Exhibit 10.3
CHANGE IN CONTROL PROTECTION
AGREEMENT
This Change in Control Protection Agreement,
dated as of
(this “ Agreement ”), between The Penn Traffic
Company (the “ Company ”) and
(the “ Key Employee ”).
R E C I T A
L S
The
Company has employed the Key Employee in an officer position and
has determined that the Key Employee holds a critical position with
the Company.
The
Company believes that, in the event it is confronted with a
situation that could result in a change in ownership or control of
the Company, continuity of management will be essential to its
ability to evaluate and respond to such situation in the best
interests of its shareholders, and the Company desires to assure
itself of the Key Employee’s services during the period in
which it is confronting such a situation, and to provide certain
financial assurances to the Key Employee.
The
Key Employee has had access to important confidential information
and important employee and customer relationships, all of which the
Key Employee agrees are valuable assets of the Company that the
Company and the Key Employee desire to reasonably
protect.
To
achieve these objectives, the Company and the Key Employee desire
to enter into an agreement providing the Company and the Key
Employee with certain rights and obligations upon the occurrence of
a Change in Control (as defined in Section 2
hereof);
The
Company and the Key Employee hereby agree as follows:
1.
Operation of Agreement .
(a)
Term . This Agreement shall become effective as of the date
first set forth above (the “ Commencement Date
”) and shall remain in effect until the third anniversary of
the Commencement Date (the “ Expiration Date
”).
(b)
Effective Date . Notwithstanding the provisions of
Section 1(a) hereof, this Agreement shall govern the
terms and conditions of the Key Employee’s employment and the
benefits and compensation to be provided to the Key Employee only
if a Change in Control is consummated prior to the Expiration Date.
For purposes of this Agreement, the “ Effective Date
” shall mean the date, prior to the Expiration Date, on which
a Change in Control is consummated; provided that if the Key
Employee is not employed by the Company on the Effective Date or at
any time during the ninety (90) days immediately prior to the
Effective Date, then the Key Employee shall not have any rights
under this Agreement. For the avoidance of doubt, the parties
acknowledge that the Key Employee shall not have any rights under,
and the terms, conditions and benefits of such Key Employee’s
employment shall not be governed by,
this Agreement prior to the Effective Date, or
if a Change in Control does not occur prior to the Expiration
Date.
2.
Definition of Change in Control .
“ Change in Control ” shall
be deemed to occur upon:
(i)
the acquisition by any individual, entity or group (a “
Person ”) (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934 (the “ Exchange Act ”)) of
beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 50% or more (on a fully
diluted basis) of either (A) the then outstanding shares of
common stock of the Company (“ Common Stock ”),
taking into account as outstanding for this purpose such Common
Stock issuable upon the exercise of options or warrants, the
conversion of convertible stock or debt, and the exercise of any
similar right to acquire such Common Stock (the “
Outstanding Company Common Stock ”) or (B) the
combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of directors
(the “ Outstanding Company Voting Securities ”);
provided , however , that for purposes of this
Agreement, the following acquisitions shall not constitute a Change
in Control: (I) any acquisition by the Company or any entity
that directly or indirectly is controlled by controls or is under
common control with the Company (an “ Affiliate
”), (II) any acquisition by any employee benefit plan
sponsored or maintained by the Company or any Affiliate, or
(III) any acquisition by the Key Employee or any group of
persons including the Key Employee (or any entity controlled by the
Key Employee or any group of persons including the Key
Employee);
(ii)
individuals who, on the date hereof, constitute the Board of
Directors of the Company (the “ Incumbent Directors
”) cease for any reason to constitute at least a majority of
the Board of Directors (the “ Board ”), provided
that any person becoming a director subsequent to the date hereof,
whose election or nomination for election was approved by a vote of
at least two-thirds of the Incumbent Directors then on the Board
(either by a specific vote or by approval of a registration
statement of the Company describing such person’s inclusion
on the Board, or a proxy statement of the Company in which such
person is named as a nominee for director, without written
objection to such nomination) shall be an Incumbent Director;
provided , however , that no individual initially
elected or nominated as a director of the Company as a result of an
actual or threatened election contest, as such terms are used in
Rule 14a-11 of Regulation A promulgated under the Exchange
Act, with respect to directors or as a result of any other actual
or threatened solicitation of proxies or consents by or on behalf
of any person other than the Board shall be deemed to be an
Incumbent Director;
(iii)
the dissolution or liquidation of the Company;
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(iv)
the sale, transfer or other disposition of all or substantially all
of the business or assets of the Company; or
(v)
the consummation of a reorganization, recapitalization, merger,
consolidation, statutory share exchange or similar form of
corporate transaction involving the Company that requires the
approval of the Company’s stockholders, whether for such
transaction or the issuance of securities in the transaction (a
“ Business Combination ”), unless immediately
following such Business Combination: (A) more than 50% of the
total voting power of (x) the entity resulting from such
Business Combination (the “ Surviving Company
”), or (y) if applicable, the ultimate parent entity
that directly or indirectly has beneficial ownership of sufficient
voting securities eligible to elect a majority of the members of
the board of directors (or the analogous governing body) of the
Surviving Company (the “ Parent Company ”), is
represented by the Outstanding Company Voting Securities that were
outstanding immediately prior to such Business Combination (or, if
applicable, is represented by shares into which the Outstanding
Company Voting Securities were converted pursuant to such Business
Combination), and such voting power among the holders thereof is in
substantially the same proportion as the voting power of the
Outstanding Company Voting Securities among the holders thereof
immediately prior to the Business Combination, and (B) at
least a majority of the members of the board of directors (or the
analogous governing body) of the Parent Company (or, if there is no
Parent Company, the Surviving Company) following the consummation
of the Business Combination were Board members at the time of the
Board’s approval of the execution of the initial agreement
providing for such Business Combination.
3.
Protected Period . If the Key Employee is an employee of the
Company on the Effective Date, the Company agrees to continue the
Key Employee in its employ, and the Key Employee agrees to remain
in the employ of the Company, on the terms and subject to
conditions of this Agreement, for a period commencing on the
Effective Date and ending on the earlier of (i) the
termination of the Key Employee’s employment with the Company
in accordance with the terms hereof and (ii) two years
immediately following the Effective Date (the “ Protected
Period ”). For purposes of clarity and not by way of
limitation, in the event of a Change in Control after the
Commencement Date but prior to the Expiration Date set forth in
Section l(a), the Expiration Date shall be adjusted to
coincide with the last day of the Protected Period.
4.
Position and Duties .
(a)
No Reduction in Position . During the Protected Period, the
Key Employee’s position (including titles), authority and
responsibilities shall be at least commensurate with those held,
exercised and assigned immediately prior to the Effective Date. It
is understood that, for purposes of this Agreement, such position,
authority and responsibilities shall not be regarded as not
commensurate merely by virtue of the fact that (i) an entity
or group of related entities shall have acquired all or
substantially all of the business, capital stock and/or assets of
(an “ Acquirer ”) or (ii) the Company or
the
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Acquirer imposes upon the Key Employee
additional or changed reporting obligations or other similar and
customary responsibilities within the group structure of the
Acquirer.
(b)
Business Time . During the Protected Period, the Key
Employee agrees to devote his full attention during normal business
hours to the business and affairs of the Company and to use his
best efforts to perform faithfully and efficiently the
responsibilities assigned to him hereunder, to the extent necessary
to discharge such responsibilities, except for (i) time spent
in managing his personal, financial and legal affairs and serving
on corporate, civic or charitable boards or committees, in each
case only if and to the extent not interfering in any material
respect with the performance of such responsibilities and to the
extent permitted by the policies of the Company and the Acquirer,
and (ii) periods of vacation and sick leave to which he is
entitled.
5.
Compensation .
(a)
Base Salary . During the Protected Period, the Key Employee
shall receive a base salary at a monthly rate at least equal to the
monthly salary paid to the Key Employee by the Company immediately
prior to the Effective Date. The base salary shall be reviewed at
least once each year after the Effective Date, and may be increased
(but not decreased) at any time and from time to time by action of
the Board or any committee thereof or any individual having
authority to take such action in accordance with the
Company’s regular practices. The Key Employee’s base
salary, as it may be increased from time to time, shall hereafter
be referred to as the “Base Salary.” Neither the Base
Salary nor any increase in the Base Salary after the Effective Date
shall serve to limit or reduce any other obligation of the Company
hereunder.
(b)
Annual Bonus . During the Protected Period, in addition to
the Base Salary, the Key Employee shall be eligible to receive
discretionary annual bonuses or incentive compensation as may be
authorized from time to time by action of the Board or the Acquirer
or any committee thereof or any individual having authority to take
such action in accordance with the Company’s or the
Acquirer’s regular practices in their sole discretion (the
“ Annual Bonus Opportunity ”). The Annual Bonus
Opportunity shall be an amount that provides the Key Employee with
the same bonus opportunity as other employees of the Company or the
Acquirer of comparable rank (“ Similarly Situated Key
Employees ”). If any fiscal year commences but does not
end during the Protected Period, the Key Employee shall receive a
pro-rated amount in respect of the Annual Bonus Opportunity for the
portion of the fiscal year occurring during the Protected Period.
Any amount payable in respect of the Annual Bonus Opportunity shall
be paid as soon as practicable following the year for which the
amount (or any prorated portion) is earned or awarded, unless
electively deferred by the Key Employee pursuant to any deferral
programs or arrangements that the Company or the Acquirer may make
available to the Key Employee.
(c)
Long-term Incentive Compensation Programs . During the
Protected Period, the Key Employee shall be eligible to participate
in all long-term incentive compensation programs that are made
available from time to time to Similarly
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Situated Key Employees, subject to and on a
basis consistent with the terms, conditions, and overall
administration of such programs.
(d)
Benefit Plans . During the Protected Period, the Key
Employee (and, to the extent applicable, his dependents) shall be
entitled to participate in or be covered under all pension,
retirement, deferred compensation, savings, medical, dental,
health, disability, group life, accidental death and travel
accident insurance plans and programs of the Company and any
Affiliate that are made available from time to time to other
Similarly Situated Key Employees, subject to and on a basis
consistent with the terms, conditions, and overall administration
of such plans and arrangements.
(e)
Expenses . During the Protected Period, the Key Employee
shall be entitled to receive prompt reimbursement for all
reasonable expenses incurred by the Key Employee (the “
Expenses ”) in accordance with the policies and
procedures of the Company as in effect from time to time with
respect to expenses incurred by other Similarly Situated Key
Employees.
(f)
Vacation and Fringe Benefits . During the Protected Period,
the Key Employee shall be entitled to paid vacation and fringe
benefits that are made available from time to time to other
Similarly Situated Key Employees.
(g)
Indemnification . During and after the Protected Period, the
Company shall indemnify the Key Employee and hold the Key Employee
harmless from and against judgments, fines, amounts paid in
settlement and reasonable expenses, including attorneys’
fees, on the same terms and conditions applicable from time to time
with respect to the indemnification of other Similarly Situated Key
Employees.
(h)
Office and Support Staff . The Key Employee shall be
entitled to an office with furnishings and other appointments, and
to secretarial and other assistance, that are made available to
other Similarly Situated Key Employees.
6.
Termination .
(a)
Death, Disability or Retirement . The Key Employee’s
employment with the Company shall terminate automatically upon the
Key Employee’s death, termination due to
“Disability” (as defined below) or voluntary retirement
under any of the Company’s retirement plans as in effect from
time to time. For purposes of this Agreement, “
Disability ” shall have the meaning set forth in the
long-term disability plan then made available to the Key Employee
by the Company or the Acquirer.
(b)
Voluntary Termination; Termination without Cause .
Notwithstanding anything in this Agreement to the contrary, the Key
Employee may voluntarily terminate employment with the Company, and
the Company may terminate the employment of the Key Employee, at
any time for any reason (including early retirement under the terms
of any of the Company’s retirement plans as in effect from
time to time), upon not less than 30 days’ written notice,
provided any termination by the
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Key
Employee pursuant to Section 6(d) hereof on account of
Good Reason (as defined therein) shall not be treated as a
voluntary termination under this Section 6(b).
(c)
Cause . The Company may terminate the Key Employee’s
employment for Cause. For purposes of this Agreement, “
Cause ” means (i) the commission by the Key
Employee of an act of fraud, dishonesty, embezzlement (including
the unauthorized disclosure or use of confidential or proprietary
information of the Company, the Acquirer or their respective
Affiliates or clients) or other act or omission intended or with
consequences that bring, or could reasonably be expected to bring,
the Company, the Acquirer or any of their respective Affiliates
into disrepute or otherwise materially harm, or could reasonably be
expected to materially harm, their respective commercial or
governmental relationships or licenses, (ii) the Key Employee
pleads guilty or no contest to or is convicted of any criminal
offense for which a penalty of imprisonment may be imposed (other
than an offense under road traffic legislation),
(iii) material misconduct as an employee of the Company or any
of its subsidiaries or other conduct tending to bring the Company,
the Acquirer or any of their respective Affiliates or shareholders
into disrepute or failure to comply with any written guidelines
adopted or promulgated by the Company or the Acquirer,
(iv) abandonment or material neglect by the Key Employee of
any of the duties
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