Exhibit 7
SETTLEMENT AGREEMENT
This Settlement Agreement (the "Agreement") dated April 30, 2004 (the "Effective
Date") is made by and among Water Pik Technologies, Inc., a Delaware corporation
(the "Company"), on the one hand, and Xxxxxxxxxx Capital Partners, LLC, a
Delaware limited liability company ("TCP"), Special Value Bond Fund, LLC, a
Delaware limited liability company ("SVBF"), Special Value Bond Fund II, LLC, a
Delaware limited liability company ("SVBFII"), SVIM/MSM, LLC, a Delaware limited
liability company ("SVIM/MSM"), SVIM/MSM II, LLC, a Delaware limited liability
company ("SVIM/MSMII"), Xxxxxxxxxx & Co., LLC, a Delaware limited liability
company ("TCO"), Xxxxxxx X. Xxxxxxxxxx ("Xxxxxxxxxx") and Xxxx X. Xxxxxxxxxx
("Xxxxxxxxxx") on the other hand. TCP, SVBF, SVBFII, SVIM/MSM, SVIM/MSMII, TCO
and Messrs. Xxxxxxxxxx and Holdsworth are collectively referred to herein as the
"TC Persons."
RECITALS
A. SVBF has the sole power of voting and disposition with respect to 650,000
shares of common stock of the Company ("Company Common Stock") and SVBFII has
the sole power of voting and disposition with respect to 1,710,485 shares of
Company Common Stock. The certificates for the shares of Company Common Stock
held by SVBF and SVBFII have restrictive legends that were placed on the
certificates pursuant to Section 9.3 of the Stock Purchase Agreement dated
December 29, 2000 by and among the Company, SVBF and SVBFII (the "Restrictive
Legends").
B. TCP and the Company are engaged in a proxy contest (the "Proxy Contest"). TCP
has made a solicitation in opposition (the "TC Solicitation") in connection with
the Company's Annual Meeting of Stockholders to be held on May 13, 2004. In
particular, TCP has solicited proxies for the election of Messrs. Xxxxxxxxxx and
Xxxxxxxxxx as directors. The proxy statement sent by TCP is dated April 7, 2004.
The Company has made its own solicitation by proxy statement and otherwise (the
"Company Solicitation").
C. The parties desire to settle the Proxy Contest on the basis set forth below.
NOW THEREFORE, in consideration for the mutual promises set forth below, the
parties, intending to be legally bound, agree as follows:
1. Representations and Warranties of the Parties.
(a) Representations and Warranties of the Company. The Company hereby
represents and warrants to each TC Person as follows:
(i) The Company is duly organized and validly existing and in good
standing under the laws of the State of Delaware, has the requisite corporate
power and authority to execute, deliver and carry out the terms of this
Agreement, and has taken
all necessary corporate action to authorize the execution, delivery and
performance of this Agreement and the transactions contemplated hereby.
(ii) This Agreement has been duly and validly authorized, executed
and delivered by the Company, and constitutes a valid and binding obligation,
enforceable against the Company in accordance with its terms.
(b) Representations and Warranties of the TC Persons. Each of the TC
Persons, severally and not jointly, represents to the Company as follows:
(i) Such TC Person has the requisite power and authority to execute,
deliver and carry out the terms of this Agreement, and has taken all necessary
action to authorize the execution, delivery and performance of this Agreement
and the transactions contemplated hereby.
(ii) This Agreement has been duly and validly authorized, executed
and delivered by such TC Person, and constitutes a valid and binding obligation,
enforceable against such TC Person in accordance with its terms.
2. Cessation of Insurgent Campaign. Messrs. Xxxxxxxxxx and Holdsworth agree that
they:
(a) hereby withdraw their nominations as directors; and
(b) will not vote any proxies that they have or may receive in response to
the TC Solicitation.
3. Voting of Shares. Xx. Xxxxxxxxxx, TCO, TCP, and SVIM/MSM shall cause SVBF to
vote the shares of Company Common Stock held by SVBF, and Xx. Xxxxxxxxxx, TCO,
TCP and SVIM/MSMII shall cause SVBFII to vote the shares of Company Common Stock
held by SVBFII in accordance with the recommendations of the Board of Directors
of the Company set forth in the Company's proxy statement dated March 26, 2004
(the "Company Proxy Statement") using the proxy card provided by the Company
with the Company Proxy Statement.
4. Press Release. On the Effective Date, the Company and TCP will promptly issue
the joint press release (the "Press Release") attached hereto as Exhibit A
(without further modification or amendment thereto). The Company will promptly
file with the Securities and Exchange Commission (the "SEC") the Press Release
as additional soliciting material. The parties hereto shall not, and shall cause
their affiliates not to, make any public statement or issue any press release
that is inconsistent with, or otherwise contrary to, the Press Release.
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5. Treatment of Shares.
(a) The Company hereby represents and warrants that the TC Persons,
considered individually or in the aggregate, are not affiliates (as that term is
defined in Rule 144(a)(i) promulgated by the SEC under the Securities Act of
1933, as amended (the "Securities Act")) of the Company and have not been
affiliates of the Company during the preceding three months.
(b) Not later than two (2) business days following the Effective Date, the
Company will issue an instruction letter to its transfer agent and shall cause
its transfer agent to immediately remove the Restrictive Legends from the
certificates held by SVBF and SVBFII. If required by the transfer agent, the
Company shall cause to be delivered by its General Counsel, or, if required,
appropriate outside counsel, an opinion to the effect that (i) the shares held
by SVBF and SVBFII are not restricted securities, (ii) the TC Persons,
considered individually or in the aggregate, are not affiliates (as that term is
defined in Rule 144(a)(i) promulgated by the SEC under the Securities Act) of
the Company and have not been affiliates of the Company during the preceding
three months and (iii) the shares held by SVBF and SVBFII may be sold pursuant
to Rule 144(k) under the Securities Act. The Company will provide TCP with a
copy of the instruction letter and any other documentation furnished by or on
behalf of the Company to the transfer agent in connection with this Section. The
Company will provide TCP with any other documents reasonably requested by TCP to
facilitate sales by TCP under Rule 144(k).
(c) From and after the Effective Date, assuming TCP takes no actions after
the Effective Date to acquire additional shares of Company Common Stock, seek
board representation or otherwise assert "control" (as that term is defined
under Rule 405 under the Securities Act) with respect to the Company, the
Company shall not, and shall cause its affiliates not to, take any action,
directly or indirectly, to prevent, restrict or otherwise delay any sale of
shares held by SVBF or SVBFII pursuant to Rule 144(k) or otherwise under the
Securities Act.
6. Payment of Expenses. The Company shall pay to TCP by wire transfer in
immediately available funds an amount up to $180,000 for the documented expenses
incurred by TCP in connection with the TC Solicitation and this Agreement. Such
payment shall be made by the Company no later than two (2) Business Days
following receipt by the Company of the documented expenses. Such payment shall
be made to an account specified by TCP.
7. No Admission of Liability or Wrongdoing. This Agreement shall not in any way
be construed as or deemed to be evidence of any admission or concession on the
part of any party hereto of (i) the merits or lack of merits of any matter
asserted in the Proxy Contest or (ii) any liability or wrongdoing whatsoever,
which liability and wrongdoing are hereby expressly denied and disclaimed by
each of the parties hereto.
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8. Mutual Releases.
(a) Company Release. For valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the Company, on behalf of itself and all of
its affiliates, successors and assigns (the "Company Releasors"), hereby
releases, acquits and forever discharges each TC Person, their counsel, public
relations firm and proxy solicitors together with their respective present and
former affiliates, officers, directors, employees, successors and assigns, and
individually (collectively, the "TC Releasees"), of and from any and all claims,
contracts, debts, demands, causes of action (whether at law or equity), demands,
expenses, losses, costs and damages ("Claims") which any Company Releasor may
have had, or may now have, or may hereafter have (whether through operation of
law, assignment or subrogation), from the beginning of time to the Effective
Date, real or suspected, known or unknown, actual or contingent, direct or
derivative, including but not limited to any Claims relating to or arising out
of the Proxy Contest or related to or arising out of the subject matter covered
by this Agreement, excepting only any action, cause of action or suit arising by
virtue of a breach of this Agreement.
(b) TC Persons Release. For valuable consideration, the receipt and
adequacy of which are hereby acknowledged, each TC Person, on behalf of itself
and all of its affiliates, successors and assigns (the "TC Releasors"), hereby
releases, acquits and forever discharges the Company, its counsel, public
relations firm and proxy solicitors together with their respective present and
former affiliates, officers, directors, employees, successors and assigns, and
individually (collectively, the "Company Releasees"), of and from any and all
Claims which any TC Releasor may have had, or may now have, or may hereafter
have (whether through operation of law, assignment or subrogation), from the
beginning of time to the Effective Date, real or suspected, known or unknown,
actual or contingent, direct or derivative, including but not limited to any
Claims relating to or arising out of the Proxy Contest or related to or arising
out of the subject matter covered by this Agreement, excepting only any action,
cause of action or suit arising by virtue of a breach of this Agreement.
(c) Additional Terms. Each TC Releasee and each Company Releasee not party
to this Agreement is intended and shall be a third-party beneficiary of the
foregoing releases. With respect to each of the releases set forth above, each
person or entity granting or receiving such a release (i) agrees that such
releases do not preclude any party hereto from seeking to enforce any
undertaking or promise contained in this Agreement or from seeking redress for
the breach of any representation, warranty or covenant contained in this
Agreement, (ii) agrees not to challenge, and shall use its best efforts to cause
each of its affiliates and representatives not to challenge, the validity of any
provisions of this Agreement and (iii) expressly waives all rights and benefits
each may have under and by virtue of the terms of Section 1542 of the California
Civil Code, which provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING
THE RELEASE, WHICH IF
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KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR.
Each party understands the statutory language of Section 1542 of the California
Civil Code.
9. Miscellaneous.
(a) Governing Law. This Agreement and all disputes arising out of or
relating to it shall be governed by and construed and enforced in accordance
with the laws of the State of California, without reference to the conflict of
laws principles thereof.
(b) Amendments. Any provision in this Agreement may be amended or waived
by an instrument in writing signed by the Company and TCP, and any such
amendment or waiver shall be binding on all parties.
(c) Successors. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, successors and
assigns.
(d) Specific Performance. Each of the parties acknowledges and agrees that
irreparable harm would occur if any provision of this Agreement were not
performed in accordance with the terms hereof, or were otherwise breached, and
that such harm could not be remedied by an award of money damages. Accordingly,
the parties hereto agree that any non-breaching party shall be entitled to an
injunction to prevent breaches of this Agreement and to enforce specifically the
terms and provisions hereof.
(e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(f) Notices. Any notice or communication required or permitted to be given
to any party pursuant to this Agreement shall be delivered by hand, transmitted
by telecopier or sent by registered or certified mail to the address(es) set
forth below, or to such other address as any party shall designate by notice in
compliance with this Section. Any notice sent in accordance with this Section
shall be deemed received one day after transmission if telecopied (and a
confirmation obtained) or delivered by hand, and five business days after
deposit if mailed.
Notice to the Company: Water Pik Technologies, Inc.
Attn: Xxxx Xxxxxx, VP and General Counsel
00 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Telecopy: 000-000-0000
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With a copy to: Xxxxxxx Xxxxx & Xxxxx
Attn: Xxxxxxx Xxxxxxx
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000
Telecopy: 000-000-0000
Notice to any TC Person: Tennebaum Capital Partners, LLC
Attn: Xxxxxxx X. Xxxxxxxxxx
00000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telecopy: 000-000-0000
With a copy to: Xxxxxx & Xxxxxxx LLP
Attn: Xxxx Xxxxxx Xxxxxx
000 Xxxx Xxxxxxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000
Telecopy: 000-000-0000
(g) Entire Agreement; No Assignment. This Agreement (i) constitutes the
entire agreement among the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof and, except as
provided in Section 9(c) above, is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder and (ii) shall not be
assigned by operation of law or otherwise without the prior written consent of
the other parties. Any attempted assignment or transfer in violation of this
Section shall be void and of no effect.
(h) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(i) Severability. In the event that any one or more of the provisions
contained in this Agreement, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
parties shall negotiate in good faith with a view to the substitution therefor
of a suitable and equitable solution in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid provision;
provided, however, that the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions contained in
this Agreement shall not be in any way impaired thereby, it being intended that
all of the rights and privileges of the parties hereto shall be enforceable to
the fullest extent permitted by law.
(j) Waiver of Jury Trial. Each party hereto hereby waives to the fullest
extent permitted by applicable law, any right it may have to a trial by jury in
respect to any litigation directly or indirectly arising out of, under or in
connection with this Agreement.
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Each party hereto (i) certifies that no representative, agent or attorney of any
other party has represented, expressly or otherwise, that such other party would
not, in the event of litigation, seek to enforce that foregoing waiver and (ii)
acknowledges that it and the other parties hereto have been induced to enter
into this Agreement by, among other things, the mutual waivers and
certifications in this Section 9(j).
(k) Rules of Construction. The parties agree that the following rules
shall govern the interpretation and construction of this Agreement: (i) all
Section headings are for convenience only and shall not limit, alter, or
otherwise affect the construction or interpretation of this Agreement; (ii)
whenever the context so requires, the neuter gender shall include the feminine
or masculine, and vice versa; and (iii) any rule of construction disfavoring the
drafting party shall not apply in the construction of any provision of this
Agreement.
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IN WITNESS WHEREOF, the parties have executed this Settlement Agreement as
of the date first written above.
Water Pik Technologies, Inc. XXXXXXXXXX CAPITAL PARTNERS, LLC, a Delaware
limited liability company
/s/ Xxxxxxx X. Xxxxxx By: Xxxxxxxxxx & Co., LLC
-----------------------
By: Xxxxxxx X. Xxxxxx Its: Managing Member
Its: President and CEO
SPECIAL VALUE BOND FUND, LLC, a Delaware
limited liability company
By: SVIM/MSM, LLC
Its: Managing Member
By: Xxxxxxxxxx & Co., LLC
Its: Managing Member
SPECIAL VALUE BOND FUND II, LLC, a Delaware
limited liability company
By: SVIM/MSM II, LLC
Its: Managing Member
By: Xxxxxxxxxx & Co., LLC
Its: Managing Member
SVIM/MSM, LLC, a Delaware limited liability
company
By: Xxxxxxxxxx & Co., LLC
Its: Managing Member
SVIM/MSM II, LLC, a Delaware limited liability
company
By: Xxxxxxxxxx & Co., LLC
Its: Managing Member
XXXXXXXXXX & CO., LLC, a Delaware
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limited liability company
Each of the above by:
/s/ Xxxxxxx X. Xxxxxxxxxx
----------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
Its: Managing Member
/s/ Xxxxxxx X. Xxxxxxxxxx
---------------------
Xxxxxxx X. Xxxxxxxxxx, an individual
/s/ Xxxxxxx X. Xxxxxxxxxx
----------------------
Xxxx X. Xxxxxxxxxx, an individual
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EXHIBIT A
For Immediate Release Contacts: Xxxx X'Xxxxxx
Water Pik Technologies, Inc.
(000) 000-0000 (office)
(000) 000-0000 (home)
xxxxxxxx@xxxxxxxx.xxx
Xxxxxx Xxxxxxx
Xxxxxxxxxx Capital Partners, LLC
(000) 000-0000
xxxxxxx@xxxxxxxx.xxx
WATER PIK AND XXXXXXXXXX END PROXY CONTEST
XXXXXXXXXX CAPITAL PARTNERS WITHDRAWS NOMINATIONS TO WATER PIK BOARD
STOCKHOLDERS TO VOTE COMPANY'S WHITE PROXY CARD ONLY
(Newport Beach, California, May 3, 2004) - Water Pik Technologies,
Inc. (NYSE: PIK) and Xxxxxxxxxx Capital Partners, LLC (TCP) today jointly
announced that TCP is discontinuing its proxy contest by withdrawing its
nominees as candidates for the Water Pik Technologies Board of Directors. TCP is
basing its decision on corporate governance changes recently announced by Water
Pik Technologies. TCP has also agreed to vote their shares for the Company's
incumbent Directors, Xxxxxxx X. Xxxxx and Chief Executive Officer, Xxxxxxx X.
Xxxxxx, at Water Pik's upcoming Annual Meeting of Stockholders on May 13, 2004.
"We are pleased Xx. Xxxxxxxxxx has acknowledged the positive steps taken to
amend our corporate governance practices and will support the recommendations of
the Board," said Xxxxxx X. Xxxxxxx, Chairman, Water Pik Technologies. "The
resolution of this proxy contest is in the best interest of all parties and will
allow us to get beyond this unfortunate war of words and continue to build more
value for all stockholders."
"We have determined that the proposed governance changes by the Water Pik Board,
together with the Company's multi-year earnings goals reduce the need for
continuing this distracting proxy contest," said Xxxxxxx X. Xxxxxxxxxx. "While I
disavow some of the Company's assertions regarding my past statements, it is not
worth fighting about them. The important thing is to move forward with the
progress we have made. We are hopeful that the Board will
continue to embrace stockholder democracy provisions and will meet or exceed
their excellent earnings projections."
Water Pik and TCP also announced that TCP will not vote any "Blue Proxy" cards
it has received or may receive. Stockholders are encouraged to vote only on the
Company's WHITE proxy card for the upcoming Annual Meeting of Stockholders on
May 13, 2004. If any stockholders have questions, they should call the Company's
proxy solicitor, MacKenzie Partners, Inc. toll-free at 1-800-322-2885 or
212-929-5500 (collect).
FORWARD-LOOKING STATEMENTS
In this press release, the statements from Xx. Xxxxxxx and Xx. Xxxxxxxxxx are
forward-looking statements. Any other statements contained in this press
release, which are not historical fact, may be considered forward-looking
statements as that term is defined in the Private Securities Litigation Reform
Act of 1995. Actual results could differ materially from these forward-looking
statements as a result of the risk factors described in the Company's filings
with the Securities and Exchange Commission, including, among others, its
ability to develop new products and execute its growth strategy, the uncertainty
of new product testing and regulatory approvals, the uncertainty that its
marketing efforts will achieve the desired results with respect to existing or
new products, its dependence on key customers, the seasonal nature of its
businesses, the impact on consumer confidence and consumer spending, the effect
of product liability claims, the impact of rising commodity costs such as steel,
copper and oil, risks associated with using foreign suppliers including
increased transportation costs, failure to protect its intellectual properties
and its ability to integrate acquisitions and realize expected synergies. In
light of these risks and uncertainties, there can be no assurance that the
forward-looking information contained in this press release will in fact
transpire. These forward-looking statements represent the Company's judgment
only as of the date of this press release. As a result, the reader is cautioned
not to rely on these forward-looking statements. The Company does not have any
intention or obligation to update these forward-looking statements.
Water Pik Technologies, Inc. is a leading developer, manufacturer and marketer
of innovative personal health care products, pool products and water-heating
systems sold under the Water
Pik(R), Jandy(R) and Laars(R) brand names. The Company has developed and
introduced many products that are considered the first of their kind and have
led to the formation of new markets, including the automatic toothbrush,
end-of-faucet water filtration system, pool heater and pulsating shower massage.
The Company's products are sold through a variety of channels, including home
centers, mass-merchandisers, drug chains and specialty retailers, wholesalers
and contractors. Headquartered in Newport Beach, California, the Company
operates ten major facilities in the United States and Canada. For more
information, visit the Water Pik Technologies, Inc. website at xxx.xxxxxxxx.xxx.
INFORMATION REGARDING PARTICIPANTS AND ADDITIONAL INFORMATION
Water Pik Technologies, Inc. has filed with the Securities and Exchange
Commission (SEC) its definitive proxy materials for the 2004 Annual Meeting of
Stockholders. These materials contain important information concerning the
matters to be acted upon at the 2004 Annual Meeting, the position of the Board
of Directors with respect to those matters and the participants in the
solicitation of proxies for that meeting.
Investors are urged to read the Company's proxy statement and additional
solicitation materials and other relevant documents filed with the SEC by the
Company because they contain important information. Investors may obtain the
Company's SEC filings free of charge at the SEC's website (xxx.xxx.xxx). In
addition, documents filed with the SEC by the Company are available free of
charge at the "Investors/Corporate Info" section of Water Pik's website
(xxx.xxxxxxxx.xxx) or by contacting Water Pik Technologies, Inc., 00 Xxxxxxxxx
Xxxxx, Xxxxx 000, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000, (000) 000-0000.