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FORM 10-K
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Securities and Exchange Commission Washington, D.C.
20549
FORM 10-K
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number 1-15297
WATER PIK TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 25-1843384
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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23 CORPORATE PLAZA, SUITE 246
NEWPORT BEACH, CA 92660
(Address of principal executive offices, including zip
code)
Registrant's telephone number, including area code:
(949) 719-3700
Securities registered pursuant to Section 12(b) of the
Act:
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Common Stock, $ .01 par value New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
(Title of each class) (Name of each exchange on which registered)
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Securities registered pursuant to Section 12(g) of the
Act: None
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2)
has been subject to such filing requirements for the
past 90 days. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best
of registrant's knowledge, in the definitive proxy
statement incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. X
The aggregate market value of the voting stock held by
non-affiliates of the registrant as of March 21, 2000
was approximately $71,476,000, based on the last
reported sales price of $7.25 as reported by the New
York Stock Exchange. Shares of common stock known by the
registrant to be beneficially owned by executive
officers or directors of the registrant are not included
in the computation; however, shares of common stock
reported to be beneficially owned by holders of 5
percent or more of the common stock are included in the
computation. The registrant has made no determination
whether any such persons are "affiliates" within the
meaning of Rule 12b-2 under the Securities Exchange Act
of 1934. The number of shares of Common Stock
outstanding on March 21, 2000 was 9,858,699 shares.
Documents incorporated by reference:
Selected portions of the Proxy Statement for the 2000
Annual Meeting of Stockholders -- Part III of this
Report.
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PART I
ITEM 1 BUSINESS
OVERVIEW
Water Pik Technologies, Inc. (the "Company" or "Water Pik Technologies") was
incorporated in Delaware on August 23, 1999. The Company has its principal
executive offices at 23 Corporate Plaza, Suite 246, Newport Beach, California
92660 (telephone number 949-719-3700). Water Pik Technologies was formed as a
result of the spin-off of the consumer products segment of Allegheny Teledyne
Incorporated, now known as Allegheny Technologies Incorporated ("ATI"), which
included the operations of the Teledyne Water Pik division and the Teledyne
Laars division, both with operations in the U.S. and Canada. On November 29,
1999, Water Pik Technologies became an independent public company when ATI
distributed all of the common stock of Water Pik Technologies to the
stockholders of ATI in a tax-free transaction (the "spin-off").
As used herein, references to the "Company" together with its consolidated
subsidiaries include the historical operation results and activities of the
business and operations transferred to the Company in the spin-off unless the
context otherwise indicates.
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 products
and heating systems. Water Pik Technologies operates in two business segments --
Personal Health Care and Pool Products and Heating Systems.
The Company competes in several distinct product categories, including:
- - Water Pik(R) showerheads
- - 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, pumps, filters
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
The Company has manufactured personal health care products for over 35 years
under the Water Pik(R) brand name. The Company's swimming pool and spa heaters,
controls, valves and water features, many of which have been manufactured for
over 40 years, are sold primarily under the Laars(R) and Jandy(R) brand names.
The Company's residential and commercial water-heating systems, which have been
manufactured for over 50 years, are sold primarily under the Laars(R) brand
name.
The extensive distribution network allows the Company to distribute its products
across various distribution channels to reach a greater number of consumers and
distributors. The Company manufactures and distributes products principally
through seven facilities located in the United States and Canada. Fiscal year
sales in 1999 were $254.7 million, in 1998 were $235.8 million and in 1997 were
$241.2 million.
INDUSTRY OVERVIEW
The Company estimates that the total market for personal health care products,
pool and spa equipment and water-heating systems in those product categories in
which the Company participated 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.
The Company believes that it can take advantage of favorable current market and
industry trends for the Personal Health Care segment and the Pool Products and
Heating Systems segment, 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.
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The Company's products complement these existing trends and provide it with the
opportunity to expand its product offerings to satisfy consumers' current and
emerging preferences. The Company believes that these trends will continue, and
that Water Pik Technologies, with its strong brand name recognition and
extensive product offerings, is well positioned to be a market leader in this
evolving marketplace.
COMPETITIVE STRENGTHS
The Company is a strong competitor for the following reasons:
- - Strong Brand Names. Over many years, the Company has developed an extensive
portfolio of company owned brand names. These strong brand names include the
Water Pik(R) personal health care products, the Laars(R) pool and spa heaters
and the Jandy(R) electronic controls, valves and water features. As consumers
turn more and more to brand name merchandise to validate their product purchase
decisions, the Company believes that its strong brand names will provide the
platform for future growth and will enable the Company to expand its product
offerings into new and existing product categories and channels of distribution.
- - Reputation for Innovative Products. The Company has a strong history of
innovative product development with both its Water Pik(R) personal health care
products and its Laars(R) and Jandy(R) pool and water-heating products. The
Company has developed and introduced many products which are considered the
first of their kind and which resulted in the formation of new markets, such as:
the Water Pik(R) Oral Irrigator; The Original Shower Massage(R) showerhead; 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, the
Company continues to develop and introduce new and innovative products such as
The Flexible Shower Massage(TM) and the Misting Massage(TM) showerheads, the
Water Pik(TM) Flosser, the Laars(R) (Hi-E) high efficiency swimming pool heater
and the Endurance(TM) modulating residential boiler. The Company has received
numerous awards for its product design, innovation and quality.
- - Extensive Distribution Network. The Company distributes its products through
more than 45,000 retail and wholesale outlets in North America which allows it
to reach a greater number of consumers and distributors than many of its
competitors. The personal health care products are distributed directly to
consumers through mass merchandisers, home centers, drug stores and co-operative
hardware chains. The pool and water-heating products are distributed 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. The Company believes
that this distribution network will allow it to quickly realize desired sales
volumes for new products as they are brought to market.
- - Proven Manufacturing Capabilities. The Company has proven skills in
transitioning the product development process into high quality, lower cost
manufacturing. The Company is skilled in production manufacturing processes,
including design for assembly; plastic injection molding; metal processing;
KANBAN production; final assembly and testing and logistics. The Company also
has begun to use lean production techniques in its manufacturing processes. The
Moorpark, California and Rochester, New Hampshire facilities are ISO 9002
certified and the Fort Collins and Loveland, Colorado facilities are ISO 9001
certified. Management believes that ISO certifications are recognized indicators
of quality manufacturing capabilities. Many customers require evidence of ISO
certifications prior to placing an order.
- - Experienced Management Team. The Company has an experienced management team
with expertise in a variety of disciplines. The President and Chief Executive
Officer has over 25 years experience in the manufacturing, distribution and
marketing of a wide variety of consumer products. Collectively, the senior
management team has a broad range of experience in marketing and merchandising,
financial management and acquisitions, and multi-national production and
distribution.
BUSINESS STRATEGY
The Company's vision is to create a growth oriented consumer products company
which capitalizes on its well-recognized brand names and develops innovative
products that provide outstanding value to its customers:
- - Accelerate Introduction of Innovative New Products. The Company intends to
accelerate the development and introduction of new and innovative products to
achieve its growth objectives. Its success in product development will continue
to be driven by consumer needs, market trends and the vulnerability of its
competitors. The Company intends to sharpen its 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. The Company intends to
increase the flexibility of our design and manufacturing processes to enhance
its ability to be responsive to consumer preferences and to enable it to
introduce new products and product extensions with shorter development cycles
than its competitors.
- - Broaden Product Offerings. The Company also intends to increase served
markets by offering related new products and product extensions. The Company
markets a variety of personal health care, pool and heating system products
which enables
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it to offer its customers and its distributors a single source for a wide range
of products. The Company has continually increased the number of its product
offerings and intends to continue to regularly introduce new products. The wide
array of products allows it to provide category management for its retail
customers and one-stop shopping capability for its wholesale and contractor
customers.
- - Leverage Our Strong Brand Name Recognition. The Company believes that its
strong Water Pik(R), Laars(R) and Jandy(R) brand names will allow it to more
rapidly market and sell new products. The strength of these brand names provides
new products with consumer credibility and acceptance. The Company's research
indicates that 85 percent of consumers recognize the Water Pik(R) brand name. By
building on its brand names, the Company expects to increase market share,
expand its product offerings, enhance consumer brand loyalty and expand its
distribution channels.
- - Capitalize Upon Our Existing Distribution Channels. As the Company
accelerates the introduction of innovative new products and broadens its product
offerings, it will be able to rapidly offer these products to existing retail
and wholesale distribution channels through its well established distribution
network. The Company believes that it can utilize all of its distribution
channels to effectively distribute more of its product lines to allow the
Company to reach a greater number of consumers and distributors. The Company
believes that it also will have an opportunity to capitalize on its 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. The Company believes that it can more fully utilize proven
manufacturing capabilities to add more value to its customers through continuous
improvements in product quality, cost reductions and product delivery. The
Company is in the process of fully integrating state-of-the-art production
techniques through out its business in order to reduce its total product cycle
time and reduce its total product cost, using a "quality first" discipline in
everything it does.
The Company also is in the process of integrating and streamlining its
manufacturing capabilities and facilities when and where appropriate to lower
its costs and improve delivery performance. In 1999, the Company initiated an
ongoing facility reduction plan. It is anticipated that by April of 2000, the
Company will have reduced its domestic manufacturing facilities from eight to
four, and relocated or outsourced the manufacturing operations of these
facilities to existing, complementary facilities. Management expects that these
facility reductions will result in annual cost savings of approximately $2.3
million. The Company intends to continue to look for innovative ways to become a
lower cost manufacturer. The Company believes 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. The Company's international sales
accounted for 14 percent of total sales in 1999, of which approximately one half
were sales in Canada. The Company believes that there is significant additional
demand for its products outside the U.S., and intends to expand the
international market penetration of its products. In August 1999, the Company
acquired substantially all the assets of Les Agencies Claude Marchand, Inc.
("Olympic"), which markets pool accessories in Canada, Europe and the United
States. The Company believes that this acquisition will help to expand its
international presence for its other products.
- - Leverage Our Customer Service Capabilities. The Company intends to satisfy
its customers' expectations and enhance its sales and profitability by
leveraging its customer service capabilities in product delivery and after-sales
service. The Company intends to continue to improve its on-time product delivery
shipments with its state-of-the-art production initiatives; establish a
one-stop, closed loop communication and response system for technical
after-sales service; and regularly update its customers' sales and technical
service representatives with training programs and new tools, hardware and
software.
- - Pursue Selected Acquisitions and Strategic Alliances. The Company intends to
pursue selected acquisitions and strategic alliances that complement and expand
its existing product lines and business. Specifically, the Company expects to
target acquisitions that will provide it 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.
The Company has no current or pending arrangements, understandings or agreements
with respect to any potential acquisitions.
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BUSINESS SEGMENTS
PERSONAL HEALTH CARE
The Personal Health Care segment designs, manufactures and markets showerheads,
oral health products and water filtration products, which are sold primarily
under the Water Pik(R) brand name.
SHOWERHEADS. Through the development and production of pulsating showerheads,
the Company became recognized as an industry leader for personal health care
products. The Company developed The Original Shower Massage(R) product line, the
first massaging showerhead. The Original Shower Massage(R) showerhead has been
redesigned and refined as consumer preferences have changed. In 1997, the award
winning Flexible Shower Massage(TM) showerhead was introduced that adjusts to a
wide variety of positions and height settings. The Flexible Shower Massage(TM)
showerhead 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.
The Company's showerhead products are marketed under the following product
names:
SuperSaver(R) Showerheads
The Original Shower Massage(R) Showerhead
The Adjustable Shower Massage Showerhead
The Flexible Shower Massage(TM) Showerhead
Misting Massage(TM) Showerhead
Water Massage Showerhead
The Company continues to refine and develop innovations to The Original Shower
Massage(R) product line, including the Misting Massage(TM) showerhead, 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. The Personal Health Care segment manufactures a complete
line of consumer oral health care devices. In 1962, the Company developed and
introduced the original Water Pik(R) Oral Irrigator. The oral health products
are designed to reduce plaque, stains and gingivitis and many of the products
are accepted by the American Dental Association. 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 February 2000, we introduced the Water Pik(TM) Flosser, an
automated dental product designed to make flossing easier and more convenient.
The oral health care products are marketed under the following product names:
Water Pik(TM) Flosser
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
The Personal Health Care segment also manufactures and markets a broad range of
professional dental products. The segment currently markets over 600 products
that are distributed in over 60 countries for use by dental professionals. The
professional dental products include articulators and accessories, prophy cups
and angles, radiographic positioning devices, condylar recording systems and
laboratory products.
WATER FILTRATION PRODUCTS. The Company manufactures and markets a full line of
point-of-use water filtration products for consumers. The Company developed the
first end-of-faucet water filter in the mid-1970's. The water filtration
products range from a convenient faucet-mount product to a high performance
in-line product. In 1998, the Electronic Faucet Filter was introduced, 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. The 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.
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The water filtration products are marketed under the following product names:
Water Pik(R) Electronic Faucet Filter
Water Pik(R) Faucet Filter
Water Pik(R) Undersink Water Filter
Water Pik(R) Wholehouse Water Filter
Water Pik(R) Compact Water Filter
Water Pik(R) Dual Process Undersink Water Filter
Water Pik(R) Water Filter Canister Kit
Water Pik(R) Instapure(R) Filtration Systems
POOL PRODUCTS AND HEATING SYSTEMS
POOL AND SPA PRODUCTS. The Company is a leader in the design, manufacture and
marketing of swimming pool and spa equipment, which are sold primarily under the
Laars(R) and Jandy(R) brand names. The 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;
- - an extensive line of pumps and filters; and
- - 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:
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PRODUCT CATEGORY BRAND NAME
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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)
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The Company is a leading manufacturer and marketer of swimming pool and spa
heaters, including natural gas, propane and oil fired residential and commercial
pool heaters. The segment manufactures both standard efficiency (82 percent) and
high efficiency (95 percent) heaters. In late 1998, the Laars(R) LX heater was
introduced 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, the Company 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 highest quality, most
technologically advanced and innovative 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.
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Jandy developed the first automatic pool cleaner, which is hydrodynamically
propelled to quietly vacuum pools. In addition, it manufactures 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.
The Company also offers fiber optic lighting to the pool and spa industries
under exclusive arrangement with Lumenyte International Corporation. The 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. The segment also offers 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, the Company 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 the Company's existing pool and spa products. These pool accessories
are being distributed in the U.S. and Europe under our Water Pik(TM) and
Jandy(TM) brand names.
WATER-HEATING SYSTEMS. The Company produces a comprehensive line of
water-heating systems for commercial, residential and industrial applications.
In August 1998, the Company acquired substantially all the assets of Trianco
Heatmaker, Inc. ("Trianco"), a manufacturer of high efficiency, sealed
combustion gas and oil fuel boilers and water-heating products, to enhance its
capabilities in commercial and residential heating systems. These products are
marketed under the following brand names:
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PRODUCT CATEGORY BRAND NAME
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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)
Laars(R) Endurance(TM)
Oil Boiler Laars(R) Max(TM)
Laars(R) Newport(TM)
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The Company has manufactured gas heating products for over 50 years, and has
expanded its product line to include residential oil boilers and high efficiency
boilers and water heaters for residential, commercial and industrial heating
applications. These 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 percent 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, the Company 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
The Company sells its products using a combination of inside sales
representatives, manufacturers' representatives and distributors which provides
a broad distribution network that allows it to efficiently distribute its
products across a number of distribution channels to reach a greater number of
consumers and distributors than many of its competitors.
PERSONAL HEALTH CARE
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.
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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 PRODUCTS AND HEATING SYSTEMS
The 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
The Company competes with domestic and international companies. Competition is
based on price, quality, service, product features, product innovation,
marketing and distribution.
The Company's success depends on the ability to introduce innovative products
before its competitors, and to design, manufacture and market a broad range of
reliable products which incorporate technological innovations and satisfy
current consumer trends. Among the most significant competitors are larger
companies which have greater financial and technical resources than the Company
does, 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 1999
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
The Company supports research and product development through both its marketing
and engineering departments. The 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, the Company generally has products in various
stages of development. The Company's research and product development
expenditures were approximately $7.7 million, $7.7 million and $8.9 million in
1999, 1998 and 1997, respectively.
The Company develops and introduces new products and categories targeted toward
capitalizing on emerging consumer trends, such as the Misting Massage(TM)
showerhead, Water Pik(TM) Flosser and Laars(R) LX heater. 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. The Company also regularly conducts clinical
research to validate the safety and effectiveness of its consumer and
professional oral health products. The research and development efforts have
resulted in numerous awards for design and innovation.
PATENTS AND TRADEMARKS
Water Pik Technologies holds a number of patents registered in the U.S., Canada
and other countries. The Company also holds the exclusive rights with respect to
certain technology included in its products. The Company relies primarily upon a
combination of trademark, copyright, know-how, trade secrets, proprietary
information, patents and contractual restrictions to protect its intellectual
property rights. Management believes that such measures afford only limited
protection and, accordingly, there can be no assurance that the steps taken to
protect its intellectual property rights will be adequate to prevent
misappropriation of its technology or the independent development of similar
technology by others. Despite the Company's efforts to protect its proprietary
rights, unauthorized parties may attempt to copy aspects of its products or
obtain and use information that the Company regards as proprietary.
8
<PAGE> 9
SEASONALITY
The Company business is highly seasonal, with operating results varying from
quarter to quarter. Both the personal health care segment and the pool products
and heating systems segment have historically experienced higher sales in the
fourth quarter of each year due to the holiday season and cooler weather. The
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 the product lines, the pool products
and heating systems segment offers extended payment terms which permit customers
to purchase pool products during the winter months, with no required payments
until spring. See also "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
EMPLOYEES
The Company's work force consists of approximately 1,700 employees. The Company
is not party to a collective bargaining agreement with respect to any of its
employees. The Company considers its relations with its employees to be good.
EXECUTIVE OFFICERS
Executive Officers of the Company as of March 2000 are as follows:
<TABLE>
<CAPTION>
NAME, OFFICE AND POSITION AGE
- ----------------------------------------------------------------------
<S> <C>
Michael P. Hoopis, President and Chief Executive Officer 49
Robert A. Shortt, Executive Vice President, Sales, Marketing
and Business Development 38
Victor C. Streufert, Vice President, Finance and Chief
Financial Officer 42
Richard P. Bisson, Vice President, Operations 40
Robert J. Rasp, General Manager, Pool Products and Heating
Systems 42
Theresa Hope-Reese, Vice President, Human Resources 42
Richard D. Tipton, Vice President, General Counsel and
Secretary 43
</TABLE>
Set forth below are the business backgrounds for the past five years of the
executive officers of the Company:
Michael P. Hoopis has been President and Chief Executive Officer of the Company
since October 1998. Prior to that time, Mr. 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
and President, Price Pfister Inc. from 1992 to 1996. Mr. Hoopis is a director of
Doskocil Manufacturing Company, Inc. a manufacturer of a broad range of plastic
and pet products and a director of Meade Instruments Corporation, a designer and
distributor of telescopes and related accessories.
Robert A. Shortt has been Executive Vice President -- Sales, Marketing and
Business Development of the Company 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 the Company since July 1999. Prior to that time, from 1996 to 1998,
Mr. Streufert was Senior Vice President, Finance and Administration and Chief
Financial Officer of National Telephone Communications, Inc. From 1995 to 1996,
Mr. Streufert was Vice President, Finance and Chief Financial Officer of Pyxis
Corporation, a health care technology and service company, and from 1989 to
1995, Mr. Streufert was Executive Vice President, Chief Financial Officer of
American Health Properties Inc.
Richard P. Bisson has been Vice President -- Operations of the Company 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
the Company since October 1999. Previously, he was President of Laars since 1996
and Vice President, Heating Systems of Laars from 1994 to 1996. Prior to 1994
Mr. Rasp held senior-level management positions with Carrier Corporation and
York International Corporation.
Theresa Hope-Reese has been Vice President, Human Resources since January 2000.
From 1988 to 1999, Ms. Hope-Reese was Vice President, Human Resources for Varco
International, Inc. a manufacturer of oil field equipment. From 1984 to 1988,
Ms. Hope-Reese was Regional Human Resources Manager for Getty Synthetic Fuels, a
Division of Air Products and Chemicals, Inc. Prior to that she was Human
Resources Manager at Data Point Corporation, a manufacturer of local area
networks.
9
<PAGE> 10
Richard D. Tipton has been Vice President, General Counsel and Secretary of the
Company since March 2000. Prior to that time, from 1999 to 2000, Mr. Tipton was
Vice President, General Counsel and Secretary of Data Processing Resources
Corporation, an information technology services company. From 1987 to 1998, Mr.
Tipton served in various legal executive positions at Chart House Enterprises,
Inc., a national restaurant company, including Vice President -- Legal Affairs
and General Counsel from 1997 to 1998 and Vice President and Associate General
Counsel from 1995 to 1997. Prior to that time, Mr. Tipton engaged in the private
practice of law in San Diego, California. He is a member of the California State
Bar.
FORWARD -- LOOKING STATEMENTS
This report contains disclosures that are forward-looking statements. All
statements regarding Water Pik Technologies' expected future financial
condition, results of operations, cash flows, dividends, financing plans,
business strategy, budgets, projected costs or cost savings, capital
expenditures, competitive positions, growth opportunities for existing products
or products under development, benefits from new technology, plans and
objectives of management for future operations and markets for stock are
forward-looking statements. In addition, forward-looking statements include
statements in which we use words such as "expect", "believe", "anticipate",
"intend", or similar expressions. Although we believe the expectations reflected
in such forward-looking statements are based on reasonable assumptions, we
cannot assure you that such expectations will prove to have been correct and
actual results may differ materially from those reflected in the forward-
looking statements. Water Pik Technologies does not have an intention of or
obligation to update forward-looking statements, even if new information, future
events or other circumstances make them incorrect or misleading.
Factors that could cause our actual results to differ from the expectations
reflected in the forward-looking statements in this document include the
following:
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
facilities. 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.
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
10
<PAGE> 11
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 1999
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.
WE ARE DEPENDENT ON CERTAIN KEY CUSTOMERS AND THE GENERAL RETAIL ENVIRONMENT.
Our top ten customers accounted for 33 percent of our net sales in 1999. South
Central Pool and Wal-Mart Stores Inc. were our largest customers, accounting for
9.5 percent and 7.4 percent, respectively, of our net sales in 1999 and 9.1
percent and 7.4 percent, 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.
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
11
<PAGE> 12
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 payments terms which permit customers to purchase pool
products during the winter months, with no required payments until spring.
WE ARE SUBJECT TO THE RISKS ASSOCIATED WITH INTERNATIONAL SALES.
During 1999, international sales accounted for approximately 14 percent of our
total sales, of which approximately 50 percent were sales made in Canada. We
anticipate that future international sales will increase and may 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."
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, 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.
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
12
<PAGE> 13
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. The
Company is not aware of any facts or circumstances that would cause such
representations and assumptions to become untrue.
If the spin-off were not to qualify as a tax-free distribution within the
meaning of Section 355 of the Code, ATI would recognize taxable gain 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."
ITEM 2 PROPERTIES
MANUFACTURING AND FACILITIES
The Company's principal manufacturing and distribution facilities as of December
31, 1999 are listed below. Five of the seven facilities are owned and, of those
owned, the facilities located in the U.S. are pledged as collateral for a credit
facility. Although the facilities vary in terms of age and condition, management
believes that these facilities have been well maintained. Each of the facilities
conducts manufacturing operations in a relatively autonomous manner, supported
by its own manufacturing and assembly area, quality assurance department, and
other support functions. The Company has instituted quality assurance programs
to provide that its products comply with the Consumer Products Safety Act and
other similar laws. The Company's Moorpark, California and Rochester, New
Hampshire facilities are ISO 9002 certified and the Fort Collins and Loveland,
Colorado facilities are ISO 9001 certified.
<TABLE>
<CAPTION>
SQUARE FOOTAGE
FACILITY LOCATION PRINCIPAL USE (OWNED/LEASED)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Fort Collins, Colorado Manufacturing of oral health products. 250,000 (owned)
Loveland, Colorado Manufacturing of showerheads, water filtration products, 136,000 (owned)
and oral health products.
Montreal, Canada (2 buildings) Manufacturing and distribution of pool and spa accessories, 55,000 (leased)
including, cleaning and maintenance supplies, white goods, 47,000 (leased)
ladders, solar reels, floating lounges, pool toys and
games.
Moorpark, California Manufacturing of pool and spa heaters, pool pumps and 200,000 (owned)
filters, valves, actuators, electronic controls, automated
cleaners, fiber optic lighting, boilers and water heaters.
Oakville, Canada Distribution of Laars(R) products. 40,000 (owned)
Rochester, New Hampshire Manufacturing of commercial boilers, water heaters, pool 80,000 (owned)
heaters and Trianco products.
Scarborough, Canada Sales, marketing, customer service, warehousing and 30,000 (leased)
distribution of Water Pik(R) Products.
</TABLE>
The Company's executive offices are located in Newport Beach, California and are
leased from third parties. A facility in Petaluma, California was leased from
third parties in November 1999 to accommodate the sales, marketing and customer
service staff for our pool products business when the facility in Novato,
California is vacated April, 2000. The Novato, California facility was also
utilized for manufacturing until January 2000. The Company's facilities are
modern and sufficient to carry on current activities.
13
<PAGE> 14
ITEM 3 LEGAL PROCEEDINGS
LEGAL PROCEEDINGS
From time to time, 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 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 results of operations for
that period.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5 MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
PRICE RANGE OF COMMON STOCK
The high and the low sales prices for the Company's common stock during the
period from November 30, 1999 (date of initial trading) through December 31,
1999 were $9.75 and $6.75, respectively. The closing price for the Company's
common stock was $9.5625 on December 31, 1999.
The Company's common stock is traded on the New York Stock Exchange under the
symbol "PIK". As of March 21, 2000, there were approximately 8,279 holders of
record of the common stock.
DIVIDEND POLICY
To date, the Company has paid no cash dividends to its stockholders. The Company
has no plans to pay dividends on its common stock in order to conserve cash for
use in its business. In addition, the terms of the Company's credit facilities
prohibit it from paying dividends.
ITEM 6 SELECTED CONSOLIDATED FINANCIAL DATA
SELECTED FINANCIAL DATA
The following table summarizes certain selected consolidated financial data for
Water Pik Technologies. The income statement data for each of the four years
ended December 31, 1999, 1998, 1997 and 1996 and the balance sheet data at
December 31, 1999, 1998 and 1997 set forth below are derived from audited
consolidated financial statements of Water Pik Technologies. The income
statement data for year ended December 31, 1995 and the balance sheet data at
December 31, 1996 and 1995 set forth below are derived from unaudited
consolidated financial statements of Water Pik Technologies.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
(in thousands, except for share and per share amounts)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME DATA:
Sales $ 254,687 $ 235,788 $ 241,167 $ 215,675 $ 205,794
Net income $ 11,054 $ 11,495 $ 17,552 $ 7,353 $ 5,231
Net income per common share --
basic and diluted $ 1.15 $ 1.17 $ 1.79 $ 0.77 $ 0.59
Average weighted common shares
outstanding 9,587,291 9,837,534 9,830,038 9,561,061 8,819,317
CONSOLIDATED BALANCE SHEET DATA:
Working capital $ 41,272 $ 35,778 $ 39,057 $ 41,914 $ 42,870
Total assets $ 160,496 $ 127,794 $ 119,974 $ 118,375 $ 97,348
Long-term debt, less current portion $ 39,883 $ -- $ -- $ -- $ --
Stockholders' equity $ 56,690 $ 88,822 $ 80,653 $ 85,335 $ 72,238
</TABLE>
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<PAGE> 15
Because Water Pik Technologies was not a publicly held company prior to November
30, 1999, the weighted average number of shares of common stock used in the
computation of earnings per share for such period is based on the distribution
ratio of the weighted average number of ATI shares of common stock of one share
of Water Pik Technologies for every 20 shares of ATI for periods prior to the
spin-off.
The historical selected consolidated financial data are not necessarily
indicative of the results of operations or financial position that would have
occurred if the Company had been a separate, independent public company during
the periods presented, nor are they indicative of its future performance. Such
historical data should be read in conjunction with the Company's "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
its consolidated financial statements and the related notes.
ITEM 7 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 consolidated financial statements, including the related notes,
included herein. For periods prior to the spin-off from ATI, the financial
statements include the businesses described below on a combined basis. 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. See also "Business -- Forward-Looking Information."
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 two business segments: Personal
Health Care and Pool Products and Heating Systems which are organized around the
Company's products. The Personal Health Care segment designs, manufactures and
markets showerheads, oral health and water filtration product lines. The Pool
Products and Heating Systems segment designs, manufactures and markets swimming
pool and spa equipment, controls and accessories as well as water-heating
products for commercial, residential and industrial applications.
Total sales of our two segments for years ending December 31, 1999, 1998 and
1997 are summarized below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
SEGMENT 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Personal Health Care $123,957 48.7% $125,763 53.3% $141,792 58.8%
Pool Products and Heating Systems $130,730 51.3% $110,025 46.7% $ 99,375 41.2%
-------- -------- --------
Total sales $254,687 100.0% $235,788 100.0% $241,167 100.0%
======== ======== ========
</TABLE>
The financial information in the Company's financial statements is not
necessarily indicative of results of operations, financial condition and cash
flows that would have occurred if the Company had been a separate, independent
public company during the periods presented nor is it indicative of our future
results. On an historical basis prior to November 29, 1999, the capital for the
Company's operations was provided by ATI's net investment in the Company, with
no debt allocated to the Company. Accordingly, the historical financial
statements prior to November 29, 1999 reflect no interest income or interest
expense. Prior to the spin-off, ATI established a five-year $60,000,000
revolving credit facility, and $34,000,000 of borrowings under the facility were
used by ATI prior to the spin-off to repay certain of its debt obligations. In
connection with the spin-off, the Company assumed this credit facility,
including the repayment obligations for ATI's $34,000,000 of borrowings.
Following the spin-off, up to $26,000,000 of borrowing availability remained
under the credit facility, subject to the borrowing base limitations under the
facility. The amount of ATI indebtedness assumed by the Company under the new
credit agreement was determined by reference to (i) historical levels of ATI
consolidated indebtedness relative to the expected market capitalization of ATI
and the Company and (ii) the level of debt and debt service capacity of the
Company, as well as its ability to finance working capital requirements through
a combination of operating cash flow and revolving credit borrowings. The
historical consolidated financial statements prior to November 29, 1999 included
herein do not reflect any changes that occurred in the capitalization or results
of operations of the Company as a result of, or after, the spin-off.
15
<PAGE> 16
RESULTS OF OPERATIONS
CONSOLIDATED RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1999 % CHANGE 1998 % CHANGE 1997
- ------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Sales $254,687 8.0% $235,788 (2.2)% $241,167
Gross profit $ 98,978 2.8% $ 96,244 (6.0)% $102,375
Operating profit $ 19,204 0.9% $ 19,032 (32.9)% $ 28,384
Gross profit as a percentage of sales 38.9% 40.8% 42.4%
Operating profit as a percentage of sales 7.5% 8.1% 11.8%
International sales as a percentage of sales 14.3% 15.8% 17.0%
</TABLE>
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Sales for 1999 were $254.7 million, representing an increase of 8.0 percent over
1998 due to increased sales of pool products and water-heating systems. The
acquisition of Olympic in 1999 contributed sales of $1.8 million or 0.7 percent
of 1999 sales. Gross profit (sales less cost of sales) as a percentage of sales
for 1999 decreased to 38.9 percent compared with 40.8 percent for 1998 primarily
due to a shift in product sales mix to lower margin pool products and heating
systems and lower prices for personal health care products in response to
competitive pressure.
Operating profit (gross profit less selling expenses and general and
administrative expenses) as a percentage of sales decreased 0.9 percent in 1999
from 1998. Selling expenses as a percentage of sales were 19.1 percent in 1999
compared with 21.1 percent in 1998. The favorable trend in selling expenses
resulted from leveraging fixed costs over a higher sales base. General and
administrative expenses as a percentage of sales for 1999 were higher at 12.2
percent compared with 11.6 percent in 1998 and include a corporate allocation
from the former parent company of Water Pik Technologies for the first 11 months
of 1999 and all of 1998. Operations subsequent to November 29, 1999 include
actual corporate expenses incurred.
Other items in 1999 affecting operating profit were $1,293,000 of seasonal
losses from Olympic, $996,000 of expenses related to closing of three
manufacturing facilities of which $258,000 was recorded as cost of sales and
$738,000 was recorded as general and administrative expenses, $930,000 of
unusual general and administrative expenses associated with bad debts of several
major retail customers, $532,000 of expenses relating to workforce reductions in
various administrative and engineering departments and $285,000 of spin-off
expenses. The costs related to the closure of manufacturing facilities and
workforce reductions are resulting from the Company's continuous cost-reduction
and cost-containment initiatives.
Interest expense for 1999 was $582,000. Effective with the date of the spin-off
through December 31, 1999, the Company had outstanding borrowing under its
credit facilities. In addition, the Company issued an 8% promissory note in
connection with its acquisition of Olympic in July, 1999. The Company had no
interest expense in 1998 or 1997 since the capital for the Company's operations
was provided by ATI's net investment in the Company with no debt allocated to
the Company.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Total sales decreased by 2.2 percent in 1998 compared to 1997. Sales of our
personal health care segment decreased due to a decline in international sales
as a result of weak economic conditions in Canada, Brazil and Russia in 1998.
Sales of personal health care products were also higher in 1997 than 1998 due to
the initial retail stocking of newly introduced products in 1997. Consolidated
sales declines in 1998 were partially offset by sales increases for
water-heating systems products resulting from the acquisition of Trianco in
August 1998 and the growth in existing pool product lines.
Gross profit as a percentage of sales decreased from 42.4 percent in 1997 to
40.8 percent in 1998. This decrease is due to a less profitable product mix of
sales. 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 percent 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.
16
<PAGE> 17
PERSONAL HEALTH CARE
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1999 % CHANGE 1998 % CHANGE 1997
- ------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Sales $123,957 (1.4)% $125,763 (11.3)% $141,792
Operating profit $ 7,982 (15.3)% $ 9,426 (51.7)% $ 19,552
Operating profit as a percentage of sales 6.4% 7.5% 13.8%
International sales as a percentage of sales 18.7% 20.5% 21.4%
</TABLE>
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Sales for 1999 of our Personal Health Care segment were 1.4 percent less than in
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, financial
difficulties of certain retail customers and weak international economic
conditions.
Operating profit decreased $1,444,000 in 1999 compared to 1998. Operating profit
was impacted by higher tooling amortization expense associated with increased
new product development initiatives. Operating profit in 1999 was also 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, workforce reductions and non-recurring spin-off costs.
These unusual expenses were offset by lower selling and marketing expenses of
$3,101,000 in 1999 compared to 1998. Selling and marketing expenses for 1999
declined compared to the prior year primarily due to the reorganization and
streamlining of operations during this period.
The Personal Health Care 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. Additionally, expenses 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 expenses were paid out during 1999. In addition,
costs of $285,000 were incurred for activities related to the spin-off,
primarily for consulting fees and increased travel expenses.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Sales of our Personal Heath Care segment decreased by 11.3 percent 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 51.7 percent 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.
POOL PRODUCTS AND HEATING SYSTEMS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1999 % CHANGE 1998 % CHANGE 1997
- ------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Sales $130,730 18.8% $110,025 10.7% $ 99,375
Operating profit $ 11,222 16.8% $ 9,606 8.8% $ 8,832
Operating profit as a percentage of sales 8.6% 8.7% 8.9%
International sales as a percentage of sales 10.2% 10.8% 10.9%
</TABLE>
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Sales of our Pool Products and Heating Systems segment increased 18.8 percent in
1999 compared to 1998. Pool products sales increased 23.0 percent due to strong
pool equipment and heater sales. Sales of the newly acquired pool products
manufacturer, Olympic, were only $1,800,000 due to normal seasonal fluctuations.
Water-heating product sales increased 10.0 percent due mainly to the acquisition
of Trianco in August 1998. Sales of water-heating products, excluding Trianco
products, decreased 3.0 percent due largely to the plant closure process which
caused a product shortage for several months, an increase in the sales backlog
and the loss of certain seasonal re-orders in the fourth quarter.
17
<PAGE> 18
Operating profit increased 16.8 percent in 1999 as compared to 1998. The
increase in operating profit was primarily due to increased sales volume, offset
by expenses of $738,000 related to the closing of two manufacturing facilities
and seasonal losses of $1,293,000 of newly acquired Olympic.
The Pool Products and Heating Systems segment incurred plan rationalization
costs of $738,000, all of which were recorded in general and administrative
expenses, related to the closures of the Randolph, Massachusetts facility and
the Novato, California facility. The Randolph facility was closed in October
1999 and the Novato facility is expected to be closed by April 2000. The
production capabilities of these two facilities has been relocated to other
facilities in order to achieve cost savings and improve manufacturing
efficiencies. The plant closure costs consisted of severance costs of $263,000,
equipment move and production line setup costs of $150,000, and plant clean up
and other costs of $325,000. At December 31, 1999, there was a reserve of
$236,000 primarily for the unpaid portion of severance expenses, remaining from
the plant closures.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Sales of our Pool Products and Heating Systems segment increased 10.7 percent 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
products and heating systems categories.
Operating profit for 1998 increased 8.8 percent 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 Laars(R) pool heater, which was included in general and
administrative expenses.
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
facilities 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. However, all of our
planned product line extensions, new product development plans, capital
expenditure programs and possible acquisitions can not be achieved without
additional capital. We plan to raise additional capital through a public
offering of our common stock. Depending upon market conditions, the Company may
also choose to issue additional stock or debt.
In 1999, cash generated from operations of $14,250,000 was used primarily to
fund the cash portion of the purchase price of Olympic of $2,500,000, to make
$8,584,000 in capital expenditures and to advance $3,997,000 to ATI. In 1998,
cash generated from operations of $22,325,000 was used to purchase Trianco for
$10,647,000, to make $8,650,000 in capital expenditures and to pay $3,223,000 to
ATI.
Our working capital increased to $41,272,000 at December 31, 1999 from
$35,778,000 at the end of 1998. The current ratio decreased to 1.7 in 1999 from
1.9 in 1998. The increase in working capital at December 31, 1999 was primarily
due to higher accounts receivable and inventory balances partially offset by
increases in accounts payable and the current portion of long-term debt.
On a historical basis prior to November 29, 1999, most of the capital for the
Company's operations was provided by ATI's net investment in the Company, for
which no interest was charged. None of ATI's debt on a historical basis was
allocated to the Company. Prior to the spin-off, ATI established a five-year
$60,000,000 revolving credit facility, and $34,000,000 of borrowings under the
facility were used by ATI to repay certain of its obligations. The Company
assumed this revolving credit facility, including the repayment obligations for
ATI's $34,000,000 of borrowings made by ATI prior to the spin-off. At December
31, 1999 the Company had $26,805,000 of borrowing availability remaining under
borrowing base limitations of the credit facility. Borrowings under the credit
facility bear interest at variable rates at, or at margins above, prevailing
prime, LIBOR (London Interbank Offered Rate), federal funds or certificate of
deposit rates and depend on the ratio of consolidated total indebtedness to
earnings before interest, taxes, depreciation and amortization from time to
time. The interest rate in effect at December 31, 1999 was 9.0 percent.
On November 3, 1999, the Company's Canadian subsidiary entered into a financing
agreement with a bank for a revolving line of credit facility up to CDN.
$11,000,000. Borrowings under the credit facility bear interest at variable
rates at, or at margins above, the prevailing Canadian prime rate. The interest
rate in effect at December 31, 1999 was 6.5 percent.
These credit facilities require the Company 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. A security
interest in substantially all of the Company's assets was granted to the lenders
under the credit agreements as collateral under the credit agreements.
18
<PAGE> 19
In August 1999, the Company acquired substantially all of the assets of Olympic,
a pool accessories manufacturer and distributor, for $2,500,000 in cash and a
$6,344,000 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. These
pool accessories are being distributed in the U.S. and Europe under our Water
Pik(TM) and Jandy(TM) brand names.
Total capital expenditures for 1999 and 1998, excluding the purchases of Olympic
and Trianco, were $8,584,000 and $8,650,000, respectively. At December 31, 1999,
Water Pik Technologies had capital expenditure commitments of $942,000.
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
facilities 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 facilities and other factors.
Prior to November 29, 1999 the Company participated in the general liability,
product liability, and workers' compensation insurance programs sponsored by
ATI. The Company has since entered into general liability, product liability and
workers compensation insurance programs of its own. 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 transferred to the
Company reserves for estimated losses under these insurance programs totaling
$10,423,000 and related deferred taxes of $4,882,000. 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.
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 the completion of a
required public offering of the Company's 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 signed prior to the
spin-off, the Company agreed 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 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 any of the taxes or other amounts were to become
payable by the Company, the payment 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.
OTHER MATTERS
INCOME TAXES
The Company's effective income tax rate was 41.3 percent for 1999, 40.0 percent
in 1998 and 39.3 percent in 1997. At the time of the spin-off, ATI transferred
to the Company $4,882,000 related to a deferred income tax asset. 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 December 31, 1999 will be
realized.
INFLATION
Inflation has not had a material impact upon the Company's results of operations
for the periods discussed above.
IMPACT OF YEAR 2000
In late 1999, the Company completed its remediation and testing of systems to
become Year 2000 ready. As a result of its planning and implementation efforts,
the Company experienced no significant disruptions in mission critical
information technology and non-information technology systems and believes those
systems successfully responded to the Year 2000 date change. The Company
expensed approximately $1,300,000 during 1998 and 1999 in connection with
remediating its systems. The Company is not aware of any material problems
resulting from Year 2000 issues, either with its products, its internal systems,
or the products and services of third parties. The Company will continue to
monitor its mission critical computer
19
<PAGE> 20
applications and those of its suppliers and vendors throughout the year 2000 to
ensure that any latent Year 2000 matters that may arise are addressed promptly.
ITEM 7A QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The principal market risks (i.e., the risk of loss arising from adverse changes
in market rates and prices) to which we are exposed are foreign exchange rates
which may generate translation and transaction gains and losses and interest
rate risk.
FOREIGN CURRENCY RISK
Operating in international markets sometimes involves exposure to volatile
movements in currency exchange rates. The economic impact of currency exchange
rate movements on the Company is complex because such changes are often linked
to variability in real growth, inflation, interest rates, governmental actions
and other factors. These changes, if material, may cause the Company to adjust
its financing and operating strategies. Consequently, isolating the effect of
changes in currency does not incorporate these other important economic factors.
International operations constituted approximately 14 percent of the Company's
1999 consolidated sales. As currency exchange rates change, translation of the
income statements of international operations into U.S. dollars affects
year-over-year comparability of operating results. The Company does not
generally hedge translation risks because cash flows from international
operations are generally reinvested locally. The Company does not enter into
hedges to minimize volatility of reported earnings because it does not believe
it is justified by the exposure or the cost.
The change in currency exchange rates for the Canadian dollar would have the
largest impact on translating future international operating profit. The Company
estimates that a 10 percent change in foreign exchange rates would not have a
material impact on reported operating profit. The Company believes that this
quantitative measure has inherent limitations because, as discussed in the first
paragraph of this section, it does not take into account any governmental
actions or changes in either customer purchasing patterns or financing and
operating strategies.
INTEREST RATE RISK
The Company's exposure to interest rate risk is limited to its domestic and
Canadian lines of credit. The Company's domestic line of credit bears interest
at prime plus 0.25 percent to 0.50 percent, or at LIBOR (London Interbank
Offered Rate) plus 125 to 225 basis points per annum. The Company's Canadian
line of credit bears interest at Canadian or U.S. prime rate plus 0.50 percent.
The Company estimates that a 10 percent change in interest rates would not have
a material impact on reported operating profit.
20
<PAGE> 21
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
WATER PIK TECHNOLOGIES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors 22
Consolidated Balance Sheets at December 31, 1999 and 1998 23
Consolidated Statements of Income for the years ended
December 31, 1999, 1998 and 1997 24
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997 25
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1999, 1998 and 1997 26
Notes to Consolidated Financial Statements 27
</TABLE>
21
<PAGE> 22
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Water Pik Technologies, Inc.
We have audited the accompanying consolidated balance sheets of Water Pik
Technologies, Inc. as of December 31, 1999 and 1998 and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended December 31, 1999. 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
in the United States. 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Water
Pik Technologies, Inc. at December 31, 1999 and 1998 and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1999 in conformity with generally accepted accounting
principles in the United States.
/s/ ERNST & YOUNG LLP
Woodland Hills, California
January 28, 2000
22
<PAGE> 23
WATER PIK TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, 1999 1998
- --------------------------------------------------------------------------------------
(IN THOUSANDS,
EXCEPT FOR SHARE AND
PER SHARE AMOUNTS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,514 $ --
Accounts receivable, less allowances for doubtful accounts
of $1,372 in 1999 and $1,756 in 1998 57,577 46,335
Inventories 26,214 18,760
Deferred income taxes 8,666 7,218
Prepaid expenses and other current assets 2,559 1,228
------------------------
TOTAL CURRENT ASSETS 96,530 73,541
Property, plant and equipment, net 38,248 33,131
Cost in excess of net assets acquired, net 21,972 19,072
Deferred income taxes 1,820 --
Other assets 1,926 2,050
------------------------
TOTAL ASSETS $160,496 $127,794
========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 27,958 $ 18,880
Accrued income taxes 248 --
Accrued liabilities 23,511 18,883
Current portion of long-term debt 3,541 --
------------------------
TOTAL CURRENT LIABILITIES 55,258 37,763
Deferred income taxes -- 1,209
Long-term debt, less current portion 39,883 --
Other accrued liabilities 8,665 --
------------------------
TOTAL LIABILITIES 103,806 38,972
Commitments and contingencies
Stockholders' equity:
Common stock, $0.01 par value: 50,000,000
Shares authorized; 9,811,763
Shares issued and outstanding 98 --
Additional paid-in capital 59,302 --
Retained earnings 1,196 --
Equity adjustments due to stock plans (3,824) --
Net advances from ATI -- 89,124
Accumulated comprehensive income (loss) (82) (302)
------------------------
TOTAL STOCKHOLDERS' EQUITY 56,690 88,822
------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $160,496 $127,794
========================
</TABLE>
See accompanying notes.
23
<PAGE> 24
WATER PIK TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1999 1998 1997
- -------------------------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT FOR PER
SHARE AMOUNTS)
<S> <C> <C> <C>
SALES $254,687 $235,788 $241,167
Cost and expenses:
Cost of sales 155,709 139,544 138,792
Selling expenses 48,721 49,830 44,740
General and administrative expenses 31,053 27,382 29,251
-----------------------------------
235,483 216,756 212,783
-----------------------------------
Income before other income and expenses 19,204 19,032 28,384
Interest expense (582) -- --
Other income 198 126 532
-----------------------------------
INCOME BEFORE INCOME TAXES 18,820 19,158 28,916
Provision for income taxes 7,766 7,663 11,364
-----------------------------------
NET INCOME $ 11,054 $ 11,495 $ 17,552
===================================
BASIC AND DILUTED NET INCOME PER COMMON SHARE $ 1.15 $ 1.17 $ 1.79
===================================
</TABLE>
See accompanying notes.
24
<PAGE> 25
WATER PIK TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999 1998 1997
- --------------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 11,054 $11,495 $17,552
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 8,491 6,324 6,388
Deferred income taxes 5 641 759
Gain on sale of property, plant and equipment (11) (13) (446)
Change in operating assets and liabilities:
Accounts receivable (9,463) 3,284 (8,497)
Inventories (4,882) 4,955 4,422
Accounts payable 7,658 (2,120) 6,849
Accrued liabilities 1,693 (1,520) (568)
Other assets and liabilities (295) (721) 571
------------------------------
CASH PROVIDED BY OPERATING ACTIVITIES 14,250 22,325 27,030
INVESTING ACTIVITIES:
Purchases of businesses (2,500) (10,647) --
Purchases of property, plant and equipment (8,584) (8,650) (6,480)
Disposals of property, plant and equipment 31 155 1,312
Other 80 40 31
------------------------------
CASH USED IN INVESTING ACTIVITIES (10,973) (19,102) (5,137)
FINANCING ACTIVITIES:
Net long-term debt borrowings 2,234 -- --
Repayment of net advances from ATI (3,997) (3,223) (22,006)
------------------------------
CASH USED IN FINANCING ACTIVITIES (1,763) (3,223) (22,006)
------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,514 -- (113)
Cash and cash equivalents at the beginning of the year -- -- 113
------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,514 $ -- $ --
==============================
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES:
Reduction of net advances from ATI resulting from spin-off $(94,985) $ -- $ --
Assumption of debt from ATI $ 34,000 $ -- $ --
Net liabilities transferred from ATI $ 5,290 $ -- $ --
Equity adjustment (due to stock plans) transferred from ATI $ 121 $ -- $ --
SUPPLEMENTAL INFORMATION:
Interest paid $ 202 $ -- $ --
Taxes paid $ 550 $ -- $ --
</TABLE>
See accompanying notes.
25
<PAGE> 26
WATER PIK TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
EQUITY ACCUMULATED
ADDITIONAL ADJUSTMENTS ADVANCES OTHER TOTAL
COMMON PAID-IN DUE TO RETAINED (TO) FROM COMPREHENSIVE STOCKHOLDERS'
STOCK CAPITAL STOCK PLANS EARNINGS ATI INCOME (LOSS) EQUITY
- ---------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
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 17,324
Net transactions with ATI -- -- -- -- (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 11,392
Net transactions with ATI -- -- -- -- (3,223) -- (3,223)
- ---------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 -- -- -- -- 89,124 (302) 88,822
Net income -- -- -- 1,196 9,858 -- 11,054
Other comprehensive income,
net of tax:
Foreign currency
translation losses -- -- -- -- -- 200 200
-------
Comprehensive income 11,254
Spin-off by ATI 93 94,892 -- -- (94,985) -- --
Net transactions with ATI -- (39,290) (121) -- (3,997) 20 (43,388)
Employee SARP plan 5 3,700 (3,703) -- -- -- 2
- ---------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 $98 $ 59,302 $(3,824) $1,196 $ -- $ (82) $56,690
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
26
<PAGE> 27
WATER PIK TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. WATER PIK TECHNOLOGIES SPIN-OFF FROM ALLEGHENY TELEDYNE INCORPORATED
DESCRIPTION OF BUSINESS
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 products and heating systems.
The Company's products include: showerheads; 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 and Pool Products and
Heating Systems.
Water Pik Technologies consists of the former consumer products segment of
Allegheny Teledyne Incorporated, now known as Allegheny Technologies
Incorporated ("ATI"), which includes the operations of the Teledyne Water Pik
division with operations in the U.S. and Canada and the Teledyne Laars division
with operations in the U.S. and Canada.
SPIN-OFF FROM ATI
In 1998, ATI announced that it would pursue a course of action that would result
in the spin-off of the Company to ATI stockholders as an independent, publicly
traded company. In August 1999, ATI received a favorable ruling from the
Internal Revenue Service that the proposed spin-off of the Company into a
freestanding public company would be treated as a tax-free distribution for
federal income tax purposes.
Prior to the spin-off, Water Pik Technologies and ATI entered into a Separation
and Distribution Agreement (see Note 7) that provides for the principal
corporate transactions required to effect the separation of the businesses after
the spin-off.
As part of the spin-off plan, borrowings of $34,000,000 made by ATI from the
Company's revolving credit facility were retained by ATI (see Note 5).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Water Pik
Technologies, Inc. and its subsidiaries. All significant inter-company accounts
and transactions have been eliminated. For periods prior to the spin-off from
ATI, the financial statements include the businesses described in Note 1 on a
combined basis. ATI's historical cost basis of assets and liabilities has been
reflected in the Company's financial statements.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.
CONCENTRATION OF RISK
The Company grants credit terms in the normal course of business to its
customers. 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. The Company does not normally require collateral
or other security to support credit sales. No customer accounted for more than
10 percent of the Company's sales in 1999, 1998 or 1997.
REVENUE RECOGNITION
Sales and related cost of sales are recognized upon the shipment of products to
customers. The Company allows credit for products returned within its policy
terms. Such returns are estimated and an allowance is provided at time of sale.
INVENTORIES
Inventories are stated at the lower of cost (last-in, first-out and first-in,
first-out cost methods) or market.
27
<PAGE> 28
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost and are depreciated using both
the accelerated and straight-line methods. Depreciation is based on the useful
lives of the properties. Buildings are depreciated over periods not exceeding 45
years, equipment over 5 to 18 years, plastic injection molds over 3 to 7 years
and leasehold improvements over the shorter of their estimated remaining lives
or lease terms. Significant improvements are capitalized while maintenance and
repairs are charged to operations as incurred.
COST IN EXCESS OF NET ASSETS ACQUIRED
Cost in excess of net assets acquired relates to businesses purchased (goodwill)
and is being amortized on a straight-line basis over periods not exceeding 15
years. Accumulated amortization was $4,155,000 and $2,610,000 at December 31,
1999 and 1998, respectively. Goodwill amortization expense was $1,545,000,
$1,096,000 and $894,000 in 1999, 1998 and 1997, respectively. Cost in excess of
net assets acquired related to businesses purchased prior to October 31, 1970 is
not being amortized. Goodwill not being amortized amounted to $239,000 at
December 31, 1999 and 1998.
INCOME TAXES
The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." Deferred income taxes are
provided on the temporary differences between income for financial statements
and income tax reporting purposes.
STOCK BASED COMPENSATION
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," (SFAS No. 123) encourages but does not require companies to
record compensation expense for stock options granted at fair value. The Company
has chosen to continue to account for stock options using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for
Stock issued to Employees," (APB No. 25) and related interpretations.
Accordingly, the Company has provided pro forma disclosures of the earnings per
share as determined under the provision of SFAS No. 123.
PRODUCT DEVELOPMENT AND RESEARCH AND DEVELOPMENT COSTS
Product development and research and development costs ($7,672,000 in 1999,
$7,734,000 in 1998 and $8,879,000 in 1997) are classified in general and
administrative expenses and are expensed as incurred.
ADVERTISING COSTS
Advertising costs ($23,852,000 in 1999, $24,664,000 in 1998 and $20,250,000 in
1997) are expensed in the year incurred.
WARRANTY COSTS
The Company's return policy is to replace, repair or issue credit for products
under warranty. Estimated warranty costs are provided when sales are recognized
and amounted to $4,565,000, $4,924,000 and $5,673,000 in 1999, 1998 and 1997,
respectively.
FOREIGN CURRENCY TRANSLATION
The financial statements of the Company's non-U.S. subsidiaries 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
recorded directly into a separate component in stockholders' equity.
COMPREHENSIVE INCOME
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income," requires foreign currency translation adjustments to be included in
other comprehensive income. Comprehensive income is presented in the
consolidated statements of stockholders' equity.
28
<PAGE> 29
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company estimates that the fair value of its cash and cash equivalents,
accounts receivable, accounts payable, and long-term debt approximate their
carrying amounts in the accompanying consolidated financial statements.
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 used in the
preparation of the Company's consolidated financial statements are reasonable.
PENDING ADOPTION OF STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 133
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," (SFAS No. 133). SFAS No. 133 establishes new standards
for recording derivatives in interim and annual financial reports requiring that
all derivative instruments be recorded as assets or liabilities, measured at
fair value. SFAS No. 133 is effective for fiscal years beginning after June 15,
2000, and therefore the Company will adopt the new requirements as of January 1,
2001. Management does not anticipate that the adoption of SFAS No. 133 will have
a significant impact on the Company's consolidated results of operations,
financial position or cash flows.
3. INVENTORIES
Inventories are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1999 1998
- ------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Raw materials and supplies $ 14,144 $ 11,616
Work-in-process 5,481 3,406
Finished goods 11,307 8,795
--------------------
Total inventories at current cost 30,932 23,817
Less: Allowances to reduce current cost values to LIFO basis (4,718) (5,057)
--------------------
Total inventories $ 26,214 $ 18,760
====================
</TABLE>
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 for the year ended December 31, 1997.
Inventories determined on the last-in, first-out methods were $19,841,000 at
December 31, 1999 and $9,748,000 at December 31, 1998. The remainder of
inventory was determined using the first-in, first-out method. These inventory
values do not differ materially from current cost.
4. SUPPLEMENTAL BALANCE SHEET INFORMATION
Property, plant and equipment were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1999 1998
- ------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Land $ 4,697 $ 4,694
Buildings 19,839 19,576
Equipment 60,053 49,318
Leasehold improvements 656 550
--------------------
85,245 74,138
Less: Accumulated depreciation and amortization (46,997) (41,007)
--------------------
Total property, plant and equipment $ 38,248 $ 33,131
====================
</TABLE>
29
<PAGE> 30
Accrued liabilities are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1999 1998
- ------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Salaries and wages $ 8,660 $ 6,269
Warranty reserves 3,338 3,165
Advertising 3,929 2,916
Sales allowances and rebates 2,596 1,572
Property taxes 855 973
Other 4,133 3,988
--------------------
Total accrued liabilities $ 23,511 $ 18,883
====================
</TABLE>
5. LONG-TERM DEBT
Long-term debt is comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1999 1998
- ------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Revolving credit facility $ 32,884 $ --
Canadian revolving credit facility 3,402 --
8% promissory note 6,679 --
Capitalized leases 459 --
--------------------
43,424 --
Less: Current portion (3,541) --
--------------------
Long-term debt $ 39,883 $ --
====================
</TABLE>
Long-term debt is payable as follows: year ended December 31,
2000 -- $3,541,000; 2001 -- $3,505,000; 2002 -- $93,000; 2003 -- $5,000;
2004 -- $32,884,000; 2005 and thereafter $3,396,000.
REVOLVING CREDIT FACILITY
On November 29, 1999, the Company entered into a financing agreement with a bank
for a revolving line of credit up to $60,000,000 through November 2004.
Borrowings under the revolving credit loan are limited to borrowing base
calculations based upon eligible account receivable and eligible inventory
balances, as defined. The credit facility is secured by the Company's assets.
Borrowings under the revolving credit loans bear interest at either the bank's
prime rate plus 0.25 percent to 0.50 percent or, if the Company exercises a
LIBOR option, at the LIBOR rate plus 125 to 225 basis points per annum. The
Company is subject to a $50,000 annual agency fee and an unused line fee equal
to .175 percent to .50 percent (determined by leverage ratio) per annum of the
monthly average unused borrowings. Interest on the revolving credit loan is
payable monthly.
The credit facility requires the Company to be in compliance with specific
financial covenants. The Company was in compliance with these financial
covenants at December 31, 1999.
The credit facility also provides for the issuance of letters of credit up to
the borrowing base less the outstanding line of credit, not to exceed
$5,000,000. A letter of credit fee is charged to the Company equal to 0.50
percent on the aggregate undrawn amount of all outstanding letters of credit. At
December 31, 1999, the aggregate amount of outstanding letters of credit under
the credit facility was $1,711,000.
CANADIAN REVOLVING CREDIT FACILITY
On November 3, 1999, the Company's Canadian subsidiary entered into a financing
agreement with a bank for a revolving line of credit up to CDN. $11,000,000,
increasing by CDN. $1,000,000 for certain months of the year, a forward exchange
contract facility of up to CDN. $2,000,000 and the issuance of letters of
credits not to exceed CDN. $500,000.
Borrowings under the revolving Canadian credit facility bear interest at either
the bank's prevailing annual Canadian or U.S. prime rate plus 0.50 percent (6.5
percent at December 31, 1999). The interest is payable monthly.
The Canadian credit facility requires the Company to be in compliance with
specific financial covenants. The Company was in compliance with these financial
covenants at December 31, 1999.
30
<PAGE> 31
PROMISSORY NOTE
On August 5, 1999, the Company's Canadian subsidiary entered into an 8 percent
promissory note with Les Agencies Claude Marchand, Inc. pursuant to the terms of
the asset purchase agreement with Les Agencies Claude Marchand, Inc. The
principal amount is $6,344,000 of which $3,172,000 is due on November 15, 2000
and $3,172,000 is due on August 6, 2001. Interest is compounded monthly and
payable quarterly. In accordance with the terms of the asset purchase agreement,
a purchase price increase of $332,000 has been estimated by the Company. The
promissory note will be amended upon concurrence of the purchase price
adjustment by the Company and Les Agencies Claude Marchand, Inc. to increase by
$332,000 to a total of $6,676,000.
6. STOCKHOLDERS' EQUITY
PREFERRED STOCK
Authorized preferred stock may be issued in one or more series, with
designations, powers and preferences as designated by the Company's Board of
Directors. At December 31, 1999 and 1998, there were no shares of preferred
stock issued and outstanding.
COMMON STOCK
On November 29, 1999 ("spin-off date"), ATI distributed all of the common stock
of the Company to the stockholders of ATI in a tax-free transaction. An
aggregate of 9,311,086 shares of common stock, par value $0.01 of the Company's
common stock were distributed in the transaction. The number of shares
distributed was based on the distribution ratio of one share of Company common
stock for every 20 shares of ATI's common stock. Following the spin-off, ATI
held no equity interest in the Company.
ALLEGHENY TELEDYNE STOCK ACQUISITION AND RETENTION PROGRAM
During 1999 and 1998, certain employees purchased ATI common stock and were
awarded restricted shares under the Allegheny Teledyne Stock Acquisition and
Retention Program ("Allegheny Teledyne SARP"). Effective November 29, 1999,
participants who purchased or designated ATI shares under the Allegheny Teledyne
SARP received 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 received 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 awarded under the Allegheny Teledyne SARP to a Company
employee were converted into 12,226 restricted shares of Company common stock as
of the spin-off date. The number of converted shares awarded was determined
based on the relationship of the ATI stock price and stock price of the Company,
so that the market value of the stock and the Company stock were equivalent
before the spin-off and immediately after the spin-off. The Allegheny Teledyne
SARP shares had a value of $150,000 when issued and the balance of the related
prepaid compensation expense of $121,000, recorded as a reduction of
stockholders' equity in the accompanying consolidated balance sheet as of the
spin-off date, is being amortized to expense on the straight-line basis over the
period of restrictions. The restrictions on these shares lapse after five years
from the original award date with restrictions lapsing from May 2003 through
August 2004. If the participant's employment with the Company is terminated
prior to the lapsing of the restrictions, the participant's interest in the
restricted shares is forfeited. These restrictions are in accordance with the
terms and conditions set forth in the original Allegheny Teledyne SARP.
STOCK ACQUISITION AND RETENTION PROGRAM
Pursuant to the Company's Stock Acquisition and Retention Program (SARP) adopted
by the Company's Board of Directors, certain key officers of the Company fully
exercised their rights on November 30, 1999 to acquire an aggregate of 333,785
shares of the Company's common stock at their quoted market price on the date of
purchase. Each officer had the right to acquire shares having an aggregate cost
of up to 200 percent of the officer's annual base salary. Payment for the
purchased shares was in the form of notes receivable by the Company from the
officers which bear interest at a rate of 6.29 percent per annum and are payable
in level monthly payments of principal and interest beginning on the fifth
anniversary of the note and continuing thereafter for the remaining term of the
note. The aggregate amount of the notes receivable from officers related to the
purchase of these shares was $2,470,000 at December 31, 1999 and was classified
as a reduction of stockholders' equity in the accompanying consolidated balance
sheet.
Further pursuant to the SARP, for every two shares purchased by an officer of
the Company under the SARP, the officer was awarded one share of restricted
common stock of the Company at no cost to the officer. The restrictions on the
restricted shares lapse, as to all such shares, on November 30, 2004. If an
officer's employment with the Company is terminated prior to the lapsing of the
restrictions, the officer's interest in the restricted shares is forfeited. As
of December 31, 1999, an aggregate
31
<PAGE> 32
of 166,892 restricted common shares had been issued by the Company which had a
recorded value of $1,235,000 at issuance based upon the closing quoted market
value of the Company's common stock on date of issuance. This amount is being
amortized to expense on the straight-line basis over the period of restrictions
and the unamortized balance is classified as a reduction of stockholders' equity
in the accompanying consolidated balance sheet.
CONVERSION OF ALLEGHENY TELEDYNE STOCK OPTIONS
During 1999 and prior years, certain employees of the Company received stock
options to acquire ATI common stock issued under ATI benefit plans. Effective
November 29, 1999, stock options outstanding under the ATI benefit plans that
were held by Company employees were converted into options to purchase shares of
Water Pik Technologies common stock. The converted stock options have the same
vesting provisions, expiration dates, and terms and conditions as the ATI stock
options they replaced. The number of options and the exercise price of the
options was adjusted in the conversion based on the relationship of the ATI
stock price and stock price of the Company, so that the "intrinsic value" (the
difference between the market value of the stock into which the options are
exercisable and the exercise price of the options outstanding) of the options
outstanding before the spin-off was equal to the intrinsic value of the options
outstanding immediately after the spin-off.
OTHER STOCK OPTIONS
In addition, the Company's Board of Directors adopted on November 12, 1999 the
Water Pik Technologies Inc. 1999 Incentive Plan and the 1999 Non-Employee
Director Stock Compensation Plan, and adopted on December 30, 1999, the 1999
Broad Based Stock Option Plan. The 1999 Incentive Plan and the 1999 Broad Based
Stock Option Plan provide for awards of up to 12 percent and 5 percent,
respectively, of the outstanding shares of the common stock of the Company to
employees of the Company. The Company grants options to non-employee directors
under the 1999 Non-Employee Director Stock Compensation Plan to purchase shares
of its common stock, at future dates at the fair market value on the date of
grant. Options become exercisable one year after the grant date. A maximum of
100,000 shares or options to acquire shares may be issued under the 1999
Non-Employee Director Stock Compensation Plan (Directors' Plan) to directors who
are not employees of the Company. As of December 31, 1999, 5,000 options had
been granted under the Directors' Plan.
STOCK OPTION INFORMATION
The following table summarizes activity of the Company employees' stock options,
including those converted from ATI options.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
NUMBER AVERAGE NUMBER AVERAGE NUMBER AVERAGE
OF EXERCISE OF EXERCISE OF EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding beginning of year 459,252 $11.54 80,866 $ 7.23 82,655 $7.23
Granted 454,333 7.69 378,386 12.45 -- --
Forfeitures (44,686) 12.87 -- -- -- --
Exercised -- -- -- -- (1,789) 7.19
-------------------------------------------------------------------
Outstanding end of year 868,899 $ 9.46 459,252 $11.54 80,866 $7.23
===================================================================
Exercisable at end of year 181,517 $10.32 54,622 $ 6.91 37,849 $6.55
===================================================================
</TABLE>
As of December 31, 1999, 1,768,000 shares were available for option grants or
awards.
Information regarding stock options outstanding as of December 31, 1999 is as
follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- --------------------------------------------------------------------------------------------------------------------------
WEIGHTED-AVERAGE
NUMBER REMAINING WEIGHTED-AVERAGE NUMBER WEIGHTED-AVERAGE
PRICE RANGE OF SHARES CONTRACTUAL LIFE EXERCISE PRICE OF SHARES EXERCISE PRICE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Under $7.00 13,776 4.8 years $ 4.76 13,776 $ 4.76
$7.00 to $11.00 557,206 9.5 years $ 7.83 69,428 $ 8.02
Over $11.00 297,917 8.6 years $12.72 98,313 $12.72
</TABLE>
Exercise prices for options outstanding as of December 31, 1999 ranged from
$4.76 to $14.47. The weighted-average remaining contractual life of those
options is 9.1 years.
32
<PAGE> 33
STOCK OPTION FAIR VALUE DISCLOSURE
The Company has adopted the disclosure-only provisions of SFAS No. 123 but
applies APB No. 25 and related interpretations in accounting for its plans. If
the Company had elected to recognize compensation cost for its stock option
plans based on the fair value at the grant dates for stock option plans
(including the converted stock options), consistent with the method prescribed
by SFAS No. 123, net income and earnings per share would have been as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999 1998 1997
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income: as reported (in thousands) $11,054 $11,495 $17,552
Net income: pro forma (in thousands) $10,719 $11,331 $17,529
Basic and diluted net income per common share: as reported $ 1.15 $ 1.17 $ 1.79
Basic and diluted net income per common share: pro forma $ 1.12 $ 1.15 $ 1.79
</TABLE>
For purposes of pro forma disclosure, the estimated fair value of the options is
amortized over the options' vesting period. Under SFAS 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>
YEAR ENDED DECEMBER 31, 1999 1998
- ------------------------------------------------------------------------------
<S> <C> <C>
Expected dividend yield 0.0% 2.9%
Expected volatility 27.0% 31.0%
Risk-free interest rate 6.2% 4.9%
Expected lives (in years) 8.0 8.0
Weighted-average fair value of options granted during year $3.66 $3.88
</TABLE>
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options. The Company's employee stock options have
characteristics significantly different from those of traded options such as
vesting restrictions and extremely limited transferability. In addition, the
assumptions used in option valuation models are highly subjective, particularly
the expected stock price volatility of the underlying stock. Because changes in
these subjective input assumptions can materially effect the fair value
estimate, in management's opinion, the existing models do not provide a reliable
single measure of the fair value of its employee stock options.
STOCKHOLDERS' RIGHTS PLAN
On November 12, 1999, the Company's Board of Directors adopted a stockholders'
rights plan under which preferred share purchase rights were authorized and
declared as a dividend on the common shares of the Company to be distributed by
ATI to its stockholders. The rights become exercisable only if a person or group
acquires 15 percent or more of the Company's common stock or announces a tender
offer, the consummation of which would result in ownership by a person or group
of 15 percent or more of the common stock. Each right will entitle stockholders
to then buy one one-hundredth of a share of Series A Junior Participating
Preferred stock at an exercise price of $60. The rights will expire on the close
of business November 12, 2009, subject to extension, earlier redemption or
exchange by the Company as described in the plan.
7. RELATED PARTY TRANSACTIONS
The accompanying financial statements include transactions with ATI as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999 1998 1997
- ----------------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Net advances from ATI, beginning of the year $ 89,124 $ 80,852 $ 85,306
Net cash transactions with ATI:
Current provision for income taxes 7,542 7,022 10,605
Insurance expense 3,594 3,948 4,263
Corporate general and administrative expense 2,292 2,358 2,412
Pension expense 1,886 1,483 1,591
Other net cash to ATI (19,311) (18,034) (40,877)
--------------------------------
Net cash transactions with ATI (3,997) (3,223) (22,006)
Transfer of ATI investment in Company (94,985) -- --
Net income allocable to ATI 9,858 11,495 17,552
--------------------------------
Net advances from ATI, end of the year $ -- $ 89,124 $ 80,852
================================
</TABLE>
33
<PAGE> 34
Prior to December 1999, the Company participated in ATI's centralized cash
management system. Cash receipts in excess of cash requirements were transferred
to ATI. Those transactions with ATI were non-interest bearing.
Corporate general and administrative expenses represent allocations for expenses
incurred by ATI on the Company's behalf including costs for finance, legal, tax
and human resources functions. These amounts were allocated within ATI based on
the net sales of the respective operations of its subsidiaries and divisions.
The Company also participated in casualty, medical and life insurance programs
sponsored by ATI. In the opinion of management, the allocations of these
expenses were reasonable. The expenses allocated for these services and programs
are not necessarily indicative of the expenses that would have been incurred if
the Company had been a separate, independent entity managing these functions.
The Company expects to incur additional general and administrative expenses,
insurance costs and other costs as a result of operating independently of ATI.
There was a payable to other ATI subsidiaries of $1,004,968 at December 31,
1999, $136,000 at December 31, 1998 and $218,000 at December 31, 1997.
In addition, prior to and in connection with the spin-off, the Company and ATI
entered into agreements providing for the separation of the companies and
governing various relationships for separating employee benefits, tax
obligations, indemnifications and interim services. A description of these
agreements follows.
SEPARATION AND DISTRIBUTION AGREEMENT
In connection with the spin-off, ATI received a tax ruling from the Internal
Revenue Service stating that the spin-off would be tax-free to ATI and its
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 within one year following the date of
the spin-off and initiation of a public offering of the Company's common stock
within eight months following the spin-off. The gross proceeds of the required
offering are to be approximately $50 million with the proceeds to be used to
further develop high quality, lower cost manufacturing capabilities, extend
existing product lines, expand the channels of distribution, develop a
self-sustaining product development process and for acquisitions and/or joint
ventures. Pursuant to the Separation and Distribution Agreement that the Company
signed prior to the date of the spin-off, the Company has agreed with ATI to
undertake such a public offering.
EMPLOYEE BENEFITS AGREEMENT
The Employee Benefits Agreement states that the Company will establish its own
qualified and nonqualified pension and other employee benefit plans and
arrangements, which generally will be the same as the ATI's plans in effect at
the time of the spin-off, except that the Company will implement an enhanced
defined contribution plan to replace ATI's defined benefit pension plan on April
1, 2000. Benefits accrued by employees of the Company under ATI's pension plan
will be frozen and will remain the obligation of the ATI pension plan which will
also retain all of the plan assets.
TAX SHARING AND INDEMNIFICATION AGREEMENT
ATI and the Company entered into a Tax Sharing and Indemnification Agreement
that 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. The Company will be
responsible for other taxes attributable to its operations.
The Tax Sharing and Indemnification Agreement provides that the Company will
indemnify ATI and its directors, officers, employees, agents and representatives
for any taxes imposed on, or other amounts paid by them, or ATI stockholders, if
the Company takes actions or fails to take actions such as completing the
required public offering, that result in the spin-off not qualifying as a
tax-free distribution. Pursuant to the Tax Sharing and Indemnification
Agreement, the Company has agreed that for a two-year period following the date
of the spin-off: (i) to continue to engage in the Company's businesses; (ii) to
continue to own and manage at least 50 percent of the assets owned directly or
indirectly immediately after the spin-off; and (iii) not to engage in a number
of specified transactions without the consent of ATI.
If the Company's obligations under the Tax Sharing and Indemnification Agreement
are breached and the spin-off fails to continue to qualify as tax-free for U.S.
federal income tax purposes as a result of such breach, the Company would be
required to satisfy the indemnification obligations described above which could
exceed the Company's net worth at that time.
34
<PAGE> 35
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, the Company 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.
8. INCOME TAXES
The Company was included in the consolidated federal and certain state income
tax returns of ATI through the date of the spin-off. ATI made any required tax
payments as part of its consolidated tax returns. Provision for income taxes
were calculated as if the Company had filed separate income tax returns.
Provision for income taxes is comprised of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999 1998 1997
- -----------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal $6,355 $6,070 $ 9,115
State 1,406 952 1,490
---------------------------
Total 7,761 7,022 10,605
Deferred:
Federal 5 599 701
State -- 42 58
---------------------------
Total 5 641 759
---------------------------
Provision for income taxes $7,766 $7,663 $11,364
===========================
</TABLE>
The following is a reconciliation of the statutory federal income tax rate to
the actual effective income tax rate:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999 1998 1997
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal tax rate 35.0% 35.0% 35.0%
State and local income taxes, net of federal tax benefit 5.0 3.5 3.4
Other 1.3 1.5 0.9
--------------------
Effective income tax rate 41.3% 40.0% 39.3%
====================
</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 values of assets acquired in business combinations
accounted for as purchases for financial reporting purposes and their
corresponding tax basis. Deferred income taxes represent future tax benefits or
costs to be recognized when those temporary differences 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>
DECEMBER 31, 1999 1998
- -------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Deferred income tax assets:
Accrued liabilities $ 9,884 $4,603
Inventories 1,381 1,496
Intangible assets 178 8
Other 16 16
-----------------
Total deferred income tax assets 11,459 6,123
Deferred income tax liabilities:
Depreciation and amortization (973) (114)
-----------------
Total deferred income tax liabilities (973) (114)
-----------------
Net deferred income tax asset $10,486 $6,009
=================
</TABLE>
As of the spin-off date, November 29, 1999, a deferred income tax asset of
$4,482,000 was transferred from ATI related to certain accrued liabilities
transferred from ATI on that date.
9. PENSION PLAN AND RETIREMENT BENEFITS
Certain of the Company's employees participate in the noncontributory defined
benefit plan sponsored by ATI. Benefits under this defined benefit plan are
generally based on years of service and/or final average pay. ATI funds the
pension plan in accordance with the requirements of the Employee Retirement
Income Security Act of 1974, as amended, and the Internal
35
<PAGE> 36
Revenue Code. Subsequent to the spin-off of the Company, ATI has retained the
obligation associated with the Company's employees that participate in this
plan.
Net periodic pension expense associated with the ATI defined benefit plan
allocated to the Company was $1,886,000, $1,483,000 and $1,591,000 in the years
ended December 31, 1999, 1998 and 1997, respectively.
The Company participates in a defined contribution plan sponsored by ATI
maintained for substantially all of its employees. The costs associated with
this plan were $593,000, $616,000 and $279,000 in 1999, 1998 and 1997,
respectively. On April 1, 2000, the Company will establish its own defined
contribution plan in lieu of the ATI defined benefit plan.
10. COMMITMENTS AND CONTINGENCIES
COMMITMENTS
Rental expense under operating leases was $1,994,000 in 1999, $1,699,000 in 1998
and $1,520,000 in 1997. Future minimum rental commitments under operating leases
with noncancelable terms of more than one year as of December 31, 1999, were as
follows: $652,000 in 2000, $343,000 in 2001, $183,000 in 2002, $98,000 in 2003
and $2,000 in 2004.
CONTINGENCIES
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.
11. EARNINGS PER SHARE
A reconciliation of weighted average shares outstanding, used to calculate basic
net income per common share, to weighted average shares outstanding assuming
dilution, used to calculate diluted net income per common share, follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999 1998 1997
- -------------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Average outstanding common shares -- basic 9,587 9,837 9,830
Shares issuable upon exercise of dilutive options 7 1 1
-----------------------------
Average outstanding common shares -- diluted 9,594 9,838 9,831
=============================
Net income amount used to report both basic and diluted per
share information $11,054 $11,495 $17,552
=============================
</TABLE>
Shares issuable upon exercise of dilutive options and the diluted effect of
restricted shares are determined using the treasury stock method.
Options to purchase 356,000, 138,000, and no shares with exercise prices greater
than the average market prices of common stock were outstanding during 1999,
1998 and 1997, respectively. These options were excluded from the respective
computations of diluted earnings per share because their effect would be
anti-dilutive.
12. ACQUISITIONS
In August 1999, the Company 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 $6,344,000 promissory
note to be amended upon calculation of a purchase price adjustment in accordance
with the terms of the asset purchase agreement. The estimated purchase price
adjustment is an increase of $332,000. In connection with the purchase, the
Company acquired $2,053,000 of working capital and $3,175,000 of property, plant
and equipment, and assumed $794,000 of liabilities. 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 supplies to white goods, ladders, solar reels, floating lounges, and
pool toys and games. Olympic distributes it products in Canada, Europe and the
United States.
Had Olympic been purchased as of January 1, 1999, pro-forma sales, net income,
basic and diluted net income per common share would have been approximately
$269,000,000, $12,000,000, $1.25 and $1.25, respectively, for the year ended
36
<PAGE> 37
December 31, 1999. Had Olympic been purchased as of January 1, 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.
In August 1998, the Company 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 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.
These acquisitions were accounted for as purchases and their operations are
included in the Company's consolidated financial statements from the respective
dates of acquisition.
13. BUSINESS SEGMENTS
Water Pik Technologies operates in two business segments: Personal Health Care
and Pool Products and Heating Systems which are organized around the Company's
products. The Personal Health Care segment designs, manufactures and markets
showerheads, oral health and water filtration product lines. The Pool Products
and Heating Systems segment designs, manufactures and markets swimming pool and
spa equipment, controls and accessories as well as water-heating products for
commercial, residential and industrial applications.
Information on the Company's business segments is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999 1998 1997
- ----------------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Sales:
Personal Health Care $123,957 $125,763 $141,792
Pool Products and Heating Systems 130,730 110,025 99,375
--------------------------------
Total sales $254,687 $235,788 $241,167
================================
Operating profit:
Personal Health Care $ 7,982 $ 9,426 $ 19,552
Pool Products and Heating Systems 11,222 9,606 8,832
--------------------------------
Total operating profit 19,204 19,032 28,384
Interest expense (582) -- --
Other income 198 126 532
--------------------------------
Income before income taxes $ 18,820 $ 19,158 $ 28,916
================================
Depreciation and amortization:
Personal Health Care $ 4,196 $ 3,234 $ 3,706
Pool Products and Heating Systems 4,295 3,090 2,682
--------------------------------
Total depreciation and amortization $ 8,491 $ 6,324 $ 6,388
================================
Capital expenditures:
Personal Health Care $ 6,153 $ 5,194 $ 4,390
Pool Products and Heating Systems 2,409 3,456 2,090
Corporate 22 -- --
--------------------------------
Total capital expenditures $ 8,584 $ 8,650 $ 6,480
================================
Identifiable assets:
Personal Health Care $ 44,657 $ 43,890 $ 50,559
Pool Products and Heating Systems 101,372 76,686 62,765
Corporate 14,467 7,218 6,650
--------------------------------
Total identifiable assets $160,496 $127,794 $119,974
================================
</TABLE>
Total foreign sales were $36,491,000 in 1999, $37,585,000 in 1998 and
$41,100,000 in 1997. Of these amounts, sales by operations in the United States
to customers in other countries were $28,168,000 in 1999, $28,482,000 in 1998
and
37
<PAGE> 38
$31,499,000 in 1997. There were no sales to individual countries outside of the
United States in excess of 10 percent of the Company's net sales.
14. QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
- ----------------------------------------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<S> <C> <C> <C> <C>
1999:
Sales $53,599 $64,863 $58,026 $78,199
Gross profit 20,527 25,162 22,183 31,106
Net income 1,357 2,779 1,953 4,965
Net income per share -- basic and diluted $ 0.14 $ 0.29 $ 0.21 $ 0.52
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
Net income per share -- basic and diluted $ 0.06 $ 0.29 $ 0.31 $ 0.52
</TABLE>
ITEM 9 CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The information required by this Item (other than the information regarding
executive officers set forth at the end of Item 1 of Part I of this Form 10-K)
will be contained in the Company's definitive Proxy Statement for its 2000
Annual Meeting of Stockholders and is incorporated herein by reference.
CHARLES J. QUEENAN, JR.(3)
Senior Counsel to Kirkpatrick & Lockhart LLP
JAMES E. ROHR(1,3)
President of PNC Bank Corp.
MICHAEL P. HOOPIS(2)
President and Chief Executive Officer of Water Pik Technologies, Inc.
WILLIAM G. OUCHI(1,3,4)
Sanford and Betty Sigoloff Professor in Corporate Renewal at the Anderson
Graduate School of Management, University of California at Los Angeles
ROBERT P. BOZZONE
Former Vice Chairman of the Board of Directors of Allegheny Technologies
Incorporated (formerly known as Allegheny Teledyne Incorporated)
W. CRAIG MCCLELLAND(1,2,4)
Retired Chairman and Chief Executive Officer of Union Camp Corporation
(1) Audit and Finance Committee
(2) Committee on Governance
(3) Personnel and Compensation Committee
(4) Stock Incentive Award Subcommittee
ITEM 11 EXECUTIVE COMPENSATION
The information required by this Item will be contained in the Company's
definitive Proxy Statement for its 2000 Annual Meeting of Stockholders and is
incorporated herein by reference.
38
<PAGE> 39
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item will be contained in the Company's
definitive Proxy Statement for its 2000 Annual Meeting of Stockholders and is
incorporated herein by reference.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item will be contained in the Company's
definitive Proxy statement for its 2000 Annual Meeting of Stockholders and is
incorporated herein by reference.
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(a) Exhibits and Financial Statements Schedules:
1) FINANCIAL STATEMENTS
The following consolidated financial statements included on pages 22 through 38
of this Report.
Report of Ernst & Young LLP, Independent Auditors
Consolidated Balance Sheets at December 31, 1999 and 1998
Consolidated Statements of Income for the years ended December 31, 1999, 1998
and 1997
Consolidated Statements of Cash Flows for the years ended December 31, 1999,
1998 and 1997
Consolidated Statements of Stockholders' Equity for the years ended December 31,
1999, 1998 and 1997
Notes to Consolidated Financial Statements
2) SUPPLEMENTAL SCHEDULES
SCHEDULE II -- QUALIFYING ACCOUNTS AND RESERVES
(IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
--------------------------
ADDITIONS
--------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COST & OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1999
Deducted from Asset Accounts:
Allowance for Doubtful Accounts $1,756 $ 858 $ -- $1,242(a) $1,372
Liability Reserves:
Warranty Reserves 3,165 2,397 -- 2,224 3,338
Product Liability Reserves -- -- 9,875(b) -- 9,875
Year ended December 31, 1998
Deducted from Asset Accounts:
Allowance for Doubtful Accounts 1,952 236 -- 432(a) 1,756
Liability Reserves:
Warranty Reserves 3,047 2,682 150(c) 2,714 3,165
Product Liability Reserves -- -- -- -- --
Year ended December 31, 1997
Deducted from Asset Accounts:
Allowance for Doubtful Accounts 1,705 410 -- 163(a) 1,952
Liability Reserves:
Warranty Reserves 3,141 5,794 -- 5,888 3,047
Product Liability Reserves -- -- -- -- --
</TABLE>
(a) Uncollectable accounts written off net of recoveries
(b) Reserves transferred from ATI at spin-off
(c) Purchase of Trianco Heatmaker assets and liabilities
39
<PAGE> 40
All other schedules have been omitted because the information is not required or
because it has been included in the Consolidated Financial Statements or Notes
thereto.
3) EXHIBITS
A list of exhibits included in this Report or incorporated by reference is found
in the Exhibit Index set forth below.
(a)(3) Exhibit Index:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------------------------------------------------------------------------
<S> <C> <C>
2.1 Separation and Distribution Agreement dated November 29,
1999 by and among Allegheny Teledyne Incorporated, TDY
Holdings, LLC, Teledyne Industries, Inc. and Water Pik
Technologies, Inc. (Incorporated by reference from Exhibit
No. 2.1 to Water Pik Technologies, Inc.'s Current Report on
Form 8-K filed with the Commission on December 1, 1999.)
3.1 Restated Certificate of Incorporation of Water Pik
Technologies, Inc., as amended. (Filed herewith.)
3.2 Amended and Restated Bylaws of Water Pik Technologies, Inc.
(Incorporated by reference from Exhibit 3.2 to Water Pik
Technologies, Inc.'s Registration Statement on Form 10 (File
No. 1-15297) ("Form 10")).
4.1 Rights Agreement dated November 12, 1999 between Water Pik
Technologies, Inc. and ChaseMellon Shareholder Services,
L.L.C., as Rights Agent. (Incorporated by reference from
Exhibit 4.1 to Water Pik Technologies, Inc.'s Current Report
on Form 8-K filed with the Commission on December 1, 1999.)
4.2 Restated Credit Agreement dated as of November 29, 1999
among Water Pik Technologies, Inc. and Laars, Inc., the
Guarantors and Lenders named therein, and The Chase
Manhattan Bank, as agent for the Lenders (the "Restated
Credit Agreement"). (Filed herewith.)
4.3 Form of Revolving Credit Note of Water Pik Technologies,
Inc. pursuant to the Restated Credit Agreement, together
with schedule. (Filed herewith.)
4.4 Pledge Agreement and Irrevocable Proxy of Water Pik
Technologies, Inc. pursuant to the Restated Credit
Agreement. (Filed herewith.)
4.5 Security Agreement of Water Pik Technologies, Inc. pursuant
to the Restated Credit Agreement. (Filed herewith.)
4.6 Water Pik Technologies, Inc.'s Security Agreement and
Mortgage-Trademarks and Patents pursuant to the Restated
Credit Agreement. (Filed herewith.)
4.7 Guarantee of Water Pik Technologies, Inc. pursuant to the
Restated Credit Agreement. (Filed herewith.)
4.8 Revolving Line of Credit Facility between Water Pik Canada
Ltd. and Banque Nationale de Paris (Canada), as amended.
(Filed herewith.)
10.1 Tax Sharing and Indemnification Agreement dated November 29,
1999 between Water Pik Technologies, Inc. and Allegheny
Teledyne Incorporated. (Incorporated by reference from
Exhibit 10.1 to Water Pik Technologies, Inc.'s Current
Report on Form 8-K filed with the Commission on December 1,
1999.)
10.2 Interim Services Agreement dated November 29, 1999 between
Water Pik Technologies, Inc. and Allegheny Teledyne
Incorporated. (Incorporated by reference from Exhibit 10.2
to Water Pik Technologies, Inc.'s Current Report on Form 8-K
filed with the Commission on December 1, 1999.)
10.3 Employee Benefits Agreement dated November 29, 1999 between
Water Pik Technologies, Inc. and Allegheny Teledyne
Incorporated. (Incorporated by reference from Exhibit 10.3
to Water Pik Technologies, Inc.'s Current Report on Form 8-K
filed with the Commission on December 1, 1999.)
* 10.4 [Amended and Restated Employment Agreement of Michael P.
Hoopis. (Incorporated by reference from Exhibit 10.4 to
Water Pik Technologies, Inc.'s Registration Statement on
Form 10.)]
* 10.5 [Employment Agreement dated December 1, 1999 between Water
Pik Technologies, Inc. and Robert J. Rasp. (Filed
herewith.)]
* 10.6 Form of Employment Agreement entered into with certain
executives of Water Pik Technologies, Inc., together with
schedule. (Filed herewith.)
* 10.7 Form of Employment Agreement entered into with certain
executives of Water Pik Technologies, Inc., together with
schedule. (Incorporated by reference from Exhibit 10.5 to
Water Pik Technologies, Inc.'s Registration Statement on
Form 10).
* 10.8 Form of Amendment to Employment Agreement with certain
executives of Water Pik Technologies, Inc., together with
schedule. (Filed herewith.)
</TABLE>
40
<PAGE> 41
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------------------------------------------------------------------------
<S> <C> <C>
* 10.9 Executive Deferred Compensation Plan of Water Pik
Technologies, Inc. (Incorporated by reference from Exhibit
No. 4.1 of Water Pik Technologies, Inc.'s Registration
Statement on Form S-8. (File No. 333-30016.)
* 10.10 1999 Non-Employee Director Stock Compensation Plan of Water
Pik Technologies, Inc. (Filed herewith.)
* 10.11 1999 Incentive Plan of Water Pik Technologies, Inc. (Filed
herewith.)
* 10.12 Fee Continuation Plan for Non-Employee Directors of Water
Pik Technologies, Inc. (Filed herewith.)
* 10.13 Employee Stock Purchase Plan of Water Pik Technologies, Inc.
(Filed herewith.)
21.1 Subsidiaries of Water Pik Technologies, Inc. (Incorporated
by reference from Exhibit 21.1 to Water Pik Technologies,
Inc.'s Registration Statement on Form 10.)
23.1 Consent of Ernst & Young LLP, independent public
accountants. (Filed herewith.)
27.1 Financial Data Schedule. (Filed herewith.)
</TABLE>
* Management contract or compensatory plan or arrangement.
The registrant hereby agrees to furnish supplementally to the Commission, upon
request, a copy of any omitted schedule to any of the agreements contained or
incorporated by reference herein.
(b) Reports on Form 8-K Filed in the Fourth Quarter of 1999:
Current Report on Form 8-K under Item 5 was filed by Water Pik Technologies,
Inc. on December 1, 1999 (with respect to a press release concerning ATI's
distribution of all of the Registrant's common stock to the stockholders of ATI
in a tax-free transaction).
(c) Exhibits
See subsection (a)(3) above.
(d) Financial Statement Schedules
See subsections (a)(1) and (2) above.
41
<PAGE> 42
SIGNATURES
Pursuant to the requirements of Section 13 or 13(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
WATER PIK TECHNOLOGIES, INC.
Date: March 24, 2000
By: /s/ MICHAEL P. HOOPIS
------------------------------------
MICHAEL P. HOOPIS
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ---- ----- ----
<S> <C> <C>
/s/ MICHAEL P. HOOPIS
- ----------------------------------
MICHAEL P. HOOPIS President, Chief Executive Officer
and a Director (Principal Executive
Officer) March 24, 2000
/s/ VICTOR C. STREUFERT
- ----------------------------------
VICTOR C. STREUFERT Vice President and
Chief Financial Officer
(Principal Accounting and Financial
Officer) March 24, 2000
/s/ ROBERT P. BOZZONE
- ----------------------------------
ROBERT P. BOZZONE Director March 24, 2000
/s/ W. CRAIG MCCLELLAND
- ----------------------------------
W. CRAIG MCCLELLAND Director March 24, 2000
/s/ WILLIAM G. OUCHI
- ----------------------------------
WILLIAM G. OUCHI Director March 23, 2000
/s/ CHARLES J. QUEENAN, JR.
- ----------------------------------
CHARLES J. QUEENAN, JR. Director March 23, 2000
/s/ JAMES E. ROHR
- ----------------------------------
JAMES E. ROHR Director March 24, 2000
</TABLE>
42
<PAGE> 43
EXHIBIT INDEX:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------------------------------------------------------------------------
<S> <C> <C>
2.1 Separation and Distribution Agreement dated November 29,
1999 by and among Allegheny Teledyne Incorporated, TDY
Holdings, LLC, Teledyne Industries, Inc. and Water Pik
Technologies, Inc. (Incorporated by reference from Exhibit
No. 2.1 to Water Pik Technologies, Inc.'s Current Report on
Form 8-K filed with the Commission on December 1, 1999.)
3.1 Restated Certificate of Incorporation of Water Pik
Technologies, Inc., as amended. (Filed herewith.)
3.2 Amended and Restated Bylaws of Water Pik Technologies, Inc.
(Incorporated by reference from Exhibit 3.2 to Water Pik
Technologies, Inc.'s Registration Statement on Form 10 (File
No. 1-15297) ("Form 10")).
4.1 Rights Agreement dated November 12, 1999 between Water Pik
Technologies, Inc. and ChaseMellon Shareholder Services,
L.L.C., as Rights Agent. (Incorporated by reference from
Exhibit 4.1 to Water Pik Technologies, Inc.'s Current Report
on Form 8-K filed with the Commission on December 1, 1999.)
4.2 Restated Credit Agreement dated as of November 29, 1999
among Water Pik Technologies, Inc. and Laars, Inc., the
Guarantors and Lenders named therein, and The Chase
Manhattan Bank, as agent for the Lenders (the "Restated
Credit Agreement"). (Filed herewith.)
4.3 Form of Revolving Credit Note of Water Pik Technologies,
Inc. pursuant to the Restated Credit Agreement, together
with schedule. (Filed herewith.)
4.4 Pledge Agreement and Irrevocable Proxy of Water Pik
Technologies, Inc. pursuant to the Restated Credit
Agreement. (Filed herewith.)
4.5 Security Agreement of Water Pik Technologies, Inc. pursuant
to the Restated Credit Agreement. (Filed herewith.)
4.6 Water Pik Technologies, Inc.'s Security Agreement and
Mortgage-Trademarks and Patents pursuant to the Restated
Credit Agreement. (Filed herewith.)
4.7 Guarantee of Water Pik Technologies, Inc. pursuant to the
Restated Credit Agreement. (Filed herewith.)
4.8 Revolving Line of Credit Facility between Water Pik Canada
Ltd. and Banque Nationale de Paris (Canada), as amended.
(Filed herewith.)
10.1 Tax Sharing and Indemnification Agreement dated November 29,
1999 between Water Pik Technologies, Inc. and Allegheny
Teledyne Incorporated. (Incorporated by reference from
Exhibit 10.1 to Water Pik Technologies, Inc.'s Current
Report on Form 8-K filed with the Commission on December 1,
1999.)
10.2 Interim Services Agreement dated November 29, 1999 between
Water Pik Technologies, Inc. and Allegheny Teledyne
Incorporated. (Incorporated by reference from Exhibit 10.2
to Water Pik Technologies, Inc.'s Current Report on Form 8-K
filed with the Commission on December 1, 1999.)
10.3 Employee Benefits Agreement dated November 29, 1999 between
Water Pik Technologies, Inc. and Allegheny Teledyne
Incorporated. (Incorporated by reference from Exhibit 10.3
to Water Pik Technologies, Inc.'s Current Report on Form 8-K
filed with the Commission on December 1, 1999.)
* 10.4 [Amended and Restated Employment Agreement of Michael P.
Hoopis. (Incorporated by reference from Exhibit 10.4 to
Water Pik Technologies, Inc.'s Registration Statement on
Form 10.)]
* 10.5 [Employment Agreement dated December 1, 1999 between Water
Pik Technologies, Inc. and Robert J. Rasp. (Filed
herewith.)]
* 10.6 Form of Employment Agreement entered into with certain
executives of Water Pik Technologies, Inc., together with
schedule. (Filed herewith.)
* 10.7 Form of Employment Agreement entered into with certain
executives of Water Pik Technologies, Inc., together with
schedule. (Incorporated by reference from Exhibit 10.5 to
Water Pik Technologies, Inc.'s Registration Statement on
Form 10).
* 10.8 Form of Amendment to Employment Agreement with certain
executives of Water Pik Technologies, Inc., together with
schedule. (Filed herewith.)
* 10.9 Executive Deferred Compensation Plan of Water Pik
Technologies, Inc. (Incorporated by reference from Exhibit
No. 4.1 of Water Pik Technologies, Inc.'s Registration
Statement on Form S-8. (File No. 333-30016.)
* 10.10 1999 Non-Employee Director Stock Compensation Plan of Water
Pik Technologies, Inc. (Filed herewith.)
* 10.11 1999 Incentive Plan of Water Pik Technologies, Inc. (Filed
herewith.)
* 10.12 Fee Continuation Plan for Non-Employee Directors of Water
Pik Technologies, Inc. (Filed herewith.)
* 10.13 Employee Stock Purchase Plan of Water Pik Technologies, Inc.
(Filed herewith.)
</TABLE>
<PAGE> 44
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------------------------------------------------------------------------
<S> <C> <C>
21.1 Subsidiaries of Water Pik Technologies, Inc. (Incorporated
by reference from Exhibit 21.1 to Water Pik Technologies,
Inc.'s Registration Statement on Form 10.)
23.1 Consent of Ernst & Young LLP, independent public
accountants. (Filed herewith.)
27.1 Financial Data Schedule. (Filed herewith.)
</TABLE>
* Management contract or compensatory plan or arrangement.
The registrant hereby agrees to furnish supplementally to the Commission, upon
request, a copy of any omitted schedule to any of the agreements contained or
incorporated by reference herein.
<PAGE> 1
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
WATER PIK TECHNOLOGIES, INC.
The name of the corporation is Water Pik Technologies, Inc. The
corporation's original Certificate of Incorporation was filed with the Secretary
of the State of Delaware on August 23, 1999.
This Restated Certificate of Incorporation restates and integrates and
also further amends the Certificate of Incorporation of the corporation, as
heretofore amended and supplemented, and was duly adopted in accordance with
the provisions of Sections 242 and 245 of the General Corporation Law of the
State of Delaware.
This Restated Certificate of Incorporation shall become effective upon
filing with the Delaware Secretary of State.
* * * * *
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
<PAGE> 2
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:
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
-2-
<PAGE> 3
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 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
-3-
<PAGE> 4
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.
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
-4-
<PAGE> 5
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 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
-5-
<PAGE> 6
(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 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.
-6-
<PAGE> 7
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 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
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<PAGE> 8
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
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
-8-
<PAGE> 9
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.
IN WITNESS WHEREOF, the corporation has caused this certificate to be
executed by the undersigned duly authorized officer on November 29, 1999.
WATER PIK TECHNOLOGIES, INC.
By: /s/ Michael P. Hoopis
----------------------------------------
Michael P. Hoopis
Title: President and Chief Executive Officer
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<PAGE> 10
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 November 12, 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.
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
<PAGE> 11
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
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:
2
<PAGE> 12
(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 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
3
<PAGE> 13
(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 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
4
<PAGE> 14
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 the undersigned duly authorized officer this 12th
day of November, 1999.
/s/ Michael P. Hoopis
-------------------------------------
Michael P. Hoopis
President and Chief Executive Officer
5
<PAGE> 1
EXHIBIT 4.2
======================================
RESTATED CREDIT AGREEMENT
Dated as of November 29, 1999
Among
WATER PIK, INC. AND LAARS, INC.
THE GUARANTORS NAMED HEREIN,
THE LENDERS NAMED HEREIN,
and
THE CHASE MANHATTAN BANK, AS AGENT
======================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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<S> <C> <C>
I. DEFINITIONS ............................................................. 2
SECTION 1.01. Certain Defined Terms .................................... 2
SECTION 1.02. Accounting Terms ......................................... 25
II. THE LOANS ............................................................... 25
SECTION 2.01. Revolving Credit Commitments ............................. 25
SECTION 2.02. Loans .................................................... 27
SECTION 2.03. Notice of Loans .......................................... 29
SECTION 2.04. Notes; Repayment of Loans ................................ 29
SECTION 2.05. Interest on Loans ........................................ 31
SECTION 2.06. Fees ..................................................... 31
SECTION 2.07. Termination and Reduction of Revolving Credit
Commitments ............................................ 32
SECTION 2.08. Interest on Overdue Amounts; Alternate Rate of Interest .. 32
SECTION 2.09. Additional Repayment of Loans ............................ 33
SECTION 2.10. Reserve Requirements; Change in Circumstances ............ 36
SECTION 2.11. Change in Legality ....................................... 38
SECTION 2.12. Indemnity ................................................ 39
SECTION 2.13. Pro Rata Treatment; Assumption by and Delegation of
Authority to the Agent ................................. 40
SECTION 2.14. Sharing of Setoffs ....................................... 42
SECTION 2.15. Payments and Computations ................................ 43
SECTION 2.16. Taxes .................................................... 44
SECTION 2.17. Issuance of Letters of Credit ............................ 47
SECTION 2.18. Payment of Letters of Credit; Reimbursement .............. 48
SECTION 2.19. Agent's Actions with respect to Letters of Credit ........ 50
SECTION 2.20. Letter of Credit Fees .................................... 50
III. COLLATERAL SECURITY ..................................................... 51
SECTION 3.01. Security Documents ....................................... 51
SECTION 3.02. Filing and Recording ..................................... 51
IV. REPRESENTATIONS AND WARRANTIES .......................................... 52
SECTION 4.01. Organization, Legal Existence ............................ 52
SECTION 4.02. Authorization ............................................ 52
SECTION 4.03. Governmental Approvals ................................... 52
SECTION 4.04. Binding Effect ........................................... 53
SECTION 4.05. Material Adverse Change .................................. 53
SECTION 4.06. Litigation; Compliance with Laws; etc .................... 53
SECTION 4.07. Financial Statements ..................................... 53
SECTION 4.08. Federal Reserve Regulations .............................. 54
SECTION 4.09. Taxes .................................................... 55
SECTION 4.10. Employee Benefit Plans ................................... 55
SECTION 4.11. No Material Misstatements ................................ 57
</TABLE>
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<TABLE>
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SECTION 4.12. Investment Company Act; Public Utility Holding Company
Act .................................................... 57
SECTION 4.13. Security Interest ........................................ 57
SECTION 4.14. Use of Proceeds .......................................... 57
SECTION 4.15. Subsidiaries ............................................. 57
SECTION 4.16. Title to Properties; Possession Under Leases;
Trademarks ............................................. 57
SECTION 4.17. Solvency ................................................. 58
SECTION 4.18. Permits, etc ............................................. 59
SECTION 4.19. Compliance with Environmental Laws ....................... 59
SECTION 4.20. No Change in Credit Criteria or Collection Policies ...... 60
SECTION 4.21. Employee Matters ......................................... 60
SECTION 4.22. Year 2000 ................................................ 60
V. CONDITIONS OF CREDIT EVENTS ............................................. 61
SECTION 5.01. All Credit Events ........................................ 61
SECTION 5.02. First Borrowing .......................................... 61
VI. AFFIRMATIVE COVENANTS ................................................... 66
SECTION 6.01. Legal Existence .......................................... 66
SECTION 6.02. Businesses and Properties ................................ 66
SECTION 6.03. Insurance ................................................ 67
SECTION 6.04. Taxes .................................................... 67
SECTION 6.05. Financial Statements, Reports, etc. ...................... 68
SECTION 6.06. Litigation and Other Notices ............................. 71
SECTION 6.07. ERISA .................................................... 72
SECTION 6.08. Maintaining Records; Access to Properties and
Inspections; Right to Audit ............................ 73
SECTION 6.09. Use of Proceeds .......................................... 73
SECTION 6.10. Fiscal Year-End .......................................... 73
SECTION 6.11. Further Assurances ....................................... 73
SECTION 6.12. Additional Grantors and Guarantors ....................... 73
SECTION 6.13. Environmental Laws ....................................... 74
SECTION 6.14. Pay Obligations to Lenders and Perform Other Covenants ... 76
SECTION 6.15. Maintain Operating Accounts .............................. 76
SECTION 6.16. Year 2000 ................................................ 76
VII. NEGATIVE COVENANTS ...................................................... 76
SECTION 7.01. Liens .................................................... 77
SECTION 7.02. Sale and Lease-Back Transactions ......................... 78
SECTION 7.03. Indebtedness ............................................. 78
SECTION 7.04. Dividends, Distributions and Payments .................... 79
SECTION 7.05. Consolidations, Mergers and Sales of Assets .............. 79
SECTION 7.06. Investments .............................................. 80
SECTION 7.07. Rental Obligations ....................................... 82
SECTION 7.08. Leverage Ratio ........................................... 82
SECTION 7.09. Fixed Charge Coverage Ratio; EBITDA ...................... 83
SECTION 7.10. Interest Coverage Ratio .................................. 83
</TABLE>
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<TABLE>
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SECTION 7.11. Business ................................................. 83
SECTION 7.12. Sales of Receivables ..................................... 83
SECTION 7.13. Use of Proceeds .......................................... 84
SECTION 7.14. ERISA .................................................... 84
SECTION 7.15. Accounting Changes ....................................... 84
SECTION 7.16. Prepayment or Modification of Indebtedness; Modification
of Charter Documents ................................... 84
SECTION 7.17. Transactions with Affiliates ............................. 84
SECTION 7.18. Consulting Fees .......................................... 85
SECTION 7.19. Negative Pledges, etc .................................... 85
VIII. EVENTS OF DEFAULT ....................................................... 85
IX. AGENT ................................................................... 89
X. MANAGEMENT, COLLECTION AND STATUS OF RECEIVABLES AND
OTHER COLLATERAL ........................................................ 93
SECTION 10.01. Collection of Receivables; Management of Collateral ..... 93
SECTION 10.02. Receivables Documentation ............................... 95
SECTION 10.03. Status of Receivables and Other Collateral .............. 96
SECTION 10.04. Monthly Statement of Account ............................ 97
SECTION 10.05. Collateral Custodian .................................... 97
XI. MISCELLANEOUS ........................................................... 97
SECTION 11.01. Notices ................................................. 97
SECTION 11.02. Survival of Agreement ................................... 98
SECTION 11.03. Successors and Assigns; Participations .................. 98
SECTION 11.04. Expenses; Indemnity ..................................... 102
SECTION 11.05. Applicable Law .......................................... 103
SECTION 11.06. Right of Setoff ......................................... 103
SECTION 11.07. Payments on Business Days ............................... 103
SECTION 11.08. Waivers; Amendments ..................................... 104
SECTION 11.09. Severability ............................................ 105
SECTION 11.10. Entire Agreement; Waiver of Jury Trial, etc ............. 105
SECTION 11.11. Confidentiality ......................................... 106
SECTION 11.12. Submission to Jurisdiction .............................. 106
SECTION 11.13. Counterparts; Facsimile Signature ....................... 107
SECTION 11.14. Headings ................................................ 107
XII. GUARANTEES .............................................................. 107
</TABLE>
iii
<PAGE> 5
EXHIBITS
EXHIBIT A Form of Revolving Credit Note
EXHIBIT B Form of Opinion of Counsel
EXHIBIT C Form of Pledge Agreement
EXHIBIT D Form of Security Agreement
EXHIBIT E Form of Assignment and Acceptance
EXHIBIT F Form of Security Agreement - Patents and Trademarks
EXHIBIT G Form of Guarantee
SCHEDULES
SCHEDULE 2.01 Revolving Credit Commitments
SCHEDULE 2.02 Domestic Lending Offices
SCHEDULE 2.03 Eurodollar Lending Offices
SCHEDULE 4.01 Qualified Jurisdictions
SCHEDULE 4.05 Material Adverse Change
SCHEDULE 4.06(a) Litigation
SCHEDULE 4.06(b) Compliance with Laws
SCHEDULE 4.10 Employee Benefit Plans
SCHEDULE 4.15 Subsidiaries
SCHEDULE 4.19 Environmental Law Compliance
SCHEDULE 4.21 Employee Matters
SCHEDULE 6.05(g) Inventory Designations
SCHEDULE 6.05(k) Borrowing Base Certificate
SCHEDULE 7.01 Existing Liens
SCHEDULE 7.03 Existing Indebtedness
SCHEDULE 7.07 Rental Obligations
iv
<PAGE> 6
RESTATED CREDIT AGREEMENT dated as of November 29,
1999, among WATER PIK, INC., a Delaware corporation
("Water Pik") and LAARS, INC., a Delaware
corporation ("Laars" and, together with Water Pik,
the "Borrowers"), the Guarantors named herein and
signatories hereto, the financial institutions from
time to time party hereto, initially consisting of
those financial institutions listed on Schedule 2.01
annexed hereto (collectively, the "Lenders"), and
THE CHASE MANHATTAN BANK, as agent for the Lenders
(in such capacity, the "Agent").
Allegheny Teledyne Incorporated ("ATI") and the Lenders are
parties to the Credit Agreement, dated as of November 29, 1999 (as in effect on
the date hereof, the "Existing Credit Agreement") providing for a loan to be
made to ATI in the principal amount not exceeding $34,000,000. Immediately prior
to the execution and delivery of this Agreement, the Borrowers, ATI and the
Lenders entered into an assumption agreement pursuant to which the Borrowers
assumed the existing obligations of ATI under the Existing Credit Agreement.
The Borrowers, the Lenders and the Agent have agreed to amend and
restate the Existing Credit Agreement to provide for such amendments on the
terms set forth in this Agreement, which Agreement shall become effective upon
the satisfaction of certain conditions precedent set forth herein.
It is the intent of the parties hereto that this Agreement not
constitute a novation of the obligations and liabilities existing under the
Existing Credit Agreement or evidence payment of all or any such obligations and
liabilities, that this Agreement restate in its entirety the Existing Credit
Agreement, and that from and after the Closing Date the Existing Credit
Agreement be of no further force or effect except as to evidence the incurrence
of the obligations thereunder.
Accordingly, in consideration of the mutual covenants contained
herein and subject to the satisfaction of the conditions set forth herein, the
Borrowers, the Lenders and the Agent hereby agree as follows:
The Borrowers have applied to the Lenders for Loans (such term and
all other capitalized terms used in this paragraph having the respective
meanings ascribed to such terms above or hereinafter) in the form of Revolving
Credit Loans to the Borrowers at any time and from time to time prior to the
Revolving Credit Termination Date in an aggregate principal amount not in excess
of $60,000,000 at any time outstanding. The proceeds of the Revolving Credit
Loans shall be used for general working capital and corporate purposes,
including, without limitation, Capital Expenditures and Permitted Acquisitions.
Holdings will guarantee the Loans in accordance with the provisions of a
Guarantee the execution and delivery of which shall be a precondition to the
effectiveness
<PAGE> 7
of this Agreement. The Grantors will provide Collateral in accordance with the
provisions of this Agreement and the Security Documents. The Lenders are
severally, and not jointly, willing to extend such Loans to the Borrowers
subject to the terms and conditions hereinafter set forth. Accordingly, the
Borrowers, the Guarantors, the Lenders and the Agent hereby agree as follows:
I. DEFINITIONS
SECTION 1.01. Certain Defined Terms. For purposes hereof, the
following terms shall have the meanings specified below:
"Adjusted LIBO Rate" shall mean, with respect to any Eurodollar
Loan for any Interest Period, an interest rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the product of (i) the LIBO Rate in
effect for such Interest Period and (ii) Statutory Reserves. For purposes
hereof, "Statutory Reserves" shall mean a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including, without
limitation, any marginal, special, emergency, or supplemental reserves)
expressed as a decimal established by the Board and any other banking authority
to which any Lender is subject for Eurocurrency Liabilities (as defined in
Regulation D). Such reserve percentages shall include, without limitation, those
imposed under Regulation D. Eurodollar Loans shall be deemed to constitute
Eurocurrency Liabilities and as such shall be deemed to be subject to such
reserve requirements without benefit of or credit for proration, exemptions or
offsets which may be available from time to time to any Lender under Regulation
D. Statutory Reserves shall be adjusted automatically on and as of the effective
date of any change in any reserve percentage.
"Affiliate" of any person shall mean any other person which,
directly or indirectly, controls or is controlled by or is under common control
with such person and, without limiting the generality of the foregoing, includes
(i) any person which beneficially owns or holds 10% or more of any class of
voting securities of such person or 10% or more of the equity interest in such
person, (ii) any person of which such person beneficially owns or holds 10% or
more of any class of voting securities or in which such person beneficially owns
or holds 10% or more of the equity interest in such person and (iii) any
director, officer or employee of such person. For the purposes of this
definition, the term "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect to any
person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such person, whether
through the ownership of voting securities or by contract or otherwise.
"Agent" shall have the meaning assigned to such term in the
preamble to this Agreement.
2
<PAGE> 8
"Alternate Base Loan" shall mean a Loan based on the Alternate
Base Rate in accordance with Article II hereof.
"Alternate Base Rate" shall mean, for any day, a rate per annum
(rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of
(a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such
day plus 1%, and (c) the Federal Funds Effective Rate in effect on such day plus
1/2 of 1%. "Prime Rate" shall mean the rate of interest per annum publicly
announced from time to time by the Agent at its principal office in New York
City as its prime rate in effect at such time. "Base CD Rate" shall mean the sum
of (a) the product of (i) the Three-Month Secondary CD Rate and (ii) Statutory
Reserves and (b) the Assessment Rate. "Three-Month Secondary CD Rate" shall
mean, for any day, the secondary market rate for three-month certificates of
deposit reported as being in effect on such day (or, if such day shall not be a
Business Day, the next preceding Business Day) by the Board through the public
information telephone line of the Federal Reserve Bank of New York (which rate
will, under the current practices of the Board, be published in Federal Reserve
Statistical Release H.15(519) during the week following such day), or, if such
rate shall not be so reported on such day or such next preceding Business Day,
the average of the secondary market quotations for three-month certificates of
deposit of major money center banks in New York City received at approximately
10:00 a.m., New York City time, on such day (or, if such day shall not be a
Business Day, on the next preceding Business Day) by the Agent from three New
York City negotiable certificate of deposit dealers of recognized standing
selected by it. "Statutory Reserves" shall mean a fraction (expressed as a
decimal), the numerator of which is the number one and the denominator of which
is the number one minus the maximum reserve percentage (including any marginal,
special, emergency or supplemental reserves) expressed as a decimal, established
by the Board and any other banking authority to which the Agent is subject, for
new negotiable nonpersonal time deposits in dollars of over $100,000 with
maturities approximately equal to three months. Statutory Reserves shall be
adjusted automatically on and as of the effective date of any change in any
reserve percentage. "Assessment Rate" shall mean, for any day, the annual
assessment rate (net of refunds and rounded upwards, if necessary, to the next
1/16 of 1%) estimated by the Agent (in good faith, but in no event in excess of
statutory or regulatory maximums) to be payable by the Agent to the Federal
Deposit Insurance Corporation (or any successor) for insurance by such
Corporation (or such successor) of time deposits made in dollars at the Agent's
domestic offices during the current calendar year. "Federal Funds Effective
Rate" shall mean, for any day, the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published on the next succeeding Business Day by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day which is a Business Day, the average of the quotations for the day of
such transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it. If for any reason the Agent shall have
determined (which determination shall be conclusive absent manifest error) that
it is unable to ascertain the Base CD Rate or the Federal Funds Effective Rate,
or both, for any reason, including, the inability or failure of the Agent to
obtain sufficient quotations in accordance with the terms hereof, the Alternate
Base Rate shall be determined without
3
<PAGE> 9
regard to clause (b) or (c), or both, of the first sentence of this definition,
as appropriate, until the circumstances giving rise to such inability no longer
exist. Any change in the Alternate Base Rate due to a change in the Prime Rate,
the Base CD Rate or the Federal Funds Effective Rate shall be effective on the
effective date of such change in the Prime Rate, the Base CD Rate or the Federal
Funds Effective Rate, respectively.
"Applicable Lending Office" shall mean, with respect to each
Lender, such Lender's Domestic Lending Office in the case of an Alternate Base
Loan and such Lender's Eurodollar Lending Office in the case of a Eurodollar
Loan.
"Assignment and Acceptance" shall mean an assignment and
acceptance entered into by a Lender and an assignee and accepted by the Agent,
in substantially the form of Exhibit E annexed hereto.
"ATI" shall have the meaning assigned to such term in the preamble
to this Agreement.
"BI Event" shall have the meaning assigned to such term in Section
2.09(e)(i) hereof.
"Board" shall mean the Board of Governors of the Federal Reserve
System of the United States.
"Borrowers" shall have the meaning assigned to such term in the
preamble to this Agreement.
"Borrowing Base" shall have the meaning assigned to such term in
Section 2.01(b) hereof.
"Business Day" shall mean any day, other than a Saturday, Sunday
or legal holiday in the State of New York, on which banks are open for
substantially all their banking business in New York City except that, if any
determination of a "Business Day" shall relate to a Eurodollar Loan, the term
"Business Day" shall in addition exclude any day on which banks are not open for
dealings in dollar deposits in the London interbank market.
"Canadian Sub" shall mean Water Pik Canada Ltd, a Canadian
corporation.
"Capital Expenditures" shall mean all expenditures for the
acquisition or leasing (pursuant to a capital lease) of fixed or capital assets
or additions to equipment (including replacements, capitalized repairs and
improvements) which should be capitalized under GAAP.
"Capitalized Lease Obligation" shall mean an obligation to pay
rent or other amounts under any lease of (or other arrangement conveying the
right to use) real and/or personal property which obligation is required to be
classified and accounted for as a
4
<PAGE> 10
capital lease on a balance sheet prepared in accordance with GAAP, and for
purposes hereof the amount of such obligation shall be the capitalized amount
thereof determined in
accordance with GAAP.
"Cash Interest Expense" shall mean, with respect to any person for
any period, the Interest Expense of such person for such period less all
non-cash items constituting Interest Expense during such period (including,
without limitation, amortization of debt discounts and payments of interest on
Indebtedness by issuance of Indebtedness).
"Casualty Event" shall have the meaning assigned to such term in
Section 2.09(e)(i) hereof.
"Change of Control" shall mean the occurrence of any of the
following events: (i) any "person" or "group" (within the meaning of Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934 (as amended from time
to time, the "Exchange Act")), shall file a Schedule 13D or 14D-1 under the
Exchange Act disclosing that such person or group has become the "beneficial
owner" (as defined in Rule 13d-3 of the Exchange Act) of more than twenty-five
percent (25%) of the total voting power of the then outstanding voting stock of
Holdings; or (ii) at any time Holdings ceases to own or control 100% of the
voting stock of each of the Borrowers (or of the Borrower surviving a merger of
the Borrowers).
"Closing Date" shall mean the date on which all of the conditions
to the occurrence of the first Credit Event hereunder shall have been satisfied,
but in no event later than December 1, 1999.
"Code" shall mean the Internal Revenue Code of 1986 and the rules
and regulations promulgated thereunder, as amended from time to time.
"Collateral" shall mean all collateral and security as described
in the Security Documents.
"Commitment Letter" shall mean that certain commitment letter
dated November 3, 1999 and accompanying fee letter from The Chase Manhattan Bank
to ATI.
"Consolidated" shall mean, in respect of any person, as applied to
any financial or accounting term, such term determined on a consolidated basis
in accordance with GAAP (except as otherwise required herein) for the person and
all consolidated subsidiaries thereof.
"Contaminant" shall mean all Hazardous Materials and all those
substances which are regulated by or form the basis of liability under Federal,
state or local environmental, health and safety statutes or regulations or any
other material or substance which constitutes a material health, safety or
environmental hazard to any person or property.
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<PAGE> 11
"Credit Event" shall mean each borrowing and each issuance of a
Letter of Credit hereunder.
"Credits" shall mean the Revolving Credit Loans and Letters of
Credit.
"Cure Loans" shall have the meaning assigned to such terms in
Section 2.13(d) hereof.
"Default" shall mean any condition, act or event which, with
notice or lapse of time or both, would constitute an Event of Default.
"Dilution Reserve" shall mean a reserve of 1% for each one percent
that the dilution percentage determined in any field examination conducted by
the Agent exceeds 10% up to 15% and an additional reserve of 2% for each one
percent that such dilution percentage as so determined exceeds 15%.
"dollars" or the symbol "$" shall mean lawful currency of the
United States of America.
"Domestic Lending Office" shall mean, with respect to any Lender,
the office of such Lender specified as its "Domestic Lending Office" opposite
its name in Schedule 2.02 annexed hereto, or such other office of such Lender as
such Lender may from time to time specify to the Borrowers and the Agent.
"Early Buy Program Receivable" shall mean a Receivable arising
from a domestic or Canadian sale made by Laars during the months of October
through February pursuant to its early buy program requiring the Customer to
make payment in three equal installments during March, April and May or April,
May and June.
"EBITDA" shall mean with respect to any person for any period the
sum of (i) Net Income, (ii) Interest Expense, (iii) depreciation and
amortization and other non-cash items properly deducted in determining Net
Income and (iv) federal, state and local income taxes, in each case of such
person for such period, computed and calculated in accordance with GAAP and
minus (v) non-cash items properly added in determining Net Income, in each case
for the corresponding period.
"Eligible Assignee" shall mean, with respect to any assignment of
the rights, interest and obligations of a Lender hereunder, a person that is at
the time of such assignment (a) a commercial bank organized under the laws of
the United States or any state thereof, organized under the laws of any other
country that is a member of the Organization of Economic Cooperation and
Development, or organized under the laws of a political subdivision of any such
country, or a finance company, insurance company or other financial institution,
in each case of the foregoing cases, having a net worth or combined capital and
surplus of at least $100,000,000, (b) already a Lender hereunder
6
<PAGE> 12
(whether as an original party to this Agreement or as the assignee of another
Lender), (c) a successor (whether by transfer of assets, merger, consolidation
or otherwise) to the commercial lending business of the assigning Lender, (d) an
affiliate of a Lender, or (e) any other person that has been consented to in
writing as an Eligible Assignee by the Borrowers and the Agent.
"Eligible Inventory" shall mean inventory of an Inventory Grantor
comprised solely of raw materials and finished goods (and specifically excluding
work in process, supplies, and packaging costs) which is, in the reasonable
opinion of the Agent, not obsolete, slow-moving or unmerchantable and is and at
all times shall continue to be acceptable to the Agent in all respects;
provided, however, that Eligible Inventory shall in no event include inventory
which (i) is not located at one of the addresses for locations of Collateral set
forth on Schedule I to the Security Agreement, as the same may be amended from
time to time, and with respect to which the Agent has not been granted and has
not perfected a valid, first priority security interest subject to Permitted
Liens (it being hereby agreed that to the extent applicable the Agent may, in
its sole discretion, require that a landlord waiver be obtained with respect to
any leased location in order that the applicable Inventory may be eligible,
provided, however, that Eligible Inventory may include up to $275,000 of
Inventory, in the aggregate at any time, located at locations where no landlord
waiver has been obtained (all such locations being set forth on Schedule I of
the Security Agreement)), (ii) which is in transit or (iii) has been returned or
rejected by a Customer. Standards of eligibility may be fixed and revised from
time to time solely by the Agent in the Agent's reasonable business judgment
based upon its lending practices consistent with practices customary in the
commercial finance industry generally. In determining eligibility, the Agent
may, but need not, rely on reports and schedules furnished by an Inventory
Grantor, but reliance by the Agent thereon from time to time shall not be deemed
to limit the right of the Agent to revise standards of eligibility at any time
as to both present and future inventory of the Inventory Grantors.
"Eligible Receivables" shall mean Receivables created by the
Receivables Grantors in the ordinary course of business arising out of the sale
or lease of goods or rendition of services by a Receivables Grantor, which are
and at all times shall continue to be reasonably acceptable to the Agent in all
respects. Standards of eligibility may be fixed and revised from time to time
solely by the Agent in the Agent's reasonable business judgment based upon its
lending practices consistent with practices customary in the commercial finance
industry generally. In general, without limiting the foregoing, a Receivable
shall in no event be deemed to be an Eligible Receivable unless: (a) all
payments due on the Receivable have been invoiced and the underlying goods
shipped or services performed, as the case may be; (b) the payment due on the
Receivable is not more than 90 days past the invoice date or in the case of an
Early Buy Program Receivable each installment payment has been made when due;
(c) the payments due on more than 50% of all Receivables (other than Early Buy
Program Receivables) from the same Customer are less than 90 days past the
invoice date; (d) the Receivable arose from a completed and bona fide
transaction (and with respect to a sale of goods, a transaction in which title
has passed to the Customer) which requires no further act under any
7
<PAGE> 13
circumstances on the part of the applicable Receivables Grantor in order to
cause such Receivable to be payable in full by the Customer; (e) the Receivable
is in full conformity with the representations and warranties made by the
applicable Receivables Grantor to the Agent and the Lenders with respect thereto
and is free and clear of all security interests and Liens of any nature
whatsoever other than any security interest deemed to be held by the applicable
Receivables Grantor or any security interest created pursuant to the Security
Documents or permitted by Section 7.01 hereof; (f) the Receivable constitutes an
"account" or "chattel paper" within the meaning of the Uniform Commercial Code
of the state in which the Receivable is located; (g) the Customer has not
asserted that the Receivable, and the applicable Receivables Grantor is not
aware that the Receivable, arises out of a bill and hold, consignment or
progress billing arrangement or is subject to any setoff, contras, net-out
contract, offset, deduction, dispute, credit, counterclaim or other defense
arising out of the transactions represented by the Receivables, but only to the
extent thereof, or independently thereof and the Customer has finally accepted
the goods from the sale out of which the Receivable arose and has not objected
to its liability thereon or returned, rejected or repossessed any of such goods,
except for complaints made or goods returned in the ordinary course of business
for which, in the case of goods returned, goods of equal or greater value have
been shipped in return; (h) the Receivable arose in the ordinary course of
business of the applicable Receivables Grantor; (i) the Customer is not (x) the
United States government or the government of any state or political subdivision
thereof or therein, or any agency or department of any thereof (unless there has
been full compliance to the satisfaction of the Agent with any applicable
assignment of claims statute) or (y) an Affiliate of Holdings, the applicable
Receivables Grantor or any subsidiary of any thereof or a supplier or creditor
of the applicable Receivables Grantor or any subsidiary thereof (provided that
such Receivable shall only be ineligible to the extent of amounts payable by
such applicable Receivables Grantor or subsidiary to such supplier or
outstanding to such creditor); (j) the Customer is a United States or Canadian
person or an obligor in the United States or Canada or an obligor located in
another jurisdiction if the applicable Receivable is covered by a letter of
credit or credit insurance in favor of, or assigned to, the Agent in form and
substance satisfactory to the Agent; (k) the Receivable complies with all
material requirements of all applicable laws and regulations, whether Federal,
state or local (including, without limitation, usury laws and laws, rules and
regulations relating to truth in lending, fair credit billing, fair credit
reporting, equal credit opportunity, fair debt collection practices and
privacy); (l) to the knowledge of the applicable Receivables Grantor, the
Receivable is in full force and effect and constitutes a legal, valid and
binding obligation of the Customer enforceable in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally and by general equity principles; (m) the Receivable is denominated in
and provides for payment by the Customer in dollars (unless a currency swap or
similar hedge approved by the Agent has been entered into with respect to such
Receivable the effect of which is to cause payment to be denominated in dollars)
and is payable to an address within the United States; (n) the Receivable has
not been and is not required to be charged off or written off as uncollectible
in accordance with GAAP or the customary business practices of the applicable
Receivables Grantor; (o) the Agent on behalf of the Lenders possesses a
8
<PAGE> 14
valid, perfected first priority security interest in such Receivable (subject to
Permitted Liens) as security for payment of the Obligations; (p) the Receivable
is not with respect to a Customer located in New Jersey, Minnesota, or any other
state denying creditors access to its courts in the absence of a Notice of
Business Activities Report or other similar filing, unless the applicable
Receivables Grantor has either qualified as a foreign corporation authorized to
transact business in such state or has filed a Notice of Business Activities
Report or similar filing with the applicable state agency for the then current
year; (q) an event as described in paragraph (e) or (f) of Article VIII has not
occurred with respect to the Customer; and (r) the Agent is satisfied with the
credit standing of the Customer in relation to the amount of credit extended.
Notwithstanding the foregoing, all Receivables of an applicable Receivables
Grantor of any single Customer which, in the aggregate, exceed 10% (or 20% in
the case of WalMart, K-Mart or Home Depot or 25% in the case of South Central
Pool Supply, provided, that in each case the Agent shall be satisfied, in its
sole discretion, that the financial condition of the relevant account debtor at
such time has not significantly deteriorated since the Closing Date as
determined by the Agent, in its sole discretion, from whatever sources are
available to the Agent) of the total Eligible Receivables of such Receivables
Grantor at the time of any such determination shall be deemed not to be Eligible
Receivables to the extent of such excess.
"Environmental Claim" shall mean any written notice of violation,
claim, deficiency, demand, abatement or other order by any governmental
authority or any person for personal injury (including sickness, disease or
death), tangible or intangible property damage, damage to the environment,
nuisance, pollution, contamination or other adverse effects on the environment,
or for fines, penalties or deed or use restrictions, resulting from or based
upon (i) the existence, or the continuation of the existence, of a Release
(including, without limitation, sudden or non-sudden, accidental or
nonaccidental Releases), of, or exposure to, any Contaminant at, in, by or from
any of the properties of the Borrowers or their subsidiaries, (ii) the
environmental aspects of the transportation, storage, treatment or disposal of
Contaminants in connection with the operation of any of the properties of the
Borrowers or their subsidiaries or (iii) the violation, or alleged violation by
Borrowers or any of their subsidiaries, of any statutes, ordinances, orders,
rules, regulations, Permits or licenses of or from any governmental authority,
agency or court relating to environmental matters connected with any of the
properties of the Borrowers or their subsidiaries, under any applicable
Environmental Law.
"Environmental Laws" shall mean the Comprehensive Environmental
Response, Compensation, and Liability Act (42 U.S.C. Section 9601 et seq.), the
Hazardous Material Transportation Act (49 U.S.C. Section 1801 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), the
Federal Water Pollution Control Act (33 U.S.C. Section 1251 et seq.), the Oil
Pollution Act of 1990 (33 U.S.C. Section 2701 et. seq.), the Safe Drinking Water
Act (42 U.S.C. Section 300f, et seq.), the Clear Air Act (42 U.S.C. Section 7401
et seq.), the Toxic Substances Control Act, as amended (15 U.S.C. Section 2601
et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C.
Section 136 et seq.), and the Occupational Safety and Health Act (29 U.S.C.
Section 651 et seq.), as such laws have been and hereafter may be amended or
supplemented, and any related or analogous present or
9
<PAGE> 15
future Federal, state or local, statutes, rules, regulations, ordinances,
licenses, permits and interpretations and orders of regulatory and
administrative bodies.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder, as in
effect from time to time.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) which together with any of the Borrowers or any subsidiary of any
thereof would be treated as a single employer under Section 302 of Title I or
Title IV of ERISA or with respect to Section 412 or Section 414(b), (c), (m) or
(o) of the Code.
"Eurodollar Lending Office" shall mean, with respect to any
Lender, the office of such Lender specified as its "Eurodollar Lending Office"
opposite its name in Schedule 2.03 annexed hereto (or, if no such office is
specified, its Domestic Lending Office), or such other office of such Lender as
such Lender may from time to time specify to the Borrowers and the Agent.
"Eurodollar Loan" shall mean a Loan based on the Adjusted LIBO
Rate in accordance with Article II hereof.
"Event of Default" shall have the meaning assigned to such term in
Article VIII hereof.
"Existing Credit Agreement" shall have the meaning assigned to
such term in the preamble to this Agreement.
"Final Maturity Date" shall mean the fifth anniversary of the
closing of the Existing Credit Agreement.
"Financial Officer" shall mean, with respect to any person, the
chief financial officer, controller, assistant controller, treasurer or
assistant treasurer of such person.
"FIRREA" shall mean the Financial Institutions Reform, Recovery
and Enforcement Act of 1989, as amended from time to time.
"Fiscal Year" shall mean the fiscal year of each of the Borrowers
for accounting purposes which in each case ends on the Sunday closest to
December 31 of each year.
"Fixed Charge Coverage Ratio" shall mean with respect to any
person at the time of determination thereof, the ratio of (i) Net Cash Flow to
(ii) Fixed Charge Expense.
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<PAGE> 16
"Fixed Charge Expense" shall mean, with respect to any person for
any period, the aggregate of (i) regularly scheduled principal payments of
Indebtedness (including, without limitation, Subordinated Indebtedness) made or
to be made by such person and its subsidiaries during such period and (ii)
dividends and other distributions, (including in the case of the Borrowers,
management fees) during such period, in each case on a Consolidated basis in
accordance with GAAP, provided, however, for purposes of calculating the Fixed
Charge Coverage Ratio for the four fiscal quarter period ending September 30,
2001, "Fixed Charge Expense" shall include no more than $3,500,000 of dividends
paid by the Borrowers to Holdings, in accordance with Section 7.04 hereof, for
the purposes of advancing funds for the payment of principal amount due by
Canadian Sub on its subordinated debt.
"Funded Debt" shall mean with respect to any person as of the date
of determination thereof, (i) all Indebtedness of such person and its
subsidiaries on a Consolidated basis outstanding at such time which matures more
than one year after the date of calculation, (ii) that portion of Indebtedness
described in clause (i) which shall be due and payable within one year from such
date of calculation and (iii) any such Indebtedness maturing within one year
from such date of calculation which is renewable or extendable at the option of
the obligor to a date more than one year from such date and including in any
event the Revolving Credit Loans.
"GAAP" shall have the meaning assigned to such term in Section
1.02 hereof.
"Grantor" shall mean any Grantor, Pledgor or Debtor, as such terms
are defined in any of the Security Documents.
"Guarantee" shall mean any obligation, contingent or otherwise, of
any person guaranteeing or having the economic effect of guaranteeing or giving
financial assistance in respect of the repayment of any Indebtedness or
obligation of any other person in any manner, whether directly or indirectly,
and shall in any event include the Holdings Guarantee, and shall include,
without limitation, any obligation of such person, direct or indirect, to (i)
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or obligation or to purchase (or to advance or supply funds for the
purchase of) any security for the payment of such Indebtedness or obligation,
(ii) purchase property, securities or services for the purpose of assuring the
owner of such Indebtedness or obligation of the payment of such Indebtedness or
obligation, or (iii) maintain working capital, equity capital, available cash or
other financial condition of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or obligation; provided, however, that the term
Guarantee shall not include endorsements for collection or collections for
deposit, in either case in the ordinary course of business.
"Guarantor" shall mean, collectively, Holdings, each subsidiary of
a Borrower existing on the Closing Date and each subsidiary of a Borrower which
becomes a guarantor of the Obligations after the date hereof.
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<PAGE> 17
"Hazardous Material" shall mean any pollutant, contaminant,
chemical, or industrial or hazardous, toxic or dangerous goods, waste, substance
or material, defined or regulated as such in (or for purposes of) any
Environmental Law and any other toxic, reactive, or flammable chemicals,
including (without limitation) any asbestos, any petroleum (including crude oil
or any fraction), any radioactive substance and any polychlorinated biphenyls;
provided, in the event that any Environmental Law is amended so as to broaden
the meaning of any term defined thereby, such broader meaning shall apply
subsequent to the effective date of such amendment; and provided, further, to
the extent that the applicable laws of any state establish a meaning for
"hazardous material," "hazardous substance," "hazardous waste," "solid waste" or
"toxic substance" which is broader than that specified in any Federal
Environmental Law, such broader meaning shall apply.
"Holdings" shall mean Water Pik Technologies, Inc., a Delaware
corporation, together with its successors and assigns.
"Holdings Guarantee" shall mean the Guarantee by Holdings of the
Obligations substantially in the form of Exhibit G hereto, as amended, modified
or supplemented from time to time.
"Indebtedness" shall mean, with respect to any person, (a) all
obligations of such person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such person evidenced by bonds,
debentures, notes or other similar instruments or upon which interest charges
are customarily paid, (c) all obligations of such person for the deferred
purchase price of property or services, except current accounts payable arising
in the ordinary course of business and not overdue beyond such period as is
commercially reasonable for such person's business, (d) all obligations of such
person under conditional sale or other title retention agreements relating to
property purchased by such person and all Capitalized Lease Obligations, (e) all
payment obligations of such person with respect to interest rate or currency
protection agreements, (f) all obligations of such person as an account party
under any letter of credit or in respect of bankers' acceptances, (g) all
obligations of any third party secured by property or assets of such person
(regardless of whether or not such person is liable for repayment of such
obligations), (h) all Guarantees of such person and (i) the redemption price of
all redeemable preferred stock of such person, but only to the extent that such
stock is redeemable at the option of the holder or requires sinking fund or
similar payments at any time prior to the Final Maturity Date.
"Indemnitees" shall have the meaning assigned to such term in
Section 11.04(c) hereof.
"Information" shall have the meaning assigned to such term in
Section 11.11 hereof.
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<PAGE> 18
"Interest Coverage Ratio" shall mean, with respect to any person
for any period, the ratio of (i) EBITDA, less all non-financed Capital
Expenditures for such period ending on or prior to the date of determination, to
(ii) the Cash Interest Expense of such person for such period.
"Interest Expense" shall mean, with respect to any person for any
period, the interest expense of such person during such period determined on a
Consolidated basis in accordance with GAAP, and shall in any event include,
without limitation, (i) the amortization of debt discounts, (ii) the
amortization of all fees payable in connection with the incurrence of
Indebtedness to the extent included in interest expense, (iii) the portion of
any Capitalized Lease Obligation allocable to interest expense, (iv) all fixed
and all calculable dividend payments on preferred stock, and (v) payments of
interest expense in kind.
"Interest Margin" and "Revolving Credit Commitment Fee Margin"
shall mean, with respect to any Loan, the amount as set forth below as
corresponds to the Leverage Ratio computed for Holdings and its subsidiaries on
a Consolidated basis for the four consecutive fiscal quarter period ending prior
to the date of determination set forth below, determined three (3) Business Days
after the delivery of the financial statements to the Agent required pursuant to
Section 6.05(a) or (b) hereof, as applicable, together with the corresponding
compliance certificates required pursuant to Section 6.05(e) hereof (which
certificate shall notify the Agent of any change to the applicable Interest
Margin from the previous four consecutive fiscal quarter period), commencing
with the financial statements and certificates for the fiscal quarter
immediately following the fiscal quarter in which Holdings has completed a
Public Offering, or if the Borrowers shall fail to timely deliver such
statements and certificates for any such period or during the continuance of an
Event of Default, then at the highest Interest Margin and Revolving Credit
Commitment Fee Margin provided for herein; provided, however, each of the
Interest Margins provided for herein shall be increased by 0.25% for any Loans
supported by M&E Availability (which, for purposes hereof and the following
paragraph, shall be calculated on the basis that Revolving Credit Loans shall be
deemed as first drawn against Eligible Inventory and Eligible Receivables until
fully utilized and then as drawn against M&E Availability):
<TABLE>
<CAPTION>
Alternate Base Revolving Credit
LIBO Rate Rate Interest Commitment Fee
Leverage Ratio Interest Margin Margin Margin
-------------- --------------- -------------- ----------------
<S> <C> <C> <C>
Greater than 2.00:1.00 2.25% 0.50% 0.50%
Equal to or less than 2.00% 0.50% 0.50%
2.00:1.00 but greater than
1.75:1.00
Equal to or less than 1.75% 0.375% 0.375%
1.75:1.00 but greater than
1.50:1.00
</TABLE>
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<PAGE> 19
<TABLE>
<CAPTION>
Alternate Base Revolving Credit
LIBO Rate Rate Interest Commitment Fee
Leverage Ratio Interest Margin Margin Margin
-------------- --------------- -------------- ----------------
<S> <C> <C> <C>
Equal to or less than 1.50% 0.375% 0.25%
1.50:1.00 but greater than
1.25:1.00
1.25:1.00 or less 1.25% 0.25% 0.175%
</TABLE>
Unless and until a Public Offering has been completed, then the
applicable Interest Margin and Revolving Credit Commitment Fee Margin shall be
calculated in the manner provided in the preceding paragraph commencing with the
financial statements and certificates for the period ending December 31, 1999
except that the applicable Margins shall be determined as follows:
<TABLE>
<CAPTION>
Alternate Base
LIBO Rate LIBO Rate Rate Interest Alternate Base
Interest Margin Interest Margin Margin For Rate Interest
For Loans Not For Loans Loans Not Margin For Loans
Leverage Supported By Supported By Supported By Supported By
Ratio M&E Availability M&E Availability M&E Availability M&E Availability
- -------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Greater than 2.50% 2.75% 0.75% 1.00%
1.75:1.00
Less than or 2.00% 2.25% 0.50% 0.75%
equal to
1.75:1.00
</TABLE>
In all instances in which the above Interest Rate Margins are
applicable, the Revolving Credit Commitment Fee Margin shall be 0.50%. On the
Closing Date, the LIBO Rate Interest Margin for Loans not supported by M&E
Availability shall be 2.00% and for those supported by M&E Availability shall be
2.25% and the Alternate Base Rate Interest Margin for Loans not supported by M&E
Availability shall be 0.50% and for those supported by M&E Availability shall be
0.75%; each shall thereafter be adjusted in accordance with the provisions
hereof.
"Interest Payment Date" shall mean (i) in the case of an Alternate
Base Loan, the first Business Day of each month, commencing December 1, 1999,
and (ii) with respect to any Eurodollar Loan, the last day of the Interest
Period applicable thereto, and, in addition, in respect of any Eurodollar Loan
of more than three (3) months' duration, each earlier day which is three (3)
months after the first day of such Interest Period.
"Interest Period" shall mean, as to any Eurodollar Loan, the
period commencing on the date of such Eurodollar Loan and ending on the
numerically
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corresponding day (or, if there is no numerically corresponding day, on the last
day) in the calendar month that is one (1), two (2), three (3) or six (6) months
thereafter, as the Borrowers may elect with respect to its Eurodollar Loans;
provided, however, that (x) if an Interest Period would end on a day that is not
a Business Day, such Interest Period shall be extended to the next succeeding
Business Day unless, with respect to Eurodollar Loans, such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day, (y) no Interest Period
shall end later than the Final Maturity Date and (z) interest shall accrue from
and including the first day of an Interest Period to but excluding the last day
of such Interest Period.
"Inventory Grantor" shall mean either Laars and Jandy Industries,
Inc. on a combined basis and any other after-acquired subsidiary of Laars which
complies with Section 6.12 hereof and as to which the Agent has completed a
field examination to its satisfaction or Water Pik and any after-acquired
subsidiary of Water Pik which complies with Section 6.12 hereof and as to which
the Agent has completed a field examination to its satisfaction.
"Laars" shall have the meaning assigned to such term in the
preamble to this Agreement.
"Laars Availability" shall mean at any time (i) the lesser at such
time of (x) the Total Commitment and (y) the Laars Borrowing Base, minus (ii)
the sum at such time of (x) the unpaid principal balance of, and accrued
interest and fees on, the Revolving Credit Loans attributed to Laars and (y) the
Letter of Credit Usage with respect to Letters of Credit issued for the account
of Laars.
"Laars Borrowing Base" shall have the meaning assigned to such
term in Section 2.01 hereof.
"Lenders" shall have the meaning assigned to such term in the
preamble to this Agreement.
"Letter of Credit" shall have the meaning assigned to such term in
Section 2.17 hereof.
"Letter of Credit Usage" shall mean at any time, (i) the aggregate
undrawn amount of all outstanding Letters of Credit at such time plus (ii) the
unreimbursed drawings at such time under all such Letters of Credit.
"Leverage Ratio" with respect to any person for any period shall
mean the ratio of (i) Funded Debt as at the date of determination to (ii) EBITDA
of such person for such period.
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"LIBO Rate" shall mean, with respect to any Eurodollar Loan for
any Interest Period, an interest rate per annum (rounded upwards, if necessary,
to the next 1/16 of 1%) equal to the rate at which dollar deposits approximately
equal in principal amount to the Agent's portion of such Eurodollar Loan and for
a maturity equal to the applicable Interest Period are offered in immediately
available funds to the principal London office of the Agent in the London
interbank market at approximately 11:00 a.m., London time, two (2) Business Days
prior to the first day of such Interest Period.
"Lien" shall mean, with respect to any asset, (i) any mortgage,
lien, pledge, encumbrance, charge or security interest in or on such asset, (ii)
the interest of a vendor or a lessor under any conditional sale agreement,
capital lease or other title retention agreement relating to such asset, (iii)
in the case of securities, any purchase option, call or similar right of a third
party with respect to such securities or (iv) any other right of or arrangement
with any creditor to have such creditor's claim satisfied out of such assets, or
the proceeds therefrom, prior to the general creditors of the owner thereof.
"Loan" shall mean any Revolving Credit Loan.
"Loan Documents" shall mean this Agreement, each Security
Document, each Guarantee executed and delivered at any time with respect to the
Obligations, the Notes, the fee letter annexed to the Commitment Letter and each
other document, instrument or agreement now or hereafter delivered to the Agent
or any Lender in connection herewith or therewith.
"Loan Party" shall mean each Borrower, each Grantor and each
Guarantor, including Holdings.
"M&E Availability" shall mean $10,000,000 in the case of Laars and
$10,000,000 in the case of Water Pik, reduced in the case of Laars by $500,000
and in the case of Water Pik by $500,000 on the last day of each calendar
quarter commencing March 31, 2000 and as further reduced in the case of Laars by
$2,500,000 and in the case of Water Pik by $2,500,000 upon completion of a
Public Offering by Holdings and as may also be reduced from time to time upon
the sale of the assets which were part of the appraisals of the Borrowers
delivered to the Agent pursuant to Section 5.02(i)(xi) and which require a
prepayment pursuant to Section 2.09 (d) hereof (such reduction in M&E
Availability for the applicable Borrower to be in the amount such disposed
assets were appraised in the applicable appraisal or to the extent not readily
ascertainable from such appraisal, a reasonable estimation of the appraised
value as determined by the Agent, in each case, less a proportion, as reasonably
determined by the Agent, of the reduction of the M&E Availability by operation
of the provisions of this paragraph).
"Margin Stock" shall have the meaning assigned to such term in
Regulation U.
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"Material Adverse Effect" shall mean a material adverse effect on
(i) the business, assets, prospects, operations or financial or other condition
of any Loan Party (other than Holdings), (ii) the ability of any Loan Party to
perform or pay the Obligations in accordance with the terms hereof or of any
other Loan Document, (iii) the rights of, or benefits available to, the Lenders
or the Agent under any Loan Document or (iv) the Agent's Lien on any material
portion of the Collateral or the priority of such Lien subject to Permitted
Liens.
"Mortgages" shall mean the real property mortgages and deeds of
trust dated as of the date hereof, and executed by the Grantor(s) in favor of
the Agent, for its own benefit and for the benefit of the Lenders, as amended,
modified or supplemented from time to time.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA.
"Net Amount of Eligible Inventory" shall mean, at any time, the
aggregate value, less warranty reserves, computed at the lower of cost (on a
FIFO basis) and current market value, of Eligible Inventory of the Inventory
Grantor.
"Net Amount of Eligible Receivables" shall mean and include at any
time, without duplication, the gross amount of Eligible Receivables at such time
less (i) sales, excise or similar taxes, (ii) warranty reserves, accrued rebates
and accrued co-op advertising and (iii) returns, discounts, claims, credits,
rebates and allowances of any nature at any time issued, owing, granted,
outstanding, if claimed.
"Net Cash Flow" shall mean, with respect to any person for any
period, without duplication of addition or subtraction of items, (A) the sum for
such period of (i) Net Income, (ii) depreciation and amortization, (iii) the
change (expressed as a positive number in the event of an increase or a negative
number in the event of a decrease) in deferred tax liabilities, (iv) other
noncash items properly deducted in arriving at Net Income and (v) the change
(expressed as a negative number in the event of an increase or a positive number
in the event of a decrease), if any, in deferred tax assets minus (B) all
non-financed Capital Expenditures during such period.
"Net Income" shall mean, with respect to any person for any
period, the aggregate income (or loss) of such person for such period which
shall be an amount equal to net revenues and other proper items of income for
such person less the aggregate for such person of any and all items that are
treated as expenses under GAAP, and less Federal, state and local income taxes,
but excluding any extraordinary gains or losses or any gains or losses from the
sale or disposition of assets other than in the ordinary course of business, all
computed and calculated in accordance with GAAP.
"Net Proceeds" shall mean (a) with respect to the sale or other
disposition of any asset by a Loan Party the excess, if any, of (i) the
aggregate amount received in cash
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(including any cash received by way of deferred payment pursuant to a note
receivable, other non-cash consideration or otherwise, but only as and when such
cash is so received) in connection with such sale or other disposition, over
(ii) the sum of (A) the amount of any Indebtedness which is secured by any such
asset or which is required to be, and is, repaid in connection with the sale or
other disposition thereof (other than Indebtedness hereunder), (B) the
reasonable out-of-pocket expenses and fees incurred by a Loan Party with respect
to legal, investment banking, brokerage, advisor and accounting and other
professional fees, sales commissions and disbursements and all other reasonable
fees, expenses and charges, in each case actually incurred in connection with
such sale or disposition, (C) all income and transfer taxes payable by any Loan
Party in connection with such sale or other disposition, whether actually paid
or estimated by a Loan Party to be payable in cash in connection with such
disposition or the payment of dividends or the making of other distributions to
a Loan Party of the proceeds thereof and (D) reserves, required to be
established in accordance with GAAP or the definitive agreements relating to
such disposition, with respect to such disposition, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations; (b) with respect to the issuance, sale or other disposition of any
stock or debt securities by a Loan Party the excess of (i) the aggregate amount
received in cash (including any cash received by way of deferred payment
pursuant to a note receivable, other non-cash consideration or otherwise, but
only as and when such cash is so received) in connection with such issuance,
sale or other disposition, over (ii) the sum of (A) the reasonable fees,
commissions, discounts and other out-of-pocket expenses including, without
limitation, related legal, investment banking and accounting fees and
disbursements incurred by such Loan Party in connection with such issuance, sale
or other disposition, and (B) all income and transfer taxes payable by a Loan
Party in connection with such issuance, sale or other disposition, whether
payable at such time or thereafter, and (C) with respect to any Casualty Event
or BI Event, the aggregate amount of proceeds of insurance received by a Loan
Party with respect to such Casualty Event or BI Event, less (i) reasonable
expenses incurred by each Loan Party in connection therewith and (ii) all
indebtedness secured by any asset affected thereby and required to be, and in
fact, repaid in connection therewith and (iii) all income and transfer taxes
payable by any Loan Party in connection therewith.
"Non Pro Rata Loan" shall have the meaning assigned to such term
in Section 2.13(d) hereof.
"Notes" shall mean the Revolving Credit Notes.
"Obligations" shall mean all obligations, liabilities and
Indebtedness of the Borrowers to the Lenders and the Agent, whether now existing
or hereafter created, direct or indirect, due or not, whether created directly
or acquired by assignment, participation or otherwise, the Security Documents
and other Loan Documents, the principal of and interest on the Loans and the
payment or performance of all other obligations, liabilities, and Indebtedness
of the Borrowers to the Lenders and the Agent hereunder, under the Letters of
Credit or under any one or more of the other Loan Documents (including the
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<PAGE> 24
payment of amounts that would become due but for the operation of the automatic
stay under Section 362(a) of the Bankruptcy Code, and interest that, but for the
filing of a petition in bankruptcy with respect to any Borrower, would accrue on
such obligations, whether or not a claim is allowed against such Borrower for
such interest in the related bankruptcy proceeding), including without
limitation all fees, costs, expenses and indemnity obligations hereunder and
thereunder.
"Other Taxes" shall have the meaning assigned to such term in
Section 2.16(b) hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Pension Plan" shall mean any employee pension benefit plan within
the meaning of Section 3(2) of ERISA which is subject to the provisions of Title
IV of ERISA or Section 412 of the Code with respect to which any of the
Borrowers or any ERISA Affiliate has liability.
"Permits" shall have the meaning assigned to such term in Section
4.18 hereof.
"Permitted Acquisitions" shall mean the acquisition by either
Borrower of all or substantially all of the assets or stock of any person
engaged in a business which is reasonably related to that of the Borrower making
such acquisition where the total consideration (including, without limitation,
assumed Indebtedness, cash, securities or other property) for any such
acquisition does not exceed $40,000,000 and that the total of Loans in
connection with any such acquisition will not exceed $30,000,000 (with any
additional consideration consisting of common equity of Holdings, Subordinated
Indebtedness or other subordinated securities on terms and conditions acceptable
to the Agent) after review by the Agent of the information described below;
provided, that all such acquisitions are approved by the Board of Directors and
stockholders, if required, of the acquiree and are not otherwise hostile; and
provided, further, that both before and immediately after giving effect to any
such acquisition no Default or Event of Default exists; and provided, further,
that both before and immediately after giving effect to a proposed acquisition,
the Borrower making such acquisition shall have applicable Availability of not
less than $5,000,000 (and, in the case of the other Borrower making an
intercompany loan to the Borrower making an acquisition, such other Borrower
shall, both before and immediately after giving effect to such intercompany
loan, also have applicable Availability of not less than $5,000,000)) and the
Leverage Ratio of Holdings and its subsidiaries on a Consolidated basis shall
not be greater than 3.00:1.00 and the ratio of Funded Debt (less Subordinated
Indebtedness) to EBITDA of Holdings and its subsidiaries on a Consolidated basis
shall not be greater than 2.50 to 1.00, both calculated on a pro forma and going
forward basis (based on the projections delivered pursuant to Section 6.05(h)
hereof, as supplemented through the Final Maturity Date) (all such compliance to
be confirmed by an officer's certificate in a form satisfactory to the Agent).
For purposes hereof, "pro forma basis" shall mean the recalculation of the
applicable financial covenants
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as if the proposed acquiree (or the business related to the assets to be
acquired from the proposed acquiree) were Consolidated with Holdings for the
twelve months immediately preceding the date of such acquisition, with such
adjustments as may be approved by the Agent. In connection with any such
acquisition, the Borrowers shall give the Agent thirty (30) days' prior written
notice of each such proposed acquisition, and together with such notice and also
on the date of consummation of such proposed acquisition, the Borrowers shall
furnish the Agent with the other items required by this definition, financial
statements (for the three prior years, if available), projections supplemental
to those delivered pursuant to Section 6.05(h), revised to give effect to the
proposed Permitted Acquisition, all instruments, documents, certificates, Lien
searches, resolutions and opinions which in the reasonable discretion of the
Agent are required to maintain compliance with the provisions of this Agreement,
including, without limitation, Section 6.12 hereof and such other information
which the Agent may reasonably request. The Agent shall promptly undertake a
review of such information and shall expeditiously inform the Borrowers as to
whether the required criteria has been satisfied.
"Permitted Overadvances" shall mean (i) involuntary overadvances
that may result from time to time due to the fact that any borrowing formulas
set forth in the Loan Documents were unintentionally exceeded (whether at the
time of any Loan or at the time of the issuance of any Letter of Credit or
otherwise) for any reason (other than the Agent's gross negligence or willful
misconduct), including Collateral believed to be eligible in fact being or
becoming ineligible and the return of uncollected checks or other items applied
to the reduction of the Loans, Letters of Credit or other Obligations, and
overadvances made by the Agent without Lenders' consent for up to two weeks
after discovering the unintentional overadvance, provided that the Agent does
not during that period voluntarily increase the amount by which the borrowing
formulas had been exceeded as of the start of that period, and (ii) voluntary
overadvances made by the Agent in its sole discretion which shall (x) not cause
the Obligations to exceed Laars Availability, Water Pik Availability or Total
Availability, as applicable, by an amount in excess of $1,000,000 at any one
time outstanding, and (y) not be made on a date which is beyond ten (10) days
after the first voluntary overadvance is made during such overadvance period, or
(z) be with the consent of all Lenders. To the extent any Permitted Overadvances
are made, each Lender shall bear its pro rata (based on its Revolving Credit
Commitment) share thereof.
"person" shall mean any natural person, corporation, business
trust, limited liability company, association, company, joint venture, limited
liability partnership, partnership or government or any agency or political
subdivision thereof.
"Plan" shall mean any employee benefit plan, other than a
multiemployer plan, within the meaning of Section 3(3) of ERISA and which is
maintained (in whole or in part) for employees of the Borrowers, any subsidiary
or any ERISA Affiliate.
"Pledge Agreement" shall mean the Pledge Agreement dated as of the
date hereof, between the Grantor(s) and the Agent, for its own benefit and for
the benefit of the
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Lenders, in substantially the form of Exhibit C annexed hereto, as amended,
modified or supplemented from time to time.
"Pledged Stock" shall have the meaning assigned to such term in
the Pledge Agreement.
"Public Offering" shall mean an offering by Holdings of its equity
securities resulting in the realization of Net Proceeds of $25,000,000 or more.
"Receivables" shall mean and include all of the Receivables
Grantors' accounts, instruments, documents, chattel paper and general
intangibles, whether secured or unsecured, whether now existing or hereafter
created or arising, and whether or not specifically assigned to the Agent for
its own benefit and/or the ratable benefit of the Lenders.
"Receivables Grantor" shall mean either Laars and Jandy
Industries, Inc. on a combined basis and any other after-acquired subsidiary of
Laars which complies with Section 6.12 hereof and as to which the Agent has
completed a field examination to its satisfaction or Water Pik and any
after-acquired subsidiary of Water Pik which complies with Section 6.12 hereof
and as to which the Agent has completed a field examination to its satisfaction.
"Register" shall have the meaning assigned to such term in Section
11.03(e) hereof.
"Regulation D" shall mean Regulation D of the Board, as the same
is from time to time in effect, and all official rulings and interpretations
thereunder or thereof.
"Regulation T" shall mean Regulation T of the Board, as the same
is from time to time in effect, and all official rulings and interpretations
thereunder or thereof.
"Regulation U" shall mean Regulation U of the Board, as the same
is from time to time in effect, and all official rulings and interpretations
thereunder or thereof.
"Regulation X" shall mean Regulation X of the Board, as the same
is from time to time in effect, and all official rulings and interpretations
thereunder or thereof.
"Release" shall mean any releasing, spilling, leaking, seepage,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, disposing or dumping, in each case as defined in Environmental Law,
and shall include any "Threatened Release," as defined in Environmental Law;
provided, in the event that any Environmental Law is amended so as to broaden
the meaning of any term defined thereby, such broader meaning shall apply
subsequent to the effective date of such amendment.
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"Remedial Work" shall mean any investigation, site monitoring,
containment, cleanup, removal, restoration or other remedial work of any kind or
nature with respect to any property of any Loan Party or their subsidiaries
(whether such property is owned, leased, subleased or used), including, without
limitation, with respect to Contaminants and the Release thereof.
"Reportable Event" shall mean a Reportable Event as defined in
Section 4043(c) of ERISA with respect to which the notice requirements have not
been waived.
"Required Lenders" shall mean, at any time, Lenders holding Loans,
exposure under the Letter of Credit Usage and unused Revolving Credit
Commitments representing at least 51% of the aggregate of (a) the aggregate
principal amount of Loans at such time, (b) the Letter of Credit Usage at such
time and (c) the aggregate unused Revolving Credit Commitments at such time, all
after giving effect to the terms of Section 2.13(d)(v).
"Responsible Officer" shall mean, with respect to any person, any
vice president or president, or the chief financial officer, controller,
assistant controller, treasurer or assistant treasurer of such person.
"Revolving Credit Alternate Base Loan" shall mean a Revolving
Credit Loan that is an Alternate Base Loan.
"Revolving Credit Commitment" shall mean, with respect to each
Lender, the commitment of such Lender to make Revolving Credit Loans hereunder
and participate in Letters of Credit in an aggregate amount at any time
outstanding not in excess of the amount opposite the name of such Lender in the
column entitled "Revolving Credit Commitment" in the table appearing in Schedule
2.01, or if applicable, the amount set forth in the Assignment and Acceptance
pursuant to which such Lender became a Lender hereunder, as such amount may be
(a) reduced from time to time pursuant to this Agreement including, without
limitation, Section 2.07 hereof and (b) reduced or increased from time to time
pursuant to assignments by or to such Lender pursuant to Section 11.03 hereof.
"Revolving Credit Commitment Fee" shall have the meaning set forth
in Section 2.06(a) hereof.
"Revolving Credit Eurodollar Loan" shall mean a Revolving Credit
Loan that is a Eurodollar Loan.
"Revolving Credit Loan" shall mean a Revolving Credit Loan made
pursuant to Sections 2.01 and 2.02 hereof.
"Revolving Credit Notes" shall mean the Revolving Credit Notes of
the Borrowers, executed and delivered as provided in Section 2.04 hereof, in
substantially the
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form of Exhibit A annexed hereto, as amended, modified or supplemented from time
to time.
"Revolving Credit Termination Date" shall mean the earlier to
occur of (i) the Final Maturity Date and (ii) such date as the Revolving Credit
Loans shall otherwise be payable in full and the Revolving Credit Commitment
shall terminate, expire or be canceled in accordance with the terms of this
Agreement.
"Security Agreement" shall mean the Security Agreement dated as of
the date hereof, between the Grantor(s) and the Agent, for its own benefit and
for the benefit of the Lenders, substantially in the form of Exhibit D annexed
hereto, as amended, modified or supplemented from time to time.
"Security Agreement - Patents and Trademarks" shall mean the
Security Agreement and Mortgage - Patents and Trademarks, dated as of the date
hereof, between the Debtor(s), as such term is defined therein, and the Agent,
for its own benefit and for the benefit of the Lenders, substantially in the
form of Exhibit F annexed hereto, as amended, modified or supplemented from time
to time.
"Security Documents" shall mean the Pledge Agreement, the Security
Agreement, the Security Agreement - Patents and Trademarks, the Mortgages and
each other agreement now existing or hereafter created providing collateral
security for the payment or performance of any Obligations.
"Stock Acquisition and Retention Program" shall mean the Stock
Acquisition and Retention Program of Holdings.
"Subordinated Indebtedness" shall mean, with respect to any of the
Borrowers or Holdings, Indebtedness subordinated in right of payment to such
person's monetary obligations under this Agreement or the other Loan Documents
(as applicable) upon terms reasonably satisfactory to and approved in writing by
the Required Lenders. For purposes of the definition of "Fixed Charge Expense"
and Section 7.16 hereof "Subordinated Indebtedness" shall include the
subordinated indebtedness of the Canadian Sub.
"subsidiary" shall mean, with respect to any person, any
corporation, association or other business entity of which securities or other
ownership interests representing more than 50% of the equity or more than 50% of
the ordinary voting power are, at the time as of which any determination is
being made, owned or controlled, directly or indirectly, by the parent of such
person or one or more subsidiaries of the parent of such person.
"Taxes" shall have the meaning assigned to such term in Section
2.16(a) hereof.
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"Total Availability" at any time shall mean the sum of Laars
Availability and Water Pik Availability.
"Total Commitment" shall mean the sum of the Lenders' Revolving
Credit Commitments, as the same may be reduced from time to time pursuant to
this Agreement including, without limitation, Section 2.07 hereof.
"Transactions" shall have the meaning assigned to such term in
Section 4.02 hereof.
"Water Pik" shall have the meaning assigned to such term in the
preamble to this Agreement.
"Water Pik Availability" shall mean at any time (i) the lesser at
such time of (x) the Total Commitment and (y) the Water Pik Borrowing Base,
minus (ii) the sum at such time of (x) the unpaid principal balance of, and
accrued interest and fees on, the Revolving Credit Loans attributed to Water Pik
and (y) the Letter of Credit Usage with respect to Letters of Credit issued for
the account of Water Pik.
"Water Pik Borrowing Base" shall have the meaning assigned to such
term in Section 2.01 hereof.
SECTION 1.02. Accounting Terms. Unless otherwise expressly
provided herein, each accounting term used herein shall have the meaning given
it under generally accepted accounting principles in effect from time to time in
the United States applied on a basis consistent with those used in preparing the
financial statements referred to in Section 6.05 hereof ("GAAP"); provided,
however, that each reference in Article VII hereof, or in the definition of any
term used in Article VII hereof, to GAAP shall mean GAAP as in effect on the
date hereof.
II. THE LOANS
SECTION 2.01. Revolving Credit Commitments. Subject to the terms
and conditions and relying upon the representations and warranties herein set
forth, each Lender, severally and not jointly, agrees to make Revolving Credit
Loans to the Borrowers, at any time and from time to time from the date hereof
to the Revolving Credit Termination Date, in an aggregate principal amount at
any time outstanding not to exceed the amount of such Lender's Revolving Credit
Commitment set forth opposite its name in Schedule 2.01(b) annexed hereto, as
such Revolving Credit Commitment may be reduced from time to time in accordance
with the provisions of this Agreement. Notwithstanding the foregoing, (A) the
aggregate principal amount of Revolving Credit Loans outstanding at any time to
the Borrowers shall not exceed (i) the lesser of (x) the Total Commitment (as
such amount may be reduced from time to time pursuant to this Agreement) and (y)
the Borrowing Base (as hereinafter defined) minus (ii) the Letter of Credit
Usage at such time
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(not to exceed $5,000,000 at any time) and minus (iii) all accrued interest,
fees and expenses at such time and (B) the aggregate principal amount of
Revolving Credit Loans outstanding at any time to (i) Laars shall not exceed an
amount equal to the sum (the "Laars Borrowing Base") of (x) up to 80% of the Net
Amount of Eligible Accounts of such Receivables Grantor, plus (y) up to 50% of
the Net Amount of Eligible Inventory of such Inventory Grantor, plus (z) the M&E
Availability attributable to Laars, minus the Letter of Credit Usage of Laars at
such time and (ii) Water Pik shall not exceed an amount equal to the sum (the
"Water Pik Borrowing Base" and, together with the Laars Borrowing Base, the
"Borrowing Base") of (x) up to 80% of the Net Amount of Eligible Accounts of
such Receivables Grantor plus (y) up to 50% of the Net Amount of Eligible
Inventory of such Receivables Grantor, plus (z) the M&E Availability
attributable to Water Pik, minus the Letter of Credit Usage of Water Pik at such
time.
Notwithstanding the foregoing, it is hereby acknowledged and
agreed that (i) the advance rate with respect to Eligible Receivables may be
reduced at any time by the Agent in its reasonable discretion if a receivable
dilution percentage in excess of ten percent (10%) is confirmed in any field
examination conducted by or on behalf of the Agent and (ii) reserves may be
reasonably established at any time by the Agent in its sole reasonable
discretion including, without limitation, the Dilution Reserve and reserves with
respect to (x) exposure under foreign exchange contracts, hedging and other
financial instruments and (y) collateral locations at which collateral valued at
$100,000 or more is located and provided not more than $275,000 in the aggregate
for all such locations for which landlord waiver and consent agreements in form
and substance satisfactory to the Agent have not been obtained.
Subject to the foregoing and within the foregoing limits, the
Borrowers may borrow, repay (or, subject to the provisions of Section 2.09
hereof, prepay) and reborrow Revolving Credit Loans, on and after the Closing
Date and prior to the Revolving Credit Termination Date, subject to the terms,
provisions and limitations set forth herein, including, without limitation, the
requirement that no Revolving Credit Loan shall be made hereunder if after
giving effect thereto (A) with respect to all Borrowers, the sum of (i) the
aggregate principal amount of the Revolving Credit Loans outstanding hereunder,
plus (ii) the Letter of Credit Usage, plus (iii) accrued interest, fees and
expenses, would exceed the lesser of (i) the Total Commitment (as such amount
may be reduced pursuant to the provisions of this Agreement) and (ii) the
Borrowing Base, (B) with respect to Laars, the sum of (i) the aggregate
principal amount of the Revolving Credit Loans outstanding hereunder to Laars
plus (ii) the Letter of Credit Usage with respect to Letters of Credit issued
for the account of Laars, would exceed the lesser of (i) the Total Commitment
(as such amount may be reduced pursuant to the provisions of this Agreement) and
(ii) the Laars Borrowing Base and (C) with respect to Water Pik, the sum of (i)
the aggregate principal amount of Revolving Credit Loans outstanding hereunder
to Water Pik plus (ii) the Letter of Credit Usage with respect to Letters of
Credit issued for the account of Water Pik, would exceed the lesser of (i) the
Total Commitment (as such amount may be reduced pursuant to the provisions of
this Agreement) and (ii) the Water Pik Borrowing Base. In accordance with
Section 6.05(k) hereof, a Responsible Officer of each Borrower shall
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furnish on each date required thereunder a separate Borrowing Base Certificate
with respect to such Borrower.
SECTION 2.02. Loans. (a) The Revolving Credit Loans made by the
Lenders on any date shall be in integral multiples of $100,000 (except that the
foregoing limitation shall not be applicable to the extent that the proceeds of
such Loans are requested to be disbursed to each of the Borrower's controlled
disbursement accounts, if any, maintained with the Agent); provided, however,
that the Eurodollar Loans made on any date shall be in a minimum aggregate
principal amount equal to the product of $500,000 times the number of Lenders on
such date.
(b) Loans shall be made ratably by the Lenders in accordance with
their respective Revolving Credit Commitments; provided, however, that the
failure of any Lender to make any Loan shall not in itself relieve any other
Lender of its obligation to lend hereunder. The initial Revolving Credit Loans
shall be made by the Lenders against delivery of Revolving Credit Notes, payable
to the order of the Lenders, as referred to in Section 2.04 hereof.
(c) Each Loan shall be either an Alternate Base Loan or a
Eurodollar Loan as the Borrowers may request pursuant to Section 2.03 hereof.
Each Lender may fulfill its obligations under this Agreement by causing its
Applicable Lending Office to make such Loan; provided, however, that the
exercise of such option shall not affect the obligation of the Borrowers to
repay such Loan in accordance with the terms of the applicable Note. Loans of
more than one type may be outstanding at the same time, provided, however, not
more than five (5) Eurodollar Loans may be outstanding at any one time.
(d) Subject to the provisions of paragraph (e) below, each Lender
shall make its Revolving Credit Loans on the proposed dates thereof by paying
the amount required to the Agent in New York, New York in immediately available
funds not later than 1:00 p.m., New York City time, and the Agent shall as soon
as practicable, but in no event later than 4:00 p.m., New York City time, credit
the amounts so received to the general deposit account of the Borrowers with the
Agent in immediately available funds or, if Loans are not to be made on such
date because any condition precedent to a borrowing herein specified is not met,
return the amounts so received to the respective Lenders.
(e) The Borrowers shall have the right at any time upon prior
irrevocable written, facsimile or telephonic notice (promptly confirmed by
written or facsimile notice) to the Agent given in the manner and at the times
specified in Section 2.03 hereof with respect to the Loans into which conversion
or continuation is to be made, to convert all or any portion of Eurodollar Loans
into Alternate Base Loans, to convert all or any portion of Alternate Base Loans
into Eurodollar Loans (specifying the Interest Period to be applicable thereto),
to convert the Interest Period with respect to all or any portion of any
Eurodollar Loans to another permissible Interest Period, and to continue all or
any portion of any Eurodollar Loans into a subsequent Interest Period, subject
to the terms and conditions of this Agreement (including the last sentence of
Section 2.02(c) hereof) and to the following:
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(i) each conversion or continuation shall be made pro rata
among the Lenders in accordance with the respective principal
amounts of the Loans comprising the conversion or continuation,
and in the case of a conversion or continuation of fewer than all
the Loans, the aggregate principal amount of Loans converted or
continued shall not be less than $100,000 in the case of Alternate
Base Loans (except that the foregoing limitation shall not be
applicable to the extent that the proceeds of such Loans are
requested to be disbursed to the Borrowers' controlled
disbursement account, if any, maintained with the Agent) or
$500,000 times the number of Lenders on such date in the case of
Eurodollar Loans and shall be an integral multiple of $100,000;
(ii) accrued interest on a Eurodollar Loan (or portion
thereof) being converted shall be paid by the Borrowers at the
time of conversion;
(iii) if any Eurodollar Loan is converted at any time other
than the end of an Interest Period applicable thereto, the
Borrowers shall make such payments associated therewith as are
required pursuant to Section 2.12;
(iv) any portion of a Revolving Credit Eurodollar Loan which
is subject to an Interest Period ending on a date that is less
than one month prior to the Revolving Credit Termination Date may
not be converted into, or continued as, a Eurodollar Loan and
shall be automatically converted at the end of such Interest
Period into a Revolving Credit Alternate Base Loan; and
(v) at the time of any conversion to, or continuation of, a
Eurodollar Loan, no Default or Event of Default shall have
occurred and be continuing.
The Interest Period applicable to any Eurodollar Loan resulting
from a conversion shall be specified by the Borrowers in the irrevocable notice
of conversion delivered pursuant to this Section; provided, however, that if no
such Interest Period shall be specified, the Borrowers shall be deemed to have
selected an Interest Period of one month's duration; and, provided further, that
no such Interest Period may be for more than one month for the period commencing
on the Closing Date and ending on the earlier to occur of (x) the 120th day
following the Closing Date and (y) the completion to the satisfaction of The
Chase Manhattan Bank of the syndication of its portion of the Total Commitment
and the Loans and other Credits thereunder. If the Borrowers shall not have
given timely notice to continue any Eurodollar Loan into a subsequent Interest
Period (and shall not otherwise have given notice to convert such Loan), such
Loan (unless repaid or required to be repaid pursuant to the terms hereof) shall
automatically be converted into an Alternate Base Loan. The Agent shall promptly
advise the Lenders of any notice given pursuant to this Section and of each
Lender's portion of the continuation or conversion hereunder.
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SECTION 2.03. Notice of Loans. The Borrowers shall, through a
Responsible Officer of any of the Borrowers, give the Agent irrevocable written,
facsimile or telephonic notice (promptly confirmed by written or facsimile
notice) of each borrowing (including, without limitation, a conversion or
continuation as permitted by Section 2.02(e) hereof) not later than 1:00 p.m.,
New York City time, (i) three (3) Business Days before a proposed Eurodollar
Loan borrowing or conversion or continuation and (ii) on the Business Day of an
Alternate Base Loan borrowing or conversion or continuation (except that no such
confirmation will be required, unless requested by the Agent, to the extent that
the proceeds of such borrowing are requested to be disbursed to Borrowers'
controlled disbursement account, if any, maintained with the Agent). Such notice
shall specify (w) whether the Loans then being requested are to be for the
account of Laars or Water Pik and are to be Alternate Base Loans or Eurodollar
Loans, it being agreed that all Loans made on the Closing Date shall be
Alternate Base Loans, (x) the date of such borrowing (which shall be a Business
Day) and amount thereof and (y) if such Loans are to be Eurodollar Loans, the
Interest Period with respect thereto. If no election as to the type of Loan is
specified in any such notice, all such Loans shall be Alternate Base Loans. If
no Interest Period with respect to any Eurodollar Loan is specified in any such
notice, then an Interest Period of one month's duration shall be deemed to have
been selected; provided, however, that no such Interest Period may be for more
than one month for the period commencing on the Closing Date and ending on the
earlier to occur of (x) the 120th day following the Closing Date and (y) the
completion to the satisfaction of The Chase Manhattan Bank of the syndication of
its portion of the Total Commitment and the Loans and other Credits thereunder.
The Agent shall promptly advise the Lenders of any notice given pursuant to this
Section 2.03 and of each Lender's portion of the requested borrowing.
SECTION 2.04. Notes; Repayment of Loans. (a) All Revolving Credit
Loans made by a Lender to the Borrowers shall be evidenced by a single Revolving
Credit Note, duly executed on behalf of the Borrowers, dated the Closing Date,
in substantially the form of Exhibit A annexed hereto, delivered and payable to
such Lender in a principal amount equal to its Revolving Credit Commitment on
such date. The outstanding balance of each Revolving Credit Loan, as evidenced
by any such Revolving Credit Note, shall mature and be due and payable on the
Revolving Credit Termination Date.
(b) Each Revolving Credit Note shall bear interest from its date
on the outstanding principal balance thereof, as provided in Section 2.05
hereof.
(c) Each Lender, or the Agent on its behalf, shall, and is hereby
authorized by the Borrowers to, endorse on the schedule attached to the
Revolving Credit Note of such Lender (or on a continuation of such schedule
attached to such Note and made a part thereof) an appropriate notation
evidencing the date and amount of each Loan to the Borrowers from such Lender,
as well as the date and amount of each payment and prepayment with respect
thereto; provided, however, that the failure of any person to make such a
notation on a Note shall not affect any obligations of the Borrowers under such
Note. Any such notation shall be conclusive and binding as to the date and
amount of such
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Loan or portion thereof, or payment or prepayment of principal or interest
thereon, absent manifest error.
(d) Notwithstanding that each request for a Loan shall identify
the Borrower for whose account such borrowing is being made, each Borrower shall
be jointly and severally liable with the other Borrower for the Obligations, and
each of the Obligations shall be secured by all of the Collateral. Each of the
Borrowers acknowledges that it is jointly and severally liable under this
Agreement and the other Loan Documents. All Credits extended to any of the
Borrowers or requested by any of the Borrowers shall be deemed to be Credits
extended for each of the Borrowers, and each of the Borrowers hereby authorizes
each other of the Borrowers to effectuate Credits on its behalf. Notwithstanding
anything to the contrary contained in this Agreement or any of the other Loan
Documents, the Agent and the Lenders shall be entitled to rely upon any request,
notice or other communication received by them from any of the Borrowers on
behalf of all Borrowers, and shall be entitled to treat their giving of any
notice hereunder to any of the Borrowers as notice to each and all Borrowers.
Each of the Borrowers agrees that the joint and several liability
of the Borrowers provided for in this subsection (d) shall not be impaired or
affected by any modification, supplement, extension or amendment or any contract
or agreement to which the other Borrower(s) may hereafter agree (other than an
agreement signed by the Agent and the Lenders specifically releasing such
liability), nor by any delay, extension of time, renewal, compromise or other
indulgence granted by the Agent or any Lender with respect to any of the
Obligations, nor by any other agreements or arrangements whatsoever with the
other Borrower(s) or with any other person, each of the Borrowers hereby waiving
all notice of such delay, extension, release, substitution, renewal, compromise
or other indulgence, and hereby consenting to be bound thereby as fully and
effectually as if it had expressly agreed thereto in advance. The liability of
each of the Borrowers is direct and unconditional as to all of the Obligations,
and may be enforced without requiring the Agent or any Lender first to resort to
any other right, remedy or security. Each of the Borrowers hereby expressly
waives promptness, diligence, notice of acceptance and any other notice with
respect to any of the Obligations, the Notes, this Agreement or any other Loan
Document and any requirement that the Agent or any Lender protect, secure,
perfect or insure any Lien or any property subject thereto or exhaust any right
or take any action against any of the Borrowers or any other person or any
collateral.
Each of the Borrowers hereby irrevocably subordinates and makes
junior to the Obligations each of the other Borrower's "claims" (as defined in
Section 101(5) of the Bankruptcy Code) to which such Borrowers are or would be
entitled by virtue of the provisions of the first paragraph of this subsection
(e) or the performance of such Borrower's obligations thereunder including,
without limitation, any right of subrogation (whether contractual, under Section
509 of the Bankruptcy Code or otherwise), reimbursement, contribution,
exoneration or similar right, or indemnity, or any right of recourse to security
for any of the Obligations unless and until all of the Obligations to the Agent
and the Lenders have been indefeasibly paid in full.
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SECTION 2.05. Interest on Loans. (a) Subject to the provisions of
Section 2.05(c) and Section 2.08 hereof, each Alternate Base Loan shall bear
interest at a rate per annum equal to the Alternate Base Rate plus the
applicable Interest Margin.
(b) Subject to the provisions of Section 2.05(c) and Section 2.08
hereof, each Eurodollar Loan shall bear interest at a rate per annum equal to
the Adjusted LIBO Rate plus the applicable Interest Margin.
(c) Interest on each Loan shall be payable in arrears on each
applicable Interest Payment Date and the Revolving Credit Termination Date.
Interest on each Alternate Base Loan shall be computed based on the number of
days elapsed in a year of 365 days and each Eurodollar Loan shall be computed
based on the number of days elapsed in a year of 360 days. The Agent shall
determine each interest rate applicable to the Loans and shall promptly advise
the Borrowers and the Lenders of the interest rate so determined.
SECTION 2.06. Fees. The Borrowers shall pay each Lender, through
the Agent, (i) on the first Business Day of each January, April, July and
October commencing January 1, 2000, (ii) on the date of any reduction of the
Revolving Credit Commitments pursuant to this Agreement including, without
limitation, Section 2.07 hereof and (iii) on the Revolving Credit Termination
Date, in immediately available funds, a commitment fee (the "Revolving Credit
Commitment Fee") equal to the Revolving Credit Commitment Fee Margin per annum
on the average daily unused amount of the Revolving Credit Commitment of such
Lender, during the preceding quarter (or shorter period commencing with the
Closing Date or ending with the Revolving Credit Termination Date) ending
immediately prior to such date it being understood that Letter of Credit Usage
shall constitute "use" of the Revolving Credit Commitment in a corresponding
amount. The Revolving Credit Commitment Fee due to each Lender under this
Section 2.06 shall commence to accrue on the date hereof and cease to accrue on
the earlier of (i) the Revolving Credit Termination Date and (ii) the
termination of the Revolving Credit Commitment of such Lender pursuant to this
Agreement including, without limitation, pursuant to Section 2.07 hereof. The
Revolving Credit Commitment Fee shall be calculated on the basis of the actual
number of days elapsed in a year of 365 days.
SECTION 2.07. Termination and Reduction of Revolving Credit
Commitments. (a) Upon at least three (3) Business Days' prior irrevocable
written notice (or facsimile notice promptly confirmed in writing) to the Agent,
the Borrowers may at any time in whole permanently terminate, or from time to
time in part permanently reduce, the Total Commitment, ratably among the Lenders
in accordance with the amounts of their Revolving Credit Commitments; provided,
however, that the Total Commitment shall not be reduced at any time to an amount
less than the Revolving Credit Loans outstanding under the Revolving Credit
Commitments and the Letter of Credit Usage at such time. Each partial reduction
of the Total Commitment shall be in a minimum of $500,000 or an integral
multiple of $100,000.
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(b) Simultaneously with any termination or reduction of the Total
Commitment pursuant to paragraph (a) of this Section 2.07, the Borrowers shall
pay to each Lender, through the Agent, the Revolving Credit Commitment Fee due
and owing through and including the date of such termination or reduction on the
amount of the Revolving Credit Commitment of such Lender so terminated or
reduced.
(c) The Revolving Credit Commitment of each Lender shall
automatically and permanently terminate on the Revolving Credit Termination
Date, and all Revolving Credit Loans still outstanding on such date shall be due
and payable in full together with accrued interest thereon.
SECTION 2.08. Interest on Overdue Amounts; Alternate Rate of
Interest. (a) Upon the occurrence and continuance of an Event of Default, the
Borrowers shall on demand from time to time pay interest, to the extent
permitted by law, on all Obligations outstanding up to the time such Event of
Default has been cured or waived at a rate per annum equal to two percent (2%)
in excess of the rates otherwise applicable to the Obligations outstanding
pursuant to Section 2.05 in the case of Loans or Section 2.20 in the case of the
letter of credit fees with respect to Letters of Credit.
(b) In the event, and on each occasion, that on the day two (2)
Business Days prior to the commencement of any Interest Period for a Eurodollar
Loan the Agent shall have determined that dollar deposits in the amount of each
Eurodollar Loan are not generally available in the London interbank market, or
that the rate at which dollar deposits are being offered will not reflect
adequately and fairly the cost to any Lender of making or maintaining such
Eurodollar Loan during such Interest Period, or that reasonable means do not
exist for ascertaining the Adjusted LIBO Rate, the Agent shall as soon as
practicable thereafter give written notice (or facsimile notice promptly
confirmed in writing) of such determination to the Borrowers and the Lenders,
and any request by the Borrowers for the making of a Eurodollar Loan pursuant to
Section 2.03 hereof or conversion or continuation of any Loan into a Eurodollar
Loan pursuant to Section 2.02 hereof shall, until the circumstances giving rise
to such notice no longer exist, be deemed to be a request for an Alternate Base
Loan. Each determination by the Agent made hereunder shall be conclusive absent
manifest error.
SECTION 2.09. Additional Repayment of Loans. (a) Subject to the
terms and conditions contained in this Section 2.09 and elsewhere in this
Agreement, the Borrowers shall have the right to prepay any Loan at any time in
whole or from time to time in part (except in the case of a Eurodollar Loan only
on the last day of an Interest Period) without penalty (except as otherwise
provided for herein); provided, however, that each such partial prepayment of a
Loan shall be in an integral multiple of $100,000 (or such lesser amount to the
extent the provisions of Section 10.01 are applicable); provided, further, that
unless the Total Commitment is also being terminated at least $1.00 of Loans
shall remain outstanding at all times.
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(b) On the date of any termination or reduction of the Total
Commitment pursuant to Section 2.07(a) hereof or elsewhere in this Agreement,
the Borrowers shall pay or prepay so much of the Revolving Credit Loans as shall
be necessary in order that each of Laars Availability, Water Pik Availability
and Total Availability equals or exceeds zero following such termination or
reduction. Any prepayments required by this paragraph (b) shall be applied to
outstanding Revolving Credit Alternate Base Loans up to the full amount thereof
before they are applied to outstanding Revolving Credit Eurodollar Loans;
provided, however, that the Borrowers shall not be required to make any
prepayment of any Eurodollar Loan pursuant to this Section until the last day of
the Interest Period with respect thereto so long as an amount equal to such
prepayment is deposited by the Borrowers in a cash collateral account with the
Agent to be held in such account on terms satisfactory to the Agent (if not
previously applied, such cash collateral may be applied by the Agent on the last
day of the applicable Interest Period to repay outstanding Eurodollar Loans as
they become due).
(c) The Borrowers shall make prepayments of the Revolving Credit
Loans from time to time such that each of Laars Availability, Water Pik
Availability and Total Availability equals or exceeds zero at all times. Any
prepayments required by this paragraph (c) shall be applied to outstanding
Revolving Credit Alternate Base Loans up to the full amount thereof before they
are applied to outstanding Revolving Credit Eurodollar Loans; provided, however,
that the Borrowers shall not be required to make any prepayment of any
Eurodollar Loan pursuant to this Section until the last day of the Interest
Period with respect thereto so long as an amount equal to such prepayment is
deposited by the Borrowers in a cash collateral account with the Agent to be
held in such account on terms satisfactory to the Agent (if not previously
applied, such cash collateral may be applied by the Agent on the last day of the
applicable Interest Period to repay outstanding Eurodollar Loans as they become
due).
(d) Within three Business Days of (i) the sale or other
disposition of any assets of any of the Borrowers or their subsidiaries
(excluding sales of assets permitted pursuant to Sections 7.05(a) and (b)
hereof) or of the capital stock of any of the Borrowers (subject to Section 7.05
hereof) or (ii) the consummation of the issuance of any debt securities of any
of the Borrowers (other than as permitted pursuant to Section 7.03 hereof), the
Borrowers shall make a mandatory prepayment of the Loans in an amount equal to
100% of the Net Proceeds, which Proceeds shall be applied as set forth in
paragraph (f) below. Nothing contained in this paragraph (d) shall be or be
deemed to be a consent to the sale of any assets or stock or the issuance of any
stock or debt securities.
(e) (i) Except as provided in clause (ii) below, promptly and in
any event not more than three (3) Business Days following the receipt by the
Agent or any of the Borrowers or any subsidiary of any of the Borrowers of any
net proceeds of (x) any casualty insurance required to be maintained pursuant to
Section 6.03 hereof on account of each separate loss, damage or injury (each, a
"Casualty Event") in excess of $100,000 (or, if there shall be continuing a
Default or an Event of Default, of the full amount of Net Proceeds) to any asset
of such Borrowers or such subsidiary (including, without limitation,
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any Collateral), or (y) any business interruption insurance required to be
maintained pursuant to Section 6.03 hereof on account of any business
interruption event (each, a "BI Event") in excess of $100,000 (or, if there
shall be continuing a Default or Event of Default, of the full amount of Net
Proceeds), such Borrowers or subsidiary shall notify the Agent of such receipt
in writing or by telephone promptly confirmed in writing, and not later than
three (3) Business Days following receipt by the Agent or such Borrowers or
subsidiary of any such Proceeds, there shall become due and payable a prepayment
of the Loans in an amount equal to 100% of such proceeds. Prepayments from such
Net Proceeds shall be applied as set forth in paragraph (f) below.
(ii) In the case of the receipt of Net Proceeds described in clause
(i) above with respect to a Casualty Event or BI Event, the Borrowers may elect,
by written notice delivered to the Agent not later than the day on which a
prepayment would otherwise be required under clause (i), (x) in the case of Net
Proceeds received with respect to a BI Event, to use such Proceeds in the
ordinary course of such Borrower's business and (y) in the case of Net Proceeds
received with respect to any Casualty Event, to apply all or a portion of such
Net Proceeds for the purpose of replacing, repairing, restoring or rebuilding
(referred to herein as a "Rebuilding") the relevant tangible property, and, in
any such event, any required prepayment under clause (i) above shall be reduced
dollar for dollar by the amount of such election under clause (x) or clause (y)
of this sentence. An election under this clause (ii) shall not be effective
unless: (x) at the time of such election there is continuing no Default or Event
of Default; (y) the Borrowers shall have certified to the Agent that: (i) the
Net Proceeds of the insurance adjustment with respect to a Casualty Event,
together with other funds available to the Borrowers shall be sufficient to
complete such Rebuilding in accordance with all applicable laws, regulations and
ordinances; and (ii) no Default or Event of Default has arisen or will arise as
a result of such BI Event, Casualty Event or Rebuilding; and (z) if the amount
of Net Proceeds in question exceeds (i) at any time before the consummation of a
Public Offering, $500,000 or (ii) at any time after the consummation of a Public
Offering, $1,000,000, the Borrowers shall have obtained the written consent of
the Required Lenders to such election.
(iii) In the event of an election under clause (ii) above, pending
application of the Net Proceeds to business operations with respect to a BI
Event or to Rebuilding with respect to a Casualty Event, the Borrowers shall not
later than the time at which prepayment would have been, in the absence of such
election, required under clause (i) above, apply such Net Proceeds to the
prepayment of the outstanding principal balance, if any, of the Revolving Credit
Loans (not in permanent reduction of the Revolving Credit Commitment), and
deposit (the "Special Deposit") with the Agent, the balance, if any, of such Net
Proceeds remaining after such application, pursuant to agreements in form, scope
and substance reasonably satisfactory to the Agent. The Special Deposit,
together with all earnings on such Special Deposit, shall be available to the
Borrowers solely for the applicable Rebuilding or ordinary course business
operations, as the case may be; provided, however, that at such time as a
Default or Event of Default shall occur, the balance of the Special Deposit and
earnings thereon may be applied by the Agent to repay the Obligations in such
order as the Agent shall elect. The Agent shall be entitled to
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require proof, as a condition to the making of any withdrawal from the Special
Deposit, that the proceeds of such withdrawal are being applied for the purposes
permitted hereunder, and, in the case of Rebuilding, that the withdrawal is
equivalent to the value of the improvements being rebuilt.
(f) When making a prepayment, whether mandatory or otherwise,
pursuant to paragraph (a) above (other than circumstances when Section 10.01 is
applicable), the Borrowers shall furnish to the Agent, not later than 1:00 p.m.
(New York City time) (i) three (3) Business Days prior to the date of such
prepayment of Alternate Base Loans and (ii) five (5) Business Days prior to the
date of such prepayment of Eurodollar Loans, written, facsimile or telephonic
notice (promptly confirmed by written or facsimile notice) of prepayment which
shall specify the prepayment date and the principal amount of each Loan (or
portion thereof) to be prepaid, which notice shall be irrevocable and shall
commit the Borrowers to prepay such Loan by the amount stated therein on the
date stated therein. Prepayments made pursuant to paragraph (d) or (e) above
shall be applied as follows: to outstanding Revolving Credit Alternate Base
Loans up to the full amount thereof and then to Revolving Credit Eurodollar
Loans up to the full amount thereof; provided, however, that the Borrowers shall
not be required to make any prepayment of any Revolving Credit Eurodollar Loan
required pursuant to this Section 2.09(f) until the last day of the Interest
Period with respect thereto so long as an amount equal to such prepayment is
deposited by the Borrowers into a cash collateral account with the Agent to be
held in such account pursuant to terms satisfactory to the Agent (if not
previously applied, such cash collateral may be applied by the Agent on the last
day of the applicable Interest Periods to repay outstanding Eurodollar Loans as
they become due). All prepayments pursuant to Section 2.09 shall be accompanied
by accrued interest on the principal amount being prepaid to the date of
prepayment.
(g) All prepayments under this Section 2.09 shall be subject to
Section 2.12 hereof.
(h) Except as otherwise expressly provided in this Section 2.09,
payments with respect to any paragraph of this Section 2.09 are in addition to
payments made or required to be made under any other paragraph of this Section
2.09.
SECTION 2.10. Reserve Requirements; Change in Circumstances. (a)
Notwithstanding any other provision herein, if after the date of this Agreement
(or in the case of any assignee of any Lender, the date of assignment) any
change in applicable law or regulation or in the interpretation or
administration thereof by any governmental authority charged with the
interpretation or administration thereof (whether or not having the force of
law), or any change in GAAP or regulatory accounting principles applicable to
the Agent or any Lender, shall: (i) subject the Agent or any Lender (which shall
for the purpose of this Section 2.10 include any assignee or lending office of
the Agent or any Lender) to any charge, fee, deduction or withholding of any
kind or to any tax with respect to any amount paid or to be paid to either the
Agent or any Lender with respect to any Eurodollar Loans made by such Lender to
the Borrowers or with respect to the obligations of any Lender
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under Sections 2.17 through 2.20 hereof or under any Letter of Credit (other
than (x) taxes imposed on the overall net income of the Agent or such Lender and
(y) franchise taxes imposed on the Agent or such Lender, in either case by the
jurisdiction in which such Lender or the Agent has its principal office or its
lending office with respect to such Eurodollar Loan or any political subdivision
or taxing authority of either thereof); (ii) change the basis of taxation of
payments to any Lender or the Agent of the principal of or interest on any
Eurodollar Loan or any other fees or amounts payable with respect to any Letter
of Credit or otherwise hereunder (other than taxes imposed on the overall net
income of such Lender or the Agent by the jurisdiction in which such Lender or
the Agent has its principal office or by any political subdivision or taxing
authority therein); (iii) impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with or for the
account of, or loans or loan commitments extended by, or Letters of Credit
issued and maintained by such Lender; or (iv) impose on any Lender or, with
respect to Eurodollar Loans, the London interbank market, any other condition
affecting this Agreement, Letters of Credit issued and maintained by or
Eurodollar Loans made by such Lender; and the result of any of the foregoing
shall be to increase the cost to any such Lender of making or maintaining any
Eurodollar Loan or Letter of Credit, or to reduce the amount of any payment
(whether of principal, interest, fee, compensation or otherwise) receivable by
such Lender or to require such Lender to make any payment in respect of any
Eurodollar Loan or Letter of Credit, then the Borrowers shall pay to such Lender
or the Agent, as the case may be, upon such Lender's or the Agent's demand, such
additional amount or amounts as will compensate such Lender or the Agent for
such additional costs or reduction. The Agent and each Lender agree to give
notice to the Borrowers of any such change in law, regulation, interpretation or
administration with reasonable promptness after becoming actually aware thereof
and of the applicability thereof to the Transactions. Notwithstanding anything
contained herein to the contrary, nothing in clause (i) or (ii) of this Section
2.10(a) shall be deemed to (x) permit the Agent or any Lender to recover any
amount thereunder which would not be recoverable under Section 2.16 hereof or
(y) require the Borrowers to make any payment of any amount to the extent that
such payment would duplicate any payment made by the Borrowers pursuant to
Section 2.16 hereof.
(b) If at any time and from time to time after the date of this
Agreement, any Lender shall determine that the adoption of any applicable
governmental law, rule, regulation or guideline regarding capital adequacy, or
any change in any applicable law, rule, regulation or guideline regarding
capital adequacy, including, without limitation, the July 1988 report of the
Basle Committee on Banking Regulations and Supervisory Practices entitled
"International Convergence of Capital Measurement and Capital Standards", or any
change in the interpretation or administration of any thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by such Lender (or its
lending office) with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or will have the effect of reducing the rate of return on
such Lender's capital or on the capital of such Lender's holding company, if
any, as a consequence of its obligations hereunder to a level below
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that which such Lender could have achieved but for such adoption, change or
compliance (taking into consideration such Lender's policies and the policies of
such Lender's holding company with respect to capital adequacy), then from time
to time the Borrowers shall pay to such Lender such additional amount or amounts
as will compensate such Lender for such reduction. Each Lender agrees to give
notice to the Borrowers of any adoption of, change in, or change in
interpretation or administration of, any such law, rule, regulation or guideline
with reasonable promptness after becoming actually aware thereof and of the
applicability thereof to the Transactions. Notwithstanding any other provision
in this paragraph (b), none of any Lender or the Agent shall be entitled to
demand compensation pursuant to this paragraph (b) if it shall not be the
general practice of such Lender or the Agent, as applicable, to demand such
compensation in similar circumstances under comparable provisions of other
comparable credit agreements.
(c) A statement of any Lender or the Agent setting forth such
amount or amounts, supported by calculations in reasonable detail, as shall be
necessary to compensate such Lender (or the Agent) as specified in paragraphs
(a) and (b) above shall be delivered to the Borrowers and shall be conclusive
absent manifest error. The Borrowers shall pay such Lender or the Agent, as the
case may be, the amount shown as due on any such statement within ten (10) days
after its receipt of the same.
(d) Failure on the part of any Lender or the Agent to demand
compensation for any increased costs, reduction in amounts received or
receivable with respect to any Interest Period or any Letter of Credit or
reduction in the rate of return earned on such Lender's capital, shall not
constitute a waiver of such Lender's or the Agent's rights to demand
compensation for any increased costs or reduction in amounts received or
receivable or reduction in rate of return in such Interest Period or in any
other Interest Period or with respect to such Letter of Credit. The protection
under this Section 2.10 shall be available to each Lender and the Agent
regardless of any possible contention of the invalidity or inapplicability of
any law, regulation or other condition which shall give rise to any demand by
such Lender or the Agent for compensation. Notwithstanding the foregoing, the
Borrowers shall not be required to compensate a Lender or the Agent pursuant to
this Section for any increased costs or reductions incurred more than six months
prior to the date that such Lender or the Agent, as the case may be, notifies
the Borrowers of the change giving rise to such increased costs or reductions
and of such Lender's or the Agent's intention to claim compensation therefor;
provided that, if the change giving rise to such increased costs or reductions
is retroactive, then the six-month period referred to above shall be extended by
a period of time equal to the period from the date of such change through and
including the earliest date of such retroactive effect.
(e) Any Lender claiming any additional amounts payable pursuant to
this Section 2.10 agrees to use reasonable efforts (consistent with legal and
regulatory restrictions) to designate a different Applicable Lending Office if
the making of such a designation would avoid the need for, or reduce the amount
of, any such additional amounts and would not, in the reasonable judgment of
such Lender, be otherwise disadvantageous to such Lender.
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SECTION 2.11. Change in Legality. (a) Notwithstanding anything to
the contrary herein contained, if any change in any law or regulation or in the
interpretation thereof by any governmental authority charged with the
administration or interpretation thereof shall make it unlawful for any Lender
to make or maintain any Eurodollar Loan or to give effect to its obligations to
make Eurodollar Loans as contemplated hereby, then, by written notice to
Borrowers and to the Agent, such Lender may:
(i) declare that Eurodollar Loans will not thereafter be made
by such Lender hereunder, whereupon the Borrowers shall be
prohibited from requesting Eurodollar Loans from such Lender
hereunder unless such declaration is subsequently withdrawn; and
(ii) require that all outstanding Eurodollar Loans, made by
such Lender be converted to Alternate Base Loans, in which event
(A) all such Eurodollar Loans shall be automatically converted to
Alternate Base Loans as of the effective date of such notice as
provided in paragraph (b) below and (B) all payments of principal
which would otherwise have been applied to repay the converted
Eurodollar Loans shall instead be applied to repay the Alternate
Base Loans resulting from the conversion of such Eurodollar Loans.
(b) For purposes of Section 2.11(a) hereof, a notice to the
Borrowers by any Lender shall be effective, if lawful, on the last day of the
then current Interest Period or, if there are then two or more current Interest
Periods, on the last day of each such Interest Period, respectively; otherwise,
such notice shall be effective with respect to the Borrowers on the date of
receipt by the Borrowers.
SECTION 2.12. Indemnity. The Borrowers shall indemnify the Agent
and each Lender against any loss or reasonable expense (including, but not
limited to, any loss or reasonable expense sustained or incurred or to be
sustained or incurred by reason of or in connection with the execution and
delivery or assignment of, or payment under, any Letter of Credit, or in
liquidating or employing deposits from third parties acquired to affect or
maintain any Loan or part thereof as a Eurodollar Loan) which the Agent or such
Lender may sustain or incur as a consequence of the following events (regardless
of whether such events occur as a result of the occurrence of an Event of
Default or the exercise of any right or remedy of the Agent or the Lenders under
this Agreement or any other agreement, or at law): any failure of the Borrowers
to fulfill on the date of any Credit Event the applicable conditions set forth
in Article V hereof applicable to it; any failure of the Borrowers to borrow
hereunder after irrevocable notice of borrowing pursuant to Section 2.03 hereof
has been given; any payment, prepayment or conversion of a Eurodollar Loan on a
date other than the last day of the relevant Interest Period; any default in
payment or prepayment of the principal amount of any Loan or any part thereof or
interest accrued thereon, or with respect to any Letter of Credit, in each case
as and when due and payable (at the due date thereof, by irrevocable notice of
prepayment or otherwise); or the occurrence of an
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Event of Default. Such loss or reasonable expense shall include, without
limitation, an amount equal to the excess, if any, of (i) the amount of interest
which would have accrued on the principal or other amount so paid, prepaid or
converted or not borrowed for the period from the date of such payment,
prepayment or conversion or failure to borrow to, in the case of a Loan, the
last day of the Interest Period for such Loan (or, in the case of a failure to
borrow, the Interest Period for such Loan which would have commenced on the date
of such failure to borrow), at the applicable rate of interest for such Loan
provided for herein over (ii) the sum of (A) the Interest Margin and (B) the
amount of interest (as reasonably determined by such Lender) that would be
realized by such Lender in reemploying the funds so paid, prepaid or converted
or not borrowed for such period or Interest Period, as the case may be. Any such
Lender shall provide to the Borrowers a statement, signed by an officer of such
Lender, explaining any loss or expense and setting forth, if applicable, the
computation pursuant to the preceding sentence, and such statement shall be
conclusive absent manifest error. The Borrowers shall pay such Lender the amount
shown as due on any such statement within ten (10) days after the receipt of the
same. The indemnities contained herein shall survive the expiration or
termination of this Agreement and of the Letters of Credit.
SECTION 2.13. Pro Rata Treatment; Assumption by and Delegation of
Authority to the Agent. (a) Except as permitted under Sections 2.10, 2.11,
2.15(c) and 2.16 hereof, or as described in subsection (d) below each borrowing,
each payment or prepayment of principal of the Notes, each payment of interest
on the Notes, each payment of any fee or other amount payable hereunder and each
reduction of the Total Commitment shall be made pro rata among the Lenders in
the proportions that their Revolving Credit Commitments bear to the Total
Commitment.
(b) Notwithstanding the occurrence or continuance of a Default or
Event of Default or other failure of any condition to the making of Loans or
occurrence of other Credit Events hereunder subsequent to the Credit Events on
the Closing Date, unless the Agent shall have been notified in writing by any
Lender in accordance with the provisions of paragraph (c) below prior to the
date of a proposed Credit Event that such Lender will not make the amount that
would constitute its pro rata share of the applicable Credits on such date
available to the Agent, the Agent may assume that such Lender has made such
amount available to the Agent on such date, and the Agent may, in reliance upon
such assumption, make available to the Borrowers a corresponding amount. If such
amount is made available to the Agent on a date after such Credit Event date,
such Lender shall pay to the Agent on demand an amount equal to the product of
(i) the daily average Federal funds rate during such period as quoted by the
Agent, times (ii) the amount of such Lender's pro rata share of such Credits,
times (iii) a fraction the numerator of which is the number of days that elapse
from and including such Credit Event date to the date on which such Lender's pro
rata share of such Credits shall have become immediately available to the Agent
and the denominator of which is 360. A certificate of the Agent submitted to any
Lender with respect to any amounts owing under this subsection shall be
conclusive in the absence of manifest error. If such Lender's pro rata share of
such Credits is not in fact made available to the Agent by such Lender within
three Business Days of such Credit Event date, the Agent (without releasing such
Lender from any liability it might have to the
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Agent or any Borrower by reason of its failure to fund) shall be entitled to
recover such amount with interest thereon at the rate per annum applicable to
the Loans hereunder, on demand, from the Borrowers.
(c) Unless and until the Agent shall have received notice from the
Required Lenders as to the existence of a Default, an Event of Default or some
other circumstance which would relieve the Lenders of their respective
obligations to extend Credits hereunder, which notice shall be in writing and
shall be signed by the Required Lenders and shall expressly state that the
Required Lenders do not intend to make available to the Agent such Lenders'
ratable share of Credits extended after the effective date of such notice, the
Agent shall be entitled to continue to make the assumptions described in Section
2.13(b) above. After receipt of the notice described in the preceding sentence,
which shall become effective on the third Business Day after receipt of such
notice by the Agent (unless otherwise agreed by the Agent), the Agent shall be
entitled to make the assumptions described in Section 2.13(b) above as to any
Credits as to which it has not received a written notice to the contrary prior
to 11:00 a.m. (New York City time) on the Business Day next preceding the day on
which such Credits are to be extended. The Agent shall not be required to extend
any Credits as to which it shall have received notice by a Lender of such
Lender's intention not to make its ratable portion of such Credits available to
the Agent. Any withdrawal of authorization as described under this Section
2.13(c) shall not affect the validity of any Credits extended prior to the
effectiveness thereof.
(d) In the event that any Lender fails to fund its ratable portion
(based on its Revolving Credit Commitment) of any Revolving Credit Loan which
such Lender is obligated to fund under the terms of this Agreement (the funded
portion of such borrowing being hereinafter referred to as a "Non Pro Rata
Loan"), until the earlier of such Lender's cure of such failure or the
termination of the Total Revolving Credit Commitment, in the Agent's sole
discretion, the proceeds of all amounts thereafter repaid to Agent by Borrowers
and otherwise required to be applied to such Lender's share of all other
Obligations pursuant to the terms of this Agreement, may be advanced to
Borrowers by Agent on behalf of such Lender to cure, in full or in part, such
failure by such Lender, but shall nevertheless be deemed to have been paid to
such Lender in satisfaction of such other Obligations. Notwithstanding anything
in this Agreement to the contrary:
(i) the foregoing provisions to this subsection (d) shall
apply only with respect to the proceeds of payments of Obligations
and shall not affect the conversion or continuation of Loans
pursuant to Section 2.02;
(ii) any such Lender shall be deemed to have cured its failure
to fund at such time as an amount equal to such Lender's ratable
portion (based on its applicable Revolving Credit Commitment) of
the requested principal portion of such Revolving Credit Loan is
fully funded to Borrowers whether made by such Lender itself or by
operation of the terms of this subsection (d)
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and whether or not the Non Pro Rata Loan with respect thereto has
been converted or continued;
(iii) amounts advanced to Borrowers to cure, in full or in
part, any such Lender's failure to fund its Revolving Credit Loans
("Cure Loans") shall bear interest at the rate applicable to
Alternate Base Loans under Section 2.05 in effect from time to
time, and for all other purposes of this Agreement shall be
treated as if they were Alternate Base Loans;
(iv) Regardless of whether or not an Event of Default has
occurred and is continuing, and notwithstanding the instructions
of Borrowers as to their desired application, all repayments of
principal which would be applied to the outstanding Revolving
Credit Alternate Base Loans shall be applied first, ratably to
Revolving Credit Alternate Base Loans constituting Non Pro Rata
Loans, second, ratably to Revolving Credit Alternate Base Loans
other than those constituting Non Pro Rata or Cure Loans and,
third, ratably to Revolving Credit Alternate Base Loans
constituting Cure Loans;
(v) for so long as, and until the earlier of any such Lender's
cure of the failure to fund its ratable portion (based on its
applicable Revolving Credit Commitment) of any Revolving Credit
Loan and the termination of the Total Revolving Credit Commitment,
the term "Required Lenders" for all purposes of this Agreement
shall exclude all Lenders whose failure to fund their ratable
portion (based on their respective applicable Revolving Credit
Commitments) of any Revolving Credit Loan have not been cured; and
(vi) for so long as, and until any such Lender's failure to
fund its ratable portion (based on its applicable Revolving Credit
Commitment) of any Revolving Credit Loan is cured in accordance
with this subsection (d), such Lender shall not be entitled to any
Revolving Credit Commitment Fee with respect to its Revolving
Credit Commitment.
SECTION 2.14. Sharing of Setoffs. Each Lender agrees that if it
shall, through the exercise of a right of banker's lien, setoff or counterclaim
against the Borrowers, including, but not limited to, a secured claim under
Section 506 of Title 11 of the United States Code or other security or interest
arising from, or in lieu of, such secured claim, received by such Lender under
any applicable bankruptcy, insolvency or other similar law or otherwise, obtain
payment (voluntary or involuntary) in respect of a Note and exposure under the
Letter of Credit Usage held by it as a result of which the unpaid principal
portion of the Notes and exposure under the Letter of Credit Usage held by it
shall be proportionately less than the unpaid principal portion of the Notes and
exposure under the Letter of Credit Usage held by any other Lender, it shall be
deemed to have simultaneously purchased from such other Lender a participation
in the Notes and exposure under the Letter of Credit Usage held by such other
Lender, so that the aggregate unpaid principal amount of the Notes and exposure
under the Letter of Credit
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Usage and participations in Notes or exposure under the Letter of Credit Usage
held by it shall be in the same proportion to the aggregate unpaid principal
amount of all Notes or exposure under the Letter of Credit Usage then
outstanding as the principal amount of the Notes or exposure under the Letter of
Credit Usage held by it prior to such exercise of banker's lien, setoff or
counterclaim was to the principal amount of all Notes or exposure under the
Letter of Credit Usage outstanding prior to such exercise of banker's lien,
setoff or counterclaim; provided, however, that if any such purchase or
purchases or adjustments shall be made pursuant to this Section 2.14 and the
payment giving rise thereto shall thereafter be recovered, such purchase or
purchases or adjustments shall be rescinded to the extent of such recovery and
the purchase price or prices or adjustments restored without interest. The
Borrowers expressly consent to the foregoing arrangements and agree that any
Lender holding a participation in a Note and exposure under the Letter of Credit
Usage deemed to have been so purchased may exercise any and all rights of
banker's lien, setoff or counterclaim with respect to any and all moneys owing
by the Borrowers to such Lender as fully as if such Lender held a Note and
exposure under the Letter of Credit Usage in the amount of such participation.
SECTION 2.15. Payments and Computations. (a) The Borrowers shall
make each payment hereunder and under any instrument delivered hereunder not
later than 1:00 p.m. (New York City time) on the day when due in lawful money of
the United States (in freely transferable dollars) to the Agent at its offices
at 200 Jericho Quadrangle, Jericho, New York 11753 for the account of the
Lenders, in immediately available funds, without set-off or counterclaim. Any
amounts received after such time on any date may, in the discretion of the
Agent, be deemed to have been received on the next succeeding Business Day for
purposes of calculating interest thereon. The Agent shall distribute any such
payments received by it for the account of any other person to the appropriate
recipient promptly following receipt thereof. The Agent may charge, when due and
payable, the Borrowers' account with the Agent for all interest, principal and
Revolving Credit Commitment Fees or other fees owing to the Agent or the Lenders
on or with respect to this Agreement and/or the Loans and other Loan Documents.
If at any time there is not sufficient availability to cover any of the payments
referred to in the prior sentence, and in any event upon the occurrence of any
Default, the Borrowers shall make any such payments upon demand.
(b) If Agent pays an amount to a Lender under this Agreement in
the belief or expectation that a related payment has been or will be received by
Agent from a Borrower and such related payment is not received by Agent, then
Agent will be entitled to recover such amount from such Lender without setoff,
counterclaim or deduction of any kind. If Agent determines at any time that any
amount received by Agent under this Agreement must be returned to Borrowers or
paid to any other person pursuant to any solvency law or otherwise, then,
notwithstanding any other term or condition of this Agreement, Agent will not be
required to distribute any portion thereof to any Lender. In addition, each
Lender will repay to Agent on demand any portion of such amount that Agent has
distributed to such Lender, together with interest at such rate, if any, as
Agent is
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required to pay to Borrowers or such other person, without setoff, counterclaim
or deduction of any kind.
(c) The outstanding principal balance of Revolving Credit Loans
may fluctuate from day to day, through Agent's disbursement of funds to, and
receipt of funds from, Borrowers. In order to minimize the frequency of
transfers of funds between Agent and each Lender, Revolving Credit Loans and
payments may be settled according to the following procedures. On the third
Business Day of each week, or more frequently (including daily), if Agent so
elects (each such day being a "Settlement Date"), Agent will advise each Lender
by telephone, telex or telecopy of the amount of each such Lender's actual
dollar investment and its ratable portion (based on its applicable Revolving
Credit Commitment) of the outstanding principal balance of Revolving Credit
Loans as of the close of business on the third Business Day immediately
preceding the Settlement Date. In the event that payments are necessary to
adjust the amount of such Lender's actual dollar investment in the outstanding
principal balance of Revolving Credit Loans to such Lender's ratable portion
(based on its applicable Revolving Credit Commitment) of the outstanding
principal balance of Revolving Credit Loans as of any Settlement Date (based on
the outstanding balances as of the close of business on the third Business Day
immediately preceding such Settlement Date), the party from which such payment
is due will pay the other, in immediately available funds, by wire transfer to
the other's account not later than 2:00 p.m. (New York time) on the Business Day
immediately following the Settlement Date. Notwithstanding the foregoing, if
Agent so elects, Agent may require that each Lender make its ratable portion
(based on its applicable Revolving Credit Commitment) of any requested Revolving
Credit Loan available to Agent for disbursement on the date of funding
applicable to such Revolving Credit Loan in accordance with Section 2.03 hereof.
Notwithstanding these procedures, each Lender's obligation to fund its portion
of each Revolving Credit Loan made by Agent to Borrower will commence on the
date such advance is made by Agent.
SECTION 2.16. Taxes. (a) Any and all payments by the Borrowers
hereunder shall be made, in accordance with Section 2.15 hereof, free and clear
of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding taxes imposed or based on the Agent's or any Lender's (or any
transferee's or assignee's, including a participation holder's (any such entity
a "Transferee")) net income, and franchise or capital taxes imposed on the Agent
or any Lender (or Transferee) by the United States or any jurisdiction under the
laws of which it is organized or any political subdivision thereof (all such
nonexcluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). If the Borrowers shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder to the Lenders (or any Transferee) or the Agent, (i) the sum payable
shall be increased by the amount necessary so that after making all required
deductions (including without limitation deductions applicable to additional
sums payable under this Section 2.16) such Lender (or any Transferee) or the
Agent (as the case may be) receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrowers shall make
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such deductions and (iii) the Borrowers shall pay the full amount deducted to
the relevant tax authority or other authority in accordance with applicable law.
(b) In addition, the Borrowers agree to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Document (hereinafter referred to as "Other Taxes").
(c) The Borrowers will indemnify each Lender (or Transferee) and
the Agent for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section 2.16) paid by such Lender (or Transferee) or the
Agent (as the case may be) and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted by the relevant tax authority
or other authority. This indemnification shall be made within 30 days from the
date such Lender (or Transferee) or the Agent (as the case may be) makes written
demand therefor. If any Lender (or Transferee) or the Agent receives a refund in
respect of any Taxes or Other Taxes for which such Lender (or Transferee) or the
Agent has received payment from the Borrowers hereunder, such Lender (or
Transferee) or the Agent shall promptly notify the Borrowers of such refund and
such Lender (or Transferee) or the Agent shall, within 30 days of receipt of a
request by the Borrowers, repay such refund to the Borrowers, net of all
out-of-pocket expenses and without interest, provided that the Borrowers, upon
the request of such Lender (or Transferee) or the Agent, agrees to return such
refund (plus any penalties, interest or other charges) to such Lender (or
Transferee) or the Agent in the event such Lender (or Transferee) or the Agent
is required to repay such refund.
(d) Within 30 days after the date of any payment of Taxes or Other
Taxes withheld by the Borrowers in respect of any payment to any Lender (or
Transferee) or the Agent, the Borrowers will furnish to the Agent, at its
address referred to in Section 11.01 hereof, such certificates, receipts and
other documents as may be reasonably required to evidence payment thereof.
(e) Without prejudice to the survival of any other agreement
hereunder, the agreements and obligations contained in this Section 2.16 shall
survive the payment in full of principal and interest hereunder.
(f) Each Lender (or Transferee) that is organized outside of the
United States and that is entitled to an exemption from or reduction of
withholding tax under the law of the jurisdiction in which the Borrowers are
located, or any treaty to which such jurisdiction is a party, with respect to
payments under this Agreement shall deliver to the Borrowers (with a copy to the
Agent) on the date hereof (or, in the case of a Transferee, on the date of the
transfer) and from time to time as required for renewal under applicable law
duly completed copies of United States Internal Revenue Service Form 1001 or
4224 (or
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any successor or additional forms), as appropriate, indicating in each case that
such Lender is entitled to receive payments under this Agreement without any (or
without full) deduction or withholding of any United States federal income
taxes. The Agent (if the Agent is an entity organized outside the United States)
and each Lender (or Transferee) that is organized outside the United States
shall promptly notify the Borrowers and the Agent of any change in its
Applicable Lending Office and upon written request of the Borrowers the Agent or
such Lender (or Transferee), as the case may be, shall, prior to the immediately
following due date of any payment by the Borrowers or any Guarantor hereunder or
under any other Loan Document, deliver to the Borrowers or such Guarantor, as
the case may be (with copies to the Agent), such certificates, documents or
other evidence, as required by the Code or Treasury Regulations issued pursuant
thereto, including, to the extent applicable, Internal Revenue Service Form
4224, Form 1001 and any other certificate or statement of exemption required by
Treasury Regulation Section 1.1441-4(a) or Section 1.1441-6(c) or any subsequent
version thereof, properly completed and duly executed by the Agent or such
Lender (or Transferee), as the case may be, establishing that such payment is
not subject to withholding under the Code to any greater extent than was the
case prior to the change in Applicable Lending Office. The Borrowers shall be
entitled to rely on such forms in their possession until receipt of any revised
or successor form pursuant to this Section 2.16(f). If the Agent or a Lender (or
Transferee) fails to provide a certificate, document or other evidence required
pursuant to this Section 2.16(f), then the Borrowers or the Agent shall be
entitled to deduct or withhold on payments to the Agent or such Lender (or
Transferee) as a result of such failure, as required by law.
(g) Borrowers shall not be required to pay any additional amounts
to the Agent or any Lender (or Transferee) in respect of United States
withholding tax pursuant to paragraph (a) above if the obligation to pay such
additional amounts would not have arisen but for a failure by the Agent or such
Lender (or Transferee) to comply with the provisions of paragraph (f) above
unless such failure results from (i) a change in applicable law, regulation or
official interpretation thereof or (ii) an amendment, modification or revocation
of any applicable tax treaty or a change in official position regarding the
application or interpretation thereof, in each case after the Closing Date (and,
in the case of a Transferee, after the date of assignment or transfer);
provided, however, Borrowers shall be required to pay those amounts to the Agent
or any Lender (or Transferee) that it was required to pay hereunder prior to the
failure of the Agent or such Lender (or Transferee) to comply with the
provisions of such paragraph (f).
(h) Each Lender (or Transferee) and the Agent shall use reasonable
efforts (consistent with legal and regulatory restrictions) to avoid or minimize
any amounts which might otherwise be payable pursuant to this Section 2.16
(including seeking refunds of any amounts that are reasonably believed not to
have been correctly or legally asserted); provided, however, that such efforts
shall not include the taking of any actions by such Lender (or Transferee) or
the Agent that would result in any tax, costs or other expense to such Lender
(or Transferee) or the Agent (other than a tax, cost or other expense for which
such Lender (or Transferee) or the Agent shall have been reimbursed or
indemnified by the
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Borrowers pursuant to this Agreement or otherwise) or any action which would or
might in the reasonable opinion of such Lender (or Transferee) or the Agent have
an adverse effect upon its business, operations or financial condition or
otherwise be disadvantageous to such Lender (or Transferee) or the Agent.
SECTION 2.17. Issuance of Letters of Credit. Upon the request of a
Borrower, and subject to the conditions set forth in Article V hereof and such
other conditions to the opening of Letters of Credit as the Agent requires of
its customers generally, the Agent shall from time to time open documentary and
standby letters of credit (each, together with the letters of credit being
assumed by the Borrowers on the Closing Date, a "Letter of Credit") for the
account of such Borrower, the aggregate undrawn amount of all outstanding
Letters of Credit to all Borrowers not at any time to exceed $5,000,000;
provided, however, that the face amount of any Letter of Credit that (A) the
Borrowers may request the Agent to open at any time shall not exceed the lesser
of (i) the Total Commitment at such time (as such may have been reduced in
accordance with the terms of this Agreement) and (ii) the Borrowing Base at such
time, minus (i) the Letter of Credit Usage at such time and (ii) the aggregate
principal amount of Revolving Credit Loans, accrued interest, fees and expenses
outstanding at such time, (B) Laars may request the Agent to open at any time
shall not exceed the Laars Borrowing Base minus the undrawn amount of all
outstanding Letters of Credit at such time as to which Laars or any of its
subsidiaries is the account party and the aggregate principal amount of the
Revolving Credit Loans outstanding for the account of Laars at such time, and
(C) Water Pik may request the Agent to open at any time shall not exceed the
Water Pik Borrowing Base minus the undrawn amounts of all Letters of Credit at
such time as to which Water Pik or any of its subsidiaries is the account party
and the aggregate outstanding principal amount of the Revolving Credit Loans
outstanding for the account of Water Pik at such time. The issuance of each
Letter of Credit shall be made on at least three Business Days' prior written
notice from the Borrowers to the Agent, at its Domestic Lending Office, which
written notice shall be an application for a Letter of Credit on the Agent's
customary form completed to the satisfaction of the Agent, together with the
proposed form of the Letter of Credit (which shall be satisfactory to the Agent)
and such other certificates, documents and other papers and information as the
Agent may reasonably request. The Agent shall not at any time be obligated to
issue any Letter of Credit if such issuance would conflict with, or cause the
Agent or any Lender to exceed any limits imposed by, any applicable requirements
of law. The expiration date of any (i) documentary Letter of Credit shall not be
later than 180 days from the date of issuance thereof and (ii) any standby
Letter of Credit shall not be later than one year from the date of issuance
thereof, and, in any event, no Letter of Credit shall have an expiration date
later than 30 days prior to the Revolving Credit Termination Date.
Notwithstanding the foregoing, a Letter of Credit may provide for automatic
extensions of its expiration date for one or more successive one year periods
provided that the Agent has the right to terminate the Letter of Credit on each
such annual expiration date (upon at least 60 days notice) and no renewal term
may extend the term of the Letter of Credit to a date that is later than the
30th day prior to the Revolving Credit Termination Date. The Letters of Credit
shall be issued with respect of transactions occurring in the ordinary course of
business of the Borrowers.
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SECTION 2.18. Payment of Letters of Credit; Reimbursement. Upon
the issuance of any Letter of Credit, the Agent shall notify each Lender of the
principal amount, the number, and the expiration date thereof and the amount of
such Lender's participation therein. By the issuance of a Letter of Credit
hereunder and without further action on the part of the Agent or the Lenders,
each Lender hereby accepts from the Agent a participation (which participation
shall be nonrecourse to the Agent) in such Letter of Credit equal to such
Lender's pro rata (based on its Revolving Credit Commitment) share of such
Letter of Credit, effective upon the issuance of such Letter of Credit. Each
Lender hereby absolutely and unconditionally assumes, as primary obligor and not
as a surety, and agrees to pay and discharge, and to indemnify and hold the
Agent harmless from liability in respect of, such Lender's pro rata share of the
amount of any drawing under a Letter of Credit. Each Lender acknowledges and
agrees that its obligation to acquire participations in each Letter of Credit
issued by the Agent and its obligation to make the payments specified herein,
and the right of the Agent to receive the same, in the manner specified herein,
are absolute and unconditional and shall not be affected by any circumstance
whatsoever, including, without limitation, (i) the occurrence and continuance of
a Default or an Event of Default hereunder; (ii) any lack of validity or
enforceability of this Agreement or any of the other Loan Documents; (iii) the
existence of any claim, setoff, defense or other right which a Borrower may have
at any time against a beneficiary named in such Letter of Credit or any
transferee of such Letter of Credit (or any person for whom any such transferee
may be acting), the Agent, any Lender, or any other person, whether in
connection with this Agreement, such Letter of Credit, the transactions
contemplated herein or any unrelated transactions (including any underlying
transactions between any Borrower or any other party and the beneficiary named
in such Letter of Credit); (iv) any draft, certificate or any other document
presented under such Letter of Credit proving to be forged, fraudulent, invalid
or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect; (v) the surrender or impairment of any security for
the performance or observance of any of the terms of any of the Loan Documents;
(vi) any failure by the Agent to provide any notices required pursuant to this
Agreement relating to such Letter of Credit; or (vii) any payment under any of
the Letters of Credit against presentation of a draft or certificate which does
not comply with the terms of such Letter of Credit and that each such payment
shall be made without any offset, abatement, withholding or reduction
whatsoever. The Agent shall review, on behalf of the Lenders, each draft and any
accompanying documents presented under a Letter of Credit and shall notify each
Lender of any such presentment. Promptly after it shall have ascertained that
any draft and any accompanying documents presented under such Letter of Credit
appear on their face to be in substantial conformity with the terms and
conditions of the Letter of Credit, the Agent shall give telephonic or facsimile
notice to the Lenders and the Borrowers of the receipt and amount of such draft
and the date on which payment thereon will be made, and the Lenders shall, by
11:00 a.m., New York City time on the date such payment is to be made, pay the
amounts required to the Agent in New York, New York in immediately available
funds, and the Agent, not later than 3:00 p.m. on such day, shall make the
appropriate payment to the beneficiary of such Letter of Credit. If in
accordance with the prior sentence the Lenders shall pay any draft presented
under a Letter of Credit, then the Agent, on behalf of the Lenders, shall charge
the revolving credit loan account of
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the Borrowers with the Agent for the amount thereof, together with the Agent's
customary overdraft fee in the event the funds available in such account shall
not be sufficient to reimburse the Lenders for such payment and the Borrowers
shall not otherwise have discharged such reimbursement obligation by 11:00 a.m.,
New York City time, on the date of such payment. If the Lenders have not been
reimbursed with respect to such drawing as provided above, the Borrowers shall
pay to the Agent, for the account of the Lenders, the amount of the drawing
together with interest on such amount at a rate per annum (computed on the basis
of the actual number of days elapsed over a year of 360 days) equal to the rate
applicable to Alternate Base Loans hereunder plus two percent (2%), payable on
demand. The obligations of the Borrowers under this Section 2.18 to reimburse
the Lenders and the Agent for all drawings under Letters of Credit shall be
joint and several, absolute, unconditional and irrevocable and shall be
satisfied strictly in accordance with their terms, irrespective of:
(a) any lack of validity or enforceability of any Letter of
Credit;
(b) the existence of any claim, setoff, defense or other right
which the Borrowers or any other person may at any time have against the
beneficiary under any Letter of Credit, the Agent or any Lender (other than the
defense of payment in accordance with the terms of this Agreement or a defense
based on the gross negligence or willful misconduct of the Agent or any Lender)
or any other person in connection with this Agreement or any other transaction;
(c) any draft or other document presented under any Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect;
(d) payment by the Agent or any Lender under any Letter of Credit
against presentation of a draft or other document which does not comply with the
terms of such Letter of Credit; and
(e) any other circumstance or event whatsoever, whether or not
similar to any of the foregoing that might, but for the provisions of this
Section, constitute legal or equitable discharge of the Borrowers' obligations
under this Section.
It is understood that in making any payment under any Letter of
Credit (x) the Agent's and any Lender's exclusive reliance on the documents
presented to it under such Letter of Credit as to any and all matters set forth
therein, including, without limitation, reliance on the amount of any draft
presented under such Letter of Credit, whether or not the amount due to the
beneficiary equals the amount of such draft and whether or not any document
presented pursuant to such Letter of Credit proves to be insufficient in any
respect, if such document on its face appears to be in order, and whether or not
any other statement or any other document presented pursuant to such Letter of
Credit proves to be forged or invalid or any statement therein proves to be
inaccurate or untrue in any respect whatsoever and (y) any noncompliance in any
immaterial respect of the documents
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presented under such Letter of Credit with the terms thereof shall, in each
case, not be deemed willful misconduct or gross negligence of the Agent or any
Lender.
SECTION 2.19. Agent's Actions with respect to Letters of Credit.
Any Letter of Credit may, in the discretion of the Agent or its correspondents,
be interpreted by them (to the extent not inconsistent with such Letter of
Credit) in accordance with the Uniform Customs and Practice for Documentary
Credits of the International Chamber of Commerce, as adopted or amended from
time to time, or any other rules, regulations and customs prevailing at the
place where any Letter of Credit is available or the drafts are drawn or
negotiated. The Agent and its correspondents may accept and act upon the name,
signature, or act of any party purporting to be the executor, administrator,
receiver, trustee in bankruptcy, or other legal representative of any party
designated in any Letter of Credit in the place of the name, signature, or act
of such party.
SECTION 2.20. Letter of Credit Fees. The Borrowers agree to pay to
the Agent for the account of each Lender a participation fee with respect to its
participations in Letters of Credit, which shall accrue at a rate per annum
equal to the margin over the Adjusted LIBO Rate applicable to interest on
Eurodollar Loans then currently in effect (without regard to any increase in the
Applicable Margin for any Eurodollar Loan supported by M&E Availability) less
0.25% on the average daily amount of such Lender's pro rata share of the Letter
of Credit Usage (excluding any portion attributable to unreimbursed drawings)
during the period from and including the Closing Date to but excluding the later
of the date on which such Lender's Revolving Credit Commitment terminates and
the date on which such Lender ceases to have any share of the Letter of Credit
Usage, as well as the Agent's standard fees with respect to the issuance,
amendment, renewal or extension of any Letter of Credit or processing of
drawings thereunder. Participation fees accrued through and including the last
day of March, June, September and December of each year shall be payable on the
first Business Day following each such period, commencing January 1, 2000;
provided that all such fees shall be payable on the date on which the Revolving
Credit Commitment terminates and any such fees accruing after the date on which
the Revolving Credit Commitment terminates shall be payable on demand. Any other
fees payable to the Agent pursuant to this paragraph shall be charged to the
Borrowers' loan account. All participation fees shall be computed on the basis
of a year of 365 days and shall be payable for the actual number of days elapsed
(including the first day but excluding the last day).
III. COLLATERAL SECURITY
SECTION 3.01. Security Documents. The Obligations shall be secured
by the Collateral described in the Security Documents and are entitled to the
benefits thereof. The Borrowers shall duly execute and deliver, or cause each
other Grantor to duly execute and deliver, the Security Documents, all consents
of third parties necessary to permit the effective granting of the Liens created
in such agreements, financing statements pursuant to the Uniform Commercial Code
and other documents, all in form and substance
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satisfactory to the Agent, as may be reasonably required by the Agent to grant
to the Lenders a valid, perfected and enforceable first priority Lien on and
security interest in (subject only to the Liens permitted under Section 7.01
hereof) the Collateral.
SECTION 3.02. Filing and Recording. The Borrowers shall, at their
sole cost and expense, cause all instruments and documents given as evidence of
security pursuant to this Agreement to be duly recorded and/or filed or
otherwise perfected in all places necessary, in the opinion of the Agent, and
take such other actions as the Agent may reasonably request, in order to perfect
and protect the Liens of the Agent and Lenders in the Collateral. The Borrowers,
to the extent permitted by law, hereby authorize the Agent to file any financing
statement in respect of any Lien created pursuant to the Security Documents
which may at any time be required or which, in the opinion of the Agent, may at
any time be desirable although the same may have been executed only by the Agent
or, at the option of the Agent, to sign such financing statement on behalf of
the Borrowers and file the same, and the Borrowers hereby irrevocably designate
the Agent, its agents, representatives and designees as its agent and
attorney-in-fact for this purpose. In the event that any re-recording or
refiling thereof (or the filing of any statements of continuation or assignment
of any financing statement) is required to protect and preserve such Lien, the
Borrowers shall, at the Borrowers' cost and expense, cause the same to be
recorded and/or refiled at the time and in the manner requested by the Agent.
IV. REPRESENTATIONS AND WARRANTIES
Each of the Borrowers and each of the Guarantors and Holdings
jointly and severally represents and warrants to each of the Lenders that both
before and after giving effect to the consummation of the Transactions:
SECTION 4.01. Organization, Legal Existence. Each of the Loan
Parties and their subsidiaries is a legal entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, has the requisite power and authority to own its property and
assets and to carry on its business as now conducted and as currently proposed
to be conducted and is qualified to do business in every jurisdiction where the
nature of its business so requires (all such jurisdictions being listed in
Schedule 4.01 annexed hereto) except where the failure to so qualify or be in
good standing would not result in a Material Adverse Effect. Each of the Loan
Parties has the corporate power to execute, deliver and perform its obligations
under this Agreement and the other Loan Documents to which it is a party, and
with respect to the Borrowers to borrow hereunder and to execute and deliver the
Notes.
SECTION 4.02. Authorization. The execution, delivery and
performance by each of the Loan Parties of this Agreement and each of the other
Loan Documents to which it is a party, the borrowings hereunder by the
Borrowers, the execution and delivery by the Borrowers of the Notes, the grant
of security interests in the Collateral created by the Security Documents and
the transactions contemplated to occur in connection with the
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Existing Credit Agreement (collectively, the "Transactions") (a) have been duly
authorized by all requisite corporate and, if required, stockholder action on
the part of the applicable Loan Party and (b) will not (i) violate (A) any
provision of law, statute, rule or regulation or the certificate or articles of
incorporation or other applicable constitutive documents or the by-laws of the
Loan Parties, or their respective subsidiaries, as the case may be, (B) any
order of any court, or any rule, regulation or order of any other agency of
government binding upon the Loan Parties, or their respective subsidiaries, or
(C) any provision of any material indenture, agreement or other instrument to
which the Loan Parties, or their respective subsidiaries, or any of their
respective properties or assets are or may be bound, (ii) be in conflict with,
result in a breach of or constitute (alone or with notice or lapse of time or
both) a default under any material indenture, agreement or other instrument
referred to in (b)(i)(C) above except where any such conflict, violation, breach
or default referred to in (i) or (ii) would not result in a Material Adverse
Effect or (iii) result in the creation or imposition of any Lien of any nature
whatsoever (other than in favor of the Agent, for its own benefit and for the
benefit of the Lenders, as contemplated by this Agreement and the Security
Documents) upon any property or assets of the Loan Parties, or their respective
subsidiaries.
SECTION 4.03. Governmental Approvals. No registration or filing
with consent or approval of, or other action by, any Federal, state or other
governmental agency, authority or regulatory body is or will be required in
connection with the Transactions, except for (a) such registrations, filings,
consents, approvals or actions the failure of which to obtain or make would not
have a Material Adverse Effect or (b) such as have been made or obtained or (c)
the filings necessary to perfect the Liens created by the Security Documents.
SECTION 4.04. Binding Effect. This Agreement and each of the other
Loan Documents to which it is a party constitutes, and each of the Notes when
duly executed and delivered by the Borrowers will constitute, a legal, valid and
binding obligation of the applicable Loan Party enforceable against such Loan
Party in accordance with its terms subject (a) as to the enforcement of
remedies, to applicable bankruptcy, insolvency, reorganization, moratorium and
other similar laws affecting the enforcement of creditors' rights generally,
from time to time in effect and (b) to general principles of equity.
SECTION 4.05. Material Adverse Change. Except as set forth in
Schedule 4.05 annexed hereto, there has been no material adverse change in the
business, assets, operations or financial condition of Holdings and its
subsidiaries since December 31, 1998.
SECTION 4.06. Litigation; Compliance with Laws; etc. (a) Except as
set forth in Schedule 4.06(a) annexed hereto, there are not any actions, suits
or proceedings at law or in equity or by or before any governmental
instrumentality or other agency or regulatory authority now pending or, to the
knowledge of any Responsible Officer of any Borrower, threatened against or
affecting any of the Loan Parties or any of their subsidiaries or the
businesses, assets or rights of any of the Loan Parties or any of their
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subsidiaries (i) which involve any of the Transactions or (ii) as to which it is
probable (within the meaning of Statement of Financial Accounting Standards No.
5) that there will be an adverse determination and which, if adversely
determined, would, individually or in the aggregate, materially impair the
ability of any of the Loan Parties or any of their subsidiaries to conduct
business substantially as now conducted, or result in a Material Adverse Effect.
(b) Except as set forth in Schedule 4.06(b) annexed hereto, no
Loan Party or subsidiary thereof are in violation of any law, or in default with
respect to any judgment, writ, injunction, decree, rule or regulation of any
court or governmental agency or instrumentality where such violation or default
would result in a Material Adverse Effect.
SECTION 4.07. Financial Statements. (a) The Borrowers have
heretofore furnished to the Agent Consolidated statements of income of Holdings
for the Fiscal Year ending December 31, 1996 and Consolidated balance sheets and
statements of income of Holdings for the Fiscal Years ending December 31, 1997
and 1998, for the six months ended June 30, 1999, and for the nine months ended
September 30, 1999, audited by independent public accountants in the case of the
statements for December 31, 1997 and December 31, 1998 and comparative with
September 30, 1998 in the case of the September 30, 1999 statements. Such
balance sheets and statements of income present fairly the Consolidated
financial condition and results of operations of Holdings as of the dates and
for the periods indicated, and such balance sheets and the notes thereto
disclose all liabilities required by GAAP of Holdings and its subsidiaries, as
of the dates thereof.
(b) The Borrowers have heretofore furnished to the Agent monthly
for August through December 1999 and for each month of 2000 and annually
thereafter through the Final Maturity Date (i) projected income statements,
balance sheets and cash flows of Holdings on a Consolidated basis and (ii)
projected income statements for each of the Borrowers, in each case together
with computations of the Laars Borrowing Base and Water Pik Borrowing Base and a
schedule confirming the ability of the Borrowers to consummate the Transactions
and demonstrating prospective compliance with all financial covenants contained
in this Agreement, such projections disclosing all material assumptions made by
Borrowers in formulating such projections and giving effect to the Transactions.
The projections are based upon reasonable estimates and material assumptions,
all of which are reasonable in light of the conditions which existed at the time
the projections were made, have been prepared on the basis of the material
assumptions stated therein, and reflect as of the Closing Date the reasonable
estimate of the results of operations of the Borrowers and Holdings on a
Consolidated basis and other information projected therein.
(c) The Borrowers have heretofore furnished to the Agent a
Consolidated pro forma balance sheet and income statement of Holdings for
September 30, 1999 and which sets forth information before and after giving
effect to the Transactions.
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(d) The financial statements referred to in this Section 4.07 have
been prepared in accordance with GAAP.
SECTION 4.08. Federal Reserve Regulations. (a) No Loan Parties or
subsidiary thereof are engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying Margin Stock.
(b) No part of the proceeds of the Loans will be used, whether
directly or indirectly, and whether immediately, incidentally or ultimately, (i)
to purchase or carry Margin Stock or to extend credit to others for the purpose
of purchasing or carrying Margin Stock or to refund indebtedness originally
incurred for such purpose, or (ii) for any purpose which entails a violation of,
or which is inconsistent with, the provisions of the Regulations of the Board,
including, without limitation, Regulation T, U or X thereof. If requested by any
Lender, the Borrowers or any subsidiary of any thereof shall furnish to such
Lender a statement on Federal Reserve Form U-1 referred to in said Regulation U.
SECTION 4.09. Taxes. The Loan Parties and each of their respective
subsidiaries has filed or caused to be filed all Federal, state, local and
foreign tax returns which are required to be filed by it, on or prior to the
date hereof, other than tax returns in respect of taxes that (x) are not
franchise, capital or income taxes, (y) in the aggregate are not material and
(z) would not, if unpaid, result in the imposition of any material Lien on any
property or assets of any Loan Party or any of its subsidiaries. Each of the
Loan Parties and each of their subsidiaries have paid or caused to be paid all
taxes shown to be due and payable on such filed returns or on any assessments
received by it, other than (i) any taxes or assessments the validity of which
such Loan Party or such subsidiary is contesting in good faith by appropriate
proceedings, and with respect to which such Loan Party or such subsidiary shall,
to the extent required by GAAP have set aside on its books adequate reserves and
(ii) taxes other than income, capital or franchise taxes that in the aggregate
are not material and which would not, if unpaid, result in the imposition of any
material Lien on any property or assets of any Loan Party or any of its
subsidiaries. Other than audits and extensions affecting Jandy Industries, Inc.
prior to the Closing Date, no Federal income tax returns of any of the Loan
Parties or any of their subsidiaries have been audited by the United States
Internal Revenue Service and no Loan Party or subsidiary thereof have as of the
date hereof requested or been granted any extension of time to file any Federal,
state, local or foreign tax return. None of the Loan Parties or their
subsidiaries are party to or have any obligation under any tax sharing agreement
other than the Tax Sharing and Indemnification Agreement entered into with ATI.
SECTION 4.10. Employee Benefit Plans. With respect to the
provisions of ERISA other than as set forth on Schedule 4.10:
(i) No Reportable Event has occurred or is continuing with respect
to any Pension Plan.
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(ii) No prohibited transaction (within the meaning of Section 406
of ERISA or Section 4975 of the Code) has occurred with respect to any Plan
subject to Part 4 of Subtitle B of Title I of ERISA.
(iii) None of the Loan Parties or any ERISA Affiliate is now, or
has been during the preceding five years, obligated to contribute to a Pension
Plan or a Multiemployer Plan. None of the Loan Parties or any ERISA Affiliate
has (A) ceased operations at a facility so as to become subject to the
provisions of Section 4062(e) of ERISA, (B) withdrawn as a substantial employer
so as to become subject to the provisions of Section 4063 of ERISA, (C) ceased
making contributions to any Pension Plan subject to the provisions of Section
4064(a) of ERISA to which any of the Loan Parties, any subsidiary or any ERISA
Affiliate made contributions, (D) incurred or caused to occur a "complete
withdrawal" (within the meaning of Section 4203 of ERISA) or a "partial
withdrawal" (within the meaning of Section 4205 of ERISA) from a Multiemployer
Plan that is a Pension Plan so as to incur withdrawal liability under Section
4201 of ERISA (without regard to subsequent reduction or waiver of such
liability under Section 4207 or 4208 of ERISA), or (E) been a party to any
transaction or agreement under which the provisions of Section 4204 of ERISA
were applicable.
(iv) No notice of intent to terminate a Pension Plan has been
filed, nor has any Plan been terminated pursuant to the provisions of Section
4041(e) of ERISA.
(v) The PBGC has not instituted proceedings to terminate (or
appoint a trustee to administer) a Pension Plan and no event has occurred or
condition exists which might constitute grounds under the provisions of Section
4042 of ERISA for the termination of (or the appointment of a trustee to
administer) any such Plan.
(vi) With respect to each Pension Plan that is subject to the
provisions of Title I, Subtitle B, Part 3 of ERISA, the funding method used in
connection with such Plan is acceptable under ERISA, and the actuarial
assumptions and methods used in connection with funding such Pension Plan
satisfy the requirements of Section 302 of ERISA. The assets of each such
Pension Plan (other than the Multiemployer Plans) are at least equal to the
present value of the greater of (i) accrued benefits (both vested and
non-vested) under such Plan, or (ii) "benefit liabilities" (within the meaning
of Section 4001(a)(16) of ERISA) under such Plan, in each case as of the latest
actuarial valuation date for such Plan (determined in accordance with the same
actuarial assumptions and methods as those used by the Plan's actuary in its
valuation of such Plan as of such valuation date). No such Pension Plan has
incurred any "accumulated funding deficiency" (as defined in Section 412 of the
Code), whether or not waived.
(vii) There are no actions, suits or claims pending (other than
routine claims for benefits) or, to the knowledge of the Borrowers or any ERISA
Affiliate, which could reasonably be expected to be asserted, against any Plan
or the assets of any such Plan. No civil or criminal action brought pursuant to
the provisions of Title I, Subtitle B, Part 5 of ERISA is pending or threatened
against any fiduciary or any Plan. None of the Plans or
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any fiduciary thereof (in its capacity as such) has been the direct or indirect
subject of any audit, investigation or examination by any governmental or
quasi-governmental agency.
(viii) All of the Plans comply currently, and have complied in the
past, both as to form and operation, with their terms and with the provisions of
ERISA and the Code, and all other applicable laws, rules and regulations; all
necessary governmental approvals for the Plans have been obtained and a
favorable determination as to the qualification under Section 401(a) of the Code
of each of the Plans which is an employee pension benefit plan (within the
meaning of Section 3(2) of ERISA) has been made by the Internal Revenue Service
and a recognition of exemption from federal income taxation under Section 501(c)
of the Code of each of the funded employee welfare benefit plans (within the
meaning of Section 3(1) of ERISA) has been made by the Internal Revenue Service,
and nothing has occurred since the date of each such determination or
recognition letter that would adversely affect such qualification.
SECTION 4.11. No Material Misstatements. No information, report,
financial statement, exhibit or schedule prepared or furnished by or on behalf
of the Borrowers to the Agent or any Lender in connection with any of the
Transactions or this Agreement, the Security Documents, the Notes or any other
Loan Documents or included therein contained or contains any material
misstatement of fact or omitted or omits to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
SECTION 4.12. Investment Company Act; Public Utility Holding
Company Act. No Loan Parties or subsidiary thereof is an "investment company" as
defined in, or is otherwise subject to regulation under, the Investment Company
Act of 1940. No Loan Parties or subsidiary thereof is a "holding company" as
that term is defined in or is otherwise subject to regulation under, the Public
Utility Holding Company Act of 1935.
SECTION 4.13. Security Interest. Each of the Security Documents
creates and grants to the Agent, for its own benefit and for the benefit of the
Lenders, a legal, valid and perfected first priority (except as permitted
pursuant to Section 7.01 hereof) Lien in the Collateral identified therein. Such
Collateral is not subject to any other Liens whatsoever, except Liens permitted
by Section 7.01 hereof.
SECTION 4.14. Use of Proceeds. All proceeds of each borrowing
under the Revolving Credit Commitment shall be used to provide for working
capital requirements and for general corporate purposes of the Borrowers
including, without limitation, Capital Expenditures, Permitted Acquisitions and
payments permitted pursuant to Section 7.04 hereof.
SECTION 4.15. Subsidiaries. As of the Closing Date, Schedule 4.15
annexed hereto sets forth each subsidiary of Holdings, its jurisdiction of
incorporation, its capitalization and ownership of capital stock of each such
subsidiary.
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SECTION 4.16. Title to Properties; Possession Under Leases;
Trademarks. (a) Each of the Loan Parties and each subsidiary has good and
marketable title to, or valid leasehold interest in, all of its respective
properties and assets shown on the most recent balance sheet referred to in
Section 4.07(a) hereof and all assets and properties acquired since the date of
such balance sheet, except for such properties as are no longer used or useful
in the conduct of its business or as have been disposed of in the ordinary
course of business, and except for minor defects in title that do not interfere
with the ability of any of the Loan Parties or any subsidiary thereof to conduct
its business as now conducted. All such assets and properties are free and clear
of all Liens other than those permitted by Section 7.01 hereof.
(b) Each of the Loan Parties and each of their subsidiaries has
complied with all obligations under all leases to which it is a party and under
which it is in occupancy, and all such leases are in full force and effect and
each of the Loan Parties and each of their subsidiaries enjoys peaceful and
undisturbed possession under all such leases.
(c) Each of the Loan Parties and each of their subsidiaries owns
or controls all material trademarks, trademark rights, trade names, trade name
rights, copyrights, patents, patent rights and licenses which are necessary for
the conduct of the business of such Loan Parties and such subsidiary. To the
best of the knowledge of the Loan Parties and their subsidiaries, no Loan Party
nor any subsidiary thereof is infringing upon or otherwise acting adversely to
any of such trademarks, trademark rights, trade names, trade name rights,
copyrights, patent rights or licenses owned by any other person or persons. To
the best of the knowledge of the Loan Parties and their subsidiaries, there is
no claim or action by any such other person pending, or to the knowledge of any
Responsible Officer of any Borrower or any subsidiary thereof, threatened,
against any of the Loan Parties or any subsidiary thereof with respect to any of
the rights or property referred to in this Section 4.16(c).
SECTION 4.17. Solvency. (a) The fair salable value of the assets
of each Borrower and its Consolidated subsidiaries is not less than the amount
that will be required to be paid on or in respect of the probable liability on
the existing debts and other liabilities (including contingent liabilities but
excluding any liability for amounts borrowed by the other Borrower hereunder) of
such Borrower and its Consolidated subsidiaries, as they become absolute and
mature.
(b) The assets of each Borrower and its Consolidated subsidiaries
do not constitute unreasonably small capital for such Borrower and its
Consolidated subsidiaries to carry out their business as now conducted and as
proposed to be conducted including the capital needs of such Borrower and its
Consolidated subsidiaries, taking into account the particular capital
requirements of the business conducted by such Borrower and its Consolidated
subsidiaries and projected capital requirements and capital availability
thereof.
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(c) No Borrower nor any subsidiary thereof intends to incur debts
beyond its ability to pay such debts as they mature (taking into account the
timing and amounts of cash to be received by such Borrower and such subsidiary,
and of amounts to be payable on or in respect of debt of such Borrower and such
subsidiary). The cash flow of each Borrower and its Consolidated subsidiaries,
after taking into account all anticipated uses of the cash of such Borrower and
its Consolidated subsidiaries, will at all times be sufficient to pay all such
amounts on or in respect of debt of such Borrower and its Consolidated
subsidiaries when such amounts are required to be paid.
(d) No Borrower nor any subsidiary thereof believes that final
judgments against it in actions for money damages presently pending will be
rendered at a time when, or in an amount such that, it will be unable to satisfy
any such judgments promptly in accordance with their terms (taking into account
the maximum reasonable amount of such judgments in any such actions and the
earliest reasonable time at which such judgments might be rendered). The cash
flow of such Borrower and its Consolidated subsidiaries, after taking into
account all other anticipated uses of the cash of such Borrower and its
Consolidated subsidiaries (including the payments on or in respect of debt
referred to in paragraph (c) of this Section), will at all times be sufficient
to pay all such judgments promptly in accordance with their terms.
SECTION 4.18. Permits, etc. Each of the Loan Parties and each of
their subsidiaries possesses all material licenses, permits, approvals and
consents, including, without limitation, all material environmental, health and
safety licenses, permits, approvals and consents of all Federal, state and local
governmental authorities as required to conduct properly its business
(collectively, "Permits"), each such Permit is and will be in full force and
effect, each of the Loan Parties and each subsidiary is in compliance in all
material respects with all such Permits, and no event (including, without
limitation, any violation of any law, rule or regulation) has occurred which
allows the revocation or termination of any such Permit or any restriction
thereon.
SECTION 4.19. Compliance with Environmental Laws. Except as
disclosed in Schedule 4.19 hereto: (i) the operations of the Loan Parties and
their subsidiaries comply in all material respects with all applicable
Environmental Laws; (ii) the Loan Parties and their subsidiaries and all of
their present facilities or operations, as well as to the knowledge of the Loan
Parties and their subsidiaries their past facilities or operations, are not
subject to any judicial proceeding or administrative proceeding or any
outstanding written order or agreement with any governmental authority or
private party respecting (a) any Environmental Law, (b) any Remedial Work, or
(c) any Environmental Claims arising from the Release of a Contaminant into the
environment which would reasonably be expected to result in a Material Adverse
Effect; (iii) to the best of the knowledge of the Loan Parties and their
subsidiaries, none of their operations is the subject of any Federal or state
investigation evaluating whether any Remedial Work is needed to respond to a
Release of any Contaminant into the environment which would reasonably be
expected to result in a Material Adverse Effect; (iv) none of the Loan Parties
or any subsidiaries of the Loan Parties nor any predecessor of any of the Loan
Parties or any subsidiaries of the
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Loan Parties has filed any notice under any Environmental Law indicating past or
present treatment, storage, or disposal of a Hazardous Material or reporting a
spill or Release of a Contaminant into the environment which would reasonably be
expected to result in a Material Adverse Effect; (v) to the best of the
knowledge of the Loan Parties and their subsidiaries, none of the Loan Parties
or their subsidiaries has any contingent liability in connection with any
Release of any Contaminant into the environment which would reasonably be
expected to result in a Material Adverse Effect; (vi) none of the operations of
the Loan Parties or their subsidiaries involve the generation, transportation,
treatment or disposal of Hazardous Materials except in material compliance with
applicable laws; (vii) neither the Loan Parties nor their subsidiaries have
disposed of any Contaminant by placing it in or on the ground or waters of any
premises owned, leased or used by any of them and to the knowledge of the Loan
Parties and their subsidiaries neither has any lessee, prior owner, or other
person except in material compliance with applicable laws; (viii) no underground
storage tanks or surface impoundments are on any property of the Loan Parties
and their subsidiaries except as are registered and are in compliance with
applicable law; and (ix) no Lien in favor of any governmental authority for (A)
any liability under any Environmental Law or regulations, or (B) damages arising
from or costs incurred by such governmental authority in response to a Release
of a Contaminant into the environment, has been filed or attached to the
property of the Loan Parties and their subsidiaries which would reasonably be
expected to result in a Material Adverse Effect.
SECTION 4.20. No Change in Credit Criteria or Collection Policies.
There has been no material change in credit criteria or collection policies
concerning account receivables of any of the Borrowers since December 31, 1998.
Without duplication, all Eligible Receivables of the Borrowers are valid,
binding and enforceable obligations of account debtors and are not subject to
any claims, defenses or setoffs. All account receivables (other than Eligible
Receivables) are valid, binding and enforceable obligations of account debtors.
SECTION 4.21. Employee Matters. Except as disclosed in Schedule
4.21 hereto, (a) neither the Loan Parties nor any of their subsidiaries nor any
of such person's employees are subject to any collective bargaining agreement,
(b) to the knowledge of the Loan Parties, no petition for certification or union
election is pending with respect to the employees of the Loan Parties or any of
their subsidiaries and no union or collective bargaining unit has sought such
certification or recognition with respect to the employees of the Loan Parties
or any of their subsidiaries and (c) there are no strikes, slowdowns, work
stoppages or controversies pending or, to the knowledge of the Loan Parties
threatened between the Loan Parties or any of their respective subsidiaries and
their respective employees, other than employee grievances arising in the
ordinary course of business none of which could have, either individually or in
the aggregate, a Material Adverse Effect.
SECTION 4.22. Year 2000. The cost to the Borrowers of
reprogramming and testing of the Borrowers' and their subsidiaries' computer
systems and related equipment to permit proper functioning in and following the
year 2000 (including, without
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limitation, reprogramming errors) will not reasonably be expected to result in a
Material Adverse Effect.
V. CONDITIONS OF CREDIT EVENTS
The obligation of each Lender to make Loans and extend other
Credits hereunder shall be subject to the following conditions precedent:
SECTION 5.01. All Credit Events. On each date on which a Credit
Event is to occur:
(a) The Agent shall have received a notice of borrowing as
required by Section 2.03 hereof or a request for the issuance of a Letter
of Credit pursuant to Section 2.17 hereof.
(b) The representations and warranties set forth in Article IV
hereof and in any documents delivered herewith, including, without
limitation, the Loan Documents, shall be true and correct in all material
respects with the same effect as though made on and as of such date
(except insofar as such representations and warranties relate expressly
to an earlier date).
(c) Each of the Borrowers shall be in compliance with all the
terms and provisions contained herein on its part to be observed or
performed, and at the time of and immediately after such Credit Event no
Default or Event of Default shall have occurred and be continuing.
(d) The Agent shall have received a certificate signed by the
Financial Officer of each of the Borrowers (i) as to the compliance with
(b) and (c) above and (ii) with respect to each Revolving Credit Loan and
each Letter of Credit, demonstrating that after giving effect thereto
each of Laars Availability, Water Pik Availability and Total Availability
is zero or greater.
SECTION 5.02. First Borrowing. The obligations of the Lenders in
respect of the first Credit Event hereunder is subject to the following
additional conditions precedent:
(a) The Lenders shall have received the favorable written opinion
of counsel for the Borrowers and each of the Guarantors and Grantors,
substantially in the form of Exhibit B hereto, dated the Closing Date,
addressed to the Lenders and satisfactory to the Agent.
(b) The Lenders shall have received (i) a copy of the certificate
or articles of incorporation or constitutive documents, in each case as
amended to date, of each of the Borrowers, the Grantors and the
Guarantors, certified as of a recent date by
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the Secretary of State or other appropriate official of the state of its
organization, and a certificate as to the good standing of each from such
Secretary of State or other official, and a certificate of good standing
from the appropriate official of each state in which it is qualified to
do business, in each case dated as of a recent date; (ii) a certificate
of the Secretary of each Borrower, Grantor and Guarantor, dated the
Closing Date and certifying (A) that attached thereto is a true and
complete copy of such person's By-laws as in effect on the date of such
certificate and at all times since a date prior to the date of the
resolution described in item (B) below, (B) that attached thereto is a
true and complete copy of a resolution adopted by such person's Board of
Directors authorizing the execution, delivery and performance of this
Agreement, the Security Documents, the Notes, the other Loan Documents
and the Credit Events hereunder, as applicable, and that such resolution
has not been modified, rescinded or amended and is in full force and
effect, (C) that such person's certificate or articles of incorporation
or constitutive documents has not been amended since the date of the last
amendment thereto shown on the certificate of good standing furnished
pursuant to (i) above, and (D) as to the incumbency and specimen
signature of each of such person's officers executing this Agreement, the
Notes, each Security Document or any other Loan Document delivered in
connection herewith or therewith, as applicable; (iii) a certificate of
another of such person's officers as to incumbency and signature of its
Secretary; and (iv) such other documents as the Agent or any Lender may
reasonably request.
(c) The Agent shall have received a certificate, dated the Closing
Date and signed by the Financial Officer of each Borrower, confirming
compliance with the conditions precedent set forth in paragraphs (b) and
(c) of Section 5.01 hereof and the conditions set forth in this Section
5.02.
(d) Each Lender shall have received its Revolving Credit Note duly
executed by the Borrowers, payable to its order and otherwise complying
with the provisions of Section 2.04 hereof.
(e) The Agent shall have received the Security Documents
(including, without limitation, the Mortgages together with title
insurance in form, scope and amount satisfactory in all respects to the
Agent and certificates evidencing the Pledged Stock, together with
undated stock powers executed in blank, each duly executed by the
applicable Grantors.
(f) The Agent shall have received certified copies of requests for
copies or information on Form UCC-11 or certificates satisfactory to the
Lenders of a UCC Reporter Service, listing all effective financing
statements which name as debtor any Borrower, any Guarantor or any
Grantor and which are filed in the appropriate offices in the states in
which are located the chief executive office and other operating offices
of such person, together with copies of such financing statements.
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With respect to any Liens not permitted pursuant to Section 7.01 hereof,
the Agent shall have received termination statements in form and
substance satisfactory to it.
(g) Each document (including, without limitation, each Uniform
Commercial Code financing statement) required by law or requested by the
Agent to be filed, registered or recorded in order to create in favor of
the Agent for its own benefit and for the benefit of the Lenders a first
priority perfected Lien in the Collateral shall have been properly filed,
registered or recorded in each jurisdiction in which the filing,
registration or recordation thereof is so required or requested. The
Agent shall have received an acknowledgment copy, or other evidence
satisfactory to it, of each such filing, registration or recordation.
(h) The Agent shall have received the results of a search of tax
and other Liens, and judgments and of the Uniform Commercial Code filings
made with respect to each of the Borrowers and each Grantor in the
jurisdictions in which the Borrowers are doing business and/or in which
any Collateral is located, and in which Uniform Commercial Code filings
have been made against each Borrower, each Guarantor and each Grantor
pursuant to paragraph (g) above.
(i) The Lenders and the Agent shall have received and determined
to be in form and substance satisfactory to them:
(i) the most recent (dated within thirty (30) days of the
Closing Date) schedule and aging of accounts receivable and
inventory designations of the Borrowers;
(ii) evidence that the Borrowers have not less than
$9,000,000 in Total Availability on the Closing Date;
(iii) the results of machinery and equipment appraisals of
the Borrowers' property conducted by MB Valuation Services
Incorporated on an orderly liquidation value indicating an
aggregate value of not less than $10,000,000, in form and
substance reasonably satisfactory to the Agent;
(iv) a copy of a field examination of the Borrowers' books
and records;
(v) evidence of the compliance by the Borrowers with Section
6.03 hereof;
(vi) the financial statements described in Section 4.07
hereof;
(vii) evidence that the Transactions are in compliance with
all applicable laws and regulations;
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(viii) the results of an environmental audit with respect to
the Borrowers' and subsidiaries' properties and operations
conducted by PES Environmental Inc. and Dames & Moore and the
scope, methodology and results of such environmental audit shall
be satisfactory to the Agent in all respects;
(ix) evidence of payment of all fees owed to the Agent and
the Lenders by the Borrowers under this Agreement, the Commitment
Letter or otherwise;
(x) evidence that other than those third party consents
which, if not received by the Borrowers, will not have a Material
Adverse Effect, all requisite third party consents (including,
without limitation, consents with respect to each of the Borrowers
and each of the Grantors and Guarantors) to the Transactions have
been received;
(xi) the results of appraisals conducted by Cushman &
Wakefield, Joseph J. Blake & Associates, Inc. and Buss-Shelger
Associates of the real property and improvements owned in fee or
leased to the Borrowers with respect to which Mortgages are to be
taken, in each case in compliance with the requirements of FIRREA
and applicable regulations and indicating an aggregate value of
not less than $26,000,000 in form and substance reasonably
satisfactory to the Agent;
(xii) copies of all major customer and supplier contracts and
all management agreements, licensing agreements and joint venture
agreements with respect to each Borrower;
(xiii) evidence that, except as set forth on Schedule 4.05
there has been no material adverse change in the business, assets,
operations or financial condition of Holdings and its subsidiaries
since December 31, 1998;
(xiv) evidence of the repayment in full of exiting credit
arrangements and the termination of all commitments to lend
thereunder, and the termination of all security interests securing
such indebtedness as required under paragraph (f) above; and
(xv) evidence that there are no actions, suits or proceedings
at law or in equity or by or before any governmental
instrumentality or other agency or regulatory authority now
pending or threatened against or affecting any Borrowers or any
subsidiary thereof or any of their respective businesses, assets
or rights which involve any of the Transactions.
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(j) The Agent and the Lenders shall have had the opportunity, if
they so choose, to examine the books of account and other records and
files of the Borrowers, subsidiaries, the Grantors and the Guarantors and
to make copies thereof, to conduct customer and supplier checkings and to
conduct a pre-closing audit which shall include, without limitation,
verification of Eligible Receivables, payment of payroll taxes and
accounts payable and formulation of an opening Borrowing Base, and the
results of such examination, checking and audit shall have been
satisfactory to the Agent and Lenders in all respects.
(k) The Agent shall have received and had the opportunity to
review and determine to be in form and substance satisfactory to it:
(i) a schedule of litigation and contingent liabilities and
an analysis of the expected disposition thereof;
(ii) copies of all lease agreements entered into by any of
the Borrowers and their subsidiaries and in connection with any
real property leases appropriate landlord and/or mortgagee waivers
or rent escrow arrangements with the Agent (covering at least six
months' rent);
(iii) copies of all loan agreements, notes and other
documentation evidencing Indebtedness for borrowed money of any of
Holdings, the Borrowers, their subsidiaries, Grantors or
Guarantors; and
(iv) copies of the Separation and Distribution Agreement,
non-employee director stock compensation plan, Tax Sharing and
Indemnification Agreement and Interim Services Agreement, all with
ATI, and an agreement by ATI to subordinate its claims as a result
of a failure of the spinoff of Holdings to qualify as a tax-free
distribution under the tax sharing and indemnification agreement
to the Obligations.
(l) Messrs. Kaye, Scholer, Fierman, Hays & Handler, LLP, counsel
to the Agent, shall have received payment in full for all reasonable
legal fees charged, and all costs and expenses incurred, by such counsel
through the Closing Date in connection with the transactions contemplated
under this Agreement, the Security Documents and the other Loan Documents
and instruments in connection herewith and therewith.
(m) The Agent and the Lenders shall have received evidence that
the spinoff of Holdings by ATI and the transactions related thereto have
been completed.
(n) The corporate structure and capitalization of Holdings and the
Borrowers shall be satisfactory to the Lenders in all respects.
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(o) All legal matters in connection with the Transactions shall be
satisfactory to the Agent, the Lenders and their respective counsel in
their sole reasonable discretion.
(p) The Borrowers shall have executed and delivered to the Agent a
disbursement authorization letter with respect to the disbursement of the
proceeds of the Credit Events made on the Closing Date, in form and
substance satisfactory to the Agent.
(q) The Agent and the Lenders shall have received a fully executed
copy of a Guarantee by Holdings, substantially in the form of Exhibit G
hereto.
(r) The Borrowers and the Agent (or another financial institution
acceptable to the Agent) shall have entered into lockbox and cash
management arrangements pursuant to documentation satisfactory in form
and substance to the Agent.
(s) The Agent shall have received such other documents as the
Lenders or the Agent or Agent's counsel shall reasonably deem necessary.
VI. AFFIRMATIVE COVENANTS
Each of the Borrowers and Holdings covenant and agree with each
Lender that, so long as this Agreement shall remain in effect or the principal
of or interest on any Note, any amount under any Letter of Credit or any fee,
expense or other Obligation payable hereunder or in connection with any of the
Transactions shall be unpaid, it will, and will cause each of its subsidiaries
(other than Canadian Sub) and, with respect to Section 6.07 hereof, each ERISA
Affiliate, to:
SECTION 6.01. Legal Existence. Do or cause to be done all things
necessary to preserve, renew and keep in full force and effect its legal
existence.
SECTION 6.02. Businesses and Properties. At all times do or cause
to be done all things necessary, using reasonable business judgment, to
preserve, renew and keep in full force and effect the rights, licenses, Permits,
franchises, patents, copyrights, trademarks and trade names material to the
conduct of its businesses; maintain and operate such businesses in the same
general manner in which they are presently conducted and operated; comply in all
material respects with all applicable laws, rules, regulations and governmental
orders (whether Federal, state or local in all applicable jurisdictions)
applicable to the operation of such businesses whether now in effect or
hereafter enacted (including, without limitation, all applicable laws, rules,
regulations and governmental orders relating to employment matters, public and
employee health and safety and all Environmental Laws) and with any and all
other applicable laws, rules, regulations and governmental orders, the lack of
compliance of any of which would have a Material Adverse Effect; and at all
times maintain, preserve and protect all property
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material to the conduct of such businesses and keep such property in good
repair, working order and condition (reasonable wear and tear excepted) and from
time to time make, or cause to be made, all needful and proper repairs,
renewals, additions, improvements and replacements thereto necessary in order
that the business carried on in connection therewith may be properly conducted
at all times.
SECTION 6.03. Insurance. (a) Keep its insurable properties
adequately insured at all times by financially sound and reputable insurers, (b)
maintain such other insurance, to such extent and against such risks, including
fire and other risks insured against by extended coverage, as is customary with
companies similarly situated and in the same or similar businesses, provided,
however, that such insurance shall insure the property of the Borrowers against
all risk of physical damage, including, without limitation, loss by fire,
explosion, theft, fraud and such other casualties as may be reasonably
satisfactory to the Agent, but in no event at any time in an amount less than
the replacement value of the Collateral, (c) maintain in full force and effect
public liability insurance against claims for personal injury or death or
property damage occurring upon, in, about or in connection with the use of any
properties owned, occupied or controlled by any Borrowers or any of their
subsidiaries, in such amount as the Agent shall reasonably deem necessary, (d)
maintain product liability and business interruption insurance to such extent as
is customary with companies similarly situated and in the same or similar
businesses (and to the extent business interruption insurance is so maintained,
assign such insurance to the Agent for its own benefit and the benefit of the
Lenders), and (e) maintain such other insurance as may be required by law or as
may be reasonably requested by the Agent for purposes of assuring compliance
with this Section 6.03. All insurance covering tangible personal property
subject to a Lien in favor of the Agent for its own benefit and for the benefit
of the Lenders granted pursuant to the Security Documents shall provide that, in
the case of each separate loss the full amount of insurance proceeds shall be
payable to the Agent and shall further provide for at least 30 days' prior
written notice to the Agent of the cancellation or substantial modification
thereof. The Agent shall be named as an additional insured on all other
insurance.
SECTION 6.04. Taxes. Pay and discharge promptly when due all
taxes, assessments and governmental charges or levies imposed upon it or upon
its income or profits or in respect of its property before the same shall become
delinquent or in default, as well as all lawful claims for labor, materials and
supplies or otherwise, which, if unpaid, might give rise to Liens upon such
properties or any part thereof; provided, however, that such payment and
discharge shall not be required with respect to (i) any such tax, assessment,
charge, levy or claim so long as the validity or amount thereof shall be
contested in good faith by appropriate proceedings and the applicable party,
shall have set aside on its books adequate reserves with respect thereto in
accordance with GAAP and such contest operates to suspend collection of the
contested tax, assessment, charge, levy or claims and enforcement of a Lien or
(ii) any tax, assessment, charge, levy or claims, the failure to pay and
discharge when due which, individually or in the aggregate would not have a
Material Adverse Effect.
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SECTION 6.05. Financial Statements, Reports, etc. Furnish to the
Agent, with copies for each of the Lenders:
(a) within 90 days after the end of each Fiscal Year, (i)
Consolidated and consolidating balance sheets and Consolidated and
consolidating income statements showing the financial position of
Holdings and its subsidiaries as of the close of such Fiscal Year and the
results of their operations during such year, and (ii) a Consolidated and
consolidating statement of shareholders' equity and a Consolidated and
consolidating statement of cash flow, as of the close of such Fiscal
Year, comparing such financial position and results of operations to such
financial condition and results of operations for the comparable period
during the immediately preceding Fiscal Year all the foregoing financial
statements to be audited by independent public accountants acceptable to
the Agent (which report shall not contain any qualification except with
respect to new accounting principles mandated by the Financial Accounting
Standards Board), and to be in form and substance acceptable to the
Agent, together with supplemental consolidating balance sheets and
statements of income, shareholders equity and cash flow prepared by such
independent public accountants as being fairly stated in relation to such
audited financial statements taken as a whole and together with
management's discussion and analysis as filed with the Securities
Exchange Commission;
(b) within 45 days after the end of each of the first three (3)
fiscal quarters of Holdings, (i) unaudited Consolidated and consolidating
balance sheets and Consolidated and consolidating income statements
showing the financial position and results of operations of Holdings and
its subsidiaries as of the end of each such quarter, (ii) a Consolidated
and consolidating statement of shareholders' equity and (iii) a
Consolidated and consolidating statement of cash flow, in each case for
the fiscal quarter just ended and for the period commencing at the end of
the immediately preceding Fiscal Year and ending with the last day of
such quarter, and comparing such financial position and results of
operations to the projections for the applicable period provided under
paragraph (h) below and to the results for the comparable period during
the immediately preceding Fiscal Year, in each case prepared and attested
to by the Financial Officer of Holdings as presenting fairly, in all
material respects, the financial position and results of operations of
Holdings and its subsidiaries and as having been prepared in accordance
with GAAP (except the absence of footnote disclosure), in each case
subject to normal year-end audit adjustments, together with management's
discussion and analysis as filed with the Securities Exchange Commission;
(c) within 35 days after the end of each month (i) unaudited
Consolidated and consolidating balance sheets and income statements
showing the financial position and results of operations of Holdings and
its subsidiaries as of the end of each such month, (ii) a Consolidated
and consolidating unconsolidated statement of shareholders' equity and
(iii) a Consolidated and consolidating statement of cash
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flow, in each case for the month just ended and for the period commencing
at the end of the immediately preceding Fiscal Year and ending with the
last day of such month, and comparing such financial position and results
of operations to the projections for the applicable period provided under
paragraph (h) below and, beginning with the receipt of the January 2001
financial statements, to the results for the comparable period during the
immediately preceding Fiscal Year, prepared and attested to by the
Financial Officer of Holdings as presenting fairly, in all material
respects, the financial position and results of operations of Holdings
and its subsidiaries and as having been prepared in accordance with GAAP
(except the absence of footnote disclosure), in each case subject to
normal year-end audit adjustments;
(d) promptly after the same become publicly available, copies of
such registration statements, annual, periodic and other reports, and
such proxy statements and other information, if any, as shall be filed by
Holdings or any subsidiaries with the Securities and Exchange Commission
pursuant to the requirements of the Securities Act of 1933 or the
Securities Exchange Act of 1934;
(e) (i) concurrently with any delivery under (a) or (b) above, a
certificate of the firm or person referred to therein (x) which
certificate shall, in the case of the certificate of the Financial
Officer of Holdings, certify that to the best of his or her knowledge no
Default or Event of Default has occurred (including with the delivery
under (a) or (b) above calculations demonstrating compliance, as of the
dates of the financial statements being furnished, with the covenants set
forth in Sections 7.08, 7.09 and 7.10 hereof) and, if such a Default or
Event of Default has occurred, specifying the nature and extent thereof
and any corrective action taken or proposed to be taken with respect
thereto and (y) which certificate, in the case of the certificate
furnished by the independent public accountants referred in paragraph (a)
above, may be limited to accounting matters and disclaim responsibility
for legal interpretations, but shall in any event certify that to the
best of such accountants' knowledge, as of the dates of the financial
statements being furnished no Default or Event of Default has occurred
under any of the covenants set forth in Sections 7.08, 7.09 and 7.10
hereof and, if such a Default or Event of Default has occurred,
specifying the nature and extent thereof and any corrective action taken
or proposed to be taken with respect thereto, and shall in addition
certify that in the course of preparing the audit and the certificate
referred to herein, such accountants have not become aware of the
occurrence of any other Default or Event of Default and, if such a
Default or Event of Default has occurred, specifying the nature thereof;
provided, however, that any certificate delivered concurrently with (a)
above shall be accompanied by a supplemental certificate confirming the
accuracy of the accountants' certificate and signed by the Financial
Officers of Holdings;
(f) if a Default or Event of Default shall have occurred and be
continuing, concurrently with any delivery under (a) above, a management
letter prepared by the independent public accountants who reported on the
financial statements delivered
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under (a) above, with respect to the internal audit and financial
controls of Holdings and its subsidiaries, and at the request of the
Agent, copies of all such management letters not previously delivered to
the Agent;
(g) within 20 days of the end of each fiscal month, an aging
schedule of the Receivables (setting forth the Early Buy Program
Receivables apart from other Receivables) in the form of the aging
schedule of Receivables dated November 24, 1999 previously furnished to
the Agent and a certificate, substantially in the form of Schedule
6.05(g) hereto, executed by the Financial Officer of the Borrowers with
respect to inventory designations, together with an executive summary
with respect to each Borrower's top ten accounts for which Receivables
are more than 90 days past due, comparing the total of such past due
Receivables for the month then ended to the total of past due Receivables
for the previous month, executed by the Financial Officer of each
Borrower, provided, however, upon the occurrence and continuance of a
Default or Event of Default or, at any time that Total Availability is
less than $5,000,000, then the foregoing shall be delivered as often
(including daily) as the Agent may request;
(h) within 25 days prior to the beginning of each Fiscal Year, a
summary of business plans and financial operation projections (including,
without limitation, with respect to Capital Expenditures) for the
Borrowers and their respective subsidiaries for such Fiscal Year
(including monthly balance sheets, statements of income and of cash flow)
and annual projections for the following three years prepared by
management and in form, substance and detail (including, without
limitation, principal assumptions) satisfactory to the Agent;
(i) within 20 days after the end of each month, an aging schedule
of the payables of each Borrower and its subsidiaries, a copy of the bank
statement of each Borrower with respect to each lock-box account and such
other sales, collections, debit and credit adjustment schedules as the
Agent may request, provided, however, upon the occurrence and continuance
of a Default or Event of Default or, at any time that Total Availability
is less than $5,000,000, then such schedules shall be delivered as often
(including daily) as the Agent may request;
(j) as soon as practicable, copies of any financial information
delivered to shareholders (and which has not already been delivered
pursuant to (d) above) and copies of all reports, forms, filings, loan
documents and financial information submitted to governmental agencies,
which might reasonably be construed as disclosing a Material Adverse
Effect;
(k) within 20 days after the end of each fiscal month, a
certificate, substantially in the form of Schedule 6.05(k) hereto,
executed by a Financial Officer of each Borrower setting forth the Laars
Borrowing Base and Water Pik Borrowing Base, respectively, and Laars
Availability and Water Pik Availability, respectively, provided, however,
upon the occurrence and continuance of a Default or Event of
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Default or, at any time that Total Availability is less than $5,000,000,
then such certificate shall be delivered as often (including daily) as
the Agent may request;
(l) immediately upon becoming aware thereof, notice to the Agent
of the breach by any party of any material agreement with any of the
Borrowers; and
(m) such other information as the Agent or any Lender may
reasonably request.
SECTION 6.06. Litigation and Other Notices. Give the Agent prompt
written notice of the following:
(a) the issuance by any court or governmental agency or authority
of any injunction, order, decision or other restraint prohibiting, or
having the effect of prohibiting, the making of the Loans or occurrence
of other Credit Events, or invalidating, or having the effect of
invalidating, any provision of this Agreement, the Notes or the other
Loan Documents, or the initiation of any litigation or similar proceeding
seeking any such injunction, order, decision or other restraint;
(b) the filing or commencement of any action, suit or proceeding
against any Borrowers or any of their subsidiaries, whether at law or in
equity or by or before any court or any Federal, state, municipal or
other governmental agency or authority, (i) which is material and is
brought by or on behalf of any governmental agency or authority, or in
which injunctive or other equitable relief is sought or (ii) as to which
it is probable (within the meaning of Statement of Financial Accounting
Standards No. 5) that there will be an adverse determination and which,
if adversely determined, would (A) reasonably be expected to result in
liability of one or more Borrowers or a subsidiary thereof in an
aggregate amount more than $250,000, not reimbursable by insurance, or
(B) materially impair the right of any Borrowers or a subsidiary thereof
to perform its obligations under this Agreement, any Note or any other
Loan Document to which it is a party;
(c) any Default or Event of Default, specifying the nature and
extent thereof and the action (if any) which is proposed to be taken with
respect thereto; and
(d) any development in the business or affairs of any Borrowers or
any of their subsidiaries which has had or which is likely to have, in
the reasonable judgment of any Responsible Officer of such Borrower, a
Material Adverse Effect.
SECTION 6.07. ERISA. (a) Pay and discharge promptly any liability
imposed upon it pursuant to the provisions of Title IV of ERISA; provided,
however, that neither the Borrowers nor any ERISA Affiliate shall be required to
pay any such liability if (1) the amount, applicability or validity thereof
shall be diligently contested in good faith by appropriate proceedings, and (2)
such person shall have set aside on its books reserves which, in the opinion of
the independent certified public accountants of such person, are adequate with
respect thereto.
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(b) Deliver to the Agent, promptly, and in any event within 5
days, after (i) the occurrence of any Reportable Event, a copy of the materials
that are filed with the PBGC, (ii) any Borrowers or any ERISA Affiliate or an
administrator of any Pension Plan files with participants, beneficiaries or the
PBGC a notice of intent to terminate any such Plan, a copy of any such notice,
(iii) the receipt of notice by any Borrowers or any ERISA Affiliate or an
administrator of any Pension Plan from the PBGC of the PBGC's intention to
terminate any Pension Plan or to appoint a trustee to administer any such Plan,
a copy of such notice, (iv) the filing thereof with the Internal Revenue
Service, if requested by the Agent, copies of each annual report that is filed
on Treasury Form 5500 with respect to any Plan, together with certified
financial statements (if any) for the Plan and any actuarial statements on
Schedule B to such Form 5500, (v) any Borrowers or any ERISA Affiliate knows or
has reason to know of any event or condition which might constitute grounds
under the provisions of Section 4042 of ERISA for the termination of (or the
appointment of a trustee to administer) any Pension Plan, an explanation of such
event or condition, (vi) the receipt by any Borrowers or any ERISA Affiliate of
an assessment of withdrawal liability under Section 4201 of ERISA from a
Multiemployer Plan, a copy of such assessment, (vii) any Borrowers or any ERISA
Affiliate knows or has reason to know of any event or condition which might
cause any one of them to incur a liability under Section 4062, 4063, 4064 or
4069 of ERISA or Section 412(n) or 4971 of the Code, an explanation of such
event or condition, and (viii) any Borrowers or any ERISA Affiliate knows or has
reason to know that an application is to be, or has been, made to the Secretary
of the Treasury for a waiver of the minimum funding standard under the
provisions of Section 412 of the Code, a copy of such application, and in each
case described in clauses (i) through (iii) and (v) through (vii) together with
a statement signed by the Financial Officer setting forth details as to such
Reportable Event, notice, event or condition and the action which such Borrowers
or such ERISA Affiliate proposes to take with respect thereto.
SECTION 6.08. Maintaining Records; Access to Properties and
Inspections; Right to Audit. Maintain financial records in accordance with
accepted financial practices, maintain its computer systems and software so as
to calculate, compare and sequence from, into and between the twentieth century
(through 1999), in the year 2000 and the twenty-first century, including leap
year calculations and, upon notice (which may be telephonic), at all reasonable
times during business hours (or at any time upon the occurrence and continuance
of an Event of Default) and as often as any Lender may request, permit any
authorized representative designated by such Lender to visit and inspect the
properties and financial records of the Borrowers and their subsidiaries and to
make extracts from such financial records at such Lender's expense, and permit
any authorized representative designated by such Lender to discuss the affairs,
finances and condition of the Borrowers and their subsidiaries with the
appropriate Financial Officer and such other officers as the Borrowers shall
deem appropriate and the Borrowers' independent public accountants, as
applicable. The Agent agrees that it shall schedule any meeting with any such
independent public accountant through the Borrowers and a Responsible Officer of
one or more Borrowers shall have the right to be present at any such meeting. At
the Borrowers' expense, the Agent shall have the right to conduct a full
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audit of the existence and condition of the accounts receivables, inventory,
books and records of the Borrowers and their subsidiaries and to review their
compliance with the terms and conditions of this Agreement and the other Loan
Documents up to four times each Fiscal Year; provided, that if a Default or
Event of Default shall have occurred and be continuing the Agent shall have the
right to conduct such audits as often as it may request at the Borrowers'
expense.
SECTION 6.09. Use of Proceeds. Use the proceeds of the Credit
Events only for the purposes set forth in Section 4.14 hereof.
SECTION 6.10. Fiscal Year-End. Cause its Fiscal Year to end on the
Sunday closest to December 31 in each year.
SECTION 6.11. Further Assurances. Execute any and all further
documents and take all further actions which may be required under applicable
law, or which the Agent may reasonably request, to grant, preserve, protect and
perfect the first priority Lien created by the Security Documents in the
Collateral.
SECTION 6.12. Additional Grantors and Guarantors. Promptly inform
the Agent of the creation or acquisition of any direct or indirect subsidiary
(subject to the provisions of Section 7.06 hereof) and cause each direct or
indirect subsidiary not in existence on the date hereof to enter into a
Guarantee of the Obligations in form and substance satisfactory to the Agent,
and to execute the Security Documents, as applicable, as a Grantor, and cause
the direct parent of each such subsidiary to pledge all of the capital stock of
such subsidiary pursuant to the Pledge Agreement and cause each such subsidiary
to pledge its accounts receivable and all other assets pursuant to the Security
Agreement.
SECTION 6.13. Environmental Laws. (a) Comply, and cause each of
their subsidiaries or tenants or other licensed users of their properties to
comply, in all material respects with the provisions of all Environmental Laws,
and shall keep their properties and the properties of their subsidiaries free of
any Lien imposed pursuant to any Environmental Law. The Borrowers shall not
cause or suffer or permit, and shall not suffer or permit any of their
subsidiaries to cause or suffer or permit, the property of the Borrowers or
their subsidiaries to be used for the generation, production, processing,
handling, storage, transporting or disposal of any Hazardous Material, except
for Hazardous Materials used, generated, produced, processed, handled, stored,
transported or disposed of in the ordinary course of business of the Borrowers
and their subsidiaries, in which case such Hazardous Materials shall be used,
stored, generated, treated and disposed of only in material compliance with
Environmental Law.
(b) Supply to the Agent copies of all environmental Permits and
all material environmental submissions by the Borrowers or any of their
subsidiaries to any governmental body and of the reports of all environmental
audits and of all other environmental tests, studies or assessments (including
the data derived from any sampling
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or survey of asbestos, soil, or subsurface or other materials or conditions)
that may be conducted or performed (by or on behalf of the Borrowers or any of
their subsidiaries) on or regarding the properties owned, operated, leased or
occupied by the Borrowers or any of their subsidiaries or regarding any
conditions that might have been affected by Hazardous Materials on or Released
or removed from such properties. The Borrowers shall also permit and authorize,
and shall cause their subsidiaries to permit and authorize, the consultants,
attorneys or other persons that prepare such submissions or reports or perform
such audits, tests, studies or assessments to discuss such submissions, reports
or audits with the Agent and the Lenders.
(c) Promptly (and in no event more than five Business Days after
the Borrowers become aware or are otherwise informed of such event) provide oral
and written notice to the Agent upon the happening of any of the following:
(i) any Borrower, any subsidiary of any Borrower, or any
tenant or other occupant of any property of such Borrowers or such
subsidiary receives written notice of any claim, complaint, charge
or notice of a material violation or potential violation of any
Environmental Law;
(ii) there has been a spill or other Release of Hazardous
Materials upon, under or about or affecting any of the properties
owned, operated, leased or occupied by any Borrowers or any
subsidiary of any Borrowers in amounts that are required to be
reported under Environmental Law, or Hazardous Materials at levels
or in amounts that may have to be reported, remedied or responded
to under Environmental Law are detected on or in the soil or
groundwater;
(iii) any Borrowers or any subsidiary of any Borrowers are or
may be liable for any costs in excess of $125,000 of cleaning up
or otherwise remedying a Release of Hazardous Materials;
(iv) any part of the properties owned, operated, leased or
occupied by any Borrowers or any subsidiary of any Borrowers are
or may be subject to a Lien under any Environmental Law; or
(v) any Borrowers or any subsidiary of any Borrowers
undertakes any material Remedial Work with respect to any
Hazardous Materials.
(d) Without in any way limiting the scope of Section 11.04(c) and
in addition to any obligations thereunder, each of the Borrowers hereby
indemnifies and agrees to hold the Agent and the Lenders harmless from and
against any liability, loss, damage, suit, action or proceeding arising out of
its business or the business of its subsidiaries pertaining to Hazardous
Materials, including, but not limited to, claims of any governmental body or any
third person arising under any Environmental Law or under tort, contract or
common law. To the extent laws of the United States or any applicable state or
local law in
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which property owned, operated, leased or occupied by any Borrowers or any
subsidiary of any Borrowers are located provide that a Lien upon such property
of such Borrowers or such subsidiary may be obtained for the removal of
Hazardous Materials which have been or may be Released, no later than sixty days
after notice that a Release has occurred is given by the Agent to such Borrowers
or such subsidiary, such Borrowers or such subsidiary shall deliver to the Agent
a report issued by a qualified third party engineer assessing the existence and
extent of any Hazardous Materials located upon or beneath the specified
property. To the extent any Hazardous Materials located therein or thereunder
either subject the property to Lien or require removal to safeguard the health
of any persons, the removal thereof shall be an affirmative covenant of the
Borrowers hereunder.
(e) In the event that any Remedial Work is required to be
performed by any Borrowers or any subsidiary of any Borrowers under any
applicable Environmental Law, any judicial order, or by any governmental entity,
such Borrowers or such subsidiary shall commence all such Remedial Work at or
prior to the time required therefor under such Environmental Law or applicable
judicial orders and thereafter diligently prosecute to completion all such
Remedial Work in accordance with and within the time allowed under such
applicable Environmental Laws or judicial orders; provided, however, that such
Remedial Work shall not be required so long as it shall be contested in good
faith by appropriate proceedings and the applicable party shall have set aside
on its books adequate reserves with respect thereto in accordance with GAAP and
such contest operates to suspend any requirement that such Remedial Work be
performed.
SECTION 6.14. Pay Obligations to Lenders and Perform Other
Covenants. (a) Make full and timely payment of the Obligations, whether now
existing or hereafter arising, (b) duly comply with all the terms and covenants
contained in this Agreement (including, without limitation, the borrowing
limitations and mandatory prepayments in accordance with Article II hereof) and
in each of the other Loan Documents, all at the times and places and in the
manner set forth therein, subject to applicable cure and grace periods, and (c)
except for the filing of continuation statements and the making of other filings
by the Agent as secured party or assignee, at all times take all actions
necessary to maintain the Liens and security interests provided for under or
pursuant to this Agreement and the Security Documents as valid and perfected
first Liens on the property intended to be covered thereby (subject only to
Liens expressly permitted hereunder) and supply all information to the Agent
necessary for such maintenance.
SECTION 6.15. Maintain Operating Accounts. Maintain all of its
operating accounts and cash management arrangements with the Agent or with other
financial institutions approved by the Agent and on terms (which shall include
obtaining blocked account agreements or tri-party lockbox agreements)
satisfactory to the Agent in its reasonable discretion.
SECTION 6.16. Year 2000. Take all actions necessary to permit the
proper functioning, in and following the year 2000 of (a) the Borrowers'
computer systems and (b)
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equipment containing embedded microchips (including systems and equipment
supplied by others or with which the Borrowers' systems interface and which are
within the control of the Borrowers and the testing of all such systems and
equipment, as so programmed, unless the failure to take such actions would not
reasonably be expected to have a Material Adverse Effect.
VII. NEGATIVE COVENANTS
Each of the Borrowers and Holdings covenant and agree with each
Lender that, so long as this Agreement shall remain in effect or the principal
of or interest on any Note, any amount under any Letter of Credit, or any fee,
expense or other Obligation payable hereunder or in connection with any of the
Transactions shall be unpaid, it will not and will not cause or permit any of
their subsidiaries (other than the Canadian Sub) and, in the case of Section
7.14 hereof, any ERISA Affiliate to, either directly or indirectly:
SECTION 7.01. Liens. Incur, create, assume or permit to exist any
Lien on any of its property or assets (including the stock of any direct or
indirect subsidiary), whether owned at the date hereof or hereafter acquired, or
assign or convey any rights to or security interests in any future revenues,
except:
(a) Liens incurred and pledges and deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance, old-age pensions and other social security benefits (not
including any lien described in Section 412(m) of the Code);
(b) Liens imposed by law, such as carriers', warehousemen's,
mechanics', materialmen's and vendors' liens and other similar liens,
incurred in good faith in the ordinary course of business and securing
obligations which are not overdue for a period of more than 15 days or
which are being contested in compliance with Section 6.04;
(c) Liens securing the payment of taxes, assessments and
governmental charges or levies, that are not delinquent or are being
diligently contested in compliance with Section 6.04;
(d) zoning restrictions, easements, rights of way, licenses,
flowage rights, reservations, provisions, covenants, conditions, waivers,
restrictions on the use of property or minor defects or irregularities of
title and similar encumbrances (and with respect to leasehold interests,
mortgages, obligations, liens and other encumbrances incurred, created,
assumed or permitted to exist and arising by, through or under a landlord
or owner of the leased property, with or without consent of the lessee)
which do not in the aggregate materially detract from the value of its
property or assets or materially impair the use thereof in the operation
of its business;
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(e) Purchase money Liens granted in connection with the incurrence
of Indebtedness permitted by Section 7.03(vii) hereof, to the vendor or
person financing the construction or acquisition of property, plant or
equipment provided that (i) such Lien is limited to the particular assets
constructed or acquired, (ii) the debt secured by the Lien does not
exceed 90% of the amount financed for the construction or acquisition
cost (including transaction costs and indemnities customarily secured by
a Lien of such type) of the specific assets on which the Lien is granted,
(iii) such Lien arises and the Indebtedness secured thereby is created
within 30 days of the completion of such construction or of such
acquisition or are incurred to extend, renew or refinance such Liens and
Indebtedness incurred within such 30-day period and (iv) such transaction
does not otherwise violate this Agreement;
(f) Liens existing on the date of this Agreement and set forth in
Schedule 7.01 annexed hereto and the extension, renewal or refunding of
the Indebtedness secured thereby to the extent permitted by Section
7.03(ii) hereof;
(g) Liens created in favor of the Agent for its own benefit and
the benefit of the Lenders pursuant to the Loan Documents;
(h) Liens and deposits securing the performance of bids, tenders,
leases, contracts (other than for the repayment of borrowed money),
statutory obligations, surety, customs and appeal bonds, performance
bonds and other obligations of like nature, incurred as an incident to
and in the ordinary course of business;
(i) Judgment Liens securing judgments and decrees, which would not
constitute an Event of Default under paragraph (j) of Article VIII; or
(j) Liens on property prior to the acquisition thereof by a
Borrower, a Guarantor or any subsidiary thereof, provided that such Lien
is not created in contemplation of or in connection with such
acquisition, such Lien does not apply to any other property and such Lien
does not materially interfere with the use, occupancy and operation of
any property, materially reduce the fair market value of such property
but for such Lien or result in any material increase in the cost of
operating, occupying or owning (or leasing) such property.
SECTION 7.02. Sale and Lease-Back Transactions. Enter into any
arrangement, directly or indirectly, with any person whereby any Borrower or any
of its subsidiaries shall sell or transfer any property, real or personal, and
used or useful in its business, whether now owned or hereafter acquired, and
thereafter rent or lease such property or other property which such Borrower or
such subsidiary intends to use for substantially the same purpose or purposes as
the property being sold or transferred.
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SECTION 7.03. Indebtedness. Incur, create, assume or permit to
exist any Indebtedness other than (i) Indebtedness secured by Liens permitted
under Section 7.01, (ii) Indebtedness (including, without limitation,
Guarantees) existing on the date hereof and listed in Schedule 7.03 annexed
hereto, and the extension, renewal or refunding thereof, but not any increase in
the principal, interest, fees or amortization from that existing on the date
hereof, (iii) Indebtedness incurred hereunder or under the other Loan Documents,
(iv) Indebtedness to trade creditors incurred in the ordinary course of
business, (v) Guarantees constituting the endorsement of negotiable instruments
for deposit or collection in the ordinary course of business, (vi) Guarantees of
the Obligations, (vii) purchase money Indebtedness (including Capitalized Lease
Obligations) to finance Capital Expenditures provided that any Lien granted with
respect to such Indebtedness is permitted by Section 7.01(e) hereof, (viii)
Subordinated Indebtedness in connection with Permitted Acquisitions, (ix)
Indebtedness (other than the Obligations) of a Borrower to another Borrower to
the extent permitted pursuant to Section 7.06 hereof and (x) other unsecured
Indebtedness in addition to that permitted pursuant to the other subsections of
this Section 7.03 not to exceed $1,000,000 in the aggregate at any one time
outstanding prior to the completion of the Public Offering and $3,000,000 in the
aggregate at any one time outstanding after the completion of the Public
Offering.
SECTION 7.04. Dividends, Distributions and Payments. Declare or
pay, directly and indirectly, any cash dividends or make any other distribution,
whether in cash, property, securities or a combination thereof, with respect to
(whether by reduction of capital or otherwise) any shares of its capital stock
or directly or indirectly redeem, purchase, retire or otherwise acquire for
value (or permit any subsidiary to purchase or acquire) any shares of any class
of its capital stock or set aside any amount for any such purpose except that
(x) any wholly-owned subsidiary of a Borrower may pay dividends or make other
distributions to such Borrower and (y) (i) so long as both before and after
giving effect to the payment of such dividends or other distributions no Default
or Event of Default has occurred and is continuing any Borrower may pay taxes
owed by the Consolidated entity as and when such taxes are due and may pay
corporate overhead of the Consolidated entity in an amount not to exceed
$1,000,000 in any Fiscal Year and (ii) so long as both before and after giving
effect to the payment of such dividends or other distributions (A) no Default or
Event of Default has occurred and is continuing, (B) the Fixed Charge Coverage
Ratio of the Borrowers and their respective subsidiaries on an combined basis
for the twelve month period ending prior to the date of such dividend is
1.25:1.00 or greater and (C) Total Availability is $5,000,000 or greater, any
Borrower may pay dividends to Holdings solely for the purposes of advancing
funds for the payment of principal amount due by Canadian Sub on its
subordinated debt as and when due in accordance with the amortization schedule
in effect on the Closing Date.
SECTION 7.05. Consolidations, Mergers and Sales of Assets.
Consolidate with or merge into any other person, or sell, lease, transfer or
assign to any persons or otherwise dispose of (whether in one transaction or a
series of transactions) any portion of its assets (whether now owned or
hereafter acquired), or permit another person to merge
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into it, or acquire all or substantially all the capital stock or assets of any
other person; provided, however, that the foregoing shall not prohibit:
(a) purchases and sales of inventory in the ordinary course;
(b) (i) sales of assets (excluding capital stock of a subsidiary)
not to exceed, in the aggregate, $250,000 prior to the consummation of a
Public Offering and $1,000,000 thereafter, in any Fiscal Year (in each
case excluding up to $400,000 of proceeds from the sale of the property
in San Antonio, Texas), and (ii) sales of worn out, obsolete, scrap or
surplus assets;
(c) sales of accounts receivable permitted by Section 7.16;
(d) liquidation of investments permitted pursuant to Sections
7.06(a) through (e);
(e) Permitted Acquisitions;
(f) so long as at the time thereof and immediately after giving
effect thereto no Default or Event of Default shall have occurred and be
continuing, the merger or consolidation of any subsidiary of a Borrower
incorporated in the United States with or into such Borrower in which no
person other than such Borrower receives consideration and the Agent in
its sole discretion is satisfied that the surviving person has assumed
all Obligations of the person merging with or consolidating into such
surviving person and that there has been no Material Adverse Effect with
respect to the Collateral;
(g) so long as at the time thereof and immediately after giving
effect thereto no Default or Event of Default shall have occurred and be
continuing, and provided that the Required Lenders have given their prior
written consent to do so, which consent may be withheld for any reason by
the Required Lenders in their sole discretion, the merger or
consolidation of either or both Borrowers with or into Holdings; and
(h) so long as at the time thereof and immediately after giving
effect thereto no Default or Event of Default shall have occurred and be
continuing, and provided that the Required Lenders have given their prior
written consent to do so, which consent shall not be unreasonably
withheld, the merger or consolidation of either Borrower with or into the
other Borrower.
SECTION 7.06. Investments. Own, purchase or acquire any stock,
obligations, assets (not in the ordinary course of business) or securities of,
or any interest in, or make any capital contribution or loan or advance to, any
other person, or make any other investments, except:
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(a) certificates of deposit, time deposits and money market
accounts in dollars of any commercial banks registered to do business in
any state of the United States (i) having capital and surplus in excess
of $500,000,000 and (ii) whose long-term debt rating is at least
investment grade as determined by either Standard & Poor's Ratings Group
or Moody's Investors Service, Inc. and certificates of deposit in dollars
offered by money market mutual funds meeting the criteria in (c) below;
(b) readily marketable direct obligations of the United States
government or any agency thereof which are backed by the full faith and
credit of the United States;
(c) investments in money market mutual funds having assets in
excess of $2,000,000,000;
(d) commercial paper at the time of acquisition having a rating of
at least A- 1 or P-1 from Standard & Poor's Ratings Group or Moody's
Investors Service, Inc., respectively;
(e) federally tax exempt securities rated A or better by either
Standard & Poor's Ratings Group or Moody's Investors Service, Inc.;
(f) investments in the stock of any subsidiary existing on the
Closing Date and Permitted Acquisitions;
(g) investments in non-cash consideration received in connection
with a permitted sale of assets (subject to the granting of a Lien as
required by the Security Documents);
(h) investments arising from transactions by any Borrower or any
of its subsidiaries with customers or suppliers in the ordinary course of
business, including, without limitation, endorsements of negotiable
instruments and debt obligations and other investments received in
connection with the bankruptcy or reorganization of customers and
suppliers or in settlement of delinquent obligations of, or other
disputes with, customers or suppliers, arising in the ordinary course of
business (subject to the granting of a Lien as required by the Security
Documents);
(i) (other than loans made to employees of the Loan Parties
pursuant to the Stock Acquisition and Retention Program which shall
consist of non-cash advances to such employees and shall have no negative
financial impact on any Loan Party) loans or advances to employees to
cover payroll, travel and similar expenses, arising in the ordinary
course, so long as the aggregate amount of such loans and advances does
not exceed $1,000,000 at any one time outstanding;
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(j) Capital Expenditures and other purchases permitted under other
provisions of this Agreement;
(k) Indebtedness representing loans and advances by one Borrower
to another Borrower not to exceed $5,000,000 at any one time outstanding
prior to the completion of the Public Offering and $10,000,000 at any one
time outstanding after completion of the Public Offering, provided that
in each instance such loans and advances are evidenced by promissory
notes pledged to the Agent for the ratable benefit of the Lenders;
(l) transactions permitted pursuant to Section 7.05; and
(m) investments consisting of loans, advances and other investments
in partnerships, joint ventures and similar investments with persons that
are not Affiliates of the Borrowers so long as the aggregate principal
amount thereof at any time outstanding shall not exceed $1,000,000;
provided that, in each case mentioned in (a), (b), (d) and (e) above, such
obligations shall mature not more than one year from the date of acquisition
thereof.
SECTION 7.07. Rental Obligations. Incur, create, assume or permit
to exist, in respect of leases of real and personal property (other than finance
leases), rental obligations or other commitments thereunder to make any direct
or indirect payment, whether as rent or otherwise, for fixed or minimum rentals,
percentage rentals, property taxes, or insurance premiums, except in ordinary
course of business.
SECTION 7.08. Leverage Ratio. Permit the Leverage Ratio of (A)
Holdings and its subsidiaries on a Consolidated basis and (B) the Borrowers and
their respective subsidiaries on a combined basis for the four consecutive
fiscal quarter period ending on the dates set forth below to be greater than the
respective amounts set forth below opposite such dates (for the fiscal quarters
ending January 2, 2000, March 31, 2000 and June 30, 2000 Leverage Ratio shall be
calculated on a trailing four fiscal quarter basis):
If no Public Offering shall have been consummated:
Quarter Ending Ratio for Holdings Ratio for the Borrowers
1/2/00 through and including the
Final Maturity Date 2.75:1.00 2.25:1.00
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After the consummation of a Public Offering:
Quarter Ending Ratio for Holdings Ratio for the Borrowers
The date ending the fiscal
quarter such Public Offering was
consummated in through and
including the Final Maturity Date 3.00:1.00 2.50:1.00
SECTION 7.09. Fixed Charge Coverage Ratio; EBITDA. (A) Permit the
Fixed Charge Coverage Ratio of the Borrowers and their respective subsidiaries
on a combined basis for the four consecutive fiscal quarter periods ending on
the dates set forth below to be less than the respective amounts set forth below
opposite such dates:
Quarter Ending Ratio
12/31/00 through and including 1.25:1.00
the Final Maturity Date
(B) Permit EBITDA of the Borrowers and their respective subsidiaries on a
combined basis for the four consecutive fiscal quarter periods ending January 2,
2000, March 31, 2000, June 30, 2000 and September 30, 2000 to be less than
$24,000,000 (for the fiscal quarters ending January 2, 2000, March 31, 2000 and
June 30, 2000 EBITDA shall be calculated on a trailing four fiscal quarter
basis).
SECTION 7.10. Interest Coverage Ratio. Permit the Interest
Coverage Ratio of the Borrowers and their respective subsidiaries on a combined
basis for the four consecutive fiscal quarter periods ending on the dates set
forth below (or, with respect to the determination to be made on June 30, 2000,
for the three consecutive fiscal quarter period ending on such date) to be less
than the respective amounts set forth below opposite such dates:
Quarter Ending Ratio
6/30/00 through and including 2.50:1.00
the Final Maturity Date
SECTION 7.11. Business. Alter the nature of its business as
operated on the date of this Agreement in any material respect.
SECTION 7.12. Sales of Receivables. Sell, assign, discount,
transfer, or otherwise dispose of any accounts receivable, promissory notes,
drafts or trade acceptances or other rights to receive payment held by it, with
or without recourse, except
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(i) for the purpose of collection or settlement in the ordinary course of
business or (ii) the sale of any such accounts to the Agent for the ratable
benefit of the Lenders.
SECTION 7.13. Use of Proceeds. Permit the proceeds of any Credit
Event to be used for any purpose which entails a violation of, or is
inconsistent with, Regulation T, U or X of the Board, or for any purpose other
than those set forth in Section 4.14 hereof.
SECTION 7.14. ERISA. (a) Engage in any transaction in connection
with which any Borrower or any ERISA Affiliate could be subject to either a
material civil penalty assessed pursuant to the provisions of Section 502 of
ERISA or a material tax imposed under the provisions of Section 4975 of the
Code.
(b) Terminate any Pension Plan in a "distress termination" under
Section 4041 of ERISA, or take any other action which could result in a material
liability of any Borrower or any ERISA Affiliate to the PBGC.
(c) Fail to make payment when due of all amounts which, under the
provisions of any Plan, any Borrower or any ERISA Affiliate are required to pay
as contributions thereto, or, with respect to any Pension Plan, permit to exist
any material "accumulated funding deficiency" (within the meaning of Section 302
of ERISA and Section 412 of the Code), whether or not waived, with respect
thereto.
(d) Adopt an amendment to any Pension Plan requiring the provision
of security under Section 307 of ERISA or Section 401(a)(29) of the Code.
SECTION 7.15. Accounting Changes. Make any change in their
accounting treatment or financial reporting practices except as required or
permitted by GAAP.
SECTION 7.16. Prepayment or Modification of Indebtedness;
Modification of Charter Documents. (a) Directly or indirectly prepay, redeem,
purchase or retire (except according to its terms) any Indebtedness, including,
without limitation, any Subordinated Indebtedness, other than Indebtedness
incurred hereunder.
(b) Modify, amend or otherwise alter the terms and provisions of
any Subordinated Indebtedness.
(c) Modify, amend or alter their certificates or articles of
incorporation or other constitutive documents or preferred stock/certificates of
designations.
SECTION 7.17. Transactions with Affiliates. Except as otherwise
specifically set forth in this Agreement (including the transactions
contemplated by the spinoff of Holdings by ATI), directly or indirectly
purchase, acquire or lease any property from, or sell, transfer or lease any
property to, or enter into any other transaction with, any stockholder,
Affiliate or agent of any Borrower, except at prices and on terms not less
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favorable to it than that which would have been obtained in an arm's-length
transaction with a non-affiliated third party.
SECTION 7.18. Consulting Fees. Pay any management, consulting or
other fees of any kind to Holdings, any subsidiary thereof or any subsidiary of
any Borrower, or to any Affiliate of Holdings, any of its subsidiaries or of the
Borrowers or any of the Borrowers' subsidiaries except as permitted pursuant to
Section 7.04.
SECTION 7.19. Negative Pledges, etc. Enter into any agreement
(other than this Agreement or any other Loan Document or any agreement relating
to any Indebtedness permitted pursuant to Sections 7.03(ii) and (vii) but only
with respect to the property securing such Indebtedness) which (a) prohibits the
creation or assumption of any Lien upon any of the Collateral, including,
without limitation, any hereafter acquired property, or (b) specifically
prohibits the amendment or other modification of this Agreement or any other
Loan Document.
VIII. EVENTS OF DEFAULT
In case of the happening of any of the following events (herein
called "Events of Default"):
(a) any representation or warranty made or deemed made by any Loan
Party or subsidiary thereof in or in connection with this Agreement, any
of the Security Documents, the Notes or other Loan Documents or any
Credit Events hereunder, shall prove to have been incorrect in any
material respect when made or deemed to be made;
(b) default shall be made in the payment of any principal of any
Note when and as the same shall become due and payable, whether at the
due date thereof or at a date fixed for prepayment thereof or by
acceleration thereof or otherwise;
(c) default shall be made in the payment of any interest on any
Note, or any fee or any other amount payable hereunder, or under the
Notes, Letters of Credit, or any other Loan Document or the Commitment
Letter or in connection with any other Credit Event or the Transactions
when and as the same shall become due and payable;
(d) default shall be made in the due observance or performance of
any covenant, condition or agreement to be observed or performed on the
part of any Loan Party pursuant to the terms of (i) Article VI or Article
VII hereof, any of the Notes, or any of the Security Documents or (ii)
any other terms of this Agreement (other than as specified in (a), (b),
(c) or (d)(i) above) and such default with respect to any such other
terms shall remain unremedied for a period of 20 days;
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(e) any Loan Party or subsidiary thereof shall (i) voluntarily
commence any proceeding or file any petition seeking relief under Title
11 of the United States Code or any other Federal, state or foreign
bankruptcy, insolvency, liquidation, reorganization or similar law, (ii)
consent to the institution of, or fail to contravene in a timely and
appropriate manner, any such proceeding or the filing of any such
petition, (iii) apply for or consent to the appointment of a receiver,
trustee, custodian, sequestrator or similar official for any Loan Party
or subsidiary thereof or for a substantial part of its property or
assets, (iv) file an answer admitting the material allegations of a
petition filed against it in any such proceeding, (v) make a general
assignment for the benefit of creditors, (vi) become unable, admit in
writing its inability or fail generally to pay its debts as they become
due, (vii) be wound up or (viii) take corporate action for the purpose of
effecting any of the foregoing;
(f) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i)
relief in respect of any Loan Party or subsidiary thereof, or of a
substantial part of the property or assets of any Loan Party or
subsidiary thereof, under Title 11 of the United States Code or any other
Federal state or foreign bankruptcy, insolvency, receivership or similar
law, (ii) the appointment of a receiver, trustee, custodian, sequestrator
or similar official for any Loan Party or subsidiary thereof or for a
substantial part of the property of any Loan Party, or (iii) the
winding-up or liquidation of any Loan Party or subsidiary thereof; and
such proceeding or petition shall continue undismissed for 60 days or an
order or decree approving or ordering any of the foregoing shall continue
unstayed and in effect for 30 days;
(g) default shall be made with respect to any Indebtedness of any
Loan Party or subsidiary thereof (excluding Indebtedness outstanding
hereunder) which either individually or taken together with other
Indebtedness as to which a default has occurred shall exceed $250,000
prior to completion of the Public Offering or $1,000,000 after completion
of the Public Offering if the effect of any such default shall be to
accelerate, or to permit the holder or obligee of any such Indebtedness
(or any trustee on behalf of such holder or obligee) at its option to
accelerate, the maturity of such Indebtedness;
(h) (i) a Reportable Event shall have occurred with respect to a
Pension Plan, (ii) the filing by any Loan Party or subsidiary thereof,
any ERISA Affiliate, or an administrator of any Plan of a notice of
intent to terminate such a Plan in a "distress termination" under the
provisions of Section 4041 of ERISA, (iii) the receipt of notice by any
Loan Party or subsidiary thereof, any ERISA Affiliate, or an
administrator of a Plan that the PBGC has instituted proceedings to
terminate (or appoint a trustee to administer) such a Pension Plan, (iv)
any other event or condition exists which might, in the opinion of the
Agent, constitute grounds under the provisions of Section 4042 of ERISA
for the termination of (or the appointment of a trustee to administer)
any Pension Plan by the PBGC, (v) a Pension Plan shall fail to maintain
the minimum funding standard required by Section 412 of the Code
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for any plan year or a waiver of such standard is sought or granted under
the provisions of Section 412(d) of the Code, (vi) any Loan Party or
subsidiary thereof or any ERISA Affiliate has incurred, or is likely to
incur, a material liability under the provisions of Section 4062, 4063,
4064 or 4201, if applicable, of ERISA, (vii) any Loan Party or subsidiary
thereof or any ERISA Affiliate fails to pay the full amount of an
installment required under Section 412(m) of the Code, (viii) the
occurrence of any other event or condition with respect to any Plan which
would constitute an event of default under any other agreement entered
into by any Loan Party or subsidiary thereof or any ERISA Affiliate, and
in each case in clauses (i) through (viii) of this subsection (h), such
event or condition, together with all other such events or conditions, if
any, could subject any Loan Party or any ERISA Affiliate to any taxes,
penalties or other liabilities which, in the opinion of the Agent, could
have a Material Adverse Effect with respect to any Loan Party or any
ERISA Affiliate;
(i) any Loan Party or any ERISA Affiliate (i) shall have been
notified by the sponsor of a Multiemployer Plan that it has incurred any
material withdrawal liability to such Multiemployer Plan, and (ii) does
not have reasonable grounds for contesting such withdrawal liability and
is not in fact contesting such withdrawal liability in a timely and
appropriate manner;
(j) a judgment or decree for the payment of money, a fine or
penalty (in each case, if not reimbursed by insurance policies of any
Loan Party or subsidiary thereof) which when taken together with all
other such judgments, decrees, fines and penalties shall exceed $250,000
shall be rendered by a court or other tribunal against any Loan Party or
subsidiary thereof and (i) shall remain undischarged or unbonded for a
period of 30 consecutive days during which the execution of such
judgment, decree, fine or penalty shall not have been stayed effectively
or (ii) any judgment creditor or other person shall legally commence
actions to levy upon assets or properties to enforce such judgment,
decree, fine or penalty or (iii) there shall be filed against any Loan
Party any tax lien or notice of levy if any such event would reasonably
be expected to result in a Material Adverse Effect;
(k) this Agreement, any Note, any of the Security Documents, any
Guarantee or other Loan Documents shall for any reason cease to be, or
shall be asserted by any Loan Party or subsidiary thereof not to be, a
legal, valid and binding obligation of any Loan Party or subsidiary
thereof, enforceable in accordance with its terms, or the Lien purported
to be created by any of the Security Documents shall for any reason cease
to be, or be asserted by any Loan Party or subsidiary thereof not to be,
a valid, first priority perfected Lien (except to the extent otherwise
permitted under this Agreement or any of the Security Documents);
(l) a Change of Control shall occur; or
(m) any material damage to, or loss, theft or destruction of, any
material Collateral, whether or not insured, or any strike, lockout,
labor dispute, embargo,
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condemnation, act of God or public enemy, or other casualty which causes,
for more than thirty (30) consecutive days beyond the coverage period of
any applicable business interruption insurance, the cessation or
substantial curtailment of revenue producing activities at any facility
of a Loan Party or subsidiary thereof, if in the case of any of the
foregoing, if any such event or circumstance would reasonably be expected
to result in a Material Adverse Effect;
then, and in any such event (other than an event described in paragraph (e) or
(f) above), and at any time thereafter during the continuance of such event, the
Agent may, and upon the written request of the Required Lenders shall, by
written notice (or facsimile notice promptly confirmed in writing) to the
Borrowers, take any or all of the following actions at the same or different
times: (i) terminate forthwith all or any portion of the Total Commitment and
the obligations of the Lenders to issue Letters of Credit hereunder, (ii)
declare the Notes and any amounts then owing to the Lenders on account of
drawings under any Letters of Credit to be forthwith due and payable, and (iii)
require that the Borrowers remit to the Agent cash collateral in an amount equal
to the aggregate undrawn amount of all outstanding Letters of Credit at such
time, such cash collateral to be held by the Agent for its own benefit and the
benefit of the Lenders in a cash collateral account on terms and conditions
satisfactory to the Agent, whereupon the principal of such Notes, together with
accrued interest and fees thereon and any amounts then owing to the Lenders on
account of drawings under any Letters of Credit and other liabilities of the
Borrowers accrued hereunder, shall become forthwith due and payable both as to
principal and interest, without presentment, demand, protest or any other notice
of any kind, all of which are hereby expressly waived by the Borrowers, anything
contained herein or in the Notes to the contrary notwithstanding; provided,
however, that with respect to a default described in paragraph (e) or (f) above,
the Total Commitment and the obligation of the Lenders to issue Letters of
Credit shall automatically terminate and the principal of the Notes, together
with accrued interest and fees thereon and any amounts then owing to the Lenders
on account of drawings under any Letters of Credit and any other liabilities of
the Borrowers accrued hereunder shall automatically become due and payable, both
as to principal and interest, without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived by the Borrowers,
anything contained herein or in the Notes to the contrary notwithstanding.
IX. AGENT
In order to expedite the transactions contemplated by this
Agreement, The Chase Manhattan Bank is hereby appointed to act as Agent on
behalf of the Lenders. Each of the Lenders and each subsequent holder of any
Note or issuer of any Letter of Credit by its acceptance thereof, irrevocably
authorizes the Agent to take such action on its behalf and to exercise such
powers hereunder and under the Security Documents and other Loan Documents as
are specifically delegated to or required of the Agent by the terms hereof and
the terms thereof together with such actions and powers as are reasonably
incidental thereto. Neither the Agent nor any of its directors, officers,
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employees or agents shall be liable as such for any action taken or omitted to
be taken by it or them hereunder or under any of the Security Documents and
other Loan Documents or in connection herewith or therewith (a) at the request
or with the approval of the Required Lenders (or, if otherwise specifically
required hereunder or thereunder, the consent of all the Lenders) or (b) in the
absence of its or their own gross negligence or willful misconduct.
The Agent is hereby expressly authorized on behalf of the Lenders,
without hereby limiting any implied authority, (a) to receive on behalf of each
of the Lenders any payment of principal of or interest on the Notes outstanding
hereunder and all other amounts accrued hereunder which are paid to the Agent,
and promptly to distribute to each Lender its proper share of all payments so
received, (b) to distribute to each Lender copies of all notices, agreements and
other material as provided for in this Agreement or in the Security Documents
and other Loan Documents as received by the Agent, (c) to maintain, in
accordance with its customary business practices, ledgers and records reflecting
the status of the Loans, the Collateral and related matters, (d) to open and
maintain bank accounts and lock boxes as the Agent deems necessary and
appropriate in accordance with the Loan Documents with respect to the
Collateral, (e) to take all actions with respect to this Agreement and the
Security Documents and other Loan Documents as are specifically delegated to the
Agent or incidental thereto, and (f) to incur and pay such expenses as the Agent
may deem necessary or appropriate in connection with the foregoing.
In the event that (a) any Borrowers fail to pay when due the
principal of or interest on any Note, any amount payable under any Letter of
Credit, or any fee payable hereunder or (b) the Agent receives written notice of
the occurrence of a Default or an Event of Default (the Agent being deemed not
to have knowledge of any Default or Event of Default unless and until written
notice thereof is given to the Agent by any Borrower or a Lender), the Agent
within a reasonable time shall give written notice thereof to the Lenders, and
shall take such action with respect to such Event of Default or other condition
or event as it shall be directed to take by the Required Lenders; provided,
however, that, unless and until the Agent shall have received such directions,
the Agent may take such action or refrain from taking such action hereunder or
under the Security Documents or other Loan Documents with respect to a Default
or Event of Default as it shall deem advisable in the best interests of the
Lenders.
The Agent shall not be responsible in any manner to any of the
Lenders for the effectiveness, enforceability, perfection, value, genuineness,
validity or due execution of this Agreement, the Notes or any of the other Loan
Documents or Collateral or any other agreements or certificates, requests,
financial statements, notices or opinions of counsel or for any recitals,
statements, warranties or representations contained herein or in any such
instrument or be under any obligation to ascertain or inquire as to the
performance or observance of any of the terms, provisions, covenants,
conditions, agreements or obligations of this Agreement or any of the other Loan
Documents or any other agreements on the part of the Borrowers and, without
limiting the generality of the foregoing, the Agent shall, in the absence of
knowledge to the contrary, be entitled to
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accept any certificate furnished pursuant to this Agreement or any of the other
Loan Documents as conclusive evidence of the facts stated therein and shall be
entitled to rely on any note, notice, consent, certificate, affidavit, letter,
telegram, teletype message, statement, order or other document which it believes
in good faith to be genuine and correct and to have been signed or sent by the
proper person or persons. It is understood and agreed that the Agent may
exercise its rights and powers under other agreements and instruments to which
it is or may be a party, and engage in other transactions with the Borrowers, as
though it were not Agent of the Lenders hereunder.
The Agent shall promptly give notice to the Lenders of the receipt
or sending of any notice, schedule, report, projection, financial statement or
other document or information pursuant to this Agreement or any of the other
Loan Documents and shall promptly forward a copy thereof to each Lender.
Neither the Agent nor any of its directors, officers, employees or
agents shall have any responsibility to the Borrowers on account of the failure
or delay in performance or breach by any Lender other than the Agent of any of
its obligations hereunder or to any Lender on account of the failure of or delay
in performance or breach by any other Lender or the Borrowers of any of their
respective obligations hereunder or in connection herewith.
The Agent may consult with legal counsel selected by it in
connection with matters arising under this Agreement or any of the other Loan
Documents and any action taken or suffered in good faith by it in accordance
with the opinion of such counsel shall be full justification and protection to
it. The Agent may exercise any of its powers and rights and perform any duty
under this Agreement or any of the other Loan Documents through agents or
attorneys.
The Agent and the Borrowers may deem and treat the payee of any
Note as the holder thereof until written notice of transfer shall have been
delivered as provided herein by such payee to the Agent and the Borrowers.
With respect to the Loans made hereunder, the Notes issued to it
and any other Credit Event applicable to it, the Agent in its individual
capacity and not as an Agent shall have the same rights, powers and duties
hereunder and under any other agreement executed in connection herewith as any
other Lender and may exercise the same as though it were not the Agent, and the
Agent and its affiliates may accept deposits from, lend money to and generally
engage in any kind of business with the Borrowers or other affiliate thereof as
if it were not the Agent. Each of the Lenders hereby acknowledges that the Agent
and/or one or more Affiliates of the Agent may at any time and from time to time
be a holder of equity interests in a Loan Party.
Each Lender agrees (i) to reimburse the Agent in the amount of
such Lender's pro rata share (based on its Revolving Credit Commitment
hereunder) of any expenses incurred for its own benefit and/or for the benefit
of the Lenders by the Agent, including counsel fees and compensation of agents
and employees paid for services
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rendered on behalf of the Lenders, not reimbursed by the Borrowers and (ii) to
indemnify and hold harmless the Agent and any of its directors, officers,
employees or agents, on demand, in the amount of its pro rata share, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against it in
its capacity as the Agent or any of them in any way relating to or arising out
of this Agreement or any of the other Loan Documents or any action taken or
omitted by it or any of them under this Agreement or any of the other Loan
Documents, to the extent not reimbursed by the Borrowers; provided, however,
that no Lender shall be liable to the Agent for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgment, suits, costs,
expenses or disbursements resulting from the gross negligence or willful
misconduct of the Agent or any of its directors, officers, employees or agents.
The foregoing agreement shall survive the repayment of all Obligations and the
termination of this Agreement.
With respect to the release of Collateral, Lenders hereby
irrevocably authorize the Agent, at its option and in its discretion, to release
any Lien granted to or held by the Agent upon any property covered by this
Agreement or the other Loan Documents (i) upon termination of the Total
Commitments and payment and satisfaction of all Obligations; (ii) constituting
property being sold or disposed of in compliance with the provisions of this
Agreement (and the Agent may rely in good faith conclusively on any such
certificate, without further inquiry); (iii) constituting Collateral and the
proceeds thereof having a value not in excess of $2,000,000 during the term of
this Agreement (provided the Net Proceeds realized are applied in accordance
with Sections 2.09(d) and (f) hereof); or (iv) constituting property leased to
any of the Borrowers or any subsidiary under a lease which has expired or been
terminated in a transaction permitted under this Agreement or is about to expire
and which has not been, and is not intended by the applicable Borrower or such
subsidiary to be, renewed or extended; provided, however, that (x) the Agent
shall not be required to execute any release on terms which, in the Agent's
opinion, would expose the Agent to liability or create any obligation or entail
any consequence other than the release of such Liens without recourse or
warranty, and (y) such release shall not in any manner discharge, affect or
impair the Obligations or any Liens upon (or obligations of any Loan Party, in
respect of), all interests retained by any Loan Party, including (without
limitation) the proceeds of any sale, all of which shall continue to constitute
part of the property covered by this Agreement or the Loan Documents.
With respect to perfecting Lenders' security interest in
Collateral which, in accordance with Article 9 of the Uniform Commercial Code or
any comparable provision of any Lien perfection statute in any applicable
jurisdiction, can be perfected only by possession, each Lender hereby appoints
each other Lender for the purpose of perfecting such interest. Should any Lender
(other than the Agent) obtain possession of any such Collateral, such Lender
shall notify the Agent, and, promptly upon the Agent's request, shall deliver
such Collateral to the Agent or in accordance with the Agent's instructions.
Each Lender agrees that it will not have any right individually to enforce or
seek to enforce this
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Agreement or any Loan Document or to realize upon any Collateral for the Loans,
it being understood and agreed that such rights and remedies may be exercised
only by the Agent.
In the event that a petition seeking relief under Title 11 of the
United States Code or any other Federal, state or foreign bankruptcy,
insolvency, liquidation or similar law is filed by or against any Loan Party,
the Agent is authorized to file a proof of claim on behalf of itself and the
Lenders in such proceeding for the total amount of Obligations owed by such Loan
Party. With respect to any such proof of claim which the Agent may file, each
Lender acknowledges that without reliance on such proof of claim, such Lender
shall make its own evaluation as to whether an individual proof of claim must be
filed in respect of such Obligations owed to such Lender and, if so, take the
steps necessary to prepare and timely file such individual claim.
Each Lender acknowledges that it has, independently and without
reliance upon the Agent or any other Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and any other Loan Document to which such
Lender is party. Each Lender also acknowledges that it will, independently and
without reliance upon the Agent or any other Lender and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own decisions in taking or not taking action under or based upon this Agreement,
any other Loan Document, any related agreement or any document furnished
hereunder.
Subject to the appointment and acceptance of a successor Agent as
provided below, the Agent may resign at any time by notifying the Lenders and
the Borrowers. Upon any such resignation, the Lenders shall have the right to
appoint a successor Agent with the consent of the Borrowers which shall not be
unreasonable withheld (but no such consent shall be required if an Event of
Default has occurred and is continuing). If no successor Agent shall have been
so appointed by such Lenders and shall have accepted such appointment within 30
days after the retiring Agent gives notice of its resignation, then the retiring
Agent may, on behalf of the Lenders, appoint a successor Agent which shall be a
bank with an office (or an affiliate with an office) in New York, New York,
having a combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as Agent hereunder by a successor bank, such
successor shall thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Agent and the retiring Agent shall
be discharged from its duties and obligations hereunder and under each of the
other Loan Documents. After any Agent's resignation hereunder, the provisions of
this Article shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as Agent.
The Lenders hereby acknowledge that the Agent shall be under no
duty to take any discretionary action permitted to be taken by the Agent
pursuant to the provisions of this Agreement or any of the other Loan Documents
unless it shall be requested in writing to do so by the Required Lenders. The
Lenders further hereby acknowledge that the
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Agent is not acting as the fiduciary of, or the trustee for, any of the Lenders
and except as expressly set forth herein, the Agent shall not have any duty to
disclose, and shall not be liable for the failure to disclose, any information
communicated to the Agent by or relating to the Borrowers or any of their
respective subsidiaries.
X. MANAGEMENT, COLLECTION AND STATUS OF RECEIVABLES
AND OTHER COLLATERAL
SECTION 10.01. Collection of Receivables; Management of
Collateral. (a) At the request of the Agent, the Borrowers will, at their own
cost and expense, (i) arrange for remittances on Receivables to be made directly
to lockboxes designated by the Agent or in such other manner as the Agent may
direct (including triparty agreements satisfactory to the Agent), and (ii)
promptly deposit, or cause to be deposited, all payments received by the
Borrowers on account of Receivables, whether in the form of cash, checks, notes,
drafts, bills of exchange, money orders or otherwise, in one or more accounts
designated by the Agent in precisely the form received (but with any
endorsements of the Borrowers necessary for deposit or collection), and until
such payments are deposited, such payments shall be deemed to be held in trust
by the Borrowers for and as the Lenders' property and shall not be commingled
with the Borrowers' other funds. If at any time (i) until the completion of a
Public Offering Total Availability shall be less than $5,000,000, (ii) after the
completion of such Public Offering Total Availability shall be less than
$5,000,000 or (iii) a Default or Event of Default shall have occurred and be
continuing, all remittances and payments that are deposited in accordance with
the foregoing will be applied by the Agent to reduce the outstanding balance (or
if such balance is reduced to zero, to be held by the Agent as cash collateral),
of the Revolving Credit Loans, subject to final collection in cash of the item
deposited and, if such lockboxes are maintained with the Agent, subject to the
assessment of a two-day collection charge.
Upon the occurrence and continuance of an Event of Default, the
Agent may send a notice of assignment and/or notice of the Agent's security
interest to any and all Customers or any third party holding or otherwise
concerned with any of the Collateral, and thereafter the Agent shall have the
sole right to collect the Receivables and/or take possession of the Collateral
and the books and records relating thereto. The Borrowers shall not, without the
Agent's prior written consent, grant any extension of the time of payment of any
Receivable, compromise or settle any Receivable for less than the full amount
thereof, release, in whole or in part, any person or property liable for the
payment thereof, or allow any credit or discount whatsoever thereon except,
prior to the occurrence and continuance of an Event of Default, in the ordinary
course of business.
(b) (i) Each of the Borrowers hereby constitute the Agent or the
Agent's designee as such Borrower's attorney-in-fact with power to endorse such
Borrower's name upon any notes, acceptances, checks, drafts, money orders or
other evidences of payment or Collateral that may come into its possession; to
sign such Borrower's name on any invoice or bill of lading relating to any
Receivables, drafts against Customers, assignments
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and verifications of Receivables and notices to Customers; to send verifications
of Receivables; upon the occurrence of an Event of Default, to notify the Postal
Service authorities to change the address for delivery of mail addressed to such
Borrowers to such address as the Agent may designate; and to do all other acts
and things necessary to carry out this Agreement. All acts of said attorney or
designee are hereby ratified and approved, and said attorney or designee shall
not be liable for any acts of omission or commission, for any error of judgment
or for any mistake of fact or law, provided that the Agent or its designee shall
not be relieved of liability to the extent it is determined by a final judicial
decision that its act, error or mistake constituted gross negligence or willful
misconduct. This power of attorney being coupled with an interest is irrevocable
until all of the Obligations are paid in full and this Agreement and the Total
Commitment is terminated.
(ii) The Agent, without notice to or consent of the Borrowers, upon
the occurrence and during the continuance of an Event of Default, (A) may sue
upon or otherwise collect, extend the time of payment of, or compromise or
settle for cash, credit or otherwise upon any terms, any of the Receivables or
any securities, instruments or insurance applicable thereto and/or release the
obligor thereon; (B) is authorized and empowered to accept the return of the
goods represented by any of the Receivables; and (C) shall have the right to
receive, endorse, assign and/or deliver in its name or the name of any of the
Borrowers any and all checks, drafts and other instruments for the payment of
money relating to the Receivables, and each of the Borrowers hereby waive notice
of presentment, protest and non-payment of any instrument so endorsed.
(c) Nothing herein contained shall be construed to constitute any
Borrower as agent of the Agent or any Lender for any purpose whatsoever, and the
Agent shall not be responsible or liable for any shortage, discrepancy, damage,
loss or destruction of any part of the Collateral wherever the same may be
located and regardless of the cause thereof (except to the extent it is
determined by a final judicial decision that the Agent's or a Lender's act or
omission constituted gross negligence or willful misconduct). The Agent and the
Lenders shall not, under any circumstances or in any event whatsoever, have any
liability for any error or omission or delay of any kind occurring in the
settlement, collection or payment of any of the Receivables or any instrument
received in payment thereof or for any damage resulting therefrom (except to the
extent it is determined by a final judicial decision that the Agent's or such
Lender's error, omission or delay constituted gross negligence or willful
misconduct). The Agent and the Lenders do not, by anything herein or in any
assignment or otherwise, assume any of the Borrowers' obligations under any
contract or agreement assigned to the Agent or the Lenders, and the Agent and
the Lenders shall not be responsible in any way for the performance by the
Borrowers of any of the terms and conditions thereof.
(d) If any of the Receivables includes a charge for any tax
payable to any governmental tax authority, the Agent is hereby authorized (but
in no event obligated) in its discretion to pay the amount thereof to the proper
taxing authority for the account of the applicable Borrower and to charge such
Borrower's account therefor. The Borrowers shall
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notify the Agent if any Receivables include any tax due to any such taxing
authority and, in the absence of such notice, the Agent shall have the right to
retain the full proceeds of such Receivables and shall not be liable for any
taxes that may be due from any Borrower by reason of the sale and delivery
creating such Receivables.
SECTION 10.02. Receivables Documentation. The Borrowers will, in
addition to the monthly Receivables agings delivered pursuant to this Agreement,
at such intervals as the Agent may require, furnish, or cause to be furnished,
such further schedules and/or information as the Agent may require relating to
the Receivables, including, without limitation, sales invoices. In addition, the
Borrowers shall notify the Agent of any non-compliance in respect of the
representations, warranties and covenants contained in Section 10.03 hereof. The
items to be provided under this Section 10.02 are to be in form satisfactory to
the Agent and are to be executed and delivered to the Agent from time to time
solely for its convenience in maintaining records of the Collateral; the
Borrowers' failure to give any of such items to the Agent shall not affect,
terminate, modify or otherwise limit the Agent's Lien or security interest in
the Collateral.
SECTION 10.03. Status of Receivables and Other Collateral. Each of
the Borrowers covenants, represents and warrants that: (a) it shall be the sole
owner, free and clear of all Liens except in favor of the Agent or otherwise
permitted hereunder, of and fully authorized to sell, transfer, pledge and/or
grant a security interest in each and every item of said Collateral owned by it;
(b) it will not seek to qualify, or maintain the qualification of, a Receivable
as an Eligible Receivable unless such Receivable shall be a good and valid
account representing an undisputed bona fide indebtedness incurred or an amount
indisputably owed by the Customer therein named, for a fixed sum as set forth in
the invoice relating thereto with respect to an absolute sale and delivery upon
the specified terms of goods sold by a Borrower, or work, labor and/or services
theretofore rendered by a Borrower; (c) it will not seek to qualify, or maintain
the qualification of, a Receivable as an Eligible Receivable unless such
Receivable or portion thereof which it seeks to so qualify is not subject to any
defense, offset, counterclaim, discount or allowance (as of the time of its
creation) except as may be stated in the invoice relating thereto or discounts
and allowances as may be customary in such Borrower's business; (d) none of the
transactions underlying or giving rise to any Eligible Receivable shall violate
any applicable state or Federal laws or regulations in any material respect, and
all documents relating to any Eligible Receivable shall be legally sufficient
under such laws or regulations and shall be legally enforceable in accordance
with their terms (subject as to enforcement of remedies to applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting the enforcement of creditors' rights generally from time to time in
effect and to general principles of equity); (e) it will not seek to qualify, or
maintain the qualification of, a Receivable as an Eligible Receivable unless to
the best of its knowledge, each Customer, guarantor or endorser with respect to
such Receivable is solvent and will continue to be fully able to pay all
Eligible Receivables on which it is obligated in full when due; (f) it will not
seek to qualify, or maintain the qualification of, a Receivable as an Eligible
Receivable unless all documents and agreements relating to such Receivable shall
be true and correct and in all respects what they purport to be; (g) it
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will not seek to qualify, or maintain the qualification of, a Receivable as an
Eligible Receivable unless to the best of its knowledge, all signatures and
endorsements that appear on all documents and agreements relating to such
Receivable shall be genuine and all signatories and endorsers with respect
thereto shall have full capacity to contract; (h) it shall maintain books and
records pertaining to the Collateral in such detail, form and scope as are
customary for businesses similarly situated; (i) it will not seek to qualify, or
maintain the qualification of, a Receivable as an Eligible Receivable unless it
shall have immediately notified the Agent as to any accounts arising out of
contracts with the United States or any department, agency or instrumentality
thereof, and shall have executed any instruments and taken any steps required by
the Agent in order that all monies due or to become due under any such contract
shall be assigned to the Agent and notice thereof given to the United States
Government under the Federal Assignment of Claims Act; (j) it will, immediately
upon learning thereof, report to the Agent any material loss or destruction of,
or substantial damage to, any of the Collateral, and any other matters affecting
the value, enforceability or collectability of any of the Collateral; (k) if any
amount payable under or in connection with any Receivable is evidenced by a
promissory note or other instrument, as such terms are defined in the Uniform
Commercial Code, such promissory note or instrument shall be immediately
pledged, endorsed, assigned and delivered to the Agent as additional collateral;
(l) it nor any other Borrower shall not re-date any invoice or sale or make
sales on extended dating beyond that customary in the industry; (m) it and each
other Borrower shall conduct a physical count of its inventory at such intervals
as the Agent may request and promptly supply the Agent with a copy of such
counts accompanied by a report of the value (based on the lower of cost (on a
FIFO basis) or market value) of such inventory, and (n) it nor any other
Borrower is not nor shall it be entitled to pledge the Lenders' credit on any
purchases or for any purpose whatsoever.
SECTION 10.04. Monthly Statement of Account. The Agent shall
render to the Borrowers each month a statement of the Borrowers' account, which
shall constitute an account stated and shall be deemed to be correct and
accepted by and be binding upon the Borrowers unless the Agent receives a
written statement of the Borrowers' exceptions within 30 days after such
statement was rendered to the Borrowers.
SECTION 10.05. Collateral Custodian. Upon the occurrence and
continuance of an Event of Default, the Agent may at any time and from time to
time employ and maintain in the premises of the Borrowers a custodian selected
by the Agent who shall have full authority to do all acts necessary to protect
the Agent's and Lenders' interests and to report to the Agent thereon. The
Borrowers hereby agree to cooperate with any such custodian and to do whatever
the Agent may reasonably request to preserve the Collateral. All costs and
expenses incurred by the Agent by reason of the employment of the custodian
shall be charged to the Borrowers' account and added to the Obligations.
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XI. MISCELLANEOUS
SECTION 11.01. Notices. Notices, consents and other communications
provided for herein shall be in writing and shall be delivered by hand or
overnight courier service or mailed by certified or registered mail or sent by
telecopy addressed,
(a) if to all or any of the Borrowers, Guarantors, or Grantors, at
c/o Water Pik Technologies, Inc., 660 Newport Center Drive, Suite 470,
Newport Beach, CA 92660, Attention: Victor C. Streufert (Telecopy No.
949-719-6472), with a copy to Kirkpatrick & Lockhart, LLP, Henry W.
Oliver Bldg., 535 Smithfield Street, Pittsburgh, PA 15222, Attention:
Kathleen D. Hendrickson (Telecopy No. 412-355-6501);
(b) if to the Agent, at The Chase Manhattan Bank, 600 Fifth
Avenue, 4th Floor, New York, New York 10020, Attention: WPTI Account
Executive (Telecopy No. 212-332-4297), with a copy to Kaye, Scholer, et
al., LLP, at 425 Park Avenue, New York, New York 10022, Attention:
Jeffrey M. Epstein, Esq. (Telecopy No. 212-836-6475); and
(c) if to any Lender, at the address set forth below its name in
Schedule 2.01 annexed hereto or in the Assignment and Acceptance pursuant
to which such Lender became a party hereto.
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if hand delivered or sent by overnight courier service or three
days after being sent by registered or certified mail, postage prepaid, return
receipt requested, if by mail, or when receipt is acknowledged if sent by
telecopy, in each case addressed to such party as provided in this Section 11.01
or in accordance with the latest unrevoked direction from such party.
SECTION 11.02. Survival of Agreement. All covenants, agreements,
representations and warranties made by any Borrower or any subsidiary thereof
herein and in the certificates or other instruments prepared or delivered in
connection with this Agreement, any of the Security Documents, any Guarantee or
any other Loan Document, shall be considered to have been relied upon by the
Lenders and shall survive the making by the Lenders of the Loans and the
execution and delivery to the Lenders of the Notes and the occurrence of any
other Credit Event and shall continue in full force and effect as long as the
principal of or any accrued interest on the Notes or any other fee or amount
payable under the Notes or this Agreement or any other Loan Document is
outstanding and unpaid and so long as the Total Commitment has not been
terminated.
SECTION 11.03. Successors and Assigns; Participations. (a)
Whenever in this Agreement any of the parties hereto is referred to, such
reference shall be deemed to include the successors and assigns of such party;
and all covenants, promises and
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agreements by or on behalf of any Loan Party, any ERISA Affiliate, any
subsidiary of any thereof, the Agent or the Lenders, that are contained in this
Agreement shall bind and inure to the benefit of their respective successors and
assigns. Without limiting the generality of the foregoing, the Borrowers
specifically confirm that any Lender may at any time and from time to time
pledge or otherwise grant a security interest in any Loan or any Note (or any
part thereof) to any Federal Reserve Bank. No Borrower may assign or transfer
any of its rights or obligations hereunder without the written consent of all
the Lenders.
(b) Each Lender, without the consent of the Borrowers or the
Agent, may sell participations to one or more banks or other entities in all or
a portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Revolving Credit Commitment) and the Loans
owing to it and undrawn Letters of Credit and the Notes held by it); provided,
however, that (i) such Lender's obligations under this Agreement (including,
without limitation, its Revolving Credit Commitment) shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties hereto for
the performance of such obligations, (iii) the banks or other entities buying
participations shall be entitled to the cost protection provisions contained in
Sections 2.10, 2.12 and 2.16 hereof, but only to the extent any of such Sections
would be available to the Lender which sold such participation, and (iv) the
Borrowers, the Agent and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement; provided, further, however, that such Lender
shall retain the sole right and responsibility to enforce the obligations of the
Loan Parties relating to the Loans, including, without limitation, the right to
approve any amendment, modification or waiver of any provision of this
Agreement, other than amendments, modifications or waivers with respect to
decreasing any fees payable hereunder or the amount of principal or the rate of
interest payable on the Loans, or extending the dates fixed for any payment of
principal of or interest on, the Loans or increasing or extending the Revolving
Credit Commitments or the release of all Collateral.
(c) Each Lender may assign by novation, to any one or more banks
or other entities with the prior written consent of the Borrowers not to be
unreasonably withheld (but no such consent shall be required for assignments
between and among the Lenders or after the occurrence and during the continuance
of a Default or an Event of Default or with respect to Eligible Assignees) and
with the prior written consent of the Agent, all or a portion of its interests,
rights and obligations under this Agreement and the other Loan Documents
(including, without limitation, all or a portion of its Revolving Credit
Commitment and the same portion of the Loans and undrawn Letters of Credit at
the time owing to it and the Note or Notes held by it), provided, however, that
(i) each such assignment shall be of a constant, and not a varying, percentage
of all of the assigning Lender's rights and obligations under this Agreement,
which shall include the same percentage interest in the Loans, Letters of Credit
and Notes, (ii) the amount of the Revolving Credit Commitment of the assigning
Lender being assigned pursuant to each such assignment (determined as of the
date the Assignment and Acceptance with respect to such assignment is delivered
to the Agent) shall be in a minimum principal amount of $5,000,000 (unless to
another Lender, in which event there shall be no minimum
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requirement) for the Revolving Credit Commitment of such Lender and the amount
of the Revolving Credit Commitment of such Lender shall not be less than
$5,000,000 or shall be zero (unless such Lender's minimum hold position shall
fall below $5,000,000 by reason of an assignment to another Lender), (iii) the
parties to each such assignment shall execute and deliver to the Agent, for its
acceptance and recording in the Register (as defined below), an Assignment and
Acceptance, together with any Note subject to such assignment and a processing
and recordation fee of $3,000 and (iv) the Assignee, if it shall not be a
Lender, shall deliver to the Agent an Administrative Questionnaire in the form
provided to such Assignee by the Agent. Upon such execution, delivery,
acceptance and recording and after receipt of the written consent of the Agent,
from and after the effective date specified in each Assignment and Acceptance,
which effective date shall be at least five (5) Business Days after the
execution thereof, (x) the assignee thereunder shall be a party hereto and, to
the extent provided in such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder and under the other Loan Documents and (y) the
Lender which is assignor thereunder shall, to the extent provided in such
Assignment and Acceptance, be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Lender's rights and obligations under this Agreement,
such Lender shall cease to be a party hereto but shall continue to be entitled
to the benefits of Sections 2.10, 2.12, 2.16 and 11.04, as well as any fees
accrued for its account hereunder and not yet paid).
(d) By executing and delivering an Assignment and Acceptance, the
Lender which is assignor thereunder and the assignee thereunder confirm to, and
agree with, each other and the other parties hereto as follows: (i) other than
the representation and warranty that it is the legal and beneficial owner of the
interest being assigned thereunder free and clear of any adverse claim, and that
its Revolving Credit Commitment and the outstanding balance of its Loans and
participations in Letters of Credit, in each case without giving effect to
assignments thereof which have not become effective, are as set forth in such
Assignment and Acceptance, such Lender makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or the execution,
legality, validity, enforceability, perfection, genuineness, sufficiency or
value of this Agreement, the other Loan Documents or any Collateral with respect
thereto or any other instrument or document furnished pursuant hereto or
thereto; (ii) such Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of any Loan Party or the
performance or observance by any Loan Party of any of its respective obligations
under this Agreement, any Guarantees or any of the other Loan Documents or any
other instrument or document furnished pursuant hereto or thereto; (iii) such
assignee represents and warrants that it is legally authorized to enter into
such Assignment and Acceptance and confirms that it has received a copy of this
Agreement, any Guarantees and of the other Loan Documents, together with copies
of financial statements and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance; (iv) such assignee will, independently and
without reliance upon the Agent, such Lender or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
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continue to make its own credit decisions in taking or not taking action under
this Agreement; (v) such assignee appoints and authorizes the Agent to take such
action as the Agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Agent by the terms hereof, together with such
powers as are reasonably incidental thereto; and (vi) such assignee agrees that
it will perform in accordance with their terms all of the obligations which by
the terms of this Agreement are required to be performed by it as a Lender.
(e) The Agent shall maintain at its address referred to in Section
11.01 hereof a copy of each Assignment and Acceptance delivered to it and a
register for the recordation of the names and addresses of the Lenders and the
Revolving Credit Commitment of, and principal amount of the Loans owing to, each
Lender from time to time (the "Register"). The entries in the Register shall be
conclusive, in the absence of manifest error, and the Borrowers, the Agent and
the Lenders may treat each person whose name is recorded in the Register as a
Lender hereunder for all purposes of this Agreement. The Register shall be
available for inspection by the Borrowers or any Lender at any reasonable time
and from time to time upon reasonable prior notice. Effective upon the
assignment of an interest hereunder, Schedule 2.01 shall be amended by the Agent
to reflect such assignment.
(f) Upon its receipt of an Assignment and Acceptance executed by
an assigning Lender and an assignee together with any Note or Notes subject to
such assignment, any processing and recordation fee and, if required, an
Administrative Questionnaire and the written consent to such assignment, the
Agent shall, if such Assignment and Acceptance has been completed and is
precisely in the form of Exhibit E annexed hereto, (i) accept such Assignment
and Acceptance, (ii) record the information contained therein in the Register
and (iii) give prompt notice thereof to the Lenders and the Borrowers. Within
five (5) Business Days after receipt of such notice, the Borrowers, at their own
expense, shall execute and deliver to the Agent in exchange for each surrendered
Note or Notes a new Note or Notes to the order of such assignee in an amount
equal to its portion of the Revolving Credit Commitment assumed by it pursuant
to such Assignment and Acceptance and, if the assigning Lender has retained any
Revolving Credit Commitment hereunder, a new Note or Notes to the order of the
assigning Lender in an amount equal to the Revolving Credit Commitment retained
by it hereunder. Such new Note or Notes shall be in an aggregate principal
amount equal to the aggregate principal amount of such surrendered Note or
Notes, shall be dated the effective date of such Assignment and Acceptance and
shall otherwise be in substantially the form of Exhibit A. Notes surrendered to
the Borrowers shall be canceled by the Borrowers.
(g) Notwithstanding any other provision herein, any Lender may, in
connection with any assignment or participation or proposed assignment or
participation pursuant to this Section 11.03, disclose to the assignee or
participant or proposed assignee or participant, any information, including,
without limitation, any Information, relating to the Borrowers furnished to such
Lender by or on behalf of the Borrowers in connection with this Agreement;
provided, however, that prior to any such disclosure, each
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such assignee or participant or proposed assignee or participant shall agree to
preserve the confidentiality of any confidential Information relating to the
Borrowers received from such Lender.
SECTION 11.04. Expenses; Indemnity. (a) Each of the Borrowers
agrees to pay all reasonable out-of-pocket expenses incurred by the Agent and
Lenders in connection with the preparation of this Agreement and the other Loan
Documents or with any amendments, modifications, waivers, extensions, renewals,
renegotiations or "workouts" of the provisions hereof or thereof (whether or not
the transactions hereby contemplated shall be consummated) or incurred by the
Agent or any of the Lenders in connection with the enforcement or protection of
its rights in connection with this Agreement or any of the other Loan Documents
or with the Loans made or the Notes or Letters of Credit issued hereunder, or in
connection with any pending or threatened action, proceeding, or investigation
relating to the foregoing, including but not limited to the reasonable fees and
disbursements of counsel for the Agent and ongoing field examination expenses
and charges, and, in connection with such enforcement or protection, the
reasonable fees and disbursements of counsel for the Lenders. Each of the
Borrowers further indemnifies the Lenders from and agrees to hold them harmless
against any documentary taxes, assessments or charges made by any governmental
authority by reason of the execution and delivery of this Agreement or the
Notes.
(b) Each of the Borrowers indemnifies the Agent and each Lender
and their respective directors, officers, employees and agents against, and
agrees to hold the Agent, each Lender and each such person harmless from, any
and all losses, claims, damages, liabilities and related expenses, including
reasonable counsel fees and expenses, incurred by or asserted against the Lender
or any such person arising out of, in any way connected with, or as a result of
(i) the use of any of the proceeds of the Loans, (ii) this Agreement, the
Guarantees, any of the Security Documents or the other documents contemplated
hereby or thereby, (iii) the performance by the parties hereto and thereto of
their respective obligations hereunder and thereunder (including but not limited
to the making of the Total Commitment) and consummation of the transactions
contemplated hereby and thereby, (iv) breach of any representation or warranty,
or (v) any claim, litigation, investigation or proceedings relating to any of
the foregoing, whether or not the Agent, any Lender or any such person is a
party thereto; provided, however, that such indemnity shall not, as to the Agent
or any Lender, apply to any such losses, claims, damages, liabilities or related
expenses to the extent that they result from the gross negligence or willful
misconduct of the Agent or any Lender.
(c) Each of the Borrowers indemnifies, and agrees to defend and
hold harmless the Agent and the Lenders and their respective officers,
directors, shareholders, agents and employees (collectively, the "Indemnitees")
from and against any loss, cost, damage, liability, lien, deficiency, fine,
penalty or expense (including, without limitation, reasonable attorneys' fees
and reasonable expenses for investigation, removal, cleanup and remedial costs
and modification costs incurred to permit, continue or resume normal operations
of any property or assets or business of the Borrowers or any subsidiary
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thereof) arising from a violation of, or failure to comply with any
Environmental Law and to remove any Lien arising therefrom except to the extent
caused by the gross negligence or willful misconduct of any Indemnitee, which
any of the Indemnitees may incur or which may be claimed or recorded against any
of the Indemnitees by any person.
(d) The provisions of this Section 11.04 shall remain operative
and in full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Loans, the invalidity or unenforceability of any term or
provision of this Agreement or the Notes, or any investigation made by or on
behalf of the Agent or any Lender. All amounts due under this Section 11.04
shall be payable on written demand therefor.
SECTION 11.05. Applicable Law. THIS AGREEMENT, THE NOTES AND THE
OTHER LOAN DOCUMENTS, IN ACCORDANCE WITH SECTION 5-1401 OF THE GENERAL
OBLIGATION LAW OF THE STATE OF NEW YORK, SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY
CONFLICTS OF LAWS PRINCIPLES THEREOF THAT WOULD CALL FOR THE APPLICATION OF THE
LAWS OF ANY OTHER JURISDICTION.
SECTION 11.06. Right of Setoff. If an Event of Default shall have
occurred and be continuing, upon the request of the Agent, each Lender shall and
is hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by such Lender to or for the credit or the account of any of the
Borrowers against any and all of the obligations of the Borrowers now or
hereafter existing under this Agreement and the Notes held by such Lender,
irrespective of whether or not such Lender shall have made any demand under this
Agreement or the Notes and although such obligations may be unmatured. Each
Lender agrees to notify promptly the Agent and the Borrowers after any such
setoff and application made by such Lender, but the failure to give such notice
shall not affect the validity of such setoff and application. The rights of each
Lender under this Section are in addition to other rights and remedies
(including, without limitation, other rights of setoff) which may be available
to such Lender.
SECTION 11.07. Payments on Business Days. (a) Should the principal
of or interest on the Notes or any fee or other amount payable hereunder become
due and payable on other than a Business Day, payment in respect thereof may be
made on the next succeeding Business Day (except as otherwise specified in the
definition of "Interest Period"), and such extension of time shall in such case
be included in computing interest, if any, in connection with such payment.
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(b) All payments by any of the Borrowers hereunder and all Loans
made by the Lenders hereunder shall be made in lawful money of the United States
of America in immediately available funds at the office of the Agent set forth
in Section 11.01 hereof.
SECTION 11.08. Waivers; Amendments. (a) No failure or delay of any
Lender 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. The rights and remedies of the Lenders hereunder are cumulative
and not exclusive of any rights or remedies which they may otherwise have. No
waiver of any provision of this Agreement or the Notes nor consent to any
departure by any of the Borrowers therefrom shall in any event be effective
unless the same shall be authorized as provided in paragraph (b) below, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given. No notice to or demand on any of the Borrowers in
any case shall entitle it to any other or further notice or demand in similar or
other circumstances. Each holder of any of the Notes shall be bound by any
amendment, modification, waiver or consent authorized as provided herein,
whether or not such Note shall have been marked to indicate such amendment,
modification, waiver or consent.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Borrowers and the Required Lenders; provided, however, that
no such agreement shall (i) change the principal amount of, or extend or advance
the maturity of or the dates for the payment of principal of or interest on, any
Note or reduce the rate of interest on any Note, or decrease any fees payable
pro rata to the Lenders, (ii) change the Revolving Credit Commitment of any
Lender, increase any percentage or amount contained in the definition of
Borrowing Base or make overadvances other than Permitted Overadvances or amend
or modify the provisions of this Section, Section 2.06, Section 2.13, Section
4.14 or Section 11.04 hereof or the definition of "Required Lenders," or (iii)
release any Guarantee or any material portion of Collateral or share or
subordinate any Lien priority, in each case without the prior written consent of
each Lender affected thereby and provided, further, however, that no such
agreement shall amend, modify or otherwise affect the rights or duties of the
Agent under this Agreement or the other Loan Documents without the written
consent of the Agent. Each Lender and holder of any Note shall be bound by any
modification, amendment or waiver authorized in accordance with this Section
regardless of whether its Notes shall be marked to make reference thereto, and
any consent by any Lender or holder of a Note pursuant to this Section shall
bind any person subsequently acquiring a Note from it, whether or not such Note
shall be so marked.
(c) In the event that the Borrowers request, with respect to this
Agreement or any other Loan Document, an amendment, modification or waiver and
such amendment, modification or waiver would require the unanimous consent of
all of the Lenders in accordance with Section 11.08(b) above, and such
amendment, modification or waiver is
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agreed to in writing by the Borrowers and the Required Lenders but not by all of
the Lenders, then notwithstanding anything to the contrary in Section 11.08(b)
above, with the written consent of the Borrowers and such Required Lenders, the
Borrowers and Required Lenders may, but shall not be obligated to, amend this
Agreement without the consent of the Lender or Lenders who did not agree to the
proposed amendment, modification or waiver (the "Minority Lenders") solely to
provide for (i) the termination of the Revolving Credit Commitment of each
Minority Lender, (ii) the assignment in accordance with Section 11.03 hereof to
one or more persons of each Minority Lender's interests, rights and obligations
under this Agreement (including, without limitation, all of such Minority
Lender's Revolving Credit Commitment as well as its portion of all outstanding
Loans and the Note or Notes held by such Minority Lender) and the other Loan
Documents and/or an increase in the Revolving Credit Commitment of one or more
Required Lenders, in each case so that after giving effect thereto the Total
Commitment shall be in the same amounts as prior to the events described in this
paragraph, (iii) the repayment to the Minority Lenders in full of all Loans
outstanding and accrued interest thereon at the time of the assignment and/or
increase in Revolving Credit Commitments described in clause (ii) above with the
proceeds of Loans made by such persons who are to become Lenders by assignment
or with the proceeds of Loans made by Required Lenders who have agreed to
increase their Revolving Credit Commitment, (iv) the payment to the Minority
Lenders by the Borrowers of all fees and other compensation due and owing such
Minority Lenders under the terms of this Agreement and the other Loan Documents
and (v) such other modifications as the Required Lenders and Borrowers shall
deem necessary in order to effect the changes specified in clauses (i) through
(iv) hereof.
SECTION 11.09. Severability. In the event any one or more of the
provisions contained in this Agreement or in the Notes or any of the other Loan
Documents should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein or therein shall not in any way be affected or impaired thereby.
SECTION 11.10. Entire Agreement; Waiver of Jury Trial, etc. (a)
This Agreement, the Notes and the other Loan Documents constitute the entire
contract between the parties hereto relative to the subject matter hereof. Any
previous agreement among the parties hereto with respect to the Transactions is
superseded by this Agreement, the Notes and the other Loan Documents. Except as
expressly provided herein or in the Notes or the Loan Documents (other than this
Agreement), nothing in this Agreement, the Notes or in the other Loan Documents,
expressed or implied, is intended to confer upon any party, other than the
parties hereto, any rights, remedies, obligations or liabilities under or by
reason of this Agreement, the Notes or the other Loan Documents.
(b) Except as prohibited by law, each party hereto hereby waives
any right it may have to a trial by jury in respect of any litigation directly
or indirectly arising out of, under or in connection with this Agreement, the
Notes, any of the other Loan Documents or the Transactions.
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<PAGE> 106
(c) Except as prohibited by law, each party hereto hereby waives
any right it may have to claim or recover in any litigation referred to in
paragraph (b) of this Section 11.10 any special, exemplary, punitive or
consequential damages or any damages other than, or in addition to, actual
damages.
(d) Each party hereto (i) certifies that no representative, agent
or attorney of any Lender has represented, expressly or otherwise, that such
Lender would not, in the event of litigation, seek to enforce the foregoing
waivers and (ii) acknowledges that it has been induced to enter into this
Agreement, the Notes or the other Loan Documents, as applicable, by, among other
things, the mutual waivers and certifications herein.
SECTION 11.11. Confidentiality. The Agent and each of the Lenders
agree to keep confidential (and to cause their respective officers, directors,
employees, agents and representatives to keep confidential) all information,
materials and documents furnished to the Agent or any Lender (the
"Information"). Notwithstanding the foregoing, the Agent and each Lender shall
be permitted to disclose Information (i) to such of its officers, directors,
employees, agents and representatives as need to know such Information in
connection with its participation in any of the Transactions or the
administration of this Agreement or the other Loan Documents; (ii) to the extent
required by applicable laws and regulations or by any subpoena or similar legal
process, or requested by any governmental agency or authority; (iii) to the
extent such Information (A) becomes publicly available other than as a result of
a breach of this Agreement, (B) becomes available to the Agent or such Lender on
a non-confidential basis from a source other than any Loan Party or any of its
subsidiaries or (C) was available to the Agent or such Lender on a
non-confidential basis prior to its disclosure to the Agent or such Lender by
any Loan Parties or any of their respective subsidiaries; (iv) to the extent any
Loan Parties or any of their respective subsidiaries shall have consented to
such disclosure in writing; (v) in connection with the sale of any Collateral
pursuant to the provisions of any of the other Loan Documents; or (vi) pursuant
to Section 11.03(g) hereof.
SECTION 11.12. Submission to Jurisdiction. (a) Any legal action or
proceeding with respect to this Agreement or the Notes or any other Loan
Document may be brought in the courts of the State of New York or of the United
States of America for the Southern District of New York, and, by execution and
delivery of this Agreement, each of the Loan Parties hereby accepts for itself
and in respect of its property, generally and unconditionally, the jurisdiction
of the aforesaid courts.
(b) Each of the Loan Parties hereby irrevocably waive, in
connection with any such action or proceeding, any objection, including, without
limitation, any objection to the laying of venue or based on the grounds of
forum non conveniens, which it may now or hereafter have to the bringing of any
such action or proceeding in such respective jurisdictions.
(c) Each of the Loan Parties hereby irrevocably consents to the
service of process of any of the aforementioned courts in any such action or
proceeding by the
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mailing of copies thereof by registered or certified mail, postage prepaid, to
each such person, as the case may be, at its address set forth in Section 11.01
hereof.
(d) Nothing herein shall affect the right of the Agent or any
Lender to serve process in any other manner permitted by law or to commence
legal proceedings or otherwise proceed against any Loan Party in any other
jurisdiction.
SECTION 11.13. Counterparts; Facsimile Signature. This Agreement
may be executed in counterparts, each of which shall constitute an original but
all of which when taken together shall constitute but one contract, and shall
become effective when copies hereof which, when taken together, bear the
signatures of each of the parties hereto shall be delivered to the Agent.
Delivery of an executed counterpart of a signature page to this Agreement by
telecopier shall be effective as delivery of a manually executed signature page
hereto.
SECTION 11.14. Headings. Article and Section headings and the
Table of Contents used herein are for convenience of reference only and are not
to affect the construction of, or to be taken into consideration in
interpreting, this Agreement.
XII. GUARANTEES
Each Guarantor, and each Borrower with respect to the Obligations
of the other Borrower, unconditionally guarantees, as a primary obligor and not
merely as a surety, jointly and severally with each other Guarantor, the due and
punctual payment of the principal of and interest on each of the Notes, when and
as due, whether at maturity, by acceleration, by notice of prepayment or
otherwise, and the due and punctual payment and performance of all other
Obligations. Each Guarantor further agrees that the Obligations may be extended
and renewed, in whole or in part, without notice to or further assent from it,
and that it will remain bound upon its guarantee notwithstanding any extension
or renewal of any Obligations.
Each Guarantor waives presentment to, demand of payment from and
protest to the Borrowers of any of the Obligations, and also waives notice of
acceptance of its guarantee and notice of protest for nonpayment. The
obligations of a Guarantor hereunder shall not be affected by (a) the failure of
any Lender or the Agent to assert any claim or demand or to enforce any right or
remedy against the Borrowers or any other Guarantor under the provisions of this
Agreement, the Notes or any of the other Loan Documents or otherwise; (b) any
rescission, waiver, amendment or modification of any of the terms or provisions
of this Agreement, the Notes, any of the other Loan Documents, any guarantee or
any other agreement; (c) the release of any security held by the Agent for the
Obligations or any of them; (d) the failure of any Lender or the Agent to
exercise any right or remedy against any other Guarantor of the Obligations; or
(e) the failure of any Lender or the Agent to take, register, perfect or
preserve any security for any of the Obligations.
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Each Guarantor further agrees that its guarantee constitutes a
guarantee of payment when due and not of collection, and waives any right to
require that any resort be had by the Agent or any Lender to any security
(including, without limitation, any Collateral) held for payment of the
Obligations or to any balance of any deposit account or credit on the books of
any Lender or the Agent in favor of any of the Borrowers or any other person.
The obligations of each Guarantor hereunder shall not be subject
to any reduction, limitation, impairment or termination for any reason,
including, without limitation, any claim of waiver, release, surrender,
alteration or compromise, and shall not be subject to any defense or setoff,
counterclaim, recoupment or termination whatsoever by reason of the invalidity,
illegality or unenforceability of the Obligations or otherwise. Without limiting
the generality of the foregoing, the obligations of each Guarantor hereunder
shall not be discharged or impaired or otherwise affected by the failure of the
Agent or any Lender to assert any claim or demand or to enforce any remedy under
this Agreement, the Notes or under any other Loan Document, any guarantee or any
other agreement, by any waiver or modification of any provision thereof, by any
default, failure or delay, willful or otherwise, in the performance of the
Obligations, or by any other act or omission which may or might otherwise in any
manner or to any extent vary the risk or reduce or extinguish the liability of
such Guarantor or otherwise operate as a discharge of such Guarantor as a matter
of law or equity.
Each Guarantor further agrees that its guarantee shall be a
continuing guarantee and shall stand as a guarantee of full and final payment
and performance of all Obligations from time to time and shall continue to be
effective or be reinstated, as the case may be, if at any time payment, or any
part thereof, of principal of or interest on any Obligation is rescinded or must
otherwise be returned by the Agent or any Lender upon the bankruptcy or
reorganization of any of the Borrowers or otherwise.
Each Guarantor hereby waives and releases in favor of the Lenders
and the Agent all rights of subrogation against or in respect of each of the
Borrowers and its property and all rights of indemnification, contribution and
reimbursement from each of the Borrowers and its property, in each case in
connection with this guarantee and any payments made hereunder, and regardless
of whether such rights arise by operation of law, pursuant to contract or
otherwise until such time as the Obligations have been fully and finally
performed and paid.
[Remainder of this page intentionally left blank]
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<PAGE> 109
IN WITNESS WHEREOF, the Borrowers, Guarantors, the Agent and the
Lenders have caused this Agreement to be duly executed by their respective
authorized officers as of the day and year first above written.
LAARS, INC.
By: /s/ S. L. Main
----------------------------
Name: S. L. Main
Title: Controller
WATER PIK, INC.
By: /s/ S. L. Main
----------------------------
Name: S. L. Main
Title: Controller
JANDY INDUSTRIES, INC.,
as a Guarantor
By: /s/ S. L. Main
----------------------------
Name: S. L. Main
Title: Controller
WATER PIK TECHNOLOGIES, INC., solely
with respect to Articles IV, VI and VII
By: /s/ S. L. Main
----------------------------
Name: S. L. Main
Title: Controller
<PAGE> 110
THE CHASE MANHATTAN BANK,
as Agent and as a Lender
By: /s/ Robert J. Arth
----------------------------
Name: Robert J. Arth
Title: V. P.
BANK ONE, N.A., as a Lender
By: /s/ Joseph Perdenza
----------------------------
Name: Joseph Perdenza
Title: Assistant Vice President
MELLON BANK, N.A., as a Lender
By: /s/ Richard M. McNiven
----------------------------
Name: Richard M. McNiven
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION, as
a Lender
By: /s/ Thomas J. Stoltz
----------------------------
Name: Thomas J. Stoltz
Title: VP.
UNION BANK OF CALIFORNIA, N.A., as a
Lender
By: /s/ Stephen W. Dunne
----------------------------
Name: Stephen W. Dunne
Title: Vice President
The registrant hereby agrees to furnish supplementally to the
Commission, upon request, a copy of any omitted schedule to any of the
agreements contained or incorporated by reference herein.
<PAGE> 1
Exhibit 4.3
FORM OF REVOLVING CREDIT NOTE
New York, New York
$_________________ November 29, 1999
FOR VALUE RECEIVED, each of the undersigned entities, on
behalf of itself and jointly and severally with all of the undersigned (each of
such undersigned entities, a "Maker" and, collectively, the "Makers"), hereby
promises to pay to the order of (the "Lender"), at the offices of THE
CHASE MANHATTAN BANK (the "Agent"), at 600 Fifth Avenue, New York, New York on
the Revolving Credit Termination Date as defined in the Restated Credit
Agreement dated as of November __, 1999, among the Makers, the Guarantors named
therein, the Lenders named therein and the Agent (as the same may be amended,
modified or supplemented from time to time in accordance with its terms, the
"Credit Agreement") or earlier as provided for in the Credit Agreement, the
lesser of the principal sum of [ ] DOLLARS ($ ) or the aggregate unpaid
principal amount of all Revolving Credit Loans to the Makers from the Lender
pursuant to the terms of the Credit Agreement, in lawful money of the United
States of America in immediately available funds, and to pay interest from the
date thereof on the principal amount hereof from time to time outstanding, in
like funds, at said office, at a rate or rates per annum and, in each case, and
payable on such dates as determined pursuant to the terms of the Credit
Agreement.
The Makers promise to pay interest, on demand, on any overdue
principal and fees and, to the extent permitted by law, overdue interest from
their due dates at a rate or rates determined as set forth in the Credit
Agreement.
The Makers hereby waive diligence, presentment, demand, protest
and notice of any kind whatsoever. The non-exercise by the holder of any of its
rights hereunder in any particular instance shall not constitute a waiver
thereof in that or any subsequent instance.
All borrowings evidenced by this Revolving Credit Note and all
payments and prepayments of the principal hereof and interest hereon and the
respective dates thereof shall be endorsed by the holder hereof on the schedule
attached hereto and made a part hereof, or on a continuation thereof which shall
be attached hereto and made a part hereof, or otherwise recorded by such holder
in its internal records; provided, however, that the failure of the holder
hereof to make such a notation or any error in such a notation shall not in any
manner affect the obligation of the Makers to
<PAGE> 2
make payments of principal and interest in accordance with the terms of this
Revolving Credit Note and the Credit Agreement.
The promises, undertakings and obligations of the Makers shall be
joint and several, irrevocable and absolute. Such promises, undertakings, and
obligations, so long as any of the Makers shall have failed to perform any of
its obligations, herein shall be enforceable against any or all of the Makers.
This Revolving Credit Note may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument.
This Revolving Credit Note is one of the Notes referred to in the
Credit Agreement (and is secured by the Collateral referred to therein), which,
among other things, contains provisions for the acceleration of the maturity
hereof upon the happening of certain events, for optional and mandatory
prepayment of the principal hereof prior to the maturity hereof and for the
amendment or waiver of certain provisions of the Credit Agreement, all upon the
terms and conditions therein specified. Capitalized terms used but not otherwise
defined herein shall have the meanings of such terms assigned in the Credit
Agreement. THIS REVOLVING CREDIT NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CHOICE OF LAW
DOCTRINE, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
WATER PIK, INC.
By: /s/ S. L. Main
Name: S. L. Main
Title: Controller
LAARS, INC.
By: /s/ S. L. Main
Name: S. L. Main
Title: Controller
2
<PAGE> 3
<TABLE>
<CAPTION>
Schedule to Form of Revolving Credit Note
Lender Principal Sum
<S> <C>
Bank One, N.A. $12,500,000
Mellon Bank, N.A. $12,500,000
Union Bank of California, N.A. $10,000,000
PNC Bank, National Association $12,500,000
</TABLE>
The registrant hereby agrees to furnish supplementally to the Commission, upon
request, a copy of any omitted schedule to any of the agreements contained or
incorporated by reference herein.
<PAGE> 1
Exhibit 4.4
PLEDGE AGREEMENT
AND IRREVOCABLE PROXY
PLEDGE AGREEMENT dated as of November 29, 1999 among Laars, Inc.,
a Delaware corporation ("Laars"), Water Pik Technologies, Inc., a Delaware
corporation ("Holdings") (Laars and Holdings are each sometimes referred to
herein as a "Grantor" and collectively as the "Grantors") and The Chase
Manhattan Bank, a New York banking corporation, as agent (the "Agent") for (i)
the lenders ("the Lenders") named in Schedule 2.01 of the Restated Credit
Agreement dated as of the date hereof, among Water Pik Technologies, Inc., a
Delaware corporation ("Water Pik"), Laars, (together with Water Pik, the
"Borrowers"), the guarantors named therein (the "Guarantors"), the Lenders and"
the Agent (as amended, modified or supplemented from time to time in accordance
with its terms, the "Credit Agreement") and (ii) for itself as issuer of the
Letters of Credit. Capitalized terms used herein and not defined herein shall
have the respective meanings assigned to such terms in the Credit Agreement.
The Agent and the Lenders have agreed to extend Loans and certain
other financial accommodations including, without limitation, the issuance of
Letters of Credit to the Borrowers pursuant to, and subject to the terms and
conditions of, the Credit Agreement. The obligation of the Lenders to extend
such Loans and of the Agent to issue Letters of Credit under the Credit
Agreement is conditioned on the execution and delivery by the Grantors of a
pledge agreement in the form hereof to secure the following (collectively, the
"Secured Obligations"): (i) all Obligations, (ii) all obligations of the
Grantors at any time and from time to time under this Pledge Agreement, and
(iii) all other obligations of the Grantors and the Guarantors at any time and
from time to time under the Credit Agreement and the other Loan Documents and
(iv) all obligations of Holdings at any time and from time to time under the
Holdings Guaranty.
Accordingly, the Grantors and the Agent hereby agree as follows:
1. Pledge. As security for the payment and performance in full of
the Secured Obligations, each Grantor hereby transfers, grants, bargains, sells,
conveys, hypothecates, pledges, sets over, endorses over, and delivers unto the
Agent, and grants to the Agent, for its own benefit and for the benefit of the
Lenders, a security interest in, (a) the shares of capital stock listed in
Schedule I annexed hereto next to such Grantor's name (the "Initial Pledged
Stock") and any additional shares of" common stock of the issuers listed in
Schedule I annexed hereto obtained in the future by the Grantors (collectively,
the Initial Pledged Stock together with all such additional shares pledged in
the future, the "Pledged Stock"), (b) all instruments of indebtedness (whether
now existing or hereinafter arising) by any of the issuers listed in Schedule I
annexed hereto which name any Grantor as payee thereunder (the "Pledged Debt")
and (c) subject to Section 5 below, all proceeds of the Pledged Stock and
Pledged
1
<PAGE> 2
Debt, including, without limitation, all cash, securities or other property at
any time and from time to time receivable or otherwise distributed in respect of
or in exchange for any of or all such Pledged Stock or Pledged Debt (the items
referred to in clauses (a) through (c) being collectively called the
"Collateral"). Upon delivery to the Agent, any securities now or hereafter
included in the Collateral including, without limitation, the Pledged Stock (the
"Pledged Securities") shall be accompanied by undated stock powers duly executed
in blank or other instruments of transfer satisfactory to the Agent and by such
other instruments and documents as the Agent may reasonably request. Each
delivery of Pledged Securities shall be accompanied by a schedule showing a
description of the securities theretofore and then being pledged hereunder,
which schedule shall be attached hereto as Schedule I and made a part hereof.
Each schedule so delivered shall supersede any prior schedules so delivered.
2. Delivery of Collateral. Each Grantor agrees to deliver
promptly or cause to be delivered to the Agent any and all Pledged Securities,
and any and all certificates or other instruments or documents representing any
of the Collateral (together with any necessary endorsement).
3. Representations, Warranties and Covenants. Each Grantor hereby
represents, warrants and covenants to and with the Agent that:
(a) except for the security interest granted to the Agent, each
Grantor (i) is and, subject to the provisions of the Credit Agreement, will at
all times continue to be the direct owner, beneficially and of record, of the
Pledged Securities that it is pledging hereunder and is and will continue to be
the holder of the Pledged Debt that it is pledging hereunder except for the
delivery and endorsement over of such Pledged Debt to the Agent as contemplated
hereunder, (ii) holds the Collateral that it is pledging hereunder free and
clear of all Liens, charges, encumbrances and security interests of every kind
and nature, and the Pledged Stock is subject to no options to purchase or any
similar or other rights of any person, (iii) will make no assignment, pledge,
hypothecation or, subject to the provisions of the Credit Agreement, transfer
of, or create any security interest in, the Collateral that it is pledging
hereunder including, without limitation, by virtue of becoming bound by any
agreement which restricts in any manner the rights of any present or future
holder of any Pledged Stock with respect thereto, and (iv) subject to Section 5
below, will cause any and all Collateral, whether for value paid by a Grantor or
otherwise, to be forthwith deposited with the Agent and pledged or assigned
hereunder;
(b) each Grantor (i) has good right and legal authority to pledge
the Collateral it is pledging hereunder in the manner hereby done or
contemplated, (ii) will not amend, modify or supplement any Pledged Security
(including, without limitation, any Pledged Debt) without the prior written
consent of the Agent, nor forgive any Indebtedness evidenced by any Pledged
Security, and (iii) will defend its title or interest thereto or therein against
any and all attachments, Liens, claims, encumbrances, security interests or
other impediments of any nature, however arising, of all persons whomsoever;
2
<PAGE> 3
(c) no consent or approval of any governmental body or regulatory
authority or any securities exchange was or is necessary to the validity of the
pledge effected hereby;
(d) by virtue of the execution and delivery by each Grantor of
this Agreement, when the certificates, instruments or other documents
representing or evidencing the Collateral are delivered to the Agent in
accordance with this Agreement, the Agent will obtain a valid and perfected
first Lien upon and security interest in such Collateral as security for the
repayment of the Secured Obligations, prior to all other Liens and encumbrances
thereon and security interests therein;
(e) the pledge effected hereby is effective to vest in the Agent
the rights of the Agent in the Collateral as set forth herein; and
(f) all of the Pledged Stock has been duly authorized and validly
issued and as at the date hereof, the Initial Pledged Stock constitutes all of
the issued and outstanding shares of capital stock of the issuers listed on
Schedule I annexed hereto.
All representations, warranties and covenants of the Grantors contained in this
Agreement shall survive the execution, delivery and performance of this
Agreement until the termination of this Agreement pursuant to Section 15 hereof.
4. Registration in Nominee Name; Denominations. Upon the
occurrence and during the continuance of an Event of Default, the Agent shall
have the right (in its sole and absolute discretion with subsequent notice to
the Grantors) to transfer to or to register the Pledged Securities in its own
name or the name of its nominee. In addition, the Agent shall at all times have
the right to exchange the certificates representing Pledged Securities for
certificates of smaller or larger denominations for any purpose consistent with
this Agreement.
5. Voting Rights; Dividends; etc. (a) Unless and until an Event
of Default hereunder shall have occurred and be continuing:
(i) Each Grantor shall be entitled to exercise any
and all voting and/or consensual rights and powers accruing to an owner of
Pledged Securities or any part thereof for any purpose not inconsistent with the
terms of this Agreement and the Credit Agreement provided that such action would
not adversely affect the rights inuring to the Agent or the Lenders under this
Agreement or the Credit Agreement or adversely affect the rights and remedies of
the Agent or the Lenders under this Agreement or the Credit Agreement or the
ability of the Agent or the Lenders to exercise the same.
(ii) The Agent shall execute and deliver to the Grantors, or
cause to be executed and delivered to the Grantors, all such proxies, powers of
attorney, and other instruments as the Grantors may reasonably request for the
purpose of enabling the Grantors to exercise the voting and/or consensual rights
and powers which they are entitled to exercise pursuant to subparagraph (i)
above.
3
<PAGE> 4
(iii) The Grantors shall be entitled to receive and retain any
and all cash dividends paid on the Pledged Securities only to the extent that
such cash dividends are permitted by, and otherwise paid in accordance with the
terms and conditions of, the Credit Agreement and applicable laws. Any and all
a. noncash dividends,
b. stock or dividends paid or payable in cash or
otherwise in connection with a partial or total liquidation or dissolution, and
c. instruments, securities, other distributions in
property, return of capital, capital surplus or paid-in surplus or other
distributions made on or in respect of Pledged Securities (other than dividends
permitted by this Section 5(a)(iii)), whether paid or payable in cash or
otherwise, whether resulting from a subdivision, combination or reclassification
of the outstanding capital stock of the issuer of any Pledged Securities or
received in exchange for Pledged Securities or any part thereof, or in
redemption thereof, as a result of any merger, consolidation, acquisition or
other exchange of assets to which such issuer may be a party or otherwise,
shall be and become part of the Collateral, and, if received by any Grantor,
shall not be commingled by such Grantor with any of its other funds or property
but shall be held separate and apart therefrom, shall be held in trust for the
benefit of the Agent and the Lenders and shall be forthwith delivered to the
Agent in the same form as so received (with any necessary endorsement).
(b) Upon the occurrence and during the continuance of an Event of
Default, all rights of any Grantor to receive any dividends, stock, instruments,
securities and other distributions which such Grantor is authorized to receive
pursuant to paragraph (a)(iii) of this Section 5 shall cease, and all such
rights shall thereupon become vested in the Agent, which shall have the sole and
exclusive right and authority to receive and retain such dividends. All
dividends which are received by any Grantor contrary to the provisions of this
Section 5(b) shall be received in trust for the benefit of the Agent, shall be
segregated from other property or funds of such Grantor and shall be forthwith
delivered to the Agent as Collateral in the same form as so received (with any
necessary endorsement). Any and all money and other property paid over to or
received by the Agent pursuant to the provisions of this Section 5 (b) shall be
retained by the Agent in an account to be established by the Agent upon receipt
of such money or other property and shall be applied in accordance with the
provisions of Section 9 hereof.
(c) Upon the occurrence and during the continuance of an Event of
Default, all rights of any Grantor to exercise the voting and consensual rights
and pursuant to the irrevocable proxy granted herein, powers which it is
entitled to exercise pursuant to Section 5(a)(i) shall cease, and all such
rights shall thereupon become vested in the Agent, which shall have the sole and
exclusive right and authority to exercise such voting and consensual rights and
powers.
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(d) As long as the Credit Agreement remains in effect and until
all of the Secured Obligations have been paid fully and indefeasibly, any
payments made in respect of the Pledged Debt shall be and become part of the
Collateral, and, if received by any Grantor, shall not be commingled by such
Grantor with any of its other funds or property but shall be held separate and
apart therefrom, shall be held in trust for the benefit of the Agent and the
Lenders and shall be forthwith delivered to the Agent in the same form as so
received.
(e) In order to permit the Agent to exercise the voting and other
consensual rights which it may be entitled to exercise pursuant to Section 5(c)
and to receive all dividends and other distributions which it may be entitled to
receive under Section 5(a)(iii) or Section 5(b), each Grantor shall promptly
execute and deliver (or cause to be executed and delivered) to the Agent all
such proxies, dividend payment orders and other instruments as the Agent may
from time to time reasonably request.
Without limiting the effect of the foregoing, each Grantor does
hereby constitute and appoint the Agent as its proxy, and the Agent shall have
the right, upon the occurrence and during the continuance of an Event of
Default, to exercise all rights, benefits, privileges and powers accruing to
such Grantor, as owner of the Pledged Securities, including, without limitation,
giving or withholding consent, calling and attending shareholders meetings to be
held from time to time with full power to vote and act for and in the name,
place, and stead of such Grantor and in the same manner, to the same extent, and
with the same effect that such Grantor would if personally present at such
meetings, giving to the Agent full power of substitution and revocation, which
proxy shall be effective, automatically and without the necessity of any action
(including any transfer of any Pledged Stock on the record books of the issuer
thereof) by any person (including the issuer of the Pledged Stock or any officer
or agent thereof).
THIS PROXY IS IRREVOCABLE
Any proxy or proxies heretofore given by any Grantor to any
person or persons whatsoever are hereby revoked. This proxy shall continue in
full force and effect until such time as all Secured Obligations are paid and
satisfied in full in accordance with the terms of the Credit Agreement.
6. Issuance of Additional Stock. Each Grantor agrees that it will
cause each of its subsidiaries not to issue any stock or other securities,
whether in addition to, by stock dividend or other distribution upon, or in
substitution for, the Pledged Securities or otherwise.
7. Supplemental Documentation. In connection with the execution
and delivery of this Agreement each Grantor shall furnish or cause to be
furnished to the Agent on or prior to the Closing Date a certificate signed by a
Responsible Officer of such Grantor dated the Closing Date, certifying that, as
of the date of such certificate, all representations and warranties of such
Grantor in Section 3
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hereof are true and correct and that such Grantor is in compliance with all
conditions, agreements and covenants to be observed or performed hereunder.
8. Remedies upon Event of Default. If an Event of Default shall
have occurred and be continuing, the Agent may sell or otherwise dispose of all
or any part of the Collateral, at public or private sale or at any broker's
board or on any securities exchange, for cash, upon credit or for future
delivery as the Agent shall deem appropriate. Each such purchaser at any such
sale shall hold the property sold absolutely, free from any claim or right on
the part of any Grantor, and each Grantor hereby waives (to the extent permitted
by law) all rights of redemption, stay and appraisal which such Grantor now has
or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted.
The Agent shall give the applicable Grantor 10 days' written
notice (which each Grantor agrees is reasonable notice within the meaning of
Section 9-504(3) of the Uniform Commercial Code as in effect in New York) of the
Agent's intention to make any sale of Collateral. Such notice, in the case of a
public sale, shall state the time and place for such sale and, in the case of a
sale at a broker's board or on a securities exchange, shall state the board or
exchange at which such sale is to be made and the day on which the Collateral,
or portion thereof, will first be offered for sale at such board or exchange.
Any such public sale shall be held at such time or times within ordinary
business hours and at such place or places as the Agent may fix and state in the
notice (if any) of such sale. At any such sale, the Collateral, or portion
thereof, to be sold may be sold in one lot as an entirety or in separate
parcels, as the Agent may (in its sole and absolute discretion) determine. The
Agent shall not be obligated to make any sale of any Collateral if it shall
determine not to do so, regardless of the fact that notice of sale of such
Collateral shall have been given. The Agent may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to which the same was so
adjourned. In case any sale of all or any part of the Collateral is made on
credit or for future delivery, the Collateral so sold may be retained by the
Agent until the sale price is paid by the purchaser or purchasers thereof, but
the Agent shall not incur any liability in case any such purchaser or purchasers
shall fail to take up and pay for the Collateral so sold and, in case of any
such failure, such Collateral may be sold again upon like notice. At any public
sale made pursuant to this Section 8, The Chase Manhattan Bank or any Lender may
bid for or purchase, free (to the extent permitted by law) from any right of
redemption, stay or appraisal on the part of any Grantor (all said rights being
also hereby waived and released to the extent permitted by law), with respect to
the Collateral or any part thereof offered for sale and The Chase Manhattan Bank
or any such Lender may make payment on account thereof by using any claim then
due and payable to The Chase Manhattan Bank or any such Lender from such Grantor
as a credit against the purchase price, and The Chase Manhattan Bank or any such
Lender may, upon compliance with the terms of sale, hold, retain and dispose of
such property without further accountability to such Grantor therefor. For
purposes hereof, a written agreement to purchase the Collateral or any portion
thereof shall be treated as a sale thereof; the Agent shall be free to carry out
such sale and purchase pursuant to such
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agreement, and no Grantor shall be entitled to the return of the Collateral or
any portion thereof subject thereto, notwithstanding the fact that after the
Agent shall have entered into such an agreement all Events of Default shall have
been remedied and the Secured Obligations paid in full. The Grantors, jointly
and severally, shall remain liable for any deficiency. As an alternative to
exercising the power of sale herein conferred upon it, the Agent may proceed by
a suit or suits at law or in equity to foreclose this Agreement and to sell the
Collateral or any portion thereof pursuant to a judgment or decree of a court or
courts having competent jurisdiction or pursuant to a proceeding by a
court-appointed receiver.
9. Application of Proceeds of Sale. The proceeds of any sale of
Collateral, as well as any Collateral consisting of cash, shall be applied by
the Agent as follows:
FIRST, to the Agent to reimburse the Agent for that portion of
the payments, if any, made by it with respect to Letters of Credit for which a
Lender, as a participant in such Letter of Credit pursuant to Section 2.18 of
the Credit Agreement, failed to pay its pro rata share thereof as required
pursuant to such Section 2.18;
SECOND, to the payment of all reasonable costs and expenses
incurred by the Agent in connection with such sale or otherwise in connection
with this Agreement or any of the Secured Obligations, including, but not
limited to, all court costs and the reasonable fees and expenses of its agents
and legal counsel, the repayment of all advances made by the Agent hereunder on
behalf of the Grantors or to protect and preserve the Collateral and any other
reasonable costs or expenses incurred in connection with the exercise of any
right or remedy hereunder;
THIRD, to the Agent to be held as cash collateral to the extent
of undrawn amounts, if any, of outstanding Letters of Credit;
FOURTH, pro rata to the payment in full of principal and interest
in respect of any Loans outstanding (pro rata as among the Lenders in accordance
with the amounts of the Loans made by them pursuant to the Credit Agreement);
FIFTH, pro rata to the payment in full of all Secured Obligations
(other than those referred to above) owed to the Lenders (pro rata as among the
Lenders in accordance with their respective Commitments); and
SIXTH, to the Grantors, their successors or assigns, or as a
court of competent jurisdiction may otherwise direct.
10. Agent Appointed Attorney-in-Fact. Each Grantor hereby
appoints the Agent its attorney-in-fact for the purpose of carrying out the
provisions of this Agreement and taking any action and executing any instrument
which the Agent may deem necessary or advisable to accomplish the
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purposes hereof, which appointment is irrevocable and coupled with an interest.
Without limiting the generality of the foregoing, the Agent shall have the
right, upon the occurrence and during the continuance of an Event of Default,
with full power of substitution either in the Agent's name or in the name of
such Grantor, to ask for, demand, sue for, collect, receive receipt and give
acquittance for any and all moneys due or to become due and under and by virtue
of any Collateral, to endorse checks, drafts, orders and other instruments for
the payment of money payable to the applicable Grantor representing any interest
or dividend, or other distribution payable in respect of the Collateral or any
part thereof or on account thereof and to give full discharge for the same, to
settle, compromise, prosecute or defend any action, claim or proceeding with
respect thereto, and to sell, assign, endorse, pledge, transfer and make any
agreement respecting, or otherwise deal with, the same; provided, however, that
nothing herein contained shall be construed as requiring or obligating the
Agent, The Chase Manhattan Bank or the Lenders to make any commitment or to make
any inquiry as to the nature or sufficiency of any payment received by the
Agent, The Chase Manhattan Bank or the Lenders, or to present or file any claim
or notice, or to take any action with respect to the Collateral or any part
thereof or the moneys due or to become due in respect thereof or any property
covered thereby, and no action taken by the Agent, The Chase Manhattan Bank or
the Lenders or omitted to be taken with respect to the Collateral or any part
thereof shall give rise to any defense, counterclaim or offset in favor of any
Grantor or to any claim or action against the Agent or the Lenders in the
absence of the gross negligence or wilful misconduct of the Agent or the
Lenders.
11. No Waiver. No failure on the part of the Agent to exercise,
and no delay in exercising, any right, power or remedy hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy by the Agent preclude any other or further exercise thereof or
the exercise of any other right, power or remedy. All remedies hereunder are
cumulative and are not exclusive of any other remedies provided by law. The
Agent and the Lenders shall not be deemed to have waived any rights hereunder or
under any other agreement or instrument unless such waiver shall be in writing
and signed by such parties.
12. Registration, etc. Each Grantor agrees that, upon the
occurrence and during the continuance of an Event of Default hereunder, if for
any reason the Agent desires to sell any of the Pledged Securities at a public
sale, it will, at any time and from time to time, upon the written request of
the Agent, take or to cause the issuer of such Pledged Securities to take such
action and to prepare, distribute and/or file such documents, as are required or
advisable in the opinion of counsel for the Agent to permit the public sale of
such Pledged Securities. Each Grantor further agrees to indemnify, defend and
hold harmless the Agent, The Chase Manhattan Bank and the Lenders and any
underwriter and their respective officers, directors, affiliates and controlling
persons (within the meaning of Section 20 of the Securities Exchange Act of
1934) from and against all loss, liability, expenses, costs, fees and
disbursements of counsel (including, without limitation, a reasonable estimate
of the cost to the Agent of legal counsel), and claims (including the costs of
investigation) which they may incur insofar as such loss, liability, expense or
claim arises out of or is based upon any untrue statement of a material fact
contained in any prospectus (or any amendment or supplement thereto) or in any
notification or
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offering circular, or arises out of or is based upon any omission to state a
material fact required to be stated therein or necessary to make the statements
in any thereof not misleading, except insofar as the same arises out of any
untrue statement or omission based upon information furnished in writing to the
applicable Grantor or the issuer of such Pledged Securities by the Agent, The
Chase Manhattan Bank, any Lender or the underwriter expressly for use therein.
The Agent (with respect to such information furnished by it), The Chase
Manhattan Bank (with respect to such information furnished by it) or such Lender
(with respect to such information furnished by it) shall indemnify, defend and
hold harmless the Grantor or the issuer of such Pledged Securities and their
respective officers, directors, affiliates and controlling persons (within the
meaning of Section 20 of the Securities Exchange Act of 1934) upon the same
terms as are applicable to the Grantor pursuant hereto. Each Grantor further
agrees to use its best efforts to qualify, file or register, or cause the issuer
of such Pledged Securities to qualify, file or register, any of the Pledged
Securities under the Blue Sky or other securities laws of such states as may be
requested by the Agent and keep effective, or cause to be kept effective, all
such qualifications, filings or registrations. Each Grantor will bear all costs
and expenses of carrying out its obligations under this Section 12. Each Grantor
acknowledges that there is no adequate remedy at law for failure by it to comply
with the provisions of this Section 12 and that such failure would not be
adequately compensable in damages, and therefore agrees that its agreements
contained in this Section 12 may be specifically enforced.
13. Security Interest Absolute. All rights of the Agent
hereunder, the grant of a security interest in the Collateral and all
obligations of the Grantors hereunder, shall be absolute and unconditional
irrespective of (i) any lack of validity or enforceability of the Credit
Agreement, any agreement with respect to any of the Secured Obligations or any
other agreement or instrument relating to any of the foregoing, (ii) any change
in time, manner or place of payment of, or in any other term of, all or any of
the Secured Obligations, or any other amendment or waiver of or any consent to
any departure from the Credit Agreement or any other agreement or instrument,
(iii) any exchange, release or nonperfection of any other collateral, or any
release or amendment or waiver of or consent to or departure from any guarantee,
for all or any of the Secured Obligations or (iv) any other circumstance which
might otherwise constitute a defense available to, or a discharge of, any
Grantor in respect of the Secured Obligations or in respect of this Agreement.
14. Agent's Fees and Expenses. The Grantors shall be jointly and
severally obligated to, upon demand, pay to the Agent the amount of any and all
reasonable expenses, including the reasonable fees and expenses of its counsel
and of any experts or agents which the Agent may incur in connection with (i)
the administration of this Agreement, (ii) the custody or preservation of, or
the sale of, collection from, or other realization upon, any of the Collateral,
(iii) the exercise or enforcement of any of the rights of the Agent hereunder or
(iv) the failure by any Grantor to perform or observe any of the provisions
hereof. In addition, the Grantors indemnify, jointly and severally, and hold the
Agent and the Lenders harmless from and against any and all liability incurred
by the Agent or the Lenders hereunder or in connection herewith, unless such
liability shall be due to the gross negligence or wilful misconduct of the Agent
or the Lenders, as the case may be. Any such amounts payable as provided
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hereunder or thereunder shall be additional Secured Obligations secured hereby
and by the other Security Documents.
15. Termination. This Agreement shall terminate when (a) all the
Secured Obligations have been fully and indefeasibly paid in cash, (b) the
Lenders have no further commitment to make any Loans under the Credit Agreement,
and (c) the Agent shall have no further obligation to issue any Letters of
Credit, at which time the Agent shall reassign and deliver to the Grantors, or
to such person or persons as the Grantors shall designate, against receipt, such
of the Collateral (if any) as shall not have been sold or otherwise still be
held by it hereunder, together with appropriate instruments of reassignment and
release; provided, however, that all indemnities of the Grantors contained in
this Agreement shall survive, and remain operative and in full force and effect
regardless of, the termination of this Agreement. Any such reassignment shall be
without recourse to or warranty by the Agent and at the expense of the Grantors.
16. Notices. All communications and notices hereunder shall be in
writing and given as provided in the Credit Agreement.
17. Further Assurances. Each Grantor agrees to do such further
acts and things, and to execute and deliver such additional conveyances,
assignments, agreements and instruments, as the Agent may at any time reasonably
request in connection with the administration and enforcement of this Agreement
or with respect to the Collateral or any part thereof or in order better to
assure and confirm unto the Agent its rights and remedies hereunder.
18. Binding Agreement; Assignments. This Agreement, and the
terms, covenants and conditions hereof, shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns,
except that no Grantor shall be permitted to assign this Agreement or any
interest herein or in the Collateral, or any part thereof, or otherwise pledge,
encumber or grant any option with respect to the Collateral, or any part
thereof, or any cash or property held by the Agent as Collateral under this
Agreement.
19. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (EXCEPT
CONFLICTS OF LAWS PRINCIPLES THEREOF), EXCEPT AS REQUIRED BY MANDATORY
PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF
THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK.
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20. Severability. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired.
21. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument. This Agreement shall be
effective when a counterpart which bears the signature of the Grantors shall
have been delivered to the Agent.
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22. Section Headings. Section headings used herein are for
convenience only and are not to affect the construction of, or be taken into
consideration in interpreting, this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Pledge Agreement as of the day and year first above written.
LAARS, INC.
By /s/ S. L. Main
Name: S. L. Main
Title: Controller
WATER PIK TECHNOLOGIES, INC.
By /s/ S. L. Main
Name: S. L. Main
Title: Controller
THE CHASE MANHATTAN BANK, as Agent
By /s/ Robert J. Arth
Name: Robert J. Arth
Title: Vice President
12
The registrant hereby agrees to furnish supplementally to the Commission, upon
request, a copy of any omitted schedule to any of the agreements contained or
incorporated by reference herein.
<PAGE> 1
Exhibit 4.5
SECURITY AGREEMENT
SECURITY AGREEMENT dated as of November 29, 1999, among Water Pik
Technologies, Inc., a Delaware corporation ("Water Pik" or a "Borrower"), Laars,
Inc., a Delaware corporation ("Laars" or a "Borrower" and together with Water
Pik, the "Borrowers"), Water Pik Technologies, Inc., a Delaware corporation
("Holdings"), Jandy Industries, Inc., a California corporation ("Jandy") (the
Borrowers, Holdings and Jandy are each sometimes referred to herein as a
"Grantor" and collectively as the "Grantors"), and The Chase Manhattan Bank, a
New York banking corporation, as agent ("Agent") for (i) the lenders (the
"Lenders") named in Schedule 2.01 of the Restated Credit Agreement dated as of
the date hereof, among the Grantors, the guarantors named therein (the
"Guarantors"), the Agent and the Lenders (as amended, modified or supplemented
from time to time in accordance with its terms, the "Credit Agreement") and (ii)
itself as issuer of the Letters of Credit.
The Agent and the Lenders have agreed to extend Loans and certain
other financial accommodations, including, without limitation, the issuance of
the Letters of Credit to the Borrowers pursuant to, and subject to the terms and
conditions of, the Credit Agreement. The obligation of the Lenders to extend
such Loans and of the Agent to issue the Letters of Credit under the Credit
Agreement is conditioned on the execution and delivery by the Grantors of a
security agreement in the form hereof to secure the following (collectively, the
"Secured Obligations": (i) all Obligations (such Obligations to include, without
limitation, the due and punctual payment and performance of (a) the principal of
and interest on the Loans, when and as due, whether at maturity, by
acceleration, upon one or more dates set for prepayment or otherwise, (b)
Indebtedness at any time and from time to time under the Letters of Credit], (c)
all obligations of the Grantors at any time and from time to time under this
Agreement and (e) all other obligations of the Grantors and Guarantors at any
time and from time to time under the Credit Agreement and the other Loan
Documents) and (ii) all obligations of Holdings under the Guaranty.
Accordingly, the Grantors and the Agent hereby agree as follows:
1. Definitions of Terms Used Herein. All capitalized terms used
herein but not defined herein shall have the meanings set forth in the Credit
Agreement. As used herein, the following terms shall have the following
meanings:
(a) "Accounts Receivable" shall mean (i) all of the
Grantors' present and future accounts, general intangibles, chattel paper and
instruments, as such terms are defined in the Uniform Commercial Code as in
effect in the State of New York ("NYUCC"), (ii) all moneys, securities and other
property and the proceeds thereof, now or hereafter held or received by, or in
transit to, the Agent or any other financial institution from or for any
Grantor, whether for safekeeping, pledge, custody, transmission, collection or
otherwise, and all of the deposits (general or special) of any
<PAGE> 2
Grantor, balances, sums and credits with, and all of the Grantors' claims
against the Agent or any other financial institution at any time existing, (iii)
all of the Grantors' right, title and interest, and all of the Grantors' rights,
remedies, security and Liens, in, to and in respect of any accounts receivable,
including, without limitation, rights of stoppage in transit, replevin,
repossession and reclamation and other rights and remedies of an unpaid vendor,
lienor or secured party, guaranties or other contracts of suretyship with
respect to accounts receivable, deposits or other security for the obligation of
any account debtor, and credit and other insurance, (iv) all of the Grantors'
right, title and interest in, to and in respect of all goods relating to, or
which by sale have resulted in, accounts receivable, including, without
limitation, all goods described in invoices or other documents or instruments
with respect to, or otherwise representing or evidencing, any account
receivable, and all returned, reclaimed or repossessed goods.
(b) "Collateral" shall mean all (i) Accounts
Receivable, (ii) Documents, (iii) Equipment, (iv) General Intangibles, (v)
Inventory, (vi) Proceeds and (vii) Investment Property.
(c) "Documents" shall mean all instruments, files,
records, ledger sheets and documents covering or relating to any of the
Collateral.
(d) "Equipment" shall mean all of the Grantors'
machinery, equipment, vehicles, furniture and fixtures and all attachments,
accessories and equipment now or hereafter owned or acquired in the Grantors'
business or used in connection therewith, and all substitutions and replacements
thereof, wherever located, whether now owned or hereafter acquired by any
Grantor.
(e) "General Intangibles" shall mean all of the
Grantors' present and future general intangibles of every kind and description,
including (without limitation) patents, patent applications, trade names and
trademarks and the goodwill of the business symbolized thereby, Federal, State
and local tax refund claims of all kinds.
(f) "Inventory" shall mean all of the Grantors'
right, title and interest in and to raw materials, work in process, finished
goods and all other inventory (as such term is defined in the NYUCC), whether
now owned or hereafter acquired, and all wrapping, packaging, advertising and
shipping materials, and any documents relating thereto.
(g) "Investment Property" shall mean all of the
Grantors' right, title and interest in and to all present and future securities,
security entitlements and securities accounts.
(h) "Proceeds" shall mean any consideration received
from the sale, exchange, lease or other disposition of any asset or property
which constitutes Collateral, any other value received as a consequence of the
possession of any Collateral and any payment received from any insurer or other
person or entity as a result of the destruction, loss, theft or other
involuntary conversion of whatever nature of any asset or property that
constitutes Collateral, and shall include,
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without limitation, all cash and negotiable instruments received or held by any
of the Lenders pursuant to any lockbox or similar arrangement relating to the
payment of Accounts Receivable.
2. Security Interests. As security for the payment or
performance, as the case may be, of the Secured Obligations, the Grantors hereby
create and grant to the Agent, its successors and its assigns, for its own
benefit and for the pro rata benefit of the Lenders, their successors and their
assigns, a security interest in the Collateral (the "Security Interest").
Without limiting the foregoing, the Agent is hereby authorized to file one or
more financing statements, continuation statements or other documents for the
purpose of perfecting, confirming, continuing, enforcing or protecting the
Security Interest, naming the Grantors as debtors and the Agent as secured
party.
The Grantors agree at all times to keep in all material respects
accurate and complete accounting records with respect to the Collateral,
including, but not limited to, a record of all payments and Proceeds received.
3. Further Assurances. Each Grantor agrees, at its expense, to
execute, acknowledge, deliver and cause to be duly filed all such further
instruments and documents and take all such actions as the Agent may from time
to time reasonably request for the assuring and preserving of the Security
Interest and the rights and remedies created hereby, including, without
limitation, the payment of any fees and taxes required in connection with the
execution and delivery of this Agreement, the granting of the Security Interest
and the filing of any financing statements or other documents in connection
herewith. If any amount payable under or in connection with any of the
Collateral shall be or become evidenced by any promissory note or other
instrument, such note or instrument shall be promptly pledged and delivered to
the Agent, duly endorsed in a manner satisfactory to the Agent. Each Grantor
agrees to notify promptly the Agent of any change in its corporate name or in
the location of its chief executive office, its chief place of business or the
office where it keeps its records relating to the Accounts Receivable owned by
it and the location of any Collateral. Each Grantor agrees promptly to notify
the Agent if any material portion of the Collateral is damaged or destroyed.
4. Inspection and Verification. The Agent and such persons as the
Agent may designate shall have the right, at any reasonable time or times during
a Grantor's usual business hours, and upon reasonable notice (which may be
telephonic), to inspect the Collateral owned by such Grantor, all records
related thereto (and to make extracts and copies from such records), and the
premises upon which any such Collateral is located, to discuss such Grantor's
affairs with the officers of such Grantor and its independent accountants and to
verify under reasonable procedures the validity, amount, quality, quantity,
value, and condition of or any other matter relating to, such Collateral,
including, in the case of Accounts Receivable or Collateral in the possession of
a third person, contacting account debtors and third persons possessing such
Collateral. Subject to the provisions of Section 11.11 of the Credit Agreement,
the Agent shall have the absolute right to share any information it gains from
such inspection or verification with any or all of the Lenders.
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5. Taxes; Encumbrances. At its option, the Agent may discharge
past due taxes, liens, security interests or other encumbrances at any time
levied or placed on the Collateral and not permitted under the Credit Agreement,
and may pay for the maintenance and preservation of the Collateral to the extent
a Grantor fails to do so as required by the Credit Agreement, and each Grantor
agrees to reimburse the Agent on demand for any payment made or any expense
incurred by it pursuant to the foregoing authorization; provided, however, that
nothing in this Section 5 shall be interpreted as excusing a Grantor from the
performance of any covenants or other promises with respect to taxes, liens,
security interests or other encumbrances and maintenances as set forth herein or
in the Credit Agreement.
6. Assignment of Security Interest. If at any time a Grantor
shall take and perfect a security interest in any property of an account debtor
or any other person to secure payment and performance of an Account Receivable,
such Grantor shall promptly assign such security interest to the Agent. Such
assignment need not be filed of public record unless necessary to continue the
perfected status of the security interest against creditors of and transferees
from the account debtor or other person granting the security interest.
7. Representations and Warranties. Each Grantor represents and
warrants to the Agent that:
(a) Title and Authority. It has (i) rights in and
good title to the Collateral in which it is granting a security interest
hereunder and (ii) the requisite power and authority to grant to the Agent the
Security Interest in such Collateral pursuant hereto and to execute, deliver and
perform its obligations in accordance with the terms of this Agreement, without
the consent or approval of any other person other than any consent or approval
which has been obtained.
(b) Filing. Fully executed Uniform Commercial Code
financing statements containing a description of the Collateral shall have been,
or shall be delivered to the Agent in a form such that they can be, filed of
record in every governmental, municipal or other office in every jurisdiction in
which any portion of the Collateral is located necessary to publish notice of
and protect the validity of and to establish a valid, legal and perfected
security interest in favor of the Agent in respect of the Collateral in which a
security interest may be perfected by filing in the United States and its
territories and possessions, and no further or subsequent filing, refiling,
recording, rerecording, registration or reregistration is necessary in any such
jurisdiction, except as provided under applicable law with respect to the filing
of Uniform Commercial Code continuation statements.
(c) Validity of Security Interest. The Security
Interest constitutes a valid, legal and perfected first priority security
interest in all of the Collateral for payment and performance of the Secured
Obligations, except as otherwise permitted under the Credit Agreement.
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(d) Information Regarding Names. It has disclosed in
writing to the Agent on Schedule I attached hereto any trade names or styles
(the "Tradenames") used to identify it in its business or in the ownership of
its properties and as to each such Tradename confirms that:
(i) each Tradename is a trade name and style (and not
the name of an independent corporation or other legal entity)
by which a Grantor may identify and sell certain of its goods
or services and conduct a portion of its business;
(ii) all Accounts Receivable involved under the
Tradenames are and shall be (x) owned solely by the Grantors
and (y) subject to the security interests and other terms of
this Security Agreement and the Credit Agreement;
(iii) any dispute which may arise with customers with
respect to the products invoiced under the name of any of the
Tradenames are to be subject to the terms of this Security
Agreement and the Credit Agreement as through the Tradenames
did not exist; and
(iv) new Tradenames may only be used after notice to
the Agent, which notice shall set forth the name of such new
Tradename.
(e) Absence of Other Liens. The Collateral is owned
by it free and clear of any Lien of any nature whatsoever, except as granted
pursuant to this Agreement and as permitted by the Credit Agreement, and, except
as provided by paragraph (b) of this Section 7, no financing statement has been
filed, under the Uniform Commercial Code as in effect in any state or otherwise,
covering any Collateral except as indicated on Schedule 7.01 to the Credit
Agreement.
(f) Additional Representations for Accounts
Receivable. (i) All Accounts Receivable owned by the Grantors on the Closing
Date constitute bona fide receivables arising in the ordinary course of
business, the amount of which is actually owing and payable to the Grantors in
the ordinary course of business, subject to no defense, claim of disability,
counterclaim or offset with respect thereto. All such Accounts Receivable, net
of a bad debt reserve determined in accordance with generally accepted
accounting principles, are collectible in accordance with their terms.
(ii) Each Account Receivable arising after the
Closing Date shall be on the date of its creation a good and valid account
representing an undisputed bona fide indebtedness incurred or an amount
indisputably owed by the Customer therein named, for a fixed sum, to the extent,
set forth in the invoice relating thereto, with respect to an absolute sale and
delivery upon the specified terms of goods sold by such Grantor, or work, labor
and/or services theretofore rendered by such Grantor; no such Account Receivable
is or shall at any time be subject to any defense, offset, counterclaim,
discount or allowance except as may be stated in the invoice relating thereto or
discounts and allowances as may be customary in such Grantor's business, and
such Grantor has no reason to
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believe such Accounts Receivable will not be paid when due; none of the
transactions underlying or giving rise to any such Account Receivable shall
violate any applicable State or Federal laws or regulations, and all documents
relating to any such Account Receivable shall be legally sufficient under such
laws or regulations and are legally enforceable in accordance with their terms;
to the best knowledge of such Grantor, each customer, guarantor or endorser is
solvent and will continue to be fully able to pay all such Accounts Receivable
on which it is obligated in full when due; no agreement under which any
deduction or offset of any kind, other than normal trade discounts and discounts
granted by a Grantor in the ordinary course of its business in accordance with
its historical practices, have been granted by such Grantor, at or before the
time such Account Receivable was created; all documents and agreements relating
to such Accounts Receivable shall be true and correct and in all respects what
they purport to be; to the best of each Grantor's knowledge, all signatures and
endorsements that appear on all documents and agreements relating to such
Accounts Receivable are genuine and all signatories and endorsers shall have
full capacity to contract.
(g) Survival of Representations and Warranties. All
representations and warranties of the Grantors contained in this Agreement shall
survive the execution, delivery and performance of this Agreement until the
termination of this Agreement pursuant to Section 28.
8. Records of Accounts Receivable; Physical Count of Inventory.
(a) Each Grantor shall keep or cause to be kept records of its Accounts
Receivable which are accurate in all material respects. In addition, each
Grantor will provide the Agent with such further schedules and/or information
respecting each Account Receivable as the Agent may reasonably require.
(b) Each Grantor shall conduct a physical count of its
Inventory at such intervals as the Agent may reasonably request, and promptly
supply the Agent with a copy of such counts accompanied by a report of the value
(based on the lower of cost (on a FIFO basis) or market value) of such
Inventory.
9. Supplemental Documentation. In connection with the execution
and delivery of this Agreement, each Grantor shall furnish or cause to be
furnished to the Agent on or prior to the Closing Date a certificate, signed by
a Responsible Officer of such Grantor dated the Closing Date, certifying that,
as of the date of such certificate, all representations and warranties of such
Grantor in Section 7 are true and correct and that such Grantor is in compliance
with all conditions, agreements and covenants to be observed or performed
hereunder.
10. Protection of Security. Each Grantor shall, at its own cost
and expense, take any and all actions reasonably necessary to defend title to
the Collateral owned by it against all persons and to defend the Security
Interest of the Agent in such Collateral, and the priority thereof, against any
adverse Lien of any nature whatsoever except for Liens permitted pursuant to
Section 7.01 of the Credit Agreement.
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11. Continuing Obligations of the Grantors. Each Grantor shall
remain liable to observe and perform all the conditions and obligations to be
observed and performed by it under each contract, agreement, interest or
obligation relating to the Collateral, all in accordance with the terms and
conditions thereof, and shall indemnify and hold harmless the Agent, and the
Lenders from any and all such liabilities.
12. Use and Disposition of Collateral. Except as set forth in the
Credit Agreement, no Grantor shall make or permit to be made any assignment,
pledge or hypothecation of the Collateral, or grant any security interest in the
Collateral except for the Security Interest. No Grantor shall make or permit to
be made any transfer of any Collateral, except Inventory in the ordinary course
of business and as otherwise permitted by the Credit Agreement, and each Grantor
shall remain at all times in possession of the Collateral owned by it other than
as set forth on Schedule I annexed hereto, transfers to the Agent pursuant to
the provisions hereof and as otherwise provided in this Agreement or the Credit
Agreement.
13. Limitation on Modifications of Accounts Receivable. No
Grantor will, without the Agent's prior written consent, grant any extension of
the time of payment of any of its Accounts Receivable, compromise, compound or
settle the same for less than the full amount thereof, release, in whole or in
part, any person liable for the payment thereof, or allow any credit or discount
whatsoever thereon other than extensions, credits, discounts, compromises or
settlements granted or made in the ordinary course of business.
14. Collections. (a) At the times set forth in Section 10.01 of
the Credit Agreement, each Grantor shall have the right to collect its Accounts
Receivable in the ordinary course of its business; provided, however, that at
the request of the Agent, each Grantor shall (i) arrange for remittances on any
of its Account Receivable to be made directly to lockboxes or blocked accounts
designated by the Agent or in such other manner as the Agent may direct, and
(ii) promptly deposit all payments received by such Grantor on account of
Accounts Receivable, whether in the form of cash, checks, notes, drafts, bills
of exchange, money orders or otherwise, in one or more accounts designated by
the Agent in precisely the form received (but with any endorsements of such
Grantor necessary for deposit or collection), subject to withdrawal by the Agent
only, as hereinafter provided, and until they are deposited, shall be deemed to
be held in trust by such Grantor for and as the Agent's property on its own
behalf and on behalf of the Lenders and shall not be commingled with such
Grantor's other funds.
(b) The Agent shall have the right, as the true and
lawful agent of the Grantors, with power of substitution for the Grantors and in
the applicable Grantor's name, the Agent's name or otherwise, for the use and
benefit of the Agent and the Lenders, (i) to endorse the applicable Grantor's
name upon any notes, acceptances, checks, drafts, money orders or other
evidences of payment or Collateral that may come into its possession; (ii) to
sign the name of the applicable Grantor on any invoice or bill of lading
relating to any of the Collateral, drafts against Customers, assignments and
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verifications of Accounts Receivable and notices to Customers; (iii) to send
verifications in form reasonably satisfactory to the applicable Grantor of
Accounts Receivable to any Customer; and (iv) upon the occurrence and during the
continuance of an Event of Default, (A) to receive, endorse, assign and/or
deliver any and all notes, acceptances, checks, drafts, money orders or other
evidences or instruments of payment relating to the Collateral or any part
thereof, and each Grantor hereby waives notice of presentment, protest and
non-payment of any instrument so endorsed, (B) to demand, collect, receive
payment of, give receipt for, extend the time of payment of and give discharges
and releases of all or any of the Collateral and/or release the Obligor thereon,
(C) to commence and prosecute any and all suits, actions or proceedings at law
or in equity in any court of competent jurisdiction to collect or otherwise
realize on all or any of the Collateral or to enforce any rights in respect of
any Collateral, (D) to settle, compromise, compound, adjust or defend any
actions, suits or proceedings relating to or pertaining to all or any of the
Collateral, (E) to notify, or to require the applicable Grantor to notify, the
account debtors obligated on any or all of the Accounts Receivable to make
payment thereof directly to the Agent, (F) to notify the Postal Service
authorities to change the address for delivery of mail addressed to any Grantor
to such address as the Agent may designate, (G) to accept the return of goods
represented by any of the Accounts Receivable, and (H) to use, sell, assign,
transfer, pledge, make any agreement with respect to or otherwise deal with all
or any of the Collateral, and to do all other acts and things necessary to carry
out the purposes of this Agreement, as fully and completely as though the Agent
were the absolute owner of the Collateral for all purposes; provided, however,
that nothing herein contained shall be construed as requiring or obligating the
Agent or any Lender to make any commitment or to make any inquiry as to the
nature or sufficiency of any payment received by the Agent or such Lender or to
present or file any claim or notice, or to take any action with respect to the
Collateral or any part thereof or the moneys due or to become due in respect
thereof or any property covered thereby, and no action taken by the Agent or any
Lender or omitted to be taken with respect to the Collateral or any part thereof
shall give rise to any defense, counterclaim or offset in favor of any Grantor
or to any claim or action against the Agent or any Lender in the absence of the
gross negligence or willful misconduct of the Agent or such Lender. It is
understood and agreed that the appointment of the Agent as the agent of the
Grantors for the purposes set forth above in this Section 14 is coupled with an
interest and is irrevocable. The provisions of this Section 14 shall in no event
relieve any Grantor of any of its obligations hereunder or under the Credit
Agreement with respect to the Collateral or any part thereof or impose any
obligation on the Agent or any Lender to proceed in any particular manner with
respect to the Collateral or any part thereof, or in any way limit the exercise
by the Agent or any Lender of any other or further right which it may have on
the date of this Agreement or hereafter, whether hereunder or by law or
otherwise.
15. Remedies upon Default. Upon the occurrence and during the
continuance of an Event of Default, each Grantor agrees to deliver each item of
Collateral to the Agent on demand, and it is agreed that the Agent shall have
the right to take any or all of the following actions at the same or different
times in accordance with applicable law: with or without legal process and with
or without previous notice or demand for performance, to take possession of the
Collateral and without liability for trespass (except for actual damage caused
by the Agent's gross negligence or willful misconduct) to
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enter any premises where the Collateral may be located for the purpose of taking
possession of or removing the Collateral and, generally, to exercise any and all
rights afforded to a secured party under, and subject to its obligations
contained in, the Uniform Commercial Code as in effect in any state or other
applicable law. Without limiting the generality of the foregoing, each Grantor
agrees that the Agent shall have the right, subject to the mandatory
requirements of applicable law, to sell or otherwise dispose of all or any part
of the Collateral, at public or private sale or at any broker's board or on any
securities exchange, for cash, upon credit or for future delivery as the Agent
shall deem appropriate. Each such purchaser at any such sale shall hold the
property sold absolutely free from any claim or right on the part of the
applicable Grantor, and such Grantor hereby waives (to the extent permitted by
law) all rights of redemption, stay and appraisal which such Grantor now has or
may at any time in the future have under any rule of law or statute now existing
or hereafter enacted.
The Agent shall give the applicable Grantor 10 days' written
notice (which each Grantor agrees is reasonable notice within the meaning of
Section 9-504(3) of the NYUCC) of the Agent's intention to make any sale of
Collateral. Such notice, in the case of a public sale, shall state the time and
place for such sale and, in the case of a sale at a broker's board or on a
securities exchange, shall state the board or exchange at which such sale is to
be made and the day on which the Collateral, or portion thereof, will first be
offered for sale at such board or exchange. Any such public sale shall be held
at such time or times within ordinary business hours and at such place or places
as the Agent may fix and state in the notice (if any) of such sale. At any such
sale, the Collateral, or portion thereof, to be sold may be sold in one lot as
an entirety or in separate parcels, as the Agent may (in its sole and absolute
discretion) determine. The Agent shall not be obligated to make any sale of any
Collateral if it shall determine not to do so, regardless of the fact that
notice of sale of such Collateral shall have been given. The Agent may, without
notice or publication, adjourn any public or private sale or cause the same to
be adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and place
to which the same was so adjourned. In case any sale of all or any part of the
Collateral is made on credit or for future delivery, the Collateral so sold may
be retained by the Agent until the sale price is paid by the purchaser or
purchasers thereof, but the Agent shall not incur any liability in case any such
purchaser or purchasers shall fail to take up and pay for the Collateral so sold
and, in case of any such failure, such Collateral may be sold again upon like
notice. At any public sale made pursuant to this Section 15, The Chase Manhattan
Bank or any Lender may bid for or purchase, free (to the extent permitted by
law) from any right of redemption, stay or appraisal on the part of any Grantor
(all said rights being also hereby waived and released to the extent permitted
by law), with respect to the Collateral or any part thereof offered for sale and
The Chase Manhattan Bank or any such Lender may make payment on account thereof
by using any claim then due and payable to The Chase Manhattan Bank or any such
Lender from such Grantor as a credit against the purchase price, and The Chase
Manhattan Bank or any such Lender may, upon compliance with the terms of sale,
hold, retain and dispose of such property without further accountability to such
Grantor therefor. For purposes hereof, a written agreement to purchase the
Collateral or any portion thereof shall be treated as a sale thereof; the Agent
shall be free to carry out such sale and purchase pursuant to such agreement,
and no Grantor shall be entitled to the return of the Collateral or any
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portion thereof subject thereto, notwithstanding the fact that after the Agent
shall have entered into such an agreement all Events of Default shall have been
remedied and the Secured Obligations paid in full and/or the Total Commitment
shall have been terminated. Grantors, jointly and severally, shall remain liable
for any deficiency. As an alternative to exercising the power of sale herein
conferred upon it, the Agent may proceed by a suit or suits at law or in equity
to foreclose this Agreement and to sell the Collateral or any portion thereof
pursuant to a judgment or decree of a court or courts having competent
jurisdiction or pursuant to a proceeding by a court-appointed receiver.
16. Application of Proceeds. The proceeds of any collection or
sale of Collateral, as well as any Collateral consisting of cash, shall be
applied by the Agent as follows:
FIRST, to the Agent to reimburse the Agent for that
portion of the payments, if any, made by it with respect to Letters of Credit
for which a Lender, as a participant in such Letter of Credit pursuant to
Section 2.18 of the Credit Agreement, failed to pay its pro rata share thereof
as required pursuant to such Section 2.18;
SECOND, to the payment of all reasonable costs and
expenses incurred by the Agent in connection with such collection or sale or
otherwise in connection with this Agreement or any of the Secured Obligations,
including, but not limited to, all court costs and the reasonable fees and
expenses of its agents and legal counsel, the repayment of all advances made by
the Agent hereunder on behalf of the Grantors and any other reasonable costs or
expenses incurred in connection with the exercise of any right or remedy
hereunder;
THIRD, to the Agent to be held as cash collateral to the
extent of the undrawn amounts, if any, of outstanding Letters of Credit;
FOURTH, pro rata to the payment in full of principal and
interest in respect of any Loans outstanding (pro rata as among the Lenders in
accordance with the amounts of the Loans made by them pursuant to the Credit
Agreement);
FIFTH, pro rata to the payment in full of all Secured
Obligations (other than those referred to above) owed to the Lenders (pro rata
as among the Lenders in accordance with their respective Commitments); and
SIXTH, to the Grantors, their successors and assigns, or
as a court of competent jurisdiction may otherwise direct.
Upon any sale of the Collateral by the Agent (including, without limitation,
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the Agent or of the officer making the sale shall be a sufficient
discharge to the purchaser or purchasers of the Collateral so sold and such
purchaser or purchasers shall not be obligated to see to the application of any
part of the purchase
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money paid over to the Agent or such officer or be answerable in any way for the
misapplication thereof.
17. Locations of Collateral; Place of Business. (a) Each Grantor
hereby represents and warrants that all the Collateral is located at the
locations listed on Schedule I hereto and that its federal employer
identification number is as set forth on said Schedule. The Grantors agree not
to establish, or permit to be established, any other location for Collateral
unless all filings under the Uniform Commercial Code as in effect in any state
or otherwise which are required by this Agreement or the Credit Agreement to be
made with respect to the Collateral have been made and the Agent has a valid,
legal and perfected first priority security interest in the Collateral.
(b) Each Grantor confirms that its chief executive
office is located as indicated on Schedule I hereto. Each Grantor agrees not to
change, or permit to be changed, the location of its chief executive office
unless all filings under the Uniform Commercial Code or otherwise which are
required by this Agreement or the Credit Agreement to be made have been made and
the Agent has a valid, legal and perfected first priority security interest.
18. Security Interest Absolute. All rights of the Agent
hereunder, the Security Interest, and all obligations of the Grantors hereunder,
shall be absolute and unconditional irrespective of (i) any lack of validity or
enforceability of the Credit Agreement, any other Loan Document, any other
agreement with respect to any of the Secured Obligations or any other agreement
or instrument relating to any of the foregoing, (ii) any change in the time,
manner or place of payment of, or in any other term of, all or any of the
Secured Obligations, or any other amendment or waiver of or consent to any
departure from the Credit Agreement, any other Loan Document or any other
agreement or instrument, (iii) any exchange, release or nonperfection of any
other Collateral, or any release or amendment or waiver of or consent to or
departure from any guarantee, for all or any of the Secured Obligations, or (iv)
any other circumstance which might otherwise constitute a defense available to,
or discharge of, the Grantors, any of the Guarantors or any other obligor in
respect of the Secured Obligations or in respect of this Agreement.
19. No Waiver. No failure on the part of the Agent to exercise,
and no delay in exercising, any right, power or remedy hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy by the Agent preclude any other or further exercise thereof or
the exercise of any other right, power or remedy. All remedies hereunder are
cumulative and are not exclusive of any other remedies provided by law. The
Agent and the Lenders shall not be deemed to have waived any rights hereunder or
under any other agreement or instrument unless such waiver shall be in writing
and signed by such parties.
20. Agent Appointed Attorney-in-Fact. Each Grantor hereby
appoints the Agent the attorney-in-fact of such Grantor solely for the purpose
of carrying out the provisions of this Agreement
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and taking any action and executing any instrument which the Agent may deem
necessary or advisable to accomplish the purposes hereof, which appointment is
irrevocable and coupled with an interest.
21. Agent's Fees and Expenses. The Grantors shall be jointly and
severally obligated to, upon demand, pay to the Agent the amount of any and all
reasonable expenses, including the reasonable fees and expenses of its counsel
and of any experts or agents which the Agent may incur in connection with (i)
the administration of this Agreement, (ii) the custody or preservation of, or
the sale of, collection from, or other realization upon, any of the Collateral,
(iii) the exercise or enforcement of any of the rights of the Agent hereunder,
or (iv) the failure of any representation or warranty of a Grantor hereunder to
be true and correct in all material respects or the failure by any Grantor to
perform or observe any of the provisions hereof. In addition, the Grantors
jointly and severally indemnify and hold the Agent and the Lenders harmless from
and against any and all liability incurred by the Agent or the Lenders hereunder
or in connection herewith, unless such liability shall be due to the gross
negligence or willful misconduct of the Agent or the Lenders, as the case may
be. Any such amounts payable as provided hereunder or thereunder shall be
additional Secured Obligations secured hereby and by the other Security
Documents.
22. Binding Agreement; Assignments. This Agreement, and the
terms, covenants and conditions hereof, shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns,
except that the Grantors shall not be permitted to assign this Agreement or any
interest herein or in the Collateral, or any part thereof, or any cash or
property held by the Agent as Collateral under this Agreement, except as
contemplated by this Agreement or the Credit Agreement.
23. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE
EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR
REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE
LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
24. Notices. All communications and notices hereunder shall be in
writing and given as provided in the Credit Agreement.
25. Severability. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable the
remaining provisions contained herein shall not in any way be affected or
impaired.
26. Section Headings. Section headings used herein are for
convenience only and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.
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27. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument. This Agreement shall be
effective when a counterpart which bears the signature of the Grantors shall
have been delivered to the Agent.
28. Termination. This Agreement and the Security Interest shall
terminate when (a) all the Secured Obligations have been fully and indefeasibly
paid in cash, (b) the Lenders have no further commitment to make any Loans under
the Credit Agreement, and (c) the Agent shall have no further obligation to
issue any Letters of Credit, at which time the Agent shall execute and deliver
to the Grantors all Uniform Commercial Code termination statements and similar
documents which the Grantor shall reasonably request to evidence such
termination; provided, however, that all indemnities of the Grantors contained
in this Agreement shall survive, and remain operative and in full force and
effect regardless of, the termination of this Agreement.
[Remainder of this page intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Security Agreement as of the day and year first above written.
WATER PIK, INC.
By: /s/ S. L. Main
Name: S. L. Main
Title: Controller
LAARS, INC.
By: /s/ S. L. Main
Name: S. L. Main
Title: Controller
WATER PIK TECHNOLOGIES, INC.
By: /s/ S. L. Main
Name: S. L. Main
Title: Controller
JANDY INDUSTRIES, INC.
By: /s/ S. L. Main
Name: S. L. Main
Title: Controller
THE CHASE MANHATTAN BANK, as Agent
By: /s/ Robert J. Arth
Name: Robert J. Arth
Title: Vice President
14
The registrant hereby agrees to furnish supplementally to the Commission, upon
request, a copy of any omitted schedule to any of the agreements contained or
incorporated by reference herein.
<PAGE> 1
Exhibit 4.6
SECURITY AGREEMENT AND MORTGAGE -
TRADEMARKS AND PATENTS
SECURITY AGREEMENT AND MORTGAGE - TRADEMARKS AND PATENTS made
this 29th day of November, 1999 among Water Pik, Inc., a Delaware corporation
("Waterpik" or a "Debtor"), Laars, Inc., a Delaware corporation ("Laars" or a
"Debtor"), Jandy Industries, Inc., a California corporation ("Jandy" or a
"Debtor"), Water Pik Technologies, Inc., a Delaware corporation ("Holdings" and
together with Waterpik, Laars and Jandy, collectively, the "Debtors") and The
Chase Manhattan Bank, a New York banking corporation having an office at 600
Fifth Avenue, New York, New York 10020, as agent (referred to herein as the
"Secured Party") for (i) the lenders (the "Lenders") named in Schedule 2.01 of
the Restated Credit Agreement dated as of the date hereof, among the Debtors,
the guarantors named therein (the "Guarantors"), the Lenders and the Secured
Party (as amended, modified or supplemented from time to time in accordance with
its terms, the "Credit Agreement") and (ii) for itself as issuer of the Letters
of Credit.
A. Waterpik has adopted or intends to adopt the terms and
designs described in Schedule A-1 annexed hereto and made a part hereof. Laars
has adopted or intends to adopt the terms and designs described in Schedule A-2
annexed hereto and made a part hereof. Jandy has adopted or intends to adopt the
terms and designs described in Schedule A-3 annexed hereto and made a part
hereof.
B. To Debtors' knowledge, Waterpik is the owner of the patents
listed on Schedule B-1 hereto, Laars is the owner of the patents listed on
Schedule B-2 hereto, and Jandy is the owner of the patents listed on Schedule
B-3 hereto.
C. The Secured Party and the Lenders have agreed to extend
Loans and certain other financial accommodations including, without limitation,
the issuance of Letters of Credit to the Debtors pursuant to, and subject to the
terms and conditions of, the Credit Agreement. The obligation of the Lenders to
extend such Loans and of the Secured Party to issue Letters of Credit under the
Credit Agreement is conditioned on the execution and delivery by the Debtors of
a security agreement in the form hereof to secure the following (the "Secured
Obligations"): (i) all Obligations (such Obligations to include, without
limitation, the due and punctual payment and performance of (a) the principal of
and interest on the Loans, when and as due, whether at maturity, by
acceleration, upon one or more dates set for prepayment or otherwise, (b)
Indebtedness at any time and from time to time under the Letters of Credit, (c)
all obligations of the Debtors at any time and from time to time under this
security agreement and (d) all other obligations of the Debtors and the
Guarantors at any time and from time to time under the Credit Agreement and the
other Loan Documents) and (ii) all obligations of Holdings under the Guaranty.
<PAGE> 2
NOW, THEREFORE, IT IS AGREED that, as security for the full
and prompt payment and performance of the Secured Obligations, the Debtors
hereby mortgage to and pledge with the Secured Party for its own benefit and the
benefit of the Lenders, and grant to the Secured Party a security interest in,
all of its right, title and interest in and to (i) each of the Trademarks (as
hereinafter defined), and the goodwill of the business symbolized by each of the
Trademarks, all customer lists and other records of Debtors relating to the
distribution of products bearing the Trademarks and each of the registrations
described in Schedules A-1, A-2 and A-3; (ii) each of the Patents (as
hereinafter defined) and each of the granted letters patent listed on Schedules
B-1, B-2 and B-3 hereto; and (iii) any and all proceeds of the foregoing,
including, without limitation, any claims by Debtors against third parties for
infringement of the Trademarks or the Patents (collectively, the "Collateral") .
1. Terms defined in the Credit Agreement and not otherwise
defined herein, shall have the meaning set forth in the Credit Agreement. As
used in this Agreement, unless the context otherwise requires:
"Patents" shall mean (i) all letters patent of the United
States or any other country, all right, title and interest therein and thereto,
and all registrations and recordings thereof, including, without limitation,
applications, registrations and recordings in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country or any political subdivision thereof, all
whether now owned or hereafter acquired by Debtors, including, but not limited
to, those applications and letters patent described in Schedules B-1, B-2 and
B-3 annexed hereto and made a part hereof, and (ii) all reissues, continuations,
continuations-in-part, extensions or divisionals thereof and all licenses
thereof.
"Trademarks" shall mean (i) all trademarks, trade names,
trade dress, service marks, designs and general intangibles of like nature, now
existing or hereafter adopted or acquired, all right, title and interest therein
and thereto, and all registrations and recordings thereof, including, without
limitation, applications, registrations and recordings in the United States
Patent and Trademark Office or in any similar office or agency of the United
States, any State thereof, or any other country or any political subdivision
thereof, all whether now owned or hereafter acquired by Debtors, including, but
not limited to, those applications and registrations described in Schedules A-1,
A-2 and A-3 annexed hereto and made a part hereof, and (ii) all reissues,
extensions or renewals thereof and all licenses thereof.
2. Each Debtor hereby represents, warrants, covenants and
agrees as follows:
(a) To such Debtor's knowledge: (i) Waterpik has sole, full,
and clear title to each U.S. trademark registration described in Schedule
A-1hereto; (ii) Laars has sole, full, and clear title to each U.S. trademark
registration described in Schedule A-2 hereto; (iii) Jandy has sole, full, and
clear title to each U.S. trademark registration described in Schedule A-3
hereto; and (iv) no claim or action has been filed by any third party that any
U.S. trademark registration described in Schedules A-1, A-2 and A-3 hereto is
invalid. Such Debtor believes that each U.S. trademark registration described in
Schedules A-1, A-2 and A-3 hereto currently is in force.
<PAGE> 3
(b) Such Debtor will perform all acts and execute all
documents, including, without limitation, assignments for security in a form
suitable for filing with the United States Patent and Trademark Office,
substantially in the forms of Exhibits 1 and 2 hereof, respectively, requested
by the Secured Party at any time which are reasonable and necessary to evidence,
perfect, maintain, record and enforce the Secured Party's interest in the
Collateral or otherwise in furtherance of the provisions of this Agreement, and
such Debtor hereby authorizes the Secured Party to execute and file one or more
financing statements (and similar documents) or copies thereof or of this
Security Agreement with respect to the Collateral signed only by the Secured
Party.
(c) Except to the extent that the Secured Party, upon prior
written notice of such Debtor, shall consent, which consent shall not
unreasonably be withheld, such Debtor will continue to use those Trademarks held
by it that such Debtor considers to be of strategic commercial importance in a
way reasonably appropriate to maintain each such trademark free from any claim
of abandonment or nonuse, and such Debtor will not knowingly do any act or
knowingly omit to do any act that it reasonably understands may result in such
trademarks becoming invalid or unenforceable.
(d) To such Debtor's knowledge: (i) Waterpik has the sole,
full and clear title to each of the Patents described in Schedule B-1 hereto;
(ii) Laars has the sole, full and clear title to each of the Patents described
in Schedule B-2 hereto; (iii) Jandy has the sole, full and clear title to each
of the Patents described in Schedule B-3 hereto, and (iv) no claim or action has
been filed by any third party that any granted letters patent described in
Schedules A-1, A-2 and A-3 hereto is invalid. Such Debtor believes that each
issued letters patent described in Schedules A-1, A-2 and A-3 hereto currently
is in force.
(e) Such Debtor shall be obligated to, upon demand, pay to
the Secured Party the amount of any and all reasonable and necessary expenses,
including the reasonable and necessary fees and expenses of its counsel and of
any experts or agents which the Secured Party may incur in connection with (i)
the administration of this Agreement, (ii) the custody or preservation of, or
the sale of, collection from, or other realization upon, any of the Collateral,
(iii) the exercise or enforcement of any of the rights of the Secured Party
hereunder, or (iv) the failure of any representation or warranty of such Debtor
hereunder to be true and correct in all material respects or the failure by such
Debtor to perform or observe any of the provisions hereof. In addition, such
Debtor indemnifies and holds the Secured Party and the Lenders harmless from and
against any and all liability incurred by the Secured Party or the Lenders
hereunder or in connection herewith, unless such liability shall be due to the
gross negligence or willful misconduct of the Secured Party or the Lenders, as
the case may be. Any such amounts payable as provided hereunder or thereunder
shall be additional Secured Obligations secured hereby and by the other Security
Documents.
(f) In the event that such Debtor shall, either itself or
through any agent, employee, licensee or designee, (i) file an application for
the registration of any Patent or Trademark with the United States Patent and
Trademark Office or any similar office or agency of the United States, any State
thereof, any other country or any political subdivision thereof or (ii)
<PAGE> 4
file any assignment of any patent or trademark, which such Debtor may acquire
from a third party, with the United States Patent and Trademark Office or any
similar office or agency of the United States, any State thereof, any other
country or any political subdivision thereof, such Debtor shall, at the request
of the Secured Party, execute and file any and all agreements, instruments,
documents and papers as the Secured Party may supply that are necessary to
evidence the Secured Party's interest in such Patent or Trademark and the
goodwill and general intangibles of such Debtor relating thereto or represented
thereby.
(g) Such Debtor has the right and power to make the assignment
and to grant the security interest herein granted; and to such Debtor's
knowledge the Collateral is not now subject to any enforceable liens, mortgages,
assignments, security interests or encumbrances of any nature whatsoever, except
in favor of the Secured Party, and to the knowledge of such Debtor none of the
Collateral is subject to any claim.
(h) Except to the extent that Secured Party, upon prior
written notice from such Debtor, shall consent, which consent shall not
unreasonably be withheld, such Debtor will not assign, sell, mortgage, lease,
transfer, pledge, hypothecate, grant a security interest in or lien upon,
encumber, or otherwise dispose of any of the Collateral, and nothing in this
Agreement shall be deemed a consent by the Secured Party to any such action
except as expressly permitted herein.
(i) To such Debtor's knowledge, as of the date hereof neither
such Debtor nor any affiliate or subsidiary thereof owns any Patents that are in
force or has any Trademarks that are registered and in force in, or the subject
of pending applications in, the United States Patent and Trademark Office or any
similar office or agency of the United States, any State thereof, any other
country or any political subdivision thereof, other than those described in
Schedules A-1, A-2, A-3, B-1, B-2, and B-3 hereto.
(j) Such Debtor will take all steps reasonable and necessary
in any proceeding before the United States Patent and Trademark Office or any
similar office or agency of the United States, any State thereof, any other
country or any political subdivision thereof, to maintain each application and
registration of the Trademarks and Patents that it considers to be of strategic
commercial importance, including, without limitation, filing of renewals,
affidavits of use, and affidavits of incontestability.
(k) Such Debtor assumes all responsibility and liability
arising from the use of the Trademarks, and such Debtor hereby indemnifies and
holds Secured Party harmless from and against any claim, suit, loss, damage or
expense (including reasonable attorneys' fees) arising out of any alleged defect
in any product manufactured, promoted or sold by such Debtor (or any affiliate
or subsidiary thereof) in connection with any Trademark or out of the
manufacture, promotion, labeling, sale or advertisement of any such product by
such Debtor (or any affiliate or subsidiary thereof). Such Debtor agrees that
Secured Party does not assume, and shall have no responsibility for, the payment
of any sums due or to become due under any agreement or contract included in the
Collateral or the performance of any obligations to be performed under or with
respect to any such agreement or contract by such Debtor, and such Debtor hereby
agrees
<PAGE> 5
to indemnify and hold the Secured Party harmless with respect to any and all
claims by any person relating thereto.
(l) Secured Party may, in its sole discretion, pay any amount
or do any act required of such Debtor hereunder or reasonably requested by
Secured Party that is necessary to preserve, defend, protect, maintain, record
or enforce any Trademark or Patent that such Debtor considers to be of strategic
commercial importance, and which such Debtor fails to do or pay, and any such
payment shall be deemed an advance by Secured Party to such Debtor and shall be
payable on demand together with interest at the highest rate then payable on the
Secured Obligations.
(m) All licenses of its Trademarks and Patents which such
Debtor believes it has granted to third parties are set forth in Schedule C
hereto.
3. If an Event of Default occurs and is not cured within the
applicable period provided in the Credit Agreement, in addition to all other
rights and remedies of the Secured Party, whether under law, the Credit
Agreement or otherwise, all such rights and remedies being cumulative, not
exclusive and enforceable alternatively, successively or concurrently, without
(except as provided herein) notice to, or consent by, Debtors, the Secured Party
shall have the following rights and remedies: (a) the Secured Party may require
that Debtors discontinue any further use of the Patents; (b) the Secured Party
may, at any time and from time to time, upon 10 days' prior written notice to
Debtors, license, whether general, special or otherwise, and whether on an
exclusive or nonexclusive basis, any of the Patents or Trademarks, throughout
the world for such term or terms, on such conditions, and in such manner, as the
Secured Party shall in its sole discretion determine; (c) the Secured Party may
(without assuming any obligations or liability thereunder), at any time, enforce
(and shall have the exclusive right to enforce) against any licensee or
sublicensee all rights and remedies of Debtors in, to and under any one or more
license agreements with respect to the Collateral, and take or refrain from
taking any action under any thereof, and Debtors hereby release the Secured
Party from, and agree to hold the Secured Party free and harmless from and
against any claims arising out of, any action taken or omitted to be taken with
respect to any such license agreement; (d) the Secured Party may, at any time
and from time to time, upon 10 days' prior notice to Debtors, assign, sell, or
otherwise dispose of, the Collateral or any of it, either with or without
special or other conditions or stipulations, with power to buy the Collateral or
any part of it, and with power also to execute assurances, and do all other acts
and things for completing the assignment, sale or disposition which the Secured
Party shall, in its sole discretion, deem appropriate or proper; and (e) in
addition to the foregoing, in order to implement the assignment, sale or other
disposal of any of the Collateral pursuant to subparagraph 3(d) hereof, the
Secured Party may, at any time, pursuant to the authority granted in the Powers
of Attorney described in paragraph 4 hereof (such authority becoming effective
on the occurrence or continuation as hereinabove provided of an Event of
Default), execute and deliver on behalf of Debtors, one or more instruments of
assignment of the Patents or Trademarks (or any application or registration
thereof), in form suitable for filing, recording or registration in any country.
Debtors agree to pay when due all reasonable costs incurred in any such transfer
of the Patents or Trademarks, including any taxes, fees and reasonable
attorneys' fees, and all such costs shall be added to the Secured Obligations.
<PAGE> 6
The Secured Party may apply the proceeds actually received from any such
license, assignment, sale or other disposition to the reasonable costs and
expenses thereof, including, without limitation, reasonable attorneys' fees and
all legal, travel and other expenses which may be incurred by the Secured Party,
and then to the Secured Obligations, in such order as to principal or interest
as the Secured Party may desire; and Debtors shall remain liable and will pay
the Secured Party on demand any deficiency remaining, together with interest
thereon at a rate equal to the highest rate then payable on the Secured
Obligations and the balance of any expenses unpaid. Nothing herein contained
shall be construed as requiring the Secured Party to take any such action at any
time. In the event of any such license, assignment, sale or other disposition of
the Collateral, or any of it, after the occurrence or continuation as
hereinabove provided of an Event of Default, Debtors shall supply their know-how
and expertise relating to the manufacture and sale of the products bearing or in
connection with the Trademarks or Patents, and their customer lists and other
records relating to the Trademarks or Patents and to the distribution of said
products, to the Secured Party or its designee.
The proceeds of any sale of Collateral, as well as any
Collateral consisting of cash, shall be applied by the Secured Party as follows:
FIRST, to the Secured Party to reimburse the Secured Party for
that portion of the payments, if any, made by it with respect to Letters of
Credit for which a Lender, as a participant in such Letter of Credit pursuant to
Section 2.18 of the Credit Agreement, failed to pay its pro rata share thereof
as required pursuant to such Section 2.18;
SECOND, to the payment of all reasonable costs and expenses
incurred by the Secured Party in connection with such sale or otherwise in
connection with this Agreement or any of the Secured Obligations, including, but
not limited to, all court costs and the reasonable fees and expenses of its
agents and legal counsel, the repayment of all advances made by the Secured
Party hereunder on behalf of the Debtors and any other reasonable costs or
expenses incurred in connection with the exercise of any right or remedy
hereunder;
THIRD, to the Secured Party to be held as cash collateral to
the extent of the undrawn amount, if any, or outstanding Letters of Credit;
FOURTH, pro rata to the payment in full of principal and
interest in respect of any Loans outstanding (pro rata as among the Lenders in
accordance with the amounts of the Loans made by them pursuant to the Credit
Agreement);
FIFTH, pro rata to the payment in full of all Secured
Obligations (other than those referred to above) owed to the Lenders (pro rata
as among the Lenders in accordance with their respective Commitments); and
SIXTH, to the Debtors, their successors or assigns, or as a
court of competent jurisdiction may otherwise direct.
4. Concurrently with the execution and delivery hereof, each
Debtor is executing and delivering to the Secured Party, in the form of Exhibit
3 hereto, five originals of a Power of Attorney for the implementation of the
assignment, sale or other disposal of the Trademarks and Patents pursuant to
paragraphs 3(d) and (e) hereof and Debtors hereby release
<PAGE> 7
the Secured Party from any claims, causes of action and demands at any time
arising out of or with respect to any actions taken or omitted to be taken by
the Secured Party under the powers of attorney granted herein, other than
actions taken or omitted to be taken through the gross negligence or willful
misconduct of the Secured Party.
5. All rights of the Secured Party hereunder, the security
interest granted to the Secured Party hereunder, and all obligations of Debtors
hereunder, shall be absolute and unconditional irrespective of (i) any lack of
validity or enforceability of the Credit Agreement, any other Loan Document, any
other agreement with respect to any of the Secured Obligations or any other
agreement or instrument relating to any of the foregoing, (ii) any change in the
time, manner or place of payment of, or in any other term of, all or any of the
Secured Obligations, or any other amendment or waiver of or consent to any
departure from the Credit Agreement, any other Loan Document or any other
agreement or instrument, (iii) any exchange, release or nonperfection of any
other Collateral, or any release or amendment or waiver of or consent to or
departure from any guarantee, for all or any of the Secured Obligations, or (iv)
any other circumstance which might otherwise constitute a defense available to,
or discharge of, Debtors, any of the Guarantors or any other obligor in respect
of the Secured Obligations or in respect of this Agreement.
6. No failure on the part of the Secured Party to exercise,
and no delay in exercising, any right, power or remedy hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy by the Secured Party preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. All remedies
hereunder are cumulative and are not exclusive of any other remedies provided by
law. The Secured Party and the Lenders shall not be deemed to have waived any
rights hereunder or under any other agreement or instrument unless such waiver
shall be in writing and signed by such parties.
7. This Agreement, and the terms, covenants and conditions
hereof, shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns, except that the Debtors shall not be
permitted to assign this Agreement or any interest herein or in the Collateral,
or any part thereof, or any cash or property held by the Secured Party as
Collateral under this Agreement, except as contemplated by this Agreement or the
Credit Agreement.
8. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE
VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
<PAGE> 8
9. All communications and notices hereunder shall be in
writing and given as provided in the Credit Agreement.
10. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable the remaining
provisions contained herein shall not in any way be affected or impaired.
11. Section headings used herein are for convenience only and
are not to affect the construction of, or to be taken into consideration in
interpreting, this Agreement.
12. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument. This Agreement shall be
effective when counterparts which bear the signature of each Debtor shall have
been delivered to the Secured Party.
13. This Agreement and the security interest granted hereunder
shall terminate when (a) all the Secured Obligations have been fully and
indefeasibly paid in cash, (b) the Lenders have no further commitment to make
any Loans under the Credit Agreement, and (c) the Secured Party shall have no
further obligation to issue any Letters of Credit, at which time the Secured
Party shall execute and deliver to the Debtors all Uniform Commercial Code
termination statements, terminations of assignment and similar documents which
the Debtors shall reasonably request to evidence such termination; provided,
however, that all indemnities of the Debtors contained in this Agreement shall
survive, and remain operative and in full force and effect regardless of, the
termination of this Agreement.
[Remainder of this page intentionally left blank.]
<PAGE> 9
IN WITNESS WHEREOF, Debtors and the Secured Party have caused
this Agreement to be executed by their respective officers thereunto duly
authorized as of the day and year first above written.
WATER PIK, INC.
By /s/ S.L. Main
-------------
Name: S.L. Main
Title: Controller
LAARS, INC.
By /s/ S.L. Main
-------------
Name: S.L. Main
Title: Controller
JANDY INDUSTRIES, INC.
By /s/ S.L. Main
-------------
Name: S.L. Main
Title: Controller
WATER PIK TECHNOLOGIES, INC.
By /s/ S.L. Main
-------------
Name: S.L. Main
Title: Controller
THE CHASE MANHATTAN BANK, as
Secured Party
By /s/ Robert J. Arth
------------------
Name: Robert J. Arth
Title: Vice President
The registrant hereby agrees to furnish supplementally to the Commission, upon
request, a copy of any omitted schedule to any of the agreements contained or
incorporated by reference herein.
<PAGE> 1
Exhibit 4.7
GUARANTEE
GUARANTEE dated as of November 29, 1999, by Water Pik
Technologies, Inc., a Delaware corporation (the "Guarantor"), in favor of The
Chase Manhattan Bank, a New York banking corporation, as agent ("Agent") for (i)
the Lenders (the "Lenders") named in Schedule 2.01 of the Restated Credit
Agreement dated as of the date hereof, among Water Pik, Inc., a Delaware
corporation ("Water Pik" or a "Borrower"), Laars, Inc., a Delaware corporation
("Laars" or a "Borrower" and together with Water Pik, the "Borrowers"), the
Guarantor, the Lenders named therein, and the Agent (as amended, modified or
supplemented from time to time in accordance with its terms, the "Credit
Agreement"; capitalized terms used herein and not otherwise defined herein shall
have the meanings attributed thereto in the Credit Agreement) and (ii) itself as
issuer of the Letters of Credit.
The Agent and the Lenders have agreed to extend Loans and certain
other financial accommodations to, including, without limitation, the issuance
of the Letters of Credit for the account of the Borrowers pursuant to, and
subject to the terms and conditions of, the Credit Agreement. The obligation of
the Lenders to extend such Loans and of the Agent to issue the Letters of Credit
under the Credit Agreement is conditioned on the execution and delivery by the
Guarantor of a guarantee in the form hereof of the Obligations (such Obligations
to include, without limitation, the due and punctual payment and performance of
(a) the principal of and interest on the Loans, when and as due, whether at
maturity, by acceleration, upon one or more dates set for prepayment or
otherwise, (b) Indebtedness at any time and from time to time under the Letters
of Credit, (c) all other obligations of the Borrowers at any time and from time
to time under the Credit Agreement and the other Loan Documents and (d) all
obligations of the Guarantor at any time and from time to time under the Loan
Documents).
Accordingly, in consideration of the premises and in order to
induce the Agent and the Lenders to make Loans and extend other financial
accommodations under the Credit Agreement, the Guarantor hereby agrees as
follows:
Section 1. Guarantee. The Guarantor hereby irrevocably and
unconditionally guarantees the punctual payment when due, whether at stated
maturity, by acceleration or otherwise, and the punctual performance, of all
present and future Obligations of the Borrowers (the foregoing being herein
referred to as the "Guaranteed Obligations");
Section 2. Waiver. The Guarantor hereby absolutely,
unconditionally and irrevocably waives, to the fullest extent permitted by law,
(i) promptness, diligence, notice of acceptance and any
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<PAGE> 2
other notice with respect to this Guarantee, (ii) presentment, demand of
payment, protest, notice of dishonor or nonpayment and any other notice with
respect to the Guaranteed Obligations, (iii) any requirement that the Agent or
Lenders protect, secure, perfect or insure any security interest or Lien or any
property subject thereto or exhaust any right or take any action against the
Borrowers or any other person or any Collateral, and (iv) any other action,
event or precondition to the enforcement of this Guarantee or the performance by
the Guarantor of the obligations hereunder.
Section 3. Guarantee Absolute. (a) The Guarantor guarantees that,
to the fullest extent permitted by law, the Guaranteed Obligations will be paid
or performed strictly in accordance with their terms, regardless of any law,
regulation or order now or hereafter in effect in any jurisdiction affecting any
of such terms or the rights of the Agent or any Lender with respect thereto.
(b) No invalidity, irregularity, voidability, voidness or
unenforceability of the Credit Agreement, the Notes, or any other Loan Document
or any other agreement or instrument relating thereto, or of all or any part of
the Guaranteed Obligations or of any security therefor shall affect, impair or
be a defense to this Guarantee.
(c) This Guarantee is one of payment and performance, not
collection, and the obligations of the Guarantor under this Guarantee are
independent of the Obligations of the Borrowers, and a separate action or
actions may be brought and prosecuted against the Guarantor to enforce this
Guarantee, irrespective of whether any action is brought against the Borrowers
or whether the Borrowers are joined in any such action or actions.
(d) The liability of the Guarantor under this Guarantee shall be
absolute and unconditional irrespective of:
(i) any change in the manner, place or terms of payment or
performance, and/or any change or extension of the time of payment or
performance of, renewal or alteration of, any Obligation, any security
therefor, or any liability incurred directly or indirectly in respect
thereof, or any other amendment or waiver of or any consent to departure
from the Credit Agreement or the Notes or any other Loan Document,
including any increase in the Guaranteed Obligations resulting from the
extension of additional credit to the Borrowers or any of their
subsidiaries or otherwise;
(ii) any sale, exchange, release, surrender, realization
upon any property by whomsoever at any time pledged or mortgaged to
secure, or howsoever securing, all or any of the Guaranteed Obligations,
and/or any offset against, or failure to perfect, or continue the
perfection of, any Lien in any such property, or delay in the perfection
of any such Lien, or any amendment or waiver of or consent to departure
from any other guarantee for all or any of the Guaranteed Obligations;
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<PAGE> 3
(iii) any exercise or failure to exercise any rights
against the Borrowers or others (including the Guarantor);
(iv) any settlement or compromise of any Obligation, any
security therefor or any liability (including any of those hereunder)
incurred directly or indirectly in respect thereof or hereof, and any
subordination of the payment of all or any part thereof to the payment of
any Obligation (whether due or not) of the Borrowers to creditors of the
Borrowers other than the Guarantor;
(v) any manner of application of Collateral, or proceeds
thereof, to all or any of the Guaranteed Obligations, or any manner of
sale or other disposition of any Collateral for all or any of the
Guaranteed Obligations or any other assets of the Borrowers or any of
their subsidiaries;
(vi) any change, restructuring or termination of the
existence of the Borrowers or any of their subsidiaries; or
(vii) any other agreements or circumstance of any nature
whatsoever which might otherwise constitute a defense available to, or a
discharge of, this Guarantee and/or obligations of the Guarantor
hereunder, or a defense to, or discharge of, the Borrowers or any other
person or party relating to this Guarantee or the obligations of the
Guarantor hereunder or otherwise with respect to the Loans, Letters of
Credit or other financial accommodations to the Borrowers.
(e) The Agent may at any time and from time to time (whether or
not after revocation or termination of this Guarantee) without the consent of,
or notice (except as shall be required by applicable statute and cannot be
waived) to, the Guarantor, and without incurring responsibility to the Guarantor
or impairing or releasing the obligations of the Guarantor hereunder, apply any
sums by whomsoever paid or howsoever realized to any Guaranteed Obligation
regardless of what Guaranteed Obligations remain unpaid.
(f) This Guarantee shall continue to be effective or be
reinstated, as the case may be, if claim is ever made upon the Agent or any
Lender for repayment or recovery of any amount or amounts received by the Agent
or such Lender in payment or on account of any of the Guaranteed Obligations and
the Agent or such Lender repays all or part of said amount by reason of any
judgment, decree or order of any court or administrative body having
jurisdiction over the Agent or such Lender or the respective property of each,
or any settlement or compromise of any such claim effected by the Agent
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<PAGE> 4
or such Lender with any such claimant (including the Borrowers), then and in
such event the Guarantor agrees that any such judgment, decree, order,
settlement or compromise shall be binding upon the Guarantor, notwithstanding
any revocation hereof or the cancellation of any note (including the Notes) or
other instrument evidencing any Obligation, and the Guarantor shall be and
remain liable to the Agent and/or such Lender hereunder for the amount so repaid
or recovered to the same extent as if such amount had never originally been
received by the Agent or such Lender.
Section 4. Continuing Guarantee. This Guarantee is a continuing
one and shall (i) remain in full force and effect until the indefeasible payment
and satisfaction in full of the Guaranteed Obligations, (ii) be binding upon the
Guarantor, its successors and assigns, and (iii) inure to the benefit of, and be
enforceable by, the Agent and its successors, transferees and assigns. All
obligations to which this Guarantee applies or may apply under the terms hereof
shall be conclusively presumed to have been created in reliance hereon.
Section 5. Representations, Warranties and Covenants. The
Guarantor hereby represents, warrants and covenants to and with the Agent
that:
(a) The Guarantor has the corporate power to execute and deliver
this Guarantee and to incur and perform its obligations hereunder;
(b) The Guarantor has duly taken all necessary corporate action
to authorize the execution, delivery and performance of this Guarantee
and to incur and perform its obligations hereunder;
(c) No consent, approval, authorization or other action by, and
no notice to or of, or declaration or filing with, any governmental or
other public body, or any other Person, is required for the due
authorization, execution, delivery and performance by the Guarantor of
this Guarantee or the consummation of the transactions contemplated
hereby;
(d) The execution, delivery and performance by the Guarantor of
this Guarantee do not and will not violate or otherwise conflict with any
term or provision of any material agreement, instrument, judgment,
decree, order or any statute, rule or governmental regulation applicable
to the Guarantor or result in the creation of any Lien upon any of its
properties or assets pursuant thereto;
(e) This Guarantee has been duly authorized, executed and
delivered by the Guarantor and constitutes the legal, valid and binding
obligation of the Guarantor, and is enforceable against the Guarantor in
accordance with its terms, except as enforcement thereof may be
4
<PAGE> 5
subject to the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar law affecting creditors' rights
generally, and general principles of equity (regardless of whether such
enforcement is sought in a proceeding in equity or at law);
(f) No proceeding referred to in paragraph (e) or (f) of Article
VIII of the Credit Agreement is pending against the Guarantor and no
other event referred to in such Article VIII has occurred and is
continuing, and the property of the Guarantor is not subject to any
assignment for the benefit of creditors;
(g) The capital stock of Water Pik and Laars owned by the
Guarantor on the date hereof consists of 1000 shares of common stock,
$0.01 par value, and 1000 shares of common stock, $ 0.01 par value,
respectively, constituting all of the authorized, issued and outstanding
capital stock of the Borrowers on the date hereof and no Borrower has any
outstanding rights, options, warrants or agreements pursuant to which it
may be required to sell any of its capital stock or other equity
security; and
(h) Without the prior written consent of the Agent, own or
operate any assets or properties or engage in any business or other
activity whatsoever (including, without limitation, the incurring of
Indebtedness or the granting of Liens), except for its ownership of the
capital stock of the Borrowers and [Canadian Sub] and activities directly
in connection therewith and except as otherwise may be specifically
permitted by the other Loan Documents.
Section 6. Expenses. The Guarantor will upon demand reimburse the
Agent for any sums, costs, and expenses which the Agent may pay or incur
pursuant to the provisions of this Guarantee or in negotiating, executing,
perfecting, defending, protecting or enforcing this Guarantee or in enforcing
payment of the Guaranteed Obligations or otherwise in connection with the
provisions hereof, including court costs, collection charges, travel expenses,
and reasonable attorneys' fees, together with interest thereon as specified in
Section 12 hereof.
Section 7. Terms. (a) All terms defined in the UCC and used
herein shall have the meanings as defined in the UCC, unless the context
otherwise requires.
(b) The words "include," "includes" and "including" shall be
deemed to be followed by the phrase "without limitation".
(c) All references herein to Sections and subsections shall be
deemed to be references to Sections and subsections of this Guarantee unless the
context shall otherwise require.
5
<PAGE> 6
Section 8. Amendments and Modification. No provision hereof shall
be modified, altered or limited except by written instrument expressly referring
to this Guarantee and to such provision, and executed by the party to be
charged.
Section 9. Subordination of Subrogation Rights. The Guarantor
hereby waives and releases any and all rights and claims it may now or hereafter
have or acquire against the Borrowers that would constitute it a "creditor" of
the Borrowers for purposes of the Federal Bankruptcy Code, including all rights
of subrogation against the Borrowers and their property and all rights of
indemnification, contribution and reimbursement from the Borrowers and their
property, regardless of whether such rights arise in connection with this
Guarantee, by operation of law, pursuant to contract or otherwise.
Section 10. Remedies Upon Default; Right of Set-Off. (a) Upon the
occurrence and during the continuance of any Event of Default, the Agent may,
without notice to or demand upon the Borrowers or the Guarantor, declare any
Guaranteed Obligations immediately due and payable, and shall be entitled to
enforce the obligations of the Guarantor hereunder.
(b) Upon such declaration by the Agent, the Agent and any Lender
is hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by the Agent or any Lender to or for the credit or the account of
the Guarantor against any and all of the obligations of the Guarantor now or
hereafter existing under this Guarantee, whether or not the Agent or such Lender
shall have made any demand under this Guarantee and although such obligations
may be contingent and unmatured. The Agent agrees promptly to notify the
Guarantor after any such set-off and application, provided that the failure to
give such notice shall not affect the validity of such set-off and application.
The rights of the Agent and Lenders under this Section 10 are in addition to
other rights and remedies (including other rights of set-off) which the Agent
and Lenders may have.
Section 11. Statute of Limitations. Any acknowledgment or new
promise, whether by payment of principal or interest or otherwise and whether by
the Borrowers or others (including the Guarantor), with respect to any of the
Guaranteed Obligations shall, if the statute of limitations in favor of the
Guarantor against the Agent or Lenders shall have commenced to run, toll the
running of such statute of limitations and, if the period of such statute of
limitations shall have expired, prevent the operation of such statute of
limitations.
Section 12. Interest. All amounts payable from time to time by
the Guarantor hereunder shall bear interest at the interest rate per annum
specified in Section 2.08 of the Credit
6
<PAGE> 7
Agreement.
Section 13. Rights and Remedies Not Waived. No act, omission or
delay by the Agent shall constitute a waiver of its rights and remedies
hereunder or otherwise. No single or partial waiver by the Agent of any default
hereunder or right or remedy which it may have shall operate as a waiver of any
other default, right or remedy or of the same default, right or remedy on a
future occasion.
Section 14. Admissibility of Guarantee. The Guarantor agrees that
any copy of this Guarantee signed by the Guarantor and transmitted by telecopier
for delivery to the Agent shall be admissible in evidence as the original itself
in any judicial or administrative proceeding, whether or not the original is in
existence.
Section 15. Notices. All notices, requests and demands to or upon
the Agent or the Guarantor under this Agreement shall be in writing and given as
provided in the Credit Agreement (with respect to the Guarantor, to the
addresses of the Borrowers as set forth in the Credit Agreement).
Section 16. Counterparts. This Guarantee may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original
and all of which shall together constitute one and the same agreement.
Section 17. CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL; ETC.
(a) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTEE MAY BE BROUGHT
IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR
THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS
GUARANTEE, THE GUARANTOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS. THE GUARANTOR HEREBY IRREVOCABLY WAIVES, IN CONNECTION WITH
ANY SUCH ACTION OR PROCEEDING, (i) TRIAL BY JURY, (ii) TO THE EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION, INCLUDING ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN
SUCH RESPECTIVE JURISDICTIONS AND (iii) THE RIGHT TO INTERPOSE ANY SET-OFF,
COUNTERCLAIM OR CROSS-CLAIM (UNLESS SUCH SET-OFF, COUNTERCLAIM OR CROSS-CLAIM
COULD NOT, BY
7
<PAGE> 8
REASON OF ANY APPLICABLE FEDERAL OR STATE PROCEDURAL LAWS, BE INTERPOSED,
PLEADED OR ALLEGED IN ANY OTHER ACTION).
(b) The Guarantor irrevocably consents to the service of process
of any of the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by certified mail, postage prepaid, to the Guarantor
at its address determined pursuant to Section 15 hereof.
(c) Nothing herein shall affect the right of the Agent to serve
process in any other manner permitted by law or to commence legal proceedings or
otherwise proceed against the Guarantor in any other jurisdiction.
(d) The Guarantor hereby waives presentment, notice of dishonor
and protests of all instruments included in or evidencing any of the Guaranteed
Obligations, and any and all other notices and demands whatsoever (except as
expressly provided herein).
Section 18. GOVERNING LAW. THIS GUARANTEE AND THE GUARANTEED
OBLIGATIONS SHALL BE GOVERNED IN ALL RESPECTS BY THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED IN SUCH STATE, WITHOUT
GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
Section 19. Captions; Separability. (a) The captions of the
Sections and subsections of this Guarantee have been inserted for convenience
only and shall not in any way affect the meaning or construction of any
provision of this Guarantee.
(b) If any term of this Guarantee shall be held to be invalid,
illegal or unenforceable, the validity of all other terms hereof shall in no way
be affected thereby.
Section 20. Acknowledgment of Receipt. The Guarantor acknowledges
receipt of a copy of this Guarantee and each of the Loan Documents.
[Remainder of this page intentionally left blank]
8
<PAGE> 9
IN WITNESS WHEREOF, the Guarantor has duly executed or caused
this Guarantee to be duly executed in the State of New York as of the date first
above set forth.
WATER PIK TECHNOLOGIES, INC.
By: /s/ S. L. Main
Name: S. L. Main
Title: Controller
9
<PAGE> 1
Exhibit 4.8
[BANQUE NATIONALE DE PARIS (CANADA) LETTERHEAD]
MONTREAL, OCTOBER 28ST 1999
WATER PIK CANADA LTD.
35, Grand Marshall Drive
Scarborough, Ontario
M1B 5N9
hereafter referred to as the "Borrower"
Attention: VICTOR C. STREUFERT
Subject: Revolving Line of Credit facility in the amount of CAD
11,000,000 and Bulge facility in the amount of CAD 1,000,000
and Forward exchange contract facility in the amount of CAD
2,000,000
Dear Sir:
Further to our recent discussions, and your acceptance of our conditional
proposal sent to you on September 30th, 1999, we are pleased to offer you new
credit facilitates totaling CAD 14,000,000, according to the terms and
conditions set forth below and those stipulated in Appendix A, which is deemed
to be an integral part of this document. This letter replaces and supersedes the
one we sent you on October 21st, 1999, which is now null and void.
Should you accept this commitment letter and sign all the related documents to
the Bank's satisfaction prior to the repayment of the facilities granted to you
by the Bank under the commitment letter dated August 4th, 1999 (the "August 4th
Credits"), we will assume that, as per our recent conversations, you wish the
Bank to roll-over and transfer the outstanding amounts of the August 4th Credits
to the credits offered to you below. Accordingly, and unless you advise us
otherwise, we would waive our demand of payment made to you upon October 4th,
1999, but would nonetheless end the Bridge revolving credit and Forward exchange
contracts facilities granted to you under the commitment letter dated August
4th, 1999, and roll-over and transfer all of the outstandings under these
facilities respectively to the Revolving credit and Forward exchange contracts
facilities offered to you below, the whole upon perfection by the Bank of the
security mentioned in section 8 (which shall rank as listed hereto), which
should be completed within 72 hours of the receipt by the Bank of said
documents, and receipt from you of a roll-over notice to that effect.
This offer is based on the representations, information and documents that you
provided.
1. AMOUNT AND NATURE OF THE CREDIT:
1.1. Revolving credit of CAD 11,000,000 or its US dollar
equivalent;
1.2. Bulge revolving credit of CAD 1,000,000 or its US dollar
equivalent for the months of March, April and May of each
year;
<PAGE> 2
1.3. Forward exchange contract facility for a maximum overall
amount of CAD 2,000,000 not exceeding a risk equivalent of CAD
220,000 and for the terms of no longer than 12 months. The
risk equivalent is determined by the Bank by evaluating the
forward exchange contracts at their market value, taking
particular note of the time remaining on each forward exchange
contract.
2. PURPOSE OF THE CREDIT:
To finance the Borrower's import and export business and its current operations
needs as well as hedge currency risk.
3. CREDIT MECHANISMS AND LIMIT:
3.1. The Borrower may utilize the revolving and bulge credits by
using one of the mechanisms indicated below or a combination
thereof not exceeding the limit determined for each credit:
3.1.1. overdraft advances;
3.1.2. letters of credit with merchandise consigned to the
Bank for a global amount not exceeding CAD 500,000;
3.1.3. letters of credit with merchandise consigned to the
Borrower for a global amount not exceeding CAD
500,000;
3.1.4. documentary acceptances with terms not exceeding 90
days for a global amount not exceeding CAD 500,000;
3.1.5. letters of guarantee for a global amount not
exceeding CAD 500,000 and for terms not exceeding 12
months (except for the letters of guarantee already
issued or to be issued in favor of Gaz Metropolitan
and Hydro-Quebec that may have longer terms than 12
months);
3.1.6. discounting of documentary credits and drafts
("Receivables") having a term no longer than 180 days
and for an aggregate amount no greater than CAD
500,000.
3.2. The aggregate amount of letters of credit with merchandise
consigned to the Bank, letters of credit with merchandise
consigned to the Borrower, documentary acceptances and letters
of guarantee cannot, at any time, exceed the amount of CAD
500,000.
3.3. The aggregate amount of utilization by means of letters of
credit with merchandise consigned to the Bank, calculated at
20%, and of the utilizations of the letters of credit with
merchandise consigned to the Borrower, calculated at 100%,
shall not exceed the sum of:
(i) 80% of the Borrower's domestic, American and foreign
accounts receivable of less than 90 days deemed acceptable by
the Bank, and
<PAGE> 3
(ii) 75% of the forward dating for the months of October to
May inclusively, payable on June 30th at the latest, based on
the Borrower's accounts receivable deemed acceptable by the
Bank.
3.4. In addition, the aggregate amount of utilization of the
revolving and bulge credits by means of overdraft advances,
letters or guarantees and documentary acceptances, shall not
exceed the sum of the following amounts:
(i) 80% of the Borrower's domestic, American and foreign
accounts receivable of less than 90 days deemed acceptable to
the Bank. Accounts receivable already used to margin
utilizations defined in section 3.3, are furthermore excluded;
and
(ii) 75% of the forward dating for the months of October to
May inclusively, payable on June 30th at the latest, based on
the Borrower's accounts receivable deemed acceptable by the
Bank but excluding the ones already used to margin
utilizations defined in section 3.3;
and
(iii) 40% of the Borrower's inventory of raw materials or
finished products evaluated at cost or market value, whichever
is the lesser;
and
(iv) 70% of the Borrower's inventory of aluminum or resin
evaluated at cost or market value, whichever is the lesser,
for a maximum global amount of CAD 1,000,000;
and
(v) 30% of the Borrower's inventory of non-finished products
evaluated at cost or market value, whichever is the lesser,
for a maximum global amount of CAD 300,000.
The sum of (iii) to (v) shall not exceed, at any time, a
maximum global amount of CAD 1,500,000 (MAXIMUM inventory
financing), amount which may be increased, at the Bank's
option, up to a maximum global amount of CAD 3,500,000, upon
the Borrower's demand and its remittance to the Bank of the
necessary documentation, including a new cash flow projection
justifying such need;
less
(vi) the liabilities to be deducted as entered on the Bank's
"Monthly Declaration of Borrowing Limit" (see Appendix B);
The above limits are also known as "financing ratios."
<PAGE> 4
4. PARTICULAR TERMS:
4.1. Forward exchange contracts are contracted at a rate and under
conditions to be mutually agreed between the Bank and the
Borrower;
4.2. The maximum term of each letter of credit and each letter of
guarantee shall be 12 months or otherwise agreed to by the
bank;
4.3. Only documentary credits issued or confirmed by a financial
institution acceptable to the Bank, or drafts drawn on an
acceptable drawee or guaranteed by a financial institution
acceptable to the Bank may be discounted by the Bank; the
relevant documents will have, on a best effort basis, to be
negotiated with the Bank;
4.4. The Bank may discount 100% of the value of each Receivable,
and each discount will be made with recourse against the
Borrower.
5. INTEREST RATES AND FEES:
5.1. Overdraft advances shall bear interest at the Bank's
prevailing annual Canadian or U.S. prime rate, plus 0.50%. The
interest shall be paid monthly, on the first day of the month;
5.2. The discount is based on a discount rate equivalent to the
Bank's prevailing annual Canadian or U.S. prime rate, plus
0.50%. The Borrower must also pay all other reasonable fees
and expenses related to the discount.
5.3. A fee of 1.5% per annum shall be charged on all letters of
guarantees, payable quarterly in advance; in addition, fixed
issuance fees of CAD 50 shall be paid upon issuance;
5.4. In the event that the Bank tolerates the utilization of credit
exceeding the maximum approved amount, an overdrawing fee of
0.5% (with a minimum of CAD 250) shall be paid, calculated on
the highest amount overdrawn during the month in question.
This fee shall be charged to the account on the last day of
the month;
5.5. In the event that the Bank observes that the agreed financing
ratios are not maintained, the Borrower shall pay an
overdrawing fee of 0.5% (with a minimum of CAD 250) on the
coverage deficit resulting from the financing ratios as
determined on the last day of the month. This fee shall be
charged to the account during the succeeding month;
5.6. Any credit balance in the Borrower's Canadian account shall
bear interest at the Bank's annual prime rate, less 4%;
5.7. Any credit balance in the Borrower's US account shall bear
interest at the Bank's annual prime rate, less 4.5%.
5.8. A study fee of CAD 25,000 is payable to the Bank by the
Borrower of which CAD 10,000 has been already pain upon
acceptance of the conditional proposal dated September 30th,
1999. The balance is payable upon acceptance of this letter.
<PAGE> 5
6. CONDITIONS TO UTILIZATION:
6.1. The conditions set forth below shall be met before any
utilization of credit is approved. The conditions shall be met
within 30 days of the date of acceptance of this offer,
failing which the Bank may, at its discretion, charge the
Borrower fees determined by the Bank or terminate this offer,
thereby making it automatically null and void:
6.1.1. Receipt by the Bank from the Borrower of the legal
documents required to put this offer into effect
(articles of incorporation, borrowing by-law and
banking resolution) and the Borrower's execution of
any agreement required by the Bank to give effect to
these presents according to the standard forms used
by the Bank;
6.1.2. Receipt of security required by these presents;
6.2. Before each discount transaction, the following conditions
must be satisfied:
6.2.1. An Application for the Discounting of a Receivable,
incorporating the assignment of its proceeds,
accompanying by all related documentation, must be
duly completed, signed by the Borrower and submitted
to the Bank;
6.2.2. Submission to the Bank of any document related to the
transaction that the Bank may reasonably request and
performance by the Borrower of any other necessary
formalities.
7. REIMBURSEMENT:
All sums owing under the credit facilities are repayable on demand. Any total
reimbursement effected after 11:00 a.m. is deemed to have been made on the next
working day. Moreover, the Bank may terminate the forward exchange facility upon
reasonable notice to the Borrower.
8. SECURITY:
As security for the fulfillment of the Borrower's obligations, the Borrower
shall grant the following securities:
8.1. Pledge in favour of the Bank of the documents referred to in
the letters of credit and documentary acceptances;
8.2. First ranking security under the Bank Act covering all the
Borrower's inventory;
8.3. First ranking moveable hypothec covering the universality of
the Borrower's present and future inventory, accounts
receivable and other debts, to be registered in the Province
of Quebec:
8.4. Security Agreement covering the universality of the Borrower's
present and future inventory, accounts receivable and other
debts and claims to be registered in the Province of Ontario;
8.5. Certified copy of the Borrower's insurance against fire and
all other risks covering all the Borrower's inventory and all
of its other assets, for their full insurable value; the Bank
<PAGE> 6
must be named an additional Beneficiary with the Borrower of
the policy covering the inventory;
8.6. As security for the fulfillment of its obligations under
letters of credit, the Borrower shall provide a certified copy
of the Borrower's maritime insurance policy or reasonable
equivalent; the Bank shall be named beneficiary of this
policy.
9. COVENANTS:
The Borrower must:
9.1. submit to the Bank, within 20 days from the end of each month,
the "Monthly Declaration of Borrowing Limit" duly filled out
and signed, accompanied by a list of accounts receivable
broken down chronologically by billing date and a list of
accounts payable; and, on request from the Bank, but at least
once a year, at the end of its fiscal year, submit a detailed
list of its accounts receivable, including the names,
addresses, telephone numbers and banking domiciliation of its
clients, and including any other breakdown the Bank may
demand;
In the event that the specified documents are not received by
the due date, monthly charges in the amount of CAD 250 shall
be paid by the Borrower for any delay during the month for
each month in which there is non-compliance with the
provisions herein;
9.2. provide the Bank with its annual audited financial statements,
and related financial covenants' certificate of compliance
(see Appendix C hereto), as well as the audited financial
statement of its parent Water Pik Technologies Inc. and
affiliated companies within 120 days following the end of each
of their respective fiscal year;
9.3. provide the Bank with its quarterly unaudited financial
statements, and related financial covenants' certificate of
compliance (see Appendix C hereto), as well as the unaudited
quarterly financial statements of its parent Water Pik
Technologies Inc., within 45 days following the end of each
quarter;
9.4. provide the Bank with monthly financial statements within 30
days of the end of each month;
9.5. provide the Bank, within 90 days of the beginning of each new
fiscal year, with its annual monthly budgeted cash flow
statements and operating budget;
9.6. at all times maintain its inventory at: 240, boul. Industriel,
Boucherville, Quebec; 110, Lauzon, Boucherville, Quebec; 35,
Grand Marshall Drive, Scarborough, Ontario; and 4880 S.
Service Road, West Oakville, Ontario; and immediately notify
the Bank in writing of any new place of business and any
change of location;
9.7. provide additional security, satisfactory to the Bank, if the
risk equivalent of the outstanding term financial instruments,
evaluated at their market value, exceeds the agreed amount of
risk equivalent by 10% or more;
9.8. not pay dividends, not purchase or repurchase its shares,
reduce its capital nor proceed to distributions to its
shareholders or advance funds to related parties and
companies, without the consent of the Bank, which consent
shall not reasonably be withheld;
<PAGE> 7
however nothing contained herein shall prohibit the payment of
a reasonable management fee to Water Pik Technologies Inc.;
9.9. maintain its current assets to current liability ratio, as
calculated by the Bank, to a minimum of 1.30 to 1. The ratio
calculation will exclude the amount of the promissory notes
due by the Borrower in connection with the purchase of Les
Agences Claude Marchand Inc.'s assets (the "Promissory
Notes");
9.10. maintain its effective equity, as calculated by the Bank, to a
minimum of USD $5,000,000 during the first year of the credits
(amount to be revised annually) and maintain an effective
equity/total net assets ratio of a minimum of 35%. Effective
equity is the shareholders' equity (capital and retained
earnings) plus loans subordinated and postponed to the Bank
and payable long-term deferred taxes, plus the Promissory
Notes and the advances from Water Pik Technologies Inc.
mentioned in section 9.11 below, less any intangible assets,
leasehold improvements, and investments and other advances or
other forms of debt or claim in, to or against affiliated
companies, shareholders or members of the Borrower's
personnel;
9.11. assure that Water Pik Technologies Inc. makes the necessary
advances to the Borrower for the repayment of each of the
Promissory Notes, if required;
9.12. postpone, unless the Bank advises the Borrower and Water Pik
Technologies Inc. otherwise, any necessary repayment of the
advances made to the Borrower by Water Pik Technologies Inc.
pursuant to section 9.11 above in order to assure the Borrower
meets the financial covenants mentioned herein at all times;
Water Pik Technologies Inc. shall accept to subordinate and
postpone the repayment of said advances accordingly by signing
this letter as provided for below;
9.13. take all reasonable actions necessary to assure that its
computer based systems and programs are able to operate and
effectively process data which includes dates on or after
January 1, 2000; such computer systems and programs shall be
designated to be used prior to, during and after the calendar
year 2000 A.D. without material error relating to date
sensitive data.
10. PROFESSIONAL FEES:
10.1. The Bank shall select the legal counsel to be mandated to
prepare and set up the legal documentation, which shall be to
the reasonable satisfaction of the Bank. The Borrower shall
submit to said counsel all documentation and information
required for this purpose. If the mandated counsel is also the
Borrower's counsel, the Bank reserves the right to have its
own legal counsel review the legal documentation.
10.2. Reasonable legal fees (to generally exclude in-house council)
and all other reasonable costs incurred by the Bank and the
Borrower for implementing the credits (including the legal
documentation review mentioned above) and obtaining the
security shall be paid by the Borrower, regardless of whether
or not the credits are used, as well as all reasonable
expenses and fees (to generally exclude in-house council) for
amendments and renewals thereof.
10.3. In the event of default by the Borrower or a material adverse
change in the Borrower's financial situation or business, the
reasonable fees and expenses incurred by the
<PAGE> 8
Bank in auditing the Borrower's financial situation and the
assets encumbered in favour of the Bank, as the case may be,
and in realizing the security shall be at the Borrower's cost.
If you are in agreement with this offer, kindly confirm your acceptance by
signing and returning the enclosed copy on or before 5:00 P.M. on the 8th day of
November, 1999, failing which this offer will become null, void and without
effect.
Cette lettre d'offre est redigee en anglais a la demande expresse de
l'emprunteur et la Banque, a cause de cette demande, exprime la meme volonte.
This commitment letter is drawn up in English at the express request of the
Borrower and, in view of such request, the Bank expresses the same intention.
Yours very truly,
BANQUE NATIONALE DE PARIS (CANADA)
/s/ Richard Kelso /s/ Nathalie Bockler
- ----------------- --------------------
Richard Kelso Nathalie Bockler
Vice-President Account Manager
Commercial Banking Commercial and Export
Import/Export Banking
ACCEPTED THIS 3rd DAY OF NOVEMBER 1999
WATER PIK CANADA LTD.
By: /s/ Victor C. Streufert And:
------------------------------ ----------------------
Name: Victor C. Streufert Name:
ACKNOWLEDGED THIS 3rd DAY OF NOVEMBER, 1999
WATER PIK TECHNOLOGIES, INC.
The undersigned, duly authorised representative of Water Pik Technologies Inc.,
acknowledges having read this commitment letter and in particular its sections
9.11 and 9.12, and undertakes that Water Pik Technologies Inc. will make the
necessary advances to the Borrower as describe in section 9.11, and will
subordinate and postpone the necessary repayments of said advances as described
in section 9.12 unless the Bank advises Water Pik Technologies Inc. and the
Borrower otherwise. Nothing herein shall be construed has granting any rights
(in particular any "third party beneficiary rights") to the holder of the
Promissory Notes.
By: /s/ Victor C. Streufert
-------------------------------
Name: Victor C. Streufert
<PAGE> 9
[BANQUE NATIONALE DE PARIS (CANADA) LETTERHEAD]
MONTREAL, THIS ___ DAY OF NOVEMBER, 1999
Water Pik Canada Ltd.
35, Grand Marshall Drive
Scarborough, Ontario
M1B 5N9
hereafter referred to as the "Borrower"
Attention: VICTOR C. STREUFERT
Subject: Commitment letter dated October 28, 1999; Revolving Line of
Credit facility in the amount of CAD 11,000,000 and Bulge
facility in the amount of CAD, 1,000,000 and Forward exchange
contract facility in the amount of CAD 2,000,000
Dear Sir:
Further to our recent discussions, and your acceptance of our letter mentioned
above, we are pleased to inform you that we are prepared to amend our financing
offer as per the terms and conditions set forth below, which do not change the
credits nor create any novation. Note that the security documents, revised
pursuant to our recent discussions, will shortly follow.
It is agreed that all other terms and conditions not amended herein shall remain
in effect.
Section 2 is amended to read now as follows:
2. PURPOSE OF THE CREDIT:
To finance the Borrower's import and export business and its
current operation needs as well as hedge currency risk. The
above credits shall in no case be used to repay any sum due in
connection with the purchase of Les Agences Claude Marchand
Inc.'s assets and in particular the promissory notes due by
the Borrower in relation with same.
A NEW SECTION 8.7 IS ADDED AS FOLLOWS:
8.7 Should there be any conflict between the security documents
above and this offer, the text of this offer shall prevail.
SECTION 9.11 IS AMENDED TO READ NOW AS FOLLOWS:
9.11 assure that Water Pik Technologies Inc. makes the necessary
advances, when available, to the Borrower for the repayment of
each of the Promissory Notes. If required, the Borrower shall
advise the Bank should the repayment be financed by another
source;
SECTION 9.12 IS AMENDED TO READ NOW AS FOLLOWS:
<PAGE> 10
9.12 postpone, unless the Bank advises the Borrower and Water Pik
Technologies Inc. otherwise, any necessary repayment of the
advances made to the Borrower by Water Pik Technologies Inc.
pursuant to section 9.11 above in order to assure the Borrower
meets the financial covenants mentioned herein at all times;
Water Pik Technologies Inc. shall accept to subordinate and
postpone the repayment of said advances accordingly by signing
this letter as provided for below; the Borrower shall
furthermore postpone in a similar way the repayment of any
advances made to the Borrower by another source pursuant to
section 9.11 above;
This amendment is based on the representations, information and documents that
you previously sent us.
If this amendment meets with your approval, please sign the attached copy and
return it to us no later than 5 p.m. on November 24, 1999, failing which we
reserve the right to consider this amendment null and void.
Sincerely,
/s/ Phillippe Bourand /s/ Nathalie Bockler
- ---------------------- -----------------------
Phillippe Bourand Nathalie Bockler
Senior Vice-President Account Manager
Corporate and Structured Finance Commercial and Export Banking
ACCEPTED THIS 19th DAY OF NOVEMBER 1999
Water Pik Canada Ltd.
By: /s/ Victor C. Streufert And:
------------------------------ ------------------------
Name: Victor C. Streufert Name:
ACKNOWLEDGED THIS 19th DAY OF NOVEMBER, 1999
WATER PIK TECHNOLOGIES, INC.
The undersigned, duly authorised representative of Water Pik Technologies Inc.,
Acknowledges having read this amendment, and the commitment letter it amends,
and in particular its sections 9.11 and 9.12, and undertakes that Water Pik
Technologies Inc. will make the necessary advances to the Borrower, when
available, as describe in Section 9.11, and will subordinate and postpone the
necessary repayments of said advances as described in section 9.12 unless the
Bank advises Water Pik Technologies Inc. and the Borrower otherwise. Nothing
herein shall be construed has granting any rights (in particular any "third
party beneficiary rights") to the holder of the Promissory Notes.
By: /s/ Victor C. Streufert
- ---------------------------------
Name: Victor C. Streufert
<PAGE> 1
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is executed December 1,
1999, by and between WATER PIK TECHNOLOGIES, INC., a Delaware corporation with
its principal place of business at 660 Newport Center Drive, Suite 470, Newport
Beach, California 92660 (the "Company" or "Employer"), and ROBERT J. RASP, an
individual residing in the State of California (the "Executive").
RECITALS:
A. The Executive is currently employed by the Company as General Manager, Pool
Products and Heating Systems.
B. The Company believes the Executive will contribute to the growth and
profitability of the Company and desires to continue to employ the Executive as
the General Manager, Pool Products and Heating Systems, of the Company.
C. Executive represents that he has a right to enter into this agreement, that
there are no restrictions imposed on him by any third party agreement which
would prevent him from honoring all terms of this agreement, and that he will
not enter into any arrangement in conflict with the terms of this agreement.
D. The Executive is willing to make his services available to the Company on the
terms and conditions hereinafter set forth.
AGREEMENT
Therefore, in consideration of the premises, mutual covenants and
agreements of the parties contained herein, and other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged,
Employer and the Executive hereby agree as follows:
1. Employment. Commencing on December 1, 1999, (the "Effective Date"),
Employer, in reliance on the representations of Executive set forth herein,
shall employ the Executive and the Executive shall accept employment by
Employer, upon the terms and conditions set forth in this Agreement.
2. Term. The term of employment (the "Term") of this Agreement shall
begin on the Effective Date and, except as otherwise provided in Sections 7, 8,
9, 10, 11 and 12 below, shall end on the first anniversary date of the Effective
Date. The Term shall be automatically extended for one additional month
commencing on the Effective Date and on the last day of each calendar month
thereafter (each, an "Extension Date") unless one party gives written notice to
the other on or before an Extension Date. As of the last day of the month in
which a notice not to renew is delivered, the Term of this Agreement shall be
twelve months and shall not be further extended. The last day of the calendar
month in which the Term hereof, as extended from time to time, is then due to
expire is hereinafter referred to as the "Expiration Date."
<PAGE> 2
3. Duties. The Executive will serve as General Manager, Pool Products
and Heating Systems, of the Company and shall report to the President and Chief
Executive Officer of the Company (the "CEO"). The Executive shall perform such
duties as are consistent with the role of General Manager, Pool Products and
Heating Systems, of the Company and such other duties as may be reasonably
assigned to him by the CEO.
4. Compensation. During the Term, Executive shall be compensated as
follows:
(a) Salary. Executive shall be paid an annual salary of
$200,000 (the "Annual Base Salary"), to be distributed in equal periodic
installments according to Employer's customary payroll practices. The Annual
Base Salary will be reviewed annually by the CEO and increased (but not
decreased) if the CEO, in his or her discretion, determines an increase to be
appropriate, based on the types of factors the CEO usually takes into account in
reviewing executive level salaries, including, but not limited to,
cost-of-living factors.
(b) Annual Incentive Compensation. The Company will provide
the Executive with a target bonus opportunity of 45% of Annual Base Salary (the
"Performance Bonus") under the Company's annual incentive bonus plan, subject to
the approval of the Company's Board of Directors or applicable committee
thereof. The annual incentive compensation paid pursuant to this subparagraph
(b) is referred to as the "Performance Bonus."
(c) Stock Options. The Company will grant to the Executive
options to purchase 25,000 shares of common stock of WPTI subject to the
approval of the Company's Board of Directors or applicable committee thereof.
The options shall be issued effective as of the date the businesses comprising
WPTI are spun-off from Allegheny Teledyne Incorporated (the "Closing Date") and
shall have a 10-year term. The purchase price for the shares issuable upon
exercise of the options shall equal the average of the high and low sales prices
of a share of common stock of the Company on the Closing Date. The options would
be issued pursuant to a plan, the shares of which will be registered on a
registration statement on Form S-8 with the Securities and Exchange Commission,
which registration statement shall be declared effective prior to the earliest
exercise date. The options shall become exercisable cumulatively in accordance
with the following schedule: 20% of the shares covered herein at any time after
the first anniversary of the Closing Date, an additional 30% of the shares
covered herein at any time after the second anniversary of the Closing Date, and
the remaining 50% of the shares covered herein at any time after the third
anniversary of the Closing Date.
5. Expense Reimbursement and Other Benefits.
(a) Reimbursement of Expenses. During the term of Executive's
employment hereunder, Employer, upon the Executive's submission of proper
substantiation in accordance with Employer's standard procedure, including
copies of all relevant invoices, receipts or other evidence reasonably requested
by Employer, shall reimburse the Executive for all reasonable expenses actually
paid or incurred by the Executive in the course of and pursuant to the business
of Employer.
(b) Employee Benefits. The following benefits shall be
provided by the Company: (i) Executive shall participate in the Group Health and
Hospitalization Plan, Group
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<PAGE> 3
Life Insurance Plan, Group Disability Insurance Plan and all other insurances,
or insurance plans and all employee benefit plans provided to employees of the
Company (collectively, the "Welfare Benefits"), and executive benefits and
bonuses covering employees of the Company as are now or may in the future be in
effect, subject to applicable eligibility requirements; and (ii) the Executive
shall participate in accordance with their respective terms in any defined
benefit and defined contribution plans provided to employees of the Company.
(c) Automobile. During the Term, Employer shall provide the
Executive with a leased automobile or the cash equivalent of the lease payments
therefor.
(d) Vacation. During the Term, the Executive will be entitled
to four (4) weeks paid vacation for each year. The Executive will also be
entitled to the paid holidays and other paid leave set forth in Employer's
policies. Vacation days and holidays during any fiscal year that are not used by
the Executive during such fiscal year may not be carried over and used in any
subsequent fiscal year.
6. Restrictions.
(a) Non-competition. During the Term and for a one (1) year
period after the termination of the Term for any reason, the Executive shall
not, directly or indirectly, engage in or have any interest in any sole
proprietorship, partnership, corporation or business or any other person or
entity (whether as an executive, officer, director, partner, agent, security
holder, creditor, consultant or otherwise) that directly or indirectly (or
through any affiliated entity) engages in competition with the Company (for this
purpose, any business that engages in the development, manufacture, distribution
or sale of products similar to those products developed, manufactured,
distributed, sold or in development by the Company at the time of termination of
the Agreement shall be deemed to be in competition with the Company); provided
that such provision shall not apply to the Executive's ownership of Common Stock
of the Company or the acquisition by the Executive, solely as an investment, of
securities of any issuer that are registered under Section 12(b) or 12(g) of the
Securities Exchange Act of 1934, as amended (the "Securities Exchange Act"), and
that are listed or admitted for trading on any United States national securities
exchange or that are quoted on the NASDAQ Stock Market, or any similar system or
automated dissemination of quotations of securities prices in common use, so
long as the Executive does not control, acquire a controlling interest in or
become a member of a group which exercises direct or indirect control of, more
than 5% of any class of capital stock of such corporation.
(b) Nondisclosure. During the Term and for a one (1) year
period after the termination of the Term for any reason, the Executive shall not
at any time divulge, communicate, use to the detriment of the Company or for the
benefit of any other person or persons, or misuse in any way, any Confidential
Information (as hereinafter defined) pertaining to the business of the Company.
Any Confidential Information or data now or hereafter acquired by the Executive
with respect to the business of the Company (which shall include, but not be
limited to, information concerning the Company's financial condition, prospects,
technology, customers, suppliers, sources of leads and methods of doing
business) shall be deemed a valuable, special and unique asset of the Company
that is received by the Executive in
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<PAGE> 4
confidence and as a fiduciary, and Executive shall remain a fiduciary to the
Company with respect to all of such information. For purposes of this Agreement,
"Confidential Information" means information disclosed to the Executive or known
by the Executive as a consequence of or through his employment by the Company
(including information conceived, originated, discovered or developed by the
Executive) prior to or after the date hereof, and not generally known, about the
Company or its or their respective businesses. Notwithstanding the foregoing,
nothing herein shall be deemed to restrict the Executive from disclosing
Confidential Information to the extent required by law. None of the foregoing
obligations and restrictions apply to any Confidential Information that the
Executive demonstrates was or became generally available to the public other
than as a result of disclosure by the Executive.
(c) Nonsolicitation of Employees and Clients. During the Term
and for a one (1) year period after the termination of the Term for any reason,
the Executive shall not, directly or indirectly, for himself or for any other
person, firm, corporation, partnership, association or other entity, other than
in connection with the performance of Executive's duties under this Agreement,
(i) solicit for employment or attempt to employ or enter into any contractual
arrangement with any employee or former employee of Employer, unless such
employee or former employee has not been employed by Employer for a period in
excess of six (6) months, (ii) call on or solicit any of the actual or targeted
prospective clients of Employer on behalf of any person or entity in connection
with any business competitive with the business of Employer, and/or (iii) make
known the names and addresses of such clients or any information relating in any
manner to Employer's trade or business relationships with such customers (unless
the Executive can demonstrate that such information was or became generally
available to the public other than as a result of a disclosure by the
Executive).
(d) Ownership of Developments. All copyrights, patents, trade
secrets, or other intellectual property rights associated with any ideas,
concepts, techniques, inventions, processes, or works of authorship developed or
created by Executive during the course of performing work for Employer or its
customers (collectively, the "Work Product") shall belong exclusively to
Employer and shall, to the extent possible, be considered a work made by the
Executive for hire for Employer within the meaning of Title 17 of the United
States Code. To the extent the Work Product may not be considered work made by
the Executive for hire for Employer, the Executive agrees to assign, and
automatically assign at the time of creation of the Work Product, without any
requirement of further consideration, any right, title, or interest the
Executive may have in such Work Product. Upon the request of Employer, the
Executive shall take such further actions, including execution and delivery of
instruments of conveyance, as may be appropriate to give full and proper effect
to such assignment.
(e) Books and Records. All books, records, and accounts
relating in any manner to the customers of Employer, whether prepared by the
Executive or otherwise coming into the Executive's possession, shall be the
exclusive property of Employer and shall be returned immediately to Employer on
termination of the Executive's employment hereunder or on Employer's request at
any time.
(f) Definition of Company. Solely for purposes of this Section
6, the term "Company" also shall include, along with all current direct and
indirect subsidiaries, any existing
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<PAGE> 5
or future subsidiaries of the Company or the Parent Company that are operating
during the time periods described herein and any other entities that directly or
indirectly, through one or more intermediaries, control, are controlled by or
are under common control with the Company or the Parent Company during the
periods described herein.
(g) Acknowledgment by Executive. The Executive acknowledges
and confirms that (i) the restrictive covenants contained in this Section 6 are
reasonably necessary to protect the legitimate business interest of Employer
including the legitimate interests of the Company, and (ii) the restrictions
contained in this Section 6 (including without limitation the length of the term
of the provisions of this Section 6) are not overbroad, over long, or unfair and
are not the result of overreaching, duress or coercion of any kind. The
Executive further acknowledges and confirms that his full, uninhibited and
faithful observance of each of the covenants contained in this Section 6 will
not cause him any undue hardship, financial, or otherwise, and that enforcement
of each of the covenants contained herein will not impair his ability to obtain
employment commensurate with his abilities and on terms fully acceptable to him
or otherwise to obtain income required for the comfortable support of him and
his family and the satisfaction of the needs of his creditors. The Executive
acknowledges and confirms that his special knowledge of the business of the
Company is such as would cause Employer serious injury or loss if he were to use
such ability and knowledge to the benefit of a competitor or were to compete
with the Company in violation of the terms of this Section 6. The Executive
further acknowledges that the restrictions contained in this Section 6 are
intended to be, and shall be, for the benefit of and shall be enforceable by,
Employer's successors and assigns.
(h) Reformation by Court. In the event that a court of
competent jurisdiction shall determine that any provision of this Section 6 is
invalid or more restrictive than permitted under the governing law of such
jurisdiction, then only as to enforcement of this Section 6 within the
jurisdiction of such court, such provision shall be interpreted and enforced as
if it provided for the maximum restriction permitted under such governing law.
(i) Extension of Time. If the Executive shall be in violation
of any provision of this Section 6 then each time limitation set forth in this
Section 6 shall be extended for a period of time equal to the period of time
during which such violation or violations occur. If Employer seeks injunctive
relief from such violation in any court, then the covenants set forth in this
Section 6 shall be extended for a period of time equal to the pendency of such
proceeding including all appeals by the Executive.
(j) Survival. The provisions of this Section 6 shall survive
the termination of this Agreement, as applicable.
7. Death. The Term shall terminate upon the death of the Executive and
be of no further force or effect. Upon such termination, Employer will pay the
Executive's estate a lump sum equal to the sum of (A) the product of one-twelfth
of the Annual Base Salary at the date of termination multiplied by the number of
months including fractions thereof remaining in the Term, and (B) the product of
one-twelfth of the Performance Bonus multiplied by the number of months
remaining in the Term. Employer reserves the right to provide this amount
through a policy of insurance on the life of the Executive.
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<PAGE> 6
8. Disability. If during the Term Executive is unable to perform his
services, by reason of illness or incapacity, for a period of 180 consecutive
days or more, Employer may, at its option, upon written notice to Executive,
terminate the Term and his employment hereunder. If the Term is terminated as a
result of the Executive's disability, Employer will pay the Executive the
product of one-twelfth of his Annual Base Salary at the date of termination for
the period remaining in the Term, to be distributed in periodic installments
according to Employer's customary payroll practices, and a lump sum equal to the
product of one-twelfth of the Performance Bonus multiplied by the number of
months remaining in the Term, to be paid at the time of such termination.
Employer shall also continue to pay the premiums for the same or substantially
similar Welfare Benefits for the remainder of the Term. Notwithstanding the
foregoing, if the Executive shall find other employment during the period he is
receiving payments pursuant to this Section 8, then the Executive shall promptly
notify Employer in writing of the date and terms of such employment and Employer
shall be entitled to reduce the amount payable to the Executive pursuant to this
Section 8 during the period from the commencement of such other employment by
the cash compensation received and to be received by the Executive for services
rendered in connection with such other employment. Employer reserves the right
to provide this benefit through a policy of insurance.
9. Termination for Cause.
(a) Employer shall have the right to terminate the Term and
the Executive's employment hereunder for Cause (as defined below). Upon any
termination pursuant to this Section 9, Employer shall pay to the Executive any
unpaid Annual Base Salary through the effective date of termination specified in
such notice. Employer shall have no further liability hereunder (other than for
reimbursement for reasonable business expenses incurred prior to the date of
termination, subject, however, to the provisions of Section 5(a)).
(b) For purposes hereof, the term "Cause" shall mean the
Executive's conviction of a felony, the Executive's personal dishonesty directly
affecting the Company; willful misconduct or gross negligence (which shall
require prior written notice to the Executive from the CEO unless not curable or
such misconduct or gross negligence is injurious to Employer); breach of a
fiduciary duty involving personal profit to the Executive; or intentional
failure to substantially perform his duties after written notice to the
Executive from the CEO that, in the reasonable judgment of the CEO, the
Executive has failed to perform specific duties.
10. Termination Without Cause. At any time Employer shall have the
right to terminate the Term and the Executive's employment hereunder by written
notice to the Executive. Upon any termination pursuant to this Section 10 (that
is not a termination under any of Sections 7, 8, 11 or 12), Employer shall pay
to the Executive a lump sum equal to the sum of (A) the product of one-twelfth
of the Annual Base Salary at the date of termination multiplied by the number of
months remaining in the Term, and (B) the product of one-twelfth of the
Performance Bonus multiplied by the number of months remaining in the Term.
Employer shall also continue to pay the premiums for the same or substantially
similar Welfare Benefits and the Executive shall be entitled to the other
benefits set forth in Section 5(b), (c) and (d) for the remainder of the Term.
In the event such entitlement is not allowed by law, the Executive shall be
entitled to the cash equivalent of that benefit. The Company shall have no
further liability
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<PAGE> 7
hereunder (other than for reimbursement for reasonable business expenses
incurred prior to the date of termination, subject, however, to the provisions
of Section 5(a)). The Executive shall be entitled to receive all severance
payments and benefits hereunder regardless of any future employment undertaken
by the Executive as long as he is in full compliance with the terms of this
Agreement.
11. Termination by Executive.
(a) The Executive shall at all times have the right, upon 30
days written notice to Employer, to terminate the Term and his employment
hereunder.
(b) Upon any termination pursuant to this Section 11 by the
Executive without Good Reason (as defined below), Employer shall pay to the
Executive any unpaid Annual Base Salary through the effective date of
termination specified in such notice. Employer shall have no further liability
hereunder (other than for reimbursement for reasonable business expenses
incurred prior to the date of termination, subject, however, to the provisions
of Section 5(a)). The Executive shall be entitled to receive all severance
payments and benefits hereunder regardless of any future employment undertaken
by the Executive as long as he is in full compliance with the terms of this
Agreement.
(c) Upon any termination pursuant to this Section 11 by the
Executive for Good Reason, Employer shall pay to the Executive the same amounts
that would have been payable by Employer to the Executive under Section 10 of
this Agreement if the Executive's employment had been terminated by Employer
without Cause. Employer shall have no further liability hereunder (other than
for reimbursement for reasonable business expenses incurred prior to the date of
termination, subject, however, to the provisions of Section 5(a)).
(d) For purposes of this Agreement, "Good Reason" shall mean
(A) the occurrence of a Change in Control (as defined in Section 12 hereof) in
Employer during the Term and (B) prior to the earlier of the expiration of the
Term and one (1) year after the date of the Change in Control, the Term and
Executive's employment with Employer is terminated by Employer without Cause, as
defined in Section 9(b) (and other than pursuant to Section 7 by reason of the
Executive's death or Section 8 by reason of the Executive's disability) or the
Executive terminates the Term and his employment as a result of (i) the
assignment to the Executive of duties which are materially inconsistent with or
substantially lesser in responsibility and scope than those usually performed by
a General Manager of the Company, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by Employer promptly after receipt of notice thereof given by the
Executive; or (ii) the failure by Employer to comply with any of the material
provisions of Section 4 of this Agreement, other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith and which is remedied by
Employer promptly after receipt of notice thereof given by the Executive.
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<PAGE> 8
12. Change in Control.
(a) For purposes of this Agreement, the term "Change in
Control" shall mean:
(i) Approval by the stockholders of Employer of (x) a
reorganization, merger, consolidation or other form of corporate
transaction or series of transactions, in each case, with respect to
which persons who were the stockholders of Employer immediately prior
to such reorganization, merger or consolidation or other transaction do
not, immediately thereafter, own more than 50% of the combined voting
power entitled to vote generally in the election of directors of the
reorganized, merged or consolidated company's then outstanding voting
securities, or (y) a liquidation or dissolution of Employer or (z) the
sale of all or substantially all of the assets of Employer (unless such
reorganization, merger, consolidation or other corporate transaction,
liquidation, dissolution or sale is subsequently abandoned); or
(ii) Individuals who constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any reason
to constitute at least a majority of the Incumbent Board, provided that
any person becoming a director subsequent to the date hereof, whose
election, or nomination for election by stockholders, was approved by a
vote of at least a majority of the directors then comprising the
Incumbent Board (other than an election or nomination of an individual
whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the directors,
as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Securities Exchange Act) shall be, for purposes of this
Agreement, considered as though such person were a member of the
Incumbent Board; or
(iii) The acquisition (other than from Employer) by
any person, entity or "group," within the meaning of Section 13(d)(3)
or 14(d)(2) of the Securities Exchange Act (excluding, for this
purpose, Employer or its subsidiaries, or any executive benefit plan of
Employer or its subsidiaries) which acquires beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Securities
Exchange Act), of 20% or more of either the then outstanding shares of
the Company or the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors of
the applicable entity.
(b) The payments made pursuant to the provisions of Section 11
as a result of a termination by the Executive for the Good Reason described in
Section 11(d) above shall be in lieu of any and all compensation due to
Executive for the years that would otherwise be remaining in the Term. Upon
receipt of said lump sum payment, this Agreement and all rights and duties of
the parties shall be terminated, except as follows. In consideration for such
lump sum payment and for the right to terminate under the conditions set forth
above, Executive agrees to consult with Employer (or its successors), and its
officers if requested to do so for a period of at least one (1) year from the
date of such termination. However, Executive shall be required to devote only
such part of his time to such services as Executive believes reasonable in
Executive's sole discretion, including not interfering with Executive's
employment, and the time and date
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<PAGE> 9
such services are offered shall be determined by Executive so long as that time
and date is within a reasonable period of time after the request. It is
expressly agreed that ATI's rights to avail itself of the advice and
consultation services of Executive shall at all times be exercised in a
reasonable manner, that adequate notice shall be given to Executive in such
events, and that non-compliance with any such request by Executive for good
reason, including, but not limited to, ill health or prior commitments, shall
not constitute a breach or violation of this Agreement. Executive agrees that,
except for reimbursement of all reasonable expenses incurred by him with respect
to such consultation and advisory services, payable as such consultation and
advisory services are rendered, he shall not be entitled to any further
compensation. It is understood that in furnishing any advisory and consulting
services provided herein, Executive shall not be an executive of Employer but
shall act in the capacity of independent contractor.
13. Waivers. It is understood that either party may waive the strict
performance of any covenant or agreement made herein; however, any waiver made
by a party hereto must be duly made in writing in order to be considered a
waiver, and the waiver of one covenant or agreement shall not be considered a
waiver of any other covenant or agreement unless specifically in writing as
aforementioned.
14. Savings Provisions. The invalidity, in whole or in part, of any
covenant or restriction, or any section, subsection, sentence, clause, phrase or
word, or other provisions of this Agreement, as the same may be amended from
time to time shall not affect the validity of the remaining portions thereof.
15. Governing Law. The Agreement shall be construed in accordance with
and governed by the laws of the State of California without giving effect to its
choice of law provisions.
16. Notices. If either party desires to give notice to the other in
connection with any of the terms and provisions of this Agreement, said notice
must be in writing and shall be deemed given when (a) delivered by hand (with
written confirmation of receipt), (b) sent by facsimile (with written
confirmation of receipt), provided that a copy is mailed by registered mail,
return receipt requested, or (c) when received by the addressee, if sent by a
nationally recognized overnight delivery service (receipt requested), in each
case addressed to the party for whom it is intended as follows (or such other
addresses as either party may designate by notice to the other party and, after
the IPO/Spin-off, at the Parent Company's or Company's then principal executive
offices):
If to Employer: Michael P. Hoopis
Allegheny Teledyne Incorporated
660 Newport Center Drive
Suite 470
Newport Beach, CA 92660
If to Executive: At the most recent home address of the Executive on
the official records of the Employer
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<PAGE> 10
17. Default. In the event either party defaults in the performance of
its obligations under this Agreement, the non-defaulting party may, after giving
30 days notice to the defaulting party to provide a reasonable opportunity to
cure such default, proceed to protect its rights by suit in equity, action at
law, or, where specifically provided for herein, by arbitration, to enforce
performance under this Agreement or to recover damages for breach thereof,
including all costs and attorneys' fees, whether settled out of court,
arbitrated, or tried (at both trial and appellate levels).
18. Section 162(m) Limits. Notwithstanding any other provision of this
Agreement, if and to the extent that any remuneration payable by Employer to the
Executive for any year would exceed the maximum amount of such remuneration that
Employer may deduct for that year by reason of Section 162(m) of the Code,
payment of the portion of the remuneration for that year that would not be so
deductible under Section 162(m) shall, in the sole discretion of the Board, be
deferred so that it shall become payable at such time or times as the Board
reasonably determines that it would be deductible by Employer under Section
162(m), with interest at the "short-term applicable federal rate" as such term
is defined in Section 1274(d) of the Code.
19. No Third Party Beneficiary. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
other than Employer, the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and assigns, any rights or
remedies under or by reason of this Agreement.
20. Waiver of Jury Trial. ALL PARTIES KNOWINGLY WAIVE THEIR RIGHTS TO
REQUEST A TRIAL BY JURY IN ANY LITIGATION IN ANY COURT OF LAW, TRIBUNAL OR LEGAL
PROCEEDING INVOLVING THE PARTIES HERETO OR ANY DISPUTES ARISING OUT OF OR
RELATED TO THIS AGREEMENT.
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21. Successors.
(a) This Agreement shall inure to the benefit of and be
binding upon the Executive and the Executive's assigns, heirs, representatives
or estate.
(b) This Agreement shall be binding upon and inure to the
benefit of the Company and its successors and assigns.
[THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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<PAGE> 12
IN WITNESS WHEREOF, WATER PIK TECHNOLOGIES, INC., by its appropriate
officer, signed this Agreement and Executive has signed this Agreement, as of
the day and year first above written.
WATER PIK TECHNOLOGIES, INC.
By: /s/ Michael P. Hoopis
-------------------------------------
Michael P. Hoopis
President and Chief Executive Officer
EXECUTIVE
/s/ Robert J. Rasp
-------------------------------------
Robert J. Rasp
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<PAGE> 1
Exhibit 10.6
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is executed ________ __,
2000, by and between WATER PIK TECHNOLOGIES, INC., a Delaware corporation with
its principal place of business at 23 Corporate Plaza, Suite 246, Newport Beach,
California 92660 (the "Company" or "Employer"), and ______(name)_________, an
individual residing in the State of California (the "Executive").
RECITALS:
A. The Executive is experienced in ___________________ and is desirous of
becoming _______(title)_____________of the Company.
B. The Company believes the Executive will contribute to the growth and
profitability of the Company and desires to employ the Executive as the
_________(title_________ of the Company.
C. Executive represents that he/she has a right to enter into this Agreement,
that there are no restrictions imposed on her by any third party Agreement which
would prevent him/her from honoring all terms of this Agreement, and that he/she
will not enter into any arrangement in conflict with the terms of this
Agreement.
D. The Executive is willing to make him/her services available to the Company on
the terms and conditions hereinafter set forth.
AGREEMENT
Therefore, in consideration of the premises, mutual covenants and
agreements of the parties contained herein, and other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged,
Employer and the Executive hereby agree as follows:
1. Employment. Commencing on ___________, 2000, (the "Effective Date"),
Employer, in reliance on the representations of Executive set forth herein,
shall employ the Executive and the Executive shall accept employment by
Employer, upon the terms and conditions set forth in this Agreement. The
effectiveness of this Agreement is subject to the Executive's satisfactory
completion of the Company's standard pre-employment physical examination and
drug and alcohol screen.
2. Term. The term of employment (the "Term") of this Agreement shall
begin on the Effective Date and, except as otherwise provided in Sections 7, 8,
9, 10, 11 and 12 below, shall end on the first anniversary date of the Effective
Date. The Term shall be automatically extended for one (1) additional month
commencing on the Effective Date and on the last day of each calendar month
thereafter (each, an "Extension Date") unless one party gives written notice to
the other on or before an Extension Date. As of the last day of the month in
which a notice not to renew is delivered, the Term of this Agreement
<PAGE> 2
shall be twelve (12) months and shall not be further extended. The last day of
the calendar month in which the Term hereof, as extended from time to time, is
then due to expire is hereinafter referred to as the "Expiration Date."
3. Duties. The Executive will serve as ________(title)_________ of the
Company and shall report to the ________________________. The Executive shall
perform such duties as are consistent with the role of _____(title)_________ of
the Company and such other duties as may be reasonably assigned to him/her by
the CEO.
4. Compensation. During the Term, Executive shall be compensated as
follows:
(a) Salary. Executive shall be paid an annual salary of
$_______ (the "Annual Base Salary"), to be distributed in equal periodic
installments according to Employer's customary payroll practices. The Annual
Base Salary will be reviewed annually by the CEO and increased (but not
decreased) if the CEO, in his or her discretion, determines an increase to be
appropriate, based on the types of factors the CEO usually takes into account in
reviewing executive level salaries, including, but not limited to,
cost-of-living factors.
(b) Annual Incentive Compensation. The Company will provide
the Executive with a target bonus opportunity of _____% of Annual Base Salary
(the "Performance Bonus") under the Company's annual incentive bonus plan,
subject to the approval of the Company's Board of Directors or applicable
committee thereof. The annual incentive compensation paid pursuant to this
subparagraph (b) is referred to as the "Performance Bonus."
(c) Stock Options. The Company will grant to the Executive
options to purchase _______ shares of common stock of WPTI subject to the
approval of the Company's Board of Directors or applicable committee thereof.
The options shall be issued within the first three (3) months of employment (the
"Issue Date") and shall have a 10-year term. The purchase price for the shares
issuable upon exercise of the options shall equal the average of the high and
low sales prices of a share of common stock of the Company on the Issue Date.
The options would be issued pursuant to a plan, the shares of which will be
registered on a registration statement on Form S-8 with the Securities and
Exchange Commission, which registration statement shall be declared effective
prior to the earliest exercise date. The options shall become exercisable
cumulatively in accordance with the following schedule: 20% of the shares
covered herein at any time after the first anniversary of the Issue Date, an
additional 30% of the shares covered herein at any time after the second
anniversary of the Issue Date, and the remaining 50% of the shares covered
herein at any time after the third anniversary of the Issue Date. In the event
of a "Change in Control" as defined herein, all options outstanding shall become
immediately exercisable; provided, however, this provision shall not be
applicable if any Change in Control results from Executive's beneficial
ownership (within
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<PAGE> 3
the meaning of Rule 13d.3 under the Securities Exchange Act) of common stock or
Company voting securities.
5. Expense Reimbursement and Other Benefits.
(a) Reimbursement of Expenses. During the term of Executive's
employment hereunder, Employer, upon the Executive's submission of proper
substantiation in accordance with Employer's standard procedure, including
copies of all relevant invoices, receipts or other evidence reasonably requested
by Employer, shall reimburse the Executive for all reasonable expenses actually
paid or incurred by the Executive in the course of and pursuant to the business
of Employer.
(b) Employee Benefits. The following benefits shall be
provided by the Company: (i) Executive shall participate in the Group Health and
Hospitalization Plan, Group Life Insurance Plan, Group Disability Insurance Plan
and all other insurances, or insurance plans and all employee benefit plans
provided to employees of the Company (collectively, the "Welfare Benefits"), and
executive benefits and bonuses covering employees of the Company as are now or
may in the future be in effect, subject to applicable eligibility requirements;
and (ii) the Executive shall participate in accordance with their respective
terms in any defined benefit and defined contribution plans provided to
employees of the Company.
(c) Automobile. During the Term, Employer shall provide the
Executive with a car allowance of _____ per month.
(d) Vacation. During the Term, the Executive will be entitled
to four (4) weeks paid vacation for each year. The Executive will also be
entitled to the paid holidays and other paid leave set forth in Employer's
policies. Vacation days and holidays during any fiscal year that are not used by
the Executive during such fiscal year may not be carried over and used in any
subsequent fiscal year.
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<PAGE> 4
6. Restrictions.
(a) Non-competition. During the Term and for a one (1) year
period after the termination of the Term for any reason, the Executive shall
not, directly or indirectly, engage in or have any interest in any sole
proprietorship, partnership, corporation or business or any other person or
entity (whether as an executive, officer, director, partner, agent, security
holder, creditor, consultant or otherwise) that directly or indirectly (or
through any affiliated entity) engages in competition with the Company (for this
purpose, any business that engages in the development, manufacture, distribution
or sale of products similar to those products developed, manufactured,
distributed, sold or in development by the Company at the time of termination of
the Agreement shall be deemed to be in competition with the Company); provided
that such provision shall not apply to the Executive's ownership of Common Stock
of the Company or the acquisition by the Executive, solely as an investment, of
securities of any issuer that are registered under Section 12(b) or 12(g) of the
Securities Exchange Act of 1934, as amended (the "Securities Exchange Act"), and
that are listed or admitted for trading on any United States national securities
exchange or that are quoted on the NASDAQ Stock Market, or any similar system or
automated dissemination of quotations of securities prices in common use, so
long as the Executive does not control, acquire a controlling interest in or
become a member of a group which exercises direct or indirect control of, more
than 5% of any class of capital stock of such corporation.
(b) Nondisclosure. During the Term and for a one (1) year
period after the termination of the Term for any reason, the Executive shall not
at any time divulge, communicate, use to the detriment of the Company or for the
benefit of any other person or persons, or misuse in any way, any Confidential
Information (as hereinafter defined) pertaining to the business of the Company.
Any Confidential Information or data now or hereafter acquired by the Executive
with respect to the business of the Company (which shall include, but not be
limited to, information concerning the Company's financial condition, prospects,
technology, customers, suppliers, sources of leads and methods of doing
business) shall be deemed a valuable, special and unique asset of the Company
that is received by the Executive in confidence and as a fiduciary, and
Executive shall remain a fiduciary to the Company with respect to all of such
information. For purposes of this Agreement, "Confidential Information" means
information disclosed to the Executive or known by the Executive as a
consequence of or through her employment by the Company (including information
conceived, originated, discovered or developed by the Executive) prior to or
after the date hereof, and not generally known, about the Company or its or
their respective businesses. Notwithstanding the foregoing, nothing herein shall
be deemed to restrict the Executive from disclosing Confidential Information to
the extent required by law. None of the foregoing obligations and restrictions
apply to any Confidential Information that the Executive demonstrates was or
became generally available to the public other than as a result of disclosure by
the Executive.
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<PAGE> 5
(c) Nonsolicitation of Employees and Clients. During the Term
and for a one (1) year period after the termination of the Term for any reason,
the Executive shall not, directly or indirectly, for herself or for any other
person, firm, corporation, partnership, association or other entity, other than
in connection with the performance of Executive's duties under this Agreement,
(i) solicit for employment or attempt to employ or enter into any contractual
arrangement with any employee or former employee of Employer, unless such
employee or former employee has not been employed by Employer for a period in
excess of six (6) months, (ii) call on or solicit any of the actual or targeted
prospective clients of Employer on behalf of any person or entity in connection
with any business competitive with the business of Employer, and/or (iii) make
known the names and addresses of such clients or any information relating in any
manner to Employer's trade or business relationships with such customers (unless
the Executive can demonstrate that such information was or became generally
available to the public other than as a result of a disclosure by the
Executive).
(d) Ownership of Developments. All copyrights, patents, trade
secrets, or other intellectual property rights associated with any ideas,
concepts, techniques, inventions, processes, or works of authorship developed or
created by Executive during the course of performing work for Employer or its
customers (collectively, the "Work Product") shall belong exclusively to
Employer and shall, to the extent possible, be considered a work made by the
Executive for hire for Employer within the meaning of Title 17 of the United
States Code. To the extent the Work Product may not be considered work made by
the Executive for hire for Employer, the Executive agrees to assign, and
automatically assign at the time of creation of the Work Product, without any
requirement of further consideration, any right, title, or interest the
Executive may have in such Work Product. Upon the request of Employer, the
Executive shall take such further actions, including execution and delivery of
instruments of conveyance, as may be appropriate to give full and proper effect
to such assignment.
(e) Books and Records. All books, records, and accounts
relating in any manner to the customers of Employer, whether prepared by the
Executive or otherwise coming into the Executive's possession, shall be the
exclusive property of Employer and shall be returned immediately to Employer on
termination of the Executive's employment hereunder or on Employer's request at
any time.
(f) Definition of Company. Solely for purposes of this Section
6, the term "Company" also shall include, along with all current direct and
indirect subsidiaries, any existing or future subsidiaries of the Company or the
Parent Company that are operating during the time periods described herein and
any other entities that directly or indirectly, through one or more
intermediaries, control, are controlled by or are under common control with the
Company or the Parent Company during the periods described herein.
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<PAGE> 6
(g) Acknowledgment by Executive. The Executive acknowledges
and confirms that (i) the restrictive covenants contained in this Section 6 are
reasonably necessary to protect the legitimate business interest of Employer
including the legitimate interests of the Company, and (ii) the restrictions
contained in this Section 6 (including without limitation the length of the term
of the provisions of this Section 6) are not overbroad, over long, or unfair and
are not the result of overreaching, duress or coercion of any kind. The
Executive further acknowledges and confirms that her full, uninhibited and
faithful observance of each of the covenants contained in this Section 6 will
not cause her any undue hardship, financial, or otherwise, and that enforcement
of each of the covenants contained herein will not impair her ability to obtain
employment commensurate with her abilities and on terms fully acceptable to her
or otherwise to obtain income required for the comfortable support of her and
her family and the satisfaction of the needs of her creditors. The Executive
acknowledges and confirms that her special knowledge of the business of the
Company is such as would cause Employer serious injury or loss if she were to
use such ability and knowledge to the benefit of a competitor or were to compete
with the Company in violation of the terms of this Section 6. The Executive
further acknowledges that the restrictions contained in this Section 6 are
intended to be, and shall be, for the benefit of and shall be enforceable by,
Employer's successors and assigns.
(h) Reformation by Court. In the event that a court of
competent jurisdiction shall determine that any provision of this Section 6 is
invalid or more restrictive than permitted under the governing law of such
jurisdiction, then only as to enforcement of this Section 6 within the
jurisdiction of such court, such provision shall be interpreted and enforced as
if it provided for the maximum restriction permitted under such governing law.
(i) Extension of Time. If the Executive shall be in violation
of any provision of this Section 6 then each time limitation set forth in this
Section 6 shall be extended for a period of time equal to the period of time
during which such violation or violations occur. If Employer seeks injunctive
relief from such violation in any court, then the covenants set forth in this
Section 6 shall be extended for a period of time equal to the pendency of such
proceeding including all appeals by the Executive.
(j) Survival. The provisions of this Section 6 shall survive
the termination of this Agreement, as applicable.
7. Death. The Term shall terminate upon the death of the Executive and
be of no further force or effect. Upon such termination, Employer will pay the
Executive's estate a lump sum equal to the sum of (A) the product of one-twelfth
of the Annual Base Salary at the date of termination multiplied by the number of
months including fractions thereof remaining in the Term, and (B) the product of
one-twelfth of the Performance Bonus multiplied by the number of months
remaining in the Term. Employer reserves the right to provide this amount
through a policy of insurance on the life of the Executive.
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<PAGE> 7
8. Disability. If during the Term Executive is unable to perform her
services, by reason of illness or incapacity, for a period of 180 consecutive
days or more, Employer may, at its option, upon written notice to Executive,
terminate the Term and her employment hereunder. If the Term is terminated as a
result of the Executive's disability, Employer will pay the Executive the
product of one-twelfth of her Annual Base Salary at the date of termination for
the period remaining in the Term, to be distributed in periodic installments
according to Employer's customary payroll practices, and a lump sum equal to the
product of one-twelfth of the Performance Bonus multiplied by the number of
months remaining in the Term, to be paid at the time of such termination.
Employer shall also continue to pay the premiums for the same or substantially
similar Welfare Benefits for the remainder of the Term. Notwithstanding the
foregoing, if the Executive shall find other employment during the period she is
receiving payments pursuant to this Section 8, then the Executive shall promptly
notify Employer in writing of the date and terms of such employment and Employer
shall be entitled to reduce the amount payable to the Executive pursuant to this
Section 8 during the period from the commencement of such other employment by
the cash compensation received and to be received by the Executive for services
rendered in connection with such other employment. Employer reserves the right
to provide this benefit through a policy of insurance.
9. Termination for Cause.
(a) Employer shall have the right to terminate the Term and
the Executive's employment hereunder for Cause (as defined below). Upon any
termination pursuant to this Section 9, Employer shall pay to the Executive any
unpaid Annual Base Salary through the effective date of termination specified in
such notice. Employer shall have no further liability hereunder (other than for
reimbursement for reasonable business expenses incurred prior to the date of
termination, subject, however, to the provisions of Section 5(a)).
(b) For purposes hereof, the term "Cause" shall mean the
Executive's conviction of a felony, the Executive's personal dishonesty directly
affecting the Company; willful misconduct or gross negligence (which shall
require prior written notice to the Executive from the CEO unless not curable or
such misconduct or gross negligence is injurious to Employer); breach of a
fiduciary duty involving personal profit to the Executive; or intentional
failure to substantially perform her duties after written notice to the
Executive from the CEO that, in the reasonable judgment of the CEO, the
Executive has failed to perform specific duties.
10. Termination Without Cause. At any time Employer shall have the
right to terminate the Term and the Executive's employment hereunder by written
notice to the Executive. Upon any termination pursuant to this Section 10 (that
is not a termination under any of Sections 7, 8, 11 or 12), Employer shall pay
to the Executive a lump sum equal to the sum of (A) the product of one-twelfth
of the Annual Base Salary at the date of termination multiplied by the number of
months remaining in the Term, and (B) the
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<PAGE> 8
product of one-twelfth of the Performance Bonus multiplied by the number of
months remaining in the Term. Employer shall also continue to pay the premiums
for the same or substantially similar Welfare Benefits and the Executive shall
be entitled to the other benefits set forth in Section 5(b), (c) and (d) for the
remainder of the Term. In the event such entitlement is not allowed by law, the
Executive shall be entitled to the cash equivalent of that benefit. The Company
shall have no further liability hereunder (other than for reimbursement for
reasonable business expenses incurred prior to the date of termination, subject,
however, to the provisions of Section 5(a)). The Executive shall be entitled to
receive all severance payments and benefits hereunder regardless of any future
employment undertaken by the Executive as long as she is in full compliance with
the terms of this Agreement.
11. Termination by Executive.
(a) The Executive shall at all times have the right, upon 30
days written notice to Employer, to terminate the Term and her employment
hereunder.
(b) Upon any termination pursuant to this Section 11 by the
Executive without Good Reason (as defined below), Employer shall pay to the
Executive any unpaid Annual Base Salary through the effective date of
termination specified in such notice. Employer shall have no further liability
hereunder (other than for reimbursement for reasonable business expenses
incurred prior to the date of termination, subject, however, to the provisions
of Section 5(a)). The Executive shall be entitled to receive all severance
payments and benefits hereunder regardless of any future employment undertaken
by the Executive as long as she is in full compliance with the terms of this
Agreement.
(c) Upon any termination pursuant to this Section 11 by the
Executive for Good Reason, Employer shall pay to the Executive the same amounts
that would have been payable by Employer to the Executive under Section 10 of
this Agreement if the Executive's employment had been terminated by Employer
without Cause. Employer shall have no further liability hereunder (other than
for reimbursement for reasonable business expenses incurred prior to the date of
termination, subject, however, to the provisions of Section 5(a)).
(d) For purposes of this Agreement, "Good Reason" shall mean
(A) the occurrence of a Change in Control (as defined in Section 12 hereof) in
Employer during the Term and (B) prior to the earlier of the expiration of the
Term and one (1) year after the date of the Change in Control, the Term and
Executive's employment with Employer is terminated by Employer without Cause, as
defined in Section 9(b) (and other than pursuant to Section 7 by reason of the
Executive's death or Section 8 by reason of the Executive's disability) or the
Executive terminates the Term and her employment as a result of (i) the
assignment to the Executive of duties which are materially inconsistent with or
substantially lesser in responsibility and scope than those usually performed by
a Vice President of the Company, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by Employer promptly
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<PAGE> 9
after receipt of notice thereof given by the Executive; or (ii) the failure by
Employer to comply with any of the material provisions of Section 4 of this
Agreement, other than an isolated, insubstantial and inadvertent failure not
occurring in bad faith and which is remedied by Employer promptly after receipt
of notice thereof given by the Executive.
12. Change in Control.
(a) For purposes of this Agreement, the term "Change in
Control" shall mean:
(i) Approval by the stockholders of Employer of (x) a
reorganization, merger, consolidation or other form of corporate
transaction or series of transactions, in each case, with respect to
which persons who were the stockholders of Employer immediately prior
to such reorganization, merger or consolidation or other transaction do
not, immediately thereafter, own more than 50% of the combined voting
power entitled to vote generally in the election of directors of the
reorganized, merged or consolidated company's then outstanding voting
securities, or (y) a liquidation or dissolution of Employer or (z) the
sale of all or substantially all of the assets of Employer (unless such
reorganization, merger, consolidation or other corporate transaction,
liquidation, dissolution or sale is subsequently abandoned); or
(ii) Individuals who constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any reason
to constitute at least a majority of the Incumbent Board, provided that
any person becoming a director subsequent to the date hereof, whose
election, or nomination for election by stockholders, was approved by a
vote of at least a majority of the directors then comprising the
Incumbent Board (other than an election or nomination of an individual
whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the directors,
as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Securities Exchange Act) shall be, for purposes of this
Agreement, considered as though such person were a member of the
Incumbent Board; or
(iii) The acquisition (other than from Employer) by
any person, entity or "group," within the meaning of Section 13(d)(3)
or 14(d)(2) of the Securities Exchange Act (excluding, for this
purpose, Employer or its subsidiaries, or any executive benefit plan of
Employer or its subsidiaries) which acquires beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Securities
Exchange Act), of 20% or more of either the then outstanding shares of
the Company or the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors of
the applicable entity.
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(b) The payments made pursuant to the provisions of Section 11
as a result of a termination by the Executive for the Good Reason described in
Section 11(d) above shall be in lieu of any and all compensation due to
Executive for the years that would otherwise be remaining in the Term. Upon
receipt of said lump sum payment, this Agreement and all rights and duties of
the parties shall be terminated, except as follows. In consideration for such
lump sum payment and for the right to terminate under the conditions set forth
above, Executive agrees to consult with Employer (or its successors), and its
officers if requested to do so for a period of at least one (1) year from the
date of such termination. However, Executive shall be required to devote only
such part of her time to such services as Executive believes reasonable in
Executive's sole discretion, including not interfering with Executive's
employment, and the time and date such services are offered shall be determined
by Executive so long as that time and date is within a reasonable period of time
after the request. It is expressly agreed that the Company's rights to avail
itself of the advice and consultation services of Executive shall at all times
be exercised in a reasonable manner, that adequate notice shall be given to
Executive in such events, and that non-compliance with any such request by
Executive for good reason, including, but not limited to, ill health or prior
commitments, shall not constitute a breach or violation of this Agreement.
Executive agrees that, except for reimbursement of all reasonable expenses
incurred by her with respect to such consultation and advisory services, payable
as such consultation and advisory services are rendered, she shall not be
entitled to any further compensation. It is understood that in furnishing any
advisory and consulting services provided herein, Executive shall not be an
executive of Employer but shall act in the capacity of independent contractor.
13. Waivers. It is understood that either party may waive the strict
performance of any covenant or agreement made herein; however, any waiver made
by a party hereto must be duly made in writing in order to be considered a
waiver, and the waiver of one covenant or agreement shall not be considered a
waiver of any other covenant or agreement unless specifically in writing as
aforementioned.
14. Savings Provisions. The invalidity, in whole or in part, of any
covenant or restriction, or any section, subsection, sentence, clause, phrase or
word, or other provisions of this Agreement, as the same may be amended from
time to time shall not affect the validity of the remaining portions thereof.
15. Governing Law. The Agreement shall be construed in accordance with
and governed by the laws of the State of California without giving effect to its
choice of law provisions.
16. Notices. If either party desires to give notice to the other in
connection with any of the terms and provisions of this Agreement, said notice
must be in writing and shall be deemed given when (a) delivered by hand (with
written confirmation of receipt), (b) sent by facsimile (with written
confirmation of receipt), provided that a copy is mailed by registered mail,
return receipt requested, or (c) when received by the addressee, if sent
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by a nationally recognized overnight delivery service (receipt requested), in
each case addressed to the party for whom it is intended as follows (or such
other addresses as either party may designate by notice to the other party and,
after the IPO/Spin-off, at the Parent Company's or Company's then principal
executive offices):
If to Employer: Michael P. Hoopis
Water Pik Technologies, Inc.
23 Corporate Plaza
Suite 246
Newport Beach, CA 92660
If to Executive: At the most recent home address of the
Executive on the official
records of the Employer
17. Default. In the event either party defaults in the performance of
its obligations under this Agreement, the non-defaulting party may, after giving
30 days notice to the defaulting party to provide a reasonable opportunity to
cure such default, proceed to protect its rights by suit in equity, action at
law, or, where specifically provided for herein, by arbitration, to enforce
performance under this Agreement or to recover damages for breach thereof,
including all costs and attorneys' fees, whether settled out of court,
arbitrated, or tried (at both trial and appellate levels).
18. Section 162(m) Limits. Notwithstanding any other provision of this
Agreement, if and to the extent that any remuneration payable by Employer to the
Executive for any year would exceed the maximum amount of such remuneration that
Employer may deduct for that year by reason of Section 162(m) of the Code,
payment of the portion of the remuneration for that year that would not be so
deductible under Section 162(m) shall, in the sole discretion of the Board, be
deferred so that it shall become payable at such time or times as the Board
reasonably determines that it would be deductible by Employer under Section
162(m), with interest at the "short-term applicable federal rate" as such term
is defined in Section 1274(d) of the Code.
19. No Third Party Beneficiary. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
other than Employer, the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and assigns, any rights or
remedies under or by reason of this Agreement.
20. Waiver of Jury Trial. ALL PARTIES KNOWINGLY WAIVE THEIR RIGHTS TO
REQUEST A TRIAL BY JURY IN ANY LITIGATION IN ANY COURT OF LAW, TRIBUNAL OR LEGAL
PROCEEDING INVOLVING THE PARTIES HERETO OR ANY DISPUTES ARISING OUT OF OR
RELATED TO THIS AGREEMENT.
21. Successors.
- 11 -
<PAGE> 12
(a) This Agreement shall inure to the benefit of and be
binding upon the Executive and the Executive's assigns, heirs, representatives
or estate.
(b) This Agreement shall be binding upon and inure to the
benefit of the Company and its successors and assigns.
IN WITNESS WHEREOF, WATER PIK TECHNOLOGIES, INC., by its appropriate
officer, signed this Agreement and Executive has signed this Agreement, as of
the day and year first above written.
WATER PIK TECHNOLOGIES, INC.
By:
Michael P. Hoopis
President and Chief Executive Officer
EXECUTIVE
(name)
- 12 -
<PAGE> 13
Schedule to Form of Employment Agreement
<TABLE>
<CAPTION>
NAME TITLE BASE SALARY ADDITIONAL PAYMENTS NUMBER OF OPTIONS
<S> <C> <C> <C> <C>
Theresa Hope-Reese Vice President - $185,000 $20,000 over 2 years 25,000
Human Resources
Richard D. Tipton Vice President, $180,000 - 30,000
General Counsel
</TABLE>
- 13 -
<PAGE> 1
Exhibit 10.8
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT is executed this 10th day of
January, 2000, by and between Water Pik Technologies, Inc., a Delaware
corporation with its principal place of business in Newport Beach, California
("Water Pik") and _______________, an individual residing in California (the
"Executive").
WHEREAS Executive and Allegheny Teledyne Incorporated entered into an
Employment Agreement on ____________ (the "Agreement");
WHEREAS the Agreement was assigned to and assumed by Water Pik
Technologies on November 29, 1999 as part of the spin-off of Allegheny Teledyne
Incorporated's consumer products business;
WHEREAS the parties wish to amend the Agreement pursuant to the terms
contained herein.
NOW THEREFORE, in consideration of the premises, mutual covenants and
agreements of the parties contained herein, and other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, Water
Pik and the Executive hereby agree, intending to be legally bound, as follows:
1. Paragraph 4(d) of the Agreement entitled "Stock Options" is hereby
amended and restated by adding the following sentence at the end of the
paragraph:
In the event of a "Change in Control" as defined herein, all options
outstanding shall become immediately exercisable; provided, however,
this provision shall not be applicable if any Change in Control results
from Executive's beneficial ownership (within the meaning of Rule 13d.3
under the Securities Exchange Act) of common stock or Company voting
securities.
<PAGE> 2
IN WITNESS WHEREOF, Water Pik, by its appropriate officer, and
Executive have signed this Amendment, as of the day and year first above
written.
WATER PIK TECHNOLOGIES, INC.
By:
EXECUTIVE
- 2 -
<PAGE> 3
Schedule to form of Amendment to Employment Agreement
Water Pik Technologies, Inc. has entered into an Amendment to
Employment Agreement on the form shown above, with each of the following
individuals:
1. Michael P. Hoopis
2. Robert A. Shortt
3. Victor C. Streufert
4. Richard P. Bisson
5. Robert J. Rasp
- 3 -
<PAGE> 1
Exhibit 10.10
WATER PIK TECHNOLOGIES, INC.
1999 NON-EMPLOYEE DIRECTOR STOCK COMPENSATION PLAN
ARTICLE I.
GENERAL
1.1. Purpose. It is the purpose of the Plan to promote the interests of
the Company and its stockholders by attracting, retaining and providing an
incentive to Non-Employee Directors through the acquisition of a proprietary
interest in the Company and an increased personal interest in its performance.
This purpose will be served by providing an opportunity for Non-Employee
Directors to elect to receive Stock Options and/or Common Stock in lieu of
Director's Retainer Fee Payments, the automatic payment of a portion of the
Director's Retainer Fee Payment in the form of Common Stock to those
Non-Employee Directors not electing to receive such portion in the form of Stock
Options and/or Common Stock and granting each Non-Employee Director annually an
option covering 1,000 shares of Common Stock.
1.2. Adoption and Term. The Plan has been approved by the Board and
shall become effective as of the Effective Date (as hereinafter defined). The
Plan shall terminate without further action upon the earlier of (a) the tenth
anniversary of the effective date, and (b) the first date upon which no shares
of Common Stock remain available for issuance under the Plan.
1.3. Definitions. As used herein the following terms have the following
meanings:
(a) "Annual Options" means the Stock Options issuable under
Section 4.4(a) of the Plan.
(b)"Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
References to a section of the Code shall include that section
and any comparable section or sections of any future legislation
that amends, supplements or supersedes said section.
(d)"Common Stock" means the common stock, par value $0.01 per
share, of the Company.
(e) "Company" means Water Pik Technologies, Inc., a Delaware
corporation, and any successor thereto.
(f) "Compensation Year" means each calendar year or portion
thereof during which the Plan is in effect.
(g)"Director" means a member of the Board.
<PAGE> 2
(h) "Director's Retainer Fee Payment" means the dollar value of
that portion of the annual retainer fee payable by the Company to
a Non-Employee Director for serving as a Director and for serving
as the chair of the Board or any committee of the Board as of a
particular Payment Date, as established by the Board and in
effect from time to time.
(i) "Effective Date" means the effective date of the distribution
by Allegheny Teledyne Incorporated to its stockholders of the
Common Stock.
(j) "Employee" means any employee of the Company or an affiliate.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended. References to a section of the Exchange Act or rule
promulgated thereunder shall include that section or rule and any
comparable section(s) or rule(s) of any future legislation or
rulemaking that amends, supplements or supersedes said section or
rule.
(l) "Fair Market Value" means, as of any given date, the average
of the high and low trading prices of the Common Stock on such
date as reported on the New York Stock Exchange, or, if the
Common Stock is not then traded on the New York Stock Exchange,
on such other national securities exchange on which the Common
Stock is admitted to trade, or, if none, on the National
Association of Securities Dealers Automated Quotation System if
the Common Stock is admitted for quotation thereon; provided,
however, if there were no sales reported as of such date, Fair
Market Value shall be computed as of the last date preceding such
date on which a sale was reported; provided, further, that if any
such exchange or quotation system is closed on any day on which
Fair Market Value is to be determined, Fair Market Value shall be
determined as of the first date immediately preceding such date
on which such exchange or quotation system was open for trading.
(m) "Non-Employee Director" means a Director who is not an
Employee.
(n) "Non-Employee Director Notice" means a written notice
delivered in accordance with Section 4.2.
(o) "Payment Date" means the first business day of January and
July of each Compensation Year on which the Director's Retainer
Fee Payment for serving as a Director is paid by the Company and
the first business day of January of each Compensation Year on
which the Director's Retainer Fee Payment for serving as the
chair of the Board or any committee of the Board is paid by the
Company.
(p) "Plan" means this Water Pik Technologies, Inc. 1999
Non-Employee Director Stock Compensation Plan, as it may
hereafter be amended from time to
2
<PAGE> 3
time.
(q) "Retainer Fee Options" means the Stock Options issuable under
Section 4.3 of the Plan.
(r) "Stock Options" means options to purchase shares of Common
Stock of the Company issuable hereunder.
1.4. Shares Subject to the Plan. The shares to be offered under the
Plan shall consist of the Company's authorized but unissued Common Stock or
treasury shares and, subject to adjustment as provided in Section 5.1 hereof,
the aggregate amount of such stock which may be issued or subject to Stock
Options issued hereunder shall not exceed 100,000 shares. If any Stock Option
granted under the Plan shall expire or terminate for any reason, without having
been exercised or vested in full, as the case may be, the unpurchased shares
subject thereto shall again be available for issuance under the Plan. Stock
Options granted under the Plan will not be qualified as "incentive stock
options" under Section 422 of the Code.
ARTICLE II.
ADMINISTRATION
2.1. The Board. The Plan shall be administered by the Board. Subject to
the provisions of the Plan, the Board shall interpret the Plan, promulgate,
amend, and rescind rules and regulations relating to the Plan and make all other
determinations necessary or advisable for its administration. Interpretation and
construction of any provision of the Plan by the Board shall be final and
conclusive. Notwithstanding the foregoing, the Board shall have or exercise no
discretion with respect to the selection of persons eligible to participate
hereunder, the determination of the number of shares of Common Stock or number
of Stock Options issuable to any person or any other aspect of Plan
administration with respect to which such discretion is not permitted in order
for grants of shares of Common Stock and Stock Options to be exempt under Rule
16b-3 promulgated under the Exchange Act.
ARTICLE III.
PARTICIPATION
3.1. Participants. Each Non-Employee Director shall participate in the
Plan on the terms and conditions hereinafter set forth.
ARTICLE IV.
PAYMENT OF DIRECTOR'S FEES
4.1. General. The Director's Retainer Fee Payment shall be paid to each
Non-Employee Director, as of each Payment Date, as set forth in the Plan and
subject to such other payment policies and procedures as the Board may establish
from time to time. If, for the applicable Compensation Year, a Non-Employee
Director has not made an election pursuant to Section 4.2 to receive Stock
Options or Common Stock in lieu of at least twenty-
3
<PAGE> 4
five percent (25%) of the Director's Retainer Fee Payment, then seventy-five
percent (75%) of such director's Retainer Fee Payment shall be paid in cash and
twenty-five percent (25%) of the Director's Retainer Fee Payment shall be paid
in the form of Common Stock.
4.2. Non-Employee Director Notice. A Non-Employee Director may file
with the Secretary of the Company or other designee of the Board of Directors
prior to the commencement of a Compensation Year a Non-Employee Director Notice
making an election to receive either twenty-five percent (25%), fifty percent
(50%), seventy-five percent (75%) or one hundred (100%) of his or her Director's
Retainer Fee Payment in the form of Stock Options and/or Common Stock with the
balance to be paid in cash. If a Director does not timely file an election, he
or she shall receive twenty-five percent (25%) of the Director's Retainer Fee
Payment in Common Stock and seventy-five percent (75%) in cash. Notwithstanding
the foregoing, elections to receive Common Stock or Stock Options may be made at
any time during a Compensation Year so long as such elections are made
irrevocably in advance of receiving the corresponding Common Stock or Stock
Options and approved in accordance with Rule 16b-3 under the Exchange Act.
4.3 Conversion of Retainer Fee Payment to Shares. Each Non-Employee
Director who pursuant to Section 4.1 or 4.2 is to receive Common Stock as all or
part of his or her Director's Retainer Fee Payment with respect to a
Compensation Year and who is elected or reelected or is a continuing
Non-Employee Director as of the date of commencement of such Compensation Year
as of the applicable Payment Date, shall receive as of each Payment Date during
such Compensation Year a number of shares of Common Stock equal to the quotient
obtained by dividing (i) the amount of the Director's Retainer Fee Payment to be
paid in the form of Common Stock by (ii) the Fair Market Value of the Common
Stock per share on such Payment Date. Cash shall be paid in lieu of any
fractional shares.
4.4 Stock Options
(a) Annual Option Grants. An Annual Option covering 1,000 shares of
Common Stock shall be granted to each Non-Employee Director on the Effective
Date, subject to approval by the stockholders of the Company. Thereafter, an
Annual Option covering 1,000 shares of Common Stock will be granted to each
Non-Employee Director automatically at the conclusion of each Company Annual
Meeting. If, after the Effective Date, a director first becomes a Non-Employee
Director on a date other than an Annual Meeting date, an Annual Option covering
1,000 shares of Common Stock will be granted to such director on his or her
first date of Board service. The purchase price of the Common Stock covered by
each Annual Option will be the Fair Market Value of a share of Common Stock as
of the date of grant of the Annual Option.
(b) Retainer Fees Options. Retainer Fee Options will be granted on the
Payment Dates of each Compensation Year. The number of shares of Common Stock to
be subject to a Retainer Fee Option shall be equal to the nearest number of
whole shares determined by multiplying the Fair Market Value of a share of
Company Common Stock on the date of grant by 0.3333 and dividing the result into
the applicable portion of the Director's Retainer Fee Payment elected to be
received as Stock Options by the Non-Employee Director for the
4
<PAGE> 5
Compensation Year. The purchase price of each share covered by each Retainer Fee
Option shall be equal to the Fair Market Value of a share of Common Stock on the
date of grant of the Retainer Fee Option multiplied by 0.6666.
(c) Duration and Exercise of Stock Options. Subject to Section 4.4(f)
below, Annual Options and Retainer Fee Options become exercisable on the first
anniversary of the date on which they were granted. Stock Options shall
terminate upon the expiration of ten years from the date of grant. No Stock
Option may be exercised for a fraction of a share and no partial exercise of any
Stock Option may be for less than one hundred (100) shares.
(d) Purchase Price. The purchase price for the shares shall be paid in
full at the time of exercise (i) in cash or by check payable to the order of the
Company, (ii) by delivery of shares of Common Stock of the Company already owned
by, and in the possession of Stock Option holder, or (iii) by delivering a
properly executed exercise notice together with irrevocable instructions to a
broker to deliver promptly to the Company the amount of sale or loan proceeds to
pay the Stock Option price (in which case the exercise will be effective upon
receipt of such proceeds by the Company). Shares of Common Stock used to satisfy
the exercise price of a Stock Option shall be valued at their Fair Market Value
on the date of exercise.
(e) Transferability. Stock Options granted hereunder shall not be
transferable, other than by will or the laws of descent and distribution, and
shall be exercisable during a Stock Option holder's lifetime only by the Stock
Option holder or by his or her guardian or legal representative, except to the
extent transfer is (i) permitted by Rule 16b-3 promulgated under the Exchange
Act and (ii) approved by the Board or its designee. Subject to the foregoing,
Stock Options shall not be assigned, pledged or otherwise encumbered by the
holder thereof, either voluntarily or by operation of law.
(f) Termination of Directorship. If a director ceases to be a director
of the Company for any reason other than death or removal by the Board of
Directors or the stockholders, the director's Stock Options shall continue to
vest as provided in Section 4.4 (c) above and the right of the Optionee to
exercise such Stock Options shall continue until the options expire in
accordance with Section 4.4(c). In no event may a Stock Option be exercised
after the expiration of the period specified in Section 4.4(c). In the event of
death of a director or former director who holds an outstanding Stock Option,
all unvested Stock Options shall automatically become fully vested as of the
date of death and the right of his or her estate or beneficiary to exercise the
Stock Options shall terminate upon the expiration of twelve months from the date
of death, but in no event may a Stock Option be exercised after the expiration
of the Option Period. In the event of removal of a director from the Board of
Directors, all rights of such director in a Stock Option that the director was
entitled to exercise on the date of removal shall terminate on the 30th day (or,
if such day is not a business day, on the next business day) after the date of
removal, but in no event may such Stock Options be exercised after the
expiration of the Option Period.
5
<PAGE> 6
ARTICLE V.
MISCELLANEOUS
5.1. Adjustments Upon Changes in Common Stock. The number and kind of
shares available for issuance under the Plan, and the number and kind of shares
subject to, and the exercise price of, outstanding Stock Options, shall be
appropriately adjusted to prevent dilution or enlargement of rights by reason of
any stock dividend, stock split, combination or exchange of shares,
recapitalization, merger, consolidation or other change in capitalization with a
similar substantive effect upon the Plan or the shares issuable under the Plan.
5.2. Amendment and Termination. The Board shall have complete power and
authority to amend the Plan at any time; provided, however, that the Board shall
not, without the affirmative approval of the stockholders of the Company, make
any amendment which requires stockholder approval under any applicable law or
regulation of a national stock exchange on which the Common Stock is traded. The
Board shall have the right and the power to terminate the Plan at any time. No
amendment or termination of the Plan may, without the consent of the
Non-Employee Director, adversely affect the right of such Non-Employee Director
with respect to any Stock Options then outstanding.
5.3. Requirements of Law. The issuance of Common Stock under the Plan
shall be subject to all applicable laws, rules and regulations and to such
approval by governmental agencies as may be required.
5.4. No Guarantee of Membership. Nothing in the Plan shall confer upon
a Non-Employee Director any right to continue to serve as a Director.
5.5 Construction. Words of any gender used in the Plan shall be
construed to include any other gender, unless the context requires otherwise.
5.6 Governing Law. This Plan shall be governed by, construed and
interpreted in accordance with the laws of the State of Delaware, without regard
to its principles of conflict of law, as to all matters, including matters of
validity, construction, effect, performance and remedies.
6
<PAGE> 1
EXHIBIT 10.11
WATER PIK TECHNOLOGIES, INC.
1999 INCENTIVE PLAN
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I PURPOSE AND ADOPTION OF THE PLAN....................................1
1.01. PURPOSE.............................................................1
1.02. ADOPTION AND TERM...................................................1
ARTICLE II DEFINITIONS........................................................1
2.01. AWARD...............................................................2
2.02. AWARD AGREEMENT.....................................................2
2.03. AWARD PERIOD........................................................2
2.04. BENEFICIARY.........................................................2
2.05. BOARD...............................................................2
2.06. CHANGE IN CONTROL...................................................2
2.07. CODE................................................................3
2.08. COMMITTEE...........................................................3
2.09. COMPANY.............................................................3
2.10. COMMON STOCK........................................................3
2.11. COMPANY VOTING SECURITIES...........................................3
2.12. DATE OF GRANT.......................................................3
2.13. EXCHANGE ACT........................................................3
2.14. EXERCISE PRICE......................................................3
2.15. FAIR MARKET VALUE...................................................3
2.16. INCENTIVE STOCK OPTION..............................................3
2.17. MERGER..............................................................3
2.18. NON-QUALIFIED STOCK OPTION..........................................3
2.19. OPTIONS.............................................................4
<PAGE> 3
2.20. OUTSTANDING COMMON STOCK............................................4
2.21. PARTICIPANT.........................................................4
2.22. PERFORMANCE AWARDS..................................................4
2.23. PERFORMANCE GOALS...................................................4
2.24. PLAN................................................................4
2.25. PURCHASE PRICE......................................................4
2.26. RESTORATION OPTION..................................................4
2.27. RESTRICTED SHARES...................................................4
2.28. RETIREMENT..........................................................4
2.29. RULE 16B-3..........................................................4
2.30. STOCK APPRECIATION RIGHTS...........................................4
2.31. SUBSIDIARY..........................................................4
2.32. TERMINATION OF EMPLOYMENT...........................................4
ARTICLE III ADMINISTRATION....................................................6
3.01. COMMITTEE...........................................................6
ARTICLE IV SHARES.............................................................6
4.01. NUMBER OF SHARES ISSUABLE...........................................6
4.02. SHARES SUBJECT TO TERMINATED AWARDS.................................6
ARTICLE V PARTICIPATION.......................................................7
5.01. ELIGIBLE PARTICIPANTS...............................................7
ARTICLE VI STOCK OPTIONS AND STOCK APPRECIATION RIGHTS........................7
<PAGE> 4
6.01. OPTION AWARDS......................................................7
6.02. STOCK APPRECIATION RIGHTS..........................................8
6.03. TERMS OF STOCK OPTIONS AND STOCK APPRECIATION RIGHTS...............9
6.04. EXERCISE PROCEDURES................................................10
6.05. CHANGE IN CONTROL..................................................10
ARTICLE VII RESTRICTED SHARES................................................10
7.01. RESTRICTED SHARE AWARDS............................................10
7.02. TERMS OF RESTRICTED SHARES.........................................11
7.03. CHANGE IN CONTROL..................................................12
ARTICLE VIII PERFORMANCE AWARDS..............................................12
8.01. PERFORMANCE AWARDS.................................................12
8.02. TERMS OF PERFORMANCE AWARDS........................................13
8.03. CHANGE IN CONTROL..................................................14
ARTICLE IX OTHER STOCK-BASED AWARDS..........................................14
9.01. GRANT OF OTHER STOCK-BASED AWARDS..................................14
9.02. TERMS OF OTHER STOCK-BASED AWARDS..................................14
9.03. FOREIGN QUALIFIED AWARDS...........................................14
ARTICLE X SHORT-TERM CASH INCENTIVE AWARDS...................................15
10.01. ELIGIBILITY.......................................................15
10.02. AWARDS............................................................15
<PAGE> 5
ARTICLE XI TERMS APPLICABLE GENERALLY TO AWARDS GRANTED UNDER THE PLAN.......16
11.01. PLAN PROVISIONS CONTROL AWARD TERMS...............................16
11.02. AWARD AGREEMENT...................................................16
11.03. MODIFICATION OF AWARD AFTER GRANT.................................16
11.04. LIMITATION ON TRANSFER............................................16
11.05. TAXES.............................................................16
11.06. SURRENDER OF AWARDS...............................................17
11.07. ADJUSTMENTS TO REFLECT CAPITAL CHANGES............................17
11.08. NO RIGHT TO EMPLOYMENT............................................19
11.09. AWARDS NOT INCLUDABLE FOR BENEFIT PURPOSES........................19
11.10. GOVERNING LAW.....................................................19
11.11. NO STRICT CONSTRUCTION............................................19
11.12. COMPLIANCE WITH RULE 16B-3........................................19
11.13. CAPTIONS..........................................................19
11.14. SEVERABILITY......................................................20
11.15. AMENDMENT AND TERMINATION.........................................19
11.16. SPECIAL PROVISION RELATING TO CERTAIN STOCK ISSUANCES.............20
<PAGE> 6
ARTICLE I
PURPOSE AND ADOPTION OF THE PLAN
1.01. PURPOSE. The purpose of the Water Pik Technologies, Inc. 1999 Incentive
Plan (hereinafter referred to as the "Plan") is to assist in attracting and
retaining highly competent employees, to act as an incentive in motivating
selected officers and other key employees of Water Pik Technologies, Inc. and
its Subsidiaries to achieve long-term corporate objectives and to enable cash
incentive awards to qualify as performance-based for purposes of the tax
deduction limitations under Section 162(m) of the Code.
1.02. ADOPTION AND TERM. The Plan has been approved by the Board of Directors of
Water Pik Technologies, Inc., to be effective as of the effective date of the
distribution by Allegheny Teledyne Incorporated to its stockholders of Water Pik
Technologies, Inc. Common Stock (the "Effective Date"), but is subject to the
approval of the stockholders of the Company. The Plan shall remain in effect
until terminated by action of the Board; provided, however, that no Incentive
Stock Option may be granted hereunder after the tenth anniversary of the
Effective Date and the provisions of Articles VII, VIII, IX and X with respect
to performance-based awards to "covered employees" under Section 162(m) of the
Code shall expire as of the fifth anniversary of the Effective Date.
ARTICLE II
DEFINITIONS
For the purpose of this Plan, capitalized terms shall have the following
meanings:
<PAGE> 7
2.01. AWARD means any one or a combination of Non-Qualified Stock Options or
Incentive Stock Options described in Article VI, Stock Appreciation Rights
described in Article VI, Restricted Shares described in Article VII, Performance
Awards described in Article VIII, Awards of cash or any other Award made under
the terms of the Plan.
2.02. AWARD AGREEMENT means a written agreement between the Company and a
Participant or a written acknowledgment from the Company to a Participant
specifically setting forth the terms and conditions of an Award granted under
the Plan.
2.03. AWARD PERIOD means, with respect to an Award, the period of time set forth
in the Award Agreement during which specified target performance goals must be
achieved or other conditions set forth in the Award Agreement must be satisfied.
2.04. BENEFICIARY means an individual, trust or estate who or which, by a
written designation of the Participant filed with the Company or by operation of
law, succeeds to the rights and obligations of the Participant under the Plan
and the Award Agreement upon the Participant's death.
2.05. BOARD means the Board of Directors of the Company.
2.06. CHANGE IN CONTROL means, and shall be deemed to have occurred upon the
occurrence of, any one of the following events:
(a) The acquisition in one or more transactions, other than from the Company, by
any individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act) of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of a number of Company Voting
Securities in excess of 25% of the Company Voting Securities unless such
acquisition has been approved by the Board;
(b) Any election has occurred of persons to the Board that causes two-thirds of
the Board to consist of persons other than (i) persons who were members of the
Board on the Effective Date and (ii) persons who were nominated for elections as
members of the Board at a time when two-thirds of the Board consisted of persons
who were members of the Board on the Effective Date, provided, however, that any
person nominated for election by a Board at least two-thirds of whom constituted
persons described in clauses (i) and/or (ii) or by persons who were themselves
nominated by such Board shall, for this purpose, be deemed to have been
nominated by a Board composed of persons described in clause (i);
(c) Approval by the stockholders of the Company of a reorganization, merger or
consolidation, unless, following such reorganization, merger or consolidation,
all or substantially all of the individuals and entities who were the respective
beneficial owners of the Outstanding Common Stock and Company Voting Securities
immediately prior to such reorganization, merger or consolidation, following
such reorganization, merger or consolidation beneficially own, directly or
indirectly, more than seventy five (75%) of, respectively, the then outstanding
shares of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors or
trustees, as the case may be, of the entity resulting from such reorganization,
merger or consolidation in substantially the same proportion
<PAGE> 8
as their ownership of the Outstanding Common Stock and Company Voting Securities
immediately prior to such reorganization, merger or consolidation, as the case
may be; or
(d) Approval by the stockholders of the Company of (i) a complete liquidation or
dissolution of the Company or (ii) a sale or other disposition of all or
substantially all the assets of the Company.
2.07. CODE means the Internal Revenue Code of 1986, as amended. References to a
section of the Code shall include that section and any comparable section or
sections of any future legislation that amends, supplements or supersedes said
section.
2.08. COMMITTEE means the Committee defined in Section 3.01.
2.09. COMPANY means Water Pik Technologies, Inc., a Delaware corporation, and
its successors.
2.10. COMMON STOCK means Common Stock of the Company, par value $0.01 per share.
2.11. COMPANY VOTING SECURITIES means the combined voting power of all
outstanding voting securities of the Company entitled to vote generally in the
election of directors to the Board.
2.12. DATE OF GRANT means the date designated by the Committee as the date as of
which it grants an Award, which shall not be earlier than the date on which the
Committee approves the granting of such Award.
2.13. EXCHANGE ACT means the Securities Exchange Act of 1934, as amended.
2.14. EXERCISE PRICE means, with respect to a Stock Appreciation Right, the
amount established by the Committee in the Award Agreement which is to be
subtracted from the Fair Market Value on the date of exercise in order to
determine the amount of the payment to be made to the Participant, as further
described in Section 6.02(b).
2.15. FAIR MARKET VALUE means, on any date, the average of the high and low
quoted sales prices of a share of Common Stock, as reported on the Composite
Tape for New York Stock Exchange Listed Companies on such date or, if there were
no sales on such date, on the last date preceding such date on which a sale was
reported.
2.16. INCENTIVE STOCK OPTION means a stock option within the meaning of Section
422 of the Code.
2.17. MERGER means any merger, reorganization, consolidation, exchange, transfer
of assets or other transaction having similar effect involving the Company.
2.18. NON-QUALIFIED STOCK OPTION means a stock option which is not an Incentive
Stock Option.
<PAGE> 9
2.19. OPTIONS means all Non-Qualified Stock Options and Incentive Stock Options
granted at any time under the Plan.
2.20. OUTSTANDING COMMON STOCK means, at any time, the issued and outstanding
shares of Common Stock.
2.21. PARTICIPANT means a person designated to receive an Award under the Plan
in accordance with Section 5.01.
2.22. PERFORMANCE AWARDS means Awards granted in accordance with Article VIII.
2.23. PERFORMANCE GOALS means operating income, operating profit (earnings from
continuing operations before interest and taxes), earnings per share, return on
investment or working capital, return on stockholders' equity, economic value
added (the amount, if any, by which net operating profit after tax exceeds a
reference cost of capital), reductions in inventory, inventory turns and on-time
delivery performance, any one of which may be measured with respect to the
Company or any one or more of its Subsidiaries and divisions and either in
absolute terms or as compared to another company or companies, and quantifiable,
objective measures of individual performance relevant to the particular
individual's job responsibilities.
2.24. PLAN means the Water Pik Technologies, Inc. 1999 Incentive Plan as
described herein, as the same may be amended from time to time.
2.25. PURCHASE PRICE, with respect to Options, shall have the meaning set forth
in Section 6.01(b).
2.26. RESTORATION OPTION means a Non-Qualified Stock Option granted pursuant to
Section 6.01(f).
2.27. RESTRICTED SHARES means Common Stock subject to restrictions imposed in
connection with Awards granted under Article VII.
2.28. RETIREMENT means early or normal retirement under a pension plan or
arrangement of the Company or one of its Subsidiaries in which the Participant
participates.
2.29. RULE 16B-3 means Rule 16b-3 promulgated by the Securities and Exchange
Commission under Section 16 of the Exchange Act, as the same may be amended from
time to time, and any successor rule.
2.30. STOCK APPRECIATION RIGHTS means Awards granted in accordance with Article
VI.
2.31. SUBSIDIARY means a subsidiary of the Company within the meaning of Section
424(f) of the Code.
2.32. TERMINATION OF EMPLOYMENT means the voluntary or involuntary termination
of a Participant's employment with the Company or a Subsidiary for any reason,
including death, disability, retirement or as the result of the divestiture of
the Participant's employer or any similar
<PAGE> 10
transaction in which the Participant's employer ceases to be the Company or one
of its Subsidiaries. Whether entering military or other government service shall
constitute Termination of Employment, or whether a Termination of Employment
shall occur as a result of disability, shall be determined in each case by the
Committee in its sole discretion.
<PAGE> 11
ARTICLE III
ADMINISTRATION
3.01. COMMITTEE. The Plan shall be administered by a committee of the Board
("Committee") comprised of at least two persons. The Committee shall have
exclusive and final authority in each determination, interpretation or other
action affecting the Plan and its Participants. The Committee shall have the
sole discretionary authority to interpret the Plan, to establish and modify
administrative rules for the Plan, to impose such conditions and restrictions on
Awards as it determines appropriate, to cancel Awards (including those made
pursuant to other plans of the Company) and to substitute new Options for
previously awarded Options which, at the time of such substitution, have an
exercise price in excess of the Fair Market Value of the underlying Common Stock
(including options granted under other incentive compensation programs of the
Company) with the consent of the recipient, and to take such steps in connection
with the Plan and Awards granted hereunder as it may deem necessary or
advisable. The Committee shall not, however, have or exercise any discretion
that would disqualify amounts payable under Article X as performance-based
compensation for purposes of Section 162(m) of the Code. The Committee may
delegate such of its powers and authority under the Plan as it deems appropriate
to a subcommittee of the Committee and/or designated officers or employees of
the Company. In addition, the full Board may exercise any of the powers and
authority of the Committee under the Plan. In the event of such delegation of
authority or exercise of authority by the Board, references in the Plan to the
Committee shall be deemed to refer, as appropriate, to the delegate of the
Committee or the Board. Actions taken by the Committee or any subcommittee
thereof, and any delegation by the Committee to designated officers or
employees, under this Section 3.01 shall comply with Section 16(b) of the
Exchange Act, the performance-based provisions of Section 162(m) of the Code,
and the regulations promulgated under each of such statutory provisions, or the
respective successors to such statutory provisions or regulations, as in effect
from time to time, to the extent applicable.
ARTICLE IV
SHARES
4.01. NUMBER OF SHARES ISSUABLE. The total number of shares initially authorized
to be issued under the Plan shall equal 12% of the issued and outstanding shares
of Common Stock immediately following the effective date of the Plan. If the
number of issued and outstanding shares of Common Stock is increased after the
effective date of the Plan, the total number of shares available under the Plan
will be increased by 12% of such increase. No more than 945,000 shares of Common
Stock may be issued under the Plan as Incentive Stock Options. The number of
shares available for issuance under the Plan shall be further subject to
adjustment in accordance with Section 11.07. The shares to be offered under the
Plan shall be authorized and unissued Common Stock, or issued Common Stock which
shall have been reacquired by the Company.
4.02. SHARES SUBJECT TO TERMINATED AWARDS. Common Stock covered by any
unexercised portions of terminated Options (including canceled Options) granted
under Article VI, Common Stock forfeited as provided in Section 7.02(a) and
Common Stock subject to any Awards which are otherwise surrendered by the
Participant may again be subject to new Awards under the Plan. Common Stock
subject to Options, or portions thereof, which have been
<PAGE> 12
surrendered in connection with the exercise of Stock Appreciation Rights shall
not be available for subsequent Awards under the Plan, but Common Stock issued
in payment of such Stock Appreciation Rights shall not be charged against the
number of shares of Common Stock available for the grant of Awards hereunder.
ARTICLE V
PARTICIPATION
5.01. ELIGIBLE PARTICIPANTS. Participants in the Plan shall be such officers and
other key employees of the Company and its Subsidiaries, whether or not members
of the Board, as the Committee, in its sole discretion, may designate from time
to time. The Committee's designation of a Participant in any year shall not
require the Committee to designate such person to receive Awards or grants in
any other year. The designation of a Participant to receive awards or grants
under one portion of the Plan does not require the Committee to include such
Participant under other portions of the Plan. The Committee shall consider such
factors as it deems pertinent in selecting Participants and in determining the
type and amount of their respective Awards. Notwithstanding any provision herein
to the contrary, the Committee may grant Awards under the Plan, other than
Incentive Stock Options, to non-employees who, in the judgment of the Committee,
render significant services to the Company or any of its Subsidiaries, on such
terms and conditions as the Committee deems appropriate and consistent with the
intent of the Plan. Subject to adjustment in accordance with Section 11.07, in
any calendar year, no Participant shall be granted Awards in respect of more
than 500,000 shares of Common Stock (whether through grants of Options or Stock
Appreciation Rights or other grants of Common Stock or rights with respect
thereto) and $2,000,000 in cash.
ARTICLE VI
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
6.01. OPTION AWARDS.
(a) GRANT OF OPTIONS. The Committee may grant, to such Participants as the
Committee may select, Options entitling the Participant to purchase shares of
Common Stock from the Company in such number, at such price, and on such terms
and subject to such conditions, not inconsistent with the terms of this Plan, as
may be established by the Committee. The terms of any Option granted under this
Plan shall be set forth in an Award Agreement.
(b) PURCHASE PRICE OF OPTIONS. The Purchase Price of each share of Common Stock
which may be purchased upon exercise of any Option granted under the Plan shall
be determined by the Committee; provided, however, that the Purchase Price of
the Common Stock purchased pursuant to Options designated by the Committee as
Incentive Stock Options shall be equal to or greater than the Fair Market Value
on the Date of Grant as required under Section 422 of the Code.
(c) DESIGNATION OF OPTIONS. Except as otherwise expressly provided in the Plan,
the Committee may designate, at the time of the grant of each Option, the Option
as an Incentive Stock Option or a Non-Qualified Stock Option.
<PAGE> 13
(d) INCENTIVE STOCK OPTION SHARE LIMITATION. No Participant may be granted
Incentive Stock Options under the Plan (or any other plans of the Company and
its Subsidiaries) which would result in shares with an aggregate Fair Market
Value (measured on the Date of Grant) of more than $100,000 first becoming
exercisable in any one calendar year.
(e) RIGHTS AS A STOCKHOLDER. A Participant or a transferee of an Option pursuant
to Section 11.04 shall have no rights as a stockholder with respect to Common
Stock covered by an Option until the Participant or transferee shall have become
the holder of record of any such shares, and no adjustment shall be made for
dividends in cash or other property or distributions or other rights with
respect to any such Common Stock for which the record date is prior to the date
on which the Participant or a transferee of the Option shall have become the
holder of record of any such shares covered by the Option; provided, however,
that Participants are entitled to share adjustments to reflect capital changes
under Section 11.07.
(f) RESTORATION OPTIONS UPON THE EXERCISE OF A NON-QUALIFIED STOCK OPTION. In
the event that any Participant delivers to the Company, or has withheld from the
shares otherwise issuable upon the exercise of a Non-Qualified Stock Option,
shares of Common Stock in payment of the Purchase Price of any Non-Qualified
Stock Option granted hereunder in accordance with Section 6.04, the Committee
shall have the authority to grant or provide for the automatic grant of a
Restoration Option to such Participant. The grant of a Restoration Option shall
be subject to the satisfaction of such conditions or criteria as the Committee
in its sole discretion shall establish from time to time. A Restoration Option
shall entitle the holder thereof to purchase a number of shares of Common Stock
equal to the number of such shares so delivered or withheld upon exercise of the
original Option and, in the discretion of the Committee, the number of shares,
if any, delivered or withheld to the Corporation to satisfy any withholding tax
liability arising in connection with the exercise of the original Option. A
Restoration Option shall have a per share Purchase Price of not less than 100%
of the per share Fair Market Value of the Common Stock on the date of grant of
such Restoration Option, a term not longer than the remaining term of the
original Option at the time of exercise thereof, and such other terms and
conditions as the Committee in its sole discretion shall determine.
6.02. STOCK APPRECIATION RIGHTS.
(a) STOCK APPRECIATION RIGHT AWARDS. The Committee is authorized to grant to any
Participant one or more Stock Appreciation Rights. Such Stock Appreciation
Rights may be granted either independent of or in tandem with Options granted to
the same Participant. Stock Appreciation Rights granted in tandem with Options
may be granted simultaneously with, or, in the case of Non-Qualified Stock
Options, subsequent to, the grant to such Participant of the related Option;
provided however, that: (i) any Option covering any share of Common Stock shall
expire and not be exercisable upon the exercise of any Stock Appreciation Right
with respect to the same share, (ii) any Stock Appreciation Right covering any
share of Common Stock shall expire and not be exercisable upon the exercise of
any related Option with respect to the same share, and (iii) an Option and Stock
Appreciation Right covering the same share of Common Stock may not be exercised
simultaneously. Upon exercise of a Stock Appreciation Right with respect to a
share of Common Stock, the Participant shall be entitled to receive an amount
equal to the excess, if any, of (A) the Fair Market Value of a share of Common
Stock on the date of exercise over (B) the Exercise Price of such Stock
Appreciation Right established in the Award Agreement, which amount shall be
payable as provided in Section 6.02(c).
<PAGE> 14
(b) EXERCISE PRICE. The Exercise Price established under any Stock Appreciation
Right granted under this Plan shall be determined by the Committee, but in the
case of Stock Appreciation Rights granted in tandem with Options shall not be
less than the Purchase Price of the related Option. Upon exercise of Stock
Appreciation Rights granted in tandem with options, the number of shares subject
to exercise under any related Option shall automatically be reduced by the
number of shares of Common Stock represented by the Option or portion thereof
which are surrendered as a result of the exercise of such Stock Appreciation
Rights.
(c) PAYMENT OF INCREMENTAL VALUE. Any payment which may become due from the
Company by reason of a Participant's exercise of a Stock Appreciation Right may
be paid to the Participant as determined by the Committee (i) all in cash, (ii)
all in Common Stock, or (iii) in any combination of cash and Common Stock. In
the event that all or a portion of the payment is made in Common Stock, the
number of shares of Common Stock delivered in satisfaction of such payment shall
be determined by dividing the amount of such payment or portion thereof by the
Fair Market Value on the Exercise Date. No fractional share of Common Stock
shall be issued to make any payment in respect of Stock Appreciation Rights; if
any fractional share would be issuable, the combination of cash and Common Stock
payable to the Participant shall be adjusted as directed by the Committee to
avoid the issuance of any fractional share.
6.03. TERMS OF STOCK OPTIONS AND STOCK APPRECIATION RIGHTS.
(a) CONDITIONS ON EXERCISE. An Award Agreement with respect to Options and/or
Stock Appreciation Rights may contain such waiting periods, exercise dates and
restrictions on exercise (including, but not limited to, periodic installments)
as may be determined by the Committee at the time of grant.
(b) DURATION OF OPTIONS AND STOCK APPRECIATION RIGHTS. Options and Stock
Appreciation Rights shall terminate upon the first to occur of the following
events:
(i) Expiration of the Option or Stock Appreciation Right as provided in the
Award Agreement; or
(ii) Termination of the Award in the event of a Participant's disability,
Retirement, death or other Termination of Employment as provided in the Award
Agreement; or
(iii) In the case of an Incentive Stock Option, ten years from the Date of
Grant; or
(iv) Solely in the case of a Stock Appreciation Right granted in tandem with an
Option, upon the expiration of the related Option.
(c) ACCELERATION OR EXTENSION OF EXERCISE TIME. The Committee, in its sole
discretion, shall have the right (but shall not be obligated), exercisable on or
at any time after the Date of Grant, to permit the exercise of an Option or
Stock Appreciation Right (i) prior to the time such Option or Stock Appreciation
Right would become exercisable under the terms of the Award Agreement, (ii)
after the termination of the Option or Stock Appreciation Right under the terms
of the Award Agreement, or (iii) after the expiration of the Option or Stock
Appreciation Right.
<PAGE> 15
6.04. EXERCISE PROCEDURES. Each Option and Stock Appreciation Right granted
under the Plan shall be exercised by accessing a telephonic voice/data response
system or internet web site maintained or otherwise approved by the Company or
its designated agent prior to the close of business on the expiration date of
the Option or Stock Appreciation Right (or by such other method as provided in
the Award Agreement or as the Committee may establish or approve from time to
time). The Purchase Price of shares purchased upon exercise of an Option granted
under the Plan shall be paid in full by means of a cashless exercise program
under which, if so instructed by the Participant, shares may be issued directly
to the Participant's broker or dealer upon the Participant's irrevocable
election. Alternatively, the Participant may pay the purchase price by cash or
any other method approved in advance by the Committee. In the event that any
Common Stock shall be transferred to the Company to satisfy all or any part of
the Purchase Price, the part of the Purchase Price deemed to have been satisfied
by such transfer of Common Stock shall be equal to the product derived by
multiplying the Fair Market Value as of the date of exercise times the number of
shares of Common Stock transferred to the Company. The Participant may not
transfer to the Company in satisfaction of the Purchase Price any fractional
share of Common Stock. Any part of the Purchase Price paid in cash upon the
exercise of any Option shall be added to the general funds of the Company and
may be used for any proper corporate purpose. Unless the Committee shall
otherwise determine, any Common Stock transferred to the Company as payment of
all or part of the Purchase Price upon the exercise of any Option shall be held
as treasury shares.
6.05. CHANGE IN CONTROL. Unless otherwise provided by the Committee in the
applicable Award Agreement, in the event of a Change in Control, all Options
outstanding on the date of such Change in Control, and all Stock Appreciation
Rights shall become immediately and fully exercisable. The provisions of this
Section 6.05 shall not be applicable to any Options or Stock Appreciation Rights
granted to a Participant if any Change in Control results from such
Participant's beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act) of Common Stock or Company Voting Securities.
ARTICLE VII
RESTRICTED SHARES
7.01. RESTRICTED SHARE AWARDS. The Committee may grant to any Participant an
Award of Common Stock in such number of shares, and on such terms, conditions
and restrictions, whether based on performance standards, periods of service,
retention by the Participant of ownership of purchased or designated shares of
Common Stock or other criteria, as the Committee shall establish. With respect
to performance-based Awards of Restricted Shares to "covered employees" (as
defined in Section 162(m) of the Code), performance targets will be limited to
specified levels of one or more of the Performance Goals. The terms of any
Restricted Share Award granted under this Plan shall be set forth in an Award
Agreement which shall contain provisions determined by the Committee and not
inconsistent with this Plan.
(a) ISSUANCE OF RESTRICTED SHARES. As soon as practicable after the Date of
Grant of a Restricted Share Award by the Committee, the Company shall cause to
be transferred on the books of the Company, or its agent, Common Stock,
registered on behalf of the Participant, evidencing the Restricted Shares
covered by the Award, but subject to forfeiture to the Company
<PAGE> 16
as of the Date of Grant if an Award Agreement with respect to the Restricted
Shares covered by the Award is not duly executed by the Participant and timely
returned to the Company. All Common Stock covered by Awards under this Article
VII shall be subject to the restrictions, terms and conditions contained in the
Plan and the Award Agreement entered into by the Participant. Until the lapse or
release of all restrictions applicable to an Award of Restricted Shares, the
share certificates representing such Restricted Shares may be held in custody by
the Company, its designee, or, if the certificates bear a restrictive legend, by
the Participant. Upon the lapse or release of all restrictions with respect to
an Award as described in Section 7.01(d), one or more share certificates,
registered in the name of the Participant, for an appropriate number of shares
as provided in Section 7.01(d), free of any restrictions set forth in the Plan
and the Award Agreement shall be delivered to the Participant.
(b) STOCKHOLDER RIGHTS. Beginning on the Date of Grant of the Restricted Share
Award and subject to execution of the Award Agreement as provided in Section
7.01(a), the Participant shall become a stockholder of the Company with respect
to all shares subject to the Award Agreement and shall have all of the rights of
a shareholder, including, but not limited to, the right to vote such shares and
the right to receive dividends; provided, however, that any Common Stock
distributed as a dividend or otherwise with respect to any Restricted Shares as
to which the restrictions have not yet lapsed, shall be subject to the same
restrictions as such Restricted Shares and held or restricted as provided in
Section 7.01(a).
(c) RESTRICTION ON TRANSFERABILITY. None of the Restricted Shares may be
assigned or transferred (other than by will or the laws of descent and
distribution, or to an inter vivos trust with respect to which the Participant
is treated as the owner under Sections 671 through 677 of the Code, except to
the extent that Section 16 of the Exchange Act limits a participant's right to
make such transfers), pledged or sold prior to lapse of the restrictions
applicable thereto.
(d) DELIVERY OF SHARES UPON VESTING. Upon expiration or earlier termination of
the forfeiture period without a forfeiture and the satisfaction of or release
from any other conditions prescribed by the Committee, or at such earlier time
as provided under the provisions of Section 7.03, the restrictions applicable to
the Restricted Shares shall lapse. As promptly as administratively feasible
thereafter, subject to the requirements of Section 11.05, the Company shall
deliver to the Participant or, in case of the Participant's death, to the
Participant's Beneficiary, one or more share certificates for the appropriate
number of shares of Common Stock, free of all such restrictions, except for any
restrictions that may be imposed by law.
7.02. TERMS OF RESTRICTED SHARES.
(a) FORFEITURE OF RESTRICTED SHARES. Subject to Sections 7.02(b) and 7.03, all
Restricted Shares shall be forfeited and returned to the Company and all rights
of the Participant with respect to such Restricted Shares shall terminate unless
the Participant continues in the service of the Company or a Subsidiary as an
employee until the expiration of the forfeiture period for such Restricted
Shares and satisfies any and all other conditions set forth in the Award
Agreement. The Committee shall determine the forfeiture period (which may, but
need not, lapse in installments) and any other terms and conditions applicable
with respect to any Restricted Share Award.
<PAGE> 17
(b) WAIVER OF FORFEITURE PERIOD. Notwithstanding anything contained in this
Article VII to the contrary, the Committee may, in its sole discretion, waive
the forfeiture period and any other conditions set forth in any Award Agreement
under appropriate circumstances (including the death, disability or Retirement
of the Participant or a material change in circumstances arising after the date
of an Award) and subject to such terms and conditions (including forfeiture of a
proportionate number of the Restricted Shares) as the Committee shall deem
appropriate.
7.03. CHANGE IN CONTROL. Unless otherwise provided by the Committee in the
applicable Award Agreement, in the event of a Change in Control, all
restrictions applicable to the Restricted Share Award shall terminate fully and
the Participant shall immediately have the right to the delivery of share
certificate or certificates for such shares in accordance with Section 7.01(d).
ARTICLE VIII
PERFORMANCE AWARDS
8.01. PERFORMANCE AWARDS.
(a) AWARD PERIODS AND CALCULATIONS OF POTENTIAL INCENTIVE AMOUNTS. The Committee
may grant Performance Awards to Participants. A Performance Award shall consist
of the right to receive a payment (measured by the Fair Market Value of a
specified number of shares of Common Stock, increases in such Fair Market Value
during the Award Period and/or a fixed cash amount) contingent upon the extent
to which certain predetermined performance targets have been met during an Award
Period. Performance Awards may be made in conjunction with, or in addition to,
Restricted Share Awards made under Article VII. The Award Period shall be two or
more fiscal or calendar years as determined by the Committee. The Committee, in
its discretion and under such terms as it deems appropriate, may permit newly
eligible employees, such as those who are promoted or newly hired, to receive
Performance Awards after an Award Period has commenced.
(b) PERFORMANCE TARGETS. The performance targets may include such goals related
to the performance of the Company or, where relevant, any one or more of its
Subsidiaries or divisions and/or the performance of a Participant as may be
established by the Committee in its discretion. In the case of Performance
Awards to "covered employees" (as defined in Section 162(m) of the Code), the
targets will be limited to specified levels of one or more of the Performance
Goals. The performance targets established by the Committee may vary for
different Award Periods and need not be the same for each Participant receiving
a Performance Award in an Award Period. Except to the extent inconsistent with
the performance-based compensation exception under Section 162(m) of the Code,
in the case of Performance Awards granted to employees to whom such section is
applicable, the Committee, in its discretion, but only under extraordinary
circumstances as determined by the Committee, may change any prior determination
of performance targets for any Award Period at any time prior to the final
determination of the Award when events or transactions occur to cause the
performance targets to be an inappropriate measure of achievement.
<PAGE> 18
(c) EARNING PERFORMANCE AWARDS. The Committee, at or as soon as practicable
after the Date of Grant, shall prescribe a formula to determine the percentage
of the Performance Award to be earned based upon the degree of attainment of
performance targets.
(d) PAYMENT OF EARNED PERFORMANCE AWARDS. Subject to the requirements of Section
11.05, payments of earned Performance Awards shall be made in cash or Common
Stock, or a combination of cash and Common Stock, in the discretion of the
Committee. The Committee, in its sole discretion, may define such terms and
conditions with respect to the payment of earned Performance Awards as it may
deem desirable.
8.02. TERMS OF PERFORMANCE AWARDS.
(a) TERMINATION OF EMPLOYMENT. Unless otherwise provided below or in Section
8.03, in the case of a Participant's Termination of Employment prior to the end
of an Award Period, the Participant will not have earned any Performance Awards.
(b) RETIREMENT. If a Participant's Termination of Employment is because of
Retirement prior to the end of an Award Period, the Participant will not be paid
any Performance Awards, unless the Committee, in its sole and exclusive
discretion, determines that an Award should be paid. In such a case, the
Participant shall be entitled to receive a pro-rata portion of his or her Award
as determined under Subsection (d).
(c) DEATH OR DISABILITY. If a Participant's Termination of Employment is due to
death or disability (as determined in the sole and exclusive discretion of the
Committee) prior to the end of an Award Period, the Participant or the
Participant's personal representative shall be entitled to receive a pro-rata
share of his or her Award as determined under Subsection (d).
(d) PRO-RATA PAYMENT. The amount of any payment made to a Participant whose
employment is terminated by Retirement, death or disability (under circumstances
described in Subsections (b) and (c)) will be the amount determined by
multiplying the amount of the Performance Award which would have been earned,
determined at the end of the Award Period, had such employment not been
terminated, by a fraction, the numerator of which is the number of whole months
such Participant was employed during the Award Period, and the denominator of
which is the total number of months of the Award Period. Any such payment made
to a Participant whose employment is terminated prior to the end of an Award
Period under this Section 8.02 shall be made at the end of the respective Award
Period, unless otherwise determined by the Committee in its sole discretion. Any
partial payment previously made or credited to a deferred account for the
benefit of a Participant as provided under Section 8.01(d) of the Plan shall be
subtracted from the amount otherwise determined as payable as provided in this
Section.
(e) OTHER EVENTS. Notwithstanding anything to the contrary in this Article VIII,
the Committee may, in its sole and exclusive discretion, determine to pay all or
any portion of a Performance Award to a Participant who has terminated
employment prior to the end of an Award Period under certain circumstances
(including the death, disability or retirement of the Participant or a material
change in circumstances arising after the Date of Grant) and subject to such
terms and conditions as the Committee shall deem appropriate.
<PAGE> 19
8.03. CHANGE IN CONTROL. Unless otherwise provided by the Committee in the
applicable Award Agreement, in the event of a Change in Control, all Performance
Awards for all Award Periods shall immediately become fully payable to all
Participants and shall be paid to Participants in accordance with Section
8.02(d), within 30 days after such Change in Control.
ARTICLE IX
OTHER STOCK-BASED AWARDS
9.01. GRANT OF OTHER STOCK-BASED AWARDS. Other stock-based awards, consisting of
stock purchase rights (with or without loans to Participants by the Company
containing such terms as the Committee shall determine), Awards of cash, Awards
of Common Stock, or Awards valued in whole or in part by reference to, or
otherwise based on, Common Stock, may be granted either alone or in addition to
or in conjunction with other Awards under the Plan. Subject to the provisions of
the Plan, the Committee shall have sole and complete authority to determine the
persons to whom and the time or times at which such Awards shall be made, the
number of shares of Common Stock to be granted pursuant to such Awards, and all
other conditions of the Awards. Any such Award shall be confirmed by an Award
Agreement executed by the Committee and the Participant, which Award Agreement
shall contain such provisions as the Committee determines to be necessary or
appropriate to carry out the intent of this Plan with respect to such Award.
9.02. TERMS OF OTHER STOCK-BASED AWARDS. In addition to the terms and conditions
specified in the Award Agreement, Awards made pursuant to this Article IX shall
be subject to the following:
(a) Any Common Stock subject to Awards made under this Article IX may not be
sold, assigned, transferred, pledged or otherwise encumbered prior to the date
on which the shares are issued, or, if later, the date on which any applicable
restriction, performance or deferral period lapses; and
(b) If specified by the Committee in the Award Agreement, the recipient of an
Award under this Article IX shall be entitled to receive, currently or on a
deferred basis, interest or dividends or dividend equivalents with respect to
the Common Stock or other securities covered by the Award; and
(c) The Award Agreement with respect to any Award shall contain provisions
dealing with the disposition of such Award in the event of a Termination of
Employment prior to the exercise, realization or payment of such Award, whether
such termination occurs because of Retirement, disability, death or other
reason, with such provisions to take account of the specific nature and purpose
of the Award.
9.03. FOREIGN QUALIFIED AWARDS. Awards under the Plan may be granted to such
employees of the Company and its Subsidiaries who are residing in foreign
jurisdictions as the Committee in its sole discretion may determine from time to
time. The Committee may adopt such supplements to the Plan as may be necessary
or appropriate to comply with the applicable laws of such foreign jurisdictions
and to afford Participants favorable treatment under such laws;
<PAGE> 20
provided, however, that no Award shall be granted under any such supplement with
terms or conditions inconsistent with the provision set forth in the Plan.
ARTICLE X
SHORT-TERM CASH INCENTIVE AWARDS
10.01. ELIGIBILITY.
Executive officers of the Company who are from time to time determined by the
Committee to be "covered employees" for purposes of Section 162(m) of the Code
will be eligible to receive short-term cash incentive awards under this Article
X.
10.02. AWARDS.
(a) PERFORMANCE TARGETS. For each fiscal year of the Company after fiscal year
1999, the Committee shall establish objective performance targets based on
specified levels of one or more of the Performance Goals. Such performance
targets shall be established by the Committee on a timely basis to ensure that
the targets are considered "preestablished" for purposes of Section 162(m) of
the Code.
(b) AMOUNTS OF AWARDS. In conjunction with the establishment of performance
targets for a fiscal year, the Committee shall adopt an objective formula (on
the basis of percentages of Participants' salaries, shares in a bonus pool or
otherwise) for computing the respective amounts payable under the Plan to
Participants if and to the extent that the performance targets are attained.
Such formula shall comply with the requirements applicable to performance-based
compensation plans under Section 162(m) of the Code and, to the extent based on
percentages of a bonus pool, such percentages shall not exceed 100% in the
aggregate.
(c) PAYMENT OF AWARDS. Awards will be payable to Participants in cash each year
upon prior written certification by the Committee of attainment of the specified
performance targets for the preceding fiscal year.
(d) NEGATIVE DISCRETION. Notwithstanding the attainment by the Company of the
specified performance targets, the Committee shall have the discretion, which
need not be exercised uniformly among the Participants, to reduce or eliminate
the award that would be otherwise paid.
(e) GUIDELINES. The Committee shall adopt from time to time written policies for
its implementation of this Article X. Such guidelines shall reflect the
intention of the Company that all payments hereunder qualify as
performance-based compensation under Section 162(m) of the Code.
(f) NON-EXCLUSIVE ARRANGEMENT. The adoption and operation of this Article X
shall not preclude the Board or the Committee from approving other short-term
incentive compensation arrangements for the benefit of individuals who are
Participants hereunder as the Board or Committee, as the case may be, deems
appropriate and in the best of the Company.
<PAGE> 21
ARTICLE XI
TERMS APPLICABLE GENERALLY TO AWARDS GRANTED UNDER THE PLAN
11.01. PLAN PROVISIONS CONTROL AWARD TERMS. Except as provided in Section 11.16,
the terms of the Plan shall govern all Awards granted under the Plan, and in no
event shall the Committee have the power to grant any Award under the Plan which
is contrary to any of the provisions of the Plan. In the event any provision of
any Award granted under the Plan shall conflict with any term in the Plan as
constituted on the Date of Grant of such Award, the term in the Plan as
constituted on the Date of Grant of such Award shall control. Except as provided
in Section 11.03 and Section 11.07, the terms of any Award granted under the
Plan may not be changed after the Date of Grant of such Award so as to
materially decrease the value of the Award without the express written approval
of the holder.
11.02. AWARD AGREEMENT. No person shall have any rights under any Award granted
under the Plan unless and until the Company and the Participant to whom such
Award shall have been granted shall have executed and delivered an Award
Agreement or received any other Award acknowledgment authorized by the Committee
expressly granting the Award to such person and containing provisions setting
forth the terms of the Award.
11.03. MODIFICATION OF AWARD AFTER GRANT. No Award granted under the Plan to a
Participant may be modified (unless such modification does not materially
decrease the value of the Award) after the Date of Grant except by express
written agreement between the Company and the Participant, provided that any
such change (a) shall not be inconsistent with the terms of the Plan, and (b)
shall be approved by the Committee.
11.04. LIMITATION ON TRANSFER. Except as provided in Section 7.01(c) in the case
of Restricted Shares, a Participant's rights and interest under the Plan may not
be assigned or transferred other than by will or the laws of descent and
distribution, and during the lifetime of a Participant, only the Participant
personally (or the Participant's personal representative) may exercise rights
under the Plan. The Participant's Beneficiary may exercise the Participant's
rights to the extent they are exercisable under the Plan following the death of
the Participant. Notwithstanding the foregoing, to the extent permitted under
Section 16(b) of the Exchange Act with respect to Participants subject to such
Section, the Committee may grant Non-Qualified Stock Options that are
transferable, without payment of consideration, to immediate family members of
the Participant or to trusts or partnerships for such family members, and the
Committee may also amend outstanding Non-Qualified Stock Options to provide for
such transferability.
11.05. TAXES. The Company shall be entitled, if the Committee deems it necessary
or desirable, to withhold (or secure payment from the Participant in lieu of
withholding) the amount of any withholding or other tax required by law to be
withheld or paid by the Company with respect to any amount payable and/or shares
issuable under such Participant's Award, or with respect to any income
recognized upon a disqualifying disposition of shares received pursuant to the
exercise of an Incentive Stock Option, and the Company may defer payment or
issuance of the cash or shares upon exercise or vesting of an Award unless
indemnified to its satisfaction against any liability for any such tax. The
amount of such withholding or tax payment shall be
<PAGE> 22
determined by the Committee and shall be payable by the Participant at such time
as the Committee determines in accordance with the following rules:
(a) The Participant shall have the right to elect to meet his or her withholding
requirement (i) by having withheld from such Award at the appropriate time that
number of shares of Common Stock, rounded up to the next whole share, whose Fair
Market Value is equal to the amount of withholding taxes due, (ii) by direct
payment to the Company in cash of the amount of any taxes required to be
withheld with respect to such Award or (iii) by a combination of shares and
cash.
(b) The Committee shall have the discretion as to any Award, to cause the
Company to pay to tax authorities for the benefit of any Participant, or to
reimburse such Participant for the individual taxes which are due on the grant,
exercise or vesting of any share Award, or the lapse of any restriction on any
share Award (whether by reason of a Participant's filing of an election under
Section 83(b) of the Code or otherwise), including, but not limited to, Federal
income tax, state income tax, local income tax and excise tax under Section 4999
of the Code, as well as for any such taxes as may be imposed upon such tax
payment or reimbursement.
(c) In the case of Participants who are subject to Section 16 of the Exchange
Act, the Committee may impose such limitations and restrictions as it deems
necessary or appropriate with respect to the delivery or withholding of shares
of Common Stock to meet tax withholding obligations.
11.06. SURRENDER OF AWARDS. Any Award granted under the Plan may be surrendered
to the Company for cancellation on such terms as the Committee and the holder
approve.
11.07. ADJUSTMENTS TO REFLECT CAPITAL CHANGES.
(a) RECAPITALIZATION. The number and kind of shares subject to outstanding
Awards, the Purchase Price or Exercise Price for such shares, the number and
kind of shares available for Awards subsequently granted under the Plan and the
maximum number of shares in respect of which Awards can be made to any
Participant in any calendar year shall be appropriately adjusted to reflect any
stock dividend, stock split, combination or exchange of shares, merger,
consolidation or other change in capitalization with a similar substantive
effect upon the Plan or the Awards granted under the Plan. The maximum number of
shares in respect of which Awards can be made to any Participant in any calendar
year shall be proportionately adjusted to reflect any other event that results
in an increase in the number of issued and outstanding shares of Common Stock.
The Committee shall have the power and sole discretion to determine the amount
of the adjustment to be made in each case.
(b) MERGER. After any Merger in which the Company is the surviving corporation,
each Participant shall, at no additional cost, be entitled upon any exercise of
all Options or receipt of other Award to receive (subject to any required action
by shareholders), in lieu of the number of shares of Common Stock receivable or
exercisable pursuant to such Award, the number and class of shares or other
securities to which such Participant would have been entitled pursuant to the
terms of the Merger if, at the time of the Merger, such Participant had been the
holder of record of a number of shares equal to the number of shares receivable
or exercisable pursuant to such Award. Comparable rights shall accrue to each
Participant in the event of successive Mergers of the character described above.
In the event of a Merger in which the Company is not the
<PAGE> 23
surviving corporation, the surviving, continuing, successor, or purchasing
corporation, as the case may be (the "Acquiring Corporation"), shall either
assume the Company's rights and obligations under outstanding Award Agreements
or substitute awards in respect of the Acquiring Corporation's stock for such
outstanding Awards. In the event the Acquiring Corporation fails to assume or
substitute for such outstanding Awards, the Board shall provide that any
unexercisable and/or unvested portion of the outstanding Awards shall be
immediately exercisable and vested as of a date prior to such Merger, as the
Board so determines. The exercise and/or vesting of any Award that was
permissible solely by reason of this Section 11.07(b) shall be conditioned upon
the consummation of the Merger. Any Options which are neither assumed by the
Acquiring Corporation nor exercised as of the date of the Merger shall terminate
effective as of the effective date of the Merger.
(c) OPTIONS TO PURCHASE SHARES OR STOCK OF ACQUIRED COMPANIES. After any Merger
in which the Company or a Subsidiary shall be a surviving corporation, the
Committee may grant substituted options under the provisions of the Plan,
pursuant to Section 424 of the Code, replacing old options granted under a plan
of another party to the Merger whose shares or stock subject to the old options
may no longer be issued following the Merger. The foregoing adjustments and
manner of application of the foregoing provisions shall be determined by the
Committee in its sole discretion. Any such adjustments may provide for the
elimination of any fractional shares which might otherwise become subject to any
Options.
<PAGE> 24
11.08. NO RIGHT TO EMPLOYMENT. No employee or other person shall have any claim
of right to be granted an Award under this Plan. Neither the Plan nor any action
taken hereunder shall be construed as giving any employee any right to be
retained in the employ of the Company or any of its Subsidiaries.
11.09. AWARDS NOT INCLUDABLE FOR BENEFIT PURPOSES. Payments received by a
Participant pursuant to the provisions of the Plan shall not be included in the
determination of benefits under any pension, group insurance or other benefit
plan applicable to the Participant which is maintained by the Company or any of
its Subsidiaries, except as may be provided under the terms of such plans or
determined by the Board.
11.10. GOVERNING LAW. All determinations made and actions taken pursuant to the
Plan shall be governed by the laws of the State of Delaware and construed in
accordance therewith.
11.11. NO STRICT CONSTRUCTION. No rule of strict construction shall be implied
against the Company, the Committee, or any other person in the interpretation of
any of the terms of the Plan, any Award granted under the Plan or any rule or
procedure established by the Committee.
11.12. COMPLIANCE WITH RULE 16B-3. It is intended that, unless the Committee
determines otherwise, Awards under the Plan be eligible for exemption under Rule
16b-3. The Board is authorized to amend the Plan and to make any such
modifications to Award Agreements to comply with Rule 16b-3, as it may be
amended from time to time, and to make any other such amendments or
modifications as it deems necessary or appropriate to better accomplish the
purposes of the Plan in light of any amendments made to Rule 16b-3.
11.13. CAPTIONS. The captions (i.e., all Section headings) used in the Plan are
for convenience only, do not constitute a part of the Plan, and shall not be
deemed to limit, characterize or affect in any way any provisions of the Plan,
and all provisions of the Plan shall be construed as if no captions have been
used in the Plan.
11.14. SEVERABILITY. Whenever possible, each provision in the Plan and every
Award at any time granted under the Plan shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of the Plan
or any Award at any time granted under the Plan shall be held to be prohibited
by or invalid under applicable law, then (a) such provision shall be deemed
amended to accomplish the objectives of the provision as originally written to
the fullest extent permitted by law and (b) all other provisions of the Plan and
every other Award at any time granted under the Plan shall remain in full force
and effect.
11.15. AMENDMENT AND TERMINATION.
(a) AMENDMENT. The Board shall have complete power and authority to amend the
Plan at any time; provided, however, that the Board shall not, without the
requisite affirmative approval of shareholders of the Company, make any
amendment which requires shareholder approval under the Code or under any other
applicable law or rule of any stock exchange which lists Common Stock or Company
Voting Securities. No termination or amendment of the Plan may, without the
consent of the Participant to whom any Award shall theretofore have been granted
under the Plan, adversely affect the right of such individual under such Award.
<PAGE> 25
(b) TERMINATION. The Board shall have the right and the power to terminate the
Plan at any time. No Award shall be granted under the Plan after the termination
of the Plan, but the termination of the Plan shall not have any other effect and
any Award outstanding at the time of the termination of the Plan may be
exercised after termination of the Plan at any time prior to the expiration date
of such Award to the same extent such Award would have been exercisable had the
Plan not terminated.
11.16. SPECIAL PROVISION RELATING TO CERTAIN STOCK ISSUANCES. Notwithstanding
anything to the contrary contained in this Plan, shares of Common Stock
authorized to be issued under this Plan may be issued to pay awards originally
made under and satisfy options originally granted under the Allegheny Teledyne
Incorporated 1996 Incentive Plan or any other stock compensation plan adopted by
ATI (an "ATI Plan"), as provided in the Employee Benefits Agreement dated as of
November 12, 1999, between the Company and Allegheny Teledyne Incorporated. All
shares of Common Stock issued in payment of an award or grant shall be governed
exclusively by the terms of such award or grant under the applicable ATI Plan,
and any terms of this Plan inconsistent therewith shall be inapplicable to such
shares.
<PAGE> 1
EXHIBIT 10.12
WATER PIK TECHNOLOGIES, INC.
FEE CONTINUATION PLAN FOR NON-EMPLOYEE DIRECTORS
1. Purpose
The purpose of this Fee Continuation Plan for Non-Employee Directors (the
"Plan") of Water Pik Technologies, Inc. (the "Company") is to provide for fee
continuation payments for any person, including a retired officer or employee of
the Company, who meets a minimum service requirement as a non-employee Director
of the Company and meets other eligibility requirements set forth herein. The
existence of this Plan will better enable the Company to attract and retain
individuals of exceptional ability to serve as non-employee Directors of the
Company.
2. Administration
The Plan shall be administered by the Vice President, General Counsel and
Secretary of the Company who shall have authority to adopt rules and regulations
from time to time for carrying out the Plan and to interpret, construe, and
administer its provisions. The decisions of the Vice President, General Counsel
and Secretary shall be final and binding upon all parties.
3. Eligibility; Years of Service
A. Each person who is a non-employee member of the Board of Directors of the
Company shall become a Participant in the Plan as of the date such person
commences service as a non-employee Director, provided, however, that a
Participant shall be eligible to receive benefits under this Plan only upon
meeting the conditions set forth in Section 3.B.
B. Each Participant who has attained five (5) or more Years of Service shall be
eligible to receive payments under the Plan.
C. For the purposes of this Plan, "Years of Service" shall be the number of
years, whether or not consecutive, of the Participant's service as a
non-employee Director, up to a maximum of ten (10) years. A Participant who is a
non-employee Director on November 29, 1999 shall receive credit for all periods
of service as a Director of Allegheny Teledyne Incorporated prior to November
29, 1999.
4. Cash Payments
Fee continuation payments shall be payable in cash to a Participant beginning in
the calendar quarter after the termination of service as a Director of, if
applicable, to a Participant's spouse or other designated beneficiary or estate
beginning the calendar quarter after the termination of service as a Director,
and shall continue at the rate of one year of benefit for each Year of Service.
The benefit shall be in an amount equal to the annual retainer fee for Directors
in effect immediately prior to the termination for such Participant's service as
a Director.
<PAGE> 2
5. Disqualification
An individual shall be disqualified from participating in this Plan at any time
if he or she takes any action that is deemed to be contrary to the best interest
of the Company.
6. Amendment and Termination of Plan
The Board of Directors may from time to time amend, modify, suspend, or
terminate this Plan, provided however that no such amendment, modification,
suspension, or termination shall reduce or in any manner adversely affect any
Participant's rights with respect to benefits that are payable or may become
payable under Section 4 as of the date of such amendment, modification,
suspension or termination.
7. Miscellaneous
This Plan shall not be construed as conferring any rights upon any Director to
continue as a Director for any period of time, or at any particular rate of
compensation.
The right to receive fee continuation payments shall be a claim against the
general assets of the Company as an unsecured general creditor. The Company may,
in its absolute discretion, establish one or more trusts or reserves which may
be funded, by reference to the Company's fee continuation payment obligations
hereunder or otherwise.
The right to fee continuation payments under this Plan shall not be assigned,
anticipated, alienated, sold, transferred, pledged, or encumbered in any manner.
If any individual ceases to be a Director of the Company before completing five
(5) Years of Service, all liability of the Company under this Plan shall
terminate.
This Plan shall be construed in accordance with and governed by the laws of the
State of Delaware, excluding any choice of law provisions which may indicate the
application of the laws of another jurisdiction.
<PAGE> 1
EXHIBIT 10.13
WATER PIK TECHNOLOGIES, INC.
EMPLOYEE STOCK PURCHASE PLAN
(THE STOCK ADVANTAGE)
ARTICLE I. INTRODUCTION AND PURPOSES OF THE PLAN
1.01 INTRODUCTION. The Water Pik Technologies, Inc. Employee
Stock Purchase Plan, also known as The Stock Advantage (the "Plan"), is
intended to provide certain employees of the Company the opportunity to
acquire shares of the Company's common stock and thereby better align
the interests of the employees and the stockholders of the Company. The
Plan is divided into two component programs, the Employee Stock Purchase
Program, also known as The Stock Advantage (the "ESPP"), and the Stock
Acquisition and Retention Program (the "SARP"). While both the ESPP and
the SARP programs are subject to the general provisions of the Plan,
each program has separate eligibility and stock acquisition provisions.
1.02 PURPOSE OF THE ESPP. The ESPP is intended to provide
Eligible Employees (defined below) with an opportunity to purchase
shares of Water Pik Technologies, Inc. Common Stock through payroll
deductions supplemented by Company Contributions (defined below). The
ESPP is designed to provide for voluntary employee stock ownership in
the Company. The ESPP is not intended to comply with the provisions of
Section 423 of the Internal Revenue Code of 1986, as amended, or any
successor tax provision.
1.03 PURPOSE OF THE SARP. The purpose of the SARP is to assist
the Company in retaining and motivating selected key management
employees who will contribute to the success of the Company. The SARP
encourages designated employees to hold a proprietary interest in the
Company by offering them an opportunity to receive grants of restricted
shares of Common Stock which, in accordance with the terms and
conditions set forth below, will vest only if the employees retain, for
a specified period of time, ownership of (i) shares of Common Stock
purchased pursuant to the SARP or (ii) already-owned shares of Stock
which such employees identify as being subject to the SARP. Awards under
the SARP will act as an incentive to participating employees to achieve
long-term objectives which will inure to the benefit of all stockholders
of the Company.
ARTICLE II. DEFINITIONS
2.01 AWARD AGREEMENT means a written agreement between the
Company and a SARP Participant or a written acknowledgment from the
Company specifically setting forth
<PAGE> 2
the terms and conditions of an award of Restricted Stock granted to a
SARP Participant pursuant to Article VIII.
2.02 BOARD shall mean the Board of Directors of the Company.
2.03 BUSINESS DAY means any day on which the New York Stock
Exchange shall be open for trading.
2.04 CAUSE means a determination by the Committee that a SARP
Participant has engaged in conduct that is dishonest or illegal,
involves moral turpitude or jeopardizes the Company's right to operate
its business in the manner in which it is now operated.
2.05 CHANGE IN CONTROL means any of the events set forth below:
(a) The acquisition in one or more transactions, other
than from the Company, by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act)
of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of a number of Company Voting
Securities in excess of 25% of the Company Voting Securities
unless such acquisition has been approved by the Board; or
(b) Any election has occurred of persons to the Board that
causes two-thirds of the Board to consist of persons other than
(i) persons who were members of the Board on January 1, 2000 and
(ii) persons who were nominated for election as members of the
Board at a time when two-thirds of the Board consisted of persons
who were members of the Board on January 1, 2000; provided,
however, that any person nominated for election by the Board at a
time when at least two-thirds of the members of the Board were
persons described in clauses (i) and/or (ii) or by persons who
were themselves nominated by such Board shall, for this purpose,
be deemed to have been nominated by a Board composed of persons
described in clause (i); or
(c) Approval by the stockholders of the Company of a
reorganization, merger or consolidation, unless, following such
reorganization, merger or consolidation, all or substantially all
of the individuals and entities who were the respective
beneficial owners of the Outstanding Stock and Company Voting
Securities immediately prior to such reorganization, merger or
consolidation, following such reorganization, merger or
consolidation beneficially own, directly or indirectly, more than
75% of, respectively, the then outstanding shares of common stock
and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of
directors or trustees, as the case may be, of the entity
resulting from such reorganization, merger or consolidation in
substantially the same proportion as their ownership of the
Outstanding Stock and Company Voting Securities immediately prior
to such reorganization, merger or consolidation, as the case may
be; or
2
<PAGE> 3
(d) Approval by the stockholders of the Company of (i) a
complete liquidation or dissolution of the Company or (ii) a sale
or other disposition of all or substantially all the assets of
the Company.
2.06 COMMITTEE means the Stock Incentive Award Subcommittee of
the Board, in the case of performance-based compensation for individuals
who are executive officers of the Company, and the Personnel and
Compensation Committee of the Board, in all other cases.
2.07 COMMON STOCK shall mean shares of common stock of the
Company, $.01 par value per share.
2.08 COMPANY shall mean Water Pik Technologies, Inc., a Delaware
corporation, its Subsidiaries, and any successors thereto.
2.09 COMPANY CONTRIBUTION shall mean an amount paid by the
Company equal to 15% of the ESPP Participant's Contribution.
2.10 COMPENSATION shall mean the base salary or wages received by
an employee from the Company, a Division or a Subsidiary.
2.11 COMPANY VOTING SECURITIES means the combined voting power of
all outstanding voting securities of the Company entitled to vote
generally in the election of the Board.
2.12 DATE OF GRANT means the date as of which an award of
Restricted Stock is granted in accordance with Article VIII.
2.13 DESIGNATED STOCK means shares of Common Stock already owned
by a SARP Participant that the SARP Participant identifies as being
subject to the SARP, thereby triggering the grant of Restricted Stock to
such SARP Participant pursuant to Article VIII.
2.14 DESIGNATION NOTICE means a written notice, in a form
acceptable to the Committee, by which a SARP Participant designates
previously-acquired shares of Common Stock as Designated Stock.
2.15 DISABILITY means any physical or mental injury or disease of
a permanent nature which renders a SARP Participant incapable of meeting
the requirements of the employment performed by such SARP Participant
immediately prior to the commencement of such disability. The
determination of whether a SARP Participant is disabled shall be made by
the Committee in its sole and absolute discretion. Notwithstanding the
foregoing, if a SARP Participant's employment by the Company or an
applicable subsidiary terminates by reason of a disability, as defined
in an Employment Agreement between such SARP Participant and the Company
or an applicable Subsidiary, such SARP Participant shall be deemed to be
disabled for purposes of the SARP.
3
<PAGE> 4
2.16 DIVIDENDS shall mean dividends or dividend equivalents paid
with respect to shares of Common Stock.
2.17 DIVISION shall mean any domestic division of the Company or
of any Subsidiary designated by the President of the Company or the
Board of Directors to participate in the Plan.
2.18 EFFECTIVE DATE means November 29, 1999.
2.19 ELIGIBLE EMPLOYEES shall mean only those Employees who are
eligible to participate in the Plan in accordance with the terms of
Article V.
2.20 EMPLOYEES shall mean all persons who are employed by the
Company, a Division or a Subsidiary who work in the United States and
whose wages are subject to FICA.
2.21 ESPP means the Employee Stock Purchase Program component of
the Plan as described in Article I, as the same may be amended from time
to time.
2.22 ESPP PARTICIPANT shall mean any Eligible Employee who elects
to participate in the ESPP in accordance with the terms of Section 5.01
2.23 ESPP PARTICIPANT CONTRIBUTION shall mean the payroll
deduction withheld periodically from the Compensation of each ESPP
Participant which shall be credited to each ESPP Participant's Share
Account.
2.24 EXCHANGE ACT means the Securities Exchange Act of 1934, as
amended.
2.25 FAIR MARKET VALUE means, as of any given date, the average
of the high and low trading prices of the Stock on such date as reported
on the New York Stock Exchange or, if the Stock is not then traded on
the New York Stock Exchange, on such other national securities exchange
on which the Stock is admitted to trade, or, if none, on the National
Association of Securities Dealers Automated Quotation System if the
Stock is admitted for quotation thereon; provided, however, if there
were no sales reported as of such date, Fair Market Value shall be
computed as of the last date preceding such date on which a sale was
reported; provided, further, that if any such exchange or quotation
system is closed on any day on which Fair Market Value is to be
determined, Fair Market Value shall be determined as of the first date
immediately preceding such date on which such exchange or quotation
system was open for trading.
2.26 HUMAN RESOURCES DEPARTMENT shall mean the department at the
Company, Division or Subsidiary responsible for processing enrollment
applications and change forms in connection with the ESPP.
2.27 OUTSTANDING STOCK means, at any time, the issued and
outstanding Common Stock.
4
<PAGE> 5
2.28 PERMITTED TRANSFEREE means a SARP Participant's spouse, or
(by blood, adoption or marriage) parent, child, stepchild, descendant or
sibling, or the estate, any guardian, custodian, conservator or
committee of, or any trust for the benefit of, the SARP Participant or
any of the foregoing persons.
2.29 PLAN shall mean the Water Pik Technologies, Inc. Employee
Stock Purchase Plan, also known as The Stock Advantage, as the same may
be amended from time to time.
2.30 PLAN ADMINISTRATOR shall mean any broker or other person, as
those terms are used in the Exchange Act, selected by the Committee or
the Board, from time to time to provide brokerage and other
administrative services with respect to the ESPP portion of the Plan.
2.31 PURCHASE AMOUNT means the dollar amount that a SARP
Participant specifies in a Purchase Notice with respect to a particular
Purchase Date.
2.32 PURCHASE DATE means, with respect to the ESPP feature of the
Plan, the Business Day or Days, as the case may be, upon which shares
are purchased under the ESPP. With respect to the SARP feature of the
Plan, "Purchase Date" shall mean, for any Offering Period, the Business
Day immediately following the last day of the Offering Period.
2.33 PURCHASED STOCK means Common Stock purchased by a SARP
Participant pursuant to Article VII, which triggers the grant of
Restricted Stock to such SARP Participant pursuant to Article VIII.
2.34 PURCHASE LOAN means a loan provided to a SARP Participant by
the Company to facilitate the SARP Participant's purchase of Common
Stock pursuant to Section 7.01.
2.35 PURCHASE NOTICE means a written notice, in a form acceptable
to the Committee, by which a SARP Participant may elect to purchase
Common Stock as of a Purchase Date in accordance with Section 7.01.
2.36 RELATED STOCK means, with respect to any share of Restricted
Stock, the two shares of Purchased Stock or Designated Stock, as the
case may be, which entitle such Participant to receive such share of
Restricted Stock pursuant to Article VIII.
2.37 RESTRICTED STOCK means shares of Common Stock awarded to a
SARP Participant subject to restrictions as described in Article VIII.
2.38 SARP means the Stock Acquisition and Retention Program
component of the Plan as described in Article I, as the same may be
amended from time to time.
5
<PAGE> 6
2.39 SARP PARTICIPANT means any Eligible Employee selected by the
Committee, pursuant to Section 5.02, as eligible to participate under
the SARP.
2.40 SHARE ACCOUNT shall mean the account established and
maintained for each ESPP Participant.
2.41 SUBSIDIARY shall mean any domestic corporation of which at
least 50% of the combined voting power of all classes of stock is owned
directly or indirectly by the Company and which is designated by the
President of the Company or the Board to participate in the Plan.
2.42 OFFERING PERIOD means each period of time designated by the
Committee in any calendar year and generally consisting of the ten (10)
consecutive Business Days beginning on the third (3rd) Business Day
following the release by the Company of its quarterly or annual summary
statements of sales and earnings, as applicable, and ending on the
twelfth (12th) Business Day following such date.
ARTICLE III. ADMINISTRATION
The Plan shall be administered by the Committee, which shall have
exclusive and final authority and discretion in each determination,
interpretation or other action affecting the Plan and its Participants. The
Committee shall have the sole and absolute authority and discretion to (i)
interpret the Plan, (ii) to modify or otherwise amend the Plan, (iii) to select,
in accordance with Section 5.01, the persons who will be SARP Participants
hereunder, (iv) to determine the eligibility of individuals to participate in
the Plan, (v) to determine the duration of leaves of absence which may be
granted to Participants without constituting a termination of their employment
for the purposes of the Plan, (vi) to impose such conditions and restrictions as
it determines appropriate and (vii) to take such other actions and make such
other determinations in connection with the Plan as it may deem necessary or
advisable. Decisions of the Committee shall be final and binding on all parties
who have an interest in the Plan and their legal representatives and
beneficiaries. No member of the Committee shall be liable for any action taken,
or determination made, by the Committee in good faith.
ARTICLE IV. STOCK ISSUABLE UNDER THE PLAN
4.01 NUMBER OF SHARES OF STOCK ISSUABLE. Subject to adjustments
as provided in Section 9.06 of the Plan, the maximum number of shares of
Common Stock available for issuance under the Plan shall be 500,000. The
Common Stock to be offered under the Plan shall be authorized and
unissued Common Stock, or Common Stock which shall have been reacquired
by the Company and held in its treasury.
4.02 SHARES SUBJECT TO TERMINATED SARP AWARDS. Shares of Common
Stock forfeited as provided in Section 8.02 may again be issued under
the SARP.
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<PAGE> 7
ARTICLE V. ELIGIBILITY TO PARTICIPATE IN THE PLAN
5.01 ELIGIBILITY TO PARTICIPATE IN THE ESPP.
(a) Requirements. A regular status Employee shall be
eligible to participate in the ESPP feature of the Plan if he or
she is employed by the Company, a Division or a Subsidiary on the
one year anniversary of his or her hire date and he or she was
credited with at least 1,000 hours of employment during the
preceding twelve-month period, except for Employees (i) under the
age of majority in the applicable state, or (ii) covered by a
collective bargaining agreement, unless the agreement
specifically provides that such employees are eligible to
participate in the Plan. Employees are credited with an hour of
employment for every hour for which such Employee is paid by the
Company, a Division or a Subsidiary, including vacation, holiday,
sick leave, jury duty or layoffs. Temporary status employees are
not eligible to participate in the Plan.
(b) Reemployment. Any Participant whose employment by the
Company, a Division or Subsidiary is terminated and is later
rehired by the Company, a Division or a Subsidiary is eligible to
become an ESPP Participant on the date he or she is rehired. An
employee who leaves the Company, a Division or a Subsidiary
before fulfilling the eligibility requirements and later is
rehired by the Company, a Division or Subsidiary will receive
credit for prior service in meeting the eligibility requirements
set forth in Section 5.01(a).
(c) Limitation on Participation of Certain Officers. No
officer (as such term is defined under Rule 16a-1 of the Exchange
Act) of the Company shall be eligible to participate in the Plan
until such time that the Board authorizes such participation
based on advice from counsel to the Company that the ESPP and the
Plan meet the criteria of Rule 16b-3 of the Exchange Act.
(d) Enrollment. An Eligible Employee may become an ESPP
Participant by filing a written enrollment application with the
Human Resources Department which includes a purchase order form
authorizing the Plan Administrator to establish a Share Account
for the benefit of the ESPP Participant and authorizing payroll
deductions in accordance with Section 6.01.
5.02 ELIGIBILITY TO PARTICIPATE IN THE SARP.
(a) Designation of Participants. Participants in the SARP
shall be such officers or senior executives of the Company as the
Committee, in its sole discretion, may designate as eligible to
participate in the SARP. Prior to the commencement of each
calendar year during the term of the SARP, the Committee shall
designate the Employees who are eligible to participate in the
SARP during such calendar year; provided, however, that with
respect to calendar year 1999, such
7
<PAGE> 8
designations shall be made no later than thirty (30) days
following the Effective Date. The Committee's designation of a
SARP Participant with respect to any calendar year shall not
require the Committee to designate such person as a SARP
Participant with respect to any other calendar year. The
Committee shall consider such factors as it deems pertinent in
selecting SARP Participants. The Committee may in its sole
discretion limit the extent of participation by any SARP
Participant in any calendar year, including but not limited to
restricting the number of any Purchased or Restricted Shares,
frequency of elections or any other levels of participation. The
Committee shall promptly provide to each Employee selected as a
SARP Participant written notice of such selection. The
designation of an Employee as a SARP Participant with respect to
a calendar year shall permit such person to elect to submit one
or more Purchase Notices and/or Designation Notices during such
calendar year irrespective of whether, in the case of Purchase
Notices, the applicable Purchase Date(s) fall within such
calendar year.
(b) SARP Participant Elections. A person who is designated
as a SARP Participant in accordance with Section 5.02(a) shall be
entitled to purchase Common Stock by delivering one or more
Purchase Notices in accordance with Article VII and such Common
Stock purchases shall result in the award of Restricted Stock to
such SARP Participant in accordance with Article VIII. In
addition, a SARP Participant shall be entitled to designate as
Designated Stock, in one or more Designation Notices delivered to
the Company at any time during a calendar year, any even number
of shares of Common Stock then owned by the SARP Participant,
other than shares of Purchased Stock, shares of Common Stock
credited to the SARP Participant's account under any tax
qualified employee benefit plan sponsored by the Company and
shares of Common Stock subject to outstanding and as yet
unexercised stock options. Such designation of shares as
Designated Stock shall result in the award of Restricted Stock to
the SARP Participant in accordance with Article VIII. The sum of
(i) the aggregate Purchase Amounts elected by a SARP Participant
pursuant to one or more Purchase Notices submitted within any one
calendar year and (ii) the Fair Market Value of the Designated
Stock designated by the SARP Participant pursuant to one or more
Designation Notices submitted within such calendar year (such
Fair Market Value being determined as of the date the applicable
Designation Notice is delivered), shall not exceed such SARP
Participant's gross annual salary in effect on the first day of
such calendar year or first day of employment, if such SARP
Participant was not employed with the Company on the first day of
such calendar year; provided, however, that for calendar year
1999, such total amount may equal two times the SARP
Participant's gross annual salary.
ARTICLE VI. EMPLOYEE STOCK PLAN PROGRAM PROVISIONS
6.01 PARTICIPANT CONTRIBUTIONS
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<PAGE> 9
(a) Participant Contributions. Each ESPP Participant shall
authorize in the election form required under Section 5.01(d) an
ESPP Participant Contribution in whole-dollar amounts for each
pay period, subject to the minimum and maximum contributions set
forth below, depending on the ESPP Participant's payroll
schedule:
9
<PAGE> 10
<TABLE>
<CAPTION>
Frequency
of Paycheck Minimum Maximum
----------- ------- -------
<S> <C> <C>
Weekly $ 5.00 $ 92.00
Bi-weekly 10.00 184.00
Semi-monthly 10.00 200.00
Monthly 20.00 400.00
</TABLE>
(b) Limit on Participant Contribution. Notwithstanding the
foregoing, in no event shall an ESPP Participant's Contribution
exceed 25% of such ESPP Participant's Compensation for such pay
period.
(c) Effective Date of Payroll Deduction. Except as set
forth below, each Eligible Employee's initial enrollment
application shall be effective no later than the first payroll
period in the quarter next succeeding the date upon which such
completed application is received by the Human Resources
Department, unless a later date is specified by the Eligible
Employee. Each Eligible Employee's completed initial enrollment
application received during the calendar quarter in which the
Company, Division or Subsidiary commences participation in the
Plan will be effective as of the first payroll period in the
calendar month next succeeding the date upon which such
application is received by the Human Resources Department.
Completed initial enrollment applications must be received by the
Human Resources Department at least two weeks before the
effective date of an Employee's enrollment. Payroll deduction
authorizations will remain effective until revised or terminated
as hereinafter provided.
(d) Plan Administrator. The ESPP feature of the Plan shall
be administered by a Plan Administrator designated by the
Committee or the Board to serve at its or their pleasure. The
Committee shall inform ESPP Participants of the name, address and
telephone number of the Plan Administrator.
(e) Changing Contribution Elections. ESPP Participants may
increase or decrease their payroll deductions (in whole-dollar
amounts, subject to the minimum and maximum limitations set forth
above) by submitting a written request to the Human Resources
Department. Any such changes will be effective as of the earliest
of the first day of January, April, July or October, immediately
succeeding receipt by the Human Resources Department of the
written request, provided that the written request for such
changes must be received by the Human Resources Department at
least two weeks before the changes are to become effective. ESPP
Participants may suspend payroll deductions, without terminating
participation in the ESPP, effective as of the payroll cycle
following a
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<PAGE> 11
written request, but must wait one full quarter following the
quarter in which the deduction was suspended to resume
deductions.
(f) Termination of Employment. Upon the termination of an
ESPP Participant's employment with the Company, a Division or
Subsidiary, the ESPP Participant may not make ESPP Participant
Contributions from lump-sum payments to him or her and no Company
Contributions will be made with respect thereto.
(g) Legal Restrictions on Changes in Contribution
Elections. Notwithstanding the foregoing, no change to payroll
deductions shall become effective unless such change shall comply
with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the Exchange
Act, the securities laws of any state having appropriate
jurisdiction, and the various rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which
the shares of Common Stock may then be listed.
6.02 COMPANY CONTRIBUTION. The Company shall contribute an amount
equal to 15% of each ESPP Participant's monthly Participant Contribution
towards the purchase of shares of Common Stock. Such Company
Contribution may be made in cash to purchase shares for the ESPP
Participant's account, or in treasury or authorized by unissued shares
of Common Stock, or both.
6.03 PURCHASE AND ALLOCATION OF COMMON STOCK UNDER THE ESPP
(a) Purchases. Subject to and in accordance with the terms
of the Plan, each ESPP Participant shall have the ESPP
Participant Contribution withheld from his or her Compensation by
payroll deduction. The Company, the Divisions and the
Subsidiaries shall accumulate on a calendar month basis and hold,
without interest to the ESPP Participants, all ESPP Participant
Contributions. As soon as practicable after the end of each
month, the Company shall apply the sum of all ESPP Participant
Contributions and Company Contributions for that month toward the
purchase of shares of Common Stock on behalf of those ESPP
Participants who have chosen to make Participant Contributions
for such month.
(b) Allocation. The Company may elect to issue authorized
but unissued shares, use treasury shares or instruct the Plan
Administrator to purchase shares of common Stock in the open
market on the Purchase Date. Shares of Common Stock shall be
purchased at the Fair Market Value on the Purchase Date. The Plan
Administrator shall then allocate to the Share Account of each
ESPP Participant the number of whole shares (or fractional
interests in whole shares) of Common Stock purchased by the Plan
Administrator under the ESPP for such month, determined by
dividing the sum of such ESPP Participant's Participant
Contributions withheld during that month, plus the Company
Contributions for such ESPP Participants for that month, by the
per share price of the Common Stock purchased under the ESPP for
that month.
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<PAGE> 12
(c) Additional Purchases. An ESPP Participant may add
other shares of Common Stock to his or her Share Account at any
time by separate purchases arranged with the Plan Administrator,
or by delivering other shares owned by such ESPP Participant to
the Plan Administrator. The Company will pay the Plan
Administrator's commissions on purchases made with Participant
Contributions and Company Contributions and on dividends
reinvested with respect to shares of the Company's Common Stock
purchased through the ESPP. The Company will not pay commissions
with respect to independent purchases or any sales made by any
Participants or reinvested dividends on shares purchased outside
of the ESPP (unless the Company adopts a universal dividend
reinvestment plan).
(d) Vesting and Share Certificates. At the time of
purchase, each ESPP Participant immediately acquires fully vested
ownership of all shares of Common Stock and any fractional
interest in shares purchased on his or her behalf. Each Share
Account shall be held by the Plan Administrator in the
appropriate ESPP Participant's name. Unless otherwise requested
by the ESPP Participant, all shares of Common Stock will be
registered in street name and will remain so registered until
delivery of the shares is requested. An ESPP Participant may
request that a certificate for any or all of his or her full
shares be delivered to him or her upon the payment by the ESPP
Participant of any applicable fee prescribed by the Plan
Administrator for such service.
(e) Dividends. Each ESPP Participant's Share Account will
be credited with all Dividends paid in request of the full shares
of any fractional interest in shares held in his or her account.
Cash Dividends will be reinvested in the Common Stock as promptly
as practicable following receipt thereof by the Plan
Administrator unless the ESPP Participant instructs the Plan
Administrator to the contrary. Stock Dividends and/or any stock
splits with respect to the shares of Common Stock held in the
ESPP Participant's Share Account will be credited to the Share
Account without charge.
6.04 DISPOSITION OF SHARES. An ESPP Participant may instruct the
Plan Administrator to sell any or all of his or her full shares and the
fractional interest in shares allocable to his or her Share Account.
Based on instructions from the ESPP Participant, upon such sale, the
Plan Administrator will either mail the ESPP Participant a check for the
proceeds or credit such Participant's Share Account with such proceeds
in each case, less the brokerage commission and any transfer taxes,
registration fee or other normal charges which are payable by the ESPP
Participant. Such instructions to the Plan Administrator or a request
for delivery of certificates will not affect the ESPP Participant's
status as an ESPP Participant unless he or she sells shares held in his
or her Share Account through the Plan Administrator more than twice a
year. If an ESPP Participant sells shares held in his or her Share
Account through the Plan Administrator more than twice per year, the
ESPP Participant must withdraw from the Plan for one year.
12
<PAGE> 13
6.05 SHARE ACCOUNT STATEMENTS. Each ESPP Participant shall
receive statements of his or her account at least quarterly, or more
often at the discretion of the management committee supervising
administration of the Plan on behalf of the Company. Such statements
shall serve as evidence of stock ownership and as the basis for tax
records, and should be retained by the ESPP Participant as a permanent
record. The relationship between the broker for the Plan Administrator
and the ESPP Participant shall be a normal relationship of a broker and
its client, and neither the Company, the Division, nor the Subsidiaries,
shall assume any responsibility in this respect.
6.06 TERMINATION OF PLAN PARTICIPATION.
(a) Notice of Termination. An ESPP Participant may
terminate his or her participation in the ESPP at any time upon
written notice to the Human Resources Department, effective the
payroll cycle following the written notice. Any voluntary
termination from the ESPP, or termination pursuant to Section
6.04, shall be for a period of not less than one year in
duration. An ESPP Participant's participation in the ESPP shall
terminate automatically without notice upon death or other
termination of employment by the ESPP Participant with the
Company, a Division or Subsidiary. Upon an ESPP Participant's
termination of participation in the Plan, the Participant's Share
Account shall be closed as set forth below.
(b) Termination of Share Account. Until the Plan
Administrator shall have received written instructions from the
ESPP Participant (or his or her estate) upon termination of the
ESPP Participant's participation in the ESPP, shares of Common
Stock held by the Plan Administrator in the Participant's Share
Account shall, unless otherwise instructed, continue to be held
by the Plan Administrator in accordance herewith for a reasonable
period of time. Upon receipt of appropriate written instructions
from the ESPP Participant (or his or her estate), the Plan
Administrator shall either cause any whole shares of the Common
Stock credited to the Share Account of the Participant to be
transferred in accordance with such instructions (and shall cause
certificates representing such shares to be mailed in accordance
with the instructions), or sell any whole shares of the Common
Stock at the prevailing market price and mail the proceeds, less
the brokerage commission and any transfer taxes, registration fee
or other normal charges which are payable by the ESPP
Participant, in accordance with the instructions of the ESPP
Participant (or his or her estate). Any fractional interest in a
share of Common Stock held in the Share Account will be sold by
the Plan Administrator a the prevailing market price and a check
for the proceeds of sale thereon will be mailed in accordance
with the instructions of the ESPP Participant (or his or her
estate).
6.07 VOTING RIGHTS AND SHAREHOLDER COMMUNICATIONS. The Plan
Administrator shall deliver to each ESPP Participant as promptly as
practicable, by mail or otherwise, all notices of meetings and proxy
statements. ESPP Participants shall also receive all other material
distributed by the Company to its stockholders. The whole
13
<PAGE> 14
shares in each ESPP Participant's Share Account shall be voted in
accordance with the Participant's signed proxy instructions duly
delivered to the Plan Administrator, or otherwise, in accordance with
rules applicable to stock listed on the New York Stock Exchange or, if
the shares of Common Stock are not listed on such exchange, the
successor principal national exchange on which the shares of Common
Stock are listed.
6.08 ESPP RIGHTS NOT TRANSFERABLE. Rights under the ESPP are
exercisable only by the ESPP Participant during his or her lifetime and
may not be assigned, transferred or encumbered by his or her prior to
the withdrawal of shares of Common Stock from his or her Share Account.
If an ESPP Participant attempts to assign, transfer or encumber any
rights under the ESPP prior to the withdrawal of shares of Common Stock
from his or her Share Account, except through a sale consistent with the
terms of the ESPP, such attempt shall be void.
ARTICLE VII. STOCK ACQUISITION AND RETENTION PROGRAM PROVISIONS
7.01 STOCK PURCHASE ELECTIONS. A SARP Participant shall have the
right to purchase Common Stock in accordance with the terms of this
Article VII. A SARP Participant may elect to purchase Common Stock under
this SARP by delivering to the Company a Purchase Notice and cash and/or
a promissory note executed by the Participant in an amount equal to the
purchase price designated in such Participant's Purchase Notice. Such
Purchase Notice shall set forth, among other things, the Purchase Amount
elected by the Participant. Such promissory note which shall evidence
such Participant's Purchase Loan in accordance with Section 7.03, shall
be in a principal amount equal to the Purchase Amount designated in such
Participant's Purchase Notice and shall by its terms become effective as
of the applicable Purchase Date. All elections under this Section 7.01
shall be irrevocable. If an election is submitted during an Offering
Period, such election shall take effect as of the Purchase Date
immediately following the close of such Offering Period. If an election
is not submitted during an Offering Period, such election shall take
effect as of the Purchase Date immediately following the close of the
next Offering Period.
7.02 ISSUANCE OF AND PAYMENT FOR COMMON STOCK. As of each
Purchase Date, the Company shall credit to each SARP Participant the
number of shares of Purchased Common Stock purchased pursuant to the
Purchase Notice submitted by such Participant. The number of shares of
Purchased Common Stock to be so credited shall be determined by dividing
the Purchase Amount designated by such SARP Participant in his or her
Purchase Notice by a purchase price per share equal to the average Fair
Market Value during the Window Period. As of any Purchase Date, only an
even number of shares of Purchased Common Stock can be purchased by a
SARP Participant and in no event shall the Company be required to issue
fractional shares. The Purchase Amount elected by a Participant, and the
principal amount of the related promissory note, shall be automatically
reduced (and if the entire Purchase Amount is paid in cash, cash shall
be returned to the Participant) to the minimum extent necessary in order
that an even number of whole shares of Purchased Common Stock is
credited to such SARP Participant as of the Purchase Date. The purchase
price for shares of Purchased Common Stock credited to a SARP
Participant as of
14
<PAGE> 15
a Purchase Date shall be paid in cash and/or by means of a Purchase Loan
made by the Company to the SARP Participant in accordance with Section
7.03. The SARP Participant shall have all of the rights of a stockholder
with respect to the shares of Purchased Common Stock credited to him or
her under this Section 7.02 including, but not limited to, the right to
vote such shares and the right to receive dividends (or dividend
equivalents) paid with respect to such shares.
7.03 TERMS OF PURCHASE LOAN.
(a) Purchase Loan. The promissory note delivered to the
Company by a SARP Participant in accordance with Section 7.01
shall evidence a Purchase Loan in principal amount equal to such
Participant's Purchase Amount reduced by the amount of cash paid,
if any. Unless the Committee shall otherwise determine prior to
the applicable Purchase Date, each Purchase Loan shall have a
term not to exceed ten years, and be secured by the shares of
Purchased Common Stock acquired with such Purchase Loan.
(b) Interest on Purchase Loan. Until the SARP
Participant's Purchase Loan is paid in full, or otherwise
satisfied or discharged in full, interest on the outstanding
balance of the Purchase Loan shall accrue at a fixed rate per
annum equal to the minimum rate required to avoid imputed
interest under the applicable provisions of the Internal Revenue
Code of 1986, as amended.
(c) Repayment of Purchase Loan. No principal or interest
payments with respect to a Purchase Loan shall be required prior
to the fifth anniversary of the date such Purchase Loan is made;
provided, however, that prior to such fifth anniversary, cash
dividends on shares of Purchased Common Stock held as security
for such Purchase Loan, and on the related shares of Restricted
Common Stock, shall be applied to pay accrued interest on the
Purchase Loan (any non-cash dividends shall remain as part of the
collateral securing such Purchase Loan). After such fifth
anniversary, level monthly payments of principal and accrued
interest with respect to a Purchase Loan shall be required for
the remaining term thereof. Unless otherwise determined by the
Committee, all outstanding principal and interest on a SARP
Participant's Purchase Loan shall be immediately due and payable
in full upon termination of the SARP Participant's employment
with the Company and its affiliates. All or any portion of the
principal and/or interest with respect to a Purchase Loan may, at
the election of the SARP Participant, be paid by the delivery to
the Company of whole shares of Common Stock, other than (i)
shares of Common Stock credited to the SARP Participant's account
under any tax qualified employee benefit plan sponsored by the
Company, (ii) shares of Common Stock subject to outstanding and
as yet unexercised stock options, and (iii) shares of Purchased
Common Stock and Designated Common Stock; provided, however, that
shares of Purchased Common Stock and Designated Common Stock can
be used to pay interest and/or principal with respect to a
Purchase Loan if at the time of such payment the SARP Participant
is an active employee of the Company or a
15
<PAGE> 16
subsidiary, or the SARP Participant's employment terminated due
to death, disability or retirement pursuant to the retirement
policy of the Company. For purposes of the immediately preceding
sentence, shares of Common Stock shall be valued at the Fair
Market Value of such shares on the Business Day immediately
preceding the date such shares are delivered to the Company.
(d) Other Terms. The promissory notes evidencing the
Purchase Loans shall contain such other terms and conditions as
the Committee may determine, including, without limitation, any
special terms relating to the retirement of a SARP Participant
prior to the expiration of the term of one or more Purchase
Loans.
7.04 COMMON STOCK CERTIFICATES. As promptly as administratively
feasible after each Purchase Date, the Company shall deliver to each
SARP Participant one or more stock certificates for the number of shares
of Common Stock purchased by such Participant as of such Purchase Date
in accordance with this Article VII. The SARP Participant shall then
deliver certificates representing a number of shares with a value equal
to the principal amount of the Purchase Loan to the Company in pledge
for the related Purchase Loan along with an executed security agreement
in such form as the Committee shall specify. Upon satisfaction in full
of the Purchase Loan, the certificates shall be delivered to the SARP
Participant free and clear of any restrictions except for any
restrictions that may be imposed by law.
ARTICLE VIII. RESTRICTED COMMON STOCK
8.01 RESTRICTED COMMON STOCK AWARDS. As of each Purchase Date,
there shall automatically be granted to any SARP Participant who
purchases Purchased Common Stock as of such Purchase Date pursuant to
Article VII an award of one share of Restricted Common Stock for each
two shares of Purchased Common Stock. The Purchase Date shall be the
Date of Grant of such Restricted Common Stock. As of any date that a
SARP Participant delivers a Designation Notice to the Company, in
accordance with Section 5.02(b), designating shares of Common Stock as
Designated Common Stock, there shall automatically be granted to such
Participant an award of one share of Restricted Common Stock for each
two shares of Designated Common Stock. The date of delivery of such
Designation Notice shall be the Date of Grant of such Restricted Common
Stock. The terms of all such Restricted Common Stock awards shall be set
forth in an Award Agreement between the Company and the SARP Participant
which shall contain such forfeiture periods and conditions, restrictions
and other provisions, not inconsistent with these rules, as shall be
determined by the Committee.
(a) Issuance of Restricted Common Stock. As soon as
practicable after the Date of Grant of Restricted Common Stock,
the Company shall cause to be transferred on the books of the
Company shares of Common Stock, registered on behalf of the SARP
Participant, evidencing such Restricted Common Stock, but subject
to forfeiture to the Company retroactive to the Date of Grant if
an Award Agreement delivered to the SARP Participant by the
Company with respect to the
16
<PAGE> 17
Restricted Common Stock is not duly executed by the SARP
Participant and timely returned to the Company. Until the lapse
or release of all restrictions applicable to an award of
Restricted Common Stock, the stock certificates representing such
Restricted Common Stock shall be held in custody by the Company
or its designee.
(b) Common Stockholder Rights. Beginning on the Date of
Grant of the Restricted Common Stock and subject to execution of
the Award Agreement as provided in Section 8.01(a), the SARP
Participant shall become a stockholder of the Company with
respect to all Common Stock subject to the Award Agreement and
shall have all of the rights of a stockholder, including, but not
limited to, the right to vote such Common Stock and the right to
receive dividends (or dividend equivalents) paid with respect to
such Common Stock; provided, however, that any Common Stock
distributed as a dividend or otherwise with respect to any
Restricted Common Stock as to which the restrictions have not yet
lapsed shall be subject to the same restrictions as such
Restricted Common Stock and shall be held as prescribed in
Section 8.01(a).
(c) Restriction on Transferability. None of the Restricted
Common Stock may be assigned, transferred (other than by will or
the laws of descent and distribution), pledged, sold or otherwise
disposed of prior to lapse or release of the restrictions
applicable thereto.
(d) Delivery of Common Stock Upon Release of Restrictions.
Upon expiration or earlier termination of the forfeiture period
without a forfeiture, the satisfaction of the Purchase Loan, if
any, for the Related Common Stock and the satisfaction of or
release from any other conditions prescribed by the Committee,
the restrictions applicable to the Restricted Common Stock shall
lapse. As promptly as administratively feasible thereafter,
subject to the requirements of Section 9.02, the Company shall
deliver to the SARP Participant, or, in case of the SARP
Participant's death, to the SARP Participant's legal
representatives, one or more stock certificates for the
appropriate number of shares of Common Stock, free of all such
restrictions, except for any restrictions that may be imposed by
law.
8.02 TERMS OF RESTRICTED COMMON STOCK.
(a) Forfeiture of Restricted Common Stock. Subject to
Section 8.02(b), all Restricted Common Stock shall be forfeited
and returned to the Company and all rights of the SARP
Participant with respect to such Restricted Common Stock shall
cease and terminate in their entirety if during the forfeiture
period (i) the SARP Participant transfers, sells or otherwise
disposes of the Related Common Stock other than to a Permitted
Transferee or in a transaction constituting a Change in Control
or (ii) the employment of the SARP Participant with the Company
and its affiliates terminates for any reason or (iii) the SARP
Participant defaults on the Purchase Loan, if any, for the
Related Common Stock. Unless the Committee, in its sole
discretion, provides otherwise in the applicable Award Agreement,
the forfeiture
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<PAGE> 18
period for any shares of Restricted Common Stock shall be five
years from the Date of Grant of such Restricted Common Stock.
Notwithstanding the foregoing, in the event of the discharge by
the Company and its subsidiaries of a SARP Participant without
Cause or termination of a SARP Participant's employment by reason
of death, Disability or retirement pursuant to the retirement
policy of the Company or its applicable subsidiaries, all
forfeiture restrictions imposed on Restricted Common Stock shall
immediately and fully lapse. In addition, upon the occurrence of
a Change in Control, all forfeiture restrictions imposed on
Restricted Common Stock shall immediately and fully lapse.
(b) Waiver of Forfeiture Period. Notwithstanding anything
contained in this Article VIII to the contrary, the Committee
may, in its sole discretion, waive the forfeiture conditions set
forth in any Award Agreement under appropriate circumstances and
subject to such terms and conditions (including forfeiture of a
proportionate number of the shares of Restricted Common Stock) as
the Committee may deem appropriate, provided that the SARP
Participant shall at that time have completed at least one year
of employment after the Date of Grant.
ARTICLE IX. MISCELLANEOUS
9.01 LIMITATIONS ON TRANSFER. Except as otherwise expressly
provided in this Plan, the rights and interest of a Participant under
the Plan may not be assigned or transferred other than by will or the
laws of descent and distribution. During the lifetime of a Participant,
only the Participant personally may exercise rights under the Plan.
9.02 TAXES. The Company shall be entitled to withhold (or secure
payment from the SARP Participant in lieu of withholding) the amount of
any withholding or other tax required by law to be withheld or paid by
the Company with respect to any Common Stock issuable under the SARP, or
with respect to any income recognized upon the lapse of restrictions
applicable to Restricted Stock, and the Company may defer issuance of
Common Stock hereunder until and unless indemnified to its satisfaction
against any liability for any such tax. The amount of such withholding
or tax payment shall be determined by the Committee or its delegate and
shall be payable by the SARP Participant at such time as the Committee
determines. The Committee shall prescribe in each Award Agreement one or
more methods by which the SARP Participant will be permitted to satisfy
his or her tax withholding obligation, which methods may include,
without limitation, the payment of cash by the SARP Participant to the
Company and the withholding, at the appropriate time, of shares of
Common Stock otherwise issuable to the SARP Participant in a number
sufficient, based upon the Fair Market Value of such Common Stock, to
satisfy such tax withholding requirements.
9.03 LEGENDS. All certificates for Common Stock delivered under
the SARP shall be subject to such transfer restrictions set forth in
this Plan and such other restrictions as the Committee may deem
advisable under the rules, regulations and other requirements of the
Securities and Exchange Commission, any stock exchange upon which the
Common Stock
18
<PAGE> 19
is then listed and any applicable federal or state securities law, and
the Committee may cause a legend or legends to be endorsed on any such
certificates making appropriate references to such restrictions.
9.04 AMENDMENT AND TERMINATION. The Committee shall have complete
power and authority to amend or terminate this Plan, including the ESPP
or SARP features of the Plan, at any time it is deemed necessary or
appropriate. No termination or amendment of the Plan or the SARP feature
may, without the consent of the SARP Participant to whom any award shall
theretofore have been granted under the SARP, adversely affect the right
of such individual under such award; provided, however, that the
Committee may, in its sole discretion, make such provision in the Award
Agreement for amendments which, in its sole discretion, it deems
appropriate. If the Plan or the ESPP feature is terminated, the entire
amount of cash allocable to the Share Account of each ESPP Participant
hereunder and not theretofore applied to the purchase of shares of
Common Stock shall be refunded to each such Participant.
9.05 NO GUARANTEE OF EMPLOYMENT; REGISTRATION REQUIREMENTS;
GOVERNING LAW. Nothing in the Plan shall be deemed to give any
Participant hereunder any right of continued employment. If at any time
the Company determines, in its sole discretion, that any listing
registration, or qualification of the Plan not already obtained is
required by any securities exchange or under any state or federal law,
or the consent or approval of any governmental regulatory body is
necessary or desirable as a condition of, or in connection with, the
implementation of continuation of the Plan, the Company may discontinue
the operation of the Plan unless such listing, registration,
qualification, consent or approval shall be effected or obtained free of
any conditions or with such conditions as are acceptable to the Board of
Directors. The foregoing shall not be construed to limit in any way the
discretion of the Company to discontinue or terminate the Plan under
circumstances other than those enumerated above. The Plan shall be
governed and construed in accordance with the laws of the State of
Delaware, without regard to any provisions with respect to conflict of
laws.
9.06 ADJUSTMENTS TO REFLECT CAPITAL CHANGES. The number and kind
of shares of Common Stock available for issuance under the Plan shall be
appropriately adjusted to reflect any stock dividend, stock split,
combination or exchange of shares, merger, consolidation or other change
in capitalization with a similar substantive effect upon the Plan. The
Committee shall have the power and sole discretion to determine the
amount of the adjustment to be made in each case.
19
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
Our audits include the financial statement schedule in Item 14(a). This schedule
is the responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits. In our opinion, the financial statement
schedule referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
We consent to the incorporation by reference in the Registration Statements of
Water Pik Technologies, Inc. pertaining to the Executive Deferred Compensation
Plan (Form S-8 No. 333-30016), Broad-Based Stock Option Plan (Form S-8 No.
333-96447), 1999 Incentive Plan (Form S-8 No. 333-96449), Teledyne, Inc. 401(k)
Plan (Form S-8 No. 333-96451), 1999 Non-Employee Director Stock Compensation
Plan (Form S-8 No. 333-96455), Employee Stock Purchase Plan (Form S-8 No.
333-96457) and Executive Deferred Compensation Plan (Form S-8 No. 333-96457) of
our report dated January 28, 2000 with respect to the consolidated financial
statements and schedule of Water Pik Technologies, Inc. included in the Annual
Report (Form 10-K) for the year ended December 31, 1999.
/s/ ERNST & YOUNG LLP
Woodland Hills, California
March 28, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
registrant's consolidated statement of income for the year ended December 31,
1999 and consolidated balance sheet as of December 31, 1999 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 2
<SECURITIES> 0
<RECEIVABLES> 59
<ALLOWANCES> 1
<INVENTORY> 26
<CURRENT-ASSETS> 97
<PP&E> 85
<DEPRECIATION> 47
<TOTAL-ASSETS> 160
<CURRENT-LIABILITIES> 55
<BONDS> 40
0
0
<COMMON> 0
<OTHER-SE> 57
<TOTAL-LIABILITY-AND-EQUITY> 160
<SALES> 255
<TOTAL-REVENUES> 255
<CGS> 156
<TOTAL-COSTS> 156
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1
<INCOME-PRETAX> 19
<INCOME-TAX> 8
<INCOME-CONTINUING> 11
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11
<EPS-BASIC> 1.15
<EPS-DILUTED> 1.15
</TABLE>
