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THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
2 Paragon Drive
Montvale, New Jersey 07645

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD June 26, 2008

To the stockholders of THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.:

We will hold a Special Meeting of Stockholders (the “Special Meeting”) of The Great Atlantic & Pacific Tea Company, Inc., a Maryland corporation (the “Company” or “A&P”), at The Woodcliff Lake Hilton, 200 Tice Boulevard, Woodcliff Lake, New Jersey, on Thursday, June 26, 2008, at 9:00 A.M. (E.S.T.), for the following purposes:

The board of directors has fixed May 27, 2008 as the record date for this meeting. Only stockholders of record at the close of business on that date are entitled to receive notice and to vote at the meeting or at any adjournment or postponement thereof.

The affirmative vote of two-thirds of the outstanding shares of the Company’s common stock entitled to vote on the matter is required to approve Proposal 1. The affirmative vote of a majority of the votes cast by holders of the Company’s common stock at the Special Meeting is required to approve each of Proposals 2, 3 and 4, provided that the total votes cast must represent a majority of the outstanding shares of the Company’s common stock entitled to vote on each such proposal. The adoption of Proposal 5 requires the affirmative vote of a majority of shares of the Company’s common stock represented in person or by proxy at the Special Meeting and entitled to vote on the record date, regardless of whether a quorum is present.

Whether or not you plan to attend the meeting, please either complete, sign and return the accompanying proxy card to the Company in the enclosed envelope, which requires no postage if mailed in the United States, or use the Internet or telephone proxy authorization options detailed on the proxy card. If you hold your shares through a bank, brokerage firm or nominee, you should follow the instructions of your bank, brokerage firm or nominee regarding voting your shares.

June 3, 2008

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to Be Held on June 26, 2008. The proxy statement is available at www.aptea.com/investors.asp.

You are cordially invited to attend the meeting. Whether or not you plan to do so, your vote is important. Please promptly submit your proxy by mail, telephone or the Internet.

THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
2 Paragon Drive
Montvale, New Jersey 07645

PROXY STATEMENT

TABLE OF CONTENTS

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SOLICITATION AND REVOCATION OF PROXIES

This proxy statement is furnished by the board of directors of The Great Atlantic & Pacific Tea Company, Inc. (the “Company” or “A&P”) for use at the Company’s Special Meeting of Stockholders to be held on June 26, 2008 (the “Special Meeting”). It is expected that the solicitation of proxies will be primarily by mail. Proxies may also be solicited personally by regular employees of the Company, by telephone or by other means of communication at nominal cost. The Company will bear the cost of such solicitation. It will reimburse banks, brokers and trustees, or their nominees, for reasonable expenses incurred by them in forwarding proxy material to beneficial owners of stock in accordance with the New York Stock Exchange (“NYSE”) schedule of charges. Any stockholder giving a proxy has the power to revoke it at any time prior to its exercise by giving notice in writing to the Secretary, at the address above, or by casting a ballot at the meeting in person or by proxy. This proxy statement is first being mailed to stockholders on or about June 3, 2008.

The Company has retained MacKenzie Partners, Inc. to assist in the solicitation of proxies for the meeting and to verify the records relating to the solicitations. MacKenzie Partners, Inc. will receive reasonable and customary compensation for its services (estimated at $25,000) and will be reimbursed for certain reasonable out-of-pocket expenses and other customary costs.

VOTING AT MEETING

Record Date; Required Votes

The Company’s board of directors has fixed the close of business on May 27, 2008 as the record date for determining the holders of the Company’s common stock entitled to notice of, and to vote at, the Special Meeting. Only holders of record of the Company’s common stock at the close of business on the record date will be entitled to notice of, and to vote at, the Special Meeting or any adjournment or postponement of the Special Meeting. There are no appraisal or dissenter’s rights with respect to any matter to be voted on at the Special Meeting.

As of the record date, 57,634,195 shares of the Company’s common stock were issued and outstanding and entitled to vote at the Special Meeting and there were approximately 5,766 holders of record of the Company’s common stock. Each share of common stock entitles the holder to one vote on each matter to be considered at the Special Meeting. If you are a record holder of the Company’s common stock, you may vote your shares of the Company’s common stock in person at the Special Meeting or by proxy as described below under “—Voting by Proxy; Revocation of Proxies.”

The presence in person or by proxy at the Special Meeting of the holders of at least a majority of the outstanding shares of the Company’s common stock entitled to vote at the meeting will constitute a quorum for the Special Meeting. Properly signed proxies that are marked “abstain” are known as abstentions. Abstentions will be counted for the purpose of determining whether a quorum exists at the Special Meeting.

Under the Maryland General Corporation Law (the “MGCL”), Proposal 1, to amend the Company’s charter, requires the affirmative vote of two-thirds of the outstanding shares of the Company’s common stock. Therefore, a stockholder’s failure to vote, a broker nonvote or an abstention will have the same effect as a vote “AGAINST” approval of the amendment to the Company’s charter.

Proposal 2, the proposal to approve the issuance of the Company’s common stock pursuant to a net share settlement of the warrants issued in connection with the Financing (as defined below), requires the affirmative vote of a majority of all votes cast by the holders of common stock at a meeting at which a quorum is present, provided that the rules and regulations of the NYSE (the “NYSE Rules”) further require that the total votes cast on the proposal represent at least a majority of the outstanding shares of the Company’s common stock entitled to vote on the proposal. Because approval is based on the affirmative vote of a majority of votes cast, a stockholder’s failure to vote will not affect the outcome of the vote on the proposal, assuming a majority of the outstanding

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shares are voted on the proposal. Because the NYSE treats abstentions as votes cast with respect to Proposal 2, an abstention will have the same effect as a vote “AGAINST” this proposal.

Proposal 3, the proposal to approve the issuance of an additional 1,577,569 shares of the Company’s common stock pursuant to the share lending agreements, requires the affirmative vote of a majority of all votes cast by the holders of common stock at a meeting at which a quorum is present, provided that the NYSE Rules further require that the total votes cast on the proposal represent at least a majority of the outstanding shares of the Company’s common stock entitled to vote on the proposal. Because approval is based on the affirmative vote of a majority of votes cast, a stockholder’s failure to vote will not affect the outcome of the vote on the proposal, assuming a majority of the outstanding shares are voted on the proposal. Because the NYSE treats abstentions as votes cast with respect to Proposal 3, an abstention will have the same effect as a vote “AGAINST” this proposal.

Proposal 4, the proposal to approve the adoption of the Company’s 2008 Long Term Incentive and Share Award Plan, requires the affirmative vote of a majority of all votes cast by the holders of common stock at a meeting at which a quorum is present, provided that the NYSE Rules further require that the total votes cast on the proposal represent at least a majority of the outstanding shares of the Company’s common stock entitled to vote on the proposal. Because approval is based on the affirmative vote of a majority of votes cast, a stockholder’s failure to vote will not affect the outcome of the vote on the proposal, assuming a majority of the outstanding shares are voted on the proposal. Because the NYSE treats abstentions as votes cast with respect to Proposal 4, an abstention will have the same effect as a vote “AGAINST” this proposal.

Proposal 5, the proposal to adjourn or postpone the Special Meeting, if necessary, to solicit additional proxies, requires the affirmative vote of a majority of the votes cast by the holders of the Company’s common stock at the Special Meeting.

Acting upon any procedural matters submitted to the stockholders at the Special Meeting will require the affirmative vote of a majority of the votes cast by the holders of the Company’s common stock with respect to such proposal.

The Company does not expect that any matter other than the proposals listed above will be brought before the Special Meeting. If, however, other matters are properly brought before the Special Meeting, or any adjournment of the Special Meeting, the persons named as proxies will vote in accordance with their discretion.

Voting by Proxy; Revocation of Proxies

Each copy of this proxy statement mailed to the Company’s stockholders is accompanied by a form of proxy and a self-addressed postage prepaid envelope.

If you are a registered stockholder (that is, if you hold your common stock in certificate form or are named as the record holder of such common stock on the stock transfer books of the Company), you should either complete and return the proxy card accompanying this proxy statement, or authorize a proxy by telephone, through the Internet or by any other electronic means by following the instructions included with your proxy card, in each case, to ensure that your vote is counted at the Special Meeting, or at any adjournment or postponement thereof, regardless of whether you plan to attend the Special Meeting.

If you hold your shares through a bank, brokerage firm or nominee, you should follow the separate voting instructions, if any, provided by the bank, brokerage firm or nominee with this proxy statement. Your bank, brokerage firm or nominee may permit proxy authorization through the Internet or by telephone. Please contact your bank, brokerage firm or nominee to determine how to vote your proxy.

You can revoke your proxy at any time before the vote is taken at the Special Meeting. If you have not voted through your bank, brokerage firm or nominee, you may revoke your proxy before the proxy is voted by:

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To submit a written notice of revocation or other communications about revoking your proxy with respect to your shares of the Company’s common stock, or to request a new proxy card, you should contact:

The Great Atlantic & Pacific Tea Company, Inc.
Two Paragon Drive
Montvale, New Jersey 07645
Telephone: (201) 573-9700
Attention: Secretary

If your shares of common stock are held in street name, you should follow the instructions of your bank, brokerage firm or nominee regarding the revocation of proxies. If your bank, brokerage firm or nominee allows you to authorize a proxy by telephone or through the Internet, you may be able to change your vote by submitting a proxy again by telephone or through the Internet.

All shares represented by valid proxies received through this solicitation, and not revoked, will be voted in accordance with your instructions on the proxy card. If you authorize a proxy by telephone or through the Internet, your shares will be voted at the Special Meeting as instructed.

If you sign and return your proxy card for your shares of the Company’s common stock without specifying on the proxy card, as to one or more proposals, how you want your shares of the Company’s common stock voted, your proxy will be voted (1) “FOR” Proposal 1, the proposal to amend the Company’s charter to increase the number of authorized shares of common stock, if you do not specify a vote “FOR” or “AGAINST” that proposal; (2) “FOR” Proposal 2, the proposal to approve the issuance of the Company’s common stock pursuant to a net share settlement of the warrants issued in connection with the Financing, if you do not specify a vote “FOR” or “AGAINST” that proposal; (3) “FOR” Proposal 3, the proposal to approve the issuance of an additional 1,577,569 shares of the Company’s common stock pursuant to the share lending agreements, if you do not specify a vote “FOR” or “AGAINST” that proposal; (4) “FOR” Proposal 4, the proposal to approve the adoption of the Company’s 2008 Long Term Incentive and Share Award Plan, if you do not specify a vote “FOR” or “AGAINST” that proposal; and (5) “FOR” Proposal 5, the proposal to adjourn or postpone the Special Meeting, if necessary, to solicit additional proxies, if you do not specify a vote “FOR” or “AGAINST” that proposal. We intend, with respect to any procedural matters submitted to the stockholders at the Special Meeting, that the shares represented by properly submitted proxies will be voted, or not voted, by and at the discretion of the persons named as proxies on the proxy card.

Effects of Abstentions

Absent specific instructions from the beneficial owner of shares, brokers may not vote shares of the Company’s common stock with respect to the proposal to amend the Company’s charter to increase the number of authorized shares of common stock, the proposal to approve the issuance of the Company’s common stock pursuant to a net share settlement of the warrants issued in connection with the Financing, the proposal to approve the issuance of the Company’s common stock pursuant to the share lending agreements, the adoption of the Company’s 2008 Long Term Incentive and Share Award Plan, the adjournment or postponement of the Special Meeting or any other matters that may properly come before the Special Meeting.

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Proposal 1, the proposal to amend the Company’s charter, requires the affirmative vote of two-thirds of the outstanding shares of the Company’s common stock. Therefore, an abstention will have the same effect as a vote “AGAINST” approval of the amendment to the Company’s charter.

Because the NYSE treats abstentions as votes cast with respect to (i) Proposal 2, the proposal to approve the issuance of the Company’s common stock pursuant to a net share settlement of the warrants issued in connection with the Financing, (ii) Proposal 3, the proposal to approve the issuance of an additional 1,577,569 shares of the Company’s common stock pursuant to the share lending agreements and (iii) Proposal 4, the proposal to approve the adoption of the Company’s 2008 Long Term Incentive and Share Award Plan, an abstention will have the same effect as a vote “AGAINST” these proposals.

Because the MGCL does not treat abstentions as votes cast with respect to Proposal 5, the proposal to adjourn or postpone the Special Meeting, if necessary, to solicit additional proxies, an abstention will have no effect on the outcome of the vote on that proposal.

Adjournments and Postponements

Although it is not expected, the Special Meeting may be adjourned or postponed for the purpose of soliciting additional proxies or for any other reason. The MGCL provides that if the Special Meeting is convened on the date for which it was called, any adjournment may be made from time to time to a date not more than 120 days after the original record date without further notice. The Company’s bylaws further state that if there is no quorum present at the Special Meeting, the holders of a majority of the outstanding shares of voting stock present in person or represented by proxy at the Special Meeting may adjourn the meeting from time to time, without notice other than an announcement made at the Special Meeting, until the requisite amount of voting stock shall be present. Any signed proxies received by the Company which are otherwise silent on the matter will be voted in favor of an adjournment in these circumstances. Any adjournment of the Special Meeting will allow the Company’s stockholders who have already sent in their revocable proxies to revoke them at any time prior to their use.

ACQUISITION OF PATHMARK AND RELATED TRANSACTIONS

The Acquisition and Related Transactions

On March 4, 2007, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) providing for the Company’s acquisition (the “Acquisition”) of Pathmark Stores, Inc. (“Pathmark”). Also on March 4, 2007, the Company entered into a financing commitment letter with Banc of America Securities LLC (“BAS”), Lehman Brothers Inc. (“Lehman”), and related entities, who committed to provide financing to fund a portion of the cash consideration payable to the Pathmark stockholders in the Acquisition and to finance working capital needs upon consummation of the Acquisition. The financing commitments provided for a $615.0 million senior secured revolving credit facility (the “ABL Facility”) to finance the working capital of the Company and certain of its subsidiaries (including Pathmark) upon consummation of the merger and (ii) up to $780.0 million of senior secured loans (the “Bridge Facility”) as “bridge” or interim financing, which the Company anticipated refinancing with senior secured notes which could have been be issued by A&P and/or certain of its subsidiaries.

As the Company previously disclosed on November 5, 2007, the Company determined that selling its shares of Metro Inc. and applying the proceeds of the sale, together with borrowings under a reduced Bridge Facility, should provide a lower anticipated total amount of indebtedness upon closing the Acquisition and lower the Company’s anticipated post-Acquisition interest expense. Because the March 4, 2007, financing commitment letter provided that the Company would retain its shares of Metro, Inc., the Company obtained necessary waivers to facilitate this financing structure, subject to the sale of the Metro shares. Also as disclosed, the Company expected that any amounts borrowed under the Bridge Facility to close the Acquisition would be refinanced shortly thereafter

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with the proceeds of an offering of senior secured notes, a convertible debt offering, or a combination thereof.

On November 8, 2007, stockholders of the Company approved the issuance of the Company’s common stock in connection with the Acquisition. On November 26, 2007, the Company sold all of its 11,726,645 shares of Metro Inc. for gross proceeds of approximately $347 million. At the closing of the Acquisition on December 3, 2007, the Company entered into the ABL Facility and the Bridge Facility to provide financing for a portion of the cash consideration in the Acquisition and to provide for working capital.

In mid-December 2007, the Company entered into a number of transactions related to the financing of the Acquisition and refinancing of the Bridge Facility (the “Financing”) including:

The Company determined to pursue an offering of convertible notes based on its understanding of the credit markets at the time of refinancing the Bridge Facility in mid-December 2007 and based on its belief that it could issue convertible notes, despite any potential dilution of the Company’s common stock that could occur upon conversion, on terms that would be more favorable to the Company than could be obtained through refinancing the Bridge Facility with an issue of senior secured notes, including lower interest rates, the absence of collateral requirements and relatively fewer covenant restrictions on the Company’s ongoing business. At the same time, based on its understanding of the liquidity for the Company’s common stock that convertible note investors would require in order for the Company to consummate a convertible note offering and to do so on favorable terms, the Company entered into share lending agreements with affiliates of BAS and Lehman, the underwriters of the convertible notes, so that an adequate amount of shares would be available to support the hedging typically desired by convertible note investors. In order to limit the potential dilution that could occur upon conversion of the convertible notes, the Company entered into the hedge and warrant transactions with affiliates of BAS and Lehman.

The Company is seeking stockholder approval at this time for Proposal 1, the proposal to amend the Company’s charter to increase the number of authorized shares of common stock, for Proposal 2, the proposal to approve the issuance of the Company’s common stock pursuant to a net share settlement of the warrants issued in connection with the Financing and for Proposal 3, the proposal to approve the issuance of an additional 1,577,569 shares of the Company’s common stock pursuant to the share lending agreements because the company had not finally determined the terms of any permanent refinancing of the Bridge Facility until after the shareholder vote approving the Acquisition and after the closing of the Acquisition.

As of the record date, 57,634,195 shares of the Company’s common stock were issued and outstanding, 3,516,253 shares were reserved for issuance pursuant to outstanding grants under the Company’s equity compensation plans, 12,309,513 shares were reserved for issuance upon exercise of warrants assumed and the rollover warrants issued in connection with the Acquisition, and 3,144,986 shares were reserved for issuance under the share lending agreements, for a total of 76,604,947 shares of the Company’s common stock issued or reserved for issuance pursuant to outstanding obligations as of the record date out of the 80,000,000 shares authorized for issuance under the Company’s charter.

As described below, the Company has agreed to reserve 11,278,988 shares of its common stock for issuance upon conversion of the Notes and 13,534,786 shares of its common stock in connection with the warrants issued in connection with the Financing. Therefore, as described below, in order to satisfy its obligations under the agreements governing the transactions related to the Financing and to provide the Company with the flexibility to issue shares of its common stock for other appropriate purposes, the Company is requesting that its stockholders approve an amendment to the

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Company’s charter to increase the number of shares of common stock that the Company is authorized to issue; to approve the issuance of shares of the Company’s common stock pursuant to a net share settlement of the warrants; and to approve the issuance of an additional 1,833,250 shares of the Company’s common stock for borrowing pursuant to the share lending agreements.

The Notes and Conversion into Shares of Common Stock; Dilution

The following is a description of the terms of the Notes that were issued in December 2007. The Notes were issued under an indenture and supplemental indentures, each of which has been filed with the SEC and is available on the SEC’s website at http://www.sec.gov. Stockholders and investors are encouraged to read the indenture and supplemental indentures because they, and not this summary, govern the Notes.

The Notes consist of $165 million aggregate principal amount of 5.125% Convertible Senior Notes due 2011 (the “2011 notes”) and $255 million aggregate principal amount of 6.75% Convertible Senior Notes due 2012 (the “2012 notes”). The Notes are the Company’s general unsecured obligations and rank equally in right of payment with all of the Company’s other existing and future obligations that are unsecured and unsubordinated. The Notes are effectively subordinated to all of the Company’s existing and future secured debt to the extent of the assets securing such indebtedness and, because the Notes are not guaranteed, are structurally subordinated to the indebtedness and other liabilities of the Company’s subsidiaries, including subsidiary guarantees of the Company’s ABL credit facility. The 2011 notes mature on June 15, 2011 unless earlier converted or repurchased. The 2012 notes mature on December 15, 2012 unless earlier converted, redeemed or repurchased.

Holders of the Notes may convert their (i) 2011 notes based on a conversion rate of 27.4725 shares of the Company’s common stock per $1,000 principal amount of 2011 notes (equal to an initial conversion price of approximately $36.40 per share) and (ii) 2012 notes based on a conversion rate of 26.4550 shares of the Company’s common stock per $1,000 principal amount of 2012 notes (equal to an initial conversion price of approximately $37.80 per share), which the Company’s will settle as described in the next paragraph, in the following circumstances:

The Notes provide for anti-dilution adjustments of the conversion rates in the event of stock or other dividends or distributions on the Company’s common stock; distribution of rights, warrants or

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options to all or substantially all holders of the Company’s common stock and payments in connection with any tender offer or exchange offer for the Company’s common stock.

Upon conversion of any Notes, the Company has the right to deliver shares of common stock, cash or a combination of cash and shares of common stock. If certain fundamental change transactions, such as a change of control of the Company, occur, conversion rate for any Notes converted in connection with those fundamental changes will be increased by a number of additional shares of common stock specified in the indenture and supplemental indentures governing the Notes.

If all of the Notes were converted into shares of the Company’s common stock, the Company would issue 11,278,988 shares of its common stock, or approximately 19.6% of the number of shares of the Company’s common stock that were issued and outstanding as of the record date, which would lead to a decrease, or dilution, of the percentage of the Company’s common stock held by stockholders prior to any such conversion. Issuing a significant number of shares of common stock upon conversion could lead to a decrease in the market price of the Company’s common stock, depending on the market’s perception of the relative value of discharging the corresponding debt obligation represented by the Notes being converted. The Company is not able to predict the net effect of any such conversion on the market price of the Company’s common stock. Additionally, the Notes may only be converted under certain circumstances described above and because the conversion prices of the Notes are significantly higher than the current market price of the Company’s common stock, the Company is not able to predict when or if the market price of the Company’s common stock may increase to a level that would result in conversion by the Noteholders. Also, any such conversion would remain subject to the Company’s right to settle the conversion by delivery of shares of common stock, cash or a combination of cash and shares of common stock and, in order to limit the potential dilution that could occur upon conversion of the convertible notes, the Company entered into the hedge and warrant transactions.

AMENDMENT OF THE COMPANY’S CHARTER TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK (PROPOSAL 1)

The Company’s stockholders are being asked to consider and vote on a proposal to approve an amendment to the Company’s charter in the form attached to this proxy statement as Appendix A and incorporated herein by reference to increase the total number of shares of common stock which the Company has authority to issue from 80,000,000 shares to 160,000,000 shares. As described above, as of the record date a total of 76,604,947 shares of the Company’s common stock were issued or reserved for issuance pursuant to outstanding obligations. If Proposals 1, 2, 3 and 4 are all approved, the Company plans to reserve an additional 11,278,988 shares of its common stock for issuance upon conversion of the Notes, 13,534,786 shares of its common stock in connection with the warrants issued in connection with the Financing and 4,750,000 shares of its common stock for issuance under the Company’s 2008 Long Term Incentive and Share Award Plan, after which a total of 106,168,721 shares of the Company’s common stock will have been issued or reserved for issuance.

The proposal to amend the Company’s charter requires the affirmative vote of two-thirds of the outstanding shares of the Company’s common stock. Therefore, a stockholder’s failure to vote, a broker nonvote or an abstention will have the same effect as a vote “AGAINST” approval of the amendment to the Company’s charter.

The Company’s board of directors deems it advisable and in the best interests of the Company to increase the number of authorized shares of common stock in order to meet its current share reservation obligations and to ensure that there is a sufficient number of authorized shares available to provide the Company with flexibility to issue common stock for appropriate purposes in the future, including any possible equity financing transactions.

Additional authorized shares of common stock could be used in connection with an arrangement, such as a stockholder rights plan, that could have the effect of hindering or delaying a third party offer to acquire the Company or its common stock at a premium to market prices. However, the Company has no plans or proposals to adopt provisions or enter into arrangements that may have material anti-takeover consequences. The Company has no plans, proposals, or

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arrangements at this time, written or otherwise, to issue any of the additional authorized shares of common stock that are the subject of this proposal, other than as disclosed in this proxy statement in connection with a net share settlement under the warrants issued in connection with the financing, pursuant to the share lending agreements and potential future grants under the Company’s 1998 Long Term Incentive Plan and 2008 Long Term Incentive Plan.

The Company has agreed, pursuant to the warrants described below, to seek stockholder approval to increase the number of authorized shares of common stock. If the Company’s stockholders do not approve the proposal to amend the Company’s charter to increase the number of authorized shares at or prior to its second annual meeting of stockholders following December 2007, then the number of shares of common stock subject to the warrants will automatically increase by 10% and the counterparties to the warrants will have the right to terminate the warrants. The number of shares of the Company’s common stock subject to the warrants is 11,278,988, so an increase of 10% would result in 12,406,887 shares being subject to the warrants. If the Company’s stockholders approve such proposal and additional shares of the Company’s common stock are issued, then the market price of the Company’s common stock may be adversely affected.

The Company’s board of directors unanimously recommends that the Company’s stockholders vote “FOR” the proposal to approve the amendment to the Company’s charter.

APPROVAL OF THE COMPANY’S SHARE ISSUANCE PURSUANT TO A NET SHARE
SETTLEMENT OF THE WARRANTS (PROPOSAL 2)

Convertible Note Hedge and Warrant Transactions

As described above, in connection with the Financing, in December 2007, the Company entered into convertible note hedge and warrant transactions designed to reduce the Company’s exposure to potential dilution of its common stock upon any conversion of the Notes. The convertible note hedge transactions allow the Company to purchase from the counterparties thereto shares of the Company’s common stock in connection with a conversion of the Notes, whereas the warrant transactions allow the counterparties thereto to require the Company to sell to them shares of the Company’s common stock.

The warrants, as amended (the “Warrants”), provide that the default settlement method is cash settlement and limit the Company’s ability to select a settlement method other than cash settlement until the Company has (a) (i) obtained stockholder approval to the extent required by the NYSE Rules to allow the issuance of the Company’s common stock pursuant to a net share settlement of the Warrants or (ii) reasonably determined that such stockholder approval is not required pursuant to the NYSE Rules and (b) authorized and reserved a number of shares of common stock equal to the product of 1.2 multiplied by the aggregate number of shares, 11,278,988, of the Company’s common stock issuable upon exercise of the Warrants, the product of which is 13,534,786 shares.

Subject to the adjustments described in the Warrants, the aggregate number of shares of the Company’s common stock issuable upon exercise of the Warrants is 11,278,988. However, any settlement of the Warrants through the issuance of common stock would be required by the terms of the Warrants to be made by net share settlement. Therefore, the actual number of shares of the Company’s common stock issuable pursuant to a net share settlement of the Warrants would equal the product of (i) the number of Warrants exercised and (ii) (A) the excess of the value weighted average price of the Company’s common stock (as determined pursuant to the terms of the Warrants) over the strike price of such Warrants divided by (B) such value weighted average price. The Warrants have strike prices of $46.20 per warrant for the Warrants relating to the 2011 notes and $49.00 per warrant for the Warrants relating to the 2012 notes.

As an example of net share settlement, if 1000 Warrants relating to the 2011 notes are exercised in 2011 when they first become exercisable and the value weighted average price of the Company’s common stock at that time is $30.00, then the number of shares of the Company’s common stock issuable pursuant to a net share settlement would be equal the product of (i) the number of Warrants exercised (1000) and (ii) (A) the excess of the value weighted average price of the Company’s common stock ($30.00) over the strike price of such Warrants ($46.20), in which case the

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excess is zero because the value weighted average price is less than the strike price, divided by (B) such value weighted average price ($30.00). In comparison, if the value weighted average price of the Company’s common stock at that time were ($50.00), then the Company would issue 76 shares of common stock upon net share settlement in this example. As illustrated in this example, the Company could issue common stock pursuant to net share settlement of the Warrants, if the value weighted average price of the Company’s common stock at the time is greater than the strike price of the relevant Warrants, which could cause the price of the Company’s common stock to be less than it might otherwise be. As discussed above under “Acquisition of Pathmark and Related Transactions—The Acquisition and Related Transactions,” the Company determined that by offering the Notes, the Company could obtain terms that would be more favorable to the Company, and to limit the potential dilution that could occur upon conversion of the convertible notes, the Company entered into the hedge and warrant transactions.

Stockholder Approval of Share Issuance in Connection with the Warrants

The Company’s stockholders are being asked to consider and vote on a proposal to approve the issuance of the Company’s common stock pursuant to a net share settlement of the Warrants.

Although not required by the MGCL, the Company believes that stockholder approval of the issuance of the Company’s common stock pursuant to a net share settlement of the Warrants is required by the NYSE Rules. Such rules require the affirmative vote of the holders of a majority of shares of the Company’s common stock cast on such proposal, in person or by proxy, provided that the total votes cast on the proposal represent at least a majority of the outstanding shares of the Company’s common stock entitled to vote on the proposal. Because approval is based on the affirmative vote of a majority of votes cast, the failure of a stockholder to vote or a broker nonvote will not affect the outcome of the vote on the proposal, assuming a majority of the outstanding shares vote on the proposal. Because the NYSE treats abstentions as votes cast with respect to this stock issuance proposal, an abstention will have the same effect as a vote “AGAINST” this proposal. Abstentions and broker nonvotes will be counted for the purpose of determining whether a quorum exists at the Special Meeting.

The Company’s board of directors deems it advisable and in the best interests of the Company for the Company’s stockholders to approve the issuance of shares of the Company’s common stock pursuant to a net share settlement of the Warrants to provide the Company with flexibility upon conversion of the Notes and under other circumstances in which the Warrants may be exercised.

The Warrants require the Company to use commercially reasonable efforts to obtain stockholder approval to the extent required by the NYSE Rules at a meeting of the Company’s stockholders to be held not later than August 15, 2008 to allow the Company to issue shares of the Company’s common stock pursuant to a net share settlement of the Warrants. If the Company’s stockholders do not approve the proposal to approve the issuance of shares of the Company’s common stock pursuant to a net share settlement of the Warrants, the Warrants will continue in effect, but the Company will not be able to use the net share settlement method upon exercise of the Warrants and will instead be required to use cash settlement. If the Company’s stockholders approve such proposal and shares of the Company’s common stock are issued pursuant to a net share settlement of the Warrants, then the market price of the Company’s common stock may be adversely affected.

The Company’s board of directors unanimously recommends that stockholders vote “FOR” the proposal to approve the issuance of shares of the Company’s common stock pursuant to a net share settlement of the Warrants.

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APPROVAL OF THE ISSUANCE OF AN ADDITIONAL 1,577,569 SHARES OF THE
COMPANY’S COMMON STOCK PURSUANT TO THE SHARE LENDING AGREEMENTS (PROPOSAL 3)

Share Lending Agreements and Common Stock Offering

As described above, in connection with the Financing, in December 2007, the Company entered into share lending agreements, as amended (the “Share Lending Agreements”), pursuant to which the Company agreed to issue and lend up to 11,278,988 shares of common stock, subject to certain adjustments, to the Share Borrowers. Under the Share Lending Agreements, the Share Borrowers have offered and sold and may offer and sell the borrowed shares in registered public offerings and have used and may use the short position resulting from the sale of such shares to facilitate the establishment of hedge positions by investors in the Notes. Borrowed shares may also be used by the Share Borrowers for other purposes, including in connection with hedging the convertible note hedge and warrant transactions described above. The Share Borrowers have received and will receive all of the proceeds from the sale of the borrowed shares. The Company has not received and will not receive any of the proceeds from such sales, but has received and will receive a nominal lending fee from the Share Borrowers. Upon expiration of the loan availability period under the Share Lending Agreements, the Share Borrowers are required to return all shares borrowed thereunder, unless the Company agrees to settle in cash.

The Share Lending Agreements limit the number of shares of common stock that the Share Borrowers may borrow to an aggregate of 9,701,419 shares until such time as (i) the Company obtains stockholder approval to the extent required by the NYSE Rules to allow it to issue up to an aggregate of 11,278,988 shares of common stock pursuant to the Share Lending Agreements or (ii) the Company reasonably determines that such stockholder approval is not required pursuant to the NYSE Rules, or such lesser number that can be issued under the Share Lending Agreements without such stockholder approval.

As discussed above under “Acquisition of Pathmark and Related Transactions—The Acquisition and Related Transactions,” the Company determined that by offering the Notes, which are convertible senior notes, in connection with the Financing, compared to an offering of senior secured notes, the Company could obtain terms that would be more favorable to the Company, despite any potential dilution of the Company’s common stock upon conversion, including lower interest rates, the absence of collateral requirements and relatively fewer covenant restrictions on the Company’s ongoing business. Also, based on the Company’s understanding of the liquidity for the Company’s common stock that convertible note investors would require in order for the Company to consummate a convertible note offering and to do so on favorable terms, the Company determined to enter into share lending agreements with affiliates of the underwriters of the convertible notes so that an adequate amount of shares would be available to support the hedging typically desired by convertible note investors. In order to limit the potential dilution that could occur upon conversion of the convertible notes, the Company entered into the hedge and warrant transactions.

There are potential risks associated with the Share Lending Agreements including the following. The issuance and sales of substantial amounts of common stock or other equity related securities including sales pursuant to the Share Lending Agreements, or the perception that such issuances and sales may occur, could adversely affect the market price of the Company’s common stock. Additionally, the existence of the Share Lending Agreements and short positions established in connection with the sale of the Notes, as well as transactions by which investors in the Notes may hedge their investments in such Notes through short sales or privately negotiated derivative transactions, or other short sales of the Company’s common stock could have the effect of causing the market price of the Company’s common stock to be lower over the term of the Share Lending Agreements than it would have been had the Company not entered into the Share Lending Agreements.

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Stockholder Approval of Share Issuance in Connection with the Share Lending Agreements

The Company’s stockholders are being asked to consider and vote on a proposal to approve the issuance of the maximum number of shares of the Company’s common stock that may be borrowed under the Share Lending Agreements.

Up to 9,701,419 shares may be issued under the Share Lending Agreements without stockholder approval. Although not required by the MGCL, the Company believes that stockholder approval of the issuance of an additional 1,577,569 shares of the Company’s common stock pursuant to the Share Lending Agreements is required by the NYSE Rules. Such rules require the affirmative vote of the holders of a majority of shares of the Company’s common stock cast on such proposal, in person or by proxy, provided that the total votes cast on the proposal represent at least a majority of the outstanding shares of the Company’s common stock entitled to vote on the proposal. Because approval is based on the affirmative vote of a majority of votes cast, the failure of a stockholder to vote or a broker nonvote will not affect the outcome of the vote on the proposal, assuming a majority of the outstanding shares vote on the proposal. Because the NYSE treats abstentions as votes cast with respect to this stock issuance proposal, an abstention will have the same effect as a vote “AGAINST” this proposal. Abstentions and broker nonvotes will be counted for the purpose of determining whether a quorum exists at the Special Meeting.

The Company’s board of directors deems it advisable and in the best interests of the Company for the Company’s stockholders to approve the issuance of the maximum number of shares of the Company’s common stock that may be borrowed under the Share Lending Agreements.

The Share Lending Agreements require the Company to use commercially reasonable efforts to obtain stockholder approval to the extent required by the NYSE Rules at a meeting of the Company’s stockholders to be held not later than August 15, 2008 to allow the Company to issue up to an aggregate of 11,278,988 shares of common stock pursuant to the Share Lending Agreements. If the Company’s stockholders do not approve the proposal to approve the issuance of an additional 1,577,569 shares of the Company’s common stock pursuant to the Share Lending Agreements, the Share Lending Agreements will continue in effect, but the number of shares that may be borrowed under the Share Lending Agreements will continue to be limited to an aggregate of 9,701,419 shares until such stockholder approval is obtained or determined to be unnecessary. If the Company’s stockholders approve such proposal and additional shares of the Company’s common stock are issued pursuant to the Share Lending Agreements, then the market price of the Company’s common stock may be adversely affected. In addition, if the Share Borrowers use the short position resulting from the sale of such shares to facilitate the establishment of hedge positions by investors in the Notes, then the market price of the Company’s common stock may be adversely affected.

The Company’s board of directors unanimously recommends that stockholders vote “FOR” the proposal to approve the issuance of shares of the Company’s common stock pursuant to the Share Lending Agreements.

APPROVAL OF THE ADOPTION OF THE COMPANY’S 2008 LONG TERM INCENTIVE
AND SHARE AWARD PLAN (PROPOSAL 4)

The Company’s stockholders are being asked to consider and vote on a proposal to approve the adoption of the Company’s 2008 Long Term Incentive and Share Award Plan (the “2008 Plan”). The 2008 Plan is intended to replace the expiring 1998 Plan. The board of directors and management believe that the 2008 Plan, like the 1998 Plan, will help attract, retain and motivate employees and promote long-term growth and profitability by further aligning employee and stockholder interests. The board of directors, therefore, unanimously recommends that stockholders vote “FOR” the proposal to approve the 2008 Plan.

The adoption of this proposal requires the affirmative vote of the holders of a majority of shares of the Company’s common stock cast on the proposal, in person or by proxy, provided that the total votes cast on the proposal represent at least a majority of the outstanding shares of the Company’s common stock entitled to vote on the proposal. Because approval is based on the affirmative vote of a majority of votes cast, the failure of a stockholder to vote or a broker nonvote will not affect the outcome of the vote on the proposal, assuming a majority of the outstanding

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shares vote on the proposal. Because the NYSE treats abstentions as votes cast with respect to this proposal, an abstention will have the same effect as a vote “AGAINST” this proposal. Abstentions and broker nonvotes will be counted for the purpose of determining whether a quorum exists at the Special Meeting.

The 1998 Plan was approved by stockholders upon its inception and was most recently approved, as amended, by the stockholders on July 13, 2006. The 1998 Plan will by its terms expire on July 14, 2008. The 2008 Plan provides for the same types of awards and is otherwise similar to the 1998 Plan and is intended to replace the 1998 Plan. The 2008 Plan has been adopted by the Company’s board of directors. If the shareholders of the Company do not approve the 2008 Plan as proposed in this proxy statement, the 2008 Plan will not be used by the Company. Upon approval by the stockholders of the 2008 Plan, no further award grants will be made under the existing 1998 Plan. The status of the 1998 Plan at May 23, 2008 was as follows:

A summary of the principal features of the 2008 Plan is provided below and is qualified in its entirety by reference to the actual 2008 Plan, a copy of which is included as Appendix B. Additionally, information regarding compensation of directors and executive officers is provided in Appendix C, which is attached to and forms part of this proxy statement.

General. The 2008 Plan provides for the grant of Awards in the form of Stock Options, Stock Appreciation Rights (“SARs”), Restricted Shares, Restricted Share Units, Performance Shares, Performance Units, Dividend Equivalents, Other Share-Based Awards or any combination thereof. The total number of shares of common stock of the Company available for grant under the 2008 Plan is 4,750,000 shares as of the effective date of the 2008 Plan (June 26, 2008), subject to increases described in “Adjustments” below. Shares may consist, in whole or in part, of authorized and unissued shares, or shares acquired by the Company in the open market or in private transactions.

The 2008 Plan has been designed so that stock options, SARs and certain performance-based Awards under the 2008 Plan may comply with Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). Compliance with Section 162(m) of the Code enables awards under the 2008 Plan to qualify as performance-based compensation that is exempt from the provision of Section 162(m) disallowing a tax deduction to public companies for annual compensation in excess of $1,000,000 paid to the Company’s CEO and certain other highly compensated executives at fiscal year end.

Administration. The 2008 Plan is administered by the Human Resources & Compensation Committee of the board of directors, or such other committee designated by the board of directors (the “Committee”), which consists of two or more directors, each of whom is a “non-employee director” to the extent applicable under Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and an “outside director” to the extent applicable under Section 162(m) of the Code; provided, however, that a failure to qualify as a non-employee director or “outside director” shall not in itself invalidate any Award made under the 2008 Plan. The Committee may make all decisions and determinations regarding the 2008 Plan as it may deem necessary or advisable. Subject to the terms of the 2008 Plan, the Committee is authorized to, among other things, determine the type(s) of Awards, the number of shares to which an Award may relate and the terms and conditions of the Awards; adopt or revise any rules and regulations as it may deem advisable to administer the 2008 Plan; accelerate the exercisability or vesting of any Award in cases of death, disability, retirement or change-in-control; and make all other decisions and determinations that may be required under the 2008 Plan. The Committee is currently comprised of Bobbie Gaunt, Chair, John Barline, Ed Lewis and Maureen Tart-Bezer.

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Eligibility. The Committee has the discretion to grant Awards to any employee of the Company, or a subsidiary or an affiliate, including any employee who is a member of the board of directors. It is, however, the Committee’s continuing intent that only management employees at or above store manager level are eligible. As of the date of this proxy statement, there are approximately 276 eligible participants.

Number of Shares of Common Stock Available under the 2008 Plan. The number of shares of common stock reserved for grant under the 2008 Plan is 4,750,000 shares, as of the effective date of the 2008 Plan (June 26, 2008) and as may be increased as described under “Adjustments” below. The Committee may not grant an Award under the 2008 Plan if the number of shares to which such Award relates, when added to the number of shares previously issued under the 2008 Plan, exceeds the total number of shares available for grant. Shares awarded under the 2008 Plan may be authorized and unissued shares.

Awards, Types and Applicable Provisions. Stock options may include nonstatutory stock options (“NSOs”) as well as incentive stock options (“ISOs”) intended to qualify for special tax treatment. The term of a stock option cannot exceed 10 years, and the exercise price of a stock option must be equal to or greater than the fair market value of the common stock on the date of grant.

Except for certain anti-dilution adjustments, the 2008 Plan prohibits (i) amendments to lower the exercise price of outstanding stock options or SARs or (ii) exchanges of stock options or SARs for other stock options or SARs with lower exercise prices or for cash or other awards.

NSO grants are governed by Section 83 of the Code. Generally, no federal income tax is payable by a participant upon the grant of an NSO. Under current tax law, if a participant exercises an NSO, he or she will be taxed on the difference between the fair market value of the common stock on the exercise date and the option exercise price. The Company will be entitled to a corresponding deduction on its income tax return upon the exercise of an NSO.

ISO grants are governed by Section 422 of the Code. Generally no federal income tax is payable by a participant upon the exercise of an ISO (except alternative minimum tax may be payable upon exercise). If the shares of common stock acquired upon exercise of an ISO are sold or exchanged more than one year after the date of exercise and more than two years after the date of grant of the option, any gain or loss will be long-term capital gain or loss. If shares of common stock acquired upon exercise of an ISO are disposed of prior to the expiration of these one-year or two-year holding periods (a “Disqualifying Disposition”), the participant will recognize ordinary income at the time of disposition, and the Company will generally be entitled to a deduction, in an amount equal to the excess of the fair market value of the shares of common stock at the date of exercise over the exercise price. Any additional gain will be treated as capital gain, long-term or short-term, depending on how long the shares of common stock have been held. Where shares of common stock are sold or exchanged in a Disqualifying Disposition (other than certain related party transactions) for an amount less than their fair market value at the date of exercise, any ordinary income recognized in connection with the Disqualifying Disposition will be limited to the amount of gain, if any, recognized in the sale or exchange, and any loss will be a long-term or short-term capital loss, depending on how long the shares of common stock have been held.

SARs entitle the participant to receive any appreciation in the value of the underlying stock from the Company, either in shares of common stock or in cash or a combination of the two, with the Committee having the discretion to determine the form in which such payment will be made. The amount payable on exercise of a SAR is measured by the difference between the fair market value of the underlying stock at exercise and the exercise price (which may not be less than the fair market value of the common stock on the date of grant). The term of an SAR cannot exceed 10 years. SARs may, but need not, be granted in conjunction with options. Upon exercise of a SAR granted in tandem with an option, the corresponding portion of the related option must be surrendered and cannot thereafter be exercised. The amount payable upon exercise of a SAR will constitute compensation income to the participant at the time of exercise, and the Company will be entitled to a corresponding deduction.

Restricted Shares and Performance Shares entitle the participant to ownership of shares of the Company’s common stock subject to any performance conditions or other restrictions including

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installment or vesting conditions. A participant who receives Restricted Shares or Performance Shares will generally recognize compensation income at the time they vest based on the then fair market value of the shares, unless the participant instead elects to be taxed at the time of the award. The Company will be entitled to a corresponding deduction.

Restricted Share Units and Performance Units entitle the participant to receive either shares of common stock or cash or a combination as the Committee shall determine upon attainment of the performance objectives or satisfaction of other restrictions or vesting criteria.

Dividend equivalents and Other Share-Based Awards may be granted to the participant separately or in conjunction with the foregoing, provided they are denominated or payable consistent with the purpose of the 2008 Plan, including unrestricted shares awarded purely as a “bonus” and cash awards as an element of or supplement to any other Award under the 2008 Plan.

A participant who receives Restricted Share Units, Performance Units, Dividend Equivalents or other Share-Based Awards will generally recognize compensation income in respect of the amounts payable under the award at the time of payment, and the Company will be entitled to a corresponding deduction.

The foregoing description concerning U.S. federal income tax consequences related to Awards is a general summary and intended solely as information for stockholders, not as tax guidance.

If the Committee determines that a Performance Share, Performance Unit or other Award (other than an Option or SAR) should qualify as “performance-based compensation” for purposes of Code Section 162(m), the grant, vesting, exercise and/or settlement of such Award must be contingent upon achievement of pre-established goals. Further, while performance objectives may vary among participants, they shall be based upon one or more of the following performance criteria:

  total stockholder return, earnings, earnings per share, operating income, net income, pro forma net income, return on stockholders’ equity, return on invested capital, return on designated assets, net asset value, economic value added, EBITDA, share price, sales, revenues, expenses, operating profit margin, operating cash flow, cash flow per share, net profit margin, and achievement of synergies.

The benefits to be received or allocated under the 2008 Plan are not determinable.

Limitations on Grants. The maximum number of shares of common stock with respect to which stock options or SARs may be granted during any calendar year to any participant under the 2008 Plan shall be 500,000 shares. The maximum number of shares of common stock that may be granted during any calendar year to any participant in connection with stock-based awards other than stock options and SARs intended to qualify as performance-based compensation within the meaning of Section 162(m)(4)(C) of the Code shall be limited to 750,000 shares or the equivalent. The maximum amount payable upon settlement of cash-based awards intended to qualify as performance-based compensation within the meaning of Section 162(m)(4)(C) of the Internal Revenue Code shall be limited to $1,000,000.

Transferability. Unless otherwise expressly indicated by the Committee, Awards are not transferable except by will or the laws of descent and distribution or beneficiary designation and shall be exercisable during the lifetime of the holder only by such holder or his/her guardian or legal representative. Under no circumstances will an Award be transferable for value or consideration.

Adjustments. In the event that a dividend in shares, recapitalization, share split, reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, share exchange, extraordinary dividend, or other similar corporate transaction or event affects the shares, such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of Award holders, the Committee shall adjust the aggregate number and kind of shares reserved for issuance under the 2008 Plan, the number and kind of shares covered by each outstanding award, and the amounts to be paid by Award holders or the Company on any outstanding Award, or provide for a distribution of cash or property. No such adjustment may increase the aggregate value of any outstanding award.

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If any Awards under the 2008 Plan or 1998 Plan are forfeited, canceled, terminated, exchanged, surrendered, applied to satisfy withholding obligations or terminated for any other reason prior to exercise or without a distribution of shares or settled in cash, then the underlying shares of common stock again become available for awards under the 2008 Plan.

Change of Control. In the event of a Change of Control (as defined in the 2008 Plan), unless otherwise provided by the Committee at the time of grant, all outstanding Awards pursuant to which a holder may have rights the exercise of which is restricted or limited shall become fully exercisable, all restrictions or limitations on outstanding Awards shall lapse, and all performance criteria and other conditions shall be deemed to be achieved or fulfilled and shall be waived by the Company.

Withholding Taxes. The Company may withhold, or require a participant to remit to the Company, an amount sufficient to satisfy any federal, state, local or foreign withholding tax requirements associated with Awards under the 2008 Plan.

Amendment and Termination. No Awards may be granted under the 2008 Plan subsequent to June 26, 2018. The Company’s board of directors may terminate the 2008 Plan at an earlier date, or amend the 2008 Plan at any time. However, the Company must obtain stockholder approval for any 2008 Plan amendment to the extent required by applicable stock exchange rules or as required for the 2008 Plan to satisfy the requirements of Section 162(m) or 422 of the Code. In addition, the award holder’s written consent is required for any amendment or termination of the 2008 Plan which will adversely affect any previously granted award.

Minimum Vesting Provisions. In the case of an Award in the form of Restricted Shares, Restricted Share Units or similar Awards, at least three years must elapse before the delivery or payment of shares of common stock or other property, except in the case of (a) termination of employment due to death, disability or retirement, (b) an Award that the Committee determines is performance based, in which case at least one year must elapse, (c) an Award to a director who is not an employee or (d) a change-in-control (pursuant to the terms of the 2008 Plan). Notwithstanding anything to the contrary contained in the 2008 Plan, a maximum amount of 10% of the shares reserved under the 2008 Plan (475,000 shares of common stock) may be delivered under the 2008 Plan pursuant to this paragraph without giving effect to the restrictions set forth above.

The Company’s board of directors unanimously recommends that the Company’s stockholders vote “FOR” the proposal to approve the adoption of the Company’s 2008 Long Term Incentive and Share Award Plan.

APPROVAL OF THE ADJOURNMENT OR POSTPONEMENT OF THE SPECIAL MEETING
(PROPOSAL 5)

The Company’s stockholders are being asked to consider and vote on a proposal to adjourn or postpone the Special Meeting, if necessary, to solicit additional proxies. The adoption of the proposal to adjourn or postpone the Special Meeting, if necessary, to solicit additional proxies requires the affirmative vote of a majority of the votes cast by the holders of the Company’s common stock at the Special Meeting, regardless of whether a quorum is present. Therefore, a stockholder’s failure to vote, a broker nonvote or an abstention will have no effect on the outcome of the vote on this proposal. The Company’s board of directors unanimously recommends that stockholders vote “FOR” the proposal to adjourn or postpone the Special Meeting, if necessary, to solicit additional proxies.

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BENEFICIAL OWNERSHIP OF SECURITIES

Beneficial Ownership of More Than 5% of the Company’s Common Stock

Except as set forth below, as of May 27, 2008, no person beneficially owned, to the knowledge of the Company, more than 5% of the outstanding shares of the Company’s common stock.

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Beneficial Ownership of Directors and Officers

The following table sets forth the number of shares of common stock of the Company beneficially owned as of May 27, 2008 by each director, each named executive officer of the Company on that date and by all directors and the executive officers of the Company as a group:

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DESCRIPTION OF THE COMPANY’S CAPITAL STOCK

The following description of the Company’s capital stock is a summary and is qualified in its entirety by reference to the Company’s charter and bylaws and by applicable law.

The Company’s authorized share capital consists of 80,000,000 common shares, $1.00 par value, and 3,000,000 preferred shares without par value. As of the record date, 57,634,195 common shares were outstanding and 76,604,947 shares were issued or reserved for issuance pursuant to outstanding obligations, and no preferred shares were outstanding.

Preferred Stock

The Company’s board of directors can, without the approval of stockholders, issue one or more series of preferred shares. The board of directors may also determine the rights, preferences and limitations of each series including the maximum number of shares in the series, voting rights, conversion rights, redemption rights, dividend rights, liquidation rights, any preferences over the common shares with respect to dividend or liquidation distributions, and the terms and conditions of issue. The preferred stock may be senior to the common stock with respect to dividends, distributions upon liquidation and other rights.

Common Stock

The Company’s common stock is listed for trading on the NYSE under the symbol “GAP.” The Company’s transfer agent and registrar for common shares is the American Stock Transfer and Trust Company, 59 Maiden Lane, New York, NY 10038, telephone: (800) 937-5449.

Common stockholders only receive dividends when, as and if authorized by the Company’s board of directors and declared by the Company. If declared, dividends may be paid in cash, stock or other forms of consideration. If and when the Company issues preferred shares, common stockholders may not receive dividends until the Company has satisfied its obligations to the preferred stockholders. Some of the Company’s outstanding debt securities, credit agreements and other loan agreements also restrict the Company’s ability to pay dividends.

All outstanding shares of common stock are fully paid and nonassessable. Any additional common shares issued in connection with the Share Lending Agreements and pursuant to a net share settlement of the Warrants would also be fully paid and nonassessable. There are no subscription rights, conversion rights or redemption or sinking fund provisions with respect to the shares of common stock but preemptive rights apply to issuances of capital stock and convertible securities in certain circumstances. Pursuant to a Stockholder Agreement dated as of March 4, 2007, between the Company and Tengelmann, Tengelmann has preemptive rights with respect to issuances of equity securities by the Company in certain circumstances.

Each share of common stock is entitled to one vote in the election of directors and other matters. Directors are elected by the vote of a plurality in interest of stockholders present in person or by proxy and entitled to vote in the election at a meeting at which a quorum is present. Common stockholders are not entitled to cumulative voting rights. Members of the Company’s board of directors serve one-year terms (and until their successors are elected and qualify) and all directors are elected annually. Directors may be removed from office by the vote of a majority of the outstanding shares entitled to vote generally for the election of directors.

The quorum required at a stockholders’ meeting is a majority of the votes entitled to be cast at the meeting, represented in person or by proxy. If a quorum is present, action on a matter is approved by the vote of a majority of all the votes cast at the meeting, unless otherwise required by law or the Company’s charter. The MGCL requires approval by two-thirds of all votes entitled to be cast on the matter by each voting group entitled to vote, in the case of extraordinary corporate actions, such as:

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Provisions Restricting a Change of Control

The Company’s charter and bylaws, as well as the provisions of the MGCL, contain provisions that may have the effect of delaying, deferring or preventing a change of control of the Company. Although the Company’s charter does not contain such a provision, the MGCL allows a corporation’s charter to contain a provision requiring for any purpose a lesser proportion of the votes of all classes or of any class of stock than the proportion required by the MGCL for that purpose, but this proportion may not be less than a majority of all votes entitled to be cast on the matter. If a corporation’s charter contains such a provision, it will affect the procedures necessary to effect a change of control.

STOCKHOLDER PROPOSALS

The Company plans to hold its next annual meeting of stockholders on or around July 19, 2008. In order to be considered for inclusion in the Company’s proxy statement for the annual meeting, stockholder proposals must be received at the Company’s principal executive offices, at The Great Atlantic & Pacific Tea Company, Inc., Two Paragon Drive, Montvale, New Jersey 07645, Telephone: (201) 573-9700, Attention: Secretary, no later than January 26, 2008 and otherwise comply with the requirements of Rule 14a-8 under the Exchange Act.

OTHER MATTERS

No business other than that set forth in the attached Notice of Special Meeting is expected to come before the Special Meeting. However, should any other matters requiring a vote of stockholders arise, including the question of adjourning the Special Meeting, the persons named in the accompanying proxy will vote thereon according to their best judgment in the interest of the Company.

By Order of the Board of Directors

ALLAN RICHARDS
Senior Vice President, Human Resources,
Labor Relations, Legal Services & Secretary

Dated: June 3, 2008

EACH PERSON SOLICITED BY THIS PROXY STATEMENT, INCLUDING ANY PERSON WHO ON MAY 27, 2008 IS A BENEFICIAL OWNER OF THE COMPANY’S COMMON STOCK, MAY REQUEST A COPY OF THE COMPANY’S ANNUAL REPORT ON FORM 10-K FOR THE LAST FISCAL YEAR. SUCH WRITTEN REQUESTS SHOULD BE DIRECTED TO THE SECRETARY OF THE COMPANY AT ITS ADDRESS ABOVE.

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APPENDIX A

FORM OF CHARTER AMENDMENT—AUTHORIZED SHARES

Article VI of the charter of The Great Atlantic & Pacific Tea Company, Inc., a Maryland corporation (the “Corporation”), is hereby amended by deleting the following paragraph in its entirety:

The total number of shares of stock which the Corporation shall have authority to issue is eighty-three million shares, of which three million shares are Preferred Stock without par value, issuable in one or more series as provided this ARTICLE VI, and eighty million shares are common stock par value one dollar for an aggregate par value of all shares of all classes of eighty million dollars.

and inserting the following paragraph in lieu thereof:

The total number of shares of stock which the Corporation shall have authority to issue is one hundred sixty-three million shares, of which three million shares are preferred stock without par value, issuable in one or more series as provided in this ARTICLE VI, and one hundred sixty million shares are common stock, par value one dollar per share, for an aggregate par value of all shares of all classes of one hundred sixty million dollars.

A-1

APPENDIX B

THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
2008 LONG TERM INCENTIVE AND SHARE AWARD PLAN

1. Purposes.

The purposes of the 2008 Long Term Incentive and Share Award Plan are to advance the interests of The Great Atlantic & Pacific Tea Company, Inc. and its stockholders by providing a means to attract, retain, and motivate employees of the Company, its subsidiaries and affiliates upon whose judgment, initiative and efforts the continued success, growth and development of the Company and its subsidiaries and affiliates are dependent.

2. Definitions.

For purposes of the Plan, the following terms shall be defined as set forth below:

B-1

B-2

3. Administration.

B-3

B-4

4. Shares Subject to the Plan.

B-5

5. Specific Terms of Awards.

B-6

B-7

B-8

B-9

6. Certain Provisions Applicable to Awards.

B-10

7. Change of Control Provisions.

All outstanding Awards pursuant to which the Participant may have rights the exercise of which is restricted or limited, shall become fully exercisable at the time of the Change of Control. Unless the right to lapse of restrictions or limitations is waived or deferred by a Participant prior to such lapse, all restrictions or limitations (including risks of forfeiture and deferrals) on outstanding Awards subject to restrictions or limitations under the Plan shall lapse, and all performance criteria and other conditions to payment of Awards under which payments of cash, Shares or other property are subject to conditions shall be deemed to be achieved or fulfilled and shall be waived by the Company at the time of the Change of Control.

B-11

Notwithstanding the foregoing, in the case of an Award that constitutes deferred compensation subject to Section 409A of the Code, the definition of “Change of Control” set forth above shall not apply, and the term “Change of Control” shall instead mean a “change in the ownership or effective control” of the Company or “in the ownership of a substantial portion of the assets” of the Company within the meaning of Section 409A (a)(2)(A)(v) of the Code (or any successor provision) and the regulations and guidance issued thereunder, but only to the extent this substitute definition is necessary in the order for the Award to comply with the requirements prescribed by Section 409A of the Code.

8. General Provisions.

B-12

B-13

B-14

APPENDIX C

EXECUTIVE AND DIRECTOR COMPENSATION

The following disclosure is information that was previously disclosed in, and is excerpted from, the Company’s definitive proxy statement on Schedule 14A filed with the SEC on May 30, 2008.

Compensation Discussion & Analysis (“CD&A”)

The Human Resources & Compensation Committee sets the Company’s compensation strategy and philosophy, as well as the specific compensation for the named executive officers. The Committee relied upon input from senior management in its executive compensation process, as well as data, information and guidance the Committee receives from its compensation consultant. This CD&A discusses the Committee’s approach to compensation, analyzes the Company’s decision-making process in setting executive pay, and displays specific amounts for each Named Executive Officer (“NEO”) in the executive compensation tables.

The principles that guide the Committee’s compensation decision-making are:

Compensation Strategy

The Committee believes that compensation must be linked to A&P’s sales performance, sustained profitable growth, return on invested capital and the consistent creation of shareholder value, and that performance must be measured against specific and clear performance objectives.

The strategy supporting our guiding principles is to:

The Process for Setting Executive Compensation

Since executive compensation decisions are made at its January meeting, the Committee’s work begins in September of each year. The Committee relies on the following tools in making compensation decisions:

The Role of the Compensation Consultant

At the direction of the Committee, the consultant reviews compensation proposals and other materials prepared by management and advises the Committee on the consistency of the proposals with the Committee’s compensation strategy and with compensation programs at other companies. At the request of the Committee, the consultant also prepares its own analysis of compensation

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matters and positions the Company’s programs within the competitive market. The consultant also advises the Committee on whether the existing program design is consistent with the Company’s compensation strategy.

Each year, the Committee (with input from management and the consultant) reviews the list of organizations whose compensation programs are a source of comparison for the Company’s own programs (i.e., the Company’s “peer group”). Management provides the Committee input on which companies compete with A&P for business and for executive talent. The consultant gathers information on suggested peer companies and meets with the Committee to discuss any data that has been gathered and proposes new or modified peer group companies where appropriate.

Once the Committee decides on a peer group or groups, it then instructs the consultant to retrieve, organize and analyze compensation program data from each of the peer group companies. In addition to the peer group data, the consultant provides the Committee a copy of its proprietary survey on compensation entitled the “Towers Perrin General Industry and Retail/Wholesale Compensation Annual Survey”. The Committee receives the peer group data and the Towers Perrin Survey in September of each year, and then proceeds with a series of meetings with management over the course of several months to discuss compensation decisions for the next fiscal year. The consultant participates in all of these meetings, with and without the presence of management.

Competitive Compensation and Comparing the Compensation Practices of Other Companies

Competitive Compensation

In order to assess whether the Company’s compensation packages are competitive, the Committee compares A&P’s Total Direct Compensation (i.e., base salary plus annual incentive(s) plus long- term incentive(s) or “TDC”) to the TDC of the peer group companies. The Committee has defined “competitive” to mean that A&P’s target TDC for any executive is the middle of the range of TDC for comparable executives within the peer group of companies:

Peer Group Analysis

Over time, A&P’s peer group of companies changes as organizations change, are acquired or cease to be publicly traded. Also, changes in A&P’s own profile (such as that resulting from A&P’s acquisition of Pathmark in 2007) may require the peer group to be revised. As a result, the Committee annually instructs the consultant to propose updated peer group rosters comprised of companies that are:

In addition to these criteria, the compensation consultant summarizes different reported financial and operating information for each member of the peer group including revenue, EBITDA,

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ROIC, number of employees and multi-year growth data. This information assists the Committee in determining whether the proposed peer group companies are similar enough to A&P to make any comparison of compensation practices meaningful to its decision-making process.

In 2007, the Committee changed its benchmarking process to include comparisons from more than one peer group. The updated process for 2007 included the following groups of companies:

1) Primary Peer Group—consisting of grocery retailers and other direct competitors (i.e. drug stores, club stores, discount stores):

2) Secondary Peer Group—consisting of other companies similar in size and industry, but which particularly compete with A&P for executive talent:

3) Grocery Retailer Sub-Set of Primary Peer Group—consisting almost exclusively of competitors in the grocery retailer marketplace.

At the Committee’s instruction, the compensation consultant retrieves the NEO TDC from each peer group company’s most recent proxy filing. The consultant then compares this data to the TDC for A&P’s top seven executives. The consultant “matches” A&P executive data to the peer group according to job title or, if job title does not present a suitable match, then to compensation ranking within the peer group company. Although the Committee specifically compares A&P’s executive TDC to the primary peer group, the Committee also considers data from the Secondary and Grocery Retailer Sub-Set Peer Groups.

In 2007, the Committee reviewed the information provided and determined that it was most appropriate to target the middle of the Primary Peer Group for each executive’s TDC. The Committee then compared those results to the information available for both the Secondary Peer Group and the Grocery Retailer Sub-Set to give its members another perspective by which to consider the competitiveness of its executive compensation packages. The Committee was satisfied that the Primary Peer Group provided a reliable standard of comparison to ensure that the TDC for A&P’s top seven executives remained competitive.

Survey Analysis

The Committee also instructs the consultant to benchmark A&P’s executive compensation against survey data maintained by the consultant. Each year, the Company provides executive position descriptions to the consultant. These descriptions are reviewed and discussed by the consultant and the Committee, and the consultant is asked to match those jobs to benchmark positions in the consultant’s own compensation surveys. The consultant used its General Industry and Retail/Wholesale Compensation Annual Survey to perform the comparison. Because of the large variance in size among the companies comprising the survey data, the consultant uses regression

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analysis to adjust for differences in company revenues. The consultant submits to the Committee a report comparing each A&P executive’s TDC with the 25th, 50th and 75th percentile of the market survey data. After the peer group analysis, the consultant’s survey analysis represents a fourth source of data that the Committee considers in benchmarking compensation for A&P’s seven most senior executives.

In addition, following discussions with the consultant the Committee determines which data source is most suitable for each executive position based on such factors as the availability of adequate data sources and the appropriateness of any matches to other executive compensation data.

The Role of Executive Management

Input from the Company’s CEO and Executive Chairman is considered in the Committee’s compensation decision making. Each year the Company’s CEO reviews and discusses with the Committee the position descriptions for the Executive Management Team (except for his own position, which is reviewed by the Company’s Executive Chairman). At meetings with the Committee and the consultant, the CEO describes his view of the relative importance of each executive to the Company and the distinguishing characteristics of each executive role. This information assists the consultant in matching A&P’s executive positions to those in the peer group companies and to the benchmark positions contained in the consultant’s survey data, as described above.

The Company’s CEO receives a copy of the consultant’s peer group analysis and survey analysis reports each year. The CEO attends approximately 4-5 meetings with the Committee and the consultant over several months during which the consultant’s reports are reviewed and discussed. The CEO provides his opinion on whether the peer group and survey results are appropriate benchmarks for setting compensation for his direct reports. The CEO also discusses with the Committee whether subjective facts (such as the responsibilities or importance of any executive role, or the profile, performance or strategy of the Company) would for any executive merit a departure from the Company’s practice of targeting the middle of the market of the Primary Peer Group for executive pay. The CEO also recommends to the Committee total compensation for each of his direct reports. The Executive Chairman provides the same assistance to the Committee regarding compensation decisions for the CEO, and will do so in the future with regard to the Executive Managing Director.³

Assessment of Company Performance

The Committee uses Company performance to assist in its compensation decision-making. First, as described in more detail below, the Committee assesses the Company’s achievement against specific objective performance metrics in the case of the MIP (i.e., sales and operating income) and the LTIP (operating income and return on invested capital) in order to determine the level of payouts under these formula-based incentive programs.

Second, in order to evaluate the quality of performance, the Committee considers objective and subjective measures such as EBITDA, comparable store sales growth, industry performance and the impact of external events on Company performance (i.e., extraordinary events outside the executives’ control but which nonetheless potentially impact Company performance). The Committee in its discretion may deviate from the formulas associated with the MIP and LTIP and adjust compensation upward or downward based upon the Committee’s assessment of the quality of performance.

Assessment of Individual Performance

Individual performance influences the Committee’s compensation decision making for all named executive officers. With respect to the Executive Chairman, the independent directors meet in

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executive session annually at the beginning of the year to agree upon the Executive Chairman performance objectives (both individual and company) for the year. At the end of the year, the independent directors meet in executive session to conduct a performance review of the Executive Chairman based upon his achievement of the agreed-upon objectives, contribution to the Company’s performance, and other leadership accomplishments. This evaluation is shared with the Executive Chairman and is provided to the Committee for its consideration in setting the Executive Chairman’s compensation.

The Committee relies upon a performance assessment and compensation recommendation from the Executive Chairman in setting compensation for the CEO and for the Executive Managing Director. For the other NEOs, the Committee receives a performance evaluation and compensation recommendation from the CEO.

The Elements of A&P’s Executive Compensation Packages

Our compensation packages are comprised of:

a) base salary;

b) an annual cash incentive award (the “Management Incentive Plan” or “MIP”);

c) a long-term equity incentive award (the “LTIP”); and

d) perquisites and certain other benefits.

A significant percentage of each NEO’s Target Total Direct Compensation (“TTDC”) consists of incentive-based pay (i.e., the MIP and LTIP). The Committee does not apply a specific formula in establishing the ratio of incentive pay as a component of TTDC. Instead, the Committee subjectively adjusts the percentage of TTDC allocated to incentive pay for each NEO based on his or her level in the organization as well as his or her ability to affect strategy and/or results for the Company.

In 2007, incentive pay as a percentage of TDC for the named executive officers was as follows:

Base Salary

Base Salary is fixed compensation (as opposed to incentive compensation that varies depending on the level of performance delivered).

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Although the Committee does not assign a particular weight to any one factor, it emphasizes performance and experience in determining Base Salary. Base Salaries may appear above or below the middle of the market for our peer group depending on the Committee’s review of the factors stated above.

Adjustments were made to the base salary for certain executives during 2007 in order to be consistent with our compensation strategy. The actual fiscal 2007 Base Salaries of the NEOs are reported in column (c) of the Summary Compensation Table on page C-14.

Incentive Compensation

MIP

The Company provides its executives an opportunity to earn an annual MIP award to reward short-term (i.e., annual) performance against pre-set goals.

If the Company’s actual performance for any goal falls between the levels listed above, the percentage payout on that goal is proportionately adjusted.

NEOs can earn up to a 200% payout on Individual Performance based upon the achievement of pre-set personal objectives and/or an exercise of the Committee’s discretion.

Based on Fiscal 2007 operating results, and assuming 100% performance against personal objectives, the MIP would have been paid out at 92.7% of target:

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Based upon the extraordinary efforts that were required and delivered individually and by the executive management team as a whole—specifically the acquisition and early closing of Pathmark in a very challenging credit environment, the divestitures of A&P’s Midwestern and Southern divisions, the seamless integration of the Pathmark business with minimal disruption to the ongoing operation of A&P, all of which combined to deliver substantial shareholder value creation—and with the recommendation of the Executive Chairman and CEO, the Committee exercised its discretion and set individual performance payout awards of 150% of target for each of the executives on the Company’s executive management team (including three of the five NEOs). As well, the Committee supported the recommendation of the Executive Chairman and CEO to equally reward each member of the CEO’s management team to reinforce the important role of team work in driving superb execution.

The actual 2007 award payments to the NEOs for the Sales Revenue and Operating Income portions of the MIP are listed under the “Non-Equity Incentive Plan Compensation” column (g) of the Summary Compensation Table on page C-14. The actual 2007 award payments to the NEOs for the individual performance component of the MIP are listed under the “Bonus” column (d) of the Summary Compensation Table on page C-14. The minimum, target and maximum values for the overall MIP awards for fiscal 2007 are listed under the “Estimated Future Payouts Under Non- Equity Incentive Plan Awards” columns (d), (e) & (f) of the Grants of Plan Based Awards Table on page C-16.

LTIP

The Company provides its executives an LTIP award to motivate management to achieve the Company’s long-term performance goals.⁵

The goals used in fiscal 2007 were:

The dollar value of the LTIP award is calculated as a percentage of the executive’s base salary. The target LTIP award for each of the named executive officers is:

The LTIP award consists of:

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The Committee chose RSUs since they are earned only if both the ROIC and OI goals are achieved over an extended (i.e. 3-year) period of time. This ensures that the compensation interests of the executive are aligned with the interests of our shareholders.

The Committee included stock options as part of the LTIP because they also align executive interests with those of shareholders by providing compensation where the value is wholly dependent on share price appreciation.

RSU awards depend upon the Company’s achievement of operating goals over a 3-year period and are only earned if the performance goals are met in the final year of the measuring period. No RSUs are awarded if the Company’s actual performance does not meet the minimum standards for either goal. Conversely, the number of RSUs may increase (up to a maximum of 2 times an individual’s target award) when performance meets or exceeds the minimums for both goals. This is different from options, which vest at the rate of 25% per year for four years.

We have not provided the percentage and dollar values comprising the ROIC and OI measures. We believe that these targets and goals are statements of the Company’s expectations and estimates of future results and, therefore, by disclosing these strategically sensitive projections we will be informing our competitors of the Company’s strategic and operating planning processes, thereby causing our Company competitive harm. Specifically, disclosing OI projections would tell competitors about our growth and operating plans for the next three years, and permit them to respond competitively before we can execute on such plans. Similarly, disclosing ROIC would tell competitors about our cost of capital and our capital development projections, which represent key cost and planning information. Although management believes that with proper execution against its strategic plan the Company will achieve these ROIC and OI targets, they represent a significant improvement over the Company’s historical performance for the past ten years and we therefore consider them to be “stretch” goals.

The estimated future payouts to the NEOs under the Company’s 2007 LTIP award are set forth in the “Estimated Future Payouts Under Equity Incentive Plan Awards” columns (h), (i) & (j) of the Grants of Plan-Based Awards Table on page C-16.

Grant Date Practice

The Committee’s practice has been that the grant date (for the purpose of determining RSU and stock option awards under the Plan) is that which occurs on the first business day after the applicable Committee meeting in which the award is approved. In January 2007, the Committee approved a policy to use the first day of each new fiscal year as the grant date for any long-term equity incentive award,⁷ subject to the Committee’s discretion in relation to the release of material non-public information in the best interests of shareholders. The Company’s grant date practice is applied equally to the named executive officers and to any other employees who receive grants of stock options or RSUs.

Ownership Commitments

The Company maintains stock ownership guidelines that are applied to all named executive officers. A&P believes that mandating management ownership of Company stock ensures their focus on the strategy of providing long-term shareholder value. Under these guidelines, named executive officers are expected to own common shares or share equivalents in the following amounts:

(1) CEO—3 times base salary;

(2)Executive Managing Director—2 time base salary;

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(3) Executive Management Team—2 times base salary;

(4) Next reporting level—1 times base salary.

For purposes of these guidelines, stock ownership includes shares over which the executive has direct or indirect ownership or control. This includes restricted stock or restricted stock units, but does not include unexercised stock options. Executives are expected to meet their ownership guidelines within five years of becoming subject to the guidelines. Each named executive officer currently meets the requirements of the stock ownership guidelines, except for the Executive Managing Director, who was hired in 2007. Recently hired executives are given a reasonable amount of time to comply with the Company’s stock ownership guidelines.

Perquisites and Certain Other Benefits

Perquisites and Certain Other Benefits consist of comprehensive and competitive health and welfare or retirement benefits as well as other benefits. The Company believes providing these benefits allows it to remain competitive for leadership talent. The aggregate incremental cost of such benefits incurred by the Company during fiscal 2007 is summarized in the “All Other Compensation Table” on page C-15.

Health and Welfare Benefits

NEOs are provided comprehensive medical, dental, life insurance and long-term disability benefits. The medical benefits (which include prescription drug and vision coverage) as well as dental benefits are provided under an “Executive Medical Program.” This program provides 100% coverage for the named executive officers and their dependents. Life insurance is provided for each executive in an amount equal to two times base salary up to a maximum of $1.0 million dollars and long-term disability protection is provided to each executive with an available benefit of up to 60% percent of base salary.

Retirement Benefits

Named executive officers are also provided access to customary retirement, savings and supplemental retirement plans:

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Compensation for Chief Executive Officer

The CEO is generally compensated in the same manner as the other executives. For the fiscal 2007 performance period, the Committee approved a performance-based annual cash incentive award to the CEO in the amount of $697,500, and a discretionary bonus award in the amount of $93,750. These amounts are reflected in columns (g) and (d), respectively, of the Summary Compensation Table on page C-14. The CEO’s Base Salary remained unchanged at $750,000 for fiscal 2007. This amount is reflected in column (c) of the Summary Compensation Table on page C- 14.

Executive Chairman of the Board

The Executive Chairman is generally compensated in the same manner as the other executives. For the fiscal 2007 performance period, the Committee approved a performance-based annual cash incentive award to the Executive Chairman in the amount of $720,750, and a discretionary bonus award in the amount of $96,875. These amounts are reflected in columns (g) and (d), respectively, of the Summary Compensation Table on page C-14. The Executive Chairman’s Base Salary remained unchanged at $775,000 for fiscal 2007. This amount is reflected in column (c) of the Summary Compensation Table on page C-14.

Income Tax Consequences

Section 162(m) of the Internal Revenue Code, enacted in 1993, subject to certain exceptions, disallows a tax deduction to public companies for compensation over $1,000,000 paid to the Company Chief Executive Officer and the four (4) other most highly compensated executives at fiscal year end. The exceptions to the $1,000,000 deduction limit include compensation paid under preexisting employment agreements and performance-based compensation meeting certain requirements. The Company’s 1994 Stock Option Plan and the 1998 Long Term Incentive and Share Award Plan are in compliance with the provisions of Section 162(m) so that amounts received upon the exercise of options should be exempt from Section 162(m) limitations.

As a matter of practice, the Committee intends to set performance-based goals annually under the Company’s annual cash incentive award plan and long-term equity incentive award plan, and to deduct compensation paid under these plans to the extent consistent with the provisions of Section 162(m). However, if such compliance with Section 162(m) conflicts with what the Committee believes to be in the best interests of the Company and its Stockholders, the Committee may conclude that the payment of non-deductible compensation best serves those interests.

Impact of Pathmark Acquisition and Other 2007 Events on Outstanding Equity Awards

In December of 2007, the Company completed its acquisition of Pathmark and thereby added 140 stores to its operating store fleet. Earlier in 2007, the Company divested its Michigan and Louisiana divisions, which resulted in the closure and/or sale of 87 store locations. With these transactions occurring in different stages at different points in time, the Committee deemed it necessary to:

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The 2005 TIP

In 2004, the Company implemented the 2005 Turnaround Incentive Compensation Program (TIP) in connection with a corporate restructuring initiative. Under the TIP, executives were awarded RSUs that would vest only if Operating Income goals were achieved in each of the 2005, 2006 and 2007 fiscal years.

The events of 2007 were a departure from the assumptions underlying the Operating Income goals in connection with the original TIP grant. The Company’s actual Operating Income for fiscal 2007 ceased to be an appropriate measure of whether the TIP performance goals had been met. As a result, in 2007 the Committee exercised discretion in order to determine whether and to what extent the TIP grant had been earned.

As the following graph shows, the Company exceeded the TIP Operating Income goals in the 2005 and 2006 fiscal years, respectively.

Standalone Operating Income Trend
Exceeds TIP Performance Target

Based on this data, on June 15, 2007 the Committee recognized the Company’s performance to date under the TIP such that the applicable performance criteria was deemed to have been met with respect to two-thirds of the RSUs granted to each executive under the TIP. The Committee further determined that 50% of the RSUs thereby earned by the executive would vest on the first day of the Company’s 2008 fiscal year, with the balance vesting on the first day of the Company’s 2009 fiscal year.

The 2006 LTIP

In 2006, the Company’s executives were awarded grants of RSUs and stock options under the Company’s 2006 Long-Term Incentive Program (LTIP). Just as had occurred with the 2005 TIP, the 2006 LTIP’s Operating Income and ROIC performance goals for the 2007 and 2008 fiscal years ceased to be effective performance measures in light of the events of 2007. As a result, in 2007 the Committee exercised discretion in order to determine whether and to what extent the 2006 LTIP grant had been earned.

As the following graph shows, in fiscal 2006 the Company exceeded both the LTIP Operating Income and ROIC goals by 55% and 124%, respectively, and the Company was on track to maintain such performance for the 2007 and 2008 fiscal years.

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FY 2006 LTIP Performance Exceeded Plan

Based on this data, on June 15, 2007 the Committee recognized the Company’s performance to date under the 2006 LTIP such that the applicable performance criteria was deemed to have been met at an achievement level of 125% for one-third of the RSUs granted to each executive thereunder. The Committee further determined that the RSUs thereby earned by the executive would vest on the first day of the Company’s 2009 fiscal year. The Committee adjusted the performance measures for the remaining two-thirds of the RSUs granted under the 2006 LTIP so as to account for the impact of events in 2007 on the operating results of the company. Whether the remaining RSUs are earned will depend on whether the Company meets the new Operating Income and ROIC targets for fiscal 2008.

The 2007 LTIP

In 2007, the Company’s executives were awarded grants of RSUs and stock options under the Company’s 2007 Long-Term Incentive Program (LTIP). Just as had occurred with the 2006 LTIP, the Operating Income and ROIC performance goals for the 2007, 2008 and 2009 fiscal years were no longer viewed as appropriate performance measures due to the events of 2007. As a result, in 2007 the Committee adjusted the performance measures for all RSUs granted under the 2007 LTIP. If earned, the 2007 LTIP will vest in fiscal year 2010.

One-Time Equity Awards

The 2007 Executive Closing & Integration Incentive Plan (“E-CLIIP”)

In support of the decision to acquire Pathmark, the Committee determined that, in order to promote a successful merger and integration for the benefit of all shareholders while also sustaining overall operational performance, it would need to expect and drive extraordinary executive performance. As previously indicated, the existing executive compensation programs are only designed to reward executives for achieving goals and measuring performance against typical business performance expectations. As a result, on June 15, 2007, the Committee approved the E-CLIIP, which is specifically designed to reward extraordinary individual and organizational performance.

Under the E-CLIIP, executives were awarded RSUs that will vest 36 months following the successful closing date of the Pathmark acquisition only if specific integration goals are achieved and, in particular, only if specific share price hurdles are cleared. The amount of the target E-CLIIP award for each executive was set by the Committee and reflects the executive’s expected contribution to the success of the Pathmark acquisition, based upon the executive’s role and responsibilities.

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The E-CLIIP is designed to reward executives for the achievement of specific acquisition milestones (i.e., closing deadlines) and performance goals (i.e., synergy targets), which are reflected in the following earned award table: