Execution Copy
August 31, 2000
Xxxxxxx Xxxxxx
Re: Sale Bonus Agreement
Dear Xxxx:
The following sets forth the agreement between you and The Grand Union Company,
a Delaware corporation (the "Company"), regarding the terms of the sale bonus
(the "Sale Bonus") that you may be eligible to receive in accordance with the
terms and conditions set forth below. This letter agreement (the "Letter
Agreement") is in addition to, and not in substitution for, any other agreements
between you and the Company, and the Sale Bonus is in addition to, and not in
substitution for, any other pay or benefits to which you are eligible to earn
from the Company.
1. Definitions. For purposes of this Letter Agreement, the following capitalized
words that are not otherwise defined in the text of the Letter Agreement shall
have the meanings set forth below:
"Aggregate Consideration" shall mean an amount equal to the sum of the
aggregate fair market value of any securities issued and any other non-cash
consideration delivered, and any cash consideration paid to the Company or
its security holders in connection with a Change in Control, plus the amount
of all indebtedness for money borrowed and capitalized leases, net of excess
cash, of the Company and its subsidiaries which is assumed or acquired by any
Purchaser in connection with a Change in Control or retired or defeased in
connection with such Change in Control. However, in the event that a Change
in Control is effectuated through a bankruptcy proceeding, Aggregate
Consideration shall not include capitalized leases assumed unless (i)
payments to the Company's senior lenders in connection with the Change in
Control equal or exceed the sum of pre-petition and post-petition amounts of
indebtedness then-owing to such lenders or (ii) the Company's senior lenders
agree in writing to accept a reduced amount of the then-owing debt ("Reduced
Amount") in a pre-arranged or pre-packaged backruptcy, which Reduced Amount
is subsequently paid. The fair market value of any securities issued and any
other non-cash consideration delivered in connection with a Change in Control
will be the value determined in good faith by the Board.
"Board" shall mean the Board of Directors of the Company.
"Cause" shall mean the termination of your employment based on (i) willful
misconduct or gross negligence by you with regard to the Company or its
business, assets or employees; (iii) the refusal by you to follow the proper
direction of the Company or the Board; (iv) substantial and continuing
refusal by you to attempt to perform the duties required of you in connection
with your employment (other than any such failure resulting from incapacity
due to physical or mental illness); (v) your being convicted of a felony or
pleading nolo contendere to a felony (other than a felony involving a motor
vehicle); (vi) the breach by you of any fiduciary duty owed by you to the
Company; or (vii) your dishonesty, misappropriation or fraud with regard to
the Company (other than good faith expense account disputes).
"Change in Control" shall mean the consummation of a Triggering Event.
"Effective Date" shall mean August 17, 2000, the date on which the
Compensation Committee of the Board approved the Sale Bonus.
The "Eligible Management Members" for the Sale Bonus are Xxxx Xxxxxxx,
Xxxxxxx Xxxxxxxx, Xxxxxxxxxx Xxxxxxx, Xxxxx Xxxxx, Xxxxxxx Xxxxxxxx, Xxxx
Xxxxxx, Xxxxx Xxxxxxxxxxx, Xxxxxxx Xxxxxx and Xxxxxx Xxxxx.
"Good Reason" shall mean any of the following:
(A) any reduction in your base salary or target bonus opportunity, or:
(B) any change in your principal work location of more than 50 miles from
your principal work location as of the Effective Date.
"Individual Share" shall mean 5% of the Management Share.
"Involuntary Termination" shall mean (a) the termination of your employment
by the Company other than for Cause, Death, Disability under the Company's
Long Term Disability Plan, or retirement under the Company's Retirement Plan
or (b) the resignation of your employment by you for Good Reason.
"Management Share" shall mean the aggregate amount of compensation payable to
Eligible Management Members in connection with the Sale Bonus. The Management
Share shall be determined pursuant to the following grid:
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Aggregate Consideration Paid Management Share Percent
---------------------------- ------------------------
------------------------------------------------------------
Below $240,000,000 0.00%
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$240,000,000 0.50%
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$260,000,000 0.60%
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$280,000,000 0.70%
------------------------------------------------------------
$300,000,000 0.90%
------------------------------------------------------------
$310,000,000 1.00%
------------------------------------------------------------
$320,000,000 1.10%
------------------------------------------------------------
$330,000,000 1.30%
------------------------------------------------------------
$340,000,000 1.50%
------------------------------------------------------------
$350,000,000 1.75%
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$360,000,000 or more 2.00%
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The Management Share shall be calculated from the first dollar of Aggregate
Consideration paid. The percentage utilized to determine the Management Share
shall be multiplied by the full amount of Aggregate Consideration paid.
Moreover, in the event the Aggregate Consideration paid falls between two of
the ranges in the above grid, the percentage to be utilized to determine the
Management Share shall be interpolated on a straight line basis between the
two ranges. Thus, for example, assuming the Aggregate Consideration paid is
$335,000,000, the Management Share would be 1.40% times $335,000,000 or
$4,690,000.
"Purchaser" shall mean any person or entity that engages in a Change in
Control transaction.
"Sellers" shall mean the Company or, if applicable, the selling equity
holders and/or selling debt holders of the Company.
A "Triggering Event" shall be deemed to have occurred on the date that any of
the following shall have occurred:
(A) the Company enters into one or more binding agreements with one or more
Purchasers to directly acquire, in exchange for cash, stock, claims, or
property, fifty percent or more of the aggregate equity securities of the
Company;
(B) the Company enters into one or more binding agreements providing for a
merger, consolidation, reorganization or other business combination upon
consummation of which one or more Purchasers would own or control fifty
percent or more of either (i) the aggregate voting securities of the Company,
(ii) the aggregate economic interest of the outstanding equity securities of
the Company or (iii) the aggregate value of the assets of the Company;
(C) the Company enters into a transaction upon consummation of which one or
more Purchasers would acquire in exchange for cash, stock, claims or property
fifty percent or more of either (i) the aggregate equity securities of the
Company, or (ii) the Company's assets; or
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(D) the Company 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 the Company pursuant to an effective registration statement
under the Securities Act of 1933, as amended.
2. Term. The term of this Letter Agreement (the "Term") shall commence on the
Effective Date and shall continue until August 17, 2001.
3. Sale Bonus.
(a) General Terms. You will become entitled to receive the Sale Bonus in the
event that (i) a Triggering Event occurs during 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 your Individual Share multiplied by the
Management Share.
(b) Payment of Sale Bonus.
(i) Change in Control--No Post-Closing Adjustment. In the event that the
transaction resulting in a Change in Control does not include any provisions
either (A) for an earn-out with respect to which a part of the Aggregate
Consideration will be paid to the Sellers either in full or in part in one or
more installments after the Change in Control or any similar deferral of the
payment of the Aggregate Consideration or (B) that would potentially require the
Sellers to reimburse any portion of the Sale Price to the Purchaser or require
the Purchaser to pay to the Sellers any amount in addition to the Aggregate
Consideration, as a result of a post-closing adjustment or any other reason,
after the Change in Control (either (A) or (B), a "Post-Closing Adjustment"),
the Company shall pay to you the Sale Bonus within five days following the date
of such Change in Control; provided, however, that in no event shall the Sale
Bonus be payable to you until the full amount of the Aggregate Consideration has
been paid to the Sellers. The Board, however, shall have the discretion to make
pro-rata payments of the Sale Bonus to the extent that the Aggregate
Consideration is paid in installments.
(ii) Change in Control--Post-Closing Adjustment. In the event that the Change in
Control transaction includes provisions for any Post-Closing Adjustment, the
Company shall pay the Sale Bonus according to the terms of this Section
3(b)(ii).
(A) In the event that the Change in Control transaction includes a
Post-Closing Adjustment described in Section 3(b)(i)(A) above, the Company
shall pay you a portion of the Sale Bonus within five days after the date of
such Change in Control equal to your Individual Share multiplied by the
Management Share multiplied by the portion of the Aggregate Consideration
paid to the Sellers on or about the date of the Change in Control.
Thereafter, within five days after any additional portion of the Aggregate
Consideration is paid to the Sellers, the Company shall pay you the remaining
portion of the Sale bonus in an amount equal to your Individual Share
multiplied by the Management Share multiplied by the additional Aggregate
Consideration.
(B) In the event that the Change in Control transaction is a Post-Closing
Adjustment described in Section 3(b)(i)(B) that would potentially require the
Sellers to reimburse any portion of the Aggregate Consideration to the
Purchaser after the Change in Control, within five days after the date of
such Change in Control, the Company shall pay you a portion of the Sale Bonus
determined in good faith by the Board immediately prior to the consummation
of the Change in Control, less an amount that shall take into account the
potential adjustment to the Sales Price (the "Withheld Amount"). As soon as
practicable after the Sellers know with certainty the portion, if any, of the
Sale Price that the Sellers must reimburse to the Purchaser and the Sellers
make such reimbursement, if any, the Company shall pay to you a prorated
portion of the Withheld Amount corresponding to the portion of the maximum
potential amount that Sellers may have been required to reimburse to the
Purchaser less the amount actually reimbursed.
(C) In the event that the Change in Control transaction is a Post-Closing
Adjustment described in Section 3(b)(i)(B) that would potentially require the
Purchaser to pay to the Sellers any amount in addition to the Sale Price
after the Change in Control, within five days after the date of such Change
in
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Control, the Company shall pay you the Sale Bonus. Thereafter, within five
days after the Purchaser knows with certainty the additional amount that such
Purchaser must pay to the Sellers, if any, and the Purchaser makes such
payment to the Sellers, the Company shall pay to you an additional amount
determined in good faith by the Board that shall take into account the
additional payment made by the Purchaser to the Sellers.
(c) Determination of the Board Final. The determination of whether a Triggering
Event or Change in Control has occurred, the amount of the Aggregate
Consideration and the amount of any Sale Bonus shall be made in good faith by
the Board (unless otherwise required by applicable law) and, absent manifest
error, shall be final and binding on you, the Company and all other interested
parties.
(d) Sale Bonus Adjustment. The parties hereto acknowledge and agree that you
shall be entitled to receive an initial Sale Bonus under this Letter Agreement
which shall become payable in connection with the first Triggering Event that
occurs during the Term, which results in a Change in Control. Adjustments to the
initial Sale Bonus and additional Sale Bonuses ("Sale Bonus Adjustments") shall
be payable with respect to any additional transactions or asset sales that occur
during the Term that would have constituted part of the Triggering Event had
they occurred prior to the Change in Control. The Sale Bonus Adjustment shall
not be made for asset sales made in the ordinary course of business. The amount
of each Sale Bonus Adjustment shall be calculated in respect to the aggregate of
all such transactions made during the Term, including those previously resulting
in the Triggering Event.
4. Effect of Termination of Employment.
(a) Involuntary Termination. In the event of your Involuntary Termination during
the Term, you shall remain entitled to receive the Sale Bonus in the same manner
as if your employment with the Company had continued for the duration of the
Term. Thus, if following your Involuntary Termination during the term, a
subsequent Triggering Event occurs during the Term, which results in a Change in
Control at any time thereafter, you shall receive a your Sale Bonus at such
time.
(b) Other Termination. In the event that your employment terminates for any
reason other than an Involuntary Termination at any time during the Term, you
shall forfeit any right you may have to receive the Sale Bonus.
5. Notice. For the purpose of this Letter Agreement, notices and all other
communications provided for in this Letter Agreement shall be in writing and
shall be deemed to have been duly given when delivered by hand, sent by
telecopier or mailed by United States registered mail, return receipt requested,
postage prepaid, addressed to the Chief Executive Officer, The Grand Union
Company, 000 Xxxxxxxxxxx Xxxx., Xxxxx, Xxx Xxxxxx 00000, telecopier: (973)
890-6012, with a copy to the General Counsel of the Company, or to you at the
address set forth on the first page of this Letter Agreement or to such other
address as either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
receipt.
6. Reduction of Payments if Reduction Would Result in Greater After-Tax Amount.
Notwithstanding anything herein to the contrary, if the payment of the Sale
Bonus and any other payments in connection with a Change in Control (together,
the "Payments") constitute a "parachute payment" (as defined in Section
280G(b)(2) of the Internal Revenue Code of 1986, as amended (the "Code")), and
the amount of the Payments net the excise tax (as described in Section 4999 of
the Code) payable with respect thereto is less than the amount to be paid to you
if the aggregate Payments to be made to you were three times your "base amount"
(as defined in Section 280G(b)(3) of the Code), less $1.00, then the aggregate
of the amounts of the Sale Bonus Payment constituting the parachute payment paid
pursuant to this Agreement shall be reduced to an amount that will equal three
times your base amount, less $1.00.
7. Miscellaneous.
(a) No Rights to Continued Employment. Neither this Letter Agreement nor any of
the rights or benefits evidenced hereby shall confer upon you any right to
continuance of employment by the Company or interfere in any way with the right
of the Company to terminate your employment, subject to the provisions of
Section 4 above, for any reason, with or without Cause.
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(b) Amendments, Waivers. No provision of this Letter Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing by the parties hereto. No waiver by either party hereto at any time
of any breach by the other party hereto of, or compliance with, any condition or
provision of this Letter Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same or
at any prior or subsequent time.
(c) Counterparts. This Letter Agreement may be executed in counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
(d) Withholding. Amounts paid to you hereunder shall be subject to all
applicable federal, state and local wage withholdings.
(e) Headings. The headings contained in this Letter Agreement are intended
solely for convenience of reference and shall not affect the rights of the
parties to this Letter Agreement.
(f) Governing Law. The validity, interpretation, construction and performance of
this Letter Agreement shall be governed by the laws of the State of New Jersey
applicable to contracts entered into and performed in such state.
If this Letter Agreement 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,
The Grand Union Company
By: /s/ Xxxx X. Xxxxxxx
-------------------
Name:
President and Chief Executive Officer
Agreed to as of this 31st day of August, 2000.
/s/ Xxxxxxx Xxxxxx
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Xxxxxxx Xxxxxx
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