<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
___________
SCHEDULE 13D
(RULE 13d-101)
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No._____)(1)
WATERLINK, INC.
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(Name of Issuer)
COMMON STOCK, PAR VALUE $.01 PER SHARE
-----------------------------------------------------------------------------
(Title of Class of Securities)
94155N105
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(CUSIP Number)
TAB A. KEPLINGER, BRANTLEY VENTURE PARTNERS, 20600 CHAGRIN BLVD.
CLEVELAND, OHIO 44122 (216) 283-4800
-----------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
JUNE 27, 1997
-----------------------------------------------------------------------------
(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1 (b)(3) or (4), check the following box [ ].
Note: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1 (a) for other parties to whom copies
are to be sent.
(Continued on following pages)
(Page 1 of 11 Pages)
______________
(1) The remainder of this cover page shall be filled out for a
reporting person's initial filing on this form with respect to the subject
class of securities, and for any subsequent amendment containing information
which would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
(C) 1996, BOWNE & CO., INC. (BULLETIN NO. 171, 10-11-96)
<PAGE> 2
SCHEDULE 13D Forms 7060
- --------------------------------------------------------------------------------
<TABLE>
CUSIP NO. 94155N105 13D PAGE 2 OF 11 PAGES
<S> <C>
- -----------------------------------------------------------------------------------------------------------
| 1 | NAME OF REPORTING PERSONS |
| | S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS |
| | |
| | Brantley Capital Corporation |
|-----|---------------------------------------------------------------------------------------------------|
| 2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ x ] |
| | (b) [ ] |
| | |
|-----|---------------------------------------------------------------------------------------------------|
| 3 | SEC USE ONLY |
| | |
|-----|---------------------------------------------------------------------------------------------------|
| 4 | SOURCE OF FUNDS* |
| | |
| | |
| | |
| | WC |
|-----|---------------------------------------------------------------------------------------------------|
| 5 | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT |
| | TO ITEMS 2(d) OR 2(e) [ ] |
| | |
| | |
| | |
|-----|---------------------------------------------------------------------------------------------------|
| 6 | CITIZENSHIP OR PLACE OF ORGANIZATION |
| | |
| | Maryland, U.S.A. |
|-------------------------------|-------|-----------------------------------------------------------------|
| NUMBER OF | 7 | SOLE VOTING POWER |
| | | |
| SHARES | | Warrants to purchase 26,250 Shares |
| |-------|-----------------------------------------------------------------|
| BENEFICIALLY | 8 | SHARED VOTING POWER |
| | | |
| OWNED BY | | |
| |-------|-----------------------------------------------------------------|
| EACH | 9 | SOLE DISPOSITIVE POWER |
| | | |
| REPORTING | | |
| | | Warrants to purchase 26,250 Shares |
| PERSON |-------|-----------------------------------------------------------------|
| | 10 | SHARED DISPOSITIVE POWER |
| WITH | | |
| | | |
|-------------------------------|-------|-----------------------------------------------------------------|
| 11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON |
| | |
| | Warrants to purchase 26,250 Shares |
|-----|---------------------------------------------------------------------------------------------------|
| 12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN |
| | SHARES* [ X ] |
| | |
|-----|---------------------------------------------------------------------------------------------------|
| 13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) |
| | |
| | 18.25% |
|-----|---------------------------------------------------------------------------------------------------|
| 14 | TYPE OF REPORTING PERSON* |
| | |
| | IV |
- -----------------------------------------------------------------------------------------------------------
</TABLE>
*SEE INSTRUCTIONS BEFORE FILLING OUT!
(C) 1996, BOWNE & CO., INC. (BULLETIN NO. 171, 10-11-96)
<PAGE> 3
SCHEDULE 13D Forms 7060
- --------------------------------------------------------------------------------
<TABLE>
CUSIP NO. 94155N105 13D PAGE 3 OF 11 PAGES
<S> <C>
- -----------------------------------------------------------------------------------------------------------
| 1 | NAME OF REPORTING PERSONS |
| | S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS |
| | |
| | Brantley Venture Partners III |
|-----|---------------------------------------------------------------------------------------------------|
| 2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ x ] |
| | (b) [ ] |
| | |
|-----|---------------------------------------------------------------------------------------------------|
| 3 | SEC USE ONLY |
| | |
|-----|---------------------------------------------------------------------------------------------------|
| 4 | SOURCE OF FUNDS* |
| | |
| | |
| | |
| | WC |
|-----|---------------------------------------------------------------------------------------------------|
| 5 | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT |
| | TO ITEMS 2(d) OR 2(e) [ ] |
| | |
| | |
| | |
|-----|---------------------------------------------------------------------------------------------------|
| 6 | CITIZENSHIP OR PLACE OF ORGANIZATION |
| | |
| | Delaware, U.S.A. |
|-------------------------------|-------|-----------------------------------------------------------------|
| NUMBER OF | 7 | SOLE VOTING POWER |
| | | |
| SHARES | | 2,100,000 (includes options to purchase 100,000 Shares) |
| |-------|-----------------------------------------------------------------|
| BENEFICIALLY | 8 | SHARED VOTING POWER |
| | | |
| OWNED BY | | |
| |-------|-----------------------------------------------------------------|
| EACH | 9 | SOLE DISPOSITIVE POWER |
| | | |
| REPORTING | | |
| | | 2,100,000 (includes options to purchase 100,000 Shares) |
| PERSON |-------|-----------------------------------------------------------------|
| | 10 | SHARED DISPOSITIVE POWER |
| WITH | | |
| | | |
|-------------------------------|-------|-----------------------------------------------------------------|
| 11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON |
| | |
| | 2,100,000 (includes options to purchase 100,000 Shares) |
|-----|---------------------------------------------------------------------------------------------------|
| 12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN |
| | SHARES* [ X ] |
| | |
|-----|---------------------------------------------------------------------------------------------------|
| 13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) |
| | |
| | .04% |
|-----|---------------------------------------------------------------------------------------------------|
| 14 | TYPE OF REPORTING PERSON* |
| | |
| | PN |
- -----------------------------------------------------------------------------------------------------------
</TABLE>
*SEE INSTRUCTIONS BEFORE FILLING OUT!
(C) 1996, BOWNE & CO., INC. (BULLETIN NO. 171, 10-11-96)
<PAGE> 4
SCHEDULE 13D Forms 7060
- --------------------------------------------------------------------------------
<TABLE>
CUSIP NO. 94155N105 13D PAGE 4 OF 11 PAGES
<S> <C>
- -----------------------------------------------------------------------------------------------------------
| 1 | NAME OF REPORTING PERSONS |
| | S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS |
| | |
| | Robert P. Pinkas |
|-----|---------------------------------------------------------------------------------------------------|
| 2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ x ] |
| | (b) [ ] |
| | |
|-----|---------------------------------------------------------------------------------------------------|
| 3 | SEC USE ONLY |
| | |
|-----|---------------------------------------------------------------------------------------------------|
| 4 | SOURCE OF FUNDS* |
| | |
| | |
| | |
| | PF |
|-----|---------------------------------------------------------------------------------------------------|
| 5 | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT |
| | TO ITEMS 2(d) OR 2(e) [ ] |
| | |
| | |
| | |
|-----|---------------------------------------------------------------------------------------------------|
| 6 | CITIZENSHIP OR PLACE OF ORGANIZATION |
| | |
| | U.S.A. |
|-------------------------------|-------|-----------------------------------------------------------------|
| NUMBER OF | 7 | SOLE VOTING POWER |
| | | |
| SHARES | | 102,000 (includes options to purchase 100,000 Shares) |
| |-------|-----------------------------------------------------------------|
| BENEFICIALLY | 8 | SHARED VOTING POWER |
| | | |
| OWNED BY | | |
| |-------|-----------------------------------------------------------------|
| EACH | 9 | SOLE DISPOSITIVE POWER |
| | | |
| REPORTING | | |
| | | 102,000 (includes options to purchase 100,000 Shares) |
| PERSON |-------|-----------------------------------------------------------------|
| | 10 | SHARED DISPOSITIVE POWER |
| WITH | | |
| | | |
|-------------------------------|-------|-----------------------------------------------------------------|
| 11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON |
| | |
| | 102,000 (includes options to purchase 100,000 Shares) |
|-----|---------------------------------------------------------------------------------------------------|
| 12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN |
| | SHARES* [ X ] |
| | |
|-----|---------------------------------------------------------------------------------------------------|
| 13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) |
| | |
| | 18.23% |
|-----|---------------------------------------------------------------------------------------------------|
| 14 | TYPE OF REPORTING PERSON* |
| | |
| | IN |
- -----------------------------------------------------------------------------------------------------------
</TABLE>
*SEE INSTRUCTIONS BEFORE FILLING OUT!
(C) 1996, BOWNE & CO., INC. (BULLETIN NO. 171, 10-11-96)
<PAGE> 5
SCHEDULE 13D Forms 7060
- --------------------------------------------------------------------------------
<TABLE>
CUSIP NO. 94155N105 13D PAGE 5 OF 11 PAGES
<S> <C>
- -----------------------------------------------------------------------------------------------------------
| 1 | NAME OF REPORTING PERSONS |
| | S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS |
| | |
| | Michael J. Finn |
|-----|---------------------------------------------------------------------------------------------------|
| 2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ x ] |
| | (b) [ ] |
| | |
|-----|---------------------------------------------------------------------------------------------------|
| 3 | SEC USE ONLY |
| | |
|-----|---------------------------------------------------------------------------------------------------|
| 4 | SOURCE OF FUNDS* |
| | |
| | |
| | |
| | PF |
|-----|---------------------------------------------------------------------------------------------------|
| 5 | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT |
| | TO ITEMS 2(d) OR 2(e) [ ] |
| | |
| | |
| | |
|-----|---------------------------------------------------------------------------------------------------|
| 6 | CITIZENSHIP OR PLACE OF ORGANIZATION |
| | |
| | U.S.A. |
|-------------------------------|-------|-----------------------------------------------------------------|
| NUMBER OF | 7 | SOLE VOTING POWER |
| | | |
| SHARES | | 1,000 |
| |-------|-----------------------------------------------------------------|
| BENEFICIALLY | 8 | SHARED VOTING POWER |
| | | |
| OWNED BY | | |
| |-------|-----------------------------------------------------------------|
| EACH | 9 | SOLE DISPOSITIVE POWER |
| | | |
| REPORTING | | |
| | | 1,000 |
| PERSON |-------|-----------------------------------------------------------------|
| | 10 | SHARED DISPOSITIVE POWER |
| WITH | | |
| | | |
|-------------------------------|-------|-----------------------------------------------------------------|
| 11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON |
| | |
| | 1,000 |
|-----|---------------------------------------------------------------------------------------------------|
| 12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN |
| | SHARES* [ x ] |
| | |
|-----|---------------------------------------------------------------------------------------------------|
| 13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) |
| | |
| | 18.24% |
|-----|---------------------------------------------------------------------------------------------------|
| 14 | TYPE OF REPORTING PERSON* |
| | |
| | IN |
- -----------------------------------------------------------------------------------------------------------
</TABLE>
*SEE INSTRUCTIONS BEFORE FILLING OUT!
(C) 1996, BOWNE & CO., INC. (BULLETIN NO. 171, 10-11-96)
<PAGE> 6
SCHEDULE 13D Forms 7060
- --------------------------------------------------------------------------------
<TABLE>
CUSIP NO. 94155N105 13D PAGE 6 OF 11 PAGES
<S> <C>
- -----------------------------------------------------------------------------------------------------------
| 1 | NAME OF REPORTING PERSONS |
| | S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS |
| | |
| | Paul H. Cascio |
|-----|---------------------------------------------------------------------------------------------------|
| 2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ x ] |
| | (b) [ ] |
| | |
|-----|---------------------------------------------------------------------------------------------------|
| 3 | SEC USE ONLY |
| | |
|-----|---------------------------------------------------------------------------------------------------|
| 4 | SOURCE OF FUNDS* |
| | |
| | |
| | |
| | PF |
|-----|---------------------------------------------------------------------------------------------------|
| 5 | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT |
| | TO ITEMS 2(d) OR 2(e) [ ] |
| | |
| | |
| | |
|-----|---------------------------------------------------------------------------------------------------|
| 6 | CITIZENSHIP OR PLACE OF ORGANIZATION |
| | |
| | U.S.A. |
|-------------------------------|-------|-----------------------------------------------------------------|
| NUMBER OF | 7 | SOLE VOTING POWER |
| | | |
| SHARES | | 1,000 |
| |-------|-----------------------------------------------------------------|
| BENEFICIALLY | 8 | SHARED VOTING POWER |
| | | |
| OWNED BY | | |
| |-------|-----------------------------------------------------------------|
| EACH | 9 | SOLE DISPOSITIVE POWER |
| | | |
| REPORTING | | |
| | | 1,000 |
| PERSON |-------|-----------------------------------------------------------------|
| | 10 | SHARED DISPOSITIVE POWER |
| WITH | | |
| | | |
|-------------------------------|-------|-----------------------------------------------------------------|
| 11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON |
| | |
| | 1,000 |
|-----|---------------------------------------------------------------------------------------------------|
| 12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN |
| | SHARES* [ X ] |
| | |
|-----|---------------------------------------------------------------------------------------------------|
| 13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) |
| | |
| | 18.24% |
|-----|---------------------------------------------------------------------------------------------------|
| 14 | TYPE OF REPORTING PERSON* |
| | |
| | IN |
- -----------------------------------------------------------------------------------------------------------
</TABLE>
*SEE INSTRUCTIONS BEFORE FILLING OUT!
(C) 1996, BOWNE & CO., INC. (BULLETIN NO. 171, 10-11-96)
<PAGE> 7
Item 1. Security and Issuer
This Statement on Schedule 13D (the "Statement") relates to the common
stock, par value $.01 per share (the "Shares"), of Waterlink, Inc., a Delaware
corporation (the "Company"). The principal offices of the Company are located at
4100 Holiday Street N.W., Suite 201, Canton, Ohio 44718-7532.
Item 2. Identity and Background
This Statement is being filed on behalf of Brantley Venture Partners
III, L.P., a Delaware limited partnership ("BVP"), Brantley Capital
Corporation, a Maryland corporation ("BCC"), Robert P. Pinkas, an individual
("Pinkas"), Michael J. Finn, an individual ("Finn") and Paul H. Cascio, an
individual ("Cascio"). BVP was formed to engage in investing in certain venture
capital securities for its own account. BCC is a non-diversified closed-end
investment company that elected to be regulated as a business development
company under the Investment Company Act of 1940, as amended, formed for the
purpose of investing in certain private and small cap public companies, in each
case, for its own account. Messrs. Pinkas, Finn and Cascio serve as officers
and/or directors of BCC and Messrs. Finn and Cascio are general partners of
Brantley Venture Management III, L.P., a Delaware limited partnership and the
sole general partner of BVP ("BVM"). Mr. Pinkas serves as the sole general
partner of Pinkas Family Partners, L.P., a Delaware limited partnership ("PFP")
and a general partner of BVM. Messrs. Pinkas, Finn and Cascio are citizens of
the United States of America and their principal occupation is managing the
affairs and investments of BVP, BCC, BVM and their respective affiliates. The
business address for each of BVP, BCC, Pinkas, Finn and Cascio is 20600 Chagrin
Boulevard, Suite 1150, Cleveland, Ohio 44122. During the past five years, none
of BVP, BCC, BVM, PFP, Pinkas, Finn or Cascio (i) has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors), or
(ii) has been a party to a civil proceeding of a judicial or administrative
body of competent jurisdiction and as a result of such proceeding was or is
subject to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities
laws or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration
The aggregate purchase price for the Shares purchased by Messrs.
Pinkas, Finn and Cascio was $44,000. All of the funds required for the purchases
of Messrs. Pinkas, Finn and Cascio were obtained from their respective personal
funds. The aggregate purchase price for the Shares acquired by BVP was
$3,400,400, which Shares were issued upon conversion of shares of the Company's
Series A, Series B and Series C Preferred Stock, respectively. All of the funds
required for the purchases of BVP were obtained from BVP's general funds. The
Options (defined below) were granted to
Page 7 of 11 Pages
<PAGE> 8
Mr. Pinkas in consideration for his service, on behalf of BVP, as a director
of the Company. The Warrants (defined below) were granted to BCC pursuant to a
warrant agreement described below, in consideration of its entering into a Note
Purchase Agreement and Credit Facility with the Company and several other
investors, pursuant to which BCC and such other investors have agreed to
purchase subordinated notes of the Company at the Company's request and subject
to the conditions contained in the Note Purchase Agreement. Pursuant to the
Note Purchase Agreement, upon the issuance of subordinated notes as described
therein, the investors and BCC will be entitled to receive additional warrants.
No subordinated notes have been issued to BCC as of the date of this Statement.
A copy of the Note Purchase Agreement is attached hereto as an Exhibit and is
specifically incorporated herein by reference, and the description herein of
such agreement is qualified in its entirety by reference thereto.
Item 4. Purpose of the Transaction
The Reporting Persons have acquired the Shares, Options and Warrants,
as the case may be, for investment purposes. None of the Reporting Persons has
any plans or proposals which would relate to, or would result in, any of the
matters set forth in items (a) through (j) of Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer
(a) BVP owns 2,000,000 Shares as of the date of this Statement,
representing approximately 18.21% of the outstanding Shares of the Company, as
to which BCC, Pinkas, Finn and Cascio each disclaims any beneficial interest.
BVP has a beneficial interest in the 100,000 Options owned by Pinkas and
described below, representing approximately 0.90% of the outstanding Shares of
the Company, as to which BCC, Pinkas, Finn and Cascio each disclaims any
beneficial interest. Pinkas owns 2000 Shares as of the date of this Statement,
representing approximately 0.02% of the outstanding Shares of the Company, as
to which BVP, BCC, Finn and Cascio each disclaims any beneficial interest. Finn
owns 1000 Shares of the Company as of the date of this Statement, representing
approximately 0.01% of the outstanding Shares of the Company, as to which BVP,
BCC, Pinkas and Cascio each disclaims any beneficial interest. Cascio owns 1000
Shares as of the date of this Statement, representing approximately 0.01% of
the outstanding Shares of the Company, as to which BVP, BCC, Pinkas and Finn
each disclaims any beneficial interest. The percentages used in the preceding
sentences are calculated based upon 10,977,554 outstanding Shares, as reported
in the Company's Prospectus, dated June 24, 1997.
BCC owns warrants to purchase 26,250 Shares at an exercise price of
$4.50 per Share (the "Warrants"), representing approximately 0.24% of the
outstanding Shares of the Company, as to which BVP, Pinkas, Finn and Cascio each
disclaims any beneficial
Page 8 of 11 Pages
<PAGE> 9
interest. The percentage used in the preceding sentence is calculated based upon
10,977,554 outstanding Shares, as reported in the Company's Prospectus, dated
June 24, 1997. The Warrants may be redeemed at the option of the Company prior
to March 6, 2001, upon written notice to BCC as described in the Warrant
Agreement. The Warrants were issued on April 18, 1997 pursuant to a Warrant
Agreement entered into as of March 6, 1997, a copy of which is attached hereto
as an Exhibit and is specifically incorporated herein by reference, and the
description herein of such agreement is qualified in its entirety by reference
thereto.
Pinkas owns options to purchase 100,000 Shares at an exercise price of
$4.00 per Share (the "Options"), representing approximately 0.90% of the
outstanding Shares of the Company, as to which BCC, Pinkas, Finn and Cascio each
disclaims any beneficial interest. The percentage used in the preceding sentence
is calculated based upon 10,977,554 outstanding Shares, as reported in the
Company's Prospectus, dated June 24, 1997. The Options were issued pursuant to
the Company's 1995 Stock Option Plan, a copy of which is attached hereto as an
Exhibit and is specifically incorporated herein by reference, and the
description herein of such agreement is qualified in its entirety by reference
thereto.
(b) Each of BVP, Pinkas, Finn and Cascio has the sole power to vote and to
dispose of all of the Shares beneficially owned by it or him, other than the
Shares represented by the Options, as to which Pinkas will have such power at
such time, if ever, as the Options are exercised and the underlying Shares are
acquired by Pinkas. BCC will have the sole power to vote and to dispose of all
of the Shares represented by the Warrants at such time, if ever, as the
Warrants are exercised and the underlying Shares are acquired by BCC.
(c) On June 27, 1997, Pinkas purchased 2000 Shares in the initial
public offering of the Company at a purchase price of $11.00 per Share. On June
27, 1997, Finn purchased 1000 Shares in the initial public offering of the
Company at a purchase price of $11.00 per Share. On June 27, 1997, Cascio
purchased 1000 Shares in the initial public offering of the Company at a
purchase price of $11.00 per Share. Except as set forth above, none of BVP, BCC,
Pinkas, Finn or Cascio has effected any transactions in the securities of the
Company during the past sixty days.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships
With Respect to Securities of the Issuer
In March 1997, BVP guaranteed through June 1, 1997 up to $2,000,000 of
the Company's indebtedness under the its secured
Page 9 of 11 Pages
<PAGE> 10
revolving credit facility with Bank of America Illinois in the event that the
Company defaulted on its payment obligations thereunder. BVP's guarantee expired
on June 1, 1997 and is no longer in effect. Except as described in this Item 6
or elsewhere in this Statement, none of the Reporting Persons has entered into
any contracts, arrangements, understandings or relationships with respect to the
securities of the Company, including but not limited to the transfer or voting
of the securities, finder's fees, joint ventures, options, puts, calls,
guarantees of loans, guarantees against losses or the giving or withholding of
proxies.
Item 7. Material to be filed as Exhibits.
1. Warrant Agreement, dated as of March 6, 1997, among
the Company, BCC and several other investors.
2. Subordinated Note Purchase Agreement and Credit
Facility, dated as of March 6, 1997, among the Company, BCC, BVP and several
other investors.
3. Waterlink, Inc. Amended and Restated 1995 Stock
Option Plan.
4. Agreement Relating to the Filing of Joint
Acquisition Statements.
After reasonable inquiry and to the best of the undersigneds'
knowledge and belief, the undersigned certify that the information set forth in
this Statement is true, complete and correct.
July 7, 1997
BRANTLEY CAPITAL CORPORATION
By: /s/ Robert P.Pinkas
Name: Robert P. Pinkas
Title: Chairman of the Board,
Chief Executive Officer and
Treasurer
BRANTLEY VENTURE PARTNERS III,
L.P.
By: Brantley Venture Management
III, L.P.
By: Pinkas Family Partners, L.P.
By: /s/Robert P. Pinkas
Name: Robert P. Pinkas
Title: General Partner
Page 10 of 11 Pages
<PAGE> 11
/s/Robert P. Pinkas
Name: Robert P. Pinkas
/s/Michael J. Finn
Name: Michael J. Finn
/s/Paul H. Cascio
Name: Paul H. Cascio
Page 11 of 11 Pages
<PAGE> 1
Exhibit 1
WARRANT AGREEMENT
THIS WARRANT AGREEMENT ("Agreement") dated as of March 6, 1997, among
WATERLINK, INC., a Delaware corporation (the "Company"), and each of the
Purchasers named on the execution page hereof (the "Purchasers").
R E C I T A L S:
----------------
This Agreement is entered into in connection with that certain
Subordinated Note Purchase Agreement and Credit Facility dated concurrently
herewith among the Company and the Purchasers (the "Note Purchase Agreement"),
pursuant to which the Company will be issuing and the Purchasers will be
purchasing the Company's Subordinated Notes due 2002 (the "Notes"). Capitalized
terms not otherwise defined herein shall have the meanings given to them in the
Note Purchase Agreement.
NOW, THEREFORE, for good and valuable consideration the receipt of
which is hereby acknowledged and the promises and the mutual agreements set
forth herein, the parties hereto agree as follows:
1. Issuance of Warrants; Form of Warrants.
--------------------------------------
1.1 GENERAL. The Company hereby agrees to issue (pro rata in
proportion to the principal amount of Notes issued to or for which each
Purchaser is then committed) to the Purchasers, at the times and upon
the conditions specified below, (i) warrants (the "Base Warrants") to
purchase, in the aggregate, up to 1,525,000 shares of the Company's
Common Stock, $.01 par value per share (the "Common Stock"), and (ii)
warrants (the "Additional Warrants") to purchase, in the aggregate, up
to 512,500 shares of Common Stock, in the case of (i) and (ii) above,
subject to the terms and on the conditions set forth in this Agreement.
The Base Warrants and the Additional Warrants are referred to herein
together as the "Warrants". The Base Warrants consist of up to five (5)
tranches of Base Warrants as set forth below (in the case of each
tranche, to be allocated pro rata in proportion to the principal amount
of Notes issued to or for which each Purchaser is then committed).
<TABLE>
<CAPTION>
Number of
Tranche Base Warrants
------- -------------
<S> <C>
Tranche 1 125,000
Tranche 2 up to 300,000
Tranche 3 up to 300,000
Tranche 4 up to 300,000
Tranche 5 up to 500,000
</TABLE>
Notwithstanding the foregoing, Tranche 1 Base Warrants to be issued hereunder to
Brantley Capital Corporation shall instead be issued to Brantley Venture
Partners III, L.P.
<PAGE> 2
The Additional Warrants consist of two (2) tranches of Additional
Warrants as set forth below (in the case of each tranche to be allocated pro
rata in proportion to the principal amount of Note issued to or for which each
Purchaser is then committed):
Number of
Tranche Additional Warrants
------- -------------------
Tranche 1 25% of the Warrants (other than
Tranche 5 Base Warrants) outstanding
at the Tranche 1 Additional Warrant
Date (defined below)
Tranche 2 50% of the Warrants (other than
Tranche 5 Base Warrants) outstanding
at the Tranche 2 Additional Warrant
Date (defined below)
Each Warrant, once issued, will initially entitle the holder thereof to
purchase one share of Common Stock for the purchase price set forth in
Section 5 below, as adjusted from time to time pursuant to the
provisions of Section 10 below.
1.2 ISSUANCE OF BASE WARRANTS. Base Warrants shall be issued
on the terms and upon the satisfaction of the following conditions, in
all cases on a pro rata basis in proportion to the principal amount of
Note issued to or for which each Purchaser or its assignee is then
committed.
(a) All of the Tranche 1 Base Warrants shall be
issued to the Purchasers on the date hereof.
(b) Tranche 2 Base Warrants shall be issued from time
to time by the Company to Purchasers or their assignees on or
prior to the earlier of a Prepayment Event or December 31,
1997 on the basis of 3,000 Tranche 2 Base Warrants for each
$100,000 of Advances (as defined in the Note Purchase
Agreement) under the Notes made on or prior to the earlier of
a Prepayment Event (as defined in the Note Purchase Agreement)
or December 31, 1997.
(c) Tranche 3 Base Warrants shall be issued from time
to time by the Company to Purchasers or their assignees prior
to a Prepayment Event on the basis of 3,000 Tranche 3 Base
Warrants for each $100,000 of Advances under the Notes
outstanding in excess of One Hundred Eighty (180) days.
(d) Tranche 4 Base Warrants shall be issued from time
to time by the Company to Purchasers or their assignees prior
to a Prepayment Event on the basis of 3,000 Tranche 4 Base
Warrants for each $100,000 of Advances under the Notes
outstanding in excess of two (2) years.
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<PAGE> 3
(e) Tranche 5 Base Warrants shall be issued as of the
date forty-two (42) months after the date hereof by the
Company to Purchasers or their assignees if a Prepayment Event
has not then occurred on the basis of 5,000 Tranche 5 Base
Warrants for each $100,000 of Advances under the Notes
outstanding as of such date.
(f) For purposes of the determinations in subsections
1.2(c) and (d) above, prepayments of Notes shall be applied in
inverse order to Advances made (i.e. last in, first out).
1.3 ISSUANCE OF ADDITIONAL WARRANTS. Additional Warrants shall
be issued on the terms and upon satisfaction of the following
conditions, in all cases on a pro rata basis in proportion to the
principal amount of Notes issued to or for which each Purchaser is then
committed:
(a) If (i) (x) a Prepayment Event occurs prior to the
first anniversary of this Agreement and (y) the Prepayment
Event Price (defined below) is less than $9.00 per share of
Common Stock (subject to adjustment in the event of a stock
split, combination or similar event), or (ii) (x) a Prepayment
Event occurs on or after the first anniversary of this
Agreement but prior to the second anniversary thereof and (y)
the Prepayment Event Price is less than $12.00 per share of
Common Stock (subject to adjustment in the event of a stock
split, combination or similar event), then the Tranche 1
Additional Warrants shall be issued by the Company to
Purchasers or their assignees, as the case may be. The date
the foregoing conditions are met shall be referred to herein
as the "Tranche 1 Additional Warrant Date."
(b) (I) Upon the occurrence of a Prepayment Event, if
any, if (i) such Prepayment Event does not occur prior to the
second anniversary hereof, and (ii) (x) if prior the third
anniversary hereof, the Prepayment Event Price is then less
than $14.00 per share of Common Stock (subject to adjustment
in the event of a stock split, combination or similar event),
or (y) if on or following the third anniversary hereof but
prior to the fourth anniversary hereof, the Prepayment Event
Price is less than $16.00 per share of Common Stock (subject
to adjustment in the event of a stock split, combination or
similar event), then the Tranche 2 Additional Warrants shall
be issued by the Company to Purchasers or their assignees, as
the case may be, or (II) if a Prepayment Event has not
occurred prior to the fourth anniversary hereof, then the
Tranche 2 Additional Warrants shall be issued by the Company
to Purchasers or their assignees, as the case may be. The date
either of the foregoing conditions are met shall be referred
to herein as the "Tranche 2 Additional Warrant Date."
2. FORM OF WARRANTS. The text of the Warrants and of the form of
election to purchase Common Stock underlying the Warrants (the "Warrant Stock")
to be set forth on the reverse thereof shall be substantially as set forth in
the Warrant Certificate ("Warrant Certificate"), attached as EXHIBIT "A" to this
Agreement. Each Warrant Certificate shall be executed on behalf of the
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<PAGE> 4
Company by the President or Vice President of the Company and attested by the
Secretary or an Assistant Secretary of the Company. Warrant Certificates shall
be dated as of the date of the execution thereof by the Company either upon
initial issuance or upon division, exchange, substitution or transfer as may be
permitted hereunder, provided that all such issuances of Warrants shall be
deemed effective upon the date that the conditions to their issuance are
satisfied.
3. REGISTRATION. The Warrant Certificates shall be numbered and shall
be registered on the books of the Company (the "Warrant Register") as they are
issued. The Company shall be entitled to treat the registered holder of any
Warrant Certificate on the Warrant Register (the "Holder") as the owner in fact
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to or interest in such Warrant Certificate, or the Warrants'
represented thereby, on the part of any other person, and shall not be liable
for any registration or transfer of Warrant Certificates which are registered or
to be registered in the name of a fiduciary or the nominee of a fiduciary unless
made with the actual knowledge that a fiduciary or nominee is committing a
breach of trust in requesting such registration or transfer, or with knowledge
of such facts that the Company's participation therein amounts to bad faith.
4. Transfer of Warrant Certificate.
-------------------------------
(a) Prior to a Prepayment Event, outstanding Warrants
and any rights to the further issuance of Warrants pursuant
hereto may only be transferred together with the Notes on a
pro rata basis (as to each tranche of Base Warrants and
Additional Warrants issued or issuable) in proportion to the
principal amount of Notes issued to each Purchaser. After the
earlier of a Prepayment Event or the fourth (4th) anniversary
of the date hereof, the Warrants may be transferred
independent of the Notes, provided such transfer is in
accordance with the terms hereof. The Warrant Certificate
shall be transferable only on the Warrant Register upon
delivery of the Warrant Certificate duly endorsed by the
Holder or by its duly authorized attorney or representative
(with evidence reasonably satisfactory to the Company of such
authorization), or accompanied by evidence reasonably
satisfactory to the Company of succession, assignment or
authority to transfer. Notwithstanding the foregoing, the
Company shall have no obligation to cause Warrant Certificates
to be transferred on the Warrant Register to any person,
unless the Holder of such Warrants shall furnish to the
Company evidence satisfactory to the Company of (i) (x)
compliance with the registration provisions of Section 5 of
the Securities Act of 1933, as amended (the "Act"), or (y) the
availability of an exemption from compliance with the
registration provisions of Section 5 of the Act; and (ii)
compliance with that certain Amended and Restated
Stockholders' Agreement to be executed by or on behalf of the
parties hereto on the Closing Date (the "Amended and Restated
Stockholders' Agreement").
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<PAGE> 5
(b) The parties hereto acknowledge and agree,
notwithstanding subsection (a) above, that this Agreement does
not restrict transfers of Warrants among the Purchasers to the
extent otherwise permitted under the Indemnification and
Contribution Agreement dated the date hereof among the
Purchasers.
5. Term of Warrants; Exercise of Warrants.
--------------------------------------
5.1 BASE WARRANTS: TERM AND EXERCISE PRICE. Each outstanding
Base Warrant entitles the registered owner thereof to purchase one (1)
share of Warrant Stock at any time prior to the close of business on
the fifth (5th) anniversary of the date hereof (the "Expiration Date")
at an initial purchase price per share of Warrant Stock of $4.50,
subject to adjustment pursuant to the provisions of Section 10 of this
Agreement (the "Base Warrant Price"; the Base Warrant Price and the
Additional Warrant Price (defined below) shall be referred to jointly
herein as the "Warrant Price.").
5.2 ADDITIONAL WARRANTS: TERM AND EXERCISE PRICE. Each
outstanding Additional Warrant entitles the registered owner thereof to
purchase one (1) share of Warrant Stock at any time prior to the
Expiration Date at the price determined as follows (the "Additional
Warrant Price."
(a) In the event a Prepayment Event occurs (i) prior
to the first anniversary of the date hereof and the Prepayment
Event Price is at that time less than $9.00 per share (subject
to adjustment pursuant to Section 10 hereof) or (ii) after the
first anniversary of the date hereof and prior to the second
anniversary of the date hereof and the Prepayment Event Price
is at that time less than $12.00 per share (subject to
adjustment pursuant to Section 10 hereof), the Additional
Warrant Price shall be the lesser of $4.50 per share (subject
to adjustment pursuant to Section 10 hereof) or the applicable
Prepayment Event Price.
(b) In the event a Prepayment Event does not occur
prior to the second anniversary of the date hereof, the
Additional Warrant Price shall be $4.50 per share (subject to
adjustment pursuant to Section 10 hereof).
(c) "Prepayment Event Price" shall mean the price per
share of Common Stock determined by the Board of Directors as
provided below within ten (10) days prior to the occurrence of
a Prepayment Event, subject to subsection (d) below. In the
event of an IPO (as defined in the Note Purchase Agreement),
the Prepayment Event Price shall be the price per share of
Common Stock offered pursuant to the IPO. In the event of a
Change in Control (as defined in the Note Purchase Agreement),
the Prepayment Event Price shall be the price reasonably and
in good faith determined by the Board of Directors as the per
share valuation of the Company based on arms length
negotiations with the acquiring entity (determined on a basis
taking into account all options, warrants, convertible
securities and similar securities then exercisable or
exercisable upon such Prepayment Event) and, if the Board so
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<PAGE> 6
desires, the opinion of a financial advisor (which financial
advisor may be the Company's independent public accountant) (a
"Financial Advisor"), subject to subsection (d) below. In the
event of an Asset Sale (as defined in the Note Purchase
Agreement), the Prepayment Event Price shall be the price
reasonably and in good faith determined by the Board of
Directors as the per share valuation of the company based on
the arms length negotiations with the acquiring entity
(determined on a basis taking into account all options,
warrants, convertible securities and similar securities then
exercisable or exercisable upon such Prepayment Event) and, if
the Board so desires, the opinion of a Financial Advisor,
subject to subsection (d) below.
(d) In the event the Holders of a majority of the
then outstanding Warrants (the "Requisite Holders") provide
written notice to the Company within ten (10) days of receipt
of written notice of the Prepayment Event Price set by the
Company of their objection to such price, the Prepayment Event
Price shall be determined as follows: (i) by agreement among
the Company and the Requisite Holders within ten (10) days
following the event requiring such determination or (ii) in
the absence of such an agreement, by an Independent Financial
Expert selected in accordance with the further provisions of
this definition. If required, an Independent Financial Expert
shall be selected within five (5) days following the
expiration of the ten (10) day period referred to above,
either by agreement among the Company and the Requisite
Holders or, in the absence of such agreement, by lot from a
list of four potential Independent Financial Experts remaining
after the Company nominates three, the Requisite Holders
nominate three, and each side eliminates one potential
Independent Financial Expert. The Independent Financial Expert
shall be instructed by the Company and the Requisite Holders
to make its determination within 20 days of its selection. The
fees and expenses of an Independent Financial Expert selected
hereunder shall be borne equally by the Company and by the
Holders (on a PRO RATA basis based on the number of Warrants
held by each Holder) participating in the transaction to which
the determination relates.
5.3 General.
-------
(a) Subject to the provisions of this Agreement, each
Holder shall have the right to purchase from the Company (and
the Company shall issue and sell to such Holder) the number of
fully paid and nonassessable shares of Warrant Stock specified
in such Holder's Warrant Certificate(s) (as adjusted from time
to time in accordance with the provisions of Section 10 of
this Agreement), upon surrender of such Warrant Certificate(s)
to the Company or its duly authorized agent, and upon payment
to the Company of the Warrant Price, or, at the option of the
Holder, by conversion of unpaid principal and accrued interest
on the Notes, if then outstanding, in an amount equal to the
Warrant Price, as adjusted in accordance with the provisions
of Section 9 of this Agreement, for the number of shares of
Warrant Stock in respect of which such Warrants are then
exercised. The date of exercise (the
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<PAGE> 7
"Exercise Date") of any Warrant shall be deemed to be the date
of receipt by the Company of the Warrant Certificate duly
filled in and signed and accompanied by proper payment as
hereinafter provided. Payment of the Warrant Price shall be
made as set forth in the Warrant Certificate.
(b) Subject to Section 6 of this Agreement, upon such
exercise of Warrants, and payment of the Warrant Price as
aforesaid, the Company shall issue and cause to be delivered
with all reasonable dispatch (but in any event within twenty
(20) business days) to or (subject to the provisions of
Section 4 of this Agreement) upon the written order of the
Holder, a certificate for the number of full shares of Warrant
Stock so purchased upon the exercise of such Warrants,
together with cash, as provided in Section 10 of this
Agreement, in respect of any fraction of a share of such stock
otherwise issuable upon such exercise. Except under
circumstances described in the following sentence, the shares
of Warrant Stock purchased pursuant to the immediately
preceding sentence shall be deemed to be issued to the Holder
as the record owner of such shares as of the close of business
on the Exercise Date. Notwithstanding the foregoing, if the
Company determines, on or after the date of exercise of any
Warrant, that issuance of the Warrant Stock represented
thereby would violate an applicable order, law, rule, or
regulation, including federal or state securities laws, the
Company shall so notify immediately the exercising Holder and
shall in good faith, and as expeditiously as possible,
endeavor to issue the Warrant Stock without such violation.
The right of purchase represented by the Warrants shall be
exercisable, at the election of the Holder thereof, either in
full or from time to time in part and, in the event that any
Warrant is exercised in respect of less than all of the shares
of Warrant Stock purchasable on such exercise at any time
prior to the Expiration Date, a new Warrant Certificate
evidencing the remaining Warrants shall be issued.
6. PAYMENT OF TAXES. The Company shall pay all documentary stamp taxes,
if any, attributable to the initial issuance of Warrant Stock upon the exercise
of Warrants PROVIDED, HOWEVER, that the Company shall not be required to pay any
tax or taxes which may be payable in respect of any permitted transfer involved
in the issue or delivery of any Warrant Certificates or Warrant Stock in a name
other than that of the registered Holder of such Warrants.
7. MUTILATED OR MISSING WARRANTS. Upon (i) receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of a Warrant Certificate, (ii) if requested by the Company, the
posting of a bond in an amount equal to the value of the lost, stolen or
destroyed Warrant Certificate, (iii) reimbursement to the Company of all
reasonable expenses incident thereto, and (iv) surrender and cancellation of
such Warrant Certificate, if mutilated, the Company will make and deliver in
lieu of such Warrant Certificate a new Warrant Certificate of like tenor and
representing an equivalent right or interest. The term "outstanding" when used
herein with reference to the Warrant Certificate as of any particular time shall
not include any Warrant Certificate in lieu of which a new Warrant Certificate
has been made and delivered by the Company in accordance with the provisions
hereof.
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<PAGE> 8
8. CAPITALIZATION OF THE COMPANY. Without giving effect to the Warrants
contemplated herein, the authorized capital stock of the Company is as set forth
in Schedule 3.1 to the Note Purchase Agreement.
9. Reservation Of Warrant Stock.
----------------------------
(a) The Company represents that there has been
reserved out of the authorized and unissued shares of Common
Stock, a number of shares sufficient to provide for the
exercise of the right of purchase represented by the Warrant
Certificates as initially issued, and the Company, which
currently acts as the transfer agent for its Common Stock
("Transfer Agent") and every subsequent Transfer Agent for any
shares of the Company's capital stock issuable upon the
exercise of any of the Warrants are hereby irrevocably
authorized and directed at all times until the Expiration Date
or earlier termination of this Agreement to reserve such
number of authorized and unissued shares of Common Stock as
shall be required for such purpose. The Company will keep a
copy of this Agreement on file with every subsequent Transfer
Agent for any shares of the Company's capital stock issuable
upon the exercise of the Warrants. The Company will supply any
such subsequent Transfer Agent with duly executed stock
certificates for issuance on exercise of Warrants and will
itself provide or make available any cash which may be
required by Section 11 of this Agreement. The Company will
furnish to any such subsequent Transfer Agent a copy of all
notices of adjustments, and certificates related thereto,
transmitted to each Holder pursuant to Section 10.3 of this
Agreement. All Warrant Certificates surrendered in the
exercise of the rights thereby evidenced shall be cancelled.
(b) The Company covenants that it shall endeavor to
comply with all securities laws regulating the offer and
delivery of shares of Common Stock upon exercise of the
Warrants; and that if any shares of Common Stock required to
be reserved for purposes of exercising the Warrants hereunder
require registration with or approval of any governmental
authority under any Federal or state law before such shares
may be validly issued or delivered upon exercise of the
Warrants, the Company shall, in good faith and as
expeditiously as possible, endeavor to secure such
registration or approval, as the case may be. The Company
covenants that all shares of Common Stock which shall be
issued upon exercise of the Warrants shall upon issue and
payment therefor be validly issued, fully paid and
nonassessable.
10. ADJUSTMENTS OF WARRANT PRICE, PREPAYMENT EVENT PRICE AND NUMBER OF
SHARES OF WARRANT STOCK. The number and kind of securities purchasable upon the
exercise of each Warrant and the Warrant Price related thereto shall be subject
to adjustment from time to time upon the happening of certain events, as
hereinafter defined, but (with respect to Warrants) only as to Warrants
outstanding at the time of such adjustment. Upon each adjustment of the Warrant
Price pursuant to the provisions of Section 10.1(b), the Holder of such Warrant
shall thereafter, prior to the Expiration Date thereof, be entitled to purchase
at the Warrant Price resulting from such
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<PAGE> 9
adjustment, the number of shares of Warrant Stock obtained by multiplying the
Warrant Price in effect immediately prior to such adjustment by the number of
shares of Warrant Stock issuable upon exercise of such Warrant immediately prior
to such adjustment and dividing the product thereof by the Warrant Price
resulting from such adjustment.
10.1 ADJUSTMENT OF THE NUMBER OF SHARES OF WARRANT STOCK AND
THE WARRANT PRICE. The number of shares of Warrant Stock and the
Warrant Price shall be subject to adjustment as follows:
(a) In case the Company shall at any time after the
date of issuance of a Warrant (A) pay a dividend or make a
distribution on its Common Stock in shares of its capital
stock (whether in shares of Common Stock or of capital stock
of any other class), (B) subdivide its outstanding shares of
Common Stock into a greater number of shares, (C) combine its
outstanding shares of Common Stock into a smaller number of
shares, or (D) reclassify, reorganize or effect any similar
transaction with respect to any of its shares of Common Stock,
or in substitution or exchange therefor (other than a change
in par value, or from par value to no par value, or from no
par value to par value), then the number and, if applicable,
kind of shares of Warrant Stock to be received by any Holder
shall be adjusted so that the Holder will be entitled to
receive on exercise the number and kind of shares of capital
stock which it would have owned immediately following such
action had its Warrants been exercised immediately prior
thereto. An adjustment made pursuant to this subsection (a)
shall become effective immediately after the payment date in
the case of a dividend or distribution and shall become
effective immediately after the effective date in the case of
a subdivision, combination, reclassification, reorganization
or similar transaction. If, as a result of an adjustment made
pursuant to this subsection (a), a Holder shall become
entitled to receive shares of two or more classes of capital
stock of the Company, the Board of Directors or a duly
authorized committee thereof shall in good faith determine
(which determination shall be conclusive and binding) the
allocation of the Warrant Price between or among shares of
such classes of capital stock. After such allocation, the
Warrant Price and number of shares of each class of capital
stock that is part of the Warrant Stock shall thereafter be
subject to adjustment in a manner and on terms determined by
the Board of Directors (which determination shall be
conclusive and binding) to be as nearly equivalent as
practicable to those applicable to Common Stock under this
Section 10.
(b) (i) From the date hereof to and including the
second anniversary of the date hereof, if the Company
shall issue any shares of Common Stock other than
Excluded Shares (as hereinafter defined) for
consideration per share (the "Issuance Price") less
than the Warrant Price (as hereinafter defined) per
share in effect immediately prior to such issuance,
the Warrant Price in effect immediately prior to such
issuance shall be reduced (but shall not be
increased) to the Issuance Price.
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10
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(ii) After the second anniversary of the date
hereof, if the Company shall issue any shares of
Common Stock other than Excluded Shares for
consideration per share less than the Warrant Price
per share in effect immediately prior to such
issuance, the Warrant Price in effect immediately
prior to such issuance shall be reduced (but shall
not be increased) to the price (calculated to the
nearest cent) determined: by dividing (A) an amount
equal to the sum of (1) the number of shares of
Common Stock outstanding on a fully diluted basis
immediately prior to such issuance multiplied by the
Warrant Price per share in effect immediately prior
to such issuance and (2) the consideration, if any,
received by the Company upon such issuance by (B) the
number of shares of Common Stock outstanding on a
fully diluted basis immediately after such issuance.
(c) CERTAIN ADJUSTMENT FACTORS. For the purposes of
any adjustment of the Warrant Price pursuant to paragraph (b)
above, the following provisions shall be applicable:
(x) CASH. In the case of the issuance of shares of
Common Stock for cash, the amount of the consideration
received by the Company shall be deemed to be the amount of
the cash proceeds received by the Company for such shares of
Common Stock before deducting therefrom any discounts,
commissions, taxes or other expenses allowed, paid or incurred
by the Company for any underwriting or otherwise in connection
with the issuance and sale thereof; and
(y) CONSIDERATION OTHER THAN CASH. In the case of the
issuance of shares of Common Stock (other than upon the
conversion of shares of capital stock or other securities of
the Company) for consideration in whole or in part other than
cash, including securities acquired in exchange therefor
(other than securities by their terms so exchangeable), the
consideration other than cash shall be deemed to be the fair
value thereof (as determined by the Board of Directors of the
Company based on an opinion of an outside financial advisor of
recognized regional or national standing, which may, but need
not, be the independent public accountants who serve as the
regular auditors of the Company (the "Financial Advisor"),
whose determination shall be conclusive and binding),
irrespective of any accounting treatment; and
(z) OPTIONS AND CONVERTIBLE SECURITIES. In the case
of the issuance of (i) options, warrants or other rights to
purchase or acquire shares of Common Stock (whether or not
exercisable immediately following such issuance), (ii)
securities by their terms convertible into or exchangeable for
shares Common Stock (whether or not so convertible or
exchangeable immediately following such issuance), or (iii)
options, warrants or rights to purchase such convertible or
exchangeable securities (whether or not exercisable
immediately following such issuance):
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<PAGE> 12
(1) the aggregate maximum number of shares
of Common Stock deliverable upon exercise of such
options, warrants or other rights to purchase or
acquire shares of Common Stock shall be deemed to
have been issued at the time such options, warrants
or other rights are first issued and for a
consideration equal to the consideration (determined
in the manner provided in clauses (x) and (y) above),
if any, received by the Company upon the issuance of
such options, warrants or other rights plus the
purchase price provided in such options, warrants or
other rights for the shares of Common Stock covered
thereby (if the purchase price per share of Common
Stock is expressed as a range, the purchase price per
share for purposes of this subparagraph (z)(1) shall
be the average of such range of prices);
(2) the aggregate maximum number of shares
of Common Stock deliverable upon conversion of or in
exchange for any such convertible or exchangeable
securities, or upon the exercise of options, warrants
or other rights to purchase or acquire such
convertible or exchangeable securities and the
subsequent conversion or exchange thereto shall be
deemed to have been issued at the time such
convertible or exchangeable securities or such
options, warrants or other rights are first issued
and for a consideration equal to the consideration,
if any, received by the Company for any such
convertible or exchangeable securities or options,
warrants or other rights (excluding any cash received
on account of accrued interest or accumulated
dividends), plus the additional consideration, if
any, to be received by the Company upon the
conversion or exchange of such securities and the
exercise of any options, warrants or other rights
(the consideration in each case to be determined in
the manner provided in clauses (x) and (y) above);
(3) on any change in the number of shares of
Common Stock deliverable upon exercise of any such
options, warrants or other rights which have become
exercisable or conversion of or exchange of such
convertible or exchangeable securities which have
become convertible or exchangeable, or any change in
the consideration to be received by the Company upon
such exercise, conversion or exchange, the Warrant
Price as then in effect shall forthwith be readjusted
to such Warrant Price as would have been obtained had
such adjustment been made upon the original issuance
of such options, warrants or other rights; provided,
however, no adjustment shall be made with respect to
such options, warrants or other rights exercised
prior to such change, or securities converted or
exchanged prior to such change;
(4) on the expiration or cancellation of any
such options, warrants or other rights, or the
termination of the right to convert or exchange such
convertible or exchangeable securities, if the
Warrant Price shall have been adjusted upon such
securities being issued or becoming exercisable,
convertible or exchangeable, such Warrant Price shall
forthwith be readjusted
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to such Warrant Price as would have been obtained had
an adjustment been made on the basis of the issuance
of only the number of shares of Common Stock actually
issued upon the exercise of such options, warrants or
other rights, or upon the conversion or exchange of
such securities; and
(5) if the Warrant Price shall have been
adjusted when such options, warrants or other rights
were first issued or such convertible or exchangeable
securities were first issued, no further adjustment
of the Warrant Price shall be made for the actual
issuance of shares of Common Stock upon the exercise,
conversion or exchange thereof.
(d) EXCLUDED SHARES. "Excluded Shares" shall mean (i)
any shares of Common Stock issued in a transaction described
in Section 10.1(a) of this Agreement; and (ii) issuances of
shares of Common Stock from time to time pursuant to stock
option or bonus plans authorized by the Board of Directors of
the Company as of the date hereof; (iii) issuances of Common
Stock, or warrants, options or rights to acquire shares of
Common Stock, or securities convertible into or exchangeable
for Common Stock pursuant to the terms of any acquisition by
the Company of all or substantially all of the operating
assets, or more than fifty percent (50%) of the voting capital
stock or other management interest of any business entity in a
transaction negotiated on an arms'-length basis and expressly
approved in advance by the Board of Directors of the Company;
(iv) issuances of shares of Common Stock from time to time
upon the exercise, exchange or conversion of warrants,
options, convertible securities, the Notes (whether or not
outstanding as of the date hereof) or other securities
outstanding as of the date hereof; and (v) issuances of shares
of Common Stock from time to time pursuant to the
anti-dilution provisions of other securities.
(e) No adjustment in the Warrant Price shall be
required unless such adjustment would require an increase or
decrease of at least 2.2% in such price; PROVIDED, HOWEVER,
that any adjustments which by reason of this subsection (f)
are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations
under this Section 10.1 shall be made to the nearest tenth of
a cent or to the nearest one-hundredth of a share, as the case
may be.
(f) The number of shares of Common Stock outstanding
at any given time shall not include shares owned or held by or
for the account of the Company, and the disposition of any
such shares shall be considered an issuance of Common Stock
for the purposes of this Section 10.
10.2 RIGHTS TO PURCHASE OTHER SECURITIES. If any of the
following shall occur:
(a) any consolidation or merger to which the Company
is a party, other than a consolidation or a merger in which
the Company is the continuing or surviving
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Company and which does not result in any reclassification of,
or change (other than as a result of a subdivision or
combination) in, outstanding shares of the Common Stock, or
(b) any sale or transfer to another corporation or
entity of all or substantially all of the assets of the
Company;
then, and in either such case, the Holder of each Warrant then
outstanding shall have the right to purchase the kind and amount of
shares of stock and/or other securities and property receivable upon
such consolidation, merger, sale or transfer by a holder of the number
of shares of Common Stock issuable upon exercise of such Warrant
immediately prior to such consolidation, merger, sale, or transfer. The
provisions of this Section 10.2 shall similarly apply to successive
consolidations, mergers, sales or transfers.
10.3 NOTICE OF ADJUSTMENT. Whenever the number of shares of
Warrant Stock purchasable upon the exercise of each Warrant or the
Warrant Price of such Warrant Stock is adjusted or reduced, as herein
provided, the Company shall mail by first class, postage prepaid, to
each Holder (a) notice of any reduction on or before the day the
reduction takes effect, which shall state the reduced Warrant Price and
the period during which it will be in effect and/or (b) a certificate
setting forth the number of shares of Warrant Stock purchasable upon
the exercise of each Warrant and the Warrant Price on such Warrant
Stock after adjustment setting forth a brief statement of the facts
requiring such adjustment and setting forth the computation by which
such adjustment was made.
10.4 NO ADJUSTMENT FOR DIVIDENDS. No adjustment in respect of
any cash dividends shall be made during the term of a Warrant or upon
the exercise or conversion of a Warrant.
10.5 CERTAIN EVENTS. If any event occurs as to which in the
reasonable judgment of the Board of Directors of the Company, in good
faith, the other provisions of this Section 9 are not strictly
applicable but the lack of any adjustment would not in the opinion of
the Board of Directors of the Company fairly reflect the purchase
rights of the Holders of the Warrants in accordance with the basic
intent and principles of the provisions of this Agreement then the
Board of Directors of the Company shall appoint a Financial Advisor
which shall give its opinion upon the adjustment, if any, on a basis
consistent with the basic intent and principles established and the
other provisions of this Section 9, necessary to preserve, without
dilution, the exercise rights of the Holders. Upon receipt of such
opinion, the Company shall forthwith make the adjustments described
therein which adjustments shall be conclusive and binding.
11. Redemption of Warrants.
----------------------
(a) Upon ten (10) days prior notice (a "Redemption
Notice") to the Holders, prior to the fourth anniversary of
the date hereof, the Company may redeem
14
<PAGE> 15
all Warrants then outstanding for no consideration upon the
occurrence of the following events (provided the Company has
issued a notice of redemption, each a "Redemption Event"):
15
<PAGE> 16
(i) The offering price in a Qualified IPO
(defined below), or the average daily Closing Price
(defined below) for twenty (20) consecutive trading
days on a rolling basis exceeds 125% of the then
applicable Target Price (defined below); and
(ii) Either (x) registration statement which
is effective covering the issuance or resale of the
Warrant Stock or (y) each Holder otherwise is
certified to sell the Warrant Stock under Rule 144 of
the Securities Act of 1933, as amended (subject only
to volume limitations).
(b) For purposes of this Section 11, "Qualified IPO"
shall mean an underwritten public offering of shares of Common
Stock, the gross proceeds of which to the Company and/or the
selling stockholders (if any) are of at least $15,000,000.
(c) For purposes of this Section 11, "Closing Price"
for each day shall mean the last reported sales price of the
Common Stock (trading regular way) or, in case no such
reported sale takes place on such day, the average of the
reported closing bid and asked prices regular way, in either
case as reported on the New York Stock Exchange or, if such
security is not listed or admitted for trading on the New York
Stock Exchange or, if such security is not listed or admitted
for trading on the New York Stock Exchange, on NASDAQ NMS, or
if such security is not quoted on such NASDAQ NMS, the average
of the closing bid and asked prices on such day in the
over-the-counter market as reported by NASDAQ or, if bid and
asked prices for such security on such day shall not have been
reported through NASDAQ, the average of the bid and asked
prices on such day, as furnished by any New York Stock
Exchange member firm making a market in the Common Stock
selected from time to time by the Board of Directors of the
Company for that purpose.
(d) For purposes of this Section 11, "Target Price"
shall mean: (i) at all times prior to the first anniversary of
the date hereof, $9.00 per share of Common Stock; (ii) on or
after the first anniversary of the date hereof but prior to
the second anniversary of the date hereof, $12.00 per share of
Common Stock; (iii) on or after the second anniversary of the
date hereof but prior to the third anniversary of the date
hereof, $14.00 per share of Common Stock; and (iv) on or after
the third anniversary of the date hereof and thereafter,
$16.00 per share of Common Stock. "Target Price" shall be
determined before deducting any underwriting fee or selling
commissions but adjusted equitably for any stock split,
combination, reclassification or similar event involving the
Common Stock.
(e) Upon receipt of a Redemption Notice, each Holder
may exercise part or all of the Warrants then outstanding and
registered in its name in accordance with the provisions of
Section 5 hereof within ten (10) days of receipt of the
Redemption Notice. Warrants not exercised within this period
following the Redemption Notice
16
<PAGE> 17
shall be deemed terminated. All Warrants not previously issued
as of a Redemption Event shall not subsequently be issued by
the Company and Purchasers shall have no rights to such
Warrants. In all events, prior to issuing a Redemption Notice,
the Company shall issue to the Purchasers all Warrants to
which the Purchasers are then entitled under Section 1 of this
Agreement.
12. ELIMINATION OF FRACTIONS. The Company shall not be required to
issue certificates representing fractional shares of Common Stock upon any
exercise of Warrants, but will make a payment in cash, in lieu of issuing such
fractional shares, based on the Current Market Price per share at the time.
13. Certificates to Bear Legends.
----------------------------
(a) The Warrant Certificates and certificates
representing shares of Warrant Stock shall be subject to a
stop-transfer order and each such certificate shall bear the
following legends by which each Holder shall be found:
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 ("ACT"). THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE ACT OR
AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED. THESE SECURITIES HAVE BEEN
ISSUED UNDER AND ARE GOVERNED BY AND ARE SUBJECT TO THAT
CERTAIN WARRANT AGREEMENT DATED MARCH 6, 1997 (THE WARRANT
AGREEMENT). A COPY OF THE WARRANT AGREEMENT CAN BE OBTAINED
FROM THE SECRETARY OF THE COMPANY.
(b) In addition, so long as the Security holders'
Agreement remains in effect all such certificates referred to
in paragraph (a) above shall also bear the following legend:
THESE SECURITIES ARE SUBJECT TO CERTAIN RESTRICTIONS ON
TRANSFER AND OTHER TERMS SET FORTH IN THAT CERTAIN AMENDED AND
RESTATED STOCKHOLDERS' AGREEMENT DATED AS OF MARCH __, 1997,
AS IT MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH
AGREEMENT CAN BE OBTAINED FROM THE SECRETARY OF THE COMPANY.
14. NO RIGHTS AS STOCKHOLDERS; NOTICES TO HOLDERS; UNISSUED WARRANTS.
Nothing contained in this Agreement or in any of the Warrant Certificates shall
be construed conferring upon the Holders or their transferees the right to vote
or to receive dividends or to consent to or receive
17
<PAGE> 18
notice as stockholders in respect of any meeting of stockholders for the
election of directors of the Company or on any other matter, or any rights
whatsoever as stockholders of the Company. Warrants as to which the conditions
precedent to issuance are not satisfied shall be void and of no effect, and no
Purchaser or other party shall have any rights with respect thereto.
15. INVESTMENT INTENT. The Warrants to be purchased pursuant to this
Agreement are being purchased for each Purchaser's own account and with no
intention of distributing or reselling the Warrants. The Holder understands that
neither the Warrants nor the Common Stock have been registered under the Act or
any applicable state securities laws and that neither the Warrants nor the
Common Stock can be sold, transferred or otherwise disposed of without
registration under the Act and applicable state securities laws, unless it has
been established to the satisfaction of the Company that they may be sold,
transferred or otherwise disposed of without such registration.
16. NOTICES. Any notice pursuant to this Agreement to be given or made
by the Holder of any Warrant Certificate to or on the Company shall be
sufficiently given or made if delivered personally or sent by telecopier or by
certified mail, addressed to the Chief Financial Officer of the Company at the
Company's principal executive offices at 4100 Holiday Street, N.W., Suite 201,
Canton, Ohio 44718 (unless notice has been given of a change of such address),
and shall be effective three (3) days after having been mailed or upon receipt
if delivered personally or sent by telecopier, with receipt confirmed by the
office of the President. Notices or demands authorized by this Agreement to be
given or made to the Holder of any Warrant Certificate shall be sufficiently
given or made if delivered personally or sent by certified mail or by
telecopier, addressed to such Holder at the address of such Holder as shown on
the Warrant Register, and shall be effective three (3) days after having been
mailed or upon receipt if delivered personally or sent by telecopier, with
receipt confirmed.
17. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
18. SUPPLEMENTS, AMENDMENTS AND WAIVERS. Any supplement or amendment
to, or any waiver of any provision of, this Agreement shall be effective when
consented to in writing by the Holders of a majority of the Warrants then
outstanding (determined as though there were one Warrant for each share of
Common Stock issuable on the exercise of the then outstanding Warrants) and by
the Company.
19. SUCCESSORS. All the covenants and provisions of this Agreement by
or for the benefit of the Company or the Holders shall bind and inure to the
benefit of their respective successors and assigns hereunder.
20. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original; but
such counterparts together shall constitute but one and the same instrument.
18
<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the day, month and year first above written.
WATERLINK, INC.
By:
---------------------------
Its:
--------------------------
19
<PAGE> 20
WARRANT PURCHASE AGREEMENT SIGNATURE PAGE
Accepted and agreed as of
the date first above written:
Brantley Capital Corporation
By:_______________________________________
[Please Sign Above This Line]
Name: Robert P. Pinkas
Title: Chairman, Chief Executive Officer
and Treasurer
Address: 20600 Chagrin Blvd.
Suite 1150
Cleveland, Ohio 44122
Telephone No.: (216) 283-4800
Telecopier No.: (216)
Taxpayer Identification No.: __________________________
20
<PAGE> 21
WARRANT PURCHASE AGREEMENT SIGNATURE PAGE
Accepted and agreed as of
the date first above written:
River Cities Capital Fund Limited Partnership
By: RC Management Limited Partnership,
its General Partner
By: Mayson, Inc., its General Partner
By:_______________________________________
[Please Sign Above This Line]
Name: Edwin T. Robinson
Title: President
Address: 221 East 4th Street
Suite 2250
Cincinnati, Ohio 45202
Telephone No.: (513) 621-9700
Telecopier No.: (513) 579-8939
Taxpayer Identification No.: 31-1413379
21
<PAGE> 22
WARRANT PURCHASE AGREEMENT SIGNATURE PAGE
Accepted and agreed as of
the date first above written:
Environmental Opportunities Fund, L.P.
By: Environmental Opportunities Management
Co., LLC, its General Partner
By:_______________________________________
[Please Sign Above This Line]
Name: Kenneth Ch'uan-k'ai Leung
Title: Manager
Address: 126 East 56th Street
24th Floor
New York, New York 10022
Telephone No.: (212) 980-0789
Telecopier No.: (212) 593-6150
Taxpayer Identification No.: 74-0488338
22
<PAGE> 23
WARRANT PURCHASE AGREEMENT SIGNATURE PAGE
Accepted and agreed as of
the date first above written:
Environmental Opportunities Fund (Cayman), L.P.
By: Environmental Opportunities Management
Co., LLC, its General Partner
By:_______________________________________
[Please Sign Above This Line]
Name: Kenneth Ch'uan-k'ai Leung
Title: Manager
Address: c/o Citco Fund Services
(Cayman Islands) Limited
P.O. Box 31106SMB
Grand Cayman, Cayman Islands, B.W.I.
Telephone No.: (713) 250-4283
Telecopier No.: (713) 250-4294
Taxpayer Identification No.: N/A
Copy of notices to:
Environmental Opportunities
Management Co., LLC
3100 Texas Commerce Tower
Houston, Texas 77002
23
<PAGE> 24
WARRANT PURCHASE AGREEMENT SIGNATURE PAGE
Accepted and agreed as of
the date first above written:
National City Capital Corporation
By:_______________________________________
[Please Sign Above This Line]
Name: Todd S. McCuaig
Title:
Address: 1965 E.6th Street
10th Floor
Cleveland, Ohio 44114
Telephone No.: (216) 575-2480
Telecopier No.: (216) 575-9965
Taxpayer Identification No.: 34-1269115
24
<PAGE> 25
WARRANT PURCHASE AGREEMENT SIGNATURE PAGE
Accepted and agreed as of
the date first above written:
IPP95, L.P.
By: WESINVEST, Inc., its General Partner
By:_______________________________________
[Please Sign Above This Line]
Name: Christine Jenkins
Title: Secretary
Address: 310 South Street
P.O. Box 1913
Morristown, NJ 07461
Telephone No.: (212) 898-0290
Telecopier No.: (212) 898-0840
Taxpayer Identification No.: 22-3356204
Copy of notices to:
IPP95, L.P.
310 South Street
P.O. Box 1913
Morristown, NJ 07461
Attn: Conor Mullett
25
<PAGE> 26
EXHIBIT A
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
("ACT"). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE
ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED.
THESE SECURITIES ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND OTHER TERMS
SET FORTH IN THAT CERTAIN AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT DATED AS
OF MARCH __, 1997, AS IT MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH
AGREEMENT CAN BE OBTAINED FROM THE SECRETARY OF THE COMPANY.
THESE SECURITIES HAVE BEEN ISSUED UNDER AND ARE GOVERNED BY AND ARE SUBJECT TO
THAT CERTAIN WARRANT AGREEMENT DATED MARCH 31, 1992 (THE "WARRANT AGREEMENT"). A
COPY OF THE WARRANT AGREEMENT CAN BE OBTAINED FROM THE SECRETARY OF THE COMPANY.
WARRANT TO PURCHASE COMMON STOCK OF
WATERLINK, INC.
WARRANT NO. _____
This certifies that, for value received, ____________________, or its
permitted assigns, is entitled, subject to the terms set forth below, to
purchase from WATERLINK, INC., a Delaware corporation (the "Company"),
______________ shares (the "Shares") (subject to reduction as provided in
Section _____ of the Warrant Agreement) of fully paid and nonassessable common
stock, $.01 par value per share, of the Company (the "Common Stock"), at the
purchase price of $_____________ per share (the "Purchase Price"), at any time
or from time to time up until 5:00 P.M. Cleveland, Ohio time on _______________,
2002.
1. Exercise Provisions.
-------------------
(a) MANNER OF EXERCISE. This Warrant may be exercised by the
holder of this Warrant surrendering to the Company at its principal
office at 4100 Holiday Street, N.W., Suite 201, Canton, Ohio 44718, or
such other address as to which the Company may hereafter give notice to
the holder, this Warrant, together with the exercise form attached to
this Warrant duly executed by the holder together with payment to the
Company in the amount obtained by multiplying the Purchase Price by the
number of shares of Common Stock designated in the exercise form.
Payment may be in cash or by cashier's or certified bank check payable
to the order of the Company, or by conversion of the unpaid principal
1
<PAGE> 27
and accrued interest under the Notes in the manner set forth in the
Notes and the Warrant Agreement.
(b) PARTIAL EXERCISE. On any partial exercise, the Company
shall promptly issue and deliver to the holder of this Warrant a new
Warrant or Warrants of like tenor in the name of that holder providing
for the right to purchase that number of shares of Common Stock as to
which this Warrant has not been exercised.
2. DELIVERY OF STOCK CERTIFICATES. Within a reasonable time after full
or partial exercise of this Warrant, the Company at its expense will cause to be
issued in the name of and delivered to the holder of this Warrant in accordance
with the requirements of the Warrant Agreement, a certificate or certificates
for the number of fully paid and nonassessable shares of Common Stock to which
that holder shall be entitled upon such exercise.
3. COMPLIANCE WITH SECURITIES ACT; DISPOSITION OF WARRANT OR SHARES OF
COMMON STOCK. The holder of this Warrant, by acceptance hereof, agrees that this
Warrant and the Shares of Common Stock to be issued upon exercise hereof are
being acquired for investment and that the holder will not offer, sell or
otherwise dispose of this Warrant or any Shares of Common Stock to be issued
upon exercise hereof, except under circumstances which will not result in a
violation of the Securities Act of 1933, as amended (the "Act") nor violate the
terms of the Warrant Agreement and, if then applicable, the Amended and Restated
Stockholders' Agreement (as defined in the Warrant Agreement). In addition, any
permitted Warrant transferee will be required to agree to the provisions of this
Section 3. The provisions of this Section 3 shall not apply to any shares of
Common Stock, the issuance or resale of which is registered under the Act.
4. Miscellaneous Provisions.
------------------------
(a) RESERVATION OF STOCK. The Company covenants that it will
at all times reserve and keep available, solely for issuance upon
exercise of this Warrant, all shares of Common Stock or other
securities from time to time issuable upon exercise of this Warrant.
(b) MODIFICATION. This Warrant and any of its terms may be
changed, waived, or terminated only by a written instrument signed by
the party against whom enforcement of that change, waiver or
termination is sought.
(c) REPLACEMENT. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or
mutilation of this Warrant and subject to the requirements of the
Warrant Agreement, the Company will execute and deliver, in lieu of
this Warrant, a new Warrant of like tenor.
(d) WARRANT AGENT. The Company may, on written notice to the
holder of this Warrant, appoint an agent having an office in Cleveland,
Ohio, for the purposes of issuing Common Stock upon the exercise of
this Warrant and of replacing or exchanging this
2
<PAGE> 28
Warrant, and after that appointment any such issuance, replacement, or
exchange shall be made at that office by that agent.
(e) NO RIGHTS AS STOCKHOLDER. No holder of this Warrant, as
such, shall, solely by holding this Warrant, be entitled to vote or
receive dividends or be considered a stockholder of the Company for any
purpose, nor shall anything in this Warrant be construed to confer on
any holder of this Warrant as such, any rights of a stockholder of the
Company or any right to vote, to give or withhold consent to any
corporate action, to receive notice of meeting of stockholders, to
receive dividends or subscription rights or otherwise.
(f) ANTI-DILUTION RIGHTS. The holder hereof shall have certain
anti-dilution protection as to the Shares of Common Stock to be issued
upon exercise as specifically set forth in the Warrant Agreement which
may result in the adjustment from time to time of the Purchase Price
and/or the number of shares of Common Stock issuable upon the exercise
hereof.
(g) NOTICES. Notices hereunder to the holder of this Warrant
shall be sent as provided in the Warrant Agreement.
Dated: _______________, 1997 WATERLINK, INC.
By:
-----------------------
3
<PAGE> 29
FORM OF EXERCISE
----------------
(To be signed only upon exercise of Warrant)
To: WATERLINK, INC.
The undersigned holder of the attached Warrant hereby irrevocably
elects to exercise the right to purchase _______________ shares of Common Stock
of WATERLINK, INC., and herewith makes payment of $___________________ for those
shares, and requests that the certificate for those shares be issued in the name
of the undersigned and delivered to the address below the signature of the
undersigned. The undersigned hereby affirms the statements and covenants all as
set forth in Section 3 of the Warrant.
Dated:_______________, 199__
(Signature must conform in all respects to
name of holder as specified on the face of
the attached Warrant)
-----------------------------------------
Signature
-----------------------------------------
Address
-----------------------------------------
<PAGE> 1
Exhibit 2
SUBORDINATED NOTE PURCHASE AGREEMENT AND CREDIT FACILITY
AMONG
WATERLINK, INC.
AND
THE PURCHASERS NAMED HEREIN
DATED AS OF MARCH 6, 1997
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I DEFINITIONS....................................................................1
1.1 Definitions....................................................................1
1.2 Accounting Terms...............................................................6
1.3 References to Documents........................................................6
ARTICLE II PURCHASE AND SALE OF NOTES.....................................................6
2.1 Purchase and Sale of Notes.....................................................6
2.2 Interest Rate..................................................................7
2.3 Method of Payment and Prepayment...............................................8
2.4 The Closing....................................................................9
2.5 Delivery of the Note...........................................................9
2.6 Allocation of Purchase Price..................................................10
ARTICLE III REPRESENTATIONS AND WARRANTIES................................................10
3.1 Representations and Warranties of the Company.................................10
3.2 Representations and Warranties of the Purchasers..............................12
ARTICLE IV CONDITIONS PRECEDENT TO CLOSING...............................................13
4.1 Conditions Precedent to Obligations of the Purchasers.........................13
4.2 Conditions Precedent to Obligations of the Company............................15
ARTICLE V COVENANTS.....................................................................15
5.1 Financial Statements and Reports..............................................15
5.2 Compliance with Small Business Investment Act.................................16
5.3 Use of Proceeds...............................................................16
5.4 Dividends.....................................................................17
ARTICLE VI SUBORDINATION.................................................................17
6.1 Subordination.................................................................17
6.2 Subrogation...................................................................21
6.3 Constructive Trust, Etc.......................................................21
6.4 Restrictions on Additional Subordinated Indebtedness..........................21
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE VII DEFAULTS......................................................................22
7.1 Defaults......................................................................22
7.2 Cross Acceleration............................................................23
ARTICLE VIII INDEMNITY.....................................................................23
8.1 Indemnification by the Company................................................23
8.2 Indemnification by Purchasers.................................................24
ARTICLE IX MISCELLANEOUS.................................................................24
9.1 Survival of Provisions........................................................24
9.2 Termination...................................................................24
9.3 Waiver Modifications in Writing...............................................24
9.4 Notice........................................................................25
9.5 Determinations................................................................26
9.6 Execution in Counterparts.....................................................26
9.7 Binding Effect; Assignment....................................................26
9.8 Governing Law.................................................................26
9.9 Severability of Provisions....................................................26
9.10 Headings......................................................................26
9.11 Entire Agreement..............................................................27
</TABLE>
ii
<PAGE> 4
SUBORDINATED NOTE PURCHASE AGREEMENT AND CREDIT FACILITY
--------------------------------------------------------
SUBORDINATED NOTE PURCHASE AGREEMENT AND CREDIT FACILITY, dated
as of March 6, 1997 (the "Agreement"), by and among Waterlink, Inc., a Delaware
corporation (the "Company"), Brantley Venture Partners III, L.P. ("Brantley")
and the Purchasers (the "Purchasers") named on the execution pages hereof.
In consideration of the mutual covenants and agreements set forth
herein and for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties agree as follows:
ARTICLE I
---------
DEFINITIONS
-----------
1.1 DEFINITIONS. As used in this Agreement, unless the context requires
a different meaning, the following terms have the meanings indicated:
"ACT" means the Securities Act of 1933, as amended, and the rules and
regulations of the Commission promulgated thereunder.
"ADVANCE" means purchases and sales of Notes in accordance with Article
II of this Agreement.
"ADVANCE FEE" has the meaning provided for in Section 2.1(d) of this
Agreement.
"AFFILIATE" means, with respect to any Person, any Person that,
directly or indirectly, controls, is controlled by or is under common
control with such Person in question. For the purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect
to any Person, shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting
securities, by contract or otherwise.
"AGREEMENT" means this Note Purchase Agreement, as the same may be
amended, supplemented or modified in accordance with the terms hereof.
"ASSET SALE" means the sale by the Company or any of the Subsidiaries
of the Company to any Person of all or substantially all of the assets
of the Company.
"BCC" means Brantley Capital Corporation.
"BOA" means BOAI, BOA London and BOA Frankfurt.
<PAGE> 5
"BRANTLEY" means Brantley Venture Partners III, L.P.
"BRANTLEY GUARANTY" means that certain Guaranty executed by Brantley,
dated as of February 26, 1997, in favor of BOAI under the Loan
Documents.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day in which banking institutions in the State of
Ohio are authorized or obligated by law to close.
"CHANGE IN CONTROL" means any (1) merger, consolidation or similar
transaction in which the Company is not the surviving corporation into
an entity with a class of equity securities registered under the
Exchange Act or (ii) any merger, consolidation or similar transaction
with a Person not having a class of securities registered under the
Exchange Act and as a result of which the holders of voting securities
of the Company immediately prior thereto receive or hold less than
sixty-seven percent (67%) of the securities of the Company or its
successor immediately thereafter.
"CLOSING" has the meaning provided therefor in Section 2.4(a) of this
Agreement.
"CLOSING DATE" has the meaning provided therefor in Section 2.4(a) of
this Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended, as in
effect on the date of this Agreement and any successor code thereto.
"COMMISSION" means the Securities and Exchange Commission or any
similar agency then having jurisdiction to enforce the Act.
"COMMON STOCK" has the meaning provided therefor in Section 3.1(a) of
this Agreement.
"COMPANY" means Waterlink, Inc., a Delaware corporation.
"EOF" means Environmental Opportunities Fund, L.P.
"EOFC" means Environmental Opportunities Fund (Cayman), L.P.
"EVENT OF DEFAULT" has the meaning provided therefor in Section 7.1 of
this Agreement.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder.
2
<PAGE> 6
"GAAP" means generally accepted accounted principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such
other statements by such other entity as may be approved by a
significant segment of the accounting profession, that are applicable
to the circumstances as of the date of determination.
"GERMAN CREDIT AGREEMENT" means the Credit Agreement, dated as of March
4, 1997, among the Company, Provista Einhundertsechsundfunfzigste
Verwaltungsgesellschaft mbH (to be known as Waterlink (Germany) GmbH),
and Bank of America National Trust and Savings Association, Frankfurt
Branch ("BOA Frankfurt"), as the same may be amended, restated,
supplemented or otherwise modified from time to time.
"HOLDER" OR "NOTEHOLDER" means a registered holder of a Note(s).
"INDEBTEDNESS" as applied to any Person, means (i) all indebtedness for
borrowed money, (ii) that portion of obligations with respect to
capital leases or industrial revenue or development bonds that is
properly classified as a liability on a balance sheet in conformity
with GAAP, (iii) notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for
borrowed money, (iv) any obligation owed for all or any part of the
deferred purchase price of the property or services (excluding any such
obligations incurred under an employee benefit plan, which purchase
price is (y) due more than six months from the date of incurrence of
the obligation in respect thereof or (z) evidenced by a note or similar
instrument and excluding, in connection with any business acquisition
by the Company or its subsidiaries, any earnout obligations or deferred
purchase price therefor, whether or not evidenced by promissory notes)
and (v) all indebtedness secured by any Lien (other than trade
indebtedness secured by a statutory lien) on any property or asset
owned or held by that Person regardless of whether the indebtedness
secured thereby shall have been assumed by that Person or is
nonrecourse to the credit of that Person.
"INTEREST PAYMENT DATE" has the meaning provided therefor in Section
2.2 of this Agreement.
"INVESTMENT COMPANY ACT" means the Investment Company Act of 1940, as
amended, and the rules and regulations promulgated by the Commission
thereunder.
"IPO" means any initial firm commitment underwritten public offering of
Common Stock of the Company, the gross proceeds of which to the Company
and/or the selling stockholders (if any) are at least $30,000,000.
"IPP95" means IPP95, L.P.
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"LIEN" means any mortgage, pledge, security interest, encumbrance,
statutory lien, hypothecation or charge of any kind (including, without
limitation, any conditional sale or other title retention agreement or
lease in the nature thereof, any sale of receivables with recourse
against the seller or any other Person except the account debtors, any
filing or agreement to file a financing statement as debtor under the
Uniform Commercial Code or any similar statute other than to reflect
ownership by a third party of property under a lease which is not in
the nature of a conditional sale or title retention agreement, or any
subordination arrangement in favor of another Person).
"LOAN DOCUMENTS" means the Loan Documents under, and as defined in, the
Waterlink Credit Agreement, the German Credit Agreement and the Sweden
Credit Agreement.
"MAXIMUM AGGREGATE ADVANCES" has the meaning provided therefor in
Section 2.1(a) of this Agreement.
"NCCC" means National City Capital Corporation.
"NOTE" or "NOTES" means the Subordinated Notes due 2002 to be issued by
the Company to the Purchasers hereunder, in substantially the form of
Exhibit A hereto.
"OFFERING DOCUMENTS" means, collectively, this Agreement, the Note, the
Warrant Agreement, the Registration Rights Agreement and the Warrants.
"PERSON" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock
company, government (or an agency or political subdivision thereof) or
other entity of any kind.
"PREPAYMENT EVENT" means the earlier of (i) an IPO, (ii) a Change in
Control or (iii) an Asset Sale.
"PRO-RATA PERCENTAGE" means for any Holder the percentage determined by
dividing (i) the aggregate principal amount of Notes held by such
Holder by (ii) the aggregate principal amount of Notes outstanding. The
initial Pro-Rata Percentage is set forth on the signature pages hereto
of the Purchasers.
"PURCHASER" means each Person who accepts and agrees to the terms
hereof as indicated by signature on the execution page of this
Agreement or counterpart as referred to in Section 9.6 of this
Agreement.
"REGISTRATION RIGHTS AGREEMENT" means the agreement providing the
Purchasers with certain registration rights pertaining to the Common
Stock underlying the Warrants, in the form of the attached Exhibit B.
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<PAGE> 8
"REPRESENTATIVES" means, collectively, the directors, officers,
partners, employees, agents or representatives, including, without
limitation, financial advisors, attorneys, accountants, experts,
consultants or agents of the Purchasers.
"REQUIRED PREPAYMENT" has the meaning provided for in Section 2.3(c) of
this Agreement.
"RIVER CITIES" means River Cities Capital Fund Limited Partnership.
"SBA" mean the U.S. Small Business Administration.
"SECURITIES" means any stock, shares, voting trusts, certificates,
bonds, debentures, options, warrants, notes, or other evidences of
indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as "Securities"
or any certificates of interest, shares or participation in temporary
or interim certificates for the purchase or acquisition of, any rights
as subscribed to, purchased or acquired, any of the foregoing.
"SECURITYHOLDERS' AGREEMENT" means that certain Amended and Restated
Stockholders' Agreement in the form of Exhibit C hereto to be executed
by the Company and the Purchasers on the Closing Date.
"SENIOR CREDIT FACILITY" means the credit facilities evidenced by the
Loan Documents.
"SENIOR INDEBTEDNESS" has the meaning provided therefor in Section
6.1(a) of this Agreement.
"SERIES A SHARES," "SERIES B SHARES," AND "SERIES C SHARES" have the
meanings provided for in Section 3.1(e) of this Agreement.
"SHARE PURCHASE AGREEMENT" means the Share Purchase Agreement among
AWPE Svenska AB, Anglian Water Holdings GmbH and the Buyers (as defined
therein), dated March 4, 1997.
"SMALL BUSINESS ACT" has the meaning provided for in Section 3.1(f) of
this Agreement.
"SUBORDINATED INDEBTEDNESS" means the indebtedness evidenced by the
Notes.
"SUBSEQUENT CREDIT FACILITY" means any credit facility entered into
upon or after termination of the Senior Credit Facility.
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<PAGE> 9
"SUBSEQUENT LOAN DOCUMENTS" means the Subsequent Security Documents and
all such other documents entered into in connection with a Subsequent
Credit Facility, including, without limitation, a credit agreement
between the Company, any Subsidiaries of the Company and a Subsequent
Senior Lender.
"SUBSEQUENT SECURITY DOCUMENTS" means security documents entered into
in connection with a Subsequent Credit Facility.
"SUBSEQUENT SENIOR LENDER" means the lender(s) under any Subsequent
Credit Facility.
"SUBSIDIARY" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the
total voting power of shares of stock entitled without regard to the
occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the
Subsidiaries of that Person or a combination thereof.
"SWEDEN CREDIT AGREEMENT" means the Credit Agreement, dated as of March
4, 1997, among the Company, Gigantissimo 2061 AB (to be known as
Waterlink (Sweden) AB) and Bank of America National Trust and Savings
Association, London Branch ("BOA London"), as the same may be amended,
restated, supplemented or otherwise modified from time to time.
"TERMINATION DATE" means the earlier of (i) December 31, 1997 or (ii) a
Prepayment Event.
"WARRANT" or "WARRANTS" means the warrants to purchase Common Stock of
the Company to be issued to the Purchasers pursuant to the terms of the
Warrant Agreement.
"WARRANT AGREEMENT" means the Warrant Agreement of even date herewith,
in the form of Exhibit D hereto, among the Company and the Purchasers.
"WATERLINK CREDIT AGREEMENT" means the Credit Agreement, dated as of
February 19, 1997, among the Company, the financial institutions from
time to time party thereto and Bank of America Illinois ("BOAI"), as
agent, as the same may be amended, restated, supplemented or otherwise
modified from time to time.
1.2 ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP as in effect from time to
time, including, without limitation, applicable statements, bulletins, and
interpretations issued by the Financial Accounting Standards Board and
bulletins, opinions, interpretations, and statements issued by the American
Institute of Certified Public Accountants or its committees. When used herein,
the term "financial statements" shall include the notes and schedules thereto.
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<PAGE> 10
1.3 REFERENCES TO DOCUMENTS. Any terms referring to instruments,
agreements or documents used herein shall mean and include such documents as
they may hereafter be amended, supplemented, modified or restated from time to
time.
ARTICLE II
----------
PURCHASE AND SALE OF NOTES
--------------------------
2.1 Purchase and Sale of Notes.
--------------------------
(a) ADVANCES. Subject to the provisions of this
Agreement, up to and including the Termination Date, each Purchaser for
itself and not for the others, hereby agrees to make Advances to the
Company up to but not exceeding an aggregate unpaid principal amount at
any one time outstanding equal to such Purchaser's Pro-Rata Percentage
multiplied by the difference between (i) Ten Million Dollars
($10,000,000) and (ii) the maximum amount guaranteed by Brantley under
the Brantley Guaranty (the "Maximum Aggregate Advances"). Upon
repayment of any Note or Notes, the principal amount thereof may not be
reborrowed by the Company. To the extent that Brantley or any
Contributor under the Contribution and Indemnification Agreement of
even date herewith among the parties hereto makes a payment under the
Brantley Guaranty, the amount of such payments shall be deemed an
Advance hereunder.
(b) ADVANCE PROCEDURE. Advances shall be made pursuant
to the Company's written or facsimile request therefor (a "Request for
an Advance"), given by the Company to Purchasers no later than three
(3) Business Days prior to the date of disbursement (other than for the
initial Advance hereunder if on the Closing Date) stating the date of
the proposed borrowing, and the amount of the aggregate and each
Purchaser's Advance. Each Request for an Advance shall be signed by an
authorized person of the Company. Each borrowing shall consist of an
Advance made by each Purchaser in an amount equal to its Pro-Rata
Percentage of such borrowing and shall be in $100,000 multiples from
each Purchaser (treating EOF and EOFC as a single Purchaser for this
purpose only) and aggregate not less than $1,000,000 from all
Purchasers. Each Purchaser shall make available to the Company in
immediately available funds the amount of such Purchaser's Pro-Rata
Percentage of the Advances on the date requested in the Request for an
Advance. In the event that upon any request for an Advance Brantley
Capital Corporation ("BCC") shall not have received the exemptive order
necessary for it to purchase Notes and Warrants as provided herein,
then each other Purchaser shall have the option to advance its pro rata
portion of the Advance that otherwise would have been required of BCC.
(c) NOTES. The Company shall execute and deliver to each
Purchaser a Note upon each Advance from such Purchaser.
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(d) ADVANCE FEE. Upon issuance of any Note to any
Purchaser, the Company shall pay to such Purchaser a fee ("Advance
Fee") equal to one percent (1%) of the principal amount of the Note
then issued; provided that the Advance Fee payable to IPP95 shall be
two percent (2%).
2.2 INTEREST RATE. The Company shall pay interest on the principal
amount of the Notes from time to time outstanding at the rate of twelve percent
(12%) (eight percent (8%) to IPP95 for the initial three month period of its
Notes) per annum for the period from and including the date of issuance of any
Note through, but not including the first anniversary date thereof and fourteen
percent (14%) per annum thereafter until the same shall be paid in full.
Interest payments shall be made quarterly in arrears on each June 30, September
30, December 31 and March 31 (collectively referred to herein as an "Interest
Payment Date"), commencing June 30, 1997. Interest will be computed on the basis
of a 360-day year and the actual number of days elapsed. Whenever any payment to
be made under the Notes shall be stated to be due on a day which is not a
Business Day, such payment may be made on the next succeeding Business Day, and
such extension of time in such case shall be included in the computation of the
payment of interest on the Notes.
2.3 Method of Payment and Prepayment.
--------------------------------
(a) The Company shall make Required Prepayments of the
principal amount of the Notes as and to the extent required by Section
2.3(c) hereof, on a pro rata basis, and may make voluntary principal
prepayments, which voluntary principal prepayments will be made on a
pro rata basis, from time to time of principal amount of the Notes in
aggregate amounts of not less than $100,000 without premium or penalty.
Any payments made on the Notes, whether of principal, interest or
premium (if any), shall be made ratably to all the Noteholders. If the
Company sets a date for the prepayment of any part of the principal
amount of the Notes, any prepayments of principal due on such date
shall be accompanied by the payment of all accrued and unpaid interest
on the portion of the principal amount of the Notes being prepaid to
the date fixed for prepayment. The Company will maintain records of the
amount of each Note, all payments and prepayments of principal and
interest thereon, the current outstanding principal balance thereof and
other appropriate information relating to the Notes. The Holder must
surrender its Note to the Company to collect the final principal
payment in cash on the Note at maturity, upon any Required Prepayment
or in the event the Company voluntarily prepays the Note in full. Any
prepayments on the Notes shall be applied in inverse order to Advances
made (i.e. last in, first out).
(b) The Company shall pay principal and interest in
money of the United States of America that at the time of payment is
legal tender for payment of public and private debts. So long as the
Purchaser shall be a Noteholder, the Company will pay (i) by wire
transfer of immediately available funds all sums becoming due on each
Note registered in the name of the Purchaser pursuant to the wire
transfer instructions provided by such Purchaser, or (ii) by mailing a
check to such Purchaser's address as the same appears on the
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<PAGE> 12
books of the Company or such other address such Purchaser shall have
designated by notice to the Company, without presentment and without
notations being made thereon. All sums becoming due on each Note shall
be paid to the Purchaser thereof without reservation of any sums
therefrom for or on account of withholding (except to the extent
otherwise required by law), counterclaim or set off.
(c) To the extent that on or after March 6, 1999, the
Company refinances the Senior Credit Facility with a Subsequent Credit
Facility or suffers to exist any other Senior Indebtedness, which
Subsequent Credit Facility and other Senior Indebtedness, together,
provide aggregate senior credit to the Company of $30,000,000 or more
and the Company's Leverage Ratio (as defined in Section 8.16 of the
Waterlink Credit Agreement as in effect on the date hereof) exceeds 4.5
to 1.0, the Company shall prepay (a "Required Prepayment") the Notes in
an amount equal to the amount of such aggregate senior credit in excess
of $30,000,000. The Required Prepayment shall be made upon such
refinancing. The Notes shall be due and payable, subject to the terms
contained therein, together with all accrued interest thereon, on the
earlier of (i) March 6, 2002 or, solely as to NCCC and River Cities,
five (5) years from the date of the first Advance, or (ii) upon the
occurrence of a Prepayment Event.
2.4 The Closing.
-----------
(a) Subject to Section 2.4(b) and subject also to the
satisfaction or waiver of each of the conditions precedent to the
Closing set forth in Article IV, the initial purchase and sale of Notes
in the aggregate principal amount specified in the Company's initial
Request for an Advance, if any, up to the Maximum Aggregate Advances
shall take place at a closing (the "Closing") at the offices of
Benesch, Friedlander, Coplan & Aronoff, 2300 BP America Building, 200
Public Square, Cleveland, Ohio 44114, on the date hereof ("Closing
Date"), or at such other place agreed upon by the parties hereto.
(b) The Closing is conditioned on the simultaneous or
prior closings of the transactions contemplated by the Share Purchase
Agreement and the Loan Documents and the satisfaction or waiver of all
other conditions to Closing set forth in Article IV of this Agreement.
As a result, the Closing Date is subject to change. The Company has
provided or promptly shall provide each Purchaser which is a party to
this Agreement with written notice of any anticipated initial Advance
hereunder to be made on the Closing Date.
(c) Once each of the Purchasers is notified by the
Company personally (if in attendance at the Closing) or by telephone
that each and every condition to Closing has been or, simultaneously
with such Purchaser's payment hereunder, will be, either satisfied or
waived, each Purchaser shall then cause payment of the principal amount
of the Notes being purchased on such date, if any, to be made to the
Company by wire transfer of immediately available funds. The Company
shall have furnished to the Purchasers the
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<PAGE> 13
account information at the time the Company notifies the Purchasers of
the date and time of the Closing.
(d) The obligation of the Purchasers to make any Advance
hereunder shall be subject to satisfaction of the following conditions
that at the date of making such Advance, and after giving effect
thereto: (a) no Event of Default or event which with the passage of
time or giving of notice, or both, would constitute an Event of
Default, shall have occurred and be then continuing and (b) each
representation and warranty set forth in Section 3 hereof is true and
correct as if then made. The acceptance by the Company of the proceeds
of any Advance shall be deemed to constitute as of the date of
acceptance a representation and warranty by the Company that all
conditions to make such Advance set forth in this Agreement have been
satisfied.
2.5 DELIVERY OF THE NOTE. Delivery of the Note purchased by a Purchaser
pursuant to this Agreement shall be made by the Company upon any Advance by
delivering to each such Purchaser against payment of the purchase price
therefor, a Note substantially in the form of Exhibit A attached to this
Agreement. As soon as practicable following the Closing, the Company shall
deliver a Note to each Purchaser not in attendance at the Closing who has paid
the full purchase price therefor in accordance with the provisions of Section
2.4(c) hereof. The Notes will be registered in the name of such Purchaser. The
Notes may only be transferred together with the related Warrants, subject
otherwise only to the express terms of the Warrant Agreement, the Warrants and
that certain Indemnification and Contribution Agreement, dated as of February
26, 1997, among Purchasers and Brantley and acknowledged by the Company.
2.6 ALLOCATION OF PURCHASE PRICE. Each Purchaser and the Company agree
that, as determined in accordance with Section 1.1273-2(h) of the Regulations
promulgated pursuant to the Code as amended, the issue price for federal income
tax purposes to be allocated to each Note issued together with the Warrants
shall equal $970,000 for each $1,000,000 of principal amount of such Note, and
the issue price for the Warrants attributable to such $1,000,000 of principal
shall equal $30,000.
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES
------------------------------
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and covenants and agrees with, as of the Closing
Date and as of the date of each Advance, each of the Purchasers as follows, it
being acknowledged and agreed by the Company that each of the Purchasers is
relying upon such representations and warranties and covenants for the purpose
of making and undertaking the representations, warranties and covenants set
forth in Section 3.2 and in the purchase of the Notes hereunder:
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(a) ORGANIZATION, QUALIFICATION AND CORPORATE POWER. The
Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and is duly
licensed or qualified to do business as a foreign corporation and in
good standing in each other jurisdiction in which it owns or lease any
real property or in which the nature of business transacted by it makes
such licensing or qualification necessary and where the failure to be
so licensed or qualified would have a material adverse effect on the
operations or financial condition of the Company. The Company has the
corporate power and authority to own and hold its properties and to
carry on its business as currently conducted and as proposed to be
conducted, and to execute, deliver and perform this Agreement and the
transactions contemplated hereby, and to issue, sell and deliver Notes
and the Warrant and, upon exercise of the Warrants, to issue and
deliver the number of the shares of Common Stock, $.001 par value
("Common Stock"), of the Company issuable upon such exercise (the
"Conversion Shares"). The Company does not own of record or
beneficially, directly or indirectly, (i) any shares of outstanding
capital stock or securities convertible into capital stock of any other
corporation other than shares of capital stock of its Subsidiaries, or
(ii) any participating interest in any partnership, joint venture or
other non-corporate business enterprise.
(b) AUTHORIZATION OF AGREEMENT. The execution, delivery
and performance by the Company of this Agreement and the other
agreements and transactions contemplated hereby to be delivered or
completed, the issuance, sale and delivery of the Notes, and the
delivery of the Conversion Shares upon exercise of the Warrants have
been duly authorized by all requisite corporate action and do not
violate any provision of law, any order of any court or other agency of
government, the Fourth Amended and Restated Certificate of
Incorporation (as amended) or the By-laws of the Company, or any
provision of any indenture, agreement or other instrument by which the
Company or any of its properties or assets is bound or affected, or
conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under any such indenture, agreement or
other instrument, or result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any of the
properties or assets of the Company.
(c) AUTHORIZATION OF CONVERSION SHARES. The Conversion
Shares have been duly reserved for issuance upon exercise of the
Warrants and, when so issued, will be duly authorized, validly issued
and outstanding, fully paid and non-assessable shares of Common Stock.
Neither the issuance, sale and delivery of the Notes, nor the issuance
and delivery of the Conversion Shares upon exercise of the Warrants is
subject to any preemptive rights of stockholders of the Company or to
any right of first refusal or other similar right in favor of any
person, except as provided in the Securityholders Agreements, the
provisions of which have been complied with by the Company.
(d) VALIDITY. This Agreement and the other agreements
and documents contemplated hereby to be executed and delivered have
been duly executed and delivered by the Company and constitute the
legal, valid and binding obligations of the company,
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enforceable in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, fraudulent conveyance and other similar laws and
principles of equity affecting creditors' rights and remedies
generally.
(e) CAPITAL STOCK. The authorized capital stock of the
Company as of the date hereof is as set forth on Schedule 3.1 hereto.
(f) SMALL BUSINESS CONCERN. The Company acknowledges
that River Cities and NCCC are Federal licensees under the Small
Business Investment Act of 1958, as amended (the "Small Business Act").
The Company, together with its "affiliates" (as that term is defined in
Title 13, Code of Federal Regulations, ss. 121.101 ET SEQ.), is a
"small business concern" within the meaning of the Small Business Act
and the regulations thereunder, including Title 13, Code of Federal
Regulations, ss. 121.101 ET SEQ. The information regarding the Company
and its affiliates set forth in the SBA Forms 480, 652 and 1031
delivered at the Closing shall be accurate and complete. The Company
does not presently engage in, and it shall not hereafter engage in, any
activities, nor shall the Company use directly or indirectly the
proceeds hereunder for any purpose for which a Small Business
Investment Company is prohibited from providing funds by the Small
Business Act and the regulations thereunder (including Title 13, Code
of Federal Regulations, ss. 107.720 ET SEQ.).
(g) OFFERING OF THE NOTES. Neither the Company nor any
person acting on its behalf has taken or will take any action which
might subject the offering, issuance or sale of the Notes to the
registration provisions of the Act.
(h) DISCLOSURE. As of the date hereof, neither this
Agreement nor any Schedule annexed hereto, nor any certificate or other
instrument referred to herein and furnished to the Purchasers by the
Company, contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements
contained therein or herein, in the light of the circumstances under
which they were made, not misleading. During the course of the
transaction and prior to any Purchaser's purchase of the Notes, the
Company has provided to such Purchaser, or allowed such Purchaser free
access to, the information sufficient to allow the Purchasers to make
an informed investment decision. As of the date hereof, to the best
knowledge of the Company's management, there is no fact known to the
Company relating to its business, affairs, operations, condition,
prospects, properties or assets which may materially adversely affect
it and which has not been disclosed to the Purchasers by the Company.
3.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each of the
Purchasers, severally and not jointly, represents and warrants to, and covenants
and agrees with, the Company as follows, it being acknowledged and agreed by
each such Purchaser that the Company is relying upon such representations and
warranties and covenants for the purpose of making and undertaking
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<PAGE> 16
the representations, warranties and covenants set forth in Section 3.1 and
Article V of this Agreement and in the issuance and sale of the Notes hereunder:
(a) The Note and Warrants to be acquired by it pursuant
to the Offering Documents (i) are being acquired for its own account
and with no intention of distributing or reselling such Note or
Warrants or any part thereof (except in compliance with the Act and the
Offering Documents) and (ii) have not been, and will not be, registered
under the Act, by reason of their issuance by the Company in a
transaction exempt from the registration requirements of the Act, and
each Purchaser acknowledges that the Note and Warrants may not be sold,
transferred, pledged or hypothecated unless such sale, transfer, pledge
or hypothecation is pursuant to an effective registration statement
covering such Note and Warrants and filed in accordance with the Act or
is exempt from such registration in the opinion of counsel reasonably
acceptable to the Company.
(b) That it is an "accredited investor" as defined in
Rule 501(a) under the Act
(c) That (i) it is authorized, and has all requisite
power and authority, to execute and deliver this Agreement and perform
the obligations and duties created hereby;
(ii) this Agreement has been duly and validly executed
by it and constitutes its valid and binding obligation, enforceable in
accordance with its terms; (iii) the purchase of the Note and Warrants
does not violate its charter, by-laws, partnership agreement, agreement
of trust or similar document or any law or regulation to which it is
subject; (iv) it has had a full opportunity to request from the Company
and to review and has received all information which it deems relevant
in making a decision to purchase the Notes and Warrants being purchased
or to be purchased by it hereunder and the Conversion Shares, (v) it
will comply with the restrictions on transferability of the Warrants
and the Conversion Shares contained in the Securityholders' Agreement,
(vi) it has the experience in making investments to make its own
investment decision, (vii) it is able to withstand the total loss of
its investment in the Company and (viii) it acknowledges that it has
made its investment decision with respect to all of the Notes being
purchased and to be purchased by it hereunder and further acknowledges
that it is not entitled to any further disclosure in connection with
the Company's requiring Advances hereunder.
ARTICLE IV
----------
CONDITIONS PRECEDENT TO CLOSING
-------------------------------
4.1 COMPANY OBLIGATIONS. The obligations of each Purchaser to purchase
the Note to be purchased by it hereunder is subject, at or prior to the Closing
Date and as specified below on each Advance date, to the satisfaction of each of
the following conditions (any and all of which may be waived in writing by any
of the Purchasers on behalf of themselves individually); provided that the
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<PAGE> 17
obligatons of BCC are subject to its having received an exemptive order from the
Securities and Exchange Commission permitting its purchase of Notes and Warrants
as provided for herein.
(a) The representations and warranties made by the Company
herein shall be true and correct in all material respects on and as of
the Closing Date and on each Advance date with the same effect as
though such representations and warranties had been made on and as of
the Closing Date and each Advance date, as the case may be, and the
Company shall have complied in all material respects with all
agreements hereunder required to be performed by it at or prior to the
Closing Date and on each Advance date.
(b) Neither the purchase of the Note agreed to be purchased by
such Purchaser hereunder nor the performance of any other obligations
of such Purchaser under the Offering Documents shall at the Closing
Date or any Advance date be prohibited or enjoined (temporarily or
permanently) under the laws of any jurisdiction to which Purchaser is
subject.
(c) On the Closing Date and each Advance date, each Purchaser
shall have received a certificate, dated the Closing Date, signed by an
authorized officer of the Company stating that the conditions specified
in Sections 4.1(a) and 4.1(b) have been satisfied, unless otherwise
waived by such Purchaser in accordance with the terms hereof.
(d) On the Closing Date, each Purchaser shall have received a
certificate, dated the Closing Date, signed by the secretary or
assistant secretary or other officer of the Company attaching true and
correct copies of the certificate of incorporation and By-Laws of the
Company and a resolution or resolutions of the Company's board of
directors authorizing the transactions contemplated by this Agreement.
(e) No default or Event of Default shall exist under this
Agreement as of the Closing Date or any Advance date.
(f) Purchaser shall have received all other documents,
agreements and certificates as Purchasers may reasonably request.
(g) There shall not have been any material adverse change in
the financial condition or prospects of the Company and or the
Subsidiaries of the Company, taken as a whole, prior to the Closing
Date.
(h) At or prior to the Closing Date, all consents and
approvals necessary to effect the transactions contemplated by this
Agreement shall have been obtained.
(i) At or prior to the Closing Date, the Offering Documents
required to be executed by the Company shall have been executed by the
Company and any other parties thereto other than the Purchaser and
delivered to the Purchasers.
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(j) Notes in form and substance reasonably satisfactory to
each Purchaser and its counsel, in an aggregate principal amount of the
initial Advances made hereunder shall have been issued to the
Purchasers as of any Advance date.
(k) The Company shall have duly authorized, validly issued and
delivered the Warrants to the Purchasers pursuant to the terms of the
Warrant Agreement.
(l) The transactions contemplated by the Share Purchase
Agreement and the Loan Documents shall have closed.
(m) The Company shall have paid to the Purchasers his or its
reasonable out-of-pocket expenses, including legal fees and
disbursements incurred in connection with the transactions contemplated
by this Agreement in an amount not to exceed fifteen thousand dollars
($15,000) and, on a pro rata basis, the Advance Fee pertaining to the
Notes issued upon Closing and each Advance date, as applicable.
(n) The Company shall have executed and delivered to
Purchasers the Registration Rights Agreement.
(o) The Company shall have entered into an advisory agreement
with Sanders Morris Mundy Inc. in a form mutually acceptable to the
Company and Sanders Morris Mundy Inc.
(p) The Company shall have executed and delivered to River
Cities and NCCC a Size Status Declaration on SBA Form 480 and an
Assurance of Compliance on SBA Form 652, and shall have provided to
River Cities and NCCC information necessary for the preparation of a
Portfolio Financing Report on SBA Form 1031.
4.2 PURCHASER OBLIGATIONS. The obligations of the Company to issue and
sell the Notes pursuant to this Agreement are subject, at the Closing Date and
as of the date of any Advance to the representations and warranties made by each
of the Purchasers being true and correct in all material respects as though such
representations and warranties had been made on and as of the Closing Date and
as of the date of any Advance, as the case may be.
ARTICLE V
---------
COVENANTS
---------
5.1 FINANCIAL STATEMENTS AND REPORTS. The Company covenants and agrees
that so long as a Purchaser or any permitted transferee of a Purchaser shall
hold of record 100 or more of the shares of Common Stock acquired by such
Purchaser pursuant to this Agreement (treating for the purpose of such
computation the holders of Series A Shares and/or Series B Shares and/or Series
C
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<PAGE> 19
Shares or Warrants as holding the maximum number of Common Shares issuable upon
conversion of such shares or exercise of such Warrants), and as to any
Noteholder so long as its Note is outstanding the Company shall furnish to such
Purchasers and each such permitted transferee and to each Noteholder:
(a) Within 120 days after the end of each fiscal year of the
Company, a balance sheet of the Company (or a consolidated balance
sheet of the Company and its subsidiaries, as the case may be) as of
the end of such fiscal year and the related statements (or consolidated
statements) of income, changes in stockholders' equity and changes in
financial position of the Company (or of the Company and its
subsidiaries) for the fiscal year then ended, together with supporting
notes thereto, certified without qualification as to scope of audit by
a firm of independent public accountants of national standing selected
by the Company and reasonably acceptable to the Purchasers and each
such transferee;
(b) Within 30 days after the end of each month in each fiscal
year, a balance sheet of the Company and its subsidiaries, as the case
may be, and the related statement (or consolidated statements) of
income and changes in financial position, unaudited but certified by
the chief financial officer of the Company, such balance sheets to be
as of the end of such month and such statements of income to be for
such month and for the period from the beginning of the fiscal year to
the end of such month, in each case subject to normal and recurring
year-end adjustments; provided, however, that in the event that such
balance sheet and related statements of income cannot be prepared
within such 30-day period because of inadequacies in the accounting
system of any entity acquired by the Company, the Company shall furnish
such balance sheet and related statements of income as soon thereafter
as is possible, and the Company shall use reasonable efforts to remedy
such inadequacies so that future balance sheets and related statements
of income may be prepared within the applicable 30-day periods;
(c) Within 30 days prior to the beginning of each fiscal year
of the Company (and with respect to any revision thereof, promptly
after such revision has been prepared), a proposed operating budget for
the Company (or of the Company and its subsidiaries, as the case may
be), insofar as practicable, including projected monthly income
statements, cash flow statements during such fiscal year and a
projected balance sheet as of the end of such fiscal year, and each
monthly financial statement furnished pursuant to 9(b) above shall
reflect variances from such operating budget, as same may from time to
time be revised; provided, however, that in the event that such annual
budget cannot be prepared within such 30-day period because of
inadequacies in the accounting system of any entity acquired by the
Company, the Company shall furnish such annual budget as soon
thereafter as is possible, and the Company shall use reasonable efforts
to remedy such inadequacies so that future annual budgets may be
prepared within the applicable 30-day periods;
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<PAGE> 20
(d) Promptly upon filing, copies of all registration
statements, prospectuses, periodic reports and other documents filed by
the Company with the Securities and Exchange Commission; and
(e) Promptly, from time to time, such other information
regarding the operations, business, affairs and financial condition of
the Company or any Subsidiary as Purchaser or any permitted transferee
of a Purchaser may reasonably request.
5.2 COMPLIANCE WITH SMALL BUSINESS INVESTMENT ACT. The Company agrees
to provide River Cities and NCCC with sufficient information to permit River
Cities and NCCC to comply with its obligations under the Small Business Act and
the regulations thereunder. Upon reasonable request, the Company shall also
provide River Cities and NCCC with (i) access to the Company's properties,
places of business, records (including financial records) and offices during
business hours and (ii) the opportunity to discuss the affairs, finances and
accounts of the Company with the officers. River Cities and NCCC and
representatives of the SBA shall be given access to the Company's records to
confirm that the proceeds received by the Company in connection with the Closing
are used for the purposes delineated in Section 5.3. The President of the
Company shall certify to River Cities and NCCC, within three (3) months of the
date of the Closing, that the Company has used the proceeds in accordance with
the purposes delineated in Section 5.3.
5.3 USE OF PROCEEDS. The Company agrees to use the investment proceeds
from each Purchaser that is a Small Business Investment Company for prospective
acquisitions, and/or for working capital. If the Company shall, without the
consent of such Purchaser, use the proceeds from such Purchaser's investment for
a purpose not described above, such Purchaser may demand that the Company
repurchase the Note and Warrants at a price equal to the purchase price paid for
such securities as required by SBA Regulations Section 107.305. Further, the
Company will use the investment proceeds from each Purchaser to repay any
overadvance under the Loan Documents with respect to which Brantley is a
guarantor.
5.4 DIVIDENDS. So long as any Notes are outstanding, the Company shall
not pay cash dividends on its capital stock.
ARTICLE VI
----------
SUBORDINATION
-------------
6.1 SUBORDINATION. So long as, and from time to time while, any Senior
Indebtedness is outstanding, anything in this Agreement or the Notes to the
contrary notwithstanding, the indebtedness of the Company hereunder as evidenced
by the Notes shall be subordinate and junior in right of payment, to the extent
and in the manner set forth in this Article VI, to all Senior Indebtedness of
the Company from time to time outstanding (whether outstanding at the date of
this Agreement or incurred after the date of this Agreement) and as the Notes
may at any time and from
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<PAGE> 21
time to time be modified or amended in any respect and to all other indebtedness
hereafter made or assumed by the Company, which by the terms of such
indebtedness or by the terms of any indenture or other instrument pursuant to
which such indebtedness is made, assumed or incurred is specifically designated
as "Senior Indebtedness" for the purposes of this Agreement and which is
permitted to be issued, made, assumed and incurred according to the terms of
this Agreement provided that such indebtedness is included within the definition
of Senior Indebtedness as set forth in the following paragraph (a).
(a) "Senior Indebtedness" means all indebtedness and other
obligations specified below whether outstanding on the date of this
Agreement or hereafter created, incurred or assumed by the Company:
(i) the obligations of the Company and its
Subsidiaries, including, without limitations the principal of,
and premium and interest on, all loans, letters of credit
bankers' acceptances and other extensions of credit under the
Loan Documents and all commitment, facility and other fees and
all expenses, reimbursements, indemnities and other amounts
payable by the Company thereunder;
(ii) subject to Section 2.3(c) above, all other
indebtedness of the Company which by its express terms is made
senior to the Notes; provided, however, that any indebtedness
incurred by the Company under this clause (ii) must be created
in connection with or arise out of a transaction in which the
Company or any Subsidiaries of the Company received cash loan
proceeds, property or credit support in the form of a letter
of credit, guaranty or like instrument;
(iii) all interest accrued or accruing on Senior
Indebtedness after the commencement of any insolvency,
bankruptcy or receivership case or proceeding in accordance
with and at the contract rate (including, without limitation,
any rate applicable upon default) specified in the agreement
or instrument creating, evidencing or governing any such
Senior Indebtedness, whether or not, pursuant to applicable
law or otherwise, the claim for such interest is allowable as
a claim in such case or proceeding; and
(iv) subject to Section 2.3(c) above, any
refinancings, refundings, renewals or extensions, in whole or
in part, of any indebtedness or other obligation described in
clauses (i) or (ii) above under any Subsequent Loan Documents
or otherwise.
(b) In the event of (i) any insolvency or bankruptcy
proceeding brought by or against the Company; (ii) any receivership,
liquidation, reorganization or other similar proceeding relative to the
Company or to its property, including its Subsidiaries; or (iii) any
proceedings for voluntary liquidation, dissolution or other winding up
of the Company, whether or not involving insolvency or bankruptcy, the
holders of Senior Indebtedness shall be entitled to receive payment in
full in cash of all principal, premium (if any), fees and
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<PAGE> 22
charges in respect of, and interest on, all Senior Indebtedness
(including interest thereon accruing after the commencement of any such
proceedings) before the holders of the Notes shall be entitled to
receive any payment or distribution in respect of the Notes. Pursuant
to the foregoing, the holders of Senior Indebtedness (until payment in
full in cash of all principal, premium (if any), fees and charges in
respect of, and interest on, all Senior Indebtedness, including
interest thereon accruing after the commencement of any such
proceedings at the rate specified in the applicable Senior Indebtedness
whether or not such interest is an allowable claim in such case or
proceeding) shall be entitled to receive for application and payment
thereof any payment or distribution of any kind or character, whether
in cash or property or securities, which may be payable or deliverable
in any such proceedings in respect of the Notes (including any such
payment or distribution which may be payable or deliverable by virtue
of the provisions of, or any security for, any securities which are
subordinate and junior in right of payment of the Notes). The Holders
of the Notes shall not exercise or attempt to exercise any right of set
off or counterclaim in respect of any obligations of the Holders of the
Notes to the Company against the obligations of the Company under the
Notes if the effect thereof shall be to reduce the amount of any such
payment or distribution to which the holders of Senior Indebtedness
would be entitled in the absence of such set off or counterclaim; and
if and to the extent that notwithstanding the foregoing, the Holders of
the Notes are required by any mandatory provision of law to exercise
any such right of set off or counterclaim each reduction of the amount
owing on account of the principal of or interest on the Notes by reason
of such set off or counterclaim shall be deemed to be a payment by the
Company in a like manner in respect of the Notes to which the second
sentence of this paragraph (b) shall apply.
(c) In the event that any default shall occur and be
continuing with respect to any Senior Indebtedness permitting the
holders, with or without the making of demand, the giving of notice or
otherwise, of such Senior Indebtedness to accelerate the maturity
thereof, the Company shall not pay and the Holders shall not be
entitled to receive any payment or distribution in respect of the Notes
of any kind, whether of principal, premium (if applicable) or interest
or, except to the extent otherwise provided in Section 6.2 of this
Agreement, institute any judicial or legal proceedings or seek to
enforce any other rights or remedies whatsoever UNLESS AND UNTIL (i) a
period of one hundred seventy-five (175) days (the "Blocking Period")
shall have elapsed from the date of such default without the same
having been cured or waived; and (ii) the Blocking Period shall have
elapsed without any holder of Senior Indebtedness having accelerated
the maturity of such Senior Indebtedness, but in such event, upon the
satisfaction of the conditions set forth in (i) and (ii) above, the
holders of the Notes will have the rights and remedies contemplated by
this Agreement.
(d) Nothing in this Agreement will prohibit the holder of any
Senior Indebtedness at any time and from time to time without the
consent of or notice to any holder of the Notes from taking any of the
following actions:
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<PAGE> 23
(i) subject to Section 2.3(c) above, extending,
renewing, modifying, waiving or amending the terms of such
Senior Indebtedness;
(ii) following 5 days notice to the Noteholders of
the terms thereof, (or, in the case of an auction, the time
and place of sale) the sale other than by the Company in the
ordinary course of business of any material portion of the
property pledged, mortgaged or otherwise securing Senior
Indebtedness in accordance with the terms of the Loan
Documents or the Subsequent Loan Documents, PROVIDED, HOWEVER,
that the failure to deliver such notice shall not otherwise
prohibit such Person from effecting such sale pursuant to the
terms of the Loan Documents or the Subsequent Loan Documents;
(iii) exchanging, releasing or otherwise dealing with
any property pledged, mortgaged or otherwise securing Senior
Indebtedness or releasing a guarantor or any other person
liable in any manner for the Senior Indebtedness or amending
or waiving the terms of any guaranty of the Senior
Indebtedness;
(iv) exercising or refraining from exercising any
rights against the Company or any other person;
(v) applying any sums, in any manner, by whomever
paid or however realized, to the Senior Indebtedness; and
(vi) taking any other action which otherwise might be
deemed to impair the rights of the holders of the Senior
Indebtedness.
Subject to the terms of this Agreement, any and all of such
actions may be taken by the holders of Senior Indebtedness without
incurring responsibility to any Holder of the Notes and without
impairing or releasing the obligations of any Holder of the Notes to
the holders of Senior Indebtedness.
(e) No right of any present or future holder of any Senior
Indebtedness to enforce the provisions of this Article VI shall at any
time in any way be prejudiced or impaired by any action or failure to
act on the part of the Company or anyone in custody of its assets or
property or by any act or any failure to act on the part of any such
holder or any other holder of Senior Indebtedness or by any breach by
the Company of the terms of this Agreement or the Notes, irrespective
of any knowledge thereof on the part of any such holder or any other
holder of Senior Indebtedness.
(f) Each Holder of the Notes will at all times retain the
right to vote its claims and otherwise act and participate in any
insolvency, bankruptcy or reorganization proceeding relative to the
Company; provided, however, no Holder of the Notes shall take any
action or
20
<PAGE> 24
vote its claims in the course of any such bankruptcy, insolvency or
reorganization proceedings so as to:
(i) contest the validity or the enforceability of the
agreements governing Senior Indebtedness including the Loan
Documents or any Subsequent Loan Documents, the promissory
notes issued to the holders of Senior Indebtedness, or the
liens and security interests to the extent granted with
respect to the Senior Indebtedness;
(ii) contest the rights and duties of the holders of
Senior Indebtedness established in the agreements or
instruments governing the same or any security agreement with
respect to such liens and security interests;
(iii) contest the validity or enforceability of this
Article VI;
(iv) contest the validity or enforceability of this
Agreement or any agreement or instrument to the extent
evidencing or relating to the Indebtedness of Company to such
Holder; or
(v) compromise their claims so as to deprive the
holders of Senior Indebtedness of the benefit of receiving all
amounts otherwise payable to the Holders of the Notes pursuant
to the reorganization or liquidation of the Company resulting
from such proceeding;
it being understood that nothing contained in this Section 6.1(f) shall
be deemed to relieve the Company of its obligations under Section
2.3(c) of this Agreement.
(g) No Affiliate or Subsidiary of the Company may take any
action or make any payment in respect of or in regard to the Notes if
the Company would be prohibited from taking such action or making such
payment pursuant to this Article VI.
(h) The provisions of this Article VI shall be given
independent effect so that if a particular payment as to the Notes is
prohibited by any one of such provisions, it shall be prohibited
although it otherwise may not be prohibited by any other provisions.
6.2 SUBROGATION Subject to the payment in cash in full of all Senior
Indebtedness, the Holders of the Notes shall be subrogated to the rights of the
holders of Senior Indebtedness to receive payments or distributions of assets of
the Company payable or distributable to the holders of Senior Indebtedness and,
as among the Company and its Subsidiaries, their creditors and the holders of
the Notes, no payments or distributions otherwise payable or deliverable in
respect of the Notes but by virtue of the provisions thereof and of Section 6.1,
paid or delivered to the holders of Senior Indebtedness shall be deemed to be a
payment by the Company on account of the Notes.
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<PAGE> 25
6.3 CONSTRUCTIVE TRUST, ETC. In the event that any Noteholder receives
any payment or distribution in contravention of the provisions hereof, such
Holder shall hold such payment or distribution in trust for the benefit of the
holders of Senior Indebtedness, and shall deliver such payment or distribution
to the holders of such Senior Indebtedness, or their respective representatives,
ratably according to the aggregate amounts remaining unpaid on account of the
Senior Indebtedness held or represented by each, to the extent necessary to make
payment in cash in full of all Senior Indebtedness remaining unpaid after giving
effect to any concurrent payment or distribution to the holders of such Senior
Indebtedness.
6.4 RESTRICTIONS ON ADDITIONAL SUBORDINATED INDEBTEDNESS. The Company
will not create or suffer to exist any Indebtedness that (i) provides that it is
subordinate in right of payment to the Senior Indebtedness other than the Notes
and (ii) is senior in right of payment to the Notes or is secured.
The Company shall give to each Noteholder a copy of any notice of
acceleration of the maturity date of any Senior Indebtedness promptly upon
receipt thereof.
No present or future holder of Senior Indebtedness shall be prejudiced
in such holder's right to enforce subordination of any Note by any act or
failure to act on the part of the Company or anyone in custody of its assets or
property. The provisions of this Article VI are solely for the purpose of
defining the relative rights of the holders of Senior Indebtedness on one hand,
and the Holders of the Notes on the other hand, and nothing herein shall impair,
as between the Company and the Holders of the Notes, the obligation of the
Company, which is unconditional and absolute, to pay the Holders thereof the
principal and interest thereon in accordance with the terms thereof.
ARTICLE VII
-----------
DEFAULTS
--------
7.1 DEFAULTS. If any of the following events (herein called an "Event
of Default" or collectively "Events of Default") shall have occurred and be
continuing, that is to say:
(a) default shall be made in the payment of any interest,
principal or premium (if any) when due on any of the Notes and such
default shall have continued for a period of twelve (12) days; or
(b) the Company breaches or defaults in the performance of any
provision of this Agreement and such breach or default shall have
continued for a period of thirty (30) days; or
(c) the Company defaults in any payment of principal of or
interest on any Senior Indebtedness, beyond any period of grace
provided with respect thereto or in the performance of any other term
or condition contained in any agreement under which any such obligation
is created if the effect of such default results in Senior Indebtedness
in excess of $1,000,000
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<PAGE> 26
becoming due prior to its stated maturity without such indebtedness
being discharged or such acceleration being rescinded or annulled
within a period of sixty (60) days; or
(d) an order for relief shall be entered in any federal
bankruptcy proceeding in which the Company is the debtor; or
bankruptcy, receivership, insolvency, reorganization, relief,
dissolution, liquidation or other similar proceedings shall be
instituted by or against the Company or all or any part of the property
of the Company under the Federal Bankruptcy Code or any other
bankruptcy or insolvency law of the United States or any bankruptcy or
insolvency law of any state of competent jurisdiction unless, if such
proceedings are instituted against the Company, such proceedings are
dismissed and discharged within ninety (90) days after they are
instituted; or
(e) the Company shall have become insolvent or unable to pay
its debts as they mature, cease doing business as a going concern,
undergo dissolution or liquidation, make an assignment for the benefit
of creditors, admit in writing its inability to pay its debts as they
become due, or if a trustee, receiver or liquidator shall be appointed
for the Company, or for any substantial portion of the assets of the
Company, and such appointment shall not be vacated within ninety (90)
days; or
(f) further, any diversion by the Company of the proceeds
hereunder from the use of proceeds as delineated in Section 5.3 shall
be an Event of Default pertaining to River Cities and NCCC requiring
the immediate repayment of River Cities' and NCCC's Notes and full
refund of the purchase price for their Warrants, plus accrued and
unpaid interest on the Notes.
then, except as provided below with respect to an Event of Default under
paragraph (a) of this Section 7.1, the Holder of the Note if only one Note shall
be outstanding, or the Holders of at least a majority of the principal amount of
the Notes, if more than one Note shall be outstanding, may at its or their
option, after notice in writing to the Company, declare the Note or all of the
Notes, as the case may be, to be forthwith due and payable and thereupon the
Note, or all of the Notes, shall be and become due and payable, together with
interest and all other amounts accrued thereon (provided that if an Event of
Default results from the filing of a voluntary petition in any bankruptcy
proceeding or the filing of an involuntary petition in any bankruptcy proceeding
which is not dismissed and discharged within ninety (90) days, the Notes
thereupon shall immediately become due and payable, with interest accrued
thereon, without any notice from the holders of the Notes or otherwise), and,
subject to the provisions of Article VI hereof, the Holder or Holders of the
Note or Notes may take any action or proceeding at law or in equity which it or
they deem advisable for the protection of its or their interests to collect and
enforce payment and the Company shall pay all expenses, court costs and
reasonable attorneys' fees incurred in connection with or arising out of any
default hereunder. Notwithstanding the foregoing, in case an Event of Default
under paragraph (a) of this Section 7.1 shall occur, the Holders shall have none
of the rights and remedies otherwise contemplated by this Section 7.1
(including, without limitation, the right to accelerate the maturity of the
Notes) UNLESS AND UNTIL (i) Blocking Period shall have elapsed from the date of
such Event of
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<PAGE> 27
Default without the same having been cured or waived; and (ii) the Blocking
Period shall have elapsed without any holder of Senior Indebtedness having
accelerated the maturity of such Senior Indebtedness, but in such event, upon
the satisfaction of said conditions (i) and (ii) above, the Holders will have
the rights and remedies contemplated by this Section 7.1.
7.2 CROSS ACCELERATION. In the event that the holders of Senior
Indebtedness in excess of $1,000,000 shall accelerate the maturity of any such
Senior Indebtedness, as a result of a default under the Loan Documents or the
Subsequent Loan Documents, then the indebtedness outstanding on the Notes,
including all accrued and unpaid interest, principal and premium, if any, as
well as any fees and expenses payable to the Noteholders, (unless waived by the
holders of Senior Indebtedness in excess of $1,000,000) shall be simultaneously
accelerated. If any acceleration is rescinded or annulled by the holders of
Senior Indebtedness within sixty (60) days from such acceleration of such Senior
Indebtedness, the acceleration of the Notes will automatically be rescinded.
ARTICLE VIII
------------
INDEMNITY
---------
8.1 INDEMNIFICATION BY THE COMPANY. The Company agrees and covenants to
hold harmless and indemnify each of the Purchasers and any Affiliates thereof
(including any director, officer, employee, agent, investment advisor or
controlling person of any of the foregoing) from and against any losses, claims,
damages, liabilities and any expenses (including, expenses of investigation) to
which such Purchaser and its Affiliates may become subject arising out of or
based upon any breach of a warranty, representation or covenant of the Company
hereunder.
8.2 INDEMNIFICATION BY PURCHASERS. The Purchasers, severally and not
jointly, agree and covenant to hold harmless and indemnify the Company and any
Affiliates of the Company (including any director, officer, employee, agent,
investment advisor or controlling person of any of the foregoing) from and
against any losses, claims, damages, liabilities and any expenses (including,
expenses of investigation) to which the Company and its Affiliates may become
subject arising out of or based upon any breach of a warranty, representation or
covenant of such Purchaser HEREUNDER.
ARTICLE IX
----------
MISCELLANEOUS
-------------
9.1 SURVIVAL OF PROVISIONS. The representations, warranties and
covenants of the Company and the Purchasers contained in this Agreement shall
survive the Closing.
9.2 TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date:
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<PAGE> 28
(a) by the Company if any of the conditions specified in
Section 4.2 of this Agreement have not been met or waived by the
Company pursuant to the terms of this Agreement by March 31, 1997
unless such date is extended by mutual agreement of the parties hereto;
and
(b) by any Purchaser, individually, if any of the conditions
specified in Section 4.1 of this Agreement have not been met or waived
by such Purchaser pursuant to the terms of this Agreement by March 31,
1997 unless such date is extended by mutual agreement of the parties
hereto.
9.3 Waiver Modifications in Writing.
-------------------------------
(a) No failure or delay on the part of the Company or any
Purchaser in exercising any right power or remedy hereunder shall
operate as a waiver thereof nor shall any single or partial exercise of
any such right, power or remedy preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. The
remedies provided for herein are cumulative and are not exclusive of
any remedies that may be available to the Company or any Purchaser at
law or in equity or otherwise. No waiver of or consent to any departure
by the Company or by any Purchaser, as the case may be, from any
provision of this Agreement shall be effective without the consent of
the Holders of not less than two-thirds (2/3) of the aggregate
principal amount of the Notes then outstanding; PROVIDED, HOWEVER, that
no such amendment or waiver shall, without the consent of each of the
Holders of the Notes then outstanding affected thereby, (i) change the
stated maturity of the principal of, or any installment of interest on,
any Note or reduce the principal amount thereof or the rate of interest
thereon or any premium payable upon redemption thereof or, change the
place of payment where, or the coin or currency in which, any Note or
any premium or the interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment on or after the
stated maturity thereof, or (ii) reduce the percentages in principal
amount of Notes, the consent of whose Holders is required for any
waiver or amendments provided for in this Agreement. No amendment or
modification of any provision of this Agreement in accordance with the
terms hereof shall be effective unless such amendment or modification
is (i) in writing and (ii) consented to by Holders of not less than
two-thirds (2/3) or more of the principal amount of the Notes then
outstanding.
(b) Except as contemplated by Section 2.1(d) or Section 4.1(o)
of this Agreement neither the Company nor the Subsidiaries of the
Company has paid or shall pay, or has caused or shall cause to be paid,
directly or indirectly, any remuneration, whether by way of interest,
fee or otherwise, to any Holder of the Notes as consideration or as an
inducement for the purchase of the Notes or any consent, waiver or
amendment of any of the terms or provisions of this Agreement.
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<PAGE> 29
9.4 NOTICE. All notices, demands and other communications provided for
hereunder shall be in writing, and, if to the Purchasers, shall be given by
registered or certified mail, return receipt requested in a pre-paid envelope,
by overnight mail or courier, or by facsimile transmission, addressed to each
Purchaser as shown on the execution page hereof (with a copy to special counsel
for Purchasers as shown below) and to such other address as such Purchaser or
its counsel may designate to the Company in writing, or addressed to the Company
as set forth below:
To Company: Waterlink, Inc.
4100 Holiday Street, N.W.
Suite 201
Canton, Ohio 44718
Attention: Chief Financial Officer
Telecopier No.: (330) 649-4008
With copy to: Benesch, Friedlander, Coplan & Aronoff LLP
2300 BP America Building
200 Public Square
Cleveland, Ohio 44114
Attention: Ira C. Kaplan
Telecopier No.: (216) 363-4588
To Special Counsel Squire, Sanders & Dempsey
to Purchasers: 127 Public Square, Ste. 4900
Cleveland, Ohio 44114
Attention: James P. Oliver
Telecopier No.: (216) 479-8793
or to such other address as the Company may designate to the Purchasers in
writing. A notice made in accordance with the terms of this Section 9.4 shall be
deemed to have been given (i) when delivered, if sent by registered or certified
mail or delivered personally or by facsimile transmission, or (ii) on the next
following Business Day if sent by overnight mail or courier.
9.5 DETERMINATIONS. All determinations to be made by the Company or any
Purchaser hereunder in its opinion or judgment or with its approval or otherwise
shall be made by it in its sole discretion.
9.6 EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto on separate counterparts,
each of which counterparts, when so executed and delivered, shall be deemed to
be m original and all of which counterparts, taken together, shall constitute
but one and the same agreement.
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9.7 BINDING EFFECT; ASSIGNMENT. Prior to the Closing Date, the rights
and obligations of any Purchaser under this Agreement may not be assigned to any
other person except with the prior written consent of the Company. Except as
expressly provided in this Agreement this Agreement shall not be construed so as
to confer any right or benefit upon any person other than the parties to this
Agreement, and their respective successors and assigns. This Agreement and all
representations, warranties and covenants contained herein, shall be binding
upon the Company and each Purchaser, and their respective successors and
permitted assigns and shall inure to the benefit of the Company, all present and
future holders of Senior Indebtedness, the Noteholders and their respective
successors and assigns.
9.8 GOVERNING LAW. This Agreement shall be deemed to be a contract made
under the laws of the State of Ohio, and for all purposes will be construed in
accordance with the laws of said state, without regard to principles of
conflicts of law.
9.9 SEVERABILITY OF PROVISIONS. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
9.10 HEADINGS. The Article and Section headings and the table of
contents used or contained in this Agreement are for the convenience of
reference only and shall not affect the construction of this Agreement.
9.11 ENTIRE AGREEMENT. This Agreement (with the Schedules and Exhibits
attached hereto) contain, and are intended as, a complete statement of all the
terms and arrangements between the parties with respect to the matters provided
for herein, and supersedes any previous agreements and understandings between
the parties with respect to those matters.
IN WITNESS WHEREOF, the parties hereto have caused Agreement to be
executed by their respective officers hereunto duly authorized, as of the date
first above written.
BRANTLEY VENTURE PARTNERS III, L.P. WATERLINK, INC.
By: Brantley Venture Management III, L.P.,
its General Partner By: _____________________
By: Pinkas Family Partners, L.P., its General Its: ________________
Partner
By: ______________________________
Robert P. Pinkas
Its: General Partner
27
<PAGE> 31
NOTE PURCHASE AGREEMENT SIGNATURE PAGE
Accepted and agreed as of
the date first above written:
Brantley Capital Corporation
- ----------------------------
NAME OF PURCHASER
By: ____________________________
Robert P. Pinkas
Its: Chairman, Chief Executive Officer
and Treasurer
Address: 20600 Chagrin Boulevard
Suite 1150
Cleveland, Ohio 44122
Telephone No.: (216) 283-4800
Telecopier No.: (216) 283-5324
Aggregate principal amount of the Notes to be purchased by
you upon Advances and the aggregate purchase price thereof:
<TABLE>
<CAPTION>
1 $ 2,100,000 $ 2,037,000 21%
- ---------------- --------------------------- ----------------------- -------------------
<S> <C> <C> <C>
Number of Note Principal Amount of the Note Aggregate Purchase Price Pro-Rata Percentage
</TABLE>
Taxpayer Identification No.:
- ---------------
28
<PAGE> 32
NOTE PURCHASE AGREEMENT SIGNATURE PAGE
Accepted and agreed as of
the date first above written:
River Cities Capital Fund Limited Partnership
- ---------------------------------------------
NAME OF PURCHASER
By: RC Management Limited Partnership,
its General Partner
By: Mayson, Inc., its General Partner
By: ____________________________
Edwin T. Robinson
Its: President
Address: 221 East 4th Street
Suite 2250
Cincinnati, Ohio 45202
Telephone No.: (513) 621-9700
Telecopier No.: (513) 579-8939
Aggregate principal amount of the Notes to be purchased by
you upon Advances and the aggregate purchase price thereof:
<TABLE>
<CAPTION>
2 $ 900,000 $ 873,000 9%
----------- -------------------------- ------------------------- ------------------
<S> <C> <C> <C>
Number of Note Principal Amount of the Note Aggregate Purchase Price Pro-Rata Percentage
</TABLE>
Taxpayer Identification No.:
31-1413379
29
<PAGE> 33
NOTE PURCHASE AGREEMENT SIGNATURE PAGE
Accepted and agreed as of
the date first above written:
Environmental Opportunities Fund, L.P.
- --------------------------------------
NAME OF PURCHASER
By: Environmental Opportunities
Management Co., LLC, its
General Partner
By: ____________________________
Kenneth Ch'uan-k'ai Leung
Its: Manager
Address: 126 East 56th Street
24th Floor
New York, New York 10022
Telephone No.: (212) 980-0789
Telecopier No.: (212) 593-6150
Aggregate principal amount of the Notes to be purchased by
you upon Advances and the aggregate purchase price thereof:
<TABLE>
<CAPTION>
3 $ 1,779,373 $ 1,725,991.81 17.79%
- --------------- --------------------------- ----------------------- -------------------
<S> <C> <C> <C>
Number of Note Principal Amount of the Note Aggregate Purchase Price Pro-Rata Percentage
</TABLE>
Taxpayer Identification No.:
74-0488338
30
<PAGE> 34
NOTE PURCHASE AGREEMENT SIGNATURE PAGE
Accepted and agreed as of the date first above written:
Environmental Opportunities Fund (Cayman), L.P.
- -----------------------------------------------
NAME OF PURCHASER
By: Environmental Opportunities
Management Co., LLC, its
General Partner
By: ____________________________
Kenneth Ch'uan-k'ai Leung
Its: Manager
Address: c/o Citco Fund Services
(Cayman Islands) Limited
P.O. Box 31106 SMB
Grand Cayman, Cayman Islands, B.W.I.
Telephone No.: (713) 250-4283
Telecopier No.: (713) 250-4294
Aggregate principal amount of the Notes to be purchased by
you upon Advances and the aggregate purchase price thereof:
<TABLE>
<CAPTION>
4 $ 220,627 $ 214,008.19 2.21%
- --------------- --------------------------- ----------------------- -------------------
<S> <C> <C> <C>
Number of Note Principal Amount of the Note Aggregate Purchase Price Pro-Rata Percentage
</TABLE>
Taxpayer Identification No.: N/A
Copy of notices to:
Environmental Opportunities
Management Company, L.L.C.
3100 Texas Commerce Tower
Houston, Texas 77002
31
<PAGE> 35
NOTE PURCHASE AGREEMENT SIGNATURE PAGE
Accepted and agreed as of
the date first above written:
National City Capital Corporation
- ---------------------------------
NAME OF PURCHASER
By: ____________________________
Todd S. McCuaig
Its: ____________________________
Address: 1965 E. 6th St.
10th Floor
Cleveland, OH 44114
Telephone No.: (216) 575-2480
Telecopier No.: (216) 575-9965
Aggregate principal amount of the Notes to be purchased by
you upon Advances and the aggregate purchase price thereof:
<TABLE>
<CAPTION>
5 $ 3,000,000 $ 2,910,000 30%
- --------------- --------------------------- ----------------------- -------------------
<S> <C> <C> <C>
Number of Note Principal Amount of the Note Aggregate Purchase Price Pro-Rata Percentage
</TABLE>
Taxpayer Identification No.:
34-1269115
32
<PAGE> 36
NOTE PURCHASE AGREEMENT SIGNATURE PAGE
Accepted and agreed as of
the date first above written:
IPP95, L.P.
- -----------
NAME OF PURCHASER
By: WESINVEST, Inc., its
General Partner
By: ____________________________
Christine Jenkins
Its: Secretary
Address: 310 South Street
P.O. Box 1913
Morristown, NJ 07461
Telephone No.: (212) 898-0290
Telecopier No.: (212) 898-0840
Aggregate principal amount of the Notes to be purchased by you upon Advances and
the aggregate purchase price thereof:
<TABLE>
<CAPTION>
6 $ 2,000,000 $ 1,940,000 20%
- --------------- --------------------------- ----------------------- -------------------
<S> <C> <C> <C>
Number of Note Principal Amount of the Note Aggregate Purchase Price Pro-Rata Percentage
</TABLE>
Taxpayer Identification No.: 22-3356204
Copies to:
IPP95.L.P.
310 South Street
P.O. Box 1913
Morristown, NJ 07461
Attn: Conor Mullett
33
<PAGE> 37
EXHIBIT A
TO THE PURCHASE AGREEMENT
[FORM OF NOTE]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT'). IT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR AN OPINION, SATISFACTORY TO THE COMPANY, FROM THE HOLDER'S COUNSEL, THAT SUCH
REGISTRATION IS NOT REQUIRED BY REASON OF AN APPLICABLE EXEMPTION OR UPON
COMPLIANCE WITH ANY APPLICABLE RULE OR REGULATION PROMULGATED UNDER THE ACT AND,
IF APPLICABLE, WITHOUT COMPLIANCE WITH ANY OTHER TERMS AND PROVISIONS
RESTRICTING ANY SUCH TRANSACTIONS, INCLUDING, WITHOUT LIMITATION, THE TERMS AND
PROVISIONS OF THAT CERTAIN AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT DATED AS
OF MARCH 6, 1997.
WATERLINK, INC.
SUBORDINATED NOTE
DUE 2002
No. __ $___________
AS STATED IN THE PURCHASE AGREEMENT (DEFINED BELOW), THE RIGHTS OF THE HOLDER
HEREOF ARE SUBJECT TO SUBORDINATION TO ALL SENIOR INDEBTEDNESS (AS DEFINED IN
THE PURCHASE AGREEMENT REFERRED TO HEREIN) OF THE COMPANY.
Waterlink, Inc., a corporation duly organized and existing under the
laws of the State of Delaware (herein called the "Company"), for value received,
hereby promises to pay to ____________________ the principal sum of
_________________________ Dollars ($___________) on March 6, 2002 and to pay
interest on said principal amount at the rate of twelve percent (12%)[eight
percent (8%) to IPP95] per annum until [one year] and fourteen percent (14%) per
annum thereafter, which interest shall be payable quarterly in arrears on each
June 30, September 30, December 31, and March 31, commencing June 30, 1997 (each
June 30, September 30, December 31 and March 31 being herein referred to as an
"Interest Payment Date").
The principal of this Note is subject to certain mandatory prepayments
in accordance with the terms of the Purchase Agreement. The Company may at any
time and from time to time prepay all or portion of the principal amount
hereunder without premium or penalty. The Holder must surrender this Note to the
Company to collect the final principal payment hereunder at maturity or
<PAGE> 38
upon the Company's prepayment thereof. The Company will maintain records of all
payments and prepayments of principal and interest made with respect to this
Note, the current outstanding principal balance hereof and other appropriate
information. Such records shall be presumptive evidence of the principal amount
owing and unpaid hereon. The Company will pay principal and interest in money of
the United States of America that at the time of payment is legal tender for
payment of public and private debts. The Company may, however, pay principal and
interest by a check payable in such money. It may mail an interest check to the
Holder's registered address.
The Company shall give written notice of any payment of this Note to
the Holder of this Note not less than five (5) Business Days prior thereto and
the opportunity, upon surrender of this Note, to deliver notice to the Company
of the Holder's determination to convert to shares of Common Stock all or a
portion of the principal and accrued interest hereon, as specified in such
notice, in lieu of and in substitution for the exercise by the Holder of all or
part of its then exercisable Warrants (which conversion shall be in all respects
on the same terms and conditions as if the Holder had exercised a like amount of
such Warrants and such like amount of Warrants shall no longer be exercisable).
This Note is one of a duly authorized issue of Notes of the Company all
issued or to be issued under and pursuant to the Subordinated Note Purchase
Agreement and Credit Facility dated as of March 6, 1997 (the "Purchase
Agreement"), duly executed and delivered by the Company, to which Purchase
Agreement and all amendments thereto reference is hereby made for a statement of
the rights, limitations of rights, obligations, duties and immunities thereunder
of the Company and the Noteholders. All capitalized terms in this Note unless
otherwise defined, have the meanings assigned to them in the Purchase Agreement.
This Note is subordinated to Senior Indebtedness of the Company. To the
extent provided in the Purchase Agreement, Senior Indebtedness must be paid
before the Notes may be paid. Each Holder by accepting a Note agrees to such
subordination provisions and authorizes the Company to give them effect. The
Senior Indebtedness shall continue to be Senior Indebtedness and entitled to the
benefits of the subordination provisions irrespective of any amendment,
modification or waiver of any term of any instrument relating to the Senior
Indebtedness or extension or renewal of such Senior Indebtedness and the
subordination provisions. Reference is made to the Purchase Agreement for a
complete description of what constitutes Senior Indebtedness and the provisions
of regarding the subordination of the Note.
The Company shall keep at its principal office a register in which the
Company shall provide for the registration of the Notes. The registered Holder
of this Note may be treated as the owner of it for all purposes.
Subject to certain exceptions, the Purchase Agreement or this Note may
be amended with the written consent of the Holders of at least two-thirds (2/3),
in principal amount of the Notes then outstanding and any past default or
compliance with any provisions may be waived in a particular instance with the
written consent of the Holders of two-thirds (2/3) in principal amount of the
Notes
2
<PAGE> 39
then outstanding. Without the consent of or notice to any Holder, the Company
may amend the Purchase Agreement or the Notes to, among other things, cure any
ambiguity, defect or inconsistency or make any other change that does not
adversely affect the rights of any Holder.
A director, officer, employee or shareholder, as such, of the Company
shall not have any liability for any obligations of the Company or any successor
corporation under this Note or the Purchase Agreement or for any claim based on,
in respect or by reason of such obligations or their creation. The Holder of
this Note by accepting this Note waives and releases all such liability. The
waiver and release are part of the consideration for the issue of this Note.
Customary abbreviations may be used in the name of a Noteholder such
as: TEN COM (tenants in common), TENANT (tenants by the entireties), JT TEN
(joint tenants with right of survivorship and not as tenants in common), CUST
(Custodian), and U/G/M/A (Uniform Gifts to Minors Act).
The Purchase Agreement and this Note shall be deemed to be contracts
made under the laws of the State of Ohio and shall for all purposes be governed
by, and construed in accordance with, the laws of such State.
IN WITNESS WHEREOF, Waterlink, Inc. has caused this Note to be signed
by an authorized officer as of the date indicated below.
Dated: ___________________, 1997
WATERLINK, INC.
(SEAL) By _______________________
Its ______________________
<PAGE> 1
Exhibit 3
WATERLINK, INC.
AMENDED AND RESTATED 1995 STOCK OPTION PLAN
1. GENERAL. This Stock Option Plan (the "Plan") provides eligible
employees of Waterlink, Inc., a Delaware corporation (the "Company"), and its
subsidiaries with the opportunity to acquire or expand their equity interest in
the Company by making available for award or purchase shares of Common Stock,
.001 par value, of the Company ("Common Stock"), through the granting of
nontransferable options to purchase shares of Common Stock ("Stock Options").
Stock Options shall be referred to herein as "Grants," and an individual grant
of Stock Options shall be referred to herein as a "Grant."
It is intended that key employees may be granted simultaneously or
from time to time, Stock Options that qualify as incentive stock options
("Incentive Stock Options") under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), or Stock Options that do not so qualify
("Non-qualified Stock Options"). No provision of the Plan is intended or shall
be construed to grant employees alternative rights in any Incentive Stock Option
granted under the Plan so as to prevent such Option from qualifying under
Section 422 of the Code.
The Plan is intended to conform to the extent necessary with all
provisions of the Securities Act of 1933, as amended (the "Securities Act"), and
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any
and all regulations and rules promulgated by the Securities and Exchange
Commission thereunder, including, without limitation, Rule 16b-3.
Notwithstanding anything herein to the contrary, the Plan shall be administered,
and Stock Options shall be granted and may be exercised, only in such a manner
as to conform to such laws, rules and regulations. To the extent permitted by
applicable law, the Plan and Stock Options granted hereunder shall be deemed
amended to the extent necessary to conform to such laws, rules and regulations.
2. PURPOSE OF THE PLAN. The purpose of the Plan is to provide
continuing incentives to key employees of the Company and of any subsidiary
corporation of the Company, by encouraging such key employees to acquire new or
additional share ownership in the Company, thereby increasing their proprietary
interest in the Company's business and enhancing their personal interest in the
Company's success.
For purposes of the Plan, a "subsidiary corporation" consists of any
corporation fifty percent (50%) of the stock of which is directly or indirectly
owned or controlled by the Company.
3. EFFECTIVE DATE OF THE PLAN. The Plan shall become effective upon
its adoption by the Board of Directors of the Company (the "Board"), subject to
approval by holders of a majority of the outstanding shares of voting capital
stock of the Company. If the Plan is not so approved within twelve (12) months
after the date the Plan is adopted by the Board, the Plan and any Grants made
hereunder shall be null and void, However, if the Plan is so approved, no
further shareholder approval shall be required with respect to the making of
Grants pursuant to the Plan, except as provided in Section 12 hereof.
4. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Board unless and until the Board appoints a committee composed of no fewer than,
two (2) members of the Board (the
1
<PAGE> 2
"Committee"). No person shall be appointed to the Committee who, during the one
(1) year period immediately preceding such person's appointment to the
Committee, has received any Grants under the Plan or any similar stock option or
stock incentive plan, other than formula-based plan, maintained by the Company
or any subsidiary corporation. A member of the Committee shall not be eligible
to participate in the Plan while serving on the Committee.
A majority of the members of the Committee shall constitute a quorum.
The acts of a majority of the members present at any meeting at which a quorum
is present (or acts unanimously approved in writing by the members of the
Committee, shall constitute binding acts of the Committee.
Subject to the terms and conditions of the Plan, Board, or the
Committee, if any (hereinafter the "Administrator") shall be authorized and
empowered:
(a) To select the key employees to whom Grants may be made;
(b) To determine the number of shares of Common Stock to be
covered by any Grant;
(c) To prescribe the terms and conditions of any Grants made
under the Plan, and the form(s) and agreement(s) used in connection
with such Grants, which shall include agreements governing the
granting of Stock Options which may provide that the stock which is
the subject of any such Grant shall be subject to the restrictions on
transfer contained in any agreement in effect among the Company and
one or more of its stockholders;
(d) To determine the time or times when Stock Options will be
granted and when they will terminate in whole or in part;
(e) To determine the time or times when Stock Options that are
granted may be exercised; provided, however, that unless the
Administrator specifically determines otherwise in any individual
instance, the standard vesting schedule for Stock Options granted
hereunder shall be four equal yearly installments;
(f) To determine, at the time a Stock Option is granted under the
Plan, whether such Stock Option is an Incentive Stock Option entitled
to the benefits of Section 422 of the Code; and
(g) To establish any other Stock Option agreement provisions not
inconsistent with the terms and conditions of the Plan or, where the
Stock Option is an incentive Stock Option, with the terms and
conditions of Section 422 of the Code.
5. EMPLOYEES ELIGIBLE FOR GRANTS. Grants may be made from time to time
to those key employees of the Company or a subsidiary corporation who are
designated by the Administrator in its sole and exclusive discretion. Key
employees may include, but shall not necessarily be limited to, members of the
Board of Directors (excluding members of the Committee) and officers of the
Company and any subsidiary corporation; however, Stock Options intended to
qualify as Incentive
2
<PAGE> 3
Stock Options shall be granted to key employees only while actually employed by
the Company or a subsidiary corporation. The Administrator may grant more than
one Stock Option to the same key employee. No Stock Option shall be granted to
any key employee during any period of time when such key employee is on a leave
of absence.
6. STOCK SUBJECT TO THE PLAN. The shares to be issued pursuant to any
Grant made under the Plan shall be shares of Common Stock. Either shares of
Common Stock held as treasury stock or authorized and unissued shares of Common
Stock, or both, may be so issued, in such amount or amounts within the maximum
limits of the Plan as the Administrator shall from time to time determine.
Subject to the provisions of the next succeeding paragraph of this
Section 6 and the provisions of Section 7(h), the aggregate number of shares of
Common Stock that can be actually issued under the Plan shall be Eight Hundred
Thousand (800,000).
If, at any time subsequent to the date of adoption of the Plan by the
Board of Directors, the number of shares of Common Stock increased or decreased,
or changed into or exchanged for a different number or kind of shares of stock
or other securities of the Company or of another corporation (whether as a
result of a stock split, stock dividend, combination or exchange of shares,
exchange for other securities, reclassification, reorganization, redesignation,
merger, consolidation, recapitalization or otherwise): (i) there shall
automatically be substituted for each share of Common Stock subject to an
unexercised Stock Option (in whole or in part) granted under the Plan, the
number and kind of shares of stock or other securities into which each share of
outstanding Common Stock shall be changed or for which each such share of Common
Stock shall be exchanged; and (ii) the option price per share of Common Stock or
unit of securities shall be increased or decreased proportionately so that the
aggregate purchase price for the securities subject to a Stock Option shall
remain the same as immediately prior to such event. In addition to the
foregoing, the Administrator shall be entitled in the event of any such
increase, decrease or exchange of shares of Common Stock to make other
adjustments to the securities subject to a Stock Option, the provisions of the
Plan, and to any related Stock Option agreements (including adjustments which
may provide for the elimination of fractional shares) where necessary (under
Section 422(a)(2) of the Code or otherwise) to preserve the terms and conditions
of any Grants hereunder.
7. STOCK OPTION PROVISIONS.
(a) GENERAL. The Administrator may grant to key employees (also
referred to as "optionees") nontransferable Stock Options that either
qualify as Incentive Stock Options under Section 422 of the Code or do
not so qualify. However, any Stock Option which is an Incentive Stock
Option shall only be granted within ten (10) years from the earlier of
(i) the date this Plan is adopted by the Board and (ii) the date this
Plan is approved by the stockholders of the Company.
(b) STOCK OPTION PLAN. The option price per share of Common Stock
which may be purchased under an Incentive Stock Option under the Plan
shall be determined by the Administrator at the time of Grant, but
shall not be less than one hundred percent (100%) of
3
<PAGE> 4
the fair market value of a share of Common Stock, determined as of the
date such Option is granted; however, if a key employee to whom an
Incentive Stock Option is granted is, at the time of the grant of such
Option, an "owner" as defined in Section 422(b)(6) of the Code
(modified as provided in Section 424(d) of the Code) of more than ten
percent (10%) of the total combined voting power of all classes of
stock of the Company or any subsidiary corporation (a "Substantial
Shareholder"), the price per share of Common Stock of such Option, as
determined by the Administrator, shall not be less than one hundred
ten percent (110%) of the fair market value of a share of Common Stock
on the date such Option is granted. The option price per share of
Common Stock under each Stock Option granted pursuant to the Plan
which is not an Incentive Stock Option shall be determined by the
Administrator at the time of Grant. Except as specifically provided
above, the fair market value of a share of Common Stock shall be
determined in accordance with procedures to be established by the
Administrator. The day on which the Administrator approves the
granting of a Stock Option shall be considered the date on which such
Option is granted.
(c) PERIOD OF STOCK OPTION. The Administrator shall determine
when each Stock Option is to expire. However, no Incentive Stock
Option shall be exercisable after the expiration of ten (10) years
from the date upon which such Option is granted, or five (5) years
from the date upon which such Option is granted to a Substantial
Shareholder.
(d) LIMITATION ON EXERCISE AND TRANSFER OF STORK OPTIONS. Only
the key employee to whom a Stock Option is granted may exercise such
Option, except where a guardian or other legal representative has been
duly appointed for such employee, and except as otherwise provided in
the case of such employee's death. No Stock Option granted hereunder
shall be transferable by an optionee other than by will or the laws of
descent and distribution. No Stock Option granted hereunder may be
pledged or hypothecated, nor shall any such Option be subject to
execution, attachment or similar process.
(e) EMPLOYMENT, HOLDING PERIOD REQUIREMENTS FOR CERTAIN OPTIONS.
The Administrator may condition any Stock Option granted hereunder
upon the continued employment of the optionee by the Company or by a
subsidiary corporation. and may make any such Stock Option immediately
exercisable. However, the Administrator will require that, from and
after the date of grant of any Incentive Stock Option granted
hereunder until the day three (3) months prior to the date such Option
is exercised, such optionee must be an employee of the Company or of a
subsidiary corporation, but always subject to the right of the Company
or any such subsidiary corporation to terminate such optionee's
employment during such period (except if the optionee's employment is
terminated due to death or permanent and total disability, in which
event such period shall be one (1) year). Each Stock Option shall be
subject to such additional restrictions as to the time and method of
exercise as shall be prescribed by the Administrator. Upon compliance
with any condition or requirement imposed by the Administrator
pursuant to the foregoing, a Stock Option or the appropriate portion
thereof may be exercised in whole or in part from time to time during
the option period; however, such exercise right(s) shall be limited to
whole shares.
4
<PAGE> 5
(f) PAYMENT FOR STOCK OPTION PRICE. A Stock Option shall be
exercised by an optionee giving written notice to the Company of his
intention to exercise the same, accompanied by full payment of the
purchase price in cash or by check or, with the consent of the
Administrator, in whole or in part with a surrender of shares of
Common Stock having a fair market value on the date of exercise equal
to that portion of the purchase price for which payment in cash or
check is not made. The Administrator may, in its sole discretion,
approve other methods of exercise for a Stock Option or payment of the
option price, provided that no such method shall cause any option
granted under the Plan as an Incentive Stock Option to not qualify
under Section 422 of the Code, or cause any share of Common Stock
issued in connection with the exercise of an option not to be a fully
paid and non-assessable share of Common Stock.
(g) CERTAIN REISSUANCES OF STOCK OPTIONS. To the extent stares of
Common Stock are surrendered by an optionee in connection with the
exercise of a Stock Option in accordance with Section 7(f), the
Administrator may in its sole discretion grant new Stock Options to
such optionee (to the extent shares of Common Stock remain available
for Grants), subject to the following terms and conditions:
(i) The number of shares of Common Stock shall be equal to
the number of shares of Common Stock being surrendered by the
optionee;
(ii) The option price per share of Common Stock shall be
equal to the fair market value of shares of Common Stock,
determined on the date of exercise of the Stock Options whose
exercise caused such Grant; and
(iii) The terms and conditions of such Stock Options shall
in all other respect replicate such terms and conditions of the
Stock Options whose exercise caused such Grant, except to the
extent such terms and conditions are determined not to be wholly
consistent with the general provisions of this Section 7, or in
conflict with the remaining provisions of this Plan.
(h) CANCELLATION AND REPLACEMENT OF STOCK OPTIONS AND RELATED
RIGHTS. The Administrator may at any time or from time to time permit
the voluntary surrender by an optionee who is the holder of any
outstanding Stock Options under the Plan, where such surrender is
conditioned upon the granting of such optionee of new Stock Options
for such number of shares as the Administrator shall determine, or may
require such a voluntary surrender as a condition precedent to the
grant of new Stock Options. The Administrator shall determine the
terms and conditions of new Stock Options, including the prices at and
periods during which they may be exercised, in accordance with the
provisions of this Plan, all or any of which may differ from the terms
and conditions of the Stock Options surrendered. Any such new Stock
Options shall be subject to all the relevant provisions of this Plan.
The shares of Common Stock subject to any Stock Option so surrendered,
and/or any shares of Common Stock subject to any Stock Option that has
lapsed or been forfeited, shall no longer be charged against the
limitation provided in Section 6 of the Plan and may again become
shares subject to the Plan. The granting of new Stock Options in
connection
5
<PAGE> 6
with the surrender of outstanding Stock Options under this Plan shall
be considered for the purposes of the Plan as the granting of new
Stock Options and not an alteration, amendment or modification of the
Plan or of the Stock Options being surrendered.
(i) LIMITATION ON EXERCISABLE INCENTIVE STOCK OPTIONS. The
aggregate fair market value of the shares of Common Stock first
becoming subject to exercise as Incentive Stock Options by a key
employee during any given calendar year shall not exceed the sum of
One Hundred Thousand Dollars ($100,000). Such aggregate fair market
value shall be determined as of the date such Option is granted,
taking into account, in the order in which granted, any other
Incentive Stock Options granted by the Company, or by a parent or
subsidiary thereof.
(j) WITHHOLDING OF TAXES. The Administrator may, in its sole
discretion, require, as a condition to any Grant or to the delivery of
certificates for shares issued hereunder, that the optionee pay to the
Company, in cash, any federal, state or local taxes of any kind
required by law to be withheld with respect to any Grant or any
delivery of shares of Common Stock upon exercise thereof. The
Administrator, in its sole discretion, may permit optionees to pay
such taxes through the withholding of shares of Common Stock otherwise
deliverable to such optionee in connection with such Grant or the
delivery to the Company of shares of Common Stock otherwise acquired
by the optionee. The Fair Market Value of shares of Common Stock
withheld by the Company or tendered to the Company for the
satisfaction of tax withholding obligations under this Section 7(j)
shall be determined on the date such shares of Common Stock are
withheld or tendered. The Company, to the extent permitted or required
by law, shall have the right to deduct from any payment of any kind
(including salary, bonus, severance or insurance proceeds) otherwise
due to an optionee any federal, state or local taxes of any kind
required by law to be withheld with respect to any Grant or to the
delivery of shares of Common Stock under the Plan, or to retain or
sell without notice a sufficient number of shares of Common Stock to
be issued to such optionee to cover any such taxes, provided that the
Company shall not sell any such shares of Common Stock if such sale
would be considered a sale by such optionce for purposes of Section 16
of the Exchange Act.
8. TERMINATION OF EMPLOYMENT. If a key employee ceases to be an
employee of the company and every subsidiary corporation, for a reason other
than death, retirement, "permanent and total disability" (as defined below) or
such key employee's employment is terminated "without cause" (as defined below),
his Grants shall, unless extended by the Administrator on or before his date of
termination of employment, terminate on the effective date of such termination
of employment. Neither the key employee nor any other person shall have any
right after such date to exercise all or any part of his Stock Options which are
not vested or otherwise subject to restriction and they shall thereupon be
forfeited, declared void and without value, or both.
If termination of employment is due to death or permanent and total
disability or is without cause, then outstanding Stock Options may be exercised
within the one (1) year period ending on the anniversary of such death,
permanent and total disability or termination without cause (except that, with
respect to Incentive Stock Options held by key employees whose employment is
terminated without cause, such Incentive Stock Options must be exercised within
three (3) months of the date of such termination). In the case of death, such
outstanding Stock Options shall be exercised by such
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key employee's estate, or the person designated by such key employee by will, or
as otherwise designated by the laws of descent and distribution. Notwithstanding
the forgoing, in no event shall any Stock Option be exercisable after the
expiration of the option period, and in the case of exercises made after a key
employee's death, not to any greater extent than such key employee would have
been entitled to exercise such Option at the time of his death.
Subject to the discretion of the Administrator, in the event a key
employee terminates employment with the Company and all subsidiary corporations
because of normal or early retirement under any pension plan or retirement plan
hereafter adopted by the Company, or permanent and total disability, any
then-outstanding Stock Options held by such key employee shall lapse at the end
of the term of such Stock Option, or thirty (30) days after such retirement,
whichever first occurs.
For purposes hereof, "permanent and total disability" means a
permanent and total disability as defined in Section 22(e) of the Code. For
purposes hereof, termination "without cause" means termination of the employee's
employment by the Company for reasons other than (i) conviction of the employee
for a felony or for any crime or offense lesser than a felony involving the
property of the Company or a subsidiary corporation or affiliate of the Company;
(ii) conduct by the employee that has caused demonstrable and serious injury to
the Company or a subsidiary, monetary or otherwise; or (iii) substandard
performance, or material misconduct or negligence in the performance, of the
employee's duties in the reasonable judgment of the Board; provided, however,
that for any employee with a written employment agreement with the Company or
any subsidiary corporation, the without cause" definition, if any, contained in
such employment agreement shall be utilized for purposes hereof.
In the event an employee of the Company or one of its subsidiary
corporations is granted a leave of absence by the Company or such subsidiary
corporation to enter military service or because of sickness, his employment
with the Company or such subsidiary corporation shall not be considered
terminated, and he shall be deemed an employee of the Company or such subsidiary
corporation during such leave of absence or any extension thereof granted by the
Company or such subsidiary corporation.
9. AMENDMENTS TO PLAN. The Administrator is authorized to interpret
this Plan and from time to time adopt any rules and regulations for carrying out
this Plan that it may deem advisable. Subject to the approval of the Board, the
Administrator may at any time amend, modify, suspend or terminate this Plan. In
no event, however, without the approval of the stockholders, shall any action of
the Administrator or the Board result in:
(a) Materially amending, modifying or altering the eligibility
requirements provided in Section 5 hereof;
(b) Materially increasing, except as provided in Section 6
hereof, the maximum number of shares of Common Stock that may be made
subject to Grants; or
(c) Materially increasing the benefits accruing to participants
under this Plan;
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except to conform this Plan and any agreements made hereunto to changes in the
Code or required by governing law.
10. INVESTMENT REPRESENTATION, APPROVALS AND LISTING. The
Administrator may, if it deems appropriate, condition its grant of any Stock
Option hereunder upon receipt of the following investment representation from
the optionee:
"I agree that any shares of Common Stock of Waterlink, Inc. which I
may acquire by virtue of this Stock Option shall be acquired for
investment purposes only and not with a view to distribution or
resale, and may not be transferred, sold, assigned, pledged,
hypothecated or otherwise disposed of by me unless (i) a registration
statement or post-effective amendment to a registration statement
under the Securities Act, with respect to said shares of Common Stock
has become effective so as to permit the sale or other disposition of
said shares by me; or (ii) there is presented to Waterlink, Inc. an
opinion of counsel satisfactory to Waterlink, Inc. to the effect that
the sale or other proposed disposition of said shares of Common Stock
by me may lawfully be made otherwise than pursuant to an effective
registration statement or post-effective amendment to a registration
statement relating to the said shares under the Securities Act of
1933, as amended."
The Company shall not be required to issue any certificate or
certificates for shares of Common Stock upon the exercise of any Stock Option
granted under this Plan prior to (i) the obtaining of any approval from any
governmental agency which the Administrator shall, in its sole discretion,
determine to be necessary or advisable; (ii) the admission of such shares to
listing on any national securities exchange on which the shares of Common Stock
may be listed; (iii) the completion of any registration or other qualifications
of the shares of Common Stock under any state or federal law or ruling or
regulations of any governmental body which the Administrator shall, in its sole
discretion, determine to be necessary or advisable or the determination by the
Administrator, in its sole discretion, that any registration or other
qualification of the shares of Common Stock is not necessary or advisable, or
(iv) the obtaining of an investment representation from the optionee in the form
stated above or in such other form as the Administrator, in its sole discretion,
shall determine to be adequate.
11. GENERAL PROVISIONS. The form and substance of Stock Option
agreements made hereunder, whether granted at the same or different times, need
not be identical. Nothing in this Plan or in any Stock Option agreement shall
confer upon any employee any right to continue in the employ of the Company or
any of its subsidiary corporations or affiliates or to interfere with or limit
the right of the Company or any subsidiary corporation or affiliate to terminate
his employment at any time, with or without cause. Nothing contained in this
Plan or in any Stock Option shall be construed as entitling any optionee to any
rights of a shareholder as a result of the grant of a Stock Option, until such
time as shares of Common Stock are actually issued to such optionee pursuant to
the exercise of such Option. This Plan may be assumed by the successors and
assigns of the Company. The liability of the Company under this Plan and any
sale made hereunder is limited to the obligations set forth herein with respect
to such sale and no term or provision of this Plan shall be construed to impose
any liability on the Company in favor of any employee (or any other party acting
on his behalf
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or in his stead) with respect to any loss, cost or expense which such employee
or party may incur in connection with or arising out of any transaction in
connection with this Plan. The cash proceeds received by the Company from the
issuance of shares of Common Stock pursuant to this Plan will be used for
general corporate purposes. The expense of administering this Plan shall be
borne by the Company. The captions and section numbers appearing in this Plan
are inserted only as a matter of convenience. They do not define, limit,
construe or describe the scope or intent of the provisions of this Plan.
12. PROVISIONS APPLICABLE SOLELY TO INSIDERS. The following provisions
shall apply only to persons who are subject to Section 16 of the Exchange Act
with respect to securities of the Company ("Insiders"), and shall apply to
Insiders notwithstanding any provision of the Plan to the contrary:
(a) No Insider shall be permitted to transfer any security the
Company acquired by him, except to the extent permitted by 17 C.F.R.
Section 240.16a-2(D)(1), upon the exercise of any Stock Option,
until at lest [sic] six (6) months and one (1) day after the later
of (i) the day on which such security is granted to the Insider or
(ii) the day on which the exercise or conversion price of such
security is fixed.
(b) An Insider may elect to have shares withheld from a Grant or
tender shares to the Company in order to satisfy the tax withholding
consequences of a Grant only during the period beginning on the third
business day following the date on which the Company releases the
financial information specified in 17 C.F.R. Section
240.16b-3(e)(1)(ii) and ending on the twelfth business day following
such date. Notwithstanding the foregoing, an Insider may elect to
have shares withheld from a Grant in order to satisfy tax
withholding consequences thereof by providing the Company with a
written election to so withhold at least six (6) months in advance
of the withholding of shares otherwise issuable upon exercise of a
Stock Option.
13. TERMINATION OF THIS PLAN. This Plan shall terminate on February 1,
2005, and thereafter no Stock Options shall be granted hereunder. All Stock
Options outstanding at the time of termination of this Plan shall continue in
full force and effect according to their terms and the terms and conditions of
this Plan.
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Exhibit 4
JOINT ACQUISITION STATEMENT
pursuant to Rule 13d-1(f)(1)
The undersigned acknowledge and agree that the foregoing statement on
Schedule 13D, as may be amended, is filed on behalf of each of the undersigned
and that all subsequent amendments to this statement on Schedule 13D, as may be
amended, shall be filed on behalf of each of the undersigned without the
necessity of filing additional joint acquisition statements. The undersigned
acknowledge that each shall be responsible for the timely filing of such
amendments, and for the completeness and accuracy of the information concerning
him or it contained therein, but shall not be responsible for the completeness
and accuracy of the information concerning the other, except to the extent that
he or it knows or has reason to believe that such information is inaccurate.
Dated: July 7, 1997
BRANTLEY CAPITAL CORPORATION
By: /s/ Robert P.Pinkas
Name: Robert P. Pinkas
Title: Chairman of the Board,
Chief Executive Officer and
Treasurer
BRANTLEY VENTURE PARTNERS III,
L.P.
By: Brantley Venture Management
III, L.P.
By: Pinkas Family Partners, L.P.
By: /s/Robert P. Pinkas
Name: Robert P. Pinkas
Title: General Partner
/s/Robert P. Pinkas
Name: Robert P. Pinkas
/s/Michael J. Finn
Name: Michael J. Finn
/s/Paul H. Cascio
Name: Paul H. Cascio
