Document:

Exhibit 10.1

 

AMENDED AND RESTATED STOCKHOLDERS’ AGREEMENT

 

Dated as
of August 23, 2005

 

among

 

Pathmark Stores, Inc.

 

and

 

The
Investors Identified on the Signature Pages Hereto

 

 

Table of Contents

 

	
  ARTICLE 1

  CERTAIN DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 1.01

  	
  Certain Definitions

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2

  CORPORATE GOVERNANCE

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2.01

  	
  Composition of the Board

  	
   

  
	
  SECTION 2.02

  	
  Vacancies

  	
   

  
	
  SECTION 2.03

  	
  Committees

  	
   

  
	
  SECTION 2.04

  	
  Certificate of Incorporation and By-Laws to
  Be Consistent

  	
   

  
	
  SECTION 2.05

  	
  Approval of the Investor Group Required for
  Certain Actions

  	
   

  
	
  SECTION 2.06

  	
  Approval of Independent Directors Required
  for Certain Actions

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3

  VOTING OF SHARES

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 3.01

  	
  Agreement with Respect to Voting of Common
  Stock

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4

  STANDSTILL, ACQUISITIONS

  OF SECURITIES AND OTHER MATTERS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 4.01

  	
  Acquisitions of Common Stock

  	
   

  
	
  SECTION 4.02

  	
  No Participation in a Group or Solicitation
  of Proxies

  	
   

  
	
  SECTION 4.03

  	
  Rights to Purchase New Securities

  	
   

  
	
  SECTION 4.04

  	
  Takeover Proposals by the Investor Group

  	
   

  
	
  SECTION 4.05

  	
  Affiliate Transactions

  	
   

  
	
  SECTION 4.06

  	
  Termination of Standstill Provisions

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5

  RESTRICTIONS ON TRANSFERABILITY OF SECURITIES

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 5.01

  	
  General

  	
   

  
	
  SECTION 5.02

  	
  Improper Sale or Encumbrance

  	
   

  
	
  SECTION 5.03

  	
  Restrictive Legends

  	
   

  
	
  SECTION 5.04

  	
  Sales of Significant Interests

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6

  CORPORATE OPPORTUNITIES AND RELATED MATTERS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 6.01

  	
  Similar Activities or Lines of Business

  	
   

  

 

i

 

	
  ARTICLE 7

  REPRESENTATIONS AND WARRANTIES

  
	
   

  	
   

  	
   

  
	
  SECTION 7.01

  	
  Representations of the Company

  	
   

  
	
  SECTION 7.02

  	
  Representations of the Members of the
  Investor Group

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8

  CONFIDENTIALITY

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 8.01

  	
  Confidentiality

  	
   

  
	
  SECTION 8.02

  	
  Furnishing of Information

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 9

  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9.01

  	
  Termination

  	
   

  
	
  SECTION 9.02

  	
  Notices

  	
   

  
	
  SECTION 9.03

  	
  No Third Party Beneficiaries

  	
   

  
	
  SECTION 9.04

  	
  Expenses

  	
   

  
	
  SECTION 9.05

  	
  Governing Law

  	
   

  
	
  SECTION 9.06

  	
  Waiver of Jury Trial

  	
   

  
	
  SECTION 9.07

  	
  Specific Performance

  	
   

  
	
  SECTION 9.08

  	
  Counterparts

  	
   

  
	
  SECTION 9.09

  	
  Entire Agreement

  	
   

  
	
  SECTION 9.10

  	
  Assignment

  	
   

  
	
  SECTION 9.11

  	
  Amendment

  	
   

  
	
  SECTION 9.12

  	
  Waiver

  	
   

  
	
  SECTION 9.13

  	
  Severability

  	
   

  
	
  SECTION 9.14

  	
  No Partnership

  	
   

  
	
  SECTION 9.15

  	
  Public Announcements

  	
   

  
	
  SECTION 9.16

  	
  Cumulative Remedies

  	
   

  
	
  SECTION 9.17

  	
  Interpretation; Headings

  	
   

  
	
  SECTION 9.18

  	
  Construction

  	
   

  
	
  SECTION 9.19

  	
  Director Duties

  	
   

  
	
  SECTION 9.20

  	
  Investors Rights

  	
   

  

 

ii

 

STOCKHOLDERS’ AGREEMENT

 

This Amended and Restated Stockholders’ Agreement
(this “Agreement”) is made as of August 23, 2005, among Pathmark
Stores, Inc., a Delaware corporation (the “Company”), and the
Investors identified on the signature pages hereto (collectively, the “Investors”).

 

RECITALS

 

WHEREAS, the Company and the Investors previously
entered into the Securities Purchase Agreement dated as of March 23, 2005 (the
“Securities Purchase Agreement”) and, in connection therewith, entered
into the Stockholders’ Agreement dated as of June 9, 2005 (the “Original
Stockholders’ Agreement”);

 

WHEREAS, the consummation of the transactions
contemplated by the Securities Purchase Agreement has resulted in the Investors
owning an aggregate of 20,000,000 investment units (“Units”), consisting
of an aggregate of 20,000,000 shares (the “Shares”) of common stock, par
value $0.01 per share, of the Company (the “Common Stock”), 10,060,000 Series A
warrants (the “Series A Investor Warrants”) to purchase additional
shares of Common Stock and 15,046,350 Series B warrants (the “Series B
Investor Warrants”; together with the Series A Investor Warrants, the “Investor
Warrants”) to purchase additional shares of Common Stock (the Units, Shares
and the Investor Warrants are collectively referred to herein as the “Purchased
Securities”); and

 

WHEREAS, the Company and the Investors wish to amend
and restate the Original Stockholders’ Agreement to, among other things, change
the authorized composition of the Company’s Board of Directors (the “Board”)
in order to allow the Company’s Chief Executive Officer to serve as a member of
the Board.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and
the mutual agreements and covenants hereinafter set forth, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:

 

ARTICLE 1

CERTAIN DEFINITIONS

 

SECTION 1.01                    Certain Definitions.  As used in this Agreement, the following
terms shall have the following respective meanings:

 

“affiliate” means, with respect to a specified person,
a person that directly, or indirectly through one or more intermediaries, controls,
is controlled by, or is under common control with, such specified person.

 

“beneficial owner” (and the related terms “beneficially
owned”, “beneficial owner” and “beneficial ownership”) has
the meaning ascribed to such term in Rule 13d-3 under the Exchange
Act.

 

 

“By-Laws” means the Amended and Restated By-Laws
of the Company, effective April 16, 2004, as they may hereafter be amended
from time to time.

 

“Cash Equivalents” means (a) marketable
direct obligations issued or unconditionally guaranteed by the United States
government or issued by any agency thereof and backed by the full faith and
credit of the United States, in each case maturing within one year from the
date of acquisition thereof, (b) marketable direct obligations issued by
any state of the United States or any political subdivision of any such state
or any public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having the highest rating
obtainable from either Standard & Poor’s Ratings Services or Moody’s
Investors Service, Inc., (c) commercial paper maturing not more than
one year from the date of issuance thereof and, at the time of acquisition,
having the highest rating obtainable from either Standard & Poor’s
Ratings Services or Moody’s Investors Service, Inc., (d) certificates
of deposit or bankers’ acceptances maturing within one year from the date of
acquisition thereof issued by any bank organized under the Laws of the United
States or any state thereof having at the date of acquisition thereof combined
capital and surplus of not less than $250,000,000, (e) demand deposit
accounts maintained with any bank organized under the Laws of the United States
or any state thereof so long as the amount maintained with any individual bank
is less than or equal to $100,000 and is insured by the Federal Deposit
Insurance Corporation and (f) investments in money market funds
substantially all of whose assets are invested in the types of assets described
in clauses (a) through (e) above.

 

“Certificate of Incorporation” means the Amended
and Restated Certificate of Incorporation of the Company, dated as of September 19,
2000, as it may hereafter be amended from time to time.

 

“Closing” means the closing on June 9, 2005 of
the issuance, purchase and sale of the Units pursuant to the Securities
Purchase Agreement.

 

“Commission” means the Securities and Exchange
Commission.

 

“Confidentiality Agreement” means the
Confidentiality Agreement, dated as of January 7, 2005, between an affiliate
of the Investors and the Company.

 

“control” (including the terms “controlled
by” and “under common control with”) means the possession, directly
or indirectly, or as trustee or executor, of the power to direct or cause the
direction of the management and policies of a person, whether through the ownership
of voting securities, as trustee or executor, by contract, credit agreement or
otherwise, including, without limitation, the ownership, directly or
indirectly, of securities having the power to elect a majority of the board of
directors or similar body governing the affairs of such person.

 

“Discriminatory Transaction”  means any corporate action that would (a )
impose material limitations on the legal rights of any member of the Investor
Group as a holder of a class of voting stock, including any action that would
impose material restrictions that are based on the size of security holding, any
business in which a security holder is engaged or any other considerations
applicable to any member of the

 

2

 

Investor Group and not to holders of the same class of
voting stock generally, or (b) deny any material benefit to any member of
the Investor Group proportionately as a holder of any class of voting stock
that is made available to other holders of that same class of voting stock
generally.

 

“Encumbrance” (including correlative terms such
as “Encumber”) means any security interest, pledge, mortgage, lien,
charge, adverse claim of ownership or use, hypothecation, violation, condition
or restriction of any kind or other encumbrance of any kind.

 

“Exchange Act” means the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated
thereunder.

 

“Fair Market Value” means, for any applicable
measurement date, the closing price of the Common Stock on Nasdaq or, in the
event that trading hours on Nasdaq are extended past 4:00 p.m. New York
Time, the last sale price at 4:00 p.m. New York Time.

 

“Fully Diluted Basis” means, in respect of the
Common Stock or warrants to purchase shares of Common Stock, the method of
calculating the number of shares of Common Stock outstanding on an applicable
measurement date, pursuant to which the following shares shall be deemed to be
outstanding:  (i) all shares of
Common Stock outstanding on such measurement date and (ii) all shares of
Common Stock issuable pursuant to any stock options of the Company or warrants
outstanding at such time which are or may become exercisable (assuming all
other conditions to or limitations on such exercise were satisfied) for shares
of Common Stock at an exercise price at or below the then current Fair Market
Value of the Common Stock.

 

“Geographic Region” means the States of Maine,
New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut, New York, New
Jersey, Pennsylvania, Delaware, Maryland and Virginia and the District of
Columbia.

 

“group” means a “group” within the meaning of Section 13(d)(3) of
the Exchange Act.

 

“Independence Standard” means the standard of
independence necessary for a director to qualify as an “Independent Director”
as such term (or any replacement term) is used under the rules and listing
standards of Nasdaq as such rules and listing standards may be amended
from time to time.

 

“Investor Designated Director” means such
person as is so designated by the Investors prior to the Closing, or the Investor
Group after the Closing, from time to time in accordance with this Agreement,
to serve as a member of the Board and who is elected or appointed to serve as a
member of the Board pursuant to Section 2.01 hereof.

 

“Investor Group” means the Investors and any
Permitted Transferee of the Investors that has become a party to this Agreement
in accordance with the provisions of Section 5.01(c) hereof.

 

“Law” means any statute, law, ordinance,
regulation, rule, code, executive order, injunction, judgment, decree or other
order issued or promulgated by any national, supranational, state, federal,
provincial, local or municipal government or any administrative or regulatory
body with authority therefrom with jurisdiction over the Company or any member
of the Investor Group, as the case may be (including any requirements under the
Exchange Act).

 

3

 

“Management Agreement” means the Management
Agreement dated as of March 23, 2005, between the Company and an affiliate
of the Investors, as it may hereafter be amended from time to time.

 

“Marketable Securities” means securities that
are (a) (i) securities of or other interests in any person that are
traded on a United States national securities exchange or quoted on the Nasdaq
Stock Market or (ii) debt securities on market terms of an issuer that has
debt or equity securities that are so traded or so reported on and in which
Marketable Securities a nationally recognized securities firm has agreed to
make a market, and (b) not subject to restrictions on transfer as a result
of any applicable contractual provisions or the provisions of the Securities
Act or, if subject to such restrictions under the Securities Act, are also subject
to registration rights reasonably acceptable to the person receiving such
Marketable Securities as consideration in a transaction pursuant to Section 4.03.

 

“Nasdaq” means The Nasdaq Stock Market, Inc.

 

“Nasdaq Regulation” means the rules and
regulations of Nasdaq or any other applicable securities exchange on which the
Common Stock is then listed.

 

“New Securities” means any capital stock of the
Company, whether now authorized or not, and rights, options or warrants to
purchase such capital stock, and securities of any type whatsoever (including,
without limitation, convertible debt securities) that are, or may become,
convertible into or exchangeable or exercisable for capital stock of the
Company; provided that the term “New Securities”
does not include (i) capital stock or rights, options or warrants to
acquire capital stock of the Company issued to the employees, consultants,
officers or directors of the Company, or which have been reserved for issuance,
pursuant to employee stock option, stock purchase, stock bonus plan, or other
similar compensation plan or arrangement approved by the Board, (ii) securities
of the Company issued to all then-existing stockholders in connection with any
stock split, stock dividend, reclassification or recapitalization of the
Company, (iii) securities of the Company issued upon the exercise of
warrants that are outstanding as of the date of this Agreement, (iv) securities
of the Company issued in connection with a transaction of the type described in
Rule 145 under the Securities Act, and (v) securities of the Company
issued pursuant to a bona fide underwritten public offering.

 

“Permitted Transferee” means, with respect to a
specified person, any affiliate of such person, provided
that such person is not a Restricted Person.

 

“person” means any individual, corporation,
partnership, limited partnership, limited liability company, syndicate, person
(including, without limitation, a “person” or “group” within the meaning of Section 13(d)(3) of
the Exchange Act), trust, association, or entity or government, political
subdivision, agency or instrumentality of government.

 

The terms “register,” “registered” and “registration”
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and the declaration or ordering
of the effectiveness of such registration statement by the Commission.

 

4

 

“Related Agreements” means the Securities
Purchase Agreement and the Management Agreement, together with that certain Registration
Rights Agreement and that certain Warrant Agreement among the parties hereto and
dated as of the date hereof.

 

“Representative” means, as to any person, such person’s
affiliates and its and their directors, officers, employees, agents, advisors
(including, without limitation, financial advisors, counsel and accountants)
and such person’s financing sources.

 

“Restricted Person” means any person that
derives at least 20% of its consolidated revenues from the operation by it of
retail supermarkets which are located in the Geographic Region.

 

“Rule 144” means Rule 144 (or any
successor provisions) under the Securities Act.

 

“Sale” means, in respect of any Common Stock,
Investor Warrants, or any other voting capital stock, any sale, assignment,
transfer, distribution or other disposition thereof or of a participation
therein, or other conveyance of legal or beneficial interest therein, or any
short position in a security or any other action or position otherwise reducing
risk related to ownership through hedging or other derivative instruments,
whether voluntarily or by operation of Law.

 

“Securities Act” means the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder.

 

“Sell” and “Sold” means to complete a
Sale.

 

“subsidiary” or “subsidiaries” of any person
means any corporation, partnership, limited liability company, joint venture,
association or other legal entity of which such person (either alone or
together with any other subsidiary) owns, directly or indirectly, more than 50%
of the stock or other equity interests, the holders of which are generally
entitled to vote for the election of the board of directors or other governing
body of such corporation or other legal entity.

 

A “Substantial Portion” of any person means, as
of any date of determination, more than 10% of the total consolidated assets of
such person and its subsidiaries as of the end of its most recent fiscal
quarter ending prior to the date of such determination.

 

Each of the following terms is defined in the Section set
forth opposite such term:

 

	
  Term

  	
   

  	
  Section

  
	
   

  	
   

  	
   

  
	
  Agreement

  	
   

  	
  Preamble

  
	
  Board

  	
   

  	
  Recitals

  
	
  Change of Control
  Proposal

  	
   

  	
  4.04

  
	
  Common Stock

  	
   

  	
  Recitals

  

 

5

 

	
  Term

  	
   

  	
  Section

  
	
   

  	
   

  	
   

  
	
  Company

  	
   

  	
  Preamble

  
	
  Confidential
  Information

  	
   

  	
  8.01(b)

  
	
  Covered Securities

  	
   

  	
  5.01(a)

  
	
  Credit Facility

  	
   

  	
  2.05(f)

  
	
  Independent Directors

  	
   

  	
  2.01(a)

  
	
  Initial Restricted
  Period

  	
   

  	
  5.01(a)

  
	
  Investor Warrants

  	
   

  	
  Recitals

  
	
  Investors

  	
   

  	
  Preamble

  
	
  Notice of Issuance

  	
   

  	
  4.03(b)

  
	
  Original Stockholders’
  Agreement

  	
   

  	
  Recitals

  
	
  Purchased Securities

  	
   

  	
  Recitals

  
	
  Securities Purchase
  Agreement

  	
   

  	
  Recitals

  
	
  Series A Investor
  Warrants

  	
   

  	
  Recitals

  
	
  Series B Investor
  Warrants

  	
   

  	
  Recitals

  
	
  Shares

  	
   

  	
  Recitals

  
	
  Special Committee

  	
   

  	
  4.04(b)

  
	
  Subsidiary Board

  	
   

  	
  2.01(f)

  
	
  Units

  	
   

  	
  Recitals

  
	
   

  	
   

  	
   

  

 

ARTICLE 2

CORPORATE GOVERNANCE

 

SECTION 2.01                                Composition of the
Board.  (a)  The By-Laws shall
be amended to provide that the authorized number of directors comprising the
Board shall be not less than eleven nor more than twelve, unless changed in
accordance with the provisions of this Agreement and the By-Laws.  The Board shall initially be composed of (i) five
Investor Designated Directors, designated by the Investors prior to the Closing
in accordance with Section 6.08 of the Securities Purchase Agreement and Section 9.20
of this Agreement, (ii) six directors, designated by the Board prior to the
Closing in accordance with Section 6.08 of the Securities Purchase
Agreement and who are individuals who comply with the Independence Standards
(together with their successors elected in accordance with Section 2.02,
the “Independent Directors”), and (iii) one director, who shall be Chief
Executive Officer of the Company.  In the
event that, immediately after the Closing, there are less than six Independent
Directors, the vacancies shall be filled in the manner set forth in Section 2.02,
except that the individual(s) selected shall be subject to the consent of the Investor
Group, which consent shall not be unreasonably withheld.  The Investor Designated Directors and the
Independent Directors shall serve in a manner consistent with the terms of the
Certificate of Incorporation and By-Laws.

 

(b) From and after the Closing, the
parties hereto shall use all reasonable efforts under applicable Law and Nasdaq
Regulations to cause there to be (i) so long as the Investor
Group beneficially owns 30% or more of the Common Stock, a number of Investor
Designated Directors that is one less than the authorized number of Independent
Directors; (ii) so long as the Investor Group beneficially
owns less than 30% but 20% or more of the Common Stock, a number of Investor
Designated Directors that is two less than the authorized number of Independent
Directors;

 

6

 

and
(iii) so long as the Investor Group beneficially
owns less than 20% but 10% or more of the Common Stock, a number of Investor
Designated Directors that is three less than the authorized number of
Independent Directors.  In the event
that, at any time, the number of Investor Designated Directors then in office
exceeds the number set forth in the preceding sentence, at the request of the
majority of the Independent Directors then in office, an appropriate number of Investor
Designated Directors shall resign from office. 
In the event the Investor Group beneficially
owns less than 10% of the Common Stock, the Investor
Group shall have no right to designate any Investor Designated Director, and,
at the request of a majority of the Independent Directors then in office, shall
cause any Investor Designated Directors then in office to resign immediately
upon such event.  For purposes of the
calculations of the percentages set forth in this Section 2.01(b), any
shares of voting equity securities issued after the date of this Agreement (other
than shares of Common Stock issued upon exercise of the Investor Warrants) shall
not be included in the computations of beneficial ownership for purposes of
this Section 2.01(b).

 

(c) At each stockholders’ meeting of the
Company at which directors will be elected, the Investor
Group shall be entitled, any time prior to the mailing of the applicable proxy
statement of the Company, to propose and nominate that number of Investor
Designated Directors as set forth in Section 2.01(b) as members of
the Board.  The Independent Directors to
be nominated and elected at any such stockholders’ meeting shall be nominated
by a majority of the Independent Directors then in office.  The Company and the Board will include the
persons so nominated by the members of the Investor
Group and the Independent Directors in each slate of directors proposed,
recommended or nominated for election by the Company or the Board and will
recommend and use all reasonable efforts to cause the election of such persons nominated.  The Company agrees to use all reasonable
efforts to solicit proxies for such nominees for director from all holders of
voting stock entitled to vote thereon. 
Such nominees shall serve in a manner consistent with the terms of the
Certificate of Incorporation and By-Laws.

 

(d) To the extent required by Nasdaq
Regulations (and without regard to the fact that one or more Investor
Designated Directors may also satisfy the Independence Standard), those members
of the Board that are neither Investor Designated Directors nor the Chief
Executive Officer of the Company shall at all times satisfy the Independence
Standard.

 

(e) The Board shall take all necessary
action, including amending the By-Laws, to provide that at every meeting of the
Board, six directors shall constitute a quorum.

 

(f) At any time after the Closing, upon
the request of the Investor Group, the
Company and the Board shall take all actions necessary so that the composition
of the board of directors, general partner, managing member (or controlling
committee thereof) or any other board or committee serving a similar function
with respect to each of the Company’s subsidiaries (each a “Subsidiary Board”)
and each committee of each Subsidiary Board shall be proportionate to the
composition requirements of the Board and of each committee thereof such that members
of the Investor Group shall have the same proportional
representation (rounded to the nearest whole number of directors, but in no
event less than one) on each Subsidiary Board and committee thereof as the members
of

 

7

 

the
Investor Group have the right to designate to the
Board and committees thereof.  The quorum
and action requirements of each Subsidiary Board and of each committee of each
Subsidiary Board shall, to the extent requested by the Investor
Group, be the same as the quorum and action requirements of the Board and each
committee thereof.

 

SECTION 2.02                    Vacancies.  In the event of any vacancy for any reason in
any Board seat reserved for Investor Designated Directors, the Investor Group
shall have the sole right to nominate another individual to serve as an
Investor Designated Director.  In the
event of any vacancy for any reason in any Board seat reserved for Independent
Directors, a majority vote of the Independent Directors then in office shall
have the sole right to nominate another individual to serve as an Independent
Director, so long as he or she complies with the Independence Standard, and such
new director, when appointed or elected, shall be an Independent Director for
purposes of this Agreement.  In the event
of any vacancy for any reason in any Board seat reserved for the Chief
Executive Officer of the Company, subject to Section 2.06 of this
Agreement, a vote of a majority of the directors then in office, plus one
director, shall have the sole right but shall not be obligated to nominate any
replacement Chief Executive Officer of the Company as a director of the
Company.  In each case, to the extent
permitted by the Certificate of Incorporation and By-Laws, the Board shall
elect each such person so nominated as soon as possible after the occurrence of
the nomination to fill such vacancy.  No Investor
Designated Director shall be removed as a director of the Company without cause,
without the approval of a majority of the other Investor Designated Directors
then in office.  No Independent Director
shall be removed as a director of the Company without cause, without the
approval of a majority of the other Independent Directors then in office.  No Chief Executive Officer Director shall be
removed as a director of the Company without cause, without the approval of a
majority of the other directors then in office, plus one director.

 

SECTION 2.03                    Committees.  (a)  The Board shall have such
committees as may be required by Law or Nasdaq Regulation, and such other
committees as the Board may from time to time establish.  Each such committee and the Board shall take
all actions necessary so that each such committee shall be comprised of not
less than three directors.  To the extent
permitted by Nasdaq Regulation, and subject to Section 2.03(b), a number
of Investor Designated Directors equal to one less than a majority of all
directors serving on each committee shall be appointed to such committee.

 

(b) To the extent that no Investor
Designated Director is permitted under Nasdaq Regulations to serve on a
particular committee of the Board, the Company and the Board shall take all
necessary action to permit at least one Investor Designated Director to attend
each meeting of such committee as a non-voting observer, in each case to the
extent permitted by such Nasdaq Regulation, and such observer shall be provided
with such notice of the meeting and information regarding the meeting as is
provided to members of such committee.

 

SECTION 2.04                    Certificate of Incorporation and
By-Laws to Be Consistent.  The Board
shall take or cause to be taken all lawful action necessary or appropriate to
ensure that none of the Certificate of Incorporation or the By-Laws or any of
the corresponding constituent documents of the Company’s subsidiaries contain
any provisions inconsistent with this Agreement or which would in any way
nullify or impair the terms of this Agreement or the rights of the Company or
of the Investor Group hereunder.

 

SECTION 2.05                    Approval of the Investor Group Required
for Certain Actions.  In addition to
any approval by the Board required by the Certificate of Incorporation, the
By-Laws, applicable Law or Nasdaq Regulation, the prior written approval of the

 

8

 

Investor Group shall be
required in order for the Board to validly approve and authorize any of the
following:

 

(a) the entry by the Company or any of
its subsidiaries into any merger or consolidation, or the acquisition (whether
by merger, consolidation, purchase of assets or stock or otherwise) by the
Company or any of its subsidiaries of any business or assets, if the value of
the consideration to be paid or received by the Company and/or its stockholders
in any such individual transaction, or in such transaction when added to the
aggregate value of the consideration paid or received by the Company and/or its
stockholders in all other such transactions approved by the Board during the
preceding 12 months, exceeds a Substantial Portion of the Company;

 

(b) the authorization or issuance of any
equity securities or any securities convertible into or exercisable for equity
securities of the Company or any subsidiary of the Company (other than options
or warrants outstanding on the date of this Agreement or pursuant to employee
or director stock option or incentive compensation or similar plans approved by
the Board or a duly authorized committee of the Board after the date of this
Agreement, including by at least one of the Investor Designated Directors on
such Board or committee);

 

(c) any sale, asset exchange, lease,
exchange, mortgage, pledge, transfer or other disposition by merger or
otherwise by the Company or any of its subsidiaries (in one transaction or a
series of related transactions) of any securities or assets of the Company or
any subsidiary thereof which constitutes a Substantial Portion of the Company;

 

(d) any amendment to the Certificate of Incorporation
or By-Laws, or the adoption of or amendment to the certificate of incorporation
or by-laws of any subsidiary of the Company;

 

(e) any change in the authorized number
of directors of the Board of the Company or the establishment or abolition of
any Board Committee;

 

(f) any incurrence or repayment (prior
to scheduled maturity) of indebtedness (including capitalized leases) in an
aggregate amount greater than $10,000,000, except for borrowings under the
Company’s existing amended and restated credit facility dated as of October 1,
2004 (the “Credit Facility”) as such Credit Facility may be amended,
restated, refinanced or replaced, in whole or in part, from time to time with
the prior written approval of the Investor
Group;

 

(g) any action to repurchase, retire,
redeem or otherwise acquire any equity securities of the Company or any subsidiary
of the Company, pursuant to self-tender offers, stock repurchase programs, open
market transactions, privately-negotiated purchases or otherwise;

 

(h) the entry by the Company or any of
its subsidiaries into any Discriminatory Transaction;

 

9

 

(i) take any action to declare, set
aside, make or pay any dividend or other distribution, payable in cash, stock,
property or otherwise, with respect to any of its capital stock or enter into
any agreement with respect to the voting of its capital stock;

 

(j) any appointment or termination of any person
as the Chief Executive Officer, President or Chief Financial Officer of the
Company; or

 

(k) any action to adopt, propose to adopt, or
maintain any shareholders’ rights plan, “poison pill” or other similar plan or
agreement (or any other plan or arrangement that could reasonably be expected
to disadvantage any stockholder on the basis of the size or voting power of its
shareholding).

 

The Company shall not, and shall not permit any of its
subsidiaries to, take any of the actions specified above without the Investor
Group approvals required above. Notwithstanding the foregoing, no approval of
the Investor Group shall be required for the Board to approve or authorize (a) the
payment of any dividend or the making of any other distributions by any
subsidiary of the Company to the Company or another subsidiary of the Company, (b) the
payment by any subsidiary of the Company of any indebtedness owed to the
Company, (c) the making of any loans by, or advances from, any subsidiary
of the Company to the Company, or (d) the transfer by any subsidiary of
the Company of any of its property or assets to the Company.

 

SECTION 2.06                    Approval of Independent
Directors Required for Certain Actions. 
In addition to any approval by the Board required by the Certificate of
Incorporation, the By-Laws, applicable Law or Nasdaq Regulations, the vote of at
least one of the Independent Directors then in office shall be required in
order for the Board to approve and authorize any action; provided,
however,  that, at any time
when the number of Independent Directors then in office on the Board is five or
more, the vote of at least two of the Independent Directors then in office
shall be required in order for the Board to approve and authorize any of the
following actions:

 

(a) any amendment to the certificate of
incorporation or by-laws, or the adoption of or amendment to the certificate of
incorporation or by-laws of any subsidiary of the Company (other than to file any
amendment that would increase the amount of the Company’s authorized Common Stock or one or more certificates of designation to establish
one or more series of preferred stock);

 

(b) any change in the authorized number
of directors of the Board or the establishment or abolition of any Board committee;

 

(c) the entry by the Company or any of
its subsidiaries into any merger or consolidation, or the acquisition (whether
by merger, consolidation, purchase of assets or stock or otherwise) by the
Company or any of its subsidiaries of any business or assets, if the value of
the consideration to be paid or received by the Company and/or its subsidiaries
and/or the Company’s stockholders in any such transaction exceeds $100 million;

 

10

 

(d) take any action to declare, set
aside, make or pay any dividend or other distribution, payable in cash, stock,
property or otherwise, with respect to any of its capital stock or enter into
any agreement with respect to the voting of it’s capital stock;

 

(e) any incurrence of indebtedness
(including capitalized leases) which would, when combined with all other
indebtedness of the Company and its subsidiaries then outstanding, as reflected
on the most recent available consolidated balance sheet of the Company plus
indebtedness incurred after the date of such balance sheet, exceed $750 million
in the aggregate; and

 

(f) any action to repurchase, retire,
redeem or otherwise acquire any equity securities of the Company or any subsidiary
of the Company, pursuant to self- tender offers, stock repurchase programs,
open market transactions, privately negotiated purchases or otherwise to the
extent that the aggregate payments made by the Company therefor after the date
of this Agreement exceed $100 million.

 

Notwithstanding the foregoing, no approval of any
Independent Directors shall be required for the Board to approve or authorize (a) the
payment of any dividend or the making of any other distributions by any
subsidiary of the Company to the Company or another subsidiary of the Company, (b) the
payment by any subsidiary of the Company of any indebtedness owed to the
Company, (c) the making of any loans by, or advances from, any subsidiary
of the Company to the Company, or (d) the transfer by any subsidiary of
the Company of any of its property or assets to the Company.

 

ARTICLE 3

VOTING OF SHARES

 

SECTION 3.01                                Agreement with
Respect to Voting of Common Stock.  (a) 
In any election of directors at a meeting of the stockholders of the Company,
the Investor Group shall cause all shares of Common Stock held by them to be
represented at such meeting either in person or by proxy and shall vote their
shares of voting stock for all nominees nominated by the Independent Directors,
in proportion to the votes cast by the holders of Common Stock (other than the Investor
Group); provided, however, that, in their sole
and absolute discretion, the Investor Group shall be permitted to cast a
greater number of votes held by them in excess of such proportion in favor of the
nominees nominated by the Independent Directors.

 

(b) With respect to all matters
submitted to a vote of holders of Common Stock (except as provided in
Sections 3.01(a)), the Investor Group may vote,
or abstain from voting, or fail to vote, some or all shares of Common Stock
held by them, in their sole and absolute discretion.

 

(c) The Investor
Group shall not execute any written consent pursuant to Section 228 of the
Delaware General Corporation Law as to any shares beneficially owned by them,
except for any written consent approved by a majority of the Independent
Directors.

 

11

 

ARTICLE 4

STANDSTILL, ACQUISITIONS

OF SECURITIES AND OTHER MATTERS

 

SECTION 4.01                    Acquisitions of Common Stock.  After the Closing and until the fifth anniversary
thereof, without the prior approval of a majority of the Independent Directors
then in office, the Investor Group shall not purchase or otherwise acquire,
directly or indirectly, beneficial ownership of any shares of Common Stock such
that the aggregate beneficial ownership of the Investor Group, after giving
effect to any such acquisition, is in excess of 49.9% (or such greater percentage
as the Investor Group may beneficially own immediately following the exercise,
in whole or in part, of the Series B Investor Warrants) of the Common
Stock of the Company, except (i) by way of stock splits, stock dividends, reclassifications,
recapitalizations, or other distributions by the Company to holders of the Common
Stock, (ii) pursuant to the exercise of the Investor Warrants in
accordance with the terms thereof, (iii) by acquisition of any New
Securities pursuant to Section 4.03, or (iv) pursuant to Section 4.04.

 

SECTION 4.02                    No Participation in a Group or
Solicitation of Proxies.  Except for actions
permitted by, or taken in compliance with, Sections 4.01, 4.03 and 4.04
and its exercise of rights pursuant to the provisions of this Agreement, the Investor
Group agrees that, prior to the fifth anniversary of the Closing, it will not,
without the prior approval of a majority of the Independent Directors then in
office, directly or indirectly:

 

(a) acquire, offer to acquire, or agree
to acquire, directly or indirectly, by purchase or otherwise, any securities or
direct or indirect rights to acquire any securities of the Company or any subsidiary
thereof, or of any successor to or person in control of the Company, or any
assets of the Company or any division thereof or of any such successor or
Controlling Person;

 

(b) make or in any way participate,
directly or indirectly, in any “solicitation” of “proxies” (as such terms are
used in the rules of the Commission) to vote any voting securities of the
Company or any subsidiary thereof; provided, however, that
the prohibition in this Section 4.02(b) shall not apply to solicitations
exempted from the proxy solicitation rules by Rule 14a-2 under
the Exchange Act or any successor provision;

 

(c) submit to the Board a written proposal
for or offer of (with or without conditions), any merger, recapitalization,
reorganization, business combination or other extraordinary transaction
involving the Company or any subsidiary thereof or any of their securities or
assets, or make any public announcement with respect to such a proposal or
offer;

 

(d) enter into any discussions,
negotiations, arrangements or understandings with any third party (other than
any person that would be a Permitted Transferee) with respect to any of the
foregoing, or otherwise form, join or in any way engage in discussions relating
to the formation of, or participate in, a group with any third party (other
than any person that would be a Permitted Transferee), in connection with any
of the foregoing; or

 

12

 

(e) request the Company or any of its
Representatives, directly or indirectly, to amend or waive any provision of
this paragraph (including this sentence);

 

provided, however, that none of
the foregoing (i) shall prevent, restrict, Encumber or in any way limit
the exercise of the fiduciary rights and obligations of any Investor Designated
Director as a director or prevent, restrict, Encumber or in any way limit the ability
of any Investor Designated Director to vote on matters, influence officers,
employees, agents, management or the other directors of the Company, take any
action or make any statement at any meeting of the Board or any committee
thereof, or otherwise to act in their capacity as directors; (ii) shall
prevent any member of the Investor Group from Selling any Covered Securities
held by it or voting its Common Stock; (iii) shall apply to or restrict
any discussions or other communications between or among directors, members, officers,
employees or agents of any member of the Investor Group or any affiliate
thereof; (iv) shall prohibit any member of the Investor Group from
soliciting, offering, seeking to effect or negotiating with any person with
respect to transfers of Covered Securities otherwise permitted by Section 5.01
or (v) restrict any disclosure or statements required to be made by any Investor
Designated Director or the Investor Group under applicable Law or Nasdaq
Regulation.

 

SECTION 4.03                    Rights to Purchase New
Securities.  (a)  In the event
that the Company proposes to issue New Securities, each member of the Investor
Group shall have the right to purchase, in lieu of the person to whom the
Company proposed to issue such New Securities, in accordance with paragraph (b) below,
a number of New Securities equal to the product of (i) the total number or
amount of New Securities which the Company proposes to issue at such time and (ii) a
fraction, the numerator of which shall be the total number of shares of Common
Stock which such member owns at such time on a Fully Diluted Basis, and the
denominator of which shall be the total number of shares of Common Stock then
outstanding on a Fully Diluted Basis.

 

(b) In the event that the Company
proposes to undertake an issuance of New Securities, it shall give written
notice (a “Notice of Issuance”) of its intention to each of the members
of the Investor Group, describing the material terms of
the New Securities, including the price thereof, and the material terms upon
which the Company proposes to issue such New Securities.  The members of the Investor
Group shall have 30 days from the date of receipt of the Notice of Issuance to
agree to purchase all or a portion of such member’s pro rata share of such New
Securities (as determined pursuant to paragraph (a) above) for the same
consideration, if such proposed consideration shall consist solely of cash, or,
if such consideration consists of property or assets other than cash, for cash,
Cash Equivalents or Marketable Securities having an equivalent value (as
reasonably determined by a majority of the Independent Directors) to the
consideration payable by the person to whom the Company proposes to issue such
New Securities at the time of payment, and otherwise upon the terms specified
in the Notice of Issuance by giving written notice to the Company and stating
therein the quantity of New Securities to be purchased by such member of the Investor
Group and the allocation of such New Securities among the members.  The rights given by the Company under this Section 4.03(b) shall
terminate if unexercised within 30 days after receipt of the Notice of Issuance
referred to in this paragraph (b).

 

13

 

(c) The Company and each member of the Investor
Group, if it elects to purchase the New Securities to be sold by the Company,
shall select a date not later than 20 days (or longer if required by Law) after
the expiration of the 30-day notice period referenced in Section 4.03(b) for
the closing of the purchase and sale of the New Securities.  In the event any purchase by the members of
the Investor Group is not consummated, other than as a
result of the fault of the Company, within the provided time period, the
Company may issue the New Securities subject to purchase by such member free
and clear from the restrictions under this Section 4.03.  Any New Securities not elected to be
purchased by such members may be sold by the Company to the person to which the
Company intended to sell such New Securities on terms and conditions no less
favorable to the Company than those offered to such members.

 

SECTION 4.04                    Takeover Proposals by the Investor
Group.  No member of the Investor
Group shall, without the prior approval of a majority of the Independent
Directors then in office, submit a proposal to acquire a majority of the Common
Stock owned by persons other than the Investor Group (a “Change of Control
Proposal”) to any person unless either of the following conditions are
satisfied:

 

(a) The Change of Control Proposal shall
contemplate either (i) a tender offer for all outstanding shares of Common
Stock not owned by the Investor Group and must
be conditioned upon a majority of such Common Stock not owned by the Investor
Group being tendered, or (ii) a merger, combination, asset sale or other
similar transaction which conditioned upon the holders of a majority of the
Common Stock not owned by the Investor Group present,
in person or by proxy, at a meeting of stockholders, voting in favor of such
transaction.  In the case of either (i) or
(ii), the same consideration must be offered to all of the Company’s
stockholders (other than the Investor Group); or

 

(b) The Change of Control Proposal shall
contemplate that a special committee of the Board shall be created consisting only
of the Independent Directors (the “Special Committee”), the Special
Committee shall retain a nationally recognized investment banking firm to
advise the Special Committee with respect to the fairness of the Change of
Control Proposal to the stockholders of the Company (other than the Investor
Group), and the Change of Control Proposal shall be approved by the Special
Committee, which shall not give its approval unless it has received an opinion
from such investment banking firm that the Change of Control Proposal is fair,
from a financial point of view, to the stockholders of the Company other than any
member of the Investor Group.

 

SECTION 4.05                    Affiliate Transactions.  No member of the Investor Group shall engage
in any transaction with the Company without the prior approval of a majority of
the Independent Directors then in office;  provided, however, that the
foregoing provision shall not apply to any transactions contemplated by this
Agreement or any of the Related Agreements or to any transactions involving the
purchase or sale of goods or services in the ordinary course of business which
are consistent with guidelines adopted by the Board from time to time and
approved by a majority of the Independent Directors then in office.

 

14

 

SECTION 4.06                    Termination of Standstill
Provisions.  The provisions of
Sections 4.01, 4.02 and 4.04 of this Agreement shall terminate without any
further action by any party upon the earlier of:

 

(i)                                     180 days after such time as the Investor Group beneficially owns less than 10%
of the outstanding Common Stock of the Company;

 

(ii)                                  such date as the Board determines to
solicit, or publicly announces, whether by press release, filing with the
Commission or otherwise, its intention to solicit, an Acquisition Proposal (as
defined in the Securities Purchase Agreement);

 

(iii)                               such date as the Board publicly
approves, accepts, authorizes or recommends to the Company’s stockholders their
approval of, or their conveyance of any Common Stock or other securities
pursuant to, any Acquisition Proposal;

 

(iv)                              such date that the Company or any
affiliate thereof has entered into a letter of intent, agreement in principle,
definitive agreement, or any other agreement with any party, with respect to an
Acquisition Proposal for the Company;

 

(v)                                 such date that any person or group,
other than the Investor
Group or any of its affiliates, shall have acquired or announced its intention
to acquire, including by commencement of a tender offer or exchange offer) beneficial
ownership of 20% of the Company’s outstanding Common Stock;

 

(vi)                              such date as the Company, the Board
or any committee of the Board takes any action, or fails to take appropriate
action, which action, or failure to take action, results in a breach of any
provision of Section 2.05; and

 

(vii)                           such date as the Company breaches
this Agreement in that the number of Investor Designated Directors on the
Board, any committee thereof or on any subsidiary Board or any committee
thereof, is less than the number of directors to which the Investor Group is entitled at such time
pursuant to Article 2, subject to notice from the members of the Investor Group and the expiration of a 30-day
period in which to cure such action or failure to act (if such action or
failure to act is reasonably capable of being cured).

 

ARTICLE 5

RESTRICTIONS ON TRANSFERABILITY OF SECURITIES

 

SECTION 5.01                    General.  (a)  Each member of the Investor Group
understands and agrees that the shares of Common Stock acquired pursuant to the
Securities Purchase Agreement have not been registered and are restricted
securities under the Securities Act. 
During the period ending six months after the Closing (the “Initial
Restricted Period”), no member of the Investor Group shall make or solicit
any Sale of, or create, incur or assume any Encumbrance with respect to, the
Units, the Investor Warrants or any shares of Common Stock now owned or
hereafter acquired by it (collectively, the “Covered Securities”); provided, however, that members of the

 

15

 

Investor
Group may, during the Initial Restricted Period, make or solicit a Sale to a
Permitted Transferee or as described in clauses (v), (vii) and (viii) below.

 

(b) After the Initial Restricted Period
(other than with respect to clauses (v), (vii) and (viii) below which
may occur at any time), each member of the Investor Group agrees that neither
it nor any of its affiliates will make any Sale of, or create, incur or assume
any Encumbrance with respect to, any of the Covered Securities except for a
Sale:

 

(i)                                     in compliance with Rule 144
under the Securities Act;

 

(ii)                                  (x) 
pursuant to a bona fide public offering registered under the Securities
Act, or

 

(y) in one or more block trades or privately
negotiated transactions exempt from the registration requirements of the
Securities Act;

 

provided, however, that in each case no Sale under
this clause (ii) is made, to the actual knowledge of such member of the Investor
Group (without inquiry in the case of a Sale pursuant to the preceding clause
(x)) to any person or group that, after giving effect to such Sale, would have
beneficial ownership of Common Stock representing more than 5% of the voting
power of the Company’s outstanding capital stock (except that, in the case of a
transfer to a person specified in Rule 13d-1(b)(1)(ii) promulgated
under the Exchange Act that would be eligible based on such person’s status and
passive intent with respect to the ownership, holding and voting of such
Covered Securities to report such person’s ownership of Covered Securities on Schedule 13G
(assuming such person owned a sufficient number of such Covered Securities to
require such filing), no Sale under this clause (ii) is made to any such
person that, after giving effect to such Sale, would have beneficial ownership
of Covered Securities representing 10% or more of the voting power of the
Company’s outstanding capital stock); and, provided,
further, that in the case of any Sale in an underwritten public
offering pursuant to clause (x) above, the members of the Investor Group shall
be deemed to have fulfilled their obligations hereunder if they have instructed
the underwriter(s) of such offering to use their reasonable efforts to prevent
any purchase of Covered Securities in such offering by any person or group that
would, upon such purchase, exceed the foregoing thresholds, as applicable;

 

(iii)                               to Permitted Transferees in
accordance with Section 5.01(c) hereof;

 

(iv)                              of 15% or less of the Common Stock
on a Fully Diluted Basis to any person, other than any person which is a
Restricted Person in a Sale in which the certificates representing such Covered
Securities issued to the transferee (x) bear the legend provided in Section 5.03(a),
if required by such Section and (y) the transferee (if

 

16

 

not already a party hereto) has executed and
delivered to the Company, as a condition precedent to such Sale, an instrument
or instruments, reasonably acceptable to the Company, confirming that such
transferee agrees to be bound by the obligations of such member of the Investor
Group under this Agreement.

 

(v)                                 transfers (i) pursuant to any
business combination, tender or exchange offer to acquire Common Stock or other
extraordinary transaction that the Board has recommended, or (ii) pursuant
to a tender or exchange offer that the Board has not recommended but only after
such time as a majority of the shares of Common Stock outstanding (other than
those owned by the Investor Group) have been tendered into such offer and after
all material conditions with respect to such offer (including any financing
condition, any minimum condition with respect to number of shares tendered and
any condition with respect to removal of any anti-takeover protections) have
been satisfied or irrevocably waived by the offeror; provided,
however, that no Investor Group securities shall be tendered into
any tender offer or exchange offer not recommended by the Board prior to the
time all such material conditions (other than any such condition that can be
satisfied only at the closing of such offer) have been satisfied or irrevocably
waived by the offeror;

 

(vi)                              transfers to the Company or a
subsidiary of the Company;

 

(vii)                           swaps, exchanges, hedges or other
similar agreements or arrangements designed to protect against fluctuations in
the value of the equity securities of the Company and not entered into with the
purpose of circumventing the provisions of this Section 5.01;

 

(viii)                        pledges of Covered Securities in
connection with any margin loan or other extensions of credit from a
broker-dealer, bank or other financial institution and not entered into with
the purpose of circumventing the provisions of this Section 5.01; or

 

(ix)                                in accordance with and subject to Section 5.04.

 

(c) No Sale of Covered Securities to a
Permitted Transferee shall be effective until such time as such Permitted
Transferee has executed and delivered to the Company, as a condition precedent
to such Sale, an instrument or instruments, reasonably acceptable to the
Company, confirming that such Permitted Transferee agrees to be bound by all
obligations of the Investor Group hereunder. 
The Investor Group shall not transfer control of a Permitted Transferee
to any person that is not also a Permitted Transferee if a direct sale of
Covered Securities to such person would violate the provisions of Section 5.01
of this Agreement.

 

SECTION 5.02                    Improper Sale or Encumbrance.  Any attempt not in compliance with this
Agreement to make any Sale of, or create, incur or assume any Encumbrance with
respect to, any Covered Securities shall be null and void and of no force and
effect, the purported transferee shall have no rights or privileges in or with
respect to the Company, and the Company shall not give any effect in the
Company’s stock records to such attempted Sale or Encumbrance.

 

17

 

SECTION 5.03                    Restrictive Legends.  (a)  Each certificate evidencing the
Covered Securities shall be stamped or otherwise imprinted with legends in
substantially the following form (in addition to any legends required by
agreement or by applicable state securities Laws):

 

(i)            THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE
OR DISTRIBUTION THEREOF.  SUCH SECURITIES
GENERALLY MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.

 

(ii)           THE SECURITIES EVIDENCED HEREBY ARE SUBJECT TO CERTAIN
RESTRICTIONS UNDER THE TERMS OF THE STOCKHOLDERS’ AGREEMENT DATED AS OF
JUNE 9, 2005, AS AMENDED FROM TIME TO TIME, BETWEEN THE ISSUER AND THE
HOLDER HEREOF AND MAY NOT BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF EXCEPT IN ACCORDANCE WITH THE TERMS OF THAT AGREEMENT.

 

(b) Each certificate evidencing any
shares of Common Stock or other securities of the Company acquired by any
member of the Yellowstone Group other than the Covered Securities shall be
stamped or otherwise imprinted with legends in substantially the following form
(in addition to any legends required by agreement or by applicable state
securities Laws):

 

THE SECURITIES EVIDENCED HEREBY ARE SUBJECT
TO CERTAIN RESTRICTIONS UNDER THE TERMS OF THE STOCKHOLDERS’ AGREEMENT DATED AS
OF JUNE 9, 2005, AS AMENDED FROM TIME TO TIME, BETWEEN THE ISSUER AND THE
HOLDER HEREOF AND MAY NOT BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF EXCEPT IN ACCORDANCE WITH THE TERMS OF THAT AGREEMENT.

 

(c) Each member of the Investor Group
consents to the Company making a notation on its records and giving
instructions to any transfer agent of its capital stock in order to implement
the restrictions on transfer established in this Agreement.

 

(d) The Company shall, at the request of
a holder of Purchased Securities, remove from each certificate evidencing
Purchased Securities transferred in compliance with the terms of Section 5.01
and with respect to which no rights or obligations under this Agreement shall
transfer, the legend described in Sections 5.03(a)(ii) and (b), and shall
remove from each certificate evidencing such Purchased Securities the legend
described in Section 5.03(a)(i) if, at the request of the Company,
such requesting holder provides, at its

 

18

 

expense,
an opinion of counsel satisfactory to the Company that the securities evidenced
thereby may be transferred without the imposition of such legend.

 

SECTION 5.04                    Sales of Significant Interests.  Each member of the Investor Group may Sell
Covered Securities to a person that would, following the consummation of such
Sale, beneficially own more than 20% of the Common Stock; provided,
however, that, in the event that such Sale is not otherwise
permitted to be made pursuant to Section 5.01 above, such member of the Investor
Group conditions such Sale by them to such person upon such person
contemporaneously therewith acquiring, or offering to acquire, on the same
price and other financial terms and conditions as are applicable to such member
of the Investor Group in such Sale, a number of shares of Common Stock owned by
stockholders of the Company other than the Investor Group equal to the product
of (A) the aggregate number of shares of Common Stock owned by
stockholders of the Company other than the Investor Group, multiplied by (B) a
fraction, the numerator of which is the number of shares of Common Stock
(including Common Stock issuable upon the exercise of warrants) proposed to be
Sold by such member of the Investor Group to such person, and the denominator
of which is the aggregate number of shares of Common Stock (including shares of
Common Stock issuable upon the exercise of warrants) owned by such member of
the Investor Group on a Fully Diluted Basis on the date of such Sale.  In order for the conditions in the preceding
proviso to be satisfied, (A) such person shall make such offer in
compliance with applicable Law, including, if applicable, Section 14(d)(1) of
the Exchange Act and Regulation 14D promulgated thereunder and (B) if as a
result of such Sale, such person would, following such Sale, beneficially own
shares of Common Stock representing in the aggregate more than 20% of the
Common Stock but less than 90% of the shares of Common Stock then outstanding,
such person must, in connection with the closing of such transaction, agree to
be bound by the obligations of the Investor Group under this Agreement.  The provisions of this Section 5.04
shall only apply for as long as the Investor Group beneficially owns at least
25% of the shares of Common Stock.

 

ARTICLE 6

CORPORATE OPPORTUNITIES AND RELATED MATTERS

 

SECTION 6.01                    Similar Activities or Lines of
Business.   

 

(a) The Company may from time to time
enter into and perform, one or more agreements (or modifications or supplements
to pre-existing agreements) with a member of the Investor Group pursuant to
which the Company, on the one hand, and such member, on the other hand, agree
to engage in transactions of any kind or nature with each other and/or agree to
compete, or to refrain from competing or to limit or restrict their
competition, with each other, including to allocate and to cause their
respective Representatives (including any who are directors, officers or
employees of both) to allocate opportunities between or to refer opportunities
to each other.  Subject to this Section 6.01, no such agreement, or
the performance thereof by the Company or the members of the Investor Group,
shall, to the fullest extent permitted by Law, be considered contrary to (i) any
fiduciary duty that a member of the Investor Group may owe to the Company or to
any stockholder of the Company by reason of the Investor Group being a
controlling or significant stockholder of the Company or participating in the
control of the

 

19

 

Company
or (ii) any fiduciary duty of any director or officer of the Company who
is also a director, officer, member or employee of a member of the Investor
Group to the Company or to any stockholder thereof.  Subject to this Section 6.01,
to the fullest extent permitted by Law, a member of the Investor Group, as a
stockholder of the Company, or as a participant in control of the Company,
shall not have or be under any fiduciary duty to refrain from entering into any
agreement or participating in any transaction referred to above and no
director, officer or employee of the Company who is also a director, officer or
employee of a member of the Investor Group shall have or be under any fiduciary
duty to the Company, to refrain from acting on behalf of the Company or of a
member of the Investor Group in respect of any such agreement or transaction or
performing any such agreement in accordance with its terms.

 

(b) Except as otherwise agreed in
writing between the Company and the Investor Group or as provided in paragraph (d) below,
each member of the Investor Group shall to the fullest extent permitted by Law
have no duty to refrain from serving as an officer or director of, or investing
in, any person which is (i) engaged in the same or similar business as the
Company or (ii) doing business with any client, customer or vendor of the
Company and such member of the Investor Group shall not, to the fullest extent
permitted by Law, be deemed to have breached its or his fiduciary duties, if
any, to the Company solely by reason of engaging in any such activity.  Except as otherwise agreed in writing between
the Company and the Investor Group or as provided in paragraph (d) below,
in the event that any member of the Investor Group acquires knowledge of a
potential transaction or matter which may be a corporate opportunity for both a
member of the Investor Group and the Company, such member of the Investor Group
shall to the fullest extent permitted by Law have no duty to communicate or
offer such corporate opportunity to the Company and shall not, to the fullest
extent permitted by Law, be liable to the Company or its stockholders for
breach of any fiduciary duty as a stockholder of the Company by reason of the
fact that such member of the Investor Group acquires or seeks such corporate
opportunity for itself, directs such corporate opportunity to another person or
entity, or otherwise does not communicate information regarding such corporate
opportunity to the Company, and the Company to the fullest extent permitted by
Law shall renounce any interest or expectancy in such business opportunity and
shall waive any claim that such business opportunity constituted a claim that
should have been presented to the Company.

 

(c) Except as otherwise agreed in
writing between the Company and the Investor Group or as provided in paragraph (d) below,
in the event that a director or officer of the Company who is also an officer,
director, member or employee of a member of the Investor Group acquires
knowledge of a potential transaction or matter which may be a corporate
opportunity for both the Company and a member of the Investor Group, such
director or officer shall to the fullest extent permitted by Law have fully
satisfied and fulfilled his or her fiduciary duty with respect to such
corporate opportunity, and the Company to the fullest extent permitted by Law
shall renounce any interest or expectancy in such business opportunity and
shall waive any claim that such business opportunity constituted a corporate
opportunity that should have been presented to the Company or any of its
affiliates, if such director or officer acts in a manner consistent with the
following policy: (i) a corporate opportunity offered to any person who is
an officer of

 

20

 

the
Company and who is also a director but not an officer of a member of the Investor
Group shall belong to the Company, unless such opportunity is expressly offered
to such person solely in his or her capacity as a director of a member of the Investor
Group, in which case such opportunity shall belong to such member of the Investor
Group; (ii) a corporate opportunity offered to any person who is a
director but not an officer of the Company and who is also a director or
officer of a member of the Investor Group shall belong to the Company only if
such opportunity is expressly offered to such person solely in his or her
capacity as a director of the Company and otherwise shall belong to such member
of the Investor Group; and (iii) a corporate opportunity offered to any
person who is an officer of both the Company and Investor Group shall belong to
the Company unless such opportunity is expressly offered to such person solely
in his or her capacity as an officer of a member of the Investor Group, in
which case such opportunity shall belong to such member of the Investor Group.

 

(d) No member of the Investor Group nor
any of their respective affiliates (other than the Company or their respective
subsidiaries) shall, directly or indirectly, enter into, or agree or commit to
enter into, any material investment, in or otherwise exploit any business
opportunity primarily related to, any Restricted Person (other than an
investment in the shares of any public company representing less than 20% of
such company’s fully diluted common equity) except with the approval of a
majority of the Independent Directors then in office.

 

(e) As used in this Section 6.01,
the term “Company” includes all of its subsidiaries, and the term “Investor
Group” includes all of its affiliates (other than the Company).

 

ARTICLE 7

REPRESENTATIONS AND WARRANTIES

 

SECTION 7.01                    Representations of the Company.  The Company hereby represents and warrants to
the Investor Group that:

 

(a) The execution, delivery and
performance by the Company of this Agreement and the consummation by the
Company of the transactions contemplated hereby are within the Company’s power
and authority and have been duly authorized by all necessary corporate
action.  This Agreement constitutes a
valid and binding agreement of the Company, enforceable against the Company in
accordance with its terms.

 

(b) The execution, delivery and
performance by the Company of this Agreement requires no action by or in
respect of, or filing with, any governmental body, agency, official or
authority, other than (i) compliance with any applicable requirements of the
federal securities Laws; and (ii) compliance with any applicable foreign
or state securities or blue sky Laws.

 

(c) The execution, delivery and
performance by the Company of this Agreement and the consummation by the
Company of the transactions contemplated hereby do not and will not (i) contravene
or conflict with the Certificate of Incorporation or

 

21

 

the
By-Laws, and (ii) assuming compliance with the matters referred to in Section 7.01(b),
contravene or conflict with or constitute a violation of, provision of any Law
applicable to the Company.

 

SECTION 7.02                    Representations of the Members
of the Investor Group.  Each member
of the Investor Group hereby represents, jointly and severally, that:

 

(a) The execution, delivery and
performance by such member of the Investor Group of this Agreement and the
consummation by such member of the Investor Group of the transactions
contemplated hereby are within each such member’s power and authority and have
been duly authorized by all requisite action on the part of such member. This
Agreement constitutes a valid and binding agreement of each member of the Investor
Group, enforceable against such member of the Investor Group in accordance with
its terms.

 

(b) The execution, delivery and
performance by such member of the Investor Group of this Agreement require no
action by or in respect of, or filing with, any governmental body, agency,
official or authority, other than (i) compliance with any applicable
requirements of the federal securities Laws; and (ii) compliance with any
applicable foreign or state securities or blue sky Laws.

 

(c) The execution, delivery and
performance by such member of the Investor Group of this Agreement and the
consummation by such member of the Investor Group of the transactions
contemplated hereby do not and will not (i) contravene or conflict with
the organizational documents of such member, and (ii) assuming compliance
with the matters referred to in Section 7.02(b), contravene or conflict
with or constitute a violation of, provision of any Law.

 

ARTICLE 8

CONFIDENTIALITY

 

SECTION 8.01                                Confidentiality.  (a)  Unless otherwise agreed to in
writing by the Company, each member of the Investor Group, on behalf of itself
and its Representatives, agrees (i) except as required by Law, to keep
confidential and not to disclose or reveal any Confidential Information (as
defined below) to any person (other than such member’s Representatives), (ii) not
to use Confidential Information for any purpose other than in connection with
its ownership of Company securities and not in any way detrimental to the
Company or its stockholders and (iii) except as required by Law, not to
disclose to any person (other than such member’s Representatives) any
Confidential Information.  In the event
that any member of the Investor Group or its Representatives are requested
pursuant to, or required by, Law to disclose any Confidential Information, such
member of the Investor Group agrees that it will provide the Company with prompt
notice of such request or requirement in order to enable the Company to seek an
appropriate protective order or other remedy (and if the Company seeks such an
order, such person will provide such cooperation as the Company shall
reasonably request) or to consult with such member with respect to the Company
taking steps to resist or narrow the scope of such request or legal process.

 

22

 

(b) “Confidential Information”
means all information about the Company furnished by the Company, whether
furnished before or after the date hereof, whether oral or written, and
regardless of the manner or form in which it is furnished, including, without
limitation, all notes, analyses, compilations, studies, forecasts, interpretations
or other documents prepared by any member of the Investor Group or its
Representatives which contain, reflect or are based upon, in whole or in part,
the information furnished to any member of the Investor Group or its
Representatives.  Confidential
Information does not include, however, information which (i) is or becomes
generally available to the public other than as a result of a disclosure by any
member of the Investor Group or its Representatives in violation of this
Agreement, the Confidentiality Agreement or other obligation of
confidentiality, (ii) was available to any member of the Investor Group on
a non-confidential basis prior to its disclosure by the Company to such member,
or (iii) becomes available to any member of the Investor Group on a
non-confidential basis from a person (other than the Company) who is not
prohibited from disclosing such information to any member of the Investor Group
by a legal, contractual or fiduciary obligation to the Company.

 

(c) Notwithstanding anything to the
contrary contained in this Agreement, any Investor Designated Director shall be
permitted to provide to members of the Investor Group and their Representatives
information concerning the Company that such individuals receive in their
capacity as directors;  provided, however, that with respect to any such information
provided, the Investor Group and its Representatives shall be bound by the same
restrictions on disclosure and use of confidential information as apply to such
Investor Designated Directors in their capacity as directors, in addition to
any applicable restrictions under this Article VIII.

 

(d) As used in this Article VIII,
the term “Company” includes the Company and all of its subsidiaries, and the
term “Investor Group” includes the members of the Investor Group and all of
their respective affiliates (other than the Company).

 

SECTION 8.02                    Furnishing of Information.  The Company shall furnish or make available
to each member of the Investor Group and its Representatives any documents filed
by the Company pursuant to each of Sections 13, 14 and 15(d) of the
Exchange Act and all annual, quarterly or other reports furnished to the
Company’s public security holders and all such other information concerning the
Company and its subsidiaries as such member of the Investor Group may
reasonably request.  The Company shall provide each member of the Investor
Group and its Representatives with reasonable access to the books and records
of the Company and its subsidiaries during normal business hours upon
reasonable notice, including without limitation, financial data (including
projections) and operating data covering each of such entities, their
businesses, operations and financial performance.

 

ARTICLE 9

MISCELLANEOUS

 

SECTION 9.01                    Termination.   This Agreement shall terminate upon the
earliest to occur of:

 

23

 

(i)                                     written agreement to that effect,
signed by all parties hereto or all parties then possessing any rights
hereunder;

 

(ii)                                  the Investor Group ceasing to
beneficially own at least 10% of the Common Stock on a Fully Diluted Basis; provided that prior to such termination the Investor
Designated Directors shall have resigned if required to do so under Section 2.01(b) of
this Agreement;

 

(iii)                               the Investor Group becoming the
beneficial owner of 90% or more of the Common Stock on a Fully Diluted Basis;
and

 

(iv)                              on the date that is the fifth
anniversary of the date of this Agreement;.

 

provided that no termination of
this Agreement pursuant to this Section 9.01 shall affect the right of any
party to recover damages for any breach of the representations, warranties or
covenants herein that occurred prior to such termination; and, provided, further, that the provisions of Article VIII
shall continue in effect for a period of 18 months following any such
termination.

 

SECTION 9.02                    Notices.  All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly given upon receipt) by delivery in person, by
telecopy or by recognized overnight courier service to the respective parties
at the following addresses (or at such other address for a party as shall be
specified by notice given in accordance with this Section 9.02):

 

(a) if to the Company:

 

Pathmark
Stores, Inc.

200 Milik Street

Carteret, New Jersey 07008

Attention:  Marc A. Strassler

 

with a copy to:

 

Shearman & Sterling LLP

599 Lexington Avenue

New York, New York  10022

Telecopy No.:  (212) 848-7179

Attention:  W. Jeffrey Lawrence

 

(b) if to any member of the Investor
Group:

 

9130 W. Sunset Boulevard

Los Angeles, California 90069

Attention:  Robert P. Bermingham

 

24

 

with a copy to:

 

Latham & Watkins LLP

633 West Fifth Street, Suite 4000

Los Angeles, CA  90071-2007

Telecopy No.:  (213) 891-8763

Attention:  Thomas C. Sadler

 

SECTION 9.03                    No Third Party Beneficiaries.  This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and, to the extent permitted
by this Agreement, their respective successors and permitted assigns, and
nothing herein, express or implied, is intended to or shall confer upon any
other person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.

 

SECTION 9.04                    Expenses.  Except as otherwise specified in this
Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such costs or expenses.

 

SECTION 9.05                    Governing Law.  This Agreement shall be governed by, and
construed in accordance with, the Laws of the State of New York, except as to
matters governed by the internal corporation Laws of the State of
Delaware.  All actions and proceedings
arising out of or relating to this Agreement shall be heard and determined
exclusively in any New York state or federal court, in each case sitting in the
Borough of Manhattan.  The parties hereto
hereby (a) submit to the exclusive jurisdiction of any New York state or
federal court, in each case sitting in the Borough of Manhattan, for the
purpose of any action or proceeding arising out of or relating to this Agreement
brought by any party hereto, and (b) irrevocably waive, and agree not to
assert by way of motion, defense, or otherwise, in any such action or
proceeding, any claim that it is not subject personally to the jurisdiction of
the above-named courts, that its property is exempt or immune from attachment
or execution, that the action or proceeding is brought in an inconvenient
forum, that the venue of the action or proceeding is improper, or that this
Agreement or the transactions contemplated hereby may not be enforced in or by
any of the above-named courts.

 

SECTION 9.06                    Waiver of Jury Trial.  Each of the parties hereto hereby waives to
the fullest extent permitted by applicable Law any right it may have to a trial
by jury with respect to any litigation directly or indirectly arising out of,
under or in connection with this Agreement or the transactions contemplated
hereby.  Each of the parties hereto (a) certifies
that no representative, agent or attorney of any other party has represented,
expressly or otherwise, that such other party would not, in the event of
litigation, seek to enforce that foregoing waiver and (b) acknowledges
that it and the other parties hereto have been induced to enter into this
Agreement and the transactions contemplated hereby, as applicable, by, among
other things, the mutual waivers and certifications in this Section 9.06.

 

SECTION 9.07                    Specific Performance.  The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was not performed
in accordance with the terms hereof and that the parties hereto shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at Law or in equity.

 

25

 

SECTION 9.08                    Counterparts.  This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
and delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.

 

SECTION 9.09                    Entire Agreement.  This Agreement and the Related Agreements
constitute the entire agreement among the parties with respect to the subject
matter hereof and thereof and supersede all prior agreements and
understandings, both written and oral, (including, without limitation the
Confidentiality Agreement and that certain Exclusivity Agreement dated as of March 9,
2005), among the parties, or any of them, with respect to the subject matter
hereof and thereof.

 

SECTION 9.10                    Assignment.  This Agreement shall not be assigned by
operation of Law or otherwise without the express written consent of the
parties hereto (which consent may be granted or withheld in the sole discretion
of any party) and any such assignment or attempted assignment without such
consent shall be void.

 

SECTION 9.11                    Amendment.  This Agreement may not be amended or modified
except (a) by an instrument in writing signed by, or on behalf of, the
Company and each member of the Investor Group or (b) by a waiver in
accordance with Section 9.12.

 

SECTION 9.12                    Waiver.  Any party to this Agreement may (a) extend
the time for the performance of any of the obligations or other acts of the
other party or (c) waive compliance with any of the agreements of the
other party or conditions to such party’s obligations contained herein.  Any such extension or waiver shall be valid
only if set forth in an instrument in writing signed by the party to be bound
thereby.  Any waiver of any term or
condition shall not be construed as a waiver of any subsequent breach or a
subsequent waiver of the same term or condition, or a waiver of any other term
or condition of this Agreement.  The failure
of any party hereto to assert any of its rights hereunder shall not constitute
a waiver of any of such rights.  All
rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.

 

SECTION 9.13                    Severability.  If any term or other provision of this
Agreement is held to be invalid, illegal or incapable of being enforced by any rule of
Law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect for so long as the economic
or legal substance of the transactions is not affected in any manner materially
adverse to any party.  Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the transactions
contemplated hereby be consummated as originally contemplated to the fullest
extent possible.

 

SECTION 9.14                    No Partnership.  No partnership, joint venture or joint
undertaking is intended to be, or is, formed among the parties hereto or any of
them by reason of this Agreement or the transactions contemplated herein.

 

26

 

SECTION 9.15                    Public Announcements.  Except as required by Law, no party to this
Agreement shall make, or cause to be made, any press release or public
announcement in respect of this Agreement or otherwise communicate with any
news media without the prior written consent of the other parties, and the
parties shall cooperate as to the timing and contents of any such press release
or public announcement.

 

SECTION 9.16                    Cumulative Remedies.  The rights and remedies provided by this
Agreement are cumulative and the use of any one right or remedy by any party
shall not preclude or waive its right to use any or all other remedies.  Said rights and remedies are given in
addition to any other rights the parties may have by Law or otherwise.

 

SECTION 9.17                    Interpretation; Headings.  Throughout this Agreement, nouns, pronouns
and verbs shall be construed as masculine, feminine, neuter, singular or
plural, whichever shall be applicable. 
Unless otherwise specified, all references herein to “Articles”,
“Sections” and paragraphs shall refer to corresponding provisions of this
Agreement.  The descriptive headings and
subheadings in this Agreement are included for convenience of reference only
and shall not affect in any way the meaning or interpretation of this Agreement
or any provision hereto.

 

SECTION 9.18                    Construction.  Each party hereto acknowledges and agrees it
has had the opportunity to draft, review and edit the language of this
Agreement and that no presumption for or against any party arising out of
drafting all or any part of this Agreement will be applied in any controversy,
claim or dispute relating to, in connection with or involving this
Agreement.  Accordingly, the parties
hereto hereby waive the benefit of any rule of Law or any legal decision
that would require, in cases of uncertainty, that the language of a contract
should be interpreted most strongly against the party who drafted such
language.

 

SECTION 9.19                    Director Duties.  Notwithstanding anything to the contrary in
this Agreement, no provision hereof shall prevent, restrict, Encumber or in any
way limit the exercise of the fiduciary rights and obligations of any Investor
Designated Director as a director, or his or her ability to vote on matters,
influence management or the other directors or otherwise to discharge their
fiduciary or other duties as directors. 
The Company shall not approve or recommend to its stockholders any
transaction or resolution, or approve, recommend or take any other action
(other than those expressly contemplated by this Agreement) that would restrict
the right of any Investor Designated Director to vote on any matter as such
director believes appropriate in light of his or her duties as a director or
the manner in which an Investor Designated Director may participate in his or
her capacity as a director in deliberations or discussions at meetings of the
Board or any committee thereof.

 

SECTION 9.20                    Investors Rights.  For purposes of this Agreement, all actions
which the Investors or members of the Investor Group are permitted to take
shall be effected by the Investors or such members, as the case may be, holding
a majority of the Purchased Securities then held by all the Investors or such
members, as the case may be.  In
addition, the rights of the Investors under this Agreement shall be allocated
among them in such manner as they shall agree from time to time.  Notwithstanding the foregoing, the parties
hereto acknowledge and agree that, for so long as the Investor Group has the
right to nominate two or more Investor Designated Directors, Yucaipa American
Alliance Fund I, L.P. and Yucaipa

 

27

 

American Alliance
(Parallel) Fund I, L.P. shall each be entitled to designate one of such
Investor Designated Directors and to fill any vacancies created if such
director designated by it ceases to serve for any reason, and any additional
Investor Designated Directors shall be designated by the members of the Investor
Group holding a majority of the Purchased Securities then held by all of such
members.

 

(signature
page follows)

 

28

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.

 

	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  PATHMARK STORES, INC., a Delaware

  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Frank Vitrano

  	
   

  
	
   

  	
  Name: 

  	
  Frank Vitrano

  
	
   

  	
  Title: 

  	
  President and Chief Financial Officer

  

 

S-1

Stockholders’ Agreement

 

 

	
   

  	
  INVESTORS:

  
	
   

  	
   

  
	
   

  	
  YUCAIPA CORPORATE INITIATIVES FUND I, L.P., a 

  
	
   

  	
   

  	
  Delaware limited partnership

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Yucaipa Corporate Initiatives Fund I, LLC

  
	
   

  	
  Its:

  	
  General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Robert P. Bermingham

  	
   

  
	
   

  	
  By: Robert P. Bermingham

  
	
   

  	
  Title: Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  YUCAIPA AMERICAN ALLIANCE

  
	
   

  	
   

  	
  (PARALLEL) FUND I, L.P., a Delaware

  
	
   

  	
   

  	
  limited partnership

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Yucaipa American Alliance Fund I, LLC

  
	
   

  	
  Its:

  	
  General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Robert P. Bermingham

  	
   

  
	
   

  	
  By: Robert P. Bermingham

  
	
   

  	
  Title: Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  YUCAIPA AMERICAN ALLIANCE FUND I,

  
	
   

  	
   

  	
  L.P., a Delaware limited partnership

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Yucaipa American Alliance Fund I, LLC

  
	
   

  	
  Its:

  	
  General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Robert P. Bermingham

  	
   

  
	
   

  	
  By: Robert P. Bermingham

  
	
   

  	
  Title: Vice President

  
							

 

S-2

Stockholders’ AgreementExhibit 10.2

 

Pathmark Stores, Inc.

200 Milik Street

Carteret, New Jersey 07008

 

August 23,
2005

 

Mr. John T. Standley

2849 Myrtle Drive

Mechanicsburg, PA 17055

 

Employment Agreement

 

Dear Mr. Standley:

 

The following sets forth the agreement (“Agreement”) between Pathmark Stores, Inc.
(the “Company”) and you
regarding the terms and provisions of your employment as Chief Executive
Officer of the Company.  Capitalized
words not otherwise defined herein shall have the meanings set forth in Section 7
below.

 

1.                                       Term
of Employment.  The term of your
employment under this Agreement, including extensions hereof (the “Term”), shall commence on August 29,
2005 (the “Effective Date”) and shall continue until August 29,
2008.  The Term shall automatically renew
for successive one-year periods, subject to written notice of non-renewal by
either party at least 180 days prior to expiration of the then Term.  Subject to the provisions of Section 4
below, either party may terminate your employment under this Agreement at any
time.

 

2.                                       Title
and Duties.  During the Term, you
shall be employed as the Chief Executive Officer and most senior officer of the
Company and shall report directly to the Board of Directors of the Company
(the “Board”). 
Your duties and responsibilities to the Company shall be consistent in
all respects with the position of Chief Executive Officer and most senior
officer of the Company, including, without limitation, having all officers and
employees of the Company report directly or indirectly to you and, subject only
to Board approval, selecting, hiring and terminating any and all officers of
the Company.  Nothing in this Agreement
shall prohibit the Board, in accordance with the Board’s good faith exercise of
its fiduciary duties with respect to corporate governance, from requiring (i) that
specified officers of the Company also report directly to the Board or to
appropriate directors or committees of the Board and (ii) that you also
report to the non-executive chairman of the Board, the Board’s lead director or
to appropriate committees of the Board. 
The previous sentence is not intended to limit in any way the
responsibilities of officers and employees to report directly or indirectly to
you with respect to normal business operations and strategic opportunities or
alternatives.  You shall devote
substantially all of your business time, attention, skills and efforts
exclusively to the business and affairs of the Company; provided that, to the extent consistent
with performing your duties hereunder, you can manage your personal finances,
engage in charitable or community services, serve on industry, civic or
charitable boards and committees and, subject to the prior written

 

 

approval of the Board (which approval will not be
unreasonably withheld), serve on the boards of corporations and other
for-profit entities.  Your principal
place of employment shall be the executive offices of the Company in the
Carteret, New Jersey area, although you understand and agree that you will be
required to travel from time to time for business purposes.  Effective on the Effective Date, you shall be
appointed to the Board and any executive committee of the Board; provided that you will not be considered
an independent director nor a Yucaipa designee under any shareholder agreement
or related agreement between the Company and Yucaipa.

 

3.                                       Compensation
and Benefits.

 

(a)                                  Annual
Salary.  As compensation to you for
all services rendered to the Company, the Company will pay you an annual base
salary ( “Annual Salary”) during the Term at the rate of
$900,000 per annum.  Your Annual Salary
shall be reviewed annually by the Board, and may be increased but not decreased
by the Board on the basis of such review. 
Your Annual Salary will be paid to you in accordance with the Company’s regular
payroll practices applicable to its executive officers (but in no event less
frequently than monthly).  For no
additional consideration, you shall serve as an officer and/or director of any
of the Company’s subsidiaries consistent with your position as Chief Executive
Officer and most senior officer of the Company.

 

(b)                                 Annual
Bonus.  During the Term, you shall be
eligible to earn an annual bonus (“Annual
Bonus”) pursuant to the Company’s Executive Incentive Plan.  For each full fiscal year of the Company
during the Term your target Annual Bonus shall equal 100% of your Annual
Salary, at the rate in effect at the beginning of the fiscal year (except that
your average annual rate of Annual Salary for the fiscal year shall be
substituted for the rate in effect at the start of the fiscal year to the
extent that the use of such average rate will not, in the reasonable, good
faith judgment of the Company, prevent such Annual Bonus from qualifying as
performance-based compensation under Section 162(m) of the Code).  Annual Bonus targets and adjustments for
performance above and below the target will be reasonably set by the Board in
good faith after consultation with you, such matrix to provide that the Annual
Bonus will increase above the target of 100% for performance above target.  Your target Annual Bonus for each partial
fiscal year during the Term shall be prorated based on the number of days in
such fiscal year occurring during the Term (including any partial fiscal year
ending at the expiration of the Term due to a non-renewal by either party, in
which case the Annual Bonus shall be calculated based on performance through
the Date of Termination).  The Annual
Bonus for each year, if earned, shall be paid to you in cash within 75 days of
the end of the applicable fiscal year. 
In addition to any Annual Bonus, within 30 days following the Effective
Date, the Company shall pay you a one-time bonus in cash in the amount of
$335,000.

 

(c)                                  Equity
Awards.  The Company shall grant you
the following equity awards (“Equity Awards”):

 

(i)  On August 23, 2005 (the “Grant Date”), an award of stock options to
purchase 1,500,000 shares of the Company’s common stock (“Common Stock”), at an exercise price equal
to the fair market value of such Common Stock on the Grant Date, pursuant to
the terms of an award agreement in the form of Attachment A.

 

2

 

(ii)  On the Effective Date, an award of
500,000 restricted shares of Common Stock, pursuant to the terms of an award
agreement in the form of Attachment B.

 

The Company shall be under no obligation to grant any
additional equity awards to you.  The
Company shall promptly register with the Securities and Exchange Commission on Form S-8
the shares of Common Stock issued or issuable as part of the Equity Awards and
shall list such shares on the Nasdaq Stock Market; provided that such shares shall be so registered and so
listed no later than the first date any Equity Award vests or any restriction
thereon lapses.  The Company agrees to
use commercially reasonable efforts to maintain the effectiveness of such
registration on Form S-8 and such listing on the Nasdaq Stock Market.

 

(d)                                 Benefits.  During the Term, you shall be eligible to
participate in all of the pension, welfare and fringe benefit programs and any
other employee benefit plan made available generally to executives of the
Company, in accordance with the terms and provisions thereof; provided, however, that the Company shall
not be obligated to provide you any non-qualified retirement plan (except
pursuant to the election by you described in Section 3(g) below).  You shall participate in the Company’s car
program on the same basis as other Company executive officers.  You shall receive life insurance and
disability coverage in accordance with the Company’s policies on the same basis
as other executive officers.  You shall
be entitled to five weeks’ vacation per each twelve-month period during the
Term and otherwise in accordance with the Company’s policies on the same basis
as other executive officers.

 

(e)                                  Relocation.  The Company shall provide you with the
following relocation benefits; provided
that the Company shall not be required to pay to you or reimburse you the
following amounts in excess, in the aggregate, of $450,000:

 

(i)  The Company shall pay or promptly
reimburse the cost of moving your personal belongings from your current primary
residence in Pennsylvania to a new residence within commuting distance of the
Company’s executive offices in New Jersey.

 

(ii)  The Company shall pay or promptly
reimburse the reasonable cost for you and the members of your family of a
reasonable number of house-hunting trips to New Jersey.

 

(iii)  The Company shall pay or promptly
reimburse the reasonable cost of temporary housing for you and your family
within commuting distance of the Company’s executive offices in New Jersey for
a period not to exceed twelve months.

 

(iv)  The Company shall pay or promptly
reimburse your reasonable commuting costs from your current primary residence
in Pennsylvania to the temporary housing contemplated by item (iii) above
and to the Company’s executive offices in New Jersey.

 

(v)  The Company shall pay or promptly
reimburse the other direct costs incurred by you in connection with your
relocation, such as brokerage commissions and buying and selling costs and, in
addition, the carrying costs of your home in Pennsylvania.

 

(vi)  The Company shall pay or promptly
reimburse any loss associated with the sale of your current primary residence
in Pennsylvania.

 

3

 

(vii)  To the extent that the payments or
reimbursements described above will result in taxable income to you, the
Company will promptly pay you an additional lump-sum amount such that you are
in the same net after-tax position you would have been in if no such relocation
expenses had been paid or reimbursed.

 

All payments and reimbursements under this Section 3(e) shall
be subject to presentation to the Company of appropriate documentation of the
costs incurred.

 

(f)                                    Business
Expenses.  The Company shall
reimburse you upon presentation by you of appropriate documentation, in
accordance with the Company’s regular practice, for business expenses
reasonably incurred by you in connection with the performance of your duties
under this Agreement.

 

(g)                                 Deferred
Compensation.  On the Effective Date
and on each anniversary of the Effective Date during the Term, the Company
shall credit an amount of $200,000 to your account under a deferred
compensation plan to be established by the Company.  With respect to such amounts, your account
balance shall vest and shall be non-forfeitable on the day before the first
anniversary of the date such amount was first credited or, if earlier,
immediately prior to the date of a Change in Control; provided, however,
that if your Involuntary Termination occurs within six months prior to a Change
in Control, you will receive at the time of the Change in Control an amount
equal to any unvested portion of your account balance that was forfeited as a
result of such termination.  Upon
termination of your employment with the Company as a result of a Termination
Event (other than a Termination Event resulting from your death or Disability,
in which case your account shall vest pro
rata in accordance with Section 4(b)(iv) below), you shall
forfeit your account balance with respect to any such amounts that are unvested
on the Date of Termination.  Promptly
following the Effective Date, the Company and you shall negotiate in good faith
and agree upon the specific terms of the deferred compensation plan, including
the applicable investment vehicle(s) and terms and schedule of
payments.  In addition, you will be
permitted to defer some or all of your Annual Salary and/or Annual Bonus
pursuant to the deferred compensation plan, as to which amounts you will be
fully vested immediately.  Any amounts
deferred under the plan will be credited to a bookkeeping account established
on the books and records of the Company for this purpose and the value of your
account, allocated among vested and unvested balances, will be adjusted to
reflect the performance of a nominal investment in accordance with the terms of
the plan.  The plan shall comply in all
respects with the requirements of Section 409A.  Notwithstanding Section 3(d) above,
on or prior to December 31, 2005, you may elect to participate, in lieu of
participating in the Company’s deferred compensation plan, in the Company’s
other non-qualified retirement plans; provided
that you shall not be eligible to receive the supplemental retirement benefits
from the Company provided to certain current officers of the Company in their
individual retirement agreements.

 

(h)                                 Indemnification.  The Company shall (i) indemnify, defend
and hold you harmless, to the full extent permitted under applicable law, for,
from and against any and all losses, claims, costs, expenses, damages,
liabilities or actions (including security holder actions) related to or
arising out of your employment with and service as a director and/or an officer
of the Company and/or its subsidiaries (including with respect to the
appointment of officers and other employees), and (ii) pay as incurred all
reasonable costs, expenses and attorneys’ fees incurred by you in connection
with or relating to the defense of any such losses, claims, costs,

 

4

 

expenses, damages, liabilities or actions or the
enforcement of any indemnification right hereunder.  You shall be entitled to coverage under any
director and officer liability insurance policies of the Company to the extent
of any other director or officer of the Company.

 

4.                                       Effect
of Termination of Employment.

 

(a)                                  Involuntary
Termination.  In the event of your
Involuntary Termination during the Term, the Company shall pay you in cash:

 

(i)  the full amount of the accrued but
unpaid Annual Salary you have earned through and including the Date of
Termination, plus a cash payment for all unused vacation time which you may
have accrued through and including the Date of Termination, on or as soon as
practicable after the Date of Termination or as otherwise required by
applicable law;

 

(ii)  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, on or as soon as practicable after the Date of Termination or
as otherwise required by applicable law;

 

(iii)  any unpaid reimbursement for business
or relocation expenses you are entitled to receive under Section(s) 3(e) and/or
3(f) above, in accordance with the Company’s expense reimbursement
policies;

 

(iv)  your vested account balance under the
deferred compensation plan described in Section 3(g) above and a
prorated portion of your unvested account balance based on the number of months
elapsed (including any partial month) in the applicable vesting period prior to
your Date of Termination, in accordance with your elections and the terms of
the plan; and

 

(v)  subject to your execution of a general
release of claims against the Company in the form of Attachment C, an amount
(the “Severance Amount”)
equal to (A) two times the sum of your Annual Salary plus your target
Annual Bonus on the Date of Termination, plus (B) a pro rata portion of
your target Annual Bonus for the applicable year (assuming for this purpose
that you have met all the necessary performance targets for such year at 100%
of the performance target) based upon the number of days occurring in such year
through and including the Date of Termination.

 

The Severance Amount shall be payable in cash in 24
equal monthly installments commencing on the date 30 days after the Date of
Termination (such 24-month period being referred to as the “Severance Period”); provided that, to the extent required
under Section 409A to avoid the imposition of additional tax under that section to
you, any payment of the Severance Amount shall commence on the six-month
anniversary of your separation from service with the Company (or, if earlier,
the date of your death) and continue in equal monthly installments over the
remainder of the Severance Period; provided
further that, to the extent permitted under Section 409A
without the imposition of additional tax under that section to you, the
Severance Amount shall be paid (A) in an immediate lump-sum in the event such
Involuntary Termination occurs on or after a Change in Control or (B) in
an immediate lump sum at the time of a Change in Control (less any amounts
previously paid to you) in the event that your Involuntary Termination occurs

 

5

 

within six months prior to a Change in Control.  In addition, medical coverage shall continue
to be provided by the Company to you and your family to the same extent as if
you remained employed with the Company, or, in the alternative, COBRA premiums
for such coverage shall be paid for by the Company, for one year following the
Date of Termination.  Except as otherwise
provided by the provisions of any pension, welfare or fringe benefit program
and any other employee benefit plan in which you are a participant or this
Agreement, in the event of your Involuntary Termination, as of the Date of
Termination, you shall not have any right to any additional payments or
benefits from the Company under this Agreement or otherwise.  The Company agrees that, in the event that
your employment with the Company terminates as a result of the Company’s
delivering a notice of non-renewal in accordance with Section 1 above
within six months prior to a Change in Control, such termination will be treated
as an Involuntary Termination for purposes of this Section 4(a).

 

(b)                                 Termination
Event.  In the event your employment
ends at any time during the Term as a result of a Termination Event, the
Company shall pay you in the same applicable manner described in Section 4(a) above:

 

(i)  the full amount of the accrued but
unpaid Annual Salary you have earned through and including the Date of
Termination, plus a cash payment for all unused vacation time which you may
have accrued through and including the Date of Termination;

 

(ii)  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 and, if the Termination Event is death or Disability, a portion
of your Annual Bonus, if any, that you would have been entitled to receive,
based upon the number of days you were employed in such year;

 

(iii)  any unpaid reimbursement for business
expenses you are entitled to receive under Section(s) 3(e) and/or 3(f) above;
and

 

(iv)  any vested account balance under the
deferred compensation plan described in Section 3(g) above and, in
the case of your termination of employment as a result of your death or
Disability, a prorated portion of your unvested account balance based on the
number of months elapsed (including any partial month) in the applicable
vesting period prior to your Date of Termination, in accordance with your
elections and the terms of the plan.

 

If the Termination Event is death or Disability,
medical coverage shall continue to be provided by the Company to you and/or
your family to the same extent as if you remained employed with the Company,
or, in the alternative, COBRA premiums for such coverage shall be paid for by
the Company, for one year following the Date of Termination.  Except as otherwise provided by the
provisions of any pension, welfare or fringe benefit program and any other
employee benefit plan in which you are a participant or this Agreement, in the
event of a Termination Event, as of the Date of Termination, you shall not have
any right to any additional payments or benefits from the Company under this
Agreement or otherwise.

 

6

 

(c)                                  Treatment
of Equity Awards.  The treatment of
your Equity Awards in connection with the termination of your employment with
the Company shall be as set forth in the award agreements described in Section 3(c) above.

 

(d)                                 Date
and Notice of Termination.  Any
termination of your employment by the Company or by you during the Term shall
be communicated 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 your termination of employment
with the Company (the “Date of Termination”)
shall be determined as follows:  (i) if
your employment is terminated for Disability, 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 30-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 (A) the date
specified in the Notice of Termination and (B) 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 your employment is
terminated by a non-renewal notice by either you or the Company, the last day
of the then Term; (v) if the basis for your Involuntary Termination is
your resignation for Good Reason, the Date of Termination shall be the later of
(A) the date specified in the Notice of Termination and (B) 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; (vi) if
your employment is terminated by your resignation other than for Good Reason,
the Date of Termination shall be the date set forth in the applicable notice,
which shall be 30 days after the date such notice is received by the Company;
and (vii) if your employment is terminated as a result of your death, the
Date of Termination shall be the date of your death.

 

(e)                                  Other
Positions.  You agree that, if
requested in connection with any termination of your employment with the
Company, you shall resign from any or all positions with the Company, including
as a member of the Board, or with any subsidiary of the Company.

 

(f)                                    Mitigation.  You shall not be required to mitigate the
Severance Amount or other payments hereunder by seeking other employment or
otherwise, and the Severance Amount and such other amounts will not be reduced
if such other employment is obtained.

 

5.                                       Payment
of Excise Taxes.

 

(a)                                  In
the event that any payment or benefit received or to be received by you
pursuant to the terms of this Agreement or of any other plan, arrangement or
agreement of the Company or any of its subsidiaries (collectively, the “Payments”), would be subject to the excise
tax (the “Excise Tax”)
imposed by Section 4999 of the Code, as determined below, the Company
shall pay to you, at the time specified in Section 5(b) below, an
additional amount (the “Gross-Up
Payment”) such that the net amount retained by you, after deduction
of the Excise Tax on Payments and any federal, state and local income and
employment or other tax and the Excise

 

7

 

Tax upon the Gross-Up Payment (including all taxes on
all Gross-Up Payments), and any interest, penalties or additions to tax payable
by you with respect thereto, shall be equal to the total Payments, less the
federal, state and local income and employment or other tax (other than the
Excise Tax) that would apply to such Payments if the Excise Tax did not apply.  For purposes of determining the amount of the
Gross-Up Payment, you shall be deemed to pay federal income taxes at the
highest marginal rates of federal income taxation applicable to the individuals
in the calendar year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rates of taxation applicable to
individuals as are in effect in the state and locality of your residence in the
calendar year in which the Gross-Up Payment is to be made, net of the maximum
reduction in federal income taxes that can be obtained by you from deduction of
such state and local taxes, taking into account any limitations applicable to
individuals subject to federal income tax at the highest marginal rates.

 

(b)                                 The
Gross-Up Payments provided for in Section 5(a) above shall be made
coincident with the Payment with respect to which such Excise Tax relates.

 

(c)                                  All
calculations under this Section 5 shall be made initially reasonably and
in good faith by the Company and the Company shall provide prompt written
notice thereof to you to enable you to timely file all applicable tax
returns.  Upon your request, the Company
shall provide you with sufficient tax and compensation data to enable you or
your tax advisor to independently make the calculations described in Section 5(a) above
and the Company shall reimburse you for reasonable fees and expenses incurred
with respect to any such calculations. 
If you give written notice to the Company of any objection to the
results of the Company’s calculations within 60 days of your receipt of written
notice thereof, the dispute shall be referred for determination to an
independent accounting firm selected by the independent auditors of the Company
(the “Accounting Firm”); provided that such Accounting Firm is
reasonably acceptable to you.  The
Company shall pay all fees and expenses of such Accounting Firm.  Pending such determination by the Accounting
Firm, the Company shall pay you the Gross-Up Payment as determined by it in
good faith.  The Company shall pay you any
additional amount determined by the Accounting Firm to be due under this Section 5
(together with interest thereon at a rate equal to 120% of the federal short
term rate determined under Section 1274(d) of the Code) promptly
after such determination.

 

(d)                                 The
determination by the Accounting Firm will be conclusive and binding upon all
parties unless the Internal Revenue Service, a court of competent jurisdiction,
or such other duly empowered governmental body or agency (a “Taxing Authority”) determines that you owe
a greater or lesser amount of Excise Tax with respect to any Payment than the
amount determined by the Accounting Firm. 
If a Taxing Authority makes a claim against you that, if successful,
would require the Company to make a payment under this Section 5(d), you
agree to contest the claim on request of the Company subject to the following
conditions:

 

(i)  You shall notify the Company of any
such claim within ten days of your being notified thereof.  In the event that the Company desires the claim
to be contested, it shall promptly (but in no event more than 30 days after the
notice from you or such shorter time as the Taxing Authority may specify for
responding to such claim) request that you contest the claim.  You shall not make any payment of any tax
which is the subject of the claim before you have given the notice or during
the 30-day period thereafter unless

 

8

 

you receive written instructions from the Company to make such payment
together with an advance of funds sufficient to make the requested payment plus
any amounts payable under this Section 5 determined as if such advance
were an Excise Tax, in which event you shall act promptly in accordance with
such instructions.

 

(ii)  If the Company so requests, you shall
contest the claim by either paying the tax claimed and suing for a refund in
the appropriate court or contesting the claim in the United States Tax Court or
other appropriate court, as directed by the Company; provided, however, that any request by the Company for you
to pay the tax shall be accompanied by an advance from the Company to you of
funds sufficient to make the requested payment plus any amounts payable under
this Section 5, determined as if such advance were an Excise Tax.  If directed by the Company in writing, you
shall take all action necessary to compromise or settle the claim, but in no
event shall you compromise or settle the claim or cease to contest the claim
without the written consent of the Company; provided,
however, that you may take any such action if you waive in writing
the right to a payment under this Section 5(d) for any amounts
payable in connection with such claim. 
You agree to cooperate in good faith with the Company in contesting the
claim and to comply with any reasonable request from the Company concerning the
contest of the claim, including the pursuit of administrative remedies, the
appropriate forum for any judicial proceedings, and the legal basis for
contesting the claim.  Upon request of
the Company, you shall take appropriate appeals of any judgment or decision
that would require the Company to make a payment under this Section 5.  The Company shall be liable for, and
indemnify, defend and hold you harmless against, any loss in connection with,
and all costs and expenses, including attorneys’ fees, which may be incurred as
a result of, contesting the claim, and will provide to you within 30 days after
each written request therefor by you cash advances or reimbursement for all
such costs and expenses actually incurred or reasonably expected to be incurred
by you as a result of contesting the claim; provided
that you are in compliance with the other provisions of this Section 5(d)(ii).

 

(e)                                  If
it is established pursuant to a final determination of a court or other Taxing
Authority that the Excise Tax is less than the amount taken into account under Section 5(a) above,
you shall repay to the Company within 30 days of your receipt of notice of such
final determination the portion of the Gross-Up Payment attributable to such
reduction (plus the portion of the Gross-Up Payment attributable to the Excise
Tax and federal, state and local income tax imposed on the portion of the
Gross-Up Payment being repaid by you if and to the extent that such repayment
results in a reduction in Excise Tax and a dollar-for-dollar reduction in your
taxable income and wages for the purpose of federal, state and local income
taxes) plus any interest received by you on the amount of such repayment.  If it is established pursuant to a final
determination of a court or other Taxing Authority that the Excise Tax exceeds
the amount taken into account hereunder (including, without limitation, by
reason of any payment the existence or amount of which cannot be determined at
the time of the Gross-Up Payment), the Company shall make an additional
Gross-Up Payment pursuant to Section 5(a) above in respect of such
excess within 30 days of the Company’s receipt of notice of such final
determination or opinion.

 

9

 

6.                                       Restrictive
Covenants.

 

(a)                                  No
Competing Employment.  During the
period beginning on the Effective Date and ending on the first anniversary of
the Date of Termination (the “Restricted
Period”), 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 5% of the number of shares outstanding of any securities which are
publicly traded), (i) compete in any Excluded Location with the Business
or (ii) provide services to, whether as an employee or consultant, own,
manage, operate, control, participate in or be connected with (as a
stockholder, partner, or any similar ownership interest) any corporation, firm,
partnership, joint venture, sole proprietorship or other entity that competes
with the Business in any Excluded Location, except for the aforementioned 5%
ownership of publicly traded securities; provided
that, in the event that your employment with the Company is terminated as a
result of either you or the Company delivering a notice of non-renewal in
accordance with Section 1 above, then, following the Date of Termination,
the Company may elect to have the restrictions in this Section 6(a) apply
for a one-year period following the Date of Termination, in which event the
Company shall continue to pay you for such one-year period a monthly amount
equal to (A) your Base Salary (at the annual rate in effect at the end of
the Term) plus your then target Annual Bonus, divided by (B) twelve; and provided further that, if the Company
desires to have the restrictions in this Section 6(a) apply to you for
such one-year period it must notify you in writing of such election at the time
that the Company delivers to you its notice of non-renewal or within 30 days
following the Company’s receipt of the notice of non-renewal from you; and provided  further
that you shall not be eligible to receive the payments of Base Salary and
Annual Bonus contemplated by this sentence during any portion of such one-year
period that you are in breach of the provisions of this Section 6(a) (provided that the Company shall give you
written notice of such breach and an opportunity to cure, if curable, and you
shall be entitled to receive such payments in the event that such breach is
cured), but the restrictions set forth in this Section 6(a) shall
continue to apply to you for such one-year period.  Notwithstanding the foregoing provisions of
this Section 6(a), (i) an entity will be treated as competing with
the Business in an Excluded Location only if such entity operates (A) a
store that is typically considered to be a “supermarket” or “supercenter” or (B) a
“wholesale grocery business” (as such terms are reasonably and customarily
understood in the Business) in such Excluded Location; and (ii) you will
not be in violation of this Section 6(a) if you are employed by or
providing services to a regional chain of stores that is affiliated with
another entity that competes with the Business in an Excluded Location, so long
as (A) such regional chain does not compete with the Business in any
Excluded Location and (B) you do not render services in any capacity to
such other entity other than the services rendered to such regional chain.

 

(b)                                 No
Solicitation of Employees and Certain Other Persons.  During the period beginning on the Effective
Date and ending on the first anniversary of the Date of Termination (the “Non-Solicitation Period”), you shall not, without the prior
written consent of the Board, other than in furtherance of the business of the
Company, directly or indirectly (i) solicit or recruit, directly or
indirectly, any Key Employee (as defined below) or any independent contractor
of the Company or any of its subsidiaries for the purpose of being employed or
retained by you, directly or indirectly, or by any person on behalf of which
you are acting as an agent, representative or employee; (ii) solicit,
influence, or attempt to influence, for

 

10

 

a purpose or in a manner that would likely be
detrimental in any material respect to the business of the Company, any
provider of services or products to the Company with respect to its
relationship therewith, including, without limitation, any person or entity
which has been a provider of services or products to the Company and its
subsidiaries during your employment with the Company, or take any action
detrimental in any material respect to the existing relationships between the
Company and any provider of services or products; or (iii) assist or
encourage any other person in carrying out, directly or indirectly, any
activity that would be prohibited by the provisions of this Section 6(b) if
such activity were carried out by you. 
In particular, you agree that, other than in furtherance of the business
of the Company, you will not, directly or indirectly, during the
Non-Solicitation Period carry out any activity or take any action, or induce
any employee of the Company and its subsidiaries to carry out any activity or
take any action, that would be reasonably likely to result in any employee or
independent contractor of the Company ceasing to perform services for the
Company or any subsidiary thereof. 
Notwithstanding the foregoing provisions of this Section 6(b), you
will not have violated this Section 6(b) if the person or entity with
which you are then employed or to which you are otherwise providing services
solicits or recruits employees, independent contractors or providers of
services or products through the placing of advertisements in a newspaper, on
the internet or similar searches for employees not targeted specifically at
employees, independent contractors or other providers of services or products
to the Company or its subsidiaries.  For
purposes of this Section 6(b), “Key
Employee” means any employee of the Company or its subsidiaries with
the title of store manager or above.  The
Company agrees to give you prompt written notice if it becomes aware that you
violated the provisions of this Section 6(b) with respect to a Key
Employee whose base salary is less than $100,000 per annum and that the first
such violation shall not be considered to be a violation if the act in question
was not directly undertaken by you.

 

(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 and its subsidiaries, the use or disclosure of which could cause the
Company and its subsidiaries 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, except as
required by law, regulation, legal process or the rules of any
self-regulatory organization.  The term “confidential information” means
confidential and proprietary information of the Company or its subsidiaries not
previously disclosed or known to the public or to the trade (other than through
a disclosure by you in breach of this Section 6(c)) with respect to
business plans, prospects and opportunities, the identity of any suppliers,
proprietary information regarding customers, 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 of the Company and its
subsidiaries.  You understand and agree
that the rights and obligations set forth in this Section 6(c) are
perpetual and, in any case, shall extend beyond the Restricted 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 6

 

11

 

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 6
or such other relief as may be required to specifically enforce any of the
covenants in this Section 6.

 

7.                                       Definitions.  For purposes of this Agreement, the following
capitalized words shall have the meanings set forth below:

 

(a)                                  “Business” shall mean the retail or
wholesale grocery business.

 

(b)                                 “Cause” shall mean (i) your
continuing, willful failure to perform your lawful and proper duties hereunder
(other than as a result of total or partial incapacity due to physical or
mental illness) after written notice from the Board of such failure to perform
such duties of your employment, (ii) your conviction of or plea of nolo contendere to any felony (other than
a felony involving a traffic infraction), or (iii) an act or acts on your
part constituting fraud, theft or embezzlement or that otherwise constitutes a
felony under the laws of the United States or any state thereof which results or
was intended to result directly or indirectly in gain or personal enrichment by
you at the expense of the Company.  In
the case of any item described in the previous sentence, you shall be given
written notice of the alleged act or omission constituting Cause, which notice
shall set forth in reasonable detail the reason or reasons that the Board
believes you are to be terminated for Cause, including any act or omission that
is the basis for the decision to terminate you. 
In the case of an act or omission described in clause (i) or (iii) of
this definition of Cause, (A) you shall be given 30 days from the date of
such written notice to effect a cure of such alleged act or omission
constituting “Cause” which, upon such cure to the reasonable satisfaction of
the Board, shall no longer constitute a basis for Cause, and (B) an
opportunity to make a presentation to the Board (accompanied by counsel or
other representative, if you so desire) at a meeting of the Board held promptly
following such 30-day cure period.  At or
following such meeting, the Board shall determine in good faith whether or not
to terminate you for “Cause” and shall notify you in writing of its
determination and the effective date of such termination (which date may be no
earlier than the date of the aforementioned Board meeting).

 

(c)                                  “Change in Control” shall mean:

 

(i)  the individuals who, as of the
Effective Date, constitute the Board, and subsequently elected members of the
Board whose election is approved or recommended by at least a majority of the
members of the Board as of the Effective Date or their successors whose
election was so approved or recommended (other than any subsequently elected
members whose initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents by
or on behalf of any Person (as defined below) other than the Board), cease for
any reason to constitute at least a majority of the Board;

 

12

 

(ii)  the acquisition of beneficial
ownership, within the meaning of Rule 13d-3 promulgated under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), of 35% or more of the
Common Stock then outstanding, by any person, entity or group (a “Person”), within the meaning of Section 13(d)(3) or
Section 14(d)(2) of the Exchange Act, other than (A) the Company
or any of its subsidiaries, (B) an employee benefit plan of the Company or
trustee or other fiduciary holding securities under an employee benefit plan of
the Company or person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such employee benefit plan, (C) an
underwriter temporarily holding securities pursuant to an offering of such
securities, (D) an entity owned, directly or indirectly, by the Company’s
stockholders in substantially the same proportions as their ownership of Common
Stock or (E) Yucaipa; provided,
however, that a reverse subsidiary merger or similar transaction
shall not be a Change in Control under this Section 7(c)(ii) if it
would not otherwise be a Change in Control under Section 7(c)(iii) below;
or

 

(iii)  the consummation in one or a series
of transactions, or the approval of the Company’s stockholders in the case of
clause (A), of either (A) a plan of complete liquidation or dissolution of
the Company or (B) a merger, amalgamation or consolidation of the Company
with any Person, the issuance of voting securities of the Company or any
subsidiary in connection with a merger, consolidation or recapitalization of
the Company or a subsidiary, the sale or other disposition of all or
substantially all of the assets of the Company to any Person or the acquisition
of assets of any Person or other business combination or transaction (each, a “Business Combination”), unless, in each
case of a Business Combination, immediately following such Business
Combination, all or substantially all of the individuals and entities who were
the beneficial owners of the Common Stock outstanding immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50% of
the then outstanding shares of Common Stock and 50% of the combined voting
power of the then outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the entity resulting from
such Business Combination (including, without limitation, an entity which as a
result of such transaction owns the Company or all or substantially all of the
assets of the Company and its subsidiaries either directly or through one or
more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the Common Stock.

 

Notwithstanding the foregoing, in no event shall a
Change in Control result from (I) any increase in Yucaipa’s beneficial
ownership of equity of the Company or (II) the acquisition by Yucaipa of
all or substantially all of the business or assets of the Company.

 

(d)                                 “Code” shall mean the Internal Revenue Code
of 1986, as amended.

 

(e)                                  “Disability” shall mean your absence from
full-time employment with the Company for a period of at least 180 consecutive
days by reason of a mental or physical illness.

 

(f)                                    “Excluded Location” means a 25-mile radius of any location
where the Company operates its business.

 

13

 

(g)                                 “Good Reason” shall mean (i) the
failure of the Company to pay any material amount of compensation to you when
due, (ii) your no longer being the Chief Executive Officer and the most
senior officer of (A) the Company or (B) in the event of a
sale of all or substantially all of the assets of the Company or a merger,
consolidation or other business combination involving the Company, the
successor to the Company’s business or assets or (C) if all or
substantially all of the voting stock of the Company is held by another public
company, such public company, (iii) the assignment to you of any duties or
responsibilities inconsistent with your status under clause (ii) of this
sentence or your failure at any time to report directly to the board of
directors of the applicable company described in such clause (ii), (iv) any
material and adverse change in your duties or reporting responsibilities, (v) the
failure of you to be reelected as Chief Executive Officer and the most senior
officer of the entity described in clause (ii) hereof or your removal from
the office of Chief Executive Officer or the most senior officer of the entity
described in clause (ii) hereof, (vi) any failure by the Company to
maintain your principal place of employment and the executive offices of the
Company in the Carteret, New Jersey area, (vii) the Company, the surviving
corporation of any merger, consolidation or other transaction with the Company
and any parent corporation of the Company or such surviving corporation ceases
to have a publicly traded class of common stock (other than where Yucaipa
continues to have a controlling interest in the Company or such surviving
corporation or parent), or (viii) any material breach by the Company of
the Agreement; provided, however,
that, for any of the foregoing to constitute Good Reason, you must provide
written notification of your intention to resign within 30 days after you know
of the occurrence of any such event, and the Company shall have 30 days (10
days in the case of a material breach related to payment of any amounts due
hereunder) 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, such
event shall no longer constitute Good Reason; provided
further that it shall not be an event of Good Reason for the
applicable entity described in clause (ii) above to appoint an individual
other than you as the non-executive chairman of its board of directors.

 

(h)                                 “Involuntary Termination” shall
mean (i) your termination of employment by the Company other than for
Cause, death or Disability (but not including the Company’s notice of
non-renewal of the Term) or (ii) your resignation of employment with the
Company for Good Reason.

 

(i)                                     “Section 409A” shall mean Section 409A
of the Code.

 

(j)                                     “Termination Event” shall mean your
resignation without Good Reason or a termination by the Company for Cause or
Disability or by reason of your death.

 

(k)                                  “Yucaipa” means The Yucaipa Companies, LLC, and each Person
or entity controlled by, controlling or under common control with The Yucaipa
Companies, LLC, including, without limitation, investment funds or other
investment entities.

 

8.                                       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 or mailed by
United States registered mail, return receipt requested, postage prepaid, or
sent by facsimile transmission, upon confirmation of receipt by the sender of
such transmission, addressed to Corporate Secretary, Pathmark Stores,

 

14

 

Inc., 200 Milik Street, Carteret, New Jersey 07008,
facsimile (732) 499-3460, with a copy to the General Counsel of the
Company (if different from the Secretary), 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.

 

9.                                       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 or for you to terminate your employment, subject to the
provisions of Section 4, for any reason, with or without Good Reason.

 

(b)                                 Entire
Agreement.  The parties to this
Agreement represent, acknowledge and agree that this Agreement, together with
the award agreements described in Section 3(c) above, sets forth the
full and complete understanding and entire agreement regarding the subject
matter hereof and shall supersede all other agreements with respect thereto.

 

(c)                                  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 provisions 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, including, without limitation, any term sheets or document other
than this Agreement setting forth the proposed terms hereof.

 

(d)                                 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.

 

(e)                                  Successors;
Binding Agreement.  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 all or 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, including, without limitation, as a
result of a change in control or by operation of law.  The Company shall 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 to
expressly assume and to agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform it if

 

15

 

no such succession had taken plan; provided, however, that no such assumption
shall relieve the Company of its obligations hereunder.

 

(f)                                    Representations.  You hereby represent and warrant to the
Company that the execution and delivery by you of this Agreement to the Company
and your performance of your obligations hereunder will not breach the terms of
any contract, agreement or understanding to which you are a party, including
any covenant not to compete against any prior employer, and you acknowledge and
agree that a breach of this representation by you shall render this Agreement
void ab initio and without force
and effect.  You further acknowledge and
agree that the grant of the Equity Awards is conditioned upon the following
representations being true and complete in your good faith belief as of the
date you sign this Agreement, which representations shall be set forth in a
written statement (the “Statement”)
delivered to the Company on such date:  (i) your
equity awards from your current employer will be forfeited or will lapse, in
each case, without the receipt of consideration by you, at the time and in the
manner previously described by you to the Board in connection with the
negotiation of this Agreement, as set forth in the Statement; and (ii) that
you have no contractual entitlement to have any of such equity awards continue
beyond the dates described in the Statement or to have any awards vest that
would otherwise be forfeited in the manner described in the Statement.  You shall not be deemed to be in breach of
the foregoing representation in the event of (X) an extension by your
current employer for not more than 90 days of the normal post-termination
exercise period described in the Statement for your options from your current
employer to allow you time to exercise your options following the expiration of
the 90-day lock-up period currently in effect for the executive officers of your
current employer and/or (Y) the exercise by your current employer of the
unilateral right of your current employer to modify any of the equity terms
described in the Statement or to make a cash or other payment or other form of
compensation to you in connection with your termination of employment.  The Company represents and warrants to you
that the execution and delivery by it of this Agreement and the Company’s
performance of its obligations hereunder have been approved by all necessary
parties and all necessary actions and will not breach or conflict with the
terms of any contract, agreement or understanding, including, without
limitation, those contemplated by the last sentence of Section 2 above.

 

(g)                                 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.

 

(h)                                 Withholding.  Amounts paid to you hereunder shall be
subject to all required federal, state and local income tax and wage
withholdings.

 

(i)                                     Source
of Payments.  All payments provided
for 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, no special or separate fund
shall be established, and no other segregation of assets made, to assure
payment and 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.

 

16

 

(j)                                     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.

 

(k)                                  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.

 

(l)                                     Attorneys’
Fees.  The Company agrees to
reimburse all reasonable legal fees and expenses incurred by you in any dispute
relating to the enforcement of this Agreement if you prevail as to at least
half of the material issues in the dispute. 
Promptly following the Effective Date, upon presentation of appropriate
documentation by you, the Company shall reimburse you for all reasonable legal
fees and expenses incurred by you in negotiating and entering into this
Agreement and the agreements contemplated hereby and matters incidental hereto
or thereto, in an amount not to exceed $50,000.

 

(m)                               Section 409A.  The provisions of this Agreement are intended
to satisfy the applicable requirements of Section 409A and shall be
performed and interpreted consistent with such intent.  If any provision of this Agreement does not
satisfy such requirements or could otherwise cause you to be subject to the
interest and penalties under Section 409A, you and the Company agree to
negotiate in good faith an appropriate modification to maintain, to the maximum
extent practicable, the original intent of the applicable provision without
violating the requirements of Section 409A (or causing the imposition of
additional tax on you under Section 409A).

 

17

 

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,

  
	
   

  	
   

  
	
   

  	
  /s/ James L.
  Moody, Jr.

  	
   

  
	
   

  	
   

  
	
   

  	
  James L. Moody, Jr.

  
	
   

  	
  Chairman of the
  Board of Directors

  

 

 

Acknowledged and Agreed as of this 23rd day
of August 2005.

 

 

	
  /s/ John T. Standley

  	
   

  
	
  John T. Standley

  

 

 

18

 

Attachment A

 

 

[Included as Exhibit 10.3 hereto]

 

 

 

Attachment B

 

 

[Included as Exhibit 10.4 hereto]

 

 

 

Attachment C

 

Release

 

I, the undersigned John
T. Standley, in consideration of the payments and benefits provided to me under
the Employment Agreement dated August 23, 2005, between Pathmark Stores, Inc.
(the “Company”) and me
(the “Agreement”), including
the Severance Amount (as defined in the Agreement)(the “Payments”), and after consultation with
counsel, I, for myself and on behalf of each of my heirs, executors,
administrators, representatives, agents, successors and assigns (collectively,
the “Releasors”), hereby
irrevocably and unconditionally release and forever discharge the Company and
its subsidiaries and affiliates (the “Company
Group”) and each of their respective officers, employees, directors,
shareholders and agents from any and all claims, actions, causes of action,
rights, judgments, obligations, damages, demands, accountings or liabilities of
whatever kind or character (collectively, “Claims”),
including, without limitation, any Claims under any federal, state, local or
foreign law, that the Releasors may have, or in the future may possess, arising
out of (i) my employment relationship with and service as an employee,
officer or director of the Company Group, and the termination of such
relationship or service, (ii) the Agreement, or (iii) any event,
condition, circumstance or obligation that occurred, existed or arose on or
prior to the date hereof; provided, however,
that this Release shall not apply to (i) the obligations of the Company
under the Agreement (including, without limitation, as to Annual Salary, Annual
Bonus, reimbursements, Severance Amount, Equity Awards and continuing medical
benefits) and (ii) any indemnification rights I may have in accordance
with the Company’s governance instruments or the Agreement or under any
director and officer liability insurance maintained by the Company.  Other than as contemplated above, the
Releasors further agree that the payments and benefits described in this
Release shall be in full satisfaction of any and all Claims for payments or
benefits, whether express or implied, that the Releasors may have against the
Company Group arising out of my employment relationship or my service as an
employee, officer and director of the Company Group and the termination
thereof.

 

In further consideration
of the Payments, the Releasors hereby unconditionally release and forever
discharge the Company Group, and each of their respective officers, employees,
directors, shareholders and agents from any and all Claims that the Releasors
may have as of the date hereof arising under the Federal Age Discrimination in
Employment Act of 1967, as amended, and the applicable rules and
regulations promulgated thereunder (“ADEA”).  By signing this Release, I hereby acknowledge
and confirm the following:  (i) I
was advised by the Company in connection with my termination of employment to
consult with an attorney of my choice prior to signing this Release and to have
such attorney explain to me the terms of this Release, including, without
limitation, the terms relating to my release of claims arising under ADEA and,
I have in fact consulted with an attorney; (ii) I was given a period of
not fewer than 21 days to consider signing this Release and to consult with an
attorney of my choosing with respect thereto; (iii) I am providing this
Release only in exchange for consideration in addition to anything of value to
which I am already entitled; and (iv) I knowingly and voluntarily am
providing this Release.

 

	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Date:

  	
   

  	
   

  

 

C-1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00090-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00090-of-00352.parquet"}]]