<PAGE> 1
FILE NO. 1-15297
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 10, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10/A-2
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...... "The Spin-Off -- Listing and Trading of
our Common Stock", "Arrangements with ATI
Relating to the Spin-Off" and "Index to
Our Financial Statements"
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 certain businesses in 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. Certain 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." After the spin-offs, our common stock will be traded
on the New York Stock Exchange under the symbol "ATI." We also intend to effect
a one-for-two reverse split of our common stock immediately after the spin-offs.
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 NOVEMBER 10, 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 will 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.
Our common stock will be traded on the New York Stock Exchange under the symbol
"PIK."
Concurrently with the spin-off, ATI will change its name to "Allegheny
Technologies Incorporated." After the spin-off, ATI's common stock will be
traded on the New York Stock Exchange under the symbol "ATI."
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
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................................... 24
Material 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................................. 35
Our Business................................................ 47
Overview.................................................. 47
Industry Overview......................................... 47
Competitive Strengths..................................... 48
Our Business Strategy..................................... 49
Our Products.............................................. 51
Sales, Marketing and Distribution......................... 55
Competition............................................... 56
Research and Product Development.......................... 56
Manufacturing and Facilities.............................. 57
Patents and Trademarks.................................... 58
Seasonality............................................... 58
Legal Proceedings......................................... 58
Employees................................................. 59
Arrangements with ATI Relating to the Spin-Off.............. 60
Separation and Distribution Agreement..................... 60
Employee Benefits Agreement............................... 61
Tax Sharing and Indemnification Agreement................. 62
Interim Services Agreement................................ 63
Management.................................................. 64
Directors................................................. 64
Committees of Our Board of Directors...................... 66
Compensation of Our Directors............................. 67
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Executive Officers and Senior Management.................... 68
Historical Compensation of Executive Officers............. 69
Employment Agreements..................................... 70
Benefit Plans Following the Spin-Off...................... 72
Security Ownership.......................................... 74
Description of Our Capital Stock............................ 75
Common Stock.............................................. 75
Preferred Stock........................................... 76
Rights Plan............................................... 76
Certain Provisions of Our Governing Documents............. 78
Anti-takeover Legislation................................. 80
Transfer Agent and Registrar.............................. 81
Liability and Indemnification of Our Officers and
Directors................................................. 81
Elimination of Liability.................................. 81
Indemnification of Officers and Directors................. 82
Available Information....................................... 82
Index to Our Financial Statements........................... F-1
</TABLE>
4
<PAGE> 8
SUMMARY
This summary highlights material 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> 9
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
nine months of 1999 were $176.5 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> 10
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 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. The ATI reverse split will have
no effect on Water Pik Technologies common
stock or the distribution ratio for 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.
7
<PAGE> 11
How will ATI distribute Water
Pik
Technologies common stock to
me? - Prior to the spin-off, ATI will deliver
all outstanding shares of Water Pik
Technologies common stock to the
distribution agent for distribution. As
promptly as practicable after the spin-
off, the distribution agent will mail
certificates for whole shares of Water Pik
Technologies common stock to ATI
stockholders of record on ,
1999.
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.
Also, the terms of our credit facility
will prohibit us from paying dividends.
Our board of directors will periodically
re-evaluate this dividend policy taking
into account our operating results,
capital needs, the terms of our credit
facilities and other factors.
8
<PAGE> 12
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? - Water Pik Technologies common stock will
be listed on the New York Stock Exchange
under the symbol "PIK." We expect that
regular trading of our common stock 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 on a
"regular way" basis and may also trade on
a when-issued or ex-distribution basis,
reflecting an assumed value for ATI common
stock after giving effect to the spin-offs
of Water Pik Technologies and Teledyne
Technologies Incorporated. When-issued or
ex-distribution trading in ATI common
stock, if available, could last from or
before , 1999 through ,
1999.
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 representa-
9
<PAGE> 13
tions 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 -- Material Federal
Income Tax Consequences of the Spin-Off."
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? - You will be provided with a separate
Information Statement describing the
spin-off of Teledyne Technologies
Incorporated.
10
<PAGE> 14
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 six
members, including Michael P. Hoopis, who
is our President and Chief Executive
Officer, and Robert P. Bozzone (Chairman),
W. Craig McClelland, William G. Ouchi,
Charles J. Queenan, Jr. and James E. Rohr,
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 be our General
Manager -- Pool Products and Heating
Systems. 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 $34 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 those
borrowings. Following the spin-off, we
will have up to $26 million of borrowing
availability remaining under the credit
facility, subject to the borrowing base
limitations under the facility.
11
<PAGE> 15
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 Shareholder Services L.L.C.
85 Challenger Road
Overpeck Centre
Ridgefield Park, New Jersey 07660
1-888-540-9877
12
<PAGE> 16
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 nine
months ended September 30, 1999 and 1998 and the years ended December 31, 1995
and 1994 and the balance sheet data at September 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>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Sales.................... $176,488 $162,018 $235,788 $241,167 $215,675 $205,794 $194,213
Net income............... $ 6,089 $ 6,396 $ 11,495 $ 17,552 $ 7,353 $ 5,231 $ 6,556
Working capital.......... $ 26,819 $ 31,242 $ 35,778 $ 39,057 $ 41,914 $ 42,870 $ 40,314
Total assets............. $128,286 $116,884 $127,794 $119,974 $118,375 $ 97,348 $ 91,966
Long-term debt........... $ 6,864 $ -- $ -- $ -- $ -- $ -- $ --
Stockholder's equity..... $ 78,845 $ 80,312 $ 88,822 $ 80,653 $ 85,335 $ 72,238 $ 71,127
</TABLE>
13
<PAGE> 17
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.
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>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------ -----------------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Sales...................................... $176,488 $235,788
Net income................................. $ 4,886 $ 9,891
Basic earnings per share................... $ 0.51 $ 1.01
Weighted average shares
outstanding -- basic..................... 9,618 9,838
Diluted earnings per share................. $ 0.51 $ 1.01
Weighted average shares
outstanding -- diluted................... 9,620 9,838
Working capital............................ $ 26,819
Total assets............................... $131,144
Long-term debt............................. $ 40,864
Stockholders' equity....................... $ 38,442
</TABLE>
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<PAGE> 18
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 our 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> 19
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 which have greater financial and technical resources than we
do, including in personal health care products, companies such as The Gillette
Company, which manufactures Braun(R) products, The Clorox Company, which
manufactures Brita(R) products, and Procter & Gamble Co., after its pending
acquisition of the manufacturer of PUR(R) products; and, in pool and
water-heating products, companies such as Essef Corporation, which includes
PacFab, Inc./East and United Dominion Industries, Ltd., whose subsidiary
Weil-McLain manufactures boiler products. Because these companies have greater
financial and technical resources than we do, they 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.
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<PAGE> 20
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.
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. In addition,
as a result of the seasonality of our product lines, we offer
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<PAGE> 21
extended payments terms which permit customers to purchase pool products during
the winter months, with no required payments until spring.
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 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."
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<PAGE> 22
OUR INABILITY TO RETAIN EXECUTIVE OFFICERS AND SENIOR MANAGEMENT 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
senior management, and on our ability to continue to attract, retain and
motivate qualified personnel. The loss of the services of one or more of our
executive officers or senior management 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 of Michael P. Hoopis, our President and Chief Executive Officer,
Robert A. Shortt, our Executive Vice President -- Sales, Marketing and Business
Development, Victor C. Streufert, our Vice President -- Finance and Chief
Financial Officer, Richard P. Bisson, Vice President -- Operations, or Robert J.
Rasp, General Manager, Pool Products and Heating Systems, could materially and
adversely affect us. We have entered into employment agreements with each of
Messrs. Hoopis, Shortt, Streufert and Bisson.
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
operations 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,
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<PAGE> 23
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.
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.
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<PAGE> 24
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 generally
equal to the amount by which the fair market value of the Water Pik Technologies
common stock distributed to ATI's stockholders exceeded the tax basis in our
assets. 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 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
21
<PAGE> 25
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.
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. A separate Information Statement will be provided to
you regarding the spin-off of Teledyne Technologies Incorporated.
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 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
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<PAGE> 26
- 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.
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.
Prior to the spin-off, ATI will deliver all outstanding shares of Water Pik
Technologies common stock to the distribution agent for distribution. As
promptly as practicable after the spin-off, the distribution agent will mail
certificates for whole shares of Water Pik Technologies common stock to ATI
stockholders of record on , 1999.
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 in open market transactions at
then-prevailing prices. The distribution agent will have sole discretion
regarding when, how, through which broker (which will not be affiliated with ATI
or Water Pik Technologies) and at what prices to make such sales. 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. The distribution agent is not affiliated with ATI
or Water Pik Technologies.
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 whole shares of Water Pik Technologies common stock distributed in the
spin-off in respect of the ATI common stock held in their accounts. Since an
Investor Services Program will not be established for our stockholders,
participants in the ATI program will receive certificates for the whole shares
of Water Pik Technologies common stock distributed to them in the spin-off and
cash instead of any fractional shares.
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.
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RESULTS OF THE SPIN-OFF
After the spin-off, we will be a separate, independent public company. Our
management, fundamentals, growth characteristics and strategic priorities will
be different from those of ATI. ATI will have no interest in Water Pik
Technologies after the spin-off.
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 , 1999. Immediately after the spin-off, we expect to
have approximately 9,200 holders of record of our common stock and approximately
9,452,994 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 September 30, 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."
Our common stock will be listed 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. The ATI reverse stock split will have no effect on Water
Pik Technologies common stock or the distribution ratio for the spin-off.
MATERIAL 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.
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- 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.
- 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,
Water Pik Technologies common stock and 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 our 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, as well as the lack of a plan or intention
on the part of ATI or Water Pik Technologies to merge with any other corporation
or to sell assets otherwise than in the ordinary course of business, or (subject
to certain exceptions) to purchase shares of its outstanding stock.
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 generally
equal to the amount by which the fair market value of our common stock
distributed to ATI's stockholders exceeds the tax basis in our assets. 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. YOU SHOULD CONSULT YOUR TAX
ADVISOR AS TO THE PARTICULAR CONSEQUENCES OF THE SPIN-OFF TO YOU, INCLUDING THE
APPLICATION OF STATE, LOCAL
25
<PAGE> 29
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 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. Our common stock
will be listed on the New York Stock Exchange under the trading symbol "PIK."
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 letters "wi" 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.
ATI common stock will continue to trade on a "regular way" basis and may
also trade on a when-issued or ex-distribution basis, reflecting an assumed
value for ATI common stock after giving effect to the spin-offs of Water Pik
Technologies and Teledyne Technologies Incorporated. When-issued or
ex-distribution trading in ATI common stock, if available, could last from on or
before , 1999 through , 1999.
Beginning on the first New York Stock Exchange trading day after the date
of the spin-off, we expect that 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
26
<PAGE> 30
- 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 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. Under Rule 144, an affiliate is entitled to sell a number of
shares within any three-month period that does not exceed the greater of 1% of
the then outstanding shares of common stock (approximately 94,530 shares
immediately after the spin-off based on the number of shares of ATI common stock
outstanding on September 30, 1999) or the average weekly trading volume of the
common stock on the New York Stock Exchange during the four calendar weeks
preceding the sale. Our directors and executive officers will hold 302,612
shares of our common stock after the spin-off. The holder may only sell such
shares through unsolicited brokers' transactions. Sales under Rule 144 are also
subject to certain requirements pertaining to the manner of such sales, notices
of such sales and the availability of current public information concerning
Water Pik Technologies.
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, 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 adjusted in the conversion based on the
relationship of the ATI stock price and the stock price of Water Pik
Technologies, 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
determination of that value cannot be made until 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.
27
<PAGE> 31
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 nine
months ended September 30, 1999 and 1998 and the years ended December 31, 1995
and 1994 and the balance sheet data at September 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>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Sales.................... $176,488 $162,018 $235,788 $241,167 $215,675 $205,794 $194,213
Net income............... $ 6,089 $ 6,396 $ 11,495 $ 17,552 $ 7,353 $ 5,231 $ 6,556
Working capital.......... $ 26,819 $ 31,242 $ 35,778 $ 39,057 $ 41,914 $ 42,870 $ 40,314
Total assets............. $128,286 $116,884 $127,794 $119,974 $118,375 $ 97,348 $ 91,966
Long-term debt........... $ 6,864 $ -- $ -- $ -- $ -- $ -- $ --
Stockholder's equity..... $ 78,845 $ 80,312 $ 88,822 $ 80,653 $ 85,335 $ 72,238 $ 71,127
</TABLE>
28
<PAGE> 32
OUR UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma consolidated income statements for the
nine months ended September 30, 1999 and for the year ended December 31, 1998
and the unaudited pro forma consolidated balance sheet at September 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 nine months ended September 30, 1999 and
for the year ended December 31, 1998 and as of September 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> 33
WATER PIK TECHNOLOGIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 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....................... 33,735 -- 33,735
Inventories............................... 26,366 -- 26,366
Deferred income taxes..................... 7,166 -- 7,166
Prepaid expenses and other current
assets.................................. 967 -- 967
-------- -------- --------
TOTAL CURRENT ASSETS................. 68,234 -- 68,234
Property, plant and equipment............. 35,746 -- 35,746
Cost in excess of net assets acquired..... 22,370 -- 22,370
Deferred income taxes..................... -- 2,858 2,858
Other assets.............................. 1,936 -- 1,936
-------- -------- --------
TOTAL ASSETS......................... $128,286 $ 2,858 $131,144
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable.......................... $ 20,481 $ -- $ 20,481
Accrued liabilities....................... 20,691 -- 20,691
Current portion of long-term debt......... 243 -- 243
-------- -------- --------
TOTAL CURRENT LIABILITIES............ 41,415 -- 41,415
Long-term debt............................ 6,864 34,000 40,864
Deferred income taxes..................... 1,162 (1,162) --
Other long-term liabilities............... -- 10,423 10,423
-------- -------- --------
TOTAL LIABILITIES.................... 49,441 43,261 92,702
-------- -------- --------
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 -- 9,452,994
shares............................... -- 95 95
Additional paid-in capital.............. -- 38,519 38,519
Net advances (to) from Allegheny
Teledyne............................. 79,017 (79,017) --
Foreign currency translation losses..... (172) -- (172)
-------- -------- --------
TOTAL STOCKHOLDERS' EQUITY........... 78,845 (40,403) 38,442
-------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY............................. $128,286 $ 2,858 $131,144
======== ======== ========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Financial
Information.
30
<PAGE> 34
WATER PIK TECHNOLOGIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 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............................ $176,488 $ -- $176,488
Costs and expenses:
Cost of sales.................. 108,616 -- 108,616
Selling expenses............... 35,444 -- 35,444
General and administrative
expenses.................... 22,326 -- 22,326
Interest expense............... -- 2,005 2,005
-------- ------- --------
166,386 2,005 168,391
-------- ------- --------
Earnings before other income..... 10,102 (2,005) 8,097
Other income..................... 47 -- 47
-------- ------- --------
INCOME BEFORE INCOME TAXES....... 10,149 (2,005) 8,144
Provision for income taxes....... 4,060 (802) 3,258
-------- ------- --------
NET INCOME....................... $ 6,089 $(1,203) $ 4,886
======== ======= ========
BASIC NET INCOME PER COMMON
SHARE.......................... $ 0.51
========
DILUTED NET INCOME PER COMMON
SHARE.......................... $ 0.51
========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Financial
Information.
31
<PAGE> 35
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............... -- 2,673 2,673
-------- ------- --------
216,756 2,673 219,429
-------- ------- --------
Earnings before other income..... 19,032 (2,673) 16,359
Other income..................... 126 -- 126
-------- ------- --------
INCOME BEFORE INCOME TAXES....... 19,158 (2,673) 16,485
Provision for income taxes....... 7,663 (1,069) 6,594
-------- ------- --------
NET INCOME....................... $ 11,495 $(1,604) $ 9,891
======== ======= ========
BASIC NET INCOME PER COMMON
SHARE.......................... $ 1.01
========
DILUTED NET INCOME PER COMMON
SHARE.......................... $ 1.01
========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Financial
Information.
32
<PAGE> 36
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.
Management believes that the estimates, assumptions and allocations made in
preparing the historical financial statements are reasonable.
NOTE 2.
The pro forma unaudited consolidated balance sheet was prepared assuming
the distribution occurred on September 30, 1999 and includes "Pro Forma
Adjustments" for transactions which occurred subsequent to September 30, 1999 as
follows:
(a) To record debt of $34,000,000 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
$10,423,000 and related deferred taxes of $4,020,000. The effect on
income from the balance sheet transfer of insurance reserves is
reflected in the historical financial statements. See Note 6 of Notes
to Combined Financial Statements.
Water Pik Technologies participates in the general liability, product
liability, and workers' compensation insurance programs sponsored by ATI.
Insurance coverage under these programs are subject to policy deductibles
for which we are at risk for losses. In connection with the spin-off, we
have agreed to indemnify ATI for losses attributable to our operations
prior to the spin-off. Reserves have been established based upon existing
and estimated claims and historical experience in settling such matters. As
a result of the spin-off, ATI will transfer to Water Pik Technologies
reserves for estimated losses under these insurance programs totaling
$10,423,000. The actual settlements of claims under these insurance
programs may differ from estimated reserves, but the possible range of loss
in excess of those accrued is not reasonably estimable. Based upon
currently available information, management does not believe that
settlement of insurance claims will have a material adverse effect on our
financial condition or liquidity, although the timing of the adjustments to
estimated insurance reserves could have a material adverse effect on our
results of operations for the periods in which the adjustments are made.
(c) To record the planned liquidation of ATI's investment of $79,017,000
and the issuance of 9,452,994 shares of Water Pik Technologies common
stock. ATI will not have any remaining interest in Water Pik
Technologies after the spin-off.
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 $2,005,000
before tax, or $1,203,000 after tax, for the nine months ended September 30,
1999, and $2,673,000
33
<PAGE> 37
before tax, or $1,604,000 after tax, for the year ended December 31, 1998.
Interest expense was calculated assuming the $34,000,000 of assumed debt had
been outstanding for the entire period with an average interest rate of 7.48%
based upon LIBOR plus 2.0% to 2.25% and commitment fees of 0.50% on the unused
portion of the facility. A 0.125% increase in the assumed interest rate on the
assumed debt would increase interest expense by $32,000 ($19,000 after tax) for
the nine months ended September 30, 1999 and by $43,000 ($26,000 after tax) for
the year ended December 31, 1998.
NOTE 4.
The average number of shares of Water Pik Technologies common stock used in
the computation of basic net income per share was 9,618,480 and 9,837,534 for
the nine months ended September 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 9,619,589 and 9,838,465 for the nine months
ended September 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.
NOTE 5.
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 on the
date of grant. Options to purchase 10% of the shares will become exercisable on
or before 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.
Pursuant to the employment agreements with Messrs. Shortt, Streufert and
Bisson, each will receive options to purchase an aggregate of 62,500, 50,000 and
37,500 shares, respectively, of Water Pik Technologies common stock 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 on the date of grant. Options to purchase 20% of
the shares will become exercisable one year after the grant date, options to
purchase an additional 30% of the shares will become exercisable two years after
the grant date, and options to purchase the remaining 50% of shares will become
exercisable three years after the grant date.
These options will be accounted for in accordance with APB Opinion 25,
"Accounting for Stock Issued to Employees," and related Interpretations.
34
<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 nine months ended September 30,
1999 and for the years ended December 31, 1998, 1997 and 1996 are summarized
below:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 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........... $ 86,610 49.1% $125,763 53.3% $141,792 58.8% $141,133 65.4%
Pool and water-heating
products.............. 89,878 50.9% 110,025 46.7% 99,375 41.2% 74,542 34.6%
-------- -------- -------- --------
Total sales............. $176,488 100% $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 $34,000,000 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 $34,000,000 of borrowings. Following the spin-off, we will have up to
$26,000,000 of borrowing availability remaining under the credit facility,
subject to the borrowing base limitations under the facility. The amount of ATI
indebtedness to be assumed by Water Pik Technologies under the new credit
agreement was determined by reference to (i) historical levels of ATI
consolidated indebtedness relative to the expected market capitalizations of
ATI, Water Pik Technologies and Teledyne Technologies and (ii) the level of debt
and debt service capacity of Water Pik Technologies, as well as its ability to
finance working capital requirements through a
35
<PAGE> 39
combination of operating cash flow and revolving credit borrowings. Accordingly,
there is no reasonable basis to reflect ATI's indebtedness in Water Pik
Technologies' historical financial statements. 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.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1998
COMBINED RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1999 % CHANGE 1998
(DOLLARS IN THOUSANDS) ------------------- -------- -------------------
(UNAUDITED)
<S> <C> <C> <C>
Sales......................... $176,488 9% $162,018
Operating profit.............. $ 10,102 (4)% $ 10,562
Operating profit as a
percentage of sales......... 5.7% 6.5%
International sales as a
percentage of sales......... 14.1% 15.8%
</TABLE>
Our total sales for the nine months ended September 30, 1999 were 9%
greater than total sales for the nine months ended September 30, 1998 due to
increased sales of pool and water-heating products. Gross profit as a percentage
of sales decreased from 40.9% for the nine months ended September 30, 1998 to
38.5% 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 total gross profit percentage. Gross
profit was also reduced due to increased tooling amortization associated with
higher levels of new product development and costs associated with the closure
of three manufacturing facilities.
Operating profit decreased 4% in the first nine months of 1999 as compared
to the same period in the prior year. The decrease was attributable primarily to
lower gross margins, seasonal losses of $403,000 incurred in building inventory
for Les Agences Claude Marchand, Inc. ("Olympic"), which was acquired August 6,
1999, unusual general and administrative expenses of $930,000 associated with
bad debts of several major retail customers and $1,576,000 of expenses related
to the closing of three manufacturing facilities, work force reductions and
non-recurring spin-off costs.
36
<PAGE> 40
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>
NINE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1999 % CHANGE 1998
(DOLLARS IN THOUSANDS) ------------------- -------- -------------------
(UNAUDITED)
<S> <C> <C> <C>
Sales........................... $86,610 (1)% $87,843
Operating profit................ $ 3,377 (37)% $ 5,367
Operating profit as a percentage
of sales...................... 3.9% 6.1%
International sales as a
percentage of sales........... 19.1% 20.4%
</TABLE>
Sales of our personal health care products were 1% less for the nine months
ended September 30, 1999 than for the nine months ended September 30, 1998 due
to lower prices for oral health and water treatment products in response to
competitive pressures, which were partially offset by increased sales in new
shower products. Additionally, sales were negatively impacted across all
categories by inventory reduction efforts by a major retail customer and
financial difficulties of certain retail customers.
Operating profit decreased $1,990,000 in the first nine 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
initiatives. Operating profit in 1999 was impacted by unusual expenses of
$930,000 associated with bad debts of several major retail customers, and
$1,075,000 of expenses related to the closure of a manufacturing facility, work
force reductions and non-recurring spin-off costs. These unusual expenses were
offset by lower selling and marketing expenses of $2,363,000 compared to the
same period in the prior year. Selling and marketing expenses for the nine
months ended September 30, 1999 declined compared to the same period in the
prior year due to the reorganization and streamlining of operations during this
period.
The Personal Health Care Products segment incurred costs of $258,000
related to the closure of a small manufacturing facility in San Antonio, Texas
in July 1999. The production capabilities of this facility were consolidated
into existing operations in order to achieve cost savings and improve
manufacturing efficiencies. The primary components of these charges were
$135,000 for equipment relocation and start-up costs, and $103,000 for severance
costs. Additionally, charges of $532,000 were incurred relating to workforce
reductions in various administrative and engineering departments throughout the
organization. The plant rationalization and reorganization costs were classified
in the income statement as follows: $373,000 in cost of sales, $60,000 in
selling expenses and $357,000 in general and administrative expenses. All costs
related to these charges have been paid out; therefore, no reserves remain on
the balance sheet for these items at September 30, 1999. In addition, spin-off
costs of $285,000 were incurred for activities related to the spin-off,
primarily for consulting fees and increased travel expenses.
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<PAGE> 41
POOL AND WATER-HEATING PRODUCTS
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1999 % CHANGE 1998
(DOLLARS IN THOUSANDS) ------------------- -------- -------------------
(UNAUDITED)
<S> <C> <C> <C>
Sales........................... $89,878 21% $74,175
Operating profit................ $ 6,725 29% $ 5,195
Operating profit as a percentage
of sales...................... 7.5% 7.0%
International sales as a
percentage of sales........... 9.3% 15.8%
</TABLE>
Sales of our pool and water-heating products increased 21% in the nine
months ended September 30, 1999 as compared to the same period in 1998. Pool
products sales increased 19% due to strong pool equipment and heater sales.
Sales of the newly acquired pool products manufacturer, Olympic, were nominal
due to normal seasonal fluctuations. Water-heating products sales increased 25%
due mainly to the acquisition of Trianco Heatmaker, Inc. ("Trianco") in August
1998. Sales of water-heating products, excluding Trianco products, increased 3%
due to improved sales of both commercial and residential water-heating products.
Operating profit increased 29% in the 1999 nine months as compared to the
same period in 1998. The increase in our operating profit was primarily due to
increased sales volume, offset by expenses of $501,000 related to the closing of
two manufacturing facilities and seasonal losses of $403,000 incurred in
building inventory for Olympic.
The Pool and Water-Heating Products segment incurred plant rationalization
costs of $501,000, all of which were recorded in general and administrative
expenses on the income statement. These costs relate to the closure of the
Randolph, Massachusetts facility and the Novato, California facility. These
plants are expected to be completely closed by March 2000. The production
capabilities of these two facilities are being relocated to other facilities in
order to achieve cost savings and improve manufacturing efficiencies. The plant
rationalization costs consisted of severance costs of $305,000 and plant
clean-up costs of $196,000. At September 30, 1999, there was a reserve of
$240,000 for the unpaid portion of these expenses.
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<PAGE> 42
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 favorable adjustment to cost of sales of $1,029,000 as a
result of a LIFO liquidation due to the discontinued production of the consumer
formulated product line in 1997 also contributed to gross profit improvement.
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<PAGE> 43
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 of $1,029,000 as a result
of a LIFO liquidation due to the decision to discontinue production of the
consumer formulated product line. In addition, the operating profit for 1996
included a $5,000,000 expense which consisted principally of $3,106,000 in costs
associated with settling a legal matter, $1,639,000 for the cost of exiting the
consumer formulated product line and a reserve of $213,000 to reorganize the
international sales organization.
40
<PAGE> 44
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 to settle a breach of contract claim alleging rights to
distribute a LaarsH pool heater.
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 for at least the next 12 months.
In the nine months ended September 30, 1999, cash generated from operations
of $23,120,000 was used to fund the cash portion of the purchase price of
Olympic of $2,500,000, to make $4,340,000 in capital expenditures and to advance
$16,196,000 to ATI. In 1998, cash generated from operations of $22,325,000 was
used to purchase
41
<PAGE> 45
Trianco for $10,647,000, to make $8,650,000 in capital expenditures and to
advance $3,223,000 to ATI.
Our working capital decreased to $26,819,000 at September 30, 1999 from
$35,778,000 at December 31, 1998. Our current ratio decreased to 1.6 at
September 30, 1999 from 1.9 at December 31, 1998. The decrease in our working
capital was primarily due to lower accounts receivable balances slightly offset
by higher inventory balances at September 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 $34,000,000 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 revolving credit facility, including the repayment obligations for ATI's
$34,000,000 of borrowings, in connection with the spin-off. As a result of the
spin-off, we will have $26,000,000 of borrowing availability remaining under the
credit facility subject to borrowing base limitations determined with reference
to our receivables, inventory and real property. Borrowings under the credit
facility will bear interest at variable rates at, or at margins above,
prevailing prime, LIBOR, federal funds or certificate of deposit rates and will
depend on the ratio of our consolidated total indebtedness to our earnings
before interest, taxes, depreciation and amortization from time to time. The
credit facility will require us to comply with various financial covenants and
restrictions, including covenants and restrictions relating to indebtedness,
liens, investments, dividend payments, consolidated net worth, interest coverage
and the relationship of our total consolidated indebtedness to our earnings
before interest, taxes, depreciation and amortization. The credit agreement will
prohibit us from declaring dividends or making other specified payments. We will
grant to the lenders under the credit agreement a security interest in
substantially all of our assets as collateral to secure our obligations under
the credit agreement.
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 Olympic, a
pool accessories manufacturer and distributor, doing business in Canada as
Olympic Pool Accessories, for $2,500,000 in cash and a $6,597,000 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, and pool toys and games. Olympic
distributes its products in Canada, Europe and the United States.
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<PAGE> 46
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 $9,800,000, of which $4,340,000 has been spent through
September 30, 1999. At September 30, 1999, Water Pik Technologies has capital
project purchase order commitments of approximately $3,300,000. Remaining
budgeted capital expenditures of $2,200,000 will be used for property
improvements and equipment purchases.
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, the terms of our credit
facility will prohibit us from paying dividends. Our board of directors will
periodically re-evaluate our dividend policy taking into account operating
results, capital needs, the terms of our credit facility and other factors.
Water Pik Technologies participates in the general liability, product
liability, and workers' compensation insurance programs sponsored by ATI.
Insurance coverage under these programs are subject to policy deductibles for
which we are at risk for losses. In connection with the spin-off, we have agreed
to indemnify ATI for losses attributable to our operations prior to the
spin-off. Reserves have been established based upon existing and estimated
claims and historical experience in settling such matters. As a result of the
spin-off, ATI will transfer to Water Pik Technologies reserves for estimated
losses under these insurance programs totaling $10,423,000. The actual
settlements of claims under these insurance programs may differ from estimated
reserves, but the possible range of loss in excess of those accrued is not
reasonably estimable. Based upon currently available information, management
does not believe that settlement of insurance claims will have a material
adverse effect on our financial condition or liquidity, although the timing of
the adjustments to estimated insurance reserves could have a material adverse
effect on our results of operations for the periods in which the adjustments are
made.
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 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.
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<PAGE> 47
We believe that our internally generated funds and borrowings from our
credit facility described above will be adequate to meet our needs for at least
the next 12 months. 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 nine months ended
September 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 September 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.
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%
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<PAGE> 48
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. We have provided those customers and
suppliers who we believe to be material to our business with Year 2000
questionnaires, including our suppliers for water, gas, electric and raw
materials. All critical customers and suppliers have not identified any material
Year 2000 issues. Efforts continue to be made to identify and resolve other
customer- and supplier-based Year 2000 issues that could affect us and our
operating and support systems. We have also identified certain Laars(R) and
Jandy(R) electronic controls that contain embedded microprocessors. We believe
that these products present no significant product-related Year 2000 issues.
Neither Water Pik Technologies nor ATI have conducted any extensive 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 anticipate spending an aggregate of $1,300,000 to address Year 2000
issues, of which approximately $1,000,000 was spent in 1998 and of which
approximately $300,000 will be spent in 1999. These expenditures do not include
expenditures which we have incurred to analyze our products which contain
embedded microprocessors for Year 2000 compliance. Substantially all costs
related to our Year 2000 initiatives are expensed as incurred and funded through
operating cash flows. Although we currently do not have any plans for additional
expenditures in excess of $1,300,000, 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 facilities and our temporary
inability to timely process orders and to deliver finished products to
customers. Alternative suppliers are available and would be used if necessary 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.
CONTINGENCY PLANS. We have been working to establish contingency plans
with respect to our critical business and operating systems should unplanned
situations arise on or after January 1, 2000, and expect such contingency plans
to be in place prior to December 31, 1999. Most of our current contingency plans
contemplate the use of current personnel to make certain manual adjustments to
systems or to perform various tasks manually. In addition, systems production
lines and supporting equipment will be backed up and shut down on December 31,
1999 and restarted on January 2, 2000. We will also have information technology
professionals and other relevant personnel available toward the
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<PAGE> 49
end of December 1999 and the early part of 2000 to assist in avoiding and
responding to adverse scenarios.
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> 50
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 nine months of 1999 were $176.5
million.
INDUSTRY OVERVIEW
We estimate that the total market for personal health care products, pool
and spa equipment and water-heating systems in those product categories in which
we participate was approximately $5.8 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 $780.0 million for water-heating systems.
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<PAGE> 51
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;
- 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 77 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 $115 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.
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<PAGE> 52
- 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 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. We believe that ISO
certifications are recognized indicators of quality manufacturing
capabilities. Many of our customers require evidence of ISO
certifications prior to placing an order.
- 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 General Manager, Pool Products and
Heating Systems 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
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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 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 reduction plan. We anticipate that by the first quarter
of 2000, we will have reduced our domestic manufacturing facilities from
eight to four, and relocated or outsourced the manufacturing operations of
these facilities to existing, complementary facilities. We expect that
these facility reductions 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
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<PAGE> 54
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 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
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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.
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 many of our products 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
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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
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>
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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 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 manufactured gas heating products for over 50 years, and we 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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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, including in personal health care products, companies such as The Gillette
Company, which manufactures Braun(R)products; The Clorox Company, which
manufactures Brita(R) products; and Procter & Gamble Co., after its pending
acquisition of the manufacturer of PUR(R) products; and, in pool and
water-heating products, companies such as Essef Corporation, which includes
PacFab, Inc./East and United Dominion Industries, Ltd., whose subsidiary
Weil-McLain manufactures boiler products.
RESEARCH AND PRODUCT DEVELOPMENT
We support research and product 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
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in various stages of development. Our research and product development
expenditures were approximately $5.9 million, $7.7 million, $8.9 million and
$7.6 million in the first nine months of 1999 and in 1998, 1997 and 1996,
respectively.
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 product 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 manufacturing facilities as of September 30, 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)
</TABLE>
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<TABLE>
<CAPTION>
FACILITY SQUARE FOOTAGE
LOCATION PRINCIPAL USE (OWNED/LEASED)
- -------- ------------------------------------ ---------------
<S> <C> <C>
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>
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. In
addition, as a result of the seasonality of our product lines, we offer extended
payment terms which permit customers to purchase pool products during the winter
months, with no required payments until spring. 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.
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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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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, 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 deductibles and retentions under the
automobile and workers' compensation policies based on the same allocation
formulas that applied prior to the spin-off.
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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 Charles J. Queenan, Jr.
and James E. Rohr (Class I), Michael P. Hoopis and William G. Ouchi (Class II),
and Robert P. Bozzone (Chairman) and W. Craig McClelland (Class III). The
Separation and Distribution Agreement also provides that we will nominate
Messrs. Queenan and Rohr (or, if either is unable or unwilling to serve, such
other candidates as Messrs. Bozzone, McClelland and Ouchi or the survivor of
them shall designate) for re-election as Class I directors 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, 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 adjusted in the conversion based on the
relationship of the ATI stock price and the stock price of Water Pik
Technologies, so that the "intrinsic value" of the options (that is, the
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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
determination of that value cannot be made until 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.
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 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
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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 the
written consent of ATI, engage in a number of specified transactions.
Transactions subject to these restrictions will include issuance of Water Pik
Technologies common stock (or certain derivatives of our stock) in amounts which
represent 40% or more of the outstanding Water Pik Technologies common stock,
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. 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 DIRECTORS
Class I directors will serve until the 2000 annual meeting of our
stockholders and until their respective successors are elected and qualified.
Our Class I Directors will be:
<TABLE>
<S> <C>
CHARLES J. QUEENAN, JR. Charles J. Queenan, Jr. is Senior
Senior Counsel, Counsel to Kirkpatrick & Lockhart LLP,
Kirkpatrick & Lockhart LLP attorneys-at-law. Prior to January 1996,
Age 69 he was a partner of that firm. Mr.
Queenan is also a director of ATI and
Crane Co. Kirkpatrick & Lockhart LLP
performs legal services for ATI,
including in connection with the
spin-off, and may in the future perform
services for us.
JAMES E. ROHR James E. Rohr has been President of PNC
President and Chief Operating Officer, Bank Corp. since 1992 and assumed the
PNC Bank Corp. additional title of Chief Operating
Age 51 Officer in 1998. He is also a director
of ATI, PNC Bank Corp. and Equitable
Resources, Inc.
</TABLE>
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CLASS II DIRECTORS
Class II directors will serve until the 2001 annual meeting of our
stockholders and until their respective successors are elected and qualified.
Our Class II Directors 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.
WILLIAM G. OUCHI William G. Ouchi became 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 in 19998, where he
Los Angeles previously had been a professor of
Age 56 Management. He is also a director of
ATI, FirstFed Financial Corp. and Sempra
Energy.
</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 directors of ATI since
of ATI August 1996. He had served as Vice
Age 66 Chairman of 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. Mr. Bozzone will serve as the
non-executive Chairman of our board of
directors.
</TABLE>
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<TABLE>
<S> <C>
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.
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.
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- 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.
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 executive 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. The non-executive Chairman of our board of directors will be paid an
additional annual retainer fee of $10,000. 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 1,000 shares of our
common stock will be granted to non-employee directors on the date of the
distribution of our common stock to ATI stockholders and at the conclusion of
each annual meeting of our stockholders. If, after the spin-off, a non-employee
director first becomes a director on a date other than an annual meeting date,
an option covering 1,000 shares of our common stock will be granted to such
non-employee director on his or her first day of board service. The purchase
price of the common stock covered by these options will be the fair market value
of our common stock on the date the option is granted.
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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.
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, General Manager, Pool Products and Heating
Systems................................................... 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
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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 General Manager, Pool Products and Heating Systems
of Water Pik Technologies since October 1999. Previously, he was President of
Laars since 1996 and Vice President, Heating Systems of Laars from 1993 to 1996.
From 1990 to 1993, he was a general manager of Carrier Corporation.
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 $40,774 for relocation expenses.
OPTION GRANTS IN LAST FISCAL YEAR
Shown below is information on grants to Mr. Hoopis of options to purchase
shares of ATI common stock pursuant to the ATI Incentive Plan during the year
ended December 31, 1998, which are reflected in the Summary Compensation Table
above.
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<PAGE> 73
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED RATES
OF STOCK PRICE
NUMBER OF % OF TOTAL APPRECIATION FOR
SECURITIES OPTIONS OPTION TERM(1)
UNDERLYING GRANTED TO EXERCISE OR -----------------------
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION 0% 5% 10%
NAME GRANTED (1) FISCAL YEAR ($/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.
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, 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.
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 annual payments of $80,000
each 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
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the high and low sales price of a share of Water Pik Technologies common stock
on the date of grant. Options to purchase 10% of the shares will become
exercisable on or before 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 annual payments of
$60,000 each for three years, 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 annual
payments of $25,000 each for two years, 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 President -- Operations. The agreement
provides for an annual base salary of $190,000 and annual payments of $10,000
each for two years, 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 an aggregate of 62,500, 50,000 and
37,500 shares, respectively, of Water Pik Technologies common stock 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 on the date of grant. Options to purchase 20% of
the shares will become exercisable one year after the grant date, options to
purchase an additional 30% of the shares will become exercisable two years after
the grant date, and options to purchase the remaining 50% of shares 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.
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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. The
total number of shares of our common stock authorized to be issued under the
incentive plan equals 10% of the issued and outstanding shares of common stock
immediately following the effective date of the incentive plan. If the number of
issued and outstanding shares of our common stock is increased after the
effective date, the total number of shares available under the incentive plan
will be increased by 10% of such increase. No more than 945,000 shares of our
common stock may be issued under the incentive plan as incentive stock options.
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 433,590 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
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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 be able to increase their holdings
in our stock fund. They will not, however, be able to increase their holdings in
the Teledyne Technologies or ATI stock funds. To the extent that the plan
fiduciaries have not already done so, on December 31, 2002, all remaining
investments in the Teledyne Technologies and ATI stock funds under our part of
the Teledyne, Inc. 401(k) Plan or our new savings plan will be 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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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
October 15, 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 October
15, 1999 (for example, through the exercise of stock options) within the meaning
of Rule 13d-3(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 11.5%
60 Wall Street
New York, NY 10260
Richard P. Simmons (2).............................. 823,690 8.7%
1000 Six PPG Place
Pittsburgh, PA 15222
Caroline W. Singleton(3)............................ 699,966 7.4%
Sole Trustee of the Singleton Family Trust
335 North Maple Drive, Suite 177
Beverly Hills, CA 90210
Scudder Kemper Investments, Inc.(4)................. 551,359 5.9%
345 Park Avenue
New York, NY 10154
Capital Research and Management Company(5).......... 507,520 5.4%
333 South Hope Street
Los Angeles, CA 90071
Michael P. Hoopis................................... 333 *
Robert P. Bozzone(6)................................ 265,574 2.8%
W. Craig McClelland................................. 397 *
William G. Ouchi.................................... 296 *
Charles J. Queenan, Jr.(6).......................... 35,481 *
James E. Rohr....................................... 531 *
All directors and Named Executive Officer as a group
(6 persons)....................................... 302,612 3.2%
</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.
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(2) Mr. Simmons will have the sole power to direct the voting of all 823,690
shares, and sole power to direct the disposition of 419,626 of these shares.
Mrs. Richard P. Simmons will have the sole power to direct the disposition
of 404,064 of these shares. The amount shown reflects shares held for Mr.
Simmons as of September 30, 1999 under the ATI Retirement Savings Plan. Mr.
Simmons disclaims beneficial ownership of 11,895 shares shown in the table
that will be owned by R. P. Simmons Family Foundation, a private charitable
foundation with respect to which Mr. Simmons serves as trustee.
(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 include shares for which beneficial ownership is disclaimed, as
follows: 12,000 shares that will be owned by Mr. Bozzone's wife; and 2,705
shares that will be owned by Mr. Queenan's wife.
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 September 30, 1999) approximately 9,452,994 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 500,000 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.
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
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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
Our board of directors has, subject to completion of the spin-off, 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 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 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
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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 the tenth
anniversary of the date of the Rights Agreement, 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 $1.00 per share but will be entitled to an
aggregate dividend of 100 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 $100 per share but
will be entitled to an aggregate payment of 100 times the payment made per share
of our common stock. Each Preferred Share will have 100 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 100 times the amount received per
share of our common stock. These rights are protected by customary antidilution
provisions.
The dividend, liquidation and voting rights attendant to one one-hundredth
of a Preferred Share purchasable upon exercise of each Right are designed to be
the approximate economic equivalent to 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
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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 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
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"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 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.
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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").
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
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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 is ChaseMellon
Shareholder Services, L.L.C.
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;
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- 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 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.
82
<PAGE> 86
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 nine
months ended September 30, 1999 and 1998.................. F-20
Combined Balance Sheets for September 30, 1999 (unaudited)
and December 31, 1998 (audited)........................... F-21
Combined Statements of Cash Flows (unaudited) for the nine
months ended September 30, 1999 and 1998.................. F-22
Combined Statements of Stockholder's Equity (unaudited) for
the nine months ended September 30, 1999 and 1998......... F-23
Notes to Interim Combined Financial Statements
(unaudited)............................................... F-24
</TABLE>
F-1
<PAGE> 87
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.
/s/ Ernst & Young LLP
Pittsburgh, Pennsylvania
April 13, 1999, except for Note 12 as to which the date is August 6, 1999
F-2
<PAGE> 88
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
======== ======== ========
BASIC NET INCOME PER COMMON SHARE............. $ 1.17 $ 1.79 $ 0.77
======== ======== ========
DILUTED NET INCOME PER COMMON SHARE........... $ 1.17 $ 1.79 $ 0.77
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 89
WATER PIK TECHNOLOGIES, INC.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash................................................ $ -- $ --
Accounts receivable, net............................ 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> 90
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> 91
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> 92
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 $34,000,000 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 $34,000,000 of borrowings, in connection with the
spin-off. Following the spin-off, Water Pik Technologies will have up to
$26,000,000 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> 93
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. These businesses were combined as they will
be wholly-owned subsidiaries under the common control of Water Pik Technologies.
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 customers and are net of
estimated returns and allowances. 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> 94
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
The average number of shares of Water Pik Technologies common stock used in
the computation of basic net income per common share was 9,837,534, 9,830,038
and 9,561,061 for the years ended December 31, 1998, 1997 and 1996,
respectively, based on a distribution ratio of one share of Water Pik
Technologies common stock for every 20 shares of Allegheny Teledyne common
stock. The average number of shares of Water Pik Technologies common stock used
in the computation of diluted net income per common share was 9,838,465,
9,831,222 and 9,561,754 for the years ended December 31, 1998, 1997 and 1996,
respectively. A distribution ratio of one share of Water Pik Technologies common
stock for every 20 shares of Allegheny Teledyne 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 Allegheny Teledyne common stock prior to the
spin-off to the market price of Water Pik Technologies after the spin-off and
therefore cannot be determined at the present time.
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
F-9
<PAGE> 95
1996, respectively. Accumulated amortization was $2,611,000 and $1,515,000 at
December 31, 1998 and 1997, 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 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.
F-10
<PAGE> 96
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.
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 $6.94 $-- $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
F-11
<PAGE> 97
Water Pik Technologies and therefore may not be comparable to the Allegheny
Teledyne assumptions used.
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................. 211,500 $22.28 -- $ -- 21,175 $14.61
Exercised............... -- $ -- (1,000) $12.86 -- $ --
------- ------ ------ ------ ------ ------
Outstanding end of
year.................. 256,700 $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 9.3 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 be determined until after the
spin-off.
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> 98
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>
The average net advances from Allegheny Teledyne were $84,988,000,
$83,079,000 and $78,719,000 for the years ended December 31, 1998, 1997 and
1996, respectively.
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. Insurance expense was allocated to
Water Pik Technologies based upon actual losses incurred plus a share of pooled
catastrophic losses under the Allegheny Teledyne self-insurance program. 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> 99
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> 100
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> 101
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. ("Trianco"), 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
working capital of $1,030,000, property, plant and equipment of $255,000 and
intangibles of $786,000. The goodwill recorded as part of this transaction was
$8,576,000. Had Trianco been purchased at the beginning of 1998, pro
F-16
<PAGE> 102
forma sales, net income, basic and diluted net income per common share would
have been approximately $240,000,000, $11,000,000, $1.12 and $1.12,
respectively. Had Trianco been purchased at the beginning of 1997, pro forma
sales, net income, basic and diluted net income per common share would have been
approximately $252,000,000, $17,000,000, $1.73 and $1.73, respectively.
In May 1996, Water Pik Technologies acquired Jandy Industries,
Inc.("Jandy"), 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 current
assets of $10,099,000, property, plant and equipment of $902,000 and current
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.
Had Jandy been purchased at the beginning of 1996, pro forma sales, net income,
basic and diluted net income per common share would have been approximately
$225,000,000, $5,000,000, $0.52 and $0.52, respectively.
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
F-17
<PAGE> 103
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.
Water Pik Technologies participates in the general liability, product
liability, and workers' compensation insurance programs sponsored by Allegheny
Teledyne. Insurance coverage under these programs are subject to policy
deductibles for which the Company is at risk for losses. In connection with the
spin-off, the Company has agreed to indemnify Allegheny Teledyne for losses
attributable to the Company's operations prior to the spin-off. Reserves have
been established based upon existing and estimated claims and historical
experience in settling such matters. As a result of the spin-off, Allegheny
Teledyne will transfer to the Company reserves for estimated losses under these
insurance programs totaling $10,423,000. The actual settlements of claims under
these insurance programs may differ from estimated reserves, but the possible
range of loss in excess of those accrued is not reasonably estimable. Based upon
currently available information, management does not believe that settlement of
insurance claims will have a material adverse effect on the Company's financial
condition or liquidity, although the timing of the adjustments to estimated
insurance reserves could have a material adverse effect on the Company's results
of operations for the periods in which the adjustments are made.
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
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 $6,597,000 promissory note. In
connection with the purchase, the Company acquired $2,053,000 of working
capital, $3,175,000 of property, plant and equipment and $541,000 of debt. The
goodwill recorded as part of this transaction was $4,410,000. 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-18
<PAGE> 104
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-19
<PAGE> 105
WATER PIK TECHNOLOGIES, INC.
COMBINED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
--------------------
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
SALES.................................................... $176,488 $162,018
Costs and expenses:
Cost of sales.......................................... 108,616 95,712
Selling expenses....................................... 35,444 35,993
General and administrative expenses.................... 22,326 19,751
-------- --------
166,386 151,456
-------- --------
Earnings before other income............................. 10,102 10,562
Other income............................................. 47 98
-------- --------
INCOME BEFORE INCOME TAXES............................... 10,149 10,660
Provision for income taxes............................... 4,060 4,264
-------- --------
NET INCOME............................................... $ 6,089 $ 6,396
======== ========
BASIC NET INCOME PER COMMON SHARE........................ $ 0.63 $ 0.65
======== ========
DILUTED NET INCOME PER COMMON SHARE...................... $ 0.63 $ 0.65
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-20
<PAGE> 106
WATER PIK TECHNOLOGIES, INC.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
(UNAUDITED) (AUDITED)
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash................................................ $ -- $ --
Accounts receivable, net............................ 33,735 46,335
Inventories......................................... 26,366 18,760
Deferred income taxes............................... 7,166 7,218
Prepaid expenses and other current assets........... 967 1,228
-------- --------
TOTAL CURRENT ASSETS........................... 68,234 73,541
Property, plant and equipment....................... 35,746 33,131
Cost in excess of net assets acquired............... 22,370 19,072
Other assets........................................ 1,936 2,050
-------- --------
TOTAL ASSETS................................... $128,286 $127,794
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable.................................... $ 20,481 $ 18,880
Accrued liabilities................................. 20,691 18,883
Current portion of long-term debt................... 243 --
-------- --------
TOTAL CURRENT LIABILITIES...................... 41,415 37,763
Long-term debt...................................... 6,864 --
Deferred income taxes............................... 1,162 1,209
-------- --------
TOTAL LIABILITIES.............................. 49,441 38,972
-------- --------
Stockholder's Equity:
Net advances from Allegheny Teledyne.............. 79,017 89,124
Foreign currency translation losses............... (172) (302)
-------- --------
TOTAL STOCKHOLDER'S EQUITY..................... 78,845 88,822
-------- --------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY..... $128,286 $127,794
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-21
<PAGE> 107
WATER PIK TECHNOLOGIES, INC.
COMBINED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
-------------------
1999 1998
-------- -------
(IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net Income................................................ $ 6,089 $ 6,396
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization........................ 6,364 4,702
Gain on sale of property, plant and equipment........ (11) (8)
Deferred income taxes................................ 5 1,057
Change in operating assets and liabilities:
Accounts receivable.................................. 14,379 15,273
Inventories.......................................... (5,034) (619)
Accrued liabilities.................................. 886 (780)
Accounts payable..................................... 181 (5,124)
Other assets......................................... (174) (849)
Other................................................... 435 (173)
-------- -------
CASH PROVIDED BY OPERATING ACTIVITIES................ 23,120 19,875
-------- -------
INVESTING ACTIVITIES:
Purchase of property, plant and equipment............... (4,340) (3,445)
Purchases of businesses................................. (2,500) (10,200)
Disposals of property, plant and equipment.............. 31 18
Other................................................... (84) 199
-------- -------
CASH USED IN INVESTING ACTIVITIES.................... (6,893) (13,428)
-------- -------
FINANCING ACTIVITIES:
Net advances to Allegheny Teledyne...................... (16,196) (6,447)
Other................................................... (31) --
-------- -------
CASH USED IN FINANCING ACTIVITIES.................... (16,227) (6,447)
-------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.......... -- --
Cash and cash equivalents at beginning of year............ -- --
-------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD................ $ -- $ --
======== =======
NON-CASH TRANSACTIONS:
Net assets acquired under promissory note............... $ 6,597 $ --
======== =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-22
<PAGE> 108
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.............................. 6,396 -- 6,396
Other comprehensive income, net of tax:
Foreign currency translation losses... -- (290) (290)
-------- ----- --------
Comprehensive income.................... 6,396 (290) 6,106
Net transactions with Allegheny
Teledyne.............................. (6,447) -- (6,447)
-------- ----- --------
BALANCE, SEPTEMBER 30, 1998............. $ 80,801 $(489) $ 80,312
======== ===== ========
BALANCE, DECEMBER 31, 1998.............. $ 89,124 $(302) $ 88,822
======== ===== ========
Net income.............................. 6,089 -- 6,089
Other comprehensive income, net of tax:
Foreign currency translation gains.... -- 130 130
-------- ----- --------
Comprehensive income.................... 6,089 130 6,219
Net transactions with Allegheny
Teledyne.............................. (16,196) -- (16,196)
-------- ----- --------
BALANCE, SEPTEMBER 30, 1999............. $ 79,017 $(172) $ 78,845
======== ===== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-23
<PAGE> 109
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.
The average number of shares of Water Pik Technologies common stock used in
the computation of basic net income per common share was 9,618,480 and 9,844,109
for the nine months ended September 30, 1999 and 1998, respectively, based on a
distribution ratio of one share of Water Pik Technologies common stock for every
20 shares of Allegheny Teledyne common stock. The average number of shares of
Water Pik Technologies common stock used in the computation of diluted net
income per common share was 9,619,589 and 9,845,085 for the nine months ended
September 30, 1999 and 1998, respectively. A distribution ratio of one share of
Water Pik Technologies common stock for every 20 shares of Allegheny Teledyne
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 Allegheny
Teledyne common stock prior to the spin-off to the market price of Water Pik
Technologies after the spin-off and therefore cannot be determined at the
present time.
NOTE 2. INVENTORIES
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
(IN THOUSANDS)
<S> <C> <C>
Raw materials and supplies.................. $13,758 $11,616
Work-in-process............................. 4,638 3,406
Finished goods.............................. 12,505 8,795
------- -------
Total inventories at current cost........... 30,901 23,817
Less allowances to reduce current cost
values to LIFO basis...................... (4,535) (5,057)
------- -------
Total inventories........................... $26,366 $18,760
======= =======
</TABLE>
F-24
<PAGE> 110
NOTE 3. BUSINESS SEGMENTS
Information on the Company's business segments for the nine months ended
September 30, 1999 and 1998 was as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Sales:
Personal Health Care Products.................... $ 86,610 $ 87,843
Pool and Water-Heating Products................ 89,878 74,175
-------- --------
Total sales.................................... $176,488 $162,018
======== ========
Operating profit:
Personal Health Care Products.................. $ 3,377 $ 5,367
Pool and Water-Heating Products................ 6,725 5,195
-------- --------
Total operating profit........................... 10,102 10,562
Other income..................................... 47 98
-------- --------
Income before income taxes....................... $ 10,149 $ 10,660
======== ========
</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.
Water Pik Technologies participates in the general liability, product
liability, and workers' compensation insurance programs sponsored by Allegheny
Teledyne. Insurance coverage under these programs are subject to policy
deductibles for which the Company is at risk for losses. In connection with the
spin-off, the Company has agreed to indemnify Allegheny Teledyne for losses
attributable to the Company's operations prior to the
F-25
<PAGE> 111
spin-off. Reserves have been established based upon existing and estimated
claims and historical experience in settling such matters. As a result of the
spin-off, Allegheny Teledyne will transfer to the Company reserves for estimated
losses under these insurance programs totaling $10,423,000. The actual
settlements of claims under these insurance programs may differ from estimated
reserves, but the possible range of loss in excess of those accrued is not
reasonably estimable. Based upon currently available information, management
does not believe that settlement of insurance claims will have a material
adverse effect on the Company's financial condition or liquidity, although the
timing of the adjustments to estimated insurance reserves could have a material
adverse effect on the Company's results of operations for the periods in which
the adjustments are made.
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
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. ACQUISITION
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 $6,597,000 promissory note. In
connection with the purchase, the Company acquired $2,053,000 of working
capital, $3,175,000 of property, plant and equipment and $541,000 of debt. The
goodwill recorded as part of this transaction was $4,410,000. 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.
Had Olympic been purchased at the beginning of 1999, pro forma sales, net
income, basic and diluted net income per common share would have been
approximately $191,000,000, $7,000,000, $0.73 and $0.73, respectively, for the
nine months ended September 30, 1999. Had Olympic been purchased at the
beginning of 1998, pro forma sales, net income, basic and diluted net income per
common share would have been approximately $248,000,000, $11,000,000, $1.12 and
$1.12, respectively, for the year ended December 31, 1998.
This acquisition was accounted for as a purchase transaction and its
operations are included in the financial statements from the date of
acquisition.
F-26
<PAGE> 112
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.
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 Amended and Restated 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>
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* Previously filed.
<PAGE> 113
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this amendment to 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: November 10, 1999
<PAGE> 1
Exhibit 2.1
SEPARATION AND DISTRIBUTION AGREEMENT
BY AND AMONG
ALLEGHENY TELEDYNE INCORPORATED,
TDY HOLDINGS, LLC,
TELEDYNE INDUSTRIES, INC.
AND
WATER PIK TECHNOLOGIES, INC.
DATED AS OF NOVEMBER __, 1999
<PAGE> 2
Table of Contents
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ARTICLE I DEFINITIONS............................................................................................2
ARTICLE II THE SEPARATION.......................................................................................12
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.....................................................16
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...........................................................................26
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..............................................................................29
5.08. Survival of Indemnities..........................................................................29
ARTICLE VI CERTAIN OTHER MATTERS................................................................................29
6.01. Insurance Matters................................................................................29
6.02. Certain Business Matters.........................................................................31
6.03. Late Payments....................................................................................31
</TABLE>
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6.04. Certain Governance Matters.......................................................................32
ARTICLE VIII EXCHANGE OF INFORMATION; CONFIDENTIALITY...........................................................32
7.01. Agreement for Exchange of Information; Archives..................................................32
7.02. Ownership of Information.........................................................................33
7.03. Compensation for Providing Information...........................................................33
7.04. Record Retention.................................................................................33
7.05. Other Agreements Providing For Exchange of Information...........................................33
7.06. Production of Witnesses; Records; Cooperation....................................................33
7.07. Confidentiality..................................................................................34
7.08. Protective Arrangements..........................................................................35
ARTICLE VIII FURTHER ASSURANCES.................................................................................35
8.01. Further Assurances...............................................................................35
ARTICLE X TERMINATION...........................................................................................36
9.01. Termination......................................................................................36
9.02. Effect of Termination............................................................................36
ARTICLE X MISCELLANEOUS.........................................................................................36
10.01. Counterparts; Entire Agreement; Corporate Power..................................................36
10.02. Governing Law; Consent to Jurisdiction...........................................................37
10.03. Assignability....................................................................................38
10.04. Third Party Beneficiaries........................................................................38
10.05. Notices..........................................................................................38
10.06. Severability.....................................................................................39
10.07. Force Majeure....................................................................................39
10.08. Headings.........................................................................................39
10.09. Survival of Covenants............................................................................39
10.10. Waivers of Default...............................................................................39
10.11. Specific Performance.............................................................................39
10.12. Amendments.......................................................................................40
10.13. Interpretation...................................................................................40
10.14. Disputes.........................................................................................40
10.15. Exclusivity of Tax Sharing Agreement.............................................................41
</TABLE>
<PAGE> 4
SEPARATION AND DISTRIBUTION AGREEMENT
THIS SEPARATION AND DISTRIBUTION AGREEMENT, dated as of
November __, 1999, is by and among Allegheny Teledyne Incorporated, a Delaware
corporation ("ATI"), TDY 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) Information, including that prepared by consultants and
other third parties;
(i) all domestic and foreign patents, copyrights, trade names,
domain 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 ("Intellectual
Property");
(j) all computer applications, programs and other software,
including operating software, network software, firmware, middleware,
internet web pages, 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,
including any claims of infringement of Intellectual Property against
third parties;
(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, the President of Water Pik or his successor.
1.20. DGCL means the Delaware General Corporation Law, as
amended.
4
<PAGE> 8
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.
1.31. FINANCING FACILITY means the credit facilities entered
into by Water Pik on or prior to the Distribution and any substitute or
successor credit facility.
5
<PAGE> 9
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,
analyses, techniques, designs, specifications, drawings, blueprints, diagrams,
models, operating and maintenance manuals, 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, whether prepared by or for any affected party.
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.
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.
6
<PAGE> 10
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 the Laars Inc. Transfer and Assumption Agreement.
1.48. LAARS INC. LIABILITIES means those Water Pik Liabilities
described in the Laars Inc. Transfer and Assumption Agreement.
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 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.
7
<PAGE> 11
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 the Distribution, executed and delivered by TII to Water Pik.
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.
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.
8
<PAGE> 12
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.
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.
9
<PAGE> 13
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 the date
hereof, 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 Water Pik Canada, Ltd., 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.
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.
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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;
(c) federal, state and local government and other contracts
and agreements that relate exclusively to the Water Pik Business;
(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 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)).
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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 INC. ASSETS means those Water Pik Assets
described in the Water Pik Inc. Transfer and Assumption Agreement.
1.93. WATER PIK INC. LIABILITIES means those Water Pik
Liabilities described in the Water Pik Inc. Transfer and Assumption Agreement.
1.94. WATER PIK INC. 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.
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, in each
case effective immediately prior to the transactions contemplated by Section
2.15 and on the Distribution Date, all of TII's and its applicable Subsidiaries'
respective right, title and interest in all Water Pik Assets.
(b) Effective immediately prior to the transactions
contemplated by Section 2.15 and on the Distribution Date, 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
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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 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).
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).
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(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, 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;
(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(d);
(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
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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, effective as of the Distribution Date, 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.
(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
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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), (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.
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
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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. Without limiting the scope of the
foregoing, no party makes any representations or warranties as to the
Intellectual Property sought to be transferred herein, including, without
limitation, whether such Intellectual Property or any portion thereof is valid,
enforceable, freely transferable, free and clear of liens (except permitted
liens) or sufficient and complete in order to conduct the Water Pik Business,
whether any party herein owns, has the exclusive right to use or has the ability
to practice such Intellectual Property or any portion thereof, or whether such
Intellectual Property or the operation of any aspect of the Water Pik Business
infringes or conflicts in any way with any Intellectual Property right of any
third party. 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 $60 million in
senior secured financing pursuant to the Financing Facility, (b) that ATI has,
prior to the date hereof, incurred $33.6 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
$33.6 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, 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,
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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 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
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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 twenty 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
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have 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 or any claim based on the
actual or alleged invalidity, unenforceability or transferability or ownership
of Intellectual Property to be transferred hereby or pursuant to any Ancillary
Agreement;
(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.
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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 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):
(a) the failure of ATI or any other member of the ATI Group to
pay, perform or otherwise promptly discharge any ATI Liabilities; and
(b) 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
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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.
(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
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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, 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
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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.
(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
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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 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.
ATI will not enter into any such settlement of a claim without the consent of
Water Pik (which will not be unreasonably withheld) if the effect thereof is to
render Water Pik liable for a monetary obligation with respect to such claim.
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.
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(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, 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: Charles J. Queenan, Jr.
James E. Rohr
Class II: Michael P. Hoopis
William G. Ouchi
Class III: Robert P. Bozzone (Chairman)
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 Charles J. Queenan, Jr.
and James E. Rohr (or, if either such candidate is unable or unwilling to serve,
such other candidate as Messrs. Bozzone and McClelland or the survivor of them
shall designate) to serve as a continuing Class I directors of Water Pik.
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(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 the 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.
(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.
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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 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
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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, 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.
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(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 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
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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 of 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.
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.
(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
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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 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
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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.
660 Newport Center Drive, Suite 470
Newport Beach, California 92660
Attn: President
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 November __, 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: /s/
Name:
Title:
TDY HOLDINGS, LLC
By:/s/
Name:
Title:
TELEDYNE INDUSTRIES, INC.
By:/s/
Name:
Title:
WATER PIK TECHNOLOGIES, INC.
By: /s/
Name:
Title:
JOINDER
The undersigned, Water Pik Inc. and Laars Inc. hereby join
this Separation and Distribution Agreement and agree, intending to be legally
bound, to be jointly and severally liable with Water Pik Technologies, Inc. for
obligations of Water Pik Technologies, Inc. under this Separation and
Distribution Agreement.
WATER PIK, INC.
By:
Name:
Title:
LAARS, 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 Fifty Five Million (55,000,000),
consisting of Fifty Million (50,000,000) shares of Common Stock, par value
one cent ($.01) per share (the "Common Stock"), and Five Million (5,000,000)
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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<PAGE> 3
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.
-3-
<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
-4-
<PAGE> 5
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
-5-
<PAGE> 6
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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<PAGE> 7
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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<PAGE> 8
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.
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<PAGE> 1
Exhibit 3.2
------------------------------
AMENDED AND RESTATED BYLAWS
OF
WATER PIK TECHNOLOGIES, INC.
------------------------------
<PAGE> 2
i
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<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...........................................................................4
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............................................................................6
Section 11. Initial Period.....................................................................6
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE IV OFFICERS..............................................................................................6
Section 1. General.............................................................................6
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.....................................................................9
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........................................................................10
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...................................................................11
ARTICLE VII GENERAL PROVISIONS..................................................................................11
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
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<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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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 ten (10) 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
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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
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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.
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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 Initial 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.
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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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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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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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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.
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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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Exhibit 4.2
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>
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PAGE
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<S> <C> <C>
Section 1. Definitions....................................................................................1
Section 2. Appointment of Rights Agent....................................................................4
Section 3. Issue of Right Certificates....................................................................4
Section 4. Form of Right Certificates.....................................................................6
Section 5. Countersignature and Registration..............................................................6
Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificates........................................7
Section 7. Exercise of Rights: Purchase Price; Expiration Date of Rights..................................7
Section 8. Cancellation and Destruction of Right Certificates.............................................8
Section 9. Availability of Preferred Shares...............................................................8
Section 10. Preferred Shares Record Date...................................................................9
Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights.............................9
Section 12. Certificate of Adjustments....................................................................15
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power..........................15
Section 14. Fractional Rights and Fractional Shares.......................................................16
Section 15. Rights of Action..............................................................................16
Section 16. Agreement of Right Holders....................................................................17
Section 17. Right Certificate Holder Not Deemed a Stockholder.............................................17
Section 18. Concerning the Rights Agent...................................................................17
Section 19. Merger or Consolidation or Change of Name of Rights Agent.....................................18
Section 20. Duties of Rights Agent........................................................................18
Section 21. Change of Rights Agent........................................................................20
Section 22. Issuance of New Right Certificates............................................................21
Section 23. Redemption....................................................................................21
Section 24. Exchange......................................................................................21
Section 25. Notice of Certain Events......................................................................22
Section 26. Notices.......................................................................................23
Section 27. Supplements and Amendments....................................................................24
Section 28. Successors....................................................................................24
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 29. Benefits of this Rights Agreement.............................................................24
Section 30. Severability..................................................................................24
Section 31. Governing Law.................................................................................24
Section 32. Counterparts..................................................................................24
Section 33. Descriptive Headings..........................................................................24
</TABLE>
ii
<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 distributed 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 ATI, the Company or any Subsidiary of the Company,
or any entity holding Common Shares for or pursuant to the terms of any such
plan. 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. Notwithstanding the foregoing
provisions of this Section 1(a), ATI shall not be deemed to be an Acquiring
Party by virtue of its ownership of capital stock of the Company prior to the
Spin-Off.
<PAGE> 5
(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;
(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 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.
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<PAGE> 6
(d) "Business Day" shall mean any day other than a Saturday, a
Sunday or a day on which banking institutions in the State of California 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).
(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, par value $.01 per share, 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> 7
(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 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
4
<PAGE> 8
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:
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.
5
<PAGE> 9
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 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.
6
<PAGE> 10
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 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 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
7
<PAGE> 11
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 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 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
8
<PAGE> 12
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 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 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
9
<PAGE> 13
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 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 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
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<PAGE> 14
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
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 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
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<PAGE> 15
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 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 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
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<PAGE> 16
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 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-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
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<PAGE> 17
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 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 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
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<PAGE> 18
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.
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 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
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<PAGE> 19
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 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).
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
16
<PAGE> 20
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
(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 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
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<PAGE> 21
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 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 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.
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<PAGE> 22
(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.
(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 with its duties,
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<PAGE> 23
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 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
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<PAGE> 24
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.
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 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.
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<PAGE> 25
(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 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.
(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
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<PAGE> 26
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 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.
660 Newport Center Drive
Suite 470
Newport Beach, California 92660
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 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.
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<PAGE> 27
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.
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.
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.
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.
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<PAGE> 28
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> 29
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, par value $.01 per share (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 500,000. 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.
<PAGE> 30
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 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 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
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<PAGE> 31
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:
(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
3
<PAGE> 32
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 $100 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; 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
4
<PAGE> 33
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 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.
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<PAGE> 34
Attest:
Secretary President and Chief Financial Officer
6
<PAGE> 35
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, par value $.01 per share (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
<PAGE> 36
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 $.01 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.
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:
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<PAGE> 37
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
Rights Agent
By_________________________________
Authorized Signature
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<PAGE> 38
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
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<PAGE> 39
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
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<PAGE> 40
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.
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<PAGE> 1
Exhibit 10.1
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.
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<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.
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<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 TDY Holdings, LLC, a Delaware limited liability
company wholly owned by ATI, and by TDY 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.
RESTRICTED REDEMPTION PERIOD means the two year period beginning on the
Effective Date and ending two years following the Public Offering.
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<PAGE> 5
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.
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
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<PAGE> 6
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.
(c) Notwithstanding Section 2.2(a), ATI will be responsible for paying
Business Taxes that arise directly from the Distribution and Other Transactions.
For this Section 2.2(c) to apply, ATI must consent in writing, which consent
shall not be unreasonably withheld, that the amount of such Business Taxes has
been correctly determined. In addition, ATI shall have the right to control any
audit, litigation or proceeding regarding such Business Taxes.
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 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
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<PAGE> 7
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.
(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.
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<PAGE> 8
(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 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,
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<PAGE> 9
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
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;
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(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
(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.
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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 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.
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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 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 quarterly accounting to ATI, due
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within 30 days after the end of each calendar quarter, 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.
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; provided that in the event that the Indemnifying Party
determines that the providing of a written paper could waive an attorney-client
privilege, the parties shall take all reasonable measures to permit the
compliance with such obligation in a manner that avoids such consequence.
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<PAGE> 14
(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)
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<PAGE> 15
injunctive relief or (ii) equitable or other 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 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
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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 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.
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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
Water Pik Technologies, Inc.
660 Newport Center Drive
Suite 470
Newport Beach, California 92660
Attn: Michael P. Hoopis, President and
Chief Executive Officer
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 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.
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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 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.
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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)
WATER PIK TECHNOLOGIES, INC.
By:
(Name)
(Title)
[OTHER COMPANIES]
By:
(Name)
(Title)
19
<PAGE> 1
Exhibit 10.3
EMPLOYEE BENEFITS AGREEMENT
BETWEEN
ALLEGHENY TELEDYNE INCORPORATED
AND
WATER PIK TECHNOLOGIES, INC.
DATED AS OF _______________, 1999
<PAGE> 2
INDEX
<TABLE>
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PAGE
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<S> <C>
ARTICLE I DEFINITIONS.............................................................................................1
ARTICLE II GENERAL PRINCIPLES.....................................................................................5
2.1 ASSUMPTION OF LIABILITIES............................................................................5
2.2 ESTABLISHMENT OF WATER PIK PLANS.....................................................................6
2.3 TERMS OF PARTICIPATION BY WATER PIK INDIVIDUALS IN WATER PIK PLANS...................................6
ARTICLE III DEFINED BENEFIT PLANS.................................................................................7
3.1 FREEZING OF PENSION PLAN BENEFITS....................................................................7
3.2 CREDITING SERVICE UNDER ATI'S PENSION PLAN...........................................................7
ARTICLE IV DEFINED CONTRIBUTION PLANS.............................................................................8
4.1 401(k) PLAN..........................................................................................8
ARTICLE V HEALTH AND WELFARE PLANS................................................................................9
5.1 ASSUMPTION OF HEALTH AND WELFARE PLAN LIABILITIES....................................................9
5.2 VENDOR CONTRACTS.....................................................................................9
5.3 PROCEDURES FOR AMENDMENTS TO PLANS, PLAN DESIGNS, ADMINISTRATIVE PRACTICES, AND VENDOR CONTRACTS....11
5.4 ATI SICKNESS AND ACCIDENT, LONG TERM DISABILITY AND PENSION DISABILITY BENEFITS.....................12
5.5 POST-RETIREMENT HEALTH AND LIFE INSURANCE BENEFITS..................................................13
5.6 COBRA AND DIRECT PAY................................................................................13
5.7 POST-DISTRIBUTION TRANSITIONAL ARRANGEMENTS.........................................................13
5.8 APPLICATION OF ARTICLE V TO WATER PIK ENTITIES......................................................14
ARTICLE VI EXECUTIVE BENEFITS AND NON-EMPLOYEE DIRECTOR BENEFITS.................................................15
6.1 ASSUMPTION OF OBLIGATIONS...........................................................................15
6.2 CONSENTS AND NOTIFICATIONS..........................................................................15
6.3 ATI 1999 BONUS PLAN.................................................................................15
6.4 ATI INCENTIVE PLANS.................................................................................15
6.5 ATI NONQUALIFIED DEFERRED COMPENSATION PROGRAMS.....................................................18
6.6 NON-EMPLOYEE DIRECTOR BENEFITS......................................................................18
6.7 CONFIDENTIALITY AND PROPRIETARY INFORMATION.........................................................19
ARTICLE VII GENERAL AND ADMINISTRATIVE...........................................................................19
7.1 INTERIM SERVICES AGREEMENT..........................................................................19
7.2 PAYMENT OF LIABILITIES, PLAN EXPENSES AND RELATED MATTERS...........................................19
7.3 SHARING OF PARTICIPANT INFORMATION..................................................................20
</TABLE>
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<TABLE>
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7.4 REPORTING AND DISCLOSURE AND COMMUNICATIONS TO PARTICIPANTS.........................................20
7.5 NON-TERMINATION OF EMPLOYMENT; NO THIRD-PARTY BENEFICIARIES.........................................20
7.6 BENEFICIARY DESIGNATIONS............................................................................21
7.7 REQUESTS FOR IRS RULINGS AND DOL OPINIONS...........................................................21
7.8 FIDUCIARY MATTERS...................................................................................21
7.9 COLLECTIVE BARGAINING...............................................................................21
7.10 CONSENT OF THIRD PARTIES...........................................................................21
7.11 INDEMNIFICATION OF ATI.............................................................................21
ARTICLE VIII MISCELLANEOUS.......................................................................................22
8.1 FOREIGN PLANS.......................................................................................22
8.2 EFFECT IF DISTRIBUTION DOES NOT OCCUR...............................................................22
8.3 RELATIONSHIP OF PARTIES.............................................................................22
8.4 AFFILIATES..........................................................................................22
8.5 COUNTERPARTS; ENTIRE AGREEMENT; CORPORATE POWER.....................................................22
8.6 GOVERNING LAW; CONSENT TO JURISDICTION..............................................................23
8.7 ASSIGNABILITY.......................................................................................23
8.8 THIRD PARTY BENEFICIARIES...........................................................................23
8.9 NOTICES.............................................................................................24
8.10 SEVERABILITY.......................................................................................24
8.11 HEADINGS...........................................................................................24
8.12 WAIVERS OF DEFAULT.................................................................................24
8.13 AMENDMENTS.........................................................................................24
8.14 INTERPRETATION.....................................................................................24
8.15 DISPUTES...........................................................................................25
</TABLE>
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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 ("Water Pik").
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 Water Pik 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 Water Pik, and their respective
Subsidiaries following the Distribution; and
WHEREAS, pursuant to the Separation and Distribution Agreement, ATI and
Water Pik 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 Water Pik or a Water
Pik Entity.
1.4 ATI Executive means an employee or former employee of ATI, an
ATI Entity, Water Pik or a Water Pik 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.
<PAGE> 5
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 closing price per share of ATI
Common Stock (regular way) on the NYSE on 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 "Water Pik," the term Award
(including the term Performance Award or SARP Award) means an award under the
Water Pik 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.
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
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<PAGE> 6
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 "Water Pik," Executive
Benefit Plans means the executive benefit plans and programs to be established
by Water Pik 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,
Water Pik, or a Water Pik 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 "Water
Pik," HCRA Plan means the Health Care Reimbursement Account Plan to be
established by Water Pik 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 "Water Pik," Health and Welfare
Plans means the health and welfare plans to be established by Water Pik 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 Water Pik
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 "Water Pik," Incentive Plan means the Incentive Plan to be
established by Water Pik pursuant to Section 2.2.
1.26 IRS means the Internal Revenue Service.
1.27 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.
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<PAGE> 7
1.28 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 "Water Pik," Non-Employee Director
means a member of Water Pik's Board of Directors who is not an employee of ATI,
an ATI Entity, Water Pik or a Water Pik Entity.
1.29 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 "Water Pik,"
Non-Employee Director Plans means the plans and programs to be established by
Water Pik pursuant to Section 2.2 that correspond to the ATI Non-Employee
Director Plans.
1.30 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
"Water Pik," Deferral Plan means the Executive Deferred Compensation Plan to be
established by Water Pik pursuant to Section 2.2.
1.31 Option, when immediately preceded by "ATI," means an option to
purchase ATI Common Stock and, when immediately preceded by "Water Pik," Option
means an option to purchase Water Pik Common Stock, in each case pursuant to an
Incentive Plan.
1.32 PBGC means the Pension Benefit Guaranty Corporation.
1.33 Performance Award means any Award granted pursuant to the
terms of the Performance Share Program.
1.34 Performance Share Program means the Allegheny Teledyne
Incorporated Performance Share Program adopted pursuant to Administrative Rules
under the ATI Incentive Plan.
1.35 Plan, when immediately preceded by "ATI" or "Water Pik," 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 Water Pik or a Water Pik Entity, as applicable.
1.36 Ratio means the amount obtained by dividing the ATI Stock
Value by the Water Pik Stock Value.
1.37 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.
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<PAGE> 8
1.38 SARP, when immediately preceded by "ATI," means the Allegheny
Teledyne Incorporated Stock Acquisition and Retention Program.
1.39 SARP Award means any Award granted pursuant to the terms of the
SARP.
1.40 Separation and Distribution Agreement is defined in the third
paragraph of the preamble of this Agreement.
1.41 Stock Purchase Plan, when immediately preceded by "ATI," means
the Allegheny Teledyne Incorporated Employee Stock Purchase Plan. When
immediately preceded by "Water Pik," Stock Purchase Plan means the employee
stock purchase plan to be established by Water Pik pursuant to Section 2.2.
1.42 Teledyne means Teledyne, Inc., a Delaware corporation, or its
successors and assigns.
1.43 Teledyne 401(k) Plan means the Teledyne, Inc. 401(k) Plan.
1.44 Water Pik Entity means any Person that is, at the relevant
time, a Subsidiary of Water Pik or is otherwise controlled, directly or
indirectly, by Water Pik.
1.45 Water Pik 401(k) Plan means the 401(k) plan established by
Water Pik effective no later than April 1, 2000 pursuant to Section 2.2.
1.46 Water Pik Individual means any individual who, Immediately
After the Distribution Date is an active hourly or salaried employee of Water
Pik or a Water Pik Entity.
1.47 Water Pik Stock Value means the opening price per share of
Water Pik Common Stock on the day following the Distribution Date.
ARTICLE II
GENERAL PRINCIPLES
2.1 ASSUMPTION OF LIABILITIES. Except as otherwise expressly
provided in Section 3.1 or Article VI, Water Pik 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
Water Pik 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 Water Pik Plans); (ii) all other Benefit Liabilities to or relating to
Water Pik Individuals and other employees of Water Pik or a Water Pik Entity,
and their dependents and beneficiaries, to the extent relating to, arising out
of or resulting from future, present or former employment with Water Pik or a
Water Pik Entity (including Benefit Liabilities under ATI Plans and Water Pik
Plans); (iii) all Benefit Liabilities relating to, arising out of or resulting
from any other actual or alleged employment relationship with Water Pik or a
Water Pik Entity; (iv) all Benefit Liabilities relating to, arising out of or
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<PAGE> 9
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
Water Pik, a Water Pik Entity, or a Water Pik Plan pursuant to this Agreement.
Notwithstanding the generality of the foregoing, Water Pik 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 WATER PIK PLANS. Effective prior to or within
a reasonable time after the Distribution Date, Water Pik 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 Water Pik Stock Purchase Plan, the
Water Pik Health and Welfare Plans, and the Water Pik Executive Benefit Plans
for the benefit of the Water Pik Individuals and other current and future
employees of Water Pik and the Water Pik Entities; provided, however, that Water
Pik 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 Section 4.1
regarding the Water Pik 401(k) Plan, or as otherwise may be set forth in
Schedule 2.2(b), the foregoing Water Pik 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, Water Pik shall adopt, or cause to be adopted, the
Water Pik Non-Employee Director Plans, for the benefit of Water Pik Non-Employee
Directors. The Water Pik 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, Water
Pik shall adopt the Water Pik 401(k) Plan and its related trust, which Water Pik
401(k) Plan shall provide for employer contributions, independent of employee
contributions and expressed as a rate of participant compensation, determined
appropriate by Water Pik in its sole discretion in light of Water Pik's choice
not to sponsor a defined benefit plan.
2.3 TERMS OF PARTICIPATION BY WATER PIK INDIVIDUALS IN WATER PIK
PLANS. The Water Pik Plans shall be, with respect to Water Pik 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 Water Pik
shall agree on methods and procedures, including amending the respective Plan
documents and/or requesting approvals or consents of Water Pik Individuals where
the parties deem appropriate, to prevent Water Pik Individuals from receiving
duplicative benefits from the ATI Plans and the Water Pik Plans. With respect to
Water Pik Individuals, each Water Pik 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 Water Pik Plan to the
same extent as if such items occurred under such Water Pik 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 Water Pik
Plans (including Foreign Plans) are based upon the understanding of the parties
that each such Water Pik Plan will assume all Benefit Liabilities of the
corresponding ATI
6
<PAGE> 10
Plan to or relating to Water Pik Individuals, as provided for herein. If any
such Benefit Liabilities are not effectively assumed by the appropriate Water
Pik Plan, then the amount of assets transferred to the trust relating to such
Water Pik 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 Water Pik 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.
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
Water Pik 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. Water Pik 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 Water Pik during the period
commencing on the Distribution Date and ending April 1, 2000.
(b) BENEFIT ACCRUAL. Water Pik 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 Water Pik 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 WATER PIK
INDIVIDUALS. For purposes of the ATI Pension Plan, the date which is the earlier
of the applicable of (i) a Water Pik's Individual's actual separation from
service with Water Pik or (ii) April 1, 2000 shall be for each Water Pik
Individual a separation from service with the employer and Water Pik 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 Water Pik Individuals to elect to
receive a lump sum form of distribution under the ATI Pension Plan.
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<PAGE> 11
ARTICLE IV
DEFINED CONTRIBUTION PLANS
4.1 401(k) PLAN.
(a) ADOPTION BY WATER PIK 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 Water Pik may elect to be a contributing sponsor and to provide
participation to Water Pik 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 Water Pik of the Water Pik 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) Water Pik Individuals shall not be permitted to direct
investments after the Distribution Date in shares of common stock of ATI
("ATI Common Stock") or in the common stock of Water Pik or any other
corporation spun off by ATI on the Distribution Date and (B) that each Water Pik
Individual shall have the right to direct the administrator of the Teledyne
401(k) Plan to liquidate the interests of Water Pik Individuals in shares of
ATI Common Stock, Water Pik 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.
(b) ESTABLISHMENT OF WATER PIK 401(k) PLAN AND TRUST. The Water Pik
401(k) Plan, established by Water Pik 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, including
provisions with respect to the ATI Common Stock and the common stock of Water
Pik and any other corporation spun off by ATI on the Distribution Date, and
shall further provide that if ATI Common Stock and/or common stock of any
previously related corporation other than Water Pik is held in accounts of Water
Pik Individuals in the Teledyne 401(k) Plan as of December 31, 2002, the
interests of Water Pik Individuals shall be liquidated by the Plan administrator
and the proceeds reinvested in Water Pik Common Stock, and (iii) shall provide
coverage from and after the earlier of (i) its adoption by Water Pik or (ii)
April 1, 2000 with respect to Water Pik 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 Water Pik 401(k) Plan,
established by Water Pik pursuant to Section 2.2, shall be exempt from taxation
under Code Section 501(a).
(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 Water Pik of the Water
Pik 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 Water
Pik Individuals. Water Pik 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 Water Pik
Individuals. Water Pik Individuals shall continue to accrue service
credit under the Teledyne 401(k) Plan for
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<PAGE> 12
vesting and benefit eligibility purposes until the earlier of (i) the
date of adoption by Water Pik of the Water Pik 401(k) Plan or (ii)
April 1, 2000. Effective as of the earlier of (i) the adoption by Water
Pik of the Water Pik 401(k) Plan or (ii) April 1, 2000: (A) the Water
Pik 401(k) Plan shall assume and be solely responsible for all Benefit
Liabilities to or relating to Water Pik Individuals under the Water Pik
401(k) Plan, and (B) ATI shall cause an amount equal to the aggregate
account balances of the Water Pik 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 Water Pik of
the Water Pik 401(k) Plan or (ii) April 1, 2000 to be transferred to
the Water Pik 401(k) Plan, and its related trust, and Water Pik 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 Water Pik 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 Water Pik Individuals under the Teledyne 401(k) Plan outstanding as
of the Distribution Date.
(ii) If any benefit with respect to a Water Pik 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 Water
Pik 401(k) Plan.
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 Water Pik 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 Water Pik Health and
Welfare Plans.
(b) Notwithstanding Section 5.1(a), all treatments which have been
pre-certified for or are being provided to a Water Pik 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 Water Pik
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.
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<PAGE> 13
(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
Water Pik 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 Water Pik 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 Water Pik of, the manner in which Water Pik's participation in
the terms and conditions of ASO Contracts as set forth above shall be
effectuated. The permissible ways in which Water Pik's participation
may be effectuated include automatically making Water Pik a party to
the ASO Contracts or obligating the third party to enter into a
separate ASO Contract with Water Pik 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 Water Pik 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. Water Pik hereby authorizes ATI to act on its behalf to extend
to Water Pik the terms and conditions of the ASO Contracts. Water Pik
shall fully cooperate with ATI in such efforts, and Water Pik shall not
perform any act, including discussing any alternative arrangements with
any third party, that would prejudice ATI's efforts.
(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 Water Pik 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 Water Pik to participate in the terms and
conditions thereof effective Immediately After the Distribution Date on
the same basis as ATI.
(iii) Water Pik'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 Water Pik. Such terms and conditions shall
include the financial and termination provisions, performance standards
and target claims. Water Pik hereby unconditionally and irrevocably
authorizes
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ATI to act on its behalf to extend to Water Pik the terms and
conditions of such Group Insurance Policies. Water Pik shall fully
cooperate with ATI in such efforts, and Water Pik 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 Water Pik 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 Water Pik 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 Water Pik of, the manner in which Water Pik's participation in
the terms and conditions of all HMO Agreements as set forth above shall
be effectuated. The permissible ways in which Water Pik's participation
may be effectuated include automatically making Water Pik a party to
the HMO Agreements or obligating the HMOs to enter into letter
agreements with Water Pik which are identical to the HMO Agreements (or
such other arrangements as to which ATI and Water Pik shall mutually
agree). Such terms and conditions shall include the financial and
termination provisions of the HMO Agreements. Water Pik hereby
authorizes ATI to act on its behalf to extend to Water Pik the terms
and conditions of the HMO Agreements. Water Pik shall fully cooperate
with ATI in such efforts, and Water Pik 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, Water Pik shall have the sole discretion to determine which
HMOs to offer to the participants in the Water Pik Health and Welfare
Plans for 2001 and subsequent years, and all HMO Agreements in which
Water Pik participates pursuant to this Section 5.2(c) shall provide
Water Pik 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, Water Pik shall not amend any Water
Pik Health and Welfare Plan or Plans, and Water Pik 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 Water Pik Health and Welfare Plan pursuant to Section 7.1, ATI shall have
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the right to amend any applicable Water Pik Health and Welfare Plan; provided
that, in ATI's reasonable good faith opinion, such amendment will have no
material adverse impact on the Water Pik Health and Welfare Plan or its
participants or, to the extent a material adverse impact would occur, such
impact would affect both the applicable Water Pik 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 Water Pik in the same proportion
that Water Pik 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, Water Pik 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
Water Pik and a third-party administrator, (2) a Group Insurance Policy
issued to ATI or Water Pik, or (3) an HMO Agreement with ATI or Water
Pik, in each case, the material terms and conditions of which contracts
and policies are extended to Water Pik or to which Water Pik becomes a
party pursuant to Section 5.2; (B) the design of either an ATI Health
and Welfare Plan or a Water Pik Health and Welfare Plan; or (C) the
financing, operation, administration or delivery of benefits under
either an ATI Health and Welfare Plan or a Water Pik Health and Welfare
Plan.
(ii) During any period in which ATI is providing Interim
Services with respect to any Water Pik Health and Welfare Plan pursuant
to Section 7.1, ATI shall be permitted to make any Change to such Water
Pik Plan; provided that, in ATI's reasonable good faith opinion, such
Change would affect both the applicable Water Pik 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 proportionally by
ATI and Water Pik in the same proportion that Water Pik 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, Water Pik 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 Water Pik, effective Immediately
After the Distribution Date, responsibility for administering all claims
incurred by Water Pik Individuals and other employees and former employees of
Water Pik and the Water Pik Entities before the Close of the Distribution Date
that are administered by ATI as of the Close of the Distribution Date. Water Pik
shall administer such claims in the same manner, and using the same methods and
procedures, as ATI used in administering such claims. Water Pik shall have sole
discretionary authority to make any necessary determinations with respect to
such claims, including entering into settlements with respect to such claims.
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5.5 POST-RETIREMENT HEALTH AND LIFE INSURANCE BENEFITS. As soon as
practicable after the Distribution Date, Water Pik shall provide ATI with a list
of all Water Pik Individuals who are, to the best knowledge of Water Pik,
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, Water Pik shall solely be responsible for administering
compliance with the health care continuation coverage requirements of COBRA and
the Water Pik Health and Welfare plans, and, with respect to Water Pik
Individuals, the ATI Health and Welfare Plans.
5.7 POST-DISTRIBUTION TRANSITIONAL ARRANGEMENTS.
(a) CONTINUANCE OF ELECTIONS, CO-PAYMENTS AND MAXIMUM BENEFITS.
(i) Water Pik shall cause the Water Pik Health and Welfare
Plans to recognize and maintain all coverage and contribution elections
made by Water Pik Individuals under the ATI Health and Welfare Plans
and apply such elections under the Water Pik 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 Water Pik 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 Water Pik Health and Welfare
Plans.
(ii) Water Pik shall cause the Water Pik Health and Welfare
Plans to recognize and give credit for (A) all amounts applied to
deductibles, out-of-pocket maximums, and other applicable benefit
coverage limits with respect to which such expenses have been incurred
by Water Pik 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 Water Pik Individuals under the ATI Health and Welfare
Plans for purposes of determining when such persons have reached their
lifetime maximum benefits under the Water Pik Health and Welfare Plans.
(iii) Water Pik 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) Water Pik shall (A) provide coverage to Water Pik
Individuals under the Water Pik Group Life Program without the need to
undergo a physical examination or otherwise provide evidence of
insurability, and (B) recognize and maintain all irrevocable
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assignments and accelerated benefit option elections made by Water Pik
Individuals under the ATI Group Life Program.
(b) OTHER POST-DISTRIBUTION TRANSITIONAL RULES.
(i) ATI HCRA PLAN. To the extent any Water Pik 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 Water Pik HCRA Plan
the account balances of Water Pik 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 Water Pik Individual contributed to the ATI CECRA Plan
during the calendar year that includes the Distribution Date, ATI shall
transfer the account balances of Water Pik Individuals for such
calendar year in the ATI CECRA Plan to the Water Pik 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, Water Pik 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 Water Pik 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, Water Pik shall obtain ATI's prior written approval
before amending any Water Pik 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
Water Pik after the date hereof and before the Close of the
Distribution Date unless Water Pik and ATI so agree.
(iv) HEALTH AND WELFARE PLANS SUBROGATION RECOVERY. After the
Close of the Distribution Date, ATI shall pay to Water Pik any amounts
ATI recovers from time to time through subrogation or otherwise for
claims incurred by or reimbursed to any Water Pik Individual. If Water
Pik 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 Water Pik Individuals), Water Pik shall pay such amounts to ATI.
5.8 APPLICATION OF ARTICLE V TO WATER PIK ENTITIES. Any reference
in this Article V to "Water Pik" shall include a reference to a Water Pik Entity
when and to the extent ATI or Water Pik has caused the Water Pik Entity to (a)
become a party to a vendor contract, group insurance contract, or HMO letter
agreement associated with a Water Pik Health
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and Welfare Plan, (b) become a self-insured entity for the purposes of one or
more Water Pik 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 Water Pik 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 Water Pik 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 Water Pik
Entity. In all such instances in which a reference in this Article V to "Water
Pik" includes a reference to a Water Pik Entity, Water Pik shall be responsible
to ATI for ensuring that the Water Pik Entity complies with the applicable terms
of this Agreement and the Water Pik Individuals allocated to such Water Pik
Entity shall have the same rights and entitlements to benefits under the
applicable Water Pik Health and Welfare Plans that the Water Pik Individual
would have had if he or she had instead been allocated to Water Pik. Further,
each such Water Pik 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 Water Pik 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, Water Pik and the Water Pik Entities shall assume and be
solely responsible for all Benefit Liabilities to or relating to Water Pik
Individuals under all ATI Executive Benefit Plans.
6.2 CONSENTS AND NOTIFICATIONS. ATI and Water Pik shall use their
Reasonable Efforts to obtain, or cause to be obtained, to the extent necessary,
the written consent of each Water Pik 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 Water Pik and the Water Pik Entities, of sole
responsibility for, and the 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 Water Pik and the
Water Pik Entities with respect to such Benefit Liabilities.
6.3 ATI 1999 BONUS PLAN. Subject to the provisions of Section
6.4(a)(ii)(B), Water Pik shall be responsible for determining, with respect to
all Awards that would otherwise be payable under any bonus Plan or arrangement
to Water Pik Individuals for the 1999 performance year, (a) the extent to which
established performance criteria (as interpreted by Water Pik, in its sole
discretion, after taking into account the effects of the Distribution) have been
met and (b) the payment level for each Water Pik Individual.
6.4 ATI INCENTIVE PLANS. ATI and Water Pik shall use their
Reasonable Efforts to take all actions necessary or appropriate so that each
outstanding Award granted under any
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ATI Incentive Plan held by any Water Pik 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 Water Pik Incentive Plan.
(a) WATER PIK INDIVIDUALS WHO ARE ACTIVE EMPLOYEES OF WATER PIK.
(i) STOCK OPTIONS. Water Pik shall cause each ATI Option that
is outstanding as of the Close of the Distribution Date and is held by
a Water Pik Individual to be converted, effective Immediately After the
Distribution Date, to a Water Pik Option (a "Converted Option"). Such
Converted Option shall provide for the option to purchase a number of
shares of Water Pik Common Stock equal to the number of shares of ATI
Common Stock subject to such ATI 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 ATI 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 ATI Option as of the Close of the
Distribution Date, except that references to ATI and its Affiliates
shall be amended to refer to Water Pik and its Affiliates.
(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 Water Pik
Individual for the period from January 1, 1998 through the
Distribution Date. Effective Immediately After the
Distribution Date, Water Pik and the Water Pik Entities shall
assume and be solely responsible for all Benefit Liabilities
to or relating to Water Pik Individuals with respect to the
administration and distribution of Performance Awards to such
Water Pik 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 Water Pik 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 Water Pik and
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the Water Pik Entities to the applicable Water Pik Individual
as provided under the terms of the Performance Share Program;
provided, however, that any ATI Common Stock allocated or
otherwise awarded to a Water Pik 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 Water Pik 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 Water Pik 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 Water Pik Common Stock received by Water Pik 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 Water Pik 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, Water Pik shall
assume all Benefit Liabilities to or relating to Water Pik Individuals
under the ATI SARP relating to the Restricted Stock (as that term is
defined in the ATI SARP), but ATI shall retain all promissory notes
payable by participants into the ATI SARP, including Water Pik
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 Water Pik Common Stock
and Teledyne Technologies Incorporated Common Stock issued in respect
of such shares of ATI Common Stock held as collateral. Effective
Immediately After the Distribution Date, pursuant to the terms of the
ATI SARP, all Water Pik Individuals holding awards of Restricted Stock
under the ATI SARP as of the Distribution Date shall receive, without
any further action on their part and in substitution for all shares of
Restricted Stock held immediately prior to the Distribution Date by
such Water Pik Individuals under the ATI SARP, a number of shares of
Water Pik Common Stock determined by multiplying the number of shares
of ATI Common Stock that are held immediately prior to the Distribution
Date as Restricted Stock under the ATI SARP 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 Water Pik Common Stock shall be subject to the same
restrictions as the shares of ATI Common Stock prior to the conversion.
(b) WATER PIK INDIVIDUALS WHO ARE NOT ACTIVE EMPLOYEES OF WATER
PIK. Each outstanding Award that is held by an individual who, as of the Close
of the Distribution Date, would otherwise be a Water Pik Individual but is not
an active employee of or on leave of absence from Water Pik or a Water Pik
Entity shall remain outstanding Immediately
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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. Subject to
the provisions of Section 6.1, effective Immediately After the Distribution
Date, Water Pik shall assume all Benefit Liabilities to or relating to Water Pik
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 Water Pik 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 Water Pik of Corporate-Owned Life
Insurance Policies on the lives of such Water Pik 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 Water Pik
Individuals under the Allegheny Teledyne Incorporated Executive Deferred
Compensation Plan.
(b) CORPORATE-OWNED LIFE INSURANCE. ATI and Water Pik 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 Water
Pik Individuals to Water Pik, effective Immediately After the Distribution Date.
If a Corporate-Owned Life Insurance Policy is so assigned to Water Pik, Water
Pik 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 Water Pik shall continue, liquidate and/or administer such Corporate-Owned
Life Insurance Policies on terms and conditions agreed to by ATI and
Water Pik. ATI and Water Pik 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 Water Pik and to determine when and whether such
individuals are deceased.
6.6 NON-EMPLOYEE DIRECTOR BENEFITS. The parties intend that all
Water Pik 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. Water Pik assumes no Benefit
Liabilities under the ATI Non-Employee Director Plans.
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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 Water Pik 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 Water Pik 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 Water Pik 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 Water Pik Plan) shall be made by ATI in its
sole and absolute discretion and such determination shall be final and binding
on all parties.
(b) PAYMENT OF LIABILITIES; DETERMINATION OF EMPLOYEE STATUS.
Water Pik shall pay directly, or reimburse ATI promptly for, all Benefit
Liabilities assumed by it pursuant to this Agreement, including all compensation
payable to Water Pik Individuals for services rendered while in the employ of
ATI or an ATI Entity before becoming a Water Pik 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 Water Pik Individuals is not yet determined, except
as otherwise specified herein or in another Ancillary Agreement with respect to
particular Benefit Liabilities, Water Pik shall make such payments or
reimbursements based upon ATI's reasonable estimates of the amounts thereof, and
when such status is determined, Water Pik shall make additional reimbursements
or payments, or ATI shall reimburse Water Pik, 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
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described in this Agreement (such as "Water Pik 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 Water Pik shall
share, ATI shall cause each applicable ATI Entity to share, and Water Pik shall
cause each applicable Water Pik 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 Water Pik Plans. ATI and Water Pik 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 Water Pik.
7.4 REPORTING AND DISCLOSURE AND COMMUNICATIONS TO PARTICIPANTS.
Water Pik shall take, and shall cause each other applicable Water Pik Entity to
take, all actions necessary or appropriate to facilitate the distribution of all
applicable ATI Plan-related communications and materials to Water Pik
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 Water
Pik Plans. Water Pik shall pay ATI the cost relating to the copies of all such
documents provided to Water Pik, except to the extent such costs are charged
pursuant to Section 7.1 or pursuant to an Ancillary Agreement. Water Pik shall
assist, and Water Pik shall cause each other applicable Water Pik 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 Water Pik Individual or
other future, present or former employee of ATI, an ATI Entity, Water Pik, or a
Water Pik Entity under any ATI Plan or Water Pik 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 Water Pik Plans, or any individual agreements; and (ii) except
as expressly provided in this Agreement, nothing in this Agreement shall
preclude Water Pik, at any time after the Close of the Distribution Date, from
amending, merging, modifying, terminating, eliminating, reducing, or otherwise
altering in any respect any Water Pik Plan, any benefit under any Plan or any
trust, insurance policy or funding vehicle related to any Water Pik Plan unless
such change could or will increase the obligations of ATI or any ATI Entity
under any Plan or agreement.
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7.6 BENEFICIARY DESIGNATIONS. All beneficiary designations made by
Water Pik Individuals for ATI Plans shall be transferred to and be in full force
and effect under the corresponding Water Pik Plans until such beneficiary
designations are replaced or revoked by the Water Pik Individual who made the
beneficiary designation.
7.7 REQUESTS FOR IRS RULINGS AND DOL OPINIONS. Water Pik 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 Water Pik 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 Water Pik Plans relating to the transactions
contemplated by this Agreement.
7.8 FIDUCIARY MATTERS. ATI and Water Pik 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 Water Pik 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 Water Pik shall use their Reasonable Efforts
to implement the applicable provisions of this Agreement to the full extent
practicable. If any provision of this Agreement cannot be implemented due to the
failure of such third party to consent, ATI and Water Pik shall negotiate in
good faith to implement the provision in a mutually satisfactory manner.
7.11 INDEMNIFICATION OF ATI. Water Pik shall indemnify, defend and
hold harmless ATI, each ATI Entity 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 "ATI Indemnitees") from and against
(i) any and all Benefit Liabilities of the ATI Indemnitees to the extent any
such Benefit Liabilities are assumed by Water Pik or a Water Pik Entity under
this Agreement and (ii) any and all changes or modifications to any rights,
privileges or benefits of or relating to any Water Pik Individual as provided in
or otherwise contemplated by this Agreement.
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ARTICLE VIII
MISCELLANEOUS
8.1 FOREIGN PLANS. To the extent that Water Pik 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 Water Pik 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 Water Pik 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 Water Pik 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
Water Pik Entity, respectively.
8.5 COUNTERPARTS; ENTIRE AGREEMENT; CORPORATE POWER.
(a) This 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.
(b) This Agreement, 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 ATI Entity, and Water
Pik represents on behalf of itself and each Water Pik Entity, 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 to consummate
the transactions contemplated hereby; and
(ii) this Agreement has been duly executed and delivered by it
and constitutes a valid and binding agreement of it enforceable in accordance
with the terms thereof.
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(d) Each party hereto acknowledges that it and each other party hereto
may be executing this Agreement 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 this Agreement to be manually
executed (any such execution to be as of the date of the initial date thereof).
8.6 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 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 transaction contemplated hereby (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 8.9 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 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.
8.7 ASSIGNABILITY. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that no party hereto may assign its respective
rights or delegate its respective obligations under this Agreement without the
express prior written consent of the other party hereto.
8.8 THIRD PARTY BENEFICIARIES. Except as otherwise expressly
provided herein, (a) the provisions of this 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, and (c) this Agreement shall not 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. No party shall be
required to deliver any notice under this Agreement to any other party with
respect to any matter in which such other party has no right, remedy or claim.
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8.9 NOTICES. All notices or other communications under this
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, to: Allegheny Teledyne Incorporated
1000 Six PPG Place
Pittsburgh, Pennsylvania 15222-5479
Attn: Senior Vice President, General Counsel
& Secretary
If to Water Pik, to: Water Pik Technologies, Inc.
600 Newport Center Drive, Suite 470
Newport Beach, California 92660
Attn: President
Any party may, by notice to the other party, change the address to which such
notices are to be given.
8.10 SEVERABILITY. If any provision of this 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.
8.11 HEADINGS. The article, section and paragraph headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
8.12 WAIVERS OF DEFAULT. Waiver by any party of any default by the
other party of any provision of this 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.
8.13 AMENDMENTS. No provisions of this 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.
8.14 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 as a whole (including all of the Schedules,
Exhibits and Appendices hereto) and not to any particular provision of this
Agreement. Article, Section, Exhibit, Schedule and Appendix references are to
the Articles, Sections,
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Exhibits, Schedules and Appendices to this Agreement unless otherwise specified.
The word "including" and words of similar import when used in this 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, all references to
"the date hereof," "the date of this Agreement," "hereby" and "hereupon" and
words of similar input shall all be references to __________, 1999, regardless
of any amendment or restatement hereof.
8.15 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 8.17; 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 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
(as defined in the Separation and Distribution Agreement). 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.
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: _______________________________
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WATER PIK TECHNOLOGIES, INC.
By: __________________________________
Title: _______________________________
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