EXHIBIT 10.6
EMPLOYMENT AGREEMENT
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Recitals
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This EMPLOYMENT AGREEMENT (the "Agreement") among WKI Holding Company,
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Inc., a Delaware corporation ("Debtor"), currently a Debtor and Debtor in
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Possession in the Chapter 11 cases referred to below and Xxxxxxx X. Xxxxx
("Executive") shall be effective on the effective date of the Reorganization
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Plan (as defined below)) (the "Agreement Date").
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WHEREAS, on May 31, 2002 (the "Petition Date"), the Debtor filed a petition
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for relief under Chapter 11 of the Bankruptcy Code with the Bankruptcy Court;
WHEREAS, the Debtor desires to continue to employ Executive to serve as the
Vice President, General Counsel and Secretary of Debtor and its Subsidiaries,
upon the terms and subject to the conditions set forth herein;
WHEREAS, Executive and the Debtor further agree that Executive may elect in
writing at any time during the twelve (12) calendar month period commencing on
December 31, 2002 to treat this Agreement as null and void if, at such time of
election, the Bankruptcy Court has not entered an order confirming a Chapter 11
plan for the Debtor (the "Reorganization Plan"), which includes as a part of the
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Reorganization Plan assumption and approval of this Agreement;
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 Debtor 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
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but 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 "Agreement" is defined in the Recitals to this Agreement.
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1.4 "Agreement Date" is defined in the Recitals to this Agreement.
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1.5 "Anniversary Date" means any annual anniversary of the Agreement
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Date.
1.6 "Annual Bonus" is defined in Section 4.2(a).
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1.7 "Authorization Order" is defined in the Recitals to this Agreement.
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1.8 "Bankruptcy Code" means the United States Bankruptcy Code, as
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amended from time to time.
1.9 "Bankruptcy Court" means any United States bankruptcy court or
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other federal court before which the Debtor may appear on any matters
related to this Agreement.
1.10 "Base Salary" is defined in Section 4.1.
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1.11 "Beneficiary" is defined in Section 8.8.
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1.12 "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,
(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 Companies or the Reorganized
Entity, or the Companies or the Reorganized Entity, as applicable,
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 Companies or the
Reorganized Entity, or the Companies or the Reorganized Entity, as
applicable, given within such ten (10) business day period, that the
implementation of such direction of the Chief Executive Officer of the
Companies or the Reorganized Entity, or the Companies or the
Reorganized Entity, as applicable, would be unlawful or unethical.
1.13 "Change of Control" means any one or more of the following events:
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(a) Before the effective date of the Reorganization Plan:
(i) 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 a Subsidiary or any
employee benefit plan (or any related trust) of the Debtor or any of
its Subsidiaries, becomes the owner of more than thirty-five percent
(35%) in aggregate principal amount of the Secured Lender Claims;
(ii) consummation of a merger, reorganization, consolidation,
or similar transaction (any of the foregoing, a "Merger") unless the
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Persons who were the holders of the Secured Lender Claims immediately
prior to the effective
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date of the Merger are the holders or the beneficial owners,
immediately after such Merger, directly or indirectly, in the
aggregate of more than fifty percent (50%) of the indebtedness or
equity (including voting securities) of the successor entity resulting
from such Merger in substantially the same relative proportions as
they owned Secured Lender Claims against the Debtor immediately before
the Merger;
(iii) consummation of a sale of all or substantially all of
the assets of the Debtor or World Kitchen, Inc. (a "Sale") unless the
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Persons who were the holders of the Secured Lender Claims immediately
prior to the effective date of the Sale are the holders or the
beneficial owners, immediately after such Sale, directly or
indirectly, in the aggregate of more than fifty percent (50%) of the
indebtedness or equity (including voting securities) of the entity or
entities that own such assets immediately after the Sale in
substantially the same relative proportions as they owned Secured
Lender Claims against the Debtor (or World Kitchen, Inc., as
applicable) immediately before the Sale; or
(iv) Bankruptcy Court approval of the liquidation of the
Debtor or World Kitchen, Inc., except in connection with a transaction
where the business is continued in another entity in which the Debtor
(or World Kitchen, Inc., as applicable) or the holders of Secured
Lender Claims hold in the aggregate more than fifty percent (50%) of
the indebtedness or ownership interests in such other entity in
substantially the same relative proportions as they owned Secured
Lender Claims against the Debtor (or World Kitchen, Inc., as
applicable) immediately before such liquidation;
(b) Immediately upon the confirmation of the Reorganization Plan
or immediately upon the effective date of the Reorganization Plan:
(i) 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
employee benefit plan (or any related trust) of the Debtor or any of
its Subsidiaries, becomes the beneficial owner, pursuant to the
Reorganization Plan, in the aggregate of more than thirty-five percent
(35%) of the Voting Securities;
(ii) consummation of a merger, reorganization, consolidation,
or similar transaction involving the Debtor or World Kitchen, Inc.
(any of the foregoing, a "Merger") unless the Persons who were the
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holders of Secured Lender Claims immediately prior to the effective
date of the Reorganization Plan are the beneficial owners, immediately
after such Merger, directly or indirectly, in the aggregate of more
than fifty percent (50%) of the common stock and any other voting
securities of the corporation resulting from such Merger in
substantially the same relative proportions as they owned Secured
Lender Claims against the Debtor (or World Kitchen, Inc., as
applicable) immediately before the Merger;
(iii) consummation of a sale of all or substantially all of
the assets of the Debtor or World Kitchen, Inc. (a "Sale") unless the
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Persons who were the holders of the Secured Lender Claims immediately
prior to the effective date of
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the Reorganization Plan are the beneficial owners, immediately after
such Sale, directly or indirectly, in the aggregate of more than fifty
percent (50%) of the common stock and any other voting securities of
the entity or entities that own such assets immediately after the Sale
in substantially the same relative proportions as they owned Secured
Lender Claims against the Debtor (or World Kitchen, Inc., as
applicable) immediately before the Sale; or
(iv) a Reorganization Plan is confirmed that does not
contemplate the continuation of a substantial part of the business of
the Debtor, or failure of the Reorganization Plan to provide for the
continuation of that part of the Debtor's business which, in the
immediately preceding twelve (12) calendar month period generated at
least sixty percent (60%) of the Debtor's gross revenue and at least
sixty percent (60%) of the Debtor's net income; or
(c) At any time following the effective date of the Reorganization
Plan:
(i) 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 Reorganized Entity
or any of its Subsidiaries, becomes the beneficial owner in the
aggregate of more than thirty-five percent (35%) of the Voting
Securities;
(ii) individuals who constitute the initial board of
directors of the Reorganized Entity elected on or immediately after
the effective date of the Reorganization Plan (the "Reorganized
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Incumbent Board") cease for any reason to constitute more than
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sixty-six and two-thirds percent (66-2/3%) of the members of the board
of directors of the Reorganized Entity; provided that any individual
who becomes a director after the effective date of the Reorganization
Plan whose election or nomination for election by the Reorganized
Entity 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 Reorganized Entity (as such terms are used in Rule
14a-11 under the Exchange Act), "tender offer" (as such term is used
in Section 14(d) of the Exchange Act) or a proposed Merger (as defined
below in clause (iii) of this Section 1.13(c))) shall be deemed to be
members of the Reorganized Incumbent Board;
(iii) 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
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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;
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(iv) consummation of a sale of all or substantially all of
the assets of the Debtor (a "Sale") unless the Persons who were the
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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
(v) The board of directors of the Reorganized Entity or the
shareholders of the Reorganized Entity, as applicable, approve a plan
of liquidation of the Debtor, World Kitchen, Inc. or the Reorganized
Entity.
Notwithstanding the foregoing, there shall not be a Change of Control if,
in advance of (or subsequent to) such event, Executive 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
shareholders' agreement contemplated by the Reorganization Plan shall not
constitute any Person as a member of a group with any other Person.
1.14 "Code" means the Internal Revenue Code of 1986, as amended from
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time to time.
1.15 "Companies" means the Debtor and World Kitchen, Inc., a Delaware
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corporation.
1.16 "Compensation Committee" means the compensation committee of the
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WKI Board or the compensation committee of the board of directors of the
Reorganized Entity, as applicable, in each case composed exclusively of
non-employee directors.
1.17 "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
Debtor, the Reorganized Entity, or by Executive.
1.18 "Debtor" is defined in the Recitals to this Agreement.
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1.19 "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 Debtor or the Reorganized Entity,
as applicable, 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.
1.20 "Emergence" means the effective date of the Reorganization Plan.
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1.21 "Employment Period" is defined in Article III.
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1.22 "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.
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1.23 "Excise Tax" means the excise tax imposed by Section 4999 of the
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Code, together with any interest or penalties imposed with respect to such
excise tax.
1.24 "Executive" is defined in the Recitals to this Agreement.
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1.25 "Fiscal Year" means the calendar year period beginning each
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January 1 and ending each December 31.
1.26 "Good Reason" means the occurrence of any one of the following
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events unless Executive specifically consents to such event in writing:
(a) any material breach of the Agreement by the Debtor or the
Reorganized Entity of any of their material obligations under this
Agreement, including any of the following occurrences which shall be
deemed to constitute a material breach of their material obligations:
(i) failure to pay Base Salary as required by Section 4.1 or
Annual Bonus as required by Section 4.2;
(ii) failure to pay or provide material benefits under
Article VI of this Agreement; 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 Debtor or Reorganized
Entity, as applicable, to agree on appropriate equity compensation
arrangements in accordance with Article V hereof, within ninety (90)
calendar days after Emergence,
(b) the failure of the Debtor or the Reorganized Entity 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 Debtor's or the Reorganized Entity's, as applicable,
requiring Executive to be principally based at any office or location
more than 25 miles away from Reston, Virginia.
1.27 "Gross-Up Payment" is defined in Section 6.4(a).
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1.28 "including" means including without limitation.
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1.29 "Interest Rate" means the prime commercial lending rate announced
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by JPMorgan Chase Bank 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 announced such a rate; provided, however,
that if the interest rate determined in accordance with this Section 1.29
exceeds the highest legally permissible interest rate, then the Interest
Rate shall be the highest legally-permissible interest rate.
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1.30 "Maximum Annual Bonus" is defined in Section 4.2(b).
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1.31 "Maximum Annual Goals" is defined in Section 4.2(b).
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1.32 "Maximum Percentage" is defined in Section 4.2(b).
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1.33 "Parachute Value" of a Payment shall mean the present value as of
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the date of the 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.
1.34 "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.
1.35 "Person" means any individual, sole proprietorship, partnership,
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joint venture, trust, unincorporated organization, association,
corporation, institution, public benefit corporation, entity or government
instrumentality, division, agency, body or department.
1.36 "Petition Date" means May 31, 2002, the date each of the Companies
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filed a petition for relief under Chapter 11 of the Bankruptcy Code.
1.37 "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.
1.38 "Reorganization Plan" is defined in the Recitals to this
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Agreement.
1.39 "Reorganized Entity" is defined in Section 5.1.
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1.40 "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.
1.41 "Secured Lender Claims" means claims arising under the Amended and
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Restated Credit Agreement dated as of April 12, 2001 among Debtor, JPMorgan
Chase Bank (formerly The Chase Manhattan Bank) and the other lenders,
agents and arranger party thereto.
1.42 "Severance Period" means two (2) years from the Date of
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Termination.
1.43 "Stock" is defined in Section 5.1.
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1.44 "Subsidiary" means, with respect to any Person, (a) any
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corporation of 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
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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%).
1.45 "Target Annual Bonus" is defined in Section 4.2(b).
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1.46 "Target Annual Goals" is defined in Section 4.2(b).
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1.47 "Target Percentage" is defined in Section 4.2(b).
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1.48 "Taxes" means the incremental United States federal, state and
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local income, excise and other taxes payable by Executive with respect to
any applicable item of income.
1.49 "Tax Gross-Up Payment" means an amount payable to Executive such
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that after payment of Taxes on such amount there remains a balance
sufficient to pay the Taxes being reimbursed.
1.50 "Termination for Good Reason" means a Termination of Employment by
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Executive for a Good Reason during the Employment Period.
1.51 "Termination of Employment" means a termination by the Debtor or
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the Reorganized Entity or by Executive of Executive's employment by the
Debtor or the Reorganized Entity, as applicable.
1.52 "Termination Without Cause" means a termination of Executive by
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the Debtor or the Reorganized Entity, as applicable, for any reason other
than Cause or Executive's death or Disability during the Employment Period.
1.53 "Value" of a Payment shall mean the economic present value of a
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Payment as of the date of the 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.
1.54 "Voting Securities" means any of the securities of the Debtor or
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the Reorganized Entity, as applicable, entitled to vote generally in the
election of the directors of the Debtor or the Reorganized Entity, as
applicable.
1.55 "WKI Board" means the board of directors of the Debtor.
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Article II. POSITION AND RESPONSIBILITIES
2.1 Duties. The Debtor shall employ, and the Debtor and World Kitchen,
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Inc. shall appoint Executive during the Employment Period as its Vice
President, General Counsel and Secretary. At such time as it shall be
formed, the Reorganized Entity shall employ and appoint Executive during
the Employment Period as its Vice President, General Counsel and Secretary.
During the Employment Period, Executive shall devote substantially all of
his business time, attention and effort to the affairs of the Companies or
the Reorganized Entity and shall use his reasonable best efforts to promote
the best
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interests of the Companies or the Reorganized Entity. Executive
shall be responsible for such functions and operations as assigned to him
from time to time by the Chief Executive Officer of the Debtor or the
Reorganized Entity, as applicable. Executive shall report on all functions
and operations within the scope of his responsibilities to the Chief
Executive Officer of the Debtor or the Reorganized Entity, as applicable.
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
Companies or the Reorganized Entity.
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 on the Agreement Date and end on
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the Anniversary Date which is three (3) years after the Agreement Date
(the "Initial Term"); provided, however, that as of the date that is
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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 Agreement 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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(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.
Article IV. COMPENSATION
4.1 Salary. The Debtor, and following the effective date of the
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Reorganization Plan, the Reorganized Entity, shall pay Executive in
accordance with the normal payroll practices of the Debtor or the
Reorganized Entity, as applicable, an annual salary at a rate of $250,000
per year ("Base Salary"). During the Employment Period, the Base Salary
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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, the
board of directors of the Reorganized Entity or the Compensation Committee.
Any increase in Base Salary shall not limit or reduce any other obligation
of the Debtor or the Reorganized Entity to Executive under this Agreement.
Once Base Salary shall have been increased, it shall be treated for all
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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 Bonus") in accordance with the terms hereof for each Fiscal
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Year which begins during the Employment Period.
(b) The WKI Board, the board of directors of the Reorganized
Entity or the Compensation Committee, as applicable, (collectively,
the "Board or Committee") shall establish performance goals, the
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achievement of which will determine the amount of the Executive's
annual bonuses for the 2002 Fiscal Year and later Fiscal Years that
end during the Employment Period. In the case of the 2002 Fiscal Year,
performance goals shall be set by the Board or Committee, within the
first ninety (90) calendar days after the Agreement Date. 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,
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his Annual Bonus for that Fiscal year shall be equal to sixty percent
(60%) (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 twenty percent (120%) (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. Notwithstanding the
foregoing, for the 2002 Fiscal Year, Executive shall be guaranteed an
Annual Bonus of not less than $50,000, provided he remains actively
employed by the Debtor through December 31, 2002.
(c) Except as described in the following sentence, the Debtor or
the Reorganized Entity, as applicable, 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; provided,
however, that the guaranteed $50,000 Annual Bonus for the 2002 Fiscal
Year shall be paid on January 2, 2003.
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Article V. PARTICIPATION IN EQUITY PLAN
5.1 Executive and the Debtor have agreed that as contemplated by the
Reorganization Plan, the Debtor shall cause the reorganized entity or entities
(the "Reorganized Entity"), that shall issue shares of all classes of its equity
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(the "Stock") pursuant to the Reorganization Plan to holders of the Secured
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Lender Claims, to reserve and authorize for issuance a specified number of
shares of the Stock of the Reorganized Entity on a fully diluted basis, for the
grant of stock options to employees, independent contractors and non-employee
directors of the Reorganized Entity and its Subsidiaries under an equity
incentive plan (the "Equity Plan"). Executive and the Debtor further agree that
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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 Debtor 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
Debtor or Reorganized Entity, as applicable, do not execute a written agreement
setting forth appropriate provisions pursuant to the immediately preceding
sentence, within ninety (90) calendar days after Emergence, 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(b).
Article VI. BENEFITS AND PERQUISITES
6.1 Benefit Plans and Perquisites.
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(a) Executive shall be entitled to participate in the welfare
benefit plans and programs and perquisites of the Debtor or the
Reorganized Entity, as applicable, on terms not less favorable than
those in effect for other senior executives of the Debtor or the
Reorganized Entity, as applicable, from time to time; provided, that
Executive shall not be covered by any severance plan, program or
policy during the Employment Period.
(b) Executive shall be entitled to participate in the retirement
and savings benefit plans and programs of the Debtor or the
Reorganized Entity, as applicable, on terms not less favorable than
those in effect for other senior executives of the Debtor or the
Reorganized Entity, as applicable, from time to time.
(c) Without limiting the generality of the foregoing, during the
Employment Period, Executive shall receive a cash benefits allowance
of $25,000 per year, which amount shall be paid (in arrears) no later
than January 31 of the following year.
6.2 Expenses. During the Employment Period, Executive shall be
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entitled to receive prompt reimbursement for all reasonable
employment-related expenses incurred by Executive upon the receipt by the
Debtor or the Reorganized Entity, as applicable, of an accounting for such
expenses in accordance with the practices, policies and procedures
applicable to other senior executives of the Debtor or the Reorganized
Entity, as applicable.
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6.3 Office; Support Staff. During the Employment Period, Executive
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shall 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 Debtor's or the Reorganized Entity'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 detailed supporting calculations both to the Debtor or
the Reorganized Entity and Executive within fifteen (15) business days
of the receipt of notice from Executive that there has been a Payment
or such earlier time as is requested by the Debtor or the Reorganized
Entity. 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
12
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 Debtor or the Reorganized Entity. Any Gross-Up
Payment, as determined pursuant to this Section 6.4, shall be paid by
the Debtor or the Reorganized Entity 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
Debtor or the Reorganized Entity 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
Debtor or the Reorganized Entity should have been made (the
"Underpayment"), consistent with the calculations required to be made
------------
hereunder. In the event the Debtor or the Reorganized Entity exhausts
its or their 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
Debtor or the Reorganized Entity to or for the benefit of Executive.
(c) The Executive shall notify the Debtor or the Reorganized
Entity in writing of any claim by the Internal Revenue Service that,
if successful, would require the payment by the Debtor or the
Reorganized Entity 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 Debtor or the Reorganized Entity 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 Debtor or the Reorganized Entity (or such
shorter period ending on the date that any payment of Taxes with
respect to such claim is due). If the Debtor or the Reorganized Entity
notifies Executive in writing prior to the expiration of such period
that the Debtor or the Reorganized Entity desires to contest such
claim, Executive shall:
(i) give the Debtor or the Reorganized Entity any information
reasonably requested by the Debtor or the Reorganized Entity relating
to such claim,
(ii) take such action in connection with contesting such
claim as the Debtor or the Reorganized Entity 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
Debtor or the Reorganized Entity,
(iii) cooperate with the Debtor or the Reorganized Entity in
good faith in order effectively to contest such claim, and
(iv) permit the Debtor or the Reorganized Entity to
participate in any proceedings relating to such claim;
13
provided, however, that the Debtor or the Reorganized Entity shall
bear and pay directly all costs and expenses (including additional
interest and penalties) incurred in connection 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 Debtor or the Reorganized Entity 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 Debtor or the Reorganized Entity
shall determine; provided, however, that, if the Debtor or the
Reorganized Entity direct or directs Executive to pay such claim and
xxx for a refund, the Debtor or the Reorganized Entity 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 Debtor's or the Reorganized
Entity'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 Debtor or the Reorganized Entity 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 Debtor's
or the Reorganized Entity's complying with the requirements of Section
6.4(c), if applicable) promptly pay to the Debtor or the Reorganized
Entity 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 Debtor or the
Reorganized Entity 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 Debtor or the Reorganized Entity 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.
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(e) Notwithstanding any other provision of this Section 6.4, the
Debtor or the Reorganized Entity may, in its or their 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.
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 Debtor or the
-------------------------------------------------
Reorganized Entity terminate 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,
Debtor or the Reorganized Entity), including, without limitation, by virtue
of the Company providing a Notice of Non-Extension to the Executive, the
Debtor or the Reorganized Entity, as applicable, 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 and Accrued Annual Bonus. The respective
provisions of any benefit plans or perquisite programs in which Executive
participates shall govern whether Executive shall be entitled to any
benefits under such plans or programs. 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 Debtor
or the Reorganized Entity 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 accordance with the
terms of, and subject to the conditions of, such plan or policy.
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 Debtor or the Reorganized Entity, as applicable, 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 and Accrued Annual 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 any 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.
7.3 Termination Without Cause or for Good Reason.
--------------------------------------------
(a) In the event of a Termination Without Cause or a Termination
for Good Reason, 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
15
available funds equal to the sum of Executive's Accrued Base Salary
and Accrued Annual Bonus;
(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 120% 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 Debtor or the Reorganized Entity, as applicable,
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 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
(vi) 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) 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 Debtor or the
Reorganized Entity, 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 demanding that such event
or events be cured not later than ten (10) business days after Debtor
or the Reorganized Entity, as applicable, receives the Notice of Good
Reason (the "Cure Period");
-----------
(ii) the Debtor or the Reorganized Entity, as applicable,
shall have failed to cure such event or events during the Cure Period;
and
16
(iii) not more than ninety (90) calendar days following the
expiration of the Cure Period, Executive shall have given the Debtor
or the Reorganized Entity, as applicable, 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. The Debtor or the Reorganized Entity, as
-------------------
applicable, shall give Executive a reasonable opportunity to review and
comment on any public announcement relating to this Agreement or
Executive's employment by the Debtor or the Reorganized Entity, as
applicable.
8.2 Approvals. The Debtor represents and warrants to Executive that it
---------
has taken all corporate action necessary to authorize this Agreement.
8.3 Full Settlement. The Debtor's or the Reorganized Entity's
---------------
obligations 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 Debtor or the Reorganized Entity, as
applicable, may have against Executive or others. Any claim which the
Debtor or the Reorganized Entity, 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 Debtor or
the Reorganized Entity, 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)(v) 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 Joint and Several Liability. World Kitchen, Inc. agrees to
---------------------------
guarantee the payment of any liabilities under this Agreement. In addition,
to the extent that the Reorganized Entity is comprised of more than one
entity, the obligations of the Reorganized Entity to Executive under this
Agreement shall be joint and several.
8.6 Liability Insurance and Indemnification. The Companies or the
---------------------------------------
Reorganized Entity, as applicable, 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 Companies or the Reorganized Entity, as applicable. The
17
Companies or the Reorganized Entity, as applicable, agree to indemnify Executive
for any job-related liability to the fullest extent permitted under applicable
law, its by-laws, and other applicable indemnification agreements of the
Companies or the Reorganized Entity, as applicable.
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 Debtor or the Reorganized Entity, as applicable,
Executive's entitlement to compensation and benefits under this
Agreement, the Debtor or the Reorganized Entity, as applicable, shall,
to the extent Executive is successful in 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 Debtor or the Reorganized
Entity, as applicable, 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 Debtor or the Reorganized Entity, as applicable, fail
to pay any amount provided under this Agreement when due, the Debtor
or the Reorganized Entity, as applicable, 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 Debtor or the Reorganized Entity,
as applicable, 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 Beneficiary
or Beneficiaries at any time or from time to time by submitting to the
Debtor or the Reorganized Entity, as applicable, a new designation in
writing.
8.10 Assignment; Successors. The Debtor or the Reorganized Entity, as
----------------------
applicable, may not assign its or their rights and obligations under this
Agreement without the prior
18
written consent of Executive except to a successor to its or their
business. This Agreement shall be binding upon and inure to the benefit of
Executive, his estate and Beneficiaries, the Debtor or the Reorganized
Entity, as applicable, and the successors and permitted assigns of the
Debtor or the Reorganized Entity, as applicable.
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 Debtor or the
Reorganized Entity, as applicable, 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 Debtor or to the Reorganized Entity, to:
11911 Freedom Drive
Xxx Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Chief Executive Officer
If to Executive, to:
Xxxxxxx X. Xxxxx
0000 Xxxxxxxx Xxxx
Xxxxxxxxxx, X.X. 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.
19
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 forms the entire agreement
----------------
between the parties hereto with respect to the subject matter contained in
the Agreement and shall supersede all prior agreements, promises and
representations regarding employment, compensation, severance or other
payments contingent 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. All of Executive's rights
------------------------------
hereunder, including his rights to compensation and benefits, shall survive
the termination of Executive's employment, the termination of this
Agreement, or both.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the Agreement Date.
WKI HOLDING COMPANY, INC.
By: /s/ C. Xxxxxx Xxxxxx
Its: Chairman
Date: January 27, 2003
WORLD KITCHEN, INC.
By: /s/ C. Xxxxxx Xxxxxx
Its: Chairman
Date: January 27, 2003
EXECUTIVE:
/s/ Xxxxxxx Xxxxx
Xxxxxxx X. Xxxxx
Date: January 28, 2003
20
