Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS AGREEMENT
(“Agreement”), dated as
of ___________ __ 2006, between J&L America, Inc. (DBA as
J&L Industrial Supply), a Michigan corporation (the
“Company”), and Michael Wessner (the
“Executive”).
W I T N E S S E T
H
WHEREAS , MSC Acquisition Corp. VI (“Buyer”)
has agreed to acquire (the “Acquisition”) all of the
outstanding stock of the Company, of which the Executive is an
employee, pursuant to a certain Stock Purchase Agreement dated
March __, 2006 between MSC Industrial Direct Co., Inc.
(“MSC”), Buyer, JLK Direct Distribution, Inc. and
Kennametal Inc. (“Kennametal”); and
WHEREAS, the Company desires to employ the Executive, and
the Executive desires to accept such employment, on and subject to
the occurrence of the “Effective Date” as defined below
and on the terms and conditions set forth herein.
NOW, THEREFORE,
in consideration of the mutual
promises, representations and warranties set forth herein, and for
other good and valuable consideration, it is hereby agreed as
follows:
1.
Employment . Effective as of and contingent upon the
consummation of the Acquisition, the Company hereby agrees to
employ the Executive, and the Executive hereby accepts such
employment, upon the terms and conditions set forth herein. The
date of consummation of the Acquisition and accordingly the
Effective Date of Executive’s employment with the Company
hereunder shall hereinafter be referred to as the “Effective
Date.” Concurrently with the Executive’s
execution of this Agreement, the Executive has executed the
Associate Confidentiality, Non-Solicitation and Non-Competition
Agreement, attached as Exhibit B hereto (the
“Confidentiality Agreement”).
2.
Term . Subject to the provisions of Section 8
hereof, the period of the Executive’s employment under this
Agreement shall be from the Effective Date through the one year
anniversary of the Effective Date, unless sooner terminated by the
Company or upon the voluntary resignation of the Executive (the
“Term”). Unless the parties otherwise agree in writing,
continuation of the Executive’s employment with the Company
beyond the expiration of the Term shall be deemed an employment at
will and Executive’s employment may thereafter be terminated
at will by Executive or the Company, provided, however, that
Section 9 and the Confidentiality Agreement shall survive
expiration of the Term and termination of the Executive’s
employment.
3.
Position and Duties .
(a)
During the first twelve months of the Term, the Executive shall
serve as the President of the Company and shall have such
responsibilities and duties, consistent with the Executive’s
responsibilities and duties to the Company prior to the Effective
Date, as from time to time may be prescribed by the President
and/or the Board of Directors of the Company. In connection with
the future integration of the Company and MSC, after the first
twelve months of the Term, Executive’s title may be changed,
in consultation with the Executive, to reflect the coordination of
MSC’s and the Company’s respective title structures,
provided, however, that the Executive’s duties shall not be
materially diminished as a result of such change in
title.
(b)
Subject to Section 3(a), during the Term, the Executive shall
perform and discharge the duties that may be assigned to him from
time to time by the President of the Company, and the Executive
shall devote his best talents, efforts and abilities to the
performance of his duties hereunder.
(c)
During the Term, the Executive shall perform such duties on a
full-time basis and the Executive shall have no other employment
and no other outside business activities whatsoever;
provided , however , that the Executive shall not be
precluded from making passive investments which do not require the
Executive’s devotion of any significant time or
effort.
4.
Compensation . (a) For the Executive’s
services hereunder, during the Term, the Company shall pay the
Executive salary (the “Base Salary”) at an annual rate
of $365,000, payable and earned at a bi-weekly rate of $14,038.46
in accordance with the customary payroll practices of the Company
and MSC.
(b)
Subject to Sections 8 and 9, following completion of 12 months of
employment with the Company and subject to the terms of the
Company’s integration bonus program and in consultation with
the Executive, Executive shall be eligible to receive an
integration bonus (the “Integration Bonus”) currently
targeted to be $500,000 (the “Target Bonus”). The
actual amount of the Integration Bonus payable to Executive shall
be no less than 30% less than, and no more than 30% greater than,
the Target Bonus; and shall be determined by the MSC Compensation
Committee in its discretion taking into account the
Executive’s performance and based on mutually agreed goals
and objectives between the Company and the Executive. Any such
Integration Bonus shall be paid to Executive on the 13 month
anniversary of the Effective Date, provided that the Executive is
an employee of the Company on the 12 month anniversary of the
Effective Date.
5.
Other Benefits . During the Term, as an
employee of the Company, then a subsidiary of MSC, the Executive
shall be entitled to participate in MSC benefits programs and plans
in accordance with the terms of such programs and plans which
include major medical and dental insurance, the MSC Industrial
Direct Co., Inc. 401(k) Plan (the
“401(k) Plan”) and tuition reimbursement. The
Executive shall be credited with service with the Company and its
affiliates
prior to the Effective Date for
purposes of vesting and eligibility, including eligibility and
vesting under the 401(k) Plan to the extent such service was
credited for such purposes under Kennametal’s
401(k) Plan and in the determination of vacation.
6.
Automobile Allowance . During the Term, the Company
shall pay the Executive $1,200 per month for expenses such as
lease, registration, insurance, repairs, maintenance, license fees,
parking, gasoline and oil incurred by the Executive incident to his
use of such automobile in connection with his duties
hereunder.
7.
Reimbursement of Expenses . During the Term, the
Company shall pay or reimburse the Executive for all reasonable
travel, entertainment and other business expenses actually incurred
or paid by the Executive in the performance of his duties hereunder
upon presentation of expense statements and/or such other
supporting information as the Company may reasonably require of the
Executive and in accordance with and subject to the Company’s
and MSC’s general procedures and policies.
8.
Termination .
(a)
The Company shall have the right to terminate the Executive’s
employment at any time, with or without Cause, prior to the
expiration of the Term.
(b)
For purposes of this Agreement, “Cause” means
(i) 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 duty to the Company; (iii) continued reporting to
work or working under the influence of alcohol, an illegal drug, an
intoxicant or a controlled substance which renders Executive
incapable of performing his or her material duties to the
satisfaction of the Company or (iv) breach of this Agreement
or the Confidentiality Agreement.
(c)
For purposes of this Agreement, “Termination Date” is
the date as of which the Executive incurs a termination of
employment with the Company that constitutes “separation of
service” within the meaning of Section 409A of the
Internal Revenue Code of 1986, as amended. Any notice of
termination of the Executive’s employment given by the
Executive or the Company pursuant to the provisions of this
Agreement shall specify the Termination Date.
9.
Obligations of Company on Termination .
Notwithstanding anything in this Agreement to the contrary, the
Company’s obligations on termination of the Executive’s
employment shall be as described in this Section 9.
(a)
Obligations of the Company in the Case of Termination by the
Company Without Cause . In the event that prior to the
expiration of the Term, the Company terminates the
Executive’s employment other than for Cause, the Company
shall provide the Executive with the following:
(i)
Amount of Severance Payment . Subject to Sections
9(c) and 9(d) below, in addition to any Base Salary and
unreimbursed expenses accrued but unpaid as of the Termination Date
(which shall be paid in accordance with the customary payroll
practices of the Company, the Company shall pay the Executive (the
“Severance Payment”) the following:
(A)
the Base Salary otherwise payable to the Executive during the
period beginning on the six-month anniversary of the Termination
Date (the “Payment Date”) and continuing through the
then remaining duration of the Term, if any, payable in
substantially equal biweekly installments in accordance with the
customary payroll practices of the Company;
(B)
the Base Salary that would have been paid to the Executive during
the period beginning on the Termination Date through the day prior
to the Payment Date, payable in a single lump sum payment on the
Payment Date;
(C)
any vacation pay accrued but unpaid as of the Termination Date,
payable in a single lump sum payment on the Payment Date;
and
(D)
any Integration Bonus that would otherwise have been payable to the
Executive, payable in a single lump sum on the 13 month anniversary
of the Effective Date.
(ii)
Continued Medical Coverage . In the event that the Executive
timely elects under the provision of COBRA to continue his or her
coverage in effect prior to the Termination Date under a group
health plan sponsored by the Company or MSC, the Executive
will be entitled to continuation of such coverage, at the
Company’s expense, for the then remaining duration of the
Term. Notwithstanding the foregoing, nothing in
Section 9(a)(ii) shall prohibit the Executive from
continuing his or her group health coverage for the remainder of
the period during which he or she is entitled to COBRA continuation
coverage, if any, at the Executive’s sole expense.
(iii)
Automobile Allowance . For the otherwise remaining
duration of the Term, the Company shall pay the Executive for
automobile related expenses as follows:
(A)
$1,200 multiplied by the number of full calendar months beginning
after the Termination Date but prior to the Payment Date,
representing the automobile allowance otherwise payable to the
Executive for the period beginning on the Termination Date and
ending on the day prior to the Payment Date, payable in a single
lump sum payment on the Payment Date; and
(B)
$1,200 per month, payable on the [first/last] business day of each
month occurring on or after the Payment Date through the then
remaining duration of the Term, if any.
(iv)
Completion Bonus . On the one-year anniversary of the
Termination Date, the Company shall pay the Executive a lump sum
completion bonus of $250,000, provided that all of the following
conditions (A) through (D) are met:
(A)
The Executive remains employed by the Company for the full 12 month
Term of this Agreement; and
(B)
The Executive continues in employment with the Company following
the expiration of the Term; and
(C)
The Executive’s employment with the Company is terminated by
the Company without Cause during the 12-month period immediately
following the expiration of the Term; and
(D)
The Company and MSC determine, in their sole discretion, that the
Executive did not breach any provision of the Confidentiality
Agreement.
(b)
Obligations of the Company in case of Termination for Death,
Disability, Cause or Voluntary Resignation by Executive
.
(i)
Upon termination of the Executive’s employment for death,
disability or for Cause or Executive’s voluntary resignation,
the Company shall have no payment or other obligations hereunder to
the Executive, except for the payment of any Base Salary, benefits
or unreimbursed expenses accrued but unpaid as of the date of such
termination and, in the event of the Executive’s voluntary
resignation following the Company’s uncured material
diminution of his duties, any completion bonus payable in
accordance with Section 9(b)(ii) below.
(ii)
Completion Bonus . On the one-year anniversary of the
Termination Date, the Company shall pay the Executive a lump sum
completion bonus of $250,000, provided that all of the following
conditions (A) through (D) are met:
(A)
The Executive remains employed by the Company for the full 12 month
Term of this Agreement; and
(B)
The Executive continues in employment with the Company following
the expiration of the Term; and
(C)
The Executive voluntarily resigns from his employment with the
Company during the 12-month period immediately following the
expiration of the Term on account of the material diminution of his
duties by the Company which diminution is not cured by the Company
within 15 days of the Executive’s providing written notice to
the Company of such diminution; and
(D)
The Company and MSC determine, in their sole discretion, that the
Executive did not breach any provision of the Confidentiality
Agreement.
(c)
As a condition of receiving the Severance Payment, at least 10 days
prior to the Payment Date, the Executive shall execute and deliver
to the Company the General Release in the form attached as
Exhibit A hereto (the “Release”). Notwithstanding
anything in this Agreement to the contrary, payment of any
Severance Payment hereunder is expressly conditioned on the
Executive’s compliance with the terms of the Release and the
Confidentiality Agreement and no further Severance Payment shall be
made following the Company’s determination, in its sole
discretion, that the Executive has breached any provision of the
Release or the Confidentiality Agreement.
(d)
Confidentiality, Non-Solicitation and Non-Competition
. In consideration of the Executive’s employment and
continued employment, and any and all payments to the Executive by
the Company, the Company’s entrusting the Executive with
Confidential Information (as defined in the Confidentiality
Agreement), and the benefits provided hereunder, including without
limitation the Severance Payment, the parties have entered into the
Confidentiality Agreement, which is hereby incorporated by
reference herein and made a part hereof as if set forth in full
herein.
10.
Severability . If any provision of this Agreement for
any reason shall be held, by a court of competent jurisdiction, to
be illegal, invalid or unenforceable, such illegality, invalidity
or unenforceability shall not render the entire Agreement illegal,
invalid or unenforceable, the parties hereto agree, and it is their
desire, that such court shall amend or modify this Agreement, and
that this Agreement, in its modified form, shall be enforceable and
valid to the maximum extent permitted by applicable law, and each
other provision hereof shall not thereby be affected and shall be
given full force and effect, and the parties shall cooperate in
good faith to further modify this Agreement so as to preserve to
the maximum extent possible the intended benefits to be received by
the parties.
11.
Successors and Assigns . The Agreement shall be
binding upon and inure to the benefit of the parties hereto, their
respective heirs, administrators, executors, personal
representatives, successors and assigns. Notwithstanding the
foregoing, the Executive’s duties and responsibilities
hereunder shall not be assignable.
12.
Governing Law . This Agreement shall be governed and
construed in accordance with the laws of the State of New York,
without regard to any rules respecting the conflicts of
laws.
13.
Notices . All notices, requests and demands given to
or made upon the respective parties hereto shall be in writing and
shall be deemed to have been given or made three business days
after the date of mailing when mailed by registered or certified
mail, postage prepaid, or on the date of delivery if delivered by
hand, or one business day after the date of delivery by Federal
Express or o
