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Exhibit 2
SUBORDINATED NOTE PURCHASE AGREEMENT AND CREDIT FACILITY
AMONG
WATERLINK, INC.
AND
THE PURCHASERS NAMED HEREIN
DATED AS OF MARCH 6, 1997
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TABLE OF CONTENTS
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Page
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ARTICLE I DEFINITIONS....................................................................1
1.1 Definitions....................................................................1
1.2 Accounting Terms...............................................................6
1.3 References to Documents........................................................6
ARTICLE II PURCHASE AND SALE OF NOTES.....................................................6
2.1 Purchase and Sale of Notes.....................................................6
2.2 Interest Rate..................................................................7
2.3 Method of Payment and Prepayment...............................................8
2.4 The Closing....................................................................9
2.5 Delivery of the Note...........................................................9
2.6 Allocation of Purchase Price..................................................10
ARTICLE III REPRESENTATIONS AND WARRANTIES................................................10
3.1 Representations and Warranties of the Company.................................10
3.2 Representations and Warranties of the Purchasers..............................12
ARTICLE IV CONDITIONS PRECEDENT TO CLOSING...............................................13
4.1 Conditions Precedent to Obligations of the Purchasers.........................13
4.2 Conditions Precedent to Obligations of the Company............................15
ARTICLE V COVENANTS.....................................................................15
5.1 Financial Statements and Reports..............................................15
5.2 Compliance with Small Business Investment Act.................................16
5.3 Use of Proceeds...............................................................16
5.4 Dividends.....................................................................17
ARTICLE VI SUBORDINATION.................................................................17
6.1 Subordination.................................................................17
6.2 Subrogation...................................................................21
6.3 Constructive Trust, Etc.......................................................21
6.4 Restrictions on Additional Subordinated Indebtedness..........................21
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ARTICLE VII DEFAULTS......................................................................22
7.1 Defaults......................................................................22
7.2 Cross Acceleration............................................................23
ARTICLE VIII INDEMNITY.....................................................................23
8.1 Indemnification by the Company................................................23
8.2 Indemnification by Purchasers.................................................24
ARTICLE IX MISCELLANEOUS.................................................................24
9.1 Survival of Provisions........................................................24
9.2 Termination...................................................................24
9.3 Waiver Modifications in Writing...............................................24
9.4 Notice........................................................................25
9.5 Determinations................................................................26
9.6 Execution in Counterparts.....................................................26
9.7 Binding Effect; Assignment....................................................26
9.8 Governing Law.................................................................26
9.9 Severability of Provisions....................................................26
9.10 Headings......................................................................26
9.11 Entire Agreement..............................................................27
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SUBORDINATED NOTE PURCHASE AGREEMENT AND CREDIT FACILITY
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SUBORDINATED NOTE PURCHASE AGREEMENT AND CREDIT FACILITY, dated
as of March 6, 1997 (the "Agreement"), by and among Waterlink, Inc., a Delaware
corporation (the "Company"), ▇▇▇▇▇▇▇▇ Venture Partners III, L.P. ("▇▇▇▇▇▇▇▇")
and the Purchasers (the "Purchasers") named on the execution pages hereof.
In consideration of the mutual covenants and agreements set forth
herein and for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties agree as follows:
ARTICLE I
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DEFINITIONS
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1.1 DEFINITIONS. As used in this Agreement, unless the context requires
a different meaning, the following terms have the meanings indicated:
"ACT" means the Securities Act of 1933, as amended, and the rules and
regulations of the Commission promulgated thereunder.
"ADVANCE" means purchases and sales of Notes in accordance with Article
II of this Agreement.
"ADVANCE FEE" has the meaning provided for in Section 2.1(d) of this
Agreement.
"AFFILIATE" means, with respect to any Person, any Person that,
directly or indirectly, controls, is controlled by or is under common
control with such Person in question. For the purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect
to any Person, shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting
securities, by contract or otherwise.
"AGREEMENT" means this Note Purchase Agreement, as the same may be
amended, supplemented or modified in accordance with the terms hereof.
"ASSET SALE" means the sale by the Company or any of the Subsidiaries
of the Company to any Person of all or substantially all of the assets
of the Company.
"BCC" means ▇▇▇▇▇▇▇▇ Capital Corporation.
"BOA" means BOAI, BOA London and BOA Frankfurt.
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"▇▇▇▇▇▇▇▇" means ▇▇▇▇▇▇▇▇ Venture Partners III, L.P.
"▇▇▇▇▇▇▇▇ GUARANTY" means that certain Guaranty executed by ▇▇▇▇▇▇▇▇,
dated as of February 26, 1997, in favor of BOAI under the Loan
Documents.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day in which banking institutions in the State of
Ohio are authorized or obligated by law to close.
"CHANGE IN CONTROL" means any (1) merger, consolidation or similar
transaction in which the Company is not the surviving corporation into
an entity with a class of equity securities registered under the
Exchange Act or (ii) any merger, consolidation or similar transaction
with a Person not having a class of securities registered under the
Exchange Act and as a result of which the holders of voting securities
of the Company immediately prior thereto receive or hold less than
sixty-seven percent (67%) of the securities of the Company or its
successor immediately thereafter.
"CLOSING" has the meaning provided therefor in Section 2.4(a) of this
Agreement.
"CLOSING DATE" has the meaning provided therefor in Section 2.4(a) of
this Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended, as in
effect on the date of this Agreement and any successor code thereto.
"COMMISSION" means the Securities and Exchange Commission or any
similar agency then having jurisdiction to enforce the Act.
"COMMON STOCK" has the meaning provided therefor in Section 3.1(a) of
this Agreement.
"COMPANY" means Waterlink, Inc., a Delaware corporation.
"EOF" means Environmental Opportunities Fund, L.P.
"EOFC" means Environmental Opportunities Fund (Cayman), L.P.
"EVENT OF DEFAULT" has the meaning provided therefor in Section 7.1 of
this Agreement.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder.
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"GAAP" means generally accepted accounted principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such
other statements by such other entity as may be approved by a
significant segment of the accounting profession, that are applicable
to the circumstances as of the date of determination.
"GERMAN CREDIT AGREEMENT" means the Credit Agreement, dated as of March
4, 1997, among the Company, Provista Einhundertsechsundfunfzigste
Verwaltungsgesellschaft mbH (to be known as Waterlink (Germany) GmbH),
and Bank of America National Trust and Savings Association, Frankfurt
Branch ("BOA Frankfurt"), as the same may be amended, restated,
supplemented or otherwise modified from time to time.
"HOLDER" OR "NOTEHOLDER" means a registered holder of a Note(s).
"INDEBTEDNESS" as applied to any Person, means (i) all indebtedness for
borrowed money, (ii) that portion of obligations with respect to
capital leases or industrial revenue or development bonds that is
properly classified as a liability on a balance sheet in conformity
with GAAP, (iii) notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for
borrowed money, (iv) any obligation owed for all or any part of the
deferred purchase price of the property or services (excluding any such
obligations incurred under an employee benefit plan, which purchase
price is (y) due more than six months from the date of incurrence of
the obligation in respect thereof or (z) evidenced by a note or similar
instrument and excluding, in connection with any business acquisition
by the Company or its subsidiaries, any earnout obligations or deferred
purchase price therefor, whether or not evidenced by promissory notes)
and (v) all indebtedness secured by any Lien (other than trade
indebtedness secured by a statutory lien) on any property or asset
owned or held by that Person regardless of whether the indebtedness
secured thereby shall have been assumed by that Person or is
nonrecourse to the credit of that Person.
"INTEREST PAYMENT DATE" has the meaning provided therefor in Section
2.2 of this Agreement.
"INVESTMENT COMPANY ACT" means the Investment Company Act of 1940, as
amended, and the rules and regulations promulgated by the Commission
thereunder.
"IPO" means any initial firm commitment underwritten public offering of
Common Stock of the Company, the gross proceeds of which to the Company
and/or the selling stockholders (if any) are at least $30,000,000.
"IPP95" means IPP95, L.P.
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"LIEN" means any mortgage, pledge, security interest, encumbrance,
statutory lien, hypothecation or charge of any kind (including, without
limitation, any conditional sale or other title retention agreement or
lease in the nature thereof, any sale of receivables with recourse
against the seller or any other Person except the account debtors, any
filing or agreement to file a financing statement as debtor under the
Uniform Commercial Code or any similar statute other than to reflect
ownership by a third party of property under a lease which is not in
the nature of a conditional sale or title retention agreement, or any
subordination arrangement in favor of another Person).
"LOAN DOCUMENTS" means the Loan Documents under, and as defined in, the
Waterlink Credit Agreement, the German Credit Agreement and the Sweden
Credit Agreement.
"MAXIMUM AGGREGATE ADVANCES" has the meaning provided therefor in
Section 2.1(a) of this Agreement.
"NCCC" means National City Capital Corporation.
"NOTE" or "NOTES" means the Subordinated Notes due 2002 to be issued by
the Company to the Purchasers hereunder, in substantially the form of
Exhibit A hereto.
"OFFERING DOCUMENTS" means, collectively, this Agreement, the Note, the
Warrant Agreement, the Registration Rights Agreement and the Warrants.
"PERSON" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock
company, government (or an agency or political subdivision thereof) or
other entity of any kind.
"PREPAYMENT EVENT" means the earlier of (i) an IPO, (ii) a Change in
Control or (iii) an Asset Sale.
"PRO-RATA PERCENTAGE" means for any Holder the percentage determined by
dividing (i) the aggregate principal amount of Notes held by such
Holder by (ii) the aggregate principal amount of Notes outstanding. The
initial Pro-Rata Percentage is set forth on the signature pages hereto
of the Purchasers.
"PURCHASER" means each Person who accepts and agrees to the terms
hereof as indicated by signature on the execution page of this
Agreement or counterpart as referred to in Section 9.6 of this
Agreement.
"REGISTRATION RIGHTS AGREEMENT" means the agreement providing the
Purchasers with certain registration rights pertaining to the Common
Stock underlying the Warrants, in the form of the attached Exhibit B.
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"REPRESENTATIVES" means, collectively, the directors, officers,
partners, employees, agents or representatives, including, without
limitation, financial advisors, attorneys, accountants, experts,
consultants or agents of the Purchasers.
"REQUIRED PREPAYMENT" has the meaning provided for in Section 2.3(c) of
this Agreement.
"RIVER CITIES" means River Cities Capital Fund Limited Partnership.
"SBA" mean the U.S. Small Business Administration.
"SECURITIES" means any stock, shares, voting trusts, certificates,
bonds, debentures, options, warrants, notes, or other evidences of
indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as "Securities"
or any certificates of interest, shares or participation in temporary
or interim certificates for the purchase or acquisition of, any rights
as subscribed to, purchased or acquired, any of the foregoing.
"SECURITYHOLDERS' AGREEMENT" means that certain Amended and Restated
Stockholders' Agreement in the form of Exhibit C hereto to be executed
by the Company and the Purchasers on the Closing Date.
"SENIOR CREDIT FACILITY" means the credit facilities evidenced by the
Loan Documents.
"SENIOR INDEBTEDNESS" has the meaning provided therefor in Section
6.1(a) of this Agreement.
"SERIES A SHARES," "SERIES B SHARES," AND "SERIES C SHARES" have the
meanings provided for in Section 3.1(e) of this Agreement.
"SHARE PURCHASE AGREEMENT" means the Share Purchase Agreement among
AWPE Svenska AB, Anglian Water Holdings GmbH and the Buyers (as defined
therein), dated March 4, 1997.
"SMALL BUSINESS ACT" has the meaning provided for in Section 3.1(f) of
this Agreement.
"SUBORDINATED INDEBTEDNESS" means the indebtedness evidenced by the
Notes.
"SUBSEQUENT CREDIT FACILITY" means any credit facility entered into
upon or after termination of the Senior Credit Facility.
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"SUBSEQUENT LOAN DOCUMENTS" means the Subsequent Security Documents and
all such other documents entered into in connection with a Subsequent
Credit Facility, including, without limitation, a credit agreement
between the Company, any Subsidiaries of the Company and a Subsequent
Senior Lender.
"SUBSEQUENT SECURITY DOCUMENTS" means security documents entered into
in connection with a Subsequent Credit Facility.
"SUBSEQUENT SENIOR LENDER" means the lender(s) under any Subsequent
Credit Facility.
"SUBSIDIARY" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the
total voting power of shares of stock entitled without regard to the
occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the
Subsidiaries of that Person or a combination thereof.
"SWEDEN CREDIT AGREEMENT" means the Credit Agreement, dated as of March
4, 1997, among the Company, Gigantissimo 2061 AB (to be known as
Waterlink (Sweden) AB) and Bank of America National Trust and Savings
Association, London Branch ("BOA London"), as the same may be amended,
restated, supplemented or otherwise modified from time to time.
"TERMINATION DATE" means the earlier of (i) December 31, 1997 or (ii) a
Prepayment Event.
"WARRANT" or "WARRANTS" means the warrants to purchase Common Stock of
the Company to be issued to the Purchasers pursuant to the terms of the
Warrant Agreement.
"WARRANT AGREEMENT" means the Warrant Agreement of even date herewith,
in the form of Exhibit D hereto, among the Company and the Purchasers.
"WATERLINK CREDIT AGREEMENT" means the Credit Agreement, dated as of
February 19, 1997, among the Company, the financial institutions from
time to time party thereto and Bank of America Illinois ("BOAI"), as
agent, as the same may be amended, restated, supplemented or otherwise
modified from time to time.
1.2 ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP as in effect from time to
time, including, without limitation, applicable statements, bulletins, and
interpretations issued by the Financial Accounting Standards Board and
bulletins, opinions, interpretations, and statements issued by the American
Institute of Certified Public Accountants or its committees. When used herein,
the term "financial statements" shall include the notes and schedules thereto.
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1.3 REFERENCES TO DOCUMENTS. Any terms referring to instruments,
agreements or documents used herein shall mean and include such documents as
they may hereafter be amended, supplemented, modified or restated from time to
time.
ARTICLE II
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PURCHASE AND SALE OF NOTES
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2.1 Purchase and Sale of Notes.
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(a) ADVANCES. Subject to the provisions of this
Agreement, up to and including the Termination Date, each Purchaser for
itself and not for the others, hereby agrees to make Advances to the
Company up to but not exceeding an aggregate unpaid principal amount at
any one time outstanding equal to such Purchaser's Pro-Rata Percentage
multiplied by the difference between (i) Ten Million Dollars
($10,000,000) and (ii) the maximum amount guaranteed by ▇▇▇▇▇▇▇▇ under
the ▇▇▇▇▇▇▇▇ Guaranty (the "Maximum Aggregate Advances"). Upon
repayment of any Note or Notes, the principal amount thereof may not be
reborrowed by the Company. To the extent that ▇▇▇▇▇▇▇▇ or any
Contributor under the Contribution and Indemnification Agreement of
even date herewith among the parties hereto makes a payment under the
▇▇▇▇▇▇▇▇ Guaranty, the amount of such payments shall be deemed an
Advance hereunder.
(b) ADVANCE PROCEDURE. Advances shall be made pursuant
to the Company's written or facsimile request therefor (a "Request for
an Advance"), given by the Company to Purchasers no later than three
(3) Business Days prior to the date of disbursement (other than for the
initial Advance hereunder if on the Closing Date) stating the date of
the proposed borrowing, and the amount of the aggregate and each
Purchaser's Advance. Each Request for an Advance shall be signed by an
authorized person of the Company. Each borrowing shall consist of an
Advance made by each Purchaser in an amount equal to its Pro-Rata
Percentage of such borrowing and shall be in $100,000 multiples from
each Purchaser (treating EOF and EOFC as a single Purchaser for this
purpose only) and aggregate not less than $1,000,000 from all
Purchasers. Each Purchaser shall make available to the Company in
immediately available funds the amount of such Purchaser's Pro-Rata
Percentage of the Advances on the date requested in the Request for an
Advance. In the event that upon any request for an Advance ▇▇▇▇▇▇▇▇
Capital Corporation ("BCC") shall not have received the exemptive order
necessary for it to purchase Notes and Warrants as provided herein,
then each other Purchaser shall have the option to advance its pro rata
portion of the Advance that otherwise would have been required of BCC.
(c) NOTES. The Company shall execute and deliver to each
Purchaser a Note upon each Advance from such Purchaser.
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(d) ADVANCE FEE. Upon issuance of any Note to any
Purchaser, the Company shall pay to such Purchaser a fee ("Advance
Fee") equal to one percent (1%) of the principal amount of the Note
then issued; provided that the Advance Fee payable to IPP95 shall be
two percent (2%).
2.2 INTEREST RATE. The Company shall pay interest on the principal
amount of the Notes from time to time outstanding at the rate of twelve percent
(12%) (eight percent (8%) to IPP95 for the initial three month period of its
Notes) per annum for the period from and including the date of issuance of any
Note through, but not including the first anniversary date thereof and fourteen
percent (14%) per annum thereafter until the same shall be paid in full.
Interest payments shall be made quarterly in arrears on each June 30, September
30, December 31 and March 31 (collectively referred to herein as an "Interest
Payment Date"), commencing June 30, 1997. Interest will be computed on the basis
of a 360-day year and the actual number of days elapsed. Whenever any payment to
be made under the Notes shall be stated to be due on a day which is not a
Business Day, such payment may be made on the next succeeding Business Day, and
such extension of time in such case shall be included in the computation of the
payment of interest on the Notes.
2.3 Method of Payment and Prepayment.
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(a) The Company shall make Required Prepayments of the
principal amount of the Notes as and to the extent required by Section
2.3(c) hereof, on a pro rata basis, and may make voluntary principal
prepayments, which voluntary principal prepayments will be made on a
pro rata basis, from time to time of principal amount of the Notes in
aggregate amounts of not less than $100,000 without premium or penalty.
Any payments made on the Notes, whether of principal, interest or
premium (if any), shall be made ratably to all the Noteholders. If the
Company sets a date for the prepayment of any part of the principal
amount of the Notes, any prepayments of principal due on such date
shall be accompanied by the payment of all accrued and unpaid interest
on the portion of the principal amount of the Notes being prepaid to
the date fixed for prepayment. The Company will maintain records of the
amount of each Note, all payments and prepayments of principal and
interest thereon, the current outstanding principal balance thereof and
other appropriate information relating to the Notes. The Holder must
surrender its Note to the Company to collect the final principal
payment in cash on the Note at maturity, upon any Required Prepayment
or in the event the Company voluntarily prepays the Note in full. Any
prepayments on the Notes shall be applied in inverse order to Advances
made (i.e. last in, first out).
(b) The Company shall pay principal and interest in
money of the United States of America that at the time of payment is
legal tender for payment of public and private debts. So long as the
Purchaser shall be a Noteholder, the Company will pay (i) by wire
transfer of immediately available funds all sums becoming due on each
Note registered in the name of the Purchaser pursuant to the wire
transfer instructions provided by such Purchaser, or (ii) by mailing a
check to such Purchaser's address as the same appears on the
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books of the Company or such other address such Purchaser shall have
designated by notice to the Company, without presentment and without
notations being made thereon. All sums becoming due on each Note shall
be paid to the Purchaser thereof without reservation of any sums
therefrom for or on account of withholding (except to the extent
otherwise required by law), counterclaim or set off.
(c) To the extent that on or after March 6, 1999, the
Company refinances the Senior Credit Facility with a Subsequent Credit
Facility or suffers to exist any other Senior Indebtedness, which
Subsequent Credit Facility and other Senior Indebtedness, together,
provide aggregate senior credit to the Company of $30,000,000 or more
and the Company's Leverage Ratio (as defined in Section 8.16 of the
Waterlink Credit Agreement as in effect on the date hereof) exceeds 4.5
to 1.0, the Company shall prepay (a "Required Prepayment") the Notes in
an amount equal to the amount of such aggregate senior credit in excess
of $30,000,000. The Required Prepayment shall be made upon such
refinancing. The Notes shall be due and payable, subject to the terms
contained therein, together with all accrued interest thereon, on the
earlier of (i) March 6, 2002 or, solely as to NCCC and River Cities,
five (5) years from the date of the first Advance, or (ii) upon the
occurrence of a Prepayment Event.
2.4 The Closing.
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(a) Subject to Section 2.4(b) and subject also to the
satisfaction or waiver of each of the conditions precedent to the
Closing set forth in Article IV, the initial purchase and sale of Notes
in the aggregate principal amount specified in the Company's initial
Request for an Advance, if any, up to the Maximum Aggregate Advances
shall take place at a closing (the "Closing") at the offices of
Benesch, Friedlander, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, on the date hereof ("Closing
Date"), or at such other place agreed upon by the parties hereto.
(b) The Closing is conditioned on the simultaneous or
prior closings of the transactions contemplated by the Share Purchase
Agreement and the Loan Documents and the satisfaction or waiver of all
other conditions to Closing set forth in Article IV of this Agreement.
As a result, the Closing Date is subject to change. The Company has
provided or promptly shall provide each Purchaser which is a party to
this Agreement with written notice of any anticipated initial Advance
hereunder to be made on the Closing Date.
(c) Once each of the Purchasers is notified by the
Company personally (if in attendance at the Closing) or by telephone
that each and every condition to Closing has been or, simultaneously
with such Purchaser's payment hereunder, will be, either satisfied or
waived, each Purchaser shall then cause payment of the principal amount
of the Notes being purchased on such date, if any, to be made to the
Company by wire transfer of immediately available funds. The Company
shall have furnished to the Purchasers the
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account information at the time the Company notifies the Purchasers of
the date and time of the Closing.
(d) The obligation of the Purchasers to make any Advance
hereunder shall be subject to satisfaction of the following conditions
that at the date of making such Advance, and after giving effect
thereto: (a) no Event of Default or event which with the passage of
time or giving of notice, or both, would constitute an Event of
Default, shall have occurred and be then continuing and (b) each
representation and warranty set forth in Section 3 hereof is true and
correct as if then made. The acceptance by the Company of the proceeds
of any Advance shall be deemed to constitute as of the date of
acceptance a representation and warranty by the Company that all
conditions to make such Advance set forth in this Agreement have been
satisfied.
2.5 DELIVERY OF THE NOTE. Delivery of the Note purchased by a Purchaser
pursuant to this Agreement shall be made by the Company upon any Advance by
delivering to each such Purchaser against payment of the purchase price
therefor, a Note substantially in the form of Exhibit A attached to this
Agreement. As soon as practicable following the Closing, the Company shall
deliver a Note to each Purchaser not in attendance at the Closing who has paid
the full purchase price therefor in accordance with the provisions of Section
2.4(c) hereof. The Notes will be registered in the name of such Purchaser. The
Notes may only be transferred together with the related Warrants, subject
otherwise only to the express terms of the Warrant Agreement, the Warrants and
that certain Indemnification and Contribution Agreement, dated as of February
26, 1997, among Purchasers and ▇▇▇▇▇▇▇▇ and acknowledged by the Company.
2.6 ALLOCATION OF PURCHASE PRICE. Each Purchaser and the Company agree
that, as determined in accordance with Section 1.1273-2(h) of the Regulations
promulgated pursuant to the Code as amended, the issue price for federal income
tax purposes to be allocated to each Note issued together with the Warrants
shall equal $970,000 for each $1,000,000 of principal amount of such Note, and
the issue price for the Warrants attributable to such $1,000,000 of principal
shall equal $30,000.
ARTICLE III
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REPRESENTATIONS AND WARRANTIES
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3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and covenants and agrees with, as of the Closing
Date and as of the date of each Advance, each of the Purchasers as follows, it
being acknowledged and agreed by the Company that each of the Purchasers is
relying upon such representations and warranties and covenants for the purpose
of making and undertaking the representations, warranties and covenants set
forth in Section 3.2 and in the purchase of the Notes hereunder:
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(a) ORGANIZATION, QUALIFICATION AND CORPORATE POWER. The
Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and is duly
licensed or qualified to do business as a foreign corporation and in
good standing in each other jurisdiction in which it owns or lease any
real property or in which the nature of business transacted by it makes
such licensing or qualification necessary and where the failure to be
so licensed or qualified would have a material adverse effect on the
operations or financial condition of the Company. The Company has the
corporate power and authority to own and hold its properties and to
carry on its business as currently conducted and as proposed to be
conducted, and to execute, deliver and perform this Agreement and the
transactions contemplated hereby, and to issue, sell and deliver Notes
and the Warrant and, upon exercise of the Warrants, to issue and
deliver the number of the shares of Common Stock, $.001 par value
("Common Stock"), of the Company issuable upon such exercise (the
"Conversion Shares"). The Company does not own of record or
beneficially, directly or indirectly, (i) any shares of outstanding
capital stock or securities convertible into capital stock of any other
corporation other than shares of capital stock of its Subsidiaries, or
(ii) any participating interest in any partnership, joint venture or
other non-corporate business enterprise.
(b) AUTHORIZATION OF AGREEMENT. The execution, delivery
and performance by the Company of this Agreement and the other
agreements and transactions contemplated hereby to be delivered or
completed, the issuance, sale and delivery of the Notes, and the
delivery of the Conversion Shares upon exercise of the Warrants have
been duly authorized by all requisite corporate action and do not
violate any provision of law, any order of any court or other agency of
government, the Fourth Amended and Restated Certificate of
Incorporation (as amended) or the By-laws of the Company, or any
provision of any indenture, agreement or other instrument by which the
Company or any of its properties or assets is bound or affected, or
conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under any such indenture, agreement or
other instrument, or result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any of the
properties or assets of the Company.
(c) AUTHORIZATION OF CONVERSION SHARES. The Conversion
Shares have been duly reserved for issuance upon exercise of the
Warrants and, when so issued, will be duly authorized, validly issued
and outstanding, fully paid and non-assessable shares of Common Stock.
Neither the issuance, sale and delivery of the Notes, nor the issuance
and delivery of the Conversion Shares upon exercise of the Warrants is
subject to any preemptive rights of stockholders of the Company or to
any right of first refusal or other similar right in favor of any
person, except as provided in the Securityholders Agreements, the
provisions of which have been complied with by the Company.
(d) VALIDITY. This Agreement and the other agreements
and documents contemplated hereby to be executed and delivered have
been duly executed and delivered by the Company and constitute the
legal, valid and binding obligations of the company,
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enforceable in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, fraudulent conveyance and other similar laws and
principles of equity affecting creditors' rights and remedies
generally.
(e) CAPITAL STOCK. The authorized capital stock of the
Company as of the date hereof is as set forth on Schedule 3.1 hereto.
(f) SMALL BUSINESS CONCERN. The Company acknowledges
that River Cities and NCCC are Federal licensees under the Small
Business Investment Act of 1958, as amended (the "Small Business Act").
The Company, together with its "affiliates" (as that term is defined in
Title 13, Code of Federal Regulations, ss. 121.101 ET SEQ.), is a
"small business concern" within the meaning of the Small Business Act
and the regulations thereunder, including Title 13, Code of Federal
Regulations, ss. 121.101 ET SEQ. The information regarding the Company
and its affiliates set forth in the SBA Forms 480, 652 and 1031
delivered at the Closing shall be accurate and complete. The Company
does not presently engage in, and it shall not hereafter engage in, any
activities, nor shall the Company use directly or indirectly the
proceeds hereunder for any purpose for which a Small Business
Investment Company is prohibited from providing funds by the Small
Business Act and the regulations thereunder (including Title 13, Code
of Federal Regulations, ss. 107.720 ET SEQ.).
(g) OFFERING OF THE NOTES. Neither the Company nor any
person acting on its behalf has taken or will take any action which
might subject the offering, issuance or sale of the Notes to the
registration provisions of the Act.
(h) DISCLOSURE. As of the date hereof, neither this
Agreement nor any Schedule annexed hereto, nor any certificate or other
instrument referred to herein and furnished to the Purchasers by the
Company, contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements
contained therein or herein, in the light of the circumstances under
which they were made, not misleading. During the course of the
transaction and prior to any Purchaser's purchase of the Notes, the
Company has provided to such Purchaser, or allowed such Purchaser free
access to, the information sufficient to allow the Purchasers to make
an informed investment decision. As of the date hereof, to the best
knowledge of the Company's management, there is no fact known to the
Company relating to its business, affairs, operations, condition,
prospects, properties or assets which may materially adversely affect
it and which has not been disclosed to the Purchasers by the Company.
3.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each of the
Purchasers, severally and not jointly, represents and warrants to, and covenants
and agrees with, the Company as follows, it being acknowledged and agreed by
each such Purchaser that the Company is relying upon such representations and
warranties and covenants for the purpose of making and undertaking
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the representations, warranties and covenants set forth in Section 3.1 and
Article V of this Agreement and in the issuance and sale of the Notes hereunder:
(a) The Note and Warrants to be acquired by it pursuant
to the Offering Documents (i) are being acquired for its own account
and with no intention of distributing or reselling such Note or
Warrants or any part thereof (except in compliance with the Act and the
Offering Documents) and (ii) have not been, and will not be, registered
under the Act, by reason of their issuance by the Company in a
transaction exempt from the registration requirements of the Act, and
each Purchaser acknowledges that the Note and Warrants may not be sold,
transferred, pledged or hypothecated unless such sale, transfer, pledge
or hypothecation is pursuant to an effective registration statement
covering such Note and Warrants and filed in accordance with the Act or
is exempt from such registration in the opinion of counsel reasonably
acceptable to the Company.
(b) That it is an "accredited investor" as defined in
Rule 501(a) under the Act
(c) That (i) it is authorized, and has all requisite
power and authority, to execute and deliver this Agreement and perform
the obligations and duties created hereby;
(ii) this Agreement has been duly and validly executed
by it and constitutes its valid and binding obligation, enforceable in
accordance with its terms; (iii) the purchase of the Note and Warrants
does not violate its charter, by-laws, partnership agreement, agreement
of trust or similar document or any law or regulation to which it is
subject; (iv) it has had a full opportunity to request from the Company
and to review and has received all information which it deems relevant
in making a decision to purchase the Notes and Warrants being purchased
or to be purchased by it hereunder and the Conversion Shares, (v) it
will comply with the restrictions on transferability of the Warrants
and the Conversion Shares contained in the Securityholders' Agreement,
(vi) it has the experience in making investments to make its own
investment decision, (vii) it is able to withstand the total loss of
its investment in the Company and (viii) it acknowledges that it has
made its investment decision with respect to all of the Notes being
purchased and to be purchased by it hereunder and further acknowledges
that it is not entitled to any further disclosure in connection with
the Company's requiring Advances hereunder.
ARTICLE IV
----------
CONDITIONS PRECEDENT TO CLOSING
-------------------------------
4.1 COMPANY OBLIGATIONS. The obligations of each Purchaser to purchase
the Note to be purchased by it hereunder is subject, at or prior to the Closing
Date and as specified below on each Advance date, to the satisfaction of each of
the following conditions (any and all of which may be waived in writing by any
of the Purchasers on behalf of themselves individually); provided that the
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obligatons of BCC are subject to its having received an exemptive order from the
Securities and Exchange Commission permitting its purchase of Notes and Warrants
as provided for herein.
(a) The representations and warranties made by the Company
herein shall be true and correct in all material respects on and as of
the Closing Date and on each Advance date with the same effect as
though such representations and warranties had been made on and as of
the Closing Date and each Advance date, as the case may be, and the
Company shall have complied in all material respects with all
agreements hereunder required to be performed by it at or prior to the
Closing Date and on each Advance date.
(b) Neither the purchase of the Note agreed to be purchased by
such Purchaser hereunder nor the performance of any other obligations
of such Purchaser under the Offering Documents shall at the Closing
Date or any Advance date be prohibited or enjoined (temporarily or
permanently) under the laws of any jurisdiction to which Purchaser is
subject.
(c) On the Closing Date and each Advance date, each Purchaser
shall have received a certificate, dated the Closing Date, signed by an
authorized officer of the Company stating that the conditions specified
in Sections 4.1(a) and 4.1(b) have been satisfied, unless otherwise
waived by such Purchaser in accordance with the terms hereof.
(d) On the Closing Date, each Purchaser shall have received a
certificate, dated the Closing Date, signed by the secretary or
assistant secretary or other officer of the Company attaching true and
correct copies of the certificate of incorporation and By-Laws of the
Company and a resolution or resolutions of the Company's board of
directors authorizing the transactions contemplated by this Agreement.
(e) No default or Event of Default shall exist under this
Agreement as of the Closing Date or any Advance date.
(f) Purchaser shall have received all other documents,
agreements and certificates as Purchasers may reasonably request.
(g) There shall not have been any material adverse change in
the financial condition or prospects of the Company and or the
Subsidiaries of the Company, taken as a whole, prior to the Closing
Date.
(h) At or prior to the Closing Date, all consents and
approvals necessary to effect the transactions contemplated by this
Agreement shall have been obtained.
(i) At or prior to the Closing Date, the Offering Documents
required to be executed by the Company shall have been executed by the
Company and any other parties thereto other than the Purchaser and
delivered to the Purchasers.
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(j) Notes in form and substance reasonably satisfactory to
each Purchaser and its counsel, in an aggregate principal amount of the
initial Advances made hereunder shall have been issued to the
Purchasers as of any Advance date.
(k) The Company shall have duly authorized, validly issued and
delivered the Warrants to the Purchasers pursuant to the terms of the
Warrant Agreement.
(l) The transactions contemplated by the Share Purchase
Agreement and the Loan Documents shall have closed.
(m) The Company shall have paid to the Purchasers his or its
reasonable out-of-pocket expenses, including legal fees and
disbursements incurred in connection with the transactions contemplated
by this Agreement in an amount not to exceed fifteen thousand dollars
($15,000) and, on a pro rata basis, the Advance Fee pertaining to the
Notes issued upon Closing and each Advance date, as applicable.
(n) The Company shall have executed and delivered to
Purchasers the Registration Rights Agreement.
(o) The Company shall have entered into an advisory agreement
with ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ Inc. in a form mutually acceptable to the
Company and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ Inc.
(p) The Company shall have executed and delivered to River
Cities and NCCC a Size Status Declaration on SBA Form 480 and an
Assurance of Compliance on SBA Form 652, and shall have provided to
River Cities and NCCC information necessary for the preparation of a
Portfolio Financing Report on SBA Form 1031.
4.2 PURCHASER OBLIGATIONS. The obligations of the Company to issue and
sell the Notes pursuant to this Agreement are subject, at the Closing Date and
as of the date of any Advance to the representations and warranties made by each
of the Purchasers being true and correct in all material respects as though such
representations and warranties had been made on and as of the Closing Date and
as of the date of any Advance, as the case may be.
ARTICLE V
---------
COVENANTS
---------
5.1 FINANCIAL STATEMENTS AND REPORTS. The Company covenants and agrees
that so long as a Purchaser or any permitted transferee of a Purchaser shall
hold of record 100 or more of the shares of Common Stock acquired by such
Purchaser pursuant to this Agreement (treating for the purpose of such
computation the holders of Series A Shares and/or Series B Shares and/or Series
C
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Shares or Warrants as holding the maximum number of Common Shares issuable upon
conversion of such shares or exercise of such Warrants), and as to any
Noteholder so long as its Note is outstanding the Company shall furnish to such
Purchasers and each such permitted transferee and to each Noteholder:
(a) Within 120 days after the end of each fiscal year of the
Company, a balance sheet of the Company (or a consolidated balance
sheet of the Company and its subsidiaries, as the case may be) as of
the end of such fiscal year and the related statements (or consolidated
statements) of income, changes in stockholders' equity and changes in
financial position of the Company (or of the Company and its
subsidiaries) for the fiscal year then ended, together with supporting
notes thereto, certified without qualification as to scope of audit by
a firm of independent public accountants of national standing selected
by the Company and reasonably acceptable to the Purchasers and each
such transferee;
(b) Within 30 days after the end of each month in each fiscal
year, a balance sheet of the Company and its subsidiaries, as the case
may be, and the related statement (or consolidated statements) of
income and changes in financial position, unaudited but certified by
the chief financial officer of the Company, such balance sheets to be
as of the end of such month and such statements of income to be for
such month and for the period from the beginning of the fiscal year to
the end of such month, in each case subject to normal and recurring
year-end adjustments; provided, however, that in the event that such
balance sheet and related statements of income cannot be prepared
within such 30-day period because of inadequacies in the accounting
system of any entity acquired by the Company, the Company shall furnish
such balance sheet and related statements of income as soon thereafter
as is possible, and the Company shall use reasonable efforts to remedy
such inadequacies so that future balance sheets and related statements
of income may be prepared within the applicable 30-day periods;
(c) Within 30 days prior to the beginning of each fiscal year
of the Company (and with respect to any revision thereof, promptly
after such revision has been prepared), a proposed operating budget for
the Company (or of the Company and its subsidiaries, as the case may
be), insofar as practicable, including projected monthly income
statements, cash flow statements during such fiscal year and a
projected balance sheet as of the end of such fiscal year, and each
monthly financial statement furnished pursuant to 9(b) above shall
reflect variances from such operating budget, as same may from time to
time be revised; provided, however, that in the event that such annual
budget cannot be prepared within such 30-day period because of
inadequacies in the accounting system of any entity acquired by the
Company, the Company shall furnish such annual budget as soon
thereafter as is possible, and the Company shall use reasonable efforts
to remedy such inadequacies so that future annual budgets may be
prepared within the applicable 30-day periods;
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(d) Promptly upon filing, copies of all registration
statements, prospectuses, periodic reports and other documents filed by
the Company with the Securities and Exchange Commission; and
(e) Promptly, from time to time, such other information
regarding the operations, business, affairs and financial condition of
the Company or any Subsidiary as Purchaser or any permitted transferee
of a Purchaser may reasonably request.
5.2 COMPLIANCE WITH SMALL BUSINESS INVESTMENT ACT. The Company agrees
to provide River Cities and NCCC with sufficient information to permit River
Cities and NCCC to comply with its obligations under the Small Business Act and
the regulations thereunder. Upon reasonable request, the Company shall also
provide River Cities and NCCC with (i) access to the Company's properties,
places of business, records (including financial records) and offices during
business hours and (ii) the opportunity to discuss the affairs, finances and
accounts of the Company with the officers. River Cities and NCCC and
representatives of the SBA shall be given access to the Company's records to
confirm that the proceeds received by the Company in connection with the Closing
are used for the purposes delineated in Section 5.3. The President of the
Company shall certify to River Cities and NCCC, within three (3) months of the
date of the Closing, that the Company has used the proceeds in accordance with
the purposes delineated in Section 5.3.
5.3 USE OF PROCEEDS. The Company agrees to use the investment proceeds
from each Purchaser that is a Small Business Investment Company for prospective
acquisitions, and/or for working capital. If the Company shall, without the
consent of such Purchaser, use the proceeds from such Purchaser's investment for
a purpose not described above, such Purchaser may demand that the Company
repurchase the Note and Warrants at a price equal to the purchase price paid for
such securities as required by SBA Regulations Section 107.305. Further, the
Company will use the investment proceeds from each Purchaser to repay any
overadvance under the Loan Documents with respect to which ▇▇▇▇▇▇▇▇ is a
guarantor.
5.4 DIVIDENDS. So long as any Notes are outstanding, the Company shall
not pay cash dividends on its capital stock.
ARTICLE VI
----------
SUBORDINATION
-------------
6.1 SUBORDINATION. So long as, and from time to time while, any Senior
Indebtedness is outstanding, anything in this Agreement or the Notes to the
contrary notwithstanding, the indebtedness of the Company hereunder as evidenced
by the Notes shall be subordinate and junior in right of payment, to the extent
and in the manner set forth in this Article VI, to all Senior Indebtedness of
the Company from time to time outstanding (whether outstanding at the date of
this Agreement or incurred after the date of this Agreement) and as the Notes
may at any time and from
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time to time be modified or amended in any respect and to all other indebtedness
hereafter made or assumed by the Company, which by the terms of such
indebtedness or by the terms of any indenture or other instrument pursuant to
which such indebtedness is made, assumed or incurred is specifically designated
as "Senior Indebtedness" for the purposes of this Agreement and which is
permitted to be issued, made, assumed and incurred according to the terms of
this Agreement provided that such indebtedness is included within the definition
of Senior Indebtedness as set forth in the following paragraph (a).
(a) "Senior Indebtedness" means all indebtedness and other
obligations specified below whether outstanding on the date of this
Agreement or hereafter created, incurred or assumed by the Company:
(i) the obligations of the Company and its
Subsidiaries, including, without limitations the principal of,
and premium and interest on, all loans, letters of credit
bankers' acceptances and other extensions of credit under the
Loan Documents and all commitment, facility and other fees and
all expenses, reimbursements, indemnities and other amounts
payable by the Company thereunder;
(ii) subject to Section 2.3(c) above, all other
indebtedness of the Company which by its express terms is made
senior to the Notes; provided, however, that any indebtedness
incurred by the Company under this clause (ii) must be created
in connection with or arise out of a transaction in which the
Company or any Subsidiaries of the Company received cash loan
proceeds, property or credit support in the form of a letter
of credit, guaranty or like instrument;
(iii) all interest accrued or accruing on Senior
Indebtedness after the commencement of any insolvency,
bankruptcy or receivership case or proceeding in accordance
with and at the contract rate (including, without limitation,
any rate applicable upon default) specified in the agreement
or instrument creating, evidencing or governing any such
Senior Indebtedness, whether or not, pursuant to applicable
law or otherwise, the claim for such interest is allowable as
a claim in such case or proceeding; and
(iv) subject to Section 2.3(c) above, any
refinancings, refundings, renewals or extensions, in whole or
in part, of any indebtedness or other obligation described in
clauses (i) or (ii) above under any Subsequent Loan Documents
or otherwise.
(b) In the event of (i) any insolvency or bankruptcy
proceeding brought by or against the Company; (ii) any receivership,
liquidation, reorganization or other similar proceeding relative to the
Company or to its property, including its Subsidiaries; or (iii) any
proceedings for voluntary liquidation, dissolution or other winding up
of the Company, whether or not involving insolvency or bankruptcy, the
holders of Senior Indebtedness shall be entitled to receive payment in
full in cash of all principal, premium (if any), fees and
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charges in respect of, and interest on, all Senior Indebtedness
(including interest thereon accruing after the commencement of any such
proceedings) before the holders of the Notes shall be entitled to
receive any payment or distribution in respect of the Notes. Pursuant
to the foregoing, the holders of Senior Indebtedness (until payment in
full in cash of all principal, premium (if any), fees and charges in
respect of, and interest on, all Senior Indebtedness, including
interest thereon accruing after the commencement of any such
proceedings at the rate specified in the applicable Senior Indebtedness
whether or not such interest is an allowable claim in such case or
proceeding) shall be entitled to receive for application and payment
thereof any payment or distribution of any kind or character, whether
in cash or property or securities, which may be payable or deliverable
in any such proceedings in respect of the Notes (including any such
payment or distribution which may be payable or deliverable by virtue
of the provisions of, or any security for, any securities which are
subordinate and junior in right of payment of the Notes). The Holders
of the Notes shall not exercise or attempt to exercise any right of set
off or counterclaim in respect of any obligations of the Holders of the
Notes to the Company against the obligations of the Company under the
Notes if the effect thereof shall be to reduce the amount of any such
payment or distribution to which the holders of Senior Indebtedness
would be entitled in the absence of such set off or counterclaim; and
if and to the extent that notwithstanding the foregoing, the Holders of
the Notes are required by any mandatory provision of law to exercise
any such right of set off or counterclaim each reduction of the amount
owing on account of the principal of or interest on the Notes by reason
of such set off or counterclaim shall be deemed to be a payment by the
Company in a like manner in respect of the Notes to which the second
sentence of this paragraph (b) shall apply.
(c) In the event that any default shall occur and be
continuing with respect to any Senior Indebtedness permitting the
holders, with or without the making of demand, the giving of notice or
otherwise, of such Senior Indebtedness to accelerate the maturity
thereof, the Company shall not pay and the Holders shall not be
entitled to receive any payment or distribution in respect of the Notes
of any kind, whether of principal, premium (if applicable) or interest
or, except to the extent otherwise provided in Section 6.2 of this
Agreement, institute any judicial or legal proceedings or seek to
enforce any other rights or remedies whatsoever UNLESS AND UNTIL (i) a
period of one hundred seventy-five (175) days (the "Blocking Period")
shall have elapsed from the date of such default without the same
having been cured or waived; and (ii) the Blocking Period shall have
elapsed without any holder of Senior Indebtedness having accelerated
the maturity of such Senior Indebtedness, but in such event, upon the
satisfaction of the conditions set forth in (i) and (ii) above, the
holders of the Notes will have the rights and remedies contemplated by
this Agreement.
(d) Nothing in this Agreement will prohibit the holder of any
Senior Indebtedness at any time and from time to time without the
consent of or notice to any holder of the Notes from taking any of the
following actions:
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(i) subject to Section 2.3(c) above, extending,
renewing, modifying, waiving or amending the terms of such
Senior Indebtedness;
(ii) following 5 days notice to the Noteholders of
the terms thereof, (or, in the case of an auction, the time
and place of sale) the sale other than by the Company in the
ordinary course of business of any material portion of the
property pledged, mortgaged or otherwise securing Senior
Indebtedness in accordance with the terms of the Loan
Documents or the Subsequent Loan Documents, PROVIDED, HOWEVER,
that the failure to deliver such notice shall not otherwise
prohibit such Person from effecting such sale pursuant to the
terms of the Loan Documents or the Subsequent Loan Documents;
(iii) exchanging, releasing or otherwise dealing with
any property pledged, mortgaged or otherwise securing Senior
Indebtedness or releasing a guarantor or any other person
liable in any manner for the Senior Indebtedness or amending
or waiving the terms of any guaranty of the Senior
Indebtedness;
(iv) exercising or refraining from exercising any
rights against the Company or any other person;
(v) applying any sums, in any manner, by whomever
paid or however realized, to the Senior Indebtedness; and
(vi) taking any other action which otherwise might be
deemed to impair the rights of the holders of the Senior
Indebtedness.
Subject to the terms of this Agreement, any and all of such
actions may be taken by the holders of Senior Indebtedness without
incurring responsibility to any Holder of the Notes and without
impairing or releasing the obligations of any Holder of the Notes to
the holders of Senior Indebtedness.
(e) No right of any present or future holder of any Senior
Indebtedness to enforce the provisions of this Article VI shall at any
time in any way be prejudiced or impaired by any action or failure to
act on the part of the Company or anyone in custody of its assets or
property or by any act or any failure to act on the part of any such
holder or any other holder of Senior Indebtedness or by any breach by
the Company of the terms of this Agreement or the Notes, irrespective
of any knowledge thereof on the part of any such holder or any other
holder of Senior Indebtedness.
(f) Each Holder of the Notes will at all times retain the
right to vote its claims and otherwise act and participate in any
insolvency, bankruptcy or reorganization proceeding relative to the
Company; provided, however, no Holder of the Notes shall take any
action or
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vote its claims in the course of any such bankruptcy, insolvency or
reorganization proceedings so as to:
(i) contest the validity or the enforceability of the
agreements governing Senior Indebtedness including the Loan
Documents or any Subsequent Loan Documents, the promissory
notes issued to the holders of Senior Indebtedness, or the
liens and security interests to the extent granted with
respect to the Senior Indebtedness;
(ii) contest the rights and duties of the holders of
Senior Indebtedness established in the agreements or
instruments governing the same or any security agreement with
respect to such liens and security interests;
(iii) contest the validity or enforceability of this
Article VI;
(iv) contest the validity or enforceability of this
Agreement or any agreement or instrument to the extent
evidencing or relating to the Indebtedness of Company to such
Holder; or
(v) compromise their claims so as to deprive the
holders of Senior Indebtedness of the benefit of receiving all
amounts otherwise payable to the Holders of the Notes pursuant
to the reorganization or liquidation of the Company resulting
from such proceeding;
it being understood that nothing contained in this Section 6.1(f) shall
be deemed to relieve the Company of its obligations under Section
2.3(c) of this Agreement.
(g) No Affiliate or Subsidiary of the Company may take any
action or make any payment in respect of or in regard to the Notes if
the Company would be prohibited from taking such action or making such
payment pursuant to this Article VI.
(h) The provisions of this Article VI shall be given
independent effect so that if a particular payment as to the Notes is
prohibited by any one of such provisions, it shall be prohibited
although it otherwise may not be prohibited by any other provisions.
6.2 SUBROGATION Subject to the payment in cash in full of all Senior
Indebtedness, the Holders of the Notes shall be subrogated to the rights of the
holders of Senior Indebtedness to receive payments or distributions of assets of
the Company payable or distributable to the holders of Senior Indebtedness and,
as among the Company and its Subsidiaries, their creditors and the holders of
the Notes, no payments or distributions otherwise payable or deliverable in
respect of the Notes but by virtue of the provisions thereof and of Section 6.1,
paid or delivered to the holders of Senior Indebtedness shall be deemed to be a
payment by the Company on account of the Notes.
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6.3 CONSTRUCTIVE TRUST, ETC. In the event that any Noteholder receives
any payment or distribution in contravention of the provisions hereof, such
Holder shall hold such payment or distribution in trust for the benefit of the
holders of Senior Indebtedness, and shall deliver such payment or distribution
to the holders of such Senior Indebtedness, or their respective representatives,
ratably according to the aggregate amounts remaining unpaid on account of the
Senior Indebtedness held or represented by each, to the extent necessary to make
payment in cash in full of all Senior Indebtedness remaining unpaid after giving
effect to any concurrent payment or distribution to the holders of such Senior
Indebtedness.
6.4 RESTRICTIONS ON ADDITIONAL SUBORDINATED INDEBTEDNESS. The Company
will not create or suffer to exist any Indebtedness that (i) provides that it is
subordinate in right of payment to the Senior Indebtedness other than the Notes
and (ii) is senior in right of payment to the Notes or is secured.
The Company shall give to each Noteholder a copy of any notice of
acceleration of the maturity date of any Senior Indebtedness promptly upon
receipt thereof.
No present or future holder of Senior Indebtedness shall be prejudiced
in such holder's right to enforce subordination of any Note by any act or
failure to act on the part of the Company or anyone in custody of its assets or
property. The provisions of this Article VI are solely for the purpose of
defining the relative rights of the holders of Senior Indebtedness on one hand,
and the Holders of the Notes on the other hand, and nothing herein shall impair,
as between the Company and the Holders of the Notes, the obligation of the
Company, which is unconditional and absolute, to pay the Holders thereof the
principal and interest thereon in accordance with the terms thereof.
ARTICLE VII
-----------
DEFAULTS
--------
7.1 DEFAULTS. If any of the following events (herein called an "Event
of Default" or collectively "Events of Default") shall have occurred and be
continuing, that is to say:
(a) default shall be made in the payment of any interest,
principal or premium (if any) when due on any of the Notes and such
default shall have continued for a period of twelve (12) days; or
(b) the Company breaches or defaults in the performance of any
provision of this Agreement and such breach or default shall have
continued for a period of thirty (30) days; or
(c) the Company defaults in any payment of principal of or
interest on any Senior Indebtedness, beyond any period of grace
provided with respect thereto or in the performance of any other term
or condition contained in any agreement under which any such obligation
is created if the effect of such default results in Senior Indebtedness
in excess of $1,000,000
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becoming due prior to its stated maturity without such indebtedness
being discharged or such acceleration being rescinded or annulled
within a period of sixty (60) days; or
(d) an order for relief shall be entered in any federal
bankruptcy proceeding in which the Company is the debtor; or
bankruptcy, receivership, insolvency, reorganization, relief,
dissolution, liquidation or other similar proceedings shall be
instituted by or against the Company or all or any part of the property
of the Company under the Federal Bankruptcy Code or any other
bankruptcy or insolvency law of the United States or any bankruptcy or
insolvency law of any state of competent jurisdiction unless, if such
proceedings are instituted against the Company, such proceedings are
dismissed and discharged within ninety (90) days after they are
instituted; or
(e) the Company shall have become insolvent or unable to pay
its debts as they mature, cease doing business as a going concern,
undergo dissolution or liquidation, make an assignment for the benefit
of creditors, admit in writing its inability to pay its debts as they
become due, or if a trustee, receiver or liquidator shall be appointed
for the Company, or for any substantial portion of the assets of the
Company, and such appointment shall not be vacated within ninety (90)
days; or
(f) further, any diversion by the Company of the proceeds
hereunder from the use of proceeds as delineated in Section 5.3 shall
be an Event of Default pertaining to River Cities and NCCC requiring
the immediate repayment of River Cities' and NCCC's Notes and full
refund of the purchase price for their Warrants, plus accrued and
unpaid interest on the Notes.
then, except as provided below with respect to an Event of Default under
paragraph (a) of this Section 7.1, the Holder of the Note if only one Note shall
be outstanding, or the Holders of at least a majority of the principal amount of
the Notes, if more than one Note shall be outstanding, may at its or their
option, after notice in writing to the Company, declare the Note or all of the
Notes, as the case may be, to be forthwith due and payable and thereupon the
Note, or all of the Notes, shall be and become due and payable, together with
interest and all other amounts accrued thereon (provided that if an Event of
Default results from the filing of a voluntary petition in any bankruptcy
proceeding or the filing of an involuntary petition in any bankruptcy proceeding
which is not dismissed and discharged within ninety (90) days, the Notes
thereupon shall immediately become due and payable, with interest accrued
thereon, without any notice from the holders of the Notes or otherwise), and,
subject to the provisions of Article VI hereof, the Holder or Holders of the
Note or Notes may take any action or proceeding at law or in equity which it or
they deem advisable for the protection of its or their interests to collect and
enforce payment and the Company shall pay all expenses, court costs and
reasonable attorneys' fees incurred in connection with or arising out of any
default hereunder. Notwithstanding the foregoing, in case an Event of Default
under paragraph (a) of this Section 7.1 shall occur, the Holders shall have none
of the rights and remedies otherwise contemplated by this Section 7.1
(including, without limitation, the right to accelerate the maturity of the
Notes) UNLESS AND UNTIL (i) Blocking Period shall have elapsed from the date of
such Event of
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Default without the same having been cured or waived; and (ii) the Blocking
Period shall have elapsed without any holder of Senior Indebtedness having
accelerated the maturity of such Senior Indebtedness, but in such event, upon
the satisfaction of said conditions (i) and (ii) above, the Holders will have
the rights and remedies contemplated by this Section 7.1.
7.2 CROSS ACCELERATION. In the event that the holders of Senior
Indebtedness in excess of $1,000,000 shall accelerate the maturity of any such
Senior Indebtedness, as a result of a default under the Loan Documents or the
Subsequent Loan Documents, then the indebtedness outstanding on the Notes,
including all accrued and unpaid interest, principal and premium, if any, as
well as any fees and expenses payable to the Noteholders, (unless waived by the
holders of Senior Indebtedness in excess of $1,000,000) shall be simultaneously
accelerated. If any acceleration is rescinded or annulled by the holders of
Senior Indebtedness within sixty (60) days from such acceleration of such Senior
Indebtedness, the acceleration of the Notes will automatically be rescinded.
ARTICLE VIII
------------
INDEMNITY
---------
8.1 INDEMNIFICATION BY THE COMPANY. The Company agrees and covenants to
hold harmless and indemnify each of the Purchasers and any Affiliates thereof
(including any director, officer, employee, agent, investment advisor or
controlling person of any of the foregoing) from and against any losses, claims,
damages, liabilities and any expenses (including, expenses of investigation) to
which such Purchaser and its Affiliates may become subject arising out of or
based upon any breach of a warranty, representation or covenant of the Company
hereunder.
8.2 INDEMNIFICATION BY PURCHASERS. The Purchasers, severally and not
jointly, agree and covenant to hold harmless and indemnify the Company and any
Affiliates of the Company (including any director, officer, employee, agent,
investment advisor or controlling person of any of the foregoing) from and
against any losses, claims, damages, liabilities and any expenses (including,
expenses of investigation) to which the Company and its Affiliates may become
subject arising out of or based upon any breach of a warranty, representation or
covenant of such Purchaser HEREUNDER.
ARTICLE IX
----------
MISCELLANEOUS
-------------
9.1 SURVIVAL OF PROVISIONS. The representations, warranties and
covenants of the Company and the Purchasers contained in this Agreement shall
survive the Closing.
9.2 TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date:
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(a) by the Company if any of the conditions specified in
Section 4.2 of this Agreement have not been met or waived by the
Company pursuant to the terms of this Agreement by March 31, 1997
unless such date is extended by mutual agreement of the parties hereto;
and
(b) by any Purchaser, individually, if any of the conditions
specified in Section 4.1 of this Agreement have not been met or waived
by such Purchaser pursuant to the terms of this Agreement by March 31,
1997 unless such date is extended by mutual agreement of the parties
hereto.
9.3 Waiver Modifications in Writing.
-------------------------------
(a) No failure or delay on the part of the Company or any
Purchaser in exercising any right power or remedy hereunder shall
operate as a waiver thereof nor shall any single or partial exercise of
any such right, power or remedy preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. The
remedies provided for herein are cumulative and are not exclusive of
any remedies that may be available to the Company or any Purchaser at
law or in equity or otherwise. No waiver of or consent to any departure
by the Company or by any Purchaser, as the case may be, from any
provision of this Agreement shall be effective without the consent of
the Holders of not less than two-thirds (2/3) of the aggregate
principal amount of the Notes then outstanding; PROVIDED, HOWEVER, that
no such amendment or waiver shall, without the consent of each of the
Holders of the Notes then outstanding affected thereby, (i) change the
stated maturity of the principal of, or any installment of interest on,
any Note or reduce the principal amount thereof or the rate of interest
thereon or any premium payable upon redemption thereof or, change the
place of payment where, or the coin or currency in which, any Note or
any premium or the interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment on or after the
stated maturity thereof, or (ii) reduce the percentages in principal
amount of Notes, the consent of whose Holders is required for any
waiver or amendments provided for in this Agreement. No amendment or
modification of any provision of this Agreement in accordance with the
terms hereof shall be effective unless such amendment or modification
is (i) in writing and (ii) consented to by Holders of not less than
two-thirds (2/3) or more of the principal amount of the Notes then
outstanding.
(b) Except as contemplated by Section 2.1(d) or Section 4.1(o)
of this Agreement neither the Company nor the Subsidiaries of the
Company has paid or shall pay, or has caused or shall cause to be paid,
directly or indirectly, any remuneration, whether by way of interest,
fee or otherwise, to any Holder of the Notes as consideration or as an
inducement for the purchase of the Notes or any consent, waiver or
amendment of any of the terms or provisions of this Agreement.
25
29
9.4 NOTICE. All notices, demands and other communications provided for
hereunder shall be in writing, and, if to the Purchasers, shall be given by
registered or certified mail, return receipt requested in a pre-paid envelope,
by overnight mail or courier, or by facsimile transmission, addressed to each
Purchaser as shown on the execution page hereof (with a copy to special counsel
for Purchasers as shown below) and to such other address as such Purchaser or
its counsel may designate to the Company in writing, or addressed to the Company
as set forth below:
To Company: Waterlink, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
With copy to: Benesch, Friedlander, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
To Special Counsel Squire, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
to Purchasers: ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇. ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as the Company may designate to the Purchasers in
writing. A notice made in accordance with the terms of this Section 9.4 shall be
deemed to have been given (i) when delivered, if sent by registered or certified
mail or delivered personally or by facsimile transmission, or (ii) on the next
following Business Day if sent by overnight mail or courier.
9.5 DETERMINATIONS. All determinations to be made by the Company or any
Purchaser hereunder in its opinion or judgment or with its approval or otherwise
shall be made by it in its sole discretion.
9.6 EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto on separate counterparts,
each of which counterparts, when so executed and delivered, shall be deemed to
be m original and all of which counterparts, taken together, shall constitute
but one and the same agreement.
26
30
9.7 BINDING EFFECT; ASSIGNMENT. Prior to the Closing Date, the rights
and obligations of any Purchaser under this Agreement may not be assigned to any
other person except with the prior written consent of the Company. Except as
expressly provided in this Agreement this Agreement shall not be construed so as
to confer any right or benefit upon any person other than the parties to this
Agreement, and their respective successors and assigns. This Agreement and all
representations, warranties and covenants contained herein, shall be binding
upon the Company and each Purchaser, and their respective successors and
permitted assigns and shall inure to the benefit of the Company, all present and
future holders of Senior Indebtedness, the Noteholders and their respective
successors and assigns.
9.8 GOVERNING LAW. This Agreement shall be deemed to be a contract made
under the laws of the State of Ohio, and for all purposes will be construed in
accordance with the laws of said state, without regard to principles of
conflicts of law.
9.9 SEVERABILITY OF PROVISIONS. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
9.10 HEADINGS. The Article and Section headings and the table of
contents used or contained in this Agreement are for the convenience of
reference only and shall not affect the construction of this Agreement.
9.11 ENTIRE AGREEMENT. This Agreement (with the Schedules and Exhibits
attached hereto) contain, and are intended as, a complete statement of all the
terms and arrangements between the parties with respect to the matters provided
for herein, and supersedes any previous agreements and understandings between
the parties with respect to those matters.
IN WITNESS WHEREOF, the parties hereto have caused Agreement to be
executed by their respective officers hereunto duly authorized, as of the date
first above written.
▇▇▇▇▇▇▇▇ VENTURE PARTNERS III, L.P. WATERLINK, INC.
By: ▇▇▇▇▇▇▇▇ Venture Management III, L.P.,
its General Partner By: _____________________
By: Pinkas Family Partners, L.P., its General Its: ________________
Partner
By: ______________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: General Partner
27
31
NOTE PURCHASE AGREEMENT SIGNATURE PAGE
Accepted and agreed as of
the date first above written:
▇▇▇▇▇▇▇▇ Capital Corporation
----------------------------
NAME OF PURCHASER
By: ____________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Chairman, Chief Executive Officer
and Treasurer
Address: ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Aggregate principal amount of the Notes to be purchased by
you upon Advances and the aggregate purchase price thereof:
1 $ 2,100,000 $ 2,037,000 21%
---------------- --------------------------- ----------------------- -------------------
Number of Note Principal Amount of the Note Aggregate Purchase Price Pro-Rata Percentage
Taxpayer Identification No.:
---------------
28
32
NOTE PURCHASE AGREEMENT SIGNATURE PAGE
Accepted and agreed as of
the date first above written:
River Cities Capital Fund Limited Partnership
---------------------------------------------
NAME OF PURCHASER
By: RC Management Limited Partnership,
its General Partner
By: ▇▇▇▇▇▇, Inc., its General Partner
By: ____________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its: President
Address: ▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Aggregate principal amount of the Notes to be purchased by
you upon Advances and the aggregate purchase price thereof:
2 $ 900,000 $ 873,000 9%
----------- -------------------------- ------------------------- ------------------
Number of Note Principal Amount of the Note Aggregate Purchase Price Pro-Rata Percentage
Taxpayer Identification No.:
▇▇-▇▇▇▇▇▇▇
29
33
NOTE PURCHASE AGREEMENT SIGNATURE PAGE
Accepted and agreed as of
the date first above written:
Environmental Opportunities Fund, L.P.
--------------------------------------
NAME OF PURCHASER
By: Environmental Opportunities
Management Co., LLC, its
General Partner
By: ____________________________
▇▇▇▇▇▇▇ Ch'uan-k'▇▇ ▇▇▇▇▇
Its: Manager
Address: ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Aggregate principal amount of the Notes to be purchased by
you upon Advances and the aggregate purchase price thereof:
3 $ 1,779,373 $ 1,725,991.81 17.79%
--------------- --------------------------- ----------------------- -------------------
Number of Note Principal Amount of the Note Aggregate Purchase Price Pro-Rata Percentage
Taxpayer Identification No.:
▇▇-▇▇▇▇▇▇▇
30
34
NOTE PURCHASE AGREEMENT SIGNATURE PAGE
Accepted and agreed as of the date first above written:
Environmental Opportunities Fund (Cayman), L.P.
-----------------------------------------------
NAME OF PURCHASER
By: Environmental Opportunities
Management Co., LLC, its
General Partner
By: ____________________________
▇▇▇▇▇▇▇ Ch'uan-k'▇▇ ▇▇▇▇▇
Its: Manager
Address: ▇/▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
(▇▇▇▇▇▇ ▇▇▇▇▇▇▇) Limited
▇.▇. ▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, B.W.I.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Aggregate principal amount of the Notes to be purchased by
you upon Advances and the aggregate purchase price thereof:
4 $ 220,627 $ 214,008.19 2.21%
--------------- --------------------------- ----------------------- -------------------
Number of Note Principal Amount of the Note Aggregate Purchase Price Pro-Rata Percentage
Taxpayer Identification No.: N/A
Copy of notices to:
Environmental Opportunities
Management Company, L.L.C.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
31
35
NOTE PURCHASE AGREEMENT SIGNATURE PAGE
Accepted and agreed as of
the date first above written:
National City Capital Corporation
---------------------------------
NAME OF PURCHASER
By: ____________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Its: ____________________________
Address: ▇▇▇▇ ▇. ▇▇▇ ▇▇.
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Aggregate principal amount of the Notes to be purchased by
you upon Advances and the aggregate purchase price thereof:
5 $ 3,000,000 $ 2,910,000 30%
--------------- --------------------------- ----------------------- -------------------
Number of Note Principal Amount of the Note Aggregate Purchase Price Pro-Rata Percentage
Taxpayer Identification No.:
▇▇-▇▇▇▇▇▇▇
32
36
NOTE PURCHASE AGREEMENT SIGNATURE PAGE
Accepted and agreed as of
the date first above written:
IPP95, L.P.
-----------
NAME OF PURCHASER
By: WESINVEST, Inc., its
General Partner
By: ____________________________
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Its: Secretary
Address: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Aggregate principal amount of the Notes to be purchased by you upon Advances and
the aggregate purchase price thereof:
6 $ 2,000,000 $ 1,940,000 20%
--------------- --------------------------- ----------------------- -------------------
Number of Note Principal Amount of the Note Aggregate Purchase Price Pro-Rata Percentage
Taxpayer Identification No.: ▇▇-▇▇▇▇▇▇▇
Copies to:
IPP95.L.P.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
33
37
EXHIBIT A
TO THE PURCHASE AGREEMENT
[FORM OF NOTE]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT'). IT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR AN OPINION, SATISFACTORY TO THE COMPANY, FROM THE HOLDER'S COUNSEL, THAT SUCH
REGISTRATION IS NOT REQUIRED BY REASON OF AN APPLICABLE EXEMPTION OR UPON
COMPLIANCE WITH ANY APPLICABLE RULE OR REGULATION PROMULGATED UNDER THE ACT AND,
IF APPLICABLE, WITHOUT COMPLIANCE WITH ANY OTHER TERMS AND PROVISIONS
RESTRICTING ANY SUCH TRANSACTIONS, INCLUDING, WITHOUT LIMITATION, THE TERMS AND
PROVISIONS OF THAT CERTAIN AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT DATED AS
OF MARCH 6, 1997.
WATERLINK, INC.
SUBORDINATED NOTE
DUE 2002
No. __ $___________
AS STATED IN THE PURCHASE AGREEMENT (DEFINED BELOW), THE RIGHTS OF THE HOLDER
HEREOF ARE SUBJECT TO SUBORDINATION TO ALL SENIOR INDEBTEDNESS (AS DEFINED IN
THE PURCHASE AGREEMENT REFERRED TO HEREIN) OF THE COMPANY.
Waterlink, Inc., a corporation duly organized and existing under the
laws of the State of Delaware (herein called the "Company"), for value received,
hereby promises to pay to ____________________ the principal sum of
_________________________ Dollars ($___________) on March 6, 2002 and to pay
interest on said principal amount at the rate of twelve percent (12%)[eight
percent (8%) to IPP95] per annum until [one year] and fourteen percent (14%) per
annum thereafter, which interest shall be payable quarterly in arrears on each
June 30, September 30, December 31, and March 31, commencing June 30, 1997 (each
June 30, September 30, December 31 and March 31 being herein referred to as an
"Interest Payment Date").
The principal of this Note is subject to certain mandatory prepayments
in accordance with the terms of the Purchase Agreement. The Company may at any
time and from time to time prepay all or portion of the principal amount
hereunder without premium or penalty. The Holder must surrender this Note to the
Company to collect the final principal payment hereunder at maturity or
38
upon the Company's prepayment thereof. The Company will maintain records of all
payments and prepayments of principal and interest made with respect to this
Note, the current outstanding principal balance hereof and other appropriate
information. Such records shall be presumptive evidence of the principal amount
owing and unpaid hereon. The Company will pay principal and interest in money of
the United States of America that at the time of payment is legal tender for
payment of public and private debts. The Company may, however, pay principal and
interest by a check payable in such money. It may mail an interest check to the
Holder's registered address.
The Company shall give written notice of any payment of this Note to
the Holder of this Note not less than five (5) Business Days prior thereto and
the opportunity, upon surrender of this Note, to deliver notice to the Company
of the Holder's determination to convert to shares of Common Stock all or a
portion of the principal and accrued interest hereon, as specified in such
notice, in lieu of and in substitution for the exercise by the Holder of all or
part of its then exercisable Warrants (which conversion shall be in all respects
on the same terms and conditions as if the Holder had exercised a like amount of
such Warrants and such like amount of Warrants shall no longer be exercisable).
This Note is one of a duly authorized issue of Notes of the Company all
issued or to be issued under and pursuant to the Subordinated Note Purchase
Agreement and Credit Facility dated as of March 6, 1997 (the "Purchase
Agreement"), duly executed and delivered by the Company, to which Purchase
Agreement and all amendments thereto reference is hereby made for a statement of
the rights, limitations of rights, obligations, duties and immunities thereunder
of the Company and the Noteholders. All capitalized terms in this Note unless
otherwise defined, have the meanings assigned to them in the Purchase Agreement.
This Note is subordinated to Senior Indebtedness of the Company. To the
extent provided in the Purchase Agreement, Senior Indebtedness must be paid
before the Notes may be paid. Each Holder by accepting a Note agrees to such
subordination provisions and authorizes the Company to give them effect. The
Senior Indebtedness shall continue to be Senior Indebtedness and entitled to the
benefits of the subordination provisions irrespective of any amendment,
modification or waiver of any term of any instrument relating to the Senior
Indebtedness or extension or renewal of such Senior Indebtedness and the
subordination provisions. Reference is made to the Purchase Agreement for a
complete description of what constitutes Senior Indebtedness and the provisions
of regarding the subordination of the Note.
The Company shall keep at its principal office a register in which the
Company shall provide for the registration of the Notes. The registered Holder
of this Note may be treated as the owner of it for all purposes.
Subject to certain exceptions, the Purchase Agreement or this Note may
be amended with the written consent of the Holders of at least two-thirds (2/3),
in principal amount of the Notes then outstanding and any past default or
compliance with any provisions may be waived in a particular instance with the
written consent of the Holders of two-thirds (2/3) in principal amount of the
Notes
2
39
then outstanding. Without the consent of or notice to any Holder, the Company
may amend the Purchase Agreement or the Notes to, among other things, cure any
ambiguity, defect or inconsistency or make any other change that does not
adversely affect the rights of any Holder.
A director, officer, employee or shareholder, as such, of the Company
shall not have any liability for any obligations of the Company or any successor
corporation under this Note or the Purchase Agreement or for any claim based on,
in respect or by reason of such obligations or their creation. The Holder of
this Note by accepting this Note waives and releases all such liability. The
waiver and release are part of the consideration for the issue of this Note.
Customary abbreviations may be used in the name of a Noteholder such
as: TEN COM (tenants in common), TENANT (tenants by the entireties), JT TEN
(joint tenants with right of survivorship and not as tenants in common), CUST
(Custodian), and U/G/M/A (Uniform Gifts to Minors Act).
The Purchase Agreement and this Note shall be deemed to be contracts
made under the laws of the State of Ohio and shall for all purposes be governed
by, and construed in accordance with, the laws of such State.
IN WITNESS WHEREOF, Waterlink, Inc. has caused this Note to be signed
by an authorized officer as of the date indicated below.
Dated: ___________________, 1997
WATERLINK, INC.
(SEAL) By _______________________
Its ______________________