Exhibit 1
EMPLOYMENT AGREEMENT
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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 (5) 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
-----------------------------
Name: Xxxxx X. Xxxxxxxxxx
Title: Director and Chairman -
Interim Chief Executive
Officer
/s/J. Xxxxx Xxxxxx
-----------------------------
J. Xxxxx Xxxxxx
(Employee)
