Employment Agreement - Albertson's Inc. and Felicia Denault Thornton
August 6, 2001
Ms. Felicia Denault Thornton
2546 Manhattan Avenue
Hermosa Beach, California 90254
Dear Felicia:
I am pleased to confirm my verbal offer of employment for the position of
Executive Vice President and Chief Financial Officer (CFO) for Albertson's, Inc.
(the "Company"). In this assignment, you will report directly to me. Your
employment with the Company will commence on August 22, 2001 (the "Effective
Date").
Your initial base salary ("Base Salary") will be $540,000 per annum,
payable in accordance with the Company's policies relating to salaried
employees. Your Base Salary may be increased (but not decreased) by the
Compensation Committee of the Board of Directors of the Company (the
"Compensation Committee") in its sole discretion.
On the Effective Date, the Company shall pay to you an amount in cash equal
to $250,000 as a signing bonus, less applicable tax withholding.
Commencing with the fiscal year of the Company ("Fiscal Year") in which the
Effective Date occurs, you will have the opportunity to earn a bonus for each
Fiscal Year as recommended by the Compensation Committee in accordance with the
Company's annual bonus plan applicable to the Company's senior officers (the
"Annual Bonus Plan"). The amount of each annual bonus shall be set by the
Compensation Committee and shall be equal to seventy percent (70%) of Base
Salary if the applicable "target" performance goals (as defined in the Annual
Bonus Plan for such period) are met (the "Target Bonus") and shall not exceed
one hundred five percent (105%) of Base Salary. The criteria for determining the
amount of any Target Bonus and the bases upon which such Target Bonus shall be
payable shall be no less favorable to you than those used for other senior
executives of the Company, such criteria and bases to be determined in the sole
discretion of the Compensation Committee.
As of the Effective Date, you will be granted 60,000 shares of deferrable
restricted stock units of the Company ("Restricted Stock Unit Award") in
accordance with the form of grant used by the Company for grants made to its
senior executive officers; provided that the provisions of such grant shall not
be inconsistent with, or provide for additional obligations upon you beyond, the
terms of this letter agreement, and shall be subject to reasonable review by
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Ms. Felicia Denault Thornton
August 6, 2001
Page 2
your counsel. Such grant shall provide that 12,000 of such units shall vest on
the Effective Date, and 12,000 of such units shall vest on each of the first,
second, third and fourth anniversaries of the Effective Date; provided in each
case that you have been continuously employed as a senior executive with the
Company from the Effective Date through the applicable vesting date, except as
otherwise provided in this letter agreement and in such deferrable restricted
stock unit agreement. To the extent that dividends are paid on Company common
stock after the Effective Date and prior to the date that the Company common
stock that is subject to a Restricted Stock Unit Award is issued to you, you
shall be entitled to receive a cash payment in an amount equal to the dividends
you would have been entitled to receive had you been the owner of such unissued
shares on the date such dividends are paid. Such cash payment shall be made at
the same time payment of dividends are made to other shareholders of Company
common stock.
As of the Effective Date, you will be granted an option ("Initial Option")
to purchase 200,000 shares of common stock of the Company at a per share
exercise price equal to the fair market value of the common stock of the Company
on the Effective Date in accordance with the form of grant used by the Company
for grants made to its senior executive officers; provided that the provisions
of such grant shall not be inconsistent with, or provide for additional
obligations upon you beyond, the terms of this letter agreement, and shall be
subject to reasonable review by your counsel. Such grant will vest and become
exercisable in annual installments at the rate of 40,000 shares on each of the
first, second, third, fourth, and fifth anniversaries of the Effective Date
(each such installment, an "Initial Option Installment"); provided in each case
that you have been continuously employed as a senior executive with the Company
from the Effective Date through the applicable vesting date, except as otherwise
provided in this letter agreement and in such stock option grant agreement.
You will be entitled to receive additional grants of stock options to
purchase shares of common stock of the Company from time to time as recommended
by the Compensation Committee in its sole discretion; provided that not later
than December 31, 2001, the Compensation Committee will grant to you an option
to purchase shares of Company common stock which has a value equal to three
million dollars ($3,000,000), the number of shares of which shall be equal to
three million dollars ($3,000,000) divided by the closing New York Stock
Exchange price of the Company's stock on the date of such grant (which would be
approximately 100,000 shares based on the current stock price), and vesting at
the rate of twenty percent (20%) of the total shares granted on each of the
first, second, third, fourth and fifth anniversaries of the date of such grant
(the "First Additional Option"). The First Additional Option grant will be in
the same form as the Initial Option. Subsequent annual option awards otherwise
shall be subject to the terms and conditions as generally apply to stock options
granted to other senior executive officers who participate in the Company's
equity incentive plans.
The Company will also provide reimbursement for reasonable legal and other
professional fees and expenses you incur in connection with the negotiation and
preparation of this letter agreement. The Company will maintain, for your
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Ms. Felicia Denault Thornton
August 6, 2001
Page 3
benefit, officer liability insurance in a form it maintains for its other senior
executive officers. You will be indemnified by the Company against liability as
an officer of the Company and any subsidiary or affiliate of the Company to the
same extent as the Company's other senior executive officers. Your rights to
such indemnification and insurance will continue so long as you may be subject
to liability, whether or not your employment may have terminated prior thereto.
You will be provided with four (4) weeks of paid vacation per year and sick
leave and paid holidays in accordance with the Company's standard policy
regarding these benefits for senior executive officers of the Company.
You will also be eligible to participate in each fringe, welfare and
pension benefit and incentive programs adopted from time to time by the Company
for the benefit of, and which generally apply to, its highest level of senior
executive offers from time to time, including the Company's 401(k) and profit
sharing plans.
The Company will reimburse you in accordance with the Company's relocation
policy provided under its "Full Service Move Program for Senior Executive
Officers" (the "Relocation Program"), a copy of which has been provided to you
previously, in connection with your relocation to Boise, Idaho. Pursuant to the
Relocation Program, you will be entitled to a "gross-up" payment with respect to
those reimbursement payments described in the Relocation Program in an amount
such that, after payment of all applicable taxes on such reimbursement payments
and "gross-up" payment, you retain an amount equal to the amount of such
reimbursement payments.
In the event of your termination of employment for any reason, within
thirty (30) days following the date of termination, you shall be entitled to
receive ("Accrued Obligations"):
(a) Any earned, but unpaid, Base Salary;
(b) Any earned, but unpaid, bonus for any Fiscal Year that ended prior to
the Fiscal Year in which the date of termination occurs;
(c) The cash equivalent of any accrued, but unused, vacation; and
(d) Any accrued employee benefits, subject to the terms of the applicable
employee benefit plans.
In the event that your employment is terminated by the Company without
Cause (as defined in Exhibit "A" hereto) or you voluntarily terminate your
employment for Good Reason (as defined in Exhibit "A" hereto), you shall receive
the following severance benefits, in addition to the Accrued Obligations:
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Ms. Felicia Denault Thornton
August 6, 2001
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(a) Severance payments and continuation of benefits as follows:
(i) For any such termination which occurs prior to the first
anniversary of the Effective Date, a lump sum payment equal to
three (3) times the sum of Base Salary and Target Bonus, and
continued participation in the Company's welfare benefit plans,
fringe benefits, and employee perquisites for a period
("Continuation Period") of three (3) years (which shall be
concurrent with any health care continuation benefits under
COBRA);
(ii) For any such termination which occurs after the first anniversary
of the Effective Date but prior to the second anniversary of the
Effective Date, a lump sum payment equal to two (2) times the sum
of Base Salary and Target Bonus, and continued participation in
the Company's welfare benefit plans, fringe benefits, and
employee perquisites for a Continuation Period of two (2) years
(which shall be concurrent with any health care continuation
benefits under COBRA); and
(iii)For any such termination which occurs after the second
anniversary of the Effective Date, a lump sum payment equal to
one (1) times the sum of Base Salary and Target Bonus, and
continued participation in the Company's welfare benefit plans,
fringe benefits, and employee perquisites for a Continuation
Period of one (1) year (which shall be concurrent with any health
care continuation benefits under COBRA).
(b) For any such termination, you shall be entitled to receive a pro-rata
portion of the amount due to you under the Annual Bonus Plan for the
fiscal year in which the date of termination occurs, which amount
shall be payable at the time of payment of bonuses under such plan to
senior executives of the Company;
(c) You shall be deemed to have earned vesting service under all unvested
outstanding stock options and all unvested outstanding restricted
stock equal to the applicable Continuation Period under subparagraph
(a) above effective upon a termination of employment. All of your
outstanding vested options to purchase Company common stock, after
giving affect to additional vesting under the preceding sentence,
shall remain exercisable for ninety (90) days from the date of
termination;
(d) Any vested Restricted Stock Unit Awards and restricted stock, after
giving affect to additional vesting under subparagraph (c) above,
shall become nonforfeitable; and
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Ms. Felicia Denault Thornton
August 6, 2001
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(e) You, to the extent determined to be nondiscriminatory under the
Company's qualified employee benefit plans, shall become fully vested
in your benefits under such plans, and you shall become fully vested
with respect to any of the Company's non-qualified benefit plans in
which you are a participant.
In the event of a termination of your employment due to your death, you
shall receive: (a) the Accrued Obligations, (b) all options to purchase stock
shall be exercisable by your legal representatives and become vested to the
extent and in the manner prescribed under the option plan pursuant to which such
options were granted, and (c) all restricted stock units and restricted stock
granted by the Company to you prior to your death shall become vested and paid
to the extent and in the manner prescribed in the plan pursuant to which such
units or stock were awarded.
If a Change in Control shall occur while you are employed by the Company,
you will be entitled to the following:
(a) All of your outstanding options to purchase Company common stock shall
become fully vested and shall be exercisable until the date of
expiration of the full stated term of the option in the manner
prescribed in the plan pursuant to which such options were awarded;
and
(b) Any Restricted Stock Unit Awards and restricted stock that are
unvested shall become fully vested and nonforfeitable in the manner
prescribed in the plan pursuant to which such units or stock were
awarded.
"Change in Control" shall have the meaning set forth in the Albertson's,
Inc. 1995 Stock-Based Incentive Plan in effect on the date hereof, or as
hereafter may be modified in a manner more favorable to you.
If the aggregate of all payments or benefits made or provided to you under
this letter agreement and under all other plans and programs of the Company (the
"Aggregate Payment") is determined to constitute a parachute payment, as such
term is defined in Section 280G(b)(2) of the Code, the Company shall pay to you,
prior to or coincident with the time any excise tax imposed by Section 4999 of
the Code (the "Excise Tax") is payable with respect to such Aggregate Payment,
an additional amount that, after the imposition of all penalties, income, excise
and other federal, state and local taxes thereon, is equal to the sum of the
Excise Tax on the Aggregate Payment and interest and penalties imposed with
respect to the Excise Tax and such additional amount ("Additional Amount"). The
determination of whether the Aggregate Payment constitutes a Parachute Payment
and, if so, the amount to be paid to you and the time of payment pursuant to
this paragraph shall be made by an independent auditor (the "Auditor") jointly
selected by the Company and you and paid by the Company. If the Company and you
cannot agree on the firm to serve as the Auditor, then the Company and you shall
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Ms. Felicia Denault Thornton
August 6, 2001
Page 6
each select one accounting firm and those two firms shall jointly select the
accounting firm to serve as the Auditor. Notwithstanding the foregoing, in the
event that the amount of your Excise Tax liability is subsequently determined to
be greater than the Excise Tax liability with respect to which an initial
Additional Amount has been paid to you under this paragraph, the Company shall
pay to you a further Additional Amount with respect to such additional Excise
Tax (and any interest and penalties thereon) at the time and in the amount
determined in the same manner as the initial Additional Amount was determined so
as to make you whole, on an after-tax basis, with respect to such Excise Tax
(and any interest and penalties thereon) and such additional amount paid by the
Company. In the event the amount of your Excise Tax liability is subsequently
determined to be less than the Excise Tax liability with respect to which an
initial payment to you has been made, you shall, as soon as practical after the
determination is made, pay to the Company the amount of the overpayment by the
Company, reduced by the amount of any relevant taxes already paid by you and not
refundable, all as determined by the Auditor. The Company and you shall
cooperate with each other in connection with any proceeding or claim relating to
the existence or amount of liability for Excise Tax, and all expenses incurred
by you in connection therewith shall be paid by the Company promptly upon notice
of demand from you.
This letter shall not be construed to create an employment contract of any
kind, express or implied, and your employment status shall be and remain
"employment at will"; provided, however, that upon termination you shall be
entitled to the benefits as set forth in this letter.
As a condition to receipt of any severance payments or continued benefits
under this letter upon your termination for any reason, you will execute a
release agreement reasonably satisfactory to Albertson's releasing any and all
claims arising out of your employment with the Company.
In the event of any conflict between the terms of this letter agreement and
the terms of any other agreement, award or arrangement contemplated hereby, the
terms of this letter agreement shall control.
If the terms outlined above reflect your understanding of our offer and you
accept employment based on these terms, please indicate your acceptance by
signing the two original letters provided. Please keep one letter for your
records and return the other to me.
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Ms. Felicia Denault Thornton
August 6, 2001
Page 7
Felicia, we are extremely pleased to have you join the Albertson's team,
and I look forward with great pleasure to our association with you in this
important role at Albertson's. I anticipate benefiting from your expertise, and
I believe you will help us establish a winning formula for success in the
future.
Sincerely,
/s/ Lawrence R. Johnston
-------------------------
Lawrence R. Johnston,
Chief Executive Officer
Accepted and agreed to this
6th day of August, 2001
/s/ Felicia Denault Thornton
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Felicia Denault Thornton
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Ms. Felicia Denault Thornton
August 6, 2001
Page 8
EXHIBIT A
"Cause" means the occurrence of any one or more of the following:
(a) That you have been convicted of, or plead guilty or nolo contendere
to, a felony involving theft or moral turpitude; or
(b) That you have engaged in conduct that constitutes gross neglect or
willful gross misconduct (including misappropriation or embezzlement
of property of, or fraud with respect to, the Company or its
subsidiaries or their affiliates) with respect to your employment
duties which results in material and demonstrable harm to the Company;
provided, however, that for purposes of determining whether conduct
constitutes willful gross misconduct, no act on your part shall be
considered "willful" unless it is done by you in bad faith and without
reasonable belief that your action was in the best interests of the
Company.
Notwithstanding the foregoing, the Company may not terminate your
employment for Cause unless (i) a determination that Cause exists is made and
approved by a majority of the Board, (ii) you are given at least 15 days'
written notice of the Board meeting called to make such determination and an
opportunity to cure during such notice period, and (iii) you and your legal
counsel are given the opportunity to address such meeting.
"Good Reason" means the occurrence of any one or more of the following,
unless you have expressly consented in writing thereto:
(a) The assignment to you of duties inconsistent in any material respect
with your position (including status, offices, titles, and reporting
relationships), authority, duties or responsibilities as contemplated
hereunder, or any other action by the Company which results in a
significant diminution in such position, authority, duties or
responsibilities, excluding any isolated and inadvertent action not
taken in bad faith and which is remedied by the Company within fifteen
(15) days after receipt of notice thereof given by you;
(b) Any failure by the Company to comply with any of the material
provisions of this letter agreement other than an isolated and
inadvertent failure not committed in bad faith and which is remedied
by the Company within fifteen (15) days after receipt of notice
thereof given by you; and
(c) Your being required to relocate to a principal place of employment
more than fifty (50) miles from your current principal place of
employment as of the Effective Date.
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