------------------------------------------------ TYPE OF REPORTING PERSON 14 OO - ------------------------------------------------------------------------------ SCHEDULE 13D - -------------------------------------------------------------------------------- CUSIP NO. 000752105 Page 8 - -------------------------------------------------------------------------------- NAMES OF REPORTING PERSONS 1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) ING (U.S.) Financial Holdings Corporation 51-0262561 - ------------------------------------------------------------------------------ CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP 2 (a) [_] (b) [X] - ------------------------------------------------------------------------------ SEC USE ONLY 3 - ------------------------------------------------------------------------------ SOURCE OF FUNDS 4 AF - ------------------------------------------------------------------------------ CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [_] 5 - ------------------------------------------------------------------------------ CITIZENSHIP OR PLACE OF ORGANIZATION 6 Delaware - ------------------------------------------------------------------------------ NUMBER OF SOLE VOTING POWER 7 SHARES 0 BENEFICIALLY ----------------------------------------------------------- SHARED VOTING POWER OWNED BY 8 3,322,222 shares of Common Stock issuable upon the EACH conversion of 299,000 shares of Series B Cumulative Convertible Preferred Stock REPORTING ----------------------------------------------------------- SOLE DISPOSITIVE POWER PERSON 9 0 WITH ----------------------------------------------------------- SHARED DISPOSITIVE POWER 10 3,322,222 shares of Common Stock issuable upon the conversion of 299,000 shares of Series B Cumulative Convertible Preferred Stock - ------------------------------------------------------------------------------ AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 11 3,322,222 shares of Common Stock issuable upon the conversion of 299,000 shares of Series B Cumulative Convertible Preferred Stock - ------------------------------------------------------------------------------ CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES 12 [_] - ------------------------------------------------------------------------------ PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13 14.6% - ------------------------------------------------------------------------------ TYPE OF REPORTING PERSON 14 CO - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ CUSIP NO. 000752105 Page 9 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ NAMES OF REPORTING PERSONS 1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) ING Bank N.V. - ------------------------------------------------------------------------------ CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP 2 (a) [_] (b) [X] - ------------------------------------------------------------------------------ SEC USE ONLY 3 - ------------------------------------------------------------------------------ SOURCE OF FUNDS 4 AF - ------------------------------------------------------------------------------ CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [_] 5 - ------------------------------------------------------------------------------ CITIZENSHIP OR PLACE OF ORGANIZATION 6 The Netherlands - ------------------------------------------------------------------------------ SOLE VOTING POWER 7 NUMBER OF 0 SHARES ----------------------------------------------------------- SHARED VOTING POWER BENEFICIALLY 8 3,322,222 shares of Common Stock issuable upon the conversion of 299,000 shares of Series B Cumulative Convertible Preferred Stock OWNED BY ----------------------------------------------------------- EACH SOLE DISPOSITIVE POWER 9 REPORTING 0 PERSON ----------------------------------------------------------- SHARED DISPOSITIVE POWER WITH 10 3,322,222 shares of Common Stock issuable upon the conversion of 299,000 shares of Series B Cumulative Convertible Preferred Stock - ------------------------------------------------------------------------------ AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 11 3,322,222 shares of Common Stock issuable upon the conversion of 299,000 shares of Series B Cumulative Convertible Preferred Stock - ------------------------------------------------------------------------------ CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES 12 [_] - ------------------------------------------------------------------------------ PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13 14.6% - ------------------------------------------------------------------------------ TYPE OF REPORTING PERSON 14 BK - ------------------------------------------------------------------------------ SCHEDULE 13D - ------------------------------------------------------------------------------ CUSIP NO. 000752105 Page 10 - ------------------------------------------------------------------------------ NAMES OF REPORTING PERSONS 1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) ING Groep N.V. - ------------------------------------------------------------------------------ CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP 2 (a) [_] (b) [X] - ------------------------------------------------------------------------------ SEC USE ONLY 3 - ------------------------------------------------------------------------------ SOURCE OF FUNDS 4 AF - ------------------------------------------------------------------------------ CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [_] 5 - ------------------------------------------------------------------------------ CITIZENSHIP OR PLACE OF ORGANIZATION 6 The Netherlands - ------------------------------------------------------------------------------ SOLE VOTING POWER 7 NUMBER OF 0 SHARES ----------------------------------------------------------- SHARED VOTING POWER BENEFICIALLY 8 OWNED BY 3,322,222 shares of Common Stock issuable upon the conversion of 299,000 shares of Series B Cumulative Convertible Preferred Stock ----------------------------------------------------------- EACH SOLE DISPOSITIVE POWER 9 REPORTING 0 PERSON ----------------------------------------------------------- WITH SHARED DISPOSITIVE POWER 10 3,322,222 shares of Common Stock issuable upon the conversion of 299,000 shares of Series B Cumulative Convertible Preferred Stock - ------------------------------------------------------------------------------ AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 11 3,322,222 shares of Common Stock issuable upon the conversion of 299,000 shares of Series B Cumulative Convertible Preferred Stock - ------------------------------------------------------------------------------ CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES 12 [_] - ------------------------------------------------------------------------------ PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13 14.6% - ------------------------------------------------------------------------------ TYPE OF REPORTING PERSON 14 IC - ------------------------------------------------------------------------------ SCHEDULE 13D - ------------------------------------------------------------------------------ CUSIP NO. 000752105 Page 11 - ------------------------------------------------------------------------------ NAMES OF REPORTING PERSONS 1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Brian P. Friedman ###-##-#### - ------------------------------------------------------------------------------ CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP 2 (a) [_] (b) [X] - ------------------------------------------------------------------------------ SEC USE ONLY 3 - ------------------------------------------------------------------------------ SOURCE OF FUNDS 4 AF - ------------------------------------------------------------------------------ CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [_] 5 - ------------------------------------------------------------------------------ CITIZENSHIP OR PLACE OF ORGANIZATION 6 United States - ------------------------------------------------------------------------------ SOLE VOTING POWER 7 NUMBER OF 0 SHARES ----------------------------------------------------------- SHARED VOTING POWER BENEFICIALLY 8 OWNED BY 1,661,111 shares of Common Stock issuable upon the conversion of 149,500 shares of Series B Cumulative Convertible Preferred Stock ----------------------------------------------------------- EACH SOLE DISPOSITIVE POWER 9 REPORTING 0 PERSON ----------------------------------------------------------- WITH SHARED DISPOSITIVE POWER 10 1,661,111 shares of Common Stock issuable upon the conversion of 149,500 shares of Series B Cumulative Convertible Preferred Stock - ------------------------------------------------------------------------------ AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 11 1,661,111 shares of Common Stock issuable upon the conversion of 149,500 shares of Series B Cumulative Convertible Preferred Stock - ------------------------------------------------------------------------------ CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES 12 [_] - ------------------------------------------------------------------------------ PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13 7.3% - ------------------------------------------------------------------------------ TYPE OF REPORTING PERSON 14 IN - ------------------------------------------------------------------------------ SCHEDULE 13D - ------------------------------------------------------------------------------ CUSIP NO. 000752105 Page 12 - ------------------------------------------------------------------------------ NAMES OF REPORTING PERSONS 1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) James L. Luikart ###-##-#### - ------------------------------------------------------------------------------ CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP 2 (a) [_] (b) [X] - ------------------------------------------------------------------------------ SEC USE ONLY 3 - ------------------------------------------------------------------------------ SOURCE OF FUNDS 4 AF - ------------------------------------------------------------------------------ CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [_] 5 - ------------------------------------------------------------------------------ CITIZENSHIP OR PLACE OF ORGANIZATION 6 United States - ------------------------------------------------------------------------------ SOLE VOTING POWER 7 NUMBER OF 0 SHARES ----------------------------------------------------------- SHARED VOTING POWER BENEFICIALLY 8 OWNED BY 1,661,111 shares of Common Stock issuable upon the conversion of 149,500 shares of Series B Cumulative Convertible Preferred Stock ----------------------------------------------------------- EACH SOLE DISPOSITIVE POWER 9 REPORTING 0 PERSON ----------------------------------------------------------- WITH SHARED DISPOSITIVE POWER 10 1,661,111 shares of Common Stock issuable upon the conversion of 149,500 shares of Series B Cumulative Convertible Preferred Stock - ------------------------------------------------------------------------------ AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 11 1,661,111 shares of Common Stock issuable upon the conversion of 149,500 shares of Series B Cumulative Convertible Preferred Stock - ------------------------------------------------------------------------------ CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES 12 [_] - ------------------------------------------------------------------------------ PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13 7.3% - ------------------------------------------------------------------------------ TYPE OF REPORTING PERSON 14 IN - ------------------------------------------------------------------------------ ITEM 1. SECURITY AND ISSUER. This statement on Schedule 13D relates to shares of common stock, par value $.01 per share (the "Common Stock"), of ABC-NACO Inc., a Delaware corporation (the "Company") which has its principal executive offices at 2001 Butterfield Road, Suite 502, Downers Grove, Illinois 60515. Furman Selz Investors II L.P., FS Employee Investors LLC, FS Parallel Fund L.P. and ING Furman Selz Asset Management LLC have acquired shares of Series B Cumulative Convertible Preferred Stock, par value $1.00 per share (the "Series B Preferred Stock") of the Company, which is convertible into shares of Common Stock. ITEM 2. IDENTITY AND BACKGROUND. The following table provides certain information about each of the reporting persons. CITIZENSHIP OR STATE OF NAME AND ADDRESS INCORPORATION/ORGANIZATION - ---------------- -------------------------- Furman Selz Investors II L.P. ("Investors") Delaware 55 East 52/nd/ Street, 37/th/ Floor New York, New York 10055-0002 FS Employee Investors LLC ("Employee Investors") Delaware 55 East 52/nd/ Street, 37/th/ Floor New York, New York 10055-0002 FS Parallel Fund L.P. ("Parallel Fund") Delaware 55 East 52/nd/ Street, 37/th/ Floor New York, New York 10055-0002 FS Private Investments LLC ("Private Investments") Delaware 55 East 52/nd/ Street, 37/th/ Floor New York, New York 10055-0002 Furman Selz Investments II LLC Delaware ("FS Investments II") 55 East 52/nd/ Street, 37/th/ Floor New York, New York 10055-0002 -13- ING Furman Selz Asset Management LLC Delaware ("ING FS Management") 230 Park Avenue New York, New York 10169 ING (U.S.) Financial Holdings Corporation Delaware ("ING U.S.") 135 East 57/th/ Street New York, New York 10022 ING Bank N.V. The Netherlands ("ING Bank") P.O. Box 810 1000 AV Amsterdam, The Netherlands ING Groep N.V. The Netherlands ("ING Groep") Strawinskylaan 2631 1077 ZZ Amsterdam Brian P. Friedman USA 55 East 52/nd/ Street, 37/th/ Floor New York, New York 10055-0002 James L. Luikart USA 55 East 52/nd/ Street, 37/th/ Floor New York, New York 10055-0002 The Executive Board of the ING Groep is the following: E. Kist (Chairman) F.S. Hubbell (as of May 2, 2000) J.H.M. Lindenbergh C. Maas A.H.G. Rinnooy Kan D. Robins (as of May 2, 2000) M. Tilmant The Executive Board of ING Bank is the following: E. Kist (Chairman) F.S. Hubbell (as of May 2, 2000) J.H.M. Lindenbergh C. Maas A.H.G. Rinnooy Kan D. Robins (as of May 2, 2000) M. Tilmant -14- The directors and executive officers of ING U.S. are the following: Directors: Michael Petrycki Wietze Prinsen Bart Staal Officers: Fernando Gentil President Bart Staal Executive Vice President Joseph Kaminsky Senior Vice President Benjamin Emanuel Vice President David Rutkin Vice President Andrew W. Druch General Counsel, Secretary and Managing Director Edward Chow Assistant Secretary Patrick Murphy Assistant Secretary Mark Seffinger Assistant Secretary The officers of ING FS Management are the following: Timothy Schantz President Edmund A. Hajim CEO Robert Miller Executive Vice President and CFO Kevin Cassidy Executive Vice President Gerald Lins General Counsel Joseph Kaminsky Senior Vice President Wendy Prager Vice President and Assistant Secretary Benjamin Emanuel Vice President David Rutkin Vice President ING Groep owns 100% of ING Bank, which owns 100% of ING U.S., which is the sole managing member and owner of 100% of the interests of ING FS Management, which is the sole managing member and owner of 81.5% of the interests of FS Investments II, which is the sole managing member of Employee Investors. FS Investments II is the sole general partner of Investors and the sole general partner of Parallel Fund. As a result of its role as manager of Investors, Employee Investors and Parallel Fund (the "Funds"), Private Investments may be deemed to be the beneficial owner of the shares beneficially owned by the Funds. -15- As a result of their positions as managing members of Private Investments, Brian P. Friedman and James L. Luikart may be deemed to be the beneficial owners of the shares beneficially owned by Private Investments and therefore deemed to be the beneficial owners of the shares held by the Funds. (d) and (e). None of the reporting persons, and to the knowledge of the reporting persons, none of the other individuals named have, within the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors), or have been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding been or are subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violations with respect to such laws. (f) Brian P. Friedman and James L. Luikart are United States citizens. The filing of this statement shall not be construed as an admission that Private Investments, FS Investments II, ING U.S., ING Bank, ING Groep, Brian P. Friedman or James L. Luikart are, for purposes of Sections 13(d) or 13(g) of the Securities Exchange Act of 1934, the beneficial owner of any shares covered by this statement. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. The funds for the purchase of Series B Preferred Stock were provided out of capital contributions made to Investors, Employee Investors and Parallel Fund and the working capital of ING FS Management. Pursuant to the Preferred Stock Purchase Agreement (as defined in Item 6), Investors, Employee Investors and Parallel Fund paid the Company $13,223,333, $1,133,333 and $643,333, respectively, for the Series B Preferred Stock. ING FS Management paid $15,000,000 for the Series B Preferred Stock. Further information about the purchase of the Series B Preferred Stock is contained in Item 6. ITEM 4. PURPOSE OF TRANSACTION. The Series B Preferred Stock was acquired for investment purposes. The reporting persons intend to review on a continuing basis their investment in the Company and the Company's business, prospects and financial condition. Based on such continuing review, alternative investment opportunities available to the reporting persons and all other factors deemed relevant (including, without limitation the market for and price of Common Stock, offers for shares of the Common Stock, general economic conditions and other future developments), the reporting persons may decide to convert all or part of the Series B Preferred Stock, or sell or seek the sale of all or part of the Series B Preferred Stock. Pursuant to a letter agreement dated March 8, 2000 between ING FS Management and FS Private Investments III LLC, a Delaware limited liability company ("Private Investments III"), ING FS Management has agreed that in the event Private Investments III forms a new private investment fund named ING Furman Selz Investors III L.P., ING FS Management shall sell 149,500 shares of Series B Preferred Stock to such new fund. -16- The Preferred Stock Purchase Agreement (as defined in Item 6) requires the Company to increase the number of directors permitted to comprise the Board of Directors from eight to nine. The Purchasers (as defined in Item 6) may only designate a director, however, if there has occurred an Event of Default as defined in the Certificate of Designation, Preferences and Rights of Series B Preferred Stock. The issuance of the Preferred Stock constitutes a material change in the capitalization of the Company. If the Preferred Stock is converted, in whole or in part, there could be a material change in the capitalization of the Company. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. (a) - (b)
NUMBER OF SHARES TO BE PERCENT OF SHARED SHARED BENEFICIALLY COMMON VOTING INVESTMENT NAME OWNED STOCK POWER POWER - ---- ------------ ---------- ------ ---------- Private Investments 1,661,111 7.3 1,661,111 1,661,111 Investors 1,464,356 6.4 1,464,356 1,464,356 Employee Investors 125,511 .6 125,511 125,511 Parallel Fund 71,244 .3 71,244 71,244 FS Investments II 1,661,111 7.3 1,661,111 1,661,111 ING FS Management 3,322,222 14.6 3,322,222 3,322,222 ING U.S. 3,322,222 14.6 3,322,222 3,322,222 ING Bank 3,322,222 14.6 3,322,222 3,322,222 ING Groep 3,322,222 14.6 3,322,222 3,322,222 Brian P. Friedman 1,661,111 7.3 1,661,111 1,661,111 James L. Luikart 1,661,111 7.3 1,661,111 1,661,111
As of February 17, 2000, the Company had 19,382,000 shares of Common Stock outstanding. (b) See the answer to Item 2 hereof. (c) Other than the transactions described herein, no transactions by any of the reporting persons required to be reported by this Item have taken place in the last sixty (60) days. (d) The limited partners of the Investors and Parallel Fund and the members of Employee Investors and ING FS Management have the right to receive dividends from, or -17- proceeds from the sale of, all or some of the Series B Preferred Stock or all or some of the Common Stock after conversion of the Preferred Stock. (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. Pursuant to a Preferred Stock Purchase Agreement dated as of February 18, 2000 (the "Preferred Stock Purchase Agreement") by and among the Investors, the Employee Investors, the Parallel Fund (each a "Purchaser" and, collectively, the "Purchasers") and the Company, the Investors, the Employee Investors and the Parallel Fund agreed to purchase, subject to the conditions set forth in the Preferred Stock Purchase Agreement, 264,467, 22,667, and 12,866 shares, respectively, of Series B Preferred Stock for an aggregate purchase price of $30,000,000. On March 8, 2000, the Purchasers assigned the right to buy 150,000 shares of Series B Preferred Stock to ING FS Management (along with the Investors, Employee Investors and Parallel Fund, a "Purchaser"). On March 8, 2000, pursuant to the Preferred Stock Purchase Agreement, the Company sold the shares of Series B Preferred Stock to the Purchasers. Immediately following the sale of the shares of Series B Preferred Stock to the Purchasers, the Purchasers sold an aggregate of 1,000 shares of Series B Preferred Stock to James Dowling, who is employed by ING FS Asset Management, for an aggregate purchase price of $100,000. James Dowling individually owns and has sole power to vote and dispose of 11,111 shares of Common Stock issuable upon the conversion of the 1,000 shares of Series B Preferred Stock. The securities owned by Mr. Dowling in his capacity as an individual are not covered by this Schedule 13D. As contemplated by the Preferred Stock Purchase Agreement, the Board of Directors of the Company approved and adopted a Certificate of Designation, Preferences and Rights (the "Certificate") to create the Series B Preferred Stock. The Certificate provides that dividends shall be cumulative at a rate of 8% per annum. Dividends shall accrue and be payable semi-annually, except that the Company is entitled to defer the first two years' dividends and pay such deferred dividends on the second anniversary of the date of original issuance of the Series B Preferred Stock. If the Company fails to pay a dividend when due, the dividend rate will increase to 12% per annum. The Series B Preferred Stock is convertible into shares of Common Stock of the Company at a conversion price of the average closing price of the Company's Common Stock for the thirty trading days ending February 17, 2000 as reported by Bloomberg rounded up to the nearest dollar. At any time after the third anniversary of the date of the original issuance of the Series B Preferred Stock, all or a portion of the shares of Series B Preferred Stock shall, at the option of the Company, automatically be converted into shares of Common Stock if certain conditions are met. The Investors, the Employee Investors, the Parallel Fund and the Company are parties to an Investors Rights Agreement dated as of March 8, 2000 (the "Investors Rights Agreement"). Pursuant to the Investors Rights Agreement, and subject to its terms and -18- conditions, the Purchasers may request that a shelf registration statement or a demand registration statement be filed by the Company. In addition, the Purchasers have certain piggyback registration rights under the Investors Rights Agreement in connection with registrations by the Company under the Securities Act of 1933. Private Investments is the manager of each of Investors, Employee Investors and Parallel Fund. The general partner of each of Investors and Parallel Fund and the managing member of Employee Investors have delegated all relevant rights to Private Investments. Brian P. Friedman and James L. Luikart are the managing members of Private Investments. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. A. Joint Reporting Agreement and Power of Attorney on Behalf of Each Reporting Person B. Preferred Stock Purchase Agreement dated February 18, 2000 C. Certificate of Designation, Preferences and Rights of Series B Cumulative Convertible Preferred Stock D. Letter Agreement between ING FS Management and Private Investments III dated March 8, 2000 -19- SIGNATURES After reasonable inquiry and to the best of their knowledge and belief, the undersigned certify that the information set forth in this statement is true, complete and correct. Dated: March 20, 2000 FURMAN SELZ INVESTORS II L.P. FS EMPLOYEE INVESTORS LLC FS PARALLEL FUND L.P. By: FS PRIVATE INVESTMENTS LLC By: /s/ Brian P. Friedman -------------------------------- Name: Brian P. Friedman Title: Managing Member FS PRIVATE INVESTMENTS LLC By: /s/ Brian P. Friedman -------------------------------- Name: Brian P. Friedman Title: Managing Member FURMAN SELZ INVESTMENTS II LLC By: /s/ Brian P. Friedman -------------------------------- Name: Brian P. Friedman Title: President -20- ING FURMAN SELZ ASSET MANAGEMENT LLC By: /s/ Robert J. Miller -------------------------------------- Name: Robert J. Miller Title: Executive Vice President ING (U.S.) FINANCIAL HOLDINGS CORPORATION By: /s/ Andrew Druch -------------------------------------- Name: Andrew Druch Title: Secretary ING BANK N.V. By: /s/ J.H.J. Houben -------------------------------------- Name: J.H.J. Houben Title: Managing Principal By: /s/ P.F.M. Van Lierop -------------------------------------- Name: P.F.M. Van Lierop Title: Senior Legal Advisor ING GROEP N.V. By: /s/ J.H.J. Houben -------------------------------------- Name: J.H.J. Houben Title: Managing Principal By: /s/ Brian P. Friedman -------------------------------------- Name: Brian P. Friedman By: /s/ James L. Luikart -------------------------------------- Name: James L. Luikart -21- EXHIBIT INDEX No. Description - --- ----------- (1) Joint Reporting Agreement and Power of Attorney on Behalf of Each Reporting Person. (2) Preferred Stock Purchase Agreement dated February 18, 2000 (3) Certificate of Designation, Preferences and Rights of Series B Cumulative Convertible Preferred Stock (4) Letter Agreement between ING FS Management and Private Investments III dated March 8, 2000 -22- EX-99.1 2 JOINT REPORTING AGREEMENT & POWER OF ATTORNEY EXHIBIT 1 JOINT REPORTING AGREEMENT AND POWER OF ATTORNEY WHEREAS, the statement or amended statement of Schedule 13D (the "Joint Statement") to which this joint reporting agreement and power of attorney (the "Agreement") is an exhibit is being filed on behalf of two or more persons (collectively, the "Reporting Persons"); and WHEREAS, the Reporting Persons prefer to file the Joint Statement on behalf of all of the Reporting Persons rather than individual statements on Schedule 13D on behalf of each of the Reporting Persons; NOW, THEREFORE, the undersigned hereby agrees as follows with each of the other Reporting Persons: 1. Each of the Reporting Persons is responsible for the timely filing of the Joint Statement and any amendments thereto. 2. Each of the Reporting Persons is responsible for the completeness and accuracy of the information concerning such Reporting Person contained in the Joint Statement. 3. None of the Reporting Persons is responsible for the completeness or accuracy of the information concerning the other Reporting Persons contained in the Joint Statement, unless such Reporting Person knows or has reason to believe that such information is inaccurate. 4. The undersigned agrees that the Joint Statement is, and any amendment thereto will be, filed on behalf of each of the Reporting Persons. 5. Each of Furman Selz Investments II LLC, ING Furman Selz Asset Management LLC, ING (U.S.) Financial Holdings Corporation, ING Bank N.V., ING Groep N.V. hereby appoints Robert Miller as attorney-in-fact with authority to execute and deliver on behalf of it any and all documents (including any amendments thereto) required to be filed or otherwise executed and delivered by it pursuant to the Securities Exchange Act of 1934, as amended, the Securities Act of 1933, as amended, all other federal, state and local securities and corporation laws, and all regulations promulgated thereunder. Each of Furman Selz Investments II LLC, ING Furman Selz Asset Management LLC, ING (U.S.) Financial Holdings Corporation, ING Bank N.V., ING Groep N.V. further grant Robert Miller authority, as attorney-in-fact, to execute, deliver, or file on behalf of it any document necessary to amend this Joint Reporting Agreement and Power of Attorney for the purpose of adding additional parties thereto at such time or times as he should, in his discretion, deem appropriate. 6. Each of Furman Selz Investors II L.P., FS Employee Investors LLC, FS Private Parallel Fund, L.P., Brian P. Friedman and James L. Luikart hereby appoints Brian P. Friedman and James L. Luikart, and each of them, as attorney-in-fact with authority to execute and deliver on his behalf any and all documents (including any amendments thereto) required to be filed or otherwise executed and delivered by him pursuant to the Securities Exchange Act of 1934, as amended, the Securities Act of 1933, as amended, all other federal, state and local securities and corporation laws, and all regulations promulgated thereunder. Each of Furman Selz Investors II L.P., FS Employee Investors LLC, FS Private Parallel Fund, L.P., Brian P. Friedman and James L. Luikart further grant Brian P. Friedman and James L. Luikart, and each of them, authority, as attorney-in-fact, to execute, deliver, or file on behalf of it any document necessary to amend this Joint Reporting Agreement and Power of Attorney for the purpose of adding additional parties thereto at such time or times as he should, in his discretion, deem appropriate. 7. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. Dated: March 20, 2000 FURMAN SELZ INVESTORS II L.P. FS EMPLOYEE INVESTORS LLC FS PRIVATE PARALLEL FUND, L.P. By: FS PRIVATE INVESTMENTS LLC By: /s/ James L. Luikart --------------------------- Name: James L. Luikart Title: Managing Member FS PRIVATE INVESTMENTS LLC By: /s/ James L. Luikart --------------------------- Name: James L. Luikart Title: Managing Member FURMAN SELZ INVESTMENTS II LLC By: /s/ Brian P. Friedman --------------------------------------- Name: Brian P. Friedman Title: President ING FURMAN SELZ ASSET MANAGEMENT LLC By: /s/ Robert J. Miller --------------------------------------- Name: Robert J. Miller Title: Vice President ING (U.S.) FINANCIAL HOLDINGS CORPORATION By: /s/ Andrew Druch --------------------------------------- Name: Andrew Druch Title: Secretary ING BANK N.V. By: /s/ J.H.J. Houben --------------------------------------- Name: J.H.J. Houben Title: By: /s/ P.F.M. Van Lierop --------------------------------------- Name: P.F.M. Van Lierop Title: Senior Legal Advisor ING GROEP N.V. By: /s/ J.H.J. Houben --------------------------------------- Name: J.H.J. Houben Title: /s/ Brian P. Friedman ------------------------------------------- Brian P. Friedman /s/ James L. Luikart ------------------------------------------- James L. Luikart EX-99.2 3 PREFERRED STOCK PURCHASE AGREEMENT EXHIBIT 2 PREFERRED STOCK PURCHASE AGREEMENT by and among ABC-NACO INC., FURMAN SELZ INVESTORS II L.P., FS EMPLOYEE INVESTORS LLC, and FS PARALLEL FUND L.P. Dated as of February 18, 2000 TABLE OF CONTENTS -----------------
Page ---- ARTICLE I SALE AND PURCHASE OF SECURITIES................................................... 1 1.1. Sale and Purchase of Series B Preferred Stock................................... 1 1.2. Closing......................................................................... 2 ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................... 2 2.1. Issuance of Series B Preferred Stock and Reservation of Common Shares........... 2 2.2. Organization and Qualification.................................................. 3 2.3. Capitalization.................................................................. 3 2.4. Authorization and Enforceability................................................ 4 2.5. Absence of Certain Changes...................................................... 4 2.6. Reports; Financial Statements................................................... 5 2.7. Absence of Undisclosed or Contingent Liabilities................................ 6 2.8. Compliance with Laws; No Violation; Consents and Approvals...................... 6 2.9. Litigation...................................................................... 7 2.10. ERISA Compliance................................................................ 7 2.11. Taxes........................................................................... 8 2.12. Environmental Matters........................................................... 9 2.13. Title to Properties............................................................. 9 2.14. Intellectual Property........................................................... 9 2.15. Certain Agreements.............................................................. 10 2.16. Related Transactions............................................................ 10 2.17. Offering of Shares of Series B Preferred Stock.................................. 10 2.18. Disclosure...................................................................... 10 2.19. Broker's Fees................................................................... 10 2.20. Rights Agreement................................................................ 11 ARTICLE III REPRESENTATIONS AND WARRANTIES OF EACH INVESTOR................................. 11 3.1. Organization.................................................................... 11 3.2. Authority Relative to this Agreement; No Conflict............................... 11 3.3. Investment Intent............................................................... 11 3.4. Economic Risk................................................................... 11 3.5. Litigation...................................................................... 12 3.6. Additional Representations...................................................... 12 3.7. Rule 144........................................................................ 12 3.8. Broker's Fees................................................................... 12 ARTICLE IV COVENANTS........................................................................ 13 4.1. Conduct of Business of the Company.............................................. 13 4.2. Access to Information........................................................... 13
-i- 4.3. Reasonable Best Efforts......................................................... 13 4.4. Amendment to Certificate of Incorporation....................................... 14 4.5. Ratification of the Agreement................................................... 14 4.6. Public Announcements............................................................ 14 4.7. Sale of Stock................................................................... 14 4.8. Amendment to Certificate of Incorporation....................................... 14 ARTICLE V CONDITIONS TO CLOSING............................................................. 15 5.1. Conditions to Investors' Obligations for Closing................................ 15 5.2. Conditions to the Company's Obligations for the Closing......................... 16 ARTICLE VI INDEMNIFICATION.................................................................. 17 6.1. Indemnification by the Company.................................................. 17 6.2. Indemnification by the Investors................................................ 18 6.3. Procedure for Indemnification................................................... 18 6.4. Period of Indemnity............................................................. 19 ARTICLE VII MISCELLANEOUS................................................................... 20 7.1. Termination; Effect of Termination; Expenses.................................... 20 7.2. Extension; Waiver............................................................... 20 7.3. Entire Agreement; Assignment.................................................... 20 7.4. Enforcement of the Agreement; Governing Law; Jurisdiction....................... 21 7.5. Validity........................................................................ 21 7.6. Notices......................................................................... 21 7.7. Descriptive Headings............................................................ 23 7.8. Parties in Interest............................................................. 23 7.9. Counterparts.................................................................... 23 7.10. Amendment....................................................................... 23 7.11. Survival........................................................................ 23 7.12. Strategic Plan.................................................................. 23 7.13. Certain Definitions............................................................. 24
-ii- EXHIBITS Exhibit A Investors and Shares of Series B Preferred Stock Exhibit B Certificate of Designation, Preferences and Rights of Series B Cumulative Convertible Preferred Stock Exhibit C Opinion of Counsel to the Company Exhibit D Investors Rights Agreement -iii- DEFINED TERMS -------------
Page ---- affiliate..................................................................... 24 Agreement..................................................................... 1 associate..................................................................... 24 Authority..................................................................... 7 Certificate of Designation.................................................... 14 Closing....................................................................... 2 Closing Date.................................................................. 2 Code.......................................................................... 8 Common Stock.................................................................. 1 Company....................................................................... 1 control....................................................................... 24 DGCL.......................................................................... 7 Documents..................................................................... 24 Employee Benefit Plans........................................................ 7 ERISA......................................................................... 7, 8 ERISA Affiliate............................................................... 8 Exchange Act.................................................................. 24 FSE........................................................................... 1 FSI-II........................................................................ 1 FSP........................................................................... 1 GAAP.......................................................................... 5 indemnified party............................................................. 18 Intellectual Property......................................................... 9 Interim Financial Statements.................................................. 6 Investor...................................................................... 1 Investors..................................................................... 1 Investors Rights Agreement.................................................... 24 Laws.......................................................................... 6 Liens......................................................................... 3 Loss.......................................................................... 17 Material Adverse Effect....................................................... 24 NASDAQ........................................................................ 1 person........................................................................ 24 Preferred Stock............................................................... 1 Purchase Price................................................................ 2 Related Transaction........................................................... 10 SEC Documents................................................................. 5 Securities Act................................................................ 24 Series B Preferred Stock...................................................... 1 Strategic Plan................................................................ 23 Subsidiaries.................................................................. 25
-iv- Taxes......................................................................... 8 Third Party Claim............................................................. 18
-v- PREFERRED STOCK PURCHASE AGREEMENT THIS IS A PREFERRED STOCK PURCHASE AGREEMENT, dated as of February 18, 2000 (the "Agreement"), by and among ABC-NACO INC., a Delaware corporation, having its --------- principal office at 2001 Butterfield Road, Suite 502, Downers Grove, Illinois 60515 (the "Company"), FURMAN SELZ INVESTORS II L.P., a Delaware limited ------- partnership, having its principal office at 55 East 52nd Street, New York, New York 10055-0002 ("FSI-II"), FS EMPLOYEE INVESTORS LLC, a Delaware limited ------ liability company, having its principal office at 55 East 52nd Street, New York, New York 10055-0002 ("FSE"), and FS PARALLEL FUND L.P., a Delaware limited --- partnership, having its principal office at 55 East 52nd Street, New York, New York 10055-0002 ("FSP", and together with FSI-II, and FSE individually referred --- to as an "Investor" and collectively as the "Investors"). -------- --------- BACKGROUND ---------- A. The Company has (i) as of February 17, 2000, issued and outstanding 19,382,000 shares of Common Stock, par value one cent ($0.01) per share (the "Common Stock"), and (ii) authorized 1,000,000 shares of preferred stock, par ------------ value one dollar ($1.00) per share (the "Preferred Stock"), no shares of which --------------- are outstanding. The Company's Common Stock is currently traded on the Nasdaq National Market ("NASDAQ"). ------ B. The Company is engaged in the business of design, engineering and manufacture of high performance freight railcar, locomotive and passenger rail suspension and coupler systems, wheels and mounted wheel sets, and specialty track products, and supplying freight, railroad signaling systems and services as well as highly engineered valve bodies and components for industrial flow control systems worldwide. C. The Company desires to designate and issue a series of its Preferred Stock, to be known as the Series B Cumulative Convertible Preferred Stock, par value one dollar ($1.00) per share (the "Series B Preferred Stock"), and the ------------------------ Investors desire to purchase all of the shares of the Series B Preferred Stock, subject to the terms and conditions contained herein. TERMS ----- NOW, THEREFORE, in consideration of the mutual covenants contained herein, and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I SALE AND PURCHASE OF SECURITIES 1.1. Sale and Purchase of Series B Preferred Stock. --------------------------------------------- (a) Subject to the terms and conditions set forth herein, at the Closing (as defined in Section 1.2(a)), the Company shall issue and sell to each Investor, and each Investor shall purchase from the Company, the number of shares of Series B Preferred Stock set forth opposite such Investor's name on Exhibit A hereto. The --------- aggregate purchase price for all 300,000 of the shares of Series B Preferred Stock being purchased hereunder is Thirty Million Dollars ($30,000,000.00) (the "Purchase Price"). The per share purchase price for the Series B Preferred Stock -------------- to be paid by each Investor pursuant to this Section 1.1 is One Hundred Dollars ($100) per share. (b) At the Closing, each Investor shall pay such Investor's portion of the Purchase Price for the shares of Series B Preferred Stock being purchased by Investor hereunder, by wire transfer of immediately available funds to an account designated by the Company, not less than two (2) business days prior to Closing. 1.2. Closing. ------- (a) The closing of the purchase and sale of shares of the Series B Preferred Stock referred to in Section 1.1 above (the "Closing") will take ------- place on the twelfth business day after the date hereof, at the offices of Dechert Price & Rhoads, 4000 Bell Atlantic Tower, 1717 Arch Street, Philadelphia, Pennsylvania 19103-2793, or on such other date to be mutually agreed by the parties hereto (the "Closing Date"). ------------ (b) At Closing, the Company will deliver to each Investor a stock certificate representing the number of shares of Series B Preferred Stock set forth opposite such Investor's name on Exhibit A hereto, registered in the --------- name of such Investor, or an affiliate or associate of such Investor, as such Investor may designate in writing to the Company. ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY -------------- The Company hereby represents and warrants to the Investors as follows: 2.1. Issuance of Series B Preferred Stock and Reservation of Common -------------------------------------------------------------- Shares. - ------ Subject to the approval of the Company's Board of Directors, the issuance, sale and delivery of the shares of Series B Preferred Stock have been duly authorized by all requisite corporate action of the Company and the shares of Series B Preferred Stock to be issued to the Investors in accordance with the terms of this Agreement and the Certificate of Designation (as defined in Section 4.4), when issued and delivered in accordance with the terms of this Agreement will be validly issued, fully paid and non-assessable, free and clear of any Liens (as defined in Section 2.2(b)) and not subject to preemptive or other similar rights of the stockholders of the Company. Subject to the terms and conditions hereof, the Company has authorized the reservation of and the issuance of the shares of Common Stock reserved for issuance upon conversion of the Series B Preferred Stock and as payment for dividends with respect to the shares of Series B Preferred Stock, in accordance with the Certificate of -2- Designation, and when issued and delivered in accordance with the terms of this Agreement will be validly issued, fully paid and non-assessable, free and clear of any Liens (as defined in Section 2.2(b)) and not subject to preemptive or other similar rights of the stockholders of the Company. 2.2. Organization and Qualification. ------------------------------ (a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power to carry on its business as it is now being conducted. The Company is duly qualified as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of its properties owned or leased or the nature of its activities makes such qualification necessary, except where the failure to be so qualified reasonably could not be expected to have a Material Adverse Effect. (b) Each of the Company's Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and has the requisite corporate power to carry on its business as it is now being conducted. Each of the Subsidiaries is duly qualified as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of its properties owned or leased or the nature of its activities make such qualification necessary, except where the failure to be so qualified reasonably could not be expected to have in a Material Adverse Effect. All of the outstanding shares of capital stock of each of the Subsidiaries have been validly issued, are fully paid and non-assessable and, except as set forth on Schedule 2.2(b), are owned by the Company free and clear of all pledges, claims, equities, options, liens, charges, rights of first refusal, "tag" or "drag" along rights, encumbrances and security interests of any kind or nature whatsoever (collectively, "Liens"). Except for the capital ----- stock of each of the Subsidiaries and except as set forth on Schedule 2.2(b), the Company does not have any other subsidiaries, nor does it own any capital stock or other proprietary interest or other voting control, directly or indirectly, in any corporation, association, trust, partnership, limited liability company, joint venture or other entity. 2.3. Capitalization. -------------- (a) As of February 17, 2000, the authorized capital stock of the Company consists of 25,000,000 shares of Common Stock, 19,382,000 of which are issued and outstanding, and 1,000,000 shares of Preferred Stock. All of the outstanding shares of Common Stock are duly authorized, validly issued, fully paid and non-assessable, and (i) have not been issued in violation of any preemptive rights, rights of first refusal or offer or similar rights of any person, and (ii) have been offered and sold in compliance with the Securities Act and applicable state securities laws. As of the date of this Agreement, no shares of Preferred Stock are issued and outstanding. No shares of Preferred Stock are held in the treasury of the Company and there are no options, warrants, or other rights are outstanding to acquire Preferred Stock, nor are such -3- rights authorized to be issued with the exception of rights related to Series A junior participating preferred stock pursuant to the Rights Agreement defined in Section 2.20 below. (b) Other than as disclosed in the SEC Documents (as defined in Section 2.6 below), there are no outstanding (i) securities of the Company or any of its Subsidiaries convertible into or exchangeable for any shares of capital stock of the Company or any of its Subsidiaries, or (ii) options, warrants, calls or other rights to acquire from the Company or any of its Subsidiaries, or other obligations or understandings or arrangements of the Company or any of its Subsidiaries to issue, any shares of capital stock of the Company or any of its Subsidiaries or securities convertible into or exchangeable for shares of capital stock of the Company or any Subsidiaries. There are no outstanding obligations of the Company or any Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock of the Company or any of its Subsidiaries (or any of the other securities set forth in the previous sentence). Except as pursuant to this Agreement, neither the Company nor any of its Subsidiaries is a party to, or bound by, any arrangement, agreement, instrument or order (i) relating to the transfer of any shares of capital stock of the Company or any of its Subsidiaries, (ii) relating to the dividend or voting rights of any shares of capital stock of the Company or any of its Subsidiaries, (iii) granting, or obligating the Company or any of its Subsidiaries to grant, to any person any preemptive right, (iv) relating to rights to registration under the Securities Act or any other securities laws of any shares of capital stock of the Company or any of its Subsidiaries, or (v) limiting or restricting the ability of the Company (A) from issuing the Series B Preferred Stock as contemplated herein, or (B) from declaring and/or paying dividends as set forth in the Certificate of Designation. Neither the Company nor any of its Subsidiaries has outstanding any loans to any person (as defined in Section 7.13(g)) in respect of the purchase of securities issued by the Company or any of its Subsidiaries. 2.4. Authorization and Enforceability. The Company has all requisite -------------------------------- corporate power and authority to execute and deliver this Agreement and each other Document, agreement or instrument contemplated hereby, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement by the Company and each other Document, agreement or instrument executed or to be executed by the Company in connection herewith and the consummation by the Company of the transactions contemplated hereby and thereby, have been or will be duly and validly authorized by the Board of Directors of the Company. This Agreement and each other Document, agreement or instrument contemplated hereby, has been or will be duly and validly executed and delivered by the Company and, assuming this Agreement and each other Document, agreement or instrument executed, or to be executed, by the Company in connection herewith, constitutes a valid and binding obligation of the Investors, this Agreement and each other Document, agreement or instrument contemplated hereby, constitutes or will constitute a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms. 2.5. Absence of Certain Changes. Except as disclosed in the SEC -------------------------- Documents (as defined in Section 2.6 below) or as contemplated by this Agreement, since October 31, 1999, -4- the Company has operated in the ordinary course and no event has occurred, and no circumstance exists, that reasonably could be expected to have a Material Adverse Effect. Except as disclosed in the Company's filings and reports under the Exchange Act, since October 31, 1999, there has not been (a) any declaration, setting aside or payment of any dividend or other distribution in respect of the capital stock of the Company or any of its Subsidiaries or any redemption or other acquisition by the Company or any of its Subsidiaries of any shares of Common Stock or other equity securities of the Company or any of its Subsidiaries, (b) any entry into any agreement, commitment or transaction by the Company or any of Subsidiaries, which is material to the Company and any of its Subsidiaries taken as a whole, except agreements, commitments or transactions in the ordinary course of business, consistent with prior practice; (c) any split, combination or reclassification of the Company's capital stock or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock; (d) any damage, destruction or loss, whether or not covered by insurance, that could reasonably be expected to have a Material Adverse Effect; or (e) any change in accounting methods, principles or practices by the Company materially affecting its assets, liabilities or business, except insofar as may have been required by a change in United States generally accepted accounting principles ("GAAP"), consistently ---- applied. 2.6. Reports; Financial Statements. ----------------------------- (a) Since February 19, 1999, the Company, and to the best of the Company's knowledge, from January 1, 1997 until February 19, 1999, the Company's predecessor ABC Rail Products Corporation, have filed all required forms, reports and documents with the SEC required to be filed by it pursuant to the federal securities laws and the rules and regulations promulgated thereunder (collectively, the "SEC Documents"), all of which have complied as of their ------------- respective filing dates in all material respects with all applicable requirements of the Securities Act and the Exchange Act. None of such forms, reports or documents at the time filed contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Except to the extent that information contained in any SEC Document has been revised or superseded by a later-filed SEC Document filed and publicly available prior to the date hereof, none of the SEC Documents contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Documents comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with GAAP (except, in the case of unaudited statements, as permitted by Form 10-Q of the SEC), applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present the consolidated financial position of the Company and its Subsidiaries, as of the dates thereof and the consolidated results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments that, individually or in the aggregate are not -5- material to a fair presentation of the consolidated financial position of the Company and its Subsidiaries). (b) The unaudited financial statements for the Company and its Subsidiaries for the five (5) month period ended December 31, 1999, and the unaudited consolidated pro forma financial statements for the calendar year ended December 31, 1999 (such unaudited financial statements, together with the unaudited quarterly financial statements for the quarter ended October 31, 1999 are referred to as the "Interim Financial Statements"), provided to Investors ---------------------------- comply as to form in all material respects with applicable accounting requirements, have been prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present the consolidated financial position of the Company and its Subsidiaries as of the date thereof and the consolidated results of their operations and cash flows for the periods then ended (subject to normal year end audit adjustments that that, individually or in the aggregate are not material to a fair presentation of the consolidated financial position of the Company and its Subsidiaries). 2.7. Absence of Undisclosed or Contingent Liabilities. Except as and ------------------------------------------------ to the extent disclosed in the SEC Documents or accrued on the balance sheet included in the Interim Financial Statements, and except for liabilities incurred in the ordinary course of business consistent with past practice and otherwise not in contravention of this Agreement (including but not limited to the representations and warranties of the Company contained herein) which individually and in the aggregate are not material, the Company and its Subsidiaries do not have any liabilities or obligations of any nature (whether absolute, contingent, liquidated, unliquidated or otherwise) that reasonably could be expected to have a Material Adverse Effect. Since the date of the Interim Financial Statements, the Company has operated in the ordinary course and there has not been any Material Adverse Effect or any change or occurrence which reasonably could be expected to have a Material Adverse Effect. 2.8. Compliance with Laws; No Violation; Consents and Approvals. ---------------------------------------------------------- (a) Each of the Company and its Subsidiaries is in compliance, in all material respects, with all treaties, statutes, laws, rules, regulations, ordinances, orders, and decrees, whether federal, state, local, or foreign ("Laws") applicable to any of them. ---- (b) Neither the execution and delivery of this Agreement or any Document, agreement or instrument contemplated hereby by the Company nor the consummation of the transactions contemplated hereby or thereby will conflict with, or result in any violation or breach of, or constitute a default (or give rise to any right of termination, modification (including, in the case of leases, any change in the amount of rent), cancellation or acceleration or result in the creation or imposition of (with or without notice or lapse of time, or both), of any Liens upon any of the properties or assets or the Company or its Subsidiaries) under, (a) the Restated Certificate of Incorporation or Bylaws of the Company or similar organizational and governance documents of any of its Subsidiaries, each as amended, (b) the terms, conditions or provisions of any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise or license applicable to the -6- Company or any of its Subsidiaries or to their properties or assets, or (c) any permit, license, approval, franchise, or other governmental or regulatory authorization held or used by or binding upon the Company or any of its Subsidiaries or their properties or assets, other than, in the case of clauses (b) or (c), any such conflicts, violations, breaches, defaults, rights or Liens that, individually or in the aggregate, reasonably could not be expected to have a Material Adverse Effect. (c) No consent, approval, order or authorization of, or registration, declaration or filing with, (x) any Federal, state, local or - foreign governmental or regulatory entity (or any department, agency, authority or political subdivision thereof) or court or arbitrator, domestic or foreign (an "Authority"), (y) NASDAQ, or (z) any third party, is required by the --------- - - Company or any of its Subsidiaries in connection with the execution and delivery of this Agreement or each other Document, agreement or instrument contemplated hereby by the Company or the consummation by the Company of the transactions contemplated by this Agreement, except for (i) the filing with the SEC of a notice on Form D or such reports under Section 13(a) of the Exchange Act as may be required in connection with this Agreement or any other Document or instrument contemplated hereby and the transactions contemplated hereby or thereby, (ii) the filing of the Certificate of Designation (as such term is defined in Section 4.4) with the Secretary of State of the State of Delaware pursuant to the Delaware General Corporation Law (the "DGCL"), (iii) applicable ---- state "blue sky" filings, if any, and (iv) such other consents, approvals, orders, authorizations, registrations, declarations and filings, which have been obtained or made or the failure of which to be obtained or made, individually or in the aggregate, reasonably could not be expected to have a Material Adverse Effect. 2.9. Litigation. There is no pending or, to the knowledge of the ---------- Company, threatened claim, arbitration proceeding, action, suit, investigation or other proceeding against or involving the Company or any of its Subsidiaries, or any of the property or rights of the Company or any of its Subsidiaries, the outcome of which if adverse to the Company or any of its Subsidiaries reasonably could be expected to have a Material Adverse Effect. Neither the Company nor any Subsidiaries is subject to or bound by any order, judgment, writ, injunction or decree of any Authority. 2.10. ERISA Compliance. ---------------- (a) Except as set forth in the SEC Documents, each employee benefit plan, as defined in ERISA (including any "multiemployer plan" as defined in Section 3(37) of ERISA), and all other arrangements maintained, contributed to, or required to be contributed to, by the Company or any ERISA Affiliate for the benefit of any employee, former employee, director or officer of the Company or under which the Company or any ERISA Affiliate has any liability with respect to any employee, former employee, director or officer of the Company ("Employee -------- Benefit Plans") (including any related trust) complies in form with, and has at - ------------- all times been maintained and operated in compliance, in all material respects, with its terms and, the requirements of all applicable laws, including, without limitation, ERISA, and the Internal -7- Revenue Code of 1986, as amended (the "Code") and the Consolidated Omnibus ---- Budget Reconciliation Act. (b) As used herein, the capitalized terms below have the following meanings: (i) "ERISA" means the Employee Retirement Income Security ----- Act of 1974, as amended. (ii) "ERISA Affiliate" means (A) any corporation included --------------- with the Company in a controlled group of corporations within the meaning of Section 414(b) of the Code; (B) any trade or business (whether or not incorporated) which is under common control with the Company within the meaning of Section 414(c) of the Code; (C) any member of an affiliated service group of which the Company is a member within the meaning of Section 414(m) of the Code; or (D) any other person treated as an affiliate of the Company under Section 414(o) of the Code. 2.11. Taxes. ---- (a) The Company and each of its Subsidiaries have filed all Federal income tax returns and all other tax returns and reports (whether foreign, state or local) required to be filed by them, the failure of which to file reasonably could be expected to have, individually or in the aggregate, a Material Adverse Effect. All such returns are complete and correct in all material respects. Except for payment of taxes being contested in good faith and in accordance with the applicable procedures, the Company and each of its Subsidiaries have paid all taxes due for the periods for which such returns were filed and all material taxes for which no return was required to be filed, and the Interim Financial Statements reflect an adequate reserve for all Taxes payable by the Company and each of its Subsidiaries for all taxable periods and portions thereof through the date of such financial statements. The Federal income tax returns of the Company and its Subsidiaries have been properly and timely filed with the Internal Revenue Service for all years through March 31, 1999 and the Company is not aware of any material deficiency being proposed, asserted or assessed against the Company or any of its Subsidiaries. As used in this Agreement, "Taxes" shall include all Federal, state, local and foreign ----- income, property, sales, excise and other taxes, tariffs or governmental charges of any nature whatsoever. -8- 2.12. Environmental Matters. To the Company's knowledge, the business, --------------------- assets and properties of the Company and each Subsidiary are and have been operated and maintained in compliance, in all material respects, with all applicable federal, state, city, county and local environmental protection laws and regulations (collectively, "Environmental Laws"). To the Company's ------------------ knowledge, no event has occurred which, with or without the passage of time or the giving of notice, or both, would constitute non-compliance by either the Company or any Subsidiary with, or a violation by either the Company or any Subsidiary of, the Environmental Laws. Neither the Company or any Subsidiary nor, to the Company's knowledge, any of their respective predecessor companies has caused or permitted to exist, as a result of an intentional or unintentional act or omission, a disposal, discharge or release (as defined in the Comprehensive Environmental Response, Compensation and Liability Act, as amended) of wastes, pollutants, contaminants or hazardous or toxic substances, on or from any site which currently is or formerly was owned, leased, occupied or used by either the Company or any Subsidiary or any predecessor company, except where such disposal, discharge or release was in material compliance with the Environmental Laws. There is no site (a) which is listed, or proposed for listing on a registry or inventory of inactive hazardous waste sites or sites potentially requiring investigation or response maintained by any Governmental Authority and which is currently is or formerly was owned, leased, occupied or used by either the Company, any Subsidiary or, to the Company's knowledge, any predecessor company, or (b) with respect to which either the Company, any Subsidiary or, to the Company's knowledge, any predecessor company has received written notice that such Company is considered to be a potentially responsible person for cleanup or other liability in respect of Environmental Laws or about which information has been requested from the Company or any Subsidiary or any of their predecessor companies; and with respect to (b) which reasonably could be expected to have a Material Adverse Effect. 2.13. Title to Properties. The Company and its Subsidiaries have good, ------------------- valid and marketable title to, or valid leasehold interests in, all their material properties and assets free and clear of all Liens, except as disclosed in the SEC Documents and except for defects in title, easements, restrictive covenants and similar encumbrances or impediments that do not materially impair the value or use of the affected properties. The Company and each of its Subsidiaries have complied in all material respects with the terms of all leases to which they are a party and under which they are in occupancy, and all such leases are in full force and effect. The Company and each of its Subsidiaries enjoy, in all material respects, peaceful and undisturbed possession under all such leases. 2.14. Intellectual Property. For purposes of this Agreement, --------------------- "Intellectual Property" shall mean all industrial and intellectual property --------------------- rights, including without limitation, patents, patent applications, patent rights, trademarks, trademark applications, trade names, service marks, service mark applications, trade mark registrations, copyrights, copyright applications, copyright registrations, technology, know-how, licenses, trade secrets, proprietary processes and formulae owned or licensed by the Company or its Subsidiaries. The Company or its Subsidiaries owns, is licensed by the owner or otherwise holds the right to use and enjoy the rights under the Intellectual Property, except where the lack of ownership, license or right to use or enjoy the rights under the Intellectual Property reasonably could not be expected to have a -9- Material Adverse Effect, and the consummation of the transactions contemplated by this Agreement will not alter or impair any such rights. No claims have been asserted by any person or Authority alleging that any of the current or contemplated activities of the Company or any of its Subsidiaries infringe upon or violate any patent, copyright, trademark, trade name, trade secret or other proprietary right of any third party, which if determined adversely to the Company or any Subsidiaries reasonably could be expected to have a Material Adverse Effect. No person or Authority has undertaken a judicial challenge or judicially questioned the validity of the Intellectual Property or the effectiveness of any license or agreement relating thereto to which the Company or any of its Subsidiaries is a party and which reasonably could be expected to have a Material Adverse Effect. 2.15. Certain Agreements. Neither the Company nor any of its ------------------ Subsidiaries is a party to, or bound by, any contract or agreement that materially limits the ability of the Company or any of its Subsidiaries directly or indirectly to compete in any line of business or with any person in any geographic area during any period of time. 2.16. Related Transactions. Except as disclosed in the Company's most -------------------- recent proxy statement, no current or former stockholder, director, officer or employee of the Company or any of its Subsidiaries (other than the Investors) nor any relative or "associate" of any such person, is presently, directly or indirectly through his or its affiliation with any other person or entity, a party to any transaction with the Company or any of its Subsidiaries providing for the furnishing of services (other than employment of such individuals by the Company or its Subsidiaries) by or to, or the sale of products by or to, or rental of real or personal property from or to, or otherwise requiring cash payments by or to, any such person. For purposes of this Agreement, a transaction of the type described in this Section 2.16 is sometimes herein referred to as a "Related Transaction." ------------------- 2.17. Offering of Shares of Series B Preferred Stock. Neither the ---------------------------------------------- Company nor any person acting on its behalf has taken or will take any action (including, without limitation, any offering of any securities of the Company under circumstances that would require, under the Securities Act, the integration of such offering with the offering and sale of the shares of Series B Preferred Stock), which might subject the offering, issuance and sale of the shares of Series B Preferred Stock to the registration requirements of Section 5 of the Securities Act. 2.18. Disclosure. To the Company's knowledge, none of the documents or ---------- written information furnished or to be furnished by the Company to the Investors in connection with the transactions contemplated hereby contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.19. Broker's Fees. The Company has not employed any broker or finder ------------- or incurred any liability for any broker's fees, commissions or finder's fees in connection with any of the transactions contemplated hereby. -10- 2.20. Rights Agreement. The Investors, and any of their permitted ---------------- assignees, shall not be deemed an Acquiring Person pursuant to the Rights Agreement, dated as of September 29, 1995 (the "Rights Agreement"), between the Company and La Salle National Trust, N.A., as amended. The execution, delivery or performance of this Agreement or the transactions contemplated hereby shall not constitute an event triggering the rights afforded under the Rights Agreement. ARTICLE III REPRESENTATIONS AND WARRANTIES OF EACH INVESTOR ---------------- Each Investor hereby represents and warrants to the Company, severally and not jointly, as follows: 3.1. Organization. The Investor is a limited partnership in the case ------------ of FS-II and FFP, or a limited liability company, in the case of FSE, duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite power to carry on its business as it is now being conducted. 3.2. Authority Relative to this Agreement; No Conflict. The Investor ------------------------------------------------- has the requisite power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby without the consent of any other person (except for such consents as have heretofore been obtained). This Agreement has been duly and validly executed and delivered by the Investor and, assuming this Agreement constitutes a valid and binding obligation of the Company, this Agreement constitutes a valid and binding agreement of the Investor enforceable against the Investor in accordance with its terms, and will not conflict with any other agreement to which the Investor is a party. 3.3. Investment Intent. The shares of Series B Preferred Stock being ----------------- purchased by the Investor and are being purchased by the Investor for investment for its own account, and not with a view to any resale, distribution or other transfer thereof that would violate the Securities Act, or the applicable state securities laws of any state. The Investor will not distribute the shares of Series B Preferred Stock in violation of the Securities Act or the applicable securities laws of any state. 3.4. Economic Risk. The Investor is well versed in financial matters, ------------- has had extensive dealings over the years in securities and is fully familiar with the operating history and financial results of the Company and is fully capable of understanding the type of investment being made pursuant to this Agreement and the risks involved in connection therewith. The Investor is financially able to hold the Series B Preferred Stock for long-term investment, believes that the nature and amount of the Series B Preferred Stock being acquired by the Investor are consistent with the Investor's overall investment program and financial position, and recognizes that there are substantial risks involved in the acquisition of the Series B Preferred Stock. -11- 3.5. Litigation. There is no action, suit, investigation or ---------- proceeding pending against, or to the knowledge of the Investor, threatened against or affecting, such Investor before any Authority that in any manner challenges or seeks to prevent, enjoin, alter or materiality delay the transactions contemplated this Agreement. 3.6. Additional Representations. The Investor: (i) is an accredited -------------------------- investor within the meaning of Rule 501(a) under the Securities Act, (ii) is aware of the limits on resale imposed by virtue of the nature of the transactions contemplated by this Agreement and is aware that the certificates representing the Investor's respective ownership of Series B Preferred Stock will bear related restrictive legends; (iii) is acquiring the shares of the Company hereunder without registration under the Securities Act in reliance on the exemption from registration contained in Section 4(2) of the Securities Act; (iv) has been given the opportunity to ask questions of, and receive answers from, the officers of the Company regarding the Company, its current and proposed business operations and the Series B Preferred Stock, and the officers of the Company have made available to the Investor all documents and information that the Investor has requested relating to an investment in the Company; (v) has access to all of the Company's public filings with the SEC; (vi) acknowledges that the Company is entering into this Agreement in reliance upon the Investor's representations and warranties and other covenants and agreements contained herein; and (vii) acknowledges that Investor is entering into this Agreement in reliance upon the Company's representations and warranties and other covenants and agreements contained herein. 3.7. Rule 144. Each Investor acknowledges that the Series B Preferred -------- Stock must be held indefinitely unless registered under the Securities Act or unless an exemption for such registration is available. Each Investor is aware of the provisions of Rule 144 promulgated under the Securities Act which permit limited resale of shares purchased in a private placement subject to the satisfaction of certain conditions, which may include, among other things, the existence of a public market for the shares, the availability of certain current public information about the Company, the resale occurring not less than one year after a party has purchased and paid for the security to be sold, the sale being effected through a "broker's transaction" or in transactions directly with a "market maker" and the number of shares being sold during any three-month period not exceeding specified limitations. Each Investor agrees that prior to any proposed transfer of the Series B Preferred Stock, such Investor shall give notice to the Company describing the manner and circumstances of the proposed transfer and, if reasonably requested by the Company, such Investor shall deliver an opinion of legal counsel, addressed to the Company, to the effect that the proposed transfer may be effected without registration under the Securities Act. 3.8. Broker's Fees. None of the Investors has employed any broker or ------------- finder or incurred any liability for any broker's fees, commissions or finder's fees in connection with any of the transactions contemplated hereby. -12- ARTICLE IV COVENANTS --------- 4.1. Conduct of Business of the Company. During the period from the ---------------------------------- date of execution of this Agreement up to and including the Closing Date, the Company and each of its Subsidiaries will each conduct its business and operations according to its ordinary and usual course of business and consistent with past practice. 4.2. Access to Information. Between the date of execution of this --------------------- Agreement and the Closing Date, the Company will upon reasonable notice (i) give the Investors and their authorized representatives access during regular business hours to all of the Company's and its Subsidiaries' offices and to all books and records of it, (ii) permit the Investors to make such inspections as it may require (and the Company shall cooperate with Investor in any inspections), and (iii) cause its officers and those of its Subsidiaries to furnish the Investor with such financial and operating data and other information with respect to the business and properties of the Company and its Subsidiaries as the Investors may from time to time request. The Investors shall maintain the confidentiality of any confidential and proprietary information so obtained by it which is not otherwise available from other sources that are free from similar restrictions; provided, however, that the foregoing shall in no way -------- ------- limit or otherwise restrict the ability of the Investors or such authorized representatives to disclose any such information concerning the Company or its Subsidiaries which it may be required to disclose (a) to its partners, board members or stockholders, to the extent required to satisfy its fiduciary obligations to such persons, or (b) otherwise pursuant to or as required by law; provided that, to the extent legally permitted, the Investors will notify the - ------- Company of such disclosure and afford the Company an opportunity to oppose said disclosure at its sole cost and expense. 4.3. Reasonable Best Efforts. Subject to the terms and conditions ----------------------- herein, each of the parties hereto agrees to use its reasonable best efforts to take, or cause to be taken, all appropriate action, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement. In case at any time after the Closing Date any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers and directors of each party to this Agreement shall take all such necessary action. Such reasonable best efforts shall include, without limitation, (i) the obtaining of all necessary consents, approvals or waivers from third parties and governmental authorities necessary to the consummation of the transactions contemplated by this Agreement, and (ii) opposing vigorously, to the extent commercially reasonable, any litigation or administrative proceeding relating to this Agreement or the transactions contemplated hereby, including, without limitation, to the extent commercially reasonable, promptly appealing any adverse court or agency order. Notwithstanding the foregoing or any other provisions contained in this Agreement to the contrary, neither the Investors nor any of their affiliates shall be under any obligation of any kind to enter into any negotiations or to otherwise agree with any Authority, including but not limited to any governmental or regulatory authority with jurisdiction over the enforcement of any applicable -13- federal, state, local and foreign antitrust, competition or other similar laws, or any other party to sell or otherwise dispose of, hold separate (through the establishment of a trust or otherwise) particular assets or categories of assets or businesses of any of the Company, the Investors or any of the Investors' affiliates. 4.4. Amendment to Certificate of Incorporation. On or before the ----------------------------------------- Closing, the Board of Directors of the Company will have taken all actions necessary to adopt the resolutions set forth in Exhibit B to this Agreement, and --------- the Company will have filed a Certificate of Designation, Preferences and Rights of Series B Cumulative Convertible Preferred Stock in the form of Exhibit B --------- hereto (the "Certificate of Designation") with the Secretary of State of the -------------------------- State of Delaware. 4.5. Ratification of the Agreement. Prior to Closing, the Board of ----------------------------- Directors of the Company shall have taken all actions necessary or appropriate to authorize and to ratify the execution of this Agreement and each other Document, other agreement or instrument contemplated herein and the transactions contemplated hereby, including authorization of the issuance, sale and delivery of the shares of Series B Preferred Stock and authorization of the reservation of and the issuance of shares of Common Stock reserved for issuance upon conversion of the Series B Preferred Stock and as payment for dividends with respect to the shares of Series B Preferred Stock. 4.6. Public Announcements. The Company and its Subsidiaries shall -------------------- consult with the Investor and obtain the prior approval and consent of the Investors before issuing any press release or otherwise making any public statement with respect to the transactions contemplated hereby, except as may be required by law, in which case the Company and its Subsidiaries shall use its good faith efforts to review the contents of any such announcement with the Investors and obtain the approval and consent of the Investors reasonably in advance of the public release of such announcement. 4.7. Sale of Stock. The Investors and their successors and assigns ------------- shall not engage in any short selling of the Company's securities, other than in the process of an orderly liquidation of the Investors' holdings of shares of Series B Preferred Stock, which shall not exceed five percent on a daily basis of the Investors' holdings of such stock as of the date of this Agreement. 4.8. Amendment to Certificate of Incorporation. Unless there shall ----------------------------------------- have occurred an Event of Default as defined in the Certificate of Designation prior to the annual meeting of the Company's stockholders to be held in April 2001 and as a result thereof, a Series B Director (as defined in the Certificate of Designation) shall have been duly elected to the Board of Directors, at the annual meeting of its stockholders to be held in April 2001, the Company shall cause to be put to the vote of the stockholders of the Company and recommend that the stockholders approve, a resolution increasing the number of directors comprising the Board of Directors to nine and authorizing an amendment to the Company's Certificate of Incorporation to effect such change. -14- ARTICLE V CONDITIONS TO CLOSING --------------------- 5.1. Conditions to Investors' Obligations for Closing. The obligation ------------------------------------------------ of each Investor to effect the purchase of shares of Series B Preferred Stock contemplated by Section 1.1(a) of this Agreement is subject to the satisfaction or written waiver of the following conditions in the Investor's sole discretion: (a) the representations and warranties of the Company contained in this Agreement that are not qualified by materiality shall be true and correct in all material respects on and as of the Closing Date with the same effect as if made on and as of the Closing Date, and the representations and warranties of the Company that are qualified by materiality shall be true and correct on and as of the Closing Date with the same effect as if made on and as of the Closing Date (except, in either case, to the extent any such representation and warranty specifically refers to a particular date, in which case such representation and warranty shall be true and correct as of such date), and the Company shall have performed, in all material respects, all of its obligations under this Agreement required to be performed by the Company prior to the Closing Date; (b) there shall not have occurred any Material Adverse Effect or any violation of Law by the Company or its Subsidiaries that reasonably could be expected to have a Material Adverse Effect; (c) each Investor shall have received a certificate of the President, Chief Executive Officer or Chief Financial Officer of the Company, on behalf of the Company, certifying as to the fulfillment of the conditions set forth in clauses (a) and (b) above; (d) no statute, rule, regulation, judgment, order or injunction shall be enacted, entered, promulgated or enforced (i) challenging the transactions contemplated hereby, seeking to restrain or prohibit the transactions contemplated hereby or seeking any damages material in relation to the Company or any Investor, (ii) seeking to impose limitations on the ability of each Investor to acquire or hold, or exercise full rights of ownership of any shares of Series B Preferred Stock, including the right to vote such shares or (iii) that otherwise reasonably could be expected to have a Material Adverse Effect; (e) each Investor shall have been provided with evidence satisfactory to the Investor in its reasonable discretion that the Board of Directors of the Company has approved the transactions contemplated by this Agreement for purposes of Section 203 of the DGCL; (f) each Investor shall have received a certificate, dated the Closing Date, duly executed by the Secretary of the Company certifying as to (i) the attached copy of resolutions of the Board of Directors of the Company authorizing and approving or ratifying the -15- execution, delivery and performance of this Agreement and the other documents and instruments contemplated hereby and the consummation of the transactions contemplated hereby and stating that such resolutions have not been modified, amended, revoked or rescinded, and (ii) the incumbency, authority and specimen signature of each officer of the Company executing this Agreement and any other document or instrument contemplated hereby; (g) each Investor shall have received a copy of a certificate of the Secretary of State of the State of Delaware certifying as to the Company's due organization, valid existence and good standing as a domestic corporation in the State of Delaware as of a date not more than two (2) business days prior to the Closing Date; (h) each Investor shall have received an opinion of counsel to the Company, dated the Closing Date, in the form attached hereto as Exhibit C; --------- (i) the Company shall have received (and furnished to each Investor evidence thereof reasonably satisfactory to each Investor) any necessary or required approvals or consents from all Authorities and other third parties necessary or required to complete the transactions contemplated hereby, and such approvals and consents shall not have been withdrawn or expired as of the Closing Date and the Certificate of Designation shall have been duly filed with the Secretary of State of the State of Delaware; (j) the Company shall have executed and delivered to each Investor the Investors Rights Agreement in the form attached hereto as Exhibit ------- D; and - - (k) the Company shall have paid, up to a maximum amount equal to Eighty Five Thousand Dollars ($85,000), the Investors' reasonable costs and expenses in connection with the transactions contemplated hereby, including, but not limited to: (i) Investors' out-of-pocket costs and expenses related to Investors' business due diligence; and (ii) the reasonable fees and expenses of Investors' outside counsel incurred in connection with the transactions contemplated hereby, including Investors' due diligence (the costs and expenses described to in clauses (i) and (ii) are referred to collectively as the "Investors' Expenses"). ------------------- (l) each Investor shall have been provided with evidence satisfactory to each Investor in its reasonable discretion that the Board of Directors of the Company has taken all necessary action in accordance with the Rights Agreement to provide that the Investors' affiliates shall be able to continue to engage in market making activities in the Company's securities in accordance with the National Association of Securities Dealers, Inc.'s rules and that such activities shall not cause the rights afforded pursuant to the Rights Agreement to become exercisable as a result thereof. 5.2. Conditions to the Company's Obligations for the Closing. The ------------------------------------------------------- obligations of the Company to effect the sale of shares of Series B Preferred Stock contemplated by Section 1.1(a) of this Agreement are subject to the satisfaction or written waiver of the following conditions: -16- (a) the representations and warranties of each Investor contained in this Agreement that are not qualified by materiality shall be true and correct in all material respects on and as of the Closing Date with the same effect as if made on and as of the Closing Date, and the representations and warranties of each Investor that are qualified by materiality shall be true and correct on and as of the Closing Date with the same effect as if made on and as of the Closing Date (except, in either case, to the extent any such representation and warranty specifically refers to a particular date, in which case such representation and warranty shall be true and correct as of such date), and each Investor shall have performed, in all material respects, all of its obligations under this Agreement required to be performed by each Investor prior to the Closing Date; (b) the Company shall have received certificates from the authorized officer of each Investor, certifying as to the fulfillment of the condition set forth in clause (a) above; (c) the Company shall have received payment of the Purchase Price by wire transfer of immediate available funds; (d) each Investor shall have executed and delivered to the Company the Investors Rights Agreement in the form attached hereto as Exhibit D; --------- and (e) the Board of Directors of the Company shall have taken all actions necessary to authorize and to ratify the execution of this Agreement and each other Document, other agreement or instrument contemplated herein and the transactions contemplated hereby. ARTICLE VI INDEMNIFICATION --------------- 6.1. Indemnification by the Company. The Company shall indemnify, ------------------------------ defend and hold harmless each of the Investors and their respective affiliates and its respective members, partners, shareholders, directors, officers, employees and agents from and against any loss, liability, claim, damage or expense (including court and arbitration fees and costs, and reasonable fees and expenses of legal counsel, investigators, expert witnesses, consultants, accountants and other professionals) (a "Loss") suffered or incurred by any such ---- indemnified party resulting from or arising out of (i) any untruth, inaccuracy or breach of any representation or warranty of the Company contained in this Agreement, or (ii) any breach of any covenant or obligation of the Company contained in this Agreement; provided that (i) the Investors shall not be -------- ---- permitted to seek indemnification from the Company under this Section 6.1 unless the aggregate amount of Losses with respect to all matters referred to in this Section 6.1 exceeds Two Hundred and Fifty Thousand Dollars ($250,000), in which event the Investors shall be entitled to seek indemnity against the Company for the full amount of such Losses, and (ii) the Company's maximum liability under this Section 6.1 shall not exceed Thirty Million Dollars ($30,000,000). -17- 6.2. Indemnification by the Investors. Each of the Investors shall -------------------------------- severally indemnify, defend and hold harmless the Company from and against any Loss suffered or incurred by the Company resulting from or arising out of a breach by such Investor of Section 4.7 of this Agreement; provided that (i) the -------- ---- Company shall not be permitted to seek indemnification from the Investor under this Section 6.2 unless the aggregate amount of Losses with respect to the matters referred to in this Section 6.2 exceeds Two Hundred and Fifty Thousand Dollars ($250,000), in which event the Company shall be entitled to seek indemnity against the Investor for the full amount of such Losses, and (ii) each Investor's maximum liability under this Section 6.2 shall not exceed the amount of its investment hereunder. 6.3. Procedure for Indemnification. ----------------------------- (a) In order for a party (the "indemnified party") to be ----------------- entitled to any indemnification provided for under this Agreement in respect of, arising out of or involving a claim or demand, made by any person against the indemnified party (a "Third Party Claim"), such indemnified party must notify ----------------- the indemnifying party in writing of the Third Party Claim within thirty (30) calendar days after receipt by such indemnified party of written notice of the Third Party Claim; provided, however, that failure to give such notification -------- ------- shall not affect the indemnification provided hereunder except to the extent the indemnifying party shall have been actually prejudiced as a result of such failure (except that the indemnifying party shall not be liable for any expenses incurred during the period in which the indemnified party failed to give such notice). Thereafter, the indemnified party shall deliver to the indemnifying party, within five (5) business days after the indemnified party's receipt thereof, copies of all notices and documents (including court papers) received by the indemnified party relating to the Third Party Claim. (i) If a Third Party Claim is made against an indemnified party, the indemnifying party will be entitled to participate in the defense thereof and, if it so chooses, to assume the defense thereof with counsel selected by the indemnifying party; provided, that such counsel reasonably is -------- not objected to by the indemnified party; and provided, further, that the -------- ------- indemnifying party first notifies the indemnified party of its intention to assume such defense within thirty (30) calendar days of receipt of notice of a Third Party Claim. Should the indemnifying party so elect to assume the defense of a Third Party Claim, the indemnifying party will not be liable to the indemnified party for any legal expenses subsequently incurred by the indemnified party in connection with the defense thereof. If the indemnifying party elects to assume the defense of a Third Party Claim, the indemnified party (x) will cooperate in all reasonable respects with the indemnifying party in - connection with such defense, (y) will not admit any liability with respect to, - or settle, compromise or discharge, any Third Party Claim without the indemnifying party's prior written consent and (z) will agree to any settlement, - compromise or discharge of a Third Party Claim which the indemnifying party may recommend and which by its terms obligates the indemnifying party to pay the full amount of the liability in connection with such Third Party Claim, which releases the indemnified party completely in connection with such Third Party Claim, which does not obligate the indemnified party to take or -18- forbear to take any action, and which would not adversely affect the business, operations or properties of the Company. (ii) In the event the indemnifying party shall assume the defense of any Third Party Claim as provided above, the indemnified party shall be entitled to participate in (but not control) such defense with its own counsel at its own expense. If the indemnifying party does not so assume the defense of any such Third Party Claim, the indemnified party may defend the same in such manner as it may deem appropriate including, but not limited to, settling such claim or litigation after giving notice of same to the indemnifying party on such terms as the indemnified party may deem appropriate, and the indemnifying party promptly will reimburse the indemnified party upon written request. (iii) Anything contained in this Agreement to the contrary notwithstanding, the indemnifying party shall not be entitled to assume the defense of any Third Party Claim (and shall be liable for attorneys' fees and expenses incurred by the indemnified party in defending such Third Party Claim) if the Third Party Claim seeks an order, injunction or other equitable relief or relief for other than money damages against the indemnified party that the indemnified party reasonably determines, after conferring with its outside counsel, cannot be separated from any related claim for money damages and which, if successful, would adversely affect the business, operations or properties of the indemnified party; provided, however, that if such equitable relief portion -------- ------- of the Third Party Claim can be so separated from that for money damages, the indemnifying party shall be entitled to assume the defense of the portion relating to money damages. 6.4. Period of Indemnity. ------------------- (a) The obligations to indemnify and hold harmless any indemnified party (i) pursuant to Section 6.1(i) hereof shall terminate when the applicable representation or warranty terminates pursuant to Section 6.4(b) below, (ii) pursuant to Section 6.1(ii) shall not terminate, and (iii) pursuant to Section 6.2 shall not terminate during such time as the Investors hold more than five percent of the shares of Series B Preferred Stock originally issued; provided, however, that the indemnity obligations shall not terminate with - -------- ------- respect to any item as to which the indemnified party shall have, before the expiration of the applicable period, previously made a claim by delivering a notice of such claim to the indemnifying party. (b) The representations and warranties of the Company contained herein shall expire two (2) years from the Closing Date, except for the representations or warranties contained in (i) Sections 2.10 (ERISA Compliance) 2.11 (Taxes) and 2.12 (Environmental Matters), which shall survive until the running of the applicable statute of limitations; and (ii) Sections 2.2 (Organization and Qualification), 2.3 (Capitalization) and 2.4 (Authorization and Enforceability), which shall not expire. -19- ARTICLE VII MISCELLANEOUS ------------- 7.1. Termination; Effect of Termination; Expenses. -------------------------------------------- (a) This Agreement may be terminated and the transactions contemplated hereby may be abandoned at any time prior to the Closing Date: (i) by mutual written consent of the Company and the Investors; or (ii) by the Investors, if the Closing does not occur by May 1, 2000; provided, however, that the right to terminate this Agreement -------- ------- pursuant to this Section 7.1(a) shall not be available to an Investor whose failure to fulfill any of its obligations under this Agreement results in the failure of any such condition; or (iii) by either party if any court of competent jurisdiction or any other governmental body shall have issued an order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the transactions contemplated hereby and such order, decree, ruling or other action shall have become final and nonappealable. (b) In the event of termination and abandonment of this Agreement pursuant to Section 7.1(a), this Agreement, except for the provisions of Section 4.2 (only with respect to confidentiality), Article VI and Section 7.1(c), shall forthwith become void and have no effect, without any liability on the part of any party or its respective members, partners, shareholders, directors, officers or shareholders; provided, that nothing in this Section -------- 7.1(b) shall relieve any party to this Agreement of liability for breach of this Agreement. (c) In the event of termination or abandonment of this Agreement pursuant to Section 7.1(a) above, the Company shall pay Investors' Expenses up to a maximum of Eighty Five Thousand Dollars ($85,000.00), in the aggregate. 7.2. Extension; Waiver. The parties hereto, may (a) extend the time ----------------- for the performance of any of the obligations or other acts of the other parties hereto, (b) waive any inaccuracies in the representations and warranties contained herein by any other applicable party or in any document, certificate or writing delivered pursuant hereto by any other applicable party or (c) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of any party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. 7.3. Entire Agreement; Assignment. This Agreement (including the ---------------------------- Schedules and Exhibits hereto) and the other documents and instruments contemplated hereby, (a) constitute the entire agreement among the parties with respect to the subject matter hereof, and supersedes all other prior agreements and understandings, both written and oral, among the -20- parties or any of them with respect to the subject matter hereof, and (b) shall not be assigned by operation of law or otherwise; provided, that each Investor -------- may assign any of its rights and obligations hereunder to any affiliate of such Investor prior to Closing and after Closing to any person, but no such assignment shall relieve Investor of its obligations hereunder unless such assignee or transferee agrees in writing to be bound by the terms hereof as though an original signatory hereto. Either an Investor or any affiliate or associate of such Investor may purchase shares of Series B Preferred Stock under this Agreement. 7.4. Enforcement of the Agreement; Governing Law; Jurisdiction. The --------------------------------------------------------- parties hereto agree that Investor would suffer irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached by the Company. It is accordingly agreed that Investor shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any state court located in the State of New York, or the United States District Court for the Southern District of New York or any federal court in the State of New York (as to which the Company agrees to submit to jurisdiction for the purposes of such or any other action), this being in addition to any other remedy to which Investor is entitled at law or in equity. This Agreement shall be governed by and construed in accordance with the substantive laws of the State of New York regardless of the laws that might otherwise govern under principles of conflicts of laws applicable thereto. 7.5. Validity. The invalidity or unenforceability of any provision of -------- this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect. 7.6. Notices. All notices, requests, claims, demands and other ------- communications hereunder shall be in writing and shall be deemed to have been duly given when delivered in person, by cable, telegram, facsimile transmission with confirmation of receipt, or telex, or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties as follows: if to Investors: --------------- Furman Selz Investors II L.P. FS Employee Investors LLC FS Parallel Fund L.P. c/o FS Private Investments LLC c/o ING Furman Selz Investments 55 East 52nd Street, 37th Floor New York, NY 10055-0002 Attention: James L. Luikart Phone: (212) 409-5600 Fax: (212) 409-5874 -21- with a required copy to: ----------------------- Dechert Price & Rhoads 4000 Bell Atlantic Tower 1717 Arch Street Philadelphia, PA 19103-2793 Attention: Carmen J. Romano, Esq. Phone: (215) 994-4000 Fax: (215) 994-2222 if to the Company: ----------------- ABC-NACO Inc. 2001 Butterfield Road Suite 502 Downers Grove, IL 60515 Attention: Vincent V. Rea, VP and Corp. Treasurer Phone: (630) 852-1300 Fax: (630) 737-0162 with required copies to: ----------------------- ABC-NACO Inc. 2001 Butterfield Road Suite 502 Downers Grove, IL 60515 Attention: Mark F. Baggio, Esq., VP, General Counsel and Secretary Phone: (630) 852-1300 Fax: (630) 737-0167 Schiff Hardin & Waite 6600 Sears Tower Chicago, Illinois 60606 Attention: Robert J. Regan, Esq. Phone: (312) 258-5606 Fax: (312) 258-5700 or to such other address as the person to whom notice is given may have previously furnished to the others in writing in the manner set forth above (provided that notice of any change of address shall be effective only upon receipt thereof). -22- 7.7. Descriptive Headings. The descriptive headings herein are -------------------- inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. 7.8. Parties in Interest. This Agreement shall be binding upon and ------------------- inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement. 7.9. Counterparts. This Agreement may be executed in two or more ------------ counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement. 7.10. Amendment. This Agreement may not be amended except by an --------- instrument in writing signed on behalf of all the parties. 7.11. Survival. The representations, warranties, covenants and -------- agreements of the Company and Investors contained in this Agreement, and all statements contained in this Agreement or any exhibit, attachment or Schedule hereto or any certificate, financial statement or SEC Documents delivered pursuant to this Agreement or in connection with the transactions contemplated hereby, shall be deemed incorporated in this Agreement and shall constitute representations, warranties, covenants and agreements of the respective party delivering the same. All such representations, warranties, covenants and agreements shall survive the Closing as provided in Section 6.4. The Company acknowledges that its representations and warranties in this Agreement shall not be affected or mitigated by any investigation conducted by Investor or its representatives prior to the Closing or any knowledge of any Investor. Each Investor shall use reasonable efforts to notify the Company in the event it discovers information which constitutes a breach of the Company's representations or warranties set forth in Article 2 hereof; provided, however, that the failure of any Investor in any way to provide such notification shall not subject the Investor to any penalty or liability and shall not change the Company's liability with respect to any breach of such representation or warranty. 7.12. Strategic Plan. The Company currently is developing a strategic -------------- plan (the "Strategic Plan") for its businesses and operations and as soon as -------------- such plan is available, the Company will provide copies of the Strategic Plan to each of the Investors. The Investors acknowledge that the Strategic Plan will contain the Company's future expectations, including projections of its results of operations or financial condition, and that the Company's actual results may differ materially from those expressed in the Strategic Plan. -23- 7.13. Certain Definitions. For purposes of this Agreement, the ------------------- following terms shall have the meanings ascribed to them below: (a) "affiliate" of a person shall mean (i) a person that --------- directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the first-mentioned person and (ii) an "associate" as that term is defined in Rule 12b-2 promulgated under the --------- Exchange Act as in effect on the date of execution of this Agreement. (b) "control" (including the terms "controlling", "controlled ------- ----------- ---------- by" and "under common control with" or correlative terms) shall mean the - -- ------------------------- possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through ownership of voting securities, by contract, or otherwise. (c) "Documents" means this Agreement, the Investors Agreement, --------- and the Certificate of Designation. (d) "Exchange Act" means the Securities Exchange Act of 1934, ------------ as amended and the rules and regulations promulgated thereunder all as the same shall be as in effect at the time. (e) "Investors Rights Agreement" means the Investors Rights -------------------------- Agreement by and among the Company and the Investors named therein. (f) "Material Adverse Effect" shall mean (i) any adverse change ----------------------- in the condition (financial or otherwise), assets (including without limitation tangible and intangible assets), liabilities, business, or results of operations or prospects of the Company or any of its Subsidiaries, which change, individually or in the aggregate, is material to the Company and its Subsidiaries taken as a whole, or (ii) any event, matter, condition or effect which materially adversely impairs the ability of the Company to perform on a timely basis its obligations under this Agreement or the Company to consummate the transactions contemplated by this Agreement. (g) "person" shall mean and include an individual, a ------ corporation, a partnership, a trust, an unincorporated organization and a government or any department, agency or political subdivision thereof. (h) "Securities Act" shall mean Securities Act of 1933, as -------------- amended, and all other applicable securities laws and the rules and regulations thereunder as in effect from time to time. -24- (i) "Subsidiaries" means when used with reference to a person, ------------ a corporation or limited liability company, the majority of the outstanding voting securities or membership interests of which are owned directly or indirectly by such person. -25- IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its officers thereunto duly authorized, on the day and year first above written. ABC-NACO INC. By: /s/ J.P. Singsank ------------------------------------------- Name: J.P. Singsank Title: Senior Vice President and Chief Financial Officer INVESTORS: FURMAN SELZ INVESTORS II L.P. FS EMPLOYEE INVESTORS LLC FS PARALLEL FUND L.P. By: FS PRIVATE INVESTMENTS LLC, Manager By: /s/ James L. Luikart ------------------------------------------- Name: James L. Luikart Title: Managing Member -26- EXHIBIT A Investors and Series B Preferred Stock
Number of Shares of Prorata Aggregate ----------------- Investors Series B Preferred Stock Purchase Price --------- ------------------------ -------------- Furman Selz Investors II L.P. 264,466.6666 $26,446,666.67 FS Employee Investors LLC 22,666.6666 $ 2,266,666.67 FS Parallel Fund L.P. 12,866.6666 $ 1,286,666.66
EX-99.3 4 CERTIFICATE OF DESTINATION, PREFERENCES AND RIGHTS EXHIBIT 3 CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK OF ABC-NACO INC. ABC-NACO Inc., a Delaware corporation (the "Corporation"), pursuant to ----------- the provisions of Section 151 of the General Corporation Law of the State of Delaware (the "DGCL"), does hereby make this Certificate of Designation under ---- the corporate seal of the Corporation and does hereby state and certify that pursuant to the authority vested in the Board of Directors of the Corporation by the Certificate of Incorporation, the Board of Directors has duly adopted the following resolutions: RESOLVED, that pursuant to Article Fourth of the Certificate of Incorporation, as amended (which authorizes one million (1,000,000) shares of preferred stock, par value $1.00 per share ("Preferred Stock"), none of which is --------------- presently issued and outstanding), the Board of Directors hereby fixes the designations and preferences and relative participating, optional and other special rights and qualifications, limitations and restrictions of a new series of Preferred Stock consisting of shares to be designated as Series B Cumulative Convertible Preferred Stock. Series B Cumulative Convertible Preferred Stock - ----------------------------------------------- RESOLVED, that the holders of Series B Cumulative Convertible Preferred Stock, except as otherwise provided by law, shall have and possess the following rights and preferences. A. Series B Cumulative Convertible Preferred Stock. ----------------------------------------------- 1. Designation, Number of Shares. This series of preferred stock ----------------------------- shall be designated as Series B Cumulative Convertible Preferred Stock ("Series ------ B Preferred Stock"), and the number of shares that shall constitute such series - ----------------- shall be Three Hundred Thousand (300,000). The par value of Series B Preferred Stock shall be $1.00 per share. 2. Rank. With respect to dividend rights and rights on liquidation, ---- winding up and dissolution of the Corporation, Series B Preferred Stock shall rank senior to: (i) the Common Stock, par value $0.01 per share ("Common ------ Stock"), of the Corporation; and - ----- (ii) the Series A and each other class of capital stock or class or series of Preferred Stock issued by the Corporation after the date hereof (in accordance with Paragraph A.7.(a)(ii) hereof), the terms of which, other than the Series A, shall specifically provide that such class or series shall rank junior to Series B Preferred Stock as to dividend rights or rights on liquidation, winding up and dissolution of the Corporation (each of the securities in clauses (i) and (ii) above collectively referred to as "Junior ------ Securities"). - ---------- 3. Dividend Provisions. ------------------- (a) Each holder of Series B Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of funds legally available therefor, dividends on each share of Series B Preferred Stock after the date of the original issuance of the Series B Preferred Stock at a rate equal to eight percent (8.0%) per share per annum on One Hundred Dollars ($100) per share in cash, or at the Corporation's election, in fully paid, non- restricted, fully tradable, non-assessable shares of Common Stock, which shares of such Common Stock shall be valued at one hundred percent (100%) of the average closing price on the NASDAQ National Market ("NASDAQ") for the sixty ------ (60) consecutive trading days immediately prior to the Dividend Declaration Date (as defined in Paragraph B. hereof). With respect to any dividend on the Series B Preferred Stock paid by the Corporation in shares of Common Stock, such shares of Common Stock when issued shall be (i) registered for sale by the holder of the Series B Preferred Stock under the Securities Act of 1933, as amended (and applicable state securities laws), and (ii) listed on NASDAQ or the NYSE. (b) All dividends, whether payable in cash or in shares of Common Stock, shall be cumulative, whether or not earned or declared, and shall accrue on a semi-annual basis beginning on the date of the original issuance of Series B Preferred Stock (whether or not funds are legally available for the declaration and/or payment of such dividends), and shall be payable semi- annually in arrears on each Dividend Payment Date (as defined in Paragraph B. hereof), commencing on the first Dividend Payment Date after the date of the original issuance of such Series B Preferred Stock. Each dividend on Series B Preferred Stock shall be payable to the holders of record of Series B Preferred Stock as they appear on the stock register of the Corporation on such record date as may be fixed by the Board of Directors, which record date shall not be less than ten (10) nor more than sixty (60) calendar days prior to the applicable Dividend Payment Date. Notwithstanding the foregoing, during the first two (2) years after the date of original issuance of the Series B Preferred Stock, the Corporation shall be entitled to defer payment of dividends on shares of Series B Preferred Stock; provided, that during such two-year -------- period, dividends on shares of Series B Preferred Stock shall cumulate and compound and any so deferred dividends shall be payable in full upon the second anniversary of the date of original issuance of the Series B Preferred Stock. (c) Dividends shall cease to accrue in respect of any shares of Series B Preferred Stock on the date such shares are converted into shares of Common Stock in accordance with Paragraph A.5. hereof. (d) Accrued dividends on the Series B Preferred Stock, if not paid on the first or any subsequent Dividend Payment Date following accrual, shall thereafter accrue additional dividends ("Additional Dividends") in respect -------------------- thereof, compounded semi-annually, at the rate specified hereinabove in Paragraph A.3.(a) hereof or as specified hereinbelow in Paragraph A.3.(g) hereof. (e) All dividends paid with respect to shares of Series B Preferred Stock pursuant to Paragraph A.3.(a) shall be paid pro rata to the holders of Series B Preferred Stock of record entitled thereto. -2- (f) Dividends on account of arrears for any past Dividend Period may be declared and paid at any time, without reference to any regular Dividend Payment Date, to the holders of Preferred Stock of record on any date as may be fixed by the Board of Directors, which date is not more than thirty (30) calendar days prior to the payment of such dividends. (g) The dividend payable to holders of Series B Preferred Stock as set forth above in Paragraph A.3.(a) shall be increased to a rate of twelve percent (12%) per share per annum on the Series B Liquidation Preference (the "Default Dividends"), which Default Dividends shall be payable in either cash, ----------------- unless prohibited by the Credit Agreement dated as of February 19, 1999 among the Company, ABC-NACO de MEXICO, S.A. de C.V., Dominion Castings Limited, Bank of America Canada, Bank of America National Trust and Savings Association and the other financial institutions party thereto, as amended and restated, or Common Stock at the choosing of each holder of Series B Preferred Stock, upon the occurrence and during the continuance of any of the following events (each an "Event of Default" and collectively the "Events of Default"), upon the giving ---------------- ----------------- of written notice thereof to the Corporation by the holders of a majority of the shares of Series B Preferred Stock then outstanding: (i) in the event that the Corporation does not (A) declare the dividend payable on the shares of Series B Preferred Stock within (30) calendar days of the Dividend Declaration Date, (B) fulfill its dividend payment obligation in full for the Series B Preferred Stock, as set forth herein, within thirty (30) calendar days after said dividend payment is due and payable, or (C) fulfill its dividend payment obligation in the form of either cash or stock as required herein; or (ii) in the event that the Corporation shall have materially breached any of the representations and warranties contained in any of the Stock Purchase Agreement or the Investors Rights Agreement; or (iii) in the event that the Corporation shall have materially breached any of the covenants or agreements contained in any of the Stock Purchase Agreement or the Investors Rights Agreement and such breach shall not have been cured to the satisfaction of the holders of record of a majority of the shares of Series B Preferred Stock then outstanding within forty-five (45) calendar days after the date of giving of notice of such breach to the Corporation; or (iv) in the event that the Corporation shall (A) apply for or consent to the appointment of a receiver, trustee or liquidator for the Corporation or any of its property; (B) admit in writing its inability to pay debts as they mature; (C) make a general assignment for the benefit of creditors; (D) be adjudicated bankrupt or insolvent; (E) file a voluntary petition in bankruptcy, a petition or answer seeking reorganization or an arrangement with creditors to take advantage of any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute, or an answer admitting the material allegations of a petition filed against it in any proceeding under any such law; or (F) have failed to have an involuntary petition in bankruptcy filed against it dismissed and discharged within sixty (60) calendar days after the date of such filing; corporate actions shall be taken for the purpose of effecting any of the foregoing; or an order, judgment or decree shall be entered without the application, approval or consent of the Corporation, by any court of competent jurisdiction, -3- approving a petition seeking reorganization of the Corporation or of all or a substantial part of its assets, and such order, judgment or decree shall continue unstayed and in effect for sixty (60) calendar days (a "Bankruptcy"); ---------- or (v) if at any time after the date of original issuance of the first share of Series B Preferred Stock, shares of Common Stock are not publicly traded on NASDAQ or NYSE, or fail to satisfy the then current requirements for listing on such market or exchange. Notwithstanding the foregoing, in the event that the Corporation is unable to meet its obligation to pay cash dividends in the form of cash because of (a) a deficiency in the cash position of the Corporation such that the payment of such dividends in cash would have a Material Adverse Effect on the Corporation, or (b) a prohibition by the DGCL, then the Corporation shall be permitted to pay Default Dividends in shares of Common Stock during such time the condition described in this paragraph continues; provided, however, that the -------- ------- Corporation shall not be entitled to satisfy its dividend payment obligations by paying dividends in shares of Common Stock upon the occurrence or during the continuance of an Event of Default set forth in Paragraph A.3.(g)(iv) hereof. (h) The holders of Series B Preferred Stock shall be entitled to receive the dividends provided for in Paragraphs A.3.(a) and (g) hereof in preference to and in priority over any dividends upon any of the Junior Securities. Such dividends on the Series B Preferred Stock shall be cumulative, whether or not earned or declared, so that if at any time full Accumulated Dividends (as defined in Paragraph B. below) on all shares of Preferred Stock then outstanding have not been paid for all Dividend Periods then elapsed and a prorated dividend on the Series B Preferred Stock at the rate aforesaid from the Dividend Payment Date immediately preceding the Junior Payment Date (as defined below) to the Junior Payment Date have not been paid or set aside for payment, the amount of such unpaid dividends shall be paid before any sum shall be set aside for or applied by the Corporation to the purchase, redemption or other acquisition for value of any shares of Junior Securities (either pursuant to any applicable sinking fund requirement or otherwise) or any dividend or other distribution shall be paid or declared and set apart for payment on any Junior Securities (the date of any such actions to be referred to as the "Junior ------ Payment Date"). In the event that the Corporation shall pay or declare any - ------------ dividend, or make any distribution, on account of any Junior Securities (including Common Stock), the holders of Series B Preferred Stock shall participate with the holders of Common Stock or other Junior Securities on a pro rata basis, based upon the number of shares of Common Stock or other Junior Securities held by each such holder (assuming conversion of all such shares of Series B Preferred Stock into Common Stock on the terms set forth herein), in receipt of such dividends when, as and if declared by the Board of Directors (other than a dividend payable in shares of Common Stock or other securities or rights convertible into or entitling the holder thereof to receive, directly or indirectly, additional shares of Common Stock), which dividends shall be in addition to and not in lieu of the dividends on shares of Series B Preferred Stock set forth in Paragraphs A.3.(a) or A.3.(g) hereof. (i) Dividends payable on Series B Preferred Stock for any period less than one (1) year shall be computed on the basis of a 360-day year consisting of twelve 30-day months plus the actual number of calendar days elapsed in the month for which such dividends are payable. -4- 4. Liquidation Preference. ---------------------- (a) Upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of all shares of Series B Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders an amount in cash equal to One Hundred Dollars ($100.00) in cash per share, plus an amount equal to full cumulative dividends (whether or not earned or declared) accrued and unpaid thereon, including Default Dividends and Additional Dividends (such amount, as so determined, is referred to herein as the "Series B Liquidation -------------------- Preference"), to the date of final distribution and no more, before any payment - ---------- or distribution is made on account of any Junior Securities. After payment in full pursuant to this Paragraph A.4., the holders of Series B Preferred Stock shall not be entitled to any further participation in any distribution in the event of liquidation, dissolution or winding up of the affairs of the Corporation. (b) Certain Transactions Treated as Liquidation. For purposes of ------------------------------------------- this Paragraph A.4., at the election of the holders of record of a majority of the then outstanding shares of Series B Preferred Stock, (A) any acquisition of the Corporation by means of merger or other form of corporate reorganization with or into another corporation in which outstanding shares of the Corporation are exchanged for securities or other consideration issued, or caused to be issued, by the other corporation or its subsidiary, in which transaction this Corporation is not the surviving entity, and, as a result of which transaction, the stockholders of the Corporation own fifty percent (50%) or less of the voting power of the surviving entity, (B) any acquisition in a transaction or series of transactions by a person or group (as defined below) of persons the result of which is that such person or group of persons owns beneficially fifty percent (50%) or more of the voting securities then outstanding of the Corporation, or (C) a sale, transfer or lease (other than a pledge or grant of a security interest to a bona fide lender) of all or substantially all of the assets of the Corporation and its Subsidiaries on a consolidated basis (other than to a wholly-owned subsidiary of the Corporation), shall be treated as a liquidation, dissolution or winding up of the Corporation and shall entitle the holders of Series B Preferred Stock to receive at the closing of any such transactions the amount that would be received in a liquidation, dissolution or winding up pursuant to Paragraph A.4.(a). hereof. For purposes hereof, the term "group" means two or more persons who act as a partnership, syndicate, or pursuant to any other arrangement or understanding, for the purpose of acquiring, holding, or disposing of securities of the Company including without limitation pursuant to Rule 13d-5 promulgated under the Exchange Act . 5. Conversion. ---------- (a) Right of Conversion. Each share of Series B Preferred Stock ------------------- shall be convertible, at the option of the holder thereof, at any time, and from time to time, after the date of issuance of such share, at the office of the Corporation or any transfer agent for the Series B Preferred Stock, into such number of fully paid, registered, non-assessable shares of Common Stock as is determined by dividing (i) One Hundred Dollars ($100.00) plus an amount equal to full cumulative dividends (whether or not earned or declared) accrued and unpaid thereon, including Default Dividends and Additional Dividends by (ii) the Conversion Price. The "Conversion Price" for the Series B Preferred Stock shall ---------------- be the average closing price of the -5- Company's Common Stock for the thirty trading days ending February 17, 2000 as reported by Bloomberg rounded up to the nearest dollar. The Conversion Price for the Series B Preferred Stock shall be subject to adjustment as set forth in Paragraph A.5.(c) hereof. (b) Procedures for Voluntary Conversion. Before any holder of ----------------------------------- shares of Series B Preferred Stock shall be entitled to convert any of such shares into shares of Common Stock, such holder shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or of any transfer agent for the Series B Preferred Stock, and shall give written notice by mail, postage prepaid, or hand delivery, to the Corporation at its principal corporate office, of the election to convert the same and shall state therein the name or names in which the certificate or certificates for shares of Common Stock are to be issued, and in the case of a partial conversion of the Series B Preferred Stock, the certificate or certificates for shares of the Series B Preferred Stock not converted. The Corporation shall, as soon as practicable thereafter, issue and deliver at such office to such holders of shares of Series B Preferred Stock, or to the nominee or nominees of such holders, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series B Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of such date. If the conversion is in connection with an underwritten offering of securities registered pursuant to the Securities Act, the conversion may, at the option of any holder tendering the Series B Preferred Stock for conversion, be conditioned upon the effectiveness of such offering, in which event the person(s) entitled to receive Common Stock issuable upon such conversion of the Series B Preferred Stock shall not be deemed to have converted such Series B Preferred Stock until immediately prior to the effectiveness of such offering and the Corporation shall deliver to such holders tendering Series B Preferred Stock for conversion written notice of the anticipated date of such effectiveness no less than ten (10) calendar days prior thereto. (c) Adjustments of Conversion Price. So long as any shares of ------------------------------- Series B Preferred Stock are outstanding, the Conversion Price of the Series B Preferred Stock shall be subject to adjustment from time to time as follows: (i) (A) Upon issuance (or deemed issuance pursuant to the provisions hereof) by the Corporation of any Additional Stock (as defined below) after the date of issuance of Series B Preferred Stock, without consideration or for an Effective Price per share, or, in the case of Convertible Securities, a conversion price per share, less than the Conversion Price for the Series B Preferred Stock in effect immediately prior to the issuance (or deemed issuance) of such Additional Stock, then the Conversion Price for the Series B Preferred Stock in effect immediately prior to each (such issuance or deemed issuance) shall be adjusted to a price determined by the following formula: (A + B) / (C + D), where "A" equals the number of shares of Common Stock outstanding immediately prior to such issuance or sale multiplied by the then applicable Conversion Price, where "B" equals the consideration, if any, received by the Corporation upon such issuance or sale, where "C" equals the total number of shares of Common Stock outstanding prior to issuance of the additional shares and where "D" equals any Additional Stock or any conversion shares, or any other shares reserved for issuance which are associated -6- with such financing, immediately after such issuance or sale. See Annex A hereto for an example of the formula set forth herein. (B) No adjustment of the Conversion Price for Series B Preferred Stock shall be made in an amount less than one-half of One Cent ($0.005) per share, provided that any adjustments which are not required to be made by reason of this sentence shall be carried forward and shall be taken into account in any subsequent adjustment to the Conversion Price. No adjustment of the Conversion Price for the Series B Preferred Stock pursuant to this Paragraph A.5.(c)(i) shall have the effect of increasing such Conversion Price for the Series B Preferred Stock above the Conversion Price in effect immediately prior to such adjustment. (C) In the case of the issuance of securities of the Corporation for cash, the amount of consideration received by the Corporation for such securities shall be deemed to be the amount of cash paid therefor before deducting any discounts, commissions or other expenses allowed, paid or incurred by the Corporation for any underwriting or otherwise in connection with the issuance and sale thereof. (D) In the case of the issuance of securities of the Corporation for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to have a dollar value equal to the fair market value as determined by the Board of Directors in accordance with generally accepted accounting principles of such non-cash consideration, irrespective of any accounting treatment thereof. (E) In the case of the issuance (whether before, on or after the date of issuance of Series B Preferred Stock) of Options or Convertible Securities, the following provisions shall apply for all purposes of this Paragraph A.5.(c)(i) and Paragraph A.5.(c)(ii) hereof: (1) With respect to Options to purchase Common Stock, the aggregate maximum number of shares of Common Stock deliverable upon exercise of such Options shall be deemed to have been issued at the time such Options were issued and for a consideration equal to the consideration (determined in the manner provided in Subparagraph A.5.(c)(i)(C) and Subparagraph A.5.(c)(i)(D) hereof), if any, received by the Corporation for such Options plus the minimum exercise price provided in such Options for Common Stock issuable thereunder. (2) With respect to Convertible Securities and Options to purchase Convertible Securities, the aggregate maximum number of shares of Common Stock deliverable upon the conversion or exchange of any such Convertible Securities and the aggregate maximum number of shares of Common Stock issuable upon the exercise of such Options to purchase Convertible Securities and the subsequent conversion or exchange of such Convertible Securities shall be deemed to have been issued at the time such Convertible Securities or such Options were issued and for a consideration equal to the consideration, if any, received by the Corporation for any such Convertible Securities and Options, plus the minimum additional consideration, if any, to be received by the Corporation -7- upon the conversion or exchange of such Convertible Securities or the exercise of such Options and the conversion or exchange of the Convertible Securities issuable upon exercise of such Options (the consideration in each case to be determined in the manner provided in Subparagraphs A.5.(c)(i)(C) and A.5.(c)(i)(D) hereof). (3) In the event of any change in the number of shares of Common Stock deliverable, or in the consideration payable to the Corporation, upon exercise of such Options or upon conversion or exchange of such Convertible Securities, including, but not limited to, a change resulting from the antidilution provisions thereof, the Conversion Price of the Series B Preferred Stock, to the extent in any way affected by or computed using such Options or Convertible Securities, shall be recomputed to reflect such change, but no further adjustment shall be made for the actual issuance of Common Stock or any payment of such consideration upon the exercise of any such Options or the conversion or exchange of such Convertible Securities. (4) Upon the expiration or termination of any such Options or any such rights to convert or exchange Convertible Securities, the Conversion Price of the Series B Preferred Stock, to the extent in any way affected by or computed using such Options or Convertible Securities, shall be recomputed to reflect the issuance of only the number of shares of Common Stock (and Options and Convertible Securities which remain in effect) that were actually issued upon the exercise of such Options or upon the conversion or exchange of such Convertible Securities. (5) The number of shares of Common Stock deemed issued and the consideration deemed paid therefor pursuant to Subparagraphs A.5.(c)(i)(E)(1) and (2) hereof shall be appropriately adjusted to reflect any change, termination or expiration of the type described in either Subparagraph A.5.(c)(i)(E)(3) or (4) hereof. (ii) "Additional Stock" shall mean any shares of Common ---------------- Stock or shares of Common Stock issuable pursuant to Convertible Securities issued or Options (or deemed to have been issued pursuant to Paragraph A.5.(c)(i)(E) hereof) by the Corporation after the date of issuance of Series B Preferred Stock, except: (A) Common Stock issued pursuant to a transaction described in Paragraph A.5.(c)(iii) hereof; (B) Common Stock or options to purchase such Common Stock issued to officers, employees or directors of, or consultants to, the Corporation, pursuant to any agreement, plan or arrangement approved by the Board of Directors of the Corporation (the "Permitted Options"); and ----------------- (C) Common Stock issued or issuable upon conversion of shares of Series B Preferred Stock. -8- (iii) In the event the Corporation at any time or from time to time after the date of issuance of Series B Preferred Stock fixes a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of shares of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock (hereinafter referred to as "Common Stock Equivalents") without payment of ------------------------ any consideration by such holder for the additional shares of Common Stock or Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of such dividend, distribution, split or subdivision if no record date is fixed), the Conversion Price of the Series B Preferred Stock shall be appropriately decreased so that the number of shares of Common Stock issuable on conversion of each share of Series B Preferred Stock shall be increased in proportion to such increase in the aggregate number of shares issuable with respect to Common Stock Equivalents, with the number of shares issuable with respect to Common Stock Equivalents determined from time to time in the manner provided for deemed issuances in Subparagraph A.5.(c)(i)(E) hereof. (iv) If the number of shares of Common Stock outstanding at any time after the date of issuance of Series B Preferred Stock is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Conversion Price for the Series B Preferred Stock shall be appropriately increased so that the number of shares of Common Stock issuable on conversion of each share of Series B Preferred Stock shall be decreased in proportion to such decrease in the outstanding shares of Common Stock. (d) Other Distributions. In the event the Corporation shall declare a ------------------- distribution payable in securities of other persons, evidences of indebtedness issued by the Corporation or other persons, assets (excluding cash dividends) or options or rights not referred to in Paragraph A.5.(c)(iii) hereof, then, in each such case for the purpose of this Paragraph A.5.(d), the holders of shares of Series B Preferred Stock shall be entitled to a proportionate share of any such distribution as though they were holders of the number of shares of Common Stock into which their shares of Series B Preferred Stock are convertible as of the record date fixed for the determination of the holders of shares of Common Stock entitled to receive such distribution. (e) Recapitalization. If at any time or from time to time there shall ---------------- be a recapitalization or reclassification of Common Stock (other than a subdivision, combination or consolidation, merger or sale of assets or stock transaction provided for in Paragraph A.4.(b) hereof), provision shall be made so that each holder of shares of Series B Preferred Stock shall thereafter be entitled to receive, upon conversion of the Series B Preferred Stock, the number of shares of stock or other securities or property of the Corporation or otherwise, receivable upon such recapitalization or reclassification by a holder of the number of shares of Common Stock into which such shares of Series B Preferred Stock could have been converted immediately prior to such recapitalization. In any such case, appropriate adjustment shall be made in the application of the provisions of this Paragraph A.5. with respect to the rights of the holders of shares of Series B Preferred Stock after the recapitalization or reclassification to the end that the provisions of this Paragraph A.5. (including adjustments of the Conversion Price then in effect -9- and the number of shares purchasable upon conversion of the Series B Preferred Stock) shall be applicable after that event as nearly equivalent as may be practicable. (f) No Impairment. The Corporation will not, by amendment of this ------------- Certificate of Incorporation or through any reorganization, recapitalization or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Paragraph A.5. and in the taking of all such action as may be necessary or appropriate in order to protect the conversion rights of the holders of shares of Series B Preferred Stock against impairment. (g) No Fractional Shares. No fractional shares shall be issued upon -------------------- conversion of the Series B Preferred Stock, and the number of shares of Common Stock to be issued shall be rounded upward to the nearest whole share, and there shall be no payment to a holder of shares of Series B Preferred Stock for any such rounded fractional share. Whether or not fractional shares result from such conversion shall be determined on the basis of the total number of shares of Series B Preferred Stock the holder is at the time converting into Common Stock and the number of shares of Common Stock issuable upon such aggregate conversion. (h) Certificate as to Adjustments. Upon the occurrence of each ----------------------------- adjustment or readjustment of the Conversion Price of the Series B Preferred Stock pursuant to this Paragraph A.5., the Corporation, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of shares of Series B Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based, certified by the Corporation's Chief Executive Officer or Chief Financial Officer. The Corporation shall, upon the written request at any time of any holder of shares of Series B Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustment and readjustment, (ii) the Conversion Price at the time in effect, and (iii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of a share of Series B Preferred Stock. (i) Notices of Record Date. In the event of any taking by the ---------------------- Corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, the Corporation shall mail to each holder of shares of Series B Preferred Stock, at least twenty (20) calendar days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right. (j) Reservation of Stock Issuable Upon Conversion, Dividends. The -------------------------------------------------------- Corporation shall at all times take appropriate steps to reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of (i) effecting the conversion of the shares of Series B Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of -10- Series B Preferred Stock, and (ii) the payment of dividends as contemplated in Paragraphs A.3.(a) and (g). If at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of Series B Preferred Stock or the payment of dividends, then in addition to such other remedies as shall be available to the holder of such shares of Series B Preferred Stock, the Corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes. (k) Notices. Any notice required by the provisions of this Paragraph ------- A.5. to be given to the holders of shares of Series B Preferred Stock shall be deemed given when received if delivered via courier or sent by facsimile, or by United States mail, postage prepaid, and addressed to each holder of record at its address appearing on the books of the Corporation. (l) Mandatory Conversion. -------------------- (i) At any time after the third (3rd) anniversary of the date of the original issuance of the Series B Preferred Stock, all or a portion of the shares of Series B Preferred Stock shall, at the option of the Corporation (as determined by the Board of Directors), automatically be converted into fully paid, registered and non-assessable shares of Common Stock in accordance with Paragraph A.5.(a) above, if the following three conditions are met: (A) the Closing Common Stock Market Price (as defined in Paragraph B.(d) hereof) for sixty (60) consecutive trading days ending no more than fifteen (15) trading days prior to such mandatory conversion, shall be the greater of (1) $18.00 or (2) not less than two hundred percent (200%) of the Conversion Price then in effect; (B) the average trading volume during such sixty (60) trading day period shall be at least 45,000 shares per trading day; and (C) an effective shelf registration (in accordance with Section 4(b) of the Investors Rights Agreement) is then in effect for the shares of Common Stock to be issued upon conversion of the shares of Series B Preferred Stock. (ii) If the Corporation has elected to convert Series B Preferred Stock into Common Stock pursuant to Paragraph A.5.(l)(i) above, the Corporation will provide written notice of mandatory conversion of shares of Series B Preferred Stock to each holder of record of Series B Preferred Stock no less than ten (10) nor more than twenty (20) calendar days prior to the date fixed for conversion by prepaid overnight delivery service, to each holder at such holder's address as it appears on the stock register of the Corporation. The Corporation's obligation to deliver shares of Common Stock shall be deemed fulfilled if, on the mandatory conversion date, the Corporation shall deposit with a bank or trust company in New York, New York having capital of at least One Hundred Million Dollars ($100,000,000), such number of shares of Common Stock as are required to be delivered by the Corporation upon the conversion of the shares of Series B Preferred Stock so called for conversion. Provided the Corporation has fulfilled its obligation to deposit shares as provided in the foregoing sentence, effective on the mandatory conversion date fixed by the Corporation and notified to the holders of Series B Preferred Stock, each outstanding share of Series B Preferred Stock plus an amount equal to full -11- cumulative dividends (whether or not earned or declared) accrued and unpaid thereon, including Default Dividends and Accumulated Dividends, shall be converted into a fully paid, registered, and non-assessable share of Common Stock at the Conversion Price then in effect, automatically and without any action on the part of any holder of shares of Series B Preferred Stock, and each such share of Common Stock shall be deemed outstanding from and after the mandatory conversion date. 6. Status of Converted Stock. In the event any shares of Series B ------------------------- Preferred Stock are converted to Common Stock pursuant to Paragraph A.5. hereof, the shares so converted or so redeemed shall be canceled, retired and eliminated and shall not be reissued by the Corporation. 7. Voting Rights. ------------- (a) Class Voting Rights. ------------------- (i) Except as otherwise provided below, a vote of at least a majority of the shares of the Series B Preferred Stock then outstanding shall be sufficient to take any action requiring the vote of the Series B Preferred Stock as a separate class. At any meeting where the Series B Preferred Stock shall have the right to vote as a separate class, the presence, in person or by proxy, of a majority of the then outstanding shares of Series B Preferred Stock shall constitute a quorum of such class. (ii) So long as any Series B Preferred Stock is outstanding, the Corporation shall not, without the affirmative vote of the holders of at least sixty-six and two-thirds percent (66 2/3%) of all outstanding shares of Series B Preferred Stock voting separately as a class, given in person or by proxy, either in writing or by resolution adopted at an annual or special meeting called for this purpose (A) amend, alter or repeal any provision of the Certificate of Incorporation or By-laws of the Corporation, each as amended, so as to affect, in any manner adverse to the holders of Series B Preferred Stock, the relative rights, preferences, qualifications, limitations or restrictions of the Series B Preferred Stock; or (B) increase the authorized number of shares of Series B Preferred Stock or create, authorize, designate or reclassify any authorized stock of the Corporation into, or increase the authorized amount of, or issue any capital stock or any securities convertible into or exchangeable or exercisable for any securities of the Corporation, ranking, either as to payment of dividends, distributions of assets upon liquidation or otherwise or redemption, prior or senior to or pari passu with the Series B Preferred Stock, or (C) create, authorize or issue any Junior Securities, which are required to be redeemed by the Corporation at any time that any shares of Series B Preferred Stock are outstanding. (b) Board of Directors. Until the occurrence of an Event of ------------------ Default, the holders of shares of Series B Preferred Stock shall not be entitled to elect any director to the Corporation's Board of Directors. Upon the occurrence of an Event of Default and the expiration of any cure period specified in Paragraph A.3(g), the holders of record of shares of Series B Preferred Stock shall be entitled to elect, voting separately as a class one (1) director to the Corporation's Board of Directors (the "Series B Director") and ----------------- the Corporation shall immediately upon such occurrence and the expiration of any such cure period, and in no event later than two (2) business days thereafter arrange for the election of the Series B Director -12- whether by special meeting or otherwise. At any such meeting called for the purpose of electing the Series B Director, the presence in person or by proxy of the holders of record of a majority of the shares of Series B Preferred Stock then outstanding, shall constitute a quorum for the election of the Series B Director to be elected by such holders. A vacancy in any directorship entitled to be elected by the holders of record of shares of Series B Preferred Stock (including without limitation, a vacancy resulting from the decision during an earlier election by the holders of the Series B Preferred Stock not to fill the directorship to be held by the Series B Director) shall be filled only by vote or written consent of the holders of record of shares of Series B Preferred Stock, in the manner set forth herein. Each Series B Director who shall have been elected as provided in this Paragraph A.7.(b) may be removed during his or her term of office, whether with or without cause, by the holders of record of a majority of the shares of Series B Preferred Stock then outstanding. The Series B Director shall be entitled to one (1) vote on all matters which directors are entitled to vote on. The holders of record of a majority of the shares of Series B Preferred Stock then outstanding shall have the right to call meetings of the Board of Directors and management of the Corporation, upon no less than ten (10) calendar days' prior written notice; provided, that such meetings are called no -------- more frequently than once per fiscal quarter. B. Definitions. As used herein, the following terms shall have the ----------- following definitions: (a) "Accumulated Dividends" means with respect to any share of --------------------- Series B Preferred Stock, the dividends that have accrued on such shares as of such specific date for Dividend Periods ending on or prior to such date and that have not previously been paid in cash, including Additional Dividends and Default Dividends. (b) "Additional Dividends" has the meaning given to such term in -------------------- Paragraph A.3.(d). (c) "Additional Stock" has the meaning set forth in Paragraph ---------------- A.5.(c)(ii). (d) "Closing Common Stock Market Price" for any day means the --------------------------------- last sale price regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices regular way, in either case as reported NASDAQ, NYSE or any other national securities market. (e) "Common Stock Equivalents" has the meaning set forth in ------------------------ Paragraph A.5.(c)(iii) hereof. (f) "Conversion Price" has the meaning set forth in Paragraph ---------------- A.5.(a) hereof. (g) "Convertible Securities" means any indebtedness or shares of ---------------------- stock convertible into or exchangeable for Common Stock. -13- (h) "Dividend Declaration Date" means the last trading day on ------------------------- NASDAQ immediately prior to June 30 and December 31 of each year in which any shares of the Series B Preferred Stock are outstanding. (i) "Dividend Payment Dates" means July 31 and January 31 of ---------------------- each year (or, if such day is not a business day, the next succeeding day that is a business day); (j) "Dividend Period" means the Initial Dividend Period and, --------------- thereafter, each Semi-Annual Dividend Period. (k) "Effective Price" of shares of Additional Stock means the --------------- quotient determined by dividing (i) the total number of such shares of Additional Stock issued or sold, or deemed to have been issued or sold, by the Corporation under Paragraph A.5.(c) hereof, into (ii) the consideration received by the Corporation under Paragraph A.5.(c) hereof for the issuance of such shares of Additional Stock. (l) "Initial Dividend Period" means the dividend period ----------------------- commencing on the date of issuance of the Series B Preferred Stock and ending on the first Dividend Payment Date to occur thereafter. (m) "Investors" shall have the meaning set forth in the Stock --------- Purchase Agreement. (n) "Investors Rights Agreement" means the Investors Rights -------------------------- Agreement dated as of March 8, 2000, by and among the Corporation and the Investors named therein, the Schedules and Exhibits thereto, and any certificate or other document required thereby, as the same may be amended from time to time. (o) "Junior Payment Date" has the meaning set forth in Paragraph ------------------- A.3.(h) hereof. (p) "Junior Securities" has the meaning set forth in Paragraph ----------------- A.2. hereof. (q) "Material Adverse Effect" shall mean (i) any adverse change ----------------------- in the condition (financial or otherwise), assets (including without limitation tangible and intangible assets), liabilities, business, or results of operations or prospects of the Company or any of its Subsidiaries, which change, individually or in the aggregate, is material to the Company and its Subsidiaries taken as a whole, or (ii) any event, matter, condition or effect which materially adversely impairs the ability of the Company to perform on a timely basis its obligations under this Agreement or the Company to consummate the transactions contemplated by this Agreement. (r) "NASDAQ" shall have the meaning set forth in Paragraph ------ A.3.(a) hereof. (s) "NYSE" shall mean the New York Stock Exchange. ---- -14- (t) "Option" means rights, options or warrants to subscribe for, ------ purchase or otherwise acquire Common Stock or Convertible Securities. (u) "Permitted Options" has the meaning set forth in Paragraph ----------------- A.5.(c)(ii)(B) hereof. (v) "person" shall mean and include an individual, a ------ corporation, a partnership, a trust, an unincorporated organization and a government or any department, agency or political subdivision thereof. (w) "Semi-Annual Dividend Periods" means the semi-annual periods ---------------------------- (1) commencing on each January 1 and ending on each June 30 and (2) commencing on July 1 and ending on each December 31. (x) "Stock Purchase Agreement" means the Preferred Stock ------------------------ Purchase Agreement dated as of February 18, 2000, by and among the Corporation and the Investors named therein, the Schedules and Exhibits thereto, and any certificate or other document required thereby, as the same may be amended from time to time. (y) "Subsidiaries" means when used with reference to a person, a ------------ corporation or limited liability company, the majority of the outstanding voting securities or membership interests of which are owned directly or indirectly by such person. IN WITNESS WHEREOF, the undersigned has caused this Certificate to be signed on the 8 day of March, 2000. ABC-NACO INC. By: /s/ J.P. Singsank ----------------------- Name: J.P. Singsank Title: Senior Vice President and Chief Financial Officer -15- ANNEX A Example of Application of Formula for Adjustment of Conversion Price. If, twelve (12) months after the original issuance of the Series B Preferred Stock, 9,000,000 shares of Common Stock were then outstanding and the Corporation were to issue 100,000 shares of Common Stock (the Additional Stock) for $8.00 per share (and thus, less than the $9 Conversion Price for Series B Preferred Stock then in effect), the Conversion Price would be adjusted as follows: [(A+B)] + [(C +D)] [(9,000,000 x $9) + (100,000 x $8)] + [(9,000,000) +(100,000)] [(81,000,000)+($800,000 )] + [(9,100,000)] [(81,800,000)] + [(9,100,000)] = $8.989 -16- EX-99.4 5 LETTER AGREEMENT EXHIBIT 4 ING FURMAN SELZ ASSET MANAGEMENT LLC 230 Park Avenue New York, New York 10169 March 8, 2000 FS Private Investments III LLC 55 East 52/nd/ Street New York, New York 10055 Attn: Mr. Brian P. Friedman Dear Sir: We understand that you are in the process of forming and raising capital for a new private investment fund, ING Furman Selz Investors III L.P., a Delaware limited partnership ("Fund III"). We have today purchased 150,000 Shares of Series B Cumulative Convertible Preferred Stock of ABC-NACO INC., a Delaware corporation (the "Shares"), at a purchase price equal to $15,000,000. This is to confirm that, if and when Fund III is formed, ING Furman Selz Asset Management LLC ("FSAM") shall sell to Fund III (or other related entities managed by FS Private Investments III LLC), and FS Private Investments III LLC, the Manager of Fund III, shall cause Fund III to purchase from FSAM, 149,500 Shares at a purchase price equal to $14,950,000, plus interest thereon at the rate of interest publicly announced from time to time by Citibank, N.A. in New York City as its prime rate plus two percent per annum. The closing for such sale and purchase shall take place promptly following the initial closing of Fund III. Very truly yours, /s/ Timothy Schantz Timothy Schantz President ACCEPTED AND AGREED: By: FS Private Investments III LLC By: /s/ Brian P. Friedman ------------------------------- Name: Brian P. Friedman Title: Managing Member -----END PRIVACY-ENHANCED MESSAGE-----