Exhibit 10.1
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
Second Amendment dated as of July 29, 1997 ("Second Amendment") to
Employment Agreement dated as of November 1, 1994, as amended by Amendment dated
as of September 17, 1996 ("Employment Agreement") between American Stores
Company, a Delaware corporation ("Company"), and Xxxxxx X. Xxxx ("Executive").
The Company and Executive are collectively referred to as the "Parties," and
individually as a "Party." All capitalized terms not defined herein shall have
the meanings ascribed in the Employment Agreement.
WHEREAS, the Parties desire to amend certain provisions of the
Employment Agreement;
NOW THEREFORE, in consideration of the premises and their mutual
agreements hereinafter set forth, the Parties hereto agree as follows:
1. Section II-A of the Employment Agreement is hereby amended to
read as follows:
"II-A. The term of this Agreement shall expire on October 31, 2002,
provided, that the terms shall be automatically extended for subsequent two-year
terms until terminated by written notice given by the Company at least three
years prior to the end of the term, or until terminated as described below."
2. Section VI-B of the Employment Agreement is hereby amended to
read as follows:
"The Company and Executive acknowledge that the Executive plays a
key managerial role with the Company and that it is in the Company's best
interest to provide Executive with a special long-range retirement plan (SLRRP)
reserved to key executives, and SLRRP is an additional substantial consideration
not present in the "employee at-will" status of the Executive prior to entering
into this Agreement. SLRRP is designed to encourage such key executives to
remain with the Company on an extended basis, have undivided loyalty to the Com-
pany, and not develop conflicts of interest by affiliating with the Company's
competitors, which could undercut Executive's availability to serve as a
possible consultant, advisor, witness, or source of information to the Company.
Accordingly, Company shall pay to Executive (or his spouse, Xxxxx Xxxx, as
provided below) an annual payment as provided below (except as provided in
Section VI-B6 below) with all rights, including vested rights, to participate in
any future benefits under SLRRP terminating at once when and if Executive enters
into or joins as an individual, partner, joint venturer, independent contractor,
officer or director of a business endeavor anywhere competing, as defined in
Section VIII-B4 hereof, with the Company or any of its subsidiaries, unless
waived in writing by the Board of Directors of the Company. The benefits
available under SLRRP are:
1. except as provided in Section VI-B6 below, annual payments shall be
made to Executive until his death and thereafter to Xxxxx Xxxx, his
spouse, if she is married to Executive at the time of his death and
survives him, until her death, beginning at the later of October 31,
2002 or at the time Executive's employment with the Company
terminates;
2. entitlement to benefits will vest based on full years of service with
the Company under this Agreement or any extensions or renewals
thereof, as follows:
SERVICE TABLE
Completed Years Vesting
Under Contract Schedule
1 (10/31/95) 0%
2 (10/31/96) 0%
3 (10/31/97) 20%
4 (10/31/98) 36%
5 (10/31/99) 52%
6 (10/31/00) 68%
7 (10/31/01) 84%
8 (10/31/02) 100%
3. the fully vested annual benefit shall be equal to $700,000, as
increased on October 31 of each year, beginning October 31, 1998,
until the termination of Executive's employment, by the annual
percentage increase in the Consumer Price Index -- All Urban Consumers
("CPI") for the twelve months ended the immediately preceding
September 30;
4. if Executive's employment is terminated (i) by death, (ii) by
disability pursuant to Section VII-B and Section VII-C herein, (iii)
by Company without cause or (iv) by Executive because of Company's
breach of a material provision of this Agreement, Executive shall be
fully vested in the SLRRP benefits without regard to Executive's years
of service under this contract;
5. if Executive is terminated for cause or voluntarily terminates his
employment with the Company other than because of Company's breach of
a material provision of this Agreement, the amounts vested at that
time will be paid on an annual basis beginning on October 31, 2002 or
at the time of termination, whichever is the last to occur; provided,
Executive is not competing and has not competed with the Company or
its affiliates as defined in Section VIII-B on or prior to the time
any such annual payment is due;
6. in the event that either (i) there is a "Change in Control"(as defined
in the Company's 1997 Stock Option and Stock Award Plan as in effect
on the date of the Second Amendment) or (ii) (A) the Executive is no
longer Chairman of the Board or Chief Executive Officer of the Company
and (B) the closing price on the New York Stock Exchange (or if the
Company's common stock is not then listed on the New York Stock Ex-
change, on the national securities exchange or in the over-the-counter
market in which the common stock is then principally traded) of a
share of common stock of the Company falls below $10 (adjusted ap-
propriately (x) for any stock split, stock dividend, reverse stock
split, share combination, reclassification, or similar transaction
occurring after July 21, 1997 and (y) for any decline in Standard &
Poors 500 Index after July 21, 1997 (but in no event shall such price
be adjusted below $5 per share as a result of such decline)) and
remains below such level for 20 consecutive trading days, the Company
shall promptly pay the Executive (or his spouse, Xxxxx Xxxx, if Ex-
ecutive is deceased), in lieu of any further obligation to make
payments under this Section VI-B, an amount equal to the present value
of the remaining unpaid vested after-tax benefits, together with an
additional amount sufficient to gross-up such payment on an after-tax
basis for U.S. Federal, State and local income taxes payable with re-
spect to such lump sum payment. For purposes of the foregoing, (i)
present value of the remaining unpaid vested after-tax benefits shall
be calculated using a discount rate equal to the product of (x) the
prime rate as it appears in the Wall Street Journal under the heading
Money Rates and (y) the difference between 1 and the Executive's tax
rate expressed as a percentage, (ii) it shall be assumed that all
payments would be taxed at the highest marginal federal and applicable
state and local income tax rates in effect for Executive or his
spouse, as the case may be, at the time of the payment hereunder based
upon his or her principal residence and taking into account the
deductibility of state and local income taxes for federal income tax
purposes and (iii) actuarial assumptions shall be made by a certified
actuary selected by the Company. The amount payable under this
Section VI-B6 shall be set forth as promptly as practicable after such
event in a certificate signed by the Company's chief financial officer
which certificate, together with reasonable supporting documentation,
shall be delivered to the Executive or his spouse, as the case may be.
3. Section VI-C of the Employment Agreement is hereby amended to
read as follows:
"VI-C. The Company shall, within 90 days after the date of the Second
Amendment, establish an irrevocable grantor trust (the "SLRRP Rabbi Trust"), the
assets of which, subject to the claims of the Company's creditors in the event
of insolvency, will be used to provide benefits under SLRRP. The Executive will
have no security or other rights to, or interest in, the assets of the SLRRP
Rabbi Trust, other than the right to be paid benefits under SLRRP in accordance
with the terms of SLRRP, this Agreement and the SLRRP Rabbi Trust."
4. The Employment Agreement is hereby amended by adding the
following Section VI-D:
"VI-D. Following termination of the Executive's employment (other than in
circumstances described in Section VI-B5), the Company shall provide the
Executive with an office, related occupancy expenses and reasonable secretarial
services until the earlier of Executive's death or October 31, 2012. Such
office (which shall include furnishings and equipment comparable to those
currently provided Executive) and service shall be provided in a city in which
the Company has its principal executive offices or at such other place as the
Executive designates (provided that the Company shall not be required to incur
rental and other occupancy expenses in excess of $24,000 per annum, adjusted for
changes in the CPI). The Company shall bear all operating expenses of such
office not to exceed $15,000 per annum (exclusive of rent and other occupancy
costs and secretarial service), adjusted for changes in the CPI.
Following termination of the Executive's employment (other than in
circumstances described in Section VI-B5), the Company will purchase medical
coverage for the Executive and his spouse, Xxxxx Xxxx, at least comparable to
the coverage under the American Stores Company Retiree Medical Plan. The
premiums for this coverage shall be payable by the Company for their lifetimes.
To the extent any premiums paid by the Company are considered taxable income to
the Executive or his spouse, the Company shall make a gross-up payment to such
persons to make them whole on an after-tax basis.
The Executive will have the opportunity afforded to all terminating
employees to convert, to the extent permitted, any group life or accident
insurance coverage to an individual policy or program. Premiums for such
coverage will not be paid by the Company."
5. Section VIII-B4 of the Employment Agreement is hereby amended to
read as follows:
"For purposes of this paragraph and Section VI above, the term "competing
business" shall refer to an entity that directly or indirectly operates or has
an interest in any establishment (1) that directly competes with operations of
the Company or its subsidiaries, as a supermarket, a drug store, a mail order
pharmacy, a warehouse store, a home medical equipment store, a club store, a
pharmacy benefit manager, a wholesale grocery distributor, or any variation
thereof, or (2) that primarily sells the products which constitute 10% or more
of the products sold by the Company or its subsidiaries in any one or
combination of such stores or businesses."
6. The Employment Agreement, as amended by this Second Amendment,
constitutes the entire agreement of the subject matter hereof and may not be
amended unless by a written agreement signed by the Parties.
7. This Second Amendment is made in and is governed by the laws of
the State of Utah.
IN WITNESS WHEREOF, the Parties have executed this Amendment as of
the date first above written.
AMERICAN STORES COMPANY
BY: /s/ Xxxxxxxx XxXxxxxxx
Name: Xxxxxxxx XxXxxxxxx
Title: Chief Legal Officer
EXECUTIVE
Xxxxxx X. Xxxx
