EXHIBIT 2
PREFERRED STOCK PURCHASE AGREEMENT
by and among
ABC-NACO INC.,
▇▇▇▇▇▇ ▇▇▇▇ INVESTORS II L.P.,
FS EMPLOYEE INVESTORS LLC,
and
FS PARALLEL FUND L.P.
Dated as of February 18, 2000
TABLE OF CONTENTS
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Page
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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
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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
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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
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DEFINED TERMS
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Page
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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
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Taxes......................................................................... 8
Third Party Claim............................................................. 18
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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
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principal office at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇ (the "Company"), ▇▇▇▇▇▇ ▇▇▇▇ INVESTORS II L.P., a Delaware limited
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partnership, having its principal office at ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ ("FSI-II"), FS EMPLOYEE INVESTORS LLC, a Delaware limited
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liability company, having its principal office at ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ ("FSE"), and FS PARALLEL FUND L.P., a Delaware limited
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partnership, having its principal office at ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ ("FSP", and together with FSI-II, and FSE individually referred
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to as an "Investor" and collectively as the "Investors").
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BACKGROUND
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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
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value one dollar ($1.00) per share (the "Preferred Stock"), no shares of which
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are outstanding. The Company's Common Stock is currently traded on the Nasdaq
National Market ("NASDAQ").
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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
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Investors desire to purchase all of the shares of the Series B Preferred Stock,
subject to the terms and conditions contained herein.
TERMS
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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.
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(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
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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
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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.
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(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
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place on the twelfth business day after the date hereof, at the offices of
Dechert Price & ▇▇▇▇▇▇, 4000 ▇▇▇▇ Atlantic Tower, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, or on such other date to be mutually
agreed by the parties hereto (the "Closing Date").
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(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
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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
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The Company hereby represents and warrants to the Investors as
follows:
2.1. Issuance of Series B Preferred Stock and Reservation of Common
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Shares.
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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
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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.
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(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
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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.
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(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
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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,
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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
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applied.
2.6. Reports; Financial Statements.
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(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
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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
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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
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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.
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(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.
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(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
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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
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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.
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(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
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Benefit Plans") (including any related trust) complies in form with, and has at
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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
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Revenue Code of 1986, as amended (the "Code") and the Consolidated Omnibus
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Budget Reconciliation Act.
(b) As used herein, the capitalized terms below have the
following meanings:
(i) "ERISA" means the Employee Retirement Income Security
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Act of 1974, as amended.
(ii) "ERISA Affiliate" means (A) any corporation included
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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.
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(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
▇▇▇▇ applications, trade ▇▇▇▇ 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:
---------------
▇▇▇▇▇▇ ▇▇▇▇ Investors II L.P.
FS Employee Investors LLC
FS Parallel Fund L.P.
c/o FS Private Investments LLC
c/o ING ▇▇▇▇▇▇ ▇▇▇▇ Investments
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
-21-
with a required copy to:
-----------------------
Dechert Price & ▇▇▇▇▇▇
4000 ▇▇▇▇ Atlantic Tower
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Company:
-----------------
ABC-NACO Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇,
VP and Corp. Treasurer
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with required copies to:
-----------------------
ABC-NACO Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.,
VP, General Counsel and Secretary
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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/ ▇.▇. ▇▇▇▇▇▇▇▇
-------------------------------------------
Name: ▇.▇. ▇▇▇▇▇▇▇▇
Title: Senior Vice President and Chief
Financial Officer
INVESTORS:
▇▇▇▇▇▇ ▇▇▇▇ INVESTORS II L.P.
FS EMPLOYEE INVESTORS LLC
FS PARALLEL FUND L.P.
By: FS PRIVATE INVESTMENTS LLC, Manager
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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
--------- ------------------------ --------------
▇▇▇▇▇▇ ▇▇▇▇ 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