Pathmark Stores, Inc. Form 8-K





Exhibit 10.2 





Pathmark Stores, Inc.

200 Milik Street

Carteret, New Jersey 07008


December 14, 2005



Mr. Kenneth Martindale  
5 South 500 West, Unit 1115  
Salt Lake City, Utah  84101


Award Agreement


Dear Mr. Martindale:


          Pursuant to and subject to
the terms and conditions set forth in this award agreement (“Award
Agreement”), Pathmark Stores, Inc. (the “Company”) hereby
grants you, effective as of the Effective Date, a stock option (“Stock
Option”) to purchase the number of shares of Common Stock set forth below. Terms
not defined in this Award Agreement, but defined in the Employment Agreement dated
December 14, 2005, between you and the Company (the “Employment
Agreement”), shall have the meaning set forth in the Employment Agreement.


          1. Stock Option.
Your Stock Option shall entitle you to purchase an aggregate of 500,000 shares of Common
Stock (“Option Shares”) at an exercise price per share (“Exercise
Price”) equal to the Fair Market Value. The Stock Option is granted without the
approval of the Company’s stockholders in reliance on Nasdaq Marketplace Rule
4350(i)(1)(A)(iv) and shall not be subject to the Company’s 2000 Employee Equity
Plan. The Stock Option is a not an “incentive stock option” within the meaning
of Section 422 of the Code. The number of Option Shares and the Exercise Price shall be
subject to adjustment as provided in Section 8 below. The Company shall reserve for
issuance a sufficient number of shares of Common Stock to permit exercise of the Stock
Option in full.


          2. Vesting. Subject
to the other terms and conditions of the Award Agreement and your continued employment
with the Company on the applicable vesting date, your Stock Option shall vest and become
exercisable in two annual installments of 166,667 Option Shares each on each of the first
two anniversaries of the Effective Date, and one installment of 166,666 Option Shares on
the third anniversary of the Effective Date. Vesting of your Stock Option may be
accelerated in accordance with the Section 5 below.









          3. Compliance with
Securities Laws.


          (a) The exercise of your
Stock Option must comply with all applicable laws and regulations governing the Stock
Option, and the Stock Option may not be exercised if the Company reasonably determines in
good faith that the exercise would not be in material compliance with such laws and
regulations.


          (b) The Company represents
and warrants to you that on or prior to the Effective Date all actions necessary to exempt
the grant of your Stock Option under Rule 16b-3(d) under the Exchange Act have been taken
by the Company.


          4. Option Term.
Subject to the other terms and conditions of this Award Agreement, the term of your Stock
Option shall commence on the Grant Date and shall expire on the tenth anniversary thereof
(the “Expiration Date”).


          5. Termination of
Employment; Change in Control.


          (a) In the event that your
employment with the Company is terminated by reason of your Involuntary Termination,
except as otherwise expressly provided in this Section 5, your Stock Option shall be
considered fully vested and shall remain exercisable until the third anniversary of the
Date of Termination.


In the event the Date of Termination occurs (A) on or after the third
anniversary of the Effective Date, (B) on or after a Change in Control, or
(C) within six months prior to a Change in Control and such Involuntary
Termination prior to the Change in Control was requested by a party to, or was
otherwise in connection with, the Change in Control, your Stock Option shall be
fully vested and shall remain exercisable (to the extent not previously
exercised) until the third anniversary of the Date of Termination.


In the event that you resign from your employment with the Company without
Good Reason and the Date of Termination is prior to the third anniversary of the
Effective Date, the vested portion of your Stock Option shall remain exercisable
until the end of the 90-day period following the Date of Termination and the
unvested portion of your Stock Option shall be forfeited. In the event that your
employment with the Company is terminated by reason of your death or Disability
and the Date of Termination is prior to the third anniversary of the Effective
Date, except as otherwise expressly provided in this Section 5, the vested
portion of your Stock Option on the Date of Termination shall remain exercisable
until the third anniversary of the Date of Termination, and the unvested portion
of your Stock Option shall be forfeited. In the event that your employment with
the Company is terminated for any reason other than your termination for Cause
and the Date of Termination is on or following the third anniversary of the
Effective Date, your Stock Option shall be fully vested and, except as otherwise
expressly provided in this Section 5, shall remain exercisable until the third
anniversary of the Date of Termination. Upon termination of your employment by
the Company for Cause, the vested and unvested portion of your Stock Option
shall be forfeited.








          (b) In the event of a
Change in Control, your Stock Option shall become fully vested immediately prior thereto;
provided, however, that the Compensation Committee of the Board
(the “Committee”) may elect in its sole discretion prior to a Change
in Control not to vest your Stock Option in connection with such Change in Control if
(i) it reasonably determines in good faith that not accelerating the unvested portion
of your Stock Option is necessary or advisable to consummate the Change in Control,
(ii) immediately following the Change in Control you are the Co-President and Chief
Marketing and Merchandising Officer of the surviving corporation in the Change in Control,
which surviving corporation is at least comparable in size to the Company immediately
prior to the Change in Control and any related transactions, (iii) such surviving
corporation has a publicly traded class of common stock and (iv) either (A) the
Company is the surviving corporation in the Change in Control or (B) your Stock
Option is assumed or replaced by such surviving corporation; provided further that
if the Committee so elects not to vest the unvested portion of your Stock Option in
connection with a Change in Control, subject to the other terms and conditions of this
Award Agreement and your continued employment with the Company on the applicable vesting
date, the portion of your Stock Option that is unvested after the date of the Change in
Control shall become fully vested on the six-month anniversary of the Change in Control
or, if earlier, in accordance with the other, applicable vesting provisions of this Award
Agreement.


          (c) In the event of a
transaction described in clause (vii) of the definition of Good Reason in the Employment
Agreement (whether or not Yucaipa has a controlling interest within the meaning of such
clause), your Stock Option shall become fully vested immediately prior to such
transaction.


          (d) Notwithstanding
anything in this Award Agreement or the Employment Agreement to the contrary, in the event
of any merger or consolidation of the Company or other transaction following which either
the Company is not the surviving corporation or the Common Stock ceases to be publicly
traded, the Committee shall provide for:


      (i)  the
substitution by the surviving corporation  or the Company’s parent corporation for
your outstanding Stock Option of  stock option(s) on the same terms as your Stock Option,
and which preserve(s)  the economic value to you of your outstanding Stock Option; or




      (ii)  where
all of the holders of the then  outstanding Common Stock (other than Yucaipa) receive
payment in cash or cash  equivalents in consideration for such Common Stock, the
cancellation of your  Stock Option upon payment to you of a per share amount in cash or
cash  equivalents equal to (A) the highest price paid for a share of Common Stock
in such transaction, minus (B) the exercise price of your Stock Option.




          6. Exercise of Stock
Option. You may exercise your Stock Option, to the extent vested, in whole or in part
during its term by delivering a written notice of exercise (in a form designated by or
otherwise reasonably acceptable to the Company) together with the exercise price to the
Secretary of the Company, or to such other person as the Company may designate, during
regular business hours, together with such additional documents as the Company may then
require. The Stock Option may be exercised for whole shares of Common Stock only. Payment
of the exercise price is due in full upon exercise of all or any part of your Stock
Option. You may elect to make payment of the exercise price to the Company (i) by
cash or check, (ii) by delivery of other shares of Common Stock with a value equal to the
exercise price that, in the case of shares acquired previously from the Company, have been
owned by you for at least six months on the date of delivery, or (iii) a combination
of any of (i) and (ii). At your discretion, subject to reasonable procedures adopted by
the Committee, the Stock Option may also be exercised on a cashless basis through a
broker, whereby irrevocable instructions are delivered to the broker to sell that number
of shares equal in value to the aggregate Exercise Price of the Option Shares with respect
to which the Stock Option is then being exercised and pay the proceeds to the Company. As
soon as reasonably practicable after receipt of such notice of exercise and full payment
of the applicable Exercise Price and any required tax withholding, consistent with the
regular settlement policy and procedures of the Company, the Company shall issue or
transfer to you the number of Option Shares with respect to which your Stock Option is
exercised, less any Option Shares withheld in accordance with Section 10 below.








          7. Transferability.
Your Stock Option is not transferable by you otherwise than (i) to or from a
Permitted Transferee, (ii) to a designated beneficiary upon death or (iii) by
will or the laws of descent and distribution, and is exercisable during your lifetime only
by you or a Permitted Transferee (or, in the event of your or a Permitted
Transferee’s adjudicated incapacity, your or Permitted Transferee’s personal
representative). No other assignment or transfer of all or any part of the Stock Option,
or of the rights represented thereby, whether voluntary or involuntary, by operation of
law or otherwise, shall vest in the assignee or transferee any interest or right herein
whatsoever and no assignment or transfer of all or any part of the Stock Option to a
Permitted Transferee shall be given effect unless such Permitted Transferee acknowledges
in a writing satisfactory to the Company that the Stock Option (and any Option Shares
acquired pursuant thereto) remains subject to the provisions of this Award Agreement and
the Employment Agreement. For purposes of this Award Agreement, “Permitted
Transferee” shall mean (i) any member of your immediate family and (ii) any
living trust or other entity established by your or any Permitted Transferee for estate
planning purposes. By way of clarification, transfers of the Stock Option shall be
permitted from any Permitted Transferee to you or between Permitted Transferees.


          8. Adjustments. In
the event of any change in the outstanding Common Stock by reason of any stock dividend or
split, reverse stock split, recapitalization, reorganization, merger, consolidation,
spin-off, combination, exchange of shares or other corporate change, or any distributions
to common shareholders other than regular cash dividends, the Committee shall make such
substitutions in or adjustments to the number and/or kind of shares or Option Shares or
other property subject to, and the Exercise Price of, your Stock Option as the Committee
shall reasonably determine in good faith to be equitable under the circumstances of such
change to maintain the benefit to you of your Stock Option.


          9. Not a Service
Contract. Your Stock Option is not an employment or service contract, and nothing
therein shall be deemed to create in any way whatsoever any obligation on your part to
continue in the employ of the Company or one of its subsidiaries, or of the Company or any
of its subsidiaries to continue your employment. In addition, nothing herein shall
obligate the Company or any of its subsidiaries, their respective shareholders, Boards of
Directors, officers or employees to continue any relationship that you might have as a
director, advisor or consultant for the Company or its subsidiaries.








          10. Withholding. You
may satisfy any applicable tax withholding obligation relating to the exercise or
acquisition of Common Stock under your Stock Option by any of the following means or by a
combination of such means: (a) tendering a cash payment; (b) authorizing the
Company to withhold shares from the shares of Common Stock otherwise deliverable to you as
a result of the exercise of your Stock Option (but no more than the minimum required
withholding liability); or (c) delivering to the Company owned and unencumbered
shares of Common Stock that, in the case of shares acquired previously from the Company,
you have owned for at least six months prior to such delivery.


          11. Notices. Any
notices in connection herewith shall be given in the manner contemplated under the
Employment Agreement.


          12. Employment
Agreement. Your Stock Option is subject to and conditional in all respects on the
effectiveness of the Employment Agreement and shall be void ab initio and without
force and effect in the event that any condition to such effectiveness is not met. In the
event of any conflict between the provisions of this Award Agreement and those of the
Employment Agreement, the provisions of this Award Agreement shall control.


          13. Governing Law.
The validity, interpretation, construction and performance of this Award Agreement shall
be governed by the laws of the State of Delaware applicable to contracts entered into and
performed in such state.


          14. Section 409A.
Your Stock Option is intended not to provide for a “deferral of compensation”
within the meaning of Section 409A, and this Award Agreement shall be interpreted
consistent with such intent. If any provision of this Award Agreement causes your Stock
Option to be subject to the requirements of Section 409A, or could otherwise cause you to
be subject to tax or the interest and penalties under Section 409A, such provision shall
be modified to maintain, to the maximum extent practicable, the original intent of the
applicable provision without violating the requirements of Section 409A and the Company
agrees to modify such provisions in such manner.


          Please indicate your
acceptance of the foregoing by signing and dating where indicated below.





 Sincerely,


/s/ John T. Standley


John T. Standley

Chief Executive Officer





Acknowledged and Agreed as of this 14th day of December, 2005.




/s/ Kenneth Martindale

Kenneth Martindale