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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material under §240.14a-12
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RITE AID CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Significantly refreshing our Board: Over the past two years, seven directors have retired and six new directors have joined the Board. As a result, six of our eight director nominees have been on the Rite Aid Board for less than two years and bring fresh perspectives to the boardroom. Following these changes, half of our director nominees are racially or ethnically diverse and thirty-eight percent of our director nominees are women. In addition to enhancing our Board’s racial, ethnic and gender diversity, these changes bring a diversity of thought and experience to the Board.
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Hiring a new CEO: As we have said before, one of the Board’s most important tasks is choosing the Company’s Chief Executive Officer. After a thorough and deliberate search process, we announced Heyward Donigan’s appointment as CEO in August 2019. The Board determined that Ms. Donigan’s strong senior executive experience, proven leadership capabilities and consistent track record of driving profitable growth, as well as her broad healthcare knowledge and digital technology expertise, would be invaluable as the Company works to deliver on the full potential of our business and create additional long-term value for our stockholders, associates, customers and patients. Nine months into Ms. Donigan’s tenure, we remain confident that she is the right person to lead the Company in this next chapter.
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Enhancing our corporate governance and ESG practices and disclosures: We have also continued to evaluate and take steps to enhance certain corporate governance practices. For example, as a result of further stockholder engagement and evaluation of trends and developments, we recently amended the Company’s By-Laws to reduce the threshold to permit special meetings of the stockholders of the Company to be called by stockholders holding at least 10% of the Company’s common stock. In addition, we have made significant progress in our environmental, social and governance efforts. Our initiatives include an ongoing commitment to cleaner, less toxic ingredients in our products and investing in a product assortment that aligns with whole being health.
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Sincerely,
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Bruce G. Bodaken
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Chairman of the Board
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Becoming the PBM of choice for middle market employers and regional health plans: EnvisionRxOptions (soon to be Elixir) will offer curated solutions that improve its competitive positioning and deliver high quality retail and mail-order pharmacy service while demonstrating superior clinical outcomes. Now the only payor-agnostic PBM with a retail pharmacy footprint, EnvisionRxOptions is poised for strong growth and improved profits.
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Unlocking the value of Rite Aid’s pharmacists: We are doubling down on our pharmacy business and renewing our commitment to leveraging the power of our trusted pharmacists to revitalize the Company’s position as a leader in meeting the health and wellness needs of customers. Rite Aid’s innovations across all of its retail and mail-order pharmacy channels, including its PBM and suite of pharmacy service solutions, will enable Rite Aid pharmacists to better consult with our customers and showcase a targeted array of over-the-counter, clinical, and holistic health and wellness solutions so that our customers can be beyond healthy—so that they can thrive.
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Revitalizing Rite Aid’s retail and digital experience: As consumers increasingly seek a balance between traditional health and holistic wellness, Rite Aid will be a destination for mind, body and spirit wellness. To introduce new generations to our iconic brand, Rite Aid is elevating its in-store experience, increasing personalized digital engagement and refreshing our merchandise to include a wide assortment of clean, modern products with attributes that resonate with more consumers.
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Sincerely,
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Heyward Donigan
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President, Chief Executive Officer and Director
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What:
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Our 2020 Annual Meeting of Stockholders
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When:
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July 8, 2020 at 9:00 a.m., Eastern Time
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Where:
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This year’s meeting is a virtual stockholders meeting at www.virtualshareholdermeeting.com/RAD2020
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Why:
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At this Annual Meeting, stockholders will be asked to:
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1.
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Elect eight directors to hold office until the 2021 Annual Meeting of Stockholders and until their respective successors are duly elected and qualified;
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2.
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Ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm;
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3.
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Approve, on an advisory basis, the compensation of our named executive officers as presented in the proxy statement;
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4.
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Approve the adoption of the Rite Aid Corporation 2020 Omnibus Equity Incentive Plan; and
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5.
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Transact such other business as may properly come before the Annual Meeting or any adjournment or postponement of the Annual Meeting.
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RECORD DATE:
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The close of business on May 11, 2020 has been fixed as the record date for determining those Rite Aid stockholders entitled to vote at the Annual Meeting. Accordingly, only stockholders of record at the close of business on that date will receive this notice of, and be eligible to vote at, the Annual Meeting and any adjournment or postponement of the Annual Meeting. The above items of business for the Annual Meeting are more fully described in the proxy statement accompanying this notice.
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PROXY VOTING:
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Your vote is important. Please read the proxy statement and the instructions on the enclosed proxy card and then, whether or not you plan to attend the virtual Annual Meeting, and no matter how many shares you own, please submit your proxy promptly by telephone or via the Internet in accordance with the instructions on the enclosed proxy card, or by completing, dating and returning your proxy card in the envelope provided. This will not prevent you from voting at the virtual Annual Meeting. It will, however, help to assure a quorum and to avoid added proxy solicitation costs.
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By order of the Board of Directors
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Heyward Donigan
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President, Chief Executive Officer and Director
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Camp Hill, Pennsylvania
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May 26, 2020
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1
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2
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Proposal No. 1: Elect eight directors to hold office until the 2021 Annual Meeting of Stockholders and until their respective successors are duly elected and qualified;
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Proposal No. 2: Ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm;
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Proposal No. 3: Approve, on an advisory basis, the compensation of our named executive officers as presented in this proxy statement; and
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Proposal No. 4: Approve the adoption of the Rite Aid Corporation 2020 Omnibus Equity Incentive Plan.
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Submitting a Proxy by Telephone: You can submit a proxy for your shares by telephone until 11:59 p.m. Eastern Time on July 7, 2020, by calling the toll-free telephone number on the enclosed proxy card, 1-800-690-6903. Telephone proxy submission is available 24 hours a day. Easy-to-follow voice prompts allow you to submit a proxy for your shares and confirm that your instructions have been properly recorded. Our telephone proxy submission procedures are designed to authenticate stockholders’ identities by using individual control numbers.
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Submitting a Proxy via the Internet: You can submit a proxy for your shares via the Internet until 11:59 p.m. Eastern Time on July 7, 2020, by accessing the website listed on the enclosed proxy card, www.proxyvote.com, and following the instructions you will find on the website. Internet proxy submission is available 24 hours a day. As with telephone proxy submission, you will be given the opportunity to confirm that your instructions have been properly recorded.
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Submitting a Proxy by Mail: If you choose to submit a proxy for your shares by mail, simply mark the enclosed proxy card, date and sign it, and return it in the postage paid envelope provided.
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3
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4
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5
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Delivering to the Secretary a written notice of revocation, dated later than the proxy, before the vote is taken at the Annual Meeting;
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Delivering to the Secretary an executed proxy bearing a later date, before the vote is taken at the Annual Meeting;
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Submitting a proxy on a later date by telephone or via the Internet (only your last telephone or Internet proxy will be counted), before 11:59 p.m. Eastern Time on July 7, 2020; or
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Attending the virtual Annual Meeting and voting (your attendance at the Annual Meeting, in and of itself, will not revoke the proxy).
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6
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7
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8
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FOR
✔ |
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THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF EACH OF THE NOMINEES LISTED ABOVE.
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9
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Name
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Age
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Position with Rite Aid
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Year First
Became Director |
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Heyward Donigan
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59
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President, Chief Executive Officer and Director
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2019
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Bruce G. Bodaken
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68
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Chairman
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2013
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Elizabeth ‘Busy’ Burr
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58
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Director
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2019
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Robert E. Knowling, Jr.
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64
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Director
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2018
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Kevin E. Lofton
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65
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Director
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2013
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Louis P. Miramontes
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65
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Director
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2018
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Arun Nayar
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69
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Director
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2018
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Katherine B. Quinn
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55
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Director
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2019
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Director Tenure*
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Board Racial and Ethnic Diversity*
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Board Gender Diversity*
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*
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The compositions depicted illustrate calculations effective following the Annual Meeting.
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10
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Name
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Age
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Director
Since |
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Current/
Former CEO |
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Management/
Business Operations |
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Retail
Industry |
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Healthcare
Industry |
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Finance/
Accounting |
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Board/
Corporate Governance |
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Bruce G. Bodaken
Chairman |
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68
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2013
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✔
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✔
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✔
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✔
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Elizabeth ‘Busy’ Burr
Director |
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58
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2019
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✔
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✔
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✔
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✔
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✔
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✔
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Heyward Donigan
President, Chief Executive Officer and Director |
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59
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2019
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✔
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✔
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✔
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✔
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Robert E. Knowling, Jr.
Director |
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64
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2018
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✔
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✔
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✔
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Kevin E. Lofton
Director |
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65
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2013
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✔
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✔
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✔
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|
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✔
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Louis P. Miramontes
Director |
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65
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2018
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✔
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|
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✔
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✔
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Arun Nayar
Director |
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69
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2018
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✔
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|
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✔
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✔
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Katherine B. Quinn
Director |
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55
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2019
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✔
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✔
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✔
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✔
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11
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Bruce G. Bodaken
Age: 68 Director Since: 2013 Committees: • Nominating and Governance • Executive (Chair) |
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Mr. Bodaken served as Chairman and Chief Executive Officer of Blue Shield of California from 2000 through 2012. Previously, Mr. Bodaken served as President and Chief Operating Officer of Blue Shield of California from 1995 to 2000, and as Executive Vice President and Chief Operating Officer from 1994 to 1995. Prior to joining Blue Shield of California, Mr. Bodaken served as Senior Vice President and Associate Chief Operating Officer of F.H.P., Inc., a managed care provider, from 1990 to 1994 and held various positions at F.H.P. from 1980 to 1990. Mr. Bodaken is currently a director and member of the compensation committee of iRhythm Technologies, Inc. Previously, Mr. Bodaken was a director on the board of WageWorks, Inc. and a member of its audit committee.
Mr. Bodaken brings to the Board in-depth knowledge of the health insurance and managed care industries and more than 20 years of executive leadership skills. |
Elizabeth ‘Busy’ Burr
Age: 58 Director Since: 2019 Committees: • Audit |
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Ms. Burr was named president and chief commercial officer of Carrot Inc. on November 6, 2019. Carrot Inc. is a digital healthcare company which offers mobile technology solutions, coaching, and support services for users to quit smoking. Prior to Carrot Inc., Ms. Burr served as the chief innovation officer and vice president of healthcare trend and innovation at Humana where she was responsible for driving the design, build, and adoption of new product platforms in digital health, provider experience, and telemedicine to improve health outcomes, create superior member experiences, and improve healthcare costs. She also founded Humana’s strategic investing practice, Humana Health Ventures. Prior to joining Humana in 2015, Ms. Burr was managing director of Citi Ventures and led large-scale business transformation efforts as the global head of Citi’s Business Incubation Function—DesignWorks. Earlier in her career, Ms. Burr spent seven years in investment banking at Morgan Stanley and Credit Suisse First Boston and previously served as vice president of global brand management at Gap, Inc. Ms. Burr holds an MBA from Stanford University and a bachelor’s degree in economics from Smith College. Ms. Burr serves on the Boards of Mr. Cooper Group and Satellite Healthcare.
Ms. Burr brings to the Board extensive experience in the health industry, innovation, business strategy, and brand management. Her experience and insights in these areas are directly relevant to the Company’s business. |
12
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Heyward Donigan
Age: 59 Director Since: 2019 Committees: • Executive |
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Ms. Donigan, President, Chief Executive Officer and Director, has been Chief Executive Officer since August 2019 and President and Chief Executive Officer since February 2020. Before joining Rite Aid, Ms. Donigan was president and chief executive officer of Sapphire Digital, which designs and develops omni-channel platforms that help consumers choose their best fit healthcare providers. In that role, Ms. Donigan led Sapphire Digital’s strategy and operations to record growth and consumer engagement. Prior to joining Sapphire Digital in 2015, Ms. Donigan was the president and chief executive officer of ValueOptions, Inc., then the nation’s largest independent behavioral health improvement company, where she drove innovation through disciplined execution and grew company revenues to over $1 billion. Previously, Ms. Donigan served as executive vice president and chief marketing officer at Premera Blue Cross, where she was responsible for driving profitable growth across the individual, small group, mid-market, and national account businesses and helped the company achieve record growth and profits. Earlier in her career, Ms. Donigan served as senior vice president of all operations at Cigna Healthcare. She also held executive roles at General Electric, Empire BCBS, and U.S. Healthcare, and previously served on the Board of Directors at several public companies, including Kindred Healthcare, NxStage Medical, Inc., and SI-BONE, Inc. Ms. Donigan holds a master’s of public administration from New York University. She graduated with a bachelor’s degree in English from the University of Virginia.
Ms. Donigan brings to the Board strong senior executive experience, proven leadership capabilities, and a consistent track record of driving profitable growth, as well as broad healthcare knowledge and digital technology expertise. |
Robert E. Knowling, Jr.
Age: 64 Director Since: 2018 Committees: • Compensation (Chair) |
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Mr. Knowling is currently Chairman of Eagles Landing Partners, which specializes in helping senior management formulate strategy, lead organizational transformations, and re-engineer businesses. Mr. Knowling also serves as an advisor-coach to chief executive officers. Mr. Knowling previously served as Chief Executive Officer of Telwares, a provider of telecommunications expense management solutions, from 2005 to 2009. From 2001 to 2005, Mr. Knowling was Chief Executive Officer of the New York City Leadership Academy, an independent nonprofit corporation created by Chancellor Joel I. Klein and Mayor Michael R. Bloomberg that is chartered with developing the next generation of principals in the New York City public school system. From 2001 to 2003, Mr. Knowling was Chairman and Chief Executive Officer of SimDesk Technologies, Inc. Prior to this, Mr. Knowling was Chairman, President and Chief Executive Officer of Covad Communications, a Warburg Pincus private equity-backed start-up company. Mr. Knowling currently serves on the board of directors of K12 Inc., Roper Technologies Inc., and Stream Companies. Mr. Knowling previously served as a director of Convergys Corporation until 2018, Ariba, Inc. until 2012, Heidrick & Struggles International, Inc. until 2015, Hewlett-Packard Company until 2005, and The Immune Response Corporation until 2005.
Mr. Knowling brings to the Board extensive experience in executive management and leadership roles, including experience leading companies through periods of high growth and organizational turnaround. In addition, his service on other boards of directors of a number of publicly-traded companies enables Mr. Knowling to share insights with the Board regarding corporate governance best practices. |
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13
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Kevin E. Lofton
Age: 65 Director Since: 2013 Committees:
• Nominating and Governance
(Chair)
• Executive
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Mr. Lofton is the Chief Executive Officer of Chicago-based CommonSpirit Health (“CSH”), one of the largest health delivery systems in the United States. The $29 billion CSH was formed in February 2019 following the merger between Catholic Health Initiatives (“CHI”) and Dignity Health. Mr. Lofton is scheduled to retire June 30, 2020. Mr. Lofton joined CHI in 1998 and served as CEO from 2003 until 2019. Mr. Lofton previously served as CEO of UAB Hospital and Howard University Hospital. Mr. Lofton is the Lead Independent Director, Chairman of the nominating and governance committee, and a member of the audit and compensation committees of Gilead Sciences, Inc. He previously served as chairman of the board of the American Hospital Association.
Mr. Lofton brings to the Board an in-depth knowledge and understanding of the healthcare industry and valuable executive leadership skills from senior management and leadership roles in healthcare systems and hospitals. He is recognized for his leadership in eliminating health disparities and creating healthy communities. |
Louis P. Miramontes
Age: 65 Director Since: 2018 Committees: • Audit (Chair)
• Compensation
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Mr. Miramontes worked at KPMG LLP from 1976 to 2014, where he served in many leadership roles, including Managing Partner of the San Francisco office and Senior Partner for KPMG’s Latin American region. Mr. Miramontes was also an audit partner directly involved with providing audit services to public and private companies, which included working with client boards of directors and audit committees regarding financial reporting, auditing matters, SEC compliance, and Sarbanes-Oxley regulations. Mr. Miramontes currently serves on the board of directors of Lithia Motors, Inc., one of the largest providers of personal transportation solutions in the U.S., and Oportun Financial Corporation, a mission driven financial services company.
Mr. Miramontes brings to the Board extensive experience in accounting, financial reporting, and corporate governance. His experience as an audit partner provides useful insights into financial and regulatory matters relevant to the Company’s business. |
14
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Arun Nayar
Age: 69 Director Since: 2018 Committees: • Audit • Executive |
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Mr. Nayar retired in December 2015 as Executive Vice President and Chief Financial Officer of Tyco International, a $10+ billion fire protection and security company, where he was responsible for managing the company’s financial risks and overseeing its global finance functions, including its tax, treasury, mergers and acquisitions, audit, and investor relations teams. Mr. Nayar joined Tyco as Senior Vice President and Treasurer in 2008, and was also Chief Financial Officer of Tyco’s ADT Worldwide. From 2010 until 2012, Mr. Nayar was Senior Vice President, Financial Planning & Analysis, Investor Relations, and Treasurer. Prior to joining Tyco, Mr. Nayar spent six years at PepsiCo, Inc., most recently as Chief Financial Officer of Global Operations and, before that, as Vice President and Assistant Treasurer—Corporate Finance. Mr. Nayar currently serves on the board of directors of Amcor Plc, a manufacturer of responsible packaging products, TFI International Inc., a leader in the transportation and logistics industry and GFL Environmental Inc., a leading North American environmental services company. Mr. Nayar is also a Senior Advisor to McKinsey & Company. He was previously a Senior Advisor to a private equity firm, BC Partners, from October 2016 to March 2020.
Mr. Nayar brings over 35 years of financial experience to the Board. His experience as a chief financial officer provides useful insights into operational and financial metrics relevant to the Company’s business. |
Katherine B. Quinn
Age: 55 Director Since: 2019 Committees: • Compensation |
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Ms. Quinn has served as vice chairman and chief administrative officer of U.S. Bancorp since April 2017 and is responsible for leading human resources, strategy, and corporate affairs at the company. Ms. Quinn joined U.S. Bancorp in 2013 as executive vice president and chief strategy and reputation officer. Prior to joining U.S. Bancorp, Ms. Quinn most recently served as senior vice president and chief marketing officer at Anthem, a health benefits company, where she directed the company’s marketing, customer communications, digital, customer experience, and retail strategies. She previously served as Anthem’s vice president of corporate marketing. Earlier in her career, Ms. Quinn served as chief marketing and strategy officer at a division of The Hartford, following leadership roles in strategy and product development at CIGNA and PacifiCare Health Systems, respectively. Ms. Quinn earned an MBA from University of Phoenix and a bachelor’s degree from Hunter College. In addition to her role at U.S. Bancorp, Ms. Quinn presently serves as a member of the Board of Directors of Taylor Corporation and the Board of Trustees for both United Way U.S.A. and Fraser, a non-profit organization serving children and adults with special needs. She previously served as a member of the Board of Trustees for Minnesota Public Radio until May 2019.
Ms. Quinn brings to the Board extensive experience in business strategy, marketing, customer experience, and health benefits. Her experience and insights in these areas are directly relevant to the Company’s business. |
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15
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presiding at all meetings of the Board, including executive sessions of the non-management directors;
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the authority to call meetings of the Board and of the non-management directors;
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serving as a liaison between the Chief Executive Officer and independent directors and facilitating communications between other members of the Board and the Chief Executive Officer (any director is free to communicate directly with the Chief Executive Officer; the Chair’s role is to attempt to improve such communications if they are not entirely satisfactory);
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working with the Chief Executive Officer in the preparation of and approving Board meeting agendas and schedules, and the information to be provided to the Board;
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chairing the periodic review of the performance of the Chief Executive Officer;
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otherwise consulting with the Chief Executive Officer on matters relating to corporate governance and Board performance; and
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if requested by major stockholders, ensuring that he is available, when appropriate, for consultation and direct communication.
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16
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17
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Delivery of compensation through an appropriate mix of base salary, short-term cash incentive awards, long-term awards, and benefits.
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Use of a mix of long-term incentive vehicles that reward both stock price appreciation and financial operating performance and have different risk profiles.
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Incorporation of measures in the performance awards to assess how efficiently and effectively we deploy our assets (return on net assets) and to compare our stock performance against the Russell 3000 Index (total stockholder return).
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Stock ownership guidelines that promote executive stock ownership.
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18
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Director
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Audit
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Compensation
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Nominating and
Governance* |
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Executive
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Bruce G. Bodaken
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Elizabeth ‘Busy’ Burr
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Heyward Donigan
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Robert E. Knowling, Jr.
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Kevin E. Lofton
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Louis P. Miramontes
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Arun Nayar
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Katherine B. Quinn*
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Marcy Syms*
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*
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Effective as of the Annual Meeting, Ms. Syms will cease to serve on the Nominating and Governance Committee and Ms. Quinn will begin serving on the Nominating and Governance Committee.
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Chairman
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Member
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Appointing, compensating, and overseeing our independent registered public accounting firm (“independent auditors”);
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Overseeing management’s fulfillment of its responsibilities for financial reporting and internal control over financial reporting; and
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Overseeing the activities of the Company’s internal audit function.
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19
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Administering Rite Aid’s stock option and other equity incentive plans;
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Reviewing and approving the base salaries of the Company’s executive officers and reviewing and recommending to the Board the base salary of the CEO;
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Reviewing and approving the Company’s goals and objectives relevant to the incentive-based compensation of the Company’s executive officers (including the CEO), evaluating the performance of the Company’s executive officers (including the CEO) in light of these goals and objectives, and determining and approving the incentive-based compensation of the Company’s executive officers (including the CEO) based on such evaluation;
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Setting corporate performance targets under all annual bonus and long-term incentive compensation plans as appropriate and determining annually the individual bonus award opportunities for the Company’s executive officers; and
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Reviewing and approving all executive officers’ employment agreements and severance arrangements.
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20
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Identifying and recommending to the Board individuals qualified to serve as Rite Aid directors;
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•
|
Recommending to the Board individual directors to serve on committees of the Board;
|
•
|
Advising the Board with respect to matters of Board composition and procedures;
|
•
|
Developing and recommending to the Board a set of corporate governance principles applicable to Rite Aid and overseeing corporate governance matters generally;
|
•
|
Overseeing the annual evaluation of the Board and management; and
|
•
|
Reviewing and approving or ratifying related person transactions in which the Company is a participant.
|
•
|
The name of the stockholder and evidence of the person’s ownership of Rite Aid stock, including the number of shares owned and the length of time of ownership; and
|
•
|
The name of the candidate, the candidate’s resume or a listing of his or her qualifications to be a Rite Aid director, and the person’s consent to be named as a director if selected by the Nominating and Governance Committee and nominated by the Board.
|
|
| |
|
| |
21
|
22
|
| |
|
| |
|
|
| |
|
| |
23
|
•
|
Educating our patients so they understand the risks of opioid abuse starting with their first opioid prescription, including providing mandatory prescription counseling from a Rite Aid pharmacist to all patients with new opioid prescriptions and to other patients with certain risk factors.
|
•
|
Making DisposeRx, a first-of-its-kind opioid disposal solution, available at all of Rite Aid’s pharmacies nationwide. Rite Aid provides DisposeRx packets to patients with new opioid prescriptions and offers DisposeRx packets to patients with chronic opioid prescriptions every six months. DisposeRx packets contain a biodegradable powder that, when mixed with water in the prescription vial, dissolves drugs, forming a viscous gel which may be safely discarded in the trash.
|
•
|
Making naloxone, a medication that can be used to reverse the effects of an opioid overdose, available without a prescription at all of Rite Aid’s pharmacies nationwide. In 2019, all stores were listed on the naloxone locator tool in Google Maps.
|
•
|
Supporting the Centers for Disease Control and Prevention guidelines for prescribing opioids, including limiting acute opioid prescriptions to a seven-day supply, limiting the daily dosage of opioids dispensed based on the strength of the opioid, and requiring the use of immediate-release formulations of opioids before extended-release opioids are dispensed.
|
•
|
Supporting HHS by counseling our patients on the HHS Guide for Clinicians on the Appropriate Dosage Reduction or Discontinuation of Long-Term Opioid Analgesics issued in 2019.
|
•
|
Providing ongoing education and training of Rite Aid pharmacists, including risk factors for opioid abuse, how to identify symptoms of an overdose and what to do in the event of an overdose, an overview of the naloxone therapies available, and proper administration of each and recommendations for follow-up care.
|
•
|
Participating in prescription drug monitoring programs, requiring that all pharmacists are registered for the programs in their respective state(s) of practice, and including a “red flag” process for pharmacists to regularly review prescriptions for certain patients. In 2019, we implemented NarxCare, a tool that helps our pharmacists make responsible dispensing decisions while mitigating possible controlled substance misuse or abuse.
|
•
|
Adding resources on drug safety and disposal on www.riteaid.com under the headings “Pharmacy—Drug Safety & Disposal.” Visitors can search for a disposal site in their community, learn how to properly dispose of medication at home, access resources provided by the Food and Drug Administration and the Drug Enforcement Administration (“DEA”), and find information on treatment for drug abuse and addiction.
|
•
|
Continuing its process to identify prescribers with questionable prescription writing practices and, when appropriate, proactively discontinuing filling controlled substances for certain prescribers.
|
•
|
Continuing to support National Take-Back Days to encourage our patients to bring their unused or unwanted medications to designated sites sponsored by local law enforcement and the DEA for proper handling.
|
•
|
Partnering with state agencies to participate in free Naloxone Distribution Day events to support local communities.
|
•
|
Developing the KidsCents Safe Medication Disposal program that is supported through the Rite Aid Foundation, which provides medication disposal units, free of charge, to local and state law enforcement
|
24
|
| |
|
| |
|
•
|
Adding 109 Safe Medication Disposal units in select Rite Aid stores nationwide.
|
•
|
Through the Rite Aid Foundation, committing $1.8 million over three years in partnership with EVERFI, a leading education technology company, to educate high school students to make safe and healthy decisions about prescription drugs. The digital prescription drug abuse prevention course is the flagship initiative of the Prescription Drug Safety Network, the nation’s first public-private initiative to combat prescription drug abuse by providing prevention education to schools.
|
|
| |
|
| |
25
|
|
Name
|
| |
Fees
Paid in Cash ($) |
| |
Stock
Awards ($)(1)(2) |
| |
Option
Awards ($) |
| |
Non-Equity
Incentive Plan Compensation ($) |
| |
Change In
Nonqualified Deferred Compensation ($) |
| |
All Other
Compensation ($) |
| |
Total
($) |
|
|
Elizabeth ‘Busy’ Burr
|
| |
79,750
|
| |
119,966
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
|
Bruce G. Bodaken
|
| |
200,000
|
| |
119,966
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
|
|
|
Robert E. Knowling, Jr.
|
| |
110,000
|
| |
119,966
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
|
|
|
Kevin E. Lofton
|
| |
110,000
|
| |
119,966
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
|
|
|
Louis P. Miramontes
|
| |
120,000
|
| |
119,966
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
|
|
|
Arun Nayar
|
| |
110,000
|
| |
119,966
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
|
|
|
Katherine B. Quinn
|
| |
72,500
|
| |
119,966
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
|
Marcy Syms
|
| |
100,000
|
| |
119,966
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
|
|
|
Joseph B. Anderson, Jr.(3)
|
| |
27,750
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
|
|
|
Michael N. Regan(3)
|
| |
30,525
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
|
|
(1)
|
Represents the grant date fair value of stock awards granted in fiscal year 2020 in accordance with Financial Accounting Standards Board (“FASB”) Topic 718. For information regarding the assumptions used in determining the fair value of an award, please refer to Note 17 to our financial statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended February 29, 2020, filed with the SEC on April 27, 2020. Delivery of the shares underlying the stock awards is deferred until the directors’ separation from services.
|
(2)
|
The number of unvested restricted stock awards outstanding as of February 29, 2020 for each director is detailed in the table below.
|
|
Name
|
| |
Grant Date
|
| |
Number of
Stock Awards (#) |
|
|
Elizabeth ‘Busy’ Burr
|
| |
|
| |
—
|
|
|
Bruce G. Bodaken
|
| |
July 17, 2017
|
| |
259
|
|
|
Kevin E. Lofton
|
| |
July 17, 2017
|
| |
259
|
|
|
Louis P. Miramontes
|
| |
|
| |
—
|
|
|
Katherine B. Quinn
|
| |
|
| |
—
|
|
|
Marcy Syms
|
| |
July 17, 2017
|
| |
259
|
|
|
Joseph B. Anderson, Jr.
|
| |
|
| |
—
|
|
|
Michael N. Regan
|
| |
|
| |
—
|
|
(3)
|
Each of Mr. Anderson and Mr. Regan served as a member of the Board through April 10, 2019. Upon their separation from the Board, each of Mr. Anderson and Mr. Regan became vested in 259 shares of our stock remaining from the grant of RSUs made on July 17, 2017.
|
26
|
| |
|
| |
|
|
FOR
✔ |
| |
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE RATIFICATION OF DELOITTE & TOUCHE LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2021.
|
|
|
| |
|
| |
27
|
|
FOR
✔ |
| |
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL OF THE COMPENSATION OF ITS NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN THIS PROXY STATEMENT.
|
|
28
|
| |
|
| |
|
|
| |
|
| |
29
|
•
|
Overhang. As of the end of the 2020 fiscal year, we had 2.548 million shares of common stock subject to outstanding equity awards of which 1.295 million shares relate to stock options and 1.253 million shares relate to unvested awards other than stock options. Additionally, 580,000 shares are collectively available for future equity awards under the 2014 Plan, of which only 400,000 were available for the grant of awards other than stock options as a result of the Plan’s fungible ratio. The 2.548 million share overhang represents approximately 4.7% of fully diluted common stock outstanding as of the end of fiscal year 2020 (or, the “overhang percentage”). The 3.35 million new shares proposed to be included in the share reserve under the 2020 Plan, along with the 580,000 shares remaining available for issuance under the 2014 Plan that would be available for grant under the 2020 Plan assuming stockholder approval, would increase the overhang percentage by an additional 7.3% to approximately 12.0%. For additional information, see the section entitled “Equity Compensation Plan Information” on page 77.
|
•
|
Annual Share Usage. The annual share usage, or burn rate, under the Company’s equity compensation program for the last three fiscal years was as follows:
|
|
|
| |
Fiscal
Year 2020 (‘000s) |
| |
Fiscal
Year 2019 (‘000s) |
| |
Fiscal
Year 2018 (‘000s) |
| |
Three-
Year Average (‘000s) |
|
|
A Stock Options Granted
|
| |
612
|
| |
0
|
| |
50
|
| |
221
|
|
|
B Restricted Stock Awards and Units Granted
|
| |
1,402
|
| |
700
|
| |
693
|
| |
932
|
|
|
C Total Options and Shares Granted (A+B)
|
| |
2,014
|
| |
700
|
| |
743
|
| |
1,152
|
|
|
D Basic Weighted Average Common Shares Outstanding
|
| |
53,228
|
| |
52,854
|
| |
52,481
|
| |
52,854
|
|
|
E Annual Share Usage (C/D)
|
| |
3.8%
|
| |
1.3%
|
| |
1.4%
|
| |
2.2%
|
|
30
|
| |
|
| |
|
•
|
No Repricing. The 2020 Plan prohibits repricing and exchange of underwater options and stock appreciation rights for cash or shares without stockholder approval. The 2020 Plan also prohibits use of reload options and discounted options.
|
•
|
Minimum Vesting Periods for Awards. The majority of awards granted under the 2020 Plan, including performance-based awards and awards vesting solely on continued service, are subject to a minimum vesting period of one year.
|
•
|
Director Limits. No participant who is a non-employee director may be granted awards during any calendar year that, when aggregate with such non-employee director’s cash fees with respect to such calendar year, exceed $750,000 in total value.
|
•
|
Fungible Share Counting Provision. The 2020 Plan provides for fungible share counting. Pursuant to this provision, each grant of a full value award such as restricted stock or phantom units will reduce the number of shares available for issuance by 1.45 shares.
|
•
|
No Single-Trigger Vesting Upon a Change in Control. The 2020 Plan does not provide for vesting of equity awards based solely on the occurrence of a change in control, without an accompanying job loss, or unless awards are not assumed or substituted in connection with the change in control.
|
•
|
The Company Intends to Utilize Performance-Based Awards. Although the 2020 Plan permits a number of types of equity and cash long-term incentives, the Company intends to continue to have a long-term incentive program with a strong focus on our performance. In fiscal year 2020, we delivered the majority of long-term incentive value to our executives through stock options, which serve to align executive and stockholder interests by rewarding executives for appreciation in stock price, and cash settled performance awards, which only vest if certain performance targets are met. Beginning in fiscal year 2021, we intend to increase the relative weighting of the equity portion of executives’ target total remuneration opportunities to ensure greater alignment with stockholder interests in the form of performance-based restricted stock units and restricted stock units.
|
•
|
Dividends and Dividend Equivalents Subject to Same Vesting as Underlying Award. Dividend or dividend equivalents on awards are subject to the same vesting restrictions as the underlying awards and are never distributed unless the underlying award vests.
|
•
|
Recoupment Policy. The Company maintains a recoupment policy as described on pages 57 to 58.
|
•
|
Stock Ownership Guidelines Apply to Directors and Senior Executives. Rite Aid directors and senior executives are also subject to stock ownership guidelines as described on pages 58 to 59.
|
|
| |
|
| |
31
|
32
|
| |
|
| |
|
|
| |
|
| |
33
|
34
|
| |
|
| |
|
|
| |
|
| |
35
|
|
Rite Aid Corporation 2020 Omnibus Equity Plan
|
| ||||||
|
Name and principal position
|
| |
Dollar value(1)
($) |
| |
Number of units(2)
(#) |
|
|
Heyward Donigan
(President and CEO) |
| |
$6,000,000
|
| |
418,702
|
|
|
James J. Peters
(COO) |
| |
$2,250,000
|
| |
157,013
|
|
|
Matthew Schroeder
(Executive VP, CFO) |
| |
$1,625,000
|
| |
113,398
|
|
|
Jocelyn Z. Konrad
(Executive VP, Chief Pharmacy Officer) |
| |
$1,350,000
|
| |
94,208
|
|
|
Current executive officers as a group (9 people)
|
| |
$14,776,000
|
| |
1,031,124
|
|
|
Current directors other than executive officers as a group (7 people)
|
| |
$960,000
|
| |
66,992
|
|
|
Current employees other than executive officers as a group
|
| |
$7,727,000
|
| |
539,218
|
|
(1)
|
Figures for each named executive officer represent grants that would be made under the 2020 Plan, subject to stockholder approval at the Annual Meeting, applying each officer's LTIP target percentage approved for the Company's 2021 fiscal year, as follows: Ms. Donigan, 600%; Mr. Peters, 300%; Mr. Schroeder, 250%; and Ms. Konrad, 225%. If the 2020 Plan is not approved by stockholders at the Annual Meeting, no grants will be made under the 2020 Plan and the 2014 Plan will remain in effect. Actual grants to be made in the future are entirely in the discretion of the Compensation Committee (or in the discretion of the Board in the case of awards to our non-employee directors).
|
(2)
|
Figures are calculated based on $14.33, the closing price of Company common stock on April 30, 2020.
|
36
|
| |
|
| |
|
|
FOR
✔ |
| |
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” APPROVAL OF THE ADOPTION OF THE RITE AID CORPORATION 2020 OMNIBUS EQUITY INCENTIVE PLAN.
|
|
|
| |
|
| |
37
|
|
Name
|
| |
Age
|
| |
Position with Rite Aid
|
|
|
Heyward Donigan(1)
|
| |
59
|
| |
President and Chief Executive Officer
|
|
|
James J. Peters(2)
|
| |
48
|
| |
Chief Operating Officer
|
|
|
Matthew Schroeder
|
| |
50
|
| |
Executive Vice President and Chief Financial Officer
|
|
|
Jessica Kazmaier
|
| |
43
|
| |
Executive Vice President and Chief Human Resources Officer
|
|
|
Jocelyn Z. Konrad
|
| |
50
|
| |
Executive Vice President and Chief Pharmacy Officer
|
|
|
Brian T. Hoover
|
| |
55
|
| |
Chief Accounting Officer
|
|
|
Justin Mennen
|
| |
39
|
| |
Executive Vice President and Chief Information Officer
|
|
|
Andre Persaud(3)
|
| |
51
|
| |
Executive Vice President, Retail
|
|
|
Daniel D. Robson(4)
|
| |
59
|
| |
President of EnvisionRxOptions (soon to be Elixir)
|
|
(1)
|
Ms. Donigan’s biographical information is provided above in the section identifying the Board of Directors. Ms. Donigan joined Rite Aid on August 12, 2019.
|
(2)
|
Mr. Peters joined Rite Aid on October 7, 2019.
|
(3)
|
Mr. Persaud joined Rite Aid on February 3, 2020.
|
(4)
|
Mr. Robson joined Rite Aid as President of EnvisionRxOptions on December 12, 2019.
|
38
|
| |
|
| |
|
|
| |
|
| |
39
|
|
Name
|
| |
Title
|
|
|
Heyward Donigan(1)
|
| |
President and Chief Executive Officer
|
|
|
James J. Peters(2)
|
| |
Chief Operating Officer
|
|
|
Matthew Schroeder(3)
|
| |
Executive Vice President, Chief Financial Officer
|
|
|
Jocelyn Z. Konrad(4)
|
| |
Executive Vice President, Chief Pharmacy Officer
|
|
|
James J. Comitale(5)
|
| |
Former Executive Vice President, General Counsel and Secretary
|
|
|
John T. Standley(6)
|
| |
Former Chief Executive Officer
|
|
|
Kermit R. Crawford(7)
|
| |
Former President and Chief Operating Officer
|
|
|
Darren W. Karst(8)
|
| |
Former Senior Executive Vice President, Chief Financial Officer and Chief Administrative Officer
|
|
|
Bryan B. Everett(9)
|
| |
Former Chief Operating Officer
|
|
(1)
|
Ms. Donigan joined Rite Aid on August 12, 2019.
|
(2)
|
Mr. Peters joined Rite Aid on October 7, 2019.
|
(3)
|
Mr. Schroeder was promoted to Chief Financial Officer effective March 12, 2019.
|
(4)
|
Ms. Konrad was promoted to Executive Vice President, Pharmacy and Retail Operations effective March 12, 2019, and subsequently transitioned to Chief Pharmacy Officer effective September 17, 2019.
|
(5)
|
Mr. Comitale left the Company on May 21, 2020.
|
(6)
|
Mr. Standley left the Company after a brief transition period that ended on August 14, 2019.
|
(7)
|
Mr. Crawford left the Company on March 12, 2019.
|
(8)
|
Mr. Karst left the Company after a brief transition period that ended on May 31, 2019.
|
(9)
|
Mr. Everett left the Company on October 11, 2019.
|
40
|
| |
|
| |
|
•
|
Adjusted EBITDA was $538.2 million or 2.5% of revenues for fiscal year 2020 compared to $563.4 million or 2.6% of revenues for the prior year. See the discussion under the caption “Cash Incentive Bonuses” below for more detail on how Adjusted EBITDA was used. The decrease in Adjusted EBITDA was due to a decrease of $34.8 million in the Retail Pharmacy segment, partially offset by a $9.5 million increase in the Pharmacy Services segment. The decrease in the Retail Pharmacy segment Adjusted EBITDA was driven by a $42.4 million reduction in Transition Services Agreement fee income from Walgreens Boots Alliance, Inc. Also contributing to the reduction in Adjusted EBITDA was a decrease in Adjusted EBITDA gross profit resulting from reimbursement rate pressures that were not fully offset by generic drug purchasing efficiencies, a reduction in vendor promotional funds and a decline in front-end same-store sales. These negative variances were partially offset by same-store prescription count growth and lower selling, general and administrative expenses due to strong labor and benefits expense control. The improvement in the Pharmacy Services segment EBITDA was due to increased revenue and improvements in pharmacy network management. See Appendix A for a reconciliation of our Adjusted EBITDA, which is a non-GAAP measure, to net income under GAAP.
|
|
| |
|
| |
41
|
|
What We Do
|
| |
What We Don’t Do
|
| ||||||
|
✔
|
| |
Conduct annual stockholder advisory vote on the compensation of our named executive officers
|
| |
✘
|
| |
We do not provide gross-up payments to cover personal income taxes or excise taxes related to executive severance benefits
|
|
|
✔
|
| |
Maintain dialogue with stockholders on various topics, including executive pay practices
|
| |
✘
|
| |
We do not have “single trigger” provisions that provide for accelerated vesting of equity awards upon a Change in Control.
|
|
|
✔
|
| |
Maintain a Compensation Committee composed entirely of independent directors
|
| |
✘
|
| |
We do not permit directors or executives to engage in hedging or pledging of Rite Aid securities
|
|
|
✔
|
| |
Retain an independent executive compensation consultant to the Compensation Committee
|
| |
✘
|
| |
We do not reward executives for imprudent, inappropriate, or unnecessary risk-taking
|
|
|
✔
|
| |
Ensure that a significant portion of executive officer total target remuneration is at risk
|
| |
✘
|
| |
We do not allow the repricing of equity awards without stockholder approval
|
|
|
✔
|
| |
Provide annual and long-term incentive plans with performance targets aligned to business goals
|
| |
|
| |
|
|
|
✔
|
| |
Require stock ownership for all named executive officers and board members
|
| |
|
| |
|
|
|
✔
|
| |
Maintain an Insider Trading Policy requiring directors and executive officers to trade only during established windows after contacting Rite Aid’s Legal Department prior to any sales or purchases of Company stock
|
| |
|
| |
|
|
|
✔
|
| |
Require equity awards to have a double trigger (qualifying termination of employment and change in control)
|
| |
|
| |
|
|
|
✔
|
| |
Complete an annual incentive compensation risk assessment
|
| |
|
| |
|
|
|
✔
|
| |
Maintain a formal clawback policy for executive officers
|
| |
|
| |
|
|
42
|
| |
|
| |
|
|
What We Heard from Stockholders
|
| |
Actions We Took in Response
|
| ||||||
|
•
|
| |
Our stockholders generally did not approve of the use of retention awards.
|
| |
•
|
| |
We did not enter into any new individual retention agreements with any of our Named Executive Officers in fiscal year 2020.
|
|
|
•
|
| |
Our stockholders generally did not approve of a mid-year adjustment to our fiscal year 2018 annual incentive plan to reflect the impact of the significant events and operational challenges occurring in the first half of fiscal year 2018.
|
| |
•
|
| |
We did not make any in-cycle adjustments to our incentive plans for fiscal year 2020.
|
|
|
•
|
| |
Our stockholders expressed a general discomfort with a lack of alignment between Company performance and pay.
|
| |
•
|
| |
We refined our peer group for fiscal year 2020 to (among other changes) remove CVS Health Corp. and Walgreens Boots Alliance, Inc.; even though each organization is a direct competitor from both business and talent acquisition perspectives, the Compensation Committee determined that these organizations are no longer appropriate peers given their significantly larger scope of operations.
|
|
|
|
| |
|
| |
•
|
| |
We maintained the emphasis on performance-based long-term incentives in fiscal year 2020, such that a significant portion of the total long-term incentive opportunity for the regular compensation program is delivered in the form of Performance-Based Restricted Cash Units.
|
|
|
| |
|
| |
43
|
•
|
Compensation should be based on the level of job responsibility, individual performance, and corporate performance, and should foster the long-term focus required for success in the pharmacy, healthcare services and retail healthcare industry. As associates progress to higher levels in the organization, an increasing proportion of their pay is linked to Company performance and stockholder returns and to longer-term performance because they are in a position to have greater influence on longer-term results.
|
•
|
Compensation should reflect the value of the job in the marketplace. To attract and retain a highly skilled, diverse work force, we must remain competitive with the pay of other employers who compete with us for talent.
|
•
|
Compensation should reward performance. Our programs should deliver compensation that is related to our corporate performance. Where corporate performance falls short of expectations, the programs should deliver lower-tier compensation. In addition, the objectives of pay-for-performance and retention must be balanced. Even in periods of temporary downturns in overall corporate performance, the programs should continue to ensure that successful, high-achieving associates will remain motivated and committed to the Company to support the stability and future needs of the Company.
|
•
|
To be effective, performance-based compensation programs should enable associates to easily understand how their efforts can affect their pay, both directly through individual performance accomplishments and indirectly through contributing to the Company’s achievement of its strategic and operational goals.
|
•
|
Compensation and benefit programs should reward performance relative to consistent measures and goals at all levels of the organization. While the programs and individual pay levels will always reflect differences in job responsibilities, geographies, and marketplace considerations, the overall structure of compensation and benefit programs should be broadly similar across the organization.
|
•
|
Compensation and benefit programs should attract and retain associates who are interested in being a part of the Rite Aid team.
|
44
|
| |
|
| |
|
•
|
Competitors for executive talent, such as grocery store chains, discount department stores, pharmacy benefits managers, companies engaged in pharmaceutical distribution, and healthcare services organizations;
|
•
|
Competitors for investment capital, such as companies considered peers by financial analysts, companies with a similar capital structure or companies whose stock price movement correlated most directly with Rite Aid;
|
•
|
Companies with which Rite Aid competes for customers that have pharmacy operations, offer similar merchandise as Rite Aid, or provide healthcare services; and
|
•
|
Companies of similar size based on revenue, EBITDA as well as enterprise value.
|
|
| |
|
| |
45
|
|
Peer Company
|
| |
Revenues
($ Millions) |
|
|
Best Buy Co., Inc.
|
| |
43,441
|
|
|
Macy’s, Inc.
|
| |
25,141
|
|
|
Dollar General Corp.
|
| |
25,105
|
|
|
Dollar Tree, Inc.
|
| |
22,979
|
|
|
AutoNation, Inc.
|
| |
21,685
|
|
|
Kohl’s Corporation
|
| |
19,474
|
|
|
The Gap, Inc.
|
| |
16,735
|
|
|
Nordstrom
|
| |
16,079
|
|
|
Laboratory Corporation of America Holdings
|
| |
14,060
|
|
|
Community Health Systems, Inc.
|
| |
13,760
|
|
|
LBrands
|
| |
13,237
|
|
|
Bed Bath & Beyond Inc.
|
| |
12,437
|
|
|
J.C. Penney Company, Inc.
|
| |
12,001
|
|
|
DaVita Inc.
|
| |
11,365
|
|
|
Office Depot Inc.
|
| |
10,928
|
|
|
Owens & Minor, Inc.
|
| |
9,686
|
|
(1)
|
Revenue reflects trailing 12-month data through February 2019 as available per Standard & Poor’s Capital IQ.
|
46
|
| |
|
| |
|
(1)
|
Target Total Remuneration for the Company’s regular executive compensation program represents the sum of (a) annual base salary rate (rather than base salary actually paid for partial year service), (b) target annual incentives (rather than target bonus opportunity prorated for partial year service), and (c) target long term incentives under the Company’s long-term incentive program (rather than awards made in connection with recruitment to the Company). Target Total Compensation does not include (i) the value of broad based benefits provided to all employees, (ii) components of all other compensation shown in the Summary Compensation Table, and (iii) inducement awards.
|
(2)
|
Totals may not equal 100 due to rounding.
|
|
| |
|
| |
47
|
|
Executive
|
| |
Base Salary at
End of FY 2020 |
| |
Increase or
Change from Prior Fiscal Year |
| |
Rationale
|
|
|
Heyward Donigan
|
| |
$1,000,000
|
| |
N/A
|
| |
Joined 8/12/2019
|
|
|
James J. Peters
|
| |
$750,000
|
| |
N/A
|
| |
Joined 10/7/2019
|
|
|
Matthew Schroeder
|
| |
$550,000
|
| |
+39%
|
| |
Additional/new responsibilities due to promotion
|
|
|
Jocelyn Z. Konrad
|
| |
$600,000
|
| |
+30%
|
| |
Additional/new responsibilities due to promotion
|
|
|
James J. Comitale
|
| |
$567,500
|
| |
+10%
|
| |
Market adjustment for role
|
|
|
Terminated Executive
|
| |
Base Salary at
Time of FY 2020 Termination |
| |
Increase or
Change from Prior Fiscal Year |
| |
Rationale
|
|
|
John T. Standley
|
| |
$1,220,550
|
| |
None
|
| |
Leadership transition plan
|
|
|
Kermit R. Crawford
|
| |
$1,000,000
|
| |
None
|
| |
Leadership transition plan
|
|
|
Darren W. Karst
|
| |
$850,750
|
| |
None
|
| |
Leadership transition plan
|
|
|
Bryan B. Everett
|
| |
$750,000
|
| |
+25%
|
| |
Additional/new responsibilities due to promotion
|
|
48
|
| |
|
| |
|
|
Executive
|
| |
Threshold Payout
(as a % of Salary) |
| |
Target Payout
(as a % of Salary) |
| |
Maximum Payout
(as a % of Salary) |
|
|
Heyward Donigan(1)
|
| |
50%
|
| |
200%
|
| |
400%
|
|
|
James J. Peters(2)
|
| |
31.25%
|
| |
125%
|
| |
250%
|
|
|
Matthew Schroeder
|
| |
25%
|
| |
100%
|
| |
200%
|
|
|
Jocelyn Z. Konrad
|
| |
25%
|
| |
100%
|
| |
200%
|
|
|
James J. Comitale
|
| |
12.5%
|
| |
50%
|
| |
100%
|
|
|
John T. Standley
|
| |
50%
|
| |
200%
|
| |
400%
|
|
|
Kermit R. Crawford
|
| |
43.75%
|
| |
175%
|
| |
350%
|
|
|
Darren W. Karst
|
| |
31.25%
|
| |
125%
|
| |
250%
|
|
|
Bryan B. Everett
|
| |
31.25%
|
| |
125%
|
| |
250%
|
|
(1)
|
Reflects opportunity for a full fiscal year. Ms. Donigan’s opportunity was prorated based on the number of months in which she provided service pursuant to her employment agreement.
|
(2)
|
Reflects opportunity for a full fiscal year. Mr. Peters’ opportunity was prorated based on the number of months in which he provided service pursuant to his employment agreement.
|
|
| |
|
| |
49
|
|
Performance Level
|
| |
Adjusted EBITDA
Goal (millions) |
| |
Resulting Payout
as a % of Target Award |
|
|
Threshold
|
| |
$500.0
|
| |
25%
|
|
|
Target
|
| |
$557.0
|
| |
100%
|
|
|
Maximum
|
| |
$600.0
|
| |
200%
|
|
|
Actual Performance
|
| |
$538.2
|
| |
66.6%
|
|
|
Executive
|
| |
Target Bonus
Opportunity |
| |
Payout % Based on
Actual EBITDA Performance |
| |
Calculated Payout
|
|
|
Heyward Donigan
|
| |
$1,166,667(1)
|
| |
66.6%
|
| |
$777,000
|
|
|
James J. Peters
|
| |
$390,625(2)
|
| |
66.6%
|
| |
$260,156
|
|
|
Matthew Schroeder
|
| |
$550,000
|
| |
66.6%
|
| |
$366,300
|
|
|
Jocelyn Z. Konrad
|
| |
$600,000
|
| |
66.6%
|
| |
$399,600
|
|
|
James J. Comitale
|
| |
$283,750
|
| |
66.6%
|
| |
$188,977
|
|
|
John T. Standley
|
| |
$2,441,100
|
| |
66.6%
|
| |
$734,938(3)
|
|
|
Kermit R. Crawford
|
| |
N/A
|
| |
N/A
|
| |
N/A(4)
|
|
|
Darren W. Karst
|
| |
$1,488,813
|
| |
66.6%
|
| |
$249,924(5)
|
|
|
Bryan B. Everett
|
| |
$750,000
|
| |
66.6%
|
| |
$383,178(6)
|
|
(1)
|
Reflects Ms. Donigan’s prorated target annual incentive opportunity under her employment agreement, based on joining Rite Aid on August 12, 2019.
|
(2)
|
Reflects Mr. Peters’ prorated target annual incentive opportunity under his employment agreement, based on joining Rite Aid on October 7, 2019.
|
(3)
|
Pursuant to the terms of his Separation Agreement, Mr. Standley was eligible to receive a pro rata annual incentive payout for fiscal year 2020. He left the Company on August 14, 2019, and, accordingly, his payout was prorated by approximately 45% to reflect the period of employment.
|
(4)
|
Pursuant to the terms of his Separation Agreement, Mr. Crawford was not eligible to earn an annual incentive in fiscal year 2020.
|
(5)
|
Pursuant to the terms of his Separation Agreement, Mr. Karst was eligible to receive a pro rata annual incentive payout for fiscal year 2020. He left the Company on May 31, 2019, and, accordingly, his payout was prorated by approximately 25% to reflect the period of employment.
|
(6)
|
Pursuant to the terms of his Separation Agreement, Mr. Everett was eligible to receive a pro rata annual incentive payout for fiscal year 2020. He left the Company on October 11, 2019, and, accordingly, his payout was prorated by approximately 76% to reflect the period of employment.
|
50
|
| |
|
| |
|
|
Executive
|
| |
Target Opportunity
(as a % of Salary) |
|
|
Heyward Donigan(1)
|
| |
450%
|
|
|
James J. Peters(2)
|
| |
250%
|
|
|
Matthew Schroeder
|
| |
150%
|
|
|
Jocelyn Z. Konrad
|
| |
200%
|
|
|
James J. Comitale(3)
|
| |
125%
|
|
|
Bryan B. Everett(3)
|
| |
250%
|
|
(1)
|
Pursuant to the terms of her Employment Agreement, Ms. Donigan will participate in Rite Aid’s long-term incentive program beginning in the Company’s 2021 fiscal year.
|
(2)
|
Pursuant to the terms of his Employment Agreement, Mr. Peters will participate in Rite Aid’s long-term incentive program beginning in the Company’s 2021 fiscal year.
|
(3)
|
Mr. Comitale is no longer eligible for the 2020-2022 long-term performance-based cash award and one-third of the restricted stock units granted on July 17, 2019 as a result of his separation from employment with the Company on May 21, 2020. Mr. Everett is no longer eligible for the 2020-2022 long-term performance-based cash award and one-third of the restricted stock units granted on July 17, 2019 as a result of his separation from employment with the Company on October 11, 2019.
|
|
Vehicle
|
| |
Approximate
Proportion of 2020 Long-Term Incentive Target Opportunity |
| |
Purpose
|
|
|
Performance-Based Cash Units
|
| |
70%
|
| |
Links compensation to multi-year operating results on key measures tied to stockholder value creation.
|
|
|
Restricted Stock
|
| |
30%
|
| |
Supports retention and provides a vehicle with more stability and less risk. Aligns executive and stockholder interests and focuses executives on value creation.
|
|
•
|
Risk/reward tradeoffs: Using multiple long-term incentive vehicles can balance the need for a strong performance-based program against risk to executives.
|
•
|
Performance measurement: Using a combination of vehicles allows the Company to focus executives on both stock price appreciation and achievement of consistent operating results (as indicated by Adjusted EBITDA and other measures), which we believe leads to creation of value for stockholders.
|
|
| |
|
| |
51
|
•
|
Management of share usage and market practice: Rite Aid considers market practice concerning both share usage and competitive long-term incentive levels. Rite Aid uses either a stock-based performance vehicle or a cash-based performance vehicle which is aligned with peer companies and retailers of similar size. The target LTI mix has been selected to align the compensation opportunity for executives and associates with our stockholder return.
|
52
|
| |
|
| |
|
|
Component Metric
|
| |
Component
Weighting |
| |
Threshold
Performance (50% Payout) |
| |
Target
Performance (100% Payout) |
| |
Maximum
Performance 200% Payout |
| |
Actual
Performance |
| |
Component
Payout % |
|
|
2019–2020 Adjusted EBITDA
|
| |
80%
|
| |
$938,938
|
| |
$1,173,672
|
| |
$1,408,406
|
| |
$1,101,655
|
| |
85%
|
|
|
2019–2020 RONA
|
| |
20%
|
| |
-3.12%
|
| |
-2.6%
|
| |
-2.08%
|
| |
-22.2%
|
| |
0%
|
|
|
Weighted Sub-Total
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
68%
|
|
|
TSR Relative to Russell 3000
|
| |
Modifier
|
| |
|
| |
|
| |
|
| |
|
| |
-25%
|
|
|
Final Calculated Payout
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
51%
|
|
|
Executive
|
| |
Target Award $
|
| |
Target # of
Units at $46.20 Grant Price(1) |
| |
Payout %
|
| |
# of Units
Earned Based on Performance |
| |
Calculated
Payout(2) |
|
|
Jocelyn Z. Konrad
|
| |
$309,078
|
| |
6,690
|
| |
51.0%
|
| |
3,411.9
|
| |
$46,470
|
|
(1)
|
Reflects grant date stock price, adjusted for 1:20 split, which occurred on April 22, 2019.
|
(2)
|
Based on stock price of $13.62 as of February 28, 2020.
|
|
| |
|
| |
53
|
|
Component Metric
|
| |
Threshold
Performance (50% Payout) |
| |
Target
Performance (100% Payout) |
| |
Maximum
Performance 200% Payout |
| |
Actual
Performance |
| |
Payout
% |
|
|
2019–2020 Adjusted EBITDA
|
| |
$938,938
|
| |
$1,173,672
|
| |
$1,408,406
|
| |
$1,101,655
|
| |
85%
|
|
|
Executive
|
| |
Target Award $
|
| |
Target # of
Units at $46.20 Grant Price(1) |
| |
Payout %
|
| |
# of Units
Earned Based on Performance |
| |
Calculated
Payout(2) |
|
|
Matthew Schroeder
|
| |
$79,464
|
| |
1,720
|
| |
85.0%
|
| |
1,462
|
| |
$19,912
|
|
|
James J. Comitale
|
| |
$168,861
|
| |
3,655
|
| |
85.0%
|
| |
3,106.75
|
| |
$42,314
|
|
(1)
|
Reflects grant date stock price, adjusted for 1:20 split, which occurred on April 22, 2019.
|
(2)
|
Based on stock price of $13.62 as of February 28, 2020.
|
54
|
| |
|
| |
|
|
Executive
|
| |
Threshold
Award ($) |
| |
Target
Award ($) |
| |
Maximum
Award ($) |
|
|
Heyward Donigan(1)
|
| |
N/A
|
| |
N/A
|
| |
N/A
|
|
|
James J. Peters(2)
|
| |
N/A
|
| |
N/A
|
| |
N/A
|
|
|
Matthew Schroeder
|
| |
216,563
|
| |
577,500
|
| |
1,443,750
|
|
|
Jocelyn Z. Konrad
|
| |
315,000
|
| |
840,000
|
| |
2,100,000
|
|
|
James J. Comitale(3)
|
| |
186,211
|
| |
496,562
|
| |
1,241,405
|
|
|
Bryan B. Everett(3)
|
| |
492,188
|
| |
1,312,500
|
| |
3,281,250
|
|
|
John T. Standley(4)
|
| |
—
|
| |
—
|
| |
—
|
|
|
Kermit R. Crawford(4)
|
| |
—
|
| |
—
|
| |
—
|
|
|
Darren W. Karst(4)
|
| |
—
|
| |
—
|
| |
—
|
|
(1)
|
Pursuant to the terms of her Employment Agreement, Ms. Donigan will participate in Rite Aid’s long-term incentive program beginning in the Company’s 2021 fiscal year.
|
(2)
|
Pursuant to the terms of his Employment Agreement, Mr. Peters will participate in Rite Aid’s long-term incentive program beginning in the Company’s 2021 fiscal year.
|
(3)
|
Mr. Comitale is not eligible for the 2020-2022 long-term performance-based cash award and one-third of the restricted stock units granted on July 17, 2019 as a result of his separation from employment with the Company on May 21, 2020. Mr. Everett is not eligible for the 2020-2022 long-term performance-based cash award and one-third of the restricted stock units granted on July 17, 2019 as a result of his separation from employment with the Company on October 11, 2019.
|
(4)
|
In connection with the leadership transition plan, Messrs. Standley, Crawford, and Karst did not participate in Rite Aid’s fiscal year 2020 long-term incentive program.
|
|
Executive
|
| |
Award Value
($) |
| |
Number of
Shares (#) |
|
|
Heyward Donigan(1)
|
| |
1,999,998
|
| |
284,900
|
|
|
James J. Peters(2)
|
| |
499,770
|
| |
61,700
|
|
|
Matthew Schroeder
|
| |
247,722
|
| |
31,800
|
|
|
Jocelyn Z. Konrad
|
| |
359,898
|
| |
46,200
|
|
|
James J. Comitale(3)
|
| |
212,667
|
| |
27,300
|
|
|
John T. Standley(4)
|
| |
—
|
| |
—
|
|
|
Kermit R. Crawford(4)
|
| |
—
|
| |
—
|
|
|
Darren W. Karst(4)
|
| |
—
|
| |
—
|
|
|
Bryan B. Everett(5)
|
| |
562,438
|
| |
72,200
|
|
|
| |
|
| |
55
|
(1)
|
Reflects inducement award conveyed to facilitate the Company’s recruitment of Ms. Donigan as Chief Executive Officer; Ms. Donigan will participate in Rite Aid’s long-term incentive program beginning in the Company’s 2021 fiscal year.
|
(2)
|
Reflects inducement award conveyed to facilitate the Company’s recruitment of Mr. Peters as Chief Operating Officer; Mr. Peters will participate in Rite Aid’s long-term incentive program beginning in the Company’s 2021 fiscal year.
|
(3)
|
Mr. Comitale is not eligible for one-third of the restricted stock units granted on July 17, 2019 as a result of his separation from employment with the Company on May 21, 2020.
|
(4)
|
In connection with the leadership transition plan, Messrs. Standley, Crawford, and Karst did not participate in Rite Aid’s fiscal year 2020 long-term incentive program.
|
(5)
|
Mr. Everett is not eligible for one-third of the restricted stock units granted on July 17, 2019 as a result of his separation from employment with the Company on October 11, 2019.
|
|
Executive
|
| |
Grant Date
Fair Value ($) |
| |
Number of
Stock Options (#) |
|
|
Heyward Donigan(1)
|
| |
1,999,646
|
| |
502,913
|
|
|
James J. Peters(2)
|
| |
499,969
|
| |
108,900
|
|
(1)
|
Reflects inducement award conveyed to facilitate the Company’s recruitment of Ms. Donigan as Chief Executive Officer; Ms. Donigan will participate in Rite Aid’s long-term incentive program beginning in the Company’s 2021 fiscal year.
|
(2)
|
Reflects inducement award conveyed to facilitate the Company’s recruitment of Mr. Peters as Chief Operating Officer; Mr. Peters will participate in Rite Aid’s long-term incentive program beginning in the Company’s 2021 fiscal year.
|
56
|
| |
|
| |
|
|
| |
|
| |
57
|
|
Position
|
| |
Minimum Ownership Requirements
|
|
|
Chief Executive Officer
|
| |
5 times base salary
|
|
|
Chief Operating Officer
|
| |
3 times base salary
|
|
|
Senior Executive Vice Presidents
|
| |
3 times base salary
|
|
|
Executive Vice Presidents
|
| |
2 times base salary
|
|
|
Senior Vice Presidents
|
| |
1 times base salary
|
|
|
Non-Management Directors
|
| |
5 times annual cash retainer
|
|
•
|
Shares owned outright by the participant or his or her immediate family members residing in the same household;
|
•
|
Restricted stock and restricted stock units whether or not vested; and
|
•
|
Shares underlying Rite Aid stock options whether or not vested.
|
58
|
| |
|
| |
|
*
|
Mr. Bodaken served on the Compensation Committee at the commencement of the 2020 fiscal year until April 10, 2019, at which time Ms. Quinn joined the Compensation Committee and the Board.
|
|
| |
|
| |
59
|
|
Name and Principal Position(1)
|
| |
Fiscal
Year |
| |
Salary
($) |
| |
Bonus
($) |
| |
Stock
Awards ($)(2) |
| |
Option
Awards ($)(2) |
| |
Non-Equity
Incentive Plan Compensation ($)(3) |
| |
Change In
Pension Value and Nonqualified Deferred Compensation Earnings ($)(4) |
| |
All Other
Compensation ($)(5) |
| |
Total
($) |
|
|
Heyward Donigan (President and CEO)
|
| |
2020
|
| |
538,462
|
| |
3,203,234
|
| |
1,999,998
|
| |
1,999,646
|
| |
777,000
|
| |
—
|
| |
101,000
|
| |
8,619,340
|
|
|
James J. Peters (COO)
|
| |
2020
|
| |
288,462
|
| |
—
|
| |
499,770
|
| |
499,969
|
| |
260,156
|
| |
—
|
| |
10,000
|
| |
1,558,356
|
|
|
Matthew Schroeder (Executive VP, CFO)
|
| |
2020
|
| |
544,098
|
| |
—
|
| |
247,722
|
| |
—
|
| |
366,300
|
| |
258,466
|
| |
215,700
|
| |
1,632,286
|
|
|
Jocelyn Z. Konrad (Executive VP, Chief Pharmacy Officer)
|
| |
2020
|
| |
594,663
|
| |
—
|
| |
359,898
|
| |
—
|
| |
399,660
|
| |
32,310
|
| |
250,969
|
| |
1,637,500
|
|
|
2019
|
| |
461,034
|
| |
—
|
| |
207,592
|
| |
—
|
| |
204,103
|
| |
—
|
| |
358,250
|
| |
1,230,979
|
| |||
|
2018
|
| |
427,846
|
| |
—
|
| |
571,326
|
| |
—
|
| |
252,450
|
| |
33,665
|
| |
124,000
|
| |
1,409,287
|
| |||
|
James J. Comitale (Former Executive VP, General Counsel and Secretary)
|
| |
2020
|
| |
565,577
|
| |
—
|
| |
212,667
|
| |
—
|
| |
188,977
|
| |
63,302
|
| |
275,477
|
| |
1,306,001
|
|
|
John T. Standley
(Former CEO) |
| |
2020
|
| |
600,886
|
| |
—
|
| |
—
|
| |
—
|
| |
734,938
|
| |
580,182
|
| |
2,063,139
|
| |
3,979,146
|
|
|
2019
|
| |
1,220,550
|
| |
—
|
| |
1,830,829
|
| |
—
|
| |
1,440,249
|
| |
53,994
|
| |
3,320,207
|
| |
7,865,829
|
| |||
|
2018
|
| |
1,219,857
|
| |
—
|
| |
5,640,243
|
| |
—
|
| |
1,825,943
|
| |
314,545
|
| |
319,874
|
| |
9,320,462
|
| |||
|
Kermit R. Crawford
(Former President and COO) |
| |
2020
|
| |
96,154
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
2,356,770
|
| |
2,452,924
|
|
|
2019
|
| |
1,000,000
|
| |
—
|
| |
1,274,966
|
| |
—
|
| |
1,032,500
|
| |
—
|
| |
252,000
|
| |
3,559,466
|
| |||
|
2018
|
| |
403,846
|
| |
—
|
| |
2,000,000
|
| |
1,080,000
|
| |
729,167
|
| |
18,921
|
| |
1,175,000
|
| |
5,406,934
|
| |||
|
Darren W. Karst
(Former Senior Executive VP,CFO and CAO) |
| |
2020
|
| |
294,490
|
| |
—
|
| |
—
|
| |
—
|
| |
249,924
|
| |
39,347
|
| |
1,849,343
|
| |
2,433,104
|
|
|
2019
|
| |
850,356
|
| |
—
|
| |
638,099
|
| |
—
|
| |
627,428
|
| |
|
| |
707,424
|
| |
2,823,307
|
| |||
|
2018
|
| |
829,856
|
| |
—
|
| |
1,534,638
|
| |
—
|
| |
776,284
|
| |
49,056
|
| |
782,185
|
| |
3,972,019
|
| |||
|
Bryan B. Everett (Former COO)
|
| |
2020
|
| |
590,221
|
| |
—
|
| |
562,438
|
| |
|
| |
383,178
|
| |
10,053
|
| |
1,015,787
|
| |
2,561,676
|
|
|
2019
|
| |
617,654
|
| |
—
|
| |
370,832
|
| |
—
|
| |
364,620
|
| |
—
|
| |
475,600
|
| |
1,828,706
|
| |||
|
2018
|
| |
533,784
|
| |
—
|
| |
1,626,434
|
| |
—
|
| |
392,700
|
| |
17,891
|
| |
413,475
|
| |
2,984,284
|
|
(1)
|
Ms. Donigan and Mr. Peters joined the Company on August 12, 2019 and October 7, 2019, respectively. Messrs. Schroeder and Comitale first became Named Executive Officers of the Company in fiscal year 2020. Mr. Comitale left the Company as of May 21, 2020. Mr. Standley left the Company as of August 14, 2019. Mr. Crawford left the Company as of March 12, 2019. Mr. Karst left the Company as of May 31, 2019. Mr. Everett left the Company as of October 11, 2019. For a description of the separation agreements entered into with Messrs. Standley, Crawford, Karst, and Everett, please see the narrative under the caption “Potential Payments Upon Termination or Change in Control, Named Executive Officer Departures.”
|
(2)
|
The amounts reported reflect the aggregate grant date fair value of each stock award and option award computed in accordance with FASB ASC Topic 718. For information regarding the assumptions used in determining the fair value of an award, please refer to Note 17 of the Company’s Annual Report on Form 10-K as filed with the SEC on April 27, 2020, Note 17 of the Company’s Annual Report on Form 10-K as filed with the SEC on April 25, 2019, and Note 17 of the Company’s Annual Report on Form 10-K as filed with the SEC on April 26, 2018.
|
(3)
|
The amounts in the “Non-Equity Incentive Plan Compensation” column for fiscal year 2020 represent annual cash incentive bonuses earned for performance in fiscal year 2020.
|
(4)
|
Represents above-market earnings (over 120% of the “applicable federal rate”), if applicable, under the Company’s defined contribution supplemental executive retirement plan, which was terminated as of March 2019.
|
60
|
| |
|
| |
|
(5)
|
The amounts in the “All Other Compensation” column for fiscal year 2020 consist of the following:
|
|
Name
|
| |
Financial
Planning ($) |
| |
Severance
Paid or Accrued ($) |
| |
Relocation,
Housing/ Transportation Expenses ($)(a) |
| |
Employer
Paid Taxes ($) |
| |
Automobile
Allowance ($) |
| |
401(k)
Matching Contributions ($) |
| |
Retention/
Award Paid ($)(b) |
| |
Consulting
Fee ($)(c) |
|
|
Ms. Donigan
|
| |
10,000
|
| |
—
|
| |
85,000
|
| |
—
|
| |
6,000
|
| |
—
|
| |
—
|
| |
—
|
|
|
Mr. Peters
|
| |
5,000
|
| |
—
|
| |
—
|
| |
—
|
| |
5,000
|
| |
—
|
| |
—
|
| |
—
|
|
|
Mr. Schroeder
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
12,000
|
| |
11,200
|
| |
192,500
|
| |
—
|
|
|
Ms. Konrad
|
| |
2,769
|
| |
—
|
| |
—
|
| |
—
|
| |
12,000
|
| |
11,200
|
| |
225,000
|
| |
—
|
|
|
Mr. Comitale
|
| |
2,277
|
| |
—
|
| |
—
|
| |
—
|
| |
12,000
|
| |
11,200
|
| |
250,000
|
| |
—
|
|
|
Mr. Standley
|
| |
8,975
|
| |
1,928,164
|
| |
—
|
| |
—
|
| |
6,000
|
| |
—
|
| |
—
|
| |
120,000
|
|
|
Mr. Crawford
|
| |
—
|
| |
2,355,770
|
| |
—
|
| |
—
|
| |
1,000
|
| |
—
|
| |
—
|
| |
—
|
|
|
Mr. Karst
|
| |
—
|
| |
1,398,829
|
| |
21,188
|
| |
—
|
| |
3,000
|
| |
11,200
|
| |
415,125
|
| |
—
|
|
|
Mr. Everett
|
| |
5,000
|
| |
616,587
|
| |
—
|
| |
—
|
| |
8,000
|
| |
11,200
|
| |
300,000
|
| |
75,000
|
|
(a)
|
Ms. Donigan received a fixed amount of relocation assistance in connection with her recruitment to the Company pursuant to her employment agreement. Mr. Karst was reimbursed for certain housing and transportation expenses pursuant to his employment agreement. The Company determines the incremental cost of said expenses based on the out-of-pocket amounts paid for rent, utilities, and travel. The Company determines the incremental cost of said expenses based on the out-of-pocket amounts paid for rent and utilities.
|
(b)
|
Represents final payment of retention awards granted in fiscal year 2018.
|
(c)
|
Represents consulting fees paid during fiscal year 2020 pursuant to consulting agreements between the Company and (i) Avalon Retail Consulting, Inc., pursuant to which Mr. Standley provided consulting services to the Company for the principal purpose of assisting in the orderly transition of his previous role and responsibilities; and (ii) Mr. Everett, pursuant to which Mr. Everett provided consulting services to the Company for the principal purpose of assisting in the orderly transition of his previous role and responsibilities.
|
|
| |
|
| |
61
|
|
|
| |
|
| |
Estimated Future Payouts
Under Non-Equity Incentive Plan Awards(1) |
| |
Estimated Future
Payouts Under Equity Incentive Plan Awards |
| |
All
Other Stock Awards (#)(2) |
| |
All
Other Option Awards (#)(3) |
| |
Exercise
or Base Price of Option Awards ($/Sh) |
| |
Grant Date
Fair Value of Stock and Option Awards ($)(4) |
| ||||||||||||
|
Name
|
| |
Grant
Date |
| |
Threshold
($) |
| |
Target
($) |
| |
Max
($) |
| |
Threshold
(#) |
| |
Target
(#) |
| |
Max
(#) |
| ||||||||||||
|
Heyward Donigan
|
| |
8/12/2019
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
284,900
|
| |
502,913
|
| |
7.02
|
| |
3,999,998
|
|
|
|
| |
|
| |
291,667
|
| |
1,166,667
|
| |
2,333,333
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
James J. Peters
|
| |
10/7/2019
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
61,700
|
| |
108,900
|
| |
8.10
|
| |
999,739
|
|
|
|
| |
|
| |
97,656
|
| |
390,625
|
| |
781,250
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
Matthew Schroeder
|
| |
7/17/2019
|
| |
216,563
|
| |
577,500
|
| |
1,443,750
|
| |
—
|
| |
—
|
| |
—
|
| |
31,800
|
| |
—
|
| |
—
|
| |
247,722
|
|
|
|
| |
|
| |
137,500
|
| |
550,000
|
| |
1,100,000
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
Jocelyn Z. Konrad
|
| |
7/17/2019
|
| |
315,000
|
| |
840,000
|
| |
2,100,000
|
| |
—
|
| |
—
|
| |
—
|
| |
46,200
|
| |
—
|
| |
—
|
| |
359,898
|
|
|
|
| |
|
| |
150,000
|
| |
600,000
|
| |
1,200,000
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
James J. Comitale
|
| |
7/17/2019
|
| |
186,211
|
| |
496,562
|
| |
1,241,405
|
| |
—
|
| |
—
|
| |
—
|
| |
27,300
|
| |
—
|
| |
—
|
| |
212,667
|
|
|
|
| |
|
| |
70,938
|
| |
283,750
|
| |
567,500
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
John T. Standley(5)
|
| |
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
|
| |
|
| |
610,275
|
| |
2,441,100
|
| |
4,882,200
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
Kermit R. Crawford(6)
|
| |
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
|
| |
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
Darren W. Karst(7)
|
| |
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
|
| |
|
| |
372,203
|
| |
1,488,813
|
| |
2,977,625
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
Bryan B. Everett(8)
|
| |
7/17/2019
|
| |
492,188
|
| |
1,312,500
|
| |
3,281,250
|
| |
—
|
| |
—
|
| |
—
|
| |
72,200
|
| |
—
|
| |
—
|
| |
562,438
|
|
|
|
| |
|
| |
234,375
|
| |
937,500
|
| |
1,875,000
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
(1)
|
On July 17, 2019, each Named Executive Officer received a grant of cash-based performance units that will be earned at the end of the Company’s 2022 fiscal year based upon the achievement of cumulative Adjusted EBITDA, EBITDA contribution from specific strategic initiatives and cumulative leverage ratio, subject to modification +/-25% based on our relative stockholder return versus the Russell 3000 Index over the three-year vesting period; provided that the Named Executive Officer is continuously employed at the Company through the date of the earnings release. The second row of the table for each Named Executive Officer reflects each such officer’s opportunity to earn an annual cash incentive bonus, as discussed in the Compensation Discussion and Analysis under the caption “Cash Incentive Bonuses.” For Ms. Donigan and Mr. Peters, who were each recruited to the Company in fiscal year 2020, pursuant to their employment agreements with the Company, the opportunity reflects the threshold, target and maximum amounts as prorated for the number of months in the fiscal year in which they served, which could have been earned at threshold, target and maximum performance. Actual annual cash incentives earned for the fiscal year are shown in the Summary Compensation Table above.
|
(2)
|
Except as noted below, grants were made under the Company’s 2014 Omnibus Equity Plan. On July 17, 2019, certain of the Named Executive Officers received a grant of restricted stock, as described in the Compensation Discussion and Analysis, under the caption “Components of Executive Compensation for Fiscal Year 2020—Restricted Stock.” The grants to Ms. Donigan and Mr. Peters were inducement awards upon their recruitment to Rite Aid which were granted on August 12, 2019 and October 7, 2019, respectively. Ms. Donigan’s restricted stock award was made under her Employment Inducement Award Plan dated August 12, 2019.
|
|
Name
|
| |
Restricted
Shares (#) |
| |
Vesting Schedule
|
|
|
Ms. Donigan
|
| |
284,900
|
| |
One-third on each of first three anniversaries of grant date
|
|
|
Mr. Peters
|
| |
61,700
|
| |
One-third on each of first three anniversaries of grant date
|
|
|
Mr. Schroeder
|
| |
31,800
|
| |
One-third on each of first three anniversaries of grant date
|
|
|
Ms. Konrad
|
| |
46,200
|
| |
One-third on each of first three anniversaries of grant date
|
|
|
Mr. Comitale
|
| |
27,300
|
| |
One-third on each of first three anniversaries of grant date
|
|
|
Mr. Standley
|
| |
|
| |
N/A
|
|
|
Mr. Crawford
|
| |
|
| |
N/A
|
|
|
Mr. Karst
|
| |
|
| |
N/A
|
|
|
Mr. Everett
|
| |
72,200
|
| |
One-third on each of first three anniversaries of grant date
|
|
62
|
| |
|
| |
|
(3)
|
Each of Ms. Donigan and Mr. Peters received an inducement award of stock options upon their recruitment to Rite Aid. Ms. Donigan’s award will vest with respect to one-quarter of the award on each of first four anniversaries of grant date. Mr. Peters’ award will vest with respect to one-third on each of first three anniversaries of grant date. Ms. Donigan’s stock option award was made under her Employment Inducement Award Plan dated August 12, 2019.
|
(4)
|
Represents the grant date fair value, measured in accordance with FASB ASC Topic 718 of stock awards made in fiscal year 2020. Grant date fair values are calculated pursuant to assumptions set forth in Note 17 of the Company’s Annual Report on form 10-K filed with the SEC on April 27, 2020.
|
(5)
|
Mr. Standley did not receive an equity award for fiscal year 2020 and was eligible for a prorated portion of any earned fiscal year 2020 annual cash incentive upon his departure and pursuant to his March 12, 2019 separation agreement.
|
(6)
|
Mr. Crawford did not receive any plan-based award for fiscal year 2020.
|
(7)
|
Mr. Karst did not receive an equity award for fiscal year 2020 and was eligible for a prorated portion of any earned fiscal year 2020 annual cash incentive, pursuant to his March 12, 2019 separation agreement.
|
(8)
|
Mr. Everett is not eligible for the 2020-2022 long-term performance-based cash award and one-third of the restricted stock units granted on July 17, 2019 as a result of his separation from employment with the Company on October 11, 2019, and was eligible for a prorated portion of any earned fiscal year 2020 annual cash incentive upon his departure and pursuant to his October 2, 2019 separation agreement.
|
|
| |
|
| |
63
|
64
|
| |
|
| |
|
|
| |
|
| |
65
|
|
|
| |
Option Awards
|
| |
Stock Awards
|
| ||||||||||||||||||||||||
|
Name
|
| |
Date of
Grant |
| |
Number of
Securities Underlying Unexercised Options (#) Exercisable |
| |
Number of
Securities Underlying Unexercised Options (#) Unexercisable(1)(2) |
| |
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) |
| |
Option
Exercise Price ($) |
| |
Option
Expiration Date |
| |
Number of
Shares or Units of Stock That Have Not Vested (#)(1)(3) |
| |
Market
Value of Shares or Units of Stock That Have Not Vested ($)(4) |
| |
Equity
Incentive Plan Awards: # of Unearned Shares or Units That Have Not Vested (#)(1)(5) |
| |
Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares or Units of Stock That Have Not Vested ($)(4) |
|
|
Heyward Donigan
|
| |
8/12/2019
|
| |
—
|
| |
502,913
|
| |
—
|
| |
7.02
|
| |
8/12/2029
|
| |
284,900
|
| |
3,880,338
|
| |
—
|
| |
—
|
|
|
James J. Peters
|
| |
10/7/2019
|
| |
—
|
| |
108,900
|
| |
—
|
| |
8.10
|
| |
10/7/2029
|
| |
61,700
|
| |
840,354
|
| |
—
|
| |
—
|
|
|
Matthew Schroeder
|
| |
6/25/2012
|
| |
1,213
|
| |
—
|
| |
—
|
| |
26.40
|
| |
6/25/2022
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
|
| |
6/24/2013
|
| |
694
|
| |
—
|
| |
—
|
| |
55.20
|
| |
6/24/2023
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
|
| |
6/23/2014
|
| |
740
|
| |
—
|
| |
—
|
| |
141.60
|
| |
6/23/2024
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
|
| |
6/24/2015
|
| |
745
|
| |
—
|
| |
—
|
| |
173.60
|
| |
6/24/2025
|
| |
|
| |
|
| |
|
| |
|
|
|
|
| |
7/17/2017
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
573
|
| |
7,804
|
| |
1,720
|
| |
23,426
|
|
|
|
| |
7/17/2019
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
3,863
|
| |
52,614
|
| |
|
| |
|
|
|
|
| |
1/4/2019
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
31,800
|
| |
433,116
|
| |
|
| |
|
|
|
Jocelyn Z. Konrad
|
| |
6/27/2011
|
| |
1,655
|
| |
—
|
| |
—
|
| |
24.80
|
| |
6/27/2021
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
|
| |
6/25/2012
|
| |
1,690
|
| |
—
|
| |
—
|
| |
26.40
|
| |
6/25/2022
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
|
| |
6/24/2013
|
| |
675
|
| |
—
|
| |
—
|
| |
55.20
|
| |
6/24/2023
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
|
| |
6/23/2014
|
| |
330
|
| |
—
|
| |
—
|
| |
141.60
|
| |
6/23/2024
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
|
| |
6/24/2015
|
| |
580
|
| |
—
|
| |
|
| |
173.60
|
| |
6/24/2025
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
|
| |
7/17/2017
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
2,230
|
| |
30,373
|
| |
6,690
|
| |
91,118
|
|
|
|
| |
1/4/2019
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
8,986
|
| |
122,389
|
| |
|
| |
|
|
|
|
| |
7/17/2019
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
46,200
|
| |
629,244
|
| |
|
| |
|
|
|
James J. Comitale
|
| |
6/25/2012
|
| |
1,210
|
| |
—
|
| |
—
|
| |
26.40
|
| |
6/25/2022(6)
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
|
| |
6/24/2013
|
| |
930
|
| |
—
|
| |
—
|
| |
55.20
|
| |
6/24/2023(6)
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
|
| |
6/23/2014
|
| |
450
|
| |
—
|
| |
—
|
| |
141.60
|
| |
6/23/2024(6)
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
|
| |
6/24/2015
|
| |
375
|
| |
—
|
| |
—
|
| |
173.60
|
| |
6/24/2025(6)
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
|
| |
7/17/2017
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
1,218
|
| |
16,589
|
| |
3,655
|
| |
49,781
|
|
|
|
| |
1/4/2019
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
6,720
|
| |
91,526
|
| |
|
| |
|
|
|
|
| |
7/17/2019
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
27,300
|
| |
371,826
|
| |
|
| |
|
|
|
John T. Standley
|
| |
6/23/2010
|
| |
71,430
|
| |
—
|
| |
—
|
| |
21.40
|
| |
6/23/2020
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
|
| |
6/27/2011
|
| |
118,079
|
| |
—
|
| |
—
|
| |
24.80
|
| |
8/14/2020
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
|
| |
6/27/2011
|
| |
70,175
|
| |
—
|
| |
—
|
| |
24.80
|
| |
8/14/2020
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
|
| |
6/25/2012
|
| |
68,965
|
| |
—
|
| |
—
|
| |
26.40
|
| |
8/14/2020
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
|
| |
6/24/2013
|
| |
46,815
|
| |
—
|
| |
—
|
| |
55.20
|
| |
8/14/2020
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
|
| |
6/23/2014
|
| |
33,925
|
| |
—
|
| |
—
|
| |
141.60
|
| |
8/14/2020
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
|
| |
6/24/2015
|
| |
28,465
|
| |
—
|
| |
—
|
| |
173.60
|
| |
8/14/2020
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
Kermit R. Crawford
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
Darren W. Karst
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
Bryan B. Everett
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
(1)
|
Refer to “Potential Payments Upon Termination or Change in Control” below for circumstances under which the terms of the vesting of equity awards would be accelerated.
|
(2)
|
The stock options granted to Ms. Donigan will vest in equal installments on each of the first four anniversaries of the grant date, and the stock options granted to Mr. Peters will vest in equal installments on each of the first three anniversaries of the grant date, in each case, based on continued employment.
|
(3)
|
Restricted shares will generally vest one-third on each of the first three anniversaries of the grant date, based on continued employment.
|
(4)
|
Determined with reference to $13.62, the closing price of a share of Rite Aid common stock on the last trading day before February 29, 2020.
|
(5)
|
For a discussion of the terms and conditions of the performance units granted on July 17, 2017, see “Compensation Discussion and Analysis, Long-Term Incentives, 2018-2020 Plan.”
|
(6)
|
These stock options will expire on August 21, 2020 based on Mr. Comitale’s departure on May 21, 2020.
|
66
|
| |
|
| |
|
|
|
| |
Option Awards
|
| |
Stock Awards
|
| ||||||
|
Name
|
| |
Number of Shares
Acquired on Exercise (#) |
| |
Value
Realized on Exercise ($) |
| |
Number of Shares
Acquired on Vesting (#) |
| |
Value
Realized on Vesting ($) |
|
|
Heyward Donigan
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
James J. Peters
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
Matthew Schroeder
|
| |
—
|
| |
—
|
| |
2,671
|
| |
21,587
|
|
|
Jocelyn Z. Konrad
|
| |
—
|
| |
—
|
| |
7,370
|
| |
58,936
|
|
|
James J. Comitale
|
| |
—
|
| |
—
|
| |
4,921
|
| |
39,630
|
|
|
John T. Standley
|
| |
—
|
| |
—
|
| |
169,300
|
| |
1,032,714
|
|
|
Kermit R. Crawford
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
Darren W. Karst
|
| |
—
|
| |
—
|
| |
33,614
|
| |
257,483
|
|
|
Bryan B. Everett
|
| |
—
|
| |
—
|
| |
115,499
|
| |
1,035,893
|
|
|
Name
|
| |
Executive
Contributions in Last FY ($) |
| |
Registrant
Contributions in Last FY ($)(2) |
| |
Aggregate
Earnings in Last FY ($)(2) |
| |
Aggregate
Withdrawals / Forfeitures ($) |
| |
Aggregate
Balance at Last FYE ($) |
|
|
Heyward Donigan
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
James J. Peters
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
Matthew Schroeder(1)
|
| |
—
|
| |
—
|
| |
301,459
|
| |
2,348,752
|
| |
—
|
|
|
Jocelyn Z. Konrad(1)
|
| |
—
|
| |
—
|
| |
43,810
|
| |
591,454
|
| |
—
|
|
|
James J. Comitale(1)
|
| |
—
|
| |
—
|
| |
91,533
|
| |
1,435,861
|
| |
—
|
|
|
John T. Standley(1)
|
| |
—
|
| |
—
|
| |
669,623
|
| |
4,928,681
|
| |
—
|
|
|
Kermit R. Crawford(1)
|
| |
—
|
| |
—
|
| |
5,011
|
| |
328,779
|
| |
—
|
|
|
Darren W. Karst(1)
|
| |
—
|
| |
—
|
| |
60,212
|
| |
1,053,794
|
| |
—
|
|
|
Bryan B. Everett(1)
|
| |
—
|
| |
—
|
| |
30,066
|
| |
508,758
|
| |
—
|
|
(1)
|
Amounts shown relate to a defined contribution supplemental executive retirement plan which covered certain Named Executive Officers and was terminated by the Company effective February 25, 2019, such that no further accruals or contributions were made in the 2020 fiscal year. Please refer to the Compensation Discussion and Analysis under the caption “Post-Retirement Benefits” for a description of the material terms of this plan.
|
(2)
|
Amounts shown were reported to the extent required in the “All Other Compensation” column of the Summary Compensation Table for fiscal year 2019.
|
|
| |
|
| |
67
|
•
|
she will be entitled to receive a severance amount equal to two times the sum of the annual base salary and target bonus, a pro-rata bonus for the fiscal year of termination based on actual performance, and any accrued but unpaid salary and benefits through the date of termination. The severance amount would be payable in installments over the two-year period following the termination; any pro-rata bonus for the fiscal year would be paid following determination of performance at the same time that payments are made to other bonus-eligible associates;
|
•
|
she will be entitled to receive a payment equal to the cost of continued health benefits under COBRA for two years following the termination, paid in a lump sum; and
|
•
|
outstanding stock options will immediately vest and be exercisable, generally, for a period of 90 days following the termination of employment and the restrictions on time-based restricted stock will immediately lapse, each to the extent the options would have vested and restrictions would have lapsed, had she remained employed by Rite Aid for two years following the termination.
|
•
|
he will be entitled to receive a severance amount equal to two times the sum of the annual base salary and target bonus, a pro-rata bonus for the fiscal year of termination based on actual performance, and any accrued but unpaid salary and benefits through the date of termination. The severance amount would be payable in installments over the two-year period following the termination; any pro-rata bonus for the fiscal year would be paid following determination of performance at the same time that payments are made to other bonus-eligible associates;
|
•
|
he will be entitled to receive a payment equal to the cost of continued health benefits under COBRA for eighteen months following the termination, paid in a lump sum; and
|
•
|
outstanding stock options will immediately vest and be exercisable, generally, for a period of 90 days following the termination of employment and the restrictions on time-based restricted stock will immediately lapse, each to the extent the options would have vested and restrictions would have lapsed, had he remained employed by Rite Aid for two years following the termination.
|
68
|
| |
|
| |
|
•
|
he will be entitled to receive a severance amount equal to two times the sum of the annual base salary and target bonus, a pro-rata target bonus for the fiscal year of termination, and any accrued but unpaid salary and benefits through the date of termination. The severance amount would be payable in installments over the two-year period following the termination; any pro-rata bonus for the fiscal year would be paid at the same time that payments are made to other bonus-eligible associates;
|
•
|
he will be entitled to receive continued health benefits for two years following the termination; and
|
•
|
outstanding stock options will immediately vest and be exercisable, generally, for a period of 90 days following the termination of employment to the extent the options would have vested had he remained employed by Rite Aid for two years following the termination.
|
•
|
she will be entitled to receive a severance amount equal to two times annual base salary as of the date of termination of employment, a pro-rata bonus for the fiscal year of termination based on actual performance, and any accrued but unpaid salary and benefits through the date of termination. The severance amount would be payable in installments over the two-year period following the termination; any pro-rata bonus for the fiscal year would be paid following determination of performance at the same time that payments are made to other bonus-eligible associates;
|
•
|
she will be entitled to receive continued health benefits for two years following the termination; and
|
•
|
outstanding stock options will immediately vest and be exercisable, generally, for a period of 90 days following the termination of employment and the restrictions on the restricted common stock will immediately lapse, each to the extent the options would have vested and restrictions would have lapsed, in each case, had she remained employed by Rite Aid for two years following the termination.
|
•
|
he will be entitled to receive a severance amount equal to two times the sum of the annual base salary and target bonus, a pro-rata bonus for the fiscal year of termination based on actual performance, and any accrued but unpaid salary and benefits through the date of termination. The severance amount would be payable in installments over the two-year period following the termination; any pro-rata bonus for the fiscal year would be paid following determination of performance at the same time that payments are made to other bonus-eligible associates;
|
•
|
he will be entitled to receive continued health benefits for two years following the termination; and
|
•
|
all outstanding stock options will immediately vest and be exercisable, generally, for a period of 90 days following the termination of employment and the restrictions on the restricted common stock will immediately lapse, each to the extent the options would have vested and restrictions would have lapsed, in each case, had he remained employed by Rite Aid for two years following the termination.
|
|
| |
|
| |
69
|
•
|
Rite Aid would pay the officer all accrued but unpaid salary and benefits;
|
•
|
any portion of any then-outstanding stock option grant that was not exercised prior to the date of termination would immediately terminate (provided that if the officer terminates his or her employment without good reason, any options that have vested and become exercisable prior to the date of termination will generally remain exercisable for a period of 90 days); and
|
•
|
any portion of any restricted stock award, or other long-term incentive award, as to which the restrictions would not have lapsed or as to which any other conditions were not satisfied prior to the date of termination would be forfeited.
|
70
|
| |
|
| |
|
|
Heyward Donigan
|
| |
Death ($)
|
| |
Disability ($)
|
| |
Termination
Without Cause or Quit for Good Reason ($) |
| |
Termination Without
Cause or Quit for Good Reason Following a Change in Control ($) |
|
|
2 × Base Salary
|
| |
n/a
|
| |
n/a
|
| |
2,000,000
|
| |
2,000,000
|
|
|
2 × Bonus
|
| |
n/a
|
| |
n/a
|
| |
4,000,000
|
| |
4,000,000
|
|
|
Pro-Rated Incentive Bonus for Past Fiscal Year
|
| |
777,000
|
| |
777,000
|
| |
777,000
|
| |
777,000
|
|
|
Benefits
|
| |
31,841
|
| |
31,841
|
| |
31,841
|
| |
31,841
|
|
|
Vesting of Equity(1)
|
| |
4,246,505
|
| |
4,246,505
|
| |
4,246,505
|
| |
7,199,564(2)
|
|
|
James J. Peters
|
| |
Death ($)
|
| |
Disability ($)
|
| |
Termination
Without Cause or Quit for Good Reason ($) |
| |
Termination Without
Cause or Quit for Good Reason Following a Change in Control ($) |
|
|
2 × Base Salary
|
| |
n/a
|
| |
n/a
|
| |
1,500,000
|
| |
1,500,000
|
|
|
2 × Bonus
|
| |
n/a
|
| |
n/a
|
| |
1,875,000
|
| |
1,875,000
|
|
|
Pro-Rated Incentive Bonus for Past Fiscal Year
|
| |
260,156
|
| |
260,156
|
| |
260,156
|
| |
260,156
|
|
|
Benefits
|
| |
31,007
|
| |
31,007
|
| |
31,007
|
| |
31,007
|
|
|
Vesting of Equity(1)
|
| |
960,988
|
| |
960,988
|
| |
960,988
|
| |
1,223,064(2)
|
|
|
Matthew Schroeder
|
| |
Death ($)
|
| |
Disability ($)
|
| |
Termination
Without Cause or Quit for Good Reason ($) |
| |
Termination Without
Cause or Quit for Good Reason Following a Change in Control ($) |
|
|
2 × Base Salary
|
| |
n/a
|
| |
n/a
|
| |
1,100,000
|
| |
1,100,000
|
|
|
2 × Bonus
|
| |
n/a
|
| |
n/a
|
| |
1,100,000
|
| |
1,100,000
|
|
|
Pro-Rated Incentive Bonus for Past Fiscal Year
|
| |
366,300
|
| |
366,300
|
| |
366,300
|
| |
366,300
|
|
|
Benefits
|
| |
30,339
|
| |
30,339
|
| |
30,339
|
| |
30,339
|
|
|
Vesting of Equity(1)
|
| |
349,162
|
| |
349,162
|
| |
349,162
|
| |
385,398(2)
|
|
|
| |
|
| |
71
|
|
Jocelyn Z. Konrad
|
| |
Death ($)
|
| |
Disability ($)
|
| |
Termination
Without Cause or Quit for Good Reason ($) |
| |
Termination Without
Cause or Quit for Good Reason Following a Change in Control ($) |
|
|
2 × Base Salary
|
| |
n/a
|
| |
n/a
|
| |
1,200,000
|
| |
1,200,000
|
|
|
2 × Bonus
|
| |
n/a
|
| |
n/a
|
| |
n/a
|
| |
n/a
|
|
|
Pro-Rated Incentive Bonus for Past Fiscal Year
|
| |
399,600
|
| |
399,600
|
| |
399,600
|
| |
399,600
|
|
|
Benefits
|
| |
30,505
|
| |
30,505
|
| |
30,505
|
| |
30,505
|
|
|
Vesting of Equity(1)
|
| |
572,258
|
| |
572,258
|
| |
572,258
|
| |
629,674(2)
|
|
|
James J. Comitale(a)
|
| |
Death ($)
|
| |
Disability ($)
|
| |
Termination
Without Cause or Quit for Good Reason ($) |
| |
Termination Without
Cause or Quit for Good Reason Following a Change in Control ($) |
|
|
2 × Base Salary
|
| |
n/a
|
| |
n/a
|
| |
1,135,000
|
| |
1,135,000
|
|
|
2 × Bonus
|
| |
n/a
|
| |
n/a
|
| |
567,500
|
| |
567,500
|
|
|
Pro-Rated Incentive Bonus for Past Fiscal Year
|
| |
188,977
|
| |
188,977
|
| |
188,977
|
| |
188,977
|
|
|
Benefits
|
| |
30,399
|
| |
30,399
|
| |
30,399
|
| |
30,399
|
|
|
Vesting of Equity(1)
|
| |
356,000
|
| |
356,000
|
| |
356,000
|
| |
391,238(2)
|
|
(a)
|
Mr. Comitale will be entitled to receive the benefits payable upon a termination without cause as governed by his employment agreement, based on his base salary and target annual bonus as of May 21, 2020, the date of his departure.
|
(1)
|
Includes the value of equity awards and performance awards held by the officer that would become vested under the applicable circumstances. The value of stock options shown is based on the excess of $13.62, the closing price of a share of Rite Aid common stock on the last trading day before February 29, 2020, over the exercise price of such options, multiplied by the number of unvested stock options held by the officer that would become vested under the applicable circumstances. The value of restricted stock and performance awards that are settled in stock shown is determined by multiplying $13.62, the closing price of a share of Rite Aid common stock on the last trading day before February 29, 2020 and the number of shares of restricted stock and the number of performance awards that are settled in stock held by the officer that would become vested under the applicable circumstances.
|
(2)
|
The value would also apply upon a change in control under the assumption that outstanding equity awards are not assumed or substituted in the change in control transaction, resulting in full vesting upon the change in control, as described above in the “Potential Payments Upon Termination or Change in Control—Change in Control Arrangements” narrative.
|
72
|
| |
|
| |
|
|
| |
|
| |
73
|
74
|
| |
|
| |
|
•
|
Met with our internal auditors and independent registered public accounting firm, with and without management present, to discuss the overall scope and plans for their respective audits, the results of their examinations, their evaluations of our internal control over financial reporting and the overall quality of our financial reporting.
|
•
|
Reviewed and discussed with management and our independent registered public accounting firm, for their respective purposes, the audited financial statements included in our Annual Report on Form 10-K for fiscal year 2020. The discussions included the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements and the Annual Report on Form 10-K for fiscal year 2020.
|
•
|
Reviewed the unaudited interim financial statements and Forms 10-Q prepared each quarter by the Company.
|
•
|
Received management representations that the Company’s financial statements were prepared in accordance with accounting principles generally accepted in the United States of America.
|
•
|
Reviewed and updated the Audit Committee charter.
|
•
|
Reviewed and discussed with our independent registered public accounting firm those matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the SEC.
|
•
|
Discussed with our independent registered public accounting firm matters relating to their independence and received the written disclosures and the letter from our independent registered public accounting firm required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the Audit Committee concerning independence. The Audit Committee has considered whether the level of non-audit related services provided by our independent registered public accounting firm is consistent with maintaining their independence.
|
•
|
Pre-approved audit, other audit-related, and tax services performed by our independent registered public accounting firm.
|
|
| |
|
| |
75
|
|
|
| |
Year Ended
|
| |||
|
Description of Fees
|
| |
February 29,
2020 |
| |
March 2,
2019 |
|
|
|
| |
(Amounts in
millions) |
| |||
|
Audit Fees, including audit of annual financial statements and reviews of interim financial statements, registration statement filings and comfort letters related to various refinancing activities
|
| |
$2.3
|
| |
$2.4
|
|
|
Audit-Related Fees, acquisition-related due diligence procedures and audits of employee benefit plans’ financial statements
|
| |
$0.2
|
| |
$0.2
|
|
|
Tax Fees, tax compliance advice and planning
|
| |
$0.0
|
| |
$0.0
|
|
|
All Other Fees
|
| |
$0.0
|
| |
$0.0
|
|
|
Total
|
| |
$2.5
|
| |
$2.6
|
|
76
|
| |
|
| |
|
|
Plan Category
|
| |
Number of Securities
to be Issued Upon Exercise of Outstanding Options, Warrants and Rights |
| |
Weighted-Average
Exercise Price of Outstanding Options, Warrants and Rights |
| |
Number of Securities
Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) |
|
|
|
| |
(a)
|
| |
(b)
|
| |
(c)
|
|
|
Equity compensation plans approved by stockholders
|
| |
2,749,240(1)
|
| |
$30.29(2)
|
| |
580,253
|
|
|
Equity compensation plans not approved by stockholders
|
| |
—
|
| |
—
|
| |
—
|
|
|
Total(3)
|
| |
2,749,240(1)
|
| |
$30.29(2)
|
| |
580,253
|
|
(1)
|
Includes 1.253 million shares issuable with respect to outstanding unvested restricted stock units (“RSUs”) and 201,698 vested Director RSUs. The remaining balance consists of outstanding stock options.
|
(2)
|
The weighted average exercise price does not take into account the shares issuable upon settlement of outstanding RSUs, which have no exercise price.
|
(3)
|
On a fully diluted basis, which reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, the number of shares of common stock outstanding was 54,005,000.
|
|
| |
|
| |
77
|
|
Beneficial Owners
|
| |
Number of
Common Shares Beneficially Owned(1) |
| |
Percentage
of Class |
|
|
Named Executive Officers and Directors:
|
| |
|
| |
|
|
|
Bruce G. Bodaken
|
| |
29,654(2)
|
| |
*
|
|
|
Elizabeth ‘Busy’ Burr
|
| |
15,400(3)
|
| |
*
|
|
|
James J. Comitale
|
| |
46,733(4)
|
| |
*
|
|
|
Kermit R. Crawford
|
| |
0
|
| |
*
|
|
|
Heyward Donigan
|
| |
284,900
|
| |
*
|
|
|
Bryan B. Everett
|
| |
102
|
| |
*
|
|
|
Darren W. Karst
|
| |
9,572
|
| |
*
|
|
|
Robert E. Knowling, Jr.
|
| |
23,192(5)
|
| |
*
|
|
|
Jocelyn Z. Konrad
|
| |
72,069(6)
|
| |
*
|
|
|
Kevin E. Lofton
|
| |
28,894(7)
|
| |
*
|
|
|
Louis P. Miramontes
|
| |
23,192(8)
|
| |
*
|
|
|
Arun Nayar
|
| |
23,192(9)
|
| |
*
|
|
|
James J. Peters
|
| |
54,450
|
| |
*
|
|
|
Katherine B. Quinn
|
| |
15,400(10)
|
| |
*
|
|
|
Matthew Schroeder
|
| |
38,423(11)
|
| |
*
|
|
|
John T. Standley
|
| |
706,304(12)
|
| |
1.29%
|
|
|
Marcy Syms
|
| |
43,551(13)
|
| |
*
|
|
|
All Executive Officers and Directors (17 persons)
|
| |
832,139(14)
|
| |
1.52%
|
|
|
5% Stockholders:
|
| |
|
| |
|
|
|
BlackRock, Inc.
55 East 52nd Street New York, NY 10055 |
| |
4,322,536(15)
|
| |
7.90%
|
|
|
The Vanguard Group
100 Vanguard Blvd. Malvern, PA 19355 |
| |
5,494,828(16)
|
| |
10.04%
|
|
*
|
Percentage less than 1% of class.
|
(1)
|
Beneficial ownership has been determined in accordance with Rule 13d-3 under the Exchange Act, thereby including options exercisable within 60 days of May 11, 2020.
|
(2)
|
This amount represents 29,395 restricted stock units that have vested or will vest before July 10, 2020 at which time said units will be payable in shares of common stock when Mr. Bodaken leaves the Board.
|
(3)
|
This amount represents 15,400 restricted stock units that have vested or will vest before July 10, 2020 at which time said units will be payable in shares of common stock when Ms. Burr leaves the Board.
|
(4)
|
This amount includes 2,965 shares which may be acquired within 60 days by exercising stock options.
|
(5)
|
This amount represents 23,192 restricted stock units that have vested or will vest before July 10, 2020 at which time said units will be payable in shares of common stock when Mr. Knowling leaves the Board.
|
(6)
|
This amount includes 4,930 shares which may be acquired within 60 days by exercising stock options.
|
78
|
| |
|
| |
|
(7)
|
This amount represents 28,385 restricted stock units that have vested or will vest before July 10, 2020 at which time said units will be payable in shares of common stock when Mr. Lofton leaves the Board.
|
(8)
|
This amount represents 23,192 restricted stock units that have vested or will vest before July 10, 2020 at which time said units will be payable in shares of common stock when Mr. Miramontes leaves the Board.
|
(9)
|
This amount represents 23,192 restricted stock units that have vested or will vest before July 10, 2020 at which time said units will be payable in shares of common stock when Mr. Nayar leaves the Board.
|
(10)
|
This amount represents 15,400 restricted stock units that have vested or will vest before July 10, 2020 at which time said units will be payable in shares of common stock when Ms. Quinn leaves the Board.
|
(11)
|
This amount includes 3,392 shares which may be acquired within 60 days by exercising stock options.
|
(12)
|
This amount includes 437,854 shares which may be acquired within 60 days by exercising stock options.
|
(13)
|
This amount represents 43,551 restricted stock units that have vested or will vest before July 10, 2020 at which time said units will be payable in shares of common stock when Ms. Syms leaves the Board.
|
(14)
|
This amount includes 11,467 shares which may be acquired within 60 days by exercising stock options by all directors and executive officers and 201,707 restricted stock units that have vested and will be payable in shares of common stock when the directors leave the Rite Aid Board of Directors.
|
(15)
|
This information is as of December 31, 2019 and based solely on a Schedule 13G filed by BlackRock, Inc. with the SEC on February 6, 2020.
|
(16)
|
This information is as of April 30, 2020 and based solely on a Schedule 13G/A filed by The Vanguard Group with the SEC on May 8, 2020.
|
|
| |
|
| |
79
|
80
|
| |
|
| |
|
|
| |
|
| |
81
|
82
|
| |
|
| |
|
|
| |
|
| |
83
|
|
|
| |
February 29,
2020 (52 weeks) |
| |
March 2,
2019 (52 weeks) |
| |
March 3,
2018 (52 weeks) |
|
|
|
| |
(Dollars in thousands)
|
| ||||||
|
Net loss from continuing operations
|
| |
$(469,219)
|
| |
$(666,954)
|
| |
$(349,532)
|
|
|
Interest expense
|
| |
229,657
|
| |
227,728
|
| |
202,768
|
|
|
Income tax expense
|
| |
387,607
|
| |
77,477
|
| |
305,987
|
|
|
Depreciation and amortization
|
| |
328,277
|
| |
357,882
|
| |
386,057
|
|
|
LIFO (credit) charge
|
| |
(64,804)
|
| |
23,354
|
| |
(28,827)
|
|
|
Lease termination and impairment charges
|
| |
42,843
|
| |
107,994
|
| |
58,765
|
|
|
Goodwill and intangible asset impairment charges
|
| |
—
|
| |
375,190
|
| |
261,727
|
|
|
(Gain) loss on debt retirements, net
|
| |
(55,692)
|
| |
554
|
| |
—
|
|
|
Merger and Acquisition-related costs
|
| |
3,599
|
| |
37,821
|
| |
24,283
|
|
|
Stock-based compensation expense
|
| |
16,087
|
| |
12,115
|
| |
25,793
|
|
|
Restructuring-related costs
|
| |
105,642
|
| |
4,704
|
| |
—
|
|
|
Inventory write-downs related to store closings
|
| |
4,652
|
| |
13,487
|
| |
7,586
|
|
|
Litigation settlement
|
| |
—
|
| |
18,000
|
| |
—
|
|
|
Loss (gain) on sale of assets, net
|
| |
4,226
|
| |
(38,012)
|
| |
(25,872)
|
|
|
Walgreens Boots Alliance merger termination fee
|
| |
—
|
| |
—
|
| |
(325,000)
|
|
|
Other
|
| |
5,336
|
| |
12,104
|
| |
16,119
|
|
|
Adjusted EBITDA from continuing operations
|
| |
$538,211
|
| |
$563,444
|
| |
$559,854
|
|
|
| |
|
| |
A-1
|
|
|
| |
February 29,
2020 (52 weeks) |
| |
March 2,
2019 (52 weeks) |
| |
March 3,
2018 (52 weeks) |
|
|
|
| |
(Dollars in thousands)
|
| ||||||
|
Net loss
|
| |
$(469,219)
|
| |
$(666,954)
|
| |
$(349,532)
|
|
|
Add back—Income tax expense
|
| |
387,607
|
| |
77,477
|
| |
305,987
|
|
|
Loss before income taxes
|
| |
(81,612)
|
| |
(589,477)
|
| |
(43,545)
|
|
|
Adjustments:
|
| |
|
| |
|
| |
|
|
|
Amortization expense
|
| |
103,941
|
| |
125,640
|
| |
147,739
|
|
|
LIFO (credit) charge
|
| |
(64,804)
|
| |
23,354
|
| |
(28,827)
|
|
|
Goodwill and intangible asset impairment charges
|
| |
—
|
| |
375,190
|
| |
261,727
|
|
|
(Gain) loss on debt retirements, net
|
| |
(55,692)
|
| |
554
|
| |
—
|
|
|
Merger and Acquisition-related costs
|
| |
3,599
|
| |
37,821
|
| |
24,283
|
|
|
Restructuring-related costs
|
| |
105,642
|
| |
4,704
|
| |
—
|
|
|
Litigation settlement
|
| |
—
|
| |
18,000
|
| |
—
|
|
|
Walgreens Boots Alliance merger termination fee
|
| |
—
|
| |
—
|
| |
(325,000)
|
|
|
Adjusted income (loss) before income taxes
|
| |
11,074
|
| |
(4,214)
|
| |
36,377
|
|
|
Adjusted income tax expense (benefit)(a)
|
| |
3,061
|
| |
(1,163)
|
| |
13,937
|
|
|
Adjusted net income (loss)
|
| |
8,013
|
| |
$(3,051)
|
| |
$22,440
|
|
|
Net loss per diluted share
|
| |
$(8.82)
|
| |
$(12.62)
|
| |
$(6.66)
|
|
|
Adjusted net income (loss) per diluted share
|
| |
$0.15
|
| |
$(0.06)
|
| |
$0.42
|
|
(a)
|
The fiscal year 2020, 2019 and 2018 annual effective tax rates, calculated using a federal rate plus a net state rate that excluded the impact of state NOL’s, state credits and valuation allowance, was used for the fifty-two weeks ended February 29, 2020, the fifty-two weeks ended March 2, 2019 and the fifty-two weeks ended March 3, 2018, respectively.
|
A-2
|
| |
|
| |
|
1.
|
Purpose; Establishment.
|
2.
|
Definitions.
|
(a)
|
“Affiliate” means any entity if, at the time of granting of an Award (1) the Company, directly or indirectly, owns at least 50% of the combined voting power of all classes of stock of such entity or at least 50% of the ownership interests in such entity or (2) such entity, directly or indirectly, owns at least 50% of the combined voting power of all classes of stock of the Company.
|
(b)
|
“Agreement” shall mean the writing evidencing an Award or a notice of an Award delivered to a Participant by the Company.
|
(c)
|
“Award” shall mean any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Phantom Unit, Stock Bonus or Other Award granted pursuant to the terms of the Plan.
|
(d)
|
“Board of Directors” shall mean the Board of Directors of the Company.
|
(e)
|
“Business Criteria” shall mean performance goals based on criteria selected by the Board or the Committee, as applicable, in its sole discretion, including, without limitation, one or more of the following criteria: (1) return on total stockholder equity; (2) earnings or book value per share of Company Stock; (3) net income (before or after taxes); (4) earnings before all or any interest, taxes, depreciation and/or amortization (“EBIT”, “EBITA” or “EBITDA”), including a non-GAAP measure of adjusted EBITDA (“Adjusted EBITDA”); (5) inventory goals; (6) return on assets, capital or investment; (7) market share; (8) cost reduction goals; (9) earnings from continuing operations; (10) levels of expense, costs or liabilities; (11) store level performance; (12) operating profit; (13) sales or revenues; (14) stock price appreciation; (15) total stockholder return; (16) implementation or completion of critical projects or processes; (17) prescription counts; (18) customer service or customer service satisfaction; (19) associate satisfaction; (20) clinics opened; (21) stores remodeled or constructed; (22) cost of capital; (23) Accountable Care Organization results; (24) medical services delivered; (25) leverage ratio or (26) any combination of the foregoing. Where applicable, Business Criteria may be expressed in terms of attaining a specified level of the particular criteria or the attainment of a percentage increase or decrease in the particular criteria, and may be applied to one or more of the Company, an Affiliate, or a division or strategic business unit of the Company, or may be applied to the performance of the Company relative to a market index, a group of other companies or a combination thereof, all as determined by the Committee. The Business Criteria may be subject to a threshold level of performance below which no payment will be made (or no vesting will occur), levels of performance at which specified payments will be made (or specified vesting will occur), and a maximum level of performance above which no additional payment will be made (or at which full vesting will occur). The Committee shall have the authority to make equitable adjustments to the Business Criteria in recognition of unusual or non-recurring events affecting the Company or any Affiliate or the financial statements of the Company or any
|
|
| |
|
| |
B-1
|
(f)
|
“Cause” shall have meaning set forth in the Participant's employment agreement with the Company; provided that if no such agreement or definition exists, “Cause” shall mean, unless otherwise specified in an Agreement, (i) the Participant's willful misconduct or gross negligence which materially and demonstrably results in financial harm to the Company; (ii) a material breach by the Participant of the Participant's fiduciary duty or duty of loyalty to the Company or any affiliate which demonstrably results in financial harm to the Company; (iii) the Participant's misappropriation of funds or other property of the Company or any Subsidiary or the plea of guilty by the Participant to or conviction of the Participant for the commission of a felony; or (iv) the conduct by the Participant which is a material violation of Company policy or which materially interferes with the Participant's ability to perform his or her duties.
|
(g)
|
“Change in Control” shall have the meaning set forth in Section 14(d).
|
(h)
|
“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and any regulations promulgated thereunder.
|
(i)
|
“Committee” shall mean a committee of the Board of Directors, which shall consist of two or more persons, each of whom shall qualify as a “nonemployee director” within the meaning of Rule 16b-3 and an “independent director” within the meaning of the New York Stock Exchange Listed Company Manual.
|
(j)
|
“Company” shall mean Rite Aid Corporation, a Delaware corporation, and, where appropriate, each of its Affiliates.
|
(k)
|
“Company Stock” shall mean the common stock of the Company, par value $1.00 per share.
|
(l)
|
“Effective Date” shall mean July 8, 2020.
|
(m)
|
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time.
|
(n)
|
“Fair Market Value” shall mean, with respect to a share of Company Stock, on a particular date (i) the closing price of Company Stock as quoted on the composite tape of the New York Stock Exchange and published in The Wall Street Journal with respect to such date, or if there is no trading of Company Stock on such date, such price on the next preceding date on which there was trading in such shares of Company Stock or (ii) if the shares of Company Stock are then traded in an over-the-counter market, the average of the closing bid and asked prices for the shares of Company Stock in such over-the-counter market for the last preceding date on which there was a sale of such Stock in such market, or (iii) if the shares of Company Stock are not then listed on a national securities exchange or traded in an over-the-counter market, such value as the Committee, in its sole discretion, shall determine in good faith using a reasonable method in accordance with Section 409A of the Code.
|
(o)
|
“Good Reason” shall have meaning set forth in the Participant's employment agreement with the Company; and if no such agreement or definition exists, “Good Reason” shall not apply to the Participant unless otherwise specified in an Agreement.
|
(p)
|
“Incentive Stock Option” shall mean an Option that qualifies as an “incentive stock option” within the meaning of Section 422 of the Code, or any successor provision, and which is designated by the Committee as an Incentive Stock Option.
|
(q)
|
“Nonqualified Stock Option” shall mean an Option other than an Incentive Stock Option.
|
(r)
|
“Option” shall mean an option to purchase shares of Company Stock granted pursuant to Section 7.
|
(s)
|
“Other Award” shall mean an Award granted pursuant to Section 13 hereof.
|
(t)
|
“Participant” shall mean an associate or non-employee director of the Company to whom an Award is granted pursuant to the Plan.
|
B-2
|
| |
|
| |
|
(u)
|
“Phantom Unit” shall mean the right, granted pursuant to Section 11, to receive in cash or shares of Company Stock the Fair Market Value of a share of Company Stock or, in the case of an Award denominated in cash, to receive the amount of cash per unit that is determined by the Committee in connection with the Award.
|
(v)
|
“Prior Equity Plans” shall mean, collectively, the Rite Aid Corporation 1999 Stock Option Plan, the Rite Aid Corporation 2000 Omnibus Equity Plan, the Rite Aid Corporation 2001 Stock Option Plan, the Rite Aid Corporation 2004 Omnibus Equity Plan, the Rite Aid Corporation 2006 Omnibus Equity Plan, the Rite Aid Corporation 2010 Omnibus Equity Plan, the Rite Aid Corporation 2012 Omnibus Equity Plan and the Rite Aid Corporation 2014 Omnibus Equity Plan.
|
(w)
|
“Qualifying Termination” shall mean a termination of employment by the Company other than for Cause or by the Participant with Good Reason (if applicable).
|
(x)
|
“Restricted Stock” shall mean a share of Company Stock which is granted pursuant to the terms of Section 9 hereof and which is subject to restrictions as set forth in Section 9(d).
|
(y)
|
“Restricted Stock Unit” shall mean the right, granted pursuant to Section 10 hereof, to receive a number of shares of Company Stock subject to certain restrictions that lapse at the end of a specified period or periods.
|
(z)
|
“Retirement” shall mean the participant's voluntary termination of employment with the Company after having attained age sixty (60) or having completed five (5) years of current, continuous service with the Company (measured from the Participant's most recent first day of employment with the Company), whichever is later.
|
(aa)
|
“Rule 16b-3” shall mean the Rule 16b-3 promulgated under the Exchange Act, as amended from time to time.
|
(bb)
|
“Securities Act” shall mean the Securities Act of 1933, as amended from time to time.
|
(cc)
|
“Stock Appreciation Right” shall mean the right to receive, upon exercise of the right, the applicable amounts as described in Section 8.
|
(dd)
|
“Stock Bonus” shall mean a bonus payable in shares of Company Stock granted pursuant to Section 12.
|
(ee)
|
“Subsidiary” shall mean a “subsidiary corporation” of the Company within the meaning of Section 424(f) of the Code.
|
3.
|
Stock Subject to the Plan.
|
(a)
|
Shares Available for Awards; Certain Limitations. The maximum number of shares of Company Stock reserved for issuance under the Plan shall be 3,350,000 shares of Company Stock plus any shares of Company Stock remaining available for grant under the Prior Equity Plans as of the Effective Date (in each case, subject to adjustment as provided by Section 3(b)), all of which may be granted as Incentive Stock Options. Any shares of Company Stock granted in connection with Options and Stock Appreciation Rights shall be counted against this limit as one (1) share for every one (1) Option or Stock Appreciation Right awarded. Any shares of Company Stock granted in connection with Awards other than Options and Stock Appreciation Rights shall be counted against this limit as 1.45 shares for every one (1) share granted in connection with such Award or by which the Award is valued. Such shares of Company Stock may be authorized but unissued shares of Company Stock or authorized and issued shares of Company Stock held in the Company's treasury. In addition, the number of shares of Company Stock that are subject to awards as of the Effective Date under the Prior Equity Plans that, in the future, are forfeited, cancelled, exchanged or surrendered or terminate (in each case, other than due to the expiration of Options on the expiration date of such Options) under the Prior Equity Plans without a distribution of shares to the Participant, shall be added to the number of shares of Company Stock available for grant under the Plan. Upon the approval of the Plan by the stockholders of the Company, no further awards shall be made under the Prior Equity Plans.
|
|
| |
|
| |
B-3
|
(b)
|
Adjustment for Change in Capitalization. In the event that any special or extraordinary dividend or other extraordinary distribution is declared (whether in the form of cash, Company Stock, or other property), or there occurs any recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, spin-off, combination, repurchase, share exchange or other similar corporate transaction or event, the Committee shall adjust, as it deems necessary or appropriate, (1) the number and kind of shares of stock which may thereafter be issued in connection with Awards, (2) the number and kind of shares of stock or other property, including cash, issued or issuable in respect of outstanding Awards, (3) the exercise price, grant price or purchase price relating to any Award, and (4) the limitations set forth in Section 3(a); provided that, with respect to Incentive Stock Options, such adjustment shall be made in accordance with Section 424 of the Code, and provided further that no such adjustment shall cause any Award hereunder which is or becomes subject to Section 409A of the Code to fail to comply with the requirements of such section. The determinations made by the Committee pursuant to this Section 4(b) shall be final, binding and conclusive.
|
(c)
|
Reuse of Shares. If any shares of Company Stock subject to an Award are forfeited, cancelled, exchanged or surrendered or if an Award otherwise terminates or expires without a distribution of shares to the Participant, the shares of Company Stock with respect to such Award shall, to the extent of any such forfeiture, cancellation, exchange, surrender, termination or expiration, again be available for Awards under the Plan. Notwithstanding the foregoing, shares of Company Stock that are exchanged by a Participant or withheld by the Company as full or partial payment in connection with any Award under the Plan, shares repurchased by the Company using stock option exercise proceeds, as well as any shares of Company Stock exchanged by a Participant or withheld by the Company or any Subsidiary to satisfy the tax withholding obligations related to any Award under the Plan, shall not be available for subsequent Awards under the Plan, and notwithstanding that a Stock Appreciation Right is settled by the delivery of a net number of shares of Company Stock, the full number of shares of Company Stock underlying such Stock Appreciation Right shall not be available for subsequent Awards under the Plan. Upon the exercise of any Award granted in tandem with any other Awards, such related Awards shall be cancelled to the extent of the number of shares of Company Stock as to which the Award is exercised and, notwithstanding the foregoing, such number of shares shall no longer be available for Awards under the Plan. In addition, (i) to the extent an Award is paid or settled in cash, the number of shares of Company Stock with respect to which such payment or settlement is made shall again be available for grants of Awards pursuant to the Plan and (ii) shares of Company Stock underlying Awards that can only be settled in cash shall not be counted against the aggregate number of shares of Company Stock available for Awards under the Plan.
|
(d)
|
Effect of Plans Operated by Acquired Companies. If a company acquired by the Company or any subsidiary or with which the Company or any Subsidiary combines has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of the pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio used in such acquisition or combination to determine the relative value of the acquired company's stock or to determine the consideration payable to the holders of common stock of the acquired company) may be used for Awards under the Plan and shall not reduce the shares authorized for grant under the Plan. Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, and shall only be made to individuals who were not employees or non-employee directors of the Company prior to such acquisition or combination.
|
(e)
|
Director Limits. In connection with service as a non-employee director of the Company, no Participant who is a non-employee director shall be granted Awards during any calendar year that, when aggregated with such non-employee director’s cash fees with respect to such calendar year, exceed $750,000 in total value (calculating the value of any such Awards based on the grant date fair value of such Awards for the Company’s financial reporting purposes).
|
(f)
|
No dividend or dividend equivalent awarded in respect of an Award under the Plan shall be paid or settled until such underlying Award becomes vested pursuant to the terms of the Plan and the applicable Agreement.
|
(g)
|
Notwithstanding anything in the Plan to the contrary excluding Section 14, (other than Awards made with respect to no more than 5% of the aggregate shares of Company Stock authorized under the Plan
|
B-4
|
| |
|
| |
|
4.
|
Administration of the Plan.
|
(a)
|
The Plan shall be administered by the Committee. The Committee shall have the authority in its sole discretion, subject to and not inconsistent with the express provisions of the Plan, to administer the Plan and to exercise all the powers and authorities either specifically granted to it under the Plan or necessary or advisable in the administration of the Plan, including, without limitation, the authority to grant Awards; to determine the persons to whom and the time or times at which Awards shall be granted; to determine the type and number of Awards to be granted, the number of shares of Company Stock or cash or other property to which an Award may relate and the terms, conditions, restrictions and performance criteria relating to any Award; to determine whether, to what extent, and under what circumstances an Award may be settled, cancelled, forfeited, exchanged, or surrendered; to determine whether an Award may be settled in cash and/or shares of Company Stock; to construe and interpret the Plan and any Award; to prescribe, amend and rescind rules and regulations relating to the Plan; to determine the terms and provisions of Agreements; and to make all other determinations deemed necessary or advisable for the administration of the Plan. The Committee may, in its sole and absolute discretion, without amendment to the Plan, (a) accelerate the date on which any Option or Stock Appreciation Right becomes exercisable, (b) waive or amend the operation of Plan provisions respecting exercise after termination of employment (provided that the term of an Option or Stock Appreciation Right may not be extended beyond ten years from the date of grant or the original term of the Option or Stock Appreciation Right, if less), (c) accelerate the vesting date, or waive any condition imposed hereunder, with respect to any Award, and (d) otherwise adjust any of the terms applicable to any such Award in a manner consistent with the terms of the Plan and applicable law. Notwithstanding anything in the Plan to the contrary, the powers and authority of the Committee shall be exercised by the Board of Directors in the case of Awards made to non-employee directors.
|
(b)
|
The Committee's interpretation of the Plan, any Awards granted pursuant to the Plan or any Agreement and all decisions and determinations by the Committee with respect to the Plan shall be final, binding, and conclusive on all parties. No member of the Board of Directors or the Committee, nor any officer or employee of the Company or any Subsidiary thereof acting on behalf of the Board of Directors or the Committee, shall be personally liable for any action, omission, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Board of Directors or the Committee and each and any officer or employee of the Company and of any Subsidiary thereof acting on their behalf shall, to the maximum extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, omission, determination or interpretation.
|
(c)
|
To the extent permitted by applicable law or the rules of any securities exchange or automated quotation system on which the shares of Company Stock are listed, quoted or traded, the Board of Directors or Committee may from time to time delegate to a committee of one or more members of the Board of Directors, or to the Chief Executive Officer of the Company the authority to grant or amend Awards or to take other administrative actions pursuant to this Section 4; provided, however, that in no event shall such individuals be delegated the authority to grant Awards to, or amend Awards held by, the following individuals: (a) individuals who are subject to Section 16 of the Exchange Act or (b) officers of the Company (or non-employee directors) to whom authority to grant or amend Awards has been delegated hereunder; provided further, that any delegation of administrative authority shall only be permitted to the extent it is permissible under applicable securities laws or the rules of any securities exchange or automated quotation system on which the shares of Company Stock are listed, quoted or traded. Any delegation hereunder shall be subject to the restrictions and limits that the Board of Directors or Committee specifies at the time of such delegation, and the Board of Directors or Committee, as the case may be, may at any time rescind the authority so delegated or appoint a new delegatee.
|
|
| |
|
| |
B-5
|
5.
|
Eligibility.
|
6.
|
Awards Under the Plan; Agreement.
|
7.
|
Options.
|
(a)
|
Identification of Options. Each Option shall be clearly identified in the applicable Agreement as either an Incentive Stock Option or a Nonqualified Stock Option. All Options shall be non-transferable, except by will or the laws of descent and distribution or except as otherwise determined by the Committee for estate planning purposes with respect to a Nonqualified Stock Option.
|
(b)
|
Exercise Price. Each Agreement with respect to an Option shall set forth the amount per share (the “option exercise price”) payable by the Participant to the Company upon exercise of the Option. The option exercise price shall be equal to or greater than the Fair Market Value of a share of Company Stock on the date of grant. Other than with respect to an adjustment described in Section 3, in no event shall the option exercise price be reduced following the grant of an Option, nor shall an Option be cancelled in exchange for a replacement Option with a lower exercise price or in exchange for another type of Award or cash payment without stockholder approval. In addition, the Committee shall not have the authority to grant an Option which provides that the Participant will be granted a new Option (sometimes referred to as a “reload option”) for a number of shares equal to the number of shares surrendered by the Participant upon exercise of all or a part of the original Option.
|
(c)
|
Term and Exercise of Options.
|
(i)
|
Each Option shall become exercisable at the time determined by the Committee and set forth in the applicable Agreement. At the time of grant of an Option, the Committee may impose such restrictions or conditions to the exercisability of the Option as it, in its absolute discretion, deems appropriate, including, but not limited to, achievement of performance goals including goals based on one or more Business Criteria. Subject to Section 7(d) hereof, the Committee shall determine and set forth in the applicable Agreement the expiration date of each Option, which shall be no later than the tenth anniversary of the date of grant of the Option.
|
(ii)
|
An Option shall be exercised by delivering the form of notice of exercise provided by the Company. Payment for shares of Company Stock purchased upon the exercise of an Option shall be made on the effective date of such exercise by one or a combination of the following means: (A) in cash or by personal check, certified check, bank cashier's check or wire transfer; (B) in shares of Company Stock owned by the Participant and valued at their Fair Market Value on the effective date of such exercise; (C) by withholding shares of Company Stock otherwise deliverable upon exercise of an Option; or (D) by any such other methods (including broker assisted cashless exercise) as the Committee may from time to time authorize; provided, however, that in the case of a Participant who is subject to Section 16 of the Exchange Act, the method of making such payment shall be in compliance with applicable law. Except as authorized by the Committee, any payment in shares of Company Stock shall be effected by the delivery of such shares to the Secretary of the Company, duly endorsed in blank or accompanied by stock powers duly executed in blank, together with any
|
B-6
|
| |
|
| |
|
(iii)
|
Certificates for shares of Company Stock purchased upon the exercise of an Option shall be issued in the name of or for the account of the Participant or other person entitled to receive such shares, and delivered to the Participant or such other person as soon as practicable following the effective date on which the Option is exercised.
|
(d)
|
Provisions Relating to Incentive Stock Options. Incentive Stock Options may only be granted to associates of the Company and its Affiliates, in accordance with the provisions of Section 422 of the Code. To the extent that the aggregate Fair Market Value of shares of Company Stock with respect to which Incentive Stock Options are exercisable for the first time by a Participant during any calendar year under the Plan and any other stock option plan of the Company or a Subsidiary shall exceed $100,000, such Options shall be treated as Nonqualified Stock Options. For purposes of this Section 7(d), Fair Market Value shall be determined as of the date on which each such Incentive Stock Option is granted. No Incentive Stock Option may be granted to an individual if, at the time of the proposed grant, such individual owns (or is deemed to own under the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company unless (A) the exercise price of such Incentive Stock Option is at least one hundred and ten percent (110%) of the Fair Market Value of a share of Company Stock at the time such Incentive Stock Option is granted and (B) such Incentive Stock Option is not exercisable after the expiration of five years from the date such Incentive Stock Option is granted.
|
(e)
|
Effect of Termination of Employment (or Provision of Services). Except as may otherwise be provided in the applicable Agreement, and subject to the Committee's authority pursuant to Section 4 hereof: (i) in the event that the employment of a Participant with the Company (or the Participant's service to the Company) shall terminate for any reason other than Cause, death, disability or Retirement, each Option granted to such Participant, to the extent that it is exercisable at the time of such termination, shall remain exercisable for the 90 day period following such termination, but in no event following the expiration of its term, and each Option that remains unexercisable as of the date of such a termination shall be terminated at the time of such termination, (ii) in the event that the employment of a Participant with the Company (or the Participant's service to the Company) shall terminate on account of the death of the Participant, each Option granted to such Participant that is outstanding as of the date of death shall become fully exercisable and shall remain exercisable by the Participant's legal representatives, heirs or legatees for the one year period following such termination, but in no event following the expiration of its term and (iii) in the event that the employment of a Participant with the Company (or the Participant's service to the Company) shall terminate on account of the disability or Retirement of the Participant (in each case as determined by the Committee), each Option granted to such Participant that is outstanding and vested as of the date of such termination shall remain exercisable by the Participant (or such Participant's legal representatives) for the one year period following such termination, but in no event following the expiration of its term and each Option that remains unexercisable as of the date of a termination due to disability or Retirement shall be terminated at the time of such termination. In the event of the termination of a Participant's employment for Cause, each outstanding Option granted to such Participant shall terminate at the commencement of business on the date of such termination.
|
(f)
|
Leave of Absence. In the case of any Participant on an approved leave of absence, the Committee may make such provision respecting the continuance of the Option while in the employ or service of the Company as it may deem equitable, except that in no event may an Option be exercised after the expiration of its term.
|
8.
|
Stock Appreciation Rights.
|
(a)
|
A Stock Appreciation Right may be granted in connection with an Option, either at the time of grant or, with respect to a Nonqualified Stock Option, at any time thereafter during the term of the Option, or may be granted unrelated to an Option. At the time of grant of a Stock Appreciation Right, the Committee may impose such restrictions or conditions to the exercisability of the Stock Appreciation Right as it, in its absolute discretion, deems appropriate, including, but not limited to, achievement of performance goals
|
|
| |
|
| |
B-7
|
(b)
|
A Stock Appreciation Right related to an Option shall require the holder, upon exercise, to surrender such Option with respect to the number of shares as to which such Stock Appreciation Right is exercised, in order to receive payment of any amount computed pursuant to Section 8(d). Such Option will, to the extent surrendered, then cease to be exercisable.
|
(c)
|
Subject to Section 8(i) and to such rules and restrictions as the Committee may impose, a Stock Appreciation Right granted in connection with an Option will be exercisable at such time or times, and only to the extent that a related Option is exercisable. All Stock Appreciation Rights shall be non-transferable (except to the extent that such related Option may be transferable), except by will or the laws of descent and distribution or except as otherwise determined by the Committee for estate planning purposes.
|
(d)
|
Upon the exercise of a Stock Appreciation Right whether related or unrelated to an Option, the holder will be entitled to receive payment of an amount determined by multiplying:
|
(i)
|
the excess of the Fair Market Value of a share of Company Stock on the date of exercise of such Stock Appreciation Right over the exercise price of the Stock Appreciation Right, by
|
(ii)
|
the number of shares as to which such Stock Appreciation Right is exercised.
|
(e)
|
Notwithstanding subsection (d) above, the Committee may place a limitation on the amount payable upon exercise of a Stock Appreciation Right. Any such limitation must be determined as of the date of grant and noted in the applicable Agreement.
|
(f)
|
Payment of the amount determined under subsection (d) above may be made solely in whole shares of Company Stock valued at their Fair Market Value on the date of exercise of the Stock Appreciation Right or alternatively, in the sole discretion of the Committee, solely in cash or a combination of cash and shares. Except as authorized by the Committee, any payment in shares of Company Stock shall be effected by the delivery of such shares to the Secretary of the Company, duly endorsed in blank or accompanied by stock powers duly executed in blank, together with any other documents and evidences as the Secretary of the Company shall require. If the Committee decides that payment will be made in shares of Company Stock, and the amount payable results in a fractional share, payment for the fractional share will be made in cash.
|
(g)
|
Other than with respect to an adjustment described in Section 3, in no event shall the exercise price with respect to a Stock Appreciation Right be reduced following the grant of a Stock Appreciation Right, nor shall a Stock Appreciation Right be cancelled in exchange for a replacement Stock Appreciation Right with a lower exercise price or in exchange for another type of Award or cash payment without stockholder approval.
|
(h)
|
Except as may otherwise be provided in the applicable Agreement, and subject to the Committee's authority pursuant to Section 4 hereof, (i) in the event that the employment of a Participant with the Company (or the Participant's service to the Company) shall terminate for any reason other than Cause, death or disability or Retirement, each Stock Appreciation Right granted to such Participant, to the extent that it is exercisable at the time of such termination, shall remain exercisable for the 90 day period following such termination, but in no event following the expiration of its term, and any Stock Appreciation Right that is not exercisable as of the date of such a termination shall be terminated at the time of such termination (except as may be otherwise determined by the Committee), (ii) in the event that the employment of a Participant with the Company (or the Participant's service to the Company) shall terminate on account of the death of the Participant, each Stock Appreciation Right granted to such Participant that is outstanding as of the date of death shall become fully exercisable and shall remain exercisable by the Participant's legal representatives, heirs or legatees for the one year period following such termination, but in no event following the expiration of its term and (iii) in the event that the employment of a Participant with the Company (or the Participant's service to the Company) shall terminate on account of the disability or Retirement of the Participant (in each case as determined by the
|
B-8
|
| |
|
| |
|
(i)
|
Leave of Absence. In the case of any Participant on an approved leave of absence, the Committee may make such provision respecting the continuance of the Stock Appreciation Right while in the employ or service of the Company as it may deem equitable, except that in no event may a Stock Appreciation Right be exercised after the expiration of its term.
|
9.
|
Restricted Stock.
|
(a)
|
Price. At the time of the grant of shares of Restricted Stock, the Committee shall determine the price, if any, to be paid by the Participant for each share of Restricted Stock subject to the Award.
|
(b)
|
Vesting Date. At the time of the grant of shares of Restricted Stock, the Committee shall establish a vesting date or vesting dates with respect to such shares. The Committee may divide such shares into classes and assign a different vesting date for each class. Provided that all conditions to the vesting of a share of Restricted Stock are satisfied, and subject to Section 9(h), upon the occurrence of the vesting date with respect to a share of Restricted Stock, such share shall vest and the restrictions of Section 9(d) shall lapse.
|
(c)
|
Conditions to Vesting. At the time of the grant of shares of Restricted Stock, the Committee may impose such restrictions or conditions to the vesting of such shares as it, in its absolute discretion, deems appropriate, including, but not limited to, achievement of performance goals including goals based on one or more Business Criteria. The Committee may also provide that the vesting or forfeiture of shares of Restricted Stock may be based upon the achievement of, or failure to achieve, certain levels of performance and may provide for partial vesting of Restricted Stock in the event that the maximum level of performance is not met if the minimum level of performance has been equaled or exceeded. Notwithstanding anything in this Section 9(c) to the contrary, unless otherwise provided by the Committee pursuant to Section 9(h) or Section 14, Restricted Stock which vests based on achievement of performance goals or levels of performance may not become fully vested prior to the first anniversary of the date upon which such Restricted Stock is granted.
|
(d)
|
Restrictions on Transfer Prior to Vesting. Prior to the vesting of a share of Restricted Stock, such Restricted Stock may not be transferred, assigned or otherwise disposed of, and no transfer of a Participant's rights with respect to such Restricted Stock, whether voluntary or involuntary, by operation of law or otherwise, shall be permitted. Immediately upon any attempt to transfer such rights, such shares, and all of the rights related thereto, shall be forfeited by the Participant.
|
(e)
|
Dividends on Restricted Stock. Any dividends paid on shares of Restricted Stock shall be held in escrow until all restrictions on such shares have lapsed.
|
(f)
|
Issuance of Certificates. The Committee may, upon such terms and conditions as it determines, provide that (1) a certificate or certificates representing the shares underlying a Restricted Stock Award shall be registered in the Participant's name and bear an appropriate legend specifying that such shares are not transferable and are subject to the provisions of the Plan and the restrictions, terms and conditions set forth in the applicable Agreement, (2) such certificate or certificates shall be held in escrow by the Company on behalf of the Participant until such shares become vested or are forfeited or (3) the Participant's ownership of the Restricted Stock shall be registered by the Company in book entry form.
|
(g)
|
Consequences of Vesting. Upon the vesting of a share of Restricted Stock pursuant to the terms hereof, the restrictions of Section 9(d) shall lapse with respect to such share. Following the date on which a
|
|
| |
|
| |
B-9
|
(h)
|
Effect of Termination of Employment (or Provision of Services). Except as may otherwise be provided in the applicable Agreement, and subject to the Committee's authority under Section 4 hereof, upon the termination of a Participant's employment (or upon cessation of such Participant's services to the Company) for any reason, any and all shares to which restrictions on transferability apply shall be immediately forfeited by the Participant and transferred to, and reacquired by, the Company. In the event of a forfeiture of shares pursuant to this section, the Company shall repay to the Participant (or the Participant's estate) any amount paid by the Participant for such shares. In the event that the Company requires a return of shares, it shall also have the right to require the return of all dividends paid on such shares, whether by termination of any escrow arrangement under which such dividends are held or otherwise.
|
10.
|
Restricted Stock Units.
|
(a)
|
Vesting Date. At the time of the grant of an Award of Restricted Stock Units, the Committee shall establish a vesting date or vesting dates with respect to such Restricted Stock Units. Provided that all conditions to the vesting of an Award of Restricted Stock Units are satisfied, and subject to Section 10(g), upon the occurrence of the vesting date with respect to a share of Restricted Stock, such share shall vest and the restrictions of Section 10(c) shall lapse.
|
(b)
|
Conditions to Vesting. At the time of the grant of an Award of Restricted Stock Units, the Committee may impose such restrictions or conditions to the vesting of such Restricted Stock Units as it, in its absolute discretion, deems appropriate, including, but not limited to, achievement of performance goals including goals based on one or more Business Criteria. The Committee may also provide that the vesting or forfeiture of Restricted Stock Units may be based upon the achievement of, or failure to achieve, certain levels of performance and may provide for partial vesting of Restricted Stock Units in the event that the maximum level of performance is not met if the minimum level of performance has been equaled or exceeded. Notwithstanding anything in this Section 10(b) to the contrary, unless otherwise provided by the Committee pursuant to Section 10(g) or Section 14, Restricted Stock Units which vests based on achievement of performance goals or levels of performance may not become fully vested prior to the first anniversary of the date upon which such Restricted Stock Unit is granted.
|
(c)
|
Restrictions on Transfer Prior to Vesting. Prior to the vesting of an Award of Restricted Stock Units, such Restricted Stock Units may not be transferred, assigned or otherwise disposed of, and no transfer of a Participant's rights with respect to such Restricted Stock Units, whether voluntary or involuntary, by operation of law or otherwise, shall be permitted. Immediately upon any attempt to transfer such rights, such Restricted Stock Units, and all of the rights related thereto, shall be forfeited by the Participant.
|
(d)
|
Dividends on Restricted Stock Units. Any dividends paid on shares of Company Stock subject to Restricted Stock Units shall solely be credited in the form of dividend equivalents and shall in no event be settled until all restrictions on Restricted Stock Units have lapsed and the underlying shares of Company Stock are settled.
|
(e)
|
Consequences of Vesting. Upon the vesting of an Award of Restricted Stock Units pursuant to the terms hereof, the restrictions of Section 10(c) shall lapse with respect to such Restricted Stock Units and stock certificates in respect of the shares of Company Stock underlying such Restricted Stock Units may, in the Company’s sole discretion, be delivered to the Participant, or his or her legal representative, in a number equal to the number of shares of Company Stock underlying the Award of Restricted Stock Units. Following the date on which an Award of Restricted Stock Units vests and is settled in shares of Company Stock, the Company shall, as determined by the Committee, make a book entry record of such shares or cause to be delivered to the Participant to whom such shares were delivered, a certificate evidencing such share, which may bear a restrictive legend, if the Committee determines such a legend to be appropriate.
|
B-10
|
| |
|
| |
|
(f)
|
Effect of Termination of Employment (or Provision of Services). Except as may otherwise be provided in the applicable Agreement, and subject to the Committee's authority under Section 4 hereof, upon the termination of a Participant's employment (or upon cessation of such Participant's services to the Company) for any reason, any and all Restricted Stock Units to which restrictions and conditions apply, together with any dividend equivalents deemed to have been credited with respect to such unvested Restricted Stock Units, shall be immediately forfeited upon the Participant's termination of employment (or upon cessation of such Participant's services to the Company) for any reason.
|
(g)
|
Settlement. Notwithstanding anything in the Plan to the contrary, with respect to Restricted Stock Units, upon the lapse of all applicable restrictions and conditions, shares of Company Stock (either in certificated or uncertificated form) shall promptly be issued to the Participant, unless otherwise deferred in accordance with procedures established by the Company in accordance with Section 409A of the Code, and such issuance or payment shall in any event be made no later than March 15th of the calendar year following the year of vesting or within such other period as is required to avoid accelerated taxation and/or tax penalties under Section 409A of the Code.
|
11.
|
Phantom Units.
|
(a)
|
Vesting Date. At the time of the grant of Phantom Units, the Committee shall establish a vesting date or vesting dates with respect to such units. The Committee may divide such units into classes and assign a different vesting date for each class. Provided that all conditions to the vesting of the Phantom Units imposed pursuant to Section 11(c) are satisfied, and subject to Section 11(d), upon the occurrence of the vesting date with respect to the Phantom Units, such units shall vest.
|
(b)
|
Benefit Upon Vesting. Unless otherwise provided in an Agreement, upon the vesting of Phantom Units, the Participant shall be paid, within 30 days of the date on which such units vest, an amount, in cash and/or shares of Company Stock, as determined by the Committee. In the case of Awards denominated in shares of Company Stock, the amount per Phantom Unit shall be equal to the sum of (1) the Fair Market Value of a share of Company Stock on the date on which such Phantom Units vest and (2) the aggregate amount of cash dividends paid with respect to a share of Company Stock during the period commencing on the date on which the Phantom Units were granted and terminating on the date on which such units vest. In the case of Awards denominated in cash, the amount per Phantom Unit shall be equal to the cash value of the Phantom Unit on the date on which such Phantom Units vest.
|
(c)
|
Conditions to Vesting. At the time of the grant of Phantom Units, the Committee may impose such restrictions or conditions to the vesting of such units as it, in its absolute discretion, deems appropriate, including, but not limited to, achievement of performance goals including goals based on one or more Business Criteria. Notwithstanding anything in this Section 11(c) to the contrary, unless otherwise provided by the Committee pursuant to Section 11(d) or Section 14, Phantom Units which vest based on achievement of performance goals may not become fully vested prior to the first anniversary of the date upon which such Phantom Units are granted.
|
(d)
|
Effect of Termination of Employment (or Provision of Services). Except as may otherwise be provided in the applicable Agreement, and subject to the Committee's authority pursuant to Section 4 hereof, Phantom Units that have not vested, together with any dividend equivalents deemed to have been credited with respect to such unvested units, shall be forfeited upon the Participant's termination of employment (or upon cessation of such Participant's services to the Company) for any reason.
|
12.
|
Stock Bonuses.
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|
| |
|
| |
B-11
|
13.
|
Other Awards, Including Cash-Based and Other Stock-Based Awards.
|
14.
|
Change in Control Provisions.
|
(a)
|
Unless otherwise provided by the Committee or in the applicable Agreement, and subject to Section 3(b), in the event of a Change in Control:
|
(i)
|
With respect to each outstanding time-based Award that is assumed or substituted in connection with a Change in Control, in the event of a Qualifying Termination of a Participant's employment or service during the 24-month period following such Change of Control, (i) such Award shall become fully vested and exercisable and (ii) the restrictions, payment conditions, and forfeiture conditions applicable to any such Award granted shall lapse. With respect to each outstanding performance-based Award that is assumed or substituted in connection with a Change in Control, in the event of a Qualifying Termination of a Participant's employment or service during the 24-month period following such Change of Control, the Participant shall vest in a number of Shares subject to such performance-based Award equal to the product of (i) the number of Shares subject to the performance-based Award assuming the target level of performance and (ii) a fraction, the numerator of which is the number of days elapsed from the first day of the performance period through and including the date of the Qualifying Termination, and the denominator of which is the total number of days in the performance period.
|
(ii)
|
With respect to each outstanding Award that is not assumed or substituted in connection with a Change in Control, immediately upon the occurrence of the Change of Control, (i) such Award shall become fully vested and exercisable, (ii) the restrictions, payment conditions, and forfeiture conditions applicable to any such Award granted shall lapse, and (iii) and any performance conditions imposed with respect to such Award shall be deemed to be achieved at target performance levels.
|
(iii)
|
For purposes of this Section 14, an Award shall be considered assumed or substituted for if, following the Change in Control, (A) the Award is of comparable value and remains subject to the same terms and conditions that were applicable to the Award immediately prior to the Change in Control except that, if the Award related to shares of Company Stock, the Award instead confers the right to receive common stock of the acquiring or ultimate parent entity and (B) the securities of the acquiring or ultimate parent entity underlying the Award after such assumption or substitution are freely tradable on a domestic stock exchange.
|
(iv)
|
Notwithstanding any other provision of the Plan, in the event of a Change in Control, except as would otherwise result in adverse tax consequences under Section 409A of the Code, the Committee may, in its discretion, provide that each Award shall, immediately upon the occurrence of a Change in Control, be cancelled in exchange for a payment in cash or securities in an amount equal to (i) the excess of the consideration paid per share of Company Stock in the Change in
|
B-12
|
| |
|
| |
|
(b)
|
Notwithstanding the foregoing, for each Award that constitutes nonqualified deferred compensation under Section 409A of the Code, if required to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, a Change in Control shall be deemed to have occurred for purposes of the payment or settlement of such Award under the Plan only if a “change in the ownership of the corporation,” a “change in effective control of the corporation” or a “change in the ownership of a substantial portion of the assets of the corporation,” within the meaning of Section 409A(a)(2)(A)(v) of the Code shall also be deemed to have occurred under Section 409A of the Code.
|
(c)
|
The obligations of the Company under the Plan shall be binding upon any successor corporation or organization resulting from the merger, consolidation or other reorganization of the Company, or upon any successor corporation or organization succeeding to substantially all of the assets and business of the Company.
|
(d)
|
A “Change in Control” of the Company shall be deemed to have occurred, as the result of a single transaction or a series of transactions, if the events set forth in any one of the following paragraphs shall have occurred:
|
(i)
|
Any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's then outstanding voting securities;
|
(ii)
|
Incumbent Directors cease at any time and for any reason to constitute a majority of the number of directors then serving on the Board of Directors. “Incumbent Directors” shall mean directors who either are directors of the Company as of the Effective Date or are elected, or nominated for election, to the Board of Directors 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 of Directors;
|
(iii)
|
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 (A) 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, more than 50% of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately alter such merger or consolidation, or (B) 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 35% or more of the combined voting power of the Company's then outstanding voting securities; or
|
(iv)
|
The stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated of 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
|
|
| |
|
| |
B-13
|
(e)
|
“Affiliate” shall have the meaning set forth in Rule 12b-2 under Section 12 of the Exchange Act.
|
(f)
|
“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.
|
(g)
|
“Exchange Act” shall mean the Securities Exchange Act of 1934. as amended from time to time.
|
(h)
|
“Person” shall have the meaning given in Section 3a9 of the Exchange Act as modified and used in Sections 13d and 14d 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 the stock of the Company.
|
15.
|
Rights as a Stockholder.
|
16.
|
No Employment Rights; No Right to Award.
|
17.
|
Securities Matters and Regulations.
|
(a)
|
Notwithstanding anything herein to the contrary, the obligation of the Company to sell or deliver Company Stock with respect to any Award granted under the Plan shall be subject to all applicable laws, rules and regulations, including all applicable federal and state securities laws, and the obtaining of all such approvals by governmental agencies as may be deemed necessary or appropriate by the Committee. The Committee may require, as a condition of the issuance and delivery of certificates evidencing shares of Company Stock pursuant to the terms hereof, that the recipient of such shares make such agreements and representations, and that such certificates bear such legends, as the Committee, in its sole discretion, deems necessary or advisable.
|
(b)
|
Each Award is subject to the requirement that, if at any time the Committee determines, in its absolute discretion, that the listing, registration or qualification of Company Stock issuable pursuant to the Plan is required by any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the grant of an Award or the issuance of Company Stock, no such Award shall be granted or payment made or Company Stock issued, in whole or in part, unless listing, registration, qualification, consent or approval has been effected or obtained free of any conditions not acceptable to the Committee.
|
(c)
|
In the event that the disposition of Company Stock acquired pursuant to the Plan is not covered by a then current registration statement under the Securities Act and is not otherwise exempt from such registration, such Company Stock shall be restricted against transfer to the extent required by the Securities Act or regulations thereunder, and the Committee may require a Participant receiving
|
B-14
|
| |
|
| |
|
18.
|
Withholding Taxes.
|
19.
|
Notification of Election Under Section 83(b) of the Code.
|
20.
|
Notification Upon Disqualifying Disposition Under Section 421(b) of the Code.
|
21.
|
Voting Proxy
|
22.
|
Amendment or Termination of the Plan.
|
23.
|
Transfer of Awards.
|
|
| |
|
| |
B-15
|
24.
|
Expenses and Receipts.
|
25.
|
Effective Date and Term of Plan.
|
26.
|
Participant Rights.
|
27.
|
Unfunded Status of Awards.
|
28.
|
No Fractional Shares.
|
29.
|
Beneficiary.
|
30.
|
Paperless Administration.
|
B-16
|
| |
|
| |
|
31.
|
Severability.
|
32.
|
Applicable Law.
|
33.
|
Section 409A Compliance.
|
34.
|
Forfeiture and Compensation Recovery.
|
(a)
|
The Committee may specify in an Agreement that the Participant's rights, payments and benefits with respect to an Award will be subject to reduction, cancellation or forfeiture or recovery by the Company upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of the Award. Such events may include termination of employment or service for Cause, violation of material Company policies, breach of noncompetition or other restrictive covenants that apply to the Participant, a determination that the payment of the Award was based on an incorrect determination that financial or other criteria were met or other conduct by the Participant that is detrimental to the business or reputation of the Company or its Affiliates.
|
(b)
|
Awards and any payments or compensation associated therewith may be made subject to forfeiture or recovery by the Company or other action pursuant to any compensation recovery or recoupment policy adopted by the Board of Directors or the Committee at any time, including without limitation in response to requirements of Section 10D of the Exchange Act and any implementing rules and regulations thereunder, or as otherwise required by law. Any Agreement may be unilaterally amended by the Committee to comply with such compensation recovery or recoupment policy.
|
|
| |
|
| |
B-17
|
•
|
the impact of widespread health developments, including the global coronavirus (“COVID-19”) pandemic, and the responses thereto (such as voluntary and in some cases, mandatory quarantines as well as shut downs and other restrictions on travel and commercial, social and other activities) which could materially and adversely affect, among other things, the economic and financial markets and labor resources of the locations in which we operate, access to credit, our front-end and pharmaceutical operations, commercial operations and sales force and executive and administrative personnel. These widespread health developments could also materially and adversely affect our third-party service providers, including suppliers and business partners, and customers and the demand for our products. These developments could result in recessionary economic conditions which could negatively impact our front-end sales and e-commerce business. Any of these developments could result in a material adverse effect on our business, financial conditions and results of operations;
|
•
|
our ability to successfully implement our new business strategy (including any delays as a result of COVID-19) and improve the operating performance of our stores;
|
•
|
our high level of indebtedness and our ability to satisfy our obligations and the other covenants contained in our debt agreements;
|
•
|
general competitive, economic, industry, market, political (including healthcare reform), and regulatory conditions, as well as factors specific to the markets in which we operate;
|
•
|
the impact of private and public third party payors’ continued reduction in prescription drug reimbursement rates and efforts to encourage mail order;
|
•
|
our ability to achieve the benefits of our efforts to reduce the costs of our generic and other drugs;
|
•
|
the risk that we may experience shortages in our generic drug supply due to replenishment delays resulting from COVID-19, which could result in the substitution of generic drugs with brand drugs, which generally have a lower profit margin;
|
•
|
the risk that changes in federal or state laws or regulations, including the Health Care Education Affordability Reconciliation Act, the repeal of all or part of the Patient Protection and the Affordable Care Act (or “ACA”) and any regulations enacted thereunder may occur;
|
•
|
the impact of the loss of one or more major third party payor contracts and the risk that providers and state contract changes may occur;
|
•
|
the risk that we will not be able to meet our obligations under our Transition Services Agreement (“TSA”) with Walgreens Boots Alliance, Inc. (“WBA”), which could expose us to significant financial penalties;
|
•
|
the risk that we cannot reduce our selling, general, and administrative expenses enough to offset lost income from the TSA as the amount of stores serviced under the agreement decreases;
|
•
|
the risk that we may need to take further impairment charges if our future results do not meet our expectations;
|
•
|
our ability to refinance our indebtedness on terms favorable to us;
|
|
| |
|
•
|
our ability to sell our calendar 2020 Centers of Medicare and Medicaid Services (“CMS”) receivable, which could negatively impact our leverage ratio;
|
•
|
our ability to grow prescription count and realize front-end sales growth;
|
•
|
the continued integration of our new senior management team and our ability to realize the benefits from our organizational restructuring;
|
•
|
our ability to achieve cost savings through the organizational restructurings within our anticipated timeframe, if at all;
|
•
|
decisions to close additional stores and distribution centers or undertake additional refinancing activities, which could result in further charges;
|
•
|
our ability to manage expenses and our investments in working capital;
|
•
|
the continued impact of gross margin pressure in the pharmacy benefit management (“PBM”) industries due to continued consolidation and client demand for lower prices while providing enhanced service offerings;
|
•
|
risks related to compromises of our information or payment systems or unauthorized access to confidential or personal information of our associates or customers;
|
•
|
our ability to maintain our current pharmacy services business and obtain new pharmacy services business, including maintaining renewals of expiring contracts, avoiding contract termination rights that may permit certain of our clients to terminate their contracts prior to their expiration, early price renegotiations prior to contract expirations and the risk that we cannot meet client guarantees;
|
•
|
our ability to maintain our current Medicare Part D business and obtain new Medicare Part D business, as a result of the annual Medicare Part D competitive bidding process and meet the financial obligations of our bid;
|
•
|
the expiration or termination of our Medicare or Medicaid managed care contracts by federal or state governments;
|
•
|
changes in future exchange or interest rates or credit ratings, changes in tax laws, regulations, rates and policies;
|
•
|
the risk that we could experience deterioration in our current Star rating with the CMS or incur CMS penalties and/or sanctions;
|
•
|
the nature, cost and outcome of pending and future litigation and other legal or regulatory proceedings, and governmental investigations;
|
•
|
the inability to fully realize the benefits of our tax attributes; and
|
•
|
other risks and uncertainties described from time to time in our filings with the Securities and Exchange Commission (the “SEC”).
|
|
| |
|