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Exhibit 10.4
THIS SUBORDINATED NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE OR OTHER SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD,
TRANSFERRED OR ASSIGNED EXCEPT (I) PURSUANT TO REGISTRATIONS THEREOF UNDER SUCH
LAWS, OR (II) IF, IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO
WATERLINK, INC. THE PROPOSED TRANSFER MAY BE EFFECTED IN COMPLIANCE WITH
APPLICABLE SECURITIES LAWS WITHOUT SUCH REGISTRATIONS.
13.00 % SUBORDINATED NOTE
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$500,000 Dated: January 18, 2001
For value received, Waterlink, Inc., a Delaware corporation with its principal
offices at 0000 Xxxxxxx Xxxxxx, Xxxxxx, XX 00000(the "Maker"), hereby promises
to pay to the order of CID EQUITY CAPITAL V, L.P., a Delaware limited
partnership with its principal offices at Xxx Xxxxxxxx Xxxxxx, Xxxxx 0000, Xxx
00000, Xxxxxxxxxxxx, Xxxxxxx 00000, or its assigns (collectively, the "Holder"),
at its principal offices or at such other place as the Holder may direct in
writing to the Maker, in lawful money of the United States of America, the
principal amount of Five Hundred Thousand Dollars ($500,000) and interest, as
provided herein, all without relief from valuation or appraisement laws. This
Note is one of a series of notes issued on the date hereof in the aggregate
principal amount of One Million Dollars ($1,000,000) (collectively, the
"Notes").
1. PAYMENT OF PRINCIPAL. Subject to acceleration or earlier payment as provided
for elsewhere in this 13.00 % Subordinated Note (the "Note"), the Maker shall
pay to the Holder on January 18, 2002, Five Hundred Thousand Dollars ($500,000)
in principal plus all accrued and unpaid interest on the full principal balance
of this Note as of that date.
2. INTEREST. Interest on the unpaid principal balance hereof existing from time
to time shall accrue at the rate of 13.00 % per annum; provided, however,
interest shall accrue at the rate of 15.00 % per annum so long as an "Event of
Default," as specified in SECTION 4(A), exists hereunder. Interest shall be
calculated on the basis of actual daily balances of outstanding principal for
the exact number of days the principal remains outstanding and shall be computed
on the basis of a 360-day year. Subject to acceleration or earlier payment as
provided elsewhere in this Note, interest shall be payable quarterly in arrears
on each April 18, July 18, October 18 and January 18 until this Note, including
all accrued and unpaid interest, is paid in full.
3. PREPAYMENT. The Maker may prepay all or any portion of the unpaid principal
balance hereof and accrued interest, without premium or penalty; provided,
however, all sums received in prepayment shall first be applied in payment of
accrued but unpaid interest and the excess, if any, shall then be applied to the
unpaid principal balance hereof (with the principal credited to installments of
the principal balance due hereunder in inverse order of their maturity). Any
payments or prepayments made on the Notes, whether principal, interest or
premium (if any), shall be made ratably as to all of the Notes.
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4. DEFAULT AND REMEDIES.
(a). If any of the following events (an "Event of Default" or
collectively "Events of Default") shall have occurred and be
continuing, that is to say: (i) the Maker defaults in the payment of
principal of or interest or premium (if any) on this Note when due and
the Maker does not cure that default within 3 days after the due date;
(ii) the Maker defaults in the performance of any obligation under this
Note (other than the payment described in the immediately preceding
clause) and the Maker does not cure that default within 30 days after
receipt by the Maker of written notice from the Holder; (iii) the Maker
defaults in any payment of principal of or interest on any Senior Debt,
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 Debt in excess of $1,000,000 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; (iv) an order for relief shall be entered in any
federal bankruptcy proceeding in which the Maker is the debtor; or
bankruptcy, receivership, insolvency, reorganization, relief,
dissolution, liquidation or other similar proceedings shall be
instituted by or against the Maker or all or any part of the property
of the Maker 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 Maker, such proceedings are dismissed and
discharged within ninety (90) days after they are instituted; or (v)
the Maker 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 Maker, or for any substantial portion of the assets of the
Maker, and such appointment shall not be vacated within ninety (90)
days;
then, except as provided below with respect to an Event of Default
under paragraph (a) of this Section 4, 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
Maker, 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 Section 5
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 Maker shall pay all expenses, court costs and reasonable
attorneys' fees incurred in connection with or arising out of any
default hereunder. Notwithstanding the
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foregoing, in case an Event of Default under paragraph (a) of this
Section 4 shall occur, the holders shall have none of the rights and
remedies otherwise contemplated by this Section 4 (including, without
limitation, the right to accelerate the maturity of the Notes) UNLESS
AND UNTIL (i) the Blocking Period (as defined herein) shall have
expired without the same having been cured or waived; and (ii) the
Blocking Period shall have expired without any holder of Senior Debt
having accelerated the maturity of such Senior Debt, 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
4.
In the event that the holders of Senior Debt in excess of
$1,000,000 shall accelerate the maturity of any such Senior Debt, as a
result of a default under the Loan Documents (as defined herein) or the
Subsequent Loan Documents (as defined herein), 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 holders of the Notes (unless waived by the holders of Senior
Debt in excess of $1,000,000), shall be simultaneously accelerated. If
any acceleration is rescinded or annulled by the holders of Senior Debt
within sixty (60) days from such acceleration of such Senior Debt, the
acceleration of the Notes will automatically be rescinded.
(b). If this Note is collected or attempted to be collected by the
initiation or prosecution of any suit or through any bankruptcy court,
or by any judicial proceeding, or is placed in the hands of attorneys
for collection, then the Maker shall pay, in addition to all other
amounts owing hereunder, all court costs and reasonable attorney's fees
incurred by the Holder.
5. SUBORDINATION.
(a). SUBORDINATION TO SENIOR DEBT. Notwithstanding anything to the
contrary contained in this Note, the Maker covenants and agrees, and
the Holder by acceptance of this Note likewise covenants and agrees,
that the Maker's indebtedness under this Note shall be junior and
subordinate to the Senior Debt (as hereafter defined) to the extent and
in the manner set forth in this SECTION 5, except to the extent
otherwise agreed to in writing by the Holder and any Senior Lender (as
defined herein) with respect to the Senior Debt held by or payable to
that Senior Lender. Each subsection of this SECTION 5 shall be given
independent effect so that if a particular payment or action is
prohibited by any one of these subsections, it shall be prohibited
although it otherwise would not be prohibited by another subsection.
Without the prior written consent of the Senior Lender (or, in the case
of the Senior Credit Facility, of the agent thereof), the Maker
covenants and agrees, and the Holder by acceptance of this Note
likewise covenants and agrees, that so long as such Senior Debt is
outstanding or commitments under the Senior Credit Facility shall
remain in effect, (i) the Maker will not make and the Holder will not
receive any voluntary prepayments hereunder, (ii) the Maker will not
grant and the Holder will not receive any collateral as security for
obligations hereunder, and (iii) the Maker and the Holder will not
amend any provision of this Section 5 nor amend in any way adverse to
any Senior Lender any other provision of this Note.
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(b). PAYMENT DEFAULT ON SENIOR DEBT. If at any time a default occurs in
the payment when due (whether at maturity or upon acceleration or
mandatory prepayment, or on any principal installment payment date or
interest payment date, or otherwise) ("Payment Default") of any Senior
Debt, then at all times thereafter until (i) the Payment Default has
been cured, (ii) the Payment Default or the benefits of this sentence
have been waived in writing by or on behalf of the Senior Lenders
holding that Senior Debt, or (iii) payment in full of all affected
Senior Debt, the Maker shall not, directly or indirectly, make any
Distribution of Assets (as hereinafter defined) or Payment (as
hereinafter defined) with respect to this Note.
(c). DISSOLUTION, LIQUIDATION OR REORGANIZATION OF MAKER. In the event
of (i) any insolvency or bankruptcy proceeding brought by or against
the Maker; (ii) any receivership, liquidation, reorganization or other
similar proceeding relative to the Maker or to its property, including
its Subsidiaries; or (iii) any proceedings for voluntary liquidation,
dissolution or other winding up of the Maker, whether or not involving
insolvency or bankruptcy, the holders of Senior Debt shall be entitled
to receive payment in full in cash of all principal, premium (if any),
fees and charges in respect of, and interest on, all Senior Debt
(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 Debt (until payment in full in
cash of all principal, premium (if any), fees and charges in respect
of, and interest on, all Senior Debt, including interest thereon
accruing after the commencement of any such proceedings at the rate
specified in the applicable Senior Debt 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 Maker against the
obligations of the Maker 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 Debt 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 Maker in a like manner in respect of
the Notes to which the second sentence of this subsection (c) shall
apply.
In the event that any default shall occur and be continuing with
respect to any Senior Debt permitting the holders, with or without the
making of demand, the giving of notice or otherwise, of such Senior
Debt to accelerate the maturity thereof, the Maker shall not pay
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and the Holders shall not be entitled to receive any Payment or
Distribution of Assets in respect of the Notes of any kind, whether of
principal, premium (if applicable) or interest or, except to the extent
otherwise provided in subsection (d) below, 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 Debt
having accelerated the maturity of such Senior Debt, 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 the Notes.
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 Maker;
provided, however, no holder of the Notes in their capacity as such
shall take any action or 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 Debt including the Loan Documents
or any Subsequent Loan Documents, the promissory notes issued
to the holders of Senior Debt, or the liens and security
interests to the extent granted with respect to the Senior
Debt;
(ii) contest the rights and duties of the holders of Senior
Debt 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 Section
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(iv) contest the validity or enforceability of this Note or
any agreement or instrument to the extent evidencing or
relating to the indebtedness of Maker to such holder; or
(v) compromise their claims so as to deprive the holders of
Senior Debt of the benefit of receiving all amounts otherwise
payable to the holders of the Notes pursuant to the
reorganization or liquidation of the Maker resulting from such
proceeding.
(d). SUBROGATION. No Distribution of Assets or Payment to which the
Holder would have been entitled except for the provisions of SECTION 5
and which are received by or paid over to the Senior Lenders or their
Representative (as hereinafter defined) shall, as between the Maker and
its creditors other than the Senior Lenders and the Holder, be deemed
to be a payment by the Maker to the Senior Lenders or on account of the
Senior Debt, and the Holder shall be subrogated (without any duty on
the part of the Senior Lenders to warrant, create, effectuate, preserve
or protect such subrogation) to the then or
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thereafter existing rights of the Senior Lenders to receive
Distributions of Assets or payments made on the Senior Debt until this
Note shall be paid in full.
(e). PAYMENTS HELD IN TRUST. If the Holder receives any Distribution of
Assets or Payment which the Holder is not entitled to retain under the
provisions of this SECTION 5, any such Distribution of Assets or
Payment so received shall be held in trust for the Senior Lenders,
shall not be commingled with any other assets of the Holder, and shall
be paid to the Senior Lenders, pro rata, to the extent necessary to
make payment in full, after giving effect to any concurrent payment or
distribution to or for the benefit of the Senior Lenders.
(f). CHANGES IN SENIOR DEBT. Any Senior Lender may at any time and from
time to time with notice to the Holder: (i) extend, renew, modify,
waive or amend the terms of the Senior Debt; (ii) sell, exchange,
release or otherwise deal with any property pledged, mortgaged or
otherwise securing the Senior Debt; (iii) release any guarantor or any
other person liable in any manner for the Senior Debt or amend or waive
the terms of the Senior Debt; (iv) exercise or refrain from exercising
any rights against the Maker or any other persons; (v) apply in any
order any sums by whomever paid or however realized to the Senior Debt;
and (vi) take any other action which otherwise might be deemed to
impair the Holder's rights. Any and all of such actions may be taken by
the Senior Lenders without incurring responsibility to the Holder and
without impairing or releasing the Holder's obligations to the Senior
Lenders.
(g). THIRD-PARTY BENEFICIARY, ETC.. The foregoing provisions regarding
subordination are solely for the purpose of defining the relative
rights of the Senior Lenders on the one hand and the Holder on the
other hand. Such provisions are for the benefit of the Senior Lenders
(and their successors and assigns) and shall be enforceable by them
directly against the Holder except to the extent otherwise agreed to in
writing by the Holder and any other Senior Lender.
(h). DEFINITIONS. As used in this SECTION 5 (or as elsewhere used in
this Note) the following terms shall have the meanings indicated:
"Distribution of Assets" means any distribution of assets of the Maker
or any of its subsidiaries of any kind or character, whether a payment,
purchase or other acquisition or retirement for cash, property, or
securities, with respect to the Maker's obligations under this Note.
"Payment" means payment (including any setoff by the Holder of
obligations owed by the Holder to the Maker against obligations of the
Maker hereunder) of any obligation now or hereafter existing under this
Note (as it may hereafter be amended, supplemented, or otherwise
modified from time to time), whether created directly or acquired by
assignment or otherwise, and interest and premiums, if any, thereon and
all other amounts payable in respect thereof or in connection
therewith.
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"Representative" means, with respect to any Senior Debt, the trustee,
agent, or other representative for one or more of the Senior Lenders,
if any, designated in the indenture, agreement or document creating,
evidencing or governing such Senior Debt or pursuant to which it was
issued, or otherwise designated by the holders of such Senior Debt.
"Senior Debt" means all indebtedness and other obligations specified
below whether outstanding on the date of this Note or hereafter
created, incurred or assumed by the Maker:
(i) the obligations of the Maker 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 (as defined in that certain Xxxxxxx and Restated
Credit Agreement dated as of February 11, 2000, as heretofore
and as hereafter amended, among the Maker and Bank of America,
NA, as agent, and the other financial institutions party
thereto (the "Senior Credit Facility")) and all commitment,
facility and other fees and all expenses, reimbursements,
indemnities and other amounts payable by the Maker thereunder;
(ii) all other indebtedness of the Maker which by its express
terms is made senior to the Notes; provided, however, that any
indebtedness incurred by the Maker under this clause (ii) must
be created in connection with or arise out of a transaction in
which the Maker or any subsidiaries of the Maker 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 Debt 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 Debt, 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) 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 loan
documents (the "Subsequent Loan Documents") entered into in
connection with any credit facility entered into after the
termination of the Senior Credit Facility or otherwise.
"Senior Lender" or "Senior Lenders" means one or more of the holders of
Senior Debt.
6. NOTICES. All notices, requests, demands, or and other communications that are
required or may be given pursuant to the terms of this Note shall be in writing
and delivery shall be deemed sufficient and to have been duly given on the date
of service if delivered personally or by
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facsimile transmission if receipt is confirmed to the party to whom notice is to
be given or on the third day after mailing if mailed by first-class mail, return
receipt requested, and properly addressed as follows:
If to the Maker, to:
Waterlink, Inc.
0000 Xxxxxxx Xxxxxx XX
Xxxxxx, Xxxx 00000-0000
Attention: President
Fax: (000)-000-0000
Copies to:
Benesch, Friedlander, Xxxxxx & Aronoff LLP
0000 XX Xxxxx
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Attention: Xxxxxxx Xxxx, Esq.
Fax: (000)-000-0000
If to the Holder, to:
CID Equity Capital V, L.P.
Xxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxx 00000
Xxxxxxxxxxxx, Xxxxxxx 00000
Attention: Mr. Xxxx Xxxxxxx
Fax: (000)-000-0000
Copies to:
Ice Xxxxxx
One American Square, Box 82001
Indianapolis, Indiana 46282
Attention: Xxxxxxxxx Xxxxx, Esq.
Fax: (000)-000-0000
or to such other address as may be specified in writing by any of the above.
7. REMEDIES. The remedies provided by this Note shall be cumulative, and
shall be in addition to and not exclusive of other remedies available under or
pursuant to the Investment Agreement, at law, or in equity. The exercise or
waiver by the Holder of any right or remedy available under this Note shall not
be deemed to be a waiver of any other right or remedy available under this Note,
the Investment Agreement, at law, or in equity.
8. MISCELLANEOUS.
(a). Whenever used herein, the singular includes the plural and the
plural includes the singular. The term "Maker" means the corporation
named in the opening paragraph hereof and its successors and assigns.
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(b). Ohio law shall govern the interpretation, construction, and
enforcement of this Note and all transactions contemplated hereby,
notwithstanding any state's choice of law rules to the contrary.
(c). The Holder, by acceptance of this Note, hereby represents and
warrants that (i) this Note has been acquired by the Holder for
investment only and not for resale or distribution hereof and (ii) the
Holder is an "accredited investor" as defined in Rule 501(a) under the
Securities Act of 1933, as amended (the "Act"). The Holder, by
acceptance of this Note, further understands, covenants and agrees that
the Maker is under no obligation and has made no commitment to provide
for registration of this Note under the Act or state securities laws,
or to take such steps as are necessary to permit the sale of this Note
without registration under those laws.
(d). The captions of the sections of this Note are solely for
convenient reference and shall not be deemed to affect the meaning or
interpretation of any provision of this Note.
IN WITNESS WHEREOF, the Maker has executed, acknowledged and delivered this Note
as of the day and year first above written.
WATERLINK, INC.
By: /s/ Xxxx X. Xxxxx
Xxxx X. Xxxxx, Chief Financial Officer
Accepted and agreed to as of this 18th day of January, 2001:
CID EQUITY CAPITAL V, L.P.
By: CID EQUITY PARTNERS V, as General Partner
By: /s/ Xxxx X. Xxxxxxx
Xxxx X. Xxxxxxx, Managing General Partner
