<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(B) OR 12(G) OF
THE SECURITIES EXCHANGE ACT OF 1934
------------------------
THE DIAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 51-0374887
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
DIAL TOWER
1850 NORTH CENTRAL AVENUE
PHOENIX, ARIZONA 85077
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (602) 207-2800
---------------------
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
------------------- ------------------------------
<S> <C>
COMMON STOCK NEW YORK STOCK EXCHANGE
PAR VALUE $0.01 PER SHARE
</TABLE>
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
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<PAGE> 2
THE DIAL CORPORATION
I. INFORMATION INCLUDED IN INFORMATION STATEMENT
AND INCORPORATED IN FORM 10 BY REFERENCE
CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT
AND ITEMS OF FORM 10
<TABLE>
<CAPTION>
ITEM ITEM
NO. CAPTION LOCATION IN INFORMATION STATEMENT
- ---- --------------------------------- -----------------------------------------------------
<S> <C> <C>
1. Business......................... "SUMMARY OF CERTAIN INFORMATION;" "INTRODUCTION;"
"THE DISTRIBUTION -- Background and Reasons for the
Distribution;" "BUSINESS AND PROPERTIES;" and
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS."
2. Financial Information............ "SUMMARY OF CERTAIN INFORMATION;" "THE
DISTRIBUTION -- Certain Significant Aspects of the
Distribution;" "THE DIAL CORP CONSUMER PRODUCTS
BUSINESS SELECTED COMBINED FINANCIAL AND OTHER DATA;"
"THE DIAL CORP CONSUMER PRODUCTS BUSINESS UNAUDITED
PRO FORMA COMBINED FINANCIAL INFORMATION;"
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS;" and "FINANCIAL
STATEMENTS."
3. Properties....................... "BUSINESS AND PROPERTIES."
4. Security Ownership of Certain
Owners and Management.......... "THE DISTRIBUTION -- Listing and Trading of Company
Common Stock;" "BOARD OF DIRECTORS AND EXECUTIVE
OFFICERS;" and "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS OF COMPANY COMMON STOCK."
5. Directors and Executive
Officers....................... "ARRANGEMENTS BETWEEN DIAL AND THE COMPANY RELATING
TO THE DISTRIBUTION;" "BOARD OF DIRECTORS AND
EXECUTIVE OFFICERS;" and "LIABILITY AND
INDEMNIFICATION OF DIRECTORS AND OFFICERS."
6. Executive Compensation........... "ARRANGEMENTS BETWEEN DIAL AND THE COMPANY RELATING
TO THE DISTRIBUTION;" "DIRECTORS' COMPENSATION;"
"EXECUTIVE COMPENSATION;" and "BOARD OF DIRECTORS AND
EXECUTIVE OFFICERS."
7. Certain Relationships and Related
Transactions................... "SUMMARY OF CERTAIN INFORMATION;" "INTRODUCTION;"
"THE DISTRIBUTION -- Background and Reasons for the
Distribution" and "-- Certain Significant Aspects of
the Distribution;" "ARRANGEMENTS BETWEEN DIAL AND THE
COMPANY RELATING TO THE DISTRIBUTION;" "BOARD OF
DIRECTORS AND EXECUTIVE OFFICERS;" and "FINANCIAL
STATEMENTS."
8. Legal Proceedings................ "BUSINESS AND PROPERTIES -- Legal Matters."
</TABLE>
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<TABLE>
<CAPTION>
ITEM ITEM
NO. CAPTION LOCATION IN INFORMATION STATEMENT
- ---- --------------------------------- -----------------------------------------------------
<S> <C> <C>
9. Market Price of and Dividends
on the Registrant's Common
Equity and Related
Stockholder Matters............ "SUMMARY OF CERTAIN INFORMATION;" "THE
DISTRIBUTION -- Listing and Trading of Company Common
Stock" and "-- Certain Significant Aspects of the
Distribution."
11. Description of Registrant's
Securities to be Registered.... "DESCRIPTION OF COMPANY CAPITAL STOCK;" "CERTAIN
ANTITAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE
CERTIFICATE OF INCORPORATION, THE BYLAWS, THE RIGHTS,
AND DELAWARE LAW."
12. Indemnification of Directors
and Officers................... "LIABILITY AND INDEMNIFICATION OF DIRECTORS AND
OFFICERS" and Annex B -- FORM OF RESTATED CERTIFICATE
OF INCORPORATION OF THE DIAL CORPORATION
13. Financial Statements and
Supplementary Data............. "SUMMARY OF CERTAIN INFORMATION;" "THE DIAL CORP
CONSUMER PRODUCTS BUSINESS SELECTED COMBINED
FINANCIAL AND OTHER DATA;" "THE DIAL CORP CONSUMER
PRODUCTS BUSINESS UNAUDITED PRO FORMA COMBINED
FINANCIAL INFORMATION;" "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS;" and "FINANCIAL STATEMENTS."
15. Financial Statements and
Exhibits.
(a) Financial Statements and
Schedules*..................... "FINANCIAL STATEMENTS" and "INDEX TO FINANCIAL
STATEMENTS."
</TABLE>
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* No schedules are included in the Information Statement because the amounts in
question are insufficient to require inclusion or because the information
required is presented in the combined financial statements contained in the
Information Statement.
2
<PAGE> 4
II. INFORMATION NOT INCLUDED IN INFORMATION STATEMENT
Item 10. Recent Sales of Unregistered Securities.
None.
Item 14. Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 15. Financial Statements and Exhibits.
(b) Exhibits:
<TABLE>
<S> <C>
2 Form of Distribution Agreement (attached to Information Statement as Annex A)
3(a) Form of Restated Certificate of Incorporation of The Dial Corporation (attached
to Information Statement as Annex B)
3(b) Form of Bylaws of The Dial Corporation (attached to Information Statement as
Annex C)
4 Form of Preferred Share Purchase Rights Agreement*
10(a) Form of Interim Services Agreement*
10(b) Form of Aircraft Services Agreement*
10(c) Form of Office Lease*
10(d) Form of Tax Sharing Agreement*
10(e) Form of Letter of Understanding on Trademarks*
10(f) Form of The Dial Corporation 1996 Stock Incentive Plan*
10(g) Form of The Dial Corporation Director's Deferred Compensation Plan*
10(h) Form of The Dial Corporation Director's Charitable Award Program*
10(i) Form of The Dial Corporation Deferred Compensation Plan*
10(j) Form of Change of Control Employment Agreements with certain executive officers
of The Dial Corporation*
10(k) Employment Agreement between The Dial Corp and Malcolm Jozoff*
10(1) Credit Agreement*
21 Subsidiaries of The Dial Corporation*
27 Financial Data Schedule
</TABLE>
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* To be filed by amendment.
3
<PAGE> 5
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
THE DIAL CORPORATION
By /s/ L. Gene Lemon
--------------------------------------
L. Gene Lemon
President
June 5, 1996
4
<PAGE> 6
A REGISTRATION STATEMENT RELATING TO THE COMMON STOCK OF THE COMPANY HAS
BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME
EFFECTIVE. INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT.
PRELIMINARY COPY DATED JUNE 5, 1996
-- FOR INFORMATION ONLY --
INFORMATION STATEMENT
THE DIAL CORPORATION
COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
This Information Statement is being furnished to stockholders of The Dial
Corp ("Dial") in connection with the distribution (the "Distribution") by Dial
to its stockholders of all of the outstanding shares of common stock of its
wholly owned subsidiary, The Dial Corporation (the "Company"). Concurrently with
the Distribution, the name of The Dial Corp will be changed to "Viad Corp".
References herein to "Dial" include the newly-named Viad Corp following the
Distribution.
The Distribution will be made in __________, 1996, on the basis of one
share of common stock of the Company for each share of Dial common stock held.
No consideration will be paid by stockholders of Dial for the shares of common
stock of the Company to be received by them in the Distribution, nor will they
be required to surrender or exchange shares of Dial in order to receive common
stock of the Company.
There is no current public market for the common stock of the Company. The
Company intends to apply to the New York Stock Exchange for listing of such
shares upon official notice of issuance.
------------------------
WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE REQUESTED NOT TO
SEND US A PROXY.
------------------------
THIS INFORMATION STATEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES. ANY SUCH OFFERING
MAY ONLY BE MADE BY MEANS OF A SEPARATE PROSPECTUS PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT AND OTHERWISE
IN COMPLIANCE WITH APPLICABLE LAW.
The date of this Information Statement is __________ __, 1996.
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
AVAILABLE INFORMATION................................................................. iv
SUMMARY OF CERTAIN INFORMATION........................................................ v
The Distribution.................................................................... v
The Dial Corporation................................................................ vi
Summary Financial Information....................................................... viii
INTRODUCTION.......................................................................... 1
THE DISTRIBUTION...................................................................... 2
Background and Reasons for the Distribution......................................... 2
Certain Significant Aspects of the Distribution..................................... 2
Manner of Effecting the Distribution................................................ 4
Material Federal Income Tax Consequences of the Distribution........................ 4
Listing and Trading of Company Common Stock......................................... 6
Conditions and Termination.......................................................... 6
ARRANGEMENTS BETWEEN DIAL AND THE COMPANY
RELATING TO THE DISTRIBUTION........................................................ 7
Distribution Agreement.............................................................. 7
Interim Services Agreement.......................................................... 10
Aircraft Services Agreement......................................................... 10
Letter of Understanding on Trademarks............................................... 10
Office Lease........................................................................ 10
Tax Sharing Agreement............................................................... 10
FINANCING............................................................................. 11
BUSINESS AND PROPERTIES............................................................... 13
Overview............................................................................ 13
Business Strategy................................................................... 13
Products............................................................................ 15
Marketing........................................................................... 17
Suppliers........................................................................... 18
Raw Materials....................................................................... 18
Competition......................................................................... 19
Research and Development............................................................ 19
Patents and Trademarks.............................................................. 19
Government Regulation............................................................... 19
Environmental....................................................................... 20
Employees........................................................................... 20
Properties.......................................................................... 20
Legal Matters....................................................................... 21
THE DIAL CORP CONSUMER PRODUCTS BUSINESS SELECTED
COMBINED FINANCIAL AND OTHER DATA................................................... 22
</TABLE>
i
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<TABLE>
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PAGE
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<S> <C>
THE DIAL CORP CONSUMER PRODUCTS BUSINESS UNAUDITED
PRO FORMA COMBINED FINANCIAL INFORMATION............................................ 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS........................................................... 29
Restructuring Charges and Asset Write-Downs......................................... 29
Results of Operations............................................................... 29
Liquidity and Capital Resources..................................................... 32
Business Outlook.................................................................... 32
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS............................................. 33
Directors of the Company............................................................ 33
Certain Board Committees............................................................ 34
Executive Officers of the Company................................................... 34
DIRECTORS' COMPENSATION............................................................... 36
Cash Compensation................................................................... 36
Directors' Stock Awards............................................................. 36
Directors' Retirement Benefits...................................................... 36
EXECUTIVE COMPENSATION................................................................ 38
Historical Compensation............................................................. 38
Compensation Following the Distribution............................................. 40
Adjustments to Outstanding Dial Stock Awards........................................ 42
Employment and Change in Control Arrangements....................................... 42
Pension Plans....................................................................... 42
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS OF
COMPANY COMMON STOCK................................................................ 45
By Management....................................................................... 45
By Others........................................................................... 46
DESCRIPTION OF COMPANY CAPITAL STOCK.................................................. 47
CERTAIN ANTITAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE CERTIFICATE OF
INCORPORATION, THE BYLAWS, THE RIGHTS, AND DELAWARE LAW............................. 47
Classified Board of Directors....................................................... 47
Number of Directors, Filling Vacancies and Removal.................................. 48
No Stockholder Action by Written Consent and Special Meetings....................... 48
Advance Notice Provisions for Stockholder Nominations and Stockholder Proposals..... 49
Company Preferred Stock............................................................. 50
Business Combinations............................................................... 51
Amendment of Certain Provisions of the Certificate of Incorporation and Bylaws...... 51
Rights.............................................................................. 51
Antitakeover Legislation............................................................ 54
Comparison with Rights of Holders of Dial Common Stock.............................. 54
</TABLE>
ii
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PAGE
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<S> <C>
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS............................... 54
Limitation of Liability of Directors................................................ 54
Indemnification of Directors and Officers........................................... 55
Indemnification Agreements.......................................................... 56
INDEX TO FINANCIAL STATEMENTS......................................................... F-1
Annex A Form of Distribution Agreement by and among The Dial Corp, The Dial Corporation
and Exhibitgroup/Giltspur, Inc.
Annex B Form of Restated Certificate of Incorporation of The Dial Corporation
Annex C Form of Bylaws of The Dial Corporation
</TABLE>
iii
<PAGE> 10
AVAILABLE INFORMATION
The Dial Corporation (the "Company") has filed a Registration Statement on
Form 10 (the "Registration Statement") with the Securities and Exchange
Commission (the "Commission") under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), with respect to the Company Common Stock (as
defined and described herein). This Information Statement does not contain all
of the information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information, reference is made hereby to the
Registration Statement and such exhibits and schedules. Statements contained
herein concerning any documents are not necessarily complete and, in each
instance, reference is made to the copies of such documents filed as exhibits to
the Registration Statement. Each such statement is qualified in its entirety by
such reference. Copies of these documents may be inspected without charge at the
principal office of the Commission at 450 5th Street, N.W., Washington, D.C.
20549, and at the Regional Offices of the Commission at 7 World Trade Center,
Suite 1300, New York, New York 10048 and at Northwestern Atrium Center, Suite
1400, 500 West Madison Street, Chicago, Illinois 60661 and copies of all or any
part thereof may be obtained from the Commission upon payment of the charges
prescribed by the Commission.
Following the Distribution, the Company will be required to comply with the
reporting requirements of the Exchange Act and will file annual, quarterly and
other reports with the Commission. The Company will also be subject to the proxy
solicitation requirements of the Exchange Act and, accordingly, will furnish
audited financial statements to its stockholders in connection with its annual
meetings of stockholders. Following the listing of the Company Common Stock on
the New York Stock Exchange (the "NYSE"), the Company will be required to file
with the NYSE copies of such reports, proxy statements and other information
which then can be inspected at the offices of the NYSE at 20 Broad Street, New
York, New York 10005.
NO PERSON IS AUTHORIZED BY DIAL OR THE COMPANY TO GIVE ANY INFORMATION OR
TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS INFORMATION
STATEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED.
iv
<PAGE> 11
SUMMARY OF CERTAIN INFORMATION
This summary is qualified by the more detailed information set forth
elsewhere in this Information Statement, which should be read in its entirety.
THE DISTRIBUTION
Distributing Company....... The Dial Corp, a Delaware corporation ("Dial").
Concurrently with the Distribution, the name of The
Dial Corp will be changed to "Viad Corp".
References to "Dial" herein include the newly-named
Viad Corp following the Distribution.
Shares to be Distributed... Approximately 94.5 million shares of common stock,
par value $0.01 per share ("Company Common Stock"),
of The Dial Corporation, a Delaware corporation
(the "Company"), based on approximately 94.5
million shares of common stock, par value $1.50 per
share, of Dial ("Dial Common Stock") currently
outstanding.
Distribution Ratio......... One share of Company Common Stock for each share of
Dial Common Stock. No consideration will be paid by
Dial's stockholders for the shares of Company
Common Stock to be received in the Distribution.
See "THE DISTRIBUTION -- Manner of Effecting the
Distribution."
Federal Income Tax
Consequences............. The Distribution is subject to receipt of a ruling
from the Internal Revenue Service (the "IRS") that
no gain or loss will be recognized by holders of
Dial Common Stock upon receipt of Company Common
Stock in the Distribution, and no gain or loss will
be recognized by Dial in respect of the
Distribution. Dial stockholders are urged to
consult their own tax advisors as to the specific
tax consequences to them of the Distribution. See
"THE DISTRIBUTION -- Material Federal Income Tax
Consequences of the Distribution."
Certain Significant Aspects
of the Distribution........ Stockholders should consider the factors discussed
under "THE DISTRIBUTION -- Certain Significant
Aspects of the Distribution."
Trading Market............. Dial Common Stock will continue to be listed and
traded on the New York Stock Exchange (the "NYSE")
after the Distribution. The Company intends to
apply to the NYSE for listing of the Company Common
Stock subject to official notice of issuance. See
"THE DISTRIBUTION -- Listing and Trading of Company
Common Stock."
Record Date................ ________ __, 1996 (the "Record Date").
Distribution Date.......... ________ __, 1996 (the "Distribution Date"). On,
or as soon as practicable after, the Distribution
Date, Dial, as distribution agent, will commence
mailing certificates representing shares of Company
Common Stock to holders of record as of the Record
Date of Dial Common Stock. Dial stockholders will
not be required to make any payment or to take any
other action to receive their Company Common Stock.
See "THE DISTRIBUTION -- Manner of Effecting the
Distribution."
Distribution Agent......... Dial.
Conditions to the
Distribution............... The Distribution is conditioned upon, among other
things (1) confirmation of investment grade credit
ratings for each of Dial and the Company and (2)
receipt by Dial of a ruling from the IRS to the
effect that the Distribution qualifies as a
tax-free distribution under Section 355 of the
Internal Revenue Code of 1986, as amended. Even if
all conditions are satisfied, the Board of
Directors of Dial has reserved the right to
v
<PAGE> 12
abandon, defer or modify the Distribution and the
related transactions described herein at any time
prior to the Distribution Date. See "THE
DISTRIBUTION -- Conditions and Termination."
Principal Businesses to Be
Retained by Dial.......... Following the Distribution, Dial will change its
name to "Viad Corp," and will continue to operate
its current services businesses consisting of the
airline catering and services, convention services,
and travel and leisure and payment services
businesses. Immediately prior to the Distribution,
Exhibitgroup/Giltspur Inc., a wholly owned
subsidiary of Dial which operates part of Dial's
convention services business ("Exhibitgroup"), will
be merged with and into Dial. See "INTRODUCTION"
and "ARRANGEMENTS BETWEEN DIAL AND THE COMPANY
RELATING TO THE DISTRIBUTION -- Distribution
Agreement."
THE DIAL CORPORATION
The Company................ Following the Distribution, the Company will own
and operate the consumer products business
currently being conducted by Dial (the "Consumer
Products Business"). References to the "Company"
herein for time periods prior to the Distribution
mean the Consumer Products Business as conducted by
Dial and, for time periods following the
Distribution, mean the Company as capitalized by
Dial with the assets and liabilities of the
Consumer Products Business pursuant to the
Distribution Agreement by and among Dial, the
Company and Exhibitgroup.
In the fiscal year ended December 30, 1995, the
Company had aggregate revenues and operating income
before restructuring charges and asset write-downs
of approximately $1.4 billion and $111.9 million,
respectively, and in the thirteen-week period ended
March 30, 1996, had aggregate revenues of $352.4
million and operating income of $36.3 million. The
Company produces and markets personal care,
detergent, household and shelf-stable food
products, including such national brand names as
DIAL, TONE, BRECK, PUREX, RENUZIT, BRILLO and
ARMOUR STAR. See "THE DIAL CORP CONSUMER PRODUCTS
BUSINESS SELECTED COMBINED FINANCIAL AND OTHER
DATA;" "THE DIAL CORP CONSUMER PRODUCTS BUSINESS
UNAUDITED PRO FORMA COMBINED FINANCIAL
INFORMATION;" "BUSINESS AND PROPERTIES" and
"FINANCIAL STATEMENTS." The principal corporate
offices of the Company are located at the Dial
Tower, 1850 North Central Avenue, Phoenix, Arizona
85077 and its telephone number is (602) 207-2800.
Financing.................. In connection with the Distribution, Dial expects
to borrow approximately $280 million under a new
$350 million credit facility to be assumed by the
Company as of the Distribution Date (the "New
Credit Facility"). In conjunction with the
Distribution, intercompany debt owed by the Company
or its subsidiaries to Dial will be deemed
contributed to capital and thereby cancelled. The
New Credit Facility will be used in conjunction
with commercial paper and a receivables sales
facility to provide the working capital required by
the Company following the Distribution. See "THE
DISTRIBUTION -- Certain Significant Aspects of the
Distribution" and "FINANCING."
vi
<PAGE> 13
Management of the
Company.................... Effective as of the Distribution, the Board of
Directors of the Company (the "Company Board") will
consist of six directors, including Malcolm Jozoff,
who will serve as Chairman of the Board, and five
directors who are currently directors of Dial. Mr.
Jozoff will also serve as President and Chief
Executive Officer of the Company and the other
executive officers of the Company will include
persons who are currently serving in the senior
management of the Consumer Products Business. See
"BOARD OF DIRECTORS AND EXECUTIVE OFFICERS."
Trading Market............. There is not currently a public market for the
Company Common Stock, although a "when-issued"
trading market (as described in "THE
DISTRIBUTION -- Listing and Trading of Company
Stock") is expected to develop prior to the
Distribution Date. The Company intends to apply to
the NYSE for listing of the Company Common Stock
upon official notice of issuance. See "THE
DISTRIBUTION -- Listing and Trading of Company
Common Stock" and "-- Certain Significant Aspects
of the Distribution."
Preferred Share Purchase
Rights of the Company...... As of the Distribution Date, the Company will have
adopted a preferred share purchase rights plan.
Certificates issued in the Distribution
representing shares of Company Common Stock will
also represent an equivalent number of associated
preferred share purchase rights of the Company (the
"Rights"). See "CERTAIN ANTITAKEOVER EFFECTS OF
CERTAIN PROVISIONS OF THE CERTIFICATE OF
INCORPORATION, THE BYLAWS, THE RIGHTS, AND DELAWARE
LAW."
Certain Provisions of the
Certificate of
Incorporation
and Bylaws............... Certain provisions of the Company's Restated
Certificate of Incorporation (the "Certificate of
Incorporation") and Bylaws, as each will be in
effect following the Distribution, may have the
effect of making more difficult an acquisition of
control of the Company in a transaction not
approved by the Company Board. See "CERTAIN
ANTITAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE
CERTIFICATE OF INCORPORATION, THE BYLAWS, THE
RIGHTS, AND DELAWARE LAW." The Certificate of
Incorporation would, in some circumstances,
eliminate certain liabilities of the Company
directors in connection with the performance of
their duties. See "LIABILITY AND INDEMNIFICATION OF
DIRECTORS AND OFFICERS."
Post-Distribution
Dividend Policy.......... It is anticipated that, following the Distribution,
Dial will initially pay quarterly cash dividends at
the annual rate of $0.32 per share of Dial Common
Stock and that the Company will initially pay
dividends at the annual rate of $0.32 per share of
Company Common Stock, resulting in the aggregate
annual dividends paid by Dial and the Company being
equivalent to the current annual dividend rate of
$0.64 per share of Dial Common Stock. However, no
such dividends have been declared, the declaration
of dividends by each of Dial and the Company will
be in the discretion of the respective Boards of
Directors of the Company and Dial, and there can be
no assurance that either company will declare such
anticipated dividends. The Company expects to
implement a dividend reinvestment plan following
the Distribution.
Transfer Agent and
Registrar..................
vii
<PAGE> 14
SUMMARY FINANCIAL INFORMATION
THE DIAL CORP CONSUMER PRODUCTS BUSINESS
SUMMARY COMBINED FINANCIAL AND OTHER DATA
The following summary financial data of the Company should be read in
conjunction with the historical combined financial statements and notes thereto
included elsewhere in this Information Statement. See "THE DIAL CORP CONSUMER
PRODUCTS BUSINESS SELECTED COMBINED FINANCIAL AND OTHER DATA" and "FINANCIAL
STATEMENTS."
<TABLE>
<CAPTION>
THIRTEEN
WEEKS ENDED FISCAL YEAR ENDED
-------------------- ------------------------------------------------------------------------
MARCH 30, APRIL 1, DECEMBER 30, DECEMBER 31, DECEMBER 25, DECEMBER 26, DECEMBER 28,
1996 1995 1995 1994 1993 1992 1991
--------- -------- ------------ ------------ ------------ ------------ ------------
(000 OMITTED, EXCEPT NUMBER OF EMPLOYEES)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net sales................. $352,392 $337,862 $1,365,290 $1,511,362 $1,420,173 $1,275,447 $1,196,499
Operating income
(loss)(1)............... 36,342 33,802 (23,656) 160,008 139,213 118,616 110,605
Income (loss) before
cumulative effect of
change in accounting
principle (1)........... 19,608 18,247 (27,489) 91,072 84,181 74,501 71,411
Net income (loss)(1)(2)... 19,608 18,247 (27,489) 91,072 84,181 31,068 71,411
FINANCIAL POSITION AT YEAR
END
Total assets.............. $806,032 $842,608 $ 798,405 $ 887,373 $ 857,516 $ 685,266 $ 662,195
Total debt (3)............ 309 3,726 3,320 3,510 6,063 31,502 31,130
Working capital........... 45,469 84,671 45,663 56,188 (10,177) (50,790) (22,434)
Dial investment and
advances................ 499,244 575,472 496,230 555,703 502,199 350,799 410,759
OTHER DATA
EBITDA (4)................ $ 43,672 $ 42,860 $ 141,062 $ 194,918 $ 172,489 $ 150,158 $ 139,933
Depreciation and
amortization............ 7,330 9,058 29,118 34,910 33,583 31,542 29,328
Total capital
expenditures............ 8,034 4,692 27,214 37,471 40,605 45,508 53,398
Number of employees (end
of period).............. 4,002 3,886 3,985 3,995 4,000 4,197 4,279
Number of employees
(average)............... 4,001 3,943 3,992 3,983 4,121 4,186 4,296
</TABLE>
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(1) After deducting restructuring charges and asset write-downs of $135,600,000
($82,100,000 after-tax) in the third fiscal quarter of 1995. Also, after
deducting $6,800,000 ($4,310,000 after-tax) in 1992 for increased ongoing
expenses (above 1991 levels) resulting from the adoption of Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," effective as of January 1,
1992.
(2) Cumulative effect of a change in accounting principle amounted to
$43,433,000 in 1992 from initial application of SFAS No. 106.
(3) Total debt includes the current portion of long-term debt and short-term
bank loans.
(4) EBITDA is defined as net income (loss) before interest expense, income
taxes, depreciation and amortization, restructuring charges and asset
write-downs and cumulative effect of change in accounting principle. EBITDA
data is presented as a measure of the Company's ability to service debt,
fund capital expenditures and finance growth. Such data should not be
considered an alternative to net income, operating income, cash flows from
operations or other operating or liquidity performance measures prescribed
by generally accepted accounting principles. Cash expenditures for various
long-term assets, interest expense and income taxes have been, and will be,
incurred which are not reflected in the EBITDA presentations.
viii
<PAGE> 15
INTRODUCTION
On February 15, 1996, The Dial Corp, a Delaware corporation ("Dial"),
announced that its Board of Directors (the "Dial Board") had approved a proposal
for a strategic restructuring to separate Dial into two publicly-traded
companies by means of a distribution as a dividend to Dial's stockholders of the
consumer products business (the "Consumer Products Business") currently being
conducted by Dial directly and through certain of its subsidiaries (the
"Distribution"). Effective as of the date of the Distribution (the "Distribution
Date"), Dial will contribute all of the assets and liabilities of the Consumer
Products Business, including the stock of certain subsidiaries, to The Dial
Corporation, a newly formed Delaware corporation (the "Company") and a wholly
owned subsidiary of Dial. References to the "Company" herein for time periods
prior to the Distribution mean the Consumer Products Business as conducted by
Dial and, for time periods following the Distribution, mean the Company as
capitalized by Dial with the assets and liabilities of the Consumer Products
Business pursuant to the Distribution Agreement (the "Distribution Agreement")
by and among Dial, the Company and Exhibitgroup/Giltspur Inc. ("Exhibitgroup").
The Distribution is subject, among other conditions, to the receipt of a ruling
from the Internal Revenue Service (the "IRS") that the transaction will be a
tax-free spin-off for federal income tax purposes (the "Tax Ruling") and to
confirmation that each of Dial and the Company will retain investment grade
credit ratings after the Distribution. See "THE DISTRIBUTION -- Conditions and
Termination."
The Distribution will be effected by distributing to holders of the common
stock, par value $1.50 per share, of Dial ("Dial Common Stock"), all of the
outstanding common stock, par value $0.01 per share, of the Company ("Company
Common Stock"). Prior to the Distribution Date, the Company will deliver
certificates for the shares of Company Common Stock to Dial as the distribution
agent (the "Distribution Agent") for transfer and distribution to the holders of
Dial Common Stock as of the Record Date (as defined herein) for the
Distribution. The Distribution will occur in ____________ 1996. In conjunction
with the Distribution, immediately prior to the Distribution Date, Exhibitgroup,
a Delaware corporation and a wholly owned subsidiary of Dial which operates part
of Dial's convention services business, will be merged with and into Dial, with
Dial as the surviving corporation (the "Merger"). The Company's principal
executive offices are located at the Dial Tower, 1850 North Central Avenue,
Phoenix, Arizona 85077 and its telephone number is (602) 207-2800.
Stockholders of Dial with inquiries relating to the Distribution should
contact Dial Shareholder Services, at The Dial Corp, Dial Tower, 1850 North
Central Avenue, Phoenix, Arizona 85077, telephone number (800) ___-______. After
the Distribution Date, stockholders of the Company with inquiries relating to
their investment in the Company should contact ____________ at The Dial
Corporation, Dial Tower, 1850 North Central Avenue, Phoenix, Arizona 85077,
telephone number (602) 207-2800.
NO ACTION IS REQUIRED BY DIAL STOCKHOLDERS IN ORDER TO RECEIVE THE COMPANY
COMMON STOCK TO WHICH THEY WILL BE ENTITLED IN THE DISTRIBUTION FOLLOWING
DECLARATION OF THE DIVIDEND.
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THE DISTRIBUTION
BACKGROUND AND REASONS FOR THE DISTRIBUTION
The Dial Board has determined, for the reasons set forth below, to separate
Dial's businesses into two publicly owned companies: the Company, which will own
and operate the Consumer Products Business currently conducted by Dial; and
Dial, which will be renamed "Viad Corp" and will continue to own and operate its
airline catering and services business, convention services business and travel
and leisure and payment services business (the "Services Business").
For more than ten years, Dial has actively sought to implement a focused
business strategy through acquisitions and divestitures. Dial, formerly The
Greyhound Corporation, has acted to strengthen its core Consumer Products
Business and Services Business through acquisitions of various brands and
complementary service businesses. In addition, since 1983, Dial has divested
non-core businesses including its meat packing business, its inter-city bus
business, its computer leasing business, its financial services and insurance
businesses, and its transportation manufacturing and replacement parts business.
The Dial Board believes that the Distribution should be beneficial to each
of Dial's current businesses, because, among other things, it will separate
businesses with distinct financial, investment and operating characteristics so
that each can adopt strategies and pursue objectives more appropriate to its
specific businesses than is possible under Dial's present combined structure.
In order to continue to succeed, each of the Consumer Products Business and
the Services Business needs to grow. Dial believes that each of these businesses
should be expanded through internal growth and acquisitions. However, Dial also
believes that its ability to expand the Consumer Products Business is
significantly limited due to the market valuation of the Dial Common Stock,
which Dial believes is discounted due to the fact that the Consumer Products
Business and Services Business are combined. As a result of the lower price
earnings multiple attributed to Dial because of its conglomerate status, it has
been forced to expand the Consumer Products Business and the Services Business
by incurring debt rather than issuing equity. Dial has also been limited in its
ability to make acquisitions in the Services Business lest it unbalance Dial's
current business mix and cause further discounting of the market valuation of
the Consumer Products Business. The Dial Board believes that, as a result of the
Distribution, the Company will be in a better position to raise capital and make
acquisitions by using a common stock which the market will value based on the
performance of the Consumer Products Business. As an independent entity, the
Company will also be able to attract and compensate qualified employees with
stock-based compensation and incentive plans directly related to the performance
of the Consumer Products Business. In conjunction with the strategy of the
Company to expand its business through internal growth and acquisitions, the
Company currently intends to issue at least $100 million in additional equity
within six to twelve months following the Distribution Date, in the form of a
sale of stock in the public or private equity markets. In addition to, or in
lieu of, a sale of stock, the Company may seek to make an acquisition or
acquisitions utilizing stock.
The Dial Board believes that, by distributing the Company Common Stock to
Dial's stockholders, there will be a greater potential for increasing the
long-term value of the investment of Dial's stockholders. The Dial Board
believes that the Distribution will allow investors to evaluate better the
performance and investment characteristics and the future prospects of the
Consumer Products Business and the Services Business now conducted by Dial,
enhancing the likelihood that each will achieve appropriate market recognition
of its performance and potential.
For the reasons stated above, the Dial Board believes that the Distribution
is in the best interests of Dial and its stockholders.
CERTAIN SIGNIFICANT ASPECTS OF THE DISTRIBUTION
The Company cautions readers that, in addition to the historical
information included herein, this Information Statement includes certain
forward-looking statements and information that are based on management's
beliefs as well as on assumptions made by and information currently available to
management.
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When used in this Information Statement, the words "anticipate," "intend,"
"plan," "believe," "estimate" and similar expressions are intended to identify
forward-looking statements. Such statements are not guarantees of future
performance and involve certain risks, uncertainties and assumptions, including,
but not limited to, the following factors which could cause the Company's future
results and stockholder values to differ materially from those expressed in any
forward-looking statements made by or on behalf of the Company.
Dependence on Domestic Markets. Mature markets and high household
penetration in the United States for a number of the Company's most significant
product categories, including detergents and bar soaps; resulting dependance on
increased usage by consumers and increasing share in relatively stagnant
domestic markets; and continued dependence on United States markets, while a
number of the Company's competitors have diversified their revenues to include a
strong international component.
Competition. Competitive pressures in the markets for the Company's
products, including, but not limited to, competition from larger companies,
which may have significantly greater resources than the Company and may be
willing to commit significant resources to capturing market share from the
Company, particularly in the detergent, personal care and air freshener
categories, or to protecting their own market share from incursions by the
Company.
Price Pressure. Failure of the Company's lower everyday pricing strategy
for its PUREX detergent products to increase volumes sufficient to achieve
increased overall revenues and income growth; and continued competitive and
consumer pressure to lower prices, particularly in the value segment.
Consumer Preferences. Changes in consumer needs and demands, particularly
with respect to products with antibacterial qualities and value-priced and
"ultra" concentrated detergent and cleaning products; failure by the Company to
anticipate consumer needs and demands and to design new products or line
extensions to meet such needs and demands; or adverse publicity with respect to
any of the Company's products or brand names.
New Products and Line Extensions. Problems or delays in introducing new
products or line extensions on a cost effective basis; failure to successfully
position and market new products and line extensions; market acceptance of new
products or line extensions; and ability of competitors to develop similar
products.
Productivity. Failure to maintain and to achieve cost efficiencies in
manufacturing and distribution, including through maintaining consistent trade
inventory levels; and lower than anticipated levels of plant utilization
resulting in higher costs.
Raw Materials. Availability and pricing levels of raw materials important
in the manufacture of the Company's products, particularly fats and oils.
Costs of Promotions and Advertising. Increased costs for trade and
consumer promotions and advertising to maintain or increase market share and to
introduce and establish new products and line extensions.
Customer Pressure. Potential for large customers to reduce inventories or
to seek pricing concessions or better trade terms; continued or increased
weakness in the overall retailing environment; and further financial
difficulties by discount retailers.
Legal and Regulatory Environment. Changes in laws, regulations and
policies of governments, agencies and similar organizations in the United States
and elsewhere affecting antibacterial soaps and cleaning products and consumer
products generally, taxes, environmental compliance, corporate restructuring,
product liability, and accounting standards, among other matters.
Economic Conditions in the United States. General economic conditions in
the United States that reduce consumer spending.
Potential Stock Issuance and Acquisition Strategy. Failure of the Company
Common Stock after the Distribution to trade at a price reflecting a
price/earnings multiple closer to that of other consumer products companies, or
general market conditions, making future equity issuances in a sale of stock or
stock acquisitions less desirable or feasible; inability to locate attractive
acquisitions at appropriate prices; absorption of
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management resources in seeking and successfully consummating acquisitions; and
problems and costs involved in integrating new acquisitions into the Company's
existing portfolio of branded products or into the Company's current management,
production and marketing structures.
International Expansion. Failure of strategy to enter new markets
globally; competition from other companies which have already established global
businesses; and risks generally associated with international acquisitions,
including exposure to currency fluctuations, limitations on foreign investment,
import/export controls, nationalizations, unstable governments and legal
systems, and the additional expense and risks inherent in operating in
geographically and culturally diverse locations.
Trading of Dial Common Stock and Company Common Stock. Performance of Dial
and the Company following the Distribution; general market conditions;
non-inclusion of the Company Common Stock in the Standard & Poor's 500 Index or
other stock indices in which Dial Common Stock is currently included affecting
the combined trading prices of the Dial Common Stock and Company Common Stock;
and no assurance that the combined prices will be greater than the trading price
of Dial Common Stock prior to the Distribution.
MANNER OF EFFECTING THE DISTRIBUTION
It is expected that the Distribution will be formally declared by the Dial
Board and consummated in the latter half of 1996. At the time of the
Distribution, share certificates for Company Common Stock will be delivered to
Dial, as Distribution Agent, for transfer. On or as soon as practicable after
the Distribution Date, the Distribution Agent will commence mailing such share
certificates to holders of Dial Common Stock as of the close of business on the
date selected by the Dial Board, or the Executive Committee thereof, as the
record date for the Distribution (the "Record Date") on the basis of one share
of Company Common Stock for each share of Dial Common Stock held on the Record
Date. All such shares of Company Common Stock will be fully paid, nonassessable
and free of preemptive rights. See "DESCRIPTION OF COMPANY CAPITAL STOCK."
Effective as of the Distribution Date, the Company intends to establish a
Dividend Reinvestment Plan (the "Company DRP"). As of the Distribution Date,
participants in the Dividend Reinvestment Plan of The Dial Corp (the "Dial DRP")
will be deemed to be participants in the Company DRP, except as provided below.
Shares of Company Common Stock distributed in the Distribution with respect to
shares of Dial Common Stock held of record by stockholders of Dial which are
enrolled in the Dial DRP will be deemed, as of the Distribution Date, to be
enrolled in the Company DRP, and shares of Company Common Stock distributed in
the Distribution with respect to shares of Dial Common Stock held of record by
Dial or its nominees for the benefit of participants in the Dial DRP will be
transferred to the Company for the benefit of the participants in the Company
DRP. Any elections as to reinvestment and other matters in effect pursuant to
the Dial DRP in effect as of the Distribution Date will be deemed to have been
made with respect to the Company DRP. Stockholders of Dial who become
stockholders of the Company as a result of the Distribution will receive further
information concerning the Company DRP and, if they do not wish to continue
participation in the Company DRP, may so notify the Company.
NO HOLDER OF DIAL COMMON STOCK WILL BE REQUIRED TO PAY ANY CASH OR OTHER
CONSIDERATION FOR THE SHARES OF COMPANY COMMON STOCK TO BE RECEIVED IN THE
DISTRIBUTION OR TO SURRENDER OR EXCHANGE SHARES OF DIAL COMMON STOCK OR TO TAKE
ANY OTHER ACTION IN ORDER TO RECEIVE COMPANY COMMON STOCK. THE DISTRIBUTION WILL
NOT AFFECT THE NUMBER OF, OR THE RIGHTS ATTACHING TO, OUTSTANDING SHARES OF DIAL
COMMON STOCK.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION
The Distribution is intended to qualify as a tax-free distribution under
Section 355 of the Internal Revenue Code of 1986, as amended (the "Code"). The
Distribution is conditioned upon receipt by Dial of the Tax Ruling to that
effect from the IRS. Accordingly, so long as the Distribution qualifies under
Section 355 of the Code, neither Dial nor the Company will recognize any income,
gain or loss with respect to the Distribution, and Dial stockholders will not
recognize any income, gain or loss upon the receipt of Company Common Stock.
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A Dial stockholder's tax basis for the Dial Common Stock with respect to
which Company Common Stock is received will be apportioned between such shares
of Dial Common Stock and such shares of Company Common Stock (including any
fractional shares) in proportion to the fair market values of each on the date
of Distribution. Such allocation must be calculated separately for each block of
shares of Dial Common Stock with respect to which Company Common Stock is
received, that is, separately for each block of shares of Dial Common Stock that
was purchased at different times or at different costs. The holding period for
such Company Common Stock received will include the period during which such
shares of Dial Common Stock were held (provided that such Dial shares are held
as a capital asset).
Treasury regulations governing Section 355 of the Code require that each
Dial stockholder who receives Company Common Stock pursuant to the Distribution
attach a statement to his or her federal income tax return for the taxable year
in which he or she receives such Company Common Stock, which statement shows the
applicability of Section 355 of the Code to the Distribution. Dial will provide
each Dial stockholder with the information necessary to comply with this
requirement.
The Tax Ruling will be based on certain factual representations and
assumptions concerning Dial and the Company. Dial is not aware of any present
facts or circumstances which should cause such representations and assumptions
to be untrue. However, certain future events not within the control of Dial or
the Company, including certain extraordinary purchases of Dial Common Stock or
Company Common Stock, could cause the Distribution not to qualify as tax free.
The Tax Sharing Agreement (as defined herein) provides that if, as a result of
any transaction, act or omission involving the Company or its subsidiaries which
is inconsistent with the tax-free status of the Distribution, including a
failure of any representation made to the IRS in the request for the Tax Ruling
concerning the Company, or an omission by the Company that causes a failure to
fulfill any condition of the Tax Ruling or any assumption on which it is based,
the Distribution fails to qualify as a tax-free spin-off under the provisions of
Section 355 of the Code, the Company will indemnify Dial for all taxes,
including penalties and interest, incurred by Dial by reason of the Distribution
being a taxable event. In order to avoid adversely affecting the intended tax
consequences of the Distribution, and incurring indemnification obligations
under the Tax Sharing Agreement, the Company intends not to (1) liquidate or
merge with any other corporation, (2) engage in certain repurchases of stock, or
(3) cease to engage in the active conduct of the trade or business conducted by
it immediately after the Distribution, unless it obtains a satisfactory opinion
of counsel or tax ruling. The Company does not expect these limitations to
significantly inhibit its financing or acquisition activities or its ability to
respond to unanticipated developments. See "ARRANGEMENTS BETWEEN DIAL AND THE
COMPANY RELATING TO THE DISTRIBUTION -- Tax Sharing Agreement."
Should the Distribution ultimately be determined not to qualify under
Section 355 of the Code, Dial stockholders would be required to recognize
ordinary dividend income upon their receipt of Company Common Stock (including
fractional shares) in an amount equal to the fair market value of such Company
Common Stock on the date of the Distribution. Dial stockholders would have a tax
basis for such Company Common Stock equal to such fair market value, and their
tax basis for their Dial Common Stock would not be affected. Dial would
recognize gain upon the Distribution equal to the excess, if any, of the fair
market value of the Company Common Stock distributed on the date of the
Distribution over Dial's tax basis for such Company Common Stock. Depending upon
the market price of the Company Common Stock immediately following the
Distribution, the corporate level gain could be well in excess of $1 billion.
Dial does not presently intend to effect the Distribution if, prior to the
Distribution Date, Dial becomes aware of circumstances that would result in the
Distribution being a taxable transaction.
THE FOREGOING SUMMARY OF THE FEDERAL INCOME TAX CONSEQUENCES OF THE
DISTRIBUTION IS FOR GENERAL INFORMATION ONLY AND MAY NOT APPLY TO DIAL
STOCKHOLDERS WHO ACQUIRED THEIR SHARES IN CONNECTION WITH THE GRANT OF A SHARE
OF RESTRICTED STOCK OR OTHERWISE AS COMPENSATION, WHO ARE NOT CITIZENS OR
RESIDENTS OF THE UNITED STATES, OR WHO ARE OTHERWISE SUBJECT TO SPECIAL
TREATMENT UNDER THE CODE. ALL DIAL STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX
ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES OF THE DISTRIBUTION TO THEM,
INCLUDING THE APPLICATION OF STATE, LOCAL AND FOREIGN TAX LAWS.
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<PAGE> 20
LISTING AND TRADING OF COMPANY COMMON STOCK
There is not currently a public market for Company Common Stock. The
Company intends to apply for listing of the Company Common Stock on the New York
Stock Exchange (the "NYSE") upon official notice of issuance. Prices at which
Company Common Stock may trade prior to the Distribution on a "when-issued"
basis (see the following paragraph) or after the Distribution cannot be
predicted. Until the Company Common Stock is fully distributed and an orderly
market develops, the prices at which trading in such stock occurs may fluctuate
significantly. The prices at which the Company Common Stock will trade will be
determined by the marketplace, and may be influenced by many factors, including,
among others, the proportional value of the Company's asset base, cash flows,
profits or other measure of value in relation to the prices of the Dial Common
Stock prior to the Distribution, the depth and liquidity of the market for such
shares, investors' perceptions of the Company and the industry in which it
participates, the Company's dividend policy, and general economic and market
conditions. Such prices may also be affected by certain provisions of the
Company's Restated Certificate of Incorporation (the "Certificate of
Incorporation") and Bylaws (the "Bylaws"), as each will be in effect following
the Distribution, that are substantially similar to existing provisions of
Dial's Certificate of Incorporation and Bylaws, as well as the Rights (as
defined herein), which may make the acquisition of control of the Company
without the approval of the Board of Directors of the Company (the "Company
Board") more difficult than would be the case in the absence of such provisions.
See "CERTAIN ANTITAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE CERTIFICATE OF
INCORPORATION, THE BYLAWS, THE RIGHTS, AND DELAWARE LAW."
In "when-issued" trading, contracts for the purchase and sale of shares of
stock are made prior to the issuance of such shares in the same manner as
currently issued shares, except that when-issued contracts are settled by
delivery of and payment for the shares on a date chosen by the particular
exchange on which such shares are to be listed. Ordinarily, in connection with a
distribution of stock such as described in this Information Statement, the date
fixed for settlement of when-issued contracts relating to such stock is the
fourth business day after distribution of such stock. Stockholders who may wish
to effect a when-issued trade in Company Common Stock should consult their
brokers for additional details.
The Company will initially have approximately __________ stockholders of
record and __________ beneficial holders, based on the number of record holders
and the estimated number of beneficial holders of Dial Common Stock as of
__________, 1996, and approximately 94.5 million shares of Company Common Stock
will be outstanding based on the number of shares of Dial Common Stock currently
outstanding. The transfer agent and registrar for the Company Common Stock will
be __________. For certain information regarding options to purchase Company
Common Stock that are expected to be outstanding after the Distribution, see
"EXECUTIVE COMPENSATION."
Shares of Company Common Stock and associated Rights distributed to Dial
stockholders in the Distribution will be freely transferable, except for
securities received by persons who may be deemed to be "affiliates" of the
Company under the Securities Act of 1933, as amended (the "Securities Act").
Persons who may be deemed to be affiliates of the Company after the Distribution
generally include individuals or entities that control, are controlled by, or
are under common control with, the Company and may include certain officers and
directors of the Company as well as principal stockholders of the Company, if
any. Persons who are affiliates of the Company will be permitted to sell their
shares of Company Common Stock only pursuant to an effective registration
statement under the Securities Act or an exemption from the registration
requirements of the Securities Act.
CONDITIONS AND TERMINATION
The Distribution is conditioned upon (1) certain transactions (including
transfers of certain assets and liabilities to the Company contemplated by the
Distribution Agreement) having been consummated in all material respects; (2)
the Company Common Stock having been approved for listing on the NYSE subject to
official notice of issuance; (3) the Registration Statement on Form 10 (the
"Registration Statement") having been filed with the Securities and Exchange
Commission (the "Commission") and having become effective and no stop order
being in effect with respect thereto; (4) all authorizations, consents,
approvals and
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clearances of all federal, state, local and foreign governmental agencies
required to permit the valid consummation of the transactions contemplated by
the Distribution Agreement having been obtained, without any conditions being
imposed that would have a material adverse effect, and all statutory
requirements for such valid consummation having been fulfilled; (5) Dial having
provided the NYSE with prior written notice of the Record Date as required by
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
rules and regulations of the NYSE; (6) no preliminary or permanent injunction or
other order, decree or ruling issued by a court of competent jurisdiction or by
a government, regulatory or administrative agency or commission, and no statute,
rule, regulation or executive order promulgated or enacted by any governmental
authority, being in effect preventing the payment of the Distribution; (7) the
Distribution being payable in accordance with applicable law; (8) the New Credit
Facility being in place, with all conditions to borrowing thereunder being
satisfied and the ability to maintain in place certain financing facilities
relating to Dial and its subsidiaries or to the Company and its subsidiaries
(including through the receipt of waivers, consents or amendments), or the
refinancing thereof, on terms satisfactory to Dial and the Company; and (9) the
Company and/or its subsidiaries having been substituted for Dial in respect of
all financial support agreements for the benefit of the Consumer Products
Business with respect to which Dial, or any subsidiary that is part of the
Services Business, is the obligor. In addition, the Distribution is conditioned
upon (1) confirmation of investment grade credit ratings for each of Dial and
the Company and (2) receipt of the Tax Ruling. Even if all the above conditions
are satisfied, the Distribution Agreement may be amended or terminated, and the
Distribution may be abandoned, or conditions thereto may be waived, at any time
prior to the Distribution Date for any reason, in the sole discretion of the
Dial Board.
ARRANGEMENTS BETWEEN DIAL AND
THE COMPANY RELATING TO THE DISTRIBUTION
For the purpose of governing certain of the relationships between Dial and
the Company after the Distribution, Dial and the Company will enter into the
various agreements described below. The Distribution Agreement appears as Annex
A hereto and the other agreements are included as exhibits to the Registration
Statement filed with the Commission, of which this Information Statement is a
part. The following summaries are qualified in their entirety by reference to
the agreements as filed.
DISTRIBUTION AGREEMENT
The Distribution Agreement will provide for, among other things, the
principal corporate transactions required to effect the Distribution and certain
other matters governing the relationship between Dial and the Company with
respect to or in consequence of the Distribution. The Distribution Agreement
also provides that, in conjunction with the Distribution, immediately prior to
the Distribution Date, Exhibitgroup will be merged with and into Dial. The text
of the Distribution Agreement is attached to this Information Statement as Annex
A.
Assets and Liabilities. Subject to certain exceptions described below, the
Distribution Agreement contains provisions designed principally to place with
the Company (1) the assets and personnel currently involved in the Consumer
Products Business and (2) financial responsibility for known and contingent or
unknown liabilities which relate directly to the Consumer Products Business as
conducted on the Distribution Date. In addition, certain assets and liabilities
of Dial described in the Distribution Agreement will be contributed to, or
assumed by, the Company. The assets include a joint ownership interest in an
aircraft held by Dial. The Dial liabilities being assumed by the Company arise
out of specified pension and post-retirement plans for former employees of
Armour and Company, which was formerly a subsidiary of Dial ("Armour Retirees"):
the Armour Pension Plan Established 1952 (Inactive), the Armour
Supplemental/Transfer Pension Plan, the Armour Long-Term Disability Plan, and
the Armour Retiree Medical Benefits Plan (collectively, the "Assumed Armour
Plans").
Contingent Claims and Insurance. There is pending litigation relating to
the Consumer Product Business which will be the responsibility of the Company
following the Distribution. Under the Distribution Agreement, the Company will
be entitled to the benefit of insurance coverage under Dial policies, to the
extent such insurance coverage existed, for claims relating to the ownership or
operation of the Consumer
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Products Business by Dial prior to the Distribution Date subject to, among other
things, the obligation to reimburse Dial for increases in insurance premiums as
a result of payments for such claims.
Employee Benefits. The Distribution Agreement contains a number of
provisions for allocating between Dial and the Company the assets and
liabilities relating to current and former employees. The provisions are
generally designed to assure that Dial and its subsidiaries will be responsible
for the payment of liabilities and obligations under employee benefit plans or
otherwise, with respect to current and former employees of Dial who are not and
were not employed in connection with the Consumer Products Business (excluding
participants in the Assumed Armour Plans, the "Dial Individuals") arising prior
to or following the Distribution Date, and that the Company and its subsidiaries
will be responsible for the payment of such liabilities and obligations with
respect to Company employees and certain other individuals ("Company
Individuals"), as well as the Assumed Armour Plans, arising prior to or
following the Distribution Date.
The Distribution Agreement provides that for any current plan year Dial
will be responsible for the payment of all liabilities and obligations for
benefits with respect to Dial Individuals, and the Company will be responsible
for the payment of all liabilities and obligations for benefits with respect to
Company Individuals under The Dial Corp Management Incentive Plan (the "Dial
MIP") and The Dial Corp Performance Unit Incentive Plan (the "Dial PUIP" and,
together with the Dial MIP, the "Dial Incentive Plans"). The performance
measures for such outstanding awards under the Dial Incentive Plans will be
equitably adjusted where necessary to take into account the effects of the
Distribution in accordance with the terms of the plans.
The Distribution Agreement provides that, as soon as practicable, and
effective as of the last day of the calendar month immediately preceding the
Distribution Date, or if such day is less than fourteen days before the
Distribution Date, the last day of the next preceding calendar month (the
"Cut-Off Date"), the Company will take, or will cause to be taken, all action
necessary to establish and administer one or more employee pension benefit plans
(each of which is hereinafter referred to as a "Company Plan") which will
provide benefits to Company Individuals who, immediately prior to the Cut-Off
Date, were participants in or otherwise entitled to benefits under The Dial
Companies Retirement Income Plan (the "Dial Retirement Plan") or the Dial
Companies Capital Accumulation Plan (the "Dial TRIM" and, together with the Dial
Retirement Plan, the "Joint Plans"). Dial has agreed in the Distribution
Agreement to transfer certain funds, based on formulas set forth in the
Distribution Agreement, from each of the Joint Plans into the applicable Company
Plan as soon as practicable after the Distribution Date. The Company has also
agreed to assume all liabilities and obligations of Dial under a number of
stand-alone qualified plans which relate solely to Company Individuals and Dial
has agreed to transfer the trusts funding such plans to the Company.
The Distribution Agreement also provides that, as of the Distribution Date,
the Company will assume or retain, or cause one or more of its subsidiaries to
assume or retain all liabilities or obligations of Dial in connection with
claims under The Dial Corp Supplemental Pension Plan, The Dial Corp Supplemental
TRIM Plan (the "Dial Supplemental TRIM Plan") and The Dial Corp Deferred
Compensation Plan (the "Dial Deferred Compensation Plan") in respect of any
Company Individual.
In connection with the Distribution, it is expected that The Dial Corp
Director's Retirement Benefit Plan (the "Dial Director's Retirement Plan") will
be amended and terminated, to change the vesting schedule and to provide that
the present value of vested accrued benefits (1) of each director who will
remain a director of Dial will be converted into restricted stock units of Dial
and will be the responsibility of Dial and (2) of each director who will become
a director of the Company will be converted into restricted stock units of the
Company and will be the responsibility of the Company.
With respect to any director of Dial who becomes a director of the Company
and ceases to be a director of Dial, the Distribution Agreement provides that,
as of the Distribution Date, the Company or one or more of its subsidiaries will
assume or retain all liabilities and obligations in connection with claims under
The Dial Corp Deferred Compensation Plan for Directors (the "Dial Directors'
Deferred Compensation Plan") and The Dial Corp Director's Charitable Award
Program. Dial will retain all such liabilities with respect to directors of Dial
who are not directors of the Company. Within 120 days of the Distribution Date,
Dial will fund a portion of the liabilities with respect to directors assumed by
the Company, including under the Dial Director's Retirement Plan described
above. In addition, the Dial Directors' Deferred Compensation Plan will
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be amended prior to the Distribution to provide that where a director has
elected to defer compensation in the form of stock units, such director's stock
unit account will be credited with a number of units representing Company Common
Stock equal to the number of stock units credited to such account as of the
Distribution Date.
The Distribution Agreement provides that, as of the Distribution Date, the
Company or one or more of its subsidiaries will assume or retain all liabilities
and obligations of the Company, Dial, or their subsidiaries in connection with
(1) claims under any of certain welfare benefit plans described in the
Distribution Agreement in respect of any Company Individual and (2) benefits of
retirees of Armour and Company under the Assumed Armour Plans. Except for the
Armour Pension Plan Established 1952 (Inactive), these liabilities are unfunded,
and Dial will transfer no cash or other funds to the Company in connection with
the Company's assumption of these liabilities.
The Distribution Agreement provides that Dial and the Company will take all
action necessary to amend the option plans of Dial and to adopt an option plan
of the Company so that adjustments can be made to outstanding Dial Options, Dial
Restricted Stock and performance-based Dial Restricted Stock awards, as defined
and described in "EXECUTIVE COMPENSATION."
The Distribution Agreement provides that Dial and the Company will take all
action necessary so that, effective as of the Distribution Date, the trustee of
the trust funding the Dial employee stock ownership plan (the "Dial ESOP") will
transfer to the trustee of a newly established Company savings plan the
aggregate account balances of Company Individuals under the Dial ESOP.
The Distribution Agreement provides that Dial and the Company will take all
action necessary so that, effective as of the Distribution Date, the Company
will establish The Dial Corporation Employee Equity Trust (the "Company Equity
Trust") to receive and hold for the benefit of Company Individuals all shares of
Company Common Stock received in the Distribution in respect of shares of Dial
Common Stock held in The Dial Corp Employee Equity Trust (the "Dial Equity
Trust"). Dial will amend the Dial Equity Trust to the extent necessary to
effectuate these actions.
In the Distribution Agreement, the Company and Dial will agree that, with
respect to individuals who, in connection with the Distribution, cease to be
employees of Dial or one of its subsidiaries and become employees of the Company
or one of its subsidiaries, such cessation will not be deemed a severance of
employment from either for purposes of any Dial Incentive Plans or for purposes
of any plan providing for the payment of severance, salary continuation or
similar benefits.
Except for individuals who are officers of both Dial and the Company, the
Distribution Agreement provides that officers and employees of Dial, the
Company, or either of their subsidiaries who are employed in the Consumer
Products Business immediately prior to the Distribution Date will be officers
and employees of the Company and its subsidiaries immediately following the
Distribution Date. Except as otherwise agreed by the parties to the Distribution
Agreement, effective as of the Distribution Date, (1) all officers or employees
of Dial and its subsidiaries who are acting as directors or officers of the
Company or its subsidiaries and are not employed in the business of the Company
will resign from such positions with the Company and its subsidiaries, and (2)
all officers or employees of the Company and its subsidiaries who are acting as
directors or officers of Dial and its subsidiaries and are not employed in the
business of Dial will resign from such positions with Dial and its subsidiaries.
Notwithstanding the foregoing, nothing in the Distribution Agreement will give
to any individual a right of employment, or continued employment, by the Company
or any of its subsidiaries.
Pursuant to the Distribution Agreement, the Distribution is subject to a
number of conditions which are described under "THE DISTRIBUTION -- Conditions
and Termination." Dial does not believe that the consent of any employees or
other beneficiaries under any plans maintained by Dial, in their capacity as
such, is required to consummate the transactions contemplated by the
Distribution Agreement, but reserves its right to obtain written consents from
employees with respect to the treatment of awards under various plans. The
Distribution Agreement may be amended or terminated, and the Distribution may be
abandoned, at any time prior to the Distribution Date for any reason, in the
sole discretion of the Dial Board.
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INTERIM SERVICES AGREEMENT
Dial and the Company will enter into an Interim Services Agreement (the
"Interim Services Agreement") prior to the Distribution Date under which each of
Dial and the Company will provide certain services on an interim basis to the
other. The principal services to be provided by Dial to the Company include:
certain office and administrative support, tax matters services, public
relations and investor services, cash management services, information systems
and financial reporting services, human resources services, insurance accounting
and claims processing services, government relations services and fleet leasing
services. The principal services to be provided by the Company to Dial will be
certain human resources services. The services will be provided for a term
beginning on the Distribution Date and expiring on the earlier of three years
from the Distribution Date or ninety days following the date on which the
recipient of such services notifies the provider that no further services will
be required. Each of Dial and the Company will charge a fee for services
provided to the other which fee will be determined and allocated according to
methods consistent with those in place prior to the Distribution Date, with a
view toward reimbursing the provider of services for the fully allocated direct
and indirect costs of providing the service, without any profit.
The Interim Services Agreement provides that the recipient of a service
may, at any time, request termination upon ninety days' advance notice to the
provider and, to the extent practicable, the parties will agree to an orderly
reduction or phase-out of such services. Once a provider discontinues such a
service, the provider will not be obligated to reinstate it.
AIRCRAFT SERVICES AGREEMENT
Dial and the Company will enter into an Aircraft Services Agreement (the
"Aircraft Services Agreement") prior to the Distribution Date which provides for
a joint ownership and shared use arrangement with respect to an aircraft
currently held by Dial, with Dial retaining a two-thirds interest and the
Company a one-third interest. The Aircraft Services Agreement will also give the
Company the right, at any time, to sell its interest to Dial for the higher of
book value or fair market value.
LETTER OF UNDERSTANDING ON TRADEMARKS
Dial and the Company will execute a Letter of Understanding on Trademarks
prior to the Distribution Date wherein Dial will agree to forego use of the Dial
name in connection with any consumer products business following the
Distribution.
OFFICE LEASE
Prior to the Distribution Date, an affiliate of Dial and the Company will
enter into an agreement pursuant to which the Company will lease from such
affiliate of Dial office space in Dial Tower, Phoenix, Arizona for use as the
Company's headquarters (the "New Lease"). Such office space is currently being
used by the Consumer Products Business. The New Lease provides that, upon the
consummation of the Distribution, a Dial affiliate will become the lessor, and
the Company will become the lessee, under the New Lease. Pursuant to the New
Lease, the Company will pay an annual rent at a fixed base rate of $15 per
square foot, plus taxes and operating expenses. The New Lease will have a term
commencing on the Distribution Date and ending on the tenth anniversary of the
Distribution Date, unless the New Lease upon which it is based expires or
terminates before that date pursuant to any of the conditions or covenants
thereof, or pursuant to law. The Company will have the right to sublease to a
third party the space, in whole or in part, for any portion, or all, of the term
of the New Lease.
TAX SHARING AGREEMENT
Through the Distribution Date, the results of the operations of the
divisions and domestic corporations that constitute the Consumer Products
Business group (the "Company Group") will be included in Dial's consolidated
United States federal income tax returns. As part of the Distribution, the
Company and Dial will enter into a Tax Sharing Agreement (the "Tax Sharing
Agreement") which provides, among other things, for the allocation among the
parties thereto of federal, state, local and foreign tax liabilities for all
periods through
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the Distribution Date. In general, the Tax Sharing Agreement provides that the
Company will be liable for all federal, state, local and foreign tax
liabilities, including any such liabilities resulting from the audit or other
adjustment to previously filed tax returns, which are attributable to the
Company Group through the Distribution Date, and that Dial will be responsible
for all other such taxes. Though valid as between the parties thereto, the Tax
Sharing Agreement is not binding on the IRS and does not affect the joint and
several liability of the Company and Dial, and their respective subsidiaries, to
the IRS for all federal taxes of the consolidated group relating to periods
prior to the Distribution Date.
While the Tax Sharing Agreement provides that the Company should be liable
generally only for items attributable to the Company Group's operations, it also
provides that if, as a result of any transaction, act or omission involving the
Company or any of its subsidiaries, including a failure of any representation
made to the IRS in the request for the Tax Ruling concerning the Company, or an
omission by the Company that causes a failure to fulfill any condition of the
Tax Ruling or any assumption on which it is based, the Distribution fails to
qualify as a tax-free spin-off under the provisions of Section 355 of the Code,
the Company will indemnify Dial for all taxes, including penalties and interest,
incurred by Dial by reason of the Distribution being a taxable event. In the
event that the Distribution failed to so qualify, Dial would recognize gain upon
the Distribution equal to the excess, if any, of the fair market value of the
Company Common Stock distributed on the Distribution Date over Dial's tax basis
for such Company Common Stock. Depending upon the market price of the Company
Common Stock immediately following the Distribution, the corporate level gain
could be well in excess of $1 billion.
FINANCING
Prior to the Distribution, the Consumer Products Business will continue to
be financed through Dial. In connection with the Distribution, a portion of
Dial's outstanding indebtedness will effectively be transferred to the Company,
as of the Distribution Date, as follows: (1) Dial will borrow approximately $280
million under a new $350 million bank credit facility (the "New Credit
Facility") which will provide that, upon effectiveness of the Distribution, the
obligations under the New Credit Facility will be assigned to, and assumed by,
the Company with the effect that Dial will have no further obligation
thereunder; (2) the amount borrowed by Dial will be used to repay outstanding
third-party indebtedness of Dial; (3) the Company will assume from Dial, and
will indemnify Dial from, all liabilities under the New Credit Facility,
including the obligation to repay the approximately $280 million initially
borrowed; (4) all intercompany receivables, payables, loans or advances between
Dial and the Company will be deemed contributed to capital and cancelled without
the payment of any cash by either Dial or the Company to the other; (5) the
Company will have the sole right to make further borrowings under the New Credit
Facility; and (6) Dial will not be obligated with respect to, and will have no
right to make, any such further borrowings under the New Credit Facility. The
New Credit Facility will be entered into pursuant to a credit agreement (the
"Credit Agreement"), a copy of which will be filed as an exhibit to the
Registration Statement of which this Information Statement is a part. The
following summary is qualified in its entirety by reference to the Credit
Agreement as filed.
The New Credit Facility to be assumed by the Company will provide for a
five-year revolving credit facility (provided that, annually at the Company's
request and with the consent of the banks, the five-year term may be extended
for additional one-year periods) under which borrowings can be made up to a
maximum of $350 million at any time outstanding. As described above, as of the
Distribution Date, Dial will have borrowed approximately $280 million under the
New Credit Facility and the Company will have assumed, and Dial will have been
released from, the obligation to repay the approximately $280 million borrowing.
The interest rate applicable to borrowings under the New Credit Facility
will be, at the Company's option, indexed to (1) the Base Rate (as defined in
the Credit Agreement), or (2) the adjusted London Interbank Offering Rate, plus
an appropriate spread over such rate during the period of the New Credit
Facility. The New Credit Facility also provides for a facility fee on the $350
million commitment. Such spread
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and fee will change moderately should the Company's debt ratings change. There
is also an annual administration fee.
The New Credit Facility will contain certain restrictive covenants
applicable to the Company that will limit its ability or the ability of its
subsidiaries to create or suffer to exist certain liens. The New Credit Facility
will also contain restrictive covenants that restrict the ability of the Company
or its material subsidiaries to merge or consolidate with or into, or convey,
transfer, lease or otherwise dispose of all or a substantial portion of its or
their assets, or enter into any partnership, joint venture, syndicate, pool or
other combination, unless, among other conditions, in the case of a merger or
consolidation, the Company is the surviving entity or the surviving entity
assumes all of the Company's obligations under the New Credit Facility in a
manner satisfactory to the lenders. The covenants of the New Credit Facility
will also require the Company to maintain certain financial covenants, including
a cash flow coverage ratio and maintenance of a minimum net worth.
In conjunction with the indebtedness which will be transferred to the
Company, Dial will also transfer a $65 million notional interest rate swap
agreement which will convert the floating interest rate on $65 million borrowed
under the New Credit Facility into a fixed interest rate (a pay-fixed swap). The
interest rate swap agreement, which has a fixed pay rate of 8.87% and a current
receive rate of 5.66%, expires December 1997.
The Company has participated in Dial's financing plan of selling
receivables to accelerate cash flow. Receivables sold under this plan amounted
to $76.7 million at December 30, 1995, $91 million at December 31, 1994 and $97
million at December 25, 1993. The proceeds from the sale of such receivables
have been remitted to Dial. The Company expects to establish a comparable
receivables financing plan which will be used in conjunction with commercial
paper and the New Credit Facility to provide the working capital required by the
Company following the Distribution.
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BUSINESS AND PROPERTIES
OVERVIEW
The Company is a leading producer and marketer of personal care, detergent,
household and shelf-stable food products. The Company reported annual revenues
for fiscal 1995 of approximately $1.4 billion and operating income before
restructuring charges and asset write-downs of $111.9 million. For the
thirteen-week period ended March 30, 1996, revenues for the Company were $352.4
million and operating income was $36.3 million. The Company maintains a
significant market presence in soaps, laundry detergents and household products,
with such well-known household brands as DIAL and LIQUID DIAL soaps, PUREX
detergents and RENUZIT air fresheners. In 1995, the Company was the leading
seller of antibacterial bar and liquid soaps in the United States measured by
unit sales, and the third largest seller of bar soaps generally in the United
States measured by unit sales. The Company was the third largest seller of
detergents, and the leader in the growing value segment of the detergent market,
in the United States measured by standard cases sold in 1995. In the domestic
market for air freshener products, the Company was the second largest seller
measured by unit sales. Soaps, detergent and air freshener products represented
more than 70% of revenues and more than 75% of operating income before
restructuring charges and asset write-downs for the Company in 1995. With
respect to the Company, references to years and periods are to fiscal years and
periods, and with respect to comparative industry data, the years are calendar
years.
The Company operates production facilities and maintains sales offices in
the United States, Canada, Mexico, Guatemala and England and also conducts
business in certain other foreign countries. The Company's corporate
headquarters and certain division and subsidiary activities are located in
Phoenix, Arizona.
With the exception of 1995, the Company has a solid record of steadily
increasing revenues and operating income: from $1.2 billion in revenues and
$110.6 million in operating income in 1991 to $1.5 billion in revenues and $160
million in operating income in 1994. Revenues in 1995 decreased 10% from 1994
due to actions by the Company to reduce trade customers' inventories, in part
through reduced promotional programs, across most product lines. Discontinuation
of low margin products also contributed to the shortfall. The Company took
$135.6 million of restructuring charges and asset write-downs in 1995 to provide
for a business-based reorganization through plant closings, workforce reductions
and correction of certain product lines. The charges resulted in an operating
loss of $23.7 million for 1995, versus operating income of $160 million in 1994.
The actions taken in 1995 were intended to permit the Company to pursue its
business strategies described below, by focusing on growing the strong core
brands and continuing to introduce line extensions and new products while
achieving substantial cost efficiencies in manufacturing and distribution.
Revenues for the thirteen weeks ended March 30, 1996 were $352.4 million, an
increase of $14.5 million or 4.3% over revenues in the comparable period in
1995. Operating income for the first fiscal quarter of 1996 was $36.3 million,
an increase of $2.5 million or 7.5% over the first fiscal quarter of 1995.
BUSINESS STRATEGY
The Company originated as the grocery products division of Armour and
Company, which entered the soap business in the 1800's and founded the DIAL
brand in 1948. The introduction of antibacterial ingredients using
hexachlorophene for "around-the-clock" protection in 1948 made DIAL soap the
first antibacterial soap marketed to retail consumers. The Company has been
expanded in recent years to include PUREX household and laundry products, 20
MULE TEAM and BORAXO household and industrial specialty products, BRECK hair
care products, RENUZIT air fresheners and other consumer products.
The Company's strategy will be to continue to seek growth in revenues and
income from its strong core brands, as well as by expanding existing lines and
introducing new products, to cut costs, to develop its international business
and further to expand its business through strategic acquisitions.
Build on Strong Core Brands. The soap, detergent and air freshener
categories in which the Company operates represented approximately $1.8 billion,
$4.5 billion and $700 million, respectively, in total domestic retail sales in
1995. While each category has demonstrated relatively slow growth in the United
States on both a unit and a dollar sales basis, due largely to high household
penetration and low population growth, the
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Company believes that there is opportunity for growth from its core brand
products, principally through increased usage by consumers and enhanced market
share. The strategy for growth varies by product category. As described below,
DIAL and LIQUID DIAL soaps are the leading antibacterial soap products in the
United States. The Company believes that the bacteria-killing capability of its
soap products will be increasingly important to the consumer. In the detergent
area, as described below, the Company has demonstrated its ability to grow
market share in the value segment of the category and expects this segment to
continue to be an important and growing part of the category. In the air
freshener category, the Company has built the RENUZIT market share from 16.3%,
measured by retail sales, in 1993 when it was acquired from S.C. Johnson, to
17.5%, measured by retail sales, currently, with the category increasing in size
during such period.
Line Extensions and New Products. The Company intends to continue its
consistent strategy of developing extensions of, or enhancements to, its
existing products, as well as developing new products, while at the same time
phasing out low-margin products from its portfolio. The Company has a record of
innovation, as well as a demonstrated ability to respond quickly to developments
within each product category. In the personal care category, the Company was the
first to market an antibacterial soap for retail consumption. As described
below, the Company led the rapid growth in the liquid soap segment of the
personal care category and has a significant presence in the recently
invigorated body wash segment. In the detergent category, the Company has
demonstrated an ability to enhance existing products and extend product lines
while continuing to aim at the value segment of the market. Line extensions and
new products are particularly important in the household products category where
sales of such products represented 14% of household products revenues in 1995.
During 1995, the Company also began to extend the use of its core brand
names across product categories. For example, the strength of the DIAL brand
with its antibacterial function was extended to dishwashing detergents and
surface kitchen cleaners with the introduction of DIAL Dishwashing Detergent &
Antibacterial Hand Cleanser and DIAL Antibacterial Kitchen Cleaner in 1995.
Similarly, the PUREX, BRILLO and PARSONS' brand names have been extended to a
new value-oriented line of household cleaning products including BRILLO Scrub &
Scour Liquid Cleanser, PUREX Carpet Cleaner, PUREX All Purpose Cleaner, PUREX
Disinfectant Spray, PUREX All-Clean and PARSONS' Glass Cleaner.
Reduce Costs. The Company pursued a cost-cutting strategy in 1995. A major
restructuring was undertaken in 1995 which involved the planned closing of six
manufacturing plants, correction of certain product lines, and a reduction in
workforce of approximately 15% (approximately 700 people), aimed at increasing
efficiency and lowering costs. As of May 31, 1996, four plants had been closed,
two of which had been sold, and 555 of the 700 people had been terminated. The
remaining actions are expected to be completed by the end of 1996. Future
earnings are expected to benefit from efficiencies resulting from streamlining
and consolidating product lines for the remaining facilities through increased
volume and reduced costs. The Company expects to pursue further cost savings
opportunities, including continued efforts to flatten production and
distribution schedules by maintaining consistent trade inventory levels, to
consolidate its distribution facilities and to lower packaging and distribution
costs through increased production of concentrated detergent products, and
direct manufacturing of body wash in the soap category.
International Markets and Opportunities. The Company's products are
currently sold in approximately 40 countries. The Company believes that the DIAL
and PUREX brands are recognized in many parts of the world and that the
international personal care, detergent and household products categories
represent a meaningful growth opportunity for the Company. To date, the Company
has not aggressively marketed its products internationally.
The Company is pursuing a three-part strategy to expand its core business
internationally. First, the Company has repatriated its brands in most
countries, by either replacing license arrangements with sales by the Company
through distributors or terminating such license arrangements. Second, the
Company has sought to increase its sales in Canada, Puerto Rico and Mexico,
where the Company has established businesses, by increasing those markets'
awareness of its products and carrying out its domestic strategies for those
products in the international markets. Finally, the Company continuously
evaluates additional markets for possible
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expansion where it is believed that the Company's products could be successfully
marketed to consumers. The Company believes that it can be most effective in
entering new markets globally by forming ventures or other alliances with, or by
acquiring, small to medium-sized local businesses which either have established
distribution channels which can be utilized for Company products or offer a
technical capability which can be expanded to include the production of Company
products.
Although the Company is committed to expanding its international business,
several of the Company's competitors are substantially larger than the Company,
have substantially greater resources than the Company and have already
established global businesses. Accordingly, there can be no assurance that the
Company's international strategy will be successful.
Acquisitions. For the long term, the key strategic goal of the Company is
to achieve significant growth in order to compete more effectively with its
larger competitors. Following the Distribution, it is believed that the share
price of the Company as an independent entity will better reflect the market
value of the Consumer Products Business, with a price/earnings multiple closer
to that of other consumer product companies. With a better valued stock, the
Company believes that it will be better positioned to make acquisitions that
will complement and build upon its existing product brands. Consistent with this
strategy, the Company currently intends to issue at least $100 million in
additional equity within six to twelve months following the Distribution Date,
in the form of the sale of stock in the public or private equity markets to
raise capital for internal growth and acquisitions. In addition to, or in lieu
of, a sale of stock, the Company may seek to make an acquisition or acquisitions
utilizing stock.
PRODUCTS
The Company is currently organized into four major categories, as follows:
Personal Care. The Company has a consistent record of innovation and
leadership in the personal care category. The Company was the first to market an
antibacterial soap for retail consumption. In 1987, with the introduction of
LIQUID DIAL, the Company led the rapid growth in what had been a relatively
small, slow-growth liquid soap segment of the category. Similarly in 1993, the
Company recognized the growth potential of the body wash segment of the
business, introducing MOISTURIZING DIAL PLUS BODY WASH. The liquid soap and body
wash segments represented approximately 15% of the overall category in 1995, up
from approximately 7.5% in 1994.
In 1994, the Company introduced the DIAL FOR KIDS line, which achieved
revenues of $18 million in 1995. In 1995, the Company introduced three new
product lines: the DIAL ULTRA SKIN CARE line, NATURE'S ACCENTS, a complete line
of skin care products, and KAYA, a line of aromatherapy hair care products
utilizing all natural botanical extracts. The DIAL ULTRA SKIN CARE line is a
unique combination of antibacterial efficacy and skin conditioning ingredients,
and includes bar soap, liquid soap and body wash. The NATURE'S ACCENTS line is
designed to capitalize on consumer interest in more indulgent bath products,
through colorful graphics, upscale fragrances, and brilliant product hues.
NATURE'S ACCENTS features translucent soap, shower and bath gel, foaming face
wash, hand and body lotion and bath crystals. The KAYA line is intended to
compete with expensive salon products but is offered through traditional retail
outlets at more affordable prices. Several of the DIAL ULTRA SKIN CARE and
NATURE'S ACCENTS products are produced in Guatemala by ISC International Ltd.
and its subsidiary companies which were acquired by Dial in July 1995.
Personal care products are currently marketed under a number of brand
names, including DIAL, MOISTURIZING DIAL PLUS, MOUNTAIN FRESH DIAL, DIAL FOR
KIDS, TONE, NATURE'S ACCENTS, PURE & NATURAL, SPIRIT and FELS NAPTHA soaps,
LIQUID DIAL antibacterial soap, BORAXO powdered hand soap and DIAL antibacterial
antiperspirant. The Company also markets the BRECK line of hair care products,
including hairsprays, shampoos and hair conditioners. DIAL bar soap is the
nation's leading deodorant soap and LIQUID DIAL soap is a leading antibacterial
liquid soap. SPIRIT bar soap, a three-in-one combination bar that cleans,
moisturizes and provides deodorant protection, is distributed nationally, as is
TONE, a complexion and moisturizing bar with cocoa butter. The Company also
markets hotel amenity products, including personal-size bar soaps under the
DIAL, TONE and PURE &
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NATURAL labels, and industrial specialties products, including hand soaps sold
under the BORAXO and 20 MULE TEAM trademarks, hand and body cleansers for the
medical market and hand cleaners for the automotive market.
The Company intends to continue to pursue a combined strategy in the
personal care category of growing its core brands based on product quality and
functionality and expanding those businesses to meet trends in the personal care
markets. In addition, while the Company's personal care business has not
benefitted significantly from its hair care and underarm deodorant products in
the past, the Company believes that there is a meaningful opportunity for growth
in those segments.
Cost cutting will also be part of the strategy for the personal care
products category. The Company manufactures all of its bar and liquid soap
products, while currently outsourcing its body wash products. The bar soap plant
in Aurora, Illinois is viewed in the industry as a low-cost production facility.
In connection with the plant closings and job eliminations announced by the
Company in 1995, two plants, and 320 jobs, relate to the personal care category.
These steps, combined with manufacturing and distribution efficiencies from the
continued efforts to maintain consistent trade inventory levels, are expected to
contribute to the profitability of this category.
Detergent. In the detergent category, the Company has pursued a strategy
of growth in the value segment of the detergent market while keeping pace with
the trends toward concentrated "ultra" detergents, as well as liquid detergents.
The Company believes that "ultra" detergent products account for approximately
90% of powder detergent cases and 65% of liquid detergent cases sold in the
United States in 1995, whereas concentrated ultra detergents did not exist in
the United States prior to 1990. The Company also believes that liquid
detergents now account for approximately 40% of the category in the United
States, based on standard cases sold, up from 30% in 1990. While the overall
detergent category is expected to experience slow growth in the United States
consistent with household formation on a national basis, the Company believes
there is opportunity for growth by the Company in this category through
continued market share improvements.
The Company acquired the PUREX brand with the acquisition of Purex
Corporation in 1985 at a time when Purex was the fifth largest producer and
marketer of detergents in the United States, based on standard cases sold. The
Company currently is the third largest producer and marketer of detergents in
the United States, on the same basis, and the leader in the value segment.
Detergent products include brands such as PUREX liquid and powder laundry
detergents, TREND liquid and powder detergents, DUTCH and INSTANT FELS powder
detergents, and PUREX BABY SOFT powder and liquid detergents. Nationally, PUREX
was the third largest brand in the detergent category for 1995, measured by
standard cases sold. The Company believes that the value segment currently
accounts for approximately 35% to 40% of detergent volume domestically, based on
standard cases sold. The Company believes that its ability to compete in this
segment depends both on product formulations and functionality and on its
pricing strategies. In 1996, the Company introduced a Color Shield feature for
its PUREX detergents, the only value detergent offering this feature. In 1996,
the Company also undertook a pricing initiative designed to lower the every day
list price point of PUREX detergent products by approximately 15%. While this
initiative will reduce revenues and income per unit of sales, the objective is
to increase volume to the point where, together with improved margins from
reduced costs, overall revenue and income growth is achieved.
The Company plans to pursue logical line extensions and new products as
opportunities arise. In 1995, the PUREX BABY SOFT powder and liquid line of
detergents -- which is designed to create a lower-priced alternative to the
principal brands in the baby clothes detergent market -- was introduced on a
national basis. TREND liquid detergent was expanded nationally in 1995.
Cost control is also very important in the detergent category because it
enables the Company to maintain lower prices on its products. The Company
manufactures the majority of its detergent products, but procures packaging from
third-party sources. As described above, the Company is closing six
manufacturing facilities, one of which produced predominantly detergent
products, and eliminating 93 jobs relating to that plant. As a result,
substantial cost savings are expected as production volume is absorbed by the
three remaining facilities which manufacture detergents. The Company is
exploring logistical efficiencies in the area of distribution by means of a move
to fewer distribution centers, reduction of stock keeping units (SKUs),
increasing full truck
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shipments and other means, and also may achieve cost savings as the continuing
trend toward concentrated detergent products permits lower packaging and
distribution costs.
Household. The household products category is a dynamic part of the
Company's business. The Company established a major presence in this category
with the acquisition of RENUZIT air fresheners in 1993. The Company has built
market share in the air freshener category from 16.3%, measured by retail sales,
in 1993, to 17.5%, measured by retail sales, currently, with the category
increasing in size during such period. In 1995, the Company reorganized its
product lines for reporting purposes. The laundry category was reclassified as
detergents only, and all non-detergent products were reclassified from the
laundry category to the household products category. The household products
category currently includes brands such as RENUZIT air fresheners, including
RENUZIT Adjustable, RENUZIT Aerosol, RENUZIT ROOMMATE and RENUZIT LONGLAST
ELECTRIC, BRILLO soap pads, SNO BOL toilet bowl cleaners, CAMEO powdered
cleanser, PARSONS' and BO-BEEP ammonia, BRUCE floor care products, PUREX TOSS 'N
SOFT sheet fabric softeners, PUREX RINSE 'N SOFT and STA PUF liquid fabric
softeners, MAGIC sizing and starch, STA-FLO starch and 20 MULE TEAM BORAX
laundry additive.
Line extensions and new, or enhanced forms of, products are particularly
important in the household products category as the Company and its competitors
seek enhanced market share on the basis of product features and price. Line
extensions, new products, and products with enhanced features represented 14% of
household product revenues in 1995. The Company introduced RENUZIT NEW NATURALS,
a line of premium aerosol air fresheners, in 1995, and in 1996 introduced
RENUZIT AROMASENSE scented candles. At the same time, the Company is
continuously reviewing its product portfolio in order to phase-out low margin
products from its portfolio. In 1995, the Company eliminated PUREX liquid bleach
from its household products category, which accounted for $15 million in
revenues in 1994.
During 1995, the Company also began to extend the use of its brand names
across product categories, with the use of the DIAL brand name in conjunction
with dishwashing detergents and surface cleaners with antibacterial ingredients,
as well as with the use of the PUREX, BRILLO and PARSONS' names in connection
with a new line of household cleaning products directed at the value segment of
the household products market.
The Company pursues a several part cost-containment strategy in the
household products category. While the Company performs its own development work
internally, it relies on external research and development by suppliers for many
product and packaging developments, thereby minimizing non-applied research and
development expenditures. Similarly, while the household division manufactures
BRILLO and certain other household products, it contracts for the manufacture of
all air freshener products, and a number of other products, thereby reducing
capital expenditures relating to manufacturing and packaging for new products.
Food. In the shelf-stable food category, the Company markets ARMOUR STAR
canned meats, and CREAM corn starch. ARMOUR STAR products maintain a strong
market position in the canned meats category. ARMOUR STAR Vienna sausage, potted
meat and sliced dried beef lead their respective segments on a national basis,
based on unit sales in 1995, and ARMOUR STAR canned meats accounted for
approximately one-sixth of all canned meat sales in the United States, based on
unit sales in 1995. The Company's strategy with respect to the shelf-stable food
category will be to increase penetration geographically, to revitalize core
products and to introduce new products. In 1995, the Company began a program of
redesigning packaging for a number of products, including its Vienna sausages.
During 1995, the food category introduced two product line extensions, ULTIMATE
CHILI LOVERS' CHILI and DELI STYLE salads, and two new product lines, ARMOUR
STAR BIG ONES MEAT STICKS and NO MORE LUMPS ALL PURPOSE THICKENER.
MARKETING
Customers. The Company sells to thousands of customers, primarily in the
United States, including supermarkets, drug stores, wholesalers, mass
merchandisers, membership club stores, distributors and other
17
<PAGE> 32
outlets. Wal-Mart Stores Inc. was the largest customer of the Company in fiscal
1995, accounting for approximately 11% of net sales.
Sales. The Company's customers are served by a national sales organization
of approximately 320 employees organized into four individual sales regions plus
specialized sales operations which sell to large mass merchandisers, membership
club stores, chain drug stores, vending and military customers. In addition,
customers are served by a national broker sales organization and a national
retail merchandising organization. The Company's sales representatives focus
their efforts both on sales of products to the Company's direct customers, as
well as on designing and executing programs to ensure sales to ultimate product
consumers. Programs directed at ultimate product consumers provide combinations
of in-store merchandising, price reductions and discounts, and include
cooperative advertising efforts.
Advertising and Promotion. The Company expends a significant portion of
its revenues for the advertising and promotion of its products. In the last
three years, over $1 billion has been spent for advertising and promotional
activities. The Company believes that such expenditures are necessary to
maintain and increase market share in an industry highly dependent on product
image and quality, consumer support and consumer trends. The Company spent $341
million in 1995, or 25% of 1995 net sales, for these purposes and the Company
plans to spend approximately the same percentage of net sales for these purposes
in 1996. Advertising typically constitutes 15% to 20% of these expenditures.
Distribution. Products are shipped by the Company from thirteen warehouses
located at domestic manufacturing facilities and eleven regional warehouses.
Regional warehouses are operated by third parties except for one warehouse
operated by the Company. Total distribution space at regional warehouses is
2,000,000 square feet and at warehouses located at manufacturing facilities is
530,000 square feet. The Company uses principally outside carriers to transport
its products.
In April 1996, the Company established large distribution centers in St.
Louis, Missouri, and Allentown, Pennsylvania, for the distribution of detergent
products. Shipments from these centers and, to some extent, from detergent
manufacturing facilities are in lots of twenty-eight pallets and 44,000 pounds.
Efficiencies and lower costs are attained because full pallets are shipped
without warehouse personnel picking and assembling product for shipment. In
addition, these large distribution centers use the Chep Mark 55, a four-way
pallet, which can be turned in any direction and packed in a more compact
manner, saving space on the trailers and reducing damage in shipment.
The Company began a program of continuous, automatic replenishment of
certain of its trade customers' inventories in May 1990. The primary objective
of the Continuous Replenishment Program is to improve service to customers and
reduce costs by shortening the order-to-delivery pipeline, i.e., by anticipating
customer needs based on historical sales, by shipping the product just before
those needs arise, and by eliminating redundancy, errors, and interruption
throughout the replenishment process. This is accomplished by using information
systems to track customer inventory levels and the movement of each product at
the customers' distribution centers, and to manage the customers' warehouse
inventories. Since its inception, the Company has expanded the Continuous
Replenishment Program and sales under the Continuous Replenishment Program
currently account for approximately 15% of the Company's net sales.
SUPPLIERS
As described above, the Company relies on a number of third parties for
research and development, manufacturing, and packaging. Many of the Company's
arrangements with respect to new products contain limited mutual exclusivity
provisions designed to permit both the Company and the supplier to profit from
the product enhancement or innovation before the Company uses an alternative
supplier or the supplier sells to one of the Company's competitors. Most
outsourcing arrangements can be terminated without material penalties on an
average of three months' notice.
RAW MATERIALS
The Company believes that ample sources of raw materials are available with
respect to all of its major products. Paper, fats and oils, detergent chemicals
and meat are the raw materials which have the most
18
<PAGE> 33
significant impact on the Company's costs. While the Company believes that it
can respond to price increases with respect to the raw materials used in its
business, rapid increases in the prices of fats and oils could have a short-term
adverse impact on results.
COMPETITION
The Company competes primarily on the basis of brand equity, brand
advertising, customer service, product performance and product quality at
competitive retail price points. The Company's operations must compete with
numerous well-established local, regional, national and international companies,
some of which are very large and act aggressively in obtaining and defending
their products' market shares and brands. Principal competitors, in one or more
categories, are The Procter & Gamble Company, Colgate-Palmolive Company, Lever
Brothers Co., a division of Unilever United States Inc., American Home Food
Products Inc., Hormel Foods Corp., The Clorox Company, Church & Dwight Co., Inc.
and S.C. Johnson & Son, Inc.
RESEARCH AND DEVELOPMENT
The Company conducts research and development at its facility in
Scottsdale, Arizona. As described above, the Company engages primarily in
applied research and development, relying on outside sources for general
research and development activities. Internal research and development is
directed at improving existing products and developing new products as well as
providing technical assistance and support to the Company's manufacturing
activities. Approximately 130 employees are engaged in research and development.
The Company's research and development expenditures totalled approximately $14.9
million, $15.3 million and $12.5 million for 1995, 1994 and 1993, respectively.
The Company relies on industry and other sources, various attitude and
usage studies prepared by independent marketing firms on behalf of the Company
and direct sales information from its largest customers to identify consumer
needs and attempt to anticipate shifts in consumer preferences to allow the
Company to develop line extensions and new products to meet changing demands.
The Company's marketing and product development groups and research and
development laboratories work together to redesign and reformulate existing
products and to develop new products.
PATENTS AND TRADEMARKS
United States patents are currently granted for a term of seventeen years
from the date a patent application is filed. As of the Distribution Date, the
Company will own a number of patents currently owned by Dial which will give the
Company competitive advantages in the marketplace. The Company will also have
the right, pursuant to license agreements, to operate under certain third-party
patents covering specific technologies.
United States trademark registrations are for a term of ten years,
renewable every ten years so long as the trademarks are used in the regular
course of trade. As of the Distribution Date, the Company will maintain a
portfolio of trademarks, currently maintained by Dial, representing substantial
goodwill in the businesses using the marks.
Many trademarks used by the Consumer Products Business, including DIAL,
PURE & NATURAL, ARMOUR STAR, TONE, TREET, PARSONS, BRUCE, CAMEO, PUREX, DUTCH,
RENUZIT, BRILLO, SNO BOL, BRECK, TREND, PUREX TOSS 'N SOFT, PUREX STA PUF, PUREX
RINSE 'N SOFT, 20 MULE TEAM, BORAXO, and MAGIC, have substantial importance and
value. Use of the ARMOUR and ARMOUR STAR trademarks by the Company will be
permitted by a perpetual license granted by ConAgra, Inc. and use of the 20 MULE
TEAM trademark is permitted by a perpetual license granted by U.S. Borax, Inc.
GOVERNMENT REGULATION
Substantially all of the operations of the Company are or may become
subject to various federal laws and agency regulation, in particular, the Food,
Drug and Cosmetic Act, the Food and Drug Administration (the "FDA"), the
Department of Agriculture, the Environmental Protection Agency, the Federal
Trade Commis-
19
<PAGE> 34
sion ("FTC") and various state laws and regulatory agencies. In addition, the
Company is subject to similar laws and regulations imposed by foreign
jurisdictions.
Federal, state, local and foreign environmental compliance may from time to
time require changes in product formulation or packaging. Such changes have not
had, and are not expected to have, a material effect on revenues, capital
expenditures or earnings of the Company.
The FDA and the FTC have in the past monitored, and may continue to
monitor, advertising and sales practices of consumer products companies with
respect to claims made in advertising and labelling relating to product
functionality and efficacy. In that respect, the Company's advertising and
labelling includes, among other things, claims as to the superior antibacterial
function of its DIAL and LIQUID DIAL soap products. The Company believes it has
substantial scientific data supporting such claims. One or more regulatory
agencies may, nonetheless, determine to challenge the Company's claims in this,
or some other respect, in the future.
ENVIRONMENTAL
The Company is subject to various environmental laws and regulations of the
United States as well as of the states and other countries in whose
jurisdictions the Company has or had operations. During the fiscal year ended
December 31, 1995, the amounts incurred in compliance with federal, state, local
and foreign legislation pertaining to environmental standards did not have a
material effect upon the capital expenditures or earnings of the Company.
As is the case with many companies, the Company faces exposure to actual or
potential claims and lawsuits involving environmental matters. Although there
are a number of pending environmental disputes involving the Consumer Products
Business, the Company believes that any liabilities resulting therefrom, after
taking into consideration amounts already provided for, but exclusive of any
potential insurance recovery, should not have a material adverse effect on the
Company's financial position or results of operations.
EMPLOYEES
As of December 30, 1995, the Company employed approximately 4,000
individuals, of whom approximately 1,700 were covered by collective bargaining
agreements. Dial announced in the third fiscal quarter of 1995 that it intends
to close six plants engaged in the Consumer Products Business which would result
in a reduction in workforce of approximately 700 employees. Of these employees,
555 had been terminated by May 31, 1996.
The Company believes that relations with its employees are satisfactory and
that collective bargaining agreements expiring in 1996 will be renegotiated in
the ordinary course without an adverse effect on the Company's operations.
As of the Distribution Date, the Company will have approximately 725
employees in its corporate office, providing management, financial and
accounting, tax, administrative, legal and other services to its operating
units.
PROPERTIES
The Company's headquarters will occupy approximately 119,000 square feet
leased from an affiliate of Dial in a building in Phoenix, Arizona, owned by a
joint venture between two subsidiaries of Dial. As of the Distribution Date, the
Company will own a 200,000 square foot facility in Scottsdale, Arizona,
currently owned by Dial, which is used to conduct much of the Company's
research, technical, administrative and other activities.
20
<PAGE> 35
The Company operates nine plants in the United States, one plant in Mexico,
one plant in Guatemala, one plant in England, and sales and administration
offices in Puerto Rico, Canada and the United Kingdom. Eleven of the plants are
owned; one plant and three of the offices are leased. Principal manufacturing
plants are as follows:
<TABLE>
<CAPTION>
LOCATION SQ. FEET PRODUCTS MANUFACTURED
- ------------------------- -------- -----------------------------------------------
<S> <C> <C>
Aurora, Illinois......... 451,000 Bar Soaps
Fort Madison, Iowa....... 447,000 Canned Meats, Microwaveable Meals
St. Louis, Missouri...... 272,400 Liquid and Dry Laundry Detergents, Fabric
Softeners
Bristol, Pennsylvania.... 261,800 Dry Detergents
Hazelton, Pennsylvania... 214,470 Dial Liquid Soaps, Liquid Detergents, Ammonia,
Scouring Pads, Fabric Softeners
London, Ohio............. 140,000 Scouring Pads and Fabric Softeners
Guatemala................ 100,000 Translucent Bar Soaps
</TABLE>
- ---------------
Management believes that the facilities of the Company in the aggregate are
adequate and suitable for their purposes and that capacity is sufficient for
current needs.
LEGAL MATTERS
As is the case with many companies, the Company faces exposure to actual or
potential claims and lawsuits involving its business and assets. Although there
are a number of pending and threatened lawsuits involving the Consumer Products
Business, the Company believes that any liabilities resulting therefrom after
taking into account amounts already provided for, but exclusive of any potential
insurance recovery, should not have a material adverse effect on the Company's
financial position or results of operations.
21
<PAGE> 36
THE DIAL CORP CONSUMER PRODUCTS BUSINESS
SELECTED COMBINED FINANCIAL AND OTHER DATA
The following table presents selected financial statement data derived from
the Company's Combined Financial Statements. The selected balance sheet data as
of December 30, 1995 and December 31, 1994 and income statement data for each of
the three fiscal years in the period ended December 30, 1995 have been derived
from the audited combined financial statements of the Company which are included
elsewhere herein. The income statement data for each of the two fiscal years
ended December 26, 1992 and December 28, 1991 and the thirteen weeks ended March
30, 1996 and April 1, 1995 and the balance sheet data as of March 30, 1996 and
April 1, 1995 and December 25, 1993, December 26, 1992 and December 28, 1991
were derived from the unaudited combined financial statements of the Company. In
the opinion of management, such unaudited financial statements include all
material adjustments necessary to present fairly the information set forth
therein and were prepared as if the Company were a separate entity for all
periods presented. The following data should be read in conjunction with the
Company's Combined Financial Statements and the notes thereto, "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" and
the other financial information included elsewhere herein. Per share data for
net income (loss) and dividends have not been presented, as the Company was not
a publicly held company during the periods presented.
<TABLE>
<CAPTION>
THIRTEEN
WEEKS ENDED FISCAL YEAR ENDED
-------------------- ------------------------------------------------------------------------
MARCH 30, APRIL 1, DECEMBER 30, DECEMBER 31, DECEMBER 25, DECEMBER 26, DECEMBER 28,
1996 1995 1995 1994 1993 1992 1991
--------- -------- ------------ ------------ ------------ ------------ ------------
(000 OMITTED, EXCEPT NUMBER OF EMPLOYEES)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net sales................. $352,392 $337,862 $1,365,290 $1,511,362 $1,420,173 $1,275,447 $1,196,499
Operating income
(loss)(1)............... 36,342 33,802 (23,656) 160,008 139,213 118,616 110,605
Income (loss) before
cumulative effect of
change in accounting
principle (1)........... 19,608 18,247 (27,489) 91,072 84,181 74,501 71,411
Net income (loss)(1)(2)... 19,608 18,247 (27,489) 91,072 84,181 31,068 71,411
FINANCIAL POSITION AT YEAR
END
Total assets.............. $806,032 $842,608 $ 798,405 $ 887,373 $ 857,516 $ 685,266 $ 662,195
Total debt (3)............ 309 3,726 3,320 3,510 6,063 31,502 31,130
Working capital........... 45,469 84,671 45,663 56,188 (10,177) (50,790) (22,434)
Dial investment and
advances................ 499,244 575,472 496,230 555,703 502,199 350,799 410,759
OTHER DATA
EBITDA (4)................ $ 43,672 $ 42,860 $ 141,062 $ 194,918 $ 172,489 $ 150,158 $ 139,933
Depreciation and
amortization............ 7,330 9,058 29,118 34,910 33,583 31,542 29,328
Total capital
expenditures............ 8,034 4,692 27,214 37,471 40,605 45,508 53,398
Number of employees (end
of period).............. 4,002 3,886 3,985 3,995 4,000 4,197 4,279
Number of employees
(average)............... 4,001 3,943 3,992 3,983 4,121 4,186 4,296
</TABLE>
- ---------------
(1) After deducting restructuring charges and asset write-downs of $135,600,000
($82,100,000 after-tax) in the third fiscal quarter of 1995. Also, after
deducting $6,800,000 ($4,310,000 after-tax) in 1992 for increased ongoing
expenses (above 1991 levels) resulting from the adoption of Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," effective as of January 1,
1992.
(2) Cumulative effect of change in accounting principle amounted to $43,433,000
in 1992 from initial application of SFAS No. 106.
(3) Total debt includes the current portion of long-term debt and short-term
bank loans.
(4) EBITDA is defined as net income (loss) before interest expense, income
taxes, depreciation and amortization, restructuring charges and asset
write-downs and cumulative effect of change in accounting principle. EBITDA
data is presented as a measure of the Company's ability to service debt,
fund capital expenditures and finance growth. Such data should not be
considered an alternative to net income, operating income, cash flows from
operations or other operating or liquidity performance measures prescribed
by generally accepted accounting principles. Cash expenditures for various
long-term assets, interest expense and income taxes have been, and will be,
incurred which are not reflected in the EBITDA presentations.
22
<PAGE> 37
THE DIAL CORP CONSUMER PRODUCTS BUSINESS
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited Pro Forma Combined Balance Sheet of the Company as
of March 30, 1996 and the unaudited Pro Forma Statements of Combined Income for
the year ended December 30, 1995 and the thirteen weeks ended March 30, 1996 and
April 1, 1995 have been prepared to reflect the following transactions and
adjustments: (1) the transfer from Dial to the Company of certain liabilities
and related deferred income tax assets associated primarily with a previously
discontinued business, along with the related expenses arising from such items;
(2) to record assumption of debt and an interest rate swap agreement and reflect
estimated interest expense; (3) to record additional expenses for aircraft
services and public company costs expected to be incurred to operate the Company
on a stand-alone basis in excess of the historical charges by Dial; (4) to
adjust state income taxes to a separate return basis; (5) to record income tax
impact of pro forma income statement adjustments; (6) to record Dial investment
and advances as a capital contribution; and (7) to record the Company's portion
of estimated transaction costs of the Distribution.
The unaudited Pro Forma Combined Balance Sheet has been prepared as if such
transactions occurred on March 30, 1996; the unaudited Pro Forma Statements of
Combined Income have been prepared as if such transactions occurred on the first
day of the periods presented. The following data should be read in conjunction
with the Company's Combined Financial Statements and the notes thereto,
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" and the other financial information included elsewhere herein.
23
<PAGE> 38
THE DIAL CORP CONSUMER PRODUCTS BUSINESS
PRO FORMA COMBINED BALANCE SHEET
(UNAUDITED)
MARCH 30, 1996
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(000 OMITTED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................... $ 4,326 $ $ 4,326
Receivables......................................... 39,537 39,537
Inventories......................................... 159,270 159,270
Deferred income taxes............................... 31,585 573(A) 32,158
Other current assets................................ 5,272 5,272
-------- -------- --------
Total current assets........................ 239,990 573 240,563
Property and equipment................................ 204,139 204,139
Deferred income taxes................................. 28,765 63,642(A) 92,407
Intangibles........................................... 332,566 332,566
Other assets.......................................... 572 572
-------- -------- --------
$ 806,032 $ 64,215 $ 870,247
======== ======== ========
LIABILITIES AND EQUITY
Current liabilities:
Short-term bank loans............................... $ 309 $ (309)(B) $ --
Trade accounts payable.............................. 87,685 87,685
Income taxes payable................................ 14,736 14,736
Other current liabilities........................... 91,791 3,748 (A) 99,289
3,750 (H)
-------- -------- --------
Total current liabilities................... 194,521 7,189 201,710
Long-term debt........................................ 280,000 (B) 280,000
Pension and other benefits............................ 105,024 142,255 (A) 247,279
Other liabilities..................................... 7,243 7,243
Dial investment and advances.......................... 499,244 (81,788)(A) --
(279,691)(B)
(137,765)(F)
Stockholders' equity.................................. 137,765 (F) 134,015
(3,750)(H)
-------- -------- --------
$ 806,032 $ 64,215 $ 870,247
======== ======== ========
</TABLE>
24
<PAGE> 39
THE DIAL CORP CONSUMER PRODUCTS BUSINESS
PRO FORMA STATEMENT OF COMBINED INCOME
(UNAUDITED)
FISCAL YEAR ENDED DECEMBER 30, 1995
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ----------
(000 OMITTED, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net sales............................................ $1,365,290 $ $1,365,290
---------- --------- -------
Costs and expenses:
Cost of products sold.............................. 709,176 709,176
Selling, general and administrative expenses....... 544,170 5,793 (C) 549,963
Restructuring charges and asset write-downs........ 135,600 135,600
Ongoing costs applicable to retirees of previously
discontinued business........................... 9,823 (A) 9,823
---------- --------- -------
1,388,946 15,616 1,404,562
---------- --------- -------
Operating income (loss)............................ (23,656) (15,616) (39,272)
---------- --------- -------
Interest expense..................................... 23,360 (21,821)(B) 20,425
18,886 (B)
---------- --------- -------
Income (loss) before income taxes.................... (47,016) (12,681) (59,697)
Income taxes (benefit)............................... (19,527) 1,242 (D) (23,539)
(5,254)(E)
---------- --------- -------
NET INCOME (LOSS).................................... $ (27,489) $ (8,669) $ (36,158)
========== ========= =======
INCOME (LOSS) PER COMMON SHARE....................... $ (0.42)
=======
DIAL COMMON SHARES OUTSTANDING (G)................... 86,865
=======
</TABLE>
25
<PAGE> 40
THE DIAL CORP CONSUMER PRODUCTS BUSINESS
PRO FORMA STATEMENT OF COMBINED INCOME
(UNAUDITED)
THIRTEEN WEEKS ENDED MARCH 30, 1996
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ---------- ---------
(000 OMITTED, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net sales................................................ $ 352,392 $ $ 352,392
-------- -------- -------
Costs and expenses:
Cost of products sold.................................. 173,350 173,350
Selling, general and administrative expenses........... 142,700 1,350 (C) 144,050
Ongoing costs applicable to retirees of previously
discontinued business............................... 2,100 (A) 2,100
-------- -------- -------
316,050 3,450 319,500
-------- -------- -------
Operating income....................................... 36,342 (3,450) 32,892
-------- -------- -------
Interest expense......................................... 4,603 (4,180)(B) 5,145
4,722 (B)
-------- -------- -------
Income before income taxes............................... 31,739 (3,992) 27,747
Income taxes............................................. 12,131 200 (D) 10,744
(1,587)(E)
-------- -------- -------
NET INCOME............................................... $ 19,608 $ (2,605) $ 17,003
======== ======== =======
INCOME PER COMMON SHARE.................................. $ 0.19
=======
DIAL COMMON SHARES OUTSTANDING (G)....................... 88,277
=======
</TABLE>
26
<PAGE> 41
THE DIAL CORP CONSUMER PRODUCTS BUSINESS
PRO FORMA STATEMENT OF COMBINED INCOME
(UNAUDITED)
THIRTEEN WEEKS ENDED APRIL 1, 1995
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(000 OMITTED, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net sales............................................. $ 337,862 $ $ 337,862
-------- -------- -------
Costs and expenses:
Cost of products sold............................... 172,887 172,887
Selling, general and administrative expenses........ 131,173 1,448 (C) 132,621
Ongoing costs applicable to retirees of previously
discontinued business............................ 2,802 (A) 2,802
-------- -------- -------
304,060 4,250 308,310
-------- -------- -------
Operating income.................................... 33,802 (4,250) 29,552
-------- -------- -------
Interest expense...................................... 4,343 (4,173)(B) 4,892
4,722 (B)
-------- -------- -------
Income before income taxes............................ 29,459 (4,799) 24,660
Income taxes.......................................... 11,212 225 (D) 9,534
(1,903)(E)
-------- -------- -------
NET INCOME............................................ $ 18,247 $ (3,121) $ 15,126
======== ======== =======
INCOME PER COMMON SHARE............................... $ 0.18
=======
DIAL COMMON SHARES OUTSTANDING (G).................... 86,108
=======
</TABLE>
27
<PAGE> 42
THE DIAL CORP CONSUMER PRODUCTS BUSINESS
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
A. To record the transfer of certain liabilities and related deferred income tax
assets associated primarily with a previously discontinued business conducted
by Dial along with the related expenses arising from such items.
B. To eliminate interest expense charged to the Company by Dial, record the
assumption from Dial of $280 million of debt and an interest rate swap
agreement and reflect estimated interest expense at an assumed effective
rate of 6% on the debt plus an estimated annual cost of the swap of
$2,086,000.
C. To record additional expenses for aircraft services and public company costs
expected to be incurred to operate the Company on a stand-alone basis.
D. To adjust state income taxes to a separate return basis.
E. To record the income tax impact of above pro forma income statement
adjustments.
F. To record Dial investment and advances as a capital contribution.
G. The weighted average number of outstanding common shares is based on Dial's
weighted average number of outstanding common shares which exclude average
shares held by the Dial Equity Trust of 5,976,333 shares for the thirteen
weeks ended March 30, 1996, 6,397,685 shares for the year ended December 31,
1995 and 6,671,465 shares for the thirteen weeks ended April 1, 1995. Shares
held by the Dial Equity Trust are not considered outstanding for net income
per share calculations until the shares are released from the Dial Equity
Trust.
H. To record estimated transaction costs of the Distribution, representing 25%
of estimated total transaction costs, allocated to the Company by Dial.
28
<PAGE> 43
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the financial condition and results of
operations of the business of the Company. The discussion should be read in
conjunction with the historical and pro forma financial statements and notes
thereto included elsewhere in this Information Statement.
As described in "BUSINESS AND PROPERTIES," the Company produces and markets
personal care, detergent, household and shelf-stable food products which
constitute a single business segment. The Company's net sales by major product
category for 1995, 1994, and 1993 were as follows (amounts in millions).
<TABLE>
<CAPTION>
1995 1994 1993
---------------- ---------------- ----------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Personal Care................................... $ 401 30% $ 443 29% $ 472 33%
Detergent....................................... 386 28% 440 29% 388 27%
Household....................................... 318 23% 329 22% 270 19%
Food............................................ 196 14% 239 16% 235 17%
International and Other......................... 64 5% 60 4% 55 4%
------ ---- ------ ---- ------ ----
$1,365 100% $1,511 100% $1,420 100%
====== ==== ====== ==== ====== ====
</TABLE>
RESTRUCTURING CHARGES AND ASSET WRITE-DOWNS
In the third fiscal quarter of 1995, the Company recorded restructuring
charges and asset write-downs totaling $135.6 million to provide for a
business-based reorganization through plant closings, workforce reductions and
correction of certain product lines. The charges provided for the closing of six
plants (Clearing, Illinois; Burlington, Iowa; Auburndale, Florida; Omaha,
Nebraska; Memphis, Tennessee; and New Berlin, Wisconsin) and the reduction of
the workforce by 700 people, substantially all of whom were or are based in the
plants to be closed.
As of May 31, 1996, four plants had been closed, two of which have been
sold, and 555 of the 700 employees had been terminated. The remaining actions
are expected to be completed by the end of 1996. Future earnings are expected to
benefit from efficiencies resulting from streamlining and consolidating product
lines for the remaining facilities through increased volume and reduced costs.
In conjunction with the restructuring, the recoverability of intangibles
was evaluated based on current projections of the undiscounted operating income
of the related business unit. Based upon these evaluations, the carrying amounts
of certain intangibles, primarily trademarks, were determined to be impaired and
were written off as part of the third quarter charge.
Other asset write-downs primarily represent the excess of the net book
value of plants and equipment to be disposed of over estimated net recoveries.
Severance pay and benefits and exit costs, primarily facility closure
costs, have been recognized in accordance with Emerging Issues Task Force Issue
No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)." Remaining severance and exit cost reserves of $24.8 million at
December 30, 1995 are believed to be adequate and are expected to be paid
utilizing cash flow from operating activities. Severance and exit costs paid and
charged to such reserves in the first fiscal quarter of 1996 amounted to $1.1
million.
RESULTS OF OPERATIONS
Thirteen weeks ended March 30, 1996 vs. Thirteen weeks ended April 1,
1995. Revenues for the thirteen weeks ended March 30, 1996 were $352.4 million,
an increase of $14.5 million or 4% over revenues in the comparable period in
1995. Operating income for the first fiscal quarter of 1996 was $36.3 million,
an increase
29
<PAGE> 44
of $2.5 million or 8% over the first fiscal quarter of 1995. Overall, operating
margins improved to 10.3% in the first fiscal quarter of 1996 from 10% in the
first fiscal quarter of 1995.
Revenues for personal care products for the first fiscal quarter of 1996
increased by $11 million over the first fiscal quarter of 1995 due to increases
in consumer consumption of DIAL soaps and to revenues from new products such as
NATURE'S ACCENTS and the DIAL ULTRA SKIN CARE line. However, operating income
declined by $0.3 million in the first fiscal quarter of 1996 largely due to
higher advertising and marketing expenses to support the Dial brands.
Detergent revenues increased by $0.5 million in the first fiscal quarter of
1996 over the comparable period in 1995, with increases in PUREX and TREND
liquid detergents overcoming decreases in dry detergents. Operating income for
the first fiscal quarter of 1996 was $3.2 million higher than in the first
fiscal quarter of 1995 due to lower manufacturing costs and transportation and
delivery expenses.
Revenues and operating income for household products were down by $3.9
million and $0.4 million, respectively, in the first fiscal quarter of 1996
compared to the first fiscal quarter of 1995 due to softness in the fabric care
business and the discontinuation of liquid bleach and private label products,
which were partially offset by strong growth in RENUZIT sales.
Revenues for the food category were up $5.2 million in the first fiscal
quarter of 1996 as compared to the first fiscal quarter of 1995 principally due
to the 1995 inventory reduction program which resulted in lower revenues in
1995. The decline in operating income of $0.7 million in the first fiscal
quarter of 1996 was largely due to higher meat costs in 1996.
Revenues for the Company's international business in the first fiscal
quarter of 1996 increased by $1.7 million and operating income increased by $0.7
million over the comparable period in 1995. The revenue increase was due to
increased exports to Canada and the revenues from ISC International Ltd. in
Guatemala which was acquired in the third fiscal quarter of 1995. Operating
income improved in the first fiscal quarter of 1996 due to the sale of European
subsidiaries which had low operating margins in 1995 and the sale of higher
margin products in Canada in 1996.
1995 vs. 1994. Revenues of $1.4 billion in 1995 were down $146.1 million
or 10% from those of 1994. The revenue decrease was due to the completion of the
1995 program to effect reductions of trade customers' inventories. This
initiative, coupled with more rapid replenishment as consumers purchase the
products off the shelf, addresses the retailers' increased emphasis on efficient
consumer response. In addition, a sales shortfall of $54.1 million in the fourth
fiscal quarter of 1995 resulted from a softness in orders due to the effects of
reduced promotional programs in connection with the 1995 trade inventory
reduction initiative, as well as certain orders received late in the fourth
fiscal quarter that were deferred and shipped in the first quarter of 1996 to
achieve efficiency in the distribution network. A planned reduction of
microwavable meals volume and other discontinued low margin products also
contributed to the variance. The Company reported an operating loss of $23.7
million for the year, after deducting $135.6 million of restructuring charges
and asset write-downs, versus operating income of $160 million in 1994.
Excluding these charges, operating income for 1995 was $111.9 million. On the
same basis, overall operating margins declined to 8.2% in 1995 from 10.6% in
1994, as the effects of the volume shortfall discussed above more than offset
the initial cost savings from the inventory reduction program. The following
discussion of operating results excludes the effects of the restructuring
charges and asset write-downs.
During the third fiscal quarter of 1995, the Company's product lines were
reorganized for reporting purposes. All non-detergent products were reclassified
from laundry products to household products. The remainder of laundry products
became the detergent category. All prior years' results have been restated to
give effect to the reclassifications.
1995 revenues and operating income for personal care products declined
$42.2 million and $9.3 million, respectively, from those of 1994. Sales volumes
in 1995 were down as a result of the 1995 trade inventory reduction program.
Loss in marketplace consumption of DIAL bar soap and other brands in 1995 was
partially offset by growth in DIAL FOR KIDS and revenues from new products such
as the DIAL ULTRA SKIN CARE line. Operating income for 1995 decreased from the
effects of the aforementioned revenue decrease.
30
<PAGE> 45
Revenues for detergent products in 1995 decreased $53.7 million from 1994
levels, due to volume softness in dry detergents and the effects of the 1995
inventory reduction program. Operating income for 1995 declined $17 million from
1994 results due to reduced sales volume and increased promotion and
distribution expenses.
1995 revenues for household products decreased $10.9 million from those of
1994. Increased revenues from DIAL Dishwashing Detergent and new RENUZIT
products in 1995 were offset by the impact of the trade inventory reduction
initiative and volume softness in fabric softeners which faced intensive price
and promotion competition during 1995. Operating income decreased $18.1 million
in 1995 from 1994, due to the effects of the revenue decrease and heavy
promotional expenses for DIAL Dishwashing Detergent and RENUZIT products.
For food products, 1995 revenues declined $43.1 million from those of 1994,
due to a phasing-out of microwavable meals, lower sales of chili and stew and
the trade inventory reduction program. Operating income in 1995 decreased $6.3
million from that of 1994 from the effects of the aforementioned lower sales
volumes, offset partially by lower manufacturing costs.
1995 revenues and operating income for the Company's international business
improved $3.8 million and $2.6 million, respectively, over those of 1994. These
increases were due principally to an acquisition made early in the third quarter
of 1995, offset partially by the effect of devaluation of the Mexican peso in
the first quarter of 1995. In addition, exports to Canada increased in 1995, as
PUREX Heavy Duty Liquid Detergent became the leading liquid laundry detergent in
three Canadian provinces and DIAL soap market share reached all-time highs in
British Columbia.
The increase in interest expense of $10.9 million in 1995 compared to 1994
is due to higher interest-bearing advances to the Company from Dial and
increases in the prime lending rate.
Excluding the effects of the restructuring charges and asset write-downs,
the 1995 effective tax rate was 38.4% as compared to 38.3% in 1994.
1994 vs. 1993. 1994 revenues of $1.5 billion were up $91.2 million or 6%
from those of 1993. Operating income in 1994 of $160 million was up $20.8
million or 15% over 1993 amounts. Overall, operating margins improved to 10.6%
from 9.8% in 1993.
The revenues and operating income of personal care products in 1994 were
down $28.7 million and $2.3 million, respectively, as sales of bar and liquid
soaps to distributors were down from 1993 levels. However, Dial's market share
for bar soap in 1994 was up from that of 1993, reflecting continuing high
consumer acceptance of these products. Lower raw material costs and marketing
expenses partially offset the effect of the volume declines in 1994.
The revenues and operating income of detergent products were up $52 million
and $4.1 million, respectively, in 1994 compared to 1993 levels, led by strong
volume increases in liquid detergents due to changing consumer preferences which
more than offset volume decreases in dry detergents.
For household products, revenues and operating income in 1994 were up $59
million and $11.2 million, respectively, from 1993 levels. The RENUZIT product
line, acquired in May of 1993, accounted for most of the improvement in 1994.
Other household product lines contributed to the increased operating income in
1994 with lower costs and expenses, while ammonia products followed industry
trends with lower sales and operating income.
Revenues and operating income for food products in 1994 were up $4.2
million and $2.4 million, respectively, from 1993 levels. Higher revenue and
operating income due to increased sales volume of most food categories for 1994
more than offset reductions in the microwavable category. Lower raw material and
other production costs contributed to the increase in 1994 operating income.
1994 revenues for the Company's international business were up $4.7 million
from 1993 levels, driven by higher volume in Mexico, Canada and Germany. A $5.4
million increase in operating results in 1994 was due mostly to eliminating
unprofitable operations, plus contributions from the higher revenue.
Interest expense increased by $6.6 million in 1994 from 1993 levels due to
higher interest-bearing advances to the Company from Dial and increases in the
prime lending rate, offset partially by a $2.9 million decrease in interest
resulting from the reduction of third-party indebtedness.
31
<PAGE> 46
The effective income tax rate in 1994 was 38.3% as compared to 36.9% in
1993. The 1993 rate was reduced for the effect on deferred tax assets of a 1%
increase in the United States corporate income tax rate which was signed into
law on August 10, 1993.
LIQUIDITY AND CAPITAL RESOURCES
Over the past three years the Company has generated cash from operating
activities totaling $265 million which has been used to finance capital
expenditures (net of asset dispositions) of $96 million, two cash acquisitions
totaling $103 million and debt repayments and remittances to Dial of $63
million.
Cash flows from operating activities were $90.3 million in 1995, $85.2
million in 1994 and $89.5 million in 1993 while capital expenditures for these
years were $27.2 million, $37.5 million and $40.6 million, respectively.
The Company has participated in Dial's financing plan of selling
receivables to accelerate cash flow. Receivables sold under this plan amounted
to $76.7 million at December 30, 1995, $91 million at December 31, 1994 and $97
million at December 25, 1993. The proceeds from the sale of such receivables
have been remitted to Dial. The Company expects to establish a comparable
receivables financing plan subsequent to the Distribution.
For the foreseeable future, the Company believes that cash generated by
operating activities will be sufficient to finance its capital expenditures, pay
dividends on the Company Common Stock and make scheduled repayments of the debt
assumed from Dial in the Distribution. In addition, as of the Distribution Date,
the Company will have available approximately $70 million of unused credit
facility available for general corporate purposes under the New Credit Facility.
See "FINANCING." In conjunction with the strategy of the Company to expand its
business through internal growth and acquisitions, it is also the Company's
current intention to issue at least $100 million in additional equity within six
to twelve months following the Distribution in the form of a sale of stock for
cash. In addition to, or in lieu of, a sale of stock, the Company may seek to
make an acquisition using stock. However, such a sale or transaction is
dependent upon stock market conditions, the economy, the Company's performance,
acquisition prospects and other factors. As a result there can be no assurance
when or in what form such a sale of stock or acquisition will occur.
As of March 30, 1996, on a pro forma basis, the Company will have deferred
income tax assets totaling $124.6 million, which the Company believes will be
fully realizable in future years. The realization of such benefits will require
average annual taxable income over the next 15 years of $24 million. The
Company's average United States annual taxable income, exclusive of
non-deductible goodwill amortization, but after deducting restructuring charges
and asset write-downs, over the past three years has been approximately $81
million ($126 million before deducting restructuring charges and asset
write-downs). In addition, approximately $87 million of such deferred tax assets
relate to pension and other benefits which will become deductible for income tax
purposes as they are paid, which will occur over many years.
The Company is subject to various environmental laws and regulations of the
United States as well as of the states and other countries in whose
jurisdictions the Company has or had operations. As is the case with many
companies, the Company faces exposure to actual or potential claims and lawsuits
involving environmental matters. The Company believes that any liabilities
resulting therefrom, after taking into consideration amounts already provided
for, but exclusive of any potential insurance recoveries, should not have a
material adverse effect on its financial position or results of operations.
BUSINESS OUTLOOK
The challenge for the Company in 1996 and the years ahead is to continue to
grow revenues while continuing to reduce costs and expenses. Revenue growth must
come from the protection of existing brands through advertising and sales
promotions, line extensions and product enhancements, the introduction of new
products, and acquisitions. The reduction of costs and expenses is expected to
result from the 1995 restructuring which will eliminate six plants and
approximately 700 employees and provide for the consolidation of distribution
facilities. Management of the Company believes that revenue growth and cost
efficiencies as shown by past results will continue in the future.
32
<PAGE> 47
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS OF THE COMPANY
Immediately following the Distribution, the Company Board is expected to
consist of the individuals named below. Directors for each class will be elected
at the annual meeting of stockholders held in the year in which the term for
such class expires and will serve thereafter for three years. The expiration of
the initial term of each director is indicated below.
<TABLE>
<CAPTION>
POSITION WITH THE COMPANY AND
NAME AGE PRINCIPAL BUSINESS AFFILIATIONS DURING PAST FIVE YEARS
- ------------------- --- ------------------------------------------------------------------
<S> <C> <C>
Thomas L. Gossage 61 Chairman and Chief Executive Officer and a director of Hercules
Incorporated, a worldwide producer of chemicals and related
products. Also a director of Alliant Techsystems Inc. and
Wilmington Trust Corporation.
Dennis C. Stanfill 68 President of the Dennis Stanfill Company, a private investment and
venture capital firm, and prior thereto was Senior Advisor, Credit
Lyonnais, a global bank; Co-Chairman and Co-Chief Executive
Officer of Metro-Goldwyn- Mayer Inc.; Chairman or President of
AME, Inc., a video post production company; and President and a
principal stockholder of Stanfill Bowen & Co., Inc., a private
investment and venture capital firm.
Joe T. Ford 58 Chairman and Chief Executive Officer and a director of ALLTEL
Corporation, a telecommunications and information services
company.
A. Thomas Young 57 Formerly Executive Vice President of Lockheed Martin Corporation
and prior thereto was President and Chief Operating Officer of
Martin Marietta Corporation. Also a director of Cooper Industries,
Inc., Potomac Electric Power Co., B.F. Goodrich, Science
Applications International Corp., and Memotec Communications Inc.
Donald E. Guinn 63 Chairman Emeritus of Pacific Telesis Group, a telecommunications
holding company. Also a director of Pacific Mutual Life Insurance
Company and BankAmerica Corporation and its subsidiary, Bank of
America, NT&SA.
Malcolm Jozoff 57 As of the Distribution Date, Chairman, President and Chief
Executive Officer of the Company. Prior to the Distribution, Mr.
Jozoff is serving as President and Chief Executive Officer of the
Consumer Products Business, positions to which he was appointed in
May 1996. From October 1993 to September 1995, he was Chairman and
Chief Executive Officer of Lenox, Inc., a manufacturer of consumer
durables. From 1967 to 1992, he was employed by The Procter &
Gamble Company, a manufacturer of consumer products where, in
1990, he achieved the positions of President -- Health Care Sector
and Corporate Group Vice President. Mr. Jozoff is also a director
of The Columbia Gas System, Inc. and ChemTrak Incorporated. In
1993, in connection with a civil proceeding brought by the
Commission, Mr. Jozoff consented, without admitting or denying the
allegations, to the entry of an order enjoining him from violating
Section 10(b) of the Exchange Act.
</TABLE>
The Certificate of Incorporation and Bylaws provide that the Company Board
will be divided into three classes of directors, with the classes to be as
nearly equal in number as possible, and that, of the initial directors of the
Company following the Distribution as identified above, one-third will continue
to serve until the 1997 Annual Meeting of Stockholders, one-third will continue
to serve until the 1998 Annual Meeting of Stockholders and one-third will
continue to serve until the 1999 Annual Meeting of Stockholders. Of the initial
directors, Thomas L. Gossage and Dennis C. Stanfill will serve until the 1997
Annual Meeting of Stockholders; Joe T. Ford and A. Thomas Young will serve until
the 1998 Annual Meeting of Stockholders; and Donald E. Guinn and Malcolm Jozoff
will serve until the 1999 Annual Meeting of Stockholders. Starting
33
<PAGE> 48
with the 1997 Annual Meeting of Stockholders, one class of directors will be
elected each year for a three-year term. The Company's Bylaws provide that
annual meetings of stockholders shall be held on the first Tuesday in May or
such other date as may be fixed by resolution of the Company Board. The first
annual meeting for which proxies will be solicited from stockholders is expected
to be held in May, 1997. See "CERTAIN ANTITAKEOVER EFFECTS OF CERTAIN PROVISIONS
OF THE CERTIFICATE OF INCORPORATION, THE BYLAWS, THE RIGHTS, AND DELAWARE
LAW -- Classified Board of Directors."
CERTAIN BOARD COMMITTEES
The Company Board is expected to establish an Executive Committee, an Audit
Committee, an Executive Compensation Committee (the "Compensation Committee")
and a Nominating Committee. The duties and membership of such committees will be
established at the initial meeting of the Company Board following the
Distribution.
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information concerning the
individuals who are expected to serve as executive officers of the Company
immediately following the Distribution. Each such individual will be elected to
the indicated office with the Company in anticipation of the Distribution and
will serve at the pleasure of the Company Board. Those individuals who have been
officers and/or employees of Dial will relinquish such positions in connection
with the Distribution.
<TABLE>
<CAPTION>
POSITION WITH THE COMPANY AND
NAME AGE PRINCIPAL BUSINESS AFFILIATIONS DURING PAST FIVE YEARS
- ------------------------------ --- ------------------------------------------------------
<S> <C> <C>
Malcolm Jozoff................ 57 Chairman, President and Chief Executive Officer of the
Company. Prior to the Distribution, Mr. Jozoff is
serving as President and Chief Executive Officer of
the Consumer Products Business, positions to which he
was appointed in May 1996. Mr. Jozoff's background and
other principal business affiliations are described
above under "-- Directors of the Company."
William L. Anthony............ 53 Executive Vice President, Administration, Controller
and Assistant Secretary of the Company. Prior to the
Distribution, Mr. Anthony is serving as Executive Vice
President, Administration, Controller and Assistant
Secretary of the Consumer Products Business, positions
to which he was appointed in September 1990.
Brent D. Bailey............... 43 Senior Vice President of the Company and General
Manager, Household. Prior to the Distribution, Mr.
Bailey is serving as Senior Vice President of the
Consumer Products Business and General Manager,
Household, positions to which he was appointed in June
1993. From October 1992 until June 1993 he was a Vice
President of the Consumer Products Business, for
Marketing, Household and Laundry. From June 1991 until
February 1992 Mr. Bailey was Vice President of
Marketing in a division of McGaw, Inc., a health care
company. From January 1990 to June 1991 he was
Executive Vice President and General Manager of New
Business Development for the then personal care
division of Weyerhauser Company.
Joseph L. Fischer............. 45 Senior Vice President of the Company and General
Manager, International. Prior to the Distribution, Mr.
Fischer is serving as Senior Vice President of the
Consumer Products Business, and General Manager,
International, a position he had held since November
1995. From January 1993 until November 1995, Mr.
Fischer was a consultant with respect to venture
capital investments in the consumer products industry.
From August 1992 to December 1993 he served as a Group
Executive, Personal Products, for Johnson & Johnson, a
manufacturer and marketer of products in the health
care field. From May 1989 to August 1992 he was a
Company President at Johnson & Johnson, Montreal,
Canada.
</TABLE>
34
<PAGE> 49
<TABLE>
<CAPTION>
POSITION WITH THE COMPANY AND
NAME AGE PRINCIPAL BUSINESS AFFILIATIONS DURING PAST FIVE YEARS
- ------------------------------ --- ------------------------------------------------------
<S> <C> <C>
John E. Greenwell............. 48 Executive Vice President of the Company and General
Manager, Detergents. Prior to the Distribution, Mr.
Greenwell is serving as Executive Vice President of
the Consumer Products Business and General Manager,
Detergents, positions to which he was appointed in
January 1996. He was a Senior Vice President of the
Consumer Products Business and General Manager,
Detergents, from June 1995 to January 1996. He also
served as General Manager, Food, from May 1994 to June
1995. From October 1992 to May 1994, he served as Vice
President of Marketing in the Food category, and from
March 1985 to October 1992 he was Director of
Marketing for Detergents in the Household and Laundry
category.
Jane Melville................. 51 Senior Vice President of the Company for Product
Supply. Prior to the Distribution, Ms. Melville is
serving as the Senior Vice President, Product Supply,
of the Consumer Products Business, a position to which
she was appointed in June 1995. Prior to that time,
Ms. Melville held a number of positions at Sterling
Winthrop, Inc. then the pharmaceutical and consumer
health division of Eastman Kodak Company, serving most
recently as Senior Vice President, Corporate
Manufacturing from October 1993 to January 1995. From
October 1992 to October 1994 she was Corporate Vice
President, Manufacturing Services, and from January
1989 to October 1992 she was President, Sterling
Organics, at Sterling Winthrop.
Ray Reed...................... 39 Senior Vice President of the Company, and General
Manager, Food. Prior to the Distribution, Mr. Reed is
serving as Senior Vice President of the Consumer
Products Business and General Manager, Food, positions
to which he was appointed in July 1995. He was Vice
President of Marketing, Food, from September 1994 to
July 1995. From October 1993 to September 1994 he
served as General Manager, New Products and Marketing
Services, for Weight Watchers Food Company, a wholly
owned subsidiary of H.J. Heinz Company, a processed
food products company. From August 1992 to October
1993 he served as General Manager, Grocery Marketing,
and from August 1991 to August 1992 he was Senior
Product Manager, Entrees and New Products, for Weight
Watchers Food Company.
Mark R. Shook................. 41 Executive Vice President of the Company and General
Manager, Personal Care. Prior to the Distribution, Mr.
Shook is serving as an Executive Vice President of the
Consumer Products Business, a position to which he was
appointed in September 1990. He was also General
Manager, Food, from September 1990 to September 1993,
General Manager, Food and International, from
September 1993 to April 1994, General Manager, Laundry
and International, from April to September, 1994,
General Manager, Soaps and Detergents, from September
1994 to July 1995, and became General Manager,
Personal Care, in July 1995.
Bernhard J. Welle............. 47 Vice President, Human Resources, of the Company. Prior
to the Distribution, Mr. Welle is serving as Vice
President, Human Resources of the Consumer Products
Business, a position he has held since October 1987.
</TABLE>
35
<PAGE> 50
DIRECTORS' COMPENSATION
Nonemployee directors of the Company will receive compensation consisting
of annual cash retainers, meeting fees and stock option awards.
CASH COMPENSATION
It is expected that directors who are not employees of the Company will be
paid an annual retainer for Company Board service of $30,000, a fee of $1,500
for each Company Board meeting attended and a fee of $1,000 for each committee
meeting attended. Directors who are employees of the Company will not be paid
any fee or additional remuneration for services as members of the Company Board
or any committee thereof.
It is also anticipated that nonemployee directors will be able to elect to
participate in The Dial Corporation Deferred Compensation Plan for Directors
(the "Company Directors' Deferred Compensation Plan") under which payment of
part or all of their directors' fees and retainers will be deferred. The Company
Directors' Deferred Compensation Plan will provide participants with the option
to defer their compensation in the form of stock units related to the price of
the Company Common Stock, as well as the option to defer in the form of cash.
Such accumulated compensation plus interest thereon at the long-term
medium-quality bond rate for cash accounts, or dividend equivalents reinvested
for stock units accounts, as the case may be, are payable to the director or to
the director's estate or beneficiary, over such period as may be designated,
upon termination as a director. Under the Dial Directors' Deferred Compensation
Plan, any stock unit accounts of directors of Dial, including directors of Dial
who become directors of the Company, will be credited with an appropriate number
of shares of Company Common Stock to reflect the Distribution. The Company will
assume all liabilities and obligations with respect to Company directors under
the Dial Directors' Deferred Compensation Plan. Directors of the Company who
cease to be directors of Dial in connection with the Distribution will not be
deemed to be terminated for purposes of the Dial Directors' Deferred
Compensation Plan.
DIRECTORS' STOCK AWARDS
Pursuant to The Dial Corporation 1996 Stock Incentive Plan (the "1996
Company Plan"), each director of the Company who is not an employee of the
Company or any of its subsidiaries or affiliates will, upon his or her first
election as a director of the Company, and annually during such director's term,
automatically be granted nonqualified stock options to purchase Company Common
Stock having an exercise price of 100% of the fair market value of the Company
Common Stock at the date of grant of such nonqualified stock option. The number
of shares subject to each such initial option grant and each such annual grant
shall be equal to the amount of the annual retainer then in effect divided by an
amount equal to one third ( 1/3) of such fair market value at the date of grant,
rounded to the nearest 100 shares. A director elected during the course of a
year will also receive, upon election, a prorated annual grant for the year in
which such election occurs, based on the number of months between the director's
election and the next annual grant date. Each holder of a Company director stock
option will also have certain rights in the event of a change in control of the
Company.
Options to purchase Dial Common Stock ("Dial Options") held by directors of
Dial who become directors of the Company and who are not also directors of Dial
will become options to purchase Company Common Stock ("Company Options") and
will be adjusted in the same manner as Dial Options held by Dial employees who
become Company Individuals, as described under "EXECUTIVE COMPENSATION --
Compensation Following the Distribution" and " -- Adjustments to Outstanding
Dial Stock Awards."
DIRECTORS' RETIREMENT BENEFITS
Dial has maintained the Dial Director's Retirement Plan pursuant to which
nonemployee directors of Dial have been able to receive retirement benefits for
a period of ten years, such benefits ranging from 15% to 100% of the annual
retainer at retirement, based on their years of service ranging from four to ten
years; in the event of a change of control of Dial (as defined in the plan), the
years of service are accelerated to ten. Dial has also provided such directors
with accidental death and dismemberment insurance benefits of $300,000 and, in
addition, travel accident insurance benefits of $250,000 when traveling on the
company's business.
36
<PAGE> 51
In connection with the Distribution, it is expected that the Dial
Director's Retirement Plan will be amended to change the vesting schedule and to
provide that the present value of vested accrued benefits of each director who
will become a Company director be converted into Company restricted stock units
which will be the responsibility of the Company and that the plan will then be
terminated.
Under The Dial Corporation Director's Charitable Award Program each
director of the Company as of the Distribution Date (but not directors elected
subsequently unless otherwise approved by the Company Board) will be eligible to
contribute $100,000 per year to one or more charitable organizations selected by
the director over a period of ten years following the director's death. The
Company will assume the obligations of Dial under a similar program with respect
to those Company directors who were Dial directors but ceased being Dial
directors in connection with the Distribution.
37
<PAGE> 52
EXECUTIVE COMPENSATION
HISTORICAL COMPENSATION
The following table sets forth, for the chief executive officer of the
Company and the individuals who will be executive officers of the Company and
were, based on compensation paid by Dial, or any of its subsidiaries, the most
highly compensated executive officers of the Consumer Products Business for the
fiscal year ended December 30, 1995 (the "Named Executive Officers"),
information concerning compensation paid in fiscal 1993 through 1995 to such
individuals by Dial or any of its subsidiaries. The principal positions listed
in the table are those currently held by the Named Executive Officers with the
Consumer Products Business.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------ LONG-TERM COMPENSATION
OTHER -----------------------------------
ANNUAL RESTRICTED SECURITIES LONG-TERM ALL OTHER
COMPEN- STOCK UNDERLYING INCENTIVE COMPEN-
FISCAL SALARY BONUS SATION AWARDS OPTIONS PAYOUTS SATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(1) ($)(2) (#) ($) ($)(3)
- --------------------------- ------ -------- -------- -------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MALCOLM JOZOFF(4).......... 1995 $ 0 $ 0 $ 0 $ 0 0 $ 0 $ 0
President and 1994 0 0 0 0 0 0 0
Chief Executive Officer 1993 0 0 0 0 0 0 0
of the Consumer Products
Business
WILLIAM L. ANTHONY......... 1995 201,130 0 11,362 0 11,800 0 6,034
Executive Vice President, 1994 190,825 125,200 25,605 0 13,800 171,900 5,725
Administration, 1993 181,153 123,100 9,843 0 12,200 208,100 5,435
Controller and Assistant
Secretary, of the Consumer
Products Business
BRENT D. BAILEY............ 1995 164,826 33,000 11,362 0 8,100 0 4,500
Senior Vice President and 1994 152,360 104,400 6,123 0 6,800 0 4,571
General Manager, 1993 133,666 81,900 3,023 0 6,400 0 0
Household, of the
Consumer Products
Business
JOHN E. GREENWELL.......... 1995 170,232 34,000 11,362 0 8,100 0 4,276
Executive Vice President 1994 146,922 100,600 11,175 0 11,500 0 4,407
and General Manager, 1993 120,520 73,300 812 0 5,800 0 3,462
Detergent, of the
Consumer Products
Business
MARK R. SHOOK.............. 1995 221,950 44,400 11,362 0 13,400 0 6,659
Executive Vice President 1994 190,797 124,600 25,607 0 13,600 158,600 5,585
and General Manager, 1993 170,745 117,200 7,196 0 11,200 135,700 5,103
Personal Care, of the
Consumer Products
Business
</TABLE>
- ---------------
(1) Amounts shown represent financial counseling services, medical premiums,
automobile usage, and other benefits paid during the years 1993 through 1995
and, for Mr. Anthony, a gross-up of the taxes due on the lapse of
restrictions on restricted stock of Dial ("Dial Restricted Stock")
representing substantially all of the 1993 amounts.
(2) Dividends were paid on Dial Restricted Stock and performance-based Dial
Restricted Stock at the same rates as paid to all stockholders. On December
30, 1995, the following persons held the following amounts of Dial
Restricted Stock and/or performance-based Dial Restricted Stock valued at
then current market values: Mr. Shook, 8,706 shares at $257,915; Mr.
Greenwell, 5,800 shares at $171,825; Mr. Anthony, 8,952 shares at $265,203;
and Mr. Bailey, 5,800 shares at $171,825.
(3) Amounts represent matching contributions under the Dial TRIM Plan and the
Dial Supplemental TRIM Plan.
(4) Mr. Jozoff was appointed to his current position with the Company on May 14,
1996. Mr. Jozoff's employment agreement (the "Employment Agreement")
provides for an annual base salary of $600,000 to be paid by Dial prior to
the Distribution, and an annual base salary of $650,000 to be paid by the
Company after the Distribution. See "-- Employment and Change in Control
Arrangements."
38
<PAGE> 53
The following table shows grants of Dial Options under The Dial Corp 1992
Stock Incentive Plan (the "1992 Dial Plan") to the Named Executive Officers
during the 1995 fiscal year. The amounts shown for each executive officer as
potential realizable values are based on assumed annualized rates of stock price
appreciation of 5% and 10% over the full ten-year term of the Dial Options,
which would result in stock appreciation per share of $15.45 and $39.15,
respectively. These potential realizable values are based solely on assumed
rates of appreciation required by applicable regulations of the Commission.
Actual gains, if any, on option exercises and common stockholdings are dependent
on the future performance of Dial Common Stock and overall stock market
conditions. There can be no assurance that the potential realizable values shown
in this table will be achieved. As a result of the Distribution, Dial Options
held by the Named Executive Officers listed below will be converted into Company
Options and, as a result, their value will depend on the future value of Company
Common Stock.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF % OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO PRICE APPRECIATION
OPTIONS EMPLOYEES IN EXERCISE FOR OPTION TERM
GRANTED FISCAL PRICE -----------------------
NAME (#)(1) YEAR(2) ($/SHARE) EXPIRATION DATE 5% ($) 10% ($)
- -------------------- ---------- ------------ --------- --------------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Malcolm Jozoff(3)... 0 0% $ 0 $ 0 $ 0
William L. Anthony.. 11,800 0.89% 24.5625 08/16/2005 182,275 461,923
Brent Bailey........ 8,100 0.61% 24.5625 08/16/2005 125,121 317,083
John E. Greenwell... 8,100 0.61% 24.5625 08/16/2005 125,121 317,083
Mark R. Shook....... 13,400 1.01% 24.5625 08/16/2005 206,990 524,556
</TABLE>
- ---------------
(1) The exercise prices are the fair market values of Dial Common Stock on the
grant date. Fifty percent of these Dial Options are exercisable one year
after grant and the balance are exercisable two years after grant; and each
such Dial Option contains the right to surrender such Dial Option for cash
upon a "change in control" (as defined in the 1992 Dial Plan). The exercise
price may be paid by delivery of already owned shares and tax withholding
obligations related to exercise may be paid by offset of the underlying
shares, subject to certain conditions.
(2) Percentages given are based on the number of Dial Options granted to all
Dial employees in 1995; as a percentage of the number of Dial Options
granted to employees of the Consumer Products Business in 1995, the
percentages would have been 2.98% for Mr. Shook, 1.80% for Mr. Greenwell,
2.63% for Mr. Anthony and 1.80% for Mr. Bailey.
(3) Mr. Jozoff was granted an option to purchase 50,000 shares of Dial Common
Stock upon entering into the Employment Agreement in May 1996, and,
following the Distribution, will be eligible to participate in all stock
option plans adopted by the Company and to receive a grant of not less than
100,000 shares annually. The option to purchase 50,000 shares was made at an
exercise price of the fair market value of Dial Common Stock on May 15, 1996
and was immediately vested, although the shares issuable upon exercise are
subject to transfer restrictions for the first year from the date of grant,
and fifty percent remain subject to such restrictions for two years from the
date of grant. Other terms of the Dial Option are as described in footnote
(1). See "-- Employment and Change in Control Arrangements."
The following table provides the information indicated with respect to Dial
Options exercised by any of the Named Executive Officers during the 1995 fiscal
year. The amounts set forth in the two columns relating to unexercised Dial
Options, unlike the amounts set forth in the column headed "Value Realized,"
have not been, and might never be, realized. The underlying Dial Options might
not be exercised; and actual gains on exercise, if any, would depend on the
value of Dial Common Stock on the date of exercise, and there can be no
assurance that these values would be realized. As a result of the Distribution,
Dial Options held by the Named Executive Officers listed below will be converted
into Company Options, and, as a result, their value will depend on the future
value of Company Common Stock.
39
<PAGE> 54
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 30, 1995 DECEMBER 30, 1995(1)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Malcolm Jozoff(2)........... 0 $0 0 0 $ 0 $ 0
William L. Anthony.......... 0 0 41,010 18,700 486,498 105,450
Brent D. Bailey............. 0 0 16,200 11,500 156,525 63,531
John E. Greenwell........... 0 0 21,438 13,850 237,256 79,100
Mark R. Shook............... 0 0 53,884 20,200 695,335 112,888
</TABLE>
- ---------------
(1) Based on the closing price of the Dial Common Stock on December 29, 1995
($29.625).
(2) For Dial Options granted to Mr. Jozoff in 1996, see footnote (3) above and
"-- Employment and Change in Control Arrangements."
The following table sets forth information on grants under the Dial PUIP
and on grants of performance-based Dial Restricted Stock under the 1992 Dial
Plan for 1995, including the performance period until payout and, for the Dial
PUIP, the estimated ranges of the payout under the Dial PUIP, for any of the
Named Executive Officers.
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
UNDER NON-STOCK PRICE BASED PLANS
PERFORMANCE -------------------------------------
NUMBER OF PERIOD THRESHOLD TARGET MAXIMUM
NAME UNITS(1)(2) UNTIL PAYOUT (# UNITS) (# UNITS) (# UNITS)
- ----------------------------------- ----------- ------------ --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Malcolm Jozoff(3).................. 0
0
William L. Anthony................. 3,540(1) 3 years 885 3,540 7,080
2,900(2) 3 years N/A N/A N/A
Brent Bailey....................... 2,800(1) 3 years 700 2,800 5,600
2,900(2) 3 years N/A N/A N/A
John E. Greenwell.................. 2,950(1) 3 years 738 2,950 5,900
2,900(2) 3 years N/A N/A N/A
Mark R. Shook...................... 4,700(1) 3 years 1,175 4,700 9,400
2,900(2) 3 years N/A N/A N/A
</TABLE>
- ---------------
(1) Granted pursuant to the Dial PUIP, under which the assumed value of the
units awarded is equal to $25.187 which was the price of the Dial Common
Stock on the initial date of grant. The value of the units for any payment
of an award is based on the average price of Dial Common Stock during the
month following the performance period. The closing price of the Dial Common
Stock on December 29, 1995 was $29.625. Payouts of awards are dependent upon
achievement of return on equity and income targets which are established at
the beginning of the performance period.
(2) Performance-based Dial Restricted Stock granted under the 1992 Dial Plan,
which is earned proportionately as total stockholder return performance
targets are met or exceeded relative to the Standard & Poor's Composite-500
Stock Index and an index of comparator companies as set forth in the Dial
1996 Proxy Statement.
(3) Pursuant to the Employment Agreement, Mr. Jozoff will be eligible following
the Distribution, to receive a long-term performance bonus for the remaining
term of the Employment Agreement up to 100% of his base salary for such
remaining term. See "-- Employment and Change in Control Arrangements."
COMPENSATION FOLLOWING THE DISTRIBUTION
Total compensation for the Company's executive officers following the
Distribution is expected to include base salary, annual and long-term
incentives, benefits and other perquisites, as described below. The Company's
executive compensation strategy will be to closely align the financial interests
of senior managers with those of the stockholders. Accordingly, a significant
portion of executive compensation will be tied to achieving specific business
goals that favorably impact the price of Company Common Stock. Set forth below
40
<PAGE> 55
is a summary of each component of executive compensation following the
Distribution, along with a summary of adjustments that will be made to
outstanding awards under Dial plans for those individuals who will be executives
of the Company following the Distribution.
Base Salary. Base salary for the most highly compensated officers of the
Company, other than Mr. Jozoff, effective as of the Distribution, is expected to
be at levels consistent with the amounts shown in the summary compensation table
under "-- Historical Compensation." Such salaries will be subject to review by
the Compensation Committee on an annual basis, based on the executive's
performance and competitive practice. Mr. Jozoff's base salary is described
below under "-- Employment and Change in Control Arrangements."
Annual Incentives. It is anticipated that following the Distribution, the
Company will adopt a Management Incentive Plan (a "Company MIP") pursuant to
which executives will be eligible for an annual bonus based on achieving
performance targets established each year. Under such a Company MIP, annual
performance targets would be set by the Compensation Committee at the beginning
of the performance period. Pursuant to such a Company MIP, the Compensation
Committee would fix individual target bonuses as a percentage of the executive's
base salary, depending on the level of responsibility. Such a Company MIP would
include a deferred compensation arrangement whereby a participant will be able
to defer part or all of his incentive award pursuant to The Dial Corporation
Deferred Compensation Plan (the "Company Deferred Compensation Plan").
Dial currently makes annual incentive awards to executives under the Dial
MIP. The Company will be responsible for payment of outstanding Dial MIP awards
for 1996 for Company executives. The performance targets will be adjusted, if
appropriate, to reflect the effects of the Distribution.
Long-Term Incentives. To accomplish the objectives of the executive
compensation program and to discourage short-term actions inconsistent with
longer-term improvement, the Company intends to design long-term incentive plans
to reward measurable performance and build stock ownership among executive
officers. Three long-term incentive vehicles may be used to achieve these
objectives: performance units, stock options and performance stock.
Performance Units. It is anticipated that, following the Distribution, the
Company will adopt a Performance Unit Incentive Plan (a "Company PUIP"), under
which key employees of the Company or its subsidiaries would be eligible, at the
end of a specified performance period, to earn awards if certain financial
objectives are achieved. Performance unit grants under such a Company PUIP would
be based on the price of the Company Common Stock on the date of the grant and a
multiple of salary determined by an independent consulting firm to reflect the
competitive practice of certain comparator companies. Participant awards would
be earned depending on the degree of achievement of specified financial goals
based on a percentage of the number of award units originally granted. Award
payments would depend on the stock price during the month following the end of
the performance period. The maximum amount of award units would be earned if the
maximum performance targets for the period are met. Proportionately fewer units
would be earned for less than maximum results. If performance is below the
threshold levels, no units would be earned.
Dial currently makes certain of its long-term incentive awards to
executives under the Dial PUIP. The Company will be responsible for payment of
outstanding Dial PUIP awards to Company executives. The performance targets will
be adjusted, if appropriate, to reflect the effects of the Distribution.
Stock Incentives. The Company will have in place the 1996 Company Plan,
under which executives will be awarded Company Options and other stock-based
awards. It is expected that the amounts of Company Options granted will be based
on multiples of salaries based on competitive practices of the Company's
comparator companies. In addition, under the 1996 Company Plan, certain
executive officers may be eligible for performance-based awards of restricted
stock of the Company ("Company Restricted Stock"), which would be earned only if
performance targets are met or exceeded.
1996 Company Plan. Prior to the Distribution, it is anticipated that the
1996 Company Plan will be adopted by the Company Board and approved by Dial, as
the Company's sole stockholder. The Company Board believes that the adoption of
the 1996 Company Plan will help the Company to attract, retain and
41
<PAGE> 56
provide appropriate incentives for management personnel. The 1996 Company Plan
is also intended to facilitate the adjustment of Dial Options as described under
"-- Adjustments to Outstanding Dial Stock Awards." The 1996 Company Plan is
expected to provide for grants or awards of options (either as incentive stock
options within Section 422 of the Code or as non-qualified options, "Options")
to purchase Company Common Stock or preferred stock, par value $0.01 per share
("Company Preferred Stock"), stock appreciation rights ("SARs"), limited stock
appreciation rights, and Company Restricted Stock. Officers and employees of the
Company, its subsidiaries and its affiliates, will be eligible to be selected as
participants in the 1996 Plan. The 1996 Company Plan will also provide for the
grant of options to directors of the Company. See "DIRECTORS'
COMPENSATION -- Directors' Stock Awards." The 1996 Company Plan will be included
as an exhibit to the Registration Statement of which this Information Statement
is a part, and any description herein is qualified in its entirety by reference
to such exhibit.
ADJUSTMENTS TO OUTSTANDING DIAL STOCK AWARDS
Dial has outstanding Dial Options to purchase Dial Common Stock under The
Dial Corp 1983 Stock Option and Incentive Plan (the "1983 Dial Plan") and under
the 1992 Dial Plan. Under the 1983 Dial Plan and the 1992 Dial Plan, Dial Option
awards may also include stock appreciation rights ("Dial SARs") and limited
stock appreciation rights ("Dial LSARs"). The 1983 Dial Plan and the 1992 Dial
Plan also provide for the grant of restricted stock ("Dial Restricted Stock").
In connection with the Distribution, each Dial Option, related Dial LSAR and
related Dial SAR outstanding and unexercised as of the Distribution Date held by
a Company Individual will be automatically converted into a Company Option (and
a related limited stock appreciation right and/or a related SAR where
applicable) for a number of shares of Company Common Stock, and at an exercise
price, intended to preserve for such Company Individual the economic value of
the shares subject to the Dial Option including the spread between the exercise
price and the fair market value of the shares subject to the Dial Option.
Each Company Individual who immediately prior to the Distribution Date is
the holder of any shares of Dial Restricted Stock will be credited with a number
of shares of Company Restricted Stock equal to the number of shares of Dial
Restricted Stock held by such Company Individual immediately prior to the
Distribution Date. Such shares of Dial Restricted Stock and Company Restricted
Stock will be held by such Company Individual subject to the rights, obligations
and restrictions in the restricted stock agreement previously applicable to the
shares of Dial Restricted Stock, except that the fact that such Company
Individual is no longer an employee of Dial will not cause a forfeiture
thereunder.
As of the Distribution Date, each Company Individual who immediately prior
thereto is the holder of an award of performance-based Dial Restricted Stock
will receive a number of shares of Company Common Stock equal to the number of
shares of Dial Common Stock subject to such award, such Company Common Stock to
be held subject to the rights, obligations and restrictions applicable to the
Dial Common Stock subject to such award, except that performance will be
measured by the combined performance of the Dial Common Stock and the Company
Common Stock through the remainder of the measuring period.
All Company Options and shares of Company Restricted Stock issued in
connection with adjustments to outstanding awards under Dial plans will be
issued pursuant to the 1996 Company Plan, as described above.
EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS
On May 13, 1996, Dial entered into the three-year Employment Agreement with
Mr. Jozoff, providing for Mr. Jozoff to serve as President and Chief Executive
Officer of the Consumer Products Business and, effective as of the Distribution,
as Chairman, President and Chief Executive Officer of the Company, which will
assume the Employment Agreement. Mr. Jozoff will not be employed by Dial in any
capacity following the Distribution. Prior to the Distribution, the Employment
Agreement provides for a base salary of $600,000 per annum to be paid by Dial
and makes Mr. Jozoff eligible for a discretionary bonus to be paid by Dial up to
100% of the base salary received by him prior to the Distribution on the basis
of criteria established by the Dial Board. Upon entering into the Employment
Agreement, Mr. Jozoff was granted a one-time bonus of $150,000 and options to
purchase 50,000 shares of Dial Common Stock with an exercise price set by the
closing market
42
<PAGE> 57
price of the Dial Common Stock on May 15, 1996. These Dial Options are fully
vested but the shares of Dial Common Stock issuable upon exercise are subject to
transfer restrictions for the first year from the date of grant, and fifty
percent remain subject to such restrictions for two years from the date of
grant. The Employment Agreement also provides that Mr. Jozoff is eligible for a
further $150,000 bonus to be paid by the Company after the Distribution, based
on his contribution to the successful completion of the Distribution.
Following the Distribution, the Employment Agreement provides that the
Company will pay Mr. Jozoff a base salary of $650,000 per annum and that Mr.
Jozoff will be eligible to receive an annual bonus grant from the Company up to
100% of his base salary determined on the basis of criteria approved by the
Company Board, a long-term performance bonus for the remaining term of the
Employment Agreement up to 100% of his base salary for such remaining term, upon
reasonable criteria to be determined by the Company Board, and an annual grant
of Options to purchase not less than 100,000 shares of Company Common Stock. The
Employment Agreement also provides that Mr. Jozoff will be eligible to
participate in all employee benefit plans of Dial or the Company available to
senior executives, and to receive life insurance, pension benefits, supplemental
pension benefits and other welfare benefits from Dial or the Company, as
applicable, on terms no less favorable in the aggregate than those of other
executives of Dial or the Company, respectively, provided that, if Mr. Jozoff is
still employed by Dial or the Company at the end of the term of the Employment
Agreement, he shall receive, retroactively and until termination of his
employment, two years of employment credit toward retirement for each one year
employed. The Employment Agreement further provides for the reimbursement of
relocation expenses, including the purchase of Mr. Jozoff's current residence
under certain circumstances. Should the Distribution not be accomplished for any
reason on or before December 31, 1996, Mr. Jozoff may continue as President and
Chief Executive Officer of the Consumer Products Business. Mr. Jozoff also has a
right to terminate the Employment Agreement as a result of a decision not to
consummate the Distribution or if the Distribution does not take place by
December 31, 1996, at any time prior to February 28, 1997 and to receive a
severance payment of $900,000. Upon such termination, all salaries, bonuses,
options and benefits accrued or to be paid under the Employment Agreement will
be forfeited.
Effective as of the Distribution Date, the Company will enter into
executive severance agreements with certain executive officers, including
Messrs. Jozoff, Shook, Greenwell, Anthony and Bailey, providing that if, within
two years after a change of control of the Company, an executive's employment is
terminated involuntarily for any reason (other than because of death,
disability, or for cause), or the executive terminates his employment for good
reason or during the thirty-day period following the change in control, then
such executive shall receive as severance compensation (a) cash equal to three
times the sum of (1) the executive's annual base salary plus (2) the executive's
highest annual bonus and (b) a gross-up of any taxes resulting from the
application of Section 4999 of the Code. For purposes of these agreements, the
executive's annual base salary is to be at least equal to twelve times the
highest monthly base salary paid to the executive during the twelve months
preceding the change in control, and the highest annual bonus is to be the
higher of (A) the highest annual cash bonus paid to the executive in any of the
three fiscal years prior to the change in control and (B) the annual bonus paid
or payable for the most recently completed fiscal year during the employment
period under the agreement.
PENSION PLANS
At December 30, 1995, Dial and certain of its subsidiaries provided
retirement benefits for most of their employees under the Dial Retirement Plan
and executives participated in the plan of their employer. For the benefit of
certain executives, Dial also maintains The Dial Corp Supplemental Pension Plan
(the "Dial Supplemental Pension Plan") which prevents the loss of pension
benefits otherwise payable except for the limitation of Section 415 of the Code.
43
<PAGE> 58
The following table shows estimated annual retirement benefits payable to a
covered participant who retires at age sixty-five or later, for the years of
service and remuneration level indicated, under the Dial Retirement Plan and the
schedule of the Dial Supplemental Pension Plan which prevents the loss of
pension benefits otherwise payable except for the limitations of Section 415 of
the Code. The remuneration covered by the Dial Retirement Plan is annual salary
and annual bonus, as reported in the summary compensation table above. The final
remuneration will be calculated on the basis of the average of the participant's
last five years of covered remuneration prior to retirement.
PENSION PLAN TABLE(1)(2)
<TABLE>
<CAPTION>
YEARS OF SERVICE
-----------------------------------------------------
REMUNERATION 15 20 25 30(3)
- ------------------------------------------ -------- -------- -------- --------
<S> <C> <C> <C> <C>
$ 125,000................................. $ 30,869 $ 41,158 $ 51,448 $ 61,737
150,000................................. 37,431 49,908 62,385 74,862
175,000................................. 43,994 58,658 73,323 87,987
200,000................................. 50,556 67,408 84,260 101,112
225,000................................. 57,119 76,158 95,198 114,237
250,000................................. 63,681 84,908 106,135 127,362
300,000................................. 76,806 102,408 128,010 153,612
400,000................................. 103,056 137,408 171,760 206,112
500,000................................. 129,306 172,408 215,510 258,612
600,000................................. 155,556 207,408 259,260 311,112
700,000................................. 181,806 242,408 303,010 363,612
800,000................................. 208,056 277,408 346,760 416,112
900,000................................. 234,306 312,408 390,510 468,612
1,000,000................................ 260,556 347,408 434,260 521,112
1,100,000................................ 286,806 382,408 478,010 573,612
</TABLE>
- ---------------
(1) The Code and the Employee Retirement Income Security Act of 1974, as amended
("ERISA") limit the annual benefits which may be paid from a tax-qualified
retirement plan. As permitted by the Code and ERISA, the Dial Supplemental
Pension Plan authorizes the payment of benefits calculated under provisions
of the retirement plan which may be above the limits permitted under the
Code and ERISA for those executives entitled to participate in the Dial
Supplemental Pension Plan.
(2) Benefits are computed on a single-life annuity basis. Such benefits reflect
a reduction to recognize some of the Social Security benefits to be received
by the employee. The amounts set forth are before any adjustment and
survivorship provisions, which would reduce, in some cases, the amounts
shown in the table.
(3) The Dial Retirement Plan limits the years of service credited for purposes
of calculating benefits to a maximum of thirty years. The Dial Supplemental
Pension Plan contains similar limits.
The number of credited years of service for Messrs. Shook, Greenwell,
Anthony and Bailey are 13, 11, 11 and 3, respectively. Messrs. Shook, Greenwell,
Anthony and Bailey's estimated retirement benefits are $133,000, $102,000,
$79,000, and $85,000, respectively. Mr. Jozoff currently has no credited years
of service.
Dial maintains the Dial TRIM, a defined contribution plan which is intended
to qualify under Section 401(k) of the Code. Dial also maintains, for certain
executives, the Dial Supplemental TRIM Plan, which provides benefits beyond the
limitations under the Dial TRIM under Section 402 of the Code.
Pursuant to the Distribution Agreement, effective as of the Cut-Off Date,
the Company will establish employee pension benefit plans (within the meaning of
Section 3(2) of ERISA) which constitute qualified plans under Section 401(a) of
the Code ("Company Pension Plans"). Such Company Pension Plans will provide
benefits for Company Individuals who, immediately prior to the Cut-Off Date, are
active or inactive participants in or otherwise entitled to benefits under the
Dial Retirement Plan, the Dial TRIM, the related supplemental plans and certain
stand-alone plans maintained by Dial solely for Company Individuals, and are
expected to provide benefits substantially identical to those provided by the
plans in which such Company Individuals currently participate.
44
<PAGE> 59
Dial ESOP. The Distribution Agreement provides that Dial and the Company
will take all action necessary so that, effective as of the Distribution Date,
the trustee of the trust funding the Dial ESOP will transfer to the trustee of a
newly established Company savings plan the aggregate account balances of Company
Individuals under the Dial ESOP.
Equity Trust. Dial currently funds certain existing employee compensation
and benefit plans through the Dial Equity Trust. As of April 30, 1996, the Dial
Equity Trust held 5,670,818 shares of Dial Common Stock to fund such benefits.
Effective as of the Distribution Date, the Company will establish the Company
Equity Trust to receive and hold for the benefit of Company Individuals all
shares of Company Common Stock received in the Distribution in respect of shares
of Dial Common Stock held in the Dial Equity Trust. Following the Distribution,
the Company will fund certain of its employee compensation and benefit plans
through the Company Equity Trust. Dial will amend the Dial Equity Trust, to the
extent necessary, to effectuate this action.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS OF COMPANY COMMON STOCK
BY MANAGEMENT
The following table sets forth the number of shares of Company Common Stock
expected to be beneficially owned following the Distribution, directly or
indirectly, by each director, each Named Executive Officer and all directors and
executive officers as a group, based upon the beneficial ownership by such
persons of Dial Common Stock as of March 15, 1996, except with respect to Mr.
Jozoff, for which the information is as of May 14, 1996. A list of the
individuals who are expected to be executive officers of the Company immediately
following the Distribution is set forth under "BOARD OF DIRECTORS AND EXECUTIVE
OFFICERS." Except as otherwise indicated, each individual named is expected to
have sole investment and voting power with respect to the securities shown.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP(A) CLASS
--------------------------------------------------------- ----------------- ----------
<S> <C> <C>
William L. Anthony....................................... 69,008 *
Brent D. Bailey.......................................... 22,778 *
Joe T. Ford.............................................. 26,868 *
Thomas L. Gossage........................................ 10,200 *
John E. Greenwell........................................ 34,174 *
Donald E. Guinn.......................................... 28,320 *
Malcolm Jozoff........................................... 51,000 *
Mark R. Shook............................................ 68,406 *
Dennis C. Stanfill....................................... 28,104 *
A. Thomas Young.......................................... 20,868 *
All directors and executive officers
(14 persons)........................................... 429,220 *
</TABLE>
- ---------------
* Less than 1%.
(a) Includes shares of Dial Common Stock subject to Dial Options which are
presently exercisable or will become exercisable within sixty days
thereafter. The number of shares of Dial Common Stock subject to such
exercisable Dial Options include 50,000 held by Mr. Jozoff, 52,144 held by
Mr. Shook, 21,438 held by Mr. Greenwell, 41,010 held by Mr. Anthony and
16,200 held by Mr. Bailey, and 336,320 for all directors and executive
officers as a group. In connection with the Distribution, such Dial Options
will be replaced with Company Options to purchase an adjusted number of
shares of Company Common Stock at an adjusted exercise price, with such
adjustments designed to preserve the existing economic benefit of the Dial
Options for the individuals. For example, at assumed prices of $20 per share
of Company Common Stock immediately following the Distribution, and $30 per
share of Dial Common Stock immediately prior to the Distribution, the number
of shares subject to such Company Options would be 75,000 for Mr. Jozoff,
78,216 for Mr. Shook, 32,157 for Mr. Greenwell, 61,515 for Mr. Anthony,
24,300 for Mr. Bailey and 504,480 for all directors and executive officers
as a group. The stock prices assumed are for illustrative purposes only.
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<PAGE> 60
BY OTHERS
The following table sets forth each person or entity that is expected to
beneficially own more than 5% of the Company Common Stock outstanding
immediately following the Distribution, based upon the ownership of Dial Common
Stock as known to the Company as of May 9, 1996.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP CLASS
--------------------------------------------------------- ----------------- ----------
<S> <C> <C>
Brinson Partners, Inc.................................... 4,990,768(1) 5.3%
Brinson Trust Company
Brinson Holdings, Inc.
SBC Holding (USA), Inc.
and Swiss Bank Corporation
209 S. LaSalle
Chicago, IL 60604
Michael F. Price and Heine............................... 9,393,100(2) 9.99%
Securities Corporation
51 John F. Kennedy Parkway
Short Hills, NJ 07078
Trustee of The Dial Corporation.......................... 5,670,818(3) 6.0%
Employee Equity Trust
</TABLE>
- ---------------
(1) The ownership information set forth herein is based in its entirety on
material contained in a Schedule 13G, dated February 9, 1996, filed with the
Commission by Brinson Partners, Inc., Brinson Trust Company, Brinson
Holdings, Inc., SBC Holding (USA), Inc. and Swiss Bank Corporation with
respect to Dial Common Stock. With respect to the shares held, such
stockholders, in the aggregate, have sole voting power and sole dispositive
power for all shares owned. Based on the foregoing, Brinson Partners, Inc.,
Brinson Trust Company, Brinson Holdings, Inc., SBC Holdings (USA), Inc. and
Swiss Bank Corporation would beneficially own 4,990,768 shares of Company
Common Stock immediately following the Distribution.
(2) The ownership information set forth herein is based in its entirety on
material contained in a Schedule 13D, dated January 17, 1996, as amended on
April 2, 1996, filed with the Commission by Michael F. Price and Heine
Securities Corporation with respect to dispositive power for all shares
owned. Based on the foregoing, Michael F. Price and Heine Securities
Corporation would beneficially own 9,393,100 shares of Company Common Stock
immediately following the Distribution.
(3) Pursuant to the Distribution Agreement, effective as of the Distribution
Date, Dial and the Company will establish the Company Equity Trust to
receive all shares of Dial Common Stock received in the Distribution in
respect of shares of Dial Common Stock held in the Dial Equity Trust.
According to information supplied to Dial by the trustee of the Dial Equity
Trust (First Interstate Bank of Arizona, N.A.), the Dial Equity Trust held
5,670,818 shares of Dial Common Stock as of January 23, 1996. Based on the
foregoing, the Company Equity Trust would beneficially own 5,670,818 shares
of Company Common Stock immediately following the Distribution.
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<PAGE> 61
DESCRIPTION OF COMPANY CAPITAL STOCK
Prior to the Distribution Date, the Company Board and Dial, as sole
stockholder of the Company, will approve and adopt the Certificate of
Incorporation. Under the Certificate of Incorporation, the total number of
shares of all classes of stock that the Company has authority to issue is
310,000,000 consisting of 10,000,000 shares of Company Preferred Stock, and
300,000,000 shares of Company Common Stock. No shares of Company Preferred Stock
are being issued in connection with the Distribution. An aggregate of up to
approximately 94,500,000 shares of Company Common Stock is expected to be
distributed in the Distribution, based on the number of shares of Dial Common
Stock outstanding on April 30, 1996. The Company plans to have authorized and
reserved for issuance 1,000,000 shares of Company Junior Participating Preferred
Stock (as defined herein) in connection with the Rights to be issued by the
Company in connection with the Distribution.
The holders of Company Common Stock are entitled to one vote per share on
all matters voted on by the stockholders, including the elections of directors,
and, except as otherwise required by law or provided in any resolution (a
"Preferred Stock Designation") adopted by the Company Board with respect to any
series of Company Preferred Stock, the holders of such shares exclusively
possess all voting power. The Certificate of Incorporation does not provide for
cumulative voting in the election of directors. Subject to any preferential
rights of any outstanding series of Company Preferred Stock, the holders of
Company Common Stock are entitled to such dividends as may be declared from time
to time by the Company Board from funds available therefor, and upon liquidation
are entitled to receive pro rata all assets of the Company available for
distribution to such holders. All shares of Company Common Stock received in the
Distribution will be fully paid and nonassessable and the holders thereof will
not have any preemptive rights. See "CERTAIN ANTITAKEOVER EFFECTS OF CERTAIN
PROVISIONS OF THE CERTIFICATE OF INCORPORATION, THE BYLAWS, THE RIGHTS, AND
DELAWARE LAW."
The Company Board is authorized to provide for the issuance of shares of
Company Preferred Stock, in one or more series, to establish the number of
shares in each series and to fix the designation, powers, preferences and rights
of each such series and the qualifications, limitations or restrictions thereof.
See "CERTAIN ANTITAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE CERTIFICATE OF
INCORPORATION, THE BYLAWS, THE RIGHTS, AND DELAWARE LAW -- Company Preferred
Stock."
CERTAIN ANTITAKEOVER EFFECTS OF CERTAIN
PROVISIONS OF THE CERTIFICATE OF INCORPORATION,
THE BYLAWS, THE RIGHTS, AND DELAWARE LAW
The Certificate of Incorporation, the Bylaws and the Rights contain certain
provisions that could make more difficult the acquisition of the Company by
means of a tender offer, a proxy contest or otherwise. The description set forth
below is intended as a summary only and is qualified in its entirety by
reference to the Certificate of Incorporation and the Bylaws, which are attached
to this Information Statement as Annex B and Annex C, respectively, and the
Rights Agreement, which is filed as an exhibit to the Registration Statement.
CLASSIFIED BOARD OF DIRECTORS
The Certificate of Incorporation and Bylaws provide that the Company Board
will be divided into three classes of directors, with the classes to be as
nearly equal in number as possible. The Company Board is expected to consist of
the persons referred to under "BOARD OF DIRECTORS AND EXECUTIVE OFFICERS." The
Certificate of Incorporation and the Bylaws provide that, of the initial
directors of the Company, approximately one-third will continue to serve until
the 1997 Annual Meeting of Stockholders, approximately one-third will continue
to serve until the 1998 Annual Meeting of Stockholders and approximately
one-third will continue to serve until the 1999 Annual Meeting of Stockholders.
Of the initial directors, Mr. Gossage and Mr. Stanfill will serve until the 1997
Annual Meeting of Stockholders, Mr. Ford and Mr. Young will serve until the 1998
Annual Meeting of Stockholders and Mr. Guinn and Mr. Jozoff will serve until the
1999 Annual Meeting of Stockholders. Starting with the 1997 Annual Meeting of
Stockholders, one class of directors will be elected each year for a three-year
term.
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<PAGE> 62
The classification of directors will have the effect of making it more
difficult for stockholders to change the composition of the Company Board. At
least two annual meetings of stockholders, instead of one, will generally be
required to effect a change in a majority of the Company Board. Such a delay may
help ensure that the Company's directors, if confronted by a holder attempting
to force a proxy contest, a tender or exchange offer, or an extraordinary
corporate transaction, would have sufficient time to review the proposal as well
as any available alternatives to the proposal and to act in what they believe to
be the best interests of the stockholders. The classification provisions will
apply to every election of directors, however, regardless of whether a change in
the composition of the Company Board would be beneficial to the Company and its
stockholders and whether or not a majority of the Company's stockholders believe
that such a change would be desirable.
The classification provisions could also have the effect of discouraging a
third party from initiating a proxy contest, making a tender offer or otherwise
attempting to obtain control of the Company, even though such an attempt might
be beneficial to the Company and its stockholders. The classification of the
Company Board could thus increase the likelihood that incumbent directors will
retain their positions. In addition, because the classification provisions may
discourage accumulations of large blocks of the Company's stock by purchasers
whose objective is to take control of the Company and remove a majority of the
Company Board, the classification of the Company Board could tend to reduce the
likelihood of fluctuations in the market price of Company Common Stock that
might result from accumulations of large blocks. Accordingly, stockholders could
be deprived of certain opportunities to sell their shares of Company Common
Stock at a higher market price than might otherwise be the case.
NUMBER OF DIRECTORS, FILLING VACANCIES AND REMOVAL
The Certificate of Incorporation provides that, subject to any rights of
holders of Company Preferred Stock to elect additional directors under specified
circumstances, the number of directors will be fixed in the manner provided in
the Bylaws. The Bylaws provide that, subject to any rights of holders of Company
Preferred Stock to elect directors under specified circumstances, the number of
directors will be fixed from time to time exclusively pursuant to a resolution
adopted by directors constituting a majority of the total number of directors
that the Company would have if there were no vacancies on the Company Board (the
"Whole Board"), but must consist of not more than eleven nor less than three
directors. In addition, the Certificate of Incorporation and Bylaws provide
that, subject to any rights of holders of Company Preferred Stock, and unless
the Company Board otherwise determines, any vacancies or newly created
directorships will be filled only by the affirmative vote of a majority of the
remaining directors, though less than a quorum. Accordingly, absent an amendment
to the Certificate of Incorporation and Bylaws, the Company Board could prevent
any stockholder from enlarging the Company Board and filling the new
directorships with such stockholder's own nominees.
Under the Delaware General Corporation Law (the "DGCL"), unless otherwise
provided in the Certificate of Incorporation, directors serving on a classified
board may only be removed by the stockholders for cause. In addition, the
Certificate of Incorporation and the Bylaws provide that directors may be
removed only for cause and only upon the affirmative vote of holders of at least
80% of the voting power of all the then outstanding shares of stock entitled to
vote generally in the election of directors ("Voting Stock"), voting together as
a single class.
NO STOCKHOLDER ACTION BY WRITTEN CONSENT AND SPECIAL MEETINGS
The Certificate of Incorporation and the Bylaws provide that, subject to
the rights of any holders of Company Preferred Stock, stockholder action can be
taken only at an annual or special meeting of stockholders and prohibit
stockholder action by written consent in lieu of a meeting. The Bylaws provide
that, subject to the rights of holders of any series of Company Preferred Stock,
special meetings of stockholders can be called only by the Chairman of the
Company Board or by the Company Board pursuant to a resolution adopted by a
majority of the Whole Board. Stockholders are not permitted to call a special
meeting or to require that the Company Board call a special meeting of
stockholders. Moreover, the business permitted to be conducted at any special
meeting of stockholders is limited to the business brought before the meeting
pursuant to the notice of meeting given by the Company.
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<PAGE> 63
The provisions of the Certificate of Incorporation and the Bylaws
prohibiting stockholder action by written consent may have the effect of
delaying consideration of a stockholder proposal until the next annual meeting
unless a special meeting is called by the Chairman or at the request of a
majority of the Whole Board. These provisions would also prevent the holders of
a majority of the voting power of the Voting Stock from unilaterally using the
written consent procedure to take stockholder action and from taking action by
consent. Moreover, a stockholder could not force stockholder consideration of a
proposal over the opposition of the Chairman and the Company Board by calling a
special meeting of stockholders prior to the time the Chairman or a majority of
the Whole Board believes such consideration to be appropriate.
ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER NOMINATIONS AND STOCKHOLDER PROPOSALS
The Bylaws establish an advance notice procedure for stockholders to make
nominations of candidates for election as directors, or bring other business
before an annual meeting of stockholders of the Company (the "Stockholder Notice
Procedure").
The Stockholder Notice Procedure provides that only individuals who are
nominated by, or at the direction of, the Company Board, or by a stockholder who
has given timely written notice to the Secretary of the Company prior to the
meeting at which directors are to be elected, will be eligible for election as
directors of the Company. The Stockholder Notice Procedure provides that at an
annual meeting only such business may be conducted as has been brought before
the meeting by, or at the direction of, the Chairman or the Company Board or by
a stockholder who has given timely written notice to the Secretary of the
Company of such stockholder's intention to bring such business before such
meeting. Under the Stockholder Notice Procedure, for notice of stockholder
nominations to be made at an annual meeting to be timely, such notice must be
received by the Company not less than seventy days nor more than ninety days
prior to the first anniversary of the previous year's annual meeting (or, if the
date of the annual meeting is advanced by more than twenty days, or delayed by
more than seventy days, from such anniversary date, not earlier than the
ninetieth day prior to such meeting and not later than the later of (1) the
seventieth day prior to such meeting and (2) the tenth day after public
announcement of the date of such meeting is first made). Notwithstanding the
foregoing, in the event that the number of directors to be elected is increased
and there is no public announcement naming all of the nominees for director or
specifying the size of the increased Company Board made by the Company at least
eighty days prior to the first anniversary of the preceding year's annual
meeting, a stockholder's notice will be timely, but only with respect to
nominees for any new positions created by such increase, if it is received by
the Company not later than the tenth day after such public announcement is first
made by the Company. Under the Stockholder Notice Procedure, for notice of a
stockholder nomination to be made at a special meeting at which directors are to
be elected to be timely, such notice must be received by the Company not earlier
than the ninetieth day before such meeting and not later than the later of (a)
the seventieth day prior to such meeting and (b) the tenth day after public
announcement of the date of such meeting is first made.
Under the Stockholder Notice Procedure, a stockholder's notice to the
Company proposing to nominate an individual for election as a director must
contain certain information, including, without limitation, the identity and
address of the nominating stockholder, the class and number of shares of stock
of the Company which are owned by such stockholder, and all information
regarding the proposed nominee that would be required to be included in a proxy
statement soliciting proxies for the proposed nominee. Under the Stockholder
Notice Procedure, a stockholder's notice relating to the conduct of business
other than the nomination of directors must contain certain information about
such business and about the proposing stockholders, including, without
limitation, a brief description of the business the stockholder proposes to
bring before the meeting, the reasons for conducting such business at such
meeting, the name and address of such stockholder, the class and number of
shares of stock of the Company beneficially owned by such stockholder, and any
material interest of such stockholder in the business so proposed. If the
Chairman of the Board or other officer presiding at a meeting determines that a
person was not nominated, or other business was not brought before the meeting,
in accordance with the Stockholder Notice Procedure, such person will not be
eligible for election as a director, or such business will not be conducted at
such meeting, as the case may be.
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<PAGE> 64
By requiring advance notice of nominations by stockholders, the Stockholder
Notice Procedure will afford the Company Board an opportunity to consider the
qualifications of the proposed nominees and, to the extent deemed necessary or
desirable by the Company Board, to inform stockholders about such
qualifications. By requiring advance notice of other proposed business, the
Stockholder Notice Procedure will also provide a more orderly procedure for
conducting annual meetings of stockholders and, to the extent deemed necessary
or desirable by the Company Board, will provide the Company Board with an
opportunity to inform stockholders, prior to such meetings, of any business
proposed to be conducted at such meetings, together with any recommendations as
to the Company Board's position regarding action to be taken with respect to
such business, so that stockholders can better decide whether to attend such a
meeting or to grant a proxy regarding the disposition of any such business.
Although the Bylaws do not give the Company Board any power to approve or
disapprove stockholder nominations for the election of directors or proposals
for action, they may have the effect of precluding a contest for the election of
directors or the consideration of stockholder proposals if the proper procedures
are not followed, and of discouraging or deterring a third party from conducting
a solicitation of proxies to elect its own slate of directors or to approve its
own proposal, without regard to whether consideration of such nominees or
proposals might be harmful or beneficial to the Company and its stockholders.
COMPANY PREFERRED STOCK
The Certificate of Incorporation authorizes the Company Board to establish
one or more series of Company Preferred Stock and to determine, with respect to
any series of Company Preferred Stock, the terms and rights of such series,
including (1) the designation of the series, (2) the number of shares of the
series, which number the Company Board may thereafter (except where otherwise
provided in the Preferred Stock Designation) increase or decrease (but not below
the number of shares thereof then outstanding), (3) whether dividends, if any,
will be cumulative or noncumulative and the dividend rate and the preferences,
if any, of the series, (4) the dates at which dividends, if any, will be
payable, (5) the redemption rights and price or prices, if any, for shares of
the series, (6) the terms and amounts of any sinking fund provided for the
purchase or redemption of shares of the series, (7) the amounts payable on
shares of the series in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company, (8) whether the shares
of the series will be convertible into or exchangeable for shares of any other
class or series, or any other security, of the Company or any other corporation,
and, if so, the specification of such other class or series or such other
security, the conversion or exchange price or prices or rate or rates, any
adjustments thereof, the date or dates as of which such shares shall be
convertible or exchangeable and all other terms and conditions upon which such
conversion or exchange may be made, (9) restrictions on the issuance of shares
of the same series or of any other class or series, and (10) the voting rights,
if any, of the holders of such series.
Dial and the Company believe that the ability of the Company Board to issue
one or more series of Company Preferred Stock will provide the Company with
flexibility in structuring possible future financings and acquisitions, and in
meeting other corporate needs which might arise. The authorized shares of
Company Preferred Stock, as well as shares of the Company Common Stock, will be
available for issuance without further action by the Company's stockholders,
unless such action is required by applicable law or the rules of any stock
exchange or automated quotation system on which the Company's securities may be
listed or traded. The NYSE currently requires stockholder approval as a
prerequisite to listing shares in several instances, including where the present
or potential issuance of shares could result in an increase in the number of
shares of common stock, or in the amount of voting securities, outstanding of at
least 20%. If the approval of the Company's stockholders is not required for the
issuance of shares of Company Preferred Stock or the Company Common Stock, the
Company Board may determine not to seek stockholder approval.
Although the Company Board has no intention at the present time of doing
so, it could issue a series of Company Preferred Stock that could, depending on
the terms of such series, impede the completion of a merger, tender offer or
other takeover attempt. The Company Board will make any determination to issue
such shares based on its judgment as to the best interests of the Company and
its stockholders. The Company Board, in so acting, could issue Company Preferred
Stock having terms that could discourage an acquisition attempt through which an
acquiror may be able to change the composition of the Company Board, including a
50
<PAGE> 65
tender offer or other transaction that some, or a majority of, the Company's
stockholders might believe to be in their best interests or in which
stockholders might receive a premium for their stock over the then current
market price of such stock.
BUSINESS COMBINATIONS
The Certificate of Incorporation provides that certain "business
combinations" (as defined in the Certificate of Incorporation) must be approved
by the holders of at least 66 2/3% of the voting power of the shares not owned
by an "interested shareholder" (as defined in the Certificate of Incorporation),
unless the business combinations are approved by the "Continuing Directors" (as
defined in the Certificate of Incorporation) or meet certain requirements
regarding price and procedure.
AMENDMENT OF CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BYLAWS
Under the DGCL, the stockholders have the right to adopt, amend or repeal
the bylaws and, with the approval of the board of directors, the certificate of
incorporation of a corporation. In addition, if the certificate of incorporation
so provides, the bylaws may be adopted, amended or repealed by the board of
directors. The Certificate of Incorporation provides that, in addition to
approval by the Company Board, the affirmative vote of the holders of at least
80% of the voting power of the outstanding shares of Voting Stock, voting
together as a single class, is required to amend provisions of the Certificate
of Incorporation relating to the prohibition of stockholder action without a
meeting; the number, election and term of the Company's directors; the filling
of vacancies on the Company Board; the removal of directors and the amendment of
the Bylaws. Approval by the Company Board, together with the vote of the holders
of a majority of the voting power of the outstanding shares of Voting Stock, is
required to amend all other provisions of the Certificate of Incorporation. The
Certificate of Incorporation further provides that the Bylaws may be amended by
the Company Board or by the affirmative vote of the holders of at least 80% of
the voting power of the outstanding shares of Voting Stock, voting together as a
single class. The Certificate of Incorporation also provides that, in addition
to approval by the Company Board, the affirmative vote of the holders of at
least 66 2/3% of the voting power of the outstanding shares of Voting Stock,
including the affirmative vote of the holders of at least 66 2/3% of the voting
power of the outstanding shares of Voting Stock not owned directly or indirectly
by an interested stockholder or any affiliate thereof, is required to amend
provisions of the Certificate of Incorporation regarding certain business
combinations. These supermajority voting requirements will have the effect of
making more difficult any amendment by stockholders of the Bylaws or of any of
the provisions of the Certificate of Incorporation described above, even if a
majority of the Company's stockholders believe that such amendment would be in
their best interests.
RIGHTS
Prior to the Distribution Date, the Company Board will declare a dividend
of one preferred share purchase right (each a "Right" and, collectively, the
"Rights") to be paid immediately following the Distribution Date in respect of
each share of the Company Common Stock to the holder of record thereof as of the
Distribution Date. Each Right will entitle the registered holder to purchase
from the Company one one-hundredth of a share of junior participating preferred
stock, par value $.01 per share ("Company Junior Preferred Stock") of the
Company at a price of $75 per one one-hundredth of a share (the "Purchase
Price"), subject to adjustment. The terms of the Rights will be set forth in a
Rights Agreement (the "Rights Agreement") between the Company and __________
(the "Rights Agent").
Until the earlier to occur of (1) ten days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") has acquired beneficial ownership of 20% or more of the then
outstanding shares of the Company Common Stock or (2) ten business days (or such
later date as may be determined by action of Company Board prior to such time as
any person or group becomes an Acquiring Person) following the commencement of,
or announcement of an intention to make, a tender offer or exchange offer the
consummation of which would result in the beneficial ownership by a person or
group of 20% or more of the outstanding shares of Company Common Stock (the
earlier of such dates being called the
51
<PAGE> 66
"Rights Distribution Date"), the Rights will be evidenced by the certificates
representing shares of Company Common Stock.
The Rights Agreement will provide that until the Rights Distribution Date
(or earlier redemption or expiration of the Rights), the Rights will be
transferred with and only with the shares of Company Common Stock. Until the
Rights Distribution Date (or earlier redemption or expiration of the Rights),
certificates representing shares of Company Common Stock will contain a notation
incorporating the terms of the Rights by reference. Until the Rights
Distribution Date (or earlier redemption or expiration of the Rights), the
surrender for transfer of any certificates representing shares of Company Common
Stock will also constitute the transfer of the Rights associated with the shares
of Company Common Stock represented by such certificate. As soon as practicable
following the Rights Distribution Date, separate certificates evidencing the
Rights ("Rights Certificates") will be mailed to holders of record of the shares
of Company Common Stock as of the close of business on the Rights Distribution
Date and such separate Rights Certificates alone will evidence the Rights.
The Rights will not be exercisable until the Rights Distribution Date. The
Rights will expire on the tenth anniversary of the Distribution Date (the "Final
Expiration Date"), unless the Final Expiration Date is extended or unless the
Rights are earlier redeemed or exchanged by the Company, in each case, as
described below.
The Purchase Price payable, and the number of shares of Company Junior
Preferred Stock or other securities or property issuable, upon exercise of the
Rights are subject to adjustment from time to time to prevent dilution (1) in
the event of a stock dividend on, or a subdivision, combination or
reclassification of, the shares of Company Junior Preferred Stock, (2) upon the
grant to holders of the shares of Company Junior Preferred Stock of certain
rights or warrants to subscribe for or purchase shares of Company Junior
Preferred Stock at a price, or securities convertible into shares of Company
Junior Preferred Stock with a conversion price, less than the then-current
market price of the shares of Company Junior Preferred Stock or (3) upon the
distribution to holders of the shares of Company Junior Preferred Stock of
evidences of indebtedness or assets (excluding regular periodic cash dividends
paid out of earnings or retained earnings or dividends payable in shares of
Company Junior Preferred Stock) or of subscription rights or warrants (other
than those referred to above).
The number of outstanding Rights and the number of one one-hundredths of a
share of Company Junior Preferred Stock issuable upon exercise of each Right are
also subject to adjustment in the event of a stock split of Company Common Stock
or a stock dividend on Company Common Stock payable in Company Common Stock or
subdivisions, consolidations or combinations of Company Common Stock occurring,
in any such case, prior to the Rights Distribution Date.
Shares of Company Junior Preferred Stock purchasable upon exercise of the
Rights will not be redeemable. Each share of Company Junior Preferred Stock will
be entitled to a minimum preferential quarterly dividend payment of $1.00 per
share but will be entitled to an aggregate dividend equal to 100 times the
dividend declared per share of Company Common Stock. In the event of
liquidation, the holders of the Junior Preferred Stock will be entitled to a
minimum preferential liquidation payment of $100 per share but will be entitled
to an aggregate payment equal to 100 times the payment made per share of Company
Common Stock. Each share of Company Junior Preferred Stock will have 100 votes,
together with Company Common Stock. Finally, in the event of any merger,
consolidation or other transaction in which Company Common Stock is exchanged,
each share of Company Junior Preferred Stock will be entitled to receive an
amount equal to 100 times the amount received per share of Company Common Stock.
These rights are protected by customary antidilution provisions.
Because of the nature of the dividend, liquidation and voting rights of
Company Junior Preferred Stock, the value of the one one-hundredth interest in a
share of Company Junior Preferred Stock purchasable upon exercise of each Right
should approximate the value of one share of Company Common Stock.
In the event that any person or group of affiliated or associated persons
becomes an Acquiring Person, proper provision will be made so that each holder
of a Right, other than Rights beneficially owned by the
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<PAGE> 67
Acquiring Person (which will thereafter be void), will thereafter have the right
to receive upon exercise thereof at then current exercise price that number of
shares of Company Common Stock having a market value of two times the exercise
price of the Right (such right being referred to as a "Flip-in Right"). In the
event that, at any time on or after the date that any person has become an
Acquiring Person, the Company is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold, proper provision will be made so that each holder of a Right
will thereafter have the right to receive, upon the exercise thereof at the then
current exercise price of the Right, that number of shares of common stock of
the acquiring company which at the time of such transaction will have a market
value of two times the exercise price of the Right.
At any time after any person or group of affiliated or associated persons
becomes an Acquiring Person and prior to the acquisition by such person or group
of 50% or more of the outstanding shares of Company Common Stock, the Company
Board may exchange the Rights (other than Rights owned by such person or group
which will have become void), in whole or in part, at an exchange ratio of one
share of Company Common Stock, or one one-hundredth of a share of Company Junior
Preferred Stock, per Right (subject to adjustment).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional shares of Company Junior Preferred Stock will
be issued (other than fractions which are integral multiples of one
one-hundredth of a share of Company Junior Preferred Stock, which may, at the
election of the Company, be evidenced by depositary receipts) and in lieu
thereof, an adjustment in cash will be made based on the market price of the
shares of Company Junior Preferred Stock on the last trading day prior to the
date of exercise.
At any time prior to the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 20% or more of the outstanding
shares of Company Common Stock, the Company Board may redeem the Rights in
whole, but not in part, at a price of $.01 per Right (the "Redemption Price").
The redemption of the Rights may be made effective at such time, on such basis
and with such conditions as the Company Board in its sole discretion may
establish. Immediately upon any redemption of the Rights, the right to exercise
the Rights will terminate and the only right of the holders of Rights will be to
receive the Redemption Price.
The terms of the Rights may be amended by the Company Board without the
consent of the holders of the Rights, including an amendment to lower (1) the
threshold at which a person becomes an Acquiring Person and (2) the percentage
of Company Common Stock proposed to be acquired in a tender or exchange offer
that would cause the Rights Distribution Date to occur, to not less than the
greater of (1) the sum of .001% and the largest percentage of the outstanding
Company Common Stock then known to the Company to be beneficially owned by any
person or group of affiliated or associated persons and (2) 10%, except that,
from and after such time as any person or group of affiliated or associated
persons becomes an Acquiring Person, no such amendment may adversely affect the
interests of the holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.
The Rights will have certain antitakeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
and thereby effect a change in the composition of the Company Board on terms not
approved by the Company Board, including by means of a tender offer at a premium
to the market price, other than an offer conditioned on a substantial number of
Rights being acquired. The Rights should not interfere with any merger or
business combination approved by the Company Board since the Rights may be
redeemed by the Company at the Redemption Price prior to the time that a person
or group has become an Acquiring Person.
The foregoing summary of certain terms of the Rights is qualified in its
entirety by reference to the form of the Rights Agreement, a copy of which has
been filed as an exhibit to the Registration Statement. The Rights are being
registered under the Exchange Act, together with Company Common Stock, pursuant
to the Registration Statement in which this Information Statement is included.
In the event that the Rights become
53
<PAGE> 68
exercisable, the Company will register the shares of the Company Junior
Preferred Stock for which the Rights may be exercised, in accordance with
applicable law.
ANTITAKEOVER LEGISLATION
Section 203 of the DGCL provides that, subject to certain exceptions
specified therein, a corporation shall not engage in any business combination
with any "interested stockholder" for a three-year period following the time
that such stockholder becomes an interested stockholder unless (1) prior to such
time, the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder, (2) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding certain shares), or
(3) on or subsequent to such time, the business combination is approved by the
board of directors of the corporation and by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder. Except as specified in Section 203 of the DGCL, an interested
stockholder is defined to include (a) any person that is the owner of 15% or
more of the outstanding voting stock of the corporation, or is an affiliate or
associate of the corporation and was the owner of 15% or more of the outstanding
voting stock of the corporation, at any time within three years immediately
prior to the relevant date and (b) the affiliates and associates of any such
person.
Under certain circumstances, Section 203 of the DGCL makes it more
difficult for a person who would be an "interested stockholder" to effect
various business combinations with a corporation for a three-year period,
although the stockholders may elect to exclude a corporation from the
restrictions imposed thereunder. The Certificate of Incorporation does not
exclude the Company from the restrictions imposed under Section 203 of the DGCL.
It is anticipated that the provisions of Section 203 of the DGCL may encourage
companies interested in acquiring the Company to negotiate in advance with the
Company Board, since the stockholder approval requirement would be avoided if a
majority of the directors then in office approve either the business combination
or the transaction which results in the stockholder becoming an interested
stockholder.
COMPARISON WITH RIGHTS OF HOLDERS OF DIAL COMMON STOCK
Dial's charter documents are substantially similar to the Certificate and
Bylaws with respect to (1) classification of the board of directors; (2)
inability of stockholders to act by written consent or to call special meetings;
(3) advance notice requirements for stockholder nominations and proposals; (4)
the supermajority voting requirement to amend provisions of the Certificate of
Incorporation relating to the prohibition of stockholder action without a
meeting, the number, election and term of the Company's directors, or the
removal of directors; (5) the supermajority voting requirement for stockholders
to amend the Bylaws related to classification of the Company Board or
establishing the size of the Company Board; (6) the elimination of director
liability in certain circumstances; and (7) the application of Section 203 of
the DGCL.
LIABILITY AND INDEMNIFICATION
OF DIRECTORS AND OFFICERS
LIMITATION OF LIABILITY OF DIRECTORS
The Certificate of Incorporation provides that a director of the Company
will not be personally liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (1) for
any breach of the director's duty of loyalty to the Company or its stockholders,
(2) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (3) under Section 174 of the DGCL,
which concerns unlawful payments of dividends, stock purchases or redemptions,
or (4) for any transaction from which the director derived an improper personal
benefit.
While the Certificate of Incorporation provides directors with protection
from awards for monetary damages for breaches of their duty of care, it does not
eliminate such duty. Accordingly, the Certificate of
54
<PAGE> 69
Incorporation will have no effect on the availability of equitable remedies such
as an injunction or rescission based on a director's breach of his or her duty
of care. The provisions of the Certificate of Incorporation described above
apply to an officer of the Company only if he or she is a director of the
Company and is acting in his or her capacity as director, and do not apply to
officers of the Company who are not directors.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Certificate of Incorporation provides that each person who is or was or
had agreed to become a director or officer of the Company, or each such person
who is or was serving or who had agreed to serve at the request of the Company
as a director or officer of another corporation, partnership, joint venture,
trust or other enterprise (including the heirs, executors, administrators or
estate of such person), will be indemnified by the Company, in accordance with
the Bylaws, to the fullest extent permitted from time to time by the DGCL, as
the same exists or may hereafter be amended (but, if permitted by applicable
law, in the case of any such amendment, only to the extent that such amendment
permits the Company to provide broader indemnification rights than said law
permitted the Company to provide prior to such amendment) or any other
applicable laws as presently or hereafter in effect. The Company may, by action
of the Company Board, provide indemnification to employees and agents of the
Company, and to persons serving as employees or agents of another corporation,
partnership, joint venture, trust or other enterprise, at the request of the
Company, with the same scope and effect as the foregoing indemnification of
directors and officers. The Company may be required to indemnify any person
seeking indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the Company Board or is a proceeding to enforce such person's
claim to indemnification pursuant to the rights granted by the Certificate of
Incorporation or otherwise by the Company. In addition, the Company may enter
into one or more agreements with any person providing for indemnification
greater or different than that provided in the Certificate of Incorporation.
The Bylaws provide that each person who was or is made a party or is
threatened to be made a party to or is involved in any action, suit, or
proceeding, whether civil, criminal, administrative or investigative (a
"Proceeding"), by reason of the fact that he or she or a person of whom he or
she is the legal representative is or was a director or officer of the Company
or is or was serving at the request of the Company as a director or officer of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such Proceeding is alleged action in an official capacity as a
director or officer or in any other capacity while serving as a director or
officer, will be indemnified and held harmless by the Company to the fullest
extent authorized by the DGCL as the same exists or may in the future be amended
(but, in the case of any such amendment, only to the extent that such amendment
permits the Company to provide broader indemnification rights than said law
permitted the Company to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith and such
indemnification will continue as to a person who has ceased to be a director,
officer, employee or agent and will inure to the benefit of his or her heirs,
executors and administrators; provided, however, except as described in the
second following paragraph with respect to Proceedings to enforce rights to
indemnification, the Company will indemnify any such person seeking
indemnification in connection with a Proceeding (or part thereof) initiated by
such person only if such Proceeding (or part thereof) was authorized by the
Company Board.
Pursuant to the Bylaws, to obtain indemnification, a claimant is to submit
to the Company a written request for indemnification. Upon such written request
by a claimant, a determination, if required by applicable law, with respect to
the claimant's entitlement to indemnification will be made, if requested by the
claimant, by independent legal counsel, or if the claimant does not so request,
by the Company Board by a majority vote of the disinterested directors even
though less than a quorum or, if there are no disinterested directors or the
disinterested directors so direct, by independent legal counsel in a written
opinion to the Company Board, or if the disinterested directors so direct, by
the stockholders of the Company. In the event the determination of entitlement
to indemnification is to be made by independent legal counsel at the request of
the claimant, the independent legal counsel will be selected by the Company
Board unless there shall have
55
<PAGE> 70
occurred within two years prior to the date of the commencement of the action,
suit or proceeding for which indemnification is claimed a Change of Control, in
which case the independent legal counsel will be selected by the claimant unless
the claimant requests that such selection be made by the Company Board.
Pursuant to the Bylaws, if a claim described in the preceding paragraph is
not paid in full by the Company within thirty days after a written claim
pursuant to the preceding paragraph has been received by the Company, the
claimant may at any time thereafter bring suit against the Company to recover
the unpaid amount of the claim and, if successful in whole or in part, the
claimant will be entitled to be paid also the expense of prosecuting such claim.
The Bylaws provide that it will be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
Proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Company) that the claimant has not
met the standard of conduct which make it permissible under the DGCL for the
Company to indemnify the claimant for the amount claimed, but the burden of
proving such defense will be on the Company. Neither the failure of the Company
(including the disinterested directors, independent legal counsel or
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
DGCL, nor an actual determination by the Company (including the disinterested
directors, independent legal counsel or stockholders) that the claimant has not
met such applicable standard of conduct, will be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct. However, the Company will be bound by a determination pursuant to the
procedures set forth in the Bylaws that the claimant is entitled to
indemnification in any suit brought by a claimant pursuant to the Bylaws.
The Bylaws provide that the right to indemnification and the payment of
expenses incurred in defending a Proceeding in advance of its final disposition
conferred in the Bylaws will not be exclusive of any other right which any
person may have or may in the future acquire under any statute, provision of the
Certificate of Incorporation, the Bylaws, agreement, vote of stockholders or
disinterested directors or otherwise. The Bylaws permit the Company to maintain
insurance, at its expense, to protect itself and any director, officer, employee
or agent of the Company or another corporation, partnership, joint venture,
trust or other enterprise against any expense, liability or loss, whether or not
the Company would have the power to indemnify such person against such expense,
liability or loss under the DGCL. The Company intends to obtain directors' and
officers' liability insurance providing coverage to its directors and officers.
In addition, the Bylaws authorize the Company, to the extent authorized from
time to time by the Company Board, to grant rights to indemnification and rights
to be paid by the Company the expenses incurred in defending any Proceeding in
advance of its final disposition, to any employee or agent of the Company to the
fullest extent of the provisions of the Bylaws with respect to the
indemnification and advancement of expenses of directors and officers of the
Company.
The Bylaws provide that the right to indemnification conferred therein is a
contract right and includes the right to be paid by the Company the expenses
incurred in defending any Proceeding in advance of its final disposition, except
that if the DGCL requires, the payment of such expenses incurred by a director
or officer in his or her capacity as a director or officer (and not in any other
capacity in which service was or is rendered by such person while a director or
officer, including, without limitation, service to an employee benefit plan) in
advance of the final disposition of a Proceeding, will be made only upon
delivery to the Company of an undertaking by or on behalf of such director or
officer, to repay all amounts so advanced if it is ultimately determined that
such director or officer is not entitled to be indemnified under the Bylaws or
otherwise.
INDEMNIFICATION AGREEMENTS
It is anticipated that the Company will authorize, and Dial as the sole
stockholder of the Company will approve, indemnification agreements for each of
the Company's directors (each, an "Indemnification Agreement," and,
collectively, the "Indemnification Agreements"). The Indemnification Agreements
will, among other things, require the Company to indemnify the officers and
directors to the fullest extent permitted by law, and to advance to the
directors all related expenses, subject to reimbursement if it is subsequently
determined that indemnification is not permitted. The Company must also
indemnify and advance all expenses incurred by directors seeking to enforce
their rights under the Indemnification Agreements, and cover directors under the
Company's directors' liability insurance. Although the form of
56
<PAGE> 71
Indemnification Agreement offers substantially the same scope of coverage
afforded by provisions in the Certificate of Incorporation and the Bylaws, it
provides greater assurance to directors that indemnification will be available,
because, as a contract, it cannot be modified unilaterally in the future by the
Company Board or by the stockholders to eliminate the rights it provides, an
action that is possible with respect to the relevant provisions of the Bylaws,
at least as to prospective elimination of such rights.
There has not been in the past and there is not presently pending any
litigation or proceeding involving a director, officer, employee or agent of the
Company in which indemnification would be required or permitted by the new
Indemnification Agreements. In addition, the Company Board is not aware of any
threatened litigation or proceeding which may result in a claim for
indemnification under any Indemnification Agreement.
The DGCL provides that a contract between a corporation and a director
thereof is not void or voidable solely because the interested director is
present at the meeting authorizing the contract if the material facts relating
to the contract are known to the board of directors and the board of directors
in good faith authorizes the contract by the affirmative vote of a majority of
the disinterested directors, or the material facts relating to the contract are
known to the stockholders and the stockholders in good faith authorize the
contract, or the contract is fair to the corporation at the time it is
authorized or approved. It is anticipated that Dial will ratify and approve the
Company Board's authorization of the Indemnification Agreements.
57
<PAGE> 72
THE DIAL CORP CONSUMER PRODUCTS BUSINESS
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report........................................................... F-2
Combined Balance Sheet at December 30, 1995 and December 31, 1994...................... F-3
Statement of Combined Income for each of the three fiscal years in the period ended
December 30, 1995.................................................................... F-4
Statement of Combined Cash Flows for each of the three fiscal years in the period ended
December 30, 1995.................................................................... F-5
Notes to Combined Financial Statements................................................. F-6
Combined Balance Sheet at March 30, 1996 (Unaudited)................................... F-17
Statement of Combined Income for the thirteen weeks ended March 30, 1996 and
April 1, 1995 (Unaudited)............................................................ F-18
Statement of Combined Cash Flows for the thirteen weeks ended March 30, 1996 and April
1, 1995 (Unaudited).................................................................. F-19
Notes to Combined Financial Statements (Unaudited)..................................... F-20
</TABLE>
F-1
<PAGE> 73
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of The Dial Corp:
We have audited the accompanying combined balance sheet of The Dial Corp
Consumer Products Business as of December 30, 1995 and December 31, 1994, and
the related combined statements of income and cash flows for each of the three
fiscal years in the period ended December 30, 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such combined financial statements present fairly, in all
material respects, the financial position of The Dial Corp Consumer Products
Business as of December 30, 1995 and December 31, 1994, and the results of its
operations and its cash flows for each of the three fiscal years in the period
ended December 30, 1995 in conformity with generally accepted accounting
principles.
/s/ DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
Phoenix, Arizona
May 24, 1996
F-2
<PAGE> 74
THE DIAL CORP CONSUMER PRODUCTS BUSINESS
COMBINED BALANCE SHEET
(000 OMITTED)
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................ $ 5,884 $ 5,897
Receivables, less allowance of $3,826 and $3,898................. 39,647 93,167
Inventories...................................................... 153,813 155,806
Deferred income taxes............................................ 32,301 23,081
Other current assets............................................. 3,418 4,572
-------- --------
Total current assets..................................... 235,063 282,523
Property and equipment............................................. 201,076 261,005
Deferred income taxes.............................................. 26,881 4,302
Intangibles........................................................ 334,708 337,360
Other assets....................................................... 677 2,183
-------- --------
$798,405 $887,373
======== ========
LIABILITIES AND DIAL INVESTMENT AND ADVANCES
Current liabilities:
Short-term bank loans............................................ $ 317 $ 16
Trade accounts payable........................................... 79,502 99,815
Income taxes payable............................................. 2,765 23,003
Other current liabilities........................................ 106,266 102,951
Current portion of long-term debt................................ 550 550
-------- --------
Total current liabilities................................ 189,400 226,335
Long-term debt..................................................... 2,453 2,944
Pension and other benefits......................................... 103,137 95,498
Other liabilities.................................................. 7,185 6,893
Commitments and contingent liabilities (Notes K, L, M and N).......
Dial investment and advances....................................... 496,230 555,703
-------- --------
$798,405 $887,373
======== ========
</TABLE>
See Notes to Combined Financial Statements.
F-3
<PAGE> 75
THE DIAL CORP CONSUMER PRODUCTS BUSINESS
STATEMENT OF COMBINED INCOME
(000 OMITTED)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------------
DECEMBER 30, DECEMBER 31, DECEMBER 25,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Net sales............................................. $1,365,290 $1,511,362 $1,420,173
---------- ---------- ----------
Costs and expenses:
Cost of products sold............................... 709,176 745,963 701,884
Selling, general and administrative expenses........ 544,170 605,391 579,076
Restructuring charges and asset write-downs......... 135,600
---------- ---------- ----------
1,388,946 1,351,354 1,280,960
---------- ---------- ----------
Operating income (loss)............................. (23,656) 160,008 139,213
Interest expense...................................... 23,360 12,468 5,909
---------- ---------- ----------
Income (loss) before income taxes..................... (47,016) 147,540 133,304
Income taxes (benefit)................................ (19,527) 56,468 49,123
---------- ---------- ----------
NET INCOME (LOSS)..................................... $ (27,489) $ 91,072 $ 84,181
========== ========== ==========
</TABLE>
See Notes to Combined Financial Statements.
F-4
<PAGE> 76
THE DIAL CORP CONSUMER PRODUCTS BUSINESS
STATEMENT OF COMBINED CASH FLOWS
(000 OMITTED)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------------
DECEMBER 30, DECEMBER 31, DECEMBER 25,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES:
Net income (loss)................................... $(27,489) $ 91,072 $ 84,181
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization.................... 29,118 34,910 33,583
Deferred income taxes............................ (34,733) 875 (5,253)
Restructuring charges and asset write-downs...... 135,600
Change in operating assets and liabilities:
Receivables.................................... 70,802 (23,453) (27,264)
Inventories.................................... 5,695 (542) (16,567)
Trade accounts payable......................... (22,356) 3,182 17,930
Other assets and liabilities, net.............. (66,329) (20,801) 2,896
-------- -------- ---------
Net cash provided by operating activities........... 90,308 85,243 89,506
-------- -------- ---------
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES:
Capital expenditures................................ (27,214) (37,471) (40,605)
Acquisitions of businesses, net of cash acquired.... (23,558) (79,000)
Proceeds from sales of property and equipment....... 7,099 1,313 667
-------- -------- ---------
Net cash used by investing activities............... (43,673) (36,158) (118,938)
-------- -------- ---------
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES:
Payments on long-term borrowings.................... (491) (495) (25,043)
Net change in short-term bank loans................. 301 (2,058) (396)
Net change in receivables sold...................... (14,290) (6,000) (15,000)
Cash transfers (to) from Dial, net.................. (32,168) (35,829) 67,977
-------- -------- ---------
Net cash provided (used) by financing activities.... (46,648) (44,382) 27,538
-------- -------- ---------
Net (decrease) increase in cash and cash
equivalents...................................... (13) 4,703 (1,894)
Cash and cash equivalents, beginning of year........ 5,897 1,194 3,088
-------- -------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR................ $ 5,884 $ 5,897 $ 1,194
======== ======== =========
</TABLE>
See Notes to Combined Financial Statements.
F-5
<PAGE> 77
THE DIAL CORP CONSUMER PRODUCTS BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS
FISCAL YEARS ENDED DECEMBER 30, 1995, DECEMBER 31, 1994
AND DECEMBER 25, 1993
A. BASIS OF PRESENTATION, DESCRIPTION OF BUSINESS AND RELATED INFORMATION.
On February 15, 1996, The Dial Corp ("Dial") announced that its Board of
Directors had approved a proposal for a strategic restructuring which would
separate Dial's consumer products and services businesses so that each would
become an independent and more focused publicly traded company. Common
stockholders of Dial are expected to receive a special dividend of one share of
the consumer products company for each Dial common share owned on the record
date (the "Distribution").
The Distribution is subject to final approval by the Dial Board of
Directors and to certain conditions, including the receipt of a ruling from the
Internal Revenue Service that the proposed transaction is tax-free and
confirmation that each of the two separate companies will retain
investment-grade credit ratings. The Distribution is expected to be completed in
the latter half of 1996.
Principles of Combination. The Combined Financial Statements present the
financial position, results of operations and cash flows of the divisions and
subsidiaries comprising the Consumer Products Business (the "Company") of Dial
as if the Company had been formed as a separate entity for all periods
presented. Dial's historical cost basis of the assets and liabilities have been
carried over to the Company. All material intercompany balances and transactions
among the entities comprising the Company have been eliminated. Per share data
for net income (loss) and dividends have not been presented, as the Company was
not a publicly held company during the periods presented.
Description of Business. The Company operates in a single business segment
which includes four product categories: Personal Care, Detergent, Household and
Food. Through the four product categories, the Company manufactures and markets
an array of brand-name consumer products such as DIAL liquid and bar soaps,
RENUZIT air fresheners, BRILLO cleaning pads, PUREX detergents, and ARMOUR STAR
canned meats, among others.
Products are produced in shared manufacturing plants or by contract
manufacturers, shipped from common distribution facilities and sold through a
national sales organization and brokers, principally in North America. Research
and administrative functions are centralized.
B. SIGNIFICANT ACCOUNTING POLICIES
The Combined Financial Statements are prepared in accordance with generally
accepted accounting principles, which require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
The Company's fiscal year ends on the last Saturday in December. Fiscal
years 1995 and 1993 consisted of 52 weeks and 1994 consisted of 53 weeks.
Revenue Recognition. Sales are recorded at the time products are shipped
to trade customers.
Major Customers. Major customers are defined as those which individually
accounted for more than 10% of the Company's sales. Sales to a major customer
accounted for 11%, 12% and 9% of the Company's combined sales in 1995, 1994 and
1993, respectively.
Marketing and Research and Development Costs. All expenditures for
marketing and research and development are charged against earnings in the year
incurred and are reported in the Statement of Combined Income under the caption,
"Selling, general and administrative expenses." Marketing costs include the
costs of advertising and various sales promotional programs.
F-6
<PAGE> 78
THE DIAL CORP CONSUMER PRODUCTS BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Cash Equivalents. The Company considers all highly liquid investments with
original maturities of three months or less from date of purchase as cash
equivalents.
Inventories. Generally, inventories are stated at the lower of cost
(first-in, first-out and average cost methods) or market.
Impairment of Long-Lived Assets. In the fourth fiscal quarter of 1995, the
Company elected the early adoption of Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of." The adoption of SFAS No. 121 had
no material effect on the combined financial statements. SFAS No. 121
establishes the accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets which are
to be held and used and for long-lived assets and certain identifiable
intangibles which are to be disposed of.
In accordance with the provisions of SFAS No. 121, the Company reviews the
carrying values of its long-lived assets and identifiable intangibles for
possible impairment whenever events or changes in circumstances indicate that
the carrying amount of assets to be held and used may not be recoverable. SFAS
No. 121 requires that for assets to be held and used, if the sum of the expected
future undiscounted cash flows is less than the carrying amount of the asset, an
impairment loss should be recognized, measured as the amount by which the
carrying amount exceeds the fair value of the asset. For assets to be disposed
of, the Company reports long-lived assets and certain identifiable intangibles
at the lower of carrying amount or fair value less cost to sell.
Property and Equipment. Property and equipment are stated at cost, net of
impairment write-downs.
Depreciation is provided principally by use of the straight-line method at
annual rates as follows:
<TABLE>
<S> <C>
Buildings.................................... 2% to 5%
Machinery and other equipment................ 5% to 33%
Leasehold improvements....................... Lesser of lease term or useful life
</TABLE>
Intangibles. Intangibles are carried at cost less accumulated
amortization. Intangibles which arose prior to November 1, 1970, as a result of
Dial's initial investment in the Company, are not being amortized. Intangibles
arising on or after November 1, 1970 are amortized on the straight-line method
over the estimated lives or periods of expected benefit, but not in excess of 40
years. The Company evaluates the carrying value of goodwill and other intangible
assets at each reporting period for possible impairment in accordance with the
provisions of SFAS No. 121 described above. Prior to the adoption of SFAS No.
121, the Company evaluated the possible impairment of goodwill and other
intangible assets based on the undiscounted projected operating income of the
related business unit.
Pension and Other Benefits. Trusteed, noncontributory pension plans cover
substantially all employees, with benefit levels supplemented in most cases by
defined matching common stock contributions to employees' 401(k) plans. Defined
benefits are based primarily on final average salary and years of service.
Funding policies provide that payments to defined benefit pension trusts shall
be at least equal to the minimum funding required by applicable regulations.
The Company has defined benefit postretirement plans that provide medical
and life insurance for eligible retirees and dependents. The related
postretirement benefit liabilities are recognized over the period that services
are provided by employees.
Foreign Currency Translation. In accordance with SFAS No. 52, "Foreign
Currency Translation," the assets and liabilities of the Company's foreign
subsidiaries are translated into U.S. dollars at exchange rates in effect at the
balance sheet date, with resulting unrealized translation gains and losses
included in Dial
F-7
<PAGE> 79
THE DIAL CORP CONSUMER PRODUCTS BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
investment and advances. Income and expense items are converted into U.S.
dollars at average rates of exchange prevailing during the year.
Stock-Based Compensation. In October 1995, the Financial Accounting
Standards Board issued SFAS No. 123, "Accounting for Stock-Based Compensation."
SFAS No. 123 defines a fair value based method of accounting for an employee
stock option or similar equity instrument. As permitted by SFAS No. 123, the
Company has currently elected to continue to measure cost for its stock-based
compensation plans using the intrinsic value based method of accounting
prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees." Accordingly, beginning in 1996, the Company will be
required to make pro forma disclosures of net income and earnings per share, as
if the fair value based method of accounting defined in SFAS No. 123 had been
applied.
C. ACQUISITIONS OF BUSINESSES
The Company acquired a small foreign soap manufacturer in 1995 and an air
freshener line in 1993. Both acquisitions were accounted for as purchases. The
purchase prices, including acquisition costs, were allocated to the net tangible
and intangible assets acquired based on estimated fair values at the dates of
the acquisitions. The difference between the purchase prices and the related
fair values of net assets acquired represents goodwill which is being amortized
on a straight-line basis over 40 years. The fair value of patents and other
intangible assets included in the acquisitions is amortized over their estimated
useful lives. The results of the acquired operations have been included in the
Statement of Combined Income from the dates of acquisition. The results of
operations of the acquired businesses from the beginning of the year to the
dates of acquisition are not material.
Net cash paid, assets acquired and debt and other liabilities assumed in
all acquisitions for the fiscal years ended 1995 and 1993 were as shown in the
table below. There were no acquisitions of businesses in 1994.
<TABLE>
<CAPTION>
1995 1993
------- --------
(000 OMITTED)
<S> <C> <C>
Assets acquired:
Property and equipment........................................ $ 4,766 $ 4,500
Intangibles................................................... 10,515 77,363
Other assets.................................................. 10,361 14,687
Debt and other liabilities assumed.............................. (2,084) (17,550)
------- --------
Net cash paid................................................... $23,558 $ 79,000
======= ========
</TABLE>
D. RESTRUCTURING CHARGES AND ASSET WRITE-DOWNS
In the third fiscal quarter of 1995, the Company recorded restructuring and
other charges to provide for a business-based reorganization through plant
closings, workforce reductions and correction of certain product lines. The
Company is closing six plants (Clearing, Illinois; Burlington, Iowa; Auburndale,
Florida; Omaha, Nebraska; Memphis, Tennessee; and New Berlin, Wisconsin) and is
reducing its workforce by approximately 15 percent, or 700 people, substantially
all of whom are based in the plants to be closed. As of December 30, 1995, the
Clearing plant had been closed and sold, and the Consumer Products workforce had
been reduced by approximately 100 employees. The remaining actions are expected
to be completed by the end of 1996. Future earnings are expected to benefit from
efficiencies resulting from streamlining/consolidating product lines for the
remaining facilities through increased volume and reduced costs.
In conjunction with the restructuring, the recoverability of intangibles
was evaluated based on current projections of the undiscounted operating income
of the related business unit. Based upon these evaluations,
F-8
<PAGE> 80
THE DIAL CORP CONSUMER PRODUCTS BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
the carrying amount of certain intangibles, primarily trademarks, were
determined to be impaired and were written off as part of the third-quarter
charge.
Other asset write-downs primarily represent the excess of the net book
value of plants and equipment to be disposed of over estimated net recoveries.
Severance pay and benefits and exit costs (primarily facility closure costs)
have been recognized in accordance with Emerging Issues Task Force Issue No.
94-3, "Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)." As of December 30, 1995, severance and exit costs totaling
$1,800,000 and $11,500,000, respectively, had been paid and charged against
these reserves. Remaining severance and exit cost reserves of $24,800,000 are
believed to be adequate. These remaining obligations are expected to be paid
from cash provided by operating activities.
The total amount of charges recorded was $156,000,000 (before tax benefit),
of which $20,400,000 was charged to cost of products sold and $135,600,000 was
classified in the Statement of Combined Income under the caption, "Restructuring
charges and asset write-downs," as follows:
<TABLE>
<CAPTION>
(000 OMITTED)
<S> <C>
Asset write-downs:
Intangibles................................................... $ 10,500
Other assets.................................................. 87,000
Severance pay and benefits...................................... 14,800
Exit costs...................................................... 23,300
--------
135,600
Tax benefit..................................................... (53,500)
--------
Restructuring charges and asset write-downs..................... $ 82,100
========
</TABLE>
E. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 31,
1995 1994
------------ ------------
(000 OMITTED)
<S> <C> <C>
Raw materials and supplies................................. $ 42,659 $ 43,877
Work in process............................................ 8,495 5,035
Finished goods............................................. 102,659 106,894
-------- --------
Inventories................................................ $153,813 $155,806
======== ========
</TABLE>
F-9
<PAGE> 81
THE DIAL CORP CONSUMER PRODUCTS BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
F. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 31,
1995 1994
------------ ------------
(000 OMITTED)
<S> <C> <C>
Land....................................................... $ 5,475 $ 11,571
Buildings and leasehold improvements....................... 79,845 100,829
Machinery and other equipment.............................. 301,763 363,072
Construction in progress................................... 16,517 29,215
--------- ---------
403,600 504,687
Less accumulated depreciation.............................. (202,524) (243,682)
--------- ---------
Property and equipment..................................... $ 201,076 $ 261,005
========= =========
</TABLE>
G. INTANGIBLES
Intangibles consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 31,
1995 1994
------------ ------------
(000 OMITTED)
<S> <C> <C>
Goodwill(1)................................................ $233,854 $225,534
Trademarks................................................. 73,967 83,244
Customer list and other intangibles........................ 99,939 97,418
-------- --------
407,760 406,196
Less accumulated amortization.............................. (73,052) (68,836)
-------- --------
Intangibles................................................ $334,708 $337,360
======== ========
</TABLE>
- ---------------
(1) Includes $155,259,000 of goodwill which arose prior to November 1, 1970, and
is not being amortized.
H. OTHER CURRENT LIABILITIES
Other current liabilities consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 31,
1995 1994
------------ ------------
(000 OMITTED)
<S> <C> <C>
Accrued compensation....................................... $ 14,046 $ 21,060
Accrued trade promotions................................... 22,378 26,221
Severance and exit cost reserves........................... 24,800
Other...................................................... 45,042 55,670
-------- --------
Other current liabilities.................................. $106,266 $102,951
======== ========
</TABLE>
I. DEBT
Long-term debt at December 30, 1995 and December 31, 1994 consists of
Industrial Revenue Bonds at 6.75% interest, payable to 2003. Such long-term debt
was prepaid in March 1996 to permit the sale of the related facility. In
addition, the Company has certain foreign revolving credit loans from banks
under agreements which provide for credit of $6,625,000 (stated in U.S. dollar
equivalent), of which $317,000 and
F-10
<PAGE> 82
THE DIAL CORP CONSUMER PRODUCTS BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
$16,000 was outstanding at December 30, 1995 and December 31, 1994,
respectively, and is reflected in the accompanying Combined Balance Sheet under
the caption, "Short-term bank loans."
Interest paid was not significantly different from interest expense for
1995, 1994 and 1993.
J. INCOME TAXES
Dial generally credits or charges the U.S. operations of the Company an
amount equal to the tax reductions realized or tax payments made by Dial as a
result of including the Company's U.S. tax results and credits in Dial's
consolidated federal income tax return and Dial's state income tax returns.
Under Dial's policies, income taxes charged will not be more, and may be less,
than taxes determined on a separate return basis.
Deferred income tax assets (liabilities) included in the Combined Balance
Sheet related to the following:
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 31,
1995 1994
------------ ------------
(000 OMITTED)
<S> <C> <C>
Property and equipment..................................... $(21,938) $(38,323)
Pension and other employee benefits........................ 39,433 35,364
Provisions for losses...................................... 26,785 15,679
Amortization of intangibles................................ 7,087 4,016
Deferred state income taxes................................ 3,739 1,441
Other deferred income tax assets........................... 9,287 11,501
Other deferred income tax liabilities...................... (5,211) (2,295)
-------- --------
Deferred tax assets........................................ $ 59,182 $ 27,383
======== ========
</TABLE>
The combined provision (benefit) for income taxes consisted of the
following:
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- -------
(000 OMITTED)
<S> <C> <C> <C>
Current:
United States:
Federal......................................... $ 11,518 $48,019 $51,598
State........................................... 549 7,367 4,435
Foreign............................................ 3,139 207 (1,657)
-------- ------- -------
15,206 55,593 54,376
-------- ------- -------
Deferred:
United States:
Federal......................................... (28,057) 683 (4,749)
State........................................... (3,778) 192 (504)
Foreign............................................ (2,898)
-------- ------- -------
(34,733) 875 (5,253)
-------- ------- -------
Provision (benefit) for income taxes................. $(19,527) $56,468 $49,123
======== ======= =======
</TABLE>
Income taxes paid in 1995, 1994 and 1993 amounted to $32,237,000,
$67,550,000 and $30,849,000, respectively.
F-11
<PAGE> 83
THE DIAL CORP CONSUMER PRODUCTS BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of the provision for income taxes and the amount that
would be computed using statutory federal income tax rates was as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
(000 OMITTED)
<S> <C> <C> <C>
Computed income taxes (benefit) at statutory
federal income tax rate of 35%................... $(16,456) $51,639 $46,656
Nondeductible goodwill amortization................ 972 565 640
State income taxes (benefit)....................... (2,099) 4,913 2,555
Adjustment of deferred tax assets at January 1,
1993 for enacted change in tax rate.............. (535)
Other, net......................................... (1,944) (649) (193)
-------- ------- -------
Provision (benefit) for income taxes............... $(19,527) $56,468 $49,123
======== ======= =======
</TABLE>
United States and foreign income (loss) before income taxes was as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
(000 OMITTED)
<S> <C> <C> <C>
United States...................................... $(47,031) $145,960 $137,027
Foreign............................................ 15 1,580 (3,723)
------- -------- --------
Income (loss) before income taxes.................. $(47,016) $147,540 $133,304
======= ======== ========
</TABLE>
K. PENSION AND OTHER BENEFITS
The Company's employees have participated in Dial's incentive compensation,
pension, stock option and other benefit plans as described elsewhere herein. In
connection with the Distribution, the Company expects to adopt employee benefit
plans which are substantially similar to certain of the Dial plans.
Pension Benefits. The Company's U.S. employees have participated primarily
in Dial pension plans. Dial has maintained trusteed, noncontributory pension
plans covering substantially all U.S. based employees of the Company. Net
periodic pension cost is based on the provisions of SFAS No. 87, "Employers'
Accounting for Pensions."
Net periodic pension cost included the following components:
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- -------
(000 OMITTED)
<S> <C> <C> <C>
Service cost benefits earned during the period....... $ 4,483 $ 5,225 $ 4,218
Interest cost on projected benefit obligation........ 6,951 6,533 6,219
Actual return on plan assets - (gain) loss........... (14,841) 174 (5,721)
Net amortization and deferral........................ 8,973 (4,788) 1,292
Other items, primarily defined contribution and
multiemployer plans................................ 3,154 2,625 3,713
-------- ------- -------
Net pension cost..................................... $ 8,720 $ 9,769 $ 9,721
======== ======= =======
</TABLE>
Weighted average assumptions used were:
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
Discount rate for obligation......................... 8.0% 8.5% 7.75%
Rate of increase in compensation levels.............. 5.0% 5.0% 5.0%
Long-term rate of return on assets................... 9.5% 9.5% 9.5%
</TABLE>
F-12
<PAGE> 84
THE DIAL CORP CONSUMER PRODUCTS BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The following table indicates the plans' funded status and amounts
recognized in the Company's Combined Balance Sheet:
<TABLE>
<CAPTION>
UNDERFUNDED AND
OVERFUNDED PLANS UNFUNDED PLANS
----------------------------- -----------------------------
DECEMBER 30, DECEMBER 31, DECEMBER 30, DECEMBER 31,
1995 1994 1995 1994
------------ ------------ ------------ ------------
(000 OMITTED)
<S> <C> <C> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefit obligation............. $ 40,179 $ 35,450 $ 24,661 $ 21,349
======= ======== ======== =======
Accumulated benefit obligation........ $ 45,550 $ 40,434 $ 28,585 $ 25,639
======= ======== ======== =======
Projected benefit obligation.......... $ 65,392 $ 56,929 $ 35,663 $ 27,375
Market value of plan assets, primarily
equity and fixed income securities
(1)................................... 58,546 46,435 24,515 20,286
------- -------- -------- -------
Plan assets under projected benefit
obligation............................ (6,846) (10,494) (11,148) (7,089)
Unrecognized transition (asset)
obligation............................ (145) (163) 1,727 2,542
Unrecognized prior service cost
(reduction)........................... (748) (989) 6,665 2,531
Unrecognized net (gain) loss............ 2,047 6,106 (4,286) (3,257)
Additional minimum liability............ (143) (406)
------- -------- -------- -------
Accrued pension cost.................... $ (5,692) $ (5,540) $ (7,185) $ (5,679)
======= ======== ======== =======
</TABLE>
- ---------------
(1) Upon Distribution, assets will be transferred to the Company plans based
upon actuarial determinations made in conformity with regulatory
requirements with provision for reimbursement by Dial to the Company of an
amount equal to any shortfall from plan assets determined under SFAS No. 87.
Postretirement Benefits Other Than Pensions. The Company has defined
benefit postretirement plans that provide medical and life insurance for
eligible employees, retirees and dependents.
The status of the plans was as follows:
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 31,
1995 1994
------------ ------------
(000 OMITTED)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees................................................. $ 28,887 $ 27,862
Fully eligible active plan participants.................. 19,512 17,203
Other active plan participants........................... 38,089 39,077
------- -------
Accumulated postretirement benefit obligation.............. 86,488 84,142
Unrecognized prior service reduction....................... 2,410
Unrecognized net gain...................................... 7,272 5,850
------- -------
Accrued postretirement benefit cost........................ $ 96,170 $ 89,992
======= =======
Discount rate for obligation............................... 8.0% 8.5%
</TABLE>
The assumed health care cost trend rate used in measuring the 1995
accumulated postretirement benefit obligation was 12% gradually declining to 5%
by the year 2002 and remaining at that level thereafter for retirees below age
65, and 8.5% gradually declining to 5% by the year 2002 and remaining at that
level thereafter for retirees above age 65. This is a 0.5% decrease from the
trend rates used for 1995 and later years in 1994's valuations.
F-13
<PAGE> 85
THE DIAL CORP CONSUMER PRODUCTS BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
A one-percentage-point increase in the assumed health care cost trend rate
for each year would increase the accumulated postretirement benefit obligation
as of December 30, 1995 by approximately 17% and the ongoing annual expense by
approximately 21%.
The net periodic postretirement benefit cost includes the following
components:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------- ------
(000 OMITTED)
<S> <C> <C> <C>
Service cost-benefits attributed to service during the
period................................................ $2,979 $ 3,623 $2,687
Interest cost on the accumulated postretirement benefit
obligation............................................ 6,695 6,572 6,406
Net amortization and deferral........................... (233)
------ ------- ------
Net periodic postretirement benefit cost................ $9,441 $10,195 $9,093
====== ======= ======
</TABLE>
L. LEASES
One plant, certain offices and equipment are leased. The leases expire in
periods ranging generally from one to five years and some provide for renewal
options ranging from one to eight years. Leases which expire are generally
renewed or replaced by similar leases. Net rent expense paid in 1995, 1994 and
1993 totaled $3,234,000, $3,319,000 and $3,249,000, respectively.
At December 30, 1995, the Company's future minimum rental payments with
respect to noncancellable operating leases with terms in excess of one year were
as follows: $3,760,000 (1996), $1,893,000 (1997), $1,146,000 (1998), $442,000
(1999) and $154,000 (2000).
M. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND FAIR VALUE OF FINANCIAL
INSTRUMENTS
Financial Instruments with Off-Balance-Sheet Risk. At December 30, 1995,
Dial had an agreement to sell undivided participating interests in a defined
pool of trade accounts receivable from customers of the Company and other Dial
businesses in an amount not to exceed $140,000,000 as a means of accelerating
cash flow. From time to time, as collections reduce accounts receivable included
in the pool, Dial sells participating interests in new receivables. The
Company's expenses of selling receivables amounted to approximately $2,323,000,
$3,941,000 and $3,341,000 in 1995, 1994 and 1993, respectively, and are included
in the Statement of Combined Income under the caption, "Selling, general and
administrative expenses." Under the terms of the agreement the Company has
retained substantially the same risk of credit loss as if the receivables had
not been sold as Dial is obligated to replace uncollectible receivables with new
accounts receivable. The Company's accounts receivable sold totaled $76,710,000
and $91,000,000 at December 30, 1995 and December 31, 1994, respectively. The
Company's average balance of accounts receivable sold approximated $33,500,000,
$79,700,000 and $89,000,000 during 1995, 1994 and 1993, respectively. The
agreement has a maturity date of the earlier of February 1997 or the date on
which the Company becomes a new publicly traded company, unless separate
replacement agreements are put in place.
Fair Value of Financial Instruments. The carrying values of cash and cash
equivalents, receivables, accounts payable and short-term bank loans approximate
fair values due to the short-term maturities of these instruments. As disclosed
in Note I of Notes to Combined Financial Statements, the Company's long-term
debt was prepaid in March 1996.
N. LITIGATION AND CLAIMS
The Company is party to various legal actions, proceedings and pending
claims. Some of the foregoing involve, or may involve, compensatory, punitive or
other damages in material amounts. Litigation is subject to many uncertainties
and it is possible that some of the legal actions, proceedings or claims
referred to above
F-14
<PAGE> 86
THE DIAL CORP CONSUMER PRODUCTS BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
could be decided against the Company. Although the amount of liability at
December 30, 1995, with respect to these matters is not ascertainable, the
Company believes that any resulting liability will not materially affect the
Company's financial position or results of operations.
The Company is subject to various environmental laws and regulations of the
United States as well as of the states and other countries in whose
jurisdictions the Company has or had operations and is subject to certain
international agreements. As is the case with many companies, the Company faces
exposure to actual or potential claims and lawsuits involving environmental
matters. Although the Company is a party to certain environmental disputes, the
Company believes that any liabilities resulting therefrom, after taking into
consideration amounts already provided for, but exclusive of any potential
insurance recoveries, will not have a material adverse effect on the Company's
financial position or results of operations.
O. TRANSACTIONS WITH THE DIAL CORP
Dial provides office space and services to the Company, and Dial's
executive, financial, legal, tax and other corporate staff departments perform
certain services for the Company at charges which are intended to provide no
profit to Dial. Expenses incurred by Dial and allocated to its subsidiaries,
including the Company, are primarily determined based on specific identification
of the individual services and expense items or are allocated to individual
entities primarily based on assets, operating income or square footage.
Management is of the opinion that such methods of expense allocation are
reasonable. It is not practicable to estimate the expenses that would have been
incurred by the Company if it had been operated on a stand-alone basis.
Allocated expenses totaled $9,634,000, $11,233,000 and $10,849,000 for 1995,
1994 and 1993, respectively, and are included in the Statement of Combined
Income under the caption, "Selling, general and administrative expenses."
Interest expense charged to the Company by Dial was $21,821,000, $11,437,000 and
$1,961,000 for 1995, 1994 and 1993, respectively. The average balance of
interest-bearing advances from Dial was $240,221,000, $163,074,000 and
$46,610,000 for 1995, 1994 and 1993, respectively. Interest is charged by Dial
based on the prime lending rate.
An analysis of the activity in "Dial investment and advances" was as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
(000 OMITTED)
<S> <C> <C> <C>
Balance, beginning of year......................... $555,703 $502,199 $350,799
Net income (loss)................................ (27,489) 91,072 84,181
Unrealized translation gain (loss)............... 184 (1,739) (758)
Cash transfers (to) from Dial, net............... (32,168) (35,829) 67,977
-------- -------- --------
Balance, end of year............................... $496,230 $555,703 $502,199
======== ======== ========
</TABLE>
Pursuant to the Distribution, the Company and Dial will enter into several
agreements, including the Distribution Agreement, Tax Sharing Agreement, Lease
Agreement, Interim Services Agreement, and Aircraft Services Agreement.
Reference is made to the summaries of these agreements included elsewhere
herein.
F-15
<PAGE> 87
THE DIAL CORP CONSUMER PRODUCTS BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
P. CONDENSED COMBINED QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
FISCAL QUARTER FISCAL QUARTER FISCAL QUARTER FISCAL QUARTER
--------------------- --------------------- ---------------------- ---------------------
1995 1994 1995 1994 1995 1994 1995 1994
-------- -------- -------- -------- --------- -------- -------- --------
(000 OMITTED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales.............. $337,862 $330,340 $363,893 $408,115 $ 308,110 $363,399 $355,425 $409,508
======== ======== ======== ======== ======== ======== ======== ========
Gross profit........... $164,975 $167,418 $178,206 $211,867 $ 139,679 $183,586 $173,254 $202,528
======== ======== ======== ======== ======== ======== ======== ========
Operating income
(loss)(1)............ $ 33,802 $ 30,152 $ 51,134 $ 49,978 $(124,444) $ 40,427 $ 15,852 $ 39,451
======== ======== ======== ======== ======== ======== ======== ========
Net income (loss)(1)... $ 18,247 $ 16,662 $ 27,868 $ 28,553 $ (78,109) $ 22,820 $ 4,505 $ 23,037
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
- ---------------
(1) After deducting restructuring charges and asset write-downs of $135,600,000
($82,100,000 after-tax) in the 1995 third quarter.
F-16
<PAGE> 88
THE DIAL CORP CONSUMER PRODUCTS BUSINESS
COMBINED BALANCE SHEET
(UNAUDITED)
MARCH 30, 1996
(000 OMITTED)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents....................................................... $ 4,326
Receivables, less allowance of $3,798........................................... 39,537
Inventories..................................................................... 159,270
Deferred income taxes........................................................... 31,585
Other current assets............................................................ 5,272
--------
Total current assets............................................................ 239,990
Property and equipment............................................................ 204,139
Deferred income taxes............................................................. 28,765
Intangibles....................................................................... 332,566
Other assets...................................................................... 572
--------
$806,032
========
LIABILITIES AND DIAL INVESTMENT AND ADVANCES
Current liabilities:
Short-term bank loans........................................................... $ 309
Trade accounts payable.......................................................... 87,685
Income taxes payable............................................................ 14,736
Other current liabilities....................................................... 91,791
--------
Total current liabilities....................................................... 194,521
Pension and other benefits........................................................ 105,024
Other liabilities................................................................. 7,243
Dial investment and advances...................................................... 499,244
--------
$806,032
========
</TABLE>
See Notes to Combined Financial Statements.
F-17
<PAGE> 89
THE DIAL CORP CONSUMER PRODUCTS BUSINESS
STATEMENT OF COMBINED INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
--------------------------------
MARCH 30, 1996 APRIL 1, 1995
-------------- -------------
(000 OMITTED)
<S> <C> <C>
Net sales......................................................... $352,392 $ 337,862
-------- --------
Costs and expenses:
Cost of products sold........................................... 173,350 172,887
Selling, general and administrative expenses.................... 142,700 131,173
-------- --------
316,050 304,060
-------- --------
Operating income.................................................. 36,342 33,802
Interest expense.................................................. 4,603 4,343
-------- --------
Income before income taxes........................................ 31,739 29,459
Income taxes...................................................... 12,131 11,212
-------- --------
NET INCOME........................................................ $ 19,608 $ 18,247
======== ========
</TABLE>
See Notes to Combined Financial Statements.
F-18
<PAGE> 90
THE DIAL CORP CONSUMER PRODUCTS BUSINESS
STATEMENT OF COMBINED CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
--------------------------------
MARCH 30, 1996 APRIL 1, 1995
-------------- -------------
(000 OMITTED)
<S> <C> <C>
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES:
Net income........................................................ $ 19,608 $ 18,247
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization................................... 7,330 9,058
Deferred income taxes........................................... (1,232) 2,532
Change in operating assets and liabilities:
Receivables.................................................. (1,099) 33,713
Inventories.................................................. (5,457) (2,923)
Trade accounts payable....................................... 8,183 (37,735)
Other assets and liabilities, net............................ (3,055) (27,004)
--------- ---------
Net cash provided (used) by operating activities.................. 24,278 (4,112)
--------- ---------
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES:
Capital expenditures.............................................. (8,034) (4,692)
Proceeds from sales of property and equipment..................... 125 137
--------- ---------
Net cash used by investing activities............................. (7,909) (4,555)
--------- ---------
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES:
Payments on long-term borrowings.................................. (3,003)
Net change in short-term bank loans............................... (8) 203
Net change in receivables sold.................................... 1,209 3,900
Cash transfers (to) from Dial, net................................ (16,125) 1,723
--------- ---------
Net cash provided (used) by financing activities.................. (17,927) 5,826
--------- ---------
Net decrease in cash and cash equivalents......................... (1,558) (2,841)
Cash and cash equivalents, beginning of year...................... 5,884 5,897
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD:......................... $ 4,326 $ 3,056
========= =========
</TABLE>
See Notes to Combined Financial Statements.
F-19
<PAGE> 91
THE DIAL CORP CONSUMER PRODUCTS BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
THIRTEEN WEEKS ENDED MARCH 30, 1996 AND APRIL 1, 1995
A. BASIS OF PRESENTATION
These financial statements should be read in conjunction with the financial
statements set forth in The Dial Corp Consumer Products Business Combined
Financial Statements and the notes thereto for each of the three years in the
period ended December 30, 1995. Accounting policies utilized in the preparation
of these financial statements are the same as set forth in such combined
Financial Statements except as modified for interim accounting policies which
are within the guidelines set forth in Accounting Principles Board Opinion No.
28,"Interim Financial Reporting."
The interim combined financial statements are unaudited. In the opinion of
management, all adjustments, consisting only of normal recurring accruals,
necessary to present fairly the financial position as of March 30, 1996, and the
results of operations and cash flows for the thirteen weeks ended March 30, 1996
and April 1, 1995, have been included. Interim results of operations are not
necessarily indicative of the results of operations for the year.
F-20
<PAGE> 92
ANNEX A
FORM OF
DISTRIBUTION AGREEMENT
BY AND AMONG
THE DIAL CORP,
A DELAWARE CORPORATION,
THE DIAL CORPORATION,
A DELAWARE CORPORATION,
AND
EXHIBITGROUP/GILTSPUR INC.,
A DELAWARE CORPORATION
<PAGE> 93
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
I. Definitions....................................................................... 1
1.01 General................................................................... 1
1.02 References to Time........................................................ 8
II. Certain Transactions Prior to the Distribution Date............................... 8
2.01 Share Purchase Rights Plan; Certificate of Incorporation; Bylaws.......... 8
2.02 Issuance of Stock......................................................... 8
2.03 Transfer of Assets and Assumption of Liabilities.......................... 8
2.04 Conduct of Business Pending the Distribution Date......................... 8
2.05 Refinancing............................................................... 8
2.06 Registration and Listing.................................................. 8
2.07 Merger.................................................................... 9
2.08 Name Change............................................................... 9
III. The Distribution.................................................................. 9
3.01 Record Date and Distribution Date......................................... 9
3.02 The Agent................................................................. 9
3.03 Delivery of Share Certificates to the Agent............................... 9
3.04 Distribution.............................................................. 9
IV. Survival, Assumption and Indemnification.......................................... 9
4.01 Survival of Agreements.................................................... 9
4.02 Taxes and Employee-Related Assets and Liabilities......................... 9
4.03 Assumption and Indemnification............................................ 10
4.04 Procedure for Indemnification............................................. 11
4.05 Remedies Cumulative....................................................... 12
V. Certain Additional Covenants...................................................... 12
5.01 Further Assurances........................................................ 12
5.02 Dial Consumer Products Board.............................................. 13
5.03 Continuing Contractual Arrangements....................................... 13
5.04 Intercompany Accounts..................................................... 13
5.05 Cash Accounts............................................................. 13
5.06 Other Agreements.......................................................... 13
5.07 Transfer Taxes............................................................ 13
5.08 Consumer Products Support Agreements...................................... 13
VI. Access to Information............................................................. 14
6.01 Provision of Corporate Records............................................ 14
6.02 Access to Information..................................................... 14
6.03 Production of Witnesses................................................... 14
</TABLE>
<PAGE> 94
TABLE OF CONTENTS (CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
6.04 Retention of Records...................................................... 14
6.05 Confidentiality........................................................... 14
VII. Employee Benefits................................................................. 15
7.01 Qualified Plans........................................................... 15
7.02 Supplemental Plans........................................................ 16
7.03 Deferred Compensation Plan................................................ 17
7.04 Welfare Plans............................................................. 17
7.05 Certain Armour Plans...................................................... 17
7.06 Stock Options; Restricted Stock........................................... 18
7.07 Dial Performance-Based Stock.............................................. 19
7.08 Dial ESOP................................................................. 19
7.09 Dial Employee Equity Trust................................................ 21
7.10 Dial Incentive Plans...................................................... 21
7.11 Severance Pay............................................................. 21
7.12 Directors' Plans.......................................................... 21
7.13 Dial Miscellaneous Plans; Post-Distribution Liabilities................... 23
7.14 Other Balance Sheet Adjustments........................................... 23
7.15 Preservation of Rights to Amend or Terminate Plans........................ 23
7.16 Reimbursement; Indemnification............................................ 23
7.17 Further Transfers......................................................... 23
7.18 Officers and Employees.................................................... 24
7.19 Employment Agreements..................................................... 24
7.20 Other Liabilities......................................................... 24
7.21 Compliance................................................................ 24
VIII. No Representations or Warranties; Exceptions...................................... 24
8.01 No Representations or Warranties; Exceptions.............................. 24
IX. Insurance......................................................................... 24
9.01 Insurance Policies and Rights Included Within Consumer Products Assets.... 24
9.02 Post-Distribution Date Claims............................................. 25
9.03 Administration and Reserves............................................... 25
9.04 Insurance Premiums........................................................ 25
9.05 Allocation of Insurance Proceeds; Cooperation............................. 25
9.06 Reimbursement of Expenses................................................. 25
9.07 Insurer Insolvency........................................................ 26
9.08 Letters of Credit......................................................... 26
9.09 No Reduction of Coverage.................................................. 26
9.10 Future Insurance Coverage................................................. 26
9.11 Assistance, Waiver of Conflict and Shared Defense......................... 26
</TABLE>
ii
<PAGE> 95
TABLE OF CONTENTS (CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
X. Miscellaneous..................................................................... 26
10.01 Conditions to Obligations................................................. 26
10.02 Complete Agreement........................................................ 27
10.03 Expenses.................................................................. 27
10.04 Governing Law............................................................. 28
10.05 Notices................................................................... 28
10.06 Amendment and Modification................................................ 28
10.07 Successors and Assigns; No Third-Party Beneficiaries...................... 28
10.08 Counterparts.............................................................. 28
10.09 Interpretation............................................................ 28
10.10 Legal Enforceability...................................................... 28
10.11 References; Construction.................................................. 29
10.12 Termination............................................................... 29
SIGNATURES............................................................................... 29
</TABLE>
EXHIBITS
A -- Aircraft Services Agreement between Dial and Dial Consumer Products
B -- Interim Services Agreement between Dial and Dial Consumer Products
C -- Lease Agreement with Dial Consumer Products
D -- Tax Sharing Agreement between Dial and Dial Consumer Products
E -- Trademark Letter of Understanding
F -- Form of Certificate of Incorporation of Dial Consumer Products
G -- Form of Bylaws of Dial Consumer Products
SCHEDULES
<TABLE>
<S> <C>
1.01(a) Collective Bargaining Agreements
1.01(b) Other Assets to be Transferred to Dial Consumer Products
1.01(c) Consumer Products Insurance Policies
1.01(d) Consumer Products Subsidiaries
1.01(e) Certain Dial Liabilities
1.01(f) Dial Miscellaneous Plans
1.01(g) Insurance Policies Relating to both Dial and Dial Consumer Products
1.01(h) Welfare Plans
7.01 Consumer Products Free-Standing Qualified Plans
</TABLE>
iii
<PAGE> 96
DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT, dated as of , 1996, by and among The Dial
Corp, a Delaware corporation ("Dial"), The Dial Corporation, a newly formed
Delaware corporation which is a wholly owned subsidiary of Dial ("Dial Consumer
Products") and Exhibitgroup/Giltspur Inc., a Delaware corporation and a wholly
owned subsidiary of Dial ("Exhibitgroup").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Dial and Dial Consumer Products have
determined that it is appropriate and desirable: (1) to consolidate into Dial
Consumer Products certain of the businesses currently conducted by Dial directly
and through certain of its subsidiaries and (2) to distribute to the holders of
the issued and outstanding shares of common stock, par value $1.50 per share, of
Dial all of the issued and outstanding shares of common stock, par value $0.01
per share, of Dial Consumer Products in accordance with Article III hereof (the
"Distribution");
WHEREAS, such Distribution is intended to qualify as a tax-free spinoff
under Section 355 of the Internal Revenue Code of 1986, as amended;
WHEREAS, in connection with the Distribution, (1) Exhibitgroup will merge
with and into Dial, with Dial being the surviving corporation and assuming all
of the rights and obligations of Exhibitgroup in accordance with Section 253 of
the Delaware General Corporation Law ("DGCL") (the "Exhibitgroup Merger") and
(2) LEN Inc., a wholly owned subsidiary of Dial, will merge with and into Dial,
with Dial being the surviving corporation and assuming all of the rights and
obligations of LEN Inc. in accordance with Section 253 of the DGCL, and, as a
result of such merger, the name of Dial will be changed as set forth in Section
2.08; and
WHEREAS, the parties hereto have determined that it is necessary and
desirable to set forth the principal corporate transactions required to effect
such Distribution and to set forth other agreements that will govern certain
other matters prior to or following such Distribution;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and intending to be legally bound thereby, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
1.01 GENERAL. As used in this Agreement, the following terms shall have
the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
Affiliate: with respect to any specified Person, a Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified Person;
provided, however, that for purposes of this Agreement, no member of either
Group shall be deemed to be an Affiliate of any member of the other Group.
Agent: Dial, which shall act as distribution agent to distribute the
shares of Dial Consumer Products Common Stock pursuant to the Distribution.
Aircraft Services Agreement: the Aircraft Services Agreement to be
entered into between Dial and Dial Consumer Products, in the form attached
hereto as Exhibit A, with such changes as may be mutually satisfactory to
Dial and Dial Consumer Products.
Asset: any and all assets and properties, tangible or intangible,
including the following: (1) cash, notes and accounts receivable (whether
current or non-current); (2) certificates of deposit, banker's acceptances,
stock, debentures, evidences of indebtedness, certificates of interest or
participation in profit-sharing agreements, collateral-trust certificates,
preorganization certificates or subscriptions, transferable shares,
investment contracts, voting-trust certificates, fractional undivided
interests in oil, gas or other
<PAGE> 97
mineral rights, puts, calls, straddles, options and other securities of any
kind; (3) trade secrets, confidential information, registered and
unregistered trademarks, service marks, service names, trade styles and
trade names, product bar codes and associated goodwill; statutory, common
law and registered copyrights; applications for any of the foregoing,
rights to use the foregoing and other rights in, to and under the
foregoing; (4) rights under leases, contracts, licenses, permits,
distribution arrangements, sales and purchase agreements, other agreements
and business arrangements; (5) real estate and buildings and other
improvements thereon; (6) leasehold improvements, fixtures, trade fixtures,
machinery, equipment (including transportation and office equipment),
tools, dies and furniture; (7) office supplies, production supplies, spare
parts, other miscellaneous supplies and other tangible property of any
kind; (8) raw materials, work-in-process, finished goods, consigned goods
and other inventories; (9) prepayments or prepaid expenses; (10) claims,
causes of action, choses in action, rights of recovery and rights of
set-off of any kind; (11) the right to receive mail, payments on accounts
receivable and other communications; (12) lists of advertisers, records
pertaining to advertisers and accounts, personnel records, lists and
records pertaining to suppliers and agents, and books, ledgers, files and
business records of every kind; (13) advertising materials and other
printed or written materials; (14) goodwill as a going concern and other
intangible properties; (15) employee contracts, including any rights
thereunder to restrict an employee from competing in certain respects; and
(16) licenses and authorizations issued by any governmental authority.
Assumed Armour Plans: those Plans of Armour and Company for which
Dial Consumer Products has agreed to indemnify Dial, pursuant to Section
7.05 of this Agreement.
Business Day: any day other than a Saturday, a Sunday or a day on
which banking institutions located in the States of Arizona, New York or
Delaware are authorized or obligated by law or executive order to close.
Claims Administration: the processing of claims made under the
Insurance Policies, including the reporting of claims to the insurance
carrier, management and defense of claims and providing for appropriate
releases upon settlement of claims.
Code: the Internal Revenue Code of 1986, as amended, or any successor
legislation and the regulations promulgated thereunder.
Collective Bargaining Agreement: any collective bargaining or other
labor agreement to which any member of either Group is a party, including
those listed on Schedule 1.01(a).
Consumer Products Assets: subject to the provisions of the Other
Agreements, (1) all of the Assets held by any member of either Group
immediately prior to the Distribution Date, which Assets are used or held
for use or necessary primarily in the operation of the Consumer Products
Business rather than the Dial Business, (2) all of the outstanding shares
of all classes of capital stock of the Consumer Products Subsidiaries and
(3) all of the Assets listed on Schedule 1.01(b).
Consumer Products Business: all of the businesses conducted
immediately prior to the Distribution Date by any member of either Group
and reported by Dial in the "Consumer Products" segment in the footnotes to
the Dial consolidated financial statements (or which would have been so
reported had it been conducted as of December 31, 1995) in the Annual
Report on Form 10-K for the year ended December 31, 1995.
Consumer Products Claim: any claim against any Consumer Products
Employee, Consumer Products Individual or member of the Consumer Products
Group with respect to any injury, loss, Liability, damage or expense that
(1) is or was incurred or asserted to have been incurred prior to the
Distribution Date in, or in connection with, the conduct of the Dial
Assets, the Consumer Products Assets, the Dial Business or the Consumer
Products Business and (2) arose or may have arisen out of one or more
occurrences or events that are or may be insured or insurable under one or
more of the Dial Policies.
Consumer Products Director: any individual who is a director of Dial
Consumer Products.
A-2
<PAGE> 98
Consumer Products Employee: any individual who (1) immediately prior
to the Distribution Date is an officer or employee of any member of either
Group and (a) is primarily employed in the Consumer Products Business or
(b) will be an employee of the Consumer Products Group immediately
following the Distribution or (2) immediately prior to the Distribution
Date is not an officer or employee of any member of either Group but at any
time prior to the Distribution Date was an officer or employee of any
member of either Group and throughout such period was primarily employed in
the Consumer Products Business.
Consumer Products Free-Standing Qualified Plans: The plans listed in
Schedule 7.01 hereto.
Consumer Products Group: Dial Consumer Products and the Consumer
Products Subsidiaries.
Consumer Products Individual: any individual who (1) is a Consumer
Products Employee or (2) is a beneficiary of any individual specified in
clause (1).
Consumer Products Liabilities: subject to the provisions of the Other
Agreements, all of the Liabilities of any member of either Group (1) which
relate directly to the Consumer Products Assets or the Consumer Products
Business as conducted immediately prior to the Distribution Date, whether
incurred or arising prior to, or after, the Distribution Date or (2) which
are specifically assumed by Dial Consumer Products under an express
provision of this Agreement.
Consumer Products Option Plan: a new Plan to be adopted by Dial
Consumer Products in connection with the Distribution, pursuant to which,
among other things, options to purchase, and restricted, shares of Dial
Consumer Products Common Stock may be granted to Consumer Products
Employees.
Consumer Products Plan: any Plan maintained or contributed to by any
member of either Group prior to the Distribution Date primarily for the
benefit of Consumer Products Employees.
Consumer Products Policies: all Insurance Policies, current and past,
which relate to the Consumer Products Business and do not relate to the
Dial Business, including the Insurance Policies listed on Schedule 1.01(c).
Consumer Products Qualified Plan: a Qualified Plan that (1) will be
sponsored or maintained by any member of the Consumer Products Group, (2)
will provide benefits for Consumer Products Individuals who, immediately
prior to the Cut-Off Date, are active or inactive participants in or
otherwise entitled to benefits under any Joint Qualified Plan or Consumer
Products Free-Standing Qualified Plan and (3) is expected to provide
benefits substantially identical to those provided by the Joint Qualified
Plan or Consumer Products Free-Standing Qualified Plan and in which such
Consumer Products Individual currently participates.
Consumer Products Restricted Stock: shares of Dial Consumer Products
Common Stock issued to an individual pursuant to the Consumer Products
Option Plan subject to forfeiture in the event that certain terms and
conditions are not satisfied.
Consumer Products Subsidiaries: all of the corporations listed on
Schedule 1.01(d).
Consumer Products Support Agreements: any obligation or agreement of
the Dial Group under any guarantee, letter of credit, letter of comfort or
working capital maintenance agreement obtained prior to the Distribution
Date for the benefit of the Consumer Products Business or any member of the
Consumer Products Group.
Current Plan Year: the plan year or fiscal year, to the extent
applicable with respect to any Plan, during which the Distribution Date
occurs.
Cut-Off Date: the last day of the calendar month immediately
preceding the Distribution Date or, if such day is less than 14 days before
the Distribution Date, the last day of the next preceding calendar month.
Deferred Compensation Plan: the Deferred Compensation Plan of Dial.
A-3
<PAGE> 99
DGCL: the Delaware General Corporation Law.
Dial: as defined in the recitals to this Agreement; provided that,
for periods from and after the Distribution, references herein to "Dial"
shall mean Dial as renamed: "Viad Corp".
Dial Assets: subject to the provisions of the Other Agreements, all
of the Assets, other than the Consumer Products Assets, held immediately
prior to the Distribution Date by any member of either Group.
Dial Business: all of the businesses, other than the Consumer
Products Business, conducted immediately prior to the Distribution Date by
any member of either Group.
Dial Common Stock: the common stock, par value $1.50 per share, of
Dial.
Dial Consumer Products: as defined in the recitals to this Agreement.
Dial Consumer Products Common Stock: the common stock, par value
$0.01 per share, of Dial Consumer Products.
Dial Director: any individual who is a director of Dial following the
Distribution.
Dial Employee: any individual who at any time prior to the
Distribution Date is or was an officer or employee of any member of any
Group, other than a Consumer Products Employee.
Dial Employee Equity Trust: The Dial Corp Employee Equity Trust.
Dial ESOP: The Dial Companies Employees' Stock Ownership Plan, a
Qualified Plan which is intended to meet the requirements of Section
4975(e)(7) of the Code.
Dial Group: Dial and its Affiliates, other than members of the
Consumer Products Group.
Dial Incentive Plan: The Dial Corp Management Incentive Plan, and The
Dial Corp Performance Unit Incentive Plan.
Dial Individual: any individual who (1) is a Dial Employee, (2) at
any time prior to the Distribution Date is or was an officer or employee of
any Former Dial Business or (3) is a beneficiary of any individual
specified in clause (1) or (2).
Dial Liabilities: subject to the provisions of the Other Agreements,
all of the Liabilities, other than the Consumer Products Liabilities, of
any member of either Group including, without limitation, all liabilities
specified on Schedule 1.01(e).
Dial Miscellaneous Plans: any Dial Plan other than (1) the Dial ESOP,
(2) the Dial Option Plan, (3) any Qualified Plan, (4) the Dial Supplemental
Plans, (5) the Deferred Compensation Plan, (6) any Welfare Plan, (7) any
Dial Incentive Plan, (8) any Plan that provides for the payment of
severance, salary continuation or similar benefits, (9) the Directors'
Plans, (10) the Dial Employee Equity Trust and (11) any Plan that is
governed by a Collective Bargaining Agreement. The Dial Miscellaneous Plans
include but are not limited to the Plans listed on Schedule 1.01(f).
Dial Option: an option to purchase shares of Dial Common Stock
granted pursuant to the Dial Option Plan, together with any stock
appreciation right or limited stock appreciation right issued in connection
therewith.
Dial Option Plan: the 1983 Stock Option and Incentive Plan of Dial
and The Dial Corp 1992 Stock Incentive Plan.
Dial Performance Based Stock: Dial Restricted Stock issued under the
Dial Corp 1992 Stock Incentive Plan subject to forfeiture if certain
performance-based conditions are not met.
Dial Plan: any Plan maintained or contributed to by any member of
either Group prior to the Distribution Date, other than a Consumer Products
Plan.
A-4
<PAGE> 100
Dial Policies: all Insurance Policies, current and past, which relate
to both the Dial Business and the Consumer Products Business, including the
Insurance Policies listed on Schedule 1.01(g).
Dial Restricted Stock: shares of Dial Common Stock issued to an
individual pursuant to the Dial Option Plan subject to forfeiture in the
event that certain terms and conditions are not satisfied.
Dial Supplemental Plans: The Dial Corp Supplemental Pension Plan and
The Dial Corp Supplemental TRIM Plan.
Directors' Plans: the Deferred Compensation Plan for Directors, the
Director's Retirement Benefit Plan and The Dial Corp Director's Charitable
Award Program.
Disclosure Document: the Registration Statement on Form 10 and the
related Information Statement.
Distribution: the distribution to holders of shares of Dial Common
Stock to be effected pursuant to Article III on the basis of one share of
Dial Consumer Products Common Stock for each share of Dial Common Stock
held of record as of the Record Date.
Distribution Date: the date, to be determined by the Board of
Directors of Dial, or the Executive Committee thereof, as of which the
Distribution shall be effected.
ERISA: the Employee Retirement Income Security Act of 1974, as
amended, or any successor legislation, and any regulations promulgated
thereunder.
Exchange Act: the Securities Exchange Act of 1934, as amended,
together with the rules and regulations promulgated thereunder.
Exhibitgroup Merger: as defined in the recitals to this Agreement.
Final Date: the fifteenth Business Day after the Distribution Date.
Foreign Exchange Rate: with respect to any currency other than United
States dollars as of any date, the average of the opening bid and asked
rates on such date at which such currency may be exchanged for United
States dollars as quoted by [ ], except that, with respect to any
Indemnifiable Loss covered by insurance, the Foreign Exchange Rate for such
currency shall be determined as set forth in Section 4.02(f)(2).
Former Dial Businesses: all of the businesses and operations, (1)
heretofore but not currently conducted by any member of the Dial Group or
(2) currently or heretofore conducted by any former Subsidiary of any such
member.
Gains Tax: the New York State Tax on Gains Derived from Certain Real
Property Transfers.
Group: the Dial Group or the Consumer Products Group.
Hewitt: Hewitt Associates, a human resources consulting firm.
Indemnifiable Losses: all losses, Liabilities, damages, claims,
demands, judgments or settlements of any nature or kind, known or unknown,
fixed, accrued, absolute or contingent, liquidated or unliquidated,
including all reasonable costs and expenses (legal, accounting or otherwise
as such costs are incurred) relating thereto, suffered by an Indemnitee.
Indemnifying Party: a Person who or which is obligated under this
Agreement to provide indemnification.
Indemnitee: a Person who may seek indemnification under this
Agreement.
Indemnity Payment: an amount that an Indemnifying Party is required
to pay to an Indemnitee pursuant to Article IV.
Information: all records, books, contracts, instruments, computer
data and other data and information.
A-5
<PAGE> 101
Information Statement: the Information Statement to be sent to the
holders of shares of Dial Common Stock in connection with the Distribution.
Insurance Administration: with respect to each Insurance Policy, (1)
the accounting for premiums (including retrospectively-rated premiums),
defense costs, indemnity payments, deductibles and retentions as
appropriate under the terms and conditions of each of the Insurance
Policies, (2) the reporting to excess insurance carriers of any losses or
claims which may cause the per-occurrence or aggregate limits of any
Insurance Policy to be exceeded and (3) the distribution of Insurance
Proceeds as contemplated by this Agreement.
Insurance Policy: insurance policies and insurance contracts of any
kind that are owned or maintained by any member of either Group as the
insured interest, including primary and excess policies, comprehensive
general liability policies, automobile, aircraft and workers' compensation
insurance policies, and self-insurance and captive insurance company
arrangements, together with the rights, benefits and privileges thereunder.
Insurance Proceeds: those monies received by an insured from an
insurance carrier or paid by an insurance carrier on behalf of the insured,
in either case net of any applicable premium adjustment,
retrospectively-rated premium, deductible, retention, cost or reserve paid
or held by or for the benefit of such insured.
Insured Claims: those Liabilities that, individually or in the
aggregate, are covered within the terms and conditions of any of the
Insurance Policies, whether or not subject to deductibles, coinsurance,
uncollectability or retrospectively-rated premium adjustments, but only to
the extent that such Liabilities are within applicable Insurance Policy
limits, including aggregates.
Interim Services Agreement: an interim services agreement between
Dial and Dial Consumer Products to be entered into prior to the
Distribution Date, in the form attached hereto as Exhibit B, with such
changes as may be satisfactory to Dial and Dial Consumer Products,
providing for (1) the Dial Group to make available certain personnel and
services to the Consumer Products Group and (2) the Consumer Products Group
to make available certain personnel and services to the Dial Group, in each
case for a period of time following the Distribution Date.
IRS: the Internal Revenue Service.
Joint Defined Benefit Plan: the Dial Companies Retirement Income
Plan.
Joint Qualified Plan: the Joint Defined Benefit Plan or the Joint
Savings Plan.
Joint Savings Plan: the Dial Companies Capital Accumulation Plan.
Lease Agreement: a lease agreement between an Affiliate of Dial and
Dial Consumer Products to be entered into prior to the Distribution Date,
in the form attached hereto as Exhibit C, with such changes as may be
mutually satisfactory to Dial and Dial Consumer Products, pursuant to which
Dial Consumer Products will lease from such Affiliate of Dial certain
premises located at Dial Tower, 1850 North Central Avenue, Phoenix, Arizona
85077.
Liabilities: all debts, liabilities and obligations, whether absolute
or contingent, matured or unmatured, liquidated or unliquidated, accrued or
unaccrued, known or unknown, whenever arising, and whether or not the same
would properly be reflected on a balance sheet, including all costs and
expenses relating thereto.
New Credit Facility: the credit facility to be entered into pursuant
to Section 5.04(a).
NYSE: the New York Stock Exchange, Inc.
Other Agreements: the Interim Services Agreement, the Sublease
Agreement, the Trademark Letter of Understanding, the Aircraft Services
Agreement and the Tax Sharing Agreement.
A-6
<PAGE> 102
Person: an individual, a partnership, a joint venture, a corporation,
a trust, an unincorporated organization or a government or any department
or agency thereof.
Plan: any plan, policy or arrangement or contract or agreement
providing benefits (including bonuses, deferred compensation, incentive
compensation, savings, stock purchases, pensions, profit sharing or
retirement or other retiree benefits, including retiree medical benefits)
for any group of employees or former employees or individual employee or
former employee, or the beneficiary or beneficiaries of any such employee
or former employee, whether formal or informal or written or unwritten and
whether or not legally binding, and including any means, whether or not
legally required, pursuant to which any benefit is provided by an employer
to any employee or former employee or the beneficiary or beneficiaries of
any such employee or former employee.
Prior Plan Year: to the extent applicable with respect to any Plan,
any plan year or fiscal year that ended on or prior to the Cut-Off Date.
Qualified Plan: a Plan which is an employee pension benefit plan
(within the meaning of Section 3(2) of ERISA) and which constitutes or is
intended in good faith to constitute a qualified plan under Section 401(a)
of the Code.
Record Date: the date to be determined by the Board of Directors of
Dial, or the Executive Committee thereof, as the record date for
determining stockholders of Dial entitled to receive the Distribution.
Registration Statement: a registration statement on Form 10 to effect
the registration of the Dial Consumer Products Common Stock pursuant to the
Exchange Act.
Representative: with respect to any Person, any of such Person's
directors, officers, employees, agents, consultants, advisors, accountants,
attorneys and representatives.
SEC: the Securities and Exchange Commission.
Securities Act: the Securities Act of 1933, as amended, together with
the rules and regulations promulgated thereunder.
Service Agreement: any third-party administrator or claims handling
agreement of any kind or nature to which any member of either Group is
directly or indirectly a party, in effect as of the date hereof, related to
the handling of Consumer Products Claims.
Subsidiary: with respect to any specified Person, any corporation or
other legal entity of which such Person or any of its Subsidiaries controls
or owns, directly or indirectly, more than 50% of the stock or other equity
interest entitled to vote on the election of members to the board of
directors or similar governing body; provided, however, that for purposes
of this Agreement, (1) the Consumer Products Subsidiaries shall be deemed
to be Subsidiaries of Dial Consumer Products and (2) the Consumer Products
Subsidiaries shall not be deemed to be Subsidiaries of Dial or any of
Dial's Subsidiaries.
Tax: as defined in the Tax Sharing Agreement.
Tax Sharing Agreement: a tax sharing agreement between Dial and Dial
Consumer Products substantially in the form attached hereto as Exhibit D,
with such changes as may be mutually satisfactory to Dial and Dial Consumer
Products.
Third-Party Claim: any claim, suit, arbitration, inquiry, proceeding
or investigation by or before any court, any governmental or other
regulatory or administrative agency or commission or any arbitration
tribunal asserted by a Person who is not a party hereto.
Trademark Letter of Understanding: a letter of understanding with
respect to trademarks between Dial and Dial Consumer Products to be entered
into prior to the Distribution Date, in the form attached hereto as Exhibit
E, with such changes as may be mutually satisfactory to Dial and Dial
Consumer Products.
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Transfer Tax: the New York State Real Estate Transfer Tax and the New
York City Real Property Transfer Tax.
Welfare Plan: any Plan, including but not limited to the Plans listed
on Schedule 1.01(h), which is not a Qualified Plan and which provides
medical, health, disability, accident, life insurance, death, dental or
other welfare benefits, including any post-employment benefits or retiree
medical benefits.
1.02 REFERENCES TO TIME. All references in this Agreement to times of the
day shall be to New York City time.
ARTICLE II
CERTAIN TRANSACTIONS PRIOR TO THE DISTRIBUTION DATE
2.01 SHARE PURCHASE RIGHTS PLAN; CERTIFICATE OF INCORPORATION;
BYLAWS. Prior to the Distribution Date, Dial Consumer Products shall adopt a
share purchase rights plan in a form mutually agreeable to Dial and Dial
Consumer Products. Dial and Dial Consumer Products shall take all action
necessary so that, at the Distribution Date, the Certificate of Incorporation
and Bylaws of Dial Consumer Products shall be in the forms attached hereto as
Exhibits F and G, respectively.
2.02 ISSUANCE OF STOCK. Prior to or as of the Distribution Date, the
parties hereto shall take all steps necessary to reclassify the outstanding
shares of Dial Consumer Products Common Stock so that, except as otherwise
contemplated by this Agreement, immediately prior to or as of the Distribution
Date the number of shares of Dial Consumer Products Common Stock outstanding and
held by Dial shall equal the number of shares of Dial Common Stock outstanding
on the Record Date.
2.03 TRANSFER OF ASSETS AND ASSUMPTION OF LIABILITIES. Prior to the
Distribution Date, the parties hereto shall take all action necessary to
transfer to Dial Consumer Products, and to cause Dial Consumer Products to
assume, as the case may be, effective as of the Distribution Date, (1) all of
the shares of capital stock of the Consumer Products Subsidiaries held by the
Dial Group, (2) all of the right, title and interest of the Dial Group in the
Consumer Products Assets and (3) all of the Consumer Products Liabilities.
2.04 CONDUCT OF BUSINESS PENDING THE DISTRIBUTION DATE. Each of the
parties hereto agrees that from the date hereof until the Distribution Date,
except as otherwise contemplated by this Agreement, it will use its best efforts
to carry on the Consumer Products Business diligently in the ordinary course and
substantially in the same manner as heretofore conducted and to preserve intact
the business organization and goodwill of the Consumer Products Business
(including using its best efforts to cause its Subsidiaries to take such
actions).
2.05 REFINANCING. Each of the parties hereto agrees that it will use
reasonable efforts to arrange the New Credit Facility, and to obtain, prior to
the Distribution Date, all necessary consents, waivers or amendments to each
bank credit agreement, debt security or other financing facility to which it and
its Subsidiaries is a party or by which it or any of its Subsidiaries is bound,
or to refinance such agreement, security or facility, in each case on terms
satisfactory to Dial and Dial Consumer Products and to the extent necessary to
permit the Distribution to be consummated without any material breach of the
terms of such agreement, security or facility.
2.06 REGISTRATION AND LISTING. Prior to the Distribution Date:
(a) Dial and Dial Consumer Products shall prepare the Information
Statement and the Registration Statement. Dial Consumer Products shall file
the Registration Statement with the SEC. Dial and Dial Consumer Products
shall use reasonable efforts to cause the Registration Statement to become
effective under the Exchange Act as promptly as reasonably practicable.
Dial and Dial Consumer Products shall prepare the Information Statement;
and after the Registration Statement becomes effective, Dial shall mail the
Information Statement to the holders of Dial Common Stock as of the Record
Date.
(b) The parties hereto shall use their best efforts to take all such
action as may be necessary or appropriate under state securities and Blue
Sky laws in connection with the transactions contemplated by this
Agreement.
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(c) Dial and Dial Consumer Products shall prepare, and Dial Consumer
Products shall file and seek to make effective, an application for the
listing of the Dial Consumer Products Common Stock on the NYSE, subject to
official notice of issuance.
(d) The parties hereto shall cooperate in preparing, filing with the
SEC and causing to become effective any registration statements or
amendments thereto which are necessary or appropriate in order to effect
the transactions contemplated hereby or to reflect the establishment of, or
amendments to, any Plans contemplated hereby.
2.07 MERGER. Immediately prior to the Distribution Date, Exhibitgroup
shall be merged with and into Dial in accordance with, and with the effects set
forth in, Section 253 of the DGCL.
2.08 NAME CHANGE. Immediately following the Distribution, LEN Inc. shall
be merged with and into Dial in accordance with, and with the effects set forth
in, Section 253 of the DGCL, and, as a result of such merger, the name of Dial
shall be changed to "Viad Corp".
ARTICLE III
THE DISTRIBUTION
3.01 RECORD DATE AND DISTRIBUTION DATE. Subject to the satisfaction of
the conditions set forth in Section 10.01(a), the Board of Directors of Dial, or
the Executive Committee thereof, if so authorized by the Board of Directors,
shall establish the Record Date and the Distribution Date and any appropriate
procedures in connection with the Distribution.
3.02 THE AGENT. Prior to the Distribution Date, Dial, as Agent, shall
make appropriate arrangements for, among other things, the payment of the
Distribution to the holders of Dial Common Stock in accordance with this Article
III.
3.03 DELIVERY OF SHARE CERTIFICATES TO THE AGENT. Prior to or as of the
Distribution Date, Dial Consumer Products shall deliver to Dial, as Agent, a
share certificate representing all of the outstanding shares of Dial Consumer
Products Common Stock to be distributed in connection with the payment of the
Distribution. After the Distribution Date, upon the request of Dial, as Agent,
Dial Consumer Products shall provide all certificates for shares of Dial
Consumer Products Common Stock that the Agent shall require in order to effect
the Distribution.
3.04 DISTRIBUTION. Except as otherwise contemplated by this Agreement,
Dial, as Agent, shall distribute, as of the Distribution Date, one share of Dial
Consumer Products Common Stock in respect of each share of Dial Common Stock
held by holders of record of Dial Common Stock on the Record Date. All shares of
Dial Consumer Products Common Stock issued in the Distribution shall be duly
authorized, validly issued, fully paid and nonassessable.
ARTICLE IV
SURVIVAL, ASSUMPTION AND INDEMNIFICATION
4.01 SURVIVAL OF AGREEMENTS. All covenants and agreements of the parties
hereto contained in this Agreement shall survive the Distribution Date.
4.02 TAXES AND EMPLOYEE-RELATED ASSETS AND LIABILITIES. This Article IV
shall not be applicable to any Plan Assets or any Indemnifiable Losses or
Liabilities related to (1) Taxes which shall be governed by the Tax Sharing
Agreement or (2) the current or former employment of any Dial Individual or
Consumer Products Individual, or the compensation or benefits for any Dial
Director or Consumer Products Director, under any Plan or otherwise, which shall
be governed by Article VII hereof.
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4.03 ASSUMPTION AND INDEMNIFICATION.
(a) Subject to Section 4.02, the Tax Sharing Agreement and Article
VII, from and after the Distribution Date, Dial shall retain or assume, as
the case may be, and shall indemnify, defend and hold harmless each
Consumer Products Individual and each member of the Consumer Products
Group, and each of their Representatives and Affiliates, from and against,
(1) all liabilities for third party claims, and directly related insurance
premium increases, relating to, arising out of or due to, directly or
indirectly, the Distribution or to the service by any Consumer Products
Individual as an officer, director or employee of any member of the Dial
Group prior to the Distribution, except to the extent covered by insurance
and provided such indemnification would be permitted by law if such
officer, director or employee made a claim for indemnification, (2) all
Liabilities of the Dial Group under this Agreement or any of the Other
Agreements, and (3) all Indemnifiable Losses of any such Consumer Products
Individual, member of the Consumer Products Group, Representative or
Affiliate relating to, arising out of or due to, directly or indirectly,
the Dial Assets, the Dial Liabilities, the Dial Business, the Dial
Individuals or the Dial Group's Representatives, whether relating to or
arising out of occurrences prior to or after the Distribution Date. Dial's
indemnity under and pursuant to this Section 4.03(a) shall include, without
limitation, any liabilities incurred by Dial Consumer Products or any
member of the Consumer Products Group due to loss of insurance by Dial
Consumer Products or any member of the Consumer Products Group as a result
of any act or failure to act by Dial or any Dial Employee or any Dial Group
Representative in connection with the procurement by Dial of insurance for
Dial Consumer Products or any member of the Consumer Products Group or in
connection with Dial's failure to give any notice to the underwriters of
any such insurance.
(b) Subject to Section 4.02, the Tax Sharing Agreement and Article
VII, and except as specifically provided in Section 4.03(a), from and after
the Distribution Date, Dial Consumer Products shall assume, and shall
indemnify, defend and hold harmless each Dial Individual and each member of
the Dial Group, and each of their Representatives and Affiliates, from and
against, (1) all Liabilities of the Consumer Products Group under this
Agreement or any of the Other Agreements and (2) all Indemnifiable Losses
of any such Dial Individual, member of the Dial Group, Representative or
Affiliate relating to, arising out of or due to, directly or indirectly,
the Consumer Products Assets, the Consumer Products Liabilities, the
Consumer Products Business, the Consumer Products Employees or the Consumer
Products Group's Representatives, whether relating to or arising out of
occurrences prior to or after the Distribution Date.
(c) If an Indemnitee realizes a Tax benefit or detriment by reason of
having incurred an Indemnifiable Loss for which such Indemnitee receives an
Indemnity Payment from an Indemnifying Party or by reason of receiving an
Indemnity Payment, then such Indemnitee shall pay to such Indemnifying
Party an amount equal to the Tax benefit, or such Indemnifying Party shall
pay to such Indemnitee an additional amount equal to the Tax detriment
(taking into account any Tax detriment resulting from the receipt of such
additional amounts), as the case may be. If, in the opinion of counsel to
an Indemnifying Party reasonably satisfactory in form and substance to the
affected Indemnitee, there is a substantial likelihood that the Indemnitee
will be entitled to a Tax benefit by reason of an Indemnifiable Loss, the
Indemnifying Party promptly shall notify the Indemnitee and the Indemnitee
promptly shall take any steps (including the filing of such returns,
amended returns or claims for refunds consistent with the claiming of such
Tax benefit) that, in the reasonable judgment of the Indemnifying Party,
are necessary and appropriate to obtain any such Tax benefit. If, in the
opinion of counsel to an Indemnitee reasonably satisfactory in form and
substance to the affected Indemnifying Party, there is a substantial
likelihood that the Indemnitee will be subjected to a Tax detriment by
reason of an Indemnification Payment, the Indemnitee promptly shall notify
the Indemnifying Party and the Indemnitee promptly shall take any steps
(including the filing of such returns or amended returns or the payment of
Tax underpayments consistent with the settlement of any Liability for Taxes
arising from such Tax detriment) that, in the reasonable judgment of the
Indemnitee, are necessary and appropriate to settle any Liabilities for
Taxes arising from such Tax detriment. If, following a payment by an
Indemnitee or an Indemnifying Party pursuant to this Section 4.03(c) in
respect of a Tax benefit or detriment, there is an adjustment to the amount
of such Tax benefit or detriment, then each of Dial and Dial Consumer
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Products shall make appropriate payments to the other, including the
payment of interest thereon at the federal statutory rate then in effect,
to reflect such adjustments.
(d) The amount which an Indemnifying Party is required to pay to any
Indemnitee pursuant to this Section 4.03 shall be reduced (including
retroactively) by any Insurance Proceeds and other amounts actually
recovered by such Indemnitee in reduction of the related Indemnifiable
Loss, it being understood and agreed that each of Dial and Dial Consumer
Products shall use its best efforts to collect any such proceeds or other
amounts to which it or any of its Subsidiaries is entitled, without regard
to whether it is the Indemnifying Party hereunder. If an Indemnitee
receives an Indemnity Payment in respect of an Indemnifiable Loss and
subsequently receives Insurance Proceeds or other amounts in respect of
such Indemnifiable Loss, then such Indemnitee shall pay to such
Indemnifying Party an amount equal to the difference between (1) the sum of
the amount of such Indemnity Payment and the amount of such Insurance
Proceeds or other amounts actually received and (2) the amount of such
Indemnifiable Loss, adjusted (at such time as appropriate adjustment can be
determined) in each case to reflect any premium adjustment attributable to
such claim. Notwithstanding anything to the contrary in this Section 4.03,
each party's indemnity under this Section 4.03 shall include the increased
cost and expense of purchasing insurance against future losses, provided
and to the extent that such cost and expense is directly attributable to
Indemnifiable Losses.
(e) If any Indemnity Payment required to be made hereunder or under
any Other Agreement is denominated in a currency other than United States
dollars, the amount of such payment shall be translated into United States
dollars using the Foreign Exchange Rate for such currency determined in
accordance with the following rules:
(1) with respect to an Indemnifiable Loss arising from payment by a
financial institution under a guarantee, comfort letter, letter of
credit, foreign exchange contract or similar instrument, the Foreign
Exchange Rate for such currency shall be determined as of the date on
which such financial institution is reimbursed;
(2) with respect to an Indemnifiable Loss covered by insurance, the
Foreign Exchange Rate for such currency shall be the Foreign Exchange
Rate employed by the insurance company providing such insurance in
settling such Indemnifiable Loss with the Indemnifying Party; and
(3) with respect to an Indemnified Loss not described in clause (1)
or (2) of this Section 4.03(e), the Foreign Exchange Rate for such
currency shall be determined as of the date that notice of the claim
with respect to such Indemnifiable Loss is given to the Indemnitee.
4.04 PROCEDURE FOR INDEMNIFICATION.
(a) If any Indemnitee receives notice of the assertion of any
Third-Party Claim with respect to which an Indemnifying Party is obligated
under this Agreement to provide indemnification, such Indemnitee shall give
such Indemnifying Party notice thereof promptly after becoming aware of
such Third-Party Claim; provided, however, that the failure of any
Indemnitee to give notice as provided in this Section 4.04 shall not
relieve any Indemnifying Party of its obligations under this Article IV,
except to the extent that such Indemnifying Party is actually prejudiced by
such failure to give notice. Such notice shall describe such Third-Party
Claim in reasonable detail and, if practicable, shall indicate the
estimated amount of the Indemnifiable Loss that has been or may be
sustained by such Indemnitee.
(b) An Indemnifying Party, at such Indemnifying Party's own expense
and through counsel chosen by such Indemnifying Party (which counsel shall
be reasonably satisfactory to the Indemnitee), may elect to defend any
Third-Party Claim; provided, however, that such an election by the
Indemnifying Party shall be deemed an admission of its obligation to
indemnify the Indemnitee with respect to such Third-Party Claim. If an
Indemnifying Party elects to defend a Third-Party Claim, then, within ten
Business Days after receiving notice of such Third-Party Claim (or sooner,
if the nature of such Third-Party Claim so requires), such Indemnifying
Party shall notify the Indemnitee of its intent to do so, and such
Indemnitee shall cooperate in the defense of such Third-Party Claim. Such
Indemnifying Party shall pay such Indemnitee's reasonable out-of-pocket
expenses incurred in connection with such
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cooperation. After notice from an Indemnifying Party to an Indemnitee of
its election to assume the defense of a Third-Party Claim, such
Indemnifying Party shall not be liable to such Indemnitee under this
Article IV for any legal or other expenses subsequently incurred by such
Indemnitee in connection with the defense thereof; provided, however, that
such Indemnitee shall have the right to employ one law firm as counsel to
represent such Indemnitee (which firm shall be reasonably acceptable to the
Indemnifying Party) if, in such Indemnitee's reasonable judgment, either a
conflict of interest between such Indemnitee and such Indemnifying Party
exists in respect of such claim or there may be defenses available to such
Indemnitee which are different from or in addition to those available to
such Indemnifying Party, and in that event (1) the reasonable fees and
expenses of such separate counsel shall be paid by such Indemnifying Party
and (2) each of such Indemnifying Party and such Indemnitee shall have the
right to run its own defense in respect of such claim. If an Indemnifying
Party elects not to defend against a Third-Party Claim, or fails to notify
an Indemnitee of its election as provided in this Section 4.04 within the
period of ten Business Days described above, such Indemnitee may defend,
compromise and settle such Third-Party Claim; provided, however, that no
such Indemnitee may compromise or settle any such Third-Party Claim without
the prior written consent of the Indemnifying Party, which consent shall
not be withheld unreasonably. Notwithstanding the foregoing, the
Indemnifying Party shall not, without the prior written consent of the
Indemnitee, (1) settle or compromise any Third-Party Claim or consent to
the entry of any judgment which does not include as an unconditional term
thereof the delivery by the claimant or plaintiff to the Indemnitee of a
written release from all Liability in respect of such Third-Party Claim or
(2) settle or compromise any Third-Party Claim in any manner that may
adversely affect the Indemnitee.
4.05 REMEDIES CUMULATIVE. The remedies provided in this Article IV shall
be cumulative and shall not preclude assertion by any Indemnitee of any other
rights or the seeking of any other remedies against any Indemnifying Party.
ARTICLE V
CERTAIN ADDITIONAL COVENANTS
5.01 FURTHER ASSURANCES.
(a) In addition to the actions specifically provided for elsewhere in
this Agreement, each of the parties hereto shall use its best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done,
all things reasonably necessary, proper or advisable under applicable laws,
regulations and agreements to consummate and make effective the
transactions contemplated by this Agreement. Without limiting the
foregoing, each party hereto shall cooperate with the other parties, and
execute and deliver, or use its best efforts to cause to be executed and
delivered, all instruments, including instruments of conveyance, assignment
and transfer, and to make all filings with, and to obtain all consents,
approvals or authorizations of, any governmental or regulatory authority or
any other Person under any permit, license, agreement, indenture or other
instrument, and take all such other actions as such party may reasonably be
requested to take by any other party hereto from time to time, consistent
with the terms of this Agreement, in order to effectuate the provisions and
purposes of this Agreement and the transfers of Assets and Liabilities and
the other transactions contemplated hereby. If any such transfer of Assets
or Liabilities is not consummated prior to or at the Distribution Date,
then the party hereto retaining such Asset or Liability shall thereafter
hold such Asset in trust for the use and benefit of the party entitled
thereto (at the expense of the party entitled thereto), or shall retain
such Liability for the account of the party by whom such Liability is to be
assumed pursuant hereto, as the case may be, and shall take such other
action as may be reasonably requested by the party to whom such Asset is to
be transferred, or by whom such Liability is to be assumed, as the case may
be, in order to place such party, insofar as reasonably possible, in the
same position as if such Asset or Liability had been transferred as
contemplated hereby. If and when any such Asset or Liability becomes
transferable, such transfer shall be effected forthwith. The parties hereto
agree that, as of the Distribution Date, each party hereto shall be deemed
to have acquired complete and sole beneficial ownership of all of the
Assets, together with all
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rights, powers and privileges incident thereto, and shall be deemed to have
assumed in accordance with the terms of this Agreement all of the
Liabilities, and all duties, obligations and responsibilities incident
thereto, that such party is entitled to acquire or required to assume
pursuant to the terms of this Agreement.
(b) Without limiting the generality of Section 5.01(a), Dial, as the
sole stockholder of Dial Consumer Products and Exhibitgroup, shall ratify
any actions which are reasonably necessary or desirable to be taken by Dial
Consumer Products or Exhibitgroup to effectuate the transactions
contemplated by this Agreement in a manner consistent with the terms of
this Agreement, including the following: (1) the Exhibitgroup Merger and
(2) the preparation and implementation of appropriate Plans for Consumer
Products Employees.
5.02 DIAL CONSUMER PRODUCTS BOARD. Prior to, or simultaneously with, the
Distribution Date, Dial Consumer Products shall take such actions as are
necessary such that its Board of Directors is comprised of those individuals
named as directors in the Information Statement.
5.03 CONTINUING CONTRACTUAL ARRANGEMENTS. Notwithstanding anything in
this Agreement to the contrary, except as set forth in Sections 5.04 and 5.05,
to the extent that any member of either Group is now providing or selling, or in
the future may provide or sell, to any member of the other Group any services,
benefits or products pursuant to any written or oral agreement or understanding
whatsoever, such agreement or understanding shall not be deemed altered, amended
or terminated as a result of this Agreement or the consummation of the
transactions contemplated hereby.
5.04 INTERCOMPANY ACCOUNTS. Effective as of the Distribution Date:
(a) Dial shall borrow $280 million under a new $350 million bank
credit facility (the "New Credit Facility") which shall provide that upon
effectiveness of the Distribution, the obligations under the facility shall
be assigned to, and assumed by, Dial Consumer Products with the effect that
Dial shall have no further obligation thereunder;
(b) the amount borrowed by Dial shall be used to repay outstanding
third-party indebtedness of Dial;
(c) Dial Consumer Products shall assume from Dial, and indemnify Dial
from, all liabilities under the New Credit Facility; and
(d) all intercompany receivables, payables, loans or advances between
Dial and Dial Consumer Products shall be deemed contributed to capital and
thereby cancelled without the payment of any cash by either Dial or Dial
Consumer Products to the other.
5.05 CASH ACCOUNTS. The cash accounts on the Distribution Date of Dial and
each Dial Subsidiary and Dial Consumer Products and each Consumer Products
Subsidiary shall remain the property of each respective company or Subsidiary.
5.06 OTHER AGREEMENTS. Each of Dial and Dial Consumer Products shall use
reasonable efforts to enter into, or to cause the appropriate members of its
Group to enter into, the Other Agreements prior to the Distribution Date. If
there shall be a conflict between the provisions of this Agreement and the
provisions of the Other Agreements, the provisions of the Other Agreements shall
control.
5.07 TRANSFER TAXES. Dial shall pay any Gains Tax, Transfer Tax and
similar transfer Taxes in any jurisdiction (and any penalties and interest with
respect to such Taxes), which become payable in connection with the Distribution
on behalf of the stockholders of Dial or Dial Consumer Products. Dial shall
indemnify and hold harmless the stockholders of Dial and Dial Consumer Products
from and against any Liability with respect to such Taxes (including any
penalties, interest and reasonable professional fees). Dial shall prepare and
file any required returns with respect to such Taxes (including returns on
behalf of the stockholders of Dial and Dial Consumer Products).
5.08 CONSUMER PRODUCTS SUPPORT AGREEMENTS. Effective as of the
Distribution Date, Dial Consumer Products shall cause itself or one or more
members of the Consumer Products Group to be substituted in all
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respects for the Dial Group or any member thereof in respect of all Consumer
Products Support Agreements. Subsequent to the Distribution Date, with respect
to any uncancelled Consumer Products Support Agreement for which no substitution
has yet been effected, Dial Consumer Products shall indemnify the Dial Group
against any Liabilities under any such Consumer Products Support Agreement in
accordance with the provisions of Article IV.
ARTICLE VI
ACCESS TO INFORMATION
6.01 PROVISION OF CORPORATE RECORDS. Prior to or as promptly as
practicable after the Distribution Date, Dial shall deliver to Dial Consumer
Products all corporate books and records of the Consumer Products Group and
copies of all corporate books and records of the Dial Group relating to the
Consumer Products Assets, the Consumer Products Liabilities, or the Consumer
Products Business, including in each case all active agreements, active
litigation files and government filings. From and after the Distribution Date,
all books, records and copies so delivered shall be the property of Dial
Consumer Products.
6.02 ACCESS TO INFORMATION. From and after the Distribution Date, each of
Dial and Dial Consumer Products shall afford to the other and to the other's
Representatives reasonable access and duplicating rights during normal business
hours to all Information within such party's possession relating to such other
party's businesses, Assets or Liabilities, insofar as such access is reasonably
required by such other party. Without limiting the foregoing, Information may be
requested under this Section 6.02 for audit, accounting, claims, litigation and
Tax purposes, as well as for purposes of fulfilling disclosure and reporting
obligations.
6.03 PRODUCTION OF WITNESSES. After the Distribution Date, each of Dial
and Dial Consumer Products shall use reasonable efforts to make available to the
other, upon written request, its directors, officers, employees and agents as
witnesses to the extent that any such Person may reasonably be required (giving
consideration to business demands of such Persons) in connection with any legal,
administrative or other proceedings in which the requesting party may from time
to time be involved.
6.04 RETENTION OF RECORDS. Except as otherwise required by law or agreed
in writing, or as otherwise provided in the Tax Sharing Agreement, each of Dial
and Dial Consumer Products shall retain, for a period of at least ten years
following the Distribution Date, all significant Information in such party's
possession or under its control relating to the business, Assets or Liabilities
of the other party and, after the expiration of such ten-year period, prior to
destroying or disposing of any of such Information, (a) the party proposing to
dispose of or destroy any such Information shall provide no less than 30 days'
prior written notice to the other party, specifying the Information proposed to
be destroyed or disposed of, and (b) if, prior to the scheduled date for such
destruction or disposal, the other party requests in writing that any of the
Information proposed to be destroyed or disposed of be delivered to such other
party, the party proposing to dispose of or destroy such Information promptly
shall arrange for the delivery of the requested Information to a location
specified by, and at the expense of, the requesting party.
6.05 CONFIDENTIALITY. From and after the Distribution Date, each of Dial
and Dial Consumer Products shall hold, and shall use its reasonable best efforts
to cause its Affiliates and Representatives to hold, in strict confidence all
Information concerning the other party obtained by it prior to the Distribution
Date or furnished to it by such other party pursuant to this Agreement or the
Other Agreements and shall not release or disclose such Information to any other
Person, except its Representatives, who shall be bound by the provisions of this
Section 6.05; provided, however, that Dial and Dial Consumer Products may
disclose such Information to the extent that (a) disclosure is compelled by
judicial or administrative process or, in the opinion of such party's counsel,
by other requirements of law, or (b) such party can show that such Information
was (1) available to such party on a nonconfidential basis prior to its
disclosure by the other party, (2) in the public domain through no fault of such
party or (3) lawfully acquired by such party from other sources after the time
that it was furnished to such party pursuant to this Agreement or the Other
Agreements. Notwithstanding the foregoing, each of Dial and Dial Consumer
Products shall be deemed to have satisfied its obligations under this Section
6.05 with respect to any Information if it exercises the same care with regard
to such Information as it takes to preserve confidentiality for its own similar
Information.
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ARTICLE VII
EMPLOYEE BENEFITS
7.01 QUALIFIED PLANS.
(a) As soon as practicable after the date hereof and effective as of
the Cut-Off Date, Dial Consumer Products shall take, or cause to be taken,
all action necessary and appropriate to establish and administer one or
more Consumer Products Qualified Plans and to provide benefits thereunder
for all Consumer Products Individuals who, immediately prior to the Cut-Off
Date, were participants in or otherwise entitled to benefits under any
Joint Qualified Plan. Dial Consumer Products agrees that each such Consumer
Products Individual shall be, to the extent applicable, entitled, for all
purposes under any applicable Consumer Products Qualified Plan, to be
credited with the term of service and any accrued benefit or account
balance credited to such Consumer Products Individual as of the Cut-Off
Date under the terms of any applicable Joint Qualified Plan as if such
service had been rendered to Dial Consumer Products and as if such accrued
benefit or account balance had originally been credited to such Consumer
Products Individual under the Consumer Products Qualified Plan. Dial agrees
to provide Dial Consumer Products, as soon as practicable after the
Distribution Date (with the cooperation of Dial Consumer Products to the
extent that relevant information is in the possession of the Consumer
Products Group), with a list of the Consumer Products Individuals who were,
to the best knowledge of Dial, participants in or otherwise entitled to
benefits under each Joint Qualified Plan immediately prior to the Cut-Off
Date, together with a listing, if requested by Dial Consumer Products, of
each such Consumer Products Individual's term of service for eligibility
and vesting purposes under such Plan and a listing of each such Consumer
Products Individual's accrued benefit or account balance thereunder. Dial
shall, as soon as practicable after the Distribution Date, provide Dial
Consumer Products with such additional information (in the possession of
the Dial Group and not already in the possession of the Consumer Products
Group) as may be reasonably requested by Dial Consumer Products and
necessary in order for the Consumer Products Group to establish and
administer effectively any Consumer Products Qualified Plan.
(b) Dial agrees, as soon as practicable following the Distribution
Date, to direct the trustee of the trust funding the Joint Defined Benefit
Plan to transfer to the trustee or other funding agent of any applicable
Consumer Products Qualified Plan, in cash, securities, other property or a
combination thereof, as reasonably determined by Dial, an amount equal to
(A) plus (B) less (C), as adjusted by (D); where (A) equals the amount of
assets allocated to the Consumer Products Individuals under the Joint
Defined Benefit Plan as of the Cut-Off Date, in accordance with Section
4044 of ERISA as determined by Hewitt; where (B) equals the amount of all
contributions, if any, attributable to Consumer Products Individuals made
subsequent to the Cut-Off Date to such applicable Joint Defined Benefit
Plan through the date of complete transfer; where (C) equals aggregate
payments made from the trust relating to such applicable Joint Defined
Benefit Plan in respect of Consumer Products Individuals from the Cut-Off
Date through the date of complete transfer; and where (D) equals the amount
of the net earnings or losses, as the case may be, from the Cut-Off Date
through the date of transfer, on the average of the daily balances of (A),
(B) and (C) and based upon the actual rate of return earned by such
applicable Joint Defined Benefit Plan during such period. To the extent
that (A) is less than the portion of the Joint Defined Benefit Plan's
assets that are internally allocated by Dial to Consumer Products
Individuals as of the Cut-Off Date (consistent with Hewitt's past
determinations of assets for financial statement purposes), Dial will
transfer to Dial Consumer Products, from a source other than the trust
funding the Joint Defined Benefit Plan, an amount equal to the difference
plus interest at 9.5% per annum from the Cut-Off Date to the date of
transfer.
(c) Dial agrees, as soon as practicable following the Distribution
Date, to direct the trustee of the trust funding each Joint Qualified Plan
which is a Joint Savings Plan to transfer to the trustee or other funding
agent of any applicable Consumer Products Qualified Plan in cash,
securities or other property or a combination thereof, as reasonably
determined by Dial, an amount equal to the account balances as of the date
of transfer attributable to the participants and beneficiaries in such
Joint Savings Plan who are Consumer Products Individuals plus the portion
of any unallocated contributions and trust earnings
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attributable to such participants and beneficiaries who are Consumer
Products Individuals. To the extent practicable such transfers shall be
effected so as to preserve investment elections of the participants and
beneficiaries in each Joint Savings Plan.
(d) In connection with the transfers described in this Section 7.01,
Dial and Dial Consumer Products shall cooperate in making any and all
appropriate filings required under the Code or ERISA, and the regulations
thereunder, and any applicable securities laws and take all such action as
may be necessary and appropriate to cause such transfers to take place as
soon as practicable after the Distribution Date; provided, however, that
each such transfer shall not take place until as soon as practicable after
the later of (1) the expiration of a 30-day period following the date of
filing the required Forms 5310-A (or any successor form thereto) with the
IRS and (2) the earlier of (A) the receipt of a favorable IRS determination
letter with respect to the qualification of each applicable Consumer
Products Qualified Plan under Section 401(a) of the Code or (B) the receipt
by Dial of an opinion of counsel reasonably satisfactory in form and
substance to Dial and Dial Consumer Products to the effect that such
counsel believes each applicable Consumer Products Qualified Plan is
qualified under Section 401(a) of the Code. Dial and Dial Consumer Products
agree to provide to such counsel such information in the possession of the
Dial Group and the Consumer Products Group, respectively, as may be
reasonably requested by such counsel in connection with the issuance of
such opinion. Dial agrees, during the period ending with the date of
complete transfer of assets and liabilities to each such Consumer Products
Qualified Plan, to cause distributions in respect of terminated or retired
participants who are Consumer Products Individuals to be made, on behalf of
Dial Consumer Products, from the relevant Joint Qualified Plan in
accordance with applicable law and pursuant to plan provisions.
(e) Dial and Dial Consumer Products shall take, or cause to be taken,
all such action as may be necessary or appropriate in order to establish
Dial Consumer Products or one or more members of the Consumer Products
Group, as appropriate, as successor to all rights, assets, duties,
Liabilities and obligations as of the Distribution Date under, or with
respect to, each Consumer Products Free-Standing Qualified Plan. Dial
agrees that, prior to the Distribution Date or as soon as practicable
thereafter, it shall provide Dial Consumer Products with all information
(in the possession of the Dial Group and not already in the possession of
the Consumer Products Group) as may be reasonably requested by Dial
Consumer Products and necessary for the Consumer Products Group to
administer effectively such Consumer Products Free-Standing Qualified Plan.
(f) Except as specifically set forth in this Section 7.01, from and
after the Distribution Date, (1) the Dial Group shall cease to have any
liability or obligation whatsoever with respect to Consumer Products
Individuals under the Joint Qualified Plans, and Dial Consumer Products
shall assume or retain, as the case may be, and shall be solely responsible
for, all liabilities and obligations whatsoever of either Group with
respect to Consumer Products Individuals under the Joint Qualified Plans
and shall be solely responsible for all liabilities and obligations
whatsoever under the Dial Consumer Products Qualified Plans and (2) the
Dial Group shall cease to have any liability or obligation whatsoever under
the Consumer Products Free-Standing Qualified Plans and Dial Consumer
Products shall assume or retain, as the case may be, and shall be solely
responsible for, all liabilities and obligations whatsoever of either group
under the Consumer Products Free-Standing Plans; provided, however, that
Dial shall either be responsible for or make all required contributions, no
later than the later of the Distribution Date and the date such
contributions are legally required to be made (A) in respect of Consumer
Products Individuals with respect to each Joint Qualified Plan and (B) with
respect to all participants in the Consumer Products Free-Standing
Qualified Plans in each case for all Prior Plan Years and for the portion
of the Current Plan Year ending on the Cut-Off Date, to the extent not
previously made.
7.02 SUPPLEMENTAL PLANS. As of the Distribution Date, Dial Consumer
Products shall assume or retain, or cause one or more members of the Consumer
Products Group to assume or retain, as the case may be, and shall be solely
responsible for, all liabilities and obligations whatsoever of either Group
whether or not incurred prior to the Distribution Date in connection with claims
under any Dial Supplemental Plan in respect of any Consumer Products Individual
and the Dial Group shall cease to have any such liability or obligation.
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7.03 DEFERRED COMPENSATION PLAN. As of the Distribution Date, Dial
Consumer Products shall assume or retain, or cause one or more members of the
Consumer Products Group to assume or retain, as the case may be, and shall be
solely responsible for, all liabilities and obligations whatsoever of either
Group whether or not incurred prior to the Distribution Date in connection with
claims under the Deferred Compensation Plan in respect of any Consumer Products
Individual and the Dial Group shall cease to have any such liability or
obligation.
7.04 WELFARE PLANS.
(a) As of the Distribution Date, Dial Consumer Products shall assume
or retain, or cause one or more members of the Consumer Products Group to
assume or retain, as the case may be, and shall be solely responsible for,
or cause its insurance carriers to be responsible for all liabilities and
obligations whatsoever of either Group whether or not incurred prior to the
Distribution Date in connection with claims under any Welfare Plan
(including any Welfare Plan providing for post-retirement or retiree
medical benefits) in respect of any Consumer Products Individual and the
Dial Group shall cease to have any liability or obligation with respect
thereto.
(b) Dial Consumer Products shall take, or cause to be taken, all
actions necessary and appropriate on behalf of itself and the Consumer
Products Group (1) to assume any existing Welfare Plan of either Group,
which Welfare Plan, as of the Distribution Date, provides benefits solely
for Consumer Products Individuals or (2) otherwise to adopt such Welfare
Plans as necessary to provide welfare benefits, effective as of the
Distribution Date, and to assume the liabilities and obligations to
Consumer Products Individuals which are or shall become the responsibility
of Dial Consumer Products to the extent specified in Section 7.04(a). For
this purpose, with respect to any Consumer Products Individual, Dial
Consumer Products or a member of the Consumer Products Group shall, to the
extent applicable, credit such Consumer Products Individual with term of
service and consider such Consumer Products Individual to have satisfied
any other eligibility criteria (including satisfaction of applicable
deductibles or coinsurance amounts) as of the Distribution Date as if such
service had been rendered to Dial Consumer Products or the member of the
Consumer Products Group and as if such eligibility criteria had been
satisfied while employed by Dial Consumer Products or the member of the
Consumer Products Group. In connection with the foregoing, Dial agrees to
provide Dial Consumer Products or its designated insurance representative
with such information (in the possession of the Dial Group and not already
in the possession of the Consumer Products Group) as may be reasonably
requested by Consumer Products and necessary for the Consumer Products
Group to assume or establish any such Welfare Plan.
(c) The Dial Group shall assume, or retain, all liabilities and
obligations whatsoever of either Group for benefits under any Welfare Plan
other than as set forth in Section 7.04(a) or Section 7.05.
7.05 CERTAIN ARMOUR PLANS.
(a) From and after the Distribution Date, Dial Consumer Products shall
indemnify Dial with respect to, or cause one or more members of the
Consumer Products Group to indemnify Dial with respect to, and shall be
responsible for, or cause its insurance carriers to be responsible for, all
Liabilities and obligations whatsoever of either Group whether or not
incurred prior to the Distribution Date in connection with the following
Plans of Armour and Company ("Armour"): (1) the Armour Pension Plan
Established 1952 (Inactive), (2) the Armour Supplemental/Transfer Pension
Plan, (3) the Armour Long-Term Disability Plan and (4) the Armour Retiree
Medical Benefits Plan (collectively, the "Assumed Armour Plans").
(b) Dial Consumer Products shall take, or cause to be taken, all
actions necessary and appropriate to establish Dial Consumer Products, or
one or more members of the Consumer Products Group, as appropriate, as
successor to all rights, assets, duties, Liabilities and obligations as of
the Distribution Date under, or with respect to, the Assumed Armour Plans.
For this purpose, with respect to any participant in an Assumed Armour
Plan, Dial Consumer Products or a member of the Consumer Products Group
shall, to the extent applicable, credit such participant with term of
service and consider such participant to have satisfied any other
eligibility criteria (including satisfaction of applicable deductibles or
coinsurance
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amounts) as of the Distribution Date as if such service had been rendered
to Dial Consumer Products or the member of the Consumer Products Group and
as if such eligibility criteria had been satisfied while employed by Dial
Consumer Products or the member of the Consumer Products Group. Dial shall
be responsible for, or make, any required contributions no later than the
later of the Distribution Date and the date such contributions are legally
required to be made with respect to all participants in any funded Assumed
Armour Plan, in each case for all Prior Plan Years and for the portion of
the Current Plan Year ending on the Cut-Off Date, to the extent not
previously made. In connection with the foregoing, Dial agrees to provide
Dial Consumer Products or its designated insurance representative with such
information (in the possession of the Dial Group and not already in the
possession of the Consumer Products Group) as may be reasonably requested
by Dial Consumer Products and necessary for the Consumer Products Group to
assume or establish any such Plan.
7.06 STOCK OPTIONS; RESTRICTED STOCK. Dial and Dial Consumer Products
shall cooperate and take all action necessary (including obtaining the consent
of the holders of Dial Options and Dial Restricted Stock (other than Dial
Performance-Based Stock which is covered in Section 7.07), if required) to amend
(if necessary), or otherwise provide for adjustments of outstanding awards
under, the Dial Option Plan, and to adopt the Consumer Products Option Plan, so
that:
(a) Effective immediately after the Distribution Date, the number of
shares of Dial Common Stock subject to, and the exercise price of, each
Dial Option which immediately prior to the Record Date is outstanding and
not exercised and is held by a Dial Individual shall be adjusted by Dial in
order to reflect the difference in the fair market value of the Dial Common
Stock attributable to the Distribution, in accordance with the requirements
of Section 424 of the Code and the regulations promulgated thereunder,
based upon (1) the average of the high and low trading prices on the NYSE
Composite Index for the Dial Common Stock on the last trading day prior to
the Distribution Date provided, however, that if the Dial Common Stock
trades ex-dividend prior to the Distribution, then the average of the high
and low trading prices on the last day on which Dial Common Stock is traded
regular way prior to the Distribution Date shall be used and (2) the
average of the high and low trading prices on the NYSE Composite Index for
the Dial Common Stock on the first trading day following the Distribution
Date on which Dial Common Stock is traded regular way on the NYSE.
(b) As of the Distribution Date, each Dial Option which immediately
prior to the Distribution Date is outstanding and not exercised and is held
by a Consumer Products Individual shall, without any action on the part of
the holder thereof, be converted into an option to purchase shares of Dial
Consumer Products Common Stock, with the number of shares of Dial Consumer
Products Common Stock subject to, and the exercise price of, such option to
be determined in accordance with the requirements of Section 424 of the
Code and the regulations promulgated thereunder, based upon (1) the average
of the high and low trading prices on the NYSE Composite Index for the Dial
Common Stock on the last trading day prior to the Distribution Date;
provided, however, that if the Dial Common Stock trades ex-dividend prior
to the Distribution, then the average of the high and low trading prices on
the last day on which Dial Common Stock is traded regular way prior to the
Distribution Date shall be used and (2) the average of the high and low
trading prices on the NYSE Composite Index for the Dial Consumer Products
Common Stock on the first trading day following the Distribution Date on
which the Dial Consumer Products Common Stock is traded regular way on the
NYSE. The exercise price of any such option shall be rounded to the nearest
whole cent; the number of shares subject to any such option shall be
rounded to the nearest share.
(c) As of the Distribution Date, the dividend escrow account of each
Dial Individual who immediately prior thereto is the holder of any shares
of Dial Restricted Stock shall be credited with a number of shares of Dial
Consumer Products Common Stock equal to the number of shares of Dial
Restricted Stock held of record in such dividend account as of the Record
Date. The Dial Consumer Products Common Stock so credited shall be held by
the Dial Individual, together with the Dial Restricted Stock, subject to
the same rights, obligations and restrictions as the Dial Restricted Stock.
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(d) As of the Distribution Date, each Consumer Products Individual who
immediately prior thereto is the holder of any shares of Dial Restricted
Stock shall be credited with a number of shares of Dial Consumer Products
Restricted Stock equal to the number of shares of Dial Restricted Stock
held by such Consumer Products Individual immediately prior to the
Distribution Date. To the extent such shares of Dial Restricted Stock were
held in The Dial Corp Restricted Stock Trust, a new identical trust shall
be established by Dial Consumer Products to which such shares shall be
transferred by the Dial Restricted Stock Trust. The Dial Restricted Stock
and Dial Consumer Products Restricted Stock shall be held by such Consumer
Products Individual subject to the rights, obligations and restrictions in
the restricted stock agreement theretofore applicable to the Dial
Restricted Stock, it being understood that the fact that such individual is
no longer an employee of Dial shall cause no forfeiture thereunder.
7.07 DIAL PERFORMANCE-BASED STOCK.
(a) As of the Distribution Date, each Dial Individual and each
Consumer Products Individual who immediately prior thereto is the holder of
an award of Dial Performance-Based Stock shall be credited with a number of
shares of Dial Consumer Products Common Stock equal to the number of shares
of Dial Common Stock subject to such award. The shares of Dial Consumer
Products Common Stock so credited shall be held by such individuals subject
to the same rights, obligations and restrictions as the Dial
Performance-Based Stock to which it relates, except that the adjustments
set forth in paragraph (b) of this Section 7.07 shall be made.
(b) Awards under the Dial Performance-Based Stock Plan outstanding as
of the Distribution Date held by Dial Individuals and Consumer Products
Individuals shall remain outstanding, using the same number of shares of
Dial Common Stock theretofore underlying the award plus an equal number of
shares of Dial Consumer Products Common Stock. For awards outstanding on
the Distribution Date, "performance" shall be measured by the combined
performance of the Dial Common Stock and the Dial Consumer Products Common
Stock through the remainder of the measuring period, using the comparator
groups in use immediately prior to the Distribution Date. The respective
Boards of Directors of Dial and Dial Consumer Products will determine
comparator groups for new awards to Dial Individuals and Dial Consumer
Products Individuals following the Distribution Date.
7.08 DIAL ESOP.
(a) Dial and Dial Consumer Products shall take all action necessary so
that, effective as of the Distribution Date, Dial Consumer Products may
establish a Consumer Products Qualified Plan (which may be the same Plan
that receives account balances of Consumer Products Individuals under the
Joint Savings Plan pursuant to Section 7.01(d)) to include therein all
Consumer Products Individuals who immediately prior to the Distribution
Date were participants in the Dial ESOP. The Consumer Products Qualified
Plan shall contain provisions deemed by Dial Consumer Products to be
necessary or appropriate to accept the transfer from the trust funding the
Dial ESOP of the account balances of Consumer Products Individuals. Each
Consumer Products Individual shall, for all purposes under the Consumer
Products Qualified Plan, be credited with the term of service and any
account balance credited to such Dial Consumer Products Individual as of
the Distribution Date under the terms of the Dial ESOP as if such service
had been rendered to the Consumer Products Group and as if such account
balance had originally been credited to such Consumer Products Individual
under the Consumer Products Qualified Plan. Dial shall amend the Dial ESOP
to the extent necessary to effectuate this Section 7.08. Dial shall provide
to Dial Consumer Products, as soon as practicable after the Distribution
Date (with the cooperation of Dial Consumer Products to the extent that
relevant information is in the possession of any member of the Consumer
Products Group) with a list of the Consumer Products Individuals who were,
to the best knowledge of Dial, participants in the Dial ESOP immediately
prior to the Distribution Date, together with a listing of each such
Consumer Products Individual's term of service for eligibility purposes
under the Dial ESOP and a listing of each such Consumer Products
Individual's account balance thereunder, together with such additional
information (in the possession of the Dial Group and not already in the
possession of the Consumer Products Group) as may be reasonably requested
by Dial
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Consumer Products and necessary in order for the Consumer Products Group
effectively to establish and administer the Consumer Products Qualified
Plan.
(b) Dial shall direct the trustee of the trust funding the Dial ESOP
to swap, or sell, in open-market transactions, all shares of Dial Consumer
Products Common Stock received by the Dial ESOP in the Distribution in
respect of unallocated shares of Dial Common Stock held by the Dial ESOP
and to reinvest the proceeds of such sale in Dial Common Stock as promptly
as practicable. Investments in Dial Common Stock may be made through open
market purchases, private transactions or (with Dial's consent) purchases
from Dial on an arm's-length basis.
(c) Shares of Dial Common Stock held by the Dial ESOP which have been
allocated to Dial Individuals ("Dial Participants") together with shares of
Dial Consumer Products Common Stock received with respect thereto in the
Distribution shall be retained in the Dial ESOP in the accounts of such
Dial participants or, if necessary, shall be transferred to the accounts of
such Dial Individuals in the Dial Companies Capital Accumulation Plan. Dial
Participants shall be given the opportunity during a specified period
following the Distribution Date to direct that such shares of Dial Consumer
Products Common Stock be sold and reinvested in Dial Common Stock.
(d) Dial shall direct the trustee of the trust funding the Dial ESOP
to transfer to the trustee or other funding agent of the Consumer Products
Qualified Plan, the aggregate account balances of the Consumer Products
Individuals as of the date of transfer, which shall include the number of
shares of Dial Common Stock in such account together with all shares of
Dial Consumer Products Common Stock received with respect thereto in the
Distribution plus that portion of any unallocated contributions and
earnings thereon which are attributable to the Consumer Products
Individuals, other than Dial Common Stock held in the Dial ESOP suspense
account. Participants in the Consumer Products Qualified Plan shall be
given the opportunity during a specified period following the Distribution
Date to direct that shares of Dial Common Stock held in their accounts be
sold and reinvested in Dial Consumer Products Common Stock.
(e) In connection with the transfers described in Section 7.08(d),
Dial and Dial Consumer Products shall cooperate in making any and all
appropriate filings required under the Code or ERISA, the regulations
thereunder and any applicable securities laws, and shall take all such
actions as may be necessary and appropriate to cause such transfers to take
place as soon as practicable after the Distribution Date; provided,
however, that such transfers shall not take place until as soon as
practicable after the later of (1) the expiration of a 30-day period
following the date of filing the required Forms 5310-A (or any successor
form thereto) with the IRS and (2) the earlier of (A) the receipt of a
favorable IRS determination letter with respect to the qualification of the
Consumer Products Qualified Plan under Section 401(a) of the Code or (B)
the receipt by Dial of an opinion of counsel reasonably satisfactory in
form and substance to Dial and Dial Consumer Products to the effect that
such counsel believes the Consumer Products Qualified Plan is qualified
under Section 401(a) of the Code. Dial and Dial Consumer Products agree to
provide to such counsel such information in the possession of the Dial
Group and the Consumer Products Group, respectively, as may be reasonably
requested by such counsel in connection with the issuance of such opinion.
(f) Except as specifically set forth in this Section 7.08, from and
after the Distribution Date, the Dial Group shall cease to have any
Liability with respect to Consumer Products Individuals under the Dial
ESOP, and the Consumer Products Group shall assume or retain, as the case
may be, and shall be solely responsible for, all Liabilities of either
Group with respect to Consumer Products Individuals under the Dial ESOP and
shall be solely responsible for all Liabilities under the Consumer Products
Qualified Plan. Notwithstanding the foregoing, Dial shall be solely
responsible for contributing or causing to be contributed, no later than
such time as may be required by law or such earlier time as may be required
under the Dial ESOP, an amount equal to the contribution which would have
been required to be made by the Dial Group in respect of Consumer Products
Individuals for any Prior Plan Year and for the Current Plan Year up to the
Distribution Date to the extent such contribution has not been previously
made.
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7.09 DIAL EMPLOYEE EQUITY TRUST.
Dial and Dial Consumer Products shall take all action necessary so that,
effective as of the Distribution Date, Dial Consumer Products may establish the
Consumer Products Employee Equity Trust to receive and hold for the benefit of
Consumer Products Individuals all shares of Dial Consumer Products Common Stock
received in the Distribution in respect of shares of Dial Common Stock held in
the Dial Employee Equity Trust. Dial shall amend the Dial Employee Equity Trust
to the extent necessary to effectuate this Section 7.09, including without
limitation to: (a) amend the promissory note from the Dial Employee Equity Trust
to Dial by providing for two notes (one from the Dial Employee Equity Trust to
Dial, the other from the Consumer Products Employee Equity Trust to Dial
Consumer Products) in amounts proportionate to the relative market
capitalizations of Dial and Dial Consumer Products immediately following the
Distribution and (b) adjust the amounts in Schedules B and C to the Dial
Employee Equity Trust in the same manner.
7.10 DIAL INCENTIVE PLANS.
(a) Dial shall be responsible for the payment of any liabilities and
obligations for benefits due and payable but unpaid as of and through the
Distribution Date under each Dial Incentive Plan with respect to any Prior
Plan Year (other than the Current Plan Year). Any deferred bonuses that
were earned with respect to any Prior Plan Year and are not paid as of the
Distribution Date shall be treated as benefits for the Current Plan Year in
accordance with Section 7.10(b).
(b) For any Current Plan Year under each Dial Incentive Plan, the Dial
Group shall be responsible for the payment of all liabilities and
obligations for benefits with respect to Dial Individuals, and the Consumer
Products Group shall be responsible for the payment of all liabilities and
obligations with respect to Consumer Products Individuals. Each of Dial and
Dial Consumer Products will, to the extent practicable, either continue
each such Dial Incentive Plan or adopt a new Plan in substitution therefor
and, in this connection, if necessary, adjust, in a manner equitable to
participants, any incentive goals contained in each Dial Incentive Plan or
such new Plan to reflect the Distribution.
(c) For purposes of the Dial Incentive Plans, individuals who, in
connection with the Distribution, cease to be employees of Dial and become
Dial Consumer Products Employees shall not be deemed to have terminated
employment for purposes of any deferral elections made by such individuals,
and service with Dial Consumer Products shall be deemed continuous service
with Dial.
7.11 SEVERANCE PAY.
(a) Dial and Dial Consumer Products agree that, with respect to
individuals who, in connection with the Distribution, cease to be employees
of the Dial Group and become employees of the Consumer Products Group, such
cessation shall not be deemed a severance of employment from either Group
for purposes of any Plan that provides for the payment of severance, salary
continuation or similar benefits and shall, in connection with the
Distribution, if and to the extent appropriate obtain waivers from
individuals against any such assertion.
(b) The Dial Group shall assume and be solely responsible for all
liabilities and obligations whatsoever in connection with claims made by or
on behalf of Dial Individuals and the Consumer Products Group shall assume
and be solely responsible for all liabilities and obligations whatsoever in
connection with claims made by or on behalf of Consumer Products
Individuals in respect of severance pay, salary continuation and similar
obligations relating to the termination or alleged termination of any such
person's employment either before, to the extent unpaid, or on or after the
Distribution Date.
7.12 DIRECTORS' PLANS.
(a) As of the Distribution Date, the Director's Retirement Benefit
Plan will be amended and terminated, to change the vesting schedule to 10%
per year and to provide that the present value of vested accrued benefits
of each participant (1) who will be a director of Dial following the
Distribution be converted into restricted units representing Dial Common
Stock (the payment for which will be the responsibility of Dial) and (2)
who will be a director of Dial Consumer Products following the
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Distribution be converted into restricted units representing Dial Consumer
Products Common Stock (the payment for which will be the responsibility of
Dial Consumer Products).
(b) (1) As of the Distribution Date, Dial Consumer Products shall
assume or retain, or cause one or more members of the Consumer Products
Group to assume or retain, as the case may be, and shall be solely
responsible for, all liabilities and obligations whatsoever of either Group
whether or not incurred prior to the Distribution Date in connection with
claims under the Dial Deferred Compensation Plan for Directors in respect
of any Consumer Products Director and the Dial Group shall cease to have
any such liability or obligation with respect thereto. Dial shall retain,
and shall be solely responsible for, all liabilities and obligations
whatsoever of either Group whether or not incurred prior to the
Distribution Date in connection with claims under the Dial Deferred
Compensation Plan for Directors in respect of (1) any individual who ceased
being a director of Dial prior to the Distribution Date and (2) any
individual who is a director of Dial but not Dial Consumer Products
immediately following the Distribution Date.
(2) For purposes of the Deferred Compensation Plan for Directors,
individuals who, in connection with the Distribution, cease to be
directors of Dial and become directors of Dial Consumer Products shall
not be deemed to have terminated their service as directors for purposes
of any deferral elections made by such individuals.
(3) Section 4.B. of the Dial Deferred Compensation Plan for
Directors shall be amended to provide that in the case of the
Distribution, where a Director has elected to defer compensation in the
form of stock units, such Director's stock unit account shall be
credited with a number of units representing Dial Consumer Products
Common Stock equal to the number of stock units credited to such account
as of the Distribution Date.
(c) (1) As of the Distribution Date, Dial Consumer Products shall
assume or retain, or cause one or more members of the Consumer Products
Group to assume or retain, as the case may be, and shall be solely
responsible for, all liabilities and obligations whatsoever of either Group
whether or not incurred prior to the Distribution Date in connection with
The Dial Corp Director's Charitable Award Program in respect of any
Consumer Products Director and the Dial Group shall cease to have any such
liability or obligation with respect thereto. Dial shall retain, and shall
be solely responsible for, all liabilities and obligations whatsoever of
either Group whether or not incurred prior to the Distribution Date in
connection with The Dial Corp Director's Charitable Award Program in
respect of (A) any individual who ceased being a director of Dial prior to
the Distribution Date and (B) any individual who is a director of Dial both
immediately prior to and immediately following the Distribution Date. To
the extent practicable, Dial shall assign to Dial Consumer Products life
insurance policies heretofore naming Dial as beneficiary with respect to
Consumer Products Directors.
(d) Within 120 days of the Distribution Date, Dial shall provide
funding to Dial Consumer Products for the liabilities assumed by Dial
Consumer Products under paragraphs (a) and (b) of this Section 7.12, in an
amount which bears the same proportion to the total amount funding such
liabilities with respect to all directors of Dial immediately prior to the
Distribution Date, as the proportion that the present value of the
liabilities allocable to Consumer Products Directors, as a group, bears to
the present value of such liabilities for all directors of Dial, as a
group, immediately prior to the Distribution.
(e) Following the Distribution, the Dial Option Plan will be amended
to provide, and the Consumer Products Option Plan will provide, that each
non-employee director will, upon his or her first election as a director,
automatically be granted options to purchase common stock of the applicable
company having an exercise price equal to fair market value at the date of
grant, with the number of shares subject to such option equal to the amount
of the directors' annual retainer divided by an amount equal to one third
( 1/3) of such fair market value of the common stock on the date of grant.
Each non-employee director will also receive an automatic annual grant of
options to purchase common stock of the applicable company having an
exercise price equal to fair market value at the date of grant, with the
number of shares subject to such option equal to the amount of the
directors' annual retainer divided by an amount equal to one third ( 1/3)
of such fair market value of the common stock on the date of grant. For a
director elected
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during the course of a year, the first such annual grant will be made upon
his or her election on a prorata basis, based upon the number of months
between such election and the next regular annual grant date.
7.13 DIAL MISCELLANEOUS PLANS; POST-DISTRIBUTION LIABILITIES.
(a) The Dial Group shall be solely responsible for the payment of all
liabilities and obligations whatsoever with respect to any Dial Individual
unpaid as of and through the Distribution Date under any Dial Miscellaneous
Plan and the Consumer Products Group shall assume and be solely responsible
for the payment of all liabilities and obligations whatsoever with respect
to any Consumer Products Individual unpaid as of and through the
Distribution Date under any Dial Miscellaneous Plan.
(b) The Dial Group shall be solely responsible for the payment of all
liabilities and obligations whatsoever arising with respect to any Dial
Individual and attributable to any period subsequent to the Distribution
Date and the Consumer Products Group shall be solely responsible for the
payment of all liabilities and obligations whatsoever arising with respect
to any Consumer Products Individual and attributable to any period
subsequent to the Distribution Date.
7.14 OTHER BALANCE SHEET ADJUSTMENTS. To the extent not otherwise
provided in this Agreement, Dial and Dial Consumer Products shall take such
action as is necessary to effect an adjustment to the books of Dial and Dial
Consumer Products so that, as of the Distribution Date, the prepaid expense
balances and accrued employee liabilities with respect to any employee liability
or obligation assumed or retained as of the Distribution Date by the Dial Group
and the Consumer Products Group are appropriately reflected on the consolidated
balance sheets as of the Distribution Date of Dial and Dial Consumer Products,
respectively.
7.15 PRESERVATION OF RIGHTS TO AMEND OR TERMINATE PLANS. No provisions of
this Agreement, including the agreement of Dial or Dial Consumer Products that
it, or any member of the Dial Group or the Consumer Products Group, will make a
contribution or payment to or under any Plan herein referred to for any period,
shall be construed as a limitation on the right of Dial or Dial Consumer
Products or any member of the Dial Group or the Consumer Products Group to amend
such Plan or terminate its participation therein which Dial or Dial Consumer
Products or any member of the Dial Group or the Consumer Products Group would
otherwise have under the terms of such Plan or otherwise, and no provision of
this Agreement shall be construed to create a right in any employee or former
employee or beneficiary of such employee or former employee under a Plan which
such employee or former employee or beneficiary would not otherwise have under
the terms of the Plan itself.
7.16 REIMBURSEMENT; INDEMNIFICATION. Each of the parties hereto
acknowledges that the Dial Group, on the one hand, and the Consumer Products
Group, on the other hand, may incur costs and expenses (including contributions
to Plans and the payment of insurance premiums) arising from or related to any
of the Plans which are, as set forth in this Agreement, the responsibility of
the other party hereto. Accordingly, Dial and Dial Consumer Products agree to
reimburse each other, as soon as practicable but in any event within 30 days of
receipt from the other party of appropriate verification, for all such costs and
expenses reduced by the amount of any tax reduction or recovery of tax benefit
realized by Dial or Dial Consumer Products, as the case may be, in respect of
the corresponding payment made by it; provided, however, that notwithstanding
anything in this Section 7.16 to the contrary, costs and expenses or other
recovery arising from any challenge by the U.S. Government to the allocation of
assets set forth in Section 7.01 shall not be subject to reimbursement, and
indemnification under this Agreement or the Distribution Agreement.
7.17 FURTHER TRANSFERS. Dial and Dial Consumer Products recognize that
there may be Consumer Products Individuals who will, after the Distribution
Date, become employed by Dial and there may be Dial individuals who become
employed, after the Distribution Date, by Dial Consumer Products. If Dial and
Dial Consumer Products so agree with respect to any such individuals, the assets
and liabilities with respect to such employees which are associated with the
plans and programs described in this Agreement may be transferred and assumed in
a manner consistent with this Agreement. Any such transfers or assumptions will
be considered to be governed by the terms of this Agreement and shall not
require the agreement of Dial and Dial Consumer Products if they occur within 3
months of the Distribution Date.
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7.18 OFFICERS AND EMPLOYEES.
(a) Except for officers of Dial Consumer Products who are also
officers of Dial, officers and employees of either Group who are employed
in the Consumer Products Business immediately prior to the Distribution
Date shall be officers and employees of the Consumer Products Group
immediately following the Distribution Date; provided, however, that
nothing herein shall give to any individual a right of employment, or
continued employment, by any member of the Consumer Products Group.
(b) Except as otherwise agreed by the parties hereto, effective as of
the Distribution Date, (1) all officers or employees of the Dial Group who
are acting as directors or officers of the Consumer Products Group and are
not employed in the Consumer Products Business shall resign from such
positions with the Consumer Products Group and (2) all officers or
employees of the Consumer Products Group who are acting as directors or
officers of the Dial Group and are not employed in the Dial Business shall
resign from such positions with the Dial Group.
7.19 EMPLOYMENT AGREEMENTS. Prior to the Distribution Date, Dial and Dial
Consumer Products shall use their best efforts to induce such individuals as
they mutually agree to enter into employment agreements with Dial Consumer
Products on terms which are mutually agreeable to Dial and Dial Consumer
Products; provided, however, that, except as otherwise provided in this
Agreement, Dial shall have no obligation to make any payments to such
individuals to induce them to enter into such employment agreements.
7.20 OTHER LIABILITIES. As of the Distribution Date: (a) Dial Consumer
Products shall assume and be solely responsible for all Liabilities whatsoever
of the Dial Group with respect to claims made by the Consumer Products
Individuals relating to any employment-related Liability not otherwise expressly
provided for in this Agreement, including earned salary, wages, severance
payments or other compensation and accrued holiday, vacation, health, dental or
retirement benefits, regardless of whether such employment-related Liability was
incurred before or after the Distribution Date and (b) Dial shall retain all
such Liabilities with respect to (1) Dial Individuals and (2) directors of Dial
who served as such prior to the Distribution Date.
7.21 COMPLIANCE. Notwithstanding anything to the contrary in this Article
VII, to the extent any actions of the parties contemplated in this Article are
determined prior to Distribution to violate law or result in unintended tax
liability for Dial Individuals or Consumer Products Individuals, such action may
be modified to avoid such violation of law or unintended tax liability.
ARTICLE VIII
NO REPRESENTATIONS OR WARRANTIES; EXCEPTIONS
8.01 NO REPRESENTATIONS OR WARRANTIES; EXCEPTIONS. Dial Consumer Products
understands and agrees that no member of the Dial Group is, in this Agreement or
in any other agreement or document, representing or warranting to Dial Consumer
Products in any way as to the Consumer Products Assets, the Consumer Products
Liabilities, or the Consumer Products Business or as to any consents or
approvals required in connection with the consummation of the transactions
contemplated by this Agreement, it being agreed and understood that Dial
Consumer Products shall take all of the Consumer Products Assets "as is, where
is" and that, except as provided in Section 5.01, Dial Consumer Products shall
bear the economic and legal risk that conveyances of the Consumer Products
Assets shall prove to be insufficient or that the title of any member of the
Consumer Products Group to any Consumer Products Assets shall be other than good
and marketable and free from encumbrances.
ARTICLE IX
INSURANCE
9.01 INSURANCE POLICIES AND RIGHTS INCLUDED WITHIN CONSUMER PRODUCTS
ASSETS. Without limiting the generality of the definition of Consumer Products
Assets set forth in Section 1.01, the Consumer Products Assets shall include (a)
any and all rights of an insured party under each of the Dial Policies,
including rights
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of indemnity and the right to be defended by or at the expense of the insurer,
with respect to all Consumer Products Claims; provided, however, that nothing in
this clause (a) shall be deemed to constitute (or to reflect) the assignment of
any of the Dial Policies to Dial Consumer Products, and (b) the Dial Consumer
Products Policies. Dial Consumer Products shall be entitled to receive from Dial
any Insurance Proceeds paid to any member of the Dial Group with respect to any
third-party Dial Consumer Products Claim under any Dial Policy.
9.02 POST-DISTRIBUTION DATE CLAIMS. If, subsequent to the Distribution
Date, any Person shall assert a Consumer Products Claim, then Dial shall at the
time such Consumer Products Claim is asserted be deemed to assign, without need
of further documentation, to Dial Consumer Products all of the Dial Group's
rights, if any, as an insured party under the applicable Dial Policy with
respect to such Consumer Products Claim, including rights of indemnity and the
right to be defended by or at the expense of the insurer; provided, however,
that nothing in this Section 9.02 shall be deemed to (1) constitute (or to
reflect) the assignment of any of the Dial Policies to Dial Consumer Products or
(2) affect the Dial indemnity set forth in Section 4.02 of this Agreement.
9.03 ADMINISTRATION AND RESERVES. Notwithstanding the provisions of
Article IV, from and after the Distribution Date:
(a) Dial shall be responsible for (1) Insurance Administration with
respect to the Dial Policies and (2) Claims Administration with respect to
any Liabilities of Dial; provided, however, that the retention of the Dial
Policies by Dial is in no way intended to limit, inhibit or preclude any
right to insurance coverage for any Insured Claim of a named insured under
the Dial Policies;
(b) Dial Consumer Products shall be responsible for (1) Insurance
Administration with respect to the Consumer Products Policies, and (2)
Claims Administration with respect to any Liabilities of Dial Consumer
Products; provided, however, that the retention of the Consumer Products
Policies by Dial Consumer Products is in no way intended to limit, inhibit
or preclude any right to insurance coverage for any Insured Claim of a
named insured under the Consumer Products Policies;
(c) Dial shall be entitled to reserves established by any member of
either Group, or the benefit of reserves held by any insurance carrier,
with respect to any Dial Liabilities; and
(d) Dial Consumer Products shall be entitled to reserves established
by any member of either Group, or the benefit of reserves held by any
insurance carrier, with respect to any Consumer Products Liabilities.
9.04 INSURANCE PREMIUMS. Dial Consumer Products shall pay premiums
(retrospectively-rated or otherwise) under the Dial Policies with respect to
Consumer Products Liabilities which are Insured Claims under the Dial Policies.
Dial shall have the right but not the obligation to pay premiums
(retrospectively-rated or otherwise) under the Dial Policies with respect to
Consumer Products Liabilities which are Insured Claims under the Dial Policies
to the extent that Dial Consumer Products does not pay such premiums, whereupon
Dial Consumer Products shall forthwith reimburse Dial for any premiums paid by
Dial with respect to such Consumer Products Liabilities.
9.05 ALLOCATION OF INSURANCE PROCEEDS; COOPERATION. Insurance Proceeds
received with respect to claims, costs and expenses under the Insurance Policies
shall be paid to Dial with respect to Dial Liabilities which are Insured Claims
under the Dial Policies and to Dial Consumer Products with respect to the
Consumer Products Liabilities which are Insured Claims under the Dial Policies.
Payment of the allocable portions of indemnity costs of Insurance Proceeds
resulting from the Liability Policies will be made to the appropriate party upon
receipt from the insurance carrier. In the event of the exhaustion of coverage
under any Dial Policy, Dial and Dial Consumer Products shall allocate Insurance
Proceeds equitably based upon the bona fide claims of the Dial Group and the
Consumer Products Group, respectively. The parties hereto agree to use their
best efforts to cooperate with respect to insurance matters.
9.06 REIMBURSEMENT OF EXPENSES. Dial Consumer Products shall (a) upon the
request of Dial, reimburse the relevant insurer or the relevant third-party
administrator, to the extent required under any
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Insurance Policy or Service Agreement with respect to any and all Consumer
Products Claims which are paid, settled, adjusted, defended and/or otherwise
handled by such insurer or third-party administrator pursuant to the terms and
conditions of such Insurance Policy or Service Agreement and (b) to the extent
the cost incurred exceeds internal charges made by Dial to Dial Consumer
Products prior to the Distribution Date, pay and/or reimburse Dial, or such
third party as Dial may require, for any and all costs, premiums, expenses,
losses paid, attorneys' fees and/or charges incurred prior to the Distribution
Date by either Group or after the Distribution Date by the Dial Group arising
directly or indirectly in connection with the payment, settlement, adjustment,
defense and/or handling of any such Consumer Products Claim or under the terms
and conditions of any Insurance Policies or Service Agreements (including any
reimbursement paid by Dial with respect to any such Consumer Products Claim to
any insurer or third-party administrator pursuant to the terms of any Insurance
Policy or Service Agreement). Dial Consumer Products shall make any
reimbursement required by clause (a) of this Section 9.06 at the time required
by the relevant Insurance Policy or Service Agreement. Dial Consumer Products
shall make any reimbursement required by clause (b) of this Section 9.06, on a
monthly basis.
9.07 INSURER INSOLVENCY. Dial shall not be obligated to reimburse Dial
Consumer Products for any Consumer Products Claim under any Insurance Policies
where such Consumer Products Claim would have been paid by the insurer or other
third party, but for the insolvency of such insurer or other third party or the
refusal by any insurer or other third party to pay such Consumer Products Claim.
9.08 LETTERS OF CREDIT. Dial Consumer Products shall post such letters of
credit in favor of such Persons as Dial may reasonably request for any amounts
due or reasonably expected to come due under Section 9.06. Dial Consumer
Products shall make reasonable efforts to negotiate agreements with any and all
insurers or third-party administrators whereby Dial Consumer Products shall
assume direct responsibility for any and all Liabilities related to it under any
Insurance Policies and/or Service Agreements and Dial shall provide reasonable
assistance in this effort.
9.09 NO REDUCTION OF COVERAGE. Dial shall take no action to eliminate or
materially reduce coverage under any Dial Policy or Service Agreement for any
Consumer Products Claim.
9.10 FUTURE INSURANCE COVERAGE. For a period of one year following the
Distribution Date, Dial shall assist Dial Consumer Products, to the extent
reasonably requested by Dial Consumer Products with the efforts of the Consumer
Products Group to secure alternative insurance coverage or claim handling
services.
9.11 ASSISTANCE, WAIVER OF CONFLICT AND SHARED DEFENSE. Each of the
parties hereto agrees to provide reasonable assistance to the other parties
hereto as regards any dispute with any third party (including insurers,
third-party administrators and state guaranty funds) as to any matter related to
the Insurance Policies or Service Agreements, but only insofar as such dispute
arises out of the acts or omissions of any third party with respect to a
Consumer Products Claim. In the event that Insured Claims of more than one Group
exist relating to the same occurrence, the parties hereto agree to defend such
Insured Claims jointly and to waive any conflict of interest necessary to the
conduct of such joint defense. Nothing in this Section 9.11 shall be construed
to limit or otherwise alter in any way the indemnity obligations of the parties
hereto, including those created by this Agreement or by operation of law.
ARTICLE X
MISCELLANEOUS
10.01 CONDITIONS TO OBLIGATIONS.
(a) The obligations of the parties hereto to consummate the payment of
the Distribution are subject to the satisfaction of each of the following
conditions:
(1) The transactions contemplated by Sections 2.01, 2.02, 2.03,
2.05, 2.06, 2.07 and 2.08 shall have been consummated in all material
respects;
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(2) The Dial Consumer Products Common Stock shall have been
approved for listing on the NYSE, subject to official notice of
issuance;
(3) The Registration Statement shall have been filed with the SEC
and shall have become effective, and no stop order with respect thereto
shall be in effect;
(4) All authorizations, consents, approvals and clearances of all
federal, state, local and foreign governmental agencies required to
permit the valid consummation by the parties hereto of the transactions
contemplated by this Agreement shall have been obtained; and no such
authorization, consent, approval or clearance shall contain any
conditions which would have a material adverse effect on (A) the Dial
Business or the Consumer Products Business, (B) the Assets, results of
operations or financial condition of the Dial Group or the Consumer
Products Group, in each case taken as a whole, or (C) the ability of
Dial or Dial Consumer Products to perform its obligations under this
Agreement; and all statutory requirements for such valid consummation
shall have been fulfilled;
(5) Dial shall have provided the NYSE with the prior written notice
of the Record Date required by Rule 10b-17 of the Exchange Act and the
rules and regulations of the NYSE;
(6) No preliminary or permanent injunction or other order, decree
or ruling issued by a court of competent jurisdiction or by a
government, regulatory or administrative agency or commission, and no
statute, rule, regulation or executive order promulgated or enacted by
any governmental authority, shall be in effect preventing the payment of
the Distribution;
(7) The Distribution shall be payable in accordance with applicable
law;
(8) The New Credit Facility shall be in place and all conditions to
borrowing thereunder shall have been satisfied, and all necessary
consents, waivers or amendments to each bank credit agreement, debt
security or other financing facility to which any member of the Dial
Group or the Consumer Products Group is a party or by which any such
member is bound shall have been obtained, or each such agreement,
security or facility shall have been refinanced, in each case on terms
satisfactory to Dial and Dial Consumer Products and to the extent
necessary to permit the Distribution to be consummated without any
material breach of the terms of such agreement, security or facility;
(9) Dial shall have received a ruling from the Internal Revenue
Service that the Distribution is tax-free;
(10) One or more of members of the Consumer Products Group shall
have been substituted, as of the Distribution Date, in all respects for
the Dial Group in respect of all Consumer Products Support Agreements;
and
(11) Investment grade ratings for each of Dial and Dial Consumer
Products shall have been confirmed.
(b) Any determination made by the Board of Directors of Dial in good
faith prior to the Distribution Date concerning the satisfaction or waiver
of any or all of the conditions set forth in Section 10.01 (a) shall be
conclusive.
10.02 COMPLETE AGREEMENT. This Agreement, the Exhibits and Schedules
hereto and the agreements and other documents referred to herein shall
constitute the entire agreement between the parties hereto with respect to the
subject matter hereof and shall supersede all previous negotiations, commitments
and writings with respect to such subject matter.
10.03 EXPENSES. Except as otherwise provided in this Agreement and the
Other Agreements, all costs and expenses of any party hereto in connection with
the preparation, execution, delivery and implementation of this Agreement and
with the consummation of the transactions contemplated by this Agreement shall
be paid by the party for whose benefit such costs and expenses are incurred,
with any costs and expenses that cannot be allocated on the foregoing basis to
be divided equally among the parties hereto.
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10.04 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware (other than the laws regarding
choice of laws and conflicts of laws) as to all matters, including matters of
validity, construction, effect, performance and remedies.
10.05 NOTICES. All notices, requests, claims, demands and other
communications hereunder (collectively, "Notices") shall be in writing and shall
be given (and shall be deemed to have been duly given upon receipt) by delivery
in person, by cable, telegram, telex or other standard form of
telecommunications, or by registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
If to Dial, or Exhibitgroup:
Viad Corp
Dial Tower
Phoenix, Arizona 85077
Attention: General Counsel
If to Dial Consumer Products:
The Dial Corporation
Dial Tower
Phoenix, Arizona 85077
Attention: General Counsel
or to such other address as any party hereto may have furnished to the other
parties by a notice in writing in accordance with this Section 10.05. Copies of
all notices, requests, claims, demands and other communications hereunder shall
also be given to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Patricia A. Vlahakis, Esq.
10.06 AMENDMENT AND MODIFICATION. This Agreement may be amended, modified
or supplemented only by a written agreement signed by all of the parties hereto.
10.07 SUCCESSORS AND ASSIGNS; NO THIRD-PARTY BENEFICIARIES. This
Agreement and all of the provisions hereof shall be binding upon and inure to
the benefit of the parties hereto and their successors and permitted assigns,
but neither this Agreement nor any of the rights, interests and obligations
hereunder shall be assigned by any party hereto without the prior written
consent of each of the other parties (which consent shall not be unreasonably
withheld). Except for the provisions of Sections 4.03 and 4.04 relating to
Indemnities, which are also for the benefit of the Indemnitees, this Agreement
is solely for the benefit of the parties hereto and their Subsidiaries and
Affiliates and is not intended to confer upon any other Persons any rights or
remedies hereunder.
10.08 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.09 INTERPRETATION. The Article and Section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties hereto and shall not in any way affect the meaning or
interpretation of this Agreement.
10.10 LEGAL ENFORCEABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. Each party acknowledges
that money damages would be an inadequate remedy for any breach of the
provisions of this Agreement and agrees that the obligations of the parties
hereunder shall be specifically enforceable.
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10.11 REFERENCES; CONSTRUCTION. References to any "Article", "Exhibit",
"Schedule" or "Section", without more, are to Appendices, Articles, Exhibits,
Schedules and Sections to or of this Agreement. Unless otherwise expressly
stated, clauses beginning with the term "including" set forth examples only and
in no way limit the generality of the matters thus exemplified.
10.12 TERMINATION. Notwithstanding any provision hereof this Agreement
may be terminated and the Distribution abandoned at any time prior to the
Distribution Date by and in the sole discretion of the Board of Directors of
Dial without the approval of any other party hereto or of Dial's stockholders.
In the event of such termination, no party hereto shall have any Liability to
any Person by reason of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
THE DIAL CORP,
a Delaware corporation
By:
--------------------------------------
THE DIAL CORPORATION,
a Delaware corporation
By:
--------------------------------------
EXHIBITGROUP/GILTSPUR INC.,
a Delaware corporation
By:
--------------------------------------
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ANNEX B
FORM OF
RESTATED CERTIFICATE OF INCORPORATION
OF
THE DIAL CORPORATION
ARTICLE I
The name of the corporation (which is hereinafter referred to as the
"Corporation") is:
The Dial Corporation
ARTICLE II
The address of the Corporation's registered office in the State of Delaware
is The Corporation Trust Center, 1209 Orange Street in the City of Wilmington,
County of New Castle. The name of the Corporation's registered agent at such
address is The Corporation Trust Company.
ARTICLE III
The purpose of the Corporation shall be to engage in any lawful act or
activity for which corporations may be organized and incorporated under the
General Corporation Law of the State of Delaware.
ARTICLE IV
The total number of shares of stock which the Corporation shall have
authority to issue is Three Hundred and Ten Million (310,000,000), consisting of
Ten Million (10,000,000) shares of Preferred Stock, par value $.01 per share
(hereinafter referred to as "Preferred Stock"), and Three Hundred Million
(300,000,000) shares of Common Stock, par value $.01 per share (hereinafter
referred to as "Common Stock").
The Preferred Stock may be issued from time to time in one or more series.
The Board of Directors is hereby authorized to provide for the issuance of
shares of Preferred Stock in series and, by filing a certificate pursuant to the
applicable law of the State of Delaware (hereinafter referred to as a "Preferred
Stock Designation"), to establish from time to time the number of shares to be
included in each such series, and to fix the designation, powers, preferences
and rights of the shares of each such series and the qualifications, limitations
and restrictions thereof. The authority of the Board of Directors with respect
to each series shall include, but not be limited to, determination of the
following:
(1) The designation of the series, which may be by distinguishing
number, letter or title.
(2) The number of shares of the series, which number the Board of
Directors may thereafter (except where otherwise provided in the Preferred
Stock Designation) increase or decrease (but not below the number of shares
thereof then outstanding).
(3) The amounts payable on, and the preferences, if any, of shares of
the series in respect of dividends, and whether such dividends, if any,
shall be cumulative or noncumulative.
(4) Dates at which dividends, if any, shall be payable.
(5) The redemption rights and price or prices, if any, for shares of
the series.
(6) The terms and amount of any sinking fund provided for the purchase
or redemption of shares of the series.
(7) The amounts payable on, and the preferences, if any, of shares of
the series in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation.
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(8) Whether the shares of the series shall be convertible into or
exchangeable for shares of any other class or series, or any other
security, of the Corporation or any other corporation, and, if so, the
specification of such other class or series of such other security, the
conversion or exchange price or prices or rate or rates, any adjustments
thereof, the date or dates at which such shares shall be convertible or
exchangeable and all other terms and conditions upon which such conversion
or exchange may be made.
(9) Restrictions on the issuance of shares of the same series or of
any other class or series.
(10) The voting rights, if any, of the holders of shares of the
series.
The Common Stock shall be subject to the express terms of the Preferred
Stock and any series thereof. Except as may be provided in this Certificate of
Incorporation or in a Preferred Stock Designation, the holders of shares of
Common Stock shall be entitled to one vote for each such share upon all
questions presented to the stockholders, the Common Stock shall have the
exclusive right to vote for the election of directors and for all other
purposes, and holders of Preferred Stock shall not be entitled to receive notice
of any meeting of stockholders at which they are not entitled to vote.
The Corporation shall be entitled to treat the person in whose name any
share of its stock is registered as the owner thereof for all purposes and shall
not be bound to recognize any equitable or other claim to, or interest in, such
share on the part of any other person, whether or not the Corporation shall have
notice thereof, except as expressly provided by applicable law.
ARTICLE V
In furtherance of, and not in limitation of, the powers conferred by law,
the Board of Directors is expressly authorized and empowered:
(1) to adopt, amend or repeal the Bylaws of the Corporation; provided,
however, that the Bylaws adopted by the Board of Directors under the powers
hereby conferred may be amended or repealed by the Board of Directors or by
the stockholders having voting power with respect thereto, provided further
that, in the case of amendments by stockholders, the affirmative vote of
the holders of at least 80 percent of the voting power of the then
outstanding Voting Stock, voting together as a single class, shall be
required in order for the stockholders to alter, amend or repeal any
provision of the Bylaws or to adopt any additional Bylaw; and
(2) from time to time to determine whether and to what extent, and at
what times and places, and under what conditions and regulations, the
accounts and books of the Corporation, or any of them, shall be open to
inspection of stockholders; and, except as so determined or as expressly
provided in this Certificate of Incorporation or in any Preferred Stock
Designation, no stockholder shall have any right to inspect any account,
book or document of the Corporation other than such rights as may be
conferred by applicable law.
The Corporation may in its Bylaws confer powers upon the Board of Directors
in addition to the foregoing and in addition to the powers and authorities
expressly conferred upon the Board of Directors by applicable law.
Notwithstanding anything contained in this Certificate of Incorporation to the
contrary, the affirmative vote of the holders of at least 80 percent of the
voting power of the then outstanding Voting Stock, voting together as a single
class, shall be required to amend, repeal or adopt any provision inconsistent
with paragraph (a) of this Article V. For the purposes of this Certificate of
Incorporation, "Voting Stock" shall mean the outstanding shares of capital stock
of the Corporation entitled to vote generally in the election of directors.
ARTICLE VI
Subject to the rights of the holders of any series of Preferred Stock or
any other series or class of stock as set forth in the Certificate of
Incorporation, any action required or permitted to be taken by the stockholders
of the Corporation must be effected at a duly called annual or special meeting
of stockholders of the Corporation and may not be effected by any consent in
writing in lieu of a meeting of such stockholders. Notwithstanding
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anything contained in this Certificate of Incorporation to the contrary, the
affirmative vote of at least 80 percent of the voting power of the then
outstanding Voting Stock, voting together as a single class, shall be required
to amend, repeal or adopt any provision inconsistent with this Article VI.
ARTICLE VII
Subject to the rights of the holders of any series of Preferred Stock or
any other series or class of stock as set forth in the Certificate of
Incorporation to elect additional directors under specified circumstances, the
number of directors of the Corporation shall be fixed by the Bylaws of the
Corporation and may be increased or decreased from time to time in such a manner
as may be prescribed by the Bylaws.
Unless and except to the extent that the Bylaws of the Corporation shall so
require, the election of directors of the Corporation need not be by written
ballot.
The directors, other than those who may be elected by the holders of any
series of Preferred Stock or any other series or class of stock as set forth in
the Certificate of Incorporation, shall be divided into three classes, as nearly
equal in number as possible. One class of directors shall be initially elected
for a term expiring at the annual meeting of stockholders to be held in 1997,
another class shall be initially elected for a term expiring at the annual
meeting of stockholders to be held in 1998, and another class shall be initially
elected for a term expiring at the annual meeting of stockholders to be held in
1999. Members of each class shall hold office until their successors are elected
and qualified. At each annual meeting of the stockholders of the Corporation
commencing with the 1997 annual meeting, (1) directors elected to succeed those
directors whose terms then expire shall be elected by a plurality vote of all
votes cast at such meeting to hold office for a term expiring at the third
succeeding annual meeting of stockholders after their election, with each
director to hold office until his or her successor shall have been duly elected
and qualified, and (2) only if authorized by a resolution of the Board of
Directors, directors may be elected to fill any vacancy on the Board of
Directors, regardless of how such vacancy shall have been created.
Subject to the rights of the holders of any series of Preferred Stock, or
any other series or class of stock as set forth in this Certificate of
Incorporation, to elect additional directors under specified circumstances, and
unless the Board of Directors otherwise determines, vacancies resulting from
death, resignation, retirement, disqualification, removal from office or other
cause, and newly created directorships resulting from any increase in the
authorized number of directors, may be filled only by the affirmative vote of a
majority of the remaining directors, though less than a quorum of the Board of
Directors, and directors so chosen shall hold office for a term expiring at the
annual meeting of stockholders at which the term of office of the class to which
they have been elected expires and until such director's successor shall have
been duly elected and qualified. No decrease in the number of authorized
directors constituting the Whole Board shall shorten the term of any incumbent
director.
Subject to the rights of the holders of any series of Preferred Stock or
any other series or class of stock as set forth in the Certificate of
Incorporation to elect additional directors under specified circumstances, any
director may be removed from office at any time, but only for cause and only by
the affirmative vote of the holders of at least 80 percent of the voting power
of the then outstanding Voting Stock, voting together as a single class.
Notwithstanding anything contained in this Certificate of Incorporation to
the contrary, the affirmative vote of the holders of at least 80 percent of the
voting power of the then outstanding Voting Stock, voting together as a single
class, shall be required to amend, repeal or adopt any provision inconsistent
with this Article VII.
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ARTICLE VIII
(1) Vote Required for Certain Business Combinations.
(a) Higher Vote for Certain Business Combinations. In addition to any
affirmative vote required by law or this Certificate of Incorporation, and
except as otherwise expressly provided in Section 2 of this Article VIII:
(i) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with (a) any Interested Stockholder
(as hereinafter defined), or (b) any other corporation (whether or not
itself any Interested Stockholder) which is, or after such merger or
consolidation would be, an Affiliate (as hereinafter defined) of an
Interested Stockholder; or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with
any Interested Stockholder, including all Affiliates of the Interested
Stockholder, of any assets of the Corporation or any Subsidiary having
an aggregate Fair Market Value (as hereinafter defined) of $10,000,000
or more; or
(iii) the issuance or transfer by the Corporation or any Subsidiary
(in one transaction or a series of transactions) of any securities of
the Corporation or any Subsidiary to any Interested Stockholder,
including all Affiliates of the Interested Stockholder, in exchange for
cash, securities or other property (or a combination thereof) having an
aggregate Fair Market Value of $10,000,000 or more; or
(iv) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an Interested
Stockholder or any Affiliates of any Interested Stockholder; or
(v) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
other transaction (whether or not an Interested Stockholder is a party
thereto) which has the effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any class of equity or
convertible securities of the Corporation or any Subsidiary which are
directly or indirectly owned by any Interested Stockholder or one or
more Affiliates of the Interested Stockholder;
shall require the affirmative vote of the holders of at least 66 2/3% of
the voting power of the then outstanding Voting Stock, voting together as a
single class, including the affirmative vote of the holders of at least
66 2/3% of the voting power of the then outstanding Voting Stock not owned
directly or indirectly by any Interested Stockholder or any Affiliate of
any Interested Stockholder, unless the requirement of such vote is not
permitted under Delaware law. Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that a lesser
percentage may be permitted, by law or in any agreement with any national
securities exchange or otherwise.
(b) Definition of "Business Combination." The term "Business
Combination" as used in this Article VIII shall mean any transaction
described in any one or more of clauses (i) through (v) of paragraph A of
this Section 1.
(2) When Higher Vote is Not Required. The provisions of Section 1 of this
Article VIII shall not be applicable to any particular Business Combination, and
such Business Combination shall require only such affirmative vote as is
required by law or any other provision of this Certificate of Incorporation, if
the conditions specified in either of the following paragraphs (a) or (b) are
met:
(a) Approval by Continuing Directors. The Business Combination shall
have been approved by a majority of the Continuing Directors (as
hereinafter defined).
(b) Price and Procedure Requirements. All of the following conditions
shall have been met:
(i) The aggregate amount of the cash and the Fair Market Value (as
hereinafter defined) as of the date of the consummation of the Business
Combination of consideration other than cash, to be
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received per share by holders of Common Stock in such Business
Combination, shall be at least equal to the highest of the following:
(A) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees)
paid by the Interested Stockholder for any shares of Common Stock
acquired by it (1) within the two-year period immediately prior to
the first public announcement of the proposal of such Business
Combination (the "Announcement Date"), or (2) in the transaction in
which it became an Interested Stockholder, whichever is higher;
(B) the Fair Market Value per share of Common Stock on the
Announcement Date or on the date on which the Interested Stockholder
became an Interested Stockholder (the "Determination Date"),
whichever is higher; and
(C) (if applicable) the price per share equal to the Fair Market
Value per share of Common Stock determined pursuant to paragraph
(b)(i)(B) above, multiplied by the ratio of (1) the highest per share
price (including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by the Interested Stockholder for any
shares of Common Stock acquired by it within the two-year period
immediately prior to the Announcement Date to (2) the Fair Market
Value per share of Common Stock on the first day in such two-year
period upon which the Interested Stockholder acquired any shares of
Common Stock.
(ii) The aggregate amount of the cash and the Fair Market Value as
of the date of the consummation of the Business Combination of
consideration other than cash to be received per share by holders of
shares of any other class, other than Common Stock or Excluded Preferred
Stock, of outstanding Voting Stock shall be at least equal to the
highest of the following (it being intended that the requirements of
this paragraph (b)(ii) shall be required to be met with respect to every
such class of outstanding Voting Stock, whether or not the Interested
Stockholder has previously acquired any shares of a particular class of
Voting Stock):
(A) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees)
paid by the Interested Stockholder for any shares of such class of
Voting Stock acquired by it (1) within the two-year period
immediately prior to the Announcement Date, or (2) in the transaction
in which it became an Interested Stockholder, whichever is higher;
(B) (if applicable) the highest preferential amount per share to
which the holders of shares of such class of Voting Stock are
entitled in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation;
(C) the Fair Market Value per share of such class of Voting
Stock on the Announcement Date or on the Determination Date,
whichever is higher; and
(D) (if applicable) the price per share equal to the Fair Market
Value per share of such class of Voting Stock determined pursuant to
paragraph (b)(ii)(C) above, multiplied by the ratio of (1) the
highest per share price (including any brokerage commissions,
transfer taxes and soliciting dealers' fees) paid by the Interested
Stockholder for any shares of such class of Voting Stock acquired by
it within the two-year period immediately prior to the Announcement
Date to (2) the Fair Market Value per share of such class of Voting
Stock on the first day in such two-year period upon which the
Interested Stockholder acquired any shares of such class of Voting
Stock.
(iii) The consideration to be received by holders of a particular
class of outstanding Voting Stock (including Common Stock and other than
Excluded Preferred Stock) shall be in cash or in the same form as the
Interested Stockholder has previously paid for shares of such class of
Voting Stock. If the Interested Stockholder has paid for shares of any
class of Voting Stock with varying forms of consideration, the form of
consideration for such class of Voting Stock shall be either cash
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or the form used to acquire the largest number of shares of such class
of Voting Stock previously acquired by it.
(iv) After such Interested Stockholder has become an Interested
Stockholder and prior to the consummation of such Business Combination:
(a) there shall have been no failure to declare and pay at the regular
date therefor any full quarterly dividends (whether or not cumulative)
on any outstanding preferred stock, except as approved by a majority of
the Continuing Directors; (b) there shall have been no reduction in the
annual rate of dividends paid on the Common Stock (except as necessary
to reflect any subdivision of the Common Stock), except as approved by a
majority of the Continuing Directors; (c) there shall have been an
increase in the annual rate of dividends as necessary fully to reflect
any recapitalization (including any reverse stock split), reorganization
or any similar reorganization which has the effect of reducing the
number of outstanding shares of the Common Stock, unless the failure so
to increase such annual rate is approved by a majority of the Continuing
Directors; and (d) such Interested Stockholder shall not have become the
Beneficial Owner of any additional Voting Stock except as part of the
transaction which results in such Interested Stockholder becoming an
Interested Stockholder.
(v) After such Interested Stockholder has become an Interested
Stockholder, such Interested Stockholder shall not have received the
benefit, directly or indirectly (except proportionately as a
shareholder), of any loans, advances, guarantees, pledges or other
financial assistance or any tax credits or other tax advantages provided
by the Corporation, whether in anticipation of or in connection with
such Business Combination or otherwise.
(vi) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the
Securities Exchange Act of 1934 and the rules and regulations thereunder
(or any subsequent provisions replacing such Act, rules or regulations)
shall be mailed to shareholders of the Corporation at least thirty (30)
days prior to the consummation of such Business Combination (whether or
not such proxy or information statement is required to be mailed
pursuant to such Act or subsequent provisions).
(3) Certain Definitions. For purposes of this Article VIII:
(a) "Person" shall mean any individual, firm, corporation or other
entity.
(b) "Interested Stockholder" shall mean any Person (other than the
Corporation or any Subsidiary) who or which:
(i) itself, or along with its Affiliates, is the Beneficial Owner,
directly or indirectly, of more than 10% of the then outstanding Voting
Stock; or
(ii) is an Affiliate of the Corporation and at any time within the
two-year period immediately prior to the date in question was itself, or
along with its Affiliates, the Beneficial Owner, directly or indirectly,
of 10% or more of the then outstanding Voting Stock; or
(iii) is an assignee of or has otherwise succeeded to any Voting
Stock which was at any time within the two-year period immediately prior
to the date in question beneficially owned by an Interested Stockholder,
if such assignment or succession shall have occurred in the course of a
transaction or series of transactions not involving a public offering
within the meaning of the Securities Act of 1933.
(c) "Beneficial Owner" shall have the meaning ascribed to such term in
Rule 13d-3 of the General Rules and Regulations of the Securities Exchange
Act of 1934, as in effect on May 1, 1996. In addition, a Person shall be
the "Beneficial Owner" of any Voting Stock which such Person or any of its
Affiliates or Associates has (i) the right to acquire (whether such right
is exercisable immediately or only after the passage of time), pursuant to
any agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise,
provided that, in the case of rights issued pursuant to the Rights
Agreement between the Corporation and , as rights agent,
dated , 1996, or any successor rights agreement, once such
rights are exercisable, a holder
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thereof shall not be deemed to be a "Beneficial Owner" for purposes of this
provision of the shares of Voting Stock issuable pursuant to such rights
unless and until such holder, on or after the date that such rights become
exercisable, acquires any additional such rights or shares of Voting Stock,
or (ii) the right to vote pursuant to any agreement, arrangement or
understanding (but neither such Person nor any such Affiliate or Associate
shall be deemed to be the Beneficial Owner of any shares of Voting Stock
solely by reason of a revocable proxy granted for a particular meeting of
stockholders, pursuant to a public solicitation of proxies for such
meeting, and with respect to which shares neither such Person nor any such
Affiliate or Associate is otherwise deemed the Beneficial Owner).
(d) For the purpose of determining whether a Person is an Interested
Stockholder pursuant to paragraph (B) of this Section 3, the number of
shares of Voting Stock deemed to be outstanding shall include shares deemed
owned through application of paragraph C of this Section 3 but shall not
include any other shares of Voting Stock which may be issuable pursuant to
any agreement, arrangement or understanding, or upon exercise of conversion
rights, warrants or options or otherwise.
(e) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on May 1, 1996.
(f) "Subsidiary" shall mean any corporation of which a majority of any
share of equity security is owned, directly or indirectly, by the
Corporation, provided, however, that for the purposes of the definition of
Interested Stockholder set forth in paragraph (b) of this Section 3, the
term "Subsidiary" shall mean only a corporation of which a majority of each
share of equity security is owned, directly or indirectly, by the
Corporation.
(g) "Continuing Director" shall mean any member of the Board of
Directors of the Corporation (the "Board") who is unaffiliated with the
Interested Stockholder and was a member of the Board prior to the time that
the Interested Stockholder became an Interested Stockholder, and any
director who is thereafter chosen to fill any vacancy on the Board or who
is elected and who, in either event, is unaffiliated with the Interested
Stockholder and in connection with his or her initial assumption of office
is recommended for appointment or election by a majority of Continuing
Directors then on the Board.
(h) "Fair Market Value" shall mean (i) in the case of stock, the
highest closing sale price during the 30-day period immediately preceding
the date in question of a share of such stock on the Composite Tape for New
York Stock Exchange listed stocks, or, if such stock is not quoted on the
Composite Tape, on the New York Stock Exchange, or, if such stock is not
listed on such exchange, on the principal United States securities exchange
registered under the Securities Exchange Act of 1934 on which such stock is
listed, or, if such stock is not listed on any such exchange, the highest
closing bid quotation with respect to a share of such stock during the
30-day period preceding the date in question on the National Association of
Securities Dealers, Inc. National Market System, or, if such stock is not
quoted thereon, on the National Association of Securities Dealers, Inc.
Automated Quotations System or any system then in use in its stead, or if
no such quotations are available, the fair market value on the date in
question of a share of such stock as determined by the Board in accordance
with Section 4 of this Article VIII; and (ii) in the case of property other
than cash or stock, the fair market value of such property on the date in
question as determined by the Board in accordance with Section 4 of this
Article VIII.
(i) In the event of any Business Combination in which the Corporation
survives, the phrase "other consideration to be received" as used in
paragraphs (b)(i) and (ii) of Section 2 of this Article VIII shall include
the shares of Common Stock and/or the shares of any other class of
outstanding Voting Stock retained by the holders of such shares.
(j) "Excluded Preferred Stock" means any series of Preferred Stock
with respect to which a majority of the Continuing Directors have approved
a Preferred Stock Designation creating such series that expressly provides
that the provisions of this Article VIII shall not apply.
(4) The Continuing Directors of the Corporation shall have the power and
duty to determine for the purposes of this Article VIII, on the basis of
information known to them after reasonable inquiry, all facts
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necessary to determine compliance with this Article VIII, including, without
limitation (a) whether a Person is an Interested Stockholder, (b) the number of
shares of Voting Stock beneficially owned by any Person, (c) whether a Person is
an Affiliate or Associate of another, (d) whether the applicable conditions set
forth in paragraph (b) of Section 2 of this Article VIII have been met with
respect to any Business Combination, (e) the Fair Market Value of stock or other
property, in accordance with paragraph (h) of Section 3 of this Article VIII,
and (f) whether the assets which are the subject of any Business Combination
have, or the consideration to be received for the issuance or transfer of
securities by the Corporation or any Subsidiary in any Business Combination has,
an aggregate Fair Market Value of $10,000,000 or more.
(5) No Effect on Fiduciary Obligations of Interested Stockholders. Nothing
contained in this Article VIII shall be construed to relieve any Interested
Stockholder from any fiduciary obligation imposed by law.
(6) Amendment, Repeal, etc. Notwithstanding any other provisions of this
Certificate of Incorporation or the Bylaws of the Corporation (and
notwithstanding the fact that a lesser percentage may be permitted by law, this
Certificate of Incorporation or the Bylaws of the Corporation), but in addition
to any affirmative vote of the holders of any particular class of the Voting
Stock required by law or this Certificate of Incorporation, the affirmative vote
of the holders of at least 66 2/3% of the voting power of the shares of the then
outstanding Voting Stock voting together as a single class, including the
affirmative vote of the holders of at least 66 2/3% of the voting power of the
then outstanding Voting Stock not owned directly or indirectly by any Interested
Stockholder or any Affiliate of any Interested Stockholder, shall be required to
amend or repeal, or adopt any provisions inconsistent with, this Article VIII of
this Certificate of Incorporation.
ARTICLE IX
Each person who is or was or had agreed to become a director or officer of
the Corporation, or each such person who is or was serving or who had agreed to
serve at the request of the Corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise (including
the heirs, executor, administrators or estate of such person), shall be
indemnified by the Corporation, in accordance with the Bylaws of the
Corporation, to the fullest extent permitted from time to time by the General
Corporation Law of the State of Delaware as the same exists or may hereafter be
amended (but, if permitted by applicable law, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than said law permitted the Corporation to
provide prior to such amendment) or any other applicable laws as presently or
hereafter in effect. The Corporation may, by action of the Board of Directors,
provide indemnification to employees and agents of the Corporation, and to
persons serving as employees or agents of another corporation, partnership,
joint venture, trust or other enterprise, at the request of the Corporation,
with the same scope and effect as the foregoing indemnification of directors and
officers. The Corporation shall be required to indemnify any person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was authorized by the
Board of Directors or is a proceeding to enforce such person's claim to
indemnification pursuant to the rights granted by this Certificate of
Incorporation or otherwise by the Corporation. Without limiting the generality
or the effect of the foregoing, the Corporation may enter into one or more
agreements with any person which provide for indemnification greater or
different than that provided in this Article IX. Any amendment or repeal of this
Article IX shall not adversely affect any right or protection existing hereunder
in respect of any act or omission occurring prior to such amendment or repeal.
ARTICLE X
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (1) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (2) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (3) under Section 174 of the General Corporation Law of the
State of Delaware, or (4) for any transaction from which the director derived an
improper personal benefit. Any amendment or repeal of this Article X shall not
adversely affect any right or
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protection of a director of the Corporation existing hereunder in respect of any
act or omission occurring prior to such amendment or repeal.
ARTICLE XI
Except as may be expressly provided in this Certificate of Incorporation,
the Corporation reserves the right at any time and from time to time to amend,
alter, change or repeal any provision contained in this Certificate of
Incorporation or a Preferred Stock Designation, and any other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted, in the manner now or hereafter prescribed herein or by
applicable law, and all rights, preferences and privileges of whatsoever nature
conferred upon stockholders, directors or any other persons whomsoever by and
pursuant to this Certificate of Incorporation in its present form or as
hereafter amended are granted subject to the right reserved in this Article XI;
provided, however, that any amendment or repeal of Article IX or Article X of
this Certificate of Incorporation shall not adversely affect any right or
protection existing hereunder in respect of any act or omission occurring prior
to such amendment or repeal, and provided further that no Preferred Stock
Designation shall be amended after the issuance of any shares of the series of
Preferred Stock created thereby, except in accordance with the terms of such
Preferred Stock Designation and the requirements of applicable law.
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ANNEX C
FORM OF
BYLAWS
OF
THE DIAL CORPORATION
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
ARTICLE I
OFFICES AND RECORDS
SECTION 1.1. Delaware Office. The principal office of the Corporation in
the State of Delaware shall be located in the City of Wilmington, County of New
Castle, and the name and address of its registered agent is The Corporation
Trust Company, 1209 Orange Street, Wilmington, Delaware.
SECTION 1.2. Other Offices. The Corporation may have such other offices,
either within or without the State of Delaware, as the Board of Directors may
designate or as the business of the Corporation may from time to time require.
SECTION 1.3. Books and Records. The books and records of the Corporation
may be kept at the Corporation's headquarters in Phoenix, Arizona or at such
other locations outside the State of Delaware as may from time to time be
designated by the Board of Directors.
ARTICLE II
STOCKHOLDERS
SECTION 2.1. Annual Meeting. Commencing in 1997, the annual meeting of the
stockholders of the Corporation shall be held on the first Tuesday in May of
each year, if not a legal holiday, and if a legal holiday then on the next
succeeding business day, at 10:00 a.m., local time, at the principal executive
offices of the Corporation, or at such other date, place and/or time as may be
fixed by resolution of the Board of Directors.
SECTION 2.2. Special Meeting. Subject to the rights of the holders of any
series of preferred stock, par value $.01 per share, of the Corporation (the
"Preferred Stock") or any other series or class of stock as set forth in the
Certificate of Incorporation, special meetings of the stockholders may be called
only by the Chairman of the Board or by the Board of Directors pursuant to a
resolution adopted by a majority of the total number of directors specified in
the resolution pursuant to Section 3.2 which the Corporation would have if there
were no vacancies (the "Whole Board").
SECTION 2.3. Place of Meeting. The Board of Directors may designate the
place of meeting for any meeting of the stockholders. If no designation is made
by the Board of Directors, the place of meeting shall be the principal office of
the Corporation.
SECTION 2.4. Notice of Meeting. Written or printed notice, stating the
place, day and hour of the meeting and the purpose or purposes for which the
meeting is called, shall be prepared and delivered by the Corporation not less
than ten days nor more than sixty days before the date of the meeting, either
personally, or by mail, to each stockholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be delivered when deposited
in the United States mail with postage thereon prepaid, addressed to the
stockholder at his address as it appears on the stock transfer books of the
Corporation. Such further notice shall be given as may be required by law. Only
such business shall be conducted at a special meeting of stockholders as shall
have been brought before the meeting pursuant to the Corporation's notice of
meeting. Meetings may be held without notice if all stockholders entitled to
vote are present (except as otherwise provided by law), or if notice is waived
by those not present in accordance with Section 6.4 of these Bylaws. Any
previously scheduled meeting of the stockholders may be postponed, and (unless
the Certificate of Incorporation otherwise provides) any special meeting of the
stockholders may be cancelled, by resolution of
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the Board of Directors upon public notice given prior to the time previously
scheduled for such meeting of stockholders.
SECTION 2.5. Quorum and Adjournment. Except as otherwise provided by law
or by the Certificate of Incorporation, the holders of a majority of the voting
power of the outstanding shares of the Corporation entitled to vote generally in
the election of directors (the "Voting Stock"), represented in person or by
proxy shall constitute a quorum at a meeting of stockholders, except that when
specified business is to be voted on by a class or series voting as a class, the
holders of a majority of the voting power of the shares of such class or series
shall constitute a quorum for the transaction of such business. The chairman of
the meeting or a majority of the shares of Voting Stock so represented may
adjourn the meeting from time to time, whether or not there is such a quorum
(or, in the case of specified business to be voted on by a class or series, the
chairman or a majority of the shares of such class or series so represented may
adjourn the meeting with respect to such specified business). No notice of the
time and place of adjourned meetings need be given except as required by law.
The stockholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
SECTION 2.6. Proxies. At all meetings of stockholders, a stockholder may
vote by proxy executed in writing by the stockholder or as may be permitted by
law, or by his duly authorized attorney-in-fact. Such proxy must be filed with
the Secretary of the Corporation or his representative at or before the time of
the meeting.
SECTION 2.7. Notice of Stockholder Business and Nominations.
(A) Annual Meetings of Stockholders. (1) Nominations of persons for
election to the Board of Directors of the Corporation and the proposal of
business to be considered by the stockholders may be made at an annual meeting
of stockholders (a) pursuant to the Corporation's notice of meeting delivered
pursuant to Section 2.4 of these Bylaws, (b) by or at the direction of the
Chairman or the Board of Directors or (c) by any stockholder of the Corporation
who is entitled to vote at the meeting, who complied with the notice procedures
set forth in clauses (2) and (3) of this paragraph (A) of this Bylaw and who was
a stockholder of record at the time such notice is delivered to the Secretary of
the Corporation.
(2) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (c) of paragraph (A)(1) of
this Bylaw, the stockholder must have given timely notice thereof in writing to
the Secretary of the Corporation and such other business must otherwise be a
proper matter for stockholder action. To be timely, a stockholder's notice shall
be delivered to the Secretary at the principal executive offices of the
Corporation not less than seventy days nor more than ninety days prior to the
first anniversary of the preceding year's annual meeting; provided, however,
that in the event that the date of the annual meeting is advanced by more than
twenty days, or delayed by more than seventy days, from such anniversary date,
notice by the stockholder to be timely must be so delivered not earlier than the
ninetieth day prior to such annual meeting and not later than the close of
business on the later of the seventieth day prior to such annual meeting or the
tenth day following the day on which public announcement of the date of such
meeting is first made. In no event shall the public announcement of an
adjournment of an annual meeting commence a new time period for the giving of a
stockholder's notice as described in this Section 2.7(A). Such stockholder's
notice shall set forth (a) as to each person whom the stockholder proposes to
nominate for election or reelection as a director all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors in an election contest, or is otherwise required, in each
case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and Rule 14a-11 thereunder, including such person's
written consent to being named in the proxy statement as a nominee and to
serving as a director if elected; (b) as to any other business that the
stockholder proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the proposal is
made; and (c) as to the stockholder giving the notice and the beneficial owner,
if any, on whose behalf the nomination or proposal is made (i) the name and
address of such stockholder, as they appear on the Corporation's books, and of
such
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beneficial owner and (ii) the class and number of shares of the Corporation
which are owned beneficially and of record by such stockholder and such
beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph (A)(2) of
this Bylaw to the contrary, in the event that the number of directors to be
elected to the Board of Directors of the Corporation is increased and there is
no public announcement naming all of the nominees for director or specifying the
size of the increased Board of Directors made by the Corporation at least eighty
days prior to the first anniversary of the preceding year's annual meeting, a
stockholder's notice required by this Bylaw shall also be considered timely, but
only with respect to nominees for any new positions created by such increase, if
it shall be delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the tenth day following the
day on which such public announcement is first made by the Corporation.
(B) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Corporation's notice of meeting pursuant to Section
2.4 of these Bylaws. Nominations of persons for election to the Board of
Directors may be made at a special meeting of stockholders at which directors
are to be elected pursuant to the Corporation's notice of meeting (a) by or at
the direction of the Board of Directors or (b) by any stockholder of the
Corporation who is entitled to vote at the meeting, who complies with the notice
procedures set forth in this Bylaw and who is a stockholder of record at the
time such notice is delivered to the Secretary of the Corporation. In the event
the Corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate such number of persons for election to such position(s) as are
specified in the Corporation's Notice of Meeting, if the stockholder's notice as
required by paragraph (A)(2) of this Bylaw shall be delivered to the Secretary
at the principal executive offices of the Corporation not earlier than the
ninetieth day prior to such special meeting and not later than the close of
business on the later of the seventieth day prior to such special meeting or the
tenth day following the day on which public announcement is first made of the
date of the special meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting. In no event shall the public
announcement of an adjournment of a special meeting commence a new time period
for the giving of a stockholder's notice as described above.
(C) General. (1) Only persons who are nominated in accordance with the
procedures set forth in this Bylaw shall be eligible to serve as directors and
only such business shall be conducted at a meeting of stockholders as shall have
been brought before the meeting in accordance with the procedures set forth in
this Bylaw. Except as otherwise provided by law, the Certificate of
Incorporation or these Bylaws, the chairman of the meeting shall have the power
and duty to determine whether a nomination or any business proposed to be
brought before the meeting was made in accordance with the procedures set forth
in this Bylaw and, if any proposed nomination or business is not in compliance
with this Bylaw, to declare that such defective proposal or nomination shall be
disregarded.
(2) For purposes of this Bylaw, "public announcement" shall mean disclosure
in a press release reported by the Dow Jones News Service, Associated Press or
comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Bylaw, a stockholder
shall also comply with all applicable requirements of the Exchange Act and the
rules and regulations thereunder with respect to the matters set forth in this
Bylaw. Nothing in this Bylaw shall be deemed to affect any rights of
stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act.
SECTION 2.8. Procedure for Election of Directors. Election of directors at
all meetings of the stockholders at which directors are to be elected shall be
by written ballot, and, except as otherwise set forth in the Certificate of
Incorporation with respect to the right of the holders of any series of
Preferred Stock or any other series or class of stock to elect additional
directors under specified circumstances, a plurality of the votes cast thereat
shall elect directors. Except as otherwise provided by law, the Certificate of
Incorporation or these Bylaws, all matters other than the election of directors
submitted to the stockholders at any meeting shall be
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decided by the affirmative vote of a majority of the shares present in person or
represented by proxy at the meeting and entitled to vote thereon.
SECTION 2.9. Inspectors of Elections; Opening and Closing the Polls.
(A) The Board of Directors by resolution shall appoint one or more
inspectors, which inspector or inspectors may include individuals who serve the
Corporation in other capacities, including, without limitation, as officers,
employees, agents or representatives of the Corporation, to act at the meeting
and make a written report thereof. One or more persons may be designated as
alternate inspectors to replace any inspector who fails to act. If no inspector
or alternate has been appointed to act, or if all inspectors or alternates who
have been appointed are unable to act, at a meeting of stockholders, the
chairman of the meeting shall appoint one or more inspectors to act at the
meeting. Each inspector, before discharging his or her duties, shall take and
sign an oath faithfully to execute the duties of inspector with strict
impartiality and according to the best of his or her ability. The inspectors
shall have the duties prescribed by the General Corporation Law of the State of
Delaware.
(B) The chairman of the meeting shall fix and announce at the meeting the
date and time of the opening and the closing of the polls for each matter upon
which the stockholders will vote at a meeting.
SECTION 2.10. No Stockholder Action by Written Consent. Subject to the
rights of the holders of any series of Preferred Stock or any other series or
class of stock as set forth in the Certificate of Incorporation, any action
required or permitted to be taken by the stockholders of the Corporation must be
effected at an annual or special meeting of stockholders of the Corporation and
may not be affected by any consent in writing by such stockholders.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.1. General Powers. The business and affairs of the Corporation
shall be managed by or under the direction of its Board of Directors. In
addition to the powers and authorities by these Bylaws expressly conferred upon
them, the Board of Directors may exercise all such powers of the Corporation and
do all such lawful acts and things as are not by law or by the Certificate of
Incorporation or by these Bylaws required to be exercised or done by the
stockholders.
SECTION 3.2. Number, Tenure and Qualifications. Subject to the rights of
the holders of any series of Preferred Stock, or any other series or class of
stock as set forth in the Certificate of Incorporation, to elect directors under
specified circumstances, the number of directors shall be fixed from time to
time exclusively pursuant to a resolution adopted by a majority of the Whole
Board, but shall consist of not more than eleven nor less than three directors.
The directors, other than those who may be elected by the holders of any series
of Preferred Stock, or any other series or class of stock as set forth in the
Certificate of Incorporation, shall be divided, with respect to the time for
which they severally hold office, into three classes, as nearly equal in number
as possible, with the term of office of the first class to expire at the 1997
annual meeting of stockholders, the term of office of the second class to expire
at the 1998 annual meeting of stockholders and the term of office of the third
class to expire at the 1999 annual meeting of stockholders. Each director shall
hold office until his or her successor shall have been duly elected and
qualified. At each annual meeting of stockholders, commencing with the 1997
annual meeting, (i) directors elected to succeed those directors whose terms
then expire shall be elected for a term of office to expire at the third
succeeding annual meeting of stockholders after their election, with each
director to hold office until his or her successor shall have been duly elected
and qualified, and (ii) only if authorized by a resolution of the Board of
Directors, directors may be elected to fill any vacancy on the Board of
Directors, regardless of how such vacancy shall have been created.
Notwithstanding the foregoing, no outside director shall be nominated by
the Board of Directors for election as a director for another term of office
unless such term of office shall begin before he attains age 70 and no inside
director's term of office shall continue after he attains age 65 or after the
termination of his
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services as an officer or employee of the Corporation, unless such continuance
is approved by a majority of the outside directors on the Board of Directors at
the time the disqualifying event occurs and each time thereafter that such
inside director is nominated for reelection. The term "outside director" means
any person who has never served as an officer or employee of the Corporation or
an affiliate and the term "inside director" means any director who is not an
"outside director." Any person who is ineligible for reelection as a director
under this paragraph may, by a majority vote of the Board of Directors, be
designated as a "Director Emeritus" and as such shall be entitled to receive
notice of, and to attend meetings of, the Board of Directors, but shall not vote
at such meetings.
SECTION 3.3. Regular Meetings. A regular meeting of the Board of Directors
shall be held without other notice than this Bylaw immediately after, and at the
same place as, each annual meeting of stockholders. The Board of Directors may,
by resolution, provide the time and place for the holding of additional regular
meetings without other notice than such resolution.
SECTION 3.4. Special Meetings. Special meetings of the Board of Directors
shall be called at the request of the Chairman of the Board, the President or a
majority of the Board of Directors. The person or persons authorized to call
special meetings of the Board of Directors may fix the place and time of the
meetings.
SECTION 3.5. Notice. Notice of any special meeting shall be given to each
director at his business or residence in writing or by telegram or by telephone
communication. If mailed, such notice shall be deemed adequately delivered when
deposited in the United States mails so addressed, with postage thereon prepaid,
at least five days before such meeting. If by telegram, such notice shall be
deemed adequately delivered when the telegram is delivered to the telegraph
company at least twenty-four hours before such meeting. If by facsimile
transmission, such notice shall be transmitted at least twenty-four hours before
such meeting. If by telephone, the notice shall be given at least twelve hours
prior to the time set for the meeting. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the Board of Directors
need be specified in the notice of such meeting, except for amendments to these
Bylaws as provided under Section 8.1 of Article VIII hereof. A meeting may be
held at any time without notice if all the directors are present (except as
otherwise provided by law) or if those not present waive notice of the meeting
in accordance with Section 6.4 hereof, either before or after such meeting.
SECTION 3.6. Conference Telephone Meetings. Members of the Board of
Directors, or any committee thereof, may participate in a meeting of the Board
of Directors or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation in a meeting shall
constitute presence in person at such meeting.
SECTION 3.7. Quorum. A whole number of directors equal to at least a
majority of the Whole Board shall constitute a quorum for the transaction of
business, but if at any meeting of the Board of Directors there shall be less
than a quorum present, a majority of the directors present may adjourn the
meeting from time to time without further notice. The act of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors. If permitted by applicable law, the directors present at
a duly organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough directors to leave less than a quorum.
SECTION 3.8. Vacancies. Subject to the rights of the holders of any series
of Preferred Stock, or any other series or class of stock as set forth in the
Certificate of Incorporation, to elect additional directors under specified
circumstances, and unless the Board of Directors otherwise determines, vacancies
resulting from death, resignation, retirement, disqualification, removal from
office or other cause, and newly created directorships resulting from any
increase in the authorized number of directors, may be filled only by the
affirmative vote of a majority of the remaining directors, though less than a
quorum of the Board of Directors and not by stockholders. Directors so chosen
shall hold office for a term expiring at the annual meeting of stockholders at
which the term of office of the class to which they have been elected expires
and until such director's successor shall have been duly elected and qualified.
No decrease in the number of authorized directors constituting the Whole Board
shall shorten the term of any incumbent director.
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SECTION 3.9. Executive and Other Committees. The Board of Directors may
designate an Executive Committee to exercise, subject to applicable provisions
of law, all the powers of the Board in the management of the business and
affairs of the Corporation when the Board is not in session, including the power
to adopt a certificate of ownership and merger pursuant to Section 253 of the
General Corporation Law of the State of Delaware, provided that, the Executive
Committee shall not have the power to declare dividends or to authorize the
issuance of the Corporation's capital stock. The Board of Directors may also, by
resolution similarly adopted, designate one or more other committees. The
Executive Committee and each such other committee shall consist of two or more
directors of the Corporation. The Board may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. Any such committee, other than the
Executive Committee (the powers of which are expressly provided for herein), may
to the extent permitted by law exercise such powers and shall have such
responsibilities as shall be specified in the designating resolution. In the
absence or disqualification of any member of such committee or committees, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not constituting a quorum, may unanimously appoint another
member of the Board to act at the meeting in the place of any such absent or
disqualified member. Each committee shall keep written minutes of its
proceedings and shall report such proceedings to the Board when required.
A majority of any committee may determine its action and fix the time and
place of its meetings, unless the Board shall otherwise provide. Notice of such
meetings shall be given to each member of the committee in the manner provided
for in Section 3.5 of these Bylaws. The Board shall have power at any time to
fill vacancies in, to change the membership of, or to dissolve any such
committee. Nothing herein shall be deemed to prevent the Board from appointing
one or more committees consisting in whole or in part of persons who are not
directors of the Corporation; provided, however, that no such committee shall
have or may exercise any authority of the Board.
SECTION 3.10. Removal. Subject to the rights of the holders of any series
of Preferred Stock, or any other series or class of stock as set forth in the
Certificate of Incorporation, to elect additional directors under specified
circumstances, any director, or the entire Board of Directors, may be removed
from office at any time, but only for cause and only by the affirmative vote of
the holders of at least 80 percent of the voting power of the then outstanding
Voting Stock, voting together as a single class.
ARTICLE IV
OFFICERS
SECTION 4.1. Elected Officers. The elected officers of the Corporation
shall be a Chairman of the Board, a President, a Secretary, a Treasurer, and
such other officers (including, without limitation, a Chief Financial Officer)
as the Board of Directors from time to time may deem proper. The Chairman of the
Board shall be chosen from the directors. All officers chosen by the Board of
Directors shall each have such powers and duties as generally pertain to their
respective offices, subject to the specific provisions of this Article IV. Such
officers shall also have powers and duties as from time to time may be conferred
by the Board of Directors or by any committee thereof.
SECTION 4.2. Election and Term of Office. The elected officers of the
Corporation shall be elected annually by the Board of Directors at the regular
meeting of the Board of Directors held after each annual meeting of the
stockholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as convenient. Subject to Section
4.7 of these Bylaws, each officer shall hold office until his successor shall
have been duly elected and shall have qualified or until his death or until he
shall resign.
SECTION 4.3. Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the stockholders and of the Board of Directors. The
Chairman of the Board shall be responsible for the general management of the
affairs of the Corporation and shall perform all duties incidental to his office
which may be required by law and all such other duties as are properly required
of him by the Board of Directors. Except where by law the signature of the
President is required, the Chairman of the Board shall possess the same power as
the President to sign all certificates, contracts, and other instruments of the
Corporation which may
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be authorized by the Board of Directors. He shall make reports to the Board of
Directors and the stockholders, and shall perform all such other duties as are
properly required of him by the Board of Directors. He shall see that all orders
and resolutions of the Board of Directors and of any committee thereof are
carried into effect.
SECTION 4.4. President. The President shall act in a general executive
capacity and shall assist the Chairman of the Board in the administration and
operation of the Corporation's business and general supervision of its policies
and affairs. The President shall, in the absence of or because of the inability
to act of the Chairman of the Board, perform all duties of the Chairman of the
Board and preside at all meetings of stockholders and of the Board of Directors.
The President may sign, alone or with the Secretary, or an Assistant Secretary,
or any other proper officer of the Corporation authorized by the Board of
Directors, certificates, contracts, and other instruments of the Corporation as
authorized by the Board of Directors.
SECTION 4.5. Secretary. The Secretary shall give, or cause to be given,
notice of all meetings of stockholders and Directors and all other notices
required by law or by these Bylaws, and in case of his absence or refusal or
neglect so to do, any such notice may be given by any person thereunto directed
by the Chairman of the Board or the President, or by the Board of Directors,
upon whose request the meeting is called as provided in these Bylaws. He shall
record all the proceedings of the meetings of the Board of Directors, any
committees thereof and the stockholders of the Corporation in a book to be kept
for that purpose, and shall perform such other duties as may be assigned to him
by the Board of Directors, the Chairman of the Board or the President. He shall
have the custody of the seal of the Corporation and may affix the same to all
instruments requiring it and attest to the same.
SECTION 4.6. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the Corporation. The Treasurer
shall deposit all moneys and other valuables in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, the Chairman of the Board, or the President,
taking proper vouchers for such disbursements. The Treasurer shall render to the
Chairman of the Board, the President and the Board of Directors, whenever
requested, an account of all his transactions as Treasurer and of the financial
condition of the Corporation. If required by the Board of Directors, the
Treasurer shall give the Corporation a bond for the faithful discharge of his
duties in such amount and with such surety as the Board of Directors shall
prescribe.
SECTION 4.7. Removal. Any officer elected by the Board of Directors may be
removed by a majority of the members of the Whole Board whenever, in their
judgment, the best interests of the Corporation would be served thereby. No
elected officer shall have any contractual rights against the Corporation for
compensation by virtue of such election beyond the date of the election of his
successor, his death, his resignation or his removal, whichever event shall
first occur, except as otherwise provided in an employment contract or an
employee plan.
SECTION 4.8. Vacancies. A newly created office and a vacancy in any office
because of death, resignation, or removal may be filled by the Board of
Directors for the unexpired portion of the term at any meeting of the Board of
Directors.
ARTICLE V
STOCK CERTIFICATES AND TRANSFERS
SECTION 5.1. Stock Certificates and Transfers.
(A) The interest of each stockholder of the Corporation shall be evidenced
by certificates for shares of stock in such form as the appropriate officers of
the Corporation may from time to time prescribe, provided, that the Board of
Directors may provide by resolution or resolutions that some or all of any or
all classes or series of the stock of the Corporation shall be uncertificated
shares. Notwithstanding the adoption of such a resolution by the Board of
Directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the
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Corporation by the Chairman or Vice-Chairman of the Board of Directors, or the
President or Vice-President, and by the Treasurer or an Assistant Treasurer, or
the Secretary or an Assistant Secretary of the Corporation representing the
number of shares registered in certificate form. Except as otherwise expressly
provided by law, the rights and obligations of the holders of uncertificated
stock and the rights and obligations of the holders of certificates representing
stock of the same class and series shall be identical.
(B) The certificates of stock shall be signed, countersigned and registered
in such manner as the Board of Directors may by resolution prescribe, which
resolution may permit all or any of the signatures on such certificates to be in
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate has ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the Corporation with the same effect as if he were such
officer, transfer agent or registrar at the date of issue.
(C) The shares of the stock of the Corporation represented by certificates
shall be transferred on the books of the Corporation by the holder thereof in
person or by his attorney, upon surrender for cancellation of certificates for
the same number of shares, with an assignment and power of transfer endorsed
thereon or attached thereto, duly executed, with such proof of the authenticity
of the signature as the Corporation or its agents may reasonably require. Upon
receipt of proper transfer instructions from the registered owner of
uncertificated shares such uncertificated shares shall be cancelled and issuance
of new equivalent uncertificated shares or certificated shares shall be made to
the person entitled thereto and the transaction shall be recorded upon the books
of the Corporation. Within a reasonable time after the issuance or transfer of
uncertificated stock, the Corporation shall send to the registered owner thereof
a written notice containing the information required to be set forth or stated
on certificates pursuant to the Delaware General Corporation Law or, unless
otherwise provided by the Delaware General Corporation Law, a statement that the
Corporation will furnish without charge to each stockholder who so requests the
powers, designations, preferences and relative participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
SECTION 5.2. Lost, Stolen or Destroyed Certificates. No certificate for
shares or uncertificated shares of stock in the Corporation shall be issued in
place of any certificate alleged to have been lost, destroyed or stolen, except
on production of such evidence of such loss, destruction or theft and on
delivery to the Corporation of a bond of indemnity in such amount, upon such
terms and secured by such surety, as the Board of Directors or any financial
officer may in its or his discretion require.
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.1. Fiscal Year. The fiscal year of the Corporation shall consist
of a year of from fifty-two to fifty-three weeks ending on the last Saturday in
December of each year.
SECTION 6.2. Dividends. The Board of Directors may from time to time
declare, and the Corporation may pay, dividends on its outstanding shares in the
manner and upon the terms and conditions provided by law and its Certificate of
Incorporation.
SECTION 6.3. Seal. The corporate seal shall be in circular form and shall
have inscribed thereon the name of the Corporation and the words "Corporate
Seal -- Delaware 1996."
SECTION 6.4. Waiver of Notice. Whenever any notice is required to be given
to any stockholder or director of the Corporation under the provisions of the
General Corporation Law of the State of Delaware, a waiver thereof in writing,
signed by the person or persons entitled to such notice, whether before or after
the time stated therein, shall be deemed equivalent to the giving of such
notice. Neither the business to be transacted at, nor the purpose of, any annual
or special meeting of the stockholders or any meeting of the Board of Directors
or committee thereof need be specified in any waiver of notice of such meeting.
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SECTION 6.5. Audits. The accounts, books and records of the Corporation
shall be audited upon the conclusion of each fiscal year by an independent
certified public accountant selected by the Board of Directors, and it shall be
the duty of the Board of Directors to cause such audit to be made annually.
SECTION 6.6. Resignations. Any director or any officer, whether elected or
appointed, may resign at any time by serving written notice of such resignation
on the Chairman of the Board, the President or the Secretary, and such
resignation shall be deemed to be effective as of the close of business on the
date said notice is received by the Chairman of the Board, the President, or the
Secretary or at such later date as is stated therein. No formal action shall be
required of the Board of Directors or the stockholders to make any such
resignation effective.
SECTION 6.7. Indemnification and Insurance. (A) Each person who was or is
made a party or is threatened to be made a party to or is involved in any
action, suit, or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he or she
or a person of whom he or she is the legal representative is or was a director
or officer of the Corporation or is or was serving at the request of the
Corporation as a director or officer of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans maintained or sponsored by the Corporation, whether the
basis of such proceeding is alleged action in an official capacity as a director
or officer or in any other capacity while serving as a director or officer,
shall be indemnified and held harmless by the Corporation to the fullest extent
authorized by the General Corporation Law of the State of Delaware as the same
exists or may hereafter be amended (but, if permitted by applicable law, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law permitted
the Corporation to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director or
officer and shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that except as provided in paragraph (C) of
this Bylaw, the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was authorized by the
Board of Directors. The right to indemnification conferred in this Bylaw shall
be a contract right and shall include the right to be paid by the Corporation
the expenses incurred in defending any such proceeding in advance of its final
disposition, such advances to be paid by the Corporation within 20 days after
the receipt by the Corporation of a statement or statements from the claimant
requesting such advance or advances from time to time; provided, however, that
if the General Corporation Law of the State of Delaware requires, the payment of
such expenses incurred by a director or officer in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such person while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding, shall be made only upon delivery to the Corporation
of an undertaking by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such director or
officer is not entitled to be indemnified under this Bylaw or otherwise.
(B) To obtain indemnification under this Bylaw, a claimant shall submit to
the Corporation a written request, including therein or therewith such
documentation and information as is reasonably available to the claimant and is
reasonably necessary to determine whether and to what extent the claimant is
entitled to indemnification. Upon written request by a claimant for
indemnification pursuant to the first sentence of this paragraph (B), a
determination, if required by applicable law, with respect to the claimant's
entitlement thereto shall be made as follows: (1) if requested by the claimant,
by Independent Counsel (as hereinafter defined), or (2) if no request is made by
the claimant for a determination by Independent Counsel, (i) by a majority vote
of the Disinterested Directors (as hereinafter defined), even though less than a
quorum, or (ii) if there are no Disinterested Directors or, if the Disinterested
Directors so direct, by Independent Counsel in a written opinion to the Board of
Directors, a copy of which shall be delivered to the claimant, or (iii) if the
Disinterested Directors so direct, by the stockholders of the Corporation. In
the event the determination of entitlement to indemnification is to be made by
Independent Counsel at the request of the claimant, the
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<PAGE> 143
Independent Counsel shall be selected by the Board of Directors unless there
shall have occurred within two years prior to the date of the commencement of
the action, suit or proceeding for which indemnification is claimed a "Change of
Control" as defined in The Dial Corporation 1996 Stock Incentive Plan, in which
case the Independent Counsel shall be selected by the claimant unless the
claimant shall request that such selection be made by the Board of Directors. If
it is so determined that the claimant is entitled to indemnification, payment to
the claimant shall be made within 10 days after such determination.
(C) If a claim under paragraph (A) of this Bylaw is not paid in full by the
Corporation within 30 days after a written claim pursuant to paragraph (B) of
this Bylaw has been received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim and, if successful in whole or in part, the claimant shall be entitled
to be paid also the expense of prosecuting such claim. It shall be a defense to
any such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition where
the required undertaking, if any is required, has been tendered to the
Corporation) that the claimant has not met the standard of conduct which makes
it permissible under the General Corporation Law of the State of Delaware for
the Corporation to indemnify the claimant for the amount claimed, but the burden
of proving such defense shall be on the Corporation. Neither the failure of the
Corporation (including without limitation, the Disinterested Directors,
Independent Counsel or stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in the General Corporation Law of the State of Delaware, nor an actual
determination by the Corporation (including, without limitation, the
Disinterested Directors, Independent Counsel or stockholders) that the claimant
has not met such applicable standard of conduct, shall be a defense to the
action or create a presumption that the claimant has not met the applicable
standard of conduct.
(D) If a determination shall have been made pursuant to paragraph (B) of
this Bylaw that the claimant is entitled to indemnification, the Corporation
shall be bound by such determination in any judicial proceeding commenced
pursuant to paragraph (C) of this Bylaw.
(E) The Corporation shall be precluded from asserting in any judicial
proceeding commenced pursuant to paragraph (C) of this Bylaw that the procedures
and presumptions of this Bylaw are not valid, binding and enforceable and shall
stipulate in such proceeding that the Corporation is bound by all the provisions
of this Bylaw.
(F) The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
Bylaw shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or Disinterested
Directors or otherwise. No repeal or modification of this Bylaw shall in any way
diminish or adversely affect the rights of any director, officer, employee or
agent of the Corporation hereunder in respect of any occurrence or matter
arising prior to any such repeal or modification.
(G) The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the General Corporation Law of the State of Delaware. To the extent that
the Corporation maintains any policy or policies providing such insurance, each
such director or officer, and each such agent or employee to which rights to
indemnification have been granted as provided in paragraph (H) of this Bylaw,
shall be covered by such policy or policies in accordance with its or their
terms to the maximum extent of the coverage thereunder for any such director,
officer, employee or agent.
(H) The Corporation may, to the extent authorized from time to time by the
Board of Directors, grant rights to indemnification, and rights to be paid by
the Corporation the expenses incurred in defending any proceeding in advance of
its final disposition, to any employee or agent of the Corporation, and to
persons serving as employees or agents of another corporation, partnership,
joint venture, trust or other enterprise, at
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<PAGE> 144
the request of the Corporation, to the fullest extent of the provisions of this
Bylaw with respect to the indemnification and advancement of expenses of
directors and officers of the Corporation.
(I) If any provision or provisions of this Bylaw shall be held to be
invalid, illegal or unenforceable for any reason whatsoever: (1) the validity,
legality and enforceability of the remaining provisions of this Bylaw
(including, without limitation, each portion of any paragraph of this Bylaw
containing any such provision held to be invalid, illegal or unenforceable, that
is not itself held to be invalid, illegal or unenforceable) shall not in any way
be affected or impaired thereby; and (2) to the fullest extent possible, the
provisions of this Bylaw (including, without limitation, each such portion of
any paragraph of this Bylaw containing any such provision held to be invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
(J) For purposes of this Bylaw:
(1) "Disinterested Director" means a director of the Corporation who
is not and was not a party to the proceeding or matter in respect of which
indemnification is sought by the claimant.
(2) "Independent Counsel" means a law firm, a member of a law firm, or
an independent practitioner, that is experienced in matters of corporation
law and shall include any person who, under the applicable standards of
professional conduct then prevailing, would not have a conflict of interest
in representing either the Corporation or the claimant in an action to
determine the claimant's rights under this Bylaw.
(K) Any notice, request or other communication required or permitted to be
given to the Corporation under this Bylaw shall be in writing and either
delivered in person or sent by telecopy, telex, telegram, overnight mail or
courier service, or certified or registered mail, postage prepaid, return
receipt requested, to the Secretary of the Corporation and shall be effective
only upon receipt by the Secretary.
ARTICLE VII
CONTRACTS, PROXIES, ETC.
SECTION 7.1. Contracts. Except as otherwise required by law, the
Certificate of Incorporation or these Bylaws, any contracts or other instruments
may be executed and delivered in the name and on the behalf of the Corporation
by such officer or officers of the Corporation as the Board of Directors may
from time to time direct. Such authority may be general or confined to specific
instances as the Board may determine. The Chairman of the Board, the President
or any Vice President may execute bonds, contracts, deeds, leases and other
instruments to be made or executed for or on behalf of the Corporation. Subject
to any restrictions imposed by the Board of Directors or the Chairman of the
Board, the President or any Vice President of the Corporation may delegate
contractual powers to others under his jurisdiction, it being understood,
however, that any such delegation of power shall not relieve such officer of
responsibility with respect to the exercise of such delegated power.
SECTION 7.2. Proxies. Unless otherwise provided by resolution adopted by
the Board of Directors, the Chairman of the Board, the President or any Vice
President may from time to time appoint an attorney or attorneys or agent or
agents of the Corporation, in the name and on behalf of the Corporation, to cast
the votes which the Corporation may be entitled to cast as the holder of stock
or other securities in any other corporation or entity, any of whose stock or
other securities may be held by the Corporation, at meetings of the holders of
the stock or other securities of such other corporation, or to consent in
writing, in the name of the Corporation as such holder, to any action by such
other corporation or entity, and may instruct the person or persons so appointed
as to the manner of casting such votes or giving such consent, and may execute
or cause to be executed in the name and on behalf of the Corporation and under
its corporate seal or otherwise, all such written proxies or other instruments
as he may deem necessary or proper in the premises.
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<PAGE> 145
ARTICLE VIII
AMENDMENTS
SECTION 8.1. Amendments. These Bylaws may be altered, amended, or repealed
at any meeting of the Board of Directors or of the stockholders, provided notice
of the proposed change was given in the notice of the meeting and, in the case
of a meeting of the Board of Directors, in a notice given no less than twenty-
four hours prior to the meeting; provided, however, that, in the case of
amendments by stockholders, notwithstanding any other provisions of these Bylaws
or any provision of law which might otherwise permit a lesser vote or no vote,
but in addition to any affirmative vote of the holders of any particular class
or series of the stock required by law, the Certificate of Incorporation or
these Bylaws, the affirmative vote of the holders of at least 80 percent of the
voting power of the then outstanding Voting Stock, voting together as a single
class, shall be required in order for the stockholders to alter, amend or repeal
any provision of these Bylaws or to adopt any additional Bylaws.
C-12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DIAL
CORP CONSUMER PRODUCTS BUSINESS FORM 10 DATED JUNE 5, 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR
<FISCAL-YEAR-END> DEC-28-1996 DEC-30-1995
<PERIOD-END> MAR-30-1996 DEC-30-1995
<CASH> 4,326 5,884
<SECURITIES> 0 0
<RECEIVABLES> 43,335 43,473
<ALLOWANCES> 3,798 3,826
<INVENTORY> 159,270 153,813
<CURRENT-ASSETS> 239,990 235,063
<PP&E> 410,417 403,600
<DEPRECIATION> 206,278 202,524
<TOTAL-ASSETS> 806,032 798,405
<CURRENT-LIABILITIES> 194,521 189,400
<BONDS> 0 2,453
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 499,244 496,230
<TOTAL-LIABILITY-AND-EQUITY> 806,032 798,405
<SALES> 352,392 1,365,290
<TOTAL-REVENUES> 352,392 1,365,290
<CGS> 173,350 709,176
<TOTAL-COSTS> 173,350 709,176
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 4,603 23,360
<INCOME-PRETAX> 31,739 (47,016)
<INCOME-TAX> 12,131 (19,527)
<INCOME-CONTINUING> 19,608 (27,489)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 19,608 (27,489)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
