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Exhibit 10.3
FORM OF EMPLOYEE BENEFITS AGREEMENT
BETWEEN
ALLEGHENY TELEDYNE INCORPORATED
AND
WATER PIK TECHNOLOGIES, INC.
DATED AS OF _______________, 1999
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INDEX
ARTICLE I DEFINITIONS ........................................................................................... 1
1.1 Agreement ................................................................................................ 1
1.2 ASO Contract ............................................................................................. 1
1.3 ATI Entity ............................................................................................... 1
1.4 ATI Executive ............................................................................................ 2
1.5 ATI Master Pension Trust ................................................................................. 2
1.6 ATI Pension Plan ......................................................................................... 2
1.7 ATI Stock Value .......................................................................................... 2
1.8 Award .................................................................................................... 2
1.9 Benefit Liabilities ...................................................................................... 2
1.10 Change .................................................................................................. 2
1.11 Close of the Distribution Date .......................................................................... 2
1.12 COBRA ................................................................................................... 2
1.13 Code .................................................................................................... 2
1.14 Corporate-Owned Life Insurance Policies ................................................................. 2
1.15 DOL ..................................................................................................... 2
1.16 ERISA ................................................................................................... 3
1.17 Executive Benefit Plans ................................................................................. 3
1.18 Foreign Plan ............................................................................................ 3
1.19 Group Insurance Policies ................................................................................ 3
1.20 HCRA Plan ............................................................................................... 3
1.21 Health and Welfare Plans ................................................................................ 3
1.22 HMO ..................................................................................................... 3
1.23 HMO Agreements .......................................................................................... 3
1.24 Immediately After the Distribution Date ................................................................. 3
1.25 Incentive Plan .......................................................................................... 3
1.26 In the Money Option ..................................................................................... 4
1.27 IRS ..................................................................................................... 4
1.28 Material Feature ........................................................................................ 4
1.29 Non-Employee Director ................................................................................... 4
1.30 Non-Employee Director Plans ............................................................................. 4
1.31 Nonqualified Deferred Compensation Programs ............................................................. 4
1.32 Option .................................................................................................. 4
1.33 Out of the Money Option ................................................................................. 4
1.34 PBGC .................................................................................................... 4
1.35 Performance Award ....................................................................................... 4
1.36 Performance Share Program ............................................................................... 5
1.37 Plan .................................................................................................... 5
1.38 Ratio ................................................................................................... 5
1.39 Reasonable Efforts ...................................................................................... 5
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1.40 SARP .................................................................................................... 5
1.41 SARP Award .............................................................................................. 5
1.42 Separation and Distribution Agreement ................................................................... 5
1.43 Spinco Entity ........................................................................................... 5
1.44 Spinco 401(k) Plan ...................................................................................... 5
1.45 Spinco Individual ....................................................................................... 5
1.46 Spinco Pension Plan ..................................................................................... 5
1.47 Spinco Stock Value ...................................................................................... 5
1.48 Stock Purchase Plan ..................................................................................... 6
1.49 Teledyne ................................................................................................ 6
1.50 Teledyne 401(k) Plan .................................................................................... 6
ARTICLE II GENERAL PRINCIPLES ................................................................................... 6
2.1 ASSUMPTION OF LIABILITIES ................................................................................ 6
2.2 ESTABLISHMENT OF SPINCO PLANS ............................................................................ 6
2.3 TERMS OF PARTICIPATION BY SPINCO INDIVIDUALS IN SPINCO PLANS ............................................. 7
ARTICLE III DEFINED BENEFIT PLANS ............................................................................... 8
3.1 FREEZING OF PENSION PLAN BENEFITS ........................................................................ 8
3.2 CREDITING SERVICE UNDER ATI'S PENSION PLAN ............................................................... 8
ARTICLE IV DEFINED CONTRIBUTION PLANS ........................................................................... 8
4.1 401(k) PLAN .............................................................................................. 9
ARTICLE V HEALTH AND WELFARE PLANS .............................................................................. 11
5.1 ASSUMPTION OF HEALTH AND WELFARE PLAN LIABILITIES ........................................................ 11
5.2 VENDOR CONTRACTS ......................................................................................... 11
5.3 PROCEDURES FOR AMENDMENTS TO PLANS, PLAN DESIGNS, ADMINISTRATIVE PRACTICES, AND VENDOR CONTRACTS ......... 13
5.4 ATI SICKNESS AND ACCIDENT, LONG TERM DISABILITY AND PENSION DISABILITY BENEFITS .......................... 14
5.5 POST-RETIREMENT HEALTH AND LIFE INSURANCE BENEFITS ....................................................... 14
5.6 COBRA AND DIRECT PAY ..................................................................................... 14
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5.7 POST-DISTRIBUTION TRANSITIONAL ARRANGEMENTS .............................................................. 14
5.8 APPLICATION OF ARTICLE V TO SPINCO ENTITIES .............................................................. 16
ARTICLE VI EXECUTIVE BENEFITS AND NON-EMPLOYEE DIRECTOR BENEFITS ................................................ 16
6.1 ASSUMPTION OF OBLIGATIONS ................................................................................ 16
6.2 CONSENTS AND NOTIFICATIONS ............................................................................... 16
6.3 ATI 1999 BONUS PLAN ...................................................................................... 17
6.4 ATI INCENTIVE PLANS ...................................................................................... 17
6.5 ATI NONQUALIFIED DEFERRED COMPENSATION PROGRAMS .......................................................... 19
6.6 NON-EMPLOYEE DIRECTOR BENEFITS ........................................................................... 20
6.7 CONFIDENTIALITY AND PROPRIETARY INFORMATION .............................................................. 20
ARTICLE VII GENERAL AND ADMINISTRATIVE .......................................................................... 20
7.1 INTERIM SERVICES AGREEMENT ............................................................................... 20
7.2 PAYMENT OF LIABILITIES, PLAN EXPENSES AND RELATED MATTERS ................................................ 20
7.3 SHARING OF PARTICIPANT INFORMATION ....................................................................... 21
7.4 REPORTING AND DISCLOSURE AND COMMUNICATIONS TO PARTICIPANTS .............................................. 21
7.5 NON-TERMINATION OF EMPLOYMENT; NO THIRD-PARTY BENEFICIARIES .............................................. 21
7.6 BENEFICIARY DESIGNATIONS ................................................................................. 22
7.7 REQUESTS FOR IRS RULINGS AND DOL OPINIONS ................................................................ 22
7.8 FIDUCIARY MATTERS ........................................................................................ 22
7.9 COLLECTIVE BARGAINING .................................................................................... 22
7.10 CONSENT OF THIRD PARTIES ................................................................................ 22
ARTICLE VIII MISCELLANEOUS ...................................................................................... 23
8.1 FOREIGN PLANS ............................................................................................ 23
8.2 EFFECT IF DISTRIBUTION DOES NOT OCCUR .................................................................... 23
8.3 RELATIONSHIP OF PARTIES .................................................................................. 23
8.4 AFFILIATES ............................................................................................... 23
8.5 GOVERNING LAW ............................................................................................ 23
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EMPLOYEE BENEFITS AGREEMENT
_____________ , 1999
The parties to this Employee Benefits Agreement, dated as of the date
written above, are Allegheny Teledyne Incorporated, a Delaware corporation
("ATI"), and Water Pik Technologies, Inc., a Delaware corporation ("Spinco").
Capitalized terms used herein (other than the formal names of ATI Plans (as
defined below) and related trusts of ATI) and not otherwise defined shall have
the respective meanings assigned to them in Article I hereof or as assigned to
them in the Separation and Distribution Agreement (as defined below).
WHEREAS, the Board of Directors of ATI has determined that it is in the
best interests of ATI and its stockholders to separate ATI's consumer products
businesses into an independent business entity;
WHEREAS, in furtherance of the foregoing, ATI and Spinco have entered
into a Separation and Distribution Agreement, dated as of the date hereof (the
"Separation and Distribution Agreement"), and certain other agreements that will
govern certain matters relating to the Separation, the Distribution and the
relationship of ATI and Spinco, and their respective Subsidiaries following the
Distribution; and
WHEREAS, pursuant to the Separation and Distribution Agreement, ATI and
Spinco have agreed to enter into this agreement allocating assets, liabilities
and responsibilities with respect to certain employee compensation and benefit
plans and programs between them.
NOW, THEREFORE, the parties, intending to be legally bound, agree as
follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement the following terms shall have the
following meanings:
1.1 Agreement means this Employee Benefits Agreement, including all the
Schedules and Exhibits hereto.
1.2 ASO Contract is defined in Section 5.2(a)(i).
1.3 ATI Entity means any entity that is, at the relevant time, an
Affiliate of ATI, except that, for periods beginning Immediately After the
Distribution Date, the term "ATI Entity" shall not include Spinco or a Spinco
Entity.
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1.4 ATI Executive means an employee or former employee of ATI, an ATI
Entity, Spinco or a Spinco Entity, who immediately before the Close of the
Distribution Date is eligible to participate in or receive a benefit under any
ATI Executive Benefit Plan.
1.5 ATI Master Pension Trust means the master trust under which the
assets of the ATI Pension Plan are held.
1.6 ATI Pension Plan means the Allegheny Teledyne Incorporated Pension
Plan.
1.7 ATI Stock Value means the average of the daily high and low
per-share trading prices of the ATI Common Stock as listed on the NYSE during
each of the twenty trading days immediately prior to the Distribution Date.
1.8 Award means an award under the Incentive Plan, including
Performance Awards and SARP Awards. When immediately preceded by "ATI," the term
Award (including the term Performance Award or SARP Award) means an award under
the ATI Incentive Plan. When immediately preceded by "Spinco," the term Award
(including the term Performance Award or SARP Award) means an award under the
Spinco Incentive Plan.
1.9 Benefit Liabilities means any Liabilities (as defined in the
Separation and Distribution Agreement) relating to any contributions,
compensation or other benefits accrued or payable under any profit sharing,
pension, savings, deferred compensation, fringe benefit, insurance, medical,
medical reimbursement, life, disability, accident, post-retirement health or
welfare benefit, stock option, stock purchase, sick pay, vacation, employment,
severance, termination or other compensation or benefit plan, agreement,
contract, policy, trust fund or arrangement.
1.10 Change is defined in Section 5.3(b)(i).
1.11 Close of the Distribution Date means 5:00 P.M., Eastern Standard
Time or Eastern Daylight Time (whichever shall then be in effect), on the
Distribution Date.
1.12 COBRA means the continuation coverage requirements for "group
health plans" under Title X of the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended, and as codified in Code Section 4980B and ERISA
Sections 601 through 608.
1.13 Code means the Internal Revenue Code of 1986, as amended.
Reference to a specific Code provision also includes any proposed, temporary, or
final regulation in force under that provision.
1.14 Corporate-Owned Life Insurance Policies means the life insurance
policies owned by ATI insuring the lives of certain ATI Executives and certain
other highly compensated employees of ATI or an ATI Entity.
1.15 DOL means the United States Department of Labor.
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1.16 ERISA means the Employee Retirement Income Security Act of 1974,
as amended. Reference to a specific provision of ERISA also includes any
proposed, temporary, or final regulation in force under that provision.
1.17 Executive Benefit Plans, when immediately preceded by "ATI," means
the executive benefit plans, programs, and arrangements established, maintained,
agreed upon, or assumed by ATI or an ATI Entity for the benefit of employees and
former employees of ATI or an ATI Entity before the Close of the Distribution
Date as listed in Schedule 1.17. When immediately preceded by "Spinco,"
Executive Benefit Plans means the executive benefit plans and programs to be
established by Spinco pursuant to Section 2.2 that correspond to the respective
ATI Executive Benefit Plans.
1.18 Foreign Plan means a Plan maintained by ATI, an ATI Entity,
Spinco, or a Spinco Entity for the benefit of employees outside the U.S.
1.19 Group Insurance Policies is defined in Section 5.2(b)(i).
1.20 HCRA Plan, when immediately preceded by "ATI," means the ATI
Health Care Reimbursement Account Plan. When immediately preceded by "Spinco,"
HCRA Plan means the Health Care Reimbursement Account Plan to be established by
Spinco pursuant to Section 2.2.
1.21 Health and Welfare Plans, when immediately preceded by "ATI,"
means the health and welfare plans listed on Schedule 1.21 established and
maintained by ATI for the benefit of employees and retirees of ATI and certain
ATI Entities, and such other welfare plans or programs as may apply to such
employees and retirees of ATI or an ATI Entity before the Close of the
Distribution Date. When immediately preceded by "Spinco," Health and Welfare
Plans means the health and welfare plans to be established by Spinco pursuant to
Section 2.2 that correspond to the respective ATI Health and Welfare Plans.
1.22 HMO means a health maintenance organization that provides benefits
under one or more of the ATI Health and Welfare Plans or the Spinco Health and
Welfare Plans.
1.23 HMO Agreements is defined in Section 5.2(c)(i).
1.24 Immediately After the Distribution Date means 5:01 P.M., Eastern
Standard Time or Eastern Daylight Time (whichever shall then be in effect), on
the Distribution Date.
1.25 Incentive Plan, when immediately preceded by "ATI," means any of
the Allegheny Teledyne Incorporated 1996 Incentive Plan, any predecessor
Incentive Plan thereto and any other stock-based incentive plans assumed by ATI
by reason of merger, combination, acquisition or otherwise. When immediately
preceded by "Spinco," Incentive Plan means the Incentive Plan to be established
by Spinco pursuant to Section 2.2.
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1.26 In the Money Option means any ATI Option that, as of the Close of
the Distribution Date, is not an Out of the Money Option (as defined in Section
1.35).
1.27 IRS means the Internal Revenue Service.
1.28 Material Feature means any feature of a Plan that could reasonably
be expected to be of material importance to the sponsoring employer or the
participants and beneficiaries of the Plan, which could include, depending on
the type and purpose of the particular Plan, the class or classes of employees
eligible to participate in such Plan, the nature, type, form, source, and level
of benefits provided by the employer under such Plan and the amount or level of
contributions, if any, required to be made by participants (or their dependents
or beneficiaries) to or under such Plan.
1.29 Non-Employee Director, when immediately preceded by "ATI," means a
member of ATI's Board of Directors who is not an employee of ATI or an ATI
Entity. When immediately preceded by "Spinco," Non-Employee Director means a
member of Spinco's Board of Directors who is not an employee of ATI, an ATI
Entity, Spinco or a Spinco Entity.
1.30 Non-Employee Director Plans, when immediately preceded by "ATI,"
means the Allegheny Teledyne Incorporated 1996 Non-Employee Director Stock
Compensation Plan and the Allegheny Teledyne Incorporated Fee Continuation Plan
for Non-Employee Directors. When immediately preceded by "Spinco," Non-Employee
Director Plans means the plans and programs to be established by Spinco pursuant
to Section 2.2 that correspond to the ATI Non-Employee Director Plans.
1.31 Nonqualified Deferred Compensation Programs, when immediately
preceded by "ATI," means the Allegheny Teledyne Incorporated Executive Deferred
Compensation Plan, the Allegheny Teledyne Incorporated Supplemental Pension Plan
and the Teledyne, Inc. Pension Equalization Plan. When immediately preceded by
"Spinco," Deferral Plan means the Executive Deferred Compensation Plan to be
established by Spinco pursuant to Section 2.2.
1.32 Option, when immediately preceded by "ATI," means an option to
purchase ATI Common Stock and, when immediately preceded by "Spinco," Option
means an option to purchase Spinco Common Stock, in each case pursuant to an
Incentive Plan.
1.33 Out of the Money Option means any ATI Option that, as of the Close
of the Distribution Date, has an exercise price that is greater than the ATI
Stock Value.
1.34 PBGC means the Pension Benefit Guaranty Corporation.
1.35 Performance Award means any Award granted pursuant to the terms of
the Performance Share Program.
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1.36 Performance Share Program means the Allegheny Teledyne
Incorporated Performance Share Program adopted pursuant to Administrative Rules
under the ATI Incentive Plan.
1.37 Plan, when immediately preceded by "ATI" or "Spinco," means any
plan, policy, program, payroll practice, on-going arrangement, contract, trust,
insurance policy or other agreement or funding vehicle providing benefits to
employees, former employees or Non-Employee Directors of ATI or an ATI Entity,
or Spinco or a Spinco Entity, as applicable.
1.38 Ratio means the amount obtained by dividing the ATI Stock Value by
the Spinco Stock Value.
1.39 Reasonable Efforts means such acts or actions that, in the
reasonable good faith opinion of the party taking such acts or actions, are
calculated to achieve, or otherwise further, the applicable provisions to which
the term applies; provided, however, to the extent any costs, fees or other
expenditures (the "Expenses") occur as a result of a party's use of Reasonable
Efforts and such expenses are not expressly allocated under the terms of this
Agreement or any Ancillary Agreement, such Expenses shall be borne by the party
for whose benefit such Expenses are incurred and such party shall indemnify and
hold harmless the other party with respect to such Expenses.
1.40 SARP, when immediately preceded by "ATI," means the Allegheny
Teledyne Incorporated Stock Acquisition and Retention Program.
1.41 SARP Award means any Award granted pursuant to the terms of the
SARP.
1.42 Separation and Distribution Agreement is defined in the third
paragraph of the preamble of this Agreement.
1.43 Spinco Entity means any Person that is, at the relevant time, a
Subsidiary of Spinco or is otherwise controlled, directly or indirectly, by
Spinco.
1.44 Spinco 401(k) Plan means the 401(k) plan established by Spinco
effective no later than April 1, 2000 pursuant to Section 2.2.
1.45 Spinco Individual means any individual who, Immediately After the
Distribution Date is an active hourly or salaried employee of Spinco or a Spinco
Entity.
1.46 Spinco Stock Value means the average of the daily high and low
per-share trading prices of the Spinco Common Stock during each of the twenty
trading days Immediately After the Distribution Date.
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1.47 Stock Purchase Plan, when immediately preceded by "ATI," means the
Allegheny Teledyne Incorporated Employee Stock Purchase Plan. When immediately
preceded by "Spinco," Stock Purchase Plan means the employee stock purchase plan
to be established by Spinco pursuant to Section 2.2.
1.48 Teledyne means Teledyne, Inc., a Delaware corporation, or its
successors and assigns.
1.49 Teledyne 401(k) Plan means the Teledyne, Inc. 401(k) Plan.
ARTICLE II
GENERAL PRINCIPLES
2.1 ASSUMPTION OF LIABILITIES. Except as otherwise expressly provided
in Sections 3.1 or 6.6, Spinco hereby assumes and agrees to pay, perform,
fulfill and discharge, in accordance with their respective terms, all of the
following (regardless of when or where such Benefit Liabilities arose or arise
or were or are incurred): (i) all Benefit Liabilities to or relating to Spinco
Individuals, and their respective dependents and beneficiaries, in each case
relating to, arising out of or resulting from employment by ATI or an ATI Entity
before the Distribution Date (including Benefit Liabilities under ATI Plans and
Spinco Plans); (ii) all other Benefit Liabilities to or relating to Spinco
Individuals and other employees of Spinco or a Spinco Entity, and their
dependents and beneficiaries, to the extent relating to, arising out of or
resulting from future, present or former employment with Spinco or a Spinco
Entity (including Benefit Liabilities under ATI Plans and Spinco Plans); (iii)
all Benefit Liabilities relating to, arising out of or resulting from any other
actual or alleged employment relationship with Spinco or a Spinco Entity; (iv)
all Benefit Liabilities relating to, arising out of or resulting from the
imposition of withdrawal liability under Subtitle E of Title IV of ERISA as a
result of a complete or partial withdrawal of any ATI Entity from a
"multiemployer plan" within the meaning of ERISA Section 4021 which occurs
solely as a result of the Separation or the Distribution; and (v) all other
Benefit Liabilities relating to, arising out of or resulting from obligations,
liabilities and responsibilities expressly assumed or retained by Spinco, a
Spinco Entity, or a Spinco Plan pursuant to this Agreement. Notwithstanding the
generality of the foregoing, Spinco does not assume or agree to pay, perform,
fulfill or discharge any Benefit Liabilities relating to, arising out of or
resulting from the Teledyne Savings and Retirement Supplement Plan.
2.2 ESTABLISHMENT OF SPINCO PLANS. Effective prior to or within a
reasonable time after the Distribution Date, Spinco shall adopt, or cause to be
adopted, the amended Teledyne 401(k) Plan for the period between the
Distribution Date and April 1, 2000, the Spinco Stock Purchase Plan, the Spinco
Health and Welfare Plans, and the Spinco Executive Benefit Plans for the benefit
of the Spinco Individuals and other current and future employees of Spinco and
the Spinco Entities; provided, however, that Spinco may, in its sole discretion,
elect not to adopt or establish the Plan or Plans listed in Schedule 2.2(a).
Subject to the provisions of
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Section 4.1 regarding the Spinco 401(k) Plan, or as otherwise may be set forth
in Schedule 2.2(b), the foregoing Spinco Plans shall be substantially identical
in all Material Features to the corresponding ATI Plans as in effect as of the
Close of the Distribution Date. Effective prior to or within a reasonable time
after the Distribution Date, Spinco shall adopt, or cause to be adopted, the
Spinco Non-Employee Director Plans, for the benefit of Spinco Non-Employee
Directors. The Spinco Non-Employee Director Plans shall be substantially
similar in all Material Features to the corresponding ATI Non-Employee
Director Plans as in effect on the Distribution Date. No later than April 1,
2000, Spinco shall adopt the Spinco 401(k) Plan and its related trust, which
Spinco 401(k) Plan shall provide for employer contributions, independent of
employee contributions and expressed as a rate of participant compensation,
determined appropriate by Spinco in its sole discretion in light of Spinco's
choice not to sponsor a defined benefit plan.
2.3 TERMS OF PARTICIPATION BY SPINCO INDIVIDUALS IN SPINCO PLANS. The
Spinco Plans shall be, with respect to Spinco Individuals, in all respects the
successors in interest to, and shall not provide benefits that duplicate
benefits provided by, the corresponding ATI Plans. ATI and Spinco shall agree on
methods and procedures, including amending the respective Plan documents and/or
requesting approvals or consents of Spinco Individuals where the parties deem
appropriate, to prevent Spinco Individuals from receiving duplicative benefits
from the ATI Plans and the Spinco Plans. With respect to Spinco Individuals,
each Spinco Plan shall provide that all service, all compensation and all other
benefit-affecting determinations that, as of the Close of the Distribution Date,
were recognized under the corresponding ATI Plan shall, as of Immediately After
the Distribution Date, receive full recognition, credit, and validity and be
taken into account under such Spinco Plan to the same extent as if such items
occurred under such Spinco Plan, except to the extent that duplication of
benefits would result. The provisions of this Agreement for the transfer of
assets from certain trusts relating to ATI Plans (including Foreign Plans) to
the corresponding trusts relating to Spinco Plans (including Foreign Plans) are
based upon the understanding of the parties that each such Spinco Plan will
assume all Benefit Liabilities of the corresponding ATI Plan to or relating to
Spinco Individuals, as provided for herein. If any such Benefit Liabilities are
not effectively assumed by the appropriate Spinco Plan, then the amount of
assets transferred to the trust relating to such Spinco Plan from the trust
relating to the corresponding ATI Plan shall be recomputed as set forth below,
but taking into account the retention of such Benefit Liabilities by such ATI
Plan, and assets shall be transferred by the trust relating to such Spinco Plan
to the trust relating to such ATI Plan so as to place each such trust in the
position it would have been in, had the initial asset transfer been made in
accordance with such recomputed amount of assets.
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ARTICLE III
DEFINED BENEFIT PLANS
3.1 FREEZING OF PENSION PLAN BENEFITS. Effective upon the applicable of
the dates under Section 3.2, the accrued benefits with respect to Spinco
Individuals who, as of the Distribution Date, were participants under the ATI
Pension Plan shall be frozen and such Individuals shall not accrue any
additional benefits from and after the Distribution Date under the ATI Pension
Plan. The assets and Benefit Liabilities with respect to such Individuals,
determined as of the Distribution Date, shall be retained by the ATI Pension
Plan and its related trust and paid therefrom when due under the terms of the
ATI Pension Plan.
3.2 CREDITING SERVICE UNDER ATI'S PENSION PLAN.
(a) VESTING. Spinco Individuals who, as of the Distribution Date, were
participants in the ATI Pension Plan will continue to receive service credit for
vesting and retirement benefit eligibility purposes under the ATI Pension Plan
for service actually rendered to Spinco during the period commencing on the
Distribution Date and ending April 1, 2000.
(b) BENEFIT ACCRUAL. Spinco Individuals who, as of the Distribution
Date, were participants in the ATI Pension Plan will continue to receive service
credit for benefit accrual purposes under the ATI Pension Plan for service
actually rendered to Spinco during the period commencing on the Distribution
Date and ending April 2, 2000. Benefits accrued with respect to service credited
pursuant to this Section 3.2 shall be paid by the ATI Pension Plan at the same
times and under the same terms and conditions as applicable to benefits accrued
under the ATI Pension Plan.
(c) DISTRIBUTION OF BENEFITS FROM ATI PENSION PLAN TO SPINCO
INDIVIDUALS. For purposes of the ATI Pension Plan, the date which is the earlier
of the applicable of (i) a Spinco's Individual's actual separation from service
with Spinco or (ii) April 1, 2000 shall be for each Spinco Individual a
separation from service with the employer and Spinco Individuals who are
eligible to commence receipt of benefits under the ATI Pension Plan may, in
their respective discretion, apply at any time after the applicable date
described above to commence benefits to the extent then payable and subject
to the terms and conditions of the ATI Pension Plan. The Distribution Date
does not, however, constitute and shall not be treated under the ATI Pension
Plan as a sale or otherwise as an event permitting Spinco Individuals to elect
to receive a lump sum form of distribution under the ATI Pension Plan.
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ARTICLE IV
DEFINED CONTRIBUTION PLANS
4.1 401(k) PLAN.
(a) ADOPTION BY SPINCO OF TELEDYNE 401(k) PLAN AMENDED TO BE A MULTIPLE
EMPLOYER PLAN. On or before the Distribution Date, the Teledyne 401(k) Plan will
be amended by Teledyne to be and become a multiple employer plan under which
Spinco may elect to be a contributing sponsor and to provide participation to
Spinco Individuals under the terms and conditions set forth in the Teledyne
401(k) Plan for a period ending on the earlier of (i) adoption by Spinco of the
Spinco 401(k) Plan or (ii) April 1, 2000. The right to amend the Teledyne 401(k)
Plan in any respect shall be exclusively within the power of Teledyne at all
relevant times. As amended, the Teledyne 401(k) Plan shall provide that (A)
Spinco Individuals shall not be permitted to direct investments after the
Distribution Date in ATI Common Stock or in the common stock of Spinco or any
other corporation spun off by ATI, (B) that each Spinco Individual shall have
the right to direct the administrator of the Teledyne 401(k) Plan to liquidate
the interests of Spinco Individuals in the common stock of ATI ("ATI Common
Stock"), Spinco Common Stock or the common stock of any other previously related
corporation and direct the method of reinvestment of the proceeds of such sale
from among the options then available under the Teledyne 401(k) Plan and (C) if
ATI Common Stock and/or common stock of any previously related corporation other
than Spinco is held in accounts of Spinco Individuals in the Teledyne 401(k)
Plan as of April 1, 2000, the interests of Spinco Individuals shall be
liquidated by the Plan administrator and the proceeds reinvested in Spinco
Common Stock.
(b) ESTABLISHMENT OF SPINCO 401(k) PLAN AND TRUST. The Spinco 401(k)
Plan, established by Spinco pursuant to Section 2.2 no later than April 1, 2000,
(i) shall be a qualified defined contribution plan within the meaning of Code
Section 401(a), (ii) except as provided under Section 4.1(c), shall contain
provisions, terms and conditions substantially similar to the provisions, terms
and conditions of the Teledyne 401(k) Plan, and (iii) shall provide coverage
from and after the earlier of (i) its adoption by Spinco or (ii) April 1, 2000
with respect to Spinco Individuals who, as of the later of the dates above, were
participants in the Teledyne 401(k) Plan as amended as described in Section
4.1(a). The trust related to the Spinco 401(k) Plan, established by Spinco
pursuant to Section 2.2, shall be exempt from taxation under Code Section
501(a).
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(c) ASSUMPTION OF LIABILITIES AND TRANSFER OF ASSETS.
(i) Effective Immediately After the Distribution Date and
until the earlier of (i) the date of adoption by Spinco of the Spinco 401(k)
Plan or (ii) April 1, 2000, ATI shall administer or cause the administration of
the assets and Benefit Liabilities of the Teledyne 401(k) Plan with respect to
both Teledyne employees and Spinco Individuals. Spinco shall pay to ATI, within
thirty (30) days of presentment of an invoice therefor, an amount equal to the
actual cost incurred by ATI for administration of the assets and Benefit
Liabilities in the Teledyne 401(k) Plan relating to Spinco Individuals. Spinco
Individuals shall continue to accrue service credit under the Teledyne 401(k)
Plan for vesting and benefit eligibility purposes until the earlier of (i) the
date of adoption by Spinco of the Spinco 401(k) Plan or (ii) April 1, 2000.
Effective as of the earlier of (i) the adoption by Spinco of the Spinco 401(k)
Plan or (ii) April 1, 2000: (A) the Spinco 401(k) Plan shall assume and be
solely responsible for all Benefit Liabilities to or relating to Spinco
Individuals under the Spinco 401(k) Plan, and (B) ATI shall cause an amount
equal to the aggregate account balances of the Spinco Individuals participating
under the Teledyne 401(k) Plan, whether such amounts are vested or unvested
under the terms of the Teledyne 401(k) Plan, which are held by the related trust
as of the applicable of (i) the date of adoption by Spinco of the Spinco 401(k)
Plan or (ii) April 1, 2000 to be transferred to the Spinco 401(k) Plan, and its
related trust, and Spinco shall cause such transferred accounts to be accepted
by such plan and trust. In ATI's sole and absolute discretion, the amount so
transferred may be in cash or in kind or a combination thereof; provided,
however, that the following shall be transferred in kind: (A) shares of ATI
Common Stock, shares of Spinco Common Stock allocated to participants' accounts
as a result of the Distribution and shares of Teledyne Technologies Incorporated
Common Stock allocated to participants' accounts as a result of the spin-off of
ATI's aerospace and electronics businesses; and (B) all promissory notes
reflecting participant loans to Spinco Individuals under the Teledyne 401(k)
Plan outstanding as of the Distribution Date.
(ii) If any benefit with respect to a Spinco Individual under
the Teledyne 401(k) Plan is subject to a qualified domestic relations order at
the time of transfer, all documentation concerning such qualified domestic
relations order shall be assigned to the Spinco 401(k) Plan.
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ARTICLE V
HEALTH AND WELFARE PLANS
5.1 ASSUMPTION OF HEALTH AND WELFARE PLAN LIABILITIES.
(a) Immediately After the Distribution Date, all Benefit Liabilities to
or relating to Spinco Individuals under the ATI Health and Welfare Plans shall
cease to be Benefit Liabilities of the ATI Health and Welfare Plans and shall be
assumed by the corresponding Spinco Health and Welfare Plans.
(b) Notwithstanding Section 5.1(a), all treatments which have been
pre-certified for or are being provided to a Spinco Individual as of the Close
of the Distribution Date shall be provided without interruption under the
appropriate ATI Health and Welfare Plan until such treatment is concluded or
discontinued pursuant to applicable plan rules and limitations, but Spinco shall
continue to be responsible for all Benefit Liabilities relating to, arising out
of or resulting from such ongoing treatments as of the Close of the Distribution
Date.
5.2 VENDOR CONTRACTS.
(a) THIRD-PARTY ASO CONTRACTS.
(i) ATI shall use its Reasonable Efforts to amend each
administrative services only contract with a third-party administrator that
relates to any of the ATI Health and Welfare Plans (an "ASO Contract") in
existence as of the date of this Agreement to permit Spinco to participate in
the terms and conditions of such ASO Contract from Immediately After the
Distribution Date until December 31, 2000. ATI shall use its Reasonable Efforts
to cause all ASO Contracts into which ATI enters after the date of this
Agreement but before the Close of the Distribution Date to allow Spinco to
participate in the terms and conditions thereof effective Immediately After the
Distribution Date on the same basis as ATI.
(ii) ATI shall have the right to determine, and shall promptly
notify Spinco of, the manner in which Spinco's participation in the terms and
conditions of ASO Contracts as set forth above shall be effectuated. The
permissible ways in which Spinco's participation may be effectuated include
automatically making Spinco a party to the ASO Contracts or obligating the third
party to enter into a separate ASO Contract with Spinco providing for the same
terms and conditions as are contained in the ASO Contracts to which ATI is a
party (or such other arrangement as to which ATI and Spinco shall mutually
agree). Such terms and conditions shall include the financial and termination
provisions, performance standards, methodology, auditing policies, quality
measures, reporting requirements and target claims. Spinco hereby authorizes ATI
to act on its behalf to extend to Spinco the terms and conditions of the ASO
Contracts. Spinco shall fully cooperate with ATI in such efforts, and Spinco
shall not perform any act, including discussing any alternative arrangements
with any third party, that would prejudice ATI's efforts.
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(b) GROUP INSURANCE POLICIES.
(i) This Section 5.2(b) applies to group insurance policies
not subject to allocation or transfer pursuant to the foregoing provisions of
this Article V ("Group Insurance Policies").
(ii) ATI shall use its Reasonable Efforts to amend each Group
Insurance Policy in existence as of the date of this Agreement for the provision
or administration of benefits under the ATI Health and Welfare Plans to permit
Spinco to participate in the terms and conditions of such policy from
Immediately After the Distribution Date until December 31, 2000. ATI shall use
its Reasonable Efforts to cause all Group Insurance Policies into which ATI
enters or which ATI renews after the date of this Agreement but before the Close
of the Distribution Date to allow Spinco to participate in the terms and
conditions thereof effective Immediately After the Distribution Date on the same
basis as ATI.
(iii) Spinco's participation in the terms and conditions of
each such Group Insurance Policy shall be effectuated by obligating the
insurance company that issued such insurance policy to ATI to issue one or more
separate policies to Spinco. Such terms and conditions shall include the
financial and termination provisions, performance standards and target claims.
Spinco hereby unconditionally and irrevocably authorizes ATI to act on its
behalf to extend to Spinco the terms and conditions of such Group Insurance
Policies. Spinco shall fully cooperate with ATI in such efforts, and Spinco
shall not perform any act, including discussing any alternative arrangements
with third parties, that would prejudice ATI's efforts.
(c) HMO AGREEMENTS.
(i) Before the Distribution Date, ATI shall use its Reasonable
Efforts to amend all letter agreements with HMOs that provide medical services
under the ATI Medical Plans for 1999 ("HMO Agreements") in existence as of the
date of this Agreement to permit Spinco to participate in the terms and
conditions of such HMO Agreements, in each case, from Immediately After the
Distribution Date until December 31, 2000. ATI shall use its Reasonable Efforts
to cause all HMO Agreements into which ATI enters after the date of this
Agreement but before the Close of the Distribution Date to allow Spinco to
participate in the terms and conditions of such HMO Agreements from Immediately
After the Distribution Date until December 31, 2000 on the same basis as ATI.
(ii) ATI shall have the right to determine, and shall promptly
notify Spinco of, the manner in which Spinco's participation in the terms and
conditions of all HMO Agreements as set forth above shall be effectuated. The
permissible ways in which Spinco's participation may be effectuated include
automatically making Spinco a party to the HMO Agreements or obligating the HMOs
to enter into letter agreements with Spinco which are identical to the HMO
Agreements (or such other arrangements as to which ATI and Spinco shall mutually
agree). Such terms and conditions shall include the financial and termination
provisions of the HMO Agreements. Spinco hereby authorizes ATI to act on its
behalf to extend to Spinco the terms and conditions of the HMO Agreements.
Spinco shall fully cooperate with ATI in such efforts, and
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Spinco shall not perform any act, including discussing any alternative
arrangements with any third-party, that would prejudice ATI's efforts.
(iii) Notwithstanding anything in this Article V to the
contrary, Spinco shall have the sole discretion to determine which HMOs to offer
to the participants in the Spinco Health and Welfare Plans for 2001 and
subsequent years, and all HMO Agreements in which Spinco participates pursuant
to this Section 5.2(c) shall provide Spinco with the right to discontinue its
participation effective January 1, 2001.
5.3 PROCEDURES FOR AMENDMENTS TO PLANS, PLAN DESIGNS, ADMINISTRATIVE
PRACTICES, AND VENDOR CONTRACTS.
(a) AMENDMENTS TO PLAN DOCUMENTS. From Immediately After the
Distribution Date through December 31, 2000, Spinco shall not amend any Spinco
Health and Welfare Plan or Plans, and Spinco shall have no rights or privileges
with respect to such Plans other than those rights and privileges contained in
any policy, contract or other written arrangement governing such Plans. During
any period in which ATI is providing Interim Services with respect to any Spinco
Health and Welfare Plan pursuant to Section 7.1, ATI shall have the right to
amend any applicable Spinco Health and Welfare Plan; provided that, in ATI's
reasonable good faith opinion, such amendment will have no material adverse
impact on the Spinco Health and Welfare Plan or its participants or, to the
extent a material adverse impact would occur, such impact would affect both the
applicable Spinco Health and Welfare Plan and any corresponding ATI Health and
Welfare Plan and any costs incurred as a result of such amendment shall be borne
by ATI and Spinco in the same proportion that Spinco and ATI employees,
respectively, participate.
(b) CHANGES IN VENDOR CONTRACTS, GROUP INSURANCE POLICIES, PLAN DESIGN,
AND ADMINISTRATION PRACTICES AND PROCEDURES.
(i) From Immediately After the Distribution Date until
December 31, 2000, Spinco shall not materially modify, or take other action
which would have a material effect on, any of the following items (each such
modification, a "Change"): (A) the termination date, administration, or
operation of (1) an ASO contract between ATI or Spinco and a third-party
administrator, (2) a Group Insurance Policy issued to ATI or Spinco, or (3) an
HMO Agreement with ATI or Spinco, in each case, the material terms and
conditions of which contracts and policies are extended to Spinco or to which
Spinco becomes a party pursuant to Section 5.2; (B) the design of either an ATI
Health and Welfare Plan or a Spinco Health and Welfare Plan; or (C) the
financing, operation, administration or delivery of benefits under either an ATI
Health and Welfare Plan or a Spinco Health and Welfare Plan.
(ii) During any period in which ATI is providing Interim
Services with respect to any Spinco Health and Welfare Plan pursuant to Section
7.1, ATI shall be permitted to make any Change to such Spinco Plan; provided
that, in ATI's reasonable good faith opinion, such Change would affect both the
applicable Spinco Health and Welfare Plan and any corresponding ATI Health and
Welfare Plan and any costs incurred as a result of such amendment
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shall be borne proportionally by ATI and Spinco in the same proportion that
Spinco and ATI employees, respectively, participate.
(c) EMPLOYEE CONTRIBUTIONS. Except as otherwise expressly provided in
Sections 5.3(a) and 5.3(b), as of January 1, 2001, Spinco shall have the right,
in its sole and absolute discretion and without compliance with Sections 5.3(a)
and 5.3(b), to increase or decrease the amount of employee contributions under
their respective Health and Welfare Plans.
5.4 ATI SICKNESS AND ACCIDENT, LONG TERM DISABILITY AND PENSION
DISABILITY BENEFITS. ATI shall transfer to Spinco, effective Immediately After
the Distribution Date, responsibility for administering all claims incurred by
Spinco Individuals and other employees and former employees of Spinco and the
Spinco Entities before the Close of the Distribution Date that are administered
by ATI as of the Close of the Distribution Date. Spinco shall administer such
claims in the same manner, and using the same methods and procedures, as ATI
used in administering such claims. Spinco shall have sole discretionary
authority to make any necessary determinations with respect to such claims,
including entering into settlements with respect to such claims.
5.5 POST-RETIREMENT HEALTH AND LIFE INSURANCE BENEFITS. As soon as
practicable after the Distribution Date, Spinco shall provide ATI with a list of
all Spinco Individuals who are, to the best knowledge of Spinco, eligible to
receive retiree medical or dental coverage under the ATI Health and Welfare
Plans from and after the Distribution Date and/or post-retirement life insurance
coverage under the ATI Group Life Program, and the type of retiree medical or
dental coverage and the level of life insurance coverage for which they are
eligible, as applicable.
5.6 COBRA AND DIRECT PAY. Effective Immediately After the Distribution
Date, Spinco shall solely be responsible for administering compliance with the
health care continuation coverage requirements of COBRA and the Spinco Health
and Welfare plans, and, with respect to Spinco Individuals, the ATI Health and
Welfare Plans.
5.7 POST-DISTRIBUTION TRANSITIONAL ARRANGEMENTS.
(a) CONTINUANCE OF ELECTIONS, CO-PAYMENTS AND MAXIMUM BENEFITS.
(i) Spinco shall cause the Spinco Health and Welfare Plans to
recognize and maintain all coverage and contribution elections made by Spinco
Individuals under the ATI Health and Welfare Plans and apply such elections
under the Spinco Health and Welfare Plans for the remainder of the period or
periods for which such elections are by their terms applicable. The transfer or
other movement of employment from ATI to Spinco at any time before the Close of
the Distribution Date shall neither constitute nor be treated as a "status
change" under the ATI Health and Welfare Plans or the Spinco Health and Welfare
Plans.
(ii) Spinco shall cause the Spinco Health and Welfare Plans to
recognize and give credit for (A) all amounts applied to deductibles,
out-of-pocket maximums, and other
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applicable benefit coverage limits with respect to which such expenses have been
incurred by Spinco Individuals under the ATI Health and Welfare Plans for the
remainder of the year in which the Distribution occurs, and (B) all benefits
paid to Spinco Individuals under the ATI Health and Welfare Plans for purposes
of determining when such persons have reached their lifetime maximum benefits
under the Spinco Health and Welfare Plans.
(iii) Spinco shall recognize and maintain through December 31,
1999 all eligible populations covered by the ATI Health and Welfare Plans (as
defined in the applicable ATI Health and Welfare Plan documents), including
Class I and Class II dependents, term and temporary employees, alternate benefit
plan employees, and all categories of part-time employees (which are fully and
non-fully eligible for company contributions).
(iv) Spinco shall (A) provide coverage to Spinco Individuals
under the Spinco Group Life Program without the need to undergo a physical
examination or otherwise provide evidence of insurability, and (B) recognize and
maintain all irrevocable assignments and accelerated benefit option elections
made by Spinco Individuals under the ATI Group Life Program.
(b) OTHER POST-DISTRIBUTION TRANSITIONAL RULES.
(i) ATI HCRA PLAN. To the extent any Spinco Individual
contributed to an account under the ATI HCRA Plan during the calendar year that
includes the Distribution Date, effective as of the Close of the Distribution
Date, ATI shall transfer to the Spinco HCRA Plan the account balances of Spinco
Individuals for such calendar year under the ATI HCRA Plan, regardless of
whether the account balance is positive or negative.
(ii) ATI CHILD/ELDER CARE REIMBURSEMENT ACCOUNT PLAN. To the
extent any Spinco Individual contributed to the ATI CECRA Plan during the
calendar year that includes the Distribution Date, ATI shall transfer the
account balances of Spinco Individuals for such calendar year in the ATI CECRA
Plan to the Spinco CECRA Plan.
(iii) POST-RETIREMENT MEDICAL PLAN. For the period ending on
December 31st of the calendar year which is five calendar years after the
Distribution Date, Spinco shall comply with all cost maintenance period
requirements and benefit maintenance period requirements under Code Sections
401(h) or 420 that are applicable to post-retirement health benefits under the
Spinco Health Plans for any pension asset transfers pursuant to Code Section 420
by or on behalf of ATI for qualified current retiree health liabilities (as
defined under Code Section 420). With respect to any pension asset transfers
pursuant to Code Section 420, Spinco shall obtain ATI's prior written approval
before amending any Spinco Health Plan with respect to the provision of
post-retirement health benefits during the cost maintenance or benefit
maintenance periods to which the ATI Health Plans are subject pursuant to Code
Section 420 and no such amendment shall be effective in any respect until ATI's
prior written approval is obtained. No pension asset transfer pursuant to Code
Section 420 shall be made by Spinco after the date hereof and before the Close
of the Distribution Date unless Spinco and ATI so agree.
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(iv) HEALTH AND WELFARE PLANS SUBROGATION RECOVERY. After the
Close of the Distribution Date, ATI shall pay to Spinco any amounts ATI recovers
from time to time through subrogation or otherwise for claims incurred by or
reimbursed to any Spinco Individual. If Spinco recovers any amounts through
subrogation or otherwise for claims incurred by or reimbursed to employees and
former employees of ATI or an ATI Entity and their respective beneficiaries and
dependents (other than Spinco Individuals), Spinco shall pay such amounts to
ATI.
5.8 APPLICATION OF ARTICLE V TO SPINCO ENTITIES. Any reference in this
Article V to "Spinco" shall include a reference to a Spinco Entity when and to
the extent ATI or Spinco has caused the Spinco Entity to (a) become a party to a
vendor contract, group insurance contract, or HMO letter agreement associated
with a Spinco Health and Welfare Plan, (b) become a self-insured entity for the
purposes of one or more Spinco Health and Welfare Plans, (c) assume all or a
portion of the liabilities or administrative responsibilities for benefits which
arose before the Close of the Distribution Date under an ATI Health and Welfare
Plan and which were expressly assumed by Spinco pursuant to the terms of this
Agreement, or (d) take any other action, extend any coverage, assume any other
liability or fulfill any other responsibility that Spinco would otherwise be
required to take under the terms of this Article V, unless it is clear from the
context that the particular reference is not intended to include a Spinco
Entity. In all such instances in which a reference in this Article V to "Spinco"
includes a reference to a Spinco Entity, Spinco shall be responsible to ATI for
ensuring that the Spinco Entity complies with the applicable terms of this
Agreement and the Spinco Individuals allocated to such Spinco Entity shall have
the same rights and entitlements to benefits under the applicable Spinco Health
and Welfare Plans that the Spinco Individual would have had if he or she had
instead been allocated to Spinco. Further, each such Spinco Entity, unless
otherwise expressly provided under the terms of this Agreement or any Ancillary
Agreement, shall defend, indemnify and hold harmless ATI for any costs incurred
by ATI pursuant to the provisions of Article V on behalf of or related to such
Spinco Entity.
ARTICLE VI
EXECUTIVE BENEFITS AND NON-EMPLOYEE DIRECTOR BENEFITS
6.1 ASSUMPTION OF OBLIGATIONS. Except (i) for Benefit Liabilities
arising under the Teledyne Pension Equalization Plan and (ii) as otherwise
expressly provided in this Article VI, effective Immediately After the
Distribution Date, Spinco and the Spinco Entities shall assume and be solely
responsible for all Benefit Liabilities to or relating to Spinco Individuals
under all ATI Executive Benefit Plans.
6.2 CONSENTS AND NOTIFICATIONS. ATI and Spinco shall use their
Reasonable Efforts to obtain, or cause to be obtained, to the extent necessary,
the written consent of each Spinco Individual who is a party to a separate
agreement between the Individual and ATI and/or a participant in any ATI
Executive Benefit Plan, to the treatment of such individual agreement and/or
Executive Benefit Plan, as applicable, in accordance with this Article VI,
including the assumption by Spinco and the Spinco Entities, of sole
responsibility for, and the
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release of ATI and the ATI Entities from, all Benefit Liabilities thereunder;
provided, that no failure to seek or to obtain any such consent shall have any
effect upon the obligations of Spinco and the Spinco Entities with respect to
such Benefit Liabilities.
6.3 ATI 1999 BONUS PLAN. Subject to the provisions of Section
6.4(a)(ii)(B), Spinco shall be responsible for determining, with respect to all
Awards that would otherwise be payable under any bonus Plan or arrangement to
Spinco Individuals for the 1999 performance year, (a) the extent to which
established performance criteria (as interpreted by Spinco, in its sole
discretion, after taking into account the effects of the Distribution) have been
met and (b) the payment level for each Spinco Individual.
6.4 ATI INCENTIVE PLANS. ATI and Spinco shall use their Reasonable
Efforts to take all actions necessary or appropriate so that each outstanding
Award granted under any ATI Incentive Plan held by any Spinco Individual shall
be determined, converted or replaced, as the case may be, as set forth in this
Section 6.4 with an Award under the Spinco Incentive Plan.
(a) SPINCO INDIVIDUALS WHO ARE ACTIVE EMPLOYEES OF SPINCO.
(i) STOCK OPTIONS.
(A) In the Money Options. Spinco shall cause each In the Money
Option that is outstanding as of the Close of the Distribution Date and is held
by a Spinco Individual to be converted, effective Immediately After the
Distribution Date, to a Spinco Option (a "Converted Option"). Such Converted
Option shall provide for the option to purchase a number of shares of Spinco
Common Stock equal to the number of shares of ATI Common Stock subject to such
In the Money Option as of the Close of the Distribution Date, multiplied by the
Ratio, and then rounded up to the nearest whole share. The per-share exercise
price of such Converted Option shall equal the per-share exercise price of such
In the Money Option as of the Close of the Distribution Date divided by the
Ratio. Each such Converted Option shall otherwise have the same terms and
conditions as were applicable to the corresponding In the Money Option as of the
Close of the Distribution Date, except that references to ATI and its Affiliates
shall be amended to refer to Spinco and its Affiliates.
(B) Out of the Money Options. Effective prior to the Close of
the Distribution Date, each Out of the Money Option that is outstanding as of
the Close of the Distribution Date and is held by a Spinco Individual shall be
canceled. After the Distribution Date, it is contemplated that a new Spinco
Option shall be granted (a "New Spinco Option") to each Spinco Individual who
has a canceled Out of the Money Option, as determined by Spinco's Board of
Directors or an applicable Committee thereof. Any Out of the Money Option that
is not canceled as described in this Section 6.4(a)(i)(B) shall be treated as if
it were an In the Money Option under Section 6.4(a)(i)(A).
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(ii) PERFORMANCE AWARDS.
(A) The current performance period under the ATI Performance
Share Program is the three-year period commencing on January 1, 1998. Either
prior to or within a reasonable time after the Distribution Date, in accordance
with the provisions of Section 6.4(a)(ii)(B), the applicable ATI Performance
Award under the ATI Performance Share Program shall be determined by ATI with
respect to each Spinco Individual for the period from January 1, 1998 through
the Distribution Date. Effective Immediately After the Distribution Date, Spinco
and the Spinco Entities shall assume and be solely responsible for all Benefit
Liabilities to or relating to Spinco Individuals with respect to the
administration and distribution of Performance Awards to such Spinco
Individuals.
(B) Notwithstanding the provisions of Section 6.3, the ATI
Personnel and Compensation Committee or the Stock Incentive Award Subcommittee,
as the case may be, shall determine, in its sole and absolute discretion, with
respect to each Spinco Individual, the extent to which, as of the Distribution
Date, such Individual has achieved target performance levels established under
the ATI Performance Share Program and the appropriate Performance Award for such
Individual based upon such performance. The Performance Award so determined
shall be pro-rated by multiplying the Performance Award determined under the
preceding sentence by a fraction, the numerator of which shall be equal to the
number of months from and including January 1, 1998 to the month in which the
Distribution Date occurs and the denominator of which shall be 36. The
Performance Award as determined hereunder shall be distributed by Spinco and the
Spinco Entities to the applicable Spinco Individual as provided under the terms
of the Performance Share Program; provided, however, that any ATI Common Stock
allocated or otherwise awarded to a Spinco Individual as part of a Performance
Award under the provisions of this Section 6.4(a)(ii) shall, prior to any
distribution to such Individual and, in any event, no later than Immediately
After the Distribution Date, be converted into Spinco Common Stock by
multiplying the number of shares of ATI Common Stock subject to such Performance
Award by an appropriate ratio, as determined by ATI's Board of Directors or an
applicable Committee thereof and then rounding up the product to the nearest
whole share.
(iii) SARP. As of the Distribution Date, all shares of ATI
Common Stock issued and outstanding held by a Spinco Individual under the ATI
SARP as Designated Stock or Purchased Stock (as those terms are defined in the
ATI SARP) shall continue to be so held, and the shares of Spinco Common Stock
received by Spinco Individuals in respect of their Purchased Stock and
Designated Stock pursuant to the distribution terms of Article III of the
Separation and Distribution Agreement and the shares of Teledyne Technologies
Incorporated Common Stock received by Spinco Individuals in respect of their
Purchased Stock and Designated Stock as a result of the spin-off of Teledyne
Technologies Incorporated by ATI to ATI's stockholders shall also be considered
Designated Stock or Purchased Stock, as the case may be, subject to the terms of
the ATI SARP. Effective Immediately After the Distribution Date, Spinco shall
assume all Benefit Liabilities to or relating to Spinco Individuals under the
ATI SARP relating to the Restricted Stock, but ATI shall retain all promissory
notes payable by participants into the ATI SARP, including Spinco Individuals,
to the order of ATI, and the collateral with respect to such notes shall include
all shares of ATI Common Stock that were pledged as collateral for purposes of
the ATI SARP immediately prior to the Distribution Date as well as the shares of
Spinco Common Stock and Teledyne Technologies Incorporated Common Stock issued
in respect of such shares of ATI Common
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Stock held as collateral. As of the Distribution Date, pursuant to the terms of
the ATI SARP, in lieu of and in substitution for all shares of ATI Common Stock
held by Spinco Individuals under the ATI SARP which are Restricted Stock (as
that term is defined in the ATI SARP), such Spinco Individuals shall, without
any further action on their part, hold a number of shares of Spinco Common Stock
determined by multiplying the number of shares of ATI Common Stock that are
Restricted Stock by an appropriate ratio, as determined by ATI's Board of
Directors or an applicable Committee thereof then rounding the product up to the
nearest whole share, and such shares of Spinco Common Stock shall be subject to
the same restrictions as the shares of ATI Common Stock prior to the conversion.
(b) SPINCO INDIVIDUALS WHO ARE NOT ACTIVE EMPLOYEES OF SPINCO. Each
outstanding Award that is held by an individual who, as of the Close of the
Distribution Date, would otherwise be a Spinco Individual but is not an active
employee of or on leave of absence from Spinco or a Spinco Entity shall remain
outstanding Immediately After the Distribution Date in accordance with its terms
as applicable as of the Close of the Distribution Date, subject to such
adjustments as may be applicable to outstanding Awards held by individuals who
remain active employees of or on leave of absence from ATI or an ATI Entity
after the Distribution Date.
6.5 ATI NONQUALIFIED DEFERRED COMPENSATION PROGRAMS.
(a) ASSUMPTION OF LIABILITIES AND TRANSFER OF ASSETS. Effective
Immediately After the Distribution Date, Spinco shall assume all Benefit
Liabilities to or relating to Spinco Individuals under the ATI Nonqualified
Deferred Compensation Programs. Effective Immediately After the Distribution
Date, to the extent ATI has acquired Corporate-Owned Life Insurance Policies as
a source of payment of liabilities which are or may be payable under the
Allegheny Teledyne Incorporated Executive Deferred Compensation Plan with
respect to Spinco Individuals, ATI shall, in ATI's sole discretion, (i) transfer
an amount in cash equal to the cash surrender value of such policies or (ii)
cause the transfer, either by assignment or any other reasonable means, to
Spinco of Corporate-Owned Life Insurance Policies on the lives of such Spinco
Individuals and such other employees or former employees of ATI or its
subsidiaries as ATI may, in its sole discretion select, or any portion thereof,
having in the aggregate a cash surrender value equal to the amount of any
Benefit Liabilities for Spinco Individuals under the Allegheny Teledyne
Incorporated Executive Deferred Compensation Plan.
(b) CORPORATE-OWNED LIFE INSURANCE. ATI and Spinco shall take all
actions necessary to replicate the manner in which ATI has heretofore held
Corporate-Owned Life Insurance Policies, and executing or accepting delivery of
any assignments reasonably requested by either party or any insurance company
insuring one or more lives under the Corporate-Owned Life Insurance Policies, as
may be necessary or appropriate in order to assign those Policies insuring
Spinco Individuals to Spinco, effective Immediately After the Distribution Date.
If a Corporate-Owned Life Insurance Policy is so assigned to Spinco, Spinco
shall assume and be solely responsible for all Benefit Liabilities, and shall be
entitled to all benefits, thereunder, effective as of the earlier of (i) the
Close of the Distribution Date and (ii) the date of such assignment. ATI and
Spinco shall continue, liquidate and/or administer such Corporate-Owned
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Life Insurance Policies on terms and conditions agreed to by ATI and Spinco. ATI
and Spinco shall share all information that may be necessary to identify the
individuals insured by the Corporate-Owned Life Insurance Policies owned by ATI
and/or Spinco and to determine when and whether such individuals are deceased.
6.6 NON-EMPLOYEE DIRECTOR BENEFITS. The parties intend that all Spinco
Non-Employee Directors who were ATI Non-Employee Directors prior to the
Distribution Date may continue to serve as ATI Non-Employee Directors. In
furtherance of such intention, ATI shall retain all Benefit Liabilities with
respect to the services of its Non-Employee Directors under the ATI Non-Employee
Director Plans accrued as of the Distribution Date. Spinco assumes no Benefit
Liabilities under the ATI Non-Employee Director Plans.
6.7 CONFIDENTIALITY AND PROPRIETARY INFORMATION. No provision of this
Agreement shall be deemed to release any individual for a violation of any
agreement or policy pertaining to confidential or proprietary information of ATI
or any of its Affiliates, or otherwise relieve any individual of his or her
obligations under any such agreement or policy.
ARTICLE VII
GENERAL AND ADMINISTRATIVE
7.1 INTERIM SERVICES AGREEMENT. Effective on or before the Distribution
Date, ATI and Spinco shall enter into an agreement relating to the coordination
of and payment for transition services to be provided by ATI regarding the
establishment and administration of the Spinco Plans (the "Interim Services
Agreement"). The provisions of the Interim Services Agreement shall be
incorporated by reference in this Agreement and shall become a part of this
Agreement.
7.2 PAYMENT OF LIABILITIES, PLAN EXPENSES AND RELATED MATTERS.
(a) ACTUARIAL AND ACCOUNTING METHODOLOGIES AND ASSUMPTIONS. For
purposes of this Agreement, unless specifically indicated otherwise: (i) all
actuarial methodologies and assumptions used for a particular Plan shall (except
to the extent otherwise determined by ATI and Spinco to be reasonable or
necessary) be substantially the same as those used in the actuarial valuation of
that Plan used to determine minimum funding requirements under ERISA Section 302
and Code Section 412(c) for 1999, or, if such Plan is not subject to such
minimum funding requirements, the assumptions used to prepare ATI's audited
financial statements for 1999, as the case may be; and (ii) the value of plan
assets shall be the value established by ATI for purposes of audited financial
statements of the relevant plan or trust for the period ending on the date as of
which the valuation is to be made. Except as otherwise contemplated by this
Agreement or as required by law, all determinations as to the amount or
valuation of any assets of or relating to any ATI Plan (whether or not such
assets are being transferred to a Spinco Plan) shall be made by ATI in its sole
and absolute discretion and such determination shall be final and binding on all
parties.
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(b) PAYMENT OF LIABILITIES; DETERMINATION OF EMPLOYEE STATUS. Spinco
shall pay directly, or reimburse ATI promptly for, all Benefit Liabilities
assumed by it pursuant to this Agreement, including all compensation payable to
Spinco Individuals for services rendered while in the employ of ATI or an ATI
Entity before becoming a Spinco Individual (to the extent not charged for
pursuant to Section 7.1 or another Ancillary Agreement). To the extent the
amount of such Benefit Liabilities is not yet determinable because the status of
individuals as Spinco Individuals is not yet determined, except as otherwise
specified herein or in another Ancillary Agreement with respect to particular
Benefit Liabilities, Spinco shall make such payments or reimbursements based
upon ATI's reasonable estimates of the amounts thereof, and when such status is
determined, Spinco shall make additional reimbursements or payments, or ATI
shall reimburse Spinco, to the extent necessary to reflect the actual amount of
such Benefit Liabilities. In determining the number of individuals in any
particular group of employees described in this Agreement (such as "Spinco
Individuals"), no individual shall be counted twice. Determinations of what
entity employs or employed a particular individual shall be made by reference to
the applicable legal entity and/or other appropriate accounting code, to the
extent possible.
7.3 SHARING OF PARTICIPANT INFORMATION. ATI and Spinco shall share, ATI
shall cause each applicable ATI Entity to share, and Spinco shall cause each
applicable Spinco Entity to share, with each other and their respective agents
and vendors (without obtaining releases) all participant information necessary
for the efficient and accurate administration of each of the ATI Plans and the
Spinco Plans. ATI and Spinco and their respective authorized agents shall,
subject to applicable laws on confidentiality, be given reasonable and timely
access to, and may make copies of, all information relating to the subjects of
this Agreement in the custody of the other party, to the extent necessary for
such administration. Until December 31, 2000, all participant information shall
be provided in a manner and medium that is compatible with the data processing
systems of ATI as in effect on the Close of the Distribution Date, unless
otherwise agreed to by ATI and Spinco.
7.4 REPORTING AND DISCLOSURE AND COMMUNICATIONS TO PARTICIPANTS. Spinco
shall take, and shall cause each other applicable Spinco Entity to take, all
actions necessary or appropriate to facilitate the distribution of all
applicable ATI Plan-related communications and materials to Spinco Individuals
and their beneficiaries, including summary plan descriptions and related
summaries of material modification, summary annual reports, investment
information, prospectuses, notices and enrollment material related to the Spinco
Plans. Spinco shall pay ATI the cost relating to the copies of all such
documents provided to Spinco, except to the extent such costs are charged
pursuant to Section 7.1 or pursuant to an Ancillary Agreement. Spinco shall
assist, and Spinco shall cause each other applicable Spinco Entity to assist,
ATI in complying with all reporting and disclosure requirements of ERISA,
including the preparation of Form 5500 annual reports for the ATI Plans, where
applicable.
7.5 NON-TERMINATION OF EMPLOYMENT; NO THIRD-PARTY BENEFICIARIES. No
provision of this Agreement or the Separation and Distribution Agreement shall
be construed to create any right, or accelerate entitlement, to any compensation
or benefit whatsoever on the part of any Spinco Individual or other future,
present or former
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employee of ATI, an ATI Entity, Spinco, or a Spinco Entity under any ATI Plan or
Spinco Plan or otherwise. Without limiting the generality of the foregoing: (i)
the Distribution shall not cause any employee to be deemed to have incurred a
termination of employment which entitles such individual to the commencement of
benefits under any of the ATI Plans, any of the Spinco Plans, or any individual
agreements; and (ii) except as expressly provided in this Agreement, nothing in
this Agreement shall preclude Spinco, at any time after the Close of the
Distribution Date, from amending, merging, modifying, terminating, eliminating,
reducing, or otherwise altering in any respect any Spinco Plan, any benefit
under any Plan or any trust, insurance policy or funding vehicle related to any
Spinco Plan unless such change could or will increase the obligations of ATI or
any ATI Entity under any Plan or agreement.
7.6 BENEFICIARY DESIGNATIONS. All beneficiary designations made by
Spinco Individuals for ATI Plans shall be transferred to and be in full force
and effect under the corresponding Spinco Plans until such beneficiary
designations are replaced or revoked by the Spinco Individual who made the
beneficiary designation.
7.7 REQUESTS FOR IRS RULINGS AND DOL OPINIONS. Spinco shall cooperate
fully with ATI on any issue relating to the transactions contemplated by this
Agreement for which ATI elects to seek a determination letter or private letter
ruling from the IRS or an advisory opinion from the DOL. ATI shall cooperate
fully with Spinco with respect to any request for a determination letter or
private letter ruling from the IRS or advisory opinion from the DOL with respect
to any of the Spinco Plans relating to the transactions contemplated by this
Agreement.
7.8 FIDUCIARY MATTERS. ATI and Spinco each acknowledges that actions
required to be taken pursuant to this Agreement may be subject to fiduciary
duties or standards of conduct under ERISA or other applicable law, and no party
shall be deemed to be in violation of this Agreement if it fails to comply with
any provisions hereof based upon its good faith determination that to do so
would violate such a fiduciary duty or standard.
7.9 COLLECTIVE BARGAINING. To the extent any provision of this
Agreement is contrary to the provisions of any collective bargaining agreement
to which ATI or any Affiliate of ATI is a party, the terms of such collective
bargaining agreement shall prevail. Should any provisions of this Agreement be
deemed to relate to a topic determined by an appropriate authority to be a
mandatory subject of collective bargaining, ATI or Spinco may be obligated to
bargain with the union representing affected employees concerning those
subjects. Neither party will agree to a modification of any collective
bargaining agreement without the consent of the other.
7.10 CONSENT OF THIRD PARTIES. If any provision of this Agreement is
dependent on the consent of any third party (such as a vendor or a union) and
such consent is withheld, ATI and Spinco shall use their Reasonable Efforts to
implement the applicable provisions of this Agreement to the full extent
practicable. If any provision of this Agreement
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cannot be implemented due to the failure of such third party to consent, ATI and
Spinco shall negotiate in good faith to implement the provision in a mutually
satisfactory manner.
ARTICLE VIII
MISCELLANEOUS
8.1 FOREIGN PLANS. To the extent that Spinco has or assumes any
responsibility for sponsorship, maintenance or administration of any Foreign
Plan, ATI shall have no responsibility or liability with respect to such Plan
and Spinco shall indemnify and hold harmless ATI from any liability under such
Plan.
8.2 EFFECT IF DISTRIBUTION DOES NOT OCCUR. If the Distribution does not
occur, then all actions and events that are, under this Agreement, to be taken
or occur effective as of the Close of the Distribution Date, Immediately After
the Distribution Date, or otherwise in connection with the Distribution, shall
not be taken or occur except to the extent specifically agreed by Spinco and
ATI.
8.3 RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be deemed
or construed by the parties or any third party as creating the relationship of
principal and agent, partnership or joint venture between the parties, it being
understood and agreed that no provision contained herein, and no act of the
parties, shall be deemed to create any relationship between the parties other
than the relationship set forth herein.
8.4 AFFILIATES. Each of ATI and Spinco shall cause to be performed, and
hereby guarantees the performance of, all actions, agreements and obligations
set forth in this Agreement to be performed by an ATI Entity or a Spinco Entity,
respectively.
8.5 GOVERNING LAW. To the extent not preempted by applicable federal
law, this Agreement shall be governed by, construed and interpreted in
accordance with the laws of the Commonwealth of Pennsylvania, without regard to
its principles of conflict of law, as to all matters, including matters of
validity, construction, effect, performance and remedies.
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IN WITNESS WHEREOF, the parties have caused this Employee Benefits
Agreement to be duly executed as of the day and year first above written.
ALLEGHENY TELEDYNE INCORPORATED
By:____________________________
Title:_________________________
WATER PIK TECHNOLOGIES, INC.
By:____________________________
Title:_________________________
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