Exhibit 10.06
CONFIDENTIAL EXECUTION COPY
SEVERANCE AND RELEASE AGREEMENT
This Severance and Release Agreement (this "Agreement") is entered
into by and between STEVE TUDOR ("Tudor") and MSC INDUSTRIAL DIRECT CO., INC. on
behalf of itself and all of its subsidiaries, divisions, affiliates, successors
and assigns (hereinafter collectively referred to as the "Company").
RECITALS
WHEREAS, Tudor and the Company wish to terminate his employment by
the Company on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the promises, releases,
covenants and agreements contained herein and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by
the parties hereto, it is hereby agreed as follows:
1. Tudor hereby resigns his employment with the Company, effective as of
March 1, 1999 (the "Effective Date"). Tudor further agrees that subsequent to
the Effective Date he shall not represent or hold himself out as an officer or
employee of the Company.
2. (a) From and after the Effective Date and until May 30, 1999, the
Company agrees to pay to Tudor severance in accordance with the Company's
customary payroll policy at
the rate of $262,500 per annum, less applicable withholding (as required by
Federal and New York State law) for income and other taxes (the "Severance
Payment"). Nothing herein shall obligate Tudor to seek employment with another
entity.
(b) From and after the Effective Date, the Company agrees to
continue to provide to Tudor, until the earlier to occur of (i) August 31, 1999
or (ii) the participation by Tudor in any other medical insurance plan, the
medical and dental and hospital insurance benefits available to him upon his
making of an election under COBRA, the cost of which insurance benefits shall be
borne by the Company.
(c) The Company further agrees:
(i) to pay to Tudor an automobile allowance of $800 per month from
and after the Effective Date through August 31, 1999;
(ii) to pay (or reimburse Tudor for ) the rental payments on his
apartment in Huntington, New York during the period from and after the Effective
Date through the rental termination date of May 30, 1999; and
(iii) to pay the cost (but not in excess of $4,000) of relocating
Tudor to Nashville, Tennessee in accordance with the Company's customary
relocation policy as in effect on the date hereof.
(d) The Company hereby retains Tudor as a consultant to the Company
for a period of three (3) years and two (2) months commencing on the Effective
Date and ending on April 30, 2002. Tudor shall not be required to devote more
than 10 hours per calendar quarter to such services, which services may be
rendered from such locations, as Tudor shall determine. In
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consideration of such services, the Company agrees to pay Tudor, in accordance
with the Company's customary payroll policy, consulting fees at the rate of
$2,500 per annum.
(e) Subject to the strict adherence by Tudor to each of the
covenants made by him hereunder, Tudor shall retain options (i) to purchase
60,000 shares of the Company's Class A common stock, par value $.001 per share
(the "Common Stock"), granted to him on April 5, 1996, of which options to
purchase 36,000 shares of Common Stock have not vested, (ii) to purchase 20,000
shares of the Common Stock granted to him on April 28, 1997, of which options to
purchase 16,000 shares of Common Stock have not vested, (iii) to purchase 30,000
shares of the Common Stock granted to him on November 19, 1997, of which options
to purchase 24,000 shares of Common Stock have not vested, and (iv) to purchase
60,000 shares of the Common Stock granted to him on October 14, 1998, none of
which options have vested. Tudor acknowledges that his consultant status with
the Company shall be terminated upon the earlier to occur of (1) his breach of
any covenant or obligation contained in this Agreement or (2) April 30, 2002,
which termination shall constitute a forfeiture of all options not vested at the
time of such termination.
(f) To further induce the strict adherence by Tudor to each of the
covenants made by him hereunder, including but not limited to the
confidentiality covenant set forth in paragraph 7, the Inducement covenant set
forth in paragraph 8 and the non-solicitation covenant set forth in paragraph 9,
the Company agrees to pay to Tudor, for a period of five (5) years commencing on
the Effective Date and terminating February 28, 2004, compensation at the rate
of $88,550 per annum (the "Inducement Payments"). The Inducement Payments shall
be payable monthly in arrears, commencing March 31, 1999, and the Company shall
be entitled to offset against such Inducement Payments the amount due to the
Company from Tudor arising out
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of his indebtedness to the Company referred to in paragraph 2(g). Tudor
acknowledges and agrees that the payment of such amounts to him shall constitute
ordinary income in accordance with applicable tax law.
(g) Tudor acknowledges and agrees that he is indebted to the Company
as of January 1, 1999 in the amount of $487,000, which amount, together with
additional accrued interest thereon of $4,058 through the Effective Date, is due
and owing in full as of the Effective Date. In consideration of the payment by
Tudor of $100,000 of such indebtedness on or prior to March 31, 1999, Tudor
agrees to pay, and the Company agrees to accept payment, of the remaining
balance of such indebtedness, together with interest thereon at the rate of 5%
per annum, in 60 monthly installments of $7,379.75 commencing March 31, 1999 and
ending February 28, 2004; provided, however, that if Tudor shall breach any of
his covenants or obligations contained in this Agreement, the unpaid balance of
such indebtedness shall be immediately due and payable.
3. As a material inducement to the Company to enter into this Agreement
and for other good and valuable consideration, the receipt of which is hereby
acknowledged by Tudor, Tudor hereby irrevocably, unconditionally and generally
releases the Company and each of the Company's officers, directors, and
employees, and the heirs, executors, administrators, receivers, successors and
assigns of all of the foregoing (collectively, "Releasee"), from, and hereby
waives and/or settles any and all, actions, causes of action, suits, debts, sums
of money, agreements, promises, damages, or any liability, claims or demands,
known or unknown and of any nature whatsoever (collectively, "Claims") which
Tudor ever had, now has or hereafter can, shall or may have, for, upon, or by
reason of any matter, cause or thing whatsoever from the beginning of the world
to the date of this Agreement, arising directly or indirectly pursuant to or out
of his
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employment with the Company, the performance of services for the Company or any
Releasee or the termination of such employment or services and, specifically,
without limitation, any Claims (a) arising under or pursuant to any contract,
express or implied, written or oral, (b) for wrongful dismissal or termination
of employment or violation of any public policy, (c) arising under any federal,
state, local or other statutes, orders, laws, ordinances, regulations or the
like that relate to the employment relationship and/or that specifically
prohibit discrimination or retaliation based upon age, race, religion, sex,
national origin, disability, sexual orientation or any other unlawful bases,
including, without limitation, the Age Discrimination in Employment Act of 1967,
as amended, the Civil Rights Act of 1991, as amended, the Civil Rights Acts of
1866 and 1871, as amended, Title VII of the Civil Rights Act of 1964, as
amended, the Americans with Disabilities Act of 1990, as amended, the Employee
Retirement Income Security Act, as amended, the Executive Law of the State of
New York, as amended, and any applicable rules and regulations promulgated
pursuant to or concerning any of the foregoing statutes, (d) for tort, tortious
or harassing conduct, infliction of mental distress, interference with contract,
fraud, libel or slander, and (e) for damages, including, without limitation,
punitive or compensatory damages or for attorneys' fees, expenses, costs, wages,
injunctive or equitable relief. This paragraph shall not apply to any claim that
Tudor may have for a breach of this Agreement. Nothing herein shall be deemed to
be a waiver or release by Tudor of any indemnification rights which may be
available to him under the Company's By-Laws or pursuant to the Business
Corporation Law of the State of New York or pursuant to any director and/or
officer insurance coverage maintained by the Company.
4. Tudor represents and warrants that he has not filed, commenced or
participated in any way in any complaints, claims, actions or proceedings of any
kind against any Releasee with
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any federal, state or local court or any administrative, regulatory or
arbitration agency or body, and he agrees not to file, assert or commence any
complaint, claim, action or proceeding of any kind against any Releasee with any
federal, state or local court or any administrative, regulatory or arbitration
agency or body with respect to any matter from the beginning of the world to the
date hereof.
5. Tudor hereby waives any right to, and agrees not to, seek reinstatement
of employment or future employment with the Company or any Releasee. Tudor
acknowledges and agrees that any monetary or other benefits which are, were or
may have been claimed to be due to Tudor and which he may have earned or
accrued, or to which he may have been entitled, have been paid or such payments
have been released, waived or settled by Tudor pursuant to this Agreement.
6. (a) By executing this Agreement, Tudor acknowledges that (i) he has
been advised by the Company to consult with an attorney before executing this
Agreement and has consulted and been represented by John Schwalb, Esq. of the
firm of Spicer, Flynn & Rudstrom, 424 Church Street, Suite 1350, Nashville,
Tennessee, 37219, in connection herewith, (ii) he has been provided with at
least a twenty-one (21) day period to review and consider whether to sign this
Agreement and that by executing and delivering this Agreement to the Company, he
is waiving any remaining portion of such twenty-one (21) day period, and (iii)
he has been advised that he has seven (7) days following execution to revoke
this Agreement (the "Revocation Period").
(b) This Agreement will not be effective or enforceable until the
Revocation Period has expired. Such revocation shall only be effective if an
originally executed written
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notice thereof is delivered to the Company on or before 5:00 p.m. on the seventh
day after execution of this Agreement. If so revoked, this Agreement shall be
deemed to be void ab initio and of no further force and effect.
7. Tudor hereby acknowledges that during his employment he has or may have
acquired proprietary, private and/or otherwise confidential information of or
concerning the Company or any persons or entities with which the Company
transacts or transacted business, including, without limitation, any non-public
financial information concerning, or any information relating to, any aspect of
the operation of the business of the Company ("Confidential Information"). Tudor
hereby represents and agrees that (a) he has returned to the Company or
destroyed, and has not retained any copies of, all documents, records or
materials of any kind, whether written or electronically created or stored,
which contain, relate to or refer to any Confidential Information ("Confidential
Materials"), (b) he has not disclosed any Confidential Information or
Confidential Materials to any person or entity outside the scope of his
employment without the express written authorization of a senior executive
officer of the Company, and (c) in consideration of the Company's entering into
this Agreement, he shall not disclose any Confidential Information or
Confidential Materials in any manner whatsoever, except as shall be required by
law.
8. Tudor hereby agrees that until April 30, 2002, he shall not, directly
or indirectly, engage or participate anywhere in the United States, North
America, or the European Economic Community as an owner, partner, shareholder,
member, employee, director, consultant or (without limitation by the specific
enumeration of the foregoing) otherwise in or with any of the companies
identified on Schedule 1 annexed hereto or in or with any affiliate of any of
such
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companies; provided, however, that nothing herein shall prevent the ownership by
Tudor of not more than 1% of the outstanding common stock of any of the
companies identified on Schedule 1. For the purposes hereof, an affiliate of any
such companies shall mean any entity in which any of such companies owns,
directly or indirectly, at least fifty percent (50%) of the ownership interests
therein. In the event of any breach of this paragraph 8, the time period of the
breached covenant shall be extended for the period of such breach. Tudor
recognizes that the territorial, time and scope limitations set forth in this
paragraph 8 are reasonable and are required for the protection of the Company,
and in the event that any such territorial, time or scope limitation is deemed
to be unreasonable by a court of competent jurisdiction, Tudor and the Company
agree to the reduction of any of said territorial, time or scope limitations to
such an area, period or scope as said court shall deem reasonable under the
circumstances. Notwithstanding the covenants contained in this paragraph 8, such
covenants shall not be construed to extend to or prevent Tudor from continuing
any employment, directorship, membership, ownership, partnership, consulting or
other arrangement with any company that is purchased, taken over or otherwise
acquired, in whole or in part, after the Effective Date of this Agreement by any
company identified on Schedule 1.
9. Tudor hereby agrees that until February 28, 2004, he shall not,
directly or indirectly, whether for himself or on behalf of any other person (a)
solicit or cause to be solicited or assist any person or entity to solicit for
employment any persons who (i) are, at the time of solicitation of employment,
employees of the Company or (ii) were, at any time during the one-year period
prior to such solicitation, employees of the Company and (b) employ or cause to
be employed, or engage as a partner, contractor, consultant or otherwise, any
persons who (i) are, at
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the time of such action, employees of the Company or (ii) were, at any time
during the one-year period prior to such action, employees of the Company.
10. Tudor covenants and agrees that he shall, at all times, whether during
or after the expiration of his consultant status, cooperate with and assist the
Company in the defense of any and all legal proceedings arising from facts and
circumstances of which he had knowledge while employed by the Company. The
Company shall reimburse Tudor for any out-of-pocket expenses incurred by him in
connection with such cooperation and assistance.
11. Tudor covenants and agrees that he shall, from time to time, make,
execute and deliver, or cause to be made, executed and delivered, such
assignments, deeds, bills of sale and other instruments, acts, consents and
assurances as the Company or its counsel may request for the effectual
consummation, confirmation and particularization of this Agreement.
12. The parties hereto agree to maintain the terms of this Agreement as
confidential and neither party, nor any person or entity acting on such party's
behalf, shall disclose such terms to any third party, except to such party's
spouse, attorney, accountant or financial advisor or as may be required by law.
Notwithstanding the confidential nature of this Agreement, Tudor may disclose
the essential terms, excluding consideration, of the non-competition provisions
of this Agreement to any employer or potential employer of Tudor or as otherwise
provided by law.
13. This Agreement shall not in any way be construed as an admission by
the Company that it has acted wrongfully with respect to Tudor or that Tudor has
any rights whatsoever against the Company, and the Company specifically
disclaims any liability for any wrongful acts against Tudor on the part of
itself, its employees or its agents.
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14. Tudor agrees that neither he, nor anyone acting on his behalf, shall
hereafter (i) make any derogatory, disparaging or critical statement about the
Company or the business of the Company or any of the Company's officers,
directors or employees or any persons who were officers, directors or employees
of the Company or (ii) communicate, directly or indirectly, with the press or
other media concerning the past or present employees or business of the Company.
15. The Company agrees that neither it, nor anyone acting on the Company's
behalf, shall hereafter make any derogatory, disparaging or critical statement
about Tudor.
16. If not revoked in accordance with paragraph 6(b), the covenants,
representations and acknowledgments contained herein shall survive the execution
and delivery of this Agreement.
17. This Agreement (a) constitutes the sole and complete understanding and
agreement between the parties hereto with respect to the matters set forth
herein and there are no other agreements or understandings, whether written or
oral and whether made contemporaneously or otherwise, that are binding upon the
parties hereto, (b) may not be amended unless in a writing signed by the parties
hereto, (c) shall be subject to, governed by and construed and enforced in
accordance with the internal laws of the State of New York and (d) shall inure
to the benefit of and be binding upon the heirs, devisees, legatees, executors,
administrators, successors, assigns, officers, directors, and affiliates of each
of the parties hereto.
18. Tudor represents and warrants that he is able to affect a knowing and
voluntary waiver and general release of claims and is not affected or impaired
by illness, use of alcohol, drugs or other substances or otherwise impaired.
Tudor represents and warrants that he is
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competent to execute this Agreement, to waive any and all claims he has or may
have against the Releasee and certifies that he is not a party to any bankruptcy
or other proceeding which would impair his right to waive any and all claims he
may have against Releasee.
IN WITNESS WHEREOF, the parties hereto have executed this Severance
and Release Agreement on the date set forth opposite their respective
signatures.
Dated: March 22, 1999 /s/ Steve Tudor
--------------------------------------
Steve Tudor
Dated: March 30, 1999 MSC INDUSTRIAL DIRECT CO., INC.
By: /s/ David Sandler
-----------------------------------
David Sandler
Senior Vice President
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