<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
WATERLINK, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
WATERLINK, INC.
4100 Holiday Street, N.W.
Canton, Ohio 44718-2532
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JANUARY 20, 2000
------------------------
To Our Stockholders:
The annual meeting of stockholders of Waterlink, Inc. will be held at the
Four Points by Sheraton, 4375 Metro Circle, N.W., Canton, Ohio 44720, on January
20, 2000 at 10:00 a.m., local time, for the following purposes:
1. To elect two Class III directors to serve until the 2003 annual meeting
of stockholders and until their respective successors are elected and
qualified, and to elect one Class II director to serve until the 2002
annual meeting of stockholders and until his successor is elected and
qualified;
2. To ratify the appointment of Ernst & Young LLP as the independent public
auditors of Waterlink; and
3. To transact such other business as may properly come before the annual
meeting and any adjournments thereof.
The foregoing matters are described in more detail in the proxy statement
which follows.
The board of directors of Waterlink has fixed the close of business on
November 30, 1999 as the record date for determining stockholders entitled to
notice of, and to vote at, the annual meeting and any adjournments thereof. A
copy of Waterlink's annual report on Form 10-K for the fiscal year ended
September 30, 1999 is enclosed.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL
MEETING, PLEASE MARK, DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY CARD IN
THE ACCOMPANYING POSTAGE-PAID ENVELOPE. PROXIES ARE REVOCABLE AT ANY TIME PRIOR
TO THEIR BEING VOTED BY WRITTEN NOTICE TO THE SECRETARY OF WATERLINK OR BY
APPEARANCE AT THE ANNUAL MEETING TO VOTE IN PERSON AND GIVING NOTICE OF SUCH
REVOCATION.
By Order of the Board of Directors
DONALD A. WEIDIG, Secretary
December 3, 1999
<PAGE> 3
WATERLINK, INC.
4100 Holiday Street, N.W.
Canton, Ohio 44718-2532
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS
JANUARY 20, 2000
------------------------
INTRODUCTION
This proxy statement is being furnished to stockholders of Waterlink, Inc.
in connection with the solicitation by the board of directors of Waterlink of
proxies for the annual meeting of stockholders of Waterlink to be held at 10:00
a.m., local time, on Thursday, January 20, 2000, at the Four Points by Sheraton,
4375 Metro Circle, N.W., Canton, Ohio, 44720. The enclosed proxy is solicited on
behalf of the board of directors of Waterlink.
Shares cannot be voted at the meeting unless the stockholder is present in
person or represented by proxy. All shares represented by properly executed
proxies received by the board of directors pursuant to this solicitation will be
voted in accordance with the stockholder's directions specified on the enclosed
proxy. If no directions have been specified by marking the appropriate squares
on the proxy, the shares will be voted in accordance with the board of
directors' recommendations. A stockholder signing and returning a proxy has the
power to revoke it at any time prior to its exercise by delivering to Waterlink
a later dated proxy or by giving notice to Waterlink in writing or in open
meeting, but without affecting any vote previously taken.
The holders of a majority of the outstanding shares of Waterlink common
stock, present in person or represented by proxy and entitled to vote,
constitute a quorum for the transaction of all business at the meeting.
Abstentions and broker non-votes are included in determining if a quorum is
present at the meeting.
Only stockholders of record at the close of business on November 30, 1999
are entitled to vote at the meeting. As of November 30, 1999, there were issued
and outstanding 19,211,091 shares of Waterlink common stock. Each share is
entitled to one vote and cumulative voting is not permitted. A list of
stockholders of record entitled to vote at the meeting will be available for
examination by any stockholder for any purpose germane to the meeting, for a
period of 10 days prior to the meeting, during normal business hours at the
offices of Waterlink, 4100 Holiday Street N.W., Canton, Ohio. The list will also
be available at the meeting.
Directors will be elected by a plurality of the votes of the shares present
in person or represented by proxy at the annual meeting and entitled to vote on
the election of directors. As to all other matters, an affirmative vote of a
majority of the shares present and voting at the meeting is required for
approval of each of the proposals set forth in this proxy statement, provided
that a majority of the issued and outstanding shares entitled to vote on the
proposal cast their vote. Abstentions from voting will have the same effect as
voting against the proposals.
This proxy statement and the enclosed proxy were first mailed to
stockholders on or about December 3, 1999.
1
<PAGE> 4
COMMON STOCK OWNERSHIP
The following table sets forth the beneficial ownership of Waterlink common
stock as of October 31, 1999 by the executive officers of Waterlink, each of the
directors and nominees of Waterlink and all executive officers, directors and
nominees of Waterlink as a group, as well as by each person known by Waterlink
to be the beneficial owner of more than 5% of Waterlink common stock. Beneficial
ownership includes shares of Waterlink common stock subject to options,
warrants, rights, or similar obligations exercisable within 60 days of the date
of determination 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 that stockholder. The percentage computations are based on 18,935,861
shares outstanding. An asterisk indicates less than one percent of shares
outstanding.
<TABLE>
<CAPTION>
SHARES OF WATERLINK
COMMON STOCK PERCENT
NAME AND ADDRESS BENEFICIALLY OF SHARES
OF BENEFICIAL OWNER OWNED OWNED
------------------- ------------------- ---------
<S> <C> <C>
State of Wisconsin Investment Board......................... 3,579,500(1) 18.90%
P.O. Box 7842
Madison, WI 53707
Brantley Venture Partners III, L.P.......................... 2,404,459(2) 12.50%
20600 Chagrin Blvd
Suite 1150
Cleveland, OH 44122
T. Rowe Price Associates, Inc............................... 1,874,650(3) 9.90%
100 East Pratt St
Baltimore, MD 21202
CID Equity Capital V L.P.................................... 1,100,000(4) 5.81%
One American Square
Suite 2850
Indianapolis, IN 46282
Environmental Opportunities................................. 676,000(5) 3.56%
Management Co., LLC
3100 Texas Commerce Tower
Houston, TX 77002
Theodore F. Savastano....................................... 1,009,164(6)(7)(8) 5.30%
T. Scott King............................................... 157,159(7)(8) *
Michael J. Vantusko......................................... 204,205(7)(8) 1.07%
Robert P. Pinkas............................................ 2,507,709(8)(9) 12.97%
Dr. Paul M. Sutton.......................................... 15,050(8)(10) *
Rollin S. Reiter............................................ 29,250(8) *
John R. Miller.............................................. 9,250(8) *
John T. Hackett............................................. 1,100,000(11) 5.81%
Dr. R. Gary Bridge.......................................... -- *
All directors, nominees and executive officers as a group (9
persons).................................................. 5,031,787(12) 26.25%
</TABLE>
2
<PAGE> 5
- ---------------
(1) Based on its filing on Form 13 G/A dated November 8, 1999.
(2) Includes warrants to purchase 304,459 shares of Waterlink common stock held
by Brantley Capital Corporation, an affiliate of Brantley Venture Partners
III, L.P. Robert P. Pinkas, a director of Waterlink, is managing general
partner of Brantley Venture Partners III, L.P. and has sole voting and
investment power with respect to these shares.
(3) Based on its filing on Form 13 G/A dated February 12, 1999 and the offering
of shares by Waterlink which offering closed on October 5, 1999. T. Rowe
Price Associates, Inc. has sole voting power with respect to 187,900 shares
and sole dispositive power with respect to 1,208,300 shares.
(4) Based on its filing on Form 13 G dated October 12, 1999.
(5) Includes warrants issued to entities to purchase an aggregate of 51,000
shares of Waterlink common stock, as to which entities Environmental
Opportunities Management Co., LLC is the general partner and has sole
voting and investment power with respect to these shares. Waterlink has
been advised that Sanders Morris Mundy Inc., one of the underwriters of
Waterlink's initial public offering in 1997, owns a 75% interest in, and
thereby controls, Environmental Opportunities Management Co. Sanders Morris
Mundy Inc. purchased 1,138,650 shares in the offering by Waterlink, which
offering closed on October 5, 1999. Such shares were purchased for certain
of its discretionary accounts, which accounts do not include Environmental
Opportunities Management Co., LLC or its related entities. Based on such
purchase, Sanders Morris Mundy Inc. would be deemed to control 1,814,650
shares or 9.56%, and therefore we have included Environmental Opportunities
Management Co., LLC in this table.
(6) Mr. Savastano's business address is 4100 Holiday Street, N.W., Canton, OH,
44718.
(7) Includes warrants to purchase the indicated shares of Waterlink common
stock:
<TABLE>
<S> <C>
Theodore F. Savastano...................................... 16,364
T. Scott King.............................................. 10,909
Michael J. Vantusko........................................ 5,455
</TABLE>
(8) Includes options for the indicated optionholder to purchase the indicated
shares of Waterlink common stock, which options are fully vested:
<TABLE>
<S> <C>
Theodore F. Savastano..................................... 100,000
T. Scott King............................................. 131,250
Michael J. Vantusko....................................... 148,750
Robert P. Pinkas.......................................... 101,250
Dr. Paul M. Sutton........................................ 4,250
Rollin S. Reiter.......................................... 4,250
John R. Miller............................................ 4,250
</TABLE>
(9) Includes shares, including the 304,459 warrants referred to in footnote 2
above, which are held by Brantley Venture Partners III, L.P., of which Mr.
Pinkas is managing general partner. Mr. Pinkas's business address is 20600
Chagrin Blvd., Suite 1150, Cleveland, OH 44122.
(10) Dr. Sutton disclaims beneficial ownership of 100 shares of common stock
held by a member of his family.
(11) Includes shares which are held by CID Equity Capital V L.P., of which Mr.
Hackett is managing general partner. Mr. Hackett's business address is One
American Square, Suite 2850, Indianapolis, IN 46282.
(12) Includes options to purchase 494,000 shares of common stock, which are
fully vested, and 337,187 warrants (as indicated above).
3
<PAGE> 6
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires Waterlink's executive officers and directors, and
persons who beneficially own more than ten percent of a registered class of
Waterlink's equity securities, to file initial reports of securities ownership
and changes in such ownership with the Securities and Exchange Commission (the
"Commission"). Such executive officers, directors and greater than ten-percent
stockholders also are required by regulations promulgated by the Commission to
furnish Waterlink with copies of all Section 16(a) forms they file with the
Commission.
To Waterlink's knowledge, based solely upon a review of such copies of the
forms furnished to Waterlink, or written representations that no such forms were
required, during the fiscal year ended September 30, 1999, its executive
officers, directors and greater than ten-percent beneficial owners complied with
all applicable Section 16(a) filing requirements.
4
<PAGE> 7
I.
ELECTION OF DIRECTORS
Pursuant to Waterlink's Certificate of Incorporation and Waterlink's
By-Laws, the board of directors is divided into three classes with each director
serving a three-year term (after the initial term). The directors of Class III
(Mr. Robert P. Pinkas and Dr. Paul M. Sutton) hold office until the scheduled
annual meeting of stockholders which is expected to be held on January 20, 2000,
the directors of Class I (Messrs. John R. Miller and Theodore F. Savastano) hold
office until the scheduled annual meeting of stockholders which is expected to
be held in January 2001 with respect to Waterlink's 2000 fiscal year, and
directors of Class II (Messrs. Rollin S. Reiter and T. Scott King) hold office
until the scheduled annual meeting of stockholders which is expected to be held
in January 2002 with respect to Waterlink's 2001 fiscal year. Stockholders will
elect the directors of each Class for three-year terms at the appropriate annual
meetings of stockholders.
Accordingly, two persons are to be elected to serve as Class III directors
at the Annual Meeting. The Board has recommended the persons named in the table
below as nominees for election as Class III directors. Mr. Pinkas is presently a
director of Waterlink. It is anticipated that Mr. Pinkas will become Chairman of
the Board of Waterlink following the annual meeting. Mr. Hackett is not
presently a director of Waterlink but has agreed to serve if elected. Mr. Reiter
has advised Waterlink that he is resigning as a director effective on the date
of the annual meeting. Accordingly, the Board has recommended the person named
in the table below as a nominee for election as a Class II director to serve
until Waterlink's annual meeting with respect to its 2001 fiscal year. Dr.
Bridge is not presently a director of Waterlink but has agreed to serve if
elected.
Unless otherwise directed, all proxies (unless revoked or suspended) will
be voted for the election of the three nominees for director set forth below.
If, for any reason, any nominee is unable to accept such nomination or to serve
as a director, an event not currently anticipated, the persons named as proxies
reserve the right to exercise their discretionary authority to substitute such
other person or persons, as the case may be, as a substitute nominee, or the
Board has the authority to reduce the number of management nominees to such
extent as they shall deem advisable. Waterlink is not aware of any reason why
any nominee should become unavailable for election, or if elected, should be
unable to serve as a director. Set forth below is certain information with
respect to the nominees.
The following information is derived from information supplied by the
directors and nominees and is presented with respect to the nominees for
election as directors of Waterlink in Class III to serve for a term of three
years and until the election and qualification of their respective successors,
the nominee for election as a director of Waterlink in Class II to serve for a
term of two years and until the election and qualification of his successor, and
for the directors in Classes I and II whose terms expire at the annual meeting
of stockholders occurring with respect to Waterlink's 2000 and 2001 fiscal
years, respectively, and until the election and qualification of their
respective successors.
NOMINEES FOR DIRECTOR WHOSE TERM EXPIRES IN 2003 (CLASS III)
<TABLE>
<CAPTION>
HAS BEEN A
AGE (AS OF DIRECTOR OF
NAME OF NOMINEE OCTOBER 31, 1999) WATERLINK SINCE
--------------- ----------------- ---------------
<S> <C> <C>
Robert P. Pinkas............................................ 45 1994
John T. Hackett............................................. 67 --
</TABLE>
5
<PAGE> 8
NOMINEE FOR DIRECTOR WHOSE TERM EXPIRES IN 2002 (CLASS II)
<TABLE>
<CAPTION>
HAS BEEN A
AGE (AS OF DIRECTOR OF
NAME OF NOMINEE OCTOBER 31, 1999) WATERLINK SINCE
--------------- ----------------- ---------------
<S> <C> <C>
Dr. R. Gary Bridge.......................................... 55 --
</TABLE>
DIRECTORS WHOSE TERM
CONTINUES AFTER THE ANNUAL MEETING
DIRECTORS WHOSE TERM EXPIRES IN 2001 (CLASS I)
<TABLE>
<CAPTION>
HAS BEEN A
AGE (AS OF DIRECTOR OF
NAME OF DIRECTOR OCTOBER 31, 1999) WATERLINK SINCE
---------------- ----------------- ---------------
<S> <C> <C>
John R. Miller.............................................. 61 1997
Theodore F. Savastano....................................... 62 1994
</TABLE>
DIRECTOR WHOSE TERM EXPIRES IN 2002 (CLASS II)
<TABLE>
<CAPTION>
HAS BEEN A
AGE (AS OF DIRECTOR OF
NAME OF DIRECTOR OCTOBER 31, 1999) WATERLINK SINCE
---------------- ----------------- ---------------
<S> <C> <C>
T. Scott King............................................... 47 1998
</TABLE>
T. Scott King was elected President and Chief Executive Officer of
Waterlink effective June 8, 1998 and was elected to the Board on September 3,
1998. Prior to joining Waterlink, Mr. King served as President and General
Manager, Consumer Brands Division of The Sherwin-Williams Company since February
1992. Prior thereto, Mr. King served as Vice President, Director of Sales and
Marketing, Consumer Division since June 1987.
John R. Miller was elected to the Board in March 1997. Since 1988, Mr.
Miller has been President, Chief Executive Officer and a Director 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; and of
Cambrex Corporation, a leading supplier of specialty and fine chemicals.
Robert P. Pinkas, a Director since the inception of Waterlink, 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 Caredata.com, Inc. It is
anticipated that Mr. Pinkas will become Chairman of the Board of Waterlink
following the annual meeting.
Theodore F. Savastano is the founder of Waterlink 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
6
<PAGE> 9
from August 1988 to May 1994. Mr. Savastano has announced his retirement as
Chairman of the Board of Waterlink effective immediately following the annual
meeting.
John T. Hackett is a nominee for director of Waterlink. Since 1991, Mr.
Hackett has been a Managing General Partner of CID Equity Partners, L.P., a
venture capital firm. Mr. Hackett also serves as a director of Ball Corporation,
Irwin Financial Corporation, Meridian Insurance Group Inc. and Wabash National
Corporation.
Dr. R. Gary Bridge is a nominee for director of Waterlink. Since 1995, Dr.
Bridge has been Vice President, Worldwide Market Intelligence and Planning, of
International Business Machines Corporation. For the twenty-three years
preceeding 1995, Dr. Bridge was a professor of psychology at Columbia
University. From 1985 to 1995, Dr. Bridge also was President of Bridge Group
Inc., a consulting practice specializing in quantitative research.
INFORMATION RELATING TO NON-DIRECTOR
EXECUTIVE OFFICER OF WATERLINK
Michael J. Vantusko, 42, a certified public accountant, joined Waterlink 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.
INFORMATION RELATING TO THE BOARD
OF DIRECTORS AND CERTAIN COMMITTEES OF THE BOARD
During the fiscal year ended September 30, 1999, the Board held 10
meetings. Waterlink has an Audit Committee, Compensation Committee and a
Nominating Committee. During the fiscal year ended September 30, 1999, Messrs.
John R. Miller, Rollin S. Reiter and Dr. Paul M. Sutton (Chairman) served on the
Audit Committee, Messrs. John R. Miller, Robert P. Pinkas, Rollin S. Reiter
(Chairman) and Dr. Paul M. Sutton served on the Compensation Committee and
Messrs. John R. Miller, Robert P. Pinkas and Dr. Paul M. Sutton (Chairman)
served on the Nominating Committee. Each of the directors attended 75% or more
of all meetings of the Board and of its committees of which he was a member.
AUDIT COMMITTEE
The Audit Committee acts as a liaison between Waterlink's independent
auditors and the Board, reviews the scope of the annual audit and the management
letter associated therewith, reviews Waterlink's annual and quarterly financial
statements and reviews the sufficiency of Waterlink's internal accounting
controls. The Audit Committee held two meetings during fiscal 1999.
COMPENSATION COMMITTEE
The general functions of the Compensation Committee include approval (or
recommendation to the Board) of the compensation arrangements for senior
management, directors and other key employees, review of benefit plans in which
officers and directors are eligible to participate and periodic review of the
equity compensation plans of Waterlink and the grants under such plans. The
Compensation Committee administers the 1997 Omnibus
7
<PAGE> 10
Incentive Plan of Waterlink, the 1995 Stock Option Plan of Waterlink, the 1997
Non-Employee Director Stock Option Plan and the Employee Stock Purchase Plan of
Waterlink. The Compensation Committee held two meetings during fiscal 1999.
NOMINATING COMMITTEE
The Nominating Committee makes recommendations concerning the organization,
size and composition of the Board and its committees, proposes nominees for
election to the Board and its committees and considers the qualifications,
compensation and retirement of directors. The Nominating Committee did not meet
during fiscal 1999. The Nominating Committee will consider nominations of
persons for election as directors that are submitted by stockholders in writing
in accordance with requirements set forth in Waterlink's By-Laws.
DIRECTOR REMUNERATION
Directors who are employees of Waterlink receive no compensation, as such,
for service as members of the Board or any committees of the Board.
Directors who are not employees of Waterlink 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 are
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 Waterlink receive for each
year of service on the Board, options under Waterlink'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, Waterlink 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: 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.
Messrs. Miller, Reiter and Sutton were each granted an option to purchase
3,000 shares of Common Stock in connection with his election to the Board. In
addition, on May 23 of each year, the anniversary of the date the Director Plan
became effective, each of Waterlink's then non-employee directors who have
served as directors for at least six months are automatically 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.
RECOMMENDATION
The Board recommends a vote FOR the each of the three nominees.
8
<PAGE> 11
EXECUTIVE COMPENSATION
The following table presents information regarding compensation we paid to
our chief executive officer and our other executive officers whose salary and
bonus together exceeded $100,000 in fiscal 1999. We refer to these individuals
collectively as the "Named Executive Officers." The compensation described in
the table does not include benefits which are generally available to all our
salaried employees and perquisites and other personal benefits which do not
exceed the lesser of $50,000 or 10% of the officer's salary and bonus shown in
the table.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION ------------------------
---------------------------------------- RESTRICTED SECURITIES
NAME AND OTHER ANNUAL STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) AWARDS($) OPTIONS(#) COMPENSATION($)
------------------ ---- --------- -------- --------------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Theodore F. Savastano 1999 $240,000 $ -- -- -- -- --
Chairman of the 1998 $240,000 $45,000(2) -- -- -- --
Board of Directors 1997 $234,013 $125,000 $1,050,000(4) -- 100,000 $1,658,750(5)
T. Scott King(1) 1999 $300,000 $ -- -- -- 125,000 $ 1,606(6)
Chief Executive 1998 $108,750 $50,000(3) -- -- 400,000 $ 1,004(6)
Officer and President 1997 -- -- -- -- -- --
Michael J. Vantusko 1999 $187,500 $ -- -- -- 75,000 $ 1,757(6)
Chief Financial
Officer 1998 $162,500 $40,000(2) -- -- 20,000 $ 1,425(6)
1997 $123,500(7) $50,000 -- -- 225,000 $ 390(6)
</TABLE>
- ---------------
(1) The board elected Mr. King to be our president and chief executive officer
effective June 8, 1998. Salary and other compensation for 1998 represent
amounts from June 8, 1998 through September 30, 1998. For terms of Mr.
King's compensation, see "Employment Agreements," below.
(2) In January 1998 bonus payments were made which represent deferred payments
in connection with our initial public offering. No other bonus amounts were
earned or paid to these individuals during fiscal 1998.
(3) Mr. King's employment agreement provided for a bonus of $50,000 upon
signing. No other bonus amount was earned by or paid to Mr. King during
fiscal 1998.
(4) The amount shown represents $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 5, below, which was paid to Mr.
Savastano pursuant to his 1994 employment agreement with Waterlink.
(5) The amount shown represents 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. The options were exercisable upon
consummation of the initial public offering. The 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 $.10 per share.
(6) The amounts shown represent Waterlink's "match" payment relating to our
401(k) Plan.
(7) The amount shown represents salary from January 1, 1997, the date Mr.
Vantusko began working for us.
STOCK OPTION GRANTS
The following table designates each grant of stock options made to the
Named Executive Officers during fiscal 1999. The per share exercise price of
options granted under our stock option plans is the fair market value of the
Waterlink common stock on the date of grant. Waterlink has not yet granted stock
appreciation rights, or SARs. Amounts under the column heading "Potential
Realizable Value..." represent hypothetical gains that could be achieved for the
options if exercised at the end of the option term. The 5% and 10% assumed
annual rates of compounded stock price appreciation are mandated by the rules of
the SEC and do not represent our estimate or projection of future Waterlink
common stock price growth. These amounts represent assumed rates of
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<PAGE> 12
appreciation in the value of our common stock from the fair market value on the
date of grant. Actual gains, if any, are dependent on the actual future
performance of our common stock which will benefit all stockholders.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT
------------------------------------------------------- ASSUMED ANNUAL
PERCENT OF RATES OF STOCKS
NUMBER OF TOTAL OPTIONS PRICE APPRECIATION
SECURITIES GRANTED TO EXERCISE FOR OPTION TERM
UNDERLYING EMPLOYEES OF --------------------
OPTIONS FISCAL BASE PRICE EXPIRATION
NAME GRANTED(#) YEAR ($/SH) DATE 5%($) 10%($)
---- ---------- ------------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Theodore F. Savastano -- -- -- -- -- --
T. Scott King 125,000 28.2% $3.25 12/11/08 $255,488 $647,458
Michael J. Vantusko 75,000 16.9% $3.25 12/11/08 $153,293 $388,475
</TABLE>
STOCK OPTION EXERCISES
The following table describes exercises of stock options during fiscal 1999
by each of the Named Executive Officers and their stock options outstanding as
of September 30, 1999. Waterlink has not granted stock appreciation rights. None
of the outstanding stock options are "in-the-money" since the exercise price of
all options are in excess of the market price for Waterlink common stock on
September 30, 1999.
AGGREGATED OPTION EXERCISE IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
AT FISCAL AT FISCAL
SHARES YEAR-END(#) YEAR-END($)
ACQUIRED ON VALUE EXERCISABLE(E) UNEXERCISABLE(U)
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE(U) EXERCISABLE(E)
---- ----------- ----------- ---------------- ----------------
<S> <C> <C> <C> <C>
Theodore F. Savastano -- -- 100,000(E) -- (E)
--(U) -- (U)
T. Scott King -- -- 100,000(E) -- (E)
425,000(U) -- (U)
Michael J. Vantusko -- -- 130,000(E) -- (E)
140,000(U) -- (U)
</TABLE>
EMPLOYMENT AGREEMENTS
Mr. Savastano entered into an employment agreement with Waterlink in 1997
which provided for him to serve as chairman of the board for an initial term of
three years subject to automatic one-year extensions on each anniversary of the
agreement until mandatory retirement at age 65. He is paid an annual base salary
of $240,000. Mr. Savastano participates in Waterlink's annual incentive bonus
plan which entitles him to earn annually an amount ranging from zero to 150% of
his base salary if performance goals established by the board of directors are
achieved. If Mr. Savastano's employment is terminated without cause or if he
terminates his employment for good cause, he will receive an amount equal to the
present value of twice the sum of his base salary in effect when terminated and
the annual bonus paid to him for that fiscal year if calculable, and if not
calculable, then the bonus paid to him with respect to the prior fiscal year. If
the payment is as a result of a change of control and the
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<PAGE> 13
termination occurs within one year of the change of control, the amount payable
to Mr. Savastano will be paid in a lump sum. In either event, if the amounts
payable to Mr. Savastano are "excess parachute payments" for federal tax
purposes, Mr. Savastano will be paid an additional amount to offset any taxes
payable with respect to the excess parachute payment and the additional payment.
He is also restricted from competing with Waterlink during the term of his
agreement and for 24 months following its termination.
In connection with Mr. Savastano leaving Waterlink, to be effective on the
earlier of the annual meeting of stockholders or January 31, 2000, Waterlink and
Mr. Savastano entered into an agreement substantially on terms consistent with
the provisions required under his existing employment agreement. Mr. Savastano
will receive $480,000 payable in 48 equal semi-monthly installments. He will
also retain until October 31, 2002 standard executive employee medical and
similar benefits. Stock options to purchase 100,000 shares of Waterlink common
stock granted to him in June 1996 with an exercise price of $4.40 per share,
will be exercisable until two years following his departure, subject to
agreed-upon volume limitations. Mr. Savastano agreed to maintain as confidential
information he had access to while employed by Waterlink. Mr. Savastano is
restricted from competing with Waterlink two years following his retirement.
Mr. King entered into an employment agreement with Waterlink in 1998 which
provides for him to serve as president and chief executive officer for an
initial term of three years subject to automatic one-year extensions on each
anniversary of the agreement until mandatory retirement at age 65. He is paid an
initial annual base salary of $300,000. Mr. King participates in Waterlink's
annual incentive bonus plan which entitles him to earn annually an amount
ranging from zero to 150% of his base salary if performance goals established by
the board of directors are achieved. He was also paid a $50,000 signing bonus.
If Mr. King's employment is terminated without cause or if he terminates his
employment for good cause, he will receive an amount equal to the present value
of one and one-half times the sum of his base salary in effect when terminated
and the annual bonus paid to him with respect to that fiscal year if termination
occurs after the first four months of the fiscal year, and if termination occurs
during the first four months of a fiscal year, then the bonus, if any, paid to
him with respect to the fiscal year immediately preceding the year in which his
employment was terminated. If any of the payments payable to Mr. King under
these circumstances are "excess parachute payments" for federal tax purposes,
Mr. King is to be paid an additional amount to offset any tax payable with
respect to the excess parachute payment and the additional payment. He is also
restricted from competing with Waterlink during the term of his agreement and
for 18 months following its termination. Mr. King was granted options to
purchase 400,000 shares of Waterlink common stock at $7.625, which was then the
fair value. Those options vest in four equal installments beginning on May 21,
1999 subject to acceleration.
Mr. Vantusko entered into an agreement with Waterlink in 1997 which
provides for him to serve as chief financial officer for initial terms of three
years subject to automatic one-year extensions on each anniversary of the
agreement. He was paid an annual base salary of $150,000. Mr. Vantusko
participates in Waterlink's annual incentive plan which entitles him to earn
annually an amount ranging from zero to 150% of his base salary if performance
goals established by the board of directors are achieved. If Mr. Vantusko's
employment is terminated without cause or if he terminates his employment for
good cause, he will receive an amount equal to the sum of his base salary in
effect when terminated and the annual bonus paid to him for that fiscal year if
calculable, and if not calculable, then the bonus paid to him with respect to
the prior fiscal year. He is also restricted from competing with Waterlink
during the term of his agreement and for 12 months following its termination. In
1997, Mr. Vantusko was granted options to purchase 100,000 shares of Waterlink
common stock at $11.00 per share, the initial offering price of the Waterlink
common stock sold in our initial public offering. This option vests in four
equal annual installments beginning on May 23, 1998, subject to acceleration.
Effective April 1, 1999, Mr. Vantusko's annual base salary was increased to
$200,000.
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<PAGE> 14
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee's function is, in part, to establish and review
Waterlink's arrangements and programs for compensating executive officers,
including the Named Executive Officers named in the Summary Compensation Table.
The Compensation Committee is composed entirely of directors who are neither
officers nor employees of Waterlink.
Waterlink's executive compensation program is designed to provide
competitive compensation and benefit programs that attract and retain capable
executives who are integral to the success of Waterlink, reward them for
achievement of both short-term and long-term objectives and provide them with an
economic incentive to increase stockholder value. The Compensation Committee
believes its policies are best implemented by providing compensation comprised
of separate components, all of which are designed to motivate executive
performance. These components are a salary, short-term incentive compensation
(bonus) and long-term incentive compensation (stock options). The bonuses and
stock options are in addition to executives' yearly based salaries, which are
intended to be competitive with companies which the Compensation Committee
believes are comparable to Waterlink.
In setting executive compensation practices for Waterlink, the Compensation
Committee generally compares executive compensation programs with other
companies' compensation programs for executives with similar responsibilities
and, based on that information, together with an analysis of other relevant
factors and on negotiations with the Named Executive Officers, established
levels of base salary.
The Compensation Committee administers the Bonus Plan pursuant to which the
executives of Waterlink, including the Named Executive Officers, are entitled to
earn, in each year during the term of their employment, bonuses based upon a
percentage of their base salary, subject to achievement of certain performance
goals and criteria determined by the Compensation Committee. The percentage of
an eligible executive's salary that may be earned as a bonus pursuant to the
Bonus Plan will vary depending upon the employee's position with Waterlink but
generally is not anticipated to exceed 150% of base salary. No bonus amounts
under the Bonus Plan were earned or paid during fiscal 1999.
The Compensation Committee believes that the grant of stock options aligns
the interests of Waterlink's executives with those of its stockholders. The
Compensation Committee determines the recipients of stock option grants and the
size of grants consistent with these principles, based upon the employee's
performance and position with Waterlink. During fiscal 1999, stock options were
granted to approximately 94 employees, including executive officers. As of
September 30, 1999, approximately 183 employees, including executive officers,
held stock options granted by Waterlink. All stock options granted during fiscal
1999 had an exercise price equal to the market value of common stock on the date
of grant. Generally, all stock options granted are anticipated to vest over four
years, except under limited circumstances.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
T. Scott King's compensation for fiscal 1999 was determined pursuant to an
employment agreement entered into contemporaneously with his election as
President and Chief Executive Officer of Waterlink effective June 8, 1998. Mr.
King's compensation, including base salary and bonus compensation, was
determined based upon negotiation between Waterlink and Mr. King. Pursuant to
Mr. King's employment agreement, he is entitled to earn up to 150% of his base
salary pursuant to Waterlink's bonus plan.
12
<PAGE> 15
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Code generally limits the annual tax deduction for
applicable remuneration paid to Waterlink's Chief Executive Officer and certain
other highly compensated executive officers to $1,000,000. The Compensation
Committee does not believe that the applicable remuneration to be paid to
Waterlink's executives will exceed the deduction limit set by Section 162(m).
MEMBERS OF THE COMMITTEE
ROLLIN S. REITER, Chairman
JOHN R. MILLER
ROBERT P. PINKAS
DR. PAUL M. SUTTON
The foregoing report of the Compensation Committee shall not be deemed
incorporated by reference by any general statement incorporating by reference
the Proxy Statement into any filing under the Securities Act or the Exchange Act
unless Waterlink specifically incorporates this information by reference, and
shall not otherwise be deemed filed under such acts.
13
<PAGE> 16
PERFORMANCE GRAPH
Set forth below is a graph comparing the percentage change in the
cumulative total stockholder return of the Common Stock, the Standard and Poor's
500 Index and a peer group index constructed by Waterlink for the period since
the Common Stock commenced trading on June 25, 1997 to the fiscal year ended
September 30, 1999. The peer group index consists of: Ionics, Incorporated;
Osmonics, Inc.; and Calgon Carbon Corporation. These corporations are involved
in various aspects of the water treatment business. This peer group index has
changed from last year, eliminating United States Filter Corporation. This
change was necessitated by the acquisition of United States Filter corporation
by Vivendi and the resulting unavailability of separate information for United
States Filter Corporation. The graph assumes $100 invested on June 25, 1997 in
Waterlink and in each of the other indices.
PERFORMANCE GRAPH
COMPARISON OF CUMULATIVE TOTAL RETURN*
TOTAL RETURN TO STOCKHOLDERS
(ASSUMES $100 INVESTED ON 6/25/97)
<TABLE>
<CAPTION>
WATERLINK INC. PEER GROUP S&P 500
-------------- ---------- -------
<S> <C> <C> <C>
6/25/97 $ 100.00 $ 100.00 $ 100.00
9/30/97 $ 170.46 $ 94.30 $ 107.05
9/30/98 $ 25.00 $ 54.33 $ 116.11
9/30/99 $ 23.86 $ 61.25 $ 146.41
</TABLE>
Source: Carl Thompson Associates www.ctaonline.com (800) 959-9677. Data from
Bloomberg Financial Markets.
* Total Return Assumes Reinvestment of Dividends (none paid by Waterlink)
Note: Companies in indices measured by Market Capitalization
14
<PAGE> 17
II.
RATIFICATION OF INDEPENDENT CERTIFIED PUBLIC AUDITORS
At the annual meeting, the stockholders of Waterlink will be asked to
ratify the appointment of the independent public auditors of Waterlink.
Waterlink's financial statements for the fiscal year ended September 30,
1999 have been examined by the firm of Ernst & Young LLP, independent certified
public auditors. Ernst & Young LLP have been the independent certified public
auditors of Waterlink since Waterlink's inception. Representatives of Ernst &
Young LLP are expected to be present at the Annual Meeting to make a statement
if they so desire and they are expected to be available to respond to
appropriate questions.
RECOMMENDATION
The Board recommends a vote FOR the ratification of the appointment of
Ernst & Young LLP as independent public auditors of Waterlink.
OTHER BUSINESS
The only business to come before the annual meeting of which management is
aware is set forth in this proxy statement. If any other business properly is
presented for action, it is intended that discretionary authority to vote the
proxies shall be exercised in respect thereof.
ANNUAL REPORTS AND FINANCIAL STATEMENTS
The annual report on Form 10-K of Waterlink for the fiscal year ended
September 30, 1999 is being furnished simultaneously herewith. Such report and
the financial statements included therein are not to be considered a part of
this proxy statement.
Upon the written request of any stockholder, management will provide, free
of charge, a copy of the exhibits to Waterlink's annual report on Form 10-K for
the fiscal year ended September 30, 1999. Requests should be directed to
Secretary, Waterlink, Inc., 4100 Holiday Street, N.W., Canton, Ohio 44718-2532.
You may also access and read our SEC filings, including exhibits to our annual
report on Form 10-K for the fiscal year ended September 30, 1999, through the
SEC's Internet site at www.sec.gov. This site contains reports, proxy and
information statements and other information regarding issuers that file
electronically with the SEC.
STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
Waterlink intends to hold its 2000 annual meeting of stockholders in
January 2001. In order for a stockholder proposal to be included in next year's
proxy statement, it must be received by the Secretary of Waterlink at its
offices, 4100 Holiday Street, N.W., Canton, Ohio 44718-2532, by August 7, 2000.
EXPENSES OF SOLICITATION
All expenses relating to the solicitation of proxies will be paid by
Waterlink. Solicitation will be made principally by mail, but officers and
regular employees may solicit proxies by telephone or personal contact with
15
<PAGE> 18
nominal expense to Waterlink. Waterlink will reimburse brokers, banks, and other
nominees who hold common stock in their names for their reasonable expenses in
forwarding proxy material to beneficial owners thereof.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
NOMINEES TO THE BOARD NAMED HEREIN AND FOR PROPOSAL II (THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP).
ALL STOCKHOLDERS ARE URGED TO MARK, SIGN AND SEND IN THEIR PROXIES WITHOUT
DELAY IN THE ENCLOSED ENVELOPE. PROMPT RESPONSE IS HELPFUL AND YOUR COOPERATION
WILL BE APPRECIATED.
By Order of the Board of Directors
DONALD A. WEIDIG, Secretary
December 3, 1999
16
<PAGE> 19
WATERLINK, INC.
ANNUAL MEETING OF STOCKHOLDERS, JANUARY 20, 2000
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby (i) acknowledges receipt of the Notice dated December 3,
1999, of the Annual Meeting (the "Annual Meeting") of Stockholders of Waterlink,
Inc. (the "Company") to be held on January 20, 2000, and (ii) constitutes and
appoints T. Scott King and Michael J. Vantusko, or either of them, attorneys and
proxies, with full power of substitution, for and in the name, place and stead
of the undersigned, to vote as directed below with respect to all shares of
Common Stock of the Company standing in the name of the undersigned, or with
respect to which the undersigned is entitled to vote, at the Annual Meeting and
any adjournment(s) or postponement(s) thereof.
1. ELECTION OF DIRECTORS
<TABLE>
<S> <C>
[ ] FOR the three nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for the nominees listed below
Robert P. Pinkas, John T. Hackett and Dr. R. Gary Bridge
</TABLE>
INSTRUCTION: To withhold authority to vote for any individual
nominee, mark "FOR the three nominees listed below" appearing
above and write that nominee's name on the space provided here:
----------------------------------------------------------------
2. PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS THE INDEPENDENT
PUBLIC AUDITORS OF THE COMPANY.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued on Reverse Side)
3. IN THEIR DISCRETION WITH RESPECT TO SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE ANNUAL MEETING.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE THREE NOMINEES LISTED ABOVE
AND FOR THE PROPOSAL.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE THREE NOMINEES LISTED ABOVE AND FOR PROPOSAL 2 ABOVE.
DATED:
------------------------------------
Signature
------------------------------------
Signature, if held jointly
PLEASE SIGN EXACTLY AS NAME APPEARS
ON THIS PROXY.
When shares are held by joint
tenants, both should sign. When
signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by the President or
other authorized officer. If a
Partnership, please sign in
partnership name by authorized
person.
PLEASE MARK, SIGN, DATE AND RETURN
THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
