A&P receives OK of key non-insider employee retention plan

By Mark Reccek

Bethlehem, Pa., Sept. 11 – The Great Atlantic & Pacific Tea Co. Inc. (A&P) received court approval of its key employee retention plan (KERP) for certain non-insider employees for a maximum payout of $5 million, according to an order filed Friday with the U.S. Bankruptcy Court for the Southern District of New York.

According to a previous motion, the proposed plan is the result of A&P losing valuable employees. To remedy loss, the company initiated a review of its employment and compensation packages and benefits, resulting in the retention plan.

As previously reported, the terms of the plan include:

• Each of the key employees will receive either one or two retention payments in total amounts ranging from 4% to 63% (in the aggregate) of their annual base salary over two performance periods of July 20 through Oct. 10 and Oct. 11 through Dec. 12;

• The average payment per individual is roughly $10,000 (about $25,000 for corporate-level employees);

• If, prior to the end of a performance period, a key employee is terminated by the debtors other than for cause or the employing retail store closes or is sold, such employee will remain eligible for a KERP payment;

• To the extent a KERP payment is earned, the payment will be made within 15 days following the end of each performance period or, if applicable, 15 days following the termination of employment;

• Within 60 days following the end of a performance period, if the debtors determine that a key employee has committed an act constituting cause or a participant voluntarily resigns from A&P, the debtors may require the participant to repay the KERP payment received without further court approval; and

• Any KERP payment that is not paid out because a key employee resigns may be offered either to a current or newly hired employee that the debtors determine to be key who is not already a KERP participant or an insider and who assumes the position of the departed employee, or a key employee who assumes all or part of the responsibilities of the departed employee provided, however, that to the extent an existing key employee agrees to assume additional responsibilities, such employee may only receive up to 50% of the unpaid KERP payment allotted for the departed key employee.

Great Atlantic & Pacific Tea, a Montvale, N.J.-based supermarket chain, filed for bankruptcy on Dec. 12, 2010. Its Chapter 11 case number is 10-24549.

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