Exhibit 10.36
CHANGE IN CONTROL
AGREEMENT
AGREEMENT made and entered into as of this 31
st day of July, 2007 by and between MSC INDUSTRIAL
DIRECT CO., INC., a New York corporation (the
“Corporation”), and Charles Bonomo having an address at
,
(the “Associate”).
WHEREAS, the Associate has been employed by the
Corporation in a senior Associate capacity and desires to remain in
the employ of the Corporation in such capacity; and
WHEREAS, the Corporation desires to induce the
Associate to so remain in the employ of the Corporation.
NOW, THEREFORE, the parties hereto hereby agree
as follows:
FIRST: Inducement Payments
.
A.
If, within two (2) years after a Change in Control, the
Associate’s “Circumstances of Employment” (as
hereinafter defined) shall have changed, the Associate may
terminate his employment by written notice to the Corporation given
no later than ninety (90) days following such change in the
Associate’s Circumstances of Employment. In the event
of such termination by the Associate of his employment or if,
within two (2) years after a Change in Control, the Corporation
shall terminate the Associate’s employment other than for
“Cause” (as hereinafter defined), the Corporation shall
pay to the Associate, subject to the provisions of paragraph F of
this Article FIRST and compliance by Associate with Article THIRD
hereof, in cash, the “Special Severance Payment” (as
hereinafter defined) as provided in Section E below.
B.
Change in Control shall be deemed to occur upon:
(a)
a change in ownership of the Corporation, which shall occur on the
date that any one person, or more than one person acting as a
“Group” (as defined under Section 409A of the Code (as
defined hereunder)), other than Mitchell Jacobson or Marjorie
Gershwind or a member of the Jacobson or Gershwind families or any
trust established principally for members of the Jacobson or
Gershwind families or an executor, administrator or personal
representative of an estate of a member of the Jacobson or
Gershwind families and/or their respective affiliates, acquires
ownership of stock of the Corporation that, together with stock
held by such person or Group, constitutes more than 50% of the
total fair market value or total voting power of the stock of the
Corporation; provided, however, that, if any one person or more
than one person acting as a Group, is considered to own more than
50% of the total fair market value or total voting power of the
stock of the Corporation, the acquisition of additional stock by
the same person or persons is not considered to cause a change in
the ownership of the Corporation;
(b)
a change in the effective control of the Corporation, which shall
occur on the date that (1) any one person, or more than one person
acting as a Group, other than Mitchell Jacobson or Marjorie
Gershwind or a member of the Jacobson or Gershwind families or any
trust established principally for members of the Jacobson or
Gershwind families or an executor, administrator or personal
representative of an estate of a member of the Jacobson or
Gershwind families and/or their respective affiliates, acquires (or
has acquired during the 12-month
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period ending on the date of the most recent
acquisition by such person or persons) ownership of stock of the
Corporation possessing 50% or more of the total voting power of the
stock of the Corporation; or (2) a majority of the members of the
Board is replaced during any 12-month period by directors whose
appointment or election is not endorsed by a majority of the
members of the Board prior to the date of the appointment or
election; provided, however, that, if one person, or more than one
person acting as a Group, is considered to effectively control the
Corporation, the acquisition of additional control of the
Corporation by the same person or persons is not considered a
change in the effective control of the Corporation; or
(c)
a change in the ownership of a substantial portion of the
Corporation’s assets, which shall occur on the date that any
one person, or more than one person acting as a Group, acquires (or
has acquired during the 12-month period ending on the date of the
most recent acquisition by such person or persons) assets from the
Corporation that have a total Gross Fair Market Value (as defined
hereunder) equal to or more than 80% of the total Gross Fair Market
Value of all of the assets of the Corporation immediately prior to
such acquisition or acquisitions; provided, however, that, a
transfer of assets by the Corporation is not treated as a change in
the ownership of such assets if the assets are transferred to (1) a
shareholder of the Corporation (immediately before the asset
transfer) in exchange for or with respect to its stock; (2) an
entity, 50% or more of the total value or voting power of which is
owned, directly or indirectly, by the Corporation; (3) a person, or
more than one person acting as a Group, that owns,
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directly or indirectly, 50% or more of the
total value or voting power of all the outstanding stock of the
Corporation; or (4) an entity, at least 50% of the total value or
voting power of which is owned, directly or indirectly, by a person
described in Article FIRST B(c)(3).
For
purposes of this Article FIRST B, “Gross Fair Market
Value” means the value of the assets of the Corporation, or
the value of the assets being disposed of, determined without
regard to any liabilities associated with such assets. For
purposes of this Article FIRST B, stock ownership is determined
under Section 409A of the Internal Revenue Code of 1986, as amended
(the “Code”).
C.
The Associate’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
Associate’s employment duties or reporting responsibilities;
(b) a reduction in the annual base salary made available by the
Corporation to the Associate from the annual base salary in effect
immediately prior to a Change in Control; or (c) a material
diminution in the Associate’s status, working conditions or
other economic benefits from those in effect immediately prior to a
Change in Control.
D.
“Cause” shall mean (i) the commission by the Associate
of any act or omission that would constitute a felony or any crime
of moral turpitude under Federal law or the law of the state or
foreign law in which such action occurred, (ii) dishonesty,
disloyalty, fraud, embezzlement, theft, disclosure of trade secrets
or confidential information or other acts or omissions that result
in a breach of fiduciary or other material duty to the Corporation
and/or a subsidiary; or (iii) continued reporting to work or
working under the influence of alcohol, an
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illegal drug, an intoxicant or a controlled
substance which renders the Associate incapable of performing his
or her material duties to the satisfaction of the Corporation
and/or its subsidiaries.
E.
The “Special Severance Payment” shall mean: (X) payment
equal to the sum of (i) the product of one and one-half (1.5) and
the annual base salary in effect immediately prior to a change in
the Associate’s Circumstances of Employment or the
termination other than for Cause of the Associate’s
employment by the Corporation, as the case may be, and (ii) the
product of one and one half (1.5) and the targeted bonus for the
Associate in effect immediately prior to a change in Associate
Circumstances of Employment or termination other than for Cause, as
the case may be, such payment to be made in equal installments in
accordance with the Corporation’s regular payroll policies
(but not less frequently than biweekly) for a period of eighteen
months, with the first such installment being made on the fifth (5
th ) business day following the six-month anniversary of
Associate’s termination of employment; (Y) payment of a pro
rata portion of the Associate’s targeted bonus in effect
immediately prior to the date such change in Associate’s
Circumstances of Employment or termination of employment other than
for Cause occurs (the “In Year Bonus”), calculated as
the product of (a) the In Year Bonus multiplied by
(b) a fraction the numerator of which is the number of whole months
elapsed in the fiscal year up to the date such change in
Associate’s Circumstances of Employment or termination
occurs, and the denominator of which is twelve (12), such payment
to be made on the fifth (5 th ) business day following
the six (6) months’ anniversary of termination of employment;
and (Z) for the two (2) year period or the remaining term of the
automobile lease at issue, whichever is less following
Associate’s date of termination of employment (other than
termination for Cause), the Corporation shall, at Associate’s
option, (a) pay Associate a monthly automobile allowance in amounts
equal to those in effect immediately prior to such termination, if
applicable, or (b) continue to make the
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monthly lease payments under the automobile
lease in effect for the benefit of Associate immediately prior to
such termination, provided that if any payment (or portion thereof)
otherwise due under this clause (Z) during the first six (6) months
following the Associate’s termination of employment is not
exempt from the application of section 409A of the Code under
applicable Treasury regulations, the amount subject to section 409A
that would otherwise be paid during such first six months shall be
held (without adjustment for earnings and losses) and paid on the
fifth (5 th ) business day following the six-month
anniversary of such termination date.
F.
As a condition to receiving the Special Severance Payment,
Associate shall execute the General Release in the form attached as
Exhibit A hereto and the Associate Confidentiality,
Non-Solicitation and Non-Competition Agreement referred to in
Article THIRD hereof and attached as Exhibit B hereto and shall
return such executed General Release and Agreement no later than 60
days following the Associate’s termination of employment, and
shall at all times be in compliance therewith.
G.
For purposes of this Agreement, “affiliate” shall have
the meaning ascribed thereto under the Securities Act of
1933.
H.
For purposes of this Agreement, “termination of
employment” means cessation of full or part time employment
with the Company and any of its subsidiaries.
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 Associate or threatened to be imposed upon the
Associate by
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virtue of the application of Section 4999(a) of
the Code, as now in effect or as the same may at any time or from
time to time be amended, or the application of any similar
provisions of state or local tax law, the Corporation shall
indemnify and hold the Associate 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 Associate 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 Associate so that the effect of
receiving all such indemnity payments will be that the Associate
shall be held harmless on an after-tax basis from the amount of all
Excise Taxes imposed upon payments made to the Associate by the
Corporation pursuant to this Agreement, it being the intent of the
parties that the Associate 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.
C.
Each indemnity payment to be made to the Associate 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 Associate is required to file a tax return showing a
liability for an Excise Tax or other tax) but, in any event, such
Request shall be made at least 15 days prior to (i) the end of the
Associate’s taxable year following the Associate’s
taxable year in which an Excise Tax is remitted to a taxing
authority, or (ii) in the event that no Excise Tax is remitted, the
end of the Associate’s taxable year following the
Associate’s taxable year in which an audit is completed or
there is a
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final and non-appealable settlement or other
resolution of the litigation. A Request shall set forth the
amount of the indemnity payment due to the Associate and the manner
in which such amount was calculated, and the Associate shall
thereafter submit such other evidence of the indemnity to which the
Associate 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 Associate agrees to notify the Corporation (a) 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, (b)
within fifteen (15) business days of the Associate’s receipt
of a revenue agent’s report (or similar document) notifying
the Associate that an Excise Tax may be imposed and (c) within
fifteen (15) business days of the Associate’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 Associate
pursuant to this Article SECOND.
E.
After receiving any of the aforementioned notices, and subject to
the Associate’s right to control any and all administrative
and judicial proceedings with respect to, or arising out of, the
examination or the Associate’s tax returns, except as such
proceedings relate to an Excise Tax, the Corporation shall have the
right (a) to examine all records, files and other information and
documentation in the Associate’s possession or under the
Associate’s control, (b) 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 Associate
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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,
(c) 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
Associate’s behalf, and (d) to pay any tax increase on the
Associate’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
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