Exhibit 10.23
PATHMARK STORES, INC.
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301 Blair Road, P.O. Box 5301, Woodbridge, NJ 07095-0915
(908) 499-3930 Fax: (908) 499-3460
Mr. John Sheehan
7 Pheasant Drive
Colts Neck, NJ 07722
Employment Agreement
Dear John:
The following sets forth the agreement between Pathmark Stores, Inc.
(the "Company") and you regarding the terms and provisions of your employment
as an employee of the Company during the Term (as hereinafter defined).
1. Term of Employment Under the Agreement The Term of your
employment under this Agreement (the "Term") shall commence on April 1, 1997
(the "Effective Date") and shall continue until March 31, 1999; provided,
however, that commencing on April 1, 1998 and on each successive April 1st
thereafter (each, a "Renewal Date"), the Term shall be automatically extended
for one additional year, unless at least 30 days prior to the next Renewal
Date the Company has delivered to you or you have delivered to the Company,
written notice of the desire, not to extend the Term. For purposes of this
Agreement, "Fiscal Year" means the Company's fiscal year. Subject to the
provisions of Section 4 below, either party may terminate your employment
under this Agreement at any time.
2. Employment During the Term During the Term, you shall be employed
as Senior Vice President - Operations of the Company, and your duties and
responsibilities to the Company shall be consistent in all respects with such
position. In addition, pursuant to this Agreement, in the sole discretion of
the Company, and for no additional consideration, you agree to serve as an
officer of any subsidiary or parent corporation of the Company. You shall
devote substantially all of your business time, attention, skills and efforts
exclusively to the business and affairs of the Company, other than de minimis
amounts of time devoted by you to the management of your personal finances or
to engaging in charitable or community services. Your principal place of
employment shall be the executive offices of the Company as established from
time to time, although you understand and agree that you will be required to
travel from time to time for business purposes.
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3. Compensation During the Term
(a) Base Salary. As compensation to you for all services
rendered to the Company, the Company will pay you a base salary (the "Salary")
at the rate of $180,000 per annum, which will be reviewed annually by the Chief
Executive Officer and may be increased but not decreased by the Board of
Directors (the "Board") or any committee thereof responsible for the Company's
executive compensation policies (the "Committee"), on the basis of such review.
Your Salary will be paid to you in accordance with the Company's regular payroll
practices applicable to its executive officers.
(b) Bonuses. During the Term, you shall be eligible to
participate in the Company's Executive Incentive Plan (the "EIP"). Under the
EIP, for each full twelve-month Fiscal Year occurring during the Term, you will
be eligible to earn an annual bonus (the "Annual Bonus") of up to 55% of your
Salary, at the rate in effect at the beginning of the applicable Fiscal Year,
based on targets set by the Committee for your Annual Bonus for such Fiscal
Year. The target for your Annual Bonus for any partial Fiscal Year occurring
during the Term shall be prorated by multiplying the target by a fraction (not
greater than one), the numerator of which shall be the number of days in such
Fiscal Year occurring during the Term and the denominator of which shall be 365.
The Annual Bonus earned by you for any Fiscal Year will be paid to you within
120 days following the end of such Fiscal Year.
(c) Benefits. During the Term, you shall be eligible to
participate in each pension, welfare and fringe benefit program made available
generally to executives of the Company in accordance with the terms and
provisions of each such program, provided, however, that the Company shall not
be obligated to provide any supplemental retirement plan or any similar
arrangement to you.
(d) Business Expenses. The Company will reimburse you upon
presentation by you of appropriate documentation for business expenses
reasonably incurred by you in connection with the performance of your duties
under this Agreement.
4. Effect of Termination of Employment
(a) Involuntary Termination. (i) Subject to Sections 4(f) and
4(g) below, in the event of your Involuntary Termination (as hereinafter
defined), the Company shall pay you (x) the full amount of the accrued but
unpaid Salary you have earned through the date of such Involuntary Termination,
plus a cash payment (calculated on the basis of your rate of Salary then in
effect) for all unused vacation time which you
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may have accrued as of the date of Involuntary Termination; (y) the amount of
any earned but unpaid Annual Bonus for any Fiscal Year of the Company ended on
or prior to the date of the termination of your employment hereunder (the "Date
of Termination", which is defined in detail under Section 4(d) below), and (z) a
Severance Amount (the "Severance Amount") equal to your annual rate of Salary,
based upon the annual rate then in effect immediately prior to the Date of
Termination, multiplied by a fraction (not greater than two), the numerator of
which is the number of months remaining in the Term, and the denominator of
which is 12, payable in the same manner as the Salary in accordance with the
Company's regular payment practices applicable to its executive officers over
the Severance Period. For purposes of this Agreement, "Involuntary Termination"
shall mean (i) your termination of employment by the Company other than for
Cause or Disability, or (ii) your resignation of employment with the Company for
Good Reason. "Cause" shall mean the termination of your employment with the
Company because of (i) your willful and repeated failure (other than by reason
of incapacity due to physical or mental illness) to perform the material duties
of your employment with the Company after notice from the Company of such
failure and your inability or unwillingness to correct such failure within
thirty (30) days of such notice; (ii) your conviction of a felony, or your plea
of no contest to a felony, (iii) perpetration by you of a material dishonest act
or fraud against the Company or any parent or subsidiary thereof; or (iv) any
material breach by you of this Agreement, including, but not limited to, any
breach of the Protective Covenants set forth in Section 5 hereof. "Disability"
shall mean your absence from continuous full-time employment with the Company
for a period of at least 180 consecutive days by reason of a mental or physical
illness. "Good Reason" shall mean your resignation because of (i) the failure of
the Company to pay any material amount of compensation to you when due; (ii) a
material, adverse reduction or material, adverse diminution in your titles,
duties, positions or responsibilities with the Company, including, but not
limited to, failure by the Company to elect you to the office of Senior Vice
President; (iii) any other material breach by the Company of the Agreement; or
(iv) receipt of notice by you pursuant to Section 1 hereof of the Company's
decision not to extend the Term. In order to constitute Good Reason, you must
provide within sixty (60) days after you know or have reason to know of the
occurrence of any such event, a Notice of Termination (as defined in Section
4(d) below). After you provide such Notice of Termination to the Company, the
Company shall have thirty (30) days from the date of receipt of such notice to
effect a cure of the condition constituting Good Reason, and, upon cure thereof
by the Company (which cure shall be retroactive with respect to any monetary
matter), such event shall no longer constitute Good Reason. "Severance Period"
shall mean, in the event of an Involuntary Termination, the period commencing on
the Date of Termination and ending on the last day of the Term.
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(ii) In the event of your Involuntary Termination,
you and your eligible dependents shall continue to be eligible to participate
during the Benefit Continuation Period (as hereinafter defined) in the medical,
dental, health and life insurance plans applicable to you immediately prior to
your Involuntary Termination on the same terms and conditions in effect for you
and your dependents immediately prior to such Involuntary Termination. For
purposes of this Agreement, Benefit Continuation Period shall mean, in
connection with your Involuntary Termination, the period beginning on the Date
of Termination and ending on the earliest to occur of (i) the end of the
Severance Period; (ii) the date you are eligible to be covered under the benefit
plans of a subsequent employer, and (iii) the date of your breach of any
provision of Section 5 hereof.
(iii) Except as otherwise provided in this Section
4(a) or the provisions of any employee benefit plan in which you are a
participant, or as required by law, in the event of your Involuntary
Termination, as of the Date of Termination, you will relinquish the right to
any additional payments or benefits from the Company under this Agreement or
otherwise.
(b) Termination Event. In the event your employment ends at
any time during the Term as a result of a Termination Event (as hereinafter
defined), the Company shall pay you the full amount of the accrued but unpaid
Salary you have earned through the Date of Termination, plus a cash payment
(calculated on the basis of your rate of Salary then in effect) for all unused
vacation time which you may have accrued as of the Date of Termination. You
shall immediately relinquish the right to any other payments or benefits from
the Company under this Agreement or otherwise, except with respect to any
employee benefit plan that provides otherwise. "Termination Event" shall mean
your resignation without Good Reason or a termination by the Company for Cause.
(c) Death or Disability. If your employment with the Company
ends as a result of your death or Disability during the Term, the Company shall
pay you (or, in the event of your death, your Beneficiary) the full amount of
the accrued but unpaid Salary you have earned through the Date of Termination,
plus a cash payment (calculated on the basis of your rate of Salary then in
effect) for all unused vacation time which you may have accrued as of the Date
of Termination. In addition, the Company shall pay you the amount of any earned
but unpaid Annual Bonus for any Fiscal Year of the Company ended on or prior to
the Date of Termination. Except as otherwise
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provided in this Section 4(c), the provisions of any employee benefit plan in
which you are a participant, as of the Date of Termination, you (or in the event
of your death, your Beneficiary) will relinquish the right to any additional
payments or benefits from the Company under this Agreement or otherwise. For
purposes of this Agreement, "Beneficiary" shall mean the person or persons
designated by you in writing to receive any benefits payable to you hereunder in
the event of your death or, if no such persons are so designated, your estate.
No Beneficiary designation shall be effective unless it is in writing and
received by the Company prior to the date of your death.
(d) Date and Notice of Termination. Any termination of your
employment by the Company or by you during the Term shall be communicated in
writing by a notice of termination to the other party hereto (the "Notice of
Termination"). The Notice of Termination shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of your
employment under the provision so indicated. The Date of Termination shall be
determined as follows: (i) if your employment is terminated for Disability,
thirty (30) days after a Notice of Termination is given (provided that you shall
not have returned to the full-time performance of your duties during such
thirty-day period); (ii) if your employment is terminated by the Company in an
Involuntary Termination, the date specified in the Notice of Termination (or if
no date is specified in the Notice of Termination, the date the Notice of
Termination is delivered to you); (iii) if your employment is terminated by the
Company for Cause, the later of (x) the date specified in the Notice of
Termination, and (y) the expiration of the applicable period set forth in the
definition of Cause during which you may effect a cure or meet with the Board if
such period expires without such cure being effected by you and without a
reversal on the part of the Board regarding its decision to terminate you for
Cause; (iv) if you resign your employment hereunder on the basis of Involuntary
Termination for Good Reason, the Date of Termination shall be the later of (x)
the date specified in the Notice of Termination, and (y) the expiration of the
applicable cure period set forth in the definition of Good Reason if such period
expires without such cure being effected by the Company; (v) the Date of
Termination in the event of your resignation of employment other than for Good
Reason shall be the date set forth in the Notice of Termination, which shall be
no earlier than thirty (30) days after the date such notice is received by the
Company; and (vi) the Date of Termination in the event of your death shall be
the date of your death.
(f) Reduced Severance Amount. Any Severance Amount payable
under the Agreement will be reduced by any compensation or benefits you earn in
connection with any employment by another employer during the Severance Period.
You agree promptly
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to provide the Company with any evidence of amounts received in connection with
such other employment which the Company shall reasonably request.
(g) Breach of Protective Covenants. If, following the Date of
Termination, you breach any of the provisions of Section 5 below, in addition to
any other remedies the Company may have, you shall not be eligible, as of the
date of such breach, for any Severance Amount, and all obligations of the
Company to pay any Severance Amount hereunder shall thereupon cease.
5. Protective Covenants
(a) No Competing Employment. During the Restricted Period (as
hereinafter defined), you shall not, without the prior written consent of the
Board, directly or indirectly, whether as owner, consultant, employee, partner,
venturer, or agent, through stock ownership, investment of capital, lending of
money or property, rendering of services, or otherwise (except ownership of less
than 1% of the number of shares outstanding of any securities which are publicly
traded), compete with the retail supermarket business, or any other business
contributing at least 15% of the consolidated revenues, of the company or any
parent or subsidiary of the Company (such businesses are hereinafter referred to
as the "Business"), or assist, become interested in or be connected with any
corporation, firm, partnership, joint venture, sole proprietorship or other
entity which so competes with the Business, except for the aforementioned 1%
ownership of publicly traded securities. The restrictions imposed by this
Section 5(a) shall not apply to any geographic area in which the Company, its
parent or subsidiaries are not engaged in the Business at the Date of
Termination. "Restricted Period" shall mean the period beginning on the
Effective Date and ending on the last day of the Term.
(b) No Solicitation of Clients, Customers or Employees. During
the Restricted Period, you shall not, without the prior written consent of the
Board, directly or indirectly (i) solicit in competition with the Business any
person who at any time either during the Term or during the Restricted Period is
or becomes a customer or a client of the Business; (ii) solicit, induce or
attempt to persuade any employee or independent contractor of the Business, to
terminate his or her employment or independent contractor relationship in order
to enter into any other employment or engage in other business or livelihood;
(iii) solicit, influence, or attempt to influence any provider of services or
products to the Business, including, without limitation, any person or entity
which has been a provider of services or products to the Business during the
Executive's employment with the Company, or take any action detrimental to the
existing or prospective relationships between the Business and any provider of
services, or (iv) assist
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or encourage any other person in carrying out, directly or indirectly, any
activity that would be prohibited by the provisions of this Section 5(b) if such
activity were carried out by you, and, in particular, you agree that you will
not, directly or indirectly, induce any employee of the Business to carry out
any such activity.
(c) Confidentiality. You recognize that the services you
perform for the Company are special, unique and extraordinary in that you may
acquire confidential information and trade secrets concerning the operations of
the Company, its parent and subsidiaries, the use or disclosure of which could
cause the Company substantial loss and damages which could not be readily
calculated, and for which no remedy at law would be adequate. Accordingly, you
covenant and agree with the Company that you will not at any time, except in
performance of your obligations to the Company hereunder, or with the prior
written consent of the Board, directly or indirectly, disclose any secret or
confidential information that you may learn by reason of your association with
the Company. The term "confidential information" includes, without limitation,
information not previously disclosed to the public or to the trade by the
Company's management with respect to the Company or any of its parent's or
subsidiaries' business plans, prospects and opportunities, the identity of
clients, suppliers or customers, information regarding operational strengths and
weaknesses, trade secrets, know-how and other intellectual property, systems,
procedures, manuals, confidential reports, product price lists, marketing plans
or strategies, and financial information. You understand and agree that the
rights and obligations set forth in this Section 5(c) are perpetual and, in any
case, shall extend beyond the Restricted Period and the Severance Period.
(d) Injunctive Relief. Without limiting the remedies available
to the Company, you acknowledge that a breach of any of the covenants contained
in this Section 5 may result in material irreparable injury to the Company for
which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of such a
breach or threat thereof, the Company shall be entitled to obtain a temporary
restraining order or a preliminary or permanent injunction restraining you from
engaging in activities prohibited by this Section 5 or such other relief as may
be required to specifically enforce any of the covenants of this Section 5.
6. Successors; Binding Agreement
(a) Assumption by Successor. The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business or assets of the Company
expressly to assume and to agree to perform this Agreement in the same manner
and to the same extent that the
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Company would be required to perform it if no such succession had taken place;
provided, however, that no such assumption shall relieve the Company of its
obligations hereunder.
(b) Enforceability; Beneficiaries. This Agreement shall be
binding upon and inure to the benefit of you (and your personal representatives
and heirs) and the Company and any organization which succeeds to substantially
all of the business or assets of the Company, whether by means of merger,
consolidation, acquisition of all or substantially all of the assets of the
Company or otherwise.
7. Notice. For the purpose of this Agreement, notices and all other
communications provided for in this 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, Pathmark Stores, Inc., 301
Blair Road, P.O. Box 5301, Woodbridge, New Jersey 07095-0915, telecopier number
(908) 499-3100, with a copy to the General Counsel of the Company, at the same
address, telecopier number (908) 499-3460, or to you at the address set forth on
the first page of this 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.
8. Miscellaneous.
(a) No Rights to Continued Employment. Neither this 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.
(b) Amendments, Waivers, Etc. No provision of this 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 Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provision or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly set
forth in this Agreement, and this Agreement shall supersede all prior
agreements, negotiations, correspondence, undertakings and communications of the
parties, oral or written, with respect to the subject matter hereof.
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(c) Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
(d) Representation. You hereby represent and warrant to the
Company that the execution and delivery by you of this Agreement to the Company
will not breach the terms of any contract, agreement or understanding to which
you are a party. You further acknowledge and agree that a breach of this
representation by you shall render this Agreement void ab initio and of no
further force and effect.
(e) Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
(f) Withholding. Amounts paid to you hereunder shall be
subject to all applicable federal, state and local wage withholdings.
(g) Source of Payments. All payments provided under this
Agreement (other than payments made pursuant to a plan which provides otherwise
or as otherwise expressly provided hereunder) shall be paid in cash from the
general funds of the Company, and no special or separate fund shall be
established, and no other segregation of assets made, to assure payment. You
will have no right, title or interest whatsoever in or to any investments which
the Company may make to aid it in meeting its obligations hereunder. To the
extent that any person acquires a right to receive payments from the Company
hereunder, such right shall be no greater than the right of an unsecured
creditor of the Company.
(h) Headings. The headings contained in this Agreement are
intended solely for convenience of reference and shall not affect the rights of
the parties to this Agreement.
(i) Governing Law. The validity, interpretation, construction
and performance of this Agreement shall be governed by the laws of the State of
New Jersey applicable to contracts entered into and performed in such state.
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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: /s/James Donald
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[Name] James Donald
[Title] President
Agreed to as of this 4th day of
April , 1997.
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/s/John Sheehan
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