Exhibit 10.25

 

 

Execution Copy

 

 

Pathmark Stores, Inc.

 

February 1, 2000

 

Marc Strassler

c/o Pathmark Stores, Inc.

200 Milik Street

Carteret, New Jersey 07008

 

Sale and Retention Bonus Agreement

 

Dear Marc:

 

The following sets forth the agreement between you and Pathmark Stores, Inc., a
corporation organized under the laws of Delaware (the “Company”), regarding the
terms of the sale bonus (the “Sale Bonus”) and the retention bonus (the
“Retention 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 or among you and the Company Group (as defined below), including without
limitation the employment agreement between you and the Company, dated February
1, 1999 (the “Employment Agreement”), and the Retention Bonus and the Sale Bonus
are in addition to, and not in substitution for, any other pay or benefits to
which you are eligible to earn from the Company Group.

 

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 Group or its security
holders in connection with a Change in Control, plus the amount of all
indebtedness of the Company Group 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. 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.

 

“Beneficial Owner” shall have the meaning given to such term in Rule 13D-3 under
the Securities and Exchange Act of 1934, as amended.

 

“Board” shall mean the Board of Directors of Holdings.

 

“Change in Control” shall mean the consummation of a Triggering Event.

 

“Company” shall mean Pathmark Stores, Inc.

“Company Group” shall mean, individually and as a group, Holdings, the Company,
PTK Holdings, Inc. and Supermarkets General Holdings Corporation, and any
successors thereto.

 

“Effective Date” shall mean February 1, 2000.

 

“Holdings” shall mean SMG-II Holdings Corporation, a corporation organized under
the laws of the State of Delaware.

 

“Independent Third Party” shall mean any entity other than a member of the
Company Group or any of the Stockholders or any entity controlled by or under
common control with any of the Stockholders or the Company Group.

 

“Payment Date” shall mean July 31, 2000.

 

“Purchaser” shall mean any Independent Third Party that engages in a Change in
Control.

 

“Sellers” shall mean selling equity holders, which holders may be at the level
of any of the Company Group.

 

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);

 

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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.

 

2.            Term. The term of this Letter Agreement (the “Term”) shall
commence on the Effective Date and shall continue until the later of (a) first
anniversary of the Effective Date if a Triggering Event does not occur prior to
such anniversary or (b) in the event that a Triggering Event occurs prior to the
first anniversary of the Effective Date, either the date of a Change in Control
that occurs subsequent to a corresponding Triggering Event or the date the
Triggering Event is definitively canceled or otherwise becomes void.

 

 

3.

Retention Bonus.

 

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 Retention Bonus equal to the annual rate of
your base salary, as in effect on the Payment Date multiplied by 0.75. The
Company will pay the Retention Bonus to you in a lump sum cash amount as soon as
practicable after the Payment Date but in no event more than thirty days
thereafter.

 

 

4.

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 0.0010 multiplied by the Aggregate
Consideration.

 

(b)          Payment of Sales 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.

 

(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 4(b)(ii).

 

(A)         In the event that the Change in Control transaction includes a
Post-Closing Adjustment described in Section 4(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 0.0010 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

 

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Consideration is paid to the Sellers, the Company shall pay you a portion of the
Aggregate Consideration multiplied by 0.0010.

 

(B)         In the event that the Change in Control transaction is a
Post-Closing Adjustment described in Section 4(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 4(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 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 Group and all other
interested parties.

 

(d)          Single Sales Bonus. The parties hereto acknowledge and agree that
you shall be entitled to receive only one Sale Bonus under this Letter Agreement
which shall become payable in connection with the first Triggering Event that
occurs during the Term and that in the event any additional Triggering Event
occurs during the Term, you will not be entitled to any Sale Bonus as a
consequence thereof.

 

 

5.

Effect of Termination of Employment.

 

(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 Payment 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.

 

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(b)          Other Termination. In the event that your employment terminates for
any reason other than an Involuntary Termination prior to the Payment Date, you
shall forfeit your right to the Retention Bonus in its entirety. Similarly, 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.

 

6.            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, Pathmark Stores,
Inc., 200 Milik Street, Carteret, New Jersey 07008, telecopier: (732) 499-3460,
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.

 

7.            Reduction of Payments if Reduction Would Result in Greater
After-Tax Amount. Notwithstanding anything herein to the contrary, if the
payment of the Retention Bonus or the Sale Bonus (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 net after-tax
amount of the parachute payment is less than the net after-tax amount 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 and/or Retention Bonus constituting the parachute
payment shall be reduced to an amount that will equal three times your base
amount, less $1.00.

 

 

8.

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 5 above, for any reason, with or without Cause.

 

(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.

 

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(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)           Stockholder Approval. This Letter Agreement shall become effective
only if it is approved by a majority of seventy-five percent of the stockholders
of Holdings, Supermarkets General Holdings Corporation, PTK Holdings, Inc. and
the Company within one-hundred and eighty days after date first shown above. In
the event that such stockholders do not approve this Agreement on or before the
one-hundred and eightieth day after the date of this Letter Agreement, it shall
automatically lapse and become void.

 

(g)          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,

 

 

 

PATHMARK STORES, INC.

 

 

 

 

 

By

/s/ James L. Donald

 

 

Name:

JAMES L. DONALD

 

 

Title:

President

 

 

Agreed to as of this 4th day of Feb., 2000.

 

 

/s/ Marc Strassler

Marc Strassler

 

 

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