Waterlink Inc – ‘S-4’ on 1/9/98

As of:  Friday, 1/9/98   ·   Accession #:  950152-98-123   ·   File #:  333-43939

in

this entire Filing. an “Entity” Search.

Show

Documents searched

and

each “hit”. the 1st “hit”.

↓↑Hints

Registration of Securities Issued in a Business-Combination Transaction   —   Form S-4
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: S-4         Waterlink, Inc.                                       84    539K 
 2: EX-5.1      Opinion re: Legality                                   2     10K 
 3: EX-23.1     Consent of Experts or Counsel                          1      5K 

S-4   —   Waterlink, Inc.
Document Table of Contents

S-4
1st Page of 84
TOC
↑Top
Previous
Next
↓Bottom
Just 1st
 

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 9, 1998.

                                           REGISTRATION NO. 333-
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM S-4
REGISTRATION STATEMENT
UNDER 

THE SECURITIES ACT OF 1933
------------------------

WATERLINK, INC. 
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                                                        [Enlarge/Download Table]
                                                                                     
            DELAWARE                         3589                    34-1788678      
(STATE OR OTHER JURISDICTION OF  (PRIMARY STANDARD INDUSTRIAL     (I.R.S. EMPLOYER   
 INCORPORATION OR ORGANIZATION)  CLASSIFICATION CODE NUMBER)   IDENTIFICATION NUMBER)

4100 HOLIDAY STREET N.W. SUITE 201
CANTON, OHIO 44718-2532 
(330) 649-4000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF 
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) 

CHET S. ROSS
WATERLINK, INC. 
4100 HOLIDAY STREET N.W. SUITE 201
CANTON, OHIO 44718-2532 
(330) 649-4000
FACSIMILE: (330) 649-4008 
(NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA 
CODE, OF AGENT FOR SERVICE) 
------------------------
COPY TO:

IRA C. KAPLAN, ESQ. 
BENESCH, FRIEDLANDER, COPLAN & ARONOFF LLP
2300 BP TOWER 
200 PUBLIC SQUARE 
CLEVELAND, OHIO 44114-2378
(216) 363-4500
FACSIMILE: (216) 363-4588 
------------------------
    Approximate date of commencement of proposed sale to the public: From time
to time after this registration statement becomes effective.                    
------------------------
If the securities being registered on this form are being offered in  
connection with the formation of a holding company and there is compliance with 
General Instruction G, check the following box. [ ]                             
------------------------
CALCULATION OF REGISTRATION FEE 

                                                        [Enlarge/Download Table]

========================================================================================================
                                                                   PROPOSED MAXIMUM                     
  TITLE OF EACH CLASS OF        AMOUNT         PROPOSED MAXIMUM        AGGREGATE           AMOUNT OF    
        SECURITIES               TO BE          OFFERING PRICE      OFFERING PRICE     REGISTRATION FEE 
     TO BE REGISTERED         REGISTERED         PER SHARE (2)            (2)                 (2)       
--------------------------------------------------------------------------------------------------------
                                                                                                        
Common Stock, par value                                                                                 
  $.01 per share (1)...... 5,000,000 shares         $16.625           $83,125,000           $24,522     
========================================================================================================

(1) Associated with the common stock, par value $.01 per share ("Common Stock"),
are preferred stock purchase rights that will not be exercisable or     
evidenced separately from the Common Stock prior to the occurrence of   
certain events.                                                         

(2) Estimated solely for the purposes of calculating the registration fee       
pursuant to Section 6(b) of the Securities Act of 1933, as amended (the 
   "Securities Act"). Pursuant to Rule 457(c) promulgated under the Securities
 Act, the offering price and registration fee are computed on the basis of
   the high and low prices of the Common Stock on January 7, 1998, as reported
on The New York Stock Exchange, Inc. Composite Transactions Reporting   
System.                                                                 
------------------------
THE REGISTRANT HEREBY RESERVES THE RIGHT TO AMEND THIS REGISTRATION     
STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE TIME 
UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES   
THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE
WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION       
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT
TO SAID SECTION 8(a), MAY DETERMINE.                                            
================================================================================

S-4
2nd Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 2nd

WATERLINK, INC. 

CROSS-REFERENCE SHEET 

                                                        [Enlarge/Download Table]

         FORM S-4 ITEM NUMBER AND HEADING                  LOCATION IN PROSPECTUS          
    -------------------------------------------  ------------------------------------------
                                                                                           
 1. Forepart of Registration Statement and                                                 
    Outside Front Cover Page of Prospectus.....  Facing Page of Registration Statement;    
                                                 Outside Front Cover Page of Prospectus    
 2. Inside Front and Outside Back Cover Pages                                              
    of Prospectus..............................  Additional Information; Outside Back Cover
                                                 Page of Prospectus                        
 3. Risk Factors, Ratio of Earnings to Fixed                                               
    Charges and Other Information..............  Prospectus Summary; Risk Factors          
 4. Terms of the Transaction...................  Prospectus Summary; Description of Capital
                                                 Stock                                     
 5. Pro Forma Financial Information............  *                                         
 6. Material Contacts with the Company Being                                               
    Acquired...................................  *                                         
 7. Additional Information Required for                                                    
    Reoffering by Persons and Parties Deemed to                                            
    be Underwriters............................  *                                         
 8. Interests of Named Experts and Counsel.....  Experts                                   
 9. Disclosure of Commission Position on                                                   
    Indemnification for Securities Act                                                     
    Liabilities................................  *                                         
10. Information with Respect to S-3                                                        
    Registrants................................  *                                         
11. Incorporation of Certain Information by                                                
    Reference..................................  *                                         
12. Information with Respect to S-2 or S-3                                                 
    Registrants................................  *                                         
13. Incorporation of Certain Information by                                                
    Reference..................................  *                                         
14. Information with Respect to Registrants                                                
    Other than S-3 or S-2 Registrants..........  Prospectus Summary; Risk Factors; The     
                                                 Company; Price Range of Common Stock;     
                                                 Dividend Policy; Capitalization; Selected 
                                                 Financial Data; Management's Discussion   
                                                 and Analysis of Financial Condition and   
                                                 Results of Operations; Business; Certain  
                                                 Transactions; Security Ownership          
15. Information with Respect to S-3                                                        
    Companies..................................  *                                         
16. Information with Respect to S-2 or S-3                                                 
    Companies..................................  *                                         
17. Information with Respect to Companies Other                                            
    than S-3 or S-2 Companies..................  *                                         
18. Information if Proxies, Consents or                                                    
    Authorizations are to be Solicited.........  *                                         
19. Information if Proxies, Consents or                                                    
    Authorizations are not to be Solicited, or                                             
    in an Exchange Offer.......................  Management; Certain Transactions; Security
                                                 Ownership                                 

---------------                                                                 
* Indicates that Item is not applicable or answer is in the negative.           

S-4
3rd Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 3rd

   THE INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
     REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
  SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
    MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
     BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
     THE SOLICITATION OF AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
    NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
 OFFER, SOLICITATION, OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.            

SUBJECT TO COMPLETION, DATED JANUARY 9, 1998

PROSPECTUS                                                                      

5,000,000 SHARES

WATERLINK, INC. 

COMMON STOCK
------------------------

  Waterlink, Inc. ("Waterlink and, collectively with its subsidiaries, the
"Company") may offer and issue the 5,000,000 shares of its common stock, $.001  
par value per share (the "Common Stock"), covered by this Prospectus in business
combination transactions (each an "Acquisition") involving its acquisition,     
directly or indirectly, of businesses or other operating assets. It anticipates 
these Acquisitions will consist principally of businesses in the water          
purification and wastewater treatment industry. Waterlink expects that (i) the  
terms of these Acquisitions will be determined by direct negotiations with the  
owners or controlling persons of the businesses or assets to be acquired and    
(ii) the shares of Common Stock issued will be valued at prices reasonably      
related to market prices prevailing either at the time an acquisition agreement 
is executed or at or about the time of delivery of the shares. It does not      
expect to pay any underwriting discounts or commissions, but may pay finder's   
fees from time to time with respect to specific Acquisitions. Any person        
receiving any such fees may be deemed to be an underwriter within the meaning of
the Securities Act of 1933, as amended (the "Securities Act"). The Company will 
pay all expenses of this offering.                                              

    As of December 31, 1997, 11,949,710 shares of Common Stock were issued and
outstanding. The Common Stock is traded on the New York Stock Exchange (the     
"NYSE") under the symbol "WLK." On January 7, 1998, the last reported sales     
price of the Common Stock on the NYSE was $16 9/16 per share.                   

Persons receiving shares of the Common Stock offered hereby may be    
contractually required to hold some or all of those shares for periods of up to 
two years. Pursuant to the provisions of Rule 145 under the Securities Act, the 
volume limitations and certain other requirements of Rule 144 under the         
Securities Act will apply to resales of those shares by affiliates of the       
businesses the Company acquires for a period of one year from the date of       
acquisition of shares of Common Stock (or such shorter period as the Securities 
and Exchange Commission (the "SEC") may prescribe).                             

With the consent of the Company, this Prospectus may also be used by  
persons ("Selling Stockholders") who have received or will receive shares of    
Common Stock offered hereby in connection with acquisitions and who may wish to 
sell such shares under circumstances requiring or making desirable its use. See 
"Resales of Shares."                                                            

    SEE "RISK FACTORS" BEGINNING ON PAGE 5 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN RISK FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF  
THE COMMON STOCK OFFERED HEREBY.                                                
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES 
AND EXCHANGE COMMISSION OR ANY SUCH STATE SECURITIES COMMISSION PASSED UPON THE 
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. 

, 1998                                  

S-4
4th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 4th

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the detailed    
information and financial statements, including the notes thereto, appearing    
elsewhere in this Prospectus. Unless otherwise indicated by the context,        
reference herein to (i) "Waterlink" means Waterlink, Inc., (ii) the "Company"   
means Waterlink and its subsidiaries, and (iii) "fiscal 1995," "fiscal 1996" and
"fiscal 1997" mean, respectively, the period from December 7, 1994 (date of     
incorporation) to September 30, 1995, the year ended September 30, 1996, and the
year ended September 30, 1997, with respect to Waterlink and certain of its     
subsidiaries.                                                                   

THE COMPANY 

   The Company is an international provider of integrated water purification
and wastewater treatment solutions, principally to industrial and municipal     
customers. The Company believes its expertise is in the analysis of a customer's
water purification and wastewater treatment requirements and the customized     
application of the Company's systems, equipment and services to provide cost    
effective solutions. Waterlink was incorporated in Delaware on December 7, 1994 
in order to participate in the consolidation of the highly fragmented water     
purification and wastewater treatment industry. The Company has begun executing 
this strategy through an acquisition program which targets businesses in four   
markets: industrial process water, industrial wastewater, municipal drinking    
water and municipal wastewater.                                                 

The Company has developed a strategic plan to:                        

  - Provide a full range of systems, equipment and services, whether
        independently or as part of a fully engineered water purification or
wastewater treatment solution                               

- Pursue growth through acquisitions that:                      

-- increase its geographic diversity                          

-- add complementary technologies, products and services      

-- broaden its customer base and industries served            

-- provide strategic, synergistic and corporate cultural fit  

        - Integrate its operations and marketing strategies in order to maximize
internal growth and increase profitability                  

     - Strengthen market share for its design/build operations outside the
United States                                               

     Primarily due to its acquisition program, the Company's pro forma net sales
for fiscal 1997 (assuming the fiscal 1997 acquisitions had occurred as of       
October 1, 1996) totaled $111 million. In addition, the Company has begun to    
realize significant improvement in internal growth rates due to the             
opportunities to cross-sell systems, equipment and services and as a result of  
the increased financial, managerial and other resources provided by the Company 
to its acquired businesses. For example, subsidiaries selling wastewater        
treatment systems now have the ability to offer both aeration and mixing systems
and subsidiaries selling water treatment systems can now offer wastewater       
treatment systems for the same projects. Additionally, the Company's            
design/build capabilities allow it to design systems that utilize a broad array 
of the Company's products and provide opportunities for its contract operation  
services. The Company also experiences cross-selling opportunities from a       
geographic and customer standpoint. For example, the Company believes that it   
should benefit from the acquisition of the Nordic Group both from the Nordic    
Group's ability to introduce the Company's existing systems, equipment and      
services into the European market and from the Company's ability to introduce   
the Nordic Group's systems, equipment and services into the Company's existing  
markets. Pro forma net sales of the businesses acquired by the Company to date  
grew 18.9% during fiscal 1997 compared to the prior year.                       

   Through its acquisition program and internal development, the Company has
established a broad distribution system both geographically and within various  
markets. In fiscal 1997, on an annualized pro forma basis, 42% of the Company's 
pro forma net sales were derived from customers located in the United States    
while approximately 58% were from outside the United States. Industrial         
customers accounted for 55% of the Company's pro forma net sales for fiscal 1997
while municipal customers accounted for 45%. The Company's industrial customers 
include a broad range of major corporations which require both purified water   
for their manufacturing processes and treatment of their wastewater outflow.    
Industries served include the pharmaceutical, electronic and microelectronic,   
pulp and paper, chemical, petrochemical, food, beverage, automotive and         

 3

S-4
5th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 5th

other heavy manufacturing industries. The Company serves large and small        
municipal customers worldwide which provide purified water to, and wastewater   
treatment for, their communities.                                               

RISK FACTORS

   The Common Stock offered hereby involves a high degree of risk. See "Risk
Factors."                                                                       

SUMMARY SELECTED FINANCIAL DATA 

     The following table sets forth summary selected consolidated financial data
of the Company since its incorporation on December 7, 1994. The financial data  
presented for and as of the end of fiscal 1995, fiscal 1996 and fiscal 1997 are 
derived from the audited consolidated financial statements of the Company. The  
financial data includes the operating results of each acquired business from the
date of acquisition in accordance with the purchase method of accounting. The   
results of operations should be read in conjunction with the financial          
information appearing elsewhere in this Prospectus. See "Consolidated Financial 
Statements" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."                                                         

                                                        [Enlarge/Download Table]

                                                               FISCAL      FISCAL      FISCAL 
                                                                1995        1996        1997  
                                                               -------     -------     -------
                                                               (IN THOUSANDS, EXCEPT PER SHARE
                                                                            DATA)             
                                                                                              
STATEMENTS OF OPERATIONS DATA:                                                                
Net sales..................................................... $ 2,684     $19,801     $64,699
Gross profit..................................................     827       8,568      24,309
Selling, general and administrative expenses..................   1,178       7,029      18,683
Special management compensation(1)............................      --          --       2,630
Amortization expense..........................................      15         307         751
Operating income (loss).......................................    (366)      1,232       2,245
Income (loss) before extraordinary item(2)....................    (512)        306         757
Net income (loss).............................................    (512)        306         372
Per common share:                                                                             
  Income (loss) before extraordinary item..................... $ (0.11)    $  0.05     $  0.09
  Net income (loss)...........................................   (0.11)       0.05        0.04
Weighted average common and equivalent shares.................   4,534       6,428       8,337

                                                        [Enlarge/Download Table]

                                                                       SEPTEMBER 30,          
                                                              --------------------------------
                                                               1995        1996         1997  
                                                              -------     -------     --------
                                                                                              
BALANCE SHEET DATA:                                                                           
Working capital.............................................. $ 2,064     $ 3,438     $ 19,430
Total assets.................................................  10,819      28,991      115,860
Total debt...................................................   6,039      12,145       18,961
Redeemable preferred stock...................................   3,900       8,500           --
Shareholders' equity (deficit)...............................     (11)      2,407       70,873

---------------                                                                 

(1) In June 1997, the Company incurred a special charge to operations of        
$2,630,000 resulting primarily from the issuance, concurrent with the   
  Company's initial public offering of Common Stock (the "IPO") which closed
   on June 27, 1997, of a ten year option to purchase 100,000 shares of common
    stock at a price of $0.10 per share to an officer of the Company pursuant to
  terms of an employment agreement. Of this amount, approximately $1,138,000
is non-cash and the remainder represents cash obligations related       
 principally to the reimbursement of income taxes resulting from the stock
    option issuance. This special charge after income taxes on a per share basis
was $0.20 for the year ended September 30, 1997.                        

(2) The Company used a portion of the proceeds from the IPO to repay            
  substantially all of its outstanding indebtedness. In addition, concurrent
  with the IPO the Company canceled a note purchase agreement. In connection
 with the early retirement of certain indebtedness and the cancellation of
    the note purchase agreement, the Company realized an extraordinary charge of
   $385,000, net of taxes of $257,000, related to the write-off of unamortized
 debt issuance costs and discounts associated with this indebtedness. This
extraordinary item on a per share basis was $0.05 for the year ended    
September 30, 1997.                                                     

 4

S-4
6th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 6th

RISK FACTORS

Prior to making an investment decision, prospective purchasers of the 
Common Stock offered hereby should consider carefully all of the information set
forth in this Prospectus and, particularly, should evaluate the following risk  
factors.                                                                        

POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS OF OPERATIONS                       

     The Company has in the past experienced quarterly fluctuations in operating
results due to the contractual nature of its business and, to a lesser extent,  
weather conditions. As part of its strategic plan, the Company expects that in  
the future it may receive contracts that are significantly larger than those    
received by the Company historically. In addition, certain of such contracts    
will be subject to the customer's ability to finance, or fund from government   
sources, the actual costs of completing the project as well as receiving any    
necessary permits. Therefore, the Company expects that its future operating     
results could fluctuate significantly, especially on a quarterly basis. The     
recognition by the Company of revenues and profits therefrom can fluctuate due  
to the timing of the awarding of such contracts and the ability to fund project 
cost. In addition, the Company has historically operated with a moderate        
backlog. As a result, quarterly sales and operating results depend in part on   
the volume and timing of contracts received and performed within the quarter,   
which are difficult to forecast. Any significant deferral or cancellation of a  
contract could have a material adverse effect on the Company's operating results
in any particular period. Accordingly, the Company believes that                
period-to-period comparisons of its operating results may not be necessarily    
indicative of future performance. As a result, the Company's operating results  
and stock price could prove to be volatile, particularly on a quarterly basis.  

LIMITED COMBINED OPERATING HISTORY; RISKS OF INTEGRATION                        

    Waterlink has grown by completing ten acquisitions consisting of seventeen
operating companies. The success of the Company will depend, in part, on the    
Company's ability to integrate the operations of these businesses and other     
companies it acquires, including centralizing certain functions to achieve cost 
savings and developing programs and processes that will promote cooperation and 
the sharing of opportunities and resources among its businesses. A number of the
businesses offer different services, utilize different capabilities and         
technologies, target different markets and customer segments and utilize        
different methods of distribution and sales representatives. While the Company  
believes that there are substantial opportunities in integrating the businesses,
these differences increase the difficulty in successfully completing such       
integration. In addition, there can be no assurance that such cross selling     
opportunities will develop or that the operating results of the Company will    
match or exceed the combined individual operating results achieved by the       
businesses prior to their respective acquisition.                               

   Waterlink's management group has been assembled only relatively recently.
There can be no assurance that the management group will be able to oversee the 
combined entity and implement the Company's operating or growth strategies      
effectively. Further, to the extent that the Company is able to implement its   
acquisition strategy, the resulting growth of the Company will place significant
demands on management and on the Company's internal controls. There can be no   
assurance that the management group will effectively be able to direct the      
Company through a period of significant growth.                                 

    Further, there can be no assurance that the Company's strategy to become a
leading international provider of integrated water purification and wastewater  
treatment solutions will be successful, or that the Company's targeted client   
segments will accept the Company as a provider of such solutions. See "Business"
and "Management."                                                               

DEPENDENCE ON ACQUISITIONS FOR GROWTH                                           

 A part of the Company's strategic plan is to grow by acquiring existing
businesses. This acquisition strategy involves risks inherent in assessing the  
values, strengths, weaknesses, risks and profitability of acquisition           
candidates, including adverse short-term effects on the Company's reported      
operating results, diversion of management's attention, dependence on retaining,
hiring and training key personnel, and risks                                    

 5

S-4
7th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 7th

associated with unanticipated problems or latent liabilities. Although the      
Company generally has been successful in acquiring companies it has pursued,    
there can be no assurance that acquisition opportunities will continue to be    
available, that the Company will have access to the capital required to finance 
potential acquisitions, that the Company will continue to acquire businesses or 
that any business acquired by the Company will be integrated successfully into  
the Company's operations and prove profitable. In addition, to the extent that  
consolidation becomes more prevalent in the industry, the prices for attractive 
acquisition candidates may be bid up to higher levels and there can be no       
assurance that businesses acquired in the future will achieve sales and         
profitability that justify the investment therein. See "The Company" and        
"Business."                                                                     

NEED FOR ADDITIONAL ACQUISITION FINANCING                                       

    The Company currently intends to use a combination of shares of its Common
Stock, cash, and debt obligations in making future acquisitions. In connection  
with such acquisitions, the Company intends generally to seek to obtain the     
agreement of the persons acquiring Common Stock not to offer, sell, contract to 
sell or otherwise dispose of such Common Stock for a period of up to two years  
from the date of acquisition. The extent to which the Company will be able or   
willing to use the Common Stock for this purpose will depend on its market value
from time to time and the willingness of potential sellers of acquisition       
targets to accept it as full or partial payment. To the extent the Company is   
unable to use the Common Stock to make future acquisitions (including shares of 
Common Stock offered hereby), its ability to grow may be limited by the extent  
to which it is able to raise capital for this purpose, as well as to expand     
existing operations, through debt or additional equity financing. At September  
30, 1997, the Company had approximately $33.2 million in the aggregate available
to it, subject to certain requirements, under the Credit Facility and the       
Canadian Line of Credit, to be used for acquisitions, working capital and other 
corporate purposes. No assurance can be given the Company will be able to obtain
the capital it would need to finance a successful acquisition program and its   
other cash needs. See "Management's Discussion and Analysis of Financial        
Condition and Results of Operations -- Liquidity and Capital Resources."        

OPERATIONS OUTSIDE THE UNITED STATES                                            

   A substantial proportion of the Company's systems, equipment and services
are sold in Europe, Canada, Latin America and other regions outside the United  
States and a number of the Company's subsidiaries operate outside of the United 
States. The Company's net sales outside the United States were approximately 58%
of its pro forma fiscal 1997 net sales. Such sales pose certain risks associated
with doing business in foreign countries, resulting from certain political,     
economic and other uncertainties, including, among others, risks of war,        
expropriation or nationalization of assets, renegotiation or nullification of   
existing contracts, changing political conditions, changing laws and policies   
affecting trade and investment, overlap of different tax structures, and the    
general hazards associated with the assertion of sovereignty over certain areas 
in which operations are conducted. Additionally, various jurisdictions have laws
limiting the right and ability of subsidiaries and joint ventures to pay        
dividends and remit earnings to affiliated companies, unless specified          
conditions are satisfied.                                                       

 Certain aspects of the Company's operations are subject to governmental
regulations in the countries in which the Company operates, including those     
relating to currency conversion and repatriation, taxation of its earnings and  
earnings of its personnel, and its use of local employees and suppliers. The    
Company's operations are also subject to the risk of changes in laws and        
policies in the various jurisdictions in which the Company operates which may   
impose restrictions on the Company, including trade restrictions, that could    
have a material adverse effect on the Company's business, financial condition   
and results of operations. Other types of government regulation which could, if 
enacted or implemented, materially and adversely affect the Company's operations
include expropriation or nationalization decrees, confiscatory tax systems,     
primary or secondary boycotts directed at specific countries or companies,      
embargoes and import restrictions or other trade barriers. The Company cannot   
determine to what extent future operations and earnings of the Company may be   
affected by new laws, new regulations, changes in or new interpretations of     
existing laws or regulations or other consequences of doing business outside the
United States.                                                                  

 6

S-4
8th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 8th

FOREIGN CURRENCY RISKS                                                          

    Because the Company's functional currency is the United States dollar, its
operations outside the United States sometime face the additional risks of      
fluctuating currency values and exchange rates, hard currency shortages and     
controls on currency exchange. The Company has operations outside the United    
States and is hedged, to some extent, from foreign exchange risks because of its
ability to purchase, manufacture and sell in the local currency of those        
jurisdictions. In addition, the Company does enter into foreign currency        
contracts under certain circumstances to reduce the Company's exposure to       
foreign exchange risks. There can be no assurance, however, that the attempted  
matching of foreign currency receipts with disbursements or hedging activity    
will adequately moderate the risk of currency or exchange rate fluctuations     
which could have a material adverse effect on the Company's business, financial 
condition and results of operations. In addition, to the extent the Company has 
operations outside the United States, the Company is subject to the impact of   
foreign currency fluctuations and exchange rate charges on the Company's        
reporting in its financial statements of the results from such operations       
outside the United States. Since such financial statements are prepared         
utilizing United States dollars as the basis for presentation, results from any 
operations outside the United States reported in the financial statements must  
be converted into dollars utilizing the appropriate foreign currency exchange   
rate, and thereby subjecting such results to the impact of currency and exchange
rate fluctuations. See "Business."                                              

DEPENDENCE ON KEY PERSONNEL                                                     

    The Company's operations depend on the continuing efforts of its executive
officers and its senior management. Should the Company be unable to retain any  
of its executive officers or senior management, the Company's prospects could be
adversely affected. In addition, the Company intends to grow through            
acquisitions and internal expansion. The Company likely will depend on the      
senior management of any significant businesses it acquires in the future and on
its ability to attract qualified management to support its internal expansion.  
The business or prospects of the Company could be affected adversely if any of  
these senior management of acquired businesses does not continue in his or her  
management role after joining the Company and if the Company is unable to       
attract and retain qualified replacements and additional members of management. 
See "Management."                                                               

COMPETITION                                                                     

    The water purification and wastewater treatment industry is fragmented and
highly competitive due to the large number of businesses within certain product 
areas. The Company competes with many companies, several of which have greater  
market penetration, depth of product line, resources and access to capital,     
which could be competitive advantages in securing certain projects. While the   
Company believes it is well positioned to deliver technology and services at a  
fair price, some competitors have developed product and service integration     
capabilities beyond the current scope of the Company. In addition, some         
competitors may have greater financial resources than the Company to finance    
acquisition and internal growth opportunities. Consequently, the Company may    
encounter significant competition in its efforts to achieve its objectives. See 
"Business -- Competition."                                                      

CYCLICALITY OF DEMAND FOR WATER PURIFICATION AND WASTEWATER EQUIPMENT           

     Much of the water purification and wastewater equipment sold by the Company
requires significant capital expenditures by its customers. As such, the timing 
of customer purchases may be affected by various economic factors, including    
interest rate and business cycle fluctuations, which are beyond the control of  
the Company. While the Company sells equipment across a broad cross section of  
industry segments and customers, the cyclical nature of capital equipment sales 
could have an adverse effect on the its revenues and profitability in general,  
and on the its revenues and profitability in any individual financial reporting 
period.                                                                         

 7

S-4
9th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 9th

POTENTIAL ENVIRONMENTAL LIABILITIES                                             

In the United States, the Comprehensive Environmental Response,       
Compensation, and Liability Act of 1980, as amended, and comparable state laws, 
impose joint and several liability without fault for the releases of hazardous  
substances into the environment. Potentially responsible parties include (i)    
owners and operators of the site, (ii) parties which create the hazardous       
substances released at the site, and (iii) parties which arrange for the        
transportation or disposal of such hazardous substances. The Company is also    
subject to applicable environmental laws in countries outside the United States 
where it operates or in which its customers are located. These requirements and 
their enforcement may vary by country but in general prescribe standards for the
protection of human health, safety and the environment. The Company could face  
claims by governmental authorities, private individuals and other persons       
alleging that hazardous substances were released during the treatment process or
from the use or disposal of end products and by-products in violation of        
applicable law.                                                                 

RELIANCE ON ENVIRONMENTAL REGULATION                                            

     Federal, state, local and foreign environmental laws and regulations impose
substantial standards for properly purifying water and treating wastewater, and 
impose liabilities for noncompliance. Environmental laws and regulations are,   
and will continue to be, a significant factor affecting the marketability of the
Company's solutions, systems and equipment. To the extent that demand for the   
Company's solutions, systems and equipment is created by the need to comply with
such environmental laws and regulations, any modification of the standards      
imposed by such laws and regulations may reduce demand, thereby adversely       
affecting the Company's business and prospects. The relaxation or repeal of any 
such laws or regulations or the strict enforcement thereof could adversely      
affect the Company's business and prospects. See "Business -- Government        
Regulation."                                                                    

PROCESS AND PRODUCT WARRANTY AND PERFORMANCE GUARANTEES                         

In connection with providing certain services and products to its     
customers, the Company sometimes is required to guarantee that the services and 
products will attain specified levels of quality or performance. Should a       
product fail to perform according to a performance guarantee, or should a       
service fail to accomplish treatment levels which are guaranteed, and should the
Company be unable to remedy such failure within any applicable cure period, the 
Company could incur financial penalties in the form of liquidated damages or    
could be required to remove and/or replace the equipment or repeat the service  
in order to meet the specifications. While the Company historically has         
fulfilled all of its guarantee obligations, there can be no assurance the       
Company will be able to fulfill its future guarantee obligations or that        
fulfilling such obligations may not involve material costs that could have a    
material adverse effect on the Company. See "Business -- Process and Product    
Warranty and Performance Guarantees."                                           

DIVIDEND POLICY; RESTRICTIONS ON PAYMENT OF DIVIDENDS                           

   The Company currently intends to retain earnings to provide funds for the
operation and expansion of its business and, accordingly, does not anticipate   
paying cash dividends in the foreseeable future. The Company's Credit Facility  
prohibits the payment of dividends without the consent of the Bank. See         
"Dividend Policy" and "Management's Discussion and Analysis of Financial        
Condition and Results of Operations--Liquidity and Capital Resources."          

POTENTIAL EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE ON PRICE OF COMMON STOCK    

   On December 31, 1997, 11,949,710 shares of Common Stock were outstanding.
The 5,175,000 shares sold in the IPO which closed on June 27, 1997 (other than  
shares that were purchased by affiliates of the Company) are freely tradable. Of
the remaining 6,774,710 shares outstanding, approximately 6,313,983 shares are  
either presently freely tradable or eligible for sale pursuant to Rule 144 under
the Securities Act of 1933, as amended (the "Securities Act"), subject to       
applicable volume limitations and other requirements. Substantially all of the  
holders of those remaining shares which would be eligible for sale pursuant to  
Rule 144                                                                        

 8

S-4
10th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 10th

have certain rights to have their shares registered in the future under the     
Securities Act. See "Description of Capital Stock -- Registration Rights        
Agreements." Sales made pursuant to Rule 144 must comply with its applicable    
volume and manner of sale limitations and other requirements.                   

As of December 31, 1997 the Company also had outstanding options to   
purchase up to a total of 1,289,800 shares of Common Stock. The Company has     
registered all the shares subject to these options under the Securities Act. See
"Management -- Benefit Plans."                                                  

In addition, the Company has outstanding warrants to purchase 350,000 
shares of Common Stock. Pursuant to the applicable warrant agreements, the      
holders of such warrants have certain rights to require the Company to register 
the shares of Common Stock to be issued upon exercise of the warrants. See      
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations -- Liquidity and Capital Resources"; "Certain Transactions -- 1997   
Notes, 1997 Warrants and Stockholder Guarantee" and "Description of Capital     
Stock -- 1997 Warrants."                                                        

POSSIBLE VOLATILITY OF STOCK PRICE                                              

     The Common Stock is listed on The New York Stock Exchange. The market price
of the Common Stock is subject to significant fluctuations from time to time in 
response to numerous factors, including variations in the reported annual and   
quarterly financial results of the Company, changes in financial projections or 
failures by the Company to meet such projections and changing conditions in the 
economy in general or in the Company's industry in particular. In addition, the 
stock markets experience significant price and volume volatility from time to   
time which may affect the market price of the Common Stock for reasons unrelated
to the Company's performance at that time. See "Price Range of Common Stock."   

POTENTIAL ANTI-TAKEOVER EFFECTS                                                 

    The Company has adopted a stockholder rights plan. The plan and provisions
of the Company's Certificate of Incorporation, as amended (the "Company         
Certificate"), the Company's Bylaws, as amended (the "Company Bylaws"), and the 
Delaware General Corporation Law (the "DGCL") may have the effect of delaying,  
discouraging, inhibiting, preventing or rendering more difficult an attempt to  
obtain control of the Company by means of a tender offer, business combination, 
proxy contest or otherwise. These provisions include the charter authorization  
of "blank check" preferred stock, classification of the Board of Directors, a   
restriction on the ability of stockholders to take actions by written consent, a
"fair price" provision and a DGCL provision imposing restrictions on business   
combinations with certain interested parties. See "Description of Capital       
Stock."                                                                         

OWNERSHIP AND CONTROL BY CERTAIN SHAREHOLDERS                                   

On a fully diluted basis and assuming the vesting and exercise of all 
outstanding options and the exercise of all outstanding warrants, the Company's 
directors and management will own or control approximately 31.2% of the         
Company's outstanding voting capital stock. Collectively, such shareholders may 
be able to effectively control decisions of the Company, as the Company         
Certificate, and the Company By-laws generally require a majority vote of       
holders of the outstanding shares of the Company to authorize actions of the    
Company. This concentration of ownership by directors and management may also   
have the effect of delaying or preventing a change in control of the Company.   
See "Security Ownership" and "Description of Capital Stock."                    

FORWARD-LOOKING STATEMENTS                                                      

    With the exception of historical information, the matters discussed herein
may include forward-looking statements that involve risks and uncertainties.    
While forward-looking statements are sometimes presented with numerical         
specificity, they are based on a variety of assumptions made by management      
regarding future circumstances over which the Company has little or no control. 
A number of important factors, including those identified in this section as    
well as factors discussed elsewhere herein, could cause the Company's actual    
results to differ materially from those in forward-looking statements or        
financial information. Actual results                                           

 9

S-4
11th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 11th

may differ from forward-looking results for a number of reasons, including the  
following: (i) changes in world economic conditions (including, but not limited 
to, the potential instability of governments and legal systems in countries in  
which the Company conducts business, and significant changes in currency        
valuations), (ii) changes in customer demand as they affect sales and product   
mix (including, but not limited to, the effect of strikes at customers'         
facilities, variations in backlog and the impact of changes in industrial       
business cycles), (iii) competitive factors (including, but not limited to,     
changes in market penetration and the introduction of new products by existing  
and new competitors), (iv) changes in operating costs (including, but not       
limited to, the effect of changes in the Company's manufacturing processes;     
changes in costs associated with varying levels of operations; changes resulting
from different levels of customers demands; the effects of unplanned work       
stoppages; changes in cost of labor and benefits; and the cost and availability 
of raw materials and energy), (v) the success of the Company's operating plan   
(including, but not limited to, its ability to achieve the total planned        
benefits of its strategic plan, its ability to find and integrate acquisitions  
into Company operations, and the ability of recently acquired companies to meet 
satisfactory operating results), and (vi) unanticipated litigation, claims or   
assessments (including, but not limited to, claims or problems related to       
product warranty and environmental issues).                                     

10

S-4
12th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 12th

THE COMPANY 

GENERAL                                                                         

    Waterlink, Inc. (the "Company") is an international provider of integrated
water purification and wastewater treatment solutions, principally to industrial
and municipal customers. The Company believes its expertise is in the analysis  
of a customer's water purification and wastewater treatment requirements and the
customized application of the Company's systems, equipment and services to      
provide cost effective solutions. Waterlink was incorporated in Delaware on     
December 7, 1994 in order to participate in the consolidation of the highly     
fragmented water purification and wastewater treatment industry. The Company has
begun executing this strategy through an acquisition program which targets      
businesses in four markets: industrial process water, industrial wastewater,    
municipal drinking water and municipal wastewater.                              

From its incorporation in December 1994 until its first acquisition in
March 1995, the Company focused on initial formation activities, attracting     
certain initial employees and pursuing its analysis of potential acquisition    
candidates. In March 1995, the Company acquired the assets of Sanborn, Inc.     
(doing business as Sanborn Technologies ("Sanborn Technologies")), being        
operated by the Company's subsidiary, SanTech Equipment, Inc. Sanborn           
Technologies is a designer and builder of industrial separation systems which   
are used by customers for environmental compliance, resource conservation and   
production processes. Later in fiscal 1995, the Company acquired Great Lakes    
Environmental, Inc. ("Great Lakes"), which enabled the Company to enter the     
industrial wastewater market. Great Lakes is a designer and builder of          
industrial wastewater pretreatment systems and custom high quality oil/water    
separation products.                                                            

  In fiscal 1996, Waterlink completed three acquisitions, comprised of the
assets of Mass Transfer Systems, Inc. ("Mass Transfer"), the assets of Aero-Mod 
Incorporated and its affiliates ("Aero-Mod") and the capital stock of Water     
Equipment Technologies, Inc. (now known as Waterlink Technologies, Inc.         
("Waterlink Technologies")). The acquisition of Mass Transfer provided access to
additional technologies used primarily in the industrial wastewater market and, 
to a lesser extent, in the municipal wastewater market. Mass Transfer is a      
designer of customized jet aeration and mixing systems used to accelerate the   
biological digestion process through the introduction of oxygen in the treatment
of wastewater. The acquisition of Aero-Mod expanded the Company's presence in   
the municipal wastewater market and presented cross-selling opportunities with  
Mass Transfer. Additionally, Aero-Mod expanded the Company's geographic presence
and scope of operations through its customer base outside of the United States, 
especially in Latin America, and its contract operations business. Aero-Mod     
designs wastewater treatment plants, provides clarifiers, filters and dewatering
equipment for the biological treatment of wastewater and biosolids and provides 
contract operation services. The acquisition of Waterlink Technologies enabled  
the Company to enter the industrial process water and municipal drinking water  
markets and increased the Company's presence in markets outside the United      
States. Waterlink Technologies is a designer and builder of water treatment     
filters and membrane separation systems, including reverse osmosis systems, and 
related treatment equipment.                                                    

     During fiscal 1997, Waterlink completed five acquisitions, comprised of the
capital stock of the Nordic Water Products Group subsidiaries (the "Nordic      
Group"), Bioclear Technology, Inc. ("Bioclear"), Lanco Environmental Products,  
Inc. ("Lanco"), Mellegard V.A. Maskiner AB ("MEVA") and Hycor Corporation       
("Hycor"). The Nordic Group provided the Company with numerous benefits         
including a distribution channel for its existing businesses into Europe;       
internationally recognized and accepted technologies and equipment used in both 
the municipal and industrial markets; and the Company's first substantial       
design/build operations, focused primarily in Europe. The Nordic Group          
manufactures continuous recirculating sand filters, inclined plate settlers and 
systems for nutrient removal, decanting centrifuges for dewatering biosolids and
hydraulic surface and bottom scrapers. The Nordic Group also installs mechanical
and electrical systems and designs and builds water purification and wastewater 
treatment plants in Europe. Bioclear provides the Company with access to        
sequential batch reactor technology, which expands its ability to treat         
industrial and municipal wastewater biologically. The Company believes that this
technology presents various cross-selling opportunities, particularly with      
Aero-Mod, Mass Transfer, Waterlink Technologies and the Nordic Group.           
Additionally, Bioclear enhances the Company's design/build capabilities. Lanco  
expands the Company's product offerings in the industrial wastewater treatment  
market and is complementary with Great                                          

11

S-4
13th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 13th

Lakes. Lanco fabricates small plate and frame filter presses for dewatering     
biosolids and inclined plate clarifiers for heavy metal removal. MEVA           
specializes in the design and installation of fine screens and related          
accessories for sewage treatment applications. Hycor designs and manufactures   
screening, dewatering and related residuals management equipment for            
liquid/solid separation in municipal wastewater and industrial wastewater and   
process applications. MEVA and Hycor extend the Company's product offerings and 
present various cross-selling opportunities with the Company's design/build     
operations.                                                                     

The Company has developed a strategic plan to:                        

  - Provide a full range of systems, equipment and services, whether
        independently or as part of a fully engineered water purification or
wastewater treatment solution                               

- Pursue growth through acquisitions that:                      

-- increase its geographic diversity                        

-- add complementary technologies, products and services    

-- broaden its customer base and industries served          

-- provide strategic, synergistic and corporate cultural fit

        - Integrate its operations and marketing strategies in order to maximize
internal growth and increase profitability                  

     - Strengthen market share for its design/build operations outside the
United States                                               

     Primarily due to its acquisition program, the Company's pro forma net sales
for fiscal 1997 totaled $111 million. In addition, the Company has begun to     
realize significant improvement in internal growth rates due to the             
opportunities to cross-sell systems, equipment and services and as a result of  
the increased financial, managerial and other resources provided by the Company 
to its acquired businesses. For example, subsidiaries selling wastewater        
treatment systems now have the ability to offer both aeration and mixing systems
and subsidiaries selling water treatment systems can now offer wastewater       
treatment systems for the same projects. Additionally, the Company's            
design/build capabilities allow it to design systems that utilize a broad array 
of the Company's products and provide opportunities for its contract operation  
services. The Company also experiences cross-selling opportunities from a       
geographic and customer standpoint. For example, the Company believes that it   
should benefit from the acquisition of the Nordic Group both from the Nordic    
Group's ability to introduce the Company's existing systems, equipment and      
services into the European market and from the Company's ability to introduce   
the Nordic Group's systems, equipment and services into the Company's existing  
markets. Pro forma net sales of the businesses acquired by the Company to date  
grew 18.9% during fiscal 1997 compared to the prior year.                       

   The Company's executive offices are located at 4100 Holiday Street, N.W.,
Suite 201, Canton, Ohio 44718-7532 and its telephone number is (330) 649-4000.  

PRICE RANGE OF COMMON STOCK 

   The Company's Common Stock has been listed on the New York Stock Exchange
(the "NYSE") under the symbol "WLK" since June 24, 1997 when the Company's      
Common Stock commenced trading in connection with the IPO, in which the initial 
per share price to the public was $11. The following table sets forth the high  
and low composite sales prices as reported by the NYSE for the fiscal quarters  
indicated.                                                                      

                                                                [Download Table]

                                                             HIGH      LOW   
                                                           --------  --------
                                                                             
Fiscal Year ended September 30, 1997                                         
  Third Quarter (from June 24, 1997)...................... $13       $11     
  Fourth Quarter..........................................  20 3/16   13     
Fiscal Year ended September 30, 1998                                         
  First Quarter...........................................  19  3/4   16 5/16
  Second Quarter (through January 7, 1998)................  17  1/8   16  1/2

12

S-4
14th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 14th

  The current quoted price of the Common Stock is listed daily in the Wall
Street Journal in the NYSE section. The number of holders of record of the      
Company's Common Stock as of December 1, 1997 was approximately 70.             

DIVIDEND POLICY 

The Company has not declared or paid any cash dividends on its Common 
Stock. It is the Company's current intention to retain earnings to finance the  
expansion of its business. Any future dividends will be at the discretion of the
Board of Directors after taking into account various factors, including, among  
others, the Company's financial condition, results of operations, cash flows    
from operations, current and anticipated cash needs and expansion plans, the    
income tax laws then in effect, the requirements of Delaware law, the           
restrictions imposed under the Credit Facility (as defined herein) and any      
restrictions that may be imposed by the Company's future credit facilities and  
other indebtedness. The Company's Credit Facility prohibits its payment of      
dividends without the consent of the lender. See "Management's Discussion and   
Analysis of Financial Condition and Results of Operations -- Liquidity and      
Capital Resources."                                                             

13

S-4
15th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 15th

CAPITALIZATION

     The following table sets forth the historical capitalization of the Company
at September 30, 1997. This table should be read in conjunction with the        
Consolidated Financial Statements of the Company and the notes thereto included 
elsewhere in this Prospectus.                                                   

                                                        [Enlarge/Download Table]

                                                                            (In thousands)
                                                                                          
Current maturities of long-term debt.......................................     $ 2,538   
Long-term debt, less current portion.......................................      12,502   
Convertible subordinated notes-related parties.............................       3,921   
                                                                                -------   
  Total debt...............................................................      18,961   
Shareholders' equity:                                                                     
  Preferred stock, $.001 par value, 10,000,000 shares authorized, none                    
     issued and outstanding................................................          --   
  Common stock, $.001 par value, 40,000,000 shares authorized, 11,906,326                 
     shares issued and outstanding(1)......................................          12   
  Additional paid-in-capital...............................................      70,739   
  Foreign currency translation adjustment..................................         (44)  
  Retained earnings........................................................         166   
                                                                                -------   
     Total shareholders' equity............................................      70,873   
                                                                                -------   
     Total capitalization..................................................     $89,834   
                                                                                =======   

---------------                                                                 

(1) Excludes (i) 1,290,800 shares subject to outstanding options granted under  
the Company's 1995 Stock Option Plan, (ii) 225,000 shares issuable upon 
  exercise of a warrant issued to a bank, (iii) 125,000 shares issuable upon
exercise of warrants issued in connection with commitments to purchase  
  subordinated indebtedness of the Company and (iv) 5,000,000 shares offered
    hereby. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources,"              
"Management -- Benefit Plans," "Certain Transactions -- 1997 Notes, 1997
Warrants and Stockholder Guarantee" and "Description of Capital Stock." 

14

S-4
16th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 16th

SELECTED FINANCIAL DATA 

    The following table sets forth selected consolidated financial data of the
Company since its incorporation on December 7, 1994. The financial data         
presented for and as of the end of fiscal 1995, fiscal 1996 and fiscal 1997 were
derived from the audited consolidated financial statements of the Company. The  
financial data includes the operating results of each acquired business from the
date of acquisition in accordance with the purchase method of accounting. The   
dates of each acquisition included in the operating results are shown below:    

                                                                [Download Table]
                                                                     
- Sanborn Technologies.........................    March 31, 1995    
- Great Lakes..................................    August 31, 1995   
- Mass Transfer................................    January 31, 1996  
- Aero-Mod.....................................    April 26, 1996    
- Waterlink Technologies.......................    September 30, 1996
- Nordic Group.................................    March 5, 1997     
- Bioclear.....................................    June 27, 1997     
- Lanco........................................    June 27, 1997     
- MEVA.........................................    September 12, 1997
- Hycor........................................    September 30, 1997

15

S-4
17th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 17th

   The data presented below should be read in conjunction with the financial
information appearing elsewhere herein.                                         

                                                                [Download Table]

                                                FISCAL      FISCAL       FISCAL  
                                                 1995        1996         1997   
                                                -------     -------     -------- 
                                                (in thousands, except per share  
                                                             data)               
                                                                                 
STATEMENT OF OPERATIONS DATA:                                                    
  Net sales.................................... $ 2,684     $19,801     $ 64,699 
  Cost of sales................................   1,857      11,233       40,390 
                                                -------     -------     -------- 
  Gross profit.................................     827       8,568       24,309 
  Selling, general and administrative                                            
     expenses..................................   1,178       7,029       18,683 
  Special management compensation(1)...........      --          --        2,630 
  Amortization.................................      15         307          751 
                                                -------     -------     -------- 
  Operating income (loss)......................    (366)      1,232        2,245 
  Other income (expense):                                                        
     Interest expense..........................    (144)       (877)      (1,281)
     Interest income and other items-net.......      33         (44)         263 
                                                -------     -------     -------- 
  Income (loss) before income taxes............    (477)        311        1,227 
  Income taxes.................................      35           5          470 
                                                -------     -------     -------- 
  Income (loss) before extraordinary item......    (512)        306          757 
  Extraordinary item, net of taxes(2)..........      --          --         (385)
                                                -------     -------     -------- 
  Net income (loss)............................ $  (512)    $   306     $    372 
                                                =======     =======     ======== 
  Net income (loss) per common share:                                            
     Income (loss) before extraordinary item... $ (0.11)    $  0.05     $   0.09 
     Extraordinary item........................      --          --        (0.05)
                                                -------     -------     -------- 
                                                $ (0.11)    $  0.05     $   0.04 
                                                =======     =======     ======== 
  Weighted average common and equivalent                                         
     shares....................................   4,534       6,428        8,337 
                                                =======     =======     ======== 

                                                                [Download Table]

                                                         SEPTEMBER 30,          
                                                --------------------------------
                                                 1995        1996         1997  
                                                -------     -------     --------
                                                                                
BALANCE SHEET DATA:                                                             
  Working capital.............................. $ 2,064     $ 3,438     $ 19,430
  Total assets.................................  10,819      28,991      115,860
  Total debt...................................   6,039      12,145       18,961
  Redeemable preferred stock...................   3,900       8,500           --
  Shareholders' equity (deficit)...............     (11)      2,407       70,873

---------------                                                                 

(1) In June 1997, the Company incurred a special charge to operations of        
  $2,630,000 resulting primarily from the issuance, concurrent with the IPO,
  of a ten year option to purchase 100,000 shares of common stock at a price
of $0.10 per share to an officer of the Company pursuant to terms of an 
  employment agreement. Of this amount, approximately $1,138,000 is non-cash
and the remainder represents cash obligations related principally to the
    reimbursement of income taxes resulting from the stock option issuance. This
special charge after income taxes on a per share basis was $0.20 for the
year ended September 30, 1997.                                          

(2) The Company used a portion of the proceeds from the IPO to repay            
  substantially all of its outstanding indebtedness. In addition, concurrent
  with the IPO the Company canceled a note purchase agreement. In connection
 with the early retirement of certain indebtedness and the cancellation of
    the note purchase agreement, the Company realized an extraordinary charge of
   $385,000, net of taxes of $257,000, related to the write-off of unamortized
 debt issuance costs and discounts associated with this indebtedness. This
extraordinary item on a per share basis was $0.05 for the year ended    
September 30, 1997.                                                     

16

S-4
18th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 18th

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 
CONDITION AND RESULTS OF OPERATIONS 

OVERVIEW                                                                        

   The Company is an international provider of integrated water purification
and wastewater treatment solutions, principally to industrial and municipal     
customers. Waterlink was incorporated in Delaware on December 7, 1994 and has   
grown through numerous acquisitions.                                            

  On June 27, 1997, the Company consummated the IPO of 4,500,000 shares of
its common stock at a price of $11 per share, before the underwriters' discount,
and received approximately $43.0 million of net proceeds. On July 16, 1997, the 
Company sold 675,000 shares of its common stock pursuant to the exercise of the 
underwriters' over-allotment option granted in connection with the IPO, and     
received approximately $6.9 million. These net proceeds from the IPO were       
primarily used to pay the cash portion of the purchase prices of Bioclear, Lanco
and MEVA, to repay indebtedness of the Company and for general working capital  
purposes.                                                                       

The Company's acquisitions have enabled it to build its technical     
capabilities and geographical presence. Through September 30, 1997, the Company 
completed the following ten acquisitions at the following effective dates:      

                                                                [Download Table]
                                                                     
- Sanborn Technologies.........................    March 31, 1995    
- Great Lakes..................................    August 31, 1995   
- Mass Transfer................................    January 31, 1996  
- Aero-Mod.....................................    April 26, 1996    
- Waterlink Technologies.......................    September 30, 1996
- Nordic Group.................................    March 5, 1997     
- Bioclear.....................................    June 27, 1997     
- Lanco........................................    June 27, 1997     
- MEVA.........................................    September 12, 1997
- Hycor........................................    September 30, 1997

As part of its strategic plan, the Company intends to continue an     
aggressive acquisition program. The Company's acquisition program has targeted  
businesses which have provided the Company with complementary systems, equipment
and services and broadened its customer and geographic base. The Company has    
sought companies which provide the potential for synergies with existing        
businesses. With respect to the acquisitions completed prior to fiscal 1997, the
Company has begun to realize significant improvement in internal growth rates   
due to the opportunities to cross-sell systems, equipment and services and as a 
result of the increased financial, managerial and other resources provided by   
the Company to its acquired businesses. The Company expects that it will        
continue to benefit from such synergies as it more fully integrates the acquired
businesses into its operations.                                                 

     The acquisitions were accounted for under the purchase method of accounting
and are included in the results of operations for the period subsequent to the  
effective date of acquisition. Due to the timing and magnitude of these         
acquisitions, results of operations for the periods presented are not           
necessarily comparable or indicative of operating results for current or future 
periods.                                                                        

     The majority of the Company's systems and equipment are custom designed and
take a number of months to produce. Revenues from large contracts are recognized
using the percentage of completion method of accounting in the proportion that  
costs bear to total estimated costs at completion. Revisions of estimated costs 
or potential contract losses, if any, are recognized in the period in which they
are determined. Revenues from remaining systems and equipment sales are         
recognized when shipped.                                                        

     The Company has in the past experienced quarterly fluctuations in operating
results due to the contractual nature of its business and, to a lesser extent,  
weather conditions. As part of its strategic plan, the                          

17

S-4
19th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 19th

Company expects that in the future it may receive contracts that are            
significantly larger than those received by the Company historically. In        
addition, certain of such contracts will be subject to the customer's ability to
finance, or fund from government sources, the actual costs of completing the    
project as well as receiving any necessary permits to commence the project.     
Therefore, the Company expects that its future operating results could fluctuate
significantly, especially on a quarterly basis. The recognition by the Company  
of revenues and profits therefrom can fluctuate due to the timing of the        
awarding of such contracts and the ability to fund project costs. In addition,  
the Company has historically operated with a moderate backlog. However, as a    
result of its strategic plan, the Company anticipates that both the dollar      
volume and number of contracts in its backlog will increase significantly. As of
September 30, 1997, the Company's backlog was approximately $30.5 million.      
Therefore, quarterly sales and operating results may be affected by the volume  
and timing of contracts received and performed within the quarter, which are    
difficult to forecast. Any significant deferral or cancellation of a contract   
could have a material adverse effect on the Company's operating results in any  
particular quarter. Because of these factors, the Company believes that         
period-to-period comparisons of its operating results are not necessarily       
indicative of future performances.                                              

RESULTS OF OPERATIONS                                                           

 The following table sets forth for the periods indicated, statements of
operations data as a percentage of net sales:                                   

                                                        [Enlarge/Download Table]

                                                                 FISCAL    FISCAL   FISCAL 
                                                                  1995      1996     1997  
                                                                 ------    ------   ------ 
                                                                                           
Net sales.......................................................  100.0%    100.0%   100.0%
Cost of sales...................................................   69.2      56.7     62.4 
                                                                  -----     -----    ----- 
Gross profit....................................................   30.8      43.3     37.6 
Selling, general and administrative expenses....................   43.9      35.5     28.9 
Special management compensation.................................     --        --      4.1 
Amortization....................................................    0.5       1.6      1.1 
                                                                  -----     -----    ----- 
Operating income (loss).........................................  (13.6)      6.2      3.5 
Other income (expense):                                                                    
  Interest expense..............................................   (5.4)     (4.4)    (2.0)
  Interest income and other items--net..........................    1.2      (0.2)     0.4 
                                                                  -----     -----    ----- 
Income (loss) before income taxes...............................  (17.8)      1.6      1.9 
Income taxes....................................................    1.3       0.1      0.7 
                                                                  -----     -----    ----- 
Income (loss) before extraordinary item.........................  (19.1)      1.5      1.2 
Extraordinary item, net of tax..................................     --        --      0.6 
                                                                  -----     -----    ----- 
Net income (loss)...............................................  (19.1)%     1.5%     0.6%
                                                                  =====     =====    ===== 

Year Ended September 30, 1997 Compared to Year Ended September 30, 1996         

Net Sales                                                             

Net sales for the year ended September 30, 1997 were $64,699,000, an  
increase of $44,898,000 from the prior year. The increase was primarily due to  
the acquisition of Mass Transfer on January 31, 1996, Aero-Mod on April 26,     
1996, Waterlink Technologies, Inc. on September 30, 1996, the Nordic Group on   
March 5, 1997, Bioclear and Lanco on June 27, 1997 and MEVA on September 12,    
1997. In addition, internal growth accounted for $6,830,000 of the increase,    
which represented an internal growth rate of 34.5%, primarily due to expansion  
in overseas markets and to the greater levels of resources provided by the      
Company to the businesses subsequent to the acquisitions. The Company measures  
internal growth by comparing each subsidiary's net sales from the months        
subsequent to their respective acquisition dates during the prior year to those 
same months in the current year.                                                

18

S-4
20th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 20th

Gross Profit                                                          

Gross profit for the year ended September 30, 1997 was $24,309,000, an
increase of $15,741,000 from the prior year. The increase was primarily due to  
the aforementioned acquisitions and internal growth. Gross margin was 37.6% for 
1997 as compared to 43.3% for 1996. Gross margins have been impacted by the     
March 1997 acquisition of the Nordic Group which historically experiences lower 
margins as compared to other Waterlink companies, as well as by a large,        
lower-margin, design/build project in Germany that is near completion at the end
of the fiscal year.                                                             

Selling, General and Administrative Expenses                          

   Selling, general and administrative expenses for the year ended September
30, 1997 were $18,683,000, an increase of $11,654,000 from the prior year. The  
increase was primarily due to the aforementioned acquisitions. Selling, general 
and administrative expenses as a percentage of net sales was 28.9% for 1997 as  
compared to 35.5% for 1996. This decrease primarily reflects the spreading of   
selling, general and administrative expenses over a larger revenue base.        

Special Management Compensation                                       

    Special management compensation of $2,630,000 for the year ended September
30, 1997 resulted primarily from the issuance, concurrent with the IPO, of a ten
year option to purchase 100,000 shares of common stock at a price of $0.10 per  
share to an officer of the Company pursuant to terms of an employment agreement.
Of this amount, approximately $1,138,000 is non-cash and the remainder          
represents cash obligations related principally to the reimbursement of income  
taxes resulting from the stock option issuance.                                 

Amortization                                                          

     Amortization expense for the year ended September 30, 1997 was $751,000, an
increase of $444,000 from the prior year. The increase was primarily due to the 
goodwill resulting from the aforementioned acquisitions.                        

Interest Expense                                                      

   Interest expense for the year ended September 30, 1997 was $1,281,000, an
increase of $404,000 from the prior year. This increase was primarily related to
increased borrowings required to finance the aforementioned acquisitions.       

Extraordinary Item                                                    

During the year ended September 30, 1997, the Company recorded an     
extraordinary charge of $385,000, net of taxes of $257,000, related to the      
write-off of unamortized debt issuance costs associated with certain            
indebtedness retired with the net proceeds from, and discounts associated with a
note purchase agreement terminated in connection with, the IPO.                 

Year Ended September 30, 1996 Compared to Fiscal Period Ended September 30, 1995

Net Sales                                                             

  Net sales for 1996 were $19,801,000, an increase of $17,117,000 from the
prior period. Substantially all of the increase was attributable to the timing  
of the acquisition of Great Lakes in fiscal 1995 and, Mass Transfer and Aero-Mod
in fiscal 1996.                                                                 

Gross Profit                                                          

  Gross profit for 1996 was $8,568,000, an increase of $7,741,000 from the
prior period. The increase was primarily due to the timing of the aforementioned
acquisitions. Gross margin was 43.3% for 1996 as compared to 30.8% in 1995.     
Sanborn Technologies, which comprised the majority of 1995 net sales, has       
historically experienced a lower gross margin that the Company's other operating
subsidiaries owned during 1996.                                                 

19

S-4
21st Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 21st

Selling, General and Administrative Expenses                          

   Selling, general and administrative expenses for 1996 were $7,029,000, an
increase of $5,851,000 from the prior period. The increase was primarily due to 
the timing of the aforementioned acquisitions. Selling, general and             
administrative expenses as a percentage of net sales was 35.5% for 1996 as      
compared to 43.9% for 1995. This decrease primarily reflects the spreading of   
selling, general and administrative expenses over a larger revenue base.        

Amortization                                                          

  Amortization expense for 1996 was $307,000, an increase of $292,000 from
the prior period. The increase was primarily due to the goodwill resulting from 
the aforementioned acquisitions.                                                

Interest Expense                                                      

  Interest expense for 1996 was $877,000, an increase of $733,000 from the
prior period. This increase primarily related to increased borrowings required  
to consummate the aforementioned acquisitions and fund working capital          
expansion.                                                                      

LIQUIDITY AND CAPITAL RESOURCES                                                 

   Since its inception, the Company's primary sources of liquidity have been
(i) borrowings available under its Credit Facility (as defined below) and prior 
credit facilities, (ii) net proceeds from the sale of the Company's common and  
preferred stock, and (iii) issuance of common stock and seller financing        
incurred in connection with the Company's completed acquisitions. Historically, 
the Company's primary uses of capital have been the funding of its acquisition  
program and working capital expansion. The Company does not currently anticipate
making significant capital investments in plant and equipment due to its focus  
on partnering with vendors which manufacture most of the components used in the 
Company's systems and equipment.                                                

For the year ended September 30, 1997, net cash used by operating     
activities was $6,708,000, purchases of equipment totaled $1,072,000 and cash   
outlays for the purchases of businesses, net of cash acquired, totaled          
$42,597,000. These cash outlays, financed primarily by long-term borrowings and 
the IPO, reflect the Company's continued acquisition program and expansion of   
existing operations.                                                            

     In June 1997, the Company recorded a special management compensation charge
of $2,630,000 resulted primarily from the issuance, concurrent with the IPO, of 
a ten year option to purchase 100,000 shares of common stock at a price of $0.10
per share to an officer of the Company pursuant to terms of an employment       
agreement. Of this amount, approximately $1,138,000 is non-cash and the         
remainder represents cash obligations related principally to the reimbursement  
of income taxes resulting from the stock option issuance.                       

   The net proceeds from the IPO were used primarily to pay the cash portion
of the purchase prices of Bioclear, Lanco and MEVA, and for the repayment of    
outstanding indebtedness and for general working capital purposes. Such         
applications enabled the Company to reduce its leverage and will enable it to   
expand its product offerings, which together are anticipated to improve its     
financial flexibility and enhance the implementation of its strategic plan.     

The Company intends to continue pursuing attractive acquisition       
opportunities. The timing, size or success of any acquisition effort and the    
associated potential capital commitments are unpredictable. The Company believes
that through the end of fiscal 1998, (i) future cash flow from operations, (ii) 
borrowings under its Credit Facility and (iii) issuances of Common Stock and    
seller financing incurred in connection with future acquisitions will be        
sufficient to fund its working capital needs, additional acquisitions and       
additional contingent consideration related to acquisitions.                    

Acquisitions                                                                    

   As part of its strategic plan, the Company has implemented an acquisition
program, which has significantly impacted liquidity and capital resources. As of
September 30, 1997, the Company has made ten                                    

20

S-4
22nd Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 22nd

acquisitions for an aggregate consideration of $81,837,000, comprised of        
$59,026,000 of cash, $7,468,000 of Common Stock, and $15,343,000 of seller      
financing and assumed debt, including convertible debt. Of the $15,343,000 of   
seller financing and assumed debt, $6,765,000 was outstanding at September 30,  
1997.                                                                           

The Company may be required to make additional purchase consideration 
payments of up to $6,545,000, contingent upon the achievement of certain        
operating results through fiscal 2000. The payments that may be required in     
fiscal 1998, 1999 and 2000 are $4,100,000, $1,713,000 and $732,000,             
respectively. In connection with two of the Company's acquisitions, the Company 
also may be required to make other additional purchase consideration payments in
the form of cash and Common Stock, in an amount equal to a fixed percentage of  
the excess of certain specified annual earnings targets through fiscal 2000.    
Since such additional purchase consideration payments, if any, are based on a   
fixed percentage of such excess amount, there is no maximum amount for such     
payments. Any such additional purchase consideration payments will be treated as
additional goodwill for accounting purposes. As of September 30, 1997,          
additional purchase consideration payments of $1,760,000 is accrued on the      
Company's balance sheet and is expected to be paid before March 31, 1998.       

Credit Availability                                                             

    On February 19, 1997, the Company entered into a credit facility with Bank
of America National Trust & Savings Association. This credit facility provided  
the Company with a revolving line of credit of up to $8,000,000 and a term loan 
of $11,000,000. The term loan was used to acquire the Nordic Group and to       
refinance certain indebtedness in connection with the acquisition.              

   In connection with this credit facility, two of the overseas subsidiaries
of the Company had separate facilities of $2,200,000 and $3,800,000,            
respectively, for borrowings in local currencies. Each separate facility is     
guaranteed by the Company, with outstanding amounts that bear interest based on 
a designated London interbank offering rate plus a spread of 250 basis points.  

   As additional consideration for this credit facility, the Company granted
the bank, pursuant to a certain warrant agreement dated February 19, 1997, a    
warrant, expiring in 2002, to purchase 225,000 shares of Common Stock at a      
purchase price of $4.50 per share.                                              

On June 27, 1997, concurrent with the closing of the IPO, the Company 
terminated this credit facility and entered into a new $40,000,000 three year,  
secured, domestic, revolving credit facility with Bank of America National Trust
& Savings Association as agent. In connection with the domestic revolving credit
facility, the separate facilities of the two overseas subsidiaries were amended 
to change availability to $4,000,000 and $3,000,000, respectively. The          
$40,000,000 domestic revolving credit facility and the $7,000,000 overseas      
facilities (the "Credit Facility") will be utilized to fund operating activities
of the Company as well as future acquisitions.                                  

     Loans under the Credit Facility will bear interest at a designated variable
base rate plus spreads ranging from 0 to 25 basis points depending on the ratio 
of total consolidated indebtedness to the Company's earnings before interest,   
taxes, depreciation and amortization. At the Company's option, the domestic     
revolving credit facility will bear interest based on a designated London       
interbank offering rate plus spreads ranging from 100 to 200 basis points. At   
September 30, 1997, approximately $32,404,000 was available under the Credit    
Facility.                                                                       

   The Credit Facility restricts or prohibits the Company from many actions,
including paying dividends and incurring or assuming other indebtedness or      
liens. The Company's obligations under the Credit Facility are secured by liens 
on substantially all of the Company's domestic assets, including equipment,     
inventory, accounts receivable and general intangibles and pledge of most of the
stock of the Company's subsidiaries. The Company has guaranteed the payment by  
its two overseas subsidiaries of their obligations under the overseas           
facilities. The two overseas subsidiaries have given a negative pledge of their 
assets in connection with the overseas facilities.                              

 In September 1997 the Company entered into a $3,000,000 credit facility
("Canadian Line of Credit") with Royal Bank of Canada, a participant in the     
Credit Agreement above, to fund Canadian working capital requirements including 
bankers acceptances and letters of credit. Interest rates are negotiated on an  
individual                                                                      

21

S-4
23rd Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 23rd

borrowing basis and are related to the Royal Bank of Canada's prime rate.       
Borrowings are payable upon demand and are guaranteed by Bioclear. At September 
30, 1997, approximately $802,000 was available under the Canadian Line of       
Credit.                                                                         

    In March 1997, the Company entered into a note purchase agreement pursuant
to which the Company could issue, and several purchasers had committed to       
purchase, five year subordinated notes in the principal amount of up to         
$10,000,000. The notes were not drawn on by the Company and upon the            
consummation of the IPO the note purchase agreement was terminated in accordance
with its terms. In consideration of entering into the note purchase agreement,  
parties agreeing to be purchasers of the notes received 125,000 warrants to     
purchase shares of Common Stock at a purchase price of $4.50 per share.         

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS                                  

  In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share, 
and SFAS No. 129, Disclosure of Information about Capital Structure. The Company
is required to adopt both standards during the first quarter of fiscal 1998.    
SFAS No. 128 replaces the presentation of primary earnings per share (EPS) under
Accounting Principle Board Opinion No. 15 and related Interpretations, with the 
presentation of basic EPS (which primarily gives effect only to common shares   
actually outstanding) and requires dual presentation of basic and diluted EPS on
the face of the income statement for all entities with complex capital          
structures. Under SFAS No. 128, the Company's 1997 basic and diluted EPS would  
be $.05 per share and $.04 per share, respectively. SFAS No. 129's primary focus
is to expand the number of entities subject to certain capital structure        
disclosure requirements, particularly nonpublic entities, and accordingly, will 
not have a significant impact on the Company's disclosures.                     

   In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of
an Enterprise and Related Information, which changes the way public companies   
report segment information in annual financial statements. The statement also   
requires public companies to report selected segment information in interim     
financial reports to shareholders. The statement is effective for the Company in
fiscal 1999 and restatement of comparative information for earlier years is     
required in the initial year of adoption. Management does not expect the        
adoption of SFAS No. 131 to have a material impact on the Company's financial   
statement disclosures.                                                          

22

S-4
24th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 24th

BUSINESS

GENERAL                                                                         

   The Company is an international provider of integrated water purification
and wastewater treatment solutions, principally to industrial and municipal     
customers. The Company believes its expertise is in the analysis of a customer's
water purification and wastewater treatment requirements and the customized     
application of the Company's systems, equipment and services to provide cost    
effective solutions. Since its formation in December 1994, the Company has grown
significantly by completing ten acquisitions consisting of seventeen operating  
companies. As a result of its acquisition program and internal development, the 
Company has increased its ability to provide integrated water purification and  
wastewater treatment solutions and has expanded its geographic presence.        

The Company has developed a strategic plan to:                        

-  Provide a full range of systems, equipment and               
services, whether independently or as part of a           
fully engineered water purification or wastewater         
treatment solution                                        

-  Pursue growth through acquisitions that:                     

--  increase its geographic diversity                       

--  add complementary technologies, products and            
services                                            

--  broaden its customer base and industries served         

--  provide strategic, synergistic and corporate            
cultural fit                                        

-  Integrate its operations and marketing strategies            
in order to maximize internal growth and increase         
profitability                                             

-  Strengthen market share for its design/build                 
operations outside the United States                      

     Primarily due to its acquisition program, the Company's pro forma net sales
for fiscal 1997 totaled $111 million. In addition, the Company has begun to     
realize significant improvement in internal growth rates due to the             
opportunities to cross-sell systems, equipment and services and as a result of  
the increased financial, managerial and other resources provided by the Company 
to its acquired businesses. For example, subsidiaries selling wastewater        
treatment systems now have the ability to offer both aeration and mixing systems
and subsidiaries selling water treatment systems can now offer wastewater       
treatment systems for the same projects. Additionally, the Company's            
design/build capabilities allow it to design systems that utilize a broad array 
of the Company's products and provide opportunities for its contract operation  
services. The Company also experiences cross-selling opportunities from a       
geographic and customer standpoint. For example, the Company believes that it   
should benefit from the acquisition of the Nordic Group both from the Nordic    
Group's ability to introduce the Company's existing systems, equipment and      
services into the European market and from the Company's ability to introduce   
the Nordic Group's systems, equipment and services into the Company's existing  
markets. Pro forma net sales of the businesses acquired by the Company to date  
grew 18.9% during fiscal 1997 compared to the prior year.                       

ACQUISITION STRATEGY                                                            

In order to achieve its objective of becoming a leading international 
provider of integrated water purification and wastewater treatment solutions,   
the Company has pursued an aggressive acquisition-based growth program. In      
connection with this program, the Company targets acquisitions that will expand 
the Company's market share, broaden its customer and geographic base, provide   
the Company with new products, technologies and services (including those which 
generate recurring revenues), and enhance the Company's design/build            
capabilities. The Company seeks well-managed, established companies that provide
a strategic fit, synergies with existing businesses and the potential for       
accelerated revenue and earnings growth. Assuming that a potential acquisition  
is complementary to, and synergistic with, the operation of the Company's       
existing subsidiaries, the candidate company is evaluated for cultural fit,     
which the Company considers to be critically                                    

23

S-4
25th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 25th

important. The Company believes that its future success depends substantially   
upon collaboration and teamwork among its operating companies and therefore upon
common operating philosophies.                                                  

The Company believes that it is an attractive partner to potential    
acquirees because the Company can facilitate their continued growth through     
enhanced availability of working capital, surety credit, and borrowing capacity,
as well as through introduction to new customers and markets. The Company also  
offers smaller acquisition candidates the ability to remain competitive by      
becoming part of a larger, more diversified organization. As customers          
frequently seek integrated water treatment solutions, companies with one or a   
few product lines are increasingly excluded from projects because they do not   
have the capability of meeting customers' requirements either from a product or 
financial standpoint. The Company offers acquisition candidates access to a     
developed international distribution system and significant management          
experience. Additionally, the Company's operating subsidiaries have             
cross-selling opportunities which enable them to be considerably more           
competitive, thereby increasing sales potential significantly. Finally, and of  
utmost importance to some candidates, it is the Company's philosophy generally  
to maintain an acquired company's culture and retain its management through     
appropriate incentives. The Company's decentralized operating strategy offers an
environment in which initiative and entrepreneurial spirit can thrive.          

The Company believes that there is a substantial number of attractive 
acquisition candidates in the United States and abroad due to the highly        
fragmented nature of the overall industry. These candidates include water       
purification equipment and wastewater equipment manufacturers, design/build     
companies, point-of-use/point-of-entry equipment providers, contract operations 
companies, specialty chemical solution providers, small unit replacement part   
companies, and regional service companies.                                      

     As consideration for future acquisitions the Company intends to continue to
use various combinations of its Common Stock, cash and notes. In connection with
such acquisitions, the Company intends generally to seek to obtain the agreement
of the persons acquiring Common Stock not to offer, sell, contract to sell or   
otherwise dispose of such Common Stock for a period of up to two years from the 
date of acquisition. The consideration for each future acquisition will vary on 
a case-by-case basis depending on the financial interests of the Company and the
historic operating results and future prospects of the business to be acquired. 
The Company will finance future acquisitions through funds provided by          
operations and by the Credit Facility and from the proceeds of future equity and
debt financing.                                                                 

SYSTEMS, EQUIPMENT AND SERVICES                                                 

     The Company provides integrated water purification and wastewater treatment
solutions, principally to its industrial customers for treatment of process     
water and wastewater and to its municipal customers for treatment of drinking   
water and wastewater. To this end, the Company provides a broad range of systems
and equipment as well as design/build and operating capabilities.               

    Systems and Equipment. The Company designs and engineers solutions for the
water purification and wastewater treatment industry. The Company believes its  
expertise is in the analysis of a customer's water purification and wastewater  
treatment requirements and the application of the Company's systems, equipment  
and services to provide cost effective solutions. The Company's equipment can be
provided to a customer either as a separate component or as part of a           
customized, fully engineered water purification or wastewater treatment system  
or subsystem. The Company generally does not make significant capital           
investments in plant and equipment, focusing instead on partnering with vendors 
which manufacture the components used in the Company's systems and equipment.   
The Company completes the final assembly of its systems and tests its systems   
prior to final delivery to the customer in order to maintain quality control.   
The Company manufactures equipment when its manufacturing process is determined 
to add a significant value to the final product.                                

Design/Build Services. The Company's design/build services include    
prescribing water purification and wastewater treatment solutions, designing and
engineering necessary facilities, arranging for construction when required and  
installing necessary equipment. The Company's strategy is to expand its presence
in the design/build segment of the water purification and wastewater treatment  
industry, particularly in the small                                             

24

S-4
26th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 26th

and medium sized municipal markets outside the United States. During the past   
five years, the Company has completed more than 50 design/build projects.       

     The Company anticipates that it will expand its activities in this area due
to the trend toward outsourcing in the industry. The Company uses many of its   
own products in its design/build operations as well as products manufactured by 
others where appropriate.                                                       

     Contract Operations. The Company operates water purification and wastewater
treatment facilities for municipal customers under contract for varying time    
periods. The Company currently operates three small municipal wastewater        
treatment facilities in the United States and one in Chile. The Company's       
strategy is to leverage its design/build services to offer its contract         
operations capability as part of a total solution. The Company is becoming more 
involved in the operation and remote monitoring of water purification and       
wastewater treatment facilities for both its industrial and municipal customers.

  Replacement Parts, Repairs and Consumables. The Company manufactures and
sells replacement parts and consumables, such as membranes, ion exchange resin  
and filter cartridges, manufactured both by the Company and other suppliers.    
This equipment is required to support water treatment systems. In addition, the 
Company performs maintenance and repair services on equipment manufactured by   
both the Company and others.                                                    

     The following table sets forth the Company's significant systems, equipment
and services, identifying both the customer base and the type of treatment      
serviced. The Company is committed to expanding its range of systems, equipment 
and services and increasing its sales throughout its available markets.         
Management believes that companies with broad product and service offerings and 
wide distribution capabilities will be able to capitalize on the major trends   
that are affecting the water purification and wastewater treatment industry.    

                                                        [Enlarge/Download Table]

                                                               INDUSTRIAL            MUNICIPAL     
                                                                 MARKET               MARKET       
                                                           -------------------  -------------------
                                                           PROCESS     WASTE    DRINKING    WASTE  
             SYSTEMS, EQUIPMENT AND SERVICES                WATER      WATER     WATER      WATER  
---------------------------------------------------------  --------   --------  --------   --------
                                                                                                   
Aeration systems.........................................                 X                    X   
  Jet aeration                                                                                     
  Submerged mechanical mixers                                                                      
Clarifiers...............................................      X          X         X          X   
  ClarAtor(R)/Split ClarAtor(TM)                                                                   
  Inclined parallel plate                                                                          
Contract operations......................................                 X         X          X   
Cutting fluid recovery systems...........................      X                                   
Design/build.............................................      X          X         X          X   
Dewatering systems -- biosolids..........................      X          X         X          X   
  Decanting centrifuges                                                                            
  DRAIMAD(TM) dewatering-bag systems                                                               
  MONOBELT(TM) filter presses                                                                      
  Plate and frame filter presses                                                                   
Filters..................................................      X          X         X          X   
  Cartridge-replacement filters                                                                    
  Continuous recirculating sand                                                                    
  Rotary vacuum pre-coat                                                                           
  Tertiary polishing                                                                               
Ion exchange media.......................................      X                    X              
  Media recharge                                                                                   
  Systems                                                                                          
Membrane separation systems..............................      X          X         X          X   
  Desalination                                                                                     
  Reverse osmosis                                                                                  
Nutrient removal systems.................................                 X                    X   
  Deni process                                                                                     
  Oxy process                                                                                      
  SEQUOX(TM) process                                                                               
Oil/water separators.....................................      X                                   
Sequential batch reactors (SBRs).........................                 X                    X   
Screens..................................................      X          X         X          X   
Sludge scrapers and skimmers.............................      X          X         X          X   

25

S-4
27th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 27th

OPERATING STRATEGY                                                              

The Company has adopted a decentralized approach to the operational   
management of its subsidiaries. While functions such as financial reporting,    
treasury, communications and risk management are centralized in the Company's   
corporate headquarters, local management is primarily responsible for the       
day-to-day operation of its business. The Company also provides its subsidiaries
with financial resources, management expertise, customer and market access which
would be unavailable to each subsidiary individually. With respect to           
acquisitions already completed, the Company has begun to realize significant    
improvement in internal growth rates due to the availability of capital and     
bonding capacity, and the opportunities to "cross-sell" products. As customers  
increasingly seek integrated solutions, the ability of each of the Company's    
subsidiaries to offer complementary equipment and services of other subsidiaries
increases the competitiveness of each company. For example, subsidiaries selling
wastewater treatment systems now have the ability to offer both aeration and    
mixing systems and subsidiaries selling water treatment systems can now offer   
wastewater treatment systems for the same projects. Additionally, the Company's 
design/build capabilities allow it to design systems that utilize a broad array 
of the Company's products and provide opportunities for its contract operation  
services. The Company also experiences cross-selling opportunities from a       
geographic and customer standpoint. For example, the Company believes that it   
should benefit from the acquisition of the Nordic Group both from the Nordic    
Group's ability to introduce the Company's existing systems, equipment and      
services into the European market and from the Company's ability to introduce   
the Nordic Group's systems, equipment and services into the Company's existing  
markets.                                                                        

   A representative from each subsidiary, along with the Company's executive
officers and other key employees, form the Company's operating committee, which 
meets on a frequent basis to facilitate the interchange of information and      
enhance cross-selling opportunities. As the Company's capabilities have grown,  
acquired subsidiaries within the Company have enjoyed growth opportunities far  
beyond those that exist for stand-alone companies concentrated in only one area 
of the industry.                                                                

SALES AND DISTRIBUTION                                                          

 The Company sells its systems, equipment and services primarily through
approximately 60 direct sales personnel and approximately 250 independent sales 
organizations. To a lesser extent, the Company sells through water treatment    
distributors which take title to equipment for resale to the end-user. The      
Company seeks to have a single sales organization within a particular market in 
order to foster a close relationship with its sales representatives and present 
a cohesive image to the marketplace. The independent sales representatives      
typically will identify sales opportunities, and then work together as a team   
with the Company's direct sales force, which has greater technical and product  
knowledge, to complete the sale and service the customer. The Company's direct  
sales force generally plays a more primary role in sales of the Company's       
design/build solutions. The Company also sells through licensees, principally in
the Asia-Pacific region as well as in Europe.                                   

CUSTOMERS                                                                       

    The Company markets its products and services to two primary categories of
customers; industrial users which require water for their manufacturing         
processes and treat their wastewater, and municipal customers which produce     
drinking water and treat wastewater. The Company has a diverse customer base,   
with no customer representing 10% or more of the Company's fiscal 1997 pro forma
net sales.                                                                      

     The Company's industrial customers include many "Fortune 500" companies and
their counterparts outside of the United States. Industries served include the  
pharmaceutical, electronic and microelectronic, pulp and paper, chemical,       
petrochemical, food, beverage, automotive and other heavy manufacturing         
industries. In fiscal 1997 approximately 55% of the Company's pro forma net     
sales were derived from industrial sales.                                       

     The municipal market is highly competitive. Municipal markets in the United
States, Canada and Europe are more regulatory driven than municipal markets in  
other regions. The Company utilizes specialized distribution channels to service
the municipal market and is skilled at participating in the municipal bidding   

26

S-4
28th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 28th

process. The Company focuses its efforts on smaller municipal projects which the
Company believes its product lines are best suited to serve. The Company        
believes that the municipal business is important to its overall success by     
virtue of its large market size. In fiscal 1997 approximately 45% of the        
Company's pro forma net sales were derived from municipal sales.                

BACKLOG                                                                         

   The Company had a backlog, consisting of written purchase orders received
by the Company of $29.5 million as of November 30, 1997 as compared to $11.0    
million as of November 30, 1996. The Company expects that virtually all of the  
backlog at the beginning of a fiscal year will be filled during that year.      
Backlog, and therefore sales, may vary from quarter to quarter as a result of   
large projects being booked during any quarter and varying project delivery     
schedules. In addition, the orders have varying delivery schedules and the      
Company's backlog as of any particular date may not be representative of actual 
net sales for any succeeding period.                                            

PROCESS AND PRODUCT WARRANTY AND PERFORMANCE GUARANTEES                         

   Consistent with market practices, the Company generally offers a warranty
on finished products for one year or in some cases 18 months from sale and 12   
months from installation. The costs associated with warranty expense have not   
been material. In connection with providing certain products and design/build   
services to its customers, the Company is sometimes required to guarantee that  
the products or services will attain specified levels of quality or performance,
based on a defined set of parameters. Should a product fail to perform according
to a warranty, or should a project fail to attain the guaranteed level of       
quality, and should the Company be unable to effect a satisfactory replacement  
or cure within the prescribed period of time, the Company could incur financial 
penalties in the form of liquidated damages or could be required to remove and  
replace the equipment or repeat the service in order to meet the specifications.
To date, the Company has not incurred any material payment or other obligations 
pursuant to such performance guarantees.                                        

RAW MATERIAL AND SUPPLIES                                                       

The raw materials and components used in the Company's products are   
commonly available commodities such as stainless steel, carbon steel, plastic,  
tubing, wiring, electrical components, pumps, valves, compressors, pressure     
vessels, oleophilic media, reverse osmosis membranes and sand. The Company's    
systems are fabricated from these materials and assembled together with products
bought from other companies to form an integrated system. The Company is not    
dependent upon any single supplier, and if any supplier were to become unable to
perform, the Company believes a substitute source could readily be found. The   
Company has generally been able to pass on price increases for raw materials and
components to its customers. The Company is not a party to any material         
long-term fixed price supply contracts.                                         

GOVERNMENT REGULATION                                                           

Federal, state, local and foreign environmental laws and regulations  
necessitate substantial expenditures and compliance with water quality standards
by generators of wastewater and wastewater by-products and impose liabilities on
such entities for noncompliance. Environmental laws and regulations and their   
enforcement are, and will continue to be, a significant factor affecting the    
marketability of the solutions, systems and equipment provided by the Company.  

Many of the countries in which the Company operates or in which its   
customers are located, including the United States, Canada and countries in     
Europe, Latin America, and the Asia-Pacific region, have adopted requirements   
that govern water quality, wastewater treatment, and wastewater by-products and 
the solutions, systems and equipment provided by the Company. These requirements
and their enforcement vary by country, but in general establish water quality   
use and disposal standards, set wastewater effluent discharge limits, and       
prescribe standards for the protection of human health and safety and the       
environment. In each such country, the Company monitors the status and impact of
local environmental regulation and enforcement as it relates to the             
marketability of the solutions, systems and equipment provided by the Company.  

27

S-4
29th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 29th

     Any changes in applicable environmental standards and requirements or their
enforcement may affect the operations of the Company by imposing additional     
regulatory compliance costs on the Company's customers, requiring the           
modification of and/or affecting the market for the Company's solutions, systems
and equipment. To the extent that demand for the Company's solutions, systems   
and equipment is created by the need to comply with such enhanced standards and 
requirements or their enforcement, any modification of the standards and        
requirements or their enforcement may reduce demand, thereby adversely affecting
the Company's business prospects. Conversely, changes in applicable             
environmental laws imposing additional regulatory compliance standards and      
requirements or causing stricter enforcement of these laws or regulations could 
increase the demand for the Company's systems, equipment and services.          

COMPETITION                                                                     

    Despite an accelerating trend toward consolidation, the water purification
and wastewater treatment industry remains fragmented and highly competitive due 
to the large number of competitors within each product area. The Company has a  
significant number of competitors, including a number of integrated suppliers   
and equipment manufacturers, some of which are larger and have greater resources
than the Company. The Company believes that success in this market is based on  
the ability to offer appropriate technology, influence specifications, have     
strong distribution, maintain respect within the consulting and engineering     
community, finance and bond projects awarded, provide timely delivery, and      
maintain a reputation for service and parts support after the sale.             
Additionally, in the municipal arena, the ability to meet bid specifications and
pricing are often primary considerations. The Company believes that its         
technologies and cost structures as well as its strong local presence in        
international markets enable it to compete effectively against these companies. 
The Company's primary competitors include United States Filter Corporation,     
Parkson Corporation, Alpha Laval and Humbolt KHD.                               

PATENTS, TRADEMARKS AND LICENSES                                                

   The Company currently owns a number of United States and foreign patents,
and registrations for United States service marks and trademarks. While each is 
of value, the Company generally does not consider any of them to be material to 
its business, although, as the Company has grown and its presence has been      
extended, its Waterlink(SM) mark has become more widely known and the goodwill  
associated with it has increased.                                               

EMPLOYEES                                                                       

  At December 31, 1997, the Company and its subsidiaries had approximately
400 employees at its various locations. None of the Company's employees in the  
United States are covered under collective bargaining agreements. The Company's 
hourly employees in Europe are covered by collective bargaining agreements.     
Management believes that the Company's relationship with its employees is good. 

PROPERTIES                                                                      

     The Company leases its corporate offices, consisting of approximately 6,000
square feet located in Canton, Ohio pursuant to a lease agreement dated July 9, 
1996 and amended October 1, 1997. In addition, its subsidiaries lease facilities
for office space and manufacturing in the United States in Clearwater, Sarasota,
and West Palm Beach, Florida; Addison and Lake Bluff, Illinois; Manhattan,      
Kansas; Medway, Massachusetts; and Grand Rapids, Michigan; and outside the      
United States in Holstebro, Denmark; Ludlow, England; Vanda, Finland;           
Neuss-Grimlinghausen, Germany; and Frolunda, Kungsbacka and Nynashamn, Sweden;  
and own facilities for office space and manufacturing in Fall River,            
Massachusetts; Winnipeg, Manitoba, Canada; and Fjaraas, Sweden. The expiration  
dates for these leases range from March 31, 1998 to March 31, 2011.             

   The Company believes that each of its facilities is in good condition and
will continue to remain suitable for its current purpose. The Company may add   
improvements to the properties listed above. The Company anticipates using its  
properties for purposes consistent with their present use. In the event any of  
the facilities becomes unavailable upon termination of the existing lease, the  
Company believes it would be able to find a suitable alternative facility       
without resulting in any significant adverse impact to the Company or its       

28

S-4
30th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 30th

operations. In the opinion of management of the Company, the properties         
described above are adequately covered by insurance.                            

LEGAL PROCEEDINGS                                                               

 The Company is, from time to time, a party to litigation arising in the
normal course of its business, most of which involves claims for personal injury
or property damage incurred in connection with its operations. The Company is   
not a party to any material litigation. Management believes none of the         
litigation will have a material adverse effect on the Company's financial       
position or results of operations.                                              

29

S-4
31st Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 31st

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS                                                

     The Company's current directors and executive officers are as follows (ages
are as of December 31, 1997):                                                   

                                                        [Enlarge/Download Table]

                     NAME                        AGE                POSITION               
-----------------------------------------------  ---  -------------------------------------
                                                                                           
Theodore F. Savastano..........................  60   Director, Chairman of the Board      
Chet S. Ross...................................  58   Director, President and Chief        
                                                      Executive Officer                    
Robert P. Pinkas...............................  44   Director                             
Michael J. Vantusko............................  40   Chief Financial Officer              
L. Dean Hertert, Jr............................  51   Vice President                       
Dr. Hans F. Larsson............................  54   Vice President                       
Dr. Paul M. Sutton.............................  49   Director                             
Rollin S. Reiter...............................  69   Director                             
John R. Miller.................................  60   Director                             

   Theodore F. Savastano is the founder of the Company and has been Chairman
of the Board since its inception in December 1994. He served as Chief Executive 
Officer of Hunter Environmental Services, Inc., a multi-disciplined             
environmental company from August 1985 to January 1988 and as Chief Executive   
Officer and founder of Summit Environmental Group, Inc., a full-service         
environmental consulting engineering company from August 1988 to May 1994.      

Chet S. Ross joined the Company in June 1995 as President and Chief   
Executive Officer and was elected to the Board on August 1, 1995. Mr. Ross has  
over 30 years of experience in the water industry. Mr. Ross and others acquired 
the operations of Wallace and Tiernan Group, Inc., a water and wastewater       
disinfection and chemical treatment company in May 1989, and he served as       
Chairman, President and Chief Executive Officer of Wallace and Tiernan until it 
was sold in 1991 to North West Water Group, PLC, a privatized water utility     
company in the United Kingdom. He then was President and Chief Executive Officer
of North West Water's North American operations from 1991 to 1994 and was a     
private consultant to North West Water from 1994 to 1995.                       

Robert P. Pinkas, a Director since the inception of the Company, is   
Chairman of the Board, Chief Executive Officer, Treasurer and a director of     
Brantley Capital Corporation, a business development corporation, and Chairman  
of the Board, Chief Executive Officer, Treasurer and a manager of Brantley      
Capital Management, L.L.C., an investment adviser. Mr. Pinkas also serves as    
managing general partner of Brantley Venture Partners, a venture capital firm   
that makes investments through its various partnership funds. Mr. Pinkas founded
and has been affiliated with the Brantley entities for more than the past five  
years. Additionally, Mr. Pinkas is a director of Quad Systems Corporation,      
Gliatech, Inc., Pediatric Services of America, Inc. and Medirisk, Inc.          

   Michael J. Vantusko, a certified public accountant, joined the Company on
January 1, 1997 as Chief Financial Officer. From October 1995 to December 1996, 
he served as Chief Financial Officer of Waxman Industries, Inc., a packager and 
distributor of plumbing, electrical and hardware products. From February 1994 to
September 1995, Mr. Vantusko served as President, Chief Operating Officer, and  
Chief Financial Officer of Overdrive Systems, Inc., an emerging software        
developer of electronic books. From 1979 to 1994, he was employed by The        
Fairchild Corporation (formerly Banner Industries, Inc.) where he held several  
positions, including Chief Financial Officer of Fairchild's largest wholly-owned
operating division from 1990 to 1994 and Vice President of Fairchild from 1986  
to 1990.                                                                        

    L. Dean Hertert, Jr. joined the Company as a Vice President in August 1996
and currently directs most of the Company's operations in the United States,    
Canada and Latin America. Mr. Hertert joined the Company from Capital Controls, 
Inc. where he was Vice President and General Manager from December 1988 to July 
1996. Capital Controls Co., Inc. is a manufacturer of equipment and instruments 
for municipal water,                                                            

30

S-4
32nd Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 32nd

industrial process water and wastewater treatment. Mr. Hertert has 20 years of  
business and multinational experience in the areas of marketing, sales and      
general management.                                                             

    Dr. Hans F. Larsson joined the Company as a Vice President upon completion
of the acquisition in March 1997 of the Nordic Group. Dr. Larsson directs the   
Company's operations in Europe and serves as the Managing Director of Nordic    
Water Products AB, a wholly-owned subsidiary of the Company. Dr. Larsson has    
served as the Managing Director of the Nordic Group since 1987.                 

     Dr. Paul M. Sutton was elected to the Board on January 2, 1997. Since 1987,
Dr. Sutton has served as President of P.M. Sutton & Associates, Inc., an        
environmental process engineering company providing services to private industry
and government organizations.                                                   

     Rollin S. Reiter was elected to the Board on March 13, 1997. Mr. Reiter was
Vice President of Sales and Marketing, Dairy, for Dean Foods Co., a grocery and 
food service company in Franklin Park, Illinois from 1990 through 1993, when he 
retired. Prior to that, Mr. Reiter was President of the Reiter Dairy Company in 
Akron, Ohio from 1968 through 1990.                                             

    John R. Miller was elected to the Board on March 13, 1997. Since 1988, Mr.
Miller has been President and Chief Executive Officer of TBN Holdings Inc., a   
resource recovery and recycling company. Mr. Miller has previously served as a  
director and Chairman of the Board of the Federal Reserve Bank of Cleveland and 
as President, Chief Operating Officer and a director of The Standard Oil        
Company. Mr. Miller serves on the Board of Directors of Eaton Corporation, a    
global manufacturer of highly engineered products which serve industrial,       
vehicle, construction, commercial and aerospace markets.                        

DIRECTORS                                                                       

   Pursuant to the Company Certificate and the Company By-laws, the Board of
the Company is divided into three classes with each director serving a          
three-year term (after the initial term). The directors of Class I (Messrs.     
Savastano and Miller) hold office until the first scheduled annual meeting of   
stockholders following the IPO, the directors of Class II (Messrs. Ross and     
Reiter) hold office until the second scheduled annual meeting of stockholders   
following the IPO and the directors of Class III (Messrs. Pinkas and Sutton)    
hold office until the third scheduled annual meeting of stockholders following  
the IPO. Stockholders will elect the directors of each Class for three-year     
terms at the appropriate succeeding annual meetings of stockholders.            

    The Board has established an Audit Committee consisting of Messrs. Sutton,
Reiter and Miller, a Compensation Committee consisting of Messrs. Pinkas,       
Sutton, Reiter and Miller and a Nominating Committee consisting of Messrs.      
Pinkas, Sutton and Miller.                                                      

DIRECTOR REMUNERATION                                                           

Directors who are employees of the Company receive no compensation, as
such, for service as members of the Board or any committees of the Board.       

   Directors who are not employees of the Company receive an annual retainer
of $10,000, payable in equal quarterly installments. In addition, non-employee  
directors receive compensation of $750 for each meeting of the Board (in excess 
of the four regularly scheduled meetings) or any committee of the Board attended
by them (other than with respect to any meetings of any committee on a day on   
which the Board also meets), and compensation of $250 for each additional       
telephonic meeting of the Board or any committee of the Board. All directors    
will be reimbursed for out of pocket expenses incurred in attending meetings of 
the Board or committees and for other expenses incurred in their capacity as    
directors.                                                                      

 In addition, directors who are not employees of the Company receive for
each year of service on the Board, options under the Company's 1997 Non-Employee
Director Stock Option Plan (the "Director Plan"). The per share exercise price  
of options granted under the Director Plan is the fair market value of the      
Common Stock on the date of grant. The exercise price of options granted under  
the Director Plan is payable in cash or in shares of Common Stock valued at fair
market value at the time of exercise, or a combination of cash and shares;      
however, the Company may establish "cashless exercise" procedures, subject to   
applicable                                                                      

31

S-4
33rd Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 33rd

laws, rules and regulations, pursuant to which a director may exercise an option
and arrange for a simultaneous sale of the underlying Common Stock, with the    
exercise price being paid from the proceeds of such sale. Options granted under 
the Director Plan will expire ten years after the date of grant, subject to     
earlier termination, and may be exercised as follows: 25% after one year from   
the date of grant, 50% after two years from the date of grant, 75% after three  
years from the date of grant and 100% after four years from the date of grant.  

   Each non-employee director was granted an option to purchase 3,000 shares
of Common Stock concurrently with the IPO. In addition, on May 23 of each year, 
the anniversary of the date the Director Plan became effective, each of the     
Company's then non-employee directors who have served as directors for at least 
six months shall automatically be granted an option to purchase 5,000 shares of 
Common Stock.                                                                   

The Director Plan is administered by the Compensation Committee. The  
principal terms of the option grants are set forth in the Director Plan.        
Therefore, the Compensation Committee has no discretion to select which         
directors receive options, the number of shares of Common Stock subject to      
options or the exercise price of options.                                       

EXECUTIVE COMPENSATION                                                          

The following table sets forth, for each of the years indicated, the  
compensation paid by the Company to the Company's Chief Executive Officer and   
all other executive officers of the Company as of September 30, 1997 who        
received annual compensation from or on behalf of the Company in excess of      
$100,000 (together, the "Named Executive Officers").                            

SUMMARY COMPENSATION TABLE

                                                        [Enlarge/Download Table]

                                                                               LONG-TERM                             
                                              ANNUAL COMPENSATION         COMPENSATION AWARDS                        
                                            -----------------------  ------------------------------                  
                                                       OTHER ANNUAL  RESTRICTED STOCK   SECURITIES                   
  NAME AND PRINCIPAL                                   COMPENSATION       AWARDS        UNDERLYING      ALL OTHER    
       POSITION        YEAR   SALARY ($)    BONUS ($)    ($) (1)           ($)         OPTIONS (#)   COMPENSATION ($)
---------------------- -----  ----------    ---------  ------------  ----------------  ------------  ----------------
                                                                                                                     
Theodore F.                                                                                                          
  Savastano...........  1997   $234,013     $125,000    $1,055,277(2)       --            100,000       $1,658,750(3)
  Chairman of the       1996   $225,800        --       $    4,977          --            100,000         --         
    Board of Directors  1995   $126,989        --          --               --             --             --         
Chet S. Ross..........  1997   $234,013     $125,000    $      768          --            300,000       $      620(4)
  Chief Executive       1996   $225,800        --       $      262          --            220,000         --         
    Officer and                                                                                                      
    President           1995   $ 95,267(5)     --       $  180,000          --             --             --         
Michael J. Vantusko...  1997   $123,500(6)  $ 50,000       --               --            225,000       $      390(4)
  Chief Financial       1996     --            --          --               --             --             --         
    Officer             1995     --            --          --               --             --             --         
L. Dean Hertert,                                                                                                     
  Jr..................  1997   $137,675     $ 25,000    $      288          --             90,000       $      365(4)
  Vice President        1996   $ 21,833(7)     --          --               --             25,000         --         
                        1995     --            --          --               --             --             --         
Dr. Hans F. Larsson...  1997   $ 64,489(8)     --          --               --             20,000         --         
  Vice President        1996     --            --          --               --             --             --         
                        1995     --            --          --               --             --             --         

---------------                                                                 

(1) Certain incidental personal benefits to executive officers of the Company   
may result from expenses incurred by the Company in the interest of   
 attracting and retaining qualified personnel. These incidental personal
     benefits made available to the Named Executive Officers during 1997 are not
described herein because the incremental cost to the Company of such  
benefits is below the SEC disclosure threshold.                       

(2) Includes $1,050,000 of gross-up payment for tax liabilities incurred by Mr. 
 Savastano upon exercise of the non-qualified stock options described in
 footnote 3, below, which was paid to Mr. Savastano pursuant to his 1994
employment agreement with the Company.                                

32

S-4
34th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 34th

(3) Compensation related to the exercise of 100,000 non-qualified stock options 
received by Mr. Savastano pursuant to the terms of his 1994 employment
     agreement with the Company, which were exercisable upon consummation of the
IPO. Compensatory amount was determined by multiplying the number of  
     options exercised by the difference between the market value at the date of
exercise ($16.6875) and the exercise price of $.10 per share.         

(4) Represents the Company's "match" payment relating to the Company's 401(k)   
Plan.                                                                 

(5) Represents salary from June 1, 1995 (date of employment with the Company).  

(6) Represents salary from January 1, 1997 (date of employment with the         
Company).                                                             

(7) Represents salary from August 1, 1996 (date of employment with the Company).

(8) Represents salary from March 5, 1997 (date of acquisition of the Nordic     
Group).                                                               

STOCK OPTION GRANTS                                                             

  The following table sets forth information regarding options to purchase
Common Stock granted to the Named Executive Officers during fiscal 1997.        

OPTION(1)/SAR(2) GRANTS IN LAST FISCAL YEAR 

                                                        [Enlarge/Download Table]

                                                 INDIVIDUAL GRANTS                                          
                                ---------------------------------------------------                         
                                              PERCENT OF                              POTENTIAL REALIZABLE  
                                NUMBER OF       TOTAL                                       VALUE AT        
                                SECURITIES     OPTIONS       EXERCISE                    ASSUMED ANNUAL     
                                UNDERLYING    GRANTED TO        OR                       RATES OF STOCKS    
                                 OPTIONS     EMPLOYEES IN   BASE PRICE   EXPIRATION    PRICE APPRECIATION   
             NAME               GRANTED(#)   FISCAL YEAR      ($/SH)        DATE       FOR OPTION TERM (3)  
------------------------------  ----------   ------------   ----------   ----------  -----------------------
                                                                                       5%($)        10%($)  
                                                                                     ----------   ----------
                                                                                                            
Theodore F. Savastano.........    100,000         9.8%        $ 0.10        6/24/07  $1,781,784   $2,843,117
Chet S. Ross..................    300,000        29.3%        $11.00        5/23/07  $2,075,352   $5,259,350
Michael J. Vantusko...........     75,000         7.3%        $ 4.25         1/2/07  $  200,460   $  508,005
                                   50,000         4.9%        $ 4.25        6/24/97  $  133,640   $  338,670
                                  100,000         9.8%        $11.00        5/23/07  $  691,784   $1,753,117
L. Dean Hertert, Jr...........     15,000         1.5%        $ 4.25       12/16/06  $   40,092   $  101,601
                                   25,000         2.4%        $ 4.25        6/24/97  $   66,820   $  169,335
                                   50,000         4.9%        $11.00        5/23/07  $  345,892   $  876,558
Dr. Hans F. Larsson...........     20,000         2.0%        $11.00        6/24/07  $  138,357   $  350,623

---------------                                                                 

(1) The per share exercise price of options granted under the Company's stock   
  option plans is the fair market value of the Common Stock on the date of
grant, with the exception of the 100,000 non-qualified stock options  
granted to Mr. Savastano described in footnote 3 of the Summary       
Compensation Table, above, which had an exercise price of $.10.       

(2) There have been no stock appreciation rights ("SARs") granted by the Company
to date.                                                              

(3) The potential realizable values represent future opportunity and have not   
    been reduced to present value in 1997 dollars. The dollar amounts included
     in these columns are the result of calculations at assumed rates set by the
    Commission for illustration purposes. These rates are not intended to be a
  forecast of the Common Stock price and are not necessarily indicative of
the values that may be realized by the Named Executive Officers. The  
 potential realizable values are based on arbitrarily assumed annualized
     rates of stock price appreciation of 5% and 10% over the full ten-year term
of the options.                                                       

33

S-4
35th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 35th

STOCK OPTION AND SAR EXERCISES                                                  

    The following table sets forth certain information concerning exercises of
stock options during 1997 by each of the Named Executive Officers and their     
stock options outstanding as of September 30, 1997.                             

AGGREGATED OPTION/SAR EXERCISE IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES(1)

                                                        [Enlarge/Download Table]

                                                                 NUMBER OF                       
                                                                SECURITIES          VALUE OF     
                                                                UNDERLYING         UNEXERCISED   
                                                                UNEXERCISED       IN-THE-MONEY   
                                                             OPTIONS AT FISCAL  OPTIONS AT FISCAL
                                                               YEAR-END (#)      YEAR-END ($)(2) 
                                    SHARES                   -----------------  -----------------
                                 ACQUIRED ON      VALUE      EXERCISABLE (E)/   EXERCISABLE (E)/ 
             NAME                EXERCISE (#)  REALIZED ($)  UNEXERCISABLE (U)  UNEXERCISABLE (U)
-------------------------------  ------------  ------------  -----------------  -----------------
                                                                                                 
Theodore F. Savastano..........     100,000     $ 1,658,750       100,000(E)       $ 1,435,000(E)
                                                                  --     (U)          --      (U)
Chet S. Ross...................     135,000     $ 1,758,375       220,000(E)       $ 3,245,000(E)
                                                                  300,000(U)       $ 2,325,000(U)
Michael J. Vantusko............      50,000         --             75,000(E)       $ 1,087,500(E)
                                                                  100,000(U)       $   775,000(U)
L. Dean Hertert, Jr............      25,000         --             40,000(E)       $   586,250(E)
                                                                   50,000(U)       $   387,500(U)
Dr. Hans F. Larsson............      --             --            --     (E)          --      (E)
                                                                   20,000(U)       $   155,000(U)

(1) There have been no SARs granted by the Company to date.                     

(2) Values are calculated for options "in-the-money" by subtracting the exercise
price paid per share of the options from the per share New York Stock 
Exchange consolidated closing price of $18.75 of the Common Stock on  
September 30, 1997.                                                   

EMPLOYMENT AGREEMENTS                                                           

    The terms of the employment arrangements between the Company and the Named
Executive Officers are described below.                                         

Mr. Savastano's employment agreement with the Company, which became   
effective as of May 23, 1997, provides for him to serve as Chairman of the Board
of the Company for an initial term of three years, subject to automatic one year
extensions upon each anniversary of the date of the employment agreement until  
mandatory retirement at age 65. The employment agreement provides for an initial
annual base salary of $240,000. Mr. Savastano will be entitled to participate in
an annual incentive bonus plan (the "Bonus Plan") that the Company has agreed,  
pursuant to Mr. Savastano's employment agreement, to establish. The Bonus Plan  
will entitle Mr. Savastano to earn, in each year during the term of the         
employment agreement, commencing with fiscal 1998, an amount ranging from 0% to 
150% of his base salary, subject to achievement of certain performance goals to 
be established by the Board. In the event that Mr. Savastano's employment is    
terminated without cause (as defined in the employment agreement) or in the     
event he terminates his employment for good reason (as defined in the employment
agreement), he will be entitled to receive (in a lump sum if such termination   
occurs within one year after a change of control (as defined in the employment  
agreement) of the Company) an amount equal to the present value of the product  
of (i) the sum of (x) the base salary in effect on the date of termination and  
(y) the annual bonus compensation paid to Mr. Savastano with respect to the     
fiscal year in which Mr. Savastano's employment is terminated provided that such
bonus is calculable as of such date, and if not so calculable, then the bonus,  
if any, paid to Mr. Savastano with respect to the fiscal year immediately       
preceding the year in which his employment is terminated (which for fiscal 1997 
was deemed to be $240,000) and (ii) two; provided, however, that if any portion 
of such compensation would constitute an "excess parachute payment" under       
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), the 
Company will pay to Mr. Savastano an additional amount to offset any taxes      

34

S-4
36th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 36th

payable with respect to the excess parachute payment and the additional payment.
The employment agreement also contains provisions which restrict Mr. Savastano  
from competing with the Company during the term of the agreement and for 24     
months following termination thereof. In addition, on June 24, 1997 Mr.         
Savastano received options exercisable to purchase 100,000 shares of Common     
Stock at an exercise price of $.10 per share pursuant to his 1994 employment    
agreement. Such options became exercisable upon the consummation of the IPO on  
June 27, 1997, and were exercised on September 2, 1997. The Company is required 
to hold Mr. Savastano harmless from, and shall pay to Mr. Savastano, any taxes  
payable by Mr. Savastano as a result of the grant of the options. The amount of 
such taxes is approximately $1,117,000, of which $1,050,000 was paid during     
fiscal 1997.                                                                    

     Mr. Ross's employment agreement with the Company, which became effective as
of May 23, 1997, provides for Mr. Ross to serve as President and Chief Executive
Officer of the Company for an initial term of three years, subject to automatic 
one year extensions upon each anniversary of the date of the employment         
agreement until mandatory retirement at age 65. The employment agreement        
provides for an initial annual base salary of $240,000. Pursuant to his         
employment agreement, Mr. Ross will be entitled to participate in the Bonus     
Plan, which will entitle him to earn, in each year during the term of his       
employment agreement, commencing with fiscal 1998, an amount ranging from 0% to 
150% of his base salary, subject to achievement of certain performance goals to 
be established by the Board. In the event that Mr. Ross' employment is          
terminated without cause (as defined in the employment agreement) or in the     
event he terminates his employment for good reason (as defined in the employment
agreement), Mr. Ross will be entitled to receive (in a lump sum if such         
termination occurs within one year after a change of control (as defined in the 
employment agreement) of the Company) an amount equal to the present value of   
the product of (i) the sum of (x) the base salary in effect on the date of      
termination and (y) the annual bonus compensation paid to Mr. Ross with respect 
to the fiscal year in which his employment is terminated, provided that such    
bonus is calculable as of such date, and if not so calculable, then the bonus,  
if any, paid to him with respect to the fiscal year immediately preceding the   
year in which his employment is terminated (which for fiscal 1997 was deemed to 
be $240,000) and (ii) two; provided, however, that if any portion of such       
compensation would constitute an "excess parachute payment" under Section 280G  
of the Code, the Company will pay to Mr. Ross an additional amount to offset any
taxes payable with respect to the excess parachute payment and the additional   
payment. The employment agreement also contains provisions which restrict Mr.   
Ross from competing with the Company during the term of the agreement and for 24
months following termination thereof. Additionally, pursuant to his employment  
agreement, under the terms of the 1995 Stock Option Plan of the Company, Mr.    
Ross was granted a non-qualified option to purchase 300,000 shares of Common    
Stock at $11 per share, the initial offering price of the Common Stock sold in  
the IPO. The ability to exercise this option vests in four equal annual         
installments, commencing upon the first anniversary of the date of grant subject
to acceleration in certain circumstances.                                       

Mr. Vantusko's employment agreement with the Company, which became    
effective as of May 23, 1997, provides for Mr. Vantusko to serve as Chief       
Financial Officer of the Company for an initial term of three years, subject to 
automatic one year extensions upon each annual anniversary of the date of the   
employment agreement, unless either party notifies the other of his or its      
intent not to extend the agreement not less than one year prior to the then     
scheduled expiration date. The employment agreement provides for an initial     
annual base salary of $150,000. Mr. Vantusko will be entitled to participate in 
the Bonus Plan, which will entitle him to earn, in each year during the term of 
his employment agreement, commencing with fiscal 1998, an amount ranging from 0%
to 150% of his base salary, subject to achievement of certain performance goals 
to be established by the Board. In the event that Mr. Vantusko's employment is  
terminated without cause (as defined in the employment agreement) or in the     
event he terminates his employment for good reason (as defined in the employment
agreement), Mr. Vantusko will be entitled to receive (in a lump sum if such     
termination occurs within one year after a change of control (as defined in the 
employment agreement) of the Company) an amount equal to the present value of   
the sum of (x) the base salary in effect on the date of termination and (y) the 
annual bonus compensation paid to Mr. Vantusko with respect to the fiscal year  
in which his employment is terminated, provided that such bonus is calculable as
of such date, and if not so calculable, then the bonus, if any, paid to him with
respect to the fiscal year immediately preceding the year in which his          
employment is terminated (which for fiscal 1997 was deemed to be $150,000). The 
employment                                                                      

35

S-4
37th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 37th

agreement also contains provisions which restrict Mr. Vantusko from competing   
with the Company during the term of the agreement and for 12 months following   
termination thereof. Additionally, pursuant to his employment agreement, under  
the terms of the 1995 Stock Option Plan of the Company, Mr. Vantusko was granted
a non-qualified option to purchase 100,000 shares of Common Stock at $11 per    
share, the initial offering price of the Common Stock sold in the IPO. The      
ability to exercise this option vests in four equal annual installments,        
commencing upon the first anniversary of the date of grant, subject to          
acceleration in certain circumstances.                                          

     Mr. Hertert's employment agreement with the Company, which became effective
as of May 23, 1997, provides for Mr. Hertert to serve as the Vice President of  
Operations of the Company for an initial term of three years, subject to        
automatic one year extensions upon each annual anniversary of the date of the   
employment agreement, unless either party notifies the other of his or its      
intent not to extend the agreement at least one year prior to the then scheduled
expiration date. The employment agreement provides for an initial annual base   
salary of $140,000. Mr. Hertert will be entitled to participate in the Bonus    
Plan, which will entitle him to earn, in each year during the term of his       
employment agreement, commencing with fiscal 1998, an amount ranging from 0% to 
150% of his base salary, subject to achievement of certain performance goals to 
be established by the Board. In the event that Mr. Hertert's employment is      
terminated without cause (as defined in the employment agreement) or in the     
event he terminates his employment for good reason (as defined in the employment
agreement), Mr. Hertert will be entitled to receive (in a lump sum if such      
termination occurs within one year after a change of control (as defined in the 
employment agreement) of the Company) an amount equal to the present value of   
the product of (i) the sum of (x) the base salary in effect on the date of      
termination and (y) the annual bonus compensation paid to Mr. Hertert with      
respect to the fiscal year in which his employment is terminated, provided that 
such bonus is calculable as of such date, and if not so calculable, then the    
bonus, if any, paid to him with respect to the fiscal year immediately preceding
the year in which his employment is terminated (which for fiscal 1997 was deemed
to be $140,000) and (ii) one and one-half. The employment agreement also        
contains provisions which restrict Mr. Hertert from competing with the Company  
during the term of the agreement and for 12 months following termination        
thereof. Additionally, pursuant to his employment agreement, under the terms of 
the 1995 Stock Option Plan of the Company, Mr. Hertert was granted a            
non-qualified option to purchase 50,000 shares of Common Stock at $11 per share,
the initial offering price of the Common Stock sold in the IPO. The ability to  
exercise this option vests in four equal annual installments, commencing upon   
the first anniversary of the date of grant, subject to acceleration in certain  
circumstances.                                                                  

   Dr. Larsson's employment agreement with Nordic Water Products AB ("Nordic
AB"), which became effective as of July 1, 1987, provides for Dr. Larsson to    
serve as Managing Director of Nordic AB, for an indefinite term. If Nordic AB   
terminates the employment agreement within 12 months after Nordic AB changes    
ownership, Nordic AB must provide Dr. Larsson at least 18 months notice of its  
intent to terminate the agreement. The employment agreement provided for an     
initial annual base salary of 336,000 Swedish krona (approximately $43,693). Dr.
Larsson's current base salary is $94,700. The employment agreement contains     
provisions which restrict Dr. Larsson from competing with Nordic AB, without    
Nordic AB's consent, during the term of the agreement.                          

BENEFIT PLANS                                                                   

The Company's Omnibus Incentive Plan                                            

  General Information.  The Company's Omnibus Incentive Plan (the "Omnibus
Plan") provides for compensatory equity based awards (each an "Award"). There   
are reserved for issuance pursuant to, or by reason of, stock awards and        
stock-based awards an aggregate number of shares of Common Stock equal to the   
lesser of (x) the greater of (i) 1,750,000 shares or (ii) 12.5% of the number of
shares of Common Stock outstanding, from time to time, (calculated on a fully   
diluted basis (including the maximum number of shares that may be issued, or    
subject to awards, under the Omnibus Plan and the Stock Option Plan (as defined 
below) (collectively, the "Employee Stock Plans"))); in either case (i) or (ii) 
above less the number of shares that are issued under the Employee Stock Plans  
after the effective date of the Omnibus Plan or are subject to outstanding      
awards under the Employee Stock Plans plus the number of any shares surrendered 
to                                                                              

36

S-4
38th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 38th

the Company in payment of the exercise price of options issued under either of  
the Employee Stock Plans or (y) 5,000,000 shares of Common Stock. The foregoing 
amount is referred to herein as the "Employee Stock Plan Share Amount." Awards  
may be granted for no consideration and consist of stock options, stock awards, 
SARs, dividend equivalents, other stock based awards (such as phantom stock) and
performance awards consisting of any combination of the foregoing. The Omnibus  
Plan is designed to provide an incentive to the officers and certain other key  
employees of the Company by making available to them an opportunity to acquire a
proprietary interest or to increase their proprietary interest in the Company.  
Any Award issued under the Omnibus Plan which is forfeited, expires or          
terminates prior to vesting or exercise will again be available for Award under 
the Omnibus Plan. No participant may receive stock or stock-based awards to     
acquire more than 500,000 shares in any one year.                               

  The Compensation Committee administers the Omnibus Plan and has the full
power and authority, subject to the provisions of the Omnibus Plan, to designate
participants, grant Awards and determine the terms of all Awards. Members of the
Compensation Committee are not eligible to receive Awards under the Omnibus     
Plan.                                                                           

  The Omnibus Plan was approved by the Company's Board and shareholders in
May 1997, and will terminate on the tenth anniversary of the date approved by   
the Board.                                                                      

   Stock Awards. The Compensation Committee has the right to grant Awards of
shares of Common Stock which are subject to such restrictions (including        
restrictions on transferability and limitations on the right to vote or receive 
dividends with respect to the restricted shares) and such terms regarding the   
lapse of restrictions as the Compensation Committee deems appropriate.          
Generally, upon termination of employment for any reason during the restriction 
period, restricted shares will be forfeited to the Company.                     

     SARs. An Award may consist of SARs. Upon exercising an SAR, the holder will
be paid by the Company the difference between the fair market value of the      
Common Stock on the date of exercise and the fair market value of the Common    
Stock on the date of the grant of the SAR, less applicable withholding of       
Federal and state taxes. The Company may, at its election, pay such difference  
in cash or in shares of Common Stock valued at the fair market value of the     
Common Stock on the day preceding the date of payment. In no event may (i) an   
aggregate payment by the Company during any fiscal year upon the exercise of    
SARs exceed $100,000, or (ii) a holder of an SAR, who is also an employee of the
Company or its subsidiaries, exercise an SAR if the aggregate amount to be      
received as a result of his or her exercise of SARs in the preceding 12 month   
period exceeds such employee's current base salary, in each case except as may  
otherwise be permitted by the Compensation Committee.                           

  Options Issued Under the Omnibus Plan. The terms of specific options are
determined by the Compensation Committee. Generally, options will be granted at 
an exercise price equal to at least 100% of fair market value of the Common     
Stock on the date of grant. Each option will be exercisable after the period or 
periods specified in the option agreement, which will generally not exceed 10   
years from the date of grant. Options may be issued in tandem with SARs ("Tandem
Options") as a performance award. Upon the exercise of an option, the option    
holder will pay to the Company the exercise price plus the amount of the        
required Federal and state withholding taxes, if any.                           

  Performance Awards Consisting of Options and SARs Issued in Tandem Under
the Omnibus Plan. Upon exercise of a Tandem Option, the optionee will be        
entitled to a credit toward the exercise price equal to the value of the SARs   
issued in tandem with the option exercised, but not to exceed the amount of the 
Federal income tax deduction allowed to the Company in respect of such SAR and  
not in an amount which would reduce the amount of payment by the optionee below 
the par value of the shares being purchased. Upon exercise of a Tandem Option,  
the related SAR will terminate, the value being limited to the credit which can 
be applied only toward the purchase price of Common Stock. In all cases, full   
payment of the net purchase price of the shares must be made in cash or its     
equivalent at the time the Tandem Option is exercised, together with the amount 
of the required Federal and State withholding taxes, if any. When a SAR issued  
as part of a Tandem Option is exercised, the option to which it relates will    
cease to be exercisable to the extent of the number of shares with respect to   
which the SAR was exercised.                                                    

37

S-4
39th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 39th

   Other Performance Awards Issued Under the Omnibus Plan.  The Omnibus Plan
authorizes the Compensation Committee to grant, to the extent permitted under   
Rule 16b-3 promulgated by the SEC under the Exchange Act, and applicable law,   
other Awards that are denominated or payable in, valued by reference to, or     
otherwise based on or related to shares of Common Stock. Furthermore, the amount
or terms of an Award may be related to the performance of the Company or to such
other criteria or measure of performance as the Compensation Committee may      
determine.                                                                      

The Company's 1995 Stock Option Plan                                            

    The Company's 1995 Stock Option Plan (the "Stock Option Plan") is intended
to encourage ownership of Common Stock by officers and other key employees and  
advisors of the Company, to encourage their continued employment with the       
Company and to provide them with additional incentives to promote the success of
the Company.                                                                    

    The Stock Option Plan authorizes the grant to officers, key employees, and
directors of awards ("Awards") consisting of "incentive stock options," as that 
term is defined under the provisions of Section 422 of the Code, and            
non-qualified stock options. There were 1,600,000 shares of Common Stock        
available for granting Awards under the Stock Option Plan. The Compensation     
Committee of the Board (the "Committee") administers the Stock Option Plan and  
has sole discretion to determine those employees to whom Awards will be granted,
the number of Awards granted, the provisions applicable to each Award and the   
time periods during which Awards may be exercisable.                            

The Committee may grant incentive stock options, non-qualified stock  
options, or a combination of the two. The exercise price of each incentive stock
option may not be less than the fair market value of the Common Stock at the    
date of grant. Under the Stock Option Plan, fair market value is generally      
determined in accordance with procedures established by the Committee. The      
option price per share of any non-qualified stock option is determined by the   
Committee on the date the option is granted. The exercise price of each         
incentive stock option granted to any stockholder possessing more than 10% of   
the combined voting power of all classes of capital stock of the Company, or, if
applicable, a parent or subsidiary of the Company, on the date of grant must not
be less than 110% of the fair market value on that date, and no such option may 
be exercisable more than five years after the date of grant.                    

    Options granted are exercisable for a term of not more than ten years from
the date of grant. In addition, no employee may be granted an incentive stock   
option to the extent the aggregate fair market value, as of the date of grant,  
of the stock with respect to which incentive stock options are first exercisable
by such employee during any calendar year exceeds $100,000.                     

     Awards granted under the Stock Option Plan are subject to adjustment upon a
recapitalization, stock split, stock dividend, merger, reorganization,          
liquidation, extraordinary dividend, or other similar event affecting the Common
Stock. An Award is not transferable, other than by will or the laws of descent  
and distribution or, in certain circumstances, pursuant to a qualified domestic 
relations order, and an Award may be exercised, during the lifetime of the      
holder of the Award, only by the holder, or the holder's personal representative
in the event of disability.                                                     

   The Stock Option Plan terminates on February 1, 2005, and Awards will not
be granted under the Stock Option Plan after that date, although the terms of   
any Award may be amended in accordance with the Stock Option Plan at any date   
prior to the end of the term of such Award. Any Awards outstanding at the time  
of termination of the Stock Option Plan continue in full force and effect       
according to the terms and conditions of the Award and the Stock Option Plan.   

    The Stock Option Plan may be amended by the Committee, subject to approval
of the Board, but no amendment may impair any rights of any holder of an Award  
previously granted under the Stock Option Plan without the holder's consent. As 
of December 31, 1997, options for 1,289,800 shares were outstanding, options for
235,500 shares had been granted and exercised, and options for 74,700 shares    
were unissued.                                                                  

38

S-4
40th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 40th

The Company's Employee Stock Purchase Plan                                      

    The Company's Employee Stock Purchase Plan (the "Stock Purchase Plan") was
approved by the Company's Board and shareholders in May 1997. There are reserved
for issuance upon the exercise of Options to be granted under the Stock Purchase
Plan an aggregate of 500,000 shares of Common Stock, subject to adjustment upon 
the occurrence of certain specific capitalization events.                       

    The Stock Purchase Plan is intended to encourage ownership of Common Stock
by eligible employees of the Company, to encourage their continued employment   
with the Company and to provide them with additional incentives to promote the  
success of the Company. Except as discussed below, eligible employees are       
employees who have been employed by the Company or any of its subsidiaries for  
at least six months and who customarily work more than 20 hours per week and    
five months per calendar year.                                                  

The Stock Purchase Plan authorizes the Compensation Committee to grant
options to purchase shares of Common Stock to eligible employees pursuant to one
or more offerings to be made under the Stock Purchase Plan. The Compensation    
Committee administers the Stock Purchase Plan and has sole discretion to        
determine when offerings will be made under the Stock Purchase Plan, the number 
of shares of Common Stock to be made available in any such offering, the length 
of the period pursuant to which employees can elect to participate in any       
offering (the "Subscription Period") and the period pursuant to which           
installment obligations of the option price must be paid (the "Purchase         
Period"). The Subscription Period and Purchase Period of any offering made under
the Stock Purchase Plan may not together exceed 27 months.                      

The Compensation Committee may exclude the employees of any specific  
subsidiary from any offering made under the Stock Purchase Plan and may         
determine not to include certain highly compensated employees. In addition, no  
option may be granted to an employee who, immediately after the option is       
granted, owns 5% or more of the value or voting power of all classes of stock of
the Company or its parent, if any, or subsidiary corporations, after taking into
account certain attribution rules. Subject to these provisions, all eligible    
employees must be given the right to participate in any offering made under the 
Stock Purchase Plan.                                                            

    Prior to any offering made under the Stock Purchase Plan, the Company will
grant to each employee eligible to participate in the offering the right to     
subscribe for an option to purchase on the last business day of the Purchase    
Period applicable to such offering at a price determined by the Compensation    
Committee, the number of full shares of Common Stock which such employee's      
accumulated payroll deductions will purchase as of the last business day of the 
Purchase Period. Unless the Compensation Committee determines otherwise, the    
option price will equal 85% of the fair market value of the Common Stock on the 
first day of the Purchase Period. Employees may elect to subscribe for options  
to purchase shares of Common Stock for an aggregate purchase price up to a      
specified percentage of their annual compensation as determined by the          
Compensation Committee for a particular offering.                               

  On the first day of the Purchase Period, eligible employees who elect to
participate in an offering will receive, subject to certain limitations set     
forth in the Stock Purchase Plan, an option to purchase the number of shares for
which such employee has subscribed. These options will be automatically         
exercised as of the last business day of the Purchase Period.                   

 Subject to certain limitations set forth in the Stock Purchase Plan, an
employee is permitted, at any time prior to the end of the Purchase Period      
applicable to such offering, to terminate or reduce his or her payroll          
deductions, to reduce his or her options to purchase or to withdraw all or part 
of the amount in his or her account, without interest. Upon the termination of  
the employee's employment with the Company prior to the last day of the Purchase
Period for any reason other than death or retirement, the employee's only right 
will be to receive the amount of cash then in such employee's account, without  
interest.                                                                       

     Options granted under the Stock Purchase Plan will be subject to adjustment
upon a recapitalization, stock split, stock dividend, merger, reorganization,   
liquidation, extraordinary dividend or other similar event affecting the Common 
Stock. Options will not be transferable, other than by will or the laws of      
descent and the distribution, or if permitted pursuant to the Code, and the     
Regulations thereunder without affecting the option's qualification under       
Section 423 of the Code, pursuant to a qualified domestic relations order, and  
an                                                                              

39

S-4
41st Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 41st

option may be exercised, during the lifetime of the holder of the option, only  
by such option holder, or his or her personal representative in the event of    
disability.                                                                     

In the case of an unusual corporate event such as liquidation, merger,
reorganization (other than a reorganization as defined by Section 368(a)(1)(F)  
of the Code), or other business combination, acquisition or change in control of
the Company through a tender offer or otherwise, the Board may, in its sole     
discretion, determine to terminate the Purchase Period of any offering made     
under the Stock Purchase Plan as of the last day of the month during which such 
unusual corporate event occurs, but in the event of any such termination, an    
option holder will have the right, commencing at least five days prior to the   
unusual corporate event, to either make a lump sum payment equal to the         
remaining portion of the purchase price payable under his or her option or to   
cancel his or her election to purchase shares pursuant to such option.          

     The Stock Purchase Plan will terminate ten years from the date of adoption,
and an option shall not be granted under the plan after such date. Any options  
outstanding at the time of termination of the Stock Purchase Plan will continue 
in full force and effect according to the terms and conditions of the Stock     
Purchase Plan. As of December 31, 1997, 42,384 shares of Common Stock were      
purchased pursuant to the Stock Purchase Plan.                                  

1997 Non-Employee Director Stock Option Plan                                    

   The Company's 1997 Non-Employee Director Stock Option Plan (the "Director
Plan") was approved by the Company's Board and shareholders in May 1997. An     
aggregate of 150,000 shares of Common Stock have been reserved for issuance     
under the Director Plan, subject to adjustment upon the occurrence of certain   
specified capitalization events.                                                

  The Director Plan is intended to encourage non-employee directors of the
Company to acquire or increase their ownership of Common Stock on reasonable    
terms and to foster a strong incentive for non-employee directors to put forth  
maximum effort for the continued success and growth of the Company. The Director
Plan became effective as of June 27, 1997 and will terminate ten years from that
date.                                                                           

Each non-employee director who becomes a member of the Board shall    
automatically be granted an option to purchase 3,000 shares of Common Stock. In 
addition, on each anniversary of the date the Director Plan became effective,   
each of the Company's then non-employee directors who has served as a director  
for at least six (6) months shall automatically be granted an option to purchase
5,000 shares of Common Stock. The per share exercise price of options granted   
under the Director Plan will be the fair market value of the Common Stock on the
date of grant. The exercise price of options granted under the Director Plan is 
payable in cash or in shares of Common Stock valued at fair market value at the 
time of exercise, or a combination of cash and shares; however, the Company may 
establish "cashless exercise" procedures, subject to applicable laws, rules and 
regulations, pursuant to which a director may exercise an option and arrange for
a simultaneous sale of the underlying Common Stock, with the exercise price     
being paid from the proceeds of such sale. Options granted under the Director   
Plan will expire ten years after the date of grant, subject to earlier          
termination, and may be exercised as follows: twenty-five percent (25%) after   
one (1) year from the date of grant, fifty percent (50%) after two (2) years    
from the date of grant, seventy-five percent (75%) after three (3) years from   
the date of grant and one hundred percent (100%) after four (4) years from the  
date of grant.                                                                  

     In the event that a director ceases to be a member of the Board (other than
by reason of death or disability), an option may be exercised by the director   
(to the extent the director was entitled to do so at the time he or she ceased  
to be a member of the Board) at any time within three months after he or she    
ceases to be a member of the Board, but not beyond the term of the option. If   
the director dies or becomes disabled while he or she is a member of the Board, 
or within three months after he or she ceases to be a member of the Board, the  
option may be exercised (to the extent the director was entitled to do so at the
time of his or her death) in full by his or her personal representative or      
distributees at any time within one year after his or her death or disability,  
but not beyond the term of the option. In the event of the occurrence of a      
Change in Control (as defined in the Director Plan) a director would be entitled
to exercise the option in full, but such option would terminate 90 days after   
the Change in Control.                                                          

40

S-4
42nd Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 42nd

The Director Plan is administered by the Compensation Committee. The  
principal terms of the option grants are set forth in the Director Plan,        
therefore, the Compensation Committee will have no discretion to select which   
directors receive options, the number of shares of Common Stock subject to      
options or the exercise price of options.                                       

     Each of the above plans may be amended at any time and from time to time by
the Board of Directors, but no amendment without the approval of the            
shareholders of the Company shall be made if shareholder approval would be      
required under applicable law. No amendment may, however, impair the rights or  
obligations of the holder of any option granted under the Omnibus Plan, the     
Stock Purchase Plan or the Director Plan without his or her consent.            

41

S-4
43rd Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 43rd

CERTAIN TRANSACTIONS

  The following summarizes certain material agreements between the Company
and its executive officers, directors and certain of its existing shareholders. 
The summary is not a complete description of such agreements and therefore this 
discussion is qualified in its entirety by reference to the agreements, copies  
of which will be made available for inspection upon written request to the      
Company. It is the Company's intention that transactions with directors,        
executive officers, employees or affiliates of the Company will be minimal and  
will be approved in advance by a majority of the disinterested members of the   
Board.                                                                          

REGISTRATION RIGHTS AGREEMENTS                                                  

     Several of the Company's officers, directors and holders of more than 5% of
the Common Stock have entered into a certain registration rights agreement (the 
"Registration Rights Agreement") relating to shares of the Company's preferred  
stock (which were converted in accordance with the terms of such preferred stock
into shares of Common Stock in connection with the IPO), the Common Stock issued
prior to the IPO(other than upon exercise of stock options) and securities of   
the Company convertible into or exchangeable for shares of Common Stock (other  
than a stock option), including the warrants (the "1997 Warrants") issued       
pursuant to a certain warrant purchase agreement executed in March 1997 between 
the Company and the other signatories thereto (the "1997 Warrant Agreement").   
Pursuant to the Registration Rights Agreement, the Company granted to the       
signatories thereto certain rights relating to registering the Common Stock     
under the Securities Act of 1933, as amended (the "Securities Act").            

  In general, the "Investors," as that term is defined in the Registration
Rights Agreement (generally defined as substantially all holders of the 1997    
Warrants) and Mr. Savastano may demand registration under the Securities Act of 
the Common Stock issued upon the conversion of outstanding shares of the        
Company's preferred stock and the exercise of the 1997 Warrants upon the request
of the Investors (treated as a single class and calculated on an "as converted  
basis"). The Company will pay all registration expenses relating to such        
registration. The Registration Rights Agreement otherwise contains such terms   
and conditions ordinarily and customarily found in registration rights          
agreements, including, without limitation, piggyback registration rights,       
indemnification provisions, and holdback agreements.                            

1997 NOTES, 1997 WARRANTS AND STOCKHOLDER GUARANTEE                             

   In March 1997, the Company entered into a certain note purchase agreement
(the "1997 Note Purchase Agreement") pursuant to which the Company could have   
issued, and several purchasers could have committed to purchase, certain        
subordinated notes (the "1997 Notes") and entered into the 1997 Warrant         
Agreement with respect to the 1997 Warrants. The parties to the 1997 Note       
Purchase Agreement and the holders of the 1997 Warrants include: Brantley       
Capital Corporation, River Cities Capital Fund Limited Partnership and          
Environmental Opportunities Management Co., LLC. These stockholders and the     
other parties to the 1997 Note Purchase Agreement (other than the Company) have 
received 125,000 1997 Warrants issued in accordance with the 1997 Warrant       
Agreement. No 1997 Notes were issued and the obligation to make advances under  
the 1997 Note Purchase Agreement has terminated.                                

   Brantley Venture Partners III, L.P. ("Brantley"), guaranteed through June
1, 1997 up to $2,000,000 of the Company's indebtedness under a certain Credit   
Facility with the Bank of America, Illinois (the "Credit Facility"), in the     
event the Company defaulted on its payment obligations thereunder. The Company  
paid no consideration to Brantley for this guarantee. To the extent that        
Brantley would have been required to make a payment under its guarantee of the  
Company's indebtedness under the Credit Facility, the amount of such payments   
would have been deemed to be an advance under the 1997 Notes from the date of   
such payment. No such payment was required and the guarantee has terminated.    
Robert P. Pinkas, a director of the Company, is an affiliate of Brantley Capital
Corporation and Brantley.                                                       

42

S-4
44th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 44th

SECURITY OWNERSHIP

     The following table sets forth the beneficial ownership of the Common Stock
as of December 31, 1997 by certain of the executive officers of the Company,    
each of the directors of the Company and all executive officers and directors of
the Company as a group, as well as by each person known by the Company to be the
beneficial owner of more than 5% of the Common Stock.                           

                                                        [Enlarge/Download Table]

                                                                   SHARES OF                           
                                                                  COMMON STOCK                         
                      NAME AND ADDRESS                            BENEFICIALLY       PERCENT OF SHARES 
                     OF BENEFICIAL OWNER                            OWNED(1)          OUTSTANDING(2)   
------------------------------------------------------------- --------------------  -------------------
                                                                                                       
Brantley Venture Partners III, L.P...........................       2,026,250(3)           16.92%      
20600 Chagrin Blvd                                                                                     
Suite 1150                                                                                             
Cleveland, OH 44122                                                                                    

Environmental Opportunities Management Co., LLC..............         650,000(4)            5.43%      
3100 Texas Commerce Tower                                                                              
Houston, TX 77002                                                                                      

River Cities Capital Fund Limited Partnership................         636,250(5)            5.32%      
221 East 4th Street                                                                                    
Suite 2250                                                                                             
Cincinnati, OH 45202                                                                                   

Theodore F. Savastano........................................       1,000,000(6)            8.30%      
Chet S. Ross.................................................         400,962(7)            3.29%      
Michael J. Vantusko..........................................         125,000(8)            1.04%      
L. Dean Hertert..............................................          66,497(9)               *       
Dr. Hans F. Larsson..........................................             385                  *       
Robert P. Pinkas.............................................       2,126,250(10)          17.61%      
Dr. Paul M. Sutton...........................................          13,000(11)              *       
Rollin S. Reiter.............................................          28,000(11)              *       
John R. Miller...............................................           8,000(11)              *       

All directors, nominees and executive officers as a group (9                                           
  persons)...................................................       3,768,094              31.21%      

---------------                                                                 

*Less than 1%                                                                   

(1) Beneficial ownership includes shares of Common Stock subject to options,  
 warrants, rights, or similar obligations exercisable within 60 days for
  purposes of computing the percentage of the person or group holding such
options or warrants. Except as noted, each stockholder has sole voting
 power and sole investment power with respect to all shares beneficially
owned by such stockholder.                                            

(2) Based upon 11,949,710 shares outstanding.                                 

(3) Includes 26,250 warrants to purchase shares of Common Stock held by       
 Brantley Capital Corporation, an affiliate of Brantley Venture Partners
    III, L.P. Robert P. Pinkas, a director of the Company, is managing general
partner of Brantley Venture Partners III, L.P. and has sole voting and
investment power with respect to these shares.                        

(4) Includes an aggregate of 25,000 warrants issued to such entities to       
purchase shares of Common Stock, as to which entities Environmental   
  Opportunities Management Co., LLC ("EOM") is the general partner and has
    sole voting and investment power with respect to these shares. The Company
    has been advised that Sanders Morris Mundy, one of the underwriters of the
Company's IPO, owns a 75% interest in, and thereby controls, EOM.     

(5) Includes 11,250 warrants to purchase shares of Common Stock. The Company  
    has been advised that Mayson, Inc. ("Mayson"), an Ohio corporation, is the
  general partner of the partnership which is the general partner of River
    Cities Capital Fund Limited Partnership and that Mr. Edwin T. Robinson and
    Mr. R. Glen Mayfield (both of 221 East 4th Street, Suite 2250, Cincinnati,
OH 45202) are the sole                                                

43

S-4
45th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 45th

  officers, directors and shareholders of Mayson, and each has sole voting
and investment power with respect to these shares.                    

 (6) Includes 100,000 options to purchase shares of Common Stock which are fully
vested.                                                               

 (7) Includes 220,000 options to purchase shares of Common Stock which are fully
vested.                                                               

(8) Includes 75,000 options to purchase shares of Common Stock which are fully
vested.                                                               

(9) Includes 40,000 options to purchase shares of Common Stock which are fully
vested.                                                               

(10) Includes shares, including securities referred to in footnote 3 above,     
    which are held by Brantley Venture Partners III, L.P., of which Mr. Pinkas
is managing general partner, and 100,000 options to purchase shares of
Common Stock which are fully vested.                                  

(11) Includes options to purchase 3,000 shares of Common Stock which are fully  
vested.                                                               

SHARES ELIGIBLE FOR FUTURE SALE 

As of December 31, 1997, 11,949,710 shares of Common Stock were       
outstanding. Of such shares, the 5,175,000 shares sold in the IPO are tradable  
by persons other than "affiliates" of the Company, as that term is defined in   
Rule 144 under the Securities Act. Of the remaining 6,774,710 shares            
outstanding, approximately 6,313,983 shares are either presently freely tradable
or eligible for sale pursuant to Rule 144. To the extent they are not presently 
freely tradable, such shares of Common Stock are "restricted securities" within 
the meaning of Rule 144 (collectively, the "Restricted Shares"). The Restricted 
Shares may not be sold unless they are registered under the Securities Act or   
sold pursuant to an applicable exemption from registration, including an        
exemption pursuant to Rule 144 under the Securities Act.                        

 The Company has registered the shares of Common Stock reserved or to be
available for issuance pursuant to the Stock Option Plan. Shares of Common Stock
issued pursuant to the Stock Option Plan generally will be available for sale in
the open market by holders who are not affiliates of the Company and, subject to
the volume and other limitations of Rule 144, by holders who are affiliates of  
the Company. In addition, each director who is not an employee of the Company   
has been granted an option to purchase shares of Common Stock. See "Management  
-- Director Remuneration."                                                      

 In connection with entering into the Credit Facility and commitments to
purchase subordinated indebtedness, the Company issued warrants to purchase     
350,000 shares of Common Stock. Pursuant to the applicable warrant agreements,  
the holders of such warrants have certain rights to require the Company to      
register the shares of Common Stock to be issued upon exercise of the warrants. 

 In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares for at
least one year, including persons who may be deemed to be "affiliates" of the   
Company, as that term is defined under Rule 144, may sell within any three-month
period a number of Restricted Shares that does not exceed the greater of one    
percent of the then outstanding shares of Common Stock or the average weekly    
trading volume of the Common Stock on the open market during the four calendar  
weeks preceding such sale. Sales under Rule 144 are also subject to certain     
manner-of-sale limitations, notice requirements, and the availability of current
public information about the Company. Pursuant to Rule 144(k), a person (or     
persons whose shares are aggregated) who is deemed not to have been an          
"affiliate" of the Company during the three months preceding a sale, and who has
beneficially owned Restricted shares for at least two years, would be entitled  
to sell such shares under Rule 144 without regard to the volume limitations,    
manner-of-sale provisions or notice requirements. Restricted Shares properly    
sold in reliance upon Rule 144 are thereafter freely tradable without           
restrictions or registration under the Securities Act, unless thereafter held by
an "affiliate" of the Company. The foregoing summary of Rule 144 is not intended
to be a complete description thereof.                                           

The Company has registered 5,000,000 shares of Common Stock under the 
Securities Act pursuant to the registration statement of which this Prospectus  
is part for its use in connection with future acquisitions. These shares        
generally will be freely tradable after their issuance by persons not affiliated
with the Company                                                                

 The effect if any, the availability for sale, or sale, of the shares of
Common Stock eligible for future sale will have on the market price of the      
Common Stock prevailing from time to time is unpredictable, and no assurance can
be given the effect will not be adverse.                                        

44

S-4
46th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 46th

DESCRIPTION OF CAPITAL STOCK

GENERAL                                                                         

   As of December 31, 1997, the authorized capital stock of the Company will
consist of 40,000,000 shares of Common Stock, par value $.001 per share, and    
10,000,000 shares of preferred stock, par value $.001 per share (the "Preferred 
Stock"), of which 11,949,710 shares of Common Stock are issued and outstanding  
and no shares of Preferred Stock will be issued and outstanding.                

  The following summary of certain provisions of the Common Stock does not
purport to be complete and is subject to, and qualified in its entirety by, the 
provisions of the Company Certificate and the Company Bylaws, each of which is  
included as an exhibit to the registration statement of which this Prospectus is
a part, and by the provisions of applicable law.                                

COMMON STOCK                                                                    

     The holders of Common Stock are entitled to one vote for each share held of
record by them upon all matters to be voted on by the holders of Common Stock.  
The holders of Common Stock are entitled to participate equally in all dividends
payable with respect to the Common Stock subject to any preferences or rights of
any outstanding preferred stock. In the event of liquidation, dissolution or    
winding up of the affairs of the Company, the holders of Common Stock are       
entitled to share ratably in all assets of the Company remaining available for  
distribution to them after payment of liabilities and after provision has been  
made for each class of stock, including any preferred stock, that has preference
over the Common Stock. Holders of shares of Common Stock, as such, have no      
conversion rights, and there are no redemption or sinking fund provisions       
applicable to the Common Stock. All of the outstanding shares of Common Stock   
are fully paid and nonassessable.                                               

PREFERRED STOCK                                                                 

The Board of Directors has the authority, without any further vote or 
action by the stockholders, to provide for the issuance of up to 10,000,000     
shares of Preferred Stock from time to time in one or more series and to fix    
such designations, rights, preferences and limitations as the Board of Directors
may determine, including the consideration received therefor, the number of     
shares comprising each series, dividend rates, redemption provisions,           
liquidation preferences, sinking fund provisions, conversion rights and voting  
rights, including Series 1 Preferred Stock (the "Series 1 Preferred Stock")     
authorized in connection with the Stockholders Rights Plan described below.     
Although it is not possible to state the effect that any issuance of Preferred  
Stock might have on the rights of holders of Common Stock, the issuance of      
Preferred Stock may have one or more of the following effects: (i) restrict     
Common Stock dividends if Preferred Stock dividends have not been paid; (ii)    
dilute the voting power and equity interests of holders of Common Stock to the  
extent that any Preferred Stock series has voting rights or is convertible into 
Common Stock; or (iii) prevent current holders of Common Stock from             
participating in the Company's assets upon liquidation until any liquidation    
preferences granted to holders of Preferred Stock are satisfied. In addition,   
the issuance of Preferred Stock may, under certain circumstances, have the      
effect of discouraging a change in control of the Company by, for example,      
granting voting rights to holders of Preferred Stock that require approval by   
the separate vote of the holders of Preferred Stock for any amendment to the    
Company Certificate or any reorganization, consolidation or merger (or other    
similar transaction involving the Company). As a result, the issuance of such   
Preferred Stock may discourage bids for the Company's Common Stock at a premium 
over the market price therefor and could have a material adverse effect on the  
market value of the Common Stock. The Board of Directors does not presently     
intend to issue any shares of Preferred Stock, other than in connection with the
stockholders rights plan, referred to below.                                    

REGISTRATION RIGHTS AGREEMENTS                                                  

  In connection with the issuance by the Company of all of the outstanding
shares of the Company's preferred stock prior to the IPO (with the exception of 
25,000 shares of the Company's preferred stock issued to one particular         
shareholder), the Common Stock issued prior to the IPO (other than upon exercise
of stock                                                                        

45

S-4
47th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 47th

options) and any securities of the Company convertible into or exchangeable for 
shares of Common Stock (other than a stock option), including the 1997 Warrants,
the Company granted to holders thereof certain rights relating to registering   
the Common Stock under the Securities Act.                                      

In general, the "Investors" as defined in the Amended and Restated    
Registration Rights Agreement dated March 6, 1997 (the "Registration Rights     
Agreement") (generally defined as substantially all holders of the Company's    
preferred stock issued prior to the IPO and 1997 Warrants) and Mr. Savastano may
demand registration under the Securities Act of the Common Stock issued upon the
conversion of outstanding shares of the Company's preferred stock and the       
exercise of the 1997 Warrants upon the request of the Investors (treated as a   
single class and calculated on an "as converted basis"). The Company will pay   
all registration expenses relating to such registration. Each of the            
registration rights agreements otherwise contain such terms and conditions      
ordinarily and customarily found in registration rights agreements, including,  
without limitation, piggyback registration rights, indemnification provisions,  
and holdback agreements.                                                        

STOCKHOLDER RIGHTS PLAN                                                         

  Each share of Common Stock, including those offered hereby, includes one
Right. Each Right entitles the registered holder to purchase from the Company   
one one-hundredth of a share of Series 1 Preferred Stock at a price of $65.00   
per one one-hundredth of a share of Series 1 Preferred Stock (the "Purchase     
Price"), subject to adjustment. The following summary description of the Rights 
does not purport to be complete and is qualified in its entirety by reference to
the Rights Agreement (the "Rights Agreement"), between the Company and American 
Stock Transfer & Trust Company, as Rights Agent (the "Rights Agent"), a copy of 
which is filed as an exhibit to the registration statement of which this        
Prospectus is a part and is incorporated herein by reference. See "Description  
of Capital Stock -- Preferred Stock."                                           

  Until the earliest to occur of (i) the first date of public announcement
that a person (other than the Company, any subsidiary of the Company, an        
employee benefit plan of the Company or a subsidiary of the Company, or an      
Exempt Person (defined below)) or group of affiliated or associated persons has 
acquired, or obtain the right to acquire, beneficial ownership of 15% or more of
the outstanding shares of Common Stock (an "Acquiring Person") and (ii) the     
tenth day (or such later date as may be specified by the Board prior to such    
time as any person or group of affiliated or associated persons becomes an      
Acquiring Person) after the date any person commences or announces its intention
to commence a tender offer or exchange offer, the consummation of which would   
result in such person, together with its affiliates or associates becoming an   
Acquiring Person (the earlier of such dates being hereinafter called the        
"Distribution Date"), the Rights are evidenced by the certificates for shares of
Common Stock. "Exempt Persons" include any person who prior to the IPO was the  
beneficial owner of 15% or more of the outstanding shares of Common Stock for so
long as (a) such person, together with all affiliates and associates thereof,   
does not increase its percentage beneficial ownership by 1% or more of the      
outstanding shares of Common Stock (b) there is no change of control of such    
person, (c) such person, together with its affiliates or associates does not    
commence a tender offer or exchange offer for Common Stock and (d) the Company  
does not consolidate or merge with or into such person, or any of its affiliates
or associates, or sell, mortgage or otherwise transfer to such person, or any of
its affiliates or associates, assets or earning power representing 50% or more  
of the assets or earning power of the Company.                                  

     The Rights Agreement provides that, until the Distribution Date, the Rights
will be transferred with and only with shares of Common Stock. Until the        
Distribution Date (or earlier redemption or expiration of the Rights),          
certificates for shares of Common Stock issued after the date of the Rights     
Agreement will contain a notation incorporating the Rights Agreement by         
reference. Until the Distribution Date (or earlier redemption or expiration of  
the Rights), the surrender for transfer of any certificates for shares of Common
Stock in respect of which Rights have been issued will also constitute the      
transfer of the Rights associated with the shares of Common Stock represented by
such certificates. As soon as practicable following the Distribution Date,      
separate certificates evidencing the Rights (the "Right Certificates") will be  
mailed to holders of record of the shares of Common Stock as of the close of    
business on the Distribution Date and such separate Right Certificates alone    
will evidence the Rights.                                                       

46

S-4
48th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 48th

  No Right will be exercisable at any time prior to the Distribution Date.
The Rights will expire on the tenth anniversary of the date of the Rights       
Agreement (the "Final Expiration Date"), unless earlier redeemed or exchanged by
the Company as described below. Until a Right is exercised, the holder thereof, 
as such, will have no rights as a stockholder of the Company, including without 
limitation the right to vote or to receive dividends.                           

    The Purchase Price payable, and the number of shares of Series 1 Preferred
Stock or other securities issuable, upon exercise of the Rights will be subject 
to adjustment from time to time to prevent dilution (i) in the event of a stock 
dividend on, or a subdivision, combination or reclassification of, the Series 1 
Preferred Stock, (ii) upon the grant to holders of shares of Series 1 Preferred 
Stock of certain rights or warrants to subscribe for or purchase shares of      
Series 1 Preferred Stock at a price, or securities convertible into shares of   
Series 1 Preferred Stock with a conversion price, less than the then current    
market price of the shares of Series 1 Preferred Stock or (iii) upon the        
distribution to holders of the shares of Series 1 Preferred Stock of evidences  
of indebtedness or cash (excluding regular periodic cash dividends), assets,    
stock (excluding dividends payable in shares of Series 1 Preferred Stock) or of 
subscription rights or warrants (other than those referred to above).           

   The number of outstanding Rights and the number of one one-hundredth of a
share of Series 1 Preferred Stock issuable upon the exercise of each Right also 
will be subject to adjustment in the event of a stock dividend on the Common    
Stock payable in shares of Common Stock or subdivision, combination or          
reclassification of the Common Stock occurring, in any such case, prior to the  
Distribution Date.                                                              

 Shares of Series 1 Preferred Stock issuable upon exercise of the Rights
will not be redeemable. Each share of Series 1 Preferred Stock will be entitled 
to a minimum preferential quarterly dividend payment equal to the greater of (i)
$1.00 per share and (ii) an amount equal to 100 times the aggregate dividends   
declared per share of Common Stock during the related quarter. In the event of  
liquidation, the holders of the shares of Series 1 Preferred Stock will be      
entitled to a preferential liquidation payment equal to accrued and unpaid      
dividends thereon, plus the greater of (a) $100 per share and (b) an amount     
equal to 100 times the liquidation payment made per share of Common Stock.      
Finally, in the event of any merger, consolidation or other transaction in which
shares of Common Stock are exchanged, each share of Series 1 Preferred Stock    
will be entitled to receive 100 times the amount received per share of Common   
Stock. These rights are protected by customary antidilution provisions. Each    
share of Series 1 Preferred Stock will have 100 votes, voting together with the 
shares of Common Stock. In addition, in the event that the amount of accrued and
unpaid dividends on the Series 1 Preferred Stock is equivalent to six full      
quarters dividends or more, the holders thereof shall have the right, voting as 
a class, to elect two directors in addition to the directors elected by the     
holders of the Common Stock.                                                    

   In the event that any person or group or affiliated or associated persons
becomes an Acquiring Person, proper provision shall be made so that each holder 
of a Right, other than Rights that are or were owned beneficially by the        
Acquiring Person (which, from and after the later of the Distribution Date and  
the date of the earliest of any such events, will be void), will thereafter have
the right to receive, upon exercise thereof at the then current exercise price  
of the Right, that number of shares of Common Stock (or, under certain          
circumstances, an economically equivalent security or securities of the Company)
having a market value of two times the exercise price of the Right.             

   To illustrate the operation of such an adjustment, at a Purchase Price of
$40.00, assuming the current market price (as determined pursuant to the        
provisions of the Rights Agreement) per share of Common Stock was $4.00, each   
Right not owned beneficially by an Acquiring Person at or after the time of such
an occurrence would entitle its holder to purchase (after the Distribution Date)
from the Company 20 shares of Common Stock (having an aggregate market value of 
$80.00) for $40.00.                                                             

 In the event that, at any time after a person or group of affiliated or
associated persons has become an Acquiring Person, (i) the Company merges with  
or into any person and the Company is not the surviving corporation, (ii) any   
person merges with or into the Company and the Company is the surviving         
corporation, but the shares of Common Stock are changed or exchanged, or (iii)  
50% or more of the Company's assets or earning power are sold, proper provision 
shall be made so that each holder of a Right will thereafter have the           

47

S-4
49th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 49th

right to receive, upon the exercise thereof at the then current exercise price  
of the Right, that number of shares of common stock (or, under certain          
circumstances, an economically equivalent security or securities) of such other 
person which at the time of such transaction would have a market value of two   
times the exercise price of the Right.                                          

   At any time after the first date of public announcement that an Acquiring
Person has become such and prior to the acquisition by any person or group of   
affiliated or associated persons of 50% or more of the outstanding shares of    
Common Stock, the Board may exchange the Rights (other than any Rights which    
have become void) for shares of Common Stock, in whole or in part, at an        
exchange ratio of one share of Common Stock per Right (subject to adjustment).  

With certain exceptions, no adjustment in the Purchase Price will be  
required until cumulative adjustments require an adjustment in the Purchase     
Price of at least 1%. The Company is not required to issue fractional shares of 
Series 1 Preferred Stock (other than fractions which are integral multiples of  
one one-hundredth of a share of Series 1 Preferred Stock, which may, at the     
option of the Company, be evidenced by depositary receipts) or fractional shares
of Common Stock or other securities issuable upon the exercise of Rights. In    
lieu of issuing such securities, the Company may make a cash payment, as        
provided in the Rights Agreement.                                               

     The Company may redeem all, but not less than all, the Rights at a price of
$.01 per Right (the "Redemption Price"), payable in cash or Common Stock, at any
time prior to such time as a person or group of affiliated or associated persons
becomes an Acquiring Person. Immediately upon any redemption of the Rights, the 
right to exercise the Rights will terminate and the only right of the holders of
Rights will be to receive the Redemption Price.                                 

    Prior to the Distribution Date, the Rights Agreement may be amended by the
Company without the approval of any holders of Rights. From and after the       
Distribution Date, the Rights Agreement may be amended by the Company without   
the approval of any holders of Rights in any manner which does not, in the good 
faith determination of the Board, adversely affect the holders of the Rights    
(other than an Acquiring Person), including amendments which add other events   
requiring adjustment to the purchase price payable and the number of shares of  
Series 1 Preferred Stock or other securities issuable upon the exercise of the  
Rights or which modify procedures relating to the redemption of the Rights.     
Under no circumstances may the Rights Agreement be amended to decrease the      
stated Redemption Price or the period of time remaining until the Final         
Expiration Date or to modify a time period relating to when the Rights may be   
redeemed at such time as the Rights are not then redeemable.                    

The Rights have certain anti-takeover effects. The Rights will cause  
substantial dilution to a person or group that attempts to acquire the Company  
on terms not approved by the Board, except pursuant to an offer conditioned on a
substantial number of Rights being acquired. The Rights should not interfere    
with any merger or other business combination approved by the Board since       
(subject to the limitations described above) the Rights may be redeemed by the  
Company at the Redemption Price prior to the time that a person or group has    
become an Acquiring Person.                                                     

1997 WARRANTS                                                                   

In March 1997, in connection with its entering into the Note Purchase 
Agreement relating to the 1997 Notes, the Company entered into a warrant        
agreement (the "1997 Warrant Agreement") pursuant to which it agreed to issue   
warrants (the "1997 Warrants") to persons agreeing to be purchasers of the 1997 
Notes. Each 1997 Warrant entitles the holder to purchase one share of Common    
Stock at an initial purchase price per share of $4.50 ("Exercise Price"). None  
of the 1997 Notes were issued but 125,000 Warrants have been issued and are     
outstanding. The Exercise Price of the 1997 Warrants is subject to adjustment   
upon the occurrence of certain events such as the issuance of securities at     
prices less than the Exercise Price then in effect, or upon stock splits, stock 
dividends, reorganizations, mergers or consolidations. The Note Purchase        
Agreement terminated upon the closing of the IPO.                               

48

S-4
50th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 50th

CERTAIN ANTI-TAKEOVER CONSIDERATIONS                                            

    The Company Certificate and the Company Bylaws, contain certain provisions
which operate only with respect to an extraordinary corporate transaction       
involving the Company (or any of its subsidiaries) and which are designed to    
encourage any person who desires to take control of and/or acquire the Company  
to enter into negotiations with the Board, thereby making more difficult the    
acquisition of the Company by means of a tender offer, a proxy contest or other 
non-negotiated means. In general, these provisions (i) provide for a classified 
Board from which directors may only be removed for cause, by the affirmative    
vote of 80% of all of the stockholders (ii) provide that only a majority of the 
Board shall have the authority to fill vacancies on the Board, (iii) limit the  
right of stockholders to amend the Company Certificate and the Company Bylaws,  
(iv) eliminate the right of stockholders to call special meetings and to take   
action without a meeting, (v) establish an advance notice procedure regarding   
the nomination of directors by stockholders and stockholder proposals to be     
brought before an annual meeting, and (vi) require that certain business        
combinations either meet certain minimum price and procedural requirements, be  
approved by the members of the Board who are unaffiliated with the persons      
seeking to effect such business combinations or be approved by a supermajority  
stockholder vote. In addition to encouraging any person intending to attempt a  
takeover of the Company to negotiate with the Board, these provisions also      
curtail such person's use of a dominant equity interest to control any          
negotiations with the Board. Under such circumstances, the Board may be better  
able to make and implement reasoned business decisions and protect the interests
of all of the Company's stockholders. A copy of the Company Certificate and the 
Company Bylaws are filed as exhibits to the registration statement of which this
Prospectus is a part.                                                           

Classified Board of Directors                                                   

 The Company Certificate provides for the Board to be divided into three
classes serving staggered terms so that directors' initial terms will expire at 
the first, second or third scheduled annual meeting of stockholders. Starting   
with the first scheduled annual meeting of the Company's stockholders following 
the IPO, one class of directors will be elected each year for a three-year term.
See "Management -- Directors and Executive Officers." The classes will be as    
nearly equal in number as possible. The classification of directors makes it    
more difficult for a significant stockholder to change the composition of the   
Board in a relatively short period of time and, accordingly, provides the Board 
and stockholders time to review any proposal that a significant stockholder may 
make and to pursue alternative courses of action which are fair to all the      
stockholders of the Company.                                                    

Removal of and Filling Vacancies on the Board of Directors of the Company       

     The Company Certificate provides that, subject to any rights of the holders
of Preferred Stock of the Company, only a majority of the Board then in office  
or the sole remaining director shall have the authority to fill any vacancies on
the Board, including vacancies created by an increase in the number of          
directors. Moreover, because the Company Certificate provides for a classified  
board, Delaware law provides that the stockholders may remove a member of the   
Board only for cause. The Company Certificate provides that the affirmative vote
of the holders of at least 80% of the voting power of stock entitled to vote    
generally in the election of directors is required to remove a director for     
cause. These provisions relating to removal and filling of vacancies on the     
Board preclude stockholders from enlarging the Board or removing incumbent      
directors and filling the vacancies with their own nominees.                    

Amendment of the Company Certificate and the Company Bylaws                     

    The Company Certificate contains provisions requiring the affirmative vote
of the holders of at least 80% of the voting power of the stock entitled to vote
generally in the election of directors to amend certain provisions of the       
Company Certificate and the Company Bylaws (including certain of the provisions 
discussed above). These provisions make it more difficult for stockholders to   
make changes in the Company Certificate or the Company Bylaws, including changes
designed to facilitate the exercise of control over the Company.                

49

S-4
51st Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 51st

Limitations on Stockholder Action by Written Consent; Special Meetings          

   Meetings. The Company Certificate provides that stockholder action can be
taken only at an annual or special meeting of stockholders and prohibits        
stockholder action by written consent in lieu of a meeting. The Company         
Certificate and the Company Bylaws provide that, subject to the rights of       
holders of any series of Preferred Stock, special meetings of stockholders can  
be called only by a majority of the entire Board or by the President or Chairman
of the Board. Stockholders are not permitted to call a special meeting or to    
require that the Board call a special meeting of stockholders. Moreover, the    
business permitted to be conducted at any special meeting of stockholders is    
limited to the business brought before the meeting by or at the direction of the
Board. These provisions prohibit a significant stockholder from proposing a     
stockholder vote on issues not approved by the Board or from authorizing        
stockholder action without a meeting at which all stockholders would be entitled
to participate.                                                                 

Nominations of Directors and Stockholder Proposals. The Company Bylaws
establish an advance notice procedure with regard to the nomination other than  
by, or at the direction of, the Board of candidates for election as directors   
(the "Nomination Procedure") and with regard to stockholder proposals to be     
brought before an annual meeting of stockholders (the "Business Procedure"). The
Nomination Procedure provides that only persons who are nominated by, or at the 
direction of, the Board, or by a stockholder who has given timely written notice
to the Secretary of the Company prior to the meeting at which directors are to  
be elected, are eligible for election as directors of the Company. The Business 
Procedure provides that to be properly brought before an annual meeting,        
business must be specified in the notice of the annual meeting given by or at   
the direction of the Board (or any duly authorized committee thereof) or brought
before the meeting by, or at the direction of, the Board (or any duly authorized
committee thereof) or by a stockholder who has given timely written notice to   
the Secretary of the Company of such stockholder's intention to bring such      
business before such meeting. The notice from the stockholder must also meet    
certain information requirements, as further set forth in the Company Bylaws.   

  If the officer of the Company presiding at the meeting determines that a
person was not nominated in accordance with the Nomination Procedure, or that   
other business was not brought before the meeting in accordance with the        
Business Procedure, such person is not eligible for election as a director, or  
such business is not to be conducted at such meeting, as the case may be.       

    The purpose of the Nomination Procedure is, by requiring advance notice of
nomination by stockholders, to afford the Board a meaningful opportunity to     
consider the qualifications of the proposed nominees and, to the extent deemed  
necessary or desirable by the Board, to inform stockholders about such          
qualifications. The purpose of the Business Procedure is, by requiring advance  
notice of stockholder proposals, to provide a more orderly procedure for        
conducting annual meetings of stockholders and, to the extent deemed necessary  
or desirable by the Board, to provide the Board with a meaningful opportunity to
inform stockholders, prior to such meetings, of any proposal to be introduced at
such meetings, together with any recommendation as to the Board's position or   
belief as to action to be taken with respect to such proposal, so as to enable  
stockholders better to determine whether they desire to attend such meeting or  
grant a proxy to the Board as to the disposition of any such proposal. Although 
the Company Bylaws do not give the Board any power to approve or disapprove     
stockholder nominations for the election of directors or of any other proposal  
submitted by stockholders, the Company Bylaws may have the effect of precluding 
a nomination for the election of directors or precluding the conducting of      
business at a particular stockholder meeting if the proper procedures are not   
followed, and may discourage or deter a third party from conducting a           
solicitation of proxies to elect its own slate of directors or otherwise        
attempting to obtain control of the Company, even if the conduct of such        
solicitation or such attempt might be beneficial to the Company and its         
stockholders.                                                                   

Fair Price Provision                                                            

Article Sixth of the Company Certificate (the "Fair Price Provision") 
requires the approval by the holders of 80% of the voting power of the          
outstanding capital stock of the Company entitled to vote on all matters        
submitted to the stockholders, generally (the "Voting Stock") as a condition for
mergers and certain other business combinations ("Business Combinations")       
involving the Company and any holder of more than                               

50

S-4
52nd Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 52nd

ten percent (10%) of such voting power (an "Interested Stockholder"), excluding 
Voting Stock beneficially owned by the Interested Stockholder, unless the       
transaction is either (i) approved by a majority of the members of the Board who
are not affiliated with the Interested Stockholder and who were directors before
the Interested Stockholder became an Interested Stockholder (the "Continuing    
Directors") or (ii) certain minimum price and procedural requirements are met.  
These requirements include that the aggregate amount of cash and the fair market
value (as defined), as of the date of the consummation of the Business          
Combination, of consideration other than cash to be received per share by       
holders of capital stock in such Business Combination shall be at least equal to
the highest of (i) the highest per share price paid by or on behalf of the      
Interested Stockholder for any share of such capital stock in connection with   
the acquisition by the Interested Stockholder of beneficial ownership of shares 
of such capital stock (x) within the two-year period immediately prior to the   
first public announcement of the proposed Business Combination (the             
"Announcement Date") or (y) in the transaction in which it became an Interested 
Stockholder, or (ii) the fair market value per share of such capital stock on   
the Announcement Date or on the date on which the Interested Stockholder became 
an Interested Stockholder (the "Determination Date"); or (iii) as to capital    
stock other than Common Stock, the highest preferential amount per share to     
which the holders of shares of such class or series of capital stock would be   
entitled in the event of any voluntary or involuntary liquidation, dissolution  
or winding up of the affairs of the Company regardless of whether the Business  
Combination to be consummated constitutes such an event. Also, the consideration
to be received by holders of a particular class or series of outstanding capital
stock must be in cash or in the same form as previously paid by or on behalf of 
the Interested Stockholder in connection with its direct or indirect acquisition
of beneficial ownership of shares of such class or series of capital stock. If  
the consideration so paid for shares of any class or series of capital stock    
varied as to form, the form of consideration for such class or series of capital
stock must be either cash or the form used to acquire beneficial ownership of   
the largest number of shares of such class or series of capital stock previously
acquired by the Interested Stockholder. In addition, there cannot be any of     
several specified changes in the payment of regular dividends or in the holdings
of capital stock by such Interested Stockholders after the Determination Date,  
nor can the Interested Stockholders make any major change in the Company's      
business or equity capital structure.                                           

The Fair Price Provision is designed to prevent a third party from    
utilizing two-tier pricing and similar inequitable tactics in a takeover        
attempt. The Fair Price Provision is not designed to prevent or discourage      
tender offers for the Company. However, the separate provisions contained in the
Company Certificate and the Company Bylaws relating to "Classified Board of     
Directors" and "Limitations on Stockholder Action by Written Consent; Special   
Meetings" discussed above will, as therein indicated, curtail an Interested     
Stockholder's ability to exercise control in several respects, including such   
stockholder's ability to change incumbent directors who may oppose a Business   
Combination or to implement a Business Combination by written consent without a 
stockholder meeting. In addition, the Fair Price Provision would discourage some
takeover attempts by persons intending to acquire the Company in two steps and  
to eliminate remaining stockholder interests by means of a Business Combination 
involving less consideration per share than the acquiring person would propose  
to pay for its initial interest in the Company.                                 

    In addition, the Company is subject to certain anti-takeover provisions of
the DGCL which prohibit the Company from engaging in any Business Combination   
with any Interested Stockholder unless certain conditions are satisfied.        

RESALES OF SHARES 

 With the consent of the Company, this Prospectus may be used by Selling
Stockholders who have received or will receive shares of Common Stock in        
connection with acquisitions and who may wish to sell such shares of Common     
Stock under circumstances requiring or making desirable its use. The Company may
consent to the use of this Prospectus by Selling Stockholders for a limited     
period of time and subject to limitations and conditions which may be varied by 
agreement between the Company and one or more Selling Stockholders. Agreements  
with Selling Stockholders permitting use of this Prospectus may provide that an 
offering of shares of Common Stock be effected in an orderly manner through     
securities dealers, acting as broker or dealer, selected by the Company; that   
Selling Stockholders enter into custody agreements with one                     

51

S-4
53rd Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 53rd

or more banks with respect to such Shares; and that sales be made only by one or
more of the methods described in this Prospectus, as appropriately supplemented 
or amended when required. Other than in circumstances where the Company may     
receive certain benefits in connection with price guaranty arrangements, the    
Company will not receive any of the proceeds from any sale of shares of Common  
Stock offered hereby by a Selling Stockholder.                                  

     Shares of Common Stock may be sold by Selling Stockholders hereunder on one
or more exchanges or otherwise; directly to purchasers in negotiated            
transactions; by or through brokers or dealers, in ordinary brokerage           
transactions or transactions in which the broker solicits purchasers; in block  
trades in which the broker or dealer, will attempt to sell shares of Common     
Stock as agent but may position and resell a portion of the block as principal; 
in transactions in which a broker or dealer, purchases as principal for resale  
for its own account; through underwriters or agents, or in any combination of   
the foregoing methods. Shares of Common Stock may be sold at a fixed offering   
price, which may be changed, at the prevailing market price at the time of sale,
at prices related to such prevailing market price or at negotiated prices. Any  
brokers, dealers, underwriters or agents, may arrange for others to participate 
in any such transaction and may receive compensation in the form of discounts,  
commissions or concessions from Selling Stockholders and/or the purchasers of   
shares of Common Stock. The proceeds to a Selling Stockholder from any sale of  
shares of Common Stock will be net of any such compensation and of any expenses 
to be borne by the Selling Stockholder. If required at the time that a          
particular offer of shares of Common Stock is made, a supplement to this        
Prospectus will be delivered that describes any material arrangements for the   
distribution of shares of Common Stock and the terms of the offering, including,
without limitation, the names of any underwriters, brokers, dealers or agents   
and any discounts, commissions or concessions and other items constituting      
compensation from the Selling Stockholder.                                      

    Selling Stockholders and any brokers, dealers, underwriters or agents that
participate with a Selling Stockholder in the distribution of shares of Common  
Stock, may be deemed to be "underwriters" within the meaning of the Securities  
Act, in which event any discounts, commissions or concessions received by any   
such brokers, dealers, underwriters or agents and any profit on the resale of   
the shares of Common Stock purchased by them may be deemed to be underwriting   
commissions or discounts under the Securities Act.                              

 The Company may agree to indemnify Selling Stockholders and/or any such
brokers, dealers, underwriters or agents against certain civil liabilities,     
including liabilities under the Securities Act, and to reimburse them for       
certain expenses in connection with the offering and sale of shares of Common   
Stock.                                                                          

   Selling Stockholders may also offer shares of Common Stock issued in past
and future acquisitions by means of prospectuses under other available          
registration statements or pursuant to exemptions from the registration         
requirements of the Securities Act, including sales which meet the requirements 
of Rule 144, Rule 144A or Rule 145(d) under the Securities Act.                 

PLAN OF DISTRIBUTION

This Prospectus covers the offer and sale of up to 5,000,000 shares of
Common Stock, which the Company may issue from time to time in connection with  
future direct and indirect acquisitions of other businesses, properties or      
securities in business combination transactions.                                

    The Company expects that the (i) terms on which it may issue the shares of
Common Stock covered hereby will be determined by direct negotiations with the  
owners or controlling persons or the businesses or assets to be acquired, (ii)  
the shares of Common Stock issued will be valued at prices reasonably related to
market prices prevailing either at the time an acquisition agreement is executed
or at or about the time of delivery of shares.                                  

LEGAL MATTERS 

 The validity of the issuance of the Common Stock offered hereby will be
passed upon for the Company by Benesch, Friedlander, Coplan & Aronoff LLP of    
Cleveland, Ohio.                                                                

52

S-4
54th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 54th

EXPERTS 

   The consolidated financial statements of Waterlink, Inc. and subsidiaries
at September 30, 1997 and 1996 and for the years ended September 30, 1997 and   
1996 and the period from December 7, 1994 to September 30, 1995, appearing in   
this Prospectus and Registration Statement (as defined below) have been audited 
by Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such report given 
upon the authority of such firm as experts in accounting and auditing.          

ADDITIONAL INFORMATION

   The Company is subject to the reporting requirements of the Exchange Act,
and, in accordance therewith, files reports, proxy statements and other         
information with the SEC. These reports, proxy statements and other information,
once filed, may be inspected, without charge, at the public reference facilities
of the SEC at its principal office at Judiciary Plaza, 450 Fifth Street, N.W.,  
Room 1024, Washington, D.C. 20549, and its regional offices at Citicorp Center, 
500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and at 7 World    
Trade Center, 13th Floor, New York, New York 10048. Copies of all or any portion
of these documents can be obtained at prescribed rates from the Public Reference
Section of the SEC at its principal office at Judiciary Plaza, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549. The SEC maintains an Internet web site 
that contains such reports, proxy statements and other information regarding    
issuers (including the Company) that file electronically with the SEC. The      
address of that site is http://www.sec.gov.                                     

The Company has filed this Registration Statement on Form S-4 (the    
"Registration Statement") under the Securities Act with the SEC with respect to 
this offering. This Prospectus, filed as a part of the Registration Statement,  
does not contain all the information set forth therein, or the exhibits and     
schedules thereto, in accordance with the rules and regulations of the SEC, and 
reference hereby is made to that omitted information. The statements made in    
this Prospectus concerning documents filed or incorporated by reference as      
exhibits to the Registration Statement accurately describe the material         
provisions of those documents and are qualified in their entirety by reference  
to those exhibits for complete statements of their provisions. The Registration 
Statement and the exhibits and schedules thereto may be inspected and copied at 
the principal office of the SEC in Washington, D.C., as described above, and are
also available at the SEC's Internet web site described above.                  

     Proxy statements, reports and other information concerning the Company that
are filed under the Exchange Act also can be inspected at the offices of the New
York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.           

53

S-4
55th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 55th

INDEX TO FINANCIAL STATEMENTS 

                                                        [Enlarge/Download Table]

                                                                                        PAGE
                                                                                            
WATERLINK, INC. AND SUBSIDIARIES                                                            
Report of Independent Auditors........................................................  F-2 
Consolidated Balance Sheets at September 30, 1997 and 1996............................  F-3 
Consolidated Statements of Operations for the years ended September 30, 1997 and 1996       
  and the period from December 7, 1994 (date of incorporation) to September 30,             
  1995................................................................................  F-5 
Consolidated Statements of Shareholders' Equity for the years ended September 30, 1997      
  and 1996 and the period from December 7, 1994 (date of incorporation) to September        
  30, 1995............................................................................  F-6 
Consolidated Statements of Cash Flows for the years ended September 30, 1997 and 1996       
  and the period from December 7, 1994 (date of incorporation) to September 30,             
  1995................................................................................  F-7 
Notes to Consolidated Financial Statements............................................  F-8 

 F-1

S-4
56th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 56th

REPORT OF INDEPENDENT AUDITORS

TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF                                   
WATERLINK, INC.                                                                 

    We have audited the accompanying consolidated balance sheets of Waterlink,
Inc. and subsidiaries as of September 30, 1997 and 1996, and the related        
consolidated statements of operations, shareholders' equity and cash flows for  
the years ended September 30, 1997 and 1996 and the period from December 7, 1994
(date of incorporation) to September 30, 1995. These financial statements are   
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.                   

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain 
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting 
the amounts and disclosures in the financial statements. An audit also includes 
assessing the accounting principles used and significant estimates made by      
management, as well as evaluating the overall financial statement presentation. 
We believe that our audits provide a reasonable basis for our opinion.          

 In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Waterlink, Inc. and subsidiaries at September 30, 1997 and 1996, and the        
consolidated results of their operations and their cash flows for the years     
ended September 30, 1997 and 1996 and the period from December 7, 1994 to       
September 30, 1995 in conformity with generally accepted accounting principles. 

                     ERNST & YOUNG LLP
Canton, Ohio                                                                    
November 11, 1997                                                               

 F-2

S-4
57th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 57th

WATERLINK, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS 

                                                        [Enlarge/Download Table]

                                                                             SEPTEMBER 30,    
                                                                         ---------------------
                                                                           1997         1996  
                                                                         --------     --------
                                                                            (In thousands)    
                                                                                              
ASSETS                                                                                        
Current assets:                                                                               
  Cash and cash equivalents............................................  $  2,482     $    119
  Trade accounts receivable, less allowance of $775 in 1997 and $101 in                       
     1996..............................................................    24,625        5,699
  Other receivables....................................................     1,320          378
  Inventories..........................................................    10,143        3,231
  Costs in excess of billings..........................................     6,413        1,447
  Refundable income taxes..............................................       635           --
  Other current assets.................................................     1,177          172
                                                                         --------     --------
Total current assets...................................................    46,795       11,046
Property, plant and equipment, at cost:                                                       
  Land, building and improvements......................................     2,366          750
  Machinery and equipment..............................................     2,536          383
  Office equipment.....................................................     1,463          747
                                                                         --------     --------
                                                                            6,365        1,880
  Less accumulated depreciation........................................       554          103
                                                                         --------     --------
                                                                            5,811        1,777
Other assets:                                                                                 
  Goodwill, net of amortization of $929 in 1997 and $287 in 1996.......    60,419       15,029
  Patents, net of amortization of $63 in 1997 and $18 in 1996..........     1,484          749
  Deferred income taxes................................................       611           --
  Other assets.........................................................       740          390
                                                                         --------     --------
                                                                           63,254       16,168
                                                                         --------     --------
Total assets...........................................................  $115,860     $ 28,991
                                                                         ========     ========

The accompanying notes are an integral part of these statements.

 F-3

S-4
58th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 58th

WATERLINK, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS 

                                                        [Enlarge/Download Table]

                                                                            SEPTEMBER 30,     
                                                                        --------------------- 
                                                                          1997         1996   
                                                                        --------     -------- 
                                                                           (In thousands,     
                                                                         except share data)   
                                                                                              
LIABILITIES AND SHAREHOLDERS' EQUITY                                                          
Current liabilities:                                                                          
  Accounts payable -- trade............................................ $  9,597     $  2,076 
  Accrued expenses.....................................................    9,447        1,931 
  Additional purchase consideration payable............................    1,760        1,013 
  Billings in excess of cost...........................................    3,425          559 
  Accrued income taxes.................................................      490           60 
  Deferred income taxes................................................      108           -- 
  Current portion of long-term obligations.............................    2,538        1,969 
                                                                        --------     -------- 
Total current liabilities..............................................   27,365        7,608 
Long-term obligations:                                                                        
  Long-term debt.......................................................   12,502        4,676 
  Notes payable -- related parties.....................................       --        3,100 
  Convertible subordinated notes -- related parties....................    3,921        2,400 
  Other................................................................    1,199          300 
                                                                        --------     -------- 
                                                                          17,622       10,476 
Redeemable Preferred Stock.............................................       --        8,500 
Shareholders' equity:                                                                         
  Preferred Stock, $.001 par value, 10,000,000 shares authorized, none                        
     issued and outstanding                                                                   
  Common Stock, voting, $.001 par value                                                       
     Authorized -- 40,000,000 shares                                                          
     Issued and outstanding -- 11,906,326 shares in 1997 and 1,999,996                        
      shares in 1996...................................................       12            2 
  Additional paid-in capital...........................................   70,739        2,611 
  Foreign currency translation adjustment..............................      (44)          -- 
  Retained earnings (deficit)..........................................      166         (206)
                                                                        --------     -------- 
Total shareholders' equity.............................................   70,873        2,407 
                                                                        --------     -------- 
Total liabilities and shareholders' equity............................. $115,860     $ 28,991 
                                                                        ========     ======== 

The accompanying notes are an integral part of these statements.

 F-4

S-4
59th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 59th

WATERLINK, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS 

                                                        [Enlarge/Download Table]

                                                           YEAR ENDED                             
                                                          SEPTEMBER 30,            PERIOD FROM    
                                                       -------------------     DECEMBER 7, 1994 TO
                                                        1997        1996       SEPTEMBER 30, 1995 
                                                       -------     -------     -------------------
                                                          (In thousands, except per share data)   
                                                                                                  
Net sales............................................. $64,699     $19,801           $ 2,684      
Cost of sales.........................................  40,390      11,233             1,857      
                                                       -------     -------           -------      
Gross profit..........................................  24,309       8,568               827      
Selling, general and administrative expenses..........  18,683       7,029             1,178      
Special management compensation.......................   2,630          --                --      
Amortization..........................................     751         307                15      
                                                       -------     -------           -------      
Operating income (loss)...............................   2,245       1,232              (366)     
Other income (expense):                                                                           
  Interest expense....................................  (1,281)       (877)             (144)     
  Interest income and other items -- net..............     263         (44)               33      
                                                       -------     -------           -------      
Income (loss) before income taxes.....................   1,227         311              (477)     
Income taxes..........................................     470           5                35      
                                                       -------     -------           -------      
Income (loss) before extraordinary item...............     757         306              (512)     
Extraordinary item, net of income taxes of $257.......    (385)         --                --      
                                                       -------     -------           -------      
Net income (loss)..................................... $   372     $   306           $  (512)     
                                                       =======     =======           =======      
Net income (loss) per common share:                                                               
  Income (loss) before extraordinary item............. $  0.09     $  0.05           $ (0.11)     
  Extraordinary item..................................   (0.05)         --                --      
                                                       -------     -------           -------      
                                                       $  0.04     $  0.05           $ (0.11)     
                                                       =======     =======           =======      
Weighted-average common and equivalent shares                                                     
  outstanding.........................................   8,337       6,428             4,534      
                                                       =======     =======           =======      

The accompanying notes are an integral part of these statements.

 F-5

S-4
60th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 60th

WATERLINK, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY 

                                                        [Enlarge/Download Table]

                                                                   FOREIGN                   TOTAL      
                                                   ADDITIONAL     CURRENCY      RETAINED   SHAREHOLDERS'
                                           COMMON   PAID-IN      TRANSLATION    EARNINGS     EQUITY     
                                           STOCK    CAPITAL      ADJUSTMENT     (DEFICIT)  (DEFICIT)    
                                           ------  ----------    -----------    --------   ----------   
                                                       (In thousands, except share data)                
                                                                                                        
PERIOD FROM DECEMBER 7, 1994 TO SEPTEMBER                                                               
  30, 1995                                                                                              
Sale of 1,200,000 shares (initial                                                                       
  capitalization)........................   $  1                                            $      1    
Issuance of 250,000 shares in connection                                                                
  with acquisition of subsidiary.........           $    500                                     500    
Net loss.................................                                        $ (512)        (512)   
                                             ---     -------         ----          ----      -------    
Balance at September 30, 1995............      1         500                       (512)         (11)   
YEAR ENDED SEPTEMBER 30, 1996                                                                           
Exercise of 50,000 stock options.........                  5                                       5    
Issuance of 499,996 shares in connection                                                                
  with acquisition of subsidiary.........      1       2,124                                   2,125    
Net income...............................                                           306          306    
Other....................................                (18)                                    (18)   
                                             ---     -------         ----          ----      -------    
Balance at September 30, 1996............      2       2,611                       (206)       2,407    
YEAR ENDED SEPTEMBER 30, 1997                                                                           
Conversion of subordinated notes for                                                                    
  600,000 shares.........................      1       2,516                                   2,517    
Issuance of 481,830 shares in connection                                                                
  with acquisition of subsidiaries.......      1       4,843                                   4,844    
Sale of 5,175,000 shares in connection                                                                  
  with the initial public offering and                                                                  
  the exercise of the underwriters                                                                      
  overallotment..........................      5      49,935                                  49,940    
Conversion of 3,250,000 shares of                                                                       
  Preferred Stock........................      3       8,497                                   8,500    
Issuance of warrants in connection with                                                                 
  debt agreements........................                413                                     413    
Exercise of 399,500 stock options........                583                                     583    
Net income...............................                                           372          372    
Other....................................              1,341          (44)                     1,297    
                                             ---     -------         ----          ----      -------    
Balance at September 30, 1997............   $ 12    $ 70,739        $ (44)       $  166     $ 70,873    
                                             ===     =======         ====          ====      =======    

The accompanying notes are an integral part of these statements.

 F-6

S-4
61st Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 61st

WATERLINK, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS 

                                                        [Enlarge/Download Table]

                                                          YEAR ENDED                              
                                                         SEPTEMBER 30,             PERIOD FROM    
                                                     ---------------------     DECEMBER 7, 1994 TO
                                                       1997         1996       SEPTEMBER 30, 1995 
                                                     --------     --------     -------------------
                                                                    (In thousands)                
                                                                                                  
OPERATING ACTIVITIES                                                                              
Net income (loss)................................... $    372     $    306          $    (512)    
Adjustments to reconcile net income (loss) to net                                                 
  cash used by operating activities:                                                              
     Extraordinary item.............................      385           --                 --     
     Special management compensation................    1,138           --                 --     
     Deferred income taxes (credit).................     (549)          --                 --     
     Depreciation and amortization..................    1,229          442                 30     
     Changes in working capital:                                                                  
       Accounts receivable..........................   (8,951)        (700)            (1,258)    
       Inventories..................................     (827)         432                290     
       Cost in excess of billings...................      (13)      (1,390)                --     
       Refundable income taxes......................     (123)          --                 --     
       Other assets.................................      462          (80)              (112)    
       Accounts payable.............................    2,265          390                229     
       Accrued expenses.............................        5          896                295     
       Billings in excess of cost...................   (2,725)        (276)               168     
       Accrued income taxes.........................      624          (34)                26     
                                                     --------     --------           --------     
Net cash used by operating activities...............   (6,708)         (14)              (844)    
INVESTING ACTIVITIES                                                                              
Purchases of equipment..............................   (1,072)        (423)               (93)    
Purchases of subsidiaries, net of cash acquired.....  (42,597)      (5,557)            (6,508)    
                                                     --------     --------           --------     
Net cash used in investing activities...............  (43,669)      (5,980)            (6,601)    
FINANCING ACTIVITIES                                                                              
Proceeds from long-term borrowings..................   33,110        1,841              4,539     
Payments on long-term borrowings....................  (30,866)      (1,304)                --     
Proceeds from sale of Common Stock..................   50,523            5                  1     
Proceeds from sale of Preferred Stock...............       --        4,576              3,900     
                                                     --------     --------           --------     
Net cash provided by financing activities...........   52,767        5,118              8,440     
Effect of exchange rate changes on cash.............      (27)          --                 --     
Increase (decrease) in cash and cash equivalents....    2,363         (876)               995     
Cash and cash equivalents at beginning of period....      119          995                 --     
                                                     --------     --------           --------     
Cash and cash equivalents at end of period.......... $  2,482     $    119          $     995     
                                                     ========     ========           ========     

The accompanying notes are an integral part of these statements.

 F-7

S-4
62nd Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 62nd

WATERLINK, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 1997

1. ACCOUNTING POLICIES                                                          

PRINCIPLES OF CONSOLIDATION                                                     

  The consolidated financial statements include the accounts of Waterlink,
Inc. and its wholly-owned subsidiaries (the "Company"). All significant         
intercompany accounts and transactions have been eliminated upon consolidation. 

FISCAL YEAR END                                                                 

   The Company's fiscal year ends on September 30th. References in the notes
to the financial statements to the years 1997 and 1996 refer to the fiscal years
ended September 30, 1997 and 1996, respectively. References in the notes to the 
financial statements to 1995 refer to the period from December 7, 1994 (date of 
incorporation) to September 30, 1995.                                           

CASH EQUIVALENTS                                                                

The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.                     

REVENUE RECOGNITION                                                             

     The majority of the Company's systems and equipment are custom designed and
take a number of months to produce. Revenues from large contracts are recognized
using the percentage of completion method of accounting in the proportion that  
costs bear to total estimated costs at completion. Revisions of estimated costs 
or potential contract losses, if any, are recognized in the period in which they
are determined. Revenues from the remaining equipment and product sales are     
recognized when shipped.                                                        

CONCENTRATIONS OF CREDIT RISK                                                   

Financial instruments which potentially subject the Company to        
concentrations of credit risk consist principally of cash equivalents and trade 
receivables. The Company places its cash equivalents with high quality financial
institutions.                                                                   

     Concentrations of credit risk with respect to trade receivables are limited
due to the Company's large number of customers and their dispersion across many 
different regions and industries. The Company grants credit to customers based  
on an evaluation of their financial condition and collateral is generally not   
required. Losses from credit sales are provided for in the financial statements 
and have historically been within management's expectations.                    

INVENTORIES                                                                     

   Inventories are valued at the lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) method.                                    

FINANCIAL INSTRUMENTS                                                           

The carrying values of cash, cash equivalents, accounts receivable and
accounts payable are a reasonable estimate of fair value due to the short-term  
nature of these instruments. Substantially all of the Company's long-term debt  
obligations, except for the convertible subordinated notes -- related parties,  
have variable rates and cost approximates fair value at September 30, 1997. The 
convertible subordinated notes -- related parties do not have a ready market and
cost is assumed to approximate fair value. The carrying value of these notes is 

 F-8

S-4
63rd Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 63rd

WATERLINK, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1997

1. ACCOUNTING POLICIES (CONTINUED)                                              
$3,921,000 at September 30, 1997, with interest rates of 3% and 5.81% and       
maturity dates through September 1999.                                          

PROPERTY, PLANT AND EQUIPMENT                                                   

   Property, plant and equipment is valued at cost. Expenditures for repairs
and maintenance are charged to operations as incurred, while expenditures for   
additions and improvements are capitalized. Depreciation is computed principally
using the straight-line method over the estimated useful lives of assets. The   
useful lives range from 30 to 40 years for building and improvements; 5 to 10   
years for machinery and equipment and 3 to 7 years for office equipment.        

GOODWILL                                                                        

  Goodwill represents costs in excess of net assets of acquired businesses
which are amortized using the straight-line method over a period of 40 years.   
The Company evaluates the realizability of goodwill based on the undiscounted   
cash flows of the applicable businesses acquired over the remaining amortization
period. Should the review indicate that goodwill is not recoverable, the        
Company's carrying value of goodwill would be reduced by the estimated shortfall
of the cash flows. No reduction of goodwill for impairment has been necessary to
date.                                                                           

FOREIGN CURRENCY TRANSLATION                                                    

Assets and liabilities of subsidiaries are translated at the rate of  
exchange in effect on the balance sheet date; income and expenses are translated
at the average rates of exchange prevailing during the year. The related        
translation adjustments are reflected as a separate component of shareholders'  
equity. Foreign currency gains and losses resulting from transactions are       
included in the results of operations and amounted to a gain of $167,000 in     
1997.                                                                           

EMPLOYEE BENEFIT PLAN                                                           

    Effective February 1, 1996, the Company implemented a defined contribution
plan which covers substantially all employees. Company contributions to the plan
in 1997 totaled $13,000. No Company contributions were made in 1996.            

NET INCOME (LOSS) PER SHARE                                                     

  Net income (loss) per share is computed by dividing net income (loss) by
the weighted-average number of shares of Common Stock and common stock          
equivalents outstanding during the year. These shares include common shares     
outstanding, convertible Preferred Stock (all of which converted, according to  
their terms, upon completion of the Company's initial public offering ("IPO") in
June 1997) and common shares which are issuable upon exercise of outstanding    
stock options and warrants.                                                     

  Pursuant to Securities and Exchange Commission Staff Accounting Bulletin
(SAB) No. 83, stock options and warrants granted by the Company during the      
twelve months preceding the Company's IPO date have been included as common     
stock equivalents as if they were outstanding for all periods presented prior to
the Company's IPO, using the treasury stock method.                             

 F-9

S-4
64th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 64th

WATERLINK, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1997

1. ACCOUNTING POLICIES (CONTINUED)                                              
USE OF ESTIMATES                                                                

The preparation of financial statements in conformity with generally  
accepted accounting principles requires management to make estimates and        
assumptions that affect the amounts reported in the financial statements and    
accompanying notes. Actual results could differ from those estimates.           

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS                                  

  In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per        
Share,and SFAS No. 129, Disclosure of Information about Capital Structure. The  
Company is required to adopt both standards during the first quarter of fiscal  
1998. SFAS No. 128 replaces the presentation of primary earnings per share (EPS)
under Accounting Principle Board Opinion No. 15 and related Interpretations,    
with the presentation of basic EPS (which primarily gives effect only to common 
shares actually outstanding) and requires dual presentation of basic and diluted
EPS on the face of the income statement for all entities with complex capital   
structures. Under SFAS No. 128 and SAB No. 83, the Company's 1997 basic and     
diluted EPS would be $.05 per share and $.04 per share, respectively. SFAS No.  
129's primary focus is to expand the number of entities subject to certain      
capital structure disclosure requirements, particularly nonpublic entities, and 
accordingly, will not have a significant impact on the Company's disclosures.   

   In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of
an Enterprise and Related Information, which changes the way public companies   
report segment information in annual financial statements. The Statement also   
requires public companies to report selected segment information in interim     
financial reports to shareholders. The Statement is effective for the Company in
fiscal 1999 and restatement of comparative information for earlier years is     
required in the initial year of adoption. Management does not expect the        
adoption of SFAS No. 131 to have a material impact on the Company's financial   
statement disclosures.                                                          

2. ACQUISITIONS                                                                 

On March 5, 1997, the Company acquired the Nordic Water Products Group
("Nordic Group") for approximately $11,256,000, consisting of $10,721,000 in    
cash and $535,000 of seller notes. The Nordic Group manufactures continuous     
recirculating sand filters, included plate settlers and systems for nutrient    
removal, decanting centrifuges for dewatering biosolids and hydraulic surface   
and bottom scrappers. The Nordic Group also designs and builds water            
purification and wastewater treatment plants in Europe. The purchase price      
includes approximately $5,731,000 of goodwill, which is being amortized on a    
straight-line basis over 40 years.                                              

 Concurrent with the closing of the Company's IPO, on June 27, 1997, the
Company acquired Bioclear Technology, Inc. ("Bioclear") and Lanco Environmental 
Products, Inc. ("Lanco"), for approximately $22,591,000, consisting of          
$16,688,000 in cash, $2,285,000 of assumed debt and 328,947 shares of Common    
Stock valued at $11 per share. Bioclear designs and builds sequential batch     
reactor systems to biologically treat industrial and municipal wastewater, and  
Lanco fabricates small plate and frame filter presses for dewatering biosolids  
and inclined plate clarifiers for heavy metal removal. The amount of goodwill   
recorded in connection with these acquisitions was approximately $19,682,000 and
is being amortized on a straight-line basis over 40 years.                      

On September 12, 1997, the Company acquired Mellegard V.A. Maskiner AB
("Meva") for approximately $6,838,000; consisting of $5,167,000 in cash and     
$1,671,000 of convertible subordinated notes. Meva specializes in the design and
installation of fine screens and related accessories for wastewater treatment   

F-10

S-4
65th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 65th

WATERLINK, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1997

2. ACQUISITIONS (CONTINUED)                                                     
applications. The purchase price includes approximately $4,952,000 of goodwill, 
which is being amortized on a straight-line basis over 40 years.                

     On September 30, 1997, the Company acquired Hycor Corporation ("Hycor") for
approximately $16,002,000; consisting of $12,500,000 in cash, $2,250,000 in     
convertible subordinated notes, $502,000 of assumed debt and 41,095 shares of   
Common Stock at $18.25 per share. Hycor designs and manufactures screening and  
dewatering equipment for liquid/solid separation in industrial and municipal    
wastewater and process applications. The purchase price includes approximately  
$13,871,000 of goodwill, which will be amortized on a straight-line basis over  
40 years.                                                                       

During fiscal 1996, the Company completed the acquisition of three    
companies that design and produce water and wastewater treatment systems. Mass  
Transfer Systems, Inc. was purchased effective January 31, 1996 for             
approximately $8,000,000, consisting of $3,500,000 in cash, $4,100,000 in seller
notes and $400,000 of assumed debt. Aero-Mod, Inc. and affiliates was purchased 
effective April 26, 1996 for approximately $2,700,000, consisting of $1,300,000 
in cash, $700,000 in seller notes and $700,000 in assumed debt. Water Equipment 
Technologies, Inc. was purchased effective September 30, 1996 for approximately 
$5,200,000, consisting of $2,600,000 in cash and 611,784 shares of Common Stock 
valued at $4.25 per share. The aggregate purchase price of the 1996 acquisitions
included approximately $9,328,000 of goodwill (Mass Transfer Systems,           
Inc. -- $5,737,000; Aero-Mod, Inc. -- $78,000 and Water Equipment Technologies, 
Inc. -- $3,513,000), which is being amortized on a straight-line basis over 40  
years.                                                                          

    During fiscal 1995, the Company acquired SanTech Equipment, Inc. and Great
Lakes Environmental, Inc. which design and produce industrial separation        
systems, wastewater pretreatment systems and oil/water separation products.     
SanTech Equipment, Inc. was purchased effective March 31, 1995 for cash of      
approximately $750,000. Great Lakes Environmental, Inc. was purchased effective 
August 31, 1995 for approximately $8,500,000, consisting of $5,800,000 of cash, 
$2,200,000 of seller obligations and 250,000 shares of Common Stock at $2.00 per
share. The purchase price of the Great Lakes Environmental, Inc. acquisition    
included approximately $7,784,000 of goodwill, which is amortized on a          
straight-line basis over 40 years.                                              

     All of the acquisitions were accounted for as purchases. The purchase price
allocations for certain of the Company's 1997 acquisitions have been based on   
preliminary estimates, which may be revised at a later date. The consolidated   
statement of operations of the Company includes the results of operations of the
acquired businesses for the period subsequent to the effective date of these    
acquisitions.                                                                   

   Under the terms of certain of the purchase agreements, the Company may be
required to make additional purchase consideration payments of up to $6,545,000,
contingent upon the achievement of specified operating results through fiscal   
2000. The payments that may be required in fiscal 1998, 1999 and 2000 are       
$4,100,000, $1,713,000 and $732,000, respectively. In connection with two of the
Company's acquisitions, the Company also may be required to make other          
additional purchase consideration payments in the form of cash and common stock,
in an amount equal to a fixed percentage of the excess of certain specified     
annual earnings targets through fiscal 2000. Since such additional purchase     
consideration payments, if any, are based on a fixed percentage of such excess  
amount, there is no maximum amount for such payments. Any such additional       
purchase consideration payments will be treated as additional goodwill for      
accounting purposes.                                                            

F-11

S-4
66th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 66th

WATERLINK, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1997

2. ACQUISITIONS (CONTINUED)                                                     
 The following unaudited pro forma information presents the consolidated
results of operations of the Company assuming the acquisitions discussed above  
were completed on October 1, 1995:                                              

                                                                [Download Table]

                                                           1997         1996  
                                                         --------     --------
                                                            (In thousands)    
                                                                              
Net sales..............................................  $111,026     $ 93,384
Operating profit.......................................     6,861        5,977
Income before taxes....................................     3,052          627
Income before extraordinary item.......................     1,740          357
Net income.............................................     1,355          357
Per common share:                                                             
  Income before extraordinary item.....................  $   0.21     $   0.05
  Net income...........................................      0.16         0.05

The pro forma results of operations are not indicative of the actual  
results of operations that would have occurred had the acquisitions been made on
the date indicated, or the results that may be obtained in the future. The above
pro forma operating results do not reflect the use of proceeds of the IPO and   
the resulting reduction of indebtedness. Pro forma operating results for the    
year ended September 30, 1997 reflect the $2,630,000 special compensation charge
and the extraordinary item of $385,000 incurred in connection with the IPO, as  
described in Notes 8 and 9.                                                     

3. INVENTORIES                                                                  

Inventories consisted of the following:                               

                                                                [Download Table]

                                                              SEPTEMBER 30,   
                                                           -------------------
                                                            1997        1996  
                                                           -------     -------
                                                             (In thousands)   
                                                                              
Raw materials and supplies...............................  $ 4,821     $ 1,864
Work in process and finished goods.......................    5,322       1,367
                                                           -------     -------
                                                           $10,143     $ 3,231
                                                           =======     =======

4. CONTRACT BILLING STATUS                                                      

   Information with respect to the billing status of contracts in process is
as follows:                                                                     

                                                                [Download Table]

                                                              SEPTEMBER 30,   
                                                           -------------------
                                                            1997        1996  
                                                           -------     -------
                                                             (In thousands)   
                                                                              
Contract costs incurred to date..........................  $17,033     $ 1,957
Estimated profits........................................    7,793       1,864
                                                           -------     -------
Contract revenue earned to date..........................   24,826       3,821
Less billings to date....................................   21,838       2,933
                                                           -------     -------
Cost and estimated earnings in excess of billings, net...  $ 2,988     $   888
                                                           =======     =======

F-12

S-4
67th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 67th

WATERLINK, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1997

4. CONTRACT BILLING STATUS (CONTINUED)                                          
 The above amounts are included in the accompanying consolidated balance
sheet as:                                                                       

                                                                [Download Table]

                                                              SEPTEMBER 30,   
                                                           -------------------
                                                            1997        1996  
                                                           -------     -------
                                                             (In thousands)   
                                                                              
Costs in excess of billings..............................  $ 6,413     $ 1,447
Billings in excess of costs..............................    3,425         559
                                                           -------     -------
                                                           $ 2,988     $   888
                                                           =======     =======

    Amounts receivable include retainage which has been billed, but is not due
pursuant to retainage provisions in construction contracts until completion of  
performance and acceptance by the customer. This retainage aggregated $1,294,000
at September 30, 1997, and $528,000 at September 30, 1996. Substantially all    
retained balances are collectible within one year.                              

5. LONG-TERM DEBT OBLIGATIONS                                                   

Long-term debt obligations consisted of the following:                

                                                        [Enlarge/Download Table]

                                                                      SEPTEMBER 30,   
                                                                   -------------------
                                                                    1997        1996  
                                                                   -------     -------
                                                                     (In thousands)   
                                                                                      
LONG-TERM DEBT                                                                        
  Revolving credit agreements with a bank, due June 27, 2000.                         
     Interest is payable monthly at designated variable rates.                        
     (6.69% at September 30, 1997)...............................  $12,000     $    --
  Subordinated note to former parent of acquired business due                         
     November 24, 1997. Interest is payable at maturity at a rate                     
     of 7% per annum.............................................      535          --
  Note payable to a bank, due January 14, 1998. Interest is                           
     payable at maturity at a rate of 4.4%.......................    1,807          --
  Note payable in annual installments of $100,000, including                          
     interest at 9.25%, commencing June 1999 through June 2005...      502          --
  Note payable to a bank, interest payable monthly at a rate of                       
     4.75%.......................................................      196          --
  Term notes payable to banks....................................       --       5,093
  Revolving credit agreement.....................................       --         672
  Other notes payable to various parties.........................       --          80
NOTES PAYABLE -- RELATED PARTIES                                                      
  Subordinated notes payable to former shareholders of acquired                       
     companies...................................................       --       3,900

F-13

S-4
68th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 68th

WATERLINK, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1997

                                                        [Enlarge/Download Table]

                                                                          SEPTEMBER 30,   
                                                                       -------------------
                                                                        1997        1996  
                                                                       -------     -------
                                                                         (In thousands)   
                                                                                          

5. LONG-TERM DEBT OBLIGATIONS (CONTINUED)                                                 
    CONVERTIBLE SUBORDINATED NOTES -- RELATED PARTIES                                     
      Note payable to former shareholders of Meva, due September 12,                      
         1999. Interest accrues at 3% per annum and is payable on a                       
         quarterly basis.............................................    1,671          --
      Note payable to a former shareholder of Hycor, due September                        
         30, 1999. Interest accrues at 5.81% per annum and is payable                     
         on a quarterly basis........................................    2,250          --
      Notes payable to former shareholders of acquired companies.....       --       2,400
                                                                       -------     -------
                                                                        18,961      12,145
    Less current maturities..........................................    2,538       1,969
                                                                       -------     -------
                                                                       $16,423     $10,176
                                                                       =======     =======

Future maturities of long-term debt obligations for the five years    
subsequent to September 30, 1997 are as follows: 1998 -- $2,538,000;            
1999 -- $3,924,000; 2000 -- $12,054,000; 2001 -- $59,000 and 2002 -- $64,000.   

Interest paid approximated $1,605,000 in 1997 and $631,000 in 1996.   

    On February 19, 1997, the Company entered into a credit facility with Bank
of America National Trust & Savings Association ("Credit Facility"). Proceeds   
from the Credit Facility were used to acquire the Nordic Group and to refinance 
certain indebtedness in connection with the acquisition. As additional          
consideration for the Credit Facility, the Company granted the Bank, pursuant to
an agreement dated February 19, 1997, a warrant, expiring in 2002, to purchase  
225,000 shares of Common Stock at a purchase price of $4.50 per share. The      
aggregate fair value of the 225,000 warrants issued of $265,500 ($1.18 per      
share) was treated as an original issue discount and was subsequently written   
off in connection with the extraordinary charge discussed in Note 9.            

On June 27, 1997, concurrent with the closing of its IPO, the Company 
terminated its Credit Facility and entered into a new $40,000,000 three year,   
secured, domestic revolving credit facility with Bank of America National Trust 
& Savings Association as agent. This facility permits the Company's overseas    
subsidiaries to incur up to $10,000,000 of additional unsecured indebtedness. In
connection with entering into the domestic revolving credit facility, the       
existing separate facilities of the two overseas subsidiaries were amended to   
provide availability of $4,000,000 and $3,000,000, respectively. The $40,000,000
domestic revolving credit facility and the $7,000,000 overseas facilities (the  
"New Credit Facility") will be utilized to fund operating activities of the     
Company as well as future acquisitions.                                         

    Loans under the domestic revolving credit facility will bear interest at a
designated variable base rate plus spreads ranging from 0 to 25 basis points    
depending on the ratio of total consolidated indebtedness to the Company's      
earnings before interest, taxes, depreciation and amortization. At the Company's
option, the domestic revolving credit facility will bear interest based on a    
designated London interbank offering rate plus spreads ranging from 100 to 200  
basis points. At September 30, 1997, approximately $32,404,000 was available    
under the New Credit Facility.                                                  

The New Credit Facility restricts or prohibits the Company from many  
actions, including paying dividends and incurring or assuming other indebtedness
or liens. The Company's obligations under the New                               

F-14

S-4
69th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 69th

WATERLINK, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1997

5. LONG-TERM DEBT OBLIGATIONS (CONTINUED)                                       
Credit Facility are secured by liens on substantially all of the Company's      
domestic assets, including equipment, inventory, accounts receivable and general
intangibles and pledge of most of the stock of the Company's subsidiaries. The  
two overseas subsidiaries have given a negative pledge of their assets in       
connection with the overseas facilities.                                        

  In September 1997, the Company entered into a $3,000,000 credit facility
("Canadian Line-of-Credit") with Royal Bank of Canada, a participant in the     
Credit Agreement above, to fund Canadian working capital requirements including 
bankers acceptances and letters of credit. Interest rates are negotiated on an  
individual borrowing basis and are related to the Royal Bank of Canada's prime  
rate. Borrowings are payable upon demand and are guaranteed by Bioclear. At     
September 30, 1997, approximately $802,000 was available under the Canadian     
Line-of-Credit.                                                                 

   Convertible subordinated notes payable to former shareholders of acquired
companies of $2,400,000, plus accrued interest, were converted into 600,000     
shares of Common Stock in 1997.                                                 

In March 1997, the Company entered into a note purchase agreement (the
"Note Purchase Agreement") pursuant to which the Company could issue, and       
several purchasers had committed to purchase, five year subordinated notes (the 
"1997 Notes"). The 1997 Notes were not drawn on by the Company and upon the     
consummation of the IPO the Note Purchase Agreement terminated in accordance    
with its terms. In consideration for entering into the Note Purchase Agreement, 
parties agreeing to be purchasers of the 1997 Notes received 125,000 warrants to
purchase shares of common stock at a purchase price of $4.50 per share. The     
aggregate fair value of the 125,000 warrants issued of $148,000 ($1.18 per      
share) was initially capitalized as deferred financing costs and was            
subsequently written off in connection with the extraordinary charge discussed  
in Note 9.                                                                      

6. LEASES                                                                       

     The Company leases certain facilities and equipment under operating leases,
some of which are with an entity controlled by former shareholders of certain   
acquired businesses. The Company believes that the rents due under the related  
party leases are comparable to those which would be charged by an unrelated     
party. Rent expense totaled $959,000 in 1997, $241,000 in 1996 and $64,000 in   
1995. Related party rent expense included in these totals amounted to $438,000  
in 1997 and $116,000 in 1996. Aggregate future minimum lease payments under     
noncancelable operating leases at September 30, 1997 are as follows:            

                                                                [Download Table]

                                                   RELATED                      
                                                    PARTY      OTHER            
                                                   LEASES      LEASES     TOTAL 
                                                   -------     ------     ------
                                                          (In thousands)        
                                                                                
1998.............................................  $   677     $  588     $1,265
1999.............................................      687        471      1,158
2000.............................................      697        357      1,054
2001.............................................      573        349        922
2002.............................................      259        198        457
Thereafter.......................................    3,295        195      3,490
                                                    ------     ------     ------
                                                   $ 6,188     $2,158     $8,346
                                                    ======     ======     ======

F-15

S-4
70th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 70th

WATERLINK, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1997

7. REDEEMABLE PREFERRED STOCK                                                   

Redeemable Preferred Stock at September 30, 1996 consisted of 400,000 
shares of Series A Preferred Stock (issued in 1995), 1,700,000 shares of Series 
B Preferred Stock (issued in 1995) and 1,150,000 shares of Series C Preferred   
Stock (issued in 1996). These shares had a par value of $.001 per share and a   
base liquidation price of $1.25 per share for Series A Preferred Shares, $2.00  
per share for Series B Preferred Shares, and $4.00 per share for Series C       
Preferred Shares.                                                               

     In accordance with the terms of the shareholder agreements, all outstanding
shares of Preferred Stock were converted into shares of Common Stock on a       
one-for-one basis concurrent with the Company's IPO in June 1997.               

8. SPECIAL MANAGEMENT COMPENSATION                                              

In June 1997, the Company incurred a special charge to operations of  
$2,630,000 resulting primarily from the issuance, concurrent with the IPO, of a 
ten year option to purchase 100,000 shares of common stock at a price of $0.10  
per share to an officer of the Company pursuant to terms of an employment       
agreement. Of this amount, approximately $1,138,000 is non-cash and the         
remainder represents cash obligations related principally to the reimbursement  
of income taxes resulting from the stock option issuance. This special charge   
after income taxes on a per share basis was $0.20 for the year ended September  
30, 1997.                                                                       

9. EXTRAORDINARY ITEM                                                           

The Company used a portion of the proceeds from its IPO to repay      
substantially all of its outstanding indebtedness. In addition, concurrent with 
the IPO the Company canceled the Note Purchase Agreement discussed in Note 5. In
connection with the early retirement of certain indebtedness and the            
cancellation of the Note Purchase Agreement, the Company realized an            
extraordinary charge of $385,000, net of taxes of $257,000, related to the      
write-off of unamortized debt issuance costs and discounts associated with this 
indebtedness. This extraordinary item on a per share basis was $0.05 for the    
year ended September 30, 1997.                                                  

10. INCOME TAXES                                                                

The provision for income taxes consists of the following:             

                                                                [Download Table]

                                                    1997       1996       1995 
                                                   ------     ------     ------
                                                          (In thousands)       
                                                                               
Current:                                                                       
  U.S. federal...................................  $  807     $   --     $   --
  State and local................................     (48)         5         35
  Foreign........................................     214         --         --
                                                   ------     ------     ------
                                                      973          5         35
Deferred.........................................    (549)        99         --
Increase (reduction) in valuation allowance......      46        (99)        --
                                                   ------     ------     ------
                                                   $  470     $    5     $   35
                                                   ======     ======     ======

 The Company made income tax payments of approximately $220,000 in 1997,
$40,000 in 1996 and $9,000 in 1995.                                             

F-16

S-4
71st Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 71st

WATERLINK, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1997

10. INCOME TAXES (CONTINUED)                                                    
   Following is the reconciliation between the provision (credit) for income
taxes and the amount computed by applying the statutory U.S. federal income tax 
rate of 34% to income before income taxes:                                      

                                                                [Download Table]

                                                   1997       1996       1995   
                                                  ------     ------     ------  
                                                         (In thousands)         
                                                                                
Provision (credit) for income taxes at the                                      
  statutory federal rate......................... $  417     $  106     $ (162) 
  Adjustments:                                                                  
     State and local income taxes................    (32)         5         35  
     Non-deductible goodwill amortization........     71         --         --  
     Difference in rates on foreign                                             
       subsidiaries..............................    (46)        --         --  
     Change in valuation allowance...............     46        (99)       163  
     Other.......................................     14         (7)        (1) 
                                                  ------     ------     ------  
Provision for income taxes....................... $  470     $    5     $   35  
                                                  ======     ======     ======  
Effective income tax rate........................     38%         2%        (7)%
                                                  ======     ======     ======  

Deferred income taxes reflect the net effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting  
purposes and the amounts used for income tax purposes. The tax effects of the   
net operating loss carryforward and temporary differences are as follows:       

                                                                [Download Table]

                                                    1997       1996       1995  
                                                   ------     ------     ------ 
                                                          (In thousands)        
                                                                                
Deferred tax assets:                                                            
  Net operating loss carryforward................  $  771     $  152     $   85 
  Other..........................................     645        133         78 
  Valuation allowance............................    (110)       (64)      (163)
                                                   ------     ------     ------ 
                                                    1,306        221         -- 
Deferred tax liabilities:                                                       
  Amortization of goodwill.......................    (261)      (164)        -- 
  Revenue recognition............................    (485)        --         -- 
  Other..........................................     (57)       (57)        -- 
                                                   ------     ------     ------ 
                                                     (803)      (221)        -- 
                                                   ------     ------     ------ 
Net deferred tax asset...........................  $  503     $   --     $   -- 
                                                   ======     ======     ====== 

For tax purposes, the Company has U.S. federal loss carryforwards of  
$1,193,000 which expire in the year 2012 and foreign net operating loss         
carryforwards of $1,175,000 that expire in 2003 . A valuation allowance has been
established for certain net operating loss carryforwards for which realization  
is uncertain.                                                                   

11. STOCK OPTION PLANS                                                          

 During 1997, the Board of Directors approved the Omnibus Incentive Plan
(the "Omnibus Plan") which provides for compensatory equity based awards to     
officers and certain other key employees of the Company. Awards may be granted  
for no consideration and consist of stock options, stock awards, SARs, dividend 
equivalents, other stock based awards (such as phantom stock) and performance   
awards consisting of any combination of the foregoing. There have been no awards
granted under this plan.                                                        

F-17

S-4
72nd Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 72nd

WATERLINK, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1997

11. STOCK OPTION PLANS (CONTINUED)                                              
 The Company's 1995 Stock Option Plan (the "Stock Option Plan") provides
grants to officers, key employees, and directors of awards consisting of        
"incentive stock options" as defined under the provisions of Section 422 of the 
Code, and non-qualified stock options. There are 1,600,000 shares of Common     
Stock available for granting of awards under the Stock Option Plan. All options 
granted under the Stock Option Plan expire ten years after the date of grant    
(see Note 12).                                                                  

   The Company's 1997 Non-Employee Director Stock Option Plan (the "Director
Plan") is authorized to issue up to 150,000 shares of Common Stock. Each        
non-employee director is automatically granted an option to purchase 3,000      
shares of Common Stock. In addition, on each anniversary date of the Director   
Plan, each of the Company's then non-employee directors who have served at least
six-months shall automatically be granted an option to purchase 5,000 shares of 
Common Stock. The per share exercise price of options granted under the Director
Plan will be the fair market value of the Common Stock on the date of grant.    
Options granted under the Director Plan will expire ten years after the date of 
grant (see Note 12).                                                            

    Under the Company's Employee Stock Purchase Plan (the "Plan"), the Company
is authorized to issue up to 500,000 shares of Common Stock. Under the terms of 
the Plan, employees can choose to have up to 20% of their annual compensation   
withheld to purchase Common Stock. The exercise price for shares subject to     
purchase under options granted shall be 85% of the fair market value of the     
Common Stock on the first day of the purchase period, unless otherwise          
determined by the compensation committee. On the last day of the purchase period
of any offering of shares made under the Plan, each outstanding option shall    
automatically be exercised. At any time prior to the end of the purchase period 
applicable to each offering, an employee is permitted to terminate or reduce his
or her payroll deductions, to reduce his or her options to purchase or to       
withdraw all or part of the amount in his or her account. The employee has the  
right to receive in cash the amount accumulated in such account. The Plan will  
terminate ten years from the date of adoption.                                  

12. STOCK BASED COMPENSATION                                                    

 It is the Company's policy to generally grant stock options for a fixed
number of shares to employees with the exercise price approximating fair value. 
The Company has elected to follow APB Opinion No. 25, "Accounting for Stock     
Issued to Employees" ("APB 25"), and related Interpretations and accordingly,   
recognizes no compensation expense for stock options granted at fair value.     
Management believes that the alternative fair value accounting provided for     
under FASB Statement No. 123, "Accounting For Stock Based Compensation" ("SFAS  
123"), requires use of option valuation methods that were not developed for use 
in valuing employee stock options. Under APB 25, compensation expense has been  
recognized for all options granted at less than the fair market value of the    
Company's common shares on the date of grant (see Note 8).                      

Pro forma information regarding net income and earnings per share is  
required by SFAS 123 and has been determined as if the Company had accounted for
its employee stock options under the fair value method of that Statement. The   
fair value of these options and the options granted as part of the Plan were    
estimated at the date of grant using a Black-Scholes option pricing model with  
the following weighted-average assumptions for 1997 and 1996: risk-free interest
rate of 6.0%, dividend yield rate of 0%, volatility factor of the expected      
market price of the Company's stock of 30% and a weighted-average expected life 
of the options of 5 years.                                                      

F-18

S-4
73rd Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 73rd

WATERLINK, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1997

12. STOCK BASED COMPENSATION (CONTINUED)                                        
Using the Black-Scholes model, the weighted-average grant-date fair value of    
options granted during 1997 and 1996 in the Stock Option Plan follows:          

                                                        [Enlarge/Download Table]

                                                          1997                1996       
                                                   ------------------  ------------------
                                                    FAIR     EXERCISE   FAIR     EXERCISE
                                                   VALUE      PRICE    VALUE      PRICE  
                                                   ------    --------  ------    --------
                                                                                         
Stock price equals exercise price................. $ 4.28     $11.20   $ 1.53     $ 3.92 
Stock price is greater than exercise price........     --         --     4.18        .10 
Stock price is less than exercise price...........     --         --     1.54       4.40 

  The weighted-average grant-date fair value of the options granted during
1997 under the Plan was $4.86.                                                  

The Black-Scholes option valuation model was developed for use in     
estimating the fair value of traded options which have no vesting restrictions  
and are fully transferable. In addition, option valuation models require the    
input of highly subjective assumptions including the expected stock price       
volatility. Because the Company's employee stock options have characteristics   
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in  
management's opinion, the existing models do not necessarily provide a reliable 
single measure of the fair value of its employee stock options.                 

   For purposes of pro forma disclosures, the estimated value of the options
is amortized to expense over the options' vesting period. The pro forma results 
are not necessarily indicative of what would have occurred had the Company      
adopted SFAS 123. The Company's pro forma information follows:                  

                                                                [Download Table]

                                                                   1997        1996 
                                                                   -----       -----
                                                                    (In thousands,  
                                                                   except per share 
                                                                         data)      
                                                                                    
Pro forma net (loss) income....................................... $(331)      $ 268
Pro forma earnings (loss) per share...............................  (.04)        .04

  A summary of the Company's stock option activity and related information
follows:                                                                        

                                                        [Enlarge/Download Table]

                                           1997                   1996                   1995         
                                   ---------------------  ---------------------  ---------------------
                                                WEIGHTED               WEIGHTED               WEIGHTED
                                                AVERAGE                AVERAGE                AVERAGE 
                                    NUMBER      EXERCISE   NUMBER      EXERCISE   NUMBER      EXERCISE
                                   OF SHARES     PRICE    OF SHARES     PRICE    OF SHARES     PRICE  
                                   ---------    --------  ---------    --------  ---------    --------
                                                                                                      
Outstanding at beginning of                                                                           
  year............................   666,500     $ 2.96    215,000      $  .10         --          -- 
Granted...........................   808,800       9.98    501,500        3.88    215,000      $  .10 
Exercised.........................  (184,500)       .33    (50,000)        .10         --          -- 
                                   ---------      -----    -------       -----    -------       ----- 
Outstanding at end of year........ 1,290,800     $ 8.48    666,500      $ 2.96    215,000      $  .10 
                                   =========      =====    =======       =====    =======       ===== 
Exercisable at end of year........   583,000     $ 3.98      3,750          --         --          -- 
                                   =========      =====    =======       =====    =======       ===== 
Available for future options......    74,700                83,500                185,000             
                                   =========               =======                =======             

The Company has reserved 1,715,500 shares of Common Stock for possible
exercise of outstanding stock options and warrants.                             

F-19

S-4
74th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 74th

WATERLINK, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1997

13. GEOGRAPHIC AREA DATA                                                        

   The Company operates in a single industry, providing integrated water and
wastewater treatment solutions to industry and municipalities worldwide. The    
Company has a strategy of acquisition and internal growth to provide integrated 
products, technologies and services to water users globally. Export sales       
represented approximately one-third of U.S. sales in 1997 and 1996.             

Revenue transfers between geographic areas and other intergeographic  
eliminations are not material. The Company does not derive more than 10% of its 
total revenue from any individual customer.                                     

   Prior to 1997, the Company's operations were all domestic. Information by
geographic area for the year ended September 30, 1997 follows:                  

                                                        [Enlarge/Download Table]

                                      UNITED STATES   SWEDEN     GERMANY      OTHER    CONSOLIDATED
                                      -------------  --------    --------    --------  ------------
                                                             (In thousands)                        
                                                                                                   
Net sales............................   $  43,015    $ 12,440    $  7,840    $  1,404    $ 64,699  
Operating income (1).................         787       1,276         137          45       2,245  
Income before income taxes (1).......         431         763          14          19       1,227  
Assets employed at year end..........      62,489      25,127       5,972      22,272     115,860  

---------------                                                                 

(1) The special management compensation charge of $2,630,000 is included under  
the United States.                                                      

F-20

S-4
75th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 75th

======================================================

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY            
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR 
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE         
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO     
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE  
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED  
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.                        

------------------

TABLE OF CONTENTS 

                                                                [Download Table]

                                        PAGE  
                                        ----- 
                                              
Prospectus Summary......................     3
Risk Factors............................     5
The Company.............................    11
Price Range of Common Stock.............    12
Dividend Policy.........................    13
Capitalization..........................    14
Selected Financial Data.................    15
Management's Discussion and Analysis of       
  Financial Condition and Results of          
  Operations............................    17
Business................................    23
Management..............................    30
Certain Transactions....................    42
Security Ownership......................    43
Shares Eligible for Future Sale.........    44
Description of Capital Stock............    45
Resales of Shares.......................    51
Plan of Distribution....................    52
Legal Matters...........................    52
Experts.................................    53
Additional Information..................    53
Index to Financial Statements...........   F-1

======================================================
======================================================

5,000,000 SHARES

WATERLINK, INC. 

COMMON STOCK

------------------
PROSPECTUS
------------------

                    , 1998
======================================================

S-4
76th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 76th

PART II 

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20.  INDEMNIFICATION OF DIRECTORS AND OFFICERS                             

  Section 145 of the Delaware General Corporation Law (the "DGCL") permits
the indemnification of the directors and officers of the Company. The Company   
Bylaws provide that it will indemnify the officers, directors, employees and    
agents of the Company to the extent permitted by the DGCL.                      

   The Company Certificate provides for the indemnification of directors and
officers of the Company, and persons who serve or served at the request of the  
Company as a director, officer, employee or agent of another corporation,       
including service with respect to employee benefit plans, against all expense,  
liability and loss (including attorneys' fees, judgments, fines, ERISA excise   
taxes or penalties in amounts paid or to be paid in settlement) reasonably      
incurred with respect to any action, suit or proceeding, whether civil,         
criminal, administrative, or investigative, provided, however, the Company shall
indemnify any such person seeking indemnification in connection with a          
proceeding initiated by such person only if such proceeding was authorized by   
the Company's Board. In the event a claim for indemnification by any person has 
not been paid in full by the Company after written request has been received by 
the Company, the claimant may at any time thereafter bring suit against the     
Company to recover the unpaid amount of the claim and, if successful in whole or
in part, the claimant shall be entitled to be paid also the expense of          
prosecuting such claim. The right to indemnification conferred in the Company   
Certificate is a contract right and shall include the right to be paid by the   
Company the expenses incurred in defending any such proceeding in advance of its
final disposition. The Company maintains insurance, at its expense, to protect  
itself and any director, officer, employee or agent of the Company against any  
such expense, liability or loss, whether or not the Company would have the power
to indemnify such person against such expense, liability or loss under state    
law.                                                                            

ITEM 21.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULE                             

(a) Exhibits                                                                    

                                                        [Enlarge/Download Table]

EXHIBIT                                                                                     
  NO.                                        DESCRIPTION                                    
--------  ----------------------------------------------------------------------------------
                                                                                            
  *3.1    Form of Fifth Amended and Restated Certificate of Incorporation of the Company    
          (filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the       
          quarterly period ended June 30, 1997, File No. 1-13041).                          
  *3.2    Form of Amended and Restated By-Laws of the Company (filed as an exhibit to the   
          Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30,   
          1997, File No. 1-13041).                                                          
  *4.1    Form of Rights Agreement, dated as of May 23, 1997, between the Company and       
          American Stock Transfer & Trust Company (filed as an exhibit to the Company's     
          Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1997, File  
          No. 1-13041).                                                                     
  *4.2    Amended and Restated Registration Rights Agreement, dated as of March 6, 1997, by 
          and among the Company, Brantley Venture Partners III, L.P., Theodore F. Savastano,
          River Cities Capital Fund limited Partnership, IPP95, L.P., Environmental         
          Opportunities Fund, L.P., Environmental Opportunities Fund (Cayman), L.P.,        
          Brantley Capital Corporation and National City Capital Corporation (filed as an   
          exhibit to the Company's Registration Statement on Form S-1, filed April 16, 1997,
          Registration No. 333-25249).                                                      
  *4.3    Registration Rights Agreement, dated as of January 31, 1996, between the Company  
          and Mass Transfer Systems, Inc (filed as an exhibit to the Company's Registration 
          Statement on Form S-1, filed April 16, 1997, Registration No. 333-25249).         
  *4.4    Registration Rights Agreement, dated as of April 26, 1996, between the Company and
          Lawrence A. Schmid (filed as an exhibit to the Company's Registration Statement on
          Form S-1, filed April 16, 1997, Registration No. 333-25249).                      

II-1

S-4
77th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 77th

                                                        [Enlarge/Download Table]

EXHIBIT                                                                                     
  NO.                                        DESCRIPTION                                    
--------  ----------------------------------------------------------------------------------
                                                                                            
  *4.5    Registration Rights Agreement dated as of September 30, 1996, between the Company,
          Lawrence Stenger, Theresa Stenger, Ronald Jaworski, Christine Jaworski, John      
          Stenger, Dawn P. Stenger, Scott Stenger, Kristie D. Stenger, Jorg Menningman,     
          Michael Mudrick, Robert Young and Gary Prae (filed as an exhibit to the Company's 
          Registration Statement on Form S-1, filed April 16, 1997, Registration No.        
          333-25249).                                                                       
   5.1    Opinion of Benesch, Friedlander, Coplan & Aronoff LLP.                            
 *10.1    Employment Agreement, dated May 23, 1997, between the Company and Chet S. Ross    
          (filed as an exhibit to the Company's Amendment No. 1 to Registration Statement on
          Form S-1, filed May 23, 1997, Registration No. 333-25249).                        
 *10.2    Employment Agreement, dated May 23, 1997, between the Company and Theodore F.     
          Savastano (filed as an exhibit to the Company's Amendment No. 1 to Registration   
          Statement on Form S-1, filed May 23, 1997, Registration No. 333-25249).           
 *10.3    Employment Agreement, dated May 23, 1997, between the Company and Michael J.      
          Vantusko (filed as an exhibit to the Company's Amendment No. 1 to Registration    
          Statement on Form S-1, filed May 23, 1997, Registration No. 333-25249).           
 *10.4    Employment Agreement, dated May 23, 1997, between the Company and L. Dean Hertert,
          Jr. (filed as an exhibit to the Company's Amendment No. 1 to Registration         
          Statement on Form S-1, filed May 23, 1997, Registration No. 333-25249).           
 *10.5    Employment Agreement, dated July 1, 1987, between Nordic Water Products AB and Dr.
          Hans F. Larsson (filed as an exhibit to the Company's Amendment No. 1 to          
          Registration Statement on Form S-1, filed May 23, 1997, Registration No.          
          333-25249).                                                                       
 *10.6    Credit Agreement, dated as of February 19, 1997 among the Company, Bank of America
          Illinois, as agent, and the other financial institutions party thereto (filed as  
          an exhibit to the Company's Registration Statement on Form S-1, filed April 16,   
          1997, Registration No. 333-25249).                                                
 *10.7    Brantley Guaranty, dated as of February 19, 1997, by Brantley Venture Partners,   
          III, L.P. in favor of Bank of America Illinois, as agent, on behalf of the other  
          financial institutions party to the Credit Agreement, dated as of February 19,    
          1997 (filed as an exhibit to the Company's Registration Statement on Form S-1,    
          filed April 16, 1997, Registration No. 333-25249).                                
 *10.8    Credit Agreement, dated as of June 27, 1997, among the Company, Bank of America   
          National Trust & Savings Association (successor by merger to Bank of America      
          Illinois), as agent, and for other financial institutions party thereto (filed as 
          an exhibit to the Company's Quarterly Report on Form 10-Q for the quarterly period
          ended June 30, 1997, File No. 1-13041).                                           
 *10.9    Credit Agreement, dated as of March 4, 1997, among Gigantissimo 2061 AB (to be    
          known as Waterlink (Sweden) AB), the Company, as guarantor, and Bank of America   
          National Trust & Savings Association, London Branch (filed as an exhibit to the   
          Company's Registration Statement on Form S-1, filed April 16, 1997, Registration  
          No. 333-25249).                                                                   
 *10.10   First Amendment, dated as of June 27, 1997, to Credit Agreement, dated March 4,   
          1997, among Waterlink (Sweden) AB, the Company, as guarantor, and Bank of America 
          National Trust & Savings Association, London Branch (filed as an exhibit to the   
          Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30,   
          1997, File No. 1-13041).                                                          
 *10.11   Credit Agreement, dated as of March 4, 1997 among Provista Einhundertsechs        
          [sigma]undfunfzigste Verwaltungsgesellschaft mbH (to be known as Waterlink        
          (Germany) GmbH), Waterlink, Inc., as guarantor, and Bank of America National Trust
          & Savings Association, Frankfurt Branch (filed as an exhibit to the Company's     
          Registration Statement on Form S-1, filed April 16, 1997, Registration No.        
          333-25249).                                                                       
 *10.12   First Amendment, dated as of June 27, 1997, to Credit Agreement, dated March 4,   
          1997, among Waterlink (Germany) GmbH, the Company, as guarantor, and Bank of      
          America National Trust & Savings Association, Frankfurt Branch (filed as an       
          exhibit to the Company's Quarterly Report on Form 10-Q for the quarterly period   
          ended June 30, 1997, File No. 1-13041).                                           
 *10.13   Common Stock Warrant Agreement, dated as of February 19, 1997, between the Company
          and Bank of America Illinois (filed as an exhibit to the Company's Registration   
          Statement on Form S-1, filed April 16, 1997, Registration No. 333-25249).         

II-2

S-4
78th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 78th

                                                        [Enlarge/Download Table]

EXHIBIT                                                                                     
  NO.                                        DESCRIPTION                                    
--------  ----------------------------------------------------------------------------------
                                                                                            
 *10.14   The Company's 1995 Stock Option Plan (filed as an exhibit to the Company's        
          Registration Statement on Form S-1, filed April 16, 1997, Registration No.        
          333-25249).                                                                       
 *10.15   Subordinated Note Purchase Agreement and Credit Facility, dated as of March 6,    
          1997, among the Company, Brantley Venture Partners III, L.P. and the purchasers   
          named therein, along with the Form of Subordinated Note due 2002 attached thereto 
          as Exhibit A (filed as an exhibit to the Company's Registration Statement on Form 
          S-1, filed April 16, 1997, Registration No. 333-25249).                           
 *10.16   Warrant Agreement, dated as of March 6, 1997, among the Company and each of the   
          purchasers named therein, along with the Form of Warrant to Purchase Common Stock,
          attached thereto as Exhibit A (filed as an exhibit to the Company's Registration  
          Statement on Form S-1, filed April 16, 1997, Registration No. 333-25249).         
 *10.17   The Company's 1997 Omnibus Incentive Plan (filed as an exhibit to the Company's   
          Amendment No. 1 to Registration Statement on Form S-1, filed May 23, 1997,        
          Registration No. 333-25249).                                                      
 *10.18   Asset Purchase Agreement, dated January 31, 1996, among the Company, Waterlink    
          Acquisition Corporation, Mass Transfer Systems, Inc., Mark E. Neville and         
          Frederick J. Siino (filed as an exhibit to the Company's Registration Statement on
          Form S-1, filed April 16, 1997, Registration No. 333-25249).                      
 *10.19   Asset Purchase Agreement, dated April 26, 1996, among the Company, A-M            
          Acquisitions Corp., Aero-Mod Incorporated, Resi-Tech, Inc. and Lawrence A. Schmid 
          (filed as an exhibit to the Company's Registration Statement on Form S-1, filed   
          April 16, 1997, Registration No. 333-25249).                                      
 *10.20   Asset Purchase Agreement, dated April 26, 1996, among the Company, B-W Acquisition
          Corp., Blue Water Services, Inc. and Lawrence A. Schmid (filed as an exhibit to   
          the Company's Registration Statement on Form S-1, filed April 16, 1997,           
          Registration No. 333-25249).                                                      
 *10.21   Agreement and Plan of Merger, dated September 27, 1996, by and among the Company, 
          Wet Acquisition Corp. and Water Equipment Technologies, Inc. and the shareholders 
          of Water Equipment Technologies, Inc (filed as an exhibit to the Company's        
          Registration Statement on Form S-1, filed April 16, 1997, Registration No.        
          333-25249).                                                                       
 *10.22   Share Purchase Agreement, dated March 4, 1997, among Waterlink (Sweden) AB,       
          Waterlink (Germany) GmbH, Awpe Svenska AB and Anglian Water Holding GmbH (filed as
          an exhibit to the Company's Registration Statement on Form S-1, filed April 16,   
          1997, Registration No. 333-25249).                                                
 *10.23   Purchase and Sale Agreement, dated March 14, 1995, among Santech, Inc. (as        
          assignee from the Company pursuant to an Assignment of Purchase and Sale Agreement
          dated March 28, 1995) and Sanborn, Inc (filed as an exhibit to the Company's      
          Registration Statement on Form S-1, filed April 16, 1997, Registration No.        
          333-25249).                                                                       
 *10.24   Asset Purchase Agreement, dated August 28, 1995, among Great Lakes Environmental, 
          Inc., a Delaware corporation (as assignee from the Company pursuant to an         
          Assignment dated August 31, 1995), Great Lakes Environmental, Inc., an Illinois   
          corporation, Lawrence Field and David Field (filed as an exhibit to the Company's 
          Registration Statement on Form S-1, filed April 16, 1997, Registration No.        
          333-25249).                                                                       
 *10.25   The Company's Employee Stock Purchase Plan (filed as an exhibit to the Company's  
          Registration Statement on Form S-1, filed April 16, 1997, Registration No.        
          333-25249).                                                                       
 *10.26   First Amendment, dated as of June 23, 1997, to the Company's Employee Stock       
          Purchase Plan (filed as an exhibit to the Company's Quarterly Report on Form 10-Q 
          for the quarterly period ended June 30, 1997, File No. 1-13041).                  
 *10.27   The Company's 1997 Non-Employee Director Stock Option Plan.                       
 *10.28   Stock Purchase Agreement among Waterlink (Sweden) AB, Waterlink, Inc. and the     
          shareholders of Mellegard V.A. Maskiner AB dated September 12, 1997 (filed as an  
          exhibit to the Company's Current Report on Form 8-K, filed September 26, 1997,    
          File No. 1-13041).                                                                

II-3

S-4
79th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 79th

                                                        [Enlarge/Download Table]

EXHIBIT                                                                                     
  NO.                                        DESCRIPTION                                    
--------  ----------------------------------------------------------------------------------
                                                                                            
 *10.29   Stock Purchase Agreement dated September 30, 1997 among Waterlink, Inc., Philip A.
          Thompson and the Hycor Corporation Employee Stock Ownership Trust (filed as an    
          exhibit to the Company's Current Report on Form 8-K, filed October 14, 1997, File 
          No. 1-13041).                                                                     
 *10.30   Stock Purchase Agreement between Waterlink, Inc., and David Romanow, Joe Romanow, 
          Brian Topnik and Robert Jenkyns dated as of April 15, 1997 (filed as an exhibit to
          the Company's Current Report on Form 8-K, filed July 9, 1997, File No. 1-13041).  
 *10.31   Stock Purchase Agreement between Great Lakes Environmental, Inc. and David M. Rice
          dated as of April 14, 1997 (filed as an exhibit to the Company's Amendment No. 1  
          to Registration Statement on Form S-1, filed May 23, 1997, Registration No.       
          333-25249).                                                                       
 *10.32   Letter Agreement among Waterlink, Inc., Bioclear Technology, Inc. and Royal Bank  
          of Canada dated September 24, 1997(filed as an exhibit to the Company's Annual    
          Report on Form 10-K, filed December 3, 1997, File No. 1-13041).                   
 *11.1    Computation of per share earnings (filed as an exhibit to the Company's Annual    
          Report on Form 10-K, filed December 3, 1997, File No. 1-13041).                   
 *21.1    List of Subsidiaries of the Company (filed as an exhibit to the Company's Annual  
          Report on Form 10-K, filed December 3, 1997, File No. 1-13041).                   
  23.1    Consent of Ernst & Young LLP.                                                     
  23.2    Consent of Benesch, Friedlander, Coplan & Aronoff LLP (contained in its Opinion   
          filed as Exhibit 5.1 hereto).                                                     
  24.1    Powers of Attorney (included on signature page).                                  

---------------                                                                 

* Incorporated herein by reference as indicated.                                

(b) Financial Statement Schedules.                                              

None.                                                                           

(c) Reports, Opinions and Appraisals.                                           

None.                                                                           

ITEM 22.  UNDERTAKINGS                                                          

(a) The undersigned registrant hereby undertakes:                               

   (1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:                        

     (i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;                                               

       (ii) To reflect in the prospectus any facts or events arising after
the Effective Time of the registration statement (or the most recent  
    post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the    
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
    deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission  
 pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
   price represent no more than a 20 percent change in the maximum aggregate
    offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement;                                 

         (iii) To include any material information with respect to the plan of
    distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;    

     (2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new     
registration statement relating to the securities offered therein, and the      
offering of such securities at that time shall be deemed to be the initial bona 
fide offering thereof.                                                          

II-4

S-4
80th Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 80th

    (3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.                                                                       

(b) The undersigned registrant hereby undertakes that, for the purpose of       
determining any liability under the Securities Act of 1933, each filing of the  
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the    
Securities Exchange Act of 1934 (and, where applicable, each filing of an       
employee benefit plan's annual report pursuant to Section 15(d) of the          
Securities Exchange Act of 1934) that is incorporated by reference in the       
registration statement shall be deemed to be a new registration statement       
relating to the securities offered therein, and the offering of such securities 
at that time shall be deemed to be the initial bona fide offering thereof.      

(c) Insofar as indemnification for liabilities arising under the Securities Act 
of 1933 may be permitted to directors, officers and controlling persons of the  
registrant pursuant to the foregoing provisions, or otherwise, the registrant   
has been advised that in the opinion of the Securities and Exchange Commission  
such indemnification is against public policy as expressed in the Act and is,   
therefore, unenforceable. In the event that a claim for indemnification against 
such liabilities (other than the payment by the registrant of expenses incurred 
by a director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the   
registrant will, unless in the opinion of its counsel the matter has been       
settled by controlling precedent, submit to a court of appropriate jurisdiction 
the question whether such indemnification by it is against public policy as     
expressed in the Act and will be governed by the final adjudication of such     
issue.                                                                          

(d) (1) The undersigned registrant hereby undertakes as follows: that prior to  
any public reoffering of the securities registered hereunder through use of a   
prospectus which is a part of this registration statement, by any person or     
party who is deemed to be an underwriter within the meaning of Rule 145(c), the 
issuer undertakes that such reoffering prospectus will contain the information  
called for by the applicable registration form with respect to reofferings by   
persons who may be deemed underwriters, in addition to the information called   
for by the other items of the applicable form.                                  

(2) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet  
the requirements of Section 10(a)(3) of the Act and is used in connection with  
an offering of securities subject to Rule 415, will be filed as a part of an    
amendment to the registration statement and will not be used until such         
amendment is effective, and that, for purposes of determining any liability     
under the Securities Act of 1933, each such post-effective amendment shall be   
deemed to be a new registration statement relating to the securities offered    
therein, and the offering of such securities at that time shall be deemed to be 
the initial bona fide offering thereof.                                         

(e) The undersigned registrant hereby undertakes to respond to requests for     
information that is incorporated by reference into the prospectus pursuant to   
Items 4, 10(b), 11 or 13 of this Form within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other    
equally prompt means. This includes information contained in documents filed    
subsequent to the Effective Time of the registration statement through the date 
of responding to the request                                                    

(f) The undersigned registrant hereby undertakes to supply by means of a        
post-effective amendment all information concerning a transaction, and the      
company being acquired involved therein, that was not the subject of and        
included in the registration statement when it became effective.                

II-5

S-4
81st Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 81st

SIGNATURES

     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS      
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON THE 9TH DAY OF JANUARY,
1998.                                                                           

                   WATERLINK, INC.

                        By: /s/ CHET S. ROSS
                                            ------------------------------------
                    Chet S. Ross
                                     President and Chief Executive
                   Officer

KNOW ALL MEN BY THESE PRESENTS, that each of the individuals whose    
signature appears below constitutes and appoints Chet S. Ross and Michael J.    
Vantusko, or any of them, his true and lawful attorney-in-fact and agent, with  
full power of substitution and resubstitution, for him and in his name, place   
and stead, in any and all capacities, to sign any and all amendments to this    
Registration Statement, and to file the same, with all exhibits thereto, and    
other documents in connection therewith, with the Securities and Exchange       
Commission, granting unto said attorney-in-fact and agent full power and        
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said      
attorney-in-fact, agent, or his substitute may lawfully do or cause to be done  
by virtue hereof.                                                               

 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS AMENDMENT TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING   
PERSONS IN THE CAPACITIES AND ON THE DATE INDICATED.                            

                                                        [Enlarge/Download Table]

              SIGNATURE                                TITLE                        DATE       
-------------------------------------  -------------------------------------- -----------------
                                                                                               

      /s/ THEODORE F. SAVASTANO        Chairman of the Board                  January 9, 1998  
-------------------------------------                                                          
        Theodore F. Savastano                                                                  

          /s/ CHET S. ROSS             President, Chief Executive             January 9, 1998  
-------------------------------------  Officer and Director                                    
            Chet S. Ross               (Principal Executive Officer)                           
       /s/ MICHAEL J. VANTUSKO         Chief Financial Officer                January 9, 1998  
-------------------------------------  (Principal Financial and                                
         Michael J. Vantusko           Accounting Officer)                                     

        /s/ ROBERT P. PINKAS           Director                               January 9, 1998  
-------------------------------------                                                          
          Robert P. Pinkas                                                                     

         /s/ JOHN R. MILLER            Director                               January 9, 1998  
-------------------------------------                                                          
           John R. Miller                                                                      

        /s/ ROLLIN S. REITER           Director                               January 9, 1998  
-------------------------------------                                                          
          Rollin S. Reiter                                                                     

       /s/ DR. PAUL M. SUTTON          Director                               January 9, 1998  
-------------------------------------                                                          
         Dr. Paul M. Sutton                                                                    

II-6

S-4
82nd Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 82nd

EXHIBIT INDEX 

                                                        [Enlarge/Download Table]

EXHIBIT                                                                                        PAGE    
  NO.                                        DESCRIPTION                                        NO.    
--------  ---------------------------------------------------------------------------------------------
                                                                                                       

  *3.1    Form of Fifth Amended and Restated Certificate of Incorporation of the Company               
          (filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the                  
          quarterly period ended June 30, 1997, File No. 1-13041).                                     
  *3.2    Form of Amended and Restated By-Laws of the Company (filed as an exhibit to the              
          Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30,              
          1997, File No. 1-13041).                                                                     
  *4.1    Form of Rights Agreement, dated as of May 23, 1997, between the Company and                  
          American Stock Transfer & Trust Company (filed as an exhibit to the Company's                
          Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1997, File             
          No. 1-13041).                                                                                
  *4.2    Amended and Restated Registration Rights Agreement, dated as of March 6, 1997, by            
          and among the Company, Brantley Venture Partners III, L.P., Theodore F. Savastano,           
          River Cities Capital Fund limited Partnership, IPP95, L.P., Environmental                    
          Opportunities Fund, L.P., Environmental Opportunities Fund (Cayman), L.P.,                   
          Brantley Capital Corporation and National City Capital Corporation (filed as an              
          exhibit to the Company's Registration Statement on Form S-1, filed April 16, 1997,           
          Registration No. 333-25249).                                                                 
  *4.3    Registration Rights Agreement, dated as of January 31, 1996, between the Company             
          and Mass Transfer Systems, Inc (filed as an exhibit to the Company's Registration            
          Statement on Form S-1, filed April 16, 1997, Registration No. 333-25249).                    
  *4.4    Registration Rights Agreement, dated as of April 26, 1996, between the Company and           
          Lawrence A. Schmid (filed as an exhibit to the Company's Registration Statement on           
          Form S-1, filed April 16, 1997, Registration No. 333-25249).                                 
  *4.5    Registration Rights Agreement dated as of September 30, 1996, between the Company,           
          Lawrence Stenger, Theresa Stenger, Ronald Jaworski, Christine Jaworski, John                 
          Stenger, Dawn P. Stenger, Scott Stenger, Kristie D. Stenger, Jorg Menningman,                
          Michael Mudrick, Robert Young and Gary Prae (filed as an exhibit to the Company's            
          Registration Statement on Form S-1, filed April 16, 1997, Registration No.                   
          333-25249).                                                                                  
   5.1    Opinion of Benesch, Friedlander, Coplan & Aronoff LLP.                                       
 *10.1    Employment Agreement, dated May 23, 1997, between the Company and Chet S. Ross               
          (filed as an exhibit to the Company's Amendment No. 1 to Registration Statement on           
          Form S-1, filed May 23, 1997, Registration No. 333-25249).                                   
 *10.2    Employment Agreement, dated May 23, 1997, between the Company and Theodore F.                
          Savastano (filed as an exhibit to the Company's Amendment No. 1 to Registration              
          Statement on Form S-1, filed May 23, 1997, Registration No. 333-25249).                      
 *10.3    Employment Agreement, dated May 23, 1997, between the Company and Michael J.                 
          Vantusko (filed as an exhibit to the Company's Amendment No. 1 to Registration               
          Statement on Form S-1, filed May 23, 1997, Registration No. 333-25249).                      
 *10.4    Employment Agreement, dated May 23, 1997, between the Company and L. Dean Hertert,           
          Jr. (filed as an exhibit to the Company's Amendment No. 1 to Registration                    
          Statement on Form S-1, filed May 23, 1997, Registration No. 333-25249).                      
 *10.5    Employment Agreement, dated July 1, 1987, between Nordic Water Products AB and Dr.           
          Hans F. Larsson (filed as an exhibit to the Company's Amendment No. 1 to                     
          Registration Statement on Form S-1, filed May 23, 1997, Registration No.                     
          333-25249).                                                                                  
 *10.6    Credit Agreement, dated as of February 19, 1997 among the Company, Bank of America           
          Illinois, as agent, and the other financial institutions party thereto (filed as             
          an exhibit to the Company's Registration Statement on Form S-1, filed April 16,              
          1997, Registration No. 333-25249).                                                           
 *10.7    Brantley Guaranty, dated as of February 19, 1997, by Brantley Venture Partners,              
          III, L.P. in favor of Bank of America Illinois, as agent, on behalf of the other             
          financial institutions party to the Credit Agreement, dated as of February 19,               
          1997 (filed as an exhibit to the Company's Registration Statement on Form S-1,               
          filed April 16, 1997, Registration No. 333-25249).                                           

S-4
83rd Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 83rd

EXHIBIT INDEX -- CONTINUED

                                                        [Enlarge/Download Table]

EXHIBIT                                                                                        PAGE    
  NO.                                        DESCRIPTION                                        NO.    
--------  ---------------------------------------------------------------------------------------------
                                                                                                       
 *10.8    Credit Agreement, dated as of June 27, 1997, among the Company, Bank of America              
          National Trust & Savings Association (successor by merger to Bank of America                 
          Illinois), as agent, and for other financial institutions party thereto (filed as            
          an exhibit to the Company's Quarterly Report on Form 10-Q for the quarterly period           
          ended June 30, 1997, File No. 1-13041).                                                      
 *10.9    Credit Agreement, dated as of March 4, 1997, among Gigantissimo 2061 AB (to be               
          known as Waterlink (Sweden) AB), the Company, as guarantor, and Bank of America              
          National Trust & Savings Association, London Branch (filed as an exhibit to the              
          Company's Registration Statement on Form S-1, filed April 16, 1997, Registration             
          No. 333-25249).                                                                              
 *10.10   First Amendment, dated as of June 27, 1997, to Credit Agreement, dated March 4,              
          1997, among Waterlink (Sweden) AB, the Company, as guarantor, and Bank of America            
          National Trust & Savings Association, London Branch (filed as an exhibit to the              
          Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30,              
          1997, File No. 1-13041).                                                                     
 *10.11   Credit Agreement, dated as of March 4, 1997, among Provista                                  
          Einhundertsechs[sigma]undfunfzigste Verwaltungsgesellschaft mbH (to be known as              
          Waterlink (Germany) GmbH), Waterlink, Inc., as guarantor, and Bank of America                
          National Trust & Savings Association, Frankfurt Branch (filed as an exhibit to the           
          Company's Registration Statement on Form S-1, filed April 16, 1997, Registration             
          No. 333-25249).                                                                              
 *10.12   First Amendment, dated as of June 27, 1997, to Credit Agreement, dated March 4,              
          1997, among Waterlink (Germany) GmbH, the Company, as guarantor, and Bank of                 
          America National Trust & Savings Association, Frankfurt Branch (filed as an                  
          exhibit to the Company's Quarterly Report on Form 10-Q for the quarterly period              
          ended June 30, 1997, File No. 1-13041).                                                      
 *10.13   Common Stock Warrant Agreement, dated as of February 19, 1997, between the Company           
          and Bank of America Illinois (filed as an exhibit to the Company's Registration              
          Statement on Form S-1, filed April 16, 1997, Registration No. 333-25249).                    
 *10.14   The Company's 1995 Stock Option Plan (filed as an exhibit to the Company's                   
          Registration Statement on Form S-1, filed April 16, 1997, Registration No.                   
          333-25249).                                                                                  
 *10.15   Subordinated Note Purchase Agreement and Credit Facility, dated as of March 6,               
          1997, among the Company, Brantley Venture Partners III, L.P. and the purchasers              
          named therein, along with the Form of Subordinated Note due 2002 attached thereto            
          as Exhibit A (filed as an exhibit to the Company's Registration Statement on Form            
          S-1, filed April 16, 1997, Registration No. 333-25249).                                      
 *10.16   Warrant Agreement, dated as of March 6, 1997, among the Company and each of the              
          purchasers named therein, along with the Form of Warrant to Purchase Common Stock,           
          attached thereto as Exhibit A (filed as an exhibit to the Company's Registration             
          Statement on Form S-1, filed April 16, 1997, Registration No. 333-25249).                    
 *10.17   The Company's 1997 Omnibus Incentive Plan (filed as an exhibit to the Company's              
          Amendment No. 1 to Registration Statement on Form S-1, filed May 23, 1997,                   
          Registration No. 333-25249).                                                                 
 *10.18   Asset Purchase Agreement, dated January 31, 1996, among the Company, Waterlink               
          Acquisition Corporation, Mass Transfer Systems, Inc., Mark E. Neville and                    
          Frederick J. Siino (filed as an exhibit to the Company's Registration Statement on           
          Form S-1, filed April 16, 1997, Registration No. 333-25249).                                 
 *10.19   Asset Purchase Agreement, dated April 26, 1996, among the Company, A-M                       
          Acquisitions Corp., Aero-Mod Incorporated, Resi-Tech, Inc. and Lawrence A. Schmid            
          (filed as an exhibit to the Company's Registration Statement on Form S-1, filed              
          April 16, 1997, Registration No. 333-25249).                                                 
 *10.20   Asset Purchase Agreement, dated April 26, 1996, among the Company, B-W Acquisition           
          Corp., Blue Water Services, Inc. and Lawrence A. Schmid (filed as an exhibit to              
          the Company's Registration Statement on Form S-1, filed April 16, 1997,                      
          Registration No. 333-25249).                                                                 

S-4
Last Page of 84
TOC
1st
Previous
Next
↓Bottom
Just 84th

EXHIBIT INDEX -- CONTINUED

                                                        [Enlarge/Download Table]

EXHIBIT                                                                                        PAGE    
  NO.                                        DESCRIPTION                                        NO.    
--------  ---------------------------------------------------------------------------------------------
                                                                                                       
 *10.21   Agreement and Plan of Merger, dated September 27, 1996, by and among the Company,            
          Wet Acquisition Corp. and Water Equipment Technologies, Inc. and the shareholders            
          of Water Equipment Technologies, Inc (filed as an exhibit to the Company's                   
          Registration Statement on Form S-1, filed April 16, 1997, Registration No.                   
          333-25249).                                                                                  
 *10.22   Share Purchase Agreement, dated March 4, 1997, among Waterlink (Sweden) AB,                  
          Waterlink (Germany) GmbH, Awpe Svenska AB and Anglian Water Holding GmbH (filed as           
          an exhibit to the Company's Registration Statement on Form S-1, filed April 16,              
          1997, Registration No. 333- 25249).                                                          
 *10.23   Purchase and Sale Agreement, dated March 14, 1995, among Santech, Inc. (as                   
          assignee from the Company pursuant to an Assignment of Purchase and Sale Agreement           
          dated March 28, 1995) and Sanborn, Inc (filed as an exhibit to the Company's                 
          Registration Statement on Form S-1, filed April 16, 1997, Registration No.                   
          333-25249).                                                                                  
 *10.24   Asset Purchase Agreement, dated August 28, 1995, among Great Lakes Environmental,            
          Inc., a Delaware corporation (as assignee from the Company pursuant to an                    
          Assignment dated August 31, 1995), Great Lakes Environmental, Inc., an Illinois              
          corporation, Lawrence Field and David Field (filed as an exhibit to the Company's            
          Registration Statement on Form S-1, filed April 16, 1997, Registration No.                   
          333-25249).                                                                                  
 *10.25   The Company's Employee Stock Purchase Plan (filed as an exhibit to the Company's             
          Registration Statement on Form S-1, filed April 16, 1997, Registration No.                   
          333-25249).                                                                                  
 *10.26   First Amendment, dated as of June 23, 1997, to the Company's Employee Stock                  
          Purchase Plan (filed as an exhibit to the Company's Quarterly Report on Form 10-Q            
          for the quarterly period ended June 30, 1997, File No. 1-13041).                             
 *10.27   The Company's 1997 Non-Employee Director Stock Option Plan.                                  
 *10.28   Stock Purchase Agreement among Waterlink (Sweden) AB, Waterlink, Inc. and the                
          shareholders of Mellegard V.A. Maskiner AB dated September 12, 1997 (filed as an             
          exhibit to the Company's Current Report on Form 8-K, filed September 26, 1997,               
          File No. 1-13041).                                                                           
 *10.29   Stock Purchase Agreement dated September 30, 1997 among Waterlink, Inc., Philip A.           
          Thompson and the Hycor Corporation Employee Stock Ownership Trust (filed as an               
          exhibit to the Company's Current Report on Form 8-K, filed October 14, 1997, File            
          No. 1-13041).                                                                                
 *10.30   Stock Purchase Agreement between Waterlink, Inc., and David Romanow, Joe Romanow,            
          Brian Topnik and Robert Jenkyns dated as of April 15, 1997 (filed as an exhibit to           
          the Company's Current Report on Form 8-K, filed July 9, 1997, File No. 1-13041).             
 *10.31   Stock Purchase Agreement between Great Lakes Environmental, Inc. and David M. Rice           
          dated as of April 14, 1997 (filed as an exhibit to the Company's Amendment No. 1             
          to Registration Statement on Form S-1, filed May 23, 1997, Registration No.                  
          333-25249).                                                                                  
 *10.32   Letter Agreement among Waterlink, Inc., Bioclear Technology, Inc. and Royal Bank             
          of Canada dated September 24, 1997(filed as an exhibit to the Company's Annual               
          Report on Form 10-K, filed December 3, 1997, File No. 1-13041).                              
 *11.1    Computation of per share earnings (filed as an exhibit to the Company's Annual               
          Report on Form 10-K, filed December 3, 1997, File No. 1-13041).                              
 *21.1    List of Subsidiaries of the Company (filed as an exhibit to the Company's Annual             
          Report on Form 10-K, filed December 3, 1997, File No. 1-13041).                              
  23.1    Consent of Ernst & Young LLP.                                                                
  23.2    Consent of Benesch, Friedlander, Coplan & Aronoff LLP (contained in its Opinion              
          filed as Exhibit 5.1 hereto).                                                                
  24.1    Powers of Attorney (included on signature page).                                             

---------------                                                                 
* Incorporated herein by reference as indicated.                                

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘S-4’ Filing		Date		First		Last			Other Filings
		3/31/11		29
		2/1/05		39
		6/27/00		67
		9/30/99		68					10-K
		9/12/99		68
		9/30/98		13					10-K
		3/31/98		22		29			10-Q
		1/14/98		67
Filed on:		1/9/98		1		81
		1/7/98		1		13
		12/31/97		3		46			10-Q
		12/3/97		79		84			10-K405,  DEF 14A
		12/1/97		14
		11/30/97		28
		11/24/97		67					8-K/A
		11/11/97		56
		10/14/97		79		84			8-K
		10/1/97		29
		9/30/97		4		84			10-K405,  8-K,  8-K/A
		9/26/97		78		84			8-K
		9/24/97		79		84
		9/12/97		16		84			8-K,  8-K/A
		9/2/97		36
		7/16/97		18
		7/9/97		79		84			8-K
		6/30/97		76		84			10-Q
		6/27/97		5		83			8-K
		6/24/97		13		36			S-8
		6/23/97		78		84
		6/1/97		43
		5/23/97		35		84			8-A12B,  S-1/A
		4/16/97		76		84			S-1
		4/15/97		79		84
		4/14/97		79		84
		3/13/97		32
		3/6/97		47		83
		3/5/97		16		64
		3/4/97		77		84
		2/19/97		22		83
		1/2/97		32
		1/1/97		31		34
		11/30/96		28
		10/1/96		4
		9/30/96		4		82
		9/27/96		78		84
		8/1/96		34
		7/9/96		29
		4/26/96		16		83
		2/1/96		63
		1/31/96		16		83
		10/1/95		66
		9/30/95		4		62
		8/31/95		16		84
		8/28/95		78		84
		8/1/95		31
		6/1/95		34
		3/31/95		16		65
		3/28/95		78		84
		3/14/95		78		84
		12/7/94		4		62
									List all Filings