THE KNOT LOGO]
[THE
KNOT
LOGO]
November
5, 2008
Mr.
Xxxxx
Xxx
Dear
Xxxxx:
It
gives
me great pleasure to confirm the terms by which The Knot, Inc. will continue
your employment as the Chief
Executive Officer,
reporting solely and directly to the Board of Directors. You shall be the
senior-most executive officer of The Knot and shall have the duties and
responsibilities customarily exercised by an individual serving in this position
in a company of the size and nature of The Knot.
The
terms
of this agreement will be effective immediately, except with respect to the
changes to your vacation days, which shall be effective January 1,
2009.
Compensation
Terms
Base
Salary
Your
annualized salary rate is $370,000 (“Base Salary”), which will be paid
semi-monthly, on the 15th and on the last workday of the month. The Compensation
Committee shall review your performance and Base Salary annually for potential
increases. Your Base Salary will be subject to withholding of income, social
security and employment taxes in accordance with The Knot’s normal
practices.
Incentive
Bonus
You
will
be eligible to earn an annual cash incentive bonus expressed as a percentage
of
Base Salary. Each year, your target and maximum bonus opportunities will
be set
by the Compensation Committee. The amount of your actual bonus will be
determined according to your achievement of certain performance criteria
established by the Compensation Committee. In the event of a “change in control”
(which, for all purposes under this agreement, shall be as defined in The
Knot’s
Amended and Restated 1999 Stock Incentive Plan), thereafter the target for
your
annual cash incentive bonus shall be at least 50% of your Base Salary, the
maximum bonus opportunity shall be at least 100% of your Base Salary, and
for
purposes of this calculation, your Base Salary shall be assumed to be the
greater of $500,000 and your actual base salary in effect on the date of
the
calculation. The incentive bonus will be conditioned upon the other terms
and
conditions of the incentive compensation program for executive officers,
as may
be in effect from time to time, and is payable within thirty (30) days following
the completion of The Knot’s annual audit and approval by the Compensation
Committee. The incentive bonus is not guaranteed and is completely
discretionary; you may receive an incentive bonus in one year but not the
next.
Other
Compensation
You
will
be eligible to participate in future incentive compensation programs for
executive officers, if and when such programs are established by the
Compensation Committee of the Board of Directors, at a level commensurate
with
your position at the time awards are granted and on the same general terms
and
conditions as apply to the other executive officers of The Knot. In addition,
in
no event will the terms of equity awards granted to you with respect to
accelerated vesting upon a “change in control” be less favorable than the terms
made available to any other executive officer, and The Knot will cause any
award
to be modified if and as necessary to carry out this provision.
Mr.
Xxxxx
Xxx
November
5, 2008
Page
2
Severance
If
your
employment is involuntarily terminated without cause by The Knot or a successor
entity, or if you resign for “Good Reason,” The Knot agrees to pay your Base
Salary for two (2) years thereafter, at your rate of pay in effect immediately
prior to such termination or resignation, and for two (2) years after such
termination or resignation receive all benefits (other than vesting of any
equity award) that were associated with your employment immediately prior
to
such termination or resignation (to the extent and at such levels that these
benefits remain available to executive employees of The Knot generally during
such 2-year period). These Base Salary payments shall be paid out in
semi-monthly installments, commencing on The Knot’s first regular payroll date
after (1) such termination (in connection with an involuntary termination
without cause) or (2) the tenth business day after the end of the Cure Period,
as defined below (in connection with a Good Reason resignation), and continuing
on each of The Knot’s regular payroll dates thereafter, and will be subject to
all applicable withholdings and taxes. The Knot’s payment of Base Salary or
provision of benefits under this paragraph will be subject in all cases to
your
continued and complete compliance during the two-year severance period with
the
terms and conditions of the non-disclosure, non-competition and non-solicitation
agreement that you will enter into with The Knot pursuant to this agreement.
In
the event of a “change in control” before or in connection with any termination
or resignation subject to this paragraph, your Base Salary for purposes of
this
paragraph shall be assumed to be the greater of $500,000 and your actual
base
salary in effect immediately prior to such termination or
resignation.
An
involuntary termination “without cause” shall mean a termination of employment
other than for death, disability, termination for Cause or any resignation
by
you other than a resignation for Good Reason. “Cause” shall mean (1) your
willful failure to perform the principal elements of your duties to The Knot
or
any of its subsidiaries, which failure is not cured within 20 days following
written notice to you specifying the conduct to be cured, (2) your conviction
of, or plea of nolo contendere to, a felony (regardless of the nature of
the
felony) or any other crime involving dishonesty, fraud, or moral turpitude,
(3)
your gross negligence or willful misconduct (including but not limited to
acts
of fraud, criminal activity or professional misconduct) in connection with
the
performance of your duties and responsibilities to The Knot or any of its
subsidiaries, (4) your failure to substantially comply with the rules and
policies of The Knot or any of its subsidiaries governing employee conduct
or
with the lawful directives of the Board of Directors of The Knot, or (5)
your
breach of any non-disclosure, non-solicitation, non-competition or other
restrictive covenant obligations to The Knot or any of its subsidiaries.
“Good
Reason” shall mean (1) any reduction of your Base Salary, (2) the relocation of
your principal place of business outside of New York City, (3) a material
breach
of this agreement by The Knot, (4) the material diminution of your
responsibilities or authority, any reduction of your title or any change
in the
reporting structure set forth in the first paragraph hereof, (5) at any time
after a “change in control,” the material and repeated interference by the Board
of Directors with the discharge of your duties or responsibilities hereunder,
or
(6) immediately following a “change in control” and for two years thereafter,
you are not the senior-most executive officer of The Knot (or, if The Knot
is
then a subsidiary, of The Knot’s ultimate operating parent company); provided,
however, that no Good Reason shall exist if you have not given written notice
to
The Knot of the initial existence of the Good Reason condition(s) and until
The
Knot has had thirty (30) days to cure such event (the “Cure Period”) after the
date on which you give The Knot written notice specifying such event in specific
detail before such event permits you to terminate your employment for Good
Reason.
Mr.
Xxxxx
Xxx
November
5, 2008
Page
3
Leased
Automobile
You
shall
be entitled to a company-provided leased automobile for personal use, the
make
and model of which shall be comparable to the company-provided leased automobile
in your possession on the effective date of this agreement. All expenses
for
routine maintenance, repair and insurance, your rights and obligations regarding
replacement leased automobiles and the tax treatment of the automobile as
a
fringe benefit to you shall be governed by The Knot’s standard practices,
policies and procedures in effect from time to time.
Benefits
and Other Terms
Benefits
and Expenses
You
will
continue to participate in The Knot benefits program as in effect on the
date
hereof. A full description of your benefits is contained in official plan
documents that are available to you. Notwithstanding anything to the contrary
contained in the official plan documents, you shall be entitled to six (6)
weeks
of vacation per year. As an executive officer, you will be covered by any
supplemental travel and business expense reimbursement policies in effect
for
executive officers. Please be advised that The Knot reserves the right to
amend,
change and terminate its policies, programs and employee benefit plans at
any
time during your employment.
Reimbursement
of Legal Expenses
If,
at
any time after a “change in control,” any contest or dispute shall arise between
you and The Knot regarding any provision of this agreement, The Knot shall
reimburse you for all legal fees and expenses reasonably incurred by you
in
connection with such contest or dispute, but only if you prevail to a
substantial extent with respect to your claims brought and pursued in connection
with such contest or dispute. Such reimbursement shall be made as soon as
practicable following the resolution of such contest or dispute (whether
or not
appealed) to the extent The Knot receives written evidence of such fees and
expenses.
Non-Disclosure,
Non-Competition and Non-Solicitation Agreement
This
agreement is conditional upon your signing of a non-disclosure, non-competition
and non-solicitation agreement in the form previously provided to
you.
Indemnification
The
Indemnification Agreement for Directors and Officers between you and The
Knot
shall continue in full force and effect. In addition, you shall continue
to be
covered by The Knot’s insurance policy for directors and officers.
At-Will
Employment
Please
understand that your employment will be “at will,” meaning that either you or
The Knot may terminate the relationship at any time, with or without cause
or
notice. Please also note that The Knot reserves the right to revise, supplement,
or rescind any of its policies, practices, and procedures (including those
described in the Employee Handbook) as it deems appropriate in its sole and
absolute discretion.
Mr.
Xxxxx
Xxx
November
5, 2008
Page
3
Compliance
With Section 409A of the Internal Revenue Code
The
intent of the parties is that payments and benefits under this agreement
comply
with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”),
and the regulations and guidance promulgated thereunder (collectively, “Section
409A”), and, accordingly, to the maximum extent permitted, this agreement shall
be interpreted to be in compliance therewith. If you notify The Knot (with
specificity as to the reason therefor) that you believe that any provision
of
this agreement (or of any award of compensation, including equity compensation
or benefits) would cause you to incur any additional tax or interest under
Section 409A and The Knot concurs with such belief or The Knot (without any
obligation whatsoever to do so) independently makes such determination, The
Knot
shall, after consulting with you, reform such provision to try to comply
with
Section 409A through good faith modifications to the minimum extent reasonably
appropriate to conform with Section 409A. To the extent that any provision
hereof is modified in order to comply with Section 409A, such modification
shall
be made in good faith and shall, to the maximum extent reasonably possible,
maintain the original intent and economic benefit to you and The Knot of
the
applicable provision without violating the provisions of Section
409A.
A
termination of employment shall not be deemed to have occurred for purposes
of
any provision of this agreement providing for the payment of any amounts
or
benefits upon or following a termination of employment unless such termination
is also a “separation from service” within the meaning of Section 409A and, for
purposes of any such provision of this agreement, references to a “termination,”
“termination of employment” or like terms shall mean “separation from service.”
If you are deemed on the date of termination to be a “specified employee” within
the meaning of that term under Section 409A(a)(2)(B) of the Code, then with
regard to any payment or the provision of any benefit that is specified as
subject to this Section or that is otherwise considered deferred compensation
under Section 409A payable on account of a “separation from service,” such
payment or benefit shall be made or provided at the date which is the earlier of
(A) the expiration of the six (6)-month period measured from the date of
such
“separation from service” and (B) the date of your death (the “Delay Period”).
Upon the expiration of the Delay Period, all payments and benefits delayed
pursuant to this Section (whether they would have otherwise been payable
in a
single sum or in installments in the absence of such delay) shall be paid
or
reimbursed to you in a lump sum, and any remaining payments and benefits
due
under this agreement shall be paid or provided in accordance with the normal
payment dates specified for them herein.
All
expenses or other reimbursements under this agreement shall be made on or
prior
to the last day of the taxable year following the taxable year in which such
expenses were incurred by you (provided that if any such reimbursements
constitute taxable income to you, such reimbursements shall be paid no later
than March 15th of the calendar year following the calendar year in which
the
expenses to be reimbursed were incurred), and no such reimbursement or expenses
eligible for reimbursement in any taxable year shall in any way affect the
expenses eligible for reimbursement in any other taxable year.
In
the
event that it is determined that any payment or distribution of any type
to or
for your benefit, whether paid or payable or distributed or distributable,
pursuant to the terms of this agreement would be subject to the additional
tax
and interest imposed by Section 409A, or any interest or penalties with respect
to such additional tax (such additional tax, together with any such interest
or
penalties, are collectively referred to as the “409A Tax”), then you shall be
entitled to receive an additional payment (a “409A Tax Restoration Payment”) in
an amount that shall fund the payment by you of any 409A Tax as well as all
income taxes imposed on the 409A Tax Restoration Payment, any 409A Tax imposed
on the 409A Tax Restoration Payment and any interest or penalties imposed
with
respect to taxes on the 409A Tax Restoration Payment or any 409A
Tax.
Mr.
Xxxxx
Xxx
November
5, 2008
Page
5
Golden
Parachute Tax
In
the
event it shall be determined that any payment or distribution by The Knot
to or
for your benefit (whether paid or payable or distributed or distributable
pursuant to the terms of this agreement or otherwise) (a “Payment”) would be
subject to the excise tax imposed by Section 4999 of the Code or any interest
or
penalties are incurred by you with respect to such excise tax (such excise
tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the “Excise Tax”), then you shall be entitled to receive an
additional payment (a “Gross-Up Payment”) in an amount such that after payment
by you of all taxes, including, without limitation, any income taxes (and
any
interest and penalties imposed with respect thereto) and Excise Tax imposed
upon
the Gross-Up Payment, you retain an amount of the Gross-Up Payment equal
to the
Excise Tax (including any interest or penalties imposed with respect to such
taxes) imposed upon the Payments. The calculations under this paragraph will
be
made in a manner consistent with the requirements of Code Sections 280G and
4999, as in effect at the time the calculations are made. The Gross-Up Payment
shall be paid to you at the earliest possible time after receiving notice
from
you, but not later than by the end of the calendar year in which the taxes
are
paid to the government, or if an audit or a tax dispute related to the Gross-Up
Payment occurs, by the end of the calendar year after the year in which the
disputed taxes are paid (or the year after the year in which such an audit
or
dispute is concluded, if no taxes are paid).
* * * * *
Mr.
Xxxxx
Xxx
November
5, 2008
Page
6
Please
indicate your acceptance of these terms by returning the original signed
and
dated version of this agreement to my attention.
Sincerely,
/s/
XXX
XXXXXX
Xxx
Xxxxxx
Chairman,
Compensation Committee of the Board of Directors
By
signing, dating and returning this agreement, you accept our terms of
employment.
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/s/
XXXXX XXX
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11/5/08
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Xxxxx
Xxx
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Date
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