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Exhibit 10.1
TAX SHARING AND INDEMNIFICATION AGREEMENT
THIS TAX SHARING AND INDEMNIFICATION AGREEMENT (the "Agreement"), dated
as of ___________1999, is made by and between Allegheny Teledyne Incorporated, a
Delaware corporation ("ATI") on behalf of itself and each member of the ATI
Consolidated Group, and Water Pik Technologies, Inc., a Delaware corporation
("SPINCO"), on behalf of itself and each member of the SPINCO Group and their
respective successors.
Witnesseth:
WHEREAS, ATI has determined to effect the Distribution pursuant to the
Distribution Agreement;
WHEREAS, the IRS has issued the IRS Ruling which states the tax
treatment of the Distribution and the Other Transactions;
WHEREAS, the parties are entering into this Agreement to ensure the
continuing effectiveness of the IRS Ruling, to provide for certain indemnities,
and to provide for various administrative matters relating to Taxes, including:
1. the preparation and filing of Tax Returns along with the payment of
Taxes shown due and payable thereon;
2. the retention and maintenance of relevant records necessary to
prepare and file appropriate Tax Returns, as well as providing for appropriate
access to those records by the parties to this Agreement;
3. the conduct of audits, examinations, and proceedings by appropriate
government entities which could result in a redetermination of Taxes; and
4. the cooperation of all parties with one another in order to fulfill
their duties and responsibilities under this Agreement and under the Code and
other applicable law; and
WHEREAS, it is the intent of the parties that SPINCO or the appropriate
member of the SPINCO Group shall economically bear the burden of all Taxes
otherwise imposed upon or attributable to the Operations of members of the
SPINCO Group occurring after the Effective Date, and that SPINCO will be
responsible for and reimburse ATI for any Incremental Tax Assessment.
NOW, THEREFORE, in consideration of the mutual promises, covenants, and
conditions contained in this Agreement, and intending to be legally bound
hereby, the parties hereto agree as follows:
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ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. For the purposes of this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural of the terms involved):
ADJUSTMENT means any final change in the Tax Liability of a taxpayer.
AFFILIATE means, when used with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries, controls
or is controlled by or is under common control with such Person.
AFFILIATED PERSON has the meaning ascribed to such term in the
Investment Company Act of 1940, as amended, and the rules and regulations
promulgated thereunder.
AGREEMENT means this Tax Sharing and Indemnification Agreement.
ASSOCIATES has the meaning ascribed to such term in the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder.
ATI CONSOLIDATED RETURN means any Tax Return that includes any member
of the ATI Consolidated Group.
ATI CONSOLIDATED GROUP means, as of any relevant date, ATI and its
Subsidiaries, determined as of such date.
BENEFICIAL OWNERSHIP has the meaning ascribed to such term in the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
BUSINESS TAXES means any Tax (except for federal income, state income
or franchise, and local and foreign gross or net income) including interest,
penalties, and other assessments thereon that is attributable to Operations of
SPINCO or members of the SPINCO Group for a tax period ending prior to or
including the Effective Date.
BUSINESS TAX RETURNS means all reports, estimates, declarations of
estimated tax, information statements and returns relating to or required to be
filed in connection with any Business Taxes, including information returns or
reports with respect to backup withholding and other payments to third parties.
CODE means the Internal Revenue Code of 1986, as amended, and the
Treasury regulations promulgated thereunder.
COMBINED RETURN shall mean all state income tax returns which ATI files
on a combined or unitary basis with respect to some or all of its Subsidiaries.
DISQUALIFIED SPINCO STOCK is defined at Section 5.2.
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DISTRIBUTION means the distribution of SPINCO common stock to the
stockholders of ATI pursuant to the Distribution Agreement.
DISTRIBUTION AGREEMENT means the Separation and Distribution Agreement
among ATI, SPINCO and certain other parties dated as of __________________1999.
EFFECTIVE DATE means the date on which the Distribution occurs.
EFFECTIVE TIME means 5 p.m., Eastern Standard Time or Eastern Daylight
Time (whichever shall then be in effect), on the Effective Date.
FINAL DETERMINATION means the final resolution of any Tax matter. A
Final Determination shall result from the first to occur of:
1. the expiration of 30 days after the IRS's acceptance of a
Waiver of Restrictions on Assessment and Collection of Deficiency in
Tax and Acceptance of Overassessment on Form 870 or 870-AD (or any
successor comparable form) (the "Waiver"), except as to reserved
matters specified therein, or the expiration of 30 days after
acceptance by any other taxing authority of a comparable agreement or
form under the laws of any other jurisdiction, including state, local,
and foreign jurisdictions; unless, within such period, the taxpayer
gives notice to the other party to this Agreement of the taxpayer's
intention to attempt to recover all or part of any amount paid pursuant
to the Waiver by the filing of a timely claim for refund;
2. a decision, judgment, decree, or other order by a court of
competent jurisdiction that is not subject to further judicial review
(by appeal or otherwise) and has become final;
3. the execution of a closing agreement under Code Section
7121, or the acceptance by the IRS of an offer in compromise under Code
Section 7122, or comparable agreements under the laws of any other
jurisdiction, including state, local, and foreign jurisdictions, except
as to reserved matters specified therein;
4. the expiration of the time for filing a claim for refund or
for instituting suit in respect of a claim for refund that was
disallowed in whole or in part by the IRS or any other taxing
authority;
5. the expiration of the applicable statute of limitations; or
6. an agreement by the parties hereto that a Final
Determination has been made.
GROSS ASSET VALUE means, when used with respect to a specified Person,
the fair market value of such Person's assets unencumbered by any liabilities.
GROUP has the meaning ascribed to such term in the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated thereunder.
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INCREMENTAL TAX ASSESSMENT means any increase in Business Taxes imposed
upon ATI after the date hereof.
INDEMNIFIED LIABILITY is defined at Section 7.1.
INDEMNIFIED PARTY is defined at Section 6.1.
INDEMNIFYING PARTIES is defined at Section 6.1.
INTERNAL DISTRIBUTIONS means the distributions of SPINCO common stock
by Teledyne Industries, Inc. to TDY Holdings, LLC, a Delaware limited liability
company wholly owned by ATI, and by TDY Holdings, LLC to ATI.
IRS means the U.S. Internal Revenue Service.
IRS INTEREST RATE means the rate of interest imposed from time to time
on underpayments of income tax pursuant to Code Section 6621(a)(2).
IRS RULING means the private letter ruling (together with any
supplements) issued by the IRS in respect of the Ruling Request.
OPERATIONS means any business activity of any SPINCO business unit, as
described in the Ruling Request.
OTHER TRANSACTIONS means the Internal Distributions and all other
transactions related to the Distribution and described in the Ruling Request,
including all modifications to such transactions reflected in supplements to the
Ruling Request.
PERSON means any natural person, corporation, limited liability
company, business trust, joint venture, association, company, partnership or
government, or any agency or political subdivision thereof.
POST-DISTRIBUTION PERIOD means any taxable period that begins after the
Effective Date.
PRE-DISTRIBUTION PERIOD means any taxable period that ends on or before
the Effective Date.
PROCEEDING is defined at Section 8.2(a).
PUBLIC OFFERING means the first public offering of SPINCO common stock
following the Distribution. The gross proceeds of such Public Offering shall be
approximately $50 million or such other amount as ATI, in its sole discretion,
may approve.
RESTRICTED PERIOD means the two year period following the Effective
Date.
RESTRICTED REDEMPTION PERIOD means the two year period beginning on the
Effective Date and ending two years following the Public Offering.
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RULING REQUEST means the request for ruling (including all exhibits),
under Section 355, and other provisions of the Code, as originally filed on
behalf of ATI on April 6, 1999, as amended and supplemented, in respect of the
Distribution.
SPINCO GROUP means: (i) as of any relevant date after the Effective
Date, SPINCO and its Subsidiaries determined as of such date; and (ii) as of any
relevant date on or before the Effective Date, SPINCO and those businesses which
become part of SPINCO or its Subsidiaries as contemplated by the Distribution
Agreement, whether or not such Persons or businesses were Subsidiaries of SPINCO
before the Distribution.
STRADDLE PERIOD means any taxable period with respect to a Tax Return,
that begins on or before the Effective Date and ends after the Effective Date.
SUBSIDIARY means with respect to ATI or SPINCO, any Person of which ATI
or SPINCO, respectively, controls or owns, directly or indirectly, more than 50%
of the stock or other equity interest entitled to vote on the election of
members to the board of directors or similar governing body.
TAXES means all federal, state, local and foreign gross or net income,
gross receipts, withholding, payroll, franchise, transfer, sales, use, value
added, estimated or other taxes of any kind whatsoever or similar charges and
assessments, such as customs, duties and the like, or other amounts paid in
respect thereof, including all interest, penalties and additions imposed with
respect to such amounts.
TAX LIABILITY means the net amount of Taxes due and paid or payable for
any taxable period, determined after applying all tax credits and all applicable
carrybacks or carryovers for net operating losses, net capital losses, unused
general business tax credits, or any other Tax items arising from a prior or
subsequent taxable period, and all other relevant adjustments.
TAX RETURNS means all reports, estimates, declarations of estimated
tax, information statements and returns relating to or required to be filed in
connection with any Taxes, other than Business Taxes, including information
returns or reports with respect to backup withholding and other payments to
third parties.
ARTICLE II
FILING OF TAX RETURNS AND PAYMENT OF TAXES
SECTION 2.1. TAX RETURNS REQUIRED TO BE FILED PRIOR TO DISTRIBUTION
DATE. ATI shall file or cause to be filed all Tax Returns of ATI and any member
of the ATI Consolidated Group required to be filed (after giving effect to any
valid extension of time in which to make such filings) prior to the Effective
Date and shall pay or cause to be paid any Tax Liability due with respect to
such Tax Returns.
SECTION 2.2. TAX RETURNS FOR PRE-DISTRIBUTION PERIODS.
(a) SPINCO shall prepare or cause to be prepared, consistent with past
practice, Business Tax Returns for the Pre-Distribution Period and shall pay or
cause to be paid any Tax
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Liability due with respect to such Business Tax Returns. ATI will promptly
notify SPINCO of any audit, assessment, notice, levy, or questionnaire with
respect to Business Taxes. SPINCO shall control all matters relating to such
Business Taxes and shall pay or cause to be paid and/or indemnify ATI or cause
ATI to be indemnified, whatever the case may be, for and defend and hold ATI
harmless against any Incremental Tax Assessment set forth in a Final
Determination of Business Taxes. Payment to ATI with respect to such Incremental
Tax Assessment shall be made in the same manner as if SPINCO were an
Indemnifying Party as set forth in Section 8.3.
(b) Except as provided in Section 2.2(a), ATI shall prepare or cause to
be prepared, for Pre-Distribution Periods, all (1) Combined Returns and (2) Tax
Returns required to be filed on a separate return basis by any member of the ATI
Consolidated Group, in each case, which Tax Returns are not required to be
(after giving effect to any valid extensions), and are not, filed on or prior to
the Effective Date and shall pay or cause to be paid any Tax Liability due with
respect to such Tax Returns. With respect to Tax Returns described in this
Section 2.2(b), ATI shall prepare the returns in a manner, absent any
intervening law change, consistent with ATI's preparation of Tax Returns covered
by Section 2.1. With respect to any Tax Returns described in part (2) of the
first sentence of this Section 2.2(b) relating to a member of the SPINCO Group,
ATI shall file such Tax Returns with the appropriate tax authority, pursuant to
a power of attorney executed and delivered to ATI by SPINCO pursuant to Section
10.15 hereof and shall pay or cause to be paid any Tax Liability due with
respect to such Tax Returns.
(c) Notwithstanding Section 2.2(a), ATI will be responsible for paying
Business Taxes that arise directly from the Distribution and Other Transactions.
For this Section 2.2(c) to apply, ATI must consent in writing, which consent
shall not be unreasonably withheld, that the amount of such Business Taxes has
been correctly determined. In addition, ATI shall have the right to control any
audit, litigation or proceeding regarding such Business Taxes.
SECTION 2.3. TAX RETURNS FOR POST-DISTRIBUTION PERIODS. SPINCO shall
(a) prepare and file or cause to be prepared and filed all Tax Returns required
to be filed by any member of the SPINCO Group for any Post-Distribution Period
and (b) pay or cause to be paid any Tax Liability due with respect to such Tax
Returns.
SECTION 2.4. TAX RETURNS FOR STRADDLE PERIOD. ATI shall prepare all Tax
Returns of or which include any member of the SPINCO Group for a Straddle
Period. ATI shall pay or cause to be paid and shall defend, indemnify and hold
SPINCO and members of the SPINCO Group harmless against the Tax Liabilities
attributable to the affected member or members of the SPINCO Group for the
portion of the Straddle Period ending on the Effective Date and SPINCO shall pay
or cause to be paid and shall defend, indemnify, and hold ATI and members of the
ATI Consolidated Group harmless against the Tax Liabilities attributable to the
affected member or members of the SPINCO Group for the remainder of the Straddle
Period beginning with the day after the Effective Date. ATI's determination of
Tax Liabilities up to and following the Effective Date shall be based on ATI's
interim closing of the books, determined as of the Effective Time, of the
affected member or members of the SPINCO Group.
SECTION 2.5. TAX-BASIS BALANCE SHEETS. In the case of any business that
was conducted prior to the Effective Date as a division of ATI, its Subsidiaries
or a member of the
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ATI Consolidated Group and which will be conducted after the Effective Date by a
member of the SPINCO Group, ATI shall prepare and furnish to SPINCO, within 120
days after the Effective Date, a tax-basis balance sheet, prepared consistent
with past practices, relating to such business as of the Effective Date.
ARTICLE III
COOPERATION AND EXCHANGE OF INFORMATION; AUDITS AND ADJUSTMENTS
SECTION 3.1. TAX RETURN INFORMATION.
(a) SPINCO shall, and shall cause each appropriate member of the SPINCO
Group to, provide ATI with all information and other assistance reasonably
requested by ATI to enable the members of the ATI Consolidated Group to prepare
and file ATI Consolidated Returns required to be filed by the ATI Consolidated
Group pursuant to this Agreement.
(b) ATI shall, and shall cause each appropriate member of the ATI
Consolidated Group to, provide SPINCO with all information and other assistance
reasonably requested by SPINCO to enable the members of the SPINCO Group to
prepare and file SPINCO Returns required to be filed by the SPINCO Group
pursuant to this Agreement.
(c) Within 60 days of the Effective Date, SPINCO shall provide and
cause each appropriate member of the SPINCO Group to provide to ATI customary
tax packages prepared consistent with past practice for any Pre-Distribution
Period or Straddle Period.
SECTION 3.2. AUDITS AND ADJUSTMENTS.
(a) Except as provided for in Section 3.3, ATI shall have full control
over and absolute discretion with respect to all matters relating to any Tax
Return covered by Section 2.1, Section 2.2 or Section 2.4.
(b) SPINCO shall have full control over and absolute discretion with
respect to all Tax Returns covered by Section 2.3.
(c) SPINCO agrees to cooperate with ATI in the negotiation, settlement,
and litigation of or other proceeding regarding any liability for or refund of
Taxes of any member paid or payable by the ATI Consolidated Group.
(d) ATI agrees to cooperate with SPINCO in the negotiation, settlement,
and litigation of or other proceeding regarding any liability for Taxes paid or
payable by any member of the SPINCO Group.
(e) ATI will promptly notify SPINCO in writing of any Adjustment
involving a change in the tax basis of any asset of SPINCO, specifying the
nature of the change so that the SPINCO Group will be able to reflect the
revised basis in its tax books and records for periods beginning on or after the
Effective Date.
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(f) In the event of a conflict between the operation of this Section
3.2 and Articles VI, VII, or VIII, those Articles will take precedence over this
Section 3.2.
SECTION 3.3. CARRYBACKS. SPINCO shall make an election under Section
172(b)(3) of the Code to relinquish the entire carryback period with respect to
any net operating loss attributable to SPINCO or any of its Subsidiaries in any
taxable period beginning after or including the Effective Date that could be
carried back to a taxable year of SPINCO or any Subsidiaries ending on or before
the Effective Date. Neither ATI nor any member of the ATI Consolidated Group
shall be required to pay to SPINCO or its Subsidiaries any refund or credit of
Taxes that results from the carryback to any taxable period ending on or before
the Effective Date of any net operating loss, capital loss, or tax credit
attributable to SPINCO or any of its Subsidiaries in any taxable period
beginning after or including the Effective Date.
ARTICLE IV
RETENTION OF RECORDS; STATUTES OF LIMITATIONS
SECTION 4.1. RETENTION OF RECORDS. ATI and SPINCO agree to retain the
appropriate records which may affect the determination of the liability for
Taxes of any member of the ATI Consolidated Group or the SPINCO Group,
respectively, until such time as there has been a Final Determination with
respect to such liability for Taxes. A party may satisfy its obligations under
the preceding sentence by allowing the other party to duplicate records at such
second party's expense.
SECTION 4.2. DESTRUCTION OF RECORDS. Any member of the SPINCO Group
intending to destroy any materials, records, or documents relating to Taxes
shall provide ATI 90 days advance notice and the reasonable opportunity to copy
or take possession of such materials, records, or documents.
SECTION 4.3. STATUTE OF LIMITATIONS. ATI and SPINCO will notify each
other in writing of any waivers or extensions of the applicable statute of
limitations that may affect the period for which any materials, records, or
documents must be retained.
ARTICLE V
REPRESENTATIONS AND COVENANTS
SECTION 5.1. COMPLIANCE WITH IRS RULING. SPINCO shall, and shall cause
each member of the SPINCO Group to, comply with each representation and
statement concerning SPINCO and the SPINCO Group made in the Ruling Request and
in the materials submitted to the IRS in connection with the Ruling Request,
including, without limitation, statements relating to actions regarding the
Public Offering and the use of Public Offering proceeds by the SPINCO Group.
SPINCO has reviewed the materials submitted to the IRS in connection with the
Ruling Request and represents to ATI that these materials, including without
limitation, any statements and representations concerning SPINCO, its business
operations, capital structure and/or organization, are complete and accurate.
During the Restricted Period, neither SPINCO nor any member of the SPINCO Group
shall take any action, refrain from taking any action or enter into any
transaction or series of transactions or agree to take any action,
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refrain from taking any action or enter into any transaction or series of
transactions that could jeopardize the tax-free status of the Distribution,
including any action, inaction or transaction that would be inconsistent with
any representation or statement made to the IRS in connection with the Ruling
Request, unless prior thereto SPINCO obtains the express written consent of ATI
which consent will be granted, if at all, in the sole discretion of ATI. SPINCO
hereby represents and warrants to ATI that SPINCO has no intention to undertake
or allow to be undertaken any of the transactions set forth in Section
5.2(a)(iii), nor does SPINCO or any member of the SPINCO Group have any
intention to cease to engage in the active conduct of its trade or business
(within the meaning of Section 355(b)(2) of the Code).
SECTION 5.2. COVENANTS.
(a) Without limiting the generality of Section 5.1, SPINCO and each
member of the SPINCO Group jointly and severally covenant and agree with ATI
that during the Restricted Period or, in the case of a transaction described in
Section 5.2(a)(iii)(4), the Restricted Redemption Period:
(i) SPINCO and the members of the SPINCO Group will continue
to engage in its business, and will continue to maintain a substantial
portion of their respective assets and business operations, as they
existed immediately prior to the Distribution; provided that the
foregoing shall not be deemed to prohibit SPINCO and the members of the
SPINCO Group from entering into or acquiring other businesses or
operations or from disposing of or shutting down segments of such
Businesses so long as SPINCO and the members of the SPINCO Group
continue to engage in such businesses and continue to so maintain such
substantial portion of their assets and business operations;
(ii) SPINCO will continue to manage and to own (A) directly,
assets which represent at least 50% of the Gross Asset Value which
SPINCO managed and owned directly immediately after the Distribution,
and (B) directly or indirectly, through one or more entities, assets
which represent at least 50% of the Gross Asset Value which SPINCO
owned indirectly through one or more entities immediately after the
Distribution;
(iii) except as provided in Section 5.2(c), neither SPINCO nor
any of its Affiliates nor any of its or their respective directors,
officers or other representatives (acting in their capacity as
directors, officers, or representatives) will undertake, authorize,
approve, recommend, permit, facilitate, or enter into any contract, or
consummate any transaction with respect to:
(1) the issuance of SPINCO common stock (including
options, warrants, rights or securities exercisable for, or
convertible into, SPINCO common stock) in a single transaction
or in a series of related or unrelated transactions (including
the Public Offering) which represents (treating any such
options, warrants, rights, or securities as exercised or
converted) 40% or more of the outstanding shares of SPINCO
common stock;
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(2) the issuance of any class or series of capital
stock or any other instrument (other than SPINCO common stock
and options, warrants, rights or securities exercisable for,
or convertible into, SPINCO common stock) that would
constitute equity for federal tax purposes (such classes or
series of capital stock and other instruments being referred
to herein as "Disqualified SPINCO Stock");
(3) the issuance of any options, rights, warrants,
securities or similar arrangements exercisable for, or
convertible into, Disqualified SPINCO Stock;
(4) any redemptions, repurchases or other
acquisitions of capital stock or other equity interests in
SPINCO by SPINCO; and/or
(5) the dissolution, merger, or complete or partial
liquidation of SPINCO or any announcement of such action.
(b) In addition to the other representations, warranties, covenants and
agreements set forth in this Agreement, SPINCO and each member of the SPINCO
Group will take, or refrain from taking, as the case may be, such actions as ATI
may request to ensure that the Distributions and the Other Transactions qualify
for the tax-free treatment stated in the IRS Ruling, including, without
limitation, such actions as ATI determines may be necessary to preserve the
validity of the IRS Ruling. Without limiting the generality of the foregoing,
SPINCO and the SPINCO Group shall cooperate with ATI if ATI, in its sole
discretion, determines to obtain additional or supplemental IRS rulings
pertaining to whether any actual or proposed change in facts and circumstances
affects the tax-free status of the Distribution or the Other Transactions.
Regardless of the fact that ATI shall control matters set forth in the preceding
sentence of this Section 5.2(b), the ATI Consolidated Group, on one hand, and
SPINCO and the SPINCO Group, on the other hand, shall equally bear
responsibility for all expenses associated with any such additional or
supplemental IRS rulings; provided, however, that any expenses associated with
any additional or supplemental IRS Rulings based on a proposed action or
omission by SPINCO or a member of the SPINCO Group will be borne solely by
SPINCO.
(c) Following the Effective Date, SPINCO and its Affiliates shall not
take any action or engage in conduct otherwise prohibited by Section 5.2 unless
prior to such action or conduct, as the case may be, SPINCO receives express
written consent from ATI which consent will be granted, if at all, in the sole
discretion of ATI.
(d) SPINCO will consummate the Public Offering within one year after
the Effective Date and will use the Public Offering proceeds in the manner and
during time periods set forth in the Ruling Request.
(e) If, within two years after the Public Offering, SPINCO disposes of
any assets, other than inventory, SPINCO will use the proceeds (net of tax and
transaction costs) from such disposition in a manner that is, in ATI's sole
discretion, consistent with the business purpose of expanding SPINCO's business
as set forth in the Ruling Request.
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ARTICLE VI
SPINCO INDEMNITY OBLIGATIONS
SECTION 6.1. SPINCO INDEMNITY. If SPINCO, or another member (or former
member) of the SPINCO Group (collectively, the "Indemnifying Parties") takes or
fails to take any action whether or not prohibited or required by Article V or
violates a representation or covenant in Article V or in the Ruling Request, and
the Distribution or any of the Other Transactions fail to or otherwise do not
qualify for the tax treatment stated in the IRS Ruling as a result of such
action, failure to take action, or violation, then the Indemnifying Parties
shall jointly and severally defend, indemnify and hold harmless ATI and each
member of the ATI Consolidated Group and each of their respective directors,
officers, employees, agents or other representatives (collectively, and/or
individually, as the case may be, the "Indemnified Party") against any liability
for such Taxes which the Indemnified Party may assume or otherwise incur and any
and all Taxes or other liabilities directly or indirectly imposed upon or
incurred by the Indemnified Party as a result of such failure or lack of
qualification, including, without limitation, any liability of the Indemnified
Party arising from Taxes imposed on stockholders of ATI whether or not any
stockholder or stockholders of ATI, or the IRS or other taxing authority,
successfully seeks recourse against the Indemnified Party on account of any such
failure.
SECTION 6.2. TENDER OFFER OR PURCHASE OFFER. Notwithstanding anything
to the contrary set forth in this Agreement, if, during the Restricted Period,
any Person or Group of Affiliated Persons or Associates acquires Beneficial
Ownership of SPINCO common stock (or any other class of outstanding SPINCO
stock) or commences a tender or other purchase offer for the capital stock of
SPINCO or initiates any other form of transaction to acquire directly or
indirectly SPINCO capital stock, upon consummation of which such Person or Group
of Affiliated Persons or Associates would acquire Beneficial Ownership of SPINCO
common stock (or any other class of outstanding SPINCO stock or equity) and as a
result thereof the Distribution or any of the Other Transactions shall fail to
or otherwise do not qualify for the tax treatment stated in the IRS Ruling then
the Indemnifying Parties shall defend, indemnify and hold harmless the
Indemnified Party against any liability for Taxes which the Indemnified Party
may assume or otherwise incur and any and all Taxes or other liabilities
directly or indirectly imposed upon or incurred by any Indemnified Party and/or
its stockholders as a result of such failure.
SECTION 6.3. EFFECT OF EXPRESS WRITTEN CONSENT OF ATI. The Indemnified
Party shall be defended, indemnified and held harmless under Section 6.1 without
regard to the fact that the Indemnifying Party may have received the express
written consent of ATI as contemplated by Article V. The Indemnified Party shall
be defended, indemnified and held harmless under Section 6.2 whether or not the
acquisition of Beneficial Ownership results from a transaction which is not
prohibited under Article V.
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ARTICLE VII
CALCULATION OF SPINCO INDEMNITY AMOUNTS
SECTION 7.1. AMOUNT OF INDEMNITY. The amount indemnified against under
Article VI ("Indemnified Liability") for a Tax based on or determined with
reference to income shall be deemed to be, for each applicable taxing
jurisdiction, an amount determined by multiplying (i) the taxing jurisdiction's
highest marginal corporate income or tax rate for the taxable period in which
the Distribution or Other Transaction occurs, times (ii) the gain or income of
the Indemnified Party which is subject to such Tax. In the case of other
Indemnified Liabilities, the amount of the Indemnified Liability shall be equal
to the amount so owed. In addition, the amount of any Indemnified Liability
shall be increased by any interest, costs, legal and professional fees,
additions, expenses and penalties incurred by the Indemnified Party. All amounts
payable under this Article VII shall, to the extent that such amounts constitute
taxable income, be grossed-up, based on the tax rate referred to in clause (i)
of the first sentence of this Section 7.1.
ARTICLE VIII
PROCEDURAL ASPECTS OF SPINCO INDEMNITY
SECTION 8.1. GENERAL.
(a) If either the Indemnified Party or any of the Indemnifying Parties
receives any written notice of deficiency, claim or adjustment or any other
written communication from a taxing authority or any other Person that may
result in an Indemnified Liability, the party receiving such notice or
communication shall promptly give written notice thereof to the other parties,
provided that any delay by the Indemnified Party in so notifying an Indemnifying
Party shall not relieve the Indemnifying Party of any liability hereunder,
except to the extent the Indemnifying Party is materially and adversely
prejudiced by such delay.
(b) Each party hereto undertakes and agrees that from and after such
time as it obtains knowledge that any representative of a taxing authority has
begun to investigate or inquire into the Distribution or any of the Other
Transactions (whether or not such investigation or inquiry is a formal or
informal investigation or inquiry), such party shall (i) notify the other
parties thereof, provided that any delay by the Indemnified Party in so
notifying the Indemnifying Party shall not relieve the Indemnifying Party of any
liability hereunder (except to the extent the Indemnifying Party is materially
and adversely prejudiced by such delay), (ii) consult with the other parties
from time to time as to the conduct of such investigation or inquiry, (iii)
provide the other parties with copies of all correspondence with such taxing
authority or any representative thereof or other Person pertaining to such
investigation or inquiry, and (iv) arrange for a representative of the other
parties to be present at all meetings with such taxing authority or any
representative thereof pertaining to such investigation or inquiry.
(c) SPINCO undertakes and agrees to give full cooperation and support
to ATI, including without limitation, attestations and/or access to Information,
as requested by ATI, to document and verify the use of the Public Offering
proceeds in the manner and during the time period set forth in the Ruling
Request. SPINCO will submit a quarterly accounting to ATI, due
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within 30 days after the end of each calendar quarter, which sets forth in
detail the use of Public Offering proceeds. This information will be submitted
to ATI in a format substantially similar to the chart attached hereto as
Appendix I.
SECTION 8.2. CONTESTS.
(a) If (i) the Indemnifying Party furnishes the Indemnified Party with
evidence satisfactory to the Indemnified Party of its ability to pay the full
amount of the Indemnified Liability and (ii) such Indemnifying Party
acknowledges in writing that the asserted liability is an Indemnified Liability,
such Indemnifying Party may assume and direct the tax examination,
administrative appeal, hearing, arbitration, suit or other proceeding (each a
"Proceeding") commenced, filed or otherwise initiated or convened to investigate
or resolve the existence and extent of such Indemnified Liability.
(b) Notwithstanding the foregoing, if at any time during a Proceeding
controlled by the Indemnifying Party pursuant to Section 8.2(a), such
Indemnifying Party fails to provide evidence satisfactory to the Indemnified
Party of its continuing ability to pay the full amount of the Indemnified
Liability or the Indemnified Party determines that such Indemnifying Party may
be unable to pay the full amount of the Indemnified Liability, then the
Indemnified Party may immediately assume control of and direct the Proceedings.
(c) During the period in which the Indemnifying Party assumes and
directs the Proceeding, if the Indemnified Liability is grouped with other
unrelated asserted liabilities or issues in the Proceeding, the parties shall
use their respective best efforts to cause the Indemnified Liability to be the
subject of a separate proceeding. If such severance is not possible, the
Indemnifying Party shall assume and direct and be responsible only for the
matters relating to the Indemnified Liability.
(d) In addition to the amounts referred to in Section 6.1, an
Indemnifying Party shall pay all out-of-pocket expenses and other costs related
to the Indemnified Liability, including but not limited to fees for attorneys,
accountants, expert witnesses or other consultants retained by such Indemnifying
Party and/or the Indemnified Party with respect to a claim pursuant to this
Agreement. To the extent that any such expenses and other costs have been or are
paid by an Indemnified Party, the Indemnifying Party shall promptly upon written
request reimburse the Indemnified Party therefor.
(e) An Indemnifying Party shall not pay (unless otherwise required by a
proper notice of levy and after prompt written notification to the Indemnified
Party of receipt of notice and demand for payment), settle, compromise or
concede any portion of the Indemnified Liability without the express written
consent of the Indemnified Party. An Indemnifying Party shall, on a timely
basis, keep the Indemnified Party informed of all developments in the Proceeding
and provide the Indemnified Party with copies of all pleadings, briefs, orders,
and other written papers; provided that in the event that the Indemnifying Party
determines that the providing of a written paper could waive an attorney-client
privilege, the parties shall take all reasonable measures to permit the
compliance with such obligation in a manner that avoids such consequence.
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(f) Any Proceeding which is not controlled or which is no longer
controlled by an Indemnifying Party pursuant to Section 8.2 shall be controlled
and directed exclusively by the Indemnified Party, and any related out-of-pocket
expenses and other costs incurred by the Indemnified Party, including but not
limited to, fees for attorneys, accountants, expert witnesses or other
consultants, with respect to a claim pursuant to this Agreement, shall be
reimbursed by such Indemnifying Party. An Indemnified Party will not be required
to pursue the claim in federal district court, the Court of Federal Claims or
any state or foreign court if as a prerequisite to such court's jurisdiction,
the Indemnified Party is required to pay the asserted liability unless the funds
necessary to invoke such jurisdiction are provided by such Indemnifying Party.
SECTION 8.3. TIME AND MANNER OF PAYMENT. Upon receipt of notice of a
Final Determination, an Indemnifying Party shall pay, within seven (7) business
days of such receipt, to the Indemnified Party the amount of the Indemnified
Liability and any expenses or other costs indemnified against (less, in the case
of an Indemnified Liability for Taxes, any amount of such Taxes paid directly by
an Indemnifying Party to the taxing authority). With respect to payments of an
Indemnified Liability for amounts other than Taxes including any and all
Liabilities with respect to ATI stockholders, the Indemnifying Party shall pay
to the Indemnified Party the amount of this Indemnified Liability within seven
(7) days of a final determination of the amount of such Liability and, in the
case of Liabilities with respect to ATI stockholders, no less than seven (7)
days prior to the date that payment is required to be made to such stockholders.
Such payment shall be paid by wire transfer of immediately available funds to an
account designated by the Indemnified Party by written notice to an Indemnifying
Party at the address specified in Section 10.11 prior to the due date of such
payment. If an Indemnifying Party delays making payment beyond the due date
hereunder, such party shall pay interest on the amount unpaid at the IRS
Interest Rate for each day and the actual number of days for which any amount
due hereunder is unpaid.
SECTION 8.4. COOPERATION. The parties shall cooperate with one another
in a timely manner in any administrative or judicial Proceeding involving any
matter that may result in an Indemnified Liability.
SECTION 8.5. ADMINISTRATION. ATI's and SPINCO's Chief Tax Officer or
other designated tax representative shall have primary responsibility for the
day-to-day administration of the provisions of this Agreement.
ARTICLE IX
DISPUTES
SECTION 9.1. DISPUTES.
(a) Resolution of any and all disputes arising from or in connection
with this Agreement, whether based on contract, tort, statute or otherwise,
including, but not limited to, unreasonable withholding of consent and disputes
in connection with claims by third parties (collectively, "Disputes"), shall be
subject to the provisions of this Section 9.1; provided, however, that nothing
contained herein shall preclude either party from seeking or obtaining (i)
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injunctive relief or (ii) equitable or other judicial relief to enforce the
provisions hereof or to preserve the status quo pending the final resolution of
Disputes hereunder.
(b) Either party may give the other party written notice of any Dispute
not resolved in the normal course of business. The parties shall attempt in good
faith to resolve any Dispute promptly by negotiation between executives of the
parties who have authority to settle the controversy. Within 15 days after
delivery of the notice, the foregoing executives of both parties shall meet at a
mutually acceptable time and place, and thereafter as often as they reasonably
deem necessary for a period not to exceed 5 days, to attempt to resolve the
Dispute. All reasonable requests for information made by one party to the other
will be honored. If the parties do not resolve the Dispute within such 20 day
period (the "Initial Mediation Period"), the parties shall attempt in good faith
to resolve the Dispute by negotiation between (a) in the case of ATI, the Chief
Financial Officer and General Counsel, and (b) in the case of SPINCO, the Chief
Financial Officer and General Counsel (collectively, the "Designated Officers").
Such officers shall meet at a mutually acceptable time and place (but in any
event no later than 20 days following the expiration of the Initial Mediation
Period) and thereafter as often as they reasonably deem necessary for a period
not to exceed 20 days, to attempt to resolve the Dispute.
(c) If the Dispute has not been resolved by negotiation within 50 days
of the first party's notice, or if the parties failed to meet within 15 days of
the first party's notice, or if the Designated Officers failed to meet within 35
days of the first party's notice, either party may commence any litigation or
other procedure allowed by law.
ARTICLE X
GENERAL
SECTION 10.1. ELECTIONS UNDER CODE SECTION 1552. Nothing in this
Agreement is intended to change or otherwise affect any election made by or on
behalf of the ATI Consolidated Group with respect to the calculation of earnings
and profits under Code Section 1552.
SECTION 10.2. PRE-DISTRIBUTION EARNINGS AND PROFITS. ATI and SPINCO
agree to allocate pre-Distribution earnings and profits in accordance with
Treasury Regulation Sections 1.312-10 and 1.1502-33.
SECTION 10.3. REMEDIES. SPINCO acknowledges that its obligations under
Article V of this Agreement are of a special, unique, unusual and extraordinary
character. Because the failure of SPINCO to perform its obligations set forth in
Article V of this Agreement could cause unique and extraordinary injury to ATI,
ATI shall, notwithstanding anything to the contrary herein, have the right in
addition to any other remedies available, at law or in equity, to seek an
injunction in a court of equity to compel SPINCO to perform such obligations.
SPINCO hereby waives any and all defenses it may have on the ground of lack of
jurisdiction or competence of the court to grant an injunction or other
equitable relief, or otherwise, and agrees that it will not assert any such
defense or any defense to a request by ATI for injunctive relief based on the
alleged existence of an adequate remedy at law or for money damages. Without
limiting the foregoing, SPINCO hereby waives the right to require ATI to post
any bond or other security
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with respect to any proceeding to enforce any provisions of this Agreement. The
existence of the rights of ATI set forth in this Section 10.3 shall not preclude
any other rights and remedies at law or in equity which ATI may have.
SECTION 10.4. ASSIGNMENT. Neither of the parties may assign or delegate
any of its rights or duties under this Agreement without the prior written
consent of the other party. This Agreement shall be binding upon, and shall
inure to the benefit of, the parties hereto and their respective successors and
permitted assigns, by merger, acquisition of assets or otherwise.
SECTION 10.5. FURTHER ASSURANCES. Subject to the provisions hereof, the
parties hereto shall make, execute, acknowledge, and deliver such other
instruments and documents, and take all such other actions, as may be reasonably
required in order to effectuate the purposes of this Agreement and to consummate
the transactions contemplated hereby. Subject to the provisions hereof, each of
the parties shall, in connection with entering into this Agreement, performing
its obligations hereunder and taking any and all actions relating hereto, comply
with all applicable laws, regulations, orders, and decrees, and promptly provide
the other parties with all such information as they may reasonably request in
order to be able to comply with the provisions of this Agreement.
SECTION 10.6. WAIVERS. No failure or delay on the part of the parties
in exercising any power or right hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such right or power, preclude
any other or further exercise thereof or the exercise of any other right or
power. No modification or waiver of any provision of this Agreement nor consent
to any departure by the parties therefrom shall in any event be effective unless
the same shall be in writing, and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given.
SECTION 10.7. CHANGE OF LAW. If, due to any change in applicable law or
regulations or their interpretation by any court of law or other governing body
having jurisdiction subsequent to the date of this Agreement, performance of any
provision of this Agreement or any transaction contemplated thereby shall become
impracticable or impossible, the parties hereto shall use their best efforts to
find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such provision.
SECTION 10.8. CONFIDENTIALITY. Subject to any contrary requirement of
law and the right of each party to enforce its rights hereunder in any legal
action, each party agrees that it shall keep strictly confidential, and shall
cause its employees and agents to keep strictly confidential, any information
which it or any of its employees or agents may acquire pursuant to, or in the
course of performing its obligations under, any provision of this Agreement.
SECTION 10.9. HEADINGS. Descriptive headings are for convenience only
and shall not control or affect the meaning or construction of any provision of
this Agreement.
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SECTION 10.10. COUNTERPARTS. For the convenience of the parties, any
number of counterparts of this Agreement may be executed by the parties hereto,
and each such executed counterpart shall be, and shall be deemed to be, an
original instrument.
SECTION 10.11. NOTICES. All notices, requests, claims and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery by
hand, by reputable overnight courier service, by facsimile transmission, or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 10.11)
listed below:
Allegheny Teledyne Incorporated
0000 Xxx XXX Xxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Attn: Xxx X. Xxxxxx, Senior Vice President,
General Counsel and Secretary
Fax No.:000-000-0000
Water Pik Technologies, Inc.
000 Xxxxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxx, President and
Chief Executive Officer
Fax No.:
or to such other address as any party may, from time to time, designate in a
written notice given in a like manner. Notice given by hand shall be deemed
delivered when received by the recipient. Notice given by mail as set out above
shall be deemed delivered five (5) calendar days after the date the same is
mailed. Notice given by reputable overnight courier shall be deemed delivered on
the next following business day after the same is sent. Notice given by
facsimile transmission shall be deemed delivered on the day of transmission
provided telephone confirmation of receipt is obtained promptly after completion
of transmission.
SECTION 10.12. COSTS AND EXPENSES. Unless otherwise specifically
provided herein, each party agrees to pay its own costs and expenses resulting
from the fulfillment of its respective obligations hereunder.
SECTION 10.13. CANCELLATION OF PRIOR TAX ALLOCATION OR TAX-SHARING
AGREEMENTS. On or prior to the Effective Date, ATI shall cancel or cause to be
canceled all agreements (other than this Agreement) providing for the allocation
or sharing of Taxes to which any member of the SPINCO Group would otherwise be
bound following the Distribution.
SECTION 10.14. INTEREST ON LATE PAYMENTS. If a party makes any payment
beyond the due date hereunder, such party shall pay interest on the amount
unpaid at the IRS Interest Rate for each day and the actual number of days for
which any amount due hereunder is unpaid.
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SECTION 10.15. POWER OF ATTORNEY. Each member of the SPINCO Group shall
execute and deliver to ATI any power of attorney or other document reasonably
requested by ATI in connection with the filing of the Tax Returns and payment of
Taxes described in Article II hereof, or any Proceeding described in Article
VIII hereof. Each member of the ATI Consolidated Group shall execute and deliver
to SPINCO a power of attorney in connection with any matters controlled by
SPINCO under Section 2.2.
SECTION 10.16. GENERAL. This Agreement, including the attachments,
shall constitute the entire agreement between the parties hereto with respect to
the subject matter hereof and shall supersede all prior agreements and
undertakings, both written and oral, between the parties with respect to the
subject matter hereof and thereof. This Agreement may not be amended or modified
except (a) by an instrument in writing signed by, or on behalf of, the parties
or (b) by a waiver in accordance with Section 10.6. This Agreement shall be
binding upon and inure solely to the benefit of the parties hereto and their
respective present and future Subsidiaries, and nothing herein, express or
implied, is intended to or shall confer upon any third parties any legal or
equitable right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
SECTION 10.17. GOVERNING LAW: CONSENT TO JURISDICTION.
(a) This Agreement shall be governed by and construed and interpreted
in accordance with the laws of the Commonwealth of Pennsylvania as to all
matters, including matters of validity, construction, effect, enforceability,
performance and remedies, irrespective of the choice of laws and principles of
the laws of the Commonwealth of Pennsylvania.
(b) Each of the parties hereto irrevocably submits to the exclusive
jurisdiction of (i) the Court of Common Pleas of Allegheny County, Pennsylvania
and (ii) the United States District Court for the Western District of
Pennsylvania, for the purposes of any suit, action or other proceeding arising
out of this Agreement or any transaction contemplated hereby or thereby (and
agrees not to commence any action, suit or proceeding relating thereto except in
such courts). Each of the parties hereto further agrees that service of any
process, summons, notice or document hand delivered or sent by U.S. registered
mail to such parties respective address set forth in Section 10.11 will be
effective service of process for any action, suit or proceeding in Pennsylvania
with respect to any matters to which it has submitted to jurisdiction as set
forth in the immediately preceding sentence. Each of the parties hereto
irrevocably and unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement or the transactions
contemplated hereby or thereby (i) the Court of Common Pleas of Allegheny
County, Pennsylvania or (ii) the United States District Court for the Western
District of Pennsylvania, and hereby further irrevocably and unconditionally
waives and agrees not to plead or claim in any such court that any such action,
suit or proceeding brought in any such court has been brought in an inconvenient
forum.
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SECTION 10.18. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed by their respective officers, each of whom is duly authorized, all
as of the Effective Date.
ALLEGHENY TELEDYNE INCORPORATED
By:
(Name)
(Title)
WATER PIK TECHNOLOGIES, INC.
By:
(Name)
(Title)
[OTHER COMPANIES]
By:
(Name)
(Title)
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