AMENDED AND RESTATED EMPLOYMENT AGREEMENT by RITE AID CORP
Company: RITE AID CORP
SEC CIK: 84129
SEC Type: EX-10.7
SIC Code: 5912
SIC Industry: RETAIL-DRUG STORES AND PROPRIETARY STORES
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the Agreement) was entered into and effective as of the 24th day of September, 2008 (the Effective Date), and amended as of the 21st day of January, 2010 (the Amendment Date), by and between Rite Aid Corporation, a Delaware corporation (the Company) and John T. Standley (the Executive).
WHEREAS, Executive desires to provide the Company with his services and the Company desires to hire and employ Executive on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive (individually a Party and together the Parties), intending to be legally bound, agree as follows:
1. Term of Employment.
The term of Executives employment under this Agreement shall commence on the Effective Date and, unless earlier terminated pursuant to Section 5 below, shall continue for a period (the Original Term of Employment) ending on the date that is three (3) years following June 24, 2010 (the Implementation Date). The Original Term of Employment shall be automatically renewed for successive one year terms (the Renewal Terms) unless at least 180 days prior to the expiration of the Original Term of Employment or any Renewal Term, either Party notifies the other Party in writing that he or it is electing to terminate this Agreement at the expiration of the then current Term of employment (a Nonrenewal Notice). Term shall mean the Original Term of Employment and all Renewal Terms. For purposes of this Agreement, except as otherwise provided herein, the phrase year during the Term or similar language shall refer to each 12 month period commencing on the Effective Date or the Implementation Date (upon the occurrence of such date) or the applicable anniversaries thereof.
2. Position and Duties.
2.1 Generally. During the Term, Executive shall serve as President and Chief Operating Officer of the Company and, commencing on the Implementation Date, shall also serve as Chief Executive Officer and shall have the titles, duties, responsibilities and authority as are customary for such positions and such other titles, duties, responsibilities and authorities as shall be assigned by the Company from time to time consistent with such positions. Executive shall devote his full working time, attention, knowledge and skills faithfully and to the best of his ability, to the duties and responsibilities so assigned by the Company in furtherance of the business affairs and activities of the Company and its subsidiaries, affiliates and strategic partners. Executive shall report solely to the Companys Board of Directors and, commencing on (i) the Amendment Date, all employees of the Company (with the exception of the Senior
Vice President of Corporate Communications) shall report directly or indirectly to Executive; and (ii) the Implementation Date, all employees of the Company shall report directly or indirectly to Executive. Following termination of Executives employment for any reason, Executive shall immediately resign from all offices and positions he holds with the Company or any subsidiary.
Other than necessary travel in connection with the performance of his duties hereunder, the Executive shall be based at the Companys headquarters.
2.2 Other Activities. Anything herein to the contrary notwithstanding, nothing in this Agreement shall preclude the Executive from engaging in the following activities: (i) serving on the board of directors of a reasonable number of other corporations or the boards of a reasonable number of trade associations and/or charitable organizations, subject to the Companys approval, which shall not be unreasonably withheld, with the current activities listed on Appendix D being approved; (ii) engaging in charitable activities and community affairs; and (iii) managing his personal investments and affairs, provided that such activities do not violate Sections 6 or 7 below or materially interfere with the proper performance of his duties and responsibilities under this Agreement. Executive shall at all times be subject to, observe and carry out such lawful rules, regulations, policies, directions, and restrictions as the Company may from time to time establish for officers of the Company.
3.1 Base Salary. During the Term, as compensation for his services hereunder, Executive shall receive a base salary at the annualized rate of $900,000.00 per year and, commencing on the Implementation Date, $1,000,000 per year (Base Salary as shall be reviewed annually for possible increase), which shall be paid in accordance with the Companys normal payroll practices and procedures, less such deductions or offsets required by applicable law or otherwise authorized by Executive.
3.2 Annual Performance Bonus. The Executive shall participate each fiscal year during the Term in the Companys annual bonus plan as adopted and approved by the Board or the Compensation Committee from time to time. For Fiscal Year 2009, Executives annual bonus opportunity pursuant to such plan shall equal 125% and, commencing on the Implementation Date, 200% (the Annual Target Bonus) of the annualized Base Salary ($900,000 per year for Fiscal Year 2009) even though the entire $900,000 Base Salary for Fiscal Year 2009 will not be paid to Executive as a result of this Agreement. For subsequent fiscal years, the Annual Target Bonus may be adjusted (however, in no event shall it be less than 125% and commencing on the Implementation Date 200%) and shall be based upon the Board approved plan for that year.
3.3 Equity Awards.
(a) On the Effective Date the Executive was granted an option (the Original Option) to purchase 3,500,000 shares of the Companys Common Stock, par value $1.00 per share (Company Stock) and on the Amendment Date the Executive was granted an option to
purchase 2,555,000 shares of Company Stock (the Amendment Option and, collectively with the Original Option, the Options). The Options are: (i) a nonqualified stock option; (ii) have an exercise price equal to(x) $0.96 for the Original Option and (y) $1.52 for the Amendment Option, respectively; (iii) have a term of ten (10) years following the date of such grant; (iv) vest and become exercisable as to one-fourth of the shares of the Company Stock subject to the applicable Option on each of the first four (4) anniversaries from the date of such grant; (v) be subject to the acceleration exercise and termination provisions set forth in Section 3.3(c) and Article 5 hereof; and (vi) otherwise be evidenced by and subject to the terms of the Companys stock option and equity plans.
(b) Executive will participate in the Companys Executive Equity Plan (the EEP). On a going forward basis, the award will be based upon Executives annual Base Salary and the stock closing price on the date of grant. For Fiscal Year 2009 only, Executives participation in the EEP will be on a prorated basis. Executives long term incentive plan target under the EEP shall be set at 200% of Base Salary.
(c) Upon the occurrence of a Change in Control of the Company and prior to the termination of Executives employment with the Company, the Options awarded pursuant to subsection (a) above and any stock options awarded pursuant to the EEP in subsection (b) above then held by Executive shall immediately vest and become exercisable in full. For purposes of this Agreement Change in Control shall have the meaning set forth in the attached Appendix A.
(d) It is understood and acknowledged by Executive that the securities underlying the stock options and/or restricted stock that may be awarded to Executive from time to time may not be subject to an effective registration statement under the federal securities laws until some time after the Effective Date. The Company agrees that if, as of the date of termination of Executives employment under the circumstances described in Sections 5.2 (except termination for Cause), 5.3 and 5.5, the securities underlying the then vested and exercisable portion of any stock options are not subject to an effective registration statement, the 90 day or one year periods, as applicable, in Section 5.2 (except termination for Cause), 5.3 and 5.5, as applicable, will be deemed to run from the first date such securities become subject to an effective registration statement.
4. Additional Benefits.
4.1 Employee Benefits. During the Term, Executive and, as to welfare plans the Executives eligible immediate family, as the case may be, shall be entitled to participate in the employee benefit plans (including, but not limited to medical, dental and life insurance plans, short-term and long-term disability coverage, the Supplemental Executive Retirement Plan (which shall be at the monthly contribution rate equal to 2% of Executives Base Salary) and 401(k) plans) in which senior management employees of the Company are generally eligible to participate, subject to any eligibility requirements and the other generally applicable terms of such plans.
4.2 Expenses. During the Term, the Company shall reimburse Executive for any expenses reasonably incurred by him in furtherance of his duties hereunder, including without limitation travel, meals and accommodations, upon submission of vouchers or receipts and in compliance with such rules and policies relating thereto as the Company may from time to time adopt or as may be required in order to permit such payments to be taken as proper deductions by the Company or any subsidiary under the Internal Revenue Code of 1986, as amended, and the rules and regulations adopted pursuant thereto now or hereafter in effect.
4.3 Vacation. Executive shall be entitled to four (4) weeks paid vacation during each year of the Term.
4.4 Automobile Allowance. During the Term, the Company shall provide Executive with an automobile allowance of $1,000.00 per month.
4.5 Annual Financial Planning Allowance. During each year of the Term, the Company shall provide Executive with an executive planning and tax services allowance in the amount of up to $7,000.00 and, commencing on the Implementation Date, in the amount of up to $10,000.
4.6 Indemnification. The Company shall (a) indemnify and hold Executive harmless, to the full extent permitted under applicable law, for, from and against any and all losses, claims, costs, expenses, damages, liabilities or actions (including security holder actions, in respect thereof) relating to or arising out of the Executives employment with and service as an officer of the Company or as an officer or director of an entity other than the Company at the request of the Company; and (b) pay all reasonable costs, expenses and attorneys fees incurred by Executive in connection with or relating to the defense of any such loss, claim, cost, expense, damage, liability or action, subject to Executives undertaking to repay in the event it is ultimately determined that Executive is not entitled to be indemnified by the Company, and enforcement of its rights hereunder. Following termination of the Executives employment or service with the Company, the Company shall cause any Director and Officer liability insurance policies applicable to the Executive prior to such termination to remain in effect for six (6) years following the date of termination of employment.
5.1 Termination of Executives Employment by the Company for Cause. The Company may terminate Executives employment hereunder for Cause (as defined below). Such termination shall be effected by written notice thereof delivered by the Company to Executive, indicating in reasonable detail the facts and circumstances alleged to provide a basis for such termination, and shall be effective as of the date of such notice in accordance with Section 12 hereof. Cause as determined in reasonable good faith by a resolution adopted by the affirmative vote of a majority of the Companys Board of Directors (after reasonable written notice to Executive setting forth in reasonable detail the specific conduct of Executive upon which the Board relies in reaching its determination, and a reasonable opportunity for Executive, together with his counsel, to be heard before the Board prior to making such determination) shall mean: (i) Executives gross negligence or willful misconduct in the performance of the duties or
responsibilities of his position with the Company or any subsidiary, or failure to timely carry out any lawful and reasonable directive of the Board of Directors; (ii) Executives intentional misappropriation of any funds or property of the Company or any subsidiary; (iii) the conduct by Executive which is a material violation of this Agreement or written Company Policy which materially interferes with the Executives ability to perform his duties; provided, however, that Executive shall have the right, within thirty (30) days after receipt of written notice (which shall set forth in reasonable detail the specific conduct of Executive that constitutes Cause and the specific provision(s) of this Agreement on which Company relies) from Company of the Executives violation of this subsection, to cure the event or circumstances giving rise to such Cause and in the event of which cure, such event or circumstances shall not constitute Cause hereunder; (iv) the commission by Executive of an act of fraud, misappropriation or embezzlement toward the Company or any subsidiary; (v) Executives gross negligence or willful misconduct which damages or injures the Company or the Companys reputation; (vi) Executive is convicted of or pleads guilty to a felony involving moral turpitude; or (vii) the use or imparting by Executive of any confidential or proprietary information of the Company, or any subsidiary in material violation of Section 6 below.
5.2 Compensation Upon Termination by the Company for Cause or by Executive Without Good Reason. In the event of Executives termination of employment (i) by the Company for Cause or (ii) by Executive voluntarily without Good Reason:
(a) Executive shall be entitled to receive within ten (10) business days of the date of termination: (i) all amounts of accrued but unpaid Base Salary through the effective date of such termination, (ii) reimbursement for reasonable and necessary expenses incurred by Executive through the date of such termination, to the extent otherwise provided under Section 4.2 above, and (iii) all other vested payments and benefits to which Executive may otherwise be entitled pursuant to the terms of the applicable benefit plan or arrangement through the effective date of such termination (collectively (i), (ii) and (iii), the Accrued Benefits). All other rights of Executive (and, except as provided in Section 5.6 below, all obligations of the Company) hereunder or otherwise in connection with Executives employment with the Company shall terminate effective as of the date of such termination of employment and Executive shall not be entitled to any payments or benefits not specifically described in this subsection (a) or (b) below.
(b) Except as provided in Section 3.3(d), any portion of any restricted stock or any other equity incentive awards as to which the restrictions have not lapsed or as to which any other conditions shall not have been satisfied prior to the date of termination shall be forfeited as of such date and any portion of Executives stock options that have vested and become exercisable prior to the date of termination shall remain exercisable for a period of ninety (90) days following the date of termination of employment (or, such later date as may be permitted by the relevant stock option or equity plan, or, if earlier, until the expiration of the respective terms of the options), whereupon all such options shall terminate; provided, however, in the event of termination of Executive by the Company for Cause, any stock options that have not been exercised prior to the date of termination shall immediately terminate as of such date.
Any termination of Executives employment by Executive voluntarily without Good Reason shall be effective upon thirty (30) days notice to the Company or such earlier date as the Company
determines in its discretion and designates in writing. A termination of Executives employment by the Company for Cause or by the Executive other than for Good Reason shall not constitute a breach of this Agreement.
5.3 Compensation Upon Termination of Executives Employment by the Company Other Than for Cause or By Executive for Good Reason. Executives employment hereunder may be terminated by the Company other than for Cause (such termination to include if the Company provides Executive a Nonrenewal Notice, a Company Nonrenewal) or by Executive for Good Reason. In the event that Executives employment hereunder is terminated by the Company other than for Cause (such termination to include a Company Nonrenewal) or by Executive for Good Reason:
(a) Executive shall be entitled to receive: (i) within ten (10) business days of the date of termination the Accrued Benefits; (ii) an amount equal to two (2) times (one (1) times in the case of a Company Nonrenewal and two (2) times in the case of a Company Nonrenewal within six (6) months of a Change in Control) the sum of Executives then Base Salary plus Annual Target Bonus as of the date of termination of employment, such amount payable in equal installments pursuant to the Companys standard payroll procedures for management employees over a period of two (2) years (one (1) year in the case of a Company Nonrenewal and two years in the case of a Nonrenewal within six (6) months of a Change in Control) following the date of termination of employment; and (iii) continued health and medical insurance coverage (or reimbursement to Executive of the cost of purchasing health and medical coverage substantially comparable in all material respects to the coverage provided by the Company to the Executive, excepting payments for such periods that the Company provides such coverage) for Executive and his immediate family for a period of two (2) years (one (1) year in the case of a Company Nonrenewal and two years in the case of a Nonrenewal within six (6) months of a Change in Control) following the date of termination of employment. In addition, if such termination occurs following the start of the Companys fiscal year, Executive shall also be entitled to receive (which shall be paid at the same time paid to other eligible participants in the bonus plan and following determination by the Board that the Company has achieved or exceeded its annual performance targets for the fiscal year) a pro rata annual bonus determined by multiplying Executives then Annual Target Bonus by a fraction (x) the numerator of which is the number of days between the beginning of the then current fiscal year of the Company and the date of termination of employment and (y) the denominator of which is 365.
(b) The Executives stock option awards held by Executive shall vest and become immediately exercisable and the restrictions with respect to any awards of restricted stock shall lapse, in each case to the extent such options would otherwise have become vested and exercisable (or such restrictions would have lapsed) had Executive remained in the employ of the Company for a period of three (3) years (one (1) year in the case of a Company Nonrenewal and three (3) years in the case of a Company Nonrenewal within six (6) months of a Change in Control) following the date of termination. Except as provided in Section 3.3(d), suchportion of Executives stock options (together with any portion of Executives stock options that have vested and
END OF PREVIEW
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