Document:

<PAGE>   1
                                                                    Exhibit 10.2

                                WARRANT AGREEMENT

         THIS WARRANT AGREEMENT ("Agreement") dated as of January 18, 2001,
among WATERLINK, INC., a Delaware corporation (the "Company"), and each of the
Warrantholders named on the execution page hereof (the "Warrantholders").

                                    R E C I T A L S:
                                    - - - - - - - -

         This Agreement is entered into in connection with the Warrantholders
lending to the Company an aggregate principal amount of $1,000,000, as evidenced
by those certain 13.00% Subordinated Notes of the Company, of even date herewith
(the "Notes"). In order to induce the Warrantholders to make their loans, the
Warrantholders have required the Company, and the Company has agreed, to issue
certain warrants to purchase shares of the Company's common stock, $.01 par
value per share ("Common Stock").

         NOW, THEREFORE, for good and valuable consideration the receipt of
which is hereby acknowledged and the promises and the mutual agreements set
forth herein, the parties hereto agree as follows:

         1.       ISSUANCE OF WARRANTS; FORM OF WARRANTS.

         1.1 GENERAL. The Company hereby agrees to issue (pro rata in proportion
         to the amount of the Warrantholder's loan to the Company) to the
         Warrantholders, at the times and upon the conditions specified below,
         warrants (the "Warrants") to purchase, in the aggregate, up to 100,000
         shares of the Common Stock. Each Warrant, once issued, will initially
         entitle the holder thereof to purchase one share of Common Stock for
         the purchase price set forth in Section 5 below, as adjusted from time
         to time pursuant to the provisions of Section 9 below.

         1.2 ISSUANCE OF THE WARRANTS. The Warrants shall be issued in the
         amounts set forth on Schedule 1 hereto on the date hereof if, and as
         soon as, the Notes are issued in accordance with their terms, and the
         corresponding funds have been delivered to the Company.

         2. FORM OF WARRANTS. The text of the Warrants and of the form of
election to purchase Common Stock underlying the Warrants (the "Warrant Stock")
to be set forth on the reverse thereof shall be substantially as set forth in
the Warrant Certificate ("Warrant Certificate"), attached as Exhibit A to this
Agreement. Each Warrant Certificate shall be executed on behalf of the Company
by the President or Vice President of the Company and attested by the Secretary
or an Assistant Secretary of the Company. Warrant Certificates shall be dated as
of the date of the execution thereof by the Company either upon initial issuance
or upon division, exchange, substitution or transfer as may be permitted
hereunder, provided that all such issuances of Warrants shall be deemed
effective upon the date that the conditions to their issuance are satisfied.

<PAGE>   2

         3. REGISTRATION. The Warrant Certificates shall be numbered and shall
be registered on the books of the Company (the "Warrant Register") as they are
issued. The Company shall be entitled to treat the registered holder of any
Warrant Certificate on the Warrant Register (the "Holder") as the owner in fact
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to or interest in such Warrant Certificate, or the Warrants'
represented thereby, on the part of any other person, and shall not be liable
for any registration or transfer of Warrant Certificates which are registered or
to be registered in the name of a fiduciary or the nominee of a fiduciary unless
made with the actual knowledge that a fiduciary or nominee is committing a
breach of trust in requesting such registration or transfer, or with knowledge
of such facts that the Company's participation therein amounts to bad faith.

         4. TRANSFER OF WARRANT CERTIFICATE. The Warrant Certificate shall be
transferable only on the Warrant Register upon delivery of the Warrant
Certificate duly endorsed by the Holder or by its duly authorized attorney or
representative (with evidence reasonably satisfactory to the Company of such
authorization), or accompanied by evidence reasonably satisfactory to the
Company of succession, assignment or authority to transfer. Notwithstanding the
foregoing, the Company shall have no obligation to cause Warrant Certificates to
be transferred on the Warrant Register to any person, unless the Holder of such
Warrants shall furnish to the Company evidence satisfactory to the Company of
(i) compliance with the registration provisions of Section 5 of the Securities
Act of 1933, as amended (the "Act"), or (ii) the availability of an exemption
from compliance with the registration provisions of Section 5 of the Act.

         5.       TERM OF WARRANTS; EXERCISE OF WARRANTS.

         5.1 TERM AND EXERCISE PRICE. Each outstanding Warrant entitles the
         registered owner thereof to purchase one (1) share of Warrant Stock at
         any time prior to the close of business on the fifth (5th) anniversary
         of the date hereof (the "Expiration Date") at an initial purchase price
         per share of Warrant Stock of $0.01, subject to adjustment pursuant to
         the provisions of Section 9 of this Agreement (the "Warrant Price").

         5.2      GENERAL.

                  (a) Subject to the provisions of this Agreement, each Holder
                  shall have the right to purchase from the Company (and the
                  Company shall issue and sell to such Holder) the number of
                  fully paid and nonassessable shares of Warrant Stock specified
                  in such Holder's Warrant Certificate(s) (as adjusted from time
                  to time in accordance with the provisions of Section 9 of this
                  Agreement), upon surrender of such Warrant Certificate(s) to
                  the Company or its duly authorized agent, and upon payment to
                  the Company of the Warrant Price, or, at the option of the
                  Holder, by conversion of unpaid principal and accrued interest
                  on the Notes, if then outstanding, in an amount equal to the
                  Warrant Price, as adjusted in accordance with the provisions
                  of Section 9 of this Agreement, for the number of shares of
                  Warrant Stock in respect of which such Warrants are then
                  exercised. The date of exercise (the "Exercise Date") of any
                  Warrant shall be deemed to be the date of

                                       2

<PAGE>   3

                  receipt by the Company of the Warrant Certificate duly filled
                  in and signed and accompanied by proper payment as hereinafter
                  provided. Payment of the Warrant Price shall be made as set
                  forth in the Warrant Certificate.

                  (b) Subject to Section 6 of this Agreement, upon such exercise
                  of Warrants, and payment of the Warrant Price as aforesaid,
                  the Company shall issue and cause to be delivered with all
                  reasonable dispatch (but in any event within twenty (20)
                  business days) to or (subject to the provisions of Section 4
                  of this Agreement) upon the written order of the Holder, a
                  certificate for the number of full shares of Warrant Stock so
                  purchased upon the exercise of such Warrants, together with
                  cash, as provided in Section 9 of this Agreement, in respect
                  of any fraction of a share of such stock otherwise issuable
                  upon such exercise. Except under circumstances described in
                  the following sentence, the shares of Warrant Stock purchased
                  pursuant to the immediately preceding sentence shall be deemed
                  to be issued to the Holder as the record owner of such shares
                  as of the close of business on the Exercise Date.
                  Notwithstanding the foregoing, if the Company determines, on
                  or after the date of exercise of any Warrant, that issuance of
                  the Warrant Stock represented thereby would violate an
                  applicable order, law, rule, or regulation, including federal
                  or state securities laws, the Company shall so notify
                  immediately the exercising Holder and shall in good faith, and
                  as expeditiously as possible, endeavor to issue the Warrant
                  Stock without such violation. The right of purchase
                  represented by the Warrants shall be exercisable, at the
                  election of the Holder thereof, either in full or from time to
                  time in part and, in the event that any Warrant is exercised
                  in respect of less than all of the shares of Warrant Stock
                  purchasable on such exercise at any time prior to the
                  Expiration Date, a new Warrant Certificate evidencing the
                  remaining Warrants shall be issued.

         6. PAYMENT OF TAXES. The Company shall pay all documentary stamp taxes,
if any, attributable to the initial issuance of Warrant Stock upon the exercise
of Warrants PROVIDED, HOWEVER, that the Company shall not be required to pay any
tax or taxes which may be payable in respect of any permitted transfer involved
in the issue or delivery of any Warrant Certificates or Warrant Stock in a name
other than that of the registered Holder of such Warrants.

         7. MUTILATED OR MISSING WARRANTS. Upon (i) receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of a Warrant Certificate, (ii) if requested by the Company, the
posting of a bond in an amount equal to the value of the lost, stolen or
destroyed Warrant Certificate, (iii) reimbursement to the Company of all
reasonable expenses incident thereto, and (iv) surrender and cancellation of
such Warrant Certificate, if mutilated, the Company will make and deliver in
lieu of such Warrant Certificate a new Warrant Certificate of like tenor and
representing an equivalent right or interest. The term "outstanding" when used
herein with reference to the Warrant Certificate as of any particular time shall
not include any Warrant Certificate in lieu of which a new Warrant Certificate
has been made and delivered by the Company in accordance with the provisions
hereof.

                                       3

<PAGE>   4

         8.       RESERVATION OF WARRANT STOCK.

                  (a) The Company represents that there has been reserved out of
                  the authorized and unissued shares of Common Stock, a number
                  of shares sufficient to provide for the exercise of the right
                  of purchase represented by the Warrant Certificates as
                  initially issued, and the Company, which currently acts as the
                  transfer agent for its Common Stock ("Transfer Agent") and
                  every subsequent Transfer Agent for any shares of the
                  Company's capital stock issuable upon the exercise of any of
                  the Warrants are hereby irrevocably authorized and directed at
                  all times until the Expiration Date or earlier termination of
                  this Agreement to reserve such number of authorized and
                  unissued shares of Common Stock as shall be required for such
                  purpose. The Company will keep a copy of this Agreement on
                  file with every subsequent Transfer Agent for any shares of
                  the Company's capital stock issuable upon the exercise of the
                  Warrants. The Company will supply any such subsequent Transfer
                  Agent with duly executed stock certificates for issuance on
                  exercise of Warrants and will itself provide or make available
                  any cash which may be required by Section 10 of this
                  Agreement. The Company will furnish to any such subsequent
                  Transfer Agent a copy of all notices of adjustments, and
                  certificates related thereto, transmitted to each Holder
                  pursuant to Section 9.3 of this Agreement. All Warrant
                  Certificates surrendered in the exercise of the rights thereby
                  evidenced shall be canceled.

                  (b) The Company covenants that it shall endeavor to comply
                  with all securities laws regulating the offer and delivery of
                  shares of Common Stock upon exercise of the Warrants; and that
                  if any shares of Common Stock required to be reserved for
                  purposes of exercising the Warrants hereunder require
                  registration with or approval of any governmental authority
                  under any Federal or state law before such shares may be
                  validly issued or delivered upon exercise of the Warrants, the
                  Company shall, in good faith and as expeditiously as possible,
                  endeavor to secure such registration or approval, as the case
                  may be. The Company covenants that all shares of Common Stock
                  which shall be issued upon exercise of the Warrants shall upon
                  issue and payment therefor be validly issued, fully paid and
                  nonassessable.

         9. ADJUSTMENTS OF WARRANT PRICE, PREPAYMENT EVENT PRICE AND NUMBER OF
SHARES OF WARRANT STOCK. The number and kind of securities purchasable upon the
exercise of each Warrant and the Warrant Price related thereto shall be subject
to adjustment from time to time upon the happening of certain events, as
hereinafter defined, but (with respect to Warrants) only as to Warrants
outstanding at the time of such adjustment. Upon each adjustment of the Warrant
Price pursuant to the provisions of Section 9.1(b), the Holder of such Warrant
shall thereafter, prior to the Expiration Date thereof, be entitled to purchase
at the Warrant Price resulting from such adjustment, the number of shares of
Warrant Stock obtained by multiplying the Warrant Price in effect immediately
prior to such adjustment by the number of shares of Warrant Stock

                                       4

<PAGE>   5

issuable upon exercise of such Warrant immediately prior to such adjustment and
dividing the product thereof by the Warrant Price resulting from such
adjustment.

         9.1 ADJUSTMENT OF THE NUMBER OF SHARES OF WARRANT STOCK AND THE WARRANT
         PRICE. The number of shares of Warrant Stock and the Warrant Price
         shall be subject to adjustment as follows:

                  (a) In case the Company shall at any time after the date of
                  issuance of a Warrant (A) pay a dividend or make a
                  distribution on its Common Stock in shares of its capital
                  stock (whether in shares of Common Stock or of capital stock
                  of any other class), (B) subdivide its outstanding shares of
                  Common Stock into a greater number of shares, (C) combine its
                  outstanding shares of Common Stock into a smaller number of
                  shares, or (D) reclassify, reorganize or effect any similar
                  transaction with respect to any of its shares of Common Stock,
                  or in substitution or exchange therefor (other than a change
                  in par value, or from par value to no par value, or from no
                  par value to par value), then the number and, if applicable,
                  kind of shares of Warrant Stock to be received by any Holder
                  shall be adjusted so that the Holder will be entitled to
                  receive on exercise the number and kind of shares of capital
                  stock which it would have owned immediately following such
                  action had its Warrants been exercised immediately prior
                  thereto. An adjustment made pursuant to this subsection (a)
                  shall become effective immediately after the payment date in
                  the case of a dividend or distribution and shall become
                  effective immediately after the effective date in the case of
                  a subdivision, combination, reclassification, reorganization
                  or similar transaction. If, as a result of an adjustment made
                  pursuant to this subsection (a), a Holder shall become
                  entitled to receive shares of two or more classes of capital
                  stock of the Company, the Board of Directors or a duly
                  authorized committee thereof shall in good faith determine
                  (which determination shall be conclusive and binding) the
                  allocation of the Warrant Price between or among shares of
                  such classes of capital stock. After such allocation, the
                  Warrant Price and number of shares of each class of capital
                  stock that is part of the Warrant Stock shall thereafter be
                  subject to adjustment in a manner and on terms determined by
                  the Board of Directors (which determination shall be
                  conclusive and binding) to be as nearly equivalent as
                  practicable to those applicable to Common Stock under this
                  Section 9.

                           (b) If the Company shall issue any shares of Common
                  Stock other than Excluded Shares (as hereinafter defined) for
                  consideration per share less than the Warrant Price per share
                  in effect immediately prior to such issuance, the Warrant
                  Price in effect immediately prior to such issuance shall be
                  reduced (but shall not be increased) to the price (calculated
                  to the nearest cent) determined: by dividing (A) an amount
                  equal to the sum of (1) the number of shares of Common Stock
                  outstanding on a fully diluted basis immediately prior to such
                  issuance multiplied by the Warrant Price per share in effect
                  immediately prior to such issuance and (2) the consideration,
                  if any, received by the Company upon such issuance by (B) the

                                       5

<PAGE>   6

               number of shares of Common Stock outstanding on a fully
               diluted basis immediately after such issuance.

               (c) CERTAIN ADJUSTMENT FACTORS. For the purposes of any
               adjustment of the Warrant Price pursuant to paragraph (b) above,
               the following provisions shall be applicable:

                           (x) CASH. In the case of the issuance of shares of
                           Common Stock for cash, the amount of the
                           consideration received by the Company shall be deemed
                           to be the amount of the cash proceeds received by the
                           Company for such shares of Common Stock before
                           deducting therefrom any discounts, commissions, taxes
                           or other expenses allowed, paid or incurred by the
                           Company for any underwriting or otherwise in
                           connection with the issuance and sale thereof; and

                           (y) CONSIDERATION OTHER THAN CASH. In the case of the
                           issuance of shares of Common Stock (other than upon
                           the conversion of shares of capital stock or other
                           securities of the Company) for consideration in whole
                           or in part other than cash, including securities
                           acquired in exchange therefor (other than securities
                           by their terms so exchangeable), the consideration
                           other than cash shall be deemed to be the fair value
                           thereof (as determined by the Board of Directors of
                           the Company based on an opinion of an outside
                           financial advisor of recognized regional or national
                           standing, which may, but need not, be the independent
                           public accountants who serve as the regular auditors
                           of the Company (the "Financial Advisor"), whose
                           determination shall be conclusive and binding),
                           irrespective of any accounting treatment; and

                           (z) OPTIONS AND CONVERTIBLE SECURITIES. In the case
                           of the issuance of (i) options, warrants or other
                           rights to purchase or acquire shares of Common Stock
                           (whether or not exercisable immediately following
                           such issuance), (ii) securities by their terms
                           convertible into or exchangeable for shares Common
                           Stock (whether or not so convertible or exchangeable
                           immediately following such issuance), or (iii)
                           options, warrants or rights to purchase such
                           convertible or exchangeable securities (whether or
                           not exercisable immediately following such issuance):

                                    (1) the aggregate maximum number of shares
                                    of Common Stock deliverable upon exercise of
                                    such options, warrants or other rights to
                                    purchase or acquire shares of Common Stock
                                    shall be deemed to have been issued at the
                                    time such options, warrants or other rights
                                    are first issued and for a consideration
                                    equal to the consideration (determined in
                                    the manner provided in clauses (x) and (y)
                                    above), if any, received by the Company upon
                                    the issuance

                                       6

<PAGE>   7

                                    of such options, warrants or other rights
                                    plus the purchase price provided in such
                                    options, warrants or other rights for the
                                    shares of Common Stock covered thereby (if
                                    the purchase price per share of Common Stock
                                    is expressed as a range, the purchase price
                                    per share for purposes of this subparagraph
                                    (z)(1) shall be the average of such range of
                                    prices);

                                    (2) the aggregate maximum number of shares
                                    of Common Stock deliverable upon conversion
                                    of or in exchange for any such convertible
                                    or exchangeable securities, or upon the
                                    exercise of options, warrants or other
                                    rights to purchase or acquire such
                                    convertible or exchangeable securities and
                                    the subsequent conversion or exchange
                                    thereto shall be deemed to have been issued
                                    at the time such convertible or exchangeable
                                    securities or such options, warrants or
                                    other rights are first issued and for a
                                    consideration equal to the consideration, if
                                    any, received by the Company for any such
                                    convertible or exchangeable securities or
                                    options, warrants or other rights (excluding
                                    any cash received on account of accrued
                                    interest or accumulated dividends), plus the
                                    additional consideration, if any, to be
                                    received by the Company upon the conversion
                                    or exchange of such securities and the
                                    exercise of any options, warrants or other
                                    rights (the consideration in each case to be
                                    determined in the manner provided in clauses
                                    (x) and (y) above);

                                    (3) on any change in the number of shares of
                                    Common Stock deliverable upon exercise of
                                    any such options, warrants or other rights
                                    which have become exercisable or conversion
                                    of or exchange of such convertible or
                                    exchangeable securities which have become
                                    convertible or exchangeable, or any change
                                    in the consideration to be received by the
                                    Company upon such exercise, conversion or
                                    exchange, the Warrant Price as then in
                                    effect shall forthwith be readjusted to such
                                    Warrant Price as would have been obtained
                                    had such adjustment been made upon the
                                    original issuance of such options, warrants
                                    or other rights; provided, however, no
                                    adjustment shall be made with respect to
                                    such options, warrants or other rights
                                    exercised prior to such change, or
                                    securities converted or exchanged prior to
                                    such change;

                                    (4) on the expiration or cancellation of any
                                    such options, warrants or other rights, or
                                    the termination of the right to convert or
                                    exchange such convertible or exchangeable
                                    securities, if the Warrant Price shall have
                                    been adjusted upon such securities being
                                    issued or becoming exercisable, convertible
                                    or exchangeable, such

                                       7

<PAGE>   8

                                    Warrant Price shall forthwith be readjusted
                                    to such Warrant Price as would have been
                                    obtained had an adjustment been made on the
                                    basis of the issuance of only the number of
                                    shares of Common Stock actually issued upon
                                    the exercise of such options, warrants or
                                    other rights, or upon the conversion or
                                    exchange of such securities; and

                                    (5) if the Warrant Price shall have been
                                    adjusted when such options, warrants or
                                    other rights were first issued or such
                                    convertible or exchangeable securities were
                                    first issued, no further adjustment of the
                                    Warrant Price shall be made for the actual
                                    issuance of shares of Common Stock upon the
                                    exercise, conversion or exchange thereof.

                  (d) EXCLUDED SHARES. "Excluded Shares" shall mean (i) any
                  shares of Common Stock issued in a transaction described in
                  Section 9.1(a) of this Agreement; and (ii) issuances of shares
                  of Common Stock from time to time pursuant to stock option or
                  bonus plans authorized by the Board of Directors of the
                  Company as of the date hereof; (iii) issuances of Common
                  Stock, or warrants, options or rights to acquire shares of
                  Common Stock, or securities convertible into or exchangeable
                  for Common Stock pursuant to the terms of any acquisition by
                  the Company of all or substantially all of the operating
                  assets, or more than fifty percent (50%) of the voting capital
                  stock or other management interest of any business entity in a
                  transaction negotiated on an arms'-length basis and expressly
                  approved in advance by the Board of Directors of the Company;
                  (iv) issuances of shares of Common Stock from time to time
                  upon the exercise, exchange or conversion of warrants,
                  options, convertible securities, the Notes (whether or not
                  outstanding as of the date hereof) or other securities
                  outstanding as of the date hereof; and (v) issuances of shares
                  of Common Stock from time to time pursuant to the
                  anti-dilution provisions of other securities.

                  (e) No adjustment in the Warrant Price shall be required
                  unless such adjustment would require an increase or decrease
                  of at least 2.2% in such price; PROVIDED, HOWEVER, that any
                  adjustments which by reason of this subsection (f) are not
                  required to be made shall be carried forward and taken into
                  account in any subsequent adjustment. All calculations under
                  this Section 9.1 shall be made to the nearest tenth of a cent
                  or to the nearest one-hundredth of a share, as the case may
                  be.

                  (f) The number of shares of Common Stock outstanding at any
                  given time shall not include shares owned or held by or for
                  the account of the Company, and the disposition of any such
                  shares shall be considered an issuance of Common Stock for the
                  purposes of this Section 9.

                                       8

<PAGE>   9

         9.2      RIGHTS TO PURCHASE OTHER SECURITIES. If any of the following
                  shall occur:

                  (a) any consolidation or merger to which the Company is a
                  party, other than a consolidation or a merger in which the
                  Company is the continuing or surviving Company and which does
                  not result in any reclassification of, or change (other than
                  as a result of a subdivision or combination) in, outstanding
                  shares of the Common Stock, or

                  (b)      any sale or transfer to another corporation or entity
                           of all or substantially all of the assets of the
                           Company;

         then, and in either such case, the Holder of each Warrant then
         outstanding shall have the right to purchase the kind and amount of
         shares of stock and/or other securities and property receivable upon
         such consolidation, merger, sale or transfer by a holder of the number
         of shares of Common Stock issuable upon exercise of such Warrant
         immediately prior to such consolidation, merger, sale, or transfer. The
         provisions of this Section 9.2 shall similarly apply to successive
         consolidations, mergers, sales or transfers.

         9.3 NOTICE OF ADJUSTMENT. Whenever the number of shares of Warrant
         Stock purchasable upon the exercise of each Warrant or the Warrant
         Price of such Warrant Stock is adjusted or reduced, as herein provided,
         the Company shall mail by first class, postage prepaid, to each Holder
         (a) notice of any reduction on or before the day the reduction takes
         effect, which shall state the reduced Warrant Price and the period
         during which it will be in effect and/or (b) a certificate setting
         forth the number of shares of Warrant Stock purchasable upon the
         exercise of each Warrant and the Warrant Price on such Warrant Stock
         after adjustment setting forth a brief statement of the facts requiring
         such adjustment and setting forth the computation by which such
         adjustment was made.

         9.4 NO ADJUSTMENT FOR DIVIDENDS. No adjustment in respect of any cash
         dividends shall be made during the term of a Warrant or upon the
         exercise or conversion of a Warrant.

         9.5 CERTAIN EVENTS. If any event occurs as to which in the reasonable
         judgment of the Board of Directors of the Company, in good faith, the
         other provisions of this Section 9 are not strictly applicable but the
         lack of any adjustment would not in the opinion of the Board of
         Directors of the Company fairly reflect the purchase rights of the
         Holders of the Warrants in accordance with the basic intent and
         principles of the provisions of this Agreement then the Board of
         Directors of the Company shall appoint a Financial Advisor which shall
         give its opinion upon the adjustment, if any, on a basis consistent
         with the basic intent and principles established and the other
         provisions of this Section 9, necessary to preserve, without dilution,
         the exercise rights of the Holders. Upon receipt of such opinion, the
         Company shall forthwith make the adjustments described therein which
         adjustments shall be conclusive and binding.

                                       9

<PAGE>   10

         10. ELIMINATION OF FRACTIONS. The Company shall not be required to
issue certificates representing fractional shares of Common Stock upon any
exercise of Warrants, but will make a payment in cash, in lieu of issuing such
fractional shares, based on the Current Market Price per share at the time.

         11. CERTIFICATES TO BEAR LEGENDS. The Warrant Certificates and
certificates representing shares of Warrant Stock shall be subject to a
stop-transfer order and each such certificate shall bear the following legends
by which each Holder shall be found:

                  THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
                  ACT OF 1933 ("ACT"). THEY MAY NOT BE SOLD, OFFERED FOR SALE,
                  PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
                  REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE ACT OR
                  AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
                  REGISTRATION IS NOT REQUIRED. THESE SECURITIES HAVE BEEN
                  ISSUED UNDER AND ARE GOVERNED BY AND ARE SUBJECT TO THAT
                  CERTAIN WARRANT AGREEMENT DATED AS OF JANUARY 18, 2001 (THE
                  WARRANT AGREEMENT). A COPY OF THE WARRANT AGREEMENT CAN BE
                  OBTAINED FROM THE SECRETARY OF THE COMPANY.

         12. NO RIGHTS AS STOCKHOLDERS; NOTICES TO HOLDERS; UNISSUED WARRANTS.
Nothing contained in this Agreement or in any of the Warrant Certificates shall
be construed conferring upon the Holders or their transferees the right to vote
or to receive dividends or to consent to or receive notice as stockholders in
respect of any meeting of stockholders for the election of directors of the
Company or on any other matter, or any rights whatsoever as stockholders of the
Company. Warrants as to which the conditions precedent to issuance are not
satisfied shall be void and of no effect, and no Purchaser or other party shall
have any rights with respect thereto.

         13. INVESTMENT INTENT. The Warrants to be purchased pursuant to this
Agreement are being purchased for each Purchaser's own account and with no
intention of distributing or reselling the Warrants. The Holder understands that
neither the Warrants nor the Common Stock have been registered under the Act or
any applicable state securities laws and that neither the Warrants nor the
Common Stock can be sold, transferred or otherwise disposed of without
registration under the Act and applicable state securities laws, unless it has
been established to the satisfaction of the Company that they may be sold,
transferred or otherwise disposed of without such registration.

         14. NOTICES. Any notice pursuant to this Agreement to be given or made
by the Holder of any Warrant Certificate to or on the Company shall be
sufficiently given or made if delivered personally or sent by telecopier or by
certified mail, addressed to the Chief Financial Officer of the Company at the
Company's principal executive offices at 4100 Holiday Street, N.W., Suite 201,
Canton, Ohio 44718 (unless notice has been given of a change of such

                                       10

<PAGE>   11

address), and shall be effective three (3) days after having been mailed or upon
receipt if delivered personally or sent by telecopier, with receipt confirmed.
Notices or demands authorized by this Agreement to be given or made to the
Holder of any Warrant Certificate shall be sufficiently given or made if
delivered personally or sent by certified mail or by telecopier, addressed to
such Holder at the address of such Holder as shown on the Warrant Register, and
shall be effective three (3) days after having been mailed or upon receipt if
delivered personally or sent by telecopier, with receipt confirmed.

         15. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.

         16. SUPPLEMENTS, AMENDMENTS AND WAIVERS. Any supplement or amendment
to, or any waiver of any provision of, this Agreement shall be effective when
consented to in writing by the Holders of a majority of the Warrants then
outstanding (determined as though there were one Warrant for each share of
Common Stock issuable on the exercise of the then outstanding Warrants) and by
the Company.

         17. SUCCESSORS. All the covenants and provisions of this Agreement by
or for the benefit of the Company or the Holders shall bind and inure to the
benefit of their respective successors and assigns hereunder.

         18. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original; but
such counterparts together shall constitute but one and the same instrument.

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the day, month and year first above written.

                                               WATERLINK, INC.

                                          By:/s/ Mark E. Brody
                                          Its: Chief Financial Officer

                                       11

<PAGE>   12

                        WARRANT AGREEMENT SIGNATURE PAGE

Accepted and agreed as of the date first above written:

BRANTLEY VENTURE PARTNERS III, L.P.

By:      BRANTLEY VENTURE MANAGEMENT III, L.P.,
         as General Partner

By:      PINKAS FAMILY PARTNERS, L.P.,
         a General Partner

By:         /s/ ROBERT P. PINKAS
   -----------------------------
         [Please Sign Above This Line]

Name:             Robert P. Pinkas
Title:            General Partner
Address:          20600 Chagrin Blvd.
                  Suite 1150
                  Cleveland, Ohio 44122

Telephone No.:  (216) 283-4800

Taxpayer Identification No.:        34-1757020

                                       12

<PAGE>   13

                        WARRANT AGREEMENT SIGNATURE PAGE

Accepted and agreed as of
the date first above written:

CID EQUITY CAPITAL V, L.P.

By:  CID EQUITY PARTNERS V,
         As General Partner

By:      /s/ John T. Hackett
   -------------------------
         [Please Sign Above This Line]

Name:             John T. Hackett
Title:            Managing General Partner
Address:          One American Square
                  Suite 2850
                  Box 82074
                  Indianapolis, Indiana 46282

Telephone No.:  (317) 269-2350

Taxpayer Identification No.:        35-1990273

                                       13

<PAGE>   14

                                   SCHEDULE 1

                                                                 Number of
Warrantholder                                                    Warrants
-------------                                                    --------

Brantley Venture Partners III, L.P.                               50,000
CID Equity Capital V, L.P.                                        50,000

                                       1

<PAGE>   15

                                    EXHIBIT A

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
("ACT"). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE
ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED.

THESE SECURITIES HAVE BEEN ISSUED UNDER AND ARE GOVERNED BY AND ARE SUBJECT TO
THAT CERTAIN WARRANT AGREEMENT DATED AS OF JANUARY 18, 2001 (THE "WARRANT
AGREEMENT"). A COPY OF THE WARRANT AGREEMENT CAN BE OBTAINED FROM THE SECRETARY
OF THE COMPANY.

                       WARRANT TO PURCHASE COMMON STOCK OF
                                 WATERLINK, INC.
                                 WARRANT NO. D-

         This certifies that, for value received, ____________________, or its
permitted assigns, is entitled, subject to the terms set forth below, to
purchase from WATERLINK, INC., a Delaware corporation (the "Company"),
______________ shares (the "Shares") (subject to adjustment as provided in
Section 9 of the Warrant Agreement) of fully paid and nonassessable common
stock, $.01 par value per share, of the Company (the "Common Stock"), at the
purchase price of $0.01 per share (the "Purchase Price"), at any time or from
time to time up until 5:00 P.M. Cleveland, Ohio time on January 17, 2006.

         1.       EXERCISE PROVISIONS.

         (a) MANNER OF EXERCISE. This Warrant may be exercised by the holder of
         this Warrant surrendering to the Company at its principal office at
         4100 Holiday Street, N.W., Suite 201, Canton, Ohio 44718, or such other
         address as to which the Company may hereafter give notice to the
         holder, this Warrant, together with the exercise form attached to this
         Warrant duly executed by the holder together with payment to the
         Company in the amount obtained by multiplying the Purchase Price by the
         number of shares of Common Stock designated in the exercise form.
         Payment may be in cash or by cashier's or certified bank check payable
         to the order of the Company, or by conversion of the unpaid principal
         and accrued interest under the Notes in the manner set forth in the
         Notes and the Warrant Agreement.

         (b) PARTIAL EXERCISE. On any partial exercise, the Company shall
         promptly issue and deliver to the holder of this Warrant a new Warrant
         or Warrants of like tenor in the name

                                       1

<PAGE>   16

         of that holder providing for the right to purchase that number of
         shares of Common Stock as to which this Warrant has not been exercised.

         2. DELIVERY OF STOCK CERTIFICATES. Within a reasonable time after full
or partial exercise of this Warrant, the Company at its expense will cause to be
issued in the name of and delivered to the holder of this Warrant in accordance
with the requirements of the Warrant Agreement, a certificate or certificates
for the number of fully paid and nonassessable shares of Common Stock to which
that holder shall be entitled upon such exercise.

         3. COMPLIANCE WITH SECURITIES ACT; DISPOSITION OF WARRANT OR SHARES OF
COMMON STOCK. The holder of this Warrant, by acceptance hereof, agrees that this
Warrant and the Shares of Common Stock to be issued upon exercise hereof are
being acquired for investment and that the holder will not offer, sell or
otherwise dispose of this Warrant or any Shares of Common Stock to be issued
upon exercise hereof, except under circumstances which will not result in a
violation of the Securities Act of 1933, as amended (the "Act") nor violate the
terms of the Warrant Agreement. In addition, any permitted Warrant transferee
will be required to agree to the provisions of this Section 3. The provisions of
this Section 3 shall not apply to any shares of Common Stock, the issuance or
resale of which is registered under the Act.

         4.       MISCELLANEOUS PROVISIONS.

         (a) RESERVATION OF STOCK. The Company covenants that it will at all
         times reserve and keep available, solely for issuance upon exercise of
         this Warrant, all shares of Common Stock or other securities from time
         to time issuable upon exercise of this Warrant.

         (b) MODIFICATION. This Warrant and any of its terms may be changed,
         waived, or terminated only by a written instrument signed by the party
         against whom enforcement of that change, waiver or termination is
         sought.

         (c) REPLACEMENT. On receipt of evidence reasonably satisfactory to the
         Company of the loss, theft, destruction, or mutilation of this Warrant
         and subject to the requirements of the Warrant Agreement, the Company
         will execute and deliver, in lieu of this Warrant, a new Warrant of
         like tenor.

         (d) WARRANT AGENT. The Company may, on written notice to the holder of
         this Warrant, appoint an agent having an office in Cleveland, Ohio, for
         the purposes of issuing Common Stock upon the exercise of this Warrant
         and of replacing or exchanging this Warrant, and after that appointment
         any such issuance, replacement, or exchange shall be made at that
         office by that agent.

         (e) NO RIGHTS AS STOCKHOLDER. No holder of this Warrant, as such,
         shall, solely by holding this Warrant, be entitled to vote or receive
         dividends or be considered a stockholder of the Company for any
         purpose, nor shall anything in this Warrant be

                                       2

<PAGE>   17

         construed to confer on any holder of this Warrant as such, any rights
         of a stockholder of the Company or any right to vote, to give or
         withhold consent to any corporate action, to receive notice of meeting
         of stockholders, to receive dividends or subscription rights or
         otherwise.

         (f) ANTI-DILUTION RIGHTS. The holder hereof shall have certain
         anti-dilution protection as to the Shares of Common Stock to be issued
         upon exercise as specifically set forth in the Warrant Agreement which
         may result in the adjustment from time to time of the Purchase Price
         and/or the number of shares of Common Stock issuable upon the exercise
         hereof.

         (g) NOTICES. Notices hereunder to the holder of this Warrant shall be
         sent as provided in the Warrant Agreement.

Dated: _______________, ______                     WATERLINK, INC.

                                                   By:
                                                      -----------------------

                                       3

<PAGE>   18

                                FORM OF EXERCISE
                                ----------------

                  (To be signed only upon exercise of Warrant)

To:      WATERLINK, INC.

         The undersigned holder of the attached Warrant hereby irrevocably
elects to exercise the right to purchase _______________ shares of Common Stock
of WATERLINK, INC., and herewith makes payment of $___________________ for those
shares, and requests that the certificate for those shares be issued in the name
of the undersigned and delivered to the address below the signature of the
undersigned. The undersigned hereby affirms the statements and covenants all as
set forth in Section 3 of the Warrant.

Dated:_______________, _____

                                    (Signature must conform in all respects to
                                    name of holder as specified on the face of
                                    the attached Warrant)

            -----------------------------------------------------------------
                                    Signature

            -----------------------------------------------------------------
                                    Address

            -----------------------------------------------------------------<PAGE>   1
                                                                    Exhibit 10.3

THIS SUBORDINATED NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE OR OTHER SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD,
TRANSFERRED OR ASSIGNED EXCEPT (I) PURSUANT TO REGISTRATIONS THEREOF UNDER SUCH
LAWS, OR (II) IF, IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO
WATERLINK, INC. THE PROPOSED TRANSFER MAY BE EFFECTED IN COMPLIANCE WITH
APPLICABLE SECURITIES LAWS WITHOUT SUCH REGISTRATIONS.

                            13.00 % SUBORDINATED NOTE
                           --------------------------

$500,000                                               Dated:  January 18, 2001

For value received, Waterlink, Inc., a Delaware corporation with its principal
offices at 4100 Holiday Street, Canton, OH 44718(the "Maker"), hereby promises
to pay to the order of BRANTLEY VENTURE PARTNERS III, L.P., a Delaware limited
partnership with its principal offices at 20600 Chagrin Blvd., Suite 1150,
Cleveland, Ohio 44122, or its assigns (collectively, the "Holder"), at its
principal offices or at such other place as the Holder may direct in writing to
the Maker, in lawful money of the United States of America, the principal amount
of Five Hundred Thousand Dollars ($500,000) and interest, as provided herein,
all without relief from valuation or appraisement laws. This Note is one of a
series of notes issued on the date hereof in the aggregate principal amount of
One Million Dollars ($1,000,000) (collectively, the "Notes").

1. PAYMENT OF PRINCIPAL. Subject to acceleration or earlier payment as provided
for elsewhere in this 13.00 % Subordinated Note (the "Note"), the Maker shall
pay to the Holder on January 18, 2002, Five Hundred Thousand Dollars ($500,000)
in principal plus all accrued and unpaid interest on the full principal balance
of this Note as of that date.

2. INTEREST. Interest on the unpaid principal balance hereof existing from time
to time shall accrue at the rate of 13.00 % per annum; provided, however,
interest shall accrue at the rate of 15.00 % per annum so long as an "Event of
Default," as specified in SECTION 4(A), exists hereunder. Interest shall be
calculated on the basis of actual daily balances of outstanding principal for
the exact number of days the principal remains outstanding and shall be computed
on the basis of a 360-day year. Subject to acceleration or earlier payment as
provided elsewhere in this Note, interest shall be payable quarterly in arrears
on each April 18, July 18, October 18 and January 18 until this Note, including
all accrued and unpaid interest, is paid in full.

3. PREPAYMENT. The Maker may prepay all or any portion of the unpaid principal
balance hereof and accrued interest, without premium or penalty; provided,
however, all sums received in prepayment shall first be applied in payment of
accrued but unpaid interest and the excess, if any, shall then be applied to the
unpaid principal balance hereof (with the principal credited to installments of
the principal balance due hereunder in inverse order of their maturity). Any
payments or prepayments made on the Notes, whether principal, interest or
premium (if any), shall be made ratably as to all of the Notes.

<PAGE>   2

4.       DEFAULT AND REMEDIES.
         (a). If any of the following events (an "Event of Default" or
         collectively "Events of Default") shall have occurred and be
         continuing, that is to say: (i) the Maker defaults in the payment of
         principal of or interest or premium (if any) on this Note when due and
         the Maker does not cure that default within 3 days after the due date;
         (ii) the Maker defaults in the performance of any obligation under this
         Note (other than the payment described in the immediately preceding
         clause) and the Maker does not cure that default within 30 days after
         receipt by the Maker of written notice from the Holder; (iii) the Maker
         defaults in any payment of principal of or interest on any Senior Debt,
         beyond any period of grace provided with respect thereto or in the
         performance of any other term or condition contained in any agreement
         under which any such obligation is created if the effect of such
         default results in Senior Debt in excess of $1,000,000 becoming due
         prior to its stated maturity without such indebtedness being discharged
         or such acceleration being rescinded or annulled within a period of
         sixty (60) days; (iv) an order for relief shall be entered in any
         federal bankruptcy proceeding in which the Maker is the debtor; or
         bankruptcy, receivership, insolvency, reorganization, relief,
         dissolution, liquidation or other similar proceedings shall be
         instituted by or against the Maker or all or any part of the property
         of the Maker under the Federal Bankruptcy Code or any other bankruptcy
         or insolvency law of the United States or any bankruptcy or insolvency
         law of any state of competent jurisdiction unless, if such proceedings
         are instituted against the Maker, such proceedings are dismissed and
         discharged within ninety (90) days after they are instituted; or (v)
         the Maker shall have become insolvent or unable to pay its debts as
         they mature, cease doing business as a going concern, undergo
         dissolution or liquidation, make an assignment for the benefit of
         creditors, admit in writing its inability to pay its debts as they
         become due, or if a trustee, receiver or liquidator shall be appointed
         for the Maker, or for any substantial portion of the assets of the
         Maker, and such appointment shall not be vacated within ninety (90)
         days;

         then, except as provided below with respect to an Event of Default
         under paragraph (a) of this Section 4, the holder of the Note if only
         one Note shall be outstanding, or the holders of at least a majority of
         the principal amount of the Notes, if more than one Note shall be
         outstanding, may at its or their option, after notice in writing to the
         Maker, declare the Note or all of the Notes, as the case may be, to be
         forthwith due and payable and thereupon the Note, or all of the Notes,
         shall be and become due and payable, together with interest and all
         other amounts accrued thereon (provided that if an Event of Default
         results from the filing of a voluntary petition in any bankruptcy
         proceeding or the filing of an involuntary petition in any bankruptcy
         proceeding which is not dismissed and discharged within ninety (90)
         days, the Notes thereupon shall immediately become due and payable,
         with interest accrued thereon, without any notice from the holders of
         the Notes or otherwise), and, subject to the provisions of Section 5
         hereof, the holder or holders of the Note or Notes may take any action
         or proceeding at law or in equity which it or they deem advisable for
         the protection of its or their interests to collect and enforce payment
         and the Maker shall pay all expenses, court costs and reasonable
         attorneys' fees incurred in connection with or arising out of any
         default hereunder. Notwithstanding the foregoing, in case an Event of
         Default under paragraph (a) of this Section 4 shall occur,

<PAGE>   3

         the holders shall have none of the rights and remedies otherwise
         contemplated by this Section 4 (including, without limitation, the
         right to accelerate the maturity of the Notes) UNLESS AND UNTIL (i) the
         Blocking Period (as defined herein) shall have expired without the same
         having been cured or waived; and (ii) the Blocking Period shall have
         expired without any holder of Senior Debt having accelerated the
         maturity of such Senior Debt, but in such event, upon the satisfaction
         of said conditions (i) and (ii) above, the holders will have the rights
         and remedies contemplated by this Section 4.

                  In the event that the holders of Senior Debt in excess of
         $1,000,000 shall accelerate the maturity of any such Senior Debt, as a
         result of a default under the Loan Documents (as defined herein) or the
         Subsequent Loan Documents (as defined herein), then the indebtedness
         outstanding on the Notes, including all accrued and unpaid interest,
         principal and premium, if any, as well as any fees and expenses payable
         to the holders of the Notes (unless waived by the holders of Senior
         Debt in excess of $1,000,000), shall be simultaneously accelerated. If
         any acceleration is rescinded or annulled by the holders of Senior Debt
         within sixty (60) days from such acceleration of such Senior Debt, the
         acceleration of the Notes will automatically be rescinded.

         (b). If this Note is collected or attempted to be collected by the
         initiation or prosecution of any suit or through any bankruptcy court,
         or by any judicial proceeding, or is placed in the hands of attorneys
         for collection, then the Maker shall pay, in addition to all other
         amounts owing hereunder, all court costs and reasonable attorney's fees
         incurred by the Holder.

5.       SUBORDINATION.

         (a). SUBORDINATION TO SENIOR DEBT. Notwithstanding anything to the
         contrary contained in this Note, the Maker covenants and agrees, and
         the Holder by acceptance of this Note likewise covenants and agrees,
         that the Maker's indebtedness under this Note shall be junior and
         subordinate to the Senior Debt (as hereafter defined) to the extent and
         in the manner set forth in this SECTION 5, except to the extent
         otherwise agreed to in writing by the Holder and any Senior Lender (as
         defined herein) with respect to the Senior Debt held by or payable to
         that Senior Lender. Each subsection of this SECTION 5 shall be given
         independent effect so that if a particular payment or action is
         prohibited by any one of these subsections, it shall be prohibited
         although it otherwise would not be prohibited by another subsection.
         Without the prior written consent of the Senior Lender (or, in the case
         of the Senior Credit Facility, of the agent thereof), the Maker
         covenants and agrees, and the Holder by acceptance of this Note
         likewise covenants and agrees, that so long as such Senior Debt is
         outstanding or commitments under the Senior Credit Facility shall
         remain in effect, (i) the Maker will not make and the Holder will not
         receive any voluntary prepayments hereunder, (ii) the Maker will not
         grant and the Holder will not receive any collateral as security for
         obligations hereunder, and (iii) the Maker and the Holder will not
         amend any provision of this Section 5 nor amend in any way adverse to
         any Senior Lender any other provision of this Note.

<PAGE>   4

         (b). PAYMENT DEFAULT ON SENIOR DEBT. If at any time a default occurs in
         the payment when due (whether at maturity or upon acceleration or
         mandatory prepayment, or on any principal installment payment date or
         interest payment date, or otherwise) ("Payment Default") of any Senior
         Debt, then at all times thereafter until (i) the Payment Default has
         been cured, (ii) the Payment Default or the benefits of this sentence
         have been waived in writing by or on behalf of the Senior Lenders
         holding that Senior Debt, or (iii) payment in full of all affected
         Senior Debt, the Maker shall not, directly or indirectly, make any
         Distribution of Assets (as hereinafter defined) or Payment (as
         hereinafter defined) with respect to this Note.

         (c). DISSOLUTION, LIQUIDATION OR REORGANIZATION OF MAKER. In the event
         of (i) any insolvency or bankruptcy proceeding brought by or against
         the Maker; (ii) any receivership, liquidation, reorganization or other
         similar proceeding relative to the Maker or to its property, including
         its Subsidiaries; or (iii) any proceedings for voluntary liquidation,
         dissolution or other winding up of the Maker, whether or not involving
         insolvency or bankruptcy, the holders of Senior Debt shall be entitled
         to receive payment in full in cash of all principal, premium (if any),
         fees and charges in respect of, and interest on, all Senior Debt
         (including interest thereon accruing after the commencement of any such
         proceedings) before the holders of the Notes shall be entitled to
         receive any payment or distribution in respect of the Notes. Pursuant
         to the foregoing, the holders of Senior Debt (until payment in full in
         cash of all principal, premium (if any), fees and charges in respect
         of, and interest on, all Senior Debt, including interest thereon
         accruing after the commencement of any such proceedings at the rate
         specified in the applicable Senior Debt whether or not such interest is
         an allowable claim in such case or proceeding) shall be entitled to
         receive for application and payment thereof any payment or distribution
         of any kind or character, whether in cash or property or securities,
         which may be payable or deliverable in any such proceedings in respect
         of the Notes (including any such payment or distribution which may be
         payable or deliverable by virtue of the provisions of, or any security
         for, any securities which are subordinate and junior in right of
         payment of the Notes). The holders of the Notes shall not exercise or
         attempt to exercise any right of set off or counterclaim in respect of
         any obligations of the holders of the Notes to the Maker against the
         obligations of the Maker under the Notes if the effect thereof shall be
         to reduce the amount of any such payment or distribution to which the
         holders of Senior Debt would be entitled in the absence of such set off
         or counterclaim; and if and to the extent that notwithstanding the
         foregoing, the holders of the Notes are required by any mandatory
         provision of law to exercise any such right of set off or counterclaim
         each reduction of the amount owing on account of the principal of or
         interest on the Notes by reason of such set off or counterclaim shall
         be deemed to be a payment by the Maker in a like manner in respect of
         the Notes to which the second sentence of this subsection (c) shall
         apply.

         In the event that any default shall occur and be continuing with
         respect to any Senior Debt permitting the holders, with or without the
         making of demand, the giving of notice or otherwise, of such Senior
         Debt to accelerate the maturity thereof, the Maker shall not pay and
         the Holders shall not be entitled to receive any Payment or
         Distribution of Assets in

<PAGE>   5

         respect of the Notes of any kind, whether of principal, premium (if
         applicable) or interest or, except to the extent otherwise provided in
         subsection (d) below, institute any judicial or legal proceedings or
         seek to enforce any other rights or remedies whatsoever UNLESS AND
         UNTIL (i) a period of one hundred seventy-five (175) days (the
         "Blocking Period") shall have elapsed from the date of such default
         without the same having been cured or waived; and (ii) the Blocking
         Period shall have elapsed without any holder of Senior Debt having
         accelerated the maturity of such Senior Debt, but in such event, upon
         the satisfaction of the conditions set forth in (i) and (ii) above, the
         holders of the Notes will have the rights and remedies contemplated by
         the Notes.

                  Each holder of the Notes will at all times retain the right to
         vote its claims and otherwise act and participate in any insolvency,
         bankruptcy or reorganization proceeding relative to the Maker;
         provided, however, no holder of the Notes in their capacity as such
         shall take any action or vote its claims in the course of any such
         bankruptcy, insolvency or reorganization proceedings so as to:

                  (i) contest the validity or the enforceability of the
                  agreements governing Senior Debt including the Loan Documents
                  or any Subsequent Loan Documents, the promissory notes issued
                  to the holders of Senior Debt, or the liens and security
                  interests to the extent granted with respect to the Senior
                  Debt;

                  (ii) contest the rights and duties of the holders of Senior
                  Debt established in the agreements or instruments governing
                  the same or any security agreement with respect to such liens
                  and security interests;

                  (iii) contest the validity or enforceability of this Section
                  5;

                  (iv) contest the validity or enforceability of this Note or
                  any agreement or instrument to the extent evidencing or
                  relating to the indebtedness of Maker to such holder; or

                  (v) compromise their claims so as to deprive the holders of
                  Senior Debt of the benefit of receiving all amounts otherwise
                  payable to the holders of the Notes pursuant to the
                  reorganization or liquidation of the Maker resulting from such
                  proceeding.

         (d). SUBROGATION. No Distribution of Assets or Payment to which the
         Holder would have been entitled except for the provisions of SECTION 5
         and which are received by or paid over to the Senior Lenders or their
         Representative (as hereinafter defined) shall, as between the Maker and
         its creditors other than the Senior Lenders and the Holder, be deemed
         to be a payment by the Maker to the Senior Lenders or on account of the
         Senior Debt, and the Holder shall be subrogated (without any duty on
         the part of the Senior Lenders to warrant, create, effectuate, preserve
         or protect such subrogation) to the then or thereafter existing rights
         of the Senior Lenders to receive Distributions of Assets or payments
         made on the Senior Debt until this Note shall be paid in full.

<PAGE>   6

         (e). PAYMENTS HELD IN TRUST. If the Holder receives any Distribution of
         Assets or Payment which the Holder is not entitled to retain under the
         provisions of this SECTION 5, any such Distribution of Assets or
         Payment so received shall be held in trust for the Senior Lenders,
         shall not be commingled with any other assets of the Holder, and shall
         be paid to the Senior Lenders, pro rata, to the extent necessary to
         make payment in full, after giving effect to any concurrent payment or
         distribution to or for the benefit of the Senior Lenders.

         (f). CHANGES IN SENIOR DEBT. Any Senior Lender may at any time and from
         time to time with notice to the Holder: (i) extend, renew, modify,
         waive or amend the terms of the Senior Debt; (ii) sell, exchange,
         release or otherwise deal with any property pledged, mortgaged or
         otherwise securing the Senior Debt; (iii) release any guarantor or any
         other person liable in any manner for the Senior Debt or amend or waive
         the terms of the Senior Debt; (iv) exercise or refrain from exercising
         any rights against the Maker or any other persons; (v) apply in any
         order any sums by whomever paid or however realized to the Senior Debt;
         and (vi) take any other action which otherwise might be deemed to
         impair the Holder's rights. Any and all of such actions may be taken by
         the Senior Lenders without incurring responsibility to the Holder and
         without impairing or releasing the Holder's obligations to the Senior
         Lenders.

         (g). THIRD-PARTY BENEFICIARY, ETC.. The foregoing provisions regarding
         subordination are solely for the purpose of defining the relative
         rights of the Senior Lenders on the one hand and the Holder on the
         other hand. Such provisions are for the benefit of the Senior Lenders
         (and their successors and assigns) and shall be enforceable by them
         directly against the Holder except to the extent otherwise agreed to in
         writing by the Holder and any other Senior Lender.

         (h). DEFINITIONS. As used in this SECTION 5 (or as elsewhere used in
         this Note) the following terms shall have the meanings indicated:

         "Distribution of Assets" means any distribution of assets of the Maker
         or any of its subsidiaries of any kind or character, whether a payment,
         purchase or other acquisition or retirement for cash, property, or
         securities, with respect to the Maker's obligations under this Note.

         "Payment" means payment (including any setoff by the Holder of
         obligations owed by the Holder to the Maker against obligations of the
         Maker hereunder) of any obligation now or hereafter existing under this
         Note (as it may hereafter be amended, supplemented, or otherwise
         modified from time to time), whether created directly or acquired by
         assignment or otherwise, and interest and premiums, if any, thereon and
         all other amounts payable in respect thereof or in connection
         therewith.

         "Representative" means, with respect to any Senior Debt, the trustee,
         agent, or other representative for one or more of the Senior Lenders,
         if any, designated in the indenture,

<PAGE>   7

         agreement or document creating, evidencing or governing such Senior
         Debt or pursuant to which it was issued, or otherwise designated by the
         holders of such Senior Debt.

         "Senior Debt" means all indebtedness and other obligations specified
         below whether outstanding on the date of this Note or hereafter
         created, incurred or assumed by the Maker:

                  (i) the obligations of the Maker and its subsidiaries,
                  including, without limitations the principal of, and premium
                  and interest on, all loans, letters of credit bankers'
                  acceptances and other extensions of credit under the Loan
                  Documents (as defined in that certain Amended and Restated
                  Credit Agreement dated as of February 11, 2000, as heretofore
                  and as hereafter amended, among the Maker and Bank of America,
                  NA, as agent, and the other financial institutions party
                  thereto (the "Senior Credit Facility")) and all commitment,
                  facility and other fees and all expenses, reimbursements,
                  indemnities and other amounts payable by the Maker thereunder;

                  (ii) all other indebtedness of the Maker which by its express
                  terms is made senior to the Notes; provided, however, that any
                  indebtedness incurred by the Maker under this clause (ii) must
                  be created in connection with or arise out of a transaction in
                  which the Maker or any subsidiaries of the Maker received cash
                  loan proceeds, property or credit support in the form of a
                  letter of credit, guaranty or like instrument;

                  (iii) all interest accrued or accruing on Senior Debt after
                  the commencement of any insolvency, bankruptcy or receivership
                  case or proceeding in accordance with and at the contract rate
                  (including, without limitation, any rate applicable upon
                  default) specified in the agreement or instrument creating,
                  evidencing or governing any such Senior Debt, whether or not,
                  pursuant to applicable law or otherwise, the claim for such
                  interest is allowable as a claim in such case or proceeding;
                  and

                  (iv) any refinancings, refundings, renewals or extensions, in
                  whole or in part, of any indebtedness or other obligation
                  described in clauses (i) or (ii) above under any loan
                  documents (the "Subsequent Loan Documents") entered into in
                  connection with any credit facility entered into after the
                  termination of the Senior Credit Facility or otherwise.

         "Senior Lender" or "Senior Lenders" means one or more of the holders of
Senior Debt.

6. NOTICES. All notices, requests, demands, or and other communications that are
required or may be given pursuant to the terms of this Note shall be in writing
and delivery shall be deemed sufficient and to have been duly given on the date
of service if delivered personally or by facsimile transmission if receipt is
confirmed to the party to whom notice is to be given or on the

<PAGE>   8

third day after mailing if mailed by first-class mail, return receipt requested,
and properly addressed as follows:

If to the Maker, to:
                           Waterlink, Inc.
                           4100 Holiday Street NW
                           Canton, Ohio 44718-2532
                           Attention: President
                           Fax: (330)-649-4008
         Copies to:
                           Benesch, Friedlander, Coplan & Aronoff LLP
                           2300 BP Tower
                           200 Public Square
                           Cleveland, Ohio 44114
                           Attention: Douglas Haas, Esq.
                           Fax: (216)-363-4588
If to the Holder, to:
                           Brantley Venture Partners III, L.P.
                           20600 Chagrin Blvd.
                           Suite 1150
                           Cleveland, Ohio 44122
                           Attention: Mr. Robert P. Pinkas
                           Fax: (216)-283-5324

or to such other address as may be specified in writing by any of the above.

7.       REMEDIES. The remedies provided by this Note shall be cumulative, and
shall be in addition to and not exclusive of other remedies available under or
pursuant to the Investment Agreement, at law, or in equity. The exercise or
waiver by the Holder of any right or remedy available under this Note shall not
be deemed to be a waiver of any other right or remedy available under this Note,
the Investment Agreement, at law, or in equity.

8.       MISCELLANEOUS.

         (a). Whenever used herein, the singular includes the plural and the
         plural includes the singular. The term "Maker" means the corporation
         named in the opening paragraph hereof and its successors and assigns.

         (b). Ohio law shall govern the interpretation, construction, and
         enforcement of this Note and all transactions contemplated hereby,
         notwithstanding any state's choice of law rules to the contrary.

         (c). The Holder, by acceptance of this Note, hereby represents and
         warrants that (i) this Note has been acquired by the Holder for
         investment only and not for resale or distribution hereof and (ii) the
         Holder is an "accredited investor" as defined in Rule

<PAGE>   9

         501(a) under the Securities Act of 1933, as amended (the "Act"). The
         Holder, by acceptance of this Note, further understands, covenants and
         agrees that the Maker is under no obligation and has made no commitment
         to provide for registration of this Note under the Act or state
         securities laws, or to take such steps as are necessary to permit the
         sale of this Note without registration under those laws.

         (d). The captions of the sections of this Note are solely for
         convenient reference and shall not be deemed to affect the meaning or
         interpretation of any provision of this Note.

IN WITNESS WHEREOF, the Maker has executed, acknowledged and delivered this Note
as of the day and year first above written.

WATERLINK, INC.

By: /s/ Mark E. Brody
  Mark E. Brody, Chief Financial Officer

Accepted and agreed to as of this 18th day of January, 2001:

BRANTLEY VENTURE PARTNERS III, L.P.
By:   BRANTLEY VENTURE MANAGEMENT III, L.P., as General Partner
By:   PINKAS FAMILY PARTNERS, L.P., a General Partner

By:  /s/ Robert P. Pinkas
  Robert P. Pinkas, General Partner

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00020-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00020-of-00352.parquet"}]]