Exhibit 99.1
EMPLOYMENT AGREEMENT
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AGREEMENT made as of this 3rd day of October, 1997, by and
between The Grand Union Company, a Delaware corporation (the "Company"), and
Xxxx Xxxxxxx (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 President and Chief
Merchandising 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 the Chief Executive Officer of the
Company 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
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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
the fourth anniversary of the date hereof (the "Employment Term"), unless
earlier terminated or extended as provided herein.
3. Compensation.
(a) Upon execution of this Agreement, the Company shall
make a loan to the Employee of two hundred twenty-five thousand dollars
($225,000) in cash, pursuant to the promissory note attached hereto as Exhibit
A.
(b) 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 $350,000.
(c) 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 Section 162(m) Committee (as
hereinafter defined) of the Board of Directors. The bonus compensation payable
to Employee for each fiscal year during the Employment Term shall be based on
percentage and performance targets determined by the Section 162(m) Committee of
the Board of Directors to provide for bonus compensation of up to 100% of the
Salary for a fiscal year in which the Company achieves the designated
performance targets; provided, however, that bonus compensation paid to the
Employee in respect of the fiscal year ending March 28, 1998 shall be at least
100% of the Salary paid to Employee for such period (the "100% Guarantee"). Such
bonus compensation, including the 100% 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 ("Section 162(m)"), and the regulations promulgated
thereunder and based on the achievement of performance targets in such fiscal
years, which performance targets shall be established by a committee of the
Board of Directors meeting the requirements of Section 162(m) (the "Section
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162(m) Committee") 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, including projected amounts of earnings before interest, taxes,
depreciation and amortization ("EBITDA").
(d) 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.
(e) Employee shall be eligible to participate in the
Company's Supplemental Retirement Plan for Key Executives (the "Plan"). For
purposes of calculation of the "target benefit" under the Plan, Employee shall
be credited with a number of years of service equal to (i) the actual number of
years of employment by Employee with the Company, plus, if Employee is employed
by the Company on the fourth anniversary of the date hereof , (ii) an additional
six (6) years of service.
(f) 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.
(g) The Employee shall be entitled to four weeks
vacation (in addition to the usual 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.
(h) 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.
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4. Stock Option.
(a) The Company hereby grants Employee an option (the
"Option") to purchase up to 450,000 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 150,000 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
SmallCap Market on the date hereof (the "Initial Exercise Price");
(ii) up to an additional 100,000 shares of the
total shares subject to the Option may be purchased by Employee on or after the
first anniversary of the date hereof, at an exercise price equal to the Initial
Exercise Price plus seventy-five cents ($.75);
(iii) up to an additional 75,000 shares of the
total shares subject to the Option may be purchased by Employee on or after the
second anniversary of the date hereof, at an exercise price equal to the Initial
Exercise Price plus one dollar and fifty cents ($1.50);
(iv) up to an additional 75,000 shares subject to
the Option may be purchased by Employee on or after the third anniversary of the
date hereof, at an exercise price equal to the Initial Exercise Price plus two
dollars and nineteen cents ($2.19); and
(v) up to an additional 50,000 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 only be purchased if the
Company shall have had 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/April 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/April 2000.
(c) Subject to earlier termination as described above
or below, the Option shall expire on the tenth anniversary of the date hereof.
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(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 as specifically 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)-(v) 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.
(a) The Employee agrees that, during the Employment
Term, he shall maintain, at his own cost and expense, his principal residence
within a 100-mile radius of Wayne, New Jersey. Employee shall be eligible for
the full benefits available under the Company's Executive Relocation Program,
provided that Employee shall experience no loss in equity on the sale of his
existing primary residence.
(b) During the Employment Term, the Employee shall be
entitled to reimbursement from the Company for reasonable and necessary travel
and related expenses between the mid-western United States and Wayne, New
Jersey, incurred by the Employee and/or Employee's immediate family, upon
presentation to the Company of valid receipts evidencing such expenses,
including round trip air fare for the Employee and his immediate family between
the New York/New Jersey metropolitan area and the mid-western United States.
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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 party. 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.
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(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 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) until
the fourth anniversary of the date hereof.
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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
8(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
the Employee's employment under 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
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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 by the Company for Cause or is 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 until the fourth anniversary of the date
hereof.
(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.
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(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: one copy to the Chief Financial Officer and
one copy to the General Counsel
If to the Employee:
Xxxx Xxxxxxx
0000 Xxxxxx Xxxx
Xxxxxxxx , Xxxxxxxxx 00000
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 of 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 sets forth the entire
understanding of the parties hereto with respect to the subject matter hereof
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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.
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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/ J. Xxxxx Xxxxxx
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Name: J. Xxxxx Xxxxxx
Title: Chairman of the Board and
Chief Executive Officer
/s/ Xxxx Xxxxxxx
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Xxxx Xxxxxxx (Employee)
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