CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF SERIES C CUMULATIVE CONVERTIBLE PARTICIPATING PREFERRED STOCK
OF
ABC-NACO INC.
ABC-NACO Inc., a Delaware corporation (the "Corporation"), pursuant to the
provisions of Section 151 of the General Corporation Law of the State of
Delaware (the "DGCL"), does hereby make this Certificate of Designation (the
"Certificate") under the corporate seal of the Corporation and does hereby state
and certify that pursuant to the authority vested in the Board of Directors of
the Corporation by the Certificate of Incorporation, the Board of Directors has
duly adopted the following resolutions:
RESOLVED, that pursuant to Article Fourth of the Certificate of Incorporation,
as restated (which authorizes one million (1,000,000) shares of Preferred Stock,
par value $1.00 per share ("Preferred Stock"), of which (i) one hundred thousand
(100,000) are designated as Series A Preferred Stock ("Series A Preferred
Stock"), none of which are issued or outstanding, (ii) three hundred thousand
(300,000) are designated as Series B Cumulative Convertible Preferred Stock
("Series B Preferred Stock"), none of which are issued or outstanding, and (iii)
three hundred and twenty-five thousand (325,000) shares are designated as Series
B-1 Cumulative Convertible Participating Preferred Stock ("Series B-1 Preferred
Stock"), 317,097.61 of which are presently issued and outstanding, the Board of
Directors hereby fixes the designations and preferences and relative
participating, optional and other special rights and qualifications, limitations
and restrictions of a new series of Preferred Stock consisting of shares to be
designated as Series C Cumulative Convertible Participating Preferred Stock.
Series C Cumulative Convertible Participating Preferred Stock
RESOLVED, that the holders of Series C Cumulative Convertible Participating
Preferred Stock, except as otherwise provided by law and this Certificate, shall
have and possess the following rights and preferences.
A. Series C Cumulative Convertible Participating Preferred Stock.
1. Designation, Number of Shares. This series of preferred stock shall
be designated as Series C Cumulative Convertible Participating Preferred
Stock ("Series C Preferred Stock"), and the number of shares that shall
constitute such series shall be one hundred fifty thousand (150,000). The par
value of Series C Preferred Stock shall be $1.00 per share.
2. Rank. With respect to dividend rights and rights on liquidation,
winding up and dissolution of the Corporation,
(a) Series C Preferred Stock shall rank senior to:
(i) the Common Stock, par value $0.01 per share ("Common Stock"), of
the Corporation; and
(ii) the Series A Preferred Stock and each other class of capital stock
or class or series of Preferred Stock issued by the Corporation after the date
hereof (in accordance with Paragraph A.7.(a)(ii) hereof), the terms of which,
other than the Series A Preferred Stock, shall specifically provide that such
class or series shall rank junior to Series C Preferred Stock as to dividend
rights or rights on liquidation, winding up and dissolution of the Corporation
(each of the securities in clauses (i) and (ii) above collectively referred to
as "Junior Securities"); and
(b) Series C Preferred Stock shall rank junior to the Series B-1
Preferred Stock.
3. Dividend Provisions.
(a) Each holder of Series C Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors, out of funds
legally available therefor, dividends on each share of Series C Preferred Stock
after the date of the original issuance of the Series C Preferred Stock at a
rate equal to ten percent (10.0%) per share per annum on One Hundred Dollars
($100) per share, in cash. In addition, if the Corporation shall pay or declare
any dividend, or make any distribution, on account of any Junior Securities
(including Common Stock), the holders of Series C Preferred Stock shall
participate with the holders of Common Stock or other Junior Securities on a pro
rata basis, based upon the number of shares of Common Stock or other Junior
Securities held by each such holders (assuming conversion of all such shares of
Series C Preferred Stock into Common Stock on the terms set forth herein), in
receipt of such dividends when, as and if declared by the Board of Directors
(other than a dividend payable in shares of Common Stock or other securities or
rights convertible into or entitling the holder thereof to receive, directly or
indirectly, additional shares of Common Stock), which dividends shall be in
addition to and not in lieu of the dividends on shares of Series C Preferred
Stock set forth in this Paragraph A.3(a) or Paragraph A.3.(g) hereof.
(b) All dividends, shall be cumulative, whether or not earned or
declared, and shall accrue on a daily basis beginning on the date of the
original issuance of Series C Preferred Stock (whether or not funds are legally
available for the declaration and/or payment of such dividends), and shall be
payable semi-annually in arrears on each Dividend Payment Date (as defined in
Paragraph B hereof), commencing on the first Dividend Payment Date after the
date of the original issuance of such Series C Preferred Stock. Each dividend
on Series C Preferred Stock shall be payable to the holders of record of Series
C Preferred Stock as they appear on the stock register of the Corporation on
such record date as may be fixed by the Board of Directors, which record date
shall not be less than ten (10) nor more than sixty (60) calendar days prior to
the applicable Dividend Payment Date. Notwithstanding the foregoing, dividends
on the shares of Series C Preferred Stock shall be deferred until the second
anniversary of the date of original issuance of the Series C Preferred Stock;
provided, that during such two-year period, dividends on shares of Series C
Preferred Stock shall cumulate and compound and any so deferred dividends shall
be payable in full upon the second anniversary of the date of original issuance
of the Series C Preferred Stock.
(c) Dividends shall cease to accrue in respect of any shares of Series
C Preferred Stock on the date such shares are converted into shares of Common
Stock in accordance with Paragraph A.5. hereof.
(d) Accrued dividends on the Series C Preferred Stock, if not paid on
the first or any subsequent Dividend Payment Date following accrual, shall
thereafter accrue additional dividends ("Additional Dividends") in respect
thereof, compounded semi-annually, at the rate specified hereinabove in
Paragraph A.3.(a) hereof or as specified hereinbelow in Paragraph A.3.(g)
hereof.
(e) All dividends paid with respect to shares of Series C Preferred
Stock pursuant to Paragraph A.3.(a) shall be paid pro rata to the holders of
Series C Preferred Stock of record entitled thereto.
(f) Dividends on account of arrears for any past Dividend Period may be
declared and paid at any time, without reference to any regular Dividend Payment
Date, to the holders of Series C Preferred Stock of record on any date as may be
fixed by the Board of Directors, which date is not more than thirty (30)
calendar days prior to the payment of such dividends.
(g) The dividend payable to holders of Series C Preferred Stock as set
forth above in Paragraph A.3.(a) shall be increased to a rate of fifteen percent
(15%) per share per annum on the Series C Liquidation Preference (the "Default
Dividends"), which Default Dividends shall be payable in cash upon the
occurrence and during the continuance of any of the following events (each an
"Event of Default" and collectively the "Events of Default"), upon the giving of
written notice thereof to the Corporation by the holders of a majority of the
shares of Series C Preferred Stock then outstanding:
(i) except, as set forth in Paragraph A.3(b) hereof, in the event that
the Corporation does not (A) declare the dividend payable on the shares of
Series C Preferred Stock within (30) calendar days of each Dividend Declaration
Date, (B) fulfill its dividend payment obligation in full for the Series C
Preferred Stock, as set forth herein, within thirty (30) calendar days after
said dividend payment is due and payable, or (C) fulfill its dividend payment
obligation as required herein; or
(ii) in the event that the Corporation shall have materially breached
any of the representations and warranties contained in either the Stock Purchase
Agreement or the Amended and Restated Investors Rights Agreement; or
(iii) in the event that the Corporation shall have materially breached
any of the covenants or agreements contained in either the Stock Purchase
Agreement or the Amended and Restated Investors Rights Agreement and such breach
shall not have been cured to the satisfaction of the holders of record of a
majority of the shares of Series C Preferred Stock then outstanding within
forty-five (45) calendar days after the date of giving of notice of such breach
to the Corporation; or
(iv) in the event that the Corporation shall (A) apply for or consent
to the appointment of a receiver, trustee or liquidator for the Corporation or
any of its property; (B) admit in writing its inability to pay debts as they
mature; (C) make a general assignment for the benefit of creditors; (D) be
adjudicated bankrupt or insolvent; (E) file a voluntary petition in bankruptcy,
a petition or answer seeking reorganization or an arrangement with creditors to
take advantage of any bankruptcy, reorganization, insolvency, readjustment of
debt, dissolution or liquidation law or statute, or an answer admitting the
material allegations of a petition filed against it in any proceeding under any
such law; or (F) have failed to have an involuntary petition in bankruptcy filed
against it dismissed and discharged within sixty (60) calendar days after the
date of such filing; corporate actions shall be taken for the purpose of
effecting any of the foregoing; or an order, judgment or decree shall be entered
without the application, approval or consent of the Corporation, by any court of
competent jurisdiction, approving a petition seeking reorganization of the
Corporation or of all or a substantial part of its assets, and such order,
judgment or decree shall continue unstayed and in effect for sixty (60) calendar
days (a "Bankruptcy"); or
(v) if at any time after the date of original issuance of the first
share of Series C Preferred Stock, shares of Common Stock are not publicly
traded on NASDAQ or NYSE, or fail to satisfy the then current requirements for
listing on such market or exchange.
(h) So long as any shares of Series B Preferred Stock or Series C
Preferred Stock remain outstanding, the Corporation shall not declare, pay or
set apart any amounts for dividends on, or make any other distribution in cash
or other property in respect of, the Junior Securities for any period, nor shall
the Corporation or any of its Subsidiaries redeem, repurchase, or otherwise
acquire for value any of the Junior Securities (either pursuant to any
applicable sinking fund requirement or otherwise) without first obtaining the
prior written consent of the holders of at least sixty-six and two-thirds
percent (66 2/3%) of the then outstanding shares of Series B Preferred Stock and
Series C Preferred Stock.
(i) Dividends payable on Series C Preferred Stock for any period less
than one (1) year shall be computed on the basis of a 360-day year consisting of
twelve 30-day months plus the actual number of calendar days elapsed in the
month for which such dividends are payable.
4. Liquidation Preference. Upon any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, the holders of all
shares of Series C Preferred Stock then outstanding shall be entitled to be paid
out of the assets of the Corporation available for distribution to its
stockholders an amount in cash equal to Two Hundred Dollars ($200.00) in cash
per share (with such dollar amount to be adjusted for any stock dividend, stock
spilt, subdivision, combination, reclassification or similar event made or taken
with respect to the Series C Preferred Stock), plus an amount equal to full
Accumulated Dividends (such amount, as so determined, is referred to herein as
the "Series C Liquidation Preference"), to the date of final distribution,
before any payment or distribution is made on account of any Junior Securities.
Upon any liquidation, dissolution or winding up of the Corporation, whether
voluntarily or involuntarily, after the holders of Series C Preferred Stock
shall have been paid in full the aggregate amount of the Series C Liquidation
Preference, the remaining net assets of the Corporation available for
distribution shall be distributed ratably among the holders of Series B
Preferred Stock, Series C Preferred Stock and Common Stock on an as-converted to
Common Stock basis. Whenever the distribution provided for in this Paragraph
A.4. shall be payable in property other than cash, the value of such
distribution shall be the fair market value of such property as determined in
good faith by the Board of Directors of the Corporation.
5. Conversion.
(a) Right of Conversion. Each share of Series C Preferred Stock shall
be convertible, at the option of the holder thereof, at any time, and from time
to time, after the date of issuance of such share, at the office of the
Corporation or any transfer agent for the Series C Preferred Stock, into such
number of fully paid, registered, non-assessable shares of Common Stock as is
determined by dividing (i) One Hundred Dollars ($100.00) (with such dollar
amount to be adjusted for any stock dividend, stock spilt, subdivision,
combination, reclassification or similar event made or taken with respect to the
Series C Preferred Stock) plus an amount equal to full Accumulated
Dividends by (ii) the Conversion Price. The "Conversion Price" for the Series C
Preferred Stock shall initially be Two Dollars and Fifty Cents ($2.50) per
share. The Conversion Price for the Series C Preferred Stock shall be subject
to adjustment as set forth in Paragraph A.5.(c) hereof.
(b) Procedures for Voluntary Conversion. Before any holder of shares
of Series C Preferred Stock shall be entitled to convert any of such shares into
shares of Common Stock, such holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or of any
transfer agent for the Series C Preferred Stock, and shall give written notice
by mail, postage prepaid, or hand delivery, to the Corporation at its principal
corporate office, of the election to convert the same and shall state therein
the name or names in which the certificate or certificates for shares of Common
Stock are to be issued, and in the case of a partial conversion of the Series C
Preferred Stock, the certificate or certificates for shares of the Series C
Preferred Stock not converted. The Corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holders of shares of Series
C Preferred Stock, or to the nominee or nominees of such holders, a certificate
or certificates for the number of shares of Common Stock to which such holder
shall be entitled as aforesaid. Such conversion shall be deemed to have been
made immediately prior to the close of business on the date of such surrender of
the shares of Series C Preferred Stock to be converted, and the person or
persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock as of such date. If the conversion is in connection
with an underwritten offering of securities registered pursuant to the
Securities Act, the conversion may, at the option of any holder tendering the
Series C Preferred Stock for conversion, be conditioned upon the effectiveness
of such offering, in which event the person(s) entitled to receive Common Stock
issuable upon such conversion of the Series C Preferred Stock shall not be
deemed to have converted such Series C Preferred Stock until immediately prior
to the effectiveness of such offering and the Corporation shall deliver to such
holders tendering Series C Preferred Stock for conversion written notice of the
anticipated date of such effectiveness no less than ten (10) calendar days prior
thereto.
(c) Adjustments of Conversion Price. So long as any shares of Series C
Preferred Stock are outstanding, the Conversion Price of the Series C Preferred
Stock shall be subject to adjustment from time to time as follows:
(i) (A) Upon issuance (or deemed issuance pursuant to the
provisions hereof) by the Corporation of any Additional Stock (as defined below)
after the date of original issuance of Series C Preferred Stock, without
consideration or for an Effective Price (as defined in Paragraph B hereof) per
share, or, in the case of Convertible Securities, a conversion price per share,
less than the Conversion Price for the Series C Preferred Stock in effect
immediately prior to the issuance (or deemed issuance) of such Additional Stock,
then the Conversion Price for the Series C Preferred Stock in effect immediately
prior to each (such issuance or deemed issuance) shall be adjusted to a price
determined by the following formula: (A + B) (C + D), where "A" equals the
number of shares of Common Stock outstanding immediately prior to such issuance
or sale multiplied by the then applicable Conversion Price, where "B" equals the
consideration, if any, received by the Corporation upon such issuance or sale,
where "C" equals the total number of shares of Common Stock outstanding prior to
issuance of the additional shares and where "D" equals any Additional Stock or
any conversion shares, or any other shares reserved for issuance which are
associated with such financing, immediately after such issuance or sale. See
Annex A hereto for an example of the formula set forth herein.
(A) hidden level
(B) No adjustment of the Conversion Price for Series C Preferred Stock
shall be made in an amount less than one-half of One Cent ($0.005) per share,
provided that any adjustments which are not required to be made by reason of
this sentence shall be carried forward and shall be taken into account in any
subsequent adjustment to the Conversion Price. No adjustment of the Conversion
Price for the Series C Preferred Stock pursuant to this Paragraph A.5.(c)(i)
shall have the effect of increasing such Conversion Price for the Series C
Preferred Stock above the Conversion Price in effect immediately prior to such
adjustment.
(C) In the case of the issuance of securities of the Corporation for
cash, the amount of consideration received by the Corporation for such
securities shall be deemed to be the amount of cash paid therefor before
deducting any discounts, commissions or other expenses allowed, paid or incurred
by the Corporation for any underwriting or otherwise in connection with the
issuance and sale thereof.
(D) In the case of the issuance of securities of the Corporation for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to have a dollar value equal to the fair market value as
determined by the Board of Directors in accordance with generally accepted
accounting principles of such non-cash consideration, irrespective of any
accounting treatment thereof.
(E) In the case of the issuance (whether before, on or after the date
of issuance of Series C Preferred Stock) of Options or Convertible Securities,
the following provisions shall apply for all purposes of this Paragraph
A.5.(c)(i) and Paragraph A.5.(c)(ii) hereof:
With respect to Options to purchase Common Stock, the aggregate maximum
number of shares of Common Stock deliverable upon exercise of such Options shall
be deemed to have been issued at the time such Options were issued and for a
consideration equal to the consideration (determined in the manner provided in
Subparagraph A.5.(c)(i)(C) and Subparagraph A.5.(c)(i)(D) hereof), if any,
received by the Corporation for such Options plus the minimum exercise price
provided in such Options for Common Stock issuable thereunder.
(2) With respect to Convertible Securities and Options to purchase
Convertible Securities, the aggregate maximum number of shares of Common Stock
deliverable upon the conversion or exchange of any such Convertible Securities
and the aggregate maximum number of shares of Common Stock issuable upon the
exercise of such Options to purchase Convertible Securities and the subsequent
conversion or exchange of such Convertible Securities shall be deemed to have
been issued at the time such Convertible Securities or such Options were issued
and for a consideration equal to the consideration, if any, received by the
Corporation for any such Convertible Securities and Options, plus the minimum
additional consideration, if any, to be received by the Corporation upon the
conversion or exchange of such Convertible Securities or the exercise of such
Options and the conversion or exchange of the Convertible Securities issuable
upon exercise of such Options (the consideration in each case to be determined
in the manner provided in Subparagraphs A.5.(c)(i)(C) and A.5.(c)(i)(D) hereof).
(3) In the event of any change in the number of shares of Common Stock
deliverable, or in the consideration payable to the Corporation, upon exercise
of such Options or upon conversion or exchange of such Convertible Securities,
including, but not limited to, a change resulting from the antidilution
provisions thereof, the Conversion Price of the Series C Preferred Stock, to the
extent in any way affected by or computed using such Options or Convertible
Securities, shall be recomputed to reflect such change, but no further
adjustment shall be made for the actual issuance of Common Stock or any payment
of such consideration upon the exercise of any such Options or the conversion or
exchange of such Convertible Securities.
(4) Upon the expiration or termination of any such Options or any such
rights to convert or exchange Convertible Securities, the Conversion Price of
the Series C Preferred Stock, to the extent in any way affected by or computed
using such Options or Convertible Securities, shall be recomputed to reflect the
issuance of only the number of shares of Common Stock (and Options and
Convertible Securities which remain in effect) that were actually issued upon
the exercise of such Options or upon the conversion or exchange of such
Convertible Securities.
(5) The number of shares of Common Stock deemed issued and the
consideration deemed paid therefor pursuant to Subparagraphs A.5.(c)(i)(E)(1)
and (2) hereof shall be appropriately adjusted to reflect any change,
termination or expiration of the type described in either Subparagraph
A.5.(c)(i)(E)(3) or (4) hereof.
(ii) "Additional Stock" shall mean all shares of Common Stock issued
(or deemed to have been issued pursuant to Paragraph A.5.(c)(i)(E) hereof) by
the Corporation after the date of original issuance of Series C Preferred Stock,
except:
(A) Common Stock issued pursuant to a transaction described in
Paragraph A.5.(c)(iii) hereof;
(B) Common Stock or options to purchase such Common Stock issued to
officers, employees or directors of, or consultants to, the Corporation,
pursuant to any agreement, plan or arrangement approved by the Board of
Directors of the Corporation (the "Permitted Options"); and
(C) Common Stock issued or issuable upon conversion of shares of Series
B-1 Preferred Stock, Series C Preferred Stock and any warrants issued in
connection with the Stock Purchase Agreement.
(iii) In the event the Corporation at any time or from time to time
after the date of original issuance of Series C Preferred Stock fixes a record
date for the effectuation of a split or subdivision of the outstanding shares of
Common Stock or the determination of holders of shares of Common Stock
entitled to receive a dividend or other distribution payable in additional
shares of Common Stock or other securities or rights convertible into, or
entitling the holder thereof to receive directly or indirectly, additional
shares of Common Stock (hereinafter referred to as "Common Stock Equivalents")
without payment of any consideration by such holder for the additional shares of
Common Stock or Common Stock Equivalents (including the additional shares of
Common Stock issuable upon conversion or exercise thereof), then, as of such
record date (or the date of such dividend, distribution, split or subdivision if
no record date is fixed), the Conversion Price of the Series C Preferred Stock
shall be appropriately decreased so that the number of shares of Common Stock
issuable on conversion of each share of Series C Preferred Stock shall be
increased in proportion to such increase in the aggregate number of shares
issuable with respect to Common Stock Equivalents, with the number of shares
issuable with respect to Common Stock Equivalents determined from time to time
in the manner provided for deemed issuances in Subparagraph A.5.(c)(i)(E)
hereof.
(iv) If the number of shares of Common Stock outstanding at any time
after the date of original issuance of Series C Preferred Stock is decreased by
a combination of the outstanding shares of Common Stock, then, following the
record date of such combination, the Conversion Price for the Series C Preferred
Stock shall be appropriately increased so that the number of shares of Common
Stock issuable on conversion of each share of Series C Preferred Stock shall be
decreased in proportion to such decrease in the outstanding shares of Common
Stock.
(d) Other Distributions. In the event the Corporation shall declare a
distribution payable in securities of other persons, evidences of indebtedness
issued by the Corporation or other persons, assets (excluding cash dividends) or
options or rights not referred to in Paragraph A.5.(c)(iii) hereof, then,
in each such case for the purpose of this Paragraph A.5.(d), the holders of
shares of Series C Preferred Stock shall be entitled to a proportionate share of
any such distribution as though they were holders of the number of shares of
Common Stock into which their shares of Series C Preferred Stock are convertible
as of the record date fixed for the determination of the holders of shares of
Common Stock entitled to receive such distribution.
(e) Recapitalization. If at any time or from time to time there shall
be a recapitalization or reclassification of Common Stock (other than a
subdivision, combination or consolidation, merger or sale of assets or stock
transaction provided for in Paragraph A.4.(b) hereof), provision shall be made
so that each holder of shares of Series C Preferred Stock shall thereafter be
entitled to receive, upon conversion of the Series C Preferred Stock, the number
of shares of stock or other securities or property of the Corporation or
otherwise, receivable upon such recapitalization or reclassification by a holder
of the number of shares of Common Stock into which such shares of Series C
Preferred Stock could have been converted immediately prior to such
recapitalization. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Paragraph A.5. with respect to the rights
of the holders of shares of Series C Preferred Stock after the recapitalization
or reclassification to the end that the provisions of this Paragraph A.5.
(including adjustments of the Conversion Price then in effect and the number of
shares purchasable upon conversion of the Series C Preferred Stock) shall be
applicable after that event as nearly equivalent as may be practicable.
(f) No Impairment. The Corporation will not, by amendment of its
Certificate of Incorporation or this Certificate of Designation or through any
reorganization, recapitalization or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Paragraph A.5. and in
the taking of all such action as may be necessary or appropriate in order to
protect the conversion rights of the holders of shares of Series C Preferred
Stock against impairment.
(g) No Fractional Shares. No fractional shares shall be issued upon
conversion of the Series C Preferred Stock, and the number of shares of Common
Stock to be issued shall be rounded upward to the nearest whole share, and there
shall be no payment to a holder of shares of Series C Preferred Stock for any
such rounded fractional share. Whether or not fractional shares result from
such conversion shall be determined on the basis of the total number of shares
of Series C Preferred Stock the holder is at the time converting into Common
Stock and the number of shares of Common Stock issuable upon such aggregate
conversion.
(h) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price of the Series C Preferred
Stock pursuant to this Paragraph A.5., the Corporation, at its expense, shall
promptly compute such adjustment or readjustment in accordance with the terms
hereof and prepare and furnish to each holder of shares of Series C Preferred
Stock a certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based, certified
by the Corporation's Chief Executive Officer or Chief Financial Officer. The
Corporation shall, upon the written request at any time of any holder of shares
of Series C Preferred Stock, furnish or cause to be furnished to such holder a
like certificate setting forth (i) such adjustment and readjustment, (ii) the
Conversion Price at the time in effect, and (iii) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of a share of Series C Preferred Stock.
(i) Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of shares of Series C Preferred Stock, at least twenty
(20) calendar days prior to the date specified therein, a notice specifying the
date on which any such record is to be taken for the purpose of such dividend,
distribution or right, and the amount and character of such dividend,
distribution or right.
(j) Reservation of Stock Issuable Upon Conversion, Dividends. The
Corporation shall at all times take appropriate steps to reserve and keep
available out of its authorized but unissued shares of Common Stock, solely for
the purpose of (i) effecting the conversion of the shares of Series C Preferred
Stock, such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of Series C
Preferred Stock, and (ii) the payment of dividends as contemplated in Paragraph
A.3.(g). If at any time the number of authorized but unissued shares of Common
Stock shall not be sufficient to effect the conversion of all then outstanding
shares of Series C Preferred Stock or the payment of dividends, then in addition
to such other remedies as shall be available to the holder of such shares of
Series C Preferred Stock, the Corporation will take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purposes.
(k) Notices. Any notice required by the provisions of this Paragraph
A.5. to be given to the holders of shares of Series C Preferred Stock shall be
deemed given when received if delivered via courier or sent by facsimile, or by
United States mail, postage prepaid, and addressed to each holder of record at
its address appearing on the books of the Corporation.
6. Status of Converted Stock. In the event any shares of Series C
Preferred Stock are converted into Common Stock pursuant to Paragraph A.5.
hereof, the shares so converted or so redeemed shall be canceled, retired and
eliminated and shall not be reissued by the Corporation.
7. Redemption.
(a) Corporation Optional Redemption.
(i) At any time after the third (3rd) anniversary of the date of the
original issuance of the Series C Preferred Stock, all of the shares of Series C
Preferred Stock shall, at the option of the Corporation (as determined by
the Board of Directors), be redeemed out of the assets of the Corporation
legally available for such redemption in an amount equal to the Series C
Liquidation Preference as of the date fixed for redemption (the "Optional
Redemption Price"), only if each of the following two conditions are met (each
to be adjusted in the event of a combination, stock split or subdivision, as the
case may be):
(A) the average Closing Common Stock Market Price (as defined in
Paragraph B.(g) hereof) for sixty (60) consecutive trading days beginning after
the third anniversary of the date of the original issuance of the Series C
Preferred Stock and ending no more than fifteen (15) trading days prior to the
date fixed for such optional redemption, shall be greater than Seven Dollars and
Fifty Cents ($7.50); and
(B) the average trading volume, as reported by Bloomberg, during such
sixty (60) trading day period shall be at least 75,000 shares per trading day.
(ii) At least ten (10) Business Days prior to the date fixed for the
Optional Redemption of Series C Preferred Stock, written notice (the "Optional
Redemption Notice") shall be given by first class mail, postage prepaid, to each
Holder of record of Series C Preferred Stock on the record date fixed for
such redemption of Series C Preferred Stock at such Holder's address as set
forth on the stock register of the Corporation on such record, which Optional
Redemption Notice shall specify the record date fixed for such redemption of
Series C Preferred Stock (the "Optional Redemption Date"). Upon the mailing of
any such Optional Redemption Notice, the Corporation shall become obligated to
redeem, on the Optional Redemption Date specified therein, all of the
outstanding shares of Series C Preferred Stock.
(iii) If an Optional Redemption Notice has been mailed in accordance
with paragraph A.7.(a) above, unless the Corporation defaults in the payment in
full of the Optional Redemption Price, dividends on Series C Preferred Stock
called for redemption shall cease to accumulate on the Optional Redemption Date,
and the Holders of such redemption shares shall cease to have any further rights
with respect thereto on the Redemption Date, other than the right to receive the
redemption price without interest.
(iv) On the Optional Redemption Date the Corporation shall pay the
Optional Redemption Price in full, in cash, by wire transfer of immediately
available funds, in respect of the shares of Series C Preferred Stock
outstanding on the Optional Redemption Date to accounts specified by the holders
of the Series C Preferred Stock so redeemed.
(v) If the Corporation exercises its right to redeem the Series C
Preferred Stock pursuant to this Paragraph A.7.(a), each holder of Series C
Preferred Stock may elect to convert such holder's shares of Series C Preferred
Stock into Common Stock of the Corporation, in accordance with the terms and
conditions set forth in Paragraph A.5. herein, by providing the Corporation with
written notice of such conversion at any time prior to the Optional Redemption
Date.
(b) Holder Optional Redemption.
(i) Holder Optional Redemption. Except as set forth in Paragraph
A.7.(a), the Corporation shall not have the right to call or redeem at any time
all or any shares of Series C Preferred Stock. Prior to the occurrence of an
event or transaction that could result in a Change of Control (the "Change of
Control Event"), the Corporation shall send written notice to each holder of
Series C Preferred Stock, which notice shall explain in reasonable detail the
Change of Control Event (the "Change of Control Notice"). The Change of Control
Notice shall be sent by first class mail at least forty-five (45) Business
Days prior to the anticipated occurrence of the Change of Control Event. Upon
receipt of a Change of Control Notice from the Corporation, each holder of
shares of Series C Preferred Stock shall have the right, by giving written
notice to the Corporation (the "Holder Optional Redemption Notice") to cause the
Corporation to redeem all of such holder's then outstanding shares of Series C
Preferred Stock at the Mandatory Redemption Price referred to below, at the
closing of the Change of Control Event. All holders electing to redeem shares
of Series C Preferred Stock shall deliver to the Corporation during regular
business hours, at the office of any transfer agent of the Corporation for the
Series C Preferred Stock, at the principal office of the Corporation or at such
other place as may be designated by the Corporation, the certificate or
certificates for the Series C Preferred Stock to be redeemed, duly endorsed for
transfer to the Corporation (if required by it) on or before the date of the
Change of Control Event (the "Holder Optional Redemption Date").
(ii) Holder Optional Redemption Price. All shares of Series C
Preferred Stock to be redeemed shall be redeemed by paying for each such share
an amount equal to (A) Two Hundred Dollars ($200.00) per share (with such dollar
amount to be adjusted for any stock dividend, stock spilt, subdivision,
combination, reclassification or similar event made or taken with respect to the
Series C Preferred Stock), plus (B) an amount equal to all Accumulated Dividends
to the Holder Optional Redemption Date, the sum of clauses (A) and (B) in each
case being referred to as the "Holder Optional Redemption Price." All payments
of the Holder Optional Redemption Price shall be made in cash.
(iii) On the Holder Optional Redemption Date the Corporation shall pay
the Holder Optional Redemption Price in full, in cash, by wire transfer of
immediately available funds, in respect of the shares of Series C Preferred
Stock outstanding on the Holder Optional Redemption Date to accounts specified
by the holders of the Series C Preferred Stock so redeemed.
(iv) The Corporation shall be prohibited from consummating the Change
of Control Event unless and until the Corporation has paid the Holder Optional
Redemption Price in accordance with Paragraph A.7.(b)(iii) above.
(c) Redeemed or Otherwise Acquired Shares to be Retired. Any shares of
Series C Preferred Stock redeemed pursuant to this Paragraph A.7. or
otherwise acquired by the Corporation in any manner whatsoever shall be canceled
and shall not under any circumstances be reissued; and the Corporation may from
time to time take such appropriate corporate action as may be necessary to
reduce accordingly the number or authorized shares of Series C Preferred Stock.
8. Voting Rights.
(a) Class Voting Rights.
(i) Except as otherwise provided below, a vote of at least a majority
of the shares of the Series C Preferred Stock then outstanding shall be
sufficient to take any action requiring the vote of the Series C Preferred Stock
as a separate class. At any meeting where the Series C Preferred Stock
shall have the right to vote as a separate class, the presence, in person or by
proxy, of a majority of the then outstanding shares of Series C Preferred Stock
shall constitute a quorum of such class.
(ii) So long as any Series C Preferred Stock is outstanding, the
Corporation shall not, without the affirmative vote of the holders of at least
sixty-six and two-thirds percent (66 2/3%) of all outstanding shares of Series C
Preferred Stock voting separately as a class, given in person or by proxy,
either in writing or by resolution adopted at an annual or special meeting
called for this purpose (A) amend, alter or repeal any provision of the Restated
Certificate of Incorporation, as amended by the Certificate of Amendment or
By-laws of the Corporation, each as amended, so as to affect, in any manner
adverse to the holders of Series C Preferred Stock, the relative rights,
preferences, qualifications, limitations or restrictions of the Series C
Preferred Stock; (B) increase the authorized number of shares of Series C
Preferred Stock or create, authorize, designate or reclassify any authorized
stock of the Corporation into, or increase the authorized amount of, or issue
any capital stock or any securities convertible into or exchangeable or
exercisable for any securities of the Corporation, ranking, either as to payment
of dividends, distributions of assets upon liquidation or otherwise or
redemption, prior or senior to or pari passu with the Series C Preferred Stock;
or (C) create, authorize or issue any Junior Securities, which are required to
be redeemed by the Corporation at any time that any shares of Series C Preferred
Stock are outstanding.
(b) Election of Directors. Notwithstanding the foregoing, each share
of Series C Preferred Stock shall be entitled to vote for the election of
Directors to the Corporation's Board of Directors whether by annual or special
meeting or otherwise. For purposes of determining the number of votes that each
share of Series C Preferred Stock is entitled to cast for the election of
Directors, each such share of Series C Preferred Stock shall be treated as if it
had been converted into that number of shares of Common Stock determined in
accordance with Paragraph A.5. hereof, immediately prior to the occurrence of
such election. The holders of shares of Series C Preferred Stock shall vote
together with the holders of shares of Common Stock as a single class for the
purpose of the election of Directors pursuant to this Paragraph A.8.(b).
B. Definitions. As used herein, the following terms shall have the
following definitions:
(a) "Accumulated Dividends" means with respect to any share of Series C
Preferred Stock, the dividends that have accrued on such shares as of such
specific date for Dividend Periods ending on or prior to such date and that have
not previously been paid in cash, including Additional Dividends and Default
Dividends.
(b) "Additional Dividends" has the meaning given to such term in
Paragraph A.3.(d).
(c) "Additional Stock" has the meaning set forth in Paragraph
A.5.(c)(ii).
(d) "Amended and Restated Investors Rights Agreement" means the Amended
and Restated Investors Rights Agreement dated as of June 25, 2001, by and among
the Corporation and the Investors named therein, the Schedules and Exhibits
thereto, and any certificate or other document required thereby, as the same may
be amended from time to time.
(e) "Business Day" shall mean any day other than Saturday, Sunday or
other day in which commercial money center banks in New York City, New York are
closed for business.
(f) "Change of Control" shall mean the occurrence of any one of the
following: (1) the consolidation or merger of the Corporation with or into any
other Person and as a result of the transaction the stockholders of the
Corporation, immediately prior to such transaction, own fifty percent (50%) or
less of the voting power or voting securities of the surviving entity after
giving effect to such transaction; (2) the sale, conveyance or disposition of a
majority of the assets of the Corporation and its Subsidiaries on a consolidated
basis (other than to a wholly owned Subsidiary of the Corporation or a pledge or
grant of a security interest to a bona fide lender); (3) any acquisition in a
transaction or series of related transactions by a Person or "group" (as defined
in Rule 13d-5 promulgated under the Exchange Act) of Persons the result of which
is that such Person of group of Persons owns beneficially fifty percent (50%) or
more of either (x) the voting securities then outstanding or (y) the then
outstanding voting power, of the Corporation; or (4) the liquidation,
dissolution or winding up of the Corporation.
(g) "Closing Common Stock Market Price" for any day means the last sale
price regular way, or, in case no such sale takes place on such day, the average
of the closing bid and asked prices regular way, in either case as reported on
NASDAQ, NYSE or any other national securities market as reported by Bloomberg.
(h) "Common Stock Equivalents" has the meaning set forth in Paragraph
A.5.(c)(iii) hereof.
(i) "Conversion Price" has the meaning set forth in Paragraph A.5.(a)
hereof.
(j) "Convertible Securities" means any indebtedness or shares of stock
convertible into or exchangeable for Common Stock.
(k) "Dividend Declaration Date" means the last trading day on NASDAQ
immediately prior to June 30 and December 31 of each year in which any shares of
the Series C Preferred Stock are outstanding.
(l) "Dividend Payment Dates" means July 31 and January 31 of each year
(or, if such day is not a business day, the next succeeding day that is a
business day);
(m) "Dividend Period" means the Initial Dividend Period and,
thereafter, each Semi-Annual Dividend Period.
(n) "Effective Price" of shares of Additional Stock means the quotient
determined by dividing (i) the total number of such shares of Additional Stock
issued or sold, or deemed to have been issued or sold, by the Corporation under
Paragraph A.5.(c) hereof, into (ii) the consideration received by the
Corporation under Paragraph A.5.(c) hereof for the issuance of such shares of
Additional Stock.
(o) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended and the rules and regulations promulgated thereunder.
(p) "Initial Dividend Period" means the dividend period commencing on
the date of issuance of the Series C Preferred Stock and ending on the first
Dividend Payment Date to occur thereafter.
(q) "Investors" shall have the meaning set forth in the Stock Purchase
Agreement.
(r) "Junior Securities" has the meaning set forth in Paragraph A.2.
hereof.
(s) "NASDAQ" shall mean the Nasdaq National Market.
(t) "NYSE" shall mean the New York Stock Exchange.
(u) "Option" means rights, options or warrants to subscribe for,
purchase or otherwise acquire Common Stock or Convertible Securities.
(v) "Permitted Options" has the meaning set forth in Paragraph
A.5.(c)(ii)(B) hereof.
(w) "Person" shall mean and include an individual, a corporation, a
partnership, a trust, an unincorporated organization and a government or any
department, agency or political subdivision thereof.
(x) "Semi-Annual Dividend Periods" means the semi-annual periods (1)
commencing on each January 1 and ending on each June 30 and (2) commencing on
July 1 and ending on each December 31.
(y) "Securities Act" shall mean the Securities Act of 1933, as amended
and the rules and regulations promulgated thereunder.
(z) "Series B-1 Preferred Stock" shall mean the Series B-1 Cumulative
Convertible Participating Preferred Stock par value, $1.00 per share, of the
Corporation.
(aa) "Stock Purchase Agreement" means the Series C Preferred Stock and
Common Stock Warrant Purchase Agreement dated as of April 17, 2001, by and among
the Corporation and the Investors named therein, the Schedules and Exhibits
thereto, and any certificate or other document required thereby, as the same may
be amended from time to time.
(bb) "Subsidiaries" means when used with reference to a person, a
corporation or limited liability company, the majority of the outstanding voting
securities or membership interests of which are owned directly or indirectly by
such person.
IN WITNESS WHEREOF, the undersigned has caused this Certificate to be
signed on the 22nd day of June, 2001.
ABC-NACO INC.
By: /s/ WAYNE R. ROCKENBACH
Name: Wayne R. Rockenbach
Title: Senior Vice President and
Chief Financial Officer
ANNEX A
Example of Application of Formula for Adjustment of Conversion Price.
If, twelve (12) months after the original issuance of the Series C Preferred
Stock, 9,000,000 shares of Common Stock were then outstanding and the
Corporation were to issue 100,000 shares of Common Stock (the Additional Stock)
for $2.00 per share (and thus, less than the Conversion Price for Series C
Preferred Stock then in effect), the Conversion Price would be adjusted as
follows:
(A+B) (C +D)
(9,000,000 x $2.50) + (100,000 x $2.00) (9,000,000) +(100,000)
(22,500,000)+($200,000) (9,100,000)
(22,700,000) (9,100,000)
= $2.4945