<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Quarterly Period Ended June 30, 1997
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from to
Commission File Number 1-13041
WATERLINK, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 34-1788678
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
---------------------------------
4100 Holiday Street N.W., Suite 201
Canton, Ohio 44718
(Address of Principal Executive Offices)
(Zip Code)
---------------------------------
330-649-4000
(Registrant's Telephone Number, Including Area Code)
----------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes ( ) No (X)
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.001 par value - 11,753,731 shares outstanding as of July 31,
1997
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<TABLE>
<CAPTION>
INDEX
WATERLINK, INC. AND SUBSIDIARIES
PAGE
<S> <C> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated balance sheets - September 30, 1996 and
June 30, 1997 3-4
Consolidated statements of operations - Three months
ended June 30, 1996 and 1997; Nine months ended
June 30, 1996 and 1997 5
Consolidated statements of cash flows - Nine months
ended June 30, 1996 and 1997 6
Notes to consolidated financial statements 7-10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11-19
PART II - OTHER INFORMATION
Item 2. Changes in Securities 20
Item 6. Exhibits and Reports on Form 8-K 20-21
Signatures 22
</TABLE>
2
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<TABLE>
<CAPTION>
PART I, ITEM I - FINANCIAL STATEMENTS
WATERLINK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30,
September 30, 1997
1996 (Unaudited)
----------- ----------
ASSETS (Thousands of dollars)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 119 $ 3,573
Accounts receivable:
Trade, net 5,699 17,746
Other 378 501
Inventories 3,231 6,498
Costs in excess of billings 1,447 9,155
Other current assets 172 442
------- -------
Total Current Assets 11,046 37,915
Property, Plant and Equipment, at cost:
Land, buildings and improvements 750 3,221
Machinery and equipment 383 2,292
Office equipment 747 1,123
------- -------
1,880 6,636
Less accumulated depreciation 103 262
------- -------
1,777 6,374
Other Assets:
Goodwill, net 15,029 39,485
Patents, net 749 555
Other assets 390 2,321
------- -------
16,168 42,361
------- -------
Total Assets $28,991 $86,650
======= =======
</TABLE>
See notes to consolidated financial statements.
3
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<TABLE>
<CAPTION>
PART I, ITEM I - FINANCIAL STATEMENTS
WATERLINK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
June 30,
September 30, 1997
1996 (Unaudited)
-------- --------
(Thousands of dollars)
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Accounts payable-trade $ 2,076 $ 11,434
Accrued expenses 1,931 6,597
Additional purchase price payable 1,013 --
Billings in excess of cost 559 1,418
Accrued income taxes 60 994
Current portion of long-term debt 1,969 2,387
-------- --------
Total Current Liabilities 7,608 22,830
Long-Term Obligations:
Long-term debt 4,676 1,000
Notes payable-related parties 3,100 --
Convertible subordinated notes-related parties 2,400 --
Other long-term obligations 300 1,225
-------- --------
10,476 2,225
Redeemable Preferred Stock
8,500 --
Shareholders' Equity:
Preferred Stock, $.001 par value, 10,000,000 shares
authorized, none issued and outstanding -- --
Common Stock, voting, $.001 par value, Authorized -
40,000,000 shares at June 30, 1997
Issued and outstanding - 1,999,996 shares at
September 30, 1996 and 10,978,231 shares at
June 30, 1997 2 11
Additional paid-in capital 2,611 62,838
Foreign currency translation adjustment -- (171)
Retained earnings (deficit) (206) (1,083)
-------- --------
Total Shareholders' Equity 2,407 61,595
-------- --------
Total Liabilities and Shareholders' Equity $ 28,991 $ 86,650
======== ========
</TABLE>
See notes to consolidated financial statements.
4
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<TABLE>
<CAPTION>
PART I, ITEM I - FINANCIAL STATEMENTS
WATERLINK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS-UNAUDITED
Three Months Ended Nine Months Ended
June 30, June 30,
1996 1997 1996 1997
-------- -------- -------- --------
(Thousands of dollars, except per share data)
<S> <C> <C> <C> <C>
Net sales $ 5,006 $ 16,316 $ 13,249 $ 41,043
Cost of sales 2,810 10,276 7,631 25,076
-------- -------- -------- --------
Gross Profit 2,196 6,040 5,618 15,967
Selling, general
and administrative
expenses 2,043 5,135 4,940 12,613
Special management
compensation -- 2,630 -- 2,630
Amortization 90 154 207 434
-------- -------- -------- --------
Operating Income (Loss) 63 (1,879) 471 290
Other Income (Expense):
Interest expense (293) (544) (648) (1,156)
Other - net (13) 3 (45) 78
-------- -------- -------- --------
Loss Before Income
Taxes (243) (2,420) (222) (788)
Income taxes (benefit) 1 (943) 3 (296)
-------- -------- -------- --------
Loss Before
Extraordinary Item (244) (1,477) (225) (492)
Extraordinary item, net
of applicable income
taxes of $257,000 -- (385) -- (385)
-------- -------- -------- --------
Net Loss $ (244) $ (1,862) $ (225) $ (877)
======== ======== ======== ========
Net Loss per Common Share:
Loss before
extraordinary item $ (0.04) $ (0.20) $ (0.04) $ (0.07)
Extraordinary item -- (0.05) -- (0.06)
-------- -------- -------- --------
$ (0.04) $ (0.25) $ (0.04) $ (0.13)
======== ======== ======== ========
Weighted Average Common
and Equivalent Shares
Outstanding 6,243 7,310 6,202 6,920
======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
5
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<TABLE>
<CAPTION>
PART I, ITEM I - FINANCIAL STATEMENTS
WATERLINK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS-UNAUDITED
Nine Months Ended
June 30,
1996 1997
-------- --------
(Thousands of dollars)
<S> <C> <C>
OPERATING ACTIVITIES
Net Loss $ (225) $ (877)
Adjustments to reconcile net loss to net cash
used by operating activities:
Extraordinary item -- 385
Special management compensation -- 2,630
Depreciation and amortization 294 593
Changes in working capital:
Accounts receivable (569) (3,986)
Inventories (670) 5,182
Costs in excess of billings (79) (7,708)
Prepaids and other assets (115) (2,250)
Accounts payable 7 690
Accrued expenses 440 (853)
Billings in excess of cost (416) 838
Accrued income taxes (37) 1,312
-------- --------
Net cash used by operating activities (1,370) (4,044)
INVESTING ACTIVITIES
Purchases of equipment (318) (476)
Purchases of subsidiaries, net of cash acquired (1,894) (25,785)
-------- --------
Net cash used in investing activities (2,212) (26,261)
FINANCING ACTIVITIES
Proceeds from long-term borrowings 1,149 21,110
Payments on long-term borrowings (2,281) (30,855)
Net proceeds from sale of common stock 5 43,569
Net proceeds from sale of preferred stock 4,600 --
-------- --------
Net cash provided by financing activities 3,473 33,824
-------- --------
Effect of exchange rate changes on cash -- (65)
Increase (decrease) in cash and cash equivalents (109) 3,454
Cash and cash equivalents at beginning of period 1,228 119
-------- --------
Cash and cash equivalents at end of period $ 1,119 $ 3,573
======== ========
</TABLE>
See notes to consolidated financial statements.
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PART I, ITEM I - FINANCIAL STATEMENTS
WATERLINK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1997
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included, as well as a special management compensation charge (Note 5) and
an extraordinary item (Note 6). Operating results for the three and nine-month
periods ended June 30, 1997 are not necessarily indicative of the results that
may be expected for the year ending September 30, 1997. For further information,
refer to the consolidated financial statements and footnotes thereto included in
the Company's Registration Statement on Form S-1 (Registration Number 333-25249)
which was declared effective as of June 24, 1997.
2. INVENTORIES
Inventories consisted of the following (thousands of dollars):
<TABLE>
<CAPTION>
September 30, June 30,
1996 1997
---- ----
<S> <C> <C>
Raw materials and supplies $ 1,864 $ 2,812
Work in process and finished goods 1,367 3,686
------ -------
$ 3,231 $ 6,498
======= =======
</TABLE>
3. ACQUISITIONS
On March 5, 1997 the Company acquired the Nordic Water Products Group ("Nordic
Group") for approximately $12,100,000, consisting of $11,100,000 in cash and
$1,000,000 of seller notes. The purchase price includes approximately $4,100,000
of goodwill, which will be amortized on a straight-line basis over 40 years. On
June 27, 1997, the Company acquired Bioclear Technology, Inc. ("Bioclear") and
Lanco
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Environmental Products, Inc. ("Lanco") for approximately $18,106,000 and
$2,200,000, respectively. The purchase price for Bioclear consisted of
approximately $14,488,000 in cash and approximately $3,618,000 in the form of
common stock valued at $11 per share. With regard to Lanco, the entire purchase
consideration was in the form of cash. The amount of goodwill recorded in
connection with these acquisitions was approximately $17,648,000 for Bioclear
and $1,875,000 for Lanco and will be amortized on a straight-line basis over 40
years. These purchase price allocations have been based on preliminary
estimates, which may be revised at a later date.
These acquisitions were accounted for as purchases. The consolidated statement
of operations of the Company includes the results of operations of the acquired
businesses for the period subsequent to the effective date of these
acquisitions.
The following unaudited pro forma information presents the consolidated results
of operations of the Company assuming the acquisitions discussed above, as well
as those acquisitions completed during the fiscal year ended September 30, 1996,
were completed on October 1, 1995 (thousands of dollars):
<TABLE>
<CAPTION>
Nine Months Ended June 30,
1996 1997
---- ----
<S> <C> <C>
Net sales $ 51,718 $ 59,706
Operating profit 2,935 1,527
Loss before taxes (32) (966)
Loss before extraordinary item (18) (551)
Net loss (18) (936)
Per common share:
Loss before extraordinary item $ (0.00) $ (0.05)
Net loss (0.00) (0.08)
</TABLE>
The pro forma results of operations are not indicative of the actual results of
operations that would have occurred had the acquisitions been made on the date
indicated, or the results that may be obtained in the future. The above pro
forma operating results do not reflect the use of proceeds of the initial public
offering and the resulting reduction of indebtedness. Pro forma operating
results for the nine months ended June 30, 1997 reflect the $2,630,000 special
management compensation charge incurred in connection with the initial public
offering.
4. CAPITALIZATION
On June 27, 1997, the Company sold 4,500,000 shares of its common stock at
$11.00 per share in an initial public offering. Proceeds from the offering, net
of underwriter commissions and other related expenses totaling approximately
$6.5 million, were approximately $43.0 million. The proceeds were primarily used
to pay the cash portion of the purchase prices of Bioclear and Lanco and to
repay indebtedness of the Company. In
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connection with the initial public offering, all outstanding shares of preferred
stock of the Company then outstanding were converted in accordance with their
terms into shares of common stock on a one-for-one basis.
A progression of shareholders' equity follows (thousands of dollars):
<TABLE>
<CAPTION>
Foreign Total
Additional Currency Retained Shareholders'
Common Paid-in Translation Earnings Equity
Stock Capital Adjustment (Deficit) (Deficit)
----- ------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balance at September 30, 1996 $ 2 $ 2,611 -- $ (206) $ 2,407
Conversion of subordinated notes
for 600,000 shares of common
stock 1 2,516 2,517
Issuance of 440,735 shares of
common stock in connection
with acquisitions of subsidiaries -- 4,094 4,094
Exercise of stock options -- 534 534
Sale of 4,500,000 shares of common
stock in connection with the
initial public offering 5 43,030 43,035
Conversion of 3,250,000 shares of
preferred stock into common stock 3 8,497 8,500
Issuance of common stock warrants
in connection with debt agreements -- 413 413
Net (loss) (877) (877)
Other 1,143 $ (171) 972
-------- ----- -------- -------- --------
Balance at June 30, 1997 $ 11 $ 62,838 $ (171) $ (1,083) $ 61,595
======== ======== ======== ======== ========
</TABLE>
5. SPECIAL MANAGEMENT COMPENSATION
In June 1997, the Company incurred a special charge to operations of $2,630,000,
resulting primarily from the issuance, concurrent with the initial public
offering, of a ten year option to purchase 100,000 shares of common stock at a
price of $0.10 per share to an officer of the Company pursuant to terms of an
employment agreement. Of this amount, approximately $1,138,000 is non-cash and
the remainder represents cash obligations related principally to the
reimbursement of income taxes resulting from the stock option issuance. This
special charge after income taxes on a per share basis was $0.23 and $0.22 for
the nine months and three months ended June 30, 1997, respectively.
6. EXTRAORDINARY ITEM
During June 1997, the Company completed an initial public offering of its common
stock and used a portion of the proceeds to repay substantially all of its
outstanding indebtedness. In addition, concurrent with the Offering, a note
purchase agreement which
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<PAGE> 10
would have allowed the Company to borrow up to $10 million in subordinated
indebtedness, terminated in accordance with its terms. In connection with the
early retirement of certain indebtedness and the termination of the note
purchase agreement, the Company realized an extraordinary charge of $385,000,
net of taxes of $257,000, related to the write-off of unamortized debt issuance
costs and discounts associated with this indebtedness. This extraordinary item
on a per share basis was $0.06 and $0.05 for the nine months and three months
ended June 30, 1997, respectively.
7. SUBSEQUENT EVENT
In July 1997, the Company sold 675,000 of its common stock pursuant to the
exercise of the underwriters' over-allotment option granted in connection with
its initial public offering completed in June 1997. The $6.9 million of net
proceeds are anticipated to be used by the Company for general working capital
purposes.
10
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PART I, ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
WATERLINK, INC. AND SUBSIDIARIES
OVERVIEW
The Company is an international provider of integrated water
purification and wastewater treatment solutions, principally to industrial and
municipal customers. Waterlink was incorporated in Delaware on December 7, 1994
and has grown both internally and through numerous acquisitions.
On June 27, 1997, the Company consummated its initial public offering
of 4,500,000 shares of its common stock at a price of $11 per share, before the
underwriters' discount and received approximately $43.0 million of net
proceeds. These net proceeds were primarily used to pay the cash portion of the
purchase prices of Bioclear and Lanco and to repay indebtedness of the Company.
On July 16, 1997, the Company sold 675,000 shares of its common stock pursuant
to the exercise of the underwriters' over-allotment option granted in
connection with the initial public offering. The resulting $6.9 million of net
proceeds are anticipated to be used by the Company for general working capital
purposes.
The Company's acquisitions have enabled it to build its technical
capabilities and geographical presence. Through June 30, 1997, the Company
completed the following eight acquisitions at the following effective dates:
- Sanborn Technologies March 31, 1995
- Great Lakes Environmental, Inc. August 31, 1995
- Mass Transfer Systems, Inc. January 31, 1996
- Aero-Mod Incorporated April 26, 1996
- Waterlink Technologies, Inc. September 30, 1996
- Nordic Water Products Group March 5, 1997
- Bioclear Technology, Inc. June 27, 1997
- Lanco Environmental Products, Inc. June 27, 1997
As part of its strategic plan, the Company intends to continue an
aggressive acquisition program. The Company's acquisition program targets
businesses which provide the Company with complementary systems, equipment and
services and broadens its customer and geographic base. The Company seeks
companies which provide the potential for synergies with existing businesses.
With respect to the acquisitions completed prior to fiscal 1997, the Company has
begun to realize significant improvement in internal growth rates due to the
opportunities to cross-sell systems, equipment and services and as a result of
the increased financial, managerial and other resources provided by the Company
to its acquired businesses. The Company expects that it will continue to benefit
from such synergies as it more fully integrates the acquired businesses into its
operations.
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The acquisitions were accounted for under the purchase method of
accounting and are included in the results of operations for the period
subsequent to the effective date of acquisition. Due to the timing and magnitude
of these acquisitions, results of operations for the periods presented are not
necessarily comparable or indicative of operating results for current or future
periods.
The majority of the Company's systems and equipment are custom designed
and take a number of months to produce. Revenues from large contracts are
recognized using the percentage of completion method of accounting in the
proportion that costs bear to total estimated costs at completion. Revisions of
estimated costs or potential contract losses, if any, are recognized in the
period in which they are determined. Revenues from remaining systems and
equipment sales are recognized when shipped.
The Company has experienced quarterly fluctuations in operating results
due to the contractual nature of its business and, to a lesser extent, weather
conditions. As part of its strategic plan, the Company expects that in the
future it may receive contracts that are significantly larger than those
received by the Company historically. In addition, certain of such contracts
will be subject to the customer's ability to finance, or fund from government
sources, the actual costs of completing the project as well as receiving any
necessary permits to commence the project. Therefore, the Company expects that
its future operating results could fluctuate significantly, especially on a
quarterly basis, due to the timing of the awarding of such contracts, the
ability to fund project costs, and the recognition by the Company of revenues
and profits therefrom. In addition, the Company has historically operated with a
moderate backlog. However, as a result of its strategic plan, the Company
anticipates that both the dollar volume and number of contracts in its backlog
will increase significantly. As of July 21, 1997, the Company's backlog was
approximately $30.0 million. Therefore, quarterly sales and operating results
may be affected by the volume and timing of contracts received and performed
within the quarter, which are difficult to forecast. Any significant deferral or
cancellation of a contract could have a material adverse effect on the Company's
operating results in any particular quarter. Because of these factors, the
Company believes that period-to-period comparisons of its operating results are
not necessarily indicative of future performance.
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RESULTS OF OPERATIONS
The following table sets forth for the periods indicated, statements of
operations data as a percentage of net sales:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
1996 1997 1996 1997
---- ----- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 56.1 63.0 57.6 61.1
----- ----- ----- -----
Gross profit 43.9 37.0 42.4 38.9
Selling, general and
administrative expenses 40.8 31.5 37.3 30.7
Special management compensation -- 16.1 -- 6.4
Amortization 1.8 0.9 1.5 1.1
---- ----- ---- ----
Operating income (loss) 1.3 (11.5) 3.6 0.7
Other income (expense):
Interest expense (5.9) (3.3) (4.9) (2.8)
Other - net (0.3) 0.0 (0.4) 0.2
---- ----- ---- ----
Loss before income taxes (4.9) (14.8) (1.7) (1.9)
Income taxes (benefit) 0.0 (5.8) 0.0 (0.7)
---- ----- ---- ----
Loss before extraordinary item (4.9) (9.0) (1.7) (1.2)
Extraordinary item, net of tax -- (2.4) -- (0.9)
---- ----- ---- ----
Net loss (4.9)% (11.4)% (1.7)% (2.1)%
===== ===== ===== =====
</TABLE>
Three Months Ended June 30, 1997 Compared to Three Months Ended June 30, 1996
Net Sales: Net sales for the three months ended June 30, 1997 were $16,316,000,
an increase of $11,310,000 from the comparable prior period. The increase was
primarily due to the acquisition of Mass Transfer Systems, Inc. ("Mass
Transfer") on January 31, 1996, of Aero-Mod Incorporated ("Aero-Mod") on April
26, 1996, of Waterlink Technologies, Inc. on September 30, 1996, and of the
Nordic Group on March 5, 1997. In addition, internal growth accounted for
$2,812,000 of the increase, which represented an internal growth rate of 56.2%,
primarily due to expansion in overseas markets and to the greater levels of
resources provided by the Company to the businesses subsequent to the
acquisitions. The Company measures internal growth by comparing each
subsidiary's net sales from the months subsequent to their respective
acquisition dates during the prior year to net sales from those same months in
the current year.
Gross Profit: Gross profit for the three months ended June 30, 1997 was
$6,040,000, an increase of $3,844,000 from the comparable prior period. The
increase was primarily due to the aforementioned acquisitions and internal
growth. Gross margin was 37.0% for 1997 as compared to 43.9% for 1996. Gross
margins have been impacted by the March 1997 acquisition of the Nordic Group
which historically experiences lower margins as compared to other Waterlink
companies.
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Selling, General and Administrative Expenses: Selling, general and
administrative expenses for the three months ended June 30, 1997 were
$5,135,000, an increase of $3,092,000 from the comparable prior period. The
increase was primarily due to the aforementioned acquisitions. Selling, general
and administrative expenses as a percentage of net sales was 31.5% as compared
to 40.8% for the comparable prior period. This decrease primarily reflects the
spreading of selling, general and administrative expenses over a larger revenue
base.
Special Management Compensation: Special management compensation of $2,630,000
for the three months ended June 30, 1997 resulted primarily from the issuance,
concurrent with the initial public offering, of a ten year option to purchase
100,000 shares of common stock at a price of $0.10 per share to an officer of
the Company pursuant to terms of an employment agreement. Of this amount,
approximately $1,138,000 is non-cash and the remainder represents cash
obligations related principally to the reimbursement of income taxes resulting
from the stock option issuance.
Amortization: Amortization expense for the three months ended June 30, 1997 was
$154,000, an increase of $64,000 from the comparable prior period. The increase
was primarily due to the goodwill resulting from the aforementioned
acquisitions.
Interest Expense: Interest expense for the three months ended June 30, 1997 was
$544,000, an increase of $251,000 from the comparable prior period. This
increase was primarily related to increased borrowings required to finance the
aforementioned acquisitions.
Extraordinary Item: During the three months ended June 30, 1997, the Company
recorded an extraordinary charge of $385,000, net of taxes of $257,000, related
to the write-off of unamortized debt issuance costs associated with certain
indebtedness retired with the net proceeds from, and discounts associated with a
note purchase agreement terminated in connection with, its initial public
offering.
Nine Months Ended June 30, 1997 Compared to Nine Months Ended June 30, 1996
Net Sales: Net sales for the nine months ended June 30, 1997 were $41,043,000,
an increase of $27,794,000 from the comparable prior period. The increase was
primarily due to the acquisition of Mass Transfer on January 31, 1996, of
Aero-Mod on April 26, 1996, of Waterlink Technologies, Inc. on September 30,
1996, and of the Nordic Group on March 5, 1997. In addition, internal growth
accounted for $5,461,000 of the increase, which represented an internal growth
rate of 41.2%, primarily due to expansion in overseas markets and to the greater
levels of resources provided by the Company to the businesses subsequent to the
acquisitions.
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<PAGE> 15
Gross Profit: Gross profit for the nine months ended June 30, 1997 was
$15,967,000, an increase of $10,349,000 from the comparable prior period. The
increase was primarily due to the aforementioned acquisitions and internal
growth. Gross margin was 38.9% for 1997 as compared to 42.4% for 1996. Gross
margins have been impacted by the March 1997 acquisition of the Nordic Group
which historically experiences lower margins as compared to other Waterlink
companies.
Selling, General and Administrative Expenses: Selling, general and
administrative expenses for the nine months ended June 30, 1997 were
$12,613,000, an increase of $7,673,000 from the comparable prior period. The
increase was primarily due to the aforementioned acquisitions. Selling, general
and administrative expenses as a percentage of net sales was 30.7% as compared
to 37.3% for the comparable prior period. This decrease primarily reflects the
spreading of selling, general and administrative expenses over a larger revenue
base.
Special Management Compensation: Special management compensation of $2,630,000
for the nine months ended June 30, 1997 resulted primarily from the issuance,
concurrent with the initial public offering, of a ten year option to purchase
100,000 shares of common stock at a price of $0.10 per share to an officer of
the Company pursuant to terms of an employment agreement. Of this amount,
approximately $1,138,000 is non-cash and the remainder represents cash
obligations related principally to the reimbursement of income taxes resulting
from the stock option issuance.
Amortization: Amortization expense for the nine months ended June 30, 1997 was
$434,000, an increase of $227,000 from the comparable prior period. The increase
was primarily due to the goodwill resulting from the aforementioned
acquisitions.
Interest Expense: Interest expense for the nine months ended June 30, 1997 was
$1,156,000, an increase of $508,000 from the comparable prior period. This
increase was primarily related to increased borrowings required to finance the
aforementioned acquisitions.
Extraordinary Item: During the nine months ended June 30, 1997, the Company
recorded an extraordinary charge of $385,000, net of taxes of $257,000, related
to the write-off of unamortized debt issuance costs associated with certain
indebtedness retired with the net proceeds from, and discounts associated with a
note purchase agreement terminated in connection with, its initial public
offering.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company's primary sources of liquidity have
been (i) borrowings available under its New Credit Facility (as defined below)
and prior credit facilities, (ii) net proceeds from the sale of the Company's
common and preferred stock, and (iii) issuance of common stock and seller
financing incurred in connection with the Company's completed acquisitions.
Historically, the Company's primary uses of capital
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<PAGE> 16
have been the funding of its acquisition program and working capital expansion.
The Company does not currently anticipate making significant capital investments
in plant and equipment due to its focus on partnering with vendors which
manufacture most of the components used in the Company's systems and equipment.
For the nine months ended June 30, 1997, net cash used by operating
activities was $4,044,000, purchases of equipment totaled $476,000 and purchases
of businesses, net of cash acquired, totaled $25,785,000. These cash outlays,
financed primarily by long-term borrowings and the initial public offering,
reflect the Company's continued acquisition program and expansion of existing
operations.
In June 1997, the Company recorded a special management compensation
charge of $2,630,000 resulted primarily from the issuance, concurrent with the
initial public offering, of a ten year option to purchase 100,000 shares of
common stock at a price of $0.10 per share to an officer of the Company
pursuant to terms of an employment agreement. Of this amount, approximately
$1,138,000 is non-cash and the remainder represents cash obligations related
principally to the reimbursement of income taxes resulting from the stock
option issuance.
The net proceeds from the initial public offering were used primarily
to pay the cash portion of the purchase prices of Bioclear and Lanco, and for
the repayment of outstanding indebtedness. Such applications enabled the Company
to reduce its leverage and will enable it to expand its product offerings, which
together are anticipated to improve its financial flexibility and enhance the
implementation of its strategic plan.
The Company intends to continue pursuing attractive acquisition
opportunities. The timing, size or success of any acquisition effort and the
associated potential capital commitments are unpredictable. The Company believes
that through the end of fiscal 1998, (i) future cash flow from operations, (ii)
net proceeds from the July 1997 exercise of the underwriters' over-allotment
option, (iii) borrowings under its New Credit Facility and (iv) issuances of
Common Stock and seller financing incurred in connection with future
acquisitions will be sufficient to fund its working capital needs, additional
acquisitions and additional contingent consideration related to acquisitions.
Acquisitions
As part of its strategic plan, the Company has implemented an
acquisition program, which has significantly impacted liquidity and capital
resources. As of June 30, 1997, the Company has made eight acquisitions
consisting of fifteen operating companies for an aggregate consideration of
$57,457,000, comprised of $41,625,000 of cash, $6,718,000 of Common Stock, and
$9,114,000 of seller financing, including convertible debt.
The Company may be required to make additional purchase consideration
payments of up to $4,465,000, contingent upon the achievement of certain
operating
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<PAGE> 17
results through fiscal 2000. The payments that may be required in fiscal 1997,
1998, 1999 and 2000 are $800,000, $2,200,000, $733,000 and $732,000,
respectively. In connection with two of the Company's acquisitions, the Company
also may be required to make other additional purchase consideration payments in
the form of cash and Common Stock, in an amount equal to a fixed percentage of
the excess of certain specified annual earnings targets through fiscal 2000.
Since such additional purchase consideration payments, if any, are based on a
fixed percentage of such excess amount, there is no maximum amount for such
payments. Any such additional purchase consideration payments will be treated as
additional goodwill for accounting purposes.
Credit Availability
On February 19, 1997, the Company entered into a credit facility with
Bank of America National Trust & Savings Association ("Credit Facility"). The
Credit Facility provided the Company with a revolving line of credit of up to
$8,000,000 and a term loan of $11,000,000. The term loan was used to acquire
the Nordic Group and to refinance certain indebtedness in connection with
the acquisition.
In connection with the Credit Facility, two of the overseas
subsidiaries of the Company entered into separate facilities of $2,200,000 and
$3,800,000, respectively, for borrowings in local currencies. Each separate
facility is guaranteed by the Company, with outstanding amounts that bear
interest based on a designated London interbank offering rate plus a spread of
250 basis points.
As additional consideration for the Credit Facility, the Company has
granted the Bank, pursuant to a certain warrant agreement dated February 19,
1997, a warrant, expiring in 2002, to purchase 225,000 shares of Common Stock at
a purchase price of $4.50 per share.
On June 27, 1997, concurrent with the closing of its initial public
offering, the Company terminated its Credit Facility and entered into a new
$40,000,000 three year, secured, domestic revolving credit facility with Bank
of America National Trust & Savings Association as agent. This facility
permits the Company's overseas subsidiaries to incur up to $10,000,000 of
additional unsecured indebtedness. In connection with entering into the
domestic revolving credit facility, the existing separate facilities of the two
overseas subsidiaries were amended to change availability from $2,200,000 and
$3,800,000 to $4,000,000 and $3,000,000, respectively. The $40,000,000 domestic
revolving credit facility and the existing $7,000,000 overseas facilities (the
"New Credit Facility") will be utilized to fund operating activities of the
Company as well as future acquisitions.
Loans under the domestic revolving credit facility will bear interest
at a designated variable base rate plus spreads ranging from 0 to 25 basis
points depending on the ratio of total consolidated indebtedness to the
Company's earnings before interest, taxes, depreciation and amortization. At
the Company's option, the domestic revolving credit facility will bear interest
based on a designated London interbank offering rate plus spreads ranging from
100 to 200 basis points. As of June 30, 1997, there were no outstanding loans
under the New Credit Facility.
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<PAGE> 18
The New Credit Facility restricts or prohibits the Company from many
actions, including paying dividends and incurring or assuming other indebtedness
or liens. The Company's obligations under the New Credit Facility are secured by
liens on substantially all of the Company's domestic assets, including
equipment, inventory, accounts receivable and general intangibles and pledge of
most of the stock of the Company's subsidiaries. The Company has guaranteed the
payment by its two overseas subsidiaries of their obligations under the overseas
facilities. The two overseas subsidiaries have given a negative pledge of their
assets in connection with the overseas facilities.
In March 1997, the Company entered into a note purchase agreement (the
"Note Purchase Agreement") pursuant to which the Company could issue, and
several purchasers had committed to purchase, five year subordinated notes in
the principal amount of up to $10,000,000 (the "1997 Notes"). The 1997 Notes
were not drawn on by the Company and upon the consummation of the initial public
offering the Note Purchase Agreement terminated in accordance with its terms.
In consideration of entering into the Note Purchase Agreement, parties agreeing
to be purchasers of the 1997 Notes received 125,000 warrants to purchase shares
of Common Stock at a purchase price of $4.50 per share.
Impact of Recently Issued Accounting Standards
In October 1995, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 123, Accounting
for Stock-Based Compensation, which provides an alternative to APB Opinion No.
25, Accounting for Stock Issued to Employees, in accounting for stock-based
compensation issued to employees. The Company intends to account for stock
options in accordance with APB Opinion No. 25. The disclosure requirements of
SFAS No. 123, which are required if an entity elects to continue to use the
accounting method in APB Opinion No. 25, will be adopted as required for the
Company's fiscal 1997 financial statements.
In February 1997, the FASB issued SFAS No. 128, Earnings Per Share,
SFAS No. 28 replaces the presentation of primary earnings per share ("EPS")
under Accounting Principles Board Opinion No. 15 and related Interpretations,
with the presentation of basic EPS (which primarily gives effect only to common
shares actually outstanding) and requires dual presentation of basic and diluted
EPS on the face of the income statement for all entities with complex capital
structures. The Company is required to adopt SFAS No. 128 during the first
quarter of fiscal 1998. The Company has not completed its evaluation of the
potential impact of this new standard on EPS in future periods.
FORWARD LOOKING STATEMENTS
This quarterly report contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995
including, without limitation, statements regarding the Company's plans,
strategies, objectives, expectations,
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<PAGE> 19
intentions, and adequacy of resources. Statements contained herein which are
not historical facts or which contain the words expect, believe or anticipate
shall be deemed to be forward looking statements. These forward-looking
statements are subject to certain risks, uncertainties and other factors which
could cause actual results to differ materially. While forward-looking
statements are sometimes presented with numerical specificity, they are based
on a variety of assumptions made by management regarding future circumstances
over which the Company has little or no control. A number of important factors
could cause the Company's actual results to differ materially from those in
forward-looking statements or financial information. Actual results may differ
from forward-looking results for a number of reasons, including the following:
(i) changes in world economic conditions (including, but not limited to, the
potential instability of governments and legal systems in countries in which
the Company conducts business, and significant changes in currency valuation),
(ii) changes in customer demand as they affect sales and product mix
(including, but not limited to, the effect of strikes at customers' facilities,
variations in backlog and the impact of changes in industrial business cycles),
(iii) competitive factors (including, but not limited to, changes in market
penetration and the introduction of new products by existing and new
competitors), (iv) changes in operating costs (including, but not limited to,
the effects of changes in the Company's manufacturing processes; changes in
costs associated with varying levels of operations; changes resulting from
different levels of customers demands; the effects of unplanned work stoppages;
changes in cost of labor and benefits; and the cost and availability of raw
materials and energy), (v) the success of the Company's operating plan
(including, but not limited to, its ability to achieve the total planned
benefits of its strategic plan, its ability to integrate acquisitions into
Company operations, and the ability of recently acquired companies to meet
satisfactory operating results), and (vi) unanticipated litigation, claims or
assessments (including, but not limited to, claims or problems related to
product warranty and environmental issues). The Company undertakes no
obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
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<PAGE> 20
PART II - OTHER INFORMATION
Item 2. Changes in Securities
- ------------------------------
On April 3, 1997, the Company issued 25,000 shares of Common Stock to
Mr. Rollin S. Reiter. Mr. Reiter is a director of the Company. Mr.
Reiter paid $106,250 (or $4.25 per share) for these shares.
On April 11, 1997, the Company issued 10,000 shares of Common Stock to
Dr. Paul M. Sutton. Dr. Sutton is a director of the Company. Dr. Sutton
paid $42,500 (or $4.25 per share) for these shares.
On April 14, 1997, the Company issued 5,000 shares of Common Stock to
Mr. John R. Miller. Mr. Miller is a director of the Company. Mr. Miller
paid $21,250 (or $4.25 per share) for these shares.
On June 24, 1997, the Company granted a ten year option to purchase
100,000 shares of Common Stock at a price of $0.10 per share to Mr.
Theodore F. Savastano, in accordance with Mr. Savastano's existing
exployment agreement. Mr. Savastano is a director and executive
officer of the Company.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
3.1 Fifth Amended and Restated Certificate of
Incorporation of the Company (including Certificate
of Designation, Preferences and Rights of Series 1
Preferred Stock).
3.2 Amended and Restated By-Laws of the Company.
4.1 Rights Agreement between the Company and American
Stock Transfer & Trust Company dated as of May 23,
1997.
10.1 First Amendment, dated as of June 23, 1997, to the
Company's Employee Stock Purchase Plan.
10.2 Credit Agreement, dated as of June 27, 1997, among
the Company, Bank of America National Trust & Savings
Association (successor by merger to Bank of America
Illinois), as agent, and for other financial
institutions party thereto.
10.3 First Amendment, dated as of June 27, 1997, to Credit
Agreement, dated as of March 4, 1997, among Waterlink
(Sweden) AB, the Company, as guarantor, and Bank of
America National Trust & Savings Association, London
Branch.
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<PAGE> 21
10.4 First Amendment, dated as of June 27, 1997, to Credit
Agreement, dated as of March 4, 1997, among Waterlink
(Germany) GmbH, the Company, as guarantor, and Bank
of America National Trust & Savings Association,
Frankfurt Branch.
11.1 Computation of earnings per share.
27.1 Financial Data Schedule as of and for the nine months
ended June 30, 1997
(b) Reports on Form 8-K
Date Item Financial Statements
---- ---- --------------------
June 27, 1997 #2 Unaudited Pro Forma Consolidated Financial
Data of Waterlink, Inc. and Subsidiaries (to the
extent incorporated therein by reference).
Financial statements of Lanco Environmental
Products, Inc. (to the extent incorporated therein
by reference).
Consolidated financial statements of Bioclear
Technology, Inc. (to the extent incorporated
therein by reference).
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<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Waterlink, Inc.
(Registrant)
By: /s/ Chet S. Ross
-----------------
Chet S. Ross
President and Chief Executive Officer
By: /s/ Michael J. Vantusko
------------------------
Michael J. Vantusko
Chief Financial Officer
Dated: August 12, 1997
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<PAGE> 1
Exhibit 3.1
FIFTH AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
WATERLINK, INC.
The original Certificate of Incorporation was filed on December 7, 1994.
This Fifth Amended and Restated Certificate of Incorporation (the "Restated
Certificate of Incorporation") was duly adopted in accordance with Sections 242
and 245 of the General Corporation Law of the State of Delaware and it amends
and restates the presently existing Fourth Amended and Restated Certificate of
Incorporation in its entirety.
FIRST: The name of the Corporation is WATERLINK, INC.
SECOND: The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in multi-material
recycling and any other lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is Fifty Million (50,000,000), divided
into classes as follows:
Ten Million (10,000,000) shares of Preferred Stock, $.001 par value
(the "Preferred Shares").
Forty Million (40,000,000) shares shall be shares of Common Stock,
$.001 par value (the "Common Shares"); and
The following is a statement of the powers, preferences, rights and
the qualifications, limitations or restrictions of the Preferred Shares, and
the Common Shares.
SECTION I.
Preferred Shares.
Subject to the provisions of this Article FOURTH and the express
provisions of each series of Preferred Shares, the Board is hereby empowered to
cause the Preferred Shares to be issued from time to time for such
consideration as it may from time to time fix, and to cause such Preferred
Shares to be issued in one or more series, with such voting powers, full or
limited, or no voting powers, and such designations, preferences and relative,
participating, optional and other special rights, and qualifications,
limitations or restrictions thereof, as shall be stated and expressed in the
resolution or resolutions providing for the issues of such stock adopted by the
<PAGE> 2
Board. Each series of Preferred Shares shall be distinctly designated. Except
in respect of the particulars fixed by the Board for each series as permitted
hereby, all Preferred Shares shall be of equal rank and shall be identical. All
shares of any one series of Preferred Shares so designated by the Board shall
be alike in every particular, except that shares of any one series issued at
different times may differ as to the dates from which dividends thereon shall
be cumulative. The voting rights, if any, of each such series and the
preferences and relative, participating, optional and other special rights of
each such series and the qualifications, limitations and restrictions thereof,
if any, may differ from those of any and all other series at any time
outstanding; and the Board is hereby expressly granted authority to fix, by
resolutions duly adopted prior to the issuance of any shares of a particular
series of Preferred Shares so designated by the Board, the voting powers of
stock of such series, if any, and the designations, preferences and relative,
participating, optional and other special rights and the qualifications,
limitations and restrictions thereof, if any, for such series, including,
without limitation, the following:
(a) The distinctive designation of and the number of Preferred Shares which
shall constitute such series; provided, that such number may be increased
(but not above the total number of authorized Preferred Shares) or
decreased (but not below the number of shares thereof then outstanding)
from time to time by like action of the Board;
(b) The rate and time at which, and the terms and conditions upon which,
dividends, if any, on Preferred Shares of such series shall be paid, the
extent of the preference or relation, if any, of such dividends to the
dividends payable on any other series of Preferred Shares or any other
class of stock of the Corporation and whether such dividends shall be
cumulative or non-cumulative.
(c) The right, if any, of the holders of Preferred Shares of such series to
convert the same into, or exchange the same for, shares of any other class
of stock or any series of any class of stock of the Corporation and the
terms and conditions of such conversion or exchange;
(d) Whether or not Preferred Shares of such series shall be subject to
redemption, and the redemption price or prices and the time or times at
which, and the terms and conditions upon which, Preferred Shares of such
series may be redeemed;
(e) The rights, if any, of the holders of Preferred Shares of such series upon
the dissolution, liquidation or winding-up of the Corporation, whether
voluntary or involuntary, which rights may be prior or after in right to,
or pari passu with, any other series of Preferred Shares;
(f) The terms of the sinking fund or redemption or purchase amount, if any, to
be provided for the Preferred Shares of such series; and
(g) The voting powers, if any, of the holders of such series of Preferred
Shares which may, without limiting the generality of the foregoing,
include the right, voting as a series by itself or together with any other
series of the Preferred Shares as a class, (i) to vote more
2
<PAGE> 3
or less than one vote per share on any or all matters voted by the
stockholders, and (ii) to elect one or more directors of the Corporation
if there has been a default in the payment of dividends on any one or more
series of the Preferred Shares or under such other circumstances and upon
such other condition as the Board may fix.
The Board may, in establishing any series of Preferred Shares, provide
limitations on the payment of dividends on the Common Shares while any
dividends on Preferred Shares are accrued and unpaid.
SECTION II.
Common Shares.
Each Common Share shall have one vote upon all matters to be voted on by
the holders of Common Shares. Each Common Share shall be entitled to
participate equally in all dividends payable with respect to the Common Shares
and to share ratably, subject to the rights and preferences of any series of
Preferred Shares, in all assets of the Corporation in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the affairs
of the Corporation, or upon any distribution of the assets of the Corporation.
SECTION III.
General.
(a) Any action required or permitted to be taken by the stockholders of the
Corporation must be effected at a duly called annual or special meeting of
such holders and may not be effected by a consent in writing by any such
holders.
(b) Except as otherwise specifically provided in this Restated Certificate of
Incorporation or in any Certificate of Designation setting forth the
preferences and rights of any series of Preferred Shares, special meetings
of stockholders of the Corporation may be called only by the Chairman of
the Board or the President, and shall be called by the President or the
Secretary at the request in writing of a majority of the Board of
Directors. Such request shall state the purpose or purposes of the
proposed meeting and the business transacted at any special meeting shall
be limited to the purpose or purposes stated in the notice. No stockholder
or group of stockholders shall have any authority to call a special
meeting of stockholders.
FIFTH: A. The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors consisting of not less than six
nor more than twelve directors, with the exact number of directors constituting
the entire Board of Directors to be determined from time to time by resolution
adopted by the affirmative vote of a majority of the entire Board of Directors.
Until otherwise determined by the Board of Directors, the number of directors
constituting the entire Board of Directors shall be six. For purposes of this
Restated Certificate
3
<PAGE> 4
of Incorporation, "the entire Board of Directors" shall mean the number of
directors that would be in office if there were no vacancies nor any unfilled
newly created directorships.
The Board of Directors shall be divided into three classes, Class I, Class
II and Class III. Each class shall consist, as nearly as may be possible, of
one-third of the number of directors constituting the entire Board of Directors.
Upon the adoption of this Restated Certificate of Incorporation, the
stockholders shall elect two directors to serve as Class I directors, two
directors to serve as Class II directors and two directors to serve as Class III
directors. The Class I directors' term shall expire at the first annual meeting
of stockholders after the effective date of the Restated Certificate of
Incorporation, the Class II directors' term shall expire at the second annual
meeting of stockholders after the effective date of the Restated Certificate of
Incorporation, and the Class III directors' term shall expire at the third
annual meeting of stockholders after the effective date of the Restated
Certificate of Incorporation. At the first annual meeting of the stockholders
after the effective date of the Restated Certificate of Incorporation and each
annual meeting of stockholders thereafter, successors to the class of directors
whose term expires at that annual meeting shall be elected for a three-year
term. If the number of directors is changed, any increase or decrease shall be
apportioned among the classes so as to maintain the number of directors in each
class as nearly equal as possible, and any additional director of any class
elected to fill a newly created directorship resulting from an increase in such
class shall hold office for a term that shall coincide with the remaining term
of that class, but in no case shall a decrease in the number of directors
shorten the term of any incumbent director. A director shall hold office until
the annual meeting for the year in which his term expires and until his
successor shall be elected and shall qualify, subject, however, to prior death,
resignation, retirement, disqualification or removal from office. Any vacancy on
the Board of Directors that results from an increase in the number of directors
may be filled by a majority of the Board of Directors then in office, provided
that a quorum is present, and any other vacancy occurring in the Board of
Directors may be filled by a majority of the directors then in office, even if
less than a quorum, or by a sole remaining director. Directors chosen to fill
any such vacancy shall hold office for a term expiring at the annual meeting of
stockholders at which the term of office of the class to which they have been
elected expires and until such director's successor shall have been duly elected
and qualified.
Notwithstanding the foregoing, whenever the holders of any one or more
series of Preferred Shares shall have the right, voting separately as a class
or series, to elect directors, the election, removal, term of office, filling
of vacancies and other features of such directorships shall be governed by the
terms of this Restated Certificate of Incorporation, applicable thereto,
including any Certificate of Designation filed with respect to such series of
Preferred Shares, such directors so elected shall not be divided into classes
pursuant to this Article FIFTH and such directors shall not be counted in
determining the maximum number of directors permitted under this Article FIFTH,
unless, in each case, expressly provided by such terms.
Any director elected by the stockholders or by the Board of Directors to
fill a vacancy may be removed only for cause by the affirmative vote of the
holders of at least eighty percent (80%) of all the shares of stock of the
Corporation outstanding and entitled to vote for the election of directors,
given at a duly called annual or special meeting of the stockholders.
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<PAGE> 5
B. The Board of Directors shall be authorized to adopt, make, amend,
alter, change, add to or repeal the By-Laws of the Corporation, subject to the
power of the stockholders to amend, alter, change, add to or repeal the By-Laws
made by the Board of Directors.
C. Unless and except to the extent that the By-Laws of the Corporation
shall so require, the election of directors of the Corporation need not be by
written ballot.
SIXTH: A. In addition to any affirmative vote required by law or this Restated
Certificate of Incorporation or the By-Laws of the Corporation, and except as
otherwise expressly provided in Section B of this Article SIXTH, a Business
Combination (as hereinafter defined) with, or proposed by or on behalf of, any
Interested Stockholder (as hereinafter defined) or any Affiliate or Associate
(as hereinafter defined) of any Interested Stockholder or any person who
thereafter would be an Affiliate or Associate of such Interested Stockholder
shall, except as otherwise prohibited by applicable law, require the affirmative
vote of not less than eighty percent (80%) of the votes entitled to be cast by
the holders of all the then outstanding shares of Voting Stock (as hereinafter
defined), voting together as a single class, excluding Voting Stock beneficially
owned by any Interested Stockholder. Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that a lesser
percentage or separate class vote may be specified, by law or in any agreement
with any national securities exchange or otherwise.
B. The provisions of Section A of this Article SIXTH shall not be
applicable to any particular Business Combination, and such Business
Combination shall require only such affirmative vote, if any, as is required by
law or by any other provision of this Restated Certificate of Incorporation or
the By-Laws of the Corporation, or any agreement with any national securities
exchange, if all of the conditions specified in either of the following
Paragraphs 1 or 2 are met or, in the case of a Business Combination not
involving the payment of consideration to the holders of the corporation's
outstanding Capital Stock (as hereinafter defined), if the condition specified
in the following Paragraph 1 is met:
1. The Business Combination shall have been approved, either
specifically or as a transaction which is within an approved category of
transactions, by a majority (whether such approval is made prior to or
subsequent to the acquisition of, or announcement or public disclosure of
the intention to acquire, beneficial ownership of the Voting Stock that
caused the Interested Stockholder to become an Interested Stockholder) of
the Continuing Directors (as hereinafter defined).
2. All of the following conditions shall have been met:
a. the aggregate amount of cash and the Fair Market Value (as
hereinafter defined), as of the date of the consummation of the Business
Combination, of consideration other than cash to be received per share by
holders of Common Shares in such Business Combination shall be at least
equal to the highest amount determined under clauses (i) and (ii) below:
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<PAGE> 6
(i) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees)
paid by or on behalf of the Interested Stockholder for any Common
Share in connection with the acquisition by the Interested
Stockholder of beneficial ownership of Common Shares (x) within the
two-year period immediately prior to the first public announcement of
the proposed Business Combination (the "Announcement Date") or (y) in
the transaction in which it became an Interested Stockholder,
whichever is higher, in either case as adjusted for any subsequent
stock split, stock dividend, subdivision or reclassification with
respect to Common Shares; and
(ii) the Fair Market Value per Common Share on the Announcement
Date or on the date on which the Interested Stockholder became an
Interested Stockholder (the "Determination Date"), whichever is
higher, as adjusted for any subsequent stock split, stock dividend,
subdivision or reclassification with respect to Common Shares.
b. The aggregate amount of cash and the Fair Market Value, as of the
date of the consummation of the Business Combination, of consideration
other than cash to be received per share by holders of shares of any
class or series of outstanding Capital Stock, other than Common Shares,
shall be at least equal to the highest amount determined under clauses
(i), (ii), (iii) and (iv) below:
(i) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees)
paid by or on behalf of the Interested Stockholder for any share of
such class or series of Capital Stock in connection with the
acquisition by the Interested Stockholder of beneficial ownership of
shares of such class or series of Capital Stock (x) within the
two-year period immediately prior to the Announcement Date, or (y)
in the transaction in which it became an Interested Stockholder,
whichever is higher, in either case as adjusted for any subsequent
stock split, stock dividend, subdivision or reclassification with
respect to such class or series of Capital Stock;
(ii) the Fair Market Value per share of such class or series of
Capital Stock on the Announcement Date or on the Determination Date,
whichever is higher, as adjusted for any subsequent stock split,
stock dividend, subdivision or reclassification with respect to such
class or series of Capital Stock;
(iii) (if applicable) the price per share equal to the Fair
Market Value per share of such class or series of Capital Stock
determined pursuant to the immediately preceding clause (ii),
multiplied by the ratio of (x) the highest per share price (including
any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by or on behalf of the Interested Stockholder for any
share of such class or series of Capital Stock in connection with the
acquisition by the Interested Stockholder of beneficial ownership of
shares of such class or series of Capital Stock within the two-year
period immediately prior to the Announcement Date, as ad-
6
<PAGE> 7
justed for any subsequent stock split, stock dividend, subdivision or
reclassification with respect to such class or series of Capital
Stock to (y) the Fair Market Value per share of such class or series
of Capital Stock on the first day in such two-year period on which
the Interested Stockholder acquired beneficial ownership of any
share of such class or series of Capital Stock, as adjusted for any
subsequent stock split, stock dividend, subdivision or
reclassification with respect to such class or series of Capital
Stock; and
(iv) (if applicable) the highest preferential amount per share
to which the holders of shares of such class or series of Capital
Stock would be entitled in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
corporation regardless of whether the Business Combination to be
consummated constitutes such an event.
The provisions of this Paragraph 2 shall be required to be met with
respect to every class or series of outstanding Capital Stock, whether or
not the Interested Stockholder has previously acquired beneficial
ownership of any shares of a particular class or series of Capital Stock.
c. The consideration to be received by holders of a particular class
or series of outstanding Capital Stock shall be in cash or in the same
form as previously has been paid by or on behalf of the Interested
Stockholder in connection with its direct or indirect acquisition of
beneficial ownership of shares of such class or series of Capital Stock.
If the consideration so paid for shares of any class or series of Capital
Stock varied as to form, the form of consideration for such class or
series of Capital Stock shall be either cash or the form used to acquire
beneficial ownership of the largest number of shares of such class or
series of Capital Stock previously acquired by the Interested Stockholder.
d. After the Determination Date and prior to the consummation of such
Business Combination: (i) except as approved by a majority of the
Continuing Directors, there shall have been no failure to declare and pay
at the regular date therefor any full quarterly dividends (whether or not
cumulative) payable in accordance with the terms of any outstanding
Capital Stock; (ii) there shall have been no reduction in the annual rate
of dividends paid on the Common Shares (except as necessary to reflect
any stock split, stock dividend or subdivision of the Common Shares),
except as approved by a majority of the Continuing Directors; (iii) there
shall have been an increase in the annual rate of dividends paid on the
Common Shares as necessary to reflect any reclassification (including any
reverse stock split), recapitalization, reorganization or any similar
transaction that has the effect of reducing the number of outstanding
Common Shares, unless the failure so to increase such annual rate is
approved by a majority of the Continuing Directors; and (iv) such
Interested Stockholder shall not have become the beneficial owner of any
additional shares of Capital Stock except as part of the transaction that
results in such Interested Stockholder becoming an Interested Stockholder
and except in a transaction that, after giving effect thereto, would not
result in any increase in the Interested Stockholder's percentage
beneficial ownership of any class or series of Capital Stock.
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e. A proxy or information statement describing the proposed Business
Combination and complying with the requirements of the Securities
Exchange Act of 1934 and the rules and regulations thereunder (the "Act")
(or any subsequent provisions replacing such Act, rules or regulations)
shall be mailed to all stockholders of the corporation at least 30 days
prior to the consummation of such Business Combination (whether or not
such proxy or information statement is required to be mailed pursuant to
such Act or subsequent provisions). The proxy or information statement
shall contain on the first page thereof, in a prominent place, any
statement as to the advisability (or inadvisability) of the Business
Combination that the Continuing Directors, or any of them, may choose to
make and, if deemed advisable by a majority of the Continuing Directors,
the opinion of an investment banking firm selected by a majority of the
Continuing Directors as to the fairness (or not) of the terms of the
Business Combination from a financial point of view to the holders of the
outstanding shares of Capital Stock other than the Interested Stockholder
and its Affiliates or Associates (as hereinafter defined), such investment
banking firm to be paid a reasonable fee for its services by the
corporation.
f. Such Interested Stockholder shall not have made any major change
in the Corporation's business or equity capital structure without the
approval of a majority of the Continuing Directors.
C. The following definitions shall apply with respect to this Article
SIXTH:
1. The term "Business Combination" shall mean:
a. any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with (i) any Interested Stockholder or (ii) any
other company (whether or not itself an Interested Stockholder) which is
or after such merger or consolidation would be an Affiliate or Associate
of an Interested Stockholder; or
b. any sale, lease, exchange, mortgage, pledge, transfer or other
disposition or security arrangement, investment, loan, advance,
guarantee, agreement to purchase, agreement to pay, extension of credit,
joint venture participation or other arrangement (in one transaction or a
series of transactions) with or for the benefit of any Interested Stock
holder or any Affiliate or Associate of any Interested Stockholder
involving any assets, securities or commitments of the corporation, any
Subsidiary or any Interested Stockholder or any Affiliate or Associate of
any Interested Stockholder which (except for any arrangement, whether as
employee, consultant or otherwise, other than as a director, pursuant to
which any Interested Stockholder or any Affiliate or Associate thereof
shall, directly or indirectly, have any control over or responsibility
for the management of any aspect of the business or affairs of the
Corporation, with respect to which arrangements the value tests set forth
below shall not apply), together with all other such arrangements
(including all contemplated future events), has an aggregate Fair Market
Value and/or involves aggregate commitments of $25,000,000 or more or
constitutes more than five percent of the book value of the total assets
(in the case of transactions involving assets or
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<PAGE> 9
commitments other than capital stock) or five percent of the stockholders'
equity (in the case of transactions in capital stock) of the entity in
question (the "Substantial Part"), as reflected in the most recent fiscal
year-end consolidated balance sheet of such entity existing at the time
the stockholders of the corporation would be required to approve or
authorize the Business Combination involving the assets, securities and/or
commitments constituting any Substantial Part; or
c. the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation or for any amendment to the Corporation's
By-Laws; or
d. any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any other
transaction (whether or not with or otherwise involving an Interested
Stockholder) that has the effect, directly or indirectly, of increasing
the proportionate share of any class or series of Capital Stock, or any
securities convertible into Capital Stock or into equity securities of any
Subsidiary, that is beneficially owned by any Interested Stockholder or
any Affiliate or Associate of any Interested Stockholder, or
e. any agreement, contract or other arrangement providing for any one
or more of the actions specified in the foregoing clauses (a) to (d).
2. The term "Capital Stock" shall mean all capital stock of the
Corporation authorized to be issued from time to time under Article FOURTH
of this Restated Certificate of Incorporation, and the term "Voting
Stock" shall mean all Capital Stock which by its terms may be voted on all
matters submitted to stockholders of the Corporation generally.
3. The term "person" shall mean any individual, firm, company or
other entity and shall include any group comprised of any person and any
other person with whom such person or any Affiliate or Associate of such
person has any agreement, arrangement or understanding, directly or
indirectly, for the purpose of acquiring, holding, voting or disposing of
Capital Stock.
4. The term "Interested Stockholder" shall mean any person (other
than the Corporation or any Subsidiary, any profit-sharing, employee
stock ownership or other employee benefit plan of the corporation or any
Subsidiary or any trustee or fiduciary with respect to any such plan or
holding Voting Stock for the purpose of funding any such plan or funding
other employee benefits for employees of the Corporation or any
Subsidiary when acting in such capacity) who (a) is or has announced or
publicly disclosed a plan or intention to become the beneficial owner of
Voting Stock representing ten percent or more of the votes entitled to be
cast by the holders of all then outstanding shares of Voting Stock; or (b)
is an Affiliate or Associate of the Corporation and at any time within the
two-year period immediately prior to the date in question was the
beneficial owner of Voting Stock representing ten percent or more of the
votes entitled to be cast by the holders of all then outstanding shares
of Voting Stock.
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<PAGE> 10
5. A person shall be a "beneficial owner" of any Capital Stock (a)
which such person or any of its Affiliates or Associates beneficially
owns, directly or indirectly; (b) which such person or any of its
Affiliates or Associates has, directly or indirectly, (i) the right to
acquire (whether such right is exercisable immediately or subject only to
the passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right to vote pursuant to
any agreement, arrangement or understanding; or (c) which are beneficially
owned, directly or indirectly, by any other person with which such person
or any of its Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing
of any shares of Capital Stock. For the purposes of determining whether a
person is an Interested Stockholder pursuant to Paragraph 4 of this
Section C, the number of shares of Capital Stock deemed to be outstanding
shall include shares deemed beneficially owned by such person through
application of this Paragraph 5 of Section C, but shall not include any
other shares of Capital Stock that may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of conversion
rights, warrants or options, or otherwise. Notwithstanding the foregoing,
for purposes of this Article SIXTH, a person shall not be deemed a
"beneficial owner" of any Capital Stock which such person has the right to
acquire upon exercise of the Rights issued pursuant to the Rights
Agreement, dated as of May 23, 1997, between the Corporation and
(including any successor rights plan thereto, the "Rights Agreement"),
if such person would not be deemed the beneficial owner of such Capital
Stock under the terms of such Rights Agreement.
6. The terms "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 under the Act as in effect
on the date of this Restated Certificate of Incorporation (the term
"registrant" in said Rule 12b-2 meaning in this case the Corporation).
7. The term "Subsidiary" means any company of which a majority of any
class of equity securities are beneficially owned by the Corporation;
provided, however, that for the purposes of the definition of Interested
Stockholder set forth in Paragraph 4 of this Section C, the term
"Subsidiary" shall mean only a company of which a majority of each class
of equity security is beneficially owned by the Corporation.
8. The term "Continuing Director" means any member of the Board of
Directors, while such person is a member of the Board of Directors, who is
not an Affiliate or Associate or representative of the Interested
Stockholder and was a member of the Board of Directors prior to the time
that the Interested Stockholder became an Interested Stock holder, and any
successor of a Continuing Director while such successor is a member of the
Board of Directors, who is not an Affiliate or Associate or representative
of the Interested Stockholder and is recommended or elected to succeed
the Continuing Director by a majority of Continuing Directors.
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9. The term "Fair Market Value" means (a) in the case of cash, the
amount of such cash; (b) in the case of stock, the highest closing sale
price during the 30-day period immediately preceding the date in question
of a share of such stock on the Composite Tape for New York Stock
Exchange-Listed Stocks, or, if such stock is not quoted on the Composite
Tape, on the New York Stock Exchange, or, if such stock is not listed on
such Exchange, on the principal United States securities exchange
registered under the Act on which such stock is listed, or, if such stock
is not listed on any such exchange, the highest closing bid quotation with
respect to a share of such stock during the 30-day period preceding the
date in question on The NASDAQ Stock Market or any similar system then in
use, or if no such quotations are available, the fair market value on the
date in question of a share of such stock as determined by a majority of
the Continuing Directors in good faith; and (c) in the case of property
other than cash or stock, the fair market value of such property on the
date in question as determined in good faith by a majority of the
Continuing Directors.
10. In the event of any Business Combination in which the Corporation
survives, the phrase "consideration other than cash to be received" as
used in Paragraphs 2.a and 2.b of Section B of this Article SIXTH shall
include the Common Shares and/or the shares of any other class or series
of Capital Stock retained by the holders of such shares.
D. A majority of the Continuing Directors shall have the power and duty to
determine for the purposes of this Article SIXTH, on the basis of information
known to them after reasonable inquiry, all questions arising under this
Article SIXTH, including, without limitation, (a) whether a person is an
Interested Stockholder, (b) the number of shares of Capital Stock or other
securities beneficially owned by any person, (c) whether a person is an
Affiliate or Associate of another, (d) whether a Proposed Action is with, or
proposed by, or on behalf of an Interested Stockholder or an Affiliate or
Associate of an Interested Stockholder, (e) whether the assets that are the
subject of any Business Combination have, or the consideration to be received
for the issuance or transfer of securities by the Corporation or any Subsidiary
in any Business Combination has, an aggregate Fair Market Value of $25,000,000
or more, and (f) whether the assets or securities that are the subject of any
Business Combination constitute a Substantial Part. Any such determination made
in good faith shall be binding and conclusive on all parties.
E. Nothing contained in this Article SIXTH shall be construed to relieve
any Interested Stockholder from any fiduciary obligation imposed by law.
F. The fact that any Business Combination complies with the provisions of
Section B of this Article SIXTH shall not be construed to impose any fiduciary
duty, obligation or responsibility on the Board of Directors, or any member
thereof, to approve such Business Combination or recommend its adoption or
approval to the stockholders of the corporation, nor shall such compliance
limit, prohibit or otherwise restrict in any manner the Board of Directors, or
any member thereof, with respect to evaluations of or actions and responses
taken with respect to such Business Combination.
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G. For the purposes of this Article SIXTH, a Business Combination or any
proposal to amend or repeal, or to adopt any provision of this Restated
Certificate of Incorporation inconsistent with, this Article SIXTH
(collectively, "Proposed Action"), is presumed to have been proposed by or on
behalf of an Interested Stockholder or an Affiliate or Associate of an
Interested Stockholder or a person who thereafter would become such if (1)
after the Interested Stockholder became such, the Proposed Action is proposed
following the election of any director of the Corporation who with respect to
such Interested Stockholder would not qualify to serve as a Continuing Director
or (2) such Interested Stockholder, Affiliate, Associate or person votes for or
consents to the adoption of any such Proposed Action, unless as to such
Interested Stockholder, Affiliate, Associate or person a majority of the
Continuing Directors makes a good faith determination that such Proposed Action
is not proposed by or on behalf of such Interested Stockholder, Affiliate,
Associate or person, based on information known to them after reasonable
inquiry.
SEVENTH: The Board of Directors of the Corporation, when evaluating any
offer of any party to (a) make a tender or exchange offer for any equity
security of the Corporation, (b) merge or consolidate the Corporation with
another entity, or (c) purchase or otherwise acquire all or substantially all
of the properties and assets of the Corporation, shall, in connection with the
exercise of its judgment in determining what is in the best interests of the
Corporation and its stockholders, give due consideration to (i) all relevant
factors, including without limitation the financial and managerial resources
and future prospects of the other entity; the social, legal, environmental and
economic effects of the employees, customers, suppliers and other affected
persons, firms, and corporations and on the communities and geographical areas
in which the Corporation and its subsidiaries operate or are located and on any
of the businesses and properties of the Corporation or any of its subsidiaries,
as well as such other factors as the directors deem relevant; and (ii) not only
the consideration being offered in relation to the then current market price
for the Corporation's outstanding shares of capital stock, but also in relation
to the then current value of the Corporation in a freely negotiated transaction
and in relation to the Board of Directors' estimate of the future value of the
Corporation (including the unrealized value of its properties and assets) as an
independent going concern.
In evaluating any such offer, the Board of Directors shall be deemed to be
performing their duly authorized duties and acting in good faith and in the
best interests of the Corporation within the meaning of Section 145 of the
General Corporation Law of Delaware, as it may be amended from time to time.
EIGHTH: A director of the corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent such exemption from liability or
limitation thereof is not permitted under the General Corporation Law of the
State of Delaware as the same exists or may hereafter be amended.
Any amendment, modification or repeal of the foregoing sentence shall not
adversely affect any right or protection of a director of the Corporation
hereunder in respect of any act or omission occurring prior to the time of such
amendment, modification or repeal.
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NINTH: The Board of Directors of the Corporation shall have the power and
authority to make, alter, amend or repeal any or all of the By-laws of the
Corporation. In addition, the Bylaws may be adopted, repealed, altered, amended
or rescinded by the affirmative vote of the holders of not less than eighty
percent (80%) of the votes entitled to be cast by the holders of all
outstanding shares of Voting Stock (as defined in Article Sixth hereof), voting
together as a single class.
TENTH: Subject to the provisions of this Restated Certificate of
Incorporation and applicable law, the Corporation reserves the right at any
time and from time to time to amend, alter, change or repeal any provision
contained in this Restated Certificate of Incorporation, and any other
provisions authorized by the laws of the State of Delaware at the time in force
may be added or inserted, in the manner now or hereafter prescribed herein or
by applicable law, and all rights, preferences and privileges of whatsoever
nature conferred upon stockholders, directors or any other persons whomsoever
by and pursuant to this Restated Certificate of Incorporation in its present
form or as hereafter amended are granted subject to the rights reserved in this
Article TENTH. Notwithstanding the foregoing and any other provisions of this
Restated Certificate of Incorporation or the By-Laws of the Corporation (and
notwithstanding the fact that a lesser percentage or separate class vote may be
specified by law, this Restated Certificate of Incorporation or the By-Laws of
the Corporation), any proposal to amend or repeal, or to adopt any provision of
this Restated Certificate of Incorporation inconsistent with, Article FOURTH,
Section III; Article FIFTH; Article SIXTH, Article SEVENTH and this Article
TENTH, shall require the affirmative vote of the holders of not less than
eighty percent (80%) of the votes entitled to be cast by the holders of all the
then outstanding shares of Voting Stock (as defined in Article SIXTH hereof),
voting together as a single class, excluding Voting Stock beneficially owned by
any Interested Stockholder (as defined in Article SIXTH hereof), provided,
however, that this sentence shall not apply to, and such eighty (80%) vote
shall not be required for, any amendment or repeal of, or the adoption of any
provision recommended by two-thirds (2/3) of the Continuing Directors (as
defined in Article SIXTH hereof).
IN WITNESS WHEREOF, Waterlink, Inc. has caused this Restated Certificate
of Incorporation to be executed by Theodore F. Savastano its Chairman of the
Board, this 26th day of June, 1997.
WATERLINK, INC.
By: /s/ Theodore F. Savastano
--------------------------------
Name: Theodore F. Savastano
Office: Chairman of the Board
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CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF SERIES 1 PREFERRED STOCK
of
WATERLINK, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
Waterlink, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware, in accordance with the provisions of
Section 103 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors of
the Fourth Amended and Restated Certificate of Incorporation of the said
Corporation, the said Board of Directors on May 23, 1997, adopted the following
resolution creating a series of Preferred Stock designated as Series 1 Preferred
Stock:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of its Fifth
Amended and Restated Certificate of Incorporation, a series of Preferred Stock
of the Corporation is hereby created and that the designation and amount thereof
and the voting powers, preferences and relative, participating, optional and
other special rights of the shares of such series, and the qualifications,
limitations or restrictions thereof are as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series 1 Preferred Stock" (the "Series 1 Preferred Stock"), and
the number of shares constituting such series shall be 40,000; provided,
however, that, if more than a total of 40,000 shares of Series I Preferred Stock
shall be issuable upon the exercise of Rights (the "Rights") issued pursuant to
the Rights Agreement, dated as of May 23, 1997, between the Corporation and
American Stock Transfer & Trust Company, as Rights Agent (as amended from time
to time) (the "Rights Agreement"), the Board of Directors of the Corporation,
pursuant to Section 151 of the General Corporation Law of the State of Delaware,
shall direct by resolution or resolutions that a certificate be properly
executed, acknowledged and filed providing for the total number of shares of
Series I Preferred Stock authorized to be issued to be increased (to the extent
that the Certificate of Incorporation then permits) to the largest number of
whole shares (rounded up to the nearest whole number) issuable upon exercise of
the Rights.
<PAGE> 15
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Series 1 Preferred Stock with respect to dividends, the holders of shares of
Series 1 Preferred Stock shall be entitled to receive, when, as and if declared
by the Board of Directors out of assets legally available for the purpose,
quarterly dividends payable in cash on the fifteenth business day of January,
April, July and October in each year (each such date being referred to herein as
a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series 1 Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (a) $1.00 or (b) subject to the provision for adjustment
hereinafter set forth, 100 times the aggregate per share amount of all cash
dividends, and 100 times the aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions other than a dividend payable in
shares of Common Stock, par value $.001 per share, of the Corporation (the
"Common Stock") or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series 1 Preferred Stock.
(B) The Corporation shall declare a dividend or distribution on the
Series 1 Preferred Stock as provided in paragraph (A) above immediately after it
declares a dividend or distribution on the Common Stock (other than a dividend
payable in shares of Common Stock); provided that, in the event no dividend or
distribution shall have been declared on the Common Stock during the period
between any Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $1.00 per share on the Series 1 Preferred
Stock shall nevertheless be payable on such subsequent Quarterly Dividend
Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series 1 Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series 1 Preferred Stock, unless
the date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or unless the date of
issue is a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series 1 Preferred Stock entitled
to receive a quarterly dividend and before such Quarterly Dividend Payment Date,
in either of which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Series 1 Preferred Stock in
an amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series 1 Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 60 days prior to the date
fixed for the payment thereof.
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Section 3. Voting Rights The holders of shares of Series 1 Preferred
Stock shall have the following voting rights:
(A) Except as provided in paragraph C of this Section 3 and subject to
the provision for adjustment hereinafter set forth, each share of Series I
Preferred Stock shall entitle the holder thereof to 100 votes on all matters
submitted to a vote of the stockholders of the Corporation.
(B) Except as otherwise provided herein or by law, the holders of shares
of Series 1 Preferred Stock and the holders of shares of Common Stock shall vote
together as one class on all matters submitted to a vote of stockholders of the
Corporation.
(C) (i) If, on the date used to determine stockholders of record for any
meeting of stockholders for the election of directors, a default in preference
dividends (as defined in subparagraph (v) below) on the Series 1 Preferred Stock
shall exist, the holders of the Series 1 Preferred Stock shall have the right,
voting as a class as described in subparagraph (ii) below, to elect two
directors (in addition to the directors elected by holders of Common Stock or
any other class or series of Preferred Stock of the Corporation). Such right may
be exercised until there is no longer a default in preference dividends (a) at
any meeting of stockholders for the election of directors or (b) at a meeting of
the holders of shares of the Series I Preferred Stock, called for such purpose.
Upon the occurrence of a default in preference dividends on the Series 1
Preferred Shares, the Chief Executive Officer or the Secretary shall call a
special meeting of the holders of the Series 1 Preferred Shares for the purpose
of the exercise of the voting rights described in this Section 3(C), unless the
next annual meeting of stockholders for the election of directors is scheduled
to be held within sixty (60) days of the date on which the default in preference
dividends occurred.
(ii) The right of the holders of Series 1 Preferred Stock to elect two
directors, as described above, shall be exercised as a class independently of
any rights of holders of any other series of Preferred Stock upon which voting
rights to elect such directors have been conferred and are then exercisable.
(iii) Each director elected by the holders of shares of Series 1
Preferred Stock shall be referred to herein as a "Series 1 Preferred Director" A
Series 1 Preferred Director so elected shall continue to serve as such director
for a term of one year, except that upon any termination of the right of all of
such holders to vote as a class for Series 1 Preferred Directors, the term of
office of such directors shall terminate. Any Series 1 Preferred Director may be
removed by, and shall not be removed except by, the vote of the holders of
record of a majority of the outstanding shares of Series 1 Preferred Stock then
entitled to vote for the election of directors, present (in person or by proxy)
and voting together as a single class (a) at a meeting of the stockholders, or
(b) at a meeting of the holders of shares of such Series 1 Preferred Stock,
called for the purpose in accordance with the By-laws of the Corporation, or (c)
by written consent signed by the holders of a majority of the then outstanding
shares of Series 1 Preferred Stock then entitled to vote for the election of
directors, taken together as a single class.
(iv) So long as a default in any preference dividends on the Series 1
Preferred Stock shall exist or the holders of any other series of Series 1
Preferred Stock shall be entitled to elect Series
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1 Preferred Directors, (a) any vacancy in the office of a Series 1 Preferred
Director may be filled (except as provided in the following clause (b)) by an
instrument in writing signed by the remaining Series 1 Preferred Director and
filed with the Corporation and (b) in the case of the removal of any Series 1
Preferred Director, the vacancy may be filled by the vote or written consent of
the holders of a majority of the outstanding shares of Series 1 Preferred Stock
then entitled to vote for the election of directors, present (in person or by
proxy) and voting together as a single class, at such time as the removal shall
be effected. Each director appointed as aforesaid by the remaining Series 1
Preferred Director shall be deemed, for all purposes hereof, to be a Series 1
Preferred Director. Whenever no default in preference dividends on the Series 1
Preferred Stock shall exist, then the number of directors constituting the Board
of Directors of the Corporation shall be reduced by two.
(v) For purposes hereof, a "default in preference dividends" on the
Series 1 Preferred Stock shall be deemed to have occurred whenever the amount of
cumulative and unpaid dividends on the Series 1 Preferred Stock shall be
equivalent to six full quarterly dividends or more (whether or not consecutive),
and, having so occurred, such default shall be deemed to exist thereafter until,
but only until, all cumulative dividends on all shares of the Series 1 Preferred
Stock then outstanding shall have been paid through the last Quarterly Dividend
Payment Date or until, but only until, non-cumulative dividends have been paid
regularly for at least one year.
(E) Except as set forth herein (or as otherwise required by applicable
law), holders of Series 1 Preferred Stock shall have no special voting rights
and their consent shall not be required (except to the extent they are entitled
to vote with the holders of the Common Stock as set forth herein) for taking any
corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series 1 Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series 1 Preferred Stock outstanding shall have
been paid in full, the Corporation shall not
(i) declare or pay dividends, or make any other distributions, on any
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series 1 Preferred Stock;
(ii) declare or pay dividends, or make any other distributions, on any
shares of stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series 1 Preferred Stock, except dividends
paid ratably on the Series 1 Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration (except
as provided in (iv) below) shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series 1
Preferred Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such junior stock in exchange for shares of
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any stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series 1 Preferred Stock;
(iv) redeem or purchase or otherwise acquire for consideration any
shares of Series 1 Preferred Stock, or any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the
Series 1 Preferred Stock, except in accordance with a purchase offer made in
writing or by publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative rights
and preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series 1 Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Certificate of Incorporation, in any other Certificate of Amendment creating a
series of Preferred Stock or as otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up.
(A) Subject to the prior and superior rights of holders of any shares of
any series of Preferred Stock ranking prior and superior to the shares of Series
1 Preferred Stock with respect to rights upon liquidation, dissolution or
winding up (voluntary or otherwise), no distribution shall be made (x) to the
holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series 1 Preferred Stock unless,
prior thereto, the holders of shares of Series 1 Preferred Stock shall have
received an amount equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such payment, plus an amount
equal to the greater of (1) $100 per share, or (2) an aggregate amount per share
equal to 100 times the aggregate amount to be distributed per share to the
holders of Common Stock, or (y) to the holders of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the
Series 1 Preferred Stock, except distributions made ratably on the Series 1
Preferred Stock and all other such parity stock in proportion to the total
amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up (the "Series 1 Liquidation Preference").
Following the payment of the full amount of the Series 1 Liquidation
Preference, no additional distributions shall be made to the holders of shares
of Series 1 Preferred Stock.
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series 1 Liquidation Preference and
the liquidation preferences of all other series of
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preferred stock, if any, which rank on a parity with the Series 1 Preferred
Stock, then such remaining assets shall be distributed ratably to the holders of
Series 1 Preferred Stock and the holders of such parity shares in proportion to
their respective liquidation preferences. In the event, however, that there are
not sufficient assets available to permit payment in full of the Capital
Adjustment, then such remaining assets shall be distributed ratably to the
holders of Common Stock.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series 1 Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
Section 8. No Redemption. The shares of Series 1 Preferred Stock shall
not be redeemable.
Section 9. Ranking. The Series 1 Preferred Stock shall rank junior to
all other series of the Corporation's Preferred Stock as to the payment of
dividends and the distribution of assets, unless the terms of any such series
shall provide otherwise.
Section 10. Amendment. The Certificate of Incorporation of the
Corporation shall not be further amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series 1
Preferred Stock so as to affect them adversely without the affirmative vote of
the holders of a majority or more of the outstanding shares of Series 1
Preferred Stock, voting separately as a class.
IN WITNESS WHEREOF, this Certificate is executed on behalf of the
Corporation by its Chairman of the Board and attested by its Secretary this 26th
day of June, 1997.
WATERLINK, INC.
By: /s/ Theodore F. Savastano
--------------------------------
Name: Theodore F. Savastano
Office: Chairman of the Board
Attest:
/s/ Kathleen S. Donatini
- --------------------------------
Kathleen S. Donatini, Secretary
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Exhibit 3.2
BY-LAWS
OF
WATERLINK, INC.
AMENDED AND RESTATED
ARTICLE I
STOCKHOLDER MEETINGS
Section 1. Place of Meetings. All meetings of the stockholders of the
Corporation shall be held at such place or places, within or without the State
of Delaware, as may from time to time be fixed by the Board of Directors of the
Corporation (the "Board"), or as shall be specified or fixed in the respective
notices or waivers of notice thereof.
Section 2. Annual Meetings. The Annual Meeting of Stockholders shall
be held on such date and at such time as may be fixed by the Board and stated
in the notice thereof, for the purpose of electing directors and for the
transaction of only such other business as is properly brought before the
meeting in accordance with these By-Laws.
To be properly brought before the meeting, business must be either (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board, (b) otherwise properly brought before the meeting
by or at the direction of the Board, or (c) otherwise properly brought before
the meeting by a stockholder. In addition to any other applicable requirements,
for business to be properly brought before the Annual Meeting by a stockholder,
the stockholder must have been given timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation, not less than 50 days nor more than 75 days prior to the meeting;
provided, however, that in the event that less than 65 days' notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be so received not later than the
close of business on the 15th day following the day on which such notice of the
date of the Annual Meeting was mailed or such public disclosure was made,
whichever first occurs. A stockholder's notice to the Secretary shall set forth
as to each matter the stockholder proposes to bring before the Annual Meeting
(i) a brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting,
(ii) the name and record address of the stockholder proposing such business,
(iii) the class and number of shares of the Corporation which are beneficially
owned by the stockholder, and (iv) any material interest of the stockholder in
such business.
Notwithstanding anything in these By-Laws to the contrary, no business
shall be transacted at the Annual Meeting except in accordance with the
procedures set forth in this Section, provided, however, that nothing in this
Section shall be deemed to preclude discussion by any stockholder of any
business properly brought before the Annual Meeting.
<PAGE> 2
The Chairman of the Annual Meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Section, and if he
should so determine, he shall so declare to the meeting and any such business
not properly brought before the meeting shall not be transacted.
Section 3. Special Meeting. Subject to the rights of the holders of
any series of preferred stock of the Corporation (the "Preferred Stock") to
elect additional directors under specified circumstances, special meetings of
the stockholders may be called by the Chairman of the Board or the President,
and shall be called by the President or the Secretary at the request in writing
of a majority of the Board. The business transacted at a special meeting shall
be confined to the purposes specified in the notice thereof. Special meetings
shall be held at such date and at such time as the Board may designate.
Section 4. Notice of Meeting. Written notice of each meeting of
stockholders, stating the place, date and hour of the meeting, and the purpose
or purposes thereof, shall be mailed not less than ten nor more than sixty days
before the date of such meeting to each stockholder entitled to vote thereat.
Section 5. Quorum. Unless otherwise provided by statute, the holders
of shares of stock entitled to cast a majority of votes at a meeting, present
either in person or by proxy, shall constitute a quorum at such meeting. The
Secretary of the Corporation or in his absence as Assistant Secretary or an
appointee of the presiding officer of the meeting, shall act as the Secretary
of the meeting.
Section 6. Voting. Except as otherwise provided by law or the Restated
Certificate of Incorporation, each stockholder entitled to vote at any meeting
shall be entitled to one vote, in person or by written proxy, for each share
held of record on the record date fixed as provided in Section 4 of Article V
of these By-Laws for determining the stockholders entitled to vote at such
meeting. Except as otherwise provided by law, the Restated Certificate of
Incorporation or these By-Laws, the vote of a majority of any quorum shall be
sufficient to elect directors and to pass any resolution within the power of
the holders of all the outstanding shares.
Elections of directors need not be by written ballot; provided,
however, that by resolution duly adopted, a vote by written ballot may be
required.
Section 7. Proxies. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy, but no such proxy shall be voted or acted upon after three years from
its date, unless the proxy provides for a longer period. A proxy shall be
irrevocable if it states that it is irrevocable and if, and only as long as, it
is coupled with an interest sufficient in law to support an irrevocable power.
A stockholder may revoke any proxy which is not irrevocable by attending the
meeting and voting in person or by filing an instrument revoking the proxy or
by delivering a proxy in accordance with applicable law bearing a later date to
the Secretary of the Corporation. In order to be exercised at a meeting of
stockholders,
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proxies shall be delivered to the Secretary of the Corporation or his
representative at or before the time of such meeting.
Section 8. Inspectors. At each meeting of the stockholders the polls
shall be opened and closed; the proxies and ballots shall be received and be
taken in charge, and all questions touching the qualification of voters and the
validity of proxies and the acceptance or rejection of votes shall be decided
by one or more Inspectors, the majority of whom, if more than one be so
appointed, shall have power to make a decision. Such Inspector(s) shall be
appointed by the Board before the meeting, or in default thereof by the
presiding officer at the meeting. If any of the Inspector(s) previously
appointed shall fail to attend or refuse or be unable to serve, substitutes
shall be appointed by the presiding officer.
Section 9. Conduct of Meetings. The date and time of the opening and
the closing of the polls for each matter upon which the stockholders will vote
at a meeting shall be announced at the meeting by the chairman of the meeting.
The Board may adopt by resolution such rules and regulations for the conduct of
the meeting of stockholders as it shall deem appropriate. Except to the extent
inconsistent with such rules and regulations as adopted by the Board, the
chairman of any meeting of stockholders shall have the right and authority to
prescribe such rules, regulations and procedures and to do all such acts as, in
the judgment of such chairman, are appropriate for the proper conduct of the
meeting. Such rules, regulations or procedures, whether adopted by the Board or
prescribed by the chairman of the meeting, may include, without limitation, the
following: (i) the establishment of an agenda or order of business for the
meeting; (ii) rules and procedures for maintaining order at the meeting and the
safety of those present; (iii) limitations on attendance at or participation in
the meeting to stockholders of record of the Corporation, their duly authorized
and constituted proxies or such other persons as the chairman of the meeting
shall determine; (iv) restrictions on entry to the meeting after the time fixed
for the commencement thereof; and (v) limitations on the time allotted to
questions or comments by participants. Unless and to the extent determined by
the Board or the chairman of the meeting, meetings of stockholders shall not be
required to be held in accordance with the rules of parliamentary procedure.
ARTICLE II
BOARD OF DIRECTORS
Section 1. Number and Term of Office. The business and affairs of the
Corporation shall be managed under the direction of the Board. The number of
directors which shall constitute the entire Board shall not be less than six
nor more than twelve and shall be determined from time to time by resolution
adopted by a majority of the entire Board. Each director shall hold office
until the annual meeting for the year in which his term expires, determined in
accordance with the provisions of Article Fifth of the Restated Certificate of
Incorporation and until his successor is elected and qualified, or until his
earlier resignation, removal from office or death.
Section 2. Election and Qualification. Each director shall be elected
in accordance with the provisions of Article Fifth of the Restated Certificate
of Incorporation and the provisions of this Section 2. Nominations of persons
for election to the Board of the Corporation at the
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Annual Meeting of Stockholders may be made at a meeting of stockholders by or
at the direction of the Board of Directors by any nominating committee or
person appointed by the Board or by any stockholder of the Corporation entitled
to vote for the election of directors at the meeting who complies with the
notice procedures set forth in this Article II. Such nominations, other than
those made by or at the direction of the Board, shall be made pursuant to
timely notice in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice shall be delivered to or mailed and received at the
principal executive offices of the Corporation not less than 50 days nor more
than 75 days prior to the meeting; provided, however, that in the event that
less than 65 days' notice or prior public disclosure of the date of the meeting
is given or made to stockholders, notice by the stockholder to be timely must
be so received not later than the close of business on the 15th day following
the day on which such notice of the date of the meeting was mailed or such
public disclosure was made, whichever first occurs. Such stockholder's notice
to the Secretary shall set forth (a) as to each person whom the stockholder
proposes to nominate for election or reelection as a director, (i) the name,
age, business address and residence of the person, (ii) the principal
occupation or employment of the person, (iii) the class and number of shares of
capital stock of the Corporation which are beneficially owned by the person and
(iv) any other information relating to the person that is required to be
disclosed in solicitations for proxies for election of directors pursuant to
Rule 14A under the Securities Exchange Act of 1934 as amended; and (b) as to
the stockholder giving the notice (i) the name and record address of the
stockholder and (ii) the class and number of shares of capital stock of the
Corporation which are beneficially owned by the stockholder. The Corporation
may require any proposed nominee to furnish such other information as may
reasonably be required by the Corporation to determine the eligibility of such
proposed nominee to serve as director of the Corporation.
No person shall be eligible for election as a director of the
Corporation at the Annual Meeting of Stockholders unless nominated in
accordance with the procedures set forth herein. The Chairman of the meeting
shall, if the facts warrant, determine and declare to the meeting that a
nomination was not made in accordance with the foregoing procedure, and if he
should so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
Section 3. Resignation and Removal. Any director may resign his office
at any time by delivering his resignation in writing to the Corporation, and
the acceptance of such resignation unless required by the terms thereof shall
not be necessary to make such resignation effective. A director may be removed
from office only in accordance with the provisions of Article Fifth of the
Restated Certificate of Incorporation.
Section 4. Meetings. The Board may hold its meetings and have an
office in such place or places within or without the State of Delaware as the
Board by resolution from time to time may determine. The Board may in its
discretion provide for regular or stated meetings of the Board. Notice of
regular or stated meetings need not be given. Special meetings of the Board
shall be held whenever called by direction of the Chairman of the Board, the
President or any two of the directors.
Notice of any special meeting shall be given by the Secretary to each
director either by mail or by telegram, facsimile, telephone or other
electronic communication or transmission. If
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<PAGE> 5
mailed, such notice shall be deemed adequately delivered when deposited in the
United States mails so addressed, with postage thereon prepaid, at least three
days before such meeting. If by telegram, such notice shall be deemed
adequately delivered when the telegram is delivered to the telegraph
Corporation at least twenty-four hours before such meeting. If by facsimile,
telephone or other electronic communication or transmission, such notice shall
be transmitted at least twenty-four hours before such meeting. Unless otherwise
indicated in the notice thereof, any and all business may be transacted at a
special meeting.
Except as otherwise provided by applicable law, at any meeting at
which every director shall be present, even though without notice, any business
may be transacted. No notice of any adjourned meeting need be given.
The Board shall meet immediately after election, following the Annual
Meeting of Stockholders, for the purpose of organizing, for the election of
corporate officers as hereinafter specified, and for the transaction of any
other business which may come before it. No notice of such meeting shall be
necessary.
Section 5. Quorum. Except as otherwise expressly required by these
By-Laws or by statute, a majority of the directors then in office (but not less
than one-third of the total number of directors constituting the entire Board)
shall be present at any meeting of the Board in order to constitute a quorum
for the transaction of business at such meeting, and the vote of a majority of
the directors present at any such meeting at which quorum is present shall be
necessary for the passage of any resolution or for an act to be the act of the
Board. In the absence of a quorum, a majority of the directors present may
adjourn such meeting from time to time until a quorum shall be present. Notice
of any adjourned meeting need not be given.
Section 6. Compensation. Each director (other than a director who is a
salaried officer of the Corporation or of any subsidiary of the Corporation),
in consideration of his serving as such, shall be entitled to receive from the
Corporation such amount per annum and such fees for attendance at meetings of
the Board or of any committee of the Board (a "Committee"), or both, as the
Board shall from time to time determine. The Board may likewise provide that
the Corporation shall reimburse each director or member of a Committee for any
expenses incurred by him on account of his attendance at any such meeting.
Nothing contained in this Section shall be construed to preclude any director
from serving the Corporation in any other capacity and receiving compensation
therefor.
ARTICLE III
COMMITTEES OF THE BOARD
Section 1. Committees. The Board shall elect from the directors an
Executive Committee, an Audit Committee, a Compensation Committee, a Nominating
Committee and any other Committee which the Board may by resolution prescribe.
Any such other Committee shall be comprised of such persons and shall possess
such authority as shall be set forth in such resolution.
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Section 2. Procedure. Each Committee shall fix its own rules of
procedure and shall meet where and as provided by such rules. Unless otherwise
stated in these By-Laws, a majority of a Committee shall constitute a quorum.
In the absence or disqualification of a member of any Committee, the members of
such Committee present at any meeting, and not disqualified from voting,
whether or not they constitute a quorum, may unanimously appoint another member
of the Board to act at the meeting in the place of any such absent or
disqualified member.
Section 3. Reports to the Board. All completed actions by the
Executive, Audit and Compensation Committees shall be reported to the Board at
the next succeeding Board meeting and shall be subject to revision or
alteration by the Board, provided, that no acts or rights of third parties
shall be affected by any such revision or alteration.
Section 4. Executive Committee. The Board shall elect an Executive
Committee comprised of the President and not less than two additional members
of the Board. During the interval between the meetings of the Board, the
Executive Committee shall possess and may exercise all the powers of the Board
in the management and direction of all the business and affairs of the
Corporation (except the matters hereinafter assigned to the Compensation
Committee) including, without limitation, the power and authority to declare
dividends and to authorize the issuance of stock, in such manner as the
Executive Committee shall deem best for the interests of the Corporation in all
cases in which specific directions shall not have been given by the Board.
Section 5. Compensation Committee. The Board shall elect a
Compensation Committee consisting of at least four members of the Board, none
of whom shall be officers or employees of the Corporation or of any subsidiary
Corporation. The Board shall appoint a chairman of such Committee who shall be
one of its members. The Compensation Committee shall have such authority and
duties as the Board by resolution shall prescribe.
Section 6. Audit Committee. The Board shall elect from among its
members an Audit Committee consisting of at least three members. The Board
shall appoint a chairman of said Committee who shall be one of its members. The
Audit Committee shall have such authority and duties as the Board by resolution
shall prescribe. In no event shall a director who is also an officer or
employee of the Corporation or any of its subsidiary companies serve as a
member of such Committee. The President shall have the right to attend (but not
vote at) each meeting of such Committee.
Section 7. Nominating Committee. The Board shall elect from among its
members a Nominating Committee consisting of at least three members. The Board
shall appoint a chairman of said Committee who shall be one of its members. The
Nominating Committee shall have such authority and duties as the Board by
resolution shall prescribe. In no event shall a director who is also an officer
or employee of the Corporation or any of its subsidiary companies serve as a
member of such Committee. The President shall have the right to attend (but not
vote at) each meeting of such Committee.
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ARTICLE IV
OFFICERS
Section 1. General. The corporate officers of the Corporation shall
consist of the following: a Chairman, whom shall be chosen from the Board, a
President, a Treasurer, a Secretary and such other officers as the Board may
from time to time designate. The same person may hold two or more offices, but
no officer shall execute, acknowledge or verify any instrument in more than one
capacity. All officers chosen by the Board shall each have such powers and
duties as generally pertain to their respective offices, subject to the
specific provisions of this Article IV.
Section 2. Term of Office. The officers of the Corporation shall be
elected by the Board. Each such officer shall hold office until his successor
is elected or appointed and qualified or until his earlier death, resignation
or removal. Any officer may be removed, with or without cause, at any time by
the Board. A vacancy in any office may be filled for the unexpired portion of
the term in the same manner as provided in these By-Laws for election or
appointment to such office.
Section 3. Chairman of the Board. The chairman of the board shall
preside at all meetings of the Board and meetings of the stockholders and shall
have such other powers and duties as may be prescribed by the Board.
Section 4. President. The president shall be the chief executive
officer of the Corporation and shall exercise supervision over the business of
the Corporation and over its several officers, subject, however, to the control
of the Board. In the absence of the chairman of the board, the president shall
preside at meetings of stockholders. The president shall have authority to sign
all certificates for shares and all deeds, mortgages, bonds, agreements, notes,
and other instruments requiring his signature; and shall have all the powers
and duties prescribed by the General Corporation Law of the State of Delaware
and such others as the Board may from time to time assign to him.
Section 5. Vice Presidents. The vice presidents, if any shall be
elected, shall have such powers and duties as may from time to time be assigned
to them by the Board, the chairman of the board or the president. At the
request of the president, or in the case of his absence or disability, a vice
president designated by the president (or in the absence of such designation,
the vice president designated by the Board) shall perform all the duties of the
president and, when so acting, shall have all the powers of the president. The
authority of vice presidents to sign in the name of the Corporation
certificates for shares and deeds, mortgages, bonds, agreements, notes and
other instruments shall be coordinate with like authority of the president.
Section 6. Secretary. The secretary shall keep minutes of all the
proceedings of the stockholders and the Board and shall make proper record of
the same, which shall be attested by him; shall have authority to execute and
deliver certificates as to any of such proceedings and any other records of the
Corporation; shall have authority to sign all certificates for shares and all
deeds, mortgages, bonds, agreements, notes and other instruments to be executed
by the Corpora-
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tion which require his signature; shall give notice of meetings of stockholders
and directors; shall produce on request at each meeting of stockholders a
certified list of stockholders arranged in alphabetical order; shall keep such
books and records as may be required by law or by the Board; and, in general,
shall perform all duties incident to the office of secretary and such other
duties as may from time to time be assigned to him by the Board, the chairman
of the board or the president.
Section 7. Treasurer. The treasurer shall be the chief financial
officer of the Corporation and shall have general supervision of all finances;
he shall have in charge all money, bills, notes, deeds, leases, mortgages and
similar property belonging to the Corporation, and shall do with the same as
may from time to time be required by the board of directors. He shall cause to
be kept adequate and correct accounts of the business transactions of the
Corporation, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, stated capital and shares, together with such
other accounts as may be required; and he shall have such other powers and
duties as may from time to time be assigned to him by the Board, the chairman
of the board or the president.
Section 8. Assistant and Subordinate Officers. Each other officer
shall perform such duties as the Board, the chairman of the board or the
president may prescribe. The Board may, from time to time, authorize any
officer to appoint and remove subordinate officers, to prescribe their
authority and duties, and to fix their compensation.
Section 9. Duties of Officers May Be Delegated. In the absence of any
officer of the Corporation, or for any other reason the Board may deem
sufficient, the Board may delegate, for the time being, the powers or duties,
or any of them, of such officers to any other officer or to any director.
Section 10. Compensation. The salaries of corporate officers shall be
fixed by the Compensation Committee provided for in Section 5 of Article III
hereof, except that the fixing of salaries below certain levels, determinable
from time to time by the Compensation Committee, may in the discretion of the
Committee be delegated to the Chief Executive Officer, subject to the approval
of the Board.
ARTICLE V
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1. Indemnification. The Corporation shall indemnify and hold
harmless, to the fullest extent permitted by applicable law as it presently
exists or may hereafter be amended, any person (an "Indemnitee") who was or is
made or is threatened to be made a party or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative, including appeals (a "proceeding"), by reason of the fact that
he, or a person for whom he is the legal representative, is or was a director
or officer of the Corporation or, while a director or officer of the
Corporation, is or was serving at the request of the Corporation as a director,
officer, employee or agent of another Corporation or of a partnership, joint
venture, trust, enterprise or nonprofit entity, including service with respect
to employee benefit plans, against
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all liability and loss suffered and expenses (including, but not limited to,
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid in settlements) reasonably paid or incurred by such Indemnitee.
Notwithstanding the preceding sentence, except as otherwise provided in Section
3, the Corporation shall be required to indemnify an Indemnitee in connection
with a proceeding (or part thereof) commenced by such Indemnitee only if the
commencement of such proceeding (or part thereof) by the Indemnitee was
authorized by the Board. The Corporation's obligation, if any, to indemnify or
to advance expenses to any Indemnitee who was or is serving at its request as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, enterprise or nonprofit entity shall be reduced by any amount
such Indemnitee may collect as indemnification or advancement of expenses from
such other corporation, partnership, joint venture, trust, enterprise or
nonprofit enterprise.
Section 2. Advance Payment. The Corporation shall pay the expenses
(including attorneys' fees) incurred by an Indemnitee in defending any
proceeding in advance of its final disposition, provided, however, that, to the
extent required by law, such payment of expenses in advance of the final
disposition of the proceeding shall be made only upon receipt of an undertaking
by the Indemnitee to repay all amounts advanced if it should be ultimately
determined that the Indemnitee is not entitled to be indemnified under this
Article V or otherwise.
Section 3. Enforcement. If a claim for indemnification or payment of
expenses under this Article V is not paid in full within thirty days after a
written claim therefor by the Indemnitee has been received by the Corporation,
the Indemnitee may file suit to recover the unpaid amount of such claim and, if
successful in whole or in part, shall be entitled to be paid the expense of
prosecuting such claim. In any such action the Corporation shall have the
burden of proving that the Indemnitee is not entitled to the requested
indemnification or payment of expenses under applicable law.
Section 4. Non-exclusivity. The rights conferred on any Indemnitee by
this Article V shall not be exclusive of any other rights which such Indemnitee
may have or hereafter acquire under any statute, provision of the Restated
Certificate of Incorporation, these By-Laws, agreement, vote of stockholders or
disinterested directors or otherwise. This Article V shall not limit the right
of the Corporation, to the extent and in the manner permitted by law, to
indemnify and to advance expenses to persons other than Indemnitees when and as
authorized by appropriate corporate action.
Section 5. Repeal or Modification. Any repeal or modification of the
foregoing provisions of this Article V shall not adversely affect any right or
protection hereunder of any Indemnitee in respect of any act or omission
occurring prior to the time of such repeal or modification.
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ARTICLE VI
CAPITAL STOCK
Section 1. Form and Execution. Certificates for shares, certifying the
number of full-paid shares owned, shall be issued to each stockholder in such
form as shall be approved by the board of directors. Such certificates shall be
signed by the chairman of the board of directors or the president or a vice
president and by the secretary or an assistant secretary or the treasurer or an
assistant treasurer; provided, however, that the signatures of any of such
officers and the seal of the Corporation upon such certificates may be
facsimiles, engraved, stamped or printed. If any officer or officers who shall
have signed, or whose facsimile signature shall have been used, printed or
stamped on any certificate or certificates for shares, shall cease to be such
officer or officers, because of death, resignation or otherwise, before such
certificate or certificates shall have been delivered by the Corporation, such
certificate or certificates shall nevertheless be as effective in all respects
as though signed by a duly elected, qualified and authorized officer or
officers, and as though the person or persons who signed such certificate or
certificates, or whose facsimile signature or signatures shall have been used
thereon, had not ceased to be an officer or officers of the Corporation.
Section 2. Transfer of Shares. Transfers of shares shall be made only
upon the books of the Corporation by the holder, in person, or by power of
attorney duly executed and filed with the Secretary of the Corporation, and on
the surrender of the certificate or certificates of such shares, properly
assigned. The Corporation may, if and whenever the Board shall so determine,
maintain one or more offices or agencies, each in charge of an agent designated
by the Board, where the shares of the capital stock of the Corporation shall be
transferred and/or registered. The Board may also make such additional rules
and regulations as it may deem expedient concerning the issue, transfer and
registration of certificates for shares of the capital stock of the
Corporation.
Section 3. Lost, Stolen or Destroyed Certificates. A new share
certificate or certificates may be issued in place of any certificate
theretofore issued by the Corporation which is alleged to have been lost,
destroyed or wrongfully taken upon (i) the execution and delivery to the
Corporation by the person claiming the certificate to have been lost, destroyed
or wrongfully taken of an affidavit of that fact, specifying whether or not, at
the time of such alleged loss, destruction or taking, the certificate was
endorsed, and (ii) the furnishing to the Corporation of indemnity and other
assurances, if any, satisfactory to the Corporation and to all transfer agents
and registrars of the class of shares represented by the certificate against
any and all losses, damages, costs, expenses or liabilities to which they or
any of them may be subjected by reason of the issue and delivery of such new
certificate or certificates or in respect of the original certificate.
Section 4. Registered Stockholders. A person in whose name shares are
of record on the books of the Corporation shall conclusively be deemed the
unqualified owner and holder thereof for all purposes and to have capacity to
exercise all rights of ownership. Neither the Corporation nor any transfer
agent of the Corporation shall be bound to recognize any equitable interest in
or
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claim to such shares on the part of any other person, whether disclosed upon
such certificate or otherwise, nor shall they be obliged to see to the
execution of any trust or obligation.
ARTICLE VII
MISCELLANEOUS
Section 1. Dividends and Reserves. Dividends upon the capital stock of
the Corporation may be declared as permitted by law by the Board or the
Executive Committee at any regular or special meeting. Before payment of any
dividend or making any distribution of profits, there may be set aside out of
the surplus or net profits of the Corporation such sum or sums as the Board or
the Executive Committee, from time to time, in their absolute discretion, think
proper as a reserve fund to meet contingencies, or for such other purposes as
the Board or Executive Committee shall think conducive to the interests of the
Corporation, and any reserve so established may be abolished and restored to
the surplus account by like action of the Board or the Executive Committee.
Section 2. Seal. The seal of the Corporation shall bear the corporate
name of the Corporation, the year of its Incorporation and the words "Corporate
Seal, Delaware".
Section 3. Waiver. Whenever any notice whatever is required to be
given by statute or under the provisions of the Restated Certificate of
Incorporation or these By-Laws, a waiver thereof in writing signed by the
person or persons entitled to such notice, whether before or after the time
stated therein, shall be deemed equivalent thereto. Neither the business to be
transacted at, nor the purpose of, any annual or special meeting of the
stockholders or the Board, as the case may be, need be specified in any waiver
of notice of such meeting.
Section 4. Fiscal Year. The fiscal year of the Corporation shall begin
with October first and end with September thirtieth.
Section 5. Contracts. Except as otherwise required by law, the
Restated Certificate of Incorporation or these By-Laws, any contracts or other
instruments may be executed and delivered in the name and on the behalf of the
Corporation by such officer or officers of the Corporation as the Board may
from time to time direct. Such authority may be general or confined to specific
instances as the Board may determine. The Chairman of the Board, the President
or any Vice President may execute bonds, contracts, deeds, leases and other
instruments to be made or executed for or on behalf of the Corporation. Subject
to any restrictions imposed by the Board, the Chairman of the Board, the
President or any Vice President of the Corporation may delegate contractual
powers to others under his jurisdiction, it being understood, however, that any
such delegation of power shall not relieve such officer of responsibility with
respect to the exercise of such delegated power.
Section 6. Proxies. Unless otherwise provided by resolution adopted by
the Board, the Chairman of the Board, the President or any Vice President may
from time to time appoint an attorney or attorneys or agent or agents of the
Corporation, in the name and on behalf of the Corporation, to cast the votes
which the Corporation may be entitled to cast as the holder of
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stock or other securities in any other corporation or other entity, any of
whose stock or other securities may be held by the Corporation, at meetings of
the holders of the stock or other securities of such other corporation or other
entity, or to consent in writing, in the name of the Corporation as such
holder, to any action by such other corporation or other entity, and may
instruct the person or persons so appointed as to the manner of casting such
votes or giving such consent, and may execute or cause to be executed in the
name and on behalf of the Corporation and under its corporate seal or
otherwise, all such written proxies or other instruments as he may deem
necessary or proper in the premises.
Section 7. Amendments. These By-Laws may be made, altered, amended or
repealed, in whole or in part, only in accordance with the provisions of
Article Ninth of the Restated Certificate of Incorporation.
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Exhibit 4.1
PRIVILEGED AND CONFIDENTIAL
Waterlink, Inc.
and
American Stock Transfer & Trust Company,
Rights Agent
Rights Agreement
DATED AS of May 23, 1997
TABLE OF CONTENTS
Section 1. Certain Definitions
Section 2. Appointment of Rights Agent
Section 3. Issue of Right Certificates
Section 4. Form of Right Certificate
Section 5. Countersignature and Registration
Section 6. Transfer, Split-Up, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificate
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights
Section 8. Cancellation and Destruction of Right Certificates
Section 9. Reservation and Availability of Preferred Shares
Section 10. Preferred Shares Record Date
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number
of Rights
Section 12. Certificate of Adjusted Purchase Price or Number of Shares
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power
Section 14. Fractional Rights and Fractional Shares
Section 15. Rights of Action
Section 16. Right Certificate Holder Not Deemed a Stockholder
Section 17. Concerning the Rights Agent
Section 18. Merger or Consolidation or Change of Name of Rights Agent
Section 19. Duties of Rights Agent
Section 20. Change of Rights Agent
Section 21. Issuance of New Right Certificates
Section 22. Redemption and Termination
Section 23. Exchange
Section 24. Notice of Certain Events
Section 25. Notices
Section 26. Supplements and Amendments
Section 27. Determination and Actions by the Board of Directors, etc.
Section 28. Successors
Section 29. Benefits of this Agreement
Section 30. Severability
Section 31. Governing Law
Section 32. Counterparts
Section 33. Descriptive Headings
<PAGE> 2
Signatures
Exhibit A--Certificate of Designation, Preferences and Rights
Exhibit B--Form of Rights Certificate
Exhibit C--Summary of Rights to Purchase Preferred Shares
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<PAGE> 3
RIGHTS AGREEMENT
THIS AGREEMENT, dated as of May 23, 1997 (the "Agreement"),
between Waterlink, Inc., a Delaware corporation (the "Corporation"), and
American Stock Transfer & Trust Company (the "Rights Agent").
WITNESSETH THAT:
WHEREAS, the Board of Directors of the Corporation has authorized and
declared a dividend of one preferred share purchase right (a "Right") for each
Common Share (as hereinafter defined) of the Corporation outstanding at the
close of business on the day on which the SEC declares the Company's
Registration Statement on Form S-1 effective (the "Record Date"), each Right
representing the right to purchase one one-hundredth of a Preferred Share (as
hereinafter defined), upon the terms and subject to the conditions herein set
forth, and has further authorized and directed the issuance of one Right with
respect to each Common Share that shall become outstanding between the Record
Date and the earliest of the Distribution Date, the Redemption Date or the
Final Expiration Date (as such terms are hereinafter defined); provided,
however, that Rights may be issued with respect to Common Shares that shall
become outstanding after the Distribution Date and prior to the earlier of the
Redemption Date and the Final Expiration Date in accordance with the provisions
of Section 22 of this Agreement.
Accordingly, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which, together
with all Affiliates and Associates of such Person, shall be the Beneficial
Owner of 15% or more of the then outstanding Common Shares (other than as a
result of a Permitted Offer) or was such a Beneficial Owner at any time after
the date hereof, whether or not such person continues to be the Beneficial
Owner of 15% or more of the then outstanding Common Shares. Notwithstanding the
foregoing, (A) the term "Acquiring Person" shall not include (i) the
Corporation, (ii) any Subsidiary of the Corporation, (iii) any employee benefit
plan of the Corporation or of any Subsidiary of the Corporation, (iv) any
Person or entity organized, appointed or established by the Corporation for or
pursuant to the terms of any such plan, (v) any Person, who or which together
with all Affiliates and Associates of such Person becomes the Beneficial Owner
of 15% or more of the then outstanding Common Shares as a result of the
acquisition of Common Shares directly from the Corporation, or (vi) an Exempt
Person, and (B) no Person shall be deemed to be an "Acquiring Person" either
(X) as a result of the acquisition of Common Shares by the Corporation which,
by reducing the number of Common Shares outstanding, increases the proportional
number of shares beneficially owned by such Person together with all Affiliates
and Associates of such Person; except that if (i) a Person would become an
Acquiring Person (but for the operation of this subclause X) as a result of the
acquisition of Common Shares by the Corporation, and (ii)
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after such share acquisition by the Corporation, such Person, or an Affiliate
or Associate of such Person, becomes the Beneficial Owner of any additional
Common Shares, then such Person shall be deemed an Acquiring Person, or (Y) if
(i) within 8 days after such Person would otherwise have become an Acquiring
Person (but for the operation of this subclause Y), such Person notifies the
Board of Directors that such Person did so inadvertently and (ii) within 2 days
after such notification, such Person is the Beneficial Owner of less than 10%
of the outstanding Common Shares.
The phrase "then outstanding," when used with reference to a Person's
Beneficial Ownership of securities of the Corporation, shall mean the number of
such securities then issued and outstanding together with the number of such
securities not then actually issued and outstanding which such Person would be
deemed to own beneficially hereunder.
(b) "Act" shall mean the Securities Act of 1933, as amended and as in
effect on the date of this Agreement.
(c) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act.
(d) A Person shall be deemed the "Beneficial Owner" of and shall be
deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or Associates
beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (whether or not in writing), or upon the exercise
of conversion rights, exchange rights, rights (other than the Rights), warrants
or options, or otherwise; provided, however, that a Person shall not be deemed
the Beneficial Owner of, or to beneficially own, securities tendered pursuant
to a tender or exchange offer made by or on behalf of such Person or any of
such Person's Affiliates or Associates until such tendered securities are
accepted for purchase or exchange; or (B) the right to vote pursuant to any
agreement, arrangement or understanding (whether or not in writing); provided,
however, that a Person shall not be deemed the Beneficial Owner of, or to
beneficially own, any security if the agreement, arrangement or understanding
to vote such security (I) arises solely from a revocable proxy or consent
given to such Person in response to a public proxy or consent solicitation made
pursuant to, and in accordance with, the applicable rules and regulations
promulgated under the Exchange Act and (2) is not also then reportable on
Schedule 13D under the Exchange Act (or any comparable or successor report); or
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<PAGE> 5
(iii) which are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate thereof) with which such Person (or
any of such Person's Affiliates or Associates) has any agreement, arrangement or
understanding (whether or not in writing) (other than customary agreements with
and between underwriters and selling group members with respect to a bona fide
public offering of securities) relating to the acquisition, holding, voting
(except to the extent contemplated by the proviso to Section l(d)(ii)(B)) or
disposing of any securities of the Corporation.
(e) "Business Day" shall mean any day other than a Saturday, Sunday or
U.S. federal holiday.
(f) "Close of Business" on any given date shall mean 5:00 P.M., New
York time, on such date; provided, however, that if such date is not a Business
Day it shall mean 5:00 P.M., New York time, on the next succeeding Business
Day.
(g) "Common Shares" when used with reference to the Corporation shall
mean the shares of Common Stock, par value $.001 per share, of the Corporation
or, in the event of a subdivision, combination or consolidation with respect to
such shares of Common Stock, the shares of Common Stock resulting from such
subdivision, combination or consolidation. "Common Shares" when used with
reference to any Person other than the Corporation shall mean the capital stock
(or equity interest) with the greatest voting power of such other Person or, if
such other Person is a Subsidiary of another Person, the Person or Persons
which. ultimately control such first-mentioned Person.
(h) "Disinterested Director" shall mean any member of the
Corporation's Board of Directors who is not an Acquiring Person or an
Affiliate, Associate, nominee, or representative of an Acquiring Person and who
was a member of the Corporation's Board of Directors prior to the time that the
Acquiring Person became an Acquiring Person or is recommended to succeed a
Disinterested Director by a majority of Disinterested Directors.
(i) "Distribution Date" shall have the meaning set forth in Section 3
hereof.
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(k) "Exempt Person" shall mean any Person who is the Beneficial Owner
of 15% or more of the outstanding Common Shares on the date of this Rights
Agreement, provided, that, if (i) the Exempt Person, together with its
Affiliates and Associates, increases its Beneficial Ownership of the then
outstanding Common Shares by 1% or more of the then outstanding Common Shares;
(ii) there is any change in the Beneficial Ownership or management control of
such Exempt Person, other than a change of Beneficial Ownership of 40% or less
of interests in the Exempt Person, which interests have no management control
or voting rights with respect to the Exempt Person; (iii) such Exempt Person,
or any of the Affiliates or Associates of such Exempt Person, commence or
publicly announce the
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intention to commence a tender or exchange offer the consummation of which
would increase the number of outstanding Common Shares Beneficially Oned by
such Exempt Person's, or any of its Affiliates or Associates; or (iv) the
Corporation shall enter into an event which would constitute a Section 13
Event, but for the fact that the Exempt Person is not considered to be an
Acquiring Person, then in any such case the Exempt Person shall immediately
cease to be an Exempt Person and shall be considered to be an Acquiring Person
for all purposes of this Agreement.
(l) "Final Expiration Date" shall mean the tenth anniversary of the
Record Date.
(m) "Interested Stockholder" shall mean any Acquiring Person or any
Affiliate or Associate of an Acquiring Person or any other Person in which any
such Acquiring Person, Affiliate or Associate has an interest, or any other
Person acting directly or indirectly on behalf of or in concert with any such
Acquiring Person, Affiliate or Associate.
(n) "Permitted Offer" shall mean a tender or exchange offer which is
for all outstanding Common Shares at a price and on terms determined, prior to
the purchase of shares under such tender or exchange offer, by at least a
majority of the Disinterested Directors, to be adequate (taking into account
all factors that such Directors deem relevant including, without limitation,
prices that could reasonably be achieved if the Corporation or its assets were
sold on an orderly basis designed to realize maximum value) and otherwise in
the best interests of the Corporation and its stockholders (other than the
Person or any Affiliate or Associate thereof on whose basis the offer is being
made) taking into account all factors that such directors may deem relevant.
(o) "Person" shall mean any individual, firm, partnership,
corporation, trust, association, joint venture or other entity, and shall
include any successor (by merger or otherwise) of such entity.
(p) "Preferred Shares" shall mean shares of Series 1 Preferred Stock,
with a par value of $.001 per share of the Corporation.
(q) "Redemption Date" shall mean the time at which the Rights are
redeemed as provided in Section 22 hereof.
(r) "Section 11(a)(ii) Event" shall mean any event described in
Section 11(a)(ii) hereof.
(s) "Section 13 Event" shall mean any event described in clause (x) or
(y) of Section 13(a) hereof.
(t) "Shares Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to the Exchange Act) by the Corporation or
an Acquiring Person that an Acquiring
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Person has become such; provided, that, if such Person is determined not to
have become an Acquiring Person pursuant to Section l(a)(Y) hereof, then no
Shares Acquisition Date shall be deemed to have occurred.
(u) "Subsidiary" of any Person shall mean any corporation or other
Person of which a majority of the voting power or equity interest is owned,
directly or indirectly, by such Person, or which is otherwise controlled by
such Person.
(v) "Triggering Event" shall mean any Section 11(a)(ii) Event or any
Section 13 Event.
Section 2. Appointment of Rights Agent. The Corporation hereby
appoints the Rights Agent to act as agent for the Corporation and the holders
of the Rights (who, in accordance with Section 3 hereof, shall prior to the
Distribution Date also be the holders of Common Shares) in accordance with the
terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. The Corporation may from time to time appoint such co-Rights
Agents as it may deem necessary or desirable.
Section 3. Issuance of Right Certificates. (a) Until the earlier of
(i) the Shares Acquisition Date or (ii) the Close of Business on the tenth day
(or such later date as may be determined by action of the Disinterested
Directors) after the date any Person (other than the Corporation, any
Subsidiary of the Corporation, any employee benefit plan of the Corporation or
of any Subsidiary of the Corporation or any Person or entity organized,
appointed or established by the Corporation for or pursuant to the terms of any
such plan) commences, or first publicly announces its intention to commence
(which intention to commence remains in effect for five Business Days after
such announcement), a tender or exchange offer the consummation of which would
result in any Person becoming an Acquiring Person (including, in the case of
both (i) and (ii), any such date which is after the date of this Agreement and
prior to the issuance of the Rights), the earlier of such dates being herein
referred to as the "Distribution Date," (x) the Rights will be evidenced
(subject to the provisions of Section 3(b) hereof) by the certificates for
Common Shares registered in the names of the holders thereof (which
certificates shall also be deemed to be Right Certificates) and not by separate
Right Certificates, and (y) the Rights will be transferable only in connection
with the transfer of the underlying Common Shares (including a transfer to the
Corporation); provided, however, that if a tender offer is abandoned prior to
the occurrence of a Distribution Date, then no Distribution Date shall occur as
a result of such tender offer. As soon as practicable after the Distribution
Date, the Corporation will prepare and execute, the Rights Agent will
countersign, and the Corporation will send or cause to be sent by first-class,
postage-prepaid mail, to each record holder of Common Shares as of the Close of
Business on the Distribution Date, at the address of such holder shown on the
records of the Corporation, a Right Certificate, substantially in the form of
Exhibit B hereto (a "Right Certificate"),
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<PAGE> 8
evidencing one Right for each Common Share so held. As of and after the
Distribution Date, the Rights will be evidenced solely by such Right
Certificates.
(b) As promptly as practicable following the Record Date, the
Corporation will send a copy of a Summary of Rights to Purchase Preferred
Shares, in substantially the form of Exhibit C hereto (the "Summary of Rights"),
by first-class, postage-prepaid mail, to each record holder of Common Shares as
of the close of business on the Record Date, at the address of such holder shown
on the records of the Corporation. With respect to certificates for Common
Shares outstanding as of the Record Date, until the Distribution Date, the
Rights will be evidenced by the certificates for Common Shares with or without a
copy of the Summary of Rights attached thereto. Until the Distribution Date (or
the earlier of the Redemption Date or the Final Expiration Date), the surrender
for transfer of any certificate for Common Shares outstanding on the Record
Date, with or without a copy of the Summary of Rights attached thereto, shall
also constitute the transfer of the Rights associated with such Common Shares.
(c) Certificates for Common Shares issued after the Record Date
(including, without limitation, reacquired Common Shares referred to in the
last sentence of this paragraph (c)) but prior to the earliest of the
Distribution Date, the Redemption Date or the Final Expiration Date, shall be
deemed also to be certificates for Rights, and shall bear the following legend:
This certificate also evidences and entitles the holder hereof to
certain rights as set forth in a Rights Agreement between Waterlink,
Inc. and American Stock Transfer & Trust Company, dated as of May 23,
1997 (the "Rights Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which is on file at the
principal executive offices of Waterlink, Inc. Under certain
circumstances, as set forth in the Rights Agreement, such Rights will
be evidenced by separate certificates and will no longer be evidenced
by this certificate. Waterlink, Inc. will mail to the holder of this
certificate a copy of the Rights Agreement without charge after
receipt of a written request therefor. Under certain circumstances set
forth in the Rights Agreement, Rights issued to, or held by, any
Person who is, was or becomes an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Agreement) and certain
related persons, whether currently held by or on behalf of such Person
or by any subsequent holder, may become null and void.
With respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the Common Shares represented by
such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares represented thereby.
In the event that the Corporation purchases or acquires any Common Shares after
the Record Date but prior to the Distribution Date, any Rights associated with
such Common Shares shall be deemed cancelled and
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retired so that the Corporation shall not be entitled to exercise any Rights
associated with the Common Shares which are no longer outstanding.
Section 4. Form of Right Certificate. (a) The Right Certificates (and
the forms of election to purchase and of assignment to be printed on the reverse
thereof) shall be substantially in the form set forth in Exhibit B hereto and
may have such marks of identification or designation and such legends, summaries
or endorsements printed thereon as the Corporation may deem appropriate and as
are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any applicable law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange on which
the Rights may from time to time be listed, or to conform to usage. Subject to
the provisions of Section 11 and Section 22 hereof, the Right Certificates shall
entitle the holders thereof to purchase such number of one-hundredths of a
Preferred Share as shall be set forth therein at the price per one one-hundredth
of a Preferred Share set forth therein (the "Purchase Price"), but the amount
and type of securities purchasable upon the exercise of each Right and the
Purchase Price thereof shall be subject to adjustment as provided herein.
(b) Any Right Certificate issued pursuant to Section 3(a) or Section
22 hereof that represents Rights which are null and void pursuant to Section
7(e) of this Agreement and any Right Certificate issued pursuant to Section 6
or Section 11 hereof upon transfer, exchange, replacement or adjustment of any
other Right Certificate referred to in this sentence, shall contain (to the
extent feasible) the following legend:
The Rights represented by this Right Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person
or an Affiliate or Associate of an Acquiring Person (as such terms are
defined in the Rights Agreement). Accordingly, this Right Certificate
and the Rights represented hereby are null and void.
Provisions of Section 7(e) of this Rights Agreement shall be operative whether
or not the foregoing legend is contained on any such Right Certificate.
Section 5. Countersignature and Registration. The Right Certificates
shall be executed on behalf of the Corporation by its Chairman of the Board,
its Chief Executive Officer, its President, any of its Vice Presidents, or its
Treasurer, either manually or by facsimile signature, shall have affixed
thereto the Corporation's seal or a facsimile thereof, and shall be attested by
the Secretary or an Assistant Secretary of the Corporation, either manually or
by facsimile signature. The Right Certificates shall be countersigned by the
Rights Agent and shall not be valid for any purpose unless so countersigned. In
case any officer of the Corporation who shall have signed any of the Right
Certificates shall cease to be such officer of the Corporation before
countersignature by the Rights Agent and issuance and delivery by the
Corporation, such Right Certificates may nevertheless be countersigned by the
Rights Agent and issued and delivered by the Corporation with the same force
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and effect as though the person who signed such Right Certificates had not
ceased to be such officer of the Corporation.
Following the Distribution Date, the Rights Agent will keep or cause
to be kept, at its principal office or offices designated as the appropriate
place for surrender of such Right Certificate or transfer, books for
registration and transfer of the Right Certificates issued hereunder. Such books
shall show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by each of the Right
Certificates and the certificate number and the date of each of the Right
Certificates.
Subject to Section 6 and Section 7(c) hereof, the Corporation and the
Rights Agent may deem and treat the person in whose name the Right Certificate
(or, prior to the Distribution Date, the associated Common Shares certificate)
is registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Right Certificate
or the associated Common Shares certificate made by anyone other than the
Corporation or the Rights Agent) for all purposes whatsoever, and neither the
Corporation nor the Rights Agent, subject to the last sentence of Section 7(e)
hereof, shall be affected by any notice to the contrary.
Section 6. Transfer, Split-Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificate.. Subject
to the provisions of Section 4(b), Section 7(e) and Section 14 hereof, at any
time after the Close of Business on the Distribution Date, and at or prior to
the Close of Business on the earlier of the Redemption Date or the Final
Expiration Date, any Right Certificate or Right Certificates may be
transferred, split up, combined or exchanged for another Right Certificate or
Right Certificates, entitling the registered holder to purchase a like number
of one one-hundredth of a Preferred Share (or, following a Triggering Event,
other securities, as the case may be) as the Right Certificate or Right
Certificates surrendered then entitled such holder (or former holder in the
case of a transfer) to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Right Certificate or Right Certificates shall
make such request in writing delivered to the Rights Agent, and shall surrender
the Right Certificate or Right Certificates to be transferred, split up,
combined or exchanged at the principal office of the Rights Agent designated
for such purpose. Neither the Rights Agent nor the Corporation shall be
obligated to take any action whatsoever with respect to the transfer of any
such surrendered Right Certificate until the registered holder shall have
completed and signed the certificate contained in the form of assignment on the
reverse side of such Right Certificate and shall have provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner)
or Affiliates or Associates thereof as the Corporation shall reasonably
request. Thereupon the Rights Agent shall, subject to Section 4(b), Section
7(e) and Section 14 hereof, countersign and deliver to the Person entitled
thereto a Right Certificate or Right Certificates, as the case may be, as so
requested. The Corporation may require payment of a sum sufficient to cover any
tax or governmental charge that may be imposed in connection with any transfer,
split up, combination or exchange of Right Certificates.
Upon receipt by the Corporation and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation
of a Right Certificate, and, in case of loss, theft
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or destruction, of indemnity or security reasonably satisfactory to them, and,
at the Corporation's request, reimbursement to the Corporation and the Rights
Agent of all reasonable expenses incidental thereto, and upon surrender to
the Rights Agent and cancellation of the Right Certificate if mutilated, the
Corporation will execute and deliver a new Right Certificate of like tenor to
the Rights Agent for countersignature and delivery to the registered holder in
lieu of the Right Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights. (a) Subject to Section 7(e) hereof, the registered holder of any Right
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part at any time after the Distribution Date
upon surrender of the Right Certificate, with the form of election to purchase
and the certificate on the reverse side thereof duly executed, to the Rights
Agent at the principal office of the Rights Agent designated for such purpose,
together with payment of the aggregate Purchase Price for the total number of
one one-hundredth of a Preferred Share (or other securities, as the case may
be) as to which such surrendered Rights are exercised, at or prior to the
earliest of (i) the close of business on the Final Expiration Date, or (ii) the
Redemption Date.
(b) The Purchase Price for each one one-hundredth of a Preferred Share
pursuant to the exercise of a Right shall initially be $65.00, shall be
subject to adjustment from time to time as provided in the next sentence and in
Sections 11 and 13(a) hereof and shall be payable in accordance with paragraph
(c) below. Anything in this Agreement to the contrary notwithstanding, in the
event that at any time after the date of this Agreement and prior to the
Distribution Date, the Corporation shall (i) declare or pay any dividend on the
Common Shares payable in Common Shares or (ii) effect a subdivision,
combination or consolidation of the Common Shares (by reclassification or
otherwise than by payment of dividends in Common Shares) into a greater or
lesser number of Common Shares, then in any such case, each Common Share
outstanding following such subdivision, combination or consolidation shall
continue to have a Right associated therewith and the Purchase Price following
any such event shall be proportionately adjusted to equal the result obtained
by multiplying the Purchase Price immediately prior to such event by a fraction
the numerator of which shall be the total number of Common Shares outstanding
immediately prior to the occurrence of the event and the denominator of which
shall be the total number of Common Shares outstanding immediately following
the occurrence of such event. The adjustment provided for in the preceding
sentence shall be made successively whenever such a dividend is declared or
paid or such a subdivision, combination or consolidation is effected.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase and the certificate duly
executed, accompanied by payment of the Purchase Price for the Preferred Shares
(or other securities, as the case may be) to be purchased and an amount equal
to any applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 6 hereof by certified check, cashier's
check or money order payable to the order of the Corporation, the Rights Agent
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shall thereupon promptly (i) (A) requisition from any transfer agent of
the Preferred Shares certificates for the number of Preferred Shares to be
purchased and the Corporation hereby irrevocably authorizes its transfer agent
to comply with all such requests, or (B) if the Corporation, in its sole
discretion, shall have elected to deposit the Preferred Shares issuable upon
exercise of the Rights hereunder into a depositary, requisition from the
depositary agent depositary receipts representing such number of Preferred
Shares as are to be purchased (in which case certificates for the Preferred
Shares represented by such receipts shall be deposited by the transfer agent
with the depositary agent) and the Corporation will direct the depositary agent
to comply with such requests, (ii) when appropriate, requisition from the
Corporation the amount of cash to be paid in lieu of issuance of fractional
shares in accordance with Section 14 hereof, (iii) after receipt of such
certificates or depositary receipts, cause the same to be delivered to or upon
the order of the registered holder of such Right Certificate, registered in
such name or names as may be designated by such holder, and (iv) when
appropriate, after receipt thereof, deliver such cash to or upon the order of
the registered holder of such Right Certificate. In the event that the
Corporation is obligated to issue other securities (including Common Shares) of
the Corporation pursuant to Section 11(a) hereof, the Corporation will make all
arrangements necessary so that such other securities are available for
distribution by the Rights Agent, if and when appropriate. Neither the Rights
Agent nor the Corporation shall be obligated to undertake any action with
respect to a registered holder upon the occurrence of any purported exercise of
the Rights unless such registered holder shall have provided such evidence of
the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates
or Associates thereof as the Corporation shall reasonably request.
In addition, in the case of an exercise of the Rights by a holder
pursuant to Section 11(a)(ii), the Rights Agent shall return such Right
Certificate to the registered holder thereof after imprinting, stamping or
otherwise indicating thereon that the rights represented by such Right
Certificate no longer include the rights provided by Section 11(a)(ii) of the
Rights Agreement and if less than all the Rights represented by such Right
Certificate were so exercised, the Rights Agent shall indicate on the Right
Certificate the number of Rights represented thereby which continue to include
the rights provided by Section 11(a)(ii).
(d) In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be
issued by the Rights Agent to the registered holder of such Right Certificate
or to his duly authorized assigns, subject to the provisions of Section 14
hereof, or the Rights Agent shall place an appropriate notation on the Right
Certificate with respect to those Rights exercised.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of
an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any
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<PAGE> 13
Affiliate or Associate thereof) who becomes a transferee after the Acquiring
Person becomes such, or (iii) a transferee of an Acquiring Person (or of any
Affiliate or Associate thereof) who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring Person or to
any Person with whom the Acquiring Person has a continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
which the Disinterested Directors have determined is part of a plan,
arrangement or understanding which has as a primary purpose or effect the
avoidance of this Section 7(e), shall become null and void without any further
action and no holder of such Rights shall have any rights whatsoever with
respect to such Rights, whether under any provision of this Agreement or
otherwise. The Corporation shall use all reasonable efforts to insure that the
provisions of this Section 7(e) and Section 4(b) hereof are complied with, but
shall have no liability to any holder of Right Certificates or other Person as
a result of its failure to make any determinations with respect to an Acquiring
Person or its Affiliates, Associates or transferees hereunder.
Section 8. Cancellation and Destruction of Right Certificates. All
Right Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Corporation or to any of
its agents, be delivered to the Rights Agent for cancellation or in cancelled
form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no
Right Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Rights Agreement. The Corporation
shall deliver to the Rights Agent for cancellation and retirement, and the
Rights Agent shall so cancel and retire, any other Right Certificate purchased
or acquired by the Corporation otherwise than upon the exercise thereof. The
Rights Agent shall deliver all cancelled Right Certificates to the Corporation,
or shall, at the written request of the Corporation, destroy such cancelled
Right Certificates, and in such case shall deliver a certificate of destruction
thereof to the Corporation.
Section 9. Reservation and Availability of Preferred Shares. The
Corporation covenants and agrees that at all times prior to the occurrence of a
Section 11(a)(ii) Event it will cause to be reserved and kept available out of
its authorized and unissued Preferred Shares, or any authorized and issued
Preferred Shares held in its treasury, the number of Preferred Shares that will
be sufficient to permit the exercise in full of all outstanding Rights and,
after the occurrence of a Section 11(a)(ii) Event, shall, to the extent
reasonably practicable, so reserve and keep available a sufficient number of
Common Shares (and/or other securities) which may be required to permit the
exercise in full of the Rights.
So long as the Preferred Shares (and, after the occurrence of a
Section 11(a)(ii) Event, Common Shares or any other securities) issuable upon
the exercise of the Rights may be listed on any national securities exchange,
the Corporation shall use its best efforts to cause, from and after such time
as the Rights become exercisable, all shares reserved for such issuance to be
listed on such exchange upon official notice of issuance upon such exercise.
The Corporation covenants and agrees that it will take all such action
as may be necessary to ensure that all Preferred Shares (or Common Shares
and/or other securities, as the case may be)
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<PAGE> 14
delivered upon exercise of Rights shall, at the time of delivery of the
certificates for such shares or other securities (subject to payment of the
Purchase Price), be duly and validly authorized and issued and fully paid and
non-assessable shares or securities.
The Corporation further covenants and agrees that it will pay when due
and payable any and all U.S. federal and state transfer taxes and charges which
may be payable in respect of the issuance or delivery of the Right Certificates
or of any Preferred Shares (or Common Shares and/or other securities, as the
case may be) upon the exercise of Rights. The Corporation shall not, however,
be required to pay any transfer tax which may be payable in respect of any
transfer or delivery of Right Certificates to a person other than, or the
issuance or delivery of certificates or depository receipts for the Preferred
Shares (or Common Shares and/or other securities, as the case may be) in a name
other than that of, the registered holder of the Right Certificate evidencing
Rights surrendered for exercise, or to issue or to deliver any certificates or
depositary receipts for Preferred Shares (or Common Shares and/or other
securities, as the case may be) upon the exercise of any Rights, until any such
tax shall have been paid (any such tax being payable by the holder of such
Right Certificate at the time of surrender) or until it has been established to
the Corporation's reasonable satisfaction that no such tax is due.
The Corporation shall use its best efforts to (i) file, as soon as
practicable following the Shares Acquisition Date, a registration statement
under the Act, with respect to the securities purchasable upon exercise of the
Rights on an appropriate form, (ii) cause such registration statement to become
effective as soon as practicable after such filing, and (iii) cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Act and the rules and regulations thereunder)
until the date of the expiration of the rights provided by Section 11(a)(ii).
The Corporation will also take such action as may be appropriate under the blue
sky laws of the various states.
Section 10. Preferred Shares Record Date. Each person in whose name
any certificate for Preferred Shares (or Common Shares and/or other securities,
as the case may be) is issued upon the exercise of Rights shall for all
purposes be deemed to have become the holder of record of the Preferred Shares
(or Common Shares and/or other securities, as the case may be) represented
thereby on, and such certificate shall be dated, the date upon which the Right
Certificate evidencing such Rights was duly surrendered and payment of the
Purchase Price (and any applicable transfer taxes) was made; provided, however,
that, if the date of such surrender and payment is a date upon which the
Preferred Shares (or Common Shares and/or other securities, as the case may be)
transfer books of the Corporation are closed, such person shall be deemed to
have become the record holder of such shares on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Shares (or
Common Shares and/or other securities, as the case may be) transfer books of
the Corporation are open.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights. The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
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(a) (i) In the event the Corporation shall at any time after the date
of this Agreement (A) declare a dividend on the Preferred Shares payable in
Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine
the outstanding Preferred Shares into a smaller number of Preferred Shares or
(D) issue any shares of its capital stock in a reclassification of the
Preferred Shares (including any such reclassification in connection with a
consolidation or merger in which the Corporation is the continuing or surviving
corporation), except as otherwise provided in this Section 11(a) and Section
7(e) hereof, the Purchase Price in effect at the time of the record date for
such dividend or of the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of capital stock issuable
on such date, shall be proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive the aggregate number and
kind of shares of capital stock which if such Right had been exercised
immediately prior to such date and at a time when the Preferred Shares transfer
books of the Corporation were open, such holder would have owned upon such
exercise and been entitled to receive by virtue of such dividend, subdivision,
combination or reclassification; provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Corporation issuable
upon exercise of one Right. If an event occurs which would require an
adjustment under both Section 11(a)(i) and Section 11(a)(ii), the adjustment
provided for in this Section 11(a)(i) shall be in addition to, and shall be
made prior to, any adjustment required pursuant to Section 11(a)(ii).
(ii) In the event any Person, alone or together with its Affiliates
and Associates, shall become an Acquiring Person, then proper provision shall
be made so that each holder of a Right (except as provided below and in Section
7(e) hereof) shall, for a period of 60 days after the later of the occurrence
of any such event or the effective date of an appropriate registration
statement under the Act pursuant to Section 9 hereof, have a right to receive,
upon exercise thereof at a price equal to the then current Purchase Price, in
accordance with the terms of this Agreement, such number of Common Shares (or,
in the discretion of the Disinterested Directors, one one-hundredth of a
Preferred Share) as shall equal the result obtained by (x) multiplying the then
current Purchase Price by the then number of one one-hundredths of a Preferred
Share for which a Right was exercisable immediately prior to the first
occurrence of a Section 11(a)(ii) Event, and dividing that product by (y) 50%
of the then current per share market price of the Corporation's Common Shares
(determined pursuant to Section 11(d) hereof) on the date of such first
occurrence (such number of shares being referred to as the "Adjustment
Shares"); provided, however, that if the transaction that would otherwise give
rise to the foregoing adjustment is also subject to the provisions of Section
13 hereof, then only the provisions of Section 13 hereof shall apply and no
adjustment shall be made pursuant to this Section 11(a)(ii). The exercise of
Rights under this Section 11(a)(ii) shall only result in the loss of rights
under Section 11(a)(ii) to the extent so exercised
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<PAGE> 16
and shall not otherwise affect the rights represented by the Rights under
this Rights Agreement, including the rights represented by Section 13.
(iii) In the event that there shall not be sufficient treasury shares
or authorized but unissued (and unreserved) Common Shares to permit the
exercise in full of the Rights in accordance with the foregoing subparagraph
(ii) and the Rights become so exercisable, notwithstanding any other provision
of this Agreement, to the extent necessary and permitted by applicable law,
each Right shall thereafter represent the right to receive, upon exercise
thereof at the then current Purchase Price, (x) a number of (or fractions of)
Common Shares (up to the maximum number of Common Shares which may permissibly
be issued) and (y) one one-hundredth of a Preferred Share or a number of, or
fractions of other equity securities of the Corporation (or, in the discretion
of the Disinterested Directors, debt) which the Disinterested Directors have
determined to have the same aggregate current market value (determined pursuant
to Section-11(d)(i) and (ii) hereof, to the extent applicable,) as one Common
Share (such number of, or fractions of, Preferred Shares, debt, or other equity
securities or debt of the Corporation being referred to as a "capital stock
equivalent"), equal in the aggregate to the number of Adjustment Shares;
provided, however, if sufficient Common Shares and/or capital stock equivalents
are unavailable, then the Corporation shall, to the extent permitted by
applicable law, take all such action as may be necessary to authorize
additional Common Shares or capital stock equivalents for issuance upon
exercise of the Rights, including the calling of a meeting of stockholders; and
provided, further, that if the Corporation is unable to cause sufficient Common
Shares and/or capital stock equivalents to be available for issuance upon
exercise in full of the Rights, then each Right shall thereafter represent the
right to receive the Adjusted Number of Shares upon exercise at the Adjusted
Purchase Price (as such terms are hereinafter defined). As used herein, the
term "Adjusted Number of Shares" shall be equal to that number of (or fractions
of) Common Shares (and/or capital stock equivalents) equal to the product of
(x) the number of Adjustment Shares and (y) a fraction, the numerator of which
is the number of Common Shares (and/or capital stock equivalents) available for
issuance upon exercise of the Rights and the denominator of which is the
aggregate number of Adjustment Shares otherwise issuable upon exercise in full
of all Rights (assuming there were a sufficient number of Common Shares
available) (such fraction being referred to as the "Proration Factor"). The
"Adjusted Purchase Price" shall mean the product of the Purchase Price and the
Proration Factor. The Disinterested Directors may, but shall not be required
to, establish procedures to allocate the right to receive Common Shares and
capital stock equivalents upon exercise of the Rights among holders of Rights.
(b) If the Corporation shall fix a record date for the issuance of
rights (other than the Rights), options or warrants to all holders of Preferred
Shares entitling them (for a period expiring within 45 calendar days after such
record date) to subscribe for or purchase Preferred Shares (or shares having
the same rights, privileges and preferences as the
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<PAGE> 17
Preferred Shares ("equivalent preferred shares") or securities convertible into
Preferred Shares or equivalent preferred shares at a price per Preferred Share
or equivalent preferred share (or having a conversion price per share, if a
security convertible into Preferred Shares or equivalent preferred shares) less
than the then current per share market price of the Preferred Shares (as
determined pursuant to Section 11(d) hereof) on such record date, the Purchase
Price shall be adjusted by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
number of Preferred Shares outstanding on such record date plus the number of
Preferred Shares which the aggregate offering price of the total number of
Preferred Shares and/or equivalent preferred shares so to be offered (and/or
the aggregate initial conversion price of the convertible securities so to be
offered) would purchase at such current per share market price, and the
denominator of which shall be the number of Preferred Shares outstanding on
such record date plus the number of additional Preferred Shares and/or
equivalent preferred shares to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially convertible).
In case such subscription price may be paid in a consideration part or all of
which shall be in a form other than cash, the value of such consideration shall
be determined in good faith by the Disinterested Directors, whose determination
shall be described in a statement filed with the Rights Agent and shall be
binding on the Rights Agent. Preferred Shares owned by or held for the account
of the Corporation shall not be deemed outstanding for the purpose of any such
computation. Such adjustment shall be made successively whenever such a record
date is fixed; and in the event that such rights, options or warrants are not
so issued, the Purchase Price shall be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.
(c) If the Corporation shall fix a record date for the making of a
distribution to all holders of the Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Corporation is the continuing or surviving corporation) of evidences of
indebtedness or assets (other than a regular quarterly cash dividend or a
dividend payable in Preferred Shares) or subscription rights or warrants
(excluding those referred to in Section 11(b) hereof), the Purchase Price shall
be adjusted by multiplying the Purchase Price in effect immediately prior to
such record date by a fraction, the numerator of which shall be the then
current per share market price (as determined pursuant to Section 11(d) hereof)
of the Preferred Shares on such record date, less the fair market value (as
determined in good faith by the Disinterested Directors, whose determination
shall be described in a statement filed with the Rights Agent and shall be
binding on the Rights Agent) of the portion of the assets or evidences of
indebtedness so to be distributed or of such subscription rights or warrants
applicable to the Preferred Shares and the denominator of which shall be such
current per share market price of the Preferred Shares. Such adjustments shall
be made successively whenever such a record date is fixed; and in the event
that such distribution is not so made, the Purchase Price shall again be
adjusted to be the Purchase Price which would then be in effect if such record
date had not been fixed.
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(d) (i) For the purpose of any computation hereunder, the "current per
share market price" of any security (a "Security" for the purpose of this
Section 11(d)(i)) on any date shall be deemed to be the average of the daily
closing prices per share of such Security for the thirty (30) consecutive
Trading Days (as is hereinafter defined) immediately prior to such date;
provided, however, that in the event that the current per share market price of
the Security is determined during a period following the announcement by the
issuer of such Security of (A) a dividend or distribution on such Security
payable in shares of such Security or securities convertible into such shares,
or (B) any subdivision, combination or reclassification of such Security and
prior to the expiration of thirty (30) Trading Days after the ex-dividend date
for such dividend or distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the current per
share market price shall be appropriately adjusted to reflect the current market
price per share equivalent of such Security. The closing price for each day
shall be the last sale price, regular way, or, in case no such sale takes place
on such day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the Security is not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Security is listed or admitted to trading or,
if the Security is not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ") or such other system then in use, or, if on any such date the
Security is not quoted by any such organization, the average of the closing bid
and asked prices as furnished by a professional market maker making a market in
the Security selected by the Disinterested Directors. If on any such date no
such market maker is making market in the Security, the fair value of the
Security on such date as determined in good faith by the Disinterested Directors
shall be used and shall be binding on the Rights Agent. The term "Trading Day"
shall mean a day on which the principal national securities exchange on which
the Security is listed or admitted to trading is open for the transaction of
business or, if the Security is not listed or admitted to trading on any
national securities exchange, a Business Day.
(ii) If the Preferred Shares are not publicly traded, the "current per
share market price" of a Preferred Share shall be conclusively deemed to be the
current per share market price of the Common Shares as determined pursuant to
Section 11(d)(i) multiplied by one hundred.
(e) Anything herein to the contrary notwithstanding, no adjustment in
the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Purchase Price; provided, however,
that any adjustments which
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by reason of this Section 11(e) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 11 shall be made to the nearest cent or to the nearest one
one-hundredth of a Preferred Share or one ten-thousandth of any other share or
security as the case may be. Notwithstanding the first sentence of this Section
11(e), any adjustment required by this Section 11 shall be made no later than
the earlier of (i) three (3) years from the date of the transaction which
mandates such adjustment or (ii) the Final Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a)(ii)
or Section 13(a) hereof, the holder of any Right thereafter exercised shall
become entitled to receive any shares of capital stock of the Corporation other
than Preferred Shares, thereafter the number of other shares so receivable upon
exercise of any Right shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Preferred Shares contained in Section 11(a) through (c),
inclusive, and the provisions of Sections 7, 9, 10, 13 and 14 with respect to
the Preferred Shares shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Corporation subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) The Corporation may elect on or after the date of any adjustment
of the Purchase Price to adjust the number of Rights, in lieu of any adjustment
in the number of Preferred Shares purchasable upon the exercise of a Right. Each
of the Rights outstanding after such adjustment of the number of Rights shall be
exercisable for the number of one one-hundredths of a Preferred Share for which
a Right was exercisable immediately prior to such adjustment. Each Right held of
record prior to such adjustment shall become that number of Rights (calculated
to the nearest one ten-thousandth) obtained by dividing the Purchase Price in
effect immediately prior to adjustment of the Purchase Price by the Purchase
Price in effect immediately after adjustment of the Purchase Price. The
Corporation shall make a public announcement of its election to adjust the
number of Rights, indicating the record date for the adjustment, and, if known
at the time, the amount of the adjustment to be made. This record date may be
the date on which the Purchase Price is adjusted or any day thereafter, but, if
the Right Certificates have been issued, shall be at least ten (10) days later
than the date of the public announcement. If Right Certificates have been
issued, upon each adjustment of the number of Rights pursuant to this Section
11(h), the Corporation shall, as promptly as practicable, cause to be
distributed to holders of record of Right Certificates on such record date Right
Certificates evidencing, subject to Section 14 hereof, the additional Rights to
which such holders shall be entitled as a result of such adjustment, or, at the
option of the Corporation, shall cause to be distributed to such holders of
record in substitution and replacement for the Right Certificates held by such
holders prior to the date of adjustment, and upon surrender thereof, if required
by the Corporation, new Right
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Certificates evidencing all the Rights to which such holders shall be entitled
after such adjustment. Right Certificates so to be distributed shall be issued,
executed and countersigned in the manner provided for herein and shall be
registered in the names of the holders of record of Right Certificates on the
record date specified in the public announcement.
(i) Irrespective of any adjustment or change in the Purchase Price or
the number of one one-hundredths of a Preferred Share issuable upon the
exercise of the Rights, the Right Certificates theretofore and thereafter
issued may continue to express the Purchase Price and the number of one
one-hundredths of a Preferred Share which were expressed in the initial Right
Certificates issued hereunder.
(j) Before taking any action that would cause an adjustment reducing
the Purchase Price below the par value, if any, of the number of one
one-hundredths of a Preferred Share, Common Shares or other securities issuable
upon exercise of the Rights, the Corporation shall take any corporate action
which may, in the opinion of its counsel, be necessary in order that the
Corporation may validly and legally issue such number of fully paid and
non-assessable one one-hundredths of a Preferred Share, Common Shares or other
securities at such adjusted Purchase Price.
(k) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Corporation may elect to defer until the occurrence of
such event the issuance to the holder of any Right exercised after such record
date the Preferred Shares, Common Shares or other securities of the
Corporation, if any, issuable upon such exercise over and above the Preferred
Shares, Common Shares or other securities of the Corporation, if any, issuable
upon exercise on the basis of the Purchase Price in effect prior to such
adjustment; provided, however, that the Corporation shall deliver to such
holder a due bill or other appropriate instrument evidencing such holder's
right to receive such additional shares upon the occurrence of the event
requiring such adjustment.
(l) Anything in this Section 11 to the contrary notwithstanding, the
Corporation shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that (i) any consolidation or subdivision of the Preferred Shares, (ii)
issuance wholly for cash of Preferred Shares at less than the current market
price, (iii) issuance wholly for cash of Preferred Shares or securities which
by their terms are convertible into or exchangeable for Preferred Shares, (iv)
stock dividends or (v) issuance of rights, options or warrants referred to in
this Section 11, hereafter made by the Corporation to holders of its Preferred
Shares shall not be taxable to such stockholders.
(m) The Corporation shall not, at any time after the Distribution
Date, (x) (i) consolidate with, (ii) merge with or into, or (iii) sell,
mortgage or transfer (or permit any
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Subsidiary to sell, mortgage or transfer), in one or more transaction, assets
or earning power aggregating more than 50% of the assets or earning power of
the Corporation and its Subsidiaries (taken as a whole) (y) to any other Person
or Persons (other than in each case, the Corporation and/or any of its
Subsidiaries in one or more transactions each of which does not violate Section
11(n) hereof), if (x) at the time of or immediately after such consolidation,
merger, sale or transfer there are any charter or by-law provisions or any
rights, warrants or other instruments or securities outstanding or agreements
in effect or other actions taken, which would materially diminish or otherwise
eliminate the benefits intended to be afforded by the Rights or (y) prior to,
simultaneously with or immediately after such consolidation, merger or sale,
the stockholders of the Person who constitutes, or would constitute, the
"Principal Party" for purposes of Section 13(a) hereof shall have received a
distribution of Rights previously owned by such Person or any of its Affiliates
and Associates. The Corporation shall not consummate any such consolidation,
merger, sale or transfer unless prior thereto the Corporation and such other
Person shall have executed and delivered to the Rights Agent a supplemental
agreement evidencing compliance with this Section 11(m).
(n) The Corporation shall not at any time after the Distribution Date,
except as permitted by Section 22 or Section 26 hereof, take (or permit any
Subsidiary to take) any action the purpose or effect of which is to materially
diminish or otherwise eliminate the benefits intended to be afforded by the
Rights.
Section 12. Certificate of Adjusted Purchase Price or Number of
Shares. Whenever an adjustment is made as provided in Sections 11 or 13
hereof, the Corporation shall promptly (a) prepare a certificate setting forth
such adjustment, and a brief statement of the facts resulting in such
adjustment, (b) file with the Rights Agent and with each transfer agent for the
Common Shares and the Preferred Shares a copy of such certificate and (c) mail
a brief summary thereof to each holder of a Right Certificate in accordance
with Section 26 hereof. The Rights Agent shall be fully protected in relying on
any such certificate and on any adjustment therein contained and shall not be
deemed to have knowledge of such adjustment unless and until it shall have
received such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power. (a) In the event that, on or following the Shares Acquisition
Date, directly or indirectly, (x) the Corporation shall consolidate with, or
merge with and into, any Interested Stockholder, or if in such merger or
consolidation all holders of Common Shares are not treated alike, any other
Person (whether or not the Corporation shall be the continuing or surviving
corporation of such consolidation or merger) (other than a merger or
consolidation which would result in all of the securities generally entitled to
vote in the election of directors ("voting securities") of the Corporation
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into securities of the surviving
entity) all of the voting securities of the Corporation or such surviving
entity outstanding immediately after such merger or consolidation and the
holders of such securities
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not having changed as a result of such merger or consolidation), or (y) the
Corporation shall sell, mortgage or otherwise transfer (or one or more of its
Subsidiaries shall sell, mortgage or otherwise transfer), in one or more
transactions other than in the ordinary course of business, assets or earning
power aggregating more than 50% of the assets or earning power of the
Corporation and its Subsidiaries (taken as a whole) to any Interested
Stockholder(s) or, if in such transaction all holders of Common Shares are not
treated alike, any other Person (other than the Corporation or any Subsidiary
of the Corporation in one or more transactions each of which does not violate
Section 11(n) hereof), then, and in each such case (except as provided in
Section 13(d) hereof), proper provision shall be made so that (i) each holder
of a Right, except as provided in Section 7(e) hereof, shall thereafter have
the right to receive, upon the exercise thereof at the then current Purchase
Price, and in lieu of Preferred Shares, such number of freely tradable Common
Shares of the Principal Party (as hereinafter defined), not subject to any
liens, encumbrances, rights of first refusal or other adverse claims, as shall
equal the result obtained by (A) multiplying the then current Purchase Price by
the number of one one-hundredths of a Preferred Share for which a Right is then
exercisable (without taking into account any adjustment previously made
pursuant to Section 11(a)(ii)) and dividing that product by (B) 50% of the then
current per share market price of the Common Shares of such Principal Party
(determined pursuant to Section 11(d) hereof) on the date of consummation of
such Section 13 Event; (ii) such Principal Party shall thereafter be liable
for, and shall assume, by virtue of such Section 13 Event, all the obligations
and duties of the Corporation pursuant to this Agreement; (iii) the term
"Corporation" shall thereafter be deemed to refer to such Principal Party, it
being specifically intended that the provisions of Section 11 hereof shall
apply only to such Principal Party following the first occurrence of a Section
13 Event; and (iv) such Principal Party shall take such steps (including, but
not limited to, the reservation of a sufficient number of its Common Shares) in
connection with the consummation of any such transaction as may be necessary to
assure that the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to the Common Shares thereafter deliverable upon
the exercise of the Rights.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause (x) or (y) of
the first sentence of Section 13(a), the Person that is the issuer of any
securities into which Common Shares of the Corporation are converted in such
merger or consolidation, and if no securities are so issued, the Person that is
the other party to such merger or consolidation (including, if applicable, the
Corporation if it is the surviving corporation); and
(ii) in the case of any transaction described in clause (z) of the
first sentence of Section 13(a), the Person that is the party receiving the
greatest portion of the assets or earning power transferred pursuant to such
transaction or transactions;
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provided, however, that in either case described in subclause (i) or (ii)
above, (1) if the Common Shares of such Person are not at such time and have
not been continuously over the preceding twelve (12) month period registered
under Section 12 of the Exchange Act, and such Person is a direct or indirect
Subsidiary of another Person the Common Shares of which are and have been so
registered, "Principal Party" shall refer to such other Person; (2) in case
such Person is a Subsidiary, directly or indirectly, of more than one Person,
the Common Shares of two or more of which are and have been so registered,
"Principal Party" shall refer to whichever of such Persons is the issuer of the
Common Shares having the greatest aggregate market value; and (3) in case such
Person is owned, directly or indirectly, by a joint venture formed by two or
more Persons that are not owned, directly or indirectly, by the same Person,
the rules set forth in (1) and (2) above shall apply to each of the chains of
ownership having an interest in such joint venture as if such party were a
"Subsidiary" of both or all of such joint venturers and the Principal Parties
in each such chain shall bear the obligations set forth in this Section 13 in
the same ratio as their direct or indirect interests in such Person bear to the
total of such interests.
(c) The Corporation shall not consummate any Section 13 Event unless
the Principal Party shall have a sufficient number of its authorized Common
Shares which have not been issued or reserved for issuance to permit the
exercise in full of the Rights in accordance with this Section 13 and unless
prior thereto the Corporation and such Principal Party shall have executed and
delivered to the Rights Agent a supplemental agreement providing for the terms
set forth in paragraphs (a) and (b) of this Section 13 and further providing
that, as soon as practicable after the date of any Section 13 Event the
Principal Party at its own expense shall:
(i) prepare and file a registration statement under the Act with
respect to the Rights and the securities purchasable upon exercise of the
Rights on an appropriate form, and will use its best efforts to cause such
registration statement to (A) become effective as soon as practicable after
such filing and (B) remain effective (with a prospectus at all times meeting
the requirements of the Act) until the Final Expiration Date;
(ii) use its best efforts to qualify or register the Rights and the
securities purchasable upon exercise of the Rights under the blue sky laws of
such jurisdictions as may be necessary or appropriate; and
(iii) deliver to holders of the Rights historical financial statements
for the Principal Party which comply in all respects with the requirements for
registration on Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive
mergers or consolidations or sales or other transfers. The rights under this
Section 13 shall be in addition to the rights to exercise Rights and
adjustments under Section 11(a)(ii) and shall survive any exercise thereof.
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(d) Notwithstanding anything in this Agreement to the contrary,
Section 13 shall not be applicable to a transaction described in subparagraphs
(x) and (y) of Section 13(a) if: (i) such transaction is consummated with a
Person or Persons who acquired Common Shares pursuant to a Permitted Offer (or
a wholly owned Subsidiary of any such Person or Persons); (ii) the price per
Common Share offered in such transaction is not less than the price per Common
Share paid to all holders of Common Shares whose shares were purchased pursuant
to such Permitted Offer; and (iii) the form of consideration offered in such
transaction is the same as the form of consideration paid pursuant to such
Permitted Offer. Upon consummation of any such transaction contemplated by this
Section 13(d), all Rights hereunder shall expire.
Section 14. Fractional Rights and Fractional Shares. (a) The
Corporation shall not be required to issue fractions of Rights or to distribute
Right Certificates which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the Right Certificates
with regard to which such fractional Rights would otherwise be issuable, an
amount in cash equal to the same fraction of the current market value of a
whole Right. For the purposes of this Section 14(a), the current market value
of a whole Right shall be the closing price of the Rights (as determined
pursuant to the provisions set forth in Section 11(d)(i) hereof) for the
Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable.
(b) The Corporation shall not be required to issue fractions of
Preferred Shares (other than fractions which are one one-hundredth or integral
multiples of one one-hundredth of a Preferred Share) upon exercise of the
Rights or to distribute certificates which evidence fractional Preferred Shares
(other than fractions which are one one-hundredth or integral multiples of one
one-hundredth of a Preferred Share). Fractions of Preferred Shares in integral
multiples of one one-hundredth of a Preferred Share may, at the election of the
Corporation, be evidenced by depositary receipts, pursuant to an appropriate
agreement between the Corporation and a depositary selected by it; provided
that such agreement shall provide that the holders of such depositary receipts
shall have the rights, privileges and preferences to which they are entitled as
beneficial owners of the Preferred Shares represented by such depositary
receipts. In lieu of fractional Preferred Shares that are not one one-hundredth
or integral multiples of one one-hundredth of a Preferred Share, the
Corporation shall pay to the registered holders of Right Certificates at the
time such Rights are exercised as herein provided an amount in cash equal to
the same fraction of the current market value of one Preferred Share,
determined pursuant to Section 11(d)(ii) hereof) for the Trading Day
immediately prior to the date of such exercise.
(c) Following the occurrence of a Section 11(a)(ii) Event, the
Corporation shall not be required to issue fractions of shares or units of such
Common Shares, capital stock equivalents or other securities upon exercise of
the Rights or to distribute certificates which evidence fractions of such
Common Shares, capital stock equivalents or other securities. In
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lieu of
fractional shares or units of such Common Shares, capital stock equivalents or
other securities, the Corporation may pay to the registered holders of Right
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the current market value of a share or
unit of such Common Shares, capital stock equivalents or other securities. For
purposes of this Section 14(c), the current market value shall be determined in
the manner set forth in Section 1l(d) hereof for the Trading Day immediately
prior to the date of such exercise and, if such capital stock equivalent is not
traded, each such capital stock equivalent shall have the value of one
one-hundredth of a Preferred Share.
(d) The holder of a Right by the acceptance of the Right expressly
waives his right to receive any fractional Rights or any fractional share upon
exercise of a Right (except as provided above).
Section 15. Rights of Action. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of
the Common Shares); and any registered holder of any Right Certificate (or,
prior to the Distribution Date, of the Common Shares), without the consent of
the Rights Agent or of the holder of any other Right Certificate (or, prior to
the Distribution Date, of the Common Shares), may, in his own behalf and for
his own benefit, enforce, and may institute and maintain any suit, action or
proceeding against the Corporation to enforce, or otherwise act in respect of,
his right to exercise the Rights evidenced by such Right Certificate in the
manner provided in such Right Certificate and in this Agreement. Without
limiting the foregoing or any remedies available to the holders of Rights, it
is specifically acknowledged that the holders of Rights would not have an
adequate remedy at law for any breach of this Agreement and will be entitled to
specific performance of the obligations under, and injunctive relief against
actual or threatened violations of the obligations of any Person subject to,
this Agreement.
Notwithstanding anything in this Agreement to the contrary, neither
the Corporation nor the Rights Agent shall have any liability to any holder of
a Right or a beneficial interest in a Right or other Person as a result of its
inability to perform any of its obligations under this Agreement by reason of
any preliminary or permanent injunction or other order, decree or ruling issued
by a court of competent jurisdiction or by a governmental, regulatory or
administrative agency or commission, or any statute, rule, regulation or
executive order promulgated or enacted by any governmental authority,
prohibiting or otherwise restraining performance of such obligation; provided,
however, the Corporation must use its best efforts to have any such order.
decree or ruling lifted or otherwise overturned as soon as possible.
Section 16. Right Certificate Holder Not Deemed a Stockholder. No
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the Preferred Shares or
any other securities of the Corporation which may at any time be issuable on
the exercise of the Rights represented thereby, nor shall anything contained
herein or in any Right Certificate be construed to confer upon the holder of
any Right Certificate, as such, any
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of the rights of a stockholder of the
Corporation or any right to vote for the election of directors or upon any
matter submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or other
actions affecting stockholders (except as provided in Section 24 hereof), or to
receive dividends or other distributions or to exercise any preemptive or
subscription rights, or otherwise, until the Right or Rights evidenced by such
Right Certificate shall have been exercised in accordance with the provisions
hereof.
Section 17. Concerning the Rights Agent. The Corporation agrees to pay
to the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the
administration and execution of this Agreement and the exercise and performance
of its duties hereunder. The Corporation also agrees to indemnify the Rights
Agent for, and to hold it harmless against, any loss, liability, or expense,
incurred without negligence, bad faith or willful misconduct on the part of the
Rights Agent, for anything done or omitted by the Rights Agent in connection
with the acceptance and administration of this Agreement, including the costs
and expenses of defending against any claim of liability arising therefrom. The
indemnity provided for herein shall survive the expiration of the Rights and
the termination of this Agreement.
The Rights Agent shall be protected and shall incur no liability for,
or in respect of, any action taken, suffered or omitted by it in connection
with, its administration of this Agreement in reliance upon any Right
Certificate or certificate for Common Shares or for other securities of the
Corporation, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
Person or Persons.
Section 18. Merger or Consolidation or Change of Name of Rights Agent.
Any corporation into which the Rights Agent or any successor Rights Agent may
be merged or with which it may be consolidated, or any corporation resulting
from any merger or consolidation to which the Rights Agent or any successor
Rights Agent shall be a party, or any corporation succeeding to the stock
transfer or all or substantially all of the corporate trust business of the
Rights Agent or any successor Rights Agent, shall be the successor to the
Rights Agent under this Agreement without the execution or filing of any paper
or any further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor Rights Agent under
the provisions of Section 20 hereof. In case at the time such successor Rights
Agent shall succeed to the agency created by this Agreement, any of the Right
Certificates shall have been countersigned but not delivered, any such
successor Rights Agent may adopt the countersignature of a predecessor Rights
Agent and deliver such Right Certificates so countersigned: and in case at that
time any of the Right Certificates shall not have been countersigned, any
successor Rights Agent may countersign such Right Certificates either in the
name of the predecessor or in the name of the successor Rights Agent; and in
all such cases such Right Certificates shall have the full force provided in
the Right Certificates and in this Agreement.
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In case at any time the name of the Rights Agent shall be changed and
at such time any of the Right Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Right Certificates so countersigned; and in case at that time
any of the Right Certificates shall not have been countersigned, the Rights
Agent may countersign such Right Certificates either in its prior name or in
its changed name; and in all such cases such Right Certificates shall have the
full force provided in the Right Certificates and in this Agreement.
Section 19. Duties of Rights Agent. The Rights Agent undertakes only
those duties and obligations imposed by this Agreement upon the following terms
and conditions, by all of which the Corporation and the holders of Right
Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Corporation), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of an Acquiring Person and the
determination of the current market price of any Security) be proved or
established by the Corporation prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board,
the Chief Executive Officer, the President, any Vice President, the Treasurer
or the Secretary of the Corporation and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any action
taken or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Corporation only.
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Corporation of any covenant or
condition contained in this Agreement or in any Rights Certificate; nor shall
it be responsible for any change in the exercisability of the Rights (including
the Rights becoming void pursuant to Section 7(e) hereof) or any adjustment
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required under the provisions of Section 11 or Section 13 hereof or responsible
for the manner, method or amount of any such adjustment or the ascertaining of
the existence of facts that would require any such adjustment (except with
respect to the exercise of Rights evidenced by Right Certificates after receipt
of the certificate described in Section 12 hereof); nor shall it by any act
hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Preferred Shares or Common Shares to be
issued pursuant to this Agreement or any Right Certificate or as to whether
any Preferred Shares or Common Shares will, when issued, be validly authorized
and issued, fully paid and non-assessable.
(f) The Corporation agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, the President,
any Vice President, the Treasurer or the Secretary of the Corporation, and to
apply to such officers for advice or instructions in connection with its
duties, and shall not be liable for any action taken or suffered by it in good
faith or lack of action in accordance with instructions of any such officer or
for any delay in acting while waiting for those instructions. Any application
by the Rights Agent for written instructions from the Corporation may, at the
option of the Rights Agent, set forth in writing any action proposed to be
taken or omitted by the Rights Agent under this Rights Agreement and the date
on or after which such action shall be taken or such omission shall be
effective. The Rights Agent shall not be liable for any action taken by, or
omission of, the Rights Agent in accordance with a proposal included in any
such application on or after the date specified in such application (which date
shall not be less than five Business Days after the date any officer of the
Corporation actually receives such application, unless any such officer shall
have consented in writing to an earlier date) unless, prior to taking any such
action (or the effective date in the case of an omission), the Rights Agent
shall have received written instruction in response to such application
specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Corporation or become pecuniarily interested in any
transaction in which the Corporation may be interested, or contract with or
lend money to the Corporation or otherwise act as fully and freely as though it
were not Rights Agent under this Agreement. Nothing herein shall preclude the
Rights Agent from acting in any other capacity for the Corporation or for any
other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys
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or agents, and the Rights Agent shall not be answerable or accountable for any
act, default, neglect or misconduct of any such attorneys or agents or for any
loss to the Corporation resulting from any such act, default, neglect or
misconduct, provided reasonable care was exercised in the selection and
continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has not been
completed, the Rights Agent shall not take any further action with respect to
such requested exercise of transfer without first consulting with the
Corporation.
Section 20. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Corporation and to each
transfer agent of the Common Shares or Preferred Shares by registered or
certified mail, and to the holders of the Right Certificates by first-class
mail. The Corporation may remove the Rights Agent or any successor Rights Agent
upon thirty (30) days' notice in writing, mailed to the Rights Agent or
successor Rights Agent, as the case may be, and to each transfer agent of the
Common Shares or Preferred Shares by registered or certified mail, and to
holders of the Right Certificates by first-class mail. If the Rights Agent
shall resign or be removed or shall otherwise become incapable of acting, the
Corporation shall appoint a successor to the Rights Agent. If the Corporation
shall fail to make such appointment within a period of sixty (60) days after
giving notice of such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by
the holder of a Right Certificate (who shall, with such notice, submit his
Right Certificate for inspection by the Corporation), then the registered
holder of any Right Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Corporation or by such a court, shall be a
corporation organized and doing business under the laws of the United States
(or of any other state of the United States so long as such corporation is
authorized to do business as a banking institution in the State of Ohio), in
good standing, having an office in the State of Ohio, which is authorized under
such laws to exercise corporate trust or stock transfer powers and is subject
to supervision or examination by federal or state authority and which has at
the time of its appointment as Rights Agent a combined capital and surplus of
at least $100,000,000. After appointment, the successor Rights Agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver
any further assurance, conveyance, act or deed necessary for the purpose. Not
later than the effective date of any such appointment the Corporation shall
file notice thereof in writing with the predecessor Rights Agent
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and each transfer agent of the Common Shares or Preferred Shares, and mail a
notice thereof in writing to the registered holders of the Right Certificates.
Failure to give any notice provided for in this Section 20, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent,
as the case may be.
Section 21. Issuance of New Right Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the
Corporation may, at its option, issue new Right Certificates evidencing Rights
in such form as may be approved by its Board of Directors to reflect any
adjustment or change in the Purchase Price and the number or kind or class of
shares or other securities or property purchasable under the Right Certificates
made in accordance with the provisions of this Agreement. In addition, in
connection with the issuance or sale of Common Shares following the
Distribution Date and prior to the earlier of the Redemption Date and the Final
Expiration Date, the Corporation (a) shall with respect to Common Shares so
issued or sold pursuant to the exercise of stock options or under any employee
plan or arrangement, or upon the exercise, conversion or exchange of
securities, notes or debentures issued by the Corporation, and (b) may, in any
other case, if deemed necessary or appropriate by the Board of Directors of the
Corporation, issue Right Certificates representing the appropriate number of
Rights in connection with such issuance or sale; provided, however, that (i)
the Corporation shall not be obligated to issue any such Right Certificates if,
and to the extent that, the Corporation shall be advised by counsel that such
issuance would create a significant risk of material adverse tax consequences
to the Corporation or the Person to whom such Right Certificate would be
issued, and (ii) no Right Certificate shall be issued if, and to the extent
that, appropriate adjustment shall otherwise have been made in lieu of the
issuance thereof.
Section 22. Redemption and Termination.
(a) (i) The Disinterested Directors may, at their option, redeem all
but not less than all the then outstanding Rights at a redemption price of $.01
per Right, as such amount may be appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof
(such redemption price being hereinafter referred to as the "Redemption
Price"), at any time prior to the earlier of (x) the occurrence of a Section
11(a)(ii) Event, or (y) the Final Expiration Date. The Corporation may, at its
option, pay the Redemption Price either in Common Shares (based on the "current
per share market price," as defined in Section 11(d) hereof, of the Common
Share at the time of redemption) or cash; provided that if the Corporation
elects to pay the Redemption Price in Common Shares, the Corporation shall not
be required to issue any fractional Common Shares and the number of Common
Shares issuable to each holder of Rights shall be rounded down to the next
whole share.
(ii) In addition, the Disinterested Directors may, at their option, at
any time following the occurrence of a Section 11(a)(ii) Event and the
expiration of any period during which the holder of Rights may exercise the
rights under Section
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11(a)(ii) but prior to any Section 13 Event, redeem all but not less than all
of the then outstanding Rights at the Redemption Price (x) in connection with
any merger, consolidation or sale or other transfer (in one transaction or in a
series of related transactions) of assets or earning power aggregating 50% or
more of the earning power of the Corporation and its subsidiaries (taken as a
whole) in which all holders of Common Shares are treated alike and not
involving (other than as a holder of Common Shares being treated like all other
such holders) an Interested Stockholder or (y) if and for so long as the
Acquiring Person is not thereafter the Beneficial Owner of 15% of the Common
Shares, and at the time of redemption no other Persons are Acquiring Persons.
(b) In the case of a redemption permitted under Section 22(a)(i),
immediately upon the date for redemption set forth (or determined in the manner
specified in) in a resolution of the Disinterested Directors ordering the
redemption of the Rights, evidence of which shall have been filed with the
Rights Agent, and without any further action and without any notice, the right
to exercise the Rights will terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption Price for each Right so
held. In the case of a redemption permitted only under Section 22(a)(ii),
evidence of which shall have been filed with the Rights Agent, the right to
exercise the Rights will terminate and represent only the right to receive the
Redemption Price upon the later of ten Business Days following the giving of
such notice or the expiration of any period during which the rights may be
exercised under Section 11(a)(ii). The Corporation shall promptly give public
notice of any such redemption; provided, however, that the failure to give, or
any defect in, any such notice shall not affect the validity of such
redemption. Within ten (l0) days after such date for redemption set forth in a
resolution of the Disinterested Directors ordering the redemption of the
Rights, the Corporation shall mail a notice of redemption to all the holders of
the then outstanding Rights at their last addresses as they appear upon the
registry books of the Rights Agent or, prior to the Distribution Date, on the
registry books of the transfer agent for the Common Shares Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of redemption will state the
method by which the payment of the Redemption Price will be made. Neither the
Corporation nor any of its Affiliates or Associates may redeem, acquire or
purchase for value any Rights at any time in any manner other than that
specifically set forth in this Section 22 and other than in connection with the
purchase of Common Shares prior to the Distribution Date.
(c) The Corporation may, at its option, discharge all of its
obligations with respect to the Rights by (i) issuing a press release
announcing the manner of redemption of the Rights in accordance with this
Agreement and (ii) mailing payment of the Redemption Price to the registered
holders of the Rights at their last addresses as they appear on the registry
books of the Rights Agent or, prior to the Distribution Date, on the registry
books of the Transfer Agent of the Common Shares, and upon such action, all
outstanding Rights and Right Certificates shall be null and void without any
further action by the Corporation.
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<PAGE> 32
Section 23. Exchange. (a) The Disinterested Directors may, at their
option, at any time after any Person becomes an Acquiring Person, exchange all
or part of the then outstanding and exercisable Rights (which shall not include
Rights that have become void pursuant to the provisions of Section 7(e) hereof)
for Common Shares of the Corporation at an exchange ratio of one Common Share
per Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the
foregoing, the Disinterested Directors shall not be empowered to effect such
exchange at any time after any Person (other than the Corporation, any
Subsidiary of the Corporation, any employee benefit plan of the Corporation, or
any such Subsidiary, any entity holding Common Shares for or pursuant to the
terms of any such a plan), together with all Affiliates and Associates of such
Person, becomes the Beneficial Owner of 50% or more of the Common Shares then
outstanding.
(b) Immediately upon the action of the Board of Directors of the
Corporation ordering the exchange of any Rights pursuant to subsection (a) of
this Section 23 and without any further action and without any notice, the
right to exercise such Rights shall terminate and the only right thereafter of
a holder of such Rights shall be to receive that number of Common Shares equal
to the number of such Rights held by such holder multiplied by the Exchange
Ratio. The Corporation shall promptly give public notice of any such exchange;
provided, however, that the failure to give, or any defect in, such notice
shall not affect the validity of such exchange. The Corporation shall promptly
mail a notice of any such exchange to all of the holders of such Rights at
their last addresses as they appear upon the registry books of the Rights
Agent. Any notice which is mailed in the manner herein provided shall be deemed
given, whether or not the holder receives the notice. Each such notice of
exchange will state the method by which the exchange of the Common Shares for
Rights will be effected and, in the event of any partial exchange, the number
of Rights which will be exchanged. Any partial exchange shall be effected pro
rata based on the number of Rights (other than Rights which have become void
pursuant to the provisions of Section 7(e) hereof ) held by each holder of
Rights.
(c) In any exchange pursuant to this Section 23, the Corporation may
substitute Preferred Shares (or equivalent preferred shares, as such term is
defined in Section 11 (b) hereof ) for some or all of the Common Shares
exchangeable for Rights, at the initial rate of one one-hundredth of a
Preferred Share (or equivalent preferred share) for each Common Share, as
appropriately adjusted to reflect adjustments in the voting rights of the
Preferred Shares pursuant to the terms thereof, so that the fraction of a
Preferred Share delivered in lieu of each Common Share shall have the same
voting rights as one Common Share.
(d) In the event that there shall not be sufficient Common Shares or
Preferred Shares issued but not outstanding or authorized but unissued to
permit any exchange of Rights as contemplated in accordance with this Section
23, the Corporation shall take all
32
<PAGE> 33
such action as may be necessary to authorize additional Common Shares or
Preferred Shares for issuance upon exchange of the Rights.
Section 24. Notice of Certain Events. (a) In case the Corporation
shall propose (i) to pay any dividend payable in stock of any class to the
holders of its Preferred Shares or to make any other distribution to the
holders of its Preferred Shares (other than a regularly quarterly cash
dividend), (ii) to offer to the holders of its Preferred Shares rights or
warrants to subscribe for or to purchase any additional Preferred Shares or
shares of stock of any class or any other securities, rights or options, (iii)
to effect any reclassification of its Preferred Shares (other than a
reclassification involving only the subdivision of outstanding Preferred
Shares), (iv) to effect any consolidation or merger into or with, or to effect
any sale, mortgage or other transfer (or to permit one or more of its
Subsidiaries to effect any sale, mortgage or other transfer) in one or more
transactions, of 50% or more of the assets or earning power of the Corporation
and its Subsidiaries (taken as a whole) to any other Person or Persons (other
than, in each case, the Corporation and/or any of its Subsidiaries in one or
more transactions each of which does not violate Section 11(m) hereof), or (v)
to effect the liquidation, dissolution or winding up of the Corporation, then,
in each such case, the Corporation shall give to each holder of a Right
Certificate, in accordance with Section 25 hereof, a notice of such proposed
action and file a certificate with the Rights Agent to that effect, which
notice and certificate shall specify the record date for the purposes of such
stock dividend, or distribution of rights or warrants, or the date on which
such reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the Preferred Shares, if any such date is to be
fixed, and such notice shall be so given in the case of any action covered by
clause (i) or (ii) above at least twenty (20) days prior to the record date for
determining holders of the Preferred Shares for purposes of such action, and in
the case of any such other action, at least twenty (20) days prior to the date
of the taking of such proposed action or the date of participation therein by
the holders of the Preferred Shares, whichever shall be the earlier.
(b) In case of a Section 11(a)(ii) Event, then (i) the Corporation
shall as soon as practicable thereafter give to each holder of a Right
Certificate, in accordance with Section 25 hereof, a notice of the occurrence
of such event, which notice shall describe such event and the consequences of
such event to holders of Rights under Section 11(a)(ii) hereof, and (ii) all
references in the preceding paragraph (a) to Preferred Shares shall be deemed
thereafter to refer also to Common Shares and/or. if appropriate, other
securities of the Corporation.
Section 25. Notices. Notices or demands authorized by this Agreement
to be given or made by the Rights Agent or by the holder of any Right
Certificate to or on the Corporation shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Rights Agent) as follows:
33
<PAGE> 34
Waterlink, Inc.
4100 Holiday Street, N.W. - Suite 201
Canton, OH 44718
Attention: Chief Executive Officer
-------------------------
Subject to the provisions of Section 20 hereof, any notice or demand authorized
by this Agreement to be given or made by the Corporation or by the holder of
any Right Certificate to or on the Rights Agent shall be sufficiently given or
made if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Corporation) as follows:
American Stock Transfer & Trust Company
40 Wall Street
-------------------------------
New York, New York 10005
-------------------------------
Attention:__________
Notices or demands authorized by this Agreement to be given or made by the
Corporation or the Rights Agent to the holder of any Right Certificate or, if
prior to the Distribution Date, to the holder of certificates representing
Common Shares shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed to such holder at the address of such holder as
shown on the registry books of the Corporation.
Section 26. Supplements and Amendments. Prior to the Distribution
Date, the Corporation and the Rights Agent shall, if the Corporation so
directs, supplement or amend any provision of this Agreement without the
approval of any holders of certificates representing Common Shares. From and
after the Distribution Date, the Corporation and the Rights Agent shall, if the
Corporation so directs, supplement or amend this Agreement without the approval
of any holders of Right Certificates in order (i) to cure any ambiguity, (ii)
to correct or supplement any provision contained herein which may be defective
or inconsistent with any other provisions herein, (iii) to shorten or lengthen
any time period hereunder or (iv) to change or supplement the provisions
hereunder in any manner which the Corporation may deem necessary or desirable
and which shall not adversely affect the interests of the holders of Right
Certificates (other than an Acquiring Person or an Affiliate or Associate of an
Acquiring Person); provided, however, that this Agreement may not be
supplemented or amended to lengthen, pursuant to clause (iii) of this sentence,
(A) a time period relating to when the Rights may be redeemed at such time as
the Rights are not then redeemable, or (B) any other time period unless such
lengthening is for the purpose of protecting, enhancing or clarifying the
rights of, and/or the benefits to, the holders of Rights. Upon the delivery of
a certificate from an appropriate officer of the Corporation which states that
the proposed supplement or amendment is in compliance with the terms of this
Section 26, the Rights Agent shall execute such supplement or amendment,
provided that such supplement or amendment does not adversely affect the rights
or obligations of the Rights Agent under Section 17 or Section 19 of this
Agreement. Prior to the Distribution Date, the interests of the holders of
Rights shall be deemed coincident with the interests of the holders of Common
Shares.
34
<PAGE> 35
Section 27. Determination and Actions by the Board of Directors, etc.
The Disinterested Directors shall have the exclusive power and authority to
administer this Agreement and to exercise all rights and powers specifically
granted to the Board, or the Corporation, or as may be necessary or advisable
in the administration of this Agreement, including, without limitation, the
right and power to (i) interpret the provisions of this Agreement, and (ii)
make all determinations deemed necessary or advisable for the administration of
this Agreement (including, without limitation, a determination to redeem or not
redeem the Rights or to amend the Agreement and whether any proposed amendment
adversely affects the interests of the holders of Right Certificates). For all
purposes of this Agreement, any calculation of the number of Common Shares or
other securities outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding Common Shares or any
other securities of which any Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules
and Regulations under the Exchange Act as in effect on the date of this
Agreement. All such actions, calculations, interpretations and determinations
(including, for purposes of clause (y) below, all omissions with respect to the
foregoing) which are done or made by the Disinterested Directors in good faith,
shall (x) be final, conclusive and binding on the Corporation, the Rights
Agent, the holders of the Right Certificates and all other parties, and (y) not
subject the Board or the Disinterested Directors to any liability to the
holders of the Right Certificates.
Section 28. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Corporation or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 29. Benefits of this Agreement. Nothing in this Agreement
shall be construed to give to any person or corporation other than the
Corporation, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the Common Shares) any legal
or equitable right, remedy or claim under this Agreement; but this Agreement
shall be for the sole and exclusive benefit of the Corporation, the Rights
Agent and the registered holders of the Right Certificates (and, prior to the
Distribution Date, the Common Shares).
Section 30. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
Section 31. Governing Law. This Agreement, each Right and each Right
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State.
Section 32. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
35
<PAGE> 36
Section 33. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and attested, all as of the date and year first above written.
WATERLINK, INC.
<TABLE>
<CAPTION>
Attest:
<S> <C>
By /s/ Kathleen S. Donatini By /s/ Chet S. Ross
--------------------------------- ---------------------------------
Name: Kathleen S. Donatini Name: Chet S. Ross
Title: Secretary Title: President & Chief Executive Officer
Attest: American Stock Transfer & Trust Company
By /s/ George Karfunkel By /s/ Herbert J. Lemmer
--------------------------------- ---------------------------------------
Name: /s/ George Karfunkel Name: Herbert J. Lemner
Title: Executive Vice President Title: Vice President
</TABLE>
36
<PAGE> 37
PREFERRED
EXHIBIT A
FORM OF
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF SERIES 1 PREFERRED STOCK
of
WATERLINK, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
Waterlink, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware, in accordance with the provisions of
Section 103 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors of
the Fourth Amended and Restated Certificate of Incorporation of the said
Corporation, the said Board of Directors on May 23, 1997, adopted the
following resolution creating a series of Preferred Stock designated as Series
1 Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of this Corporation in accordance with the provisions of its Fifth Amended and
Restated Certificate of Incorporation, a series of Preferred Stock of the
Corporation is hereby created and that the designation and amount thereof and
the voting powers, preferences and relative, participating, optional and other
special rights of the shares of such series, and the qualifications,
limitations or restrictions thereof are as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series 1 Preferred Stock" (the "Series 1 Preferred Stock"), and
the number of shares constituting such series shall be 40,000; provided,
however, that, if more than a total of 40,000 shares of Series 1 Preferred
Stock shall be issuable upon the exercise of Rights (the "Rights") issued
pursuant to the Rights Agreement, dated as of May 23, 1997, between the
Corporation and American Stock Transfer & Trust Company, as Rights Agent (as
amended from time to time) (the "Rights Agreement"), the Board of Directors of
the Corporation, pursuant to Section 151 of the General Corporation Law of the
State of Delaware, shall direct by resolution or resolutions that a certificate
be properly executed, acknowledged and filed providing for the total number of
shares of Series 1 Preferred Stock authorized to be issued to be increased (to
the extent that the Certificate of Incorporation then permits) to the largest
number of whole shares (rounded up to the nearest whole number) issuable upon
exercise of the Rights.
37
<PAGE> 38
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of any shares
of any series of Preferred Stock ranking prior and superior to the shares of
Series 1 Preferred Stock with respect to dividends, the holders of shares of
Series 1 Preferred Stock shall be entitled to receive, when, as and if declared
by the Board of Directors out of assets legally available for the purpose,
quarterly dividends payable in cash on the fifteenth business day of January,
April, July and October in each year (each such date being referred to herein
as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly
Dividend Payment Date after the first issuance of a share or fraction of a
share of Series 1 Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $1.00 or (b) subject to the provision
for adjustment hereinafter set forth, 100 times the aggregate per share amount
of all cash dividends, and 100 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions other than a dividend
payable in shares of Common Stock, par value $.001 per share, of the
Corporation (the "Common Stock") or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on the Common Stock
since the immediately preceding Quarterly Dividend Payment Date, or, with
respect to the first Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a share of Series 1 Preferred Stock.
(B) The Corporation shall declare a dividend or distribution on the Series
1 Preferred Stock as provided in paragraph (A) above immediately after it
declares a dividend or distribution on the Common Stock (other than a dividend
payable in shares of Common Stock); provided that, in the event no dividend or
distribution shall have been declared on the Common Stock during the period
between any Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $1.00 per share on the Series 1 Preferred
Stock shall nevertheless be payable on such subsequent Quarterly Dividend
Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series 1 Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares of Series 1 Preferred Stock,
unless the date of issue of such shares is prior to the record date for the
first Quarterly Dividend Payment Date, in which case dividends on such shares
shall begin to accrue from the date of issue of such shares, or unless the date
of issue is a Quarterly Dividend Payment Date or is a date after the record
date for the determination of holders of shares of Series 1 Preferred Stock
entitled to receive a quarterly dividend and before such Quarterly Dividend
Payment Date, in either of which events such dividends shall begin to accrue
and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of Series 1
Preferred Stock in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board
of Directors may fix a record date for the determination of holders of shares
of Series 1 Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be not more than 60 days
prior to the date fixed for the payment thereof.
38
<PAGE> 39
Section 3. Voting Rights The holders of shares of Series 1 Preferred Stock
shall have the following voting rights:
(A) Except as provided in paragraph C of this Section 3 and subject to the
provision for adjustment hereinafter set forth, each share of Series 1
Preferred Stock shall entitle the holder thereof to 100 votes on all matters
submitted to a vote of the stockholders of the Corporation.
(B) Except as otherwise provided herein or by law, the holders of shares
of Series 1 Preferred Stock and the holders of shares of Common Stock shall
vote together as one class on all matters submitted to a vote of stockholders
of the Corporation.
(C) (i) If, on the date used to determine stockholders of record for any
meeting of stockholders for the election of directors, a default in preference
dividends (as defined in subparagraph (v) below) on the Series 1 Preferred
Stock shall exist, the holders of the Series 1 Preferred Stock shall have the
right, voting as a class as described in subparagraph (ii) below, to elect two
directors (in addition to the directors elected by holders of Common Stock or
any other class or series of Preferred Stock of the Corporation). Such right
may be exercised until there is no longer a default in preference dividends (a)
at any meeting of stockholders for the election of directors or (b) at a
meeting of the holders of shares of the Series 1 Preferred Stock, called for
such purpose. Upon the occurrence of a default in preference dividends on the
Series 1 Preferred Shares, the Chief Executive Officer or the Secretary shall
call a special meeting of the holders of the Series 1 Preferred Shares for the
purpose of the exercise of the voting rights described in this Section 3(C),
unless the next annual meeting of stockholders for the election of directors is
scheduled to be held within sixty (60) days of the date on which the default in
preference dividends occurred.
(ii) The right of the holders of Series 1 Preferred Stock to elect two
directors, as described above, shall be exercised as a class independently of
any rights of holders of any other series of Preferred Stock upon which voting
rights to elect such directors have been conferred and are then exercisable.
(iii) Each director elected by the holders of shares of Series 1 Preferred
Stock shall be referred to herein as a "Series 1 Preferred Director." A Series
1 Preferred Director so elected shall continue to serve as such director for a
term of one year, except that upon any termination of the right of all of such
holders to vote as a class for Series 1 Preferred Directors, the term of office
of such directors shall terminate. Any Series 1 Preferred Director may be
removed by, and shall not be removed except by, the vote of the holders of
record of a majority of the outstanding shares of Series 1 Preferred Stock then
entitled to vote for the election of directors, present (in person or by proxy)
and voting together as a single class (a) at a meeting of the stockholders, or
(b) at a meeting of the holders of shares of such Series 1 Preferred Stock,
called for the purpose in accordance with the By-laws of the Corporation, or
(c) by written consent signed by the holders of a majority of the then
outstanding shares of Series 1 Preferred Stock then entitled to vote for the
election of directors, taken together as a single class.
39
<PAGE> 40
(iv) So long as a default in any preference dividends on the Series 1
Preferred Stock shall exist or the holders of any other series of Series 1
Preferred Stock shall be entitled to elect Series 1 Preferred Directors, (a)
any vacancy in the office of a Series 1 Preferred Director may be filled
(except as provided in the following clause (b)) by an instrument in writing
signed by the remaining Series 1 Preferred Director and filed with the
Corporation and (b) in the case of the removal of any Series 1 Preferred
Director, the vacancy may be filled by the vote or written consent of the
holders of a majority of the outstanding shares of Series 1 Preferred Stock
then entitled to vote for the election of directors, present (in person or by
proxy) and voting together as a single class, at such time as the removal shall
be effected. Each director appointed as aforesaid by the remaining Series 1
Preferred Director shall be deemed, for all purposes hereof, to be a Series 1
Preferred Director. Whenever no default in preference dividends on the Series 1
Preferred Stock shall exist, then the number of directors constituting the
Board of Directors of the Corporation shall be reduced by two.
(v) For purposes hereof, a "default in preference dividends" on the Series
1 Preferred Stock shall be deemed to have occurred whenever the amount of
cumulative and unpaid dividends on the Series 1 Preferred Stock shall be
equivalent to six full quarterly dividends or more (whether or not
consecutive), and, having so occurred, such default shall be deemed to exist
thereafter until, but only until, all cumulative dividends on all shares of the
Series 1 Preferred Stock then outstanding shall have been paid through the last
Quarterly Dividend Payment Date or until, but only until, non-cumulative
dividends have been paid regularly for at least one year.
(E) Except as set forth herein (or as otherwise required by applicable
law), holders of Series 1 Preferred Stock shall have no special voting rights
and their consent shall not be required (except to the extent they are entitled
to vote with the holders of the Common Stock as set forth herein) for taking
any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series 1 Preferred Stock as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series 1 Preferred Stock
outstanding shall have been paid in full, the Corporation shall not
(i) declare or pay dividends, or make any other distributions, on any
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series 1 Preferred Stock;
(ii) declare or pay dividends, or make any other distributions, on any
shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series 1 Preferred Stock,
except dividends paid ratably on the Series 1 Preferred
40
<PAGE> 41
Stock and all such parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such shares are then
entitled;
(iii) redeem or purchase or otherwise acquire for consideration (except as
provided in (iv) below) shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series 1
Preferred Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such junior stock in exchange for shares of
any stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series 1 Preferred Stock;
(iv) redeem or purchase or otherwise acquire for consideration any shares
of Series 1 Preferred Stock, or any shares of stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding up) with the Series
1 Preferred Stock, except in accordance with a purchase offer made in writing
or by publication (as determined by the Board of Directors) to all holders of
such shares upon such terms as the Board of Directors, after consideration of
the respective annual dividend rates and other relative rights and preferences
of the respective series and classes, shall determine in good faith will result
in fair and equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section
4, purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series 1 Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Certificate of Incorporation, in any other Certificate of Amendment creating a
series of Preferred Stock or as otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up.
(A) Subject to the prior and superior rights of holders of any shares of
any series of Preferred Stock ranking prior and superior to the shares of
Series 1 Preferred Stock with respect to rights upon liquidation, dissolution
or winding up (voluntary or otherwise), no distribution shall be made (x) to
the holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series 1 Preferred Stock unless,
prior thereto, the holders of shares of Series 1 Preferred Stock shall have
received an amount equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such payment, plus an amount
equal to the greater of (1) $100 per share, or (2) an aggregate amount per
share equal to 100 times the aggregate amount to be distributed per share to
the holders of Common Stock, or (y) to the holders of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up)
41
<PAGE> 42
with the Series 1 Preferred Stock, except distributions made ratably on the
Series 1 Preferred Stock and all other such parity stock in proportion to the
total amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up (the "Series 1 Liquidation Preference").
Following the payment of the full amount of the Series 1 Liquidation Preference,
no additional distributions shall be made to the holders of shares of Series 1
Preferred Stock.
(B) In the event, however, that there are not sufficient assets available
to permit payment in full of the Series 1 Liquidation Preference and the
liquidation preferences of all other series of preferred stock, if any, which
rank on a parity with the Series 1 Preferred Stock, then such remaining assets
shall be distributed ratably to the holders of Series 1 Preferred Stock and
the holders of such parity shares in proportion to their respective liquidation
preferences. In the event, however, that there are not sufficient assets
available to permit payment in full of the Capital Adjustment, then such
remaining assets shall be distributed ratably to the holders of Common Stock.
Section 7. Consolidation, Merger, etc. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series 1 Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 100 times the aggregate amount of stock.
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
Section 8. No Redemption. The shares of Series 1 Preferred Stock shall not
be redeemable.
Section 9. Ranking. The Series 1 Preferred Stock shall rank junior to all
other series of the Corporation's Preferred Stock as to the payment of
dividends and the distribution of assets, unless the terms of any such series
shall provide otherwise.
42
<PAGE> 43
Section 10. Amendment. The Certificate of Incorporation of the
Corporation shall not be further amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series 1
Preferred Stock so as to affect them adversely without the affirmative vote of
the holders of a majority or more of the outstanding shares of Series 1
Preferred Stock, voting separately as a class.
IN WITNESS WHEREOF, this Certificate is executed on behalf of the
Corporation by its Chairman of the Board and attested by its Secretary this __
day of ___________, 1997.
WATERLINK, INC.
-----------------------------------
Attest:
- -----------------------------------
Kathleen S. Donatini, Secretary
43
<PAGE> 44
EXHIBIT B
FORM OF RIGHT CERTIFICATE
CERTIFICATE
NO. R- _____ RIGHTS
NOT EXERCISABLE AFTER _________, ___________ OR EARLIER IF REDEEMED BY THE
CORPORATION. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER RIGHT ON THE
TERMS SET FORTH IN THE RIGHTS AGREEMENT. THE RIGHTS REPRESENTED BY THIS
CERTIFICATE WERE ISSUED TO A PERSON WHO WAS OR BECOMES AN ACQUIRING PERSON,
THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME VOID UNDER
CERTAIN CIRCUMSTANCES AS SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT.
RIGHT CERTIFICATE
WATERLINK, INC.
This certifies that ________, or registered assigns, is the registered
owner of the number of Rights set forth above, each of which entitles the owner
thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of May 23, 1997 (the "Rights Agreement "), between
Waterlink, Inc., a Delaware corporation (the "Corporation"), and American Stock
Transfer & Trust Company (the "Rights Agent"), to purchase from the Corporation
at any time after the Distribution Date (as such term is defined in the Rights
Agreement) and prior to 5:00 P.M., New York time, on _______, 2007, unless the
Rights evidenced hereby shall have been previously redeemed by the Corporation,
at the principal office or offices of the Rights Agent designated for such
purpose, or at the office of its successor as Rights Agent, one one-hundredth
of a fully paid non-assessable share of Series 1 Preferred Stock, without par
value (the "Preferred Shares"), of the Corporation, at a purchase price of
$65.00 per one one-hundredth of Preferred Share (the "Purchase Price"), upon
presentation and surrender of this Right Certificate with the Form of Election
to Purchase duly executed. The number of Rights evidenced by this Right
Certificate (and the number of one one-hundredths of a Preferred Share which
may be purchased upon exercise hereof) set forth above, and the Purchase Price
set forth above, are the number and Purchase Price as of ___________, 1997,
based on the Preferred Shares as constituted at such date.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is defined
in the Rights Agreement), if the Rights evidenced by this Right Certificate are
beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of
any such Acquiring Person (as such terms are defined in the Rights Agreement),
(ii) a transferee of any such Acquiring Person, Associate or Affiliate who
becomes a transferee after the Acquiring Person becomes such, or (iii) under
certain circumstances specified in the Rights Agreement, a transferee of any
such Acquiring Person, Associate or Affiliate who becomes a transferee prior to
or concurrently with the Acquiring Person
44
<PAGE> 45
becoming such, such Rights shall become null and void and no holder hereof
shall have any right with respect to such Rights from and after the
occurrence of such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the number of
one one-hundredth of a Preferred Share or other securities which may be
purchased upon the exercise of the Rights evidenced by this Right Certificate
are subject to modification and adjustment upon the happening of certain
events, including Triggering Events (as such term is defined in the Rights
Agreement).
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Corporation and the holders of the Right Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the principal executive offices
of the Corporation and the principal office or offices of the Rights Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal office of the Rights Agent, may be exchanged for
another Right Certificate or Right Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number of
Preferred Shares or other securities as the Rights evidenced by the Right
Certificate or Right Certificates surrendered shall have entitled such holder
to purchase. If this Right Certificate shall be exercised in part, the holder
shall be entitled to receive upon surrender hereof another Right Certificate or
Right Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate may be redeemed by the Corporation at a redemption price of
$.01 per Right (subject to adjustment as provided in the Rights Agreement)
payable in cash.
No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are one
one-hundredth or integral multiples of one one-hundredth of a Preferred Share,
which may, at the election of the Corporation, be evidenced by depositary
receipts), but in lieu thereof a cash payment will be made, as provided in the
Rights Agreement.
No holder of this Right Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of the Preferred Shares or of
any other securities of the Corporation which may at any time be issuable on
the exercise hereof, nor shall anything contained in the Rights Agreement or
herein be construed to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Corporation or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or other
distributions or to exercise any preemptive
45
<PAGE> 46
or subscription rights, or otherwise, until the Right or Rights evidenced by
this Right Certificate shall have been exercised as provided in the Rights
Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Corporation
and its corporate seal. Dated as of __________, 1997.
[SEAL
ATTEST:] WATERLINK, INC.
___________________________________ By:________________________________
Name: Name:
Title: Title:
Countersigned:
American Stock Transfer & Trust Company
By:________________________________
Authorized Signatory
Name:
Title:
46
<PAGE> 47
---------------------
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED ______________ hereby sells, assigns and transfers
unto___________________________________________________________________________
(Please print name and address of transferee)
________________________________________________________________________________
this Right Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ___________ Attorney, to
transfer the within Right Certificate on the books of the within-named
Corporation, with full power of substitution.
Dated: ___________,_______
----------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
The undersigned hereby certifies that (1) the Rights evidenced by this
Right Certificate are not being sold, assigned or transferred by or on behalf
of a Person who is or was an Acquiring Person or an Affiliate or Associate
thereof (as such terms are defined in the Right Agreement) and (2) after due
inquiry and to the best knowledge of the undersigned, the undersigned did not
acquire the Rights evidenced by this Right Certificate from any Person who is
or was an Acquiring Person or an Affiliate or Associate thereof (as such terms
are defined in the Rights Agreement).
----------------------------------
Signature
47
<PAGE> 48
FORM OF ELECTION TO PURCHASE
(To be executed by the registered holder
if such holder desires to exercise Rights
represented by the Right Certificate.)
To the Rights Agent:
The undersigned hereby irrevocably elects to exercise ____ Rights
represented by this Right Certificate to purchase the Preferred Shares, Common
Shares or other securities issuable upon the exercise of such Rights and
requests that certificates for such Preferred Shares, Common Shares or other
securities be issued in the name of: Please insert social security or other
identifying number _________________________________________________
_____________________________________________________________________________
(Please print name and address)
_____________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social ecurity
or other identifying number_________________________________________________
____________________________________________________________________________
(Please print name and address)
____________________________________________________________________________
Dated: __________,________
----------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
The undersigned hereby certifies that (1) the Rights evidenced by this
Right Certificate are not being exercised by or on behalf of a Person who is or
was an Acquiring Person or an Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement) and (2) after due inquiry and to the best
knowledge of the undersigned, the undersigned did not acquire the
Rights evidenced by this Rights Certificate from any Person who is or was an
Acquiring Person or an Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement).
---------------------------------
Signature
48
<PAGE> 49
- -------------------------------------------------------------------------------
NOTICE
The signature on the foregoing Forms of Assignment and Election and
certificates must conform to the name as written upon the face of this Right
Certificate in every particular, without alteration or enlargement or any
change whatsoever.
In the event the certification set forth above in the Form of Assignment
or the Form of Election to Purchase, as the case may be, is not completed, the
Corporation and the Rights Agent will deem the Beneficial Owner of the Rights
evidenced by this Right Certificate to be an Acquiring Person or an Affiliate
or Associate thereof (as such terms are defined in the Rights Agreement) and
such Assignment or Election to Purchase will not be honored.
49
<PAGE> 50
PREFERRED
EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
On May 23, 1997, the Board of Directors of Waterlink, Inc. (the
"Corporation") declared a dividend distribution of one preferred share purchase
right (a "Right") for each outstanding share of Common Stock, par value $.001
per share (the "Common Shares"), of the Corporation. The dividend is payable to
the stockholders of record on the day on which the SEC declares the Company's
Registration Statement on Form S-1 effective, (the "Record Date"), and with
respect to Common Shares issued thereafter until the Distribution Date (as
defined below) and, in certain circumstances, with respect to Common Shares
issued after the Distribution Date. Except as set forth below, each Right, when
it becomes exercisable, entitles the registered holder to purchase from the
Corporation one one-hundredth of a share of Series 1 Preferred Stock, without
par value (the "Preferred Shares"), of the Corporation at a price of $65.00
per one one-hundredth of a Preferred Share (the "Purchase Price"), subject to
adjustment. The description and terms of the Rights are set forth in a Rights
Agreement (the "Rights Agreement") between the Corporation and American Stock
Transfer & Trust Company, as Rights Agent (the "Rights Agent"), dated as of May
23, 1997.
Initially, the Rights will attach to all certificates representing Common
Shares then outstanding, and no separate Right Certificates will be
distributed. The Rights will separate from the Common Shares upon the earliest
to occur of (i) a person or group of affiliated or associated persons
(excluding certain Exempt Persons, as defined in the Rights Agreement) having
acquired beneficial ownership of 15% or more of the outstanding Common Shares
(except pursuant to a Permitted Offer, as hereinafter defined); or (ii) 10 days
(or such later date as the Board may determine) following the commencement of,
or announcement of an intention to make a tender offer or exchange offer the
consummation of which would result in a person or group becoming an Acquiring
Person (as hereinafter defined) (the earliest of such dates being called the
"Distribution Date"). A person or group whose acquisition of Common Shares
causes a Distribution Date pursuant to clause (i) above is an "Acquiring
Person." The date that a person or group becomes an Acquiring Person is the
"Shares Acquisition Date."
The Rights Agreement provides that, until the Distribution Date, the
Rights will be transferred with and only with the Common Shares. Until the
Distribution Date (or earlier redemption or expiration of the Rights) new
Common Share certificates issued after the Record Date upon transfer or new
issuance of Common Shares will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights), the surrender for transfer of any certificates for
Common Shares outstanding as of the Record Date, even without such notation or
a copy of this Summary of Rights being attached thereto, will also constitute
the transfer of the Rights associated with the Common Shares represented by
such certificate. As soon as practicable following the Distribution Date,
separate certificates evidencing the Rights ("Right Certificates") will be
mailed to holders of record of the Common Shares as of the close of business on
the Distribution Date (and to each initial record holder of
50
<PAGE> 51
certain Common Shares issued after the Distribution Date), and such separate
Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on _____, 2007, unless earlier redeemed by the
Corporation as described below.
In the event that any person becomes an Acquiring Person (except pursuant
to a tender or exchange offer which is for all outstanding Common Shares at a
price and on terms which a majority of certain members of the Board of
Directors determines to be adequate and in the best interests of the
Corporation, its stockholders and other relevant constituencies, other than
such Acquiring Person, its affiliates and associates (a "Permitted Offer")),
each holder of a Right will thereafter have the right (the "Flip-In Right") to
receive upon exercise the number of Common Shares or of one one-hundredths of a
Preferred Share (or, in certain circumstances, other securities of the
Corporation) having a value (immediately prior to such triggering event) equal
to two times the exercise price of the Right. Notwithstanding the foregoing,
following the occurrence of the event described above, all Rights that are, or
(under certain circumstances specified in the Rights Agreement) were,
beneficially owned by any Acquiring Person or any affiliate or associate
thereof will be null and void.
In the event that, at any time following the Shares Acquisition Date, (i)
the Corporation is acquired in a merger or other business combination
transaction in which the holders of all of the outstanding Common Shares
immediately prior to the consummation of the transaction are not the holders of
all of the surviving corporation's voting power, or (ii) more than 50% of the
Corporation's assets or earning power is sold or transferred, in either case
with or to an Acquiring Person or any affiliate or associate or any other
person in which such Acquiring Person, affiliate or associate has an interest
or any person acting on behalf of or in concert with such Acquiring Person,
affiliate or associate, or, if in such transaction all holders of Common Shares
are not treated alike, any other person, then each holder of a Right (except
Rights which previously have been voided as set forth above) shall thereafter
have the right (the "Flip-Over Right") to receive, upon exercise, common
shares of the acquiring company having a value equal to two times the exercise
price of the Right. The holder of a Right will continue to have the Flip-Over
Right whether or not such holder exercises or surrenders the Flip-In Right.
The Purchase Price payable, and the number of Preferred Shares, Common
Shares or other securities issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the
Preferred Shares, (ii) upon the grant to holders of the Preferred Shares of
certain rights or warrants to subscribe for or purchase Preferred Shares at a
price or securities convertible into Preferred Shares with a conversion price,
less than the then current market price of the Preferred Shares or (iii) upon
the distribution to holders of the Preferred Shares of evidences of
indebtedness or assets (excluding regular quarterly cash dividends) or of
subscription rights or warrants (other than those referred to above).
2
<PAGE> 52
The number of outstanding Rights and the number of one one-hundredths of a
Preferred Share issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the Common Shares or a stock
dividend on the Common Shares payable in Common Shares or subdivisions,
consolidations or combinations of the Common Shares occurring, in any such
case, prior to the Distribution Date.
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $1.00 per share but, if greater, will be entitled
to an aggregate dividend per share of 100 times the dividend declared per
Common Share. In the event of liquidation, the holders of the Preferred Shares
will be entitled to a minimum preferential liquidation payment of an amount
equal to accrued and unpaid dividends thereon, plus an amount equal to the
greater of (1) $100 per share, or (2) 100 times all amounts distributed per
share to the holders of the Common Shares. Finally, in the event of any merger,
consolidation or other transaction in which Common Shares are exchanged, each
Preferred Share will be entitled to receive 100 times the amount received per
Common Share. These rights are protected by customary antidilution provisions.
In the event that the amount of accrued and unpaid dividends on the Preferred
Shares is equivalent to six full quarterly dividends or more, the holders of
the Preferred Shares shall have the right, voting as a class, to elect two
directors in addition to the directors elected by the holders of the Common
Shares until all cumulative dividends on the Preferred Shares have been paid
through the last quarterly dividend payment date or until non-cumulative
dividends have been paid regularly for at least one year.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional Preferred Shares will be issued (other than
fractions which are one one-hundredth or integral multiples of one
one-hundredth of a Preferred Share, which may, at the election of the
Corporation, be evidenced by depositary receipts) and in lieu thereof, an
adjustment in cash will be made based on the market price of the Preferred
Shares on the last trading day prior to the date of exercise.
At any time prior to the earlier to occur of (i) a person becoming an
Acquiring Person or (ii) the expiration of the Rights, and under certain other
circumstances, the Corporation may redeem the Rights in whole, but not in part,
at a price of $.01 per Right (the "Redemption Price") which redemption shall be
effective upon the action of the Board of Directors. Additionally, following
the Shares Acquisition Date, the Corporation may redeem the then outstanding
Rights in whole, but not in part, at the Redemption Price, provided that such
redemption is in connection with a merger or other business combination
transaction or series of transactions involving the Corporation in which all
holders of Common Shares are treated alike but not involving an Acquiring
Person or its affiliates or associates.
All of the provisions of the Rights Agreement may be amended by the Board
of Directors of the Corporation prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board in order to cure any ambiguity, defect or inconsistency, to make changes
which do not adversely affect the interests of holders of Rights
52
<PAGE> 53
(excluding the interests of any Acquiring Person), or, subject to certain
limitations, to shorten or lengthen any time period under the Rights Agreement.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Corporation, including, without limitation, the
right to vote or to receive dividends. While the distribution of the Rights
will not be taxable to stockholders of the Corporation, stockholders
may, depending upon the circumstances, recognize taxable income should the
Rights become exercisable or upon the occurrence of certain events thereafter.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form S-1. A
copy of the Rights Agreement is available free of charge from the Corporation.
This summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is
hereby incorporated herein by reference.
53
<PAGE> 1
Exhibit 10.1
FIRST AMENDMENT TO THE
EMPLOYEE STOCK PURCHASE PLAN OF WATERLINK, INC.
WHEREAS, Waterlink, Inc. (the "Company"), by action of its Board of
Directors, adopted the Employee Stock Purchase Plan of Waterlink, Inc. (the
"Plan") on May 23, 1997; and
WHEREAS, the stockholders of Waterlink, Inc. approved the Plan on May 23,
1997; and
WHEREAS, Section 23 of the Plan provides that the Plan may be amended at
any time and from time to time by the Board of Directors of the Company, subject
to stockholder approval in certain cases; and
WHEREAS, the Company desires to amend the Plan.
NOW, THEREFORE, the Company hereby amends the Plan as follows, effective as
of effective date of the Plan:
1. Section 2.2 shall be amended by adding the following at the end of
such Section:
"The Annual Compensation of an Employee who becomes an Employee due to the
acquisition by the Company of stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock of a corporation
shall include the amount paid to such person under any incentive
compensation or bonus plan of the company so acquired, provided such
amounts were paid within the twelve (12) month period immediately preceding
the first day of the Subscription Period of an offering of Shares made
under the Plan."
2. Section 2.7 shall be amended by adding the following at the end of
such Section:
"Employment with a corporation prior to the acquisition of stock possessing
fifty percent (50%) or more of the total combined voting power of all
classes of such corporation's stock by the Company shall be included for
purposes of determining whether a person is an Employee."
3. Section 2.8 shall be amended by the addition of the following at the
end of such Section:
"In the event that a registration statement with respect to the Initial
Public Offering of Shares is filed with the Securities and Exchange
Commission, pursuant to the Securities Act of 1933, as amended, the Fair
Market Value of any Shares subject to the exercise of
<PAGE> 2
Options granted on or after the effective date of such registration statement,
and on or before the Closing Date, shall be the Initial Public Offering Price."
4. Article 2 shall be amended by adding the following definitions and all
Sections within Article 2 shall be renumbered as appropriate:
"Closing Date" means the date upon which the Company closes the Initial Public
Offering.
"Initial Public Offering" means the first offering of Shares for sale to the
public in accordance with the Securities Act of 1933, as amended, and pursuant
to a registration statement on Form S-1 filed with and declared effective by the
Securities and Exchange Commission.
"Initial Public Offering Price" means the price negotiated by the underwriters
and the Company at which price the Company agrees to sell shares to the
underwriters for purposes of the Initial Public Offering.
5. Section 9 shall be amended to read as follows:
"Payment of the exercise price of any Option granted pursuant to the Plan shall
be made in installments through payroll deductions, and may also be made through
deductions from bonuses paid during the Purchase Period and cash payments as
described herein. Each Employee electing to participate in an offering of Shares
made under the Plan shall authorize the Company to withhold a designated amount
from his regular weekly, biweekly, semimonthly, or monthly pay for each payroll
period during the Purchase Period. The Employee may also elect to have an amount
deducted from any bonus payment made to him during the Purchase Period and to
have such amount credited to his Account, provided that the sum of all payroll
deductions and all amounts deducted from bonus payments does not exceed the
total amount of the Employee's election to purchase Shares made during the
Subscription Period, which is subject to the limits of Section 7. The designated
amount from the Employee's regular pay shall be not less than (i) the total
amount of the Employee's election to purchase Shares made during the
Subscription Period divided by the Employee's Annual Compensation times (ii) the
amount of the Employee's regular pay. If the sum of the amount deducted from
bonus payments as elected by the Employee and the sum of all payroll deductions
is less than the total amount of the Employee's election to purchase Shares made
during the Subscription Period, the Employee may make a cash payment in the
amount of the difference. The Employee may make one election to cancel any
election to have an amount deducted from any bonus payment. Any cancellation
with respect to a bonus payment shall be in addition to the cancellation
provisions of Section 12.
In the event that an Employee elects not to have the amount originally elected
to be deducted from any bonus payment deducted from such payment, he may, but is
not
<PAGE> 3
required to, elect to increase the payroll deduction amount originally elected,
provided that the total of all such payroll deduction amounts during the
Purchase Period, and all cash payments made, do not exceed the total amount of
his election to purchase Shares made during the Subscription Period, which is
subject to the limits of Section 7.
All payroll deductions, as well as any payments with respect to bonus payments,
shall be credited to the Employee's Account. No interest shall accrue on the
amounts credited to an Employee's Account pursuant to this Section 9."
6. The second sentence of Section 10 shall be amended to read as follows:
"Upon the exercise of an Option, the aggregate amount of the payroll deductions
and any deductions from bonus payments, as well as any cash payments credited to
the Account of each Employee as of that date will automatically be applied to
the exercise price for the purchase of that number of Shares, rounded to the
nearest whole share, equal to the Account balance divided by the exercise price,
not to exceed the maximum number of shares issuable under the Option."
IN WITNESS WHEREOF, the Company has executed this First Amendment as of
this 23rd day of June, 1997.
<PAGE> 4
WATERLINK, INC.
By: /S/ Michael J. Vantusko
---------------------------
Michael J. Vantusko
Chief Financial Officer
<PAGE> 1
Exhibit 10.2
===============================================================================
- -------------------------------------------------------------------------------
$40,000,000
CREDIT AGREEMENT
DATED AS OF JUNE 27, 1997
AMONG
WATERLINK, INC.,
BANK OF AMERICA ILLINOIS,
AS AGENT
AND
LETTER OF CREDIT ISSUING BANK,
AND
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
===============================================================================
- -------------------------------------------------------------------------------
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Section Page
------- ----
<S> <C>
ARTICLE I
DEFINITIONS..........................................................................1
-----------
1.01 Certain Defined Terms...................................................................1
---------------------
1.02 Other Interpretive Provisions..........................................................22
-----------------------------
1.03 Accounting Principles...............................................................23
---------------------
ARTICLE II
THE CREDITS.........................................................................23
-----------
2.01 Amounts and Terms of Commitment........................................................23
-------------------------------
2.02 Loan Accounts..........................................................................23
-------------
2.03 Procedure for Borrowing................................................................24
-----------------------
2.04 Conversion and Continuation Elections..................................................25
-------------------------------------
2.05 Voluntary Termination or Reduction of Commitments......................................26
-------------------------------------------------
2.06 Optional Prepayments...................................................................26
--------------------
2.07 Mandatory Prepayments of Loans; Mandatory Commitment Reductions........................27
---------------------------------------------------------------
(c) Equity Issuance...............................................................27
---------------
(d) General.......................................................................27
-------
2.08 Repayment..............................................................................27
---------
2.09 Interest...............................................................................27
--------
2.10 Fees...................................................................................28
----
(a) Agency Fees....................................................................28
-----------
(b) Commitment Fees................................................................28
---------------
2.11 Computation of Fees and Interest.......................................................29
--------------------------------
2.12 Payments by the Company................................................................29
-----------------------
2.13 Payments by the Banks to the Agent.....................................................30
----------------------------------
2.14 Sharing of Payments, Etc...............................................................30
-------------------------
ARTICLE III
THE LETTERS OF CREDIT...............................................................31
---------------------
3.01 The Letter of Credit Subfacility.......................................................31
--------------------------------
3.02 Issuance, Amendment and Renewal of Letters of Credit...................................32
----------------------------------------------------
3.03 Risk Participations, Drawings and Reimbursements.......................................34
------------------------------------------------
3.04 Repayment of Participations............................................................35
---------------------------
3.05 Role of the Issuing Bank...............................................................36
------------------------
3.06 Obligations Absolute...................................................................37
--------------------
3.07 Cash Collateral Pledge.................................................................38
----------------------
3.08 Letter of Credit Fees..................................................................38
---------------------
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
3.09 Uniform Customs and Practice...........................................................38
----------------------------
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY..............................................39
--------------------------------------
4.01 Taxes..................................................................................39
-----
4.02 Illegality.............................................................................40
----------
4.03 Increased Costs and Reduction of Return................................................40
---------------------------------------
4.04 Funding Losses.........................................................................41
--------------
4.05 Inability to Determine Rates...........................................................42
----------------------------
4.06 Reserves on Offshore Rate Loans........................................................42
-------------------------------
4.07 Certificates of Banks..................................................................42
---------------------
4.08 Survival...............................................................................42
-------
ARTICLE V
CONDITIONS PRECEDENT................................................................42
--------------------
5.01 Conditions of Initial Credit Extensions................................................42
---------------------------------------
(a) Credit Agreement and Notes....................................................43
--------------------------
(b) Resolutions; Incumbency.......................................................43
-----------------------
(c) Organization Documents; Good Standing.........................................43
-------------------------------------
(d) Legal Opinions................................................................43
--------------
(e) Payment of Fees...............................................................43
---------------
(f) Certificate...................................................................43
-----------
(g) Collateral Documents..........................................................44
--------------------
(h) IPO...........................................................................45
---
(i) Bioclear Acquisition..........................................................45
--------------------
(j) Lanco Acquisition.............................................................45
-----------------
(k) Bank Payoff Letter............................................................45
------------------
(l) Pro Forma Balance Sheet.......................................................45
-----------------------
(m) Solvency Certificate..........................................................45
--------------------
(o) Other Documents...............................................................46
---------------
5.02 Conditions to All Credit Extensions....................................................46
-----------------------------------
(b) Continuation of Representations and Warranties................................46
----------------------------------------------
(c) No Existing Default...........................................................46
-------------------
ARTICLE VI
REPRESENTATIONS AND WARRANTIES......................................................46
------------------------------
6.01 Corporate Existence and Power..........................................................46
-----------------------------
6.02 Corporate Authorization; No Contravention..............................................47
-----------------------------------------
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
6.03 Governmental Authorization.............................................................47
--------------------------
6.04 Binding Effect.........................................................................47
--------------
6.05 Litigation.............................................................................47
----------
6.06 No Default.............................................................................48
----------
6.07 ERISA Compliance.......................................................................48
----------------
6.08 Use of Proceeds; Margin Regulations....................................................48
-----------------------------------
6.09 Title to Properties....................................................................48
-------------------
6.10 Taxes..................................................................................49
-----
6.11 Financial Condition....................................................................49
--------------------
6.12 Environmental Matters..................................................................49
---------------------
6.13 Collateral Documents...................................................................50
--------------------
6.14 Regulated Entities.....................................................................50
------------------
6.15 No Burdensome Restrictions.............................................................50
--------------------------
6.16 Solvency...............................................................................51
--------
6.17 Labor Relations........................................................................51
---------------
6.18 Copyrights, Patents, Trademarks and Licenses, etc......................................51
-------------------------------------------------
6.19 Subsidiaries...........................................................................51
------------
6.20 Broker's; Transaction Fees.............................................................51
--------------------------
6.21 Insurance..............................................................................51
---------
6.22 Swap Obligations.......................................................................51
----------------
6.23 Full Disclosure........................................................................52
---------------
6.24 Subordination Provisions...............................................................52
------------------------
ARTICLE VII
AFFIRMATIVE COVENANTS...............................................................52
---------------------
7.01 Financial Statements..................................................................52
---------------------
7.02 Certificates; Other Information........................................................53
-------------------------------
7.03 Notices................................................................................53
-------
7.04 Preservation of Corporate Existence, Etc...............................................54
----------------------------------------
7.05 Maintenance of Property................................................................55
-----------------------
7.06 Insurance..............................................................................55
---------
7.07 Payment of Obligations.................................................................55
----------------------
7.08 Compliance with Laws...................................................................55
--------------------
7.09 Compliance with ERISA..................................................................55
---------------------
7.10 Inspection of Property and Books and Records...........................................56
--------------------------------------------
7.11 Environmental Laws.....................................................................56
------------------
7.12 Use of Proceeds........................................................................56
---------------
7.13 Solvency...............................................................................56
--------
7.14 Further Assurances.....................................................................56
------------------
7.15 Foreign Subsidiaries Security..........................................................57
-----------------------------
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
ARTICLE VIII
NEGATIVE COVENANTS..................................................................57
------------------
8.01 Limitation on Liens....................................................................57
-------------------
8.02 Disposition of Assets..................................................................59
---------------------
8.03 Consolidations and Mergers.............................................................59
--------------------------
8.04 Loans and Investments..................................................................60
---------------------
8.05 Limitation on Indebtedness.............................................................61
--------------------------
8.06 Transactions with Affiliates...........................................................62
----------------------------
8.07 Use of Proceeds........................................................................62
---------------
8.08 Contingent Obligations.................................................................62
----------------------
8.09 Joint Ventures.........................................................................62
--------------
8.10 Lease Obligations......................................................................62
-----------------
8.11 Restricted Payments....................................................................63
-------------------
8.12 ERISA..................................................................................63
-----
8.13 Change in Business.....................................................................64
------------------
8.14 Accounting Changes.....................................................................64
------------------
8.15 Minimum Net Worth......................................................................64
-----------------
8.16 Leverage Ratio.........................................................................64
--------------
8.17 Senior Leverage Ratio.................................................................64
---------------------
8.18 Interest Coverage Ratio...............................................................65
-----------------------
8.19 Current Ratio.........................................................................65
-------------
8.20 Operating Income......................................................................65
----------------
ARTICLE IX
EVENTS OF DEFAULT...................................................................65
-----------------
9.01 Event of Default.......................................................................65
----------------
(a) Non-Payment...................................................................65
-----------
(b) Representation or Warranty....................................................66
--------------------------
(c) Specific Defaults.............................................................66
-----------------
(d) Other Defaults................................................................66
--------------
(e) Cross-Default.................................................................66
-------------
(f) Insolvency; Voluntary Proceedings.............................................66
---------------------------------
(g) Involuntary Proceedings.......................................................67
-----------------------
(h) ERISA.........................................................................67
-----
(i) Monetary Judgments............................................................67
------------------
(j) Non-Monetary Judgments........................................................67
----------------------
(k) Collateral....................................................................67
----------
(l) Change of Control.............................................................68
-----------------
</TABLE>
-iv-
<PAGE> 6
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
(m) Guarantor Defaults............................................................68
------------------
(n) Invalidity of Subordination Provisions........................................68
--------------------------------------
9.02 Remedies...............................................................................68
--------
9.03 Rights Not Exclusive...................................................................69
--------------------
ARTICLE X
THE AGENT...........................................................................69
---------
10.01 Appointment and Authorization; "Agent"................................................69
-------------------------------------
10.02 Delegation of Duties..................................................................69
--------------------
10.03 Liability of Agent....................................................................70
------------------
10.04 Reliance by Agent.....................................................................70
-----------------
10.05 Notice of Default.....................................................................70
-----------------
10.06 Credit Decision.......................................................................71
---------------
10.07 Indemnification of Agent..............................................................71
------------------------
10.08 Agent in Individual Capacity..........................................................71
----------------------------
10.09 Successor Agent.......................................................................72
---------------
10.10 Withholding Tax.......................................................................72
---------------
ARTICLE XI
MISCELLANEOUS.......................................................................74
-------------
11.01 Amendments and Waivers................................................................74
----------------------
11.02 Notices...............................................................................74
-------
11.03 No Waiver; Cumulative Remedies........................................................75
------------------------------
11.04 Costs and Expenses....................................................................75
------------------
11.05 Company Indemnification...............................................................76
-----------------------
11.06 Payments Set Aside....................................................................76
------------------
11.07 Successors and Assigns................................................................76
----------------------
11.08 Assignments, Participations, etc......................................................76
---------------------------------
11.09 Confidentiality.......................................................................78
---------------
11.10 Set-off...............................................................................78
-------
11.11 Automatic Debits of Fees..............................................................79
------------------------
11.12 Notification of Addresses, Lending Offices, Etc.......................................79
------------------------------------------------
11.13 Counterparts..........................................................................79
------------
11.14 Severability..........................................................................79
------------
11.15 No Third Parties Benefited............................................................79
--------------------------
11.16 Governing Law and Jurisdiction........................................................79
------------------------------
11.17 Waiver of Jury Trial..................................................................80
--------------------
11.18 Entire Agreement......................................................................80
----------------
</TABLE>
-v-
<PAGE> 7
SCHEDULES
Schedule 1.01 Existing Letters of Credit
Schedule 2.01 Commitments
Schedule 6.11 Permitted Liabilities
Schedule 6.19 Subsidiaries and Minority Interests
Schedule 8.01 Existing Liens
Schedule 8.04 Existing Investments
Schedule 8.05 Existing Indebtedness
Schedule 8.08 Contingent Obligations
Schedule 11.02 Lending Offices; Addresses for Notices
EXHIBITS
Exhibit A Form of Notice of Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Compliance Certificate
Exhibit D-1 Form of Legal Opinion of Company's Counsel
Exhibit D-2 Form of Legal Opinion of Special Illinois Counsel to
the Company
Exhibit E Form of Assignment and Acceptance
Exhibit F Form of Promissory Note
-vi-
<PAGE> 8
CREDIT AGREEMENT
----------------
This CREDIT AGREEMENT is entered into as of June 27, 1997, among
Waterlink, Inc., a Delaware corporation (the "COMPANY"), the several financial
institutions from time to time party to this Agreement (collectively, the
"BANKS"; individually, a "BANK"), and Bank of America Illinois, as letter of
credit issuing bank and as agent for the Banks.
WHEREAS, the Banks have agreed to make available to the Company and a
revolving credit facility with a letter of credit subfacility upon the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
-----------
1.01 CERTAIN DEFINED TERMS. The following terms have the following
meanings:
"ACQUISITION" means any transaction or series of related
transactions for the purpose of or resulting, directly or indirectly,
in (a) the acquisition of all or substantially all of the assets of a
Person, or of any business or division of a Person, (b) the acquisition
of in excess of 50% of the capital stock, partnership interests,
membership interests or equity of any Person, or otherwise causing any
Person to become a Subsidiary, or (c) a merger or consolidation or any
other combination with another Person (other than a Person that is a
Subsidiary) provided that the Company or the Subsidiary is the
surviving entity.
"AFFILIATE" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person. A Person shall be deemed to control
another Person if the controlling Person possesses, directly or
indirectly, the power to direct or cause the direction of the
management and policies of the other Person, whether through the
ownership of voting securities, membership interests, by contract, or
otherwise.
"AGENT" means BAI in its capacity as agent for the Banks
hereunder, and any successor agent arising under Section 10.09.
"AGENT-RELATED PERSONS" means BAI and any successor agent
arising under Section 10.09 and any successor letter of credit issuing
bank hereunder, together with their respective Affiliates, and the
officers, directors, employees, agents and attorneys-in-fact of such
Persons and Affiliates.
"AGENT'S PAYMENT OFFICE" means the address for payments set
forth on Schedule 11.02 or such other address as the Agent may from
time to time specify.
<PAGE> 9
"AGREEMENT" means this Credit Agreement.
"APPLICABLE MARGIN" shall mean on any date the applicable
percentage set forth below based upon the Level as shown in the
Compliance Certificate then most recently delivered to the Banks:
<TABLE>
<CAPTION>
Revolving Loans Letters of Credit
--------------- -----------------
Offshore Base Commitment
Level Rate Rate Non-Financial Financial Fee
----- ---- ---- ------------- --------- -----------
<S> <C> <C> <C> <C> <C>
I 2.00% .250% 1.000% 2.000% .500%
II 1.75% -0- .875% 1.750% .500%
III 1.50% -0- .750% 1.500% .375%
IV 1.25% -0- .625% 1.250% .300%
V 1.00% -0- .500% 1.000% .300%
</TABLE>
PROVIDED, HOWEVER that for the period from the date hereof until the
date that is 3 Business Days after the date the first Compliance
Certificate is delivered to the Banks pursuant to Section 7.02(b), the
Applicable Margin shall be deemed to be the Level determined pursuant
to the certificate referred to in Section 5.01(n); PROVIDED FURTHER
that, if the Company shall have failed to deliver to the Banks by the
date required hereunder any Compliance Certificate pursuant to Section
7.02(b), then from the date such Compliance Certificate was required to
be delivered until the date of such delivery the Applicable Margin
shall be deemed to be Level I. Each change in the Applicable Margin
shall take effect with respect to all outstanding Loans on the third
Business Day immediately succeeding the day on which such Compliance
Certificate is received by the Agent. Notwithstanding the foregoing, no
reduction in the Applicable Margin shall be effected if a Default or an
Event of Default shall have occurred and be continuing on the date when
such change would otherwise occur, it being understood that on the
third Business Day immediately succeeding the day on which such Default
or Event of Default is either waived or cured (assuming no other
Default or Event of Default shall be then pending), the Applicable
Margin shall be reduced (on a prospective basis) in accordance with the
then most recently delivered Compliance Certificate.
"APPROVED ALTERNATIVE CURRENCY" means Sterling, Deutschmarks,
Krona or ECU's or any other currency (other than Dollars) approved by
the Agent and the Issuing Bank.
"ASSIGNEE" has the meaning specified in Section 11.08(a).
-2-
<PAGE> 10
"ATTORNEY COSTS" means and includes all reasonable and
customary fees and disbursements of any law firm or other external
counsel, the allocated cost of internal legal services and all
disbursements of internal counsel.
"BAI" means Bank of America Illinois, an Illinois banking
association.
"BANK" has the meaning specified in the introductory clause
hereto. References to the "Banks" shall include BAI, including in its
capacity as Issuing Bank; for purposes of clarification only, to the
extent that BAI may have any rights or obligations in addition to those
of the Banks due to its status as Issuing Bank, its status as such will
be specifically referenced.
"BANKRUPTCY CODE" means the Federal Bankruptcy Reform Act of
1978 (11 U.S.C. Section 101, ET SEQ.).
"BASE RATE" means, for any day, the higher of: (a) 0.50% per
annum above the latest Federal Funds Rate; and (b) the rate of interest
in effect for such day as publicly announced from time to time by BAI
in Chicago, Illinois as its "reference rate." The "reference rate" is a
rate set by BAI based upon various factors including BAI's costs and
desired return, general economic conditions and other factors, and is
used as a reference point for pricing some loans, which may be priced
at, above, or below such announced rate. Any change in the reference
rate announced by BAI shall take effect at the opening of business on
the day specified in the public announcement of such change.
"BASE RATE LOAN" means a Revolving Loan, or an L/C Advance,
that bears interest based on the Base Rate.
"BIOCLEAR" means Bioclear Technology, Inc., a Canadian
corporation.
"BIOCLEAR ACQUISITION" means the acquisition by the Company of
all of the capital stock of Bioclear pursuant to the Bioclear
Acquisition Documents.
"BIOCLEAR ACQUISITION DOCUMENTS" means the executed purchase
agreement between the Company and Bioclear, and all other documents
entered into or delivered in connection therewith.
"BORROWING" means a borrowing hereunder consisting of Loans of
the same Type made to the Company on the same day by the Banks under
Article II, and, in the case of Offshore Rate Loans, having the same
Interest Period.
"BORROWING DATE" means any date on which a Borrowing occurs
under Section 2.03.
"BUSINESS DAY" means any day other than a Saturday, Sunday or
other day on which commercial banks in Chicago or San Francisco are
authorized or required by law to close
-3-
<PAGE> 11
and, if the applicable Business Day relates to any Offshore Rate Loan,
means such a day on which dealings are carried on in the applicable
offshore interbank market.
"CAPITAL ADEQUACY REGULATION" means any guideline, request or
directive of any central bank or other Governmental Authority, or any
other law, rule or regulation, whether or not having the force of law,
in each case, regarding capital adequacy of any bank or of any
corporation controlling a bank.
"CAPITAL EXPENDITURES" means, for any period and with respect
to any Person, the aggregate of all expenditures by such Person and its
Subsidiaries for the acquisition or leasing of fixed or capital assets
or additions to equipment (including replacements, capitalized repairs
and improvements during such period) which should be capitalized under
GAAP on a consolidated balance sheet of such Person and its
Subsidiaries.
"CAPITAL LEASE" has the meaning specified in the definition
of "Capital Lease Obligations."
"CAPITAL LEASE OBLIGATIONS" means all monetary obligations of
the Company or any of its Subsidiaries under any leasing or similar
arrangement which, in accordance with GAAP, is classified as a capital
lease ("CAPITAL LEASE").
"CASH EQUIVALENTS" means:
(a) securities issued or fully guaranteed or insured
by the United States Government or any agency thereof and
backed by the full faith and credit of the United States
having maturities of not more than six months from the date of
acquisition;
(b) certificates of deposit, time deposits,
Eurodollar time deposits, repurchase agreements, reverse
repurchase agreements, or bankers' acceptances, having in each
case a tenor of not more than six months, issued by any Bank,
or by any U.S. commercial bank having combined capital and
surplus of not less than $100,000,000 whose short term
securities are rated at least A-1 by Standard & Poor's
Corporation and P-1 by Moody's Investors Service, Inc.;
(c) commercial paper of an issuer rated at least A-1
by Standard & Poor's Corporation or P-1 by Moody's Investors
Service Inc. and in either case having a tenor of not more
than three months.
"CASH COLLATERALIZE" means to pledge and deposit with or
deliver to the Agent, for the benefit of the Agent, the Issuing Bank
and the Banks, as additional collateral for the L/C Obligations, cash
or deposit account balances pursuant to documentation in form and
substance satisfactory to the Agent and the Issuing Bank (which
documents are hereby consented to by the Banks). Derivatives of such
term shall have corresponding meaning. The Company hereby grants the
Agent, for the benefit of the Agent, the Issuing Bank and
-4-
<PAGE> 12
the Banks, a security interest in all such cash and deposit account
balances. Cash collateral shall be maintained in blocked deposit
accounts at BAI. The Agent shall invest any and all available funds
deposited in such deposit accounts, within 10 business days after the
date the relevant funds become available, in securities issued or fully
guaranteed or insured by the United States Government or any agency
thereof backed by the full faith and credit of the United States having
maturities of three months from the date of acquisition thereof
(collectively, "Government Obligations"). The Company hereby
acknowledges and agrees that the Agent shall not have any liability
with respect to, and the Company hereby indemnifies the Agent against,
any loss resulting from the acquisition of the Government Obligations
and the Agent shall not have any obligation to monitor the trading
activity of any such Governmental Obligations on and after the
acquisition thereof for the purpose of obtaining the highest possible
return with respect thereto, the Agent's responsibility being limited
to acquiring such Governmental Obligations.
"CHANGE OF CONTROL" means (a) any Person or any two or more
Persons acting in concert (in any such case, excluding the Closing Date
Stockholders and their Affiliates) acquiring beneficial ownership
(within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Exchange Act), directly or indirectly, of capital
stock of the Company (or other securities convertible into such capital
stock) representing 20% or more of the combined voting power of all
capital stock of the Company entitled to vote in the election of
directors, other than capital stock having such power only by reason of
the happening of a contingency, or (b) during any period of twelve
consecutive calendar months, individuals who at the beginning of such
period constituted the Company's board of directors (together with any
new directors whose election by the Company's board of directors or
whose nomination for election by the Company's stockholders was
approved by a vote of at least a majority of the directors then still
in office who either were directors at the beginning of such period or
whose election or nomination for election was previously so approved)
cease for any reasons other than death or disability to constitute a
majority of the directors then in office.
"CLOSING DATE" means the date on which all conditions
precedent set forth in Section 5.01 are satisfied or waived by all
Banks.
"CODE" means the Internal Revenue Code of 1986, and
regulations promulgated thereunder.
"COLLATERAL" means all property and interests in property and
proceeds thereof now owned or hereafter acquired by the Company or any
Guarantor in or upon which a Lien now or hereafter exists in favor of
the Banks, or the Collateral Agent on behalf of the Banks, whether
under this Agreement or under any other documents executed by any such
Persons and delivered to the Collateral Agent.
"COLLATERAL AGENT" means the Agent acting in its capacity as
Collateral Agent pursuant to the Collateral Documents (other than the
Guaranty).
-5-
<PAGE> 13
"COLLATERAL DOCUMENTS" means, collectively, (a) the Security
Agreements, the Guaranty, the Pledge Agreements, the Intellectual
Property Assignments and all other security agreements, patent and
trademark assignments, guarantees and other similar agreements between
the Company or its Subsidiaries and the Banks or the Collateral Agent
for the benefit of the Banks now or hereafter delivered to the Banks or
the Collateral Agent pursuant to or in connection with the transactions
contemplated hereby, and all financing statements (or comparable
documents now or hereafter filed in accordance with the UCC or
comparable law) against the Company or any Subsidiaries or any
Guarantor as debtor in favor of the Banks or the Collateral Agent for
the benefit of the Banks as secured party and (b) any amendments,
supplements, modifications, renewals, replacements, consolidations,
substitutions and extensions of any of the foregoing.
"COMMITMENT", as to each Bank, has the meaning specified in
Section 2.01.
"COMMITMENT FEE" has the meaning specified in Section 2.10(b).
"COMPANY" means Waterlink, Inc., a Delaware corporation.
"COMPLIANCE CERTIFICATE" means a certificate substantially in
the form of EXHIBIT C.
"CONSOLIDATED CURRENT ASSETS" means, as of any date of
determination, all amounts which would, in accordance with GAAP, be
included under current assets on a consolidated balance sheet of the
Company and its Subsidiaries.
"CONSOLIDATED CURRENT LIABILITIES" means, as of any date of
determination, all amounts which would, in accordance with GAAP, be
included under current liabilities on a consolidated balance sheet of
the Company and its Subsidiaries, but excluding the current portion of
any Indebtedness under this Agreement.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, gross
consolidated interest expense for the period (including all
commissions, discounts, fees and other charges in connection with
standby letters of credit and similar instruments) for the Company and
its Subsidiaries, PLUS the portion of the upfront costs and expenses
for Swap Contracts (to the extent not included in gross interest
expense) fairly allocated to such Swap Contracts as expenses for such
period, as determined in accordance with GAAP and after giving effect
to any Swap Contract then in effect.
"CONTINGENT OBLIGATION" means, as to any Person, any direct or
indirect liability of that Person, whether or not contingent, with or
without recourse, (a) with respect to any Indebtedness, lease,
dividend, letter of credit or other obligation (the "primary
obligations") of another Person (the "primary obligor"), including any
obligation of that Person (i) to purchase, repurchase or otherwise
acquire such primary obligations or any security therefor, (ii) to
advance or provide funds for the payment or discharge of any such
primary obligation, or to maintain working capital or equity capital of
the primary obligor or otherwise to
-6-
<PAGE> 14
maintain the net worth or solvency or any balance sheet item, level of
income or financial condition of the primary obligor, (iii) to purchase
property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation, or (iv) otherwise
to assure or hold harmless the holder of any such primary obligation
against loss in respect thereof (each, a "GUARANTY OBLIGATION"); (b)
with respect to any Surety Instrument (other than any Letter of Credit)
issued for the account of that Person or as to which that Person is
otherwise liable for reimbursement of drawings or payments; (c) to
purchase any materials, supplies or other property from, or to obtain
the services of, another Person if the relevant contract or other
related document or obligation requires that payment for such
materials, supplies or other property, or for such services, shall be
made regardless of whether delivery of such materials, supplies or
other property is ever made or tendered, or such services are ever
performed or tendered, or (d) in respect of any Swap Contract. The
amount of any Contingent Obligation shall, in the case of Guaranty
Obligations, be deemed equal to the stated or determinable amount of
the primary obligation in respect of which such Guaranty Obligation is
made or, if not stated or if indeterminable, the maximum reasonably
anticipated liability in respect thereof, and in the case of other
Contingent Obligations other than in respect of Swap Contracts, shall
be equal to the maximum reasonably anticipated liability in respect
thereof and, in the case of Contingent Obligations in respect of Swap
Contracts, shall be equal to the Swap Termination Value.
"CONTRACTUAL OBLIGATION" means, as to any Person, any
provision of any security issued by such Person or of any agreement,
undertaking, contract, indenture, mortgage, deed of trust or other
instrument, document or agreement to which such Person is a party or by
which it or any of its property is bound.
"CONVERSION/CONTINUATION DATE" means any date on which, under
Section 2.04, the Company (a) converts Loans of one Type to another
Type, or (b) continues as Loans of the same Type, but with a new
Interest Period, Loans having Interest Periods expiring on such date.
"CREDIT EXTENSION" means and includes (a) the making of any
Loans hereunder, and (b) the Issuance of any Letters of Credit
hereunder.
"DEFAULT" means any event or circumstance which, with the
giving of notice, the lapse of time, or both, would (if not cured or
otherwise remedied during such time) constitute an Event of Default.
"DEUTSCHMARKS" means the lawful currency of Germany.
"DISPOSITION" means (a) the sale, lease, conveyance or other
disposition of Property in excess of $100,000, other than sales or
other dispositions expressly permitted under Section 8.02, and (b) the
sale or transfer by the Company or any Subsidiary of the Company of any
equity securities issued by any Subsidiary of the Company and held by
such transferor Person.
-7-
<PAGE> 15
"DOLLARS", "dollars" and "$" each mean lawful money of the
United States.
"DOMESTIC SUBSIDIARY" means each Subsidiary of the Company
that is organized under the laws of the United States or any state
thereof.
"EBIT" means, for any period, for the Company and its
Subsidiaries on a consolidated basis, determined in accordance with
GAAP, the sum of (a) net income (or net loss) for such period PLUS (b)
all amounts treated as expenses for interest to the extent included in
the determination of such net income (or loss), PLUS (c) all accrued
taxes on or measured by income to the extent included in the
determination of such net income (or loss); PROVIDED, HOWEVER, that net
income (or loss) shall be computed for these purposes without giving
effect to extraordinary losses or extraordinary gains, PLUS (d) with
respect to any business acquired during the period of determination, an
amount equal to the sum of (x) the total compensation paid to each
management equity holder of such acquired business during the twelve
month period immediately preceding the date such business was acquired
LESS the base compensation paid to each such Person during such twelve
month period PLUS (y) the aggregate amount of managment fees paid to
management equity holders or Affiliates thereof during such twelve
month period to the extent that such managment fee is no longer
required to be paid after the date of such acquisition; and PROVIDED
FURTHER, that for the purpose of computations under Sections 8.16, 8.17
and 8.18 for any business acquired during the period of determination
(including the Bioclear Acquisition and the Lanco Acquisition), EBIT
for such period shall be determined on a pro forma basis as if such
acquisition had occurred as of the beginning of such period.
"EBITDA" means, for any period, for the Company and its
Subsidiaries on a consolidated basis, determined in accordance with
GAAP, the sum of (a) the net income (or net loss) for such period PLUS
(b) all amounts treated as expenses for depreciation and interest and
the amortization of intangibles of any kind to the extent included in
the determination of such net income (or loss), PLUS (c) all accrued
taxes on or measured by income to the extent included in the
determination of such net income (or loss); PROVIDED, HOWEVER, that net
income (or loss) shall be computed for these purposes without giving
effect to extraordinary losses or extraordinary gains, PLUS (d) with
respect to any business acquired during the period of determination, an
amount equal to the sum of (x) the total compensation paid to each
management equity holder of such acquired business during the twelve
month period immediately preceding the date such business was acquired
LESS the base compensation paid to each such Person during such twelve
month period PLUS (y) the aggregate amount of managment fees paid to
management equity holders or Affiliates thereof during such twelve
month period to the extent that such managment fee is no longer
required to be paid after the date of such acquisition; and PROVIDED
FURTHER, that for the purpose of computations under Sections 8.16, 8.17
and 8.18 for any business acquired during the period of determination
(including the Bioclear Acquisition and the Lanco Acquisition), EBITDA
for such period shall be determined on a pro forma basis as if such
acquisition had occurred as of the beginning of such period.
-8-
<PAGE> 16
"ECU" means the European Currency Unit used in the European
Monetary System.
"EFFECTIVE AMOUNT" means (a) with respect to any Revolving
Loans on any date, the aggregate outstanding principal amount thereof
after giving effect to any Borrowings and prepayments or repayments of
Revolving Loans occurring on such date and (b) with respect to any
outstanding L/C Obligations on any date, the amount of such L/C
Obligations on such date after giving effect to any Issuances of
Letters of Credit occurring on such date and any other changes in the
aggregate amount of the L/C Obligations as of such date, including as a
result of any reimbursements of outstanding unpaid drawings under any
Letters of Credit or any reductions in the maximum amount available for
drawing under Letters of Credit taking effect on such date. For
purposes of Section 2.07, the Effective Amount shall be determined
without giving effect to any mandatory prepayments to be made under
said Section.
"ELIGIBLE ASSIGNEE" means (a) a commercial bank organized
under the laws of the United States, or any state thereof, and having a
combined capital and surplus of at least $100,000,000; (b) a commercial
bank organized under the laws of any other country which is a member of
the Organization for Economic Cooperation and Development (the "OECD"),
or a political subdivision of any such country, and having a combined
capital and surplus of at least $100,000,000, PROVIDED that such bank
is acting through a branch or agency located in the United States; and
(c) a Person that is primarily engaged in the business of commercial
banking and that is (i) a Subsidiary of a Bank, (ii) a Subsidiary of a
Person of which a Bank is a Subsidiary, or (iii) a Person of which a
Bank is a Subsidiary.
"ENVIRONMENTAL CLAIMS" means all claims, however asserted, by
any Governmental Authority or other Person alleging potential liability
or responsibility for violation of any Environmental Law, or for
release or injury to the environment.
"ENVIRONMENTAL LAWS" means all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes,
together with all administrative orders, directed duties, requests,
licenses, authorizations and permits of, and agreements with, any
Governmental Authorities, in each case relating to environmental,
health, safety and land use matters.
"ENVIRONMENTAL PERMITS" has the meaning specified in Section
6.12(b).
"ERISA" means the Employee Retirement Income Security Act of
1974, and regulations promulgated thereunder.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) under common control with the Company within the meaning
of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of
the Code for purposes of provisions relating to Section 412 of the
Code).
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<PAGE> 17
"ERISA EVENT" means (a) a Reportable Event with respect to a
Pension Plan; (b) a withdrawal by the Company or any ERISA Affiliate
from a Pension Plan subject to Section 4063 of ERISA during a plan year
in which it was a substantial employer (as defined in Section
4001(a)(2) of ERISA) or a cessation of operations which is treated as
such a withdrawal under Section 4062(e) of ERISA; (c) a complete or
partial withdrawal by the Company or any ERISA Affiliate from a
Multiemployer Plan or notification that a Multiemployer Plan is in
reorganization; (d) the filing of a notice of intent to terminate, the
treatment of a Plan amendment as a termination under Section 4041 or
4041A of ERISA, or the commencement of proceedings by the PBGC to
terminate a Pension Plan or Multiemployer Plan; (e) an event or
condition which might reasonably be expected to constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Pension Plan or Multiemployer Plan; or
(f) the imposition of any liability under Title IV of ERISA, other than
PBGC premiums due but not delinquent under Section 4007 of ERISA, upon
the Company or any ERISA Affiliate.
"EURODOLLAR RESERVE PERCENTAGE" has the meaning specified in
the definition of "Offshore Rate".
"EVENT OF DEFAULT" means any of the events or circumstances
specified in Section 9.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, and
regulations promulgated thereunder.
"EXISTING LETTER OF CREDIT" means each letter of credit listed
on SCHEDULE 1.01.
"FDIC" means the Federal Deposit Insurance Corporation, and
any Governmental Authority succeeding to any of its principal
functions.
"FEDERAL FUNDS RATE" means, for any day, the rate set forth in
the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Bank of New
York (including any such successor, "H.15(519)") on the preceding
Business Day opposite the caption "Federal Funds (Effective)"; or, if
for any relevant day such rate is not so published on any such
preceding Business Day, the rate for such day will be the arithmetic
mean as determined by the Agent of the rates for the last transaction
in overnight Federal funds arranged prior to 9:00 a.m. (New York City
time) on that day by each of three leading brokers of Federal funds
transactions in New York City selected by the Agent.
"FEE LETTER" has the meaning specified in Section 2.10(a).
"FINANCIAL LETTERS OF CREDIT" means any Letter of Credit which
either the Agent or the Issuing Bank determines is required under
applicable law (including regulations and guidelines established by
banking regulators) relating to reserve requirements to be classified
as a financial letter of credit.
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<PAGE> 18
"FOREIGN SUBSIDIARY" means each Subsidiary of the Company
that is not a Domestic Subsidiary.
"FRB" means the Board of Governors of the Federal Reserve
System, and any Governmental Authority succeeding to any of its
principal functions.
"FURTHER TAXES" means any and all present or future taxes,
levies, assessments, imposts, duties, deductions, fees, withholdings or
similar charges (including, without limitation, net income taxes and
franchise taxes), and all liabilities with respect thereto, imposed by
any jurisdiction on account of amounts payable or paid pursuant to
Section 4.01.
"FX TRADING OFFICE" means the Foreign Exchange Trading Center
#5193, San Francisco, California, of the Bank of America National Trust
and Savings Association, or such other foreign exchange trading center
of the Bank of America National Trust and Savings Association as it may
designate from time to time.
"GAAP" means generally accepted accounting principles set
forth from time to time in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of Certified
Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date
of determination; PROVIDED, HOWEVER, that for purposes of all
computations required to be made with respect to compliance by the
Company with SECTIONS 8.15, 8.16, 8.17, 8.18, 8.19 and 8.20, such term
shall mean generally accepted accounting principles as in effect on the
date of this Agreement, applied in a manner consistent with those used
in preparing the financial statements referred to in SECTION 6.11.
"GOVERNMENTAL AUTHORITY" means any nation or government, any
state or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"GUARANTOR" means each Domestic Subsidiary of the Company and,
to the extent requested pursuant to Section 7.15, each Foreign
Subsidiary of the Company.
.
"GUARANTY" means the Guaranty, dated as of the date hereof,
duly executed and delivered by Guarantors in favor of the Agent, on
behalf of the Banks, as the same may be amended, supplemented or
otherwise modified from time to time.
"GUARANTY OBLIGATION" has the meaning specified in the
definition of "Contingent Obligation."
"HAZARDOUS MATERIALS" means any toxic or hazardous waste,
substance or chemical or any pollutant, contaminant, chemical or other
substance defined or regulated pursuant to
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<PAGE> 19
any Environmental Law, including, without limitation, asbestos,
petroleum, crude oil or any fraction thereof.
"HONOR DATE" has the meaning specified in Section 3.03(b).
"INDEBTEDNESS" of any Person means, without duplication, (a)
all indebtedness for borrowed money; (b) all obligations issued,
undertaken or assumed as the deferred purchase price of property or
services (other than trade payables entered into in the ordinary course
of business on ordinary terms); (c) all non-contingent reimbursement or
payment obligations with respect to Surety Instruments and all L/C
Obligations; (d) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses; (e)
all indebtedness created or arising under any conditional sale or other
title retention agreement, or incurred as financing, in either case
with respect to property acquired by the Person (even though the rights
and remedies of the seller or bank under such agreement in the event of
default are limited to repossession or sale of such property); (f) all
obligations with respect to capital leases; (g) all indebtedness
referred to in clauses (a) through (f) above secured by (or for which
the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or in property (including
accounts and contracts rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such
Indebtedness; and (h) all Guaranty Obligations in respect of
indebtedness or obligations of others of the kinds referred to in
clauses (a) through (g) above; it being understood and agreed that the
Company's obligation to fund $1,200,000 of Sweden Sub's employee
benefit plans in connection with the initial capitalization thereof
shall not be included within the definition of "Indebtedness".
"INDEMNIFIED LIABILITIES" has the meaning specified in Section
11.05.
"INDEMNIFIED PERSON" has the meaning specified in Section
11.05.
"INDEPENDENT AUDITOR" has the meaning specified in Section
7.01(a).
"INSOLVENCY PROCEEDING" means, with respect to any Person, (a)
any case, action or proceeding with respect to such Person before any
court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution,
winding-up or relief of debtors, or (b) any general assignment for the
benefit of creditors, composition, marshaling of assets for creditors,
or other, similar arrangement in respect of its creditors generally or
any substantial portion of its creditors; undertaken under U.S.
Federal, state or foreign law, including the Bankruptcy Code.
"INTELLECTUAL PROPERTY ASSIGNMENTS" means, collectively, those
certain Patent Assignment, Trademark Assignment and Copyright
Assignment duly executed and delivered by each of the Company and each
Guarantor in favor of the Collateral Agent, for the benefit of itself
and the Banks, as the same may be amended, supplemented or otherwise
modified from time to time.
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<PAGE> 20
"INTEREST PAYMENT DATE" means, as to any Offshore Rate Loan,
the last day of each Interest Period applicable to such Offshore Rate
Loan and, as to any Base Rate Loan, the last Business Day of each
March, June, September and December and each date such Loan is
converted into another Type of Loan; PROVIDED, HOWEVER, that if any
Interest Period exceeds three months, the date that falls three months
after the beginning of such Interest Period and after each Interest
Payment Date thereafter is also an Interest Payment Date.
"INTEREST COVERAGE RATIO" means, with respect to any period,
the ratio of EBIT for that period to Consolidated Interest Expense for
that period.
"INTEREST PERIOD" means, as to any Offshore Rate Loan, the
period commencing on the Borrowing Date of such Loan or on the
Conversion/Continuation Date on which the Loan is converted into or
continued as an Offshore Rate Loan, and ending on the date one, two,
three or six months thereafter as selected by the Company in its Notice
of Borrowing or Notice of Conversion/Continuation;
PROVIDED that:
(a) if any Interest Period would otherwise end on a
day that is not a Business Day, that Interest Period shall be
extended to the following Business Day unless the result of
such extension would be to carry such Interest Period into
another calendar month, in which event such Interest Period
shall end on the preceding Business Day;
(b) any Interest Period that begins on the last
Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last
Business Day of the calendar month at the end of such Interest
Period; and
(c) no Interest Period for any Term Loan shall extend
beyond the Term Maturity Date and no Interest Period for any
Revolving Loan shall extend beyond the Revolving Termination
Date.
"IPO" has the meaning specified in Section 5.01(h).
"IRS" means the Internal Revenue Service, and any Governmental
Authority succeeding to any of its principal functions under the Code.
"ISSUANCE DATE" has the meaning specified in Section 3.01(a).
"ISSUE" means, with respect to any Letter of Credit, to issue
or to extend the expiry of, or to renew or increase the amount of, such
Letter of Credit; and the terms "ISSUED," "ISSUING" and "ISSUANCE" have
corresponding meanings.
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<PAGE> 21
"ISSUING BANK" means BAI in its capacity as issuer of one or
more Letters of Credit hereunder, together with any replacement letter
of credit issuer arising under Section 10.01(b) or Section 10.09.
"JOINT VENTURE" means a single-purpose corporation,
partnership, limited liability company, joint venture or other similar
legal arrangement (whether created by contract or conducted through a
separate legal entity) now or hereafter formed by the Company or any of
its Subsidiaries with another Person in order to conduct a common
venture or enterprise with such Person.
"KRONA" means the lawful currency of Sweden.
"LANCO" means Lanco Environmental Products, Inc., a Michigan
corporation.
"LANCO ACQUISITION" means the acquisition of all of the
capital stock of Lanco by the Company pursuant to the Lanco Acquisition
Documents.
"LANCO ACQUISITION DOCUMENTS" means the executed purchase
agreement between the Company and Lanco, and all other documents
entered into or delivered in connection therewith.
"L/C ADVANCE" means each Bank's participation in any L/C
Borrowing in accordance with its Pro Rata Share.
"L/C AMENDMENT APPLICATION" means an application form for
amendment of outstanding standby or commercial documentary letters of
credit as shall at any time be in use at the Issuing Bank, as the
Issuing Bank shall request.
"L/C APPLICATION" means an application form for issuances of
standby or commercial documentary letters of credit as shall at any
time be in use at the Issuing Bank, as the Issuing Bank shall request.
"L/C BORROWING" means an extension of credit resulting from a
drawing under any Letter of Credit which shall not have been reimbursed
on the date when made nor converted into a Borrowing of Revolving Loans
under Section 3.03(c).
"L/C COMMITMENT" means the commitment of the Issuing Bank to
Issue, and the commitment of the Banks severally to participate in,
Letters of Credit from time to time Issued or outstanding under Article
III, in an aggregate amount not to exceed on any date the amount of
$20,000,000, as the same shall be reduced as a result of a reduction in
the L/C Commitment pursuant to Section 2.06; PROVIDED that the L/C
Commitment is a part of the combined Commitments, rather than a
separate, independent commitment.
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<PAGE> 22
"L/C OBLIGATIONS" means at any time the sum of (a) the
aggregate undrawn amount of all Letters of Credit then outstanding,
plus (b) the amount of all unreimbursed drawings under all Letters of
Credit, including all outstanding L/C Borrowings.
"L/C-RELATED DOCUMENTS" means the Letters of Credit, the L/C
Applications, the L/C Amendment Applications and any other document
relating to any Letter of Credit, including any of the Issuing Bank's
standard form documents for letter of credit issuances.
"LENDING OFFICE" means, as to any Bank, the office or offices
of such Bank specified as its "Lending Office" or "Domestic Lending
Office" or "Offshore Lending Office", as the case may be, on SCHEDULE
11.02, or such other office or offices as such Bank may from time to
time notify the Company and the Agent.
"LETTERS OF CREDIT" means any letters of credit (whether
Financial Letters of Credit or Non-Financial Letters of Credit) that is
either (a) an Existing Letter of Credit or (b) Issued by the Issuing
Bank pursuant to Article III.
"LEVEL" means, and includes, Level I, Level II, Level III,
Level IV or Level V, whichever is in effect at the relevant time.
"LEVEL I" shall exist at any time the Leverage Ratio is
greater than 3.50:1.0.
"LEVEL II" shall exist at any time the Leverage Ratio is equal
to or less than 3.50:1.0 but equal to or greater than 3.00:1.0.
"LEVEL III" shall exist at any time the Leverage Ratio is less
than 3.00:1.0 but equal to or greater than 2.50:1.0.
"LEVEL IV" shall exist at any time the Leverage Ratio is less
than 2.50:1.0 but greater than or equal to 2.00:1.0.
"LEVEL V shall exist at any time the Leverage Ratio is less
than 2.00:1.0.
"LEVERAGE RATIO" means, with respect to any period, the ratio
of total consolidated Indebtedness (other than L/C Obligations relating
to Non-Financial Letters of Credit) as of the end of that period to
EBITDA for that period.
"LIEN" means any security interest, mortgage, deed of trust,
pledge, hypothecation, assignment, charge or deposit arrangement,
encumbrance, lien (statutory or other) or preferential arrangement of
any kind or nature whatsoever in respect of any property (including
those created by, arising under or evidenced by any conditional sale or
other title retention agreement, the interest of a lessor under a
capital lease, any financing lease having substantially the same
economic effect as any of the foregoing, or the filing of any financing
statement naming the owner of the asset to which such lien relates as
debtor, under the Uniform Commercial Code or any comparable law) and
any contingent or other agreement
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<PAGE> 23
to provide any of the foregoing, but not including the interest of a
lessor under an operating lease.
"LOAN" means an extension of credit by a Bank to the Company
under Article II or Article III in the form of a Revolving Loan or L/C
Borrowing.
"LOAN DOCUMENTS" means this Agreement, any Notes, the Fee
Letters, the L/CRelated Documents, the Collateral Documents and all
other documents delivered to the Agent or any Bank in connection
herewith.
"MAJORITY BANKS" means (a) at any time two Banks are party to
this Agreement, both Banks, and (b) at any other time, prior to the
termination of the Commitment, Banks holding at least 66-2/3% of the
then aggregate Commitments or, if the Commitments have been terminated,
Banks holding at least 66-2/3% of the then unpaid principal amount of
Loans and L/C Obligations.
"MARGIN STOCK" means "margin stock" as such term is defined in
Regulation G, T, U or X of the FRB.
"MATERIAL ADVERSE EFFECT" means (a) a material adverse change
in, or a material adverse effect upon, the operations, business,
properties, condition (financial or otherwise) or prospects of the
Company or the Company and its Subsidiaries taken as a whole or as to
any Subsidiary; (b) a material impairment of the ability of the Company
or any Subsidiary to perform under any Loan Document and to avoid any
Event of Default; or (c) a material adverse effect upon the legality,
validity, binding effect or enforceability against the Company or any
Subsidiary of any Loan Document.
"MULTIEMPLOYER PLAN" means a "multiemployer plan", within the
meaning of Section 4001(a)(3) of ERISA, to which the Company or any
ERISA Affiliate makes, is making, or is obligated to make contributions
or, during the preceding three calendar years, has made, or been
obligated to make, contributions.
"NET INCOME" shall mean for any period, the net income (or
loss) of the Company and its Subsidiaries on a consolidated basis for
such period taken as a single accounting period determined in
conformity with GAAP, PROVIDED that there shall be excluded (i) the
income (or loss) of any entity accrued prior to the date it becomes a
Subsidiary of the Company or is merged into or consolidated with the
Company or any Subsidiary or on which its assets are acquired by the
Company or any Subsidiary of the Company and (ii) the income of any
Subsidiary of the Company to the extent that the declaration or payment
of dividends or similar distributions by that Subsidiary of that income
is not at the time permitted by operation of the terms of its charter
or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary.
"NET ISSUANCE PROCEEDS" means, in respect of any issuance of
debt or equity, cash proceeds and non-cash proceeds received or
receivable in connection therewith, net of
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<PAGE> 24
reasonable out-of-pocket costs and expenses paid or incurred in
connection therewith in favor of any Person not an Affiliate of the
Company.
"NET PROCEEDS" means proceeds in cash, checks or other cash
equivalent financial instruments (including Cash Equivalents) as and
when received by the Person making a Disposition, net of: (a) the
direct costs relating to such Disposition (excluding amounts payable to
the Company or any Affiliate of the Company), (b) sale, use or other
transaction taxes paid or payable as a result thereof, (c) amounts
required to be applied to repay principal, interest and prepayment
premiums and penalties on Indebtedness secured by a Lien on the asset
which is the subject of such Disposition, and (d) amounts related to
the sale of any demonstration plant the proceeds of which are utilized
by the Company for new demonstration plants and/or marketing expenses.
"NET WORTH" means shareholders' equity as determined in
accordance with GAAP.
"NON-FINANCIAL LETTERS OF CREDIT" means Letters of Credit
which are not Financial Letters of Credit.
"NOTE" means a promissory note executed by the Company in
favor of a Bank pursuant to Section 2.02(b), in substantially the form
of EXHIBIT F.
"NOTICE OF BORROWING" means a notice in substantially the
form of EXHIBIT A.
"NOTICE OF CONVERSION/CONTINUATION" means a notice in
substantially the form of EXHIBIT B.
"OBLIGATIONS" means all advances, debts, liabilities,
obligations, covenants and duties arising under any Loan Document owing
by the Company to any Bank, the Agent, the Collateral Agent, or any
Indemnified Person, whether direct or indirect (including those
acquired by assignment), absolute or contingent, due or to become due,
now existing or hereafter arising.
"OFFSHORE RATE" means, for any Interest Period, with respect
to Offshore Rate Loans comprising part of the same Borrowing, the rate
of interest per annum (rounded upward to the next 1/16th of 1%)
determined by the Agent as follows:
Offshore Rate = LIBOR
--------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"EURODOLLAR RESERVE PERCENTAGE" means for any day for any
Interest Period the maximum reserve percentage (expressed as a
decimal, rounded upward to the next 1/100th of 1%) in effect
on such day (whether or not applicable to any Bank) under
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<PAGE> 25
regulations issued from time to time by the FRB for
determining the maximum reserve requirement (including any
emergency, supplemental or other marginal reserve requirement)
with respect to Eurocurrency funding (currently referred to as
"Eurocurrency liabilities"); and
"LIBOR" means the rate of interest per annum determined by the
Agent to be the rate of interest per annum at which dollar
deposits in the approximate amount of the amount of the Loan
to be made or continued as, or converted into, an Offshore
Rate Loan by the Agent and having a maturity comparable to
such Interest Period would be offered to major banks in the
London interbank market at their request at approximately
11:00 a.m. (London time) two Business Days prior to the
commencement of such Interest Period.
The Offshore Rate shall be adjusted automatically as to all Offshore
Rate Loans then outstanding as of the effective date of any change in
the Eurodollar Reserve Percentage.
"OFFSHORE RATE LOAN" means a Loan that bears interest based on
the Offshore Rate.
"ORGANIZATION DOCUMENTS" means, for any corporation, the
certificate or articles of incorporation, the bylaws, any certificate
of determination or instrument relating to the rights of preferred
shareholders of such corporation, any shareholder rights agreement, and
all applicable resolutions of the board of directors (or any committee
thereof) of such corporation.
"OTHER TAXES" means any present or future stamp, court or
documentary taxes or any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or from the
execution, delivery, performance, enforcement or registration of, or
otherwise with respect to, this Agreement or any other Loan Documents.
"PARTICIPANT" has the meaning specified in Section 11.08(d).
"PBGC" means the Pension Benefit Guaranty Corporation, or any
Governmental Authority succeeding to any of its principal functions
under ERISA.
"PENSION PLAN" means a pension plan (as defined in Section
3(2) of ERISA) subject to Title IV of ERISA which the Company sponsors,
maintains, or to which it makes, is making, or is obligated to make
contributions, or in the case of a multiple employer plan (as described
in Section 4064(a) of ERISA) has made contributions at any time during
the immediately preceding five (5) plan years.
"PERMITTED ACQUISITION THRESHOLD" means (a) in the event that
the Leverage Ratio as determined before giving effect to an Acquisition
is equal to or greater than 3.00:1.0, $2,500,000 and (b) in the event
that the Leverage Ratio as determined before giving effect to an
Acquisition is less than 3.00:1.0, $5,000,000.
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<PAGE> 26
"PERMITTED FOREIGN SUBSIDIARY INDEBTEDNESS" has the meaning
specified in Section 8.05(f).
"PERMITTED LIENS" has the meaning specified in Section 8.01.
"PERMITTED SELLER DEBT" has the meaning specified in Section
8.05(i).
"PERMITTED SWAP OBLIGATIONS" means all obligations (contingent
or otherwise) of the Company or any Subsidiary existing or arising
under Swap Contracts, provided that each of the following criteria is
satisfied: (a) such obligations are (or were) entered into by such
Person in the ordinary course of business for the purpose of directly
mitigating risks associated with liabilities, commitments or assets
held or reasonably anticipated by such Person, or changes in the value
of securities issued by such Person in conjunction with a securities
repurchase program not otherwise prohibited hereunder, and not for
purposes of speculation or taking a "market view;" (b) such Swap
Contracts do not contain (i) any provision ("walk-away" provision)
exonerating the non-defaulting party from its obligation to make
payments on outstanding transactions to the defaulting party, or (ii)
any provision creating or permitting the declaration of an event of
default, termination event or similar event upon the occurrence of an
Event of Default hereunder (other than an Event of Default under
Section 9.01(a)).
"PERSON" means an individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture or Governmental Authority.
"PLAN" means an employee benefit plan (as defined in Section
3(3) of ERISA) which the Company sponsors or maintains or to which the
Company makes, is making, or is obligated to make contributions and
includes any Pension Plan.
"PLEDGE AGREEMENTS" means, collectively, those certain Pledge
Agreement, duly executed and delivered by each of the Company and the
Guarantors pledging the stock of its Subsidiaries to the Collateral
Agent, for the benefit of itself and the Banks, as the same may be
amended, supplemented or otherwise modified from time to time.
"PLEDGED COLLATERAL" has the meaning specified in the relevant
Pledge Agreement.
"PROPERTY" means any interest in any kind of property or
asset, whether real, personal or mixed, and whether tangible or
intangible.
"PRO RATA SHARE" means, as to any Bank at any time, the
percentage equivalent (expressed as a decimal, rounded to the ninth
decimal place) at such time of such Bank's Commitment divided by the
combined Commitments of all Banks.
"REGISTRATION STATEMENT" means the Registration Statement on
Form S-1, Registration Number 333-25249 filed by the Company with the
SEC on May 23, 1997, together with the
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<PAGE> 27
amendments thereto filed on or prior to the Closing Date (copies of
which have been delivered to the Banks).
"REPORTABLE EVENT" means, any of the events set forth in
Section 4043(c) of ERISA or the regulations thereunder, other than any
such event for which the 30-day notice requirement under ERISA has been
waived in regulations issued by the PBGC.
"REQUIREMENT OF LAW" means, as to any Person, any law
(statutory or common), treaty, rule or regulation or determination of
an arbitrator or of a Governmental Authority, in each case applicable
to or binding upon the Person or any of its property or to which the
Person or any of its property is subject.
"RESPONSIBLE OFFICER" means the chief executive officer or the
president of the Company, or any other officer having substantially the
same authority and responsibility; or, with respect to compliance with
financial covenants, the chief financial officer or the treasurer of
the Company, or any other officer having substantially the same
authority and responsibility.
"REVOLVING LOAN" has the meaning specified in Section 2.01.
"REVOLVING TERMINATION DATE" means the earlier to occur of:
(a) June 27, 2000; and
(b) the date on which the Commitments terminate in
accordance with the provisions of this Agreement.
"SEC" means the Securities and Exchange Commission, or any
Governmental Authority succeeding to any of its principal functions.
"SECURITY AGREEMENTS" means, collectively, those certain
Security Agreement, duly executed and delivered by each of the Company
and the Guarantors in favor of the Collateral Agent, for the benefit of
itself and the Banks, as the same may be amended, supplemented or
otherwise modified from time to time.
"SENIOR LEVERAGE RATIO" means, with respect to any period, the
ratio of total consolidated Indebtedness (other than Subordinated Debt
and L/C Obligations relating to Non-Financial Letters of Credit) as of
the end of that period to EBITDA for that period.
"SOLVENT" means, when used with respect to a Person, that (a)
the fair saleable value of the assets of such Person is in excess of
the total amount of the present value of its liabilities (including for
purposes of this definition all liabilities (including loss reserves as
determined by such Person), whether or not reflected on a balance sheet
prepared in accordance with GAAP and whether direct or indirect, fixed
or contingent, secured or unsecured, disputed or undisputed), (b) such
Person is able to pay its debts or obligations in
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the ordinary course as they mature and (c) such Person does not have
unreasonably small capital to carry out its business as conducted and
as proposed to be conducted. "Solvency" shall have a correlative
meaning.
"SPOT RATE" for a currency means the rate generally quoted by
the Bank of America National Trust and Savings Association as the spot
rate for the purchase by the Bank of America National Trust and Savings
Association of such currency with another currency through its FX
Trading Office on the date two Business Days prior to the date as of
which the foreign exchange computation is made.
"STERLING" means the lawful currency of the United Kingdom.
"SUBORDINATED DEBT" means the Indebtedness permitted to be
incurred by the Company pursuant to SECTION 8.05(G).
"SUBSIDIARY" of a Person means any corporation , association,
partnership, limited liability company, joint venture or other business
entity of which more than 50% of the voting stock, membership interests
or other equity interests (in the case of Persons other than
corporations), is owned or controlled directly or indirectly by the
Person, or one or more of the Subsidiaries of the Person, or a
combination thereof. Unless the context otherwise clearly requires,
references herein to a "Subsidiary" refer to a Subsidiary of the
Company.
"SURETY INSTRUMENTS" means all letters of credit (including
standby and documentary), banker's acceptances, bank guaranties,
shipside bonds, surety bonds and similar instruments.
"SWAP CONTRACT" means any agreement, whether or not in
writing, relating to any transaction that is a rate swap, basis swap,
forward rate transaction, commodity swap, commodity option, equity or
equity index swap or option, bond, note or bill option, interest rate
option, forward foreign exchange transaction, cap, collar or floor
transaction, currency swap, cross-currency rate swap, swaption,
currency option or any other, similar transaction (including any option
to enter into any of the foregoing) or any combination of the
foregoing, and, unless the context otherwise clearly requires, any
master agreement relating to or governing any or all of the foregoing.
"SWAP TERMINATION VALUE" means, in respect of any one or more
Swap Contracts, after taking into account the effect of any legally
enforceable netting agreement relating to such Swap Contracts, (a) for
any date on or after the date such Swap Contracts have been closed out
and termination value(s) determined in accordance therewith, such
termination value(s), and (b) for any date prior to the date referenced
in clause (a) the amount(s) determined as the mark-to-market value(s)
for such Swap Contracts, as determined by the Company based upon one or
more mid-market or other readily available quotations provided by any
recognized dealer in such Swap Contracts (which may include any Bank).
"TAXES" means any and all present or future taxes, levies,
assessments, imposts, duties, deductions, fees, withholdings or similar
charges, and all liabilities with respect
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thereto, excluding, in the case of each Bank and the Agent,
respectively, taxes imposed on or measured by its net income by the
jurisdiction (or any political subdivision thereof) under the laws of
which such Bank or the Agent, as the case may be, is organized or
maintains a lending office.
"TRANSACTION" shall include (a) the IPO, (b) the Bioclear
Acquisition, (c) the Lanco Acquisition and (d) the refinancing of
certain Indebtedness of the Company and its Subsidiaries (including
Bioclear and Lanco) on the Closing Date.
"TYPE" means, with respect to any Borrowing, its nature as a
Base Rate Loan or an Offshore Rate Loan.
"UNFUNDED PENSION LIABILITY" means the excess of a Plan's
benefit liabilities under Section 4001(a)(16) of ERISA, over the
current value of that Plan's assets, determined in accordance with the
assumptions used for funding the Pension Plan pursuant to Section 412
of the Code for the applicable plan year.
"UNITED STATES" and "U.S." each means the United States of
America.
"WHOLLY-OWNED SUBSIDIARY" means any corporation, association,
partnership, limited liability company, joint venture or other business
entity in which (other than directors' qualifying shares required by
law) 100% of the equity interests of each class having ordinary voting
power, and 100% of the equity interests of every other class, in each
case, at the time as of which any determination is being made, is
owned, beneficially and of record, by the Company, or by one or more of
the other Wholly-Owned Subsidiaries, or both.
1.02 OTHER INTERPRETIVE PROVISIONS. (a) The meanings of defined
terms are equally applicable to the singular and plural forms of the defined
terms.
(b) The words "hereof", "herein", "hereunder" and similar
words refer to this Agreement as a whole and not to any particular provision of
this Agreement; and Section, Schedule and Exhibit references are to this
Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other
writings, however evidenced.
(ii) The term "including" is not limiting and means
"including without limitation."
(iii) In the computation of periods of time from a
specified date to a later specified date, the word "from" means "from
and including"; the words "to" and "until" each mean "to but
excluding", and the word "through" means "to and including."
(d) Unless otherwise expressly provided herein, (i) references
to agreements (including this Agreement) and other contractual instruments shall
be deemed to include all
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0198007.05
<PAGE> 30
subsequent amendments and other modifications thereto, but only to the extent
such amendments and other modifications are not prohibited by the terms of any
Loan Document, and (ii) references to any statute or regulation are to be
construed as including all statutory and regulatory provisions consolidating,
amending, replacing, supplementing or interpreting the statute or regulation.
(e) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(f) This Agreement and other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms. Unless otherwise expressly
provided, any reference to any action of the Agent or the Banks by way of
consent, approval or waiver shall be deemed modified by the phrase "in its/their
sole discretion."
(g) This Agreement and the other Loan Documents are the result
of negotiations among and have been reviewed by counsel to the Agent, the
Company and the other parties, and are the products of all parties. Accordingly,
they shall not be construed against the Banks or the Agent merely because of the
Agent's or Banks' involvement in their preparation.
1.03 ACCOUNTING PRINCIPLES. (a) Unless the context otherwise
clearly requires, all accounting terms not expressly defined herein shall be
construed, and all financial computations required under this Agreement shall be
made, in accordance with GAAP, consistently applied.
(b) References herein to "fiscal year" and "fiscal quarter"
refer to such fiscal periods of the Company.
ARTICLE II
THE CREDITS
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2.01 AMOUNTS AND TERMS OF COMMITMENT. Each Bank severally agrees, on
the terms and conditions set forth herein, to make loans to the Company (each
such loan, a "REVOLVING LOAN") from time to time on any Business Day during the
period from the Closing Date to the Revolving Termination Date, in an aggregate
amount not to exceed at any time outstanding the amount set forth on SCHEDULE
2.01 (such amount, as the same may be reduced under Section 2.05 or as a result
of one or more assignments under Section 10.08, the Bank's "COMMITMENT");
PROVIDED, HOWEVER, that, after giving effect to any Borrowing of Revolving Loans
(exclusive of Revolving Loans which are repaid with the proceeds of, and
simultaneously with the incurrence of, the respective incurrence of Revolving
Loans), the Effective Amount of all outstanding Revolving Loans and the
Effective Amount of all L/C Obligations, shall not at any time exceed the
combined Commitments; AND PROVIDED FURTHER, that the Effective Amount of the
Revolving Loans of any Bank plus the participation of such Bank in the Effective
Amount of all L/C Obligations shall not at any time exceed such Bank's
Commitment. Within the limits of each Bank's Commitment, and subject to the
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other terms and conditions hereof, the Company may borrow under this Section
2.01, prepay under Section 2.06 and reborrow under this Section 2.01.
2.02 LOAN ACCOUNTS.
(a) The Loans made by each Bank and the Letters of Credit
Issued by the Issuing Bank shall be evidenced by one or more accounts or records
maintained by such Bank or Issuing Bank, as the case may be, in the ordinary
course of business. The accounts or records maintained by the Agent, the Issuing
Bank and each Bank shall be prima facie evidence of the amount of the Loans made
by the Banks to the Company and the Letters of Credit Issued for the account of
the Company, and the interest and payments thereon. Any failure so to record or
any error in doing so shall not, however, limit or otherwise affect the
obligation of the Company hereunder to pay any amount owing with respect to the
Loans or any Letter of Credit.
(b) Upon the request of any Bank made through the Agent, the
Loans made by such Bank may be evidenced by one or more Notes, instead of or in
addition to loan accounts. Each such Bank shall record on the schedules annexed
to its Note(s) the date, amount and maturity of each Loan made by it and the
amount of each payment of principal made by the Company with respect thereto.
Each such Bank is irrevocably authorized by the Company to make such
recordations on its Note(s) and each Bank's record shall be deemed prima facie
correct; PROVIDED, HOWEVER, that the failure of a Bank to make, or an error in
making, a notation thereon with respect to any Loan shall not limit or otherwise
affect the obligations of the Company hereunder or under any such Note to such
Bank.
2.03 PROCEDURE FOR BORROWING.
(a) Each Borrowing (other than an L/C Borrowing) shall be made
upon the Company's irrevocable written notice delivered to the Agent in the form
of a Notice of Borrowing (which notice must be received by the Agent prior to
12:00 noon (Chicago time) (i) three Business Days prior to the requested
Borrowing Date, in the case of Offshore Rate Loans and (ii) on the date of the
requested Borrowing Date, in the case of Base Rate Loans, specifying:
(i) the amount of the Borrowing, which shall be in an
aggregate minimum amount of $100,000, or any multiple of $10,000 in
excess thereof, in the case of Base Rate Loans, and $500,000, or any
multiple of $100,000 in excess thereof, in the case of Offshore Rate
Loans;
(ii) the requested Borrowing Date, which shall be a Business
Day;
(iii) the Type of Loans comprising the Borrowing; and
(iv) the duration of the Interest Period applicable to such
Loans included in such notice. If the Notice of Borrowing fails to
specify the duration of the Interest Period for any Borrowing
comprised of Offshore Rate Loans, such Interest Period shall be three
months;
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<PAGE> 32
PROVIDED, HOWEVER, that with respect to the Borrowing to be made on the Closing
Date, the Notice of Borrowing shall be delivered to the Agent not later than
10:00 a.m. (Chicago time) on the Closing Date and such Borrowing will consist of
Base Rate Loans only; and PROVIDED FURTHER, all Borrowings during the first 90
days following the Closing Date (or such shorter period as determined by the
Agent) shall have the same Interest Period and shall be Base Rate Loans or
Offshore Rate Loans for Interest Periods no longer than one month.
(b) The Agent will promptly notify each Bank of its receipt of
any Notice of Borrowing and of the amount of such Bank's Pro Rata Share of that
Borrowing.
(c) Each Bank will make the amount of its Pro Rata Share of
each Borrowing available to the Agent for the account of the Company at the
Agent's Payment Office by 2:00 p.m. (Chicago time) on the Borrowing Date
requested by the Company in funds immediately available to the Agent. The
proceeds of all such Loans will then be made available to the Company by the
Agent at such office by crediting the account of the Company on the books of BAI
with the aggregate of the amounts made available to the Agent by the Banks and
in like funds as received by the Agent.
(d) After giving effect to any Borrowing, unless the Agent
shall otherwise consent, there may not be more than five different Interest
Periods in effect.
2.04 CONVERSION AND CONTINUATION ELECTIONS.
(a) The Company may, upon irrevocable written notice to the
Agent in accordance with Section 2.04(b):
(i) elect, as of any Business Day, in the case of
Base Rate Loans, or as of the last day of the applicable Interest
Period, in the case of Offshore Rate Loans, to convert any such Loans
(or any part thereof in an aggregate minimum amount of $100,000, or any
multiple of $10,000 in excess thereof, in the case of Base Rate Loans,
and $500,000, or any multiple of $100,000 in excess thereof, in the
case of Offshore Rate Loans) into Loans of any other Type; or
(ii) elect as of the last day of the applicable
Interest Period, to continue any Loans having Interest Periods expiring
on such day (or any part thereof in an amount not less than $500,000,
or that is in an integral multiple of $100,000 in excess thereof);
PROVIDED, that if at any time the aggregate amount of Offshore Rate Loans in
respect of any Borrowing is reduced, by payment, prepayment, or conversion of
part thereof to be less than $500,000, such Offshore Rate Loans shall
automatically convert into Base Rate Loans, and on and after such date the right
of the Company to continue such Loans as, and convert such Loans into, Offshore
Rate Loans shall terminate.
(b) The Company shall deliver a Notice of
Conversion/Continuation to be received by the Agent not later than 12:00 noon
(Chicago time) at least (i) three Business Days in
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advance of the Conversion/ Continuation Date, if the Loans are to be converted
into or continued as Offshore Rate Loans and (ii) on the date of the
Conversion/Continuation Date, if the Loans are to be converted into Base Rate
Loans, specifying:
(i) the proposed Conversion/Continuation Date;
(ii) the aggregate amount of Loans to be converted or
continued;
(iii) the Type of Loans resulting from the proposed
conversion or continuation; and
(iv) other than in the case of conversions into Base Rate
Loans, the duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable
to Offshore Rate Loans, the Company has failed to select a new Interest Period
to be applicable to such Offshore Rate Loans by the time specified in Section
2.04(b), or if any Default or Event of Default then exists, the Company shall be
deemed to have elected to convert such Offshore Rate Loans into Base Rate Loans
effective as of the expiration date of such Interest Period.
(d) The Agent will promptly notify each Bank of its receipt of
a Notice of Conversion/Continuation, or, if no timely notice is provided by the
Company, the Agent will promptly notify each Bank of the details of any
automatic conversion. All conversions and continuations shall be made ratably
according to the respective outstanding principal amounts of the Loans, with
respect to which the notice was given, held by each Bank.
(e) Unless the Majority Banks otherwise consent, during the
existence of a Default or Event of Default, the Company may not elect to have a
Loan converted into or continued as an Offshore Rate Loan.
(f) After giving effect to any conversion or continuation of
Loans, unless the Agent shall otherwise consent, there may not be more than five
different Interest Periods in effect.
2.05 VOLUNTARY TERMINATION OR REDUCTION OF COMMITMENTS. The Company may,
upon not less than three Business Days' prior notice to the Agent, terminate the
Commitments, or permanently reduce the Commitments by an aggregate minimum
amount of $500,000 or any multiple of $500,000 in excess thereof; UNLESS, after
giving effect thereto and to any prepayments of Revolving Loans made on the
effective date thereof, (a) the Effective Amount of all Revolving Loans and L/C
Obligations together would exceed the amount of the combined Commitments then in
effect, or (b) the Effective Amount of all L/C Obligations then outstanding
would exceed the L/C Commitment. Once reduced in accordance with this Section,
the Commitments may not be increased. Any reduction of the Commitments shall be
applied to each Bank according to its Pro Rata Share. If and to the extent
specified by the Company in the notice to the Agent, some or all of the
reduction in the combined Commitments shall be applied to reduce the L/C
Commitment. All accrued commitment
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and letter of credit fees to, but not including, the effective date of any
reduction or termination of the Commitments shall be paid on the effective date
of such reduction or termination.
2.06 OPTIONAL PREPAYMENTS. Subject to Section 4.04, the Company may, at
any time or from time to time, upon irrevocable notice to the Agent, prepay
Loans ratably among the Banks in whole or in part, in minimum amounts of
$100,000, or any multiple of $10,000 in excess thereof, in the case of Base Rate
Loans, and $500,000, or any multiple of $100,000 in excess thereof, in the case
of Offshore Rate Loans. Such notice of prepayment shall specify the date and
amount of such prepayment and the Type(s) of Loans to be prepaid. The Agent will
promptly notify each Bank of its receipt of any such notice, and of such Bank's
Pro Rata Share of such prepayment. If such notice is given by the Company, the
Company shall make such prepayment and the payment amount specified in such
notice shall be due and payable on the date specified therein, together with
accrued interest to each such date on the amount prepaid and any amounts
required pursuant to Section 4.04.
2.07 MANDATORY PREPAYMENTS OF LOANS; MANDATORY COMMITMENT REDUCTIONS.
(a) If on any date the Effective Amount of L/C Obligations
exceeds the L/C Commitment, the Company shall Cash Collateralize on such date
the outstanding Letters of Credit in an amount equal to the excess of the
maximum amount then available to be drawn under the Letters of Credit over the
Aggregate L/C Commitment. Subject to Section 4.04, if on any date after giving
effect to any Cash Collateralization made on such date pursuant to the preceding
sentence, the Effective Amount of all Revolving Loans then outstanding plus the
Effective Amount of all L/C Obligations exceeds the combined Commitments, the
Company shall immediately, and without notice or demand, prepay the outstanding
principal amount of the Revolving Loans and L/C Advances by an amount equal to
the applicable excess.
(b) ASSET DISPOSITIONS. If the Company or any of its
Subsidiaries shall at any time or from time to time make or agree to make a
Disposition then (i) the Company shall promptly notify the Agent of such
proposed Disposition (including the amount of the estimated Net Proceeds to be
received by the Company in respect thereof) and (ii) promptly upon receipt by
the Company or its Subsidiary of the Net Proceeds of such Disposition the
Company shall prepay Revolving Loans (without any reduction in the Commitments).
(c) EQUITY ISSUANCE. If the Company shall issue new common or
preferred equity after the Closing Date, the Company shall promptly notify the
Agent of the estimated Net Issuance Proceeds of such issuance to be received by
the Company in respect thereof. Promptly upon receipt by the Company of the Net
Issuance Proceeds of such issuance, the Company shall prepay Revolving Loans
(without any reduction in the Commitments) in an aggregate amount equal to 50%
the amount of such Net Issuance Proceeds to the extent, and only to the extent,
necessary for the Leverage Ratio to be equal to 3.00:1 after giving effect to
such prepayment.
(d) GENERAL. Any prepayments pursuant to this Section 2.07 shall
be applied first to any Base Rate Loans then outstanding and then to Offshore
Rate Loans with the shortest Interest Periods remaining. The Company shall pay,
together with each prepayment under this
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Section 2.07, accrued interest on the amount prepaid and any amounts required
pursuant to Section 3.04.
2.08 REPAYMENT. The Company shall repay to the Banks on the Revolving
Termination Date the aggregate principal amount of Revolving Loans outstanding
on such date.
2.09 INTEREST.
(a) Each Loan shall bear interest on the outstanding principal
amount thereof from the applicable Borrowing Date at a rate per annum equal to
the Offshore Rate or the Base Rate, as the case may be (and subject to the
Company's right to convert to other Types of Loans under Section 2.04), PLUS the
Applicable Margin.
(b) Interest on each Loan shall be paid in arrears on each
Interest Payment Date. Interest shall also be paid on the date of any prepayment
of Loans under Section 2.06 or 2.07 for the portion of the Loans so prepaid and
upon payment (including prepayment) in full thereof and, during the existence of
any Event of Default, interest shall be paid on demand of the Agent at the
request or with the consent of the Majority Banks.
(c) Notwithstanding Section 2.09(a), while any Event of Default
exists or after acceleration, the Company shall pay interest (after as well as
before entry of judgment thereon to the extent permitted by law) on the
principal amount of all outstanding Obligations, at a rate per annum which is
determined by adding 2% per annum to the Applicable Margin then in effect for
such Loans; PROVIDED, HOWEVER, that, on and after the expiration of any Interest
Period applicable to any Offshore Rate Loan outstanding on the date of
occurrence of such Event of Default or acceleration, the principal amount of
such Loan shall, during the continuation of such Event of Default or after
acceleration, bear interest at a rate per annum equal to the Base Rate plus the
Applicable Margin plus 2%.
(d) Anything herein to the contrary notwithstanding, the
obligations of the Company to any Bank hereunder shall be subject to the
limitation that payments of interest shall not be required for any period for
which interest is computed hereunder, to the extent (but only to the extent)
that contracting for or receiving such payment by such Bank would be contrary to
the provisions of any law applicable to such Bank limiting the highest rate of
interest that may be lawfully contracted for, charged or received by such Bank,
and in such event the Company shall pay such Bank interest at the highest rate
permitted by applicable law.
2.10 FEES. In addition to certain fees described in Section 3.08:
(a) AGENCY FEES. The Company shall pay the fees to the Agent for
the Agent's own account, as required by the letter agreement ("FEE LETTER")
between the Company and the Agent, dated June 27, 1997.
(b) COMMITMENT FEES. The Company shall pay to the Agent for
the account of each Bank a commitment fee ("Commitment Fee") on the average
daily unused portion of such Bank's
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Commitment, computed on a quarterly basis in arrears on the last Business Day of
each calendar quarter based upon the daily utilization for that quarter as
calculated by the Agent, equal to the Applicable Margin per annum. For purposes
of calculating utilization under this Section, the Commitments shall be deemed
used to the extent of the Effective Amount of Revolving Loans then outstanding,
plus the Effective Amount of L/C Obligations then outstanding. Such commitment
fee shall accrue from the Closing Date to the Revolving Termination Date and
shall be due and payable quarterly in arrears on the last Business Day of each
March, June, September and December through the Revolving Termination Date, with
the final payment to be made on the Revolving Termination Date; PROVIDED that,
in connection with any reduction or termination of Commitments under Section
2.05, the accrued commitment fee calculated for the period ending on such date
shall also be paid on the date of such reduction or termination, with the
following quarterly payment being calculated on the basis of the period from
such reduction or termination date to such quarterly payment date. The
commitment fees provided in this Section shall accrue at all times after the
above-mentioned commencement date, including at any time during which one or
more conditions in Article V are not met.
2.11 COMPUTATION OF FEES AND INTEREST.
(a) All computations of interest for Base Rate Loans when the
Base Rate is determined by BAI's "reference rate" shall be made on the basis of
a year of 365 or 366 days, as the case may be, and actual days elapsed. All
other computations of fees and interest shall be made on the basis of a 360-day
year and actual days elapsed (which results in more interest being paid than if
computed on the basis of a 365-day year). Interest and fees shall accrue during
each period during which interest or such fees are computed from the first day
thereof to the last day thereof.
(b) Each determination of an interest rate by the Agent shall be
conclusive and binding on the Company and the Banks in the absence of manifest
error. The Agent will, at the request of the Company or any Bank, deliver to the
Company or the Bank, as the case may be, a statement showing the quotations used
by the Agent in determining any interest rate and the resulting interest rate.
2.12 PAYMENTS BY THE COMPANY.
(a) All payments to be made by the Company shall be made without
set-off, recoupment or counterclaim. Except as otherwise expressly provided
herein, all payments by the Company shall be made to the Agent for the account
of the Banks at the Agent's Payment Office, and shall be made in dollars and in
immediately available funds, no later than 12:00 Noon (Chicago time) on the date
specified herein. The Agent will promptly distribute to each Bank its Pro Rata
Share (or other applicable share as expressly provided herein) of such payment
in like funds as received. Any payment received by the Agent later than 12:00
Noon (Chicago time) shall be deemed to have been received on the following
Business Day and any applicable interest or fee shall continue to accrue for the
day actually received.
(b) Subject to the provisions set forth in the definition of
"Interest Period" herein, whenever any payment is due on a day other than a
Business Day, such payment shall be made on
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the following Business Day, and such extension of time shall in such case be
included in the computation of interest or fees, as the case may be.
(c) Unless the Agent receives notice from the Company prior to
the date on which any payment is due to the Banks that the Company will not make
such payment in full as and when required, the Agent may assume that the Company
has made such payment in full to the Agent on such date in immediately available
funds and the Agent may (but shall not be so required), in reliance upon such
assumption, distribute to each Bank on such due date an amount equal to the
amount then due such Bank. If and to the extent the Company has not made such
payment in full to the Agent, each Bank shall repay to the Agent on demand such
amount distributed to such Bank, together with interest thereon at the Federal
Funds Rate for each day from the date such amount is distributed to such Bank
until the date repaid.
2.13 PAYMENTS BY THE BANKS TO THE AGENT.
(a) Unless the Agent receives notice from a Bank on or prior to
the Closing Date or, with respect to any Borrowing after the Closing Date, at
least one Business Day prior to the date of such Borrowing, that such Bank will
not make available as and when required hereunder to the Agent for the account
of the Company the amount of that Bank's Pro Rata Share of the Borrowing, the
Agent may assume that each Bank has made such amount available to the Agent in
immediately available funds on the Borrowing Date and the Agent may (but shall
not be so required), in reliance upon such assumption, make available to the
Company on such date a corresponding amount. If and to the extent any Bank shall
not have made its full amount available to the Agent in immediately available
funds and the Agent in such circumstances has made available to the Company such
amount, that Bank shall on the Business Day following such Borrowing Date make
such amount available to the Agent, together with interest at the Federal Funds
Rate for each day during such period. A notice of the Agent submitted to any
Bank with respect to amounts owing under this clause (a) shall be conclusive,
absent manifest error. If such amount is so made available, such payment to the
Agent shall constitute such Bank's Loan on the date of Borrowing for all
purposes of this Agreement. If such amount is not made available to the Agent on
the Business Day following the Borrowing Date, the Agent will notify the Company
of such failure to fund and, upon demand by the Agent, the Company shall pay
such amount to the Agent for the Agent's account, together with interest thereon
for each day elapsed since the date of such Borrowing, at a rate per annum equal
to the interest rate applicable at the time to the Loans comprising such
Borrowing.
(b) The failure of any Bank to make any Loan on any Borrowing
Date shall not relieve any other Bank of any obligation hereunder to make a Loan
on such Borrowing Date, but no Bank shall be responsible for the failure of any
other Bank to make the Loan to be made by such other Bank on any Borrowing Date.
2.14 SHARING OF PAYMENTS, ETC. If, other than as expressly provided
elsewhere herein, any Bank shall obtain on account of the Loans made by it any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) in excess of its ratable share (or other share
contemplated hereunder), such Bank shall immediately (a) notify the Agent of
such fact, and (b) purchase from the other Banks such participations in the
Loans made by them as shall be necessary
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to cause such purchasing Bank to share the excess payment pro rata with each of
them; PROVIDED, HOWEVER, that if all or any portion of such excess payment is
thereafter recovered from the purchasing Bank, such purchase shall to that
extent be rescinded and each other Bank shall repay to the purchasing Bank the
purchase price paid therefor, together with an amount equal to such paying
Bank's ratable share (according to the proportion of (i) the amount of such
paying Bank's required repayment to (ii) the total amount so recovered from the
purchasing Bank) of any interest or other amount paid or payable by the
purchasing Bank in respect of the total amount so recovered. The Company agrees
that any Bank so purchasing a participation from another Bank may, to the
fullest extent permitted by law, exercise all its rights of payment (including
the right of set-off, but subject to Section 11.10) with respect to such
participation as fully as if such Bank were the direct creditor of the Company
in the amount of such participation. The Agent will keep records (which shall be
conclusive and binding in the absence of manifest error) of participations
purchased under this Section and will in each case notify the Banks following
any such purchases or repayments.
ARTICLE III
THE LETTERS OF CREDIT
---------------------
3.01 THE LETTER OF CREDIT SUBFACILITY.
(a) On the terms and conditions set forth herein (i) the Issuing
Bank agrees, (A) from time to time on any Business Day during the period from
the Closing Date to the Revolving Termination Date to issue Letters of Credit
for the account of the Company, and to amend or renew Letters of Credit
previously issued by it, in accordance with Sections 3.02(c) and (d), and (B) to
honor drafts under the Letters of Credit; and (ii) the Banks severally agree to
participate in Letters of Credit Issued for the account of the Company;
PROVIDED, that the Issuing Bank shall not be obligated to Issue, and no Bank
shall be obligated to participate in, any Letter of Credit if as of the date of
Issuance of such Letter of Credit (the "ISSUANCE DATE") (1) the Effective Amount
of all L/C Obligations plus the Effective Amount of all Revolving Loans exceeds
the combined Commitments, (2) the participation of any Bank in the Effective
Amount of all L/C Obligations plus the Effective Amount of the Revolving Loans
of such Bank exceeds such Bank's Commitment or (3) the Effective Amount of L/C
Obligations exceeds the L/C Commitment. Within the foregoing limits, and subject
to the other terms and conditions hereof, the Company's ability to obtain
Letters of Credit shall be fully revolving, and, accordingly, the Company may,
during the foregoing period, obtain Letters of Credit to replace Letters of
Credit which have expired or which have been drawn upon and reimbursed.
(b) The Issuing Bank is under no obligation to Issue any Letter
of Credit if:
(i) any order, judgment or decree of any Governmental
Authority or arbitrator shall by its terms purport to enjoin or restrain
the Issuing Bank from Issuing such Letter of Credit, or any Requirement
of Law applicable to the Issuing Bank or any request or directive
(whether or not having the force of law) from any Governmental Authority
with jurisdiction over the Issuing Bank shall prohibit, or request that
the Issuing Bank refrain from, the
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Issuance of letters of credit generally or such Letter of Credit in
particular or shall impose upon the Issuing Bank with respect to such
Letter of Credit any restriction, reserve or capital requirement (for
which the Issuing Bank is not otherwise compensated hereunder) not in
effect on the Closing Date, or shall impose upon the Issuing Bank any
unreimbursed loss, cost or expense which was not applicable on the
Closing Date and which the Issuing Bank in good faith deems material to
it;
(ii) the Issuing Bank has received written notice from
any Bank, the Agent or the Company, on or prior to the Business Day
prior to the requested date of Issuance of such Letter of Credit, that
one or more of the applicable conditions contained in Article V is not
then satisfied;
(iii) the expiry date of any requested Letter of Credit
is after the Revolving Termination Date, unless the Company has Cash
Collateralized, in form and substance satisfactory to the Issuing Bank,
its L/C Obligations under such Letter of Credit on or prior to the date
of the Issuance of such Letter of Credit;
(iv) any requested Letter of Credit does not provide
for drafts, or is not otherwise in form and substance acceptable to the
Issuing Bank, or the Issuance of a Letter of Credit shall violate any
applicable policies of the Issuing Bank; or
(v) such Letter of Credit is in a face amount less than
$25,000, unless such lesser amount is approved by the Agent and the
Issuing Bank, or is to be denominated in a currency other than Dollars
or an Approved Alternate Currency
(c) All determinations of the stated amount of Letters of Credit
and of the principal amount of L/C Obligations, in each case to the extent
denominated in an Approved Alternate Currency, shall be made by the Agent by
converting same into Dollars at the Spot Rate. Each such determination by the
Agent shall be conclusive and binding on the Company and each Bank in the
absence of manifest error. The Agent will, at the request of the Company or any
Bank, deliver to such Person a statement showing the quotations used by the
Agent in making such determination.
3.02 ISSUANCE, AMENDMENT AND RENEWAL OF LETTERS OF CREDIT.
(a) Each Letter of Credit shall be issued upon the irrevocable
written request of the Company received by the Issuing Bank (with a copy sent by
the Company to the Agent) at least three days (or such shorter time as the
Issuing Bank may agree in a particular instance in its sole discretion) prior to
the proposed date of issuance. Each such request for issuance of a Letter of
Credit shall be by facsimile, confirmed immediately in an original writing, in
the form of an L/C Application, and shall specify in form and detail
satisfactory to the Issuing Bank: (i) the proposed date of issuance of the
Letter of Credit (which shall be a Business Day); (ii) the face amount of the
Letter of Credit; (iii) the expiry date of the Letter of Credit; (iv) the name
and address of the beneficiary thereof; (v) the documents to be presented by the
beneficiary of the Letter of Credit in case of any drawing thereunder; (vi) the
full text of any certificate to be presented by the beneficiary in case of any
drawing thereunder; and (vii) such other matters as the Issuing Bank may
require.
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(b) Prior to the Issuance of any Letter of Credit, the Issuing
Bank will confirm with the Agent (by telephone or in writing) that the Agent has
received a copy of the L/C Application or L/C Amendment Application from the
Company and, if not, the Issuing Bank will provide the Agent with a copy
thereof. Unless the Issuing Bank has received notice on or before the Business
Day the Issuing Bank is to issue a requested Letter of Credit from the Agent (A)
directing the Issuing Bank not to issue such Letter of Credit because such
issuance is not then permitted under Section 3.01(a) as a result of the
limitations set forth in clauses (1) through (3) thereof or Section 3.01(b)(ii);
or (B) that one or more conditions specified in Article V are not then
satisfied; then, subject to the terms and conditions hereof, the Issuing Bank
shall, with the written approval of the Agent, on the requested date, issue a
Letter of Credit for the account of the Company in accordance with the Issuing
Bank's usual and customary business practices.
(c) From time to time while a Letter of Credit is outstanding
and prior to the Revolving Termination Date, the Issuing Bank will, upon the
written request of the Company received by the Issuing Bank (with a copy sent by
the Company to the Agent) at least three days (or such shorter time as the
Issuing Bank may agree in a particular instance in its sole discretion) prior to
the proposed date of amendment, amend any Letter of Credit issued by it. Each
such request for amendment of a Letter of Credit shall be made by facsimile,
confirmed immediately in an original writing, made in the form of an L/C
Amendment Application and shall specify in form and detail satisfactory to the
Issuing Bank: (i) the Letter of Credit to be amended; (ii) the proposed date of
amendment of the Letter of Credit (which shall be a Business Day); (iii) the
nature of the proposed amendment; and (iv) such other matters as the Issuing
Bank may require. The Issuing Bank shall be under no obligation to amend any
Letter of Credit if: (A) the Issuing Bank would have no obligation at such time
to issue such Letter of Credit in its amended form under the terms of this
Agreement; or (B) the beneficiary of any such letter of Credit does not accept
the proposed amendment to the Letter of Credit. The Agent will promptly notify
the Banks of the receipt by it of any L/C Application or L/C Amendment
Application.
(d) The Issuing Bank and the Banks agree that, while a Letter of
Credit is outstanding and prior to the Revolving Termination Date, at the option
of the Company and upon the written request of the Company received by the
Issuing Bank (with a copy sent by the Company to the Agent) at least five days
(or such shorter time as the Issuing Bank may agree in a particular instance in
its sole discretion) prior to the proposed date of notification of renewal, the
Issuing Bank shall be entitled to authorize the automatic renewal of any Letter
of Credit issued by it. Each such request for renewal of a Letter of Credit
shall be made by facsimile, confirmed immediately in an original writing, in the
form of an L/C Amendment Application, and shall specify in form and detail
satisfactory to the Issuing Bank: (i) the Letter of Credit to be renewed; (ii)
the proposed date of notification of renewal of the Letter of Credit (which
shall be a Business Day); (iii) the revised expiry date of the Letter of Credit;
and (iv) such other matters as the Issuing Bank may require. The Issuing Bank
shall be under no obligation so to renew any Letter of Credit if: (A) the
Issuing Bank would have no obligation at such time to issue or amend such Letter
of Credit in its renewed form under the terms of this Agreement; or (B) the
beneficiary of any such Letter of Credit does not accept the proposed renewal of
the Letter of Credit. If any outstanding Letter of Credit shall provide that it
shall be automatically renewed unless the beneficiary thereof receives notice
from the Issuing Bank that such Letter of Credit shall not be renewed, and if at
the time of renewal the Issuing Bank
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would be entitled to authorize the automatic renewal of such Letter of Credit in
accordance with this clause (d) upon the request of the Company but the Issuing
Bank shall not have received any L/C Amendment Application from the Company with
respect to such renewal or other written direction by the Company with respect
thereto, the Issuing Bank shall nonetheless be permitted to allow such Letter of
Credit to renew, and the Company and the Banks hereby authorize such renewal,
and, accordingly, the Issuing Bank shall be deemed to have received an L/C
Amendment Application from the Company requesting such renewal.
(e) The Issuing Bank may, at its election (or as required by the
Agent at the direction of the Majority Banks), deliver any notices of
termination or other communications to any Letter of Credit beneficiary or
transferee, and take any other action as necessary or appropriate, at any time
and from time to time, in order to cause the expiry date of such Letter of
Credit to be a date not later than the Revolving Termination Date.
(f) This Agreement shall control in the event of any conflict
with any L/C-Related Document (other than any Letter of Credit).
(g) The Issuing Bank will also deliver to the Agent,
concurrently or promptly following its delivery of a Letter of Credit, or
amendment to or renewal of a Letter of Credit, to an advising bank or a
beneficiary, a true and complete copy of each such Letter of Credit or amendment
to or renewal of a Letter of Credit.
3.03 RISK PARTICIPATIONS, DRAWINGS AND REIMBURSEMENTS.
(a) Immediately upon the Issuance of each Letter of Credit, each
Bank shall be deemed to, and hereby irrevocably and unconditionally agrees to,
purchase from the Issuing Bank a participation in such Letter of Credit and each
drawing thereunder in an amount equal to the product of (i) the Pro Rata Share
of such Bank, times (ii) the maximum amount available to be drawn under such
Letter of Credit and the amount of such drawing, respectively. For purposes of
Section 2.01(b), each Issuance of a Letter of Credit shall be deemed to utilize
the Commitment of each Bank by an amount equal to the amount of such
participation.
(b) In the event of any request for a drawing under a Letter of
Credit by the beneficiary or transferee thereof, the Issuing Bank will promptly
notify the Company. The Company shall reimburse the Issuing Bank (by an L/C
Borrowing or otherwise) prior to 12:00 Noon (Chicago time), on each date that
any amount is paid by the Issuing Bank under any Letter of Credit (each such
date, an "HONOR DATE"), in an amount equal to the amount so paid by the Issuing
Bank (such amount, in the case of a Letter of Credit denominated in an Approved
Alternate Currency, being deemed to be the Dollar equivalent of the amount
drawn, determined on the basis of the Spot Rate for such Approved Alternate
Currency as of the approximate time of such drawing). In the event the Company
fails to reimburse the Issuing Bank for the full amount of any drawing under any
Letter of Credit by 12:00 Noon (Chicago time) on the Honor Date, the Issuing
Bank will promptly notify the Agent and the Agent will promptly notify each Bank
thereof, and the Company shall be deemed to have requested that Base Rate Loans
in an aggregate amount equal to the unreimbursed drawing be made by the Banks to
be disbursed on the Honor Date under such Letter of Credit,
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subject to the amount of the unutilized portion of the Revolving Commitment and
subject to the conditions set forth in Section 5.02. Any notice given by the
Issuing Bank or the Agent pursuant to this clause (b) may be oral if immediately
confirmed in writing (including by facsimile); PROVIDED that the lack of such an
immediate confirmation shall not affect the conclusiveness or binding effect of
such notice.
(c) Each Bank shall upon any notice pursuant to Section 3.03(b)
make available to the Agent for the account of the relevant Issuing Bank an
amount in Dollars and in immediately available funds equal to its Pro Rata Share
of the amount of the drawing, whereupon the participating Banks shall (subject
to Section 3.03(d)) each be deemed to have made a Revolving Loan consisting of a
Base Rate Loan to the Company in that amount. If any Bank so notified fails to
make available to the Agent for the account of the Issuing Bank the amount of
such Bank's Pro Rata Share of the amount of the drawing by no later than 2:00
p.m. (Chicago time) on the Honor Date, then interest shall accrue on such Bank's
obligation to make such payment, from the Honor Date to the date such Bank makes
such payment, at a rate per annum equal to the Federal Funds Rate in effect from
time to time during such period. The Agent will promptly give notice of the
occurrence of the Honor Date, but failure of the Agent to give any such notice
on the Honor Date or in sufficient time to enable any Bank to effect such
payment on such date shall not relieve such Bank from its obligations under this
Section 3.03.
(d) With respect to any unreimbursed drawing that is not
converted into Revolving Loans consisting of Base Rate Loans to the Company in
whole or in part, because of the Company's failure to satisfy the conditions set
forth in Section 5.02 or for any other reason, the Company shall be deemed to
have incurred from the Issuing Bank an L/C Borrowing in the amount of such
drawing (such amount, in the case of a Letter of Credit denominated in an
Approved Alternate Currency, being deemed to be the Dollar equivalent of the
amount drawn, determined on the basis of the Spot Rate for such Approved
Alternate Currency as of the approximate time of such drawing), which L/C
Borrowing shall be due and payable on demand (together with interest) and shall
bear interest at a rate per annum equal to the Base Rate plus the Applicable
Margin plus 2% per annum, and each Bank's payment to the Issuing Bank pursuant
to Section 3.03(c) shall be deemed payment in respect of its participation in
such L/C Borrowing and shall constitute an L/C Advance from such Bank in
satisfaction of its participation obligation under this Section 3.03.
(e) Each Bank's obligation in accordance with this Agreement to
make the Revolving Loans or L/C Advances, as contemplated by this Section 3.03,
as a result of a drawing under a Letter of Credit, shall be absolute and
unconditional and without recourse to the Issuing Bank and shall not be affected
by any circumstance, including (i) any set-off, counterclaim, recoupment,
defense or other right which such Bank may have against the Issuing Bank, the
Company or any other Person for any reason whatsoever; (ii) the occurrence or
continuance of a Default, an Event of Default or a Material Adverse Effect; or
(iii) any other circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing; PROVIDED, however, that each Bank's obligation
to make Revolving Loans under this Section 3.03 is subject to the conditions set
forth in Section 5.02.
3.04 REPAYMENT OF PARTICIPATIONS.
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(a) Upon (and only upon) receipt by the Agent for the account of
the Issuing Bank of immediately available funds from the Company (i) in
reimbursement of any payment made by the Issuing Bank under the Letter of Credit
with respect to which any Bank has paid the Agent for the account of the Issuing
Bank for such Bank's participation in the Letter of Credit pursuant to Section
3.03 or (ii) in payment of interest thereon, the Agent will pay to each Bank, in
the same funds as those received by the Agent for the account of the Issuing
Bank, the amount of such Bank's Pro Rata Share of such funds, and the Issuing
Bank shall receive the amount of the Pro Rata Share of such funds of any Bank
that did not so pay the Agent for the account of the Issuing Bank.
(b) If the Agent or the Issuing Bank is required at any time to
return to the Company, or to a trustee, receiver, liquidator, custodian, or any
official in any Insolvency Proceeding, any portion of the payments made by the
Company to the Agent for the account of the Issuing Bank pursuant to Section
3.04(a) in reimbursement of a payment made under the Letter of Credit or
interest or fee thereon, each Bank shall, on demand of the Agent, forthwith
return to the Agent or the Issuing Bank the amount of its Pro Rata Share of any
amounts so returned by the Agent or the Issuing Bank plus interest thereon from
the date such demand is made to the date such amounts are returned by such Bank
to the Agent or the Issuing Bank, at a rate per annum equal to the Federal Funds
Rate in effect from time to time.
3.05 ROLE OF THE ISSUING BANK.
(a) Each Bank and the Company agree that, in paying any drawing
under a Letter of Credit, the Issuing Bank shall not have any responsibility to
obtain any document (other than any sight draft and certificates expressly
required by the Letter of Credit) or to ascertain or inquire as to the validity
or accuracy of any such document or the authority of the Person executing or
delivering any such document.
(b) No Agent-Related Person nor any of the respective
correspondents, participants or assignees of the Issuing Bank shall be liable to
any Bank for: (i) any action taken or omitted in connection herewith at the
request or with the approval of the Banks (including the Majority Banks, as
applicable); (ii) any action taken or omitted in the absence of gross negligence
or willful misconduct; or (iii) the due execution, effectiveness, validity or
enforceability of any L/C-Related Document.
(c) The Company hereby assumes all risks of the acts or
omissions of any beneficiary or transferee with respect to its use of any Letter
of Credit; PROVIDED, however, that this assumption is not intended to, and shall
not, preclude the Company's pursuing such rights and remedies as it may have
against the beneficiary or transferee at law or under any other agreement. No
Agent-Related Person, nor any of the respective correspondents, participants or
assignees of the Issuing Bank, shall be liable or responsible for any of the
matters described in clauses (i) through (vii) of Section 3.06; PROVIDED,
however, anything in such clauses to the contrary notwithstanding, that the
Company may have a claim against the Issuing Bank, and the Issuing Bank may be
liable to the Company, to the extent, but only to the extent, of any direct, as
opposed to consequential or exemplary, damages suffered by the Company which the
Company proves were caused by the
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Issuing Bank's willful misconduct or gross negligence or the Issuing Bank's
willful failure to pay under any Letter of Credit after the presentation to it
by the beneficiary of a sight draft and certificate(s) strictly complying with
the terms and conditions of a Letter of Credit. In furtherance and not in
limitation of the foregoing: (i) the Issuing Bank may accept documents that
appear on their face to be in order, without responsibility for further
investigation, regardless of any notice or information to the contrary; and (ii)
the Issuing Bank shall not be responsible for the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign a
Letter of Credit or the rights or benefits thereunder or proceeds thereof, in
whole or in part, which may prove to be invalid or ineffective for any reason.
3.06 OBLIGATIONS ABSOLUTE. The obligations of the Company under this
Agreement and any L/C-Related Document to reimburse the Issuing Bank for a
drawing under a Letter of Credit, and to repay any L/C Borrowing and any drawing
under a Letter of Credit converted into Revolving Loans, shall be unconditional
and irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement and each such other L/C-Related Document under all circumstances,
including the following:
(i) any lack of validity or enforceability of this Agreement
or any L/C-Related Document;
(ii) any change in the time, manner or place of payment of,
or in any other term of, all or any of the obligations of the Company
in respect of any Letter of Credit or any other amendment or waiver of
or any consent to departure from all or any of the L/C-Related
Documents;
(iii) the existence of any claim, set-off, defense or other
right that the Company may have at any time against any beneficiary or
any transferee of any Letter of Credit (or any Person for whom any
such beneficiary or any such transferee may be acting), the Issuing
Bank or any other Person, whether in connection with this Agreement,
the transactions contemplated hereby or by the L/C-Related Documents
or any unrelated transaction;
(iv) any draft, demand, certificate or other document
presented under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect; or any loss or delay in the
transmission or otherwise of any document required in order to make a
drawing under any Letter of Credit;
(v) any payment by the Issuing Bank under any Letter of
Credit against presentation of a draft or certificate that does not
strictly comply with the terms of any Letter of Credit; or any payment
made by the Issuing Bank under any Letter of Credit to any Person
purporting to be a trustee in bankruptcy, debtor-in-possession,
assignee for the benefit of creditors, liquidator, receiver or other
representative of or successor to any beneficiary or any transferee of
any Letter of Credit, including any arising in connection with any
Insolvency Proceeding;
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(vi) any exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or consent to
departure from any other guarantee, for all or any of the obligations of
the Company in respect of any Letter of Credit; or
(vii) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing, including any other
circumstance that might otherwise constitute a defense available to, or
a discharge of, the Company or a guarantor.
3.07 CASH COLLATERAL PLEDGE. Upon (i) the request of the Agent or the
Majority Banks, (A) if the Issuing Bank has honored any full or partial drawing
request on any Letter of Credit and such drawing has resulted in an L/C
Borrowing hereunder, or (B) if, as of the Revolving Termination Date, any
Letters of Credit may for any reason remain outstanding and partially or wholly
undrawn, or (ii) the occurrence of the circumstances described in Section
2.07(a) requiring the Company to Cash Collateralize Letters of Credit, then, the
Company shall immediately Cash Collateralize the L/C Obligations in an amount
equal to such L/C Obligations.
3.08 LETTER OF CREDIT FEES.
(a) The Company shall pay to the Agent for the account of each
of the Banks a letter of credit fee with respect to the Letters of Credit equal
to the Applicable Margin per annum of the average daily maximum amount available
to be drawn of the outstanding Letters of Credit, computed on a quarterly basis
in arrears on the last Business Day of each March, June, September and December
based upon Letters of Credit outstanding for that quarter as calculated by the
Agent. Such letter of credit fees shall be due and payable quarterly in arrears
on the last Business Day of each calendar quarter during which Letters of Credit
are outstanding, commencing on the first such quarterly date to occur after the
Closing Date, through the Revolving Termination Date (or such later date upon
which the outstanding Letters of Credit shall expire), with the final payment to
be made on the Revolving Termination Date (or such later expiration date).
(b) The Company shall pay to the Issuing Bank a letter of credit
fronting fee for each Letter of Credit Issued by the Issuing Bank equal to .125%
per annum of the face amount (or increased face amount, as the case may be) of
such Letter of Credit. Such Letter of Credit fronting fee shall be due and
payable quarterly in arrears on the last Business Day of each calendar quarter
during which such Letter of Credit is outstanding, commencing on the first such
quarterly date to occur after such Letter of Credit is issued, through the
Revolving Termination Date (or such later date upon which such Letter of Credit
shall expire), with the final payment to be made on the Revolving Termination
Date (or such later expiration date).
(c) The Company shall pay to the Issuing Bank from time to time
on demand the normal issuance, presentation, amendment and other processing
fees, and other standard costs and charges, of the Issuing Bank relating to
letters of credit as from time to time in effect.
3.09 UNIFORM CUSTOMS AND PRACTICE. The Uniform Customs and Practice
for Documentary Credits as published by the International Chamber of Commerce
most recently at the time of
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issuance of any Letter of Credit shall (unless otherwise expressly provided in
the Letters of Credit) apply to the Letters of Credit.
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY
--------------------------------------
4.01 TAXES.
(a) Any and all payments by the Company to each Bank or the
Agent under this Agreement and any other Loan Document shall be made free and
clear of, and without deduction or withholding for, any Taxes. In addition, the
Company shall pay all Other Taxes.
(b) If the Company shall be required by law to deduct or
withhold any Taxes, Other Taxes or Further Taxes from or in respect of any sum
payable hereunder to any Bank or the Agent, then:
(i) the sum payable shall be increased as necessary so that,
after making all required deductions and withholdings (including
deductions and withholdings applicable to additional sums payable
under this Section), such Bank or the Agent, as the case may be,
receives and retains an amount equal to the sum it would have received
and retained had no such deductions or withholdings been made;
(ii) the Company shall make such deductions and
withholdings;
(iii) the Company shall pay the full amount deducted or
withheld to the relevant taxing authority or other authority in
accordance with applicable law; and
(iv) the Company shall also pay to each Bank or the Agent
for the account of such Bank, at the time interest is paid, Further
Taxes in the amount that the respective Bank specifies as necessary to
preserve the after-tax yield the Bank would have received if such
Taxes, Other Taxes or Further Taxes had not been imposed.
(c) The Company agrees to indemnify and hold harmless each Bank
and the Agent for the full amount of i) Taxes, ii) Other Taxes, and iii) Further
Taxes in the amount that the respective Bank specifies as necessary to preserve
the after-tax yield the Bank would have received if such Taxes, Other Taxes or
Further Taxes had not been imposed, and any liability (including penalties,
interest, additions to tax and expenses) arising therefrom or with respect
thereto, whether or not such Taxes, Other Taxes or Further Taxes were correctly
or legally asserted. Payment under this indemnification shall be made within 30
days after the date the Bank or the Agent makes written demand therefor.
(d) Within 30 days after the date of any payment pursuant to
this Section by the Company of Taxes, Other Taxes or Further Taxes, the Company
shall furnish to each Bank or the
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0198007.05
<PAGE> 47
Agent the original or a certified copy of a receipt evidencing payment thereof,
or other evidence of payment satisfactory to such Bank or the Agent.
(e) If the Company is required to pay any amount to any Bank or
the Agent pursuant to clauses (b) or (c) of this Section, then such Bank shall
use reasonable efforts (consistent with legal and regulatory restrictions) to
change the jurisdiction of its Lending Office so as to eliminate any such
additional payment by the Company which may thereafter accrue, if such change in
the sole judgment of such Bank is not otherwise disadvantageous to such Bank.
4.02 ILLEGALITY.
(a) If any Bank determines that the introduction of any
Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, has made it
unlawful, or that any central bank or other Governmental Authority has asserted
that it is unlawful, for any Bank or its applicable Lending Office to make
Offshore Rate Loans, then, on notice thereof by the Bank to the Company through
the Agent, any obligation of that Bank to make Offshore Rate Loans shall be
suspended until the Bank notifies the Agent and the Company that the
circumstances giving rise to such determination no longer exist.
(b) If a Bank determines that it is unlawful to maintain any
Offshore Rate Loan, the Company shall, upon its receipt of notice of such fact
and demand from such Bank (with a copy to the Agent), prepay in full such
Offshore Rate Loans of that Bank then outstanding, together with interest
accrued thereon and amounts required under Section 4.04, either on the last day
of the Interest Period thereof, if the Bank may lawfully continue to maintain
such Offshore Rate Loans to such day, or immediately, if the Bank may not
lawfully continue to maintain such Offshore Rate Loan. If the Company is
required to so prepay any Offshore Rate Loan, then concurrently with such
prepayment, the Company may borrow from the affected Bank, in the amount of such
repayment, a Base Rate Loan.
(c) If the obligation of any Bank to make or maintain Offshore
Rate Loans has been so terminated or suspended, the Company may elect, by giving
notice to the Bank through the Agent that all Loans which would otherwise be
made by the Bank as Offshore Rate Loans shall be instead Base Rate Loans.
(d) Before giving any notice to the Agent under this Section,
the affected Bank shall designate a different Lending Office with respect to its
Offshore Rate Loans if such designation will avoid the need for giving such
notice or making such demand and will not, in the judgment of the Bank, be
illegal or otherwise disadvantageous to the Bank.
4.03 INCREASED COSTS AND REDUCTION OF RETURN.
(a) If any Bank determines that, due to either (i) the
introduction of or any change in or in the interpretation of any law or
regulation or (ii) the compliance by that Bank with any guideline or request
from any central bank or other Governmental Authority (whether or not having the
force of law), there shall be any increase in the cost to such Bank of agreeing
to make or making,
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funding or maintaining any Offshore Rate Loans or participating in Letters of
Credit, or, in the case of the Issuing Bank, any increase in the cost to the
Issuing Bank of agreeing to issue, issuing or maintaining any Letter of Credit
or of agreeing to make or making, funding or maintaining any unpaid drawing
under any Letter of Credit, then the Company shall be liable for, and shall from
time to time, upon demand (with a copy of such demand to be sent to the Agent),
pay to the Agent for the account of such Bank, additional amounts as are
sufficient to compensate such Bank for such increased costs.
(b) If any Bank shall have determined that (i) the introduction
of any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy
Regulation, (iii) any change in the interpretation or administration of any
Capital Adequacy Regulation by any central bank or other Governmental Authority
charged with the interpretation or administration thereof, or (iv) compliance by
the Bank (or its Lending Office) or any corporation controlling the Bank with
any Capital Adequacy Regulation, affects or would affect the amount of capital
required or expected to be maintained by the Bank or any corporation controlling
the Bank and (taking into consideration such Bank's or such corporation's
policies with respect to capital adequacy and such Bank's desired return on
capital) determines that the amount of such capital is increased as a
consequence of its Commitment, loans, credits or obligations under this
Agreement, then, upon demand of such Bank to the Company through the Agent, the
Company shall pay to the Bank, from time to time as specified by the Bank,
additional amounts sufficient to compensate the Bank for such increase.
4.04 FUNDING LOSSES. The Company shall reimburse each Bank and hold each
Bank harmless from any loss or expense which the Bank may sustain or incur as a
consequence of:
(i) the failure of the Company to make on a timely basis any
payment of principal of any Offshore Rate Loan;
(ii) the failure of the Company to borrow, continue or
convert a Loan after the Company has given (or is deemed to have
given) a Notice of Borrowing or a Notice of Conversion/ Continuation;
(iii) the failure of the Company to make any prepayment in
accordance with any notice delivered under Section 2.06;
(iv) the prepayment (including pursuant to Section 2.07) or
other payment (including after acceleration thereof) of an Offshore
Rate Loan on a day that is not the last day of the relevant Interest
Period; or
(v) the automatic conversion under Section 2.04 of any
Offshore Rate Loan to a Base Rate Loan on a day that is not the last
day of the relevant Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Offshore Rate Loans or from fees payable
to terminate the deposits from which such funds were obtained. For purposes of
calculating amounts payable by the Company to the Banks under this Section and
under Section 4.03(a), each Offshore Rate Loan made by a Bank (and
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each related reserve, special deposit or similar requirement) shall be
conclusively deemed to have been funded at the LIBOR used in determining the
Offshore Rate for such Offshore Rate Loan by a matching deposit or other
borrowing in the interbank eurodollar market for a comparable amount and for a
comparable period, whether or not such Offshore Rate Loan is in fact so funded.
4.05 INABILITY TO DETERMINE RATES. If the Agent determines that for any
reason adequate and reasonable means do not exist for determining the Offshore
Rate for any requested Interest Period with respect to a proposed Offshore Rate
Loan, or that the Offshore Rate applicable pursuant to Section 2.09(a) for any
requested Interest Period with respect to a proposed Offshore Rate Loan does not
adequately and fairly reflect the cost to the Banks of funding such Loan, the
Agent will promptly so notify the Company and each Bank. Thereafter, the
obligation of the Banks to make or maintain Offshore Rate Loans hereunder shall
be suspended until the Agent revokes such notice in writing. Upon receipt of
such notice, the Company may revoke any Notice of Borrowing or Notice of
Conversion/Continuation then submitted by it. If the Company does not revoke
such Notice, the Banks shall make, convert or continue the Loans, as proposed by
the Company, in the amount specified in the applicable notice submitted by the
Company, but such Loans shall be made, converted or continued as Base Rate Loans
instead of Offshore Rate Loans.
4.06 RESERVES ON OFFSHORE RATE LOANS. The Company shall pay to each
Bank, as long as such Bank shall be required under regulations of the FRB to
maintain reserves with respect to liabilities or assets consisting of or
including Eurocurrency funds or deposits (currently known as "Eurocurrency
liabilities"), additional costs on the unpaid principal amount of each Offshore
Rate Loan equal to the actual costs of such reserves allocated to such Loan by
the Bank (as determined by the Bank in good faith, which determination shall be
conclusive), payable on each date on which interest is payable on such Loan,
provided the Company shall have received at least 15 days' prior written notice
(with a copy to the Agent) of such additional interest from the Bank. If a Bank
fails to give notice 15 days prior to the relevant Interest Payment Date, such
additional interest shall be payable 15 days from receipt of such notice.
4.07 CERTIFICATES OF BANKS. Any Bank claiming reimbursement or
compensation under this Article IV shall deliver to the Company (with a copy to
the Agent) a certificate setting forth in reasonable detail the amount payable
to the Bank hereunder and such certificate shall be conclusive and binding on
the Company in the absence of manifest error.
4.08 SURVIVAL. The agreements and obligations of the Company in this
Article IV shall survive the payment of all other Obligations.
ARTICLE V
CONDITIONS PRECEDENT
--------------------
5.01 CONDITIONS OF INITIAL CREDIT EXTENSIONS. The obligation of each
Bank to make its initial Credit Extension hereunder is subject to the condition
that the Agent shall have received on or
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before the Closing Date all of the following, in form and substance satisfactory
to the Agent and each Bank, and in sufficient copies for each Bank:
(a) CREDIT AGREEMENT AND NOTES. This Agreement and the Notes
executed by each party thereto;
(b) RESOLUTIONS; INCUMBENCY.
(i) Copies of the resolutions of the board of directors
of the Company and each Subsidiary that may become party to a Loan
Document authorizing the transactions contemplated hereby, certified as
of the Closing Date by the Secretary or an Assistant Secretary of such
Person; and
(ii) A certificate of the Secretary or Assistant
Secretary of the Company, and each Subsidiary that may become party to a
Loan Document certifying the names and true signatures of the officers
of the Company or such Subsidiary authorized to execute, deliver and
perform, as applicable, this Agreement, and all other Loan Documents to
be delivered by it hereunder;
(c) ORGANIZATION DOCUMENTS; GOOD STANDING. Each of the following
documents:
(i) the articles or certificate of incorporation, the
bylaws and board of directors resolutions of the Company and each
Subsidiary as in effect on the Closing Date, certified by the Secretary
or Assistant Secretary of the Company or such Subsidiary as of the
Closing Date; and
(ii) a good standing certificate for the Company and
each Subsidiary party to any Loan Document from the Secretary of State
(or similar, applicable Governmental Authority) of its state of
incorporation and each state where the Company or such Subsidiary is
qualified to do business as a foreign corporation as of a recent date,
together with a bring-down certificate by facsimile, dated the Closing
Date;
(d) LEGAL OPINIONS. An opinion addressed to the Agent, the
Collateral Agent and the Banks (i) of Benesch, Friedlander, Coplan & Aronoff,
P.L.L., counsel to the Company, substantially in the form of EXHIBIT D-1, (ii)
from Arnstein & Lehr, special Illinois counsel to the Company, substantially in
the form of EXHIBIT D-2, and (iii) from local counsel in such jurisdictions as
the Agent may request, such opinion to be in form and substance acceptable to
the Agent.
(e) PAYMENT OF FEES. Evidence of payment by the Company of all
accrued and unpaid fees, costs and expenses to the extent then due and payable
on the Closing Date, together with Attorney Costs of BAI to the extent invoiced
prior to or on the Closing Date, plus such additional amounts of Attorney Costs
as shall constitute BAI's reasonable estimate of Attorney Costs incurred or to
be incurred by it through the closing proceedings (provided that such estimate
shall not thereafter preclude final settling of accounts between the Company and
BAI); including any such costs, fees and expenses arising under or referenced in
Sections 2.10 and 10.04;
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(f) CERTIFICATE. A certificate signed by a Responsible Officer,
dated as of the Closing Date:
(i) stating that the representations and warranties
contained in Article VI are true and correct on and as of such date,
as though made on and as of such date;
(ii) stating that no Default or Event of Default exists or
would result from the Credit Extension; and
(iii) stating that there has occurred since September 30,
1996, no event or circumstance that has resulted or could reasonably
be expected to result in a Material Adverse Effect.
(g) COLLATERAL DOCUMENTS. The Collateral Documents, executed by
the Company and each Subsidiary party to such Collateral Document, in
appropriate form for recording, where necessary, together with:
(i) acknowledgment copies of all UCC-l financing
statements filed, registered or recorded to perfect the security
interests of the Collateral Agent for the benefit of the Banks, or other
evidence satisfactory to the Agent that there has been or will be filed,
registered or recorded all financing statements and other filings,
registrations and recordings necessary and advisable to perfect the
Liens of the Collateral Agent for the benefit of the Banks in accordance
with applicable law;
(ii) written advice relating to such Lien and judgment
searches as the Collateral Agent shall have requested of the Company,
and such termination statements or other documents as may be necessary
to confirm that the Collateral is subject to no other Liens in favor of
any Persons (other than Permitted Liens);
(iii) all certificates and instruments representing the
Pledged Collateral, stock transfer powers executed in blank as the
Collateral Agent or the Banks may specify;
(iv) evidence that all other actions necessary or, in
the opinion of the Collateral Agent or the Banks, desirable to perfect
and protect the first priority security interest created by the
Collateral Documents have been taken;
(v) funds sufficient to pay any filing or recording
tax or fee in connection with any and all UCC-1 financing statements;
(vi) evidence that the Collateral Agent has been named
as loss payee under all policies of casualty insurance, and as
additional insured under all policies of liability insurance;
(vii) such consents, estoppels, subordination
agreements and other documents and instruments executed by landlords,
tenants and other Persons party to material contracts
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relating to any Collateral as to which the Agent shall be granted a
Lien for the benefit of the Banks, as requested by the Agent or any
Bank; and
(viii) evidence that all other actions necessary or, in
the opinion of the Collateral Agent or the Banks, desirable to perfect
and protect the first priority Lien created by the Collateral Documents,
and to enhance the Collateral Agent's ability to preserve and protect
its interests in and access to the Collateral, have been taken;
(h) IPO. The Company shall have received in available funds at
least $40,000,000 in net cash proceeds from the initial public issuance of its
common stock (the "IPO") effected as contemplated by the Registration Statement.
(i) BIOCLEAR ACQUISITION. The Company shall have delivered to
the Agent all Bioclear Acquisition Documents, certified as true and correct by a
Responsible Officer, all of which Bioclear Acquisition Documents shall be in
form and substance reasonably satisfactory to the Bank's and each of the
conditions precedent to the Company's obligations to consummate the Bioclear
Acquisition shall have been satisfied (without any waiver thereto not agreed to
by the Banks) to the reasonable satisfaction of the Agent. The Bioclear
Acquisition shall have been consummated in substantial compliance with the terms
of the Bioclear Acquisition Documents and all applicable laws.
(j) LANCO ACQUISITION. The Company shall have delivered to the
Agent all Lanco Acquisition Documents, certified as true and correct by a
Responsible Officer, all of which Lanco Acquisition Documents shall be in form
and substance reasonably satisfactory to the Bank's and each of the conditions
precedent to the Company's obligations to consummate the Lanco Acquisition shall
have been satisfied (without any waiver thereto not agreed to by the Banks) to
the reasonable satisfaction of the Agent. The Lanco Acquisition shall have been
consummated in substantial compliance with the terms of the Lanco Acquisition
Documents and all applicable laws.
(k) BANK PAYOFF LETTER. A bank payoff letter, or other evidence
of satisfaction, in form and substance acceptable to the Agent from Bank of
America Illinois, to the effect that the total amount due under the Company's
agreements with such lender howsoever due and owing (whether as principal,
interest or premium) shall be satisfied (and such agreements terminated) upon
payment of an amount certain, together with such lien releases and other
documents as the Agent shall require.
(l) PRO FORMA BALANCE SHEET. A pro forma consolidated balance
sheet of the Company and its Subsidiaries, after giving effect to the
Transaction and the related financing thereof, together with a Compliance
Certificate executed by a Responsible Officer, demonstrating compliance by the
Company with SECTIONS 8.15, 8.16, 8.17, 8.18, 8.19 and 8.20 as of March 31, 1997
(after giving effect to the Transaction and the related financing thereof),
which pro forma balance sheet and Compliance Certificate shall be in form and
substance acceptable to the Agent.
(m) SOLVENCY CERTIFICATE. A written solvency certificate from
the chief financial officer of the Company in form and content satisfactory to
the Banks, dated the initial Borrowing
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Date, with respect to the value, Solvency and other factual information of, or
relating to, as the case may be, Company, after giving effect to the Initial
Borrowing.
(n) APPLICABLE MARGIN CERTIFICATE. The Company shall have
delivered to the Agent a certificate, executed by a Responsible Officer,
delineating the Applicable Margin after giving pro forma effect to the Loans to
be incurred on the Closing Date and the consummation of the Transaction, the
form and substance of such certificate to be satisfactory to the Agent.
(o) OTHER DOCUMENTS. Such other approvals, opinions, documents
or materials as the Agent or any Bank may request.
5.02 CONDITIONS TO ALL CREDIT EXTENSIONS. The obligation of each Bank to
make any Loan to be made by it (including its initial Loan) or to continue or
convert any Loan under Section 2.04 and the obligation of the Issuing Bank to
Issue any Letter of Credit (including the initial Letter of Credit) is subject
to the satisfaction of the following conditions precedent on the relevant
Borrowing Date or Issuance Date:
(a) NOTICE, APPLICATION. The Agent shall have received (with, in
the case of the initial Loans only, a copy for each Bank) a Notice of Borrowing
or, in the case of any Issuance of any Letter of Credit, the Issuing Bank and
the Agent shall have received an L/C Application or L/C Amendment Application,
as required under Section 3.02;
(b) CONTINUATION OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties in Article VI shall be true and correct on and as
of such Borrowing Date or Issuance Date with the same effect as if made on and
as of such Borrowing Date or Issuance Date (except to the extent such
representations and warranties expressly refer to an earlier date, in which case
they shall be true and correct as of such earlier date); and
(c) NO EXISTING DEFAULT. No Default or Event of Default shall
exist or shall result from such Borrowing or continuation or conversion or
Issuance.
Each Notice of Borrowing, L/C Application or L/C Amendment Application submitted
by the Company hereunder shall constitute a representation and warranty by the
Company hereunder, as of the date of each such notice and as of each Borrowing
Date or Issuance Date, as applicable, that the conditions in this Section 5.02
are satisfied.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
------------------------------
The Company represents and warrants to the Agent and each Bank that:
6.01 CORPORATE EXISTENCE AND POWER. The Company and each of its
Subsidiaries:
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(a) is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation;
(b) has the power and authority and all governmental licenses,
authorizations, consents and approvals to own its assets, carry on its
business and to execute, deliver, and perform its obligations under the
Loan Documents;
(c) is duly qualified as a foreign corporation and is licensed
and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification or license; and
(d) is in compliance with all Requirements of Law; except, in
each case referred to in clause (c) or clause (d), to the extent that
the failure to do so could not reasonably be expected to have a Material
Adverse Effect.
6.02 CORPORATE AUTHORIZATION; NO CONTRAVENTION. The execution, delivery
and performance by the Company and its Subsidiaries of this Agreement and each
other Loan Document to which such Person is party, have been duly authorized by
all necessary corporate action, and do not and will not:
(a) contravene the terms of any of such Person's Organization
Documents;
(b) conflict with or result in any breach or contravention of,
or the creation of any Lien under, any document evidencing any
Contractual Obligation to which such Person is a party or any order,
injunction, writ or decree of any Governmental Authority to which such
Person or its property is subject; or
(c) violate any Requirement of Law.
6.03 GOVERNMENTAL AUTHORIZATION. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, the Company or
any of its Subsidiaries of the Agreement or any other Loan Document.
6.04 BINDING EFFECT. This Agreement and each other Loan Document to
which the Company or any of its Subsidiaries is a party constitute the legal,
valid and binding obligations of the Company and any of its Subsidiaries to the
extent it is a party thereto, enforceable against such Person in accordance with
their respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability.
6.05 LITIGATION. There are no actions, suits, proceedings, claims or
disputes pending, or to the best knowledge of the Company, threatened or
contemplated, at law, in equity, in arbitration or before any Governmental
Authority, against the Company, or its Subsidiaries or any of their respective
properties which: (a) purport to affect or pertain to this Agreement or any
other Loan
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Document, or any of the transactions contemplated hereby or thereby; or (b) if
determined adversely to the Company or its Subsidiaries, would reasonably be
expected to have a Material Adverse Effect. No injunction, writ, temporary
restraining order or any order of any nature has been issued by any court or
other Governmental Authority purporting to enjoin or restrain the execution,
delivery or performance of this Agreement or any other Loan Document, or
directing that the transactions provided for herein or therein not be
consummated as herein or therein provided.
6.06 NO DEFAULT. No Default or Event of Default exists or would result
from the incurring of any Obligations by the Company. As of the Closing Date,
neither the Company nor any Subsidiary is in default under or with respect to
any Contractual Obligation in any respect which, individually or together with
all such defaults, could reasonably be expected to have a Material Adverse
Effect, or that would, if such default had occurred after the Closing Date,
create an Event of Default under Section 9.01(e).
6.07 ERISA COMPLIANCE.
(a) Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code and other federal or state law. Each
Plan which is intended to qualify under Section 401(a) of the Code has received
a favorable determination letter from the IRS and to the best knowledge of the
Company, nothing has occurred which would cause the loss of such qualification.
The Company and each ERISA Affiliate has made all required contributions to any
Plan subject to Section 412 of the Code, and no application for a funding waiver
or an extension of any amortization period pursuant to Section 412 of the Code
has been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of Company,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan which has resulted or could reasonably be expected to
result in a Material Adverse Effect. There has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to any Plan which
has resulted or could reasonably be expected to result in a Material Adverse
Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither
the Company nor any ERISA Affiliate has incurred, or reasonably expects to
incur, any liability under Title IV of ERISA with respect to any Pension Plan
(other than premiums due and not delinquent under Section 4007 of ERISA); (iv)
neither the Company nor any ERISA Affiliate has incurred, or reasonably expects
to incur, any liability (and no event has occurred which, with the giving of
notice under Section 4219 of ERISA, would result in such liability) under
Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v)
neither the Company nor any ERISA Affiliate has engaged in a transaction that
could be subject to Section 4069 or 4212(c) of ERISA.
6.08 USE OF PROCEEDS; MARGIN REGULATIONS. The proceeds of the Loans are
to be used solely for the purposes set forth in and permitted by Section 7.12
and Section 8.07. Neither the Company nor any Subsidiary is generally engaged in
the business of purchasing or selling Margin Stock or extending credit for the
purpose of purchasing or carrying Margin Stock.
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6.09 TITLE TO PROPERTIES. The Company and each Subsidiary have good
record and marketable title in fee simple to, or valid leasehold interests in,
all real property necessary or used in the ordinary conduct of their respective
businesses, except for such defects in title as could not, individually or in
the aggregate, have a Material Adverse Effect. As of the Closing Date, the
property of the Company and its Subsidiaries is subject to no Liens, other than
Permitted Liens.
6.10 TAXES. The Company and its Subsidiaries have filed all Federal and
other material tax returns and reports required to be filed, and have paid all
Federal and other material taxes, assessments, fees and other governmental
charges levied or imposed upon them or their properties, income or assets
otherwise due and payable, except those which are being contested in good faith
by appropriate proceedings and for which adequate reserves have been provided in
accordance with GAAP. There is no proposed tax assessment against the Company or
any Subsidiary that would, if made, have a Material Adverse Effect.
6.11 FINANCIAL CONDITION. (a) The (x) audited consolidated financial
statements of the Company and its Subsidiaries dated September 30, 1996 and (y)
the unaudited consolidated financial statements of the Company and its
Subsidiaries dated March 31, 1997, in each case including the related
consolidated statements of income or operations, shareholders' equity and cash
flows for the period ended on that date:
(i) were prepared in accordance with GAAP consistently
applied throughout the period covered thereby, except as otherwise
expressly noted therein (subject to ordinary, good faith year end audit
adjustments);
(ii) fairly present the financial condition of the
Company and its Subsidiaries as of the date thereof and results of
operations for the period covered thereby; and
(iii) except as specifically disclosed in SCHEDULE
6.11, show all material indebtedness and other liabilities, direct or
contingent, of the Company and its consolidated Subsidiaries as of the
date thereof, including liabilities for taxes, material commitments and
Contingent Obligations.
(b) Since September 30, 1996, there has been no Material Adverse
Effect.
6.12 ENVIRONMENTAL MATTERS.
(a) The on-going operations of the Company and each of its
Subsidiaries comply in all respects with all Environmental Laws, except such
non-compliance which would not (if enforced in accordance with applicable law)
result in liability in excess of $250,000 in the aggregate.
(b) The Company and each of its Subsidiaries have obtained all
licenses, permits, authorizations and registrations required under any
Environmental Law ("Environmental Permits") and necessary for their respective
ordinary course operations, all such Environmental Permits are in good standing,
and the Company and each of its Subsidiaries are in compliance with all material
terms and conditions of such Environmental Permits.
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(c) None of the Company, any of its Subsidiaries or any of their
respective present Property or operations, is subject to any outstanding written
order from or agreement with any Governmental Authority, nor subject to any
judicial or docketed administrative proceeding, respecting any Environmental
Law, Environmental Claim or Hazardous Material.
(d) There are no Hazardous Materials or other conditions or
circumstances existing with respect to any Property, or arising from operations
prior to the Closing Date, of the Company or any of its Subsidiaries that would
reasonably be expected to give rise to Environmental Claims with a potential
liability of the Company and its Subsidiaries in excess of $250,000 in the
aggregate for any such condition, circumstance or Property. In addition, (i)
neither the Company nor any of its Subsidiaries has any underground storage
tanks (x) that are not properly registered or permitted under applicable
Environmental Laws, or (y) that are leaking or disposing of Hazardous Materials
off-site, and (ii) the Company and its Subsidiaries have notified all of their
employees of the existence, if any, of any health hazard arising from the
conditions of their employment and have met all notification requirements under
Title III of CERCLA and all other Environmental Laws.
6.13 COLLATERAL DOCUMENTS.
(a) The provisions of each of the Collateral Documents are
effective to create in favor of the Collateral Agent for the benefit of the
Banks, a legal, valid and enforceable first priority security interest in all
right, title and interest of the Company and its Subsidiaries in the collateral
described therein; and financing statements have been delivered to the
Collateral Agent on the Closing Date to be filed in the offices in all of the
jurisdictions listed in the schedule to the Security Agreement, and each
Intellectual Property Assignment has been delivered to the Collateral Agent on
the Closing Date to be filed in the U.S. Patent and Trademark Office and the
U.S. Copyright Office.
(b) The provisions of each Pledge Agreement are effective to
create, in favor of the Collateral Agent for the benefit of the Banks, a legal,
valid and enforceable security interest in all of the collateral described
therein; and the Pledged Collateral was delivered to the Collateral Agent or its
nominee in accordance with the terms thereof. The Lien of each Pledge Agreement
constitutes a perfected, first priority security interest in all right, title
and interest of the Company or such Subsidiary, as the case may be, in the
Collateral described therein, prior and superior to all other Liens and
interests.
(c) All representations and warranties of the Company and any of
its Subsidiaries party thereto contained in the Collateral Documents are true
and correct.
6.14 REGULATED ENTITIES. None of the Company nor any Subsidiary, is an
"Investment Company" within the meaning of the Investment Company Act of 1940.
The Company is not subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, any
state public utilities code, or any other Federal or state statute or regulation
limiting its ability to incur Indebtedness.
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6.15 NO BURDENSOME RESTRICTIONS. Neither the Company nor any Subsidiary
is a party to or bound by any Contractual Obligation, or subject to any
restriction in any Organization Document, or any Requirement of Law, which could
reasonably be expected to have a Material Adverse Effect.
6.16 SOLVENCY. The Company and each of its Subsidiaries are Solvent.
6.17 LABOR RELATIONS. There are no strikes, lockouts or other labor
disputes against the Company or any of its Subsidiaries, or, to the best of the
Company's knowledge, threatened against or affecting the Company or any of its
Subsidiaries, and no significant unfair labor practice complaint is pending
against the Company or any of its Subsidiaries or, to the best knowledge of the
Company, threatened against any of them before any Governmental Authority.
6.18 COPYRIGHTS, PATENTS, TRADEMARKS AND LICENSES, ETC. The Company or
its Subsidiaries own or are licensed or otherwise have the right to use all of
the patents, trademarks, service marks, trade names, copyrights, contractual
franchises, authorizations and other rights that are reasonably necessary for
the operation of their respective businesses, without conflict with the rights
of any other Person. To the best knowledge of the Company, no slogan or other
advertising device, product, process, method, substance, part or other material
now employed, or now contemplated to be employed, by the Company or any
Subsidiary infringes upon any rights held by any other Person. No claim or
litigation regarding any of the foregoing is pending or threatened, and no
patent, invention, device, application, principle or any statute, law, rule,
regulation, standard or code is pending or, to the knowledge of the Company,
proposed, which, in either case, could reasonably be expected to have a Material
Adverse Effect.
6.19 SUBSIDIARIES. As of the Closing Date and after giving effect to the
Transaction, the Company has no Subsidiaries other than those specifically
disclosed in part (a) of SCHEDULE 6.19 hereto and has no equity investments in
any other corporation or entity other than those specifically disclosed in part
(b) of SCHEDULE 6.19.
6.20 BROKER'S; TRANSACTION FEES. Neither the Company nor any of its
Subsidiaries has any obligation to any Person in respect of any finder's,
broker's or investment banker's fee in connection with the Transaction except as
described in the Registration Statement in connection with the IPO.
6.21 INSURANCE. The properties of the Company and its Subsidiaries are
insured with financially sound and reputable insurance companies not Affiliates
of the Company, in such amounts, with such deductibles and covering such risks
as are customarily carried by companies engaged in similar businesses and owning
similar properties in localities where the Company or such Subsidiary operates.
6.22 SWAP OBLIGATIONS. Neither the Company nor any of its Subsidiaries
has incurred any outstanding obligations under any Swap Contracts, other than
Permitted Swap Obligations. The Company has undertaken its own independent
assessment of its consolidated assets, liabilities and commitments and has
considered appropriate means of mitigating and managing risks associated with
such matters and has not relied on any swap counterparty or any Affiliate of any
swap counterparty in determining whether to enter into any Swap Contract.
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6.23 FULL DISCLOSURE. None of the representations or warranties made by
the Company or any Subsidiary in the Loan Documents as of the date such
representations and warranties are made or deemed made, and none of the
statements contained in any exhibit, report, statement or certificate furnished
by or on behalf of the Company or any Subsidiary in connection with the Loan
Documents (including the offering and disclosure materials delivered by or on
behalf of the Company to the Banks prior to the Closing Date), contains any
untrue statement of a material fact or omits any material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they are made, not misleading as of the time when made
or delivered.
6.24 SUBORDINATION PROVISIONS. The subordination provisions contained in
all notes, debentures and other instruments entered into or issued in respect of
Subordinated Debt and Permitted Seller Debt are enforceable against the issuer
of the respective security and the holders thereof, and the Loans and all other
Obligations and all Permitted Foreign Subsidiary Indebtedness entitled to the
benefits of any Loan Document and any related guaranty are within the
definitions of "Senior Indebtedness", or other comparable definition, included
in such provisions.
ARTICLE VII
AFFIRMATIVE COVENANTS
---------------------
So long as any Bank shall have any Commitment hereunder, or any Loan or
other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit
shall remain outstanding, unless the Majority Banks waive compliance in writing:
7.01 FINANCIAL STATEMENTS. The Company shall deliver to the Agent,
in form and detail satisfactory to the Agent and the Majority Banks, with
sufficient copies for the Agent and each Bank:
(a) as soon as available, but not later than 90 days after the
end of each fiscal year (commencing with the fiscal year ended September
30, 1997), a copy of the audited consolidated and consolidating balance
sheet of the Company and its Subsidiaries as at the end of such year and
the related consolidated and consolidating statements of income or
operations, shareholders' equity and cash flows for such year, setting
forth in each case in comparative form the figures for the previous
fiscal year, and accompanied by the opinion of Ernst & Young LLP or
another nationally-recognized independent public accounting firm
("INDEPENDENT AUDITOR") which report shall state that such consolidated
financial statements present fairly the financial position for the
periods indicated in conformity with GAAP applied on a basis consistent
with prior years. Such opinion shall not be qualified or limited because
of a restricted or limited examination by the Independent Auditor of any
material portion of the Company's or any Subsidiary's records; and
(b) as soon as available, but not later than 45 days after the
end of each of the first three fiscal quarters of each fiscal year
(commencing with the fiscal quarter ended June 30,
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1997), a copy of the unaudited consolidated and consolidating balance
sheet of the Company and its Subsidiaries as of the end of such quarter
and the related consolidated and consolidating statements of income,
shareholders' equity and cash flows for the period commencing on the
first day and ending on the last day of such quarter, and certified by a
Responsible Officer as fairly presenting, in accordance with GAAP
(subject to ordinary, good faith year-end audit adjustments), the
financial position and the results of operations of the Company and the
Subsidiaries.
7.02 CERTIFICATES; OTHER INFORMATION. The Company shall furnish to the
Agent, with sufficient copies for each Bank:
(a) concurrently with the delivery of the financial statements
referred to in SECTION 7.01(a), a certificate of the Independent Auditor
stating that in making the examination necessary therefor no knowledge
was obtained of any Default or Event of Default, except as specified in
such certificate;
(b) concurrently with the delivery of the financial statements
referred to in SECTIONS 7.01(a) and (b), a Compliance Certificate
executed by a Responsible Officer;
(c) promptly, copies of all financial statements and reports
that the Company sends to its shareholders, and copies of all financial
statements and regular, periodical or special reports (including Forms
10K, 10Q and 8K) that the Company or any Subsidiary may make to, or file
with, the SEC;
(d) as soon as available, but in any event not later than the
30th day prior to the end of each fiscal year, a copy of the plan and
forecast (including a projected consolidated and consolidating balance
sheet, income statement and cash flow statement) of the Company and its
Subsidiaries for the next fiscal year;
(e) within 30 days after each anniversary of the Closing Date,
new insurance certificates satisfying the requirements of SECTION
5.01(g)(vi); and
(f) promptly, such additional information regarding the
business, financial or corporate affairs of the Company or any
Subsidiary as the Agent, at the request of any Bank, may from time to
time request.
7.03 NOTICES. The Company shall promptly notify the Agent and each
Bank:
(a) of the occurrence of any Default or Event of Default;
(b) of any matter that has resulted or may reasonably be
expected to result in a Material Adverse Effect, including (i) breach or
non-performance of, or any default under, a Contractual Obligation of
the Company or any Subsidiary; (ii) any dispute, litigation,
investigation, proceeding or suspension between the Company or any
Subsidiary and any Governmental Authority; or (iii) the commencement of,
or any material development in, any
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litigation or proceeding affecting the Company or any Subsidiary;
including pursuant to any applicable Environmental Laws;
(c) of the occurrence of any of the following events affecting
the Company or any ERISA Affiliate (but in no event more than 10 days
after such event), and deliver to the Agent and each Bank a copy of any
notice with respect to such event that is filed with a Governmental
Authority and any notice delivered by a Governmental Authority to the
Company or any ERISA Affiliate with respect to such event:
(i) an ERISA Event;
(ii) a material increase in the Unfunded Pension
Liability of any Pension Plan;
(iii) the adoption of, or the commencement of
contributions to, any Plan subject to Section 412 of the Code by the
Company or any ERISA Affiliate; or
(iv) the adoption of any amendment to a Plan subject to
Section 412 of the Code, if such amendment results in a material
increase in contributions or Unfunded Pension Liability.
(d) of any material change in accounting policies or financial
reporting practices by the Company or any of its consolidated
Subsidiaries; and
(e) upon the request from time to time of the Agent, the Swap
Termination Values, together with a description of the method by which
such values were determined, relating to any then-outstanding Swap
Contracts to which the Company or any of its Subsidiaries is party.
Each notice under this Section shall be accompanied by a written
statement by a Responsible Officer setting forth details of the occurrence
referred to therein, and stating what action the Company or any affected
Subsidiary proposes to take with respect thereto and at what time. Each notice
under SECTION 7.03(a) shall describe with particularity any and all clauses or
provisions of this Agreement or other Loan Document that have been (or
foreseeably will be) breached or violated.
7.04 PRESERVATION OF CORPORATE EXISTENCE, ETC. The Company shall, and
shall cause each Subsidiary to:
(a) preserve and maintain in full force and effect its corporate
existence and good standing under the laws of its state or jurisdiction
of incorporation;
(b) preserve and maintain in full force and effect all
governmental rights, privileges, qualifications, permits, licenses and
franchises necessary or desirable in the normal conduct of its business,
except in connection with transactions permitted by Section 8.03 and
sales of assets permitted by Section 8.02;
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(c) use reasonable efforts, in the ordinary course of business,
to preserve its business organization and goodwill; and
(d) preserve or renew all of its registered patents, trademarks,
trade names and service marks, the non-preservation of which could
reasonably be expected to have a Material Adverse Effect.
7.05 MAINTENANCE OF PROPERTY. The Company shall maintain, and shall
cause each Subsidiary to maintain, and preserve all its property which is used
or useful in its business in good working order and condition, ordinary wear and
tear excepted and make all necessary repairs thereto and renewals and
replacements thereof.
7.06 INSURANCE. The Company shall maintain, and shall cause each
Subsidiary to maintain, with financially sound and reputable independent
insurers, insurance with respect to its properties and business against loss or
damage of the kinds customarily insured against by Persons engaged in the same
or similar business, of such types and in such amounts as are customarily
carried under similar circumstances by such other Persons.
7.07 PAYMENT OF OBLIGATIONS. The Company shall, and shall cause each
Subsidiary to, pay and discharge as the same shall become due and payable, all
their respective obligations and liabilities, including:
(a) all tax liabilities, assessments and governmental charges or
levies upon it or its properties or assets, unless the same are being
contested in good faith by appropriate proceedings and adequate reserves
in accordance with GAAP are being maintained by the Company or such
Subsidiary;
(b) all lawful claims which, if unpaid, would by law become a
Lien (other than a Permitted Lien) upon its property; and
(c) all indebtedness, as and when due and payable, but subject
to any subordination provisions contained in any instrument or agreement
evidencing such Indebtedness.
7.08 COMPLIANCE WITH LAWS. The Company shall comply, and shall cause
each Subsidiary to comply, in all material respects with all Requirements of Law
of any Governmental Authority having jurisdiction over it or its business
(including the Federal Fair Labor Standards Act), except such as may be
contested in good faith or as to which a bona fide dispute may exist.
7.09 COMPLIANCE WITH ERISA. The Company shall, and shall cause each of
its ERISA Affiliates to: (a) maintain each Plan in compliance in all material
respects with the applicable provisions of ERISA, the Code and other federal or
state law; (b) cause each Plan which is qualified under Section 401(a) of the
Code to maintain such qualification unless such Plan is terminated; and (c) make
all required contributions to any Plan subject to Section 412 of the Code.
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7.10 INSPECTION OF PROPERTY AND BOOKS AND RECORDS. The Company shall
maintain and shall cause each Subsidiary to maintain proper books of record and
account, in which full, true and correct entries in conformity with GAAP
consistently applied shall be made of all financial transactions and matters
involving the assets and business of the Company and such Subsidiary. The
Company shall permit, and shall cause each Subsidiary to permit, representatives
and independent contractors of the Agent or any Bank to visit and inspect any of
their respective properties, to examine their respective corporate, financial
and operating records, and make copies thereof or abstracts therefrom, and to
discuss their respective affairs, finances and accounts with their respective
directors, officers, and independent public accountants, all at the expense of
the Company and at such reasonable times during normal business hours and as
often as may be reasonably desired, upon reasonable advance notice to the
Company; PROVIDED, HOWEVER, when an Event of Default exists the Agent or any
Bank may do any of the foregoing at the expense of the Company at any time
during normal business hours and without advance notice.
7.11 ENVIRONMENTAL LAWS. The Company shall, and shall cause each
Subsidiary to, conduct its operations and keep and maintain its property in
compliance with all Environmental Laws.
7.12 USE OF PROCEEDS. The Company shall use the proceeds of the
Revolving Loans for working capital and other general corporate purposes, other
than for the purpose of financing a hostile Acquisition, the refinancing of
certain Indebtedness in connection with the Transaction and the payment of fees
and expenses relating thereto, in each case not in contravention of any
Requirement of Law or of any Loan Document.
7.13 SOLVENCY. The Company shall at all times be, and shall cause
each of its Subsidiaries to be, Solvent.
7.14 FURTHER ASSURANCES.
(a) The Company shall ensure that all written information,
exhibits and reports furnished to the Agent or the Banks do not and will not
contain any untrue statement of a material fact and do not and will not omit to
state any material fact or any fact necessary to make the statements contained
therein not misleading in light of the circumstances in which made, and will
promptly disclose to the Agent and the Banks and correct any defect or error
that may be discovered therein or in any Loan Document or in the execution,
acknowledgment or recordation thereof.
(b) Promptly upon request the Agent or the Majority Banks, the
Company shall (and shall cause any of its Subsidiaries to) do, execute,
acknowledge, deliver, record, re-record, file, re-file, register and
re-register, any and all such further acts, deeds, conveyances, security
agreements, mortgages, assignments, estoppel certificates, financing statements
and continuations thereof, termination statements, notices of assignment,
transfers, certificates, assurances and other instruments the Agent or such
Banks, as the case may be, may reasonably require from time to time in order (i)
to carry out more effectively the purposes of this Agreement or any other Loan
Document, (ii) to subject any of the properties, rights or interests covered by
any of the Collateral Documents to the Liens created by any of the Collateral
Documents, (iii) to perfect and maintain the validity, effectiveness and
priority of any of the Collateral Documents and the Liens intended to be
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created thereby, and (iv) to better assure, convey, grant, assign, transfer,
preserve, protect and confirm to the Collateral Agent and Banks the rights
granted or now or hereafter intended to be granted to the Collateral Agent and
the Banks under any Loan Document or under any other document executed in
connection therewith.
7.15 FOREIGN SUBSIDIARIES SECURITY. If following a change in the
relevant sections of the Code, the regulations and rules promulgated thereunder
and any rulings issued thereunder and at the request of the Agent or the
Majority Banks, counsel for the Company acceptable to the Agent and the Majority
Banks does not within 30 days after such request deliver evidence satisfactory
to the Agent, with respect to any Foreign Subsidiary which is a Wholly-Owned
Subsidiary of the Company, that (i) a pledge of 66-2/3% or more of the total
combined voting power of all classes of capital stock of such Foreign Subsidiary
entitled to vote, (ii) the entering into by such Foreign Subsidiary of a
guaranty in substantially the form of the Guaranty or (iii) the entering into by
such Foreign Subsidiary of a security agreement in substantially the form of the
Security Agreement, in either case would cause the earnings of such Foreign
Subsidiary to be treated as a deemed dividend to such Foreign Subsidiary's
United States parent or would otherwise violate a material applicable law, then
in the case of a failure to deliver the evidence described in clause (i) above,
that portion of such Foreign Subsidiary's outstanding capital stock not
theretofore pledged pursuant to the Pledge Agreement shall be pledged to the
Collateral Agent for the benefit of the Banks pursuant to the Pledge Agreement
(or another pledge agreement in substantially similar form, if needed), (ii) in
the case of a failure to deliver the evidence described in clause (ii) above,
such Foreign Subsidiary shall execute and deliver a guaranty of the Obligations
of the Company under the Loan Documents and (iii) in the case of a failure to
deliver the evidence described in clause (iii) above, such Foreign Subsidiary
shall execute and deliver a security agreement granting the Collateral Agent for
the benefit of the Banks a security interest in all of such Foreign Subsidiary's
assets, in each case with all documents delivered pursuant to this Section 7.15
to be in form and substance satisfactory to the Agent and the Majority Banks.
ARTICLE VIII
NEGATIVE COVENANTS
------------------
So long as any Bank shall have any Commitment hereunder, or any Loan or
other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit
shall remain outstanding, unless the Majority Banks waive compliance in writing:
8.01 LIMITATION ON LIENS. The Company shall not, and shall not suffer or
permit any Subsidiary to, directly or indirectly, make, create, incur, assume or
suffer to exist any Lien upon or with respect to any part of its property,
whether now owned or hereafter acquired, other than the following ("PERMITTED
LIENS"):
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(a) any Lien (other than as described in SECTION 8.01(m))
existing on property of the Company or any Subsidiary on the Closing
Date and set forth in SCHEDULE 8.01 securing Indebtedness outstanding on
such date;
(b) any Lien created under any Loan Document;
(c) Liens for taxes, fees, assessments or other governmental
charges which are not delinquent or remain payable without penalty, or
to the extent that non-payment thereof is permitted by Section 7.07,
provided that no notice of lien has been filed or recorded under the
Code;
(d) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the
ordinary course of business which are not delinquent or remain payable
without penalty or which are being contested in good faith and by
appropriate proceedings, which proceedings have the effect of preventing
the forfeiture or sale of the property subject thereto;
(e) Liens (other than any Lien imposed by ERISA) consisting of
pledges or deposits required in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other
social security legislation;
(f) Liens on the property of the Company or its Subsidiary
securing (i) the non-delinquent performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, (ii)
contingent obligations on surety and appeal bonds, and (iii) other
non-delinquent obligations of a like nature; in each case, incurred in
the ordinary course of business, provided all such Liens in the
aggregate would not (even if enforced) cause a Material Adverse Effect;
(g) Liens consisting of judgment or judicial attachment liens,
provided that the enforcement of such Liens is effectively stayed and
all such liens in the aggregate at any time outstanding for the Company
and its Subsidiaries do not exceed $250,000;
(h) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or
interfere with the ordinary conduct of the businesses of the Company and
its Subsidiaries;
(i) Liens on assets of corporations which become Subsidiaries
after the date of this Agreement, PROVIDED, HOWEVER, that such Liens
existed at the time the respective corporations became Subsidiaries and
were not created in anticipation thereof and do not in the aggregate at
any time outstanding exceed $500,000;
(j) purchase money security interests on any property acquired
or held by the Company or its Subsidiaries in the ordinary course of
business, securing Indebtedness incurred or assumed for the purpose of
financing all or any part of the cost of acquiring such property;
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PROVIDED THAT (i) any such Lien attaches to such property concurrently
with or within 20 days after the acquisition thereof, (ii) such Lien
attaches solely to the property so acquired in such transaction and
(iii) the principal amount of the Indebtedness secured by any and all
such purchase money security interests shall not at any time exceed,
together with Indebtedness permitted under Section 8.05(d), $500,000;
(k) Liens securing Capital Lease Obligations on assets subject
to such Capital Leases, provided that such Capital Leases are otherwise
permitted under Section 8.10(c);
(l) Liens arising solely by virtue of any statutory or common
law provision relating to banker's liens, rights of set-off or similar
rights and remedies as to deposit accounts or other funds maintained
with a creditor depository institution; PROVIDED THAT (i) such deposit
account is not a dedicated cash collateral account and is not subject to
restrictions against access by the Company in excess of those set forth
by regulations promulgated by the FRB, and (ii) such deposit account is
not intended by the Company or any Subsidiary to provide collateral to
the depository institution;
(m) Liens on the property, plant and equipment owned by
Bioclear Technology, Inc. securing the banker's acceptance described in
item 5 on SCHEDULE 8.05, without giving effect to any extensions or
renewals thereof; and
(n) Liens on the assets of Waterlink (Sweden) AB granted to the
Swedish government securing Waterlink (Sweden) AB's obligations up to an
aggregate amount not to exceed $1,000,000 with respect to its employee
benefit plans at any time prior to the date the Company has issued a
guaranty to the Swedish government with respect thereto limited to said
amount (it being understood and agreed that the Company shall issue such
guaranty and obtain a release of the Lien permitted pursuant to this
clause (m) within 45 days after the Closing Date).
8.02 DISPOSITION OF ASSETS. The Company shall not, and shall not suffer
or permit any Subsidiary to, directly or indirectly, sell, assign, lease,
convey, transfer or otherwise dispose of (whether in one or a series of
transactions) any property (including accounts and notes receivable, with or
without recourse) or enter into any agreement to do any of the foregoing,
except:
(a) dispositions of inventory, or used, worn-out or surplus
equipment (including, without limitation, demonstration or pilot
plants), all in the ordinary course of business;
(b) the sale of equipment to the extent that such equipment is
exchanged for credit against the purchase price of similar replacement
equipment, or the proceeds of such sale are reasonably promptly applied
to the purchase price of such replacement equipment; and
(c) dispositions of inventory and/or equipment by (i) the
Company or any Guarantor to the Company or any Guarantor pursuant to
reasonable business requirements and (ii) other assets of the Company or
any Subsidiary to any Foreign Subsidiary in an aggregate amount for all
such dispositions after the date of this Agreement not to exceed
$250,000.
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8.03 CONSOLIDATIONS AND MERGERS. The Company shall not, and shall not
suffer or permit any Subsidiary to, merge, consolidate with or into, or convey,
transfer, lease or otherwise dispose of (whether in one transaction or in a
series of transactions all or substantially all of its assets whether now owned
or hereafter acquired) to or in favor of any Person, except:
(a) any Domestic Subsidiary may merge with the Company, PROVIDED
that the Company shall be the continuing or surviving corporation, or
with any one or more Subsidiaries, provided that if any transaction
shall be between a Domestic Subsidiary and a Wholly-Owned Domestic
Subsidiary, the Wholly-Owned Domestic Subsidiary shall be the continuing
or surviving corporation;
(b) any Domestic Subsidiary may sell all or substantially all
of its assets (upon voluntary liquidation or otherwise), to the Company
or another Wholly-Owned Domestic Subsidiary;
(c) any Foreign Subsidiary may be merged with and into, or be
dissolved or liquidated into, or transfer any of its assets to , any
Foreign Subsidiary so long as in each case at least 65% of the total
combined voting power of all classes of capital stock of all first-tier
Foreign Subsidiaries are pledged pursuant to the relevant Pledge
Agreement; and
(d) the assets of any Foreign Subsidiary may be transferred to
the Company or any of its Domestic Subsidiaries, and any Foreign
Subsidiary may be merged with and into, or be dissolved or liquidated
into, the Company or any of its Domestic Subsidiaries so long as the
Company or such Domestic Subsidiary is the surviving corporation of any
such merger, dissolution or liquidation.
8.04 LOANS AND INVESTMENTS. The Company shall not purchase or acquire,
or suffer or permit any Subsidiary to purchase or acquire, or make any
commitment therefor, any capital stock, equity interest, or any obligations or
other securities of, or any interest in, any Person, or make or commit to make
any Acquisitions, or make or commit to make any advance, loan, extension of
credit or capital contribution to or any other investment in, any Person
including any Affiliate of the Company (together, "INVESTMENTS"), except for:
(a) Investments held by the Company or Subsidiary in the form
of Cash Equivalents;
(b) extensions of credit in the nature of accounts receivable
or notes receivable arising from the sale or lease of goods or services
in the ordinary course of business;
(c) extensions of credit by (i) the Company to any Guarantor or
by any Guarantor to another Guarantor or the Company and (ii) any
Wholly-Owned Foreign Subsidiary to another Wholly-Owned Foreign
Subsidiary, PROVIDED, that any extension of credit pursuant to this
clause (c) (other than as described in subclause (ii)) shall be
evidenced by a promissory note, in form and substance acceptable to the
Agent, and such promissory note shall be delivered to the Collateral
Agent pursuant to the relevant Pledge Agreement;
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(d) Investments, subject to Section 8.09, incurred in order to
consummate Acquisitions (other than the Bioclear Acquisition and the
Lanco Acquisition) otherwise permitted herein, PROVIDED that (i) any
such Acquisition the aggregate consideration of which exceeds the
relevant Permitted Acquisition Threshold shall not be permitted without
the prior written approval of the Majority Banks, (ii) no Default or
Event of Default is in existence both before and after giving effect to
such Acquisition, (iii) such Acquisition is undertaken in accordance
with all applicable Requirements of Law, and (iv) the prior, effective
written consent or approval to such Acquisition of the board of
directors or equivalent governing body of the acquiree is obtained;
(e) Investments constituting Permitted Swap Obligations or
payments or advances under Swap Contracts relating to Permitted Swap
Obligations;
(f) Investments existing as of the Closing Date and listed on
SCHEDULE 8.04;
(g) Investments (other than pursuant to Section 8.04(c)) made
by the Company after the date of this Agreement in any Guarantor;
(h) the Bioclear Acquisition and the Lanco Acquisition, subject
to compliance with all conditions set forth in SECTION 5.02; and
(i) Permitted Seller Debt.
8.05 LIMITATION ON INDEBTEDNESS. The Company shall not, and shall not
suffer or permit any Subsidiary to, create, incur, assume, suffer to exist, or
otherwise become or remain directly or indirectly liable with respect to, any
Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement;
(b) Indebtedness consisting of Contingent Obligations permitted
pursuant to Section 8.08;
(c) Indebtedness existing on the Closing Date and set forth in
SCHEDULE 8.05 (provided that the banker's acceptance described in item
___ on SCHEDULE 8.05 shall not be permitted to exist at any time on and
after February 1, 1998);
(d) other Indebtedness in an aggregate amount outstanding not to
exceed $1,000,000 (including Indebtedness secured by Liens permitted by
Section 8.01(i) and (j));
(e) Indebtedness incurred in connection with leases permitted
pursuant to Section 8.10;
(f) unsecured Indebtedness (or commitments relating thereto) of
any Foreign Subsidiary, PROVIDED that the aggregate amount of all such
Indebtedness outstanding shall not
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exceed the Dollar equivalent of $10,000,000 at any time (any such
Indebtedness, "PERMITTED FOREIGN SUBSIDIARY INDEBTEDNESS");
(g) subordinated Indebtedness of the Company (other than as
listed on SCHEDULE 8.05) in an aggregate amount outstanding not to
exceed $10,000,000, such Indebtedness to be on terms and conditions
satisfactory to the Agent;
(h) Indebtedness permitted to be incurred pursuant to SECTION
8.04(c); and
(i) unsecured Indebtedness under seller notes containing terms
satisfactory to the Agent and fully subordinated to the Loans and the
other Obligations on term satisfactory to the Agent (any such
Indebtedness, "PERMITTED SELLER DEBT").
8.06 TRANSACTIONS WITH AFFILIATES. The Company shall not, and shall not
suffer or permit any Subsidiary to, enter into any transaction with any
Affiliate of the Company, except upon fair and reasonable terms no less
favorable to the Company or such Subsidiary than would obtain in a comparable
arm's-length transaction with a Person not an Affiliate of the Company or such
Subsidiary.
8.07 USE OF PROCEEDS. The Company shall not, and shall not suffer or
permit any Subsidiary to, use any portion of the Loan proceeds or any Letter of
Credit, directly or indirectly, (i) to purchase or carry Margin Stock, (ii) to
repay or otherwise refinance indebtedness of the Company or others incurred to
purchase or carry Margin Stock, (iii) to extend credit for the purpose of
purchasing or carrying any Margin Stock, or (iv) to acquire any security in any
transaction that is subject to Section 13 or 14 of the Exchange Act.
8.08 CONTINGENT OBLIGATIONS. The Company shall not, and shall not
suffer or permit any Subsidiary to, create, incur, assume or suffer to exist any
Contingent Obligations except:
(a) endorsements for collection or deposit in the ordinary
course of business;
(b) Permitted Swap Obligations;
(c) Contingent Obligations of the Company and its Subsidiaries
existing as of the Closing Date and listed in SCHEDULE 8.08;
(d) Contingent Obligations of the Company with respect to
Permitted Foreign Subsidiary Indebtedness; and
(e) Contingent Obligations of the Company arising under this
Agreement.
8.09 JOINT VENTURES. The Company shall not, and shall not suffer or
permit any Subsidiary to enter into any Joint Venture.
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8.10 LEASE OBLIGATIONS. The Company shall not, and shall not suffer or
permit any Subsidiary to, create or suffer to exist any obligations for the
payment of rent for any property under lease or agreement to lease, except for:
(a) leases of the Company and of Subsidiaries in existence on
the Closing Date and any renewal, extension or refinancing thereof;
(b) operating leases entered into by the Company or any
Subsidiary after the Closing Date in the ordinary course of business;
PROVIDED that the aggregate annual rental payments for all such
operating leases shall not exceed in any fiscal year $250,000; and
(c) Capital Leases other than those permitted under clause (a)
of this Section, entered into by the Company or any Subsidiary after the
Closing Date to finance the acquisition of equipment; PROVIDED that the
aggregate Capital Lease Obligations for all such Capital Leases shall
not at any time exceed $250,000.
8.11 RESTRICTED PAYMENTS.
(a) The Company shall not, and shall not suffer or permit any
Subsidiary to, declare or make any dividend payment or other distribution of
assets, properties, cash, rights, obligations or securities on account of any
shares of any class of its capital stock, or purchase, redeem or otherwise
acquire for value any shares of its capital stock or any warrants, rights or
options to acquire such shares, now or hereafter outstanding, except that (i)
any Wholly-Owned Subsidiary may declare and make dividend payments or other
distributions to the Company or a Wholly-Owned Subsidiary of the Company and
(ii) on and after September 30, 1997 and so long as (x) no Default or Event of
Default is in existence both before and after giving effect to the declaration
and payment of such dividend and (y) the Leverage Ratio as of the end of the two
fiscal quarters immediately preceding the date of the declaration and payment of
such dividend was less than 2.00:1.0, the Company may declare and pay cash
dividends, PROVIDED that, at the time it is declared, the aggregate amount of
such dividend, when added to all dividends theretofore declared and paid
pursuant to this clause (ii), shall not exceed an amount equal to 25% of
cumulative Net Income for the period from June 30, 1997 and ending on the last
day of the last fiscal quarter of the Company then ended.
(b) The Company shall not, and shall not permit any Subsidiary
to, make (or give any notice in respect or) any voluntary or optional payment or
prepayment on or redemption or acquisition for value of any Subordinated Debt
(other than Indebtedness described in item 4 o SCHEDULE 8.05) or Permitted
Seller Debt or, with respect to any Subordinated Debt incurred pursuant to
SECTION 8.05(g), any scheduled principal payment without the consent of the
Banks.
8.12 ERISA. The Company shall not, and shall not suffer or permit any of
its Subsidiaries to, (i) terminate any Plan subject to Title IV of ERISA so as
to result in any material (in the opinion of the Majority Banks) liability to
the Company or any ERISA Affiliate, (ii) permit to exist any ERISA Event or any
other event or condition, which presents the risk of a material (in the opinion
of the Majority Banks) liability to any member of the Controlled Group, (iii)
make a complete or
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partial withdrawal (within the meaning of ERISA Section 4201) from any
Multiemployer Plan so as to result in any material (in the opinion of the
Majority Banks) liability to the Company or any ERISA Affiliate, (iv) enter into
any new Plan or modify any existing Plan so as to increase its obligations
thereunder which could result in any material (in the opinion of the Majority
Banks) liability to any member of the Controlled Group, or (v) permit the
present value of all nonforfeitable accrued benefits under any Plan (using the
actuarial assumptions utilized by the PBGC upon termination of a Plan)
materially (in the opinion of the Majority Banks) to exceed the fair market
value of Plan assets allocable to such benefits, all determined as of the most
recent valuation date for each such Plan.
8.13 CHANGE IN BUSINESS. The Company shall not, and shall not suffer or
permit any Subsidiary to, engage in any material line of business substantially
different from those lines of business carried on by the Company and its
Subsidiaries on the date hereof.
8.14 ACCOUNTING CHANGES. The Company shall not, and shall not suffer or
permit any Subsidiary to, make any significant change in accounting treatment or
reporting practices, except as required by GAAP, or change the fiscal year of
the Company or of any Subsidiary.
8.15 MINIMUM NET WORTH. The Company shall not permit its consolidated
Net Worth at any time to be less than an amount equal to the sum of (a)
$60,000,000 PLUS (b) 75% of the Company's positive Net Income, if any, for each
fiscal quarter ending after the date hereof and prior to the date of
determination PLUS (c) an amount equal to 100% of the cash and non-cash proceeds
of any equity securities issued by the Company after the Closing Date and prior
to the date of determination.
8.16 LEVERAGE RATIO. The Company shall not permit, at any time during a
period listed below, its Leverage Ratio at such time for the twelve month period
(taken as one accounting period) last ended prior to the date of determination,
to be greater than the ratio set forth below opposite the respective period in
which the determination is being made:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From and including the Closing Date 4.00:1.00
to but excluding the last day of the
fiscal quarter ended in September, 1998
Thereafter, from and including the last day of the 3.75:1.0
fiscal quarter ended in September, 1998 to but
excluding the last day of the fiscal quarter ended
in September, 1999
Thereafter 3.50:1.0
</TABLE>
8.17 SENIOR LEVERAGE RATIO. The Company shall not permit, at any time
during a period listed below, its Senior Leverage Ratio at such time for the
twelve month period (taken as one accounting
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period) last ended prior to the date of determination, to be greater than the
ratio set forth below opposite the respective period in which the determination
is being made:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From and including the Closing Date 3.50:1.00
to but excluding the last day of the
fiscal quarter ended in September, 1998
Thereafter, from and including the last day 3.25:1.0
of the fiscal quarter ended in September,
1998 to but excluding the last day of the
fiscal quarter ended in September, 1999
Thereafter 3.00:1.0
</TABLE>
8.18 INTEREST COVERAGE RATIO. The Company shall not permit, at any time
during a period listed below, its Interest Coverage Ratio at such time for the
twelve month period (taken as one accounting period) last ended prior to the
date of determination, to be less than the ratio set forth below opposite the
respective period in which the determination is being made:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From and including the Closing Date 2.00:1.0
to but excluding the last day of the fiscal
quarter ended in September, 1998
Thereafter 2.25:1.0
</TABLE>
8.19 CURRENT RATIO. The Company shall not permit, at any time, its ratio of
Consolidated Current Assets at such time to Consolidated Current Liabilities at
such time to be less than 1.50:1.
8.20 OPERATING INCOME. The Company shall not permit (as of the end of
any fiscal quarter) its operating income to be less than $.01.
ARTICLE IX
EVENTS OF DEFAULT
-----------------
9.01 EVENT OF DEFAULT. Any of the following shall constitute an "EVENT
OF DEFAULT":
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(a) NON-PAYMENT. The Company fails to pay, (i) when and as
required to be paid herein, any amount of principal of any Loan or of any L/C
Obligation, or (ii) within five days after the same becomes due, any interest,
fee or any other amount payable hereunder or under any other Loan Document; or
(b) REPRESENTATION OR WARRANTY. Any representation or warranty
by the Company or any Subsidiary made or deemed made herein, in any other Loan
Document, or which is contained in any certificate, document or financial or
other statement by the Company, any Subsidiary, or any Responsible Officer,
furnished at any time under this Agreement, or in or under any other Loan
Document, is incorrect in any material respect on or as of the date made or
deemed made; or
(c) SPECIFIC DEFAULTS. The Company fails to perform or
observe any term, covenant or agreement contained in any of Section 7.01, 7.02,
7.03 or 7.09 or in Article VIII; or
(d) OTHER DEFAULTS. The Company or any Subsidiary party
thereto fails to perform or observe any other term or covenant contained in this
Agreement or any other Loan Document, and such default shall continue unremedied
for a period of 20 days after the earlier of (i) the date upon which a
Responsible Officer knew or reasonably should have known of such failure or (ii)
the date upon which written notice thereof is given to the Company by the Agent
or any Bank; or
(e) CROSS-DEFAULT. (i) The Company or any Subsidiary (A) fails
to make any payment in respect of any Indebtedness or Contingent Obligation
(other than in respect of Swap Contracts), having an aggregate principal amount
(including undrawn committed or available amounts and including amounts owing to
all creditors under any combined or syndicated credit arrangement) of more than
$1,000,000 when due (whether by scheduled maturity, required prepayment,
acceleration, demand, or otherwise) and such failure continues after the
applicable grace or notice period, if any, specified in the relevant document on
the date of such failure]; or (B) fails to perform or observe any other
condition or covenant, or any other event shall occur or condition exist, under
any agreement or instrument relating to any such Indebtedness or Contingent
Obligation, and such failure continues after the applicable grace or notice
period, if any, specified in the relevant document on the date of such failure
if the effect of such failure, event or condition is to cause, or to permit the
holder or holders of such Indebtedness or beneficiary or beneficiaries of such
Indebtedness (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause such Indebtedness to be declared to be
due and payable prior to its stated maturity, or such Contingent Obligation to
become payable or cash collateral in respect thereof to be demanded; or (ii)
there occurs under any Swap Contract an Early Termination Date (as defined in
such Swap Contract) resulting from (1) any event of default under such Swap
Contract as to which the Company or any Subsidiary is the Defaulting Party (as
defined in such Swap Contract) or (2) any Termination Event (as so defined) as
to which the Company or any Subsidiary is an Affected Party (as so defined),
and, in either event, the Swap Termination Value owed by the Company or such
Subsidiary as a result thereof is greater than $250,000; or
(f) INSOLVENCY; VOLUNTARY PROCEEDINGS. The Company or any
Subsidiary (i) ceases or fails to be solvent, or generally fails to pay, or
admits in writing its inability to pay, its debts as they become due, subject to
applicable grace periods, if any, whether at stated maturity or otherwise;
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(ii) voluntarily ceases to conduct its business in the ordinary course; (iii)
commences any Insolvency Proceeding with respect to itself; or (iv) takes any
action to effectuate or authorize any of the foregoing; or
(g) INVOLUNTARY PROCEEDINGS. (i) Any involuntary Insolvency
Proceeding is commenced or filed against the Company or any Subsidiary, or any
writ, judgment, warrant of attachment, execution or similar process, is issued
or levied against a substantial part of the Company's or any Subsidiary's
properties, and any such proceeding or petition shall not be dismissed, or such
writ, judgment, warrant of attachment, execution or similar process shall not be
released, vacated or fully bonded within 60 days after commencement, filing or
levy; (ii) the Company or any Subsidiary admits the material allegations of a
petition against it in any Insolvency Proceeding, or an order for relief (or
similar order under non-U.S. law) is ordered in any Insolvency Proceeding; or
(iii) the Company or any Subsidiary acquiesces in the appointment of a receiver,
trustee, custodian, conservator, liquidator, mortgagee in possession (or agent
therefor), or other similar Person for itself or a substantial portion of its
property or business; or
(h) ERISA. (i) An ERISA Event shall occur with respect to a
Pension Plan or Multiemployer Plan which has resulted or could reasonably be
expected to result in liability of the Company under Title IV of ERISA to the
Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of
$250,000 the aggregate amount of Unfunded Pension Liability among all Pension
Plans at any time exceeds $250,000; or (iii) the Company or any ERISA Affiliate
shall fail to pay when due, after the expiration of any applicable grace period,
any installment payment with respect to its withdrawal liability under Section
4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of
$250,000; or
(i) MONETARY JUDGMENTS. One or more non-interlocutory
judgments, noninterlocutory orders, decrees or arbitration awards is entered
against the Company or any Subsidiary involving in the aggregate a liability (to
the extent not covered by independent third-party insurance as to which the
insurer does not dispute coverage) as to any single or related series of
transactions, incidents or conditions, of $250,000 or more, and the same shall
remain unsatisfied, unvacated and unstayed pending appeal for a period of 30
days after the entry thereof; or
(j) NON-MONETARY JUDGMENTS. Any non-monetary judgment, order
or decree is entered against the Company or any Subsidiary which does or would
reasonably be expected to have a Material Adverse Effect, and there shall be any
period of 10 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not be in
effect; or
(k) COLLATERAL.
(i) any provision of any Collateral Document shall for any
reason cease to be valid and binding on or enforceable against the Company
or any Subsidiary of the Company party thereto or the Company or any
Subsidiary of the Company shall so state in writing or bring an action to
limit its obligations or liabilities thereunder; or
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(ii) any Collateral Document shall for any reason (other
than pursuant to the terms thereof or as a result of the failure of the
Collateral Agent to file appropriate continuation statements) cease to
create a valid security interest in the Collateral purported to be covered
thereby or such security interest shall for any reason cease to be a
perfected and first priority security interest subject only to Permitted
Liens; or
(l) CHANGE OF CONTROL. There occurs any Change of Control; or
(m) GUARANTOR DEFAULTS. Any Guarantor fails in any material
respect to perform or observe any term, covenant or agreement in the Guaranty or
the Guaranty is for any reason partially (including with respect to future
advances) or wholly revoked or invalidated, or otherwise ceases to be in full
force and effect, or any Guarantor or any other Person contests in any manner
the validity or enforceability thereof or denies that it has any further
liability or obligation thereunder; or any event described at clauses (f) or (g)
of this Section occurs with respect to such Guarantor; or
(n) INVALIDITY OF SUBORDINATION PROVISIONS. The subordination
provisions of any agreement or instrument governing any Subordinated Debt or any
Permitted Seller Debt is for any reason revoked or invalidated, or otherwise
cease to be in full force and effect, or enforceability thereof or denies that
it has any further liability or obligation thereunder, or the Loans and the
other Obligations hereunder or Permitted Foreign Subsidiary Indebtedness
entitled to receive the benefits of any Loan Document is for any reason
subordinated or does not have the priority contemplated by this Agreement or
such subordination provisions.
9.02 REMEDIES. If any Event of Default occurs, the Agent shall, at the
request of, or may, with the consent of, the Majority Banks:
(a) declare the commitment of each Bank to make Loans and any
obligation of the Issuing Bank to Issue Letters of Credit to be
terminated, whereupon such commitments and obligation shall be
terminated;
(b) declare an amount equal to the maximum aggregate amount
that is or at any time thereafter may become available for drawing
under any outstanding Letters of Credit (whether or not any beneficiary
shall have presented, or shall be entitled at such time to present, the
drafts or other documents required to draw under such Letters of
Credit) to be immediately due and payable, and declare the unpaid
principal amount of all outstanding Loans, all interest accrued and
unpaid thereon, and all other amounts owing or payable hereunder or
under any other Loan Document to be immediately due and payable,
without presentment, demand, protest or other notice of any kind, all
of which are hereby expressly waived by the Company; and
(c) exercise on behalf of itself and the Banks all rights and
remedies available to it and the Banks under the Loan Documents or
applicable law;
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PROVIDED, HOWEVER, that upon the occurrence of any event specified in Sections
9.01(f) or (g) (in the case of clause (i) of Section 9.01 (g) upon the
expiration of the 60-day period mentioned therein), the obligation of each Bank
to make Loans and any obligation of the Issuing Bank to Issue Letters of Credit
shall automatically terminate and the unpaid principal amount of all outstanding
Loans and all interest and other amounts as aforesaid shall automatically become
due and payable without further act of the Agent, the Issuing Bank or any Bank.
9.03 RIGHTS NOT EXCLUSIVE. The rights provided for in this Agreement
and the other Loan Documents are cumulative and are not exclusive of any other
rights, powers, privileges or remedies provided by law or in equity, or under
any other instrument, document or agreement now existing or hereafter arising.
ARTICLE X
THE AGENT
10.01 APPOINTMENT AND AUTHORIZATION; "AGENT".
(a) Each Bank hereby irrevocably (subject to Section 10.09)
appoints, designates and authorizes the Agent (including, without limitation, in
its capacity as Collateral Agent) to take such action on its behalf under the
provisions of this Agreement and each other Loan Document and to exercise such
powers and perform such duties as are expressly delegated to it by the terms of
this Agreement or any other Loan Document, together with such powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
contained elsewhere in this Agreement or in any other Loan Document, the Agent
shall not have any duties or responsibilities, except those expressly set forth
herein, nor shall the Agent have or be deemed to have any fiduciary relationship
with any Bank, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against the Agent. Without limiting the generality
of the foregoing sentence, the use of the term "agent" in this Agreement with
reference to the Agent is not intended to connote any fiduciary or other implied
(or express) obligations arising under agency doctrine of any applicable law.
Instead, such term is used merely as a matter of market custom, and is intended
to create or reflect only an administrative relationship between independent
contracting parties.
(b) The Issuing Bank shall act on behalf of the Banks with
respect to any Letters of Credit Issued by it and the documents associated
therewith until such time and except for so long as the Agent may agree at the
request of the Majority Lenders to act for such Issuing Bank with respect
thereto; PROVIDED, HOWEVER, that the Issuing Bank shall have all of the benefits
and immunities (i) provided to the Agent in this Article X with respect to any
acts taken or omissions suffered by the Issuing Bank in connection with Letters
of Credit Issued by it or proposed to be Issued by it and the application and
agreements for letters of credit pertaining to the Letters of Credit as fully as
if the term "Agent", as used in this Article X, included the Issuing Bank with
respect to such acts or omissions, and (ii) as additionally provided in this
Agreement with respect to the Issuing Bank.
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10.02 DELEGATION OF DUTIES. The Agent may execute any of its duties
under this Agreement or any other Loan Document by or through agents, employees
or attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects with
reasonable care.
10.03 LIABILITY OF AGENT. None of the Agent-Related Persons shall (i)
be liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) be responsible in any manner to any of the Banks for any recital,
statement, representation or warranty made by the Company or any Subsidiary or
Affiliate of the Company, or any officer thereof, contained in this Agreement or
in any other Loan Document, or in any certificate, report, statement or other
document referred to or provided for in, or received by the Agent under or in
connection with, this Agreement or any other Loan Document, or the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document, or for any failure of the Company or any other party to
any Loan Document to perform its obligations hereunder or thereunder. No
Agent-Related Person shall be under any obligation to any Bank to ascertain or
to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any other Loan Document, or to
inspect the properties, books or records of the Company or any of the Company's
Subsidiaries or Affiliates.
10.04 RELIANCE BY AGENT.
(a) The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to the
Company), independent accountants and other experts selected by the Agent. The
Agent shall be fully justified in failing or refusing to take any action under
this Agreement or any other Loan Document unless it shall first receive such
advice or concurrence of the Majority Banks as it deems appropriate and, if it
so requests, it shall first be indemnified to its satisfaction by the Banks
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Agreement or
any other Loan Document in accordance with a request or consent of the Majority
Banks and such request and any action taken or failure to act pursuant thereto
shall be binding upon all of the Banks.
(b) For purposes of determining compliance with the conditions
specified in Section 5.01, each Bank that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent by the Agent to such Bank for consent,
approval, acceptance or satisfaction, or required thereunder to be consented to
or approved by or acceptable or satisfactory to the Bank.
10.05 NOTICE OF DEFAULT. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default, except
with respect to defaults in the payment of
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principal, interest and fees required to be paid to the Agent for the account of
the Banks, unless the Agent shall have received written notice from a Bank or
the Company referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". The Agent will
notify the Banks of its receipt of any such notice. The Agent shall take such
action with respect to such Default or Event of Default as may be requested by
the Majority Banks in accordance with Article IX; PROVIDED, HOWEVER, that unless
and until the Agent has received any such request, the Agent may (but shall not
be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable or in the
best interest of the Banks.
10.06 CREDIT DECISION. Each Bank acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by the Agent hereinafter taken, including any review of the affairs of the
Company and its Subsidiaries, shall be deemed to constitute any representation
or warranty by any Agent-Related Person to any Bank. Each Bank represents to the
Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of the
Company and its Subsidiaries, and all applicable bank regulatory laws relating
to the transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to the Company and its Subsidiaries
hereunder. Each Bank also represents that it will, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigations as
it deems necessary to inform itself as to the business, prospects, operations,
property, financial and other condition and creditworthiness of the Company.
Except for notices, reports and other documents expressly herein required to be
furnished to the Banks by the Agent, the Agent shall not have any duty or
responsibility to provide any Bank with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition or creditworthiness of the Company which may come into the possession
of any of the Agent-Related Persons.
10.07 INDEMNIFICATION OF AGENT. Whether or not the transactions
contemplated hereby are consummated, the Banks shall indemnify upon demand the
Agent-Related Persons (to the extent not reimbursed by or on behalf of the
Company and without limiting the obligation of the Company to do so), pro rata,
from and against any and all Indemnified Liabilities; PROVIDED, HOWEVER, that no
Bank shall be liable for the payment to the Agent-Related Persons of any portion
of such Indemnified Liabilities resulting solely from such Person's gross
negligence or willful misconduct. Without limitation of the foregoing, each Bank
shall reimburse the Agent upon demand for its ratable share of any costs or
out-of-pocket expenses (including Attorney Costs) incurred by the Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated by or referred to herein, to the extent that the Agent is not
reimbursed for such expenses by or on behalf of the Company. The undertaking in
this Section shall survive the payment of all Obligations hereunder and the
resignation or replacement of the Agent.
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10.08 AGENT IN INDIVIDUAL CAPACITY. BAI and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with the Company and its
Subsidiaries and Affiliates as though BAI were not the Agent or the Issuing Bank
hereunder and without notice to or consent of the Banks. The Banks acknowledge
that, pursuant to such activities, BAI or its Affiliates may receive information
regarding the Company or its Affiliates (including information that may be
subject to confidentiality obligations in favor of the Company or such
Subsidiary) and acknowledge that the Agent shall be under no obligation to
provide such information to them. With respect to its Loans, BAI shall have the
same rights and powers under this Agreement as any other Bank and may exercise
the same as though it were not the Agent or the Issuing Bank.
10.09 SUCCESSOR AGENT. The Agent may, and at the request of the
Majority Banks shall, resign as Agent upon 30 days' notice to the Banks. If the
Agent resigns under this Agreement, the Majority Banks shall appoint from among
the Banks a successor agent for the Banks which successor agent shall be
approved by the Company. If no successor agent is appointed prior to the
effective date of the resignation of the Agent, the Agent may appoint, after
consulting with the Banks and the Company, a successor agent from among the
Banks. Upon the acceptance of its appointment as successor agent hereunder, such
successor agent shall succeed to all the rights, powers and duties of the
retiring Agent and the term "Agent" shall mean such successor agent and the
retiring Agent's appointment, powers and duties as Agent shall be terminated.
After any retiring Agent's resignation hereunder as Agent, the provisions of
this Article X and Sections 11.04 and 11.05 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement. If no successor agent has accepted appointment as Agent by the date
which is 30 days following a retiring Agent's notice of resignation, the
retiring Agent's resignation shall nevertheless thereupon become effective and
the Banks shall perform all of the duties of the Agent hereunder until such
time, if any, as the Majority Banks appoint a successor agent as provided for
above. Notwithstanding the foregoing, however, BAI may not be removed as the
Agent at the request of the Majority Banks unless BAI shall also simultaneously
be replaced as "Issuing Bank" hereunder pursuant to documentation in form and
substance reasonably satisfactory to BAI.
10.10 WITHHOLDING TAX
(a) If any Bank is a "foreign corporation, partnership or
trust" within the meaning of the Code and such Bank claims exemption from, or a
reduction of, U.S. withholding tax under Sections 1441 or 1442 of the Code, such
Bank agrees with and in favor of the Agent, to deliver to the Agent:
(i) if such Bank claims an exemption from, or a
reduction of, withholding tax under a United States tax treaty, two
properly completed and executed copies of IRS Form 1001 before the
payment of any interest in the first calendar year and before the
payment of any interest in each third succeeding calendar year during
which interest may be paid under this Agreement;
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(ii) if such Bank claims that interest paid under
this Agreement is exempt from United States withholding tax because it
is effectively connected with a United States trade or business of such
Bank, two properly completed and executed copies of IRS Form 4224
before the payment of any interest is due in the first taxable year of
such Bank and in each succeeding taxable year of such Bank during which
interest may be paid under this Agreement; and
(iii) such other form or forms as may be required
under the Code or other laws of the United States as a condition to
exemption from, or reduction of, United States withholding tax.
Such Bank agrees to promptly notify the Agent of any change in circumstances
which would modify or render invalid any claimed exemption or reduction.
(b) If any Bank claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001 and
such Bank sells, assigns, grants a participation in, or otherwise transfers all
or part of the Obligations of the Company to such Bank, such Bank agrees to
notify the Agent of the percentage amount in which it is no longer the
beneficial owner of Obligations of the Company to such Bank. To the extent of
such percentage amount, the Agent will treat such Bank's IRS Form 1001 as no
longer valid.
(c) If any Bank claiming exemption from United States
withholding tax by filing IRS Form 4224 with the Agent sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations of the
Company to such Bank, such Bank agrees to undertake sole responsibility for
complying with the withholding tax requirements imposed by Sections 1441 and
1442 of the Code.
(d) If any Bank is entitled to a reduction in the applicable
withholding tax, the Agent may withhold from any interest payment to such Bank
an amount equivalent to the applicable withholding tax after taking into account
such reduction. However, if the forms or other documentation required by clause
(a) of this Section are not delivered to the Agent, then the Agent may withhold
from any interest payment to such Bank not providing such forms or other
documentation an amount equivalent to the applicable withholding tax imposed by
Sections 1441 and 1442 of the Code, without reduction.
(e) If the IRS or any other Governmental Authority of the
United States or other jurisdiction asserts a claim that the Agent did not
properly withhold tax from amounts paid to or for the account of any Bank
(because the appropriate form was not delivered or was not properly executed, or
because such Bank failed to notify the Agent of a change in circumstances which
rendered the exemption from, or reduction of, withholding tax ineffective, or
for any other reason) such Bank shall indemnify the Agent fully for all amounts
paid, directly or indirectly, by the Agent as tax or otherwise, including
penalties and interest, and including any taxes imposed by any jurisdiction on
the amounts payable to the Agent under this Section, together with all costs and
expenses (including Attorney Costs). The obligation of the Banks under this
Section shall survive the payment of all Obligations and the resignation or
replacement of the Agent.
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<PAGE> 81
ARTICLE XI
MISCELLANEOUS
-------------
11.01 AMENDMENTS AND WAIVERS. No amendment or waiver of any provision
of this Agreement or any other Loan Document, and no consent with respect to any
departure by the Company or any applicable Subsidiary therefrom, shall be
effective unless the same shall be in writing and signed by the Majority Banks
(or by the Agent at the written request of the Majority Banks) and the Company
and acknowledged by the Agent, and then any such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; PROVIDED, HOWEVER, that no such waiver, amendment, or consent shall,
unless in writing and signed by all the Banks and the Company and acknowledged
by the Agent, do any of the following:
(a) increase or extend the Commitment of any Bank (or reinstate
any Commitment terminated pursuant to Section 8.02);
(b) postpone or delay any date fixed by this Agreement or any
other Loan Document for any payment of principal, interest, fees or
other amounts due to the Banks (or any of them) hereunder or under any
other Loan Document;
(c) reduce the principal of, or the rate of interest specified
herein on any Loan, or (subject to clause (iii) below) any fees or other
amounts payable hereunder or under any other Loan Document;
(d) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Loans which is required for the Banks or
any of them to take any action hereunder; or
(e) amend this Section, or Section 2.14, or any provision herein
providing for consent or other action by all Banks;
and, PROVIDED FURTHER, that (i) no amendment, waiver or consent shall, unless in
writing and signed by the Issuing Bank in addition to the Majority Banks or all
the Banks, as the case may be, affect the rights or duties of the Issuing Bank
under this Agreement or any L/C-Related Document relating to any Letter of
Credit Issued or to be Issued by it, (ii) no amendment, waiver or consent shall,
unless in writing and signed by the Agent in addition to the Majority Banks or
all the Banks, as the case may be, affect the rights or duties of the Agent
under this Agreement or any other Loan Document, and (iii) the Fee Letter may be
amended, or rights or privileges thereunder waived, in a writing executed by the
parties thereto.
11.02 NOTICES.
(a) All notices, requests, consents, approvals, waivers and
other communications shall be in writing (including, unless the context
expressly otherwise provides, by facsimile
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<PAGE> 82
transmission, provided that any matter transmitted by facsimile (i) shall be
immediately confirmed by a telephone call to the recipient at the number
specified on SCHEDULE 11.02, and (ii) shall be followed promptly by delivery of
a hard copy original thereof) and mailed, faxed or delivered, to the address or
facsimile number specified for notices on SCHEDULE 11.02; or, as directed to the
Company or the Agent, to such other address as shall be designated by such party
in a written notice to the other parties, and as directed to any other party, at
such other address as shall be designated by such party in a written notice to
the Company and the Agent.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered for
overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the date
deposited into the U.S. mail, or if delivered, upon delivery; except that
notices pursuant to Article II, III or X to the Agent shall not be effective
until actually received by the Agent, and notices pursuant to Article III to the
Issuing Bank shall not be effective until actually received by the Issuing Bank
at the address specified for the "Issuing Bank" on the applicable signature page
hereof.
(c) Any agreement of the Agent and the Banks herein to receive
certain notices by telephone or facsimile is solely for the convenience and at
the request of the Company. The Agent and the Banks shall be entitled to rely on
the authority of any Person purporting to be a Person authorized by the Company
to give such notice and the Agent and the Banks shall not have any liability to
the Company or other Person on account of any action taken or not taken by the
Agent or the Banks in reliance upon such telephonic or facsimile notice. The
obligation of the Company to repay the Loans and L/C Obligations shall not be
affected in any way or to any extent by any failure by the Agent and the Banks
to receive written confirmation of any telephonic or facsimile notice or the
receipt by the Agent and the Banks of a confirmation which is at variance with
the terms understood by the Agent and the Banks to be contained in the
telephonic or facsimile notice.
11.03 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no
delay in exercising, on the part of the Agent or any Bank, any right, remedy,
power or privilege hereunder, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege.
11.04 COSTS AND EXPENSES. The Company shall:
(a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse BAI (including in its capacity as Agent and
Issuing Bank) within five Business Days after demand (subject to Section
5.01(e)) for all costs and expenses incurred by BAI (including in its capacity
as Agent and Issuing Bank) in connection with the development, preparation,
delivery, administration and execution of, and any amendment, supplement, waiver
or modification to (in each case, whether or not consummated), this Agreement,
any Loan Document and any other documents prepared in connection herewith or
therewith, and the consummation of the transactions
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<PAGE> 83
contemplated hereby and thereby, including reasonable Attorney Costs incurred by
BAI (including in its capacity as Agent and Issuing Bank) with respect thereto;
and
(b) pay or reimburse the Agent and each Bank within five
Business Days after demand (subject to Section 5.01(e)) for all costs and
expenses (including Attorney Costs) incurred by them in connection with the
enforcement, attempted enforcement, or preservation of any rights or remedies
under this Agreement or any other Loan Document during the existence of an Event
of Default or after acceleration of the Loans (including in connection with any
"workout" or restructuring regarding the Loans, and including in any Insolvency
Proceeding or appellate proceeding).
11.05 COMPANY INDEMNIFICATION. Whether or not the transactions
contemplated hereby are consummated, the Company shall indemnify, defend and
hold the Agent-Related Persons, and each Bank and each of its respective
officers, directors, employees, counsel, agents and attorneys-in-fact (each, an
"INDEMNIFIED PERSON") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses and disbursements (including Attorney Costs) of any kind or
nature whatsoever which may at any time (including at any time following
repayment of the Loans, the termination of the Letters of Credit and the
termination, resignation or replacement of the Agent or replacement of any Bank)
be imposed on, incurred by or asserted against any such Person in any way
relating to or arising out of the Company entering into this Agreement or any
document contemplated by or referred to herein, or the transactions contemplated
hereby, or any action taken or omitted by any such Person under or in connection
with any of the foregoing, including with respect to any investigation,
litigation or proceeding (including any Insolvency Proceeding or appellate
proceeding) related to or arising out of this Agreement or the Loans or Letters
of Credit or the use of the proceeds thereof, whether or not any Indemnified
Person is a party thereto (all the foregoing, collectively, the "INDEMNIFIED
LIABILITIES"); PROVIDED, that the Company shall have no obligation hereunder to
any Indemnified Person with respect to Indemnified Liabilities resulting solely
from the gross negligence or willful misconduct of such Indemnified Person. The
agreements in this Section shall survive payment of all other Obligations.
11.06 PAYMENTS SET ASIDE. To the extent that the Company makes a
payment to the Agent or the Banks, or the Agent or the Banks exercise their
right of set-off, and such payment or the proceeds of such set-off or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside or required (including pursuant to any settlement entered into by the
Agent or such Bank in its discretion) to be repaid to a trustee, receiver or any
other party, in connection with any Insolvency Proceeding or otherwise, then (a)
to the extent of such recovery the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such set-off had not occurred, and (b)
each Bank severally agrees to pay to the Agent upon demand its pro rata share of
any amount so recovered from or repaid by the Agent.
11.07 SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Company may not assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of the Agent and each Bank.
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<PAGE> 84
11.08 ASSIGNMENTS, PARTICIPATIONS, ETC.
(a) Any Bank may, with the written consent of the Agent and
the Issuing Bank, which consents shall not be unreasonably withheld, at any time
assign and delegate to one or more Eligible Assignees (provided that no written
consent of the Agent or the Issuing Bank shall be required in connection with
any assignment and delegation by a Bank to an Eligible Assignee that is an
Affiliate of such Bank) (each an "ASSIGNEE") all, or any ratable part of all, of
the Loans, the Commitments, the L/C Obligations and the other rights and
obligations of such Bank hereunder, in a minimum amount of $5,000,000 (or, if
less, the entire amount of such Bank's Loans, Commitment and L/C Obligations);
PROVIDED, HOWEVER, that the Company and the Agent may continue to deal solely
and directly with such Bank in connection with the interest so assigned to an
Assignee until (i) written notice of such assignment, together with payment
instructions, addresses and related information with respect to the Assignee,
shall have been given to the Company and the Agent by such Bank and the
Assignee; (ii) such Bank and its Assignee shall have delivered to the Company
and the Agent an Assignment and Acceptance in the form of EXHIBIT E ("ASSIGNMENT
AND ACCEPTANCE") together with any Note or Notes subject to such assignment and
(iii) the assignor Bank or Assignee has paid to the Agent a processing fee in
the amount of $3,000.
(b) From and after the date that the Agent notifies the
assignor Bank that it has received (and provided its consent with respect to) an
executed Assignment and Acceptance and payment of the above-referenced
processing fee, (i) the Assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, shall have the rights and obligations of a
Bank under the Loan Documents, and (ii) the assignor Bank shall, to the extent
that rights and obligations hereunder and under the other Loan Documents have
been assigned by it pursuant to such Assignment and Acceptance, relinquish its
rights and be released from its obligations under the Loan Documents.
(c) Within five Business Days after its receipt of notice by
the Agent that it has received an executed Assignment and Acceptance and payment
of the processing fee, (and provided that it consents to such assignment in
accordance with Section 11.08(a)), the Company shall execute and deliver to the
Agent, new Notes evidencing such Assignee's assigned Loans and Commitment and,
if the assignor Bank has retained a portion of its Loans and its Commitment,
replacement Notes in the principal amount of the Loans retained by the assignor
Bank (such Notes to be in exchange for, but not in payment of, the Notes held by
such Bank). Immediately upon each Assignee's making its processing fee payment
under the Assignment and Acceptance, this Agreement shall be deemed to be
amended to the extent, but only to the extent, necessary to reflect the addition
of the Assignee and the resulting adjustment of the Commitments arising
therefrom. The Commitment allocated to each Assignee shall reduce such
Commitments of the assigning Bank PRO TANTO.
(d) Any Bank may at any time sell to one or more commercial
banks or other Persons not Affiliates of the Company (a "PARTICIPANT")
participating interests in any Loans, the Commitment of that Bank and the other
interests of that Bank (the "originating Bank") hereunder and under the other
Loan Documents; PROVIDED, HOWEVER, that (i) the originating Bank's obligations
under this Agreement shall remain unchanged, (ii) the originating Bank shall
remain solely responsible for the performance of such obligations, (iii) the
Company, the Issuing Bank and the
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<PAGE> 85
Agent shall continue to deal solely and directly with the originating Bank in
connection with the originating Bank's rights and obligations under this
Agreement and the other Loan Documents, and (iv) no Bank shall transfer or grant
any participating interest under which the Participant has rights to approve any
amendment to, or any consent or waiver with respect to, this Agreement or any
other Loan Document, except to the extent such amendment, consent or waiver
would require unanimous consent of the Banks as described in the FIRST PROVISO
to Section 11.01. In the case of any such participation, the Participant shall
not have any rights under this Agreement, or any of the other Loan Documents,
and all amounts payable by the Company hereunder shall be determined as if such
Bank had not sold such participation; except that, if amounts outstanding under
this Agreement are due and unpaid, or shall have been declared or shall have
become due and payable upon the occurrence of an Event of Default, each
Participant shall be deemed to have the right of set-off in respect of its
participating interest in amounts owing under this Agreement to the same extent
as if the amount of its participating interest were owing directly to it as a
Bank under this Agreement.
(e) Notwithstanding any other provision in this Agreement, any
Bank may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement and the Note held by
it in favor of any Federal Reserve Bank in accordance with Regulation A of the
FRB or U.S. Treasury Regulation 31 CFR ss.203.14, and such Federal Reserve Bank
may enforce such pledge or security interest in any manner permitted under
applicable law.
11.09 CONFIDENTIALITY. Each Bank agrees to take and to cause its
Affiliates to take normal and reasonable precautions and exercise due care to
maintain the confidentiality of all information identified as "confidential" or
"secret" by the Company and provided to it by the Company or any Subsidiary, or
by the Agent on the Company's or such Subsidiary's behalf, under this Agreement
or any other Loan Document, and neither it nor any of its Affiliates shall use
any such information other than in connection with or in enforcement of this
Agreement and the other Loan Documents or in connection with other business now
or hereafter existing or contemplated with the Company or any Subsidiary; except
to the extent such information (i) was or becomes generally available to the
public other than as a result of disclosure by the Bank, or (ii) was or becomes
available on a non-confidential basis from a source other than the Company,
provided that such source is not bound by a confidentiality agreement with the
Company known to the Bank; PROVIDED, HOWEVER, that any Bank may disclose such
information (A) at the request or pursuant to any requirement of any
Governmental Authority to which the Bank is subject or in connection with an
examination of such Bank by any such authority; (B) pursuant to subpoena or
other court process; (C) when required to do so in accordance with the
provisions of any applicable Requirement of Law; (D) to the extent reasonably
required in connection with any litigation or proceeding to which the Agent, any
Bank or their respective Affiliates may be party; (E) to the extent reasonably
required in connection with the exercise of any remedy hereunder or under any
other Loan Document; (F) to such Bank's independent auditors and other
professional advisors; (G) to any Participant or Assignee, actual or potential,
provided that such Person agrees in writing to keep such information
confidential to the same extent required of the Banks hereunder; (H) as to any
Bank or its Affiliate, as expressly permitted under the terms of any other
document or agreement regarding confidentiality to which the Company or any
Subsidiary is party or is deemed party with such Bank or such Affiliate; and (I)
to its Affiliates.
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<PAGE> 86
11.10 SET-OFF. In addition to any rights and remedies of the Banks
provided by law, if an Event of Default exists or the Loans have been
accelerated, each Bank is authorized at any time and from time to time, without
prior notice to the Company, any such notice being waived by the Company to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held by,
and other indebtedness at any time owing by, such Bank to or for the credit or
the account of the Company against any and all Obligations owing to such Bank,
now or hereafter existing, irrespective of whether or not the Agent or such Bank
shall have made demand under this Agreement or any Loan Document and although
such Obligations may be contingent or unmatured. Each Bank agrees promptly to
notify the Company and the Agent after any such set-off and application made by
such Bank; PROVIDED, HOWEVER, that the failure to give such notice shall not
affect the validity of such set-off and application.
11.11 AUTOMATIC DEBITS OF FEES. With respect to any principal or
interest due on the Loans, unreimbursed L/C Obligation, Commitment Fees,
arrangement fee, letter of credit fee or other fee, or any other cost or expense
(including Attorney Costs) due and payable to the Agent, the Issuing Bank or BAI
under the Loan Documents, the Company hereby irrevocably authorizes BAI to debit
any deposit account of the Company with BAI in an amount such that the aggregate
amount debited from all such deposit accounts does not exceed such fee or other
cost or expense. If there are insufficient funds in such deposit accounts to
cover the amount of the fee or other cost or expense then due, such debits will
be reversed (in whole or in part, in BAI's sole discretion) and such amount not
debited shall be deemed to be unpaid. No such debit under this Section shall be
deemed a set-off.
11.12 NOTIFICATION OF ADDRESSES, LENDING OFFICES, ETC. Each Bank shall
notify the Agent in writing of any changes in the address to which notices to
the Bank should be directed, of addresses of any Lending Office, of payment
instructions in respect of all payments to be made to it hereunder and of such
other administrative information as the Agent shall reasonably request.
11.13 COUNTERPARTS. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken together shall be deemed to
constitute but one and the same instrument.
11.14 SEVERABILITY. The illegality or unenforceability of any provision
of this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required hereunder.
11.15 NO THIRD PARTIES BENEFITED. This Agreement is made and entered
into for the sole protection and legal benefit of the Company, the Banks, the
Agent and the Agent-Related Persons, and their permitted successors and assigns,
and no other Person shall be a direct or indirect legal beneficiary of, or have
any direct or indirect cause of action or claim in connection with, this
Agreement or any of the other Loan Documents.
11.16 GOVERNING LAW AND JURISDICTION.
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<PAGE> 87
(a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF ILLINOIS; PROVIDED THAT
THE PARTIES SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE
OF ILLINOIS OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF ILLINOIS, AND
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, THE AGENT AND
THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE COMPANY, THE AGENT AND
THE BANKS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH
JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE
COMPANY, THE AGENT AND THE BANKS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS,
COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY
ILLINOIS LAW.
11.17 WAIVER OF JURY TRIAL. THE COMPANY, THE BANKS AND THE AGENT EACH
WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION,
PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST
ANY OTHER PARTY OR ANY AGENTRELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER
WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE COMPANY, THE
BANKS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE
TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED
BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF.
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
11.18 ENTIRE AGREEMENT. This Agreement, together with the other Loan
Documents, embodies the entire agreement and understanding among the Company,
the Banks and the Agent, and supersedes all prior or contemporaneous agreements
and understandings of such Persons, verbal or written, relating to the subject
matter hereof and thereof.
* * *
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<PAGE> 88
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in Chicago, Illinois by their proper and duly
authorized officers as of the day and year first above written.
WATERLINK, INC.
By: /s/ Michael J. Vantusko
-------------------------------------------
Title: Chief Financial Officer
----------------------------------------
BANK OF AMERICA ILLINOIS, as Agent
By: /s/ Jay McKeenan
-------------------------------------------
Title: Assistant Vice President
----------------------------------------
BANK OF AMERICA ILLINOIS,
Individually as a Bank and as the Issuing Bank
By: /s/ Timothy J. Pepowski
-------------------------------------------
Title: Senior Vice President
----------------------------------------
S-1
<PAGE> 89
THE ROYAL BANK OF CANADA,
By: /s/ W.H. Desisuriers
-------------------------------------------
Title: Senior Account Manager
----------------------------------------
S-2
<PAGE> 90
SCHEDULE 2.01
COMMITMENTS
AND PRO RATA SHARES
<TABLE>
<CAPTION>
Pro Rata
Bank Commitment Share
---- ---------- -----
<S> <C> <C>
Bank of America Illinois $30,000,000 75%
The Royal Bank of
Canada $10,000,000 25%
TOTAL _________________
$40,000,000 100%
</TABLE>
<PAGE> 91
SCHEDULE 11.02
--------------
AGENT AND BANK NOTICE INFORMATION
---------------------------------
BANK OF AMERICA ILLINOIS,
as Agent and Collateral Agent
Bank of America Illinois
231 South LaSalle Street
Chicago, Illinois 60697
Attn: Jay McKeown
Tel: 312-828-7299
Fax: 312-974-9102
AGENT'S PAYMENT OFFICE:
- -----------------------
Bank of America Illinois
231 South LaSalle Street
Chicago, Illinois 60697
BANK OF AMERICA ILLINOIS,
- -------------------------
as a Bank
Bank of America Illinois
231 South LaSalle Street
Chicago, Illinois 60697
Attn: Tim Pepowski
Tel: 312-828-1304
Fax: 312-828-1974
Notices (other than Borrowing notices
and Notices of Conversion/Continuation):
Bank of America Illinois
231 South LaSalle Street
Chicago, Illinois 60697
Attn: Tim Pepowski
Tel: 312-828-1304
Fax: 312-828-1974
<PAGE> 92
BANK OF AMERICA ILLINOIS,
- -------------------------
as Issuing Bank
Bank of America Illinois
231 South LaSalle Street
Chicago, Illinois 60697
Attn: Tim Pepowski
Tel: 312-828-1304
Fax: 312-828-1974
THE ROYAL BANK OF CANADA
- ------------------------
The Royal Bank of Canada
Business Banking Centre
9th Floor
220 Portage Avenue
Winnipeg, Manitoba
R3C 3A6
Canada
Attn: W.H. Desiauriers
Tel: 204-988-4288
Fax: 204-988-4487
COMPANY NOTICE INFORMATION
--------------------------
Waterlink, Inc.
4100 Holiday Street N.W.
Canton, Ohio 44718
Attn: Chief Financial Officer
Tel: 330-649-4000
Fax: 330-649-4008
<PAGE> 1
Exhibit 10.3
FIRST AMENDMENT
---------------
This First Amendment (this "Amendment") is entered into as of
this 27th day of June, 1997 among Waterlink (Sweden) AB (f/k/a Gigantissimo 2061
(AB), the "Borrower"), Waterlink, Inc. (the "Guarantor") and Bank of America
National Trust & Savings Association, London Branch (the "Bank"). Unless
otherwise specified herein, capitalized terms used in this Amendment shall have
the meanings ascribed to them by the Agreement (as defined below).
RECITALS
--------
WHEREAS, the Borrower, the Guarantor and the Bank are party to
the Credit Agreement, dated as of March 4, 1997 (as amended, supplemented,
restated or otherwise modified from time to time, the "Agreement");
WHEREAS, the Borrower, the Guarantor and the Bank wish to
enter into certain amendments to the Agreement, all as more fully set forth
herein;
NOW THEREFORE, in consideration of the mutual execution hereof
and other good and valuable consideration, the parties hereto agree as follows:
SECTION 1. AMENDMENTS.
(a) Section 1.01 of the Agreement is hereby amended
by deleting the definition "APPLICABLE MARGIN" contained therein in its
entirety and inserting in lieu thereof the following:
"APPLICABLE MARGIN" shall mean, from time to time,
the Applicable Margin applicable to Offshore Rate Loans (as
each such term is defined in the Waterlink Credit Agreement)
as determined pursuant to the Waterlink Credit Agreement.
(b) Section 1.01 of the Agreement is hereby further
amended by deleting the date "February 18, 2000" appearing in the
definition "TERMINATION DATE" contained therein and inserting in lieu
thereof the date "June 27, 2000".
(c) Section 1.01 of the Agreement is hereby further
amended by deleting the date "February 19, 1997" appearing in the
definition "WATERLINK CREDIT AGREEMENT" contained therein and inserting
in lieu thereof the date "June 27, 1997".
(d) The signature page to the Agreement is hereby
amended by deleting the dollar amount "$3,800,000" contained thereon
and inserting in lieu thereof the dollar amount "$3,000,000".
<PAGE> 2
SECTION 2. REFERENCE TO AND EFFECT UPON THE AGREEMENT.
(a) Except as specifically amended above, the
Agreement shall remain in full force and effect and are hereby ratified
and confirmed.
(b) The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or remedy
of the Bank under the Agreement, nor constitute a waiver of any
provision of the Agreement, except as specifically set forth herein.
Upon the effectiveness of this Amendment, each reference in the
Agreement to "this Agreement", "hereunder", "hereof", "herein" or words
of similar import shall mean and be a reference to the Agreement as
amended hereby.
SECTION 3. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.
SECTION 4. HEADINGS. Section headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purposes.
SECTION 5. COUNTERPARTS. This Amendment may be executed in
any number of counterparts, each of which when so executed shall be deemed an
original but all such counterparts shall constitute one and the same instrument.
SECTION 6. EFFECTIVENESS. This Amendment shall become
effective as of the date first written above upon the delivery of executed
signature pages for this Amendment signed by the Borrower, the Guarantor and the
Bank.
[signature pages follow]
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this Amendment by
its duly authorized officer as of the date first written above.
WATERLINK (SWEDEN) AB (f/k/a GIGANTISSIMO
2061 (AB))
By: /s/ Michael J. Vantusko
--------------------------------------
Title: Director
-----------------------------------
WATERLINK, INC., as Guarantor
By: /s/ Michael J. Vantusko
--------------------------------------
Title: Chief Financial Officer
-----------------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, LONDON BRANCH
By: /s/ Keith Thomas
--------------------------------------
Title: Vice President
-----------------------------------
<PAGE> 1
Exhibit 10.4
FIRST AMENDMENT
---------------
This First Amendment (this "Amendment") is entered into as of
this 27th day of June, 1997 among Waterlink (Germany) GmbH (f/k/a Provista
Einhundertsechsundf[upsilon]nfzigste Verwaltungsgesellschaft mbH, the
"Borrower"), Waterlink, Inc. (the "Guarantor") and Bank of America National
Trust & Savings Association, Frankfurt Branch (the "Bank"). Unless otherwise
specified herein, capitalized terms used in this Amendment shall have the
meanings ascribed to them by the Agreement (as defined below).
RECITALS
WHEREAS, the Borrower, the Guarantor and the Bank are party to
the Credit Agreement, dated as of March 4, 1997 (as amended, supplemented,
restated or otherwise modified from time to time, the "Agreement");
WHEREAS, the Borrower, the Guarantor and the Bank wish to
enter into certain amendments to the Agreement, all as more fully set forth
herein;
NOW THEREFORE, in consideration of the mutual execution hereof
and other good and valuable consideration, the parties hereto agree as follows:
SECTION 1. AMENDMENTS.
(a) Section 1.01 of the Agreement is hereby amended
by deleting the definition "APPLICABLE MARGIN" contained therein in its
entirety and inserting in lieu thereof the following:
"APPLICABLE MARGIN" shall mean, from time to time,
the Applicable Margin applicable to Offshore Rate Loans (as
each such term is defined in the Waterlink Credit Agreement)
as determined pursuant to the Waterlink Credit Agreement.
(b) Section 1.01 of the Agreement is hereby further
amended by deleting the date "February 18, 2000" appearing in the
definition "TERMINATION DATE" contained therein and inserting in lieu
thereof the date "June 27, 2000".
(c) Section 1.01 of the Agreement is hereby further
amended by deleting the date "February 19, 1997" appearing in the
definition "WATERLINK CREDIT AGREEMENT" contained therein and inserting
in lieu thereof the date "June 27, 1997".
(d) The signature page to the Agreement is hereby
amended by deleting the dollar amount "$2,200,000" contained thereon
and inserting in lieu thereof the dollar amount "$4,000,000".
<PAGE> 2
SECTION 2. REFERENCE TO AND EFFECT UPON THE AGREEMENT.
(a) Except as specifically amended above, the
Agreement shall remain in full force and effect and are hereby ratified
and confirmed.
(b) The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or remedy
of the Bank under the Agreement, nor constitute a waiver of any
provision of the Agreement, except as specifically set forth herein.
Upon the effectiveness of this Amendment, each reference in the
Agreement to "this Agreement", "hereunder", "hereof", "herein" or words
of similar import shall mean and be a reference to the Agreement as
amended hereby.
SECTION 3. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.
SECTION 4. HEADINGS. Section headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purposes.
SECTION 5. COUNTERPARTS. This Amendment may be executed in any
number of counterparts, each of which when so executed shall be deemed an
original but all such counterparts shall constitute one and the same instrument.
SECTION 6. EFFECTIVENESS. This Amendment shall become
effective as of the date first written above upon the delivery of executed
signature pages for this Amendment signed by the Borrower, the Guarantor and the
Bank.
[signature pages follow]
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this Amendment by
its duly authorized officer as of the date first written above.
WATERLINK (GERMANY) GmbH (f/k/a PROVISTA
EINHUNDERTSECHSUNDFUNFZIGSTE
VERWALTUNGSGESELLSCHAFT mbH)
By: /s/ Michael J. Vantusko
--------------------------------------
Title: Director
-----------------------------------
WATERLINK, INC., as Guarantor
By: /s/ Michael J. Vantusko
--------------------------------------
Title: Chief Financial Officer
-----------------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, FRANKFURT BRANCH
By: /s/ Rudi Perkowsky
--------------------------------------
Title: Geschaftsleiter & Country Manager
-----------------------------------
<PAGE> 1
EXHIBIT 11.1 - COMPUTATION OF EARNINGS PER SHARE
WATERLINK, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
1996 1997 1996 1997
----------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Average common shares outstanding 1,469,835 3,221,875 1,457,153 2,649,696
Net effect of the following common
stock equivalents (as if outstanding for
all periods presented):
Shares issued in connection with
acquisition of Waterlink
Technologies 611,784 -- 611,784 61,422
Shares issued in connection with
exercise of options to purchase
common stock 115,000 2,363 115,000 70,403
Conversion of convertible
subordinated notes into common
stock 100,000 -- 100,000 5,128
Conversion of preferred stock into
common stock (1) 3,250,000 3,107,143 3,250,000 3,202,381
Impact of outstanding stock options
and warrants (using treasury
stock method) 696,420 978,298 668,402 931,301
----------- ----------- ----------- ---------
Totals 6,243,039 7,309,679 6,202,339 6,920,331
=========== =========== =========== =========
Loss before extraordinary item $ (244,000) $(1,477,000) $ (225,000) $(492,000)
Extraordinary item -- (385,000) -- (385,000)
----------- ----------- ----------- ---------
Net Loss $ (244,000) $(1,862,000) $ (225,000) $(877,000)
=========== =========== =========== =========
Net loss per common share:
Loss before extraordinary item $ (0.04) $ (0.20) $ (0.04) $ (0.07)
Extraordinary item -- (0.05) -- (0.06)
----------- ----------- ----------- ---------
$ (0.04) $ (0.25) $ (0.04) $ (0.13)
=========== =========== =========== =========
</TABLE>
(1) Assumes conversion of Series A, Series B and Series C Preferred Stock
into Common Stock on a one-for-one basis.
23
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 3,573,000
<SECURITIES> 0
<RECEIVABLES> 18,247,000
<ALLOWANCES> 0
<INVENTORY> 6,498,000
<CURRENT-ASSETS> 37,915,000
<PP&E> 6,636,000
<DEPRECIATION> 262,000
<TOTAL-ASSETS> 86,650,000
<CURRENT-LIABILITIES> 22,830,000
<BONDS> 2,225,000
<COMMON> 11,000
0
0
<OTHER-SE> 61,584,000
<TOTAL-LIABILITY-AND-EQUITY> 86,650,000
<SALES> 41,043,000
<TOTAL-REVENUES> 41,043,000
<CGS> 25,076,000
<TOTAL-COSTS> 25,076,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,156,000
<INCOME-PRETAX> (788,000)
<INCOME-TAX> (296,000)
<INCOME-CONTINUING> (492,000)
<DISCONTINUED> 0
<EXTRAORDINARY> (385,000)
<CHANGES> 0
<NET-INCOME> (877,000)
<EPS-PRIMARY> (0.13)
<EPS-DILUTED> (0.13)
</TABLE>
