EXHIBIT 10.37
CONFIDENTIAL
June 18, 1999
Xxxxx Xxxxx
Acme Markets, Inc.
00 Xxxxxx Xxxxxx Xxxxxxx
Xxxxxxx, XX 00000
Re: Retention Bonus and Severance Agreement and Release
Dear Xxxxx:
This Retention Bonus and Severance Agreement and Release (the "Letter
Agreement") sets forth the terms of your employment with Xxxxxxxxx'x Inc. or one
of its affiliates ("Albertson's") commencing on the date of closing of the
merger involving American Stores Company ("ASC") and Albertson's. The date of
closing will occur when the certificate of merger is filed with the Secretary of
State of Delaware (the "Closing Date"). You are referred to in this Letter
Agreement as "you" or "the executive," and American Stores Company and
Albertson's are referred to collectively as the "Company." Congratulations on
your joining the Albertson's team.
1. Duration. The term of this Letter Agreement will begin on the Closing
Date and end three years later, unless sooner terminated (the
"Employment Term").
2. Title. You will be employed as Executive Vice President, Operations.
You will devote your best efforts and all of your business time,
attention and skill to the performance of the duties associated with
this position. You will report to The Chairman and Chief Executive
Officer or his/her successor. You will also perform such other duties
as The Chairman and Chief Executive Officer or his/her successor may
in good faith assign to you, which shall not be inconsistent with your
position with Albertson's. Your principal place of employment will be
Boise, ID.
3. Compensation. Your annual base salary will be $375,000, which will be
paid to you in accordance with Albertson's normal payroll procedures.
You will be eligible to receive a target bonus equal to 70% of your
base salary pursuant to the Xxxxxxxxx'x, Inc. Officers' Bonus Plan in
accordance with the terms and conditions of that Plan. You will be
eligible to participate in the Xxxxxxxxx'x Inc. Amended and Restated
1995 Stock-Based Incentive Plan. Stock option grants are discretionary
and must be approved by the Board of Directors of Xxxxxxxxx'x Inc. on
an annual basis. Under that Plan, options are typically granted on an
annual basis and vest at the rate of twenty percent per year based on
continued employment with Albertson's. For illustrative purposes, a
Executive Vice President may be granted an annual option target grant
of approximately $2,000,000. This is the equivalent dollar amount
"invested" in Albertson's stock through the plan. For example, if the
stock price of Albertson's on the date of grant is $60.00, 33,334
shares would be granted ($2,000,000/$60.00 per share). For the first
year of your employment, the amount of option grants are expected to
be doubled (e.g., 66,667 shares assuming a $60.00 per share stock
price). It is anticipated that the first stock option grants to you
under the Plan will be made within thirty days following the closing
of the merger. The foregoing does not obligate Albertson's to make any
kind of option grant.
4. Benefits. During your employment, you will be eligible to participate
in the applicable benefit plans and programs generally made available
to other Albertson's executives of similar status, primary place of
employment and title to you. You recognize that these plans and
programs may change at any time.
5. Retention Bonus. You will be eligible for a retention bonus of up to
$787,500 subject to the terms described below. One third of that
amount (i.e., $262,500) will be paid to you only if you are employed
by Albertson's on the first anniversary of the Closing Date. One third
of that amount will be paid to you only if you are employed by
Albertson's on the second anniversary of the Closing Date. And, one
third of that amount will be paid to you only if you are employed by
Albertson's on the third anniversary of the Closing Date. All such
amounts will be paid as soon as reasonably practicable following the
respective anniversary dates.
6. Termination.
(a) If your employment is terminated by Albertson's without
"Cause" (as defined below) or you terminate your employment with "Good
Reason" (as defined below), Albertson's sole obligation to you
hereunder shall be to pay or provide to you (i) any accrued and unpaid
base salary earned through the date of termination, (ii) an amount
equal to $787,500, less the amount of all payments theretofore paid to
you pursuant to Section 5 hereof and (iii) for the duration of the
three-year Employment Term, medical, dental and life insurance
benefits as if your employment had not been terminated; provided,
however, that if you become reemployed with another employer and are
eligible to receive medical or other welfare benefits under another
employer-provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such other
plan during such applicable period of eligibility. You may terminate
your employment for Good Reason only if you provide Albertson's
written notice of such termination within ninety days of the
occurrence of Good Reason.
(b) If your employment with Albertson's terminates for "Cause"
or you terminate without "Good Reason," Albertson's sole obligation
to you hereunder shall be to pay to you any accrued and unpaid base
salary earned through the date of termination.
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For purposes of this Letter Agreement "Cause" shall mean:
(i) Your willful and continued failure to perform
substantially your duties with Albertson's (other than any such
failure resulting from incapacity due to physical or mental
illness) which has not been cured within thirty days after a
written demand for substantial performance is delivered to you by
the Chief Executive Officer of Albertson's which specifically
identifies the manner in which you have not substantially
performed your duties, or
(ii) Your willfully engaging in illegal conduct or gross
misconduct which is materially and demonstrably injurious to
Albertson's.
For purposes of this provision, no act or failure to act on your
part shall be considered "willful" unless it is done, or omitted to be
done, by you in bad faith or without reasonable belief that your
action or omission was in the best interests of Albertson's.
For purposes of this Letter Agreement "Good Reason" shall mean:
(i) Your base salary is reduced below $375,000;
(ii) Your duties and responsibilities as Executive Vice
President, Operations are materially and adversely diminished,
excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied
by Albertson's promptly after written notice thereof is given by
you to Albertson's; or
(iii) You are required to be based at a location more than
35 miles from the location where your employment is based
pursuant to this Letter Agreement.
(c) The severance pay and benefits provided for in this
Section 6 shall be in lieu of any other severance pay to which you may
be entitled under any severance policy; employment agreement or other
policy, plan or program with Albertson's or any of its affiliates
(including, after the Closing Date, American Stores Company and its
affiliates). Your entitlement to any compensation or benefits other
than as provided herein shall be determined in accordance with the
employee benefit plans of Albertson's as in effect from time to time
and as may be modified.
(d) Any termination by Albertson's for Cause, or by you for Good
Reason, shall be communicated by a Notice of Termination to the other
party hereto. For purposes of this Letter Agreement, a "Notice of
Termination" means a written notice which (i) indicates the specific
termination provision in this Letter Agreement relied upon, and (ii)
to the extent applicable, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of your
employment under the provision so indicated. The failure by you or
Albertson's to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or Cause
shall not waive any right of yours or Albertson's, respectively,
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hereunder or preclude you or Albertson's, respectively, from asserting
such fact or circumstance in enforcing yours or Albertson's rights
hereunder.
(e) You may be entitled to certain "gross up" payments in
connection with the merger involving Albertson's and American Stores
Company as set forth in Addendum A attached hereto and incorporated
herein by reference.
7. Employment At-Will. At the end of the three year term of this
Agreement, you will be employed on an at-will basis, such that you may
terminate your employment at any time and Albertson's may terminate
your employment at any time for any reason.
8. Entire Agreement. This Letter Agreement sets forth the entire
agreement of the parties with respect to your employment with
Albertson's and any of its affiliates and the termination thereof, and
supercedes any and all agreements, oral or written, with respect
thereto, including, but not limited to, your Employment Agreements
with American Stores Company and your participation in the American
Stores Company Employee Severance Policy, in which you will cease to
participate as of the Closing Date, and any offer letters or other
employment terms and conditions, which are hereby superceded and
rendered null and void.
9. Effective Date. The rights and obligations of the parties under this
Letter Agreement are conditioned upon the occurrence of the Closing
Date. If the Closing Date does not occur, this Letter Agreement shall
be null and void.
10. Governing Law. The validity, interpretation, construction and
performance of this Letter Agreement shall in all respects be governed
by the laws of Delaware, without reference to principles of conflict
of law.
11. Disclosure. From and after the date of execution of this Letter
Agreement, you will not disclose this Letter Agreement, or any of its
contents, to any person, entity or corporation other than your spouse,
immediate family, attorney, tax advisor or financial advisor. You may
discuss this Letter Agreement with Executive Officers in Albertson's
Human Resources or Legal departments.
12. Taxes. All payments and benefits hereunder shall be subject to all
applicable taxes required to be withheld by Albertson's pursuant to
federal, state or local laws.
13. Cooperation. In the event of your termination, for whatever reason,
you shall cooperate with Albertson's and be reasonably available to
Albertson's with respect to continuing and/or future matters arising
out of your employment or any other relationship with Albertson's,
whether such matters are business-related, legal or otherwise. You
shall be compensated for such services at hourly rates approximately
proportionate to your weekly salary divided by forty plus expenses.
Any testimony you give must be truthful and accurate.
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14. Releases. Within the later of one week after the Closing Date or
twenty-one days after you have been provided this Agreement for your
consideration, you shall execute a General Release substantially in
the form as set forth in Addendum B hereto. Additionally, as a
condition to your receipt of the final installment of the retention
bonus paid or payable under Section 5 and/or Section 6 of this Letter
Agreement, you shall execute a General Release substantially in the
form as set forth in Addendum B.
15. Non-Waiver of Rights. The failure to enforce at any time the
provisions of this Letter Agreement or to require at any time
performance by the other party of any of the provisions hereof shall
in no way be construed to be a waiver of such provisions or to affect
either the validity of this Letter Agreement or any part hereof, or
the right of either party to enforce each and every provision in
accordance with its terms.
16. Solicitation of Employees. You agree that for the one (1) year period
following your termination of employment with Albertson's, you will
not, either directly or indirectly, alone or in conjunction with
another party, solicit, employ, or attempt to employ, any individual
who on the date of termination is, or within one year prior thereto
was, an employee of Albertson's.
17. Non-Assignment. You shall not assign all or any portion of this Letter
Agreement without the prior written consent of Albertson's.
18. Modification. No provision of this Letter Agreement may be modified,
altered or amended except by an instrument in writing executed by the
parties hereto.
19. Full Settlement. Albertson's obligation to make the payments provided
for in this Letter Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which Albertson's
may have against you. In no event shall you be obligated to seek other
employment or take any other action by way of mitigation of the
amounts payable to you under any of the provisions of this Letter
Agreement and such amounts shall not be reduced whether or not you
obtain other employment.
20. Confidential Information. You shall hold in a fiduciary capacity for
the benefit of Albertson's all secret or confidential information,
knowledge or data relating to Albertson's, and its businesses, which
shall have been obtained by you during your employment by Albertson's
(including American Stores Company and any of its affiliates) and
which shall not be or become public knowledge (other than by acts by
you or representatives of you in violation of this Letter Agreement).
After termination of your employment, you shall not, without the prior
written consent of Albertson's or as may otherwise be required by law
or legal process, communicate or divulge any such information,
knowledge or data to anyone other than Albertson's and those
designated by it. In no event shall an asserted violation of the
provisions of this Section 20 constitute a basis for deferring or
withholding any amounts otherwise payable to you under this Agreement.
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21. Arbitration. By signing this Agreement, you agree that all claims or
disputes covered by this Agreement or otherwise arising out of or
relating to your employment during the term of the Agreement must be
submitted to binding arbitration and that this arbitration will be the
sole and exclusive remedy for resolving any such claim or dispute.
This promise to resolve claims by arbitration is equally binding upon
both you and Albertson's.
Any arbitration will be administered by the American Arbitration
Association under its Commercial Arbitration Rules. The arbitrator
shall apply the Federal Rules of Evidence. The arbitrator shall have
jurisdiction to hear and rule on pre-hearing disputes and is
authorized to hold pre-hearing conferences by telephone or in person
as the arbitrator deems necessary.
The Company shall pay the costs of arbitration and each party shall
bear its own expenses; provided, that if you are the prevailing party
in any such proceeding, the Company shall reimburse you for your
reasonable costs and expenses, including attorney's fees, incurred in
connection with such proceeding.
If you accept the terms of this Letter Agreement, please sign below in the space
provided.
Very truly yours,
XXXXXXXXX'X, INC.
By: /s/ Xxxxxx X. Xxxxx
-------------------------------
Name: Xxxxxx X. Xxxxx
Title: Executive Vice President
/s/ Xxxxx X. Xxxxx
----------------------
Executive Signature
7/16/99
----------------------
Date
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Addendum A
Certain Additional Payments by the Company
(a) Anything in the Retention Bonus and Severance Agreement and
Release dated June 18, 1999, (the "Letter Agreement") to the contrary
notwithstanding and except as set forth below, in the event it shall be
determined that any payment or distribution by the Company to or for the benefit
of the Executive (whether paid or payable or distributed or distributable
pursuant to the terms of the Letter Agreement or otherwise, but determined
without regard to any additional payments required under this Addendum) (a
"Payment") would be subject to the excise tax imposed by Section 4999 of the
Code or any interest or penalties are incurred by the Executive with respect to
such excise tax (such excise tax, together with any such interest and penalties,
are hereinafter collectively referred to as the "Excise Tax"), then the
Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. Notwithstanding the foregoing provisions of this
Addendum, if it shall be determined that the Executive is entitled to a Gross-Up
Payment, but that the Payments do not exceed 110% of the greatest amount (the
"Reduced Amount") that could be paid to the Executive such that the receipt of
Payments would not give rise to any Excise Tax, then no Gross-Up Payment shall
be made to the Executive and the Payments, in the aggregate, shall be reduced to
the Reduced Amount.
(b) Subject to the provisions of (c) below, all determinations
required to be made under this Addendum, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by a nationally
recognized certified public accounting firm as may be designated by the
Executive (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of
the receipt of notice from the Executive that there has been a Payment, or such
earlier time as is requested by the Company. All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Addendum, shall be paid by the Company to the
Executive within five days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of the uncertainty in the application
of Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to (c) below and the Executive thereafter
is required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the Executive is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the thirty day period
following the date on which it gives such notice to the Company (or such shorter
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period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by
the Company,
(iii)cooperate with the Company in good faith to effectively contest
such claim, and
(iv) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section (c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of such taxes for the taxable year of the Executive with respect to
which such contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and the Executive shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service or any other
taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section (c) above, the Executive becomes entitled to
receive any refund with respect to such claim, the Executive shall (subject to
the Company's complying with the requirements of Section (c) above) promptly pay
to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Section (c) above, a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of thirty days after such determination, then such advance shall be forgiven and
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shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
The provisions of this Addendum apply to all payments and
distributions made by the Company for the benefit of Executive that are
considered to be contingent on the "change of control" that occurs for purposes
of Sections 280G and 4999 of the Code in connection with or relating to the
merger involving Albertson's and American Stores Company and under the Letter
Agreement. It does not extend to any other merger, acquisition or other
transaction that Albertson's could enter into in the future.
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Addendum B
General Release
I, with the intention of binding myself and my heirs, executors,
administrators and assigns, do hereby release, remise, acquit and forever
discharge Albertson's, as it is defined in the Retention Bonus and Severance
Agreement and Release, dated June 18, 1999 (the "Agreement") and its present and
former officers, directors, employees, agents, attorneys, executives, affiliated
companies, divisions, subsidiaries, successors, predecessors and assigns
(collectively the "Released Parties"), of and from any and all prior or current
employment contracts, agreements, arrangements, practices, policies or other
statements or conduct; claims; actions; causes of action; demands; rights;
damages; debts; sums of money; accounts; financial obligations; suits; expenses;
attorneys' fees and liabilities of whatever kind or nature in law, equity or
otherwise, whether now known or unknown, suspected or unsuspected, which I,
individually or as a member of a class, now have, own or hold, or have at any
time heretofore had, owned or held, arising through the date hereof, against any
Released Parties arising out of or in any way connected with my employment
relationship with American Stores Company and/or any of its affiliates,
including without limitation, any claims for severance or vacation benefits,
unpaid wages, salary or incentive payment, breach of contract, wrongful
discharge, impairment of economic opportunity, intentional infliction of
emotional harm or other tort, or employment discrimination under any applicable
federal, state or local statute, provision, order or regulation including, but
not limited to, any claim under Title VII of the Civil Rights Act, the Federal
Age Discrimination in Employment Act, the Americans With Disabilities Act and
any similar or analogous state statute excepting only:
A. those obligations of Albertson's payable under or contemplated by
the Letter Agreement; and
B. any rights to indemnification I may have under applicable
corporate law, the by-laws or certificate of incorporation of
American Stores Company, Albertson's, Inc., and/or any of their
affiliates or as an insured under any Director's and Officer's
liability insurance policy now or previously in force.
I acknowledge and agree that I have not, with respect to any transaction or
state of facts existing prior to the date of execution of this General Release,
filed any complaints, charges or lawsuits against Albertson's, American Stores
Company and/or any of their affiliates with any governmental agency or any court
or tribunal.
I further declare and represent that I have carefully read and fully
understand the terms of this General Release and the Agreement, that I have been
given not less than twenty-one (21) days to consider this General Release, that
I have been advised to seek, and have had the opportunity to seek, the advice
and assistance of counsel with regard to this General Release, and that I
knowingly and voluntarily, of my own free will, without any duress, being fully
informed and after due deliberate thought and action, accept the terms of and
sign the same as my own free act.
To the extent applicable to me, I expressly waive and relinquish all rights
and benefits afforded by Section 1542 of the Civil Code of the State of
California, and I do so understanding and acknowledging the significance and
consequence of that waiver. Section 1542 of the Civil Code of the State of
California states:
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A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his
settlement with the debtor.
I understand that I may revoke this General Release anytime within seven
(7) days of signing it and that the terms of this General Release will not be
effective until the seven (7) day revocation period expires.
/s/ Xxxxx X. Xxxxx
----------------------
Executive
STATE OF Idaho )
) SS.
COUNTY OF Ada )
On this 16th day of July, 1999, before me personally appeared Xxxxx X.
Xxxxx, to me known to be the person described in and who executed the General
Release and acknowledged that he/she executed the same as his/her free act and
deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official
seal in the Country and State aforesaid, the day and year first above written.
/s/ Xxxx Xxxxx Xxxxxx
-------------------------
Notary Public
My Commission Expires: 12/27/04
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