Exhibit 10.3
AMENDED AND RESTATED AGREEMENT made
and entered into as of this 27th day of December, 2005 by and
between MSC INDUSTRIAL DIRECT CO., INC., a New York
corporation (the “Corporation”), and JAMES SCHROEDER
having an address
at ,
(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 Executive and the
Corporation are parties to an Agreement dated January 8, 1999
(the “Prior Agreement”), providing the Executive with
certain benefits on and in connection with a “Change in
Control” as defined therein; and
WHEREAS, due to certain recent
legislation known as the American Job Creations Act of 2004 and
certain regulations promulgated or proposed thereunder, including
regulations under Section 409A of the Internal Revenue Code of
1986, as amended (the “Code”), regarding deferred
compensation plans and other arrangements (the
“Regulations”), the benefits under the Prior Agreement
are in certain respects not in compliance with the Regulations, and
such lack of compliance could have a material adverse affect on the
tax treatment of such benefits to the Executive; and
WHEREAS, the Corporation desires to
induce the Executive to remain in the employ of the Corporation and
the Executive desires the Corporation to effect certain changes to
the Prior Agreement so that such benefits are in compliance with
the Regulations.
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
$2,000,000, 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, the
Corporation shall terminate the Executive’s employment other
than for “Cause” (as hereinafter defined), the
Corporation shall pay to the Executive, subject to the provisions
of paragraph G of this Article FIRST, on the fifth (5
th ) business day following the six months’
anniversary of the date of such termination (or the date of
Executive’s death, if earlier), in cash, the “Special
Severance Payment” (as hereinafter defined).
C.
A 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 THE Regulations), 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
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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 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
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most recent acquisition by such person or
persons) assets from the Corporation that have a total Gross Fair
Market Value (as defined below) 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, 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 C.(c)(3).
For purposes of
this Article FIRST C., “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 C., stock ownership is determined under the
Regulations.
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
(i) the commission by the Executive 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 illegal drug, an intoxicant or a
controlled substance which renders the Executive incapable of
performing his or her material duties to the satisfaction of the
Corporation and/or its subsidiaries.
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.
As a condition to receiving the
Special Severance Payment, the Executive shall execute the General
Release in the form attached as Exhibit A hereto.
H.
For purposes of this Agreement,
“affiliate” shall have the meaning ascribed thereto
under the Securities Act of 1933.
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I.
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
Executive or threatened to be imposed upon the Executive by 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
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 (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 Executive’s receipt of a revenue agent’s report (or
similar document) notifying the Executive that an Excise Tax may be
imposed and (c) 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 (a) to examine all records, files and other
information and documentation in the Executive’s possession
or under the Executive’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 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, (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 Executive’s behalf, and
(d) 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
