<PAGE>
 
                                                                    EXHIBIT 10.7



                                                                  March 10, 1998



Culligan Water Technologies, Inc.
One Culligan Parkway
Northbrook, IL  60063

Attention:  Michael E. Salvati
            Vice President, Finance and
            Chief Financial Officer
 
Ladies and Gentlemen:

     Bank of Montreal (the "Lender") is pleased to establish a revolving line of
credit in favor of Culligan Water Technologies, Inc. (the "Borrower") in the
amount of $50,000,000.00, which shall continue from March 10, 1998 through March
1, 1999 (the "Maturity Date") unless the line of credit is terminated on an
earlier date as set forth below.

     (a)  Loans under this line of credit will be evidenced and governed by the
Lender's standard form of master note (the "Note"), a copy of which is attached
hereto, and will bear interest, at the Borrower's option, at:

          (i)  a rate per annum equal to the Lender's corporate base rate of
     interest announced by the Lender from time to time (for purposes hereof,
     the "corporate base rate" shall mean, for any day, the greater of the rate
     of interest announced by the Lender from time to time as its prime
     commercial rate, or equivalent, for U.S. loans to borrowers located in the
     United States or the sum of the overnight Federal funds rate as determined
     by the Lender in accordance with its customary practices plus 1/2 of 1%),
     changing when and as the corporate base rate changes, with interest payable
     on the last day of each calendar quarter, commencing June 30, 1998, on the
     Maturity Date, and on demand thereafter; or

          (ii)  subject to availability and for interest periods of 1, 2, 3 or 6
     months, as Borrower may select subject to the terms and conditions hereof
     and the Note, or such other interest periods as Borrower and the Lender may
     mutually agree upon, at a rate per annum equal to the sum of .75% per annum
     plus the Eurodollar rate (for purposes hereof, the "Eurodollar rate" shall
     mean, with respect to the relevant interest period, the rate per annum
     (rounded up, if necessary, to the nearest 1/100 of 1%) appearing on Dow
     Jones Telerate Page 3750 or any
<PAGE>
 
     successor page) as the London interbank offered rate for deposits in U.S.
     dollars at approximately 11:00 a.m. (London time) two bank business days
     prior to the first day of such interest period for a term and in an amount
     comparable to such interest period and the requested loan, and, if for any
     reason such rate is unavailable, the rate at which deposits in U.S. dollars
     in the amount and for a maturity corresponding to that of the loan are
     offered by the bank Lender in the offshore interbank market at
     approximately 11 a.m. (London time) two business days prior to the date on
     which such loan is made, in each case adjusted for maximum statutory
     reserve requirements. Each Eurodollar rate loan shall be in an amount of
     $500,000 or such greater amount which is an integral multiple of $250,000.
     Interest shall be payable on each Eurodollar rate loan on the last day of
     the relevant interest period (and, if the interest period is longer than 3
     months, on each date occurring every three months after the commencement of
     such interest), on the Maturity Date and on demand thereafter.

     (b)   No interest period for or maturity of a loan hereunder shall extend
beyond the Maturity Date. Interest and fees will be computed on the basis of
actual days elapsed on a 360-day year basis. During the continuance of a Default
(defined below) the Lender may, at its option, by notice to the Borrower,
declare that loans may only be made as, converted into or continued as loans
bearing interest at the corporate base rate of interest. During the continuance
of a Default the Lender may, at its option, by notice to the Borrower, declare
that (i) each loan bearing interest at a rate other than the corporate base rate
shall bear interest for the remainder of the applicable interest period at the
rate otherwise applicable to such interest period plus 2% per annum and (ii)
each loan bearing interest at the corporate base rate shall bear interest at a
rate per annum equal to the corporate base rate plus 2% per annum.

     (c)  The Borrower will use the proceeds of the loans hereunder to make
acquisitions permitted under the Agreement (as defined below) and general
corporate purposes or the repayment or refinancing of indebtedness incurred in
connection therewith.

     (d)  The Borrower will perform, comply with and observe for the Lender's
benefit the agreements set forth in Articles VI, VII, VIII and IX of the Credit
Agreement dated as of April 30, 1997 by and among the Borrower, various
Subsidiaries of the Borrower, the lenders party thereto and Bank of America
Illinois, as administrative agent for such lenders (as amended to the date
hereof, the "Agreement"). For purposes hereof, the provisions of the Agreement,
together with related definitions and ancillary provisions, are hereby
incorporated herein by reference, mutatis mutandis, and shall be deemed to
continue in effect for the Lender's benefit as in effect on the date hereof,
whether or not the Agreement remains in effect and without giving effect to any
amendment, modification or waiver to the terms thereof except to the extent
consented to in writing by the Lender hereunder, with any reference therein to
the Loan Documents to be deemed to refer to this letter, the Note, and the
Subsidiary Guaranty executed and delivered in connection herewith and all
references therein to the Agent or any Lender to be deemed to refer to the
Lender hereunder. Without limiting the foregoing, the Borrower hereby represents
and warrants to the Lender that the execution and delivery of this letter, and
the extension of credit to the Borrower hereunder, is permitted by the terms of
the Agreement and will not, now or at any time after giving effect to any loan
requested hereunder, conflict with the terms thereof.
<PAGE>
 
     (e)  The Borrower may not borrow under this line of credit unless, after
giving effect to the proposed borrowing, the following statements are true and
correct on the date of borrowing: (i) there exists no Default (as defined below)
or event which, with giving of notice, or lapse of time, or both, would be a
Default and (ii) the representations and warranties set forth in Article VI of
the Agreement are true and correct. Any request by the Borrower for a borrowing
hereunder shall be deemed to be a representation and warranty by the Borrower
that the statements set forth in the previous sentence are true and correct in
all material respects. Any request by the Borrower for a loan shall be made not
later than 10:00 a.m. (Chicago time) on the requesting funding date (which shall
be a bank business day), provided that if such requesting borrowing is for a
Eurodollar rate loan, or in the event the Borrower wishes to continue a
Eurodollar rate loan or convert a corporate base rate loan into a Eurodollar
rate loan, the Borrower shall give the Lender notice by 10:00 a.m. (Chicago
time) 3 bank business days prior to the first day of the requested interest
period.

     (f)  All outstanding loans and accrued and unpaid interest, at the option
of the Lender, may be declared immediately due and payable without notice if
there exists any Default hereunder. "Default" means (i) any failure by the
Borrower to pay principal when due or interest, fees, or other obligations
within 5 days of when due under this letter, the Note, or any other agreement or
arrangement with the Lender, (ii) the existence of any default under the Note or
the Guaranty (as defined below), or any violation or failure to comply with any
provision of the Note or the Guaranty, or lack of enforceability of the Guaranty
or (iii) the existence of any Event of Default under and as defined in the
Agreement.

     (g)  The full amount of this line of credit will be fully guaranteed by
that certain guaranty dated March 10, 1998 (the "Guaranty") executed by each of
the Guarantors (identified on Schedule 6.16 of the Agreement).

     (h)  The Lender may make assignments and sell participations in this line
of credit, the Note and the loans made hereunder, and may disclose information
pertaining to the Borrower to prospective assignees and participants. Any
assignment will release the Lender of its funding obligation with respect to the
amount assigned and may be made only with the Borrower's consent (which consent
will not unreasonably be withheld). The Borrower agrees that if it fails to pay
any loan when due, any purchaser of a participation interest in such loan shall
be entitled to seek enforcement of this note if the purchaser is permitted to do
so pursuant to the terms of the participation agreement between the Lender and
such purchaser.

     (i)  This line of credit shall be effective as of the date of this letter
when the Borrower has signed and returned to the Lender a copy of this letter
and has provided the Lender with executed originals of the Note, the Guaranty,
the fee letter supplied by the Lender (and any fees identified therein as due),
resolutions, incumbency certificates, and an opinion of counsel in form and
substance satisfactory to the Lender.

     (j)  THIS LETTER AND THE NOTE SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF ILLINOIS. BOTH PARTIES HERETO HEREBY WAIVE TRIAL BY JURY IN THE EVENT
THIS LETTER OR THE NOTE BECOMES THE SUBJECT OF A DISPUTE.
<PAGE>
 
     If this letter reflects the Borrower's understanding, please cause it to be
executed and returned to my attention, together with the other items referred to
in paragraph (i).


                                              Very truly yours,


                                              Bank of Montreal


                                              By:
                                              Title:
 

Accepted and agreed:


CULLIGAN WATER TECHNOLOGIES, INC.


By:


Title:  Vice President, Finance


Date:
<PAGE>
 
                                  MASTER NOTE
 
                                                               Chicago, Illinois
$50,000,000.00                                             Date:  March 10, 1998


 
     FOR VALUE RECEIVED, CULLIGAN WATER TECHNOLOGIES, INC. (the "Borrower")
promises to pay to the order of BANK OF MONTREAL (the "Lender"), in lawful money
of the United States at the office of the Lender at 115 S. LaSalle Street,
Chicago, Illinois, or as the Lender may otherwise direct, the lesser of Fifty
Million and no/100 Dollars ($50,000,000.00) or the aggregate outstanding unpaid
principal amount of loans advanced hereunder, together with interest as provided
below. All principal amounts outstanding under this Note, together with any
unpaid interest, shall be due and payable on the Maturity Date.

     The Borrower and the Lender may agree to a fixed interest rate and a
specific maturity for a loan (a "fixed rate loan") at the time of borrowing.
Interest on each fixed rate loan shall be payable upon the maturity of such
fixed rate loan and, in the case of a fixed rate loan with an original maturity
in excess of three months, interest shall also be payable on the last day of
each three-month interval while such fixed rate loan is outstanding.

     Any fixed rate loan not paid at maturity and any other loan as to which a
fixed rate is not agreed shall bear interest at a rate equal to the sum of the
corporate base rate of interest announced by the Lender from time to time,
changing when and as the corporate base rate changes. Interest on all loans
bearing interest at a rate related to the corporate base rate shall be payable
on the last day of each quarter, on the maturity date of this Note (whether due
to acceleration or otherwise) and on demand thereafter.

     Any person authorized to borrow on behalf of the Borrower (an "authorized
person") may request a loan hereunder by telephone or telex. The Borrower agrees
that, in implementing this arrangement, the Lender is authorized to honor
requests which it believes, in good faith, to emanate from an authorized person
acting pursuant to this note, whether in fact that be the case or not. If the
Lender requests a written confirmation, the Borrower will confirm the terms of
each loan so requested by mailing a confirmation letter to the Lender signed by
any authorized person. If the Lender elects to confirm the terms of a loan to
the Borrower, the Borrower will notify the Lender in writing within 10 days
after the Borrower's receipt of such confirmation if it believes such
confirmation to be inaccurate, and the Borrower hereby waives any right to
contest the accuracy of such confirmation after such 10-day period.

     The Borrower hereby authorizes the Lender to record loans, maturities,
repayments, interest rates and payment dates on the schedule attached to this
note or otherwise in accordance with the Lender's usual practice. The obligation
of the Borrower to repay each loan made hereunder shall be absolute and
unconditional notwithstanding any failure of the Lender to enter such amounts of
such
<PAGE>
 
schedule or to receive written confirmation of the transaction from the Borrower
and, in the event of disagreement as to the terms of a transaction, the Lender's
records shall govern, absent manifest error. The Borrower hereby authorizes the
Lender to deposit the proceeds of loans to, and to charge payments of principal
and interest against, the Borrower's deposit account with the Lender.

     Each payment of principal or interest hereunder shall be made in
immediately available funds. If any payment shall become due and payable on a
Saturday, Sunday or legal holiday under the laws of Illinois, such payment shall
be made on the next succeeding business day in Illinois and any such extended
time of the payment of principal or interest shall be included in computing
interest at the rate this note bears in connection with such payment. All
interest hereunder shall be computed for the actual number of days elapsed on a
360-day year basis.

     If any change in any law, rule, regulation or directive (including, without
limitation, Regulation D of the Board of Governors of the Federal Reserve
System) imposes any condition the result of which is to increase the cost to the
Lender of making, funding or maintaining any fixed rate loan hereunder or
reduces any amount receivable by the Lender hereunder in connection with a fixed
rate loan, the Borrower shall pay the Lender the amount of such increased
expense incurred or the reduction in any amount received which the Lender
determines is attributable to making, funding and maintaining the fixed rate
loans hereunder. A fixed rate loan may not be prepaid prior to the agreed
maturity of the loan without the written consent of the Lender. If, for any
reason, any payment of a fixed rate loan occurs prior to maturity of that loan,
the Borrower will indemnify the Lender for any loss or cost resulting therefrom,
including, without limitation, any loss or cost in liquidating or employing
deposits acquired to fund or maintain the fixed rate loan. Loans bearing
interest at a rate related to the corporate base rate may be prepaid by the
Borrower, without premium or penalty.

     The Borrower expressly waives any presentment, demand, protest or notice in
connection with this note now, or hereafter, required by applicable law and
agrees to pay all costs and expenses of collection. This note shall be governed
by the internal law (and not the law of conflicts) of the State of Illinois,
giving effect, however, to federal laws applicable to national Lenders.

     This Note is issued pursuant to, and is entitled to the benefits of, the
Line of Credit Letter, dated as of March 9, 1998 (the "Letter") addressed by the
Lender to the Borrower to which Letter, as it may be amended from time to time,
reference is hereby made for a statement of the terms and conditions governing
this Note, including (i) the terms and conditions under which the maturity date
hereof may be accelerated and (ii) a reference to the Guaranty which supports
this Note. Capitalized terms used herein and not otherwise defined herein are
used with the meanings attributed to them in the Letter.


                                               CULLIGAN WATER TECHNOLOGIES, INC.


                                               By:

                                               Title:  Vice President, Finance
<PAGE>
 
                                    SCHEDULE

                      to be attached and become a part of
                      the Master Note dated March 9, 1998
                 executed by Culligan Water Technologies, Inc.
                                 and payable to
                                Bank of Montreal

<TABLE>
<CAPTION>
 
                                                                             Unpaid        Initials
                                              Amount of                     Principal      of Person
  Date of       Amount of                     Interest       Principal       Balance        Making
Transaction      Loan          Maturity         Rate         Payment         of Note       Notation
<S>              <C>            <C>             <C>            <C>            <C>           <C>   







</TABLE>
<PAGE>
 
                              SUBSIDIARY GUARANTY
                                        
     THIS SUBSIDIARY GUARANTY (this "Guaranty") is made as of March 10, 1998, by
the entities listed on Schedule "1" attached hereto (collectively, the
"Subsidiary Guarantors") in favor of the Lender under the Line of Credit
referred to below;


     WITNESSETH:


     WHEREAS, CULLIGAN WATER TECHNOLOGIES, INC., a Delaware corporation (the
"Principal") and Bank of Montreal (together with its successors and assigns, the
"Lender") have entered into a certain letter agreement dated as of even date
herewith evidencing a line of credit (as same may be amended or modified from
time to time, the "Line of Credit"), providing, subject to the terms and
conditions thereof, for extensions of credit to be made by the Lender to the
Principal;

     WHEREAS, it is a condition precedent to the Lender's executing the Line of
Credit that each of the Subsidiary Guarantors execute and deliver this Guaranty
whereby each of the Subsidiary Guarantors shall guarantee the payment when due,
subject to Section 9 hereof, of all principal, interest and other amounts that
shall be at any time payable by the Principal under the Line of Credit, the
Notes and any other documents executed in connection therewith (the "Loan
Documents"); and

     WHEREAS, in consideration of the financial and other support that the
Principal has provided, and such financial and other support as the Principal
may in the future provide, to the Subsidiary Guarantors, and in order to induce
the Lender to enter into the Line of Credit, each of the Subsidiary Guarantors
is willing to guarantee the obligations of the Principal under the Line of
Credit, the Notes, and the other Loan Documents;

     NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

     SECTION 1.  Definitions.  Terms defined in the Line of Credit and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein.

     SECTION 2.01 Representations and Warranties.  Each of the Subsidiary
Guarantors represents and warrants (which representations and warranties shall
be deemed to have been
<PAGE>
 
renewed upon each borrowing date under the Line of Credit) that:

     (a)  it (i) is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation; (ii) has all
requisite corporate power, and has all material governmental licenses,
authorizations, consents and approvals necessary to own its assets and carry on
its business as now being or as proposed to be conducted; and (iii) is qualified
to do business in all jurisdictions in which the nature of the business
conducted by it makes such qualification necessary and where failure so to
qualify would have a Material Adverse Effect.

     (b)  it has all necessary corporate power and authority to execute, deliver
and perform its obligations under this Guaranty; the execution, delivery and
performance of this Guaranty have been duly authorized by all necessary
corporate action; and this Guaranty has been duly and validly executed and
delivered by it and constitutes its legal, valid and binding obligation,
enforceable in accordance with its terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency, reorganization, or moratorium or other
similar laws relating to the enforcement of creditors' rights generally and by
general equitable principles.

     (c)  neither the execution and delivery by it of this Guaranty nor
compliance with the terms and provisions hereof will conflict with or result in
a breach of, or require any consent under, its articles or certificate of
incorporation or by-laws or any applicable law or regulation, or any order,
writ, injunction or decree of any court or governmental authority or agency, or
any agreement or instrument to which it is a party or by which it is bound or to
which it is subject, or constitute a default under any such agreement or
instrument, or result in the creation or imposition of any Lien upon any of its
revenues or assets pursuant to the terms of any such agreement or instrument.

     SECTION 2.02 Covenants.  Each of the Subsidiary Guarantors covenants that,
so long as the Lender has any commitment outstanding under the Line of Credit or
any amount payable under the Line of Credit or any Note shall remain unpaid,
that it will, and, if necessary, will enable the Principal to fully comply with
those covenants and agreements incorporated by reference into the Line of
Credit.

     SECTION 3. The Guaranty.  Subject to Section 9 hereof, each of the
Subsidiary Guarantors hereby unconditionally guarantees the full and punctual
payment (whether at stated maturity, upon acceleration or otherwise) of the
principal of and interest on each Note issued by the Principal pursuant to the
Line of Credit, and the full and punctual payment of all other amounts payable
by the Principal under the Line of Credit and the other Loan Documents (all of
the foregoing, subject to the provisions of Section 9 hereof, being referred to
collectively as the "Guaranteed Obligations"). Upon failure by the Principal to
pay punctually any such amount, each of the Subsidiary Guarantors agrees that it
shall forthwith on demand pay the amount not so paid at the place and in the
manner specified in the Line of Credit, any Note or the relevant Loan Document,
as the case may be.

     SECTION 4. Guaranty Unconditional.  Subject to Section 9 hereof, the
obligations of
<PAGE>
 
each of the Subsidiary Guarantors hereunder shall be unconditional and absolute
and, without limiting the generality of the foregoing, shall not be released,
discharged or otherwise affected by:

     (i)  any extension, renewal, settlement, compromise, waiver or release in
respect of any obligation of the Principal under the Line of Credit, any Note,
or any other Loan Document, by operation of law or otherwise or any obligation
of any other guarantor of any of the Guaranteed Obligations;

     (ii)  any modification or amendment of or supplement to the Line of Credit,
any Note, or any other Loan Document;

     (iii)  any release, nonperfection or invalidity of any direct or indirect
security for any obligation of the Principal under the Line of Credit, any Note,
any Loan Document, or any obligations of any other guarantor of any of the
Guaranteed Obligations;

     (iv)  any change in the corporate existence, structure or ownership of the
Principal or any other guarantor of any of the Guaranteed Obligations, or any
insolvency, bankruptcy, reorganization or other similar proceeding affecting the
Principal, or any other guarantor of the Guaranteed Obligations, or its assets
or any resulting release or discharge of any obligation of the Principal, or any
other guarantor of any of the Guaranteed Obligations;

     (v)  the existence of any claim, setoff or other rights which the
Subsidiary Guarantors may have at any time against the Principal, any other
guarantor of any of the Guaranteed Obligations, the Lender or any other Person,
whether in connection herewith or any unrelated transactions;

     (vi)  any invalidity or unenforceability relating to or against the
Principal, or any other guarantor of any of the Guaranteed Obligations, for any
reason related to the Line of Credit, any other Loan Document, or any provision
of applicable law or regulation purporting to prohibit the payment by the
Principal, or any other guarantor of the Guaranteed Obligations, of the
principal of or interest on any Note or any other amount payable by the
Principal under the Line of Credit, the Notes, or any other Loan Document; or

     (vii)  any other act or omission to act or delay of any kind by the
Principal, any other guarantor of the Guaranteed Obligations, the Lender or any
other Person or any other circumstance whatsoever which might, but for the
provisions of this paragraph, constitute a legal or equitable discharge of any
Subsidiary Guarantor's obligations hereunder.

     SECTION 5.  Discharge Only Upon Payment In Full: Reinstatement In Certain
Circumstances. Each of the Subsidiary Guarantor's obligations hereunder shall
remain in full force and effect until all Guaranteed Obligations shall have been
paid in full and the commitment under the Line of Credit shall have terminated
or expired. If at any time any payment of the principal of or interest on any
Note or any other amount payable by the Principal or any other
<PAGE>
 
party under the Line of Credit or any other Loan Document is rescinded or must
be otherwise restored or returned upon the insolvency, bankruptcy or
reorganization of the Principal or otherwise, each of the Subsidiary Guarantor's
obligations hereunder with respect to such payment shall be reinstated as though
such payment had been due but not made at such time.

     SECTION 6. Waiver of Notice.  Each of the Subsidiary Guarantors irrevocably
waives acceptance hereof, presentment, demand, protest and, to the fullest
extent permitted by law, any notice not provided for herein, as well as any
requirement that at any time any action be taken by any Person against the
Principal, any other guarantor of the Guaranteed Obligations, or any other
Person.

     SECTION 7. Subrogation.  Each of the Subsidiary Guarantors hereby agrees
not to assert any right, claim or cause of action, including, without
limitation, a claim for subrogation, reimbursement, indemnification or
otherwise, against the Principal arising out of or by reason of this Guaranty or
the obligations hereunder, including, without limitation, the payment or
securing or purchasing of any of the Guaranteed Obligations by any of the
Subsidiary Guarantors unless and until the Guaranteed Obligations are paid in
full and any commitment to lend under the Line of Credit and other Loan
Documents is terminated.

     SECTION 8. Stay of Acceleration.  If acceleration of the time for payment
of any amount payable by the Principal under the Line of Credit, any Note or any
other Loan Document is stayed upon the insolvency, bankruptcy or reorganization
of the Principal, all such amounts otherwise subject to acceleration under the
terms of the Line of Credit, any Note or any other Loan Document shall
nonetheless be payable by each of the Subsidiary Guarantors hereunder forthwith
on demand by the Lender.

     SECTION 9. Limitation on Obligations.  (a) It is the intention of each of
the Subsidiary Guarantors and the Lenders that each of the Subsidiary
Guarantor's obligations hereunder shall be in, but not in excess of, as of any
date, the greater of the following (such greater amount determined hereunder
being the relevant Subsidiary Guarantor's "Maximum Liability"): (i) the
aggregate amount of all monies received by the Subsidiary Guarantor from the
Principal after the date hereof (whether by loan, capital infusion or other
means), or (ii) the maximum amount (such amount being the Subsidiary Guarantor's
"Alternative Limitation") not subject to avoidance under Title 11 of the United
States Code, as same may be amended from time to time, or any applicable state
law (collectively, the "Bankruptcy Code"). As to the Alternative Limitation of
the Subsidiary Guarantors, to the extent such obligations would otherwise be
subject to avoidance under the Bankruptcy Code if the Subsidiary Guarantor is
not deemed to have received valuable consideration, fair value or reasonably
equivalent value for its obligations hereunder, any Subsidiary Guarantor's
obligations hereunder shall be reduced to that amount which, after giving effect
thereto, would not render the Subsidiary Guarantor insolvent, or leave the
Subsidiary Guarantor with an unreasonably small capital to conduct its business,
or cause the Subsidiary Guarantor to have incurred debts (or intended to have
incurred debts) beyond its ability to pay such debts as they mature, at the time
such obligations are deemed to have been incurred under the Bankruptcy Code. As
used herein, the terms "insolvent" and "unreasonably
<PAGE>
 
small capital" shall likewise be determined in accordance with the Bankruptcy
Code. This Section 9(a) with respect to the Alternative Limitation of the
Subsidiary Guarantor is intended solely to preserve the rights of the Agent
hereunder to the maximum extent not subject to avoidance under the Bankruptcy
Code, and neither the Subsidiary Guarantor nor any other person or entity shall
have any right or claim under this Section 9(a) with respect to the Alternative
Limitation, except to the extent necessary so that the obligations of the
Subsidiary Guarantor hereunder shall not be rendered voidable under the
Bankruptcy Code.

     (b)  Each of the Subsidiary Guarantors agrees that the Guaranteed
Obligations may at any time and from time to-time exceed the Maximum Liability
of each Subsidiary Guarantor, and may exceed the aggregate Maximum Liability of
all other Subsidiary Guarantors, without impairing this Guaranty or affecting
the rights and remedies of the Lender hereunder. Nothing in this Section 9(b)
shall be construed to increase any Subsidiary Guarantor's obligations hereunder
beyond its Maximum Liability.

     (c)  In the event any Subsidiary Guarantor (a "Paying Subsidiary
Guarantor") shall make any payment or payments under this Guaranty or shall
suffer any loss as a result of any realization upon any collateral granted by it
to secure its obligations under this Guaranty, each other Subsidiary Guarantor
(each a "Non-Paying Subsidiary Guarantor") shall contribute to such Paying
Subsidiary Guarantor an amount equal to such Non-Paying Subsidiary Guarantor's
"Pro Rata Share" of such payment or payments made, or losses suffered, by such
Paying Subsidiary Guarantor. For the purposes hereof, each Non-Paying Subsidiary
Guarantor's "Pro Rata Share" with respect to any such payment or loss by a
Paying Subsidiary Guarantor shall be determined as of the date on which such
payment or loss was made by reference to the ratio of (i) such Non-Paying
Subsidiary Guarantor's Maximum Liability as of such date (without giving effect
to any right to receive, or obligation to make, any contribution hereunder) to
(ii) the aggregate Maximum Liability of all Subsidiary Guarantors hereunder
(including such Paying Subsidiary Guarantor) as of such date (without giving
effect to any right to receive, or obligation to make, any contribution
hereunder). Nothing in this Section 9 (c) shall affect any Subsidiary
Guarantor's several liability for the entire amount of the Guaranteed
Obligations (up to such Subsidiary Guarantor's Maximum Liability). Each of the
Subsidiary Guarantors covenants and agrees that its right to receive any
contribution under this Guaranty from a Non-Paying Subsidiary Guarantor shall be
subordinate and junior in right of payment to all the Guaranteed Obligations.
The provisions of this Section 9(c) are for the benefit of both the Agent and
the Subsidiary Guarantors and may be enforced by any one, or more, or all of
them in accordance with the terms hereof.

     SECTION 10. Notices.  All notices, requests and other communications to any
party hereunder shall be given or made by telecopier or other writing and
telecopied, or mailed or delivered to the intended recipient in care of the
Principal at its address or telecopier number set forth in the Agreement or such
other address or telecopy number as the Principal may hereafter specify for such
purpose by notice to the Lender. Except as otherwise provided in this Guaranty,
all such communications shall be deemed to have been duly given when transmitted
by telecopier, or personally delivered or, in the case of a mailed notice sent
by certified mail return-
<PAGE>
 
receipt requested, on the date set forth on the receipt (provided, that any
refusal to accept any such notice shall be deemed to be notice thereof as of the
time of any such refusal), in each case given or addressed as aforesaid.

     SECTION 11. No Waivers.  No failure or delay by the Lender in exercising
any right, power or privilege hereunder shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies provided in this Guaranty, the Line of Credit, the Notes,
and the other Loan Documents shall be cumulative and not exclusive of any rights
or remedies provided by law.

     SECTION 12. Successors and Assigns.  This Guaranty is for the benefit of
the Lender and its successors and permitted assigns and in the event of an
assignment of any amounts payable under the Line of Credit, the Notes, or the
other Loan Documents, the rights hereunder, to the extent applicable to the
indebtedness so assigned, may be transferred with such indebtedness. This
Guaranty shall be binding upon each of the Subsidiary Guarantors and their
respective successors and permitted assigns.

     SECTION 13. Changes in Writing.  Neither this Guaranty nor any provision
hereof may be changed, waived, discharged or terminated orally, but only in
writing signed by each of the Subsidiary Guarantors and the Lender.

     SECTION 14. GOVERNING LAW SUBMISSION TO JURISDICTION WAIVER OF JURY TRIAL.
THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF
THE STATE OF ILLINOIS. EACH OF THE SUBSIDIARY GUARANTORS HEREBY SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF ILLINOIS AND OF ANY ILLINOIS STATE COURT SITTING IN CHICAGO,
ILLINOIS AND FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO
THIS GUARANTY (INCLUDING, WITHOUT LIMITATION, ANY OF THE OTHER LOAN DOCUMENTS)
OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH OF THE SUBSIDIARY GUARANTORS
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH
ANY OF THEM MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE
SUBSIDIARY GUARANTORS, AND THE LENDER ACCEPTING THIS GUARANTY, HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED
HEREBY.

     SECTION 15. Taxes. etc.  All payments required to be made by any of the
Subsidiary Guarantors hereunder shall be made without setoff or counterclaim and
free and clear of and
<PAGE>
 
without deduction or withholding for or on account of, any present or future
taxes, levies, imposts, duties or other charges of whatsoever nature imposed by
any government or any political or taxing authority thereof, provided, however,
that if any of the Subsidiary Guarantors is required by law to make such
deduction or withholding, such Subsidiary Guarantor shall forthwith pay to the
Lender, such additional amount as results in the net amount received by the
Lender, equaling the full amount which would have been received by the Lender,
had no such deduction or withholding been made.

     IN WITNESS WHEREOF, each of the Subsidiary Guarantors has caused this
Guaranty to be duly executed, under seal, by its authorized officer as of the
day and year first above written.

 
                                     CULLIGAN INTERNATIONAL COMPANY

                                     By:

                                     Title:  Vice President, Finance



                                     BRUNER CORPORATION

                                     By:

                                     Title:  Vice President, Finance



                                     CULLIGAN DES PLAINES VALLEY
                                     WATER CONDITIONING, INC.

                                     By:

                                     Title:  Vice President, Finance



                                     CULLIGAN DISTRIBUTION SERVICES, INC.

                                     By:

                                     Title:  Vice President, Finance
<PAGE>
 
                                        CULLIGAN PENINSULA INDUSTRIAL
                                        WATER CONDITIONING CO.


                                        By:

                                        Title: Vice President, Finance



                                        CULLIGAN WATER COMPANY OF
                                        SAN DIEGO, INC.

                                        By:

                                        Title: Vice President, Finance



                                        CULLIGAN WATER CONDITIONING OF
                                        ORANGE COUNTY

                                        By:

                                        Title: Vice President, Finance



                                        CULLIGAN WATER CONDITIONING OF
                                        SOUTH BEND, INC

                                        By:

                                        Title: Vice President, Finance



                                        CWC FINANCE CORP.

                                        By:

                                        Title: Vice President, Finance



                                        EVERPURE, INC.
<PAGE>
 
                                            By:

                                            Title:  Vice President, Finance



                                            GREATER CHICAGO CULLIGAN WATER
                                            CONDITIONING, INC.

                                            By:

                                            Title:  Vice President, Finance



                                            INDIANA SOFT WATER SERVICE, INC.

                                            By:

                                            Title:  Vice President, Finance



                                            PLYMOUTH PRODUCTS, INC.

                                            By:

                                            Title:  Vice President, Finance
<PAGE>
 
                                  SCHEDULE "1"

                             SUBSIDIARY GUARANTORS
                                        
<TABLE> 
<CAPTION> 


Subsidiary                                              State of
----------                                              ----------
Guarantor                                               Incorporation
---------                                               -------------
<S>                                                        <C> 
Culligan International Company                             Delaware

Bruner Corporation                                         Delaware

Culligan Des Plaines Valley Water Conditioning, Inc.       Illinois

Culligan Distribution Services, Inc.                       Iowa

Culligan Peninsula Industrial Water Conditioning Co.       California

Culligan Water Company of San Diego, Inc.                  Delaware

Culligan Water Conditioning of Orange County               California

Culligan Water Conditioning of South Bend, Inc.            Indiana

CWC Finance Corp.                                          Illinois

Everpure, Inc.                                             Nevada

Greater Chicago Culligan Water Conditioning, Inc.          Illinois

Indiana Soft Water Service, Inc.                           Indiana

Plymouth Products, Inc.                                    Delaware
</TABLE>