RITE AID CORPORATION RESTRICTED
STOCK AND STOCK OPTION AWARD AGREEMENT
THIS AGREEMENT, made as of the 5th day of December, 1999 (the
"Effective Date"), by and between (the "Company") and Xxxx X. Xxxxxxx (the
"Executive").
W I T N E S S E T H:
WHEREAS, the Company and the Executive have entered into an
employment agreement, dated as of the Effective Date (the "Employment
Agreement"), pursuant to which the Executive will serve as President and
Chief Operating Officer of the Company; and
WHEREAS, the Employment Agreement provides that, effective as
of the Effective Date, the Company shall grant to the Executive the Option
and the Restricted Stock (as hereinafter defined), subject to the terms and
conditions of this Agreement and the Employment Agreement.
NOW, THEREFORE, in consideration of the covenants and
agreements herein contained, the parties hereto agree as follows:
1. Grant of Option and Restricted Stock . (a) The Company
hereby grants to the Executive the right and option (the "Option") to
purchase, on the terms and conditions set forth herein, subject however to
the acceleration and exercise provisions of Section 5 of the Employment
Agreement and all other applicable provisions of the Employment Agreement,
all or any part of an aggregate of 2,000,000 shares of the Company's common
stock, par value $1.00 per share ("Common Stock") (such Common Stock, as
adjusted hereunder, being referred to as the "Option Shares"). The purchase
price per share of the Option Shares shall be equal to the lesser of (A)
the average of the closing prices of the Common Stock on the New York Stock
Exchange ("NYSE") over the 20 consecutive trading days immediately
preceding the Effective Date and (B) the closing price of the Common Stock
on the NYSE on the Effective Date (or, if the Effective Date is not a
trading day, the trading day immediately preceding the Effective Date)
(such price, as adjusted hereunder, being referred to as the "Option
Price"). The number of Option Shares and the Option Price shall be subject
to adjustment as provided in Section 8 hereof. Subject to earlier
termination as provided in the Employment Agreement, the term of the Option
(the "Term") shall commence on the Effective Date and terminate on the
tenth anniversary of the Effective Date. The Company shall at all times
during the Term of the Option reserve for issuance a sufficient number of
shares of Common Stock to permit exercise of the Option in full.
(b) The Company hereby grants to the Executive, on the
terms and conditions set forth herein, subject however to the acceleration
and forfeiture provisions of the Employment Agreement and all other
applicable provisions of the Employment Agreement, an aggregate of 200,000
shares of restricted Common Stock (the "Restricted Stock"). The Restricted
Stock and any interest therein, may not be sold, assigned, transferred,
pledged, hypothecated or otherwise disposed of, except by will or the laws
of descent and distribution, prior to the lapse of restrictions provided
for in Section 3 hereof. Except as otherwise provided herein, the Executive
shall possess all incidents of ownership of the Restricted Stock granted
hereunder, including the right to receive dividends with respect to such
Restricted Stock and the right to vote such Restricted Stock.
(c) The Company represents and warrants to Executive that
on or prior to the Effective Date all actions necessary to exempt the grant
of the Option and the Restricted Stock under Rule 16b-3(d) under the
Securities Exchange Act of 1934, as amended, have been taken by the
Company.
(d) The Company represents and warrants to Executive that
the issuance of the Option and the Restricted Stock will be made pursuant
to an available exemption from registration and qualification under all
applicable federal and state securities or Blue Sky laws.
2. Registration of Option Shares and Restricted Stock; Listing
Obligations. (a) As soon as practicable after the Effective Date, the
Company shall, at its sole expense, cause the Common Stock subject to the
Option and the resale of the Restricted Stock to be registered under the
Securities Act of 1933, as amended (the "Securities Act") and registered or
qualified under applicable state securities laws, so that the Common Stock
issuable upon exercise of the Option and the Restricted Stock shall be
freely tradeable. The Company shall thereafter use its best efforts to
maintain the continuing effectiveness of such registration and
qualification for so long as the Executive or any Permitted Transferee (as
hereinafter defined) holds (i) the Option (or any portion thereof), (ii)
any of the Option Shares acquired upon exercise thereof or (iii) any of the
Restricted Stock (whether or not the restrictions thereon have lapsed), or
until such earlier date as counsel to the Company, reasonably acceptable to
Executive, provides the Company a written opinion (a copy of which shall
promptly be provided to Executive) satisfactory to Executive to the effect
that all Option Shares theretofore issued and subsequently issuable upon
exercise of the Option and all shares of Restricted Stock may otherwise be
freely sold under United States federal and other applicable law without
regard to volume limitations or other conditions.
(b) As soon as practicable after the Effective Date, the
Company shall, at its sole expense, cause the Common Stock subject to the
Option and the Restricted Stock to be listed on all exchanges on which the
Common Stock is from time to time listed. The Company shall thereafter use
its best efforts to maintain the continued listing of such Common Stock and
Restricted Stock for so long as the Executive or any Permitted Transferee
holds (i) the Option (or any portion thereof), (ii) any of the Option
Shares acquired upon exercise thereof or (iii) any of the Restricted Stock
(whether or not the restrictions thereon have lapsed).
3. Vesting and Exercisability.
(a) Regular Vesting Schedule. Subject to the provisions
of this Agreement and except as provided in Section 5 of the Employment
Agreement, the Option shall become vested and exercisable, and all
restrictions shall lapse with respect to the Restricted Stock, in each
case, in thirty-six (36) equal monthly installments commencing on the date
which is one month following the Effective Date.
(b) Acceleration of Vesting and Lapse of Restriction.
Upon the occurrence of a Change in Control of the Company (as defined in
Appendix A hereto), the Option shall become immediately vested and fully
exercisable and all restrictions on the transfer of the Restricted Stock
shall immediately lapse in full.
(c) Except as provided in Section 5 of the Employment
Agreement, any portion of the Option that has become vested and exercisable
shall remain vested and exercisable until the end of the full ten-year
Term of the Option.
(d) Certain Definitions. For purposes of this Agreement,
all capitalized terms not otherwise defined herein shall have the
respective meanings ascribed to such terms under the Employment Agreement.
4. Method of Exercising Option; Gross-Up; Section 83(b)
Election.
(a) The Option may be exercised from time to time, in
whole or in part, as to that portion of the Option that has from time to
time become vested and exercisable. Full payment for the Option Shares
purchased shall be made at the time of any exercise under this Agreement.
The option price shall be payable to the Company either (i) in United
States dollars in cash or by check, bank draft, or postal or express money
order, or (ii) through the delivery of shares of Common Stock owned by the
Executive for at least six months prior to the date of exercise having a
Fair Market Value equal to the full Option Price, or (iii) by a combination
of (i) and (ii) above. For purposes of this Agreement "Fair Market Value"
shall mean the closing price of the Common Stock on the NYSE on the trading
day immediately prior to the date of exercise or if the Common Stock is not
then listed on the NYSE, Fair Market Value shall be as determined pursuant
to good faith negotiations between the Executive and the Company. At the
Option holder's discretion, subject to reasonable procedures adopted by the
Company, the Option may also be exercised on a cashless basis through a
broker, whereby irrevocable instructions are delivered to the broker to
sell that number of shares equal in value to the aggregate Option Price of
the Option Shares with respect to which the Option is then being exercised
and pay the proceeds to the Company. Subject to the terms and conditions
hereof, the Option shall be exercisable by notice to the Company on the
form provided by the Company upon request of the Executive. In the event
the Option is being exercised by any person or persons other than the
Executive, the notice shall be accompanied by proof, satisfactory to the
Company, of the right of such person or persons to exercise such right
under this Agreement.
(b) At the time of exercise of the Option, the Executive
shall pay to the Company such amount as may be necessary to satisfy the
Company's obligation to withhold Federal, state or local income or other
taxes incurred by reason of such exercise (i) by tendering to the Company a
check in the amount of such withholding, (ii) by electing to have withheld
upon exercise shares of Common Stock having an aggregate Fair Market Value
equal to the amount of such tax withholding or (iii) by a combination of
(i) and (ii).
(c) The Executive hereby agrees to make an election
pursuant to Section 83(b) of the Code (the "Election") within the thirty
(30) day period commencing on the Effective Date to include the value of
the Restricted Stock as of the Effective Date in the Executive's gross
income for federal income tax purposes. In connection with the Election,
the Company shall, within the time period prescribed by law for withholding
and/or payment of estimated or other taxes by reason of such inclusion,
make an additional payment (the "Restricted Stock Gross-Up Payment") to the
Executive in an amount such that, after giving effect to the imposition of
all applicable federal, state and local income, employment and any other
taxes or impositions on such payment (the "Aggregate Tax"), the Executive
retains a net amount equal to the aggregate amount of all federal, state
and local income, employment and any other taxes or impositions incurred by
Executive by reason of such inclusion. For purposes of determining the
amount of the Restricted Stock Gross-Up Payment, Executive shall be deemed
to pay federal income, employment and any other tax for his taxable year in
which such inclusion occurs and his taxable year in which such Restricted
Stock Gross-Up Payment is made at the highest applicable marginal rate of
federal, state and local income, employment or other applicable taxation in
such year. The amount of the Restricted Stock Gross-Up Payment shall be
determined by the Company's outside auditor, who will timely furnish the
Company and Executive with a written statement (together with full
supporting and other relevant material) setting forth the amount of the
required Restricted Stock Gross-Up Payment. The Executive shall promptly
notify the Company of his filing of the Election. If it is established
pursuant to a final determination of a court or an Internal Revenue Service
proceeding that the Aggregate Tax is more or less than was initially taken
into account hereunder, then each of the Company and the Executive agree to
pay to the other party, as applicable, an amount (the "Make Up Amount")
such that the amount of the Restricted Stock Gross-Up Payment finally
retained by the Executive after giving effect to the Make Up Amount is
equal to the amount contemplated by the second sentence of this paragraph
(c).
5. Issuance of Option Shares. As promptly as practicable after
receipt of such written notification of exercise and full payment of the
Option Price and any required tax withholding, the Company shall issue or
transfer to the Executive the number of Option Shares with respect to which
the Option has been exercised (less shares withheld in satisfaction of tax
withholding obligations, if any), and shall deliver to the Executive a
certificate or certificates therefor, registered in the Executive's name.
6. Non-Transferability of Option. The Option is not
transferable by the Executive otherwise than (i) to or from a Permitted
Transferee, (ii) to a designated beneficiary upon death or (iii) by will or
the laws of descent and distribution, and is exercisable during the
Executive's lifetime only by the Executive or a Permitted Transferee (or,
in the event of the Executive's or a Permitted Transferee's adjudicated
incapacity, the Executive's or Permitted Transferee's personal
representative). No other assignment or transfer of all or any part of the
Option, or of the rights represented thereby, whether voluntary or
involuntary, by operation of law or otherwise, shall vest in the assignee
or transferee any interest or right herein whatsoever and no assignment or
transfer of all or any part of the Option to a Permitted Transferee shall
be given effect unless such Permitted Transferee acknowledges in a writing
satisfactory to the Company that the Option (and any Option Shares acquired
pursuant thereto) remains subject to the provisions of this Agreement and
the Employment Agreement. For purposes of this Agreement, "Permitted
Transferee" shall mean (i) any member of Executive's immediate family and
(ii) any living trust or other entity established by Executive or any
Permitted Transferee for estate planning purposes. By way of clarification,
transfers of the Option shall be permitted from any Permitted Transferee to
Executive or between Permitted Transferees.
7. No Rights as Shareholder with Respect to Option. Neither the
Executive nor any transferee of the Option shall have any of the rights of
a shareholder with respect to any Option Shares until such time as the
Option shall have been duly exercised as provided herein, and no adjustment
shall be made for cash distributions in respect of such Option Shares for
which the record date is prior to such date.
8. Adjustments. In the event of any change in the outstanding
shares of Common Stock by reason of any stock dividend or split,
recapitalization, merger, consolidation, spinoff, combination or exchange
of shares or other corporate change, or any distributions to common
shareholders other than regular cash dividends, the compensation committee
(the "Compensation Committee") of the Board of Directors of the Company
shall make such substitutions in or adjustments to the number and/or kind
of shares of Common Stock or other property subject to, and the Option
Price of, the Option as shall be equitable under the circumstances of such
change.
9. Compliance with Law. Notwithstanding any of the provisions
hereof, the Executive hereby agrees that Executive shall not exercise the
Option, and that the Company shall not be obligated to issue or transfer
any shares to the Executive hereunder, if the exercise thereof or the
issuance or transfer of such shares shall constitute a violation of any
provisions of any applicable law or regulation of any governmental
authority; provided that nothing in this Section 9 shall be deemed to limit
the Company's liability hereunder for any act or omission which would cause
the issuance or transfer of such shares to give rise to such a violation.
10. Acquisition for Purpose of Investment. The Executive hereby
represents and warrants that the Restricted Stock and any Option Shares
acquired pursuant to the exercise of the Option are or will be acquired for
his own account solely for the purpose of investment and not with a view
to, or for sale in connection with, any distribution thereof in violation
of the Securities Act of 1933, as amended (the "Securities Act"). The
Executive hereby acknowledges that to the extent that from time to time the
Restricted Stock and Option Shares have not been registered under the
Securities Act, such Restricted Stock and Option Shares may be sold or
disposed of by the Executive in the absence of such registration only
pursuant to an exemption from the registration requirements of the
Securities Act, provided that nothing in this Section 10 shall be deemed to
limit the Company's obligations under Section 2.
11. Legend; Lapse of Restrictions; Forfeiture.
(a) The Executive acknowledges that the sale, transfer
and other disposition of the Restricted Stock are subject to the
restrictions set forth in Section 1(b) hereof. The Executive agrees to the
placement on certificates representing the Restricted Stock of a legend
(the "Legend"), substantially as set forth below:
This certificate and the shares of stock represented hereby are
subject to the terms and conditions, including forfeiture
provisions and restrictions against transfer (the
"Restrictions"), contained in a Restricted Stock and Stock
Option Award Agreement and an Employment Agreement, each dated
as of December 4, 1999, between the registered owner and Rite
Aid Corporation. Any attempt to dispose of these shares in
contravention of the Restrictions, including by way of sale,
assignment, transfer, pledge, hypothecation or otherwise, shall
be null and void and without effect.
(b) Upon each lapse of restrictions relating to the
shares of Restricted Stock granted hereunder, the Company shall promptly
issue to the Executive or the Executive's personal representative a stock
certificate representing a number of shares of Common Stock, free of the
restrictive legend described in Section 11(a), equal to the number of
shares of Restricted Stock with respect to which such restrictions have
lapsed. If certificates representing such Restricted Stock shall have
theretofore been delivered to the Executive, such certificates shall be
returned to the Company, complete with any necessary signatures or
instruments of transfer prior to the issuance by the Company of such
unlegended shares of Common Stock.
(c) Until such time as the Company has caused the Option
Shares and Restricted Stock to be registered under the Securities Act, each
share of Restricted Stock delivered to the Executive and each Option Share
acquired pursuant to the exercise of the Option shall bear an additional
legend, substantially as set forth below:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"). These securities have been acquired for
investment and not with a view toward distribution or resale,
and may not be sold, offered for sale, transferred, assigned or
pledged in the absence of an effective registration statement
for such shares under the Securities Act and all applicable
state securities laws or an exemption from such registration
requirements.
(d) Upon the registration of the Option Shares and
Restricted Stock, as the case may be, the Company shall promptly issue to
the Executive or the Executive's personal representative a stock
certificate representing a number of shares of Common Stock, free of the
restrictive legend described in Section 11(c), equal to the number of
shares of Restricted Stock with respect to which such restrictions have
lapsed or Option Shares acquired pursuant to the exercise of the Option. If
certificates representing such Restricted Stock or Option Shares shall have
theretofore been delivered to the Executive, such certificates shall be
returned to the Company, complete with any necessary signatures or
instruments of transfer prior to the issuance by the Company of such
unlegended shares of Common Stock.
12. Notices. All notices and other communications under this
Agreement shall be in writing and shall be given by hand delivery to the
other party or by registered or certified mail, return receipt requested,
postage prepaid, or by a nationally recognized overnight courier addressed
as follows:
If to the Executive:
Xxxx Xxxxxxx
Xxxx X. Xxxxxxx
0000 X.X. Xxxx Xxxxxx
Xxxxxxxx, Xxxxxx 00000
If to the Company:
Rite Aid Corporation
00 Xxxxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxxxx 00000
Attention: General Counsel
or to such other address as either party furnishes to the other in writing
in accordance with this Section 12. Notices and communications shall be
effective when actually received by the addressee.
13. Successors. This Agreement shall be binding upon the heirs,
executors, administrators and successors of the parties hereto. No rights
or obligations of the Company under this Agreement may be assigned or
transferred except that the Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business and/or assets of the Company expressly
to assume and agree to perform this Agreement in the same manner and to the
same extent that the Company would have been required to perform it if no
such succession had taken place. As used in this Agreement, the "Company"
shall mean both the Company as defined above and any successor to its
business and/or assets (by merger, purchase or otherwise) which executes
and delivers the agreement provided for in this Section 13 or which
otherwise becomes bound by all the terms and provisions of this Agreement
by operation of law or otherwise.
14. No Right to Employment. The granting of the Option and the
Restricted Stock shall not be construed as granting Executive any right to
continued employment by the Company or its subsidiaries. Subject to the
terms of the Employment Agreement, the right of the Company and its
subsidiaries to terminate Executive's employment at any time and for any
reason, is specifically reserved.
15. Governing Law. This Agreement shall be construed and
interpreted in accordance with the laws of the State of Delaware, without
regard to its rules relating to conflicts of laws.
16. Entire Agreement. This Agreement and the relevant
provisions of the Employment Agreement comprise the entire agreement
between the parties hereto with respect to the subject matter hereof, and
may be modified or terminated only by the written consent of the parties
hereto.
17. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, and said
counterparts shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to due authorization, the Company has caused
this Agreement to be executed in its name on its behalf, all as of the day
and year first above written.
RITE AID CORPORATION
_____________________________
Name: Xxxxxxx Xxxxx
Title: Chairman of the Board
_____________________________
Xxxx Xxxxxxx
APPENDIX A
A "Change in Control of the Company" shall be deemed to have
occurred if, as the result of a single transaction or a series of
transactions, the event set forth in any one of the following paragraphs
shall have occurred:
(1) any Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company representing 25%
or more of the combined voting power of the Company's then
outstanding voting securities; or
(2) Incumbent Directors cease at any time and for any
reason to constitute a majority of the number of directors then
serving on the Board. "Incumbent Directors" shall mean directors who
either (A) are directors of the Company as of the Effective Date or
(B) are elected, or nominated for election, to the Board with the
affirmative votes of at least a majority of the Incumbent Directors
at the time of such election or nomination (but shall not include an
individual whose election or nomination is in connection with an
actual or threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors to the
Board); or
(3) there is consummated a merger or consolidation of the
Company or any direct or indirect subsidiary of the Company with any
other corporation, other than (i) a merger or consolidation which
would result in the voting securities of the Company outstanding
immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity or any parent thereof) at
least 60% of the combined voting power of the securities of the
Company or such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation as appropriate, or
(ii) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no
Person is or becomes the Beneficial Owner, directly or indirectly, of
securities of the Company representing 25% or more of the combined
voting power of the Company's then outstanding voting securities; or
(4) the stockholders of the Company approve a plan of
liquidation or dissolution of the Company or an agreement for the
sale or disposition by the Company of all or substantially all of the
Company's assets, other than a sale or disposition by the Company of
all or substantially all of the Company's assets to an entity, at
least 60% of the combined voting power of the voting securities of
which are owned by stockholders of the Company in substantially the
same proportions as their ownership of the Company immediately prior
to such sale.
"Affiliate" shall have the meaning set forth in Rule 12b-2 under Section 12
of the Exchange Act.
"Beneficial Owner" shall have the meaning set forth in Rule 13d-3 under the
Exchange Act, except that a Person shall not be deemed to be the Beneficial
Owner of any securities which are properly filed on a Form 13G.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
"Person" shall have the meaning given in Section 3(a)(9) of the Exchange
Act, as modified and used in Sections 13(d) and 14(d) thereof, except that
such term shall not include (i) the Company or any of its subsidiaries,
(ii) a trustee or other fiduciary holding securities under an employee
benefit plan of the Company or any of its subsidiaries, (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company.
