Exhibit 10.1

 

EXECUTION COPY

 

 

 

WATTS WATER TECHNOLOGIES, INC.

 

 

$225,000,000

5.85% Senior Notes

Due April 30, 2016

 

 

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

 

NOTE PURCHASE AGREEMENT

 

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

 

 

Dated as of April 27, 2006

 

 

 

PPN: 942749 A# 9

 

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

 

TABLE OF CONTENTS

 

Section

 

 

Page

1.

AUTHORIZATION OF NOTES

1

 

 

 

2.

SALE AND PURCHASE OF NOTES

1

 

 

 

3.

CLOSING

2

 

 

 

4.

CONDITIONS TO CLOSING

2

 

4.1.

Representations and Warranties

2

 

4.2.

Performance; No Default

2

 

4.3.

Compliance Certificates

3

 

4.4.

Opinions of Counsel

3

 

4.5.

Purchase Permitted By Applicable Law, etc

3

 

4.6.

Sale of Other Notes

3

 

4.7.

Payment of Special Counsel Fees

3

 

4.8.

Private Placement Number

4

 

4.9.

Changes in Corporate Structure

4

 

4.10.

Subsidiary Guaranty

4

 

4.11.

New Credit Agreement

4

 

4.12.

Proceedings and Documents.

4

 

 

 

 

5.

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

4

 

5.1.

Organization; Power and Authority

4

 

5.2.

Authorization, etc

5

 

5.3.

Disclosure

5

 

5.4.

Organization and Ownership of Shares of Subsidiaries; Affiliates

6

 

5.5.

Financial Statements

6

 

5.6.

Compliance with Laws, Other Instruments, etc

7

 

5.7.

Governmental Authorizations, etc.

7

 

5.8.

Litigation; Observance of Agreements, Statutes and Orders

7

 

5.9.

Taxes

8

 

5.10.

Title to Property; Leases

8

 

5.11.

Licenses, Permits, etc

8

 

5.12.

Compliance with ERISA

9

 

5.13.

Private Offering by the Company

10

 

5.14.

Use of Proceeds; Margin Regulations

10

 

5.15.

Existing Debt; Future Liens

10

 

5.16.

Foreign Assets Control Regulations, Anti-Terrorism Order, etc.

11

 

5.17.

Status under Certain Statutes

11

 

5.18.

Environmental Matters

11

 

 

 

 

6.

REPRESENTATIONS OF THE PURCHASERS.

12

 

6.1.

Purchase for Investment

12

 

6.2.

Source of Funds

12

 

 

 

 

7.

INFORMATION AS TO COMPANY

14

 

i

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

 

 

7.1.

Financial and Business Information

14

 

7.2.

Officer’s Certificate

16

 

7.3.

Inspection

17

 

 

 

 

8.

PREPAYMENT OF THE NOTES.

18

 

8.1.

No Scheduled Prepayments

18

 

8.2.

Optional Prepayments with Make-Whole Amount

18

 

8.3.

Allocation of Partial Prepayments

18

 

8.4.

Maturity; Surrender, etc

18

 

8.5.

Purchase of Notes

19

 

8.6.

Make-Whole Amount

19

 

 

 

 

9.

AFFIRMATIVE COVENANTS

20

 

9.1.

Compliance with Law

20

 

9.2.

Insurance

20

 

9.3.

Maintenance of Properties

21

 

9.4.

Payment of Taxes and Claims

21

 

9.5.

Corporate Existence, etc

21

 

 

 

 

10.

NEGATIVE COVENANTS

21

 

10.1.

Fixed Charge Coverage Ratio

22

 

10.2.

Priority Debt

22

 

10.3.

Liens.

22

 

10.4.

Sale of Assets

23

 

10.5.

Mergers, Consolidations, etc

25

 

10.6.

Designation of Restricted and Unrestricted Subsidiaries

25

 

10.7.

Subsidiary Guaranty.

26

 

10.8.

Nature of Business.

26

 

10.9.

Transactions with Affiliates

26

 

 

 

 

11.

EVENTS OF DEFAULT

27

 

 

 

12.

REMEDIES ON DEFAULT, ETC

29

 

12.1.

Acceleration

29

 

12.2.

Other Remedies

30

 

12.3.

Rescission

30

 

12.4.

No Waivers or Election of Remedies, Expenses, etc

30

 

 

 

 

13.

REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES

30

 

13.1.

Registration of Notes

30

 

13.2.

Transfer and Exchange of Notes

31

 

13.3.

Replacement of Notes

31

 

 

 

 

14.

PAYMENTS ON NOTES.

32

 

14.1.

Place of Payment

32

 

14.2.

Home Office Payment

32

 

 

 

 

15.

EXPENSES, ETC

32

 

15.1.

Transaction Expenses

32

 

15.2.

Survival

33

 

ii

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

 

16.

SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT

33

 

 

 

17.

AMENDMENT AND WAIVER

33

 

17.1.

Requirements

33

 

17.2.

Solicitation of Holders of Notes

33

 

17.3.

Binding Effect, etc

34

 

17.4.

Notes held by Company, etc

34

 

 

 

 

18.

NOTICES

34

 

 

 

19.

REPRODUCTION OF DOCUMENTS

35

 

 

 

20.

CONFIDENTIAL INFORMATION

35

 

 

 

21.

SUBSTITUTION OF PURCHASER

36

 

 

 

22.

RELEASE OF SUBSIDIARY GUARANTOR

36

 

 

 

23.

MISCELLANEOUS

37

 

23.1.

Successors and Assigns

37

 

23.2.

Payments Due on Non-Business Days

37

 

23.3.

Severability

37

 

23.4.

Construction

37

 

23.5.

Counterparts

38

 

23.6.

Governing Law

38

 

iii

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

 

SCHEDULE A

—

Information Relating to Purchasers

SCHEDULE B

—

Defined Terms

 

 

 

SCHEDULE 4.9

—

Changes in Corporate Structure

SCHEDULE 5.3

—

Disclosure

SCHEDULE 5.4

—

Subsidiaries; Affiliates

SCHEDULE 5.5

—

Financial Statements

SCHEDULE 5.11

—

Licenses, Permits, etc.

SCHEDULE 5.14

—

Use of Proceeds

SCHEDULE 5.15

—

Existing Debt

SCHEDULE 10.3

—

Liens

 

 

 

EXHIBIT 1

—

Form of Senior Note

EXHIBIT 4.4(a)(i)

—

Form of Opinion of Counsel for the Company and the Subsidiary Guarantors

EXHIBIT 4.4(a)(ii)

—

Form of Opinion of Kenneth R. Lepage, Assistant General Counsel of the Company

EXHIBIT 4.4(b)

—

Form of Opinion of Special Counsel for the Purchasers

EXHIBIT B-1

—

Form of Subsidiary Guaranty

 

iv

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

 

WATTS WATER TECHNOLOGIES, INC.

815 Chestnut Street

North Andover, MA  01845

(978) 688-1811

Fax:  (978) 794-1848

 

$225,000,000

5.85% Senior Notes, due April 30, 2016

 

Dated as of April 27, 2006

 

TO EACH OF THE PURCHASERS LISTED IN

THE ATTACHED SCHEDULE A:

 

Ladies and Gentlemen:

 

WATTS WATER TECHNOLOGIES, INC., a Delaware corporation (the “Company”), agrees
with you as follows:

 

1.                                      AUTHORIZATION OF NOTES.

 

The Company has authorized the issue and sale of $225,000,000 aggregate
principal amount of its 5.85% Senior Notes due April 30, 2016 (the “Notes”, such
term to include any such notes issued in substitution therefor pursuant to
Section 13 of this Agreement). The Notes shall be substantially in the form set
out in Exhibit 1, with such changes therefrom, if any, as may be approved by you
and the Company. Certain capitalized terms used in this Agreement are defined in
Schedule B; references to a “Schedule” or an “Exhibit” are, unless otherwise
specified, to a Schedule or an Exhibit attached to this Agreement. Subject to
Section 22, the Notes will be guaranteed by each domestic Subsidiary that is now
or in the future becomes a borrower under the Credit Agreement or a signatory to
the Bank Guaranties (individually, a “Subsidiary Guarantor” and collectively,
the “Subsidiary Guarantors”) pursuant to a guaranty substantially in the form of
Exhibit B-1 (the “Subsidiary Guaranty”).

 

2.                                      SALE AND PURCHASE OF NOTES.

 

Subject to the terms and conditions of this Agreement, the Company will issue
and sell to you and each of the other purchasers named in Schedule A (the “Other
Purchasers”), and you and the Other Purchasers will purchase from the Company,
at the Closing provided for in Section 3, Notes in the principal amount
specified opposite your names in Schedule A at the purchase price of 100% of the
principal amount thereof. Your obligation hereunder and the obligations of the
Other Purchasers are several and not joint obligations and you shall have no

 

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

 

liability to any Person for the performance or non-performance by any Other
Purchaser hereunder.

 

3.                                      CLOSING.

 

The sale and purchase of the Notes to be purchased by you and the Other
Purchasers shall occur at the offices of Gardner Carton & Douglas LLP, 191 N.
Wacker Drive, Suite 3700, Chicago, Illinois  60606 at 9:00 a.m., Chicago time,
at a closing (the “Closing”) on April 27, 2006 or on such other Business Day
thereafter on or prior to April 30, 2006 as may be agreed upon by the Company
and you and the Other Purchasers. At the Closing the Company will deliver to you
the Notes to be purchased by you in the form of a single Note (or such greater
number of Notes in denominations of at least $100,000 as you may request) dated
the date of the Closing and registered in your name (or in the name of your
nominee), against delivery by you to the Company or its order of immediately
available funds in the amount of the purchase price therefor by wire transfer of
immediately available funds for the account of the Company to account number
9429158549 at Bank of America, 100 Federal Street, Boston, MA 02110, ABA No.
026-009-593. If at the Closing the Company fails to tender such Notes to you as
provided above in this Section 3, or any of the conditions specified in Section
4 shall not have been fulfilled to your satisfaction, you shall, at your
election, be relieved of all further obligations under this Agreement, without
thereby waiving any rights you may have by reason of such failure or such
nonfulfillment.

 

4.                                      CONDITIONS TO CLOSING.

 

Your obligation to purchase and pay for the Notes to be sold to you at the
Closing is subject to the fulfillment to your satisfaction, prior to or at the
Closing, of the following conditions:

 

4.1.         Representations and Warranties.

 

The representations and warranties of the Company in this Agreement shall be
correct when made and at the time of the Closing.

 

4.2.         Performance; No Default.

 

The Company shall have performed and complied with all agreements and conditions
contained in this Agreement required to be performed or complied with by it
prior to or at the Closing and after giving effect to the issue and sale of the
Notes (and the application of the proceeds thereof as contemplated by Section
5.14) no Default or Event of Default shall have occurred and be continuing.
Neither the Company nor any Subsidiary shall have entered into any transaction
since the date of the Memorandum that would have been prohibited by Section 10
had such Section applied since such date.

 

2

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

 

4.3.         Compliance Certificates.

 

(a)           Officer’s Certificate. The Company shall have delivered to you an
Officer’s Certificate, dated the date of the Closing, certifying that the
conditions specified in Sections 4.1, 4.2 and 4.9 have been fulfilled.

 

(b)           Secretary’s Certificate. The Company and each Subsidiary Guarantor
shall have delivered to you a certificate certifying as to the resolutions
attached thereto and other corporate proceedings relating to the authorization,
execution and delivery of the Notes and the Agreement or the Subsidiary
Guaranty, as the case may be.

 

4.4.         Opinions of Counsel.

 

You shall have received opinions in form and substance satisfactory to you,
dated the date of the Closing (a)(i) from Wilmer Cutler Pickering Hale and Dorr
LLP, counsel to the Company and the Subsidiary Guarantors, covering the matters
set forth in Exhibit 4.4(a)(i) and (a)(ii) Kenneth R. Lepage, Assistant General
Counsel of the Company, covering the matters set forth in Exhibit 4.4(a)(ii)
(and the Company instructs its counsel to deliver such opinions to you) and
(b) from Gardner Carton & Douglas LLP, your special counsel in connection with
such transactions, substantially in the form set forth in Exhibit 4.4(b) and
covering such other matters incident to such transactions as you may reasonably
request.

 

4.5.         Purchase Permitted By Applicable Law, etc.

 

On the date of the Closing your purchase of Notes shall (i) be permitted by the
laws and regulations of each jurisdiction to which you are subject, without
recourse to provisions (such as Section 1405(a)(8) of the New York Insurance
Law) permitting limited investments by insurance companies without restriction
as to the character of the particular investment, (ii) not violate any
applicable law or regulation (including, without limitation, Regulation U, T or
X of the Board of Governors of the Federal Reserve System) and (iii) not subject
you to any tax, penalty or liability under or pursuant to any applicable law or
regulation, which law or regulation was not in effect on the date hereof. If
requested by you, you shall have received an Officer’s Certificate certifying as
to such matters of fact as you may reasonably specify to enable you to determine
whether such purchase is so permitted.

 

4.6.         Sale of Other Notes.

 

Contemporaneously with the Closing the Company shall sell to the Other
Purchasers and the Other Purchasers shall purchase the Notes to be purchased by
them at the Closing as specified in Schedule A.

 

4.7.         Payment of Special Counsel Fees.

 

Without limiting the provisions of Section 15.1, the Company shall have paid on
or before the Closing the fees, charges and disbursements of your special
counsel referred to in Section 4.4, to the extent reflected in a statement of
such counsel rendered to the Company at least one Business Day prior to the
Closing.

 

3

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

 

4.8.         Private Placement Number.

 

A Private Placement Number issued by Standard & Poor’s CUSIP Service Bureau (in
cooperation with the Securities Valuation Office of the National Association of
Insurance Commissioners) shall have been obtained for the Notes by Gardner
Carton & Douglas LLP.

 

4.9.         Changes in Corporate Structure.

 

Except as specified in Schedule 4.9, the Company shall not have changed its
jurisdiction of incorporation or been a party to any merger or consolidation and
shall not have succeeded to all or any substantial part of the liabilities of
any other entity, at any time following the date of the most recent financial
statements referred to in Schedule 5.5.

 

4.10.       Subsidiary Guaranty.

 

Each Subsidiary Guarantor shall have executed and delivered the Subsidiary
Guaranty in favor of you and the Other Purchasers and you shall have received a
copy of a fully executed counterpart thereof.

 

4.11.       New Credit Agreement.

 

You and your special counsel shall have received a copy of the executed Credit
Agreement.

 

4.12.       Proceedings and Documents.

 

All corporate and other proceedings in connection with the transactions
contemplated by this Agreement and all documents and instruments incident to
such transactions shall be satisfactory to you and your special counsel, and you
and your special counsel shall have received all such counterpart originals or
certified or other copies of such documents as you or they may reasonably
request.

 

5.                                      REPRESENTATIONS AND WARRANTIES OF THE
COMPANY.

 

The Company represents and warrants to you that:

 

5.1.         Organization; Power and Authority.

 

The Company is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and is duly
qualified as a foreign corporation and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Company has the corporate power and authority to own or hold
under lease the properties it purports to own or hold under lease, as described
in the Memorandum, to transact the business it transacts and proposes to
transact as described in the Memorandum, to execute and deliver this Agreement
and the Notes and to perform the provisions hereof and thereof.

 

4

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

 

5.2.         Authorization, etc.

 

This Agreement and the Notes have been duly authorized by all necessary
corporate action on the part of the Company, and this Agreement constitutes, and
upon execution and delivery thereof each Note will constitute, a legal, valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors’ rights generally and (ii) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).

 

The Subsidiary Guaranty has been duly authorized by all necessary corporate
action on the part of each Subsidiary Guarantor and upon execution and delivery
thereof will constitute the legal, valid and binding obligation of each
Subsidiary Guarantor, enforceable against each Subsidiary Guarantor in
accordance with its terms, except as such enforceability may be limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors’ rights generally and (ii) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).

 

5.3.         Disclosure.

 

The Company, through its agent, Banc of America Securities LLC, has delivered to
you and each Other Purchaser a copy of a Confidential Private Placement
Memorandum, dated March 2006, which includes the Company’s Annual Report on Form
10-K for the year ended December 31, 2005 (the “Form 10-K” and, together with
the Confidential Private Placement Memorandum, the “Memorandum”), relating to
the transactions contemplated hereby. The Memorandum fairly describes, in all
material respects, the general nature of the business and principal properties
of the Company and its Subsidiaries. Except as disclosed in Schedule 5.3, this
Agreement, the Memorandum, the documents, certificates or other writings
delivered to you by or on behalf of the Company in connection with the
transactions contemplated hereby and the financial statements listed in
Schedule 5.5, taken as a whole, do not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading in light of the circumstances under which they
were made. Except as disclosed in the Memorandum or as expressly described in
Schedule 5.3, or in one of the documents, certificates or other writings
identified therein, or in the financial statements listed in Schedule 5.5, since
December 31, 2005, there has been no change in the financial condition,
operations, business or properties of the Company or any Subsidiary except
changes that individually or in the aggregate would not reasonably be expected
to have a Material Adverse Effect. There is no fact known to the Company that
would reasonably be expected to have a Material Adverse Effect that has not been
set forth herein or in the Memorandum or in the other documents, certificates
and other writings delivered to you by or on behalf of the Company specifically
for use in connection with the transactions contemplated hereby.

 

5

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

 

5.4.         Organization and Ownership of Shares of Subsidiaries; Affiliates.

 

(a)           Schedule 5.4 contains (except as noted therein) complete and
correct lists of:  (i) the Company’s Subsidiaries, showing, as to each
Subsidiary, the correct name thereof, the jurisdiction of its organization,
whether such Subsidiary is a Restricted Subsidiary and the percentage of shares
of each class of its capital stock or similar equity interests outstanding owned
by the Company and each other Subsidiary, (ii) the Company’s Affiliates, other
than Subsidiaries, and (iii) the Company’s directors and senior officers.

 

(b)           All of the outstanding shares of capital stock or similar equity
interests of each Subsidiary shown in Schedule 5.4 as being owned by the Company
and its Subsidiaries have been validly issued, are fully paid and nonassessable
(to the extent that such concepts are legally applicable) and are owned by the
Company or another Subsidiary free and clear of any Lien (except as otherwise
disclosed in Schedule 5.4).

 

(c)           Each Subsidiary identified in Schedule 5.4 is a corporation or
other legal entity duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization, and is duly qualified as a foreign
corporation or other legal entity and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Each such Subsidiary has the corporate or other power and
authority to own or hold under lease the properties it purports to own or hold
under lease and to transact the business it transacts and proposes to transact.

 

(d)           No Subsidiary is a party to, or otherwise subject to, any legal
restriction or any agreement (other than this Agreement, the agreements listed
on Schedule 5.4 and customary limitations imposed by corporate, partnership or
comparable law statutes) restricting the ability of such Subsidiary to pay
dividends out of profits or make any other similar distributions of profits to
the Company or any of its Subsidiaries that owns outstanding shares of capital
stock or similar equity interests of such Subsidiary.

 

5.5.         Financial Statements.

 

The Company has delivered to you and each Other Purchaser copies of the
financial statements of the Company and its Subsidiaries listed on Schedule 5.5.
All of said financial statements (including in each case the related schedules
and notes) fairly present in all material respects the consolidated financial
position of the Company and its Subsidiaries as of the respective dates
specified in such Schedule and the consolidated results of their operations and
cash flows for the respective periods so specified and have been prepared in
accordance with GAAP consistently applied throughout the periods involved except
as set forth in the notes thereto (subject, in the case of any interim financial
statements, to normal year-end adjustments).

 

6

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

 

5.6.         Compliance with Laws, Other Instruments, etc.

 

The execution, delivery and performance by the Company of this Agreement and the
Notes will not (i) contravene, result in any breach of, or constitute a default
under, or result in the creation of any Lien in respect of any property of the
Company or any Subsidiary under, any indenture, mortgage, deed of trust, loan,
purchase or credit agreement, lease, corporate charter or by-laws, or any other
agreement or instrument to which the Company or any Subsidiary is bound or by
which the Company or any Subsidiary or any of their respective properties may be
bound or affected, (ii) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree, or ruling of any court,
arbitrator or Governmental Authority applicable to the Company or any Subsidiary
or (iii) violate any provision of any statute or other rule or regulation of any
Governmental Authority, including, without limitation, the USA Patriot Act,
applicable to the Company or any Subsidiary.

 

The execution, delivery and performance by each Subsidiary Guarantor of the
Subsidiary Guaranty will not (i) contravene, result in any breach of, or
constitute a default under, or result in the creation of any Lien in respect of
any property of such Subsidiary Guarantor under, any agreement, or corporate
charter or by-laws, to which such Subsidiary Guarantor is bound or by which such
Subsidiary Guarantor or any of its properties may be bound or affected, (ii)
conflict with or result in a breach of any of the terms, conditions or
provisions of any order, judgment, decree, or ruling of any court, arbitrator or
Governmental Authority applicable to such Subsidiary Guarantor or (iii) violate
any provision of any statute or other rule or regulation of any Governmental
Authority applicable to such Subsidiary Guarantor.

 

5.7.         Governmental Authorizations, etc.

 

No consent, approval or authorization of, or registration, filing or declaration
with, any Governmental Authority is required in connection with the execution,
delivery or performance by the Company of this Agreement or the Notes, or the
execution, delivery or performance by each Subsidiary Guarantor of the
Subsidiary Guaranty.

 

5.8.         Litigation; Observance of Agreements, Statutes and Orders.

 

(a)           Except as disclosed under the caption “Business–Product Liability,
Environmental and Other Litigation Matters” in the Form 10-K, there are no
actions, suits or proceedings pending or, to the knowledge of the Company,
threatened against or affecting the Company or any Subsidiary or any property of
the Company or any Subsidiary in any court or before any arbitrator of any kind
or before or by any Governmental Authority that, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect.

 

(b)           Except as disclosed under the caption “Business–Product Liability,
Environmental and Other Litigation Matters” in the Form 10-K, neither the
Company nor any Subsidiary is in default under any term of any agreement or
instrument to which it is a party or by which it is bound, or any order,
judgment, decree or ruling of any court, arbitrator or Governmental Authority or
is in violation of any applicable law, ordinance, rule or regulation (including
Environmental Laws and the USA Patriot Act) of any

 

7

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

 

Governmental Authority, which default or violation, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect.

 

5.9.         Taxes.

 

The Company and its consolidated Subsidiaries have filed all tax returns that
are required to have been filed in any jurisdiction, and have paid all taxes
shown to be due and payable on such returns and all other taxes and assessments
levied upon them or their properties, assets, income or franchises, to the
extent such taxes and assessments have become due and payable and before they
have become delinquent, except for the filing of any tax returns of which the
failure to file, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect and except for the payment of any
taxes and assessments (i) the amount of which is not individually or in the
aggregate Material or (ii) the amount, applicability or validity of which is
currently being contested in good faith by appropriate proceedings and with
respect to which the Company or a consolidated Subsidiary, as the case may be,
has established adequate reserves in accordance with GAAP. The Company knows of
no basis for any other tax or assessment that would reasonably be expected to
have a Material Adverse Effect. The charges, accruals and reserves on the books
of the Company and its consolidated Subsidiaries in respect of Federal, state or
other taxes for all fiscal periods are adequate. The Federal income tax
liabilities of the Company and its consolidated Subsidiaries have been
determined by the Internal Revenue Service and paid for all fiscal years up to
and including the fiscal year ended December 31, 2001.

 

5.10.       Title to Property; Leases.

 

The Company and its Subsidiaries have good and sufficient title to their
respective properties that individually or in the aggregate are Material,
including all such properties reflected in the most recent audited balance sheet
referred to in Section 5.5 or purported to have been acquired by the Company or
any Subsidiary after said date (except as sold or otherwise disposed of in the
ordinary course of business), in each case free and clear of Liens prohibited by
this Agreement. All leases that individually or in the aggregate are Material
are valid and subsisting and are in full force and effect in all material
respects.

 

5.11.       Licenses, Permits, etc.

 

Except as disclosed in Schedule 5.11,

 

(a)           the Company and its Subsidiaries own or possess all licenses,
permits, franchises, authorizations, patents, copyrights, service marks,
trademarks and trade names, or rights thereto, that individually or in the
aggregate are Material, without known conflict with the rights of others;

 

(b)           to the best knowledge of the Company, no product of the Company
infringes in any material respect any license, permit, franchise, authorization,
patent, copyright, service mark, trademark, trade name or other right owned by
any other Person; and

 

8

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

 

(c)           to the best knowledge of the Company, there is no Material
violation by any Person of any right of the Company or any of its Subsidiaries
with respect to any patent, copyright, service mark, trademark, trade name or
other right owned or used by the Company or any of its Subsidiaries.

 

5.12.       Compliance with ERISA.

 

(a)           The Company and each ERISA Affiliate have operated and
administered each Plan in compliance with all applicable laws except for such
instances of noncompliance as have not resulted in and would not reasonably be
expected to result in a Material Adverse Effect. Neither the Company nor any
ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or
the penalty or excise tax provisions of the Code relating to employee benefit
plans (as defined in Section 3 of ERISA), and no event, transaction or condition
has occurred or exists that would reasonably be expected to result in the
incurrence of any such liability by the Company or any ERISA Affiliate, or in
the imposition of any Lien on any of the rights, properties or assets of the
Company or any ERISA Affiliate, in either case pursuant to Title I or IV of
ERISA or to such penalty or excise tax provisions or to Section 401(a)(29) or
412 of the Code, other than such liabilities or Liens as would not be
individually or in the aggregate Material.

 

(b)           The amount (determined under GAAP) by which the present value of
the aggregate benefit liabilities under each of the Plans that is subject to
Title IV of ERISA (other than Multiemployer Plans), determined as of the end of
such Plan’s most recently ended plan year on the basis of the actuarial
assumptions specified for funding purposes in such Plan’s most recent actuarial
valuation report, exceeded the aggregate current value of the assets of such
Plan allocable to such benefit liabilities is disclosed in the notes to
financial statements accompanying the most recent audited financial statements
of the Company listed on Schedule 5.5. Subject to the provisions of the
preceding sentence, the term “benefit liabilities” has the meaning specified in
section 4001 of ERISA and the terms “current value” and “present value” have the
meaning specified in section 3 of ERISA.

 

(c)           The Company and its ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities) under
section 4201 or 4204 of ERISA in respect of Multiemployer Plans that
individually or in the aggregate are Material.

 

(d)           The expected postretirement benefit obligation (determined as of
the last day of the Company’s most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by section 4980B of
the Code) of the Company and its Subsidiaries is not Material.

 

(e)           The execution and delivery of this Agreement and the issuance and
sale of the Notes hereunder will not involve any transaction that is subject to
the prohibitions of section 406 of ERISA or in connection with which a tax could
be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code. The representation
by the Company in the first

 

9

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

 

sentence of this Section 5.12(e) is made in reliance upon and subject to the
accuracy of your representation in Section 6.2 as to the sources of the funds
used to pay the purchase price of the Notes to be purchased by you.

 

5.13.       Private Offering by the Company.

 

Neither the Company nor anyone acting on its behalf has offered the Notes, the
Subsidiary Guaranty or any similar securities for sale to, or solicited any
offer to buy any of the same from, or otherwise approached or negotiated in
respect thereof with, any Person other than you and the Other Purchasers and not
more than five other Institutional Investors, each of which has been offered the
Notes at a private sale for investment. Neither the Company nor anyone acting on
its behalf has taken, or will take, any action that would subject the issuance
or sale of the Notes or the execution and delivery of the Subsidiary Guaranty to
the registration requirements of Section 5 of the Securities Act.

 

5.14.       Use of Proceeds; Margin Regulations.

 

The Company will apply the proceeds of the sale of the Notes to refinance or
repay Debt of the Company as set forth in Schedule 5.14 and for general
corporate purposes. No part of the proceeds from the sale of the Notes will be
used, directly or indirectly, for the purpose of buying or carrying any margin
stock within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System (12 CFR 221), or for the purpose of buying or carrying or
trading in any securities under such circumstances as to involve the Company in
a violation of Regulation X of said Board (12 CFR 224) or to involve any broker
or dealer in a violation of Regulation T of said Board (12 CFR 220). Margin
stock does not constitute more than 1% of the value of the consolidated assets
of the Company and its Subsidiaries and the Company does not have any present
intention that margin stock will constitute more than 1% of the value of such
assets. As used in this Section, the terms “margin stock” and “purpose of buying
or carrying” shall have the meanings assigned to them in said Regulation U.

 

5.15.       Existing Debt; Future Liens.

 

(a)           Except as described therein, Schedule 5.15 sets forth a complete
and correct list of all outstanding Debt of the Company and its Subsidiaries as
of December 31, 2005, since which date there has been no Material change in the
amounts, interest rates, sinking funds, installment payments or maturities of
the Debt of the Company or its Subsidiaries. Neither the Company nor any
Subsidiary is in default and no waiver of default is currently in effect in the
payment of any principal or interest on any Debt of the Company or such
Subsidiary and no event or condition exists with respect to any Debt of the
Company or any Subsidiary that would permit (or that with notice or the lapse of
time, or both, would permit) one or more Persons to cause such Debt to become
due and payable before its stated maturity or before its regularly scheduled
dates of payment.

 

(b)           Except as disclosed in Schedule 5.15, neither the Company nor any
Subsidiary has agreed or consented to cause or permit in the future (upon the
happening

 

10

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

 

of a contingency or otherwise) any of its property, whether now owned or
hereafter acquired, to be subject to a Lien not permitted by Section 10.3.

 

5.16.       Foreign Assets Control Regulations, Anti-Terrorism Order, etc.

 

(a)           Neither the sale of the Notes by the Company hereunder nor its use
of the proceeds thereof will violate (i) the Trading with the Enemy Act, as
amended, (ii) any of the foreign assets control regulations of the United States
Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto or (iii) to the knowledge of the
Company, the Anti-Terrorism Order. Without limiting the foregoing, neither the
Company nor any Subsidiary (A) is a blocked Person described in Section 1 of the
Anti-Terrorism Order or (B) engages in any dealings or transactions, or is
otherwise associated, with any such Person.

 

(b)           No part of the proceeds from the sale of the Notes hereunder will
be used, directly or indirectly, for any payments to any governmental official
or employee, political party, official of a political party, candidate for
political office, or anyone else acting in an official capacity, in order to
obtain, retain or direct business or obtain any improper advantage, in violation
of the United States Foreign Corrupt Practices Act of 1977, as amended, assuming
in all cases that such Act applies to the Company.

 

5.17.       Status under Certain Statutes.

 

Neither the Company nor any Subsidiary is subject to regulation under the
Investment Company Act of 1940, as amended, the Interstate Commerce Act, as
amended by the ICC Termination Act, as amended, or the Federal Power Act, as
amended.

 

5.18.       Environmental Matters.

 

Except as disclosed under the caption “Business–Product Liability, Environmental
and Other Litigation Matters” in the Form 10-K, neither the Company nor any
Subsidiary has knowledge of any claim or has received any notice of any claim,
and no proceeding has been instituted raising any claim against the Company or
any of its Subsidiaries or any of their respective real properties now or
formerly owned, leased or operated by any of them or other assets, alleging any
damage to the environment or violation of any Environmental Laws, except, in
each case, such as would not reasonably be expected to result in a Material
Adverse Effect. Except as disclosed in the Form 10-K,

 

(a)           neither the Company nor any Subsidiary has knowledge of any facts
which would give rise to any claim, public or private, of violation of
Environmental Laws or damage to the environment emanating from, occurring on or
in any way related to real properties now or formerly owned, leased or operated
by any of them or to other assets or their use, except, in each case, such as
would not reasonably be expected to result in a Material Adverse Effect;

 

(b)           neither the Company nor any of its Subsidiaries has stored any
Hazardous Materials on real properties now or formerly owned, leased or operated
by any of them or

 

11

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

 

disposed of any Hazardous Materials in a manner contrary to any Environmental
Laws in each case in any manner that would reasonably be expected to result in a
Material Adverse Effect; and

 

(c)           all buildings on all real properties now owned, leased or operated
by the Company or any of its Subsidiaries are in compliance with applicable
Environmental Laws, except where failure to comply would not reasonably be
expected to result in a Material Adverse Effect.

 

6.                                      REPRESENTATIONS OF THE PURCHASERS.

 

6.1.         Purchase for Investment.

 

You represent that you are purchasing the Notes for your own account or for one
or more separate accounts maintained by you or for the account of one or more
pension or trust funds and not with a view to the distribution thereof, provided
that the disposition of your or their property shall at all times be within your
or their control. You understand that the Notes have not been registered under
the Securities Act and may be resold only if registered pursuant to the
provisions of the Securities Act or if an exemption from registration is
available, except under circumstances where neither such registration nor such
an exemption is required by law, and that the Company is not required to
register the Notes. You represent that you are an “accredited investor” within
the meaning of Rule 501(a)(1), (2), (3) or (7) of Regulation D promulgated under
the Securities Act.

 

6.2.         Source of Funds.

 

You represent that at least one of the following statements is an accurate
representation as to each source of funds (a “Source”) to be used by you to pay
the purchase price of the Notes to be purchased by you hereunder:

 

(a)           the Source is an “insurance company general account” (as the term
is defined in the United States Department of Labor’s Prohibited Transaction
Exemption (“PTE”) 95-60) in respect of which the amount of reserves and
liabilities (as defined by the annual statement for life insurance companies
approved by the National Association of Insurance Commissioners (the “NAIC
Annual Statement”) for the general account contract(s) held by or on behalf of
any employee benefit plan together with the amount of the reserves and
liabilities for the general account contract(s) held by or on behalf of any
other employee benefit plans maintained by the same employer (or affiliate
thereof as defined in PTE 95-60) or by the same employee organization in the
general account do not exceed 10% of the total reserves and liabilities of the
general account (exclusive of separate account liabilities) plus surplus as set
forth in the NAIC Annual Statement filed with such Purchaser’s state of
domicile, such percentage limitation being determined in accordance with PTE
95-60; or

 

(b)           the Source is a separate account that is maintained solely in
connection with such Purchaser’s fixed contractual obligations under which the
amounts payable, or credited, to any employee benefit plan (or its related
trust) that has any interest in such

 

12

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

 

separate account (or to any participant or beneficiary of such plan (including
any annuitant)) are not affected in any manner by the investment performance of
the separate account; or

 

(c)           the Source is either (i) an insurance company pooled separate
account, within the meaning of PTE 90-1 (issued January 29, 1990), or (ii) a
bank collective investment fund, within the meaning of PTE 91-38 (issued July
12, 1991) and, except as you have disclosed to the Company in writing pursuant
to this paragraph (c), no employee benefit plan or group of plans maintained by
the same employer or employee organization beneficially owns more than 10% of
all assets allocated to such pooled separate account or collective investment
fund; or

 

(d)           the Source constitutes assets of an “investment fund” (within the
meaning of Part V of PTE 84-14 (the “QPAM Exemption”)) managed by a “qualified
professional asset manager” or “QPAM” (within the meaning of Part V of the QPAM
Exemption), no employee benefit plan’s assets that are included in such
investment fund, when combined with the assets of all other employee benefit
plans established or maintained by the same employer or by an affiliate (within
the meaning of Section V(c)(1) of the QPAM Exemption) of such employer or by the
same employee organization and managed by such QPAM, exceed 20% of the total
client assets managed by such QPAM, the conditions of Part I(c), (f) and (g) of
the QPAM Exemption are satisfied, neither the QPAM nor a Person controlling or
controlled by the QPAM (applying the definition of “control” in Section V(e) of
the QPAM Exemption) owns a 5% or more interest in the Company and (i) the
identity of such QPAM and (ii) the names of all employee benefit plans whose
assets are included in such investment fund have been disclosed to the Company
in writing pursuant to this clause (d); or

 

(e)           the Source constitutes assets of a “plan(s)” (within the meaning
of Section IV of PTE 96-23 (the “INHAM Exemption”)) managed by an “in-house
asset manager” or “INHAM” (within the meaning of Part IV of the INHAM
exemption), the conditions of Part I(a), (d), (g) and (h) of the INHAM Exemption
are satisfied, neither the INHAM nor a Person controlling or controlled by the
INHAM (applying the definition of “control” in Section IV(h) of the INHAM
Exemption) owns a 5% or more interest in the Company and (i) the identity of
such INHAM and (ii) the name(s) of the employee benefit plan(s) whose assets
constitute the Source have been disclosed to the Company in writing pursuant to
this clause (e); or

 

(f)            the Source is a governmental plan; or

 

(g)           the Source is one or more employee benefit plans, or a separate
account or trust fund comprised of one or more employee benefit plans, each of
which has been identified to the Company in writing pursuant to this paragraph
(g); or

 

(h)           the Source does not include assets of any employee benefit plan,
other than a plan exempt from the coverage of ERISA.

 

13

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

 

As used in this Section 6.2, the terms “employee benefit plan”, “governmental
plan” and “separate account” shall have the respective meanings assigned to such
terms in Section 3 of ERISA.

 

7.                                      INFORMATION AS TO COMPANY.

 

7.1.         Financial and Business Information

 

The Company will deliver to each holder of Notes that is an Institutional
Investor:

 

(a)           Quarterly Statements — within 60 days after the end of each
quarterly fiscal period in each fiscal year of the Company (other than the last
quarterly fiscal period of each such fiscal year), duplicate copies of,

 

(i)            consolidated balance sheet of the Company and its Subsidiaries as
at the end of such quarter,

 

(ii)           consolidated statements of income of the Company and its
Subsidiaries for such quarter and (in the case of the second and third quarters)
for the portion of the fiscal year ending with such quarter, and

 

(iii)          consolidated statements of cash flows of the Company and its
Subsidiaries for such quarter or (in the case of the second and third quarters)
for the portion of the fiscal year ending with such quarter,

 

setting forth in each case in comparative form the figures for the corresponding
periods in the previous fiscal year, all in reasonable detail, prepared in
accordance with GAAP applicable to quarterly financial statements generally, and
certified by a Senior Financial Officer as fairly presenting, in all material
respects, the financial position of the companies being reported on and their
results of operations and cash flows, subject to changes resulting from year-end
adjustments, provided that delivery within the time period specified above of
copies of the Company’s Quarterly Report on Form 10-Q prepared in compliance
with the requirements therefor and filed with the Securities and Exchange
Commission shall be deemed to satisfy the requirements of this Section 7.1(a),
provided, further, that the Company shall be deemed to have made such delivery
of such Form 10-Q if it shall have timely made such Form 10-Q available on
“EDGAR” and on its home page on the worldwide web (at the date of this Agreement
located at:  http//www.wattswater.com) and shall have given each Purchaser prior
notice of such availability on EDGAR and on its home page in connection with
each delivery (such availability and notice thereof being referred to as
“Electronic Delivery”);

 

(b)           Annual Statements — within 105 days after the end of each fiscal
year of the Company, duplicate copies of,

 

(i)            consolidated balance sheet of the Company and its Subsidiaries,
as at the end of such year, and

 

14

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

 

(ii)           consolidated statements of income, changes in shareholders’
equity and cash flows of the Company and its Subsidiaries, for such year,

 

setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail, prepared in accordance with GAAP, and
accompanied by an opinion of independent certified public accountants of
recognized national standing, which opinion shall state that such financial
statements present fairly, in all material respects, the financial position of
the companies being reported upon and their results of operations and cash flows
and have been prepared in conformity with GAAP, and that the examination of such
accountants in connection with such financial statements has been made in
accordance with generally accepted auditing standards, and that such audit
provides a reasonable basis for such opinion in the circumstances, provided that
the delivery within the time period specified above of the Company’s Annual
Report on Form 10-K for such fiscal year (together with the Company’s annual
report to shareholders, if any, prepared pursuant to Rule 14a-3 under the
Exchange Act) prepared in accordance with the requirements therefor and filed
with the Securities and Exchange Commission shall be deemed to satisfy the
requirements of this Section 7.1(b), provided, further, that the Company shall
be deemed to have made such delivery of such Form 10-K if it shall have timely
made Electronic Delivery thereof;

 

(c)           Unrestricted Subsidiaries — if, at the time of delivery of any
financial statements pursuant to Section 7.1(a) or (b), Unrestricted
Subsidiaries account for more than 10% of (i) the consolidated total assets of
the Company and its Subsidiaries reflected in the balance sheet included in such
financial statements or (ii) the consolidated revenues of the Company and its
Subsidiaries reflected in the consolidated statement of income included in such
financial statements, an unaudited balance sheet for all Unrestricted
Subsidiaries taken as whole as at the end of the fiscal period included in such
financial statements and the related unaudited statements of income,
stockholders’ equity and cash flows for such Unrestricted Subsidiaries for such
period, together with consolidating statements reflecting all eliminations or
adjustments necessary to reconcile such group financial statements to the
consolidated financial statements of the Company and its Subsidiaries shall be
delivered together with the financial statements required pursuant to Sections
7.1(a) and (b);

 

(d)           SEC and Other Reports — promptly upon their becoming available,
one copy of (i) each financial statement, report, notice or proxy statement sent
by the Company or any Restricted Subsidiary to public securities holders
generally, and (ii) each regular or periodic report, each registration statement
other than registration statements on Form S-8 (without exhibits except as
expressly requested by such holder), and each prospectus and all amendments
thereto filed by the Company or any Restricted Subsidiary with the Securities
and Exchange Commission and of all press releases and other statements made
available generally by the Company or any Restricted Subsidiary to the public
concerning developments that are Material;

 

(e)           Notice of Default or Event of Default — promptly, and in any event
within five Business Days after a Responsible Officer becoming aware of the
existence of any

 

15

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

 

Default or Event of Default or that any Person has given any notice or taken any
action with respect to a claimed default hereunder or that any Person has given
notice or taken any action with respect to a claimed default of the type
referred to in Section 11(f), a written notice specifying the nature and period
of existence thereof and what action the Company is taking or proposes to take
with respect thereto;

 

(f)            ERISA Matters — promptly, and in any event within five Business
Days after a Responsible Officer becoming aware of any of the following, a
written notice setting forth the nature thereof and the action, if any, that the
Company or an ERISA Affiliate proposes to take with respect thereto:

 

(i)            with respect to any Plan, any reportable event, as defined in
section 4043(b) of ERISA and the regulations thereunder, for which notice
thereof has not been waived pursuant to such regulations as in effect on the
date hereof; or

 

(ii)           the taking by the PBGC of steps to institute, or the threatening
by the PBGC of the institution of, proceedings under section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer, any Plan, or
the receipt by the Company or any ERISA Affiliate of a notice from a
Multiemployer Plan that such action has been taken by the PBGC with respect to
such Multiemployer Plan; or

 

(iii)          any event, transaction or condition that would result in the
incurrence of any liability by the Company or any ERISA Affiliate pursuant to
Title I or IV of ERISA or the penalty or excise tax provisions of the Code
relating to employee benefit plans, or in the imposition of any Lien on any of
the rights, properties or assets of the Company or any ERISA Affiliate pursuant
to Title I or IV of ERISA or such penalty or excise tax provisions, if such
liability or Lien, taken together with any other such liabilities or Liens then
existing, would reasonably be expected to have a Material Adverse Effect;

 

(g)           Notices from Governmental Authority — promptly, and in any event
within 30 days of receipt thereof, copies of any notice to the Company or any
Subsidiary from any Federal or state Governmental Authority relating to any
order, ruling, statute or other law or regulation that would reasonably be
expected to have a Material Adverse Effect; and

 

(h)           Requested Information — with reasonable promptness, such other
data and information relating to the business, operations, affairs, financial
condition, assets or properties of the Company or any of its Subsidiaries or
relating to the ability of the Company to perform its obligations hereunder and
under the Notes as from time to time may be reasonably requested by any such
holder of Notes.

 

7.2.         Officer’s Certificate.

 

Each set of financial statements delivered to a holder of Notes pursuant to
Section 7.1(a) or (b) shall be accompanied by a certificate of a Senior
Financial Officer setting

 

16

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

 

forth (which, in the case of Electronic Delivery of any such financial
statements, shall be by separate concurrent delivery of such certificate to each
holder of Notes):

 

(a)           Covenant Compliance — the information (including detailed
calculations) required in order to establish whether the Company was in
compliance with the requirements of Section 10.1 through Section 10.9,
inclusive, during the quarterly or annual period covered by the statements then
being furnished (including with respect to each such Section, where applicable,
the calculations of the maximum or minimum amount, ratio or percentage, as the
case may be, permissible under the terms of such Sections, and the calculation
of the amount, ratio or percentage then in existence); and

 

(b)           Event of Default — a statement that such officer has reviewed the
relevant terms hereof and has made, or caused to be made, under his or her
supervision, a review of the transactions and conditions of the Company and its
Subsidiaries from the beginning of the quarterly or annual period covered by the
statements then being furnished to the date of the certificate and that such
review shall not have disclosed the existence during such period of any
condition or event that constitutes a Default or an Event of Default or, if any
such condition or event existed or exists (including any such event or condition
resulting from the failure of the Company or any Subsidiary to comply with any
Environmental Law), specifying the nature and period of existence thereof and
what action the Company shall have taken or proposes to take with respect
thereto.

 

7.3.         Inspection.

 

The Company will permit the representatives of each holder of Notes that is an
Institutional Investor:

 

(a)           No Default — if no Default or Event of Default then exists, at the
expense of such holder and upon reasonable prior notice to the Company, to visit
the principal executive office of the Company, to discuss the affairs, finances
and accounts of the Company and its Subsidiaries with the Company’s officers,
and (with the consent of the Company, which consent will not be unreasonably
withheld) its independent public accountants, and (with the consent of the
Company, which consent will not be unreasonably withheld) to visit the other
offices and properties of the Company and each Restricted Subsidiary, all at
such reasonable times and as often as may be reasonably requested in writing;
and

 

(b)           Default — if a Default or Event of Default then exists, at the
expense of the Company, to visit and inspect any of the offices or properties of
the Company or any Subsidiary, to examine all their respective books of account,
records, reports and other papers, to make copies and extracts therefrom, and to
discuss their respective affairs, finances, and accounts with their respective
officers and independent public accountants (and by this provision the Company
authorizes said accountants to discuss the affairs, finances and accounts of the
Company and its Subsidiaries), all at such times and as often as may be
requested.

 

17

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

 

8.                                      PREPAYMENT OF THE NOTES.

 

8.1.         No Scheduled Prepayments.

 

No regularly scheduled prepayments are due on the Notes prior to their stated
maturity.

 

8.2.         Optional Prepayments with Make-Whole Amount.

 

The Company may, at its option, upon notice as provided below, prepay at any
time all, or from time to time any part of, Notes in an amount not less than
$1,000,000 in the aggregate in the case of a partial prepayment, at 100% of the
principal amount so prepaid, plus the Make-Whole Amount determined for the
prepayment date with respect to such principal amount. The Company will give
each holder of Notes written notice of each optional prepayment under this
Section 8.2 not less than 30 days and not more than 60 days prior to the date
fixed for such prepayment. Each such notice shall specify such date, the
aggregate principal amount of the Notes to be prepaid on such date, the
principal amount of each Note held by such holder to be prepaid (determined in
accordance with Section 8.3), and the interest to be paid on the prepayment date
with respect to such principal amount being prepaid, and shall be accompanied by
a certificate of a Senior Financial Officer as to the estimated Make-Whole
Amount due in connection with such prepayment (calculated as if the date of such
notice were the date of the prepayment), setting forth the details of such
computation. Two Business Days prior to such prepayment, the Company shall
deliver to each holder of Notes a certificate of a Senior Financial Officer
specifying the calculation of such Make-Whole Amount as of the specified
prepayment date.

 

8.3.         Allocation of Partial Prepayments.

 

In the case of each partial prepayment of Notes pursuant to this Section 8, the
principal amount of the Notes to be prepaid shall be allocated among all of the
Notes at the time outstanding in proportion, as nearly as practicable, to the
respective unpaid principal amounts thereof not theretofore called for
prepayment.

 

8.4.         Maturity; Surrender, etc.

 

In the case of each prepayment of Notes pursuant to this Section 8, the
principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment, together with interest on such
principal amount accrued to such date and the applicable Make-Whole Amount, if
any. From and after such date, unless the Company shall fail to pay such
principal amount when so due and payable, together with the interest and
Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall
cease to accrue. Any Note paid or prepaid in full shall be surrendered to the
Company and canceled and shall not be reissued, and no Note shall be issued in
lieu of any prepaid principal amount of any Note.

 

18

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

 

8.5.         Purchase of Notes.

 

The Company will not and will not permit any Affiliate to purchase, redeem,
prepay or otherwise acquire, directly or indirectly, any of the outstanding
Notes except upon the payment or prepayment of the Notes in accordance with the
terms of this Agreement and the Notes. The Company will promptly cancel all
Notes acquired by it or any Affiliate pursuant to any payment, prepayment or
purchase of Notes pursuant to any provision of this Agreement and no Notes may
be issued in substitution or exchange for any such Notes.

 

8.6.         Make-Whole Amount.

 

The term “Make-Whole Amount” means, with respect to any Note, an amount equal to
the excess, if any, of the Discounted Value of the Remaining Scheduled Payments
with respect to the Called Principal of such Note over the amount of such Called
Principal, provided that the Make-Whole Amount may in no event be less than
zero. For the purposes of determining the Make-Whole Amount, the following terms
have the following meanings:

 

“Called Principal” means, with respect to any Note, the principal of such Note
that is to be prepaid pursuant to Section 8.2 or has become or is declared to be
immediately due and payable pursuant to Section 12.1, as the context requires.

 

“Discounted Value” means, with respect to the Called Principal of any Note, the
amount obtained by discounting all Remaining Scheduled Payments with respect to
such Called Principal from their respective scheduled due dates to the
Settlement Date with respect to such Called Principal, in accordance with
accepted financial practice and at a discount factor (applied on the same
periodic basis as that on which interest on the Notes is payable) equal to the
Reinvestment Yield with respect to such Called Principal.

 

“Reinvestment Yield” means, with respect to the Called Principal of any Note,
.50% over the yield to maturity implied by (i) the yields reported, as of
10:00 A.M. (New York City time) on the second Business Day preceding the
Settlement Date with respect to such Called Principal, on the display designated
as the “PX1 Screen” on the Bloomberg Financial Market Service (or such other
display as may replace the PX1 Screen on Bloomberg Financial Market Service) for
actively traded U.S. Treasury securities having a maturity equal to the
Remaining Average Life of such Called Principal as of such Settlement Date, or
(ii) if such yields are not reported as of such time or the yields reported as
of such time are not ascertainable, the Treasury Constant Maturity Series Yields
reported, for the latest day for which such yields have been so reported as of
the second Business Day preceding the Settlement Date with respect to such
Called Principal, in Federal Reserve Statistical Release H.15 (519) (or any
comparable successor publication) for actively traded U.S. Treasury securities
having a constant maturity equal to the Remaining Average Life of such Called
Principal as of such Settlement Date. Such implied yield will be determined, if
necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent
yields in accordance with accepted financial practice and (b) interpolating
linearly between (1) the actively traded U.S. Treasury security with the
maturity closest to and greater than the Remaining

 

19

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

 

Average Life and (2) the actively traded U.S. Treasury security with the
maturity closest to and less than the Remaining Average Life.

 

“Remaining Average Life” means, with respect to any Called Principal, the number
of years (calculated to the nearest one-twelfth year) obtained by dividing (i)
such Called Principal into (ii) the sum of the products obtained by multiplying
(a) the principal component of each Remaining Scheduled Payment with respect to
such Called Principal by (b) the number of years (calculated to the nearest
one-twelfth year) that will elapse between the Settlement Date with respect to
such Called Principal and the scheduled due date of such Remaining Scheduled
Payment.

 

“Remaining Scheduled Payments” means, with respect to the Called Principal of
any Note, all payments of such Called Principal and interest thereon that would
be due after the Settlement Date with respect to such Called Principal if no
payment of such Called Principal were made prior to its scheduled due date,
provided that if such Settlement Date is not a date on which interest payments
are due to be made under the terms of the Notes, then the amount of the next
succeeding scheduled interest payment will be reduced by the amount of interest
accrued to such Settlement Date and required to be paid on such Settlement Date
pursuant to Section 8.2 or 12.1.

 

“Settlement Date” means, with respect to the Called Principal of any Note, the
date on which such Called Principal is to be prepaid pursuant to Section 8.2 or
has become or is declared to be immediately due and payable pursuant to
Section 12.1, as the context requires.

 

9.                                      AFFIRMATIVE COVENANTS.

 

The Company covenants that so long as any of the Notes are outstanding:

 

9.1.         Compliance with Law.

 

The Company will, and will cause each Subsidiary to, comply with all laws,
ordinances or governmental rules or regulations to which each of them is
subject, including, without limitation, Environmental Laws, and will obtain and
maintain in effect all licenses, certificates, permits, franchises and other
governmental authorizations necessary to the ownership of their respective
properties or to the conduct of their respective businesses, in each case to the
extent necessary to ensure that non-compliance with such laws, ordinances or
governmental rules or regulations or failures to obtain or maintain in effect
such licenses, certificates, permits, franchises and other governmental
authorizations would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

 

9.2.         Insurance.

 

The Company will, and will cause each Restricted Subsidiary to, maintain, with
financially sound and reputable insurers, insurance with respect to their
respective properties and businesses against such casualties and contingencies,
of such types, on such terms and in such amounts (including deductibles,
co-insurance and self-insurance, if adequate reserves are

 

20

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

 

maintained with respect thereto) as is customary in the case of entities of
established reputations engaged in the same or a similar business and similarly
situated.

 

9.3.         Maintenance of Properties.

 

The Company will and will cause each Restricted Subsidiary to maintain and keep,
or cause to be maintained and kept, their respective properties in good repair,
working order and condition (other than ordinary wear and tear), so that the
business carried on in connection therewith may be properly conducted at all
times, provided that this Section shall not prevent the Company or any
Restricted Subsidiary from discontinuing the operation and the maintenance of
any of its properties if such discontinuance is desirable in the conduct of its
business and the Company has concluded that such discontinuance would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

 

9.4.         Payment of Taxes and Claims.

 

The Company will, and will cause each Subsidiary to, file all income tax or
similar tax returns required to be filed in any jurisdiction and to pay and
discharge all taxes shown to be due and payable on such returns and all other
taxes, assessments, governmental charges, or levies imposed on them or any of
their properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent
and all claims for which sums have become due and payable that have or might
become a Lien on properties or assets of the Company or any Subsidiary, provided
that neither the Company nor any Subsidiary need pay any such tax or assessment
or claims if (i) the amount, applicability or validity thereof is contested by
the Company or such Subsidiary on a timely basis in good faith and in
appropriate proceedings, and the Company or a Subsidiary has established
adequate reserves therefor in accordance with GAAP on the books of the Company
or such Subsidiary or (ii) the nonpayment of all such taxes and assessments in
the aggregate would not reasonably be expected to have a Material Adverse
Effect.

 

9.5.         Corporate Existence, etc.

 

The Company will at all times preserve and keep in full force and effect its
corporate existence. Subject to Sections 10.4 and 10.5, the Company will at all
times preserve and keep in full force and effect the corporate existence of each
of its Restricted Subsidiaries (unless merged into the Company or a Restricted
Subsidiary) and all rights and franchises of the Company and its Restricted
Subsidiaries unless, in the good faith judgment of the Company, the termination
of or failure to preserve and keep in full force and effect such corporate
existence, right or franchise would not, individually or in the aggregate, have
a Material Adverse Effect.

 

10.                               NEGATIVE COVENANTS.

 

The Company covenants that so long as any of the Notes are outstanding:

 

21

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

 

10.1.       Fixed Charge Coverage Ratio.

 

The Company will not permit the ratio of Consolidated Income Available for Fixed
Charges to Consolidated Fixed Charges (in each case for the Company’s then most
recently completed four fiscal quarters) to be less than 2.00 to 1.00 at any
time.

 

10.2.       Priority Debt.

 

The Company will not permit Priority Debt to exceed 20% of Consolidated Total
Assets at any time.

 

10.3.       Liens.

 

The Company will not, and will not permit any Restricted Subsidiary to, permit
to exist, create, assume or incur, directly or indirectly, any Lien on its
properties or assets, whether now owned or hereafter acquired (unless it makes,
or causes to be made, effective provision whereby the Notes will be equally and
ratably secured with any and all other obligations thereby secured, such
security to be pursuant to an agreement or agreements reasonably satisfactory to
the Required Holders), except:

 

(a)           Liens for taxes, assessments or governmental charges not then due
and delinquent or the nonpayment of which is permitted by Section 9.4;

 

(b)           Liens incidental to the conduct of business or the ownership of
properties and assets (including landlords’, lessors’, carriers’,
warehousemen’s, mechanics’, materialmen’s and other similar Liens) and Liens to
secure the performance of bids, tenders, leases or trade contracts, or to secure
statutory obligations (including obligations under workers compensation,
unemployment insurance and other social security legislation), surety or appeal
bonds or other Liens of like general nature incurred in the ordinary course of
business and not in connection with the borrowing of money;

 

(c)           any attachment or judgment Lien, unless the judgment it secures
has not, within 60 days after the entry thereof, been discharged or execution
thereof stayed pending appeal, or has not been discharged within 60 days after
the expiration of any such stay;

 

(d)           Liens securing Debt of a Restricted Subsidiary owed to the Company
or to another Restricted Subsidiary;

 

(e)           Liens securing Debt existing on property or assets of the Company
or any Restricted Subsidiary as of the date of this Agreement that are described
in Schedule 10.3;

 

(f)            encumbrances in the nature of leases, subleases, zoning
restrictions, easements, rights of way, minor survey exceptions and other rights
and restrictions of record on the use of real property and defects in title
arising or incurred in the ordinary course of business, which, individually and
in the aggregate, do not materially impair the use of the property or assets
subject thereto by the Company or such Restricted

 

22

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

 

Subsidiary in their business or which relate only to assets that in the
aggregate are not Material;

 

(g)           Liens (i) existing on property at the time of its acquisition by
the Company or a Restricted Subsidiary and not created in contemplation thereof,
whether or not the Debt secured by such Lien is assumed by the Company or a
Restricted Subsidiary; or (ii) on property created contemporaneously with its
acquisition or within 365 days of the acquisition or completion of construction
or improvements thereof to secure or provide for all or a portion of the
purchase price or cost of construction or improvements of such property after
the date of Closing; or (iii) existing on property of a Person at the time such
Person is merged or consolidated with, or becomes a Restricted Subsidiary of, or
substantially all of its assets are acquired by, the Company or a Restricted
Subsidiary and not created in contemplation thereof; provided that such Liens do
not extend to additional property of the Company or any Restricted Subsidiary
(other than property that is an improvement to or is acquired for specific use
in connection with the subject property) and that the aggregate principal amount
of Debt secured by each such Lien does not exceed the lesser of cost of
acquisition or construction or the fair market value (determined in good faith
by one or more officers of the Company to whom authority to enter into the
transaction has been delegated by the board of directors of the Company) of the
property subject thereto;

 

(h)           Liens on accounts receivable and related contract rights granted
in favor of purchasers or providers of financing in connection with Receivables
Securitization Financings;

 

(i)            Liens resulting from extensions, renewals or replacements of
Liens permitted by paragraphs (e) and (g), provided that (i) there is no
increase in the principal amount or decrease in maturity of the Debt secured
thereby at the time of such extension, renewal or replacement, (ii) any new Lien
attaches only to the same property theretofore subject to such earlier Lien and
(iii) immediately after such extension, renewal or replacement no Default or
Event of Default would exist; and

 

(j)            Liens securing Debt not otherwise permitted by paragraphs
(a) through (i) above, provided that, after giving effect to the incurrence of
the Debt so secured, Priority Debt does not exceed 20% of Consolidated Total
Assets.

 

10.4.       Sale of Assets.

 

Except as permitted by Section 10.5, the Company will not, and will not permit
any Restricted Subsidiary to, sell, lease, transfer or otherwise dispose of,
including by way of merger (collectively a “Disposition”), any assets, including
capital stock of Restricted Subsidiaries, in one or a series of transactions, to
any Person, other than:

 

(a)           Dispositions in the ordinary course of business;

 

(b)           Dispositions by the Company to a Restricted Subsidiary or by a
Restricted Subsidiary to the Company or a Restricted Subsidiary; or

 

23

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

 

(c)           Dispositions not otherwise permitted by Section 10.4(a) or (b),
provided that:

 

(i)            each such Disposition is made in an arms length transaction for a
consideration at least equal to the fair market value of the property subject
thereto;

 

(ii)           the sum of (A) the aggregate net book value of all assets
disposed of in any period of 365 consecutive days pursuant to this
Section 10.4(c) and (B) the maximum amount of third-party financing outstanding
during such period pursuant to Section 10.4(d)(i) does not exceed 10% of
Consolidated Total Assets as of the end of the immediately preceding fiscal
year; and

 

(iii)          at the time of such Disposition and after giving effect thereto
no Default or Event of Default shall have occurred and be continuing; and

 

(d)           Dispositions of receivables and related assets in a Receivables
Securitization Financing, provided that the sum of (i) the maximum outstanding
amount of third-party financing with respect to such Receivables Securitization
Financing during any period of 365 days and (ii) the aggregate net book value of
all assets disposed of during such period pursuant to Section 10.4(c)(ii) does
not exceed 10% of Consolidated Total Assets as of the end of the immediately
preceding fiscal year.

 

Notwithstanding the foregoing, the Company may, or may permit any Restricted
Subsidiary to, make a Disposition and the assets subject to such Disposition
shall not be subject to or included in the foregoing limitations and
computations contained in Section 10.4(c)(ii) and Section 10.4(d) to the extent
that each such Disposition is for a consideration at least equal to the fair
market value of the property subject thereto, and

 

(A)          such assets are leased back by the Company or any Restricted
Subsidiary, as lessee, within 365 days of the original acquisition or
construction thereof by the Company or such Restricted Subsidiary; or

 

(B)           the net proceeds from such Disposition are within 365 days of such
Disposition:

 

(i)            reinvested in productive assets used or useful in carrying on the
business of the Company and its Restricted Subsidiaries; or

 

(ii)           applied to the payment or prepayment of any outstanding Debt of
the Company or any Restricted Subsidiary that is pari passu with or senior to
the Notes, including the Notes.

 

Any prepayment of Notes pursuant to this Section 10.4 shall be in accordance
with Sections 8.2 and 8.3, without regard to the minimum prepayment requirements
of Section 8.2 if such proceeds are less than such minimum.

 

24

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

 

10.5.       Mergers, Consolidations, etc.

 

The Company will not, and will not permit any Restricted Subsidiary to,
consolidate with or merge with any other Person or convey, transfer, sell or
lease all or substantially all of its assets in a single transaction or series
of transactions to any Person except that:

 

(a)           the Company may consolidate or merge with any other Person or
convey, transfer, sell or lease all or substantially all of its assets in a
single transaction or series of transactions to any Person, provided that:

 

(i)            the successor formed by such consolidation or the survivor of
such merger or the Person that acquires by conveyance, transfer, sale or lease
all or substantially all of the assets of the Company as an entirety, as the
case may be, is a solvent corporation organized and existing under the laws of
the United States or any state thereof (including the District of Columbia),
and, if the Company is not such corporation, such corporation (y) shall have
executed and delivered to each holder of any Notes its assumption of the due and
punctual performance and observance of each covenant and condition of this
Agreement and the Notes and (z) shall have caused to be delivered to each holder
of any Notes an opinion of nationally recognized independent counsel or other
independent counsel reasonably satisfactory to the Required Holders, to the
effect that all agreements or instruments effecting such assumption are
enforceable in accordance with their terms and comply with the terms hereof; and

 

(ii)           immediately before and after giving effect to such transaction,
no Default or Event of Default shall have occurred and be continuing; and

 

(b)           Any Restricted Subsidiary may (x) merge into the Company (provided
that the Company is the surviving corporation) or a Restricted Subsidiary or
(y) sell, transfer or lease all or any part of its assets to the Company or a
Restricted Subsidiary, or (z) merge or consolidate with, or sell, transfer or
lease all or substantially all of its assets to, any Person in a transaction
that is permitted by Section 10.4 or, as a result of which, such Person becomes
a Restricted Subsidiary; provided in each instance set forth in clauses (x)
through (z) that immediately before and after giving effect thereto, there shall
exist no Default or Event of Default.

 

No such conveyance, transfer, sale or lease of all or substantially all of the
assets of the Company shall have the effect of releasing the Company or any
successor corporation that shall theretofore have become such in the manner
prescribed in this Section 10.5 from its liability under this Agreement or the
Notes.

 

10.6.       Designation of Restricted and Unrestricted Subsidiaries.

 

The Company may designate any Restricted Subsidiary as an Unrestricted
Subsidiary and any Unrestricted Subsidiary as a Restricted Subsidiary by notice
in writing given to the holders of the Notes; provided that,

 

25

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

 

(a)           if such Subsidiary initially is designated a Restricted
Subsidiary, then such Restricted Subsidiary may be subsequently designated as an
Unrestricted Subsidiary and such Unrestricted Subsidiary may be subsequently
designated as a Restricted Subsidiary, but no further changes in designation may
be made;

 

(b)           if such Subsidiary initially is designated an Unrestricted
Subsidiary, then such Unrestricted Subsidiary may be subsequently designated as
a Restricted Subsidiary and such Restricted Subsidiary may be subsequently
designated as an Unrestricted Subsidiary, but no further changes in designation
may be made; and

 

(c)           the Company may not designate a Restricted Subsidiary as an
Unrestricted Subsidiary unless:  (i) such Restricted Subsidiary does not own,
directly or indirectly, any Debt or capital stock of the Company or any other
Restricted Subsidiary, (ii) such designation, considered as a sale of assets, is
permitted under Section 10.4(c)(ii), and (iii) immediately before and after such
designation there exists no Default or Event of Default.

 

10.7.       Subsidiary Guaranty.

 

The Company will not permit any domestic Subsidiary to become a borrower under
the Credit Agreement or a party to the Bank Guaranties or to directly or
indirectly guaranty any of the Company’s obligations under the Credit Agreement
unless such Subsidiary is, or concurrently therewith becomes, a party to the
Subsidiary Guaranty.

 

10.8.       Nature of Business.

 

The Company will not, and will not permit any Restricted Subsidiary to, engage
in any business if, as a result, the general nature of the business in which the
Company and its Restricted Subsidiaries, taken as a whole, would then be engaged
would be substantially changed from the general nature of the business in which
the Company and its Restricted Subsidiaries, taken as a whole, are engaged on
the date of this Agreement as described in the Memorandum.

 

10.9.       Transactions with Affiliates.

 

The Company will not and will not permit any Restricted Subsidiary to enter into
directly or indirectly any Material transaction or Material group of related
transactions (including without limitation the purchase, lease, sale or exchange
of properties of any kind or the rendering of any service) with any Affiliate
(other than the Company or another Restricted Subsidiary), except in the
ordinary course of the Company’s or such Restricted Subsidiary’s business and
upon fair and reasonable terms no less favorable to the Company or such
Restricted Subsidiary than would be obtainable in a comparable arm’s-length
transaction with a Person not an Affiliate.

 

26

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

 

11.                               EVENTS OF DEFAULT.

 

An “Event of Default” shall exist if any of the following conditions or events
shall occur and be continuing:

 

(a)           the Company defaults in the payment of any principal or Make-Whole
Amount on any Note when the same becomes due and payable, whether at maturity or
at a date fixed for prepayment or by declaration or otherwise; or

 

(b)           the Company defaults in the payment of any interest on any Note
for more than five Business Days after the same becomes due and payable; or

 

(c)           the Company defaults in the performance of or compliance with any
term contained in Sections 10.1 through 10.9; or

 

(d)           the Company defaults in the performance of or compliance with any
term contained herein (other than those referred to in paragraphs (a), (b) and
(c) of this Section 11) and such default is not remedied within 30 days after
the earlier of (i) a Responsible Officer obtaining actual knowledge of such
default or (ii) the Company receiving written notice of such default from any
holder of a Note; or

 

(e)           any representation or warranty made in writing by or on behalf of
the Company or any Subsidiary Guarantor or by any officer of the Company or any
Subsidiary Guarantor in this Agreement, the Subsidiary Guaranty or in any
writing furnished in connection with the transactions contemplated hereby or
thereby proves to have been false or incorrect in any material respect on the
date as of which made; or

 

(f)            (i) the Company or any Restricted Subsidiary is in default (as
principal or as guarantor or other surety) in the payment of any principal of or
premium or make-whole amount or interest on any Debt that is outstanding in an
aggregate principal amount greater than $30,000,000 beyond any period of grace
provided with respect thereto, or (ii) the Company or any Restricted Subsidiary
is in default in the performance of or compliance with any term of any evidence
of any Debt that is outstanding in an aggregate principal amount greater than
$30,000,000 or of any mortgage, indenture or other agreement relating thereto or
any other condition exists, and as a consequence of such default or condition
such Debt has become, or has been declared (or one or more Persons are entitled
to declare such Debt to be), due and payable before its stated maturity or
before its regularly scheduled dates of payment, or (iii) as a consequence of
the occurrence or continuation of any event or condition (other than the passage
of time or the right of the holder of Debt to convert such Debt into equity
interests), (x) the Company or any Restricted Subsidiary has become obligated to
purchase or repay Debt before its regular maturity or before its regularly
scheduled dates of payment in an aggregate outstanding principal amount greater
than $30,000,000, or (y) one or more Persons have the right to require the
Company or any Restricted Subsidiary so to purchase or repay such Debt; or

 

27

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

 

(g)           the Company or any Material Restricted Subsidiary (i) is generally
not paying, or admits in writing its inability to pay, its debts as they become
due, (ii) files, or consents by answer or otherwise to the filing against it of,
a petition for relief or reorganization or arrangement or any other petition in
bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency,
reorganization, moratorium or other similar law of any jurisdiction, (iii) makes
an assignment for the benefit of its creditors, (iv) consents to the appointment
of a custodian, receiver, trustee or other officer with similar powers with
respect to it or with respect to any substantial part of its property, (v) is
adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for
the purpose of any of the foregoing; or

 

(h)           a court or governmental authority of competent jurisdiction enters
an order appointing, without consent by the Company or any Material Restricted
Subsidiary, a custodian, receiver, trustee or other officer with similar powers
with respect to it or with respect to any substantial part of its property, or
constituting an order for relief or approving a petition for relief or
reorganization or any other petition in bankruptcy or for liquidation or to take
advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering
the dissolution, winding-up or liquidation of the Company or any Material
Restricted Subsidiary, or any such petition shall be filed against the Company
or any Material Restricted Subsidiary and such petition shall not be dismissed
within 60 days; or

 

(i)            a final judgment or judgments for the payment of money
aggregating more than $30,000,000 are rendered against one or more of the
Company and its Restricted Subsidiaries, which judgments are not, within 60 days
after entry thereof, bonded, discharged or stayed pending appeal, or are not
discharged within 60 days after the expiration of such stay; or

 

(j)            if (i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a waiver of
such standards or extension of any amortization period is sought or granted
under section 412 of the Code, (ii) a notice of intent to terminate any Plan
shall have been or is reasonably expected to be filed with the PBGC or the PBGC
shall have instituted proceedings under ERISA section 4042 to terminate or
appoint a trustee to administer any Plan or the PBGC shall have notified the
Company or any ERISA Affiliate that a Plan may become a subject of any such
proceedings, (iii) the aggregate “amount of unfunded benefit liabilities”
(within the meaning of section 4001(a)(18) of ERISA) under all Plans determined
in accordance with Title IV of ERISA, shall be greater than $30,000,000,
(iv) the Company or any ERISA Affiliate shall have incurred or is reasonably
expected to incur any liability pursuant to Title I or IV of ERISA or the
penalty or excise tax provisions of the Code relating to employee benefit plans,
(v) the Company or any ERISA Affiliate withdraws from any Multiemployer Plan, or
(vi) the Company or any Restricted Subsidiary establishes or amends any employee
welfare benefit plan that provides post-employment welfare benefits in a manner
that would increase the liability of the Company or any Restricted Subsidiary
thereunder; and any such event or events described in clauses (i) through (vi)
above, either individually or together with any other such event or events,
would reasonably be expected to have a Material Adverse Effect; or

 

28

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

 

(k)           any Subsidiary Guarantor defaults in the performance of or
compliance with any term or condition contained in the Subsidiary Guaranty or
the Subsidiary Guaranty ceases to be in full force and effect, except as
provided in Section 22, or is declared to be null and void in whole or in
material part by a court or other governmental or regulatory authority having
jurisdiction or the validity or enforceability thereof shall be contested by the
Company or any Subsidiary Guarantor or any of them renounces any of the same or
denies that it has any or further liability thereunder.

 

As used in Section 11(j), the terms “employee benefit plan” and “employee
welfare benefit plan” shall have the respective meanings assigned to such terms
in Section 3 of ERISA.

 

12.                               REMEDIES ON DEFAULT, ETC.

 

12.1.       Acceleration.

 

(a)           If an Event of Default with respect to the Company described in
paragraph (g) or (h) of Section 11 (other than an Event of Default described in
clause (i) of paragraph (g) or described in clause (vi) of paragraph (g) by
virtue of the fact that such clause encompasses clause (i) of paragraph (g)) has
occurred, all the Notes then outstanding shall automatically become immediately
due and payable.

 

(b)           If any other Event of Default has occurred and is continuing,
holders of a majority in principal amount of the Notes at the time outstanding
may at any time at its or their option, by notice or notices to the Company,
declare all the Notes then outstanding to be immediately due and payable.

 

(c)           If any Event of Default described in paragraph (a) or (b) of
Section 11 has occurred and is continuing, any holder or holders of Notes at the
time outstanding affected by such Event of Default may at any time, at its or
their option, by notice or notices to the Company, declare all the Notes held by
it or them to be immediately due and payable.

 

Upon any Notes becoming due and payable under this Section 12.1, whether
automatically or by declaration, such Notes will forthwith mature and the entire
unpaid principal amount of such Notes, plus (x) all accrued and unpaid interest
thereon and (y) any applicable Make-Whole Amount determined in respect of such
principal amount (to the full extent permitted by applicable law) , shall all be
immediately due and payable, in each and every case without presentment, demand,
protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically provided for) and that the provision for payment
of a Make-Whole Amount by the Company in the event that the Notes are prepaid or
are accelerated as a result of an Event of Default is intended to provide
compensation for the deprivation of such right under such circumstances.

 

29

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

 

12.2.       Other Remedies.

 

If any Default or Event of Default has occurred and is continuing, and
irrespective of whether any Notes have become or have been declared immediately
due and payable under Section 12.1, the holder of any Note at the time
outstanding may proceed to protect and enforce the rights of such holder by an
action at law, suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained herein or in any Note, or for an
injunction against a violation of any of the terms hereof or thereof, or in aid
of the exercise of any power granted hereby or thereby or by law or otherwise.

 

12.3.       Rescission.

 

At any time after any Notes have been declared due and payable pursuant to
clause (b) or (c) of Section 12.1, the holders of a majority in principal amount
of the Notes then outstanding, by written notice to the Company, may rescind and
annul any such declaration and its consequences if (a) the Company has paid all
overdue interest on the Notes, all principal of and any Make-Whole Amount on any
Notes that are due and payable and are unpaid other than by reason of such
declaration, and all interest on such overdue principal and any Make-Whole
Amount and (to the extent permitted by applicable law) any overdue interest in
respect of the Notes, at the Default Rate, (b) all Events of Default and
Defaults, other than non-payment of amounts that have become due solely by
reason of such declaration, have been cured or have been waived pursuant to
Section 17, and (c) no judgment or decree has been entered for the payment of
any monies due pursuant hereto or to the Notes. No rescission and annulment
under this Section 12.3 will extend to or affect any subsequent Event of Default
or Default or impair any right consequent thereon.

 

12.4.       No Waivers or Election of Remedies, Expenses, etc.

 

No course of dealing and no delay on the part of any holder of any Note in
exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such holder’s rights, powers or remedies. No right, power or
remedy conferred by this Agreement or by any Note upon any holder thereof shall
be exclusive of any other right, power or remedy referred to herein or therein
or now or hereafter available at law, in equity, by statute or otherwise.
Without limiting the obligations of the Company under Section 15, the Company
will pay to the holder of each Note on demand such further amount as shall be
sufficient to cover all costs and expenses of such holder incurred in any
enforcement or collection under this Section 12, including, without limitation,
reasonable attorneys’ fees, expenses and disbursements.

 

13.                               REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.

 

13.1.       Registration of Notes.

 

The Company shall keep at its principal executive office a register for the
registration and registration of transfers of Notes. The name and address of
each holder of one or more Notes, each transfer thereof and the name and address
of each transferee of one or more Notes shall be registered in such register.
Prior to due presentment for registration of transfer,

 

30

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

 

the Person in whose name any Note shall be registered shall be deemed and
treated as the owner and holder thereof for all purposes hereof, and the Company
shall not be affected by any notice or knowledge to the contrary. The Company
shall give to any holder of a Note that is an Institutional Investor, promptly
upon request therefor, a complete and correct copy of the names and addresses of
all registered holders of Notes.

 

13.2.       Transfer and Exchange of Notes.

 

Upon surrender of any Note at the principal executive office of the Company for
registration of transfer or exchange (and in the case of a surrender for
registration of transfer, duly endorsed or accompanied by a written instrument
of transfer duly executed by the registered holder of such Note or his attorney
duly authorized in writing and accompanied by the address for notices of each
transferee of such Note or part thereof), the Company shall execute and deliver,
at the Company’s expense (except as provided below), one or more new Notes (as
requested by the holder thereof) in exchange therefor, in an aggregate principal
amount equal to the unpaid principal amount of the surrendered Note. Each such
new Note shall be payable to such Person as such holder may request and shall be
substantially in the form of Exhibit 1. Each such new Note shall be dated and
bear interest from the date to which interest shall have been paid on the
surrendered Note or dated the date of the surrendered Note if no interest shall
have been paid thereon. The Company may require payment of a sum sufficient to
cover any stamp tax or governmental charge imposed in respect of any such
transfer of Notes. Notes shall not be transferred in denominations of less than
$100,000, provided that if necessary to enable the registration of transfer by a
holder of its entire holding of Notes, one Note may be in a denomination of less
than $100,000. Any transferee, by its acceptance of a Note registered in its
name (or the name of its nominee), shall be deemed to have made the
representation set forth in Section 6.2.

 

13.3.       Replacement of Notes.

 

Upon receipt by the Company of evidence reasonably satisfactory to it of the
ownership of and the loss, theft, destruction or mutilation of any Note (which
evidence shall be, in the case of an Institutional Investor, notice from such
Institutional Investor of such ownership and such loss, theft, destruction or
mutilation), and

 

(a)           in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to it (provided that if the holder of such Note is, or is a nominee
for, an original Purchaser or another Institutional Investor holder of a Note
with a minimum net worth of at least $50,000,000, such Person’s own unsecured
agreement of indemnity shall be deemed to be satisfactory), or

 

(b)           in the case of mutilation, upon surrender and cancellation
thereof,

 

the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note, dated and bearing interest from the date to which interest shall have been
paid on such lost, stolen, destroyed or mutilated Note or dated the date of such
lost, stolen, destroyed or mutilated Note if no interest shall have been paid
thereon.

 

31

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

 

14.                               PAYMENTS ON NOTES.

 

14.1.       Place of Payment.

 

Subject to Section 14.2, payments of principal, Make-Whole Amount, if any, and
interest becoming due and payable on the Notes shall be made in Chicago,
Illinois at the principal office of Bank of America in such jurisdiction. The
Company may at any time, by notice to each holder of a Note, change the place of
payment of the Notes so long as such place of payment shall be either the
principal office of the Company in such jurisdiction or the principal office of
a bank or trust company in such jurisdiction.

 

14.2.       Home Office Payment.

 

So long as you or your nominee shall be the holder of any Note, and
notwithstanding anything contained in Section 14.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for principal,
Make-Whole Amount, if any, and interest by the method and at the address
specified for such purpose below your name in Schedule A, or by such other
method or at such other address as you shall have from time to time specified to
the Company in writing for such purpose, without the presentation or surrender
of such Note or the making of any notation thereon, except that upon written
request of the Company made concurrently with or reasonably promptly after
payment or prepayment in full of any Note, you shall surrender such Note for
cancellation, reasonably promptly after any such request, to the Company at its
principal executive office or at the place of payment most recently designated
by the Company pursuant to Section 14.1. Prior to any sale or other disposition
of any Note held by you or your nominee you will, at your election, either
endorse thereon the amount of principal paid thereon and the last date to which
interest has been paid thereon or surrender such Note to the Company in exchange
for a new Note or Notes pursuant to Section 13.2. The Company will afford the
benefits of this Section 14.2 to any Institutional Investor that is the direct
or indirect transferee of any Note purchased by you under this Agreement and
that has made the same agreement relating to such Note as you have made in this
Section 14.2.

 

15.                               EXPENSES, ETC.

 

15.1.       Transaction Expenses.

 

Whether or not the transactions contemplated hereby are consummated, the Company
will pay all costs and expenses (including reasonable attorneys’ fees of a
special counsel and, if reasonably required, local or other counsel) incurred by
you and each Other Purchaser or holder of a Note in connection with such
transactions and in connection with any amendments, waivers or consents under or
in respect of this Agreement, the Notes or the Subsidiary Guaranty (whether or
not such amendment, waiver or consent becomes effective), including: (a) the
costs and expenses incurred in enforcing or defending (or determining whether or
how to enforce or defend) any rights under this Agreement, the Notes or the
Subsidiary Guaranty or in responding to any subpoena or other legal process or
informal investigative demand issued in connection with this Agreement, the
Notes or the Subsidiary Guaranty, or by reason of being a holder of any Note,
and (b) the costs and expenses, including financial advisors’ fees, incurred in
connection with the insolvency or bankruptcy of the Company or any

 

32

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

 

Subsidiary or in connection with any work-out or restructuring of the
transactions contemplated hereby and by the Notes. The Company will pay, and
will save you and each other holder of a Note harmless from, all claims in
respect of any fees, costs or expenses if any, of brokers and finders (other
than those retained by you).

 

15.2.       Survival.

 

The obligations of the Company under this Section 15 will survive the payment or
transfer of any Note, the enforcement, amendment or waiver of any provision of
this Agreement or the Notes, and the termination of this Agreement.

 

16.                               SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
ENTIRE AGREEMENT.

 

All representations and warranties contained herein shall survive the execution
and delivery of this Agreement and the Notes, the purchase or transfer by you of
any Note or portion thereof or interest therein and the payment of any Note, and
may be relied upon by any subsequent holder of a Note, regardless of any
investigation made at any time by or on behalf of you or any other holder of a
Note. All statements contained in any certificate or other instrument delivered
by or on behalf of the Company pursuant to this Agreement shall be deemed
representations and warranties of the Company under this Agreement. Subject to
the preceding sentence, this Agreement and the Notes embody the entire agreement
and understanding between you and the Company and supersede all prior agreements
and understandings relating to the subject matter hereof.

 

17.                               AMENDMENT AND WAIVER.

 

17.1.       Requirements.

 

This Agreement, the Notes and the Subsidiary Guaranty may be amended, and the
observance of any term hereof or of the Notes or such Subsidiary Guaranty may be
waived (either retroactively or prospectively), with (and only with) the written
consent of the Company and the Required Holders, except that (a) no amendment or
waiver of any of the provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any
defined term (as it is used therein), will be effective as to you unless
consented to by you in writing, and (b) no such amendment or waiver may, without
the written consent of the holder of each Note at the time outstanding affected
thereby, (i) subject to the provisions of Section 12 relating to acceleration or
rescission, change the amount or time of any prepayment or payment of principal
of, or reduce the rate or change the time of payment or method of computation of
interest or of the Make-Whole Amount on, the Notes, (ii) change the percentage
of the principal amount of the Notes the holders of which are required to
consent to any such amendment or waiver, or (iii) amend any of Sections 8,
11(a), 11(b), 12, 17 or 20.

 

17.2.       Solicitation of Holders of Notes.

 

(a)           Solicitation. The Company will provide each holder of the Notes
(irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to
enable such holder to

 

33

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

 

make an informed and considered decision with respect to any proposed amendment,
waiver or consent in respect of any of the provisions hereof or of the Notes.
The Company will deliver executed or true and correct copies of each amendment,
waiver or consent effected pursuant to the provisions of this Section 17 to each
holder of outstanding Notes promptly following the date on which it is executed
and delivered by, or receives the consent or approval of, the requisite holders
of Notes.

 

(b)           Payment. The Company will not directly or indirectly pay or cause
to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, or grant any security, to any holder of Notes as
consideration for or as an inducement to the entering into by any holder of
Notes or any waiver or amendment of any of the terms and provisions hereof
unless such remuneration is concurrently paid, or security is concurrently
granted, on the same terms, ratably to each holder of Notes then outstanding
even if such holder did not consent to such waiver or amendment.

 

17.3.       Binding Effect, etc.

 

Any amendment or waiver consented to as provided in this Section 17 applies
equally to all holders of Notes and is binding upon them and upon each future
holder of any Note and upon the Company without regard to whether such Note has
been marked to indicate such amendment or waiver. No such amendment or waiver
will extend to or affect any obligation, covenant, agreement, Default or Event
of Default not expressly amended or waived or impair any right consequent
thereon. No course of dealing between the Company and the holder of any Note nor
any delay in exercising any rights hereunder or under any Note shall operate as
a waiver of any rights of any holder of such Note. As used herein, the term
“this Agreement” or “the Agreement” and references thereto shall mean this
Agreement as it may from time to time be amended or supplemented.

 

17.4.       Notes held by Company, etc.

 

Solely for the purpose of determining whether the holders of the requisite
percentage of the aggregate principal amount of Notes then outstanding approved
or consented to any amendment, waiver or consent to be given under this
Agreement or the Notes, or have directed the taking of any action provided
herein or in the Notes to be taken upon the direction of the holders of a
specified percentage of the aggregate principal amount of Notes then
outstanding, Notes directly or indirectly owned by the Company or any of its
Affiliates shall be deemed not to be outstanding.

 

18.                               NOTICES.

 

All notices and communications provided for hereunder shall be in writing and
sent (a) by facsimile if the sender on the same day sends a confirming copy of
such notice by a recognized overnight delivery service (charges prepaid), or
(b) by registered or certified mail with return receipt requested (postage
prepaid), or (c) by a recognized overnight delivery service (with charges
prepaid). Any such notice must be sent:

 

34

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

 

(i)            if to you or your nominee, to you or it at the address specified
for such communications in Schedule A, or at such other address as you or it
shall have specified to the Company in writing,

 

(ii)           if to any other holder of any Note, to such holder at such
address as such other holder shall have specified to the Company in writing, or

 

(iii)          if to the Company, to the Company at its address set forth at the
beginning hereof to the attention of the Chief Executive Officer, or at such
other address as the Company shall have specified to the holder of each Note in
writing.

 

Notices under this Section 18 will be deemed given only when actually received.

 

19.                               REPRODUCTION OF DOCUMENTS.

 

This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by you at the Closing (except the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and you may destroy any original document so reproduced. The
Company agrees and stipulates that, to the extent permitted by applicable law,
any such reproduction shall be admissible in evidence as the original itself in
any judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by you in the regular
course of business) and any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence. This Section 19
shall not prohibit the Company or any other holder of Notes from contesting any
such reproduction to the same extent that it could contest the original, or from
introducing evidence to demonstrate the inaccuracy of any such reproduction.

 

20.                               CONFIDENTIAL INFORMATION.

 

For the purposes of this Section 20, “Confidential Information” means
information delivered to you by or on behalf of the Company or any Subsidiary in
connection with the transactions contemplated by or otherwise pursuant to this
Agreement that is proprietary in nature and that was clearly marked or labeled
or otherwise adequately identified when received by you as being confidential
information of the Company or such Subsidiary, provided that such term does not
include information that (a) was publicly known or otherwise known to you prior
to the time of such disclosure, (b) subsequently becomes publicly known through
no act or omission by you or any Person acting on your behalf, (c) otherwise
becomes known to you other than through disclosure by the Company or any
Subsidiary or (d) constitutes financial statements delivered to you under
Section 7.1 that are otherwise publicly available. You will maintain the
confidentiality of such Confidential Information in accordance with procedures
adopted by you in good faith to protect confidential information of third
parties delivered to you, provided that you may deliver or disclose Confidential
Information to (i) your directors, trustees, officers, employees, agents,
attorneys and affiliates (to the extent such disclosure reasonably relates to
the administration of the investment represented by your Notes), (ii) your
financial

 

35

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

 

advisors and other professional advisors who agree to hold confidential the
Confidential Information substantially in accordance with the terms of this
Section 20, (iii) any other holder of any Note, (iv) any Institutional Investor
to which you sell or offer to sell such Note or any part thereof or any
participation therein (if such Person has agreed in writing prior to its receipt
of such Confidential Information to be bound by the provisions of this
Section 20), (v) any Person from which you offer to purchase any security of the
Company (if such Person has agreed in writing prior to its receipt of such
Confidential Information to be bound by the provisions of this Section 20),
(vi) any federal or state regulatory authority having jurisdiction over you,
(vii) the National Association of Insurance Commissioners or any similar
organization, or any nationally recognized rating agency that requires access to
information about your investment portfolio or (viii) any other Person to which
such delivery or disclosure may be necessary or appropriate (w) to effect
compliance with any law, rule, regulation or order applicable to you, (x) in
response to any subpoena or other legal process, (y) in connection with any
litigation to which you are a party or (z) if an Event of Default has occurred
and is continuing, to the extent you may reasonably determine such delivery and
disclosure to be necessary or appropriate in the enforcement or for the
protection of the rights and remedies under your Notes and this Agreement. Each
holder of a Note, by its acceptance of a Note, will be deemed to have agreed to
be bound by and to be entitled to the benefits of this Section 20 as though it
were a party to this Agreement. On reasonable request by the Company in
connection with the delivery to any holder of a Note of information required to
be delivered to such holder under this Agreement or requested by such holder
(other than a holder that is a party to this Agreement or its nominee), such
holder will enter into an agreement with the Company embodying the provisions of
this Section 20.

 

21.                               SUBSTITUTION OF PURCHASER.

 

You shall have the right to substitute any one of your Affiliates as the
purchaser of the Notes that you have agreed to purchase hereunder, by written
notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain such Affiliate’s agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon receipt
of such notice, wherever the word “you” is used in this Agreement (other than in
this Section 21), such word shall be deemed to refer to such Affiliate in lieu
of you. In the event that such Affiliate is so substituted as a purchaser
hereunder and such Affiliate thereafter transfers to you all of the Notes then
held by such Affiliate, upon receipt by the Company of notice of such transfer,
wherever the word “you” is used in this Agreement (other than in this
Section 21), such word shall no longer be deemed to refer to such Affiliate, but
shall refer to you, and you shall have all the rights of an original holder of
the Notes under this Agreement.

 

22.                               RELEASE OF SUBSIDIARY GUARANTOR.

 

You and each subsequent holder of a Note agree to release any Subsidiary
Guarantor from the Subsidiary Guaranty (i) if such Subsidiary Guarantor ceases
to be such as a result of a Disposition permitted by Section 10.4 or 10.5, or
(ii) at such time as the banks party to the Credit Agreement release such
Subsidiary as a borrower under the Credit Agreement and/or as a guarantor under
the Bank Guaranties; provided, however, that you and each subsequent

 

36

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

 

holder will not be required to release a Subsidiary Guarantor from the
Subsidiary Guaranty upon such Subsidiary’s release from the Bank Guaranties if
(A) a Default or Event of Default has occurred and is continuing, (B) such
Subsidiary Guarantor is to become a borrower under the Credit Agreement, or (C)
such release is part of a plan of financing that contemplates such Subsidiary
Guarantor guaranteeing any other Debt of the Company. Such Subsidiary Guarantor
shall automatically be released from the Subsidiary Guaranty upon the delivery
to the holders of the Notes of a certificate from a Senior Financial Officer of
the Company stating that the requirements of this Section 22 have been met. If
any fee or other form of consideration is given to any holder of Debt of the
Company expressly for the purpose of such release, holders of the Notes shall
receive equivalent consideration.

 

23.                               MISCELLANEOUS.

 

23.1.       Successors and Assigns.

 

All covenants and other agreements contained in this Agreement by or on behalf
of any of the parties hereto bind and inure to the benefit of their respective
successors and assigns (including, without limitation, any subsequent holder of
a Note) whether so expressed or not.

 

23.2.       Payments Due on Non-Business Days.

 

Anything in this Agreement or the Notes to the contrary notwithstanding, any
payment of principal of or Make-Whole Amount or interest on any Note that is due
on a date other than a Business Day shall be made on the next succeeding
Business Day without including the additional days elapsed in the computation of
the interest payable on such next succeeding Business Day; provided that if the
maturity date of any Note is a date other than a Business Day, the payment
otherwise due on such maturity date shall be made on the next succeeding
Business Day and shall include the additional days elapsed in the computation of
interest payable on such next succeeding Business Day.

 

23.3.       Severability.

 

Any provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.

 

23.4.       Construction.

 

Each covenant contained herein shall be construed (absent express provision to
the contrary) as being independent of each other covenant contained herein, so
that compliance with any one covenant shall not (absent such an express contrary
provision) be deemed to excuse compliance with any other covenant. Where any
provision herein refers to action to be taken by any Person, or which such
Person is prohibited from taking, such provision shall be applicable whether
such action is taken directly or indirectly by such Person.

 

37

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

 

23.5.       Counterparts.

 

This Agreement may be executed in any number of counterparts, each of which
shall be an original but all of which together shall constitute one instrument.
Each counterpart may consist of a number of copies hereof, each signed by less
than all, but together signed by all, of the parties hereto.

 

23.6.       Governing Law.

 

This Agreement shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the law of the Commonwealth of
Massachusetts excluding choice-of-law principles of the law of such Commonwealth
that would require the application of the laws of a jurisdiction other than such
Commonwealth.

 

*    *    *    *    *

 

38

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

 

If you are in agreement with the foregoing, please sign the form of agreement on
the accompanying counterpart of this Agreement and return it to the Company,
whereupon the foregoing shall become a binding agreement between you and the
Company.

 

 

Very truly yours,

 

 

 

 

 

WATTS WATER TECHNOLOGIES, INC.

 

 

 

 

 

 

 

By:

/s/ William C. McCartney

 

 

Name:

 William C. McCartney

 

 

Title:

   Chief Financial Officer

 

 

S-1

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

 

The foregoing is agreed

 

 

to as of the date thereof.

 

 

 

 

 

METROPOLITAN LIFE INSURANCE
COMPANY

 

 

 

 

By:

 

/s/ Judith A. Gulotta

 

 

Name:

Judith A. Gulotta

 

 

Title:

Director

 

 

 

 

 

 

THE TRAVELERS INSURANCE COMPANY

 

 

 

 

By:

 

 

/s/ Judith A. Gulotta

 

 

Name:

Judith A. Gulotta

 

 

Title:

Director

 

 

 

 

 

 

THE TRAVELERS LIFE AND ANNUITY
REINSURANCE COMPANY

 

 

 

 

 

METLIFE INVESTORS USA INSURANCE
COMPANY

 

 

 

 

 

METLIFE INVESTORS INSURANCE
COMPANY

 

 

 

 

 

By: Metropolitan Life Insurance Company, its
investment manager

 

 

 

 

By:

 

/s/ Judith A. Gulotta

 

 

Name:

Judith A. Gulotta

 

 

Title:

Director

 

 

 

 

MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY

 

 

By: BABSON CAPITAL MANAGEMENT LLC,
Its Investment Advisor

 

 

 

 

By:

 

 

/s/ Elisabeth A. Perenick

 

 

Name:

Elisabeth A. Perenick

 

 

Title:

Managing Director

 

 

 

S-2

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

 

C.M. LIFE INSURANCE COMPANY

 

 

By: BABSON CAPITAL MANAGEMENT LLC,
Its Investment Sub-Advisor

 

 

 

 

By:

 

/s/ Elisabeth A. Perenick

 

 

Name:

Elisabeth A. Perenick

 

 

Title:

Managing Director

 

 

 

 

 

 

MASSMUTUAL ASIA LIMITED

 

 

By: BABSON CAPITAL MANAGEMENT LLC,
Its Investment Advisor

 

 

 

 

By:

 

/s/ Elisabeth A. Perenick

 

 

Name:

Elisabeth A. Perenick

 

 

Title:

Managing Director

 

 

 

 

 

 

MML BAY STATE LIFE INSURANCE
COMPANY

 

 

By: BABSON CAPITAL MANAGEMENT LLC,
Its Investment Sub-Advisor

 

 

 

 

By:

 

/s/ Elisabeth A. Perenick

 

 

Name:

Elisabeth A. Perenick

 

 

Title:

Managing Director

 

 

 

 

JEFFERSON-PILOT LIFE INSURANCE
COMPANY

 

 

 

 

 

By: Delaware Investment Advisers, a series of
Delaware Management Business Trust, Attorney
in Fact

 

 

 

 

By:

 

/s/ Chuck Devereux

 

 

Name:

Chuck Devereux

 

 

Title:

Senior Vice President

 

 

 

S-3

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

 

JEFFERSON PILOT FINANCIAL INSURANCE
COMPANY

 

 

 

 

 

By: Delaware Investment Advisers, a series of
Delaware Management Business Trust, Attorney
in Fact

 

 

 

 

By:

 

/s/ Chuck Devereux

 

 

Name:

Chuck Devereux

 

 

Title:

Senior Vice President

 

 

 

 

 

 

CONNECTICUT GENERAL LIFE INSURANCE
COMPANY

 

 

By: CIGNA Investments, Inc. (authorized agent)

 

 

 

 

 

By:

       /s/ Lori E. Hopkins

 

 

 

Name:

  Lori E. Hopkins

 

 

 

Title:

    Vice President

 

 

 

 

 

 

LIFE INSURANCE COMPANY OF NORTH
AMERICA

 

 

By: CIGNA Investments, Inc. (authorized agent)

 

 

 

 

 

By:

       /s/ Lori E. Hopkins

 

 

 

Name:

  Lori E. Hopkins

 

 

 

Title:

    Vice President

 

 

 

 

 

 

BANKERS LIFE AND CASUALTY COMPANY

 

 

CONSECO LIFE INSURANCE COMPANY

 

 

CONSECO SENIOR HEALTH INSURANCE

 

 

COMPANY

 

 

CONSECO HEALTH INSURANCE COMPANY

 

 

WASHINGTON NATIONAL INSURANCE

 

 

COMPANY

 

 

 

 

By:

 

/s/ Timothy L. Powell

 

 

Name:

Timothy L. Powell

 

 

Title:

Vice President

 

 

 

S-4

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

 

AMERICAN INVESTORS LIFE INSURANCE
COMPANY

 

 

 

 

 

By: AmerUs Capital Management Group, Inc.,
its authorized attorney-in-fact

 

 

 

 

 

By:

     /s/ Roger D. Fors

 

 

 

Name:

  Roger D. Fors

 

 

 

Title:

  Vice President – Private Placements

 

 

 

 

 

 

LAFAYETTE LIFE INSURANCE COMPANY

 

 

 

 

By:

  /s/ Kent R. Adams

 

 

Name:

 Kent R. Adams

 

 

Title:

 V.P. Fixed Income Securities

 

 

 

 

 

 

FARM BUREAU LIFE INSURANCE COMPANY
OF MICHIGAN

 

 

 

 

By:

 /s/ Kent R. Adams

 

 

Name:

Kent R. Adams

 

 

Title:

V.P. Fixed Income Securities

 

 

 

 

 

 

AMERICAN UNITED LIFE INSURANCE
COMPANY

 

 

 

 

By:

/s/ Kent R. Adams

 

 

Name:

Kent R. Adams

 

 

Title:

V.P. Fixed Income Securities

 

 

 

 

 

 

THE STATE LIFE INSURANCE COMPANY

 

 

 

 

By:

  /s/ Kent R. Adams

 

 

Name:

Kent R. Adams

 

 

Title:

V.P. Fixed Income Securities

 

 

 

S-5

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

 

HARTFORD LIFE INSURANCE COMPANY

 

 

By: Hartford Investment Management Company

 

 

Its: Agent and Attorney-in-Fact

 

 

 

 

 

By:

         /s/ Ronald A. Mendel

 

 

 

Name:

   Ronald A. Mendel

 

 

 

Title:

   Managing Director

 

 

 

 

 

 

SWISS RE LIFE & HEALTH AMERICA INC.

 

 

By: Swiss Re Asset Management (Americas) Inc.

 

 

 

 

By:

     /s/ John H. DeMallie

 

 

Name:

John H. DeMallie

 

 

Title:

Vice President

 

 

 

 

 

 

ASSURITY LIFE INSURANCE COMPANY

 

 

 

 

By:

   /s/ Victor Weber

 

 

Name:

Victor Weber

 

 

Title:

Senior Director - Investments

 

 

 

6

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

 

SCHEDULE B

 

DEFINED TERMS

 

As used herein, the following terms have the respective meanings set forth below
or set forth in the Section hereof following such term:

 

“Affiliate” means, at any time, and with respect to any Person, (a) any other
Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person, and (b) any Person beneficially owning or holding, directly
or indirectly, 10% or more of any class of voting or equity interests of the
Company or any Subsidiary or any corporation of which the Company and its
Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly,
10% or more of any class of voting or equity interests. As used in this
definition, “Control” means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
Unless the context otherwise clearly requires, any reference to an “Affiliate”
is a reference to an Affiliate of the Company. Notwithstanding anything in the
foregoing to the contrary, a Person that (i) would be an Affiliate of the
Company solely by virtue of its ownership of voting or equity interests of the
Company and (ii) is eligible pursuant to Rule 13d-1(b) under the Exchange Act to
file a statement with the Securities and Exchange Commission on Schedule 13G,
shall not be deemed to be an Affiliate.

 

“Anti-Terrorism Order” means Executive Order 13224 of September 23, 2001
Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten
to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)).

 

“Bank Guaranties” means the Guaranties of domestic Subsidiaries of Debt
outstanding under the Credit Agreement, as such Guaranties or agreements may be
amended, restated or otherwise modified, and any successors thereto.

 

“Business Day” means (a) for the purposes of Section 8.6 only, any day other
than a Saturday, a Sunday or a day on which commercial banks in New York City
are required or authorized to be closed, and (b) for the purposes of any other
provision of this Agreement, any day other than a Saturday, a Sunday or a day on
which commercial banks in Chicago, Illinois, Boston, Massachusetts or New York
City are required or authorized to be closed.

 

“Capital Lease” means, at any time, a lease with respect to which the lessee is
required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.

 

“Closing” is defined in Section 3.

 

“Code” means the Internal Revenue Code of 1986, as amended from time to time,
and the rules and regulations promulgated thereunder from time to time.

 

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

 

“Company” means Watts Water Technologies, Inc., a Delaware corporation.

 

“Confidential Information” is defined in Section 20.

 

“Consolidated EBITDA” means, for any period, the sum of Consolidated Net Income
for such period, plus, to the extent deducted in determining such Consolidated
Net Income, (i) Consolidated Interest Expense, (ii) federal, state, local and
foreign income, franchise, value added and similar taxes, and (iii) depreciation
and amortization expense.

 

“Consolidated Fixed Charges” means, for any period, the sum of (i) Consolidated
Interest Expense for such period and (ii) Consolidated Rentals for such period
under all leases other than Capital Leases.

 

“Consolidated Income Available for Fixed Charges” means, for any period, the sum
of (i) Consolidated EBITDA for such period and (ii) Consolidated Rentals for
such period under all leases other than Capital Leases.

 

“Consolidated Interest Expense” means, for any period, the consolidated interest
expense of the Company and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP.

 

“Consolidated Net Income” means, for any period, the net income or loss of the
Company and its Restricted Subsidiaries for such period (including, without
duplication, income attributed to minority interests) determined on a
consolidated basis in accordance with GAAP, but in any event excluding
extraordinary or nonrecurring gains or losses.

 

“Consolidated Rentals” means, for any period, the rental expense of the Company
and its Restricted Subsidiaries for such period under all leases, determined on
a consolidated basis in accordance with GAAP.

 

“Consolidated Total Assets” means, as of any date, the total assets of the
Company and its Restricted Subsidiaries as of such date, determined on a
consolidated basis in accordance with GAAP.

 

“Credit Agreement” means the Credit Agreement dated as of April 27, 2006 among
the Company, certain subsidiaries of the Company, the Lenders (as defined
therein) and Bank of America, N.A., as Administrative Agent, Swing Line Lender
and L/C Issuer, as such agreement may be hereafter amended, restated,
supplemented, refinanced, increased or reduced from time to time, and any
successor credit agreement or similar facility.

 

“Debt” with respect to any Person means, at any time, without duplication,

 

(a)           its liabilities for borrowed money;

 

2

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

 

(b)           its liabilities for the deferred purchase price of property
acquired by such Person (excluding accounts payable and other accrued
liabilities arising in the ordinary course of business but including all
liabilities created or arising under any conditional sale or other title
retention agreement with respect to any such property);

 

(c)           all liabilities appearing on its balance sheet in accordance with
GAAP in respect of Capital Leases;

 

(d)           all liabilities for borrowed money secured by any Lien with
respect to any property owned by such Person (whether or not it has assumed or
otherwise become liable for such liabilities); and

 

(e)           any Guaranty of such Person with respect to liabilities of a type
described in any of clauses (a) through (d) hereof.

 

“Default” means an event or condition the occurrence or existence of which
would, with the lapse of time or the giving of notice or both, become an Event
of Default.

 

“Default Rate” means that rate of interest that is the greater of (i) 2% per
annum above the rate of interest stated in clause (a) of the first paragraph of
the Notes or (ii) 2% over the rate of interest publicly announced by Bank of
America in Chicago, Illinois as its “base” or “prime” rate.

 

“Disposition” is defined in Section 10.4.

 

“Electronic Delivery” is defined in Section 7.1(a).

 

“Environmental Laws” means any and all Federal, state, local, and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any materials into the environment, including but not limited to
those related to hazardous substances or wastes, air emissions and discharges to
waste or public systems.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and the rules and regulations promulgated thereunder from
time to time in effect.

 

“ERISA Affiliate” means any trade or business (whether or not incorporated) that
is treated as a single employer together with the Company under section 414 of
the Code.

 

“Event of Default” is defined in Section 11.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

3

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

 

“Form 10-K” is defined in Section 5.3.

 

“GAAP” means generally accepted accounting principles as in effect from time to
time in the United States of America.

 

“Governmental Authority” means

 

(a)           the government of

 

(i)            the United States of America or any State or other political
subdivision thereof, or

 

(ii)           any jurisdiction in which the Company or any Subsidiary conducts
all or any part of its business, or which asserts jurisdiction over any
properties of the Company or any Subsidiary, or

 

(b)           any entity exercising executive, legislative, judicial, regulatory
or administrative functions of, or pertaining to, any such government.

 

“Guaranty” means, with respect to any Person, any obligation (except the
endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person:

 

(a)           to purchase such indebtedness or obligation or any property
constituting security therefor;

 

(b)           to advance or supply funds (i) for the purchase or payment of such
indebtedness or obligation, or (ii) to maintain any working capital or other
balance sheet condition or any income statement condition of any other Person or
otherwise to advance or make available funds for the purchase or payment of such
indebtedness or obligation;

 

(c)           to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such indebtedness or
obligation of the ability of any other Person to make payment of the
indebtedness or obligation; or

 

(d)           otherwise to assure the owner of such indebtedness or obligation
against loss in respect thereof.

 

In any computation of the indebtedness or other liabilities of the obligor under
any Guaranty, the indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.

 

4

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

 

“Hazardous Material” means any and all pollutants, toxic or hazardous wastes or
any other substances that might pose a hazard to health or safety, the removal
of which may be required or the generation, manufacture, refining, production,
processing, treatment, storage, handling, transportation, transfer, use,
disposal, release, discharge, spillage, seepage, or filtration of which is or
shall be restricted, prohibited or penalized by any applicable law (including,
without limitation, asbestos, urea formaldehyde foam insulation and
polycholorinated biphenyls).

 

“holder” means, with respect to any Note, the Person in whose name such Note is
registered in the register maintained by the Company pursuant to Section 13.1.

 

“INHAM Exemption” is defined in Section 6.2(e).

 

“Institutional Investor” means (a) any original purchaser of a Note, (b)  any
holder of more than $2,000,000 in aggregate principal amount of the Notes at the
time outstanding, and (c) any bank, trust company, savings and loan association
or other financial institution, any pension plan, any investment company, any
insurance company, any broker or dealer, or any other similar financial
institution or entity, regardless of legal form.

 

“Lien” means, with respect to any Person, any mortgage, lien, pledge, charge,
security interest or other encumbrance, or any interest or title of any vendor,
lessor, lender or other secured party to or of such Person under any conditional
sale or other title retention agreement or Capital Lease, upon or with respect
to any property or asset of such Person (including in the case of stock,
stockholder agreements, voting trust agreements and all similar arrangements).

 

“Make-Whole Amount” is defined in Section 8.6.

 

“Material” means material in relation to the business, operations, affairs,
financial condition, assets or properties of the Company and its Restricted
Subsidiaries taken as a whole.

 

“Material Adverse Effect” means a material adverse effect on (a) the business,
operations, affairs, financial condition, assets or properties of the Company
and its Restricted Subsidiaries taken as a whole, or (b) the ability of the
Company to perform its obligations under this Agreement and the Notes, or (c)
the ability of any Material Subsidiary Guarantor to perform its obligations
under the Subsidiary Guaranty, or (d) the validity or enforceability of this
Agreement, the Notes or the Subsidiary Guaranty.

 

“Material Restricted Subsidiary” means, at any time, any Subsidiary Guarantor or
any Restricted Subsidiary that would at such time account for more than 5% of
(i) Consolidated Total Assets as of the end of the most recently completed
fiscal quarter or (ii) consolidated revenue of the Company and its Restricted
Subsidiaries for the four fiscal quarters ending as of the end of the most
recently completed fiscal quarter.

 

5

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

 

“Material Subsidiary Guarantor” means, at any time, any Subsidiary Guarantor
that would at such time account for more than 5% of (i) Consolidated Total
Assets as of the end of the most recently completed fiscal quarter or
(ii) consolidated revenue of the Company and its Restricted Subsidiaries for the
four fiscal quarters ending as of the end of the most recently completed fiscal
quarter.

 

“Memorandum” is defined in Section 5.3.

 

“Multiemployer Plan” means any Plan that is a “multiemployer plan” (as such term
is defined in section 4001(a)(3) of ERISA).

 

“Notes” is defined in Section 1.

 

“Officer’s Certificate” means a certificate of a Senior Financial Officer or of
any other officer of the Company whose responsibilities extend to the subject
matter of such certificate.

 

“Other Purchasers” is defined in Section 2.

 

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in
ERISA or any successor thereto.

 

“Person” means an individual, partnership, corporation, limited liability
company, association, trust, unincorporated organization, or a government or
agency or political subdivision thereof.

 

“Plan” means an “employee benefit plan” (as defined in section 3(3) of ERISA)
that is or, within the preceding five years, has been established or maintained,
or to which contributions are or, within the preceding five years, have been
made or required to be made, by the Company or any ERISA Affiliate or with
respect to which the Company or any ERISA Affiliate may have any liability.

 

“Priority Debt” means, as of any date, the sum (without duplication) of
(a) outstanding unsecured Debt of Restricted Subsidiaries that are not
Subsidiary Guarantors other than (i) Debt owed to the Company or another
Restricted Subsidiary and (ii) unsecured Debt of a Person outstanding at the
time it becomes a Restricted Subsidiary, provided that (A) such Person is not an
Unrestricted Subsidiary and (B) such Debt was not incurred in contemplation of
such Person becoming a Restricted Subsidiary, and (b) Debt of the Company and
its Restricted Subsidiaries secured by Liens not otherwise permitted by the
introductory clause of Section 10.3 and Sections 10.3 (a) through (i).

 

“property” or “properties” means, unless otherwise specifically limited, real or
personal property of any kind, tangible or intangible, choate or inchoate.

 

“Purchaser” means each purchaser listed in Schedule A.

 

6

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

 

“QPAM Exemption” is defined in Section 6.2(d).

 

“Receivables Securitization Financing”  means a transaction or group of
transactions typically referred to as a securitization in which a Person sells,
directly or indirectly through another Person, its accounts receivable on a
limited recourse basis in a transaction treated as a legal true sale to a
special purpose bankruptcy remote entity that obtains debt financing or sells
interests in such receivables to finance the purchase price.

 

“Required Holders” means, at any time, the holders of at least a majority in
principal amount of the Notes at the time outstanding (exclusive of Notes then
owned by the Company or any of its Affiliates).

 

“Responsible Officer” means any Senior Financial Officer and any other officer
of the Company with responsibility for the administration of the relevant
portion of this Agreement.

 

“Restricted Subsidiary” means any Subsidiary (a) of which at least a majority of
the voting securities are owned by the Company and/or one or more Restricted
Subsidiaries and (b) that the Company has not designated an Unrestricted
Subsidiary by notice in writing given to the holders of the Notes pursuant to
Section 10.6.

 

“Securities Act” means the Securities Act of 1933, as amended from time to time.

 

“Senior Financial Officer” means the chief financial officer, principal
accounting officer, treasurer or comptroller of the Company.

 

“Source” is defined in Section 6.2.

 

“Subsidiary” means, as to any Person, any corporation, association or other
business entity in which such Person or one or more of its Subsidiaries or such
Person and one or more of its Subsidiaries owns sufficient equity or voting
interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership, limited liability
company or joint venture if more than a 50% interest in the profits or capital
thereof is owned by such Person or one or more of its Subsidiaries or such
Person and one or more of its Subsidiaries (unless such partnership, limited
liability company or joint venture can and does ordinarily take major business
actions without the prior approval of such Person or one or more of its
Subsidiaries). Unless the context otherwise clearly requires, any reference to a
“Subsidiary” is a reference to a Subsidiary of the Company.

 

“Subsidiary Guarantor” is defined in Section 1.

 

“Subsidiary Guaranty” is defined in Section 1.

 

7

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

 

“this Agreement” or “the Agreement” is defined in Section 17.3.

 

“Unrestricted Subsidiary” means any Subsidiary of the Company that has been so
designated by notice in writing given to the holders of the Notes.

 

“USA Patriot Act” means Public Law 107-56 of the United States of America,
United and Strengthening America by Providing Tools Required to Intercept and
Obstruct Terrorism (USA PATRIOT) Act of 2001, as amended from time to time.

 

8

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