Exhibit 10.07
AGREEMENT made and entered into as of this 8th day of January, 1999 by and
between MSC INDUSTRIAL DIRECT CO., INC., a New York corporation (the
"Corporation"), and XXXXX XXXXXXX, (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive has been employed by the Corporation in a
senior executive capacity and desires to remain in the employ of the Corporation
in such capacity; and
WHEREAS, the Corporation desires to induce the Executive to so
remain in the employ of the Corporation.
NOW, THEREFORE, the parties hereto hereby agree as follows:
First: Inducement Payments: A. Subject to the provisions of
paragraph G of this Article FIRST, if a "Change in Control" (as hereinafter
defined) shall occur, the Corporation shall pay to the Executive, in cash, the
amount of $1,200,000, which amount shall be due and payable thirty (30) days
after the occurrence of a Change in Control.
B. If, within five (5) years after a Change in Control, the
Executive's "Circumstances of Employment" (as hereinafter defined) shall have
changed, the Executive may terminate his employment by written notice to the
Corporation given no later than ninety (90) days following such change in the
Executive's Circumstances of Employment. In the event of such termination by the
Executive of his employment or if, within five (5) years after a Change in
Control, subject to the provisions of paragraph G of this Article FIRST, the
Corporation shall terminate the Executive's employment other than for "Cause"
(as hereinafter defined), the
Corporation shall pay to the Executive, within thirty (30) days of such
termination, in cash, the "Special Severance Payment" (as hereinafter defined).
C. A "Change in Control" shall be deemed to occur upon (a) the sale
by the Corporation of all or substantially all of its assets to any "person" (as
hereinafter defined); (b) the consolidation of the Corporation with any person
or the merger of the Corporation with any person as a result of which merger the
Corporation is not the surviving entity as a publicly held corporation; or (c)
the sale or issuance by the Corporation and/or the Sale by any one or more of
its stockholders in one or more transactions, related or unrelated, of the
Corporation's voting securities to one or more persons (other than Xxxxxxxx
Xxxxxxxx or Xxxxxxxx Xxxxxxxxx) as a result of which any such person and its
"affiliates" (as hereinafter defined) shall possess more than 50% of the
combined voting power of the Corporation's then outstanding securities. As used
herein, a "person" shall mean any individual, partnership, firm, trust,
corporation or similar entity, and an "affiliate" shall mean any person that,
directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with, any other person.
D. The Executive's "Circumstances of Employment" shall have changed
if there shall have occurred any of the following events: (a) a material
reduction or change in the Executive's employment duties or reporting
responsibilities; (b) a reduction in the annual base salary made available by
the Corporation to the Executive from the annual base salary in effect
immediately prior to a Change in Control; or (c) a material diminution in the
Executive's status, working conditions or other economic benefits from those in
effect immediately prior to a Change in Control.
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E. "Cause" shall mean a good faith determination by the Board of
Directors of the Corporation that the termination of the employment by the
Corporation of the Executive is necessary by reason of (i) the commission by the
Executive of any act which, if successfully prosecuted by the appropriate
authorities, would constitute a felony under Federal or state law, unless the
Executive performed the acts underlying such felony in good faith and in a
manner the Executive reasonably believed to be in or not opposed to the best
interests of the Corporation; (ii) the Executive's embezzlement or intentional
misappropriation of any property of the Corporation; or (iii) the Executive's
having divulged, furnished or made accessible to anyone other than the
Corporation, its directors, officers, employees, auditors and legal advisors,
otherwise than in the regular course of business of the Corporation, any
confidential information or knowledge relating to the customers, employees,
operations, financial condition, revenues or projections of the Corporation,
other than information in the public domain.
F. The "Special Severance Payment" shall mean a lump sum payment
equal to the difference between (a) the sum of (i) the product of five and the
annual base salary in effect immediately prior to a change in the Executive's
Circumstances of Employment or the termination other than for Cause of the
Executive's employment by the Corporation, as the case may be, and (ii) the
product of five and the largest annual bonus paid to or accrued with respect to
the Executive by the Corporation during the three fiscal years immediately
preceding the termination of the Executive's employment and (b) the aggregate of
all base salary and bonus amounts paid to the Executive by the Corporation
during the period commencing upon a Change in Control and ending on the date of
termination of the Executive's employment.
G. Notwithstanding any other provision of this Agreement, the
Executive agrees that no amount shall be payable by the Corporation to the
Executive hereunder if the
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payment of all or any part of such amount shall restrict of otherwise impair, as
determined by the Corporation in its sole discretion, the ability of the
Corporation to utilize the "pooling of interests" method of accounting, as such
term is understood under generally accepted accounting principles.
Second: Tax Indemnification. A. In the event that, as a result of
any of the payments or other consideration provided for or contemplated by
Article FIRST of this Agreement or otherwise, a tax (an "Excise Tax") shall be
imposed upon the Executive or threatened to be imposed upon the Executive by
virtue of the application of Section 4999(a) of the Internal Revenue Code of
1986, as now in effect or as the same may at any time or from time to time be
amended (the "Code"), or the application of any similar provisions of state or
local tax law, the Corporation shall indemnify and hold the Executive harmless
from and against all such taxes (including additions to tax, penalties and
interest and additional Excise Taxes, whether applicable to payments pursuant to
the provisions of this Agreement or otherwise) incurred by, or imposed upon, the
Executive and all expenses arising therefrom.
B. Each indemnity payment to be made by the Corporation pursuant to
part A of this Article SECOND shall be increased by the amount of all Federal,
state and local tax liabilities (including additions to tax, payroll taxes,
penalties and interest and Excise Tax) incurred by, or imposed upon, the
Executive so that the effect of receiving all such indemnity payments will be
that the Executive shall be held harmless on an after-tax basis from the amount
of all Excise Taxes imposed upon payments made to the Executive by the
Corporation pursuant to this Agreement, it being the intent of the parties that
the Executive shall not incur any out-of-pocket costs or expenses of any kind or
nature on account of the Excise Tax and the receipt of the indemnity payments to
be made by the Corporation pursuant hereto.
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C. Each indemnity payment to be made to the Executive pursuant to
this Article SECOND shall be payable within fifteen (15) business days of
delivery of a written request (a "Request") for such payment to the Corporation
(which request may be made prior to the time the Executive is required to file a
tax return showing a liability for an Excise Tax or other tax). A Request shall
set forth the amount of the indemnity payment due to the Executive and the
manner in which such amount was calculated, and the Executive shall thereafter
submit such other evidence of the indemnity to which the Executive is entitled
as the Corporation shall reasonably request. All such information shall, if the
Corporation shall request, be set forth in a statement signed by a nationally
recognized accounting firm or a partner thereof and the Corporation shall pay
all fees and expenses of such accounting firm incurred in the preparation
thereof.
D. The Executive agrees to notify the Corporation (i) within fifteen
(15) business days of being informed by a representative of the Internal Revenue
Service (the "Service") or any state or local taxing authority that the Service
or such authority intends to assert that an Excise Tax is or may be payable,
(ii) within fifteen (15) business days of the Executive's receipt of a revenue
agent's report (or similar document) notifying the Executive that an Excise Tax
may be imposed and (iii) within fifteen (15) business days of the Executive's
receipt of a Notice of Deficiency under Section 6212 of the Code or similar
provision under state or local law which is based in whole or in part upon an
Excise Tax and/or a payment made to the Executive pursuant to this Article
SECOND.
E. After receiving any of the aforementioned notices, and subject to
the Executive's right to control any and all administrative and judicial
proceedings with respect to, or arising out of, the examination or the
Executive's tax returns, except as such proceedings
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relate to an Excise Tax, the Corporation shall have the right (i) to examine all
records, files and other information and documentation in the Executive's
possession or under the Executive's control, (ii) to be present and to
participate, to the extent desired, in all administrative and judicial
proceedings with respect to an Excise Tax, including the right to appear and act
for the Executive at such proceedings in resisting any contentions made by the
Service or a state or local taxing authority with respect to an Excise Tax and
to file any and all written responses in connection therewith, (iii) to forego
any and all administrative appeals, proceedings, hearings and conferences with
the Service or a state or local taxing authority with respect to an Excise Tax
on the Executive's behalf, and (iv) to pay any tax increase on the Executive's
behalf and to control all administrative and judicial proceedings with respect
to a claim for refund from the Service or state or local taxing authority with
respect to such tax increase.
F. The Corporation shall be solely responsible for all reasonable
legal and accounting or other expenses (whether of the Executive's
representative or the representative of the Corporation) incurred in connection
with any such administrative or judicial proceedings insofar as they relate to
an Excise Tax or other tax increases resulting therefrom and the Executive
agrees to execute and file, or cause to be executed and filed, such instruments
and documents, including, without limitation, waivers, consents and Powers of
Attorneys, as the Corporation shall reasonably deem necessary or desirable in
order to enable it to exercise the rights granted to it pursuant to part E of
this Article SECOND.
G. The liability of the Corporation shall not be affected by the
Executive's failure to give any notice provided for in this Article SECOND
unless such failure materially prejudices the Corporation's ability to
effectively resist any contentions made by the Service or a state or local
taxing authority. The Executive may not compromise or settle a claim which he is
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indemnified against hereunder without the consent of the Corporation, unless the
Executive can establish by a preponderance of the evidence that the decision of
the Corporation was not made in the good faith belief that a materially more
favorable result could be obtained by continuing to defend against the claim (or
prosecute a claim for refund).
Third: At Will Employment. Nothing in this Agreement shall confer
upon the Executive the right to remain in the employ of the Corporation, it
being understood and agreed that (a) the Executive is an employee at will and
serves at the pleasure of the Corporation at such compensation as the
Corporation shall determine from time to time and (b) the Corporation shall have
the right to terminate the Executive's employment at any time, with or without
Cause. In the event of any such termination prior to the occurrence of a Change
in Control, no amount shall be payable by the Corporation to the Executive
pursuant to Article FIRST hereof.
Fourth: Costs of Enforcement. In the event that the Executive incurs
any costs or expenses, including attorneys' fees, in the enforcement of his
rights under this Agreement then, unless the Corporation is wholly successful in
defending against the enforcement of such rights, the Corporation shall promptly
pay to the Executive all such costs and expenses.
Fifth: Notices. All notices hereunder shall be in writing and shall
be sent by registered or certified mail, return receipt requested, if intended
for the Corporation shall be addressed to it, attention of its President, 00
Xxxxxx Xxxx, Xxxxxxxx, Xxx Xxxx 00000 or at such other address of which the
Corporation shall have given notice to the Executive in the manner herein
provided; and if intended for the Executive, shall be mailed to him at the
address of the
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Executive first set forth above or at such other address of which the Executive
shall have given notice to the Corporation in the manner herein provided.
Sixth: Entire Agreement. This Agreement constitutes the entire
understanding between the parties with respect to the matters referred to
herein, and no waiver of or modification to the terms hereof shall be valid
unless in writing signed by the party to be charged and only to the extent
therein set forth. All prior and contemporaneous agreements and understandings
with respect to the subject matter of this Agreement are hereby terminated and
superseded by this Agreement.
Seventh: Withholding. The Corporation shall be entitled to withhold
from amounts payable to the Executive hereunder-such amounts as may be required
by applicable law.
Eighth: Binding Nature. This Agreement shall be binding upon and
inure to the benefit of the parties hereto, their respective heirs,
administrators, executors, personal representatives, successors and assigns.
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Ninth: Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the law of the State of New York.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first above written.
MSC INDUSTRIAL DIRECT CO., INC.
By: /s/ Xxxxxxxx Xxxxxxxx
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Name: Xxxxxxxx Xxxxxxxx
Title: President
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/s/ Xxxxx Xxxxxxx
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XXXXX XXXXXXX
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