EXECUTION COPY
Pathmark Stores, Inc.
July 1, 2000
Xxxxx X. Xxxxxx
c/o Pathmark Stores, Inc.
000 Xxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
Side Letter to the Sale and Retention Bonus Agreement,
The Stock Award Agreement and the Employment Agreement
Dear Xxx:
This side letter (the "Letter") sets forth the agreement
between you and Pathmark Stores, Inc., a corporation organized under the laws of
Delaware (the "Company"), regarding the amendment to the terms of the Sale and
Retention Bonus Agreement between you and the Company dated February 1, 2000
(the "Bonus Agreement") and to the terms of the employment agreement between you
and the Company, dated October 8, 1996 (the "Employment Agreement") and the
stock award agreement dated October 8, 1996 (the "Stock Award Agreement"). This
Letter shall be effective as of the date first set forth above.
A. Amendments to the Bonus Agreement.
1. New Definitions. (a) The following definition are hereby
added after the definition of "Payment Date" in Section 1 of the Bonus
Agreement:
"Plan Effective Date" shall mean the effective date of the
judicial consent to the Joint Prepackaged Chapter 11 Plan of
Reorganization.
(b) The following definition is hereby added to Section 1 of
the Bonus Agreement immediately prior to the definition of "Triggering Event":
"Stock Option" shall mean any vested or unvested outstanding
stock option awarded under any equity compensation plan of the Company
or its subsidiaries that is exercisable upon vesting for shares of
common stock of the Company or any of its subsidiaries.
2. Modified Definition. The definition of "Triggering Event"
in Section 1 of the Bonus Agreement is hereby deleted in its entirety and
replaced by the following:
Prior to the Plan Effective Date, a "Triggering Event" shall
be deemed to have occurred on the date that any of he following shall
have occurred:
(A) any member of the Company Group enters into a binding
agreement with one or more Independent Third Parties to directly
acquire, in exchange for cash, stock, claims, or property, fifty
percent or more of the aggregate equity securities of Holdings for
which the MLCP Investors and the Equitable Investors (as defined in the
Amended and Restated Stockholders Agreement among Holdings and its
Stockholders, dated January 22, 1998) (together, the "Stockholders")
are Beneficial Owners as of the Effective Date;
(B) any member of the Company Group enters into a binding
agreement providing for a merger, consolidation, reorganization or
other business combination upon consummation of which one or more
Independent Third Parties would own or control fifty percent or more of
either (i) the aggregate voting securities of the Company Group, (ii)
the aggregate economic interest of the outstanding equity securities of
the Company Group or (iii) the aggregate value of the assets of the
Company;
(C) any member of the Company Group enters into transaction
upon consummation of which an Independent Third Party would acquire in
exchange for cash, stock, claims or property fifty percent or more of
either (I) the aggregate equity securities of the Company, PTK
Holdings, Inc. or Supermarkets General Holdings Corporation, or (II)
the Company's assets; or
(D) any member of the Company Group files a plan of
reorganization or motion for relief in a case under title 11 of the
United States Code for the purpose of implementing an agreement or
transaction of the type described in any of the preceding clauses (A),
(B) or (C);
provided, however, that a Triggering Event shall not include any change
of ownership resulting from a public offering of any of the securities
of any of the Company Group pursuant to an effective registration
statement under the Securities Act of 1933, as amended.
On and after the Plan Effective Date, a "Triggering Event"
shall be deemed to have occurred on the date that any of the following
shall have occurred, provided that a Triggering Event may occur only on
or before the second anniversary of the Plan Effective Date:
(A) the acquisition by any Person of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended) of 35% or more of the common stock of
the Company (the "Common Stock") then outstanding, and the individuals
who, as of the Plan Effective Date, constitute the Board and
subsequently elected members of the Board whose election is approved or
recommended by at least a majority of such current members or their
successors whose election was so approved or recommended (other than
any subsequently elected members whose initial assumption of office
occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board) cease for any reason to constitute at
least a majority of such Board; provided, however, that in no event
shall a Triggering Event be deemed to have occurred upon any such
acquisition by (i) any employee benefit plan of the Company, (ii) any
Person or entity organized, appointed or established by the Company for
or pursuant to the terms of any such employee benefit plan, or (iii)
any Person (other than any of Fidelity Management & Research Company or
Fidelity Management Trust Company or by any fund or account associated
with either Fidelity Management & Research Company or Fidelity
Management Trust Company) who as of the Plan Effective Date was the
beneficial owner of 15% or more of the shares of Common Stock
outstanding on such date unless and until such Person, together with
all Affiliates of such Person, becomes the beneficial owner of 35% or
more of the shares of Common Stock then outstanding whereupon a Change
in Control shall be deemed to have occurred;
(B) the Company enters into a binding agreement with one or
more Persons to directly acquire, in exchange for cash, stock, claims
or property, 50% or more of the aggregate equity securities of the
Company; or
(C) the Company enters into a binding agreement providing for
a merger, consolidation, reorganization or other business combination
upon consummation of which one or more Persons would own or control 50%
or more of either (i) the aggregate voting securities of the Company,
or (ii) the aggregate value of the assets of the Company.
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For purposes of the above definition of Triggering Event only,
the following defined terms shall apply:
"Affiliate" means, with respect to any Person, any other
entity which (i) is a Subsidiary of such Person, (ii) is, directly or
indirectly, under common control with such Person, or (iii) is,
directly or indirectly, controlling such Person.
"Person" means any person, entity or "group" within the
meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act,
except that such term shall not include (i) the Company or any of its
subsidiaries, (ii) a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or any of its
subsidiaries, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) an entity owned,
directly or indirectly, by the shareholders of Pathmark in
substantially the same proportions as their ownership of stock of the
Company.
"Subsidiary" means with respect to any Person, any entity of
which:
(i) if a corporation, a majority of the total voting power of
shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees
thereof is at the time of determination owned or controlled, directly
or indirectly, collectively or individually, by such Person or by one
or more Affiliates of such Person, and
(ii) if a partnership, association, limited liability company
or other entity, a majority of the partnership, membership or other
similar ownership interest thereof is at the time of determination
owned or controlled, directly or indirectly, collectively or
individually, by such Person or by one or more Affiliates of such
Person.
3. Retention Bonus. Section 3 of the Bonus Agreement is hereby
deleted in its entirety and replaced by the following:
3. Retention Bonus.
(a) Retention Payment. In consideration of, and
subject to, your continued employment with the Company during the
period beginning on the Effective Date and ending on the Payment Date,
the Company will pay you a lump sum cash amount equal to $2,000,000
(the "Retention Payment") as soon as practicable after the Payment Date
but in no event more than thirty days thereafter.
(b) Restricted Stock Grant. In addition to the
Retention Payment, within thirty days after the Plan Effective Date
provided that you continue to be employed by the Company on such date,
the Company will grant you 98,510 shares of Company common stock in the
form of restricted stock (the "Restricted Stock"). The Restricted Stock
will become fully vested on the first anniversary of the Plan Effective
Date.
(c) Retention Bonus Defined. The Retention Payment
and the Restricted Stock shall constitute the Retention Bonus.
(d) Upon a Triggering Event; Other Acceleration of
Vesting. Upon the occurrence of a Triggering Event, the Retention
Payment shall become immediately payable in full and the Restricted
Stock shall become immediately vested. The Retention Payment will be
paid in a lump sum cash amount as soon as practicable after the date of
the Triggering Event. In addition, the Restricted Stock will vest in
its entirety on the date of your Involuntary Termination (as defined in
the Employment Agreement).
4. Section 4(a) of the Bonus Agreement is hereby deleted in
its entirety and replaced by the following:
(a) General Terms. You will become entitled to
receive the Sale Bonus in the event that (i) a Triggering Event occurs
on or before the end of the Term and (ii) a Change in Control
contemplated by such Triggering Event occurs thereafter. The amount of
the Sale Bonus shall be equal to 0.0043 multiplied by the Aggregate
Consideration; provided, however, that the Sale Bonus shall be reduced
by the net value you receive in connection with your Stock Options, if
any, that are redeemed for cash or exchanged for other securities at
the time of or prior to a Change in Control.
5. Section 5(a) of the Bonus Agreement is hereby deleted in
its entirety and replaced by the following:
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(a) Involuntary Termination. In the event of your
Involuntary Termination (as defined in the Employment Agreement) prior
to the Payment Date, you shall be entitled to receive the Retention
Bonus in accordance with the terms of Section 3, as if your employment
had continued until such Liquidation Date. In the event of your
Involuntary Termination on or after August 1, 2000 and prior to a
Triggering Event, you shall remain entitled to receive the Sale Bonus
in the event of a subsequent Triggering Event and a corresponding
Change in Control in the same manner as if your employment with the
Company had continued through the end of the Term.
B. Amendment to the Employment Agreement.
1. Extension of the Term. Section 1 of the Employment
Agreement is hereby deleted in its entirety and replaced by the following:
1. Term of Employment Under the Agreement. The Term
of your employment under this Agreement (the "Term") shall commence on
October 8, 1996 (the "Effective Date") and shall continue until October
8, 2005. For purposes of this Agreement, "Fiscal Year" means the
Company's fiscal year. Subject to the provisions of Section 6 below,
either party may terminate your employment under this Agreement at any
time.
2. Definitions.
(a) The following definition is hereby added after the
definition of "Involuntary Termination" in Section 9 of the Employment
Agreement:
"Plan Effective Date" shall mean the effective date of the
judicial consent to the Joint Prepackaged Chapter 11 Plan of
Reorganization.
(b) The definition of "Change in Control" as set forth in
Section 9 of the Employment Agreement is hereby deleted in its entirety and
replaced by the following:
Prior to the Plan Effective Date, "Change in Control" shall
mean the acquisition by a person (other than a person or group of
persons that beneficially own an equity interest in Holdings or the
Company on the Effective Date or any person controlled thereby) of more
than 50% control of the voting securities of Holdings as a result of a
sale of voting securities after the Effective Date by the persons who,
on the Effective Date, have a beneficial interest in such voting
securities, but shall not include any change in the ownership of the
Company or Holdings resulting from a public offering.
On and after the Plan Effective Date, a "Change in Control"
shall be deemed to have occurred on the date that any of the following
shall have occurred:
(i) the acquisition by any Person of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended) of 35% or more of the common stock of
the Company (the "Common Stock") then outstanding, and the individuals
who, as of the Plan Effective Date, constitute the Board and
subsequently elected members of the Board whose election is approved or
recommended by at least a majority of such current members or their
successors whose election was so approved or recommended (other than
any subsequently elected members whose initial assumption of office
occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board) cease for any reason to constitute at
least a majority of such Board; provided, however, that in no event
shall a Triggering Event be deemed to have occurred upon any such
acquisition by (A) any employee benefit plan of the Company, (B) any
Person or entity organized, appointed or established by the Company for
or pursuant to the terms of any such employee benefit plan, or (C) any
Person (other than any of Fidelity Management & Research Company or
Fidelity Management Trust Company or by any fund or account associated
with either Fidelity Management & Research Company or Fidelity
Management Trust Company) who as of the Plan Effective Date was the
beneficial owner of 15% or more of the shares of Common Stock
outstanding on such date unless and until such Person, together with
all Affiliates of such Person, becomes the beneficial owner of 35% or
more of the shares of Common Stock then outstanding whereupon a Change
in Control shall be deemed to have occurred;
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(ii) the Company enters into a binding agreement with one or
more Persons to directly acquire, in exchange for cash, stock, claims
or property, 50% or more of the aggregate equity securities of the
Company; or
(iii) the Company enters into a binding agreement providing
for a merger, consolidation, reorganization or other business
combination upon consummation of which one or more Persons would own or
control 50% or more of either (A) the aggregate voting securities of
the Company, or (B) the aggregate value of the assets of the Company.
For purposes of the above definition of Change in Control
only, the following defined terms shall apply:
"Affiliate" means, with respect to any Person, any other
entity which (i) is a Subsidiary of such Person, (ii) is, directly or
indirectly, under common control with such Person, or (iii) is,
directly or indirectly, controlling such Person.
"Person" means any person, entity or "group" within the
meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act,
except that such term shall not include (i) the Company or any of its
subsidiaries, (ii) a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or any of its
subsidiaries, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) an entity owned,
directly or indirectly, by the shareholders of Pathmark in
substantially the same proportions as their ownership of stock of the
Company.
"Subsidiary" means with respect to any Person, any entity of
which:
(i) if a corporation, a majority of the total voting power of
shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees
thereof is at the time of determination owned or controlled, directly
or indirectly, collectively or individually, by such Person or by one
or more Affiliates of such Person, and
(ii) if a partnership, association, limited liability company
or other entity, a majority of the partnership, membership or other
similar ownership interest thereof is at the time of determination
owned or controlled, directly or indirectly, collectively or
individually, by such Person or by one or more Affiliates of such
Person.
3. Equity Compensation You acknowledge and agree that in
consideration of the Retention Bonus set forth in the Bonus Agreement, as
amended by this Letter, you hereby waive all rights to the long-term incentive
compensation set forth in Section 4 of the Employment Agreement. Accordingly,
the parties hereto agree that, as of the Plan Effective Date, Section 4 of the
Employment Agreement, as well as Exhibits A and B of the Employment Agreement
shall become void and have no further force or effect.
4. D&O Liability Insurance. The following Section 6(h) is
hereby added after Section 6(g) of the Employment Agreement:
(h) As of the Plan Effective Date, the Company shall
purchase a six-year "tail" on its directors and officers liability
insurance policy.
(SIGNATURE PAGE FOLLOWS)
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If this Letter sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this Letter,
which will then constitute our agreement on this subject.
Sincerely,
PATHMARK STORES, INC.
By
---------------------------------
Name:
Title
Agreed to as of this ___th day of _______, 2000.
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Xxxxx X. Xxxxxx
