Document:

Exhibit
10.1

 

EXECUTION
COPY

 

 

 

WATTS WATER
TECHNOLOGIES, INC.

 

 

$225,000,000

5.85% Senior Notes

Due April 30, 2016

 

 

 

NOTE PURCHASE
AGREEMENT

 

 

 

Dated as of April
27, 2006

 

 

 

PPN: 942749 A# 9

 

 

TABLE OF CONTENTS

 

	
  Section

  	
   

  	
   

  	
  Page

  
	
  1.

  	
  AUTHORIZATION OF NOTES

  	
  1

  
	
   

  	
   

  	
   

  
	
  2.

  	
  SALE AND PURCHASE OF NOTES

  	
  1

  
	
   

  	
   

  	
   

  
	
  3.

  	
  CLOSING

  	
  2

  
	
   

  	
   

  	
   

  
	
  4.

  	
  CONDITIONS TO CLOSING

  	
  2

  
	
   

  	
  4.1.

  	
  Representations and Warranties

  	
  2

  
	
   

  	
  4.2.

  	
  Performance; No Default

  	
  2

  
	
   

  	
  4.3.

  	
  Compliance Certificates

  	
  3

  
	
   

  	
  4.4.

  	
  Opinions of Counsel

  	
  3

  
	
   

  	
  4.5.

  	
  Purchase Permitted By Applicable Law, etc

  	
  3

  
	
   

  	
  4.6.

  	
  Sale of Other Notes

  	
  3

  
	
   

  	
  4.7.

  	
  Payment of Special Counsel Fees

  	
  3

  
	
   

  	
  4.8.

  	
  Private Placement Number

  	
  4

  
	
   

  	
  4.9.

  	
  Changes in Corporate Structure

  	
  4

  
	
   

  	
  4.10.

  	
  Subsidiary Guaranty

  	
  4

  
	
   

  	
  4.11.

  	
  New Credit Agreement

  	
  4

  
	
   

  	
  4.12.

  	
  Proceedings and Documents.

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

  	
  4

  
	
   

  	
  5.1.

  	
  Organization; Power and Authority

  	
  4

  
	
   

  	
  5.2.

  	
  Authorization, etc

  	
  5

  
	
   

  	
  5.3.

  	
  Disclosure

  	
  5

  
	
   

  	
  5.4.

  	
  Organization and Ownership of Shares of
  Subsidiaries; Affiliates

  	
  6

  
	
   

  	
  5.5.

  	
  Financial Statements

  	
  6

  
	
   

  	
  5.6.

  	
  Compliance with Laws, Other Instruments, etc

  	
  7

  
	
   

  	
  5.7.

  	
  Governmental Authorizations, etc.

  	
  7

  
	
   

  	
  5.8.

  	
  Litigation; Observance of Agreements, Statutes and
  Orders

  	
  7

  
	
   

  	
  5.9.

  	
  Taxes

  	
  8

  
	
   

  	
  5.10.

  	
  Title to Property; Leases

  	
  8

  
	
   

  	
  5.11.

  	
  Licenses, Permits, etc

  	
  8

  
	
   

  	
  5.12.

  	
  Compliance with ERISA

  	
  9

  
	
   

  	
  5.13.

  	
  Private Offering by the Company

  	
  10

  
	
   

  	
  5.14.

  	
  Use of Proceeds; Margin Regulations

  	
  10

  
	
   

  	
  5.15.

  	
  Existing Debt; Future Liens

  	
  10

  
	
   

  	
  5.16.

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

  	
  11

  
	
   

  	
  5.17.

  	
  Status under Certain Statutes

  	
  11

  
	
   

  	
  5.18.

  	
  Environmental Matters

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  REPRESENTATIONS OF THE PURCHASERS.

  	
  12

  
	
   

  	
  6.1.

  	
  Purchase for Investment

  	
  12

  
	
   

  	
  6.2.

  	
  Source of Funds

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  INFORMATION AS TO COMPANY

  	
  14

  

 

i

 

	
   

  	
  7.1.

  	
  Financial and Business Information

  	
  14

  
	
   

  	
  7.2.

  	
  Officer’s Certificate

  	
  16

  
	
   

  	
  7.3.

  	
  Inspection

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  PREPAYMENT OF THE NOTES.

  	
  18

  
	
   

  	
  8.1.

  	
  No Scheduled Prepayments

  	
  18

  
	
   

  	
  8.2.

  	
  Optional Prepayments with Make-Whole Amount

  	
  18

  
	
   

  	
  8.3.

  	
  Allocation of Partial Prepayments

  	
  18

  
	
   

  	
  8.4.

  	
  Maturity; Surrender, etc

  	
  18

  
	
   

  	
  8.5.

  	
  Purchase of Notes

  	
  19

  
	
   

  	
  8.6.

  	
  Make-Whole Amount

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  AFFIRMATIVE COVENANTS

  	
  20

  
	
   

  	
  9.1.

  	
  Compliance with Law

  	
  20

  
	
   

  	
  9.2.

  	
  Insurance

  	
  20

  
	
   

  	
  9.3.

  	
  Maintenance of Properties

  	
  21

  
	
   

  	
  9.4.

  	
  Payment of Taxes and Claims

  	
  21

  
	
   

  	
  9.5.

  	
  Corporate Existence, etc

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  NEGATIVE COVENANTS

  	
  21

  
	
   

  	
  10.1.

  	
  Fixed Charge Coverage Ratio

  	
  22

  
	
   

  	
  10.2.

  	
  Priority Debt

  	
  22

  
	
   

  	
  10.3.

  	
  Liens.

  	
  22

  
	
   

  	
  10.4.

  	
  Sale of Assets

  	
  23

  
	
   

  	
  10.5.

  	
  Mergers, Consolidations, etc

  	
  25

  
	
   

  	
  10.6.

  	
  Designation of Restricted and Unrestricted
  Subsidiaries

  	
  25

  
	
   

  	
  10.7.

  	
  Subsidiary Guaranty.

  	
  26

  
	
   

  	
  10.8.

  	
  Nature of Business.

  	
  26

  
	
   

  	
  10.9.

  	
  Transactions with Affiliates

  	
  26

  
	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  EVENTS OF DEFAULT

  	
  27

  
	
   

  	
   

  	
   

  
	
  12.

  	
  REMEDIES ON DEFAULT, ETC

  	
  29

  
	
   

  	
  12.1.

  	
  Acceleration

  	
  29

  
	
   

  	
  12.2.

  	
  Other Remedies

  	
  30

  
	
   

  	
  12.3.

  	
  Rescission

  	
  30

  
	
   

  	
  12.4.

  	
  No Waivers or Election of Remedies, Expenses, etc

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
  REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES

  	
  30

  
	
   

  	
  13.1.

  	
  Registration of Notes

  	
  30

  
	
   

  	
  13.2.

  	
  Transfer and Exchange of Notes

  	
  31

  
	
   

  	
  13.3.

  	
  Replacement of Notes

  	
  31

  
	
   

  	
   

  	
   

  	
   

  
	
  14.

  	
  PAYMENTS ON NOTES.

  	
  32

  
	
   

  	
  14.1.

  	
  Place of Payment

  	
  32

  
	
   

  	
  14.2.

  	
  Home Office Payment

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
  15.

  	
  EXPENSES, ETC

  	
  32

  
	
   

  	
  15.1.

  	
  Transaction Expenses

  	
  32

  
	
   

  	
  15.2.

  	
  Survival

  	
  33

  

 

ii

 

	
  16.

  	
  SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
  AGREEMENT

  	
  33

  
	
   

  	
   

  	
   

  
	
  17.

  	
  AMENDMENT AND WAIVER

  	
  33

  
	
   

  	
  17.1.

  	
  Requirements

  	
  33

  
	
   

  	
  17.2.

  	
  Solicitation of Holders of Notes

  	
  33

  
	
   

  	
  17.3.

  	
  Binding Effect, etc

  	
  34

  
	
   

  	
  17.4.

  	
  Notes held by Company, etc

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
  18.

  	
  NOTICES

  	
  34

  
	
   

  	
   

  	
   

  
	
  19.

  	
  REPRODUCTION OF DOCUMENTS

  	
  35

  
	
   

  	
   

  	
   

  
	
  20.

  	
  CONFIDENTIAL INFORMATION

  	
  35

  
	
   

  	
   

  	
   

  
	
  21.

  	
  SUBSTITUTION OF PURCHASER

  	
  36

  
	
   

  	
   

  	
   

  
	
  22.

  	
  RELEASE OF SUBSIDIARY GUARANTOR

  	
  36

  
	
   

  	
   

  	
   

  
	
  23.

  	
  MISCELLANEOUS

  	
  37

  
	
   

  	
  23.1.

  	
  Successors and Assigns

  	
  37

  
	
   

  	
  23.2.

  	
  Payments Due on Non-Business Days

  	
  37

  
	
   

  	
  23.3.

  	
  Severability

  	
  37

  
	
   

  	
  23.4.

  	
  Construction

  	
  37

  
	
   

  	
  23.5.

  	
  Counterparts

  	
  38

  
	
   

  	
  23.6.

  	
  Governing Law

  	
  38

  

 

iii

 

	
  SCHEDULE A

  	
  —

  	
  Information
  Relating to Purchasers

  
	
  SCHEDULE B

  	
  —

  	
  Defined Terms

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 4.9

  	
  —

  	
  Changes in
  Corporate Structure

  
	
  SCHEDULE 5.3

  	
  —

  	
  Disclosure

  
	
  SCHEDULE 5.4

  	
  —

  	
  Subsidiaries;
  Affiliates

  
	
  SCHEDULE 5.5

  	
  —

  	
  Financial
  Statements

  
	
  SCHEDULE 5.11

  	
  —

  	
  Licenses,
  Permits, etc.

  
	
  SCHEDULE 5.14

  	
  —

  	
  Use of Proceeds

  
	
  SCHEDULE 5.15

  	
  —

  	
  Existing Debt

  
	
  SCHEDULE 10.3

  	
  —

  	
  Liens

  
	
   

  	
   

  	
   

  
	
  EXHIBIT 1

  	
  —

  	
  Form of Senior
  Note

  
	
  EXHIBIT
  4.4(a)(i)

  	
  —

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

  
	
  EXHIBIT
  4.4(a)(ii)

  	
  —

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

  
	
  EXHIBIT 4.4(b)

  	
  —

  	
  Form of Opinion
  of Special Counsel for the Purchasers

  
	
  EXHIBIT B-1

  	
  —

  	
  Form of
  Subsidiary Guaranty

  

 

iv

 

WATTS WATER
TECHNOLOGIES, INC.

815 Chestnut
Street

North Andover,
MA  01845

(978) 688-1811

Fax:  (978) 794-1848

 

$225,000,000

5.85% Senior
Notes, due April 30, 2016

 

Dated as of April
27, 2006

 

TO EACH OF THE
PURCHASERS LISTED IN

THE ATTACHED SCHEDULE A:

 

Ladies and
Gentlemen:

 

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

 

1.                                      AUTHORIZATION
OF NOTES.

 

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

 

2.                                      SALE
AND PURCHASE OF NOTES.

 

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

 

 

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

 

3.                                      CLOSING.

 

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

 

4.                                      CONDITIONS
TO CLOSING.

 

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

 

4.1.         Representations and Warranties.

 

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

 

4.2.         Performance; No Default.

 

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

 

2

 

4.3.         Compliance Certificates.

 

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

 

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

 

4.4.         Opinions of Counsel.

 

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

 

4.5.         Purchase Permitted By Applicable Law,
etc.

 

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

 

4.6.         Sale of Other Notes.

 

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

 

4.7.         Payment of Special Counsel Fees.

 

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

 

3

 

4.8.         Private Placement Number.

 

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

 

4.9.         Changes in Corporate Structure.

 

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

 

4.10.       Subsidiary Guaranty.

 

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

 

4.11.       New Credit Agreement.

 

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

 

4.12.       Proceedings and Documents. 

 

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

 

5.                                      REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.

 

The Company represents and warrants to you that:

 

5.1.         Organization; Power and Authority.

 

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

 

4

 

5.2.         Authorization, etc.

 

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

 

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

 

5.3.         Disclosure.

 

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

 

5

 

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

 

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

 

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

 

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

 

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

 

5.5.         Financial Statements.

 

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

 

6

 

5.6.         Compliance with Laws, Other
Instruments, etc.

 

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

 

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

 

5.7.         Governmental Authorizations, etc. 

 

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

 

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

 

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

 

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

 

7

 

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

 

5.9.         Taxes.

 

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

 

5.10.       Title to Property; Leases.

 

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

 

5.11.       Licenses, Permits, etc.

 

Except as disclosed in Schedule 5.11,

 

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

 

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

 

8

 

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

 

5.12.       Compliance with ERISA.

 

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

 

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

 

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

 

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

 

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

 

9

 

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

 

5.13.       Private Offering by the Company.

 

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

 

5.14.       Use of Proceeds; Margin Regulations.

 

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

 

5.15.       Existing Debt; Future Liens.

 

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

 

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

 

10

 

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

 

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

 

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

 

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

 

5.17.       Status under Certain Statutes.

 

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

 

5.18.       Environmental Matters.

 

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

 

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

 

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

 

11

 

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

 

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

 

6.                                      REPRESENTATIONS
OF THE PURCHASERS. 

 

6.1.         Purchase for Investment.

 

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

 

6.2.         Source of Funds.

 

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

 

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

 

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

 

12

 

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

 

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

 

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

 

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

 

(f)            the Source is a governmental plan;
or

 

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

 

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

 

13

 

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

 

7.                                      INFORMATION
AS TO COMPANY.

 

7.1.         Financial and Business Information 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

14

 

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

 

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

 

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

 

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

 

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

 

15

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

7.2.         Officer’s Certificate.

 

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

 

16

 

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

 

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

 

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

 

7.3.         Inspection.

 

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

 

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

 

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

 

17

 

8.                                      PREPAYMENT
OF THE NOTES. 

 

8.1.         No Scheduled Prepayments.

 

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

 

8.2.         Optional Prepayments with Make-Whole
Amount.

 

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

 

8.3.         Allocation of Partial Prepayments.

 

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

 

8.4.         Maturity; Surrender, etc.

 

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

 

18

 

8.5.         Purchase of Notes.

 

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

 

8.6.         Make-Whole Amount.

 

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

 

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

 

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

 

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

 

19

 

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

 

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

 

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

 

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

 

9.                                      AFFIRMATIVE
COVENANTS.

 

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

 

9.1.         Compliance with Law.

 

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

 

9.2.         Insurance.

 

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

 

20

 

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

 

9.3.         Maintenance of Properties.

 

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

 

9.4.         Payment of Taxes and Claims.

 

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

 

9.5.         Corporate Existence, etc.

 

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

 

10.                               NEGATIVE
COVENANTS.

 

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

 

21

 

10.1.       Fixed Charge Coverage Ratio.

 

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

 

10.2.       Priority Debt.

 

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

 

10.3.       Liens. 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

22

 

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

 

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

 

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

 

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

 

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

 

10.4.       Sale of Assets.

 

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

 

(a)           Dispositions in the ordinary course
of business;

 

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

 

23

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

24

 

10.5.       Mergers, Consolidations, etc.

 

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

 

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

 

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

 

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

 

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

 

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

 

10.6.       Designation of Restricted and
Unrestricted Subsidiaries.

 

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

 

25

 

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

 

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

 

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

 

10.7.       Subsidiary Guaranty. 

 

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

 

10.8.       Nature of Business. 

 

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

 

10.9.       Transactions with Affiliates.

 

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

 

26

 

11.                               EVENTS
OF DEFAULT.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

27

 

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

 

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

 

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

 

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

 

28

 

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

 

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

 

12.                               REMEDIES
ON DEFAULT, ETC.

 

12.1.       Acceleration.

 

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

 

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

 

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

 

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

 

29

 

12.2.       Other Remedies.

 

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

 

12.3.       Rescission.

 

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

 

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

 

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

 

13.                               REGISTRATION;
EXCHANGE; SUBSTITUTION OF NOTES.

 

13.1.       Registration of Notes.

 

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

 

30

 

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

 

13.2.       Transfer and Exchange of Notes.

 

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

 

13.3.       Replacement of Notes.

 

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

 

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

 

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

 

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

 

31

 

14.                               PAYMENTS
ON NOTES. 

 

14.1.       Place of Payment.

 

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

 

14.2.       Home Office Payment.

 

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

 

15.                               EXPENSES,
ETC.

 

15.1.       Transaction Expenses.

 

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

 

32

 

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

 

15.2.       Survival.

 

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

 

16.                               SURVIVAL
OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.

 

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

 

17.                               AMENDMENT
AND WAIVER.

 

17.1.       Requirements.

 

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

 

17.2.       Solicitation of Holders of Notes.

 

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

 

33

 

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

 

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

 

17.3.       Binding Effect, etc.

 

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

 

17.4.       Notes held by Company, etc.

 

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

 

18.                               NOTICES.

 

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

 

34

 

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

 

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

 

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

 

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

 

19.                               REPRODUCTION
OF DOCUMENTS.

 

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

 

20.                               CONFIDENTIAL
INFORMATION.

 

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

 

35

 

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

 

21.                               SUBSTITUTION
OF PURCHASER.

 

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

 

22.                               RELEASE
OF SUBSIDIARY GUARANTOR.

 

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

 

36

 

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

 

23.                               MISCELLANEOUS.

 

23.1.       Successors and Assigns.

 

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

 

23.2.       Payments Due on Non-Business Days.

 

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

 

23.3.       Severability.

 

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

 

23.4.       Construction.

 

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

 

37

 

23.5.       Counterparts.

 

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

 

23.6.       Governing Law.

 

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

 

*   
*    *    *   
*

 

38

 

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

 

	
   

  	
  Very truly yours,

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  WATTS WATER TECHNOLOGIES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ William C. McCartney

  	
   

  
	
   

  	
  Name:

  	
   William C. McCartney

  	
   

  
	
   

  	
  Title:

  	
     Chief Financial Officer

  	
   

  
							

 

S-1

 

	
  The foregoing is agreed

  	
   

  	
   

  
	
  to as of the date thereof.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  METROPOLITAN LIFE INSURANCE

  COMPANY

  	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Judith A. Gulotta

  	
   

  	
   

  
	
  Name: 

  	
  Judith A. Gulotta

  	
   

  	
   

  
	
  Title:

  	
  Director

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  THE TRAVELERS INSURANCE COMPANY

  	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  /s/ Judith A. Gulotta

  	
   

  	
   

  
	
  Name: 

  	
  Judith A. Gulotta

  	
   

  	
   

  
	
  Title:

  	
  Director

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  THE TRAVELERS LIFE AND ANNUITY

  REINSURANCE COMPANY

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  METLIFE INVESTORS USA INSURANCE

  COMPANY

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  METLIFE INVESTORS INSURANCE

  COMPANY

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: Metropolitan Life Insurance Company, its

  investment manager

  	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Judith A. Gulotta

  	
   

  	
   

  
	
  Name: 

  	
  Judith A. Gulotta

  	
   

  	
   

  
	
  Title:

  	
  Director

  	
   

  	
   

  
	
   

  	
   

  
	
  MASSACHUSETTS MUTUAL LIFE

  INSURANCE COMPANY

  	
   

  	
   

  
	
  By: BABSON CAPITAL MANAGEMENT LLC,

  Its Investment Advisor

  	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  /s/ Elisabeth A. Perenick

  	
   

  	
   

  
	
  Name: 

  	
  Elisabeth A. Perenick

  	
   

  	
   

  
	
  Title:

  	
  Managing Director

  	
   

  	
   

  
										

 

S-2

 

	
  C.M. LIFE INSURANCE COMPANY

  	
   

  	
   

  
	
  By: BABSON CAPITAL MANAGEMENT LLC,

  Its Investment Sub-Advisor

  	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Elisabeth A. Perenick

  	
   

  	
   

  
	
  Name: 

  	
  Elisabeth A. Perenick

  	
   

  	
   

  
	
  Title:

  	
  Managing Director

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  MASSMUTUAL ASIA LIMITED

  	
   

  	
   

  
	
  By: BABSON CAPITAL MANAGEMENT LLC,

  Its Investment Advisor

  	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Elisabeth A. Perenick

  	
   

  	
   

  
	
  Name: 

  	
  Elisabeth A. Perenick

  	
   

  	
   

  
	
  Title:

  	
  Managing Director

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  MML BAY STATE LIFE INSURANCE

  COMPANY

  	
   

  	
   

  
	
  By: BABSON CAPITAL MANAGEMENT LLC,

  Its Investment Sub-Advisor

  	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Elisabeth A. Perenick

  	
   

  	
   

  
	
  Name: 

  	
  Elisabeth A. Perenick

  	
   

  	
   

  
	
  Title:

  	
  Managing Director

  	
   

  	
   

  
	
   

  	
   

  
	
  JEFFERSON-PILOT LIFE INSURANCE

  COMPANY

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: Delaware Investment Advisers, a series
  of

  Delaware Management Business Trust, Attorney

  in Fact

  	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Chuck Devereux

  	
   

  	
   

  
	
  Name: 

  	
  Chuck Devereux

  	
   

  	
   

  
	
  Title:

  	
  Senior Vice President

  	
   

  	
   

  
						

 

S-3

 

	
  JEFFERSON PILOT FINANCIAL INSURANCE

  COMPANY

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: Delaware Investment Advisers, a series
  of

  Delaware Management Business Trust, Attorney

  in Fact

  	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Chuck Devereux

  	
   

  	
   

  
	
  Name: 

  	
  Chuck Devereux

  	
   

  	
   

  
	
  Title:

  	
  Senior Vice President

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  CONNECTICUT GENERAL LIFE INSURANCE

  COMPANY

  	
   

  	
   

  
	
  By: CIGNA Investments, Inc. (authorized agent)

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
         /s/ Lori E. Hopkins

  	
   

  	
   

  
	
   

  	
  Name:

  	
    Lori E. Hopkins

  	
   

  	
   

  
	
   

  	
  Title:

  	
      Vice President

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  LIFE INSURANCE COMPANY OF NORTH

  AMERICA

  	
   

  	
   

  
	
  By: CIGNA Investments, Inc. (authorized agent)

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
         /s/ Lori E. Hopkins

  	
   

  	
   

  
	
   

  	
  Name:

  	
    Lori E. Hopkins

  	
   

  	
   

  
	
   

  	
  Title:

  	
      Vice President

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  BANKERS LIFE AND CASUALTY COMPANY

  	
   

  	
   

  
	
  CONSECO LIFE INSURANCE COMPANY

  	
   

  	
   

  
	
  CONSECO SENIOR HEALTH INSURANCE

  	
   

  	
   

  
	
  COMPANY

  	
   

  	
   

  
	
  CONSECO HEALTH INSURANCE COMPANY

  	
   

  	
   

  
	
  WASHINGTON NATIONAL INSURANCE

  	
   

  	
   

  
	
  COMPANY

  	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Timothy L. Powell

  	
   

  	
   

  
	
  Name: 

  	
  Timothy L. Powell

  	
   

  	
   

  
	
  Title:

  	
  Vice President

  	
   

  	
   

  
										

 

S-4

 

	
  AMERICAN INVESTORS LIFE INSURANCE

  COMPANY

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: AmerUs Capital Management Group, Inc.,

  its authorized attorney-in-fact

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
       /s/ Roger D. Fors

  	
   

  	
   

  
	
   

  	
  Name:

  	
    Roger D. Fors

  	
   

  	
   

  
	
   

  	
  Title:

  	
    Vice President – Private Placements

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  LAFAYETTE LIFE INSURANCE COMPANY

  	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
    /s/ Kent R. Adams

  	
   

  	
   

  
	
  Name: 

  	
   Kent R. Adams

  	
   

  	
   

  
	
  Title:

  	
   V.P. Fixed Income Securities

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  FARM BUREAU LIFE INSURANCE COMPANY

  OF MICHIGAN

  	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   /s/ Kent R. Adams

  	
   

  	
   

  
	
  Name:

  	
  Kent R. Adams

  	
   

  	
   

  
	
  Title:

  	
  V.P. Fixed Income Securities

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  AMERICAN UNITED LIFE INSURANCE

  COMPANY

  	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Kent R. Adams

  	
   

  	
   

  
	
  Name: 

  	
  Kent R. Adams

  	
   

  	
   

  
	
  Title:

  	
  V.P. Fixed Income Securities

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  THE STATE LIFE INSURANCE COMPANY

  	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
    /s/ Kent R. Adams

  	
   

  	
   

  
	
  Name: 

  	
  Kent R. Adams

  	
   

  	
   

  
	
  Title:

  	
  V.P. Fixed Income Securities

  	
   

  	
   

  
											

 

S-5

 

	
  HARTFORD LIFE INSURANCE COMPANY

  	
   

  	
   

  
	
  By: Hartford Investment Management Company

  	
   

  	
   

  
	
  Its: Agent and Attorney-in-Fact

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
           /s/ Ronald A.
  Mendel

  	
   

  	
   

  
	
   

  	
  Name:

  	
     Ronald A. Mendel

  	
   

  	
   

  
	
   

  	
  Title:

  	
     Managing Director

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  SWISS RE LIFE & HEALTH AMERICA INC.

  	
   

  	
   

  
	
  By: Swiss Re Asset Management (Americas) Inc.

  	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
       /s/ John H. DeMallie

  	
   

  	
   

  
	
  Name:

  	
  John H. DeMallie

  	
   

  	
   

  
	
  Title:

  	
  Vice President

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  ASSURITY LIFE INSURANCE COMPANY

  	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
     /s/ Victor Weber

  	
   

  	
   

  
	
  Name: 

  	
  Victor Weber

  	
   

  	
   

  
	
  Title:

  	
  Senior Director - Investments

  	
   

  	
   

  
									

 

6

 

SCHEDULE B

 

DEFINED TERMS

 

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

 

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

 

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

 

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

 

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

 

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

 

“Closing” is defined
in Section 3.

 

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

 

 

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

 

“Confidential Information”
is defined in Section 20.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(a)           its liabilities for
borrowed money;

 

2

 

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

 

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

 

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

 

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

 

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

 

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

 

“Disposition” is
defined in Section 10.4.

 

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

 

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

 

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

 

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

 

“Event of Default”
is defined in Section 11.

 

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

 

3

 

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

 

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

 

“Governmental Authority”
means

 

(a)           the government of

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

4

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

5

 

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

 

“Memorandum” is
defined in Section 5.3.

 

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

 

“Notes” is defined
in Section 1.

 

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

 

“Other Purchasers”
is defined in Section 2.

 

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

 

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

 

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

 

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

 

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

 

“Purchaser” means
each purchaser listed in Schedule A.

 

6

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Source” is defined
in Section 6.2.

 

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

 

“Subsidiary Guarantor”
is defined in Section 1.

 

“Subsidiary Guaranty”
is defined in Section 1.

 

7

 

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

 

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

 

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

 

8EXHIBIT 10.2

 

[FORM OF
SENIOR NOTE]

 

WATTS WATER
TECHNOLOGIES, INC.

 

5.85% SENIOR NOTE

DUE APRIL 30, 2016

 

	
  No.
  R-[          ]

  	
   

  	
   

  	
   

  	
  [Date]

  
	
  $[                ]

  	
   

  	
   

  	
   

  	
  PPN:

  	
  942749 A# 9

  

 

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 April 30, 2016, 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
5.85% per annum from the date hereof, payable semiannually, on April 30 and
October 30, in each year, commencing with the April 30 or October 30 next
succeeding the date hereof (except that the first such payment shall be on
October 30, 2006), 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) 7.85% 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 April 27, 2006 (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 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 April 27, 2006 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:

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