<PAGE> 1
FILE NO.
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 13, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
WATER PIK TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 25-1843384
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
660 NEWPORT CENTER DRIVE, SUITE 470
NEWPORT BEACH, CALIFORNIA 92660
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (949) 719-3700
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON WHICH
TITLE OF EACH CLASS TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
--------------------------------------- ------------------------------
<S> <C>
COMMON STOCK, PAR VALUE $.01 PER SHARE NEW YORK STOCK EXCHANGE
PREFERRED SHARE PURCHASE RIGHTS NEW YORK STOCK EXCHANGE
</TABLE>
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
(TITLE OF CLASS)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
WATER PIK TECHNOLOGIES, INC.
INFORMATION INCLUDED IN INFORMATION STATEMENT
AND INCORPORATED IN FORM 10 BY REFERENCE
<TABLE>
<CAPTION>
ITEM
NO. ITEM CAPTION LOCATION IN INFORMATION STATEMENT
- ---- ------------ ---------------------------------
<C> <S> <C>
1 Business........................................... "Summary," "Management's Discussion and
Analysis of Financial Condition and
Results of Operations" and "Our Business"
2 Financial Information.............................. "Management's Discussion and Analysis of
Financial Condition and Results of
Operations," "Our Historical Selected
Financial Data," "Our Unaudited Pro Forma
Consolidated Financial Information," and
"Index to Our Financial Statements"
3 Properties......................................... "Our Business"
4 Security Ownership of Certain Beneficial Owners and
Management......................................... "Security Ownership"
5 Directors and Officers............................. "Management" and "Liability and
Indemnification of Our Officers and
Directors"
6 Executive Compensation............................. "Management"
7 Certain Relationships and Related Transactions..... "Arrangements with ATI Relating to the
Spin-Off"
8 Legal Proceedings.................................. "Our Business"
9 Market Price of and Dividends on the Registrant's
Common Equity and Related Stockholder Matters...... Not Applicable
10 Recent Sales of Unregistered Securities............ Not Applicable
11 Description of Registrant's Securities to be
Registered......................................... "Description of Our Capital Stock"
12 Indemnification of Officers and Directors.......... "Liability and Indemnification of Our
Officers and Directors"
13 Financial Statements and Supplementary Data........ "Management's Discussion and Analysis of
Financial Condition and Results of
Operations," "Our Historical Selected
Financial Data," "Our Unaudited Pro Forma
Consolidated Financial Information," and
"Index to Our Financial Statements"
14 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................ Not Applicable
15 Financial Statements and Exhibits.................. "Index to Our Financial Statements" and
"Exhibit Index"
</TABLE>
<PAGE> 3
[ALLEGHENY TELEDYNE INCORPORATED LOGO]
, 1999
To Our Stockholders:
These are exciting times at your company. In January we announced our plans
to effect a major transformation of Allegheny Teledyne that included the
spin-offs of two of our business segments into independent, publicly-traded
companies. This transformation is now being implemented. The businesses formerly
comprising our Consumer segment will be a separate company known as Water Pik
Technologies, Inc. The businesses formerly comprising our Aerospace and
Electronics segment will now be a separate company known as Teledyne
Technologies Incorporated. The common stock of these companies will be traded on
the New York Stock Exchange under the symbols "PIK" and "TDY," respectively.
Concurrently with the spin-offs, we will change our name to "Allegheny
Technologies Incorporated." We also intend to effect a one-for-two reverse split
of our common stock.
The spin-offs will allow Allegheny Technologies to focus exclusively on its
strategic growth objectives as one of the largest and most diversified specialty
metals companies in the world. ATI's strong base of companies provides an
excellent foundation for enhanced operating synergies and for adding
strategically complementary acquisitions. At the same time, the spin-offs
provide each new company with a sharper focus, more efficient access to the
capital markets, and substantial growth opportunities in its respective areas of
expertise. By creating these new companies, we believe that we will unlock
greater value for their respective businesses and enhance their ability to
thrive in today's competitive marketplace.
Both of the spin-offs, which will be tax-free to U.S. stockholders and
which do not require any action on your part, will be completed on ,
1999. For every 20 shares of ATI common stock that you own as of the close of
business on that date, you will receive one share of Water Pik Technologies
common stock. For every seven shares of ATI common stock that you own as of the
close of business on , 1999, you will receive one share of Teledyne
Technologies common stock.
The enclosed Information Statement contains information about the spin-off
of Water Pik Technologies and about Water Pik Technologies' business, management
and financial performance. Information about the Teledyne Technologies spin-off
is being provided to you in a separate document. We encourage you to read all of
these materials carefully.
Very truly yours,
Richard P. Simmons
Chairman
<PAGE> 4
[WATER PIK TECHNOLOGIES, INC. LOGO]
, 1999
To Our Future Stockholders:
Welcome to Water Pik Technologies, Inc. On , 1999 you will
become a stockholder of our company. We hope that you share our enthusiasm about
our new company and its future.
Water Pik Technologies is a leader in the design, manufacturing and
marketing of a broad range of well recognized personal health care products and
pool and water-heating products. We believe that our Water Pik(R), Laars(R) and
Jandy(R) products have strong brand name recognition and a reputation for
quality and innovation among consumers.
For over 35 years, we have manufactured personal health care products, such
as The Original Shower Massage(R) product line, that are sold primarily under
our Water Pik(R) brand name. Our swimming pool and spa heaters, controls, valves
and accessories, many of which we have manufactured for over 40 years, are sold
primarily under our Laars(R) and Jandy(R) brand names. Our residential and
commercial water-heating systems, which we have manufactured for over 50 years,
are sold primarily under our Laars(R) brand name.
Our vision is to create a growth oriented consumer products company which
capitalizes on our well recognized brand names and develops innovative products
that provide outstanding value to our customers. I am excited to be working with
a management team that will provide high caliber, experienced leadership and
that is committed to achieving our business strategy.
Please read the enclosed material for more information about our company.
We look forward to your support and are pleased to have you share in this
exciting opportunity.
Very truly yours,
Michael P. Hoopis
President and Chief Executive Officer
<PAGE> 5
PRELIMINARY INFORMATION STATEMENT DATED SEPTEMBER 13, 1999 -- FOR INFORMATION
ONLY
INFORMATION STATEMENT
-------------------------
ALLEGHENY TELEDYNE INCORPORATED'S SPIN-OFF
OF
WATER PIK TECHNOLOGIES, INC.
-------------------------
We are furnishing you with this Information Statement in connection with
the spin-off by Allegheny Teledyne Incorporated ("ATI") of all of the
outstanding common stock of Water Pik Technologies, Inc. to stockholders of ATI.
We own and operate the businesses formerly comprising the Consumer segment of
ATI.
ATI will accomplish the spin-off by distributing all issued and outstanding
shares of our common stock to holders of record of ATI common stock. ATI will
distribute one share of our common stock for every 20 ATI shares held as of the
close of business on , 1999. The actual number of our shares to be
distributed will depend on the number of ATI shares outstanding on that date.
Concurrently with the spin-off, ATI will change its name to "Allegheny
Technologies Incorporated."
OWNING SHARES OF OUR COMMON STOCK WILL ENTAIL RISKS. PLEASE READ "RISK
FACTORS" BEGINNING ON PAGE 15.
NO VOTE OF STOCKHOLDERS IS REQUIRED IN CONNECTION WITH THE SPIN-OFF. WE ARE
NOT ASKING YOU FOR A PROXY AND YOU ARE NOT REQUESTED TO SEND US A PROXY.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
INFORMATION STATEMENT IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THIS INFORMATION STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES.
The date of this Information Statement is , 1999.
<PAGE> 6
[PHOTOGRAPHS OF WATER PIK TECHNOLOGIES PRODUCTS]
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary..................................................... 5
Risk Factors................................................ 15
Cautionary Statement as to Forward-Looking Statements....... 21
The Spin-Off................................................ 22
Reasons for the Spin-Off.................................. 22
Manner of Effecting the Spin-Off.......................... 23
Results of the Spin-Off................................... 23
Certain Federal Income Tax Consequences of the Spin-Off... 24
Listing and Trading of Our Common Stock................... 26
Our Historical Selected Financial Data...................... 28
Our Unaudited Pro Forma Consolidated Financial
Information............................................... 29
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 34
Our Business................................................ 44
Overview.................................................. 44
Industry Overview......................................... 44
Competitive Strengths..................................... 45
Our Business Strategy..................................... 46
Our Products.............................................. 48
Sales, Marketing and Distribution......................... 52
Competition............................................... 53
Research and Development.................................. 53
Manufacturing and Facilities.............................. 54
Patents and Trademarks.................................... 55
Seasonality............................................... 55
Legal Proceedings......................................... 55
Employees................................................. 55
Arrangements with ATI Relating to the Spin-Off.............. 56
Separation and Distribution Agreement..................... 56
Employee Benefits Agreement............................... 57
Tax Sharing and Indemnification Agreement................. 58
Interim Services Agreement................................ 59
Management.................................................. 60
Directors................................................. 60
Committees of Our Board of Directors...................... 61
Compensation of Our Directors............................. 63
</TABLE>
3
<PAGE> 8
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Executive Officers and Senior Management.................. 64
Historical Compensation of Executive Officers............. 65
Employment Agreements..................................... 66
Benefit Plans Following the Spin-Off...................... 67
Security Ownership.......................................... 70
Description of Our Capital Stock............................ 71
Common Stock.............................................. 71
Preferred Stock........................................... 72
Rights Plan............................................... 72
Certain Provisions of Our Governing Documents............. 74
Anti-takeover Legislation................................. 77
Transfer Agent and Registrar.............................. 77
Liability and Indemnification of Our Officers and
Directors................................................. 78
Elimination of Liability.................................. 78
Indemnification of Officers and Directors................. 78
Available Information....................................... 78
Index to Our Financial Statements........................... F-1
</TABLE>
4
<PAGE> 9
SUMMARY
This summary highlights selected information from this Information
Statement, but does not contain all the details concerning the spin-off,
including information that may be important to you. To better understand us and
the spin-off, you should carefully review this entire document. References to
"we," "us," "our", "Water Pik Technologies" or "the Company" mean Water Pik
Technologies, Inc. and our subsidiaries and divisions. References to "ATI" mean
Allegheny Teledyne Incorporated and its subsidiaries and divisions.
WHO WE ARE
Water Pik Technologies is a leader in the design, manufacturing and
marketing of a broad range of well recognized personal health care products and
pool and water-heating products, which include the following:
PERSONAL HEALTH CARE PRODUCTS
- Water Pik(R) shower heads, including The Original Shower Massage(R)
shower head and innovations such as The Flexible Shower Massage(TM) and
the Misting Massage(TM) shower heads
- Water Pik(R) oral health products such as the Water Pik(R) Oral
Irrigator, Water Pik(R) Dental Systems and the SenSonic(R) Plaque Removal
Instrument and a broad range of professional dental products
- Water Pik(R) water filtration products such as our Water Pik(R) and
Instapure(R) filtration systems
POOL AND WATER-HEATING PRODUCTS
- Laars(R) swimming pool and spa heaters, such as the Laars(R) LX
- Jandy(R) pool and spa digital controls
- Jandy(R) RayVac automatic pool cleaners
- Jandy(R) pool and spa plumbing products, such as valves, actuators, pumps
and filters
- Jandy(R) water features such as the Sheer Descent(R) Waterfall and the
Jandy(R) Fountain
- Jandy(R) Sheer Radiance(TM)fiber optic lighting for underwater perimeter
and landscaping uses
- Water Pik(TM) and Jandy(TM) pool and spa accessories, including cleaning
and maintenance supplies, white goods, ladders, solar reels, floating
lounges, pool toys and games
- Laars(R) residential and commercial water-heating systems, such as the
Laars(R) Endurance(TM) modulating boiler and the Mighty Max(R) series of
commercial boilers and water heaters
5
<PAGE> 10
We believe our Water Pik(R), Laars(R) and Jandy(R) products have strong
brand name recognition and a reputation for quality and innovation among
consumers. Through our extensive distribution network, our products are
distributed through more than 45,000 retail and wholesale outlets in North
America. Fiscal year sales in 1998 were $235.8 million and sales for the first
six months of 1999 were $118.5 million.
OUR COMPETITIVE STRENGTHS AND BUSINESS STRATEGY
Our vision is to create a growth oriented consumer products company which
capitalizes on our well recognized brand names and develops innovative products
that provide outstanding value to our customers.
COMPETITIVE STRENGTHS
We believe we are a strong competitor for the following reasons:
- Strong Brand Names
- Reputation for Innovative Products
- Extensive Distribution Network
- Proven Manufacturing Capabilities
- Experienced Management Team
OUR BUSINESS STRATEGY
To achieve our vision, we intend to pursue the following strategies:
- Accelerate Introduction of Innovative New Products
- Broaden Product Offerings
- Leverage Our Strong Brand Name Recognition
- Capitalize Upon Our Existing Distribution Channels
- Utilize Our Manufacturing Capabilities to Become a Lower Cost Producer
- Expand Our International Presence
- Leverage Our Customer Services Capabilities
- Pursue Selected Acquisitions and Strategic Alliances
QUESTIONS AND ANSWERS ABOUT US AND THE SPIN-OFF
Why are we being spun-off by
ATI? - After a strategic review completed in
1998, ATI concluded that its Consumer
segment, which will comprise our Company,
would be able to grow faster and more
effectively as a separate, independent
public company. As a separate company, we
will be better able to focus on our own
strategic priorities and to have more
effi-
6
<PAGE> 11
cient access to the capital markets than
we could as part of ATI. We believe that
the spin-off will enable our business to
expand and grow more quickly and
efficiently in the following ways:
- Our business has different
fundamentals, growth characteristics
and strategic priorities than the
specialty metals businesses currently
conducted by ATI. The separation of
our business from those of ATI will
enable us to focus on our own
strategic priorities, which should
increase our ability to capitalize on
growth opportunities for our business
and enhance our ability to respond
more quickly to changes in the
markets that we serve.
- The spin-off will enable us to have
direct access to the capital markets.
We intend to raise our own equity
capital that we will use to expand
our business by further developing
high quality, lower cost
manufacturing capabilities; pursuing
product line extensions for existing
categories; expanding into new
channels of distribution with
existing products; developing a
self-sustaining product development
process; and seeking complementary
acquisitions and alliances to enhance
our market presence.
- The spin-off will enable us to
recruit, retain and motivate key
employees by providing them with
stock-based compensation incentives
directly tied to the success of our
separated business.
What will I receive in the
spin-off? - ATI will distribute one share of our
common stock for every 20 shares of ATI
stock you owned as of , 1999.
For example, if you own 100 shares of ATI
common stock, you will receive five shares
of our common stock. You will continue to
own your ATI common stock. ATI intends to
effect a one-for-two reverse split of its
common stock immediately after the
spin-off.
What do I have to do to
participate
in the spin-off? - Nothing. No stockholder vote is required
for the spin-off.
How will ATI distribute Water
Pik
Technologies common stock to
me? - If you own ATI common stock on the record
date, the distribution agent will
automatically
7
<PAGE> 12
credit your shares of our common stock to
a book-entry account established to hold
your Water Pik Technologies common stock
on , 1999 and will mail you a
statement of your Water Pik Technologies
common stock ownership. Following the
spin-off you may retain your shares of
Water Pik Technologies common stock in
your book-entry account, sell them,
transfer them to a brokerage or other
account, or request a physical
certificate for whole shares. You will
not receive new ATI stock certificates.
What is the record date? - The record date is , 1999.
What if I hold my shares of ATI
stock through my stockbroker,
bank or other nominee? - If you hold your shares of ATI stock
through your stockbroker, bank or other
nominee, you are probably not a
stockholder of record and your receipt of
Water Pik Technologies common stock
depends on your arrangements with the
nominee that holds your shares of ATI
stock for you. We anticipate that
stockbrokers, banks and other nominees
generally will credit their customers'
accounts with Water Pik Technologies
common stock on or about , 1999,
but you should check with your
stockbroker, bank or other nominee.
Following the spin-off you may instruct
your stockbroker, bank or other nominee to
transfer your shares of Water Pik
Technologies common stock into your own
name to be held in book-entry form through
the direct registration system operated by
the distribution agent.
How will you treat fractional
shares? - If you are otherwise entitled to receive a
fractional share of Water Pik
Technologies common stock you will receive
cash instead of the fractional share.
Fractional shares will be aggregated and
sold by the distribution agent, which will
distribute to you your portion of the cash
proceeds promptly after the spin-off. No
interest will be paid on any cash
distributed instead of fractional shares.
What is Water Pik Technologies'
dividend policy? - We currently anticipate that no cash
dividends will be paid on Water Pik
Technologies common stock in order to
conserve cash for use in our business,
including possible future acquisitions.
Our board of directors will periodically
re-evaluate this dividend policy taking
into account our operating results,
capital needs and other factors.
8
<PAGE> 13
How does Water Pik Technologies
common stock differ from ATI
common stock? - Water Pik Technologies common stock and
ATI common stock will be different
securities and will not trade or be valued
alike. Water Pik Technologies and ATI will
be separate companies, with different
management, fundamentals, growth
characteristics and strategic priorities.
However, as with ATI common stock, Water
Pik Technologies common stock will have
the following characteristics:
- be fully paid and nonassessable;
- have one vote per share, with no
right to cumulate votes;
- carry no preemptive rights; and
- be accompanied by Preferred Share
Purchase Rights.
How will Water Pik Technologies
common stock trade? - We have applied to list Water Pik
Technologies common stock on the New York
Stock Exchange under the symbol "PIK" and
expect that regular trading will begin on
, 1999. A temporary form of
interim trading called "when-issued
trading" may occur for our common stock on
or before , 1999 and continue
through , 1999. If when-issued
trading occurs, the listing for Water Pik
Technologies common stock will be
accompanied by the "wi" letters on the New
York Stock Exchange. If when-issued
trading develops, you will be able to buy
Water Pik Technologies common stock in
advance of the , 1999 spin-off
and you may sell Water Pik Technologies
common stock in advance of such date on a
when-issued basis.
How will ATI common stock trade? - ATI stock will continue to trade "regular
way."
Is the spin-off taxable for
United
States federal income tax
purposes?
- No. ATI has received a tax ruling from the
Internal Revenue Service (or IRS) stating
that the spin-off will be tax-free to ATI
and to ATI's stockholders. The continuing
validity of the IRS tax ruling is subject
to various factual representations and
assumptions, including the completion of a
public offering of our common stock within
approximately one year of the spin-off.
See "Risk Factors" and "The Spin-Off --
Certain Federal Income Tax Consequences of
the Spin-Off."
9
<PAGE> 14
Will we be related to ATI in any
way
after the spin-off? - ATI will not own any of our common stock
after the spin-off.
- Until the third annual meeting of our
stockholders held after the spin-off, at
least a majority of the members of our
board of directors will also be members of
the board of directors of ATI. See
"Management."
- We will enter into the following
agreements with ATI prior to the spin-off:
- A Separation and Distribution
Agreement, which provides for the
various corporate transactions
required to separate our business
from other businesses of ATI and
governs various relationships and
circumstances that may arise between
us after the spin-off;
- An Employee Benefits Agreement, which
contains various agreements between
ATI and us concerning employees,
pension and employee benefit plans
and other compensation arrangements
for current and former employees of
our business;
- A Tax Sharing and Indemnification
Agreement allocating certain federal,
state, local and foreign tax
responsibilities and liabilities
between ATI and us; and
- An Interim Services Agreement under
which ATI will provide various
services to us for limited periods of
time following the spin-off.
See "Arrangements with ATI Relating to the
Spin-Off."
Are there any risks entailed in
owning our stock? - Yes. Stockholders should consider
carefully the matters discussed in the
section of this Information Statement
called "Risk Factors."
How can I obtain information
about
the separate spin-off of ATI's
Aerospace and Electronics
segment?
- The decision to spin-off Teledyne
Technologies Incorporated, the company
that owns and operates the businesses
formerly comprising ATI's Aerospace and
Electronics segment, was the result of the
strategic process that led to the decision
to spin-off Water Pik Technologies. You
will be provided with a separate
Information Statement describing the
spin-off of Teledyne Technologies
Incorporated.
10
<PAGE> 15
WHAT WE HAVE ALREADY DONE IN PREPARATION FOR THE SPIN-OFF
Board Appointments - As of the date of the spin-off, the board
of directors will consist of at least four
members, including Michael P. Hoopis, who
is our President and Chief Executive
Officer, and Robert P. Bozzone, W. Craig
McClelland and William G. Ouchi, who are
directors of ATI. Until the third annual
meeting of our stockholders held after the
spin-off, at least a majority of our
directors will also be members of the
board of directors of ATI. See
"Management."
Senior Management Appointments - Michael P. Hoopis is our President and
Chief Executive Officer. He has been the
President and Chief Executive Officer of
ATI's Consumer segment since October 1998.
Mr. Hoopis has over 25 years experience in
the manufacturing, distribution and
marketing of a wide variety of consumer
products. Robert A. Shortt will be our
Executive Vice President -- Sales,
Marketing and Business Development, Victor
C. Streufert will be our Vice
President -- Finance and Chief Financial
Officer, Richard P. Bisson will be our
Vice President -- Operations, and Robert
J. Rasp will continue as President of
Laars. These executives collectively have
a broad range of experience in marketing
and merchandising, financial management
and acquisitions, and multi-national
production and distribution.
New Credit Facility - Prior to the spin-off, ATI will establish
a five-year, $60 million secured term loan
and revolving credit facility. Prior to
the spin-off, ATI will use $40 million of
borrowings under this credit facility to
repay certain of its debt obligations. In
connection with the spin-off, we will
assume the repayment obligations for $40
million under this credit facility.
Following the spin-off, we will have up to
$20 million of borrowing availability
remaining under the credit facility,
subject to the terms of the facility.
11
<PAGE> 16
WHO CAN HELP ANSWER YOUR QUESTIONS
Stockholders of ATI with questions relating to the spin-off should contact:
Richard J. Harshman
Vice President, Investor Relations
and Corporate Communications
Allegheny Teledyne Incorporated
1000 Six PPG Place
Pittsburgh, Pennsylvania 15222-5479
412-394-2861
The distribution agent for our common stock in the spin-off and the
transfer agent and registrar for our common stock after the spin-off is:
ChaseMellon Shareholders Services, L.L.C.
85 Challenger Road
Overpeck Centre
Ridgefield Park, New Jersey 07660
1-XXX-XXX-XXXX
12
<PAGE> 17
OUR HISTORICAL SELECTED FINANCIAL DATA
The following table summarizes certain selected combined financial data for
Water Pik Technologies. The income statement data for each of the three years
ended December 31, 1998, 1997 and 1996 and the balance sheet data at December
31, 1998 and 1997 set forth below are derived from audited combined financial
statements of Water Pik Technologies. The income statement data for the six
months ended June 30, 1999 and 1998 and the years ended December 31, 1995 and
1994 and the balance sheet data at June 30, 1999 and 1998 and December 31, 1996,
1995 and 1994 set forth below are derived from unaudited combined financial
statements of Water Pik Technologies.
The historical selected combined financial data are not necessarily
indicative of the results of operations or financial position that would have
occurred if Water Pik Technologies had been a separate, independent public
company during the periods presented, nor are they indicative of our future
performance. Such historical data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our combined financial statements and the related notes included
in this Information Statement. Per share data has not been presented because
Water Pik Technologies was not a publicly held company during the periods
presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Sales.................... $118,462 $105,477 $235,788 $241,167 $215,675 $205,794 $194,213
Net income............... $ 4,136 $ 3,381 $ 11,495 $ 17,552 $ 7,353 $ 5,231 $ 6,556
Working capital.......... $ 26,812 $ 36,771 $ 35,778 $ 39,057 $ 41,914 $ 42,870 $ 40,314
Total assets............. $116,198 $109,276 $127,794 $119,974 $118,375 $ 97,348 $ 91,966
Stockholder's equity..... $ 77,573 $ 77,237 $ 88,822 $ 80,653 $ 85,335 $ 72,238 $ 71,127
</TABLE>
13
<PAGE> 18
PRO FORMA SELECTED CONSOLIDATED FINANCIAL DATA
The pro forma selected financial data set forth below are derived from the
unaudited pro forma consolidated financial information included in this
Information Statement. The pro forma data do not represent what our financial
condition or results of operations would have been had we operated as a
separate, independent public company, nor does it give effect to any events
other than those discussed in the related notes. The pro forma data also does
not project Water Pik Technologies' financial position or results of operations
as of any future date or for any future period.
The capital structure that existed when our business operated as a part of
ATI is not relevant because it does not reflect the expected future capital
structure of Water Pik Technologies as a separate, independent public company.
Accordingly, per share data for earnings has not been presented except for pro
forma earnings per share for the six months ended June 30, 1999 and the year
ended December 31, 1998. The basic weighted average shares outstanding were
calculated by applying the distribution ratio (one share of Water Pik
Technologies common stock for every 20 shares of ATI common stock) to ATI's
basic weighted average shares outstanding during each period.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, 1998
----------------- ------------------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Sales....................................... $118,462 $235,788
Net income.................................. $ 3,176 $ 9,575
Basic earnings per share.................... $ 0.33 $ 0.97
Weighted average shares
outstanding -- basic...................... 9,666 9,838
Diluted earnings per share.................. $ 0.33 $ 0.97
Weighted average shares
outstanding -- diluted.................... 9,667 9,838
Working capital............................. $ 26,812
Total assets................................ $119,345
Long-term debt.............................. $ 40,000
Stockholders' equity........................ $ 30,970
</TABLE>
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RISK FACTORS
You should carefully consider all the information we have included in this
Information Statement. In particular, you should carefully consider the risk
factors described below. In addition, please read "Cautionary Statement as to
Forward-Looking Statements" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations," where we describe additional
uncertainties associated with our business and certain forward-looking
statements included in this Information Statement.
WE MAY BE UNABLE TO SUCCESSFULLY ENHANCE OUR EXISTING PRODUCTS AND DEVELOP AND
MARKET ENHANCED OR NEW PRODUCTS IN A TIMELY AND COST-EFFECTIVE MANNER.
Our growth and future success will depend upon our ability to enhance our
existing products and to develop and market enhanced or new products in a timely
and cost effective manner. We may not be successful in developing or marketing
enhanced or new products, and our products may not be accepted by the market.
The resulting level of sales of any of our enhanced or new products may not
justify the costs associated with their development and marketing.
WE MAY NOT HAVE SUFFICIENT CAPITAL RESOURCES TO FUND PLANNED PRODUCT LINE
EXTENSIONS, NEW PRODUCT DEVELOPMENT, CAPITAL EXPENDITURES AND POSSIBLE
ACQUISITIONS.
We cannot satisfy all of our planned product line extensions, new product
development plans, capital expenditure programs and possible acquisitions
without additional capital. We believe that our working capital and general
financing requirements for our existing business can be satisfied from the
anticipated cash flow from operations and available borrowings under the credit
facility. We plan to raise additional capital through a public offering of our
common stock. In addition, we are required to complete a public offering of our
common stock in order for the representations underlying the IRS tax ruling to
remain valid.
Our ability to raise additional capital will depend on a variety of
factors, some of which will not be within our control, including investor
perceptions of us, our business and the industries in which we operate, and
general economic and market conditions. We may be unable to successfully raise
needed capital and the amount of net proceeds that will be available to us may
not be sufficient to meet our needs. Failure to successfully raise needed
capital on a timely basis or to obtain any needed additional financing could
have a material adverse effect on our business, results of operations and
financial condition.
THE FAILURE OF OUR GROWTH STRATEGY COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR
BUSINESS.
As part of our growth strategy, we plan to:
- develop high quality, lower cost manufacturing capabilities;
- pursue product line extensions for existing categories;
- expand into new channels of distribution with existing products;
- develop a self-sustaining product development process; and
- seek complementary acquisitions and alliances to enhance our market
presence.
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<PAGE> 20
We cannot assure you that our strategic objectives will be realized or, if
realized, will result in increased revenue, profitability or market presence.
Executing our strategy may also place a strain on our production,
information systems and other resources. To manage growth effectively, we must
maintain a high level of manufacturing quality and efficiency, continue to
enhance our operational, financial and management systems, including our
database management, inventory control and distribution systems, and expand,
train and manage our employee base. We cannot assure you that we will be able to
effectively manage our expansion in any one or more of these areas, and any
failure to do so could have a material adverse effect on our business, results
of operations and financial condition.
INCREASING COMPETITION COULD REDUCE THE DEMAND FOR OUR PRODUCTS.
The markets in which we operate are highly competitive. We compete with
domestic and international companies. Among our most significant competitors are
larger companies, such as The Gillette Company, which manufactures Braun(R)
products; The Clorox Company, which manufactures Brita(R) products; Procter &
Gamble Co., after its pending acquisition of the manufacturer of PUR(R)
products; Essef Corporation, which includes PacFab, Inc./East; and United
Dominion Industries, Ltd., whose subsidiary Weil-McLain manufactures boiler
products. These companies have greater financial and technical resources than we
do and may be willing to commit significant resources to protect their own
market shares or to capture market share from us. As a result, we may need to
incur greater costs than previously incurred for trade and consumer promotions
and advertising to preserve or improve market share and to introduce and
establish new products and line extensions. At the same time, we may need to
undertake additional production related cost-cutting measures to enable us to
respond to competitors' price reductions and marketing efforts without reducing
our margins. We cannot assure you that we will be able to make such additional
expenditures or implement such cost-cutting measures or that, if made or
implemented, they will be effective.
IF WE FAIL TO UNDERTAKE A PUBLIC OFFERING OF OUR COMMON STOCK WITHIN ONE YEAR
FOLLOWING THE SPIN-OFF, WE WILL BE IN BREACH OF OUR AGREEMENTS WITH ATI.
ATI has received a tax ruling from the IRS stating that the spin-off will
be tax-free to ATI and to ATI's stockholders. One of the assumptions underlying
the tax ruling is that we will undertake a public offering of our common stock
within one year following the spin-off and use the anticipated gross proceeds of
approximately $50 million (less associated costs) for further development of
high quality, lower cost manufacturing capabilities, for product line
extensions, to expand channels of distribution, to develop a self-sustaining
product development process, and for acquisitions and/or joint ventures.
Pursuant to the Separation and Distribution Agreement and the Tax Sharing and
Indemnification Agreement, we have also agreed with ATI to undertake such a
public offering. Our failure to do so would be a breach of those agreements and
subject us to substantial liabilities.
WE ARE DEPENDENT ON CERTAIN KEY CUSTOMERS AND THE GENERAL RETAIL ENVIRONMENT.
Our top ten customers accounted for 33% of our net sales in 1998. South
Central Pool and Wal-Mart Stores Inc. were our largest customers, accounting for
9.1% and 7.4%, respectively, of our net sales in 1998.
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<PAGE> 21
We face pricing pressures from our trade customers. Because of the highly
competitive retail environment, retailers have increasingly sought to reduce
inventory levels and obtain pricing concessions from vendors. From time to time,
we may need to reduce the prices for some of our products to respond to
competitive and consumer pressures. We are also subject to the risk that
high-volume customers could seek alternative pricing concessions or better trade
terms. The loss of, or a substantial decrease in the volume of purchases by,
South Central Pool or Wal-Mart Stores Inc. or any of our other top customers
could have a material adverse effect on our business, results of operations and
financial condition.
Our performance also is dependent upon the general health of the retail
environment. Changes in that environment and the financial difficulties of
retailers could have a material adverse effect on our business, results of
operations and financial condition.
ACQUISITIONS INVOLVE INHERENT RISKS THAT MAY ADVERSELY AFFECT OUR OPERATING
RESULTS AND FINANCIAL CONDITION.
Our growth strategy includes possible acquisitions. Acquisitions involve
various inherent risks, such as:
- our ability to assess accurately the value, strengths, weaknesses,
contingent and other liabilities and potential profitability of
acquisition candidates;
- the potential loss of key personnel of an acquired business;
- our ability to integrate acquired businesses and to achieve identified
financial and operating synergies anticipated to result from an
acquisition; and
- unanticipated changes in business and economic conditions affecting an
acquired business.
We recently completed the acquisition of substantially all the assets of
Les Agences Claude Marchand Inc., doing business in Canada as Olympic Pool
Accessories, a manufacturer and distributor of pool accessories located in
Montreal, Quebec. We may be unable to successfully complete the integration of
Olympic Pool Accessories into our operations.
OUR BUSINESS IS HIGHLY SEASONAL WHICH MAY ADVERSELY AFFECT OUR OPERATING RESULTS
AND FINANCIAL CONDITION.
Our business is highly seasonal, with operating results varying from
quarter to quarter. Both our personal health care products and our water-heating
products have historically experienced higher sales in the third and fourth
quarters of each year due to the holiday season and cooler weather. Our swimming
pool and spa equipment products have historically experienced higher sales in
the second and fourth quarters of each year as consumers purchase such products
in anticipation of and during the warmer spring and summer months.
HAVING NO OPERATING HISTORY AS AN INDEPENDENT COMPANY MAKES IT DIFFICULT TO
PREDICT OUR PROFITABILITY AS A STAND-ALONE COMPANY.
We do not have an operating history as an independent company. Our business
has historically relied on ATI for various financial, managerial and
administrative services and has been able to benefit from the earnings,
financial resources, assets and cash flows of
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<PAGE> 22
ATI's other businesses. After the spin-off, ATI will only be obligated to
provide us with the assistance and services set forth in the Interim Services
Agreement. See "Arrangements with ATI Relating to the Spin-Off."
Following the spin-off, we will incur costs and expenses associated with
the management of a public company that we expect will be greater than the
amounts reflected in our historical financial statements. We will also incur
interest expense and be subject to the other requirements associated with our
credit facility. While we have been profitable as part of ATI, we cannot assure
you that, as a stand-alone company, our future profits will be comparable to
historical operating results before the spin-off.
We also will need to dedicate significant managerial and other resources at
the corporate level to establish the infrastructure and systems necessary for us
to operate as an independent public company. While we believe that we have
sufficient management resources, we cannot assure you that this will be the case
or that we will successfully implement our operating and growth initiatives.
Failure to implement these initiatives successfully could have a material
adverse effect on our business, results of operations and financial condition.
WE ARE SUBJECT TO THE RISKS ASSOCIATED WITH INTERNATIONAL SALES.
During 1998, international sales accounted for approximately 16% of our
total sales, of which approximately 7% were sales made in Canada. We anticipate
that future international sales will increase and account for a more significant
percentage of our sales. Risks associated with such increased international
sales include:
- political and economic instability;
- export controls;
- changes in legal and regulatory requirements;
- U.S. and foreign government policy changes affecting the markets for our
products;
- changes in tax laws and tariffs;
- the impact of the transition to a common European currency;
- convertibility and transferability of international currencies; and
- exchange rate fluctuations (which may affect sales to international
customers and the value of and profits earned on international sales when
converted into dollars).
Any of these factors could have a material adverse effect on our business,
results of operations and financial condition. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
OUR INABILITY TO RETAIN KEY PERSONNEL COULD HAVE A MATERIAL ADVERSE EFFECT ON
OUR FUTURE SUCCESS.
Our future success depends to a significant extent upon the continued
service of our executive officers, many of whom recently joined us, and other
key management and technical personnel, and on our ability to continue to
attract, retain and motivate qualified personnel. The loss of the services of
one or more of our key employees or our failure to attract, retain and motivate
qualified personnel could have a material adverse effect on our business,
results of operations and financial condition. In particular, the loss of the
services
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<PAGE> 23
of Michael P. Hoopis, our President and Chief Executive Officer, could
materially and adversely affect us.
PRODUCT LIABILITY CLAIMS OR PRODUCT RECALLS COULD HAVE A MATERIAL ADVERSE EFFECT
ON OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
As a manufacturer and distributor of consumer products, our results of
operation are susceptible to adverse publicity regarding the quality or safety
of our products. In particular, product liability claims challenging the safety
of our products may result in a decline in sales for a particular product, which
could adversely affect our results of operations. This could be true even if the
claims themselves are ultimately settled for immaterial amounts. We cannot
assure you that this type of adverse publicity will not occur or that product
liability claims will not be made in the future.
In addition, we are subject to the Consumer Products Safety Act which
empowers the Consumer Products Safety Commission to exclude from the market
products that are found to be unsafe or hazardous. Under certain circumstances,
the Consumer Products Safety Commission could require us to repurchase or recall
one or more of our products. Laws regulating certain consumer products exist in
some cities and states, as well as in other countries in which we sell our
products, and more restrictive laws and regulations may be adopted in the
future.
If the Consumer Products Safety Commission would require us to recall or
repurchase our products, or if we would institute a voluntary recall of our
products, the repurchase or recall could be costly to us financially and could
damage our reputation. If we were required to remove, or we voluntarily removed,
our products from the market, our reputation could be tarnished and we might
have large quantities of finished products that could not be sold. This could
have a material adverse effect on our business, results of operations and
financial condition.
FAILURE TO PROTECT OUR INTELLECTUAL PROPERTY COULD REDUCE OUR COMPETITIVENESS.
Our intellectual property rights are important to our business. We rely
primarily upon a combination of trademark, copyright, know-how, trade secrets,
proprietary information, patent and contractual restrictions to protect our
intellectual property rights. We believe that such measures afford only limited
protection and, accordingly, we cannot assure you that the steps taken by us to
protect these intellectual property rights will be adequate to prevent
misappropriation of our technology or the independent development of similar
technology by others. The costs associated with protecting our intellectual
property rights, including litigation costs, may be material. We also cannot be
sure that we will be able to successfully assert our intellectual property
rights or that these rights will not be invalidated, circumvented or challenged.
In addition, the laws of some foreign countries in which our products are sold
do not protect our intellectual property rights to the same extent as the laws
of the United States. A failure by us or our inability to protect our
intellectual property rights, and a successful intellectual property challenge
or infringement proceeding against us, could make us less competitive and have a
material adverse effect on our business, operating results and financial
condition.
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<PAGE> 24
SINCE THERE HAS BEEN NO PRIOR MARKET FOR OUR COMMON STOCK IT IS IMPOSSIBLE TO
PREDICT THE PRICES AT WHICH OUR COMMON STOCK WILL TRADE IN THE OPEN MARKET.
There has been no prior trading market for our common stock, and we cannot
predict the prices at which trading in our common stock will occur after the
spin-off. The trading prices for our common stock could fluctuate significantly.
SUBSTANTIAL SALES OF OUR COMMON STOCK FOLLOWING THE SPIN-OFF OR THE PROSPECT OF
THE REQUIRED PUBLIC OFFERING COULD CAUSE A DECREASE IN THE MARKET PRICE OF OUR
COMMON STOCK.
Substantially all of the shares of our common stock distributed in the
spin-off will be eligible for immediate resale in the public market. In
transactions similar to the spin-off, it is not unusual for a significant
redistribution of shares to occur during the first few weeks or even months
following completion of the transaction because of the differing objectives and
strategies of investors, including mutual funds, who acquire shares of common
stock in the transaction. In addition, the prospect of our being required to
undertake a public offering of our common stock within one year following the
spin-off may adversely affect the market price of our common stock.
We are not able to predict what the market price for our common stock will
be following the spin-off. Sales of substantial amounts of our common stock in
the public market during this period, the perception that any redistribution has
not been completed, or the prospect of our having to undertake a public offering
of our common stock following the spin-off, could materially adversely affect
the market price of our common stock.
FAILURE OF REPRESENTATIONS AND ASSUMPTIONS UNDERLYING THE IRS TAX RULING COULD
CAUSE THE SPIN-OFF NOT TO BE TAX-FREE TO ATI OR TO ATI'S STOCKHOLDERS AND MAY
REQUIRE US TO INDEMNIFY ATI.
While the tax ruling relating to the qualification of the spin-off as a
tax-free distribution within the meaning of Section 355 of the Internal Revenue
Code of 1986, as amended (the "Code"), generally is binding on the IRS, the
continuing validity of the tax ruling is subject to certain factual
representations and assumptions, including the assumption that we will complete
a required public offering of our common stock within one year following the
spin-off, and use the anticipated gross proceeds of approximately $50 million
(less associated costs) to further develop high quality, lower cost
manufacturing capabilities, extend our existing product lines, expand our
channels of distribution, develop a self-sustaining product development process,
and for acquisitions and/or joint ventures. ATI and Water Pik Technologies are
not aware of any facts or circumstances that would cause such representations
and assumptions to become untrue.
If the spin-off were not to qualify as a tax-free distribution within the
meaning of Section 355 of the Code, ATI would recognize taxable gain equal to
the amount by which the fair market value of the Water Pik Technologies common
stock distributed to ATI's stockholders exceeded ATI's tax basis in our common
stock. In addition, the distribution of our common stock to each ATI stockholder
would generally be treated as taxable in an amount equal to the fair market
value of the Water Pik Technologies common stock they receive.
If the spin-off qualified as a distribution under Section 355 of the Code
but was disqualified as tax-free to ATI because of certain post-spin-off
circumstances (such as an
20
<PAGE> 25
acquisition of Water Pik Technologies), ATI would recognize taxable gain as
described above, but the distribution of our common stock in the spin-off would
generally be tax-free to each ATI stockholder.
The Tax Sharing and Indemnification Agreement also provides that we will be
responsible for any taxes imposed on and other amounts paid by ATI, its agents
and representatives and its stockholders as a result of the failure of the
spin-off to qualify as a tax-free distribution within the meaning of Section 355
of the Code if the failure or disqualification is caused by certain
post-spin-off actions by or with respect to us (including our subsidiaries) or
our stockholders. For example, the acquisition of Water Pik Technologies by a
third party during the two-year period following the spin-off could cause such a
failure or disqualification. If any of the taxes or other amounts described
above were to become payable by us, the payment could have a material adverse
effect on our business, results of operations, financial position, and cash flow
and could exceed our net worth by a substantial amount. See "Arrangements with
ATI Relating to the Spin-Off -- Tax Sharing and Indemnification Agreement."
PROVISIONS OF OUR GOVERNING DOCUMENTS, APPLICABLE LAW AND THE TAX SHARING AND
INDEMNIFICATION AGREEMENT COULD HAVE THE EFFECT OF DELAYING OR PREVENTING OUR
CHANGE IN CONTROL, WHICH MAY HAVE AN ADVERSE EFFECT ON THE MARKET PRICE OF OUR
COMMON STOCK.
Our Certificate of Incorporation, Bylaws and Rights Agreement, and the
General Corporation Law of the State of Delaware contain several provisions that
could make the acquisition of control of Water Pik Technologies more difficult
if our board of directors has not approved the transaction. See "Description of
Our Capital Stock -- Rights Plan," "-- Certain Provisions of Our Governing
Documents," and "-- Anti-takeover Legislation." Certain tax aspects of the
spin-off could also discourage an acquisition of control of Water Pik
Technologies for some period of time. For example, the acquisition of Water Pik
Technologies by a third party during the two-year period following the spin-off
could result in the spin-off not qualifying as a tax-free distribution within
the meaning of Section 355 of the Code and trigger indemnification obligations
of Water Pik Technologies under the Tax Sharing and Indemnification Agreement.
See "Arrangements with ATI Relating to the Spin-Off -- Tax Sharing and
Indemnification Agreement."
CAUTIONARY STATEMENT AS TO FORWARD-LOOKING STATEMENTS
We caution you that this document contains disclosures that are
forward-looking statements. All statements regarding ATI's or Water Pik
Technologies' expected future financial condition, results of operations, cash
flows, dividends, financing plans, business strategy, budgets, projected costs
or cost savings, capital expenditures, competitive positions, growth
opportunities for existing products or products under development, benefits from
new technology, plans and objectives of management for future operations and
markets for stock are forward-looking statements. In addition, forward-looking
statements include statements in which we use words such as "expect," "believe,"
"anticipate," "intend," or similar expressions. Although we believe the
expectations reflected in such forward-looking statements are based on
reasonable assumptions, we cannot assure you that such expectations will prove
to have been correct, and actual results may differ materially from those
reflected in the forward-looking statements.
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Factors that could cause our actual results to differ from the expectations
reflected in the forward-looking statements in this document include those set
forth in "Risk Factors."
Neither Water Pik Technologies nor ATI has any intention of or obligation
to update forward-looking statements, even if new information, future events or
other circumstances make them incorrect or misleading.
THE SPIN-OFF
REASONS FOR THE SPIN-OFF
After a strategic review completed in 1998, ATI concluded that its Consumer
segment, which will comprise our Company, would be able to grow faster and more
effectively as a separate, independent public company. As a separate company, we
will be better able to focus exclusively on our own strategic priorities and
have more efficient access to the capital markets than we could as part of ATI.
This Information Statement relates only to distribution of the common stock
of Water Pik Technologies, whose business is that formerly comprising ATI's
Consumer segment. A separate Information Statement will be provided to you
regarding the spin-off of Teledyne Technologies Incorporated, the company that
owns and operates the businesses formerly comprising ATI's Aerospace and
Electronics segment.
We believe that the spin-off will enable our business to expand and grow
more quickly and efficiently in the following ways:
- Our business has different fundamentals, growth characteristics and
strategic priorities than the specialty metals businesses currently
conducted by ATI. The separation of our business from those of ATI will
allow us to focus on our own strategic priorities, which should increase
our ability to capitalize on growth opportunities for our business and
enhance our ability to respond more quickly to changes in the markets
that we serve.
- The spin-off will enable us to have direct access to the capital markets
to finance the expansion of our business and support our future growth.
More specifically, we intend to raise our own equity capital to:
- further develop high quality, lower cost manufacturing capabilities;
- pursue product line extensions for existing categories;
- expand into new channels of distribution with existing products;
- develop a self-sustaining product development process; and
- seek acquisitions and/or joint ventures, and acquire product lines
and/or businesses that complement our existing business to attain
critical mass.
- The spin-off will enable us to recruit, retain and motivate key employees
by providing them with stock-based compensation incentives directly tied
to the success of our business.
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<PAGE> 27
MANNER OF EFFECTING THE SPIN-OFF
ATI will effect the spin-off by distributing all issued and outstanding
shares of our common stock to holders of record of ATI common stock as of the
close of business on , 1999. The spin-off will be made on the basis
of one share of our common stock for every 20 shares of ATI common stock held.
Since we will use a direct registration system to implement the spin-off,
the distribution agent will credit the shares of Water Pik Technologies common
stock distributed on the date of the spin-off to book-entry accounts established
for each ATI stockholder and will mail an account statement to each stockholder
stating the number of whole shares of Water Pik Technologies common stock
received by such stockholder in the spin-off. Following the spin-off,
stockholders may request that their shares be transferred to a brokerage or
other account or that physical stock certificates be issued for their shares of
Water Pik Technologies common stock.
If a stockholder is otherwise entitled to receive a fractional share of
Water Pik Technologies common stock, that stockholder will instead receive cash.
The distribution agent will, promptly after the date of the spin-off, aggregate
all fractional share interests in Water Pik Technologies common stock with those
of other similarly situated stockholders and sell such fractional share
interests in Water Pik Technologies common stock at then-prevailing prices. The
distribution agent will distribute the cash proceeds to stockholders entitled to
such proceeds pro rata based upon their fractional interests in Water Pik
Technologies common stock. No interest will be paid on any cash distributed
instead of fractional shares.
No owner of ATI common stock will be required to pay any cash or other
consideration for shares of Water Pik Technologies common stock received in the
spin-off or to surrender or exchange any shares of ATI common stock to receive
shares of Water Pik Technologies common stock. The actual total number of shares
of Water Pik Technologies common stock to be distributed will depend on the
number of shares of ATI common stock outstanding on , 1999.
Participants in the ATI Investor Services Program will be credited with the
number of shares (including fractional shares) of Water Pik Technologies common
stock distributed in the spin-off in respect of the ATI common stock held in
their accounts.
NO CONSIDERATION WILL BE PAID BY STOCKHOLDERS OF ATI FOR THE SHARES OF OUR
COMMON STOCK TO BE RECEIVED BY THEM IN THE SPIN-OFF, AND ATI STOCKHOLDERS WILL
NOT BE REQUIRED TO SURRENDER OR EXCHANGE SHARES OF ATI COMMON STOCK OR TAKE ANY
OTHER ACTION IN ORDER TO RECEIVE OUR COMMON STOCK.
RESULTS OF THE SPIN-OFF
After the spin-off, we will be an independent, separate public company. Our
management, fundamentals, growth characteristics and strategic priorities will
be different from those of ATI.
Concurrently with the spin-off, ATI will change its name to "Allegheny
Technologies Incorporated."
The number and identity of our stockholders immediately after the spin-off
will be the same as the number and identity of ATI's stockholders at the close
of business on
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, 1999. Immediately after the spin-off, we expect to have approximately
holders of record of our common stock and approximately shares of our
common stock outstanding, based on the number of record stockholders and issued
and outstanding shares of ATI common stock as of the close of business on
, 1999, and on the distribution ratio of one share of our common
stock for every 20 shares of ATI common stock owned by ATI stockholders at that
time.
As with ATI common stock, the shares of Water Pik Technologies common stock
will:
- be fully paid and nonassessable;
- have one vote per share, with no right to cumulate votes;
- carry no preemptive rights; and
- be accompanied by Preferred Share Purchase Rights.
Water Pik Technologies common stock and ATI common stock, however, will be
different securities and will not trade or be valued alike. See "Description of
Our Capital Stock."
We have applied to have our common stock approved for listing on the New
York Stock Exchange under the trading symbol "PIK."
The spin-off will not, in and of itself, affect the number of outstanding
shares of ATI common stock or the rights associated with these shares. ATI
intends to effect a one-for-two reverse split of its common stock immediately
following the spin-off.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE SPIN-OFF
The following is a summary of the material United States federal income tax
consequences of the spin-off. It is not intended to address the tax consequences
applicable to every stockholder. In particular, this summary does not cover
state, local, or international income and other tax consequences. Accordingly,
stockholders are strongly encouraged to consult their individual tax advisors
for information on the tax consequences applicable to their individual
situations.
ATI has received a tax ruling from the IRS that states that the spin-off
will qualify as a tax-free distribution under Section 355 of the Code. In
accordance with this tax ruling:
- No gain or loss will be recognized by ATI upon the distribution of Water
Pik Technologies common stock to ATI's stockholders.
- No gain or loss will be recognized by ATI's stockholders as a result of
your receipt of our common stock in the spin-off except to the extent
that you receive cash instead of a fractional share.
- If you receive cash instead of a fractional share of our common stock in
the spin-off, you will be treated as having received the fractional share
in the spin-off and then having sold the fractional share. Accordingly,
you will recognize gain or loss equal to the difference between the cash
you receive and the amount of tax basis allocable (as described below) to
the fractional share. The gain or loss will be capital gain or loss if
you would have held the fractional share as a capital asset.
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- Your tax basis in your ATI common stock will be apportioned among the ATI
common stock, the common stock of Water Pik Technologies and the common
stock of Teledyne Technologies you receive in the spin-offs on the basis
of the relative fair market values of the shares at the time of the
spin-offs. Promptly following the spin-off, ATI will send a letter to the
holders of ATI common stock who receive our common stock in the spin-off
that will explain the allocation of tax basis among ATI common stock, the
Water Pik Technologies common stock and the Teledyne Technologies common
stock you receive in the spin-offs.
- The holding period of Water Pik Technologies common stock that you
receive in the spin-off will be the same as the holding period of ATI
common stock with respect to which you received our common stock so long
as you hold the ATI common stock as a capital asset on the date of the
spin-off.
The tax ruling relating to the qualification of the spin-off as a tax-free
distribution within the meaning of Section 355 of the Code generally is binding
on the IRS. However, the continuing validity of the tax ruling is subject to
certain factual representations and assumptions, including completion of the
required public offering of our common stock within one year of the spin-off,
and the use of the anticipated gross proceeds of approximately $50 million (less
associated costs) to further develop high quality, lower cost manufacturing
capabilities, extend our existing product lines, expand our channels of
distribution, develop a self-sustaining development process, and for
acquisitions and/or joint ventures.
If the spin-off were not to qualify as a tax-free distribution within the
meaning of Section 355 of the Code, ATI would recognize taxable gain equal to
the amount by which the fair market value of our common stock distributed to
ATI's stockholders exceeds ATI's tax basis in the our common stock. In addition,
each ATI stockholder who receives our common stock in the spin-off would
generally be treated as having received a taxable distribution in an amount
equal to the fair market value of our common stock. If the spin-off qualified
under Section 355 of the Code but was disqualified as tax-free to ATI because of
certain post-spin-off circumstances, ATI would recognize taxable gain as
described above but the spin-off would generally be tax-free to each ATI
stockholder as described in the preceding paragraph. See "Risk Factors."
THE FOREGOING SUMMARIZES THE MATERIAL UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES OF THE SPIN-OFF UNDER CURRENT LAW AND IS INTENDED FOR GENERAL
INFORMATION ONLY. YOU SHOULD CONSULT YOUR TAX ADVISOR AS TO THE PARTICULAR
CONSEQUENCES OF THE SPIN-OFF TO YOU, INCLUDING THE APPLICATION OF STATE, LOCAL
AND INTERNATIONAL TAX LAWS, AND AS TO POSSIBLE CHANGES IN TAX LAW THAT MAY
AFFECT THE TAX CONSEQUENCES DESCRIBED ABOVE.
The Tax Sharing and Indemnification Agreement provides that we are not to
take any action inconsistent with, or fail to take any action required by, the
request for the tax ruling or the tax ruling unless ATI has given its prior
written consent or, in certain circumstances, a supplemental ruling that permits
such action is obtained. The Tax Sharing and Indemnification Agreement also
provides that we will be responsible for any taxes imposed on, or other amounts
paid by, ATI, its agents and representatives and its stockholders as a result of
the failure of the spin-off to qualify as a tax-free distribution within the
meaning of Section 355 of the Code if the failure or disqualification is
attributable to certain post-spin-off actions or failures to act by or with
respect to us (including our subsidiaries) or our stockholders, such as the
acquisition of Water Pik Technologies by a third party at a time and in a manner
that would cause such a failure or
25
<PAGE> 30
disqualification. See "Arrangements with ATI Relating to the Spin-Off -- Tax
Sharing and Indemnification Agreement."
LISTING AND TRADING OF OUR COMMON STOCK
Currently, there is no public market for our common stock. We have applied
to have our common stock approved for listing on the New York Stock Exchange
under the trading symbol "PIK."
We expect that a when-issued trading market for our common stock will
develop on or before the close of business on , 1999.
We expect that the New York Stock Exchange will determine that ATI common
stock traded on or after , 1999, the second trading day prior to
the record date for the spin-off, will be traded "regular way" (with due bills
attached). As a result, after that trading day, ATI common stock will have due
bills attached entitling the buyer to receive and requiring the seller to
deliver the shares of Water Pik Technologies common stock to be distributed in
the spin-off as well as the underlying shares of ATI common stock.
Beginning on the first New York Stock Exchange trading day after the date
of the spin-off, we expect that trading of ATI common stock "regular way" (with
due bills attached) will no longer be permitted and ATI common stock will trade
"regular way" only, entitling the buyer to receive only ATI common stock.
Until our common stock is fully distributed and an orderly market develops,
the prices at which trading in our common stock occurs may fluctuate
significantly and may be lower or higher than the price that would be expected
for a fully-distributed issue. The prices at which our common stock will trade
following the spin-off will be determined by the marketplace and may be
influenced by many factors, including:
- the depth and liquidity of the market for our common stock;
- investor perceptions of us, our business and the markets in which we
operate;
- our dividend policy;
- our financial results; and
- general economic and market conditions.
Substantially all of the shares of our common stock that are distributed in
the spin-off will be eligible for immediate resale. In transactions similar to
the spin-off, it is not unusual for a significant redistribution of shares to
occur during the first few weeks or even months following completion of the
transaction because of the differing objectives and strategies of investors who
acquire shares of our common stock in the transaction. We are not able to
predict whether substantial amounts of our common stock will be sold in the open
market following the spin-off or what effect these sales may have on prices at
which our common stock may trade. Sales of substantial amounts of our common
stock in the public market during this period, or the perception that any
redistribution has not been completed, or the prospect of our having to
undertake a public offering of our common
26
<PAGE> 31
stock following the spin-off could materially adversely affect the market price
of our common stock.
Generally, the shares of our common stock that are distributed in the
spin-off will be freely transferable, except for securities received by persons
deemed to be our "affiliates" under the Securities Act of 1933, as amended
("Securities Act"). Persons who may be deemed to be our affiliates after the
spin-off generally include individuals or entities that control, are controlled
by, or are in common control with, us, including our directors. Persons who are
our affiliates will be permitted to sell shares of our common stock they receive
in the spin-off only pursuant to an effective registration statement under the
Securities Act or an exemption from the registration requirements of the
Securities Act, such as in accordance with the requirements of Rule 144 under
the Securities Act.
27
<PAGE> 32
OUR HISTORICAL SELECTED FINANCIAL DATA
The following table summarizes certain selected combined financial data for
Water Pik Technologies. The income statement data for each of the three years
ended December 31, 1998, 1997 and 1996 and the balance sheet data at December
31, 1998 and 1997 set forth below are derived from audited combined financial
statements of Water Pik Technologies. The income statement data for the six
months ended June 30, 1999 and 1998 and the years ended December 31, 1995 and
1994 and the balance sheet data at June 30, 1999 and 1998 and December 31, 1996,
1995 and 1994 set forth below are derived from unaudited combined financial
statements of Water Pik Technologies.
The historical selected combined financial data are not necessarily
indicative of the results of operations or financial position that would have
occurred if Water Pik Technologies had been a separate, independent public
company during the periods presented, nor are they indicative of our future
performance. Such historical data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our combined financial statements and the related notes included
in this Information Statement. Per share data has not been presented because
Water Pik Technologies was not a publicly held company during the periods
presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Sales.................... $118,462 $105,477 $235,788 $241,167 $215,675 $205,794 $194,213
Net income............... $ 4,136 $ 3,381 $ 11,495 $ 17,552 $ 7,353 $ 5,231 $ 6,556
Working capital.......... $ 26,812 $ 36,771 $ 35,778 $ 39,057 $ 41,914 $ 42,870 $ 40,314
Total assets............. $116,198 $109,276 $127,794 $119,974 $118,375 $ 97,348 $ 91,966
Stockholder's equity..... $ 77,573 $ 77,237 $ 88,822 $ 80,653 $ 85,335 $ 72,238 $ 71,127
</TABLE>
28
<PAGE> 33
OUR UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma consolidated income statements for the
six months ended June 30, 1999 and for the year ended December 31, 1998 and the
unaudited pro forma consolidated balance sheet at June 30, 1999 present the
combined results of operations and financial position of Water Pik Technologies
assuming that the transactions contemplated by the spin-off had been completed
as of the beginning of 1998 with respect to the pro forma consolidated income
statements for the six months ended June 30, 1999 and for the year ended
December 31, 1998 and as of June 30, 1999 with respect to the pro forma
consolidated balance sheet. In the opinion of management, they include all
material adjustments necessary to reflect, on a pro forma basis, the impact of
transactions contemplated by the spin-off on the historical financial
information of Water Pik Technologies. The adjustments are described in the
notes to the pro forma consolidated financial information and are set forth in
the "Pro Forma Adjustments" column.
The unaudited pro forma consolidated financial information of Water Pik
Technologies should be read in conjunction with the historical financial
statements of Water Pik Technologies and the related notes. The pro forma
financial information has been presented for informational purposes only and
does not reflect the results of operations or financial position of Water Pik
Technologies that would have occurred had Water Pik Technologies operated as a
separate, independent public company for the periods presented. Actual results
might have differed from pro forma results if Water Pik Technologies had
operated independently. The pro forma financial information should not be relied
upon as being indicative of results Water Pik Technologies would have had or of
future results after the spin-off.
29
<PAGE> 34
WATER PIK TECHNOLOGIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
WATER PIK PRO FORMA WATER PIK
TECHNOLOGIES, INC. ADJUSTMENTS TECHNOLOGIES, INC.
------------------ ----------- ------------------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Cash...................................... $ -- $ -- $ --
Accounts receivable....................... 38,212 -- 38,212
Inventories............................... 19,878 -- 19,878
Deferred income taxes..................... 5,154 -- 5,154
Prepaid expenses and other current
assets.................................. 1,041 -- 1,041
-------- -------- --------
TOTAL CURRENT ASSETS................. 64,285 -- 64,285
Property, plant and equipment............. 31,502 -- 31,502
Cost in excess of net assets acquired..... 18,441 -- 18,441
Deferred income taxes..................... -- 3,147 3,147
Other assets.............................. 1,970 -- 1,970
-------- -------- --------
TOTAL ASSETS......................... $116,198 $ 3,147 $119,345
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable.......................... $ 17,999 $ -- $ 17,999
Accrued liabilities....................... 19,474 -- 19,474
-------- -------- --------
TOTAL CURRENT LIABILITIES............ 37,473 -- 37,473
Long-term debt............................ -- 40,000 40,000
Deferred income taxes..................... 1,152 (1,152) --
Other long-term liabilities............... -- 10,902 10,902
-------- -------- --------
TOTAL LIABILITIES.................... 38,625 49,750 88,375
-------- -------- --------
Stockholders' Equity:
Preferred stock, par value $0.01:
authorized -- 5,000,000 shares;
issued and outstanding -- none....... -- -- --
Common stock, par value $0.01:
authorized -- 50,000,000 shares;
issued and outstanding -- 9,535,304
shares............................... -- 95 95
Additional paid-in capital.............. -- 31,124 31,124
Net advances (to) from Allegheny
Teledyne............................. 77,822 (77,822) --
Foreign currency translation losses..... (249) -- (249)
-------- -------- --------
TOTAL STOCKHOLDERS' EQUITY........... 77,573 (46,603) 30,970
-------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY............................. $116,198 $ 3,147 $119,345
======== ======== ========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Financial
Information.
30
<PAGE> 35
WATER PIK TECHNOLOGIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
WATER PIK PRO FORMA WATER PIK
TECHNOLOGIES, INC. ADJUSTMENTS TECHNOLOGIES, INC.
------------------ ----------- ------------------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
SALES............................ $118,462 $ -- $118,462
Costs and expenses:
Cost of sales.................. 72,773 -- 72,773
Selling expenses............... 23,441 -- 23,441
General and administrative
expenses.................... 15,474 -- 15,474
Interest expense............... -- 1,600 1,600
-------- ------- --------
111,688 1,600 113,288
-------- ------- --------
Earnings before other income..... 6,774 (1,600) 5,174
Other income..................... 119 -- 119
-------- ------- --------
INCOME BEFORE INCOME TAXES....... 6,893 (1,600) 5,293
Provision for income taxes....... 2,757 (640) 2,117
-------- ------- --------
NET INCOME....................... $ 4,136 $ (960) $ 3,176
======== ======= ========
BASIC NET INCOME PER COMMON
SHARE.......................... $ 0.33
========
DILUTED NET INCOME PER COMMON
SHARE.......................... $ 0.33
========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Financial
Information.
31
<PAGE> 36
WATER PIK TECHNOLOGIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
WATER PIK PRO FORMA WATER PIK
TECHNOLOGIES, INC. ADJUSTMENTS TECHNOLOGIES, INC.
------------------ ----------- ------------------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
SALES............................ $235,788 $ -- $235,788
Costs and expenses:
Cost of sales.................. 139,544 -- 139,544
Selling expenses............... 49,830 -- 49,830
General and administrative
expenses.................... 27,382 -- 27,382
Interest expense............... -- 3,200 3,200
-------- ------- --------
216,756 3,200 219,956
-------- ------- --------
Earnings before other income..... 19,032 (3,200) 15,832
Other income..................... 126 -- 126
-------- ------- --------
INCOME BEFORE INCOME TAXES....... 19,158 (3,200) 15,958
Provision for income taxes....... 7,663 (1,280) 6,383
-------- ------- --------
NET INCOME....................... $ 11,495 $(1,920) $ 9,575
======== ======= ========
BASIC NET INCOME PER COMMON
SHARE.......................... $ 0.97
========
DILUTED NET INCOME PER COMMON
SHARE.......................... $ 0.97
========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Financial
Information.
32
<PAGE> 37
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
NOTE 1.
The historical financial statements of Water Pik Technologies reflect
periods during which Water Pik Technologies did not operate as a separate,
independent public company. Certain estimates, assumptions and allocations were
made in preparing such financial statements. Therefore, the historical financial
statements do not necessarily reflect the results of operations or financial
position that would have occurred had Water Pik Technologies been a separate,
independent public company during the periods presented, nor are they indicative
of future performance.
NOTE 2.
The pro forma unaudited consolidated balance sheet was prepared assuming
the distribution occurred on June 30, 1999 and includes "Pro Forma Adjustments"
for transactions which occurred subsequent to June 30, 1999 as follows:
(a) To record debt of $40,000,000 to be assumed by Water Pik Technologies
at the date of the spin-off.
(b) To record the transfer of insurance and product liability reserves of
$10,902,000 and related deferred taxes of $4,299,000.
(c) To record the planned liquidation of the remaining investment by ATI
and the issuance of 9,535,304 shares of Water Pik Technologies common
stock.
NOTE 3.
Pro forma net income was adjusted to include interest expense on ATI debt
that we will assume in connection with the spin-off in the amount of $1,600,000
before tax, or $960,000 after tax, for the six months ended June 30, 1999 and
$3,200,000 before tax, or $1,920,000 after tax, for the year ended December 31,
1998. Interest expense was calculated assuming the $40,000,000 of assumed debt
had been outstanding for the entire period with an average interest rate of
8.0%.
NOTE 4.
The average number of shares of Water Pik Technologies common stock used in
the computation of basic net income per share was 9,666,250 and 9,837,534 for
the six months ended June 30, 1999 and the year ended December 31, 1998,
respectively, based on a distribution ratio of one share of Water Pik
Technologies common stock for every 20 shares of ATI common stock. The average
number of shares of Water Pik Technologies common stock used in the computation
of diluted net income per share was 9,667,448 and 9,838,465 for the six months
ended June 30, 1999 and the year ended December 31, 1998, respectively. A
distribution ratio of one share of Water Pik Technologies common stock for every
20 shares of ATI common stock was used to adjust the stock options. The actual
stock option adjustment will be based upon the relation of the market price of
ATI common stock prior to the spin-off to the market price of Water Pik
Technologies common stock after the spin-off and therefore cannot be determined
at the present time.
33
<PAGE> 38
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion is based upon and should be read in conjunction
with the audited combined financial statements, including the related notes,
included in this Information Statement. Some of the statements in this
Management's Discussion and Analysis of Financial Condition and Results of
Operations are forward-looking statements. Actual results could differ
materially from the expectations reflected in these forward-looking statements
as a result of various factors, some of which are described below.
OVERVIEW OF BUSINESS
Water Pik Technologies is a leader in the design, manufacturing and
marketing of a broad range of well recognized personal health care products and
pool and water-heating products. The Company operates in two business segments:
Personal Health Care Products and Pool and Water-Heating Products. The Company's
products include: shower heads; oral health products; water filtration products;
pool and spa heaters, controls, valves and water features; and residential and
commercial water-heating systems.
Total sales of our two segments for the six months ended June 30, 1999 and
for the years ended December 31, 1998, 1997 and 1996 are summarized below:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
SEGMENT 1999 1998 1997 1996
- ---------------------- --------------- --------------- --------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Personal health
care products....... $ 55,849 47.1% $125,763 53.3% $141,792 58.8% $141,133 65.4%
Pool and water-heating
products............ 62,613 52.9% 110,025 46.7% 99,375 41.2% 74,542 34.6%
Total sales:.......... $118,462 100% $235,788 100% $241,167 100% $215,675 100%
======== ======== ======== ========
</TABLE>
The financial information in these financial statements is not necessarily
indicative of results of operations, financial condition and cash flows that
would have occurred if Water Pik Technologies had been a separate, independent
public company during the periods presented nor is it indicative of our future
results. On an historical basis, the capital for our business was provided by
ATI's net investment in our business. In addition, no debt was allocated to us.
Accordingly, our historical financial statements reflect no interest income or
interest expense. Prior to the spin-off, ATI will establish a five-year
$60,000,000 secured term loan and revolving credit facility, and $40,000,000 of
borrowings under the facility will be used by ATI prior to the spin-off to repay
certain of ATI's debt obligations. In connection with the spin-off, we will
assume this term loan and credit facility, including the repayment obligations
for ATI's $40,000,000 of borrowings. Following the spin-off, we will have up to
$20,000,000 of borrowing availability remaining under the credit facility,
subject to the terms of the facility. The historical combined financial
statements included herein do not reflect any changes that may occur in the
capitalization or results of operations of Water Pik Technologies as a result
of, or after, the spin-off.
34
<PAGE> 39
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
COMBINED RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1999 % CHANGE 1998
(DOLLARS IN THOUSANDS) -------------- -------- --------------
(UNAUDITED)
<S> <C> <C> <C>
Sales................................. $118,462 12% $105,477
Operating profit...................... $ 6,774 22% $ 5,564
Operating profit as a percentage of
sales............................... 5.7% 5.3%
International sales as a percentage of
sales............................... 13.5% 16.1%
</TABLE>
Our total sales for the six months ended June 30, 1999 were 12% greater
than for the six months ended June 30, 1998 due to increases in pool and
water-heating products sales. Gross profit as a percentage of sales decreased
from 40.3% for the six months ended June 30, 1998 to 38.6% for the same period
in 1999. Variable contribution margin by product line remained consistent from
period to period; however a less profitable product mix accounted for most of
the decrease in the total gross profit percentage. Tooling amortization
associated with higher levels of new product development also impacted gross
profit.
Operating profit increased 22% in the first six months of 1999 as compared
to the same period in the prior year mainly due to increases in sales for pool
systems and water-heating products. Operating profit in 1999 was negatively
impacted by unusual expenses of $930,000 associated with bad debts of several
major retail customers, in addition to $1,164,000 of expenses related to plant
rationalization costs and non-recurring spin-off related costs.
Sales and operating profit for the Company's two segments are presented
separately below and in Note 3 of the Notes to the Interim Combined Financial
Statements.
PERSONAL HEALTH CARE PRODUCTS
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1999 % CHANGE 1998
(DOLLARS IN THOUSANDS) -------------- -------- --------------
(UNAUDITED)
<S> <C> <C> <C>
Sales................................... $55,849 1% $55,147
Operating profit........................ $ 330 (68)% $ 1,018
Operating profit as a percentage of
sales................................. 0.6% 1.8%
International sales as a percentage of
sales................................. 19.5% 21.5%
</TABLE>
Sales of our personal health care products were 1% greater for the six
months ended June 30, 1999 than for the six months ended June 30, 1998 due to
increased sales of The Flexible Shower Massage(]). Sales of other products were
negatively impacted by inventory reduction efforts by a major retailer and
pricing pressures.
35
<PAGE> 40
Operating profit decreased $688,000 in the first six months of 1999 when
compared to the same period in the prior year. Operating profit was impacted by
higher tooling amortization associated with increased new product development
efforts. Advertising for the six months ended June 30, 1999 decreased from the
comparable period in 1998 when substantial new product introductory costs were
incurred. Operating profit in 1999 was impacted by unusual expenses of $930,000
associated with bad debts of several major retail customers, in addition to
$775,000 of expenses related to the closure of a manufacturing facility and for
spin-off related expenses. These unusual expenses were offset by lower selling
and marketing expenses of $1,490,000 compared to the same period in the prior
year. Selling and marketing expenses for the six months ended June 30, 1999
declined compared to the same period in the prior year due to a reorganization
and streamlining of operations during this period.
POOL AND WATER-HEATING PRODUCTS
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1999 % CHANGE 1998
(DOLLARS IN THOUSANDS) -------------- -------- --------------
(UNAUDITED)
<S> <C> <C> <C>
Sales................................... $62,613 24% $50,330
Operating profit........................ $ 6,444 42% $ 4,546
Operating profit as a percentage of
sales................................. 10.3% 9.0%
International sales as a percentage of
sales................................. 8.1% 10.2%
</TABLE>
Sales of our pool and water-heating products increased 24% in the six
months ended June 30, 1999 as compared to the same period in 1998. Pool products
sales increased 20% due to strong pool equipment and heater sales. Water-heating
products sales increased 38% due mainly to the acquisition of Trianco Heatmaker,
Inc. ("Trianco") in August 1998. Sales of water-heating products, excluding
Trianco products, increased 7% due to strong sales of our commercial
water-heating products.
Operating profit increased 42% in the 1999 six months as compared to the
same period in 1998. The increase in our operating profit was primarily due to
increased sales volume.
36
<PAGE> 41
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
COMBINED RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 % CHANGE 1997 % CHANGE 1996
(DOLLARS IN THOUSANDS) ------------ -------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C>
Sales................ $235,788 (2)% $241,167 12% $215,675
Operating profit..... $ 19,032 (33)% $ 28,384 131% $ 12,310
Operating profit as a
percentage of
sales.............. 8.1% 11.8% 5.7%
International sales as
a percentage of
sales.............. 15.8% 17.0% 17.5%
</TABLE>
1998 COMPARED TO 1997
Our total sales decreased by 2% in 1998 compared to 1997. Sales of personal
health care products decreased due to a decline in international sales as a
result of weak economic conditions in Canada, Brazil and Russia. In 1997, sales
of personal health care products were higher due to the initial retail stocking
of newly introduced products. Sales declines in 1998 were partially offset by
sales increases for water-heating products resulting from the acquisition of
Trianco in August 1998 and the growth in existing pool products lines.
Gross profit as a percentage of sales decreased from 42.4% in 1997 to 40.8%
in 1998. This decrease is due to a less profitable product mix. In addition,
cost of sales were reduced in 1997 as a result of a one-time benefit from the
discontinued production of the consumer formulated product line.
Operating profit in 1998 declined to $19,032,000, or 8.1% of sales, due to
the decrease in sales and change in product mix, costs associated with launching
new personal health care products and expenses associated with settling a legal
matter.
1997 COMPARED TO 1996
Our total sales increased by 12% in 1997 compared to 1996. The increase in
1997 sales was primarily due to successful product introductions of a new shower
massage and pool heater, the inclusion of a full year of sales from Jandy
Industries, Inc. ("Jandy"), a pool products manufacturer acquired in May 1996,
and improved sales of water-heating products. The increase in 1997 sales was
partially offset by the lower sales related to discontinuing certain water
filtration products.
Gross profit as a percentage of sales increased from 37.8% in 1996 to 42.4%
in 1997. The increase in gross profit was primarily due to higher sales volume
and a more profitable product mix. A significant factor affecting the improved
product mix was the elimination of our low margin consumer formulations
business. A one-time adjustment to cost of sales as a result of the discontinued
production of the consumer formulated product line in 1997 also contributed to
gross profit improvement.
37
<PAGE> 42
Operating profit in 1997 increased to $28,384,000 or 11.8% of sales, as a
result of the increase in overall sales and higher gross margins resulting from
operating efficiencies and cost savings. Operating profit for 1996 was adversely
effected by charges of approximately $5,000,000 associated with the settlement
of a patent infringement claim and the costs incurred to exit the consumer
formulations business.
Sales and operating profit for the Company's two segments are presented
separately below and in Note 9 of the Notes to the Combined Financial
Statements.
PERSONAL HEALTH CARE PRODUCTS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 % CHANGE 1997 % CHANGE 1996
(DOLLARS IN THOUSANDS) ------------ -------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C>
Sales.................. $125,763 (11)% $141,792 --% $141,133
Operating profit....... $ 9,426 (52)% $ 19,552 103% $ 9,646
Operating profit as a
percentage of
sales................ 7.5% 13.8% 6.8%
International sales as
a percentage of
sales................ 20.2% 21.4% 21.1%
</TABLE>
1998 COMPARED TO 1997
Sales of our personal heath care products decreased by 11% in 1998 compared
to 1997. Sales decreased due to a decline in international sales as result of
weak economic conditions in Canada, Brazil and Russia and two discontinued
product lines. In 1997, sales were higher due to the initial retail stocking of
newly introduced products.
Operating profit decreased by 52% due to the lower sales volume and
additional advertising expenses associated with the launch of new products. In
1997, cost of sales was favorably impacted by discontinued production of certain
products.
1997 COMPARED TO 1996
Sales of personal health care products were consistent from 1996 to 1997.
Increased sales of new shower head models in 1997 were offset by the lower sales
of discontinued water filtration and consumer formulated products.
Operating profit increased by 103% in 1997 compared to 1996 due to the
change in product mix, discontinuing low margin consumer formulated products,
and a one-time favorable adjustment to cost of sales associated with
discontinuing certain products. In addition, the operating profit for 1996
included a $5,000,000 expense associated with settling a legal matter and the
cost of exiting the consumer formulated product line.
38
<PAGE> 43
POOL AND WATER-HEATING PRODUCTS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 % CHANGE 1997 % CHANGE 1996
(DOLLARS IN THOUSANDS) ------------ -------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C>
Sales.................. $110,025 11% $99,375 33% $74,542
Operating profit....... 9,606 9% 8,832 232% 2,664
Operating profit as a
percentage of
sales................ 8.7% 8.9% 3.6%
International sales as
a percentage of
sales................ 10.8% 10.9% 10.8%
</TABLE>
1998 COMPARED TO 1997
Sales of pool and water-heating products increased 11% or $10,650,000 in
1998 compared to 1997. The acquisition of Trianco in August 1998 accounted for
$5,368,000 of the increase in sales. Sales increased in all pool and
water-heating product categories.
Operating profit for 1998 increased 9% or $774,000 compared to 1997. This
increase is primarily due to the increased sales volume for pool products and
the acquisition of Trianco, which was partially offset by a $1,007,000
non-recurring expense associated with settling a legal matter.
1997 COMPARED TO 1996
Sales of pool and water-heating products increased 33% or $24,833,000 in
1997 compared to 1996. Sales of pool products increased by $21,952,000. This was
mainly due to the inclusion of a full year of sales from Jandy, acquired in May
1996, which accounted for $12,300,000 of the increase. Sales of water-heating
products increased by 12% or $2,881,000, due to increased sales of commercial
water-heating products.
Operating profit increased 232% or $6,168,000 in 1997 compared to 1996.
Increased sales volume accounted primarily for the increase in operating profit.
In addition, improvements related to discontinuing low margin water treatment
pool products contributed to the increase in operating profit.
FINANCIAL CONDITION AND LIQUIDITY
Our principal capital requirements are to fund working capital needs and
capital expenditures and to meet required debt payments. We anticipate that our
operating cash flow, together with available borrowings under our credit
facility described below, will be sufficient to meet our working capital
requirements, capital expenditure requirements and interest service requirements
on our debt obligations.
In the six months ended June 30, 1999, cash generated from operations of
$17,033,000 was used to make $1,669,000 in capital expenditures and to advance
$15,438,000 to ATI. In 1998, cash generated from operations of $22,325,000 was
used to purchase Trianco for $10,647,000, and make $8,650,000 in capital
expenditures and to advance $3,223,000 to ATI.
39
<PAGE> 44
Our working capital decreased to $26,812,000 at June 30, 1999 from
$35,778,000 at December 31, 1998. Our current ratio decreased to 1.7 at June 30,
1999 from 1.9 at December 31, 1998. The decrease in our working capital was
primarily due to lower accounts receivable balances at June 30, 1999. Our
accounts receivable balances are generally higher at year-end due to the
seasonality of our business and the extension of deferred payment terms to pool
product customers consistent with industry practices.
Our working capital decreased to $35,778,000 at December 31, 1998 from
$39,057,000 at the end of 1997. The current ratio decreased to 1.9 in 1998 from
2.0 in 1997. The decrease in working capital was primarily due to lower accounts
receivable and inventory balances at December 31, 1998, even after taking into
account the working capital acquired in our purchase of Trianco.
On a historical basis, most of our capital was provided by ATI's net
investment in our business, for which no interest was charged. We were not
allocated any amount of ATI's debt on a historical basis. Prior to the spin-off,
ATI will establish a five-year $60,000,000 secured term loan and revolving
credit facility, and $40,000,000 of borrowings under the facility will be used
by ATI to repay certain of ATI's debt obligations. We will assume this term loan
and credit facility, including the repayment obligations for ATI's $40,000,000
of borrowings, in connection with the spin-off. Following the spin-off, we will
have up to $20,000,000 of borrowing availability remaining under the credit
facility, subject to the terms of the facility.
In order to expand our business and implement our strategic objectives, we
will aggressively develop high quality, lower cost manufacturing capabilities;
pursue product line extensions for existing categories; expand into new channels
of distribution with existing products; develop a self-sustaining product
development process; and seek acquisitions and alliances to more quickly attain
the critical mass required to successfully compete in all of our chosen product
categories.
In August 1999, we acquired substantially all of the assets of Les Agences
Claude Marchand, Inc. ("Olympic"), a pool accessories manufacturer and
distributor, doing business in Canada as Olympic Pool Accessories, for
$2,500,000 in cash and a $6,687,000 promissory note. Olympic is located in
Montreal, Quebec, and produces a full line of pool accessories ranging from
cleaning and maintenance supplies to white goods, ladders, solar reels, floating
lounges, pool toys and games. Olympic distributes its products in Canada, Europe
and the United States. We expect to distribute these pool accessories in the
U.S. and Europe under our Water Pik(]) and Jandy(]) brand names. This
acquisition will be accounted for as a purchase transaction.
Total capital expenditures for 1999, excluding the purchase of Olympic, are
expected to approximate $10,000,000, of which $1,669,000 has been spent through
June 30, 1999.
We currently anticipate that no cash dividends will be paid on Water Pik
Technologies common stock in order to conserve cash for use in our business,
including possible future acquisitions. In addition, we expect that our credit
facility will restrict the payment of dividends. Our board of directors will
periodically re-evaluate this dividend policy taking into account operating
results, capital needs and other factors.
In connection with the spin-off, ATI received a tax ruling from the IRS
stating that the spin-off would be tax-free to ATI and to ATI's stockholders.
The continuing validity of the Internal Revenue Service tax ruling is subject to
certain factual representations and assumptions, including our completion of a
required public offering of our common stock
40
<PAGE> 45
within one year following the spin-off and use of the anticipated gross proceeds
of approximately $50,000,000 (less associated costs) for further development of
high quality, lower cost manufacturing capabilities, for product line
extensions, to expand channels of distribution, to develop a self-sustaining
product development process, and for acquisitions and/or joint ventures.
Pursuant to the Separation and Distribution Agreement that Water Pik
Technologies will sign prior to the spin-off, we will also agree with ATI to
undertake such a public offering.
The Tax Sharing and Indemnification Agreement between ATI and Water Pik
Technologies provides that we will indemnify ATI and its agents and
representatives for taxes imposed on, and other amounts paid by, them or ATI's
stockholders if we take actions or fail to take actions (such as completing the
public offering) that result in the spin-off not qualifying as a tax-free
distribution. If any of the taxes or other amounts were to become payable by us,
the payment could have a material adverse effect on our business, results of
operations, financial condition and cash flow and the amount we could be
required to pay could exceed our net worth by a substantial amount.
We believe that our internally generated funds, borrowings from our credit
facility described above and proceeds from the required public offering will be
adequate to meet foreseeable needs. We may choose, however, to issue additional
stock and debt depending on market conditions.
OTHER MATTERS
INCOME TAXES
The Company's effective income tax rate was 40.0% for the six months ended
June 30, 1999 and 1998, 40.0% in 1998, 39.3% in 1997 and 40.3% in 1996. The
Company has determined, based on its history of operating earnings, expectations
of future operating earnings and potential tax planning strategies, that it is
more likely than not that the deferred income tax assets at June 30, 1999 will
be realized.
INFLATION
Inflation has not had a material impact upon the Company's results of
operations for the periods discussed above.
LEGAL MATTERS
From time to time, a number of lawsuits, claims and proceedings have been
or may be asserted against us relating to the conduct of our business, including
those pertaining to product liability, patent infringement, commercial,
employment and employee benefits. While the outcome of litigation cannot be
predicted with certainty, and some of these lawsuits, claims or proceedings may
be determined adversely to us, we do not believe that the disposition of any
such pending matters is likely to have a material adverse effect on our
financial condition or liquidity, although the resolution in any reporting
period or one or more of these matters could have a material adverse effect on
our results of operations for that period.
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<PAGE> 46
YEAR 2000 READINESS DISCLOSURE
YEAR 2000 TASK FORCES. Over the past several years, ATI has put in place
management task forces at its operating companies, including in ATI's Consumer
segment, to identify whether its computer systems, which include business
computers, mill equipment and process control computers and other devices using
microprocessors, as well as telecommunication and payroll and employee benefit
processing systems, would function properly with respect to dates in the Year
2000 and thereafter. These task forces have reported to ATI's Executive Resource
Information Committee, a senior management committee charged with reviewing and
establishing priorities for information technology-related matters, including
Year 2000 issues, and which reports to the Audit and Finance Committee of ATI's
board of directors. Through these efforts, Year 2000 identification, solution
development, testing and implementation initiatives, and contingency planning
initiatives have proceeded at Water Pik Technologies.
TARGETED COMPLETION OF INTERNAL SOLUTIONS. In part as a result of ATI's
Year 2000 initiatives, but mostly due to evolving business needs and continuing
technological advancements, we have been modifying and replacing portions of our
computer software and hardware systems. We estimate that, based on dollars
expended, installation of solutions to identified Year 2000 issues relating to
our information technology systems is approximately 95% complete. We also
estimate that based on dollars expended, about 90% of solutions have been
implemented for our non-information technology systems. Substantially all
internal solutions relating to Year 2000 functionality of our computer systems
were developed and implemented by September 1, 1999.
OTHER YEAR 2000 AREAS OF FOCUS. Efforts continue to be made to identify
and resolve customer- and supplier-based Year 2000 issues that could affect us
and our operating and support systems. We believe that we have identified
substantially all material customer-and supplier-based Year 2000 issues. We have
also identified certain Laars(R) and Jandy(R) products that contain embedded
microprocessors. We believe that these products do not present significant
product-related Year 2000 issues. Neither Water Pik Technologies nor ATI have
conducted any review of discontinued products or products manufactured and sold
by discontinued or divested businesses.
YEAR 2000 EXPENDITURES. Excluding expenditures necessitated by ordinary
business needs and continuing technological advancements in the computer
industry, we spent approximately $1,000,000 in 1998 and we anticipate spending
another estimated $300,000 in 1999 to address Year 2000 issues. These
expenditures do not include expenditures that may be required to address Year
2000 issues associated with some products. Substantially all costs related to
our Year 2000 initiatives are expensed as incurred and funded through operating
cash flows. Additional amounts may be spent in later years.
OVERALL ASSESSMENT; WORST CASE SCENARIO. Based upon internal assessments,
formal communications with suppliers and customers with which we exchange
electronic data, and work completed to date, we believe that Year 2000 issues
should not pose significant operational problems or have a material impact on
our consolidated financial condition, results of operations or cash flow. A
failure of third party vendors or customers to be Year 2000 ready, however,
could adversely affect these beliefs and is not quantifiable at the present
time. Such failure could have a material adverse effect on our business,
consolidated financial condition, results of operations or cash flow in a given
period, but probably not over the long-term. The most reasonably likely worst
case scenario of our failure (or the failure of our suppliers or customers) to
resolve Year 2000 problems would be a temporary slowdown or cessation of
manufacturing operations at one or more of our
42
<PAGE> 47
facilities and our temporary inability to timely process orders and to deliver
finished products to customers. Delays in meeting customers' orders would affect
the timing of billings to and payments received from customers with respect to
orders and could result in other liabilities. Customers' Year 2000 problems
could also delay the timing of payments to us for orders. Efforts are underway
to establish contingency plans should unplanned situations arise on or after
January 1, 2000.
FACTORS THAT MAY AFFECT YEAR 2000 ESTIMATES. While we have been conducting
a comprehensive Year 2000 review of our computer systems and products, there may
be Year 2000-related matters that have not been identified. Actual dollar
amounts spent by us to address Year 2000 issues could materially differ from the
estimates for a number of reasons, including:
- changes in the availability or costs of personnel trained in this area;
- changes made to our remediation plans;
- the ability of our significant suppliers, customers and others with which
we conduct business, including governmental agencies, to identify and
resolve their own Year 2000 issues; or
- identification of other Year 2000-related matters.
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<PAGE> 48
OUR BUSINESS
OVERVIEW
Our vision is to create a growth oriented consumer products company which
capitalizes on our well recognized brand names and develops innovative products
that provide outstanding value to our customers.
We are a leader in the design, manufacturing and marketing of a broad range
of well recognized personal health care products and pool and water-heating
products. We believe our Water Pik(R), Laars(R) and Jandy(R) products have
strong brand name recognition and a reputation for quality and innovation among
consumers.
We compete in several distinct product categories, including:
- Water Pik(R) shower heads
- Water Pik(R) oral health products
- Water Pik(R) and Instapure(R) water filtration products
- Laars(R) and Jandy(R) pool and spa heaters, controls, valves and water
features
- Water Pik(TM) and Jandy(TM) pool and spa accessories, including cleaning
and maintenance supplies, white goods, ladders, solar reels, floating
lounges, pool toys and games
- Laars(R) residential and commercial water-heating systems
We have manufactured personal health care products for over 35 years under
our Water Pik(R) brand name. Our swimming pool and spa heaters, controls, valves
and water features, many of which we have manufactured for over 40 years, are
sold primarily under our Laars(R) and Jandy(R) brand names. Our residential and
commercial water-heating systems, which we have manufactured for over 50 years,
are sold primarily under our Laars(R) brand name.
Our extensive distribution network allows us to distribute our products
across various distribution channels to reach a greater number of consumers and
distributors. We manufacture and distribute our products principally through
eight facilities located in the United States and Canada. Fiscal year sales in
1998 were $235.8 million and sales for the first six months of 1999 were $118.5
million.
INDUSTRY OVERVIEW
The total market for personal health care products, pool and spa equipment
and water-heating systems was approximately $6.0 billion in 1997, consisting of
over $4.0 billion for personal health care products, approximately $1.0 billion
for pool and spa equipment and approximately $1.0 billion for water-heating
systems.
We believe we can take advantage of favorable current market and industry
trends for personal health care products and pool and water-heating products,
such as:
- demographic trends reflecting the aging of the U.S. population;
- an increased emphasis on a personal health care lifestyle;
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<PAGE> 49
- an increased emphasis on spending time at home or "cocooning"; and
- an increased use of the backyard for outdoor living, recreation and
relaxation.
The U.S. population consists of approximately 78 million "baby boomers,"
the first of whom have turned 50. These consumers wish to remain active and seek
personal health care products to maintain a high quality of life. Moreover,
"baby boomers" typically have more discretionary income which they are more
likely to spend on home remodeling projects, including projects to improve their
backyards, pools and spas. In addition, many consumers now view the backyard as
an extension of their indoor living environment and are improving backyards as
they would the interiors of their homes. The U.S. Census Bureau reports that an
estimated $199.1 billion was spent on home improvements and repairs in 1996.
We believe our products complement these existing trends and provide us
with the opportunity to expand our product offerings to satisfy consumers'
current and emerging preferences. We also believe that these trends will
continue, and that Water Pik Technologies, with our strong brand name
recognition and extensive product offerings, is well-positioned to be a market
leader in this evolving marketplace.
COMPETITIVE STRENGTHS
We believe we are a strong competitor for the following reasons:
- STRONG BRAND NAMES. Over many years, we have developed an extensive
portfolio of company owned brand names. These strong brand names include
our Water Pik(R) personal health care products, our Laars(R) pool and spa
heaters and our Jandy(R) electronic controls, valves and water features.
As consumers turn more and more to brand name merchandise to validate
their product purchase decisions, we believe that our strong brand names
will provide the platform for future growth and will enable us to expand
our product offerings into new and existing product categories and
channels of distribution.
- REPUTATION FOR INNOVATIVE PRODUCTS. We have a strong history of
innovative product development with both our Water Pik(R) personal health
care products and our Laars(R) and Jandy(R) pool and water-heating
products. We have developed and introduced many products which are
considered the first of their kind and which resulted in the creation of
new markets, such as: the Water Pik(R) Oral Irrigator; The Original
Shower Massage(R) shower head; the Instapure(R) end-of-faucet water
filter; the Laars(R) swimming pool heater; the Jandy(R) automatic
swimming pool cleaner and the Jandy(R) AquaLink(R) electronic swimming
pool control system. In response to changing consumer preferences, we
continue to develop and introduce new and innovative products such as The
Flexible Shower Massage(TM) and the Misting Massage(TM) shower heads, the
Laars(R) (Hi-E) high efficiency swimming pool heater and the
Endurance(TM) modulating residential boiler. We have received numerous
awards for our product design, innovation and quality.
- EXTENSIVE DISTRIBUTION NETWORK. We distribute our products through more
than 45,000 retail and wholesale outlets in North America which allows us
to reach a greater number of consumers and distributors than many of our
competitors. We distribute our personal health care products directly to
consumers through mass merchandisers, home centers, drug stores and
co-operative hardware chains. We distribute our pool and water-heating
equipment through various channels of
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<PAGE> 50
distribution, including pool wholesalers, pool builders and a network of
plumbing and heating, ventilation and air conditioning (or HVAC)
wholesalers, as well as retailers and service companies. We believe that
this distribution network will allow us to quickly realize desired sales
volumes for new products as they are brought to market.
- PROVEN MANUFACTURING CAPABILITIES. We have proven skills in
transitioning the product development process into high quality, lower
cost manufacturing. We are skilled in production manufacturing processes,
including design for assembly; plastic injection molding; metal
processing; KANBAN production; final assembly and testing and logistics.
We also have begun to use lean production techniques in our manufacturing
processes. Our Moorpark, California and Rochester, New Hampshire
facilities are ISO 9002 certified and our Fort Collins and Loveland,
Colorado facilities are ISO 9001 certified.
- EXPERIENCED MANAGEMENT TEAM. We have an experienced management team with
expertise in a variety of disciplines. Our President and Chief Executive
Officer has over 25 years experience in the manufacturing, distribution
and marketing of a wide variety of consumer products. Our Executive Vice
President -- Sales, Marketing and Business Development, our Vice
President -- Finance and Chief Financial Officer, our Vice
President -- Operations, and our President of Laars collectively have a
broad range of experience in marketing and merchandising, financial
management and acquisitions, and multi-national production and
distribution.
OUR BUSINESS STRATEGY
Our vision is to create a growth oriented consumer products company which
capitalizes on our well recognized brand names and develops innovative products
that provide outstanding value to our customers:
- ACCELERATE INTRODUCTION OF INNOVATIVE NEW PRODUCTS. We intend to
accelerate the development and introduction of new and innovative
products to achieve our growth objectives. Our success in product
development will continue to be driven by consumer needs, market trends
and the vulnerability of our competitors. We intend to sharpen our focus
on the regular development of new products and extensions to existing
product lines. These developments may range from significant new product
functions or features to innovative design changes to satisfy changing
consumer preferences. We intend to increase the flexibility of our design
and manufacturing processes to enhance our ability to be responsive to
consumer preferences and to enable us to introduce new products and
product extensions with shorter development cycles than our competitors.
- BROADEN PRODUCT OFFERINGS. We also intend to increase served markets by
offering related new products and product extensions. The variety of our
personal health care and pool and water-heating products enables us to
offer our customers and our distributors a single source for a wide range
of products. We have continually increased the number of our product
offerings and intend to continue to regularly introduce new products. Our
wide array of products allows us to provide category management for our
retail customers and one-stop shopping capability for our wholesale and
contractor customers.
- LEVERAGE OUR STRONG BRAND NAME RECOGNITION. We believe that our strong
Water Pik(R), Laars(R) and Jandy(R) brand names will allow us to more
rapidly market and sell
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<PAGE> 51
new products. We believe that the strength of these brand names provides new
products with consumer credibility and acceptance. Our research indicates that
85% of consumers recognize the Water Pik(R) brand name. By building on our brand
names, we expect to increase market share, expand our product offerings,
enhance consumer brand loyalty and expand our distribution channels.
- CAPITALIZE UPON OUR EXISTING DISTRIBUTION CHANNELS. As we accelerate the
introduction of innovative new products and broaden our product
offerings, we believe that we will be able to rapidly offer these
products to existing retail and wholesale distribution channels through
our well established distribution network. We believe we can utilize all
of our distribution channels to effectively distribute more of our
product lines to allow us to reach a greater number of consumers and
distributors. We believe we also have an opportunity to capitalize on our
distribution strengths in specific product segments by cross-selling
other products into those channels of distribution. For example, some
Water Pik(R) products have the potential to be sold through wholesale and
construction distribution channels that currently sell Laars(R) products.
- UTILIZE OUR PROVEN MANUFACTURING CAPABILITIES TO BECOME A LOWER COST
PRODUCER. We believe we can more fully utilize our proven manufacturing
capabilities to add more value to our customers through continuous
improvements in product quality, cost reductions and product delivery. We
are in the process of fully integrating state-of-the art production
techniques across business functions to reduce our total product cycle
time and reduce our total product cost, using a "quality first"
discipline in everything we do.
We also are in the process of integrating and streamlining our
manufacturing capabilities and facilities when and where appropriate to
lower our costs and improve delivery performance. In 1999, we initiated an
ongoing facility rationalization plan. We anticipate that by year end, we
will have rationalized four of our facilities and relocated or outsourced
their operations to existing, complementary facilities, which we expect
will result in annual cost savings of approximately $2.3 million. We
intend to continue to look for innovative ways to become a lower cost
manufacturer. We believe that achieving world-class capabilities will
provide us with a dynamic structure of high product quality, lower product
cost and an efficient product delivery system as we strive to continuously
exceed our customers' requirements.
- EXPAND OUR INTERNATIONAL PRESENCE. Our international sales accounted for
16% of total sales in 1998, of which 7% were in Canada. We believe that
there is significant additional demand for our products outside the U.S.,
and we intend to expand the international market penetration of our
products. In August 1999, we acquired substantially all the assets of
Olympic, which markets pool accessories in Canada, Europe and the United
States. We believe this acquisition will help us to expand our
international presence for our other products.
- LEVERAGE OUR CUSTOMER SERVICE CAPABILITIES. We believe we can satisfy
our customers' expectations and enhance our sales and profitability by
leveraging our customer service capabilities in product delivery and
after-sales service. We intend to continue to improve our on-time product
delivery shipments with our state-of-the-art production initiatives;
establish a one-stop, closed loop communication and response system for
technical after-sales service; and regularly update our
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<PAGE> 52
customers' sales and technical service representatives with training
programs and new tools, hardware and software.
- PURSUE SELECTED ACQUISITIONS AND STRATEGIC ALLIANCES. We intend to
pursue selected acquisitions and strategic alliances that complement and
expand our existing product lines and business. Specifically, we expect
to target acquisitions that will provide us with:
- broader product offerings;
- access to product innovation and unique product design capabilities;
- access to advanced manufacturing processes;
- new and efficient distribution channels; and
- increased access to product categories, markets and industries that
are experiencing rapid consolidation.
We have no current or pending arrangements, understandings or agreements
with respect to any potential acquisitions.
OUR PRODUCTS
PERSONAL HEALTH CARE PRODUCTS
We design, manufacture and market shower heads, oral health products and
water filtration products, which are sold primarily under the Water Pik(R) brand
name.
SHOWER HEADS. Through our development and production of pulsating shower
heads, we became recognized as an industry leader for personal health care
products. We developed The Original Shower Massage(R) product line, the first
massaging shower head. We have redesigned and refined The Original Shower
Massage(R) shower head as consumer preferences have changed. In 1997, we
introduced the award winning Flexible Shower Massage(TM) shower head that
adjusts to a wide variety of positions and height settings. The Flexible Shower
Massage(TM) shower head received Good Housekeeping magazine's "Good Buy" award
for 1998; was named one of Today's Homeowner magazine's "Best New Products" for
1998; and received the "Excellence in Design Award" from Appliance Manufacturer
magazine in the "Personal Care/Portable Appliances" category.
Our shower head products are marketed under the following product names:
SuperSaver(R) Showerheads
The Original Shower Massage(R) Showerhead
The Adjustable Shower Massage Showerhead
The Flexible Shower Massage(TM) Showerhead
Misting Massage(TM) Showerhead
Water Massage Showerhead
We continue to refine and develop innovations to The Original Shower
Massage(R) product line, including the Misting Massage(TM) shower head, which
was introduced in June 1999, as well as the Water Massage pulsating shower and
extensions such as the adjustable handle shower massage, which is ergonomically
designed and easier to hold than other models.
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<PAGE> 53
ORAL HEALTH PRODUCTS. We manufacture a complete line of consumer oral
health care devices. In 1962, we developed and introduced the original Water
Pik(R) Oral Irrigator. Our oral health products are designed to reduce plaque,
stains and gingivitis and are accepted by the American Dental Association. Our
products include personal and family Water Pik(R) Dental Systems, and the
SenSonic(R) Plaque Removal Instrument, an electronic toothbrush that generates
30,000 sonic brush strokes per minute. In early 2000, we also plan to introduce
the Water Pik(TM) Flosser, an automated dental product designed to make flossing
easier and more convenient.
Our oral health care products are marketed under the following product
names:
Professional Oral Irrigator
Personal Oral Irrigator
Family Oral Irrigator
PlaqueControl 3000(R)
Travel Oral Irrigator
Water Pik Plus(R) Plaque Control System
SenSonic(R) Plaque Removal Instrument
SenSonic(R) ADVANCED Plaque Removal Instrument
SenSonic Plus(R) Plaque Control System
We also manufacture and market a broad range of professional dental
products. We currently market over 600 products that are distributed in over 60
countries for use by dental professionals. Our professional dental products
include articulators and accessories, prophy cups and angles, radiographic
positioning devices, condylar recording systems and laboratory products.
WATER FILTRATION PRODUCTS. We manufacture a full line of point-of-use
water filtration products for consumers. We developed the first end-of-faucet
water filter in the mid-1970's. Our water filtration products range from a
convenient faucet-mount product to a high performance in-line product. In 1998,
we introduced the Electronic Faucet Filter, Model F-7, one of the most advanced
faucet-mount filters available to consumers. The F-7 filter contains an
electronic monitor to let the consumer know that the filter is working and to
alert the consumer when the filter needs to be replaced. Our high performance
water filtration products are designed to reduce lead, chlorine, pesticides,
cryptosporidium and giardia cysts, asbestos, sediment, bad taste and odors to
provide consumers with healthier, better tasting water.
Our water filtration products are marketed under the following product
names:
Water Pik(R) Electronic Faucet Filter
Water Pik(R) Faucet Filter
Water Pik(R) Undersink Water Filter
Water Pik(R) Wholehouse Water Filter
Water Pik(R) Compact Water Filter
Water Pik(R) Dual Process Undersink Water Filter
Water Pik(R) Water Filter Canister Kit
Water Pik(R) Instapure(R) Filtration Systems
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<PAGE> 54
POOL AND WATER-HEATING PRODUCTS
POOL AND SPA PRODUCTS. We are a leader in the design and manufacture of
swimming pool and spa equipment which we sell primarily under the Laars(R) and
Jandy(R) brand names. Our products include:
- an extensive line of swimming pool and spa heaters;
- technologically advanced digital controls to automate all functions of a
consumer's pool, spa, backyard, lighting and water effects;
- automatic pool cleaners;
- state-of-the-art swimming pool and spa plumbing products, such as valves
and actuators;
- water features such as waterfalls, rockfalls and fountains;
- fiber optic lighting for underwater, perimeter and landscaping uses; and
- an extensive line of pumps and filters.
- pool and spa accessories, including cleaning and maintenance supplies,
white goods, ladders, solar reels, floating lounges, pool toys and games.
These products are marketed under the following brand names:
<TABLE>
<CAPTION>
PRODUCT CATEGORY BRAND NAME
- ---------------- ----------------------
<S> <C>
Pool Heater Laars(R) Lite
Laars(R) LX
High-Efficiency Pool Heater Laars(R) Hi-E2
Oil Pool Heater Laars(R) DP
Commercial Pool Heater Laars(R) AP
Electronic Controls Jandy(R) RS
Fiber Optic Lighting Jandy(R) Sheer
Radiance(TM)
Control Valves Jandy(R) Valve
Valve Actuator Jandy(R) JVA
Automatic Pool Cleaner Jandy(R) RayVac
Water Features Jandy(R) Sheer
Descent(R)
Pumps and Filters Jandy(R) Pump
Jandy(R) Filter
Maintenance Equipment and Accessories Olympic (in Canada)
Water Pik(TM)
Jandy(TM)
</TABLE>
We are a leading manufacturer of swimming pool and spa heaters, including
natural gas, propane and oil fired residential and commercial pool heaters. We
manufacture both standard efficiency (82%) and high efficiency (95%) heaters. In
late 1998, we introduced the Laars(R) LX heater with advanced technology polymer
headers, graphic user interface controls with an alphanumeric display,
fan-assisted combustion and modern European
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appliance styling. The Laars(R) LX heater is designed to enable the consumer to
perform complete diagnostics, set precise pool and spa temperatures and easily
switch from pool to spa mode.
In 1996, we acquired Jandy, one of the leading producers of electronic
control systems, automatic valves, automatic cleaners and other water features
for the swimming pool and spa industries. Jandy(R) electronic pool and spa
controls are recognized as being one of the most technologically advanced,
innovative and quality products in the pool and spa industry. Jandy(R) produces
a wide array of electronic control systems ranging from basic systems which
adjust only one or two functions to sophisticated systems that completely
automate a pool, spa, lighting, water features and landscape features.
Jandy developed the first automatic pool cleaner, which is hydrodynamically
propelled to quietly vacuum pools. In addition, we manufacture valves and valve
actuators which automate pool and spa plumbing to switch water circulation from
pool to spa, control spa overflow, drain water and control fountains, waterfalls
and other water features. Jandy(R) valves and valve actuators also are used by
original equipment manufacturers for many automation applications.
We also offer fiber optic lighting to the pool and spa industries under our
exclusive arrangement with Lumenyte International Corporation. Our fiber optic
lighting is marketed under the Sheer Radiance(TM) name, a patented system that
lights pools and provides multiple color options to create unique lighting
designs. We also offer design features for pools, including the Sheer
Descent(TM) Waterfall, which produces a range of water effects, and the
Jandy(R)Fountain.
In August 1999, we acquired substantially all the assets of Olympic, which
does business in Canada as Olympic Pool Accessories. Olympic manufactures and
distributes cleaning and maintenance supplies, white goods, ladders, solar
reels, floating lounges and pool toys and games. The acquisition of Olympic
complements our existing pool and spa products. We expect that we will
distribute these pool accessories in the U.S. and Europe under our Water Pik(TM)
and Jandy(TM) brand names.
WATER-HEATING SYSTEMS. We produce a comprehensive line of water-heating
systems for commercial, residential and industrial applications. In August 1998,
we acquired substantially all the assets of Trianco, a manufacturer of high
efficiency, sealed combustion gas and oil fuel boilers and water-heating
products, to enhance our capabilities in
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commercial and residential heating systems. These products are marketed under
the following brand names:
<TABLE>
<CAPTION>
PRODUCT CATEGORY BRAND NAME
- ---------------- --------------------
<S> <C>
Commercial Boilers and Water Heaters Laars(R) Mighty Therm(R)
Laars(R) Mighty Max
Laars(R) Mighty Stack(R)
Residential Boiler Laars(R) Mini-Therm
Residential Combination Boiler Laars(R) Mini-Combo(TM)
High-Efficiency Boiler Laars(R) CB(TM)
Modulating Boiler Laars(R) Endurance(TM)
Oil Boiler Laars(R) Max(TM)
Laars(R) Newport(TM)
</TABLE>
We have been a leading manufacturer of gas heating products for over 50
years, and have expanded our product line to include residential oil boilers and
high efficiency boilers and water heaters for residential, commercial and
industrial heating applications. Our products include:
- the Mighty Therm(R) series of commercial boilers and water heaters which
are natural draft appliances for propane or natural gas fuels;
- the Mighty Max(R) series of commercial boilers and water heaters which
are forced draft separated combustion appliances with efficiencies of 85%
for propane or natural gas fuels;
- the Mini Therm(R) induced draft series of residential boilers;
- the Mini Combo(TM) induced draft combination hydronic boiler and domestic
water heater;
- the Mighty Stack(R) automatic circulating water heater;
- the Newport(TM) oil boiler ; and
- the MAX(TM) oil boiler.
In January 1999, we introduced an innovative residential gas boiler, the
Laars(R) Endurance(TM) boiler, which is fully modulating to match a home's
changing heat load and is designed to provide homeowners with precise
temperature control throughout the home while reducing energy consumption. The
Endurance(TM) boiler is the first modulating residential boiler manufactured and
distributed in North America.
SALES, MARKETING AND DISTRIBUTION
We have a broad distribution network which allows us to efficiently
distribute our products across a number of distribution channels to reach a
greater number of consumers and distributors than many of our competitors.
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<PAGE> 57
PERSONAL HEALTH CARE PRODUCTS
The Original Shower Massage(R) product line is marketed to consumers
through mass merchandisers and home centers such as Wal-Mart, K-Mart and The
Home Depot.
Our Water Pik(R) and other consumer oral health products are marketed to
consumers through mass merchandisers such as Wal-Mart, K-Mart and Target.
Professional dental products are marketed under the DENAR(R), Getz(R) and
HANAU(TM) brands through professional dental supply dealers.
Professional dental products and select consumer oral health products, as
well as replacement parts, also may be purchased on-line at www.waterpik.com.
The website also offers product information literature, including instructions
for product use and service advice and the locations of retail outlets carrying
Water Pik(R) products.
Water filtration products are marketed under the Water Pik(R) and
Instapure(R) brand names and are sold to consumers through mass merchandisers,
home centers, drug stores and co-operative hardware chains.
POOL AND WATER-HEATING PRODUCTS
Our Laars(R) and Jandy(R) swimming pool and spa equipment products are sold
through an international network of wholesale distributors, contractors,
retailers and service companies. Laars(R) water-heating systems are sold through
a network of sales representatives and plumbing and HVAC wholesalers in the
United States, Canada and internationally.
COMPETITION
We compete with domestic and international companies. Competition is based
on price, quality, service, product features, product innovation, marketing and
distribution.
We believe that our success depends on our ability to introduce innovative
products before our competitors, and to design, manufacture and market a broad
range of reliable products which incorporate technological innovations and
satisfy current consumer trends. Among our most significant competitors are
larger companies which have greater financial and technical resources than we
do, such as The Gillette Company, which manufactures Braun(R)products; The
Clorox Company, which manufactures Brita(R) products; Procter & Gamble Co.,
after its pending acquisition of the manufacturer of PUR(R) products; Essef
Corporation, which includes PacFab, Inc./East; and United Dominion Industries,
Ltd., whose subsidiary Weil-McLain manufactures boiler products.
RESEARCH AND DEVELOPMENT
We support research and development through both our marketing and
engineering departments. Our marketing team, together with outside consultants,
research both demographics and lifestyle trends to identify product concepts
related to unmet consumer needs. Product concepts are then expressed in
engineering prototypes in the first stage of new product development. Research
continues as product concepts evolve through interaction with consumer focus
groups. At any point in time, we generally have products in various stages of
development.
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<PAGE> 58
We develop and introduce new products and categories targeted toward
capitalizing on emerging consumer trends, such as the Misting Massage(TM) shower
head and Laars(R) LX heater. Our research and development efforts also focus on
continuing to develop improved and innovative products that meet increasing
energy efficiency performance requirements and stricter environmental
regulations. We also regularly conduct clinical research to validate the safety
and effectiveness of our consumer and professional oral health products. Our
research and development efforts have resulted in numerous awards for design and
innovation.
MANUFACTURING AND FACILITIES
Our principal domestic facilities as of September 1, 1999 are listed below.
Five of the eight facilities are owned and, of those owned, none are subject to
mortgages or similar encumbrances. Although the facilities vary in terms of age
and condition, our management believes that these facilities have been well
maintained. Each of our facilities conducts manufacturing operations in a
relatively autonomous manner, supported by its own manufacturing and assembly
area, quality assurance department, and other support functions. We have
instituted quality assurance programs to provide that our products comply with
the Consumer Products Safety Act and other similar laws. Our Moorpark,
California and Rochester, New Hampshire facilities are ISO 9002 certified and
our Fort Collins and Loveland, Colorado facilities are ISO 9001 certified.
<TABLE>
<CAPTION>
FACILITY SQUARE FOOTAGE
LOCATION PRINCIPAL USE (OWNED/LEASED)
- -------- ------------------------------------ ---------------
<S> <C> <C>
Fort Collins, Colorado............ Manufacturing of shower heads, water 250,000 (owned)
filtration products, and oral health
products.
Loveland, Colorado................ Manufacturing of shower heads, water 136,000 (owned)
filtration products, and oral health
products.
Montreal, Canada.................. Manufacturing and distribution of 55,000 (leased)
(2 buildings) pool and spa accessories, including 47,000 (leased)
cleaning and maintenance supplies,
white goods, ladders, solar reels,
floating lounges, pool toys and
games.
Moorpark, California.............. Manufacturing of pool and spa 200,000 (owned)
heaters, pool pumps and filters,
fiber optic lighting, boilers and
water heaters.
Novato, California................ Manufacturing of valves, actuators, 40,000 (leased)
electronic controls and automatic
cleaners
Oakville, Canada.................. Distribution of Laars(R) products 40,000 (owned)
Rochester, New Hampshire.......... Manufacturing of commercial boilers, 80,000 (owned)
water heaters, pool heaters and
Trianco products
Scarborough, Canada............... Sales, marketing, customer service, 30,000 (leased)
warehousing and distribution of
Water Pik(R) products
</TABLE>
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Our executive offices, located in Newport Beach, California are leased from
third parties. Our facilities are modern and sufficient for use to carry on our
current activities.
PATENTS AND TRADEMARKS
Water Pik Technologies holds a number of patents registered in the U.S.,
Canada and other countries. We also hold the exclusive rights with respect to
certain technology included in our products. We rely primarily upon a
combination of trademark, copyright, know-how, trade secrets, proprietary
information, patents and contractual restrictions to protect our intellectual
property rights. We believe that such measures afford only limited protection
and, accordingly, there can be no assurance that the steps taken by us to
protect our intellectual property rights will be adequate to prevent
misappropriation of our technology or the independent development of similar
technology by others. Despite our efforts to protect our proprietary rights,
unauthorized parties may attempt to copy aspects of our products or obtain and
use information that we regard as proprietary. See "Risk Factors."
SEASONALITY
Our business is highly seasonal, with operating results varying from
quarter to quarter. Both our personal health care products and water-heating
systems products have historically experienced higher sales in the third and
fourth quarters of each year due to the holiday season and cooler weather. Our
swimming pool and spa equipment products have historically experienced higher
sales in the second and fourth quarters of each year as consumers purchase such
products in anticipation of and during the warmer spring and summer months. See
"Risk Factors" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
LEGAL PROCEEDINGS
From time to time, a number of lawsuits, claims and proceedings have been
or may be asserted against us relating to the conduct of our business, including
those pertaining to product liability, patent infringement, commercial,
employment and employee benefits. While the outcome of litigation cannot be
predicted with certainty, and some of these lawsuits, claims or proceedings may
be determined adversely to us, we do not believe that the disposition of any
such pending matters is likely to have a material adverse effect on our
financial condition or liquidity, although the resolution in any reporting
period or one or more of these matters could have a material adverse effect on
our results of operations for that period.
EMPLOYEES
Our work force consists of approximately 1,600 employees. We are not party
to a collective bargaining agreement with respect to any of our employees. We
consider our relations with our employees to be good.
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<PAGE> 60
ARRANGEMENTS WITH ATI RELATING TO THE SPIN-OFF
For the purpose of governing certain of the relationships between ATI and
Water Pik Technologies relating to the spin-off, to provide for an orderly
transition and for other matters, ATI and Water Pik Technologies will enter into
the agreements described below, copies of which have been filed as exhibits to
the Registration Statement of which this Information Statement is a part. The
following summaries of the material terms of these agreements are qualified by
reference to the agreements as so filed.
SEPARATION AND DISTRIBUTION AGREEMENT
ATI and Water Pik Technologies and certain other companies affiliated with
ATI will enter into a Separation and Distribution Agreement that will provide
for the principal corporate transactions required to effect the separation of
our businesses from those of ATI, the spin-off and certain other matters
governing the relationship among us after the spin-off.
To separate our business from other businesses of ATI, the subsidiary of
ATI that has historically held most of the assets used in our business will
transfer those assets to us and we will purchase the remaining assets used in
our business from other subsidiaries of ATI, without representation or warranty
and on an "as is," "where is" basis and "with all faults". We will assume all
liabilities associated with our business, including those arising from the
operation of our business both before and after the spin-off.
Each of ATI and Water Pik Technologies will release the other from all
other obligations and liabilities owed to such party existing on the date of the
spin-off, other than liabilities and obligations arising under the Separation
and Distribution Agreement and the other agreements entered into in connection
with the spin-off. Likewise, each of ATI and Water Pik Technologies will
indemnify the other for liabilities arising from a breach of these agreements or
the failure to pay or discharge the liabilities assumed by such party under the
Separation and Distribution Agreement.
The Separation and Distribution Agreement requires that we initiate a
public offering of our common stock within eight months following the spin-off,
and complete the public offering within one year following the spin-off. It also
requires that we use proceeds of the offering as contemplated by the tax ruling
request. It was represented in the tax ruling request that we anticipate that
gross proceeds of the required public offering would be approximately $50
million and that we intend to use the net proceeds of the offering to further
develop high quality, lower cost manufacturing capabilities, extend our existing
product lines, expand our channels of distribution, develop a self-sustaining
product development process, and for acquisitions and/or joint ventures.
We are currently an additional named insured under various ATI insurance
policies. Under the Separation and Distribution Agreement, we will be entitled
to the benefit of pre-spin-off historical coverage under ATI's property,
liability and certain other insurance policies to the extent coverage is
applicable or potentially available and where limits of liability have not been
exhausted, either on a per occurrence or aggregate basis. The terms and
conditions of these policies, including limits of liability, will not be amended
as a consequence of the spin-off. Going forward, we will be responsible to the
full extent of the deductible or self-insured retention for each claim made
against us under the general liability policies and we will continue to be
responsible for our allocable share of the
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<PAGE> 61
deductibles and retentions under the automobile and workers' compensation
policies based on the same allocation formulas that applied prior to the
spin-off.
The Separation and Distribution Agreement provides that until the third
annual meeting of our stockholders held following the spin-off, at least a
majority of our directors will also be members of the board of directors of ATI.
The initial members of our board of directors will be William G. Ouchi (Class
I), Michael P. Hoopis (Class II), and Robert P. Bozzone and W. Craig McClelland
(Class III). The Separation and Distribution Agreement also provides that we
will nominate Mr. Ouchi (or, if he is unable or unwilling to serve, such other
candidate as Messrs. Bozzone and McClelland or the survivor of them shall
designate) for re-election as a Class I director at the first annual meeting of
our stockholders following the spin-off.
EMPLOYEE BENEFITS AGREEMENT
Prior to the date of the spin-off, ATI and Water Pik Technologies will
enter into an Employee Benefits Agreement to set forth the manner in which
assets and liabilities under employee benefit plans and other employment-related
liabilities will be divided between them, and to help ensure a smooth transition
for employees' benefits in the spin-off. In general, we will be responsible for
compensation and employee benefits relating to our employees.
The Employee Benefits Agreement provides that we will establish our own
qualified and nonqualified pension and other employee benefit plans and
arrangements, which generally will be the same as ATI's plans as in effect at
the time of the spin-off, except that we anticipate that we will establish an
enhanced defined contribution plan to replace ATI's defined benefit pension
plan. Benefits accrued by our employees under the ATI pension plan will be
frozen and we will have no liability, and ATI will have no obligation to
transfer assets, with respect to those benefits. In addition, ATI will retain
all liabilities for pension benefits in excess of qualified plan limits under
the Teledyne, Inc. Pension Equalization Plan.
After the spin-off, all of the account balances of our employees under the
Teledyne, Inc. 401(k) plan will be transferred from the Teledyne, Inc. 401(k)
plan to our 401(k) plan.
In addition to the tax-qualified retirement plans discussed above, we will
establish certain nonqualified stock and deferred compensation plans and
arrangements for key employees that mirror plans and arrangements offered by
ATI, except that we may not establish a performance share program similar to the
ATI Performance Share Program. These plans and arrangements include an employee
stock purchase plan, an omnibus stock incentive plan providing for awards of
stock options, stock appreciation rights and restricted stock and the
establishment of a stock acquisition and retention program ("SARP") similar to
ATI's SARP, and supplemental pension benefits. In addition, we will establish
plans and arrangements for non-employee directors of the Company that are
similar to plans and arrangements offered to ATI's non-employee directors.
The Employee Benefits Agreement will also provide for the treatment of
outstanding options to acquire ATI common stock issued under ATI benefit plans.
At the time of the spin-off, most ATI stock options held by our employees will
be converted into options to purchase shares of Water Pik Technologies common
stock. The number of shares the option holder would be able to purchase and the
exercise price of the options would be
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adjusted in the conversion based on the relationship of the ATI stock price and
the stock price of our common stock over a fixed period of time, so that the
"intrinsic value" of the options (that is, the difference between the market
value of the stock acquired on the exercise and the exercise price of the
options) before the spin-off would be equivalent to the intrinsic value of the
options immediately after the spin-off. The options would otherwise continue to
be and become exercisable on the terms and conditions set forth in the original
ATI benefit plans. Options with exercise prices that are greater than the ATI
stock price at the time of the spin-offs ("out of the money" options) which are
held by our employees will be canceled. It is contemplated that we will grant
new options to holders of the canceled options.
Under the Employee Benefit Agreement, the current award period under the
ATI Performance Share Program would be terminated when the spin-off occurs.
ATI's compensation committee will determine the amount of the awards, if any,
that have been earned, based on the achievement of plan goals through the
spin-off date, and will make awards pro-rated for the shortened Program term.
Pursuant to the Program, payments will be made in cash and stock. Stock payments
to our employees will be paid in Water Pik Technologies common stock. Pursuant
to the Program, we will make the payments in three annual installments, with the
first payment expected to be made early in the year 2000.
The Employee Benefits Agreement also provides for the treatment of
purchased, designated and restricted shares issued under the ATI Stock
Acquisition and Retention Program prior to the spin-off. Under the Agreement,
participants who have purchased or designated ATI shares will receive
distributions of the common stock of Teledyne Technologies and Water Pik
Technologies in the spin-offs on the purchased or designated ATI shares. The
shares they receive in the spin-off, as well as the original ATI shares, will
continue to be held as collateral for the loans for the purchased shares, all of
which will be retained by ATI, until the loans are fully paid. Restricted shares
issued under the Program to our employees will be converted into shares of Water
Pik Technologies common stock. The new Water Pik Technologies shares will also
be restricted shares until the restriction lapse on the terms and conditions set
forth in the original ATI Program.
The Employee Benefits Agreement provides, in general, that we will receive
no assets with which to fund liabilities under non-qualified plans. An exception
applies with respect to the Allegheny Teledyne Executive Deferred Compensation
Plan under which employees with total annual compensation in excess of $100,000
may elect to defer a portion or all of their salary and/or bonus; it is
anticipated that we will receive company-owned life insurance policies or other
assets with a cash value equal to the amount of deferred compensation
liabilities at the time of the spin-off.
TAX SHARING AND INDEMNIFICATION AGREEMENT
On or prior to the date of the spin-off, ATI and Water Pik Technologies
will enter into a Tax Sharing and Indemnification Agreement that will set forth
each party's rights and obligations regarding payment and refunds, if any, with
respect to taxes for periods before and after the spin-off and related matters
such as the filing of tax returns and the conduct of audits or other proceedings
involving claims made by taxing authorities.
In general, ATI will be responsible for filing consolidated U.S. federal
and consolidated, combined or unified state income tax returns for periods
through the date of the spin-off, and for paying the taxes relating to such
returns including any subsequent
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adjustments resulting from the redetermination of such tax liability by the
applicable taxing authorities. We will be responsible for other taxes
attributable to our operations.
The Tax Sharing and Indemnification Agreement provides that we will
indemnify ATI and its directors, officers, employees, agents and representatives
for any taxes imposed on, or other amounts paid by them, or ATI's stockholders,
if we take actions or fail to take actions such as completing the required
public offering, that result in the spin-off not qualifying as a tax-free
distribution. For example, pursuant to the Tax Sharing and Indemnification
Agreement, Water Pik Technologies will agree that for a two-year period
following the date of the spin-off: (i) we will continue to engage in the Water
Pik Technologies business; (ii) we will continue to own and manage at least 50%
of the assets which we own directly or indirectly immediately after the
spin-off; and (iii) we will not, unless we obtain an IRS tax ruling that such
transaction will not cause the spin-off to be taxable for U.S. federal income
tax purposes, engage in a number of specified transactions. Transactions subject
to these restrictions will include, among others, issuance of Water Pik
Technologies common stock (or certain derivatives of our stock) in amounts which
would equal or exceed 40% of the outstanding Water Pik Technologies common stock
immediately after the spin-off, issuance of instruments other than Water Pik
Technologies common stock (or derivatives of our stock) constituting equity for
U.S. federal tax purposes, certain redemptions and other acquisitions of capital
stock or equity securities of Water Pik Technologies, or the merger, dissolution
or liquidation of Water Pik Technologies.
If our obligations under the Tax Sharing and Indemnification Agreement were
breached and the spin-off were to fail to continue to qualify as tax-free for
U.S. federal income tax purposes as a result of such breach, we would be
required to satisfy the indemnification obligations described above. This
indemnification obligation could exceed our net worth at that time.
Though valid as between the parties thereto, the Tax Sharing and
Indemnification Agreement is not binding on the IRS and does not affect the
several liability of ATI, Water Pik Technologies and their respective
subsidiaries to the IRS for all U.S. federal taxes of the consolidated group
relating to periods prior to the spin-off.
INTERIM SERVICES AGREEMENT
On or prior to the date of the spin-off, ATI and Water Pik Technologies
will enter into an Interim Services Agreement pursuant to which ATI will provide
us with transitional administrative and support services for a period of time
not expected to exceed 12 months. The Interim Services Agreement will provide
that we will pay a fee to ATI intended to approximate ATI's cost for such
services plus 10%.
The Interim Services Agreement will provide that we will indemnify ATI for
all claims, losses, damages, liabilities and costs incurred by ATI to a third
party arising in connection with the provisions of a service under the
agreement, other than those costs resulting from ATI's willful misconduct or
gross negligence. In general, we can terminate an interim service after an
agreed notice period.
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MANAGEMENT
DIRECTORS
Our board of directors is expected initially to consist of the individuals
named below. Until the third annual meeting of our stockholders following the
spin-off, at least a majority of the members of our board of directors will also
be directors of ATI. See "Arrangements with ATI Relating to the
Spin-Off -- Separation and Distribution Agreement" and "Description of Our
Capital Stock."
Our Certificate of Incorporation provides that we will have three classes
of directors, the initial terms of office of which will expire, respectively, at
the annual meeting of our stockholders in 2000, 2001 and 2002. We expect to hold
our first annual meeting of stockholders in , 2000. Successors to
any directors whose terms are expiring are elected to three-year terms and hold
office until their successors are elected and qualified.
Also set forth below with respect to each director is the class of which
such director will be a member. Unless otherwise indicated, the business address
for each person listed below is 660 Newport Center Drive, Suite 470, Newport
Beach, California 92660. Each individual listed below is a citizen of the United
States.
Our Bylaws contain provisions designed to ensure that at least a majority
of our directors are also directors of ATI until the third annual meeting of our
stockholders held after the spin-off. The Bylaws also provide that no quorum of
the board will be deemed present unless at least a majority of the directors
present are also members of the board of directors of ATI.
CLASS I DIRECTOR
The Class I director will serve until the 2000 annual meeting of our
stockholders and until his successor is elected and qualified. Our Class I
Director will be:
<TABLE>
<S> <C>
WILLIAM G. OUCHI William G. Ouchi is the Sanford and
Sanford and Betty Sigloff Professor in Betty Sigloff Professor in Corporate
Corporate Renewal, Anderson Renewal at the Anderson Graduate School
Graduate School of Management, of Management, University of California
University of California at at Los Angeles. He is also a director of
Los Angeles ATI and FirstFed Financial Corp.
Age: 56
</TABLE>
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CLASS II DIRECTOR
The Class II director will serve until the 2001 annual meeting of our
stockholders and until his respective successor is elected and qualified. Our
Class II Director will be:
<TABLE>
<S> <C>
MICHAEL P. HOOPIS, Michael P. Hoopis has been our President
President and Chief Executive Officer, and Chief Executive Officer since
Water Pik Technologies October 1998. Prior to that time, Mr.
Age: 48 Hoopis was affiliated with The Black &
Decker Corporation, in various executive
positions, including as President,
Worldwide Household Products and as
Executive Vice President from 1996 to
1998; President, Price Pfister, Inc.
from 1992 to 1996; President, Kwikset
Corporation from 1991 to 1992; and Vice
President of Manufacturing, U.S.
Household Products from 1989 to 1991.
Mr. Hoopis was President of the Stiffel
Company from 1986 to 1989, and he has
held various marketing, manufacturing
and engineering positions with other
corporations. Mr. Hoopis is a director
of Doskocil Manufacturing Company, Inc.,
a manufacturer of a broad range of
plastic and pet products.
</TABLE>
CLASS III DIRECTORS
Class III directors will serve until the 2002 annual meeting of our
stockholders and until their respective successors are elected and qualified.
Our Class III Directors will be:
<TABLE>
<S> <C>
ROBERT P. BOZZONE Robert P. Bozzone has been Vice Chairman
Vice Chairman of the Board of the Board of ATI since August 1996.
of ATI He had served as Vice Chairman of
Age: 66 Allegheny Ludlum Corporation since
August 1994, and previously was
President and Chief Executive Officer of
Allegheny Ludlum Corporation. He is a
director of ATI and DQE, Inc., whose
principal subsidiary is Duquesne Light
Company.
W. CRAIG MCCLELLAND W. Craig McClelland served as Chairman
Retired Chairman and Chief and Chief Executive Officer of Union
Executive Officer, Camp Corporation, a manufacturer of
Union Camp Corporation paper products, from July 1994 until his
Age: 65 retirement in June 1999. Prior to that
time, he served as President and Chief
Operating Officer of Union Camp. He is
also a director of ATI, International
Paper Corporation and PNC Bank Corp.
</TABLE>
COMMITTEES OF OUR BOARD OF DIRECTORS
In addition to other committees established by our board of directors from
time to time, our board has established an Audit and Finance Committee, a
Governance Committee and a Personnel and Compensation Committee.
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AUDIT AND FINANCE COMMITTEE. The principal audit functions of the Audit
and Finance Committee include:
- Making recommendations to the board of directors regarding the
appointment of the independent accountants for the coming year.
- Reviewing the scope and general extent of and proposed fees for the
annual audit plan and other activities of the independent accountants and
the audit plan of the internal auditors.
- Reviewing with management and the independent accountants, upon
completion of the annual audit, the financial statements and related
reports for their adequacy and compliance with generally accepted
accounting, reporting and disclosure standards.
- Evaluating the effectiveness of our internal and external audit efforts,
accounting and financial controls, policies and procedures and business
ethics policies and practices through a review of reports by, and at
regular meetings with, the internal and external auditors and with
management, as appropriate.
The principal finance functions of the Audit and Finance Committee include:
- Reviewing and evaluating proposed bank credit agreements and other major
financial proposals.
- Reviewing and evaluating our relationships with banks and other financial
institutions.
- Reviewing and making recommendations to the board of directors concerning
policies with respect to dividends and capital structure.
- Meeting with the independent auditors and the internal auditors, with and
without management being present, to discuss all appropriate matters.
GOVERNANCE COMMITTEE. The Governance Committee will:
- Make recommendations to the board of directors with respect to candidates
for nomination as new board members and with respect to incumbent
directors for nomination as continuing board members.
- Make recommendations to the board of directors concerning the memberships
of committees of the board and the chairpersons of the respective
committees.
- Make recommendations to the board of directors with respect to the
remuneration paid and benefits provided to members of the board in
connection with their service on the board and its committees.
- Administer our formal compensation programs for directors, including the
Water Pik Technologies, Inc. 1999 Non-Employee Director Stock
Compensation Plan.
- Make recommendations to the board of directors concerning the
composition, organization and operations of the board of directors,
including the orientation of new members and the flow of information.
- Evaluate board tenure policies as well as policies covering the
retirement or resignation of incumbent directors.
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<PAGE> 67
PERSONNEL AND COMPENSATION COMMITTEE. The Personnel and Compensation
Committee will:
- Make recommendations to the board of directors concerning general
executive management organization matters.
- Make recommendations to the board of directors concerning compensation
and benefits for employees who are also our directors, consult with our
Chief Executive Officer on compensation and benefit matters relating to
other officers who are required to file reports under Section 16 of the
Securities Exchange Act of 1934, as amended ("statutory insiders") and
make recommendations to the board of directors concerning compensation
policies and procedures relating to officers who are statutory insiders.
- Make recommendations to the board of directors concerning policy matters
relating to employee benefits and employee benefit plans.
- Make awards of stock-based compensation to officers who are our statutory
insiders.
- Administer our formal incentive compensation plans.
COMPENSATION OF OUR DIRECTORS
Directors who are not our employees will be paid an annual retainer fee of
$20,000. Directors will also be paid $1,000 for each board meeting and $1,000
for each committee meeting attended. Each non-employee chair of a committee will
be paid an annual fee of $1,500. Directors who are our employees will not
receive any compensation for their services on our board or its committees.
The non-employee directors will also participate in the 1999 Non-Employee
Director Stock Compensation Plan (the "Director Stock Plan"). The purpose of the
Director Stock Plan is to provide non-employee directors with an increased
personal interest in our performance.
Under the Director Stock Plan, options to purchase shares of our
common stock will be granted to non-employee directors at the conclusion of each
annual meeting of our stockholders. The purchase price of the common stock
covered by these annual options will be the fair market value of our common
stock on the date the option is granted.
The Director Stock Plan also provides that each non-employee director will
receive at least 25% of the annual retainer fee in the form of our common stock
and/or options to acquire our common stock. Each director may elect a greater
percentage. Options granted under this part of the Director Stock Plan are
intended to provide each electing director with options having an exercise value
on the date of grant equal to the foregone fees; that is, the difference between
the exercise price and the market price of the underlying shares of common stock
on the date of grant is intended to be equal to the foregone fees.
In order to continue to attract and retain non-employee directors of
exceptional ability and experience, we will also maintain a Fee Continuation
Plan for Non-Employee Directors. Under the plan, benefits will be payable to a
person who serves as a non-employee director for at least five years. The annual
benefit will equal the retainer fee in effect when the director retires from the
board. Benefits will be paid for each year of the participant's credited service
as a director up to a maximum of ten years.
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<PAGE> 68
EXECUTIVE OFFICERS AND SENIOR MANAGEMENT
Set forth below are the name, age, position and office to be held with us,
and principal occupations and employment during the past five years, of those
individuals who are expected to serve as our executive officers and as our
senior management immediately following the spin-off. Those individuals named
below who are currently officers or employees of ATI will resign from all such
positions prior to the spin-off. Our executive officers will be elected to serve
until they resign or are removed, or are otherwise disqualified to serve, or
until their successors are elected and qualified.
<TABLE>
<CAPTION>
NAME, OFFICE AND POSITION AGE
- ------------------------- ---
<S> <C>
EXECUTIVE OFFICERS
Michael P. Hoopis, President and Chief Executive Officer.... 48
Robert A. Shortt, Executive Vice President -- Sales,
Marketing and Business Development........................ 39
Victor C. Streufert, Vice President -- Finance and Chief
Financial Officer......................................... 42
Richard P. Bisson, Vice President -- Operations............. 40
SENIOR MANAGEMENT
Robert J. Rasp, President -- Laars.......................... 41
</TABLE>
Mr. Hoopis' employment history is described above under "Directors."
Robert A. Shortt has been Executive Vice President -- Sales, Marketing and
Business Development of Water Pik Technologies since July 1999. From 1996 to
1999, Mr. Shortt was Vice President, Marketing and Merchandising of CSK Auto
Corp., an automotive parts and accessories retailer. From 1995 to 1996, Mr.
Shortt was Vice President, Marketing of Price Pfister, Inc., a division of The
Black & Decker Corporation, and from 1990 to 1995, Mr. Shortt was Vice President
of Kwikset Corporation, a division of The Black & Decker Corporation.
Victor C. Streufert has been Vice President -- Finance and Chief Financial
Officer of Water Pik Technologies since July 1999. Prior to that time, from 1996
to 1998, Mr. Streufert was Senior Vice President, Finance and Administration and
Chief Financial Officer of National Telephone Communications, Inc. From 1995 to
1996, Mr. Streufert was Vice President, Finance and Chief Financial Officer of
Pyxis Corporation, a health care technology and service company, and from 1989
to 1995, Mr. Streufert was Executive Vice President, Chief Financial Officer of
American Health Properties Inc.
Richard P. Bisson has been Vice President -- Operations of Water Pik
Technologies since July 1999. From January 1999 to July 1999, Mr. Bisson was a
Consultant to the Chairman and Chief Executive Officer of Eldor Corporation, a
producer of transformers for consumer and automotive markets. From 1996 to
January 1999, Mr. Bisson was Managing Director of Gilardoni S.p.A., a supplier
of products, components and services in medical, security and non-destructive
testing industries. From 1990 to 1996, Mr. Bisson held a variety of positions
with Price Pfister, Inc., a division of The Black & Decker Corporation,
including Director, Manufacturing and Director, Engineering Services.
Robert J. Rasp has been President of Laars since 1996. He was Vice
President, Heating Systems of Laars from 1993 to 1996. From 1990 to 1993, he was
a general manager of Carrier Corporation.
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<PAGE> 69
HISTORICAL COMPENSATION OF EXECUTIVE OFFICERS
Shown below is information concerning the annual and long-term compensation
for services rendered in all capacities to ATI and its subsidiaries for the
years ended December 31, 1998 of the individual who will serve as our Chief
Executive Officer and who was the only executive officer employed, by ATI or an
affiliate of ATI at December 31, 1998 (the "Named Executive Officer"). The
compensation described in this table was paid by ATI or an affiliate of ATI. The
table does not reflect the compensation to be paid to our executive officers in
the future.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------- ---------------------
RESTRICTED OPTIONS
NAME AND PRINCIPAL FISCAL OTHER ANNUAL STOCK (SHARES) ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION AWARDS (1) COMPENSATION
- ------------------ ---------- -------- -------- ------------ ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael P. Hoopis,
President and Chief
Executive
Officer............ 1998 $100,000 -- -- -- 40,000 $42,949(2)
(3 months)
</TABLE>
- -------------------------
(1) Reflects options granted under ATI's Incentive Plan.
(2) Includes $40,774 for relocation expenses.
OPTION GRANTS IN LAST FISCAL YEAR
Shown below is information on grants to Mr. Hoopis of options to purchase
shares of ATI common stock pursuant to the ATI Incentive Plan during the year
ended December 31, 1998, which are reflected in the Summary Compensation Table
above.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED RATES
OF STOCK PRICE
NUMBER OF % OF TOTAL APPRECIATION FOR
SECURITIES OPTIONS OPTION TERM(1)
UNDERLYING GRANTED TO EXERCISE OR -----------------------
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION 0% 5% 10%
NAME GRANTED (1) FISCAL YEAR ($/SHARE) DATE $ $ $
- ---- ----------- ------------ ----------- ---------- --- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael P. Hoopis.... 20,000 * $17.40625 10/05/08 0 218,875 554,875
20,000 * $ 20.375 12/17/08 0 256,300 649,500
</TABLE>
- -------------------------
* Less than 1%.
(1) Reflects options granted under ATI's Incentive Plan.
(2) No gain to the optionee is possible without stock price appreciation, which
will benefit all stockholders commensurately. The assumed "potential
realizable values" are mathematically derived from certain prescribed rates
of stock price appreciation. The actual value of these option grants depends
on the future performance of ATI common stock and overall stock market
condition. There is no assurance that the values reflected in this table
will be realized.
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<PAGE> 70
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
SHARES UNEXERCISED OPTIONS AT OPTIONS AT FISCAL
ACQUIRED ON VALUE FISCAL YEAR END(#) YEAR END($)(1)
NAME AND PRINCIPAL POSITION EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- --------------------------- ------------- ----------- ----------------------------- -------------------------
<S> <C> <C> <C> <C>
Michael P. Hoopis............ 0 0 0/40,000 0/56,250
</TABLE>
- -------------------------
(1) The "value of unexercised in-the-money options" is calculated by subtracting
the exercise price per share from $20.21875 which was the average of the
high and low sales prices of a share of ATI common stock on the New York
Stock Exchange on December 31, 1998. Of the options held by Mr. Hoopis,
options to purchase 20,000 shares were not in-the-money at December 31,
1998.
Under the Employee Benefits Agreement, in general, options to purchase
shares of ATI common stock that are held by our employees, including Mr. Hoopis,
will be converted into options to purchase shares of Water Pik Technologies
common stock. The number of our shares that our employees will be able to
purchase and the exercise price of the options will be adjusted in the
conversion based on the relationship of the ATI stock price and the stock price
of Water Pik Technologies over a fixed period of time. Options with exercise
prices that are greater than the ATI stock price at the time of the spin-off
will be cancelled. It is contemplated that we will grant new options for our
common stock to holders of the cancelled options.
EMPLOYMENT AGREEMENTS
On September 15, 1998, ATI entered into an employment agreement with Mr.
Hoopis which provides for an initial term of employment expiring on December 31,
2002. In connection with the spin-off, we will assume all the obligations of
ATI, as employer, under that agreement. Under the agreement, Mr. Hoopis is
entitled to an annual base salary of $400,000 and certain additional payments on
the first three anniversaries of the agreement. In addition, at the spin-off
date, Mr. Hoopis will receive options to purchase 3% of the shares of common
stock of Water Pik Technologies. The options will have a ten year term and will
be exercisable at a price equal to the average of the high and low sales price
of a share of Water Pik Technologies common stock. Options to purchase 10% of
the shares will become exercisable one year after the grant date, options to
purchase an additional 20% of the shares will become exercisable two years after
the grant date, and options to purchase the remaining 70% of the shares will
become exercisable three years after the grant date.
ATI has entered into an employment agreement with Robert A. Shortt as our
Executive Vice President -- Sales, Marketing and Business Development. The
agreement provides for an annual base salary of $245,000 and certain additional
payments, and provides for an initial term of employment expiring on June 28,
2000, which will be automatically extended unless written notice is given by
either party. ATI has entered into an employment agreement with Victor C.
Streufert as our Vice President -- Finance and Chief Financial Officer. The
agreement provides for annual base salary of $225,000 and certain additional
payments, and provides for an initial term of employment expiring on July 6,
2000, which will be automatically extended unless written notice is given by
either party. ATI has entered into an employment agreement with Richard Bisson
as our Vice
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<PAGE> 71
President -- Operations. The agreement provides for an annual base salary of
$190,000 and certain additional payments, and provides for an initial term of
employment expiring on July 1, 2000, which will be automatically extended unless
written notice is given by either party. In connection with the spin-off, we
will assume all the obligations of ATI, as employer, under these agreements.
After the spin-off, Messrs. Shortt, Streufert and Bisson will be entitled to
participate in the Water Pik Technologies annual incentive bonus plan, under the
terms and conditions applicable to all participants.
Pursuant to the employment agreements with Messrs. Shortt, Streufert and
Bisson, each will receive options to purchase shares of common stock of Water
Pik Technologies at the spin-off date. The options will have a ten year term and
will be exercisable at a price equal to the average of the high and low sales
price of a share of Water Pik Technologies common stock. For Messrs. Shortt,
Streufert and Bisson, options to purchase and shares, respectively,
will become exercisable one year after the grant date, options to purchase an
additional , and shares, respectively, will become exercisable
two years after the grant date, and options to purchase an additional ,
and shares, respectively, will become exercisable three years after
the grant date.
The employment agreements for each of Messrs. Hoopis, Shortt, Streufert and
Bisson will automatically terminate upon the death of the executive, and may be
terminated at our option if the executive becomes disabled or at any time
without cause. In these events, we would be required to make certain severance
payments, in the case of Mr. Hoopis, in an amount equal to the greater of his
base salary and performance bonus for the remaining term of his agreement or two
years, and in the case of Messrs. Shortt, Streufert and Bisson, in an amount
equal to the executive's base salary and performance bonus for one year and,
except in the case of death, to continue certain benefits for the benefit of,
the executive or his estate. We may also terminate each executive at any time
for "cause," in which case the executive would be entitled to no severance
payments or other benefits. Each executive may terminate his respective
agreement at any time by providing prior written notice pursuant to the terms of
the agreement. If an executive terminates the agreement without "good reason,"
he would be entitled to no severance payments or other benefits. If an executive
terminates the agreement with "good reason," including upon the occurrence of
"Change in Control," as defined in the agreement, he would be entitled to
receive severance payments and benefits.
BENEFIT PLANS FOLLOWING THE SPIN-OFF
OUR INCENTIVE PLANS
On or prior to the date of the spin-off, our board of directors will adopt,
and ATI as our sole stockholder will approve, the following incentive
compensation plans.
LONG-TERM INCENTIVE PLAN. Our long-term incentive plan is expected to
provide for the grant of various types of long-term incentive awards to selected
employees, consistent with the objectives and restrictions of the plan. Although
these awards may include non-qualified stock options, incentive stock options
under the Internal Revenue Code of 1986, as amended (the "Code"), stock
appreciation rights, and restricted and unrestricted share awards, it is
expected that only stock options and restricted stock awards under a stock
acquisition and retention program will be granted under the plan initially. A
total of shares of our common stock will be available for issuance
under our long-term incentive plan. The term of the plan is expected to be ten
years.
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<PAGE> 72
The plan will vest broad powers in the Personnel and Compensation Committee
of our board of directors to administer and interpret the plan. This power will
include the authority to select the persons to be granted awards, to determine
the terms, goals and conditions of awards, and to determine whether such goals
and conditions have been met.
While the precise number of shares is yet to be determined, it is
anticipated that we will grant options for up to shares of our common
stock to our senior management following the spin-off in addition to those
options granted in connection with the conversion of options to purchase ATI
common stock under the Employee Benefits Agreement. We also expect to establish
a stock acquisition and retention program ("SARP") under our incentive plan with
terms that are similar to the SARP established by ATI. Under this program, each
year, key executives will be given the opportunity to purchase shares of our
stock, or designate shares of our stock previously acquired by them, with a
value equal to their base salary at the beginning of the year. Under the SARP,
executives who purchase shares can deliver a promissory note, payable to the
Company, as payment of the purchase price. Executives will receive an award of
one restricted share of our common stock for each two shares they purchase or
designate. In general, the restricted shares will vest only if the participant
retains the shares purchased or designated by the participant as subject to the
SARP for a period of five years.
ANNUAL INCENTIVE PLAN. Our annual incentive plan is expected to give the
Personnel and Compensation Committee of our board of directors the discretion to
determine the aggregate amount of money to be used for awards based upon
competitive compensation practices and such measures of our performance as the
committee selects from time to time. Individual awards will be determined
annually by the Personnel and Compensation Committee in accordance with
performance goals established by the committee at the beginning of the year.
DEFERRED COMPENSATION PLAN. It is anticipated that we will implement a
deferred compensation plan that will allow certain of our executives to defer
all or a portion of their annual salary and annual incentive plan awards, as
well as amounts due under certain of our other compensation programs. A
participant's deferred benefit will be credited with earnings based on or more
hypothetical investments available under the plan. The plan is not funded. We
expect, however, to hold insurance policies on the lives of participants in the
plan, to the extent insurance is reasonably available, to provide a possible
source of cash for payments that become due under the plan.
OTHER PLANS
SAVINGS PLAN. We plan to establish an enhanced defined contribution 401(k)
program for our employees prior to April 1, 2000 and transfer account balances
of affected employees under the Teledyne, Inc. 401(k) Plan directly to our new
plan. Until we establish our new plan, our employees will continue to
participate in a part of the Teledyne, Inc. 401(k) Plan that is maintained for
the benefit of our employees. After the spin-off and until we establish our new
savings plan, our part of the Teledyne, Inc. 401(k) Plan will offer along with
other funds, three common stock funds as investment alternatives: (i) our common
stock fund, (ii) a Teledyne Technologies common stock fund, and (iii) an ATI
common stock fund. Our plan participants will not be able to increase their
holdings in the Teledyne Technologies, ATI or, until we establish our new 401(k)
plan, our stock funds but will be allowed to transfer their account balances out
of those funds. To the extent that the plan fiduciaries have not already done
so, on April 1, 2000, all remaining investments in the Teledyne Technologies and
ATI stock funds under
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<PAGE> 73
our part of the Teledyne, Inc. 401(k) Plan or our new savings plan will be
automatically liquidated and the proceeds transferred to the Water Pik
Technologies common stock fund under the applicable plan. Similar investment
restrictions and automatic liquidations will apply to the Water Pik Technologies
stock fund available under the ATI and Teledyne Technologies savings plans.
EMPLOYEE STOCK PURCHASE PLAN. We expect to adopt an employee stock
purchase plan similar to ATI's Stock Advantage Plan, under which our employees
will be permitted to purchase shares of our common stock through payroll
deductions supplemented by Company contributions.
OTHER BENEFIT PLANS. It is expected that we will adopt a number of plans
to provide certain employee welfare benefits to our active employees as well as
our retirees after the spin-off, including medical, short and long-term
disability, life insurance, severance and other benefits, and our board of
directors will reserve the right to amend, suspend or terminate any of these
welfare plans.
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<PAGE> 74
SECURITY OWNERSHIP
The following table sets forth the number of shares of our common stock
expected to be beneficially owned following the spin-off, directly or
indirectly, by each person known to us who is expected to own beneficially more
than five percent of our outstanding common stock, each director, our Named
Executive Officer and such persons as a group, in each case based upon the
beneficial ownership of such persons of ATI common stock reported to ATI as of
August 31, 1999, and the distribution ratio of one share of our common stock for
every 20 shares of ATI common stock owned by the named persons, including shares
as to which a right to acquire ownership exists within 60 days of August 31,
1999 (for example, through the exercise of stock options) within the meaning of
Rule 13d3(d)(1) under the Securities Exchange Act of 1934. Each person has sole
voting and investment power with respect to the shares listed unless otherwise
indicated.
<TABLE>
<CAPTION>
NUMBER OF
BENEFICIAL OWNER SHARES PERCENT OF CLASS
- ---------------- --------- ----------------
<S> <C> <C>
J. P. Morgan & Co. Incorporated(1).................. 1,078,210 11.3%
60 Wall Street
New York, NY 10260
Richard P. Simmons (2).............................. 807,238 8.5%
1000 Six PPG Place
Pittsburgh, PA 15222
Caroline W. Singleton(3)............................ 699,966 7.3%
Sole Trustee of the Singleton Family Trust
335 North Maple Drive, Suite 177
Beverly Hills, CA 90210
Scudder Kemper Investments, Inc.(4)................. 551,359 5.8%
345 Park Avenue
New York, NY 10154
Capital Research and Management Company(5).......... 507,520 5.3%
333 South Hope Street
Los Angeles, CA 90071
Michael P. Hoopis................................... -- *
Robert P. Bozzone(6)................................ 253,574 2.7%
W. Craig McClelland(6).............................. 247 *
William G. Ouchi.................................... 346 *
All directors and Named Executive Officer as a group
(4 persons)....................................... 254,167 2.7%
</TABLE>
- -------------------------
* Less than one percent of the outstanding shares.
(1) J.P. Morgan & Co. Incorporated filed a Form 13F under the Securities
Exchange Act of 1934 indicating that as of June 30, 1999, it beneficially
owned 21,564,205 shares of ATI common stock, including 15,924,890 shares as
to which it had sole voting power and 158,369 shares as to which it had
shared voting power.
(2) Mr. Simmons will have the sole power to direct the voting of all 807,238
shares, and sole power to direct the disposition of 403,170 of these shares.
Mrs. Richard P. Simmons will have the sole power to direct the disposition
of 404,064 of these shares.
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<PAGE> 75
The amount shown reflects shares held for Mr. Simmons as of August 31, 1999
under the ATI Retirement Savings Plan. The amount shown does not include the
shares which will be paid by ATI to Mr. Simmons as his base salary for 1999,
in the annual amount of 45,000 shares of ATI common stock, as directed by
the ATI Stock Incentive Award Subcommittee or options to acquire shares of
ATI common stock which Mr. Simmons may exercise within 60 days of August 31,
1999 under ATI incentive stock plans (or options to acquire shares of ATI
common stock which Mr. Simmons has transferred as gifts to family members,
as to which he disclaims beneficial ownership), which will remain options to
purchase shares of ATI common stock following the spin-off. Mr. Simmons
disclaims beneficial ownership of shares, not shown in the table, that will
be owned by R. P. Simmons Family Foundation.
(3) Caroline W. Singleton filed a Schedule 13D dated August 25, 1999, indicating
that as of July 26, 1999, she beneficially owned 13,999,320 shares of ATI
common stock, which had been held by Dr. Henry E. Singleton. The shares had
been subsequently transferred to the Singleton Family Trust, of which she is
the sole trustee.
(4) Scudder Kemper Investments, Inc. filed a Schedule 13G dated February 12,
1999 indicating that as of December 31, 1998, it beneficially owned ATI
common stock as follows: 2,326,862 sole voting power; 7,974,265 shared
voting power; 10,928,613 sole dispositive power; and 98,569 shared
dispositive power.
(5) Capital Research and Management Company filed a Schedule 13G dated February
8, 1999 indicating that as of December 31, 1998, it held sole dispositive
power, and no voting power, with respect to 10,150,400 shares of ATI common
stock as a result of acting as investment adviser to various registered
investment companies.
(6) The amounts shown do not include options to acquire shares of ATI common
stock which these individuals may exercise within 60 days of August 31, 1999
under ATI's non-employee director stock-based compensation plan and which
will remain options to purchase shares of ATI common stock; the amounts do
not include shares for which beneficial ownership is disclaimed, including
150 shares owned by Mr. McClelland's wife; 12,000 shares owned by Mr.
Bozzone's wife; and 3,585 shares owned by the Bozzone Family Foundation.
DESCRIPTION OF OUR CAPITAL STOCK
Our Certificate of Incorporation ("Certificate") provides that our
authorized capital consists of (i) 50,000,000 shares of common stock, $.01 par
value, of which (based on the number of shares of ATI common stock outstanding
as of , 1999) approximately shares of our common stock will be
issued to stockholders of ATI in the spin-off, and (ii) 5,000,000 shares of
preferred stock, par value $.01 per share, of which shares have
been designated as Series A Junior Participating Preferred Stock for issuance in
connection with the exercise of Water Pik Technologies Rights (as described
below). See "-- Rights Plan."
COMMON STOCK
Each share of our common stock will entitle its holder of record to one
vote for the election of directors and all other matters to be voted on by the
stockholders. Holders of our common stock will not have cumulative voting
rights. As a result, the holders of a majority of the shares of our common stock
voting for the election of directors may elect all nominees standing for
election as our directors.
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Subject to the rights of holders of preferred stock, holders of our common
stock will be entitled to receive such dividends, if any, as may be declared
from time to time by our board of directors in its discretion from funds legally
available for that use. Subject to the rights of holders of preferred stock,
holders of our common stock will be entitled to share on a pro rata basis in any
distribution to stockholders upon our liquidation, dissolution or winding up. No
holder of our common stock will have any preemptive right to subscribe for any
of our stock or other security.
PREFERRED STOCK
Our board of directors, without further action by the stockholders, may
from time to time authorize the issuance of shares of our preferred stock in one
or more series and, within certain limitations, fix the powers, preferences and
rights and the qualifications, limitations or restrictions thereof and the
number of shares constituting any series or designations of such series.
Satisfaction of any dividend preferences of our outstanding preferred stock
would reduce the amount of funds available for the payment of dividends on our
common stock. Holders of our preferred stock would normally be entitled to
receive a preference payment in the event of our liquidation, dissolution or
winding up before any payment is made to the holders of our common stock.
Under certain circumstances, the issuance of our preferred stock may render
more difficult or tend to discourage our change in control. Although we
currently have no plans to issue shares of our preferred stock, our board of
directors, without stockholder approval, may issue our preferred stock with
voting and conversion rights which could adversely affect the rights of holders
of shares of our common stock. For a description of the terms of our Series A
Junior Participating Preferred Stock. See "-- Rights Plan."
RIGHTS PLAN
On , 1999, our board of directors declared a dividend of one
preferred share purchase right (each, a "Right") for each outstanding share of
our common stock. Each Right entitles the registered holder to purchase from us
one one-hundredth of a share of Series A Junior Participating Preferred Stock
(the "Preferred Shares") of Water Pik Technologies at a price of $ per one
one-hundredth of a Preferred Share (the "Purchase Price"), subject to
adjustment. The description and terms of the Rights are set forth in a Rights
Agreement dated as of , 1999 between us and ChaseMellon Shareholder
Services, L.L.C., as Rights Agent.
Until the earlier to occur of:
- a public announcement that a person or group of affiliated or associated
persons (an "Acquiring Person"), has acquired beneficial ownership of 15%
or more of our outstanding shares of common stock; or
- 10 business days (or such later date as may be determined by our board of
directors) 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 15% or more of
our outstanding common stock (the earlier of such dates being the
"Distribution Date"), the Rights will be evidenced by the common stock
certificate with a copy of the Summary of Rights attached to it.
The Rights Agreement provides that, until the Distribution Date (or earlier
redemption or expiration of the Rights), the Rights will be transferred with and
only with
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our common stock. Until the Distribution Date (or earlier redemption or
expiration of the Rights), new certificates of our common stock issued upon
transfer or new issuance of our common stock will contain a notation
incorporating the Rights Agreement by reference.
Until the Distribution Date (or earlier redemption or expiration of the
Rights), the surrender for transfer of any certificates for our common stock,
even without such notation or a copy of the Summary of Rights being attached
thereto, will also constitute the transfer of the Rights associated with our
common stock represented by such certificate. As soon as practicable following
the Distribution Date, separate Rights Certificates will be mailed to holders of
record of our common stock as of the close of business on the Distribution Date
and such separate Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The final
expiration date for the Rights will occur at the close of business on
, 2009, unless this date is extended or unless the Rights are
earlier redeemed or exchanged by us, in each case, as described below.
The Purchase Price payable, and the number of Preferred Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution:
- in the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Preferred Shares;
- upon the grant to holders of the Preferred Shares of certain rights or
warrants to subscribe for or purchase Preferred Shares at a price, or
securities convertible into Preferred Shares with a conversion price,
less than the then-current market price of the Preferred Shares; or
- upon the distribution to holders of the Preferred Shares of evidence of
indebtedness or assets (excluding regular periodic cash dividends paid
out of earnings or retained earnings or dividends payable in Preferred
Shares) 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
Preferred Share issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of our common stock or a stock dividend
on our common stock payable in shares of our common stock or subdivisions,
consolidations or combinations of our common stock occurring, in any such case,
prior to the Distribution Date.
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $ per share but will be entitled to an
aggregate dividend of times the dividend declared per share of our common
stock. If we are liquidated, the holders of the Preferred Shares will be
entitled to a minimum preferential liquidation payment of $ per share but
will be entitled to an aggregate payment of times the payment
made per share of our common stock. Each Preferred Share will have
votes, voting together with our common stock. Finally, if we engage in a merger,
consolidation, or any other transaction in which shares of our common stock are
exchanged, each Preferred Share will be entitled to receive times the
amount received per share of our common stock. These rights are protected by
customary antidilution provisions.
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<PAGE> 78
Because of the nature of the Preferred Shares' dividend, liquidation and
voting rights, the value of the one one-hundredth interest in a Preferred Share
purchasable upon exercise of each Right should approximate the value of one
share of our common stock.
In the event that we are acquired in a merger or other business combination
transaction or 50% or more of our consolidated assets or earning power are sold
after a person or group has become an Acquiring Person, 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. If any person or group of affiliated or associated persons becomes an
Acquiring Person, proper provision shall be made so that each holder of a Right,
other than Rights beneficially owned by the Acquiring Person (which will
thereafter be void), will thereafter have the right to receive upon exercise
that number of shares of our common stock having a market value of two times the
exercise price of the Right.
At any time after any person or group becomes an Acquiring Person and prior
to the acquisition by such person or group of 50% or more of the outstanding
shares of our common stock, our board of directors 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 our common stock, or
one one-hundredth of a Preferred Share, per Right.
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 Preferred Shares will be issued (other than
fractions which are integral multiples of one one-hundredth of a Preferred
Share, which may, at our election, be evidenced by depository receipts) and, in
lieu thereof, an adjustment in cash will be made based on the market price of
the Preferred Shares 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 15% or more of the outstanding
shares of our common stock, our board of directors may redeem the Rights in
whole, but not in part, at a price of $.01 per Right. The redemption of the
Rights may be made effective at such time on such basis with such conditions as
our board of directors 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 our board of directors without
the consent of the holders of the Rights, 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 of the Right will have no rights as
our stockholder, including, without limitation, the right to vote or to receive
dividends.
CERTAIN PROVISIONS OF OUR GOVERNING DOCUMENTS
The following is a description of certain provisions of our Certificate and
Bylaws. The description is qualified in its entirety by reference to the full
texts of the Certificate and Bylaws. Certain provisions of our Certificate and
Bylaws could have the effect of making it
74
<PAGE> 79
more difficult for a third party to acquire, or of discouraging a third party
from attempting to acquire, control of us, without the approval of our board of
directors.
CHARTER PROVISIONS AFFECTING CONTROL AND OTHER TRANSACTIONS. Our
Certificate requires the affirmative vote of the holders of at least two-thirds
of the outstanding shares of our common stock to approve certain fundamental
changes such as a merger, consolidation, sale of substantially all of our
assets, dissolution, certain purchases by us or one of our subsidiaries of
shares of our common stock or other assets from a "significant shareholder," any
merger of a "significant shareholder" into us or one of our subsidiaries, or any
reclassification or recapitalization of us consummated within five years after a
"significant shareholder" becomes such, if the result of such reclassification
or recapitalization is to reduce the number of outstanding shares of our common
stock or convert any such shares into cash or other securities. This
supermajority voting requirement is not applicable if the fundamental change has
been approved at a meeting of our board of directors by the vote of more than
two-thirds of the incumbent directors. A "significant shareholder" is defined as
any person who owns beneficially a number of shares of our common stock that is
greater than 10% of the outstanding shares of our common stock, and any and all
associates and affiliates of such person.
CLASSIFICATION OF DIRECTORS. Our Certificate provides that our board of
directors will consist of three classes of directors. The initial members of our
board of directors will be divided into three classes to serve as follows: the
Class I director will initially hold office for a term to expire at the first
annual meeting of stockholders after his initial election; the Class II director
will initially hold office for a term to expire at the second annual meeting of
stockholders after his initial election; and the Class III directors will
initially hold office for a term to expire at the third annual meeting of
stockholders after their initial election. At each annual meeting of our
stockholders, only the election of directors of the class whose term is expiring
will be voted upon, and upon election each director will serve a three-year
term. See "Management -- Directors."
RIGHT TO CALL A SPECIAL MEETING. Our Certificate provides that special
meetings of the stockholders may only be called by the Chairman of our board of
directors or the Chief Executive Officer or by our board of directors pursuant
to a resolution passed by a majority of the directors then in office.
Accordingly, our stockholders will not have the right to call a special meeting
of the stockholders. Our Certificate further provides that only such business
will be conducted at a special meeting of stockholders as shall have been
brought before the meeting pursuant to our notice of the special meeting.
Nominations of persons for election to our board of directors may be made
at a special meeting of stockholders at which directors are to be elected
pursuant to our notice of meeting (i) by or at the direction of our board of
directors or (ii) by any stockholder of record at the time of the giving of
notice of such meeting. Nominations by a stockholder of persons for election to
our board of directors may be made if the stockholder's notice is delivered to
our Secretary not earlier than the 90th day prior to the special meeting and not
later than the 75th day prior to the special meeting or the 10th day following
the day on which a public announcement is first made of the special meeting and
of the nominees proposed by the board of directors to be elected at the meeting.
PROCEDURES TO BRING BUSINESS BEFORE A MEETING; NO ACTION BY CONSENT. Our
Certificate provides that in order for nominations or other business to be
properly brought before an annual meeting by a stockholder, the stockholder must
give timely notice thereof in writing to our Secretary. To be timely, a
stockholder's notice must be delivered to our Secretary not less than 60 days
nor more than 90 days prior to the first anniversary of the
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<PAGE> 80
preceding year's annual meeting; provided, however, that in the event the date
of the annual meeting is advanced by more than 30 days or delayed by more than
60 days from the anniversary date, notice by the stockholder to be timely must
be so delivered not earlier than the 90th day prior to such annual meeting and
not later than the 60th day prior to such annual meeting or the 10th day
following the day on which public announcement of the date of such meeting is
first made.
Our Certificate also provides that any action required to be taken by our
stockholders must be effected at a duly called annual or special meeting of our
stockholders and may not be effected by the written consent of our stockholders.
FIDUCIARY DUTIES OF DIRECTORS. Our Certificate provides that our directors
may take into account the effects of their actions on our employees, suppliers,
distributors and customers and the effect upon communities in which our offices
or facilities are located or any other factors considered pertinent.
As permitted by the General Corporation Law of the State of Delaware (the
"DGCL"), our Certificate includes a provision eliminating the personal liability
of a director to the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director except for liability:
- for any breach of the director's duty of loyalty to the corporation or
its stockholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- for unlawful payment of a dividend or an unlawful stock purchase or
redemption; and
- for any transaction from which the director derives an improper personal
benefit.
Our Certificate further provides that, if the DGCL is amended to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of our directors shall be eliminated or limited to
the fullest extent so permitted. Our Certificate also specifies that no
amendment to or repeal of the provision shall apply to or have any effect on the
liability or alleged liability of any of our directors for or with respect to
any acts or omissions of such director occurring prior to the amendment or
repeal.
CHARTER AMENDMENTS. Our Certificate provides that the affirmative vote of
the holders of at least 75% of the combined voting power of the outstanding
shares of our capital stock is required to amend or rescind, or adopt any
provision inconsistent with the purpose or intent of the provisions of our
Certificate relating to the adoption, amendment and repeal of our Bylaws,
limitations of certain liabilities of directors, actions of stockholders,
classification of directors, certain factors permitted to be considered by the
directors, approval of certain fundamental changes, and amendments to our
Certificate.
BYLAW PROVISIONS REGARDING ATI DIRECTORS. Our Bylaws contain provisions
designed to ensure that at least a majority of our directors are also directors
of ATI until the third annual meeting of our stockholders held after the
spin-off. The Bylaws also provide that no quorum of the board will be deemed
present unless at least a majority of the directors present are also members of
the board of directors of ATI.
BYLAW AMENDMENTS. Our Certificate authorizes our board of directors to
adopt, amend or repeal our Bylaws. Our Certificate also provides that our
stockholders may not adopt, amend or repeal our Bylaws other than by the same
affirmative vote that is required to amend certain provisions of our Certificate
(See "-- Charter Amendments").
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<PAGE> 81
ANTI-TAKEOVER LEGISLATION
Since neither our Certificate nor our Bylaws contain a provision expressly
electing not to be governed by Section 203 of the DGCL, we are subject to this
statutory anti-takeover provision. Section 203 provides that any person who
acquires 15% or more of a corporation's voting stock (thereby becoming an
"interested stockholder") may not engage in a "business combination" with the
corporation for a period of three years following the time the person became an
interested stockholder, unless:
- the board of directors of the corporation approved, prior to such time,
either the business combination or the transaction that resulted in the
person becoming an interested stockholder;
- upon consummation of the transaction that resulted in that person
becoming an interested stockholder, that person owns at least 85% of the
corporation's voting stock outstanding at the time the transaction
commenced (excluding shares owned by persons who are directors and
officers of that corporation and shares owned by employee stock plans in
which participants do not have the right to determine confidentially
whether shares will be tendered in a tender or exchange offer);
- the business combination is approved by the board of directors and
authorized by the affirmative vote (at an annual or special meeting and
not by written consent) of at least 66 2/3% of the outstanding shares of
voting stock not owned by the interested stockholder.
In determining whether a stockholder is the "owner" of 15% or more of a
corporation's voting stock for purposes of Section 203, ownership is defined to
include the right, directly or indirectly, to acquire stock or to control the
voting or disposition of stock. A "business combination" is defined to include:
- mergers or consolidations of a corporation with an interested
stockholder;
- sales or other dispositions of ten percent or more of the assets of a
corporation with or to an interested stockholder;
- certain transactions resulting in the issuance or transfer to an
interested stockholder of any stock of a corporation or its subsidiaries;
- certain transactions which would result in increasing the proportionate
share of the stock of a corporation or its subsidiaries owned by an
interested stockholder; and
- receipt by an interested stockholder of the benefit (except
proportionately as a stockholder) of any loans, advances, guarantees,
pledges or other financial benefits from, by or to a corporation or any
of its majority-owned subsidiaries.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock will be ChaseMellon
Shareholder Services, L.L.C.
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<PAGE> 82
LIABILITY AND INDEMNIFICATION OF OUR OFFICERS AND DIRECTORS
ELIMINATION OF LIABILITY
As permitted by the DGCL, our Certificate eliminates, subject to certain
statutory limitations, the liability of directors to Water Pik Technologies or
its stockholders for monetary damages for breaches of fiduciary duty, except for
liability
- for any breach of the director's duty of loyalty to the corporation or
its stockholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- under Section 174 of the DGCL; or
- for any transaction from which the director derived an improper personal
benefit.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Under Section 145 of the DGCL, a corporation has the power to indemnify
directors and officers under certain prescribed circumstances and, subject to
certain limitations, against certain costs and expenses, including attorney's
fees actually and reasonably incurred in connection with any action, suit or
proceeding, whether civil, criminal, administrative or investigative, to which
any of them is a party by reason of his or her being a director or officer of
the corporation if it is determined that he or she acted in accordance with the
applicable standard of conduct set forth in such statutory provision.
Our Certificate provides that we will indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding by reason of the fact that he or she is or
was one of our directors or officers, or is or was serving at our request as a
director, officer, employee or agent of another entity, against certain
liabilities, costs and expenses.
We are also authorized to maintain, and do maintain, insurance on behalf of
any person who is or was one of our directors or officers, or is or was serving
at our request as a director, officer, employee or agent of another entity
against any liability asserted against such person and incurred by such person
in any such capacity or arising out of his or her status as such, whether or not
we would have the power to indemnify such person against such liability under
the DGCL.
AVAILABLE INFORMATION
We have filed a Registration Statement on Form 10 with the Securities and
Exchange Commission with respect to our common stock. The Registration Statement
and the exhibits to it contain some information not appearing in this
Information Statement. This Information Statement provides a summary of some of
the agreements and contracts appearing as exhibits to the Registration
Statement. You are encouraged to see the exhibits to the Registration Statement
for a more complete description of the contracts and agreements summarized in
this Information Statement.
You may access and read the Registration Statement and all of the exhibits
to it through the SEC's Internet site at www.sec.gov. This site contains
reports, proxy and information statements and other information regarding
issuers that file electronically with the SEC. You may also read and copy any
document we file at the SEC's public reference
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<PAGE> 83
room located at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the
SEC at 1-800-SEC-0330 for further information on the public reference room.
After the spin-off, we will be required to file annual, quarterly and
special reports and other information with the SEC. We will also be subject to
proxy solicitation requirements. Once filed, you can access this information
from the SEC in the manner set forth in the preceding paragraph. Following the
spin-off, our filings will also be available at the offices of the New York
Stock Exchange, 20 Broad Street, New York, New York 10005.
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<PAGE> 84
INDEX TO OUR FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors.............................. F-2
Combined Statements of Income for the years ended December
31, 1998, 1997 and 1996................................... F-3
Combined Balance Sheets for December 31, 1998 and 1997...... F-4
Combined Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996.......................... F-5
Combined Statements of Stockholder's Equity for the years
ended December 31, 1998, 1997 and 1996.................... F-6
Notes to Combined Financial Statements...................... F-7
Combined Statements of Income (unaudited) for the six months
ended June 30, 1999 and 1998.............................. F-19
Combined Balance Sheets for June 30, 1999 (unaudited) and
December 31, 1998 (audited)............................... F-20
Combined Statements of Cash Flows (unaudited) for the six
months ended June 30, 1999 and 1998....................... F-21
Combined Statements of Stockholder's Equity (unaudited) for
the six months ended June 30, 1999 and 1998............... F-22
Notes to Interim Combined Financial Statements
(unaudited)............................................... F-23
</TABLE>
F-1
<PAGE> 85
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors
Water Pik Technologies, Inc.
We have audited the accompanying combined balance sheets of Water Pik
Technologies, Inc. as of December 31, 1998 and 1997 and the related combined
statements of income, stockholder's equity, and cash flows for each of the three
years in the period ended December 31, 1998. 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, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Water Pik
Technologies, Inc. at December 31, 1998 and 1997, and the combined results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
Pittsburgh, Pennsylvania
April 13, 1999, except for Note 12 as to which the date is August 6, 1999
F-2
<PAGE> 86
WATER PIK TECHNOLOGIES, INC.
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1998 1997 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
SALES......................................... $235,788 $241,167 $215,675
Cost and expenses:
Cost of sales............................... 139,544 138,792 134,134
Selling expenses............................ 49,830 44,740 43,112
General and administrative expenses......... 27,382 29,251 26,119
-------- -------- --------
216,756 212,783 203,365
-------- -------- --------
Earnings before other income.................. 19,032 28,384 12,310
Other income.................................. 126 532 7
-------- -------- --------
INCOME BEFORE TAXES........................... 19,158 28,916 12,317
Provision for income taxes.................... 7,663 11,364 4,964
-------- -------- --------
NET INCOME.................................... $ 11,495 $ 17,552 $ 7,353
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 87
WATER PIK TECHNOLOGIES, INC.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash................................................ $ -- $ --
Accounts receivable................................. 46,335 48,270
Inventories......................................... 18,760 22,001
Deferred income taxes............................... 7,218 6,598
Prepared expenses and other current assets.......... 1,228 1,509
-------- --------
TOTAL CURRENT ASSETS........................... 73,541 78,378
Property, plant and equipment....................... 33,131 29,459
Cost in excess of net assets acquired............... 19,072 11,592
Deferred income taxes............................... -- 52
Other assets........................................ 2,050 493
-------- --------
TOTAL ASSETS................................... $127,794 $119,974
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable.................................... $ 18,880 $ 19,715
Accrued liabilities................................. 18,883 19,606
-------- --------
TOTAL CURRENT LIABILITIES...................... 37,763 39,321
Deferred income taxes............................... 1,209 --
-------- --------
TOTAL LIABILITIES.............................. 38,972 39,321
-------- --------
Stockholder's Equity:
Net advances from Allegheny Teledyne.............. 89,124 80,852
Foreign currency translation losses............... (302) (199)
-------- --------
TOTAL STOCKHOLDER'S EQUITY..................... 88,822 80,653
-------- --------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY..... $127,794 $119,974
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 88
WATER PIK TECHNOLOGIES, INC.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1998 1997 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income.................................. $ 11,495 $ 17,552 $ 7,353
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............ 6,324 6,388 5,582
Deferred income taxes.................... 641 759 (348)
Gain or loss on sale of property, plant
and equipment.......................... (13) (446) 106
Change in operating assets and liabilities:
Inventories.............................. 4,955 4,422 1,506
Accounts receivable...................... 3,284 (8,497) 2,887
Accounts payable......................... (2,120) 6,849 (208)
Accrued liabilities...................... (1,520) (568) (2,208)
Other assets............................. (948) 834 (628)
Other....................................... 227 (263) (148)
-------- -------- --------
CASH PROVIDED BY OPERATING ACTIVITIES.... 22,325 27,030 13,894
-------- -------- --------
INVESTING ACTIVITIES:
Purchases of business....................... (10,647) -- (13,480)
Purchases of property, plant and
equipment................................ (8,650) (6,480) (6,010)
Disposals of property, plant and
equipment................................ 155 1,312 --
Other....................................... 40 31 (112)
-------- -------- --------
CASH USED IN INVESTING ACTIVITIES........ (19,102) (5,137) (19,602)
-------- -------- --------
FINANCING ACTIVITIES:
Net advances (to) from Allegheny Teledyne... (3,223) (22,006) 5,821
-------- -------- --------
CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES............................. (3,223) (22,006) 5,821
-------- -------- --------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................. -- (113) 113
Cash and cash equivalents at beginning of
year........................................ -- 113 --
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR...... $ -- $ -- $ 113
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 89
WATER PIK TECHNOLOGIES, INC.
COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
ADVANCES ACCUMULATED
(TO) FROM OTHER
ALLEGHENY COMPREHENSIVE STOCKHOLDER'S
TELEDYNE INCOME EQUITY
--------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1995.............. $72,132 $ 106 $ 72,238
======= ===== ========
Net income.............................. 7,353 -- 7,353
Other comprehensive income, net of tax:
Foreign currency translation losses... -- (77) (77)
------- ----- --------
Comprehensive income.................... 7,353 (77) 7,276
Net transactions with Allegheny
Teledyne.............................. 5,821 -- 5,821
------- ----- --------
BALANCE, DECEMBER 31, 1996.............. 85,306 29 85,335
======= ===== ========
Net income.............................. 17,552 -- 17,552
Other comprehensive income, net of tax:
Foreign currency translation losses... -- (228) (228)
------- ----- --------
Comprehensive income.................... 17,552 (228) 17,324
Net transactions with Allegheny
Teledyne.............................. (22,006) -- (22,006)
------- ----- --------
BALANCE, DECEMBER 31, 1997.............. 80,852 (199) 80,653
======= ===== ========
Net income.............................. 11,495 -- 11,495
Other comprehensive income, net of tax:
Foreign currency translation losses... -- (103) (103)
------- ----- --------
Comprehensive income.................... 11,495 (103) 11,392
Net transactions with Allegheny
Teledyne.............................. (3,223) -- (3,223)
------- ----- --------
BALANCE, DECEMBER 31, 1998.............. $89,124 $(302) $ 88,822
======= ===== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 90
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 1. ALLEGHENY TELEDYNE INCORPORATED SPIN-OFF OF WATER PIK TECHNOLOGIES,
INC.
Water Pik Technologies, Inc. ("Water Pik Technologies" or the "Company") is
a leader in the design, manufacturing and marketing of a broad range of well
recognized personal health care products and pool and water-heating products.
The Company's products include: shower heads; oral health products; water
filtration products; pool and spa heaters, controls, valves and water features;
and residential and commercial water-heating systems. Water Pik Technologies
operates in two business segments, Personal Health Care Products and Pool and
Water-Heating Products.
In 1998, Allegheny Teledyne Incorporated ("Allegheny Teledyne") announced
that it would pursue a course of action that would result in the spin-off of
Water Pik Technologies to Allegheny Teledyne stockholders as an independent,
publicly-traded company (the "spin-off"). In August 1999, Allegheny Teledyne
received a favorable ruling from the Internal Revenue Service that the proposed
spin-off of Water Pik Technologies into a freestanding public company would be
treated as a tax-free distribution for federal income tax purposes. In September
1999, Allegheny Teledyne's Board of Directors approved the various transactions
pertaining to the spin-off and delegated to its Executive Committee the
authority to set the record date and distribution date for the spin-off.
Immediately following the spin-off, Allegheny Teledyne will no longer have a
financial investment in Water Pik Technologies.
Water Pik Technologies consists of the Consumer segment of Allegheny
Teledyne which includes the operations of the Teledyne Water Pik division with
operations in the U.S., Canada and Japan and the Teledyne Laars division with
operations in the U.S. and Canada.
A five-year $60,000,000 secured term loan and revolving credit facility
will be established by Allegheny Teledyne, and $40,000,000 of borrowings under
the facility will be used by Allegheny Teledyne prior to the spin-off to repay
certain of Allegheny Teledyne's debt obligations. Water Pik Technologies will
assume this term loan and credit facility, including the repayment obligations
for Allegheny Teledyne's $40,000,000 of borrowings, in connection with the
spin-off. Following the spin-off, Water Pik Technologies will have up to
$20,000,000 of borrowing availability remaining under the credit facility,
subject to the terms of the facility. In addition, prior to and in connection
with the spin-off, Water Pik Technologies and Allegheny Teledyne will enter into
agreements providing for the separation of the companies and governing various
relationships for separating employee benefits, tax obligations, indemnification
and transition services.
The financial statements of Water Pik Technologies include the combined
financial position, results of operations and cash flows of the businesses
described above. Allegheny Teledyne's historical cost basis of assets and
liabilities has been reflected in the Water Pik Technologies financial
statements. The financial information in these financial statements is not
necessarily indicative of results of operations, financial position and cash
flows that would have occurred if Water Pik Technologies had been a separate
stand-alone entity during the periods presented or of future results. The
combined financial statements included herein do not reflect any changes that
may occur in the capitalization and operations of Water Pik Technologies as a
result of, or after, the spin-off.
F-7
<PAGE> 91
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF COMBINATION
The combined financial statements of Water Pik Technologies include the
accounts of the businesses distributed by Allegheny Teledyne and its
subsidiaries as described in Note 1. Significant intercompany accounts and
transactions have been eliminated.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts and related disclosures. Actual results
could differ from those estimates. Management believes that the estimates are
reasonable.
REVENUE RECOGNITION
Revenues are recorded upon shipment of product to the customer. Certain
products sold to pool industry customers include deferred payment terms
consistent with industry practices. Sales returns and allowances are recognized
when the product has been received from the customer, has been inspected by the
Company and has been determined to be a valid claim. Sales returns and
allowances of $16,239,000, $16,193,000 and $17,690,000 in 1998, 1997 and 1996,
respectively, are reflected in net sales amounts on the income statements.
INTERNATIONAL SALES
Total international sales were $37,185,000 in 1998, $41,099,000 in 1997 and
$37,780,000 in 1996. Of these amounts, sales by operations in the United States
to customers in other countries were $28,468,000 in 1998, $31,499,000 in 1997
and $29,338,000 in 1996. There were no sales to individual countries outside of
the United States in excess of 10 percent of the Company's net sales.
PRODUCT DEVELOPMENT AND RESEARCH AND DEVELOPMENT COSTS
Product development and research and development costs ($7,734,000 in 1998,
$8,879,000 in 1997 and $7,592,000 in 1996) are expensed as incurred.
ADVERTISING COSTS
Advertising costs ($24,664,000 in 1998, $20,250,000 in 1997 and $17,939,000
in 1996) are expensed in the year incurred.
WARRANTY COSTS AND RESERVES
The Company's return policy is to replace, repair or issue credit for
product under warranty. The Company has established an accrual for these
anticipated future warranty costs. Amounts expensed for warranty costs were
$4,924,000, $5,673,000 and $4,098,000 in 1998, 1997 and 1996, respectively.
F-8
<PAGE> 92
INCOME TAXES
Provision for income taxes includes deferred taxes resulting from temporary
differences in income for financial and tax purposes using the liability method.
Such temporary differences result primarily from differences in the carrying
value of assets and liabilities.
NET INCOME PER COMMON SHARE
Historical earnings per share are not presented since Water Pik
Technologies common stock was not part of the capital structure of Allegheny
Teledyne for the periods presented. Water Pik Technologies will present basic
and diluted earnings per share in the first report it issues after the effective
date of the spin-off.
ACCOUNTS RECEIVABLE
Receivables are presented net of a reserve for doubtful accounts of
$1,756,000 at December 31, 1998 and $1,952,000 at December 31, 1997. The Company
markets its products to a diverse customer base, principally throughout the
United States and Canada. Trade credit is extended based upon evaluations of
each customer's ability to perform its obligations, which are updated
periodically.
INVENTORIES
Inventories are stated at the lower of cost (last-in, first-out and
first-in, first-out cost methods) or market.
PROPERTY AND EQUIPMENT
Property, plant and equipment are carried at cost. The method of
depreciation adopted for all property placed into service after July 1, 1996 is
the straight-line method. For buildings and equipment acquired prior to July 1,
1996, depreciation is computed using a combination of accelerated and
straight-line methods. The Company believes the straight-line method more
appropriately reflects its financial results by better allocating costs of new
property over the useful lives of these assets. The effect of this change on net
income in 1996 was not material.
COST IN EXCESS OF NET ASSETS ACQUIRED
Cost in excess of net assets acquired related to businesses purchased after
November 1970 are being amortized on a straight-line basis over periods not
exceeding 15 years. Goodwill amortization expense was $1,096,000, $894,000 and
$546,000 in 1998, 1997 and 1996, respectively.
FOREIGN CURRENCY TRANSLATION
The Company's foreign entities' accounts are measured using local currency
as the functional currency. Assets and liabilities are translated at the
exchange rate in effect at year-end. Revenues and expenses are translated at the
rates of exchange prevailing during the year. Translation adjustments arising
from differences in exchange rates from period to
F-9
<PAGE> 93
period are included in the cumulative foreign currency translation account in
stockholder's equity.
NOTE 3. INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Raw materials and supplies.................. $11,616 $13,955
Work-in-process............................. 3,406 3,896
Finished goods.............................. 8,795 8,783
------- -------
Total inventories at current cost........... 23,817 26,634
Less allowances to reduce current cost
values to LIFO basis...................... (5,057) (4,633)
------- -------
Total inventories........................... $18,760 $22,001
======= =======
</TABLE>
Inventories determined on the last-in, first-out method were $9,748,000 at
December 31, 1998 and $13,660,000 at December 31, 1997. The remainder of the
inventory was determined using the first-in, first-out method. These inventory
values do not differ materially from current cost.
During 1997, the discontinuation of a product line resulted in a
liquidation of last-in, first-out inventory quantities. This inventory was
carried at the lower costs prevailing in prior years as compared with the cost
of current purchases. The effect of this last-in, first-out liquidation was to
increase net income by $625,000 in 1997.
NOTE 4. SUPPLEMENTAL BALANCE SHEET INFORMATION
Property, plant and equipment were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Land........................................ $ 4,694 $ 4,699
Buildings................................... 19,576 19,243
Equipment and leasehold improvements........ 49,868 43,421
-------- --------
74,138 67,363
Accumulated depreciation and amortization... (41,007) (37,904)
-------- --------
Total property, plant and equipment......... $ 33,131 $ 29,459
======== ========
</TABLE>
Accrued liabilities included salaries and wages of $6,269,000 and
$7,725,000 at December 31, 1998 and 1997, respectively. Accrued warranty
reserves were $3,165,000 and $3,047,000 at December 31, 1998 and 1997,
respectively.
F-10
<PAGE> 94
NOTE 5. STOCKHOLDER'S EQUITY
Allegheny Teledyne sponsors an incentive plan that provides for stock
option awards to officers and key employees. Water Pik Technologies has officers
and key employees who have participated in this plan. Water Pik Technologies
accounts for its stock option plans in accordance with APB Opinion No. 25,
"Accounting for Stock Issued to Employees," and related Interpretations. Under
APB Opinion No. 25, no compensation expense is recognized because the exercise
price of the Company's employee stock options equals the market price of the
underlying stock at the date of the grant.
If compensation cost for these options had been determined using the
fair-value method prescribed by FASB Statement No. 123, "Accounting for
Stock-based Compensation," net income would have been reduced by $164,000,
$23,000, and $20,000 for the years ended December 31, 1998, 1997 and 1996,
respectively. Under FASB Statement No. 123, the fair value of each option grant
is estimated on the date of grant using the Black-Scholes option-pricing model
with the following weighted-average assumptions (there were no option grants in
1997):
<TABLE>
<CAPTION>
1998 1997 1996
----- ---- -----
<S> <C> <C> <C>
Expected dividend yield................................. 2.9% --% 3.9%
Expected volatility..................................... 31% --% 31%
Risk-free interest rate................................. 4.9% --% 6.3%
Expected lives.......................................... 8.0 -- 8.0
Weighted-average fair value of options granted during $6.95 $-- $4.25
year..................................................
</TABLE>
The pro forma amounts above are not necessarily representative of the
effects of awards on future pro forma earnings because future grants of employee
stock options by Water Pik Technologies management may not be comparable to
awards made to employees while Water Pik Technologies was part of Allegheny
Teledyne and the assumptions used to compute the fair value of any stock option
awards will be specific to Water Pik Technologies and therefore may not be
comparable to the Allegheny Teledyne assumptions used.
F-11
<PAGE> 95
Stock option transactions in Allegheny Teledyne common stock under
Allegheny Teledyne's incentive plan for Water Pik Technologies employees are
summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------------------- -------------------- --------------------
WEIGHTED- WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- --------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding beginning of
year.................. 45,200 $12.94 46,200 $12.94 25,025 $11.52
Granted................. 208,000 $22.31 -- $ -- 21,175 $14.61
Exercised............... -- $ -- (1,000) $12.86 -- $ --
------- ------ ------ ------ ------ ------
Outstanding end of
year.................. 253,200 $20.64 45,200 $12.94 46,200 $12.94
======= ====== ====== ====== ====== ======
Exercisable at end
of year............... 30,531 $12.37 21,156 $11.72 10,106 $10.37
======= ====== ====== ====== ====== ======
</TABLE>
Exercise prices for outstanding options to purchase Allegheny Teledyne
common stock as of December 31, 1998 ranged from $8.51 to $25.88. The
weighted-average remaining contractual life of those options is 9.2 years.
In connection with the spin-off of Water Pik Technologies, outstanding
stock options held by Water Pik Technologies employees will be converted into
options to purchase Water Pik Technologies common stock. The number of shares
and the exercise price of each Allegheny Teledyne option that is converted to a
Water Pik Technologies option will be converted based upon a formula that
preserves the inherent economic value, vesting and term provisions of such
Allegheny Teledyne options. The exchange ratio and fair market value of the
Water Pik Technologies common stock, upon active trading, will also impact the
number of options issued to Water Pik Technologies employees. The ultimate
number of stock options to be held by Water Pik Technologies employees and the
number and exercise price of the Water Pik Technologies stock options to be
issued, subject to the above calculation, cannot yet be determined.
Water Pik Technologies intends to establish its own long-term incentive
plan which will provide its Board of Directors the flexibility to grant
restricted stock, incentive stock options, stock appreciation rights and
non-qualified stock options to officers and employees of Water Pik Technologies.
F-12
<PAGE> 96
NOTE 6. RELATED PARTY TRANSACTIONS
The accompanying financial statements include transactions with Allegheny
Teledyne as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Net advances from Allegheny Teledyne, beginning
of the year.................................... $80,852 $85,306 $72,132
Net cash transactions with Allegheny Teledyne:
Current provision for income taxes............. 7,022 10,605 5,312
Insurance expense.............................. 3,948 4,263 4,069
Corporate general and administrative expense... 2,358 2,412 2,157
Pension expense................................ 1,483 1,591 1,591
Other net cash to Allegheny Teledyne........... (18,034) (40,877) (7,308)
------- ------- -------
Net cash transactions with Allegheny
Teledyne.................................... (3,223) (22,006) 5,821
Net income....................................... 11,495 17,552 7,353
------- ------- -------
Net advances from Allegheny Teledyne, end of
the year....................................... $89,124 $80,852 $85,306
======= ======= =======
</TABLE>
Water Pik Technologies participates in Allegheny Teledyne's centralized
cash management system. Cash receipts in excess of cash requirements are
transferred to Allegheny Teledyne. These transactions with Allegheny Teledyne
are non-interest bearing and the net advances fluctuate on a daily basis.
Corporate general and administrative expenses represent allocations for
expenses incurred by Allegheny Teledyne on the Company's behalf including costs
for finance, legal, tax and human resources functions. Amounts above were
allocated based on net sales, which management believes to be reasonable. Water
Pik Technologies also participates in casualty, medical and life insurance
programs sponsored by Allegheny Teledyne. In the opinion of management, the
allocations of these expenses are reasonable. The expenses allocated for these
services and programs are not necessarily indicative of the expenses that would
have been incurred if Water Pik Technologies had been a separate, independent
public entity and had managed these functions. The Company may incur additional
general and administrative expenses, pension and insurance costs and other costs
as a result of operating independently of Allegheny Teledyne.
In addition, prior to and in connection with the spin-off, Water Pik
Technologies and Allegheny Teledyne will enter into agreements providing for the
separation of the companies and governing various relationships for separating
employee benefits, tax obligations, indemnification and transition services.
There was a payable of $136,000 at December 31, 1998 and $218,000 at
December 31, 1997 to other Allegheny Teledyne subsidiaries.
F-13
<PAGE> 97
NOTE 7. INCOME TAXES
Water Pik Technologies is included in the consolidated federal and certain
state income tax returns of Allegheny Teledyne. Any required tax payments were
made by Allegheny Teledyne as part of its consolidated returns. Provision for
income taxes was calculated as if Water Pik Technologies had filed separate
income tax returns. Provision for income taxes was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------ --------- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal........................................ $6,070 $ 9,115 $4,566
State.......................................... 952 1,490 746
------ --------- ------
Total....................................... 7,022 10,605 5,312
------ --------- ------
Deferred:
Federal........................................ 599 701 (299)
State.......................................... 42 58 (49)
------ --------- ------
Total....................................... 641 759 (348)
------ --------- ------
Provision for income taxes....................... $7,663 $ 11,364 $4,964
====== ========= ======
</TABLE>
The following is a reconciliation of the statutory federal income tax rate
to the actual effective income tax rate:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Federal tax rate.......................................... 35.0% 35.0% 35.0%
State and local income taxes, net of federal tax
benefit................................................. 3.5 3.4 4.0
Other..................................................... 1.5 0.9 1.3
---- ---- ----
Effective income tax rate................................. 40.0% 39.3% 40.3%
==== ==== ====
</TABLE>
Deferred income taxes result from temporary differences in the recognition
of income and expense for financial and income tax reporting purposes, and
differences between the fair value of assets acquired in business combinations
accounted for as purchases for financial reporting purposes and their
corresponding tax bases. Deferred income taxes represent future tax benefits or
costs to be recognized when those temporary differences
F-14
<PAGE> 98
reverse. The categories of assets and liabilities that have resulted in
differences in the timing of the recognition of income and expense were as
follows:
<TABLE>
<CAPTION>
1998 1997
------ ------
(IN THOUSANDS)
<S> <C> <C>
Deferred Income Tax Assets:
Reserves.................................................. $3,587 $4,081
Inventory valuation....................................... 1,496 1,497
Vacation pay accrual...................................... 883 925
Deferred compensation and other benefit plans............. 133 26
Intangible assets......................................... 8 333
Other items............................................... 16 69
------ ------
Total deferred income tax assets............................ 6,123 6,931
------ ------
Deferred Income Tax Liabilities:
Bases of property, plant and equipment.................... 114 281
------ ------
Total deferred income tax liabilities....................... 114 281
------ ------
Net deferred income tax asset............................... $6,009 $6,650
====== ======
</TABLE>
NOTE 8. PENSION PLAN AND RETIREMENT BENEFITS
Certain Water Pik Technologies employees participate in the noncontributory
defined benefit plan sponsored by Allegheny Teledyne. Benefits under the defined
benefit plan are generally based on years of service and/or final average pay.
Allegheny Teledyne funds the pension plan in accordance with the requirements of
the Employee Retirement Income Security Act of 1974, as amended, and the
Internal Revenue Code. Subsequent to the spin-off of Water Pik Technologies,
Allegheny Teledyne will retain the obligation associated with the Water Pik
Technologies employees that participate in this plan.
Net periodic pension expense associated with the Allegheny Teledyne defined
benefit plan allocated to Water Pik Technologies was $1,483,000 in the year
ended December 31, 1998 and $1,591,000 in both the years ended December 31, 1997
and 1996.
Water Pik Technologies participates in a defined contribution plan
sponsored by Allegheny Teledyne maintained for substantially all of its
employees. The costs associated with this plan were $616,000, $279,000 and
$286,000 in 1998, 1997 and 1996, respectively. Subsequent to the distribution,
Water Pik Technologies intends to establish its own enhanced defined
contribution plan to replace the former defined benefit plan.
NOTE 9. BUSINESS SEGMENTS
Water Pik Technologies is a leader in the design, manufacturing and
marketing of a broad range of well recognized personal health care products and
pool and water-heating products. The Company competes in several product
categories including: shower heads; oral health products; water filtration
products; pool and spa heaters, controls, valves and water features; and
residential and commercial water-heating systems.
F-15
<PAGE> 99
Water Pik Technologies operates in two business segments: Personal Health
Care Products and Pool and Water-Heating Products.
Information on the Company's business segments was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Sales:
Personal Health Care Products................. $125,763 $141,792 $141,133
Pool and Water-Heating Products............... 110,025 99,375 74,542
-------- -------- --------
Total sales..................................... $235,788 $241,167 $215,675
======== ======== ========
Operating profit:
Personal Health Care Products................. $ 9,426 $ 19,552 $ 9,646
Pool and Water-Heating Products............... 9,606 8,832 2,664
-------- -------- --------
Total operating profit.......................... 19,032 28,384 12,310
Other income.................................... 126 532 7
-------- -------- --------
Income before income taxes...................... $ 19,158 $ 28,916 $ 12,317
======== ======== ========
Depreciation and amortization:
Personal Health Care Products................. $ 3,234 $ 3,706 $ 3,233
Pool and Water-Heating Products............... 3,090 2,682 2,349
-------- -------- --------
$ 6,324 $ 6,388 $ 5,582
======== ======== ========
Capital expenditures:
Personal Health Care Products................. $ 5,194 $ 4,390 $ 4,405
Pool and Water-Heating Products............... 3,456 2,090 1,605
-------- -------- --------
$ 8,650 $ 6,480 $ 6,010
======== ======== ========
Identifiable assets:
Personal Health Care Products................. $ 43,890 $ 50,559 $ 53,760
Pool and Water-Heating Products............... 76,686 62,765 57,206
Corporate..................................... 7,218 6,650 7,409
-------- -------- --------
$127,794 $119,974 $118,375
======== ======== ========
</TABLE>
NOTE 10. ACQUISITIONS
In August 1998, Water Pik Technologies acquired the assets of Trianco
Heatmaker, Inc., a manufacturer of high efficiency gas and oil boiler and
water-heating products based in Randolph, Massachusetts for $10,647,000 in cash.
In connection with the purchase, the Company acquired operating assets with a
fair value of $4,153,000 and assumed operating liabilities of $2,082,000. The
goodwill recorded as part of this transaction was $8,576,000.
F-16
<PAGE> 100
In May 1996, Water Pik Technologies acquired Jandy Industries, Inc., a
United States producer of water flow control valves and electronic control
systems for the swimming pool industry. The business was purchased for
$13,480,000 in cash, excluding payments for contingent consideration. In
connection with the purchase, the Company acquired operating assets with a fair
value of $11,001,000 and assumed operating liabilities of $10,346,000. The
goodwill recorded as part of this transaction was $12,825,000. In addition, as
part of this transaction, there was contingent consideration based on minimum
sales volume achieved over the three years ended December 31, 1998, 1997 and
1996. The contingent consideration was accounted for as a purchase price
adjustment. All minimum sales levels were achieved, and Water Pik Technologies
paid $500,000 to the seller in each of these three years.
Both of these acquisitions were accounted for as purchase transactions and
their operations are included in the financial statements from the date of
acquisition.
NOTE 11. COMMITMENTS AND CONTINGENCIES
Rental expense under operating leases was $1,699,000 in 1998, $1,520,000 in
1997 and $1,454,000 in 1996. Future minimum rental commitments under operating
leases with non-cancelable terms of more than one year as of December 31, 1998,
were as follows: $731,000 in 1999, $578,000 in 2000, $311,000 in 2001, $180,000
in 2002 and $85,000 in 2003.
In connection with the spin-off, Allegheny Teledyne received a tax ruling
from the Internal Revenue Service stating that the spin-off will be tax-free to
Allegheny Teledyne and to Allegheny Teledyne's stockholders. The continuing
validity of the Internal Revenue Service tax ruling is subject to certain
factual representations and assumptions, including completion of the required
public offering of the Company's common stock within approximately one year
following the spin-off and use of the anticipated gross proceeds of $50,000,000
(less associated costs) for further development of high quality, lower cost
manufacturing capabilities, for product line extensions, to expand channels of
distribution, and for acquisitions and/or joint ventures. Pursuant to the
Separation and Distribution Agreement that the Company will sign prior to the
spin-off, Water Pik Technologies will agree with Allegheny Teledyne to undertake
such a public offering.
The Tax Sharing and Indemnification Agreement between Allegheny Teledyne
and Water Pik Technologies provides that the Company will indemnify Allegheny
Teledyne and its representatives and agents for taxes imposed on, and other
amounts paid by, them or Allegheny Teledyne stockholders if the Company takes
actions or fails to take actions (such as completing the public offering) that
result in the spin-off not qualifying as a tax-free distribution. If the Company
were required to so indemnify Allegheny Teledyne, such an obligation would have
a material adverse effect on the Company's business, results of operations,
financial condition and cash flow and the amount the Company could be required
to pay could exceed its net worth by a substantial amount.
A number of lawsuits, claims and proceedings have been or may be asserted
against the Company relating to the conduct of its business, including those
pertaining to product liability, patent infringement, commercial, employment and
employee benefits. While the outcome of litigation cannot be predicted with
certainty, and some of these lawsuits, claims or proceedings may be determined
adversely to the Company, management does not believe that the disposition of
any such pending matters is likely to have a material adverse effect on the
Company's financial condition or liquidity, although the resolution in any
F-17
<PAGE> 101
reporting period or one or more of these matters could have a material adverse
effect on the Company's results of operations for that period.
NOTE 12. SUBSEQUENT EVENTS
In August 1999, Water Pik Technologies acquired substantially all of the
assets of Les Agencies Claude Marchand, Inc. ("Olympic"), a pool accessories
manufacturer and distributor, doing business in Canada as Olympic Pool
Accessories, for $2,500,000 in cash and a $6,687,000 promissory note. Olympic is
located in Montreal, Quebec, and produces a full line of pool accessories
ranging from cleaning and maintenance equipment supplies to white goods,
ladders, solar reels, floating lounges, pool toys and games. Olympic's products
are distributed in Canada, Europe and the United States. Water Pik Technologies
expects to distribute these pool accessories in the U.S. and Europe under its
Water Pik(TM) and Jandy(TM) brand names.
This acquisition will be accounted for as a purchase transaction.
NOTE 13. QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1998 --
Sales................................ $48,613 $56,864 $56,541 $73,770
Gross profit......................... $19,114 $23,391 $23,801 $29,938
Net income........................... $ 555 $ 2,826 $ 3,015 $ 5,099
1997 --
Sales................................ $50,503 $63,832 $57,346 $69,486
Gross profit......................... $19,363 $27,964 $24,513 $30,535
Net income........................... $ 988 $ 6,224 $ 4,047 $ 6,293
</TABLE>
F-18
<PAGE> 102
WATER PIK TECHNOLOGIES, INC.
COMBINED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
--------------------
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
SALES.................................................... $118,462 $105,477
Costs and expenses:
Cost of sales.......................................... 72,773 62,972
Selling expenses....................................... 23,441 24,186
General and administrative expenses.................... 15,474 12,755
-------- --------
111,688 99,913
-------- --------
Earnings before other income............................. 6,774 5,564
Other income............................................. 119 71
-------- --------
INCOME BEFORE INCOME TAXES............................... 6,893 5,635
Provision for income taxes............................... 2,757 2,254
-------- --------
NET INCOME............................................... $ 4,136 $ 3,381
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-19
<PAGE> 103
WATER PIK TECHNOLOGIES, INC.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
----------- ------------
(UNAUDITED) (AUDITED)
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash................................................... $ -- $ --
Accounts receivable.................................... 38,212 46,335
Inventories............................................ 19,878 18,760
Deferred income taxes.................................. 5,154 7,218
Prepaid expenses and other current assets.............. 1,041 1,228
-------- --------
TOTAL CURRENT ASSETS.............................. 64,285 73,541
Property, plant and equipment.......................... 31,502 33,131
Cost in excess of net assets acquired.................. 18,441 19,072
Other assets........................................... 1,970 2,050
-------- --------
TOTAL ASSETS...................................... $116,198 $127,794
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable....................................... $ 17,999 $ 18,880
Accrued liabilities.................................... 19,474 18,883
-------- --------
TOTAL CURRENT LIABILITIES......................... 37,473 37,763
Deferred income taxes.................................. 1,152 1,209
-------- --------
TOTAL LIABILITIES................................. 38,625 38,972
-------- --------
Stockholder's Equity:
Net advances from Allegheny Teledyne................. 77,822 89,124
Foreign currency translation losses.................. (249) (302)
-------- --------
TOTAL STOCKHOLDER'S EQUITY........................ 77,573 88,822
-------- --------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY........ $116,198 $127,794
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-20
<PAGE> 104
WATER PIK TECHNOLOGIES, INC.
COMBINED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
-------------------
1999 1998
-------- -------
(IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net Income.............................................. $ 4,136 $ 3,381
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization........................ 4,162 3,343
Deferred income taxes................................ 2,007 1,262
Gain on sale of property, plant and equipment........ (21) (8)
Change in operating assets and liabilities:
Accounts receivable.................................. 8,123 10,079
Inventories.......................................... (1,118) (248)
Accounts payable..................................... (881) (4,081)
Accrued liabilities.................................. 591 (4,015)
Other assets......................................... (206) (797)
Other................................................... 240 41
-------- -------
CASH PROVIDED BY OPERATING ACTIVITIES................ 17,033 8,957
-------- -------
INVESTING ACTIVITIES:
Purchase of property, plant and equipment............... (1,669) (2,222)
Disposals of property, plant and equipment.............. 32 18
Other................................................... 42 (70)
-------- -------
CASH USED IN INVESTING ACTIVITIES.................... (1,595) (2,274)
-------- -------
FINANCING ACTIVITIES:
Net advances to Allegheny Teledyne...................... (15,438) (6,683)
-------- -------
CASH USED IN FINANCING ACTIVITIES.................... (15,438) (6,683)
-------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.......... -- --
Cash and cash equivalents at beginning of year............ -- --
-------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD................ $ -- $ --
======== =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-21
<PAGE> 105
WATER PIK TECHNOLOGIES, INC.
COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
ADVANCES ACCUMULATED
(TO) FROM OTHER
ALLEGHENY COMPREHENSIVE STOCKHOLDER'S
TELEDYNE INCOME EQUITY
--------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1997.............. $ 80,852 $(199) $ 80,653
======== ===== ========
Net income.............................. 3,381 -- 3,381
Other comprehensive income, net of tax:
Foreign currency translation losses... -- (114) (114)
-------- ----- --------
Comprehensive income.................... 3,381 (114) 3,267
Net transactions with Allegheny
Teledyne.............................. (6,683) -- (6,683)
-------- ----- --------
BALANCE, JUNE 30, 1998.................. $ 77,550 $(313) $ 77,237
======== ===== ========
BALANCE, DECEMBER 31, 1998.............. $ 89,124 $(302) $ 88,822
======== ===== ========
Net income.............................. 4,136 -- 4,136
Other comprehensive income, net of tax:
Foreign currency translation gains.... -- 53 53
-------- ----- --------
Comprehensive income.................... 4,136 53 4,189
Net transactions with Allegheny
Teledyne.............................. (15,438) -- (15,438)
-------- ----- --------
BALANCE, JUNE 30, 1999.................. $ 77,822 $(249) $ 77,573
======== ===== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-22
<PAGE> 106
NOTES TO INTERIM COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
These interim combined financial statements include the accounts of Water
Pik Technologies, Inc. ("Water Pik Technologies" or the "Company"). These
unaudited combined financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions for Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and note disclosures
required by generally accepted accounting principles for complete financial
statements. In the opinion of the Company, all adjustments (which include only
normal recurring adjustments) considered necessary for a fair presentation have
been included. These unaudited combined financial statements should be read in
conjunction with the annual combined financial statements and related notes
included in this Information Statement. The results of operations for these
interim periods are not necessarily indicative of the operating results for a
full year.
NOTE 2. INVENTORIES
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
------------- -----------------
(IN THOUSANDS)
<S> <C> <C>
Raw materials and supplies................. $12,040 $11,616
Work-in-process............................ 3,412 3,406
Finished goods............................. 9,445 8,795
------- -------
Total inventories at current cost.......... 24,897 23,817
Less allowances to reduce current cost
values to LIFO basis..................... (5,019) (5,057)
------- -------
Total inventories.......................... $19,878 $18,760
======= =======
</TABLE>
F-23
<PAGE> 107
NOTE 3. BUSINESS SEGMENTS
Information on the Company's business segments for the six months ended
June 30, 1999 and 1998 was as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Sales:
Personal Health Care Products.................. $ 55,849 $ 55,147
Pool and Water-Heating Products................ 62,613 50,330
-------- --------
Total sales.................................... $118,462 $105,477
======== ========
Operating profit:
Personal Health Care Products.................. $ 330 $ 1,018
Pool and Water-Heating Products................ 6,444 4,546
-------- --------
Total operating profit........................... 6,774 5,564
Other income..................................... 119 71
-------- --------
Income before income taxes....................... $ 6,893 $ 5,635
======== ========
</TABLE>
NOTE 4. COMMITMENTS AND CONTINGENCIES
In connection with the spin-off, Allegheny Teledyne received a tax ruling
from the Internal Revenue Service stating that the spin-off will be tax-free to
Allegheny Teledyne and to Allegheny Teledyne's stockholders. The continuing
validity of the Internal Revenue Service tax ruling is subject to certain
factual representations and assumptions, including completion of the required
public offering of the Company's common stock within approximately one year
following the spin-off and use of the anticipated gross proceeds of $50,000,000
(less associated costs) for further development of high quality, lower cost
manufacturing capabilities, for product line extensions, to expand channels of
distribution, and for acquisitions and/or joint ventures. Pursuant to the
Separation and Distribution Agreement that the Company will sign prior to the
spin-off, Water Pik Technologies will agree with Allegheny Teledyne to undertake
such a public offering.
The Tax Sharing and Indemnification Agreement between Allegheny Teledyne
and Water Pik Technologies provides that the Company will indemnify Allegheny
Teledyne and its representatives and agents for taxes imposed on, and other
amounts paid by, them or its stockholders if the Company takes actions or fails
to take actions (such as completing the public offering) that result in the
spin-off not qualifying as a tax-free distribution. If the Company were required
to so indemnify Allegheny Teledyne, such an obligation could have a material
adverse effect on the Company's business, results of operations, financial
condition, and cash flow and the amount the Company could be required to pay
could exceed its net worth by a substantial amount.
A number of lawsuits, claims and proceedings have been or may be asserted
against the Company relating to the conduct of its business, including those
pertaining to product liability, patent infringement, commercial, employment and
employee benefits. While the outcome of litigation cannot be predicted with
certainty, and some of these lawsuits, claims or proceedings may be determined
adversely to the Company, management does not
F-24
<PAGE> 108
believe that the disposition of any such pending matters is likely to have a
material adverse effect on the Company's financial condition or liquidity,
although the resolution in any reporting period or one or more of these matters
could have a material adverse effect on the Company's results of operations for
that period.
NOTE 5. SUBSEQUENT EVENT
In August 1999, Water Pik Technologies acquired substantially all of the
assets of Les Agencies Claude Marchand, Inc. ("Olympic"), a pool accessories
manufacturer and distributor, doing business in Canada as Olympic Pool
Accessories, for $2,500,000 in cash and a $6,687,000 promissory note. Olympic is
located in Montreal, Quebec, and produces a full line of pool accessories
ranging from cleaning and maintenance equipment supplies to white goods,
ladders, solar reels, floating lounges, pool toys and games. Olympic's products
are distributed in Canada, Europe and the United States. Water Pik Technologies
expects to distribute these pool accessories in the U.S. and Europe under its
Water Pik(TM) and Jandy(TM) brand names.
This acquisition will be accounted for as a purchase transaction.
F-25
<PAGE> 109
EXHIBIT INDEX
<TABLE>
<C> <S>
2.1 Form of Separation and Distribution Agreement between
Allegheny Teledyne Incorporated, TII Holdings, LLC, Teledyne
Industries, Inc. and Water Pik Technologies, Inc.
3.1 Form of Restated Certificate of Incorporation of Water Pik
Technologies, Inc.
3.2 Form of Amended and Restated Bylaws of Water Pik
Technologies, Inc.
4.1 Specimen Certificate for Common Stock of Water Pik
Technologies, Inc.*
4.2 Form of Rights Agreement between Water Pik Technologies,
Inc. and ChaseMellon Shareholder Services, L.L.C.
4.3 Credit Agreement*
10.1 Form of Tax Sharing and Indemnification Agreement between
Allegheny Teledyne Incorporated and Water Pik Technologies,
Inc.
10.2 Form of Interim Services Agreement between Allegheny
Teledyne Incorporated and Water Pik Technologies, Inc.
10.3 Form of Employee Benefits Agreement between Allegheny
Teledyne Incorporated and Water Pik Technologies, Inc.
10.4 Employment Agreement of Michael P. Hoopis*
10.5 Form of Employment Agreement entered into with certain
executives of Water Pik Technologies, Inc., together with
Schedule*
10.6 Form of Water Pik Technologies, Inc. 1999 Non-Employee
Director Stock Compensation Plan
10.7 Form of Water Pik Technologies, Inc. 1999 Incentive Plan
10.8 Form of Water Pik Technologies, Inc. Fee Continuation Plan
for Non-Employee Directors*
21.1 Significant Subsidiaries of Water Pik Technologies, Inc.*
27.1 Financial Data Schedule
</TABLE>
- -------------------------
* To be filed by amendment
<PAGE> 110
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.
WATER PIK TECHNOLOGIES, INC.
(Registrant)
By: /s/ MICHAEL P. HOOPIS
-----------------------------------
Name: Michael P. Hoopis
Title: President and Chief Executive
Officer
Date: September 13, 1999
<PAGE> 1
Exhibit 2.1
FORM OF
SEPARATION AND DISTRIBUTION AGREEMENT
BY AND AMONG
ALLEGHENY TELEDYNE INCORPORATED,
TII HOLDINGS, LLC,
TELEDYNE INDUSTRIES, INC.
AND
WATER PIK TECHNOLOGIES, INC.
DATED AS OF ___________, 1999
<PAGE> 2
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I DEFINITIONS........................................................................................ 2
ARTICLE II THE SEPARATION..................................................................................... 13
2.01. Transfer of Assets and Assumption of Liabilities................................................... 13
2.02. Water Pik Assets................................................................................... 13
2.03. Water Pik Liabilities.............................................................................. 14
2.04. Termination of Agreements.......................................................................... 15
2.05. Documents Relating to Transfer of Real Property Interests
and Tangible Property Located Thereon.............................................................. 16
2.06. Documents Further Evidencing Transfers of Assets and Assumption of Liabilities..................... 16
2.07. Other Ancillary Agreements......................................................................... 16
2.08. Disclaimer of Representations and Warranties....................................................... 17
2.09. Financing Arrangements............................................................................. 17
2.10. Governmental Approvals and Consents................................................................ 17
2.11. Novation of Assumed Water Pik Liabilities.......................................................... 18
2.12. Transfer of Subsidiary Assets and Assumption of Subsidiary Liabilities............................. 19
2.13. Consummation of Purchase and Sale Agreement........................................................ 19
2.14. TI Contribution and Liquidation.................................................................... 19
2.15. Interim Distributions.............................................................................. 19
ARTICLE III THE DISTRIBUTION................................................................................... 20
3.01. The Distribution................................................................................... 20
3.02. Actions Prior to the Distribution.................................................................. 20
3.03. Fractional Shares.................................................................................. 21
ARTICLE IV THE PUBLIC OFFERING................................................................................ 21
4.01. The Public Offering................................................................................ 21
4.02. Proceeds of the Public Offering.................................................................... 22
4.03. Remedies........................................................................................... 22
ARTICLE V MUTUAL RELEASES; INDEMNIFICATION................................................................... 22
5.01. Release of Pre-Distribution Claims................................................................. 22
5.02. Indemnification by Water Pik....................................................................... 25
5.03. Indemnification by ATI............................................................................. 25
5.04. Indemnification Obligations Net of Insurance Proceeds and other Amounts............................ 26
5.05. Procedures for Indemnification of Third Party Claims............................................... 26
5.06. Additional Matters................................................................................. 27
5.07. Remedies Cumulative................................................................................ 28
5.08. Survival of Indemnities............................................................................ 28
ARTICLE VI CERTAIN OTHER MATTERS.............................................................................. 28
6.01. Insurance Matters.................................................................................. 28
6.02. Certain Business Matters........................................................................... 31
6.03. Late Payments...................................................................................... 31
6.04. Certain Governance Matters......................................................................... 31
ARTICLE VII EXCHANGE OF INFORMATION; CONFIDENTIALITY........................................................... 31
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
7.01. Agreement for Exchange of Information; Archives.................................................... 31
7.02. Ownership of Information........................................................................... 32
7.03. Compensation for Providing Information............................................................. 32
7.04. Record Retention................................................................................... 32
7.05. Other Agreements Providing For Exchange of Information............................................. 32
7.06. Production of Witnesses; Records; Cooperation...................................................... 32
7.07. Confidentiality.................................................................................... 33
7.08. Protective Arrangements............................................................................ 34
ARTICLE VIII FURTHER ASSURANCES................................................................................. 34
8.01. Further Assurances................................................................................. 34
ARTICLE IX TERMINATION........................................................................................ 35
9.01. Termination........................................................................................ 35
9.02. Effect of Termination.............................................................................. 35
ARTICLE X MISCELLANEOUS...................................................................................... 35
10.01. Counterparts; Entire Agreement; Corporate Power.................................................... 35
10.02. Governing Law; Consent to Jurisdiction............................................................. 36
10.03. Assignability...................................................................................... 37
10.04. Third Party Beneficiaries.......................................................................... 37
10.05. Notices............................................................................................ 37
10.06. Severability....................................................................................... 38
10.07. Force Majeure...................................................................................... 38
10.08. Headings........................................................................................... 38
10.09. Survival of Covenants.............................................................................. 38
10.10. Waivers of Default................................................................................. 38
10.11. Specific Performance............................................................................... 38
10.12. Amendments......................................................................................... 39
10.13. Interpretation..................................................................................... 39
10.14. Disputes........................................................................................... 39
10.15. Exclusivity of Tax Sharing Agreement............................................................... 40
</TABLE>
ii
<PAGE> 4
SEPARATION AND DISTRIBUTION AGREEMENT
THIS SEPARATION AND DISTRIBUTION AGREEMENT, dated as of ____________,
1999, is by and among Allegheny Teledyne Incorporated, a Delaware corporation
("ATI"), TII Holdings, LLC, a Delaware limited liability company the sole member
of which is ATI ("Holdings"), Teledyne Industries, Inc., a California
corporation and an indirect wholly owned subsidiary of ATI ("TII"), and Water
Pik Technologies, Inc., a Delaware corporation and wholly owned subsidiary of
TII ("Water Pik"). Capitalized terms used herein and not otherwise defined shall
have the respective meanings assigned to them in Article I hereof.
WHEREAS, the Board of Directors of ATI has determined that it is in the
best interests of ATI and its stockholders to separate ATI's existing businesses
into three independent businesses; and
WHEREAS, in furtherance of the foregoing, it is appropriate and
desirable to transfer the Water Pik Assets to Water Pik and to cause Water Pik
to assume the Water Pik Liabilities, all as more fully described in this
Agreement and the Ancillary Agreements; and
WHEREAS, ATI intends, subject to completion of the transactions
contemplated hereby (including the foregoing transfer of Water Pik Assets and
assumption of Water Pik Liabilities) and to the other terms of this Agreement
and to further action by its Board of Directors, to effect the Distribution; and
WHEREAS, the Form 10 Registration Statement has become effective under
the Exchange Act; and
WHEREAS, ATI has received a private letter ruling from the Internal
Revenue Service to the effect that, among other things, the Distribution will
qualify as a tax-free distribution for federal income tax purposes under Section
355 of the Code; and
WHEREAS, the Distribution is to be followed by the Public Offering; and
WHEREAS, it is expected that, following certain transfers of other
Assets and assignments and assumptions of other Liabilities, ATI will distribute
to its stockholders all of the capital stock of Teledyne Technologies
Incorporated ("Teledyne Technologies") held directly or indirectly by ATI and
that, in connection therewith, ATI and Teledyne Technologies have entered into
agreements, including the Teledyne Technologies Separation and Distribution
Agreement, to address matters relating to the Teledyne Technologies
Distribution; and
WHEREAS, it is appropriate and desirable to set forth the principal
corporate transactions required to effect the Separation, the Distribution and
the Public Offering and certain other agreements that will govern certain
matters relating to the Separation, the Distribution and the Public Offering and
the relationships of ATI and Water Pik and their respective Subsidiaries
following the Separation and the Distribution;
NOW, THEREFORE, the parties, intending to be legally bound, agree as
follows:
<PAGE> 5
ARTICLE I
DEFINITIONS
For the purpose of this Agreement the following terms shall have the
following meanings:
1.01. ACTION means any demand, action, suit, countersuit, arbitration,
inquiry, proceeding or investigation by or before any federal, state, local,
foreign or international Governmental Authority or any arbitration or mediation
tribunal.
1.02. AFFILIATE of any Person means a Person that controls, is
controlled by, or is under common control with such Person. As used herein,
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such entity, whether
through ownership of voting securities or other interests, by contract or
otherwise.
1.03. AGENT means the distribution agent to be appointed by ATI to
distribute to the stockholders of ATI the shares of Water Pik Common Stock held
by ATI pursuant to the Distribution.
1.04. AGREEMENT means this Separation and Distribution Agreement,
including all of the Schedules hereto.
1.05. ANCILLARY AGREEMENTS means the deeds, lease assignments and
assumptions, leases, subleases and sub-subleases, subscription or contribution
agreements, stock powers, and the supplemental and other agreements and
instruments related thereto contemplated by Article II, including the Laars Inc.
Transfer and Assumption Agreement, the Water Pik Inc. Transfer and Assumption
Agreement, the Purchase and Sale Agreement, the Employee Benefits Agreement, the
Interim Services Agreement, the Trademark License Agreement, the Patent
Assignments and related powers of attorney and the Tax Sharing Agreement.
1.06. ASSETS means assets, properties and rights (including goodwill),
wherever located (including in the possession of vendors or other third parties
or elsewhere), whether real, personal or mixed, tangible, intangible or
contingent, in each case whether or not recorded or reflected or required to be
recorded or reflected on the books and records or financial statements of any
Person, including the following:
(a) all accounting and other books, records and files whether
in paper, microfilm, microfiche, computer tape or disc, magnetic tape
or any other form;
(b) all apparatus, computers and other electronic data
processing equipment, fixtures, machinery, equipment, furniture, office
equipment, automobiles, trucks, rolling stock, vessels, motor vehicles
and other transportation equipment, special and general tools, test
devices, prototypes and models and other tangible personal property;
(c) all inventories of materials, parts, raw materials,
supplies, work-in-process and finished goods and products;
2
<PAGE> 6
(d) all interests in real property of whatever nature,
including easements, whether as owner, lessor, sublessor, lessee,
sublessee or otherwise;
(e) all interests in any capital stock or other equity
interests of any Subsidiary or any other Person, all bonds, notes,
debentures or other securities issued by any Subsidiary or any other
Person, all loans, advances or other extensions of credit or capital
contributions to any Subsidiary or any other Person and all other
investments in securities of any Person;
(f) all license agreements, leases of personal property, open
purchase orders for raw materials, supplies, parts or services,
unfilled orders for the manufacture and sale of products and other
contracts, agreements or commitments;
(g) all deposits, letters of credit and performance and surety
bonds;
(h) all written technical information, data, specifications,
research and development information, engineering drawings, operating
and maintenance manuals, and materials and analyses prepared by
consultants and other third parties;
(i) all domestic and foreign patents, copyrights, trade names,
trademarks, service marks and registrations and applications for any of
the foregoing, mask works, trade secrets, inventions, other proprietary
information and licenses from third Persons granting the right to use
any of the foregoing;
(j) all computer applications, programs and other software,
including operating software, network software, firmware, middleware,
design software, design tools, systems documentation and instructions;
(k) all cost information, sales and pricing data, customer
prospect lists, supplier records, customer and supplier lists, customer
and vendor data, correspondence and lists, product literature, artwork,
design, development and manufacturing files, vendor and customer
drawings, formulations and specifications, quality records and reports
and other books, records, studies, surveys, reports, plans and
documents;
(l) all prepaid expenses, trade accounts and other accounts
and notes receivables;
(m) all rights under contracts or agreements, all claims or
rights against any Person arising from the ownership of any Asset, all
rights in connection with any bids or offers and all related claims,
choses in action or similar rights, whether accrued or contingent;
(n) all rights as a named insured under insurance policies and
all rights in the nature of insurance, indemnification or contribution;
(o) all licenses, permits, approvals and authorizations which
have been issued by any Governmental Authority;
3
<PAGE> 7
(p) cash or cash equivalents, bank accounts, lock boxes and
other deposit agreements; and
(q) interest rate, currency, commodity or other swap, collar,
cap or other hedging or similar agreements or arrangements.
1.07. ATI AUTOMOBILE POLICIES means those ATI Policies that (i) insure
Water Pik or any other member of the Water Pik Group, and (ii) provide
automobile insurance.
1.08. ATI COMMON STOCK means the Common Stock, par value $0.10 per
share, of ATI.
1.09. ATI GENERAL LIABILITY POLICIES means those ATI Policies that (i)
insure Water Pik or any other member of the Water Pik Group, and (ii) provide
general liability, public liability, or comprehensive general liability
insurance.
1.10. ATI GROUP means ATI and each Person (other than any member of the
Water Pik Group or the Water Pik Group) that is an Affiliate of ATI immediately
after the Effective Time.
1.11. ATI INDEMNITEES has the meaning set forth in Section 5.02.
1.12. ATI LIABILITIES means all Liabilities of ATI other than Water Pik
Liabilities and Teledyne Technologies Liabilities.
1.13. ATI POLICIES means policies of insurance that have been issued
to, or in favor of, ATI or Subsidiaries of ATI.
1.14. ATI PRODUCT LIABILITY POLICIES means those insurance ATI Policies
that (i) insure Water Pik or any other member of the Water Pik Group, and (ii)
provide product liability insurance.
1.15. ATI WORKERS COMPENSATION POLICIES means those ATI Policies that
(i) insure Water Pik or any other member of the Water Pik Group, and (ii)
provide workers compensation insurance.
1.16. CODE means the Internal Revenue Code of 1986, as amended.
1.17. COMMISSION means the Securities and Exchange Commission.
1.18. CONSENTS means any consents, waivers or approvals from, or
notification requirements to, any third parties.
1.19. DESIGNATED OFFICERS means, (i) in the case of ATI, the Senior
Vice President, General Counsel and Secretary of ATI or his successor, and (ii)
in the case of Water Pik, _____________ or his successor.
4
<PAGE> 8
1.20. DGCL means the Delaware General Corporation Law, as amended.
1.21. DISPUTES has the meaning set forth in Section 10.14.
1.22. DISTRIBUTION means the distribution by ATI on a pro rata basis to
holders of ATI Common Stock of all of the outstanding shares of Water Pik Common
Stock.
1.23. DISTRIBUTION DATE means the date on which the Distribution
occurs.
1.24. EFFECTIVE TIME means 5:00 p.m., Eastern Standard Time or Eastern
Daylight Time (whichever shall be then in effect), on the Distribution Date.
1.25. EMPLOYEE BENEFITS AGREEMENT means the Employee Benefits
Agreement, dated as of the date hereof, by and between ATI and Water Pik.
1.26. ENVIRONMENTAL LAW means any federal, state, local, foreign or
international statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, common law (including tort and environmental
nuisance law), legal doctrine, order, judgment, decree, injunction, requirement
or agreement with any Governmental Authority, now or hereafter in effect
relating to health, safety, pollution or the environment (including ambient air,
surface water, groundwater, land surface or subsurface strata) or to emissions,
discharges, releases or threatened releases of any substance currently or at any
time hereafter listed, defined, designated or classified as hazardous, toxic,
waste, radioactive or dangerous, or otherwise regulated, under any of the
foregoing, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of any such substances,
including the Comprehensive Environmental Response, Compensation and Liability
Act, the Superfund Amendments and Reauthorization Act and the Resource
Conservation and Recovery Act and comparable provisions in state, local, foreign
or international law.
1.27. ENVIRONMENTAL LIABILITIES means all Liabilities relating to,
arising out of or resulting from any Environmental Law or contract or agreement
relating to environmental, health or safety matters (including all removal,
remediation or cleanup costs, investigatory costs, governmental response costs,
natural resources damages, property damages, personal injury damages, costs of
compliance with any settlement, judgment or other determination of Liability and
indemnity, contribution or similar obligations) and all costs and expenses
(including allocated costs of in-house counsel and other personnel), interest,
fines, penalties or other monetary sanctions in connection therewith.
1.28. EXCHANGE ACT means the Securities Exchange Act of 1934, as
amended, together with the rules and regulations promulgated thereunder.
1.29. EXCLUDED ASSETS has the meaning set forth in Section 2.02(b).
1.30. EXPENSE FACTORS means expense factors or similar factors or
multipliers set forth in policies of insurance or related agreements applicable
to liabilities, losses or defense costs insured thereunder that are subject to a
Self-Insurance Obligation.
5
<PAGE> 9
1.31. FINANCING FACILITY means
1.32. FORM 10 REGISTRATION STATEMENT means the registration statement
on Form 10 filed under the Exchange Act, pursuant to which Water Pik Common
Stock will be registered under the Exchange Act following the Distribution,
together with all amendments thereto.
1.33. GOVERNMENTAL APPROVALS means any notices, reports or other
filings to be made, or any consents, registrations, approvals, permits or
authorizations to be obtained from, any Governmental Authority.
1.34. GOVERNMENTAL AUTHORITY shall mean any federal, state, local,
foreign or international court, government, department, commission, board,
bureau, agency, official or other regulatory, administrative or governmental
authority.
1.35. GROUP means the ATI Group, the Water Pik Group or the Teledyne
Technologies Group, as the context requires.
1.36. INCURRED LOSSES means the sum of paid losses (indemnity and loss
adjustment expenses) and reserves for unpaid losses.
1.37. INDEMNIFYING PARTY has the meaning set forth in Section 5.04(a).
1.38. INDEMNITEE has the meaning set forth in Section 5.04(a).
1.39. INDEMNITY PAYMENT has the meaning set forth in Section 5.04(a).
1.40. INFORMATION means information, whether or not patentable or
copyrightable, in written, oral, electronic or other tangible or intangible
forms, stored in any medium, including studies, reports, records, books,
contracts, instruments, surveys, discoveries, ideas, concepts, know-how,
techniques, designs, specifications, drawings, blueprints, diagrams, models,
prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes,
computer programs or other software, marketing plans, customer names,
communications by or to attorneys (including attorney-client privileged
communications), memos and other materials prepared by attorneys or under their
direction (including attorney work product), and other technical, financial,
employee or business information or data.
1.41. INFORMATION STATEMENT means the Information Statement forming a
part of the Form 10 Registration Statement to be mailed to holders of ATI Common
Stock in connection with the Distribution.
1.42. INITIAL MEDIATION PERIOD has the meaning set forth in Section
10.14.
6
<PAGE> 10
1.43. INSURANCE POLICIES means the insurance policies written by
insurance carriers unaffiliated with ATI pursuant to which Water Pik or one or
more of its Subsidiaries (or their respective officers or directors) will be
insured parties after the Effective Time.
1.44. INSURANCE PROCEEDS means those monies:
(a) received by an insured from an insurance carrier;
(b) paid by an insurance carrier on behalf of the insured; or
(c) received (including by way of set off) from any third
party in the nature of insurance, contribution or indemnification in
respect of any Liability;
in any such case net of any applicable premium adjustments (including reserves
and retrospectively rated premium adjustments) and net of any costs or expenses
(including allocated costs of in-house counsel and other personnel) incurred in
the collection thereof.
1.45. INTERIM SERVICES AGREEMENT means the Interim Services Agreement,
dated as of the date hereof, by and between ATI and Water Pik.
1.46. LAARS INC. means Laars Inc., a Delaware corporation.
1.47. LAARS INC. ASSETS means those Water Pik Assets described in
Schedule 1.47.
1.48. LAARS INC. LIABILITIES means those Water Pik Liabilities
described in Schedule 1.48.
1.49. LAARS INC. TRANSFER AND ASSUMPTION AGREEMENT means the Asset
Transfer and Liabilities Assumption Agreement, dated as of the date hereof,
between Water Pik and Laars Inc.
1.50. LIABILITIES means any and all losses, claims, charges, debts,
demands, actions, causes of action, suits, damages, obligations, payments, costs
and expenses, sums of money, accounts, reckonings, bonds, specialties,
indemnities and similar obligations, exonerations, covenants, contracts,
controversies, agreements, promises, doings, omissions, variances, guarantees,
make whole agreements and similar obligations, and other liabilities, including
all contractual obligations, whether absolute or contingent, matured or
unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown,
whenever arising, and including those arising under any law, rule, regulation,
Action, threatened or contemplated Action (including the costs and expenses of
demands, assessments, judgments, settlements and compromises relating thereto
and reasonable attorneys' fees and any and all costs and expenses (including
allocated costs of in-house counsel and other personnel), whatsoever incurred in
investigating, preparing or defending against any such Actions or threatened or
contemplated Actions), order or consent decree of any Governmental Authority or
any award of any arbitrator or mediator of any kind, and those arising under any
contract, commitment or undertaking, including those arising under this
Agreement or any Ancillary Agreement, in each case, whether or not recorded or
reflected or
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required to be recorded or reflected on the books and records or financial
statements of any Person.
1.51. NYSE means The New York Stock Exchange, Inc.
1.52. NON-WATER PIK ASSETS means any Assets of ATI or any of its
Affiliates (including any member of the Water Pik Group) other than the Water
Pik Assets.
1.53. PATENT ASSIGNMENTS means the Patent Assignments, effective as of
__________ 1999, executed and delivered by _____________ to ______________.
1.54 PER CASE MAXIMUM means (i) with respect to any single occurrence
covered under ATI Automobile Policies, $100,000 (inclusive of indemnity and loss
adjustment expenses multiplied by applicable Expense Factors) and (ii) with
respect to any single occurrence covered by ATI Workers Compensation policies,
$150,000 (inclusive of indemnity and loss adjustment expenses multiplied by
applicable Expense Factors).
1.55. PERSON means an individual, a general or limited partnership, a
corporation, a trust, a joint venture, an unincorporated organization, a limited
liability entity, any other entity and any Governmental Authority.
1.56 POOLED LOSS COSTS ALLOCABLE TO WATER PIK means the share allocated
to Water Pik by virtue of its participation in a pooling arrangement among ATI
divisions applicable to claims that (i) are covered under ATI Automobile
Policies and ATI Workers Compensation Policies; (ii) exceed the Per Case
Maximum; and (iii) are within a policy's deductible or other form of
self-insurance, which allocation to Water Pik will be based upon the same or
substantially similar to those factors as have been applied immediately before
the Distribution Date.
1.57. PRIME RATE means the rate which PNC Bank, N.A., Pittsburgh,
Pennsylvania (or any successor thereto or other commercial bank agreed to by the
parties hereto) announces from time to time as its prime lending rate, as in
effect from time to time.
1.58. PUBLIC OFFERING means the underwritten public offering by Water
Pik of shares of Water Pik Common Stock pursuant to the Public Offering
Registration Statement and as contemplated by the Tax Sharing Agreement.
1.59. PUBLIC OFFERING REGISTRATION STATEMENT means the registration
statement to be filed by Water Pik under the Securities Act of 1933, as amended,
pursuant to which the offering and sale of shares of Water Pik Common Stock to
be issued in the Public Offering will be registered, together with all
amendments thereto.
1.60. PURCHASE AND SALE AGREEMENT means the Purchase and Sale
Agreement, dated as of the date hereof, between TICL Newco and TICL.
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1.61. RECORD DATE means the close of business on the date determined by
the ATI Board of Directors as the record date for determining stockholders of
ATI entitled to receive shares of Water Pik Common Stock in the Distribution.
1.62. RIGHTS means the Rights to be distributed by Water Pik in respect
of Water Pik Common Stock in accordance with Section 3.02 hereof and pursuant to
the Rights Agreement between Water Pik and ChaseMellon Shareholder Services,
L.L.C.
1.63. RULING REQUEST means the request for ruling (including all
exhibits), as amended and supplemented, under Section 355 and other provisions
of the Code, originally filed on behalf of ATI on April 6, 1999 in respect of
the Distribution.
1.64. SECURITY INTEREST means any mortgage, security interest, pledge,
lien, charge, claim, option, right to acquire, voting or other restriction,
right-of-way, covenant, condition, easement, encroachment, restriction on
transfer, or other encumbrance of any nature whatsoever.
1.65. SELF INSURANCE OBLIGATION means an obligation by one or more
insureds to pay or reimburse to the issuers of an insurance policy (whether by
way of deductible, retrospective premium, premium adjustment, self-insured
retention or other form of self-insurance), indemnity, allocated loss expense,
and other proceeds multiplied by Expense Factors, if any.
1.66. SEPARATION means the transfer of the Water Pik Assets to Water
Pik and its Subsidiaries and the assumption by Water Pik and its Subsidiaries of
the Water Pik Liabilities, all as more fully described in this Agreement and the
Ancillary Agreements.
1.67. SUBSIDIARY of any Person means any corporation or other
organization whether incorporated or unincorporated of which at least a majority
of the securities or interests having by the terms thereof ordinary voting power
to elect at least a majority of the board of directors or others performing
similar functions with respect to such corporation or other organization is
directly or indirectly owned or controlled by such Person or by any one or more
of its Subsidiaries, or by such Person and one or more of its Subsidiaries;
provided, however that no Person that is not directly or indirectly wholly owned
by any other Person shall be a Subsidiary of such other Person unless such other
Person controls, or has the right, power or ability to control, that Person.
1.68. TAX SHARING AGREEMENT means the Tax Sharing and Indemnification
Agreement, dated as of the date hereof, as the same may be amended, by and
between ATI and Water Pik.
1.69. TAXES has the meaning set forth in the Tax Sharing Agreement.
1.70. TELEDYNE TECHNOLOGIES COMMON STOCK means the Common Stock, par
value $.01 per share, of Teledyne Technologies.
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1.71. TELEDYNE TECHNOLOGIES DISTRIBUTION means the distribution by ATI
on a pro rata basis to holders of ATI Common Stock of all of the outstanding
shares of Teledyne Technologies Common Stock owned by ATI.
1.72. TELEDYNE TECHNOLOGIES GROUP means Teledyne Technologies, each
Subsidiary of Teledyne Technologies and each other Person that is contemplated
to be controlled directly or indirectly by Teledyne Technologies at the time of
the Teledyne Technologies Distribution.
1.73. TELEDYNE TECHNOLOGIES LIABILITIES has the meaning assigned to
that term in the Teledyne Technologies Separation and Distribution Agreement.
1.74. TELEDYNE TECHNOLOGIES SEPARATION AND DISTRIBUTION AGREEMENT means
the Separation and Distribution Agreement, dated as of _________, 1999, among
ATI, Holdings, TII and Teledyne Technologies.
1.75. THIRD PARTY CLAIM has the meaning set forth in Section 5.05(a).
1.76. TI means Teledyne, Inc., a Delaware corporation.
1.77. TICL means Teledyne Industries Canada Limited, an Ontario
corporation.
1.78. TICL ASSETS means those certain assets of TICL listed and
described in Schedule 1.78.
1.79. TICL LIABILITIES means those liabilities of TICL described in
Schedule 1.79.
1.80. TICL NEWCO means _________________, an Ontario corporation wholly
owned by Water Pik.
1.81. TI LIQUIDATION means the dissolution and liquidation of TI in
accordance with applicable provisions of the DGCL and Section 332 of the Code,
as a result of which Holdings will own all of the outstanding capital stock of
TII.
1.82. UNDERWRITERS means the managing underwriters for the Public
Offering.
1.83. UNDERWRITING AGREEMENT means an underwriting agreement in
customary form to be entered into among Water Pik and the Underwriters with
respect to the Public Offering.
1.84. UNPAID LOSSES means liabilities and losses, including indemnity
payments and allocated loss expenses, that are subject to a Self Insurance
Obligation and that, as of the Distribution Date have not been paid by Water Pik
or a member of Water Pik Group and that do not appear on Schedule 1.84.
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1.85. WATER PIK ASSETS has the meaning set forth in Section 2.02(a).
1.86. WATER PIK BALANCE SHEET means the audited consolidated balance
sheet of Water Pik, including the notes thereto, as of [September 30], 1999.
1.87. WATER PIK BUSINESS means the business and operations of the
divisions and Subsidiaries of TI or TII comprising Teledyne Water Pik, Jandy and
Teledyne Laars and any business or operation conducted by Water Pik or any
Affiliate of Water Pik at any time on or after the Distribution Date.
1.88. WATER PIK COMMON STOCK means the Common Stock, $.01 par value per
share, of Water Pik and, after the distribution of Rights referred to in Section
3.02, shall include the associated Rights.
1.89. WATER PIK CONTRACTS means the following contracts and agreements
to which TII or any of its Affiliates is a party or by it or any of its
Affiliates or any of their respective Assets is bound, whether as of the date
hereof or prior to or at the Effective Time, and whether or not in writing,
except for any such contract or agreement that is expressly contemplated to be
retained by any member of the ATI Group pursuant to any provision of this
Agreement or any Ancillary Agreement:
(a) any contract or agreement entered into in the name of, or
expressly on behalf of, any division, business unit or member of the
Water Pik Group;
(b) any contract or agreement that relates exclusively to the
Water Pik Business, including those listed or described on Schedule
1.89(b);
(c) federal, state and local government and other contracts
and agreements that relate exclusively to the Water Pik Business,
including those listed or described on Schedule 1.89(c);
(d) any contract or agreement representing capital or
operating equipment lease obligations reflected on the Water Pik
Balance Sheet, including obligations as lessee under those contracts or
agreements listed on Schedule 1.89(d) (as such Schedule may be
supplemented after the date hereof and prior to the Effective Time to
assign capital and operating equipment lease obligations that relate
exclusively to the Water Pik Business and that were, are or may be
executed and delivered after the date of the Water Pik Balance Sheet);
(e) any contract or agreement that is otherwise expressly
contemplated pursuant to this Agreement or any of the Ancillary
Agreements to be assigned to Water Pik or any member of the Water Pik
Group;
(f) any guarantee, indemnity, representation, warranty or
other Liability of any member of the Water Pik Group or the ATI Group
in respect of any other Water Pik Contract, any Water Pik Liability or
the Water Pik Business (including guarantees of
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financing incurred by customers or other third parties in connection
with purchases of products or services from the Water Pik Business);
and
(g) the contracts, agreements and other documents listed or
described on Schedule 1.89(g).
1.90. WATER PIK GROUP means Water Pik, each Subsidiary of Water Pik and
each other Person that is contemplated to be controlled directly or indirectly
by Water Pik as of the Effective Time.
1.91. WATER PIK INC. means Water Pik Inc., a Delaware corporation.
1.92. WATER PIK ASSETS means those Water Pik Assets described in
Schedule 1.92.
1.93. WATER PIK LIABILITIES means those Water Pik Liabilities
described in Schedule 1.93.
1.94. WATER PIK TRANSFER AND ASSUMPTION AGREEMENT means the Asset and
Transfer and Liabilities Assumption Agreement, dated as of the date hereof,
between Water Pik and Water Pik Inc.
1.95. WATER PIK INDEMNITEES has the meaning set forth in Section
5.03(a).
1.96. WATER PIK LIABILITIES has the meaning set forth in Section 2.03.
1.97. YEAR 2000 COMPLIANT means, with respect to an Asset, that such
Asset will (i) accurately process date/time data (including, but not limited to,
calculating, comparing, sorting, sequencing and calendar generation), including
single century formulas and multi-century formulas, from, into and between the
twentieth and twenty-first centuries and the years 1999 and 2000, including leap
year calculations, and will not malfunction or generate incorrect values or
invalid results involving such dates/times; (ii) accurately interface with other
systems, as appropriate, in order to supply, receive or process dates/times and
other data, to the extent that other information technology properly exchanges
data with it; (iii) provide that date/time-related functionalities, date/time
fields and any user input interfaces include a four digit year format and/or
other indication of century, as applicable; and (iv) not cause any other Asset
that is otherwise Year 2000 Compliant to fail to be Year 2000 Compliant.
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<PAGE> 16
ARTICLE II
THE SEPARATION
2.01. TRANSFER OF ASSETS AND ASSUMPTION OF LIABILITIES. (a) TII hereby
assigns, transfers, conveys and delivers to Water Pik, and agrees to cause its
applicable Subsidiaries to assign, transfer, convey and deliver to Water Pik,
and Water Pik hereby accepts from TII and its Subsidiaries, all of TII's and its
applicable Subsidiaries' respective right, title and interest in all Water Pik
Assets.
(b) Water Pik hereby assumes and agrees faithfully to perform, satisfy,
discharge and fulfill all the Water Pik Liabilities in accordance with their
respective terms. Water Pik shall be responsible for all Water Pik Liabilities,
regardless of when or where such Liabilities arose or arise or whether the facts
on which they are based occurred prior to or subsequent to the date hereof,
regardless of where or against whom such Liabilities are asserted or determined
or whether asserted or determined prior to the date hereof, and regardless of
whether arising from or alleged to arise from negligence, recklessness,
violation of law, fraud or misrepresentation (whether based on tort, contract,
statute or otherwise) by any member of the ATI Group or the Water Pik Group or
any of their respective directors, officers, employees, agents, Subsidiaries or
Affiliates.
(c) In the event that at any time or from time to time (whether prior
to or after the Distribution Date) any party hereto (or any member of such
party's respective Group), shall receive or otherwise possess any Asset that is
allocated to any other Person pursuant to this Agreement or any Ancillary
Agreement, such party or member shall promptly transfer, or cause to be
transferred, such Asset to the Person so entitled thereto. Prior to any such
transfer, the Person receiving or possessing such Asset shall hold such Asset in
trust for any such other Person.
2.02. WATER PIK ASSETS. (a) For purposes of this Agreement, "Water Pik
Assets" shall mean (without duplication):
(i) all Assets reflected in the Water Pik Balance Sheet as
Assets of Water Pik and its Subsidiaries, subject to any dispositions
of any such Assets subsequent to the date of the Water Pik Balance
Sheet;
(ii) all Assets acquired by or for the exclusive benefit of
Water Pik subsequent to the date of the Water Pik Balance Sheet and
prior to the Effective Time that would have been reflected in the Water
Pik Balance Sheet as Assets of Water Pik had they been owned on the
date of the Water Pik Balance Sheet;
(iii) subject to Section 6.01, any rights of any member of the
Water Pik Group under any of the Insurance Policies, including any
rights thereunder arising after the Distribution Date in respect of any
Insurance Policies that are occurrence policies; and
(iv) (A) any Assets that any Ancillary Agreement contemplates
will be transferred to any member of the Water Pik Group, (B) any Water
Pik Contracts and (C) all issued and outstanding capital stock of the
Subsidiaries, the partnership interests and other Assets of TII listed
on Schedule 2.02(a)(iv).
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Notwithstanding the foregoing, the Water Pik Assets shall not in any event
include the Excluded Assets referred to in Section 2.02(b) below.
(b) For the purposes of this Agreement, "Excluded Assets" shall mean:
(i) the Assets listed or described on Schedule 2.02(b)(i); and
(ii) any and all Assets that are expressly contemplated by
this Agreement or any Ancillary Agreement (or the Schedules hereto or
thereto) as Assets to be retained by ATI or any other member of the ATI
Group (including the Teledyne Technologies Group).
(c) Water Pik acknowledges and agrees that the Assets reflected as
Water Pik Assets in the Water Pik Balance Sheet are so reflected based on the
books and records maintained, and other information supplied, by Water Pik
personnel, and that the Water Pik Assets constitute all of the Assets necessary
to operate the Water Pik Business as presently conducted.
2.03. WATER PIK LIABILITIES. For the purposes of this Agreement, "Water
Pik Liabilities" shall mean (without duplication):
(a) any and all Liabilities that are expressly contemplated by this
Agreement or any Ancillary Agreement (or the Schedules hereto or thereto) as
Liabilities to be assumed by Water Pik or any member of the Water Pik Group,
including those described in Schedule 2.03(i), and all agreements, obligations
and Liabilities of any member of the Water Pik Group under this Agreement or any
of the Ancillary Agreements;
(b) all Liabilities, including any employee-related Liabilities and
Environmental Liabilities, relating to, arising out of or resulting from:
(i) the operation of the Water Pik Business as conducted at
any time prior to, at or after the Effective Time (including any
Liability relating to, arising out of or resulting from the design,
manufacture and sale of products or services of the Water Pik Business
or from any act or failure to act by any director, officer, employee,
agent or representative of any Person (whether or not such act or
failure to act is or was within such Person's authority));
(ii) the operation of any business conducted by any member of
the Water Pik Group at any time after the Effective Time (including any
Liability relating to, arising out of or resulting from any act or
failure to act by any director, officer, employee, agent or
representative of any Person (whether or not such act or failure to act
is or was within such Person's authority)); or
(iii) any Water Pik Assets (including any Water Pik Contracts
and any real property and leasehold interests) or ownership of any
Water Pik Assets at any time prior to, at or after the Effective Time;
in any such case whether arising before, on or after the Effective Time;
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(c) all Liabilities relating to, arising out of or resulting from the
Financing Facility;
(d) all Liabilities relating to, arising out of or resulting from any
of the terminated, divested or discontinued businesses and operations listed or
described on Schedule 2.03(iv);
(e) all Liabilities reflected as liabilities or obligations of Water
Pik in the Water Pik Balance Sheet, subject to any discharge of such Liabilities
subsequent to the date of the Water Pik Balance Sheet, and all liabilities or
obligations of Water Pik incurred subsequent to the date of the Water Pik
Balance Sheet that would have been reflected in the Water Pik Balance Sheet had
they been incurred as of the date of the Water Pik Balance Sheet;
(f) any Liabilities relating to, arising out of or resulting from any
infringement of any intellectual property of any third party, including but not
limited to patent rights, trademark and service mark rights (registered and
common law), trade dress rights, copyrights, misappropriation of trade secret,
based upon or resulting from the operation of the Water Pik Business and
regardless of whether said infringement occurred prior to, on or after the
Distribution Date;
(g) any and all guarantees by ATI or any member of the ATI Group of
obligations to assure payment or performance by or other Liabilities of the
Water Pik Group or the Water Pik Business; and
(h) any Liabilities relating to, arising out of, or resulting from any
of the Water Pik Assets that are not Year 2000 Compliant.
2.04. TERMINATION OF AGREEMENTS. (a) Except as set forth in Section
2.04(b), in furtherance of the releases and other provisions of Section 5.01
hereof, Water Pik and each member of the Water Pik Group, on the one hand, and
each of ATI and the respective members of the ATI Group, on the other hand,
hereby terminate any and all agreements, arrangements, commitments or
understandings, whether or not in writing, between or among Water Pik and/or any
member of the Water Pik Group, on the one hand, and ATI or any member of the ATI
Group, on the other hand, effective as of the Effective Time, including (except
as set forth in Schedule 2.04(a)) any intercompany accounts payable or accounts
receivable accrued as of the Effective Time that are reflected in the books and
records of the parties or otherwise documented in writing in accordance with
past practices; provided, however, to the extent that the termination of any
such agreement, arrangement, commitment or understanding is inconsistent with
any Ancillary Agreement, such termination shall be effective as of the date of
effectiveness of the applicable Ancillary Agreement. No such terminated
agreement, arrangement, commitment or understanding (including any provision
thereof which purports to survive termination) shall be of any further force or
effect after the Effective Time (or, to the extent contemplated by the proviso
to the immediately preceding sentence, after the effective time of the
applicable Ancillary Agreement). Each party shall, at the reasonable request of
any other party, take, or cause to be taken, such other actions as may be
necessary to effect the foregoing.
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(b) The provisions of Section 2.04(a) shall not apply to any of the
following agreements, arrangements, commitments or understandings (or to any of
the provisions thereof): (i) this Agreement and the Ancillary Agreements (and
each other agreement or instrument expressly contemplated by this Agreement or
any Ancillary Agreement to be entered into by any of the parties hereto or any
of the members of their respective Groups); (ii) any agreements, arrangements,
commitments or understandings listed or described on Schedule 2.04(b)(ii); (iii)
any agreements, arrangements, commitments or understandings to which any Person
other than the parties hereto and their respective Affiliates is a party (it
being understood that to the extent that the rights and obligations of the
parties and the members of their respective Groups under any such agreements,
arrangements, commitments or understandings constitute Water Pik Assets or Water
Pik Liabilities, they shall be assigned and assumed pursuant to Section 2.01);
and (iv) any other agreements, arrangements, commitments or understandings that
this Agreement or any Ancillary Agreement expressly contemplates will survive
the Effective Time.
2.05. DOCUMENTS RELATING TO TRANSFER OF REAL PROPERTY INTERESTS AND
TANGIBLE PROPERTY LOCATED THEREON. In furtherance of the assignment, transfer
and conveyance of Water Pik Assets and the assumption of Water Pik Liabilities
set forth in Section 2.01(a) and (b), simultaneously with the execution and
delivery hereof or as promptly as practicable thereafter, each of TII and Water
Pik or their applicable Subsidiaries is executing and delivering or will execute
and deliver such deeds, lease assignments and assumptions, leases, subleases and
sub-subleases as may be necessary to effectively transfer any real property and
leasehold interests forming part of the Water Pik Assets and conform to any
laws, regulations or usage applicable in the jurisdiction in which the relevant
real property is located.
2.06. DOCUMENTS FURTHER EVIDENCING TRANSFERS OF ASSETS AND ASSUMPTION
OF LIABILITIES. In furtherance of the assignment, transfer and conveyance of
Water Pik Assets and the assumption of Water Pik Liabilities set forth in
Section 2.01(a) and (b), simultaneously with the execution and delivery hereof
or as promptly as practicable thereafter, (i) TII shall execute and deliver, and
shall cause its Subsidiaries to execute and deliver, such further bills of sale,
stock powers, certificates of title, assignments of contracts and other
instruments of transfer, conveyance and assignment as and to the extent
necessary to fully evidence the transfer, conveyance and assignment of all of
TII's and its respective Subsidiaries' right, title and interest in and to the
Water Pik Assets to Water Pik and (ii) Water Pik shall execute and deliver to
TII and its Subsidiaries such further bills of sale, stock powers, certificates
of title, assumptions of contracts and other instruments of assumption as and to
the extent necessary to fully evidence the valid and effective assumption of the
Water Pik Liabilities by Water Pik.
2.07. OTHER ANCILLARY AGREEMENTS. Effective as of the date hereof each
of ATI, TII and Water Pik will execute and deliver, and cause any of their
respective Subsidiaries that are parties thereto to execute and deliver all
Ancillary Agreements to which it is a party.
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2.08. DISCLAIMER OF REPRESENTATIONS AND WARRANTIES. Each of ATI (on
behalf of itself and each member of ATI, including TII) and Water Pik (on behalf
of itself and each member of the Water Pik Group) understands and agrees that,
except as expressly set forth herein or in any Ancillary Agreement, no party to
this Agreement, any Ancillary Agreement or any other agreement or document
contemplated by this Agreement, any Ancillary Agreement or otherwise, is
representing or warranting in any way as to the Assets, businesses or
Liabilities transferred or assumed as contemplated hereby or thereby (including
whether an asset is Year 2000 Compliant), as to any consents or approvals
required in connection therewith, as to the value or freedom from any Security
Interests of, or any other matter concerning, any Assets of such party, or as to
the absence of any defenses or rights of setoff or freedom from counterclaims
with respect to any claim or other Asset, including any accounts receivable, of
any party, or as to the legal sufficiency of any assignment, document or
instrument delivered hereunder to convey title to any Asset or thing of value
upon the execution, delivery and filing hereof or thereof. Except as may
expressly be set forth herein or in any Ancillary Agreement, all such Assets are
being transferred on an "as is," "where is," "with all faults" basis (and, in
the case of any real property, by means of a quitclaim or similar form deed or
conveyance) and the respective transferees shall bear the economic and legal
risks that any conveyance shall prove to be insufficient to vest in the
transferee good and marketable title, free and clear of any Security Interest.
Without limiting the foregoing, neither ATI nor any other party hereto
(excluding Water Pik), or to any Ancillary Agreement, is making any
representation or warranty to Water Pik or any other Person in respect of the
Water Pik Balance Sheet, including in respect of the accuracy or presentation
thereof, or the adequacy of accruals, reserves and other amounts reflected
thereon.
2.09. FINANCING ARRANGEMENTS. Each of the parties hereto acknowledges
that (a) ATI has arranged availability for up to $___ million in senior secured
financing pursuant to the Financing Facility, (b) that ATI has, prior to the
date hereof, incurred $____ million in indebtedness pursuant to such Financing
Facility; and (c) that ATI has used, or will use prior to the Distribution Date,
such indebtedness to refinance other outstanding indebtedness of ATI. Water Pik
agrees that, following the Distribution Date, Water Pik will indemnify ATI (and
all the other members of the ATI Group) and defend and hold such parties
harmless from and against all the obligations of ATI (or Water Pik) arising
under the Financing Facility (including the obligation to repay such $___
million in outstanding borrowings), with the effect that ATI (and all other
members of the ATI Group) shall have no further liability or obligation under
the Financing Facility.
2.10. GOVERNMENTAL APPROVALS AND CONSENTS. (a) To the extent that the
Separation requires any Governmental Approvals or Consents, the parties will use
all reasonable efforts to obtain any such Governmental Approvals and Consents.
(b) If and to the extent that the valid, complete and perfected
transfer or assignment (or novation of any federal government contract) to the
Water Pik Group of any Water Pik Assets (or from the Water Pik Group of any
Non-Water Pik Assets) would be a violation of applicable laws or require any
Consent or Governmental Approval in connection with the Separation, then, unless
ATI shall otherwise determine, the transfer or assignment to or from the Water
Pik Group, as the case may be, of such Water Pik Assets or Non-Water Pik Assets,
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respectively, shall be automatically deemed deferred and any such purported
transfer or assignment shall be null and void until such time as all legal
impediments are removed and/or such Consents or Governmental Approvals have been
obtained. Notwithstanding the foregoing, such Asset shall be deemed a Water Pik
Asset for purposes of determining whether any Liability is a Water Pik
Liability.
(c) If the transfer or assignment of any Assets intended to be
transferred or assigned hereunder is not consummated prior to or at the
Effective Time, whether as a result of the provisions of Section 2.10(b) or for
any other reason, then the Person retaining such Asset shall thereafter hold
such Asset for the use and benefit, insofar as reasonably possible, of the
Person entitled thereto (at the expense of the Person entitled thereto). In
addition, the Person retaining such Asset shall take such other actions as may
be reasonably requested by the Person to whom such Asset is to be transferred in
order to place such Person, insofar as reasonably possible, in the same position
as if such Asset had been transferred as contemplated hereby and so that all the
benefits and burdens relating to such Water Pik Assets (or such Non-Water Pik
Assets, as the case may be), including possession, use, risk of loss, potential
for gain, and dominion, control and command over such Assets, are to inure from
and after the Effective Time to the Water Pik Group (or the ATI Group, as the
case may be).
(d) If and when the Consents and/or Governmental Approvals, the absence
of which caused the deferral of transfer of any Asset pursuant to Section
2.10(b), are obtained, the transfer of the applicable Asset shall be effected in
accordance with the terms of this Agreement and/or the applicable Ancillary
Agreement.
(e) The Person retaining an Asset due to the deferral of the transfer
of such Asset shall not be obligated, in connection with the foregoing, to
expend any money unless the necessary funds are advanced by the Person entitled
to the Asset, other than reasonable out-of-pocket expenses, attorneys' fees and
recording or similar fees, all of which shall be promptly reimbursed by the
Person entitled to such Asset.
2.11. NOVATION OF ASSUMED WATER PIK LIABILITIES. (a) Each of ATI, TII
and Water Pik at the request of any of the others, shall use all reasonable
efforts to obtain, or to cause to be obtained, any consent, substitution,
approval or amendment required to novate (including with respect to any federal
government contract) or assign all obligations under agreements, leases,
licenses and other obligations or Liabilities, or to obtain in writing the
unconditional release of all parties to such arrangements other than any member
of the Water Pik Group, so that, in any such case, Water Pik and its
Subsidiaries will be solely responsible for such Liabilities; provided, however,
that no member of the ATI Group shall be obligated to pay any consideration
therefor to any third party from whom such consents, approvals, substitutions
and amendments are requested.
(b) If ATI, TII or Water Pik is unable to obtain, or to cause to be
obtained, any such required consent, approval, release, substitution or
amendment, the applicable member of the ATI Group shall continue to be bound by
such agreements, leases, licenses and other obligations and, unless not
permitted by law or the terms thereof, Water Pik shall, as agent or
subcontractor for ATI, TII or such other Person, as the case may be, pay,
perform and discharge fully all the
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obligations or other Liabilities of ATI, TII or such other Person, as the case
may be, thereunder from and after the date hereof. Water Pik shall indemnify and
defend each ATI Indemnitee and hold each of them harmless against any
Liabilities arising in connection therewith. Each of ATI and TII, as the case
may be, shall, without further consideration, pay and remit, or cause to be paid
or remitted, to Water Pik promptly all money, rights and other consideration
received by it or any member of its respective Group in respect of such
performance (unless any such consideration is an Excluded Asset). If and when
any such consent, approval, release, substitution or amendment shall be obtained
or such agreement, lease, license or other rights or obligations shall otherwise
become assignable or able to be novated, each of ATI and TII, as the case may
be, shall thereafter assign, or cause to be assigned, all its rights,
obligations and other Liabilities thereunder or any rights or obligations of any
member of its respective Group to Water Pik without payment of further
consideration and Water Pik shall, without the payment of any further
consideration, assume such rights and obligations.
2.12. TRANSFER OF SUBSIDIARY ASSETS AND ASSUMPTION OF SUBSIDIARY
LIABILITIES. Immediately following the transfer of Water Pik Assets and
assumption of Water Pik Liabilities contemplated by Section 2.01, Water Pik
shall contribute to Water Pik Inc. the Water Pik Inc. Assets and cause Water Pik
Inc. to assume the Water Pik Inc. Liabilities in accordance with the Water Pik
Inc. Transfer and Assumption Agreement, and shall contribute to Laars Inc. the
Laars Inc. Assets and cause Laars Inc. to assume the Laars Inc. Liabilities in
accordance with the Laars Inc. Transfer and Assumption Agreement.
2.13. CONSUMMATION OF PURCHASE AND SALE AGREEMENT. Immediately
following the transfer of Assets and assumption of Liabilities contemplated by
Section 2.12, the parties hereto will cause the transactions contemplated by the
Purchase and Sale Agreement to be consummated, pursuant to which TICL Newco will
purchase the TICL Assets from TICL for approximately $5,600,000 in cash.
2.14. TI CONTRIBUTION AND LIQUIDATION. Prior to consummation of the
transactions contemplated by Section 2.15, ATI will contribute to Holdings all
of the outstanding capital stock of TI and the TI Liquidation will be effected.
2.15. INTERIM DISTRIBUTIONS. Following the TI Liquidation, TII will
distribute to Holdings and Holdings will distribute to ATI all of the
outstanding Water Pik Common Stock.
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ARTICLE III
THE DISTRIBUTION
3.01. THE DISTRIBUTION. The ATI Board shall have the sole and absolute
discretion to determine whether and when to effect the Distribution. If the ATI
Board declares the Distribution, on or prior to the Distribution Date, ATI will
deliver to the Agent for the benefit of holders of record of ATI Common Stock on
the Record Date, a single stock certificate, endorsed by ATI in blank,
representing all of the outstanding shares of Water Pik Common Stock then owned
by ATI or any member of the ATI Group, and will instruct the Agent to
distribute, or make book-entry credits for, one share of Water Pik Common Stock
in respect of every ____ shares of ATI Common Stock held by holders of record of
ATI Common Stock on the Record Date, subject to Section 3.03.
3.02. ACTIONS PRIOR TO THE DISTRIBUTION. Prior to the Distribution:
(a) On such date as ATI shall determine, Water Pik shall mail to the
holders of ATI Common Stock the Information Statement.
(b) ATI and Water Pik shall cooperate in preparing, filing with the
Commission under the Securities Act and causing to become effective any
registration statements or amendments thereto that are appropriate to reflect
the establishment of or amendments to any employee benefit plan contemplated by
the Employee Benefits Agreement.
(c) ATI and Water Pik shall by means of a reclassification, stock split
or stock distribution or other means cause the number of outstanding shares of
Water Pik Common Stock held by ATI to be equal to the number of shares to be
distributed in the Distribution (as determined by ATI).
(d) ATI and Water Pik shall take all such action as may be necessary or
appropriate under the securities or blue sky laws of states or other political
subdivisions of the United States in connection with the transactions
contemplated by this Agreement or any Ancillary Agreement.
(e) Water Pik shall use all efforts to have approved an application to
permit listing of the Water Pik Common Stock on the NYSE or another mutually
agreeable stock exchange or quotation system.
(f) ATI and Water Pik shall take all actions which may be required to
elect or otherwise appoint as directors of Water Pik, on or prior to the
Distribution Date, the persons named in the Form 10 Registration Statement to
constitute the Board of Directors of Water Pik on the Distribution Date.
(g) ATI shall cause a Certificate of Amendment and Restatement of the
Water Pik Certificate of Incorporation substantially in the form filed with the
Form 10 Registration Statement, to be filed for record with the Secretary of
State of Delaware and to be in effect on the Distribution Date, and the Board of
Directors of Water Pik shall amend the Bylaws of Water Pik
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so that the Water Pik Bylaws are substantially in the form filed with the Form
10 Registration Statement.
(h) Water Pik shall declare a distribution of, and distribute, one
Right with respect to each share of Water Pik Common Stock to be distributed in
the Distribution.
(i) ATI and Water Pik shall take all actions as may be necessary to
approve the stock-based employee benefit plans of Water Pik in order to satisfy
the requirements of Section 162(m) and other applicable provisions of the Code
and any requirements of the NYSE (or any other stock exchange or quotations
system on which Water Pik Common Stock is to be listed or traded).
3.03. FRACTIONAL SHARES. No certificates or scrip representing
fractional shares of Water Pik Common Stock will be distributed to holders of
ATI Common Stock in the Distribution. The Agent will, as soon as practicable
after the Distribution Date, (a) determine the number of whole shares and
fractional shares of Water Pik Common Stock allocable to each holder of record
of ATI Common Stock as of the Record Date, (b) aggregate all fractional shares
held by such holders, and (c) sell the whole shares attributable to the
aggregate of such fractional shares, in open market transactions, in each case
at the then prevailing trading prices, and to cause to be distributed to each
such holder, in lieu of any fractional share, without interest, such holder's
ratable share of the proceeds of such sale, after making appropriate deductions
of the amount required, if any, to be withheld for U.S. federal income tax
purposes.
ARTICLE IV
THE PUBLIC OFFERING
4.01. THE PUBLIC OFFERING. (a) Water Pik shall consummate the Public
Offering not later than one year following the Distribution Date. Actions
required in order to so consummate the Public Offering shall include, but not
necessarily be limited to, those specified in this Section 4.01.
(b) Water Pik shall file the Public Offering Registration Statement not
later than at the end of the eighth month following the month in which the
Distribution Date occurs, and shall file such amendments or supplements thereto,
as may be necessary in order to cause the same to become and remain effective as
required by law or by the Underwriters, including, but not limited to, filing
such amendments to the Public Offering Registration Statement as may be required
by the Underwriting Agreement, the Commission or federal, state or foreign
securities laws.
(c) Water Pik shall enter into the Underwriting Agreement and shall
comply with its obligations thereunder.
(d) Water Pik shall take all such action as may be necessary or
appropriate under state securities and blue sky laws of the United States (and
any comparable laws under any foreign jurisdictions) in connection with the
Public Offering.
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(e) Water Pik shall prepare, file and take all actions necessary to
make effective an application for listing of the Water Pik Common Stock issued
in the Public Offering on the NYSE, subject to official notice of issuance.
(f) Water Pik shall participate in the preparation of materials and
presentations as the Underwriters shall deem necessary or desirable.
(g) Water Pik shall pay all third party costs, fees and expenses
relating to the Public Offering, all of the reimbursable expenses of the
Underwriters pursuant to the Underwriting Agreement, all of the costs of
producing, printing, mailing and otherwise distributing the Prospectus, as well
as the Underwriters' discount as provided in the Underwriting Agreement.
4.02. PROCEEDS OF THE PUBLIC OFFERING. The Public Offering will be a
primary offering of Water Pik Common Stock and the net proceeds of the Public
Offering will be retained by Water Pik. Water Pik will use such net proceeds as
provided in the Tax Sharing Agreement and the Ruling Request.
4.03. REMEDIES. Water Pik acknowledges that its agreements in this
Article IV are of a special, unique, unusual and extraordinary character.
Because the failure of Water Pik to perform its obligations set forth in the
provisions of this Article IV could cause unique and extraordinary injury to
ATI, ATI shall, notwithstanding anything to the contrary herein, have the right
in addition to any other remedies available, at law or in equity, to seek an
injunction in a court of equity to compel Water Pik to perform such obligations.
Water Pik hereby waives any and all defenses it may have on the ground of lack
of jurisdiction or competence of the court to grant an injunction or other
equitable relief, or otherwise, and agrees that it will not assert any such
defense or any defense to a request by ATI for injunctive relief based on the
alleged existence of an adequate remedy at law or for money damages. Without
limiting the foregoing, Water Pik hereby waives the right to require ATI to post
any bond or other security with respect to any proceeding to enforce the
provisions of this Article IV. The existence of the rights of ATI set forth in
this Section 4.03 shall not preclude any other rights and remedies at law or in
equity which ATI may have.
ARTICLE V
MUTUAL RELEASES; INDEMNIFICATION
5.01. RELEASE OF PRE-DISTRIBUTION CLAIMS. (a) Except as provided in
Section 5.01(c), effective as of the Effective Time, Water Pik does hereby, for
itself and each other member of the Water Pik Group, their respective Affiliates
(other than any member of the ATI Group), successors and assigns, and all
Persons who at any time prior to the Effective Time have been stockholders,
directors, officers, agents or employees of any member of the Water Pik Group
(in each case, in their respective capacities as such), remise, release and
forever discharge each of ATI and Teledyne Technologies, the respective members
of the ATI Group and the Teledyne Technologies Group, their respective
Affiliates (other than any member of the Water Pik Group), successors and
assigns, and all Persons who at any time prior to the Effective Time have
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been stockholders, directors, officers, agents or employees of any member of ATI
or the Teledyne Technologies Group (in each case, in their respective capacities
as such), and their respective heirs, executors, administrators, successors and
assigns, from any and all Liabilities whatsoever, whether at law or in equity
(including any right of contribution), whether arising under any contract or
agreement, by operation of law or otherwise, existing or arising from any acts
or events occurring or failing to occur or alleged to have occurred or to have
failed to occur or any conditions existing or alleged to have existed on or
before the Effective Time, including in connection with the transactions and all
other activities undertaken to implement the Separation or the Distribution.
(b) Except as provided in Section 5.01(c), effective as of the
Effective Time, ATI does hereby, for itself and each other member of the ATI
Group and its Affiliates (other than any member of the Water Pik Group),
successors and assigns, and all Persons who at any time prior to the Effective
Time have been stockholders, directors, officers, agents or employees of any
member of the ATI Group (in each case, in their respective capacities as such),
remise, release and forever discharge Water Pik, the respective members of the
Water Pik Group, their respective Affiliates (other than any member of the ATI
Group), successors and assigns, and all Persons who at any time prior to the
Effective Time have been stockholders, directors, officers, agents or employees
of any member of the Water Pik Group (in each case, in their respective
capacities as such), and their respective heirs, executors, administrators,
successors and assigns, from any and all Liabilities whatsoever, whether at law
or in equity (including any right of contribution), whether arising under any
contract or agreement, by operation of law or otherwise, existing or arising
from any acts or events occurring or failing to occur or alleged to have
occurred or to have failed to occur or any conditions existing or alleged to
have existed on or before the Effective Time, including in connection with the
transactions and all other activities undertaken to implement the Separation or
the Distribution.
(c) Nothing contained in Section 5.01(a) or (b) shall impair any right
of any Person to enforce this Agreement, any Ancillary Agreement or any
agreements, arrangements, commitments or understandings that are specified in
Section 2.04(b) or the applicable Schedules thereto not to terminate as of the
Effective Time, in each case in accordance with its terms. Nothing contained in
Section 5.01(a) or (b) shall release any Person from:
(i) any Liability provided in or resulting from any agreement
among any members of the ATI Group or the Water Pik Group that is
specified in Section 2.04(b) or the applicable Schedules thereto as not
to terminate as of the Effective Time, or any other Liability specified
in such Section 2.04(b) as not to terminate as of the Effective Time;
(ii) any Liability, contingent or otherwise, assumed,
transferred, assigned or allocated to the Group of which such Person is
a member in accordance with, or any other Liability of any member of
any Group under, this Agreement or any Ancillary Agreement;
(iii) any Liability for the sale, lease, construction or
receipt of goods, property or services purchased, obtained or used in
the ordinary course of business by a member of one Group from a member
of any other Group prior to the Effective Time;
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(iv) any Liability for unpaid amounts for products or services
or refunds owing on products or services due on a value-received basis
for work done by a member of one Group at the request or on behalf of a
member of another Group;
(v) any Liability that the parties may have with respect to
indemnification or contribution pursuant to this Agreement for claims
brought against the parties by third Persons, which Liability shall be
governed by the provisions of this Article V and, if applicable, the
appropriate provisions of the Ancillary Agreements; or
(vi) any Liability the release of which would result in the
release of any Person other than a Person released pursuant to this
Section 5.01; provided that the parties agree not to bring suit or
permit any of their Subsidiaries to bring suit against any Person with
respect to any Liability to the extent that such Person would be
released with respect to such Liability by this Section 5.01 but for
the provisions of this clause (vi).
(d) Water Pik shall not make, and shall not permit any member of the
Water Pik Group to make, any claim or demand, or commence any Action asserting
any claim or demand, including any claim of contribution or indemnification,
against ATI, Teledyne Technologies or any member of the ATI Group or Teledyne
Technologies Group, or any other Person released pursuant to Section 5.01(a),
with respect to any Liabilities released pursuant to Section 5.01(a). Without
limiting the generality of the foregoing, Water Pik shall not make, and shall
not permit any other member of the Water Pik Group to make, any claim or demand,
or commence any Action asserting any claim or demand, including any claim of
contribution or indemnification, against ATI, Teledyne Technologies or any
member of the ATI Group or the Teledyne Technologies Group, or any other Person
released pursuant to Section 5.01(a), with respect to whether any Asset should
or should not have been classified as a Water Pik Asset or whether any Liability
should or should not have been classified as a Water Pik Liability or with
respect to the Water Pik Balance Sheet, including in respect of the accuracy or
presentation thereof, or the adequacy of accruals, reserves and other amounts
reflected thereon. ATI shall not, and shall not permit any member of the ATI
Group, to make any claim or demand, or commence any Action asserting any claim
or demand, including any claim of contribution or any indemnification, against
Water Pik or any member of the Water Pik Group, or any other Person released
pursuant to Section 5.01(b), with respect to any Liabilities released pursuant
to Section 5.01(b).
(e) It is the intent of each of ATI and Water Pik by virtue of the
provisions of this Section 5.01 to provide for a full and complete release and
discharge of all Liabilities existing or arising from all acts and events
occurring or failing to occur or alleged to have occurred or to have failed to
occur and all conditions existing or alleged to have existed on or before the
Effective Time, between or among Water Pik or any member of the Water Pik Group,
on the one hand, and ATI, Water Pik or any member of the ATI Group or the
Teledyne Technologies Group, on the other hand (including any contractual
agreements or arrangements existing or alleged to exist between or among any
such members on or before the Effective Time), except as expressly set forth in
Section 5.01(c) or otherwise in this Agreement. At any time, at the request of
any other party, each party shall cause each member of its respective Group to
execute and deliver releases reflecting the provisions hereof.
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5.02. INDEMNIFICATION BY WATER PIK. Except as provided in Section 5.04,
Water Pik shall indemnify, defend and hold harmless ATI, each member of the ATI
Group and each of their respective directors, officers, employees, agents and
representatives, and each of the heirs, executors, successors and assigns of any
of the foregoing (collectively, the "ATI Indemnitees"), and Teledyne
Technologies, each member of the Teledyne Technologies Group and each of their
respective directors, officers and employees, and each of the heirs, executors,
successors and assigns of any of the foregoing (collectively, the "Teledyne
Technologies Indemnitees"), from and against any and all Liabilities of the ATI
Indemnitees and the Teledyne Technologies Indemnitees, respectively, relating
to, arising out of or resulting from any of the following items (without
duplication):
(a) the failure of Water Pik or any other member of the Water Pik Group
or any other Person to pay, perform or otherwise promptly discharge any Water
Pik Liabilities or Water Pik Contract in accordance with their respective terms,
whether prior to or after the Effective Time or the date hereof;
(b) the Water Pik Business, any Water Pik Liability or any Water Pik
Contract;
(c) any breach by Water Pik or any member of the Water Pik Group of
this Agreement or any of the Ancillary Agreements;
(d) the operation of the Water Pik Business, as conducted at any time
prior to, on or after the Distribution Date (including any Liability relating
to, arising out of or resulting from any act or failure to act by any director,
officer, employee, agent or representative (whether or not such act or failure
to act is or was within such Person's authority));
(e) any infringement of any intellectual property right of any third
party, including, but not limited to, patent rights, trademark and service mark
rights (registered and common law), trade dress rights, copyrights,
misappropriation of trade secret, based upon or resulting from the operation of
the Water Pik Business and regardless of whether said alleged infringement
occurred prior to, on or after the Distribution Date;
(f) Liabilities assumed by any member of the Water Pik Group under any
Ancillary Agreement;
(g) any guarantee, indemnity, representation, warranty or other
Liability of or made by any member of the ATI Group in respect of any Liability
or alleged Liability of any member of the Water Pik Group; and
(h) any untrue statement or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, with respect
to all information contained in the Form 10 Registration Statement or the
Information Statement.
5.03. INDEMNIFICATION BY ATI. (a) ATI shall indemnify, defend and hold
harmless Water Pik, each member of the Water Pik Group and each of their
respective directors, officers, employees, agents and representatives, and each
of the heirs, executors, successors and assigns of any of the
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foregoing (collectively, the "Water Pik Indemnitees"), from and against any and
all Liabilities of the Water Pik Indemnitees relating to, arising out of or
resulting from any of the following items (without duplication):
(i) the failure of ATI or any other member of the ATI Group to
pay, perform or otherwise promptly discharge any ATI Liabilities; and
(ii) any breach by ATI of this Agreement or any of the
Ancillary Agreements.
5.04. INDEMNIFICATION OBLIGATIONS NET OF INSURANCE PROCEEDS AND OTHER
AMOUNTS. (a) The parties intend that any Liability subject to indemnification or
reimbursement pursuant to this Article V will be net of Insurance Proceeds that
actually reduce the amount of the Liability. Accordingly, the amount which any
party (an "Indemnifying Party") is required to pay to any Person entitled to
indemnification hereunder (an "Indemnitee") will be reduced by any Insurance
Proceeds theretofore actually recovered by or on behalf of the Indemnitee in
reduction of the related Liability. If an Indemnitee receives a payment (an
"Indemnity Payment") required by this Agreement from an Indemnifying Party in
respect of any Liability and subsequently receives Insurance Proceeds, then the
Indemnitee will pay to the Indemnifying Party an amount equal to the excess of
the Indemnity Payment received over the amount of the Indemnity Payment that
would have been due if the Insurance Proceeds had been received, realized or
recovered before the Indemnity Payment was made.
(b) An insurer who would otherwise be obligated to pay any claim shall
not be relieved of the responsibility with respect thereto or, solely by virtue
of the indemnification provisions hereof, have any subrogation rights with
respect thereto, it being expressly understood and agreed that no insurer or any
other third party shall be entitled to a "windfall" (i.e., a benefit they would
not be entitled to receive in the absence of the indemnification provisions) by
virtue of the indemnification provisions hereof. Nothing contained in this
Agreement or any Ancillary Agreement shall obligate any member of any Group to
seek to collect or recover any Insurance Proceeds.
5.05. PROCEDURES FOR INDEMNIFICATION OF THIRD PARTY CLAIMS. (a) If an
Indemnitee shall receive notice or otherwise learn of the assertion by a Person
(including any Governmental Authority) who is not a member of the ATI Group or
the Water Pik Group of any claim or of the commencement by any such Person of
any Action (collectively, a "Third Party Claim") with respect to which an
Indemnifying Party may be obligated to provide indemnification to such
Indemnitee pursuant to Section 5.02 or 5.03, or any other Section of this
Agreement or any Ancillary Agreement, such Indemnitee shall give such
Indemnifying Party and, if ATI is not the Indemnifying Party, ATI written notice
thereof as soon as practicable but in any event not less than 20 days after
becoming aware of such Third Party Claim. Any such notice shall describe the
Third Party Claim in reasonable detail. Notwithstanding the foregoing, the
failure of any Indemnitee or other Person to give notice as provided in this
Section 5.05(a) shall not relieve the related Indemnifying Party of its
obligations under this Article V, except to the extent that such Indemnifying
Party is actually prejudiced by such failure to give notice.
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(b) An Indemnifying Party may elect to defend (and, unless the
Indemnifying Party has specified any reservations or exceptions, to seek to
settle or compromise), at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel, any Third Party Claim. Within 30 days after
the receipt of notice from an Indemnitee in accordance with Section 5.05(a) (or
sooner, if the nature of such Third Party Claim so requires), the Indemnifying
Party shall notify the Indemnitee of its election whether the Indemnifying Party
will assume responsibility for defending such Third Party Claim, which election
shall specify any reservations or exceptions. After notice from an Indemnifying
Party to an Indemnitee of its election to assume the defense of a Third Party
Claim, such Indemnitee shall have the right to employ separate counsel and to
participate in (but not control) the defense, compromise, or settlement thereof,
but the fees and expenses of such counsel shall be the expense of such
Indemnitee except as set forth in the next sentence. In the event that the
Indemnifying Party has elected to assume the defense of the Third Party Claim
but has specified, and continues to assert, any reservations or exceptions in
such notice, then, in any such case, the reasonable fees and expenses of one
separate counsel for all Indemnitees shall be borne by the Indemnifying Party.
(c) If an Indemnifying Party elects not to assume responsibility for
defending a Third Party Claim, or fails to notify an Indemnitee of its election
as provided in Section 5.05(b), such Indemnitee may defend such Third Party
Claim at the cost and expense (including allocated costs of in-house counsel and
other personnel) of the Indemnifying Party.
(d) Unless the Indemnifying Party has failed to assume the defense of
the Third Party Claim in accordance with the terms of this Agreement, no
Indemnitee may settle or compromise any Third Party Claim without the consent of
the Indemnifying Party.
(e) No Indemnifying Party shall consent to entry of any judgment or
enter into any settlement of the Third Party Claim without the consent of the
Indemnitee if the effect thereof is to permit any injunction, declaratory
judgment, other order or other nonmonetary relief to be entered, directly or
indirectly, against any Indemnitee.
5.06. ADDITIONAL MATTERS. (a) Any claim on account of a Liability which
does not result from a Third Party Claim shall be asserted by written notice
given by the Indemnitee to the related Indemnifying Party. Such Indemnifying
Party shall have a period of 30 days after the receipt of such notice within
which to respond thereto. If such Indemnifying Party does not respond within
such 30-day period, such Indemnifying Party shall be deemed to have refused to
accept responsibility to make payment. If such Indemnifying Party does not
respond within such 30-day period or rejects such claim in whole or in part,
such Indemnitee shall be free to pursue such remedies as may be available to
such party as contemplated by this Agreement and the Ancillary Agreements.
(b) In the event of payment by or on behalf of any Indemnifying Party
to any Indemnitee in connection with any Third Party Claim, such Indemnifying
Party shall be subrogated to and shall stand in the place of such Indemnitee as
to any events or circumstances in respect of which such Indemnitee may have any
right, defense or claim relating to such Third Party Claim against any claimant
or plaintiff asserting such Third Party Claim or against any other person. Such
Indemnitee shall cooperate with such Indemnifying Party in a reasonable manner,
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and at the cost and expense (including allocated costs of in-house counsel and
other personnel) of such Indemnifying Party, in prosecuting any subrogated
right, defense or claim.
(c) In the event of an Action in which the Indemnifying Party is not a
named defendant, if either the Indemnified Party or Indemnifying Party shall so
request, the parties shall endeavor to substitute the Indemnifying Party for the
named defendant. If such substitution or addition cannot be achieved for any
reason or is not requested, the named defendant shall allow the Indemnifying
Party to manage the Action as set forth in this Section and the Indemnifying
Party shall fully indemnify the named defendant against all costs of defending
the Action (including court costs, sanctions imposed by a court, attorneys'
fees, experts' fees and all other external expenses, and the allocated costs of
in-house counsel and other personnel), the costs of any judgment or settlement,
and the cost of any interest or penalties relating to any judgment or
settlement.
5.07. REMEDIES CUMULATIVE. The remedies provided in this Article V
shall be cumulative and shall not preclude assertion by any Indemnitee of any
other rights or the seeking of any and all other remedies against any
Indemnifying Party.
5.08. SURVIVAL OF INDEMNITIES. The rights and obligations of each of
the Indemnitees under this Article V shall survive the sale or other transfer by
any party of any Assets or businesses or the assignment by it of any
Liabilities.
ARTICLE VI
CERTAIN OTHER MATTERS
6.01. INSURANCE MATTERS. (a) In no event shall ATI, any other member of
the ATI Group or any ATI Indemnitee have any liability or obligation whatsoever
to any member of the Water Pik Group in the event that any Insurance Policy or
other contract or policy of insurance shall be terminated or otherwise cease to
be in effect for any reason, shall be unavailable or inadequate to cover any
Liability of any member of the Water Pik Group for any reason whatsoever or
shall not be renewed or extended beyond the current expiration date.
(b) (i) Except as otherwise provided in any Ancillary Agreement, the
parties intend by this Agreement that Water Pik and each other member of the
Water Pik Group be successors-in-interest to all rights that any member of the
Water Pik Group may have as of the Distribution Date as a subsidiary, affiliate,
division or department of ATI prior to the Distribution Date under any policy of
insurance issued to ATI and intended to insure the Water Pik Group by any
insurance carrier unaffiliated with ATI or under any agreements related to such
policies executed and delivered prior to the Distribution Date, including any
rights such member of the Water Pik Group may have, as an insured or additional
named insured, subsidiary, affiliate, division or department, to avail itself of
any such policy of insurance or any such agreements related to such policies as
in effect prior to the Distribution Date. At the request of Water Pik, ATI shall
take all reasonable steps, including the execution and delivery of any
instruments, to effect the foregoing; provided however that ATI shall not be
required to pay any amounts, waive any rights or incur any Liabilities in
connection therewith.
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(ii) Except as otherwise contemplated by any Ancillary Agreement, after
the Distribution Date, neither of ATI nor Water Pik or any member of their
respective Groups shall, without the consent of the other, provide any such
insurance carrier with a release, or amend, modify or waive any rights under any
such policy or agreement, if such release, amendment, modification or waiver
would adversely affect any rights or potential rights of any member of the other
Group thereunder; provided however that the foregoing shall not (A) preclude any
member of any Group from presenting any claim or from exhausting any policy
limit, (B) require any member of any Group to pay any premium or other amount or
to incur any Liability, or (C) require any member of any Group to renew, extend
or continue any policy in force. Each of Water Pik and ATI will, and will cause
its respective Group to, share such information as is reasonably necessary in
order to permit the other to manage and conduct its insurance matters in an
orderly fashion.
(c) This Agreement shall not be considered as an attempted assignment
of any policy of insurance or as a contract of insurance and shall not be
construed to waive any right or remedy of any member of the ATI Group in respect
of any Insurance Policy or any other contract or policy of insurance.
(d) Water Pik does hereby, for itself and each other member of the
Water Pik Group, agree that no member of the ATI Group or any ATI Indemnitee
shall have any Liability whatsoever as a result of the insurance policies and
practices of ATI and its Affiliates as in effect at any time prior to the
Distribution Date, including as a result of the level or scope of any such
insurance, the creditworthiness of any insurance carrier, the terms and
conditions of any policy, the adequacy or timeliness of any notice to any
insurance carrier with respect to any claim or potential claim or otherwise.
(e) Nothing in this Agreement shall be deemed to restrict any member of
the Water Pik Group from acquiring at its own expense any other insurance policy
in respect of any Liabilities or covering any period.
(f) With respect to policy periods prior to the Distribution Date:
(i) Water Pik shall be responsible for: (A) all Unpaid Losses
(but not to exceed the applicable Per Case Maximum) as of the
Distribution Date attributable to Water Pik Liabilities covered under
ATI Automobile Policies and ATI Workers Compensation Policies for
policies in effect prior to the Distribution Date; and (B) Pooled Loss
Costs Allocable to Water Pik.
(ii) On or before June 1, 2000 and on a quarterly basis
thereafter, ATI shall provide Water Pik with a calculation of amounts
due ATI or refunds due Water Pik for Water Pik's obligations incurred
under ATI Automobile Policies and ATI Workers Compensation Policies for
policies under subparagraph immediately (i) above. The initial
calculations shall be based on (A) the change in total Incurred Losses
between the Distribution Date and March 31, 2000 for all such policies
in effect prior to the Distribution Date multiplied by the Expense
Factors set forth in such policies and applicable to such Incurred
Losses, but only with respect to that portion of Incurred
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Losses attributable to Water Pik Liabilities not exceeding the
applicable Per Case Maximum; and (B) the change in Pooled Loss Costs
Allocable to Water Pik for the period between the Distribution Date and
March 31, 2000 for all such policies in effect prior to the
Distribution Date. Subsequent calculations shall be based on (A) the
change in total Incurred Losses for the subsequent quarterly periods
multiplied by the Expense Factors set forth in such policies and
applicable to such losses; but only with respect to that portion of
losses attributable to Water Pik Liabilities not exceeding the
applicable Per Case Maximum, and (B) the change in Pooled Loss Costs
Allocable to Water Pik for the subsequent quarterly period. It is
specifically understood and agreed that Water Pik Liabilities and
losses that are covered under ATI Policies, other than ATI Workers
Compensation Policies and ATI Automobile Policies, shall not be subject
to a pooling arrangement among ATI divisions that prior to the
Distribution Date applied with respect to certain claims subject to a
Self-Insurance Obligation.
(iii) Within 30 days after receipt by Water Pik of ATI's
calculations referred to in subparagraph (ii) immediately above, Water
Pik on the one hand and ATI on the other hand shall pay to the other
the net amount owed after taking into account the combined amounts
reflected on the calculations.
(g) At its sole option, ATI shall have the right to handle, defend,
resolve, and administer claims in its sole discretion, with respect to Water Pik
Liabilities covered, in whole or in part, by ATI Policies, including, without
limitation, the reporting of claims to the issuers of such ATI Policies
insurance carriers, as well as the management, defense and settlement of claims.
Water Pik agrees to cooperate, at its own expense, with ATI in the reporting,
handling, defense, resolution and administration of such claims. Alternatively,
ATI, at its sole option shall have the right to require, at any time and from
time to time, that Water Pik and any member of the Water Pik Group, at their
sole expense, defend, resolve and administer any one or more or all claims with
respect to Water Pik Liabilities covered in whole, or in part, by ATI Policies,
including without limitation, the reporting of claims to the issuers of such ATI
Policies, as well as the management, defense and settlement of such claims and,
if ATI exercises such option, Water Pik and members of the Water Pik Group, at
ATI's request, shall at their expense provide ATI with any and all information
concerning, and permit ATI to monitor, the foregoing management, defense,
settlement and insurance handling of such claims. Except with the express
written consent of ATI, neither Water Pik nor any member of the Water Pik Group
shall provide any issuer of ATI Policies with a release, nor shall they amend,
modify, or waive any rights under such ATI Policies, if such release, amendment,
modification or waiver would adversely affect rights or potential rights of ATI
or any other member of the ATI Group.
(h) With respect to policies procured by or for the Water Pik Group
subsequent to January 1999 and to policy years commencing on or after the
Distribution Date, Water Pik shall be responsible for all aspects of claims
administration with respect to Water Pik Liabilities, and ATI shall have no
responsibility therefor whatsoever.
(i) With respect to any Water Pik Liabilities or Water Pik losses
covered under ATI Policies other than ATI Workers Compensation Policies and ATI
Automobile Policies,
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including, but not limited to ATI General Liability Policies and ATI Product
Liability Policies, Water Pik shall be responsible for all Unpaid Losses and all
costs and expenses that give rise to a Self-Insurance Obligation. In the event
that ATI pays any such costs and expenses, Water Pik shall reimburse ATI within
thirty days of receipt of a billing for any such costs and expenses.
6.02. CERTAIN BUSINESS MATTERS. No member of any Group shall have any
duty to refrain from (i) engaging in the same or similar activities or lines of
business as any member of any other Group, (ii) doing business with any
potential or actual supplier or customer of any member of any other Group, or
(iii) engaging in, or refraining from, any other activities whatsoever relating
to any of the potential or actual suppliers or customers of any member of any
other Group.
6.03. LATE PAYMENTS. Except as expressly provided to the contrary in
this Agreement or in any Ancillary Agreement, any amount not paid when due
pursuant to this Agreement or any Ancillary Agreement (and any amounts billed or
otherwise invoiced or demanded and properly payable that are not paid within 30
days of such bill, invoice or other demand) shall accrue interest at a rate per
annum equal to the Prime Rate plus 2%.
6.04. CERTAIN GOVERNANCE MATTERS. (a) Water Pik and ATI intend that
until the third annual meeting of stockholders of Water Pik held following the
Distribution Date, at least a majority of the members of the Board of Directors
of Water Pik will at all times consist of persons who are also members of the
Board of Directors of ATI. The initial members of the Board of Directors of
Water Pik and the respective initial Classes of the Board in which they will
serve are as follows:
Class I: William G. Ouchi
Class II: Michael P. Hoopis
Class III: Robert P. Bozzone
W. Craig McClelland
(b) Water Pik will, with respect to the first annual meeting of
stockholders of Water Pik held following the Distribution Date, nominate for
election and recommend to stockholders the election of William G. Ouchi (or, if
he is unable or unwilling to serve, such other candidate as Messrs. Bozzone and
McClelland or their survivor of them shall designate) to serve as a continuing
Class I director of Water Pik.
(c) Water Pik shall take such action from time to time as ATI requests
in order to assure that, until the third annual meeting of stockholders of Water
Pik following the Distribution Date, at least a majority of the members of the
Board of Directors of Water Pik will at all times consist of persons who are
also members of the Board of Directors of ATI. Without limiting the generality
of the foregoing, if for any reason (including death, resignation or
disqualification) there are no directors of Water Pik who are also directors of
ATI, Water Pik will immediately take all action requested by ATI to appoint to
the Board of Directors of Water Pik such members of the Board of Directors of
ATI as ATI shall designate.
ARTICLE VII
EXCHANGE OF INFORMATION; CONFIDENTIALITY
7.01. AGREEMENT FOR EXCHANGE OF INFORMATION; ARCHIVES. (a) Each of ATI
and Water Pik, on behalf of itself and its respective Group, agrees to provide,
or cause to be provided, to each other Group, at any time before or after the
Distribution Date, as soon as reasonably practicable after written request
therefor, any Information in the possession or under the control of such
respective Group which the requesting party reasonably requires (i) to comply
with reporting, disclosure, filing or other requirements imposed on the
requesting party (including under applicable securities or tax laws) by a
Governmental Authority having jurisdiction over the requesting party, (ii) for
use in any other judicial, regulatory, administrative, tax or other proceeding
or in order to satisfy audit, accounting, claims, regulatory, litigation, tax or
other similar requirements, or (iii) to comply with its obligations under this
Agreement or any Ancillary Agreement; provided, however, that in the event that
any party determines that any such provision of Information could be
commercially detrimental, violate any law or agreement, or waive any
attorney-client privilege, the parties shall take all reasonable measures to
permit the compliance with such obligations in a manner that avoids any such
harm or consequence.
(b) After the Distribution Date, each of ATI and Water Pik shall have
access during regular business hours (as in effect from time to time) to the
documents and objects of historic significance that relate to their respective
Businesses that are in the possession of any other of such parties or members of
their respective Groups. Any party seeking such access may, at its cost, obtain
copies (but not originals) of documents for bona fide business purposes and may
obtain objects for exhibition purposes for commercially reasonable periods of
time if required for bona fide business purposes, provided that such party shall
cause any such objects to be returned promptly in the same condition in which
they were delivered and shall comply with any rules, procedures or other
requirements, and shall be subject to any restrictions (including prohibitions
on removal of specified objects), that are then applicable to the possessing
party.
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(c) After the Distribution Date, (i) Water Pik shall maintain in effect
adequate systems and controls to the extent necessary to enable the members of
the ATI Group to satisfy their respective reporting, accounting, audit and other
obligations, and (ii) Water Pik shall provide, or cause to be provided, to ATI,
all financial and other data and information as ATI determines necessary or
advisable in order to prepare ATI financial statements and reports or filings
with any Governmental Authority.
7.02. OWNERSHIP OF INFORMATION. Any Information owned by one Group that
is provided to a requesting party pursuant to Section 7.01 shall be deemed to
remain the property of the providing party. Unless specifically set forth
herein, nothing contained in this Agreement shall be construed as granting or
conferring rights of license or otherwise in any such Information.
7.03. COMPENSATION FOR PROVIDING INFORMATION. The party requesting such
Information agrees to reimburse the other party for the reasonable costs, if
any, of creating, gathering and copying such Information, to the extent that
such costs are incurred for the benefit of the requesting party. Except as may
be otherwise specifically provided elsewhere in this Agreement or in any other
agreement between the parties, such costs shall be computed in accordance with
the providing party's standard methodology and procedures.
7.04. RECORD RETENTION. To facilitate the possible exchange of
Information pursuant to this Article VII and other provisions of this Agreement
after the Distribution Date, the parties agree to use their reasonable best
efforts to retain all Information in their respective possession or control on
the Distribution Date in accordance with the policies of ATI as in effect on the
Distribution Date. No party will destroy, or permit any of its Subsidiaries to
destroy, any Information which the other party may have the right to obtain
pursuant to this Agreement prior to the seventh anniversary of the date hereof
without first using its reasonable best efforts to notify the other party of the
proposed destruction and giving the other party the opportunity to take
possession of such information prior to such destruction; provided, however,
that in the case of any Information relating to Taxes or to Environmental
Liabilities, such period shall be extended to the expiration of the applicable
statute of limitations (giving effect to any extensions thereof).
7.05. OTHER AGREEMENTS PROVIDING FOR EXCHANGE OF INFORMATION. The
rights and obligations granted under this Article VII are subject to any
specific limitations, qualifications or additional provisions on the sharing,
exchange or confidential treatment of Information set forth in any Ancillary
Agreement.
7.06. PRODUCTION OF WITNESSES; RECORDS; COOPERATION. (a) After the
Distribution Date, except in the case of an adversarial Action by one party
against another party, each party hereto shall use its reasonable efforts to
make available to each other party, upon written request, the former, current
and future directors, officers, employees, other personnel and agents of the
members of its respective Group as witnesses and any books, records or other
documents within its control or which it otherwise has the ability to make
available, to the extent that any such person (giving consideration to business
demands of such directors, officers, employees, other personnel and agents) or
books, records or other documents may reasonably be required in connection with
any Action in which the requesting party may from time
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to time be involved, regardless of whether such Action is a matter with respect
to which indemnification may be sought hereunder. The requesting party shall
bear all costs and expenses (including allocated costs of in-house counsel and
other personnel) in connection therewith.
(b) If an Indemnifying Party chooses to defend or to seek to compromise
or settle any Third Party Claim, the other parties shall make available to such
Indemnifying Party, upon written request, the former, current and future
directors, officers, employees, other personnel and agents of the members of its
respective Group as witnesses and any books, records or other documents within
its control or which it otherwise has the ability to make available, to the
extent that any such person (giving consideration to business demands of such
directors, officers, employees, other personnel and agents) or books, records or
other documents may reasonably be required in connection with such defense,
settlement or compromise, or such prosecution, evaluation or pursuit, as the
case may be, and shall otherwise cooperate in such defense, settlement or
compromise, or such prosecution, evaluation or pursuit, as the case may be.
(c) Without limiting any provision of this Section, the parties shall
cooperate and consult to the extent reasonably necessary with respect to any
Action, and each of the parties agrees to cooperate, and to cause each member of
its respective Group to cooperate, with each other in the defense of any
infringement or similar claim with respect to any intellectual property and
shall not claim to acknowledge, or permit any member of its respective Group to
claim to acknowledge, the validity or infringing use of any intellectual
property of a third Person in a manner that would hamper or undermine the
defense of such infringement or similar claim.
(d) The obligation of the parties to provide witnesses pursuant to this
Section 7.06 is intended to be interpreted in a manner so as to facilitate
cooperation and shall include the obligation to provide as witnesses inventors
and other officers without regard to whether the witness or the employer of the
witness could assert a possible business conflict (subject to the qualifications
set forth in the first sentence of Section 7.06(a)).
(e) In connection with any matter contemplated by this Section 7.06,
the parties will enter into a mutually acceptable joint defense agreement so as
to maintain to the extent practicable any applicable attorney-client privilege
or work product immunity of any member of any Group.
7.07. CONFIDENTIALITY. (a) Subject to Section 7.08, each of ATI and
Water Pik, on behalf of itself and each member of its respective Group, agrees
to hold, and to cause its respective directors, officers, employees, agents,
accountants, counsel and other advisors and representatives to hold, in strict
confidence, with at least the same degree of care that applies to ATI's
confidential and proprietary information pursuant to policies in effect as of
the Distribution Date, all Information concerning each such other Group that is
either in its possession or furnished by any such other Group or its respective
directors, officers, employees, agents, accountants, counsel and other advisors
and representatives at any time pursuant to this Agreement, any Ancillary
Agreement or otherwise, and shall not use any such Information other than for
such purposes as shall be expressly permitted hereunder or thereunder, except,
in each case, to the extent that such Information has been (i) in the public
domain through no fault of such party or any member of such Group or any of
their respective directors, officers, employees,
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agents, accountants, counsel and other advisors and representatives, (ii) later
lawfully acquired from other sources by such party (or any member of such
party's Group) which sources are not themselves bound by a confidentiality
obligation), or (iii) independently generated without reference to any
proprietary or confidential Information of the other party.
(b) Each party agrees not to release or disclose, or permit to be
released or disclosed, any such Information to any other Person, except its
directors, officers, employees, agents, accountants, counsel and other advisors
and representatives who need to know such Information (who shall be advised of
their obligations hereunder with respect to such Information), except in
compliance with Section 7.08. Without limiting the foregoing, when any
Information is no longer needed for the purposes contemplated by this Agreement
or any Ancillary Agreement, each party will promptly after request of the other
party either return to the other party all Information in a tangible form
(including all copies thereof and all notes, extracts or summaries based
thereon) or certify to the other party that it has destroyed such Information
(and such copies thereof and such notes, extracts or summaries based thereon).
7.08. PROTECTIVE ARRANGEMENTS. In the event that any party or any
member of its Group either determines on the advice of its counsel that it is
required to disclose any Information pursuant to applicable law or receives any
demand under lawful process or from any Governmental Authority to disclose or
provide Information of any other party (or any member of any other party's
Group) that is subject to the confidentiality provisions hereof, such party
shall notify the other party prior to disclosing or providing such Information
and shall cooperate at the expense of the requesting party in seeking any
reasonable protective arrangements requested by such other party. Subject to the
foregoing, the Person that received such request may thereafter disclose or
provide Information to the extent required by such law (as so advised by
counsel) or by lawful process or such Governmental Authority.
ARTICLE VIII
FURTHER ASSURANCES
8.01. FURTHER ASSURANCES. (a) In addition to the actions specifically
provided for elsewhere in this Agreement, each of the parties hereto shall use
its reasonable efforts, prior to, on and after the Distribution Date, 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 and the Ancillary Agreements.
(b) Without limiting the foregoing, prior to, on and after the date
hereof, each party hereto shall cooperate with the other parties, and without
any further consideration, but at the expense of the requesting party, to
execute and deliver, or use its reasonable 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 Authority or any other Person under any
permit, license, agreement, indenture or other instrument (including any
Consents or Governmental Approvals), and to take all such other actions as such
party may reasonably be requested to take by any other party hereto
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from time to time, consistent with the terms of this Agreement and the Ancillary
Agreements, in order to effectuate the provisions and purposes of this Agreement
and the Ancillary Agreements and the transfers of the Water Pik Assets and the
assignment and assumption of the Water Pik Liabilities and the other
transactions contemplated hereby and thereby. Without limiting the foregoing,
each party will, at the reasonable request, cost and expense of any other party,
take such other actions as may be reasonably necessary to vest in such other
party good and marketable title, free and clear of any Security Interest, if and
to the extent it is practicable to do so.
(c) On or prior to the Distribution Date, ATI and Water Pik in their
respective capacities as direct and indirect stockholders of their respective
Subsidiaries, shall each ratify any actions which are reasonably necessary or
desirable to be taken by ATI or Water Pik or any other Subsidiary of ATI, as the
case may be, to effectuate the transactions contemplated by this Agreement.
(d) ATI and Water Pik, on behalf of itself and each member of its
respective Group, waive (and agree not to assert against any of the others) any
claim or demand that any of them may have against any of the others for any
Liabilities or other claims relating to or arising out of: (i) the failure of
Water Pik or any member of the Water Pik Group, on the one hand, or of ATI or
any member of the ATI Group, on the other hand, to provide any notification or
disclosure required under any state Environmental Law in connection with the
Separation or the other transactions contemplated by this Agreement, including
the transfer by any member of any Group to any member of any other Group of
ownership or operational control of any Assets not previously owned or operated
by such transferee; or (ii) any inadequate, incorrect or incomplete notification
or disclosure under any such state Environmental Law by the applicable
transferor. To the extent any Liability to any Governmental Authority or any
third Person arises out of any action or inaction described in clause (i) or
(ii) above, the transferee of the applicable Asset hereby assumes and agrees to
pay any such Liability.
ARTICLE IX
TERMINATION
9.01. TERMINATION. This Agreement may be terminated by ATI at any time
prior to the Distribution Date.
9.02. EFFECT OF TERMINATION. In the event of any termination of this
Agreement pursuant to Section 9.01, no party to this Agreement (or any of its
directors or officers) shall have any Liability or further obligation to any
other party.
ARTICLE X
MISCELLANEOUS
10.01. COUNTERPARTS; ENTIRE AGREEMENT; CORPORATE POWER. (a) This
Agreement and each Ancillary Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party.
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(b) This Agreement, and the Ancillary Agreements and the Exhibits,
Schedules and Appendices hereto and thereto contain the entire agreement between
the parties with respect to the subject matter hereof, supersede all previous
agreements, negotiations, discussions, writings, understandings, commitments and
conversations with respect to such subject matter and there are no agreements or
understandings between the parties other than those set forth or referred to
herein or therein.
(c) ATI represents on behalf of itself and each other member of the ATI
Group and Water Pik represents on behalf of itself and each other member of the
Water Pik Group, as follows:
(i) each such Person has the requisite corporate or other
power and authority and has taken all corporate or other action
necessary in order to execute, deliver and perform each of this
Agreement and each other Ancillary Agreements to which it is a party
and to consummate the transactions contemplated hereby and thereby; and
(ii) this Agreement and each Ancillary Agreement to which it
is a party has been duly executed and delivered by it and constitutes a
valid and binding agreement of it enforceable in accordance with the
terms thereof.
(d) Each party hereto acknowledges that it and each other party hereto
may be executing certain of the Ancillary Agreements by facsimile, stamp or
mechanical signature. Each party hereto expressly adopts and confirms each such
facsimile, stamp or mechanical signature made in its respective name as if it
were a manual signature, agrees that it will not assert that any such signature
is not adequate to bind such party to the same extent as if it were signed
manually and agrees that at the reasonable request of any other party hereto at
any time it will as promptly as reasonably practicable cause each such Ancillary
Agreement to be manually executed (any such execution to be as of the date of
the initial date thereof).
10.02. GOVERNING LAW; CONSENT TO JURISDICTION. (a) This Agreement and,
unless expressly provided therein, each Ancillary Agreement, shall be governed
by and construed and interpreted in accordance with the laws of the Commonwealth
of Pennsylvania as to all matters, including matters of validity, construction,
effect, enforceability, performance and remedies, irrespective of the choice of
laws principles of the Commonwealth of Pennsylvania.
(b) Each of the parties hereto irrevocably submits to the exclusive
jurisdiction of (i) the Court of Common Pleas of Allegheny County, Pennsylvania
and (ii) the United States District Court for the Western District of
Pennsylvania, for the purposes of any suit, action or other proceeding arising
out of this Agreement or any Ancillary Agreement or any transaction contemplated
hereby or thereby (and agrees not to commence any action, suit or proceeding
relating thereto except in such courts). Each of the parties hereto further
agrees that service of any process, summons, notice or document hand delivered
or sent by U.S. registered mail to such party's respective address set forth in
Section 10.05 will be effective service of process for any action, suit or
proceeding in Pennsylvania with respect to any matters to which it has submitted
to jurisdiction as set forth in the immediately preceding sentence. Each of the
parties hereto
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irrevocably and unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement or any Ancillary
Agreement or the transactions contemplated hereby or thereby in (i) the Court of
Common Pleas of Allegheny County, Pennsylvania or (ii) the United States
District Court for the Western District of Pennsylvania, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum.
10.03. ASSIGNABILITY. Except as set forth in any Ancillary Agreement,
this Agreement and each Ancillary Agreement shall be binding upon and inure to
the benefit of the parties hereto and thereto, respectively, and their
respective successors and assigns (including any direct or indirect assignee of
any of the Water Pik Assets); provided, however, that no party hereto or thereto
may assign its respective rights or delegate its respective obligations under
this Agreement or any Ancillary Agreement without the express prior written
consent of the other parties hereto or thereto.
10.04. THIRD PARTY BENEFICIARIES. Except for the indemnification rights
under this Agreement of any ATI Indemnitee, Water Pik Indemnitee or Teledyne
Technologies Indemnitee in their respective capacities as such, (a) the
provisions of this Agreement and each Ancillary Agreement are solely for the
benefit of the parties and are not intended to confer upon any Person except the
parties any rights or remedies hereunder, (b) there are no third party
beneficiaries of this Agreement or any Ancillary Agreement, and (c) neither this
Agreement nor any Ancillary Agreement shall provide any third person with any
remedy, claim, liability, reimbursement, claim of action or other right in
excess of those existing without reference to this Agreement or any Ancillary
Agreement. No party hereto shall have any right, remedy or claim with respect to
any provision of this Agreement or any Ancillary Agreement to the extent such
provision relates solely to the other two parties hereto or the members of such
other two parties' respective Groups. No party shall be required to deliver any
notice under this Agreement or under any Ancillary Agreement to any other party
with respect to any matter in which such other party has no right, remedy or
claim.
10.05. NOTICES. All notices or other communications under this
Agreement or any Ancillary Agreement shall be in writing and shall be deemed to
be duly given when (a) delivered in person or (b) deposited in the United States
mail or private express mail, postage prepaid, addressed as follows:
If to ATI, Holdings
or TII, to: Allegheny Teledyne Incorporated
1000 Six PPG Place
Pittsburgh, Pennsylvania 15222-5479
Attn: Senior Vice President, General
Counsel & Secretary
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If to Water Pik
to : Water Pik Technologies, Inc.
Attn:
Any party may, by notice to the other party, change the address to which such
notices are to be given.
10.06. SEVERABILITY. If any provision of this Agreement or any
Ancillary Agreement or the application thereof to any Person or circumstance is
determined by a court of competent jurisdiction to be invalid, void or
unenforceable, the remaining provisions hereof or thereof, or the application of
such provision to Persons or circumstances or in jurisdictions other than those
as to which it has been held invalid or unenforceable, shall remain in full
force and effect and shall in no way be affected, impaired or invalidated
thereby, so long as the economic or legal substance of the transactions
contemplated hereby or thereby, as the case may be, is not affected in any
manner adverse to any party. Upon such determination, the parties shall
negotiate in good faith in an effort to agree upon such a suitable and equitable
provision to effect the original intent of the parties.
10.07. FORCE MAJEURE. No party shall be deemed in default of this
Agreement or any Ancillary Agreement to the extent that any delay or failure in
the performance of its obligations under this Agreement or any Ancillary
Agreement results from any cause beyond its reasonable control and without its
fault or negligence, such as acts of God, acts of civil or military authority,
embargoes, epidemics, war, riots, insurrections, fires, explosions, earthquakes,
floods, unusually severe weather conditions, labor problems or unavailability of
parts, or, in the case of computer systems, Year 2000 problems or any failure in
electrical or air conditioning equipment. In the event of any such excused
delay, the time for performance shall be extended for a period equal to the time
lost by reason of the delay.
10.08. HEADINGS. The article, section and paragraph headings contained
in this Agreement and in the Ancillary Agreements are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement or any Ancillary Agreement.
10.09. SURVIVAL OF COVENANTS. Except as expressly set forth in any
Ancillary Agreement, the covenants, representations and warranties contained in
this Agreement and each Ancillary Agreement, and liability for the breach of any
obligations contained herein, shall survive each of the Separation and the
Distribution and shall remain in full force and effect.
10.10. WAIVERS OF DEFAULT. Waiver by any party of any default by the
other party of any provision of this Agreement or any Ancillary Agreement shall
not be deemed a waiver by the waiving party of any subsequent or other default,
nor shall it prejudice the rights of the other party.
10.11. SPECIFIC PERFORMANCE. In the event of any actual or threatened
default in, or breach of, any of the terms, conditions and provisions of this
Agreement or any
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Ancillary Agreement, the party or parties who are or are to be thereby aggrieved
shall have the right to specific performance and injunctive or other equitable
relief of its rights under this Agreement or such Ancillary Agreement, in
addition to any and all other rights and remedies at law or in equity, and all
such rights and remedies shall be cumulative. The parties agree that the
remedies at law for any breach or threatened breach, including monetary damages,
are inadequate compensation for any loss and that any defense in any action for
specific performance that a remedy at law would be adequate is waived. Any
requirements for the securing or posting of any bond with such remedy are
waived.
10.12. AMENDMENTS. No provisions of this Agreement or any Ancillary
Agreement shall be deemed waived, amended, supplemented or modified by any
party, unless such waiver, amendment, supplement or modification is in writing
and signed by the authorized representative of the party against whom it is
sought to enforce such waiver, amendment, supplement or modification. Without
limiting the foregoing, the parties agree that any waiver, amendment, supplement
or modification of this Agreement or any Ancillary Agreement that solely relates
to and affects only two of the three parties hereto shall not require the
consent of the third party hereto.
10.13. INTERPRETATION. Words in the singular shall be held to include
the plural and vice versa and words of one gender shall be held to include the
other genders as the context requires. The terms "hereof," "herein," and
"herewith" and words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement (or the applicable Ancillary Agreement) as
a whole (including all of the Schedules, Exhibits and Appendices hereto and
thereto) and not to any particular provision of this Agreement (or such
Ancillary Agreement). Article, Section, Exhibit, Schedule and Appendix
references are to the Articles, Sections, Exhibits, Schedules and Appendices to
this Agreement (or the applicable Ancillary Agreement) unless otherwise
specified. The word "including" and words of similar import when used in this
Agreement (or the applicable Ancillary Agreement) shall mean "including, without
limitation," unless the context otherwise requires or unless otherwise
specified. The word "or" shall not be exclusive. Unless expressly stated to the
contrary in this Agreement or in any Ancillary Agreement, all references to "the
date hereof," "the date of this Agreement," "hereby" and "hereupon" and words of
similar import shall all be references to __________, 1999, regardless of any
amendment or restatement hereof.
10.14. DISPUTES. (a) Resolution of any and all disputes arising from or
in connection with this Agreement other than those arising from or in connection
with Article IV of this Agreement, whether based on contract, tort, statute or
otherwise, including, but not limited to, disputes in connection with claims by
third parties (collectively, "Disputes"), shall be subject to the provisions of
this Section 10.14; provided, however, that nothing contained herein shall
preclude any party from seeking or obtaining (i) injunctive relief or (ii)
equitable or other judicial relief to enforce the provisions hereof or to
preserve the status quo pending resolution of Disputes hereunder.
(b) Any party may give the other parties written notice of any Dispute
not resolved in the normal course of business. The parties shall attempt in good
faith to resolve any Dispute promptly by negotiation between executives of the
parties who have authority to settle
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the controversy. Within 15 days after delivery of the notice, the foregoing
executives of both parties shall meet at a mutually acceptable time and place,
and thereafter as often as they reasonably deem necessary for a period not to
exceed five days, to attempt to resolve the Dispute. All reasonable requests for
information made by one party to the other will be honored. If the parties do
not resolve the Dispute within such 20 day period (the "Initial Mediation
Period"), the parties shall attempt in good faith to resolve the Dispute by
negotiation between or among the Designated Officers. The Designated Officers
shall meet at a mutually acceptable time and place (but in no event no later
than 15 days following the expiration of the Initial Mediation Period) and
thereafter as often as they reasonably deem necessary for a period not to exceed
15 days, to attempt to resolve the Dispute.
(c) If the Dispute has not been resolved by negotiation within 50 days
of the first party's notice, or if the parties failed to meet within 15 days of
the first party's notice, or if the Designated Officers failed to meet within 35
days of the first party's notice, any party may commence any litigation or other
procedure allowed by law.
10.15. EXCLUSIVITY OF TAX SHARING AGREEMENT. Notwithstanding anything
in this Agreement to the contrary, and subject to the provisions of Article IV
hereof, the Tax Sharing Agreement will be the exclusive agreement among the
parties with respect to all matters pertaining to Taxes, including, without
limitation, indemnification with respect to matters pertaining to Taxes and
indemnification with respect to the qualification of the Distribution as a
tax-free distribution under Section 355 and related provisions of the Code.
IN WITNESS WHEREOF, the parties have caused this Separation and
Distribution Agreement to be executed by their duly authorized representatives.
ALLEGHENY TELEDYNE INCORPORATED
By:
-------------------------------
Name:
Title:
TII HOLDINGS, LLC
By:
-------------------------------
Name:
Title:
TELEDYNE INDUSTRIES, INC.
By:
-------------------------------
Name:
Title:
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WATER PIK TECHNOLOGIES, INC.
By:
-------------------------------
Name:
Title:
41
<PAGE> 1
Exhibit 3.1
FORM OF
RESTATED CERTIFICATE OF INCORPORATION
OF
WATER PIK TECHNOLOGIES, INC.
ONE: The name of the corporation is Water Pik Technologies, Inc.
(hereinafter referred to as the "Corporation").
TWO: The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle,
and the name of its registered agent at such address is The Corporation Trust
Company.
THREE: The purpose of the Corporation is to engage in any lawful act or
activity for which a Corporation may be organized under the Delaware General
Corporation Law.
FOUR: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is ____________ Million (__________),
consisting of _________ Million (_________) shares of Common Stock, par value
one cent ($.01) per share (the "Common Stock"), and _______ Million (__________)
shares of Preferred Stock, par value one cent ($.01) per share (the "Preferred
Stock"). The term "Voting Stock" shall hereafter refer to all shares of capital
stock entitled to vote generally in the election of directors.
A. Common Stock
1. Except where otherwise provided by law, by this Restated Certificate
of Incorporation, or by resolution of the Board of Directors pursuant to this
Article FOUR, the holders of the Common Stock issued and outstanding shall have
and possess the exclusive right to notice of stockholders' meetings and the
exclusive voting rights and powers of the capital stock.
2. Subject to any preferential rights of the Preferred Stock, dividends
may be paid on the Common Stock, as and when declared by the Board of Directors,
out of any funds of the Corporation legally available for the payment of such
dividends.
B. Preferred Stock
The Board of Directors is authorized, subject to any limitations
prescribed by law, 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 (such certificate being 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 (including but
not limited to voting powers, if any), preferences and rights of the shares of
each such series and any qualifications, limitations or restrictions thereof.
The number of authorized shares of Preferred Stock may be increased or decreased
(but not below the number of shares thereof then outstanding) by the affirmative
vote of the holders of a majority of the Common Stock, without a vote of the
holders of the Preferred Stock, or of any series thereof, unless a vote of any
such holders is required pursuant to the terms of any Preferred Stock
Designation.
FIVE: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
<PAGE> 2
A. The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors. In
addition to the powers and authority expressly conferred upon them by
statute or by this Restated Certificate of Incorporation or the Bylaws
of the Corporation, the directors are hereby empowered to exercise all
such powers and do all such acts and things as may be exercised or done
by the Corporation.
B. The Board of Directors may adopt, amend or repeal the
Bylaws of the Corporation. The stockholders of the Corporation may not
adopt, amend or repeal the Bylaws of the Corporation other than by the
affirmative vote of 75% of the combined voting power of all outstanding
voting securities of the Corporation entitled to vote generally in the
election of directors of the Board of Directors of the Corporation
("Voting Power"), voting together as a single class.
C. The directors of the Corporation need not be elected by
written ballot unless the Bylaws so provide.
SIX: The Corporation reserves the right to amend and repeal any
provision contained in this Restated Certificate of Incorporation in the manner
from time to time prescribed by the laws of the State of Delaware.
All rights herein conferred are granted subject to this reservation.
SEVEN: A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which such director derived any
improper personal benefit. No amendment to or repeal of this Article SEVEN shall
apply to or have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment or repeal. If the Delaware General
Corporation Law is amended to authorize corporate action further eliminating the
personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the Delaware General Corporation Law, as amended.
EIGHT: A. Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is otherwise 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
is or was a director or an officer of the Corporation or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan
(hereinafter an "indemnitee"), whether the basis of such proceeding is alleged
action in an official capacity as a director, officer, employee or agent or in
any other capacity while serving as a director, officer, employee or agent,
shall be indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than such 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 in
settlement) reasonably incurred or suffered by such indemnitee in connection
therewith; provided, however, that, except as provided in Section C of this
Article EIGHT with respect to proceedings to enforce rights to indemnification,
the Corporation shall indemnify any such indemnitee in connection with a
proceeding (or part thereof) initiated by such indemnitee only if such
proceeding (or part thereof) was authorized by
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the Board of Directors of the Corporation.
B. Right to Advancement of Expenses. The right to indemnification
conferred in Section A of this Article EIGHT shall include the right to be paid
by the Corporation the expenses (including attorneys' fees) incurred in
defending any such proceeding in advance of its final disposition (hereinafter
an "advancement of expenses"); provided, however, that, if the Delaware General
Corporation Law requires, an advancement of expenses incurred by an indemnitee
in his or her capacity as a director or officer of the Corporation (and not in
any other capacity in which service was or is rendered by such indemnitee,
including, without limitation, service to an employee benefit plan) shall be
made only upon delivery to the Corporation of an undertaking (hereinafter an
"undertaking"), by or on behalf of such indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right to appeal (hereinafter a "final adjudication")
that such indemnitee is not entitled to be indemnified for such expenses under
this Section B or otherwise. The rights to indemnification and to the
advancement of expenses conferred in Sections A and B of this Article EIGHT
shall be contract rights and such rights shall continue as to an indemnitee who
has ceased to be a director, officer, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators.
C. Right of Indemnitee to Bring Suit. If a claim under Section A or B
of this Article EIGHT is not paid in full by the Corporation within sixty (60)
days after a written claim has been received by the Corporation, except in the
case of a claim for an advancement of expenses, in which case the applicable
period shall be twenty (20) days, the indemnitee may at any time thereafter
bring suit against the Corporation to recover the unpaid amount of the claim. If
successful in whole or in part in any such suit, or in a suit brought by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the indemnitee shall be entitled to be paid also the expense of
prosecuting or defending such suit. In any suit brought by the indemnitee to
enforce a right to indemnification hereunder (but not in a suit brought by the
indemnitee to enforce a right to an advancement of expenses) it shall be a
defense that, and in any suit brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the Corporation
shall be entitled to recover such expenses upon a final adjudication that the
indemnitee has not met any applicable standard for indemnification set forth in
the Delaware General Corporation Law. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the Delaware General Corporation Law, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or brought by the Corporation to recover an advancement of expenses pursuant to
the terms of an undertaking, the burden of proving that the indemnitee is not
entitled to be indemnified, or to such advancement of expenses, under this
Article EIGHT or otherwise shall be on the Corporation.
D. Non-Exclusivity of Rights. The rights to indemnification and to the
advancement of expenses conferred in this Article EIGHT shall not be exclusive
of any other right which any person may have or hereafter acquire under any
statute, the Corporation's Restated Certificate of Incorporation, Bylaws,
agreement, vote of stockholders or disinterested directors or otherwise.
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<PAGE> 4
E. Insurance. 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 Delaware General Corporation Law.
F. Indemnification of Employees and Agents of the Corporation. The
Corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification and to the advancement of expenses to
any employee or agent of the Corporation, including any subsidiary of the
Corporation, to the fullest extent of the provisions of this Article with
respect to the indemnification and advancement of expenses of directors and
officers of the Corporation.
G. Amendment. Any repeal or modification of this Article EIGHT shall
not change the rights of any person to indemnification with respect to any
action or omission occurring prior to such repeal or modification.
NINE: The following provisions are inserted for the definition,
limitation and regulation of actions of the stockholders of the Corporation:
A. Action to be Taken at Stockholder Meetings Only. 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 such stockholders and may not be
effected by the written consent of such stockholders.
B. Calling of Special Meetings. Special meetings of the stockholders,
other than those required by statute, may be called only by the Board of
Directors pursuant to a resolution approved by a majority of the directors then
in office, the Chairman of the Board or the Chief Executive Officer. The Board
of Directors may postpone, reschedule or cancel any previously scheduled special
meeting.
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. 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 a stockholder of record at the time of giving of notice
as provided in this Article NINE, Section B, who shall be entitled to vote at
the meeting and who complies with the notice procedures set forth in this
Article NINE, Section B. Nominations by stockholders of persons for election to
the Board of Directors may be made at such a special meeting of stockholders if
the stockholder's notice required by Article NINE, Section C shall be delivered
to the Secretary of the Corporation 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 seventy-fifth day prior
to such special meeting or the tenth day following the day on which a public
announcement (as defined in subparagraph (e) of Article NINE, Section C) is
first made of the special meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting.
C. Notice of Nominations and Action to be Taken at an Annual Meeting.
(a) 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
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meeting of stockholders (i) pursuant to the Corporation's notice of meeting,
(ii) by or at the direction of the Board of Directors or (iii) by any
stockholder of the Corporation who was a stockholder of record at the time of
giving of the notice provided for in this Article NINE, Section C who is
entitled to vote at the meeting and who complies with the notice procedures set
forth in this Article NINE, Section C.
(b) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (iii) of paragraph (a) of
this Article NINE, Section C, the stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation and such business must be
a proper matter for stockholder action under the Delaware General Corporation
Law. 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-five
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 thirty days or delayed by more than
sixty days from such anniversary date, or in the case of the first annual
meeting of the Corporation's stockholders after the Corporation becomes subject
to the reporting requirements of Section 12 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), 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 sixtieth
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. Such
stockholder's notice shall set forth (i) 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, or is otherwise required, in each case
pursuant to Regulation 14A under the Exchange Act (including such person's
written consent to being named in the proxy statement as a nominee and to
serving as a director if elected); (ii) 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 financial or other interest in such
business of such stockholder and the beneficial owner, if any, on whose behalf
the proposal is made; and (iii) as to the stockholder giving the notice and the
beneficial owner, if any, on whose behalf the nomination or proposal is made,
(1) the name and address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner and (2) the class and number
of shares of the Corporation which are owned beneficially and of record by such
stockholder and such beneficial owner.
(c) Notwithstanding anything in the second sentence of paragraph (b) of
this Article NINE, Section C 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-five days prior to the first anniversary of the
preceding year's annual meeting, a stockholder's notice required by this Article
NINE, Section C 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.
(d) Only such persons who are nominated in accordance with the
procedures set forth in this Article NINE, Section C shall be eligible to serve
as directors and only such business shall be conducted at an annual meeting of
stockholders as shall have been brought before the meeting in accordance with
the procedures set forth in this Article NINE, Section C. The presiding officer
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
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in this Article NINE, Section C and, if any proposed nomination or business is
not in compliance with this Article NINE, Section C, to declare that such
defective proposed business or nomination shall be disregarded.
(e) For purposes of this Article NINE, Section C, "public announcement"
shall mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or a 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.
(f) Notwithstanding the foregoing provisions of this Article NINE,
Section C, 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 Article NINE, Section C. Nothing in this Article NINE,
Section C 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.
(g) The Bylaws of the Corporation may contain additional provisions not
inconsistent with this Article NINE, Section C regarding nominations of persons
for election to the Board of Directors of the Corporation and the proposal of
business to be transacted by the stockholders. Without limiting the category of
such provisions which would not be inconsistent with this Article NINE, Section
C, a provision in the Bylaws of the Corporation which sets forth additional
information which must be provided by a stockholder in the notice required by
this Article NINE, Section C shall not be deemed to be so inconsistent.
D. Voting. The stockholders shall not have the right to cumulate their
votes in the election of directors.
TEN: (A) Except as otherwise fixed pursuant to the provisions of
Article FOUR hereof relating to the rights of the holders of any class or series
of stock having a preference over the Common Stock as to dividends or upon
liquidation to elect additional directors under specified circumstances, the
number of directors of the Corporation shall be fixed from time to time by the
affirmative vote of a majority of the whole Board of Directors. The directors,
other than those who may be elected by the holders of any class or series of
stock having a preference over the Common Stock as to dividends or upon
liquidation, shall be classified, with respect to the time for which they
severally hold office, into three classes: Class I, Class II and Class III. The
terms of office of the initial classes of directors shall be as follows: the
Class I Directors shall be elected to hold office for a term to expire at the
first annual meeting of stockholders after the initial classification of
directors; the Class II Directors shall be elected to hold office for a term to
expire at the second annual meeting of stockholders after the initial
classification of directors; and the Class III Directors shall be elected to
hold office for a term to expire at the third annual meeting of stockholders
after the initial classification of directors; and in the case of each class,
until their respective successors are duly elected and qualified. At each annual
meeting of stockholders the directors elected to succeed those whose terms have
expired shall be identified as being of the same class as the directors they
succeed and shall be elected to hold office for a term to expire at the third
annual meeting of stockholders after their election, or until his or her earlier
resignation or removal, and until their respective successors are duly elected
and qualified.
(B) Except as otherwise fixed pursuant to the provisions of Article
FOUR hereof relating to the rights of the holders of any class or series of
stock having a preference over the Common Stock as to dividends or upon
liquidation to elect directors:
(a) In case of any increase in the number of directors, the
additional director or
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directors, and in case of any vacancy in the Board of Directors due to
death, resignation, removal, disqualification or any other reason, the
successors to fill the vacancies, shall be elected only by a majority
of the directors then in office, even though less than a quorum, or by
a sole remaining director and not by the stockholders, unless otherwise
provided by law or by resolution adopted by a majority of the whole
Board of Directors.
(b) Directors appointed in the manner provided in paragraph
(a) to newly created directorships resulting from any increase in the
authorized number of directors or any vacancies on the Board of
Directors resulting from death, resignation, removal, disqualification
or any other cause shall hold office for a term expiring at the next
annual meeting of stockholders at which the term of the class to which
they have been elected expires.
(c) No decrease in the number of directors constituting the
Board of Directors shall shorten the term of any incumbent director.
(C) Except as otherwise fixed pursuant to the provisions of Article
FOUR hereof relating to the rights of the holders of any class or series of
stock having a preference over the Common Stock as to dividends or upon
liquidation to elect directors, any director or directors may be removed from
office at any time, but only for cause and only by the affirmative vote of 75%
of the Voting Power, voting together as a single class.
ELEVEN: In addition to any other considerations which the Board of
Directors, any committee thereof or any individual director lawfully may take
into account in determining whether to take or refrain from taking corporate
action on any matter, including making or declining to make any recommendations
to the stockholders of the Corporation, the Board of Directors, any committee
thereof or any individual director may in its, his or her discretion consider
the long term as well as the short term best interests of the Corporation
(including the possibility that these interests may best be served by the
continued independence of the Corporation), taking into account and weighing as
deemed appropriate the effects of such action on employees, suppliers,
distributors and customers of the Corporation and its subsidiaries and the
effect upon communities in which the offices or facilities of the Corporation
and its subsidiaries are located and any other factors considered pertinent.
This Article ELEVEN shall be deemed to grant discretionary authority to the
Board of Directors, any committee thereof and each individual director, and
shall not be deemed to provide to any specific constituency any right to be
considered.
TWELVE: In addition to the requirements of (i) law and (ii) the other
provisions of this Restated Certificate of Incorporation, the affirmative vote
of the holders of at least two-thirds of the outstanding shares of Common Stock
of the Corporation entitled to vote shall be required for the adoption or
authorization of a Fundamental Change unless the Fundamental Change has been
approved at a meeting of the Board of Directors by the vote of more than
two-thirds of the incumbent members of the Board of Directors.
As used in this Article Twelve, "Fundamental Change" shall mean (1) any
merger or consolidation of the Corporation with or into any other corporation,
(2) any sale, lease, exchange, transfer or other disposition, but excluding a
mortgage or any other security device, of all or substantially all of the assets
of the Corporation, (3) any merger or consolidation of a Significant Shareholder
with or into the Corporation or a direct or indirect subsidiary of the
Corporation, (4) any sale, lease, exchange, transfer or other disposition to the
Corporation or to a direct or indirect subsidiary of the Corporation of any
Common Stock of the Corporation held by a Significant Shareholder or any other
assets of a Significant Shareholder which, if included with all other
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dispositions consummated during the same fiscal year of the Corporation by the
same Significant Shareholder, would result in dispositions of assets having an
aggregate fair value in excess of five percent of the total consolidated assets
of the Corporation as shown on its certified balance sheet as of the end of the
fiscal year preceding the proposed disposition, (5) any reclassification of
Common Stock of the Corporation, or any recapitalization involving Common Stock
of the Corporation, consummated within five years after a Significant
Shareholder becomes a Significant Shareholder, whereby the number of outstanding
shares of Common Stock is reduced or any of such shares are converted into or
exchanged for cash or other securities, (6) any dissolution and (7) any
agreement, contract or other arrangement providing for any of the transactions
described in this definition of Fundamental Change but, notwithstanding anything
to the contrary herein, Fundamental Change shall not include any merger pursuant
to the Delaware General Corporation Law, as amended from time to time, which
does not require a vote of the Corporation's stockholders for approval.
As used in this Article TWELVE, "Significant Shareholder" shall mean
any person who or which beneficially owns a number of shares of Common Stock of
the Corporation, whether or not such number includes shares not then outstanding
or entitled to vote, which exceeds a number equal to fifteen percent of the
outstanding shares of Common Stock of the Corporation entitled to vote, any and
all affiliates of such person and any and all associates and family members of
such person or any such affiliate.
THIRTEEN: Notwithstanding any other provisions of this Restated
Certificate of Incorporation 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 Voting Stock required by law or
this Restated Certificate of Incorporation, the affirmative vote of the holders
or at least 75% of the Voting Power, voting together as a single class, shall be
required to alter, amend, supplement or repeal, or to adopt any provision
inconsistent with the purpose or intent of, paragraph B of Article FIVE and
Articles SEVEN, NINE, TEN, ELEVEN, TWELVE or THIRTEEN; provided, however, that
no amendment of Article TWELVE shall apply to any person who is a Significant
Shareholder at the time of the adoption of such amendment.
-8-
<PAGE> 1
Exhibit 3.2
--------------------------------------------------
FORM OF
AMENDED AND RESTATED BYLAWS
OF
WATER PIK TECHNOLOGIES, INC.
--------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I OFFICES................................................................................................1
Section 1. Registered Office...................................................................1
Section 2. Other Offices.......................................................................1
ARTICLE II MEETINGS OF STOCKHOLDERS..............................................................................1
Section 1. Place of Meetings...................................................................1
Section 2. Annual Meeting......................................................................1
Section 3. Special Meetings....................................................................1
Section 4. Notice of Meetings..................................................................1
Section 5. Quorum; Adjournment.................................................................2
Section 6. Proxies and Voting..................................................................2
Section 7. Stock List..........................................................................2
ARTICLE III BOARD OF DIRECTORS...................................................................................3
Section 1. Duties and Powers...................................................................3
Section 2. Number and Term of Office...........................................................3
Section 3. Vacancies...........................................................................3
Section 4. Meetings............................................................................4
Section 5. Quorum..............................................................................4
Section 6. Actions of Board Without a Meeting..................................................5
Section 7. Meetings by Means of Conference Telephone...........................................5
Section 8. Committees..........................................................................5
Section 9. Compensation........................................................................5
Section 10. Removal............................................................................5
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
Section 11. Initial Period.....................................................................6
ARTICLE IV OFFICERS..............................................................................................6
Section 1. General.............................................................................7
Section 2. Election; Term of Office............................................................7
Section 3. Chairman of the Board...............................................................7
Section 4. Chief Executive Officer.............................................................7
Section 5. President...........................................................................7
Section 6. Vice President......................................................................7
Section 7. Secretary...........................................................................8
Section 8. Assistant Secretaries...............................................................8
Section 9. Treasurer...........................................................................8
Section 10. Assistant Treasurers...............................................................8
Section 11. Other Officers.....................................................................8
ARTICLE V STOCK..................................................................................................9
Section 1. Form of Certificates; Uncertificated Shares.........................................9
Section 2. Signatures..........................................................................9
Section 3. Lost Certificates...................................................................9
Section 4. Transfers...........................................................................9
Section 5. Record Date.........................................................................9
Section 6. Beneficial Owners..................................................................10
Section 7. Voting Securities Owned by the Corporation.........................................10
ARTICLE VI NOTICES..............................................................................................10
Section 1. Notices............................................................................10
Section 2. Waiver of Notice...................................................................10
ARTICLE VII GENERAL PROVISIONS..................................................................................11
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
Section 1. Dividends..........................................................................11
Section 2. Disbursements......................................................................11
Section 3. Corporation Seal...................................................................11
ARTICLE VIII AMENDMENTS.........................................................................................11
</TABLE>
<PAGE> 5
AMENDED AND RESTATED BYLAWS
OF
WATER PIK TECHNOLOGIES, INC.
-------------------------------------------
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the
Corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware.
Section 2. Other Offices. The Corporation may also have
offices at such other places both within and without the State of Delaware as
the Board of Directors may determine from time to time.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders for
the election of directors or for any other purpose shall be held at such time
and place, either within or without the State of Delaware, as shall be
designated from time to time by the Board of Directors or the officer of the
Corporation calling the meeting as authorized by the Corporation's Certificate
of Incorporation and stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
Section 2. Annual Meeting. Each Annual Meeting of Stockholders
shall be held on such date and at such time as shall be designated from time to
time by the Board of Directors and stated in the notice of the meeting. At an
Annual Meeting, the stockholders shall elect directors, and transact such other
business as may properly be brought before the meeting.
Section 3. Special Meetings. Special meetings of the
stockholders, other than those required by statute, may be called only as
provided in, and for the purposes specified in accordance with, the
Corporation's Certificate of Incorporation.
Section 4. Notice of Meetings. Written notice of the place,
date, and time of each meeting of the stockholders shall be given not less than
ten (10) nor more than sixty (60) days before the date on which the meeting is
to be held, to each stockholder entitled to vote at such meeting, except as
otherwise provided herein or as required from time to time by the Delaware
General Corporation Law or the Certificate of Incorporation. The notice of a
special meeting shall also state the purpose or purposes for which the meeting
is called.
<PAGE> 6
Section 5. Quorum; Adjournment. At any meeting of the
stockholders, the holders of a majority of all of the shares of the stock
entitled to vote at the meeting, present in person or by proxy, shall constitute
a quorum for all purposes, unless or except to the extent that the presence of a
larger number may be required by law or the Certificate of Incorporation. If a
quorum shall fail to attend any meeting, the chairperson of the meeting or the
holders of a majority of the shares of stock entitled to vote who are present,
in person or by proxy, may adjourn the meeting to another place, date, or time
until a quorum shall be present or represented.
When a meeting is adjourned to another place, date or time,
written notice need not be given of the adjourned meeting if the place, date and
time thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than thirty
(30) days after the date for which the meeting was originally noticed, or if a
new record date is fixed for the adjourned meeting, written notice of the place,
date, and time of the adjourned meeting shall be given in conformity herewith.
At any adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 6. Proxies and Voting. At any meeting of the
stockholders, every stockholder entitled to vote may vote in person or by proxy,
authorized by an instrument in writing or in such manner as may be prescribed by
the Delaware General Corporation Law, filed in accordance with the procedure
established for the meeting.
Each stockholder shall have one vote for every share of stock
entitled to vote which is registered in his name on the record date for the
meeting, except as otherwise provided herein or required by law or the
Certificate of Incorporation.
All voting, including on the election of directors but
excepting where otherwise provided herein or required by law or the Certificate
of Incorporation, may be by a voice vote; provided, however, that upon demand
therefor by a stockholder entitled to vote or such stockholder's proxy, or at
the discretion of the chairperson of the meeting, a stock vote shall be taken.
Every stock vote shall be taken by ballots, each of which shall state the name
of the stockholder or proxy voting and such other information as may be required
under the procedure established for the meeting. Every vote taken by ballots
shall be counted by an inspector or inspectors appointed by the Board of
Directors or the chairperson of the meeting.
All elections shall be determined by a plurality of the votes
cast. Except as otherwise required by law or the Certificate of Incorporation,
all other matters shall be determined by a majority of the votes cast. For
purposes of these Bylaws, a vote characterized as an abstention shall not count
as a vote "cast."
Section 7. Stock List. A complete list of stockholders
entitled to vote at any meeting of stockholders, arranged in alphabetical order
for each class of stock and showing the address of each such stockholder and the
number of shares registered in such stockholder's name, shall be open to the
examination of any such stockholder, for any purpose germane to the meeting,
during ordinary business hours for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or if not so
specified, at the place where the meeting is to be held.
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<PAGE> 7
The stock list shall also be kept at the place of the meeting
during the whole time thereof and shall be open to the examination of any such
stockholder who is present. This list shall presumptively determine the identity
of the stockholders entitled to vote at the meeting and the number of shares
held by each of them.
ARTICLE III
BOARD OF DIRECTORS
Section 1. Duties and Powers. The business of the Corporation
shall be managed by or under the direction of the Board of Directors which 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 directed or required to be exercised or done by the stockholders.
Section 2. Number and Term of Office. Subject to Section 11 of
this Article III, the Board of Directors shall consist of not less than four (4)
and not more than seven (7) members. Subject to the foregoing sentence, the
number of directors shall be fixed and may be changed from time to time by
resolution duly adopted by a majority of the directors then in office, except as
otherwise provided by law, the Certificate of Incorporation or these Bylaws.
Except as provided in Section 3 of this Article, directors shall be elected by
the holders of record of a plurality of the votes cast at Annual Meetings of
stockholders. Any director may resign at any time upon written notice to the
Corporation. Directors need not be stockholders.
The directors, other than those who may be elected by the
holders of any class or series of stock having a preference over the Common
Stock as to dividends or upon liquidation, shall be classified, with respect to
the time for which they severally hold office, into three classes: Class I,
Class II and Class III. Each class shall consist, as nearly as may be possible,
of one-third of the whole number of the Board of Directors. The terms of office
of the initial classes of directors shall be as follows: the Class I Directors
shall be elected to hold office for a term to expire at the first Annual Meeting
of stockholders after the initial classification of directors; the Class II
Directors shall be elected to hold office for a term to expire at the second
Annual Meeting of stockholders; and the Class III Directors shall be elected to
hold office for a term to expire at the third Annual Meeting of stockholders;
and in the case of each class, until their respective successors are duly
elected and qualified. At each annual meeting of stockholders the directors
elected to succeed those whose terms have expired shall be identified as being
of the same class as the directors they succeed and shall be elected to hold
office for a term to expire at the third Annual Meeting of stockholders after
their election, or until his or her earlier resignation or removal, and until
their respective successors are duly elected and qualified. This paragraph of
Article III, Section 2 is also contained in Article TEN, Section (A) of the
Corporation's Certificate of Incorporation, and accordingly, may be altered,
amended or repealed only to the extent and at the time the comparable
Certificate Article is altered, amended or repealed.
Section 3. Vacancies. Except as otherwise fixed pursuant to
the provisions of Article FOUR of the Corporation's Certificate of Incorporation
relating to the rights of the
3
<PAGE> 8
holders of any class or series of stock having a preference over the Common
Stock as to dividends or upon liquidation to elect directors:
(a) In case of any increase in the number of directors, the
additional director or directors, and in case of any vacancy in the Board of
Directors due to death, resignation, removal, disqualification or any other
reason, the successors to fill the vacancies, shall be elected by a majority of
the directors then in office, even though less than a quorum, or by a sole
remaining director.
(b) Directors appointed in the manner provided in paragraph
(a) to newly created directorships resulting from any increase in the authorized
number of directors or any vacancies on the Board of Directors resulting from
death, resignation, removal, disqualification or any other cause shall hold
office for a term expiring at the next Annual Meeting of stockholders at which
the term of the class to which they have been elected expires and until their
successors are duly elected and qualified, or until their earlier resignation or
removal.
(c) No decrease in the number of directors constituting the
Board of Directors shall shorten the term of any incumbent director.
The foregoing provisions of this Article III, Section 3 are
also contained in Article TEN, Section (B) of the Corporation's Certificate of
Incorporation, and accordingly, may be altered, amended or repealed only to the
extent and at the time the comparable Certificate Article is altered, amended or
repealed.
Section 4. Meetings. The Board of Directors of the Corporation
may hold meetings, both regular and special, either within or without the State
of Delaware. The first meeting of each newly-elected Board of Directors shall be
held immediately following the Annual Meeting of Stockholders and no notice of
such meeting shall be necessary to be given the newly-elected directors in order
legally to constitute the meeting, provided a quorum shall be present. Regular
meetings of the Board of Directors may be held without notice at such time and
at such place as may from time to time be determined by the Board of Directors.
Special meetings of the Board of Directors may be called by the Chairman of the
Board, the President or a majority of the directors then in office. Notice
thereof stating the place, date and hour of the meeting shall be given to each
director either by mail not less than forty-eight (48) hours before the date of
the meeting, by telephone, telegram or facsimile transmission on twenty-four
(24) hours' notice, or on such shorter notice as the person or persons calling
such meeting may deem necessary or appropriate in the circumstances. Meetings
may be held at any time without notice if all the directors are present or if
all those not present waive such notice in accordance with Section 2 of Article
VI of these Bylaws.
Section 5. Quorum. Except as may be otherwise specifically
provided by law, the Certificate of Incorporation or these Bylaws (including
Section 11 of this Article III), at all meetings of the Board of Directors, a
majority of the directors then in office shall constitute a quorum for the
transaction of business and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the Board of
Directors. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn
4
<PAGE> 9
the meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 6. Actions of Board Without a Meeting. Unless
otherwise provided by the Certificate of Incorporation or these Bylaws, any
action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a meeting if all
members of the Board of Directors or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Board of Directors or committee.
Section 7. Meetings by Means of Conference Telephone. Unless
otherwise provided by the Certificate of Incorporation or these Bylaws, members
of the Board of Directors of the Corporation, or any committee designated by the
Board of Directors, may participate in a meeting of the Board of Directors or
such committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this Section 7 shall
constitute presence in person at such meeting.
Section 8. Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of any such committee. In the absence or disqualification
of a member of a committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or disqualified member,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not such members constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Any committee, to the extent allowed by
law and provided in the Bylaw or resolution establishing such committee, shall
have and may exercise all the powers and authority of the Board of Directors in
the management of the business and affairs of the Corporation, and may authorize
the seal of the Corporation to be affixed to all papers which may require it.
Each committee shall keep regular minutes and report to the Board of Directors
when required.
Section 9. Compensation. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, the Board of Directors shall have
the authority to fix the compensation of directors. The directors may be paid
their expenses, if any, of attendance at each meeting of the Board of Directors
and may be paid a fixed sum for attendance at each meeting of the Board of
Directors or a stated salary as director. No such payment shall preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be allowed
like compensation for attending committee meetings.
Section 10. Removal. Any director or directors may be removed
from office only as provided in the Corporation's Certificate of Incorporation.
5
<PAGE> 10
Section 11. Initial Period. (a) As used in these Bylaws, (i)
the "Third Annual Meeting" means the third Annual Meeting of stockholders held
after the date on which the common stock of the Corporation becomes registered
pursuant to Section 12 of the Securities Exchange Act of 1934, (ii) the "Initial
Period" means the period beginning on the date of the adoption of this Section
11 and ending on the date of the Third Annual Meeting, (iii) "ATI" means
Allegheny Teledyne Incorporated, a Delaware corporation, (iv) and "Majority
Directors" means directors of the Corporation who are also members of the Board
of Directors of ATI.
(b) During the Initial Period, at least a majority of the
directors of the Corporation shall be Majority Directors. If the election of any
director at any time during the Initial Period or if a director's ceasing to be
a member of the Board of Directors of ATI results in the number of Majority
Directors being less than a majority of the directors of the Corporation then in
office, the number of directors shall be increased to the next largest number
such that the filling of the resulting vacancy or vacancies by the election of
one or more directors who are also members of the Board of Directors of ATI will
result in a majority of the directors of the Corporation being Majority
Directors, and the successor or successors to fill said vacancy or vacancies
shall be elected by a majority of the Majority Directors then in office, or by a
sole remaining Majority Director.
(c) In case of any vacancy in the Board of Directors during
the Initial Period due to death, resignation, removal or disqualification of or
any other reason affecting any Majority Director, the successor to fill the
vacancy shall be elected by a majority of the Majority Directors then in office,
or by a sole remaining Majority Director. Directors elected in the manner
provided in this paragraph (c) shall hold office for a term expiring at the next
Annual Meeting of stockholders at which the term of the class to which they have
been elected expires and until their successors are duly elected and qualified,
or until their earlier resignation or removal.
(d) During the Initial Period, no quorum shall exist at a
meeting of the Board of Directors and no act shall be the act of the Board of
Directors unless a majority of the directors present at any such meeting are
Majority Directors.
(e) The provisions of this Section 11 may not be altered,
amended or repealed during the Interim Period except by a resolution duly
adopted by all of the Majority Directors.
ARTICLE IV
OFFICERS
Section 1. General. The officers of the Corporation shall be
appointed by the Board of Directors and shall consist of a Chairman of the
Board, a Chief Executive Officer, a President, such number of Vice Presidents as
the Board of Directors shall elect from time to time, a Secretary, a Treasurer
(or a position with the duties and responsibilities of a Treasurer) and such
other officers and assistant officers (if any) as the Board of Directors may
elect from time to time. Any number of offices may be held by the same person,
unless the Certificate of Incorporation or these Bylaws otherwise provide.
6
<PAGE> 11
Section 2. Election; Term of Office. The Board of Directors at
its first meeting held after each Annual Meeting of stockholders shall elect a
Chairman of the Board or a President, or both, a Secretary and a Treasurer (or a
position with the duties and responsibilities of a Treasurer), and may also
elect at that meeting or any other meeting, such other officers and agents as it
shall deem necessary or appropriate. Each officer of the Corporation shall
exercise such powers and perform such duties as shall be determined from time to
time by the Board of Directors together with the powers and duties customarily
exercised by such officer; and each officer of the Corporation shall hold office
until such officer's successor is elected and qualified or until such officer's
earlier resignation or removal. Any officer may resign at any time upon written
notice to the Corporation. The Board of Directors may remove any officer at any
time, with or without cause, by the affirmative vote of a majority of directors
then in office.
Section 3. Chairman of the Board. The Chairman of the Board
shall preside at all meetings of the stockholders and the Board of Directors and
shall have such other duties and powers as may be prescribed by the Board of
Directors from time to time. The Board of Directors may also designate one of
its members as Vice Chairman of the Board. The Vice Chairman of the Board shall,
during the absence or inability to act of the Chairman of the Board, have the
powers and perform the duties of the Chairman of the Board, and shall have such
other powers and perform such other duties as shall be prescribed from time to
time by the Board of Directors.
Section 4. Chief Executive Officer. The Chief Executive
Officer shall have general charge and control over the affairs of the
Corporation, subject to the Board of Directors, shall see that all orders and
resolutions of the Board of Directors are carried out, shall report thereon to
the Board of Directors, and shall have such other powers and perform such other
duties as shall be prescribed from time to time by the Board of Directors.
Section 5. President. The President shall have general and
active management of the business of the Corporation and shall see that all
orders and resolutions of the Board of Directors are carried into effect. The
President shall have and exercise such further powers and duties as may be
specifically delegated to or vested in the President from time to time by these
Bylaws or the Board of Directors. In the absence of the Chairman of the Board
and the Vice Chairman of the Board, or in the event of the inability of or
refusal to act by the Chairman of the Board and the Vice Chairman of the Board,
or if the Board of Directors has not designated a Chairman or Vice Chairman, the
President shall perform the duties of the Chairman of the Board, and, when so
acting, shall have all of the powers and be subject to all of the restrictions
upon the Chairman of the Board.
Section 6. Vice President. In the absence of the President or
in the event of his inability or refusal to act, the Vice President (or in the
event there be more than one vice president, the vice presidents in the order
designated by the Board of Directors, or in the absence of any designation, then
in the order of their election) shall perform the duties of the President and,
when so acting, shall have all the powers of and be subject to all the
restrictions upon the President. The Vice Presidents shall perform such other
duties and have such other powers as the Board of Directors or the President may
from time to time prescribe.
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<PAGE> 12
Section 7. Secretary. The Secretary shall attend all meetings
of the Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for the standing and special committees
when required. The Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors, and
shall perform such other duties as may be prescribed by the Board of Directors
or the President. If the Secretary shall be unable or shall refuse to cause to
be given notice of all meetings of the stockholders and special meetings of the
Board of Directors, and if there be no Assistant Secretary, then either the
Board of Directors or the President may choose another officer to cause such
notice to be given. The Secretary shall have custody of the seal of the
Corporation and the Secretary or any Assistant Secretary, if there be one, shall
have authority to affix the same to any instrument requiring it and when so
affixed, it may be attested by the signature of the Secretary or by the
signature of any such Assistant Secretary. The Board of Directors may give
general authority to any other officer to affix the seal of the Corporation and
to attest the affixing by his or her signature. The Secretary shall see that all
books, reports, statements, certificates and other documents and records
required by law to be kept or filed are properly kept or filed, as the case may
be.
Section 8. Assistant Secretaries. Except as may be otherwise
provided in these Bylaws, Assistant Secretaries, if there be any, shall perform
such duties and have such powers as from time to time may be assigned to them by
the Board of Directors, the President, or the Secretary, and shall have the
authority to perform all functions of the Secretary, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
Secretary.
Section 9. Treasurer. The Treasurer shall have the custody of
the corporate funds and securities, shall keep complete and accurate accounts of
all receipts and disbursements of the Corporation, and shall deposit all monies
and other valuable effects of the Corporation in its name and to its credit in
such banks and other depositories as may be designated from time to time by the
Board of Directors. The Treasurer shall disburse the funds of the Corporation,
taking proper vouchers and receipts for such disbursements. The Treasurer shall,
when and if required by the Board of Directors, give and file with the
Corporation a bond, in such form and amount and with such surety or sureties as
shall be satisfactory to the Board of Directors, for the faithful performance of
his or her duties as Treasurer. The Treasurer shall have such other powers and
perform such other duties as the Board of Directors or the President shall from
time to time prescribe.
Section 10. Assistant Treasurers. Except as may be otherwise
provided in these Bylaws, Assistant Treasurers, if there be any, shall perform
such duties and have such powers as from time to time may be assigned to them by
the Board of Directors, the President, or the Treasurer, and shall have the
authority to perform all functions of the Treasurer, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
Treasurer.
Section 11. Other Officers. Such other officers as the Board
of Directors may choose shall perform such duties and have such powers as may be
assigned to them from time to time by the Board of Directors. The Board of
Directors may delegate to any officer of the
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<PAGE> 13
Corporation the power to choose such other officers and to prescribe their
respective duties and powers.
ARTICLE V
STOCK
Section 1. Form of Certificates; Uncertificated Shares. The
shares of the Corporation shall be represented by certificates; provided, that
the Board of Directors may provide by resolution or resolutions that some or all
of any or all classes or series of its stock shall be uncertificated shares in
accordance with the Delaware General Corporation Law. Any such resolution shall
not apply to shares represented by a certificate until such certificate is
surrendered to the Corporation. Notwithstanding the adoption of such a
resolution by the Board of Directors, every holder of stock in the Corporation
represented by a certificate, and upon request every holder of uncertificated
shares of stock in the Corporation, shall be entitled to have a certificate
signed in the name of the Corporation (i) by the Chairman of the Board or the
President or a Vice President and (ii) by the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary of the Corporation,
certifying the number of shares owned by such holder in the Corporation.
Section 2. Signatures. Any or all the signatures on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have 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 such person were such officer, transfer agent or registrar at the date of
issue.
Section 3. Lost Certificates. The Board of Directors may
direct a new certificate to be issued in place of any certificate theretofore
issued by the Corporation alleged to have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming the certificate
of stock to be lost, stolen or destroyed. When authorizing such issue of a new
certificate, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate, or such owner's legal representative, to advertise the
same in such manner as the Board of Directors shall require and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate alleged
to have been lost, stolen or destroyed.
Section 4. Transfers. Stock of the Corporation shall be
transferable in the manner prescribed by law and in these Bylaws. Transfers of
stock shall be made on the books of the Corporation only by the person named in
the certificate or in the Corporation's books as the registered owner of
uncertificated shares or by such person's attorney lawfully constituted in
writing and upon the surrender of the certificate (if any) therefor, which shall
be cancelled before a new certificate shall be issued.
Section 5. Record Date. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment
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<PAGE> 14
thereof, or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than sixty (60) days nor less than ten (10) days before the date of
such meeting, nor more than sixty (60) days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
Section 6. Beneficial Owners. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by law.
Section 7. Voting Securities Owned by the Corporation. Powers
of attorney, proxies, waivers of notice of meeting, consents and other
instruments relating to securities owned by the Corporation may be executed in
the name of and on behalf of the Corporation by the Chairman of the Board, the
President, any Vice President or the Secretary and any such officer may, in the
name of and on behalf of the Corporation, take all such action as any such
officer may deem advisable to vote in person or by proxy at any meeting of
security holders of any corporation in which the Corporation may own securities
and at any such meeting shall possess and may exercise any and all rights and
power incident to the ownership of such securities and which, as the owner
thereof, the Corporation might have exercised and possessed if present. The
Board of Directors may, by resolution, from time to time confer like powers upon
any other person or persons.
ARTICLE VI
NOTICES
Section 1. Notices. Whenever written notice is required by
law, the Certificate of Incorporation or these Bylaws, to be given to any
director, member of a committee or stockholder, such notice may be given by
mail, addressed to such director, member of a committee or stockholder, at such
person's address as it appears on the records of the Corporation, with postage
thereon prepaid, and such notice shall be deemed to be given at the time when
the same shall be deposited in the United States mail. Written notice may also
be given personally or by telegram, facsimile transmission, electronic mail,
telex or cable and such notice shall be deemed to be given at the time of
receipt thereof if given personally or at the time of transmission thereof if
given by telegram, facsimile transmission, electronic mail, telex or cable.
Section 2. Waiver of Notice. Whenever any notice is required
by law, the Certificate of Incorporation or these Bylaws to be given to any
director, member or a committee or stockholder, 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 notice.
10
<PAGE> 15
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special meeting
or by any Committee of the Board of Directors having such authority at any
meeting thereof, and may be paid in cash, in property, in shares of the capital
stock or in any combination thereof. Before payment of any dividend, there may
be set aside out of any funds of the Corporation available for dividends such
sum or sums as the Board of Directors from time to time, in its absolute
discretion, deems proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation, or for any proper purpose, and the Board of Directors may modify or
abolish any such reserve.
Section 2. Disbursements. All notes, checks, drafts and orders
for the payment of money issued by the Corporation shall be signed in the name
of the Corporation by such officers or such other persons as the Board of
Directors may designate from time to time.
Section 3. Corporation Seal. The corporate seal, if the
Corporation shall have a corporate seal, shall have inscribed thereon the name
of the Corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE VIII
AMENDMENTS
Except as otherwise specifically provided in the particular
Article of these Bylaws to be altered, amended or repealed, these Bylaws may be
altered, amended or repealed and new Bylaws may be adopted 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.
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<PAGE> 1
Exhibit 4.2
FORM OF
WATER PIK TECHNOLOGIES, INC.
AND
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
RIGHTS AGENT
--------------------
RIGHTS AGREEMENT
DATED AS OF ____________, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 1. Definitions.....................................................................................1
Section 2. Appointment of Rights Agent.....................................................................6
Section 3. Issue of Right Certificates.....................................................................6
Section 4. Form of Right Certificates......................................................................9
Section 5. Countersignature and Registration..............................................................10
Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed,
Lost or Stolen Right Certificates..............................................................11
Section 7. Exercise of Rights: Purchase Price; Expiration Date of Rights..................................12
Section 8. Cancellation and Destruction of Right Certificates.............................................14
Section 9. Availability of Preferred Shares...............................................................14
Section 10. Preferred Shares Record Date...................................................................15
Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights.............................16
Section 12. Certificate of Adjustments.....................................................................27
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power...........................27
Section 14. Fractional Rights and Fractional Shares........................................................29
Section 15. Rights of Action...............................................................................30
Section 16. Agreement of Right Holders.....................................................................31
Section 17. Right Certificate Holder Not Deemed a Stockholder..............................................31
Section 18. Concerning the Rights Agent....................................................................32
Section 19. Merger or Consolidation or Change of Name of Rights Agent......................................33
Section 20. Duties of Rights Agent.........................................................................34
Section 21. Change of Rights Agent.........................................................................37
Section 22. Issuance of New Right Certificates.............................................................38
Section 23. Redemption.....................................................................................39
Section 24. Exchange.......................................................................................40
Section 25. Notice of Certain Events.......................................................................42
Section 26. Notices........................................................................................43
Section 27. Supplements and Amendments.....................................................................44
Section 28. Successors.....................................................................................44
Section 29. Benefits of this Rights Agreement..............................................................45
</TABLE>
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<PAGE> 3
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 30. Severability...................................................................................45
Section 31. Governing Law..................................................................................45
Section 32. Counterparts...................................................................................45
Section 33. Descriptive Headings...........................................................................46
Signatures.......................................................................................................45
Exhibit A - Form of Certificate of Designations
Exhibit B - Form of Right Certificate
</TABLE>
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<PAGE> 4
Agreement, dated as of ______________, 1999, between WATER PIK
TECHNOLOGIES, INC., a Delaware corporation (the "Company"), and CHASEMELLON
SHAREHOLDER SERVICES, L.L.C., a limited liability company (the "Rights Agent").
The Board of Directors of the Company has authorized and
declared a dividend of one preferred share purchase right (a "Right") for each
Common Share (as hereinafter defined) of the Company to be issued in the
distribution of Common Shares of the Company (the "Spin-Off") by Allegheny
Teledyne Incorporated, a Delaware corporation ("ATI"), to ATI's stockholders,
each Right representing the right to purchase one one-hundredth of a Preferred
Share (as hereinafter defined) upon the terms and subject to the conditions
herein set forth, and has further authorized and directed the issuance of one
Right with respect to each Common Share of the Company that shall become
outstanding between the effective date of the Spin-Off (the "Record Date") and
the earliest of the Distribution Date, the Redemption Date and the Final
Expiration Date (as such terms are hereinafter defined).
Accordingly, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Definitions. For purposes of this Rights Agreement,
the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 15 % or more of the Common Shares of the Company then
outstanding, but shall not include the Company, any Subsidiary of the Company,
any employee benefit plan of the Company or any Subsidiary of the Company, or
any entity holding Common Shares for or pursuant to the terms of any such plan.
<PAGE> 5
Notwithstanding the foregoing, no Person shall become an "Acquiring Person" as
the result of an acquisition of Common Shares of the Company by the Company
which, by reducing the number of shares outstanding, increases the proportionate
number of shares beneficially owned by such Person to 15 % or more of the Common
Shares then outstanding; provided, however, that if a Person shall become the
Beneficial Owner of 15 % or more of the Common Shares then outstanding by reason
of share purchases by the Company and shall, after such share purchases by the
Company, become the Beneficial Owner of any additional Common Shares, then such
Person shall be deemed to be an "Acquiring Person." Notwithstanding the
foregoing, if the Board of Directors of the Company determines in good faith
that a Person who would otherwise be an "Acquiring Person," as defined pursuant
to the foregoing provisions of this Section 1(a), has become such inadvertently,
and such Person divests as promptly as practicable a sufficient number of Common
Shares so that such Person would no longer be an "Acquiring Person," as defined
pursuant to the foregoing provisions of this Section 1(a), then such Person
shall not be deemed to be an "Acquiring Person" for any purposes of this Rights
Agreement.
(b) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act, as in effect on the date of this Rights
Agreement.
(c) A Person shall be deemed the "Beneficial Owner" of and
shall be deemed to "beneficially own" any Securities:
(i) that such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly;
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<PAGE> 6
(ii) that such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant to
any agreement, arrangement or understanding (other than customary
agreements with and between underwriters and selling group members with
respect to a bona fide public offering of Securities), upon the
exercise of conversion rights, exchange rights, rights (other than
these Rights), warrants or options, or otherwise; provided, however,
that a Person shall not be deemed the Beneficial Owner of, or to
beneficially own, Securities tendered pursuant to a tender or exchange
offer made by or on behalf of such Person or any of such Person's
Affiliates or Associates until such tendered Securities are accepted
for purchase or exchange; or (B) the right to vote pursuant to any
agreement, arrangement or understanding; provided, however, that a
Person shall not be deemed the Beneficial Owner of, or to beneficially
own, any Security if the agreement, arrangement or understanding to
vote such Security (1) arises solely from a revocable proxy or consent
given to such Person in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable
rules and regulations promulgated under the Exchange Act and (2) is not
also then reportable on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
(iii) that are beneficially owned, directly or indirectly, by
any other Person with which such Person or any of such Person's
Affiliates or Associates has any agreement, arrangement or
understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide
public offering of Securities) for the purpose of holding, acquiring,
voting (except to the extent
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contemplated by the provisos to Section l(c)(ii)) or disposing of any
Securities of the Company.
Notwithstanding anything in this definition of Beneficial
Ownership to the contrary, the phrase "then outstanding," when used with
reference to a Person's Beneficial Ownership of Securities of the Company, shall
mean the number of such Securities then issued and outstanding together with the
number of such Securities not then actually issued and outstanding which such
Person would be deemed to own beneficially hereunder.
(d) "Business Day" shall mean any day other than a Saturday, a
Sunday or a day on which banking institutions in the Commonwealth of
Pennsylvania and/or the State of New York are authorized or obligated by law or
executive order to close.
(e) "Close of business" on any given date shall mean 5:00
P.M., Eastern time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., Eastern time, on the next succeeding
Business Day.
(f) "Common Shares" when used with reference to the Company
shall mean the shares of common stock, par value $.01 per share, of the Company.
"Common Shares" when used with reference to any Person other than the Company
shall mean the capital stock (or equity interest) with the greatest voting power
of such other Person or, if such other Person is a Subsidiary of another Person,
the Person that ultimately controls such first-mentioned Person.
(g) "Company" shall have the meaning set forth in the preamble
hereof.
(h) "Current per share market price" shall have the meaning
set forth in Section 11(d).
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<PAGE> 8
(i) "Distribution Date" shall have the meaning set forth in
Section 3.
(j) "Equivalent preferred shares" shall have the meaning set
forth in Section 11(b).
(k) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(l) "Exchange Ratio" shall have the meaning set forth in
Section 24(a).
(m) "Final Expiration Date" shall have the meaning set forth
in Section 7(a).
(n) "Person" shall mean any individual, firm, corporation or
other entity, and shall include any successor (by merger or otherwise) of such
entity.
(o) "Preferred Shares" shall mean shares of Series A Junior
Participating Preferred Stock, without par value, of the Company having the
rights and preferences set forth in the form of Certificate of Designations
attached to this Rights Agreement as Exhibit A.
(p) "Purchase Price" shall have the meaning set forth in
Section 4.
(q) "Record Date" shall have the meaning set forth in the
second paragraph hereof.
(r) "Redemption Date" shall have the meaning set forth in
Section 7(a).
(s) "Redemption Price" shall have the meaning set forth in
Section 23(a).
(t) "Right" shall have the meaning set forth in the second
paragraph hereof.
(u) "Right Certificate" shall have the meaning set forth in
Section 3(a).
(v) "Rights Agent" shall have the meaning set forth in the
preamble hereof.
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<PAGE> 9
(w) "Security" shall have the meaning set forth in Section
3(a)(10) of the Exchange Act.
(x) "Shares Acquisition Date" shall mean the first date of
public announcement by the Company or an Acquiring Person that an Acquiring
Person has become such.
(y) "Subsidiary" of any Person shall mean any corporation or
other entity of which a majority of the voting power of the voting equity
securities or equity interests is owned, directly or indirectly, by such Person.
(z) "Summary of Rights" shall have the meaning set forth in
Section 3(b).
(aa) "Trading Day" shall have the meaning set forth in Section
11(d).
Section 2. Appointment of Rights Agent. The Company hereby
appoints the Rights Agent to act as agent for the Company and the holders of the
Rights (who, in accordance with Section 3, shall prior to the Distribution Date
also be the holders of the Common Shares of the Company) in accordance with the
terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. The Company may from time to time appoint such co-Rights Agents as
it may deem necessary or desirable.
Section 3. Issue of Right Certificates. (a) Until the earlier
of (i) the Shares Acquisition Date or (ii) the tenth business day (or such later
date as may be determined by action of the Board of Directors prior to such time
as any Person becomes an Acquiring Person) after the date of the commencement or
the announcement of an intention to commence by any Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan of the Company
or of any Subsidiary of the Company or any entity holding Common Shares for or
pursuant to the terms of any such plan) of a tender or exchange offer the
consummation of which
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<PAGE> 10
would result in any Person becoming the Beneficial Owner of Common Shares of the
Company aggregating 15% or more of the then outstanding Common Shares (including
any such date which is after the date of this Rights Agreement and prior to the
issuance of the Rights; the earlier of such dates being herein referred to as
the "Distribution Date"), (x) the Rights will be evidenced (subject to the
provisions of Section 3(b)) by the certificates for Common Shares registered in
the names of the holders thereof (which certificates shall also be deemed to be
Right Certificates) and not by separate Right Certificates, and (y) the right to
receive Right Certificates will be transferable only in connection with the
transfer of Common Shares. As soon as practicable after the Distribution Date,
the Company will prepare and execute, the Rights Agent will countersign, and the
Company will send or cause to be sent (and the Rights Agent will, if requested,
send) by first-class, insured, postage-prepaid mail, to each record holder of
Common Shares as of the close of business on the Distribution Date at the
address of such holder shown on the records of the Company a Right Certificate,
in substantially the form of Exhibit B hereto, evidencing one Right for each
Common Share so held (a "Right Certificate"). As of the Distribution Date, the
Rights will be evidenced solely by such Right Certificates.
(b) Until the Distribution Date (or the earlier of the
Redemption Date or the Final Expiration Date), the surrender for transfer of any
certificate for Common Shares outstanding on the Record Date shall also
constitute the transfer of the Rights associated with the Common Shares
represented thereby.
(c) Until the earliest of the Distribution Date, the
Redemption Date or the Final Expiration Date, certificates for Common Stock
shall have impressed on, printed on, written on or otherwise affixed to them the
following legend:
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<PAGE> 11
This certificate also evidences and entitles the
holder hereof to certain rights as set forth in a Rights
Agreement between Water Pik Technologies, Inc. and ChaseMellon
Shareholder Services, L.L.C., dated as of ______________,
1999, as amended from time to time (as so amended, the "Rights
Agreement"), the terms of which are hereby incorporated herein
by reference and a copy of which is on file at the principal
executive offices of Water Pik Technologies, Inc. Under
certain circumstances, as set forth in the Rights Agreement,
such Rights will be evidenced by separate certificates and
will no longer be evidenced by this certificate. Water Pik
Technologies, Inc. will mail to the holder of this certificate
a copy of the Rights Agreement without charge after receipt of
a written request therefor. Under certain circumstances, as
set forth in the Rights Agreement, Rights issued to any Person
who becomes an Acquiring Person (as defined in the Rights
Agreement) may become null and void.
With respect to the certificates containing the foregoing legend, until the
Distribution Date the Rights associated with the Common Shares represented by
such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares represented thereby.
(d) Until the earliest of the Distribution Date, the
Redemption Date or the Final Expiration Date, confirmations and account
statements sent to holders of Common Shares in book-entry form and initial
transaction statements relating to the registration, pledge or release from
pledge of Common Shares in uncertificated form shall have impressed on, printed
on, written on or otherwise affixed to them substantially the following legend:
The shares of the Common Stock, par value $.01 per share, of
Water Pik Technologies, Inc., to which this statement relates
also evidence and entitle the holder thereof to certain Rights
as set forth in a Rights Agreement between Water Pik
Technologies, Inc. and ChaseMellon Shareholder Services,
L.L.C., dated as of __________, 1999 (the "Rights Agreement"),
the terms of which are hereby incorporated herein by reference
and a copy of which is on file at the principal executive
offices of Water Pik Technologies, Inc. Under certain
circumstances, as set forth in the Rights Agreement, such
Rights will be evidenced by separate certificates and will no
longer be evidenced by the shares to which this statement
relates. Water Pik Technologies, Inc. will mail to the holder
of the shares to which this statement relates and any
registered pledgee of uncertificated shares a copy of the
Rights Agreement without charge after receipt of a written
request therefor.
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<PAGE> 12
Under certain circumstances, as set forth in the Rights
Agreement, Rights issued to any Person who becomes an
Acquiring Person (as defined in the Rights Agreement) may
become null and void.
With respect to Common Shares in book-entry form for which there has been sent a
confirmation or account statement and Common Shares in uncertificated form for
which there has been sent an initial transaction statement containing the
foregoing legend, until the Distribution Date, the rights associated with such
Common Shares shall be evidenced by such Common Shares alone, and the
registration of transfer or pledge, or the release from pledge, of any such
Common Shares shall also constitute the registration of transfer or pledge, or
the release from pledge, as the case may be, of the rights associated with such
Common Shares.
(e) In the event that the Company purchases or acquires any
Common Shares after the Record Date but prior to the Distribution Date, any
Rights associated with such Common Shares shall be deemed cancelled and retired
so that the Company shall not be entitled to exercise any Rights associated with
Common Shares that are no longer outstanding.
Section 4. Form of Right Certificates. The Right Certificates
(and the forms of election to purchase Preferred Shares and of assignment to be
printed on the reverse thereof) shall be substantially the same as Exhibit B
hereto and may have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Rights
Agreement or as may be required to comply with any applicable law or with any
rule or regulation made pursuant thereto or with any rule or regulation of any
stock exchange or automated quotation system on which the Rights may from time
to time be listed or to conform to usage. Subject to the provisions of Section
22, the Right Certificates shall entitle the holders thereof to purchase such
number of one one-hundredths of a Preferred Share as shall be set forth therein
at the price per
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one one-hundredth of a Preferred Share set forth therein (the "Purchase Price"),
but the number of such one one-hundredths of a Preferred Share and the Purchase
Price shall be subject to adjustment as provided herein.
Section 5. Countersignature and Registration. The Right
Certificates shall be executed on behalf of the Company by its Chairman of the
Board, its Chief Executive Officer, its President, any of its Vice Presidents,
or its Treasurer, either manually or by facsimile signature, shall have affixed
thereto the Company's seal or a facsimile thereof, and shall be attested by the
Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Right Certificates shall be manually countersigned by
the Rights Agent and shall not be valid for any purpose unless countersigned. In
case any officer of the Company who shall have signed any of the Right
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates nevertheless may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the person who signed such Right Certificates had not ceased to be such officer
of the Company; and any Right Certificate may be signed on behalf of the Company
by any person who, at the actual date of the execution of such Right
Certificate, shall be a proper officer of the Company to sign such Right
Certificate, although at the date of execution of this Rights Agreement any such
person was not such an officer.
Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal office, books for registration and transfer
of the Right Certificates issued hereunder. Such books shall show the names and
addresses of the holders of the Right Certificates, the
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<PAGE> 14
number of Rights evidenced on its face by each of the Right Certificates and the
date of each of the Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of
Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.
Subject to the provisions of Section 14, at any time after the close of business
on the Distribution Date and at or prior to the close of business on the earlier
of the Redemption Date or the Final Expiration Date, any Right Certificate or
Right Certificates (other than Right Certificates representing Rights that have
become void pursuant to Section 11(a)(ii) or that have been exchanged pursuant
to Section 24) may be transferred, split up, combined or exchanged for another
Right Certificate or Right Certificates, entitling the registered holder to
purchase a like number of one one-hundredths of a Preferred Share as the Right
Certificate or Right Certificates surrendered then entitled such holder to
purchase. Any registered holder desiring to transfer, split up, combine or
exchange any Right Certificate or Right Certificates shall make such request in
writing delivered to the Rights Agent and shall surrender the Right Certificate
or Right Certificates to be transferred, split up, combined or exchanged at the
principal office of the Rights Agent. Thereupon the Rights Agent shall
countersign and deliver to the person entitled thereto a Right Certificate or
Right Certificates, as the case may be, as so requested. The Company may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer, split up, combination or exchange of
Right Certificates.
Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Right Certificate and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them and, at the
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<PAGE> 15
Company's request, reimbursement to the Company and the Rights Agent of all
reasonable expenses incidental thereto and upon surrender to the Rights Agent
and cancellation of the Right Certificate if mutilated, the Company will make
and deliver a new Right Certificate of like tenor to the Rights Agent for
delivery to the registered holder in lieu of the Right Certificate so lost,
stolen, destroyed or mutilated.
Section 7. Exercise of Rights: Purchase Price; Expiration Date
of Rights. (a) The registered holder of any Right Certificate may exercise the
Rights evidenced thereby (except as otherwise provided herein) in whole or in
part at any time after the Distribution Date upon surrender of the Right
Certificate, with the form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent at the principal office of the Rights Agent,
together with payment of the Purchase Price for each one one-hundredth of a
Preferred Share as to which Rights are being exercised, at or prior to the
earliest of (i) the close of business on ___________, 2009 (the "Final
Expiration Date"), (ii) the time at which the Rights are to be redeemed as
provided in Section 23 (the "Redemption Date"), or (iii) the time at which such
Rights are to be exchanged as provided in Section 24.
(b) The Purchase Price for each one one-hundredth of a
Preferred Share purchasable pursuant to the exercise of a Right shall initially
be $_____, shall be subject to adjustment from time to time as provided in
Section 11 or 13, and shall be payable in lawful money of the United States of
America in accordance with Section 7 (c).
(c) Upon receipt of a Right Certificate representing
exercisable Rights, with the form of election to purchase duly executed,
accompanied by payment of the Purchase Price for the shares to be purchased and
an amount equal to any applicable transfer tax required to be
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paid by the holder of such Right Certificate in accordance with Section 9 by
certified check, cashier's check or money order payable to the order of the
Company, the Rights Agent shall thereupon promptly (i) (A) requisition from any
transfer agent of the Preferred Shares certificates for the number of Preferred
Shares to be purchased and the Company hereby authorizes such transfer agent to
comply with all such requests or (B) requisition from the depositary agent
depositary receipts representing such number of one one-hundredths of a
Preferred Share as are to be purchased (in which case certificates for the
Preferred Shares represented by such receipts shall be deposited by the transfer
agent with the depositary agent) and the Company hereby directs the depositary
agent to comply with such request, (ii) when appropriate, requisition from the
Company the amount of cash to be paid in lieu of issuance of fractional shares
in accordance with Section 14, (iii) promptly after receipt of such certificates
or depositary receipts, cause the same to be delivered to or upon the order of
the registered holder of such Right Certificate, registered in such name or
names as may be designated by such holder, and (iv) when appropriate, after
receipt, promptly deliver such cash to or upon the order of the registered
holder of such Right Certificate.
(d) In case the registered holder of any Right Certificate
shall exercise less than all the Rights evidenced thereby, a new Right
Certificate evidencing Rights equivalent to the Rights remaining unexercised
shall be issued by the Rights Agent to the registered holder of such Right
Certificate or to his duly authorized assigns, subject to the provisions of
Section 14.
Section 8. Cancellation and Destruction of Right Certificates.
All Right Certificates surrendered for the purpose of exercise, transfer, split
up, combination or exchange shall, if surrendered to the Company or to any of
its agents, be delivered to the Rights Agent for
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cancellation or in cancelled form, or, if surrendered to the Rights Agent, shall
be cancelled by it, and no Right Certificates shall be issued in lieu thereof
except as expressly permitted by any of the provisions of this Rights Agreement.
The Company shall deliver to the Rights Agent for cancellation and retirement
and the Rights Agent shall so cancel and retire, any other Right Certificate
purchased or acquired by the Company otherwise than upon the exercise thereof.
The Rights Agent shall deliver all cancelled Right Certificates to the Company
or shall, at the written request of the Company, destroy such cancelled Right
Certificates and in such case shall deliver a certificate of destruction thereof
to the Company.
Section 9. Availability of Preferred Shares. The Company
covenants and agrees that it will cause to be reserved and kept available out of
its authorized and unissued Preferred Shares or any Preferred Shares held in its
treasury the number of Preferred Shares that will be sufficient to permit the
exercise in full of all outstanding Rights in accordance with Section 7. The
Company covenants and agrees that it will take all such action as may be
necessary to ensure that all Preferred Shares delivered upon exercise of Rights
shall, at the time of delivery of the certificates for such Preferred Shares
(subject to payment of the Purchase Price), be duly and validly authorized and
issued and fully paid and nonassessable shares.
The Company further covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes and charges which
may be payable in respect of the issuance or delivery of the Right Certificates
or of any Preferred Shares upon the exercise of Rights. The Company shall not,
however, be required to pay any transfer tax which may be payable in respect of
any transfer or delivery of Right Certificates to a person other than, or any
issuance or delivery of certificates or depositary receipts for Preferred Shares
in a name other than
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that of, the registered holder of the Right Certificate evidencing the Rights
surrendered for exercise or to issue or to deliver any certificates or
depositary receipts for Preferred Shares upon the exercise of any Rights until
any such tax shall have been paid (any such tax being payable by the holder of
such Right Certificate at the time of surrender) or until it has been
established to the Company's reasonable satisfaction that no such tax is due.
Section 10. Preferred Shares Record Date. Each person in whose
name any certificate for Preferred Shares is issued upon an exercise of Rights
shall for all purposes be deemed to have become the holder of record of the
Preferred Shares represented thereby on, and such certificate shall be dated,
the date upon which the Right Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and any applicable transfer
taxes) was made; provided, however, that if the date of such surrender and
payment is a date upon which the Preferred Share transfer books of the Company
are closed, such person shall be deemed to have become the record holder of such
shares on and such certificate shall be dated the next succeeding Business Day
on which the Preferred Share transfer books of the Company are open. Prior to
the exercise of the Rights evidenced thereby, the holder of a Right Certificate
shall not be entitled to any rights of a holder of the Preferred Shares for
which such Rights shall be exercisable, including, without limitation, the right
to vote, to receive dividends or other distributions or to exercise any
preemptive rights, and shall not be entitled to receive any notice of any
proceedings of the Company except as provided herein.
Section 11. Adjustment of Purchase Price, Number of Shares or
Number of Rights. The Purchase Price, the number of Preferred Shares covered by
each Right and the
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number of Rights outstanding are subject to adjustment from time to time as
provided in this Section 11.
(a) (i) In the event that the Company shall at any time after
the date of this Rights Agreement (A) declare a dividend on the Preferred Shares
payable in Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C)
combine the outstanding Preferred Shares into a smaller number of Preferred
Shares or (D) issue any shares of its capital stock in a reclassification of the
Preferred Shares (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or surviving
corporation), except as otherwise provided in this Section 11(a), the Purchase
Price in effect at the time of the record date for such dividend or of the
effective date of such subdivision, combination or reclassification and the
number and kind of shares of capital stock issuable on such date shall be
proportionately adjusted so that the holder of any Right exercised after such
time shall be entitled to receive the aggregate number and kind of shares of
capital stock which, if such Right had been exercised immediately prior to such
date and at a time when the Preferred Share transfer books of the Company were
open, he would have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination or reclassification; provided,
however, that in no event shall the consideration to be paid upon the exercise
of one Right be less than the aggregate par value of the shares of capital stock
of the Company issuable upon exercise of one Right.
(ii) Subject to Section 24, in the event that any
Person becomes an Acquiring Person, each holder of a Right shall thereafter have
a right to receive, upon exercise thereof at a price equal to the then-current
Purchase Price multiplied by the number of one one-hundredths of a Preferred
Share for which a Right is then exercisable, in accordance with the
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terms of this Rights Agreement and in lieu of Preferred Shares, such number of
Common Shares of the Company as shall equal the result obtained by (A)
multiplying the then-current Purchase Price by the number of one one-hundredths
of a Preferred Share for which a Right is then exercisable and dividing that
product by (B) 50% of the current per share market price of the Common Shares
(determined pursuant to Section 11(d)) on the date of such event. In the event
that any Person shall become an Acquiring Person and the Rights shall then be
outstanding, the Company shall not take any action which would eliminate or
diminish the benefits intended to be afforded by the Rights.
From and after the occurrence of such event, any Rights that
are or were acquired or beneficially owned by any Acquiring Person (or any
Associate or Affiliate of such Acquiring Person) shall be void and any holder of
such Rights shall thereafter have no right to exercise such Rights under any
provision of this Rights Agreement. No Right Certificate shall be issued
pursuant to Section 3 to represent Rights beneficially owned by an Acquiring
Person or any Associate or Affiliate thereof whose Rights have become void
pursuant to the preceding sentence; no Right Certificate shall be issued at any
time for the transfer of any Rights to an Acquiring Person or any Associate or
Affiliate thereof or to any nominee of such Acquiring Person, Associate or
Affiliate as such Rights would be void pursuant to the preceding sentence; and
any Right Certificate delivered to the Rights Agent for transfer to an Acquiring
Person shall be canceled.
(iii) In the event that there shall not be sufficient
Common Shares issued but not outstanding or authorized but unissued to permit
the exercise in full of the Rights in accordance with the foregoing subparagraph
(ii), the Company shall take all such action as may be
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necessary to authorize additional Common Shares for issuance upon exercise of
the Rights. In the event the Company shall, after good faith effort, be unable
to take all such action as may be necessary to authorize such additional Common
Shares, the Company shall substitute, for each Common Share that would otherwise
be issuable upon exercise of a Right, a number of Preferred Shares or fraction
thereof such that the product of the current per share market price of one
Preferred Share multiplied by such number or fraction is equal to the current
per share market price of one Common Share as of the date of issuance of such
Preferred Shares or fraction thereof.
(b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of Preferred Shares
entitling them (for a period expiring within 45 calendar days after such record
date) to subscribe for or purchase Preferred Shares (or shares having the same
rights, privileges and preferences as the Preferred Shares ("equivalent
preferred shares")) or Securities convertible into or exchangeable for Preferred
Shares or equivalent preferred shares at a price per Preferred Share or
equivalent preferred share (or having a conversion or exchange price per share,
if a Security convertible into or exchangeable for Preferred Shares or
equivalent preferred shares) less than the then-current per share market price
of the Preferred Shares on such record date, the Purchase Price to be in effect
after such record date shall be determined by multiplying the Purchase Price in
effect immediately prior to such record date by a fraction, the numerator of
which shall be the number of Preferred Shares outstanding on such record date
plus the number of Preferred Shares which the aggregate offering price of the
total number of Preferred Shares and/or equivalent preferred shares so to be
offered (and/or the aggregate initial conversion or exchange price of the
convertible or exchangeable
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<PAGE> 22
Securities so to be offered) would purchase at such current market price and the
denominator of which shall be the number of Preferred Shares outstanding on such
record date plus the number of additional Preferred Shares and/or equivalent
preferred shares to be offered for subscription or purchase (or into or for
which the convertible or exchangeable Securities so to be offered are initially
convertible or exchangeable); provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right. In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent. Preferred Shares owned by or held for the account
of the Company shall not be deemed outstanding for the purpose of any such
computation. Such adjustment shall be made successively whenever such a record
date is fixed; and in the event that such rights, options or warrants are not so
issued, the Purchase Price shall be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for making a
distribution to all holders of the Preferred Shares (including any such
distribution to be made in connection with a consolidation or merger in which
the Company is the continuing or surviving corporation) of assets or evidences
of indebtedness (other than a regular quarterly cash dividend or a dividend
payable in Preferred Shares) or subscription rights or warrants (excluding those
referred to in Section 11(b)), the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the
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<PAGE> 23
numerator of which shall be the then-current per share market price of the
Preferred Shares on such record date, less the fair market value (as determined
in good faith by the Board of Directors of the Company, whose determination
shall be described in a statement filed with the Rights Agent) of the portion of
the assets or evidences of indebtedness so to be distributed or of such
subscription rights or warrants applicable to one Preferred Share, and the
denominator of which shall be such current per share market price of the
Preferred Shares; provided, however, that in no event shall the consideration to
be paid upon the exercise of one Right be less than the aggregate par value of
the shares of capital stock of the Company to be issued upon exercise of one
Right. Such adjustments shall be made successively whenever such a record date
is fixed; and in the event that such distribution is not so made, the Purchase
Price shall again be adjusted to be the Purchase Price which would then be in
effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, the
"current per share market price" of any Security on any date shall be deemed to
be the average of the daily closing prices per share or other unit of such
Security for the 30 consecutive Trading Days immediately prior to such date;
provided, however, that in the event that the current per share market price of
a Security is to be determined for any date during a period that follows the
announcement by the issuer of such Security of (A) a dividend or distribution on
such Security payable in shares or other units of such Security or Securities
convertible into or exchangeable for such shares or other units of such
Security, or (B) any subdivision, combination or reclassification of such
Security and does not end prior to the expiration of 30 Trading Days after the
ex-dividend date for such dividend or distribution or the record date for such
subdivision, combination or reclassification, then, and in each such case, the
current per share market price shall be
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appropriately adjusted to reflect such dividend, distribution, subdivision,
combination or reclassification. The closing price of a Security for any Trading
Day shall be the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular way,
in either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if such Security is not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on the
principal national securities exchange on which such Security is listed or
admitted to trading or, if such Security is not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by the National Association of Securities Dealers, Inc. Automated
Quotations System ("NASDAQ") or such other system then in use, or, if on any
such Trading Day such Security is not reported by any such system, the average
of the closing bid and asked prices as furnished by a professional market maker
making a market in such Security selected by the Board of Directors of the
Company. The term "Trading Day" for any Security shall mean a day on which the
principal national securities exchange on which such Security is listed or
admitted to trading is open for the transaction of business or, if such Security
is not listed or admitted to trading on any national securities exchange, a
Business Day.
(ii) For the purpose of any computation hereunder,
the current per share market price of the Preferred Shares shall be determined
in accordance with the method set forth in Section 11(d)(i) if possible. If the
Preferred Shares are not publicly traded, the current
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<PAGE> 25
per share market price of the Preferred Shares shall be conclusively deemed to
be the current per share market price of the Common Shares as determined
pursuant to Section 11(d)(i) multiplied by one hundred (appropriately adjusted
to reflect any stock split, stock dividend or similar transaction occurring
after the date hereof). If neither the Common Shares nor the Preferred Shares
are publicly held or listed or traded, current per share market price shall mean
the fair value per share as determined in good faith by the Board of Directors
of the Company, whose determination shall be described in a statement filed with
the Rights Agent.
(e) No adjustment in the Purchase Price shall be required
unless such adjustment would require an increase or decrease of at least 1% in
the Purchase Price; provided, however, that any adjustments which by reason of
this Section 11(e) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 11 shall be made to the nearest cent or to the nearest one one-millionth
of a Preferred Share or one ten-thousandth of any other Security, as the case
may be. Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
years from the date of the transaction which requires such adjustment or (ii)
the date of the expiration of the right to exercise any Rights.
(f) If, as a result of an adjustment made pursuant to Section
11(a), the holder of any Right thereafter exercised shall become entitled to
receive any shares of capital stock of the Company other than Preferred Shares,
then the number of such other shares so receivable upon exercise of any Right
shall be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the Preferred
Shares contained in
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Section 11(a) through (c) inclusive, and the provisions of Sections 7, 9, 10 and
13 with respect to the Preferred Shares shall apply on like terms to any such
other shares.
(g) All Rights originally issued by the Company subsequent to
any adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised the option
provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of any calculation made pursuant to Section 11(b) or (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one one-hundredths of a Preferred Share (calculated to the nearest one
one-millionth of a Preferred Share) obtained by (i) multiplying (A) the number
of one one-hundredths of a share covered by a Right immediately prior to this
adjustment by (B) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in substitution
for any adjustment in the number of one one-hundredths of a Preferred Share
purchasable upon the exercise of a Right. Each of the Rights outstanding after
such adjustment of the number of Rights shall be exercisable for the number of
one one-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one ten-
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thousandth) obtained by dividing the Purchase Price in effect immediately prior
to adjustment of the Purchase Price by the Purchase Price in effect immediately
after adjustment of the Purchase Price. The Company shall make a public
announcement of its election to adjust the number of Rights, indicating the
record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if Right Certificates have been
issued, shall be at least 10 days later than the date of the public
announcement. If Right Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Right
Certificates on such record date Right Certificates evidencing, subject to
Section 14, the additional Rights to which such holders shall be entitled as a
result of such adjustment, or, at the option of the Company, shall cause to be
distributed to such holders of record in substitution and replacement for the
Right Certificates held by such holders prior to the date of adjustment and,
upon surrender thereof, if required by the Company, new Right Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Right Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein and shall be registered in
the names of the holders of record of Right Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase
Price or the number of one one-hundredths of a Preferred Share issuable upon
exercise of the Rights, the Right Certificates theretofore and thereafter issued
may continue to express the Purchase Price
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and the number of one one-hundredths of a Preferred Share which were expressed
in the initial Right Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below one one-hundredth of the then par value, if
any, of the Preferred Shares issuable upon exercise of the Rights, the Company
shall take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully paid and
nonassessable Preferred Shares at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer, until the occurrence of such
event, issuing to the holder of any Right exercised after such record date the
Preferred Shares and other Securities of the Company, if any, issuable upon such
exercise over and above the Preferred Shares and other Securities of the
Company, if any, issuable upon such exercise on the basis of the Purchase Price
in effect prior to such adjustment; provided, however, that the Company shall
deliver to such holder a due bill or other appropriate instrument evidencing
such holder's right to receive such additional shares or Securities upon the
occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that it in its sole discretion shall determine
to be advisable in order that any consolidation or subdivision of the Preferred
Shares or issuance wholly for cash of Preferred Shares or Securities which by
their terms are convertible into or exchangeable for Preferred Shares, of
dividends on Preferred Shares payable in Preferred
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Shares or of rights, options or warrants referred to in Section 11(b) hereafter
made by the Company to holders of its Preferred Shares shall not be taxable to
such stockholders.
(n) In the event that at any time after the Record Date and
prior to the Distribution Date, the Company shall (i) pay any dividend on the
Common Shares payable in Common Shares or (ii) effect a subdivision, combination
or consolidation of the Common Shares (by reclassification or otherwise than by
payment of dividends in Common Shares) into a greater or lesser number of Common
Shares, then in any such case (A) the number of one one-hundredths of a
Preferred Share purchasable after such event upon proper exercise of each Right
shall be determined by multiplying the number of one one-hundredths of a
Preferred Share so purchasable immediately prior to such event by a fraction,
the numerator of which is the number of Common Shares outstanding immediately
before such event and the denominator of which is the number of Common Shares
outstanding immediately after such event, and (B) each Common Share outstanding
immediately after such event shall have issued with respect to it that number of
Rights which each Common Share outstanding immediately prior to such event had
issued with respect to it. The adjustments provided for in this Section 11(n)
shall be made successively whenever such a dividend is paid or such a
subdivision, combination or consolidation is effected.
Section 12. Certificate of Adjustments. Whenever an adjustment
is made as provided in Section 11 or 13, the Company shall promptly (a) prepare
a certificate setting forth such adjustment and a brief statement of the facts
accounting for such adjustment, (b) file with the Rights Agent and with each
transfer agent for the Common Shares or the Preferred Shares a copy of such
certificate, and (c) mail such certificate or a brief summary thereof to each
holder of a Right Certificate in accordance with Section 25.
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Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power. In the event that, directly or indirectly, at any time
after a Person has become an Acquiring Person, (a) the Company shall consolidate
with, or merge with and into, any other Person, (b) any Person shall consolidate
with the Company or merge with and into the Company and the Company shall be the
continuing or surviving corporation of such merger and, in connection with such
transaction, all or part of the Common Shares shall be changed into or exchanged
for stock or other Securities of any other Person (or the Company) or cash or
any other property, or (c) the Company shall sell or otherwise transfer (or one
or more of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power aggregating 50% or more of the assets or
earning power of the Company and its Subsidiaries, taken as a whole, to any
Person other than the Company or one or more of its wholly owned Subsidiaries,
then, and in each such case, proper provision shall be made so that (i) each
holder of a Right (except as otherwise provided herein) shall thereafter have
the right to receive, upon exercise thereof at a price equal to the then-current
Purchase Price multiplied by the number of one one-hundredths of a Preferred
Share for which a Right is then exercisable, in accordance with the terms of
this Rights Agreement and in lieu of Preferred Shares, such number of Common
Shares of such other Person (including the Company as the successor or surviving
corporation) as shall equal the result obtained by (A) multiplying the
then-current Purchase Price by the number of one one-hundredths of a Preferred
Share for which a Right is then exercisable and dividing that product by (B) 50%
of the current per share market price of the Common Shares of such other Person
(determined pursuant to Section 11(d)) on the date of consummation of such
consolidation, merger, sale or transfer; (ii) the issuer of such Common Shares
shall thereafter be liable for and shall assume, by virtue of such
consolidation, merger, sale or transfer, all the
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obligations and duties of the Company pursuant to this Rights Agreement; (iii)
the term "Company" shall thereafter be deemed to refer to such issuer; and (iv)
such issuer shall take such steps (including, but not limited to, the
reservation of a sufficient number of its Common Shares in accordance with
Section 9) in connection with such consummation as may be necessary to assure
that the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to the Common Shares thereafter deliverable upon
exercise of the Rights. The Company shall not consummate any such consolidation,
merger, sale or transfer unless prior thereto the Company and such issuer shall
have executed and delivered to the Rights Agent a supplemental agreement so
providing. The Company shall not enter into any transaction of the kind referred
to in this Section 13 if at the time of such transaction there are any rights,
warrants, instruments or securities outstanding or any agreements or
arrangements which, as a result of the consummation of such transaction, would
eliminate or substantially diminish the benefits intended to be afforded by the
Rights. The provisions of this Section 13 shall similarly apply to successive
mergers, consolidations, sales and other transfers.
Section 14. Fractional Rights and Fractional Shares. (a) The
Company shall not be required to issue fractions of Rights or to distribute
Right Certificates which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to any registered holder of a Right Certificate with
regard to which a fractional Right would otherwise be issuable, an amount in
cash equal to the same fraction of the current market value of a whole Right.
For purposes of this Section 14(a), the current market value of a whole Right
shall be the closing price of the Rights on the Trading Day immediately prior to
the date on which fractional Rights would otherwise have been issuable
(determined in accordance with Section 11(d)(i)). If for any such
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date no closing price of the Rights can be determined, the current market value
of a whole Right shall be its fair value on such date as determined in good
faith by the Board of Directors of the Company.
(b) The Company shall not be required to issue fractions of
Preferred Shares (other than fractions which are integral multiples of one
one-hundredth of a Preferred Share) upon exercise of the Rights or to distribute
certificates which evidence fractional Preferred Shares (other than fractions
which are integral multiples of one one-hundredth of a Preferred Share).
Fractions of Preferred Shares in integral multiples of one one-hundredth of a
Preferred Share may, at the election of the Company, be evidenced by depositary
receipts pursuant to an appropriate agreement between the Company and a
depositary selected by it; provided, that such agreement shall provide that the
holders of such depositary receipts shall have all the rights, privileges and
preferences to which they are entitled as beneficial owners of the Preferred
Shares represented by such depositary receipts. In lieu of fractional Preferred
Shares that are not integral multiples of one one-hundredth of a Preferred
Share, the Company shall pay to any registered holder of a Right Certificate at
the time Rights represented thereby are exercised as herein provided an amount
in cash equal to the same fraction of the current market value of one Preferred
Share. For purposes of this Section 14(b), the current market value of a
Preferred Share shall be the closing price of a Preferred Share on the Trading
Day immediately prior to the date of such exercise (determined in accordance
with Section 11(d)(i)).
(c) The holder of a Right by the acceptance of such Right
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right (except as provided above).
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Section 15. Rights of Action. All rights of action in respect
of this Rights Agreement, excepting the rights of action given to the Rights
Agent under Section 18, are vested in the respective registered holders of the
Right Certificates (and, prior to the Distribution Date, the registered holders
of the Common Shares); and any registered holder of any Right Certificate (or,
prior to the Distribution Date, of Common Shares), without the consent of the
Rights Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of Common Shares), may, in his own behalf and for his own
benefit, enforce and may institute and maintain any suit, action or proceeding
against the Company to enforce or otherwise act in respect of his right to
exercise the Rights evidenced by such Right Certificate in the manner provided
in such Right Certificate and in this Rights Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Rights Agreement and will be entitled to specific
performance of the obligations under and injunctive relief against actual or
threatened violations of the obligations of any Person subject to this Rights
Agreement.
Section 16. Agreement of Right Holders. Every holder of a
Right, by accepting the same, consents and agrees with the Company and the
Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, Rights will be
transferable only in connection with the transfer of the applicable Common
Shares;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office of the Rights Agent, duly endorsed or accompanied by a
proper instrument of transfer; and
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(c) the Company and the Rights Agent may deem and treat the
person in whose name a Right Certificate (or, prior to the Distribution Date,
the associated Common Share certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on any Right Certificate or the associated Common Share
certificate made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary.
Section 17. Right Certificate Holder Not Deemed a Stockholder.
No holder, as such, of any Right Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Preferred
Shares or any other Securities of the Company which may at any time be issuable
on the exercise of the Rights represented thereby, nor shall anything contained
herein or in any Right Certificate be construed to confer upon the holder of any
Right Certificate, as such, any of the rights of a stockholder of the Company,
including any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof or to give or withhold consent
to any corporate action or to receive notice of meetings or other actions
affecting stockholders (except as provided in Section 25) or to receive
dividends or subscription rights or otherwise, until the Right or Rights
evidenced by such Right Certificate shall have been exercised in accordance with
the provisions hereof.
Section 18. Concerning the Rights Agent. The Company agrees to
pay to the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the administration
and execution of this Rights Agreement and the
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exercise and performance of its duties hereunder. The Company also agrees to
indemnify the Rights Agent for, and to hold it harmless against, any loss,
liability or expense incurred without negligence, bad faith or willful
misconduct on the part of the Rights Agent for anything done or omitted by the
Rights Agent in connection with the acceptance and administration of this Rights
Agreement, including the costs and expenses of defending against any claim of
liability in the premises.
The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Rights Agreement in reliance upon any
Right Certificate or certificate for the Preferred Shares or Common Shares or
for other Securities of the Company, instrument of assignment or transfer, power
of attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged by the
proper person or persons or otherwise in reliance upon the advice of counsel as
set forth in Section 20.
Section 19. Merger or Consolidation or Change of Name of
Rights Agent. Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party or any corporation succeeding to
the stock transfer or corporate trust powers of the Rights Agent or any
successor Rights Agent shall be the successor to the Rights Agent under this
Rights Agreement without the execution or filing of any paper or any further act
on the part of any of the parties hereto; provided, that such corporation would
be eligible for appointment as a successor Rights Agent
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under the provisions of Section 21. In case at the time such successor Rights
Agent shall succeed to the agency created by this Rights Agreement any of the
Right Certificates shall have been countersigned but not delivered, any such
successor Rights Agent may adopt the countersignature of the predecessor Rights
Agent and deliver such Right Certificates so countersigned; and in case at that
time any of the Right Certificates shall not have been countersigned, any
successor Rights Agent may countersign such Right Certificates either in the
name of the predecessor Rights Agent or in the name of the successor Rights
Agent; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Rights Agreement.
In case at any time the name of the Rights Agent shall be
changed and at such time any of the Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Right Certificates so countersigned; and in
case at that time any of the Right Certificates shall not have been
countersigned, the Rights Agent may countersign such Right Certificates either
in its prior name or in its changed name; and in all such cases such Right
Certificates shall have the full force provided in the Right Certificates and in
this Rights Agreement.
Section 20. Duties of Rights Agent. The Rights Agent
undertakes the duties and obligations imposed by this Rights Agreement upon the
following terms and conditions, by all of which the Company and the holders of
Right Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may
be legal counsel for the Company), and the opinion of such counsel shall be full
and complete
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authorization and protection to the Rights Agent as to any action taken or
omitted by it in good faith and in accordance with such opinion.
(b) The Rights Agent shall not be deemed to have knowledge of
any fact or matter pertaining to the performance of its duties under this Rights
Agreement, except such facts or matters as are evidenced by records which are
required to be created and maintained by it hereunder or to the extent it shall
have been advised thereof in writing by the Company or by a holder of Rights.
Whenever in the performance of its duties under this Rights Agreement the Rights
Agent shall deem it necessary or desirable that any fact or matter be proved or
established by the Company prior to taking or suffering any action hereunder,
such fact or matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively proved and established
by a certificate signed by any one of the Chairman of the Board, the Chief
Executive Officer, the President, any Vice President, the Treasurer or the
Secretary of the Company and delivered to the Rights Agent; and such certificate
shall be full authorization to the Rights Agent for any action taken or suffered
in good faith by it under the provisions of this Rights Agreement in reliance
upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company
and any other Person only for its own negligence, bad faith or willful
misconduct.
(d) The Rights Agent shall not be liable for or by reason of
any of the statements of fact or recitals contained in this Rights Agreement or
in the Right Certificates (except its countersignature thereof) or be required
to verify the same, but all such statements and recitals are and shall be deemed
to have been made by the Company only.
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<PAGE> 38
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Rights Agreement or the execution and delivery
hereof (except the due execution hereof by the Rights Agent) or in respect of
the validity or execution of any Right Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Rights Agreement or in any Right
Certificate; nor shall it be responsible for any change in the exercisability of
the Rights (including any Rights becoming void pursuant to Section 11(a)(ii)) or
any adjustment in the terms of the Rights (including the manner, method or
amount thereof) provided for in Section 3, 11, 13, 23 or 24 or the ascertaining
of the existence of facts that would require any such change or adjustment
(except with respect to the exercise of Rights evidenced by Right Certificates
after actual notice that such change or adjustment is required); nor shall it by
any act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Preferred Shares to be issued pursuant to
this Rights Agreement or any Right Certificate or as to whether any Preferred
Shares will, when issued, be validly authorized and issued and fully paid and
nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing by
the Rights Agent of the provisions of this Rights Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder from
any one of the Chairman of the Board, the Chief Executive Officer, the
President, any Vice President, the Secretary or the Treasurer of the Company and
to apply to such officers for advice or instructions in connection
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with its duties, and the Rights Agent shall not be liable for any action taken
or suffered by it in good faith in accordance with instructions of any such
officer or for any delay in acting while waiting for those instructions.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
Securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not the Rights
Agent under this Rights Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Company or for any other legal
entity.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either itself
or by or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss resulting from any such act, default,
neglect or misconduct; provided, that reasonable care was exercised in the
selection and continued employment thereof.
Section 21. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Rights Agreement upon 30 days' notice in writing mailed to the Company and to
each transfer agent of the Common Shares or Preferred Shares by registered or
certified mail and to the holders of the Right Certificates by first-class mail.
The Company may remove the Rights Agent or any successor Rights Agent upon 30
days' notice in writing mailed to the Rights Agent or successor Rights Agent, as
the case may be, and to each transfer agent of the Common Shares or Preferred
Shares by registered or
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<PAGE> 40
certified mail and to the holders of the Right Certificates by first-class mail.
If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights Agent.
If the Company shall fail to make such appointment within a period of 30 days
after giving notice of such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Rights Agent or
by the holder of a Right Certificate (which holder shall, with such notice,
submit such holder's Right Certificate for inspection by the Company), then the
registered holder of any Right Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Company or by such a court, shall be a
corporation or limited liability company which is authorized under applicable
laws to exercise corporate trust or stock transfer powers and is subject to
supervision or examination by federal or state authority and which has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $50 million. After appointment, the successor Rights Agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named as the Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Shares or Preferred Shares and mail a notice thereof in writing to
the registered holders of the Right Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein shall not affect
the legality or validity of the resignation or removal of the Rights Agent or
the appointment of the successor Rights Agent, as the case may be.
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Section 22. Issuance of New Right Certificates.
Notwithstanding any of the provisions of this Rights Agreement or of the Rights
to the contrary, the Company may, at its option, issue new Right Certificates
evidencing Rights in such form as may be approved by its Board of Directors to
reflect any adjustment or change in the Purchase Price and the number or kind or
class of shares or other Securities or property purchasable under the Right
Certificates made in accordance with the provisions of this Rights Agreement.
Section 23. Redemption. (a) The Board of Directors of the
Company may, at its option, at any time prior to such time as any Person becomes
an Acquiring Person, redeem all but not less than all of the outstanding Rights
at a price of $.01 per Right, appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof (such
redemption price being hereinafter referred to as the "Redemption Price"). The
redemption of the Rights by the Board of Directors may be made effective at such
time, on such basis and with such conditions as the Board of Directors in its
sole discretion may establish; and
(b) Immediately upon the action of the Board of Directors of
the Company ordering the redemption of the Rights pursuant to paragraph (a) of
this Section 23 and without any further action and without any notice, the right
to exercise the Rights will terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption Price. The Company shall
promptly give public notice of any such redemption; provided, however, that the
failure to give, or any defect in, any such notice shall not affect the validity
of such redemption. Within 10 days after such action of the Board of Directors
ordering the redemption of the Rights, the Company shall mail a notice of
redemption to all holders of the outstanding Rights at their last addresses as
they appear upon the registry books of the Rights Agent or, prior to the
Distribution
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<PAGE> 42
Date, on the registry books of the transfer agent for the Common Shares. Any
notice which is mailed in the manner herein provided shall be deemed given,
whether or not any particular holder receives notice. Each such notice of
redemption will state the method by which payment of the Redemption Price will
be made. Neither the Company nor any of its Affiliates or Associates may redeem,
acquire or purchase for value any Rights at any time in any manner other than
that specifically set forth in this Section 23 or in Section 24 and other than
in connection with the purchase of Common Shares prior to the Distribution Date.
Section 24. Exchange. (a) The Board of Directors of the
Company may, at its option, at any time after any Person becomes an Acquiring
Person, exchange all or part of the then outstanding and exercisable Rights
(which shall not include any Rights that have become void pursuant to the
provisions of Section 11(a)(ii)) for Common Shares at an exchange ratio of one
Common Share per Right (the "Exchange Ratio"). Notwithstanding the foregoing,
the Board of Directors shall not be empowered to effect such exchange at any
time after any Person (other than the Company, any Subsidiary of the Company,
any employee benefit plan of the Company or any such Subsidiary, or any entity
holding Common Shares for or pursuant to the terms of any such plan), together
with all Affiliates and Associates of such Person, becomes the Beneficial Owner
of 50% or more of the Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors of
the Company ordering the exchange of any Rights pursuant to paragraph (a) of
this Section 24 and without any further action and without any notice, the right
to exercise such Rights will terminate and the only right thereafter of a holder
of such Rights shall be to receive that number of Common Shares equal to the
number of such Rights held by such holder multiplied by the Exchange Ratio. The
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Company shall promptly give public notice of any such exchange; provided,
however, that the failure to give, or any defect in, any such notice shall not
affect the validity of such exchange. The Company promptly shall mail notice of
such exchange to all holders of such Rights at their last addresses as they
appear upon the registry books of the Rights Agent. Any notice which is mailed
in the manner herein provided shall be deemed given, whether or not any
particular holder receives notice. Each such notice of exchange will state the
method by which the exchange of the Common Shares for Rights will be effected
and, in the event of any partial exchange, the number of Rights which will be
exchanged. Any partial exchange shall be effected pro rata based on the number
of Rights (other than Rights which have become void pursuant to the provisions
of Section 11(a)(ii)) held by each holder of Rights.
(c) In the event that there shall not be sufficient Common
Shares issued but not outstanding or authorized but unissued to permit an
exchange of Rights in accordance with this Section 24, the Company shall take
all such action as may be necessary to authorize additional Common Shares for
issuance upon exchange of the Rights. In the event the Company shall, after good
faith effort, be unable to take all such action as may be necessary to authorize
such additional Common Shares, the Company shall substitute, for each Common
Share that would otherwise be issuable upon exchange of a Right, a number of
Preferred Shares or equivalent preferred shares or fraction thereof such that
the product of the current per share market price of one Preferred Share or
equivalent preferred share multiplied by such number or fraction is equal to the
current per share market price of one Common Share as of the date of issuance of
such Preferred Shares or equivalent preferred shares or fraction thereof.
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(d) The Company shall not be required to issue fractions of
Common Shares or to distribute certificates which evidence fractional Common
Shares in an exchange. In lieu of such fractional Common Shares, the Company
shall pay to any registered holder of a Right Certificate with regard to which a
fractional Common Share would otherwise be issuable an amount in cash equal to
the same fraction of the current market value of a whole Common Share. For
purposes of this paragraph (d), the current market value of a whole Common Share
shall be the closing price of a Common Share on the Trading Day immediately
prior to the date of exchange pursuant to this Section 24 (determined in
accordance with Section 11(d)(i)).
Section 25. Notice of Certain Events. (a) In case the Company
shall propose (i) to pay any dividend payable in stock of any class to the
holders of its Preferred Shares or to make any other distribution to the holders
of its Preferred Shares (other than a regular quarterly cash dividend), (ii) to
offer to the holders of its Preferred Shares rights or warrants to subscribe for
or to purchase any additional Preferred Shares or shares of stock of any other
class or any other Securities, (iii) to effect any reclassification of its
Preferred Shares (other than a reclassification involving only the subdivision
of outstanding Preferred Shares), (iv) to effect any consolidation or merger
into or with, or to effect any sale or other transfer (or to permit one or more
of its Subsidiaries to effect any sale or other transfer), in one or more
transactions, of 50% or more of the assets or earning power of the Company and
its Subsidiaries, taken as a whole, to, any other Person, or (v) to effect the
liquidation, dissolution or winding up of the Company, then, in each such case,
the Company shall give to each holder of a Right Certificate, in accordance with
Section 26, a notice of such proposed action, which shall specify (x) the record
date for the purposes of such stock dividend or distribution of rights or
warrants or the date on which such
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<PAGE> 45
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution or winding up is to take place and (y) the date of participation
therein by the holders of the Common Shares and/or Preferred Shares, if any such
date is to be fixed, and such notice shall be so given in the case of any action
covered by clause (i) or (ii) above at least 10 days prior to the record date
for determining holders of the Preferred Shares for purposes of such action, and
in the case of any such other action at least 10 days prior to the date of the
taking of such proposed action or the date of participation therein by the
holders of the Common Shares and/or Preferred Shares, whichever shall be the
earlier.
(b) In case the event set forth in Section 11(a)(ii) shall
occur, then the Company shall as soon as practicable thereafter give to each
holder of a Right Certificate, in accordance with Section 26, a notice of the
occurrence of such event, which notice shall describe such event and the
consequences of such event to holders of Rights under said Section 11(a)(ii).
Section 26. Notices. Notices or demands authorized by this
Rights Agreement to be given or made by the Rights Agent or by the holder of any
Right Certificate to or on the Company shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Rights Agent) as follows:
Water Pik Technologies, Inc.
__________________
__________________
Attention: Corporate Secretary
Subject to the provisions of Section 21, any notice or demand authorized by this
Rights Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on
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<PAGE> 46
the Rights Agent shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Company) as follows:
ChaseMellon Shareholder Services, L.L.C.
Overpeck Centre
85 Challenger Road
Ridgefield Park, NJ 07660
Notices or demands authorized by this Rights Agreement to be given or made by
the Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. Supplements and Amendments. The Company may from
time to time supplement or amend this Rights Agreement without the approval of
any holders of Right Certificates in order to cure any ambiguity, to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provision herein, or to make any other provisions with respect to
the Rights which the Company may deem necessary or desirable, any such
supplement or amendment to be evidenced by a writing signed by the Company and
the Rights Agent; provided, however, that from and after such time as any Person
becomes an Acquiring Person this Rights Agreement shall not be amended in any
manner which would adversely affect the interests of the holders of Rights.
Without limiting the foregoing, the Company may at any time prior to such time
as any Person becomes an Acquiring Person amend this Rights Agreement to extend
the Final Expiration Date or change the Purchase Price hereunder.
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Section 28. Successors. All the covenants and provisions of
this Rights Agreement by or for the benefit of the Company or the Rights Agent
shall bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 29. Benefits of this Rights Agreement. Nothing in this
Rights Agreement shall be construed to give to any person or corporation other
than the Company, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the Common Shares) any legal
or equitable right, remedy or claim under this Rights Agreement; but this Rights
Agreement shall be for the sole and exclusive benefit of the Company, the Rights
Agent and the registered holders of the Right Certificates (and, prior to the
Distribution Date, the Common Shares).
Section 30. Severability. If any term, provision, covenant or
restriction of this Rights Agreement is held by a court of competent
jurisdiction or other authority to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Rights
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
Section 31. Governing Law. This Rights Agreement and each
Right Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State.
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Section 32. Counterparts. This Rights Agreement may be
executed in any number of counterparts and each of such counterparts shall for
all purposes be deemed to be an original, and all such counterparts shall
together constitute but one and the same instrument.
Section 33. Descriptive Headings. Descriptive headings of the
several Sections of this Rights Agreement are inserted for convenience only and
shall not control or affect the meaning or construction of any of the provisions
hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Rights
Agreement to be duly executed and attested all as of the day and year first
above written.
Attest: WATER PIK TECHNOLOGIES, INC.
By: By:
----------------------------- -----------------------------
Title: Title:
CHASEMELLON SHAREHOLDER
SERVICES, L.L.C.
Attest: Rights Agent
By: By:
----------------------------- -----------------------------
Title: Assistant Vice President Title: Vice President
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<PAGE> 50
Exhibit A
FORM
of
CERTIFICATE OF DESIGNATIONS
of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
WATER PIK TECHNOLOGIES, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
Water Pik Technologies, Inc., a corporation organized and
existing under the General Corporation Law of the State of Delaware (hereinafter
called the "Corporation"), hereby certifies that the following resolution was
adopted by the Board of Directors of the Corporation as required by Section 151
of the General Corporation Law at a meeting duly called and held on
______________, 1999.
RESOLVED, that, pursuant to the authority granted to and
vested in the Board of Directors of this Corporation (hereinafter called the
"Board of Directors" or the "Board") in accordance with the provisions of the
Certificate of Incorporation, the Board of Directors hereby creates a series of
Preferred Stock, without par value (the "Preferred Stock"), of the Corporation
and hereby states the designation and number of shares and fixes the relative
rights, preferences, and limitations thereof as follows:
Section 1. Designation and Amount. The shares of such series
shall be designated as "Series A Junior Participating Preferred Stock" (the
"Series A Preferred Stock") and the number of shares constituting the Series A
Preferred Stock shall be __________. Such number of shares may be increased or
decreased by resolution of the Board of Directors; provided, that no decrease
shall reduce the number of shares of Series A Preferred Stock to a number less
than the number of shares then outstanding plus the number of shares reserved
for issuance upon the exercise of outstanding options, rights or warrants or
upon the conversion or exchange of any outstanding securities issued by the
Corporation convertible into or exchangeable for shares of Series A Preferred
Stock.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of any
series of Preferred Stock (or any similar stock) ranking prior and
superior to the Series A Preferred Stock
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<PAGE> 51
with respect to dividends, the holders of shares of Series A Preferred
Stock, in preference to the holders of shares of Common Stock, par
value $.01 per share (the "Common Stock"), of the Corporation and of
any other junior stock, shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for
the purpose, quarterly dividends payable in cash on the first day of
March, June, September and December in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"), commencing
on the first Quarterly Dividend Payment Date after the first issuance
of a share or fraction of a share of Series A Preferred Stock, in an
amount per share (rounded to the nearest cent) equal to the greater of
(a) $1 or (b) subject to the provision for adjustment hereinafter set
forth, 100 times the aggregate per share amount of all cash dividends
and 100 times the aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions, other than a dividend
payable in shares of Common Stock or a subdivision of the outstanding
shares of Common Stock (by reclassification or otherwise), declared on
the Common Stock since the immediately preceding Quarterly Dividend
Payment Date or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share or fraction of a share of
Series A Preferred Stock. In the event the Corporation shall at any
time declare or pay any dividend on the Common Stock payable in shares
of Common Stock or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into
a greater or lesser number of shares of Common Stock, then in each such
case the amount to which holders of shares of Series A Preferred Stock
were entitled immediately prior to such event under clause (b) of the
preceding sentence shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution
on the Series A Preferred Stock as provided in paragraph (A) of this
Section immediately after it declares a dividend or distribution on the
Common Stock (other than a dividend payable in shares of Common Stock);
provided, that, in the event no dividend or distribution shall have
been declared on the Common Stock during the period between any
Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $1 per share on the Series A
Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares,
unless the date of issue of such shares is prior to the record date for
the first Quarterly Dividend Payment Date, in which case dividends on
such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment
Date or is a date after the record date for the determination of
holders of shares of Series A Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in
either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly
A-2
<PAGE> 52
Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series A Preferred Stock in
an amount less than the total amount of such dividends at the time
accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The
Board of Directors may fix a record date for the determination of
holders of shares of Series A Preferred Stock entitled to receive
payment of a dividend or distribution declared thereon, which record
date shall be not more than 60 days prior to the date fixed for the
payment thereof.
Section 3. Voting Rights. The holders of shares of Series A
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Preferred Stock shall entitle the holder
thereof to 100 votes on all matters submitted to a vote of the
stockholders of the Corporation. In the event the Corporation shall at
any time declare or pay any dividend on the Common Stock payable in
shares of Common Stock or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the number of votes per share to which
holders of shares of Series A Preferred Stock were entitled immediately
prior to such event shall be adjusted by multiplying such number by a
fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) Except as otherwise provided herein, in any other
Certificate of Designations creating a series of Preferred Stock or any
similar stock, or by law, the holders of shares of Series A Preferred
Stock and the holders of shares of Common Stock and any other capital
stock of the Corporation having general voting rights shall vote
together as one class on all matters submitted to a vote of
stockholders of the Corporation.
(C) Except as set forth herein or as otherwise provided by
law, holders of Series A Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the extent
they are entitled to vote with holders of the Common Stock as set forth
herein) for taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of
Series A Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
A-3
<PAGE> 53
(i) declare or pay dividends or make any other
distributions on any shares of stock ranking junior (as to
dividends) to the Series A Preferred Stock;
(ii) declare or pay dividends or make any other
distributions on any shares of stock ranking on a parity (as
to dividends) with the Series A Preferred Stock, except
dividends paid ratably on the Series A Preferred Stock and all
such parity stock on which dividends are payable and in
arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem, purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to
the Series A Preferred Stock; provided, that the Corporation
may at any time redeem, purchase or otherwise acquire shares
of any such junior stock in exchange for shares of any stock
of the Corporation ranking junior (either as to dividends or
upon dissolution, liquidation or winding up) to the Series A
Preferred Stock; or
(iv) redeem, purchase or otherwise acquire for
consideration any shares of Series A Preferred Stock or any
shares of stock ranking on a parity with the Series A
Preferred Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board
of Directors) to all holders of such shares upon such terms as
the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and
preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable
treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
paragraph (A) of this Section 4, purchase or otherwise acquire such
shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized and
unissued shares of Preferred Stock and may be reissued as part of a new series
of Preferred Stock subject to the conditions and restrictions on issuance set
forth herein, in the Certificate of Incorporation or in any other Certificate of
Designations creating a series of Preferred Stock or any similar stock or
otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up.
Upon any liquidation, dissolution or winding up of the
Corporation, no distribution shall be made (1) to the holders of shares of stock
ranking junior (upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received $____ per share, plus an amount equal to the
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment;
A-4
<PAGE> 54
provided, that the holders of shares of Series A Preferred Stock shall be
entitled to receive an aggregate amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 100 times the aggregate amount to be
distributed per share to holders of shares of Common Stock, or (2) to the
holders of shares of stock ranking on a parity (upon liquidation, dissolution or
winding up) with the Series A Preferred Stock, except distributions made ratably
on the Series A Preferred Stock and all such parity stock in proportion to the
total amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the Corporation shall at
any time declare or pay any dividend on the Common Stock payable in shares of
Common Stock or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the aggregate amount to which
holders of shares of Series A Preferred Stock were entitled immediately prior to
such event under the proviso in clause (1) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 7. Consolidation, Merger. etc. In case the Corporation
shall enter into any consolidation, merger, combination or other transaction in
which shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Preferred
Stock shall not be redeemable.
Section 9. Rank. The Series A Preferred Stock shall rank, with
respect to the payment of dividends and the distribution of assets, junior to
all other series of the Preferred Stock.
Section 10. Amendment. The Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the shares of Series A
Preferred Stock so as to affect them
A-5
<PAGE> 55
adversely without the affirmative vote of the holders of at least two-thirds of
the outstanding shares of Series A Preferred Stock, voting together as a single
class.
IN WITNESS WHEREOF, this Certificate of Designations is
executed on behalf of the Corporation by its Chairman of the Board and attested
by its Secretary this __th day of ______________, 1999.
Attest:
- -------------------------------- --------------------------------------
Secretary President and Chief Financial Officer
A-6
<PAGE> 56
Exhibit B
Form of Right Certificate
Certificate No. R- Rights
NOT EXERCISABLE AFTER _________________, 2009 OR EARLIER IF
REDEMPTION OR EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO
REDEMPTION AT $.01 PER RIGHT AND TO EXCHANGE ON THE TERMS SET
FORTH IN THE RIGHTS AGREEMENT.
Right Certificate
WATER PIK TECHNOLOGIES, INC.
This certifies that _______________________, or registered
assigns, is the registered owner of the number of Rights set forth above, each
of which entitles the owner thereof, subject to the terms, provisions and
conditions of the Rights Agreement, dated as of ______________, 1999, as amended
from time to time (as so amended, the "Rights Agreement"), between Water Pik
Technologies, Inc., a Delaware corporation (the "Company"), and ChaseMellon
Shareholder Services, L.L.C., a limited liability company (the "Rights Agent"),
to purchase from the Company at any time after the Distribution Date (as such
term is defined in the Rights Agreement) and prior to 5:00 P.M., Eastern time,
on __________, 2009 at the principal office of the Rights Agent, or at the
office of its successor as Rights Agent, one one-hundredth of a fully paid
non-assessable share of Series A Junior Participating Preferred Stock, without
par value (the "Preferred Shares"), of the Company, at a purchase price of
$______ per one one-hundredth of a Preferred Share (the "Purchase Price"), upon
presentation and surrender of this Right Certificate with the Form of Election
to Purchase duly executed. The number of Rights evidenced by this Right
Certificate (and the number of one one-hundredths of a Preferred Share which may
be purchased upon exercise hereof) set forth above, and the Purchase Price set
forth above, are the number and Purchase Price as of ______________, 1999, based
on the Preferred Shares as constituted at such date. As provided in the Rights
Agreement, the Purchase Price and the number of one one-hundredths of a
Preferred Share which may be purchased upon the exercise of the Rights evidenced
by this Right Certificate are subject to modification and adjustment upon the
happening of certain events.
This Right Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Rights Agreement reference is hereby made for a full description of
the rights, limitations of rights, obligations, duties and immunities hereunder
of the Rights Agent, the Company and the holders of the Right Certificates.
Copies of the Rights
B-1
<PAGE> 57
Agreement are on file at the principal executive offices of the Company and the
above-mentioned office of the Rights Agent.
Subject to the provisions of the Rights Agreement, this Right
Certificate, with or without other Right Certificates, upon surrender at the
principal office of the Rights Agent, may be exchanged for another Right
Certificate or Right Certificates of like tenor and date evidencing Rights
entitling the holder to purchase a like aggregate number of Preferred Shares as
the Rights evidenced by the Right Certificate or Right Certificates surrendered
shall have entitled such holder to purchase. If this Right Certificate shall be
exercised in part, the holder shall be entitled to receive upon surrender hereof
another Right Certificate or Right Certificates for the number of whole Rights
not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate (i) may be redeemed by the Company at a redemption
price of $.01 per Right or (ii) may be exchanged in whole or in part for shares
of the Company's Common Stock, par value $.10 per share, or Preferred Shares.
No fractional Preferred Shares will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of one one-hundredth of a Preferred Share, which may, at the
election of the Company, be evidenced by depositary receipts), but in lieu
thereof a cash payment will be made as provided in the Rights Agreement.
No holder of this Right Certificate shall be entitled to vote
or receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Company which may at any time be
issuable upon exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company, including any right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, to give or withhold consent to any corporate action, to receive
notice of meetings or other actions affecting stockholders (except as provided
in the Rights Agreement), or to receive dividends or subscription rights, until
the Right or Rights evidenced by this Right Certificate shall have been
exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Rights Agent.
B-2
<PAGE> 58
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal. Dated as of ________________________.
ATTEST: WATER PIK TECHNOLOGIES, INC.
____________________________________ By_________________________________
Countersigned:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
Rights Agent
By_________________________________
Authorized Signature
B-3
<PAGE> 59
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer this Right Certificate.)
FOR VALUE RECEIVED ____________________________________ hereby
sells, assigns and transfers unto ______________________________________________
(Please print name and address of transferee)
________________________________________________________________________________
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint ________________, as his
Attorney, to transfer the within Right Certificate on the books of the
within-named Company, with full power of substitution.
Dated:
---------------------------
---------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
- --------------------------------------------------------------------------------
The undersigned hereby certifies that the Rights evidenced by
this Right Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).
---------------------------
Signature
- --------------------------------------------------------------------------------
B-4
<PAGE> 60
Form of Reverse Side of Right Certificate -- continued
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights represented by this Right Certificate.)
To: WATER PIK TECHNOLOGIES, INC.
The undersigned hereby irrevocably elects to exercise
__________________ Rights represented by this Right Certificate to purchase the
Preferred Shares issuable upon the exercise of such Rights and requests that
certificates for such Preferred Shares be issued in the name of:
Please insert social security
or other identifying number
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
Dated:
---------------------------
---------------------------
Signature
B-5
<PAGE> 61
Form of Reverse Side of Right Certificate - continued
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
- --------------------------------------------------------------------------------
The undersigned hereby certifies that the Rights evidenced by
this Right Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).
---------------------------
Signature
- --------------------------------------------------------------------------------
NOTICE
The signature in the Form of Assignment or Form of Election to
Purchase, as the case may be, must conform to the name as written upon the face
of this Right Certificate in every particular, without alteration or enlargement
or any change whatsoever.
In the event the certification set forth above in the Form of
Assignment or the Form of Election to Purchase, as the case may be, is not
completed, the Company and the Rights Agent will deem the beneficial owner of
the Rights evidenced by this Right Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement) and such
Assignment or Election to Purchase will not be honored.
B-6
<PAGE> 1
Exhibit 10.1
FORM OF TAX SHARING AND INDEMNIFICATION AGREEMENT
===============================================================================
THIS TAX SHARING AND INDEMNIFICATION AGREEMENT (the "Agreement"), dated
as of ___________1999, is made by and between Allegheny Teledyne Incorporated, a
Delaware corporation ("ATI") on behalf of itself and each member of the ATI
Consolidated Group, and Water Pik Technologies, Inc., a Delaware corporation
("SPINCO"), on behalf of itself and each member of the SPINCO Group and their
respective successors.
Witnesseth
----------
WHEREAS, ATI has determined to effect the Distribution pursuant to the
Distribution Agreement;
WHEREAS, the IRS has issued the IRS Ruling which states the tax treatment of the
Distribution and the Other Transactions;
WHEREAS, the parties are entering into this Agreement to ensure the continuing
effectiveness of the IRS Ruling, to provide for certain indemnities, and to
provide for various administrative matters relating to Taxes, including:
1. the preparation and filing of Tax Returns along with the
payment of Taxes shown due and payable thereon;
2. the retention and maintenance of relevant records necessary
to prepare and file appropriate Tax Returns, as well as
providing for appropriate access to those records by the
parties to this Agreement;
3. the conduct of audits, examinations, and proceedings by
appropriate government entities which could result in a
redetermination of Taxes; and
4. the cooperation of all parties with one another in order to
fulfill their duties and responsibilities under this
Agreement and under the Code and other applicable law; and
WHEREAS, it is the intent of the parties that SPINCO or the appropriate member
of the SPINCO Group shall economically bear the burden of all Taxes otherwise
imposed upon or attributable to the Operations of members of the SPINCO Group
occurring after the Effective Date, and that SPINCO will be responsible for and
reimburse ATI for any Incremental Tax Assessment.
NOW, THEREFORE, in consideration of the mutual promises, covenants, and
conditions contained in this Agreement, and intending to be legally bound
hereby, the parties hereto agree as follows:
<PAGE> 2
ARTICLE I
DEFINITIONS
-----------
SECTION 1.1 DEFINITIONS. For the purposes of this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural of the terms involved):
ADJUSTMENT means any final change in the Tax Liability of a taxpayer.
AFFILIATE means, when used with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries, controls
or is controlled by or is under common control with such Person.
AFFILIATED PERSON has the meaning ascribed to such term in the
Investment Company Act of 1940, as amended, and the rules and regulations
promulgated thereunder.
AGREEMENT means this Tax Sharing and Indemnification Agreement.
ASSOCIATES has the meaning ascribed to such term in the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder.
ATI CONSOLIDATED RETURN means any Tax Return that includes any member
of the ATI Consolidated Group.
ATI CONSOLIDATED GROUP means, as of any relevant date, ATI and its
Subsidiaries, determined as of such date.
BENEFICIAL OWNERSHIP has the meaning ascribed to such term in the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
BUSINESS TAXES means any Tax (except for federal income, state income
or franchise, and local and foreign gross or net income) including interest,
penalties, and other assessments thereon that is attributable to Operations of
SPINCO or members of the SPINCO Group for a tax period ending prior to or
including the Effective Date.
BUSINESS TAX RETURNS means all reports, estimates, declarations of
estimated tax, information statements and returns relating to or required to be
filed in connection with any Business Taxes, including information returns or
reports with respect to backup withholding and other payments to third parties.
CODE means the Internal Revenue Code of 1986, as amended, and the
Treasury regulations promulgated thereunder.
COMBINED RETURN shall mean all state income tax returns which ATI files
on a combined or unitary basis with respect to some or all of its Subsidiaries.
DISQUALIFIED SPINCO STOCK is defined at Section 5.2.
2
<PAGE> 3
DISTRIBUTION means the distribution of SPINCO common stock to the
stockholders of ATI pursuant to the Distribution Agreement.
DISTRIBUTION AGREEMENT means the Separation and Distribution Agreement
among ATI, SPINCO and certain other parties dated as of __________________1999.
EFFECTIVE DATE means the date on which the Distribution occurs.
EFFECTIVE TIME means 5 p.m., Eastern Standard Time or Eastern Daylight
Time (whichever shall then be in effect), on the Effective Date.
FINAL DETERMINATION means the final resolution of any Tax matter. A
Final Determination shall result from the first to occur of:
1. the expiration of 30 days after the IRS's acceptance of a Waiver
of Restrictions on Assessment and Collection of Deficiency in Tax
and Acceptance of Overassessment on Form 870 or 870-AD (or any
successor comparable form) (the "Waiver"), except as to reserved
matters specified therein, or the expiration of 30 days after
acceptance by any other taxing authority of a comparable agreement
or form under the laws of any other jurisdiction, including state,
local, and foreign jurisdictions; unless, within such period, the
taxpayer gives notice to the other party to this Agreement of the
taxpayer's intention to attempt to recover all or part of any
amount paid pursuant to the Waiver by the filing of a timely claim
for refund;
2. a decision, judgment, decree, or other order by a court of
competent jurisdiction that is not subject to further judicial
review (by appeal or otherwise) and has become final;
3. the execution of a closing agreement under Code Section 7121, or
the acceptance by the IRS of an offer in compromise under Code
Section 7122, or comparable agreements under the laws of any other
jurisdiction, including state, local, and foreign jurisdictions,
except as to reserved matters specified therein;
4. the expiration of the time for filing a claim for refund or for
instituting suit in respect of a claim for refund that was
disallowed in whole or in part by the IRS or any other taxing
authority;
5. the expiration of the applicable statute of limitations; or
6. an agreement by the parties hereto that a Final Determination has
been made.
GROSS ASSET VALUE means, when used with respect to a specified Person,
the fair market value of such Person's assets unencumbered by any liabilities.
GROUP has the meaning ascribed to such term in the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated thereunder.
3
<PAGE> 4
INCREMENTAL TAX ASSESSMENT means any increase in Business Taxes imposed
upon ATI after the date hereof.
INDEMNIFIED LIABILITY is defined at Section 7.1.
INDEMNIFIED PARTY is defined at Section 6.1.
INDEMNIFYING PARTIES is defined at Section 6.1.
INTERNAL DISTRIBUTIONS means the distributions of SPINCO common stock
by Teledyne Industries, Inc. to TII Holdings, LLC, a Delaware limited liability
company and a subsidiary of ATI, and by TII Holdings, LLC to ATI.
IRS means the U.S. Internal Revenue Service.
IRS INTEREST RATE means the rate of interest imposed from time to time
on underpayments of income tax pursuant to Code Section 6621(a)(2).
IRS RULING means the private letter ruling (together with any
supplements) issued by the IRS in respect of the Ruling Request.
OPERATIONS means any business activity of any SPINCO business unit, as
described in the Ruling Request.
OTHER TRANSACTIONS means the Internal Distributions and all other
transactions related to the Distribution and described in the Ruling Request,
including all modifications to such transactions reflected in supplements to the
Ruling Request.
PERSON means any natural person, corporation, limited liability
company, business trust, joint venture, association, company, partnership or
government, or any agency or political subdivision thereof.
POST-DISTRIBUTION PERIOD means any taxable period that begins after the
Effective Date.
PRE-DISTRIBUTION PERIOD means any taxable period that ends on or before
the Effective Date.
PROCEEDING is defined at Section 8.2(a).
PUBLIC OFFERING means the first public offering of SPINCO common stock
following the Distribution. The gross proceeds of such Public Offering shall be
approximately $50 million or such other amount as ATI, in its sole discretion,
may approve.
RESTRICTED PERIOD means the two year period following the Effective
Date.
4
<PAGE> 5
RESTRICTED REDEMPTION PERIOD means the two year period beginning on the
Effective Date and ending two years following the Public Offering.
RULING REQUEST means the request for ruling (including all exhibits),
under Section 355, and other provisions of the Code, as originally filed on
behalf of ATI on April 6, 1999, as amended and supplemented, in respect of the
Distribution.
SPINCO GROUP means: (i) as of any relevant date after the Effective
Date, SPINCO and its Subsidiaries determined as of such date; and (ii) as of any
relevant date on or before the Effective Date, SPINCO and those businesses which
become part of SPINCO or its Subsidiaries as contemplated by the Distribution
Agreement, whether or not such Persons or businesses were Subsidiaries of SPINCO
before the Distribution.
STRADDLE PERIOD means any taxable period with respect to a Tax Return,
that begins on or before the Effective Date and ends after the Effective Date.
SUBSIDIARY means with respect to ATI or SPINCO, any Person of which ATI
or SPINCO, respectively, 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.
TAXES means all federal, state, local and foreign gross or net income,
gross receipts, withholding, payroll, franchise, transfer, sales, use, value
added, estimated or other taxes of any kind whatsoever or similar charges and
assessments, such as customs, duties and the like, or other amounts paid in
respect thereof, including all interest, penalties and additions imposed with
respect to such amounts.
TAX LIABILITY means the net amount of Taxes due and paid or payable for
any taxable period, determined after applying all tax credits and all applicable
carrybacks or carryovers for net operating losses, net capital losses, unused
general business tax credits, or any other Tax items arising from a prior or
subsequent taxable period, and all other relevant adjustments.
TAX RETURNS means all reports, estimates, declarations of estimated
tax, information statements and returns relating to or required to be filed in
connection with any Taxes, other than Business Taxes, including information
returns or reports with respect to backup withholding and other payments to
third parties.
5
<PAGE> 6
ARTICLE II
FILING OF TAX RETURNS AND PAYMENT OF TAXES
------------------------------------------
SECTION 2.1. TAX RETURNS REQUIRED TO BE FILED PRIOR TO DISTRIBUTION
DATE. ATI shall file or cause to be filed all Tax Returns of ATI and any member
of the ATI Consolidated Group required to be filed (after giving effect to any
valid extension of time in which to make such filings) prior to the Effective
Date and shall pay or cause to be paid any Tax Liability due with respect to
such Tax Returns.
SECTION 2.2. TAX RETURNS FOR PRE-DISTRIBUTION PERIODS.
(a) SPINCO shall prepare or cause to be prepared, consistent with past
practice, Business Tax Returns for the Pre-Distribution Period and
shall pay or cause to be paid any Tax Liability due with respect to
such Business Tax Returns. ATI will promptly notify SPINCO of any
audit, assessment, notice, levy, or questionnaire with respect to
Business Taxes. SPINCO shall control all matters relating to such
Business Taxes and shall pay or cause to be paid and/or indemnify ATI
or cause ATI to be indemnified, whatever the case may be, for and
defend and hold ATI harmless against any Incremental Tax Assessment
set forth in a Final Determination of Business Taxes. Payment to ATI
with respect to such Incremental Tax Assessment shall be made in the
same manner as if SPINCO were an Indemnifying Party as set forth in
Section 8.3.
(b) Except as provided in Section 2.2(a), ATI shall prepare or cause to be
prepared, for Pre-Distribution Periods, all (1) Combined Returns and
(2) Tax Returns required to be filed on a separate return basis by any
member of the ATI Consolidated Group, in each case, which Tax Returns
are not required to be (after giving effect to any valid extensions),
and are not, filed on or prior to the Effective Date and shall pay or
cause to be paid any Tax Liability due with respect to such Tax
Returns. With respect to Tax Returns described in this Section 2.2(b),
ATI shall prepare the returns in a manner, absent any intervening law
change, consistent with ATI's preparation of Tax Returns covered by
Section 2.1. With respect to any Tax Returns described in part (2) of
the first sentence of this Section 2.2(b) relating to a member of the
SPINCO Group, ATI shall file such Tax Returns with the appropriate tax
authority, pursuant to a power of attorney executed and delivered to
ATI by SPINCO pursuant to Section 10.15 hereof and shall pay or cause
to be paid any Tax Liability due with respect to such Tax Returns.
SECTION 2.3. TAX RETURNS FOR POST-DISTRIBUTION PERIODS. SPINCO shall
(a) prepare and file or cause to be prepared and filed all Tax Returns required
to be filed by any member of the SPINCO Group for any Post-Distribution Period
and (b) pay or cause to be paid any Tax Liability due with respect to such Tax
Returns.
SECTION 2.4. TAX RETURNS FOR STRADDLE PERIOD. ATI shall prepare all Tax
Returns of or which include any member of the SPINCO Group for a Straddle
Period. ATI shall pay or cause to be paid and shall defend, indemnify and hold
SPINCO and members of the SPINCO Group harmless against the Tax Liabilities
attributable to the affected member or members of the SPINCO Group for the
portion of the Straddle Period ending on the Effective Date and SPINCO shall pay
or cause to be paid and shall defend, indemnify, and hold ATI and members of the
ATI Consolidated Group harmless against the Tax Liabilities attributable to the
affected member or
6
<PAGE> 7
members of the SPINCO Group for the remainder of the Straddle Period beginning
with the day after the Effective Date. ATI's determination of Tax Liabilities up
to and following the Effective Date shall be based on ATI's interim closing of
the books, determined as of the Effective Time, of the affected member or
members of the SPINCO Group.
SECTION 2.5. TAX-BASIS BALANCE SHEETS. In the case of any business that
was conducted prior to the Effective Date as a division of ATI, its Subsidiaries
or a member of the ATI Consolidated Group and which will be conducted after the
Effective Date by a member of the SPINCO Group, ATI shall prepare and furnish to
SPINCO, within 120 days after the Effective Date, a tax-basis balance sheet,
prepared consistent with past practices, relating to such business as of the
Effective Date.
ARTICLE III
COOPERATION AND EXCHANGE OF INFORMATION; AUDITS AND ADJUSTMENTS;
----------------------------------------------------------------
SECTION 3.1. TAX RETURN INFORMATION
(a) SPINCO shall, and shall cause each appropriate member of the
SPINCO Group to, provide ATI with all information and other
assistance reasonably requested by ATI to enable the members of
the ATI Consolidated Group to prepare and file ATI Consolidated
Returns required to be filed by the ATI Consolidated Group
pursuant to this Agreement.
(b) ATI shall, and shall cause each appropriate member of the ATI
Consolidated Group to, provide SPINCO with all information and
other assistance reasonably requested by SPINCO to enable the
members of the SPINCO Group to prepare and file SPINCO Returns
required to be filed by the SPINCO Group pursuant to this
Agreement.
(c) Within 60 days of the Effective Date, SPINCO shall provide and
cause each appropriate member of the SPINCO Group to provide to
ATI customary tax packages prepared consistent with past practice
for any Pre-Distribution Period or Straddle Period.
SECTION 3.2. AUDITS AND ADJUSTMENTS
(a) Except as provided for in Section 3.3, ATI shall have full control
over and absolute discretion with respect to all matters relating
to any Tax Return covered by Section 2.1, Section 2.2 or Section
2.4.
(b) SPINCO shall have full control over and absolute discretion with
respect to all Tax Returns covered by Section 2.3.
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(c) SPINCO agrees to cooperate with ATI in the negotiation,
settlement, and litigation of or other proceeding regarding any
liability for or refund of Taxes of any member paid or payable by
the ATI Consolidated Group.
(d) ATI agrees to cooperate with SPINCO in the negotiation,
settlement, and litigation of or other proceeding regarding any
liability for Taxes paid or payable by any member of the SPINCO
Group.
(e) ATI will promptly notify SPINCO in writing of any Adjustment
involving a change in the tax basis of any asset of SPINCO,
specifying the nature of the change so that the SPINCO Group will
be able to reflect the revised basis in its tax books and records
for periods beginning on or after the Effective Date.
(f) In the event of a conflict between the operation of this Section
3.2 and Articles VI, VII, or VIII, those Articles will take
precedence over this Section 3.2.
SECTION 3.3. CARRYBACKS. SPINCO shall make an election under Section
172(b)(3) of the Code to relinquish the entire carryback period with respect to
any net operating loss attributable to SPINCO or any of its Subsidiaries in any
taxable period beginning after or including the Effective Date that could be
carried back to a taxable year of SPINCO or any Subsidiaries ending on or before
the Effective Date. Neither ATI nor any member of the ATI Consolidated Group
shall be required to pay to SPINCO or its Subsidiaries any refund or credit of
Taxes that results from the carryback to any taxable period ending on or before
the Effective Date of any net operating loss, capital loss, or tax credit
attributable to SPINCO or any of its Subsidiaries in any taxable period
beginning after or including the Effective Date.
ARTICLE IV
RETENTION OF RECORDS; STATUTES OF LIMITATIONS
---------------------------------------------
SECTION 4.1. RETENTION OF RECORDS. ATI and SPINCO agree to retain the
appropriate records which may affect the determination of the liability for
Taxes of any member of the ATI Consolidated Group or the SPINCO Group,
respectively, until such time as there has been a Final Determination with
respect to such liability for Taxes. A party may satisfy its obligations under
the preceding sentence by allowing the other party to duplicate records at such
second party's expense.
SECTION 4.2. DESTRUCTION OF RECORDS. Any member of the SPINCO Group
intending to destroy any materials, records, or documents relating to Taxes
shall
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provide ATI 90 days advance notice and the reasonable opportunity to copy
or take possession of such materials, records, or documents.
SECTION 4.3. STATUTE OF LIMITATIONS. ATI and SPINCO will notify each
other in writing of any waivers or extensions of the applicable statute of
limitations that may affect the period for which any materials, records, or
documents must be retained.
ARTICLE V
REPRESENTATIONS AND COVENANTS
-----------------------------
SECTION 5.1. COMPLIANCE WITH IRS RULING.
SPINCO shall, and shall cause each member of the SPINCO Group to,
comply with each representation and statement concerning SPINCO and the SPINCO
Group made in the Ruling Request and in the materials submitted to the IRS in
connection with the Ruling Request, including, without limitation, statements
relating to actions regarding the Public Offering and the use of Public Offering
proceeds by the SPINCO Group. SPINCO has reviewed the materials submitted to the
IRS in connection with the Ruling Request and represents to ATI that these
materials, including without limitation, any statements and representations
concerning SPINCO, its business operations, capital structure and/or
organization, are complete and accurate. During the Restricted Period, neither
SPINCO nor any member of the SPINCO Group shall take any action, refrain from
taking any action or enter into any transaction or series of transactions or
agree to take any action, refrain from taking any action or enter into any
transaction or series of transactions that could jeopardize the tax-free status
of the Distribution, including any action, inaction or transaction that would be
inconsistent with any representation or statement made to the IRS in connection
with the Ruling Request, unless prior thereto SPINCO obtains the express written
consent of ATI which consent will be granted, if at all, in the sole discretion
of ATI. SPINCO hereby represents and warrants to ATI that SPINCO has no
intention to undertake or allow to be undertaken any of the transactions set
forth in Section 5.2(a)(iii), nor does SPINCO or any member of the SPINCO Group
have any intention to cease to engage in the active conduct of its trade or
business (within the meaning of Section 355(b)(2) of the Code).
SECTION 5.2. COVENANTS.
(a) Without limiting the generality of Section 5.1, SPINCO and each
member of the SPINCO Group jointly and severally covenant and
agree with ATI that during the Restricted Period or, in the case
of a transaction described in Section 5.2(a)(iii)(4), the
Restricted Redemption Period:
(i) SPINCO and the members of the SPINCO Group will continue to
engage in its business, and will continue to maintain a
substantial portion of their respective assets and business
operations, as they existed immediately prior to the
Distribution; provided that the
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foregoing shall not be deemed to prohibit SPINCO and the
members of the SPINCO Group from entering into or acquiring
other businesses or operations or from disposing of or
shutting down segments of such Businesses so long as SPINCO
and the members of the SPINCO Group continue to engage in
such businesses and continue to so maintain such substantial
portion of their assets and business operations;
(ii) SPINCO will continue to manage and to own (A) directly,
assets which represent at least 50% of the Gross Asset Value
which SPINCO managed and owned directly immediately after
the Distribution, and (B) directly or indirectly, through
one or more entities, assets which represent at least 50% of
the Gross Asset Value which SPINCO owned indirectly through
one or more entities immediately after the Distribution;
(iii)Except as provided in Section 5.2(c), neither SPINCO nor any
of its Affiliates nor any of its or their respective
directors, officers or other representatives (acting in
their capacity as directors, officers, or representatives)
will undertake, authorize, approve, recommend, permit,
facilitate, or enter into any contract, or consummate any
transaction with respect to:
(1) the issuance of SPINCO common stock (including options,
warrants, rights or securities exercisable for, or
convertible into, SPINCO common stock) in a single
transaction or in a series of related or unrelated
transactions (including the Public Offering) which
represents (treating any such options, warrants,
rights, or securities as exercised or converted) 40% or
more of the outstanding shares of SPINCO common stock;
(2) the issuance of any class or series of capital stock or
any other instrument (other than SPINCO common stock
and options, warrants, rights or securities exercisable
for, or convertible into, SPINCO common stock) that
would constitute equity for federal tax purposes (such
classes or series of capital stock and other
instruments being referred to herein as "Disqualified
SPINCO Stock");
(3) the issuance of any options, rights, warrants,
securities or similar arrangements exercisable for, or
convertible into, Disqualified SPINCO Stock;
(4) any redemptions, repurchases or other acquisitions of
capital stock or other equity interests in SPINCO by
SPINCO; and/or
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(5) the dissolution, merger, or complete or partial
liquidation of SPINCO or any announcement of such
action.
(b) In addition to the other representations, warranties, covenants and
agreements set forth in this Agreement, SPINCO and each member of the
SPINCO Group will take, or refrain from taking, as the case may be,
such actions as ATI may request to ensure that the Distributions and
the Other Transactions qualify for the tax-free treatment stated in
the IRS Ruling, including, without limitation, such actions as ATI
determines may be necessary to preserve the validity of the IRS
Ruling. Without limiting the generality of the foregoing, SPINCO and
the SPINCO Group shall cooperate with ATI if ATI, in its sole
discretion, determines to obtain additional or supplemental IRS
rulings pertaining to whether any actual or proposed change in facts
and circumstances affects the tax-free status of the Distribution or
the Other Transactions. Regardless of the fact that ATI shall control
matters set forth in the preceding sentence of this Section 5.2(b),
the ATI Consolidated Group, on one hand, and SPINCO and the SPINCO
Group, on the other hand, shall equally bear responsibility for all
expenses associated with any such additional or supplemental IRS
rulings; provided, however, that any expenses associated with any
additional or supplemental IRS Rulings based on a proposed action or
omission by SPINCO or a member of the SPINCO Group will be borne
solely by SPINCO.
(c) Following the Effective Date, SPINCO and its Affiliates shall not take
any action or engage in conduct otherwise prohibited by Section 5.2
unless prior to such action or conduct, as the case may be, SPINCO
receives express written consent from ATI which consent will be
granted, if at all, in the sole discretion of ATI.
(d) SPINCO will consummate the Public Offering within one year after the
Effective Date and will use the Public Offering proceeds in the manner
and during time periods set forth in the Ruling Request.
(e) If, within two years after the Public Offering, SPINCO disposes of any
assets, other than inventory, SPINCO will use the proceeds (net of tax
and transaction costs) from such disposition in a manner that is, in
ATI's sole discretion, consistent with the business purpose of
expanding SPINCO's business as set forth in the Ruling Request.
ARTICLE VI
SPINCO INDEMNITY OBLIGATIONS
----------------------------
SECTION 6.1. SPINCO INDEMNITY. If SPINCO, or another member (or former
member) of the SPINCO Group (collectively, the "Indemnifying Parties") takes or
fails to take any action whether or not prohibited or required by Article V or
violates a representation or covenant in Article V or in the Ruling Request, and
the Distribution or
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any of the Other Transactions fail to or otherwise do not qualify for the tax
treatment stated in the IRS Ruling as a result of such action, failure to take
action, or violation, then the Indemnifying Parties shall jointly and severally
defend, indemnify and hold harmless ATI and each member of the ATI Consolidated
Group and each of their respective directors, officers, employees, agents or
other representatives (collectively, and/or individually, as the case may be,
the "Indemnified Party") against any liability for such Taxes which the
Indemnified Party may assume or otherwise incur and any and all Taxes or other
liabilities directly or indirectly imposed upon or incurred by the Indemnified
Party as a result of such failure or lack of qualification, including, without
limitation, any liability of the Indemnified Party arising from Taxes imposed on
stockholders of ATI whether or not any stockholder or stockholders of ATI, or
the IRS or other taxing authority, successfully seeks recourse against the
Indemnified Party on account of any such failure.
SECTION 6.2. TENDER OFFER OR PURCHASE OFFER. Notwithstanding anything
to the contrary set forth in this Agreement, if, during the Restricted Period,
any Person or Group of Affiliated Persons or Associates acquires Beneficial
Ownership of SPINCO common stock (or any other class of outstanding SPINCO
stock) or commences a tender or other purchase offer for the capital stock of
SPINCO or initiates any other form of transaction to acquire directly or
indirectly SPINCO capital stock, upon consummation of which such Person or Group
of Affiliated Persons or Associates would acquire Beneficial Ownership of SPINCO
common stock (or any other class of outstanding SPINCO stock or equity) and as a
result thereof the Distribution or any of the Other Transactions shall fail to
or otherwise do not qualify for the tax treatment stated in the IRS Ruling then
the Indemnifying Parties shall defend, indemnify and hold harmless the
Indemnified Party against any liability for Taxes which the Indemnified Party
may assume or otherwise incur and any and all Taxes or other liabilities
directly or indirectly imposed upon or incurred by any Indemnified Party and/or
its stockholders as a result of such failure.
SECTION 6.3. EFFECT OF EXPRESS WRITTEN CONSENT OF ATI. The Indemnified
Party shall be defended, indemnified and held harmless under Section 6.1 without
regard to the fact that the Indemnifying Party may have received the express
written consent of ATI as contemplated by Article V. The Indemnified Party shall
be defended, indemnified and held harmless under Section 6.2 whether or not the
acquisition of Beneficial Ownership results from a transaction which is not
prohibited under Article V.
ARTICLE VII
CALCULATION OF SPINCO INDEMNITY AMOUNTS
---------------------------------------
SECTION 7.1. AMOUNT OF INDEMNITY. The amount indemnified against under
Article VI ("Indemnified Liability") for a Tax based on or determined with
reference to income shall be deemed to be, for each applicable taxing
jurisdiction, an amount determined by multiplying (i) the taxing jurisdiction's
highest marginal corporate income or tax rate for the taxable period in which
the Distribution or Other Transaction occurs, times (ii) the gain or income of
the Indemnified Party which is subject to such Tax. In the case of other
Indemnified Liabilities, the amount of the Indemnified Liability shall be
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equal to the amount so owed. In addition, the amount of any Indemnified
Liability shall be increased by any interest, costs, legal and professional
fees, additions, expenses and penalties incurred by the Indemnified Party. All
amounts payable under this Article VII shall, to the extent that such amounts
constitute taxable income, be grossed-up, based on the tax rate referred to in
clause (i) of the first sentence of this Section 7.1.
ARTICLE VIII
PROCEDURAL ASPECTS OF SPINCO INDEMNITY
--------------------------------------
SECTION 8.1. GENERAL.
(a) If either the Indemnified Party or any of the Indemnifying Parties
receives any written notice of deficiency, claim or adjustment or any
other written communication from a taxing authority or any other
Person that may result in an Indemnified Liability, the party
receiving such notice or communication shall promptly give written
notice thereof to the other parties, provided that any delay by the
Indemnified Party in so notifying an Indemnifying Party shall not
relieve the Indemnifying Party of any liability hereunder, except to
the extent the Indemnifying Party is materially and adversely
prejudiced by such delay.
(b) Each party hereto undertakes and agrees that from and after such time
as it obtains knowledge that any representative of a taxing authority
has begun to investigate or inquire into the Distribution or any of
the Other Transactions (whether or not such investigation or inquiry
is a formal or informal investigation or inquiry), such party shall
(i) notify the other parties thereof, provided that any delay by the
Indemnified Party in so notifying the Indemnifying Party shall not
relieve the Indemnifying Party of any liability hereunder (except to
the extent the Indemnifying Party is materially and adversely
prejudiced by such delay), (ii) consult with the other parties from
time to time as to the conduct of such investigation or inquiry, (iii)
provide the other parties with copies of all correspondence with such
taxing authority or any representative thereof or other Person
pertaining to such investigation or inquiry, and (iv) arrange for a
representative of the other parties to be present at all meetings with
such taxing authority or any representative thereof pertaining to such
investigation or inquiry.
(c) SPINCO undertakes and agrees to give full cooperation and support to
ATI, including without limitation, attestations and/or access to
Information, as requested by ATI, to document and verify the use of
the Public Offering proceeds in the manner and during the time period
set forth in the Ruling Request. SPINCO will submit a monthly
accounting to ATI which sets forth in detail the use of Public
Offering proceeds. This information will be submitted to ATI in a
format substantially similar to the chart attached hereto as
Appendix I.
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SECTION 8.2. CONTESTS.
(a) If (i) the Indemnifying Party furnishes the Indemnified Party with
evidence satisfactory to the Indemnified Party of its ability to pay
the full amount of the Indemnified Liability and (ii) such
Indemnifying Party acknowledges in writing that the asserted liability
is an Indemnified Liability, such Indemnifying Party may assume and
direct the tax examination, administrative appeal, hearing,
arbitration, suit or other proceeding (each a "Proceeding") commenced,
filed or otherwise initiated or convened to investigate or resolve the
existence and extent of such Indemnified Liability.
(b) Notwithstanding the foregoing, if at any time during a Proceeding
controlled by the Indemnifying Party pursuant to Section 8.2(a), such
Indemnifying Party fails to provide evidence satisfactory to the
Indemnified Party of its continuing ability to pay the full amount of
the Indemnified Liability or the Indemnified Party determines that
such Indemnifying Party may be unable to pay the full amount of the
Indemnified Liability, then the Indemnified Party may immediately
assume control of and direct the Proceedings.
(c) During the period in which the Indemnifying Party assumes and directs
the Proceeding, if the Indemnified Liability is grouped with other
unrelated asserted liabilities or issues in the Proceeding, the
parties shall use their respective best efforts to cause the
Indemnified Liability to be the subject of a separate proceeding. If
such severance is not possible, the Indemnifying Party shall assume
and direct and be responsible only for the matters relating to the
Indemnified Liability.
(d) In addition to the amounts referred to in Section 6.1, an Indemnifying
Party shall pay all out-of-pocket expenses and other costs related to
the Indemnified Liability, including but not limited to fees for
attorneys, accountants, expert witnesses or other consultants retained
by such Indemnifying Party and/or the Indemnified Party with respect
to a claim pursuant to this Agreement. To the extent that any such
expenses and other costs have been or are paid by an Indemnified
Party, the Indemnifying Party shall promptly upon written request
reimburse the Indemnified Party therefor.
(e) An Indemnifying Party shall not pay (unless otherwise required by a
proper notice of levy and after prompt written notification to the
Indemnified Party of receipt of notice and demand for payment),
settle, compromise or concede any portion of the Indemnified Liability
without the express written consent of the Indemnified Party. An
Indemnifying Party shall, on a timely basis, keep the Indemnified
Party informed of all developments in the Proceeding and provide the
Indemnified Party with copies of all pleadings, briefs, orders, and
other written papers.
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(f) Any Proceeding which is not controlled or which is no longer
controlled by an Indemnifying Party pursuant to Section 8.2 shall be
controlled and directed exclusively by the Indemnified Party, and any
related out-of-pocket expenses and other costs incurred by the
Indemnified Party, including but not limited to, fees for attorneys,
accountants, expert witnesses or other consultants, with respect to a
claim pursuant to this Agreement, shall be reimbursed by such
Indemnifying Party. An Indemnified Party will not be required to
pursue the claim in federal district court, the Court of Federal
Claims or any state or foreign court if as a prerequisite to such
court's jurisdiction, the Indemnified Party is required to pay the
asserted liability unless the funds necessary to invoke such
jurisdiction are provided by such Indemnifying Party.
SECTION 8.3. TIME AND MANNER OF PAYMENT. Upon receipt of notice of a
Final Determination, an Indemnifying Party shall pay, within seven (7) business
days of such receipt, to the Indemnified Party the amount of the Indemnified
Liability and any expenses or other costs indemnified against (less, in the case
of an Indemnified Liability for Taxes, any amount of such Taxes paid directly by
an Indemnifying Party to the taxing authority). With respect to payments of an
Indemnified Liability for amounts other than Taxes including any and all
Liabilities with respect to ATI stockholders, the Indemnifying Party shall pay
to the Indemnified Party the amount of this Indemnified Liability within seven
(7) days of a final determination of the amount of such Liability and, in the
case of Liabilities with respect to ATI stockholders, no less than seven (7)
days prior to the date that payment is required to be made to such stockholders.
Such payment shall be paid by wire transfer of immediately available funds to an
account designated by the Indemnified Party by written notice to an Indemnifying
Party at the address specified in Section 10.11 prior to the due date of such
payment. If an Indemnifying Party delays making payment beyond the due date
hereunder, such party shall pay interest on the amount unpaid at the IRS
Interest Rate for each day and the actual number of days for which any amount
due hereunder is unpaid.
SECTION 8.4. COOPERATION. The parties shall cooperate with one another
in a timely manner in any administrative or judicial Proceeding involving any
matter that may result in an Indemnified Liability.
SECTION 8.5. ADMINISTRATION. ATI's and SPINCO's Chief Tax Officer or
other designated tax representative shall have primary responsibility for the
day-to-day administration of the provisions of this Agreement.
ARTICLE IX
DISPUTES
--------
SECTION 9.1. DISPUTES.
(a) Resolution of any and all disputes arising from or in connection
with this Agreement, whether based on contract, tort, statute or
otherwise, including, but not limited to, unreasonable withholding
of consent and disputes in connection with claims by third parties
(collectively, "Disputes"), shall be subject to the provisions of
this Section 9.1; provided, however, that nothing contained herein
shall preclude either party from seeking or obtaining (i) injunctive
relief or (ii) equitable or other
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judicial relief to enforce the provisions hereof or to preserve the
status quo pending the final resolution of Disputes hereunder.
(b) Either party may give the other party written notice of any Dispute
not resolved in the normal course of business. The parties shall
attempt in good faith to resolve any Dispute promptly by negotiation
between executives of the parties who have authority to settle the
controversy. Within 15 days after delivery of the notice, the
foregoing executives of both parties shall meet at a mutually
acceptable time and place, and thereafter as often as they
reasonably deem necessary for a period not to exceed 5 days, to
attempt to resolve the Dispute. All reasonable requests for
information made by one party to the other will be honored. If the
parties do not resolve the Dispute within such 20 day period (the
"Initial Mediation Period"), the parties shall attempt in good faith
to resolve the Dispute by negotiation between (a) in the case of
ATI, the Chief Financial Officer and General Counsel, and (b) in the
case of SPINCO, the Chief Financial Officer and General Counsel
(collectively, the "Designated Officers"). Such officers shall meet
at a mutually acceptable time and place (but in any event no later
than 20 days following the expiration of the Initial Mediation
Period) and thereafter as often as they reasonably deem necessary
for a period not to exceed 20 days, to attempt to resolve the
Dispute.
(c) If the Dispute has not been resolved by negotiation within 50 days
of the first party's notice, or if the parties failed to meet within
15 days of the first party's notice, or if the Designated Officers
failed to meet within 35 days of the first party's notice, either
party may commence any litigation or other procedure allowed by law.
ARTICLE X
GENERAL
-------
SECTION 10.1. ELECTIONS UNDER CODE SECTION 1552. Nothing in this
Agreement is intended to change or otherwise affect any election made by or on
behalf of the ATI Consolidated Group with respect to the calculation of earnings
and profits under Code Section 1552.
SECTION 10.2. PRE-DISTRIBUTION EARNINGS AND PROFITS. ATI and SPINCO
agree to allocate pre-Distribution earnings and profits in accordance with
Treasury Regulation Sections 1.312-10 and 1.1502-33.
SECTION 10.3. REMEDIES. SPINCO acknowledges that its obligations under
Article V of this Agreement are of a special, unique, unusual and extraordinary
character. Because the failure of SPINCO to perform its obligations set forth in
Article V of this Agreement could cause unique and extraordinary injury to ATI,
ATI shall, notwithstanding anything to the contrary herein, have the right in
addition to any other remedies available, at law or in equity, to seek an
injunction in a court of equity to compel SPINCO to perform such
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obligations. SPINCO hereby waives any and all defenses it may have on the ground
of lack of jurisdiction or competence of the court to grant an injunction or
other equitable relief, or otherwise, and agrees that it will not assert any
such defense or any defense to a request by ATI for injunctive relief based on
the alleged existence of an adequate remedy at law or for money damages. Without
limiting the foregoing, SPINCO hereby waives the right to require ATI to post
any bond or other security with respect to any proceeding to enforce any
provisions of this Agreement. The existence of the rights of ATI set forth in
this Section 10.3 shall not preclude any other rights and remedies at law or in
equity which ATI may have.
SECTION 10.4. ASSIGNMENT. Neither of the parties may assign or delegate
any of its rights or duties under this Agreement without the prior written
consent of the other party. This Agreement shall be binding upon, and shall
inure to the benefit of, the parties hereto and their respective successors and
permitted assigns, by merger, acquisition of assets or otherwise.
SECTION 10.5. FURTHER ASSURANCES. Subject to the provisions hereof, the
parties hereto shall make, execute, acknowledge, and deliver such other
instruments and documents, and take all such other actions, as may be reasonably
required in order to effectuate the purposes of this Agreement and to consummate
the transactions contemplated hereby. Subject to the provisions hereof, each of
the parties shall, in connection with entering into this Agreement, performing
its obligations hereunder and taking any and all actions relating hereto, comply
with all applicable laws, regulations, orders, and decrees, and promptly provide
the other parties with all such information as they may reasonably request in
order to be able to comply with the provisions of this Agreement.
SECTION 10.6. WAIVERS. No failure or delay on the part of the parties
in exercising any power or right hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such right or power, preclude
any other or further exercise thereof or the exercise of any other right or
power. No modification or waiver of any provision of this Agreement nor consent
to any departure by the parties therefrom shall in any event be effective unless
the same shall be in writing, and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given.
SECTION 10.7. CHANGE OF LAW. If, due to any change in applicable law or
regulations or their interpretation by any court of law or other governing body
having jurisdiction subsequent to the date of this Agreement, performance of any
provision of this Agreement or any transaction contemplated thereby shall become
impracticable or impossible, the parties hereto shall use their best efforts to
find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such provision.
SECTION 10.8. CONFIDENTIALITY. Subject to any contrary requirement of
law and the right of each party to enforce its rights hereunder in any legal
action, each party agrees that it shall keep strictly confidential, and shall
cause its employees and agents to keep strictly confidential, any information
which it or any of its employees or
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agents may acquire pursuant to, or in the course of performing its obligations
under, any provision of this Agreement.
SECTION 10.9. HEADINGS. Descriptive headings are for convenience only
and shall not control or affect the meaning or construction of any provision of
this Agreement.
SECTION 10.10. COUNTERPARTS. For the convenience of the parties, any
number of counterparts of this Agreement may be executed by the parties hereto,
and each such executed counterpart shall be, and shall be deemed to be, an
original instrument.
SECTION 10.11. NOTICES. All notices, requests, claims and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery by
hand, by reputable overnight courier service, by facsimile transmission, or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 10.11)
listed below:
Allegheny Teledyne Incorporated
1000 Six PPG Place
Pittsburgh, Pennsylvania 15222-5479
Attn: Jon D. Walton
Senior Vice President, General Counsel
and Secretary
Fax No.:412-394-2837
SPINCO
[address]
Attn:
Fax No.:
or to such other address as any party may, from time to time, designate in a
written notice given in a like manner. Notice given by hand shall be deemed
delivered when received by the recipient. Notice given by mail as set out above
shall be deemed delivered five (5) calendar days after the date the same is
mailed. Notice given by reputable overnight courier shall be deemed delivered on
the next following business day after the same is sent. Notice given by
facsimile transmission shall be deemed delivered on the day of transmission
provided telephone confirmation of receipt is obtained promptly after completion
of transmission.
SECTION 10.12. COSTS AND EXPENSES. Unless otherwise specifically
provided herein, each party agrees to pay its own costs and expenses resulting
from the fulfillment of its respective obligations hereunder.
SECTION 10.13. CANCELLATION OF PRIOR TAX ALLOCATION OR TAX-SHARING
AGREEMENTS. On or prior to the Effective Date, ATI shall cancel or cause to be
canceled all agreements (other than this Agreement) providing for the allocation
or sharing of
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Taxes to which any member of the SPINCO Group would otherwise be bound following
the Distribution.
SECTION 10.14. INTEREST ON LATE PAYMENTS. If a party makes any payment
beyond the due date hereunder, such party shall pay interest on the amount
unpaid at the IRS Interest Rate for each day and the actual number of days for
which any amount due hereunder is unpaid.
SECTION 10.15. POWER OF ATTORNEY. Each member of the SPINCO Group shall
execute and deliver to ATI any power of attorney or other document reasonably
requested by ATI in connection with the filing of the Tax Returns and payment of
Taxes described in Article II hereof, or any Proceeding described in Article
VIII hereof. Each member of the ATI Consolidated Group shall execute and deliver
to SPINCO a power of attorney in connection with any matters controlled by
SPINCO under Section 2.2.
SECTION 10.16. GENERAL. This Agreement, including the attachments,
shall constitute the entire agreement between the parties hereto with respect to
the subject matter hereof and shall supersede all prior agreements and
undertakings, both written and oral, between the parties with respect to the
subject matter hereof and thereof. This Agreement may not be amended or modified
except (a) by an instrument in writing signed by, or on behalf of, the parties
or (b) by a waiver in accordance with Section 10.6. This Agreement shall be
binding upon and inure solely to the benefit of the parties hereto and their
respective present and future Subsidiaries, and nothing herein, express or
implied, is intended to or shall confer upon any third parties any legal or
equitable right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
SECTION 10.17. GOVERNING LAW: CONSENT TO JURISDICTION.
(a) This Agreement shall be governed by and construed and interpreted in
accordance with the laws of the Commonwealth of Pennsylvania as to
all matters, including matters of validity, construction, effect,
enforceability, performance and remedies, irrespective of the choice
of laws and principles of the laws of the Commonwealth of
Pennsylvania.
(b) Each of the parties hereto irrevocably submits to the exclusive
jurisdiction of (i) the Court of Common Pleas of Allegheny County,
Pennsylvania and (ii) the United States District Court for the
Western District of Pennsylvania, for the purposes of any suit,
action or other proceeding arising out of this Agreement or any
transaction contemplated hereby or thereby (and agrees not to
commence any action, suit or proceeding relating thereto except in
such courts). Each of the parties hereto further agrees that service
of any process, summons, notice or document hand delivered or sent
by U.S. registered mail to such parties respective address set forth
in Section 10.11 will be effective service of process for any
action, suit or proceeding in Pennsylvania with respect to any
matters to which it has submitted to jurisdiction as set forth in
the immediately preceding sentence. Each of the parties hereto
irrevocably and unconditionally waives any objection to the laying
of venue of any action, suit or proceeding arising out of this
Agreement or the transactions contemplated hereby or thereby (i) the
Court of Common Pleas of Allegheny County, Pennsylvania or (ii) the
United States District Court for the
19
<PAGE> 20
Western District of Pennsylvania, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such
court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum.
SECTION 10.18. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed by their respective officers, each of whom is duly authorized, all
as of the Effective Date.
ALLEGHENY TELEDYNE INCORPORATED
By: _________________________________________________
(Name)
(Title)
SPINCO
By: _________________________________________________
(Name)
(Title)
[OTHER COMPANIES]
By: ___________________________________________________
(Name)
(Title)
20
<PAGE> 1
Exhibit 10.2
FORM OF
INTERIM SERVICES AGREEMENT
THIS INTERIM SERVICES AGREEMENT, dated as of _________, 1999 (the
"Agreement"), is between Allegheny Teledyne Incorporated, a Delaware corporation
("Provider" or "ATI") and Water Pik Technologies, Inc., a Delaware corporation
("User" or "Water Pik");
WHEREAS, pursuant to a Separation and Distribution Agreement, dated as
of _________, 1999 (the "Distribution Agreement"), Provider will distribute the
stock of User to Provider's stockholders (the "Distribution"), following which
Distribution each of Provider and User will continue in existence as
independent, publicly-traded companies; and
WHEREAS, this Agreement is entered into pursuant to the Distribution
Agreement and sets forth the terms on which Provider will, for a limited period,
provide certain transition services to, and permit the use of certain of its
assets by, User following the Distribution referred to above; and
WHEREAS, capitalized terms used herein, unless otherwise defined
herein, shall have the meaning assigned to them in the Distribution Agreement.
NOW, THEREFORE, in consideration of the respective agreements and
covenants contained in this Agreement, and intending to be legally bound hereby,
the parties agree as follows:
SECTION 1. SERVICES. (a) Subject to the terms of this Agreement,
Provider shall provide, or shall cause another member of the ATI Group to
provide, the services described on Schedule A to User, or another member of the
Water Pik Group designated by User, from and after the Distribution Date and
during the time periods specified on said Schedule. Provider (or such other
member of the ATI Group) shall supply such services substantially in accordance
with Provider's normal practices in providing such services as of the
Distribution Date (except as otherwise provided in Schedule A).
(b) In consideration for the Services, User shall pay to Provider the
amounts set forth on Schedule A. Provider shall invoice User on a monthly basis
for the Services provided to User. Amounts due under such invoices shall be
payable within thirty days after receipt.
(c) Provider and User agree to cooperate and to make all reasonable
efforts to work together to take such actions as are reasonably necessary to
eliminate the need for or to otherwise discontinue as expeditiously as
reasonably possible the Services performed under this Agreement.
(d) Provider shall be permitted to cause third parties to provide
Services to User hereunder (in lieu of Provider or a member of the ATI Group),
at Provider's sole discretion.
<PAGE> 2
(e) To the extent Schedule A calls for any services to be provided by
User to Provider, such services shall be supplied in accordance with the terms
and provisions of this Agreement, except that Water Pik shall be deemed to be
the "Provider" and Allegheny Teledyne Incorporated shall be deemed to be the
"User."
SECTION 2. TERM. The term of this Agreement shall be a period of 12
months, commencing on the Distribution Date and ending on the first year
anniversary of the Distribution Date; unless otherwise indicated on Schedule A;
provided, however, that User may terminate any of the Services provided
hereunder on not less than 30 days prior written notice to Provider. The parties
may extend the term of this Agreement by written agreement signed by both
parties. Notwithstanding the foregoing, if (i) either party fails to perform any
material provision of this Agreement and the failure to perform is not corrected
within 15 days after the other party gives written notice of such default or
(ii) User fails to make any payment required under this Agreement at the time it
is due and such failure is not corrected within five days after written notice
of such failure, then the non-defaulting party may terminate this Agreement
effective at the end of such five-day notice period.
SECTION 3. STANDARD OF CONDUCT; LIMITATION OF LIABILITY. (a) Provider
shall have no liability with respect to its furnishing any of the Services
hereunder to User except on account of Provider's willful misconduct or gross
negligence. In agreeing to provide the Services as an accommodation to User,
Provider is not making any representation or warranty as to the quality,
suitability or adequacy of the Services for any purpose or use, including
without limitation any representation as to whether any asset of Provider or any
third party is Year 2000 Compliant. Without limiting generality of the
foregoing, Water Pik understands and agrees that ATI assumes no responsibility
for the adequacy or accuracy of the Water Pik's financial statements or filings
with the Securities and Exchange Commission. In providing the Services, Provider
shall not be obligated to (i) hire any additional employees, (ii) maintain the
employment of any specific employee, or (iii) purchase, lease or license any
additional equipment or other assets. For the purposes of this Agreement, "Year
2000 Compliant" means, with respect to an Asset, that such Asset will (A)
accurately process date/time data (including, but not limited to, calculating,
comparing, sorting, sequencing and calendar generation), including single
century formulas and multi-century formulas, from, into and between the
twentieth and twenty-first centuries and the years 1999 and 2000, including leap
year calculations, and will not malfunction or generate incorrect values or
invalid results involving such dates/times; (B) accurately interface with other
systems, as appropriate, in order to supply, receive or process dates/times and
other data, to the extent that other information technology properly exchanges
data with it; (C) provide that date/time-related functionalities, date/time
fields and any user input interfaces include a four digit year format and/or
other indication of century, as applicable; and (D) not cause any other Asset
that is otherwise Year 2000 Compliant to fail to be Year 2000 Compliant.
(b) It is understood and agreed that Provider shall not be obligated to
perform or to cause to be performed any services hereunder in a volume or
quantity which substantially exceeds the historical volumes or quantities of
such services performed for
<PAGE> 3
User or other members of the Water Pik Group. The parties further acknowledge
that it is User's intention to provide to itself, or procure the services to be
provided by Provider hereunder from third parties other than Provider, as
promptly as is reasonably practicable following the Distribution Date. Provider
will not be required to perform or to cause to be performed any of the Services
for the benefit of any third party or any other entity other than User or any
directly or indirectly wholly owned subsidiary or majority owned affiliate of
User.
(c) Provider's maximum liability to, and the sole remedy of, User for
breach of this Agreement shall be the lesser of (i) User's incremental
out-of-pocket cost of performing such service itself or (ii) User's incremental
out-of-pocket cost of obtaining such service from a third party (provided, that
User shall exercise all reasonable efforts under the circumstances to minimize
the cost of any such alternative to such services by selecting the most
cost-effective alternatives which provide the functional equivalent of the
services replaced) or if lesser, the amount paid by user to Provider hereunder.
Notwithstanding anything to the contrary herein, (A) in no event shall Provider
have any liability to User for special or consequential damages under this
Agreement, including as a result of Provider's breach of this Agreement or the
gross negligence or willful misconduct of Provider under this Agreement, and (B)
in no event shall Provider have any liability of any kind under this Agreement
to any third party.
(d) Except as otherwise provided in the foregoing paragraphs (a) - (c)
of this Section 3, User shall be solely liable and responsible for, and shall
indemnify Provider and its directors, officers, employees, agents,
representatives and affiliates from, any and all claims, liabilities,
obligations, losses, costs, expenses, litigation, proceedings, taxes,
assessments, charges, demands or judgments of any kind or nature whatsoever
("Losses") for acts or omissions in furnishing Services to User under this
Agreement. Upon termination of this Agreement or the earlier termination of any
Services, User shall be obligated to return to Provider as soon as is reasonably
practicable, any equipment or other property of Provider relating to the
Services which is in User's control or possession and which is not an asset to
be retained by User under the Distribution Agreement or the Ancillary
Agreements.
SECTION 4. FORCE MAJEURE. Neither party shall be responsible for
failure or delay in performance of any service to be performed hereunder, nor
shall either party be responsible for failure or delay in receiving such
service, if caused by an act of God, act of public enemy, war, government acts
or regulations, fire, flood, hurricane, embargo, quarantine, epidemic, labor
stoppages, accident, explosion, unusually severe weather, any Asset of such
party or third party that is not Year 2000 Compliant or other cause similar or
dissimilar to the foregoing beyond their control (herein called "Force
Majeure"); provided, however, that prior to being relieved of any of its
obligations, the party whose performance has been interrupted by such
circumstances shall use reasonable efforts to remove or otherwise address the
effects of any such event or condition as soon as practicable and shall promptly
give written notice to the other party upon the occurrence of any of such events
or circumstances and shall use reasonable efforts to resume full performance of
this Agreement as soon as is practicable. Notwithstanding the foregoing, to the
extent services are available after the occurrence of a Force Majeure event,
User
<PAGE> 4
shall be entitled to, and Provider shall provide, a level of services equivalent
to the proportionate share of services used by User immediately prior to the
occurrence of any such Force Majeure event.
SECTION 5. CONFIDENTIALITY. Any and all information which is exchanged
by the parties in connection with this Agreement, whether of a technical or
business nature, shall be considered confidential. The parties agree that such
confidential information shall be treated in accordance with the terms and
provisions of the Distribution Agreement.
SECTION 6. AMENDMENT. This Agreement may be amended only by a writing
signed by each of the parties.
SECTION 7. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute a single instrument.
SECTION 8. THIRD PARTIES. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
or entity other than User and Provider (and its associated indemnified parties
under Section 3(d)) any rights or remedies under, or by reason of, this
Agreement.
SECTION 9. WAIVERS. Any waiver by any party of any breach of or failure
to comply with any provision of this Agreement by any other party to this
Agreement shall be in writing and shall not be construed as, or constitute, a
continuing waiver of such provision, or a waiver of any other breach of, or
failure to comply with, any other provision of this Agreement.
SECTION 10. GOVERNING LAW; CONSTRUCTION. This Agreement shall be
construed and enforced in accordance with and governed by the internal
substantive laws of the Commonwealth of Pennsylvania. The headings in this
Agreement are solely for convenience of reference and shall not be given any
effect in the construction or interpretation of this Agreement. References to
Sections are references to Sections of this Agreement. The Schedule to this
Agreement is incorporated herein and is part of this Agreement.
SECTION 11. NOTICES. All notices, requests, claims and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery by
hand, by reputable overnight courier service, by facsimile transmission, or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 11) listed
below:
<PAGE> 5
if to Allegheny Teledyne Incorporated: Allegheny Teledyne Incorporated
1000 Six PPG Place
Pittsburgh, PA 15222-5479
Attention: Senior Vice President,
General Counsel and Secretary
Fax No.: 412-394-2837
if to Water Pik Technologies, Inc. Water Pik Technologies, Inc.
660 Newport Center Drive, Suite 470
Newport Beach, CA 92660
Attention: General Counsel
Fax No.: [_____________]
or to such other address as any party may, from time to time, designate in a
written notice given in a like manner. Notice given by hand shall be deemed
delivered when received by the recipient. Notice given by mail as set out above
shall be deemed delivered five calendar days after the date the same is mailed.
Notice given by reputable overnight courier shall be deemed delivered on the
next following business day after the same is sent. Notice given by facsimile
transmission shall be deemed delivered on the day of transmission provided
telephone confirmation of receipt is obtained promptly after completion of
transmission.
SECTION 12. ASSIGNMENT. Neither of the parties may assign or delegate
any of its rights or duties under this Agreement without the prior written
consent of the other party. This Agreement shall be binding upon, and shall
inure to the benefit of, the parties hereto and their respective successors and
permitted assigns.
SECTION 13. DISPUTES. (a) Resolution of any and all disputes arising
from or in connection with this Agreement, whether based on contract, tort,
statute or otherwise, including, but not limited to, disputes in connection with
claims by third parties (collectively, "Disputes"), shall be subject to the
provisions of this Section 13; provided, however, that nothing contained herein
shall preclude either party from seeking or obtaining (i) injunctive relief or
(ii) equitable or other judicial relief to enforce the provisions hereof or to
preserve the status quo pending resolution of Disputes hereunder.
(b) Either party may give the other party written notice of any Dispute
not resolved in the normal course of business. The parties shall attempt in good
faith to resolve any Dispute promptly by negotiation between executives of the
parties who have authority to settle the controversy. Within 15 days after
delivery of the notice, the foregoing executives of both parties shall meet at a
mutually acceptable time and place, and thereafter as often as they reasonably
deem necessary for a period not to exceed 5 days, to attempt to resolve the
Dispute. All reasonable requests for information made by one party to the other
will be honored. If the parties do not resolve the Dispute within such 20 day
period (the "Initial Mediation Period"), the parties shall attempt in good faith
to resolve the Dispute by negotiation between (i) in the case of Allegheny
Teledyne Incorporated, the Senior Vice President, General Counsel and Secretary
and (ii) in the case of Water Pik, the General Counsel (collectively, the
"Designated Officers"). Such officers shall meet at a mutually acceptable time
and place (but in any event no later than 15 days following the expiration of
the Initial Mediation Period) and thereafter as often as
<PAGE> 6
they reasonably deem necessary for a period not to exceed 15 days, to attempt to
resolve the Dispute.
(c) If the Dispute has not been resolved by negotiation within 50 days
of the first party's notice, or if the parties failed to meet within 30 days of
the first party's notice, or if the Designated Officers failed to meet within 35
days of the first party's notice, either party may commence any litigation or
other procedure allowed by law.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
ALLEGHENY TELEDYNE INCORPORATED
By: ___________________________
Title: ___________________________
WATER PIK TECHNOLOGIES, INC.
By: ___________________________
Title: ___________________________
<PAGE> 1
Exhibit 10.3
FORM OF EMPLOYEE BENEFITS AGREEMENT
BETWEEN
ALLEGHENY TELEDYNE INCORPORATED
AND
WATER PIK TECHNOLOGIES, INC.
DATED AS OF _______________, 1999
<PAGE> 2
INDEX
<TABLE>
<S> <C>
ARTICLE I DEFINITIONS ........................................................................................... 1
1.1 Agreement ................................................................................................ 1
1.2 ASO Contract ............................................................................................. 1
1.3 ATI Entity ............................................................................................... 1
1.4 ATI Executive ............................................................................................ 2
1.5 ATI Master Pension Trust ................................................................................. 2
1.6 ATI Pension Plan ......................................................................................... 2
1.7 ATI Stock Value .......................................................................................... 2
1.8 Award .................................................................................................... 2
1.9 Benefit Liabilities ...................................................................................... 2
1.10 Change .................................................................................................. 2
1.11 Close of the Distribution Date .......................................................................... 2
1.12 COBRA ................................................................................................... 2
1.13 Code .................................................................................................... 2
1.14 Corporate-Owned Life Insurance Policies ................................................................. 2
1.15 DOL ..................................................................................................... 2
1.16 ERISA ................................................................................................... 3
1.17 Executive Benefit Plans ................................................................................. 3
1.18 Foreign Plan ............................................................................................ 3
1.19 Group Insurance Policies ................................................................................ 3
1.20 HCRA Plan ............................................................................................... 3
1.21 Health and Welfare Plans ................................................................................ 3
1.22 HMO ..................................................................................................... 3
1.23 HMO Agreements .......................................................................................... 3
1.24 Immediately After the Distribution Date ................................................................. 3
1.25 Incentive Plan .......................................................................................... 3
1.26 In the Money Option ..................................................................................... 4
1.27 IRS ..................................................................................................... 4
1.28 Material Feature ........................................................................................ 4
1.29 Non-Employee Director ................................................................................... 4
1.30 Non-Employee Director Plans ............................................................................. 4
1.31 Nonqualified Deferred Compensation Programs ............................................................. 4
1.32 Option .................................................................................................. 4
1.33 Out of the Money Option ................................................................................. 4
1.34 PBGC .................................................................................................... 4
1.35 Performance Award ....................................................................................... 4
1.36 Performance Share Program ............................................................................... 5
1.37 Plan .................................................................................................... 5
1.38 Ratio ................................................................................................... 5
1.39 Reasonable Efforts ...................................................................................... 5
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
1.40 SARP .................................................................................................... 5
1.41 SARP Award .............................................................................................. 5
1.42 Separation and Distribution Agreement ................................................................... 5
1.43 Spinco Entity ........................................................................................... 5
1.44 Spinco 401(k) Plan ...................................................................................... 5
1.45 Spinco Individual ....................................................................................... 5
1.46 Spinco Pension Plan ..................................................................................... 5
1.47 Spinco Stock Value ...................................................................................... 5
1.48 Stock Purchase Plan ..................................................................................... 6
1.49 Teledyne ................................................................................................ 6
1.50 Teledyne 401(k) Plan .................................................................................... 6
ARTICLE II GENERAL PRINCIPLES ................................................................................... 6
2.1 ASSUMPTION OF LIABILITIES ................................................................................ 6
2.2 ESTABLISHMENT OF SPINCO PLANS ............................................................................ 6
2.3 TERMS OF PARTICIPATION BY SPINCO INDIVIDUALS IN SPINCO PLANS ............................................. 7
ARTICLE III DEFINED BENEFIT PLANS ............................................................................... 8
3.1 FREEZING OF PENSION PLAN BENEFITS ........................................................................ 8
3.2 CREDITING SERVICE UNDER ATI'S PENSION PLAN ............................................................... 8
ARTICLE IV DEFINED CONTRIBUTION PLANS ........................................................................... 8
4.1 401(k) PLAN .............................................................................................. 9
ARTICLE V HEALTH AND WELFARE PLANS .............................................................................. 11
5.1 ASSUMPTION OF HEALTH AND WELFARE PLAN LIABILITIES ........................................................ 11
5.2 VENDOR CONTRACTS ......................................................................................... 11
5.3 PROCEDURES FOR AMENDMENTS TO PLANS, PLAN DESIGNS, ADMINISTRATIVE PRACTICES, AND VENDOR CONTRACTS ......... 13
5.4 ATI SICKNESS AND ACCIDENT, LONG TERM DISABILITY AND PENSION DISABILITY BENEFITS .......................... 14
5.5 POST-RETIREMENT HEALTH AND LIFE INSURANCE BENEFITS ....................................................... 14
5.6 COBRA AND DIRECT PAY ..................................................................................... 14
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
5.7 POST-DISTRIBUTION TRANSITIONAL ARRANGEMENTS .............................................................. 14
5.8 APPLICATION OF ARTICLE V TO SPINCO ENTITIES .............................................................. 16
ARTICLE VI EXECUTIVE BENEFITS AND NON-EMPLOYEE DIRECTOR BENEFITS ................................................ 16
6.1 ASSUMPTION OF OBLIGATIONS ................................................................................ 16
6.2 CONSENTS AND NOTIFICATIONS ............................................................................... 16
6.3 ATI 1999 BONUS PLAN ...................................................................................... 17
6.4 ATI INCENTIVE PLANS ...................................................................................... 17
6.5 ATI NONQUALIFIED DEFERRED COMPENSATION PROGRAMS .......................................................... 19
6.6 NON-EMPLOYEE DIRECTOR BENEFITS ........................................................................... 20
6.7 CONFIDENTIALITY AND PROPRIETARY INFORMATION .............................................................. 20
ARTICLE VII GENERAL AND ADMINISTRATIVE .......................................................................... 20
7.1 INTERIM SERVICES AGREEMENT ............................................................................... 20
7.2 PAYMENT OF LIABILITIES, PLAN EXPENSES AND RELATED MATTERS ................................................ 20
7.3 SHARING OF PARTICIPANT INFORMATION ....................................................................... 21
7.4 REPORTING AND DISCLOSURE AND COMMUNICATIONS TO PARTICIPANTS .............................................. 21
7.5 NON-TERMINATION OF EMPLOYMENT; NO THIRD-PARTY BENEFICIARIES .............................................. 21
7.6 BENEFICIARY DESIGNATIONS ................................................................................. 22
7.7 REQUESTS FOR IRS RULINGS AND DOL OPINIONS ................................................................ 22
7.8 FIDUCIARY MATTERS ........................................................................................ 22
7.9 COLLECTIVE BARGAINING .................................................................................... 22
7.10 CONSENT OF THIRD PARTIES ................................................................................ 22
ARTICLE VIII MISCELLANEOUS ...................................................................................... 23
8.1 FOREIGN PLANS ............................................................................................ 23
8.2 EFFECT IF DISTRIBUTION DOES NOT OCCUR .................................................................... 23
8.3 RELATIONSHIP OF PARTIES .................................................................................. 23
8.4 AFFILIATES ............................................................................................... 23
8.5 GOVERNING LAW ............................................................................................ 23
</TABLE>
iii
<PAGE> 5
EMPLOYEE BENEFITS AGREEMENT
_____________ , 1999
The parties to this Employee Benefits Agreement, dated as of the date
written above, are Allegheny Teledyne Incorporated, a Delaware corporation
("ATI"), and Water Pik Technologies, Inc., a Delaware corporation ("Spinco").
Capitalized terms used herein (other than the formal names of ATI Plans (as
defined below) and related trusts of ATI) and not otherwise defined shall have
the respective meanings assigned to them in Article I hereof or as assigned to
them in the Separation and Distribution Agreement (as defined below).
WHEREAS, the Board of Directors of ATI has determined that it is in the
best interests of ATI and its stockholders to separate ATI's consumer products
businesses into an independent business entity;
WHEREAS, in furtherance of the foregoing, ATI and Spinco have entered
into a Separation and Distribution Agreement, dated as of the date hereof (the
"Separation and Distribution Agreement"), and certain other agreements that will
govern certain matters relating to the Separation, the Distribution and the
relationship of ATI and Spinco, and their respective Subsidiaries following the
Distribution; and
WHEREAS, pursuant to the Separation and Distribution Agreement, ATI and
Spinco have agreed to enter into this agreement allocating assets, liabilities
and responsibilities with respect to certain employee compensation and benefit
plans and programs between them.
NOW, THEREFORE, the parties, intending to be legally bound, agree as
follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement the following terms shall have the
following meanings:
1.1 Agreement means this Employee Benefits Agreement, including all the
Schedules and Exhibits hereto.
1.2 ASO Contract is defined in Section 5.2(a)(i).
1.3 ATI Entity means any entity that is, at the relevant time, an
Affiliate of ATI, except that, for periods beginning Immediately After the
Distribution Date, the term "ATI Entity" shall not include Spinco or a Spinco
Entity.
<PAGE> 6
1.4 ATI Executive means an employee or former employee of ATI, an ATI
Entity, Spinco or a Spinco Entity, who immediately before the Close of the
Distribution Date is eligible to participate in or receive a benefit under any
ATI Executive Benefit Plan.
1.5 ATI Master Pension Trust means the master trust under which the
assets of the ATI Pension Plan are held.
1.6 ATI Pension Plan means the Allegheny Teledyne Incorporated Pension
Plan.
1.7 ATI Stock Value means the average of the daily high and low
per-share trading prices of the ATI Common Stock as listed on the NYSE during
each of the twenty trading days immediately prior to the Distribution Date.
1.8 Award means an award under the Incentive Plan, including
Performance Awards and SARP Awards. When immediately preceded by "ATI," the term
Award (including the term Performance Award or SARP Award) means an award under
the ATI Incentive Plan. When immediately preceded by "Spinco," the term Award
(including the term Performance Award or SARP Award) means an award under the
Spinco Incentive Plan.
1.9 Benefit Liabilities means any Liabilities (as defined in the
Separation and Distribution Agreement) relating to any contributions,
compensation or other benefits accrued or payable under any profit sharing,
pension, savings, deferred compensation, fringe benefit, insurance, medical,
medical reimbursement, life, disability, accident, post-retirement health or
welfare benefit, stock option, stock purchase, sick pay, vacation, employment,
severance, termination or other compensation or benefit plan, agreement,
contract, policy, trust fund or arrangement.
1.10 Change is defined in Section 5.3(b)(i).
1.11 Close of the Distribution Date means 5:00 P.M., Eastern Standard
Time or Eastern Daylight Time (whichever shall then be in effect), on the
Distribution Date.
1.12 COBRA means the continuation coverage requirements for "group
health plans" under Title X of the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended, and as codified in Code Section 4980B and ERISA
Sections 601 through 608.
1.13 Code means the Internal Revenue Code of 1986, as amended.
Reference to a specific Code provision also includes any proposed, temporary, or
final regulation in force under that provision.
1.14 Corporate-Owned Life Insurance Policies means the life insurance
policies owned by ATI insuring the lives of certain ATI Executives and certain
other highly compensated employees of ATI or an ATI Entity.
1.15 DOL means the United States Department of Labor.
-2-
<PAGE> 7
1.16 ERISA means the Employee Retirement Income Security Act of 1974,
as amended. Reference to a specific provision of ERISA also includes any
proposed, temporary, or final regulation in force under that provision.
1.17 Executive Benefit Plans, when immediately preceded by "ATI," means
the executive benefit plans, programs, and arrangements established, maintained,
agreed upon, or assumed by ATI or an ATI Entity for the benefit of employees and
former employees of ATI or an ATI Entity before the Close of the Distribution
Date as listed in Schedule 1.17. When immediately preceded by "Spinco,"
Executive Benefit Plans means the executive benefit plans and programs to be
established by Spinco pursuant to Section 2.2 that correspond to the respective
ATI Executive Benefit Plans.
1.18 Foreign Plan means a Plan maintained by ATI, an ATI Entity,
Spinco, or a Spinco Entity for the benefit of employees outside the U.S.
1.19 Group Insurance Policies is defined in Section 5.2(b)(i).
1.20 HCRA Plan, when immediately preceded by "ATI," means the ATI
Health Care Reimbursement Account Plan. When immediately preceded by "Spinco,"
HCRA Plan means the Health Care Reimbursement Account Plan to be established by
Spinco pursuant to Section 2.2.
1.21 Health and Welfare Plans, when immediately preceded by "ATI,"
means the health and welfare plans listed on Schedule 1.21 established and
maintained by ATI for the benefit of employees and retirees of ATI and certain
ATI Entities, and such other welfare plans or programs as may apply to such
employees and retirees of ATI or an ATI Entity before the Close of the
Distribution Date. When immediately preceded by "Spinco," Health and Welfare
Plans means the health and welfare plans to be established by Spinco pursuant to
Section 2.2 that correspond to the respective ATI Health and Welfare Plans.
1.22 HMO means a health maintenance organization that provides benefits
under one or more of the ATI Health and Welfare Plans or the Spinco Health and
Welfare Plans.
1.23 HMO Agreements is defined in Section 5.2(c)(i).
1.24 Immediately After the Distribution Date means 5:01 P.M., Eastern
Standard Time or Eastern Daylight Time (whichever shall then be in effect), on
the Distribution Date.
1.25 Incentive Plan, when immediately preceded by "ATI," means any of
the Allegheny Teledyne Incorporated 1996 Incentive Plan, any predecessor
Incentive Plan thereto and any other stock-based incentive plans assumed by ATI
by reason of merger, combination, acquisition or otherwise. When immediately
preceded by "Spinco," Incentive Plan means the Incentive Plan to be established
by Spinco pursuant to Section 2.2.
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1.26 In the Money Option means any ATI Option that, as of the Close of
the Distribution Date, is not an Out of the Money Option (as defined in Section
1.35).
1.27 IRS means the Internal Revenue Service.
1.28 Material Feature means any feature of a Plan that could reasonably
be expected to be of material importance to the sponsoring employer or the
participants and beneficiaries of the Plan, which could include, depending on
the type and purpose of the particular Plan, the class or classes of employees
eligible to participate in such Plan, the nature, type, form, source, and level
of benefits provided by the employer under such Plan and the amount or level of
contributions, if any, required to be made by participants (or their dependents
or beneficiaries) to or under such Plan.
1.29 Non-Employee Director, when immediately preceded by "ATI," means a
member of ATI's Board of Directors who is not an employee of ATI or an ATI
Entity. When immediately preceded by "Spinco," Non-Employee Director means a
member of Spinco's Board of Directors who is not an employee of ATI, an ATI
Entity, Spinco or a Spinco Entity.
1.30 Non-Employee Director Plans, when immediately preceded by "ATI,"
means the Allegheny Teledyne Incorporated 1996 Non-Employee Director Stock
Compensation Plan and the Allegheny Teledyne Incorporated Fee Continuation Plan
for Non-Employee Directors. When immediately preceded by "Spinco," Non-Employee
Director Plans means the plans and programs to be established by Spinco pursuant
to Section 2.2 that correspond to the ATI Non-Employee Director Plans.
1.31 Nonqualified Deferred Compensation Programs, when immediately
preceded by "ATI," means the Allegheny Teledyne Incorporated Executive Deferred
Compensation Plan, the Allegheny Teledyne Incorporated Supplemental Pension Plan
and the Teledyne, Inc. Pension Equalization Plan. When immediately preceded by
"Spinco," Deferral Plan means the Executive Deferred Compensation Plan to be
established by Spinco pursuant to Section 2.2.
1.32 Option, when immediately preceded by "ATI," means an option to
purchase ATI Common Stock and, when immediately preceded by "Spinco," Option
means an option to purchase Spinco Common Stock, in each case pursuant to an
Incentive Plan.
1.33 Out of the Money Option means any ATI Option that, as of the Close
of the Distribution Date, has an exercise price that is greater than the ATI
Stock Value.
1.34 PBGC means the Pension Benefit Guaranty Corporation.
1.35 Performance Award means any Award granted pursuant to the terms of
the Performance Share Program.
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1.36 Performance Share Program means the Allegheny Teledyne
Incorporated Performance Share Program adopted pursuant to Administrative Rules
under the ATI Incentive Plan.
1.37 Plan, when immediately preceded by "ATI" or "Spinco," means any
plan, policy, program, payroll practice, on-going arrangement, contract, trust,
insurance policy or other agreement or funding vehicle providing benefits to
employees, former employees or Non-Employee Directors of ATI or an ATI Entity,
or Spinco or a Spinco Entity, as applicable.
1.38 Ratio means the amount obtained by dividing the ATI Stock Value by
the Spinco Stock Value.
1.39 Reasonable Efforts means such acts or actions that, in the
reasonable good faith opinion of the party taking such acts or actions, are
calculated to achieve, or otherwise further, the applicable provisions to which
the term applies; provided, however, to the extent any costs, fees or other
expenditures (the "Expenses") occur as a result of a party's use of Reasonable
Efforts and such expenses are not expressly allocated under the terms of this
Agreement or any Ancillary Agreement, such Expenses shall be borne by the party
for whose benefit such Expenses are incurred and such party shall indemnify and
hold harmless the other party with respect to such Expenses.
1.40 SARP, when immediately preceded by "ATI," means the Allegheny
Teledyne Incorporated Stock Acquisition and Retention Program.
1.41 SARP Award means any Award granted pursuant to the terms of the
SARP.
1.42 Separation and Distribution Agreement is defined in the third
paragraph of the preamble of this Agreement.
1.43 Spinco Entity means any Person that is, at the relevant time, a
Subsidiary of Spinco or is otherwise controlled, directly or indirectly, by
Spinco.
1.44 Spinco 401(k) Plan means the 401(k) plan established by Spinco
effective no later than April 1, 2000 pursuant to Section 2.2.
1.45 Spinco Individual means any individual who, Immediately After the
Distribution Date is an active hourly or salaried employee of Spinco or a Spinco
Entity.
1.46 Spinco Stock Value means the average of the daily high and low
per-share trading prices of the Spinco Common Stock during each of the twenty
trading days Immediately After the Distribution Date.
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1.47 Stock Purchase Plan, when immediately preceded by "ATI," means the
Allegheny Teledyne Incorporated Employee Stock Purchase Plan. When immediately
preceded by "Spinco," Stock Purchase Plan means the employee stock purchase plan
to be established by Spinco pursuant to Section 2.2.
1.48 Teledyne means Teledyne, Inc., a Delaware corporation, or its
successors and assigns.
1.49 Teledyne 401(k) Plan means the Teledyne, Inc. 401(k) Plan.
ARTICLE II
GENERAL PRINCIPLES
2.1 ASSUMPTION OF LIABILITIES. Except as otherwise expressly provided
in Sections 3.1 or 6.6, Spinco hereby assumes and agrees to pay, perform,
fulfill and discharge, in accordance with their respective terms, all of the
following (regardless of when or where such Benefit Liabilities arose or arise
or were or are incurred): (i) all Benefit Liabilities to or relating to Spinco
Individuals, and their respective dependents and beneficiaries, in each case
relating to, arising out of or resulting from employment by ATI or an ATI Entity
before the Distribution Date (including Benefit Liabilities under ATI Plans and
Spinco Plans); (ii) all other Benefit Liabilities to or relating to Spinco
Individuals and other employees of Spinco or a Spinco Entity, and their
dependents and beneficiaries, to the extent relating to, arising out of or
resulting from future, present or former employment with Spinco or a Spinco
Entity (including Benefit Liabilities under ATI Plans and Spinco Plans); (iii)
all Benefit Liabilities relating to, arising out of or resulting from any other
actual or alleged employment relationship with Spinco or a Spinco Entity; (iv)
all Benefit Liabilities relating to, arising out of or resulting from the
imposition of withdrawal liability under Subtitle E of Title IV of ERISA as a
result of a complete or partial withdrawal of any ATI Entity from a
"multiemployer plan" within the meaning of ERISA Section 4021 which occurs
solely as a result of the Separation or the Distribution; and (v) all other
Benefit Liabilities relating to, arising out of or resulting from obligations,
liabilities and responsibilities expressly assumed or retained by Spinco, a
Spinco Entity, or a Spinco Plan pursuant to this Agreement. Notwithstanding the
generality of the foregoing, Spinco does not assume or agree to pay, perform,
fulfill or discharge any Benefit Liabilities relating to, arising out of or
resulting from the Teledyne Savings and Retirement Supplement Plan.
2.2 ESTABLISHMENT OF SPINCO PLANS. Effective prior to or within a
reasonable time after the Distribution Date, Spinco shall adopt, or cause to be
adopted, the amended Teledyne 401(k) Plan for the period between the
Distribution Date and April 1, 2000, the Spinco Stock Purchase Plan, the Spinco
Health and Welfare Plans, and the Spinco Executive Benefit Plans for the benefit
of the Spinco Individuals and other current and future employees of Spinco and
the Spinco Entities; provided, however, that Spinco may, in its sole discretion,
elect not to adopt or establish the Plan or Plans listed in Schedule 2.2(a).
Subject to the provisions of
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Section 4.1 regarding the Spinco 401(k) Plan, or as otherwise may be set forth
in Schedule 2.2(b), the foregoing Spinco Plans shall be substantially identical
in all Material Features to the corresponding ATI Plans as in effect as of the
Close of the Distribution Date. Effective prior to or within a reasonable time
after the Distribution Date, Spinco shall adopt, or cause to be adopted, the
Spinco Non-Employee Director Plans, for the benefit of Spinco Non-Employee
Directors. The Spinco Non-Employee Director Plans shall be substantially
similar in all Material Features to the corresponding ATI Non-Employee
Director Plans as in effect on the Distribution Date. No later than April 1,
2000, Spinco shall adopt the Spinco 401(k) Plan and its related trust, which
Spinco 401(k) Plan shall provide for employer contributions, independent of
employee contributions and expressed as a rate of participant compensation,
determined appropriate by Spinco in its sole discretion in light of Spinco's
choice not to sponsor a defined benefit plan.
2.3 TERMS OF PARTICIPATION BY SPINCO INDIVIDUALS IN SPINCO PLANS. The
Spinco Plans shall be, with respect to Spinco Individuals, in all respects the
successors in interest to, and shall not provide benefits that duplicate
benefits provided by, the corresponding ATI Plans. ATI and Spinco shall agree on
methods and procedures, including amending the respective Plan documents and/or
requesting approvals or consents of Spinco Individuals where the parties deem
appropriate, to prevent Spinco Individuals from receiving duplicative benefits
from the ATI Plans and the Spinco Plans. With respect to Spinco Individuals,
each Spinco Plan shall provide that all service, all compensation and all other
benefit-affecting determinations that, as of the Close of the Distribution Date,
were recognized under the corresponding ATI Plan shall, as of Immediately After
the Distribution Date, receive full recognition, credit, and validity and be
taken into account under such Spinco Plan to the same extent as if such items
occurred under such Spinco Plan, except to the extent that duplication of
benefits would result. The provisions of this Agreement for the transfer of
assets from certain trusts relating to ATI Plans (including Foreign Plans) to
the corresponding trusts relating to Spinco Plans (including Foreign Plans) are
based upon the understanding of the parties that each such Spinco Plan will
assume all Benefit Liabilities of the corresponding ATI Plan to or relating to
Spinco Individuals, as provided for herein. If any such Benefit Liabilities are
not effectively assumed by the appropriate Spinco Plan, then the amount of
assets transferred to the trust relating to such Spinco Plan from the trust
relating to the corresponding ATI Plan shall be recomputed as set forth below,
but taking into account the retention of such Benefit Liabilities by such ATI
Plan, and assets shall be transferred by the trust relating to such Spinco Plan
to the trust relating to such ATI Plan so as to place each such trust in the
position it would have been in, had the initial asset transfer been made in
accordance with such recomputed amount of assets.
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ARTICLE III
DEFINED BENEFIT PLANS
3.1 FREEZING OF PENSION PLAN BENEFITS. Effective upon the applicable of
the dates under Section 3.2, the accrued benefits with respect to Spinco
Individuals who, as of the Distribution Date, were participants under the ATI
Pension Plan shall be frozen and such Individuals shall not accrue any
additional benefits from and after the Distribution Date under the ATI Pension
Plan. The assets and Benefit Liabilities with respect to such Individuals,
determined as of the Distribution Date, shall be retained by the ATI Pension
Plan and its related trust and paid therefrom when due under the terms of the
ATI Pension Plan.
3.2 CREDITING SERVICE UNDER ATI'S PENSION PLAN.
(a) VESTING. Spinco Individuals who, as of the Distribution Date, were
participants in the ATI Pension Plan will continue to receive service credit for
vesting and retirement benefit eligibility purposes under the ATI Pension Plan
for service actually rendered to Spinco during the period commencing on the
Distribution Date and ending April 1, 2000.
(b) BENEFIT ACCRUAL. Spinco Individuals who, as of the Distribution
Date, were participants in the ATI Pension Plan will continue to receive service
credit for benefit accrual purposes under the ATI Pension Plan for service
actually rendered to Spinco during the period commencing on the Distribution
Date and ending April 2, 2000. Benefits accrued with respect to service credited
pursuant to this Section 3.2 shall be paid by the ATI Pension Plan at the same
times and under the same terms and conditions as applicable to benefits accrued
under the ATI Pension Plan.
(c) DISTRIBUTION OF BENEFITS FROM ATI PENSION PLAN TO SPINCO
INDIVIDUALS. For purposes of the ATI Pension Plan, the date which is the earlier
of the applicable of (i) a Spinco's Individual's actual separation from service
with Spinco or (ii) April 1, 2000 shall be for each Spinco Individual a
separation from service with the employer and Spinco Individuals who are
eligible to commence receipt of benefits under the ATI Pension Plan may, in
their respective discretion, apply at any time after the applicable date
described above to commence benefits to the extent then payable and subject
to the terms and conditions of the ATI Pension Plan. The Distribution Date
does not, however, constitute and shall not be treated under the ATI Pension
Plan as a sale or otherwise as an event permitting Spinco Individuals to elect
to receive a lump sum form of distribution under the ATI Pension Plan.
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ARTICLE IV
DEFINED CONTRIBUTION PLANS
4.1 401(k) PLAN.
(a) ADOPTION BY SPINCO OF TELEDYNE 401(k) PLAN AMENDED TO BE A MULTIPLE
EMPLOYER PLAN. On or before the Distribution Date, the Teledyne 401(k) Plan will
be amended by Teledyne to be and become a multiple employer plan under which
Spinco may elect to be a contributing sponsor and to provide participation to
Spinco Individuals under the terms and conditions set forth in the Teledyne
401(k) Plan for a period ending on the earlier of (i) adoption by Spinco of the
Spinco 401(k) Plan or (ii) April 1, 2000. The right to amend the Teledyne 401(k)
Plan in any respect shall be exclusively within the power of Teledyne at all
relevant times. As amended, the Teledyne 401(k) Plan shall provide that (A)
Spinco Individuals shall not be permitted to direct investments after the
Distribution Date in ATI Common Stock or in the common stock of Spinco or any
other corporation spun off by ATI, (B) that each Spinco Individual shall have
the right to direct the administrator of the Teledyne 401(k) Plan to liquidate
the interests of Spinco Individuals in the common stock of ATI ("ATI Common
Stock"), Spinco Common Stock or the common stock of any other previously related
corporation and direct the method of reinvestment of the proceeds of such sale
from among the options then available under the Teledyne 401(k) Plan and (C) if
ATI Common Stock and/or common stock of any previously related corporation other
than Spinco is held in accounts of Spinco Individuals in the Teledyne 401(k)
Plan as of April 1, 2000, the interests of Spinco Individuals shall be
liquidated by the Plan administrator and the proceeds reinvested in Spinco
Common Stock.
(b) ESTABLISHMENT OF SPINCO 401(k) PLAN AND TRUST. The Spinco 401(k)
Plan, established by Spinco pursuant to Section 2.2 no later than April 1, 2000,
(i) shall be a qualified defined contribution plan within the meaning of Code
Section 401(a), (ii) except as provided under Section 4.1(c), shall contain
provisions, terms and conditions substantially similar to the provisions, terms
and conditions of the Teledyne 401(k) Plan, and (iii) shall provide coverage
from and after the earlier of (i) its adoption by Spinco or (ii) April 1, 2000
with respect to Spinco Individuals who, as of the later of the dates above, were
participants in the Teledyne 401(k) Plan as amended as described in Section
4.1(a). The trust related to the Spinco 401(k) Plan, established by Spinco
pursuant to Section 2.2, shall be exempt from taxation under Code Section
501(a).
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(c) ASSUMPTION OF LIABILITIES AND TRANSFER OF ASSETS.
(i) Effective Immediately After the Distribution Date and
until the earlier of (i) the date of adoption by Spinco of the Spinco 401(k)
Plan or (ii) April 1, 2000, ATI shall administer or cause the administration of
the assets and Benefit Liabilities of the Teledyne 401(k) Plan with respect to
both Teledyne employees and Spinco Individuals. Spinco shall pay to ATI, within
thirty (30) days of presentment of an invoice therefor, an amount equal to the
actual cost incurred by ATI for administration of the assets and Benefit
Liabilities in the Teledyne 401(k) Plan relating to Spinco Individuals. Spinco
Individuals shall continue to accrue service credit under the Teledyne 401(k)
Plan for vesting and benefit eligibility purposes until the earlier of (i) the
date of adoption by Spinco of the Spinco 401(k) Plan or (ii) April 1, 2000.
Effective as of the earlier of (i) the adoption by Spinco of the Spinco 401(k)
Plan or (ii) April 1, 2000: (A) the Spinco 401(k) Plan shall assume and be
solely responsible for all Benefit Liabilities to or relating to Spinco
Individuals under the Spinco 401(k) Plan, and (B) ATI shall cause an amount
equal to the aggregate account balances of the Spinco Individuals participating
under the Teledyne 401(k) Plan, whether such amounts are vested or unvested
under the terms of the Teledyne 401(k) Plan, which are held by the related trust
as of the applicable of (i) the date of adoption by Spinco of the Spinco 401(k)
Plan or (ii) April 1, 2000 to be transferred to the Spinco 401(k) Plan, and its
related trust, and Spinco shall cause such transferred accounts to be accepted
by such plan and trust. In ATI's sole and absolute discretion, the amount so
transferred may be in cash or in kind or a combination thereof; provided,
however, that the following shall be transferred in kind: (A) shares of ATI
Common Stock, shares of Spinco Common Stock allocated to participants' accounts
as a result of the Distribution and shares of Teledyne Technologies Incorporated
Common Stock allocated to participants' accounts as a result of the spin-off of
ATI's aerospace and electronics businesses; and (B) all promissory notes
reflecting participant loans to Spinco Individuals under the Teledyne 401(k)
Plan outstanding as of the Distribution Date.
(ii) If any benefit with respect to a Spinco Individual under
the Teledyne 401(k) Plan is subject to a qualified domestic relations order at
the time of transfer, all documentation concerning such qualified domestic
relations order shall be assigned to the Spinco 401(k) Plan.
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ARTICLE V
HEALTH AND WELFARE PLANS
5.1 ASSUMPTION OF HEALTH AND WELFARE PLAN LIABILITIES.
(a) Immediately After the Distribution Date, all Benefit Liabilities to
or relating to Spinco Individuals under the ATI Health and Welfare Plans shall
cease to be Benefit Liabilities of the ATI Health and Welfare Plans and shall be
assumed by the corresponding Spinco Health and Welfare Plans.
(b) Notwithstanding Section 5.1(a), all treatments which have been
pre-certified for or are being provided to a Spinco Individual as of the Close
of the Distribution Date shall be provided without interruption under the
appropriate ATI Health and Welfare Plan until such treatment is concluded or
discontinued pursuant to applicable plan rules and limitations, but Spinco shall
continue to be responsible for all Benefit Liabilities relating to, arising out
of or resulting from such ongoing treatments as of the Close of the Distribution
Date.
5.2 VENDOR CONTRACTS.
(a) THIRD-PARTY ASO CONTRACTS.
(i) ATI shall use its Reasonable Efforts to amend each
administrative services only contract with a third-party administrator that
relates to any of the ATI Health and Welfare Plans (an "ASO Contract") in
existence as of the date of this Agreement to permit Spinco to participate in
the terms and conditions of such ASO Contract from Immediately After the
Distribution Date until December 31, 2000. ATI shall use its Reasonable Efforts
to cause all ASO Contracts into which ATI enters after the date of this
Agreement but before the Close of the Distribution Date to allow Spinco to
participate in the terms and conditions thereof effective Immediately After the
Distribution Date on the same basis as ATI.
(ii) ATI shall have the right to determine, and shall promptly
notify Spinco of, the manner in which Spinco's participation in the terms and
conditions of ASO Contracts as set forth above shall be effectuated. The
permissible ways in which Spinco's participation may be effectuated include
automatically making Spinco a party to the ASO Contracts or obligating the third
party to enter into a separate ASO Contract with Spinco providing for the same
terms and conditions as are contained in the ASO Contracts to which ATI is a
party (or such other arrangement as to which ATI and Spinco shall mutually
agree). Such terms and conditions shall include the financial and termination
provisions, performance standards, methodology, auditing policies, quality
measures, reporting requirements and target claims. Spinco hereby authorizes ATI
to act on its behalf to extend to Spinco the terms and conditions of the ASO
Contracts. Spinco shall fully cooperate with ATI in such efforts, and Spinco
shall not perform any act, including discussing any alternative arrangements
with any third party, that would prejudice ATI's efforts.
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(b) GROUP INSURANCE POLICIES.
(i) This Section 5.2(b) applies to group insurance policies
not subject to allocation or transfer pursuant to the foregoing provisions of
this Article V ("Group Insurance Policies").
(ii) ATI shall use its Reasonable Efforts to amend each Group
Insurance Policy in existence as of the date of this Agreement for the provision
or administration of benefits under the ATI Health and Welfare Plans to permit
Spinco to participate in the terms and conditions of such policy from
Immediately After the Distribution Date until December 31, 2000. ATI shall use
its Reasonable Efforts to cause all Group Insurance Policies into which ATI
enters or which ATI renews after the date of this Agreement but before the Close
of the Distribution Date to allow Spinco to participate in the terms and
conditions thereof effective Immediately After the Distribution Date on the same
basis as ATI.
(iii) Spinco's participation in the terms and conditions of
each such Group Insurance Policy shall be effectuated by obligating the
insurance company that issued such insurance policy to ATI to issue one or more
separate policies to Spinco. Such terms and conditions shall include the
financial and termination provisions, performance standards and target claims.
Spinco hereby unconditionally and irrevocably authorizes ATI to act on its
behalf to extend to Spinco the terms and conditions of such Group Insurance
Policies. Spinco shall fully cooperate with ATI in such efforts, and Spinco
shall not perform any act, including discussing any alternative arrangements
with third parties, that would prejudice ATI's efforts.
(c) HMO AGREEMENTS.
(i) Before the Distribution Date, ATI shall use its Reasonable
Efforts to amend all letter agreements with HMOs that provide medical services
under the ATI Medical Plans for 1999 ("HMO Agreements") in existence as of the
date of this Agreement to permit Spinco to participate in the terms and
conditions of such HMO Agreements, in each case, from Immediately After the
Distribution Date until December 31, 2000. ATI shall use its Reasonable Efforts
to cause all HMO Agreements into which ATI enters after the date of this
Agreement but before the Close of the Distribution Date to allow Spinco to
participate in the terms and conditions of such HMO Agreements from Immediately
After the Distribution Date until December 31, 2000 on the same basis as ATI.
(ii) ATI shall have the right to determine, and shall promptly
notify Spinco of, the manner in which Spinco's participation in the terms and
conditions of all HMO Agreements as set forth above shall be effectuated. The
permissible ways in which Spinco's participation may be effectuated include
automatically making Spinco a party to the HMO Agreements or obligating the HMOs
to enter into letter agreements with Spinco which are identical to the HMO
Agreements (or such other arrangements as to which ATI and Spinco shall mutually
agree). Such terms and conditions shall include the financial and termination
provisions of the HMO Agreements. Spinco hereby authorizes ATI to act on its
behalf to extend to Spinco the terms and conditions of the HMO Agreements.
Spinco shall fully cooperate with ATI in such efforts, and
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<PAGE> 17
Spinco shall not perform any act, including discussing any alternative
arrangements with any third-party, that would prejudice ATI's efforts.
(iii) Notwithstanding anything in this Article V to the
contrary, Spinco shall have the sole discretion to determine which HMOs to offer
to the participants in the Spinco Health and Welfare Plans for 2001 and
subsequent years, and all HMO Agreements in which Spinco participates pursuant
to this Section 5.2(c) shall provide Spinco with the right to discontinue its
participation effective January 1, 2001.
5.3 PROCEDURES FOR AMENDMENTS TO PLANS, PLAN DESIGNS, ADMINISTRATIVE
PRACTICES, AND VENDOR CONTRACTS.
(a) AMENDMENTS TO PLAN DOCUMENTS. From Immediately After the
Distribution Date through December 31, 2000, Spinco shall not amend any Spinco
Health and Welfare Plan or Plans, and Spinco shall have no rights or privileges
with respect to such Plans other than those rights and privileges contained in
any policy, contract or other written arrangement governing such Plans. During
any period in which ATI is providing Interim Services with respect to any Spinco
Health and Welfare Plan pursuant to Section 7.1, ATI shall have the right to
amend any applicable Spinco Health and Welfare Plan; provided that, in ATI's
reasonable good faith opinion, such amendment will have no material adverse
impact on the Spinco Health and Welfare Plan or its participants or, to the
extent a material adverse impact would occur, such impact would affect both the
applicable Spinco Health and Welfare Plan and any corresponding ATI Health and
Welfare Plan and any costs incurred as a result of such amendment shall be borne
by ATI and Spinco in the same proportion that Spinco and ATI employees,
respectively, participate.
(b) CHANGES IN VENDOR CONTRACTS, GROUP INSURANCE POLICIES, PLAN DESIGN,
AND ADMINISTRATION PRACTICES AND PROCEDURES.
(i) From Immediately After the Distribution Date until
December 31, 2000, Spinco shall not materially modify, or take other action
which would have a material effect on, any of the following items (each such
modification, a "Change"): (A) the termination date, administration, or
operation of (1) an ASO contract between ATI or Spinco and a third-party
administrator, (2) a Group Insurance Policy issued to ATI or Spinco, or (3) an
HMO Agreement with ATI or Spinco, in each case, the material terms and
conditions of which contracts and policies are extended to Spinco or to which
Spinco becomes a party pursuant to Section 5.2; (B) the design of either an ATI
Health and Welfare Plan or a Spinco Health and Welfare Plan; or (C) the
financing, operation, administration or delivery of benefits under either an ATI
Health and Welfare Plan or a Spinco Health and Welfare Plan.
(ii) During any period in which ATI is providing Interim
Services with respect to any Spinco Health and Welfare Plan pursuant to Section
7.1, ATI shall be permitted to make any Change to such Spinco Plan; provided
that, in ATI's reasonable good faith opinion, such Change would affect both the
applicable Spinco Health and Welfare Plan and any corresponding ATI Health and
Welfare Plan and any costs incurred as a result of such amendment
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<PAGE> 18
shall be borne proportionally by ATI and Spinco in the same proportion that
Spinco and ATI employees, respectively, participate.
(c) EMPLOYEE CONTRIBUTIONS. Except as otherwise expressly provided in
Sections 5.3(a) and 5.3(b), as of January 1, 2001, Spinco shall have the right,
in its sole and absolute discretion and without compliance with Sections 5.3(a)
and 5.3(b), to increase or decrease the amount of employee contributions under
their respective Health and Welfare Plans.
5.4 ATI SICKNESS AND ACCIDENT, LONG TERM DISABILITY AND PENSION
DISABILITY BENEFITS. ATI shall transfer to Spinco, effective Immediately After
the Distribution Date, responsibility for administering all claims incurred by
Spinco Individuals and other employees and former employees of Spinco and the
Spinco Entities before the Close of the Distribution Date that are administered
by ATI as of the Close of the Distribution Date. Spinco shall administer such
claims in the same manner, and using the same methods and procedures, as ATI
used in administering such claims. Spinco shall have sole discretionary
authority to make any necessary determinations with respect to such claims,
including entering into settlements with respect to such claims.
5.5 POST-RETIREMENT HEALTH AND LIFE INSURANCE BENEFITS. As soon as
practicable after the Distribution Date, Spinco shall provide ATI with a list of
all Spinco Individuals who are, to the best knowledge of Spinco, eligible to
receive retiree medical or dental coverage under the ATI Health and Welfare
Plans from and after the Distribution Date and/or post-retirement life insurance
coverage under the ATI Group Life Program, and the type of retiree medical or
dental coverage and the level of life insurance coverage for which they are
eligible, as applicable.
5.6 COBRA AND DIRECT PAY. Effective Immediately After the Distribution
Date, Spinco shall solely be responsible for administering compliance with the
health care continuation coverage requirements of COBRA and the Spinco Health
and Welfare plans, and, with respect to Spinco Individuals, the ATI Health and
Welfare Plans.
5.7 POST-DISTRIBUTION TRANSITIONAL ARRANGEMENTS.
(a) CONTINUANCE OF ELECTIONS, CO-PAYMENTS AND MAXIMUM BENEFITS.
(i) Spinco shall cause the Spinco Health and Welfare Plans to
recognize and maintain all coverage and contribution elections made by Spinco
Individuals under the ATI Health and Welfare Plans and apply such elections
under the Spinco Health and Welfare Plans for the remainder of the period or
periods for which such elections are by their terms applicable. The transfer or
other movement of employment from ATI to Spinco at any time before the Close of
the Distribution Date shall neither constitute nor be treated as a "status
change" under the ATI Health and Welfare Plans or the Spinco Health and Welfare
Plans.
(ii) Spinco shall cause the Spinco Health and Welfare Plans to
recognize and give credit for (A) all amounts applied to deductibles,
out-of-pocket maximums, and other
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applicable benefit coverage limits with respect to which such expenses have been
incurred by Spinco Individuals under the ATI Health and Welfare Plans for the
remainder of the year in which the Distribution occurs, and (B) all benefits
paid to Spinco Individuals under the ATI Health and Welfare Plans for purposes
of determining when such persons have reached their lifetime maximum benefits
under the Spinco Health and Welfare Plans.
(iii) Spinco shall recognize and maintain through December 31,
1999 all eligible populations covered by the ATI Health and Welfare Plans (as
defined in the applicable ATI Health and Welfare Plan documents), including
Class I and Class II dependents, term and temporary employees, alternate benefit
plan employees, and all categories of part-time employees (which are fully and
non-fully eligible for company contributions).
(iv) Spinco shall (A) provide coverage to Spinco Individuals
under the Spinco Group Life Program without the need to undergo a physical
examination or otherwise provide evidence of insurability, and (B) recognize and
maintain all irrevocable assignments and accelerated benefit option elections
made by Spinco Individuals under the ATI Group Life Program.
(b) OTHER POST-DISTRIBUTION TRANSITIONAL RULES.
(i) ATI HCRA PLAN. To the extent any Spinco Individual
contributed to an account under the ATI HCRA Plan during the calendar year that
includes the Distribution Date, effective as of the Close of the Distribution
Date, ATI shall transfer to the Spinco HCRA Plan the account balances of Spinco
Individuals for such calendar year under the ATI HCRA Plan, regardless of
whether the account balance is positive or negative.
(ii) ATI CHILD/ELDER CARE REIMBURSEMENT ACCOUNT PLAN. To the
extent any Spinco Individual contributed to the ATI CECRA Plan during the
calendar year that includes the Distribution Date, ATI shall transfer the
account balances of Spinco Individuals for such calendar year in the ATI CECRA
Plan to the Spinco CECRA Plan.
(iii) POST-RETIREMENT MEDICAL PLAN. For the period ending on
December 31st of the calendar year which is five calendar years after the
Distribution Date, Spinco shall comply with all cost maintenance period
requirements and benefit maintenance period requirements under Code Sections
401(h) or 420 that are applicable to post-retirement health benefits under the
Spinco Health Plans for any pension asset transfers pursuant to Code Section 420
by or on behalf of ATI for qualified current retiree health liabilities (as
defined under Code Section 420). With respect to any pension asset transfers
pursuant to Code Section 420, Spinco shall obtain ATI's prior written approval
before amending any Spinco Health Plan with respect to the provision of
post-retirement health benefits during the cost maintenance or benefit
maintenance periods to which the ATI Health Plans are subject pursuant to Code
Section 420 and no such amendment shall be effective in any respect until ATI's
prior written approval is obtained. No pension asset transfer pursuant to Code
Section 420 shall be made by Spinco after the date hereof and before the Close
of the Distribution Date unless Spinco and ATI so agree.
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<PAGE> 20
(iv) HEALTH AND WELFARE PLANS SUBROGATION RECOVERY. After the
Close of the Distribution Date, ATI shall pay to Spinco any amounts ATI recovers
from time to time through subrogation or otherwise for claims incurred by or
reimbursed to any Spinco Individual. If Spinco recovers any amounts through
subrogation or otherwise for claims incurred by or reimbursed to employees and
former employees of ATI or an ATI Entity and their respective beneficiaries and
dependents (other than Spinco Individuals), Spinco shall pay such amounts to
ATI.
5.8 APPLICATION OF ARTICLE V TO SPINCO ENTITIES. Any reference in this
Article V to "Spinco" shall include a reference to a Spinco Entity when and to
the extent ATI or Spinco has caused the Spinco Entity to (a) become a party to a
vendor contract, group insurance contract, or HMO letter agreement associated
with a Spinco Health and Welfare Plan, (b) become a self-insured entity for the
purposes of one or more Spinco Health and Welfare Plans, (c) assume all or a
portion of the liabilities or administrative responsibilities for benefits which
arose before the Close of the Distribution Date under an ATI Health and Welfare
Plan and which were expressly assumed by Spinco pursuant to the terms of this
Agreement, or (d) take any other action, extend any coverage, assume any other
liability or fulfill any other responsibility that Spinco would otherwise be
required to take under the terms of this Article V, unless it is clear from the
context that the particular reference is not intended to include a Spinco
Entity. In all such instances in which a reference in this Article V to "Spinco"
includes a reference to a Spinco Entity, Spinco shall be responsible to ATI for
ensuring that the Spinco Entity complies with the applicable terms of this
Agreement and the Spinco Individuals allocated to such Spinco Entity shall have
the same rights and entitlements to benefits under the applicable Spinco Health
and Welfare Plans that the Spinco Individual would have had if he or she had
instead been allocated to Spinco. Further, each such Spinco Entity, unless
otherwise expressly provided under the terms of this Agreement or any Ancillary
Agreement, shall defend, indemnify and hold harmless ATI for any costs incurred
by ATI pursuant to the provisions of Article V on behalf of or related to such
Spinco Entity.
ARTICLE VI
EXECUTIVE BENEFITS AND NON-EMPLOYEE DIRECTOR BENEFITS
6.1 ASSUMPTION OF OBLIGATIONS. Except (i) for Benefit Liabilities
arising under the Teledyne Pension Equalization Plan and (ii) as otherwise
expressly provided in this Article VI, effective Immediately After the
Distribution Date, Spinco and the Spinco Entities shall assume and be solely
responsible for all Benefit Liabilities to or relating to Spinco Individuals
under all ATI Executive Benefit Plans.
6.2 CONSENTS AND NOTIFICATIONS. ATI and Spinco shall use their
Reasonable Efforts to obtain, or cause to be obtained, to the extent necessary,
the written consent of each Spinco Individual who is a party to a separate
agreement between the Individual and ATI and/or a participant in any ATI
Executive Benefit Plan, to the treatment of such individual agreement and/or
Executive Benefit Plan, as applicable, in accordance with this Article VI,
including the assumption by Spinco and the Spinco Entities, of sole
responsibility for, and the
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<PAGE> 21
release of ATI and the ATI Entities from, all Benefit Liabilities thereunder;
provided, that no failure to seek or to obtain any such consent shall have any
effect upon the obligations of Spinco and the Spinco Entities with respect to
such Benefit Liabilities.
6.3 ATI 1999 BONUS PLAN. Subject to the provisions of Section
6.4(a)(ii)(B), Spinco shall be responsible for determining, with respect to all
Awards that would otherwise be payable under any bonus Plan or arrangement to
Spinco Individuals for the 1999 performance year, (a) the extent to which
established performance criteria (as interpreted by Spinco, in its sole
discretion, after taking into account the effects of the Distribution) have been
met and (b) the payment level for each Spinco Individual.
6.4 ATI INCENTIVE PLANS. ATI and Spinco shall use their Reasonable
Efforts to take all actions necessary or appropriate so that each outstanding
Award granted under any ATI Incentive Plan held by any Spinco Individual shall
be determined, converted or replaced, as the case may be, as set forth in this
Section 6.4 with an Award under the Spinco Incentive Plan.
(a) SPINCO INDIVIDUALS WHO ARE ACTIVE EMPLOYEES OF SPINCO.
(i) STOCK OPTIONS.
(A) In the Money Options. Spinco shall cause each In the Money
Option that is outstanding as of the Close of the Distribution Date and is held
by a Spinco Individual to be converted, effective Immediately After the
Distribution Date, to a Spinco Option (a "Converted Option"). Such Converted
Option shall provide for the option to purchase a number of shares of Spinco
Common Stock equal to the number of shares of ATI Common Stock subject to such
In the Money Option as of the Close of the Distribution Date, multiplied by the
Ratio, and then rounded up to the nearest whole share. The per-share exercise
price of such Converted Option shall equal the per-share exercise price of such
In the Money Option as of the Close of the Distribution Date divided by the
Ratio. Each such Converted Option shall otherwise have the same terms and
conditions as were applicable to the corresponding In the Money Option as of the
Close of the Distribution Date, except that references to ATI and its Affiliates
shall be amended to refer to Spinco and its Affiliates.
(B) Out of the Money Options. Effective prior to the Close of
the Distribution Date, each Out of the Money Option that is outstanding as of
the Close of the Distribution Date and is held by a Spinco Individual shall be
canceled. After the Distribution Date, it is contemplated that a new Spinco
Option shall be granted (a "New Spinco Option") to each Spinco Individual who
has a canceled Out of the Money Option, as determined by Spinco's Board of
Directors or an applicable Committee thereof. Any Out of the Money Option that
is not canceled as described in this Section 6.4(a)(i)(B) shall be treated as if
it were an In the Money Option under Section 6.4(a)(i)(A).
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<PAGE> 22
(ii) PERFORMANCE AWARDS.
(A) The current performance period under the ATI Performance
Share Program is the three-year period commencing on January 1, 1998. Either
prior to or within a reasonable time after the Distribution Date, in accordance
with the provisions of Section 6.4(a)(ii)(B), the applicable ATI Performance
Award under the ATI Performance Share Program shall be determined by ATI with
respect to each Spinco Individual for the period from January 1, 1998 through
the Distribution Date. Effective Immediately After the Distribution Date, Spinco
and the Spinco Entities shall assume and be solely responsible for all Benefit
Liabilities to or relating to Spinco Individuals with respect to the
administration and distribution of Performance Awards to such Spinco
Individuals.
(B) Notwithstanding the provisions of Section 6.3, the ATI
Personnel and Compensation Committee or the Stock Incentive Award Subcommittee,
as the case may be, shall determine, in its sole and absolute discretion, with
respect to each Spinco Individual, the extent to which, as of the Distribution
Date, such Individual has achieved target performance levels established under
the ATI Performance Share Program and the appropriate Performance Award for such
Individual based upon such performance. The Performance Award so determined
shall be pro-rated by multiplying the Performance Award determined under the
preceding sentence by a fraction, the numerator of which shall be equal to the
number of months from and including January 1, 1998 to the month in which the
Distribution Date occurs and the denominator of which shall be 36. The
Performance Award as determined hereunder shall be distributed by Spinco and the
Spinco Entities to the applicable Spinco Individual as provided under the terms
of the Performance Share Program; provided, however, that any ATI Common Stock
allocated or otherwise awarded to a Spinco Individual as part of a Performance
Award under the provisions of this Section 6.4(a)(ii) shall, prior to any
distribution to such Individual and, in any event, no later than Immediately
After the Distribution Date, be converted into Spinco Common Stock by
multiplying the number of shares of ATI Common Stock subject to such Performance
Award by an appropriate ratio, as determined by ATI's Board of Directors or an
applicable Committee thereof and then rounding up the product to the nearest
whole share.
(iii) SARP. As of the Distribution Date, all shares of ATI
Common Stock issued and outstanding held by a Spinco Individual under the ATI
SARP as Designated Stock or Purchased Stock (as those terms are defined in the
ATI SARP) shall continue to be so held, and the shares of Spinco Common Stock
received by Spinco Individuals in respect of their Purchased Stock and
Designated Stock pursuant to the distribution terms of Article III of the
Separation and Distribution Agreement and the shares of Teledyne Technologies
Incorporated Common Stock received by Spinco Individuals in respect of their
Purchased Stock and Designated Stock as a result of the spin-off of Teledyne
Technologies Incorporated by ATI to ATI's stockholders shall also be considered
Designated Stock or Purchased Stock, as the case may be, subject to the terms of
the ATI SARP. Effective Immediately After the Distribution Date, Spinco shall
assume all Benefit Liabilities to or relating to Spinco Individuals under the
ATI SARP relating to the Restricted Stock, but ATI shall retain all promissory
notes payable by participants into the ATI SARP, including Spinco Individuals,
to the order of ATI, and the collateral with respect to such notes shall include
all shares of ATI Common Stock that were pledged as collateral for purposes of
the ATI SARP immediately prior to the Distribution Date as well as the shares of
Spinco Common Stock and Teledyne Technologies Incorporated Common Stock issued
in respect of such shares of ATI Common
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<PAGE> 23
Stock held as collateral. As of the Distribution Date, pursuant to the terms of
the ATI SARP, in lieu of and in substitution for all shares of ATI Common Stock
held by Spinco Individuals under the ATI SARP which are Restricted Stock (as
that term is defined in the ATI SARP), such Spinco Individuals shall, without
any further action on their part, hold a number of shares of Spinco Common Stock
determined by multiplying the number of shares of ATI Common Stock that are
Restricted Stock by an appropriate ratio, as determined by ATI's Board of
Directors or an applicable Committee thereof then rounding the product up to the
nearest whole share, and such shares of Spinco Common Stock shall be subject to
the same restrictions as the shares of ATI Common Stock prior to the conversion.
(b) SPINCO INDIVIDUALS WHO ARE NOT ACTIVE EMPLOYEES OF SPINCO. Each
outstanding Award that is held by an individual who, as of the Close of the
Distribution Date, would otherwise be a Spinco Individual but is not an active
employee of or on leave of absence from Spinco or a Spinco Entity shall remain
outstanding Immediately After the Distribution Date in accordance with its terms
as applicable as of the Close of the Distribution Date, subject to such
adjustments as may be applicable to outstanding Awards held by individuals who
remain active employees of or on leave of absence from ATI or an ATI Entity
after the Distribution Date.
6.5 ATI NONQUALIFIED DEFERRED COMPENSATION PROGRAMS.
(a) ASSUMPTION OF LIABILITIES AND TRANSFER OF ASSETS. Effective
Immediately After the Distribution Date, Spinco shall assume all Benefit
Liabilities to or relating to Spinco Individuals under the ATI Nonqualified
Deferred Compensation Programs. Effective Immediately After the Distribution
Date, to the extent ATI has acquired Corporate-Owned Life Insurance Policies as
a source of payment of liabilities which are or may be payable under the
Allegheny Teledyne Incorporated Executive Deferred Compensation Plan with
respect to Spinco Individuals, ATI shall, in ATI's sole discretion, (i) transfer
an amount in cash equal to the cash surrender value of such policies or (ii)
cause the transfer, either by assignment or any other reasonable means, to
Spinco of Corporate-Owned Life Insurance Policies on the lives of such Spinco
Individuals and such other employees or former employees of ATI or its
subsidiaries as ATI may, in its sole discretion select, or any portion thereof,
having in the aggregate a cash surrender value equal to the amount of any
Benefit Liabilities for Spinco Individuals under the Allegheny Teledyne
Incorporated Executive Deferred Compensation Plan.
(b) CORPORATE-OWNED LIFE INSURANCE. ATI and Spinco shall take all
actions necessary to replicate the manner in which ATI has heretofore held
Corporate-Owned Life Insurance Policies, and executing or accepting delivery of
any assignments reasonably requested by either party or any insurance company
insuring one or more lives under the Corporate-Owned Life Insurance Policies, as
may be necessary or appropriate in order to assign those Policies insuring
Spinco Individuals to Spinco, effective Immediately After the Distribution Date.
If a Corporate-Owned Life Insurance Policy is so assigned to Spinco, Spinco
shall assume and be solely responsible for all Benefit Liabilities, and shall be
entitled to all benefits, thereunder, effective as of the earlier of (i) the
Close of the Distribution Date and (ii) the date of such assignment. ATI and
Spinco shall continue, liquidate and/or administer such Corporate-Owned
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<PAGE> 24
Life Insurance Policies on terms and conditions agreed to by ATI and Spinco. ATI
and Spinco shall share all information that may be necessary to identify the
individuals insured by the Corporate-Owned Life Insurance Policies owned by ATI
and/or Spinco and to determine when and whether such individuals are deceased.
6.6 NON-EMPLOYEE DIRECTOR BENEFITS. The parties intend that all Spinco
Non-Employee Directors who were ATI Non-Employee Directors prior to the
Distribution Date may continue to serve as ATI Non-Employee Directors. In
furtherance of such intention, ATI shall retain all Benefit Liabilities with
respect to the services of its Non-Employee Directors under the ATI Non-Employee
Director Plans accrued as of the Distribution Date. Spinco assumes no Benefit
Liabilities under the ATI Non-Employee Director Plans.
6.7 CONFIDENTIALITY AND PROPRIETARY INFORMATION. No provision of this
Agreement shall be deemed to release any individual for a violation of any
agreement or policy pertaining to confidential or proprietary information of ATI
or any of its Affiliates, or otherwise relieve any individual of his or her
obligations under any such agreement or policy.
ARTICLE VII
GENERAL AND ADMINISTRATIVE
7.1 INTERIM SERVICES AGREEMENT. Effective on or before the Distribution
Date, ATI and Spinco shall enter into an agreement relating to the coordination
of and payment for transition services to be provided by ATI regarding the
establishment and administration of the Spinco Plans (the "Interim Services
Agreement"). The provisions of the Interim Services Agreement shall be
incorporated by reference in this Agreement and shall become a part of this
Agreement.
7.2 PAYMENT OF LIABILITIES, PLAN EXPENSES AND RELATED MATTERS.
(a) ACTUARIAL AND ACCOUNTING METHODOLOGIES AND ASSUMPTIONS. For
purposes of this Agreement, unless specifically indicated otherwise: (i) all
actuarial methodologies and assumptions used for a particular Plan shall (except
to the extent otherwise determined by ATI and Spinco to be reasonable or
necessary) be substantially the same as those used in the actuarial valuation of
that Plan used to determine minimum funding requirements under ERISA Section 302
and Code Section 412(c) for 1999, or, if such Plan is not subject to such
minimum funding requirements, the assumptions used to prepare ATI's audited
financial statements for 1999, as the case may be; and (ii) the value of plan
assets shall be the value established by ATI for purposes of audited financial
statements of the relevant plan or trust for the period ending on the date as of
which the valuation is to be made. Except as otherwise contemplated by this
Agreement or as required by law, all determinations as to the amount or
valuation of any assets of or relating to any ATI Plan (whether or not such
assets are being transferred to a Spinco Plan) shall be made by ATI in its sole
and absolute discretion and such determination shall be final and binding on all
parties.
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<PAGE> 25
(b) PAYMENT OF LIABILITIES; DETERMINATION OF EMPLOYEE STATUS. Spinco
shall pay directly, or reimburse ATI promptly for, all Benefit Liabilities
assumed by it pursuant to this Agreement, including all compensation payable to
Spinco Individuals for services rendered while in the employ of ATI or an ATI
Entity before becoming a Spinco Individual (to the extent not charged for
pursuant to Section 7.1 or another Ancillary Agreement). To the extent the
amount of such Benefit Liabilities is not yet determinable because the status of
individuals as Spinco Individuals is not yet determined, except as otherwise
specified herein or in another Ancillary Agreement with respect to particular
Benefit Liabilities, Spinco shall make such payments or reimbursements based
upon ATI's reasonable estimates of the amounts thereof, and when such status is
determined, Spinco shall make additional reimbursements or payments, or ATI
shall reimburse Spinco, to the extent necessary to reflect the actual amount of
such Benefit Liabilities. In determining the number of individuals in any
particular group of employees described in this Agreement (such as "Spinco
Individuals"), no individual shall be counted twice. Determinations of what
entity employs or employed a particular individual shall be made by reference to
the applicable legal entity and/or other appropriate accounting code, to the
extent possible.
7.3 SHARING OF PARTICIPANT INFORMATION. ATI and Spinco shall share, ATI
shall cause each applicable ATI Entity to share, and Spinco shall cause each
applicable Spinco Entity to share, with each other and their respective agents
and vendors (without obtaining releases) all participant information necessary
for the efficient and accurate administration of each of the ATI Plans and the
Spinco Plans. ATI and Spinco and their respective authorized agents shall,
subject to applicable laws on confidentiality, be given reasonable and timely
access to, and may make copies of, all information relating to the subjects of
this Agreement in the custody of the other party, to the extent necessary for
such administration. Until December 31, 2000, all participant information shall
be provided in a manner and medium that is compatible with the data processing
systems of ATI as in effect on the Close of the Distribution Date, unless
otherwise agreed to by ATI and Spinco.
7.4 REPORTING AND DISCLOSURE AND COMMUNICATIONS TO PARTICIPANTS. Spinco
shall take, and shall cause each other applicable Spinco Entity to take, all
actions necessary or appropriate to facilitate the distribution of all
applicable ATI Plan-related communications and materials to Spinco Individuals
and their beneficiaries, including summary plan descriptions and related
summaries of material modification, summary annual reports, investment
information, prospectuses, notices and enrollment material related to the Spinco
Plans. Spinco shall pay ATI the cost relating to the copies of all such
documents provided to Spinco, except to the extent such costs are charged
pursuant to Section 7.1 or pursuant to an Ancillary Agreement. Spinco shall
assist, and Spinco shall cause each other applicable Spinco Entity to assist,
ATI in complying with all reporting and disclosure requirements of ERISA,
including the preparation of Form 5500 annual reports for the ATI Plans, where
applicable.
7.5 NON-TERMINATION OF EMPLOYMENT; NO THIRD-PARTY BENEFICIARIES. No
provision of this Agreement or the Separation and Distribution Agreement shall
be construed to create any right, or accelerate entitlement, to any compensation
or benefit whatsoever on the part of any Spinco Individual or other future,
present or former
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<PAGE> 26
employee of ATI, an ATI Entity, Spinco, or a Spinco Entity under any ATI Plan or
Spinco Plan or otherwise. Without limiting the generality of the foregoing: (i)
the Distribution shall not cause any employee to be deemed to have incurred a
termination of employment which entitles such individual to the commencement of
benefits under any of the ATI Plans, any of the Spinco Plans, or any individual
agreements; and (ii) except as expressly provided in this Agreement, nothing in
this Agreement shall preclude Spinco, at any time after the Close of the
Distribution Date, from amending, merging, modifying, terminating, eliminating,
reducing, or otherwise altering in any respect any Spinco Plan, any benefit
under any Plan or any trust, insurance policy or funding vehicle related to any
Spinco Plan unless such change could or will increase the obligations of ATI or
any ATI Entity under any Plan or agreement.
7.6 BENEFICIARY DESIGNATIONS. All beneficiary designations made by
Spinco Individuals for ATI Plans shall be transferred to and be in full force
and effect under the corresponding Spinco Plans until such beneficiary
designations are replaced or revoked by the Spinco Individual who made the
beneficiary designation.
7.7 REQUESTS FOR IRS RULINGS AND DOL OPINIONS. Spinco shall cooperate
fully with ATI on any issue relating to the transactions contemplated by this
Agreement for which ATI elects to seek a determination letter or private letter
ruling from the IRS or an advisory opinion from the DOL. ATI shall cooperate
fully with Spinco with respect to any request for a determination letter or
private letter ruling from the IRS or advisory opinion from the DOL with respect
to any of the Spinco Plans relating to the transactions contemplated by this
Agreement.
7.8 FIDUCIARY MATTERS. ATI and Spinco each acknowledges that actions
required to be taken pursuant to this Agreement may be subject to fiduciary
duties or standards of conduct under ERISA or other applicable law, and no party
shall be deemed to be in violation of this Agreement if it fails to comply with
any provisions hereof based upon its good faith determination that to do so
would violate such a fiduciary duty or standard.
7.9 COLLECTIVE BARGAINING. To the extent any provision of this
Agreement is contrary to the provisions of any collective bargaining agreement
to which ATI or any Affiliate of ATI is a party, the terms of such collective
bargaining agreement shall prevail. Should any provisions of this Agreement be
deemed to relate to a topic determined by an appropriate authority to be a
mandatory subject of collective bargaining, ATI or Spinco may be obligated to
bargain with the union representing affected employees concerning those
subjects. Neither party will agree to a modification of any collective
bargaining agreement without the consent of the other.
7.10 CONSENT OF THIRD PARTIES. If any provision of this Agreement is
dependent on the consent of any third party (such as a vendor or a union) and
such consent is withheld, ATI and Spinco shall use their Reasonable Efforts to
implement the applicable provisions of this Agreement to the full extent
practicable. If any provision of this Agreement
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<PAGE> 27
cannot be implemented due to the failure of such third party to consent, ATI and
Spinco shall negotiate in good faith to implement the provision in a mutually
satisfactory manner.
ARTICLE VIII
MISCELLANEOUS
8.1 FOREIGN PLANS. To the extent that Spinco has or assumes any
responsibility for sponsorship, maintenance or administration of any Foreign
Plan, ATI shall have no responsibility or liability with respect to such Plan
and Spinco shall indemnify and hold harmless ATI from any liability under such
Plan.
8.2 EFFECT IF DISTRIBUTION DOES NOT OCCUR. If the Distribution does not
occur, then all actions and events that are, under this Agreement, to be taken
or occur effective as of the Close of the Distribution Date, Immediately After
the Distribution Date, or otherwise in connection with the Distribution, shall
not be taken or occur except to the extent specifically agreed by Spinco and
ATI.
8.3 RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be deemed
or construed by the parties or any third party as creating the relationship of
principal and agent, partnership or joint venture between the parties, it being
understood and agreed that no provision contained herein, and no act of the
parties, shall be deemed to create any relationship between the parties other
than the relationship set forth herein.
8.4 AFFILIATES. Each of ATI and Spinco shall cause to be performed, and
hereby guarantees the performance of, all actions, agreements and obligations
set forth in this Agreement to be performed by an ATI Entity or a Spinco Entity,
respectively.
8.5 GOVERNING LAW. To the extent not preempted by applicable federal
law, this Agreement shall be governed by, construed and interpreted in
accordance with the laws of the Commonwealth of Pennsylvania, without regard to
its principles of conflict of law, as to all matters, including matters of
validity, construction, effect, performance and remedies.
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<PAGE> 28
IN WITNESS WHEREOF, the parties have caused this Employee Benefits
Agreement to be duly executed as of the day and year first above written.
ALLEGHENY TELEDYNE INCORPORATED
By:____________________________
Title:_________________________
WATER PIK TECHNOLOGIES, INC.
By:____________________________
Title:_________________________
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<PAGE> 1
Exhibit 10.6
FORM OF WATER PIK TECHNOLOGIES, INC.
1999 NON-EMPLOYEE DIRECTOR STOCK COMPENSATION PLAN
ARTICLE I. GENERAL
1.1. Purpose. It is the purpose of the Plan to promote the interests of
the Company and its stockholders by attracting, retaining and providing an
incentive to Non-Employee Directors through the acquisition of a proprietary
interest in the Company and an increased personal interest in its performance.
This purpose will be served by providing an opportunity for Non-Employee
Directors to elect to receive Stock Options and/or Common Stock in lieu of
Director's Retainer Fee Payments, the automatic payment of a portion of the
Director's Retainer Fee Payment in the form of Common Stock to those
Non-Employee Directors not electing to receive such portion in the form of Stock
Options and/or Common Stock and granting each Non-Employee Director annually an
option covering shares of Common Stock.
1.2. Adoption and Term. The Plan has been approved by the Board and
shall become effective as of the Effective Date (as hereinafter defined). The
Plan shall terminate without further action upon the earlier of (a) the tenth
anniversary of the Effective Date, and (b) the first date upon which no shares
of Common Stock remain available for issuance under the Plan.
1.3. Definitions. As used herein the following terms have the following
meanings:
(a) "Annual Options" means the Stock Options issuable under
Section 4.4(a) of the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
References to a section of the Code shall include that section
and any comparable section or sections of any future
legislation that amends, supplements or supersedes said
section.
(d) "Common Stock" means the common stock, par value $0.10 per
share, of the Company.
(e) "Company" means Water Pik Technologies, Inc., a Delaware
corporation, and any successor thereto.
(f) "Compensation Year" means each calendar year or portion
thereof during which the Plan is in effect.
(g) "Director" means a member of the Board.
(h) "Director's Fees" means the Director's Retainer Fee Payments
and the Director's Meeting Fee Payments.
<PAGE> 2
(i) "Director's Meeting Fee Payment" means the dollar amount of
the fees which the Non-Employee Director would be entitled to
receive for attending meetings of the Board or any committee
of the Board or for serving as the chair of the Board or any
committee of the Board.
(j) "Director's Retainer Fee Payment" means the dollar value of
that portion of the annual retainer fee payable by the Company
to a Non-Employee Director as of a particular Quarterly
Payment Date, as established by the Board and in effect from
time to time.
(k) "Effective Date" means the effective date of the distribution
by Allegheny Teledyne Incorporated to its stockholders of the
Common Stock.
(l) "Employee" means any employee of the Company or an affiliate.
(m) "Fair Market Value" means, as of any given date, the average
of the high and low trading prices of the Common Stock on such
date as reported on the New York Stock Exchange, or, if the
Common Stock is not then traded on the New York Stock
Exchange, on such other national securities exchange on which
the Common Stock is admitted to trade, or, if none, on the
National Association of Securities Dealers Automated Quotation
System if the Common Stock is admitted for quotation thereon;
provided, however, if there were no sales reported as of such
date, Fair Market Value shall be computed as of the last date
preceding such date on which a sale was reported; provided,
further, that if any such exchange or quotation system is
closed on any day on which Fair Market Value is to be
determined, Fair Market Value shall be determined as of the
first date immediately preceding such date on which such
exchange or quotation system was open for trading.
(n) "Non-Employee Director" means a Director who is not an
Employee.
(o) "Non-Employee Director Notice" means a written notice
delivered in accordance with Section 4.2.
(p) "Plan" means this Water Pik Technologies, Inc. 1999
Non-Employee Director Stock Compensation Plan, as it may
hereafter be amended from time to time.
(q) "Quarterly Payment Date" means each of the quarterly dates on
which the Director's Retainer Fee Payment is paid by the
Company.
(r) "Retainer Fee Options" means the Stock Options issuable under
Section 4.3 of the Plan.
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<PAGE> 3
(s) "Stock Options" means options to purchase shares of Common
Stock of the Company issuable hereunder.
1.4. Shares Subject to the Plan. The shares to be offered under the
Plan shall consist of the Company's authorized but unissued Common Stock or
treasury shares and, subject to adjustment as provided in Section 5.1 hereof,
the aggregate amount of such stock which may be issued or subject to Stock
Options issued hereunder shall not exceed _______________. If any Stock Option
granted under the Plan shall expire or terminate for any reason, without having
been exercised or vested in full, as the case may be, the unpurchased shares
subject thereto shall again be available for issuance under the Plan. Stock
Options granted under the Plan will not be qualified as "incentive stock
options" under Section 422 of the Code.
ARTICLE II. ADMINISTRATION
2.1. The Board. The Plan shall be administered by the Board. Subject to
the provisions of the Plan, the Board shall interpret the Plan, promulgate,
amend, and rescind rules and regulations relating to the Plan and make all other
determinations necessary or advisable for its administration. Interpretation and
construction of any provision of the Plan by the Board shall be final and
conclusive. Notwithstanding the foregoing, the Board shall have or exercise no
discretion with respect to the selection of persons eligible to participate
hereunder, the determination of the number of shares of Common Stock or number
of Stock Options issuable to any person or any other aspect of Plan
administration with respect to which such discretion is not permitted in order
for grants of shares of Common Stock and Stock Options to be exempt under Rule
16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
ARTICLE III. PARTICIPATION
3.1. Participants. Each Non-Employee Director shall participate in the
Plan on the terms and conditions hereinafter set forth.
ARTICLE IV. PAYMENT OF DIRECTOR'S FEES
4.1. General. The Director's Retainer Fee Payment shall be paid to each
Non-Employee Director, as of each Quarterly Payment Date, as set forth in the
Plan and subject to such other payment policies and procedures as the Board may
establish from time to time. Director's Meeting Fee payments shall be paid
reasonably promptly following the date of the meeting to which such payments
relate. If for the applicable Compensation Year such Non-Employee Director has
not made an election to receive Stock Options or Common Stock in lieu of at
least one-fourth (1/4) of the Director's Retainer Fee Payment pursuant to
Section 4.2, three-fourths (3/4) of the Director's Retainer Fee Payment shall be
paid in cash and one-fourth (1/4) of the Director's Retainer Fee Payment shall
be paid in the form of Common Stock.
4.2. Non-Employee Director Notice. Non-Employee Directors may file with
the Committee or its designee at least six months prior to the commencement of a
Compensation Year a Non-Employee Director Notice electing to receive a specified
portion (but not below twenty five percent (25%)) of his or her Director's
Retainer Fee Payment in the form of Stock Options and/or Common Stock.
3
<PAGE> 4
Notwithstanding the foregoing, elections to receive Common Stock or Stock
Options may be made at any time during a Compensation Year so long as such
elections are made irrevocably at least six months in advance of receiving the
corresponding Common Stock or Stock Options and (i) the director making such
election became a Non-Employee Director less than six months before the
commencement of the subject Compensation Year, or (ii) such elections relate to
the Common Stock or Stock Options for service in calendar years 1999 and 2000.
In any such case, the Common Stock and/or Stock Options shall be granted at the
later of (i) the first business day which is six months and one day after the
date of the director's election to receive a Common Stock or Stock Option or
(ii) the date on which Stock Options or shares of Common Stock otherwise would
be issued.
4.3. Conversion of Retainer Fee Payment to Shares.
Each Non-Employee Director who pursuant to Section 4.1 or 4.2 is to
receive Common Stock as part of his or her Director's Retainer Fee Payment with
respect to a Compensation Year and who is elected or reelected or is a
continuing Non-Employee Director as of the date of commencement of such
Compensation Year and as of the applicable Quarterly Payment Date, shall receive
as of each Quarterly Payment Date during such Compensation Year a number of
shares of Common Stock equal to the quotient obtained by dividing (i) the amount
of the Director's Retainer Fee Payment to be paid in the form of Common Stock by
(ii) the Fair Market Value of the Common Stock per share on such Quarterly
Payment Date. Cash shall be paid in lieu of any fractional shares.
4.4. Stock Options.
(a) Annual Option Grants. An Annual Option covering shares of
Common Stock shall be granted to each Non-Employee Director on the date of
adoption of this Plan by the Board, subject to approval of the stockholders of
the Company. Thereafter, an Annual Option covering shares of Common Stock
will be granted to each Non-Employee Director automatically at the conclusion of
each Company Annual Meeting. If, after the date of adoption of this Plan, a
director first becomes a Non-Employee Director on a date other than an Annual
Meeting date, an Annual Option covering shares of Common Stock will be
granted to such director on his or her first date of Board service. The purchase
4
<PAGE> 5
price of the Common Stock covered by each Annual Option will be the Fair Market
Value of a share of Common Stock as of the date of grant of the Annual Option.
(b) Retainer Fees Options. Retainer Fees Options for a Compensation
Year will be granted on January 2 of such Compensation Year (or if such January
2 is not a business day, on the next succeeding business day) for service during
such Compensation Year. The number of shares of Common Stock to be subject to a
Retainer Fees Option shall be equal to the nearest number of whole shares
determined by multiplying the Fair Market Value of a share of Company Common
Stock on the date of grant by 0.3333 and dividing the result into the portion of
the Director's Retainer Fee Payment elected to be received as Stock Options by
the Non-Employee Director for the Compensation Year. The purchase price of each
share covered by each Retainer Fee Option shall be equal to the Fair Market
Value of a share of Common Stock on the date of grant of the Retainer Fee Option
multiplied by 0.6666.
(c) Duration and Exercise of Stock Options. Subject to Section 4.04(f)
below, Annual Options and Retainer Fee Options become exercisable on the first
anniversary of the date on which they were granted. Stock Options shall
terminate upon the expiration of ten years from the date of grant. No Stock
Option may be exercised for a fraction of a share and no partial exercise of any
Stock Option may be for less than shares.
(d) Purchase Price. The purchase price for the shares shall be paid in
full at the time of exercise (i) in cash or by check payable to the order of the
Company, (ii) by delivery of shares of Common Stock of the Company already owned
by, and in the possession of the Stock Option holder, or (iii) by delivering a
properly executed exercise notice together with irrevocable instructions to a
broker to deliver promptly to the Company the amount of sale or loan proceeds to
pay the Stock Option price (in which case the exercise will be effective upon
receipt of such proceeds by the Company). Shares of Common Stock used to satisfy
the exercise price of a Stock Option shall be valued at their Fair Market Value
on the date of exercise.
(e) Transferability. Stock Options granted hereunder shall not be
transferable, other than by will or the laws of descent and distribution and
shall be exercisable during a Stock Option holder's lifetime only by the Stock
Option holder or by his or her guardian or legal representative, except to the
extent transfer is permitted by Rule 16b-3 promulgated under the Exchange Act.
Subject to the foregoing, Stock Options shall not be
5
<PAGE> 6
assigned, pledged or otherwise encumbered by the holder thereof, either
voluntarily or by operation of law.
(f) Termination of Directorship. All rights of a Director in a Stock
Option, to the extent that the Stock Option has not been exercised, shall
terminate three months after the date of the termination of his or her services
as a director for any reason other than (i) the death of the Director, (ii)
cessation of services as a director because the individual, although nominated
by the Board, is not elected by the stockholders to the Board, or (iii)
retirement because of total and permanent disability as defined in Section
22(e)(3) of the Code (collectively "Termination Events"). If a Director ceases
to be a director of the Company because of a Termination Event, the nearest
whole number of unexercisable Stock Options shall immediately become exercisable
which equals the number of full months actually served by the director as a
Non-Employee Director during the Compensation Year at issue divided by 12,
multiplied by the number of unexercisable Stock Options on the date of the
Termination Event. The remaining unexercisable portion of all such Stock Options
shall terminate. All then exercisable Stock Options shall expire twelve months
after the date of a Termination Event.
ARTICLE V. MISCELLANEOUS
5.1. Adjustments Upon Changes in Common Stock. The number and kind of
shares available for issuance under the Plan, and the number and kind of shares
subject to, and the exercise price of, outstanding Stock Options, shall be
appropriately adjusted to prevent dilution or enlargement of rights by reason of
any stock dividend, stock split, combination or exchange of shares,
recapitalization, merger, consolidation or other change in capitalization with a
similar substantive effect upon the Plan or the shares issuable under the Plan.
5.2. Amendment and Termination. The Board shall have complete power and
authority to amend the Plan at any time; provided, however, that the Board shall
not, without the affirmative approval of the stockholders of the Company, make
any amendment which requires stockholder approval under Rule 16b-3 promulgated
under the Exchange Act, or under any applicable law. The Board shall have the
right and the power to terminate the Plan at any time. No amendment or
termination of the Plan may, without the consent of the Non-Employee Director,
adversely affect the right of such Non-Employee Director with respect to any
Stock Options then outstanding.
5.3. Requirements of Law. The issuance of Common Stock under the Plan
shall be subject to all applicable laws, rules and regulations and to such
approval by governmental agencies as may be required.
5.4. No Guarantee of Membership. Nothing in the Plan shall confer upon
a Non-Employee Director any right to continue to serve as a Director.
5.5. Construction. Words of any gender used in the Plan shall be
construed to include any other gender, unless the context requires otherwise.
6
<PAGE> 7
5.6. Governing Law. This Plan shall be governed by, construed and
interpreted in accordance with the laws of the State of Delaware, without regard
to its principles of conflict of law, as to all matters, including matters of
validity, construction, effect, performance and remedies.
7
<PAGE> 1
Exhibit 10.7
FORM OF
WATER PIK TECHNOLOGIES, INC.
1999 INCENTIVE PLAN
ARTICLE I
PURPOSE AND ADOPTION OF THE PLAN
1.01. PURPOSE. The purpose of the Water Pik Technologies, Inc.
1999 Incentive Plan (hereinafter referred to as the "Plan") is to assist in
attracting and retaining highly competent employees, to act as an incentive in
motivating selected officers and other key employees of Water Pik Technologies,
Inc. and its Subsidiaries to achieve long-term corporate objectives and to
enable cash incentive awards to qualify as performance-based for purposes of the
tax deduction limitations under Section 162(m) of the Code.
1.02. ADOPTION AND TERM. The Plan has been approved by the
Board of Directors of Water Pik Technologies, Inc., to be effective as of the
effective date of the distribution by Allegheny Teledyne Incorporated to its
stockholders of Water Pik Technologies, Inc. Common Stock (the "Effective
Date"), but is subject to the approval of the stockholders of the Company. The
Plan shall remain in effect until terminated by action of the Board; provided,
however, that no Incentive Stock Option may be granted hereunder after the tenth
anniversary of the Effective Date and the provisions of Articles VII, VIII, IX
and X with respect to performance-based awards to "covered employees" under
Section 162(m) of the Code shall expire as of the fifth anniversary of the
Effective Date.
ARTICLE II
DEFINITIONS
For the purpose of this Plan, capitalized terms shall have the
following meanings:
2.01. AWARD means any one or a combination of Non-Qualified
Stock Options or Incentive Stock Options described in Article VI, Stock
Appreciation Rights described in Article VI, Restricted Shares described in
Article VII, Performance Awards described in Article VIII, Awards of cash or any
other Award made under the terms of the Plan.
2.02. AWARD AGREEMENT means a written agreement between the
Company and a Participant or a written acknowledgment from the Company to a
Participant specifically setting forth the terms and conditions of an Award
granted under the Plan.
<PAGE> 2
2.03. AWARD PERIOD means, with respect to an Award, the period
of time set forth in the Award Agreement during which specified target
performance goals must be achieved or other conditions set forth in the Award
Agreement must be satisfied.
2.04. BENEFICIARY means an individual, trust or estate who or
which, by a written designation of the Participant filed with the Company or by
operation of law, succeeds to the rights and obligations of the Participant
under the Plan and the Award Agreement upon the Participant's death.
2.05. BOARD means the Board of Directors of the Company.
2.06. CHANGE IN CONTROL means, and shall be deemed to have
occurred upon the occurrence of, any one of the following events:
(a) The acquisition in one or more transactions,
other than from the Company, by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Exchange Act) of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of a number
of Company Voting Securities in excess of 25% of the Company
Voting Securities unless such acquisition has been approved by
the Board;
(b) Any election has occurred of persons to the Board
that causes two-thirds of the Board to consist of persons
other than (i) persons who were members of the Board on the
Effective Date and (ii) persons who were nominated for
elections as members of the Board at a time when two-thirds of
the Board consisted of persons who were members of the Board
on the Effective Date, provided, however, that any person
nominated for election by a Board at least two-thirds of whom
constituted persons described in clauses (i) and/or (ii) or by
persons who were themselves nominated by such Board shall, for
this purpose, be deemed to have been nominated by a Board
composed of persons described in clause (i);
(c) Approval by the stockholders of the Company of a
reorganization, merger or consolidation, unless, following
such reorganization, merger or consolidation, all or
substantially all of the individuals and entities who were the
respective beneficial owners of the Outstanding Common Stock
and Company Voting Securities immediately prior to such
reorganization, merger or consolidation, following such
reorganization, merger or consolidation beneficially own,
directly or indirectly, more than seventy five (75%) of,
respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of
directors or trustees, as the case may be, of the entity
resulting from such reorganization, merger or consolidation in
substantially the same proportion as their ownership of the
Outstanding Common Stock and Company Voting Securities
immediately prior to such reorganization, merger or
consolidation, as the case may be; or
<PAGE> 3
(d) Approval by the stockholders of the Company of
(i) a complete liquidation or dissolution of the Company or
(ii) a sale or other disposition of all or substantially all
the assets of the Company.
2.07. CODE means the Internal Revenue Code of 1986, as
amended. References to a section of the Code shall include that section and any
comparable section or sections of any future legislation that amends,
supplements or supersedes said section.
2.08. COMMITTEE means the Committee defined in Section 3.01.
2.09. COMPANY means Water Pik Technologies, Inc., a
Delaware corporation, and its successors.
2.10. COMMON STOCK means Common Stock of the Company, par
value $0.01 per share.
2.11. COMPANY VOTING SECURITIES means the combined voting
power of all outstanding voting securities of the Company entitled to vote
generally in the election of directors to the Board.
2.12. DATE OF GRANT means the date designated by the Committee
as the date as of which it grants an Award, which shall not be earlier than the
date on which the Committee approves the granting of such Award.
2.13. EXCHANGE ACT means the Securities Exchange Act of 1934,
as amended.
2.14. EXERCISE PRICE means, with respect to a Stock
Appreciation Right, the amount established by the Committee in the Award
Agreement which is to be subtracted from the Fair Market Value on the date of
exercise in order to determine the amount of the payment to be made to the
Participant, as further described in Section 6.02(b).
2.15. FAIR MARKET VALUE means, on any date, the average of the
high and low quoted sales prices of a share of Common Stock, as reported on the
Composite Tape for New York Stock Exchange Listed Companies on such date or, if
there were no sales on such date, on the last date preceding such date on which
a sale was reported.
2.16. INCENTIVE STOCK OPTION means a stock option within the
meaning of Section 422 of the Code.
2.17. MERGER means any merger, reorganization, consolidation,
exchange, transfer of assets or other transaction having similar effect
involving the Company.
2.18. NON-QUALIFIED STOCK OPTION means a stock option which is
not an Incentive Stock Option.
<PAGE> 4
2.19. OPTIONS means all Non-Qualified Stock Options and
Incentive Stock Options granted at any time under the Plan.
2.20. OUTSTANDING COMMON STOCK means, at any time, the issued
and outstanding shares of Common Stock.
2.21. PARTICIPANT means a person designated to receive an
Award under the Plan in accordance with Section 5.01.
2.22. PERFORMANCE AWARDS means Awards granted in accordance
with Article VIII.
2.23. PERFORMANCE GOALS means operating income, operating
profit (earnings from continuing operations before interest and taxes), earnings
per share, return on investment or working capital, return on stockholders'
equity, economic value added (the amount, if any, by which net operating profit
after tax exceeds a reference cost of capital), reductions in inventory,
inventory turns and on-time delivery performance, any one of which may be
measured with respect to the Company or any one or more of its Subsidiaries and
divisions and either in absolute terms or as compared to another company or
companies, and quantifiable, objective measures of individual performance
relevant to the particular individual's job responsibilities.
2.24. PLAN means the Water Pik Technologies, Inc. 1999
Incentive Plan as described herein, as the same may be amended from time to
time.
2.25. PURCHASE PRICE, with respect to Options, shall have the
meaning set forth in Section 6.01(b).
2.26. RESTORATION OPTION means a Non-Qualified Stock Option
granted pursuant to Section 6.01(f).
2.27. RESTRICTED SHARES means Common Stock subject to
restrictions imposed in connection with Awards granted under Article VII.
2.28. RETIREMENT means early or normal retirement under a
pension plan or arrangement of the Company or one of its Subsidiaries in which
the Participant participates.
2.29. RULE 16B-3 means Rule 16b-3 promulgated by the
Securities and Exchange Commission under Section 16 of the Exchange Act, as the
same may be amended from time to time, and any successor rule.
2.30. STOCK APPRECIATION RIGHTS means Awards granted in
accordance with Article VI.
2.31. SUBSIDIARY means a subsidiary of the Company within the
meaning of Section 424(f) of the Code.
<PAGE> 5
2.32. TERMINATION OF EMPLOYMENT means the voluntary or
involuntary termination of a Participant's employment with the Company or a
Subsidiary for any reason, including death, disability, retirement or as the
result of the divestiture of the Participant's employer or any similar
transaction in which the Participant's employer ceases to be the Company or one
of its Subsidiaries. Whether entering military or other government service shall
constitute Termination of Employment, or whether a Termination of Employment
shall occur as a result of disability, shall be determined in each case by the
Committee in its sole discretion.
ARTICLE III
ADMINISTRATION
3.01. COMMITTEE. The Plan shall be administered by a committee
of the Board ("Committee") comprised of at least two persons. The Committee
shall have exclusive and final authority in each determination, interpretation
or other action affecting the Plan and its Participants. The Committee shall
have the sole discretionary authority to interpret the Plan, to establish and
modify administrative rules for the Plan, to impose such conditions and
restrictions on Awards as it determines appropriate, to cancel Awards (including
those made pursuant to other plans of the Company) and to substitute new Options
for previously awarded Options which, at the time of such substitution, have an
exercise price in excess of the Fair Market Value of the underlying Common Stock
(including options granted under other incentive compensation programs of the
Company) with the consent of the recipient, and to take such steps in connection
with the Plan and Awards granted hereunder as it may deem necessary or
advisable. The Committee shall not, however, have or exercise any discretion
that would disqualify amounts payable under Article X as performance-based
compensation for purposes of Section 162(m) of the Code. The Committee may
delegate such of its powers and authority under the Plan as it deems appropriate
to a subcommittee of the Committee and/or designated officers or employees of
the Company. In addition, the full Board may exercise any of the powers and
authority of the Committee under the Plan. In the event of such delegation of
authority or exercise of authority by the Board, references in the Plan to the
Committee shall be deemed to refer, as appropriate, to the delegate of the
Committee or the Board. Actions taken by the Committee or any subcommittee
thereof, and any delegation by the Committee to designated officers or
employees, under this Section 3.01 shall comply with Section 16(b) of the
Exchange Act, the performance-based provisions of Section 162(m) of the Code,
and the regulations promulgated under each of such statutory provisions, or the
respective successors to such statutory provisions or regulations, as in effect
from time to time, to the extent applicable.
ARTICLE IV
SHARES
4.01. NUMBER OF SHARES ISSUABLE. The total number of shares
initially authorized to be issued under the Plan shall be ________________
shares of Common Stock. The number of shares available for issuance under the
Plan shall be further subject to adjustment in accordance with Section 11.07.
The shares to be offered under the Plan shall be authorized and
<PAGE> 6
unissued Common Stock, or issued Common Stock which shall have been reacquired
by the Company.
4.02. SHARES SUBJECT TO TERMINATED AWARDS. Common Stock
covered by any unexercised portions of terminated Options (including canceled
Options) granted under Article VI, Common Stock forfeited as provided in Section
7.02(a) and Common Stock subject to any Awards which are otherwise surrendered
by the Participant may again be subject to new Awards under the Plan. Common
Stock subject to Options, or portions thereof, which have been surrendered in
connection with the exercise of Stock Appreciation Rights shall not be available
for subsequent Awards under the Plan, but Common Stock issued in payment of such
Stock Appreciation Rights shall not be charged against the number of shares of
Common Stock available for the grant of Awards hereunder.
ARTICLE V
PARTICIPATION
5.01. ELIGIBLE PARTICIPANTS. Participants in the Plan shall be
such officers and other key employees of the Company and its Subsidiaries,
whether or not members of the Board, as the Committee, in its sole discretion,
may designate from time to time. The Committee's designation of a Participant in
any year shall not require the Committee to designate such person to receive
Awards or grants in any other year. The designation of a Participant to receive
awards or grants under one portion of the Plan does not require the Committee to
include such Participant under other portions of the Plan. The Committee shall
consider such factors as it deems pertinent in selecting Participants and in
determining the type and amount of their respective Awards. Notwithstanding any
provision herein to the contrary, the Committee may grant Awards under the Plan,
other than Incentive Stock Options, to non-employees who, in the judgment of the
Committee, render significant services to the Company or any of its
Subsidiaries, on such terms and conditions as the Committee deems appropriate
and consistent with the intent of the Plan. Subject to adjustment in accordance
with Section 11.07, in any calendar year, no Participant shall be granted Awards
in respect of more than _____________ shares of Common Stock (whether through
grants of Options or Stock Appreciation Rights or other grants of Common Stock
or rights with respect thereto) and $_______________ in cash.
ARTICLE VI
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
6.01. OPTION AWARDS.
(a) GRANT OF OPTIONS. The Committee may grant, to
such Participants as the Committee may select, Options
entitling the Participant to purchase shares of Common Stock
from the Company in such number, at such price, and on such
terms and subject to such conditions, not inconsistent with
the terms of this Plan, as may be established by the
Committee. The terms of any Option granted under this Plan
shall be set forth in an Award Agreement.
<PAGE> 7
(b) PURCHASE PRICE OF OPTIONS. The Purchase Price of
each share of Common Stock which may be purchased upon
exercise of any Option granted under the Plan shall be
determined by the Committee; provided, however, that the
Purchase Price of the Common Stock purchased pursuant to
Options designated by the Committee as Incentive Stock Options
shall be equal to or greater than the Fair Market Value on the
Date of Grant as required under Section 422 of the Code.
(c) DESIGNATION OF OPTIONS. Except as otherwise
expressly provided in the Plan, the Committee may designate,
at the time of the grant of each Option, the Option as an
Incentive Stock Option or a Non-Qualified Stock Option.
(d) INCENTIVE STOCK OPTION SHARE LIMITATION. No
Participant may be granted Incentive Stock Options under the
Plan (or any other plans of the Company and its Subsidiaries)
which would result in shares with an aggregate Fair Market
Value (measured on the Date of Grant) of more than $100,000
first becoming exercisable in any one calendar year.
(e) RIGHTS AS A STOCKHOLDER. A Participant or a
transferee of an Option pursuant to Section 11.04 shall have
no rights as a stockholder with respect to Common Stock
covered by an Option until the Participant or transferee shall
have become the holder of record of any such shares, and no
adjustment shall be made for dividends in cash or other
property or distributions or other rights with respect to any
such Common Stock for which the record date is prior to the
date on which the Participant or a transferee of the Option
shall have become the holder of record of any such shares
covered by the Option; provided, however, that Participants
are entitled to share adjustments to reflect capital changes
under Section 11.07.
(f) RESTORATION OPTIONS UPON THE EXERCISE OF A
NON-QUALIFIED STOCK OPTION. In the event that any Participant
delivers to the Company, or has withheld from the shares
otherwise issuable upon the exercise of a Non-Qualified Stock
Option, shares of Common Stock in payment of the Purchase
Price of any Non-Qualified Stock Option granted hereunder in
accordance with Section 6.04, the Committee shall have the
authority to grant or provide for the automatic grant of a
Restoration Option to such Participant. The grant of a
Restoration Option shall be subject to the satisfaction of
such conditions or criteria as the Committee in its sole
discretion shall establish from time to time. A Restoration
Option shall entitle the holder thereof to purchase a number
of shares of Common Stock equal to the number of such shares
so delivered or withheld upon exercise of the original Option
and, in the discretion of the Committee, the number of shares,
if any, delivered or withheld to the Corporation to satisfy
any withholding tax liability arising in connection with the
exercise of the original Option. A Restoration Option shall
have a per share Purchase Price of not less than 100% of the
per share Fair Market Value of the Common Stock on the
<PAGE> 8
date of grant of such Restoration Option, a term not longer
than the remaining term of the original Option at the time of
exercise thereof, and such other terms and conditions as the
Committee in its sole discretion shall determine.
6.02. STOCK APPRECIATION RIGHTS.
(a) STOCK APPRECIATION RIGHT AWARDS. The Committee is
authorized to grant to any Participant one or more Stock
Appreciation Rights. Such Stock Appreciation Rights may be
granted either independent of or in tandem with Options
granted to the same Participant. Stock Appreciation Rights
granted in tandem with Options may be granted simultaneously
with, or, in the case of Non-Qualified Stock Options,
subsequent to, the grant to such Participant of the related
Option; provided however, that: (i) any Option covering any
share of Common Stock shall expire and not be exercisable upon
the exercise of any Stock Appreciation Right with respect to
the same share, (ii) any Stock Appreciation Right covering any
share of Common Stock shall expire and not be exercisable upon
the exercise of any related Option with respect to the same
share, and (iii) an Option and Stock Appreciation Right
covering the same share of Common Stock may not be exercised
simultaneously. Upon exercise of a Stock Appreciation Right
with respect to a share of Common Stock, the Participant shall
be entitled to receive an amount equal to the excess, if any,
of (A) the Fair Market Value of a share of Common Stock on the
date of exercise over (B) the Exercise Price of such Stock
Appreciation Right established in the Award Agreement, which
amount shall be payable as provided in Section 6.02(c).
(b) EXERCISE PRICE. The Exercise Price established
under any Stock Appreciation Right granted under this Plan
shall be determined by the Committee, but in the case of Stock
Appreciation Rights granted in tandem with Options shall not
be less than the Purchase Price of the related Option. Upon
exercise of Stock Appreciation Rights granted in tandem with
options, the number of shares subject to exercise under any
related Option shall automatically be reduced by the number of
shares of Common Stock represented by the Option or portion
thereof which are surrendered as a result of the exercise of
such Stock Appreciation Rights.
(c) PAYMENT OF INCREMENTAL VALUE. Any payment which
may become due from the Company by reason of a Participant's
exercise of a Stock Appreciation Right may be paid to the
Participant as determined by the Committee (i) all in cash,
(ii) all in Common Stock, or (iii) in any combination of cash
and Common Stock. In the event that all or a portion of the
payment is made in Common Stock, the number of shares of
Common Stock delivered in satisfaction of such payment shall
be determined by dividing the amount of such payment or
portion thereof by the Fair Market Value on the Exercise Date.
No fractional share of Common Stock shall be issued to make
any payment in respect of Stock Appreciation Rights; if any
fractional share would be issuable, the
<PAGE> 9
combination of cash and Common Stock payable to the
Participant shall be adjusted as directed by the Committee to
avoid the issuance of any fractional share.
6.03. TERMS OF STOCK OPTIONS AND STOCK APPRECIATION RIGHTS.
(a) CONDITIONS ON EXERCISE. An Award Agreement with
respect to Options and/or Stock Appreciation Rights may
contain such waiting periods, exercise dates and restrictions
on exercise (including, but not limited to, periodic
installments) as may be determined by the Committee at the
time of grant.
(b) DURATION OF OPTIONS AND STOCK APPRECIATION
RIGHTS. Options and Stock Appreciation Rights shall terminate
upon the first to occur of the following events:
(i) Expiration of the Option or Stock
Appreciation Right as provided in the Award
Agreement; or
(ii) Termination of the Award in the event of a
Participant's disability, Retirement, death or other
Termination of Employment as provided in the Award
Agreement; or
(iii) In the case of an Incentive Stock Option,
ten years from the Date of Grant; or
(iv) Solely in the case of a Stock Appreciation
Right granted in tandem with an Option, upon the
expiration of the related Option.
(c) ACCELERATION OR EXTENSION OF EXERCISE TIME. The
Committee, in its sole discretion, shall have the right (but
shall not be obligated), exercisable on or at any time after
the Date of Grant, to permit the exercise of an Option or
Stock Appreciation Right (i) prior to the time such Option or
Stock Appreciation Right would become exercisable under the
terms of the Award Agreement, (ii) after the termination of
the Option or Stock Appreciation Right under the terms of the
Award Agreement, or (iii) after the expiration of the Option
or Stock Appreciation Right.
6.04. EXERCISE PROCEDURES. Each Option and Stock Appreciation
Right granted under the Plan shall be exercised by written notice to the Company
which must be received by the officer or employee of the Company designated in
the Award Agreement on or before the close of business on the expiration date of
the Award. The Purchase Price of shares purchased upon exercise of an Option
granted under the Plan shall be paid in full in cash by the Participant pursuant
to the Award Agreement; provided however, that the Committee may (but shall not
be required to) permit payment to be made by delivery to the Company of either
(a)
<PAGE> 10
Common Stock (which may include Restricted Shares or shares otherwise issuable
in connection with the exercise of the Option, subject to such rules as the
Committee deems appropriate) or (b) any combination of cash and Common Stock, or
(c) such other consideration as the Committee deems appropriate and in
compliance with applicable law (including payment in accordance with a cashless
exercise program under which, if so instructed by the Participant, Common Stock
may be issued directly to the Participant's broker or dealer upon receipt of an
irrevocable written notice of exercise from the Participant). In the event that
any Common Stock shall be transferred to the Company to satisfy all or any part
of the Purchase Price, the part of the Purchase Price deemed to have been
satisfied by such transfer of Common Stock shall be equal to the product derived
by multiplying the Fair Market Value as of the date of exercise times the number
of shares of Common Stock transferred to the Company. The Participant may not
transfer to the Company in satisfaction of the Purchase Price any fractional
share of Common Stock. Any part of the Purchase Price paid in cash upon the
exercise of any Option shall be added to the general funds of the Company and
may be used for any proper corporate purpose. Unless the Committee shall
otherwise determine, any Common Stock transferred to the Company as payment of
all or part of the Purchase Price upon the exercise of any Option shall be held
as treasury shares.
6.05. CHANGE IN CONTROL. Unless otherwise provided by the
Committee in the applicable Award Agreement, in the event of a Change in
Control, all Options outstanding on the date of such Change in Control, and all
Stock Appreciation Rights shall become immediately and fully exercisable. The
provisions of this Section 6.05 shall not be applicable to any Options or Stock
Appreciation Rights granted to a Participant if any Change in Control results
from such Participant's beneficial ownership (within the meaning of Rule 13d-3
under the Exchange Act) of Common Stock or Company Voting Securities.
ARTICLE VII
RESTRICTED SHARES
7.01. RESTRICTED SHARE AWARDS. The Committee may grant to any
Participant an Award of Common Stock in such number of shares, and on such
terms, conditions and restrictions, whether based on performance standards,
periods of service, retention by the Participant of ownership of purchased or
designated shares of Common Stock or other criteria, as the Committee shall
establish. With respect to performance-based Awards of Restricted Shares to
"covered employees" (as defined in Section 162(m) of the Code), performance
targets will be limited to specified levels of one or more of the Performance
Goals. The terms of any Restricted Share Award granted under this Plan shall be
set forth in an Award Agreement which shall contain provisions determined by the
Committee and not inconsistent with this Plan.
(a) ISSUANCE OF RESTRICTED SHARES. As soon as
practicable after the Date of Grant of a Restricted Share
Award by the Committee, the Company shall cause to be
transferred on the books of the Company, or its agent, Common
Stock, registered on behalf of the Participant, evidencing the
Restricted Shares covered by the Award, but subject to
forfeiture to the Company as of the Date of Grant if an Award
Agreement with respect to the Restricted Shares covered by the
Award is not duly executed by the Participant and timely
<PAGE> 11
returned to the Company. All Common Stock covered by Awards
under this Article VII shall be subject to the restrictions,
terms and conditions contained in the Plan and the Award
Agreement entered into by the Participant. Until the lapse or
release of all restrictions applicable to an Award of
Restricted Shares, the share certificates representing such
Restricted Shares may be held in custody by the Company, its
designee, or, if the certificates bear a restrictive legend,
by the Participant. Upon the lapse or release of all
restrictions with respect to an Award as described in Section
7.01(d), one or more share certificates, registered in the
name of the Participant, for an appropriate number of shares
as provided in Section 7.01(d), free of any restrictions set
forth in the Plan and the Award Agreement shall be delivered
to the Participant.
(b) STOCKHOLDER RIGHTS. Beginning on the Date of
Grant of the Restricted Share Award and subject to execution
of the Award Agreement as provided in Section 7.01(a), the
Participant shall become a stockholder of the Company with
respect to all shares subject to the Award Agreement and shall
have all of the rights of a shareholder, including, but not
limited to, the right to vote such shares and the right to
receive dividends; provided, however, that any Common Stock
distributed as a dividend or otherwise with respect to any
Restricted Shares as to which the restrictions have not yet
lapsed, shall be subject to the same restrictions as such
Restricted Shares and held or restricted as provided in
Section 7.01(a).
(c) RESTRICTION ON TRANSFERABILITY. None of the
Restricted Shares may be assigned or transferred (other than
by will or the laws of descent and distribution, or to an
inter vivos trust with respect to which the Participant is
treated as the owner under Sections 671 through 677 of the
Code, except to the extent that Section 16 of the Exchange Act
limits a participant's right to make such transfers), pledged
or sold prior to lapse of the restrictions applicable thereto.
(d) DELIVERY OF SHARES UPON VESTING. Upon expiration
or earlier termination of the forfeiture period without a
forfeiture and the satisfaction of or release from any other
conditions prescribed by the Committee, or at such earlier
time as provided under the provisions of Section 7.03, the
restrictions applicable to the Restricted Shares shall lapse.
As promptly as administratively feasible thereafter, subject
to the requirements of Section 11.05, the Company shall
deliver to the Participant or, in case of the Participant's
death, to the Participant's Beneficiary, one or more share
certificates for the appropriate number of shares of Common
Stock, free of all such restrictions, except for any
restrictions that may be imposed by law.
7.02. TERMS OF RESTRICTED SHARES.
(a) FORFEITURE OF RESTRICTED SHARES. Subject to
Sections 7.02(b) and 7.03, all Restricted Shares shall be
forfeited and returned to
<PAGE> 12
the Company and all rights of the Participant with respect to
such Restricted Shares shall terminate unless the Participant
continues in the service of the Company or a Subsidiary as an
employee until the expiration of the forfeiture period for
such Restricted Shares and satisfies any and all other
conditions set forth in the Award Agreement. The Committee
shall determine the forfeiture period (which may, but need
not, lapse in installments) and any other terms and conditions
applicable with respect to any Restricted Share Award.
(b) WAIVER OF FORFEITURE PERIOD. Notwithstanding
anything contained in this Article VII to the contrary, the
Committee may, in its sole discretion, waive the forfeiture
period and any other conditions set forth in any Award
Agreement under appropriate circumstances (including the
death, disability or Retirement of the Participant or a
material change in circumstances arising after the date of an
Award) and subject to such terms and conditions (including
forfeiture of a proportionate number of the Restricted Shares)
as the Committee shall deem appropriate.
7.03. CHANGE IN CONTROL. Unless otherwise provided by the
Committee in the applicable Award Agreement, in the event of a Change in
Control, all restrictions applicable to the Restricted Share Award shall
terminate fully and the Participant shall immediately have the right to the
delivery of share certificate or certificates for such shares in accordance with
Section 7.01(d).
ARTICLE VIII
PERFORMANCE AWARDS
8.01. PERFORMANCE AWARDS.
(a) AWARD PERIODS AND CALCULATIONS OF POTENTIAL
INCENTIVE AMOUNTS. The Committee may grant Performance Awards
to Participants. A Performance Award shall consist of the
right to receive a payment (measured by the Fair Market Value
of a specified number of shares of Common Stock, increases in
such Fair Market Value during the Award Period and/or a fixed
cash amount) contingent upon the extent to which certain
predetermined performance targets have been met during an
Award Period. Performance Awards may be made in conjunction
with, or in addition to, Restricted Share Awards made under
Article VII. The Award Period shall be two or more fiscal or
calendar years as determined by the Committee. The Committee,
in its discretion and under such terms as it deems
appropriate, may permit newly eligible employees, such as
those who are promoted or newly hired, to receive Performance
Awards after an Award Period has commenced.
(b) PERFORMANCE TARGETS. The performance targets may
include such goals related to the performance of the Company
or, where relevant, any one or more of its Subsidiaries or
divisions and/or the performance of
<PAGE> 13
a Participant as may be established by the Committee in its
discretion. In the case of Performance Awards to "covered
employees" (as defined in Section 162(m) of the Code), the
targets will be limited to specified levels of one or more of
the Performance Goals. The performance targets established by
the Committee may vary for different Award Periods and need
not be the same for each Participant receiving a Performance
Award in an Award Period. Except to the extent inconsistent
with the performance-based compensation exception under
Section 162(m) of the Code, in the case of Performance Awards
granted to employees to whom such section is applicable, the
Committee, in its discretion, but only under extraordinary
circumstances as determined by the Committee, may change any
prior determination of performance targets for any Award
Period at any time prior to the final determination of the
Award when events or transactions occur to cause the
performance targets to be an inappropriate measure of
achievement.
(c) EARNING PERFORMANCE AWARDS. The Committee, at or
as soon as practicable after the Date of Grant, shall
prescribe a formula to determine the percentage of the
Performance Award to be earned based upon the degree of
attainment of performance targets.
(d) PAYMENT OF EARNED PERFORMANCE AWARDS. Subject to
the requirements of Section 11.05, payments of earned
Performance Awards shall be made in cash or Common Stock, or a
combination of cash and Common Stock, in the discretion of the
Committee. The Committee, in its sole discretion, may define
such terms and conditions with respect to the payment of
earned Performance Awards as it may deem desirable.
8.02. TERMS OF PERFORMANCE AWARDS.
(a) TERMINATION OF EMPLOYMENT. Unless otherwise
provided below or in Section 8.03, in the case of a
Participant's Termination of Employment prior to the end of an
Award Period, the Participant will not have earned any
Performance Awards.
(b) RETIREMENT. If a Participant's Termination of
Employment is because of Retirement prior to the end of an
Award Period, the Participant will not be paid any Performance
Awards, unless the Committee, in its sole and exclusive
discretion, determines that an Award should be paid. In such a
case, the Participant shall be entitled to receive a pro-rata
portion of his or her Award as determined under Subsection
(d).
(c) DEATH OR DISABILITY. If a Participant's
Termination of Employment is due to death or disability (as
determined in the sole and exclusive discretion of the
Committee) prior to the end of an Award Period, the
Participant or the Participant's personal representative shall
be entitled to receive a pro-rata share of his or her Award as
determined under Subsection (d).
<PAGE> 14
(d) PRO-RATA PAYMENT. The amount of any payment made
to a Participant whose employment is terminated by Retirement,
death or disability (under circumstances described in
Subsections (b) and (c)) will be the amount determined by
multiplying the amount of the Performance Award which would
have been earned, determined at the end of the Award Period,
had such employment not been terminated, by a fraction, the
numerator of which is the number of whole months such
Participant was employed during the Award Period, and the
denominator of which is the total number of months of the
Award Period. Any such payment made to a Participant whose
employment is terminated prior to the end of an Award Period
under this Section 8.02 shall be made at the end of the
respective Award Period, unless otherwise determined by the
Committee in its sole discretion. Any partial payment
previously made or credited to a deferred account for the
benefit of a Participant as provided under Section 8.01(d) of
the Plan shall be subtracted from the amount otherwise
determined as payable as provided in this Section.
(e) OTHER EVENTS. Notwithstanding anything to the
contrary in this Article VIII, the Committee may, in its sole
and exclusive discretion, determine to pay all or any portion
of a Performance Award to a Participant who has terminated
employment prior to the end of an Award Period under certain
circumstances (including the death, disability or retirement
of the Participant or a material change in circumstances
arising after the Date of Grant) and subject to such terms and
conditions as the Committee shall deem appropriate.
8.03. CHANGE IN CONTROL. Unless otherwise provided by the
Committee in the applicable Award Agreement, in the event of a Change in
Control, all Performance Awards for all Award Periods shall immediately become
fully payable to all Participants and shall be paid to Participants in
accordance with Section 8.02(d), within 30 days after such Change in Control.
ARTICLE IX
OTHER STOCK-BASED AWARDS
9.01. GRANT OF OTHER STOCK-BASED AWARDS. Other stock-based
awards, consisting of stock purchase rights (with or without loans to
Participants by the Company containing such terms as the Committee shall
determine), Awards of cash, Awards of Common Stock, or Awards valued in whole or
in part by reference to, or otherwise based on, Common Stock, may be granted
either alone or in addition to or in conjunction with other Awards under the
Plan. Subject to the provisions of the Plan, the Committee shall have sole and
complete authority to determine the persons to whom and the time or times at
which such Awards shall be made, the number of shares of Common Stock to be
granted pursuant to such Awards, and all other conditions of the Awards. Any
such Award shall be confirmed by an Award Agreement executed by the Committee
and the Participant, which Award Agreement shall contain such provisions as the
Committee determines to be necessary or appropriate to carry out the intent of
this Plan with respect to such Award.
<PAGE> 15
9.02. TERMS OF OTHER STOCK-BASED AWARDS. In addition to the
terms and conditions specified in the Award Agreement, Awards made pursuant to
this Article IX shall be subject to the following:
(a) Any Common Stock subject to Awards made under
this Article IX may not be sold, assigned, transferred,
pledged or otherwise encumbered prior to the date on which the
shares are issued, or, if later, the date on which any
applicable restriction, performance or deferral period lapses;
and
(b) If specified by the Committee in the Award
Agreement, the recipient of an Award under this Article IX
shall be entitled to receive, currently or on a deferred
basis, interest or dividends or dividend equivalents with
respect to the Common Stock or other securities covered by the
Award; and
(c) The Award Agreement with respect to any Award
shall contain provisions dealing with the disposition of such
Award in the event of a Termination of Employment prior to the
exercise, realization or payment of such Award, whether such
termination occurs because of Retirement, disability, death or
other reason, with such provisions to take account of the
specific nature and purpose of the Award.
9.03. FOREIGN QUALIFIED AWARDS. Awards under the Plan may be
granted to such employees of the Company and its Subsidiaries who are residing
in foreign jurisdictions as the Committee in its sole discretion may determine
from time to time. The Committee may adopt such supplements to the Plan as may
be necessary or appropriate to comply with the applicable laws of such foreign
jurisdictions and to afford Participants favorable treatment under such laws;
provided, however, that no Award shall be granted under any such supplement with
terms or conditions inconsistent with the provision set forth in the Plan.
ARTICLE X
SHORT-TERM CASH INCENTIVE AWARDS
10.01. ELIGIBILITY. Executive officers of the Company who are
from time to time determined by the Committee to be "covered employees" for
purposes of Section 162(m) of the Code will be eligible to receive short-term
cash incentive awards under this Article X.
10.02. AWARDS.
(a) PERFORMANCE TARGETS. For each fiscal year of the
Company after fiscal year 1999, the Committee shall establish
objective performance targets based on specified levels of one
or more of the Performance Goals. Such performance targets
shall be established by the Committee on a timely basis to
ensure that the targets are considered "preestablished" for
purposes of Section 162(m) of the Code.
<PAGE> 16
(b) AMOUNTS OF AWARDS. In conjunction with the
establishment of performance targets for a fiscal year, the
Committee shall adopt an objective formula (on the basis of
percentages of Participants' salaries, shares in a bonus pool
or otherwise) for computing the respective amounts payable
under the Plan to Participants if and to the extent that the
performance targets are attained. Such formula shall comply
with the requirements applicable to performance-based
compensation plans under Section 162(m) of the Code and, to
the extent based on percentages of a bonus pool, such
percentages shall not exceed 100% in the aggregate.
(c) PAYMENT OF AWARDS. Awards will be payable to
Participants in cash each year upon prior written
certification by the Committee of attainment of the specified
performance targets for the preceding fiscal year.
(d) NEGATIVE DISCRETION. Notwithstanding the
attainment by the Company of the specified performance
targets, the Committee shall have the discretion, which need
not be exercised uniformly among the Participants, to reduce
or eliminate the award that would be otherwise paid.
(e) GUIDELINES. The Committee shall adopt from time
to time written policies for its implementation of this
Article X. Such guidelines shall reflect the intention of the
Company that all payments hereunder qualify as
performance-based compensation under Section 162(m) of the
Code.
(f) NON-EXCLUSIVE ARRANGEMENT. The adoption and
operation of this Article X shall not preclude the Board or
the Committee from approving other short-term incentive
compensation arrangements for the benefit of individuals who
are Participants hereunder as the Board or Committee, as the
case may be, deems appropriate and in the best of the Company.
ARTICLE XI
TERMS APPLICABLE GENERALLY TO AWARDS GRANTED UNDER THE PLAN
11.01. PLAN PROVISIONS CONTROL AWARD TERMS. Except as provided
in Section 11.16, the terms of the Plan shall govern all Awards granted under
the Plan, and in no event shall the Committee have the power to grant any Award
under the Plan which is contrary to any of the provisions of the Plan. In the
event any provision of any Award granted under the Plan shall conflict with any
term in the Plan as constituted on the Date of Grant of such Award, the term in
the Plan as constituted on the Date of Grant of such Award shall control. Except
as provided in Section 11.03 and Section 11.07, the terms of any Award granted
under the Plan may not be changed after the Date of Grant of such Award so as to
materially decrease the value of the Award without the express written approval
of the holder.
11.02. AWARD AGREEMENT. No person shall have any rights under
any Award granted under the Plan unless and until the Company and the
Participant to whom such
<PAGE> 17
Award shall have been granted shall have executed and delivered an Award
Agreement or received any other Award acknowledgment authorized by the Committee
expressly granting the Award to such person and containing provisions setting
forth the terms of the Award.
11.03. MODIFICATION OF AWARD AFTER GRANT. No Award granted
under the Plan to a Participant may be modified (unless such modification does
not materially decrease the value of the Award) after the Date of Grant except
by express written agreement between the Company and the Participant, provided
that any such change (a) shall not be inconsistent with the terms of the Plan,
and (b) shall be approved by the Committee.
11.04. LIMITATION ON TRANSFER. Except as provided in Section
7.01(c) in the case of Restricted Shares, a Participant's rights and interest
under the Plan may not be assigned or transferred other than by will or the laws
of descent and distribution, and during the lifetime of a Participant, only the
Participant personally (or the Participant's personal representative) may
exercise rights under the Plan. The Participant's Beneficiary may exercise the
Participant's rights to the extent they are exercisable under the Plan following
the death of the Participant. Notwithstanding the foregoing, to the extent
permitted under Section 16(b) of the Exchange Act with respect to Participants
subject to such Section, the Committee may grant Non-Qualified Stock Options
that are transferable, without payment of consideration, to immediate family
members of the Participant or to trusts or partnerships for such family members,
and the Committee may also amend outstanding Non-Qualified Stock Options to
provide for such transferability.
11.05. TAXES. The Company shall be entitled, if the Committee
deems it necessary or desirable, to withhold (or secure payment from the
Participant in lieu of withholding) the amount of any withholding or other tax
required by law to be withheld or paid by the Company with respect to any amount
payable and/or shares issuable under such Participant's Award, or with respect
to any income recognized upon a disqualifying disposition of shares received
pursuant to the exercise of an Incentive Stock Option, and the Company may defer
payment or issuance of the cash or shares upon exercise or vesting of an Award
unless indemnified to its satisfaction against any liability for any such tax.
The amount of such withholding or tax payment shall be determined by the
Committee and shall be payable by the Participant at such time as the Committee
determines in accordance with the following rules:
(a) The Participant shall have the right to elect to
meet his or her withholding requirement (i) by having withheld
from such Award at the appropriate time that number of shares
of Common Stock, rounded up to the next whole share, whose
Fair Market Value is equal to the amount of withholding taxes
due, (ii) by direct payment to the Company in cash of the
amount of any taxes required to be withheld with respect to
such Award or (iii) by a combination of shares and cash.
(b) The Committee shall have the discretion as to any
Award, to cause the Company to pay to tax authorities for the
benefit of any Participant, or to reimburse such Participant
for the individual taxes which are due on the grant, exercise
or vesting of any share Award, or the lapse of any restriction
on
<PAGE> 18
any share Award (whether by reason of a Participant's filing
of an election under Section 83(b) of the Code or otherwise),
including, but not limited to, Federal income tax, state
income tax, local income tax and excise tax under Section 4999
of the Code, as well as for any such taxes as may be imposed
upon such tax payment or reimbursement.
(c) In the case of Participants who are subject to
Section 16 of the Exchange Act, the Committee may impose such
limitations and restrictions as it deems necessary or
appropriate with respect to the delivery or withholding of
shares of Common Stock to meet tax withholding obligations.
11.06. SURRENDER OF AWARDS. Any Award granted under the Plan
may be surrendered to the Company for cancellation on such terms as the
Committee and the holder approve.
11.07. ADJUSTMENTS TO REFLECT CAPITAL CHANGES.
(a) RECAPITALIZATION. The number and kind of shares
subject to outstanding Awards, the Purchase Price or Exercise
Price for such shares, the number and kind of shares available
for Awards subsequently granted under the Plan and the maximum
number of shares in respect of which Awards can be made to any
Participant in any calendar year shall be appropriately
adjusted to reflect any stock dividend, stock split,
combination or exchange of shares, merger, consolidation or
other change in capitalization with a similar substantive
effect upon the Plan or the Awards granted under the Plan. The
Committee shall have the power and sole discretion to
determine the amount of the adjustment to be made in each
case.
(b) MERGER. After any Merger in which the Company is
the surviving corporation, each Participant shall, at no
additional cost, be entitled upon any exercise of all Options
or receipt of other Award to receive (subject to any required
action by shareholders), in lieu of the number of shares of
Common Stock receivable or exercisable pursuant to such Award,
the number and class of shares or other securities to which
such Participant would have been entitled pursuant to the
terms of the Merger if, at the time of the Merger, such
Participant had been the holder of record of a number of
shares equal to the number of shares receivable or exercisable
pursuant to such Award. Comparable rights shall accrue to each
Participant in the event of successive Mergers of the
character described above. In the event of a Merger in which
the Company is not the surviving corporation, the surviving,
continuing, successor, or purchasing corporation, as the case
may be (the "Acquiring Corporation"), shall either assume the
Company's rights and obligations under outstanding Award
Agreements or substitute awards in respect of the Acquiring
Corporation's stock for such outstanding Awards. In the event
the Acquiring Corporation fails to assume or substitute for
such outstanding Awards, the Board shall provide that any
unexercisable and/or unvested portion of the outstanding
Awards shall be immediately exercisable and vested as of a
date
<PAGE> 19
prior to such Merger, as the Board so determines. The exercise
and/or vesting of any Award that was permissible solely by
reason of this Section 11.07(b) shall be conditioned upon the
consummation of the Merger. Any Options which are neither
assumed by the Acquiring Corporation nor exercised as of the
date of the Merger shall terminate effective as of the
effective date of the Merger.
(c) OPTIONS TO PURCHASE SHARES OR STOCK OF ACQUIRED
COMPANIES. After any Merger in which the Company or a
Subsidiary shall be a surviving corporation, the Committee may
grant substituted options under the provisions of the Plan,
pursuant to Section 424 of the Code, replacing old options
granted under a plan of another party to the Merger whose
shares or stock subject to the old options may no longer be
issued following the Merger. The foregoing adjustments and
manner of application of the foregoing provisions shall be
determined by the Committee in its sole discretion. Any such
adjustments may provide for the elimination of any fractional
shares which might otherwise become subject to any Options.
11.08. NO RIGHT TO EMPLOYMENT. No employee or other person
shall have any claim of right to be granted an Award under this Plan. Neither
the Plan nor any action taken hereunder shall be construed as giving any
employee any right to be retained in the employ of the Company or any of its
Subsidiaries.
11.09. AWARDS NOT INCLUDABLE FOR BENEFIT PURPOSES. Payments
received by a Participant pursuant to the provisions of the Plan shall not be
included in the determination of benefits under any pension, group insurance or
other benefit plan applicable to the Participant which is maintained by the
Company or any of its Subsidiaries, except as may be provided under the terms of
such plans or determined by the Board.
11.10. GOVERNING LAW. All determinations made and actions
taken pursuant to the Plan shall be governed by the laws of the State of
Delaware and construed in accordance therewith.
11.11. NO STRICT CONSTRUCTION. No rule of strict construction
shall be implied against the Company, the Committee, or any other person in the
interpretation of any of the terms of the Plan, any Award granted under the Plan
or any rule or procedure established by the Committee.
11.12. COMPLIANCE WITH RULE 16B-3. It is intended that, unless
the Committee determines otherwise, Awards under the Plan be eligible for
exemption under Rule 16b-3. The Board is authorized to amend the Plan and to
make any such modifications to Award Agreements to comply with Rule 16b-3, as it
may be amended from time to time, and to make any other such amendments or
modifications as it deems necessary or appropriate to better accomplish the
purposes of the Plan in light of any amendments made to Rule 16b-3.
11.13. CAPTIONS. The captions (i.e., all Section headings)
used in the Plan are for convenience only, do not constitute a part of the Plan,
and shall not be deemed to limit,
<PAGE> 20
characterize or affect in any way any provisions of the Plan, and all provisions
of the Plan shall be construed as if no captions have been used in the Plan.
11.14. SEVERABILITY. Whenever possible, each provision in the
Plan and every Award at any time granted under the Plan shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of the Plan or any Award at any time granted under the Plan shall be
held to be prohibited by or invalid under applicable law, then (a) such
provision shall be deemed amended to accomplish the objectives of the provision
as originally written to the fullest extent permitted by law and (b) all other
provisions of the Plan and every other Award at any time granted under the Plan
shall remain in full force and effect.
11.15. AMENDMENT AND TERMINATION.
(a) AMENDMENT. The Board shall have complete power
and authority to amend the Plan at any time; provided,
however, that the Board shall not, without the requisite
affirmative approval of shareholders of the Company, make any
amendment which requires shareholder approval under Rule 16b-3
or the Code, unless such compliance is no longer desired under
Rule 16b-3, the Code or under any other applicable law or rule
of any stock exchange which lists Common Stock or Company
Voting Securities. No termination or amendment of the Plan
may, without the consent of the Participant to whom any Award
shall theretofore have been granted under the Plan, adversely
affect the right of such individual under such Award.
(b) TERMINATION. The Board shall have the right and
the power to terminate the Plan at any time. No Award shall be
granted under the Plan after the termination of the Plan, but
the termination of the Plan shall not have any other effect
and any Award outstanding at the time of the termination of
the Plan may be exercised after termination of the Plan at any
time prior to the expiration date of such Award to the same
extent such Award would have been exercisable had the Plan not
terminated.
11.16. SPECIAL PROVISION RELATING TO CERTAIN STOCK ISSUANCES.
Notwithstanding anything to the contrary contained in this Plan, shares of
Common Stock authorized to be issued under this Plan may be issued to pay awards
originally made under and satisfy options originally granted under the Allegheny
Teledyne Incorporated 1996 Incentive Plan or any other stock option plan adopted
by ATI (an "ATI Plan"), as provided in the Employee Benefits Agreement dated as
of ____________, 1999, between the Company and Allegheny Teledyne Incorporated.
All shares of Common Stock issued in payment of an award or grant shall be
governed exclusively by the terms of such award or grant under the applicable
ATI Plan, and any terms of this Plan inconsistent therewith shall be
inapplicable to such shares.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
registrant's combined statement of income for the year ended December 31,
1998 and the six months ended June 30, 1999 and combined balance sheet as of
December 31, 1998 and June 30, 1999 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0001094286
<NAME> WATER PIK TECHNOLOGIES, INC.
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 JUN-30-1999
<CASH> 0 0
<SECURITIES> 0 0
<RECEIVABLES> 48 40
<ALLOWANCES> 2 2
<INVENTORY> 19 20
<CURRENT-ASSETS> 74 64
<PP&E> 74 76
<DEPRECIATION> 41 44
<TOTAL-ASSETS> 128 116
<CURRENT-LIABILITIES> 38 37
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 89 78
<TOTAL-LIABILITY-AND-EQUITY> 128 116
<SALES> 236 118
<TOTAL-REVENUES> 236 118
<CGS> 140 73
<TOTAL-COSTS> 140 73
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 19 7
<INCOME-TAX> 8 3
<INCOME-CONTINUING> 11 4
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 11 4
<EPS-BASIC> 0 0
<EPS-DILUTED> 0 0
</TABLE>
