Exhibit 10.1

 

2020 PERFORMANCE STOCK UNIT AWARD AGREEMENT

FOR COMPANY EMPLOYEES

UNDER THE WATTS WATER TECHNOLOGIES, INC.

SECOND AMENDED AND RESTATED 2004 STOCK INCENTIVE PLAN

This award of performance stock units (“Performance Stock Units”) of Watts Water
Technologies, Inc. (the “Company”) made to the grantee (the “Grantee”), as set
forth in the Performance Stock Unit award notification provided through the
Grantee’s stock plan account on the E*TRADE website, is subject to the
provisions of the Company’s Second Amended and Restated 2004 Stock Incentive
Plan (the “Plan”) and the terms and conditions contained in this 2020
Performance Stock Unit Award Agreement (the “Agreement”) and shall constitute
Deferred Stock (as defined in the Plan) which is earned based on performance as
provided herein.  By accepting the award of Performance Stock Units on the
E*TRADE website, the Grantee agrees to the terms and conditions of this
Agreement.

1.         Nature and Acceptance of Award.  This Performance Stock Unit award
entitles the Grantee to receive a share of Class A Common Stock of the Company
(“Stock”) for each Performance Stock Unit that is earned and vested as
determined pursuant to Sections 3 and 5 below. The target number of Performance
Stock Units the Grantee shall be eligible to earn and become vested in with
respect to this Agreement is set forth on the E*TRADE website (the “Target
Award”). The Grantee shall have no rights to the Performance Stock Units or to
receive the Stock upon settlement of the Performance Stock Units under this
Agreement unless he or she shall have accepted the Performance Stock Unit award
and this Agreement through the E*TRADE website.  Unless and until the shares of
Stock are actually issued to the Grantee upon settlement of the Performance
Stock Units in accordance with this Agreement, the Grantee shall not by reason
of being granted the Performance Stock Units be deemed to be a shareholder of
the Company or to have any other right to the Stock, except as otherwise
provided in this Agreement.

2.         Restrictions and Conditions.

(a)        The Performance Stock Units granted herein may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of by the Grantee.

(b)        Except as otherwise provided herein, if the Grantee’s employment with
the Company and its Subsidiaries is voluntarily or involuntarily terminated for
any reason (other than death, disability or due to Normal Retirement (as defined
below)) prior to the last day of the Performance Period, all Performance Stock
Units shall be immediately and automatically forfeited to the Company upon
termination of employment, without payment of any consideration to the
Grantee.  The Grantee shall have no further rights with respect to the
Performance Stock Units or to receive shares of Stock with respect thereto.

 

(c)        Notwithstanding the foregoing, if the Grantee’s employment or service
is terminated by reason of death or disability (as determined by the
Administrator):

(i)         if the date of termination of service is within the last twelve
months of the Performance Period, then the determination of number of
Performance Stock Units earned and vested will be conducted as if the
Participant had not terminated employment; and

(ii)       if the date of termination of service is within the first twenty-four
months of the Performance Period, then the number of Performance Stock Units
earned and vested shall be determined by multiplying the Target Award by a
fraction, the numerator of which is the number of days from the start of the
Performance Period to and including the date of termination of service, and the
denominator of which is the number of days in the Performance Period, with such
date of termination of service being a Payment Date under Section 4.

(d)        Notwithstanding the foregoing, if the Grantee’s employment or service
is terminated due to Normal Retirement (as defined below) prior to the last day
of the Performance Period, then the Performance Stock Units shall continue to
vest in accordance with the vesting provisions of this Section 2(d) and be
settled on the Payment Date,  but only if Grantee (i) has complied with the
provisions of Section 10 at all times during his or her employment, (ii)
continues to comply with the provisions of Section 10, and (iii) if deemed
necessary by the Company to have an enforceable non-compete similar to that
provided in Section 10(b), then to execute and not revoke or violate a separate
Non-Competition Agreement the terms of which are substantially similar to those
set forth in Section 10 below.  For the avoidance of doubt, if (A) the Grantee
violates the provisions of Section 10, (B) fails to execute a Non-Competition
Agreement as may be requested by the Company, (C) revokes or violates any
Non-Competition Agreement so executed, or (D) the obligations set forth in
Section 10(b) or the Non-Competition Agreement are deemed unenforceable, then
the Performance Stock Units shall not continue to vest pursuant to this Section
2(d) and any unvested Performance Stock Units shall be immediately and
automatically forfeited to the Company without any further action required by
the Company. The portion of the Performance Stock Units that are eligible to
vest in accordance with this Section 2(d) shall be determined by multiplying (A)
the Earned Performance Stock Units determined pursuant to Section 3 below for
the entire Performance Period, by (B) a fraction, the numerator of which is the
number of days the Grantee was continually employed since the beginning of the
Performance Period and the denominator of which is the number of days in the
Performance Period.

3.         Determination of Number of Performance Stock Units Earned.

(a)        No Performance Stock Units shall be earned or vested unless the
Company’s ROIC (as defined below) equals or exceeds ___% (the “Minimum
Performance Goal”).

(b)        If the Minimum Performance Goal is obtained, then the number of
Performance Stock Units that will be earned and vested, if any, for the
Performance Period shall be determined as follows:

Earned Performance Stock Units = Payout Percentage x Target Award

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The “Payout Percentage” is based on the Company’s achievement with respect to
(i) “ROIC” (as defined below) and “Revenue CAGR” (as defined below) (the
“Performance Goals”), as determined at the end of the Performance Period in
accordance with the following table:

3 Year
Revenue
CAGR

ROIC

 

Below
Threshold

 

Threshold

 

Target

 

Maximum

 

Payout Percentage

Below
Threshold

0%

60%

75%

100%

Threshold

60%

60%

75%

125%

Target

80%

80%

100%

150%

Maximum

100%

100%

150%

200%

 

Achievement between (i) below threshold and threshold, (ii) threshold and target
and (iii) target and maximum will be interpolated linearly.  All Performance
Stock Units that are not earned at the end of the Performance Period shall be
forfeited.

(c)        Defined Terms.

(i)         “Average Invested Capital” shall mean the average of invested
capital as of December 31, 2021 and the invested capital as of December 31, 2022
where the invested capital is defined as the sum of the Company’s long-term debt
plus the current portion of long-term debt, less cash, cash equivalents and
investments, plus stockholder equity.

(ii)       “Normal Retirement” shall mean any termination of the Grantee’s
employment (other than a Company-initiated termination for Cause) after the date
the Grantee attains age 55 and completes 10 or more years of employment or
service with the Company or one of its Subsidiaries (as determined by the
Administrator).  “Cause” shall mean (i) an act constituting a felony; (ii) fraud
or dishonesty that results in or is likely to result in economic damage to the
Company; or (iii) willful misconduct in the performance of duties.

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(iii)      “Performance Period” shall mean January 1, 2020 through and including
December 31, 2022.

(iv)       “Revenue CAGR” shall mean the 3-year compound annual growth rate in
the Company’s revenue during the Performance Period. For the purposes of
calculating Revenue CAGR under this Agreement, the revenue shall be adjusted to
reflect foreign exchange and proforma revenue in the base year 2019 (adjusted
for acquisitions and divestitures).

(v)        “ROIC” shall mean the Company’s return on Average Invested Capital
calculated as a percentage for the twelve-month period ending on the last day of
the Performance Period by dividing net operating profit after tax by Average
Invested Capital.  For the purposes of calculating ROIC under this Agreement,
“net operating profit” shall be adjusted to exclude the impact of all
restructuring, foreign exchange, impairments, legal settlements, employee
separation costs, product liability charges, retroactive tax law changes, and
other significant, unforeseen events outside of the Company’s control to the
extent such items were not contemplated and included in the Company’s 2020-2024
Strategic Plan, upon which the ROIC goals were based.

(d)        The Revenue CAGR and ROIC goals shall be adjusted to reflect the
impact of any acquisition or disposition of an entity, business or business
segment during the Performance Period.

4.         Settlement and Payment of Performance Stock Units.

(a)        Except as otherwise provided for payment upon a Sale Event or under
Section 2(c)(ii), any earned Performance Stock Units shall be settled and shares
of Stock issued to the Grantee as soon as administratively practicable following
the Administrator’s certification of the achievement of the Performance Goals at
the end of the Performance Period (such date of settlement being the “Payment
Date”); provided, that the Payment Date shall occur no later than March 15 of
the year following the end of the Performance Period.  Performance Stock Units
earned under Section 2(c)(ii) shall be settled and shares of Stock issued to the
Grantee or the Grantee’s beneficiary as soon as administratively practicable
following the Grantee’s termination of service, but no later than March 15 of
the year following the year of Grantee’s termination of service.

(b)        Notwithstanding anything herein to the contrary, the Company may
postpone the issuance of the shares of Stock until it is satisfied that the
issuance of such Stock will not violate any applicable law. The actual issuance
of the shares of Stock shall be subject to such terms and conditions as the
Company may establish from time to time in order to comply with applicable law.

(c)        Notwithstanding anything herein to the contrary, the Administrator
may adjust the calculation of Revenue CAGR and/or ROIC to exclude certain items
that were not contemplated and included in the Company’s 2020-2024 Strategic
Plan if, in its sole judgment, such adjustment is appropriate.

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(d)        Notwithstanding anything herein to the contrary, the Administrator
may, in its discretion, grant additional Performance Stock Units to a Grantee at
the time of settlement to account for demonstrated quality of performance;
provided that the number of Performance Stock Units earned by Grantee under this
Agreement may not exceed 200% of the Target Award.

(e)        Notwithstanding anything herein to the contrary, the Administrator
may, in its discretion, decrease the number of Performance Stock Units earned by
the Grantee at the time of settlement in exceptional circumstances or for good
reason.

5.         Sale Event.  In the event of a Sale Event during the Performance
Period, the Performance Stock Units will be deemed to have been earned at the
greater of (a) the Target Award, or (b) the number of Performance Stock Units
that would be earned based on the actual performance of the Company determined
as if the Company’s last quarter end prior to the date of the Sale Event was the
last day of the Performance Period.  The Performance Stock Units will become
payable in shares of Stock or cash, as the Administrator may determine, within
sixty (60) days following the Sale Event.

6.         Dividend Equivalent Rights.  If the Company pays a cash dividend on
its Stock during the Performance Period, then the Grantee has the right to
receive a cash payment at the time the earned and vested Performance Stock Units
are settled determined by (a) multiplying the value of the dividends paid on a
share of Stock during the Performance Period by the number of Performance Stock
Units actually earned and vested at the end of the Performance Period (“Dividend
Equivalents”). The right to Dividend Equivalents will cease and be forfeited
upon the forfeiture and cancellation of the Performance Stock Units under this
Agreement.

7.         Incorporation of Plan.  Notwithstanding anything herein to the
contrary, this Agreement shall be subject to and governed by all the terms and
conditions of the Plan, including the powers of the Administrator set forth in
Section 2(b) of the Plan.  Capitalized terms in this Agreement shall have the
meaning specified in the Plan, unless a different meaning is specified herein.

8.         Limitations on Transferability.  This Agreement is personal to the
Grantee, is non-assignable and is not transferable in any manner, by operation
of law or otherwise, other than by will or the laws of descent and distribution.

9.         Tax Withholding.  The Grantee acknowledges and agrees that the
Company has the right to deduct from payments of any kind otherwise due to the
Grantee any federal, state, local or other taxes of any kind required by law to
be withheld with respect to the grant, settlement or payment of the Performance
Stock Units.  The Grantee shall satisfy such tax withholding obligations on the
Performance Stock Units by transferring to the Company, on each date on which
such tax liability shall arise, such number of shares of Stock as have a Fair
Market Value equal to the amount of the Company’s minimum required tax
withholding obligation.  Such delivery of Stock to the Company shall be deemed
to happen automatically, without any action required on the part of the Grantee,
and the Company is hereby authorized to take such actions as are necessary to
effect such delivery.

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10.       Non-Solicitation,  Non-Disparagement and Non-Competition for Retiree
Vesting.

(a)        In consideration of the Company entering into this Agreement with the
Grantee, the Grantee agrees that throughout his or her term of employment with
the Company and for a period of twelve (12) months following the Grantee’s date
of termination with the Company, the Grantee shall not, directly or indirectly:
(i) divert or attempt to divert or assist others in diverting any business of
the Company by soliciting, contacting or communicating with any customer or
supplier of the Company with whom the Grantee has direct or indirect contact or
upon termination of employment has had direct or indirect contact during the
twelve (12) month period immediately preceding the Grantee’s date of termination
with the Company; (ii) solicit, induce, attempt to induce or assist others in
attempting to induce any employee or other service provider of the Company with
whom the Grantee has worked or had material contact with, during the twelve (12)
month period immediately preceding the termination of the Grantee’s employment,
to leave the employment of the Company or a subsidiary of the Company or to
accept employment or affiliation with any other company or firm of which the
Grantee becomes an employee, owner, partner or consultant; or (iii) make any
statements, orally or in writing, cause to be published or in any way
disseminate any information concerning the Company or any subsidiaries of the
Company concerning the Company’s business, business operations or business
practices that in any way, in form or substance, harms, disparages or otherwise
casts an unfavorable light upon the Company or any subsidiaries of the Company
or upon any of their reputations or standing in the business community or the
community as a whole.  The provisions of this Section 10 do not prohibit the
Grantee from communicating with, cooperating with, or providing information to
the Securities and Exchange Commission, the Department of Labor, the EEOC, the
NLRB, or any government agency that might be interpreted as disparaging.  In
consideration of the Company entering into this Agreement with the Grantee, the
Grantee further agrees that throughout his or her term of employment with the
Company, except on behalf of the Company, the Grantee shall not, directly or
indirectly, engage in or participate in, or prepare to engage in or participate
in, the Business, or provide services in any capacity to any person or entity
engaged in or preparing to engage in the Business in competition with the
Company. For purposes of this Section 10 and each subpart, “Company” shall
include the Company and any parent company, subsidiary, or affiliated company of
the Company and any of their respective successors or assigns.

(b)        In consideration of the continued vesting of the Grantee’s
Performance Stock Units pursuant to Section 2(d) above, the Grantee agrees that
throughout his or her term of employment with the Company and following the
Grantee’s termination with the Company due to Normal Retirement through the
Payment Date, the Grantee will not, directly or indirectly, either through any
form of ownership (other than ownership of securities of a publicly-held
corporation of which the Grantee owns, or has real or contingent rights to own,
two percent (2%) or less of any class of outstanding securities) or as a
director, officer, principal, agent, employee, employer, advisor, consultant,
investor, member, partner or in any other individual or representative capacity
whatsoever, either for Grantee’s own benefit or for the benefit of any other
person, (i) engage or participate in, or prepare to engage in or participate in,
the Business or (ii) manage, join, operate, lend to, invest in, control, or
render any services to any person or entity engaged in or preparing to engage in
the Business, in each case (i) and (ii) in competition with the Company anywhere
in the Restricted Territory.  For purposes of this Agreement, the “Restricted
Territory” means each city, county, state, territory and country in which (i)
Grantee provided services or had a material presence or influence at any time
during the last two (2) years of Grantee’s employment with the Company or (ii)
the Company is engaged in or is

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preparing to engage in the Business as of the date of Grantee’s termination of
employment, which Grantee acknowledges includes the Americas, Europe, and
Asia-Pacific, Middle East and Africa.  For purposes of this Agreement,
“Business” means the business of (i) supplying products and systems that manage
and conserve the flow of fluids and energy into, through and out of buildings in
the residential and commercial markets, (ii)  designing, fabricating and
distributing residential and commercial flow control products, HVAC and gas
products, drainage and water re-use products as well as water quality products,
and (iii) any other business the Company is engaged in or preparing to engage in
as of the date of Grantee’s termination of employment.

(c)        The Grantee and the Company acknowledge and mutually agree that the
continued vesting of the Performance Stock Units pursuant to Section 2(d) above
following the Grantee’s termination is sufficient consideration to enforce the
non-competition provision set forth in Section 10(b) above.  The non-competition
provision set forth in Section 10(b) shall take effect on the date Grantee
accepts this Agreement through the E*TRADE website.

11.       Compensation Recovery Policy.  Notwithstanding anything contained in
this Agreement to the contrary, all Performance Stock Units awarded under this
Agreement, and any shares of Stock issued upon settlement hereunder shall be
subject to forfeiture or repayment pursuant to the terms of the Company’s
Compensation Recovery Policy as in effect from time to time, including any
amendments necessary for compliance with the requirements of the Dodd-Frank Wall
Street Reform and Consumer Protection Act.

12.       Miscellaneous.

(a)        Notice hereunder shall be given to the Company at its principal place
of business, and shall be given to the Grantee at the address on file with the
Company, or in either case at such other address as one party may subsequently
furnish to the other party in writing.

(b)        This Agreement does not confer upon the Grantee any rights with
respect to continuation of employment by the Company or any Subsidiary. Further,
Grantee understands and agrees that Grantee’s employment with the Company is and
shall remain at-will. Nothing in this Agreement is intended to modify the
at-will nature of Grantee’s employment relationship with the Company.

(c)        Grantee acknowledges that Grantee has the right to consult with
independent legal counsel prior to accepting this Agreement and that Grantee
either consulted, or on Grantee’s own volition chose not to consult, with such
counsel.

 

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