1
Exhibit 10.12
AGREEMENT
---------
AGREEMENT, dated as of the 31st day of December, 1996 (the "Agreement"), by
and between Syratech Corporation, a Delaware Corporation (the "Company"), THL
Transaction I Corp., a Delaware corporation ("THL I"), Xxxxxxx Xxxxxxxx ("Xx.
Xxxxxxxx") and Xxxxxx Xxxxxx (the "Executive").
RECITALS
--------
WHEREAS, the Executive is currently employed by the Company pursuant to the
Employment Agreement by and between the Company and the Executive, dated as of
the 16th day of August, 1991 (the "Employment Agreement");
WHEREAS, the Company entered into an Agreement and Plan of Merger, dated as
of the 23rd day of October, 1996 (the "Merger Agreement"), by and between THL I
and the Company (the merger contemplated therein referred to herein as the
"Merger");
WHEREAS, Xx. Xxxxxxxx desires to transfer shares of common stock of the
Company (the "Shares") that he owns to the Company so that the Company may
transfer an equal number of newly issued Shares to the Executive for services
rendered to the Company;
WHEREAS, Xx. Xxxxxxxx, the Company and THL I desire that the Executive have
an increased ownership interest in the Company to encourage the Executive's full
attention and dedication to the Company;
WHEREAS, the Company and THL I acknowledge that as a result of the
transactions contemplated in this Agreement, the Company should receive tax
deductions at no out-of-pocket cost to the Company, and the Company and THL I
desire to transfer the economic benefit of such tax deductions to the Executive
to reduce the Executive's out-of-pocket cost resulting from the transactions
contemplated in this Agreement; and
WHEREAS, pursuant to agreements dated the date hereof (the "Other
Agreements") with Mr. E. Xxxxx Xxxxxxxx and Xx. Xxxx Xxxxxx (the "Other
Executives"), Xx. Xxxxxxxx is agreeing to transfer Shares to the Company on
certain dates.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements set forth herein, the parties hereto agree as follows:
1. TRANSFER OF SHARES BY XX. XXXXXXXX. (a) On December 31, 1996, Xx.
Xxxxxxxx will transfer to the Company 10,604
2
Shares, which, for purposes of this Section l(a) (and Sections l(b), 2(a) and
2(b) hereof) shall have a value of $32 per Share, or an aggregate value of
$339,328.
(b) On January 14, 1997, Xx. Xxxxxxxx will transfer to the Company 10,628
Shares, or an aggregate value of $340,096.
(c) On January 14, 1998, Xx. Xxxxxxxx will transfer to the Company the
largest number of whole Shares (as opposed to fractional shares) that has an
aggregate value no greater than $99,991; provided however, Xx. Xxxxxxxx shall
not be obliged to transfer, and shall not transfer, to the Company more than
3,124 Shares pursuant to this Section l(c). For purposes of this Section l(c)
and Section 3(c), the value of the Shares shall be equal to the average closing
price per share for the prior twenty trading days on an established securities
exchange, or, if the shares are not traded on such exchange, the closing or last
price per share reported by the National Association of Securities Dealers
Automated Quotation System. If the Shares are not so traded or quoted, the value
of the Shares shall be such value as is reasonably and in good faith determined
by the Board of Directors of the Company.
2. TRANSFER OF SHARES BY THE COMPANY. (a) On December 31, 1996, the Company
will transfer to the Executive that number of newly issued Shares equal to the
number of Shares transferred by Xx. Xxxxxxxx to the Company pursuant to Section
L(A).
(b) On January 14, 1997, the Company will transfer to the Executive that
number of newly issued Shares equal to the number of Shares transferred by Xx.
Xxxxxxxx to the Company pursuant to Section l(b).
(c) On January 14, 1998, the Company will transfer to the Executive that
number of newly issued Shares equal to the number of Shares transferred by Xx.
Xxxxxxxx to the Company pursuant to Section l(c).
3. TAX GROSS-UP. (a) On December 31, 1996, the Company will pay to the
Executive in a lump sum in cash $234,346.
(b) On January 14, 1997, the Company will pay to the Executive in a lump
sum in cash an amount equal to the lesser of (x) the income tax benefit to the
Company from the transfer of Shares pursuant to Section 2(b) and the payment of
cash made pursuant to this Section 3(b) or (y) the aggregate amount of federal,
state and local income taxes owed by the Executive as a result of the transfer
of Shares pursuant to Section 2(b) and the payment of cash pursuant to this
Section 3(b); provided however,
2
3
that to the extent that such amount exceeds $234,876 (the "Excess Amount"), such
Excess Amount will be paid on January 14, 1998. The manner in which the payment
to be made under this Section 3(b) is to be calculated and subsequently adjusted
shall be determined in good faith by the Company.
(c) On January 14, 1998, the Company will pay to the Executive in a lump
sum in cash an amount equal to the lesser of (x) the income tax benefit to the
Company from the transfer of Shares pursuant to Section 2(c) and the payment of
cash made pursuant to this Section 3(c) or (y) the aggregate amount of federal,
state and local income taxes owed by the Executive as a result of the transfer
of Shares pursuant to Section 2(c) and the payment of cash pursuant to this
Section 3(c). The manner in which the payment to be made under this Section 3(c)
is to be calculated and subsequently adjusted shall be determined in good faith
by the Company.
(d) In no event shall any payments be made-to the Executive under this
Section 3 to the extent such payments, when aggregated with all other payments
to the Executive under this Section 3 and the value of Shares (determined at the
time of transfer) transferred to the Executive under Section 2 hereof, exceed
$1,317,693.
(e) In no event shall any payments be made to the Executive under this
Section 3 to the extent such payments, when added to the value of Shares
(determined at the time of transfer) transferred to the Executive under Section
2 hereof, after taking into account any other payments to which the Executive is
entitled or was paid from the Company, or any affiliate thereof, would result in
a loss of a deduction to the Company or any of its affiliates by reason of
Section 280G of the Internal Revenue Code of 1986, as amended (the "Excess
Payments"). To the extent any such Excess Payments have already been made to the
Executive, at the time of a determination of such Excess Payments, the Executive
shall promptly forfeit and return such Excess Payments to the Company. The
determination of whether there are Excess Payments shall be made in good faith
by the Company from time to time and shall be binding upon the Executive. In
addition, upon a final determination by a governmental authority that there are
Excess Payments, such Excess Payments shall be promptly returned to the Company
by the Executive. The Company shall have the right of set-off to collect the
amounts due the Company hereunder.
(f) Upon a final determination by a governmental authority that part or all
of the Company's or any of its affiliates deductions for income tax purposes
relating to the transfer of Shares to the Executive under Section 2 hereof and
the pay-
3
4
ments to the Executive under this Section 3 are disallowed as deductions for any
tax periods in which the deductions were taken by the Company or any of its
affiliates for any reason, the Executive shall promptly reimburse and pay to the
Company an amount equal to the taxes, interest and penalties assessed to the
Company, or any of its affiliates, any disallowed tax benefits of any of them
and any costs related thereto, resulting from such disallowed deductions, but in
no event greater than the aggregate payments made to the Executive under this
Section 3. The Company shall have the right of set-off to collect the amounts
due the Company hereunder.
4. WITHHOLDING TAXES. The Company shall withhold from any amounts payable
under this Agreement such federal, state, local or foreign taxes as shall be
required to be withheld pursuant to any applicable law or regulation by reason
of the Share transfers and payments referred to in Sections 2 and 3. The
Executive shall remit to the Company any additional withholding taxes
subsequently determined to be due by a governmental authority by reason of the
Share transfers and payments referred to in Sections 2 and 3.
5. CANCELLATION OF SHARES. The Company will cancel the Shares transferred
by Xx. Xxxxxxxx to the Company pursuant to Section 1. The Company will cancel
such Shares upon the Company's receipt of such Shares.
6. THE EXECUTIVE'S TAX RETURN. The Executive will report on his appropriate
income tax returns that the value of Shares received by him pursuant to Sections
2(a), 2(b) and 2(c) is that amount which is determined under Sections l(a), l(b)
and l(c), respectively.
7. EMPLOYMENT AGREEMENT. The Employment Agreement shall continue to govern
the contractual employment relationship between the Company and the Executive
except as provided in this Agreement. The transfer of the Shares pursuant to
Sections 1 and 2 and the payment of the related gross-up pursuant to Section 3
are irrevocable and unconditional and are not based upon future employment with
the Company.
8. MERGER AGREEMENT. (a) The parties hereto acknowledge and agree that
neither the execution of this Agreement nor the consummation of the transactions
contemplated hereby are inconsistent with, or violate any of the provisions of,
the Merger Agreement.
(b) The Merger Agreement, as in effect on the date hereof, provides that
Xx. Xxxxxxxx shall retain 714,400 Shares in the Merger. The parties hereto agree
that the Merger Agreement
4
5
shall promptly be amended to decrease this number by the number of Shares to be
transferred by Xx. Xxxxxxxx to the Company on December 31, 1996 and January 14,
1997 pursuant to this Agreement and the Other Agreements and by the number of
Shares transferred and to be transferred by Xx. Xxxxxxxx for estate planning and
charitable purposes. The Executive agrees that the number of Shares to be
retained by him in the Merger shall be increased by the number of Shares to be
transferred to him by the Company on December 31, 1996 and January 14, 1997
pursuant to this Agreement, and the parties hereto agree that the Merger
Agreement shall be amended to so provide (including by providing that such
number will not be decreased by any "proration" provisions). Accordingly, the
Executive will retain 41,132 Shares in the Merger.
9. FURTHER ASSURANCES. The parties agree to execute such other documents
and to take such further actions as may be necessary to carry-out the intent and
purpose of this Agreement and the transactions contemplated hereby.
10. GOVERNING LAW. This Agreement shall be governed by, and interpreted in
accordance with, the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws.
11. DISPUTES. Any controversy or claim arising out of or relating to this
Agreement, including any breach, validity or termination thereof, shall be
finally settled by binding arbitration in Boston, Massachusetts by one
arbitrator in accordance with the Commercial Arbitration Rules of the American
Arbitration Association then in effect. Judgment upon the award of the
arbitrator may be entered in any court of competent jurisdiction. The
arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. ss.
1-16.
12. COUNTERPARTS. This Agreement may be executed in counterparts each of
which shall be deemed to constitute an original, but all of which together shall
constitute one and the same instrument.
13. CAPTIONS. The section captions herein are for convenience of reference
only, do not constitute part of this Agreement and shall not be deemed to limit
or otherwise affect any of the provisions hereof.
5
6
IN WITNESS WHEREOF, the parties below have caused this Agreement to be duly
executed by persons duly authorized, all as of the date first written above.
/s/ Xxx Xxxxxx
------------------------------
Xxx Xxxxxx
/s/ Xxxxxxx Xxxxxxxx
------------------------------
Xxxxxxx Xxxxxxxx
THL TRANSACTION I CORP.,
a Delaware corporation
By: /s/ Xxxx X. Xxxxxx
---------------------------
Name: Xxxx X. Xxxxxx
Title: Secretary
SYRATECH CORPORATION,
a Delaware Corporation
By: /s/ Xxxx X. Xxxxxxxx
---------------------------
Name:
Title:
6
