-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ui38ml/o1pRDMy2FBIn1bKYOSMG44O6wOpStGsx4KjQimINERWMQxSgW3zU4zkjf lvoRlg4wrr6qKwArurycCQ== 0000895345-97-000261.txt : 19970812 0000895345-97-000261.hdr.sgml : 19970812 ACCESSION NUMBER: 0000895345-97-000261 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 19970811 SROS: NONE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: GRAND UNION CO /DE/ CENTRAL INDEX KEY: 0000316236 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 251518276 STATE OF INCORPORATION: DE FISCAL YEAR END: 0325 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-44467 FILM NUMBER: 97655633 BUSINESS ADDRESS: STREET 1: 201 WILLOWBROOK BLVD CITY: WAYNE STATE: NJ ZIP: 07470-0966 BUSINESS PHONE: 2018906000 MAIL ADDRESS: STREET 1: 201 WILLOWBROOK BLVD CITY: WAYNE STATE: NJ ZIP: 07470 FORMER COMPANY: FORMER CONFORMED NAME: SUCCESSOR TO GRAND UNION CO/VA/ DATE OF NAME CHANGE: 19600201 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: HARRIS J WAYNE CENTRAL INDEX KEY: 0001043937 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: THE GRAND UNION COMPANY STREET 2: 201 WILLOWBROOK BLVD CITY: WAYNE STATE: NJ ZIP: 07470 BUSINESS PHONE: 2018906000 MAIL ADDRESS: STREET 1: THE GRAND UNION COMPANY STREET 2: 201 WILLOWBROOK BLVD CITY: WAYNE STATE: NJ ZIP: 07470 SC 13D 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934* The Grand Union Company - ----------------------------------------------------------------- (Name of Issuer) Common Stock (Par Value $ 0.01 Per Share) - ----------------------------------------------------------------- (Title of Class of Securities) 386532303 - ----------------------------------------------------------------- (CUSIP Number) J. Wayne Harris David K. Robbins, Esq. The Grand Union Company Fried, Frank, Harris, Shriver & Jacobson 201 Willowbrook Boulevard 350 S. Grand Avenue, 32nd Floor Wayne, NJ 07470-0966 Los Angeles, CA 90071 (973) 890-6000 (213) 473-2000 - -------------------------- ----------------------------------------- (Name, Address and Telephone Number of Persons Authorized to Receive Notices and Communications) August 1, 1997 - ----------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ]. Note: Six copies of this statement, including all exhibits, should be filed with the Commission. See Rule 13d-1(a) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for Mr. Harris's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). SCHEDULE 13D CUSIP No. 336532303 Page 2 of 22 Pages 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON J. Wayne Harris EIN: ###-##-#### 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] 3 SEC USE ONLY SHADED AREA ONLY 4 SOURCE OF FUNDS* Not Applicable 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] Not Applicable 6 CITIZENSHIP OR PLACE OF ORGANIZATION United States NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH 7 SOLE VOTING POWER 600,000 8 SHARED VOTING POWER 0 9 SOLE DISPOSITIVE POWER 600,000 10 SHARED DISPOSITIVE POWER 0 11 AGGREGATE AMOUNT OF BENEFICIALLY OWNED BY EACH REPORTING PERSON 600,000 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] Not Applicable 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 5.67% 14 TYPE OF REPORTING PERSON* IN ITEM 1. Security and Issuer. ------------------- This Schedule 13D is filed on behalf of J. Wayne Harris, an individual ("Mr. Harris"), with the Securities and Exchange Commission on August 11, 1997 (the "Schedule 13D"), relating to shares of the common stock, par value $0.01 per share (the "Common Stock") of The Grand Union Company (the "Company"), which are issuable upon exercise of options to purchase shares of the Common Stock granted to Mr. Harris pursuant to, and subject to the conditions of, the Employment Agreement, dated as of August 1, 1997, by and between the Company and Mr. Harris, a copy of which is attached hereto as Exhibit 1 (the "Employment Agreement"). The Company's principal executive offices are located at 201 Willowbrook Boulevard, Wayne, New Jersey 07470-0966. ITEM 2. Identity and Background. ----------------------- (a)-(c) Mr. Harris's business address is c/o The Grand Union Company, 201 Willowbrook Boulevard, Wayne, New Jersey 07470- 0966. Mr. Harris's principal occupation or employment is serving as Chairman of the Board and Chief Executive Officer of the Company. (d)-(f) During the past five years, Mr. Harris has not been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or been a party to a civil proceeding or a judicial or administrative body of competent jurisdiction as a result of which he was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. Mr. Harris is a citizen of the United States. ITEM 3. Source and Amount of Funds or Other Consideration. ------------------------------------------------- Pursuant to the Employment Agreement, among other things, Mr. Harris was granted options (the "Options") to purchase an aggregate of 1,250,000 shares of the Common Stock. Of such Options, 600,000 are exercisable immediately (the "Initial Options") subject, in the case of 100,000 Initial Options, to approval by the Company's stockholders of an amendment to the Company's 1995 Equity Incentive Plan (the "Plan") to be submitted to the Company's stockholders at the 1997 Annual Meeting of Stockholders, currently scheduled to be held on September 25, 1997. Mr. Harris did not pay or give any consideration to the Company for the grant of such options other than his execution and delivery of the Employment Agreement. See Item 5 of this Schedule 13D for a more complete description of the Employment Agreement. By virtue of the Employment Agreement, Mr. Harris may be deemed to have acquired beneficial ownership of the shares of Common Stock issuable upon exercise of the Initial Options (the "Initial Option Shares") for purposes of Rule 13d-3(d) of the rules and regulations under the Securities Exchange Act of 1934, as amended (together with such rules and regulations, the "Exchange Act"). The aggregate amount of funds required to purchase all of the Initial Option Shares upon exercise of the Initial Options would be $825,000. Mr. Harris has not determined the source of funds to be used to acquire the Initial Option Shares when and if he determines to exercise the Initial Options, but may use personal funds or funds borrowed from a financial institution or other lender. ITEM 4. Purpose of Transaction. ---------------------- The Initial Options were acquired by Mr. Harris in connection with his execution and delivery of the Employment Agreement. The board of directors of the Company has considered, and is likely to consider in the future, from time to time, engaging in transactions of the types enumerated in paragraphs (a) through (j) of Item 4 of Schedule 13D. As a member of the board of directors of the Company, Mr. Harris anticipates that he would participate in such consideration, and, as an executive officer of the Company, Mr. Harris anticipates that he would participate in the implementation of any such transaction approved by the Company's board of directors. While Mr. Harris has no current plans to purchase or sell any securities of the Company, he may determine, based upon market and general economic conditions, the business affairs and financial condition of the Company, the market price of the Common Stock, and other matters deemed relevant by him, to acquire additional securities of the Company pursuant to the exercise of the Options to the extent such Options are exercisable through purchases in the open market, or otherwise; or to sell, from time to time, some or all of the Initial Option Shares, shares of Common Stock acquired pursuant to the exercise of the other Options, when such Options become exercisable, or such additional shares, if acquired. Subject to the foregoing and to the responses to Items 5 and 6 herein, Mr. Harris has no plans or proposals which relate to or would result in any transaction, event or action enumerated in paragraphs (a) through (j) of Item 4 of the form of Schedule 13D promulgated under the Exchange Act. ITEM 5. Interests in Securities of the Issuer. ------------------------------------- (a) For purposes of Rule 13d-3 under the Exchange Act, by virtue of the Employment Agreement, Mr. Harris may be deemed to be the beneficial owner of an aggregate of 600,000 Initial Option Shares for which the Initial Options granted to him pursuant to the Employment Agreement are exercisable. Such 600,000 Initial Option Shares, if outstanding, would constitute approximately 5.67% of the total number of shares of Common Stock outstanding. (b) The Employment Agreement grants to Mr. Harris the right to acquire the Initial Option Shares, subject to the terms and conditions contained therein. See Items 4 and 6 of this Schedule 13D. Until Mr. Harris acquires the Initial Option Shares, the Initial Option Shares will remain unissued by the Company. Upon issuance of the Initial Option Shares, Mr. Harris will have the sole power to direct the vote and disposition of such shares. (c) Except as described, Mr. Harris has not effected any transactions in the Common Stock during the sixty days preceding the date of this Schedule 13D. (d) No person other than Mr. Harris has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the Option Shares. (e) Not applicable. ITEM 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer. -------------------------------------------------------- The Company and Mr. Harris entered into the Employment Agreement effective as of August 1, 1997. The Employment Agreement provides that Mr. Harris shall serve as the Company's Chief Executive Officer for a term from August 1, 1997 to July 31, 2001 (the "Term"). In addition, Mr. Harris was also elected to serve as a member of the Company's board of directors, and as Chairman of the Board. The Employment Agreement provides that during the Term, the Company shall pay cash compensation to Mr. Harris of: (i) a base salary at an annual rate of $600,000 per year, prorated based on the actual number of weeks worked during the fiscal years ending 1998 and 2002; and (ii) bonus compensation in an amount determined by a special subcommittee of the Company's Compensation Committee (the "162(m) Committee"), subject to the following: (x) for the fiscal year ending March 28, 1998, the maximum bonus payable shall be 120% of Mr. Harris's base salary paid for such period, and the minimum bonus payable for such period shall be 75% of such base salary; and (y) for the fiscal year ending each year during the Term thereafter, the minimum bonus target shall be 100% of Mr. Harris's base salary for the applicable period, with the actual amount of the bonus payable for each such period to be subject to achievement of performance targets established by the 162(m) Committee of the Company's Board of Directors no later than the 90th day of the fiscal year for which the targets apply pursuant to a bonus plan meeting the requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder. Under the Employment Agreement, Mr. Harris has been granted options to purchase an aggregate of 1,250,000 shares. The Options are exercisable as follows: (i) Options to purchase 500,000 shares at an exercise price equal to $1.375 (the closing price as reported by NASDAQ-National Market on the Effective Date), became exercisable upon execution of the Employment Agreement; (ii) Options to purchase 100,000 shares at an exercise price equal to $1.375, become exercisable immediately upon approval by stockholders of the Company of an amendment to the Plan to be submitted to the Company's stockholders at the 1997 Annual Meeting of Stockholders of the Company, currently scheduled to be held on September 25, 1997 (together with the Options referred to in paragraph (i) above, the "Initial Options"); (iii) Options to purchase 200,000 shares at an exercise price equal to $1.375, shall become exercisable if and when the Company shall have earnings before interest, tax, depreciation and amortization expense ("EBITDA") of an aggregate of at least $147 million for any 13 continuous 4 week fiscal reporting periods commencing on the Effective Date and ending on or before the end of the Company's fiscal year ending in 2000; (iv) Options to purchase 150,000 shares at an exercise price equal to $2.375, will become exercisable on or after August 1, 1998; (v) Options to purchase 150,000 shares at an exercise price equal to $3.375, will become exercisable on or after August 1, 1999; and (vi) Options to purchase 150,000 shares at an exercise price equal to $4.375, will become exercisable on or after August 1,2000. The Employment Agreement further provides that the Company shall pay, or reimburse Mr. Harris for, the costs of (i) commuting between a principal residence (the "Principal Residence") in a city other than the area within a 100-mile radius of the Company's current principal executive offices (the "Principal Office City") and (ii) maintaining an apartment or condominium in the Principal Office City, and that if Mr. Harris determines to relocate his principal residence to the Principal Office City on or before July 31, 1999, that he shall be eligible for the full benefits available under the Company's Executive Relocation Program. The Employment Agreement may be terminated upon the occurrence of any of the following: (i) the close of business on the date of expiration of the Term; (ii) the close of business on the date of Mr. Harris's death; (iii) the close of business on an early termination date mutually agreed to in writing by the Company and Mr. Harris; (iv) the close of business on the day on which the Company shall have delivered to Mr. Harris a written notice of the Company's election to terminate his employment for "Cause" (as defined in the Employment Agreement); (v) the close of business on the day on which the Company shall have delivered to Mr. Harris a written notice of the Company's election to terminate his employment because of Disability (as defined in the Employment Agreement); (vi) the close of business on the day following the date on which the Board of Directors shall have adopted a resolution terminating the employment of Mr. Harris hereunder and such termination is not for death, Cause or Disability; or (vii) the close of business on the date which is five business days after the date on which Mr. Harris delivers to the Company a written notice of Mr. Harris's election to terminate his employment hereunder (x) for "Good Reason" (as defined in the Employment Agreement) or (y) for any other reason. If Mr. Harris's employment with the Company terminates pursuant to clauses (i), (vi) or (vii)(x) above, all of the Options shall immediately become exercisable by Employee up to and including thirty days after the effective date of such termination of employment, after which all of the Options shall terminate. If Mr. Harris's employment with the Company terminates pursuant to clauses (ii) or (v) above, those Options which are then exercisable may be exercised by Mr. Harris (or his executor or administrator or the person or persons to whom any Options have been transferred by will or the applicable laws of descent and distribution) up to and including thirty days after the effective date of such termination of employment, after which all of the Options shall terminate. If Mr. Harris's employment with the Company terminates for any other reason, including, without limitation, termination by the Company for "Cause" or termination by the Employee for any reason other than Good Reason, the Options shall terminate as of the effective date of such termination. If Mr. Harris's employment with the Company terminates for any reason, the Company will pay Mr. Harris any portion of the Salary accrued on or prior to the date of termination but not paid. If Mr. Harris's employment with the Company terminates pursuant to clauses (vi) or (vii)(x) above, the Company will pay Mr. Harris any portion of his bonus compensation which has accrued on or prior to the date of termination but has not been paid. If Mr. Harris's employment with the Company terminates pursuant to clauses (vi) or (vii)(x) above, the Company will continue to pay Mr. Harris his salary (at the rate in effect on the date of termination of his employment) for the remainder of the term of the Employment Agreement. The Employment Agreement also provides that Mr. Harris shall be eligible to participate in the Company's Supplemental Retirement Plan for Key Executives (the "SERP"). Upon retirement of Mr. Harris from the Company at age 62 or later, for purposes of calculation of the "target benefit" under the SERP, Mr. Harris shall be credited with eleven (11) years of service under the SERP if Mr. Harris retires at the age of 62, in addition to the actual number of years of service by Mr. Harris after he reaches the age of 62. If the employment of Mr. Harris with the Company terminates pursuant to clauses (vi) or (vii)(x) above, prior to the date on which Mr. Harris reaches the age of 62, for purposes of calculation of the "target benefit" under the SERP, Mr. Harris shall be credited with a number of years of service equal to the sum of (a) the actual number of years of employment of Mr. Harris with the Company plus (b) seven. If Mr. Harris terminates his employment with the Company other than for Good Reason (as defined in the Employment Agreement) prior to the date on which Mr. Harris has reached the age of 62, for purposes of calculation of the "target benefit" under the SERP, Mr. Harris shall be credited with a number of years of service equal to the actual number of years of employment of Mr. Harris with the Company. The Employment Agreement also contains provisions concerning other employee benefits, confidentiality, and non- competition, which are customary for agreements with executives in Mr. Harris's position. The foregoing description of the Employment Agreement is qualified in its entirety by reference to the full text thereof, filed as Exhibit 1 hereto, and incorporated by reference herein and made a part hereof. Mr. Harris has been advised by Trefoil Capital Investors II, L.P. ("Trefoil") and GE Investment Private Placement Partners II, A Limited Partnership (collectively with Trefoil, the "Investors"), which collectively control approximately 71.61% of the outstanding voting power of the Company's capital stock, that the Investors intend to vote at the 1997 Annual Meeting in favor of the election of Mr. Harris as a director of the Company and in favor of the Company's compensations plans and amendments relating to the grant of the Options and the payment of the bonus compensation provided for pursuant to the Employment Agreement. Mr. Harris has also been advised by the Company's board of directors that, subject to any applicable election or approval by the Company's stockholders during the Term of the Employment Agreement, they intend that he shall serve as Chairman of the Board during the Term of the Employment Agreement. The responses set forth in Items 3 and 4 of this Schedule 13D are incorporated herein by reference in their entirety. Other than the foregoing, there are no contracts, arrangements, understandings or relationships (legal or otherwise) between Mr. Harris and any other person with respect to securities of the Company. ITEM 7. Material to be Filed as Exhibits. -------------------------------- Exhibit 1 -- Employment Agreement, dated as of August 1, 1997, by and between The Grand Union Company and J. Wayne Harris. SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: August 10, 1997 /s/J. Wayne Harris ----------------------------- J. Wayne Harris Exhibit Index Document -------- Exhibit 1 -- Employment Agreement, dated as of August 1, 1997, by and between The Grand Union Company and J. Wayne Harris. EX-1 2 Exhibit 1 EMPLOYMENT AGREEMENT -------------------- AGREEMENT made as of this 1st day of August, 1997, by and between The Grand Union Company, a Delaware corporation (the "Company"), and J. Wayne Harris (the "Employee"). WHEREAS, the Company desires to retain the exclusive services of Employee and Employee desires to be employed by the Company for the term of this Agreement; NOW, THEREFORE, in consideration of the premises and of the mutual covenants contained herein, the parties hereto agree as follows: 1. Duties. (a) The Employee shall serve as Chief Executive Officer of the Company or such other position as may be agreed between the Employee and the Company, and shall perform such duties, services and responsibilities as are consistent with such positions, including the general management and supervision of the business and personnel of the Company and its subsidiaries. The Employee's duties, services and responsibilities will be performed under the overall supervision of and consistent with the policies of the Board of Directors of the Company (the "Board of Directors"). (b) During the Employment Term (as hereinafter defined), the Employee shall devote his full business time, attention and skill to the performance of such duties, services and responsibilities, and will use his best efforts to promote the interests of the Company. The Employee will not, without the prior written approval of the Board of Directors, engage in any other business activity which would interfere with the performance of his duties, services and responsibilities hereunder or which is in violation of policies established from time to time by the Company. The foregoing shall not be construed to prohibit (i) the Employee's service as a member of the board of directors or as an officer of any non-profit trade association or civic, educational or charitable organization, or (ii) subject to the following proviso and the provisions of Section 8(b), the Employee from making personal investments of a passive nature; provided that such service or investments by the Employee do not materially interfere with the performance by the Employee of his duties, services and responsibilities hereunder. (c) During the Employment Term, the Employee shall be based at the Company's principal executive offices in Wayne, New Jersey, which executive offices may be relocated within a 100-mile radius of the Company's existing executive offices (such 100 mile radius of Wayne, New Jersey, constituting the "Principal Office City"), except for reasonably required travel in the performance of his duties, services and responsibilities hereunder. 2. Term. The term of employment of the Employee hereunder shall commence as of the date hereof and shall continue in full force and effect until July 31, 2001 (the "Employment Term"), unless earlier terminated or extended as provided herein. 3. Compensation. (a) In consideration of the performance by the Employee of the Employee's obligations during the Employment Term (including any services as an officer, director, employee, member of any committee of the Company or any of its subsidiaries, or otherwise), the Company will, during the Employment Term, pay the Employee a salary (the "Salary") at an annual rate of $600,000. The Board of Directors shall review Employee's Salary on an annual basis in order to evaluate possible increases thereto. (b) During the term of this Agreement, Employee shall be eligible to receive bonus compensation at the end of each fiscal year of the Company in an amount to be determined by the Compensation Committee of the Board of Directors. The bonus compensation for the fiscal year ending March 28, 1998 shall be in an amount determined by the Compensation Committee of the Board of Directors up to 120% of the Salary for such fiscal year; provided, however, that bonus compensation shall be at least 75% of the Salary paid to Employee in respect of such fiscal year ending March 28, 1998 (the "75% Guarantee"). Subject to satisfaction of the performance targets referenced in the last sentence of this Section 3(b), the bonus compensation for each fiscal year subsequent to the fiscal year ending March 28, 1998 shall be in an amount determined by the Compensation Committee of the Board of Directors in an amount not less than 100% of the Salary for such fiscal year. Such bonus compensation, including the 75% Guarantee, shall be prorated (based on the number of weeks worked by Employee during the fiscal year in question) for each of the fiscal year ending March 28, 1998 and the fiscal year ending in March 2002. The amount of bonus compensation in any year shall be determined pursuant to a bonus plan which has been approved by the Company's shareholders in the manner prescribed pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder and based on the achievement of performance targets in such fiscal years, which performance targets shall be established by the Compensation Committee of the Board of Directors no later than the end of the 90th day in any such fiscal year or the end of the 90th day after the date hereof with respect to the fiscal year ending March 28, 1998, as the case may be; such performance targets to be related to the Company's annual operating plan adopted by the Board of Directors. (c) The Salary shall be payable in accordance with the normal payroll practices of the Company then in effect. The Salary, and all bonuses or other forms of compensation paid to the Employee hereunder, shall be subject to all applicable taxes required to be withheld by the Company pursuant to federal, state or local law. The Employee shall be solely responsible for income taxes imposed on the Employee by reasons of any cash or non-cash compensation and benefits provided hereunder. (d) Employee shall be eligible to participate in the Company's Supplemental Retirement Plan for Key Executives (the "Plan"). Upon Employee's retirement from the Company at age 62 or later, for purposes of calculation of the "target benefit" under the Plan, Employee shall be credited with eleven (11) years of service under the Plan if Employee retires at the age of 62 and shall also be credited with one additional year of service for each additional year during which Employee is employed with the Company after Employee reaches the age of 62. If the Employee's employment with the Company terminates pursuant to Section 6(a)(vi) or Section 6(a)(vii)(x) prior to the date on which the Employee has reached the age of 62, for purposes of calculation of the "target benefit" under the Plan, Employee shall be credited with a number of years of service equal to the sum of (a) the actual number of years of employment of the Employee with the Company and (b) seven years of service. If the Employee terminates his employment with the Company other than for Good Reason prior to the date on which the Employee has reached the age of 62, for purposes of calculation of the "target benefit" under the Plan, Employee shall be credited with a number of years of service equal to the actual number of years of employment of the Employee with the Company. (e) The Employee shall be entitled to participate in any employee benefit plans (including any life insurance plan) then in effect for similarly situated employees to the extent the Employee meets the eligibility requirements for any such plan; provided, however, that nothing in this paragraph shall require the Company to provide health, medical or life insurance benefits to the Employee or any dependent of the Employee with respect to any condition existing prior to the commencement of the Employee's employment, except as covered by the Company's health, medical or life insurance plans sponsored for employees in general. (f) The Employee shall be entitled to four weeks vacation (in addition to the usual national holidays) during each year during which the Employee serves hereunder. Such vacation shall be taken at such time or times as may be agreed between the Employee and the Company. Vacation not taken during any year during the Employment Term will not be carried forward. (g) If (i) the Employee is absent from work for more than 180 calendar days in any twelve-month period by reason of illness or incapacity (whether physical or otherwise) or (ii) the Company reasonably determines that the Employee is unable to perform his duties, services and responsibilities hereunder by reason of illness or incapacity (whether physical or otherwise) for more than 180 calendar days in any twelve- month period during the Employment Term ("Disability"), the Company shall not be obligated to pay the Employee any compensation (Salary or bonus) for any period in excess of such 180 days; furthermore, any such payments during such 180-day period shall be reduced by any amount the Employee is entitled to receive as a result of such disability under any plan provided through the Company or under state or federal law. 4. Stock Option. (a) The Company hereby grants Employee an option (the "Option") to purchase up to 1,250,000 shares of Common Stock. (b) Except as otherwise provided in this Agreement, the Option shall be exercisable, on a cumulative basis, at the times and prices as follows: (i) up to 500,000 of the total shares subject to the Option may be purchased by Employee on or after the date hereof at an exercise price equal to the closing price of the Common Stock on the NASDAQ-NMS on the date hereof (the "Initial Exercise Price"); (ii) up to an additional 150,000 shares of the total shares subject to the Option may be purchased by Employee on or after August 1, 1998 at an exercise price equal to the Initial Exercise Price plus one dollar; (iii) up to an additional 150,000 shares of the total shares subject to the Option may be purchased by Employee on or after the August 1, 1999 at an exercise price equal to the Initial Exercise Price plus two dollars; (iv) up to an additional 150,000 shares subject to the Option may be purchased by Employee on or after August 1, 2000 at an exercise price equal to the Initial Exercise Price plus three dollars; (v) up to 200,000 shares subject to the Option may be purchased by Employee at an exercise price equal to the Initial Exercise Price; provided that such shares may not be purchased under any circumstances whatsoever unless the Company has Earnings Before Interest, Tax, Depreciation and Amortization ("EBITDA") of an aggregate of at least $147 million for any 13 continuous 4 week fiscal reporting periods ending on or before the end of the Company's fiscal year ending in March 2000; and further provided that the Option to purchase such shares shall immediately terminate if the Company has not satisfied such EBITDA threshold by the end of the Company's fiscal year ending in March 2000; and (vi) the remaining 100,000 shares subject to the Option may be purchased by Employee on or after the date hereof (subject to approval by the stockholders of the Company at the next annual meeting of the Company of an amendment to the 1995 Equity Incentive Plan) at an exercise price equal to the Initial Exercise Price. (c) Subject to earlier termination as described above or below, the Option shall expire on the tenth anniversary of the date hereof. (d) If the Employee's employment with the Company terminates pursuant to Section 6(a)(i), 6(a)(vi) or Section 6(a)(vii)(x) hereof, the Option shall immediately become exercisable by Employee, for any and all of such number of shares subject to the Option, at any time up to and including thirty days after the effective date of such termination of employment after which the Option shall terminate with respect to all shares covered thereby. If the Employee's employment with the Company terminates pursuant to Section 6(a)(ii) or Section 6(a)(v) hereof, the portion of the Option which is then exercisable may be exercised by Employee (or Employee's executor or administrator or the person or persons to whom the Option is transferred by will or the applicable laws of descent and distribution) at any time up to and including thirty days after the effective date of such termination of employment after which the Option shall terminate with respect to all shares covered thereby. If the employment of Employee with the Company shall terminate for any reason other than provided in the immediately preceding two sentences, including, without limitation, termination by the Company for "Cause" or termination by the Employee for any reason other than Good Reason, the Option shall terminate and become null and void, as of the effective date of such termination. (e) The Option is being granted pursuant to the 1995 Equity Incentive Plan; provided that the grant of the Option as it relates to the shares referenced in clauses 4(b)(ii)-(vi) is subject to approval by the stockholders of the Company at the next annual meeting of the Company of an amendment to the 1995 Equity Incentive Plan. 5. Relocation and Relocation Expenses. Without limiting the Employee's responsibilities under Section 1, Employee may reside at Employee's principal residence ("Employee's Principal Residence") throughout the duration of the Employment Term, which Employee's Principal Residence may be outside the Principal Office City. During such time as Employee resides at Employee's Principal Residence and such residence is not in the Principal Office City: (i) Employee may commute between the Employee's Principal Residence and the Principal Office City; provided, however, if within two years of the date hereof, Employee relocates his residence to the Principal Office City, Employee shall be eligible for the full benefits under the Company's Executive Relocation Program; and (ii) the Company agrees to pay, or reimburse Employee for, the reasonable costs of an apartment or condominium in the Principal Office City to serve as local accommodations for Employee and for one round trip air fare per week between the Employee's Principal Residence and the Principal Office City, upon submission by Employee to the Chief Financial Officer (or his designee or designees) of vouchers or expense statements satisfactorily evidencing such expenses. 6. Termination. (a) Except as otherwise provided in this Agreement, the employment of Employee hereunder and the Employment Term shall terminate upon the earliest to occur of the dates specified below: (i) the close of business on the date of expiration of the Employment Term; (ii) the close of business on the date of the Employee's death; (iii) the close of business on an early termination date mutually agreed to in writing by the Company and the Employee; (iv) the close of business on the day on which the Company shall have delivered to the Employee a written notice of the Company's election to terminate his employment for "Cause" (as defined in Section 6(c) hereof); (v) the close of business on the day on which the Company shall have delivered to the Employee a written notice of the Company's election to terminate his employment because of Disability; (vi) the close of business on the day following the date on which the Board of Directors shall have adopted a resolution terminating the employment of the Employee hereunder and such termination is not for death, Cause or Disability; or (vii) the close of business on the date which is five (5) business days after the date on which the Employee delivers to the Company a written notice of the Employee's election to terminate his employment hereunder (x) for "Good Reason" (as defined in Section 6(d) hereof) or (y) for any other reason. (b) Any purported termination by the Company or by the Employee pursuant to Section 6(a) (iv)-(vii) hereof shall be communicated by written "Notice of Termination" to the other. For purposes of this Agreement, a "Notice of Termination" shall mean a written notice which indicates the specific termination provision in this Agreement relied upon and which sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Employee's employment under the provision so indicated. For purposes of this Agreement, no such purported termination shall be effective without delivery of such Notice of Termination. (c) For purposes of this Agreement, termination of employment for "Cause" shall mean termination based on (i) the Employee's material breach of this Agreement, or (ii) any other conduct by the Employee constituting valid cause for termination under the laws of the State of New Jersey. (d) For purposes of this Agreement, the term "Good Reason" shall mean the occurrence of any of the following events or conditions without the Employee's express written consent: (i) any assignment to Employee of any material duties other than those contemplated by, or any limitations of Employee's powers in any material respect not contemplated by, Section 1(a) hereof; provided, however, that Employee first delivers written notice thereof to the Chief Financial Officer of the Company and the Company shall have failed to cure such non-permitted assignment or limitation within thirty (30) days after receipt of such written notice; or (ii) any material breach by the Company of this Agreement; provided, however, that Employee first delivers written notice thereof to the Chief Financial Officer of the Company and the Company shall have failed to cure such breach within thirty (30) days after receipt of such written notice. (e) In the event of termination of this Agreement, for whatever reason, the Employee agrees to cooperate with the Company and to be reasonably available to the Company with respect to continuing and/or future matters arising out of the Employee's employment or any other relationship with the Company, whether such matters are business-related, legal or otherwise. The Company agrees to reimburse the Employee for the Employee's reasonable travel expenses incurred in complying with the terms of this paragraph upon delivery by the Employee to the Company of valid receipts for such expenses. The provisions of this paragraph shall survive termination of this Agreement. 7. Termination Payments. If the Employee's employment with the Company terminates for whatever reason, the Company will pay the Employee any portion of the Salary accrued hereunder on or prior to the date of termination but not paid. If the Employee's employment with the Company terminates pursuant to Section 6(a)(vi) or Section 6(a)(vii)(x) hereof, the Company will pay the Employee any portion of Employee's bonus compensation pursuant to Section 3(c) hereof which has accrued hereunder on or prior to the date of termination but has not been paid (the "Prorata Bonus"). The Prorata Bonus shall be calculated by: (i) annualizing the Company's performance through the date of termination for the fiscal year in question; (ii) determining the bonus compensation due to the Employee pursuant to Section 3(c) hereof on the basis of the Company's annualized results for the fiscal year in question; and (iii) prorating the bonus compensation based on the number of weeks worked by the Employee during the fiscal year in question. Except for purposes of this Section 7, the Employee's bonus compensation pursuant to Section 3(c) for any fiscal year shall not be deemed to have been accrued prior to the completion of the fiscal year in question. If the Employee's employment with the Company terminates pursuant to Section 6(a)(vi) or Section 6(a)(vii)(x) hereof, the Company will continue to pay the Employee an amount equal to the Employee's Salary (at the salary rate in effect on the date of termination of the Employee's employment hereunder) for the remainder of the term of this Agreement. The foregoing payments upon termination shall constitute the exclusive payments due the Employee upon termination under this Agreement, but shall have no effect on any benefits which may be due the Employee under any plan of the Company which provides benefits after termination of employment. 8. Employee Covenants. (a) Unauthorized Disclosure. The Employee agrees and understands that in the Employee's position with the Company, the Employee will be exposed to and receive information relating to the confidential affairs of the Company, including but not limited to technical information, business and marketing plans, strategies, customer information, other information concerning the Company's products, promotions, development, financing, expansion plans, business policies and practices, and other forms of information considered by the Company to be confidential and in the nature of trade secrets. Except to the extent that the proper performance of the Employee's duties, services and responsibilities hereunder may require disclosure, and except as such information (i) was known to the Employee prior to his employment by the Company or (ii) was or becomes generally available to the public other than as a result of a disclosure by the Employee in violation of the provisions of this Section 6(a), the Employee agrees that during the Employment Term and thereafter the Employee will keep such information confidential and not disclose such information, either directly or indirectly, to any third person or entity without the prior written consent of the Company. This confidentiality covenant has no temporal, geographical or territorial restriction. Upon termination of this Agreement, the Employee will promptly supply to the Company all property, keys, notes, memoranda, writings, lists, files, reports, customer lists, correspondence, tapes, disks, cards, surveys, maps, logs, machines, technical data or any other tangible product or document which has been produced by, received by or otherwise submitted to the Employee during or prior to the Employment Term. (b) Non-competition. By and in consideration of the Company's entering into this Agreement and the Salary and benefits to be provided by the Company hereunder, and further in consideration of the Employee's exposure to the proprietary information of the Company, the Employee agrees that, subject to the provisions of the last two sentences of Section 1(b), the Employee will not, during the Employment Term, directly or indirectly own, manage, operate, join, control, be employed by, or participate in the ownership, management, operation or control of or be connected in any manner, including but not limited to holding the positions of shareholder, director, officer, consultant, independent contractor, employee, partner, or investor, with any Competing Enterprise. For purposes of this paragraph, the term "Competing Enterprise" shall mean any person, corporation, partnership or other entity operating one or more supermarkets within a ten (10) mile radius of any Company store if the aggregate of such Company stores (x) represent ten percent (10%) or more of the total number of Company stores operating at the date of termination (or other applicable date invoking the application of this non-compete clause) or (y) account for ten percent (10%) or more of the annual sales volume of the Company for the fiscal year immediately preceding the year of termination (or other applicable date invoking application of this non-compete clause). For this purpose, (1) "supermarket" means any store which is part of a supermarket or combination store chain or is a warehouse club selling grocery and perishable items to the public and (2) any entity operating supermarkets includes any wholesaler to independently-owned supermarkets operating under the same tradename. The prohibition of this clause (b) shall not be deemed to prevent Employee from owning 1% or less of any class of equity securities of an entity that has a class of equity securities registered under Section 12 of the Securities Exchange Act of 1934, as amended. Notwithstanding anything to the contrary in this Section 8(b), the non-competition clause contained in this Section 8(b) shall immediately terminate on the effective date of termination of the Employee's employment with the Company unless such termination is a result of termination of the Employee's employment with the Company by the Company for Cause or is a result of termination of the Employee's employment with the Company by the Employee without Good Reason, in which case the non-competition clause contained in this Section 8(b) shall remain in full force and effect for the duration of the Employment Term. (c) Non-solicitation. During the Employment Term and for a period of two years thereafter, the Employee shall not interfere with the Company's relationship with, or endeavor to entice away from the Company, any person who at any time during the Employment Term was an employee or customer of the Company or otherwise had a material business relationship with the Company. (d) Transactions Offered to the Corporation; Proprietary Materials. During the term of his employment hereunder, Employee agrees to bring to the attention of the Board of Directors or the Chief Financial Officer, all proposals, business opportunities or investments of whatever nature, in areas in which the Company and/or any of its subsidiary companies is active or may be interested in becoming active, which are created or devised by Employee or come to the attention of Employee and which might reasonably be expected to be of interest to the Company and/or any its subsidiary companies. Without limiting the generality of the foregoing, Employee acknowledges and agrees that memoranda, notes, records and other documents made or compiled by Employee or made available to Employee during the term of this Agreement concerning the business and/or activities of the Company and/or any of its subsidiary companies shall be the Company's property and shall be delivered by Employee to the Chief Financial Officer upon termination of this Agreement or at any other time at the request of the Board of Directors. (e) Remedies. The Employee agrees that any breach of the terms of this Section 8 would result in irreparable injury and damage to the Company for which the Company would have no adequate remedy at law; the Employee therefore also agrees that in the event of said breach or any threat of breach, the Company shall be entitled to an immediate injunction and restraining order to prevent such breach and/or threatened breach and/or continued breach by the Employee and/or any and all persons and/or entities acting for and/or with the Employee, without having to prove damages, in addition to any other remedies to which the Company may be entitled at law or in equity. The terms of this paragraph shall not prevent the Company from pursuing any other available remedies for any breach or threatened breach hereof, including but not limited to the recovery of damages from the Employee. The provisions of subsections (a), (b), (c), (d) and (e) of this Section 8 shall survive any termination of this Agreement and the Employment Term. The existence of any claim or cause of action by the Employee against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the covenants and agreements of this Section 8. 9. Notices. Any notice or other communication required or permitted hereunder shall be in writing and shall be deemed to have been given (i) if personally delivered, when so delivered, or (ii) if mailed, three (3) business days after having been placed in the United States mail, registered or certified, postage prepaid, addressed to the party to whom it is directed at the address set forth below: If to the Company: The Grand Union Company 201 Willowbrook Boulevard Wayne, New Jersey 07470 Attention: Chief Financial Officer With a copy to: Fried, Frank, Harris, Shriver & Jacobson 350 South Grand Avenue Los Angeles, California 90071 Attention: David K. Robbins If to the Employee: J. Wayne Harris 44 Charles Street West Apartment 1704 Toronto, Ontario M4Y1R7 by registered or certified mail, postage prepaid, return receipt requested. 10. Binding Effect/Assignment. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, personal representatives, estates, successors (including, without limitation, by way of merger) and assigns. Notwithstanding the provisions or the immediately preceding sentence, the Employee shall not assign all or any portion of this Agreement without the prior written consent of the Company. 11. Entire Agreement. This Agreement and the Option Agreement set forth the entire understanding of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements, written or oral, between them as to such subject matter. This Agreement may not be amended, nor may any provision hereof be modified or waived, except by an instrument in writing duly signed by the party to be charged. 12. Severability. If any provision of this Agreement, or any application thereof to any circumstances, is invalid, in whole or in part, such provision or application shall to that extent be severable and shall not affect other provisions or applications of this Agreement. 13. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New Jersey, without reference to the principles of conflict of laws. 14. Modifications and Waivers. No provisions of this Agreement may be modified, altered or amended except by an instrument in writing executed by the parties hereto. No waiver by either party hereto of any breach by the other party hereto of any provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions at the time or at any prior or subsequent time. 15. Headings. The headings contained herein are solely for the purposes of reference, are not part of this Agreement and shall not in any way affect the meaning or interpretation of this Agreement. 16. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be 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 authority of its Board of Directors, and the Employee has hereunto set his hand, as of the day and year first above written. THE GRAND UNION COMPANY By:/s/Roger E. Stangeland ----------------------------- Name: Roger E. Stangeland Title: Director and Chairman - Interim Chief Executive Officer /s/J. Wayne Harris ----------------------------- J. Wayne Harris (Employee) -----END PRIVACY-ENHANCED MESSAGE-----