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General Counsel Employment Agreement

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Exhibit 10.8


EMPLOYMENT AGREEMENT


THIS EMPLOYMENT AGREEMENT (the " Agreement" ) is entered into as of the 9th day of March, 2009 (the " Effective Date" ) by and between Rite Aid Corporation, a Delaware corporation (the " Company" ) and Marc A. Strassler (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 Executive' s employment under this Agreement shall commence on the Effective Date and, unless earlier terminated pursuant to Section 5 below, shall continue for a period ending on the date that is two (2) years following the Effective Date (the " Original Term of Employment" ). The Original Term of Employment shall be automatically renewed for successive one-year terms (the " Renewal Terms" ) unless at least 120 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 . " 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 applicable anniversaries thereof.


2. Position And Duties.


2.1 Generally . During the Term, Executive shall serve as General Counsel of the Company and shall have the titles, duties, responsibilities and authority as are customary for such position(s) and such other titles, duties, responsibilities and authorities as shall be assigned by the Company from time to time consistent with such position(s). Executive shall devote his full working time, attention, knowledge and skills faithfully and to the best of his ability, to the duties and responsibilities assigned by the Company in furtherance of the business affairs and activities of the Company and its subsidiaries, affiliates and strategic partners. Following termination of Executive' s employment for any reason, Executive shall immediately resign from all offices and positions he holds with the Company or any subsidiary.


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Other than necessary travel in connection with the performance of his duties hereunder, the Executive shall be based at the Company' s 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 Company' s approval, which shall not be unreasonably withheld, (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. Compensation .


3.1 Base Salary . During the Term, as compensation for his services hereunder, Executive shall receive a salary at the annualized rate of Four Hundred Ten Thousand Dollars ($410,000.00) per year (" Base Salary" as may be adjusted from time to time pursuant to this Agreement), which shall be paid in accordance with the Company' s 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 Company' s annual bonus plan as adopted and approved by the Board or the Compensation Committee from time to time. For the first fiscal year (Fiscal Year 2010), Executive' s annual bonus opportunity pursuant to such plan shall equal 60% (the " Annual Target Bonus" ) of the Base Salary, which shall be prorated based upon the Effective Date. For subsequent fiscal years, the Annual Target Bonus may be adjusted (including eliminated or reduced, with such elimination and/or reductions to the same extent that annual bonus opportunities for similarly situated senior management employees are also eliminated or reduced, as the case may be) and shall be based upon the Board approved annual bonus plan for that year.


3.3 Equity Awards .


(a) At the first regular meeting of the Compensation Committee of the Board of Directors following the Effective Date, Executive will be granted an option (the " Option" ) to purchase 750,000 shares (which shall be proportionally adjusted to give effect to any reverse stock split or other change in capitalization) of the Company' s Common Stock, par value $1.00 per share (" Company Stock" ). The Option shall (i) be a non-qualified stock option, (ii) have an exercise price equal to the closing price of the Company Stock as reported on the New York Stock Exchange (" NYSE " ) on the date of grant, (iii) have a term of ten (10) years following the date of grant, (iv) vest and become exercisable as to one-fourth of the shares of the Company Stock subject to the option on each of the


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first four (4) anniversaries from the date of 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 Company' s stock option and equity plans.


(b) At the first meeting of the Compensation Committee of the Board of Directors following the Effective Date that grants under the equity incentive program are made and subject to the approval of the Compensation Committee, Executive will be recommended for participation in the Company' s Executive Equity Plan (the " EEP" ). For the first fiscal year (FY 2010) only, Executive' s participation in the EEP will be on a prorated basis.


(c) Upon the occurrence of a Change in Control of the Company and prior to the termination of Executive' s employment with the Company, the Options awarded pursuant to subsection (a) 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 Options 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 Executive' s 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 the Options are not subject to an effective registration statement, the 90-day periods 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 Executive' s 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 provide for benefits, to the extent provided, at the level as other similarly situated participants) 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


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hereafter in effect. The provisions of Section 14.2 shall apply to all reimbursements made under this Section 4.2 to the extent Section 14.2 applies.


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 per month.


4.5 Annual Financial Planning Allowance . During each year of the Term, the Company shall provide Executive with an executive planning allowance in the amount of $3,000.


4.6 Relocation Expenses . Subject to Executive providing reasonable documentation to Company, the Company shall reimburse Executive up to a total of $135,000 for transportation, commuting, lodging and other relocation expenses (including but not limited to moving, house hunting trips and other direct costs incurred in connection with Executive' s relocation) incurred by Executive for a period of up to twenty-four (24) months from the Effective Date (collectively, the " Relocation Benefits Payments" ) . To the extent the Relocation Benefits Payments are subject to federal, state or local income tax payments by Executive, Company shall also pay to Executive an additional amount (the " Gross-Up Payment" ) such that the net amount retained by the Executive, after deduction of the applicable federal, state and local income taxes on the Relocation Benefits Payments and the applicable federal, state and local income taxes upon the Gross-Up Payment shall be equal to the total Relocation Benefits Payments.


4.7 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 Executive' s 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 enforcement of its rights hereunder; and (b) pay all reasonable costs, expenses and attorney' s 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 Executive' s undertaking to repay in the event it is ultimately determined that Executive is not entitled to be indemnified by the Company. Following termination of the Executive' s 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. Termination .


5.1 Termination of Executive' s Employment by the Company for Cause . The Company may terminate Executive' s employment hereunder for Cause (as defined below). Such termination shall be effected by written notice thereof delivered by the


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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 committee comprised of three senior officers (one of which shall be Executive' s supervisor and, if Executive' s supervisor is not the Company' s Chief Executive Officer or Chief Operating Officer, the Company' s Chief Executive Officer or Chief Operating Officer) of the Company or the Board of Directors shall mean: (i) Executive' s 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 Company; (ii) Executive' s 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 Company Policy or which materially interferes with the Executive' s ability to perform his duties, provided, however that the Company has provided written notice (which shall set forth in reasonable detail the specific conduct of the Executive that constitutes Cause and the specific provisions of this Agreement on which the Company relies) to the Executive of the existence of any condition described in this subsection (iii) within 30 days of the date that the Executive' s supervisor has actual knowledge of the initial existence of such condition, and the Executive has not cured the condition within 30 days of the receipt of such notice. Any termination of employment by the Company for Cause pursuant to this Section 5.1 must occur no later than the date that is the second anniversary of the Company' s actual knowledge of the initial existence of the condition giving rise to the termination right; (iv) the commission by Executive of an act of fraud or dishonesty toward the Company or any subsidiary; (v) Executive' s gross negligence or willful misconduct which damages or injures the Company or the Company' s 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 Executive' s 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 ((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 Executive' s 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.


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(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 Executive' s stock options that have vested and become exercisable prior to the date of termination shall remain exercisable for a period of 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 Executive' s employment by Executive voluntarily without Good Reason shall be effective upon 30 days' notice to the Company or such earlier date as the Company determines in its discretion and designates in writing, it being agreed that the Company may reduce or eliminate the notice period and pay the Executive his Base Salary, pro rated as applicable, for the number of days in the shortened notice period; provided, however, if the Company elects to eliminate the notice period, then in such event there shall be no additional payment to Executive. A termination of Executive' s 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 Executive' s Employment by the Company Other Than for Cause or by Executive for Good Reason . Executive' s employment hereunder may be terminated by the Company other than for Cause or by Executive for Good Reason. In the event that Executive' s employment hereunder is terminated by the Company other than for Cause 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 times Executive' s then Base Salary as of the date of termination of employment, such amount payable in equal installments pursuant to the Company' s standard payroll procedures for management employees over a period of two years following the date of termination of employment, and (iii) continued health insurance coverage for Executive and his immediate family for a period of two years following the date of termination of employment. In addition, if such termination occurs following the start of the Company' s fiscal year, Executive shall also be entitled to receive to the extent not previously paid (which shall be paid at the same time paid to other eligible participants in the bonus plan and following determination by the Board of Directors that the Company has achieved or exceeded its annual performance targets for the fiscal year) a pro rata annual bonus equal to the product of (A) the maximum annual bonus (based upon Executive' s applicable Annual Target Bonus) that Executive would have earned (based upon actual results and had Executive remained employed) for all bonus measurement periods during or prior to the date Executive' s employment termination occurs, and (B) a fraction, (x) the numerator of which is (1) the number of days between the beginning of the then current fiscal year of the Company and the date of termination of employment for any applicable partial fiscal year or (2) for any applicable


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completed fiscal year, 365, and (y) the denominator of which is 365. For any period during which the Executive would be entitled to continuation coverage through the application of Internal Revenue Code Section 4980B (" COBRA" ), this coverage shall be provided at the expense of the Company. For any period after the expiration of the period required by COBRA, but prior to the end of the month in which the second anniversary of the Date of Termination occurs, this coverage will be provided at the expense of the Executive (or his beneficiaries or estate). Executive (or his beneficiaries or estate) shall remit payment by check to the Company in the amount of the then current amount used to calculate premiums for participants entitled to receive continuation coverage under COBRA. The Company shall, on the last day of each month, provide the Executive (or his beneficiaries or estate) with a payment sufficient to place the Executive (or his beneficiaries or estate) in the same economic position had such individuals or entity not been required to pay the premium described in the preceding sentence.


(b) The Executive' s 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 two years following the date of terminatio
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