Exhibit 10.1
EMPLOYMENT AGREEMENT
AGREEMENT, made and entered into by and between THE GREAT ATLANTIC &
PACIFIC TEA COMPANY, INC. (the "Company"), and DR. ANDREAS GULDIN (the
"Employee").
W I T N E S S E T H
WHEREAS, the Company and the Employee (the "Parties") have agreed to
enter into this agreement (the "Agreement") relating to the employment of the
Employee by the Company,
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein and for other good and valuable consideration, the Parties,
intending to be legally bound, agree as follows:
1. Term of Employment.
(a) The Company agrees to continue to employ the Employee, and the
Employee agrees to remain in the employment of the Company, in accordance with
the terms and provisions of this Agreement, for the period set forth below (the
"Employment Period").
(b) The Employment Period under this Agreement shall commence as of May
1, 2007 and, subject only to the provisions of Sections 7, 8 and 9 below
relating to termination of employment, shall continue until (i) the close of
business on April 30, 2010 or (ii) such later date as shall result from the
operation of subparagraph (c) below (the "Terminal Date").
(c) Commencing on December 1, 2008, and on the first day of each month
thereafter (such date and each such first day, the "Renewal Date") the Terminal
Date set forth in subparagraph (b) above shall be extended so as to occur
eighteen months from the Renewal Date unless either the Company or the Employee
shall have given written notice to the other Party on or before such Renewal
Date that the Terminal Date is not to be extended.
2. Duties. It is the intention of the Parties that during the term of
his employment under this Agreement, the Employee will serve as the Executive
Managing Director, Strategy & Corporate Development, reporting to the Executive
Chairman of the Company. The Employee will devote his full business time and
attention to the affairs of the Company and his duties as Executive Managing
Director, Strategy & Corporate Development. The Employee will have such duties
as are appropriate to his position, and will have such authority as required to
enable him to perform these duties. The Employee will also serve as a member of
the Board of Directors, as Tengelmann's representative.
3. Salary and Incentive Compensation.
3.1 Salary. The Company will pay the Employee a base salary at an
initial annual rate of not less than $450,000.00, which base salary as in effect
from time to time will not be reduced and will be reviewed periodically (at
intervals of not more than twelve (12) months) by the Compensation Committee of
the Board of Directors (the "Board") for the purpose of considering increases
thereof. In evaluating increases in the Employee's base salary, the Compensation
Committee of the Board will take into account such factors as corporate
performance, individual merit, and such other considerations as it deems
appropriate. The Employee's base salary will be paid in accordance with the
standard practices for other corporate executives of the Company.
3.2 Annual Incentive Compensation. The Employee will be eligible to
receive annually or otherwise any incentive compensation awards, whether payable
in cash, shares of common stock of the Company or otherwise, which the Company,
the Compensation Committee of the Board or such other authorized committee of
the Board determines to award or grant. For fiscal year 2007, the Employee will
participate in the Management Incentive Program at an annual incentive target of
77.7% of annual base salary ($350,000.00).
3.3 Long-Term Incentive. Effective May 1, 2007, the Employee will
participate in the 2007 Long Term Incentive Plan (LTIP) at a Total LTIP Target
of $1,200,000.00, which is 150% of the Employee's total annual cash
compensation. Of the Total LTIP Target, 75% will be issued to the Employee in
the form of a grant of Restricted Stock Units (Units) pursuant to the Company's
1998 Long Term Incentive and Share Award Plan (the "Plan"), and 25% will be
issued to the Employee in the form of a grant of Non-Qualified Stock Options
(Options), also pursuant to the Plan. The grant letter will provide that the
options will not be forfeited in the event the Employee's employment with the
Company ends in connection with his reactivation of employment with Tengelmann
Warenhandelsgesellschaft KG or any of its affiliates ("Tengelmann") and as long
as he remains an employee of Tengelmann on all of the vesting dates set forth in
the grant letter. In addition, if the Employee terminates his employment in
connection with his commencement of employment with Tengelmann, the Compensation
Committee of the Board shall have the authority to provide for such treatment of
outstanding Units to the Employee (including, without limitation, the
accelerated vesting of all or any portion of any such awards) and the payout of
benefits to the Employee as the Compensation Committee determines in its sole
discretion to be equitable under the circumstances.
3.4 Special Award. Effective May 1, 2007, the Company will grant to the
Employee 15,000 Performance Restricted Stock Units pursuant to the Company's
1998 Long Term Incentive and Share Award Plan, 5,000 of which will vest on the
closing date of the Pathmark transaction, 5,000 of which will vest on the
one-year anniversary of the closing date, and the remaining 5,000 of which will
vest on the two-year anniversary of the closing date. The grant letter will
provide that any earned RSU's will not be forfeited in the event the Employee's
employment with the Company ends in connection with his reactivation of
employment with Tengelmann and as long as he remains an employee of Tengelmann
on all of the vesting dates set forth in the grant letter.
4. Benefit Programs. The Employee will receive such benefits and
awards, including without limitation stock options and restricted share awards,
as the Compensation Committee of the Board shall determine and will be eligible
to participate in all employee benefit plans and programs of the Company from
time to time in effect for the benefit of senior executives of the Company,
including, but not limited to, pension and other retirement plans, group life
insurance, hospitalization and surgical and major medical coverage, sick leave,
salary continuation arrangements, vacations and holidays, long-term disability,
and such other benefits as are or may be made available from time to time to
senior executives of the Company. In addition, the Company will permit the
Employee to take up to 20 business days of unpaid leave per calendar year. The
Employee must submit requests for such leave, which at a minimum must be five
consecutive business days in duration, to the Executive Chairman for approval.
5. Business Expenses and Perquisites. The Employee will be reimbursed
for all reasonable expenses incurred by him in connection with the conduct of
the business of the Company, provided he properly accounts therefor in
accordance with the Company's policies. He will also be entitled to such other
perquisites as are customary for senior executives of the Company. The Employee
will also be reimbursed for housing costs for up to three years from May 1,
2007.
6. Office and Services Furnished. The Company shall furnish the
Employee with office space, secretarial assistance and such other facilities and
services as shall be suitable to the Employee's position and adequate for the
performance of his duties hereunder.
7. Termination of Employment by the Company.
7.1 Involuntary Termination by the Company Other Than For Permanent and
Total Disability or For Cause. The Company may terminate the Employee's
employment at any time and for any reason (other than for Permanent and Total
Disability as provided in Section 7.2 below, for Performance as provided in
Section 7.3 below or for Cause as provided in Section 7.4 below) by giving him a
written notice of termination to that effect at least 14 days before the date of
termination. In the event the Company terminates the Employee's employment for
any reason (other than for Permanent and Total Disability as provided in Section
7.2, below, for Performance as provided in Section 7.3 below or for Cause as
provided in Section 7.4 below), the Employee shall be entitled to the benefits
described in Section 10 or Section 11, whichever is applicable.
7.2 Termination Due to Permanent and Total Disability. If the Employee
incurs a Permanent and Total Disability, as defined below, the Company may
terminate the Employee's employment by giving him written notice of termination
at least 14 days before the date of such termination. In the event of such
termination of the Employee's employment because of Permanent and Total
Disability, the Employee shall be entitled to receive (i) his base salary
pursuant to Section 3.1 and any other compensation and benefits to the extent
actually earned by the Employee pursuant to this Agreement or any benefit plan
or program of the Company as of the date of such termination of employment at
the normal time for payment of such salary, compensation or benefits, and (ii)
any reimbursement amounts owing under Section 5. For purposes of this Agreement,
the Employee shall be considered to have incurred a Permanent and Total
Disability if he is unable to substantially carry out his duties under this
Agreement by reason of any medically determinable physical or mental impairment
which can be expected to result in death or which has lasted or can be expected
to last for a continuous period of not less than 12 months. The existence of
such Permanent and Total Disability shall be determined by the Compensation
Committee of the Board of Directors of the Company and shall be evidenced by
such medical certification as the Secretary of the Company shall require.
7.3 Termination for Performance. The Company may terminate the
Employee's employment for Performance if the Employee fails to meet
satisfactorily the performance goals established for the Employee. The
determination as to whether the Employee has met satisfactorily such performance
goals shall be determined by the Company in its sole discretion. The Company
shall exercise its right to terminate the Employee's employment for Performance
by giving him written notice of termination on or before the date of such
termination specifying the performance goal or goals that the Employee failed to
meet. In the event of such termination of the Employee's employment for
Performance, the Employee shall be entitled to receive (i) his base salary
pursuant to Section 3.1 and any other compensation and benefits to the extent
actually earned by the Employee under this Agreement or any benefit plan or
program of the Company as of the date of such termination at the normal time for
payment of such salary, compensation or benefits, and (ii) any reimbursement
amounts owing under Section 5. Furthermore, the Employee, upon his execution of
a Confidential Separation and Release Agreement, shall be entitled to the
following:
(a) The Company shall pay to the Employee as a severance benefit a
total of fifty-two (52) weeks of base salary continuation. Such salary
continuation payments will be made to the Employee on the Company's normal and
routine bi-weekly pay dates. In the event that the Employee dies before the end
of such 52-week period, the payments for the remainder of such period shall be
paid to the Employee's estate.
(b) During the period of 12 months beginning on the date of the
Employee's termination of employment, the Employee shall remain covered by the
medical plans of the Company that covered him immediately prior to his
termination of employment as if he had remained in employment for such period.
In the event that the Employee's participation in any such plan is barred, the
Company shall arrange to provide the Employee with substantially similar
benefits. Any medical insurance coverage for such 12-month period pursuant to
this subsection (b) shall become secondary upon the earlier of (i) the date on
which the Employee begins to be covered by comparable medical coverage provided
by a new employer, or (ii) the earliest date upon which the Employee becomes
eligible for Medicare or a comparable Government insurance program. The
Employee's COBRA entitlements shall become effective at the end of the extended
benefit coverage provided pursuant to this subsection (b).
7.4 Termination for Cause. The Company may terminate the Employee's
employment for Cause if (i) the Employee willfully, substantially, and
continually fails to perform the duties for which he is employed by the Company,
(ii) the Employee willfully fails to comply with reasonable instructions, (iii)
the Employee willfully engages in conduct which is or would reasonably be
expected to be materially and demonstrably injurious to the Company, (iv) the
Employee willfully engages in an act or acts of dishonesty resulting in material
personal gain to the Employee at the expense of the Company, (v) the Employee is
convicted of a felony, (vi) the Employee engages in an act or acts of gross
malfeasance in connection with his employment hereunder, (vii) the Employee
commits a material breach of the confidentiality provision set forth in Section
15, or (viii) the Employee exhibits demonstrable evidence of alcohol or drug
abuse having a substantial adverse effect on his job performance hereunder. The
Company shall exercise its right to terminate the Employee's employment for
Cause by giving him written notice of termination on or before the date of such
termination specifying in reasonable detail the circumstances constituting such
Cause. In the event of such termination of the Employee's employment for Cause,
the Employee shall be entitled to receive (i) his base salary pursuant to
Section 3.1 and any other compensation and benefits to the extent actually
earned pursuant to this Agreement or any benefit plan or program of the Company
as of the date of such termination at the normal time for payment of such
salary, compensation or benefits and (ii) any amounts owed under the
reimbursement policy of Section 5.
8. Termination of Employment by the Employee.
(a) Good Reason. The Employee may terminate his employment for Good
Reason by giving the Company a written notice of termination at least
14 days before the date of such termination specifying in reasonable
detail the circumstances constituting such Good Reason. In the event of
the Employee's termination of his employment for Good Reason, the
Employee shall be entitled to the benefits described in Section 10 or
Section 11, whichever is applicable. For purposes of this Agreement,
Good Reason shall mean (i) a significant reduction in the scope of the
Employee's authority, functions, duties or responsibilities from that
which is contemplated by this Agreement, (ii) any reduction in the
Employee's base salary, or (iii) a significant reduction in the
employee benefits provided to the Employee other than in connection
with an across-the-board reduction similarly affecting substantially
all senior executives of the Company. If an event constituting a ground
for termination of employment for Good Reason occurs, and the Employee
fails to give notice of termination within 3 months after the
occurrence of such event, the Employee shall be deemed to have waived
his right to terminate employment for Good Reason in connection with
such event (but not for any other event for which the 3-month period
has not expired).
(b) Other. The Employee may terminate his employment at any time and
for any reason, other than pursuant to subsection (a) above, by giving
the Company a written notice of termination to that effect at least 14
days before the date of termination. In the event of the Employee's
termination of his employment pursuant to this subsection (b), the
Employee shall be entitled to receive (i) his base salary pursuant to
Section 3.1 and any other compensation and benefits to the extent
actually earned by the Employee pursuant to this Agreement or any
benefit plan or program of the Company as of the date of such
termination at the normal time for payment of such salary, compensation
or benefits, and (ii) any reimbursement amounts owing under Section 5.
9. Termination of Employment By Death. In the event of the death of the
Employee during the course of his employment hereunder, the Employee's
estate shall be entitled to receive (i) his base salary pursuant to
Section 3.1 and any other compensation and benefits to the extent
actually earned by the Employee pursuant to this Agreement or any other
benefit plan or program of the Company as of the date of such
termination at the normal time for payment of such salary, compensation
or benefits, and (ii) any reimbursement amounts owing under Section 5.
In addition, in the event of such death, the Employee's beneficiaries
shall receive any death benefits owed to them under the Company's
employee benefit plans.
10. Benefits Upon Termination Without Cause or For Good Reason (No
Change of Control). If (a) the Employee's employment with the Company
shall terminate (i) because of termination by the Company pursuant to
Section 7.1 other than for Cause or Performance or Permanent and Total
Disability, or (ii) because of termination by the Employee for Good
Reason pursuant to Section 8(a), and (b) such termination of employment
does not occur within 13 months following a "Change of Control" of the
Company (as defined in Section 12), the Employee, upon execution of a
Confidential Separation and Release Agreement, shall be entitled to the
following:
(a) The Company shall pay to the Employee his base salary pursuant to
Section 3.1 and any other compensation and benefits to the extent
actually earned by the Employee under this Agreement or any benefit
plan or program of the Company as of the date of such termination at
the normal time for payment of such salary, compensation or benefits.
(b) The Company shall pay the Employee any reimbursement amounts owing
under Section 5.
(c) The Company shall pay to the Employee as a severance benefit for
each month during the 18-month period beginning with the month next
following the date of termination of the Employee's employment, an
amount equal to one-twelfth of the sum of (i) his annual rate of base
salary immediately preceding his termination of employment, and (ii)
the average of his three highest annual bonuses awarded under the
Company's annual management incentive bonus plan for any of the five
fiscal years immediately preceding the fiscal year of his termination
of employment, (or, if he was not eligible for a bonus for at least
three fiscal years in such five-year period, then the average of such
bonuses for all of the fiscal years in such five-year period for which
he was eligible, and if he was not eligible for such a bonus in any
previous fiscal year, then 100% of his target annual bonus for the
fiscal year in which the termination occurred), with any deferred
bonuses counting for the fiscal year in which it was earned rather than
the year in which it was paid. Each such monthly benefit shall be paid
to the Employee on the Company's normal and routine bi-weekly pay
dates. In the event that the Employee dies before the end of such
18-month period, the payments for the remainder of such period shall be
made to the Employee's estate.
(d) The Company shall pay to the Employee as a bonus for the fiscal
year in which the termination occurred an amount equal to a portion
(determined as provided in the next sentence) of the bonus that the
Employee would actually have received under the Company's annual
management incentive bonus plan for the fiscal year of termination of
the Employee's employment if his employment had not terminated
(determined on the basis of his actual bonus opportunity and the actual
degree of achievement of the applicable performance goals) or, if no
bonus opportunity for that year had been established for the Employee
at the time of such termination of employment, such portion of the
bonus awarded to him under the Company's annual management incentive
bonus plan for the fiscal year immediately preceding the fiscal year of
the termination of his employment, with deferred bonuses counting for
the fiscal year in which it was earned rather than the year in which it
was paid. Such portion shall be determined by dividing the number of
days of the Employee's employment during such fiscal year up to his
termination of employment by 365 (366 if a leap year). Such payment
shall be made on or about the date on which bonuses for the applicable
fiscal year are paid to executives of the Company generally under the
Company's annual management incentive bonus plan.
(e) During the period of 18 months beginning on the date of the
Employee's termination of employment, the Employee shall remain covered
by the medical, dental, vision, life insurance, and, if reasonably
commercially available through nationally reputable insurance carriers,
long-term disability plans of the Company that covered him immediately
prior to his termination of employment as if he had remained in
employment for such period. In the event that the Employee's
participation in any such plan is barred, the Company shall arrange to
provide the Employee with substantially similar benefits (but, in the
case of long-term disability benefits, only if reasonably commercially
available). Any medical insurance coverage for such 18-month period
pursuant to this subsection (e) shall become secondary upon the earlier
of (i) the date on which the Employee begins to be covered by
comparable medical coverage provided by a new employer, or (ii) the
earliest date upon which the Employee becomes eligible for Medicare or
a comparable Government insurance program.
11. Benefits Upon Termination Without Cause or For Good Reason (Change
of Control). If (a) the Employee's employment with the Company shall
terminate (i) because of termination by the Company pursuant to Section
7.1 other than for Cause or Performance or Permanent and Total
Disability, (ii) because of termination by the Employee for Good Reason
pursuant to Section 8(a), or (iii) for any reason during the 30 days
beginning on the first anniversary of a Change of Control, and (b) such
termination of employment occurs within 13 months following a "Change
of Control" of the Company (as defined in Section 12), the Employee,
upon execution of a Confidential Separation and Release Agreement,
shall be entitled to the following:
(a) The Company shall pay to the Employee his base salary pursuant to
Section 3.1 and any other compensation and benefits to the extent
actually earned by the Employee under this Agreement or any benefit
plan or program of the Company as of the date of such termination at
the normal time for payment of such salary, compensation or benefits.
(b) The Company shall pay the Employee any reimbursement amounts owing
under Section 5.
(c) The Company shall pay to the Employee as a severance benefit an
amount equal to three (3) times the sum of (i) his annual rate of base
salary immediately preceding his termination of employment, and (ii)
the average of his three highest annual bonuses awarded under the
Company's annual management incentive bonus plan for any of the five
fiscal years immediately preceding the fiscal year of his termination
of employment (or, if he was not eligible for a bonus for at least
three fiscal years in such five-year period, then the average of such
bonuses for all of the fiscal years in such five-year period for which
he was eligible, and if he was not eligible for such a bonus in any
previous fiscal year, then 100% of his target annual bonus for the
fiscal year in which the termination occurred, with any deferred
bonuses counting for the fiscal year in which it was earned rather than
the year in which it was paid. Such severance benefit shall be paid in
a lump sum within 45 days after the date of such termination of
employment.
(d) The Company shall pay to the Employee as a bonus for the fiscal
year in which the termination occurred an amount equal to a portion
(determined as provided in the next sentence) of the bonus that the
Employee would actually have received under the Company's annual
management incentive bonus plan for the fiscal year of termination of
the Employee's employment if his employment had not terminated
(determined on the basis of his actual bonus opportunity and the actual
degree of achievement of the applicable performance goals) or, if no
bonus opportunity for that year had been established for the Employee
at the time of such termination of employment, such portion of the
bonus awarded to him under the Company's annual management incentive
bonus plan for the fiscal year immediately preceding the fiscal year of
the termination of his employment, with deferred bonuses counting for
the fiscal year in which it was earned rather than the year in which it
was paid. Such portion shall be determined by dividing the number of
days of the Employee's employment during such fiscal year up to his
termination of employment by 365 (366 if a leap year). Such payment
shall be made on or about the date on which bonuses for the applicable
fiscal year are paid to executives of the Company generally under the
Company's annual management incentive bonus plan.
(e) During the period of 36 months beginning on the date of the
Employee's termination of employment, the Employee shall remain covered
by the medical, dental, vision, life insurance, and, if reasonably
commercially available through nationally reputable insurance carriers,
long-term disability plans of the Company that covered him immediately
prior to his termination of employment as if he had remained in
employment for such period. In the event that the Employee's
participation in any such plan is barred, the Company shall arrange to
provide the Employee with substantially similar benefits (but, in the
case of long-term disability benefits, only if reasonably commercially
available). Any medical insurance coverage for such 36-month period
pursuant to this subsection (e) shall become secondary upon the earlier
of (i) the date on which the Employee begins to be covered by
comparable medical coverage provided by a new employer, or (ii) the
earliest date upon which the Employee becomes eligible for Medicare or
a comparable Government insurance program.
12. Change of Control. For the purposes of this Agreement, a "Change of
Control" shall be deemed to have occurred if (a) any person or persons
acting together which would constitute a "group" for purposes of
Section 13(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), (other than the Company, any subsidiary of the
Company, and Tengelmann Warenhandelsgesellschaft KG (a partnership
organized under the laws of the Federal Republic of Germany or any
successor to such partnership, hereinafter "Tengelmann")) shall
beneficially own (as defined in Rule 13d-3 of the Exchange Act),
directly or indirectly, at least 30% of the total voting power of all
classes of capital stock of the Company entitled to vote generally in
the election of the Board and such voting power exceeds the then
current voting power of Tengelmann; (b) control of Tengelmann is
acquired by any person or persons other than family members or entities
controlled by family members of Erivan Haub; (c) Current Directors (as
herein defined) shall cease for any reason to constitute at least a
majority of the members of the Board (for this purpose, a "Current
Director" shall mean any member of the Board as of the date hereof and
any successor of a Current Director whose election, or nomination for
election by the Company's shareholders, was approved by at least
two-thirds of the Current Directors then on the Board); (d) the
shareholders of the Company approve (i) a plan of complete liquidation
of the Company or (ii) an agreement providing for the merger or
consolidation of the Company other than a merger or consolidation in
which (x) the holders of the common stock of the Company immediately
prior to the consolidation or merger have, directly or indirectly, at
least a majority of the common stock of the continuing or surviving
corporation immediately after such consolidation or merger or (y) the
Board immediately prior to the merger or consolidation would,
immediately after the merger or consolidation, constitute a majority of
the board of directors of the continuing or surviving corporation; or
(e) the shareholders of the Company approve an agreement (or
agreements) providing for the sale or other disposition (in one
transaction or a series of transactions) of all or substantially all of
the assets of the Company.
13. Entitlement to Other Benefits. Except as otherwise provided in this
Agreement, this Agreement shall not be construed as limiting in any way
any rights or benefits that the Employee or his spouse, dependents or
beneficiaries may have pursuant to any other plan or program of the
Company.
14. Non-Competition. The Employee agrees that during the term of this
Agreement and for a period of eighteen months following termination of
his employment, the Employee will not, within any of the geographical
areas of the United States in which the Company is then conducting
business (either directly or through franchisees), directly or
indirectly, own, manage, operate, control, be employed by, participate
in, provide consulting services to, or be connected in any manner with
the ownership, management, operation or control of any business similar
to any of the types of businesses conducted by the Company to any
significant extent during his employment or on the date of termination
of his employment, except the Employee may own for investment purposes
up to 1% of the capital stock of any company whose stock is publicly
traded, and during such eighteen month period following termination of
his employment the Employee will not contact or solicit employees of
the Company for the purpose of inducing such employees to leave the
employ of the Company. Notwithstanding any other provision of this
Agreement, if the Employee breaches this non-competition provision,
then the Company may, in addition to any other rights and remedies
available to it at law or under this Agreement, discontinue paying to
the Employee any of the severance benefits described in Sections 7, 10
and 11.
15. Confidential Information and Trade Secrets. The Employee hereby
acknowledges that he will have access to and become acquainted with
various trade secrets and proprietary information of the Company and
other confidential information relating to the Company. The Employee
covenants that he will not, directly or indirectly, disclose or use
such information except as is necessary and appropriate in connection
with his employment by the Company and that he will otherwise adhere in
all respects to the Company's policies against the use or disclosure of
such information.
16. Arbitration; Injunctive Relief. Any controversy or claim arising
out of or relating to this Agreement, directly or indirectly, or the
performance or breach thereof, will be settled by arbitration in
accordance with the rules of the American Arbitration Association, and
judgment upon the award rendered by the arbitrators may be entered in
any court having jurisdiction thereof. The arbitration will be held in
New Jersey, or such other place as may be agreed upon at the time by
the parties to the arbitration. The parties shall bear their own
expenses in connection with any arbitration or proceeding arising out
of or relating to this Agreement, directly or indirectly, or the
performance or breach thereof; provided, however, that in the event
that the Employee substantially prevails, the Company agrees promptly
to reimburse the Employee for all expenses (including costs and fees of
witnesses, evidence and attorneys fees and expenses) reasonably
incurred by him in investigating, prosecuting, defending, or preparing
to prosecute or defend any action, proceeding or claim arising out of
or relating to this Agreement, directly or indirectly, or the
performance or breach thereof. The parties acknowledge and agree that a
breach of Employee's obligations under Sections 14 or 15 could cause
irreparable harm to Company for which Company would have no adequate
remedy at law, and further agree that, notwithstanding the agreement of
the parties to arbitrate controversies or claims as set forth above,
the Company may apply to a court of competent jurisdiction to seek to
enjoin preliminarily or permanently any breach or threatened breach of
the Employee's obligations under Sections 14 and 15.
17. Indemnification. The Company shall indemnify and hold the Employee
harmless to the fullest extent legally permissible under the laws of
the State of Maryland, against any and all expenses, liabilities and
losses (including attorney's fees, judgments, fines and amounts paid in
settlement) reasonably incurred or suffered by him by reason of any
claim or cause of action asserted against him because of his service at
any time as a director or officer of the Company. The Company shall
advance to the Employee the amount of his expenses incurred in
connection with any proceeding relating to such service to the fullest
extent legally permissible under the laws of the State of Maryland.
Notwithstanding the foregoing, the Company's obligations pursuant to
this Section 17 shall not apply in the case of any claim or cause of
action by or in the right of the Company or any subsidiary thereof.
18. Liability Insurance. To the extent that Company maintains a
directors and officers liability insurance policy in effect, the
Company will take all steps necessary to ensure that the Employee is
covered under such policy for his service as a director or officer of
the Company or any subsidiary of the Company with respect to claims
made at any time with respect to such service.
19. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution made, or
benefit provided (including, without limitation, the acceleration of
any payment, distribution or benefit and the accelerated exercisability
of any stock option), to or for the benefit of the Employee (whether
paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 19) (a "Payment") would
be subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (or any similar excise tax) or any
interest or penalties are incurred by the Employee with respect to such
excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise
Tax"), then the Employee shall be entitled to receive from the Company
an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Employee of all taxes (including any Excise Tax,
income tax or employment tax and taking into account any lost or
reduced tax deductions on account of such Gross-Up Payment) imposed
upon the Gross-Up Payment and any interest or penalties imposed with
respect to such taxes, the Employee retains from the Gross-Up Payment
an amount equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 19(c), all determinations
required to be made under this Section 19, including determination of
whether a Gross-Up Payment is required and of the amount of any such
Gross-up Payment, shall be made by Price Waterhouse Coopers or the
Company's then current accounting firm (the "Accounting Firm"), which
shall provide detailed supporting calculations both to the Company and
the Employee within 15 business days of the date of termination of the
Employee's employment, if applicable, or such earlier time as is
requested by the Company, provided that any determination that an
Excise Tax is payable by the Employee shall be made on the basis of
substantial authority. The initial Gross-Up Payment, if any, as
determined pursuant to this Section 19(b), shall be paid to the
Employee within five business days of the receipt of the Accounting
Firm's determination. If the Accounting Firm determines that no Excise
Tax is payable by the Employee, it shall furnish the Employee with a
written opinion that he has substantial authority not to report any
Excise Tax on his Federal income tax return. Any determination by the
Accounting Firm meeting the requirements of this Section 19(b) shall be
binding upon the Company and the Employee; subject only to payments
pursuant to the following sentence based on a determination that
additional Gross-Up Payments should have been made, consistent with the
calculations required to be made hereunder (the amount of such
additional payments is referred to herein as the "Gross-Up
Underpayment"). In the event that the Company exhausts its remedies
pursuant to Section 19(c) and the Employee thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine
the amount of the Gross-Up Underpayment that has occurred and any such
Gross-Up Underpayment shall be promptly paid by the Company to or for
the benefit of the Employee. The fees and disbursements of the
Accounting Firm shall be paid by the Company.
(c) The Employee shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the
payment by the Company of a Gross-Up Payment. Such notification shall
be given as soon as practicable but not later than ten business days
after the Employee receives written notice of such claim and shall
apprise the Company of the nature of such claim and the date on which
such Claim is requested to be paid. The Employee shall not pay such
claim prior to the expiration of the 30-day period following the date
on which it gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Employee in writing prior to the
expiration of such period that it desires to contest such claim and
that it will bear the costs and provide the indemnification as required
by this sentence, the Employee shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good faith in order effectively to
contest such claim, and (iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Employee harmless, on an
after-tax basis, for any Excise Tax, income tax or employment tax (taking into
account any lost or reduced tax deductions on account of such payments),
including interest and penalties with respect thereto, imposed as a result of
such representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 19(c), the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Employee to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Employee agrees
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the Company directs the
Employee to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to the Employee on an interest-free basis and shall
indemnify and hold the Employee harmless, on an after-tax basis, from any Excise
Tax, income tax or employment tax (taking into account any lost or reduced tax
deductions on account of such advance), including interest or penalties with
respect thereto, imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and further provided that any
extension of the statute of limitations relating to the payment of taxes for the
taxable year of the Employee with respect to which such contested amount is
claimed to be due is limited solely to such contested amount. Furthermore, the
Company's control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the Employee shall be
entitled to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Employee of an amount advanced by the
Company pursuant to Section 19(c), the Employee becomes entitled to receive any
refund with respect to such claim, the Employee shall (subject to the Company's
complying with the requirements of Section 19(c)) promptly pay to the Company
the amount of such refund (together with any interest paid or credited thereon
after taxes applicable thereto). If, after the receipt by the Employee of an
amount advanced by the Company pursuant to Section 19(c), a determination is
made that the Employee shall not be entitled to any refund with respect to such
claim and the Company does not notify the Employee in writing of its intent to
contest such denial of refund prior to the expiration of 30 days after such
determination, then any obligation of the Employee to repay such advance shall
be forgiven and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
20. No Duty to Seek Employment. The Employee shall not be under any
duty or obligation to seek or accept other employment following termination of
employment, and, except as otherwise provided in paragraph 14, no amount,
payment or benefits due to the Employee hereunder shall be reduced or suspended
if the Employee accepts subsequent employment.
21. Deductions and Withholding. All amounts payable or which become
payable under any provision of this Agreement shall be subject to any deductions
authorized by the Employee and any deductions and withholdings required by law.
22. Modifications to Comply with IRC Section 409A. If any payments
under this Agreement would not comply with the requirements of Section 409A of
Internal Revenue Code of 1986, as amended, and the regulations and Internal
Revenue Service guidance thereunder, the Parties hereto agree to use their best
efforts to modify the terms of such payments in a manner mutually agreeable to
both Parties so that such requirements are satisfied.
23. Governing Law. The validity, interpretation and performance of this
Agreement will be governed by the laws of the State of New Jersey without regard
to the conflict of law provisions.
24. Severability. If any one or more of the provisions contained in
this Agreement is held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability will not affect any other
provision hereof.
25. Successors and Assigns. This Agreement will be binding upon and
inure to the benefit of the Parties hereto and their personal representatives,
and, in the case of the Company, its successors and assigns. To the extent the
Company's obligations under this Agreement are transferred to any successor or
assign, such successor or assign shall be treated as the "Company" for purposes
of this Agreement. Other than as contemplated by this Agreement, the Employee
may not assign his rights or duties under this Agreement.
26. Continuing Effect. Wherever appropriate to the intention of the
Parties hereto, the respective rights and obligations of the Parties, including
but not limited to the obligations referred to in Sections 7, 10, 11, 14, 15, 16
and 19, hereof, will survive any termination or expiration of the term of this
Agreement.
27. Entire Agreement. This Agreement constitutes the entire agreement
between the Parties and supersedes any and all other agreements and
understandings between the Parties in respect of the matters addressed in this
Agreement.
28. Amendment and Waiver. No amendment or waiver of any provision of
this Agreement shall be effective, unless the same shall be in writing and
signed by the Parties, and then such amendment, waiver or consent shall be
effective only in the specific instance or for the specific purpose for which
such amendment, waiver or consent was given.
29. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed 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 its duly authorized officer and the Employee has hereunto set his
hand as of the day and year first above written.
THE GREAT ATLANTIC & PACIFIC
TEA COMPANY, INC.
BY: /s/Allan Richards DATE: May 7, 2007
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ITS: SVP HR, Labor Relations, Legal Services
/s/Dr.Andreas Guldin May 7, 2007
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DR. ANDREAS GULDIN DATE