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Prepared by MERRILL CORPORATION www.edgaradvantage.com

Execution Copy  

June 30, 2000 

U.S.
Bank National Association

610 Second Avenue South

Minneapolis, Minnesota 55402 

Ladies
and Gentlemen: 

    Reference
is made to that certain amended and restated letter credit facility agreement dated as of March 18, 1998, as amended by letter amendments dated May 6, 1998,
August 14, 1998, February 18, 1999 and March 29, 2000 ( as so amended, the "Credit Agreement"), between Osmonics, Inc., a Minnesota corporation (the "Borrower") and U.S.
Bank National Association (f/k/a First Bank National Association), a national banking association ("U.S. Bank," or in its capacity as agent for the Banks described in the Credit Agreement, the
"Agent"). Capitalized terms not otherwise defined herein shall have the same meaning as defined in the Credit Agreement. The Borrower desires to amend the Credit Agreement with respect to certain
provisions thereof. 

    Section
1.  Amendments to Credit Agreement.  Subject to Section 4 hereof, the Credit Agreement is amended
as follows: 

    (a) Schedule 1.1
is amended to replace the amount "$30,000,000 with the amount "$24,000,000." 

    (b) Section 2.1
of the Credit Agreement is amended by deleting Sections 2.1(c)(iii) and (iv) thereof and substituting in lieu thereof the
following: 

    (iii) [Reserved]

    (iv) [Reserved]

    (c) Section
4.11(j) of the Credit Agreement is deleted in its entirety. 

    (d) Section
4.20(a) of the Credit Agreement is amended to read in its entirety as follows: 

    (a)  Leverage Ratio.  The Borrower will not permit the Leverage Ratio (as defined in Section 7
hereof) as of the last day of any fiscal quarter ending during any period of measurement described below to be greater than the ratio set forth below for such period: 

	Measurement Period	 	Maximum Leverage Ratio
	April 1, 2000 through September 30, 2000	 	3.25 to 1.00
	October 1, 2000, and thereafter	 	2.75 to 1.00

provided , however, that if the Borrower elects to pay dividends at any time prior to March 31, 2003, as permitted pursuant to the provisions in
Section 4.15(a), the maximum Leverage Ratio for the period from the date such dividends are paid shall be 2.50 to 1.00. 

    (e) Section
5.1(c) of the Credit Agreement is amended by deleting the clause ", or Section 3 or 4 of the Security Agreement" and substituting a period in lieu
thereof. 

    (f)  Section
5.1(j) of the Credit Agreement is deleted in its entirety. 

    (g) Section 7 of the Credit Agreement is amended by deleting the definitions of "Control Agreement," "Loan Documents," "Revolving Commitment Amount," "Security
Agreement," and "Security
Documents" and substituting in lieu thereof the following definitions in the appropriate alphabetical order: 

    "Loan Documents": This Agreement and the Notes. 

    "Revolving Commitment Amount": With respect to a Bank, initially the amount set opposite such Bank's name on Schedule 1.1 hereof as its
Revolving Commitment Amount, but as the same may be reduced from time to time pursuant to Section 1.7 hereof. 

    (h) Section
8.1 of the Credit Agreement is amended by deleting the clause "amending the Security Agreement or releasing or subordinating any of the "Collateral" (as
defined therein, except as provided therein)," as it appears therein. 

    (i)  Exhibit
A to the Credit Agreement is hereby amended and restated to read as set forth on Exhibit A to this Amendment, which Exhibit A is hereby made a part of the
Credit Agreement as Exhibit A thereto. 

    Section
2.  [Reserved]  

    Section
3.  Representations and Warranties of the Borrower.  To induce the Banks to enter into this
Amendment and to make and maintain the Revolving Loans under the Credit Agreement as amended hereby, the Borrower hereby warrants and represents to the Banks that it is duly authorized to execute and
deliver this Amendment, and to perform its obligations under the Credit Agreement as amended hereby, and that this Amendment constitutes the legal, valid and binding obligation of the Borrower,
enforceable in accordance with its terms. 

    Section
4.  Conditions to the Effectiveness of this Amendment.  This Amendment shall not become effective
until, and shall become effective when, each and every one of the following conditions shall have been satisfied: 

    (a) the
Agent shall have received executed counterparts of this Amendment, duly executed by the Borrower and each of the Banks. 

    (b) the
Agent shall have received the following instruments, documents and certificates: 

	(i)
	a
new Revolving Note in the form of Exhibit A to this Amendment, duly executed by the
Borrower;

	(ii)
	a
Termination Agreement in the form of Exhibit B to this Amendment, duly executed by the
parties thereto (the "Termination Agreement"); 

    (c) the
Agent shall have received for distribution pursuant to the Termination Agreement and from the proceeds of the "Collateral" subject to the Security Agreement,
cash equal to not less than US$4,000,000. 

    (d) the
representations and warranties in the Credit Agreement shall be true and correct as though made on the date hereof, except for changes that are permitted by the
terms of the Credit Agreement. 

    (e) except
as described in Section 2.1 and 2.2 hereof, no Event of Default shall have occurred and be continuing under the Credit Agreement. 

    Notwithstanding
any provision hereof, this Amendment shall terminate and the Agent and the Banks shall have no obligation hereunder if the forgoing conditions precedent are not
satisfied by 4:00 p.m. (Minneapolis time) June 30, 2000, provided, however, that the obligations of the Companies under Section 5.2 of this Amendment shall survive any such
termination. 

2

    Upon satisfaction of all of the foregoing, (a) the Agent shall notify the Borrower and the Banks that this Amendment has become effective, but the failure of the Agent to give
such notice shall not affect the validity of this Amendment or prevent it from becoming effective, and (b) the Agent shall cause to
be returned to the Borrower such of the Collateral (as defined in the Security Agreement) as shall not have been sold or otherwise applied pursuant to the terms hereof or the Termination Agreement. 

    Section
5.  General.  

    5.1  Construction.  All references in the Credit Agreement to "this Agreement," "herein" and similar
references shall be deemed to refer to the Credit Agreement as amended by this Amendment. All references in the other Loan Documents to the "Credit Agreement" and similar references shall be deemed to
refer to the Credit Agreement, as amended by this Amendment. Except as hereby amended, the Credit Agreement shall remain in full force and effect and is hereby ratified and confirmed in all respects. 

    5.2  Expenses.  The Borrower agrees to reimburse the Agent upon demand for all reasonable expenses
(including reasonable attorneys' fees and legal expenses) incurred by the Agent in the preparation, negotiation and execution of this Amendment and any other document required to be furnished
herewith, and in enforcing the obligations of the Borrower hereunder, and to pay and save the Agent and the Banks harmless from all liability for, any stamp or other taxes which may be payable with
respect to the execution or delivery of this Amendment or the issuance of the Note hereunder, which obligations of the Borrower shall survive any termination of the Credit Agreement or this Amendment. 

    5.3  Counterparts.  This Amendment may be executed in as many counterparts as may be deemed necessary or
convenient, and by the different parties hereto on separate counterparts, each of which, when so executed, shall be deemed an original but all such counterparts shall constitute but one and the same
instrument. 

    5.4  Severability.  Any provision of this Amendment which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining portions hereof or affecting the validity or
enforceability of such provisions in any other jurisdiction. 

    5.5  Law.  This Amendment shall be governed by, and construed in accordance with, the internal law, and
not the law of conflicts, of the State of Minnesota. 

OSMONICS,
INC. 

By 

   Its 

Accepted
and agreed to as of the day and year first above written. 

U.S.
BANK NATIONAL ASSOCIATION

(f/k/a FIRST BANK NATIONAL ASSOCIATION)

in its individual capacity and as Agent 

By 

   Its 

3Prepared by MERRILL CORPORATION www.edgaradvantage.com

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Execution Copy  

  
      TERMINATION AGREEMENT         

    THIS TERMINATION AGREEMENT dated as of June 30, 2000 (the "Agreement") is made by and between ReliaStar Life Insurance Company, Northern Life Insurance
Company, ReliaStar Life Insurance Company of New York, ReliaStar United Services Life Insurance Company, Washington Square Advisers Private Placement Fund, any subsequent holder of a Note under the
Note Purchase Agreement (as defined in the Intercreditor Agreement) (collectively, the "Purchasers"), the banks which are parties to the Credit Agreement specified below (the "Banks"), and U.S. Bank
National Association, as agent for the Banks (in such capacity, the "Agent") and as Collateral Agent under the Security Documents (defined below) (in such capacity, the "Collateral Agent"). 

  RECITALS         

     A. The
Banks, the Agent and Osmonics, Inc., a Minnesota corporation (the "Borrower") are parties to that certain Amended and Restated Letter Credit Agreement
dated as of March 18, 1998 (as amended, and as the same may be amended, supplemented or modified from time to time, the "Credit Agreement"). 

     B. The
Banks, the Agent, the Purchasers and the Collateral Agent are parties to that certain Amended and Restated Security Agreement dated as of March 18, 1998
(the "Security Agreement") whereunder, among other things, the Borrower granted to the Collateral Agent for the benefit of the Agent, the Banks and the Purchasers a security interest in certain
"Collateral" consisting of certain securities accounts and investments. 

     C. In
connection with the Security Agreement, the Purchasers, the Banks, the Agent and the Collateral Agent executed and mutually delivered an Intercreditor Agreement
dated as of March 18, 1998 (the "Intercreditor Agreement" and collectively with the Security Agreement, the "Security Documents"). 

     D. The
Borrower has requested that the Agent, the Banks, Collateral Agent and the Purchasers agree to terminate the Security Documents, in exchange for the
Pay-Down Amounts indicated below. 

    NOW,
THEREFORE, in consideration of the foregoing Recitals and for other good and valuable consideration, it is agreed as follows: 

  TERMS         

    1.  Distribution of Pay-Down Amounts.  On June 30, 2000, the Borrower shall cause to
be distributed to the Collateral Agent from the proceeds of the "Collateral" (as defined in the Security Agreement) the aggregate amount of $4,000,000 (the "Pay-Down Amount"). Upon
receiving such distribution, the Collateral Agent shall distribute the Pay-Down Amount to the Purchasers for application to the Notes issued under the Note Purchase Agreement. The
Collateral Agent shall distribute the Pay-Down Amount pursuant to wire transfer instructions furnished in writing to the Collateral Agent by the Borrower. This Agreement shall terminate
and the Purchasers, the Collateral Agent, the Agent and the Banks shall have no obligation hereunder if the Pay-Down Amount is not received by the Collateral Agent by 4:00 p.m.
(Minneapolis time) on June 30, 2000. 

    2.  Termination of Security Documents.  Upon the distribution of the Pay-Down Amount by the
Collateral Agent to the Banks and the Purchasers in the manner set forth in Section 1 hereof, the Security Documents shall be automatically terminated without further action by the parties,
provided, that Section 8(e) of the Security Agreement and Section 10 of the Intercreditor Agreement shall each remain in full force and effect and shall not be terminated hereby. 

    3.  Notices.  Any notice, report, demand, waiver, distribution, consent, and other communications
pertaining to this Agreement shall be in writing and shall be given by hand delivery, by prepaid 

registered or certified mail, with return receipt requested, by an established national overnight courier providing proof of delivery for next business day delivery, addressed as follows: 

If
to the Purchasers: 

c/o
Reliastar Investment Research, Inc.

100 Washington Avenue South

Minneapolis, MN 55401-2121

Attention: Randall J. Williamson

Telecopier: 612-372-5368 

If
to the Agent or the Banks: 

Mail
Station—MPFP0609

601 Second Avenue South

Minneapolis, MN 55402-4302

Attention: Nick Myers

Telecopier: 612-973-0822 

If
to the Grantor: 

5951
Clearwater Drive

Minnetonka, Minnesota 55343

Attention: Keith B. Robinson

Telecopier: 612-933-0141 

    The
date of any such notice and service thereof shall be deemed to be (i) the day of delivery if hand delivered or delivered by overnight courier or (ii) the day of
delivery as indicated on the return receipt if dispatched by mail. Any party may change its address for the purpose of notice by giving of such change in accordance with the provisions of this
Section. 

    4.  Miscellaneous.  This Agreement constitutes the entire agreement and understanding of the parties
concerning subject matter thereof. This Agreement may be amended only by a writing signed by the party against whom enforcement is sought. The headings in this Agreement are intended solely for
convenience or reference and shall be given no effect in the construction or interpretation of this Agreement. This Agreement shall be governed by and construed in accordance with the laws of the
State of Minnesota, without regard to the choice of law rules utilized in that jurisdiction. This Agreement, when transmitted by facsimile or otherwise, shall bind and inure to the benefit of the
parties hereto and their respective heirs, personal representatives, successors and permitted assigns. 

    5.  Further Assurances.  Each party hereto will promptly execute and deliver to the any other requesting
party any and all documents or instruments reasonably requested by such other party and take such other further action reasonably requested by such other party to further evidence or effectuate the
terms and conditions of this Agreement. 

    6.  Advice of Counsel; Read and Understood.  Each of the parties agrees and acknowledges (a) that
he or she has read and understood each and every term and provision of this Agreement and (b) has been advised by competent counsel regarding this Agreement. 

    7.  Counterparts.  This Agreement may be executed in several counterparts, each of which shall be deemed
to be an original. 

2

    IN WITNESS WHEREOF, the parties hereto have duly executed this Termination Agreement as of the day and year first above written. 

	 
	 	 

	 	 	U.S. BANK NATIONAL ASSOCIATION, as sole Bank under the Credit Agreement, as Agent and as Collateral Agent, each as aforesaid
	 	 	By

	 	 	 Its

	 

RELIASTAR PURCHASERS:	 
 	 

 
	 

RELIASTAR LIFE INSURANCE COMPANY	 
 	 

RELIASTAR UNITED SERVICES LIFE INSURANCE COMPANY
	By
	 	By

	 Its
	 	 Its

	 

NORTHERN LIFE INSURANCE COMPANY	 
 	 

WASHINGTON SQUARE ADVISERS PRIVATE PLACEMENT TRUST FUND
	By
	 	By

	 Its
	 	 Its

	 

RELIASTAR LIFE INSURANCE COMPANY OF NEW YORK	 
 	 

 
	By
	 	 
	 Its
	 	 

3

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TERMINATION AGREEMENT

RECITALS

TERMS

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