Exhibit 10.1
 

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

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

 
 
WATTS WATER TECHNOLOGIES, INC.
 
$75,000,000
5.05% Senior Notes
Due June 18, 2020
 
 
 
NOTE PURCHASE AGREEMENT
 
 
Dated as of June 18, 2010
 

 

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

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

 
 

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

 

TABLE OF CONTENTS
         
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
2
 
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
3
 
4.9.
Changes in Corporate Structure
4
 
4.10.
Subsidiary Guaranty
4
 
4.11.
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
4
 
5.3.
Disclosure
5
 
5.4.
Organization and Ownership of Shares of Subsidiaries; Affiliates
5
 
5.5.
Financial Statements
6
 
5.6.
Compliance with Laws, Other Instruments, etc
6
 
5.7.
Governmental Authorizations, etc.
7
 
5.8.
Litigation; Observance of Agreements, Statutes and Orders
7
 
5.9.
Taxes
7
 
5.10.
Title to Property; Leases
8
 
5.11.
Licenses, Permits, etc
8
 
5.12.
Compliance with ERISA
8
 
5.13.
Private Offering by the Company
9
 
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
10
 
5.17.
Status under Certain Statutes
11
 
5.18.
Environmental Matters
11
     
6.
REPRESENTATIONS OF THE PURCHASERS.
11
         
6.1.
Purchase for Investment.
11
 
6.2.
Source of Funds
12

 
i

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

 

TABLE OF CONTENTS
(continued)
         
Page
           
7.
INFORMATION AS TO COMPANY
13
         
7.1.
Financial and Business Information
13
 
7.2.
Officer’s Certificate
16
 
7.3.
Inspection
16
     
8.
PREPAYMENT OF THE NOTES.
17
         
8.1.
No Scheduled Prepayments
17
 
8.2.
Optional Prepayments with Make-Whole Amount
17
 
8.3.
Allocation of Partial Prepayments
18
 
8.4.
Maturity; Surrender, etc
18
 
8.5.
Purchase of Notes
18
 
8.6.
Make-Whole Amount
18
     
9.
AFFIRMATIVE COVENANTS
19
         
9.1.
Compliance with Law
20
 
9.2.
Insurance
20
 
9.3.
Maintenance of Properties
20
 
9.4.
Payment of Taxes and Claims
20
 
9.5.
Corporate Existence, etc
21
     
10.
NEGATIVE COVENANTS
21
         
10.1.
Fixed Charge Coverage Ratio
21
 
10.2.
Priority Debt
21
 
10.3.
Liens.
21
 
10.4.
Sale of Assets
23
 
10.5.
Mergers, Consolidations, etc
24
 
10.6.
Designation of Restricted and Unrestricted Subsidiaries
25
 
10.7.
Subsidiary Guaranty.
25
 
10.8.
Nature of Business.
25
 
10.9.
Transactions with Affiliates
26
 
10.10.
Terrorism Sanctions Regulations
26
     
11.
EVENTS OF DEFAULT
26
     
12.
REMEDIES ON DEFAULT, ETC
28
         
12.1.
Acceleration
28
 
12.2.
Other Remedies
29
 
12.3.
Rescission
29
 
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
30

 
ii

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

 

TABLE OF CONTENTS
(continued)
             
Page
         
13.3.
Replacement of Notes
31
     
14.
PAYMENTS ON NOTES.
31
         
14.1.
Place of Payment
31
 
14.2.
Home Office Payment
31
     
15.
EXPENSES, ETC
32
         
15.1.
Transaction Expenses
32
 
15.2.
Survival
32
     
16.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT
32
     
17.
AMENDMENT AND WAIVER
33
         
17.1.
Requirements
33
 
17.2.
Solicitation of Holders of Notes
33
 
17.3.
Binding Effect, etc
33
 
17.4.
Notes held by Company, etc
34
     
18.
NOTICES
34
           
19.
REPRODUCTION OF DOCUMENTS
34
     
20.
CONFIDENTIAL INFORMATION
35
     
21.
SUBSTITUTION OF PURCHASER
36
     
22.
RELEASE OF SUBSIDIARY GUARANTOR
36
     
23.
MISCELLANEOUS
36
         
23.1.
Successors and Assigns
36
 
23.2.
Payments Due on Non-Business Days
36
 
23.3.
Severability
37
 
23.4.
Construction
37
 
23.5.
Counterparts
37
 
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 5.15
--
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, 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
 
$75,000,000
5.05% Senior Notes, due June 18, 2020
 
Dated as of June 18, 2010
 
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 $75,000,000 aggregate principal
amount of its 5.05% Senior Notes due June 18, 2020 (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 Bingham McCutchen LLP, 399 Park Avenue,
New York, New York 10022 at 9:00 a.m., New York time, at a closing (the
“Closing”) on June 18, 2010 or on such other Business Day thereafter on or prior
to June 18, 2010 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 9429 1585 49 at
Bank of America, New York, New York, 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.
 
 
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.
 

 
2

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

 

 
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, 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
Bingham McCutchen 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.
 
 
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 Bingham
McCutchen LLP.
 

 
3

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

 

 
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.
Credit Agreement.

 
The issuance of the Notes and the execution, delivery and performance by the
Company of this Agreement have been approved by the applicable lenders under the
Credit Agreement, to the extent such approval is required under the 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, in each case, except as would not
reasonably be expected to result in a Material Adverse Effect, to execute and
deliver this Agreement and the Notes and to perform the provisions hereof and
thereof.
 
 
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
 

 
4

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

 

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, J.P. Morgan Securities, Inc., has delivered to
you and each Other Purchaser a copy of a Confidential Private Placement
Memorandum, dated April, 2010, which includes the Company’s Annual Report on
Form 10-K for the year ended December 31, 2009 (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; provided that, with respect to projected financial information, the
Company represents only that such information was prepared in good faith based
upon assumptions believed to be reasonable at the time.  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, 2009, 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, the Form 10-K 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.
 
 
5.4.
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.
 

 
5

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

 

(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,
except as would not reasonably be expected to have a Material Adverse Effect.
 
(d)           No Subsidiary is a party to, or otherwise subject to, any legal
restriction or any Material 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).
 
 
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 Material 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.
 

 
6

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

 

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 Material 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 (and not obtained) 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 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
 

 
7

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

 

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, 2006.
 
 
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 or otherwise as permitted under this Agreement), 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, except as would not reasonably be expected to have a
Material Adverse Effect.
 
 
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
 
(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
 

 
8

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

 

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, reasonably be expected to have a
Material Adverse Effect.
 
(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 would reasonably be expected to have a Material
Adverse Effect.
 
(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 would not reasonably be expected
to result a Material Adverse Effect.
 
(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 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.
 

 
9

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

 

 
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 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 list of
all outstanding Debt of the Company and its Subsidiaries as of December 31,
2009, 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.  Such list is complete and correct in all
material respects.  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 Material Debt of the Company or such Subsidiary and no event or
condition exists with respect to any Material 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 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.
 

 
10

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

 
 
(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. The Company and its Subsidiaries conduct in the
ordinary course of business a review of the effect of existing Environmental
Laws and claims alleging potential liability or responsibility for violation of
any Environmental Law on their respective businesses, operations and properties,
and as a result thereof the Company has reasonably concluded that, except as
disclosed in the Form 10-K, such Environmental Laws and claims could not,
individually or in the aggregate, reasonably be expected to have 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.
 

 
11

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

 

 
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 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
 

 
12

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

 

(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.
 
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,
 

 
13

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

 
 
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
 
(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
 

 
14

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

 

revenues of the Company and its Subsidiaries reflected in the consolidated
statement of income included in such financial statements, an unaudited combined
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 combined 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 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,
 

 
15

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

 

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 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:
 

 
16

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

 
 
(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, no
more than once per year, (i) 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 (provided that if such accountants fail to discuss such matters with
such representatives, no Default shall arise therefrom), and (with the consent
of the Company, which consent will not be unreasonably withheld) (ii) to visit
the other offices and properties of the Company and each Restricted Subsidiary,
all at such reasonable times 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.
 
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.
 

 
17

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

 

 
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.
 
 
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
 

 
18

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

 

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 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:
 

 
19

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

 

 
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 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.
 

 
20

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

 

 
9.5.
Corporate Existence, etc.

 
Subject to Section 10.5, 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:
 
 
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;
 

 
21

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

 

(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 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 securing Debt 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, provided that, notwithstanding anything contained in this Section
10.3(j), the Company shall not, and shall not permit any domestic Subsidiary to,
create or permit to exist any Lien on any of its respective properties securing
Debt outstanding or issued under any Credit Agreement unless and until the Debt
evidenced by the Notes shall be secured equally and ratably with such Debt
pursuant to an agreement or agreements reasonably acceptable to the Required
Holders.
 

 
22

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

 

 
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
 
(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
 

 
23

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

 

(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:
 
(ii)           reinvested in productive assets used or useful in, or otherwise
reinvested in, carrying on the business of the Company and its Restricted
Subsidiaries; or
 
(iii)           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.
 
 
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
 

 
24

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

 
 
(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,
 
(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.
 

 
25

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

 

 
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.
 
 
10.10.
Terrorism Sanctions Regulations.

 
The Company will not and will not permit any Subsidiary to (a) become a Person
described or designated in the Specially Designated Nationals and Blocked
Persons List of the Office of Foreign Assets Control or in Section 1 of the Anti
Terrorism Order or (b) engage in any dealings or transactions with any such
Person.
 
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
 

 
26

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

 

(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
 
(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
 

 
27

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

 

(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 the ERISA
Underfunding Limit then in effect, (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, (iv) the Company or any ERISA Affiliate withdraws from
any Multiemployer Plan, or (v) 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 (v) above, either individually or
together with any other such event or events, would reasonably be expected to
have a Material Adverse Effect; or
 
(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.
 

 
28

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

 

(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.
 
 
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.
 

 
29

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

 

 
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, 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.
 

 
30

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

 

 
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 $100,000,000, 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.
 
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.
 

 
31

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

 

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 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.
 

 
32

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

 
 
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 the provisions of
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 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.
 

 
33

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

 

 
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:
 
(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.
 

 
34

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

 

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 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 federal or state regulatory authority having
jurisdiction over you, (vi) 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 (vii) 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.  Without limitation of the
foregoing, each Holder and any transferee agrees that it will not trade any
securities (other than the Notes) of the Company based on any material
non-public information it receives in connection with this Agreement and the
Notes.
 

 
35

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

 

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 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 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.
 

 
36

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

 

 
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.

 
(a)           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.
 
(b)           All accounting terms which are not expressly defined in this
Agreement have the meanings ascribed to them in GAAP.  Except as otherwise
specifically provided herein, all computations made pursuant to this Agreement
shall be made in accordance with GAAP, and all financial statements shall be
prepared in accordance with GAAP.  If at any time any change in GAAP would
affect the computation of any financial ratio or requirement set forth in this
Agreement, and the Required Holders or the Company shall so request, the
Required Holders and the Company shall negotiate in good faith to amend such
ratio or requirement to preserve the original intent thereof in light of such
change in GAAP (subject to the approval of the Required Holders); provided that,
until so amended, (i) such ratio or requirement shall continue to be computed in
accordance with GAAP prior to such change therein and (ii) the Company shall
provide to the Required Holders financial statements and other documents
required under this Agreement or as reasonably requested hereunder setting forth
a reconciliation between calculations of such ratio or requirement made before
and after giving effect to such change in GAAP.  For purposes of determining
compliance with the financial covenants, or the determination of financial
terms, contained in this Agreement, any election by the Company to measure an
item of Debt using fair value (as permitted by “the Fair Value Measurement and
Disclosure topic of the Financial Standards Board Standards Codification (Topic
820)” or any similar accounting standard) shall be disregarded and such
determination shall be made instead using the par value of such Debt.
 
 
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.
 

 
37

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

 

 
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

 
 
 
 
 
[Signature Page to Note Purchase Agreement - Watts Water Technologies, Inc.]
 

 
 

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

 

The foregoing is agreed
to as of the date thereof.

METROPOLITAN LIFE INSURANCE COMPANY

GENERAL AMERICAN LIFE INSURANCE COMPANY
by Metropolitan Life Insurance Company, its Investment Manager

METLIFE INSURANCE COMPANY OF CONNECTICUT
by Metropolitan Life Insurance Company, its Investment Manager

By:
/s/ Judith A Gulotta
Name:
Judith A. Gulotta
Title:
Managing Director

EMPLOYERS REASSURANCE COMPANY
By: MetLife Investment Advisors Company, LLC, its investment adviser

By:
/s/ Judith A Gulotta
Name:
Judith A. Gulotta
Title:
Managing Director

[Signature Page to Note Purchase Agreement - Watts Water Technologies, Inc.]
 
 
 
 
 
 

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

 
 

CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By:
CIGNA Investments, Inc. (authorized agent)
       
By:
/s/ Lori E. Hopkins
 
Name:
Lori E. Hopkins
 
Title:
Managing Director

LIFE INSURANCE COMPANY OF NORTH AMERICA
By:
CIGNA Investments, Inc. (authorized agent)
       
By:
/s/ Lori E. Hopkins
 
Name:
Lori E. Hopkins
 
Title:
Managing Director

 
 
 

 

[Signature Page to Note Purchase Agreement - Watts Water Technologies, Inc.]
 
 
 
 
 

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

 
 
AMERICAN UNITED LIFE INSURANCE COMPANY
           
By:
/s/ Kent Adams
Name:
Kent Adams
 
Title:
V.P. Investments
         
THE STATE LIFE INSURANCE COMPANY
By:
American United Life Insurance Company, Its Agent
             
By:
/s/ Kent Adams
 
Name:
Kent Adams
 
Title:
V.P. Investments

 

 
 

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

 
 
ASSURITY LIFE INSURANCE COMPANY
       
By:
/s/ Victor Weber
Name:
Victor Weber
Title:
Senior Director - Investments

 
 

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

 

SCHEDULE A
 
INFORMATION RELATING TO PURCHASERS

Purchaser Name
 
METROPOLITAN LIFE INSURANCE COMPANY
 
Name in which to register Notes
 
METROPOLITAN LIFE INSURANCE COMPANY
 
Note registration number(s); principal amount(s)
 
R-1; $37,000,000
Payment on account of Note
 
Method
 
Account information
 
 
 
Federal Funds Wire Transfer
 
JPMorgan Chase Bank
ABA # 021000021
Account #: 002-2-410591
Account Name: Metropolitan Life Insurance Company
 
Re:           (see “Accompanying Information” below)
 
Accompanying information
Name of Issuer:        WATTS WATER TECHNOLOGIES, INC.
 
Description of
Security:        5.05% Senior Notes due June 18, 2020
 
PPN:        942749 B*2
 
Due date and application (as among principal, premium and interest) of the
payment being made.
Address / Fax # for All Notices
 
Metropolitan Life Insurance Company
10 Park Avenue
P.O. Box 1902
Morristown, NJ  07962-1902
Attn: Director, Investments, Private Placements
Fax: 973-355-4250
 
With a copy (other than with respect to deliveries of financial statements) to:
 
Metropolitan Life Insurance Company
10 Park Avenue
P.O. Box 1902
Morristown, NJ 07962-1902
Attn: Chief Counsel, Securities Investments (PRIV)
Email: sec_invest_law@metlife.com
 
 
Instructions re Delivery of Notes
 
Metropolitan Life Insurance Company
10 Park Avenue
Morristown, NJ  07962
Attn:           Daniel Scudder, Esq. Securities Investments, Law Department
 
Tax identification number
 
 
13-5581829
 

Schedule A - 1
 
 

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

 
 
Purchaser Name
 
GENERAL AMERICAN LIFE INSURANCE COMPANY
 
Name in which to register Notes
 
GENERAL AMERICAN LIFE INSURANCE COMPANY
 
Note registration number(s); principal amount(s)
 
R-2; $13,000,000
Payment on account of Note
 
Method
 
Account information
 
 
 
Federal Funds Wire Transfer
 
JPMorgan Chase Bank
ABA # 021000021
Account #: 323-8-90946
Account Name: General American Life Insurance Company
 
Re:           (see “Accompanying Information” below)
 
Accompanying information
Name of Issuer:           WATTS WATER TECHNOLOGIES, INC.
 
Description of
Security:           5.05% Senior Notes due June 18, 2020
 
PPN:           942749 B*2
 
Due date and application (as among principal, premium and interest) of the
payment being made.
Address / Fax # for All Notices
 
General American Life Insurance Company
c/o Metropolitan Life Insurance Company
10 Park Avenue
P.O. Box 1902
Morristown, NJ  07962-1902
Attn: Director, Investments, Private Placements
Fax: 973-355-4250
 
With a copy (other than with respect to deliveries of financial statements) to:
 
General American Life Insurance Company
c/o Metropolitan Life Insurance Company
10 Park Avenue
P.O. Box 1902
Morristown, NJ 07962-1902
Attn: Chief Counsel, Securities Investments (PRIV)
Email: sec_invest_law@metlife.com
 
 
Instructions re Delivery of Notes
 
General American Life Insurance Company
c/o Metropolitan Life Insurance Company
10 Park Avenue
Morristown, NJ  07962
Attn:           Daniel Scudder, Esq. Securities Investments, Law Department
 
Tax identification number
 
 
43-0285930
 

Schedule A - 2
 
 

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

 

Purchaser Name
 
METLIFE INSURANCE COMPANY OF CONNECTICUT
 
Name in which to register Notes
 
METLIFE INSURANCE COMPANY OF CONNECTICUT
 
Note registration number(s); principal amount(s)
 
R-3; $5,000,000
Payment on account of Note
 
Method
 
Account information
 
 
 
Federal Funds Wire Transfer
 
JPMorgan Chase Bank
ABA # 021000021
Account #: 910-2-587434
Account Name: MetLife Insurance Company of Connecticut
 
Re:           (see “Accompanying Information” below)
 
Accompanying information
Name of Issuer:           WATTS WATER TECHNOLOGIES, INC.
 
Description of
Security:           5.05% Senior Notes due June 18, 2020
 
PPN:           942749 B*2
 
Due date and application (as among principal, premium and interest) of the
payment being made.
Address / Fax # for All Notices
 
MetLife Insurance Company of Connecticut
c/o Metropolitan Life Insurance Company
10 Park Avenue
P.O. Box 1902
Morristown, NJ  07962-1902
Attn: Director, Investments, Private Placements
Fax: 973-355-4250
 
With a copy (other than with respect to deliveries of financial statements) to:
 
MetLife Insurance Company of Connecticut
c/o Metropolitan Life Insurance Company
10 Park Avenue
P.O. Box 1902
Morristown, NJ 07962-1902
Attn: Chief Counsel, Securities Investments (PRIV)
Email: sec_invest_law@metlife.com
 
 
Instructions re Delivery of Notes
 
MetLife Insurance Company of Connecticut
c/o Metropolitan Life Insurance Company
10 Park Avenue
Morristown, NJ  07962
Attn:           Daniel Scudder, Esq. Securities Investments, Law Department
 
Tax identification number
 
 
06-0566090
 

Schedule A - 3
 
 

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

 

Purchaser Name
 
EMPLOYERS REASSURANCE COMPANY
 
Name in which to register Notes
 
EMPLOYERS REASSURANCE COMPANY
 
Note registration number(s); principal amount(s)
 
R-4; $5,000,000
Payment on account of Note
 
Method
 
Account information
 
 
 
Federal Funds Wire Transfer
 
JPMorgan Chase Bank
ABA # 021000021
Account #: G10190/57760-Global
Account Name: Employers Reassurance Company
 
Re:           Fixed Income Fund Private Placement and “Accompanying Information”
below
 
Accompanying information
Name of Issuer:           WATTS WATER TECHNOLOGIES, INC.
 
Description of
Security:           5.05% Senior Notes due June 18, 2020
 
PPN:           942749 B*2
 
Due date and application (as among principal, premium and interest) of the
payment being made.
Address / Fax # for All Notices
 
Employers Reassurance Company
c/o MetLife Investment Advisors Company LLC
10 Park Avenue
P.O. Box 1902
Morristown, NJ  07962-1902
Attn: Director, Investments, Private Placements
Fax: 973-355-4250
 
With a copy (other than with respect to deliveries of financial statements) to:
 
Employers Reassurance Company
c/o MetLife Investment Advisors Company LLC
10 Park Avenue
P.O. Box 1902
Morristown, NJ 07962-1902
Attn: Chief Counsel, Securities Investments (PRIV)
Email: sec_invest_law@metlife.com
 
 
Instructions re Delivery of Notes
JPMorgan Chase Bank, N.A.
4 New York Plaza
New York, NY 10004
Attention: Brian Cavanaugh
Tel: 212-623-2721
Tax identification number
 
 
48-1024691
 

Schedule A - 4
 
 

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

 

Purchaser Name
 
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
 
Name in which to register Notes
 
CIG & CO.
 
Note registration number(s); principal amount(s)
 
R-5; $4,000,000
R-6; $1,000,000
 
Payment on account of Note
 
Method
 
Account information
 
 
Federal Funds Wire Transfer
 
JPMorgan Chase Bank
BNF=CIGNA Private Placements/AC=9009001802
ABA# 021000021
OBI= “Accompanying Information” below
 
Accompanying information
Name of Issuer:           WATTS WATER TECHNOLOGIES, INC.
 
Description of
Security:            5.05% Senior Notes due June 18, 2020
 
PPN:           942749 B*2
 
Due date and application (as among principal, premium and interest) of the
payment being made.
Address / Fax # for notices related to payments
 
CIG & Co.
c/o CIGNA Investments, Inc.
Attn: Fixed Income Securities
Wilde Building, A5PRI
900 Cottage Grove Rd.
Bloomfield, CT  06002
Fax: 860-226-8400
 
With a copy to:
J.P. Morgan Chase Bank
14201 Dallas Parkway, 12th Floor
Dallas, TX  75254-2916
Attn: Rudy Paredes, Mail Code TX1-J222
Tel: 469-477-1960
Fax: 469-477-1904
 
Address / Fax # for all other notices
 
CIG & Co.
c/o CIGNA Investments, Inc.
Attn: Fixed Income Securities
Wilde Building, A5PRI
900 Cottage Grove Rd.
Bloomfield, CT  06002
Fax: 860-226-8400
Instructions re Delivery of Notes
 
JPMorgan Chase Bank
4 New York Plaza
New York, NY  10004
Attn: Brian Cavanaugh
Together with Transmittal to Securities Custodian Letter
 
Tax identification number
 
 
13-3574027
 

Schedule A - 5
 
 

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

 

Purchaser Name
 
LIFE INSURANCE COMPANY OF NORTH AMERICA
 
Name in which to register Notes
 
CIG & CO.
 
Note registration number(s); principal amount(s)
 
R-7; $3,000,000
 
Payment on account of Note
 
Method
 
Account information
 
 
Federal Funds Wire Transfer
 
JPMorgan Chase Bank
BNF=CIGNA Private Placements/AC=9009001802
ABA# 021000021
OBI= “Accompanying Information” below
 
Accompanying information
Name of Issuer:          WATTS WATER TECHNOLOGIES, INC.
 
Description of
Security:           5.05% Senior Notes due June 18, 2020
 
PPN:           942749 B*2
 
Due date and application (as among principal, premium and interest) of the
payment being made.
Address / Fax # for notices related to payments
 
CIG & Co.
c/o CIGNA Investments, Inc.
Attn: Fixed Income Securities
Wilde Building, A5PRI
900 Cottage Grove Rd.
Bloomfield, CT  06002
Fax: 860-226-8400
 
With a copy to:
J.P. Morgan Chase Bank
14201 Dallas Parkway, 12th Floor
Dallas, TX  75254-2916
Attn: Rudy Paredes, Mail Code TX1-J222
Tel: 469-477-1960
Fax: 469-477-1904
 
Address / Fax # for all other notices
 
CIG & Co.
c/o CIGNA Investments, Inc.
Attn: Fixed Income Securities
Wilde Building, A5PRI
900 Cottage Grove Rd.
Bloomfield, CT  06002
Fax: 860-226-8400
Instructions re Delivery of Notes
 
JPMorgan Chase Bank
4 New York Plaza
New York, NY  10004
Attn: Brian Cavanaugh
Together with Transmittal to Securities Custodian Letter
 
Tax identification number
 
 
13-3574027
 

Schedule A - 6
 
 

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

 

Purchaser Name
 
AMERICAN UNITED LIFE INSURANCE COMPANY
 
Name in which to register Notes
 
AMERICAN UNITED LIFE INSURANCE COMPANY
 
Note registration number(s); principal amount(s)
 
R-8; $4,000,000
 
Payment on account of Note
 
Method
 
Account information
 
 
 
Federal Funds Wire Transfer
 
Bank of New York
ABA # 021000018
Credit A/C#: GLA111566
Account Name: American United Life Insurance Co.
Account #: 186683
 
Re:           (see “Accompanying Information” below)
 
Accompanying information
Name of Issuer:           WATTS WATER TECHNOLOGIES, INC.
 
Description of
Security:           5.05% Senior Notes due June 18, 2020
 
PPN:           942749 B*2
 
Due date and application (as among principal, premium and interest) of the
payment being made.
Address / Fax # for All Notices
 
American United Life Insurance Company
One American Square
P.O. Box 368
Indianapolis, IN  46206
Attn: Michael Bullock, Securities Department
 
Instructions re Delivery of Notes
 
The Bank of New York
One Wall Street, 3rd Floor
New York, NY  10286
Attn: Anthony Saviano/Window A
Re:           American United Life, Account # 186683
 
Tax identification number
 
 
35-0145825
 

Schedule A - 7
 
 

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

 

Purchaser Name
 
THE STATE LIFE INSURANCE COMPANY
 
Name in which to register Notes
 
THE STATE LIFE INSURANCE COMPANY
 
Note registration number(s); principal amount(s)
 
R-9; $1,000,000
 
Payment on account of Note
 
Method
 
Account information
 
 
 
Federal Funds Wire Transfer
 
Bank of New York
ABA # 021000018
Credit A/C#: GLA111566
Account Name: The State Life Insurance Co.
Account #: 343761
 
Re:           (see “Accompanying Information” below)
 
Accompanying information
Name of Issuer:            WATTS WATER TECHNOLOGIES, INC.
 
Description of
Security:            5.05% Senior Notes due June 18, 2020
 
PPN:           942749 B*2
 
Due date and application (as among principal, premium and interest) of the
payment being made.
Address / Fax # for All Notices
 
The State Life Insurance Company
c/o American United Life Insurance Company
One American Square
P.O. Box 368
Indianapolis, IN  46206
Attn: Michael Bullock, Securities Department
 
Instructions re Delivery of Notes
 
The Bank of New York
One Wall Street, 3rd Floor
New York, NY  10286
Attn: Anthony Saviano/Window A
Re:           The State Life Insurance Co. c/o American United Life, Account #
343761
 
Tax identification number
 
 
35-0684263
 

Schedule A - 8
 
 

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

 

Purchaser Name
 
ASSURITY LIFE INSURANCE COMPANY
 
Name in which to register Notes
 
ASSURITY LIFE INSURANCE COMPANY
 
Note registration number(s); principal amount(s)
 
R-10; $2,000,000
 
Payment on account of Note
 
Method
 
Account information
 
 
 
Federal Funds Wire Transfer
 
US Bank National Association
13th & M Streets
Lincoln, NE  68508
ABA # 104000029
Account of: Assurity Life Insurance Company
Account #: 1-494-0092-9092
 
Re:           (see “Accompanying Information” below)
 
Accompanying information
Name of Issuer:            WATTS WATER TECHNOLOGIES, INC.
 
Description of
Security:            5.05% Senior Notes due June 18, 2020
 
PPN:           942749 B*2
 
Due date and application (as among principal, premium and interest) of the
payment being made.
Address / Fax # for notices related to payments
 
Assurity Life Insurance Company
1526 K Street
Lincoln, NE  68508
Attn: Investment Division
Fax: 402-458-2170
 
Address / Fax # for all other notices
 
Assurity Life Insurance Company
1526 K Street
P.O. Box 82533
Lincoln, NE  68501-2533
 
Contact:
Victor Weber, Senior Director - Investments
Tel: 402-437-3682
Fax: 402-458-2170
Email: vweber@assurity.com
Instructions re Delivery of Notes
 
Assurity Life Insurance Company
1526 K Street
Lincoln, NE  68508
Attn: Victor Weber
 
Tax identification number
 
 
38-1843471
 

Schedule A - 9
 
 

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

 

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.
 

Schedule B - 1
 
 

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

 
 
“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, 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;
 
(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);
 

Schedule B - 2
 
 

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

 
 
(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.
 
“ERISA Underfunding Limit” means, at any time, (a) $40,000,000 if such time is
on or before June 18, 2015 or (b) $50,000,000 if such time is after June 18,
2015.
 
“Event of Default” is defined in Section 11.
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
“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.
 

Schedule B - 3
 
 

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

 
 
“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
Debt 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 Debt or any property constituting security
therefor;
 
(b)           to advance or supply funds (i) for the purchase or payment of such
Debt, 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 Debt;
 
(c)           to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such Debt of the ability of
any other Person to make payment of the Debt; or
 
(d)           otherwise to assure the owner of such Debt against loss in respect
thereof.
 
In any computation of the Debt of the obligor under any Guaranty, the Debt that
are the subject of such Guaranty shall be assumed to be direct obligations of
such obligor.
 
“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).
 

Schedule B - 4
 
 

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

 
 
“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.
 
“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.
 
“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.
 

Schedule B - 5
 
 

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

 
 
“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.
 
“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.
 

Schedule B - 6
 
 

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

 
 
“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.
 
“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.
 

Schedule B - 7
 
 

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

 

SCHEDULE 4.9
 
CHANGES IN CORPORATE STRUCTURE
 
None
 

Schedule 4.9
 
 

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

 

SCHEDULE 5.3
 
DISCLOSURE
 
None
 

Schedule 5.3
 
 

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

 

SCHEDULE 5.4
 
SUBSIDIARIES AND AFFILIATES
 
(a)(i) Subsidiaries
 
North America
 
Name of Subsidiary
 
Jurisdiction of Organization
 
Direct Parent(s)
 
Percentage
Ownership
 
Watts Regulator Co.
 
MA
 
Watts Water Technologies, Inc.
 
100%
 
Watts Drainage Products, Inc.
 
DE
 
Watts Regulator Co.
100%
Webster Valve, Inc.
 
NH
 
Watts Regulator Co.
100%
Watts Radiant, Inc.
 
DE
 
Watts Regulator Co.
100%
Watts Premier, Inc.
 
AZ
 
Watts Regulator Co.
100%
Orion Enterprises, Inc.
 
KS
Watts Regulator Co.
100%
HF Scientific, Inc.
 
FL
Watts Regulator Co.
100%
Dormont Manufacturing Company
 
PA
Watts Regulator Co.
100%
Watts Water Quality and Conditioning Products, Inc.
 
DE
 
Watts Regulator Co.
100%
Blue Ridge Atlantic, Inc.
 
NC
 
Orion Enterprises, Inc.
100%
Watts Industries (Canada), Inc.
Ontario
 
Watts Water Technologies, Inc.
100%

Europe & Africa
 
Name of Subsidiary
 
Jurisdiction of Organization
 
Direct Parent(s)
 
Percentage
Ownership 1
 
Watts Industries Europe BV
 
Netherlands
 
Watts Regulator Co.
 
100%
 
Watts Intermes GmbH
 
Austria
 
Watts Industries Netherlands BV
 
Watts Intermes AG
99%
 
1%
Watts Industries Belgium Bvba (formerly Watts Ocean NV)
 
Belgium
 
Watts Industries Europe BV
100%
Watts Belgium Holding Bvba
 
Belgium
 
Watts Industries Europe BV
100%
Watts Microflex NV
 
Belgium
 
Watts Belgium Holding Bvba
100%
Watts Industries Bulgaria EAD
 
Bulgaria
 
Watts Industries Europe BV
100%
BLÜCHER Metal A/S
 
Denmark
 
Watts Denmark Holding ApS
100%

 

 
Schedule 5.4 - 1
 
 

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

 

Watts Denmark Holding ApS
 
Denmark
 
Watts Italy Holding S.r.l.
 
Watts Industries Europe BV
35%
 
65%
BLÜCHER France SARL
France
 
BLÜCHER Metal A/S
100%
Gripp S.A.S.
France
 
Watts France Holding S.A.S.
100%
Porquet S.A.S.
France
 
Watts France Holding S.A.S.
100%
Watts Electronics S.A.S.
France
 
Watts France Holding S.A.S.
100%
Watts France Holding S.A.S.
France
 
Watts Industries Europe BV
100%
Watts Industries France S.A.S.
(formerly Watts Eurotherm SAS)
France
 
Watts France Holding S.A.S.
100%
BLÜCHER Beteiligungs GmbH
Germany
 
BLÜCHER Metal A/S
100%
BLÜCHER Germany GmbH
Germany
 
BLÜCHER Metal A/S
100%
Watts Germany Holding GmbH
Germany
 
Watts Industries Europe BV
100%
Watts Industries Deutschland GmbH
Germany
 
Watts Germany Holding GmbH
100%
Watts Instrumentation GmbH
Germany
Watts Germany Holding GmbH
100%
Giuliani Anello S.r.l.
 
Italy
Watts Italy Holding S.r.l.
100%
Watts Italy Holding S.r.l.
Italy
 
Watts Industries Europe BV
100%
Watts Industries Italia S.r.l. (formerly Watts Cazzaniga S.p.A.)
 
Italy
Watts Italy Holding S.r.l.
100%
Watts Industries Luxembourg
 
Luxembourg
 
Watts Industries Belgium Bvba
100%
Watts Industries Netherlands BV (formerly Watts Ocean BV)
 
Netherlands
 
Watts Industries Europe BV
100%
BLÜCHER Norway AS
Norway
 
BLÜCHER Metal A/S
100%
Watts Industries, Sp. Z.o.o
 
Poland
 
Watts Industries Europe BV
100%
Watts Industries Iberica SA
 
Spain
 
Watts Industries Europe BV
100%
BLÜCHER Sweden AB
Sweden
 
BLÜCHER Metal A/S
100%
Kim Olofsson Safe Corporation AB
Sweden
 
Watts Holding Sweden AB
100%
Watts Holding Sweden AB
Sweden
 
Watts Industries Europe BV
100%
Watts Industries Nordic AB
Sweden
 
Watts Holding Sweden AB
100%
Watts Intermes AG
 
Switzerland
 
Watts Industries Europe BV
100%
Watts Industries Tunisia S.A.S.
 
Tunisia
 
Watts Electronics S.A.S.
100%
Actuated Controls Ltd.
United Kingdom
 
Black Teknigas Limited
100%
Black Automatic Controls Ltd.
United Kingdom
 
Black Teknigas Limited
100%
Black Teknigas Limited
United Kingdom
 
Watts Industries U.K. Ltd.
100%
BLÜCHER UK LTD
United Kingdom
 
BLÜCHER Metal A/S
100%
BM Stainles Steel Drains Limited
United Kingdom
 
BLÜCHER UK LTD
100%

 

 
Schedule 5.4 - 2
 
 

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

 

Electro Controls Ltd.
United Kingdom
 
Watts Industries U.K. Ltd.
100%
Teknigas Ltd.
United Kingdom
 
Black Teknigas Limited
100%
W125
United Kingdom
 
Watts Industries Europe BV
100%
Watts Industries U.K. Ltd.
United Kingdom
 
Watts Industries Europe BV
100%
Watts U.K. Ltd.
United Kingdom
 
Watts Industries Europe BV
100%

China
 
Name of Subsidiary
 
Jurisdiction of Organization
 
Direct Parent(s)
 
Percentage
Ownership1
 
Tianjin Watts Valve Co. Ltd.
 
China
 
Watts Regulator Co.
 
100%
 
Watts (Ningbo) International Trading Co., Ltd.
 
China
 
Watts Regulator Co.
 
100%
 
Watts (Shanghai) Management Company Limited
 
China
 
Watts Regulator Co.
 
100%
 
Watts Plumbing Technologies (Taizhou) Co. Ltd. (f/k/a Taizhou Shida Plumbing
Manufacturing Co. Ltd.)
 
China
 
Watts Regulator Co.
 
100%
 
Watts Valve (Ningbo) Co., Ltd.
 
China
 
Watts Regulator Co.
 
100%
 
Watts Valve (Taizhou) Co., Ltd.
 
China
 
Watts Regulator Co.
 
100%
 

 
All of the Company’s Subsidiaries are Restricted Subsidiaries.
 
(a)(ii)  Affiliates
 
Dormont Manufacturing Company owns an 11.1% equity interest in a U.S. company
named Mechline, Inc. and an 11.1% equity interest in a U.K. company named
Mechline Developments Limited.

Black Teknigas Limited owns a 49.9% equity interest in Black Teknigas (Far East)
Limited, a company organized under the laws of Hong Kong.

As of February 1, 2010, Timothy P. Horne beneficially owned 19.5% of the
Company’s class A common stock and 99.0% of the Company’s class B common stock.
 
 

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

1 Certain non-U.S. subsidiaries may have outstanding director qualifying shares
as required by local law.

 
Schedule 5.4 - 3
 
 

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

 
 
As of April 13, 2010, Gabelli Funds, LLC, et al. beneficially owned 11.7% of the
Company’s class A common stock.
 
(a)(iii)  Directors and Senior Officers
 

 
Name
 
Office
 
       
Patrick S. O’Keefe
Chief Executive Officer, President and Director
 
 
William C. McCartney
Chief Financial Officer and Treasurer
 
 
J. Dennis Cawte
Group Managing Director, Europe
 
 
Ernest E. Elliott
Executive Vice President of Marketing
 
 
David J. Coghlan
Chief Operating Officer
 
 
Michael P. Flanders
President, Asia
 
 
Kenneth R. Lepage
General Counsel, Executive Vice President of Administration and Secretary
 
 
Ralph E. Jackson, Jr.
Director
 
 
Kenneth J. McAvoy
Director
 
 
John K. McGillicuddy
Director
 
 
Gordon W. Moran
Non-Executive Chairman of the Board and Director
 
 
Robert L. Ayers
Director
 
 
Kennett F. Burnes
Director
 
 
Richard J. Carthcart
Director

 
(d)           Restrictions on dividends and distributions
 
The Credit Agreement dated June 18, 2010, as amended from time to time, by and
among the Company, certain subsidiaries of the Company, the lenders named
therein, the other parties thereto and Bank of America, N.A., as administrative
agent.

 
Schedule 5.4 - 4
 
 

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

 

SCHEDULE 5.5
 
FINANCIAL STATEMENTS
 

 
Financial Statements as of and for the (a) fiscal year ended December 31, 2009,
included with the Company’s annual report on Form 10-K for the fiscal year ended
December 31, 2009 and (b) fiscal quarter ended April 4, 2010 included within the
Company’s quarterly report on Form 10-Q for the fiscal quarter April 4, 2010.
 

Schedule 5.4 - 5
 
 

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

 

SCHEDULE 5.11
 
LICENSES, PERMITS, ETC.
 

 
None
 

Schedule 5.11
 
 
 
 

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

 

SCHEDULE 5.15
 
EXISTING DEBT

Company
Description
Rate
Balance (as of 12/31/09
unless otherwise indicated)
Watts Water Technologies, Inc. and subsidiaries
Amended and Restated Credit Agreement, dated as of April 27, 2006 (to be
terminated substantially simultaneously with the issuance of the Notes)
 
Up to $350,000,000
Watts Water Technologies, Inc. and subsidiaries
 
Credit Agreement, dated as of June 18, 2010
 
Up to $300,000,000
(as of June 18, 2010)
Watts Water Technologies, Inc. and subsidiaries
 
Senior Notes due 2020
5.05%
$75,000,000
(as of June 18, 2010)
Watts Water Technologies, Inc. and subsidiaries
 
Senior Notes due 2016
5.85%
$225,000,000
Watts Water Technologies, Inc. and subsidiaries
 
Senior Notes due 2013
5.47%
$75,000,000
Watts Water Technologies, Inc. and subsidiaries
 
Senior Notes due 2010
 
4.87%
$50,000,000
(repaid in May 2010)
Watts Industries Italia S.r.l.
 
Ministry of Industry, Commerce
8.49%
$210,123
 
4/4/10 balance: $199,394
BLÜCHER Metal A/S
 
Mortgage loan
2.27%
$4,700,915
 
4/4/10 balance: $4,278,704
Blue Ridge Atlantic, Inc.
Debt secured by lien on van and related property of Blue Ridge Atlantic, Inc. in
favor of Ford Credit
       
Capital Leases
 
     
Watts Electronics S.A.S.
 
Building and related property
Euribor 3M +1.8%
$274,605 **
Watts Electronics S.A.S.
 
Extension building and related property – Rosieres
Euribor 3M +1.6%
$1,260,678 **
Watts Electronics S.A.S.
 
Machinery and equipment and related property
3.6%
$27,371 **
 
[**4/4/10 aggregate balance: $1,408,323]
Gripp S.A.S.
 
Machinery and equipment and related property
12.1%
$392,558
 
4/4/10 balance: $199,519

Schedule 5.15 - 1
 
 
 
 

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

 

Porquet S.A.S.
 
Machinery and equipment and related property
12.97%
$1,775
 
4/4/10 balance: $0
Watts Industries Italia S.r.l.
 
Building and related property
Euribor 3M
$11,722,654
 
4/4/10 balance: $10,916,543
Watts Industries Bulgaria EAD
 
Machinery and equipment and related property
Euribor 3M +6.65%
$5,798
 
4/4/10 balance: $0
       
Letters of Credit/Banker’s Acceptances
Watts Regulator Co.
Commercial letter of credit issued at the request of Watts Regulator Co. for the
benefit of Fortune Manufacturing Limited in the face amount of $459,645.38 (as
of 6/15/2010).
Watts Water Technologies, Inc.
Letter of credit issued for the benefit of Fortune Mfg. Co. Ltd. in the face
amount of $378,155.94 (as of 6/14/2010)
Watts Water Technologies, Inc.
Banker’s acceptance in favor of Fortune Mfg. Co. Ltd. in the face amount of
$30,857.06 (as of 6/15/2010)
Watts Water Technologies, Inc.
Banker’s acceptance in favor of Fortune Mfg. Co. Ltd. in the face amount of
$8,964.40 (as of 6/15/2010)
Watts Water Technologies, Inc.
Banker’s acceptance in favor of Fortune Mfg. Co. Ltd. in the face amount of
$8,750.10 (as of 6/15/2010)
Watts Water Technologies, Inc.
Banker’s acceptance in favor of Fortune Mfg. Co. Ltd. in the face amount of
$11,294.40 (as of 6/15/2010)
Watts Water Technologies, Inc.
Banker’s acceptance in favor of Fortune Mfg. Co. Ltd. in the face amount of
$21,623.48 (as of 6/15/2010)

 

Schedule 5.15 - 2
 
 
 
 

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

 

SCHEDULE 10.3
 
LIENS

Company
Description
Rate
Balance – see schedule 5.15
BLÜCHER Metal A/S
 
Mortgage loan
2.27%
 
Watts Electronics S.A.S.
 
Building and related property
Euribor 3M +1.8%
 
Watts Electronics S.A.S.
 
Extension building and related property – Rosieres
Euribor 3M +1.6%
 
Watts Electronics S.A.S.
 
Machinery and equipment and related property
3.6%
 
Gripp S.A.S.
 
Machinery and equipment and related property
12.1%
 
Porquet S.A.S.
 
Machinery and equipment and related property
12.97%
 
Watts Industries Italia S.r.l.
 
Building and related property
Euribor 3M
 
Watts Industries Bulgaria EAD
 
Machinery and equipment and related property
Euribor 3M +6.65%
 
Watts Water Technologies, Inc.
Liens on file with the State of Delaware in favor of Marmon/Keystone Corporation
on inventory and related property of Marmon/Keystone Corporation on consignment
at Watts.
Dormont Manufacturing Company
Liens on file with the State of Pennsylvania in favor of PNC Bank NA and/or
JPMorgan Trust Company National Association on assets of Dormont Manufacturing
Company.  The indebtedness secured by such liens has been repaid.
HF Scientific, Inc.
Liens on file with the State of Florida in favor of Cardinal Health on assets of
HF Scientific, Inc.  The indebtedness secured by such liens has been repaid.
(Lien terminated in May 2010.)
Watts Water Technologies, Inc. and subsidiaries
Various UCC filings made for protective purposes with respect to operating
leases.
Blue Ridge Atlantic, Inc.
Lien in favor of Ford Credit on van and related property of Blue Ridge Atlantic,
Inc.

 

 

Schedule 10.3 - 1
 
 
 
 

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

 

EXHIBIT 1
 
[FORM OF SENIOR NOTE]
 
WATTS WATER TECHNOLOGIES, INC.
 
5.05% SENIOR NOTE
DUE JUNE 18, 2020
 
No. R-[_____]
[Date]
$[_______]
 
PPN:  942749 B*2
 

 
FOR VALUE RECEIVED, the undersigned, WATTS WATER TECHNOLOGIES, INC. (herein
called the “Company”), a corporation organized and existing under the laws of
the State of Delaware, promises to pay to [_____________], or registered
assigns, the principal sum of [_______________] ($[___________]) on June 18,
2020, with interest (computed on the basis of a 360-day year of twelve 30-day
months) (a) on the unpaid balance thereof at the rate of 5.05% per annum from
the date hereof, payable semiannually, on June 18th and December 18th in each
year, commencing with the June 18th or December 18th next succeeding the date
hereof (except that the first such payment shall be on December 18, 2010), until
the principal hereof shall have become due and payable, and (b) to the extent
permitted by law on any overdue payment (including any overdue prepayment) of
principal, any overdue payment of interest and any overdue payment of any
Make-Whole Amount (as defined in the Note Purchase Agreement referred to below),
payable semiannually as aforesaid (or, at the option of the registered holder
hereof, on demand), at a rate per annum from time to time equal to the greater
of (i) 7.05% or (ii) 2% over the rate of interest publicly announced by Bank of
America, or its successor, from time to time in Chicago, Illinois as its “base”
or “prime” rate.
 
Payments of principal of, interest on and any Make-Whole Amount with respect to
this Note are to be made in lawful money of the United States of America at the
principal office of Bank of America in Chicago, Illinois or at such other place
as the Company shall have designated by written notice to the holder of this
Note as provided in the Note Purchase Agreement referred to below.
 
This Note is one of a series of Senior Notes (herein called the “Notes”) issued
pursuant to a Note Purchase Agreement dated as of June 18, 2010 (as from time to
time amended, the “Note Purchase Agreement”), between the Company and the
respective Purchasers named therein and is entitled to the benefits
thereof.  Each holder of this Note will be deemed, by its acceptance hereof, (i)
to have agreed to the confidentiality provisions set forth in Section 20 of the
Note Purchase Agreement and (ii) to have made the representations set forth in
Section 6 of the Note Purchase Agreement.
 
This Note is a registered Note and, as provided in the Note Purchase Agreement,
upon surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the registered
holder hereof or such holder’s attorney
 

Exhibit 1 - 1
 
 
 
 

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

 
 
duly authorized in writing, a new Note for a like principal amount will be
issued to, and registered in the name of, the transferee.  Prior to due
presentment for registration of transfer, the Company may treat the person in
whose name this Note is registered as the owner hereof for the purpose of
receiving payment and for all other purposes, and the Company will not be
affected by any notice to the contrary.
 
This Note is subject to optional prepayment, in whole or from time to time in
part, at the times and on the terms specified in the Note Purchase Agreement but
not otherwise.
 
If an Event of Default, as defined in the Note Purchase Agreement, occurs and is
continuing, the principal of this Note may be declared or otherwise become due
and payable in the manner, at the price (including any applicable Make-Whole
Amount) and with the effect provided in the Note Purchase Agreement.
 
Payment of the principal of, and interest and Make-Whole Amount, if any, on this
Note, and all other amounts due under the Note Purchase Agreement, is guaranteed
pursuant to the terms of a Guaranty dated as of June 18, 2010 of certain
Subsidiaries of the Company.
 
This Note 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.
 

 
WATTS WATER TECHNOLOGIES, INC.
       
By:
   
Name:
   
Title:
 

 

Exhibit 1 - 2
 
 
 
 

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

 
 
EXHIBIT 4.4(a)(i)
 
[wilmerhale1.gif]

 
FORM OF OPINION OF COUNSEL
TO THE COMPANY AND THE SUBSIDIARY GUARANTORS
 
June 18, 2010
 
 
 
To the parties on Schedule A
 
 
Ladies and Gentlemen:
 
We have acted as special counsel to Watts Water Technologies, Inc., a Delaware
corporation (the “Company”), Watts Regulator Co., a Massachusetts corporation
(“Watts Regulator”), Dormont Manufacturing Company, a Pennsylvania corporation
(“Dormont”), Webster Valve, Inc., a New Hampshire corporation (“Webster”), and
Watts Water Quality and Conditioning Products, Inc., a Delaware corporation
(“WWQCP”), in connection with the preparation, execution and delivery of that
certain Note Purchase Agreement of even date herewith (the “Agreement”) made by
the Company.  This opinion is being furnished pursuant to Section 4.4 of the
Agreement.  Capitalized terms used herein and not defined herein shall have the
respective meanings given to such terms in the Agreement.  In rendering the
opinions expressed below, we have examined:
 
 
a.
the Agreement;

 
 
b.
the 5.05% Senior Notes due 2020 in the aggregate principal amount of $75,000,000
of even date herewith issued by the Company to the Purchasers (the “Notes”);

 
 
c.
the Subsidiary Guaranty of even date herewith executed by each of the Guarantors
(defined below) in favor of the Purchasers (the “Subsidiary Guaranty”);

 
 
d.
the Company’s Certificate of Incorporation, certified by the Secretary of State
of the State of Delaware (the “Company’s Certificate of Incorporation”) as of
May 27, 2010;

 
 
e.
a Certificate of the Secretary of the Company, dated as of the date hereof,
attesting to (i) true, correct and complete copies of the Company’s Certificate
of Incorporation, the By-Laws of the Company, and certain resolutions of the
board of directors of the Company, as each of the foregoing is in effect on the
date hereof, and (ii) the authorization, incumbency and signatures of certain
officers of the Company;

 
[wilmerhale2.gif]

 
 

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

 
To the Parties on Schedule A
June 18, 2010
Page 4
 
 
 
f.
the Restated Articles of Organization of Watts Regulator, certified by the
Secretary of the Commonwealth of the Commonwealth of Massachusetts as of May 28,
2010;

 
 
g.
a Certificate of the Secretary of Watts Regulator, dated as of the date hereof,
attesting to (i) true, correct and complete copies of the Restated Articles of
Organization of Watts Regulator, the By-Laws of Watts Regulator and certain
resolutions of the board of directors of Watts Regulator, as each of the
foregoing is in effect on the date hereof, and (ii) the authorization,
incumbency and signatures of certain officers of Watts Regulator;

 
 
h.
the Certificate of Incorporation of WWQCP, certified by the Secretary of State
of the State of Delaware as of May 27, 2010;

 
 
i.
a Certificate of the Secretary of WWQCP, dated as of the date hereof, attesting
to (i) true, correct and complete copies of the Certificate of Incorporation of
WWQCP, the By-Laws of WWQCP and certain resolutions of the board of directors of
WWQCP, as each of the foregoing is in effect on the date hereof, and (ii) the
authorization, incumbency and signatures of certain officers of WWQCP;

 
 
j.
certificates of legal existence and corporate good standing as set forth on
Schedule I hereto; and

 
 
k.
a certificate of William C. McCartney, Chief Financial Officer of the Company,
as to certain Investment Company Act Matters (the “Investment Company Act
Certificate”), and a certificate of William C. McCartney, Chief Financial
Officer of the Company as to certain other matters (the “Officer’s Certificate”
and together with the Investment Company Act Certificate, the “Officer’s
Certificates”).

 
The documents referred to in clauses (a)-(c) above are referred to collectively
as the “Transaction Documents.”  Watts Regulator, Dormont, Webster and WWQCP are
referred to individually as a “Guarantor” and collectively as the
“Guarantors.”  The Company and the Guarantors are referred to individually as an
“Obligor” and collectively as the “Obligors.”  The Company, Watts Regulator and
WWQCP are referred to individually as a “DE/MA Obligor” and collectively as the
“DE/MA Obligors.”
 
In our examination of the documents described above, we have assumed the
genuineness of all signatures, the legal capacity and competence of all
individuals, the completeness and accuracy of all corporate records provided to
us, the authenticity of all documents submitted to us as originals, the
conformity to original documents of all copies of documents submitted to us as
copies, and the authenticity of the originals of such latter documents.  We have
not reviewed the corporate minute books of any of the Obligors.
 
In rendering this opinion, we have relied, as to all questions of fact material
to this opinion, upon certificates of public officials and officers of the
Obligors, upon the representations made to us
 

 
 

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

 
To the Parties on Schedule A
June 18, 2010
Page 5
 
 
by one or more officers or employees of the Obligors, upon the representations
and warranties of the Obligors and the Purchasers in the Transaction Documents
and upon the Officer’s Certificates of the Company  referred to in clause (k)
above.  We have not conducted any independent investigation of, or attempted to
verify independently, such factual matters.  We have not conducted a search of
any electronic databases or the dockets of any court, administrative or
regulatory body or agency in any jurisdiction.
 
For purposes of this opinion, we have assumed that (i) the Transaction Documents
and all other instruments executed and delivered in connection therewith have
been duly authorized, executed and delivered by all parties thereto other than
the DE/MA Obligors, and that all such other parties have all requisite power and
authority, and have taken all action necessary, to execute and deliver, and to
perform their obligations under, the Transaction Documents and all other
instruments executed and delivered in connection therewith, and (ii) no consent,
approval, authorization, declaration or filing by or with any governmental
commission, board or agency is required by any party to the Transaction
Documents other than the DE/MA Obligors for the valid execution and delivery of,
and performance of their obligations under, such documents.  We have also
assumed that each of the Transaction Documents and all other instruments
executed and delivered in connection therewith is the valid and binding
obligation of each party thereto other than the Obligors and is enforceable
against such other parties in accordance with its respective terms.  We do not
render any opinion as to the application of or compliance with any federal or
state law or regulation to the power, authority or competence of any party to
the Transaction Documents other than the DE/MA Obligors.
 
We are opining herein solely as to the state laws of the Commonwealth of
Massachusetts, the statute codified as 8 Del. C. §§ 101-398 and known as the
General Corporation Law of the State of Delaware (the “DGCL Statute”), and the
federal laws of the United States of America.  To the extent that any other laws
govern any of the matters as to which we are opining herein, we have assumed for
the purposes of this opinion, with your permission and without investigation,
that such laws are identical to the state laws of the Commonwealth of
Massachusetts, and we express no opinion as to whether such assumption is
reasonable or correct.  We express no opinion herein with respect to compliance
by the Obligors with state securities or "blue sky" laws or with any state or
federal anti-fraud laws. We have also assumed that in connection with the offer
and sale of the Notes, none of the Obligors nor any person acting on their
behalf has engaged in any form of “general solicitation or general advertising”
within the meaning contemplated by Rule 502(c) of Regulation D promulgated under
the Securities Act of 1933, as amended (the “Securities Act”).
 
The opinions expressed in paragraph 1 below, insofar as they relate to the legal
existence and good standing of the Obligors, are based solely upon the
certificates referred to in clause (j) above, are rendered as of the respective
dates of such certificates, and are limited accordingly.  We express no opinion
as to the tax good standing of any of the Obligors in any jurisdiction.
 
For the purposes of the opinions contained in paragraph 9 below, we are relying
solely on the facts set forth in the Investment Company Act Certificate referred
to in clause (k) above.  For the purposes of the opinions contained in paragraph
10 below, we have assumed that the Company shall at all times be in compliance
with Section 5.14 of the Agreement.
 

 
 

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

 
To the Parties on Schedule A
June 18, 2010
Page 6
 
 
Our opinions below are qualified to the extent that they may be subject to or
affected by (i) applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, fraudulent transfer or similar laws relating to or
affecting the rights of creditors generally, (ii) statutory or decisional law
concerning recourse by creditors to security in the absence of notice or
hearing, (iii) duties and standards imposed on creditors and parties to
contracts, including, without limitation, requirements of good faith,
reasonableness and fair dealing, and (iv) general principles of equity,
including the availability of any equitable or specific remedy, or the
successful assertion of any equitable defense.  We assume that (i) there has
been no mutual mistake of fact or misunderstanding, or fraud, duress or undue
influence in connection with the negotiation, execution or delivery of the
Transaction Documents, and (ii) there are and have been no agreements or
understandings among the parties, written or oral, and there is and has been no
usage of trade or course of prior dealing among the parties that would, in
either case, vary, supplement or qualify the terms of the Transaction
Documents.  We also express no opinion herein as to any provision of any
Transaction Document (a) which may be deemed or construed to waive any right of
any Obligor, (b) to the effect that rights and remedies are not exclusive, and
to the effect that every right or remedy is cumulative and may be exercised in
addition to or with any other right or remedy and does not preclude recourse to
one or more other rights or remedies, (c) relating to the effect of invalidity
or unenforceability of any provision of a Transaction Document on the validity
or enforceability of any other provision thereof, (d) requiring the payment of
penalties, consequential damages or liquidated damages, (e) which is in
violation of public policy, (f) which provides that the terms of any Transaction
Document may not be waived or modified except in writing, (g) relating to choice
of law or consent to jurisdiction, (h) purporting to establish evidentiary
standards, or (i) purporting to charge interest on interest.
 
We have assumed for the purposes of our opinion that each Purchaser is subject
to control, regulation or examination by a state or federal regulatory agency
within the meaning of Section 49(e) of Chapter 271 of the Massachusetts General
Laws or is in compliance with Section 49(d) of Chapter 271 of the Massachusetts
General Laws.  The opinions expressed below are qualified to the extent that a
Purchaser could be barred from maintaining an action or obtaining a recovery in
the courts of the Commonwealth of Massachusetts if such Purchaser is transacting
business therein (within the meaning of Massachusetts General Laws,
Chapter 156D) without complying with the requirements of Massachusetts General
Laws, Chapter 156D.
 
For purposes of our opinions rendered below, and without limiting any other
comments and qualifications set forth herein, insofar as they relate to the
enforceability against the Guarantors, we have assumed that each Guarantor has
received reasonably equivalent value and fair consideration in exchange for its
obligations or undertakings in connection with the transactions contemplated by
the Transaction Documents to which it is a party, and that prior to and after
consummation of the transactions contemplated by the Transaction Documents to
which it is a party, each Guarantor is not insolvent, rendered insolvent or left
with unreasonably small capital within the meaning of 11 U.S.C. § 548 and
Massachusetts General Laws, Chapter 109A, § 1 et seq.  With respect to our
opinions below, we have assumed that the execution and delivery of the
Transaction Documents and consummation of the transactions contemplated thereby
is necessary or convenient to the conduct, promotion or attainment of the
business and the carrying out of the business and affairs of the Company and of
each Guarantor under the DGCL Statute § 122(13) or Massachusetts General Laws,
Chapter. 156D §3.02(b), as applicable.
 

 
 

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

 
To the Parties on Schedule A
June 18, 2010
Page 7
 
 
For purposes of our opinions rendered below, we have assumed that the facts and
law governing the future performance by each of the Obligors of their respective
obligations under the Transaction Documents will be identical to the facts and
law governing its performance on the date of this opinion.
 
Based upon and subject to the foregoing, it is our opinion that:
 
 
1.
Each of the Company and WWQCP is a corporation validly existing and in good
standing under the laws of the Commonwealth of Delaware.  Watts Regulator is a
corporation validly existing and in good standing under the laws of the
Commonwealth of Massachusetts.  Dormont is a corporation validly existing and in
good standing under the laws of the State of Pennsylvania.  Webster is a
corporation validly existing and in good standing under the laws of the State of
New Hampshire.  Each of the DE/MA Obligors has all requisite corporate power and
authority to conduct its business as it is, to our knowledge, currently
conducted.

 
 
2.
Each DE/MA Obligor has all requisite corporate power and authority to execute
and deliver, and to perform its obligations under, each Transaction Document to
which it is a party and to consummate the transactions contemplated thereby.

 
 
3.
The execution, delivery and performance by each DE/MA Obligor of each
Transaction Document to which it is a party have been duly authorized by all
necessary corporate action on the part of such DE/MA Obligor.

 
 
4.
Each of the Transaction Documents has been duly executed and delivered by each
Obligor party thereto, and constitutes the valid and binding obligation of such
Obligor enforceable against such Obligor in accordance with its respective
terms.

 
 
5.
Based on the representations set forth in the Agreement, the offer, issuance and
sale of the Notes and the delivery of the Subsidiary Guaranty are exempt from
registration under the Securities Act of 1933, as amended, and do not require
qualification of an indenture under the Trust Indenture Act of 1939, as amended.

 
 
6.
Except for the Company’s filing in a timely manner of a Form D with the
Securities and Exchange Commission (the “Form D Filing”), no authorization,
approval or consent of, and no designation, filing, declaration, registration
and/or qualification with, any U.S. federal or Massachusetts state governmental
or regulatory authority or agency is required on the part of the Company in
connection with the execution and delivery by the Company of the Agreement and
the consummation of the transactions contemplated thereby, or the offer,
issuance and sale by the Company of the Notes, and, except for the Form D
Filing, no authorization, approval or consent of, and no designation, filing,
declaration, registration and/or qualification with, any U.S. federal or
Massachusetts state governmental or regulatory authority or agency is required
on the part of any Guarantor in connection with the execution and delivery of
the Subsidiary Guaranty by any Guarantor or the consummation of the transactions
contemplated thereby.

 

 
 

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

 
To the Parties on Schedule A
June 18, 2010
Page 8
 
 
 
7.
The issuance and sale of the Notes by the Company, the execution and delivery by
the Company of the Notes and the Agreement and the consummation of the
transactions contemplated by the Agreement do not result in any breach or
violation of any of the provisions of, or constitute a default under, or result
in the creation or imposition of any Lien on, the property of the Company
pursuant to the provisions of the Company’s Certificate of Incorporation or
By-Laws.  The issuance and sale of the Notes by the Company, the execution and
delivery by the Company of the Notes and the Agreement and the consummation of
the transactions contemplated thereby do not result in any breach or violation
of any of the provisions of, or constitute a default under, or result in the
creation or imposition of any Lien on, the property of the Company or any
Subsidiary pursuant to (i) any loan agreement to which the Company or any
Subsidiary is a party or by which any of them or their property is bound that is
filed (or incorporated by reference) as an exhibit to the Company’s Annual
Report on Form 10-K for the fiscal year end December 31, 2009, or any other
report or registration statement that has been subsequently filed by the Company
with the Securities and Exchange Commission prior to the date hereof
(collectively, the “Form 10-K”), (ii) any other Material agreement or instrument
to which the Company or any Subsidiary is a party or by which any of them or
their property is bound that is filed (or incorporated by reference) as an
exhibit to the Form 10-K, or (iii) any state laws of the Commonwealth of
Massachusetts, the DGCL Statute or the federal laws of the United States of
America applicable to the Company or any Subsidiary.

 
 
8.
The execution and delivery of the Subsidiary Guaranty by the DE/MA Obligors
party thereto and the consummation of the transactions contemplated thereby will
not result in any breach or violation of any of the provisions of, or constitute
a default under, or result in the creation or imposition of any Lien on, the
property of such DE/MA Obligor pursuant to the provisions of its respective
certificate of incorporation or articles of organization or bylaws.  The
execution and delivery of the Subsidiary Guaranty by the Guarantors and the
consummation of the transactions contemplated thereby will not result in any
breach or violation of any of the provisions of, or constitute a default under,
or result in the creation or imposition of any Lien on, the property of any
Guarantor pursuant to the provisions of (i) any loan agreement to which it is a
party or by which it or its property is bound that is filed (or incorporated by
reference) as an exhibit to the Form 10-K, (ii) any other Material agreement or
instrument to which it is a party or by which it or its property is bound that
is filed (or incorporated by reference) as an exhibit to the Form 10-K, (iii)
any state laws of the Commonwealth of Massachusetts or federal laws of the
United States of America applicable to the Guarantors, or (iv) with respect to
WWQCP, the DGCL Statute.

 

 
 

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

 
To the Parties on Schedule A
June 18, 2010
Page 9
 
 
 
9.
Neither the Company nor any Subsidiary is an “investment company” or a company
“controlled” by an “investment company,” as such terms are defined in the
Investment Company Act of 1940, as amended.

 
 
10.
The issuance of the Notes and the intended use of the proceeds of the sale of
the Notes as contemplated under the Agreement do not violate the provisions of
Regulations T, U or X of the Board of Governors of the Federal Reserve System.

 
This opinion is provided to you as a legal opinion only and not as a guaranty or
warranty of the matters discussed herein.  This opinion is based upon currently
existing facts, statutes, rules, regulations and judicial decisions, and is
rendered as of the date hereof, and we disclaim any obligation to advise you of
any change in any of the foregoing sources of law or subsequent developments in
law or changes in facts or circumstances which might affect any matters or
opinions set forth herein.
 
Please note that we are opining only as to the matters expressly set forth
herein, and no opinion should be inferred as to any other matters.  This opinion
is rendered only to the Purchasers and is solely for the benefit of the
Purchasers and their permitted successors and assigns in connection with the
consummation of the transactions contemplated by the Transaction Documents, and
may not be used for any other purpose, nor may this opinion be furnished to,
quoted to or relied upon by any other person for any purpose, without our prior
written consent, provided, however, this opinion may be disclosed to but not
relied upon by (a) prospective assignees of the addressees hereof, (b) legal
counsel for any addressee or prospective assignee thereof, (c) regulatory
authorities having jurisdiction over any of the addressees hereof or their
successors and assigns, and (d) third parties pursuant to valid legal process,
in each case, without our prior consent.
 
Very truly yours,
 
 

 WILMER CUTLER PICKERING  HALE AND DORR LLP    
By:
______________________
 
John D. Sigel, a Partner

 

 
 

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

 

Schedule A
 
Opinion Addressees

Metropolitan Life Insurance Company
General American Life Insurance Company
MetLife Insurance Company of Connecticut
Employers Reassurance Company
Connecticut General Life Insurance Company
Life Insurance Company of North America
American United Life Insurance Company
The State Life Insurance Company
Assurity Life Insurance Company
 
 

Exhibit 4.4(a)(i) - 1
 
 
 
 

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

 

Schedule I
 
Good Standing and Legal Existence Certificates
 
Certificate of legal existence and good standing of Watts Water Technologies,
Inc., issued by the Secretary of State of the State of Delaware on June 8, 2010.
 
Certificate of legal existence and good standing of Watts Water Technologies,
Inc., issued by the Secretary of the Commonwealth of the Commonwealth of
Massachusetts on June 7, 2010.
 
Certificate of legal existence and good standing of Watts Regulator Co., issued
by the Secretary of the Commonwealth of the Commonwealth of Massachusetts on
June 7, 2010.
 
Certificate of legal existence and good standing of Webster Valve, Inc., issued
by the Secretary of State of the State of New Hampshire on June 8, 2010.
 
Certificate of legal existence and good standing of Dormont Manufacturing
Company, issued by Secretary of the Commonwealth of the Commonwealth of
Pennsylvania on June 9, 2010.
 
Certificate of legal existence and good standing of Watts Water Quality and
Conditioning Products, Inc. issued by the Secretary of State of the State of
Delaware on June 8, 2010.
 

 

Exhibit 4.4(a)(i) - 2
 
 
 
 

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

 

EXHIBIT 4.4(a)(ii)
 
FORM OF OPINION OF KENNETH R. LEPAGE,
GENERAL COUNSEL OF THE COMPANY
 
The opinion of Kenneth R. Lepage, General Counsel to the Company, shall be to
the effect that:
 
1.           To the best of my knowledge, the issuance and sale of the Notes by
the Company, the execution and delivery by the Company of the Notes and the
Agreement, the execution and delivery by the Guarantors of the Subsidiary
Guaranty and the consummation of the transactions contemplated thereby do not
result in any breach or violation of any of the provisions of, or constitute a
default under, or result in the creation or imposition of any Lien on, the
property of the Company or any Subsidiary pursuant to any order, writ,
injunction or decree of any court or Governmental Authority applicable to the
Company.
 
2.           Except as disclosed in the Company’s Annual Report on Form 10-K for
the fiscal year end December 31, 2009, or any other report or registration
statement subsequently filed by the Company with the Securities and Exchange
Commission (the “Form 10-K”), there are no private or governmental litigation
matters, proceedings or investigations pending or, to the best of my knowledge,
threatened against the Company, that are likely to result, individually or in
the aggregate, in a Material Adverse Effect.
 

 

Exhibit 4.4(a)(ii)
 
 
 
 

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

 

EXHIBIT 4.4(b)
FORM OF OPINION OF SPECIAL COUNSEL
TO THE PURCHASERS

June 18, 2010

To each of the Purchasers listed on the attached Annex 1

Re:      Watts Water Technologies, Inc.
$75,000,000 5.05% Senior Notes due June 18, 2020

Ladies and Gentlemen:

We have acted as special counsel to each of you (collectively, the “Purchasers”)
in connection with that certain Note Purchase Agreement, dated as of June 18,
2010 (the “Note Purchase Agreement”), between Watts Water Technologies, Inc., a
Delaware corporation (the “Company”), and each of the Purchasers, which
provides, among other things, for the issuance and sale by the Company of the
Company’s 5.05% Senior Notes due June 18, 2020, in the aggregate principal
amount of $75,000,000 (the “Notes”).
 
The capitalized terms used herein and not defined herein have the meanings
assigned to them by or pursuant to the terms of the Note Purchase
Agreement.  This opinion is delivered to each of the Purchasers pursuant to
Section 4.4(b) of the Note Purchase Agreement.  Our representation of the
Purchasers has been as special counsel for the purposes stated above.
 
In connection with this opinion, we have examined originals or copies of the
following documents:
 
(i)           the Note Purchase Agreement;
 
(ii)         the Notes;
 
(iii)         a guaranty agreement, dated as of the date hereof (collectively,
the “Guaranty Agreement”) executed and delivered by certain Subsidiaries (each a
“Subsidiary Guarantor” and collectively, the “Subsidiary Guarantors” and
together with the Company, collectively, the “Obligors”) in favor of each of the
Purchasers;
 
(iv)         a certificate of the Secretary of the Company, dated the date
hereof, delivered pursuant to Section 4.3(b) of the Note Purchase
 

 
 

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

 
To each of the Purchasers listed on the attached Annex 1
June 18, 2010
Page 2

 
Agreement certifying, among other things, that the attached certificate of
incorporation, as certified by the Delaware Secretary of State and by-laws of
the Company (the “Company’s Governing Documents”), and those certain resolutions
passed by the Board of Directors of the Company authorizing participation in the
transactions contemplated by the Financing Documents (as hereinafter defined) to
which it is a party, are true, complete and correct copies thereof and are in
full force and effect, and as to the incumbency and specimen signatures of
certain officers;
 
(v)           a certificate of the Secretary of each Subsidiary Guarantor, dated
the date hereof, delivered pursuant to Section 4.3(b) of the Note Purchase
Agreement certifying, among other things, that the attached articles of
organization and operating agreement or other governing documents of such
Subsidiary Guarantor and those certain resolutions passed by the Board of
Directors of such Subsidiary Guarantor authorizing participation in the
transactions contemplated by the Financing Documents to which such Subsidiary
Guarantor is a party, are true, complete and correct copies thereof and are in
full force and effect, and as to the incumbency and specimen signatures of
certain officers;
 
(vi)           an Officer’s Certificate of the Company, dated the date hereof,
with respect to the matters set forth therein, delivered pursuant to Section
4.3(a) of the Note Purchase Agreement;
 
(vii)            the opinion of Wilmer Cutler Pickering Hale and Dorr LLP,
counsel to the Company and the Subsidiary Guarantors, dated the date hereof and
delivered to the Purchasers pursuant to Section 4.4(a)(i) of the Note Purchase
Agreement;
 
(viii)           the opinion of Kenneth R. Lepage, General Counsel of the
Company, dated the date hereof and delivered to the Purchasers pursuant to
Section 4.4(a)(ii) of the Note Purchase Agreement;
 
(ix)           a letter of even date herewith from J.P. Morgan Securities, Inc.
addressed to us and certain others as to the manner of offering the Notes (the
“Offeree Letter”);
 
(x)           a cross receipt acknowledging payment and receipt of the purchase
price for the Notes (the “Cross Receipt”); and
 
(xi)           a certificate of legal existence and good standing of the Company
issued by the Secretary of State of the State of Delaware on June 8, 2010.
 

 
 

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

 
To each of the Purchasers listed on the attached Annex 1
June 18, 2010
Page 3

 
The documents specified in clauses (i) through (iii) hereof, inclusive, are
referred to herein, collectively, as the “Financing Documents.”  This opinion is
based entirely upon our examination of the documents listed in the preceding
paragraph and we have made no other documentary review or investigation for
purposes of this opinion.  Based on such investigation as we have deemed
appropriate, the opinions referred to in clauses (vii) and (viii) above are
satisfactory in form and scope to us, and, in our opinion, you are justified in
relying thereon.
 
As to all matters of fact (including factual conclusions and characterizations
and descriptions of purpose, intention or other state of mind), we have relied,
with the Purchasers’ permission, entirely upon (1) the representations and
warranties of the Obligors and the Purchasers set forth in the Note Purchase
Agreement and the Guaranty Agreement, and (2) the correctness of all statements
set forth in the certificates described in clauses (iv) through (vi) above and
the Offeree Letter, and we have assumed, without independent inquiry, the
accuracy of such representations, warranties and statements.
 
We have assumed the genuineness of all signatures, the conformity to the
originals of all documents reviewed by us as copies, the authenticity and
completeness of all original documents reviewed by us in original or copy form,
the legal competence of each individual executing any document and, except for
such matters as are expressly provided in paragraph (h) as to which we render
our opinions in paragraph 1 below, that each Person executing the Financing
Documents validly exists, has the power, authority and legal right under its
articles or certificate of incorporation, by-laws or operating agreement and
other governing organizational documents, and under applicable corporate or
other enterprise legislation and other applicable laws, as the case may be, to
enter into and perform its obligations under the Financing Documents, and is
qualified to do business and in good standing under the laws of its jurisdiction
of incorporation or organization and each jurisdiction where such qualification
is required generally or is necessary in order for such party to enforce its
rights under such documents, and that such documents have been duly authorized,
executed and delivered by, and, as to Persons other than the Obligors, are
binding upon and enforceable against, such Persons.
 
For purposes of this opinion, we have made such examination of law as we have
deemed necessary.  This opinion is limited solely to the internal substantive
laws of the Commonwealth of Massachusetts by courts located in Massachusetts
without regard to choice of law, the Delaware General Corporation Law, and the
federal laws of the United States of America (in each case, except for federal
and state tax, energy, utilities, national security, anti-terrorism, anti-
 

 
 

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

 
To each of the Purchasers listed on the attached Annex 1
June 18, 2010
Page 4

 
money laundering or antitrust laws, as to which we express no opinion in this
letter), and we express no opinion as to the laws of any other
jurisdiction.  Our opinion in paragraph 5 below is based solely on a review of
the Company’s Governing Documents.  We have not made any analysis of the
internal substantive law of Delaware, including statutes, rules or regulations
or any interpretations thereof by any court, administrative body, or other
Governmental Authority, and we express no opinion in paragraph 5 below as to the
internal substantive law of Delaware.  We note that the Financing Documents
contain provisions stating they are to be governed by the laws of the
Commonwealth of Massachusetts.  No opinion is given herein as to any choice of
law provision, or otherwise as to the choice of law or internal substantive
rules of law that any court or other tribunal may apply to the transactions
contemplated by the Financing Documents.  Except as set forth in paragraph 4
below, we express no opinions as to any securities or “blue sky” laws of any
jurisdiction.
 
Our opinion is further subject to the following exceptions, qualifications and
assumptions, all of which we understand to be acceptable to the Purchasers:
 
(a)           We have assumed without any independent investigation (i) that the
execution, delivery and performance by each of the parties thereto of the
Financing Documents do not and will not conflict with, or result in a breach of,
the terms, conditions or provisions of, or result in a violation of, or
constitute a default or require any consent (other than such consents as have
been duly obtained) under, any organizational document (other than the Company's
Governing Documents) of the Company, any order, judgment, arbitration award or
stipulation, or any agreement, to which any of such parties is a party or is
subject or by which any of the properties or assets of any of such parties is
bound, (ii) that the statements regarding delivery and receipt of documents and
funds referred to in the Cross Receipt between the Purchasers and the Company
are true and correct, and (iii) that the Financing Documents are valid and
binding obligations of each party thereto to the extent that laws other than
those of the Commonwealth of Massachusetts are relevant thereto (other than the
laws of the United States of America, but only to the limited extent the same
may be applicable to the Obligors and relevant to our opinions expressed below).

(b)           The enforcement of any obligations of any Person under the
Financing Documents or otherwise may be limited by or subject to bankruptcy,
insolvency, reorganization, moratorium, marshaling or other laws and rules of
law affecting the enforcement generally of creditors’ rights and remedies
(including such as may deny giving effect to waivers
 

 
 

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

 
To each of the Purchasers listed on the attached Annex 1
June 18, 2010
Page 5

 
of debtors’ or guarantors’ rights), and we express no opinion as to the status
under any fraudulent conveyance laws or fraudulent transfer laws of any of the
obligations of any Person, whether under the Financing Documents or otherwise.
 
(c)           We express no opinion as to the availability of any specific or
equitable relief of any kind.
 
(d)           The enforcement of any of the Purchasers’ rights may in all cases
be subject to an implied duty of good faith and fair dealing and to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding at law or in equity) and will be subject to a duty to act in a
commercially reasonable manner.
 
(e)           We express no opinion as to the effect of suretyship defenses, or
defenses in the nature thereof, with respect to the obligations of the
Subsidiary Guarantors or any other applicable guarantor, joint obligor, surety,
accommodation party or other secondary obligor.
 
(f)           We express no opinion as to the enforceability of any particular
provision of any of the Financing Documents relating to or constituting (i)
waivers of rights to object to jurisdiction or venue, consents to jurisdiction
or venue, or waivers of rights to (or methods of) service of process, (ii)
waivers of any applicable defenses, setoffs, recoupments, or counterclaims,
(iii) waiver or variations of legal provisions or rights that are not capable of
waiver or variation under applicable law, (iv) exculpation or exoneration
clauses, clauses relating to rights of indemnity or contribution, and clauses
relating to releases or waivers of unmatured claims or rights or (v) the
imposition or collection of interest or overdue interest  or providing for a
penalty rate of interest or late charges on overdue or defaulted obligations, or
the payment of any premium, liquidated damages, or other amounts which may be
held by an court to be a “penalty” or “forfeiture.”
 
(g)           Our opinion in paragraph 6 below is based solely on a review of
generally applicable federal laws of the United States of America and on the
opinion of Wilmer Cutler Pickering Hale and Dorr LLP referred to in clause (vii)
above as to generally applicable laws of the Commonwealth of Massachusetts, and
not on any search with respect to, or review of, any orders, decrees, judgments
or other determinations specifically applicable to any Obligor.
 

 
 

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

 
To each of the Purchasers listed on the attached Annex 1
June 18, 2010
Page 6

 
(h)           We have relied with your permission upon the opinion given by
Wilmer Cutler Pickering Hale and Dorr LLP referred to in clause (vii) above as
to good standing, existence, power and authority of each Obligor and the
authorization, execution and delivery by each Obligor of the Financing Documents
to which it is a party and as to all matters of Massachusetts and Delaware law,
including but not limited to the Massachusetts law opinions in paragraphs 2, 3
and 6 below.  We assume each Purchaser (i) has not knowingly contracted for,
charged, taken or received, directly or indirectly, interest and expenses (as
such terms are used in Massachusetts General Laws, Chapter 271, Section 49) the
aggregate of which exceeds twenty percent per annum or the equivalent rate for a
longer or shorter period upon the applicable sum loaned by it to the Company and
(ii) is subject to control, regulation or examination by a state or federal
regulation authority within the meaning of Massachusetts General Laws, Chapter
271, Section 49.
 
    (i)      We express no opinion as to the effect of events, acts or omissions
occurring, circumstances arising, or changes of law becoming effective or
occurring after the date hereof on the matters addressed in this opinion letter,
and we assume no responsibility to inform you of additional or changed facts, or
changes in law, of which we may become aware.
 
Based upon the foregoing, and subject to the limitations and qualifications set
forth below, we are of the opinion that:
 
1.           The Company is a corporation validly existing in good standing
under the laws of the State of Delaware, with requisite corporate power and
authority to enter into this Agreement and to issue the Notes.

2.           The Note Purchase Agreement and the Notes constitute the legal,
valid and binding agreements of, the Company, enforceable in accordance with
their respective terms.

3.           The Subsidiary Guaranty constitutes the legal, valid and binding
agreement of each Subsidiary Guarantor, enforceable in accordance with its
terms.
 
4.           The offer, sale and delivery of the Notes and delivery of the
Subsidiary Guaranty by the applicable Obligors each on the date hereof do not
require the registration of the Notes or the Subsidiary Guaranty under the
Securities Act of 1933, as amended, nor the qualification of an indenture under
the Trust Indenture Act of 1939, as amended.
 

 
 

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

 
To each of the Purchasers listed on the attached Annex 1
June 18, 2010
Page 7

 
5.           The issuance and sale of the Notes and compliance with the terms
and provisions of the Notes and the Note Purchase Agreement do not conflict with
or result in any breach of any of the provisions of the Company’s Governing
Documents.
 
6.           No approval, consent or withholding of objection on the part of, or
filing, registration or qualification with, any Federal or Massachusetts state
governmental body is required under Federal or Massachusetts law in connection
with the execution and delivery of the Note Purchase Agreement or the Notes by
the Company.
 

 
 

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

 
To each of the Purchasers listed on the attached Annex 1
June 18, 2010
Page 8

This opinion is delivered solely to the Purchasers and for the Purchasers’
benefit in connection with the Financing Documents and may not be relied upon by
the Purchasers for any other purpose or relied upon by any other person or
entity (other than future holders of Notes acquired in accordance with the terms
of the Note Purchase Agreement) for any reason without our prior written
consent.
 

 
Very truly yours,
             
BINGHAM McCUTCHEN LLP

 
 

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

 

ANNEX 1

Purchasers

Metropolitan Life Insurance Company
General American Life Insurance Company
MetLife Insurance Company of Connecticut
Employers Reassurance Company
Connecticut General Life Insurance Company
Life Insurance Company of North America
American United Life Insurance Company
The State Life Insurance Company
Assurity Life Insurance Company
 
 

Exhibit 4.4(b)

 
 
 
 

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

 

EXHIBIT B-1
 
[FORM OF SUBSIDIARY GUARANTY]
 
THIS GUARANTY (this “Guaranty”) dated as of June 18, 2010 is made by the
undersigned (each, a “Guarantor”), in favor of the holders from time to time of
the Notes hereinafter referred to, including each purchaser named in the Note
Purchase Agreement hereinafter referred to, and their respective successors and
assigns (collectively, the “Holders” and each individually, a “Holder”).
 
W I T N E S S E T H:
 
WHEREAS, WATTS WATER TECHNOLOGIES, INC., a Delaware corporation (the “Company”),
and the initial Holders have entered into a Note Purchase Agreement dated as of
June 18, 2010 (the Note Purchase Agreement, as amended, supplemented, restated
or otherwise modified from time to time in accordance with its terms and in
effect, the “Note Purchase Agreement”);
 
WHEREAS, the Note Purchase Agreement provides for the issuance by the Company of
$75,000,000 aggregate principal amount of Notes (as defined in the Note Purchase
Agreement);
 
WHEREAS, the Company owns, directly or indirectly, all or a substantial portion
of the issued and outstanding capital stock or partnership interests of each
Guarantor and, by virtue of such ownership and otherwise, each Guarantor will
derive substantial benefits from the issuance and sale of the Company’s Notes;
 
WHEREAS, it is a condition precedent to the obligation of the Holders to
purchase the Notes that each Guarantor shall have executed and delivered this
Guaranty to the Holders; and
 
WHEREAS, each Guarantor desires to execute and deliver this Guaranty to satisfy
the conditions described in the preceding paragraph;
 
NOW, THEREFORE, in consideration of the premises and other benefits to each
Guarantor, and of the purchase of the Company’s Notes by the Holders, and for
other good and valuable consideration, the receipt and sufficiency of which are
acknowledged, each Guarantor makes this Guaranty as follows:
 
SECTION 1.  Definitions.  Any capitalized terms not otherwise herein defined
shall have the meanings attributed to them in the Note Purchase Agreement.
 
SECTION 2.  Guaranty.  Each Guarantor, jointly and severally with each other
Guarantor, unconditionally and irrevocably guarantees to the Holders the due,
prompt and complete payment by the Company of the principal of, Make-Whole
Amount, if any, and interest on, and each other amount due under, the Notes or
the Note Purchase Agreement, when and as the same shall become due and payable
(whether at stated maturity or by required or optional prepayment or by
declaration or otherwise) in accordance with the terms of the Notes and the Note
Purchase Agreement (the Notes and the Note Purchase Agreement being sometimes
 

Exhibit B-1 - 1
 
 

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

 
 
hereinafter collectively referred to as the “Note Documents” and the amounts
payable by the Company under the Note Documents, and all other monetary
obligations of the Company thereunder (including any attorneys’ fees and
expenses), being sometimes collectively hereinafter referred to as the
“Obligations”).  This Guaranty is a guaranty of payment and not just of
collectibility and is in no way conditioned or contingent upon any attempt to
collect from the Company or upon any other event, contingency or circumstance
whatsoever.  If for any reason whatsoever the Company shall fail or be unable
duly, punctually and fully to pay such amounts as and when the same shall become
due and payable, each Guarantor, without demand, presentment, protest or notice
of any kind, will forthwith pay or cause to be paid such amounts to the Holders
under the terms of such Note Documents, in lawful money of the United States, at
the place specified in the Note Purchase Agreement, or perform or comply with
the same or cause the same to be performed or complied with, together with
interest (to the extent provided for under such Note Documents) on any amount
due and owing from the Company.  Each Guarantor, promptly after demand, will pay
to the Holders the reasonable costs and expenses of collecting such amounts or
otherwise enforcing this Guaranty, including the reasonable fees and expenses of
counsel.  Notwithstanding the foregoing, the right of recovery against each
Guarantor under this Guaranty is limited to the extent it is judicially
determined with respect to any Guarantor that entering into this Guaranty would
violate Section 548 of the United States Bankruptcy Code or any comparable
provisions of any state law, in which case such Guarantor shall be liable under
this Guaranty only for amounts aggregating up to the largest amount that would
not render such Guarantor’s obligations hereunder subject to avoidance under
Section 548 of the United States Bankruptcy Code or any comparable provisions of
any state law.
 
SECTION 3.  Guarantor’s Obligations Unconditional.  The obligations of each
Guarantor under this Guaranty shall be primary, absolute and unconditional
obligations of each Guarantor, shall not be subject to any counterclaim,
set-off, deduction, diminution, abatement, recoupment, suspension, deferment,
reduction or defense based upon any claim each Guarantor or any other person may
have against the Company or any other person, and to the full extent permitted
by applicable law shall remain in full force and effect without regard to, and
shall not be released, discharged or in any way affected by, any circumstance or
condition whatsoever (whether or not each Guarantor or the Company shall have
any knowledge or notice thereof), including:
 
(a)           any termination, amendment or modification of or deletion from or
addition or supplement to or other change in any of the Note Documents or any
other instrument or agreement applicable to any of the parties to any of the
Note Documents;
 
(b)           any furnishing or acceptance of any security, or any release of
any security, for the Obligations, or the failure of any security or the failure
of any person to perfect any interest in any collateral;
 
(c)           any failure, omission or delay on the part of the Company to
conform or comply with any term of any of the Note Documents or any other
instrument or agreement referred to in paragraph (a) above, including, without
limitation, failure to give notice to any Guarantor of the occurrence of a
“Default” or an “Event of Default” under any Note Document;
 

Exhibit B-1 - 2
 
 

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

 
 
(d)           any waiver of the payment, performance or observance of any of the
obligations, conditions, covenants or agreements contained in any Note Document,
or any other waiver, consent, extension, indulgence, compromise, settlement,
release or other action or inaction under or in respect of any of the Note
Documents or any other instrument or agreement referred to in paragraph (a)
above or any obligation or liability of the Company, or any exercise or
non-exercise of any right, remedy, power or privilege under or in respect of any
such instrument or agreement or any such obligation or liability;
 
(e)           any failure, omission or delay on the part of any of the Holders
to enforce, assert or exercise any right, power or remedy conferred on such
Holder in this Guaranty, or any such failure, omission or delay on the part of
such Holder in connection with any Note Document, or any other action on the
part of such Holder;
 
(f)           any voluntary or involuntary bankruptcy, insolvency,
reorganization, arrangement, readjustment, assignment for the benefit of
creditors, composition, receivership, conservatorship, custodianship,
liquidation, marshaling of assets and liabilities or similar proceedings with
respect to the Company, any Guarantor or to any other person or any of their
respective properties or creditors, or any action taken by any trustee or
receiver or by any court in any such proceeding;
 
(g)           any discharge, termination, cancellation, frustration,
irregularity, invalidity or unenforceability, in whole or in part, of any of the
Note Documents or any other agreement or instrument referred to in paragraph (a)
above or any term hereof;
 
(h)           any merger or consolidation of the Company or any Guarantor into
or with any other corporation, or any sale, lease or transfer of any of the
assets of the Company or any Guarantor to any other person;
 
(i)           any change in the ownership of any shares of capital stock of the
Company or any change in the corporate relationship between the Company and any
Guarantor, or any termination of such relationship;
 
(j)           any release or discharge, by operation of law, of any Guarantor
from the performance or observance of any obligation, covenant or agreement
contained in this Guaranty; or
 
(k)           any other occurrence, circumstance, happening or event whatsoever,
whether similar or dissimilar to the foregoing, whether foreseen or unforeseen,
and any other circumstance which might otherwise constitute a legal or equitable
defense or discharge of the liabilities of a guarantor or surety or which might
otherwise limit recourse against any Guarantor.
 
SECTION 4.  Full Recourse Obligations.  The obligations of each Guarantor set
forth herein constitute the full recourse obligations of such Guarantor
enforceable against it to the full extent of all its assets and properties.
 

Exhibit B-1 - 3
 
 

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

 
 
SECTION 5.  Waiver.  Each Guarantor unconditionally waives, to the extent
permitted by applicable law, (a) notice of any of the matters referred to in
Section 3, (b) notice to such Guarantor of the incurrence of any of the
Obligations, notice to such Guarantor or the Company of any breach or default by
such Company with respect to any of the Obligations or any other notice that may
be required, by statute, rule of law or otherwise, to preserve any rights of the
Holders against such Guarantor, (c) presentment to or demand of payment from the
Company or the Guarantor with respect to any amount due under any Note Document
or protest for nonpayment or dishonor, (d) any right to the enforcement,
assertion or exercise by any of the Holders of any right, power, privilege or
remedy conferred in the Note Purchase Agreement or any other Note Document or
otherwise, (e) any requirement of diligence on the part of any of the Holders,
(f) any requirement to exhaust any remedies or to mitigate the damages resulting
from any default under any Note Document, (g) any notice of any sale, transfer
or other disposition by any of the Holders of any right, title to or interest in
the Note Purchase Agreement or in any other Note Document and (h) any other
circumstance whatsoever which might otherwise constitute a legal or equitable
discharge, release or defense of a guarantor or surety or which might otherwise
limit recourse against such Guarantor.
 
SECTION 6.  Subrogation, Contribution, Reimbursement or Indemnity.  Until all
Obligations have been indefeasibly paid in full, each Guarantor agrees not to
take any action pursuant to any rights which may have arisen in connection with
this Guaranty to be subrogated to any of the rights (whether contractual, under
the United States Bankruptcy Code, as amended, including Section 509 thereof,
under common law or otherwise) of any of the Holders against the Company or
against any collateral security or guaranty or right of offset held by the
Holders for the payment of the Obligations. Until all Obligations have been
indefeasibly paid in full, each Guarantor agrees not to take any action pursuant
to any contractual, common law, statutory or other rights of reimbursement,
contribution, exoneration or indemnity (or any similar right) from or against
the Company which may have arisen in connection with this Guaranty.  So long as
the Obligations remain, if any amount shall be paid by or on behalf of the
Company to any Guarantor on account of any of the rights waived in this
paragraph, such amount shall be held by such Guarantor in trust, segregated from
other funds of such Guarantor, and shall, forthwith upon receipt by such
Guarantor, be turned over to the Holders (duly endorsed by such Guarantor to the
Holders, if required), to be applied against the Obligations, whether matured or
unmatured, in such order as the Holders may determine.  The provisions of this
paragraph shall survive the term of this Guaranty and the payment in full of the
Obligations.
 
SECTION 7.  Effect of Bankruptcy Proceedings, etc.  This Guaranty shall continue
to be effective or be automatically reinstated, as the case may be, if at any
time payment, in whole or in part, of any of the sums due to any of the Holders
pursuant to the terms of the Note Purchase Agreement or any other Note Document
is rescinded or must otherwise be restored or returned by such Holder upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Company or any other person, or upon or as a result of the appointment of a
custodian, receiver, trustee or other officer with similar powers with respect
to the Company or other person or any substantial part of its property, or
otherwise, all as though such payment had not been made.  If an event permitting
the acceleration of the maturity of the principal amount of the Notes shall at
any time have occurred and be continuing, and such acceleration shall at such
time be prevented by reason of the pendency against the Company or any other
person of a case or proceeding under a bankruptcy or insolvency law, each
Guarantor agrees that, for purposes of this Guaranty
 

Exhibit B-1 - 4
 
 

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

 
 
and its obligations hereunder, the maturity of the principal amount of the Notes
and all other Obligations shall be deemed to have been accelerated with the same
effect as if any Holder had accelerated the same in accordance with the terms of
the Note Purchase Agreement or other applicable Note Document, and such
Guarantor shall forthwith pay such principal amount, Make-Whole Amount, if any,
and interest thereon and any other amounts guaranteed hereunder without further
notice or demand.
 
SECTION 8.  Term of Agreement.  This Guaranty and all guaranties, covenants and
agreements of each Guarantor contained herein shall continue in full force and
effect and shall not be discharged until the earlier to occur of (i) such time
as all of the Obligations shall be paid and performed in full and all of the
agreements of such Guarantor hereunder shall be duly paid and performed in full
and (ii) such Guarantor is released by the Holders.
 
SECTION 9.  Representations and Warranties.  Each Guarantor represents and
warrants to each Holder that:
 
(a)           such Guarantor is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization and has the
requisite power and authority to own and operate its property, to lease the
property it operates as lessee and to conduct the business in which it is
currently engaged;
 
(b)           such Guarantor has the requisite power and authority and the legal
right to execute and deliver, and to perform its obligations under, this
Guaranty, and has taken all necessary action to authorize its execution,
delivery and performance of this Guaranty;
 
(c)           this Guaranty constitutes a legal, valid and binding obligation of
such Guarantor enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors’ rights
generally and by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law);
 
(d)           the execution, delivery and performance of this 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 Guarantor
under any indenture, mortgage, deed of trust, loan, credit agreement, corporate
charter or by-laws, or any other agreement evidencing Debt, (ii) 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 Guarantor under, any
other agreement or instrument to which such Guarantor is bound or by which such
Guarantor or any of its properties may be bound or affected, except as would not
reasonably be expected to have a Material Adverse Effect, (iii) 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 Guarantor, except as would not reasonably be expected to have
a Material Adverse Effect, or (iv) violate any provision of any statute or other
rule or regulation of any Governmental Authority applicable to such Guarantor,
except as would not reasonably be expected to have a Material Adverse Effect;
 

Exhibit B-1 - 5
 
 

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

 
 
(e)           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 such Guarantor of this Guaranty;
 
(f)           except as disclosed in writing to the Holders, no litigation,
investigation or proceeding of or before any arbitrator or governmental
authority is pending or, to the knowledge of such Guarantor, threatened by or
against such Guarantor or any of its properties or revenues (i) with respect to
this Guaranty or any of the transactions contemplated hereby or (ii) which would
reasonably be expected to have a Material Adverse Effect;
 
(g)           such Guarantor (after giving due consideration to any rights of
contribution) has received fair consideration and reasonably equivalent value
for the incurrence of its obligations hereunder or as contemplated hereby and
after giving effect to the transactions contemplated herein, (i) the fair value
of the assets of such Guarantor (both at fair valuation and at present fair
saleable value) exceeds its liabilities, (ii) such Guarantor is able to and
expects to be able to pay its debts as they mature, and (iii) such Guarantor has
capital sufficient to carry on its business as conducted and as proposed to be
conducted.
 
SECTION 10.  Notices.  All notices and communications provided for hereunder
shall be in writing and sent by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or by registered or certified mail with return receipt
requested (postage prepaid), or by a recognized overnight delivery service (with
charges prepaid) (a) if to the Company or any Holder at the address set forth in
the Note Purchase Agreement or (b) if to a Guarantor, in care of the Company at
the Company’s address set forth in the Note Purchase Agreement, or in each case
at such other address as the Company, any Holder or such Guarantor shall from
time to time designate in writing to the other parties.  Any notice so addressed
shall be deemed to be given when actually received.
 
SECTION 11.  Survival.  All warranties, representations and covenants made by
each Guarantor herein or in any certificate or other instrument delivered by it
or on its behalf hereunder shall be considered to have been relied upon by the
Holders and shall survive the execution and delivery of this Guaranty,
regardless of any investigation made by any of the Holders.  All statements in
any such certificate or other instrument shall constitute warranties and
representations by such Guarantor hereunder.
 
SECTION 12.  Submission to Jurisdiction.  Each Guarantor irrevocably submits to
the jurisdiction of the courts of the Commonwealth of Massachusetts and of the
courts of the United States of America having jurisdiction in the Commonwealth
of Massachusetts for the purpose of any legal action or proceeding in any such
court with respect to, or arising out of, this Guaranty, the Note Purchase
Agreement or the Notes.  Each Guarantor consents to process being served in any
suit, action or proceeding by mailing a copy thereof by registered or certified
mail, postage prepaid, return receipt requested.  Each Guarantor agrees that
such service upon receipt (i) shall be deemed in every respect effective service
of process upon it in any such suit, action or proceeding and (ii) shall, to the
fullest extent permitted by law, be taken and held to be valid personal service
upon and personal delivery to such Guarantor.
 

Exhibit B-1 - 6
 
 

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

 
 
SECTION 13.  Miscellaneous.  Any provision of this Guaranty which 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 not invalidate or render
unenforceable such provision in any other jurisdiction.  To the extent permitted
by applicable law, each Guarantor hereby waives any provision of law that
renders any provisions hereof prohibited or unenforceable in any respect.  The
terms of this Guaranty shall be binding upon, and inure to the benefit of, each
Guarantor and the Holders and their respective successors and assigns.  No term
or provision of this Guaranty may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by each Guarantor and the
Required Holders.  The section and paragraph headings in this Guaranty are for
convenience of reference only and shall not modify, define, expand or limit any
of the terms or provisions hereof, and all references herein to numbered
sections, unless otherwise indicated, are to sections in this Guaranty.  This
Guaranty shall in all respects be governed by, and construed in accordance with,
the laws of the Commonwealth of Massachusetts, including all matters of
construction, validity and performance.
 

Exhibit B-1 - 7
 
 

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

 

IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be duly executed
as of the day and year first above written.
 

 

 
WATTS REGULATOR CO.
         
By: ________________________________
 
Name:
 
Title:
         
WATTS WATER QUALITY AND
CONDITIONING PRODUCTS, INC.
         
By: ________________________________
 
Name:
 
Title:
         
DORMONT MANUFACTURING COMPANY
         
By: ________________________________
 
Name:
 
Title:
         
WEBSTER VALVE, INC.
         
By: ________________________________
 
Name:
 
Title:

Exhibit B-1 - 8
 
 

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

 

FORM OF JOINDER TO SUBSIDIARY GUARANTY
 
The undersigned (the “Guarantor”), joins in the Subsidiary Guaranty dated as of
June 18, 2010 from the Guarantors named therein in favor of the Holders, as
defined therein, and agrees to be bound by all of the terms thereof and
represents and warrants to the Holders that:
 
(a)           the Guarantor is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization and has the
requisite power and authority to own and operate its property, to lease the
property it operates as lessee and to conduct the business in which it is
currently engaged;
 
(b)           the Guarantor has the requisite power and authority and the legal
right to execute and deliver this Joinder to Subsidiary Guaranty (“Joinder”) and
to perform its obligations hereunder and under the Subsidiary Guaranty and has
taken all necessary action to authorize its execution and delivery of this
Joinder and its performance of the Subsidiary Guaranty;
 
(c)           the Subsidiary Guaranty constitutes a legal, valid and binding
obligation of the Guarantor enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors’ rights
generally and by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law);
 
(d)           the execution, delivery and performance of this Joinder 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 Guarantor
under any indenture, mortgage, deed of trust, loan, credit agreement, corporate
charter or by-laws, or any other agreement evidencing Debt, (ii) 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 Guarantor under, any
other agreement or instrument to which such Guarantor is bound or by which such
Guarantor or any of its properties may be bound or affected, except as would not
reasonably be expected to have a Material Adverse Effect, (iii) 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 Guarantor, except as would not reasonably be expected to have
a Material Adverse Effect, or (iv) violate any provision of any statute or other
rule or regulation of any Governmental Authority applicable to such Guarantor,
except as would not reasonably be expected to have a Material Adverse Effect;
 
(e)           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 such Guarantor of this Joinder;
 
(f)           except as disclosed in writing to the Holders, no litigation,
investigation or proceeding of or before any arbitrator or governmental
authority is pending or, to the knowledge of the Guarantor, threatened by or
against the Guarantor or any of its properties or revenues (i) with respect to
this Joinder, the Subsidiary Guaranty or any of the transactions contemplated
hereby or (ii) that would reasonably be expected to have a Material Adverse
Effect;
 

Exhibit B-1 - 9
 
 

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

 

(g)           such Guarantor (after giving due consideration to any rights of
contribution) has received fair consideration and reasonably equivalent value
for the incurrence of its obligations hereunder or as contemplated hereby and
after giving effect to the transactions contemplated herein, (i) the fair value
of the assets of such Guarantor (both at fair valuation and at present fair
saleable value) exceeds its liabilities, (ii) such Guarantor is able to and
expects to be able to pay its debts as they mature, and (iii) such Guarantor has
capital sufficient to carry on its business as conducted and as proposed to be
conducted.
 
Capitalized Terms used but not defined herein have the meanings ascribed in the
Subsidiary Guaranty.
 
IN WITNESS WHEREOF, the undersigned has caused this Joinder to Subsidiary
Guaranty to be duly executed as of __________, ____.
 
 

   [Name of Guarantor]        
By:
   
Name:
   
Title:
 

Exhibit B-1 - 10
 
 

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