-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ke+GAx3GzppD4TThYgRYJR10Kg7xGMFa/c3AXjVOD3yvtMgHC21a/eJeWJXRBoQ6 vju+Xho1gONU2S1RI0RGSA== 0000950152-97-005032.txt : 19970708 0000950152-97-005032.hdr.sgml : 19970708 ACCESSION NUMBER: 0000950152-97-005032 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19970707 SROS: NONE GROUP MEMBERS: BRANTLEY CAPITAL CORP GROUP MEMBERS: BRANTLEY VENTURE PARTNERS III GROUP MEMBERS: MICHAEL J. FINN GROUP MEMBERS: PAUL H, CASCIO GROUP MEMBERS: ROBERT P. PINKAS SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: WATERLINK INC CENTRAL INDEX KEY: 0001037682 STANDARD INDUSTRIAL CLASSIFICATION: MISC INDUSTRIAL & COMMERCIAL MACHINERY & EQUIPMENT [3590] IRS NUMBER: 341788678 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-51219 FILM NUMBER: 97636987 BUSINESS ADDRESS: STREET 1: 4100 HOLIDAY ST NW STREET 2: SUITE 201 CITY: CANTON STATE: OH ZIP: 44718-2532 BUSINESS PHONE: 3306494000 MAIL ADDRESS: STREET 1: 4100 HOLIDAY ST NW STREET 2: SUITE 201 CITY: CANTON STATE: OH ZIP: 44718-2532 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: BRANTLEY CAPITAL CORP CENTRAL INDEX KEY: 0001021009 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 341838462 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: BRANTLEY CAPITAL MANAGEMENT LTD STREET 2: 20600 CHAGRIN BLVD SUITE 1150 CITY: CLEVELAND STATE: OH ZIP: 44122 BUSINESS PHONE: 2162834800 MAIL ADDRESS: STREET 1: BRANTLEY CAPITAL MANAGEMENT LTD STREET 2: 20600 CHAGRIN BLVD SUITE 1150 CITY: CLEVELAND STATE: OH ZIP: 44122 SC 13D 1 BRANTLEY CAPITAL CORP./WATERLINK SCHEDULE 13D 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ___________ SCHEDULE 13D (RULE 13d-101) UNDER THE SECURITIES EXCHANGE ACT OF 1934 (Amendment No._____)(1) WATERLINK, INC. ----------------------------------------------------------------------------- (Name of Issuer) COMMON STOCK, PAR VALUE $.01 PER SHARE ----------------------------------------------------------------------------- (Title of Class of Securities) 94155N105 ----------------------------------------------------------------------------- (CUSIP Number) TAB A. KEPLINGER, BRANTLEY VENTURE PARTNERS, 20600 CHAGRIN BLVD. CLEVELAND, OHIO 44122 (216) 283-4800 ----------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) JUNE 27, 1997 ----------------------------------------------------------------------------- (Date of Event Which Requires Filing of This Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1 (b)(3) or (4), check the following box [ ]. Note: Six copies of this statement, including all exhibits, should be filed with the Commission. See Rule 13d-1 (a) for other parties to whom copies are to be sent. (Continued on following pages) (Page 1 of 11 Pages) ______________ (1) The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). (C) 1996, BOWNE & CO., INC. (BULLETIN NO. 171, 10-11-96) 2 SCHEDULE 13D Forms 7060 - -------------------------------------------------------------------------------- CUSIP NO. 94155N105 13D PAGE 2 OF 11 PAGES - ----------------------------------------------------------------------------------------------------------- | 1 | NAME OF REPORTING PERSONS | | | S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS | | | | | | Brantley Capital Corporation | |-----|---------------------------------------------------------------------------------------------------| | 2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ x ] | | | (b) [ ] | | | | |-----|---------------------------------------------------------------------------------------------------| | 3 | SEC USE ONLY | | | | |-----|---------------------------------------------------------------------------------------------------| | 4 | SOURCE OF FUNDS* | | | | | | | | | | | | WC | |-----|---------------------------------------------------------------------------------------------------| | 5 | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT | | | TO ITEMS 2(d) OR 2(e) [ ] | | | | | | | | | | |-----|---------------------------------------------------------------------------------------------------| | 6 | CITIZENSHIP OR PLACE OF ORGANIZATION | | | | | | Maryland, U.S.A. | |-------------------------------|-------|-----------------------------------------------------------------| | NUMBER OF | 7 | SOLE VOTING POWER | | | | | | SHARES | | Warrants to purchase 26,250 Shares | | |-------|-----------------------------------------------------------------| | BENEFICIALLY | 8 | SHARED VOTING POWER | | | | | | OWNED BY | | | | |-------|-----------------------------------------------------------------| | EACH | 9 | SOLE DISPOSITIVE POWER | | | | | | REPORTING | | | | | | Warrants to purchase 26,250 Shares | | PERSON |-------|-----------------------------------------------------------------| | | 10 | SHARED DISPOSITIVE POWER | | WITH | | | | | | | |-------------------------------|-------|-----------------------------------------------------------------| | 11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON | | | | | | Warrants to purchase 26,250 Shares | |-----|---------------------------------------------------------------------------------------------------| | 12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN | | | SHARES* [ X ] | | | | |-----|---------------------------------------------------------------------------------------------------| | 13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) | | | | | | 18.25% | |-----|---------------------------------------------------------------------------------------------------| | 14 | TYPE OF REPORTING PERSON* | | | | | | IV | - -----------------------------------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT! (C) 1996, BOWNE & CO., INC. (BULLETIN NO. 171, 10-11-96) 3 SCHEDULE 13D Forms 7060 - -------------------------------------------------------------------------------- CUSIP NO. 94155N105 13D PAGE 3 OF 11 PAGES - ----------------------------------------------------------------------------------------------------------- | 1 | NAME OF REPORTING PERSONS | | | S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS | | | | | | Brantley Venture Partners III | |-----|---------------------------------------------------------------------------------------------------| | 2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ x ] | | | (b) [ ] | | | | |-----|---------------------------------------------------------------------------------------------------| | 3 | SEC USE ONLY | | | | |-----|---------------------------------------------------------------------------------------------------| | 4 | SOURCE OF FUNDS* | | | | | | | | | | | | WC | |-----|---------------------------------------------------------------------------------------------------| | 5 | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT | | | TO ITEMS 2(d) OR 2(e) [ ] | | | | | | | | | | |-----|---------------------------------------------------------------------------------------------------| | 6 | CITIZENSHIP OR PLACE OF ORGANIZATION | | | | | | Delaware, U.S.A. | |-------------------------------|-------|-----------------------------------------------------------------| | NUMBER OF | 7 | SOLE VOTING POWER | | | | | | SHARES | | 2,100,000 (includes options to purchase 100,000 Shares) | | |-------|-----------------------------------------------------------------| | BENEFICIALLY | 8 | SHARED VOTING POWER | | | | | | OWNED BY | | | | |-------|-----------------------------------------------------------------| | EACH | 9 | SOLE DISPOSITIVE POWER | | | | | | REPORTING | | | | | | 2,100,000 (includes options to purchase 100,000 Shares) | | PERSON |-------|-----------------------------------------------------------------| | | 10 | SHARED DISPOSITIVE POWER | | WITH | | | | | | | |-------------------------------|-------|-----------------------------------------------------------------| | 11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON | | | | | | 2,100,000 (includes options to purchase 100,000 Shares) | |-----|---------------------------------------------------------------------------------------------------| | 12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN | | | SHARES* [ X ] | | | | |-----|---------------------------------------------------------------------------------------------------| | 13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) | | | | | | .04% | |-----|---------------------------------------------------------------------------------------------------| | 14 | TYPE OF REPORTING PERSON* | | | | | | PN | - -----------------------------------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT! (C) 1996, BOWNE & CO., INC. (BULLETIN NO. 171, 10-11-96) 4 SCHEDULE 13D Forms 7060 - -------------------------------------------------------------------------------- CUSIP NO. 94155N105 13D PAGE 4 OF 11 PAGES - ----------------------------------------------------------------------------------------------------------- | 1 | NAME OF REPORTING PERSONS | | | S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS | | | | | | Robert P. Pinkas | |-----|---------------------------------------------------------------------------------------------------| | 2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ x ] | | | (b) [ ] | | | | |-----|---------------------------------------------------------------------------------------------------| | 3 | SEC USE ONLY | | | | |-----|---------------------------------------------------------------------------------------------------| | 4 | SOURCE OF FUNDS* | | | | | | | | | | | | PF | |-----|---------------------------------------------------------------------------------------------------| | 5 | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT | | | TO ITEMS 2(d) OR 2(e) [ ] | | | | | | | | | | |-----|---------------------------------------------------------------------------------------------------| | 6 | CITIZENSHIP OR PLACE OF ORGANIZATION | | | | | | U.S.A. | |-------------------------------|-------|-----------------------------------------------------------------| | NUMBER OF | 7 | SOLE VOTING POWER | | | | | | SHARES | | 102,000 (includes options to purchase 100,000 Shares) | | |-------|-----------------------------------------------------------------| | BENEFICIALLY | 8 | SHARED VOTING POWER | | | | | | OWNED BY | | | | |-------|-----------------------------------------------------------------| | EACH | 9 | SOLE DISPOSITIVE POWER | | | | | | REPORTING | | | | | | 102,000 (includes options to purchase 100,000 Shares) | | PERSON |-------|-----------------------------------------------------------------| | | 10 | SHARED DISPOSITIVE POWER | | WITH | | | | | | | |-------------------------------|-------|-----------------------------------------------------------------| | 11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON | | | | | | 102,000 (includes options to purchase 100,000 Shares) | |-----|---------------------------------------------------------------------------------------------------| | 12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN | | | SHARES* [ X ] | | | | |-----|---------------------------------------------------------------------------------------------------| | 13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) | | | | | | 18.23% | |-----|---------------------------------------------------------------------------------------------------| | 14 | TYPE OF REPORTING PERSON* | | | | | | IN | - -----------------------------------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT! (C) 1996, BOWNE & CO., INC. (BULLETIN NO. 171, 10-11-96) 5 SCHEDULE 13D Forms 7060 - -------------------------------------------------------------------------------- CUSIP NO. 94155N105 13D PAGE 5 OF 11 PAGES - ----------------------------------------------------------------------------------------------------------- | 1 | NAME OF REPORTING PERSONS | | | S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS | | | | | | Michael J. Finn | |-----|---------------------------------------------------------------------------------------------------| | 2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ x ] | | | (b) [ ] | | | | |-----|---------------------------------------------------------------------------------------------------| | 3 | SEC USE ONLY | | | | |-----|---------------------------------------------------------------------------------------------------| | 4 | SOURCE OF FUNDS* | | | | | | | | | | | | PF | |-----|---------------------------------------------------------------------------------------------------| | 5 | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT | | | TO ITEMS 2(d) OR 2(e) [ ] | | | | | | | | | | |-----|---------------------------------------------------------------------------------------------------| | 6 | CITIZENSHIP OR PLACE OF ORGANIZATION | | | | | | U.S.A. | |-------------------------------|-------|-----------------------------------------------------------------| | NUMBER OF | 7 | SOLE VOTING POWER | | | | | | SHARES | | 1,000 | | |-------|-----------------------------------------------------------------| | BENEFICIALLY | 8 | SHARED VOTING POWER | | | | | | OWNED BY | | | | |-------|-----------------------------------------------------------------| | EACH | 9 | SOLE DISPOSITIVE POWER | | | | | | REPORTING | | | | | | 1,000 | | PERSON |-------|-----------------------------------------------------------------| | | 10 | SHARED DISPOSITIVE POWER | | WITH | | | | | | | |-------------------------------|-------|-----------------------------------------------------------------| | 11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON | | | | | | 1,000 | |-----|---------------------------------------------------------------------------------------------------| | 12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN | | | SHARES* [ x ] | | | | |-----|---------------------------------------------------------------------------------------------------| | 13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) | | | | | | 18.24% | |-----|---------------------------------------------------------------------------------------------------| | 14 | TYPE OF REPORTING PERSON* | | | | | | IN | - -----------------------------------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT! (C) 1996, BOWNE & CO., INC. (BULLETIN NO. 171, 10-11-96) 6 SCHEDULE 13D Forms 7060 - -------------------------------------------------------------------------------- CUSIP NO. 94155N105 13D PAGE 6 OF 11 PAGES - ----------------------------------------------------------------------------------------------------------- | 1 | NAME OF REPORTING PERSONS | | | S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS | | | | | | Paul H. Cascio | |-----|---------------------------------------------------------------------------------------------------| | 2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ x ] | | | (b) [ ] | | | | |-----|---------------------------------------------------------------------------------------------------| | 3 | SEC USE ONLY | | | | |-----|---------------------------------------------------------------------------------------------------| | 4 | SOURCE OF FUNDS* | | | | | | | | | | | | PF | |-----|---------------------------------------------------------------------------------------------------| | 5 | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT | | | TO ITEMS 2(d) OR 2(e) [ ] | | | | | | | | | | |-----|---------------------------------------------------------------------------------------------------| | 6 | CITIZENSHIP OR PLACE OF ORGANIZATION | | | | | | U.S.A. | |-------------------------------|-------|-----------------------------------------------------------------| | NUMBER OF | 7 | SOLE VOTING POWER | | | | | | SHARES | | 1,000 | | |-------|-----------------------------------------------------------------| | BENEFICIALLY | 8 | SHARED VOTING POWER | | | | | | OWNED BY | | | | |-------|-----------------------------------------------------------------| | EACH | 9 | SOLE DISPOSITIVE POWER | | | | | | REPORTING | | | | | | 1,000 | | PERSON |-------|-----------------------------------------------------------------| | | 10 | SHARED DISPOSITIVE POWER | | WITH | | | | | | | |-------------------------------|-------|-----------------------------------------------------------------| | 11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON | | | | | | 1,000 | |-----|---------------------------------------------------------------------------------------------------| | 12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN | | | SHARES* [ X ] | | | | |-----|---------------------------------------------------------------------------------------------------| | 13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) | | | | | | 18.24% | |-----|---------------------------------------------------------------------------------------------------| | 14 | TYPE OF REPORTING PERSON* | | | | | | IN | - -----------------------------------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT! (C) 1996, BOWNE & CO., INC. (BULLETIN NO. 171, 10-11-96) 7 Item 1. Security and Issuer This Statement on Schedule 13D (the "Statement") relates to the common stock, par value $.01 per share (the "Shares"), of Waterlink, Inc., a Delaware corporation (the "Company"). The principal offices of the Company are located at 4100 Holiday Street N.W., Suite 201, Canton, Ohio 44718-7532. Item 2. Identity and Background This Statement is being filed on behalf of Brantley Venture Partners III, L.P., a Delaware limited partnership ("BVP"), Brantley Capital Corporation, a Maryland corporation ("BCC"), Robert P. Pinkas, an individual ("Pinkas"), Michael J. Finn, an individual ("Finn") and Paul H. Cascio, an individual ("Cascio"). BVP was formed to engage in investing in certain venture capital securities for its own account. BCC is a non-diversified closed-end investment company that elected to be regulated as a business development company under the Investment Company Act of 1940, as amended, formed for the purpose of investing in certain private and small cap public companies, in each case, for its own account. Messrs. Pinkas, Finn and Cascio serve as officers and/or directors of BCC and Messrs. Finn and Cascio are general partners of Brantley Venture Management III, L.P., a Delaware limited partnership and the sole general partner of BVP ("BVM"). Mr. Pinkas serves as the sole general partner of Pinkas Family Partners, L.P., a Delaware limited partnership ("PFP") and a general partner of BVM. Messrs. Pinkas, Finn and Cascio are citizens of the United States of America and their principal occupation is managing the affairs and investments of BVP, BCC, BVM and their respective affiliates. The business address for each of BVP, BCC, Pinkas, Finn and Cascio is 20600 Chagrin Boulevard, Suite 1150, Cleveland, Ohio 44122. During the past five years, none of BVP, BCC, BVM, PFP, Pinkas, Finn or Cascio (i) has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors), or (ii) has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. Item 3. Source and Amount of Funds or Other Consideration The aggregate purchase price for the Shares purchased by Messrs. Pinkas, Finn and Cascio was $44,000. All of the funds required for the purchases of Messrs. Pinkas, Finn and Cascio were obtained from their respective personal funds. The aggregate purchase price for the Shares acquired by BVP was $3,400,400, which Shares were issued upon conversion of shares of the Company's Series A, Series B and Series C Preferred Stock, respectively. All of the funds required for the purchases of BVP were obtained from BVP's general funds. The Options (defined below) were granted to Page 7 of 11 Pages 8 Mr. Pinkas in consideration for his service, on behalf of BVP, as a director of the Company. The Warrants (defined below) were granted to BCC pursuant to a warrant agreement described below, in consideration of its entering into a Note Purchase Agreement and Credit Facility with the Company and several other investors, pursuant to which BCC and such other investors have agreed to purchase subordinated notes of the Company at the Company's request and subject to the conditions contained in the Note Purchase Agreement. Pursuant to the Note Purchase Agreement, upon the issuance of subordinated notes as described therein, the investors and BCC will be entitled to receive additional warrants. No subordinated notes have been issued to BCC as of the date of this Statement. A copy of the Note Purchase Agreement is attached hereto as an Exhibit and is specifically incorporated herein by reference, and the description herein of such agreement is qualified in its entirety by reference thereto. Item 4. Purpose of the Transaction The Reporting Persons have acquired the Shares, Options and Warrants, as the case may be, for investment purposes. None of the Reporting Persons has any plans or proposals which would relate to, or would result in, any of the matters set forth in items (a) through (j) of Item 4 of Schedule 13D. Item 5. Interest in Securities of the Issuer (a) BVP owns 2,000,000 Shares as of the date of this Statement, representing approximately 18.21% of the outstanding Shares of the Company, as to which BCC, Pinkas, Finn and Cascio each disclaims any beneficial interest. BVP has a beneficial interest in the 100,000 Options owned by Pinkas and described below, representing approximately 0.90% of the outstanding Shares of the Company, as to which BCC, Pinkas, Finn and Cascio each disclaims any beneficial interest. Pinkas owns 2000 Shares as of the date of this Statement, representing approximately 0.02% of the outstanding Shares of the Company, as to which BVP, BCC, Finn and Cascio each disclaims any beneficial interest. Finn owns 1000 Shares of the Company as of the date of this Statement, representing approximately 0.01% of the outstanding Shares of the Company, as to which BVP, BCC, Pinkas and Cascio each disclaims any beneficial interest. Cascio owns 1000 Shares as of the date of this Statement, representing approximately 0.01% of the outstanding Shares of the Company, as to which BVP, BCC, Pinkas and Finn each disclaims any beneficial interest. The percentages used in the preceding sentences are calculated based upon 10,977,554 outstanding Shares, as reported in the Company's Prospectus, dated June 24, 1997. BCC owns warrants to purchase 26,250 Shares at an exercise price of $4.50 per Share (the "Warrants"), representing approximately 0.24% of the outstanding Shares of the Company, as to which BVP, Pinkas, Finn and Cascio each disclaims any beneficial Page 8 of 11 Pages 9 interest. The percentage used in the preceding sentence is calculated based upon 10,977,554 outstanding Shares, as reported in the Company's Prospectus, dated June 24, 1997. The Warrants may be redeemed at the option of the Company prior to March 6, 2001, upon written notice to BCC as described in the Warrant Agreement. The Warrants were issued on April 18, 1997 pursuant to a Warrant Agreement entered into as of March 6, 1997, a copy of which is attached hereto as an Exhibit and is specifically incorporated herein by reference, and the description herein of such agreement is qualified in its entirety by reference thereto. Pinkas owns options to purchase 100,000 Shares at an exercise price of $4.00 per Share (the "Options"), representing approximately 0.90% of the outstanding Shares of the Company, as to which BCC, Pinkas, Finn and Cascio each disclaims any beneficial interest. The percentage used in the preceding sentence is calculated based upon 10,977,554 outstanding Shares, as reported in the Company's Prospectus, dated June 24, 1997. The Options were issued pursuant to the Company's 1995 Stock Option Plan, a copy of which is attached hereto as an Exhibit and is specifically incorporated herein by reference, and the description herein of such agreement is qualified in its entirety by reference thereto. (b) Each of BVP, Pinkas, Finn and Cascio has the sole power to vote and to dispose of all of the Shares beneficially owned by it or him, other than the Shares represented by the Options, as to which Pinkas will have such power at such time, if ever, as the Options are exercised and the underlying Shares are acquired by Pinkas. BCC will have the sole power to vote and to dispose of all of the Shares represented by the Warrants at such time, if ever, as the Warrants are exercised and the underlying Shares are acquired by BCC. (c) On June 27, 1997, Pinkas purchased 2000 Shares in the initial public offering of the Company at a purchase price of $11.00 per Share. On June 27, 1997, Finn purchased 1000 Shares in the initial public offering of the Company at a purchase price of $11.00 per Share. On June 27, 1997, Cascio purchased 1000 Shares in the initial public offering of the Company at a purchase price of $11.00 per Share. Except as set forth above, none of BVP, BCC, Pinkas, Finn or Cascio has effected any transactions in the securities of the Company during the past sixty days. (d) Not applicable. (e) Not applicable. Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer In March 1997, BVP guaranteed through June 1, 1997 up to $2,000,000 of the Company's indebtedness under the its secured Page 9 of 11 Pages 10 revolving credit facility with Bank of America Illinois in the event that the Company defaulted on its payment obligations thereunder. BVP's guarantee expired on June 1, 1997 and is no longer in effect. Except as described in this Item 6 or elsewhere in this Statement, none of the Reporting Persons has entered into any contracts, arrangements, understandings or relationships with respect to the securities of the Company, including but not limited to the transfer or voting of the securities, finder's fees, joint ventures, options, puts, calls, guarantees of loans, guarantees against losses or the giving or withholding of proxies. Item 7. Material to be filed as Exhibits. 1. Warrant Agreement, dated as of March 6, 1997, among the Company, BCC and several other investors. 2. Subordinated Note Purchase Agreement and Credit Facility, dated as of March 6, 1997, among the Company, BCC, BVP and several other investors. 3. Waterlink, Inc. Amended and Restated 1995 Stock Option Plan. 4. Agreement Relating to the Filing of Joint Acquisition Statements. After reasonable inquiry and to the best of the undersigneds' knowledge and belief, the undersigned certify that the information set forth in this Statement is true, complete and correct. July 7, 1997 BRANTLEY CAPITAL CORPORATION By: /s/ Robert P.Pinkas Name: Robert P. Pinkas Title: Chairman of the Board, Chief Executive Officer and Treasurer BRANTLEY VENTURE PARTNERS III, L.P. By: Brantley Venture Management III, L.P. By: Pinkas Family Partners, L.P. By: /s/Robert P. Pinkas Name: Robert P. Pinkas Title: General Partner Page 10 of 11 Pages 11 /s/Robert P. Pinkas Name: Robert P. Pinkas /s/Michael J. Finn Name: Michael J. Finn /s/Paul H. Cascio Name: Paul H. Cascio Page 11 of 11 Pages EX-1 2 EXHIBIT 1 1 Exhibit 1 WARRANT AGREEMENT THIS WARRANT AGREEMENT ("Agreement") dated as of March 6, 1997, among WATERLINK, INC., a Delaware corporation (the "Company"), and each of the Purchasers named on the execution page hereof (the "Purchasers"). R E C I T A L S: ---------------- This Agreement is entered into in connection with that certain Subordinated Note Purchase Agreement and Credit Facility dated concurrently herewith among the Company and the Purchasers (the "Note Purchase Agreement"), pursuant to which the Company will be issuing and the Purchasers will be purchasing the Company's Subordinated Notes due 2002 (the "Notes"). Capitalized terms not otherwise defined herein shall have the meanings given to them in the Note Purchase Agreement. NOW, THEREFORE, for good and valuable consideration the receipt of which is hereby acknowledged and the promises and the mutual agreements set forth herein, the parties hereto agree as follows: 1. Issuance of Warrants; Form of Warrants. -------------------------------------- 1.1 GENERAL. The Company hereby agrees to issue (pro rata in proportion to the principal amount of Notes issued to or for which each Purchaser is then committed) to the Purchasers, at the times and upon the conditions specified below, (i) warrants (the "Base Warrants") to purchase, in the aggregate, up to 1,525,000 shares of the Company's Common Stock, $.01 par value per share (the "Common Stock"), and (ii) warrants (the "Additional Warrants") to purchase, in the aggregate, up to 512,500 shares of Common Stock, in the case of (i) and (ii) above, subject to the terms and on the conditions set forth in this Agreement. The Base Warrants and the Additional Warrants are referred to herein together as the "Warrants". The Base Warrants consist of up to five (5) tranches of Base Warrants as set forth below (in the case of each tranche, to be allocated pro rata in proportion to the principal amount of Notes issued to or for which each Purchaser is then committed).
Number of Tranche Base Warrants ------- ------------- Tranche 1 125,000 Tranche 2 up to 300,000 Tranche 3 up to 300,000 Tranche 4 up to 300,000 Tranche 5 up to 500,000
Notwithstanding the foregoing, Tranche 1 Base Warrants to be issued hereunder to Brantley Capital Corporation shall instead be issued to Brantley Venture Partners III, L.P. 2 The Additional Warrants consist of two (2) tranches of Additional Warrants as set forth below (in the case of each tranche to be allocated pro rata in proportion to the principal amount of Note issued to or for which each Purchaser is then committed): Number of Tranche Additional Warrants ------- ------------------- Tranche 1 25% of the Warrants (other than Tranche 5 Base Warrants) outstanding at the Tranche 1 Additional Warrant Date (defined below) Tranche 2 50% of the Warrants (other than Tranche 5 Base Warrants) outstanding at the Tranche 2 Additional Warrant Date (defined below) Each Warrant, once issued, will initially entitle the holder thereof to purchase one share of Common Stock for the purchase price set forth in Section 5 below, as adjusted from time to time pursuant to the provisions of Section 10 below. 1.2 ISSUANCE OF BASE WARRANTS. Base Warrants shall be issued on the terms and upon the satisfaction of the following conditions, in all cases on a pro rata basis in proportion to the principal amount of Note issued to or for which each Purchaser or its assignee is then committed. (a) All of the Tranche 1 Base Warrants shall be issued to the Purchasers on the date hereof. (b) Tranche 2 Base Warrants shall be issued from time to time by the Company to Purchasers or their assignees on or prior to the earlier of a Prepayment Event or December 31, 1997 on the basis of 3,000 Tranche 2 Base Warrants for each $100,000 of Advances (as defined in the Note Purchase Agreement) under the Notes made on or prior to the earlier of a Prepayment Event (as defined in the Note Purchase Agreement) or December 31, 1997. (c) Tranche 3 Base Warrants shall be issued from time to time by the Company to Purchasers or their assignees prior to a Prepayment Event on the basis of 3,000 Tranche 3 Base Warrants for each $100,000 of Advances under the Notes outstanding in excess of One Hundred Eighty (180) days. (d) Tranche 4 Base Warrants shall be issued from time to time by the Company to Purchasers or their assignees prior to a Prepayment Event on the basis of 3,000 Tranche 4 Base Warrants for each $100,000 of Advances under the Notes outstanding in excess of two (2) years. 2 3 (e) Tranche 5 Base Warrants shall be issued as of the date forty-two (42) months after the date hereof by the Company to Purchasers or their assignees if a Prepayment Event has not then occurred on the basis of 5,000 Tranche 5 Base Warrants for each $100,000 of Advances under the Notes outstanding as of such date. (f) For purposes of the determinations in subsections 1.2(c) and (d) above, prepayments of Notes shall be applied in inverse order to Advances made (i.e. last in, first out). 1.3 ISSUANCE OF ADDITIONAL WARRANTS. Additional Warrants shall be issued on the terms and upon satisfaction of the following conditions, in all cases on a pro rata basis in proportion to the principal amount of Notes issued to or for which each Purchaser is then committed: (a) If (i) (x) a Prepayment Event occurs prior to the first anniversary of this Agreement and (y) the Prepayment Event Price (defined below) is less than $9.00 per share of Common Stock (subject to adjustment in the event of a stock split, combination or similar event), or (ii) (x) a Prepayment Event occurs on or after the first anniversary of this Agreement but prior to the second anniversary thereof and (y) the Prepayment Event Price is less than $12.00 per share of Common Stock (subject to adjustment in the event of a stock split, combination or similar event), then the Tranche 1 Additional Warrants shall be issued by the Company to Purchasers or their assignees, as the case may be. The date the foregoing conditions are met shall be referred to herein as the "Tranche 1 Additional Warrant Date." (b) (I) Upon the occurrence of a Prepayment Event, if any, if (i) such Prepayment Event does not occur prior to the second anniversary hereof, and (ii) (x) if prior the third anniversary hereof, the Prepayment Event Price is then less than $14.00 per share of Common Stock (subject to adjustment in the event of a stock split, combination or similar event), or (y) if on or following the third anniversary hereof but prior to the fourth anniversary hereof, the Prepayment Event Price is less than $16.00 per share of Common Stock (subject to adjustment in the event of a stock split, combination or similar event), then the Tranche 2 Additional Warrants shall be issued by the Company to Purchasers or their assignees, as the case may be, or (II) if a Prepayment Event has not occurred prior to the fourth anniversary hereof, then the Tranche 2 Additional Warrants shall be issued by the Company to Purchasers or their assignees, as the case may be. The date either of the foregoing conditions are met shall be referred to herein as the "Tranche 2 Additional Warrant Date." 2. FORM OF WARRANTS. The text of the Warrants and of the form of election to purchase Common Stock underlying the Warrants (the "Warrant Stock") to be set forth on the reverse thereof shall be substantially as set forth in the Warrant Certificate ("Warrant Certificate"), attached as EXHIBIT "A" to this Agreement. Each Warrant Certificate shall be executed on behalf of the 3 4 Company by the President or Vice President of the Company and attested by the Secretary or an Assistant Secretary of the Company. Warrant Certificates shall be dated as of the date of the execution thereof by the Company either upon initial issuance or upon division, exchange, substitution or transfer as may be permitted hereunder, provided that all such issuances of Warrants shall be deemed effective upon the date that the conditions to their issuance are satisfied. 3. REGISTRATION. The Warrant Certificates shall be numbered and shall be registered on the books of the Company (the "Warrant Register") as they are issued. The Company shall be entitled to treat the registered holder of any Warrant Certificate on the Warrant Register (the "Holder") as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such Warrant Certificate, or the Warrants' represented thereby, on the part of any other person, and shall not be liable for any registration or transfer of Warrant Certificates which are registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with the actual knowledge that a fiduciary or nominee is committing a breach of trust in requesting such registration or transfer, or with knowledge of such facts that the Company's participation therein amounts to bad faith. 4. Transfer of Warrant Certificate. ------------------------------- (a) Prior to a Prepayment Event, outstanding Warrants and any rights to the further issuance of Warrants pursuant hereto may only be transferred together with the Notes on a pro rata basis (as to each tranche of Base Warrants and Additional Warrants issued or issuable) in proportion to the principal amount of Notes issued to each Purchaser. After the earlier of a Prepayment Event or the fourth (4th) anniversary of the date hereof, the Warrants may be transferred independent of the Notes, provided such transfer is in accordance with the terms hereof. The Warrant Certificate shall be transferable only on the Warrant Register upon delivery of the Warrant Certificate duly endorsed by the Holder or by its duly authorized attorney or representative (with evidence reasonably satisfactory to the Company of such authorization), or accompanied by evidence reasonably satisfactory to the Company of succession, assignment or authority to transfer. Notwithstanding the foregoing, the Company shall have no obligation to cause Warrant Certificates to be transferred on the Warrant Register to any person, unless the Holder of such Warrants shall furnish to the Company evidence satisfactory to the Company of (i) (x) compliance with the registration provisions of Section 5 of the Securities Act of 1933, as amended (the "Act"), or (y) the availability of an exemption from compliance with the registration provisions of Section 5 of the Act; and (ii) compliance with that certain Amended and Restated Stockholders' Agreement to be executed by or on behalf of the parties hereto on the Closing Date (the "Amended and Restated Stockholders' Agreement"). 4 5 (b) The parties hereto acknowledge and agree, notwithstanding subsection (a) above, that this Agreement does not restrict transfers of Warrants among the Purchasers to the extent otherwise permitted under the Indemnification and Contribution Agreement dated the date hereof among the Purchasers. 5. Term of Warrants; Exercise of Warrants. -------------------------------------- 5.1 BASE WARRANTS: TERM AND EXERCISE PRICE. Each outstanding Base Warrant entitles the registered owner thereof to purchase one (1) share of Warrant Stock at any time prior to the close of business on the fifth (5th) anniversary of the date hereof (the "Expiration Date") at an initial purchase price per share of Warrant Stock of $4.50, subject to adjustment pursuant to the provisions of Section 10 of this Agreement (the "Base Warrant Price"; the Base Warrant Price and the Additional Warrant Price (defined below) shall be referred to jointly herein as the "Warrant Price."). 5.2 ADDITIONAL WARRANTS: TERM AND EXERCISE PRICE. Each outstanding Additional Warrant entitles the registered owner thereof to purchase one (1) share of Warrant Stock at any time prior to the Expiration Date at the price determined as follows (the "Additional Warrant Price." (a) In the event a Prepayment Event occurs (i) prior to the first anniversary of the date hereof and the Prepayment Event Price is at that time less than $9.00 per share (subject to adjustment pursuant to Section 10 hereof) or (ii) after the first anniversary of the date hereof and prior to the second anniversary of the date hereof and the Prepayment Event Price is at that time less than $12.00 per share (subject to adjustment pursuant to Section 10 hereof), the Additional Warrant Price shall be the lesser of $4.50 per share (subject to adjustment pursuant to Section 10 hereof) or the applicable Prepayment Event Price. (b) In the event a Prepayment Event does not occur prior to the second anniversary of the date hereof, the Additional Warrant Price shall be $4.50 per share (subject to adjustment pursuant to Section 10 hereof). (c) "Prepayment Event Price" shall mean the price per share of Common Stock determined by the Board of Directors as provided below within ten (10) days prior to the occurrence of a Prepayment Event, subject to subsection (d) below. In the event of an IPO (as defined in the Note Purchase Agreement), the Prepayment Event Price shall be the price per share of Common Stock offered pursuant to the IPO. In the event of a Change in Control (as defined in the Note Purchase Agreement), the Prepayment Event Price shall be the price reasonably and in good faith determined by the Board of Directors as the per share valuation of the Company based on arms length negotiations with the acquiring entity (determined on a basis taking into account all options, warrants, convertible securities and similar securities then exercisable or exercisable upon such Prepayment Event) and, if the Board so 5 6 desires, the opinion of a financial advisor (which financial advisor may be the Company's independent public accountant) (a "Financial Advisor"), subject to subsection (d) below. In the event of an Asset Sale (as defined in the Note Purchase Agreement), the Prepayment Event Price shall be the price reasonably and in good faith determined by the Board of Directors as the per share valuation of the company based on the arms length negotiations with the acquiring entity (determined on a basis taking into account all options, warrants, convertible securities and similar securities then exercisable or exercisable upon such Prepayment Event) and, if the Board so desires, the opinion of a Financial Advisor, subject to subsection (d) below. (d) In the event the Holders of a majority of the then outstanding Warrants (the "Requisite Holders") provide written notice to the Company within ten (10) days of receipt of written notice of the Prepayment Event Price set by the Company of their objection to such price, the Prepayment Event Price shall be determined as follows: (i) by agreement among the Company and the Requisite Holders within ten (10) days following the event requiring such determination or (ii) in the absence of such an agreement, by an Independent Financial Expert selected in accordance with the further provisions of this definition. If required, an Independent Financial Expert shall be selected within five (5) days following the expiration of the ten (10) day period referred to above, either by agreement among the Company and the Requisite Holders or, in the absence of such agreement, by lot from a list of four potential Independent Financial Experts remaining after the Company nominates three, the Requisite Holders nominate three, and each side eliminates one potential Independent Financial Expert. The Independent Financial Expert shall be instructed by the Company and the Requisite Holders to make its determination within 20 days of its selection. The fees and expenses of an Independent Financial Expert selected hereunder shall be borne equally by the Company and by the Holders (on a PRO RATA basis based on the number of Warrants held by each Holder) participating in the transaction to which the determination relates. 5.3 General. ------- (a) Subject to the provisions of this Agreement, each Holder shall have the right to purchase from the Company (and the Company shall issue and sell to such Holder) the number of fully paid and nonassessable shares of Warrant Stock specified in such Holder's Warrant Certificate(s) (as adjusted from time to time in accordance with the provisions of Section 10 of this Agreement), upon surrender of such Warrant Certificate(s) to the Company or its duly authorized agent, and upon payment to the Company of the Warrant Price, or, at the option of the Holder, by conversion of unpaid principal and accrued interest on the Notes, if then outstanding, in an amount equal to the Warrant Price, as adjusted in accordance with the provisions of Section 9 of this Agreement, for the number of shares of Warrant Stock in respect of which such Warrants are then exercised. The date of exercise (the 6 7 "Exercise Date") of any Warrant shall be deemed to be the date of receipt by the Company of the Warrant Certificate duly filled in and signed and accompanied by proper payment as hereinafter provided. Payment of the Warrant Price shall be made as set forth in the Warrant Certificate. (b) Subject to Section 6 of this Agreement, upon such exercise of Warrants, and payment of the Warrant Price as aforesaid, the Company shall issue and cause to be delivered with all reasonable dispatch (but in any event within twenty (20) business days) to or (subject to the provisions of Section 4 of this Agreement) upon the written order of the Holder, a certificate for the number of full shares of Warrant Stock so purchased upon the exercise of such Warrants, together with cash, as provided in Section 10 of this Agreement, in respect of any fraction of a share of such stock otherwise issuable upon such exercise. Except under circumstances described in the following sentence, the shares of Warrant Stock purchased pursuant to the immediately preceding sentence shall be deemed to be issued to the Holder as the record owner of such shares as of the close of business on the Exercise Date. Notwithstanding the foregoing, if the Company determines, on or after the date of exercise of any Warrant, that issuance of the Warrant Stock represented thereby would violate an applicable order, law, rule, or regulation, including federal or state securities laws, the Company shall so notify immediately the exercising Holder and shall in good faith, and as expeditiously as possible, endeavor to issue the Warrant Stock without such violation. The right of purchase represented by the Warrants shall be exercisable, at the election of the Holder thereof, either in full or from time to time in part and, in the event that any Warrant is exercised in respect of less than all of the shares of Warrant Stock purchasable on such exercise at any time prior to the Expiration Date, a new Warrant Certificate evidencing the remaining Warrants shall be issued. 6. PAYMENT OF TAXES. The Company shall pay all documentary stamp taxes, if any, attributable to the initial issuance of Warrant Stock upon the exercise of Warrants PROVIDED, HOWEVER, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any permitted transfer involved in the issue or delivery of any Warrant Certificates or Warrant Stock in a name other than that of the registered Holder of such Warrants. 7. MUTILATED OR MISSING WARRANTS. Upon (i) receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of a Warrant Certificate, (ii) if requested by the Company, the posting of a bond in an amount equal to the value of the lost, stolen or destroyed Warrant Certificate, (iii) reimbursement to the Company of all reasonable expenses incident thereto, and (iv) surrender and cancellation of such Warrant Certificate, if mutilated, the Company will make and deliver in lieu of such Warrant Certificate a new Warrant Certificate of like tenor and representing an equivalent right or interest. The term "outstanding" when used herein with reference to the Warrant Certificate as of any particular time shall not include any Warrant Certificate in lieu of which a new Warrant Certificate has been made and delivered by the Company in accordance with the provisions hereof. 7 8 8. CAPITALIZATION OF THE COMPANY. Without giving effect to the Warrants contemplated herein, the authorized capital stock of the Company is as set forth in Schedule 3.1 to the Note Purchase Agreement. 9. Reservation Of Warrant Stock. ---------------------------- (a) The Company represents that there has been reserved out of the authorized and unissued shares of Common Stock, a number of shares sufficient to provide for the exercise of the right of purchase represented by the Warrant Certificates as initially issued, and the Company, which currently acts as the transfer agent for its Common Stock ("Transfer Agent") and every subsequent Transfer Agent for any shares of the Company's capital stock issuable upon the exercise of any of the Warrants are hereby irrevocably authorized and directed at all times until the Expiration Date or earlier termination of this Agreement to reserve such number of authorized and unissued shares of Common Stock as shall be required for such purpose. The Company will keep a copy of this Agreement on file with every subsequent Transfer Agent for any shares of the Company's capital stock issuable upon the exercise of the Warrants. The Company will supply any such subsequent Transfer Agent with duly executed stock certificates for issuance on exercise of Warrants and will itself provide or make available any cash which may be required by Section 11 of this Agreement. The Company will furnish to any such subsequent Transfer Agent a copy of all notices of adjustments, and certificates related thereto, transmitted to each Holder pursuant to Section 10.3 of this Agreement. All Warrant Certificates surrendered in the exercise of the rights thereby evidenced shall be cancelled. (b) The Company covenants that it shall endeavor to comply with all securities laws regulating the offer and delivery of shares of Common Stock upon exercise of the Warrants; and that if any shares of Common Stock required to be reserved for purposes of exercising the Warrants hereunder require registration with or approval of any governmental authority under any Federal or state law before such shares may be validly issued or delivered upon exercise of the Warrants, the Company shall, in good faith and as expeditiously as possible, endeavor to secure such registration or approval, as the case may be. The Company covenants that all shares of Common Stock which shall be issued upon exercise of the Warrants shall upon issue and payment therefor be validly issued, fully paid and nonassessable. 10. ADJUSTMENTS OF WARRANT PRICE, PREPAYMENT EVENT PRICE AND NUMBER OF SHARES OF WARRANT STOCK. The number and kind of securities purchasable upon the exercise of each Warrant and the Warrant Price related thereto shall be subject to adjustment from time to time upon the happening of certain events, as hereinafter defined, but (with respect to Warrants) only as to Warrants outstanding at the time of such adjustment. Upon each adjustment of the Warrant Price pursuant to the provisions of Section 10.1(b), the Holder of such Warrant shall thereafter, prior to the Expiration Date thereof, be entitled to purchase at the Warrant Price resulting from such 8 9 adjustment, the number of shares of Warrant Stock obtained by multiplying the Warrant Price in effect immediately prior to such adjustment by the number of shares of Warrant Stock issuable upon exercise of such Warrant immediately prior to such adjustment and dividing the product thereof by the Warrant Price resulting from such adjustment. 10.1 ADJUSTMENT OF THE NUMBER OF SHARES OF WARRANT STOCK AND THE WARRANT PRICE. The number of shares of Warrant Stock and the Warrant Price shall be subject to adjustment as follows: (a) In case the Company shall at any time after the date of issuance of a Warrant (A) pay a dividend or make a distribution on its Common Stock in shares of its capital stock (whether in shares of Common Stock or of capital stock of any other class), (B) subdivide its outstanding shares of Common Stock into a greater number of shares, (C) combine its outstanding shares of Common Stock into a smaller number of shares, or (D) reclassify, reorganize or effect any similar transaction with respect to any of its shares of Common Stock, or in substitution or exchange therefor (other than a change in par value, or from par value to no par value, or from no par value to par value), then the number and, if applicable, kind of shares of Warrant Stock to be received by any Holder shall be adjusted so that the Holder will be entitled to receive on exercise the number and kind of shares of capital stock which it would have owned immediately following such action had its Warrants been exercised immediately prior thereto. An adjustment made pursuant to this subsection (a) shall become effective immediately after the payment date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination, reclassification, reorganization or similar transaction. If, as a result of an adjustment made pursuant to this subsection (a), a Holder shall become entitled to receive shares of two or more classes of capital stock of the Company, the Board of Directors or a duly authorized committee thereof shall in good faith determine (which determination shall be conclusive and binding) the allocation of the Warrant Price between or among shares of such classes of capital stock. After such allocation, the Warrant Price and number of shares of each class of capital stock that is part of the Warrant Stock shall thereafter be subject to adjustment in a manner and on terms determined by the Board of Directors (which determination shall be conclusive and binding) to be as nearly equivalent as practicable to those applicable to Common Stock under this Section 10. (b) (i) From the date hereof to and including the second anniversary of the date hereof, if the Company shall issue any shares of Common Stock other than Excluded Shares (as hereinafter defined) for consideration per share (the "Issuance Price") less than the Warrant Price (as hereinafter defined) per share in effect immediately prior to such issuance, the Warrant Price in effect immediately prior to such issuance shall be reduced (but shall not be increased) to the Issuance Price. 9 10 10 11 (ii) After the second anniversary of the date hereof, if the Company shall issue any shares of Common Stock other than Excluded Shares for consideration per share less than the Warrant Price per share in effect immediately prior to such issuance, the Warrant Price in effect immediately prior to such issuance shall be reduced (but shall not be increased) to the price (calculated to the nearest cent) determined: by dividing (A) an amount equal to the sum of (1) the number of shares of Common Stock outstanding on a fully diluted basis immediately prior to such issuance multiplied by the Warrant Price per share in effect immediately prior to such issuance and (2) the consideration, if any, received by the Company upon such issuance by (B) the number of shares of Common Stock outstanding on a fully diluted basis immediately after such issuance. (c) CERTAIN ADJUSTMENT FACTORS. For the purposes of any adjustment of the Warrant Price pursuant to paragraph (b) above, the following provisions shall be applicable: (x) CASH. In the case of the issuance of shares of Common Stock for cash, the amount of the consideration received by the Company shall be deemed to be the amount of the cash proceeds received by the Company for such shares of Common Stock before deducting therefrom any discounts, commissions, taxes or other expenses allowed, paid or incurred by the Company for any underwriting or otherwise in connection with the issuance and sale thereof; and (y) CONSIDERATION OTHER THAN CASH. In the case of the issuance of shares of Common Stock (other than upon the conversion of shares of capital stock or other securities of the Company) for consideration in whole or in part other than cash, including securities acquired in exchange therefor (other than securities by their terms so exchangeable), the consideration other than cash shall be deemed to be the fair value thereof (as determined by the Board of Directors of the Company based on an opinion of an outside financial advisor of recognized regional or national standing, which may, but need not, be the independent public accountants who serve as the regular auditors of the Company (the "Financial Advisor"), whose determination shall be conclusive and binding), irrespective of any accounting treatment; and (z) OPTIONS AND CONVERTIBLE SECURITIES. In the case of the issuance of (i) options, warrants or other rights to purchase or acquire shares of Common Stock (whether or not exercisable immediately following such issuance), (ii) securities by their terms convertible into or exchangeable for shares Common Stock (whether or not so convertible or exchangeable immediately following such issuance), or (iii) options, warrants or rights to purchase such convertible or exchangeable securities (whether or not exercisable immediately following such issuance): 11 12 (1) the aggregate maximum number of shares of Common Stock deliverable upon exercise of such options, warrants or other rights to purchase or acquire shares of Common Stock shall be deemed to have been issued at the time such options, warrants or other rights are first issued and for a consideration equal to the consideration (determined in the manner provided in clauses (x) and (y) above), if any, received by the Company upon the issuance of such options, warrants or other rights plus the purchase price provided in such options, warrants or other rights for the shares of Common Stock covered thereby (if the purchase price per share of Common Stock is expressed as a range, the purchase price per share for purposes of this subparagraph (z)(1) shall be the average of such range of prices); (2) the aggregate maximum number of shares of Common Stock deliverable upon conversion of or in exchange for any such convertible or exchangeable securities, or upon the exercise of options, warrants or other rights to purchase or acquire such convertible or exchangeable securities and the subsequent conversion or exchange thereto shall be deemed to have been issued at the time such convertible or exchangeable securities or such options, warrants or other rights are first issued and for a consideration equal to the consideration, if any, received by the Company for any such convertible or exchangeable securities or options, warrants or other rights (excluding any cash received on account of accrued interest or accumulated dividends), plus the additional consideration, if any, to be received by the Company upon the conversion or exchange of such securities and the exercise of any options, warrants or other rights (the consideration in each case to be determined in the manner provided in clauses (x) and (y) above); (3) on any change in the number of shares of Common Stock deliverable upon exercise of any such options, warrants or other rights which have become exercisable or conversion of or exchange of such convertible or exchangeable securities which have become convertible or exchangeable, or any change in the consideration to be received by the Company upon such exercise, conversion or exchange, the Warrant Price as then in effect shall forthwith be readjusted to such Warrant Price as would have been obtained had such adjustment been made upon the original issuance of such options, warrants or other rights; provided, however, no adjustment shall be made with respect to such options, warrants or other rights exercised prior to such change, or securities converted or exchanged prior to such change; (4) on the expiration or cancellation of any such options, warrants or other rights, or the termination of the right to convert or exchange such convertible or exchangeable securities, if the Warrant Price shall have been adjusted upon such securities being issued or becoming exercisable, convertible or exchangeable, such Warrant Price shall forthwith be readjusted 12 13 to such Warrant Price as would have been obtained had an adjustment been made on the basis of the issuance of only the number of shares of Common Stock actually issued upon the exercise of such options, warrants or other rights, or upon the conversion or exchange of such securities; and (5) if the Warrant Price shall have been adjusted when such options, warrants or other rights were first issued or such convertible or exchangeable securities were first issued, no further adjustment of the Warrant Price shall be made for the actual issuance of shares of Common Stock upon the exercise, conversion or exchange thereof. (d) EXCLUDED SHARES. "Excluded Shares" shall mean (i) any shares of Common Stock issued in a transaction described in Section 10.1(a) of this Agreement; and (ii) issuances of shares of Common Stock from time to time pursuant to stock option or bonus plans authorized by the Board of Directors of the Company as of the date hereof; (iii) issuances of Common Stock, or warrants, options or rights to acquire shares of Common Stock, or securities convertible into or exchangeable for Common Stock pursuant to the terms of any acquisition by the Company of all or substantially all of the operating assets, or more than fifty percent (50%) of the voting capital stock or other management interest of any business entity in a transaction negotiated on an arms'-length basis and expressly approved in advance by the Board of Directors of the Company; (iv) issuances of shares of Common Stock from time to time upon the exercise, exchange or conversion of warrants, options, convertible securities, the Notes (whether or not outstanding as of the date hereof) or other securities outstanding as of the date hereof; and (v) issuances of shares of Common Stock from time to time pursuant to the anti-dilution provisions of other securities. (e) No adjustment in the Warrant Price shall be required unless such adjustment would require an increase or decrease of at least 2.2% in such price; PROVIDED, HOWEVER, that any adjustments which by reason of this subsection (f) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 10.1 shall be made to the nearest tenth of a cent or to the nearest one-hundredth of a share, as the case may be. (f) The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issuance of Common Stock for the purposes of this Section 10. 10.2 RIGHTS TO PURCHASE OTHER SECURITIES. If any of the following shall occur: (a) any consolidation or merger to which the Company is a party, other than a consolidation or a merger in which the Company is the continuing or surviving 13 14 Company and which does not result in any reclassification of, or change (other than as a result of a subdivision or combination) in, outstanding shares of the Common Stock, or (b) any sale or transfer to another corporation or entity of all or substantially all of the assets of the Company; then, and in either such case, the Holder of each Warrant then outstanding shall have the right to purchase the kind and amount of shares of stock and/or other securities and property receivable upon such consolidation, merger, sale or transfer by a holder of the number of shares of Common Stock issuable upon exercise of such Warrant immediately prior to such consolidation, merger, sale, or transfer. The provisions of this Section 10.2 shall similarly apply to successive consolidations, mergers, sales or transfers. 10.3 NOTICE OF ADJUSTMENT. Whenever the number of shares of Warrant Stock purchasable upon the exercise of each Warrant or the Warrant Price of such Warrant Stock is adjusted or reduced, as herein provided, the Company shall mail by first class, postage prepaid, to each Holder (a) notice of any reduction on or before the day the reduction takes effect, which shall state the reduced Warrant Price and the period during which it will be in effect and/or (b) a certificate setting forth the number of shares of Warrant Stock purchasable upon the exercise of each Warrant and the Warrant Price on such Warrant Stock after adjustment setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. 10.4 NO ADJUSTMENT FOR DIVIDENDS. No adjustment in respect of any cash dividends shall be made during the term of a Warrant or upon the exercise or conversion of a Warrant. 10.5 CERTAIN EVENTS. If any event occurs as to which in the reasonable judgment of the Board of Directors of the Company, in good faith, the other provisions of this Section 9 are not strictly applicable but the lack of any adjustment would not in the opinion of the Board of Directors of the Company fairly reflect the purchase rights of the Holders of the Warrants in accordance with the basic intent and principles of the provisions of this Agreement then the Board of Directors of the Company shall appoint a Financial Advisor which shall give its opinion upon the adjustment, if any, on a basis consistent with the basic intent and principles established and the other provisions of this Section 9, necessary to preserve, without dilution, the exercise rights of the Holders. Upon receipt of such opinion, the Company shall forthwith make the adjustments described therein which adjustments shall be conclusive and binding. 11. Redemption of Warrants. ---------------------- (a) Upon ten (10) days prior notice (a "Redemption Notice") to the Holders, prior to the fourth anniversary of the date hereof, the Company may redeem 14 15 all Warrants then outstanding for no consideration upon the occurrence of the following events (provided the Company has issued a notice of redemption, each a "Redemption Event"): 15 16 (i) The offering price in a Qualified IPO (defined below), or the average daily Closing Price (defined below) for twenty (20) consecutive trading days on a rolling basis exceeds 125% of the then applicable Target Price (defined below); and (ii) Either (x) registration statement which is effective covering the issuance or resale of the Warrant Stock or (y) each Holder otherwise is certified to sell the Warrant Stock under Rule 144 of the Securities Act of 1933, as amended (subject only to volume limitations). (b) For purposes of this Section 11, "Qualified IPO" shall mean an underwritten public offering of shares of Common Stock, the gross proceeds of which to the Company and/or the selling stockholders (if any) are of at least $15,000,000. (c) For purposes of this Section 11, "Closing Price" for each day shall mean the last reported sales price of the Common Stock (trading regular way) or, in case no such reported sale takes place on such day, the average of the reported closing bid and asked prices regular way, in either case as reported on the New York Stock Exchange or, if such security is not listed or admitted for trading on the New York Stock Exchange or, if such security is not listed or admitted for trading on the New York Stock Exchange, on NASDAQ NMS, or if such security is not quoted on such NASDAQ NMS, the average of the closing bid and asked prices on such day in the over-the-counter market as reported by NASDAQ or, if bid and asked prices for such security on such day shall not have been reported through NASDAQ, the average of the bid and asked prices on such day, as furnished by any New York Stock Exchange member firm making a market in the Common Stock selected from time to time by the Board of Directors of the Company for that purpose. (d) For purposes of this Section 11, "Target Price" shall mean: (i) at all times prior to the first anniversary of the date hereof, $9.00 per share of Common Stock; (ii) on or after the first anniversary of the date hereof but prior to the second anniversary of the date hereof, $12.00 per share of Common Stock; (iii) on or after the second anniversary of the date hereof but prior to the third anniversary of the date hereof, $14.00 per share of Common Stock; and (iv) on or after the third anniversary of the date hereof and thereafter, $16.00 per share of Common Stock. "Target Price" shall be determined before deducting any underwriting fee or selling commissions but adjusted equitably for any stock split, combination, reclassification or similar event involving the Common Stock. (e) Upon receipt of a Redemption Notice, each Holder may exercise part or all of the Warrants then outstanding and registered in its name in accordance with the provisions of Section 5 hereof within ten (10) days of receipt of the Redemption Notice. Warrants not exercised within this period following the Redemption Notice 16 17 shall be deemed terminated. All Warrants not previously issued as of a Redemption Event shall not subsequently be issued by the Company and Purchasers shall have no rights to such Warrants. In all events, prior to issuing a Redemption Notice, the Company shall issue to the Purchasers all Warrants to which the Purchasers are then entitled under Section 1 of this Agreement. 12. ELIMINATION OF FRACTIONS. The Company shall not be required to issue certificates representing fractional shares of Common Stock upon any exercise of Warrants, but will make a payment in cash, in lieu of issuing such fractional shares, based on the Current Market Price per share at the time. 13. Certificates to Bear Legends. ---------------------------- (a) The Warrant Certificates and certificates representing shares of Warrant Stock shall be subject to a stop-transfer order and each such certificate shall bear the following legends by which each Holder shall be found: THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 ("ACT"). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. THESE SECURITIES HAVE BEEN ISSUED UNDER AND ARE GOVERNED BY AND ARE SUBJECT TO THAT CERTAIN WARRANT AGREEMENT DATED MARCH 6, 1997 (THE WARRANT AGREEMENT). A COPY OF THE WARRANT AGREEMENT CAN BE OBTAINED FROM THE SECRETARY OF THE COMPANY. (b) In addition, so long as the Security holders' Agreement remains in effect all such certificates referred to in paragraph (a) above shall also bear the following legend: THESE SECURITIES ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND OTHER TERMS SET FORTH IN THAT CERTAIN AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT DATED AS OF MARCH __, 1997, AS IT MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH AGREEMENT CAN BE OBTAINED FROM THE SECRETARY OF THE COMPANY. 14. NO RIGHTS AS STOCKHOLDERS; NOTICES TO HOLDERS; UNISSUED WARRANTS. Nothing contained in this Agreement or in any of the Warrant Certificates shall be construed conferring upon the Holders or their transferees the right to vote or to receive dividends or to consent to or receive 17 18 notice as stockholders in respect of any meeting of stockholders for the election of directors of the Company or on any other matter, or any rights whatsoever as stockholders of the Company. Warrants as to which the conditions precedent to issuance are not satisfied shall be void and of no effect, and no Purchaser or other party shall have any rights with respect thereto. 15. INVESTMENT INTENT. The Warrants to be purchased pursuant to this Agreement are being purchased for each Purchaser's own account and with no intention of distributing or reselling the Warrants. The Holder understands that neither the Warrants nor the Common Stock have been registered under the Act or any applicable state securities laws and that neither the Warrants nor the Common Stock can be sold, transferred or otherwise disposed of without registration under the Act and applicable state securities laws, unless it has been established to the satisfaction of the Company that they may be sold, transferred or otherwise disposed of without such registration. 16. NOTICES. Any notice pursuant to this Agreement to be given or made by the Holder of any Warrant Certificate to or on the Company shall be sufficiently given or made if delivered personally or sent by telecopier or by certified mail, addressed to the Chief Financial Officer of the Company at the Company's principal executive offices at 4100 Holiday Street, N.W., Suite 201, Canton, Ohio 44718 (unless notice has been given of a change of such address), and shall be effective three (3) days after having been mailed or upon receipt if delivered personally or sent by telecopier, with receipt confirmed by the office of the President. Notices or demands authorized by this Agreement to be given or made to the Holder of any Warrant Certificate shall be sufficiently given or made if delivered personally or sent by certified mail or by telecopier, addressed to such Holder at the address of such Holder as shown on the Warrant Register, and shall be effective three (3) days after having been mailed or upon receipt if delivered personally or sent by telecopier, with receipt confirmed. 17. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio. 18. SUPPLEMENTS, AMENDMENTS AND WAIVERS. Any supplement or amendment to, or any waiver of any provision of, this Agreement shall be effective when consented to in writing by the Holders of a majority of the Warrants then outstanding (determined as though there were one Warrant for each share of Common Stock issuable on the exercise of the then outstanding Warrants) and by the Company. 19. SUCCESSORS. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Holders shall bind and inure to the benefit of their respective successors and assigns hereunder. 20. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which so executed shall be deemed to be an original; but such counterparts together shall constitute but one and the same instrument. 18 19 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed on the day, month and year first above written. WATERLINK, INC. By: --------------------------- Its: -------------------------- 19 20 WARRANT PURCHASE AGREEMENT SIGNATURE PAGE Accepted and agreed as of the date first above written: Brantley Capital Corporation By:_______________________________________ [Please Sign Above This Line] Name: Robert P. Pinkas Title: Chairman, Chief Executive Officer and Treasurer Address: 20600 Chagrin Blvd. Suite 1150 Cleveland, Ohio 44122 Telephone No.: (216) 283-4800 Telecopier No.: (216) Taxpayer Identification No.: __________________________ 20 21 WARRANT PURCHASE AGREEMENT SIGNATURE PAGE Accepted and agreed as of the date first above written: River Cities Capital Fund Limited Partnership By: RC Management Limited Partnership, its General Partner By: Mayson, Inc., its General Partner By:_______________________________________ [Please Sign Above This Line] Name: Edwin T. Robinson Title: President Address: 221 East 4th Street Suite 2250 Cincinnati, Ohio 45202 Telephone No.: (513) 621-9700 Telecopier No.: (513) 579-8939 Taxpayer Identification No.: 31-1413379 21 22 WARRANT PURCHASE AGREEMENT SIGNATURE PAGE Accepted and agreed as of the date first above written: Environmental Opportunities Fund, L.P. By: Environmental Opportunities Management Co., LLC, its General Partner By:_______________________________________ [Please Sign Above This Line] Name: Kenneth Ch'uan-k'ai Leung Title: Manager Address: 126 East 56th Street 24th Floor New York, New York 10022 Telephone No.: (212) 980-0789 Telecopier No.: (212) 593-6150 Taxpayer Identification No.: 74-0488338 22 23 WARRANT PURCHASE AGREEMENT SIGNATURE PAGE Accepted and agreed as of the date first above written: Environmental Opportunities Fund (Cayman), L.P. By: Environmental Opportunities Management Co., LLC, its General Partner By:_______________________________________ [Please Sign Above This Line] Name: Kenneth Ch'uan-k'ai Leung Title: Manager Address: c/o Citco Fund Services (Cayman Islands) Limited P.O. Box 31106SMB Grand Cayman, Cayman Islands, B.W.I. Telephone No.: (713) 250-4283 Telecopier No.: (713) 250-4294 Taxpayer Identification No.: N/A Copy of notices to: Environmental Opportunities Management Co., LLC 3100 Texas Commerce Tower Houston, Texas 77002 23 24 WARRANT PURCHASE AGREEMENT SIGNATURE PAGE Accepted and agreed as of the date first above written: National City Capital Corporation By:_______________________________________ [Please Sign Above This Line] Name: Todd S. McCuaig Title: Address: 1965 E.6th Street 10th Floor Cleveland, Ohio 44114 Telephone No.: (216) 575-2480 Telecopier No.: (216) 575-9965 Taxpayer Identification No.: 34-1269115 24 25 WARRANT PURCHASE AGREEMENT SIGNATURE PAGE Accepted and agreed as of the date first above written: IPP95, L.P. By: WESINVEST, Inc., its General Partner By:_______________________________________ [Please Sign Above This Line] Name: Christine Jenkins Title: Secretary Address: 310 South Street P.O. Box 1913 Morristown, NJ 07461 Telephone No.: (212) 898-0290 Telecopier No.: (212) 898-0840 Taxpayer Identification No.: 22-3356204 Copy of notices to: IPP95, L.P. 310 South Street P.O. Box 1913 Morristown, NJ 07461 Attn: Conor Mullett 25 26 EXHIBIT A THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 ("ACT"). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. THESE SECURITIES ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND OTHER TERMS SET FORTH IN THAT CERTAIN AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT DATED AS OF MARCH __, 1997, AS IT MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH AGREEMENT CAN BE OBTAINED FROM THE SECRETARY OF THE COMPANY. THESE SECURITIES HAVE BEEN ISSUED UNDER AND ARE GOVERNED BY AND ARE SUBJECT TO THAT CERTAIN WARRANT AGREEMENT DATED MARCH 31, 1992 (THE "WARRANT AGREEMENT"). A COPY OF THE WARRANT AGREEMENT CAN BE OBTAINED FROM THE SECRETARY OF THE COMPANY. WARRANT TO PURCHASE COMMON STOCK OF WATERLINK, INC. WARRANT NO. _____ This certifies that, for value received, ____________________, or its permitted assigns, is entitled, subject to the terms set forth below, to purchase from WATERLINK, INC., a Delaware corporation (the "Company"), ______________ shares (the "Shares") (subject to reduction as provided in Section _____ of the Warrant Agreement) of fully paid and nonassessable common stock, $.01 par value per share, of the Company (the "Common Stock"), at the purchase price of $_____________ per share (the "Purchase Price"), at any time or from time to time up until 5:00 P.M. Cleveland, Ohio time on _______________, 2002. 1. Exercise Provisions. ------------------- (a) MANNER OF EXERCISE. This Warrant may be exercised by the holder of this Warrant surrendering to the Company at its principal office at 4100 Holiday Street, N.W., Suite 201, Canton, Ohio 44718, or such other address as to which the Company may hereafter give notice to the holder, this Warrant, together with the exercise form attached to this Warrant duly executed by the holder together with payment to the Company in the amount obtained by multiplying the Purchase Price by the number of shares of Common Stock designated in the exercise form. Payment may be in cash or by cashier's or certified bank check payable to the order of the Company, or by conversion of the unpaid principal 1 27 and accrued interest under the Notes in the manner set forth in the Notes and the Warrant Agreement. (b) PARTIAL EXERCISE. On any partial exercise, the Company shall promptly issue and deliver to the holder of this Warrant a new Warrant or Warrants of like tenor in the name of that holder providing for the right to purchase that number of shares of Common Stock as to which this Warrant has not been exercised. 2. DELIVERY OF STOCK CERTIFICATES. Within a reasonable time after full or partial exercise of this Warrant, the Company at its expense will cause to be issued in the name of and delivered to the holder of this Warrant in accordance with the requirements of the Warrant Agreement, a certificate or certificates for the number of fully paid and nonassessable shares of Common Stock to which that holder shall be entitled upon such exercise. 3. COMPLIANCE WITH SECURITIES ACT; DISPOSITION OF WARRANT OR SHARES OF COMMON STOCK. The holder of this Warrant, by acceptance hereof, agrees that this Warrant and the Shares of Common Stock to be issued upon exercise hereof are being acquired for investment and that the holder will not offer, sell or otherwise dispose of this Warrant or any Shares of Common Stock to be issued upon exercise hereof, except under circumstances which will not result in a violation of the Securities Act of 1933, as amended (the "Act") nor violate the terms of the Warrant Agreement and, if then applicable, the Amended and Restated Stockholders' Agreement (as defined in the Warrant Agreement). In addition, any permitted Warrant transferee will be required to agree to the provisions of this Section 3. The provisions of this Section 3 shall not apply to any shares of Common Stock, the issuance or resale of which is registered under the Act. 4. Miscellaneous Provisions. ------------------------ (a) RESERVATION OF STOCK. The Company covenants that it will at all times reserve and keep available, solely for issuance upon exercise of this Warrant, all shares of Common Stock or other securities from time to time issuable upon exercise of this Warrant. (b) MODIFICATION. This Warrant and any of its terms may be changed, waived, or terminated only by a written instrument signed by the party against whom enforcement of that change, waiver or termination is sought. (c) REPLACEMENT. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of this Warrant and subject to the requirements of the Warrant Agreement, the Company will execute and deliver, in lieu of this Warrant, a new Warrant of like tenor. (d) WARRANT AGENT. The Company may, on written notice to the holder of this Warrant, appoint an agent having an office in Cleveland, Ohio, for the purposes of issuing Common Stock upon the exercise of this Warrant and of replacing or exchanging this 2 28 Warrant, and after that appointment any such issuance, replacement, or exchange shall be made at that office by that agent. (e) NO RIGHTS AS STOCKHOLDER. No holder of this Warrant, as such, shall, solely by holding this Warrant, be entitled to vote or receive dividends or be considered a stockholder of the Company for any purpose, nor shall anything in this Warrant be construed to confer on any holder of this Warrant as such, any rights of a stockholder of the Company or any right to vote, to give or withhold consent to any corporate action, to receive notice of meeting of stockholders, to receive dividends or subscription rights or otherwise. (f) ANTI-DILUTION RIGHTS. The holder hereof shall have certain anti-dilution protection as to the Shares of Common Stock to be issued upon exercise as specifically set forth in the Warrant Agreement which may result in the adjustment from time to time of the Purchase Price and/or the number of shares of Common Stock issuable upon the exercise hereof. (g) NOTICES. Notices hereunder to the holder of this Warrant shall be sent as provided in the Warrant Agreement. Dated: _______________, 1997 WATERLINK, INC. By: ----------------------- 3 29 FORM OF EXERCISE ---------------- (To be signed only upon exercise of Warrant) To: WATERLINK, INC. The undersigned holder of the attached Warrant hereby irrevocably elects to exercise the right to purchase _______________ shares of Common Stock of WATERLINK, INC., and herewith makes payment of $___________________ for those shares, and requests that the certificate for those shares be issued in the name of the undersigned and delivered to the address below the signature of the undersigned. The undersigned hereby affirms the statements and covenants all as set forth in Section 3 of the Warrant. Dated:_______________, 199__ (Signature must conform in all respects to name of holder as specified on the face of the attached Warrant) ----------------------------------------- Signature ----------------------------------------- Address ----------------------------------------- EX-2 3 EXHIBIT 2 1 Exhibit 2 SUBORDINATED NOTE PURCHASE AGREEMENT AND CREDIT FACILITY AMONG WATERLINK, INC. AND THE PURCHASERS NAMED HEREIN DATED AS OF MARCH 6, 1997 2 TABLE OF CONTENTS -----------------
Page ---- 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
i 3
Page ---- 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
ii 4 SUBORDINATED NOTE PURCHASE AGREEMENT AND CREDIT FACILITY -------------------------------------------------------- SUBORDINATED NOTE PURCHASE AGREEMENT AND CREDIT FACILITY, dated as of March 6, 1997 (the "Agreement"), by and among Waterlink, Inc., a Delaware corporation (the "Company"), Brantley Venture Partners III, L.P. ("Brantley") and the Purchasers (the "Purchasers") named on the execution pages hereof. In consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: ARTICLE I --------- DEFINITIONS ----------- 1.1 DEFINITIONS. As used in this Agreement, unless the context requires a different meaning, the following terms have the meanings indicated: "ACT" means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. "ADVANCE" means purchases and sales of Notes in accordance with Article II of this Agreement. "ADVANCE FEE" has the meaning provided for in Section 2.1(d) of this Agreement. "AFFILIATE" means, with respect to any Person, any Person that, directly or indirectly, controls, is controlled by or is under common control with such Person in question. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "AGREEMENT" means this Note Purchase Agreement, as the same may be amended, supplemented or modified in accordance with the terms hereof. "ASSET SALE" means the sale by the Company or any of the Subsidiaries of the Company to any Person of all or substantially all of the assets of the Company. "BCC" means Brantley Capital Corporation. "BOA" means BOAI, BOA London and BOA Frankfurt. 5 "BRANTLEY" means Brantley Venture Partners III, L.P. "BRANTLEY GUARANTY" means that certain Guaranty executed by Brantley, dated as of February 26, 1997, in favor of BOAI under the Loan Documents. "BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day in which banking institutions in the State of Ohio are authorized or obligated by law to close. "CHANGE IN CONTROL" means any (1) merger, consolidation or similar transaction in which the Company is not the surviving corporation into an entity with a class of equity securities registered under the Exchange Act or (ii) any merger, consolidation or similar transaction with a Person not having a class of securities registered under the Exchange Act and as a result of which the holders of voting securities of the Company immediately prior thereto receive or hold less than sixty-seven percent (67%) of the securities of the Company or its successor immediately thereafter. "CLOSING" has the meaning provided therefor in Section 2.4(a) of this Agreement. "CLOSING DATE" has the meaning provided therefor in Section 2.4(a) of this Agreement. "CODE" means the Internal Revenue Code of 1986, as amended, as in effect on the date of this Agreement and any successor code thereto. "COMMISSION" means the Securities and Exchange Commission or any similar agency then having jurisdiction to enforce the Act. "COMMON STOCK" has the meaning provided therefor in Section 3.1(a) of this Agreement. "COMPANY" means Waterlink, Inc., a Delaware corporation. "EOF" means Environmental Opportunities Fund, L.P. "EOFC" means Environmental Opportunities Fund (Cayman), L.P. "EVENT OF DEFAULT" has the meaning provided therefor in Section 7.1 of this Agreement. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. 2 6 "GAAP" means generally accepted accounted principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession, that are applicable to the circumstances as of the date of determination. "GERMAN CREDIT AGREEMENT" means the Credit Agreement, dated as of March 4, 1997, among the Company, Provista Einhundertsechsundfunfzigste Verwaltungsgesellschaft mbH (to be known as Waterlink (Germany) GmbH), and Bank of America National Trust and Savings Association, Frankfurt Branch ("BOA Frankfurt"), as the same may be amended, restated, supplemented or otherwise modified from time to time. "HOLDER" OR "NOTEHOLDER" means a registered holder of a Note(s). "INDEBTEDNESS" as applied to any Person, means (i) all indebtedness for borrowed money, (ii) that portion of obligations with respect to capital leases or industrial revenue or development bonds that is properly classified as a liability on a balance sheet in conformity with GAAP, (iii) notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money, (iv) any obligation owed for all or any part of the deferred purchase price of the property or services (excluding any such obligations incurred under an employee benefit plan, which purchase price is (y) due more than six months from the date of incurrence of the obligation in respect thereof or (z) evidenced by a note or similar instrument and excluding, in connection with any business acquisition by the Company or its subsidiaries, any earnout obligations or deferred purchase price therefor, whether or not evidenced by promissory notes) and (v) all indebtedness secured by any Lien (other than trade indebtedness secured by a statutory lien) on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is nonrecourse to the credit of that Person. "INTEREST PAYMENT DATE" has the meaning provided therefor in Section 2.2 of this Agreement. "INVESTMENT COMPANY ACT" means the Investment Company Act of 1940, as amended, and the rules and regulations promulgated by the Commission thereunder. "IPO" means any initial firm commitment underwritten public offering of Common Stock of the Company, the gross proceeds of which to the Company and/or the selling stockholders (if any) are at least $30,000,000. "IPP95" means IPP95, L.P. 3 7 "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. 4 8 "REPRESENTATIVES" means, collectively, the directors, officers, partners, employees, agents or representatives, including, without limitation, financial advisors, attorneys, accountants, experts, consultants or agents of the Purchasers. "REQUIRED PREPAYMENT" has the meaning provided for in Section 2.3(c) of this Agreement. "RIVER CITIES" means River Cities Capital Fund Limited Partnership. "SBA" mean the U.S. Small Business Administration. "SECURITIES" means any stock, shares, voting trusts, certificates, bonds, debentures, options, warrants, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "Securities" or any certificates of interest, shares or participation in temporary or interim certificates for the purchase or acquisition of, any rights as subscribed to, purchased or acquired, any of the foregoing. "SECURITYHOLDERS' AGREEMENT" means that certain Amended and Restated Stockholders' Agreement in the form of Exhibit C hereto to be executed by the Company and the Purchasers on the Closing Date. "SENIOR CREDIT FACILITY" means the credit facilities evidenced by the Loan Documents. "SENIOR INDEBTEDNESS" has the meaning provided therefor in Section 6.1(a) of this Agreement. "SERIES A SHARES," "SERIES B SHARES," AND "SERIES C SHARES" have the meanings provided for in Section 3.1(e) of this Agreement. "SHARE PURCHASE AGREEMENT" means the Share Purchase Agreement among AWPE Svenska AB, Anglian Water Holdings GmbH and the Buyers (as defined therein), dated March 4, 1997. "SMALL BUSINESS ACT" has the meaning provided for in Section 3.1(f) of this Agreement. "SUBORDINATED INDEBTEDNESS" means the indebtedness evidenced by the Notes. "SUBSEQUENT CREDIT FACILITY" means any credit facility entered into upon or after termination of the Senior Credit Facility. 5 9 "SUBSEQUENT LOAN DOCUMENTS" means the Subsequent Security Documents and all such other documents entered into in connection with a Subsequent Credit Facility, including, without limitation, a credit agreement between the Company, any Subsidiaries of the Company and a Subsequent Senior Lender. "SUBSEQUENT SECURITY DOCUMENTS" means security documents entered into in connection with a Subsequent Credit Facility. "SUBSEQUENT SENIOR LENDER" means the lender(s) under any Subsequent Credit Facility. "SUBSIDIARY" means, with respect to any Person, any corporation, association or other business entity of which more than 50% of the total voting power of shares of stock entitled without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the Subsidiaries of that Person or a combination thereof. "SWEDEN CREDIT AGREEMENT" means the Credit Agreement, dated as of March 4, 1997, among the Company, Gigantissimo 2061 AB (to be known as Waterlink (Sweden) AB) and Bank of America National Trust and Savings Association, London Branch ("BOA London"), as the same may be amended, restated, supplemented or otherwise modified from time to time. "TERMINATION DATE" means the earlier of (i) December 31, 1997 or (ii) a Prepayment Event. "WARRANT" or "WARRANTS" means the warrants to purchase Common Stock of the Company to be issued to the Purchasers pursuant to the terms of the Warrant Agreement. "WARRANT AGREEMENT" means the Warrant Agreement of even date herewith, in the form of Exhibit D hereto, among the Company and the Purchasers. "WATERLINK CREDIT AGREEMENT" means the Credit Agreement, dated as of February 19, 1997, among the Company, the financial institutions from time to time party thereto and Bank of America Illinois ("BOAI"), as agent, as the same may be amended, restated, supplemented or otherwise modified from time to time. 1.2 ACCOUNTING TERMS. All accounting terms not specifically defined herein shall be construed in accordance with GAAP as in effect from time to time, including, without limitation, applicable statements, bulletins, and interpretations issued by the Financial Accounting Standards Board and bulletins, opinions, interpretations, and statements issued by the American Institute of Certified Public Accountants or its committees. When used herein, the term "financial statements" shall include the notes and schedules thereto. 6 10 1.3 REFERENCES TO DOCUMENTS. Any terms referring to instruments, agreements or documents used herein shall mean and include such documents as they may hereafter be amended, supplemented, modified or restated from time to time. ARTICLE II ---------- PURCHASE AND SALE OF NOTES -------------------------- 2.1 Purchase and Sale of Notes. -------------------------- (a) ADVANCES. Subject to the provisions of this Agreement, up to and including the Termination Date, each Purchaser for itself and not for the others, hereby agrees to make Advances to the Company up to but not exceeding an aggregate unpaid principal amount at any one time outstanding equal to such Purchaser's Pro-Rata Percentage multiplied by the difference between (i) Ten Million Dollars ($10,000,000) and (ii) the maximum amount guaranteed by Brantley under the Brantley Guaranty (the "Maximum Aggregate Advances"). Upon repayment of any Note or Notes, the principal amount thereof may not be reborrowed by the Company. To the extent that Brantley or any Contributor under the Contribution and Indemnification Agreement of even date herewith among the parties hereto makes a payment under the Brantley Guaranty, the amount of such payments shall be deemed an Advance hereunder. (b) ADVANCE PROCEDURE. Advances shall be made pursuant to the Company's written or facsimile request therefor (a "Request for an Advance"), given by the Company to Purchasers no later than three (3) Business Days prior to the date of disbursement (other than for the initial Advance hereunder if on the Closing Date) stating the date of the proposed borrowing, and the amount of the aggregate and each Purchaser's Advance. Each Request for an Advance shall be signed by an authorized person of the Company. Each borrowing shall consist of an Advance made by each Purchaser in an amount equal to its Pro-Rata Percentage of such borrowing and shall be in $100,000 multiples from each Purchaser (treating EOF and EOFC as a single Purchaser for this purpose only) and aggregate not less than $1,000,000 from all Purchasers. Each Purchaser shall make available to the Company in immediately available funds the amount of such Purchaser's Pro-Rata Percentage of the Advances on the date requested in the Request for an Advance. In the event that upon any request for an Advance Brantley Capital Corporation ("BCC") shall not have received the exemptive order necessary for it to purchase Notes and Warrants as provided herein, then each other Purchaser shall have the option to advance its pro rata portion of the Advance that otherwise would have been required of BCC. (c) NOTES. The Company shall execute and deliver to each Purchaser a Note upon each Advance from such Purchaser. 7 11 (d) ADVANCE FEE. Upon issuance of any Note to any Purchaser, the Company shall pay to such Purchaser a fee ("Advance Fee") equal to one percent (1%) of the principal amount of the Note then issued; provided that the Advance Fee payable to IPP95 shall be two percent (2%). 2.2 INTEREST RATE. The Company shall pay interest on the principal amount of the Notes from time to time outstanding at the rate of twelve percent (12%) (eight percent (8%) to IPP95 for the initial three month period of its Notes) per annum for the period from and including the date of issuance of any Note through, but not including the first anniversary date thereof and fourteen percent (14%) per annum thereafter until the same shall be paid in full. Interest payments shall be made quarterly in arrears on each June 30, September 30, December 31 and March 31 (collectively referred to herein as an "Interest Payment Date"), commencing June 30, 1997. Interest will be computed on the basis of a 360-day year and the actual number of days elapsed. Whenever any payment to be made under the Notes shall be stated to be due on a day which is not a Business Day, such payment may be made on the next succeeding Business Day, and such extension of time in such case shall be included in the computation of the payment of interest on the Notes. 2.3 Method of Payment and Prepayment. -------------------------------- (a) The Company shall make Required Prepayments of the principal amount of the Notes as and to the extent required by Section 2.3(c) hereof, on a pro rata basis, and may make voluntary principal prepayments, which voluntary principal prepayments will be made on a pro rata basis, from time to time of principal amount of the Notes in aggregate amounts of not less than $100,000 without premium or penalty. Any payments made on the Notes, whether of principal, interest or premium (if any), shall be made ratably to all the Noteholders. If the Company sets a date for the prepayment of any part of the principal amount of the Notes, any prepayments of principal due on such date shall be accompanied by the payment of all accrued and unpaid interest on the portion of the principal amount of the Notes being prepaid to the date fixed for prepayment. The Company will maintain records of the amount of each Note, all payments and prepayments of principal and interest thereon, the current outstanding principal balance thereof and other appropriate information relating to the Notes. The Holder must surrender its Note to the Company to collect the final principal payment in cash on the Note at maturity, upon any Required Prepayment or in the event the Company voluntarily prepays the Note in full. Any prepayments on the Notes shall be applied in inverse order to Advances made (i.e. last in, first out). (b) The Company shall pay principal and interest in money of the United States of America that at the time of payment is legal tender for payment of public and private debts. So long as the Purchaser shall be a Noteholder, the Company will pay (i) by wire transfer of immediately available funds all sums becoming due on each Note registered in the name of the Purchaser pursuant to the wire transfer instructions provided by such Purchaser, or (ii) by mailing a check to such Purchaser's address as the same appears on the 8 12 books of the Company or such other address such Purchaser shall have designated by notice to the Company, without presentment and without notations being made thereon. All sums becoming due on each Note shall be paid to the Purchaser thereof without reservation of any sums therefrom for or on account of withholding (except to the extent otherwise required by law), counterclaim or set off. (c) To the extent that on or after March 6, 1999, the Company refinances the Senior Credit Facility with a Subsequent Credit Facility or suffers to exist any other Senior Indebtedness, which Subsequent Credit Facility and other Senior Indebtedness, together, provide aggregate senior credit to the Company of $30,000,000 or more and the Company's Leverage Ratio (as defined in Section 8.16 of the Waterlink Credit Agreement as in effect on the date hereof) exceeds 4.5 to 1.0, the Company shall prepay (a "Required Prepayment") the Notes in an amount equal to the amount of such aggregate senior credit in excess of $30,000,000. The Required Prepayment shall be made upon such refinancing. The Notes shall be due and payable, subject to the terms contained therein, together with all accrued interest thereon, on the earlier of (i) March 6, 2002 or, solely as to NCCC and River Cities, five (5) years from the date of the first Advance, or (ii) upon the occurrence of a Prepayment Event. 2.4 The Closing. ----------- (a) Subject to Section 2.4(b) and subject also to the satisfaction or waiver of each of the conditions precedent to the Closing set forth in Article IV, the initial purchase and sale of Notes in the aggregate principal amount specified in the Company's initial Request for an Advance, if any, up to the Maximum Aggregate Advances shall take place at a closing (the "Closing") at the offices of Benesch, Friedlander, Coplan & Aronoff, 2300 BP America Building, 200 Public Square, Cleveland, Ohio 44114, on the date hereof ("Closing Date"), or at such other place agreed upon by the parties hereto. (b) The Closing is conditioned on the simultaneous or prior closings of the transactions contemplated by the Share Purchase Agreement and the Loan Documents and the satisfaction or waiver of all other conditions to Closing set forth in Article IV of this Agreement. As a result, the Closing Date is subject to change. The Company has provided or promptly shall provide each Purchaser which is a party to this Agreement with written notice of any anticipated initial Advance hereunder to be made on the Closing Date. (c) Once each of the Purchasers is notified by the Company personally (if in attendance at the Closing) or by telephone that each and every condition to Closing has been or, simultaneously with such Purchaser's payment hereunder, will be, either satisfied or waived, each Purchaser shall then cause payment of the principal amount of the Notes being purchased on such date, if any, to be made to the Company by wire transfer of immediately available funds. The Company shall have furnished to the Purchasers the 9 13 account information at the time the Company notifies the Purchasers of the date and time of the Closing. (d) The obligation of the Purchasers to make any Advance hereunder shall be subject to satisfaction of the following conditions that at the date of making such Advance, and after giving effect thereto: (a) no Event of Default or event which with the passage of time or giving of notice, or both, would constitute an Event of Default, shall have occurred and be then continuing and (b) each representation and warranty set forth in Section 3 hereof is true and correct as if then made. The acceptance by the Company of the proceeds of any Advance shall be deemed to constitute as of the date of acceptance a representation and warranty by the Company that all conditions to make such Advance set forth in this Agreement have been satisfied. 2.5 DELIVERY OF THE NOTE. Delivery of the Note purchased by a Purchaser pursuant to this Agreement shall be made by the Company upon any Advance by delivering to each such Purchaser against payment of the purchase price therefor, a Note substantially in the form of Exhibit A attached to this Agreement. As soon as practicable following the Closing, the Company shall deliver a Note to each Purchaser not in attendance at the Closing who has paid the full purchase price therefor in accordance with the provisions of Section 2.4(c) hereof. The Notes will be registered in the name of such Purchaser. The Notes may only be transferred together with the related Warrants, subject otherwise only to the express terms of the Warrant Agreement, the Warrants and that certain Indemnification and Contribution Agreement, dated as of February 26, 1997, among Purchasers and Brantley and acknowledged by the Company. 2.6 ALLOCATION OF PURCHASE PRICE. Each Purchaser and the Company agree that, as determined in accordance with Section 1.1273-2(h) of the Regulations promulgated pursuant to the Code as amended, the issue price for federal income tax purposes to be allocated to each Note issued together with the Warrants shall equal $970,000 for each $1,000,000 of principal amount of such Note, and the issue price for the Warrants attributable to such $1,000,000 of principal shall equal $30,000. ARTICLE III ----------- REPRESENTATIONS AND WARRANTIES ------------------------------ 3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to, and covenants and agrees with, as of the Closing Date and as of the date of each Advance, each of the Purchasers as follows, it being acknowledged and agreed by the Company that each of the Purchasers is relying upon such representations and warranties and covenants for the purpose of making and undertaking the representations, warranties and covenants set forth in Section 3.2 and in the purchase of the Notes hereunder: 10 14 (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, 11 15 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 12 16 the representations, warranties and covenants set forth in Section 3.1 and Article V of this Agreement and in the issuance and sale of the Notes hereunder: (a) The Note and Warrants to be acquired by it pursuant to the Offering Documents (i) are being acquired for its own account and with no intention of distributing or reselling such Note or Warrants or any part thereof (except in compliance with the Act and the Offering Documents) and (ii) have not been, and will not be, registered under the Act, by reason of their issuance by the Company in a transaction exempt from the registration requirements of the Act, and each Purchaser acknowledges that the Note and Warrants may not be sold, transferred, pledged or hypothecated unless such sale, transfer, pledge or hypothecation is pursuant to an effective registration statement covering such Note and Warrants and filed in accordance with the Act or is exempt from such registration in the opinion of counsel reasonably acceptable to the Company. (b) That it is an "accredited investor" as defined in Rule 501(a) under the Act (c) That (i) it is authorized, and has all requisite power and authority, to execute and deliver this Agreement and perform the obligations and duties created hereby; (ii) this Agreement has been duly and validly executed by it and constitutes its valid and binding obligation, enforceable in accordance with its terms; (iii) the purchase of the Note and Warrants does not violate its charter, by-laws, partnership agreement, agreement of trust or similar document or any law or regulation to which it is subject; (iv) it has had a full opportunity to request from the Company and to review and has received all information which it deems relevant in making a decision to purchase the Notes and Warrants being purchased or to be purchased by it hereunder and the Conversion Shares, (v) it will comply with the restrictions on transferability of the Warrants and the Conversion Shares contained in the Securityholders' Agreement, (vi) it has the experience in making investments to make its own investment decision, (vii) it is able to withstand the total loss of its investment in the Company and (viii) it acknowledges that it has made its investment decision with respect to all of the Notes being purchased and to be purchased by it hereunder and further acknowledges that it is not entitled to any further disclosure in connection with the Company's requiring Advances hereunder. ARTICLE IV ---------- CONDITIONS PRECEDENT TO CLOSING ------------------------------- 4.1 COMPANY OBLIGATIONS. The obligations of each Purchaser to purchase the Note to be purchased by it hereunder is subject, at or prior to the Closing Date and as specified below on each Advance date, to the satisfaction of each of the following conditions (any and all of which may be waived in writing by any of the Purchasers on behalf of themselves individually); provided that the 13 17 obligatons of BCC are subject to its having received an exemptive order from the Securities and Exchange Commission permitting its purchase of Notes and Warrants as provided for herein. (a) The representations and warranties made by the Company herein shall be true and correct in all material respects on and as of the Closing Date and on each Advance date with the same effect as though such representations and warranties had been made on and as of the Closing Date and each Advance date, as the case may be, and the Company shall have complied in all material respects with all agreements hereunder required to be performed by it at or prior to the Closing Date and on each Advance date. (b) Neither the purchase of the Note agreed to be purchased by such Purchaser hereunder nor the performance of any other obligations of such Purchaser under the Offering Documents shall at the Closing Date or any Advance date be prohibited or enjoined (temporarily or permanently) under the laws of any jurisdiction to which Purchaser is subject. (c) On the Closing Date and each Advance date, each Purchaser shall have received a certificate, dated the Closing Date, signed by an authorized officer of the Company stating that the conditions specified in Sections 4.1(a) and 4.1(b) have been satisfied, unless otherwise waived by such Purchaser in accordance with the terms hereof. (d) On the Closing Date, each Purchaser shall have received a certificate, dated the Closing Date, signed by the secretary or assistant secretary or other officer of the Company attaching true and correct copies of the certificate of incorporation and By-Laws of the Company and a resolution or resolutions of the Company's board of directors authorizing the transactions contemplated by this Agreement. (e) No default or Event of Default shall exist under this Agreement as of the Closing Date or any Advance date. (f) Purchaser shall have received all other documents, agreements and certificates as Purchasers may reasonably request. (g) There shall not have been any material adverse change in the financial condition or prospects of the Company and or the Subsidiaries of the Company, taken as a whole, prior to the Closing Date. (h) At or prior to the Closing Date, all consents and approvals necessary to effect the transactions contemplated by this Agreement shall have been obtained. (i) At or prior to the Closing Date, the Offering Documents required to be executed by the Company shall have been executed by the Company and any other parties thereto other than the Purchaser and delivered to the Purchasers. 14 18 (j) Notes in form and substance reasonably satisfactory to each Purchaser and its counsel, in an aggregate principal amount of the initial Advances made hereunder shall have been issued to the Purchasers as of any Advance date. (k) The Company shall have duly authorized, validly issued and delivered the Warrants to the Purchasers pursuant to the terms of the Warrant Agreement. (l) The transactions contemplated by the Share Purchase Agreement and the Loan Documents shall have closed. (m) The Company shall have paid to the Purchasers his or its reasonable out-of-pocket expenses, including legal fees and disbursements incurred in connection with the transactions contemplated by this Agreement in an amount not to exceed fifteen thousand dollars ($15,000) and, on a pro rata basis, the Advance Fee pertaining to the Notes issued upon Closing and each Advance date, as applicable. (n) The Company shall have executed and delivered to Purchasers the Registration Rights Agreement. (o) The Company shall have entered into an advisory agreement with Sanders Morris Mundy Inc. in a form mutually acceptable to the Company and Sanders Morris Mundy Inc. (p) The Company shall have executed and delivered to River Cities and NCCC a Size Status Declaration on SBA Form 480 and an Assurance of Compliance on SBA Form 652, and shall have provided to River Cities and NCCC information necessary for the preparation of a Portfolio Financing Report on SBA Form 1031. 4.2 PURCHASER OBLIGATIONS. The obligations of the Company to issue and sell the Notes pursuant to this Agreement are subject, at the Closing Date and as of the date of any Advance to the representations and warranties made by each of the Purchasers being true and correct in all material respects as though such representations and warranties had been made on and as of the Closing Date and as of the date of any Advance, as the case may be. ARTICLE V --------- COVENANTS --------- 5.1 FINANCIAL STATEMENTS AND REPORTS. The Company covenants and agrees that so long as a Purchaser or any permitted transferee of a Purchaser shall hold of record 100 or more of the shares of Common Stock acquired by such Purchaser pursuant to this Agreement (treating for the purpose of such computation the holders of Series A Shares and/or Series B Shares and/or Series C 15 19 Shares or Warrants as holding the maximum number of Common Shares issuable upon conversion of such shares or exercise of such Warrants), and as to any Noteholder so long as its Note is outstanding the Company shall furnish to such Purchasers and each such permitted transferee and to each Noteholder: (a) Within 120 days after the end of each fiscal year of the Company, a balance sheet of the Company (or a consolidated balance sheet of the Company and its subsidiaries, as the case may be) as of the end of such fiscal year and the related statements (or consolidated statements) of income, changes in stockholders' equity and changes in financial position of the Company (or of the Company and its subsidiaries) for the fiscal year then ended, together with supporting notes thereto, certified without qualification as to scope of audit by a firm of independent public accountants of national standing selected by the Company and reasonably acceptable to the Purchasers and each such transferee; (b) Within 30 days after the end of each month in each fiscal year, a balance sheet of the Company and its subsidiaries, as the case may be, and the related statement (or consolidated statements) of income and changes in financial position, unaudited but certified by the chief financial officer of the Company, such balance sheets to be as of the end of such month and such statements of income to be for such month and for the period from the beginning of the fiscal year to the end of such month, in each case subject to normal and recurring year-end adjustments; provided, however, that in the event that such balance sheet and related statements of income cannot be prepared within such 30-day period because of inadequacies in the accounting system of any entity acquired by the Company, the Company shall furnish such balance sheet and related statements of income as soon thereafter as is possible, and the Company shall use reasonable efforts to remedy such inadequacies so that future balance sheets and related statements of income may be prepared within the applicable 30-day periods; (c) Within 30 days prior to the beginning of each fiscal year of the Company (and with respect to any revision thereof, promptly after such revision has been prepared), a proposed operating budget for the Company (or of the Company and its subsidiaries, as the case may be), insofar as practicable, including projected monthly income statements, cash flow statements during such fiscal year and a projected balance sheet as of the end of such fiscal year, and each monthly financial statement furnished pursuant to 9(b) above shall reflect variances from such operating budget, as same may from time to time be revised; provided, however, that in the event that such annual budget cannot be prepared within such 30-day period because of inadequacies in the accounting system of any entity acquired by the Company, the Company shall furnish such annual budget as soon thereafter as is possible, and the Company shall use reasonable efforts to remedy such inadequacies so that future annual budgets may be prepared within the applicable 30-day periods; 16 20 (d) Promptly upon filing, copies of all registration statements, prospectuses, periodic reports and other documents filed by the Company with the Securities and Exchange Commission; and (e) Promptly, from time to time, such other information regarding the operations, business, affairs and financial condition of the Company or any Subsidiary as Purchaser or any permitted transferee of a Purchaser may reasonably request. 5.2 COMPLIANCE WITH SMALL BUSINESS INVESTMENT ACT. The Company agrees to provide River Cities and NCCC with sufficient information to permit River Cities and NCCC to comply with its obligations under the Small Business Act and the regulations thereunder. Upon reasonable request, the Company shall also provide River Cities and NCCC with (i) access to the Company's properties, places of business, records (including financial records) and offices during business hours and (ii) the opportunity to discuss the affairs, finances and accounts of the Company with the officers. River Cities and NCCC and representatives of the SBA shall be given access to the Company's records to confirm that the proceeds received by the Company in connection with the Closing are used for the purposes delineated in Section 5.3. The President of the Company shall certify to River Cities and NCCC, within three (3) months of the date of the Closing, that the Company has used the proceeds in accordance with the purposes delineated in Section 5.3. 5.3 USE OF PROCEEDS. The Company agrees to use the investment proceeds from each Purchaser that is a Small Business Investment Company for prospective acquisitions, and/or for working capital. If the Company shall, without the consent of such Purchaser, use the proceeds from such Purchaser's investment for a purpose not described above, such Purchaser may demand that the Company repurchase the Note and Warrants at a price equal to the purchase price paid for such securities as required by SBA Regulations Section 107.305. Further, the Company will use the investment proceeds from each Purchaser to repay any overadvance under the Loan Documents with respect to which Brantley is a guarantor. 5.4 DIVIDENDS. So long as any Notes are outstanding, the Company shall not pay cash dividends on its capital stock. ARTICLE VI ---------- SUBORDINATION ------------- 6.1 SUBORDINATION. So long as, and from time to time while, any Senior Indebtedness is outstanding, anything in this Agreement or the Notes to the contrary notwithstanding, the indebtedness of the Company hereunder as evidenced by the Notes shall be subordinate and junior in right of payment, to the extent and in the manner set forth in this Article VI, to all Senior Indebtedness of the Company from time to time outstanding (whether outstanding at the date of this Agreement or incurred after the date of this Agreement) and as the Notes may at any time and from 17 21 time to time be modified or amended in any respect and to all other indebtedness hereafter made or assumed by the Company, which by the terms of such indebtedness or by the terms of any indenture or other instrument pursuant to which such indebtedness is made, assumed or incurred is specifically designated as "Senior Indebtedness" for the purposes of this Agreement and which is permitted to be issued, made, assumed and incurred according to the terms of this Agreement provided that such indebtedness is included within the definition of Senior Indebtedness as set forth in the following paragraph (a). (a) "Senior Indebtedness" means all indebtedness and other obligations specified below whether outstanding on the date of this Agreement or hereafter created, incurred or assumed by the Company: (i) the obligations of the Company and its Subsidiaries, including, without limitations the principal of, and premium and interest on, all loans, letters of credit bankers' acceptances and other extensions of credit under the Loan Documents and all commitment, facility and other fees and all expenses, reimbursements, indemnities and other amounts payable by the Company thereunder; (ii) subject to Section 2.3(c) above, all other indebtedness of the Company which by its express terms is made senior to the Notes; provided, however, that any indebtedness incurred by the Company under this clause (ii) must be created in connection with or arise out of a transaction in which the Company or any Subsidiaries of the Company received cash loan proceeds, property or credit support in the form of a letter of credit, guaranty or like instrument; (iii) all interest accrued or accruing on Senior Indebtedness after the commencement of any insolvency, bankruptcy or receivership case or proceeding in accordance with and at the contract rate (including, without limitation, any rate applicable upon default) specified in the agreement or instrument creating, evidencing or governing any such Senior Indebtedness, whether or not, pursuant to applicable law or otherwise, the claim for such interest is allowable as a claim in such case or proceeding; and (iv) subject to Section 2.3(c) above, any refinancings, refundings, renewals or extensions, in whole or in part, of any indebtedness or other obligation described in clauses (i) or (ii) above under any Subsequent Loan Documents or otherwise. (b) In the event of (i) any insolvency or bankruptcy proceeding brought by or against the Company; (ii) any receivership, liquidation, reorganization or other similar proceeding relative to the Company or to its property, including its Subsidiaries; or (iii) any proceedings for voluntary liquidation, dissolution or other winding up of the Company, whether or not involving insolvency or bankruptcy, the holders of Senior Indebtedness shall be entitled to receive payment in full in cash of all principal, premium (if any), fees and 18 22 charges in respect of, and interest on, all Senior Indebtedness (including interest thereon accruing after the commencement of any such proceedings) before the holders of the Notes shall be entitled to receive any payment or distribution in respect of the Notes. Pursuant to the foregoing, the holders of Senior Indebtedness (until payment in full in cash of all principal, premium (if any), fees and charges in respect of, and interest on, all Senior Indebtedness, including interest thereon accruing after the commencement of any such proceedings at the rate specified in the applicable Senior Indebtedness whether or not such interest is an allowable claim in such case or proceeding) shall be entitled to receive for application and payment thereof any payment or distribution of any kind or character, whether in cash or property or securities, which may be payable or deliverable in any such proceedings in respect of the Notes (including any such payment or distribution which may be payable or deliverable by virtue of the provisions of, or any security for, any securities which are subordinate and junior in right of payment of the Notes). The Holders of the Notes shall not exercise or attempt to exercise any right of set off or counterclaim in respect of any obligations of the Holders of the Notes to the Company against the obligations of the Company under the Notes if the effect thereof shall be to reduce the amount of any such payment or distribution to which the holders of Senior Indebtedness would be entitled in the absence of such set off or counterclaim; and if and to the extent that notwithstanding the foregoing, the Holders of the Notes are required by any mandatory provision of law to exercise any such right of set off or counterclaim each reduction of the amount owing on account of the principal of or interest on the Notes by reason of such set off or counterclaim shall be deemed to be a payment by the Company in a like manner in respect of the Notes to which the second sentence of this paragraph (b) shall apply. (c) In the event that any default shall occur and be continuing with respect to any Senior Indebtedness permitting the holders, with or without the making of demand, the giving of notice or otherwise, of such Senior Indebtedness to accelerate the maturity thereof, the Company shall not pay and the Holders shall not be entitled to receive any payment or distribution in respect of the Notes of any kind, whether of principal, premium (if applicable) or interest or, except to the extent otherwise provided in Section 6.2 of this Agreement, institute any judicial or legal proceedings or seek to enforce any other rights or remedies whatsoever UNLESS AND UNTIL (i) a period of one hundred seventy-five (175) days (the "Blocking Period") shall have elapsed from the date of such default without the same having been cured or waived; and (ii) the Blocking Period shall have elapsed without any holder of Senior Indebtedness having accelerated the maturity of such Senior Indebtedness, but in such event, upon the satisfaction of the conditions set forth in (i) and (ii) above, the holders of the Notes will have the rights and remedies contemplated by this Agreement. (d) Nothing in this Agreement will prohibit the holder of any Senior Indebtedness at any time and from time to time without the consent of or notice to any holder of the Notes from taking any of the following actions: 19 23 (i) subject to Section 2.3(c) above, extending, renewing, modifying, waiving or amending the terms of such Senior Indebtedness; (ii) following 5 days notice to the Noteholders of the terms thereof, (or, in the case of an auction, the time and place of sale) the sale other than by the Company in the ordinary course of business of any material portion of the property pledged, mortgaged or otherwise securing Senior Indebtedness in accordance with the terms of the Loan Documents or the Subsequent Loan Documents, PROVIDED, HOWEVER, that the failure to deliver such notice shall not otherwise prohibit such Person from effecting such sale pursuant to the terms of the Loan Documents or the Subsequent Loan Documents; (iii) exchanging, releasing or otherwise dealing with any property pledged, mortgaged or otherwise securing Senior Indebtedness or releasing a guarantor or any other person liable in any manner for the Senior Indebtedness or amending or waiving the terms of any guaranty of the Senior Indebtedness; (iv) exercising or refraining from exercising any rights against the Company or any other person; (v) applying any sums, in any manner, by whomever paid or however realized, to the Senior Indebtedness; and (vi) taking any other action which otherwise might be deemed to impair the rights of the holders of the Senior Indebtedness. Subject to the terms of this Agreement, any and all of such actions may be taken by the holders of Senior Indebtedness without incurring responsibility to any Holder of the Notes and without impairing or releasing the obligations of any Holder of the Notes to the holders of Senior Indebtedness. (e) No right of any present or future holder of any Senior Indebtedness to enforce the provisions of this Article VI shall at any time in any way be prejudiced or impaired by any action or failure to act on the part of the Company or anyone in custody of its assets or property or by any act or any failure to act on the part of any such holder or any other holder of Senior Indebtedness or by any breach by the Company of the terms of this Agreement or the Notes, irrespective of any knowledge thereof on the part of any such holder or any other holder of Senior Indebtedness. (f) Each Holder of the Notes will at all times retain the right to vote its claims and otherwise act and participate in any insolvency, bankruptcy or reorganization proceeding relative to the Company; provided, however, no Holder of the Notes shall take any action or 20 24 vote its claims in the course of any such bankruptcy, insolvency or reorganization proceedings so as to: (i) contest the validity or the enforceability of the agreements governing Senior Indebtedness including the Loan Documents or any Subsequent Loan Documents, the promissory notes issued to the holders of Senior Indebtedness, or the liens and security interests to the extent granted with respect to the Senior Indebtedness; (ii) contest the rights and duties of the holders of Senior Indebtedness established in the agreements or instruments governing the same or any security agreement with respect to such liens and security interests; (iii) contest the validity or enforceability of this Article VI; (iv) contest the validity or enforceability of this Agreement or any agreement or instrument to the extent evidencing or relating to the Indebtedness of Company to such Holder; or (v) compromise their claims so as to deprive the holders of Senior Indebtedness of the benefit of receiving all amounts otherwise payable to the Holders of the Notes pursuant to the reorganization or liquidation of the Company resulting from such proceeding; it being understood that nothing contained in this Section 6.1(f) shall be deemed to relieve the Company of its obligations under Section 2.3(c) of this Agreement. (g) No Affiliate or Subsidiary of the Company may take any action or make any payment in respect of or in regard to the Notes if the Company would be prohibited from taking such action or making such payment pursuant to this Article VI. (h) The provisions of this Article VI shall be given independent effect so that if a particular payment as to the Notes is prohibited by any one of such provisions, it shall be prohibited although it otherwise may not be prohibited by any other provisions. 6.2 SUBROGATION Subject to the payment in cash in full of all Senior Indebtedness, the Holders of the Notes shall be subrogated to the rights of the holders of Senior Indebtedness to receive payments or distributions of assets of the Company payable or distributable to the holders of Senior Indebtedness and, as among the Company and its Subsidiaries, their creditors and the holders of the Notes, no payments or distributions otherwise payable or deliverable in respect of the Notes but by virtue of the provisions thereof and of Section 6.1, paid or delivered to the holders of Senior Indebtedness shall be deemed to be a payment by the Company on account of the Notes. 21 25 6.3 CONSTRUCTIVE TRUST, ETC. In the event that any Noteholder receives any payment or distribution in contravention of the provisions hereof, such Holder shall hold such payment or distribution in trust for the benefit of the holders of Senior Indebtedness, and shall deliver such payment or distribution to the holders of such Senior Indebtedness, or their respective representatives, ratably according to the aggregate amounts remaining unpaid on account of the Senior Indebtedness held or represented by each, to the extent necessary to make payment in cash in full of all Senior Indebtedness remaining unpaid after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness. 6.4 RESTRICTIONS ON ADDITIONAL SUBORDINATED INDEBTEDNESS. The Company will not create or suffer to exist any Indebtedness that (i) provides that it is subordinate in right of payment to the Senior Indebtedness other than the Notes and (ii) is senior in right of payment to the Notes or is secured. The Company shall give to each Noteholder a copy of any notice of acceleration of the maturity date of any Senior Indebtedness promptly upon receipt thereof. No present or future holder of Senior Indebtedness shall be prejudiced in such holder's right to enforce subordination of any Note by any act or failure to act on the part of the Company or anyone in custody of its assets or property. The provisions of this Article VI are solely for the purpose of defining the relative rights of the holders of Senior Indebtedness on one hand, and the Holders of the Notes on the other hand, and nothing herein shall impair, as between the Company and the Holders of the Notes, the obligation of the Company, which is unconditional and absolute, to pay the Holders thereof the principal and interest thereon in accordance with the terms thereof. ARTICLE VII ----------- DEFAULTS -------- 7.1 DEFAULTS. If any of the following events (herein called an "Event of Default" or collectively "Events of Default") shall have occurred and be continuing, that is to say: (a) default shall be made in the payment of any interest, principal or premium (if any) when due on any of the Notes and such default shall have continued for a period of twelve (12) days; or (b) the Company breaches or defaults in the performance of any provision of this Agreement and such breach or default shall have continued for a period of thirty (30) days; or (c) the Company defaults in any payment of principal of or interest on any Senior Indebtedness, beyond any period of grace provided with respect thereto or in the performance of any other term or condition contained in any agreement under which any such obligation is created if the effect of such default results in Senior Indebtedness in excess of $1,000,000 22 26 becoming due prior to its stated maturity without such indebtedness being discharged or such acceleration being rescinded or annulled within a period of sixty (60) days; or (d) an order for relief shall be entered in any federal bankruptcy proceeding in which the Company is the debtor; or bankruptcy, receivership, insolvency, reorganization, relief, dissolution, liquidation or other similar proceedings shall be instituted by or against the Company or all or any part of the property of the Company under the Federal Bankruptcy Code or any other bankruptcy or insolvency law of the United States or any bankruptcy or insolvency law of any state of competent jurisdiction unless, if such proceedings are instituted against the Company, such proceedings are dismissed and discharged within ninety (90) days after they are instituted; or (e) the Company shall have become insolvent or unable to pay its debts as they mature, cease doing business as a going concern, undergo dissolution or liquidation, make an assignment for the benefit of creditors, admit in writing its inability to pay its debts as they become due, or if a trustee, receiver or liquidator shall be appointed for the Company, or for any substantial portion of the assets of the Company, and such appointment shall not be vacated within ninety (90) days; or (f) further, any diversion by the Company of the proceeds hereunder from the use of proceeds as delineated in Section 5.3 shall be an Event of Default pertaining to River Cities and NCCC requiring the immediate repayment of River Cities' and NCCC's Notes and full refund of the purchase price for their Warrants, plus accrued and unpaid interest on the Notes. then, except as provided below with respect to an Event of Default under paragraph (a) of this Section 7.1, the Holder of the Note if only one Note shall be outstanding, or the Holders of at least a majority of the principal amount of the Notes, if more than one Note shall be outstanding, may at its or their option, after notice in writing to the Company, declare the Note or all of the Notes, as the case may be, to be forthwith due and payable and thereupon the Note, or all of the Notes, shall be and become due and payable, together with interest and all other amounts accrued thereon (provided that if an Event of Default results from the filing of a voluntary petition in any bankruptcy proceeding or the filing of an involuntary petition in any bankruptcy proceeding which is not dismissed and discharged within ninety (90) days, the Notes thereupon shall immediately become due and payable, with interest accrued thereon, without any notice from the holders of the Notes or otherwise), and, subject to the provisions of Article VI hereof, the Holder or Holders of the Note or Notes may take any action or proceeding at law or in equity which it or they deem advisable for the protection of its or their interests to collect and enforce payment and the Company shall pay all expenses, court costs and reasonable attorneys' fees incurred in connection with or arising out of any default hereunder. Notwithstanding the foregoing, in case an Event of Default under paragraph (a) of this Section 7.1 shall occur, the Holders shall have none of the rights and remedies otherwise contemplated by this Section 7.1 (including, without limitation, the right to accelerate the maturity of the Notes) UNLESS AND UNTIL (i) Blocking Period shall have elapsed from the date of such Event of 23 27 Default without the same having been cured or waived; and (ii) the Blocking Period shall have elapsed without any holder of Senior Indebtedness having accelerated the maturity of such Senior Indebtedness, but in such event, upon the satisfaction of said conditions (i) and (ii) above, the Holders will have the rights and remedies contemplated by this Section 7.1. 7.2 CROSS ACCELERATION. In the event that the holders of Senior Indebtedness in excess of $1,000,000 shall accelerate the maturity of any such Senior Indebtedness, as a result of a default under the Loan Documents or the Subsequent Loan Documents, then the indebtedness outstanding on the Notes, including all accrued and unpaid interest, principal and premium, if any, as well as any fees and expenses payable to the Noteholders, (unless waived by the holders of Senior Indebtedness in excess of $1,000,000) shall be simultaneously accelerated. If any acceleration is rescinded or annulled by the holders of Senior Indebtedness within sixty (60) days from such acceleration of such Senior Indebtedness, the acceleration of the Notes will automatically be rescinded. ARTICLE VIII ------------ INDEMNITY --------- 8.1 INDEMNIFICATION BY THE COMPANY. The Company agrees and covenants to hold harmless and indemnify each of the Purchasers and any Affiliates thereof (including any director, officer, employee, agent, investment advisor or controlling person of any of the foregoing) from and against any losses, claims, damages, liabilities and any expenses (including, expenses of investigation) to which such Purchaser and its Affiliates may become subject arising out of or based upon any breach of a warranty, representation or covenant of the Company hereunder. 8.2 INDEMNIFICATION BY PURCHASERS. The Purchasers, severally and not jointly, agree and covenant to hold harmless and indemnify the Company and any Affiliates of the Company (including any director, officer, employee, agent, investment advisor or controlling person of any of the foregoing) from and against any losses, claims, damages, liabilities and any expenses (including, expenses of investigation) to which the Company and its Affiliates may become subject arising out of or based upon any breach of a warranty, representation or covenant of such Purchaser HEREUNDER. ARTICLE IX ---------- MISCELLANEOUS ------------- 9.1 SURVIVAL OF PROVISIONS. The representations, warranties and covenants of the Company and the Purchasers contained in this Agreement shall survive the Closing. 9.2 TERMINATION. This Agreement may be terminated at any time prior to the Closing Date: 24 28 (a) by the Company if any of the conditions specified in Section 4.2 of this Agreement have not been met or waived by the Company pursuant to the terms of this Agreement by March 31, 1997 unless such date is extended by mutual agreement of the parties hereto; and (b) by any Purchaser, individually, if any of the conditions specified in Section 4.1 of this Agreement have not been met or waived by such Purchaser pursuant to the terms of this Agreement by March 31, 1997 unless such date is extended by mutual agreement of the parties hereto. 9.3 Waiver Modifications in Writing. ------------------------------- (a) No failure or delay on the part of the Company or any Purchaser in exercising any right power or remedy hereunder shall operate as a waiver thereof nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to the Company or any Purchaser at law or in equity or otherwise. No waiver of or consent to any departure by the Company or by any Purchaser, as the case may be, from any provision of this Agreement shall be effective without the consent of the Holders of not less than two-thirds (2/3) of the aggregate principal amount of the Notes then outstanding; PROVIDED, HOWEVER, that no such amendment or waiver shall, without the consent of each of the Holders of the Notes then outstanding affected thereby, (i) change the stated maturity of the principal of, or any installment of interest on, any Note or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon redemption thereof or, change the place of payment where, or the coin or currency in which, any Note or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the stated maturity thereof, or (ii) reduce the percentages in principal amount of Notes, the consent of whose Holders is required for any waiver or amendments provided for in this Agreement. No amendment or modification of any provision of this Agreement in accordance with the terms hereof shall be effective unless such amendment or modification is (i) in writing and (ii) consented to by Holders of not less than two-thirds (2/3) or more of the principal amount of the Notes then outstanding. (b) Except as contemplated by Section 2.1(d) or Section 4.1(o) of this Agreement neither the Company nor the Subsidiaries of the Company has paid or shall pay, or has caused or shall cause to be paid, directly or indirectly, any remuneration, whether by way of interest, fee or otherwise, to any Holder of the Notes as consideration or as an inducement for the purchase of the Notes or any consent, waiver or amendment of any of the terms or provisions of this Agreement. 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. 4100 Holiday Street, N.W. Suite 201 Canton, Ohio 44718 Attention: Chief Financial Officer Telecopier No.: (330) 649-4008 With copy to: Benesch, Friedlander, Coplan & Aronoff LLP 2300 BP America Building 200 Public Square Cleveland, Ohio 44114 Attention: Ira C. Kaplan Telecopier No.: (216) 363-4588 To Special Counsel Squire, Sanders & Dempsey to Purchasers: 127 Public Square, Ste. 4900 Cleveland, Ohio 44114 Attention: James P. Oliver Telecopier No.: (216) 479-8793 or to such other address as the Company may designate to the Purchasers in writing. A notice made in accordance with the terms of this Section 9.4 shall be deemed to have been given (i) when delivered, if sent by registered or certified mail or delivered personally or by facsimile transmission, or (ii) on the next following Business Day if sent by overnight mail or courier. 9.5 DETERMINATIONS. All determinations to be made by the Company or any Purchaser hereunder in its opinion or judgment or with its approval or otherwise shall be made by it in its sole discretion. 9.6 EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of counterparts and by different parties hereto on separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be m original and all of which counterparts, taken together, shall constitute but one and the same agreement. 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. BRANTLEY VENTURE PARTNERS III, L.P. WATERLINK, INC. By: Brantley Venture Management III, L.P., its General Partner By: _____________________ By: Pinkas Family Partners, L.P., its General Its: ________________ Partner By: ______________________________ Robert P. Pinkas Its: General Partner 27 31 NOTE PURCHASE AGREEMENT SIGNATURE PAGE Accepted and agreed as of the date first above written: Brantley Capital Corporation - ---------------------------- NAME OF PURCHASER By: ____________________________ Robert P. Pinkas Its: Chairman, Chief Executive Officer and Treasurer Address: 20600 Chagrin Boulevard Suite 1150 Cleveland, Ohio 44122 Telephone No.: (216) 283-4800 Telecopier No.: (216) 283-5324 Aggregate principal amount of the Notes to be purchased by you upon Advances and the aggregate purchase price thereof:
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: Mayson, Inc., its General Partner By: ____________________________ Edwin T. Robinson Its: President Address: 221 East 4th Street Suite 2250 Cincinnati, Ohio 45202 Telephone No.: (513) 621-9700 Telecopier No.: (513) 579-8939 Aggregate principal amount of the Notes to be purchased by you upon Advances and the aggregate purchase price thereof:
2 $ 900,000 $ 873,000 9% ----------- -------------------------- ------------------------- ------------------ Number of Note Principal Amount of the Note Aggregate Purchase Price Pro-Rata Percentage
Taxpayer Identification No.: 31-1413379 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: ____________________________ Kenneth Ch'uan-k'ai Leung Its: Manager Address: 126 East 56th Street 24th Floor New York, New York 10022 Telephone No.: (212) 980-0789 Telecopier No.: (212) 593-6150 Aggregate principal amount of the Notes to be purchased by you upon Advances and the aggregate purchase price thereof:
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.: 74-0488338 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: ____________________________ Kenneth Ch'uan-k'ai Leung Its: Manager Address: c/o Citco Fund Services (Cayman Islands) Limited P.O. Box 31106 SMB Grand Cayman, Cayman Islands, B.W.I. Telephone No.: (713) 250-4283 Telecopier No.: (713) 250-4294 Aggregate principal amount of the Notes to be purchased by you upon Advances and the aggregate purchase price thereof:
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. 3100 Texas Commerce Tower Houston, Texas 77002 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: ____________________________ Todd S. McCuaig Its: ____________________________ Address: 1965 E. 6th St. 10th Floor Cleveland, OH 44114 Telephone No.: (216) 575-2480 Telecopier No.: (216) 575-9965 Aggregate principal amount of the Notes to be purchased by you upon Advances and the aggregate purchase price thereof:
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.: 34-1269115 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: ____________________________ Christine Jenkins Its: Secretary Address: 310 South Street P.O. Box 1913 Morristown, NJ 07461 Telephone No.: (212) 898-0290 Telecopier No.: (212) 898-0840 Aggregate principal amount of the Notes to be purchased by you upon Advances and the aggregate purchase price thereof:
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.: 22-3356204 Copies to: IPP95.L.P. 310 South Street P.O. Box 1913 Morristown, NJ 07461 Attn: Conor Mullett 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 ______________________ EX-3 4 EXHIBIT 3 1 Exhibit 3 WATERLINK, INC. AMENDED AND RESTATED 1995 STOCK OPTION PLAN 1. GENERAL. This Stock Option Plan (the "Plan") provides eligible employees of Waterlink, Inc., a Delaware corporation (the "Company"), and its subsidiaries with the opportunity to acquire or expand their equity interest in the Company by making available for award or purchase shares of Common Stock, .001 par value, of the Company ("Common Stock"), through the granting of nontransferable options to purchase shares of Common Stock ("Stock Options"). Stock Options shall be referred to herein as "Grants," and an individual grant of Stock Options shall be referred to herein as a "Grant." It is intended that key employees may be granted simultaneously or from time to time, Stock Options that qualify as incentive stock options ("Incentive Stock Options") under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or Stock Options that do not so qualify ("Non-qualified Stock Options"). No provision of the Plan is intended or shall be construed to grant employees alternative rights in any Incentive Stock Option granted under the Plan so as to prevent such Option from qualifying under Section 422 of the Code. The Plan is intended to conform to the extent necessary with all provisions of the Securities Act of 1933, as amended (the "Securities Act"), and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder, including, without limitation, Rule 16b-3. Notwithstanding anything herein to the contrary, the Plan shall be administered, and Stock Options shall be granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and Stock Options granted hereunder shall be deemed amended to the extent necessary to conform to such laws, rules and regulations. 2. PURPOSE OF THE PLAN. The purpose of the Plan is to provide continuing incentives to key employees of the Company and of any subsidiary corporation of the Company, by encouraging such key employees to acquire new or additional share ownership in the Company, thereby increasing their proprietary interest in the Company's business and enhancing their personal interest in the Company's success. For purposes of the Plan, a "subsidiary corporation" consists of any corporation fifty percent (50%) of the stock of which is directly or indirectly owned or controlled by the Company. 3. EFFECTIVE DATE OF THE PLAN. The Plan shall become effective upon its adoption by the Board of Directors of the Company (the "Board"), subject to approval by holders of a majority of the outstanding shares of voting capital stock of the Company. If the Plan is not so approved within twelve (12) months after the date the Plan is adopted by the Board, the Plan and any Grants made hereunder shall be null and void, However, if the Plan is so approved, no further shareholder approval shall be required with respect to the making of Grants pursuant to the Plan, except as provided in Section 12 hereof. 4. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the Board unless and until the Board appoints a committee composed of no fewer than, two (2) members of the Board (the 1 2 "Committee"). No person shall be appointed to the Committee who, during the one (1) year period immediately preceding such person's appointment to the Committee, has received any Grants under the Plan or any similar stock option or stock incentive plan, other than formula-based plan, maintained by the Company or any subsidiary corporation. A member of the Committee shall not be eligible to participate in the Plan while serving on the Committee. A majority of the members of the Committee shall constitute a quorum. The acts of a majority of the members present at any meeting at which a quorum is present (or acts unanimously approved in writing by the members of the Committee, shall constitute binding acts of the Committee. Subject to the terms and conditions of the Plan, Board, or the Committee, if any (hereinafter the "Administrator") shall be authorized and empowered: (a) To select the key employees to whom Grants may be made; (b) To determine the number of shares of Common Stock to be covered by any Grant; (c) To prescribe the terms and conditions of any Grants made under the Plan, and the form(s) and agreement(s) used in connection with such Grants, which shall include agreements governing the granting of Stock Options which may provide that the stock which is the subject of any such Grant shall be subject to the restrictions on transfer contained in any agreement in effect among the Company and one or more of its stockholders; (d) To determine the time or times when Stock Options will be granted and when they will terminate in whole or in part; (e) To determine the time or times when Stock Options that are granted may be exercised; provided, however, that unless the Administrator specifically determines otherwise in any individual instance, the standard vesting schedule for Stock Options granted hereunder shall be four equal yearly installments; (f) To determine, at the time a Stock Option is granted under the Plan, whether such Stock Option is an Incentive Stock Option entitled to the benefits of Section 422 of the Code; and (g) To establish any other Stock Option agreement provisions not inconsistent with the terms and conditions of the Plan or, where the Stock Option is an incentive Stock Option, with the terms and conditions of Section 422 of the Code. 5. EMPLOYEES ELIGIBLE FOR GRANTS. Grants may be made from time to time to those key employees of the Company or a subsidiary corporation who are designated by the Administrator in its sole and exclusive discretion. Key employees may include, but shall not necessarily be limited to, members of the Board of Directors (excluding members of the Committee) and officers of the Company and any subsidiary corporation; however, Stock Options intended to qualify as Incentive 2 3 Stock Options shall be granted to key employees only while actually employed by the Company or a subsidiary corporation. The Administrator may grant more than one Stock Option to the same key employee. No Stock Option shall be granted to any key employee during any period of time when such key employee is on a leave of absence. 6. STOCK SUBJECT TO THE PLAN. The shares to be issued pursuant to any Grant made under the Plan shall be shares of Common Stock. Either shares of Common Stock held as treasury stock or authorized and unissued shares of Common Stock, or both, may be so issued, in such amount or amounts within the maximum limits of the Plan as the Administrator shall from time to time determine. Subject to the provisions of the next succeeding paragraph of this Section 6 and the provisions of Section 7(h), the aggregate number of shares of Common Stock that can be actually issued under the Plan shall be Eight Hundred Thousand (800,000). If, at any time subsequent to the date of adoption of the Plan by the Board of Directors, the number of shares of Common Stock increased or decreased, or changed into or exchanged for a different number or kind of shares of stock or other securities of the Company or of another corporation (whether as a result of a stock split, stock dividend, combination or exchange of shares, exchange for other securities, reclassification, reorganization, redesignation, merger, consolidation, recapitalization or otherwise): (i) there shall automatically be substituted for each share of Common Stock subject to an unexercised Stock Option (in whole or in part) granted under the Plan, the number and kind of shares of stock or other securities into which each share of outstanding Common Stock shall be changed or for which each such share of Common Stock shall be exchanged; and (ii) the option price per share of Common Stock or unit of securities shall be increased or decreased proportionately so that the aggregate purchase price for the securities subject to a Stock Option shall remain the same as immediately prior to such event. In addition to the foregoing, the Administrator shall be entitled in the event of any such increase, decrease or exchange of shares of Common Stock to make other adjustments to the securities subject to a Stock Option, the provisions of the Plan, and to any related Stock Option agreements (including adjustments which may provide for the elimination of fractional shares) where necessary (under Section 422(a)(2) of the Code or otherwise) to preserve the terms and conditions of any Grants hereunder. 7. STOCK OPTION PROVISIONS. (a) GENERAL. The Administrator may grant to key employees (also referred to as "optionees") nontransferable Stock Options that either qualify as Incentive Stock Options under Section 422 of the Code or do not so qualify. However, any Stock Option which is an Incentive Stock Option shall only be granted within ten (10) years from the earlier of (i) the date this Plan is adopted by the Board and (ii) the date this Plan is approved by the stockholders of the Company. (b) STOCK OPTION PLAN. The option price per share of Common Stock which may be purchased under an Incentive Stock Option under the Plan shall be determined by the Administrator at the time of Grant, but shall not be less than one hundred percent (100%) of 3 4 the fair market value of a share of Common Stock, determined as of the date such Option is granted; however, if a key employee to whom an Incentive Stock Option is granted is, at the time of the grant of such Option, an "owner" as defined in Section 422(b)(6) of the Code (modified as provided in Section 424(d) of the Code) of more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any subsidiary corporation (a "Substantial Shareholder"), the price per share of Common Stock of such Option, as determined by the Administrator, shall not be less than one hundred ten percent (110%) of the fair market value of a share of Common Stock on the date such Option is granted. The option price per share of Common Stock under each Stock Option granted pursuant to the Plan which is not an Incentive Stock Option shall be determined by the Administrator at the time of Grant. Except as specifically provided above, the fair market value of a share of Common Stock shall be determined in accordance with procedures to be established by the Administrator. The day on which the Administrator approves the granting of a Stock Option shall be considered the date on which such Option is granted. (c) PERIOD OF STOCK OPTION. The Administrator shall determine when each Stock Option is to expire. However, no Incentive Stock Option shall be exercisable after the expiration of ten (10) years from the date upon which such Option is granted, or five (5) years from the date upon which such Option is granted to a Substantial Shareholder. (d) LIMITATION ON EXERCISE AND TRANSFER OF STORK OPTIONS. Only the key employee to whom a Stock Option is granted may exercise such Option, except where a guardian or other legal representative has been duly appointed for such employee, and except as otherwise provided in the case of such employee's death. No Stock Option granted hereunder shall be transferable by an optionee other than by will or the laws of descent and distribution. No Stock Option granted hereunder may be pledged or hypothecated, nor shall any such Option be subject to execution, attachment or similar process. (e) EMPLOYMENT, HOLDING PERIOD REQUIREMENTS FOR CERTAIN OPTIONS. The Administrator may condition any Stock Option granted hereunder upon the continued employment of the optionee by the Company or by a subsidiary corporation. and may make any such Stock Option immediately exercisable. However, the Administrator will require that, from and after the date of grant of any Incentive Stock Option granted hereunder until the day three (3) months prior to the date such Option is exercised, such optionee must be an employee of the Company or of a subsidiary corporation, but always subject to the right of the Company or any such subsidiary corporation to terminate such optionee's employment during such period (except if the optionee's employment is terminated due to death or permanent and total disability, in which event such period shall be one (1) year). Each Stock Option shall be subject to such additional restrictions as to the time and method of exercise as shall be prescribed by the Administrator. Upon compliance with any condition or requirement imposed by the Administrator pursuant to the foregoing, a Stock Option or the appropriate portion thereof may be exercised in whole or in part from time to time during the option period; however, such exercise right(s) shall be limited to whole shares. 4 5 (f) PAYMENT FOR STOCK OPTION PRICE. A Stock Option shall be exercised by an optionee giving written notice to the Company of his intention to exercise the same, accompanied by full payment of the purchase price in cash or by check or, with the consent of the Administrator, in whole or in part with a surrender of shares of Common Stock having a fair market value on the date of exercise equal to that portion of the purchase price for which payment in cash or check is not made. The Administrator may, in its sole discretion, approve other methods of exercise for a Stock Option or payment of the option price, provided that no such method shall cause any option granted under the Plan as an Incentive Stock Option to not qualify under Section 422 of the Code, or cause any share of Common Stock issued in connection with the exercise of an option not to be a fully paid and non-assessable share of Common Stock. (g) CERTAIN REISSUANCES OF STOCK OPTIONS. To the extent stares of Common Stock are surrendered by an optionee in connection with the exercise of a Stock Option in accordance with Section 7(f), the Administrator may in its sole discretion grant new Stock Options to such optionee (to the extent shares of Common Stock remain available for Grants), subject to the following terms and conditions: (i) The number of shares of Common Stock shall be equal to the number of shares of Common Stock being surrendered by the optionee; (ii) The option price per share of Common Stock shall be equal to the fair market value of shares of Common Stock, determined on the date of exercise of the Stock Options whose exercise caused such Grant; and (iii) The terms and conditions of such Stock Options shall in all other respect replicate such terms and conditions of the Stock Options whose exercise caused such Grant, except to the extent such terms and conditions are determined not to be wholly consistent with the general provisions of this Section 7, or in conflict with the remaining provisions of this Plan. (h) CANCELLATION AND REPLACEMENT OF STOCK OPTIONS AND RELATED RIGHTS. The Administrator may at any time or from time to time permit the voluntary surrender by an optionee who is the holder of any outstanding Stock Options under the Plan, where such surrender is conditioned upon the granting of such optionee of new Stock Options for such number of shares as the Administrator shall determine, or may require such a voluntary surrender as a condition precedent to the grant of new Stock Options. The Administrator shall determine the terms and conditions of new Stock Options, including the prices at and periods during which they may be exercised, in accordance with the provisions of this Plan, all or any of which may differ from the terms and conditions of the Stock Options surrendered. Any such new Stock Options shall be subject to all the relevant provisions of this Plan. The shares of Common Stock subject to any Stock Option so surrendered, and/or any shares of Common Stock subject to any Stock Option that has lapsed or been forfeited, shall no longer be charged against the limitation provided in Section 6 of the Plan and may again become shares subject to the Plan. The granting of new Stock Options in connection 5 6 with the surrender of outstanding Stock Options under this Plan shall be considered for the purposes of the Plan as the granting of new Stock Options and not an alteration, amendment or modification of the Plan or of the Stock Options being surrendered. (i) LIMITATION ON EXERCISABLE INCENTIVE STOCK OPTIONS. The aggregate fair market value of the shares of Common Stock first becoming subject to exercise as Incentive Stock Options by a key employee during any given calendar year shall not exceed the sum of One Hundred Thousand Dollars ($100,000). Such aggregate fair market value shall be determined as of the date such Option is granted, taking into account, in the order in which granted, any other Incentive Stock Options granted by the Company, or by a parent or subsidiary thereof. (j) WITHHOLDING OF TAXES. The Administrator may, in its sole discretion, require, as a condition to any Grant or to the delivery of certificates for shares issued hereunder, that the optionee pay to the Company, in cash, any federal, state or local taxes of any kind required by law to be withheld with respect to any Grant or any delivery of shares of Common Stock upon exercise thereof. The Administrator, in its sole discretion, may permit optionees to pay such taxes through the withholding of shares of Common Stock otherwise deliverable to such optionee in connection with such Grant or the delivery to the Company of shares of Common Stock otherwise acquired by the optionee. The Fair Market Value of shares of Common Stock withheld by the Company or tendered to the Company for the satisfaction of tax withholding obligations under this Section 7(j) shall be determined on the date such shares of Common Stock are withheld or tendered. The Company, to the extent permitted or required by law, shall have the right to deduct from any payment of any kind (including salary, bonus, severance or insurance proceeds) otherwise due to an optionee any federal, state or local taxes of any kind required by law to be withheld with respect to any Grant or to the delivery of shares of Common Stock under the Plan, or to retain or sell without notice a sufficient number of shares of Common Stock to be issued to such optionee to cover any such taxes, provided that the Company shall not sell any such shares of Common Stock if such sale would be considered a sale by such optionce for purposes of Section 16 of the Exchange Act. 8. TERMINATION OF EMPLOYMENT. If a key employee ceases to be an employee of the company and every subsidiary corporation, for a reason other than death, retirement, "permanent and total disability" (as defined below) or such key employee's employment is terminated "without cause" (as defined below), his Grants shall, unless extended by the Administrator on or before his date of termination of employment, terminate on the effective date of such termination of employment. Neither the key employee nor any other person shall have any right after such date to exercise all or any part of his Stock Options which are not vested or otherwise subject to restriction and they shall thereupon be forfeited, declared void and without value, or both. If termination of employment is due to death or permanent and total disability or is without cause, then outstanding Stock Options may be exercised within the one (1) year period ending on the anniversary of such death, permanent and total disability or termination without cause (except that, with respect to Incentive Stock Options held by key employees whose employment is terminated without cause, such Incentive Stock Options must be exercised within three (3) months of the date of such termination). In the case of death, such outstanding Stock Options shall be exercised by such 6 7 key employee's estate, or the person designated by such key employee by will, or as otherwise designated by the laws of descent and distribution. Notwithstanding the forgoing, in no event shall any Stock Option be exercisable after the expiration of the option period, and in the case of exercises made after a key employee's death, not to any greater extent than such key employee would have been entitled to exercise such Option at the time of his death. Subject to the discretion of the Administrator, in the event a key employee terminates employment with the Company and all subsidiary corporations because of normal or early retirement under any pension plan or retirement plan hereafter adopted by the Company, or permanent and total disability, any then-outstanding Stock Options held by such key employee shall lapse at the end of the term of such Stock Option, or thirty (30) days after such retirement, whichever first occurs. For purposes hereof, "permanent and total disability" means a permanent and total disability as defined in Section 22(e) of the Code. For purposes hereof, termination "without cause" means termination of the employee's employment by the Company for reasons other than (i) conviction of the employee for a felony or for any crime or offense lesser than a felony involving the property of the Company or a subsidiary corporation or affiliate of the Company; (ii) conduct by the employee that has caused demonstrable and serious injury to the Company or a subsidiary, monetary or otherwise; or (iii) substandard performance, or material misconduct or negligence in the performance, of the employee's duties in the reasonable judgment of the Board; provided, however, that for any employee with a written employment agreement with the Company or any subsidiary corporation, the without cause" definition, if any, contained in such employment agreement shall be utilized for purposes hereof. In the event an employee of the Company or one of its subsidiary corporations is granted a leave of absence by the Company or such subsidiary corporation to enter military service or because of sickness, his employment with the Company or such subsidiary corporation shall not be considered terminated, and he shall be deemed an employee of the Company or such subsidiary corporation during such leave of absence or any extension thereof granted by the Company or such subsidiary corporation. 9. AMENDMENTS TO PLAN. The Administrator is authorized to interpret this Plan and from time to time adopt any rules and regulations for carrying out this Plan that it may deem advisable. Subject to the approval of the Board, the Administrator may at any time amend, modify, suspend or terminate this Plan. In no event, however, without the approval of the stockholders, shall any action of the Administrator or the Board result in: (a) Materially amending, modifying or altering the eligibility requirements provided in Section 5 hereof; (b) Materially increasing, except as provided in Section 6 hereof, the maximum number of shares of Common Stock that may be made subject to Grants; or (c) Materially increasing the benefits accruing to participants under this Plan; 7 8 except to conform this Plan and any agreements made hereunto to changes in the Code or required by governing law. 10. INVESTMENT REPRESENTATION, APPROVALS AND LISTING. The Administrator may, if it deems appropriate, condition its grant of any Stock Option hereunder upon receipt of the following investment representation from the optionee: "I agree that any shares of Common Stock of Waterlink, Inc. which I may acquire by virtue of this Stock Option shall be acquired for investment purposes only and not with a view to distribution or resale, and may not be transferred, sold, assigned, pledged, hypothecated or otherwise disposed of by me unless (i) a registration statement or post-effective amendment to a registration statement under the Securities Act, with respect to said shares of Common Stock has become effective so as to permit the sale or other disposition of said shares by me; or (ii) there is presented to Waterlink, Inc. an opinion of counsel satisfactory to Waterlink, Inc. to the effect that the sale or other proposed disposition of said shares of Common Stock by me may lawfully be made otherwise than pursuant to an effective registration statement or post-effective amendment to a registration statement relating to the said shares under the Securities Act of 1933, as amended." The Company shall not be required to issue any certificate or certificates for shares of Common Stock upon the exercise of any Stock Option granted under this Plan prior to (i) the obtaining of any approval from any governmental agency which the Administrator shall, in its sole discretion, determine to be necessary or advisable; (ii) the admission of such shares to listing on any national securities exchange on which the shares of Common Stock may be listed; (iii) the completion of any registration or other qualifications of the shares of Common Stock under any state or federal law or ruling or regulations of any governmental body which the Administrator shall, in its sole discretion, determine to be necessary or advisable or the determination by the Administrator, in its sole discretion, that any registration or other qualification of the shares of Common Stock is not necessary or advisable, or (iv) the obtaining of an investment representation from the optionee in the form stated above or in such other form as the Administrator, in its sole discretion, shall determine to be adequate. 11. GENERAL PROVISIONS. The form and substance of Stock Option agreements made hereunder, whether granted at the same or different times, need not be identical. Nothing in this Plan or in any Stock Option agreement shall confer upon any employee any right to continue in the employ of the Company or any of its subsidiary corporations or affiliates or to interfere with or limit the right of the Company or any subsidiary corporation or affiliate to terminate his employment at any time, with or without cause. Nothing contained in this Plan or in any Stock Option shall be construed as entitling any optionee to any rights of a shareholder as a result of the grant of a Stock Option, until such time as shares of Common Stock are actually issued to such optionee pursuant to the exercise of such Option. This Plan may be assumed by the successors and assigns of the Company. The liability of the Company under this Plan and any sale made hereunder is limited to the obligations set forth herein with respect to such sale and no term or provision of this Plan shall be construed to impose any liability on the Company in favor of any employee (or any other party acting on his behalf 8 9 or in his stead) with respect to any loss, cost or expense which such employee or party may incur in connection with or arising out of any transaction in connection with this Plan. The cash proceeds received by the Company from the issuance of shares of Common Stock pursuant to this Plan will be used for general corporate purposes. The expense of administering this Plan shall be borne by the Company. The captions and section numbers appearing in this Plan are inserted only as a matter of convenience. They do not define, limit, construe or describe the scope or intent of the provisions of this Plan. 12. PROVISIONS APPLICABLE SOLELY TO INSIDERS. The following provisions shall apply only to persons who are subject to Section 16 of the Exchange Act with respect to securities of the Company ("Insiders"), and shall apply to Insiders notwithstanding any provision of the Plan to the contrary: (a) No Insider shall be permitted to transfer any security the Company acquired by him, except to the extent permitted by 17 C.F.R. Section 240.16a-2(D)(1), upon the exercise of any Stock Option, until at lest [sic] six (6) months and one (1) day after the later of (i) the day on which such security is granted to the Insider or (ii) the day on which the exercise or conversion price of such security is fixed. (b) An Insider may elect to have shares withheld from a Grant or tender shares to the Company in order to satisfy the tax withholding consequences of a Grant only during the period beginning on the third business day following the date on which the Company releases the financial information specified in 17 C.F.R. Section 240.16b-3(e)(1)(ii) and ending on the twelfth business day following such date. Notwithstanding the foregoing, an Insider may elect to have shares withheld from a Grant in order to satisfy tax withholding consequences thereof by providing the Company with a written election to so withhold at least six (6) months in advance of the withholding of shares otherwise issuable upon exercise of a Stock Option. 13. TERMINATION OF THIS PLAN. This Plan shall terminate on February 1, 2005, and thereafter no Stock Options shall be granted hereunder. All Stock Options outstanding at the time of termination of this Plan shall continue in full force and effect according to their terms and the terms and conditions of this Plan. 9 EX-4 5 EXHIBIT 4 1 Exhibit 4 JOINT ACQUISITION STATEMENT pursuant to Rule 13d-1(f)(1) The undersigned acknowledge and agree that the foregoing statement on Schedule 13D, as may be amended, is filed on behalf of each of the undersigned and that all subsequent amendments to this statement on Schedule 13D, as may be amended, shall be filed on behalf of each of the undersigned without the necessity of filing additional joint acquisition statements. The undersigned acknowledge that each shall be responsible for the timely filing of such amendments, and for the completeness and accuracy of the information concerning him or it contained therein, but shall not be responsible for the completeness and accuracy of the information concerning the other, except to the extent that he or it knows or has reason to believe that such information is inaccurate. Dated: July 7, 1997 BRANTLEY CAPITAL CORPORATION By: /s/ Robert P.Pinkas Name: Robert P. Pinkas Title: Chairman of the Board, Chief Executive Officer and Treasurer BRANTLEY VENTURE PARTNERS III, L.P. By: Brantley Venture Management III, L.P. By: Pinkas Family Partners, L.P. By: /s/Robert P. Pinkas Name: Robert P. Pinkas Title: General Partner /s/Robert P. Pinkas Name: Robert P. Pinkas /s/Michael J. Finn Name: Michael J. Finn /s/Paul H. Cascio Name: Paul H. Cascio -----END PRIVACY-ENHANCED MESSAGE-----