EXHIBIT 10.12
AMENDMENT NO. 1 TO
EMPLOYMENT AGREEMENT
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THIS AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT, by and between Rite Aid
Corporation, a Delaware corporation (the "Company") and Xxxx Xxxxxxx
("Executive") is entered into as of the 7th day of May, 2001 (the "Effective
Date ).
WHEREAS, Executive and the Company have previously entered into that
certain Employment Agreement, dated as of December 5, 1999, as supplemented by
side letter dated April 5, 2000 between counsel (the "Employment Agreement");
and
WHEREAS, the Company wishes to provide Executive additional bonus
compensation to further incentivize Executive to remain in the employment of the
Company;
NOW, THEREFORE, in consideration of the mutual premises set forth
herein, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the Company and Executive hereby agree as
follows:
1. Amendment to Employment. As of the Effective Date, the Employment
Agreement is hereby amended to incorporate by reference therein a new Appendix
13, which is attached hereto as Exhibit 1.
2. Employment Agreement to Remain in Effect. Except as modified by this
Amendment No. 1, the Employment Agreement shall remain in lull force and effect
in accordance with its terms. Without limiting the generality of the foregoing,
the Additional Incentive Bonus payable to Executive as provided in Exhibit 1
shall not in any way limit and is not in derogation of the Company's obligations
to fully indemnify Executive for fees, costs and expenses and any other matters
pursuant to Section 3(1) of the Employment Agreement. In the event of a conflict
between the provisions of flier Amendment No. 1 and the Employment Agreement,
this Amendment No. 1 shall be controlling.
3. Capitalized Terms. Capitalized terms used herein or in Exhibit 1 and
not otherwise defined shall have the respective meanings set forth in the
Employment Agreement.
4. Fees and Expenses. Promptly following the execution and delivery of
this Amendment No. 1 by Executive, the Company shall reimburse Executive for
legal fees and expenses incurred by Executive in negotiating and entering into
this Amendment No. 1 (and incidental matters contemplated hereby).
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IN WITNESS WHEREOF, Executive has hereunto set Executive's hand and,
pursuant to due authorization, the Company has caused this Amendment No, 1 to be
executed in its name and on its behalf all as of the date and year first above
written.
RITE AID CORPORATION
By: /s/ Xxxxxx Xxxxxx
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Its Senior Executive Vice President
/s/ Xxxx Xxxxxx
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Xxxx Xxxxxxx
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Exhibit 1
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APPENDIX B
1. Entitlement to Incentive Bonus. In addition to the bonus and other
compensation provided in the Employment Agreement, the Company shall pay
Executive an incentive bonus in the amount set forth in Section 2 below (the
"Additional Incentive Bonus") on or within 5 days after the date first described
below:
(a) The Additional Incentive Bonus shall be paid on January 1, 2002,
if Executive is an employee of the Company on that date; or
(b) The Additional Incentive Bonus shall be paid on the Date of
Termination under the Employment Agreement, if Executive's employment is
terminated prior to January 1, 2002 (i) by reason of Executive's death or
Disability, (ii) by the Company without Cause, or (iii) by Executive for Good
Reason; or
(c) The Additional Incentive Bonus shall be paid on the Date of
Termination under the Employment Agreement, if Executive terminates her
employment for any reason (or the Company terminates Executive's employment for
any reason) prior to January 1, 2002 but such Date of Termination is
simultaneous with or after the occurrence of a Change in Control of the Company;
or
The date as of which Executive first becomes entitled to receive the Additional
Incentive Bonus is referred to as the "Bonus Payment Date." For purposes of the
Amendment No. 1, Executive shall be deemed to be an employee of the Company (and
accordingly her employment shall be deemed not to have terminated) unless and
until the Date of Termination has occurred. Notwithstanding anything to the
contrary herein, Executive shall not be entitled to receive any Additional
Incentive Bonus if the Company properly terminates Executive's employment for
Cause and the actual Date of Termination is prior to January 1, 2002 and no
Change in Control of the Company has occurred on or prior to such Date of
Termination.
2. Amount of Incentive Bonus. The amount of the Additional Incentive
Bonus shall be equal to the sum of (i) $1,624,000 (the "Base Amount"), plus (ii)
simple interest thereon at the rate of nine percent (9%) per annum from December
5, 1999 through the applicable Bonus Payment Date (such sum, the "Additional
Bonus Amount") subject to offset only in accordance with Section 3 below and
repayment only in accordance with Section 4 below.
3. Reduction in the Amount of the Incentive Bonus. If, on or prior to
the Bonus Payment Date, there has occurred a final settlement and/or a binding,
nonappealable judgment by a court or other tribunal of competent jurisdiction
(in either case, a "Final Determination") of all claims which Executive has
arising out of or relating to Executive's Employment Protection Agreement, dated
September 22, 1998, Xxxx Xxxxx, Inc., a subsidiary of with The Kroger Co.
(collectively, the "Kroger Claim"), then the Additional Bonus Amount payable to
Executive shall be reduced (but not below zero) by an amount equal to the
excess, if any, of (i) the amount of any consideration paid by The Kroger Co. to
Executive, that is not subject to forfeiture or offset, pursuant to such Final
Determination (but excluding any payment in respect of punitive damages or by
way of penalty) less (ii) the sum, without double counting, of (x) any
consideration paid or payable by Executive pursuant to or in connection with
such Final Determination (and any counterclaims or cross-claims ("Related
Claims") arising from, related to or in connection with the departure by
Executive and/or any other employee from The Kroger Co., their consideration of
and conduct in relation to employment by the Company and/or their, or anyone
else s subsequent employment with the Company) and (y) all unpaid amounts
(including, in any event, attorneys fees and costs incurred by Executive in
connection with the Kroger Claims or Related Claims that have not been paid by
the Company) required to be indemnified by the Company pursuant to Section 3(f)
of the Employment Agreement (any such excess, the "Net Recovery Amount"). It is
understood that there shall be no reduction of or offset to the Additional
Incentive Bonus required to be paid by the Company to Executive by virtue of any
Net Recovery Amount unless Executive shall have received the Net Recovery Amount
prior to the Bonus Payment Date and a Final Determination has resolved all
Related Claims against Executive by or in the right of The Kroger Co. and its
affiliates,
4. Reimbursement Amounts by Executive. Subject to the limitations set
forth in Section 4(d), in the event the Company timely pays the full Additional
Incentive Bonus to Executive pursuant to Section l(a) (A) on January 1, 2002 or
within 5 days thereafter (in the case of subsection (a) below) or (B) prior to a
Final Determination (in the case of subsection (b) below), Executive shall be
required to reimburse the Company for the amounts set forth in subsections (a)
and (b) below (in the aggregate, the "Reimbursement Obligation"), provided, that
in no event shall the aggregate amount of the Reimbursement Obligation exceed
the amount of the Additional Incentive Bonus actually paid by the Company to
Executive, plus attorneys' fees, if any, received by Executive pursuant to the
Final Determination and already reimbursed by the Company.
(a) Reimbursement if Executive Receives an Award in the Kroger
Litigation After Receipt of Additional Incentive Bonus. If the Final
Determination occurs after the Bonus Payment Date and, as provided above, the
Company timely paid the full Additional Incentive Bonus pursuant to Section 1(a)
on the Bonus Payment Date, Executive shall be obligated to reimburse the Company
for an amount equal to the Net Recovery Amount received by Executive (not to
exceed the Additional Bonus Amount theretofore actually paid by the Company to
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Executive, less any amount theretofore paid or payable by Executive to the
Company pursuant to Section 4(a)), plus attorneys fees, if any, received by
Executive pursuant to the Final Determination and already reimbursed by the
Company.
(b) Reimbursement Obligation Deferred Until Executive Receives
Amounts in Excess of What Executive is Entitled to Retain. Executive shall pay
the Company the amounts required under Section 4(a) or (b) within 15 days
following the date as to which any such Reimbursement Obligation arises,
provided, that any such payment obligation (or portion thereof) shall not arise
and shall be deferred until such time or times as Executive shall actually have
received payment from the Additional Incentive Bonus and any Net Recovery Amount
an amount that, in the aggregate, is in excess of the full Additional Bonus
Amount and all legal fees then due in connection with the Kroger Claim have been
paid or reimbursed. Any excess recovery in the Kroger Claim beyond the amount of
the Reimbursement Obligation shall be retained by Executive.
(c) Amounts Payable to the Company. Any amount payable by Executive
to the Company pursuant to this Section 4 shall be net of: (x) any tax detriment
of any nature whatsoever suffered by Executive with respect to receipt of the
Additional Incentive Bonus, or portion thereof, the payment of the Reimbursement
Obligation and/or the receipt of any funds giving rise to the Reimbursement
Obligation, including without limitation, the tax detriments set forth in
Schedule I attached hereto (it being the intent of the parties that Executive be
in the same net after-tax position as if Executive (i) could deduct one-hundred
percent (100%) of the amount reimbursed to the Company in the year such
reimbursement is made and (ii) was not subject to any withholding, employment or
other incremental taxes from having received an excess payment from the Company
or Kroger Co., as the case may be, that is thereafter paid to the Company) and
(y) without duplication of any amounts already deducted in the calculation, all
amounts then owed, or which Executive in her good faith believes are owed, by
the Company to Executive pursuant to Section 3(1) of the Employment Agreement.
5. Amendment to Section 2(a) of Employment Agreement. The last line of
Section 2(a) of the Employment Agreement shall be amended to delete the words
"from the Board and." It is understood that Executive shall not be required to
resign from the Company s Board of Directors as a result of termination of her
employment prior to December 5, 2002 unless her employment simultaneously or
previously has been terminated by the Company for "Cause."
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6. Payments. All amounts payable by the Company to Executive pursuant
to this Amendment No. 1 (including without limitation any amounts due as a
result of the application of Section 5(e) of the Employment Agreement) shall be
paid in a lump sum in cash, by wire transfer to an account designated by
Executive.
7. Conduct of Claim Against Kroger; Settlement. The Company
acknowledges and agrees that Executive shall have the full right to pursue her
claim against The Kroger Co. and its affiliates and to fully control any
litigation she institutes and the defense of any counterclaim arising in
connection therewith, in such manner as Executive may determine in her sole
discretion. The Company further acknowledges and agrees that Executive has and
shall have no duty to the Company to enter into or refrain from entering into
any proposed settlement agreement, or to agree to or reject any particular term
or condition thereof, and that Executive may enter into a settlement agreement
with The Kroger Co. and its affiliates on terms and conditions acceptable to the
Executive, or reject any proposed settlement in her sole discretion.
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Schedule 1
TAX DETRIMENTS
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Detriments to be taken into account shall include:
(a) any decrease in personal itemized deductions resulting from an
increase in Executive's adjusted gross income ("AGI") (including the 7.5%
(medical), 2% (miscellaneous) and 3% (general) AGI adjustments);
(b) Executive's portion of the increased Medicare premium resulting
from the receipt of the Additional Incentive Bonus and the Net Recovery Amount;
and
(c) any increased alternative minimum tax ("AMT") resulting from the
treatment of state income taxes claimed as a deduction by Executive in respect
of the Additional Incentive Bonus and the Net Recovery Amount;
(d) the amount, of the Reimbursement Obligation disallowed as a
deduction or as a result of the 2% floor imposed on miscellaneous itemized
deductions in the year in which it is paid;
(e) any increased AMT resulting from the treatment of the
Reimbursement Obligation for AMT purposes;
(f) any detriment related to the time value of money determined on
the basis of an 8% annual discount rate resulting from a carryover or carryback,
if any, of any portion of such Reimbursement Obligation that is not currently
deductible in the year in which it is paid;
(g) any detriment resulting from the application of any limitation
imposed upon the deductibility of the Reimbursement Obligation for state law
purposes in the year in which it is paid;
(h) any detriment resulting from differences in tax brackets applied
to Executive's taxable income for the taxable year that the Additional Incentive
Bonus is received versus the tax brackets applied to Executive's taxable income
for the taxable year that the Reimbursement Obligation is claimed as a
deduction; and
(i) any detriment resulting from a change in either Federal, state,
or local tax laws, including changes in the tax rates.
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