Employment Agreement - Marshall

Employment Agreement - Claus

Amendment to Agreement - Claus

 
 
 
 

EX-10.1 2 ex10_1.htm EXHIBIT 10.1 - EMPLOYMENT AGREEMENT

 


 

EXHIBIT 10.1

 

EMPLOYMENT AGREEMENT

 

AGREEMENT, made and entered into as of the 22nd day of January, 2010, by and between THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. (the “Company”), and RONALD MARSHALL (the “Employee”).

 

W I T N E S S E T H

 

WHEREAS, the Company and the Employee (the “Parties”) have agreed to enter into this agreement (the “Agreement) relating to the employment of the Employee by the Company;

 

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the Parties, intending to be legally bound, agree as follows:

 

1. Term of Employment.

 

(a) The Company agrees to employ the Employee, and the Employee agrees to remain in the employment of the Company, in accordance with the terms and provisions of this Agreement, for the period set forth below (the “Employment Period”).

 

(b) The Employment Period under this Agreement shall commence as of February 8, 2010 (the “Effective Date”) and, subject only to the provisions of Sections 7, 8 and 9 below relating to termination of employment, shall continue until the close of business on February 28, 2013 or, if the Employment Period is extended pursuant to subsection (c) of this Section 1, the close of business on the Extended Termination Date (as defined in subsection (c) of this Section 1).

 

(c) On February 28, 2013 and on each Extended Termination Date (as hereinafter defined), the Employment Period will automatically be extended for an additional 12-month period so as to end on the the last of February of the succeeding calendar year (an "Extended Termination Date") unless either Party gives written notice to the other Party at least 60 days in advance of the date on which the Employment Period would otherwise end that the Employment Period not be extended.

 

2. Duties.

 

It is the intention of the Parties that during the term of his employment under this Agreement, the Employee will serve as Chief Executive Officer and President of the Company. The Employee will devote his full business time and attention to the affairs of the Company and his duties as its Chief Executive Officer and President. The Employee will have such duties as are appropriate to his position as Chief Executive Officer and President of the Company, and will have such authority as required to enable him to perform these duties.  Consistent with the foregoing, the Employee shall comply with all reasonable instructions of the Board of Directors of the Company (the “Board”).  The Employee will be based at the headquarters of the Company,

 

 

 

 


 

 

which are currently located at Montvale, New Jersey, and his services will be rendered there except insofar as travel may be involved in connection with his regular duties.  The Employee will report to the Board.  The Parties recognize and agree that, during the Employment Period, the Employee may engage in non-profit, civic and charitable activities that do not conflict with the business and affairs of the Company or interfere with the Employee’s performance of his duties hereunder.

 

3. Salary and Bonus.

 

3.1 Salary.  The Company will pay the Employee a base salary at an initial annual rate of not less than $1,000,000, which base salary as in effect from time to time will not be reduced and will be reviewed periodically (at intervals of not more than twelve (12) months) by the Management Development and Compensation Committee (the “Compensation Committee”) of the Board of Directors of the Company (the “Board”) for the purpose of considering increases thereof.  In evaluating increases in the Employee’s base salary, the Compensation Committee will take into account such factors as corporate performance, individual merit, and such other considerations as it deems appropriate.  The Employee’s base salary will be paid in accordance with the standard practices for other corporate executives of the Company.

 

3.2 Incentive Compensation.  The Employee will be eligible to receive annually or otherwise any incentive compensation awards, whether payable in cash, shares of common stock of the Company or otherwise, which the Company, the Compensation Committee or such other authorized committee of the Board determines to award or grant.  For each fiscal year of the Company falling in whole or in part during the Employment Period, the Employee’s target annual incentive compensation opportunity will be no less than 100% of his base salary for the portion of the Employment Period falling within that fiscal year and the Employee’s maximum annual incentive compensation opportunity will be no less than 200% of his base salary for the portion of the Employment Period falling within that fiscal year; provided, however, that the Employee shall not be entitled to an incentive compensation award for the Company’s fiscal year ending in 2010.  The Employee’s annual incentive compensation award for the first full fiscal year falling during the Employment Period shall be no less than $1,000,000.

 

3.3 Inducement Grant.  Effective as of the Effective Date, the Company shall grant to the Employee under The Great Atlantic & Pacific Tea Company, Inc. 2008 Long-Term Incentive and Share Award Plan (the “LTIP”) (i) time-vested restricted stock units having a value on the Effective Date of $1,000,000, vesting at the rate of 1/4 on the first anniversary of the Effective Date and 3/4 on the third anniversary of the Effective Date if the Employee remains in the employment of the Company until the applicable date, and (ii) stock options having a value on the Effective Date of $1,000,000, becoming exercisable at the rate of 1/3 on the first anniversary of the Effective Date, 1/3 on the second anniversary of the Effective Date and 1/3 on the third anniversary of the Effective Date if the Employee remains in the employment of the Company until the applicable date.  The value of such time-vested restricted stock units and stock options shall be determined by the Compensation Committee in good faith, which, in the case of the stock options, will be based on the Black-Scholes option valuation model.  The terms and conditions of such time-vested restricted stock units and stock options will be substantially the same as the terms and conditions of comparable awards made under the LTIP in 2009, except as provided in subsection (f) of Section 10 of this Agreement.

 

 

 

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4. Benefit Programs.

 

4.1 Other Benefits.  The Employee will receive such benefits and awards, including without limitation stock options and restricted share awards, as the Compensation Committee shall determine and will be eligible to participate in all employee benefit plans and programs of the Company from time to time in effect for the benefit of senior executives of the Company, including, but not limited to, pension and other retirement plans, group life insurance, medical coverages, sick leave, salary continuation arrangements, vacations and holidays, relocation program, long-term disability, and such other benefits as are or may be made available from time to time to senior executives of the Company.  The Company agrees to provide the Employee with up to 6 months of temporary housing under the Company’s Senior Executive Relocation Program (rather than the 60 days of temporary housing provided for in such program) and (ii) basic term life insurance of $1,000,000 during the Employment Period (rather than the basic term life insurance coverage of $500,000 provided for in the Company’s BeneFlex Program).

 

4.2 Annual LTIP Grants.  Effective as of the date the annual awards are made under the LTIP in 2010 (the “2010 Grant Date”), the Company will grant to the Employee under the LTIP (i) time-vested restricted stock units having a value on the 2010 Grant Date of $1,333,333, vesting at the rate of 1/4 on the first anniversary of the 2010 Grant Date and 3/4 on the third anniversary of the 2010 Grant Date if the Employee remains in the employment of the Company until the applicable date, (ii) time-vested restricted stock units having a value on the 2010 Grant Date of $444,444, vesting at the rate of 100% on the third anniversary of the 2010 Grant Date if the Employee remains in the employment of the Company until the applicable date, (iii) performance-based restricted stock units having a value on the 2010 Grant Date of $888,889, vesting at the rate of 100% on the second anniversary of the 2010 Grant Date if the Employee remains in the employment of the Company until the applicable date and the performance conditions are met, and (iv) stock options having a value on the 2010 Grant Date of $1,333,333, becoming exercisable at the rate of 1/3 on the first anniversary of the 2010 Grant Date, 1/3 on the second anniversary of the 2010 Grant Date and 1/3 on the third anniversary of the 2010 Grant Date if the Employee remains in the employment of the Company until the applicable date.  The value of such time-vested restricted stock units, performance-based restricted stock units and stock options shall be determined by the Compensation Committee in good faith, which, in the case of the stock options, will be based on the Black-Scholes option valuation model.  The terms and conditions of such time-vested restricted stock units, performance-based restricted and stock options will be substantially the same as the terms and conditions of comparable awards granted by the Company to other senior executives of the Company in 2010.  In subsequent years, the Employee, provided he remains in the employment of the Company, shall be considered for awards under the LTIP on the same basis as other senior executives of the Company.

 

4.3 Legal Expenses.  The Company agrees to reimburse the Employee for his reasonable legal expenses incurred in the negotiation of this Agreement, but such reimbursement shall not exceed $25,000.

 

 

 

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5. Business Expenses.

 

The Employee will be reimbursed for all reasonable expenses incurred by him in connection with the conduct of the business of the Company, provided he properly accounts therefor in accordance with the Company’s policies.

 

6. Office and Services Furnished.

 

The Company shall furnish the Employee with office space, secretarial assistance and such other facilities and services as shall be suitable to the Employee’s position and adequate for the performance of his duties hereunder.

 

7. Termination of Employment by the Company.

 

7.1 Involuntary Termination by the Company Other Than For Permanent and Total Disability, For Performance or For Cause.  The Company may terminate the Employee’s employment at any time and for any reason (other than for Permanent and Total Disability as provided in Section 7.2 below, for Performance as provided in Section 7.3 below or for Cause as provided in Section 7.4 below) by giving him a written notice of termination to that effect at least 14 days before the date of termination.  In the event the Company terminates the Employee’s employment for any reason (other than for Permanent and Total Disability as provided in Section 7.2 below, for Performance as provided in Section 7.3 below or for Cause as provided in Section 7.4 below), the Employee shall be entitled to the benefits described in Section 10.

 

7.2 Termination Due to Permanent and Total Disability.  If the Employee incurs a Permanent and Total Disability, as defined below, the Company may terminate the Employee’s employment by giving him written notice of termination at least 14 days before the date of such termination.  In the event of such termination of the Employee’s employment because of Permanent and Total Disability, the Employee shall be entitled to receive (i) his base salary pursuant to Section 3.1 and any other compensation and benefits to the extent actually earned by the Employee pursuant to this Agreement or any benefit plan or program of the Company as of the date of such termination of employment at the normal time for payment of such salary, compensation or benefits, and (ii) any reimbursement amounts owing under Section 5.  For purposes of this Agreement, the Employee shall be considered to have incurred a Permanent and Total Disability if he becomes disabled within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the regulations thereunder.  The existence of such Permanent and Total Disability shall be determined by the Compensation Committee and shall be evidenced by such medical certification as the Compensation Committee shall require.

 

7.3 Termination for Performance.  After March 1, 2012, the Company may terminate the Employee’s employment for Performance if the Company fails to achieve the results called for in the business plan approved by the Board for the Company’s fiscal year beginning in 2011 or any subsequent fiscal year.  The determination as to whether the Employee has achieved the results called for in the business plan shall be made by the Board in its sole discretion.  The Company shall exercise its right to terminate the Employee’s employment for Performance by giving him written notice of termination on or before the date of such termination

 

 

 

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specifying the performance goal or goals that were not met.  In the event of such termination of the Employee’s employment for Performance, the Employee shall be entitled to the following:

 

(a) The Company shall pay to the Employee his base salary pursuant to Section 3.1 and any other compensation and benefits to the extent actually earned by the Employee under this Agreement or any benefit plan or program of the Company as of the date of such termination at the normal time for payment of such salary, compensation or benefits.

 

(b) The Company shall pay the Employee any reimbursement amounts owing under Section 5.

 

(c) Subject to the Employee’s timely execution of a Confidential Separation and Release Agreement as provided in Section 23 of this Agreement, the Company shall pay to the Employee as a severance benefit for each month during the 12-month period beginning with the month next following the date of termination of the Employee’s employment an amount equal to one-twelfth of his annual rate of base salary immediately preceding his termination of employment.  Each such monthly benefit shall be paid no later than the last day of the applicable month.  In the event that the Employee dies before the end of such 12-month period, the payments for the remainder of such period shall be paid to the Employee’s estate.  The commencement of payments pursuant to this subsection shall be subject to Section 22 of this Agreement.

 

(d) Subject to the Employee’s timely execution of a Confidential Separation and Release Agreement as provided in Section 23 of this Agreement, during the period of 12 months beginning on the date of the Employee’s termination of employment, the Employee shall remain covered by the medical plans of the Company that covered him immediately prior to his termination of employment as if he had remained in employment for such period.  In the event that the Employee’s participation in any such plan is barred, the Company shall arrange to provide the Employee with substantially similar benefits.  Any medical insurance coverage for such 12-month period pursuant to this subsection (d) shall become secondary upon the earlier of (i) the date on which the Employee begins to be covered by comparable medical coverage provided by a new employer, or (ii) the earliest date upon which the Employee becomes eligible for Medicare or a comparable Government insurance program.  The Employee’s COBRA entitlements shall become effective at the end of the extended benefit coverage provided pursuant to this subsection (d).  The commencement of payments pursuant to this subsection shall be subject to Section 22 of this Agreement.

 

7.4 Termination for Cause.  The Company may terminate the Employee’s employment for Cause if (i) the Employee willfully, substantially, and continually fails to perform the duties for which he is employed by the Company, (ii) the Employee willfully fails to comply with the reasonable instructions of the Board, (iii) the Employee willfully engages in conduct which is or would reasonably be expected to be materially and demonstrably injurious to the Company, (iv) the Employee willfully engages in an act or acts of dishonesty resulting in material personal gain to the Employee at the expense of the Company, (v) the Employee is con-

 

 

 

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victed of a felony, (vi) the Employee engages in an act or acts of gross malfeasance in connection with his employment hereunder, (vii) the Employee commits a material breach of the confidentiality provision set forth in Section 15, or (viii) the Employee exhibits demonstrable evidence of alcohol or drug abuse having a substantial adverse effect on his job performance hereunder.  The Company shall exercise its right to terminate the Employee’s employment for Cause by giving him written notice of termination on or before the date of such termination specifying in reasonable detail the circumstances constituting such Cause; provided, however, that (except as provided in the next sentence) in the case of a termination pursuant to clause (i) or (ii) of the preceding sentence, the Company shall give the Employee at least 10 days’ written notice of such failure and the termination shall occur at the end of such 10-day period unless the Employee shall have cured such failure to the reasonable satisfaction of the Board within such 10-day period.  The proviso in the preceding sentence requiring 10 days’ written notice in the case of a termination pursuant to clause (i) or (ii) shall apply only the first time that the Company seeks to terminate the Employee’s employment pursuant to said clause (i) or (ii).  In the event of such termination of the Employee’s employment for Cause, the Employee shall be entitled to receive (A) his base salary pursuant to Section 3.1 and any other compensation and benefits to the extent actually earned pursuant to this Agreement or any benefit plan or program of the Company as of the date of such termination at the normal time for payment of such salary, compensation or benefits and (B) any amounts owed under the reimbursement policy of Section 5.

 

8. Termination of Employment by the Employee.

 

(a) Good Reason.  The Employee may terminate his employment for Good Reason by giving the Company a written notice of termination at least 14 days before the date of such termination specifying in reasonable detail the circumstances constituting such Good Reason.  In the event of the Employee’s termination of his employment for Good Reason, the Employee shall be entitled to the benefits described in Section 10.  For purposes of this Agreement, Good Reason shall mean (i) a significant reduction in the scope of the Employee’s authority, functions, duties or responsibilities from that which is contemplated by this Agreement, (ii) the Employee being required to report directly to someone other than the Board, (iii) any reduction in the Employee’s base salary, (iv) a significant reduction in the employee benefits provided to the Employee other than in connection with an across-the-board reduction similarly affecting substantially all senior executives of the Company or (v) the relocation, without the Employee’s consent, of the Employee’s place of work to a location outside a 50-mile radius of Montvale, New Jersey.  If an event constituting a ground for termination of employment for Good Reason occurs, and the Employee fails to give notice of termination within 3 months after the occurrence of such event, the Employee shall be deemed to have waived his right to terminate employment for Good Reason in connection with such event (but not for any other event for which the 3-month period has not expired).

 

(b) Other.  The Employee may terminate his employment at any time and for any reason, other than pursuant to subsection (a) above, by giving the Company a written notice of termination to that effect at least 14 days before the date of termination.  In the event of the Employee’s termination of his employment pursuant to this subsection (b), the Employee shall be entitled to receive (i) his base salary pursuant to Section 3.1 and any other compensation and benefits to the extent actually earned by the Employee pur-

 

 

 

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suant to this Agreement or any benefit plan or program of the Company as of the date of such termination at the normal time for payment of such salary, compensation or benefits, and (ii) any reimbursement amounts owing under Section 5.

 

9. Termination of Employment By Death.  In the event of the death of the Employee during the course of his employment hereunder, the Employee’s estate shall be entitled to receive (i) his base salary pursuant to Section 3.1 and any other compensation and benefits to the extent actually earned by the Employee pursuant to this Agreement or any other benefit plan or program of the Company as of the date of such termination at the normal time for payment of such salary, compensation or benefits, and (ii) any reimbursement amounts owing under Section 5.  In addition, in the event of such death, the Employee’s beneficiaries shall receive any death benefits owed to them under the Company’s employee benefit plans.

 

10. Benefits Upon Termination Without Cause or For Good Reason.  If the Employee’s employment with the Company shall terminate (i) because of termination by the Company pursuant to Section 7.1 other than (A) for Cause, (B) for Performance or (C) because of Permanent and Total Disability, or (ii) because of termination by the Employee for Good Reason pursuant to Section 8(a), the Employee shall be entitled to the following:

 

(a) The Company shall pay to the Employee his base salary pursuant to Section 3.1 and any other compensation and benefits to the extent actually earned by the Employee under this Agreement or any benefit plan or program of the Company as of the date of such termination at the normal time for payment of such salary, compensation or benefits.

 

(b) The Company shall pay the Employee any reimbursement amounts owing under Section 5.

 

(c) Subject to the Employee’s timely execution of a Confidential Separation and Release Agreement as provided in Section 23 of this Agreement, the Company shall pay to the Employee as a severance benefit for each month during the 24-month period beginning with the month next following the date of termination of the Employee’s employment an amount equal to one-twelfth of the sum of (i) his annual rate of base salary immediately preceding his termination of employment, and (ii) the average of his three highest annual bonuses awarded under the Company’s annual management incentive bonus plan for any of the five fiscal years immediately preceding the fiscal year of his termination of employment (or, if he was not eligible for a bonus for at least three fiscal years in such five-year period, then the average of such bonuses for all of the fiscal years in such five-year period for which he was eligible, and if he was not eligible for such a bonus in any previous fiscal year, then 100% of his target annual bonus for the fiscal year in which the termination occurred), with any deferred bonuses counting for the fiscal year in which they were earned rather than the fiscal year in which they were paid.  Each such monthly benefit shall be paid no later than the last day of the applicable month.  In the event that the Employee dies before the end of such 24-month period, the payments for the remainder of such period shall be made to the Employee’s estate.  The commencement of payments pursuant to this subsection shall be subject to Section 22 of this Agreement.

 

 

 

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(d) Subject to the Employee’s timely execution of a Confidential Separation and Release Agreement as provided in Section 23 of this Agreement, the Company shall pay to the Employee as a bonus for the fiscal year in which the termination of his employment occurred an amount equal to a portion (determined as provided in the next sentence) of the bonus that the Employee would actually have received under the Company’s annual management incentive bonus plan for the fiscal year of termination of the Employee’s employment if his employment had not terminated (determined on the basis of his actual bonus opportunity and the actual degree of achievement of the applicable performance goals) or, if no bonus opportunity for that year had been established for the Employee at the time of such termination of employment, such portion of the bonus awarded to him under the Company’s annual management incentive bonus plan for the fiscal year immediately preceding the fiscal year of the termination of his employment, with deferred bonuses counting for the fiscal year in which they were earned rather than the fiscal year in which they were paid.  Such portion shall be determined by dividing the number of days of the Employee’s employment during such fiscal year up to his termination of employment by 365 (366 if a leap year).  Subject to Section 22 of this Agreement, such payment shall be made on the date on which bonuses for the applicable fiscal year are paid to executives of the Company generally under the Company’s annual management incentive bonus plan, and the Employee shall have no right to any further bonuses under said plan.

 

(e) Subject to the Employee’s timely execution of a Confidential Separation and Release Agreement as provided in Section 23 of this Agreement, during the period of 24 months beginning on the date of the Employee’s termination of employment, the Employee shall remain covered by the medical, dental, vision, life insurance, and, if reasonably commercially available through nationally reputable insurance carriers, long-term disability plans of the Company that covered him immediately prior to his termination of employment as if he had remained in employment for such period.  In the event that the Employee’s participation in any such plan is barred, the Company shall arrange to provide the Employee with substantially similar benefits (but, in the case of long-term disability benefits, only if reasonably commercially available) .  Any medical insurance coverage for such 24-month period pursuant to this subsection (e) shall become secondary upon the earlier of (i) the date on which the Employee begins to be covered by comparable medical coverage provided by a new employer, or (ii) the earliest date upon which the Employee becomes eligible for Medicare or a comparable Government insurance program.  The Employee’s COBRA entitlements shall become effective at the end of the extended benefit coverage provided pursuant to this subsection (e).  The commencement of payments pursuant to this subsection shall be subject to Section 22 of this Agreement.

 

(f) Subject to the Employee’s timely execution of a Confidential Separation and Release Agreement as provided in Section 23 of this Agreement, the Employee shall become fully vested on the date of his termination of employment in all of the time-vested restricted stock units and stock options described in Section 3.3 of this Agreement.

 

11. Benefits Upon Non-Extension of Employment Period.  If the Employee’s employment with the Company shall terminate on February 28, 2013 or an Extended Termina-

 

 

 

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tion Date by reason of the non-extension of the Employment Period pursuant to Section 1(c) of this Agreement as a result of notice of non-extension given by the Employee or by both the Employee and the Company pursuant to said Section 1(c), the Employee shall be entitled to receive (i) his base salary pursuant to Section 3.1 and any other compensation and benefits to the extent actually earned by the Employee under this Agreement or any benefit plan or program of the Company as of the date of such termination at the normal time for payment of such salary, compensation or benefits and (ii) any amounts owed under the reimbursement policy of Section 5.  If the Employee’s employment with the Company shall terminate on February 28, 2013 or an Extended Termination Date by reason of the non-extension of the Employment Period pursuant to Section 1(c) of this Agreement as a result of notice of non-extension given by the Company pursuant to said Section 1(c), the Employee shall be entitled to the following:

 

(a) The Company shall pay to the Employee his base salary pursuant to Section 3.1 and any other compensation and benefits to the extent actually earned by the Employee under this Agreement or any benefit plan or program of the Company as of the date of such termination at the normal time for payment of such salary, compensation or benefits.

 

(b) The Company shall pay the Employee any reimbursement amounts owing under Section 5.

 

(c) Subject to the Employee’s timely execution of a Confidential Separation and Release Agreement as provided in Section 23 of this Agreement, the Company shall pay to the Employee as a severance benefit for each month during the 12-month period beginning with the month next following the date of termination of the Employee’s employment an amount equal to one-twelfth of his annual rate of base salary immediately preceding his termination of employment.  Each such monthly benefit shall be paid no later than the last day of the applicable month.  In the event that the Employee dies before the end of such 12-month period, the payments for the remainder of such period shall be paid to the Employee’s estate.  The commencement of payments pursuant to this subsection shall be subject to Section 22 of this Agreement.

 

(d) Subject to the Employee’s timely execution of a Confidential Separation and Release Agreement as provided in Section 23 of this Agreement, during the period of 12 months beginning on the date of the Employee’s termination of employment, the Employee shall remain covered by the medical plans of the Company that covered him immediately prior to his termination of employment as if he had remained in employment for such period.  In the event that the Employee’s participation in any such plan is barred, the Company shall arrange to provide the Employee with substantially similar benefits.  Any medical insurance coverage for such 12-month period pursuant to this subsection (d) shall become secondary upon the earlier of (i) the date on which the Employee begins to be covered by comparable medical coverage provided by a new employer, or (ii) the earliest date upon which the Employee becomes eligible for Medicare or a comparable Government insurance program.  The Employee’s COBRA entitlements shall become effective at the end of the extended benefit coverage provided pursuant to this subsection (d).  The commencement of payments pursuant to this subsection shall be subject to Section 22 of this Agreement.

 

 

 

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12. Stock Ownership Requirement.  While employed by the Company, the Employee shall be expected to maintain ownership of common stock or stock equivalents having a value equal to three times his base salary in accordance with guidelines established by the Compensation Committee.  For purposes of these guidelines, stock ownership includes shares over which the Employee has direct or indirect ownership or control.  Stock equivalents for this purpose include vested restricted stock units but do not include unvested restricted stock units, unvested restricted stock or unexercised stock options.  The Employee is expected to meet this ownership requirement within five years after the Effective Date.

 

13. Entitlement to Other Benefits.

 

Except as otherwise provided in this Agreement, this Agreement shall not be construed as limiting in any way any rights or benefits that the Employee or his spouse, dependents or beneficiaries may have pursuant to any other plan or program of the Company.

 

14. Non-Competition.

 

The Employee agrees that during the Noncompetition Period (as hereinafter defined), the Employee will not, within any of the geographical areas of the United States or Canada in which the Company is then conducting business (either directly or through franchisees), directly or indirectly, own, manage, operate, control, be employed by, participate in, provide consulting services to, or be connected in any manner with the ownership, management, operation or control of any business similar to any of the types of businesses conducted by the Company to any significant extent during his employment or on the date of termination of his employment, except the Employee may own for investment purposes up to 1% of the capital stock of any company whose stock is publicly traded, and during the Noncompetition Period the Employee will not contact or solicit employees of the Company for the purpose of inducing such employees to leave the employ of the Company.  For purposes of this Agreement, the Noncompetition Period shall be the period beginning on the Effective Date and ending on the date which is eighteen months after the termination of the Employee’s employment with the Company, except that in the case of a termination entitling the Employee to severance benefits under Section 7.3(c) or 10(c) hereof, the Noncompetition Period shall instead end on the date which is (i) 12 months after such termination of employment if Section 7.3(c) is applicable, and (ii) 24 months after such termination of employment if Section 10(c) is applicable.  If, at the enforcement of this Section 14, a court or arbitrator holds that the duration or scope stated therein is unreasonable under circumstances then existing, the Parties agree that the maximum duration and scope reasonable under such circumstances will be substituted for the stated duration or scope and that the court or arbitrator should revise the restrictions contained in this Section 14 to cover the maximum duration and scope permitted by law.

 

15. Confidential Information and Trade Secrets.

 

The Employee hereby acknowledges that he will have access to and become acquainted with various trade secrets and proprietary information of the Company and other confidential information relating to the Company.  The Employee covenants that he will not, directly or indirectly, disclose or use such information except as is necessary and appropriate in connec-

 

 

 

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tion with his employment by the Company and that he will otherwise adhere in all respects to the Company’s policies against the use or disclosure of such information.

 

16. Arbitration; Injunctive Relief.

 

Any controversy or claim arising out of or relating to this Agreement, directly or indirectly, or the performance or breach thereof, will be settled by arbitration in accordance with the rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof.  The arbitration will be held in New York, New York, or such other place as may be agreed upon at the time by the parties to the arbitration.  The parties shall bear their own expenses in connection with any arbitration or proceeding arising out of or relating to this Agreement, directly or indirectly, or the performance or breach thereof; provided, however, that in the event that the Employee substantially prevails, the Company agrees promptly to reimburse the Employee for all expenses (including costs and fees of witnesses, evidence and attorney’s fees and expenses) reasonably incurred by him in investigating, prosecuting, defending, or preparing to prosecute or defend any action, proceeding or claim arising out of or relating to this Agreement, directly or indirectly, or the performance or breach thereof.  The parties acknowledge and agree that a breach of Employee’s obligations under Sections 14 or 15 could cause irreparable harm to the Company for which the Company would have no adequate remedy at law, and further agree that, notwithstanding the agreement of the parties to arbitrate controversies or claims as set forth above, the Company may apply to a court of competent jurisdiction to seek to enjoin preliminarily or permanently any breach or threatened breach of the Employee’s obligations under Sections 14 and 15.

 

17. Indemnification.

 

The Company shall indemnify and hold the Employee harmless to the fullest extent legally permissible under the laws of the State of Maryland, against any and all expenses, liabilities and losses (including attorney’s fees, judgments, fines and amounts paid in settlement) reasonably incurred or suffered by him by reason of any claim or cause of action asserted against him because of his service at any time as a director or officer of the Company.  The Company shall advance to the Employee the amount of his expenses incurred in connection with any proceeding relating to such service to the fullest extent legally permissible under the laws of the State of Maryland.  Notwithstanding the foregoing, the Company’s obligations pursuant to this Section 17 shall not apply in the case of any claim or cause of action by or in the right of the Company or any subsidiary thereof.

 

18. Liability Insurance.

 

The Company shall maintain a directors and officers liability insurance policy and will take all steps necessary to ensure that the Employee is covered under such policy for his service as a director or officer of the Company or any subsidiary of the Company with respect to claims made at any time with respect to such service.

 

 

 

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19. Certain Additional Payments by the Company.

 

(a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution made, or benefit provided (including, without limitation, the acceleration of any payment, distribution or benefit and the accelerated exercisability of any stock option), to or for the benefit of the Employee (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 19) (a “Payment”) would be subject to the excise tax imposed by Section 4999 of the Code (or any similar excise tax) or any interest or penalties are incurred by the Employee with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then the Employee shall be entitled to receive from the Company an additional payment (a “Gross-Up Payment”) in an amount such that after payment by the Employee of all taxes (including any Excise Tax, income tax or employment tax and taking into account any lost or reduced tax deductions on account of such Gross-Up Payment) imposed upon the Gross-Up Payment and any interest or penalties imposed with respect to such taxes, the Employee retains an amount from the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.  Notwithstanding the foregoing provisions of this Section 19(a), if it shall be determined that the Employee is entitled to a Gross-Up Payment, but that the portion of the Payments that would be treated as “parachute payments” under Section 280G of the Code does not exceed by more than $150,000 the greatest amount (the “Safe Harbor Amount”) that could be paid to the Employee such that the receipt of Payments would not give rise to any Excise Tax, then no Gross-up Payment shall be made to the Employee and the amount payable under Section 10(c) of this Agreement shall be reduced so that the Payments, in the aggregate, are reduced to the Safe Harbor Amount.  For purposes of reducing the payments to the Safe Harbor Amount, only amounts payable under this Agreement (and no other Payments) shall be reduced. If the reduction of the amounts payable under this Agreement would not result in a reduction of the Payments to the Safe Harbor Amount, no amounts payable under this Agreement shall be reduced pursuant to this Section 19(a).

 

(b) Subject to the provisions of Section 19(c), all determinations required to be made under this Section 19, including determination of whether a Gross-Up Payment is required and of the amount of any such Gross-up Payment, shall be made by the accounting firm selected by the Company to audit the Company's financial statements (the “Accounting Firm”), which shall provide detailed supporting calculations both to the Company and the Employee within 15 business days of the date of termination of the Employee’s employment, if applicable, within 15 days after receipt of written notice from the Employee that there has been a Payment, or at such earlier time as is requested by the Company, provided that any determination that an Excise Tax is payable by the Employee shall be made on the basis of substantial authority.  The initial Gross-Up Payment, if any, as determined pursuant to this Section 19(b), shall be paid to the Employee within five business days of the receipt of the Accounting Firm’s determination.  If the Accounting Firm determines that no Excise Tax is payable by the Employee, it shall furnish the Employee with a written opinion that he has substantial authority not to report any Excise Tax on his Federal income tax return.  Any determination by the Accounting Firm meeting the requirements of this Section 19(b) shall be binding upon the Company and the Employee; subject only to payments pur-

 

 

 

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suant to the following sentence based on a determination that additional Gross-Up Payments should have been made, consistent with the calculations required to be made hereunder (the amount of such additional payments is referred to herein as the “Gross-Up Underpayment”).  In the event that the Company exhausts its remedies pursuant to Section 19(c) and the Employee thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Gross-Up Underpayment that has occurred and any such Gross-Up Underpayment shall be promptly paid by the Company to or for the benefit of the Employee.  The fees and disbursements of the Accounting Firm shall be paid by the Company.

 

(c) The Employee shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of a Gross-Up Payment.  Such notification shall be given as soon as practicable but not later than ten business days after the Employee receives written notice of such claim and shall apprise the Company of the nature of such claim and the date on which such Claim is requested to be paid.  The Employee shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due).  If the Company notifies the Employee in writing prior to the expiration of such period that it desires to contest such claim and that it will bear the costs and provide the indemnification as required by this sentence, the Employee shall:

 

 

(i) give the Company any information reasonably requested by the Company relating to such claim,

 

(ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company and reasonably acceptable to the Employee,

 

(iii) cooperate with the Company in good faith in order effectively to contest such claim, and

 

(iv) permit the Company to participate in any proceedings relating to such claim;

 

provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Employee harmless, on an after-tax basis, for any Excise Tax, income tax or employment tax (taking into account any lost or reduced tax deductions on account of such payments), including interest and penalties with respect thereto, imposed as a result of such representation and payment of costs and expenses.  Without limitation on the foregoing provisions of this Section 19(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Employee to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Employee agrees to prosecute such contest to a deter-

 

 

 

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mination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Employee to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Employee on an interest-free basis and shall indemnify and hold the Employee harmless, on an after-tax basis, from any Excise Tax, income tax or employment tax (taking into account any lost or reduced tax deductions on account of such advance), including interest or penalties with respect thereto, imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to the payment of taxes for the taxable year of the Employee with respect to which such contested amount is claimed to be due is limited solely to such contested amount.  Furthermore, the Company’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Employee shall be entitled, in his sole discretion, to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

 

(d) If, after the receipt by the Employee of an amount advanced by the Company pursuant to Section 19(c), the Employee becomes entitled to receive any refund with respect to such claim, the Employee shall (subject to the Company’s complying with the requirements of Section 19(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto).  If, after the receipt by the Employee of an amount advanced by the Company pursuant to Section 19(c), a determination is made that the Employee shall not be entitled to any refund with respect to such claim and the Company does not notify the Employee in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then any obligation of the Employee to repay such advance shall be forgiven and the amount of such advance shall offset, to the extent thereof, the amount of/ Gross-Up Payment required to be paid.

 

(e) Anything in this Section 19 to the contrary notwithstanding, the Gross-Up Payments shall be made no later than the end of the calendar year next following the calendar year in which the Employee remits the related taxes.

 

20. No Duty to Seek Employment.  The Employee shall not be under any duty or obligation to seek or accept other employment following termination of employment, and no amount, payment or benefits due to the Employee hereunder shall be reduced or suspended if the Employee accepts subsequent employment.

 

21. Deductions and Withholding.

 

All amounts payable or which become payable under any provision of this Agreement shall be subject to any deductions authorized by the Employee and any deductions and withholdings required by law.

 

22. Compliance with IRC Section 409A.

 

In the event that it shall be determined that any payments or benefits under this Agreement constitute nonqualified deferred compensation covered by Section 409A of the Code for which no exemption under Code Section 409A or the regulations thereunder is available

 

 

 

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(“Covered Deferred Compensation”), then notwithstanding anything in this Agreement to the contrary, (i) if the Employee is a “specified employee” (within the meaning of Code Section 409A and the regulations thereunder and as determined by the Company in accordance with said Section 409A) at the time of the Employee’s separation from service (as defined below), the payment of any such Covered Deferred Compensation payable on account of such separation from service shall be made no earlier than the date which is 6 months after the date of the Employee’s separation from service (or, if earlier than the end of such 6-month period, the date of the Employee’s death) and (ii) the Employee shall be deemed to have terminated from employment for purposes of this Agreement if and only if the Employee has experienced a “separation from service” within the meaning of said Section 409A and the regulations thereunder.  To the extent any payment of Covered Deferred Compensation is subject to the 6-month delay, such payment shall be paid immediately at the end of such 6-month period (or the date of death, if earlier).  Whenever payments under this Agreement are to be made in installments, each such installment shall be deemed a separate payment for purposes of Code Section 409A.  The provisions of this Agreement relating to such Covered Deferred Compensation shall be interpreted and operated consistently with the requirements of Code Section 409A and the regulations thereunder.  If it is found by the Internal Revenue Service that this Agreement fails Code Section 409A in terms of written documentary compliance, the Company will indemnify the Employee for any legal and accounting costs, any taxes, interest and penalties, and any other associated costs, that are related solely to the documentary non-compliance.  Except as set forth in the preceding sentence, no other action or failure to act pursuant to this Section 22 shall subject the Company to any claim, liability or expense, and the Company shall have no obligation to indemnify or otherwise protect the Employee from the obligation to pay any taxes, interest or penalties pursuant to Code Section 409A.

 

Anything in this Agreement to the contrary notwithstanding, any payments or benefits under this Agreement that are conditioned on the timely execution of a Confidential Separation and Release Agreement and that would, in the absence of this sentence, be payable before the date which is 60 days after the termination of the Employee’s employment shall be delayed until, and paid on, such 60th day after the termination of the Employee’s employment (or, if such 60th day is not a business day, on the next succeeding business day), but only if the Employee executes such Confidential Separation and Release Agreement, and does not revoke it, in accordance with Section 23 of this Agreement.

 

Anything in this Agreement to the contrary notwithstanding, any reimbursements or in-kind benefits to which the Employee is entitled under this Agreement (other than such reimbursements or benefits that are not taxable to the Employee for federal income tax purposes or that are otherwise exempt from coverage under Section 409A of the Code pursuant to said Section 409A and the regulations thereunder) shall meet the following requirements: (i) the amount of expenses eligible for reimbursement, or in-kind benefits provided, in one calendar year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year (except that the Company’s medical plans may impose a limit on the amount that may be reimbursed or provided), (ii) any reimbursement of an eligible expense must be made on or before the last day of the calendar year following the calendar year in which the expense was incurred, and (iii) the Employee’s right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit.

 

 

 

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23. Confidential Separation and Release Agreement.

 

For purposes of this Agreement, a “Confidential Separation and Release Agreement” shall mean a Confidential Separation and Release Agreement in the form prescribed by the Company at the applicable time which is executed by the Employee within 50 days after the termination of the Employee’s employment and not revoked by him.  Such Confidential Separation and Release Agreement shall (i) include a similar release and similar non-disparagement and other covenants to be made by the Company in favor of the Employee except in cases of fraud, dishonesty, gross malfeasance or gross negligence on the part of the Employee, and (ii) not require that the Employee release his rights under the Company’s directors and officers liability insurance policy, the Company’s By-laws or the laws of the State of Maryland governing the indemnification of officers.  If the Employee fails to execute such Confidential Separation and Release Agreement within such 50-day period or shall revoke his agreement thereto, the Employee shall not be entitled to any of the payments or benefits under this Agreement that are conditioned upon his timely execution of a Confidential Separation and Release Agreement.

 

24. Governing Law.

 

The validity, interpretation and performance of this Agreement will be governed by the laws of the State of New Jersey without regard to the conflict of law provisions.

 

25. Notice.

 

Any written notice required to be given by one Party to the other Party hereunder will be deemed effected if mailed by registered mail:

 

 

To the Company at:

The Great Atlantic & Pacific Tea Company

 

 

2 Paragon Drive

 

 

Montvale, New Jersey  07645

 

 

Attention:  General Counsel

 

or such other address as may be stated in a notice given as hereinbefore provided

 

To the Employee at such address as may be stated in a notice

 

given to the Company as hereinabove provided.

 

26. Severability.

 

If any one or more of the provisions contained in this Agreement is held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability will not affect any other provision hereof.

 

27. Successors and Assigns.

 

This Agreement will be binding upon and inure to the benefit of the Parties hereto and their personal representatives, and, in the case of the Company, its successors and assigns.  To the extent the Company’s obligations under this Agreement are transferred to any successor or assign, such successor or assign shall be treated as the “Company” for purposes of this

 

 

 

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Agreement.  Other than as contemplated by this Agreement, the Employee may not assign his rights or duties under this Agreement.

 

28. Continuing Effect.

 

Wherever appropriate to the intention of the Parties hereto, the respective rights and obligations of the Parties, including the obligations referred to in Sections 10, 14, 15, 16, 17, 19 and 22, hereof, will survive any termination or expiration of the term of this Agreement.

 

29. Entire Agreement.

 

This Agreement constitutes the entire agreement between the Parties and supersedes any and all other agreements and understandings between the Parties in respect of the matters addressed in this Agreement.

 

30. Amendment and Waiver.

 

No amendment or waiver of any provision of this Agreement shall be effective, unless the same shall be in writing and signed by the Parties, and then such amendment, waiver or consent shall be effective only in the specific instance or for the specific purpose for which such amendment, waiver or consent was given.

 

31. Employee Representations.

 

The Employee hereby represents and warrants to the Company that (a) the execution, delivery and performance of this Agreement by the Employee does not and will not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which the Employee is a party or by which he is bound, and (b) except as disclosed to the Company by the Employee, the Employee is not a party to or bound by any employment agreement, transition services agreement, noncompetition agreement, nonsolicitation agreement or confidentiality agreement with any other person or entity.

 

32. Counterparts.

 

This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed an original but all of which together shall constitute one and the same instrument.

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and the Employee has hereunto set his hand as of the day and year first above written.

 

 

 

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THE GREAT ATLANTIC & PACIFIC TEA

COMPANY, INC.

 

 

By:    /s/ Christian Haub         

          Name:  Christian Haub

          Title:    Executive Chairman

 

 /s/ Ronald Marshall           

Ronald Marshall

 

 

 

 

 

 

 

 

 

 

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E. CLAUS EMPLOYMENT AGREEMENT - SEPTEMBER 8, 2005
 
 
                         EXECUTIVE EMPLOYMENT AGREEMENT
 
                  AGREEMENT, made and entered into as of the 15th day of August,
2005, by and between THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. (the
"Company"), and Eric Claus (the "Employee").
 
                         W I T N E S S E T H
 
                  WHEREAS, the Company and the Employee (the "Parties") have
agreed to enter into this agreement (the "Agreement) relating to the employment
of the Employee by the Company;
 
                  NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein and for other good and valuable consideration, the
Parties, intending to be legally bound, agree as follows:
 
1. Term of Employment; Prior Employment Agreement Superseded.
 
(a) The Company agrees to employ the Employee, and the Employee agrees to remain
in the employment of the Company, in accordance with the terms and provisions of
this Agreement, for the period set forth below (the "Employment Period").
 
(b) The Employment Period under this Agreement shall commence as of August 15,
2005 and, subject only to the provisions of Sections 7, 8 and 9 below relating
to termination of employment, shall continue until the close of business on
August 14, 2008 or, if the Employment Period is extended pursuant to subsection
(c) of this Section 1, the close of business on the Extended Termination Date
(as defined in subsection c of this Section 1).
 
(c) On August 14, 2008 and on each Extended Termination Date (as hereinafter
defined), the Employment Period will automatically be extended for an additional
12-month period so as to end on the succeeding August 14 (an "Extended
Termination Date") unless either Party gives written notice to the other Party
at least 6 months in advance of the date on which the Employment Period would
otherwise end that the Employment Period not be extended. If the Employment
Period terminates by reason of the non-extension of the Employment Period by the
Company, the termination of the Employee's employment at the end of the
Employment Period shall be treated as a termination of the Employee's employment
pursuant to Section 7.1 (entitling the Employee to the benefits described in
Section 10 or Section 11, whichever is applicable), unless the requirements for
a termination pursuant to Section 7.2, 7.3 or 7.4 are satisfied (in which case,
the Employee's entitlement to benefits will be governed by the applicable
section). If the Employment Period terminates by reason of the non-extension of
the Employment Period by the Employee or by reason of the non-extension of the
Employment Period by both the Employee and the Company, the termination of the
Employee's employment at the end of the Employment Period shall be treated as a
termination of employment by the Employee pursuant to Section 8(b) (in which
case, the Employee's entitlement to benefits will be governed by Section 8(b)),
unless the requirements for a termination pursuant to Section 8(a) are satisfied
(entitling the Employee to the benefits described in Section 10 or Section 11,
whichever is applicable).
 
(d) This Agreement supersedes the Executive Employment Agreement dated November
11, 2002 between the Employee and The Great Atlantic & Pacific Tea Company of
Canada Limited, and the Employee shall have no further right to any compensation
or benefits under that agreement.
 
2. Duties.
 
                  It is the intention of the Parties that during the term of his
employment under this Agreement, the Employee will serve as Chief Executive
Officer and President of the Company. The Employee will devote his full business
time and attention to the affairs of the Company and his duties as its Chief
Executive Officer and President. The Employee will have such duties as are
appropriate to his position as Chief Executive Officer and President of the
Company, and will have such authority as required to enable him to perform these
duties. Consistent with the foregoing, the Employee shall comply with all
reasonable instructions of the Executive Chairman of the Company. The Employee
will be based at the headquarters of the Company, which are currently located at
Montvale, New Jersey, and his services will be rendered there except insofar as
travel may be involved in connection with his regular duties. The Employee will
report directly to the Executive Chairman of the Company.
 
3. Salary and Bonus.
 
3.1 Salary. The Company will pay the Employee a base salary at an initial annual
rate of not less than $550,000, which base salary as in effect from time to time
will not be reduced and will be reviewed periodically (at intervals of not more
than twelve (12) months) by the Governance Committee (the "Governance
Committee") of the Board of Directors of the Company (the "Board") for the
purpose of considering increases thereof. In evaluating increases in the
Employee's base salary, the Governance Committee will take into account such
factors as corporate performance, individual merit, and such other
considerations as it deems appropriate. The Employee's base salary will be paid
in accordance with the standard practices for other corporate executives of the
Company.
 
3.2 Incentive Compensation. The Employee will be eligible to receive annually or
otherwise any incentive compensation awards, whether payable in cash, shares of
common stock of the Company or otherwise, which the Company, the Governance
Committee or such other authorized committee of the Board determines to award or
grant. For each fiscal year of the Company falling in whole or in part during
the Employment Period, the Employee's target annual incentive compensation
opportunity will be no less than 100% of his base salary for the portion of the
Employment Period falling within that fiscal year and the Employee's maximum
annual incentive compensation opportunity will be no less than 200% of his base
salary for the portion of the Employment Period falling within that fiscal year.
 
3.3 Signing Bonus. The Company shall pay the Employee a signing bonus of
$800,000 within 30 days after the execution of this Agreement by the Company and
the Employee.
 
4. Benefit Programs.
 
4.1 Other Benefits. The Employee will receive such benefits and awards,
including without limitation stock options and restricted share awards, as the
Governance Committee shall determine and will be eligible to participate in all
employee benefit plans and programs of the Company from time to time in effect
for the benefit of senior executives of the Company, including, but not limited
to, pension and other retirement plans, group life insurance, hospitalization
and surgical and major medical coverages, sick leave, salary continuation
arrangements, vacations and holidays, long-term disability, and such other
benefits as are or may be made available from time to time to senior executives
of the Company. The Employee shall be entitled to continue to participate in the
Company's Supplemental Executive Retirement Plan (SERP), and his service with
The Great Atlantic & Pacific Tea Company of Canada Limited shall be fully
recognized under the SERP on the same basis as if it were service with the
Company.
 
4.2 Grant of Performance Restricted Stock Units. Effective as of August 15,
2005, the Company will grant to the Employee 150,000 performance restricted
stock units pursuant to the Company's 2005 Turnaround Incentive Compensation
Plan. The terms and conditions of such performance restricted stock units will
be substantially the same as the terms and conditions of performance restricted
stock units granted by the Company to other senior executives of the Company in
2005.
 
4.3      Legal Expenses.
                  The Company agrees to reimburse the Employee for his
reasonable legal expenses incurred in the negotiation of this Agreement.
 
5.       Business Expenses.
 
                  The Employee will be reimbursed for all reasonable expenses
incurred by him in connection with the conduct of the business of the Company,
provided he properly accounts therefor in accordance with the Company's
policies.
 
6. Office and Services Furnished.
 
                  The Company shall furnish the Employee with office space,
secretarial assistance and such other facilities and services as shall be
suitable to the Employee's position and adequate for the performance of his
duties hereunder.
 
7. Termination of Employment by the Company.
 
7.1 Involuntary Termination by the Company Other Than For Permanent and Total
Disability, For Performance or For Cause.
The Company may terminate the Employee's employment at any time and for any
reason (other than for Permanent and Total Disability as provided in Section 7.2
below, for Performance as provided in Section 7.3 below or for Cause as provided
in Section 7.4 below) by giving him a written notice of termination to that
effect at least 45 days before the date of termination. In the event the Company
terminates the Employee's employment for any reason (other than for Permanent
and Total Disability as provided in Section 7.2 below, for Performance as
provided in Section 7.3 below or for Cause as provided in Section 7.4 below),
the Employee shall be entitled to the benefits described in Section 10 or
Section 11, whichever is applicable.
 
7.2 Termination Due to Permanent and Total Disability.
If the Employee incurs a Permanent and Total Disability, as defined below, the
Company may terminate the Employee's employment by giving him written notice of
termination at least 45 days before the date of such termination. In the event
of such termination of the Employee's employment because of Permanent and Total
Disability, the Employee shall be entitled to receive (i) his base salary
pursuant to Section 3.1 and any other compensation and benefits to the extent
actually earned by the Employee pursuant to this Agreement or any benefit plan
or program of the Company as of the date of such termination of employment at
the normal time for payment of such salary, compensation or benefits, and (ii)
any reimbursement amounts owing under Section 5. For purposes of this Agreement,
the Employee shall be considered to have incurred a Permanent and Total
Disability if he is unable to substantially carry out his duties under this
Agreement by reason of any medically determinable physical or mental impairment
which can be expected to result in death or which has lasted or can be expected
to last for a continuous period of not less than 12 months. The existence of
such Permanent and Total Disability shall be evidenced by such medical
certification as the Secretary of the Company shall require and shall be subject
to the approval of the Governance Committee, and termination under this section
shall be subject to the duty of the Company to make reasonable accommodation of
the Employee's disability pursuant to relevant legislation respecting
disabilities, discrimination and human rights.
 
7.3 Termination for Performance.
The Company may terminate the Employee's employment for Performance if the
Employee fails to meet satisfactorily the performance goals established for the
Employee by the Compensation Committee of the Board in consultation with the
Employee. The determination as to whether the Employee has met satisfactorily
such performance goals shall be determined by the Board in its sole discretion.
The Company shall exercise its right to terminate the Employee's employment for
Performance by giving him written notice of termination on or before the date of
such termination specifying the performance goal or goals that the Employee
failed to meet. In the event of such termination of the Employee's employment
for Performance, the Employee shall be entitled to the following:
 
(a)      The Company shall pay to the Employee his base salary pursuant to
         Section 3.1 and any other compensation and benefits to the extent
         actually earned by the Employee under this Agreement or any benefit
         plan or program of the Company as of the date of such termination at
         the normal time for payment of such salary, compensation or benefits.
 
(b)      The Company shall pay the Employee any reimbursement amounts owing
         under Section 5.
 
(c)      The Company shall pay to the Employee as a severance benefit for each
         month during the 12-month period beginning with the month next
         following the date of termination of the Employee's employment an
         amount equal to one-twelfth of his annual rate of base salary
         immediately preceding his termination of employment. Each such monthly
         benefit shall be paid no later than the last day of the applicable
         month. In the event that the Employee dies before the end of such
         12-month period, the payments for the remainder of such period shall be
         paid to the Employee's estate.
 
(d)      During the period of 12 months beginning on the date of the Employee's
         termination  of  employment,  the Employee shall remain covered by the
         medical plans of the Company that covered him immediately prior to his
         termination of employment as if he had remained in employment for such
         period.  In the event that the  Employee's  participation  in any such
         plan is barred, the Company shall arrange to provide the Employee with
         substantially  similar benefits.  Any medical  insurance  coverage for
         such  12-month  period  pursuant to this  subsection  (d) shall become
         secondary  upon the  earlier  of (i) the date on  which  the  Employee
         begins to be covered by comparable  medical coverage provided by a new
         employer,  or (ii) the earliest  date upon which the Employee  becomes
         eligible for Medicare or a comparable  Government  insurance  program.
         The Employee's COBRA entitlements shall become effective at the end of
         the extended  benefit  coverage  provided  pursuant to this subsection
         (d).
 
(e)      Any outstanding stock options with respect to the common stock of the
         Company held by the Employee on the date of termination of the
         Employee's employment, to the extent then exercisable, shall remain
         exercisable for a period of three months following such termination of
         employment (but in no event beyond the expiration date of the
         applicable option).
 
7.4 Termination for Cause.
The Company may terminate the Employee's employment for Cause if (i) the
Employee willfully, substantially, and continually fails to perform the duties
for which he is employed by the Company, (ii) the Employee willfully fails to
comply with the reasonable instructions of the Executive Chairman of the
Company, (iii) the Employee willfully engages in conduct which is or would
reasonably be expected to be materially and demonstrably injurious to the
Company, (iv) the Employee willfully engages in an act or acts of dishonesty
resulting in material personal gain to the Employee at the expense of the
Company, (v) the Employee is convicted of a felony, (vi) the Employee engages in
an act or acts of gross malfeasance in connection with his employment hereunder,
(vii) the Employee commits a material breach of the confidentiality provision
set forth in Section 15, or (viii) the Employee exhibits demonstrable evidence
of alcohol or drug abuse having a substantial adverse effect on his job
performance hereunder. The Company shall exercise its right to terminate the
Employee's employment for Cause by giving him written notice of termination on
or before the date of such termination specifying in reasonable detail the
circumstances constituting such Cause. In the event of such termination of the
Employee's employment for Cause, the Employee shall be entitled to receive (i)
his base salary pursuant to Section 3.1 and any other compensation and benefits
to the extent actually earned pursuant to this Agreement or any benefit plan or
program of the Company as of the date of such termination at the normal time for
payment of such salary, compensation or benefits and (ii) any amounts owed under
the reimbursement policy of Section 5. In the event that the Employee's
employment is terminated for Cause pursuant to this Section 7.4, any outstanding
stock options with respect to the common stock of the Company held by the
Employee on the date of termination of the Employee's employment, to the extent
then exercisable, shall remain exercisable for a period of 30 days following
such termination of employment (but in no event beyond the expiration date of
the applicable option).
 
8.       Termination of Employment by the Employee.
 
(a)      Good Reason. The Employee may terminate his employment for Good Reason
         by giving the Company a written notice of termination at least 45 days
         before the date of such termination specifying in reasonable detail the
         circumstances constituting such Good Reason. In the event of the
         Employee's termination of his employment for Good Reason, the Employee
         shall be entitled to the benefits described in Section 10 or Section
         11, whichever is applicable. For purposes of this Agreement, Good
         Reason shall mean (i) a significant reduction in the scope of the
         Employee's authority, functions, duties or responsibilities from that
         which is contemplated by this Agreement, (ii) any reduction in the
         Employee's base salary, or (iii) a significant reduction in the
         employee benefits provided to the Employee other than in connection
         with an across-the-board reduction similarly affecting substantially
         all senior executives of the Company. If an event constituting a ground
         for termination of employment for Good Reason occurs, and the Employee
         fails to give notice of termination within 3 months after the
         occurrence of such event, the Employee shall be deemed to have waived
         his right to terminate employment for Good Reason in connection with
         such event (but not for any other event for which the 3-month period
         has not expired).
 
(b)      Other. The Employee may terminate his employment at any time and for
         any reason, other than pursuant to subsection (a) above, by giving the
         Company a written notice of termination to that effect at least 45 days
         before the date of termination. In the event of the Employee's
         termination of his employment pursuant to this subsection (b), the
         Employee shall be entitled to receive (i) his base salary pursuant to
         Section 3.1 and any other compensation and benefits to the extent
         actually earned by the Employee pursuant to this Agreement or any
         benefit plan or program of the Company as of the date of such
         termination at the normal time for payment of such salary, compensation
         or benefits, and (ii) any reimbursement amounts owing under Section 5.
 
9.       Termination of Employment By Death. In the event of the death of the
         Employee during the course of his employment hereunder, the Employee's
         estate shall be entitled to receive (i) his base salary pursuant to
         Section 3.1 and any other compensation and benefits to the extent
         actually earned by the Employee pursuant to this Agreement or any other
         benefit plan or program of the Company as of the date of such
         termination at the normal time for payment of such salary, compensation
         or benefits, and (ii) any reimbursement amounts owing under Section 5.
         In addition, in the event of such death, the Employee's beneficiaries
         shall receive any death benefits owed to them under the Company's
         employee benefit plans.
 
10.      Benefits Upon Termination Without Cause or For Good Reason (No Change
         of Control). If (a) the Employee's employment with the Company shall
         terminate (i) because of termination by the Company pursuant to Section
         7.1 other than for Cause, for Performance or because of Permanent and
         Total Disability, or (ii) because of termination by the Employee for
         Good Reason pursuant to Section 8(a), and (b) such termination of
         employment does not occur within 13 months following a "Change of
         Control" of the Company (as defined in Section 12), the Employee shall
         be entitled to the following:
 
(a)      The Company shall pay to the Employee his base salary pursuant to
         Section 3.1 and any other compensation and benefits to the extent
         actually earned by the Employee under this Agreement or any benefit
         plan or program of the Company as of the date of such termination at
         the normal time for payment of such salary, compensation or benefits.
 
(b)      The Company shall pay the Employee any reimbursement amounts owing
         under Section 5.
 
(c)      The Company shall pay to the Employee as a severance  benefit for each
         month  during  the  24-month  period  beginning  with the  month  next
         following  the date of  termination  of the  Employee's  employment an
         amount equal to  one-twelfth of the sum of (i) his annual rate of base
         salary immediately  preceding his termination of employment,  and (ii)
         the average of his three  highest  annual  bonuses  awarded  under the
         Company's annual  management  incentive bonus plan for any of the five
         calendar years  preceding his termination of employment (or, if he was
         not  eligible  for a bonus for at least three  calendar  years in such
         five-year  period,  then the  average of such  bonuses  for all of the
         calendar years in such five-year period for which he was eligible, and
         if he was not  eligible for such a bonus in any  previous  year,  then
         100% of his target  annual  bonus for the year of  termination  of his
         employment),  with any deferred  bonuses  counting for the year earned
         rather than the year paid.  Each such monthly benefit shall be paid no
         later than the last day of the applicable month. In the event that the
         Employee dies before the end of such 24-month period, the payments for
         the remainder of such period shall be made to the Employee's estate.
 
(d)      The  Company  shall  pay to the  Employee  as a bonus  for the year of
         termination of his employment an amount equal to a portion (determined
         as provided in the next sentence) of the bonus that the Employee would
         actually have received under the Company's annual management incentive
         bonus plan for the  calendar  year of  termination  of the  Employee's
         employment if his  employment  had not  terminated  (determined on the
         basis  of his  actual  bonus  opportunity  and the  actual  degree  of
         achievement  of the  applicable  performance  goals)  or,  if no bonus
         opportunity for that year had been established for the Employee at the
         time of such  termination  of  employment,  such  portion of the bonus
         awarded to him under the Company's annual  management  incentive bonus
         plan for the calendar year immediately  preceding the calendar year of
         the termination of his employment,  with deferred bonuses counting for
         the year  earned  rather  than the year paid.  Such  portion  shall be
         determined by dividing the number of days of the Employee's employment
         during such calendar year up to his  termination  of employment by 365
         (366 if a leap year).  Such payment shall be made on or about the date
         on which bonuses for the applicable year are paid to executives of the
         Company  generally  under the Company's  annual  management  incentive
         bonus  plan,  and the  Employee  shall  have no right  to any  further
         bonuses under said plan.
 
(e)      During the period of 24 months beginning on the date of the Employee's
         termination  of  employment,  the Employee shall remain covered by the
         medical,   dental,   vision,   life  insurance,   and,  if  reasonably
         commercially   available  through   nationally   reputable   insurance
         carriers,  long-term  disability plans of the Company that covered him
         immediately  prior  to  his  termination  of  employment  as if he had
         remained  in  employment  for  such  period.  In the  event  that  the
         Employee's participation in any such plan is barred, the Company shall
         arrange to provide the Employee with  substantially  similar  benefits
         (but, in the case of long-term disability benefits, only if reasonably
         commercially  available)  . Any medical  insurance  coverage  for such
         24-month period pursuant to this subsection (e) shall become secondary
         upon the  earlier of (i) the date on which the  Employee  begins to be
         covered by comparable medical coverage provided by a new employer,  or
         (ii) the earliest  date upon which the Employee  becomes  eligible for
         Medicare or a comparable  Government insurance program. The Employee's
         COBRA  entitlements  shall become effective at the end of the extended
         benefit coverage provided pursuant to this subsection (e).
 
(f)      Any outstanding stock options with respect to the common stock of the
         Company held by the Employee on the date of termination of the
         Employee's employment, to the extent then exercisable, shall remain
         exercisable for a period of twelve months following such termination of
         employment (but in no event beyond the expiration date of the
         applicable option).
 
11.      Benefits Upon Termination Without Cause or For Good Reason (Change of
         Control). If (a) the Employee's employment with the Company shall
         terminate (i) because of termination by the Company pursuant to Section
         7.1 other than for Cause, for Performance or because of Permanent and
         Total Disability, (ii) because of termination by the Employee for Good
         Reason pursuant to Section 8(a), or (iii) for any reason during the 30
         days beginning on the first anniversary of a Change of Control, and (b)
         such termination of employment occurs within 13 months following a
         "Change of Control" of the Company (as defined in Section 12), the
         Employee shall be entitled to the following:
 
(a)      The Company shall pay to the Employee his base salary pursuant to
         Section 3.1 and any other compensation and benefits to the extent
         actually earned by the Employee under this Agreement or any benefit
         plan or program of the Company as of the date of such termination at
         the normal time for payment of such salary, compensation or benefits.
 
(b)      The Company shall pay the Employee any reimbursement amounts owing
         under Section 5.
 
(c)       The Company shall pay to the Employee as a severance benefit an amount
          equal to three (3) times the sum of (i) his annual rate of base salary
          immediately  preceding his  termination  of  employment,  and (ii) the
          average  of  his  three  highest  annual  bonuses  awarded  under  the
          Company's annual  management  incentive bonus plan for any of the five
          calendar years  preceding his termination of employment (or, if he was
          not  eligible  for a bonus for at least three  calendar  years in such
          five-year  period,  then the  average of such  bonuses  for all of the
          calendar years in such five-year period for which he was eligible, and
          if he was not  eligible for such a bonus in any  previous  year,  then
          100% of his target  annual  bonus for the year of  termination  of his
          employment),  with any deferred  bonuses  counting for the year earned
          rather than the year paid.  Such severance  benefit shall be paid in a
          lump  sum  within  45 days  after  the  date of  such  termination  of
          employment.
 
(d)       The  Company  shall  pay to the  Employee  as a bonus  for the year of
          termination of his employment an amount equal to a portion (determined
          as provided in the next sentence) of the bonus that the Employee would
          actually have received under the Company's annual management incentive
          bonus plan for the  calendar  year of  termination  of the  Employee's
          employment if his  employment  had not  terminated  (determined on the
          basis  of his  actual  bonus  opportunity  and the  actual  degree  of
          achievement  of the  applicable  performance  goals)  or,  if no bonus
          opportunity for that year had been established for the Employee at the
          time of such  termination  of  employment,  such  portion of the bonus
          awarded to him under the Company's annual  management  incentive bonus
          plan for the calendar year immediately  preceding the calendar year of
          the termination of his employment,  with deferred bonuses counting for
          the year  earned  rather  than the year paid.  Such  portion  shall be
          determined by dividing the number of days of the Employee's employment
          during such calendar year up to his  termination  of employment by 365
          (366 if a leap year).  Such payment shall be made on or about the date
          on which bonuses for the applicable year are paid to executives of the
          Company  generally  under the Company's  annual  management  incentive
          bonus  plan,  and the  Employee  shall  have no right  to any  further
          bonuses under said plan.
 
(e)       During the period of 36 months beginning on the date of the Employee's
          termination  of  employment,  the Employee shall remain covered by the
          medical,   dental,   vision,   life  insurance,   and,  if  reasonably
          commercially   available  through   nationally   reputable   insurance
          carriers,  long-term  disability plans of the Company that covered him
          immediately  prior  to  his  termination  of  employment  as if he had
          remained  in  employment  for  such  period.  In the  event  that  the
          Employee's participation in any such plan is barred, the Company shall
          arrange to provide the Employee with  substantially  similar  benefits
          (but, in the case of long-term disability benefits, only if reasonably
          commercially  available).  Any  medical  insurance  coverage  for such
          36-month period pursuant to this subsection (e) shall become secondary
          upon the  earlier of (i) the date on which the  Employee  begins to be
          covered by comparable medical coverage provided by a new employer,  or
          (ii) the earliest  date upon which the Employee  becomes  eligible for
          Medicare or a comparable  Government insurance program. The Employee's
          COBRA  entitlements  shall become effective at the end of the extended
          benefit coverage provided pursuant to this subsection (e).
 
(f)      Any outstanding stock options with respect to the common stock of the
         Company held by the Employee on the date of termination of the
         Employee's employment, to the extent then exercisable, shall remain
         exercisable for a period of twelve months following such termination of
         employment (but in no event beyond the expiration date of the
         applicable option).
 
12.      Change of Control. For the purposes of this Agreement, a "Change of
         Control" shall be deemed to have occurred if (a) any person or persons
         acting together which would constitute a "group" for purposes of
         Section 13(d) of the Securities Exchange Act of 1934, as amended (the
         `Exchange Act") (other than the Company, any subsidiary of the Company,
         and Tengelmann Warenhandelsgesellschaft KG (a partnership organized
         under the laws of the Federal Republic of Germany or any successor to
         such partnership, hereinafter "Tengelmann")) shall beneficially own (as
         defined in Rule 13d-3 of the Exchange Act), directly or indirectly, at
         least 30% of the total voting power of all classes of capital stock of
         the Company entitled to vote generally in the election of the Board and
         such voting power exceeds the then current voting power of Tengelmann;
         (b) control of Tengelmann is acquired by any person or persons other
         than family members or entities controlled by family members of Erivan
         Haub; (c) Current Directors (as hereinafter defined) shall cease for
         any reason to constitute at least a majority of the members of the
         Board (for this purpose, a "Current Director" shall mean any member of
         the Board as of the date hereof and any successor of a Current Director
         whose election, or nomination for election by the Company's
         shareholders, was approved by at least two-thirds of the Current
         Directors then on the Board); (d) the shareholders of the Company
         approve (i) a plan of complete liquidation of the Company or (ii) an
         agreement providing for the merger or consolidation of the Company
         other than a merger or consolidation in which (x) the holders of the
         common stock of the Company immediately prior to the consolidation or
         merger have, directly or indirectly, at least a majority of the common
         stock of the continuing or surviving corporation immediately after such
         consolidation or merger or (y) the Board immediately prior to the
         merger or consolidation would, immediately after the merger or
         consolidation, constitute a majority of the board of directors of the
         continuing or surviving corporation; or (e) the shareholders of the
         Company approve an agreement (or agreements) providing for the sale or
         other disposition (in one transaction or a series of transactions) of
         all or substantially all of the assets of the Company.
 
13.      Entitlement to Other Benefits.
 
                  Except as otherwise provided in this Agreement, this Agreement
shall not be construed as limiting in any way any rights or benefits that the
Employee or his spouse, dependents or beneficiaries may have pursuant to any
other plan or program of the Company.
 
14. Non-Competition.
 
                  The Employee agrees that during the Noncompetition Period (as
hereinafter defined), the Employee will not, within any of the geographical
areas of the United States or Canada in which the Company is then conducting
business (either directly or through franchisees), directly or indirectly, own,
manage, operate, control, be employed by, participate in, provide consulting
services to, or be connected in any manner with the ownership, management,
operation or control of any business similar to any of the types of businesses
conducted by the Company to any significant extent during his employment or on
the date of termination of his employment, except the Employee may own for
investment purposes up to 1% of the capital stock of any company whose stock is
publicly traded, and during the Noncompetition Period the Employee will not
contact or solicit employees of the Company for the purpose of inducing such
employees to leave the employ of the Company. For purposes of this Agreement,
the Noncompetition Period shall be the period beginning on August 15, 2005 and
ending on the date which is eighteen months after the termination of the
Employee's employment with the Company, except that in the case of a termination
entitling the Employee to severance benefits under Section 7.3(c), 10(c) or
11(c) hereof, the Noncompetition Period shall instead end on the date which is
(i) 12 months after such termination of employment if Section 7.3(c) is
applicable, (ii) 24 months after such termination of employment if Section 10(c)
is applicable, and (iii) 36 months after such termination of employment if
Section 11(c) is applicable.
 
15. Confidential Information and Trade Secrets.
 
                  The Employee hereby acknowledges that he will have access to
and become acquainted with various trade secrets and proprietary information of
the Company and other confidential information relating to the Company. The
Employee covenants that he will not, directly or indirectly, disclose or use
such information except as is necessary and appropriate in connection with his
employment by the Company and that he will otherwise adhere in all respects to
the Company's policies against the use or disclosure of such information.
 
16. Arbitration; Injunctive Relief.
 
                  Any controversy or claim arising out of or relating to this
Agreement, directly or indirectly, or the performance or breach thereof, will be
settled by arbitration in accordance with the rules of the American Arbitration
Association, and judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof. The arbitration will be held
in New York, New York, or such other place as may be agreed upon at the time by
the parties to the arbitration. The parties shall bear their own expenses in
connection with any arbitration or proceeding arising out of or relating to this
Agreement, directly or indirectly, or the performance or breach thereof;
provided, however, that in the event that the Employee substantially prevails,
the Company agrees promptly to reimburse the Employee for all expenses
(including costs and fees of witnesses, evidence and attorney's fees and
expenses) reasonably incurred by him in investigating, prosecuting, defending,
or preparing to prosecute or defend any action, proceeding or claim arising out
of or relating to this Agreement, directly or indirectly, or the performance or
breach thereof. The parties acknowledge and agree that a breach of Employee's
obligations under Sections 14 or 15 could cause irreparable harm to the Company
for which the Company would have no adequate remedy at law, and further agree
that, notwithstanding the agreement of the parties to arbitrate controversies or
claims as set forth above, the Company may apply to a court of competent
jurisdiction to seek to enjoin preliminarily or permanently any breach or
threatened breach of the Employee's obligations under Sections 14 and 15.
 
17.      Indemnification.
 
                  The Company shall indemnify and hold the Employee harmless to
the fullest extent legally permissible under the laws of the State of Maryland,
against any and all expenses, liabilities and losses (including attorney's fees,
judgments, fines and amounts paid in settlement) reasonably incurred or suffered
by him by reason of any claim or cause of action asserted against him because of
his service at any time as a director or officer of the Company. The Company
shall advance to the Employee the amount of his expenses incurred in connection
with any proceeding relating to such service to the fullest extent legally
permissible under the laws of the State of Maryland. Notwithstanding the
foregoing, the Company's obligations pursuant to this Section 17 shall not apply
in the case of any claim or cause of action by or in the right of the Company or
any subsidiary thereof.
 
18.      Liability Insurance.
 
                  To the extent that the Company maintains a directors and
officers liability insurance policy in effect, the Company will take all steps
necessary to ensure that the Employee is covered under such policy for his
service as a director or officer of the Company or any subsidiary of the Company
with respect to claims made at any time with respect to such service.
 
19.     Certain Additional Payments by the Company.
 
(a)     Anything in this Agreement to the contrary notwithstanding, in the event
        it shall be determined that any payment or distribution made, or benefit
        provided (including, without limitation, the acceleration of any
        payment, distribution or benefit and the accelerated exercisability of
        any stock option), to or for the benefit of the Employee (whether paid
        or payable or distributed or distributable pursuant to the terms of this
        Agreement or otherwise, but determined without regard to any additional
        payments required under this Section 19) (a "Payment") would be subject
        to the excise tax imposed by Section 4999 of the Internal Revenue Code
        of 1986, as amended (or any similar excise tax) or any interest or
        penalties are incurred by the Employee with respect to such excise tax
        (such excise tax, together with any such interest and penalties, are
        hereinafter collectively referred to as the "Excise Tax"), then the
        Employee shall be entitled to receive from the Company an additional
        payment (a "Gross-Up Payment") in an amount such that after payment by
        the Employee of all taxes (including any Excise Tax, income tax or
        employment tax and taking into account any lost or reduced tax
        deductions on account of such Gross-Up Payment) imposed upon the
        Gross-Up Payment and any interest or penalties imposed with respect to
        such taxes, the Employee retains an amount from the Gross-Up Payment
        equal to the Excise Tax imposed upon the Payments.
 
(b)     Subject to the provisions of Section 19(c), all determinations required
        to be made under this Section 19, including determination of whether a
        Gross-Up Payment is required and of the amount of any such Gross-up
        Payment, shall be made by the accounting firm selected by the Company to
        audit the Company's financial statements (the "Accounting Firm"), which
        shall provide detailed supporting calculations both to the Company and
        the Employee within 15 business days of the date of termination of the
        Employee's employment, if applicable, within 15 days after receipt of
        written notice from the Employee that there has been a Payment, or at
        such earlier time as is requested by the Company, provided that any
        determination that an Excise Tax is payable by the Employee shall be
        made on the basis of substantial authority. The initial Gross-Up
        Payment, if any, as determined pursuant to this Section 19(b), shall be
        paid to the Employee within five business days of the receipt of the
        Accounting Firm's determination. If the Accounting Firm determines that
        no Excise Tax is payable by the Employee, it shall furnish the Employee
        with a written opinion that he has substantial authority not to report
        any Excise Tax on his Federal income tax return. Any determination by
        the Accounting Firm meeting the requirements of this Section 19(b) shall
        be binding upon the Company and the Employee; subject only to payments
        pursuant to the following sentence based on a determination that
        additional Gross-Up Payments should have been made, consistent with the
        calculations required to be made hereunder (the amount of such
        additional payments is referred to herein as the "Gross-Up
        Underpayment"). In the event that the Company exhausts its remedies
        pursuant to Section 19(c) and the Employee thereafter is required to
        make a payment of any Excise Tax, the Accounting Firm shall determine
        the amount of the Gross-Up Underpayment that has occurred and any such
        Gross-Up Underpayment shall be promptly paid by the Company to or for
        the benefit of the Employee. The fees and disbursements of the
        Accounting Firm shall be paid by the Company.
 
(c)     The Employee shall notify the Company in writing of any claim by the
        Internal Revenue Service that, if successful, would require the payment
        by the Company of a Gross-Up Payment. Such notification shall be given
        as soon as practicable but not later than ten business days after the
        Employee receives written notice of such claim and shall apprise the
        Company of the nature of such claim and the date on which such Claim is
        requested to be paid. The Employee shall not pay such claim prior to the
        expiration of the 30-day period following the date on which it gives
        such notice to the Company (or such shorter period ending on the date
        that any payment of taxes with respect to such claim is due). If the
        Company notifies the Employee in writing prior to the expiration of such
        period that it desires to contest such claim and that it will bear the
        costs and provide the indemnification as required by this sentence, the
        Employee shall:
 
(i)     give the Company any information reasonably requested by the Company
        relating to such claim,
(ii)    take such action in connection with contesting such claim as the Company
        shall reasonably request in writing from time to time, including,
        without limitation, accepting legal representation with respect to such
        claim by an attorney reasonably selected by the Company and reasonably
        acceptable to the Employee,
(iii)   cooperate with the Company in good faith in order effectively to contest
        such claim, and (iv) permit the Company to participate in any
        proceedings relating to such claim;
 
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Employee harmless, on an
after-tax basis, for any Excise Tax, income tax or employment tax (taking into
account any lost or reduced tax deductions on account of such payments),
including interest and penalties with respect thereto, imposed as a result of
such representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 19(c), the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Employee to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Employee agrees
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the Company directs the
Employee to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to the Employee on an interest-free basis and shall
indemnify and hold the Employee harmless, on an after-tax basis, from any Excise
Tax, income tax or employment tax (taking into account any lost or reduced tax
deductions on account of such advance), including interest or penalties with
respect thereto, imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and further provided that any
extension of the statute of limitations relating to the payment of taxes for the
taxable year of the Employee with respect to which such contested amount is
claimed to be due is limited solely to such contested amount. Furthermore, the
Company's control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the Employee shall be
entitled, in his sole discretion, to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
 
(d) If, after the receipt by the Employee of an amount advanced by the Company
pursuant to Section 19(c), the Employee becomes entitled to receive any refund
with respect to such claim, the Employee shall (subject to the Company's
complying with the requirements of Section 19(c)) promptly pay to the Company
the amount of such refund (together with any interest paid or credited thereon
after taxes applicable thereto). If, after the receipt by the Employee of an
amount advanced by the Company pursuant to Section 19(c), a determination is
made that the Employee shall not be entitled to any refund with respect to such
claim and the Company does not notify the Employee in writing of its intent to
contest such denial of refund prior to the expiration of 30 days after such
determination, then any obligation of the Employee to repay such advance shall
be forgiven and the amount of such advance shall offset, to the extent thereof,
the amount of/ Gross-Up Payment required to be paid.
 
20. No Duty to Seek Employment. The Employee shall not be under any duty or
obligation to seek or accept other employment following termination of
employment, and no amount, payment or benefits due to the Employee hereunder
shall be reduced or suspended if the Employee accepts subsequent employment.
 
21. Deductions and Withholding.
 
                  All amounts payable or which become payable under any
provision of this Agreement shall be subject to any deductions authorized by the
Employee and any deductions and withholdings required by law.
 
22. Modifications to Comply with IRC Section 409A.
 
                  If any payments under this Agreement would not comply with the
requirements of Section 409A of Internal Revenue Code of 1986, as amended, and
the regulations and Internal Revenue Service guidance thereunder, the Parties
hereto agree to use their best efforts to modify the terms of such payments in a
manner mutually agreeable to both Parties so that such requirements are
satisfied and so that the Employee receives the same economic benefit as before
any such modification is made or should have been made.
 
23. Governing Law.
 
                  The validity, interpretation and performance of this Agreement
will be governed by the laws of the State of New Jersey without regard to the
conflict of law provisions.
 
24. Notice.
 
                  Any written notice required to be given by one Party to the
other Party hereunder will be deemed effected if mailed by registered mail:
 
 
        To the Company at:             The Great Atlantic & Pacific Tea Company
                                       2 Paragon Drive
                                       Montvale, New Jersey  07645
                                       Attention:  General Counsel
 
or such other address as may be stated in a notice given as hereinbefore
provided
 
             To the Employee at such address as may be stated in a notice
             given to the Company as hereinabove provided.
 
25.      Severability.
 
                  If any one or more of the provisions contained in this
Agreement is held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability will not affect any other provision
hereof.
 
26. Successors and Assigns.
 
                  This Agreement will be binding upon and inure to the benefit
of the Parties hereto and their personal representatives, and, in the case of
the Company, its successors and assigns. To the extent the Company's obligations
under this Agreement are transferred to any successor or assign, such successor
or assign shall be treated as the "Company" for purposes of this Agreement.
Other than as contemplated by this Agreement, the Employee may not assign his
rights or duties under this Agreement.
 
27.      Continuing Effect.
 
                  Wherever appropriate to the intention of the Parties hereto,
the respective rights and obligations of the Parties, including the obligations
referred to in Sections 10, 11, 14, 15, 16, 17, 19 and 22, hereof, will survive
any termination or expiration of the term of this Agreement.
 
28.      Entire Agreement.
 
                  This Agreement constitutes the entire agreement between the
Parties and supersedes any and all other agreements and understandings between
the Parties in respect of the matters addressed in this Agreement.
 
29. Amendment and Waiver.
 
                  No amendment or waiver of any provision of this Agreement
shall be effective, unless the same shall be in writing and signed by the
Parties, and then such amendment, waiver or consent shall be effective only in
the specific instance or for the specific purpose for which such amendment,
waiver or consent was given.
 
30.      Counterparts.
 
                  This Agreement may be executed in any number of counterparts,
each of which when so executed shall be deemed an original but all of which
together shall constitute one and the same instrument.
 
                  IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed by its duly authorized officer and the Employee has hereunto set his
hand as of the day and year first above written.
 
                                THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
 
 
                                By: /s/Eric Claus
 
                                Name:  Eric Claus
                                Title:  Chief Executive Officer and President
 
 
 
</TEXT>
</DOCUMENT>
 

 

 

 

 

<DOCUMENT>

<TYPE>EX-10

<SEQUENCE>7

<FILENAME>ex101clausamendmentltr.txt

<DESCRIPTION>EXHIBIT 10.1 ERIC CLAUS AMENDMENT LETTER

<TEXT>

                                                                Exhibit 10.1

 

 

 

 

 

 

November 28, 2005

 

Eric Claus

The Atrium

1512 Palisades Avenue

Unit 17N

Fort Lee, NJ 07024

 

         Re:      Amendment to your Executive Employment Agreement

 

Dear Eric:

 

         The purpose of this letter is to amend your Executive Employment

Agreement dated as of August 15, 2005 as follows:

 

         In paragraphs 3.1, 3.2 and 4.1, references to the "Governance

Committee" are hereby changed to "Compensation Committee."

 

         Except as indicated above, the Executive Employment Agreement, its

terms and conditions shall remain in full force and effect. If the terms

outlined above are acceptable, please sign below and return to me an original

executed copy of this letter agreement. Upon execution of this letter agreement,

the Executive Employment Agreement shall be deemed amended in accordance with

Paragraph 29 thereof.

 

                               Sincerely,

 

                               The Great Atlantic & Pacific Tea Company, Inc.

 

                               By: /s/Allan Richards

                                   ------------------------------------

                                   Allan Richards, SVP Human Resources,

                                   Labor Relations and Legal Services

 

Agreed to and accepted this 2nd day

of December, 2005.

 

/s/Eric Claus

 

</TEXT>

</DOCUMENT>