EXECUTION COPY
Pathmark Stores, Inc.
July 1, 2000
Xxxxxx Xxxxx
c/o Pathmark Stores, Inc.
000 Xxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
Side Letter to the Sale and Retention Bonus Agreement,
The Employment Agreement and Certain Additional Understandings
Dear Xxxxxx:
This side letter (the "Letter") sets forth the agreement
between you and Pathmark Stores, Inc., a corporation organized under the laws of
Delaware (the "Company"), regarding the amendment to the terms of the Sale and
Retention Bonus Agreement between you and the Company dated February 1, 2000
(the "Bonus Agreement") and to the terms of the employment agreement between you
and the Company, dated February 1, 1999 (the "Employment Agreement"). In
addition, this Letter includes an acknowledgement of certain occurrences in
connection with the terms of the Employment Agreement. This Letter shall be
effective as of the date first set forth above.
A. Amendments to the Bonus Agreement.
1. New Definitions. (a) The following definition is hereby
added to Section 1 of the Bonus Agreement immediately prior to the definition of
"Payment Date":
"Liquidation Date" shall mean January 31, 2001.
(b) The following definition is hereby added to Section 1 of
the Bonus Agreement immediately prior to the definition of "Purchaser":
"Plan Effective Date" shall mean the effective date of the
judicial consent to the Joint Prepackaged Chapter 11 Plan of
Reorganization of the Company, its parent companies and subsidiaries.
(c) The following definition is hereby added to Section 1 of
the Bonus Agreement immediately prior to the definition of "Triggering Event":
"Stock Option" shall mean any vested or unvested outstanding
stock option awarded under any equity compensation plan of the Company
or its subsidiaries that is exercisable upon vesting for shares of
common stock of the Company or any of its subsidiaries.
2. Modified Definition. The definition of "Triggering Event"
in Section 1 of the Bonus Agreement is hereby deleted in its entirety and
replaced by the following:
Prior to the Plan Effective Date, a "Triggering Event" shall
be deemed to have occurred on the date that any of he following shall
have occurred:
(A) any member of the Company Group enters into a binding
agreement with one or more Independent Third Parties to directly
acquire, in exchange for cash, stock, claims, or property, fifty
percent or more of the aggregate equity securities of Holdings for
which the MLCP Investors and the Equitable Investors (as defined in the
Amended and Restated Stockholders Agreement among Holdings and its
Stockholders, dated January 22, 1998) (together, the "Stockholders")
are Beneficial Owners as of the Effective Date;
(B) any member of the Company Group enters into a binding
agreement providing for a merger, consolidation, reorganization or
other business combination upon consummation of which one or more
Independent Third Parties would own or control fifty percent or more of
either (i) the aggregate voting securities of the Company Group, (ii)
the aggregate economic interest of the outstanding equity securities of
the Company Group or (iii) the aggregate value of the assets of the
Company;
(C) any member of the Company Group enters into transaction
upon consummation of which an Independent Third Party would acquire in
exchange for cash, stock, claims or property fifty percent or more of
either (I) the aggregate equity securities of the Company, PTK
Holdings, Inc. or Supermarkets General Holdings Corporation, or (II)
the Company's assets; or
(D) any member of the Company Group files a plan of
reorganization or motion for relief in a case under title 11 of the
United States Code for the purpose of implementing an agreement or
transaction of the type described in any of the preceding clauses (A),
(B) or (C);
provided, however, that a Triggering Event shall not include any change
of ownership resulting from a public offering of any of the securities
of any of the Company Group pursuant to an effective registration
statement under the Securities Act of 1933, as amended.
On and after the Plan Effective Date, a "Triggering Event"
shall be deemed to have occurred on the date that any of the following
shall have occurred, provided that a Triggering Event may occur only
during the Term (as defined in Section 2 below):
(A) the acquisition by any Person of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended) of 35% or more of the common stock of
the Company (the "Common Stock") then outstanding, and the individuals
who, as of the Plan Effective Date, constitute the Board and
subsequently elected members of the Board whose election is approved or
recommended by at least a majority of such current members or their
successors whose election was so approved or recommended (other than
any subsequently elected members whose initial assumption of office
occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board) cease for any reason to constitute at
least a majority of such Board; provided, however, that in no event
shall a Triggering Event be deemed to have occurred upon any such
acquisition by (i) any employee benefit plan of the Company, (ii) any
Person or entity organized, appointed or established by the Company for
or pursuant to the terms of any such employee benefit plan, or (iii)
any Person (other than any of Fidelity Management & Research Company or
Fidelity Management Trust Company or by any fund or account associated
with either Fidelity Management & Research Company or Fidelity
Management Trust Company) who as of the Plan Effective Date was the
beneficial owner of 15% or more of the shares of Common Stock
outstanding on such date unless and until such Person, together with
all Affiliates of such Person, becomes the beneficial owner of 35% or
more of the shares of Common Stock then outstanding whereupon a Change
in Control shall be deemed to have occurred;
(B) the Company enters into a binding agreement with one or
more Persons to directly acquire, in exchange for cash, stock, claims
or property, 50% or more of the aggregate equity securities of the
Company; or
(C) the Company enters into a binding agreement providing for
a merger, consolidation, reorganization or other business combination
upon consummation of which one or more Persons would own or control 50%
or more of either (i) the aggregate voting securities of the Company,
or (ii) the aggregate value of the assets of the Company.
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For purposes of the above definition of Triggering Event only,
the following defined terms shall apply:
"Affiliate" means, with respect to any Person, any other
entity which (i) is a Subsidiary of such Person, (ii) is, directly or
indirectly, under common control with such Person, or (iii) is,
directly or indirectly, controlling such Person.
"Person" means any person, entity or "group" within the
meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act,
except that such term shall not include (i) the Company or any of its
subsidiaries, (ii) a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or any of its
subsidiaries, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) an entity owned,
directly or indirectly, by the shareholders of Pathmark in
substantially the same proportions as their ownership of stock of the
Company.
"Subsidiary" means with respect to any Person, any entity of
which:
(i) if a corporation, a majority of the total voting power of
shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees
thereof is at the time of determination owned or controlled, directly
or indirectly, collectively or individually, by such Person or by one
or more Affiliates of such Person, and
(ii) if a partnership, association, limited liability company
or other entity, a majority of the partnership, membership or other
similar ownership interest thereof is at the time of determination
owned or controlled, directly or indirectly, collectively or
individually, by such Person or by one or more Affiliates of such
Person.
3. Term. Section of the Bonus Agreement is hereby deleted in
its entirety and replaced by the following:
2. Term. The term of this Letter Agreement (the "Term") shall
commence on the Effective Date and shall continue until the second anniversary
of the Plan Effective Date.
4. Retention Bonus. Section 3 of the Bonus Agreement is hereby
deleted in its entirety and replaced by the following:
3. Retention Bonus.
(a) Prior to a Triggering Event. In consideration of, and
subject to, your continued employment with the Company prior to a
Triggering Event and during the period beginning on the Effective Date
and ending on the Liquidation Date, the Company will pay you a
Retention Bonus equal to the annual rate of your base salary, as in
effect on the Payment Date. The Retention Bonus will be paid in two
substantially equal installments on each of the Payment Date and the
Liquidation Date, subject to your continued employment with the Company
on each such date. The Company will pay the Retention Bonus to you in
lump sum cash amounts as soon as practicable after the Payment Date and
the Liquidation Date but in no event more than thirty days thereafter,
respectively.
(b) Upon a Triggering Event. Upon the occurrence of a
Triggering Event, the Retention Bonus shall become immediately payable
in full. For purposes of calculating the amount of the Retention Bonus
the date of the Triggering Event shall be considered the Payment Date.
The Retention Bonus will be paid in a lump sum cash amount as soon as
practicable after the date of the Triggering Event.
5. Section 4(a) of the Bonus Agreement is hereby deleted in
its entirety and replaced by the following:
(a) General Terms. You will become entitled to receive the
Sale Bonus in the event that (i) a Triggering Event occurs on or before
the end of the Term and (ii) a Change in Control contemplated by such
Triggering Event occurs thereafter. The amount of the Sale Bonus shall
be equal to 0.00075 multiplied by the Aggregate Consideration;
provided, however, that the Sale Bonus shall be reduced by the net
value you receive in connection with your Stock Options, if any, that
are redeemed for cash or exchanged for other securities at the time of
or prior to a Change in Control.
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6. Section 5 of the Bonus Agreement is hereby deleted in its
entirety and replaced by the following:
5. Effect of Termination of Employment.
(a) Involuntary Termination. In the event of your
Involuntary Termination (as defined in the Employment Agreement) prior
to the Liquidation Date, you shall be entitled to receive the Retention
Bonus in accordance with the terms of Section 3, as if your employment
had continued until such Liquidation Date. In the event of your
Involuntary Termination on or after August 1, 2000 and prior to a
Triggering Event, you shall remain entitled to receive the Sale Bonus
in the event of a subsequent Triggering Event and a corresponding
Change in Control in the same manner as if your employment with the
Company had continued through the end of the Term.
(b) Other Termination. In the event that your
employment terminates for any reason other than an Involuntary
Termination prior to the Payment Date, you shall forfeit your right to
the Retention Bonus in its entirety. In the event that your employment
terminates for any reason other than an Involuntary Termination after
the Payment Date but prior to the Liquidation Date, you shall forfeit
your right to any unpaid portion of the Retention Bonus. Similarly, in
the event that your employment terminates for any reason other than an
Involuntary Termination at any time during the Term, you shall forfeit
any right you may have to receive the Sale Bonus.
B. Acknowledgement; Amendment to the Employment Agreement.
1. Acknowledgement of a Sale of the Company. You and the
Company hereby acknowledge and agree that, prior to the date of this Letter, a
"Sale of the Company" (within the meaning of Section 4(d) of the Employment
Agreement) has occurred by virtue of the execution of the merger agreement dated
March 9, 1999 among two of the Company's parent companies and Royal Ahold N.V.,
and that any Involuntary Termination (as such term is defined in the Employment
Agreement) will be governed by the terms of Section 5(a)(iii) of the Employment
Agreement.
2. Amendment of "Good Reason". The definition of "Good Reason"
as set forth in Section 5(g)(iii) of the Employment Agreement is hereby amended
to add the following subsection (E) immediately after subsection (D):
or (E) a material, adverse reduction or diminution in
your title, duties, positions or responsibilities with the Company.
C. Forgiveness of Indebtedness.
1. Description of the Debt. You and the Company acknowledge
and agree that immediately prior to the date of this Letter, you owed the a
parent of the Company, Supermarkets General Holdings Corporation ("Holdings"),
$16,000 with respect to a loan made to you by Holdings on March 15, 1990 (the
"Loan Amount").
2. Forgiveness of Debt. In consideration of, among other
things, your agreement to the amendments set forth above with respect to the
Retention Bonus and the Sale Bonus, as of the date of your termination of
employment with the Company, its parents, subsidiaries and affiliates, without
any further action on your part or on the part of the Company, the Company, as
successor to the lending entity, shall automatically forgive the Loan Amount in
full and all interest and other accrued amounts
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associated with the Loan Amount and the loan corresponding to such Loan Amount.
If this Letter sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this Letter,
which will then constitute our agreement on this subject.
Sincerely,
PATHMARK STORES, INC.
By
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Name:
Title
Agreed to as of this ___th day of _______, 2000.
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Xxxxxx Xxxxx
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