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Tax Sharing And Indemnification Agreement

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TAX SHARING AND INDEMNIFICATION AGREEMENT


THIS TAX SHARING AND INDEMNIFICATION AGREEMENT (the "Agreement"), dated as of November 29, 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 November 29, 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.


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RESTRICTED REDEMPTION PERIOD means the two year period beginning on the Effective Date and ending two years following the Public Offering.


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.


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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 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


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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 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.


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