EXHIBIT 10.6
Amended and Restated
EMPLOYMENT AGREEMENT
between
WKI HOLDING COMPANY, INC.
and
XXXXXX XxXXXX
EMPLOYMENT AGREEMENT
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Recitals
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WHEREAS, Xxxxxx XxXxxx (the "Executive") entered into an Employment
Agreement (the "Employment Agreement") with WKI Holding Company, Inc. (the
"Company") which was effective as of November 25, 2002 and executed in January
of 2003; and
WHEREAS, the Employment Agreement was amended by an amendment which was
effective as of May 31, 2003 and an amendment which was dated July 9, 2003 (the
amendments, collectively with the Employment Agreement being collectively
referred to herein as the "Prior Agreement"); and
WHEREAS, the Company desires to continue to employ Executive to serve as
the Chief Financial Officer and Senior Vice President upon the terms and subject
to the conditions set forth in this Agreement (the "Agreement") which shall be
effective on July 31, 2003 (the "Agreement Date"); and
WHEREAS, the Company and Executive further agree and acknowledge that the
terms of this Agreement supersede and completely replace the terms of the Prior
Agreement as of the Agreement Date and that the Prior Agreement is null and void
as of the Agreement Date.
NOW, THEREFORE, in consideration of the premises (which are deemed to be an
integral part of this Agreement) and the mutual covenants, representations,
warranties and agreements contained herein, the Company and Executive hereby
agree as follows:
Article I. DEFINITIONS
The terms set forth below have the following meanings (such meanings to be
applicable to both the singular and plural forms, except where otherwise
expressly indicated):
1.1 "Accrued Annual Bonus" means the amount of any Annual Bonus earned but
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not yet paid with respect to the Fiscal Year ended prior to the Date of
Termination.
1.2 "Accrued Base Salary" means the amount of Executive's Base Salary
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which is earned but not yet paid as of the Date of Termination.
1.3 "Accrued Retention Bonus" means the amount (if any) of any Retention
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Bonus vested but not yet paid as of the Date of Termination.
1.4 "Agreement" is defined in the Recitals to this Agreement.
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1.5 "Agreement Date" is defined in the Recitals to this Agreement.
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1.6 "Anniversary Date" means any annual anniversary of the Agreement Date.
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1.7 "Annual Bonus" is defined in Section 4.2(a).
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1.8 "Base Salary" is defined in Section 4.1.
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1.9 "Beneficiary" is defined in Section 8.9.
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1.10 "Cause" means any of the following:
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(a) Executive's commission of a misdemeanor involving fraud,
dishonesty, or moral turpitude, or of a felony,
(b) Executive's willful or intentional material breach of his
material obligations under this Agreement, provided that such
misconduct is not cured to the best of Executive's ability within ten
(10) business days after the delivery of notice to Executive of such
misconduct
(c) willful or intentional material misconduct by Executive in the
performance of his duties under this Agreement, or
(d) the willful or intentional failure by Executive to materially
comply (to the best of his ability) with a specific, written direction
of the Chief Executive Officer of the Company that is not inconsistent
with this Agreement and Executive's responsibilities hereunder,
provided that such refusal or failure (i) is not cured to the best of
Executive's ability within ten (10) business days after the delivery
of such direction to Executive and (ii) is not based on Executive's
good faith belief, as expressed by written notice to the Chief
Executive Officer of the Company, given within such ten (10) business
day period, that the implementation of such direction of the Chief
Executive Officer of the Company would be unlawful or unethical.
1.11 "Change of Control" means any one or more of the following events:
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(a) any person (as such term is used in Rule 13d-5 under the Exchange
Act) or group (as such term is defined in Sections 3(a)(9) and
13(d)(3) of the Exchange Act), other than any Subsidiary or any
employee benefit plan (or any related trust) of the Company or any of
its Subsidiaries, becomes the beneficial owner in the aggregate of
more than thirty-five percent (35%) of the Voting Securities;
(b) individuals who constitute the initial board of directors of the
Company as of January 31, 2003 (the "Reorganized Incumbent Board")
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cease for any reason to constitute more than sixty-six and two-thirds
percent (66-2/3%) of the members of the board of directors of the
Company; provided that any individual who becomes a director after
January 31, 2003 whose election or nomination for election by the
Company's shareholders, was approved by more than sixty-six and
two-thirds percent (66-2/3%) of the members of the Reorganized
Incumbent Board (other than an election or nomination of an individual
whose initial assumption of office is in connection with an actual or
threatened "election contest" relating to the election of the
directors of the Company (as such terms are used in Rule 14a-11 under
the Exchange Act), "tender offer" (as such term is used
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in Section 14(d) of the Exchange Act) or a proposed Merger (as defined
below in clause (iii) of this Section 1.11(c))) shall be deemed to be
members of the Reorganized Incumbent Board;
(c) consummation of a merger, reorganization, consolidation, or
similar transaction (any of the foregoing, a "Merger") unless the
Persons who were the beneficial owners of the Voting Securities
immediately before such Merger, are the beneficial owners, immediately
after such Merger, directly or indirectly, in the aggregate, of more
than sixty percent (60%) of the common stock and any other voting
securities of the entity resulting from such Merger in substantially
the same relative proportions as they owned the Voting Securities
immediately before the Merger;
(d) consummation of a transfer or sale of all or substantially all of
the assets of the Company or World Kitchen, Inc. (a "Sale") unless the
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Persons who were the beneficial owners of the Voting Securities
immediately before such Sale, are the beneficial owners, immediately
after such Sale, directly or indirectly, in the aggregate, of more
than sixty percent (60%) of the common stock and any other voting
securities of the entity or entities that own such assets immediately
after the Sale; or
(e) The board of directors of the Company or the shareholders of the
Company, as applicable, approve a plan of liquidation of the Company
or World Kitchen, Inc.
Notwithstanding the foregoing, there shall not be a Change of Control if,
in advance of (or subsequent to) such event, Executive, in his sole
discretion, agrees in writing that such event shall not constitute a Change
of Control. For purposes of this definition of Change of Control, entry
into and performance of the Stockholders' Agreement entered into by and
among the Company and certain of its stockholders, dated as of January 31,
2003 (as the same may be amended from time to time) shall not constitute
any Person as a member of a group with any other Person.
1.12 "Code" means the Internal Revenue Code of 1986, as amended from time
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to time.
1.13 "Compensation Committee" means the compensation committee of the WKI
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Board, composed exclusively of non-employee directors.
1.14 "Date of Termination" means the effective date of a Termination of
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Employment for any reason, including death or Disability, whether by the
Company or by Executive.
1.15 "Disability" means a mental or physical condition which renders
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Executive unable or incompetent to carry out the material job
responsibilities which Executive held or the material duties to which
Executive was assigned at the time the disability was incurred, which has
existed for at least three (3) calendar months and which in the opinion of
a physician mutually agreed upon by the Company and Executive (provided
that the parties shall not unreasonably withhold such agreement) is
expected to be permanent or to last for an indefinite duration or a
duration in excess of six (6) calendar months.
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1.16 "Employment Period" is defined in Article III.
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1.17 "Equity Plan" means the WKI Holding Company, Inc. Stock Option Plan.
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1.18 "Exchange Act" means the United States Securities Exchange Act of
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1934, as amended, or any federal statute or statutes which shall be enacted
to take its place, together with all rules and regulations promulgated
thereunder.
1.19 "Excise Tax" means the excise tax imposed by Section 4999 of the Code,
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together with any interest or penalties imposed with respect to such excise
tax.
1.20 "Executive" is defined in the Recitals to this Agreement.
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1.21 "Fiscal Year" means the calendar year period beginning each January 1
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and ending each December 31.
1.22 "Good Reason" means the occurrence of any one of the following events:
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(a) any material breach of the Agreement by the Company (or by World
Kitchen, Inc. under Section 8.5 hereof) of any material obligations
under this Agreement, including any of the following occurrences which
shall be deemed to constitute a material breach of a material
obligation:
(i) failure to pay Base Salary as required by Section 4.1, Annual
Bonus as required by Section 4.2, or Retention Bonus as required by
Section 4.3;
(ii) failure to pay or provide material benefits under Articles V
and VI of this Agreement, including without limitation, the failure to
comply with the provisions of the Long-Term Incentive Plan or any
applicable Guidelines as are adopted by the Committee relating
thereto; or
(iii) any substantial adverse change in the position,
responsibilities, and duties of Executive as compared to Executive's
position, responsibilities and duties as set forth in Section 2.1,
(iv) failure of Executive and the Company to agree on appropriate
equity compensation arrangements in accordance with Article V hereof
by the Agreement Date,
(b) the failure of the Company to assign this Agreement to a
successor, as applicable, or the failure of such successor to
explicitly assume and agree to be bound by this Agreement, or
(c) the Company's requiring Executive to be principally based at any
office or location more than 25 miles away from Reston, Virginia.
Notwithstanding the foregoing, none of the foregoing events shall
constitute a "Good Reason" event if, in advance of (or subsequent to) such
event, Executive, in his sole discretion, agrees in writing that such event
shall not constitute a "Good Reason" event within the meaning of this Agreement.
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1.23 "Gross-Up Payment" is defined in Section 6.4(a).
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1.24 "Guidelines" shall have the meaning set forth in the Long-Term
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Incentive Plan.
1.25 "including" means including without limitation.
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1.26 "Interest Rate" means the prime commercial lending rate announced by
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JPMorgan Chase Bank or its successor on the date an amount is to be
determined hereunder or, if no such rate shall be announced on such date,
the immediately prior date on which JPMorgan Chase Bank or its successor
announced such a rate; provided, however, that if the interest rate
determined in accordance with this Section 1.30 exceeds the highest legally
permissible interest rate, then the Interest Rate shall be the highest
legally-permissible interest rate.
1.27 "Long-Term Incentive Plan" means the WKI Holding Company, Inc.
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Long-Term Incentive Plan effective as of May 29, 2003, as in effect from
time to time.
1.28 "Maximum Annual Bonus" is defined in Section 4.2(b).
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1.29 "Maximum Annual Goals" is defined in Section 4.2(b).
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1.30 "Maximum Percentage" is defined in Section 4.2(b).
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1.31 "Parachute Value" of a Payment shall mean the present value as of the
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date of a change of control for purposes of Section 280G of the Code of the
portion of such Payment that constitutes a "parachute payment" under
Section 280G(b)(2), as determined by the Accounting Firm for purposes of
determining whether and to what extent the Excise Tax will apply to such
Payment.
1.32 "Payment" shall mean any payment or distribution in the nature of
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compensation (within the meaning of Section 280G(b)(2) of the Code) to or
for the benefit of Executive, whether paid or payable pursuant to this
Agreement or otherwise.
1.33 "Person" means any individual, sole proprietorship, partnership, joint
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venture, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, entity or government
instrumentality, division, agency, body or department.
1.34 "Prorata Annual Bonus" means (a) the product of the Target Annual
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Bonus for the Fiscal Year that includes the Date of Termination multiplied
by (b) a fraction, the numerator of which is the number of days which have
elapsed in the Fiscal Year through the Date of Termination and the
denominator of which is 365.
1.35 "Prorata Retention Bonus" is defined in Section 4.3(c).
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1.36 "Retention Bonus" is defined in Section 4.3(a).
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1.37 "Safe Harbor Amount" means 2.99 times Executive's "base amount,"
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within the meaning of Section 280G(b)(3) of the Code.
1.38 "Severance Period" means two (2) years from the Date of Termination.
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1.39 "Stock" means the shares of common stock, par value $0.01 per share,
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of the Company.
1.40 "Subsidiary" means, with respect to any Person, (a) any corporation of
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which more than fifty percent (50%) of the outstanding capital stock having
ordinary voting power to elect a majority of the board of directors of such
corporation (irrespective of whether, at the time, stock of any other class
or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time, directly or
indirectly, owned by such Person, or (b) any partnership, limited liability
company or other entity in which such Person has a direct or indirect
interest (whether in the form of voting or participation in profits or
capital contribution) of more than fifty percent (50%).
1.41 "Target Annual Bonus" is defined in Section 4.2(b).
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1.42 "Target Annual Goals" is defined in Section 4.2(b).
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1.43 "Target Percentage" is defined in Section 4.2(b).
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1.44 "Taxes" means the incremental United States federal, state and local
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income, excise and other taxes payable by Executive with respect to any
applicable item of income.
1.45 "Tax Gross-Up Payment" means an amount payable to Executive such that
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after payment of Taxes on such amount there remains a balance sufficient to
pay the Taxes being reimbursed.
1.46 "Termination for Cause" means a termination of the employment of the
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Executive by the Company for Cause during the Employment Period.
1.47 "Termination for Good Reason" means a Termination of Employment by
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Executive for a Good Reason during the Employment Period.
1.48 "Termination of Employment" means a termination by the Company or by
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Executive of Executive's employment by the Company.
1.49 "Termination Without Cause" means a termination of the employment of
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Executive by the Company for any reason other than Cause or Executive's
death or Disability during the Employment Period.
1.50 "Value" of a Payment shall mean the economic present value of a
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Payment as of the date of a change of control for purposes of Section 280G
of the Code, as determined by the Accounting Firm using the discount rate
required by Section 280G(d)(4) of the Code.
1.51 "Voting Securities" means any of the securities of the Company
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entitled to vote generally in the election of the directors of the Company.
1.52 "WKI Board" means the board of directors of the Company.
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Article II. POSITION AND RESPONSIBILITIES
2.1 Duties. During the Employment Period, the Company shall employ the
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Executive as its Chief Financial Officer and as a Senior Vice President of
the Company. During the Employment Period, World Kitchen, Inc. shall also
appoint Executive as its' Chief Financial Officer and Senior Vice
President. Executive shall be responsible for such functions and operations
as assigned to him from time to time by the Chief Executive Officer of the
Company. Executive shall report on all functions and operations within the
scope of his responsibilities to the Chief Executive Officer of the
Company. During the Employment Period, and excluding any periods of
disability, vacation, or sick leave to which Executive is entitled,
Executive agrees to devote his full attention and time to the business and
affairs of the Company and the Subsidiaries.
2.2 Other Activities. Executive may serve on corporate, civic or
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charitable boards or committees, deliver lectures, fulfill speaking
engagements or teach at educational institutions, or manage personal
investments, provided that such activities do not individually or in the
aggregate materially interfere with the performance of Executive's duties
under this Agreement.
Article III. EMPLOYMENT PERIOD
3.1 Employment Period.
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(a) Subject to the termination provisions hereinafter provided, the
initial term of Executive's employment under this Agreement (the
"Employment Period") shall commence as of November 25, 2002 (the
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"Employment Date") and end on the Anniversary Date which is three (3)
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years after the Employment Date (the "Initial Term"); provided,
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however, that as of the date that is six (6) months before the end of
the Initial Term, the Employment Period will automatically be extended
through the Anniversary Date that is five years after the Employment
Date, unless one party has previously provided the other with a notice
that such extension shall not take place (a "Notice of
Non-Extension"). The period from the end of the Initial Term through
such fifth Anniversary Date is referred to as the "Extension Period".
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The Initial Term and the Extension Period shall collectively be
referred to herein as the "Employment Period."
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(b) Notwithstanding the foregoing, (i) if either party timely
delivers a written Notice of Non-Extension to the other in accordance
with the provisions of Subsection (a) hereof, this Agreement and the
Employment Period shall automatically terminate at the end of the
Initial Term and (ii) this Agreement and the Employment Period shall
automatically terminate at the end of the Employment Period, subject
to Executive's rights as set forth in Section 7.
Article IV. COMPENSATION
4.1 Salary. The Company shall pay to Executive in accordance with the
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normal payroll practices of the Company an annual salary at a rate of
$430,000 per year ("Base Salary"). During the Employment Period, the Base
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Salary shall be reviewed at least annually and may be increased (but not
decreased) from time to time as shall be determined by the WKI Board or the
Compensation Committee. Any increase in Base Salary shall not limit or
reduce any other obligation of the Company to Executive under this
Agreement. Each such increase in the Base Salary shall be treated for all
purposes of this Agreement as Executive's Base Salary. Base Salary shall
not be decreased at any time without the express written consent of
Executive.
4.2 Annual Bonus.
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(a) Executive shall be eligible to earn an annual cash bonus ("Annual
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Bonus") in accordance with the terms hereof for each Fiscal Year which
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begins during the Employment Period.
(b) The WKI Board or the Compensation Committee, as applicable,
(collectively, the "Board or Committee") shall establish written
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performance goals, the achievement of which will determine the amount
of the Executive's annual bonuses for the 2003 Fiscal Year and later
Fiscal Years that end during the Employment Period. Performance goals
for other Fiscal Years shall be established annually by the Board or
Committee, after consultation wit the Executive, within ninety (90)
calendar days after the first day of the applicable Fiscal Year. If
Executive achieves the target level of such performance goals (the
"Target Annual Goals"), as determined by the Board or Committee, his
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Annual Bonus for that Fiscal year shall be equal to seventy percent
(70%) (the "Target Percentage") of Executive's Base Salary (the
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"Target Annual Bonus"). If Executive achieves the maximum level of
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such performance goals ("Maximum Annual Goals") for any such Fiscal
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year, as determined by the Board or Committee, his Annual Bonus for
that Fiscal Year shall be one hundred and forty percent (140%) (the
"Maximum Percentage") of Executive's Base Salary (the "Maximum Annual
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Bonus"). The Annual Bonus for any Fiscal Year may exceed the Maximum
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Annual Bonus at the discretion of the Board or Committee. The Target
Percentage and the Maximum Percentage may be increased by the Board or
Committee, from time to time, but may not be decreased below the above
specified percentages of Executive's Base Salary without the express
written consent of Executive. If Executive achieves a level of
performance which falls between the Target Annual Goals and the
Maximum Annual Goals, linear interpolation shall be applied to
determine Executive's Annual Bonus for such year.
(c) Except as described in the following sentence, the Company shall
pay the entire Annual Bonus that is payable with respect to a Fiscal
Year in a lump sum cash payment as soon as practicable after the Board
or Committee determines whether and the degree to which Maximum Annual
Goals or Target Annual Goals have been achieved following the close of
such Fiscal Year. Any such Annual Bonus shall in any event be
determined and paid within ninety (90) calendar days after the end of
the Fiscal Year.
4.3 Retention Bonus.
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(a) Executive shall be eligible for a cash retention bonus (the
"Retention Bonus") equal to a total of one hundred percent (100%) of
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Base Salary in accordance with the following vesting schedule:
(i) since Executive remained employed by the Company through
December 31, 2002, a portion of the Retention Bonus equal to
twenty-five percent (25%) of Base Salary was vested on that date;
(ii) since Executive remained employed by the Company until
January 31, 2003, a portion of the Retention Bonus equal to an
additional twenty-five percent (25%) of Base Salary was vested on that
date; and
(iii) if Executive remains employed by the Company through
December 31, 2003, a portion of the Retention Bonus equal to an
additional fifty percent (50%) of Base Salary shall vest.
(b) Each portion of the Retention Bonus shall be paid in cash to
Executive no later than thirty (30) calendar days after it vests in
accordance with the provisions of Section 4.3(a) above.
(c) In the event of a Termination Without Cause or a Termination for
Good Reason, or if Executive's Termination of Employment is due to his
death or Disability, then he or his Beneficiaries, as the case may be,
shall be vested in and paid (in addition to any portion of the
Retention Bonus which previously vested but was unpaid), the portion
of the unvested portion of the Retention Bonus on a time-prorated
basis (the "Prorata Retention Bonus"), which shall consist of the
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following:
(i) if the amount referred to in Section 4.3(a)(iii) is not
vested on the Date of Termination, the product of fifty percent (50%)
of Base Salary multiplied by a fraction (not in excess of 1.00), the
numerator of which is the number of days which have elapsed from the
Employment Date through the Date of Termination and the denominator of
which is the number of days from the Employment Date through December
31, 2003.
Article V. PARTICIPATION IN EQUITY PLAN
5.1 Executive and the Company agree that Executive shall be a participant
in the Equity Plan on terms and conditions mutually agreeable to the
Executive and the Compensation Committee. Executive and the Company agree
that the parties shall negotiate in good faith to establish appropriate
terms for the reservation and authorization for the issuance of Stock under
the Equity Plan with respect to Executive. If Executive and the Company do
not execute a written agreement setting forth appropriate provisions
pursuant to the immediately preceding sentence by the Agreement Date, then
Executive shall have Good Reason to terminate his employment, without the
requirement under this Agreement to comply with the provisions of Section
7.3(c).
5.2 In the event of a conflict between this Agreement and the Equity Plan,
the provisions of the Equity Plan shall control, including without
limitation, all provisions
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pertaining to Executive's rights under the Equity Plan in the event of a
Change of Control or a Termination of Employment.
Article VI. BENEFITS AND PERQUISITES
6.1 Benefit Plans, Perquisites and Additional Payments.
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(a) During the Employment Period, Executive shall be entitled to
participate in the welfare benefit plans and programs and perquisites
of the Company on terms not less favorable than those in effect for
other senior executives of the Company from time to time; provided,
that Executive shall not be covered by any severance plan, program or
policy during the Employment Period.
(b) During the Employment Period, Executive shall be entitled to
participate in the retirement and savings benefit plans and programs
of the Company on terms not less favorable than those in effect for
other senior executives of the Company from time to time.
(c) Without limiting the generality of the foregoing, during the
Employment Period, Executive shall continue to receive a cash benefits
allowance of $35,000 per year, which amount shall be paid (in arrears)
no later than January 31 of the following year.
(d) During the Employment Period, Executive shall also be entitled to
participate in the Long-Term Incentive Plan or such other plan or
program sponsored by the Company providing deferred compensation or
retirement benefits, as in effect from time to time.
(e) Notwithstanding any provision of the Long-Term Incentive Plan or
this Agreement to the contrary, in the event of a Change of Control
during the Employment Period , in addition to any amounts payable to
the Executive under this Agreement, the Equity Plan, the Long-Term
Incentive Plan or otherwise, Executive shall also be entitled to
receive no later than thirty (30) days after the Change of Control a
lump sum cash payment in immediately available funds equal to (A)
minus (B), where:
(A) = the difference between (1) two million dollars
($2,000,000) and (2) all amounts paid to the
Executive under the Long-Term Incentive Plan (or
which become payable as a result of the Change of
Control or his Termination of Employment, if
applicable); and
(B) = the severance benefits which are payable under
Section 7.3(a)(ii) hereof (in the event that
Executive also incurs a Termination Without Cause
or a Termination for Good Reason as a result of
the Change of Control).
6.2 Expenses. During the Employment Period, Executive shall be entitled to
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receive prompt reimbursement for all reasonable employment-related expenses
incurred by
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Executive upon the receipt by the Company of an accounting for such
expenses in accordance with the practices, policies and procedures
applicable to other senior executives of the Company.
6.3 Office; Support Staff. During the Employment Period, Executive shall
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be entitled to an office, and to secretarial and other assistance,
appropriate to his position and duties under this Agreement.
6.4 Gross-Up Payment.
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(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that
any Payment would be subject to the Excise Tax, then Executive shall
be entitled to receive an additional payment (the "Gross-Up Payment")
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in an amount such that, after payment by Executive of all Taxes (and
any interest or penalties imposed with respect to such Taxes),
including any income taxes (and any interest and penalties imposed
with respect thereto) and Excise Tax imposed upon the Gross-Up
Payment, Executive retains an amount of the Gross-Up Payment equal to
the Excise Tax imposed upon the Payments. Notwithstanding the
foregoing provisions of this Section 6.4(a), if it shall be determined
that Executive is entitled to the Gross-Up Payment, but that the
Parachute Value of all Payments does not exceed one hundred and ten
percent (110%) of the Safe Harbor Amount, then except as provided
below, no Gross-Up Payment shall be made to Executive and the amounts
payable under this Agreement, other than amounts or benefits provided
under Article V of this Agreement or pursuant to any other option or
equity grants to Executive (the "Subject Payments"), shall be reduced
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(but not below zero) so that the Parachute Value of all Payments, in
the aggregate, equals the Safe Harbor Amount. The reduction of the
amounts payable hereunder, if applicable, shall be made by first
reducing the payments under Section 7.3(a)(ii), unless an alternative
method of reduction is elected by Executive, and in any event shall be
made in such a manner as to maximize the Value of all Payments
actually made to Executive. For purposes of reducing the Payments to
the Safe Harbor Amount, only the Subject Payments shall be reduced. If
the reduction of the Subject Payments would not result in a reduction
of the Parachute Value of all Payments to the Safe Harbor Amount, no
amounts payable under the Agreement shall be reduced pursuant to this
Section 6.4(a), and the Gross-Up Payment shall be made to Executive.
The Company's obligation to make Gross-Up Payments under this Section
6.4 shall not be conditioned upon Executive's Termination of
Employment.
(b) Subject to the provisions of Section 6.4(c), all determinations
required to be made under this Section 6.4, including whether and when
a Gross-Up Payment is required, the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination,
shall be made by Ernst & Young, LLP, or such other nationally
recognized certified public accounting firm as may be designated by
Executive (the "Accounting Firm"). The Accounting Firm shall provide
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detailed supporting calculations both to the Company and Executive
within fifteen (15) business days of the receipt of notice from
Executive that there
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has been a Payment or such earlier time as is requested by the
Company. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting
the Change of Control, Executive may appoint another nationally
recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 6.4, shall be paid by the Company
to Executive within five (5) business days of the receipt of the
Accounting Firm's determination. Any determination by the Accounting
Firm shall be binding upon the Company and Executive. As a result of
the uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it
is possible that Gross-Up Payments that will not have been made by the
Company should have been made (the "Underpayment"), consistent with
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the calculations required to be made hereunder. In the event the
Company exhausts its remedies pursuant to Section 6.4(c) and Executive
thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that
has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification
shall be given as soon as practicable, but no later than ten (10)
business days after Executive is informed in writing of such claim.
The Executive shall apprise the Company of the nature of such claim
and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the
thirty (30) calendar day period following the date on which Executive
gives such notice to the Company (or such shorter period ending on the
date that any payment of Taxes with respect to such claim is due). If
the Company notifies Executive in writing prior to the expiration of
such period that the Company desires to contest such claim, Executive
shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time,
including accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties)
incurred in connection
12
with such contest, and shall indemnify and hold Executive harmless, on
an after-tax basis, for any Excise Tax or income tax (including
interest and penalties) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing
provisions of this Section 6.4(c), the Company shall control all
proceedings taken in connection with such contest, and, at its or
their sole discretion, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the applicable
taxing authority in respect of such claim and may, at its or their
sole discretion, either direct Executive to pay the tax claimed and
xxx for a refund or contest the claim in any permissible manner, and
Executive agrees to prosecute such contest to a determination before
any administrative tribunal, in a court of initial jurisdiction and in
one or more appellate courts, as the Company shall determine;
provided, however, that, if the Company direct or directs Executive to
pay such claim and xxx for a refund, the Company shall advance the
amount of such payment to Executive, on an interest-free basis, and
shall indemnify and hold Executive harmless, on an after-tax basis,
from any Excise Tax or income tax (including interest or penalties)
imposed with respect to such advance or with respect to any imputed
income in connection with such advance; and provided, further, that
any extension of the statute of limitations relating to payment of
Taxes for the taxable year of Executive with respect to which such
contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of the contest
shall be limited to issues with respect to which the Gross-Up Payment
would be payable hereunder, and Executive shall be entitled to settle
or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
(d) If, after the receipt by Executive of a Gross-Up Payment or an
amount advanced by the Company pursuant to Section 6.4(c), Executive
becomes entitled to receive any refund with respect to the Excise Tax
to which such Gross-Up Payment relates or with respect to such claim,
Executive shall (subject to the Company's complying with the
requirements of Section 6.4(c), if applicable) promptly pay to the
Company the amount of such refund (together with any interest paid or
credited thereon after Taxes applicable thereto). If, after the
receipt by Executive of an amount advanced by the Company pursuant to
Section 6.4(c), a determination is made that Executive shall not be
entitled to any refund with respect to such claim and the Company do
or does not notify Executive in writing of its or their intent to
contest such denial of refund prior to the expiration of thirty (30)
calendar days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such
advance shall be offset, to the extent thereof, against the amount of
Gross-Up Payment required to be paid.
(e) Notwithstanding any other provision of this Section 6.4, the
Company may, in its sole discretion, withhold and pay over to the
Internal Revenue Service or any other applicable taxing authority, for
the benefit of Executive, all or any portion of any Gross-Up Payment,
and Executive hereby consents to such withholding.
13
Article VII. TERMINATION BENEFITS
7.1 Termination for Cause, Other Than for Good Reason, Death or
-----------------------------------------------------------
Disability, or At or After End of Employment Term. If (i) the Company
-------------------------------------------------
terminates Executive's employment for Cause, (ii) Executive terminates his
employment other than for Good Reason, death or Disability, or (iii) the
Executive's employment is terminated at or after the end of the Employment
Period for any reason (whether by Executive or the Company), including,
without limitation, by virtue of the Company providing a Notice of
Non-Extension to the Executive, the Company shall pay to Executive as soon
as reasonably possible but in no event later than thirty (30) calendar days
after the Date of Termination an amount equal to the sum of Executive's
Accrued Base Salary, Accrued Annual Bonus, and Accrued Retention Bonus. The
respective provisions of the Equity Plan, the Long-Term Incentive Plan and
any other benefit plans and perquisite programs in which Executive
participates shall govern whether Executive shall be entitled to any
benefits thereunder in the event his employment is terminated under any of
the foregoing circumstances. Notwithstanding the foregoing, in the event
that the Executive's employment is terminated after the end of the
Employment Period under circumstances which would entitle him to receive
severance benefits under a severance plan or policy of the Company in
effect as such time, the amount of the Executive's severance pay shall in
no event be less than one (1) year's Base Salary (as in effect at
termination), payable in a lump sum, in cash, within thirty (30) days of
the Date of Termination.
7.2 Termination for Death or Disability. If, before the end of the
-----------------------------------
Employment Period, Executive's employment terminates due to his death or
Disability, the Company shall pay to Executive or his Beneficiaries, as the
case may be, as soon as reasonably possible but in no event later than
thirty (30) calendar days after the Date of Termination, an amount which is
equal to the sum of Executive's Accrued Base Salary, Accrued Annual Bonus,
Accrued Retention Bonus, and Prorata Retention Bonus. Further, if the Date
of Termination occurs during the period commencing from July 1 through
December 31 of any Fiscal Year, Executive or his Beneficiaries, as the case
may be, shall be paid a Prorata Annual Bonus as soon as reasonably possible
but in no event later than thirty (30) calendar days after the Date of
Termination. The respective provisions of the Equity Plan, Long-Term
Incentive Plan and any other benefit plans or perquisite programs in which
Executive participates shall govern whether Executive or his Beneficiaries,
as applicable, shall be entitled to any benefits under such plans or
programs in the event of a termination of Executive's employment for death
or Disability.
7.3 Termination Without Cause or for Good Reason.
--------------------------------------------
(a) In the event of a Termination Without Cause or a Termination for
Good Reason during the Employment Period, Executive shall receive the
following:
(i) as soon as reasonably possible but in no event later than
thirty (30) calendar days after the Date of Termination, a lump sum
amount in immediately available funds equal to the sum of Executive's
Accrued Base Salary, Accrued Annual Bonus, Accrued Retention Bonus,
and Prorata Retention Bonus;
14
(ii) as soon as reasonably possible but in no event later than
thirty (30) calendar days after the Date of Termination, a lump sum
amount in immediately available funds equal to 135% of Executive's
Base Salary;
(iii) if the Date of Termination occurs during the period
commencing from July 1 through December 31 of any Fiscal Year, as soon
as reasonably possible but in no event later than thirty (30) calendar
days after the Date of Termination, a lump sum amount in immediately
available funds equal to the Prorata Annual Bonus;
(iv) as soon as reasonably possible but in no event later than
thirty (30) calendar days after the Date of Termination, a lump sum
amount in immediately available funds equal to the total amount (if
any) of Executive's unvested benefits under any plan or program
sponsored by the Company, providing deferred compensation or
retirement benefits, that are forfeited on account of the Termination
of Employment, and that would have vested, had Executive's employment
continued through the end of the Severance Period;
(v) the provisions of the Equity Plan, the Long-Term Incentive
Plan and any other benefit plans or perquisite programs in which
Executive is a participant as of the Date of Termination shall govern
whether Executive shall be entitled to any benefits under such plans
or programs in the event of a Termination for Good Reason or a
Termination Without Cause;
(vi) the medical and dental benefits referred to in Section
6.1(a) to which Executive is entitled as of the Date of Termination
through the Severance Period; and
(vii) as soon as reasonably possible but in no event later than
thirty (30) calendar days after the Date of Termination, but without
duplication of the foregoing, a lump sum cash payment equal to the
present value (determined using the Interest Rate) of the amounts
payable under Section 6.1(c) for the period from the Date of
Termination through the Severance Period.
(b) In addition to the amounts payable under Subsection 7.3(a) above,
in the event that Executive's employment is terminated on account of a
Termination Without Cause or a Termination for Good Reason during the
Employment Period (regardless of whether a Change of Control has
occurred), Executive shall also be entitled to receive the amounts
described in Section 6.1(e) hereof.
(c) Executive's Termination of Employment shall not be considered to
be for Good Reason unless:
(i) not more than ninety (90) calendar days after the occurrence
(or if later, not more than ninety (90) calendar days after the
Executive becomes aware) of the event or events alleged to constitute
Good Reason, Executive provides the Company, as applicable, with
written notice (the "Notice of Good Reason") of his intent to consider
---------------------
the Termination for Good Reason, including a detailed description of
the specific reasons which form the basis for such consideration, and
15
demanding that such event or events be cured not later than ten (10)
business days after the Company receives the Notice of Good Reason
(the "Cure Period");
(ii) the Company shall have failed to cure such event or events
during the Cure Period; and
(iii) not more than ninety (90) calendar days following the
expiration of the Cure Period, Executive shall have given the Company
a second notice (a "Notice of Termination for Good Reason") stating
-------------------------------------
that such cure has not occurred and that as a result, Executive is
terminating his employment for Good Reason on the date (after the end
of the Cure Period) specified in the Notice of Termination for Good
Reason. A Notice of Termination for Good Reason shall not be based
upon any reason or reasons other than one or more reasons set forth in
the Notice of Good Reason.
Article VIII. MISCELLANEOUS
8.1 Public Announcement. Executive shall be given a reasonable opportunity
-------------------
to review and comment on any public announcement by the Company or any of
its Subsidiaries relating to this Agreement or Executive's employment by
the Company.
8.2 Approvals. The Company represents and warrants to Executive that it
---------
has taken all corporate action necessary to authorize and enter into this
Agreement.
8.3 No Offset. The obligations of the Company (and World Kitchen, Inc.
---------
solely for purposes of Section 8.5) to make the payments provided for in
this Agreement and otherwise to perform their obligations hereunder shall
not be affected by any circumstances, including set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company or
World Kitchen, Inc. may have against Executive or others. Any claim which
the Company or World Kitchen, Inc. as applicable, may have against
Executive, whether for a breach of this Agreement or otherwise, shall be
brought in a separate action or proceeding and not as part of any action or
proceeding brought by Executive to enforce any rights against the Company
or World Kitchen, Inc. as applicable, under this Agreement.
8.4 No Mitigation. In no event shall Executive be obligated to seek other
-------------
employment or to take any other action to mitigate the amounts payable to
Executive under any of the provisions of this Agreement, nor shall the
amount of any payment hereunder be reduced by any compensation earned as a
result of Executive's employment by another employer, except that any
continued welfare benefits provided for by Section 7.3(a)(vi) shall not
duplicate any benefits that are provided to Executive and his family by
such other employer and shall be secondary to any coverage provided by such
other employer.
8.5 Guarantee. World Kitchen, Inc. agrees to guarantee the payment of all
---------
liabilities under this Agreement, except the payment of amounts which are
due and owing under the Long-Term Incentive Plan or the Equity Plan, which
payments shall remain the sole obligation of the Company. World Kitchen,
Inc. represents and warrants to Executive
16
that it has taken all corporate action necessary to authorize and make the
foregoing guarantee of payment.
8.6 Liability Insurance and Indemnification. The Company shall maintain
---------------------------------------
directors' and officers' liability insurance for Executive while employed,
and for a six (6) year period following Termination of Employment at a
level equivalent to the most favorable and protective coverage for any
active officer or director of the Company. The Company agrees to indemnify
Executive for any job-related liability to the fullest extent permitted
under all applicable laws, its by-laws, and all other applicable
indemnification agreements of the Company and any of its Subsidiaries.
8.7 Non-Solicitation. In consideration of the benefits provided under this
----------------
Agreement, Executive hereby agrees to be bound by the provisions of this
Section. During the Employment Period and for a period of one (1) year
after termination of employment for any reason, Executive shall not in any
manner, directly or indirectly, induce or attempt to induce any employee of
the Companies or any Subsidiary or affiliate to quit or abandon his or her
employment, or any customer, independent contractor, consultant, supplier
or vendor of the Company Business to quit or abandon its relationship for
any purpose whatsoever. For purposes of this Section, "Company Business"
means the development, manufacture or purchase from third parties and
marketing of consumer bakeware, dinnerware, kitchen and household tools,
rangetop cookware and cutlery products.
8.8 Enforcement.
-----------
(a) If Executive incurs legal, accounting, expert witness or other
fees and expenses in an effort to establish, in connection with any
dispute with the Company, Executive's entitlement to compensation and
benefits under this Agreement, the Company shall, to the extent
Executive is successful in, or enters into a settlement with the
Company in which the Company agrees to resolve, such dispute,
reimburse Executive for such fees and expenses, to the extent the
incurrence and amount thereof are reasonable, and shall pay Executive
a Tax Gross-Up Payment in respect of the Taxes incurred by Executive
with respect to such reimbursement of fees and expenses. The Company
shall reimburse Executive for such fees and expenses on a monthly
basis upon Executive's request for reimbursement accompanied by
evidence that the fees and expenses were incurred.
(b) If the Company fails to pay any amount provided under this
Agreement when due, the Company shall pay interest on such amount at a
rate equal to the Interest Rate.
8.9 Beneficiary. If Executive dies prior to receiving all of the amounts
-----------
payable to him in accordance with the terms and conditions of this
Agreement, such amounts shall be paid to the beneficiary ("Beneficiary")
-----------
designated by Executive in writing to the Company during his lifetime, or
if no such Beneficiary is designated, to Executive's estate. Such payments
shall be made in a lump sum to the extent so payable and, to the extent not
payable in a lump sum, in accordance with the terms of this Agreement.
Executive, without the consent of any prior Beneficiary, may change his
designation of
17
designation of Beneficiary or Beneficiaries at any time or from time to
time by submitting to the Company a new designation in writing.
8.10 Assignment; Successors. Neither the Company nor World Kitchen, Inc.
----------
may assign its rights or obligations under this Agreement without the prior
written consent of Executive except to any surviving entity following a
Change of Control that has assumed in writing all of the obligations under
this Agreement. This Agreement shall be binding upon and inure to the
benefit of Executive, his estate and Beneficiaries, the Company and the
successors and permitted assigns of the Company. Any assignment or
attempted assignment in violation of this Section 8.10 shall constitute a
Good Reason event of termination.
8.11 Nonalienation. Except as otherwise expressly provided herein, benefits
-------------
payable under this Agreement shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
charge, garnishment, execution or levy of any kind, either voluntary or
involuntary, prior to actually being received by Executive, and any such
attempt to dispose of any right to benefits payable hereunder shall be
void.
8.12 Severability. If all or any part of this Agreement is declared by any
------------
court or governmental authority to be unlawful or invalid, such
unlawfulness or invalidity shall not serve to invalidate any portion of
this Agreement not declared to be unlawful or invalid. Any provision so
declared to be unlawful or invalid shall, if possible, be construed in a
manner which will give effect to the terms of such provision to the fullest
extent possible while remaining lawful and valid.
8.13 Amendment; Waiver. This Agreement shall not be amended or modified
-----------------
except by written instrument executed by the Company, World Kitchen, Inc.
and Executive. A waiver of any term, covenant or condition contained in
this Agreement shall not be deemed a waiver of any other term, covenant or
condition, and any waiver of any default in any such term, covenant or
condition shall not be deemed a waiver of any later default thereof or of
any other term, covenant or condition.
8.14 Notices. All notices hereunder shall be in writing and delivered by
-------
hand, by nationally-recognized delivery service that guarantees overnight
delivery, or by first-class, registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Company, to:
00000 Xxxxxxx Xxxxx
Xxx Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: General Counsel
18
If to Executive, to:
Xxxxxx XxXxxx
0000 Xxxxxxxxxx Xx.
XxXxxx, XX 00000
with a copy to:
Xx. Xxxxxxx X. Xxxxxxx
The Ayco Company
000 Xxxxx Xx.
Xxxxx 000
Xxxx Xxxxxx, XX 00000
The parties may from time to time designate a new address by notice given
in accordance with this Section 8.14. Notice shall be considered to have
been given when actually received by the addressee.
8.15 Counterparts. This Agreement may be executed in several counterparts,
------------
each of which shall be deemed to be an original but all of which together
shall constitute one and the same instrument.
8.16 Entire Agreement. This Agreement and each of the plans, benefit
----------------
programs and policies in effect from time to time during the Employment
Period forms the entire agreement between the parties hereto with respect
to the subject matter contained in the Agreement and in the respective
plans, benefit programs and policies and shall supersede all prior
agreements, promises and representations regarding employment,
compensation, severance or other payments or any other obligation of the
Company or any of its Subsidiaries upon Termination of Employment, whether
in writing or otherwise.
8.17 Applicable Law. This Agreement shall be interpreted and construed in
--------------
accordance with the laws of the State of Delaware, without regard to its
choice of law principles.
8.18 Survival of Executive's Rights. Each of the provisions of this
------------------------------
Agreement which by their terms are to be performed after, or which
expressly survive, the termination of this Agreement or the Date of
Termination shall survive the termination of Executive's employment, the
termination of this Agreement, or both.
19
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the Agreement Date.
WKI HOLDING COMPANY, INC.
By: /s/ Xxxxx Xxxxxxx
--------------------------------
Its:
-------------------------------
Date: July 31, 2003
------------------------------
WORLD KITCHEN, INC.
By:
--------------------------------
Its:
-------------------------------
Date:
------------------------------
EXECUTIVE:
/s/ Xxxxxx XxXxxx
-----------------------------------
Xxxxxx XxXxxx
July 31, 2003
-----------------------------------
Date
20
