Exhibit 10.1
EMPLOYMENT AGREEMENT
AGREEMENT made as of this 1st day of August, 1997, by and between
The Grand Union Company, a Delaware corporation (the "Company"), and J. Xxxxx
Xxxxxx (the "Employee").
WHEREAS, the Company desires to retain the exclusive services of
Employee and Employee desires to be employed by the Company for the term of this
Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, the parties hereto agree as follows:
1. Duties.
(a) The Employee shall serve as Chief Executive Officer of the
Company or such other position as may be agreed between the Employee and the
Company, and shall perform such duties, services and responsibilities as are
consistent with such positions, including the general management and supervision
of the business and personnel of the Company and its subsidiaries. The
Employee's duties, services and responsibilities will be performed under the
overall supervision of and consistent with the policies of the Board of
Directors of the Company (the "Board of Directors").
(b) During the Employment Term (as hereinafter defined), the
Employee shall devote his full business time, attention and skill to the
performance of such duties, services and responsibilities, and will use his best
efforts to promote the interests of the Company. The Employee will not, without
the prior written approval of the Board of Directors, engage in any other
business activity which would interfere with the performance of his duties,
services and responsibilities hereunder or which is in violation of policies
established from time to time by the Company. The foregoing shall not be
construed to prohibit (i) the Employee's service as a member of the board of
directors or as an officer of any non-profit trade association or civic,
educational or charitable organization, or (ii) subject to the following proviso
and the provisions of Section 8(b), the Employee from making personal
investments of a passive nature; provided that such service or investments by
the Employee do not materially interfere with the performance by the Employee of
his duties, services and responsibilities hereunder.
(c) During the Employment Term, the Employee shall be based at
the Company's principal executive offices in Wayne, New Jersey, which executive
offices may be relocated within a 100-mile radius of the Company's existing
executive offices (such 100 mile radius of Wayne, New Jersey, constituting the
"Principal Office City"), except for reasonably required travel in the
performance of his duties, services and responsibilities hereunder.
2. Term. The term of employment of the Employee hereunder shall
commence as of the date hereof and shall continue in full force and effect until
July 31, 2001 (the "Employment Term"), unless earlier terminated or extended as
provided herein.
3. Compensation.
(a) In consideration of the performance by the Employee of the
Employee's obligations during the Employment Term (including any services as an
officer, director, employee, member of any committee of the Company or any of
its subsidiaries, or otherwise), the Company will during the Employment Term pay
the Employee a salary (the "Salary") at an annual rate of $600,000. The Board of
Directors shall review Employee's Salary on an annual basis in order to evaluate
possible increases thereto.
(b) During the term of this Agreement, Employee shall be
eligible to receive bonus compensation at the end of each fiscal year of the
Company in an amount to be determined by the Compensation Committee of the Board
of Directors. The bonus compensation for the fiscal year ending March 28, 1998
shall be in an amount determined by the Compensation Committee of the Board of
Directors up to 120% of the Salary for such fiscal year; provided, however, that
bonus compensation shall be at least 75% of the Salary paid to Employee in
respect of such fiscal year ending March 28, 1998 (the "75% Guarantee"). Subject
to satisfaction of the performance targets referenced in the last sentence of
this Section 3(b), the bonus compensation for each fiscal year subsequent to the
fiscal year ending March 28, 1998 shall be in an amount determined by the
Compensation Committee of the Board of Directors in an amount not less than 100%
of the Salary for such fiscal year. Such bonus compensation, including the 75%
Guarantee, shall be prorated (based on the number of weeks worked by Employee
during the fiscal year in question) for each of the fiscal year ending March 28,
1998 and the fiscal year ending in March 2002. The amount of bonus compensation
in any year shall be determined pursuant to a bonus plan which has been approved
by the Company's shareholders in the manner prescribed pursuant to Section
162(m) of the Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder and based on the achievement of performance targets in
such fiscal years, which performance targets shall be established by the
Compensation Committee of the Board of Directors no later than the end of the
90th day in any such fiscal year or the end of the 90th day after the date
hereof with respect to the fiscal year ending March 28, 1998, as the case may
be; such performance targets to be related to the Company's annual operating
plan adopted by the Board of Directors.
(c) The Salary shall be payable in accordance with the normal
payroll practices of the Company then in effect. The Salary, and all bonuses or
other forms of compensation paid to the Employee hereunder, shall be subject to
all applicable taxes required to be withheld by the Company pursuant to federal,
state or local law. The Employee shall be solely responsible for income taxes
imposed on the Employee by reasons of any cash or non-cash compensation and
benefits provided hereunder.
(d) Employee shall be eligible to participate in the Company's
Supplemental Retirement Plan for Key Executives (the "Plan"). Upon Employee's
retirement
from the Company at age 62 or later, for purposes of calculation of the "target
benefit" under the Plan, Employee shall be credited with eleven (11) years of
service under the Plan if Employee retires at the age of 62 and shall also be
credited with one additional year of service for each additional year during
which Employee is employed with the Company after Employee reaches the age of
62. If the Employee's employment with the Company terminates pursuant to Section
6(a)(vi) or Section 6(a)(vii)(x) prior to the date on which the Employee has
reached the age of 62, for purposes of calculation of the "target benefit" under
the Plan, Employee shall be credited with a number of years of service equal to
the sum of (a) the actual number of years of employment of the Employee with the
Company and (b) seven years of service. If the Employee terminates his
employment with the Company other than for Good Reason prior to the date on
which the Employee has reached the age of 62, for purposes of calculation of the
"target benefit" under the Plan, Employee shall be credited with a number of
years of service equal to the actual number of years of employment of the
Employee with the Company.
(e) The Employee shall be entitled to participate in any
employee benefit plans (including any life insurance plan) then in effect for
similarly situated employees to the extent the Employee meets the eligibility
requirements for any such plan; provided, however, that nothing in this
paragraph shall require the Company to provide health, medical or life insurance
benefits to the Employee or any dependent of the Employee with respect to any
condition existing prior to the commencement of the Employee's employment,
except as covered by the Company's health, medical or life insurance plans
sponsored for employees in general.
(f) The Employee shall be entitled to four weeks vacation (in
addition to the usual national holidays) during each year during which the
Employee serves hereunder. Such vacation shall be taken at such time or times as
may be agreed between the Employee and the Company. Vacation not taken during
any year during the Employment Term will not be carried forward.
(g) If (i) the Employee is absent from work for more than 180
calendar days in any twelve-month period by reason of illness or incapacity
(whether physical or otherwise) or (ii) the Company reasonably determines that
the Employee is unable to perform his duties, services and responsibilities
hereunder by reason of illness or incapacity (whether physical or otherwise) for
more than 180 calendar days in any twelve-month period during the Employment
Term ("Disability"), the Company shall not be obligated to pay the Employee any
compensation (Salary or bonus) for any period in excess of such 180 days;
furthermore, any such payments during such 180-day period shall be reduced by
any amount the Employee is entitled to receive as a result of such disability
under any plan provided through the Company or under state or federal law.
4. Stock Option.
(a) The Company hereby grants Employee an option (the
"Option") to purchase up to 1,250,000 shares of Common Stock.
(b) Except as otherwise provided in this Agreement, the Option
shall be exercisable, on a cumulative basis, at the times and prices as follows:
(i) up to 500,000 of the total shares subject to the
Option may be purchased by Employee on or after the date hereof at an exercise
price equal to the closing price of the Common Stock on the NASDAQ-NMS on the
date hereof (the "Initial Exercise Price");
(ii) up to an additional 150,000 shares of the total
shares subject to the Option may be purchased by Employee on or after August 1,
1998 at an exercise price equal to the Initial Exercise Price plus one dollar;
(iii) up to an additional 150,000 shares of the total
shares subject to the Option may be purchased by Employee on or after the August
1, 1999 at an exercise price equal to the Initial Exercise Price plus two
dollars;
(iv) up to an additional 150,000 shares subject to the
Option may be purchased by Employee on or after August 1, 2000 at an exercise
price equal to the Initial Exercise Price plus three dollars;
(v) up to 200,000 shares subject to the Option may be
purchased by Employee at an exercise price equal to the Initial Exercise Price;
provided that such shares may not be purchased under any circumstances
whatsoever unless the Company has Earnings Before Interest, Tax, Depreciation
and Amortization ("EBITDA") of an aggregate of at least $147 million for any 13
continuous 4 week fiscal reporting periods ending on or before the end of the
Company's fiscal year ending in March 2000; and further provided that the Option
to purchase such shares shall immediately terminate if the Company has not
satisfied such EBITDA threshold by the end of the Company's fiscal year ending
in March 2000; and
(vi) the remaining 100,000 shares subject to the Option
may be purchased by Employee on or after the date hereof (subject to approval by
the stockholders of the Company at the next annual meeting of the Company of an
amendment to the 1995 Equity Incentive Plan) at an exercise price equal to the
Initial Exercise Price.
(c) Subject to earlier termination as described above or
below, the Option shall expire on the tenth anniversary of the date hereof.
(d) If the Employee's employment with the Company terminates
pursuant to Section 6(a)(i), 6(a)(vi) or Section 6(a)(vii)(x) hereof, the Option
shall immediately become exercisable by Employee, for any and all of such number
of shares subject to the Option, at any time up to and including thirty days
after the effective date of such termination of employment after which the
Option shall terminate with respect to all shares covered thereby. If the
Employee's employment with the Company terminates pursuant to Section 6(a)(ii)
or Section 6(a)(v) hereof, the portion of the Option which is then exercisable
may be exercised by Employee (or Employee's executor or administrator or the
person or persons to whom the Option is transferred by will or the applicable
laws of descent and distribution) at any time up to
and including thirty days after the effective date of such termination of
employment after which the Option shall terminate with respect to all shares
covered thereby. If the employment of Employee with the Company shall terminate
for any reason other than provided in the immediately preceding two sentences,
including, without limitation, termination by the Company for "Cause" or
termination by the Employee for any reason other than Good Reason, the Option
shall terminate and become null and void, as of the effective date of such
termination.
(e) The Option is being granted pursuant to the 1995 Equity
Incentive Plan; provided that the grant of the Option as it relates to the
shares referenced in clauses 4(b)(ii)-(vi) is subject to approval by the
stockholders of the Company at the next annual meeting of the Company of an
amendment to the 1995 Equity Incentive Plan.
5. Relocation and Relocation Expenses. Without limiting the
Employee's responsibilities under Section 1, Employee may reside at Employee's
principal residence ("Employee's Principal Residence") throughout the duration
of the Employment Term, which Employee's Principal Residence may be outside the
Principal Office City. During such time as Employee resides at Employee's
Principal Residence and such residence is not in the Principal Office City:
(i) Employee may commute between the Employee's Principal
Residence and the Principal Office City; provided, however, if within two years
of the date hereof, Employee relocates his residence to the Principal Office
City, Employee shall be eligible for the full benefits under the Company's
Executive Relocation Program; and
(ii) the Company agrees to pay, or reimburse Employee for, the
reasonable costs of an apartment or condominium in the Principal Office City to
serve as local accommodations for Employee and for one round trip air fare per
week between the Employee's Principal Residence and the Principal Office City,
upon submission by Employee to the Chief Financial Officer (or his designee or
designees) of vouchers or expense statements satisfactorily evidencing such
expenses.
6. Termination.
(a) Except as otherwise provided in this Agreement, the
employment of Employee hereunder and the Employment Term shall terminate upon
the earliest to occur of the dates specified below:
(i) the close of business on the date of expiration of
the Employment Term;
(ii) the close of business on the date of the Employee's
death;
(iii) the close of business on an early termination date
mutually agreed to in writing by the Company and the Employee;
(iv) the close of business on the day on which the
Company shall have delivered to the Employee a written notice of the Company's
election to terminate his employment for "Cause" (as defined in Section 6(c)
hereof);
(v) the close of business on the day on which the
Company shall have delivered to the Employee a written notice of the Company's
election to terminate his employment because of Disability;
(vi) the close of business on the day following the date
on which the Board of Directors shall have adopted a resolution terminating the
employment of the Employee hereunder and such termination is not for death,
Cause or Disability; or
(vii) the close of business on the date which is five
business days after the date on which the Employee delivers to the Company a
written notice of the Employee's election to terminate his employment hereunder
(x) for "Good Reason" (as defined in Section 6(d) hereof) or (y) for any other
reason.
(b) Any purported termination by the Company or by the
Employee pursuant to Section 6(a)(iv)-(vii) hereof shall be communicated by
written "Notice of Termination" to the other. For purposes of this Agreement, a
"Notice of Termination" shall mean a written notice which indicates the specific
termination provision in this Agreement relied upon and which sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Employee's employment under the provision so indicated. For
purposes of this Agreement, no such purported termination shall be effective
without delivery of such Notice of Termination.
(c) For purposes of this Agreement, termination of employment
for "Cause" shall mean termination based on (i) the Employee's material breach
of this Agreement, or (ii) any other conduct by the Employee constituting valid
cause for termination under the laws of the State of New Jersey.
(d) For purposes of this Agreement, the term "Good Reason"
shall mean the occurrence of any of the following events or conditions without
the Employee's express written consent:
(i) any assignment to Employee of any material duties
other than those contemplated by, or any limitations of Employee's powers in any
material respect not contemplated by, Section 1(a) hereof; provided, however,
that Employee first delivers written notice thereof to the Chief Financial
Officer of the Company and the Company shall have failed to cure such
non-permitted assignment or limitation within thirty (30) days after receipt of
such written notice; or
(ii) any material breach by the Company of this
Agreement; provided, however, that Employee first delivers written notice
thereof to the Chief Financial
Officer of the Company and the Company shall have failed to cure such breach
within thirty (30) days after receipt of such written notice.
(e) In the event of termination of this Agreement, for
whatever reason, the Employee agrees to cooperate with the Company and to be
reasonably available to the Company with respect to continuing and/or future
matters arising out of the Employee's employment or any other relationship with
the Company, whether such matters are business-related, legal or otherwise. The
Company agrees to reimburse the Employee for the Employee's reasonable travel
expenses incurred in complying with the terms of this paragraph upon delivery by
the Employee to the Company of valid receipts for such expenses. The provisions
of this paragraph shall survive termination of this Agreement.
7. Termination Payments. If the Employee's employment with the
Company terminates for whatever reason, the Company will pay the Employee any
portion of the Salary accrued hereunder on or prior to the date of termination
but not paid. If the Employee's employment with the Company terminates pursuant
to Section 6(a)(vi) or Section 6(a)(vii)(x) hereof, the Company will pay the
Employee any portion of Employee's bonus compensation pursuant to Section 3(c)
hereof which has accrued hereunder on or prior to the date of termination but
has not been paid (the "Prorata Bonus"). The Prorata Bonus shall be calculated
by: (i) annualizing the Company's performance through the date of termination
for the fiscal year in question; (ii) determining the bonus compensation due to
the Employee pursuant to Section 3(c) hereof on the basis of the Company's
annualized results for the fiscal year in question; and (iii) prorating the
bonus compensation based on the number of weeks worked by the Employee during
the fiscal year in question. Except for purposes of this Section 7, the
Employee's bonus compensation pursuant to Section 3(c) for any fiscal year shall
not be deemed to have been accrued prior to the completion of the fiscal year in
question. If the Employee's employment with the Company terminates pursuant to
Section 6(a)(vi) or Section 6(a)(vii)(x) hereof, the Company will continue to
pay the Employee an amount equal to the Employee's Salary (at the salary rate in
effect on the date of termination of the Employee's employment hereunder) for
the remainder of the term of this Agreement.
The foregoing payments upon termination shall constitute the
exclusive payments due the Employee upon termination under this Agreement, but
shall have no effect on any benefits which may be due the Employee under any
plan of the Company which provides benefits after termination of employment.
8. Employee Covenants.
(a) Unauthorized Disclosure. The Employee agrees and
understands that in the Employee's position with the Company, the Employee will
be exposed to and receive information relating to the confidential affairs of
the Company, including but not limited to technical information, business and
marketing plans, strategies, customer information, other information concerning
the Company's products, promotions, development, financing, expansion plans,
business policies and practices, and other forms of information considered by
the Company to be confidential and in the nature of trade secrets. Except to the
extent that the
proper performance of the Employee's duties, services and responsibilities
hereunder may require disclosure, and except as such information (i) was known
to the Employee prior to his employment by the Company or (ii) was or becomes
generally available to the public other than as a result of a disclosure by the
Employee in violation of the provisions of this Section 6(a), the Employee
agrees that during the Employment Term and thereafter the Employee will keep
such information confidential and not disclose such information, either directly
or indirectly, to any third person or entity without the prior written consent
of the Company. This confidentiality covenant has no temporal, geographical or
territorial restriction. Upon termination of this Agreement, the Employee will
promptly supply to the Company all property, keys, notes, memoranda, writings,
lists, files, reports, customer lists, correspondence, tapes, disks, cards,
surveys, maps, logs, machines, technical data or any other tangible product or
document which has been produced by, received by or otherwise submitted to the
Employee during or prior to the Employment Term.
(b) Non-competition. By and in consideration of the Company's
entering into this Agreement and the Salary and benefits to be provided by the
Company hereunder, and further in consideration of the Employee's exposure to
the proprietary information of the Company, the Employee agrees that, subject to
the provisions of the last two sentences of Section 1(b), the Employee will not,
during the Employment Term, directly or indirectly own, manage, operate, join,
control, be employed by, or participate in the ownership, management, operation
or control of or be connected in any manner, including but not limited to
holding the positions of shareholder, director, officer, consultant, independent
contractor, employee, partner, or investor, with any Competing Enterprise. For
purposes of this paragraph, the term "Competing Enterprise" shall mean any
person, corporation, partnership or other entity operating one or more
supermarkets within a ten (10) mile radius of any Company store if the aggregate
of such Company stores (x) represent ten percent (10%) or more of the total
number of Company stores operating at the date of termination (or other
applicable date invoking the application of this non-compete clause) or (y)
account for ten percent (10%) or more of the annual sales volume of the Company
for the fiscal year immediately preceding the year of termination (or other
applicable date invoking application of this non-compete clause). For this
purpose, (1) "supermarket" means any store which is part of a supermarket or
combination store chain or is a warehouse club selling grocery and perishable
items to the public and (2) any entity operating supermarkets includes any
wholesaler to independently-owned supermarkets operating under the same
tradename. The prohibition of this clause (b) shall not be deemed to prevent
Employee from owning 1% or less of any class of equity securities of an entity
that has a class of equity securities registered under Section 12 of the
Securities Exchange Act of 1934, as amended. Notwithstanding anything to the
contrary in this Section 8(b), the non-competition clause contained in this
Section 8(b) shall immediately terminate on the effective date of termination of
the Employee's employment with the Company unless such termination is a result
of termination of the Employee's employment with the Company by the Company for
Cause or is a result of termination of the Employee's employment with the
Company by the Employee without Good Reason, in which case the non-competition
clause contained in this Section 8(b) shall remain in full force and effect for
the duration of the Employment Term.
(c) Non-solicitation. During the Employment Term and for a
period of two years thereafter, the Employee shall not interfere with the
Company's relationship with, or endeavor to entice away from the Company, any
person who at any time during the Employment Term was an employee or customer of
the Company or otherwise had a material business relationship with the Company.
(d) Transactions Offered to the Corporation; Proprietary
Materials. During the term of his employment hereunder, Employee agrees to bring
to the attention of the Board of Directors or the Chief Financial Officer, all
proposals, business opportunities or investments of whatever nature, in areas in
which the Company and/or any of its subsidiary companies is active or may be
interested in becoming active, which are created or devised by Employee or come
to the attention of Employee and which might reasonably be expected to be of
interest to the Company and/or any its subsidiary companies. Without limiting
the generality of the foregoing, Employee acknowledges and agrees that
memoranda, notes, records and other documents made or compiled by Employee or
made available to Employee during the term of this Agreement concerning the
business and/or activities of the Company and/or any of its subsidiary companies
shall be the Company's property and shall be delivered by Employee to the Chief
Financial Officer upon termination of this Agreement or at any other time at the
request of the Board of Directors.
(e) Remedies. The Employee agrees that any breach of the terms
of this Section 8 would result in irreparable injury and damage to the Company
for which the Company would have no adequate remedy at law; the Employee
therefore also agrees that in the event of said breach or any threat of breach,
the Company shall be entitled to an immediate injunction and restraining order
to prevent such breach and/or threatened breach and/or continued breach by the
Employee and/or any and all persons and/or entities acting for and/or with the
Employee, without having to prove damages, in addition to any other remedies to
which the Company may be entitled at law or in equity. The terms of this
paragraph shall not prevent the Company from pursuing any other available
remedies for any breach or threatened breach hereof, including but not limited
to the recovery of damages from the Employee.
The provisions of subsections (a), (b), (c), (d) and (e) of this
Section 8 shall survive any termination of this Agreement and the Employment
Term. The existence of any claim or cause of action by the Employee against the
Company, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by the Company of the covenants and agreements of
this Section 8.
9. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been given (i) if
personally delivered, when so delivered, or (ii) if mailed, three (3) business
days after having been placed in the United States mail, registered or
certified, postage prepaid, addressed to the party to whom it is directed at the
address set forth below:
If to the Company:
The Grand Union Company
000 Xxxxxxxxxxx Xxxxxxxxx
Xxxxx, Xxx Xxxxxx 00000
Attention: Chief Financial Officer
With a copy to:
Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx
If to the Employee:
J. Xxxxx Xxxxxx
00 Xxxxxxx Xxxxxx Xxxx
Xxxxxxxxx 0000
Xxxxxxx, Xxxxxxx X0X0X0
by registered or certified mail, postage prepaid, return receipt requested.
10. Binding Effect/Assignment. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
executors, personal representatives, estates, successors (including, without
limitation, by way of merger) and assigns. Notwithstanding the provisions or the
immediately preceding sentence, the Employee shall not assign all or any portion
of this Agreement without the prior written consent of the Company.
11. Entire Agreement. This Agreement and the Option Agreement set
forth the entire understanding of the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements, written or oral, between them
as to such subject matter. This Agreement may not be amended, nor may any
provision hereof be modified or waived, except by an instrument in writing duly
signed by the party to be charged.
12. Severability. If any provision of this Agreement, or any
application thereof to any circumstances, is invalid, in whole or in part, such
provision or application shall to that extent be severable and shall not affect
other provisions or applications of this Agreement.
13. Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New Jersey, without
reference to the principles of conflict of laws.
14. Modifications and Waivers. No provisions of this Agreement may
be modified, altered or amended except by an instrument in writing executed by
the parties hereto. No waiver by either party hereto of any breach by the other
party hereto of any provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions at the time
or at any prior or subsequent time.
15. Headings. The headings contained herein are solely for the
purposes of reference, are not part of this Agreement and shall not in any way
affect the meaning or interpretation of this Agreement.
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by authority of its Board of Directors, and the Employee has hereunto
set his hand, as of the day and year first above written.
THE GRAND UNION COMPANY
By: /s/ Xxxxx X. Xxxxxxxxxx
------------------------------------
Xxxxx X. Xxxxxxxxxx
Director, Chairman, and interim
Chief Executive Officer
/s/ J. Xxxxx Xxxxxx
------------------------------------
J. Xxxxx Xxxxxx (Employee)
