<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 20, 1999
--------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----- -----
Commission file number 1-6814
BIG V SUPERMARKETS, INC.
(Exact name of registrant as specified in its charter)
NEW YORK 14-1459448
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
176 North Main Street, Florida, New York 10921
(Address of principal executive offices) (Zip Code)
(914) 651-4411
(Registrant's telephone number, including area code)
Not applicable.
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No
--- ---
Shares of Common Stock outstanding as of May 4, 1999: 1,000 shares
This quarterly report on Form 10-Q is being filed voluntarily and shall not be
deemed to be subject to Section 18 of the Securities Exchange Act of 1934.
<PAGE>
BIG V SUPERMARKETS, INC.
FORM 10-Q FOR THE 12 WEEKS ENDED MARCH 20, 1999
INDEX
PART I
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C> <C>
Item 1. Financial Statements
Unaudited Consolidated Statements of Loss............. 3
Unaudited Consolidated Balance Sheets................. 4
Unaudited Consolidated Statements of Cash Flows....... 5
Notes to Unaudited Consolidated Financial Statements.. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations .................. 7-11
</TABLE>
PART II
OTHER INFORMATION
<TABLE>
<S> <C> <C>
Item 1. Legal Proceedings....................................... 12
Item 2. Changes in Securities................................... 12
Item 3. Defaults upon Senior Securities......................... 12
Item 4. Submission of Matters to a Vote of Security Holders..... 12
Item 5. Other Information....................................... 12
Item 6. Exhibits and Reports on Form 8-K........................ 12
SIGNATURES....................................................... 13
</TABLE>
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BIG V SUPERMARKETS, INC.
CONSOLIDATED STATEMENTS OF LOSS
(In Thousands)
<TABLE>
<CAPTION>
UNAUDITED
-------------------------------
For the Twelve For the Twelve
Weeks Ended Weeks Ended
March 20, 1999 March 21, 1998
-------------- --------------
<S> <C> <C>
SALES $190,697 $182,237
-------- --------
COSTS AND EXPENSES:
Cost of Sales (exclusive of depreciation and
amortization shown separately below) 140,131 135,020
Selling, general and administrative 41,685 38,929
Depreciation and amortization 3,750 3,601
Interest expense, net of interest income of $102 and
$67 for the 12 week periods ended March 20, 1999
and March 21, 1998, respectively 5,120 5,217
-------- --------
Total costs and expenses 190,686 182,767
-------- --------
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY CHARGE 11 (530)
INCOME TAX EXPENSE (BENEFIT) 189 (190)
-------- --------
LOSS BEFORE EXTRAORDINARY CHARGE (178) (340)
EXTRAORDINARY CHARGE, net of tax benefit of $246 (547) -
-------- --------
NET LOSS $ (725) $ (340)
======== ========
</TABLE>
See notes to unaudited consolidated financial statements.
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<PAGE>
BIG V SUPERMARKETS, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
(UNAUDITED)
MARCH 20, 1999 DECEMBER 26, 1998 1
--------------- --------------------
<S> <C> <C>
ASSETS
- ------
CURRENT ASSETS:
Cash $ 16,751 $ 15,674
Accounts receivable 8,401 11,941
Inventories 34,634 35,493
Refundable income taxes 691 630
Prepaid expenses and other current assets 3,067 2,282
Asset held for sale 4,567 4,482
-------- --------
Total current assets 68,111 70,502
PROPERTY AND EQUIPMENT - At cost, less accumulated
depreciation and amortization of $88,655 at March 20, 1999
and $85,756 at December 26, 1998 55,206 57,521
GOODWILL - Less accumulated amortization of $15,403 at
March 20, 1999 and $14,938 at December 26, 1998 63,906 64,371
INVESTMENT IN WAKEFERN FOOD CORPORATION 13,173 13,173
WAKEFERN WAREHOUSE AGREEMENT - Less accumulated
amortization of $8,512 at March 20, 1999 and $8,273 at
December 26, 1998 32,856 33,095
OTHER ASSETS 10,633 9,002
-------- --------
TOTAL ASSETS $243,885 $247,664
======== ========
LIABILITIES AND STOCKHOLDER'S DEFICIT
- -------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 35,248 $ 43,822
Accrued expenses and taxes other than income taxes 13,966 16,825
Deferred income taxes 6,203 6,213
Current portion of long-term debt 9,384 12,499
Current portion of capitalized lease obligations 808 808
-------- --------
Total current liabilities 65,609 80,167
-------- --------
OTHER LONG-TERM LIABILITIES 10,056 10,056
-------- --------
LONG-TERM DEBT - Less current portion 165,332 153,342
-------- --------
CAPITALIZED LEASE OBLIGATIONS - Less current portion 25,042 25,228
-------- --------
DEFERRED INCOME TAXES 6,070 6,070
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S DEFICIT
Common stock, par value, $1.00 per share; authorized, 1,000
shares; issued, 1,000 shares 1 1
Paid-in capital 8,105 8,405
Accumulated deficit (36,330) (35,605)
-------- --------
Total stockholder's deficit (28,224) (27,199)
-------- --------
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIT $243,885 $247,664
======== ========
/1/ Taken from the audited consolidated financial statements for the year ended December 26, 1998.
</TABLE>
See notes to unaudited consolidated financial statements.
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<PAGE>
BIG V SUPERMARKETS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
UNAUDITED
-------------------------------
For the Twelve For the Twelve
Weeks Ended Weeks Ended
March 20, 1999 March 21, 1998
--------------- --------------
<S> <C> <C>
CASH BALANCE, BEGINNING OF PERIOD $ 15,674 $13,498
-------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss (725) (340)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 3,750 3,601
Amortization of deferred debt costs 206 270
Write-off of unamortized deferred financing costs 793 -
Amortization of discount on debt 25 28
Noncash rent expense 231 332
Deferred income taxes (10) -
Loss on disposal of equipment - 2
Changes in assets and liabilities:
Decrease in accounts receivable 3,540 4,659
Decrease in inventories 859 1,520
Increase in refundable income taxes (61) (203)
Increase in prepaid expenses (822) (708)
Increase in assets held for sale (85) -
Increase in other assets (122) (438)
Decrease in accounts payable (8,574) (8,278)
Decrease in accrued expenses (2,859) (4,062)
Decrease in other long-term liabilities (231) (518)
-------- -------
Net cash used in operating activities (4,085) (4,135)
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property and equipment (696) (3,589)
Proceeds from the sale of store equipment 1 3
Increase in investment in Wakefern Food Corp. - (40)
-------- -------
Net cash used in investing activities (695) (3,626)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings 60,000 32
Proceeds from revolver borrowings - 10,000
Principal payments on long-term debt (48,150) (4,330)
Payments on revolver borrowings (3,000) -
Financing fees in connection with new senior debt (2,507) -
Principal payments on capital lease obligations (186) (143)
Return of capital to Holding (300) -
-------- -------
Net cash provided by financing activities 5,857 5,559
-------- -------
NET INCREASE (DECREASE) IN CASH 1,077 (2,202)
-------- -------
CASH BALANCE, END OF PERIOD $ 16,751 $11,296
======== =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 7,047 $ 7,177
Income taxes $ 4 $ 14
</TABLE>
See notes to unaudited consolidated financial statements.
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<PAGE>
BIG V SUPERMARKETS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
1. Basis of Presentation
---------------------
The accompanying interim consolidated financial statements as of and for
the period ended March 20, 1999, included herein, have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and rule 10-01 of Regulation
S-X promulgated by the Securities and Exchange Commission. The balance sheet at
December 26, 1998, has been taken from the audited financial statements as of
that date. In the opinion of management, the consolidated financial statements
include all adjustments, which consist only of normal recurring adjustments
necessary for a fair presentation of operating results for the interim periods.
Certain financial information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. Accordingly, reference is made to the consolidated
financial statements and notes thereto included in the Company's annual report
on Form 10-K for the year ended December 26, 1998. Operating results for the
periods presented are not necessarily indicative of the results for the entire
fiscal year.
2. Income Taxes
------------
Income taxes are based on the estimated effective tax rate expected to be
applicable for the full fiscal year in accordance with Accounting Standards
Board Opinion No. 28, "Interim Financial Reporting".
3. Preopening Costs
----------------
Effective December 27, 1998, the Company adopted Statement of Position
(SOP) No. 98-5, Reporting on the Costs of Start-Up Activities, which requires
the costs associated with start-up activities, such as opening a new store, be
expensed as incurred. There was no financial statement impact related to the
adoption of this SOP.
4. Extraordinary Charge
--------------------
On January 14, 1999 the Company refinanced its existing Credit Agreement
("Agreement") by entering into a new Bank Credit Agreement ("New Agreement")
with different lenders. The Company repaid amounts due under the Agreement
prior to their scheduled maturity dates and recognized an extraordinary after-
tax charge of $547,000 as a result of writing-off unamortized deferred financing
costs associated with the Agreement.
-6-
<PAGE>
ITEM 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Basis of Presentation
The following discussion of the Company's financial condition and results
of operations should be read in conjunction with the unaudited financial
statements and notes thereto included elsewhere in this Form 10-Q.
<TABLE>
<CAPTION>
12 Weeks Ended 12 Weeks Ended
March 20, 1999 March 21, 1998
-------------- --------------
<S> <C> <C>
Income Statement Data:
Sales........................................... 100.0% 100.0%
Gross margin.................................... 26.5 25.9
Selling, general and administrative............. 21.9 21.4
EBITDA (1)...................................... 4.7 4.6
Depreciation and amortization................... 2.0 2.0
Interest, net................................... 2.7 2.9
------ ------
Income (Loss) before income taxes
and extraordinary charge........................ 0.0 (0.3)
Income tax expense (benefit).................... 0.1 (0.1)
------ ------
Loss before extraordinary charge................ (0.1) (0.2)
Extraordinary charge............................ (0.3) -
------ ------
Net loss........................................ (0.4)% (0.2)%
====== ======
Other Data (in millions):
EBITDA.......................................... $ 9.1 $ 8.5
====== ======
Net cash used in operating activities........... $ (4.1) $ (4.1)
====== ======
Net cash used in investing activities........... $ (0.7) $ (3.6)
====== ======
Net cash provided by financing activities....... $ 5.9 $ 5.5
====== ======
</TABLE>
- ---------------------
(1) EBITDA represents earnings before interest expense, depreciation and
amortization, including noncash losses on the sale of property, plant and
equipment, income taxes and LIFO provision/credit. EBITDA is a widely accepted
financial indicator of a company's ability to service and/or incur debt, and
also represents a primary component of many of the Company's debt covenants.
Noncompliance with a covenant would represent a default under the Company's debt
agreements which could subject the Company to debt acceleration if not waived or
amended. EBITDA should not be construed as an alternative to, or a better
indicator of, operating income (as determined in accordance with generally
accepted accounting principles) or to cash flows from operating activities (as
determined in accordance with generally accepted accounting principles) and
should not be construed as an indication of the Company's operating performance
or as a measure of liquidity.
-7-
<PAGE>
Results of Operations
12 Weeks Ended March 20, 1999 Compared to 12 Weeks Ended March 21, 1998
Sales
Total store sales were $190.7 million and $182.2 million for the 12 week
periods ended March 20, 1999 and March 21, 1998, respectively, reflecting a 4.6%
increase over the prior year. The increase in total store sales was
attributable to sustained growth across the chain supplemented by the opening of
the Company's thirty-second store in Mt. Vernon, New York and a major renovation
of the Company's Kingston, New York store.
Same store sales increased 3.7% to $182.6 million from the comparable
prior year amount of $176.0 million.
Gross Margin
Gross margin increased in 1999 to 26.5% of sales compared to 25.9% for the
comparable prior year period. The margin increase was primarily the result of
improvements in nonperishable selling margins, improvements in stock loss and
lower product costs.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased to 21.9% of sales
for the 12-week period ended March 20, 1999 as compared to 21.4% for the 12-week
period ended March 21, 1998. The increase was attributable to higher
advertising, occupancy, and other store overhead costs.
EBITDA
EBITDA increased 7.1% to $9.1 million for the 12-week period ended March
20, 1999, compared to $8.5 million for the prior year period. The quarterly
EBITDA margin increased 0.1% to 4.7% and was attributable to increases in
sales and gross margin (0.6%) reduced by increases in selling, general and
administrative expenses (0.5%).
Depreciation and Amortization
Depreciation and amortization, as a percentage of sales, was 2.0% for the
12-week periods ended March 20, 1999 and March 21, 1998. The consistent rate
represents an absolute dollar increase of $0.1 million. The increase was due to
depreciation on equipment for the Company's 1997 and 1998 expanded and replaced
stores partially offset by an increased number of fully depreciated leasehold
improvements.
-8-
<PAGE>
Interest, net
Interest, net, decreased $0.1 million or 0.2% of sales for the 12 week
period ended March 20, 1999 compared to the prior year period. The decrease was
due to lower average outstanding borrowings resulting from the refinancing and
reduced capital expenditures.
Net Loss
Net loss for the 12 week period ended March 20, 1999 was $0.7 million
compared to the net loss of $0.3 million in the prior year. The increase in net
loss in the current quarter was attributable to the extraordinary write-off of
unamortized deferred financing fees from the Company's old senior debt.
Liquidity and Capital Resources
The Company completed a $60.0 million debt refinancing on January 14, 1999.
This enabled the Company to pay off its existing senior debt of $46.7 million
and revolver borrowings of $3.0 million. All other mandatory principal payments
required by the various debt agreements were paid during the 12 week period
ended March 20, 1999.
The Company had a working capital ratio of 1:1 at March 20, 1999 and .9:1
at December 26, 1998. The Company typically requires small amounts of working
capital since inventory is generally sold prior to the time payments to Wakefern
Food Corp. and other suppliers are due. The Company's primary source of
liquidity during the 12 weeks ended March 20, 1999 was cash flows generated
through operations supplemented by additional working capital derived from the
Company's refinancing.
Net cash used in operating activities was $4.1 million for the 12 week
periods ended March 20, 1999 and March 21, 1998. An increase in noncash items,
primarily the write-off of unamortized deferred financing fees associated with
the old senior debt, was offset by increased use of working capital.
Net cash used in investing activities was $0.7 million and $3.6 million
for the 12 week periods ended March 20, 1999 and March 21, 1998, respectively.
The decrease from the prior year was due to concentrated capital spending in the
final three quarters of 1999 and the completion and opening of the Company's
new store in Mt. Vernon, New York in the first quarter of 1998.
Net cash provided by financing activities was $5.9 million and $5.6
million for the 12 week periods ended March 20, 1999 and March 21, 1998,
respectively. The increase was due to the refinancing of the Company's senior
debt.
For the 52 weeks ending December 25, 1999, the Company projects its
major uses of cash as follows: (i) cash interest payments (including capitalized
leases) of $23.1 million; (ii) capital expenditures of $15.0 million; and (iii)
scheduled debt and capital lease payments of $13.3 million (including the non-
recourse demand note payable solely from the proceeds of the sale of the
Company's Baldwin Place Shopping Center located in Somers, New York). Management
believes operating cash flow, together with borrowings under the bank revolving
credit facility, will be sufficient to meet the Company's operating needs,
scheduled capital expenditures and will enable the Company to service its debt
in accordance with its terms.
-9-
<PAGE>
The new Bank Credit Agreement ("New Agreement") provides for a $25.0
million revolving credit facility. No borrowings were outstanding as of March
20, 1999. Additionally, $6.4 million was used from this facility for letters of
credit and bonding purposes. The New Agreement requires the Company to meet
certain financial covenants, including maximum amounts of annual capital
expenditures, minimum fixed charge coverage ratios, maximum leverage ratios,
interest coverage ratios and minimum amounts of consolidated net worth. The
Company was in full compliance with all of its financial covenants as of March
20, 1999 and management believes the Company will remain in compliance for the
next twelve months.
Year 2000 Issues
Most of the Company's key business processes (such as product procurement,
product delivery, inventory identification, retail sales and financial-
information reporting) depend on computer based systems. For this reason and
the information technology (IT) interrelationships between the Big V
Supermarkets, Inc. and Wakefern Food Corporation ("Wakefern"), the Company is
participating with Wakefern in a comprehensive assessment of its business
exposure relative to the Year 2000 issue (Y2K). The assessment covers both IT
and other environment (Non-IT) systems to identify the potential areas affected
by Y2K.
The Company and Wakefern have assessed all systems for Y2K readiness,
giving the highest priority to those IT systems that are considered critical to
its business operations. Wakefern provides all of the Company's financial,
general ledger and payroll applications and a majority of the Company's
processing services. Some in-store IT systems are currently Y2K compliant.
Others, including receiving and labor management are at various stages of
remediation or testing. The Company anticipates all critical IT systems will be
Y2K compliant before the end of 1999.
The Company has substantially completed an inventory of its Non-IT systems,
which includes those systems containing embedded chip technology commonly found
in buildings and related equipment. Remediation required for the Non-IT systems
will be performed throughout 1999.
The Company and Wakefern are utilizing the necessary internal and external
resources to replace, upgrade or modify all significant systems affected by Y2K.
The total estimated costs to remediate the Y2K issue will not have a significant
adverse affect on income from operations.
The Company has established a Contingency Planning Committee. To date,
high level contingency plans have been developed for all mission critical
business processes. The Company anticipates it will have a fully developed
contingency plan by the second quarter of 1999 and such plan will be
continuously reviewed and updated throughout the remainder of 1999.
Although the Company does not expect Y2K issues to have a material adverse
impact on the Company's business as a result of the aforementioned comments, the
Company's Y2K compliance is dependent upon key business partners (primarily
Wakefern) also being Y2K compliant on a timely basis. Accordingly, there can be
no guarantee the Company's overall efforts will prevent a material adverse
impact on the Company's future results of operations, financial condition and
cash flows. The possible consequences to the Company of not being fully Y2K
compliant include temporary supermarket closings, delays in the receipt of
merchandise, errors in product ordering or acquisition and other financial
transactions and the inability to efficiently process customer purchases. In
addition, business disruptions could result from the loss of power or the loss
of communication (satellite, phone, or other) among supermarkets, Wakefern and
the Company's corporate
-10-
<PAGE>
offices. However, the Company believes established contingency plans
supplemented by Wakefern's available resources will help to minimize the impact
of any isolated disruptions.
Forward-Looking Statements
Other than statements of historical fact, all statements included in this
Form 10-Q, including the statements under Item 2, "Management's Discussion and
Analysis of Financial Condition and Results of Operations", are, or may be
considered forward-looking information, as defined in the Private Securities
Litigation Reform Act of 1995. Examples of such statements in this report
include those concerning the Year 2000 issue, projected cash outlays for
interest, principal payments, and capital expenditures. The Company cautions
the reader there is no assurance actual results or business conditions will not
differ materially from those forward-looking statements whether expressed,
suggested or implied as a result of various factors. Such factors include, but
are not limited to, increased competitive pressures from existing competitors
and new entrants, general or regional economic conditions, interest rate
environment and its affect on the Company's cost of capital, the liquidity of
the Company on a cash flow basis (including the Company's ability to comply with
the financial covenants of all applicable credit agreements), the success of
operating initiatives including the ability to control various expense
categories, and other risk factors detailed herein and in other filings of the
Company.
-11-
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.41 Promissory Note between Big V Holding Corp. and James
A. Toopes. Jr., dated December 28, 1998.
10.42 Employment and Non-Competition Agreement dated as of
February 23, 1999 between Mark S. Schwartz, Big V
Holding Corp. and Big V Supermarkets, Inc.
27 Financial Data Schedule
(b) Reports on Form 8-K
March 1, 1999 Appointment of New President and Chief
Executive Officer
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BIG V SUPERMARKETS, INC.
Date: May 4, 1999 /s/ James A. Toopes, Jr.
-------------------------------------
James A. Toopes, Jr.
Vice Chairman, Chief Financial and
Administrative Officer
Date: May 4, 1999 /s/ John Onufer, Jr.
---------------------------------------
John Onufer, Jr.
Vice President - Controller
-13-
<PAGE>
BIG V SUPERMARKETS, INC.
PROMISSORY NOTE
For value received, the undersigned (the Obligor) promises to pay to the order
of Big V Holding Corp., a Delaware corporation, with its principal executive
offices located at 75 State Street, Boston, Massachusetts 02109 (the Company),
the principal sum of Three Hundred Thousand Dollars ($300,000) (the Principal
Amount) in lawful money of the United States of America, together with all
accrued but unpaid interest, on December 31, 2003 (the Maturity Date), subject
to the terms outlined below:
. The note, together with accrued but unpaid interest thereon, will be
forgiven in its entirety at the maturity date if the obligor remains
in the employ of Big V Supermarkets, Inc. through the maturity date
(December 31, 2003).
. The note, together with accrued but unpaid interest thereon, will be
forgiven in its entirety upon a change of control, directly or
indirectly, of fifty percent or more of the outstanding voting
securities of the Company or any of its subsidiaries and employment in
the new company is not continued.
. The note, together with accrued but unpaid interest thereon, will be
due and payable if the obligor leaves the employ of the company at any
time prior to the maturity date, other than a termination without
cause (as defined in the undersigned's Employment Agreement with the
Company.).
. Interest shall accrue at the minimum rate allowed under Internal
Revenue Service regulations.
In witness whereof, the Note has been duly executed and delivered by the Obligor
on the date first above written.
/s/ James A. Toopes, Jr.
------------------------
James A. Toopes, Jr.
264 Highland Avenue
Ridgewood, New Jersey 07450
Date: December 28, 1998
-----------------
<PAGE>
Exhibit 10.42
-------------
EMPLOYMENT AND NON-COMPETITION AGREEMENT
----------------------------------------
THIS AGREEMENT is entered into as of the 23rd day of February, 1999 by and
among Mark S. Schwartz, an individual resident of 3422 Hidden River View,
Annapolis, MD 15403 (the "Executive"), Big V Holding Corp., a Delaware
corporation ("Holding"), and Big V Supermarkets, Inc., a New York corporation
(the "Company").
RECITALS
--------
WHEREAS, the Company and Holding are parties to a Management Agreement
under which Holding provides the services of senior management to the Company
(the "Management Agreement");
WHEREAS, the Executive has indicated his willingness to enter into this
Agreement and to perform management services for the Company under the
Management Agreement as are set forth herein; and
WHEREAS, the Company and the Executive desire to set forth the terms and
conditions under which the Executive shall be employed by Holding and upon which
Holding shall compensate the Executive.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
and agreements hereinafter set forth, Holding, the Company and the Executive
agree as follows:
SECTION ONE
-----------
EMPLOYMENT
----------
1.01 Office. Holding hereby employs, engages and hires the Executive, and
------
the Executive agrees to serve Holding, as an executive-level employee of Holding
for the term of employment specified in section 1.04 herein.
1.02 Responsibilities. The Executive shall serve as President and Chief
----------------
Executive Officer and Director of Holding and the Company, performing such
duties as
1
<PAGE>
shall reasonably be required of a President and Chief Executive Officer are
reasonably consistent with the job description attached hereto as Exhibit A
---------
reporting only to the Board of Directors of Holding (the "Board"). The Executive
shall have such other powers and perform such other reasonable additional
executive duties as may from time to time be assigned to him by the Board.
1.03 Full-Time Commitment. The Executive will serve Holding faithfully
--------------------
AND to the best of his ability and will devote substantially all of his time,
energy, experience, and talents during regular business hours and as otherwise
reasonably necessary to such employment, to the exclusion of all other business
activities.
1.04 Term. The term of this Agreement (the "Term") shall be from the date
----
hereof until the earlier of (a) the termination of the Executive's employment
hereunder pursuant toSections 3.01 or 3.04 hereof or (b) December 31, 2003,
provided, however, that the Term shall be automatically renewed for an
additional one-year period following December 31, 2003 and for additional one-
year periods thereafter unless (i) either Holding or the Executive notifies the
other of its or his desire not to renew the Term no later than December 31, 2002
or, with respect to a year in which the Term has been renewed, one year prior to
the last day of such renewal year, (ii) the Executive's employment is terminated
pursuant to Sections 3.01 or 3.04, in which case the Term shall end as of the
date of such termination or (iii) the Executive's employment is terminated
pursuant to Sections 3.02, 3.03 or 3.05, in which case the Term shall end on
December 31, 2003 or, with respect to any renewal years December 31 of the year
in which such termination occurred.
2
<PAGE>
SECTION TWO
COMPENSATION OF EXECUTIVE
-------------------------
2.01 Base Salary. During the Term the Executive shall receive as a base
-----------
salary $500,000 per annum (the "Base Salary"). The Base salary shall be paid in
weekly installments in arrears and subject to withholding and other applicable
taxes. The Base Salary shall be reviewed annually at the end of each calendar
year beginning with calendar year 2000 by the Board and may be increased at that
time if the Board determines, in its sole discretion, that the Base Salary
warrants any increase.
2.02 Bonuses. The Executive shall be entitled to receive accrued annual
-------
bonuses at the end of each calendar year in accordance with the Annual Incentive
Bonus Plan attached hereto as Schedule I (the "Plan"). The Annual Incentive
----------
Bonus Plan initially provides for a $250,000 annual base bonus depending on the
Company's meeting certain performance criteria set forth in the Plan, and
subject to adjustment downward or upward for performance below or in excess of
the criteria set forth in the Plan; provided, however, notwithstanding the
foregoing, the Executive shall be entitled to a minimum bonus pursuant to the
foregoing of $200,000 for 1999, to be paid in accordance with Schedule I
----------
("Initial Bonus"). If, however, the Executive's employment is terminated
pursuant to either Sections 3.01 or 3.04 hereunder within two years from the
date hereof, the Company may, at its sole discretion, demand that Executive
repay a portion of the Initial Bonus not earned pursuant to the Section III of
the Annual Percentage Bonus Plan attached hereto as Schedule I. The Executive
----------
shall repay such Initial Bonus using a certified or official bank check payable
to the Company, within ten (10) days of such demand. The payment of the
Executive's bonus shall be subject to withholding and other applicable taxes.
2.03 Options. As soon as practicable after commencement of the Term, the
-------
Executive shall be granted an option, pursuant to Holding's 1990 Time
Accelerated Restricted Stock Option Plan (the "Option Plan"), to purchase
[19,000] shares of the
3
<PAGE>
common stock, $.01 par value per share, of Holding ("Option Stock") for $35 per
share. Such option shall be evidenced by an option agreement in substantially
the form attached hereto as Exhibit B (the "Stock Option Agreement"). The Option
---------
Stock shall vest and become exercisable based upon the performance schedule set
forth in the Stock Option Agreement.
2.04 Vacation. The Executive shall be entitled to take four weeks of paid
--------
vacation annually during the Term, to be taken at such time or times as shall be
mutually convenient and consistent with his duties and obligations to Holding
and the requirements of the Company.
2.05 Expenses. Holding shall promptly pay or reimburse the Executive for
--------
all reasonable expenses incurred by him in connection with the performance of
his duties and responsibilities hereunder, including, but not limited to,
expenses paid or incurred for travel relating to the business of Holding or the
Company. All requests for reimbursement of expenses referred to in this
paragraph shall be accompanied by such underlying documents or other evidence as
are reasonably required to support the deduction of such expenses in accordance
with the rules established by Holding, which shall be consistent with the rules
in effect at the Company for the Company's executive officers.
2.06 Life Insurance. Subject to the Executive's reasonable insurability,
--------------
Holding shall obtain and keep in full force and effect during the Term, at its
own cost and expense, insurance covering the Executive's life in an amount equal
to 200% of his Base Salary as of January 1st of each year during the Term, or
such higher percentage as the Company may maintain from time to time with
respect to its senior executives, payable to his estate or such other person or
persons as he may from time to time direct. In addition to such insurance,
Holding or the Company, in its discretion, and at its own cost and expense, may
also obtain insurance for its own benefit covering the
4
<PAGE>
Executive's life in such amount as it considers advisable, and the Executive
agrees to cooperate fully to enable Holding or the Company to obtain such
insurance.
2.07 Automobile. During the Term, Holding shall make available to the
----------
Executive a luxury class automobile in accordance with the Company's car policy
for senior officers, together with all normal maintenance of such automobile
including insurance, garage, repairs, etc. If Holding makes available to the
Executive a leased automobile, the Executive shall have the right to purchase
the same with his own funds at the end of the lease term at the purchase option
exercise price.
2.08 Relocation Expenses. (a) The Company shall reimburse the Executive
-------------------
for certain specified reasonable expenses actually incurred by the Executive and
his immediate family in relocating to the Florida, New York area in accordance
with the Company's established relocation policy guidelines. Upon the purchase
or renting of a residence, the Executive will be reimbursed for specific closing
costs or allowances in accordance with the Company's established relocation
policy guidelines relating to "buy-side" transactions. The Company will also
provide the Executive with the assistance of a national relocation company to
market the Executive's home in Maryland.
(b) The Company will provide the Executive with temporary living
arrangements in an apartment rented by the Company for a period of six months
from first day of employment, which period may be extended for up to three
additional months if necessary and approved by the Chairman.
(c) The Company will reimburse the Executive and his immediate family
for a reasonable number of return trips to Maryland and house search trips to
New York.
(d) In the event that the reimbursement of the Executive for foregoing
expenses results in taxable income to the Executive, the Executive will be
grossed-up to the extent of 33% of the incremental taxable income through a
bonus.
5
<PAGE>
2.09 Other Benefits. The Executive shall be entitled to participate in
--------------
ALL employment benefit plans now existing or hereafter established by Holding,
which shall be consistent with such benefit plans or arrangements generally made
available to senior executive officers of the Company.
SECTION THREE
-------------
TERMINATION
-----------
3.01 Cause. The Executive may be terminated from his employment by
-----
Holding at any time for Cause without prior notice, and Holding shall, upon such
termination, have no obligation to pay the compensation specified in section 2
herein except that Holding shall be obligated to pay the Base Salary specified
in Section 2.01 herein through the date of such termination. For purposes of
this Agreement, "Cause" shall mean a termination of employment of the Executive
by Holding or any of its subsidiaries due to (a) the commission by the Executive
of an act of fraud or embezzlement (including the unauthorized disclosure of
confidential or proprietary information of Holding or the Company which results
in, or which could be reasonably expected to result in, a material injury to
Holding or the Company), (b) a felony conviction or guilty plea of the
Executive, (c) willful misconduct as an employee of Holding or the Company which
results in material injury to Holding or the Company or (d) the willful failure
of the Executive to render services to Holding or the Company in accordance with
his employment which failure amounts to a material neglect of his duties to
Holding or the Company; as determined in each case in good faith by the Board.
In the event of a termination for Cause pursuant to this Section 3.01, the
Executive's right to receive compensation and other benefits I except for
payments for services previously rendered, shall cease immediately upon such
termination.
3.02 Disability; Death. If the Executive shall fail to or be unable to
-----------------
perform the duties required hereunder because of any serious physical or other
incapacity as
6
<PAGE>
determined by an independent medical doctor selected by the Board, and such
failure or inability shall continue for a period of 180 consecutive days or
longer during the Term, Holding shall have the right to terminate this
Agreement. This Agreement shall terminate automatically upon the death of the
Executive. In the event of termination due to death or disability pursuant to
this Section 3.02, the Executive's right to receive compensation hereunder shall
cease, except that (a) the Executive shall receive any life or disability
insurance benefits (as applicable) and Holding shall pay to the Executive all
bonus compensation earned or awarded hereunder to the date of termination, (b)
in the event of termination due to disability and subject to the Executive's
reasonable insurability, during the Term the Executive shall continue to receive
medical and health insurance benefits otherwise made available to other senior
executives, except to the extent such coverage is available to the Executive
from sources other than Holding or the Company, (c) in the event of termination
due to disability, Holding shall continue to treat the Executive as an employee
for federal tax purposes but only if and to the extent Holding is permitted to
do so under applicable statutes, regulations and rulings and only for so long as
Holding is required to pay the Executive Base Salary pursuant to the terms
hereof and the Executive is not employed by any other person or entity and (d)
in the event of termination due to disability, Holding shall continue to pay the
Executive his Base Salary in accordance with Section 2.01 hereof until the end
of the Term, provided that any Base Salary payable pursuant to this Section 3.02
shall be reduced by any compensation received by the Executive during such
period from any entity or person (it being understood that the Executive shall
not be obligated to seek other employment) and by any disability insurance
benefits received by the Executive. Except as specifically provided in the
preceding sentence, the Base Salary shall not be subject to any increases
whatsoever.
3.03 Termination Without Cause. Holding shall have the right to terminate
-------------------------
the employment of the Executive at any time without Cause ("Cause" shall be
determined
7
<PAGE>
according to Section 3.01 herein). In such case, the Executive's right to
receive compensation and other benefits hereunder, other than bonus compensation
earned or awarded to the date of such termination, shall cease. Notwithstanding
the foregoing, Holding shall continue to pay the Executive his Base Salary in
accordance with Section 2.01 hereof until the earlier of two (2) years from the
date of such termination or the end of the Term (the "Severance Term"); provided
that any Base Salary payable pursuant to this Section 3.03 shall be reduced by
any compensation received by the Executive during such period from any entity or
person (it being understood that the Executive shall not be obligated to seek
other employment). Except as specifically provided in the preceding sentence,
the Base Salary shall not be subject to any increases whatsoever.
3.04 Voluntary Termination. The Executive may voluntarily terminate
---------------------
his employment hereunder at any time, for any reason or for no reason. In such
case, the Executive's right to receive compensation and other benefits
hereunder, other than Base Salary and bonus compensation earned or awarded, in
each case to the date of such termination, shall cease.
3.05 Termination for Good Reason. The Executive shall have the right
---------------------------
to terminate his employment with Holding for "Good Reason" upon written notice
to Holding, delivered to Holding promptly after the event or cause constituting
"Good Reason." For purposes of this Agreement, "Good Reason" shall mean (a) the
failure to elect or appoint the Executive as President and Chief Executive
Officer and to the Board of Directors of Holding or the Company or (b) the
failure by Holding or the Company to pay any compensation or other amount due
the Executive under this Agreement, which failure is not remedied within ten
(10) business days after written notice thereof is delivered to Holding by the
Executive. The Executive's termination for Good Reason hereunder shall be
treated for purposes of this Agreement, and for purposes of the Shareholders'
Agreement by and among Holding and the shareholders of Holding named therein,
dated as of December 28, 1990 (the "Shareholders'
8
<PAGE>
Agreement"), and the Non-Qualified Time Accelerated Restricted Stock Option
Agreement to be entered into pursuant to Section 2.03 hereof, as if the
Executive were terminated without Cause by Holding pursuant to Section 3.03
hereof.
SECTION FOUR
------------
SALE OF COMMON STOCK TO EXECUTIVE; PUT OPTION
---------------------------------------------
4.01 The Executive hereby agrees to purchase from Holding, and Holding
hereby agrees to sell, assign and convey to the Executive, 20,000 shares (the
"Purchase Shares") of Common Stock for the aggregate purchase price of $700,000
at a closing to occur within 90 days hereof (the "Closing"). At the Closing:
(a) the Executive shall pay such purchase price by delivering to Holding a
promissory note made in the principal amount of $700,000 payable to the order of
Holding in the form of Exhibit C hereto (the "Promissory Note") and a pledge
---------
agreement in the form of Exhibit D hereto (the "Pledge Agreement"), and (b) the
---------
Company shall deliver to the Executive certificates representing the Purchase
Shares, duly registered in the name of the Executive. The sale will be governed
by the Management Stock Subscription Agreement in the form of Exhibit E hereto.
---------
4.02 The Executive agrees to execute and deliver to Holding at the Closing
the Shareholders' Agreement, and a certificate acknowledging, in connection with
the purchase of the Purchase Shares, that he is making and shall be bound by,
the representations, warranties, agreements, acknowledgments and covenants set
forth on Exhibits hereto.
4.03 Pursuant to the conditions set forth in this Section 4, the Company
grants the Executive an option to require the Company to purchase certain shares
held by the Executive (the "Put Option") so long as the Executive is still
employed by the Company pursuant to this contract as of December 31, 2003 and
December 31, 2005 (each year shall be referred to as a "Put Year"). To be
eligible for the Put Option for a particular Put Year, the following thresholds
must be met:
9
<PAGE>
(i) the actual Cash Flow (as defined in the Plan) for the Put Year
must exceed the actual Cash Flow of the prior year by 2.5%; and
(ii) the Company must have a cumulative actual Cash Flow that exceeds
the cumulative Plan Cash Flow (as defined in the Plan) for all
target periods up through and including the Put Year.
If the Company meets the above thresholds during a Put Year, the Executive
may, upon written notice to the Company (the "Put Notice"), require the Company
to repurchase free and clear of any liens, claims or encumbrances, up to 25% of
the Purchase Stock and Option Stock in each Put Year, up to an aggregate of 50%
of such stock for both Bonus Years (the "Put Shares"). The purchase price for
the Put Shares shall be calculated as follows (the "Put Share Price" formula):
Put Share Price = (Bonus Year Cash Flow x 5.5) - Funded Indebtedness
--------------------------------------------------
Outstanding Capital Stock
"Bonus Year Cash Flow" shall equal the actual Cash Flow for the particular
Bonus Year.
"Funded Indebtedness" shall mean all of the Company's funded indebtedness
as of the end of the Put Year, including capital leases, as reported in the
Company's audited financial statements.
"Outstanding Capital Stock" shall mean all of the Company's outstanding
capital stock on a fully diluted basis as of the end of a Put Year.
In order to exercise the Put Option, the Executive must deliver the Put
Notice to the Company within thirty (30) days of receipt by the Company of
audited financial statements for such Put Year. The closing of the purchase of
the Put Shares shall occur at 10:00 a.m. at the Company on the thirtieth day
after receipt by the Company of the Put Notice (or at such date, time and place
as the parties may otherwise agree). At the Closing, the Executive shall
deliver to the Company certificates representing the shares to be purchased,
together with stock powers endorsed in blank free and clear of
10
<PAGE>
all liens and encumbrances. The Company shall deliver the Put Share Price using
a certified or official bank check payable to the Executive.
4.04 Notwithstanding the provisions of this Section 4, the issuing of such
Purchase Shares and the consummation of the Put Option are subject to the
receipt by Holding of the consents required by certain lending institutions to
such transactions. The Company agrees to seek for such consents whenever such
consents are required.
SECTION FIVE
------------
COVENANT NOT TO COMPETE
-----------------------
5.01 Non-Competition. So long as the Executive is employed by Holding and
---------------
for a period of one (1) year from the date of the Executive's termination of
employment hereunder or, if terminated pursuant to Sections 3.02, 3.03 and 3.05,
until the earlier of the expiration of the Term, notwithstanding such
termination, or the Severance Term, the Executive shall not, directly or
indirectly, by or for himself or as the agent of another or through another as
his agent (a) own any interest in (other than up to five percent of any publicly
traded security), provide consulting or other services to or serve as an officer
or director or engage in the management or operation of any entity that,
directly or indirectly, owns, manages or operates, or participates in the
operation of, any supermarket or other retail grocery store located within 20
miles of any supermarket owned or operated by the Company or any subsidiary of
the Company, or (b) solicit for employment, employ or induce or advise any
employee to leave the employ of Holding, the Company or any of its subsidiaries.
Notwithstanding the foregoing, if the Executive is terminated pursuant to
Sections 3.02, 3.03 or 3.05 hereof, after one year from the date of such
termination the Executive may elect by written instrument in form and substance
reasonably acceptable to Holding, to waive any and all rights to, and release
Holding and the Company from any and all obligations to pay or provide, any Base
Salary or benefits to which the Executive would otherwise be entitled pursuant
to such Sections 3.02, 3.03 or 3.05. In such event, notwithstanding anything
herein to the
11
<PAGE>
contrary, from and after ten (10) business days following the date on which an
originally executed copy of such instrument is delivered to Holding, the
Executive shall no longer be subject to the restrictions set forth in this
Section 5.01 and neither Holding nor the Company shall be obligated to make any
payments or provide any benefits or other compensation to the Executive.
5.02 Restitution. In addition to all other remedies provided for
-----------
hereunder, the Executive agrees that if he shall violate any of the provisions
of this Section 5, Holding shall be entitled to an accounting and repayment of
all profits, compensation, remuneration or other benefits that the Executive may
realize arising from or related to any such violation.
5.03 Modification. The parties agree and acknowledge that the duration,
------------
scope and geographic area of the covenant not to compete described in this
Section 5 are fair, reasonable and necessary in order to protect the good will
and other legitimate interests of Holding, that adequate compensation has been
received by the Executive for such obligations, and that these obligations do
not prevent the Executive from earning a livelihood. If, however, for any reason
any court determines under applicable law that the provisions in this Section 5
pertaining to duration, scope and geographic area in relation to non-competition
are too broad or otherwise unreasonable, that the consideration provided for
hereunder is inadequate or that the Executive has been prevented unlawfully from
earning a livelihood (together, such provisions being hereinafter referred to as
"Restrictions"), such Restrictions shall be interpreted, modified or rewritten,
and such court is hereby requested and authorized by the parties hereto to
revise the Restrictions, to include the maximum Restrictions as are valid and
enforceable under applicable law.
12
<PAGE>
SECTION SIX
-----------
CONFIDENTIAL INFORMATION
------------------------
6.01 Proprietary Information. In the course of his service to Holding and
-----------------------
the Company, the Executive shall have access to confidential and proprietary
information, including, but not limited to strategic plans or data, financial
statements, information concerning marketing data, customer research and data,
information concerning sources of supply, pricing information and data, trade
secrets or the business, operations or financial condition of Holding, the
Company and its subsidiaries and affiliates and Wakefern Food Corporation. Such
information shall be referred to hereinafter as "Proprietary Information" and
shall include any and all items enumerated in the preceding sentence whether
previously existing, now existing or arising hereafter, whether conceived or
developed by others or by the Executive alone or with others, and whether or not
conceived or developed during regular working hours. Proprietary Information
which is in the public domain during the period of service by the Executive,
provided the same is not in the public domain as a consequence of disclosure
directly or indirectly by the Executive in violation of this Agreement, shall
not be subject to the restrictions of Sections 6.01 through 6.03 herein.
6.02 Fiduciary Obligations. The Executive acknowledges that Holding and
---------------------
the Company have expended, and will continue to expend, significant amounts of
time, effort and money in the procurement of their Proprietary Information, that
Holding and the Company have taken all reasonable steps in protecting the
secrecy of the Proprietary Information, that said Proprietary Information is of
critical importance to Holding and the Company and that a violation of this
Section 6 would seriously and irreparably impair and damage the business of both
Holding and the Company, and the Executive agrees to keep all Proprietary
Information in a fiduciary capacity for the sole benefit of Holding and the
Company.
13
<PAGE>
6.03 Non-Disclosure. The Executive shall not disclose. directly or
--------------
indirectly (except as the Executive's duties in the regular and proper course of
business of Holding or the Company may require and except as required by law),
any Proprietary Information to any person other than Holding, the Company or
authorized employees thereof at the time of such disclosure, or to such other
persons to whom the Executive has been specifically instructed to make
disclosure by the Board of Directors of Holding or the Company and in all such
cases only to the extent required in the regular and proper course of business
of Holding and the Company. At the termination of his employment, the Executive
shall deliver to Holding all notes, letters, documents and records which may
contain Proprietary Information which are then in his possession or control and
shall not retain or use any copies or summaries thereof.
SECTION SEVEN
-------------
REMEDIES
--------
7.01 Remedies. The Executive acknowledges that he has carefully read and
--------
considered the terms of this Agreement and knows them to be essential to induce
Holding and the Company to enter into this Agreement and that any breach of the
provisions contained herein will result in serious and irreparable injury to
Holding and the Company. Therefore, in the event of a breach of this Agreement,
Holding and the Company shall be entitled to equitable relief against the
Executive, including, without limitation, an injunction to restrain the
Executive from such breach and to compel compliance with this Agreement in
protecting or enforcing its rights and remedies.
SECTION EIGHT
-------------
MISCELLANEOUS
-------------
8.01 Notice of Sale. If, during the term of Executive's employment
--------------
hereunder, Holding, the Company or an Affiliate (as defined in the Shareholders'
Agreement) of the Company to which this Agreement is assigned is sold to a third
party (whether directly or indirectly, by sale of stock or assets, merger or
otherwise), Holding shall endeavor to
14
<PAGE>
give Executive such advance notice therefor as is practicable in the
circumstances, taking into account the need of the parties to the transaction to
maintain confidentiality of their negotiations until public announcement
thereof. In such event, Executive shall not disclose to any other person the
pendency of such transaction until such public announcement is made.
8.02 Indemnification. Holding and the Company shall indemnify Executive
---------------
in the event that he is a party or threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was a director or officer of Holding or the Company, its subsidiaries or
Affiliates, in which capacity he is or was serving at the request of Holding or
the Company, against expenses (including attorneys' fees which shall be advanced
as incurred) judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding to
the fullest extent and in the manner set forth and permitted by the General
Corporation Law of the State of Delaware, and any other applicable law, as from
time to time in effect.
8.03 Notices. All notices hereunder, to be effective, shall be in writing
-------
and shall be deemed delivered when delivered by hand or five days after being
sent by first-class-certified mail, postage and fees prepaid, as follows (unless
and until notice of another or different address shall be given):
(i) If to Holding: Big V Holding Corp.
c/o Thomas H. Lee Company
75 State Street
Boston, Massachusetts 02109
Attn: Chairman
Copy to: Charles W. Robins, Esquire
Hutchins, Wheeler & Dittmar
A Professional Corporation
101 Federal Street
Boston, Massachusetts 02110
15
<PAGE>
(ii) If to the Executive: To the address set forth below.
8.04 Modification. This Agreement, together with the Stock Option
------------
Agreement, Promissory Note, Pledge Agreement and Shareholders' Agreement,
constitute the entire agreement between the parties hereto with regard to the
subject matter hereof, terminating and superseding all prior understandings and
agreements, whether written or oral. This Agreement may not be amended or
revised except by a writing signed by the parties.
8.05 Assignment. This Agreement and all rights hereunder are personal to
----------
the Executive and may not be assigned by him. Notwithstanding anything else in
this Agreement to the contrary, Holding and the Company may assign this
Agreement to and all rights hereunder shall inure to the benefit of any person,
firm or corporation succeeding to all or substantially all of the business or
assets of the Company whether by purchase, merger or consolidation.
8.06 Captions. Captions herein have been inserted solely for convenience
--------
of reference and in no way define, limit or describe the scope or substance of
any provision of this Agreement.
8.07 Severability. The provisions of this Agreement are severable, and
------------
the invalidity of any provision shall not affect the validity of any other
provision. In the event that any arbitrator or court of competent jurisdiction
shall determine that any provision of this Agreement or the application thereof
is unenforceable because of the duration or scope thereof, the parties hereto
agree that said arbitrator or court in making such determination shall have the
power to reduce the duration and scope of such provision to the extent necessary
to make it enforceable, and that the Agreement in its reduced form shall be
valid and enforceable to the full extent permitted by law.
16
<PAGE>
8.08 Taking Effect. The terms and conditions set forth in this Agreement
-------------
shall take effect and be binding upon the parties as of the date first above
written.
8.09 Governing Law. This Agreement shall be construed under and governed
-------------
by the laws of the State of New York.
****
17
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
a binding contract as of the day and year first above written.
BIG V HOLDING CORP.
By /s/David Bronstein
----------------------
(signature)
David Bronstein
----------------------
(print name)
Chairman & CEO
----------------------
(print title)
EXECUTIVE: BIG V SUPERMARKETS, INC.
/s/Mark S. Schwartz By /s/David Bronstein
- --------------------- ----------------------
Mark S. Schwartz (signature)
David Bronstein
----------------------
(print name)
Chairman & CEO
----------------------
(print title)
Executive's Home Address:
3422 Hidden River View
Annapolis, MD 15403
18
<PAGE>
SCHEDULE I
----------
TO
--
EMPLOYMENT AGREEMENT WITH MARK S. SCHWARTZ
------------------------------------------
ANNUAL INCENTIVE BONUS PLAN
---------------------------
I. ANNUAL INCENTIVE BONUS BASE AMOUNT AND SCALE
The Annual Incentive Bonus base amount (the "Base Amount") for the
Executive for each year shall equal 50% of his Base Salary for such year.
For each year shown below, the Executive will earn all of the Base Amount
upon the achievement by the Company of the "Plan Cash Flow" shown below for
such year:
YEAR PLAN CASH FLOW ($000)/1/
---- --------------------
- ---------------------------------
/1/ For the years ending 2000 through 2003 and including any extensions of this
- ---
Agreement, the Plan Cash Flow targets shall be determined by the Executive
Committee of Holding and approved by the Compensation Committee of the Board
19
<PAGE>
1999 46,300
2000 *
2001 *
2002 *
2003 *
Cumulative Plan Cash *
Flow for all Target
Periods
The achievement of the Plan Cash Flow target will result in the payment of
an Annual Incentive Bonus equal to the Base Amount. The Bonus will be
reduced by one eleventh (1/11) of the Base Amount for each one percent by
which the Plan Cash Flow target exceeds the Company's actual Cash Flow for
the applicable year; provided, however, that if less than 90% of the Plan
Cash Flow target is achieved, no Bonus will be paid.
In the event the Company's actual Cash Flow exceeds the Plan Cash Flow
target for the applicable year, the Annual Incentive Bonus will be
increased as follows: (i) by 0.2% of the Executive's Base Salary (as of the
last day of the year) for each 0.1% by which the Company's actual Cash Flow
exceeds the applicable Plan Cash Flow target but is less than 110% of the
Plan Cash Flow target, (ii) by 0.3% of the Base Salary for each 0.1% by
which the Company's actual Cash Flow exceeds 110% of the applicable Plan
Cash Flow target but is less than 120% of the Plan Cash Flow target, and
(iii) by 0.4% of the Base Salary for each 0.1% by which the Company's
actual Cash Flow exceeds 120% of the applicable Plan Cash Flow target.
II. "CASH FLOW" DEFINED
-------------------
For the purpose of this Agreement, "Cash Flow" shall mean the Company's
consolidated income without reduction for non-cash compensation expense or
deferred compensation expense, interest (except as indicated below), income
taxes, depreciation or amortization but after deduction of: (i) all
operating expenses (including up to $250,000 in management fees payable to
Thomas H. Lee Company and J.S. Frelinghuysen & Co. pursuant to their
respective Management Agreements with the Company) and (iii) other reserves
required in connection with the operation of the Company's business in the
ordinary course. The determination of Cash Flow shall not take into
account any income or expense attributable to LIFO reserves, or gains or
losses on sales of assets or other extraordinary gains or losses. Except
as otherwise provided herein, Cash Flow shall be determined in accordance
with generally accepted accounting
20
<PAGE>
principles consistently applied, all as reflected in the Company's most
recently available consolidated audited financial statements for the
immediately preceding fiscal year and as certified by the Chief Financial
Officer of the Company. The Plan Cash Flow targets set forth above shall be
adjusted in the manner and to the extent reasonably determined by the
Company's Board of Directors in order to take into account (i) material
changes in the Company's methods of accounting, (ii) the sale of
substantial assets by the Company or (iii) the acquisition of ongoing
business, whether by merger, consolidation or otherwise. Any such
adjustment shall be made in good faith with the intent that, after taking
into account the nature of the cause of the adjustment, the measure of the
Company's performance established by the Plan Cash Flow targets before and
after the adjustment will be as nearly equivalent as is reasonably
possible.
III. ANNUAL BONUS PAYMENT, EARLY TERMINATION PAYMENT
-----------------------------------------------
The Annual Incentive Bonus shall be paid by Holding on April 30 of the year
immediately following the year in which it was earned or within thirty (30)
days of the date on which the Company receives its audited financial
statements for such year, whichever occurs first. Such Bonus is not
payable prior to such date unless the Company is sold or the Executive is
terminated pursuant to Sections 3.02, 3.03 or 3.05 hereof. If any of the
events occur, the Bonus will vest to the extent that the Bonus would
otherwise be payable by measuring the Company's Cash Flow as of the date
the material terms of such sale were established (the "Sale Date") against
the Plan Cash Flow target pro rated to the Sale Date, taking into account
seasonal factors as determined in good faith by the Company's Board of
Directors; provided, however, that the amount of any resulting Bonus will
also be pro rated to the Sale Date based on the number of days elapsed (up
to and including the Sale Date). If the Executive's employment terminates
for any other reason, no portion of his Annual Incentive Bonus will be paid
without authorization and approval of the Board of Directors of Holding.
Annual Incentive Bonus Payments are not assignable or transferable except
by beneficiary designations to take effect at death.
For the purpose of this Plan, a sale of the Company shall mean a sale of
all or substantially all of the assets of the Company or the sale or other
transfer of 50% or more of the common stock of the Company held by the
Institutional Investors (as defined in the Shareholders' Agreement among
Big V Holding Corp. and its shareholders dated as of December 28, 1990) to
an unaffiliated third party or parties.
21
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<PERIOD-START> DEC-27-1998
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0
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