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TABLE OF CONTENTS
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy
Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant ý |
Filed by a Party other than the Registrant o |
Check the appropriate box: |
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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 |
(Name of Registrant as Specified In Its Charter) |
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant) |
Payment of Filing Fee (Check the appropriate box): |
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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Proposed maximum aggregate value of transaction:
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Total fee paid:
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Fee paid previously with preliminary materials. |
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing. |
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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Filing Party:
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Date Filed:
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RITE AID CORPORATION
P.O. BOX 3165
HARRISBURG, PENNSYLVANIA 17105
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on June 25, 2015
To Our Stockholders:
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What: |
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Our 2015 Annual Meeting of Stockholders |
When: |
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June 25, 2015 at 8:00 a.m., local time |
Where: |
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Clarion Hotel
148 Sheraton Drive
New Cumberland, PA 17070 |
Why: |
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At this Annual Meeting, stockholders will be asked to: |
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1. |
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Elect nine directors to hold office until the 2016 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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Approve, on an advisory basis, the compensation of our named executive officers as presented in the proxy statement; |
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Consider and vote on stockholder proposals, if properly presented at the Annual Meeting; 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. |
The
close of business on May 1, 2015 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.
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 Annual Meeting in person, 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 in person at the Annual Meeting. It will, however, help to assure a quorum and to
avoid added proxy solicitation costs.
You
may revoke your proxy at any time before the vote is taken by delivering to the Secretary of Rite Aid a written revocation or a proxy with a later date (including a proxy by
telephone or via the Internet) or by voting your shares in person at the Annual Meeting, in which case your prior proxy would be disregarded.
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By order of the Board of Directors |
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Marc A. Strassler Secretary
Camp Hill, Pennsylvania
May 15, 2015 |
Table of Contents
TABLE OF CONTENTS
Table of Contents
RITE AID CORPORATION
P.O. BOX 3165
HARRISBURG, PENNSYLVANIA 17105
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
To Be Held on June 25, 2015
Important Notice Regarding the Availability of Proxy Materials for the
Stockholder Meeting to be Held on June 25, 2015:
The proxy statement and annual report, as well as the Company's proxy card, are available at
www.proxyvote.com.
This
proxy statement is being furnished to you by the Board of Directors (the "Board" or "Board of Directors") of Rite Aid Corporation (the "Company" or "Rite Aid") to solicit your proxy
to vote your shares at our 2015 Annual Meeting of Stockholders (the "Annual Meeting"). The Annual Meeting will be held on June 25, 2015 at 8:00 a.m., local time, at the Clarion Hotel,
148 Sheraton Drive, New Cumberland, PA 17070. This proxy statement, the foregoing notice and the accompanying proxy card are first being mailed and made available on or about
May 15, 2015 to all holders of our common stock, par value $1.00 per share, entitled to vote at the Annual Meeting. At Rite Aid and in this proxy statement, we refer to our employees as
associates.
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
Who is entitled to vote at the Annual Meeting?
Holders of Rite Aid common stock as of the close of business on the record date, May 1, 2015, will receive notice of, and be
eligible to vote at, the Annual Meeting and any adjournment or postponement of the Annual Meeting. At the close of business on the record date, Rite Aid had outstanding and entitled to vote
988,837,450 shares of common stock. No other shares of Rite Aid capital stock are entitled to notice of and to vote at the Annual Meeting.
What matters will be voted on at the Annual Meeting?
There are five proposals that are scheduled to be considered and voted on at the Annual
Meeting:
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- Proposal No. 1: Elect nine directors to hold office until the 2016 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: Conduct an advisory vote to approve the compensation of our named executive officers as presented in this proxy
statement;
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- Proposal No. 4: Consider a stockholder proposal relating to accelerated vesting of performance awards; and
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- Proposal No. 5: Consider a stockholder proposal relating to proxy access.
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Stockholders
also will be asked to consider and vote at the Annual Meeting on any other matter that may properly come before the Annual Meeting or any adjournment or postponement of the
Annual Meeting. At this time, the Board of Directors is unaware of any matters, other than those set forth above and the possible submission of the Krol Proposals, as described in the section entitled
"Other Matters," that may properly come before the Annual Meeting.
What are the Board's voting recommendations?
The Board recommends that you vote "FOR" the nominees of the Board in the election of directors, "FOR" the ratification of
Deloitte & Touche LLP as the Company's independent registered public accounting firm, "FOR" the approval, on an advisory basis, of the compensation of our named executive officers as
presented in this proxy statement and "AGAINST" each of the stockholder proposals.
What is the difference between holding shares as a stockholder of record and as a beneficial
owner?
If your shares are registered directly in your name with our transfer agent, Broadridge Financial Solutions, Inc., you are
considered the "stockholder of record" with respect to those shares.
If
your shares are held in a stock brokerage account or by a bank or other nominee, those shares are held in "street name" and you are considered the "beneficial owner" of the shares. As
the beneficial owner of those shares, you have the right to direct your broker, bank or nominee how to vote your shares, and you will receive separate instructions from your broker, bank or other
holder of record describing how to vote your shares.
How can I vote my shares before the Annual Meeting?
If you hold your shares in your own name, you may submit a proxy by telephone, via the
Internet or by mail.
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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 Daylight Time on June 24, 2015, 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 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 Daylight Time on June 24, 2015, 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.
By
casting your vote in any of the three ways listed above, you are authorizing the individuals listed on the proxy to vote your shares in accordance with your instructions. You may also
attend the Annual Meeting and vote in person.
If your shares are held in the name of a bank, broker or other nominee, you will receive instructions from the holder of record that you
must follow for your shares to be voted. The availability of telephonic or Internet voting will depend on the bank's or broker's voting process. Please check with your bank or broker and follow the
voting procedures your bank or broker provides to vote your
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shares.
Also, please note that if the holder of record of your shares is a bank, broker or other nominee and you wish to vote in person at the Annual Meeting, you must request a legal proxy from your
bank, broker or other nominee that holds your shares and present that proxy and proof of identification at the Annual Meeting; otherwise, you will not be able to vote in person at the Annual Meeting.
If I am the beneficial owner of shares held in "street name" by my broker, will my broker
automatically vote my shares for me?
New York Stock Exchange ("NYSE") rules applicable to brokers grant your broker discretionary authority to vote your shares without
receiving your instructions on certain matters. Your broker has discretionary voting authority under NYSE rules to vote your shares on the ratification of Deloitte & Touche LLP as our
independent registered public accounting firm. However, unless you provide voting instructions to your broker, your broker does not have discretionary authority to vote on the election of directors,
the advisory vote on the compensation of our named executive officers and the vote on each of the stockholder proposals. Accordingly, it is particularly important that
beneficial owners instruct their brokers how they wish to vote their shares.
How will my shares be voted if I give my proxy but do not specify how my shares should be
voted?
If you provide specific voting instructions, your shares will be voted at the Annual Meeting in accordance with your instructions. If
you hold shares in your name and sign and return a proxy card without giving specific voting instructions, your shares will be voted "FOR" the nominees of the Board in the election of directors, "FOR"
the ratification of Deloitte & Touche LLP as the Company's independent registered public accounting firm, "FOR" the approval, on an advisory basis, of the compensation of our named
executive officers and "AGAINST" each of the stockholder proposals.
Could other matters be decided at the Annual Meeting?
At this time, we are unaware of any matters, other than as set forth above and the possible submission of the Krol Proposals, as
described in the section entitled "Other Matters," that may properly come before the Annual Meeting. If any other matters properly come before the Annual Meeting, the persons named in the enclosed
proxy, or their duly constituted substitutes acting at the Annual Meeting or any adjournment or postponement of the Annual Meeting, will be deemed authorized to vote or otherwise act on such matters
in accordance with their judgment.
Who may attend the Annual Meeting?
All stockholders are invited to attend the Annual Meeting. Persons who are not stockholders may attend only if invited by the Board of
Directors. If you are the beneficial owner of shares held in the name of your broker, bank or other nominee, you must bring proof of ownership (e.g., a current broker's statement) in order to
be admitted to the meeting. You can obtain directions to the Annual Meeting by contacting our Investor Relations Department at (717) 975-3710.
Can I vote in person at the Annual Meeting?
Yes. If you hold shares in your own name as a stockholder of record, you may come to the Annual Meeting and cast your vote at the
meeting by properly completing and submitting a ballot. If you are the beneficial owner of shares held in the name of your broker, bank or other nominee, you must first obtain
a legal proxy from your broker, bank or other nominee giving you the right to vote those shares and submit that proxy along with a properly completed ballot at the meeting; otherwise, you will not be
able to vote in person at the Annual Meeting.
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How can I change my vote?
You may revoke your proxy at any time before it is exercised by:
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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 Daylight Time on June 24, 2015; or
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- Attending the Annual Meeting and voting in person (your attendance at the Annual Meeting, in and of itself, will not revoke the
proxy).
Any
written notice of revocation, or later dated proxy, should be delivered to:
Rite
Aid Corporation
30 Hunter Lane
Camp Hill, Pennsylvania 17011
Attention: Marc A. Strassler, Secretary
Alternatively,
you may hand deliver a written revocation notice, or a later dated proxy, to the Secretary at the Annual Meeting before we begin voting.
If
your shares of Rite Aid common stock are held by a bank, broker or other nominee, you must follow the instructions provided by the bank, broker or other nominee if you wish to change
your vote.
What is an "abstention" and how would it affect the vote?
An "abstention" occurs when a stockholder sends in a proxy with explicit instructions to decline to vote regarding a particular matter.
Abstentions are counted as present for purposes of determining a quorum. An abstention with respect to the election of directors is neither a vote cast "for" a nominee nor a vote cast "against" the
nominee and, therefore, will have no effect on the outcome of the vote. Abstentions with respect to the ratification of Deloitte & Touche LLP as our independent registered public
accounting firm, the advisory vote on compensation of our named executive officers and the vote on each of the stockholder proposals will have the same effect as voting "against" the proposal.
What is a broker "non-vote" and how would it affect the vote?
A broker non-vote occurs when a broker or other nominee who holds shares for the beneficial owner is unable to vote those shares for
the beneficial owner because the broker or other nominee does not have discretionary voting power for the proposal and has not received voting instructions from the beneficial owner of the shares.
Brokers will have discretionary voting power to vote shares for which no voting instructions have been provided by the beneficial owner only with respect to the ratification of Deloitte &
Touche LLP as our independent registered public accounting firm. Brokers will not have such discretionary voting power to vote shares with respect to the election of directors, the advisory
vote on the compensation of our named executive officers and the vote on each of the stockholder proposals. Shares that are the subject of a broker non-vote are included for quorum purposes, but a
broker non-vote with respect to a proposal will not be counted as a vote cast and will not be counted as a vote represented at the meeting and entitled to vote and, consequently, will have no effect
on the outcome of the vote. Accordingly, it is particularly important that beneficial owners of Rite Aid shares instruct their brokers how to vote their shares.
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What are the quorum and voting requirements for the proposals?
In deciding the proposals that are scheduled for a vote at the Annual Meeting, each holder of common stock as of the record date is
entitled to one vote per share of common stock. In order to take action on the proposals, a quorum, consisting of the holders of 494,418,726 shares (a majority of the aggregate number of shares of
Rite Aid common stock) issued and outstanding and entitled to vote as of the record date for the Annual Meeting, must be present in person or by proxy. This is referred to as a "quorum." Proxies
marked "Abstain" and broker non-votes will be treated as shares that are present for purposes of determining the presence of a quorum.
The affirmative vote of a majority of the total number of votes cast is required for the election of each director nominee named in
Proposal No. 1. This means that the votes cast "for" that nominee must exceed the votes cast "against" that nominee. Any shares not voted (whether by abstention, broker non-vote or otherwise)
will not be counted as votes cast and will have no effect on the outcome of the vote. For more information on the operation of our majority voting standard, see the section entitled "Board of
DirectorsCorporate GovernanceMajority Voting Standard and Policy."
The affirmative vote of a majority of the shares represented at the meeting and entitled to vote is required for the ratification of
Deloitte & Touche LLP as our independent registered public accounting firm in Proposal No. 2. Any shares represented and entitled to vote at the meeting and not voted (whether by
abstention or otherwise) will have the same effect as a vote "against" the proposal.
The affirmative vote of a majority of the shares represented at the meeting and entitled to vote is required for the approval of the
advisory vote on the compensation of our named executive officers in Proposal No. 3. Any shares represented and entitled to vote at the meeting and not voted (whether by abstention or
otherwise) will have the same effect as a vote "against" the proposal. Any broker non-votes with respect to the advisory vote on the compensation of our named executive officers will not be counted as
shares represented at the meeting and entitled to vote and, consequently, will have no effect on the outcome of the vote.
The affirmative vote of a majority of the shares represented at the meeting and entitled to vote is required for the approval of the
stockholder proposal in Proposal No. 4. Any shares represented and entitled to vote at the meeting and not voted (whether by abstention or otherwise) will have the same effect as a vote
"against" the proposal. Any broker non-votes with respect to the stockholder proposal will not be counted as shares represented at the meeting and entitled to vote and, consequently, will have no
effect on the outcome of the vote.
The affirmative vote of a majority of the shares represented at the meeting and entitled to vote is required for the approval of the
stockholder proposal in Proposal No. 5. Any shares represented and entitled to vote at the meeting and not voted (whether by abstention or otherwise) will have the same effect as a vote
"against" the proposal. Any broker non-votes with respect to the stockholder proposal will not be counted as shares represented at the meeting and entitled to vote and, consequently, will have no
effect on the outcome of the vote.
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What happens if a quorum is not present at the Annual Meeting?
If the shares present in person or represented by proxy at the Annual Meeting are not sufficient to constitute a quorum, the
stockholders by a vote of the holders of a majority of votes present in person or represented by proxy (which may be voted by the proxyholders) may, without further notice to any stockholder (unless a
new record date is set), adjourn the meeting to a different time and place to permit further solicitations of proxies sufficient to constitute a quorum.
Who will count the votes?
Representatives of Broadridge Financial Solutions, Inc. will tabulate the votes and act as inspectors of election.
Who will conduct the proxy solicitation and how much will it cost?
We are soliciting proxies from stockholders on behalf of our Board and will pay for all costs incurred by it in connection with the
solicitation. In addition to solicitation by mail, the directors, officers and associates of Rite Aid and its subsidiaries may solicit proxies from stockholders of Rite Aid in person or by telephone,
facsimile or email without additional compensation other than reimbursement for their actual expenses.
We
have retained Innisfree M&A Incorporated ("Innisfree"), a proxy solicitation firm, to assist us in the solicitation of proxies for the Annual Meeting. Rite Aid will pay Innisfree a
fee of approximately $12,000 and reimburse the firm for approximately $2,000 of reasonable out-of-pocket expenses.
Arrangements
also will be made with brokerage firms and other custodians, nominees and fiduciaries for the forwarding of solicitation material to the beneficial owners of stock held of
record by such persons, and we will reimburse such custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses in connection with the forwarding of solicitation materials to the
beneficial owners of our stock.
Why did I receive a "Notice of Internet Availability of Proxy Materials" but no proxy
materials?
We distribute our proxy materials to certain stockholders via the Internet under the "Notice and Access" approach permitted by the
rules of the U.S. Securities and Exchange Commission (the "SEC"). This approach expedites stockholders' receipt of proxy materials while conserving natural resources and reducing our distribution
costs. On May 15, 2015, we mailed a Notice of Internet Availability of Proxy Materials containing instructions on how to access the proxy materials on the Internet to participating
stockholders.
If you have any questions about voting your shares or attending the Annual Meeting, please call our Investor Relations Department at
(717) 975-3710.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
General
Our By-Laws provide that the Board of Directors may be composed of up to 15 members, with the number to be fixed from time to time by
the Board. The Board has fixed the number of directors at nine, effective as of the date of the Annual Meeting, and there are nine nominees for director at our Annual Meeting.
Director Nominees
The Board of Directors, based on the recommendation of the Nominating and Governance Committee, has nominated Joseph B. Anderson, Jr.,
Bruce G. Bodaken, David R. Jessick, Kevin E. Lofton, Myrtle S. Potter, Michael N. Regan, Frank A. Savage, John T. Standley and Marcy Syms to be elected directors at the Annual Meeting. Other than
Mr. Savage, each of the nominees for director to be elected at the Annual Meeting currently serves as a director of the Company. In selecting Mr. Anderson as a nominee, the Board voted
to waive the requirement that a nominee has not yet reached the age of 72 because of Mr. Anderson's extensive knowledge and experience, his valuable contributions as a Board member and his
leadership as Chair of the Nominating and Governance Committee.
Each
director elected at the Annual Meeting will hold office until the 2016 Annual Meeting of Stockholders. Each director elected at the Annual Meeting will serve until his or her
successor is duly elected and qualified.
If
any nominee at the time of election is unable or unwilling to serve or is otherwise unavailable for election, and as a consequence thereof other nominees are designated, then the
persons named in the proxy or their substitutes will have the discretion and authority to vote or to refrain from voting for other nominees in accordance with their judgment.
RECOMMENDATION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR"
THE ELECTION OF EACH OF THE NOMINEES LISTED ABOVE.
BOARD OF DIRECTORS
The following table sets forth certain information with respect to our director nominees as of May 1, 2015. If elected, each of
the following person's terms will expire at the 2016 Annual Meeting of Stockholders.
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Name
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Position with Rite Aid |
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Year First
Became
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John T. Standley |
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52 |
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Chairman and Chief Executive Officer |
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2009 |
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Joseph B. Anderson, Jr. |
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72 |
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Director |
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2005 |
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Bruce G. Bodaken |
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63 |
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Director |
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2013 |
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David R. Jessick |
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61 |
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Director |
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2009 |
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Kevin E. Lofton |
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60 |
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Director |
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2013 |
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Myrtle S. Potter |
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56 |
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Director |
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2013 |
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Michael N. Regan |
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67 |
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Director |
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2007 |
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Frank A. Savage |
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67 |
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Director |
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Marcy Syms |
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64 |
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Director |
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2005 |
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Board Composition
The Board is committed to ensuring that it is composed of a highly capable and diverse group of directors who are well-equipped to
oversee the success of the business and effectively represent the interests of stockholders. In addition, the Board believes that having directors with a mix of tenures on the Board helps transition
the knowledge of the more experienced directors while providing a broad, fresh set of perspectives and a Board with a diversity of experiences and viewpoints.
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Director Tenure* |
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Board Gender Diversity* |
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Board Racial Diversity* |
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- The
compositions depicted include calculations based on the assumption that Mr. Savage is elected to the Board at the Annual Meeting.
In
assessing Board composition and selecting and recruiting director candidates, the Board seeks to maintain an engaged, independent Board with broad experience and judgment that is
committed to representing the long-term interests of our stockholders. The Nominating and Governance Committee considers a wide range of factors, including the size of the Board, the experience and
expertise of existing Board members, other positions the director candidate has held or holds (including other board memberships), and the candidate's independence. In addition, the Nominating and
Governance Committee takes into account a candidate's ability to contribute to the diversity of background and experience represented on the Board, and it reviews its effectiveness in balancing these
considerations when assessing the composition of the Board.
Prior
to the Annual Meeting, the Nominating and Governance Committee sought to recruit an additional Board member whose qualifications align with the Company's long-term growth strategy.
After considering a number of candidates and comprehensively reviewing these candidates' abilities and qualifications, the Nominating and Governance Committee recommended Mr. Savage for
election to the Board. Mr. Savage brings to the Board extensive experience in senior management and in-depth financial and banking knowledge and experience.
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The
chart below summarizes the qualifications, attributes, and skills for each of our director nominees. The fact that we do not list a particular experience or qualification for a
director nominee does not mean that nominee does not possess that particular experience or qualification.
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Skills and Experience
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Standley |
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Anderson |
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Bodaken |
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Jessick |
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Lofton |
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Potter |
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Regan |
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Savage |
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Syms |
Current/Former CEO |
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X |
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X |
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X |
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X |
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X |
Management/Business Operations |
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X |
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X |
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X |
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X |
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X |
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X |
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X |
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X |
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X |
Retail Industry |
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X |
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X |
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X |
Healthcare Industry |
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X |
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X |
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X |
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Finance/Accounting |
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X |
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X |
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X |
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X |
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X |
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Board/Corporate Governance |
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X |
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X |
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X |
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X |
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X |
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X |
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X |
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X |
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X |
Director Biographies
Following are the biographies for our director nominees, including information concerning the particular experience, qualifications,
attributes or skills that led the Nominating and Governance Committee and the Board to conclude that such person should serve on the Board:
John T. Standley. Mr. Standley, Chairman and Chief Executive Officer, has been Chairman of the Board since June 21, 2012,
Chief
Executive Officer since June 2010 and was President from September 2008 until June 2013. Mr. Standley served as the Chief Operating Officer from September 2008 until June 2010. He also served
as a consultant to Rite Aid from July 2008 to September 2008. From August 2005 through December 2007, Mr. Standley served as Chief Executive Officer and was a member of the Board of Directors
of Pathmark Stores, Inc. From June 2002 to August 2005, he served as Senior Executive Vice President and Chief Administrative Officer of Rite Aid and, in addition, in January 2004 was appointed
Chief Financial Officer of Rite Aid. He had served as Senior Executive Vice President and Chief Financial Officer of Rite Aid from September 2000 to June 2002 and had served as Executive Vice
President and Chief Financial Officer of Rite Aid from December 1999 until September 2000. Mr. Standley is a member of the National Association of Chain Drug Stores' Board of Directors and also
serves on the SUPERVALU INC. Board of Directors.
As
the Company's Chief Executive Officer, with more than 20 years of retail, financial and executive experience, Mr. Standley brings to the Board an in-depth understanding
of all aspects of the Company, including its customers, operations and key business drivers. In addition, his experience serving as a chief financial officer of a number of companies, including the
Company, provides the Board with additional insights into financial and accounting matters relevant to the Company's operations.
Joseph B. Anderson, Jr. Mr. Anderson has been the Chairman of the Board and Chief Executive Officer of TAG Holdings, LLC, a
manufacturing, service and technology business, since January 2002. Mr. Anderson was Chairman of the Board and Chief Executive Officer of Chivas Industries, LLC from 1994 to 2002.
Mr. Anderson also serves as a director of Quaker Chemical Corporation and Meritor, Inc. Mr. Anderson previously served as a director of NV Energy Inc. until December
2013 and Valassis Communications, Inc. until February 2014.
Mr. Anderson
has a broad base of experience, including 19 years of chief executive officer experience at manufacturing, service and technology companies. From this
experience, Mr. Anderson brings an array of skills, including in the areas of strategic, business and financial planning and corporate development. In addition, his service on the boards of
directors of a number of publicly-traded companies provides
the Board with insights into how boards at other companies have addressed issues similar to those faced by the Company.
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Bruce G. Bodaken. From 2000 through December 2012, Mr. Bodaken served as Chairman and Chief Executive Officer of Blue Shield of
California.
Mr. Bodaken also previously served as President and Chief Operating Officer of Blue Shield of California from 1995 to 2000 and 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, including Regional Vice President. Mr. Bodaken is currently a director and a member of the audit committee of WageWorks, Inc.
and a director and member of the compensation and nominating and governance committees of AltheaDx, Inc. He is also a member of the Institute of Medicine's Roundtable on Value and
Science-Driven Health Care and has a Visiting Scholar appointment at the Brookings Institution.
Mr. Bodaken
brings to the Board an in-depth knowledge of the health insurance and managed care industries and more than 20 years of executive leadership skills.
David R. Jessick. Self-employed since 2005, Mr. Jessick served as a consultant to Rite Aid's Chief Executive Officer and senior
financial
staff from July 2002 until February 2005 and was Senior Executive Vice President, Chief Administrative Officer of Rite Aid from December 1999 to July 2002. From July 1998 to June 1999,
Mr. Jessick was Executive Vice President, Finance and Investor Relations of Fred Meyer, Inc., and from February 1997 to July 1998, Mr. Jessick was Chief Financial Officer of Fred
Meyer, Inc. From 1979 to 1996, he held various financial positions including Executive Vice President and Chief Financial Officer at Thrifty Payless Holdings, Inc. Mr. Jessick
began his career as a Certified Public Accountant for Peat, Marwick, Mitchell & Co. Mr. Jessick is currently a director and audit committee chairman of Big 5 Sporting Goods
Corporation. In addition, he previously served as a director of DFC Global Corp. from 2005 to 2014.
Mr. Jessick
brings over 33 years of retail, executive and financial experience to the Board. His familiarity with our business and his experience as a chief financial
officer provide useful insights into operational and financial matters relevant to the Company's business. In addition, his service on other boards of directors enables Mr. Jessick to share
insights with the Board regarding corporate governance best practices.
Kevin E. Lofton. Mr. Lofton has served as the Chief Executive Officer of Catholic Health Initiatives ("CHI"), a healthcare system
operating
the full continuum of services from hospitals to home health agencies nationwide since 2003 and as President and CEO of CHI from 2003 through January 2014. Mr. Lofton previously served as Chief
Executive Officer of the University of Alabama at Birmingham Hospital and Howard University Hospital in Washington, D.C. Mr. Lofton is also a director and member of the audit and compensation
committees of Gilead Sciences, Inc.
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.
Myrtle S. Potter. Ms. Potter has served since 2005 as the Chief Executive Officer of Myrtle Potter & Company, LLC, a
private
consulting firm she founded, and from 2009 to 2014 as the Chief Executive Officer of Myrtle Potter Media, Inc., a consumer healthcare content company she founded. Ms. Potter previously
served at Genentech, Inc., as President of Commercial Operations from 2004 to 2005 and as Executive Vice President, Commercial Operations and Chief Operating Officer from 2000 to 2004. From
1998 to 2000 Ms. Potter served as President of Bristol-Myers Squibb, Inc.'s Cardiovascular Metabolic U.S. operations. Ms. Potter serves as a director of Liberty Mutual Holding
Company, Inc., Insmed, Inc., Everyday Health, Inc. and Proteus Digital Health, Inc. and as a trustee of The University of Chicago. Ms. Potter served on the board of
Medco Health Solutions, Inc. from
10
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December
2007 until its acquisition by Express Scripts, Inc. in April 2012. She continued on the board at Express Scripts until June 2012.
Ms. Potter
brings to the Board extensive experience in executive management and leadership roles in the healthcare industry. She also brings valuable experience as a consultant to
global life science, biopharmaceutical and biotechnical companies regarding corporate strategy, customer engagement, commercialization, product development and as a former board member of two leading
pharmacy benefits management companies.
Michael N. Regan. Since August 2014, Mr. Regan has served as Executive Vice President and Chief
Financial Officer of Outrigger Enterprises Group, a privately held hospitality company. Prior to that, Mr. Regan served as the Hold Separate Manager on behalf of the Federal Trade Commission,
operating the Lumiere Place Casino and Hotel in St. Louis, Missouri from August 2013 through its sale in spring 2014 and prior to that as Chief Financial Officer of Indianapolis
Downs LLC, a casino and horse track complex located near Indianapolis, Indiana during its bankruptcy from January 2012 through its sale in February 2013. From May 2007 through December 2011,
Mr. Regan was a self-employed private equity investor. Prior thereto, Mr. Regan served as Chief Financial Officer of The St. Joe Company, a major real estate development company
based in Florida, from November 2006 to May 2007. From 1997 to November 2006, he served as Senior Vice President, Finance and held various other positions with The St. Joe Company and was a
member of the senior management team. Prior to joining The St. Joe Company, he served in various financial management functions at Harrah's Entertainment from 1980 through 1997, including as
Vice President and controller from 1991 to 1997.
Mr. Regan's
over 30 years of experience, including serving as a chief financial officer and as a senior vice president of finance, provides the Board with additional
perspectives on financial, operational and strategic planning, and real estate matters relevant to the Company.
Frank A. Savage. Mr. Savage has been a senior advisor to investment banking firm Lazard Ltd. ("Lazard") since January 1,
2014
and served as Vice Chairman of U.S. Investment Banking at Lazard from 2009 to December 31, 2013. He was the Co-Head of Lazard's Restructuring Group from June 1999 to December 31, 2013
and also served on Lazard's Deputy Chairman Committee from 2006 to December 2013. Prior to joining Lazard, Mr. Savage served as Co-Head of the Restructuring Practice at investment banking firm
BT Alex. Brown Inc. and before that was the Head of the Restructuring Group at investment bank UBS AG. Mr. Savage is currently a director and member of the Corporate Governance and
Nominating Committee of SUPERVALU INC.
Mr. Savage
brings to the Board extensive financial and investment banking experience.
Marcy Syms. Ms. Syms served as a director of Syms Corp., a chain of retail clothing stores, from 1983, when she was named
President and COO,
until 2012. Ms. Syms became CEO of Syms Corp. in 1998 and was named Chair in 2010. In November 2011, Syms Corp. and its subsidiaries filed voluntary petitions for relief under Chapter 11
of the United States Bankruptcy Code and ceased all retail operations. Ms. Syms is also a founding member of the Board of Directors of the Syms School of Business at Yeshiva University.
Currently, Ms. Syms serves as President of the Sy Syms Foundation and Founder and President of the TPD Group LLC, a multi-generational succession planning company.
Ms. Syms
brings to the Board over 18 years of experience as a chief executive officer of a chain of retail stores, including an array of skills in strategic planning,
marketing and human resources matters similar to those faced by the Company.
Board Leadership
Mr. Standley serves as Chairman of the Board and Chief Executive Officer. Mr. Regan has served as our Lead Independent
Director since 2011 and it is expected that he will continue in that role.
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The
Company's governance framework provides the Board with flexibility to select the appropriate leadership structure for the Company. In connection with the 2012 Annual Meeting, the
Board reviewed its leadership structure in light of the Company's operating and governance environment and determined that Mr. Standley should serve as the Chairman of the Board effective as of
the 2012 Annual Meeting, based on the Board's belief that Mr. Standley's in-depth knowledge of the Company, keen understanding of the Company's operations and proven leadership and vision
positioned him to provide strong and effective leadership to the Board. The Board has determined to maintain its current leadership structure, taking into account the foregoing factors as well as the
evaluation of Mr. Standley's performance as Chief Executive Officer, his very positive relationships with other members of the Board and the leadership and strategic vision he has brought to
the Chairman position.
The
Board has no policy mandating the combination or separation of the Chairman of the Board and Chief Executive Officer positions and believes that, given the dynamic and competitive
environment in which we operate, the right leadership structure may vary from time to time based on changes in circumstances. The Board makes this determination based on what it believes best serves
the needs of the Company and its stockholders at any particular time. For the reasons described above, the Board continues to believe that Mr. Standley provides excellent leadership of the
Board in the performance of its duties and that a unified structure provides decisive and effective leadership both within and outside the Company.
In
addition, the Board continues to maintain the position of Lead Independent Director that it created in 2009. Under our Corporate Governance Guidelines, in the event that the Chairman
of the Board is also the Chief Executive Officer or otherwise is not an independent director, the independent members of the Board will choose an independent director to serve as Lead Independent
Director. The Lead Independent Director, who is expected to serve at least one year, has the following responsibilities, which are described in our Corporate Governance
Guidelines:
-
- presides at all meetings of the Board at which the Chairman of the Board is not present, including executive sessions of the
non-management directors;
-
- has the authority to call meetings of the non-management directors;
-
- serves as a liaison between the Chairman of the Board and/or Chief Executive Officer and independent directors and facilitates
communications between other members of the Board and the Chairman and/or Chief Executive Officer (any director is free to communicate directly with the Chairman and/or Chief Executive Officer; the
lead director's role is to attempt to improve such communications if they are not entirely satisfactory);
-
- works with the Chairman and/or Chief Executive Officer in the preparation of, and approves, Board meeting agendas and schedules and
the information to be provided to the Board;
-
- chairs the annual review of the performance of the Chief Executive Officer;
-
- otherwise consults with the Chairman and/or Chief Executive Officer on matters relating to corporate governance and Board performance;
and
-
- if requested by major stockholders, ensures that he/she is available, when appropriate, for consultation and direct communication.
Corporate Governance
We recognize that good corporate governance is an important means of protecting the interests of our stockholders, associates,
customers, suppliers and the community. The Board of Directors, through the Nominating and Governance Committee, monitors corporate governance developments and proposed legislative, regulatory and
stock exchange corporate governance reforms.
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Website Access to Corporate Governance Materials. Our corporate governance information and materials, including our Corporate
Governance Guidelines,
current charters for each of the Audit Committee, Compensation Committee, Nominating and Governance Committee and Executive Committee, our Code of Ethics for the CEO and Senior Financial Officers, our
Code of Ethics and Business Conduct, our Stock Ownership Guidelines and our Related Person Transaction Policy, are posted on our website at www.riteaid.com under the headings "Corporate
InfoGovernance" and are available in print upon request to Rite Aid Corporation, 30 Hunter
Lane, Camp Hill, Pennsylvania 17011, Attention: Secretary. The information on our website is not, and shall not be deemed, a part of this proxy statement. The Board regularly reviews corporate
governance developments and will modify these materials and practices from time to time as warranted.
Codes of Ethics. The Board has adopted a Code of Ethics that is applicable to our Chief Executive Officer and senior financial
officers. The Board
has also adopted a Code of Ethics and Business Conduct that applies to all of our officers, directors and associates. Any amendment to either code or any waiver of either code for executive officers
or directors will be disclosed promptly on our website at www.riteaid.com under the headings "Corporate InfoGovernanceCode of
Ethics."
Director Independence. For a director to be considered independent under the NYSE corporate governance listing standards, the
Board of Directors must
affirmatively determine that the director does not have any direct or indirect material relationship with the Company, including any of the relationships specifically proscribed by the NYSE
independence standards. The Board considers all relevant facts and circumstances in making its independence determinations. Only independent directors may serve on our Audit Committee, Compensation
Committee and Nominating and Governance Committee.
As
a result of this review, the Board affirmatively determined that the following directors and director nominees, including each director serving on the Audit Committee, the
Compensation Committee and the Nominating and Governance Committee, satisfy the independence requirements of the NYSE listing standards: Joseph B. Anderson, Jr., Bruce G. Bodaken, David R. Jessick,
Kevin E. Lofton, Myrtle S. Potter, Michael N. Regan, Frank A. Savage and Marcy Syms. The Board also determined that the members of the Audit Committee satisfy the additional independence requirements
of Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the additional NYSE independence requirements for audit committee members. In addition, the Board
has determined that the members of the Compensation Committee satisfy the additional NYSE independence requirements for compensation committee members.
There
is no family relationship between any of the nominees and executive officers of Rite Aid.
Majority Voting Standard and Policy. Under the Company's By-Laws, a nominee for director in uncontested elections of directors
(as is the case for
this Annual Meeting) will be elected to the Board if the votes cast "for" such nominee's election exceed the votes cast "against" such nominee's election. In contested elections, directors will be
elected by a plurality of votes cast. For this purpose, a contested election means any meeting of stockholders for which (i) the Secretary of the Company receives a notice that a stockholder
(or group of stockholders) has nominated a person for election to the Board in compliance with the advance notice requirements for stockholder nominees for director or the proxy access requirements,
in each case as set forth in the By-Laws, and (ii) such nomination has not been withdrawn by such stockholder (or group of stockholders) on or prior to the 14th day
preceding the date the Company first mails its notice of meeting for such meeting to the stockholders.
Under
the Company's Corporate Governance Guidelines, a director who fails to receive the required number of votes for re-election in accordance with the By-Laws will, within five days
following certification of the stockholder vote, tender his or her written resignation to the Chairman of the Board for consideration by the Board, subject to the procedures set forth in the
guidelines.
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Board Oversight of Risk Management
The Board of Directors, as a whole and through the various committees of the Board, oversees the Company's management of risk, focusing
primarily on five areas of risk: operational, financial performance, financial reporting, legal and regulatory, and strategic and reputational.
Management
of the Company is responsible for developing and implementing the Company's plans and processes for risk management. The Board believes that its leadership structure,
described above, supports the risk oversight function of the Board. The Board of Directors, at least annually, reviews with management its plans and processes for managing risk. The Board also
receives periodic updates from the Company's Chief Compliance Officer with regard to the overall effectiveness of the Company's risk management program and significant areas of risk to the Company,
focusing on the five primary areas of risk set forth above as well as other areas of risk identified from time to time by either the Board, a Board committee or management. In addition, the Board
receives periodic updates from the Company's Chief Administrative Officer on cybersecurity matters, including information services security and security controls over credit card, customer, associate
and patient data.
In
addition, other Board committees consider risks within their respective areas of responsibility and advise the Board of any significant risks. For example, the Compensation Committee
considers risks relating to the Company's compensation programs and policies and the Audit Committee focuses on assessing and mitigating financial reporting risks, including risks related to internal
control over financial reporting and legal and compliance risks.
Compensation-Related Risk Assessment
The Compensation Committee reviews all incentive plans relative to established criteria and conducts an assessment to ensure that none
of our incentive plans encourage excessive risk-taking by our executives or associates. Together with executive management, the Compensation Committee has considered the risks arising from the
Company's compensation programs
for its executives and associates and has concluded that the compensation policies are not reasonably likely to have a material adverse effect on the Company.
The
Compensation Committee reviews the risk profile and the relationship between the Company's compensation programs to the overall risk profile of the Company. Some of the features of
our incentive programs that limit risk include:
-
- Delivery of compensation through an appropriate mix of base salary, cash incentive bonuses, long-term awards, and benefits.
-
- Use of a mix of long-term incentive vehicles that reward both stock price appreciation and financial operating performance and have
different risk profiles.
-
- Incorporation of additional measures in the performance awards to assess how efficiently we use capital (leverage ratio) and to
compare our stock performance against the Russell 2000 Index (total stockholder return).
-
- Stock ownership guidelines that promote executive stock ownership.
Committees of the Board of Directors
The Board of Directors has four standing committees: the Audit Committee, the Compensation Committee, the Nominating and Governance
Committee and the Executive Committee. Current copies of the charters for each of these committees are available on our website at www.riteaid.com under
the headings "Corporate
InfoGovernanceCorporate Governance CommitteesCommittee Charters."
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The
current members of the committees are identified in the following table.
|
|
|
|
|
|
|
|
|
Director
|
|
Audit |
|
Compensation |
|
Nominating and
Governance |
|
Executive |
John T. Standley |
|
|
|
|
|
|
|
Chair |
Joseph B. Anderson, Jr. |
|
|
|
|
|
Chair |
|
|
Bruce G. Bodaken |
|
|
|
X |
|
X |
|
|
David R. Jessick |
|
Chair |
|
|
|
|
|
X |
Kevin E. Lofton |
|
X |
|
|
|
|
|
|
Myrtle S. Potter |
|
|
|
|
|
X |
|
|
Michael N. Regan |
|
X |
|
X |
|
|
|
X |
Marcy Syms |
|
|
|
Chair |
|
|
|
|
Audit Committee. The Audit Committee, which held eight meetings during fiscal year 2015, currently consists of David R. Jessick
(Chair), Kevin E.
Lofton and Michael N. Regan. The Board has determined that each of these individuals is an independent director under the NYSE listing standards and satisfies the additional independence requirements
of Rule 10A-3 under the Exchange Act and the additional requirements of the NYSE listing standards for audit committee members. See the section entitled "Corporate
GovernanceDirector Independence" above. The Board has determined that each of these individuals is also "financially literate" under the applicable NYSE listing standards. The Board has
determined that David R. Jessick qualifies as an "audit committee financial expert" as that term is defined under applicable SEC rules.
The
functions of the Audit Committee include the following:
-
- Appointing, compensating and overseeing our independent registered public accounting firm ("independent auditors");
-
- Overseeing management's fulfillment of its responsibilities for financial reporting and internal control over financial reporting; and
-
- Overseeing the activities of the Company's internal audit function.
The
independent auditors and internal auditors meet with the Audit Committee with and without the presence of management representatives. For additional information, see the section
entitled "Audit Committee Report," as well as the Audit Committee's charter, which is posted on our website at www.riteaid.com under the headings
"Corporate InfoGovernanceCorporate Governance CommitteesCommittee Charters."
Compensation Committee. The Compensation Committee, which met four times during fiscal year 2015, currently consists of Marcy
Syms (Chair), Bruce G.
Bodaken and Michael N. Regan. The Board has determined that each of these individuals is an independent director under the NYSE listing standards and satisfies the additional independence requirements
of the NYSE listing standards for compensation committee members. See the section entitled "Corporate GovernanceDirector Independence" above.
The
functions of the Compensation Committee include the following:
-
- Administering Rite Aid's stock option and other equity incentive plans;
-
- 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;
-
- 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
15
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The
Compensation Committee reviews the performance of the Company's executive personnel, including the Company's named executive officers, and develops and makes recommendations to the
Board of Directors with respect to executive compensation policies. The Compensation Committee is empowered by the Board of Directors to award to executive officers appropriate bonuses, stock options,
stock appreciation rights and stock-based awards. The details of the processes and procedures for the consideration and determination of the compensation of our named executive officers are described
in the section entitled "Executive CompensationCompensation Discussion and Analysis." The objectives of the Compensation Committee are to support the achievement of desired Company
performance, to provide compensation and benefits that will attract and retain superior talent, reward performance and to fix a portion of compensation to the outcome of the Company's performance.
As
provided in its charter, the Compensation Committee has the authority to engage an external compensation consultant and to determine the scope of any services provided. The
Compensation Committee may terminate the engagement at any time. The external compensation consultant reports to the Compensation Committee Chair.
Since
June 2010, the Compensation Committee has utilized Exequity LLP as its independent consultant. With respect to fiscal year 2015, Exequity LLP reviewed recommendations
and analysis prepared by management and provided advice and counsel to the Compensation Committee. Exequity LLP does not provide any other services to the Company. The Compensation Committee
has assessed the independence of Exequity LLP, taking into consideration the factors set forth in the NYSE listing standards and SEC rules, and determined that the engagement of
Exequity LLP does not raise any conflicts of interest.
Nominating and Governance Committee. The Nominating and Governance Committee, which held two meetings during fiscal year 2015,
currently consists of
Joseph B. Anderson, Jr. (Chair), Bruce G. Bodaken and Myrtle S. Potter. The Board has determined that each of these individuals is an independent director under the NYSE listing standards. See the
section entitled "Corporate GovernanceDirector Independence" above.
The
functions of the Nominating and Governance Committee include the following:
-
- Identifying and recommending to the Board individuals qualified to serve as Rite Aid directors;
-
- 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.
Executive Committee. The members of the Executive Committee currently are John T. Standley (Chair), David R. Jessick and Michael
N. Regan. The
Executive Committee did not meet during fiscal
16
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year
2015. The Executive Committee, except as limited by Delaware law, is empowered to exercise all of the powers of the Board of Directors.
Nomination of Directors
The Nominating and Governance Committee will consider director candidates recommended by stockholders. In considering such
recommendations, the Nominating and Governance Committee will take into consideration the needs of the Board and the qualifications of the candidate. The Nominating and Governance Committee may also
take into consideration the number of shares held by the recommending stockholder and the length of time that such shares have been held. To have a candidate considered by the Nominating and
Governance Committee, a stockholder must submit the recommendation in writing and must include the following information:
-
- 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.
The
stockholder recommendation and information described above must be sent to Rite Aid Corporation, 30 Hunter Lane, Camp Hill, Pennsylvania 17011, Attention: Secretary. The Nominating
and Governance Committee will accept recommendations of director candidates throughout the year; however, in order for a recommended director candidate to be considered for nomination to stand for
election at an upcoming annual meeting of stockholders, the recommendation must be received by the Secretary not fewer than 120 days prior to the anniversary date of Rite Aid's most recent
annual meeting of stockholders.
The
Nominating and Governance Committee believes that the minimum qualifications for serving as a Rite Aid director are that a candidate demonstrate, by significant accomplishment in his
or her field, an ability to make a meaningful contribution to the Board's oversight of Rite Aid's business and affairs and have an impeccable record and reputation for honest and ethical conduct in
his or her professional and personal activities. In addition, the Nominating and Governance Committee examines a candidate's specific experiences and skills, availability in light of other
commitments, potential conflicts of interest and independence from management and the Company. The Nominating and Governance Committee also seeks to have the Board represent a diversity of backgrounds
and experience. The Nominating and Governance Committee assesses its achievement of diversity through the review of Board composition as part of the Board's annual self-assessment process.
The
Nominating and Governance Committee identifies potential candidates by asking current directors and executive officers to notify the committee if they become aware of persons,
meeting the criteria described above, who have had a change in circumstances that might make them available to serve on the Boardfor example, retirement as a CEO or CFO of a public
company or exiting government or military service. The Nominating and Governance Committee also, from time to time, may engage firms that specialize in identifying director candidates. As described
above, the committee will also consider candidates recommended by stockholders. Frank A. Savage was recommended for consideration by the Nominating and Governance Committee by John T. Standley.
The
Nominating and Governance Committee may review publicly available information, conduct an interview and/or check references to assess the person's accomplishments and qualifications
in light of the needs of the Board and the accomplishments and qualifications of any other candidates that the committee might be considering. The committee's evaluation process does not vary based on
whether or not a candidate is recommended by a stockholder, although, as stated above, the Board may take
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into
consideration the number of shares held by the recommending stockholder and the length of time that such shares have been held.
Executive Sessions of Non-Management Directors
In order to promote discussion among the non-management directors, regularly scheduled executive sessions (i.e., meetings of
non-management directors without management present) are held to review such topics as the non-management directors determine. Mr. Regan, our Lead Independent Director, presides at our
executive sessions. The non-management directors met in executive session seven times during fiscal year 2015.
Communications with the Board of Directors
The Board has established a process to receive communications from stockholders and other interested parties. Stockholders and other
interested parties may contact any member (or all members) of the Board, any Board committee or any chair of any such committee by mail or electronically. To communicate with the Board of Directors,
the non-management directors, a committee of directors or any individual directors, including our Lead Independent Director, correspondence should be addressed to the Board of Directors or any such
individual directors or committee of directors by either name or title. All such correspondence should be sent to Rite Aid Corporation, c/o Secretary, P.O. Box 3165, Harrisburg,
Pennsylvania 17105. To communicate with any of the directors electronically, stockholders should go to our website at www.riteaid.com. Under the
headings "Corporate InfoGovernanceBoard of DirectorsContact the Board of Directors" you will find an on-line form, as well as an email address, that may be used
for writing an electronic message to the Board, the non-management directors, any individual directors, or any committee of directors. Please follow the instructions on the website in order to send
your message.
All
communications received as set forth above will be opened by the Secretary for the purpose of determining whether the contents represent a message to the directors, and depending on
the facts and
circumstances outlined in the communication, will be distributed to the Board, the non-management directors, an individual director or committee of directors, as appropriate. The Secretary will make
sufficient copies of the contents to send to each director who is a member of the Board or of the committee to which the envelope or e-mail is addressed.
Directors' Attendance at Board, Committee and Annual Meetings
The Board of Directors held 12 meetings during fiscal year 2015. Each incumbent director attended at least 75% of the aggregate of the
meetings of the Board of Directors and meetings held by all committees on which such director served, during the period for which such director served.
It
is our policy that directors are invited and encouraged to attend the annual meeting of stockholders. All eight of our eight directors serving on the Board at the time of the meeting
attended the 2014 Annual Meeting of Stockholders.
Directors' Compensation
Each non-management director receives an annual payment of $100,000 in cash, payable quarterly in arrears. In addition, (i) the
Lead Independent Director receives an additional annual payment of $25,000; (ii) the Chair of the Audit Committee receives an additional annual payment of $20,000; (iii) the Chairs of
the Compensation Committee and the Nominating and Governance Committee each receive an additional annual payment of $10,000; and (iv) each member of the Audit Committee (other than the Chair)
receives an additional annual payment of $10,000. Non-management directors also received an annual award of restricted stock or restricted stock units valued at $90,000 through June 30, 2014.
Beginning with the 2014 Annual Meeting of Stockholders, the value of the annual award
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of
restricted stock or restricted stock units was changed to $120,000. The annual grant vests 80% on the first anniversary of the grant and 10% on each of the second and third anniversaries of the
grant.
Directors who are officers and/or Rite Aid associates receive no separate compensation for service as directors or committee members. Directors are reimbursed for travel and lodging expenses
associated with attending Board of Directors and Board committee meetings.
Non-management
directors are subject to our Stock Ownership Guidelines discussed on page 46.
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Table of Contents
DIRECTOR COMPENSATION TABLE FOR FISCAL YEAR 2015
The following Director Compensation Table sets forth fees, awards and other compensation paid to or earned by our non-management
directors who served during the fiscal year ended February 28, 2015:
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Name
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Fees
Paid in
Cash ($) |
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Stock
Awards
($)(1)(2) |
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Option
Awards
($)(3) |
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Non-Equity
Incentive Plan
Compensation
($) |
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Change In
Nonqualified
Deferred
Compensation
Earnings ($) |
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All Other
Compensation
($) |
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Total ($) |
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Joseph B. Anderson, Jr. |
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110,000 |
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120,000 |
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230,000 |
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Bruce G. Bodaken |
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100,000 |
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120,000 |
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220,000 |
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David R. Jessick |
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120,000 |
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120,000 |
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240,000 |
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Kevin E. Lofton |
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110,000 |
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120,000 |
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230,000 |
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Myrtle S. Potter |
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100,000 |
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120,000 |
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220,000 |
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Michael N. Regan |
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135,000 |
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120,000 |
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255,000 |
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Marcy Syms |
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110,000 |
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120,000 |
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230,000 |
|
- (1)
- Represents
the grant date fair value of awards in fiscal year 2015 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 15 to our financial statements contained in our Annual Report on Form 10-K for the fiscal year ended February 28,
2015. We recognize expense ratably over the three-year vesting period.
- (2)
- The
number of unvested restricted stock units outstanding as of February 28, 2015 for each individual who served as a non-management director during
fiscal year 2015 is detailed in the table below.
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Name
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Grant Date |
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Number of
Stock
Awards (#) |
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Joseph B. Anderson, Jr. |
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June 21, 2012 |
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7,692 |
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June 20, 2013 |
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6,250 |
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June 19, 2014 |
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16,713 |
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Bruce G. Bodaken |
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June 20, 2013 |
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6,250 |
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June 19, 2014 |
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16,713 |
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David R. Jessick |
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June 21, 2012 |
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7,692 |
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June 20, 2013 |
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6,250 |
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June 19, 2014 |
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16,713 |
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Kevin E. Lofton |
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November 8, 2013 |
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2,209 |
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June 19, 2014 |
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16,713 |
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Myrtle S. Potter |
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November 29, 2013 |
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1,790 |
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June 19, 2014 |
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16,713 |
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Michael N. Regan |
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June 21, 2012 |
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7,692 |
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June 20, 2013 |
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6,250 |
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June 19, 2014 |
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16,713 |
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Marcy Syms |
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June 21, 2012 |
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7,692 |
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June 20, 2013 |
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6,250 |
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June 19, 2014 |
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16,713 |
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20
Table of Contents
- (3)
- The
number of unexercised options outstanding as of February 28, 2015 for each individual who served as a non-management director during fiscal year
2015 is detailed in the table below.
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Name
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Grant Date |
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Exercise
Price($) |
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Outstanding(#) |
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Number of
Securities
Underlying
Unexercised
Options(#)
Exercisable |
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Number of
Securities
Underlying
Unexercised
Options(#)
Unexercisable |
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Joseph B. Anderson, Jr. |
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9/21/2005 |
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3.65 |
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100,000 |
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100,000 |
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6/21/2006 |
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4.55 |
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50,000 |
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50,000 |
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6/27/2007 |
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6.15 |
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50,000 |
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50,000 |
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Bruce G. Bodaken |
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David R. Jessick |
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Kevin E. Lofton |
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Myrtle S. Potter |
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Michael N. Regan |
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6/27/2007 |
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6.15 |
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100,000 |
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100,000 |
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Marcy Syms |
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9/21/2005 |
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3.65 |
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100,000 |
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100,000 |
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6/21/2006 |
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4.55 |
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50,000 |
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50,000 |
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6/27/2007 |
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6.15 |
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50,000 |
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50,000 |
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21
Table of Contents
PROPOSAL NO. 2
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The accounting firm of Deloitte & Touche LLP ("Deloitte & Touche") has been selected as the independent registered
public accounting firm for the Company for the fiscal year ending February 27, 2016. Deloitte & Touche has audited the accounts and records of Rite Aid and its subsidiaries since 2000.
Although the selection of accounting firms does not require ratification, the Board of Directors has directed that the appointment of Deloitte & Touche be submitted to the stockholders for
ratification due to the significance of their appointment by the Company. If the stockholders do not ratify the appointment of Deloitte & Touche, the Audit Committee will consider the
appointment of another independent registered public accounting firm. A representative of Deloitte & Touche will be present at the Annual Meeting, will have the opportunity to make a statement
and will be available to respond to appropriate questions.
RECOMMENDATION
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 2016.
22
Table of Contents
PROPOSAL NO. 3
ADVISORY VOTE ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
In accordance with the requirements of Section 14A of the Exchange Act, we are including in this proxy statement a resolution,
subject to stockholder vote, to approve, on a non-binding, advisory basis, the compensation of our Named Executive Officers (as defined in the section entitled "Executive
CompensationCompensation Discussion and Analysis").
Prior
to voting, stockholders may wish to carefully review our discussion of the compensation of our Named Executive Officers, as presented in the Compensation Discussion and Analysis,
tables and narrative disclosure, on pages 33-46, as well as the discussion regarding the Compensation Committee on pages 15-16.
The
Company's primary compensation goals for our Named Executive Officers are to attract, motivate and retain the most talented and dedicated executives and to align the interests of our
Named Executive Officers with the interests of our stockholders. The Company's compensation programs are designed to reward our Named Executive Officers for the achievement of annual and long-term
strategic and operational goals and the achievement of increased total stockholder return, while at the same time avoiding the encouragement of unnecessary or excessive risk-taking. The Company
encourages stockholders to review the executive compensation disclosure in the Compensation Discussion and Analysis section and executive compensation tables in this proxy statement for complete
details of how its compensation policies and procedures for its Named Executive Officers operate and are designed to achieve the Company's compensation objectives.
We
believe that the Company's compensation programs for its Named Executive Officers have been effective at promoting the achievement of positive results, appropriately aligning pay and
performance and in enabling the Company to attract and retain very talented executives within our industry, while at the same time avoiding the encouragement of unnecessary or excessive risk taking.
We
are asking our stockholders to indicate their support for the compensation of our Named Executive Officers as described in this proxy statement. This proposal, commonly known as a
"say-on-pay" proposal, gives you as a stockholder the opportunity to express your views on our fiscal year 2015 compensation for our Named Executive Officers. This vote is not intended to address any
specific item
of compensation; rather, the vote relates to the overall compensation of our Named Executive Officers as described in this proxy statement in accordance with the compensation disclosure rules of the
SEC.
Accordingly,
the following resolution is submitted for a stockholder vote at the Annual Meeting:
"RESOLVED,
that the stockholders approve, on an advisory basis, the compensation paid to the Company's named executive officers, as disclosed in the Company's Proxy Statement for the 2015 Annual
Meeting of Stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the compensation tables and the
narrative discussion."
Although
this is an advisory vote which will not be binding on the Compensation Committee or the Board, the Compensation Committee and the Board will carefully review the results of the
stockholder vote. The Compensation Committee will consider stockholders' concerns and take them into account in future determinations concerning compensation of its Named Executive Officers. The Board
therefore recommends that you indicate your support for the compensation of the Company's Named Executive Offices in fiscal year 2015, as outlined in the above resolution.
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Table of Contents
RECOMMENDATION
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.
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Table of Contents
STOCKHOLDER PROPOSALS
We expect the following proposals (Proposal No. 4 and Proposal No. 5 on the proxy card) to be presented by stockholders
at the Annual Meeting. The proposals and supporting statements may contain assertions about Rite Aid or other statements that we believe are incorrect. We have not attempted to refute all of the
inaccuracies in the proposals and supporting statements and the Company is not responsible for the content of the proposals. The Board has recommended a vote against these proposals for the reasons
set forth following each proposal.
PROPOSAL NO. 4
STOCKHOLDER PROPOSALACCELERATED VESTING OF PERFORMANCE AWARDS
CtW Investment Group ("CtW"), which owns 865 shares of common stock (based on information provided to us by CtW) and whose address will
be provided by the Company promptly upon oral or written request, has notified us that it intends to present the following proposal at the Annual Meeting. The Board of Directors strongly opposes
adoption of the proposal and asks stockholders to review the Board's response, which follows the proposal and the proponent's supporting statement below.
Stockholder Proposal
RESOLVED:
The shareholders ask the board of directors to adopt a policy that if there is a change in control (as defined under any applicable employment agreement, equity incentive plan or other
plan), there shall be no accelerated vesting of long-term performance awards granted to any senior executive,
provided, however, that the board's Compensation Committee may provide in an applicable grant or purchase agreement that any such unvested award will vest on a partial, pro rata basis up to the time
of the senior executive's termination, with such qualifications for an award as that Committee may determine.
This
resolution shall be implemented so as not to affect any contractual rights in existence on the date this policy is adopted.
Supporting Statement
Rite
Aid's 2014 proxy states that its long-term performance awards "only vest if certain performance targets are met." The company awards senior executives these performance awards that
are structured to vest over a period of years, are linked to multi-year operating results and in 2014 accounted for 35% of the executives' long-term incentive compensation target. The 2014 proxy
states that if a change in control is followed by a "qualifying termination" for a senior executive, "all performance criteria will be deemed to have been achieved at target levels" and the award
"fully vested."
We
do not question that some form of severance payments may be appropriate in those situations, and Rite Aid already provides for severance payments based upon multiples of base salaries
and bonus. We are concerned, however, that Rite Aid's current practices may permit windfall awards unrelated to a senior executive's performance.
We
focus on the long-term performance-based awards because those awards explicitly aim to reward performance. We are not persuaded that executives somehow "deserve" long-term performance
award they did not earn. To accelerate the vesting of unearned awards on the theory that an executive was denied the opportunity to earn them seems inconsistent with a true "pay for performance"
philosophy.
This
proposal attempts to strike a balance between the current practice of accelerating all unearned awards versus the alternative of forfeiting all unearned shares. The proposal would
allow
25
Table of Contents
an
affected executive to be eligible for an accelerated vesting of long-term performance awards on a pro rata basis as of his or her termination date, with the details of any pro rata award to be
determined by the Compensation Committee.
THE BOARD OF DIRECTORS' STATEMENT IN OPPOSITION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "AGAINST"
THIS PROPOSAL FOR THE FOLLOWING REASONS:
The
Board has given careful consideration to this proposal and has concluded for the reasons described below that the adoption of this resolution is not in the best interests of Rite Aid
and its stockholders.
The
Board opposes the proposal because it believes the proposal would conflict with and potentially undermine Rite Aid's compensation program, which the Compensation Committee has
designed to include long-term incentives to our executive officers that are intended to align their interests with the interests of stockholders and attract and retain talented leadership. Our
stockholders have overwhelmingly supported our executive compensation program, with 97% of our stockholders approving the compensation of our Named Executive Officers in our annual advisory vote at
the 2014 and 2013 Annual Meetings.
The current structure of equity awards is balanced and should not be changed.
The
Board believes that our executive compensation program addresses the concerns raised by the proposal in connection with a potential change in control transaction. Our equity
compensation plan provides that, except as otherwise provided in a Named Executive Officer's employment agreement or individual award agreement, if outstanding awards pursuant to the equity plan are
assumed or
substituted in connection with a change in control, the vesting of such awards will not accelerate unless the change in control is followed by a qualifying termination of employment. Our executive
compensation program includes performance based awards the vesting of which is purely performance based except for the unusual circumstance of a change in control in which the acquiring corporation
does not assume or provide for the substitution of outstanding equity awardsa circumstance that can only occur once and may never actually occur in the life time of the Company.
The current structure of equity awards appropriately aligns the interests of senior officers and stockholders.
The
Board believes that it is appropriate for equity-based compensation to vest under a "double-trigger" framework because, in many change-in-control transactions, senior executive
positions of the target company are eliminated as duplicative following the closing of the transaction. If compensation programs are not properly designed, the risk of loss of a substantial portion of
executive compensation can discourage management from pursuing the best alternatives for creating long-term value for stockholders, including a potential change-of-control transaction, while
encouraging pursuit of alternatives more likely to result in longer term employment of the executive team. Due to this potential conflict, we believe that appropriately-designed change-in-control
arrangements are an important tool to align management's interests with the interests of stockholders.
The
Board believes that aligning the interests of senior executive officers and stockholders is critically important, particularly when the Company is considering a potential change in
control transaction. As discussed above, the risk of losing a substantial portion of executive compensation can discourage management from pursuing the course that maximizes long-term value for
stockholders. Full vesting of equity based awards, including performance awards, upon a qualifying termination of employment following a change in control provides senior executives with the
opportunity to realize the value created prior to and in connection with the change in control transaction, which is derived at least in part from their efforts and talents. The Board further believes
that it is important to consider the fact that individual senior executive officers generally do not control the timing of a change in control transaction and of their termination from employment
related to the change in control.
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Moreover, when a change in control is imminent, the incentive for senior executive officers to remain with the Company declines if such officers expect to lose a
portion of their awards in connection with the transaction. The potential departure of key Company employees when a potential change in control transaction is on the horizon could reduce the value of
the Company to an acquirer, thereby reducing the amount stockholders would realize in the transaction. Accelerated vesting in the limited circumstance of a qualifying termination of employment
following change in control provides an important retention incentive for senior executive officers to continue serving with the Company through a potential transaction and preserve the value that
such senior executive officers add to the Company. As a result, the Board believes that the proposal would undermine the retention incentive provided by Rite Aid's long-term incentive awards.
The proposal would put the Company at a disadvantage in retaining talented leadership.
The
Board also believes that adopting pro-rata vesting would put Rite Aid at a competitive disadvantage in attracting and retaining talented leadership. For the reasons described above,
accelerated vesting upon a change in control is a standard provision in employment arrangements and equity plans for senior executive officers in public companies. A recent study of 160 public
companies from the S&P 500 found that approximately 95% of such companies vest and settle at least one type of long-term incentive award in connection with a change in control and that the
majority and increasing practice with respect to performance based awards is to pay the vested award in full rather than pro
rata ("2014 Study of Executive Change-in-Control Arrangements" by Meridian Compensation Partners LLC).
The
Board believes that the Compensation Committee, composed entirely of independent directors, should retain the ability to exercise its judgment to design an executive compensation
program that promotes the best interests of stockholders and takes into account market conditions.
RECOMMENDATION
FOR THE REASONS STATED ABOVE, THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT YOU VOTE "AGAINST"
THIS STOCKHOLDER PROPOSAL.
27
Table of Contents
PROPOSAL NO. 5
STOCKHOLDER PROPOSALPROXY ACCESS
Steven Krol, who owns 245,863 shares of common stock (based on information provided to us by Mr. Krol) and whose address will be
provided by the Company promptly upon oral or written request, has notified us that he intends to present the following proposal at the Annual Meeting. The Board of Directors strongly opposes adoption
of the proposal and asks stockholders to review the Board's response, which follows the proposal and the proponent's supporting statement below.
Stockholder Proposal
RESOLVED:
The shareholders of Rite Aid Corporation request that our Board adopt a "proxy access" bylaw with conforming amendments to related bylaws, that requires Rite Aid to include in any proxy
materials where directors are to be elected, the name, Disclosure and Statement (as defined herein) of any person nominated to the board by a shareholder or group thereof (the "Nominator") that meets
the criteria below. Rite Aid shall allow shareholders to vote on such nominee(s) on it's own proxy card.
The
number of shareholder-nominated candidates appearing in proxy materials shall not exceed 25% of the number of directors then serving. This bylaw should provide that a Nominator must:
1. beneficially
own 3% or more of the Company's outstanding common stock continuously for at least three years before the nomination is submitted;
2. give
the company written notice, within the time period identified in Rite Aid's bylaws, of information required by the bylaws or rules of the SEC about (i) the
nominee, including consent to being named in the proxy materials, to serving as director if elected, and to public disclosure of data required by the bylaws; and (ii) the Nominator, including
ownership proof of the required shares (the "Disclosure") and
3. certify
that (i) it assumes liability arising from the Nominator's communications with shareholders, including the Disclosure and Statement; (ii) it will
comply with all legal requirements in it's soliciting material; and (iii) that the required shares were acquired in the ordinary course of business not to change or influence control of Rite
Aid.
The
Nominator may submit with the Disclosure a Supporting Statement not exceeding the current SEC word limit (the "Statement"). The Board shall define the priority given to multiple nominations
exceeding the 25% limit.
Supporting Statement
The long-term owners of Rite Aid should have a meaningful voice in electing directors. This Proposal adopts strict 3% and 3 year
eligibility thresholds. The 25% limit on shareholder-nominated candidates prevents abuse.
Greater
senior management accountability and a corporate culture change at Rite Aid is compelling. Our nearly 30% share price drop in one month beginning last
September 18th and our .25 cent share price early 2009 are just two tragic examples. Since the year 2000, Walgreens stock has nearly tripled and CVS stock has nearly
quintupled; Rite Aid stock has been cut in half!
Currently,
separate shareholder-nominee ballots create shareholder confusion and huge expenses, all meant by public companies to discourage the commencement of the proxy contest at all.
This Proposal, would now allow shareholders to see and vote for shareholder-nominated candidates on the same Rite Aid proxy card as board-nominated candidates, avoiding confusion and unnecessary
wasted expense.
28
Table of Contents
This
nearly identical Proposal won majority vote last year at another company.
THE BOARD OF DIRECTORS' STATEMENT IN OPPOSITION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "AGAINST" THIS
PROPOSAL FOR THE FOLLOWING REASONS:
The Board believes that this stockholder proposal is unnecessary because our stockholders already have a meaningful and appropriate
"proxy access" right. After engaging with a number of our stockholders regarding the desirability of a proxy access framework and the appropriate proxy access terms, we amended our By-Laws in April
2015 to allow any stockholder (or group of no more than 20 stockholders) owning 3% or more of the Company's common stock continuously for at least 3 years to nominate candidates for
election to up to 20% of our Board and require the Company to include such nominees in our proxy statement. Our By-Laws did not previously provide for proxy access.
As
we believe that our current proxy access framework is in the best interests of our stockholders, the Board recommends a vote AGAINST the stockholder proposal.
We have adopted a carefully considered proxy access framework that strikes the appropriate balance between enhancing stockholder rights and adequately protecting
the best interests of all of our stockholders.
Many
stockholders expressed their support for proxy access, noting their beliefs that proxy access rights would increase accountability of directors to stockholders and would give
stockholders a more meaningful voice in electing directors. At the same time, however, stockholders expressed varying points of view about the appropriate terms of a proxy access framework. The Board
also considered the views of opponents of proxy access that believe that the implementation of any proxy access provision could undermine the role of the Company's independent Nominating and
Governance Committee, and could lead to, among other things, unnecessary expense and distraction, as well as an inexperienced, fragmented and less effective Board with directors who may pursue special
interests not shared by all or any large portion of our stockholders.
Based
on the information available to the Board and the Board's own deliberations on the topic, the Board concluded that the best course of action for the Company and our stockholders
was to adopt a proxy access bylaw with thresholds that were set based on the Company's particular circumstances. The Board determined that a 3% ownership threshold, with the ability to nominate
candidates for election to up to 20% of our Board, was most appropriate for the Company.
The
Board believes that this stockholder proposal, which contemplates proxy access for up to one quarter of the Board, does not strike the appropriate balance. Again, our stockholders
did not possess uniform views on this topic. The Board sought to balance the potential disruption that could be created
by regular proxy contests and the corresponding turnover of a number of Board seats, together with the challenges of on-boarding and integrating these new directors, against the benefits stockholders
would gain under proxy access. The Board concluded that subjecting one-fifth of the Board seats to proxy access provides an appropriately balanced approach.
We have a strong corporate governance structure and record of accountability.
The Company's current corporate governance structure reflects a significant and ongoing commitment to strong and effective governance practices and a willingness
to be responsive and accountable to stockholders. We regularly assess and refine our corporate governance policies and procedures to take into account evolving best practices and to address feedback
provided by our stockholders and other stakeholders.
29
Table of Contents
In
addition to adopting a proxy access bylaw earlier this year, we have implemented numerous other corporate governance measures to ensure the Board remains accountable to stockholders
and to provide our stockholders with a meaningful voice in the nomination and election of directors and the ability to communicate with directors and promote the consideration of stockholder views.
For example:
-
- Each director serves a one-year term and stands for re-election at each annual meeting of stockholders.
-
- Directors must be elected by a majority vote in an uncontested election and a director who fails to receive the required number of
votes for re-election must tender his or her written resignation for consideration by the Board.
-
- The Board is composed entirely of independent directors, other than the Chief Executive Officer.
-
- Key committees of the Board are comprised fully of independent directors.
-
- We have a Lead Independent Director with defined and significant responsibilities.
-
- Our stockholders are able to:
-
- recommend director candidates to our Nominating and Governance Committee, which considers such recommendations in the
same manner as recommendations received from other sources (as described further under "Board of DirectorsNomination of Directors");
-
- directly nominate director candidates and solicit proxies for the election of those candidates in accordance with our
By-Laws and the federal securities laws;
-
- submit proposals for inclusion in the Company's proxy statement for consideration at an annual meeting of stockholders,
subject to the rules and regulations of the SEC;
-
- communicate directly with members of our Board, the Chairman, any Board committee or our independent directors as a group
(as described further under "Board of DirectorsCommunications with the Board of Directors"); and
-
- express their views on executive compensation through annual "say-on-pay" votes.
Our
Board also has shown an ongoing commitment to Board refreshment and to having highly qualified, independent voices in the boardroom. Through our robust director nomination and
evaluation process, we have added three new independent directors to the Board since May 2013Bruce G. Bodaken, Kevin E. Lofton, Myrtle S. Potterand have nominated a fourth
new independent director, Frank A. Savage, for election at the Annual Meeting.
In
light of the Board's continuing commitment to ensuring effective corporate governance, as evidenced by the adoption of a proxy access bylaw and by the other actions described above
and elsewhere in this proxy statement, the Board believes that adoption of this proposal is not necessary.
RECOMMENDATION
FOR THE REASONS STATED ABOVE, THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT YOU VOTE "AGAINST"
THIS STOCKHOLDER PROPOSAL.
30
Table of Contents
EXECUTIVE OFFICERS
Officers are appointed annually by the Board of Directors and serve at the discretion of the Board of Directors. Set forth below is
information regarding the current executive officers of Rite Aid.
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|
|
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Name
|
|
Age |
|
Position with Rite Aid |
John T. Standley(1) |
|
|
52 |
|
Chairman and Chief Executive Officer |
Kenneth A. Martindale |
|
|
55 |
|
President and Chief Operating Officer |
Frank G. Vitrano(2) |
|
|
59 |
|
Senior Executive Vice President and Chief Administrative Officer |
Darren W. Karst(3) |
|
|
55 |
|
Executive Vice President and Chief Financial Officer |
Dedra N. Castle |
|
|
49 |
|
Executive Vice President, Human Resources |
Enio Anthony Montini, Jr. |
|
|
62 |
|
Executive Vice President, Merchandising |
Marc A. Strassler |
|
|
67 |
|
Executive Vice President, General Counsel and Secretary |
Robert I. Thompson |
|
|
61 |
|
Executive Vice President, Pharmacy |
Robert K. Thompson |
|
|
57 |
|
Executive Vice President, Store Operations |
Douglas E. Donley |
|
|
52 |
|
Senior Vice President and Chief Accounting Officer |
- (1)
- Mr. Standley's
biographical information is provided above in the section identifying the Board of Directors.
- (2)
- Mr. Vitrano
served as Chief Financial Officer until August 20, 2014.
- (3)
- Mr. Karst
joined the Company as Chief Financial Officer on August 20, 2014.
Kenneth A. Martindale. Mr. Martindale was appointed President as of June 2013, and has served as Rite Aid's Chief Operating
Officer since June
2010. From December 2008 until June 2010, he served as Rite Aid's Senior Executive Vice President and Chief Merchandising, Marketing and Logistics Officer. Mr. Martindale served as
Co-President, Chief Merchandising and Marketing Officer for Pathmark Stores, Inc. from January 2006 until its acquisition by the Great Atlantic & Pacific Tea Company in December 2007. In
January 2000, Mr. Martindale joined the Board of Directors of Intesource, Inc.; became Chairman of the Board in March 2004; and served as President, Chief Executive Officer and Chairman
of the Board from November 2004 until January 2006. From September 1999 until November 2004, Mr. Martindale was Principal of Martindale Development Group, L.L.C. From September 1999 until July
2003, Mr. Martindale was Managing Director/CEO of Orchard Street, Inc., a privately held specialty food retailer which he founded and owned. Mr. Martindale was Executive Vice
President of Sales and Procurement with Fred Meyer, Inc. from January 1998 until September 1999 and was Senior Vice President of Sales and Procurement with Smith's Food & Drug
Centers, Inc. from June
1996 until January 1998. Mr. Martindale currently serves on the Board of Directors of the National Association of Chain Drug Stores.
Frank G. Vitrano. Mr. Vitrano has served as our Senior Executive Vice President and Chief Administrative Officer since September
2008 and
Chief Financial Officer from September 2008 until August 2014. Previously, Mr. Vitrano spent 35 years at Pathmark Stores, Inc., where most recently he served as President, Chief
Financial Officer and Treasurer from October 2002 until December 2005 and Co-President, Chief Financial Officer and Treasurer from January 2006 until its acquisition by the Great Atlantic &
Pacific Tea Company in December 2007. Mr. Vitrano announced his retirement, to be effective in September 2015.
Darren W. Karst. Mr. Karst joined Rite Aid as Executive Vice President and Chief Financial Officer effective August 20, 2014.
Prior to
joining Rite Aid, from 2002 until 2014, Mr. Karst served as Executive Vice President, Chief Financial Officer and Assistant Secretary with Roundy's, Inc., a Wisconsin-based supermarket
chain. From March 1995 until March 1996, Mr. Karst served as Senior Vice President, Chief Financial Officer, Secretary and Director of Dominick's Supermarkets, Inc. and
31
Table of Contents
from
March 1996 until the acquisition of Dominick's by Safeway in 1998, Mr. Karst served as Executive Vice President, Finance and Administration, Chief Financial Officer, Secretary and
Director. Mr. Karst was a partner at the Yucaipa Companies, a private equity investment firm, from 1991 to 2002.
Dedra N. Castle. Ms. Castle has served as our Executive Vice President and Chief Human Resources Officer since March 24,
2014. Prior to
joining Rite Aid, from 2012 until 2014, Ms. Castle was a founding member and managing partner of Castle Partners, LLC, a human resources management services firm, and Level
Mediation, LLC, a multi-state mediation firm. From 2008 until 2012, Ms. Castle worked for the Sam's Club Division of Wal-Mart Stores, Inc., where she served as the Vice President
of Club/Field Support, People, Inclusion, Diversity and Policy. Prior to joining Sam's Club, she held senior human resources positions at Winn-Dixie Stores, Inc. and Auto Zone
Stores, Inc.
Enio Anthony Montini, Jr. Mr. Montini has served as our Executive Vice President, Merchandising since
April 2011. From February 2010 to April 2011, he served as Senior Vice President, Category Management. Prior to serving in this position, from February 2008 until January 2010 he served as Executive
Vice President, Chief Operating Officer with MARC USA, a privately held company. From February 2005 until January 2008, Mr. Montini was Senior Vice President of Operations with MARC USA and
from September 2004 until January 2005, he served as Senior Vice President, Channel Marketing with MARC USA.
Marc A. Strassler. Mr. Strassler has served as our Executive Vice President, General Counsel and Secretary since March 2009.
Previously,
Mr. Strassler served as Senior Vice President, General Counsel and Corporate Secretary with Pathmark Stores, Inc. from 1997 until its acquisition by the Great Atlantic & Pacific
Tea Company in December 2007. From 1987 until 1997, he served as Vice President, General Counsel and Secretary of Pathmark.
Robert I. Thompson. Mr. Thompson has served as our Executive Vice President, Pharmacy since September 2009. From August 2008 until
September
2009, Mr. Thompson served as Senior Vice President, Pharmacy Operations. From February 2008 to August 2008, he served as Senior Vice President, Northeast Division, and from June 2007 to
February 2008, Mr. Thompson served as Vice President, Integration. From July 2004 (when he first joined Rite Aid) to June 2007, he served as Vice President, Pharmacy Business Development.
Robert (Bob) K. Thompson. Mr. Thompson has served as our Executive Vice President of Store Operations since July 2011. From
November 2007 to
July 2011, Mr. Thompson served as Senior Vice President of our Western Division. Prior to joining Rite Aid in 2007, he was a Senior Vice President for the West Region of Target Corporation
where he served for nearly 20 years in operations positions of increasing responsibility.
Douglas E. Donley. Mr. Donley has served as our Senior Vice President, Chief Accounting Officer since October 2005. He had been
Group Vice
President, Corporate Controller from 1999 to October 2005. Mr. Donley served as the acting principal financial officer of the Company from October 7 to October 8, 2008, and as a
financial analyst for the Company from 1996 to 1999. He was an internal auditor for Harsco Corporation from 1994 to 1996. Prior to joining Harsco, he was an auditor for KPMG Peat Marwick. In March
2007, pursuant to a plea agreement, Mr. Donley pled guilty to state misdemeanor offenses related to driving under the influence. Mr. Donley has subsequently satisfied all terms of the
plea agreement. The Company believes that this matter does not adversely affect Mr. Donley's fitness to serve as an officer.
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Table of Contents
EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
Introduction
We encourage you to read this Compensation Discussion and Analysis for a detailed discussion and analysis of our fiscal year 2015
executive compensation program for the individuals named below. We refer to these individuals throughout this Compensation Discussion and Analysis and the accompanying tables as our "Named Executive
Officers."
|
|
|
Name
|
|
Title |
John T. Standley |
|
Chairman and Chief Executive Officer |
Kenneth A. Martindale |
|
President and Chief Operating Officer |
Frank G. Vitrano(1) |
|
Senior Executive Vice President, Chief Financial Officer and Chief Administrative Officer |
Darren W. Karst(2) |
|
Executive Vice President and Chief Financial Officer |
Robert K. Thompson |
|
Executive Vice President, Store Operations |
Marc A. Strassler |
|
Executive Vice President, General Counsel |
- (1)
- Mr. Vitrano
served as Chief Financial Officer until August 20, 2014.
- (2)
- Mr. Karst
joined the Company on August 20, 2014.
Executive Summary
Rite
Aid Corporation is the third largest retail drugstore chain in the United States based on revenues and number of stores, operating 4,570 stores as of
February 28, 2015 in 31 states and the District of Columbia. Our goals are to consistently understand and exceed the expectations of our customers at each of these stores by providing them with
the best products, services and advice to meet their unique needs, thereby allowing us to meet our key business objectives and ultimately provide sustainable long-term value to our stockholders.
We
believe that accomplishing these goals starts with our ability to attract, retain and appropriately motivate executive officers who have the knowledge, experience and leadership
ability to manage our business and promote a culture of teamwork and development that inspires each and every one of our associates to give their best effort every day.
We
feel that we have assembled a very strong team of executives, which has in turn resulted in our ability to attract and retain highly talented individuals at all levels of the
organization who are committed to our core values of excellence, integrity and respect for people and have the ability to execute our strategic and operational priorities. This combination of strong
executive leadership and highly talented and motivated team-driven associates played a key role in our strong financial performance in fiscal year 2015, as described below.
We had a successful year in fiscal year 2015, as evidenced by our strong corporate performance in the key areas described
below:
-
- We had net income of $2,109.2 million, or $2.08 per diluted share, including the impact of a reduction in our deferred tax
asset valuation allowance of $1,682.4 million or $1.65 per diluted share. This was our third consecutive fiscal year of net income. We had a 71% increase over
33
Table of Contents
We
believe strongly that pay should align with performance and this focus is reflected in our executive compensation programs. We seek to provide our Named
Executive Officers with opportunities to earn total direct compensation (base salary, annual incentives, and long-term incentives) that are generally aligned with compensation levels provided to peer
company executives and executives within similarly-sized retailers more broadly.
Because
of our desire to reinforce a performance-based culture, the Company emphasizes a pay mix that is comprised primarily of variable pay. As a result, base salary makes up the
smallest portion of total direct compensation for the Named Executive Officers, with variable pay in the form of annual and long-term incentives comprising the remaining portion. The mix varies by
position, taking into account each position's ability to influence Company results, as well as competitive practice. See page 39 for a graphical representation of pay mix by executive.
In June 2011, our stockholders voted to hold an advisory vote on executive compensation every year. Consistent with that vote, the
Board resolved to hold an advisory "say-on-pay" vote every year in connection with its annual meeting of stockholders. At our 2014 Annual Meeting approximately 97% of shares voting on the proposal
approved the compensation of our Named Executive Officers on a non-binding, advisory basis. As a result of the overwhelming support of our stockholders in respect of the say-on-pay vote conducted at
our 2014 Annual Meeting, the Compensation Committee determined that no material changes should be made to our executive compensation program for our Named Executive Officers in fiscal year 2015. As in
the past, the Compensation Committee will continue to review the results of future advisory say-on-pay votes and will consider stockholders' concerns and take them into account in future
determinations concerning the compensation of our Named Executive Officers.
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Table of Contents
We used Adjusted EBITDA as the primary financial metric in our annual incentive plan and long-term performance awards in fiscal year
2015. We believe this was appropriate because EBITDA growth has historically shown a strong positive correlation with three-year and five-year total stockholder return for Rite Aid and its peer group,
and that it represented the best indicator of Rite Aid's operating performance based on our financial situation and corporate structure. With respect to long-term performance awards, the Compensation
Committee, like it did in fiscal year 2014, included leverage ratio as an additional performance metric over the three-year performance period. The Compensation Committee believes that leverage ratio
is a key indicator of our corporate performance, as it measures how efficiently we use our available capital and focuses management on the need to improve the Company's financial condition over time.
Additionally, with respect to our executive officers, including our Named Executive Officers, the Compensation Committee added a provision subjecting the long-term performance award to modification
based on our relative stockholder return versus the Russell 2000 Index over the three-year measuring period.
As
discussed above, our Adjusted EBITDA for fiscal year 2015 was $1,323 million which was slightly below our adjusted annual plan target of $1,340 million. We originally
established an Adjusted EBITDA performance target of $1,350 million for fiscal year 2015. Our original plan target of $1,350 million was
subsequently adjusted to include the impact of the projected EBITDA results of RediClinic and Health Dialog, which were acquired after the original target for the fiscal year was established.
Consequently, and as described in more detail below under "Cash Incentive Bonuses," we paid annual incentives to our Named Executive Officers at 80% of target level.
Objectives of Our Executive Compensation Program
All of our executive compensation and benefits programs are within the purview of the Compensation Committee, which bases these
programs on the same objectives that guide the Company in establishing all of its compensation programs. The Compensation Committee also administers the Company's equity incentive compensation plans.
In establishing or approving the compensation of our Named Executive Officers in any given year, the Compensation Committee is generally guided by the following
objectives:
-
- 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 retail drugstore 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
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Table of Contents
The Compensation Committee's Processes
The Compensation Committee has established a number of processes to assist it in ensuring that the Company's executive compensation
program is achieving its objectives. Among those are:
Assessment of Company performance. The Compensation Committee uses Company performance measures in two ways. First, in assessing the
linkage between
actual total compensation and performance, the Compensation Committee considers various measures of Company and industry performance, such as comparable store sales growth, EBITDA growth, return on
sales, debt leverage ratios, return on average invested capital and assets and total stockholder return. In determining performance relative to the Company's peer group (as discussed further below),
the Compensation Committee does not apply a formula or assign these performance measures relative weights. Instead, it makes a subjective determination after considering such measures collectively.
Second, as described in more detail below, the Compensation Committee has established specific Company target incentive/award levels and performance measures that determine the size of payouts under
the Company's two formula-based incentive programsthe cash incentive bonus program and performance awards granted under the Company's long-term incentive program.
Assessment of competitive compensation levels. The Compensation Committee, with the help of its independent compensation consultant
Exequity LLP, assesses the Company's programs relative to a peer group of retail organizations and published survey data. The peer group was originally approved by the Compensation Committee in
January 2015 after a comprehensive review. Because the Company has a limited number of publicly-traded direct competitors and because pharmacy sales (which account for over two-thirds of the Company's
revenue) have a different cyclicality than the sales of many other retailers, we reviewed potential peers relative to multiple criteria including:
-
- Competitors for executive talent such as grocery store chains, discount department stores, and companies engaged in pharmaceutical
distribution;
-
- 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 or offer similar merchandise as Rite Aid; and
-
- Companies of similar size based on revenue as well as enterprise value.
The
resulting peer companies, which are considered to be the best representation of our target labor market, are listed below.
36
Table of Contents
Fiscal Year 2015 Peer Group
|
|
|
|
|
Peer Company
|
|
Revenues
($ Millions) |
|
CVS Caremark Corp. |
|
|
139,367 |
|
AmerisourceBergen Corp. |
|
|
123,981 |
|
The Home Depot, Inc. |
|
|
83,176 |
|
Target Corp. |
|
|
77,617 |
|
Walgreen Co. |
|
|
72,618 |
|
Lowe's Companies, Inc. |
|
|
56,223 |
|
Safeway Inc. |
|
|
35,959 |
|
Sears Holdings Corp. |
|
|
31,198 |
|
The TJX Companies, Inc. |
|
|
29,078 |
|
Macy's, Inc. |
|
|
28,105 |
|
Staples Inc. |
|
|
22,492 |
|
Catamaran Corporation. |
|
|
21,582 |
|
Dollar General Corp. |
|
|
18,910 |
|
Supervalu Inc. |
|
|
17,409 |
|
Office Depot Inc. |
|
|
16,096 |
|
Whole Foods Market, Inc. |
|
|
14,626 |
|
J.C. Penney Company, Inc. |
|
|
12,257 |
|
Family Dollar Stores, Inc. |
|
|
10,546 |
|
Dollar Tree, Inc. |
|
|
8,602 |
|
- Note:
- Revenue
reflects trailing 12 month data through December 2014 as available per Standard & Poor's Research Insight.
The
Compensation Committee compares the compensation levels of Rite Aid's Named Executive Officers to peer company compensation levels in the aggregate, and also compares the pay of
individual executives if the jobs are sufficiently similar to make the comparison meaningful.
In
addition to the peer group data, the Compensation Committee reviews market data based on specific functional responsibility for each executive from published survey data. The survey
analysis targets data from similarly-sized retail organizations based on each executive's functional responsibility. The surveys used in the analysis include Mercer's Global
Premium Executive Remuneration Suite and Towers Watson's Survey Report on Top Management Compensation.
The
Compensation Committee uses the peer group and survey data primarily to ensure that the executive compensation program as a whole is competitive, meaning generally within 25% of the
median range of comparative pay of the market when Rite Aid achieves the targeted performance levels. The Compensation Committee further designed the incentive plans in such a way that executives can
earn above competitive levels for superior performance and below competitive levels if performance is below expectations. The Compensation Committee assesses overall alignment of the compensation
program rather than benchmarking a specific target position with consideration of factors such as Company and individual performance, how executive roles function within Rite Aid, concerns about
executive retention, and availability of equity compensation. The Compensation Committee assesses Rite Aid's performance relative to its peer group on both a one- and three-year basis and observed
alignment of performance with actual total direct compensation levels for the executives in the aggregate.
In
fiscal year 2015, management engaged Mercer, a compensation consultant, to provide management with compensation information for certain executive officers. Pursuant to the terms of
its retention, Mercer reported directly to management, and not to the Compensation Committee, although
37
Table of Contents
the
Compensation Committee did review recommendations and analysis prepared by management and Mercer in determining fiscal year 2015 compensation for the Named Executive Officers.
Total compensation review. The Compensation Committee reviews each executive's base pay, annual bonus, and long-term incentives
annually with the
guidance of the Compensation Committee's independent compensation consultant. Following the fiscal year 2015 review, the Compensation Committee determined that the target level and components of
compensation for fiscal year 2015 were reasonable in the aggregate.
Components of Executive Compensation for Fiscal Year 2015
For fiscal year 2015, the compensation program for our Named Executive Officers consisted of four primary components: (i) base
salary, (ii) a cash incentive bonus opportunity under the Company's annual incentive bonus plan, (iii) long-term incentives consisting of stock options,
restricted stock and performance units and (iv) a benefits package, including a Supplemental Executive Retirement Program ("SERP"). A significant portion of total compensation is variable,
i.e., subject to performance and is comprised of target annual incentives and target long-term incentives.
The
Compensation Committee believes that this program appropriately balances the mix of cash and equity compensation, the mix of currently-paid and longer-term compensation, and the
security of base benefits in a way that best furthers the compensation objectives discussed above. The chart below shows the overall mix of base salary, target annual incentives, target long-term
incentives, and contributions under the SERP for each of the Named Executive Officers.
38
Table of Contents
Target Total Remuneration(1)
Compensation Component as a % of Total Remuneration for Fiscal Year 2015(2)
- (1)
- Target
Total Remuneration represents the sum of base salary, target annual incentives, target long-term incentives, and SERP contributions. Value of
broad-based benefits provided to all employees and components of other compensation (except the SERP) have been excluded.
- (2)
- Percentages
may not total 100% due to rounding.
Base Salary
Base salary is one element of an executive's annual cash compensation during employment. The value of base salary reflects the
executive's long-term performance, skill set and the market value of that skill set. In setting base salaries for fiscal year 2015, the Compensation Committee considered the following factors:
Pay levels at comparable companies. As noted above, the Compensation Committee uses the peer group data to test for the reasonableness
and
competitiveness of base salaries, but it also exercised subjective judgment in view of the Company's compensation objectives.
Internal relativity. Meaning the relative pay differences for different job levels.
39
Table of Contents
Individual performance. Except for increases associated with promotions or increased responsibility, increases in base salary for
executives from
year to year are generally limited to minimal adjustments to reflect individual performance.
Consideration of the mix of overall compensation. Consistent with our compensation objectives, as executives progress to higher levels
in the
organization, a greater proportion of overall compensation is directly linked to Company performance and stockholder returns. Mr. Standley's overall compensation, for example, is more heavily
weighted toward short- and long-term incentive compensation (approximately 85% in the aggregate as shown in the bar chart above) than that of the other Named Executive Officers.
The
Compensation Committee reviewed the Named Executive Officers' base salaries in June of fiscal year 2015 (and the initial salary of Mr. Karst in August) and considered the
principles described above under "The Compensation Committee's Processes" in establishing Named Executive Officers' base salaries for the fiscal year. The table below shows changes in base salaries
for the Named Executive Officers in fiscal year 2015, which reflect promotions and changes in role as noted below.
|
|
|
|
|
|
|
|
|
Executive
|
|
Base Salary at
End of FY 2015 |
|
Increase from
Prior Fiscal Year |
|
Rationale |
John T. Standley |
|
$ |
1,150,000 |
|
|
9.5 |
% |
Market and merit increase |
Kenneth A. Martindale |
|
$ |
900,000 |
|
|
|
|
|
Frank G. Vitrano |
|
$ |
844,131 |
|
|
3.0 |
% |
Merit increase |
Darren W. Karst |
|
$ |
790,000 |
|
|
|
|
|
Robert K. Thompson |
|
$ |
500,320 |
|
|
4.8 |
% |
Merit increase |
Marc A. Strassler |
|
$ |
477,531 |
|
|
4.5 |
% |
Merit increase |
The
Compensation Committee increased Mr. Standley's base salary as recognition for his proven leadership and strong performance as Chief Executive Officer and to align his salary
to be competitive within 25% of the median of our peer companies.
Cash Incentive Bonuses
The Company established an annual incentive plan in order to incentivize the Named Executive Officers to meet the Company's Adjusted
EBITDA target for fiscal year 2015. The Compensation Committee establishes a target percentage of salary for each participant at the beginning of the fiscal year and approves the financial goals
required for the Company to pay an award. Payouts for the Named Executive Officers are then determined by the Company's financial results for the year relative to the predetermined performance
measures. As shown in the Summary Compensation Table under "Non-Equity Incentive Plan Compensation," incentives were paid to Named Executive Officers for fiscal year 2015 performance.
Bonus targets. Targets for each Named Executive Officer were determined based on job responsibilities, internal relativity, and peer
group and survey
data. The Compensation Committee's objective was to set bonus targets such that total annual cash compensation (including base salary and annual incentive assuming a target payout) was generally
aligned with the market with a substantial portion of that compensation linked to corporate performance. Consistent with our executive compensation philosophy, individuals with greater job
responsibilities had a greater proportion of their total cash compensation tied to Company performance through the incentive plan. The Compensation
40
Table of Contents
Committee
as a result established the following targets for fiscal year 2015 (expressed as a percentage of base salary, including Mr. Karst's opportunity which is pro rated for his period of
employment):
Annual Incentive Opportunity
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
Threshold Payout
(as a % of Salary) |
|
Target Payout
(as a % of Salary) |
|
Maximum Payout
(as a % of Salary) |
|
John T. Standley |
|
|
50 |
% |
|
200 |
% |
|
400 |
% |
Kenneth A. Martindale |
|
|
38 |
% |
|
150 |
% |
|
300 |
% |
Frank G. Vitrano |
|
|
31 |
% |
|
125 |
% |
|
250 |
% |
Darren W. Karst |
|
|
11 |
% |
|
44 |
% |
|
88 |
% |
Robert K. Thompson |
|
|
19 |
% |
|
75 |
% |
|
150 |
% |
Marc A. Strassler |
|
|
19 |
% |
|
75 |
% |
|
150 |
% |
Company performance measures. The Compensation Committee established the following Company performance goals, which applied to all plan
participants,
in February 2014:
Fiscal Year 2015 Annual Incentive Plan Performance Goals
|
|
|
|
|
Performance Level
|
|
Adjusted EBITDA
Goal (millions) |
|
Threshold |
|
$ |
1,272 |
|
Target |
|
$ |
1,340 |
|
Maximum |
|
$ |
1,475 |
|
The
Compensation Committee believes that using Adjusted EBITDA as the primary measure for the annual incentive plan appropriately encourages officers, including the Named Executive
Officers, to focus on improving operating results which ultimately drive stockholder value. EBITDA growth has historically shown a strong positive correlation with three-year and five-year total
stockholder return for Rite Aid and its peer group. The majority of Rite Aid's peer companies use an EBITDA measure in their annual incentive plans. Based on Rite Aid's current financial situation and
capital structure, the Committee believes that Adjusted EBITDA is the best indicator of Rite Aid's operating performance. The measure is tracked regularly, clearly understood by the officers, and the
officers can impact the measure by taking actions to improve the operating performance of our stores. In addition, the Company regularly communicates Adjusted EBITDA to the investment community.
Under
the plan formula, payouts can range from 0% to 200% of bonus targets depending on Company performance. We originally established an Adjusted EBITDA performance target of
$1,350 million for fiscal year 2015. Although this performance level was only slightly above our fiscal year 2014 performance of $1,325 million, we recognized the challenges within our
target related to continued reimbursement rate pressure and more drug cost increases than normal, offset by the benefits of
improved generic purchasing as a result of the new McKesson agreement. Our original plan target of $1,350 million was subsequently adjusted to include the impact of the projected EBITDA results
of RediClinic and Health Dialog, which were acquired after the original target for the fiscal year was established. The adjusted target level of Adjusted EBITDA of $1,340 million was based on
our annual operating plan and was in line with guidance provided to the investment community.
In
fiscal year 2015, Rite Aid's actual Adjusted EBITDA was $1,323 million, which was slightly below the target performance level, resulting in bonus payments at approximately 80%
of the target level. As discussed in greater detail in our Annual Report on Form 10-K, we define Adjusted EBITDA as net income (loss) excluding the impact of income taxes, interest expense,
depreciation and amortization, LIFO adjustments, charges or credits for facility closing and impairment, inventory write-downs related to store closings, stock-based compensation expense, debt
modifications and retirements,
41
Table of Contents
sale
of assets and investments, revenue deferrals related to customer loyalty programs and other items. We reference this particular non-GAAP financial measure not only as a basis for incentive
compensation but also in our corporate decision-making because it provides supplemental information that facilitates internal comparisons to the historical operating performance of prior periods and
external comparisons to competitors' historical operating performance.
Long-Term Incentive Program
Long-term incentive target opportunity. The purpose of the long-term incentive program is to support the long-term perspective necessary
for
continued success in our business and focus our Named Executive Officers on creating long-term, sustainable stockholder value. Our annual long-term incentive targets for each Named Executive Officer
are shown below:
Long-Term Incentive Targets
|
|
|
|
|
Executive
|
|
Target
(as a % of Salary) |
|
John T. Standley |
|
|
500 |
% |
Kenneth A. Martindale |
|
|
400 |
% |
Frank G. Vitrano |
|
|
220 |
% |
Darren W. Karst |
|
|
200 |
% |
Robert K. Thompson |
|
|
200 |
% |
Marc A. Strassler |
|
|
150 |
% |
Because
long-term incentive targets have consistently been below the median of our peer companies, the Compensation Committee increased the annual targets of our Named Executive Officers
for fiscal year 2015. The Compensation Committee reviewed available peer group data and found that the design of the long-term incentive program is reasonably aligned with general retail industry
market practice. Target grant values for individual executive officers were established based on individual performance and internal relativity. Consistent with the Company's compensation philosophy,
executive officers at higher levels received a greater proportion of total pay in the form of long-term incentives.
Long-term incentive mix. In fiscal year 2015 we used the following types of awards:
|
|
|
|
|
|
Vehicle
|
|
Proportion of 2015
Long-Term
Incentive Target
Opportunity |
|
Purpose |
Stock Options |
|
|
40 |
% |
Provides a vehicle measured by stock price that rewards increases in stockholder value. |
Performance Awards |
|
|
35 |
% |
Links compensation to multi-year operating results on key measures tied to stockholder value creation. |
Restricted Stock |
|
|
25 |
% |
Supports retention and provides a vehicle with more stability and less risk. Aligns executive and stockholder interests and focuses executives on value creation. |
In
determining the overall mix of long-term incentive vehicles, the following factors were considered:
-
- 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
42
Table of Contents
The
Compensation Committee's process for setting grant dates is discussed below. Then, on the approval date, those values are converted to the equivalent number of shares based on the
closing price of the Company's common stock on the date of approval for restricted shares and using the Black-Scholes valuation method for stock options. Performance awards are denominated in shares
(1 unit = 1 share).
Grant timing. The Compensation Committee has a policy that annual long-term incentive awards (other than special or new hire grants)
will be approved
by the Committee once a year at its annual meeting held in connection with the annual stockholders meeting with a grant date of the second business day after release of the Company's first quarter
earnings. Grants are made to the Named Executive Officers at the same time as awards are made to all other associates as part of the annual grant process.
Special awards. From time to time, the Company may make grants in addition to the annual equity grant including those to Named Executive
Officers.
Typically these grants include awards to new hires, promotional awards, or retention awards.
Performance Awards
Performance awards provide the Named Executive Officers with units, which are denominated in a target number of shares and payable in
Company stock if the designated Company performance goals are achieved over the prescribed performance period. Payouts can range from 0% to 200% of target. Performance awards are intended to align
interests of executives with those of stockholders through the use of measures the Company believes drive its long-term success. Performance awards are normally granted annually and are structured as
a targeted number of units based on the Company's achievement of specific performance levels with payout occurring after a three-year period.
Prior
to fiscal year 2015 performance awards were denominated in a target cash value and payable in cash if the designated Company performance goals are achieved over the prescribed
performance period.
For
the fiscal year 2013 performance award grant, the Compensation Committee determined to measure achievement for the award against Adjusted EBITDA goals and leverage ratio goals, in
each case to be measured over the 2013-2015 measuring period. We believe Adjusted EBITDA continues to be the best measure of Company performance, while the leverage ratio (net debt / Adjusted EBITDA)
measures how efficiently we use our available capital and focuses management on the need to improve the financial condition of the Company over time. We determined that the optimum mix of the
performance goals for the 2013-2015 Plan was 80% Adjusted EBITDA and 20% leverage ratio. We believe that the weighting appropriately balances the goals of maximizing profitability and improving of
financial condition through the reduction of debt leverage.
For
the fiscal year 2014 and 2015 performance award grants, the Compensation Committee again determined to base 80% of the award on the achievement of Adjusted EBITDA goals and the
remaining 20% on leverage ratio goals, in each case to be measured over the 2014-2016 and 2015-2017 measuring periods, respectively. In addition, the Compensation Committee also added a provision
subjecting the award to modification based on our relative stockholder return versus the Russell 2000 Index over the respective three year measuring periods, which the Compensation Committee believes
43
Table of Contents
would
further align the interests of our executives with those of our stockholders and add an additional incentive for them to create sustainable long-term value for the Company.
2013-2015 Plan. The 2013-2015 Plan was based 80% on Adjusted EBITDA goals and 20% on leverage ratio goals over the three year
performance period.
Adjusted EBITDA is compared to the sum of annual targets over the three years in the performance period. The leverage ratio is compared to the weighted average target over the three years in the
performance period. For the three year measurement period both Adjusted EBITDA and the leverage ratio performance exceeded target levels. The three year cumulative Adjusted EBITDA was
$3,801 million compared to a target of $3,432 million and the three year weighted average leverage ratio was 3.78 compared to a target of 4.04 (note that lower leverage ratios represent
better performance). The performance resulted in an average cash payout of 165% of the target unit value.
2014-2016 Plan. The 2014-2016 Plan is based 80% on the Adjusted EBITDA goals and 20% on leverage ratio goals to be determined over the
three year
performance period, as the Compensation Committee again determined that these goals appropriately balanced maximizing profitability and improving our financial condition through the reduction of debt
leverage. In addition, in order to further align the interests of our executives with those of our stockholders and add an additional incentive for them to create sustainable long-term value for the
Company, the Compensation Committee also determined to subject the award to modification based on our relative stockholder return versus the Russell 2000 Index over the three year measuring period.
For fiscal years 2014 through 2015, performance has exceeded target levels for both measures. Cumulative Adjusted EBITDA was $2,647 million compared to a target of $2,465 million. Actual
leverage ratio was 4.47 compared to a target of 4.57 (note that lower leverage ratios represent better performance). Additionally, our stockholder return is performing in the top one-third of the
Russell 2000 Index, which if sustained over the performance period would result in a positive modification of the awards.
2015-2017 Plan. The 2015-2017 Plan is based 80% on the Adjusted EBITDA goals and 20% on leverage ratio goals to be determined over the
three year
performance period. In addition, in order to further align the interests of our executives with those of our stockholders and add an additional incentive for them to create sustainable long-term value
for the Company, the Compensation Committee also determined to subject the award to modification based on our relative stockholder return versus the Russell 2000 Index over the three year measuring
period. For fiscal year 2015, performance is slightly lower than target levels for both measures. Adjusted EBITDA was $1,323 million compared to a target of $1,340 million. Actual leverage
ratio was 4.18 compared to a target of 3.89 (note that lower leverage ratios represent better performance). Our stockholder return is performing in the top one-third of the Russell 2000 Index, which
if sustained over the performance period would result in a positive modification of the awards.
Stock Options
Stock options are intended to reward executives for value creation and they only have value if our stock price increases over time,
which aligns the interests of our executives with our stockholders. The Company's ten-year options, granted at the market price on the date of grant, help focus executives on long-term growth. In
addition, because options vest ratably over a four-year period, they are intended to help retain executives and keep them focused on long-term performance.
Restricted Stock
Restricted stock grants are intended to support retention of executives and focus them on long-term performance because they generally
vest over a multi-year period (three years or longer) and are tied to the value of our stock. The risk profile of restricted stock is aligned with stockholders as it can motivate executives to both
increase and preserve stock price.
44
Table of Contents
Post-Retirement Benefits
Supplemental Executive Retirement Program. Each of the Named Executive Officers receive benefits under a defined contribution
supplemental executive
retirement plan ("SERP"). Under the SERP, Rite Aid credits each participant with a specific sum to an individual account established for the participant, on a monthly basis while the participant is
employed. The amount credited is equal to 2% of the executive officer's annual base compensation. The participants are able to select among a choice of earnings indexes, and their accounts are
credited with earnings that mirror the investment results of such indexes. Participants vest in their accounts at the rate of 20% per year for each calendar year of participation in the SERP at a
five-year rolling rate with the entire account balance for each participant vesting upon death or total disability of the participant, termination without cause during the 12-month period following a
"change in control" of the Company as defined in the SERP or upon termination of employment at age 60 or greater with at least five years of participation in the SERP. SERP payments may be delayed due
to certain tax rules or deferral elections made by the executive.
Other Post-Employment and Change in Control Benefits
To attract and retain highly skilled executives and to provide for certainty of rights and obligations, Rite Aid has historically
provided employment agreements to its executive officers, including our Named Executive Officers. The terms of the employment agreements are described in more detail under the caption "Executive
Employment Agreements." Additional information regarding the severance and change in control benefits provided under the employment agreements is described under the section entitled "Executive
CompensationPotential Payments Upon Termination or Change in Control."
Deductibility Cap on Executive Compensation
The Compensation Committee is aware that Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), treats
certain elements of executive compensation in excess of $1,000,000 a year payable to our Chief Executive Officer and three other most highly compensated executives (other than our Chief Financial
Officer) as an expense not deductible by the Company for federal income tax purposes. Payments to these individuals in excess of the $1,000,000 limit will be deductible if they meet the definition of
"performance-based compensation" as defined in Section 162(m) of the Code.
While
the Compensation Committee plans to continue taking actions intended to limit the impact of Section 162(m), it also believes that the tax deduction is only one of several
relevant considerations in setting compensation. Therefore, in order to maintain the flexibility to provide compensation programs for our Named Executive Officers that will best incentivize them to
achieve our key business objectives and create sustainable long-term shareholder value, the Compensation Committee reserves the right to pay compensation that may not be deductible to the Company if
it determines that doing so would be in the best interests of the Company. Based on the Company's current tax situation, compliance with Section 162(m) of the Code is not a significant concern.
Policy Regarding Recoupment of Certain Compensation
The Company has adopted a formal compensation recovery or "clawback" policy for its executive officers, including all Named Executive
Officers. Pursuant to this policy, the Board of Directors of the Company may seek to recoup certain incentive compensation, including cash bonuses and equity incentive awards paid based upon the
achievement of financial performance metrics, from executives in the event that the Company is required to restate its financial statements.
45
Table of Contents
Prohibition on Margin Accounts and Hedging and Similar Transactions
Our executive officers and directors, including the Named Executive Officers, are subject to an insider trading policy that, among
other things, prohibits them from holding Company securities in a margin account, and also prohibits them from engaging in put or call options, short selling or similar hedging activities involving
our stock. We prohibit these transactions because they may reduce the individual's incentive to improve our performance, focus the individual on short-term performance at the expense of long-term
objectives and misalign the individual's interests with those of our stockholders generally.
Director and Officer Stock Ownership Guidelines
In June 2014, we revised our Stock Ownership Guidelines in order to further the investment of our non-management directors, executive
officers, and Senior Vice Presidents in the success of the Company and to encourage a long-term perspective in managing the Company. The stock ownership requirements are:
|
|
|
Position
|
|
Minimum Ownership Requirements (Number of Share Equivalents) |
Chief Executive Officer |
|
lesser of 1,400,000 share equivalents or 5 times base salary |
President(1) |
|
lesser of 700,000 share equivalents or 3 times base salary |
Senior Executive Vice Presidents |
|
lesser of 700,000 share equivalents or 3 times base salary |
Executive Vice Presidents |
|
lesser of 200,000 share equivalents or 2 times base salary |
Senior Vice Presidents |
|
lesser of 100,000 share equivalents or 1 times base salary |
Non-Management Directors(2) |
|
lesser of 150,000 share equivalents or 2 times annual cash retainer |
- (1)
- If
the President is also the Chief Executive Officer, the Chief Executive Officer amount shall apply.
- (2)
- Other
than an Executive Chairman, who shall be subject to the same requirement as the Chief Executive Officer.
Newly
appointed or promoted executives who are or become subject to our Stock Ownership Guidelines and newly elected non-management directors have five years from the time they are
appointed, promoted or elected, as the case may be, to meet the stock ownership requirements. Currently, all of those persons subject to the guidelines, including all Named Executive Officers and
senior vice presidents, have achieved the minimum holding ownership requirement or have not yet served for five years.
For
the purposes of determining stock ownership levels, the following forms of equity interests in the Company are included:
-
- 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.
Restricted
stock and restricted stock units, whether or not vested and shares owned count as one (1) share equivalent per share beneficially owned and stock options whether
or not vested count as one-half (.5) share equivalent per stock option.
The
Compensation Committee is responsible for interpreting and administering the Stock Ownership Guidelines, and may, from time to time, reevaluate and revise the Stock Ownership
Guidelines, including when there are changes to the Company's capital structure or where implementation of the Stock Ownership Guidelines would cause a non-management director, executive officer or
Senior Vice President to incur a hardship due to his or her unique financial circumstances.
46
Table of Contents
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors has reviewed and discussed the foregoing Compensation Discussion and Analysis with
management and, based on that review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
Marcy
Syms, Chair
Bruce G. Bodaken
Michael N. Regan
47
Table of Contents
SUMMARY COMPENSATION TABLE
The following summary compensation table sets forth the cash and non-cash compensation for the fiscal years ended February 28,
2015, March 1, 2014, and March 2, 2013, respectively, paid to or earned by (i) our principal executive officer, (ii) our principal financial officer and (iii) the
other three most highly compensated executive officers of the Company who were serving during the 2015 fiscal year (collectively, the "Named Executive Officers").
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
|
Fiscal
Year |
|
Salary
($) |
|
Bonus
($) |
|
Stock
Awards
($)(4) |
|
Option
Awards
($)(4) |
|
Non-Equity
Incentive
Plan
Compensation
($)(5) |
|
Change In
Nonqualified
Deferred
Compensation
Earnings
($)(6) |
|
All Other
Compensation
($)(7) |
|
Total
($) |
|
John T. Standley |
|
|
2015 |
|
|
1,150,000 |
|
|
|
|
|
3,411,852 |
|
|
3,032,895 |
|
|
2,991,291 |
|
|
128,354 |
|
|
291,279 |
|
|
11,005,671 |
(8) |
(CEO) |
|
|
2014 |
|
|
1,035,000 |
|
|
|
|
|
810,060 |
|
|
1,788,333 |
|
|
4,200,000 |
|
|
240,511 |
|
|
273,325 |
|
|
8,347,229 |
|
|
|
|
2013 |
|
|
1,000,000 |
|
|
|
|
|
564,168 |
|
|
1,255,163 |
|
|
4,654,700 |
|
|
100,026 |
|
|
265,225 |
|
|
7,839,282 |
|
Kenneth A. Martindale |
|
|
2015 |
|
|
900,000 |
|
|
|
|
|
2,847,576 |
|
|
949,428 |
|
|
1,583,050 |
|
|
32,359 |
|
|
321,012 |
|
|
6,633,425 |
(8) |
(President & COO) |
|
|
2014 |
|
|
878,250 |
|
|
|
|
|
396,888 |
|
|
875,926 |
|
|
2,587,500 |
|
|
102,797 |
|
|
308,158 |
|
|
5,149,519 |
|
|
|
|
2013 |
|
|
795,675 |
|
|
|
|
|
303,490 |
|
|
549,276 |
|
|
2,259,299 |
|
|
43,292 |
|
|
284,990 |
|
|
4,236,021 |
|
Frank G. Vitrano |
|
|
2015 |
|
|
844,131 |
|
|
|
|
|
1,252,452 |
|
|
1,113,030 |
|
|
1,347,801 |
|
|
101,829 |
|
|
313,042 |
|
|
4,972,286 |
(8) |
(Senior Executive |
|
|
2014 |
|
|
819,545 |
|
|
|
|
|
397,440 |
|
|
877,454 |
|
|
2,048,862 |
|
|
267,137 |
|
|
303,256 |
|
|
4,713,694 |
|
VP & CAO)(1) |
|
|
2013 |
|
|
795,675 |
|
|
|
|
|
303,490 |
|
|
549,276 |
|
|
2,259,299 |
|
|
86,143 |
|
|
312,235 |
|
|
4,306,118 |
|
Darren W. Karst |
|
|
2015 |
|
|
419,310 |
|
|
|
|
|
2,891,198 |
|
|
812,498 |
|
|
275,775 |
|
|
1,802 |
|
|
126,309 |
|
|
4,526,892 |
(8) |
(Executive VP & CFO)(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert K. Thompson |
|
|
2015 |
|
|
500,321 |
|
|
|
|
|
771,720 |
|
|
290,103 |
|
|
527,161 |
|
|
47,575 |
|
|
143,185 |
|
|
2,280,065 |
(8) |
(Executive VP, Store Operations)(3) |
|
|
2014 |
|
|
477,405 |
|
|
|
|
|
115,644 |
|
|
255,558 |
|
|
716,107 |
|
|
118,397 |
|
|
133,626 |
|
|
1,816,737 |
|
Marc A. Strassler |
|
|
2015 |
|
|
477,532 |
|
|
|
|
|
424,800 |
|
|
377,715 |
|
|
502,787 |
|
|
|
|
|
232,674 |
|
|
2,015,507 |
(8) |
(Executive VP, General |
|
|
2014 |
|
|
456,968 |
|
|
|
|
|
110,676 |
|
|
244,671 |
|
|
685,452 |
|
|
|
|
|
220,883 |
|
|
1,718,649 |
|
Counsel) |
|
|
2013 |
|
|
441,515 |
|
|
|
|
|
105,864 |
|
|
235,508 |
|
|
646,168 |
|
|
27,653 |
|
|
213,452 |
|
|
1,670,160 |
|
- (1)
- Mr. Vitrano
served as Chief Financial Officer until August 20, 2014.
- (2)
- Mr. Karst
joined the Company on August 20, 2014.
- (3)
- Mr. Thompson,
who has served the Company in his position since fiscal year 2012, first became a Named Executive Officer in fiscal year 2014.
- (4)
- The
amounts reported reflect the aggregate grant date fair value of each 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 15 of the Company's Annual Report on Form 10-K as filed with the SEC on April 23, 2015,
Note 13 of the Company's Annual Report on Form 10-K as filed with the SEC on April 23, 2014, and Note 15 of the Company's Annual Report on Form 10-K as filed with
the SEC on April 23, 2013, as applicable. The 2015 stock award includes the grant date fair value of the performance awards at target. Based upon the maximum level of achievement under the
performance awards, the grant date fair value of such awards would increase for the Named Executive Officers as follows:
|
|
|
|
|
Name
|
|
|
|
Mr. Standley |
|
$ |
1,990,188 |
|
Mr. Martindale |
|
$ |
623,040 |
|
Mr. Vitrano |
|
$ |
730,656 |
|
Mr. Karst |
|
$ |
496,396 |
|
Mr. Thompson |
|
$ |
190,452 |
|
Mr. Strassler |
|
$ |
247,800 |
|
48
Table of Contents
- (5)
- The
amounts reported in the "Non-Equity Incentive Plan Compensation" column consist of the following:
|
|
|
|
|
|
|
|
Name
|
|
Annual Cash Incentive
Bonus for Performance in
the Applicable Fiscal
Year ($) |
|
FY13-15
LTIPPerformance
Units vested
in FY 2015(A) |
|
Mr. Standley |
|
|
1,835,171 |
|
|
1,156,120 |
|
Mr. Martindale |
|
|
1,077,165 |
|
|
505,885 |
|
Mr. Vitrano |
|
|
841,916 |
|
|
505,885 |
|
Mr. Karst |
|
|
275,775 |
|
|
|
|
Mr. Thompson |
|
|
299,405 |
|
|
227,756 |
|
Mr. Strassler |
|
|
285,767 |
|
|
217,020 |
|
- (A)
- Represents
the amounts in respect of long-term cash incentive units that become vested in fiscal year 2015, based on achievement of cumulative Adjusted
EBITDA and average leverage ratio targets for each of fiscal year 2013, 2014 and 2015.
- (6)
- Represents
above-market earnings (over 120% of the "applicable federal rate") under the Company's defined contribution supplemental executive retirement
plans.
- (7)
- The
amounts in the "All Other Compensation" column for fiscal year 2015 consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Financial
Planning
($) |
|
Personal
Use of
Company
Aircraft
($)(A) |
|
Supplemental
Executive
Retirement
Plan
Allocations
($) |
|
Housing/
Transportation
Expenses
($)(B) |
|
Employer
Paid
Taxes
($)(C) |
|
Automobile
Allowance
($) |
|
401(k)
Matching
Contributions
($) |
|
Mr. Standley |
|
|
2,879 |
|
|
|
|
|
266,000 |
|
|
|
|
|
|
|
|
12,000 |
|
|
10,400 |
|
Mr. Martindale |
|
|
3,480 |
|
|
|
|
|
216,000 |
|
|
47,441 |
|
|
31,692 |
|
|
12,000 |
|
|
10,400 |
|
Mr. Vitrano |
|
|
5,000 |
|
|
|
|
|
200,133 |
|
|
51,877 |
|
|
33,633 |
|
|
12,000 |
|
|
10,400 |
|
Mr. Karst |
|
|
|
|
|
|
|
|
94,800 |
|
|
23,509 |
|
|
|
|
|
8,000 |
|
|
|
|
Mr. Thompson |
|
|
3,000 |
|
|
|
|
|
117,785 |
|
|
|
|
|
|
|
|
12,000 |
|
|
10,400 |
|
Mr. Strassler |
|
|
2,625 |
|
|
|
|
|
112,551 |
|
|
51,224 |
|
|
43,874 |
|
|
12,000 |
|
|
10,400 |
|
- (A)
- With
respect to personal use of aircraft, the Company determines the incremental cost of an officer's aircraft usage by calculating the variable flight-hour
cost associated with the particular aircraft. Variable cost in general includes fuel, landing fees, maintenance costs per flight, per hour and catering.
- (B)
- Each
of Messrs. Martindale, Vitrano, Karst and Strassler is reimbursed for certain housing and transportation expenses pursuant to his respective
employment agreement. The Company determines the incremental cost of these expenses based on the out-of-pocket amounts paid for rent, utilities and travel.
- (C)
- Figures
in this column represent the Company-paid taxes related to housing and transportation expenses reimbursed by the Company for
Messrs. Martindale, Vitrano and Strassler pursuant to their respective employment agreements.
- (8)
- Amount
includes the value of stock-based performance awards granted and reported at target-value in fiscal year 2015. Historically, long-term incentive
performance awards were denominated in target cash value and reported at actual earned value when paid. Realization of the fiscal year 2015 long-term incentive performance awards is contingent upon
achievement of performance metrics covering fiscal years 2015-2017. Due to the change to a stock based award, the table includes both the cash earned with respect to the fiscal year 2013 award as well
as the fiscal year 2015 stock based performance award at target value. The following amounts are included in the disclosed compensation:
|
|
|
|
|
|
|
|
|
|
The value of FY13-15 LTIP
Performance units actually
earned and paid in
FY 2015
($) |
|
The target value of unvested
FY15-17 LTIP Performance
shares granted in
FY 2015
($) |
|
Mr. Standley |
|
|
1,156,120 |
|
|
1,990,188 |
|
Mr. Martindale |
|
|
505,885 |
|
|
623,040 |
|
Mr. Vitrano |
|
|
505,885 |
|
|
730,656 |
|
Mr. Karst |
|
|
|
|
|
496,396 |
|
Mr. Thompson |
|
|
227,756 |
|
|
190,452 |
|
Mr. Strassler |
|
|
217,020 |
|
|
247,800 |
|
49
Table of Contents
GRANTS OF PLAN-BASED AWARDS TABLE FOR FISCAL YEAR 2015
The following table summarizes grants of plan-based awards made to Named Executive Officers during our fiscal year ended
February 28, 2015.
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Grant
Date
Fair
Value
of Stock
and
Option
Awards
($)(4) |
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|
Estimated Future Payouts
Under Non-Equity
Incentive Plan Awards(1) |
|
Estimated Future
Payouts Under Equity
Incentive Plan Awards |
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|
Exercise
or Base
Price of
Option
Awards
($/Sh) |
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All
Other
Stock
Awards
(#)(2) |
|
All
Other
Option
Awards
(#)(3) |
|
Name
|
|
Committee
Action
Date |
|
Grant
Date |
|
Threshold
50% ($) |
|
Target
100% ($) |
|
Max
200%($) |
|
Threshold
(#) |
|
Target
(#) |
|
Max
(#) |
|
John T. Standley |
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|
1,150,000 |
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2,300,000 |
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|
4,600,000 |
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6/17/2014 |
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6/23/2014 |
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140,550 |
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281,100 |
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562,200 |
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200,800 |
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678,500 |
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|
7.08 |
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6,444,747 |
|
Kenneth A. Martindale |
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|
675,000 |
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|
1,350,000 |
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|
2,700,000 |
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6/17/2014 |
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6/23/2014 |
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44,000 |
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|
88,000 |
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176,000 |
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314,200 |
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212,400 |
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|
7.08 |
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3,797,004 |
|
Frank G. Vitrano |
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|
527,582 |
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|
1,055,164 |
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|
2,110,328 |
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6/17/2014 |
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6/23/2014 |
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51,600 |
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103,200 |
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206,400 |
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73,700 |
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249,000 |
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|
7.08 |
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2,365,482 |
|
Darren W. Karst |
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493,750 |
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987,500 |
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|
1,975,000 |
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7/16/2014 |
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8/20/2014 |
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38,600 |
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77,200 |
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154,400 |
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372,442 |
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207,800 |
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6.43 |
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3,703,696 |
|
Robert K. Thompson |
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|
187,620 |
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375,240 |
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|
750,480 |
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6/17/2014 |
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6/23/2014 |
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13,450 |
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26,900 |
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53,800 |
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82,100 |
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64,900 |
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7.08 |
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1,061,823 |
|
Marc A. Strassler |
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179,074 |
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358,148 |
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716,297 |
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6/17/2014 |
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6/23/2014 |
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17,500 |
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35,000 |
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70,000 |
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25,000 |
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84,500 |
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7.08 |
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802,515 |
|
- (1)
- The
first amount for each Named Executive Officer relates to an annual cash incentive bonus, as discussed in the Compensation Discussion and Analysis under
the caption "Cash Incentive Bonuses." On June 23, 2014, each Named Executive Officer received a grant of performance-based units that will be earned based upon the achievement of an Adjusted
EBITDA and average leverage ratio goal for fiscal years 2015, 2016 and 2017. Vesting for the performance units will occur, provided the performance targets have been met, on February 27, 2017
(the end of the Company's fiscal year 2017), provided that the Named Executive Officer is continuously employed at the Company through the date of the earnings release for fiscal year 2017.
- (2)
- On
June 23, 2014, the Named Executive Officers received a grant of restricted stock (except for Mr. Karst, who received a grant of restricted
stock on August 20, 2014), as described in the Compensation Discussion and Analysis, under the caption "Components of Executive Compensation for Fiscal Year 2015Restricted Stock."
These restricted shares will vest one-third on each of the first three anniversaries of the grant date based on continued employment:
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|
Name
|
|
Restricted
Shares
(#) |
|
Mr. Standley |
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|
200,800 |
|
Mr. Martindale |
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|
314,200 |
|
Mr. Vitrano |
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|
73,700 |
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Mr. Karst |
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|
372,442 |
|
Mr. Thompson |
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|
82,100 |
|
Mr. Strassler |
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|
25,000 |
|
- (3)
- On
June 23, 2014, the Named Executive Officers received a grant of stock options (except for Mr. Karst, who received a grant of stock options
on August 20, 2014), as described in the Compensation Discussion and Analysis, under the caption "Components of Executive Compensation for Fiscal Year 2015Stock Options." These
stock options will vest one-fourth on each of the first four anniversaries of the grant date based on continued employment:
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Name
|
|
Stock
Options
(#) |
|
Mr. Standley |
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678,500 |
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Mr. Martindale |
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|
212,400 |
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Mr. Vitrano |
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|
249,000 |
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Mr. Karst |
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|
207,800 |
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Mr. Thompson |
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64,900 |
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Mr. Strassler |
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|
84,500 |
|
- (4)
- Represents
the grant date fair value, measured in accordance with FASB ASC Topic 718 of stock and option awards made in fiscal year 2015. Grant date fair
values are calculated pursuant to assumptions set forth in Note 15 of the Company's 2015 Annual Report on Form 10-K filed with the SEC on April 23, 2015.
50
Table of Contents
EXECUTIVE EMPLOYMENT AGREEMENTS
Rite Aid has entered into employment agreements with each of the Named Executive Officers, the material terms of which are described
below.
-
- Mr. Standley serves as Chairman of the Board and Chief Executive Officer;
-
- Mr. Martindale serves as President and Chief Operating Officer;
-
- Mr. Vitrano serves as Senior Executive Vice President and Chief Administrative Officer and served as Chief Financial Officer
until August 20, 2014;
-
- Mr. Karst serves as Executive Vice President and Chief Financial Officer, a role he assumed on August 20, 2014;
-
- Mr. Thompson serves as Executive Vice President, Store Operations; and
-
- Mr. Strassler serves as Executive Vice President, General Counsel and Secretary.
Term. Except for Mr. Karst, whose term commenced on August 20, 2014, the term of each executive's employment commenced on the
effective
date of his employment agreement, as follows: Mr. Standley, September 24, 2008 (as amended and restated as of January 21, 2010); Mr. Martindale, December 3, 2008;
Mr. Vitrano, September 24, 2008; Mr. Thompson, November 12, 2007 (as amended and restated as of July 11, 2011); and Mr. Strassler, March 9, 2009. Each
employment agreement has an initial term of two years, other than in the case of Mr. Standley, whose agreement has an initial term of three years (each such period, the "Initial Term"). Each
agreement will automatically renew for successive one-year terms (each, a "Renewal Term"), unless either the executive or Rite Aid provides the other with notice of
non-renewal at least 180 days prior to the expiration of the Initial Term or a Renewal Term, as applicable.
Salary and Incentive Bonus. The respective agreements provide each executive with a base salary and an incentive compensation target
(which may be
reviewed periodically for increase by the Compensation Committee). The current base salary and incentive compensation amounts are set forth below:
-
- Mr. Standley is currently entitled to an annual base salary of $1,150,000. If Rite Aid's performance meets certain targets in
the future, Mr. Standley may receive an annual bonus that, if awarded, will equal or exceed 200% of his annual base salary then in effect.
-
- Mr. Martindale is currently entitled to an annual base salary of not less than $900,000. If Rite Aid's performance meets
certain targets in the future, Mr. Martindale may receive an annual incentive bonus that, if awarded at 100% of target, will equal or exceed 150% of his annual base salary then in effect.
-
- Mr. Vitrano is currently entitled to an annual base salary of not less than $844,131. If Rite Aid's performance meets certain
targets in the future, Mr. Vitrano may receive an annual incentive bonus that, if awarded at 100% of target, will equal 125% of his annual base salary then in effect.
-
- Mr. Karst is currently entitled to an annual base salary of not less than $790,000. If Rite Aid's performance meets certain
targets in the future, Mr. Karst may receive an annual incentive bonus that, if awarded at 100% of target, will equal 75% of his annual base salary then in effect.
-
- Mr. Thompson is currently entitled to receive an annual base salary of not less than $500,320. If Rite Aid's performance meets
certain targets in the future, Mr. Thompson may receive an annual incentive bonus that, if awarded at 100% of target, will equal 75% of his annual base salary then in effect.
51
Table of Contents
-
- Mr. Strassler is currently entitled to an annual base salary of not less than $477,532. If Rite Aid's performance meets certain
targets in the future, Mr. Strassler may receive an annual incentive bonus that, if awarded at 100% of target, will equal 75% of his annual base salary then in effect.
Other Benefits. Pursuant to their employment agreements, each of the Named Executive Officers is also entitled to participate in Rite
Aid's welfare
benefits, fringe benefit and perquisite programs, and savings plans.
Restrictive Covenants. The employment agreement of each Named Executive Officer prohibits the officer from competing with Rite Aid
during his or her
employment period and for a period of one year, or with respect to Mr. Strassler, two years, thereafter.
Termination and Change in Control Benefits. The provisions of the employment agreements relating to termination of employment are
described under the
caption "Potential Payments Upon Termination or Change in Control" below.
52
Table of Contents
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR 2015 YEAR-END
The following table summarizes the number of securities underlying outstanding equity awards for the Named Executive Officers as of
February 28, 2015:
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|
Option Awards |
|
Stock Awards |
|
Name
|
|
Date of
Grant |
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable |
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable(1)(2)(4) |
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#) |
|
Option
Exercise
Price
($) |
|
Option
Expiration
Date |
|
Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)(1)(2)(4) |
|
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)(3) |
|
Equity
Incentive
Plan
Awards:
# of
Unearned
Shares or
Units That
Have Not
Vested
(#) |
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares or
Units of
Stock That
Have Not
Vested
($) |
|
John T. Standley |
|
|
9/24/2008 |
|
|
|
|
|
|
|
|
|
|
|
0.96 |
|
|
9/24/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/2/2008 |
|
|
168,800 |
|
|
|
|
|
|
|
|
0.89 |
|
|
10/2/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/25/2009 |
|
|
580,600 |
|
|
|
|
|
|
|
|
1.24 |
|
|
6/25/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/21/2010 |
|
|
2,555,000 |
|
|
|
|
|
|
|
|
1.52 |
|
|
1/21/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/23/2010 |
|
|
1,428,600 |
|
|
|
|
|
|
|
|
1.07 |
|
|
6/23/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/27/2011 |
|
|
2,233,418 |
|
|
1,531,667 |
|
|
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|
|
1.24 |
|
|
6/27/2021 |
|
|
608,108 |
|
|
4,852,702 |
|
|
|
|
|
|
|
|
|
|
6/25/2012 |
|
|
689,650 |
|
|
689,650 |
|
|
|
|
|
1.32 |
|
|
6/25/2022 |
|
|
142,466 |
|
|
1,136,879 |
|
|
|
|
|
|
|
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|
|
6/24/2013 |
|
|
234,075 |
|
|
702,225 |
|
|
|
|
|
2.76 |
|
|
6/24/2023 |
|
|
195,666 |
|
|
1,561,415 |
|
|
|
|
|
|
|
|
|
|
6/23/2014 |
|
|
|
|
|
678,500 |
|
|
|
|
|
7.08 |
|
|
6/23/2024 |
|
|
200,800 |
|
|
1,602,384 |
|
|
281,100 |
|
|
1,990,188 |
|
Kenneth A. Martindale |
|
|
12/3/2008 |
|
|
|
|
|
|
|
|
|
|
|
0.47 |
|
|
12/3/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/25/2009 |
|
|
|
|
|
|
|
|
|
|
|
1.24 |
|
|
6/25/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/23/2010 |
|
|
1,400,000 |
|
|
|
|
|
|
|
|
1.07 |
|
|
6/23/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/27/2011 |
|
|
843,906 |
|
|
572,855 |
|
|
|
|
|
1.24 |
|
|
6/27/2021 |
|
|
225,225 |
|
|
1,797,296 |
|
|
|
|
|
|
|
|
|
|
6/25/2012 |
|
|
301,800 |
|
|
301,800 |
|
|
|
|
|
1.32 |
|
|
6/25/2022 |
|
|
76,638 |
|
|
611,571 |
|
|
|
|
|
|
|
|
|
|
6/24/2013 |
|
|
114,650 |
|
|
343,950 |
|
|
|
|
|
2.76 |
|
|
6/24/2023 |
|
|
95,866 |
|
|
765,011 |
|
|
|
|
|
|
|
|
|
|
6/23/2014 |
|
|
|
|
|
212,400 |
|
|
|
|
|
7.08 |
|
|
6/23/2024 |
|
|
314,200 |
|
|
2,507,316 |
|
|
88,000 |
|
|
623,040 |
|
Frank G. Vitrano |
|
|
6/23/2010 |
|
|
|
|
|
|
|
|
|
|
|
1.07 |
|
|
6/23/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/27/2011 |
|
|
|
|
|
572,855 |
|
|
|
|
|
1.24 |
|
|
6/27/2021 |
|
|
225,225 |
|
|
1,797,296 |
|
|
|
|
|
|
|
|
|
|
6/25/2012 |
|
|
150,900 |
|
|
301,800 |
|
|
|
|
|
1.32 |
|
|
6/25/2022 |
|
|
76,638 |
|
|
611,571 |
|
|
|
|
|
|
|
|
|
|
6/24/2013 |
|
|
114,850 |
|
|
344,550 |
|
|
|
|
|
2.76 |
|
|
6/24/2023 |
|
|
96,000 |
|
|
766,080 |
|
|
|
|
|
|
|
|
|
|
6/23/2014 |
|
|
|
|
|
249,000 |
|
|
|
|
|
7.08 |
|
|
6/23/2024 |
|
|
73,700 |
|
|
588,126 |
|
|
103,200 |
|
|
730,656 |
|
Darren W. Karst |
|
|
8/20/2014 |
|
|
|
|
|
207,800 |
|
|
|
|
|
6.43 |
|
|
8/20/2024 |
|
|
372,442 |
|
|
2,972,087 |
|
|
77,200 |
|
|
496,396 |
|
Robert K. Thompson |
|
|
12/18/2007 |
|
|
210,811 |
|
|
|
|
|
|
|
|
4.04 |
|
|
12/18/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/2/2008 |
|
|
117,200 |
|
|
|
|
|
|
|
|
0.89 |
|
|
10/2/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/25/2009 |
|
|
|
|
|
|
|
|
|
|
|
1.24 |
|
|
6/25/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/23/2010 |
|
|
191,300 |
|
|
|
|
|
|
|
|
1.07 |
|
|
6/23/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/27/2011 |
|
|
143,775 |
|
|
47,925 |
|
|
|
|
|
1.24 |
|
|
6/27/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/11/2011 |
|
|
125,000 |
|
|
125,000 |
|
|
|
|
|
1.28 |
|
|
7/11/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/25/2012 |
|
|
135,850 |
|
|
135,850 |
|
|
|
|
|
1.32 |
|
|
6/25/2022 |
|
|
28,066 |
|
|
223,967 |
|
|
|
|
|
|
|
|
|
|
6/24/2013 |
|
|
33,450 |
|
|
100,350 |
|
|
|
|
|
2.76 |
|
|
6/24/2023 |
|
|
27,933 |
|
|
222,905 |
|
|
|
|
|
|
|
|
|
|
6/23/2014 |
|
|
|
|
|
64,900 |
|
|
|
|
|
7.08 |
|
|
6/23/2024 |
|
|
82,100 |
|
|
655,158 |
|
|
26,900 |
|
|
190,452 |
|
Marc A. Strassler |
|
|
6/25/2009 |
|
|
|
|
|
|
|
|
|
|
|
1.24 |
|
|
6/25/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/23/2010 |
|
|
|
|
|
|
|
|
|
|
|
1.07 |
|
|
6/23/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/27/2011 |
|
|
|
|
|
64,225 |
|
|
|
|
|
1.24 |
|
|
6/27/2021 |
|
|
225,225 |
|
|
1,797,296 |
|
|
|
|
|
|
|
|
|
|
6/25/2012 |
|
|
|
|
|
129,400 |
|
|
|
|
|
1.32 |
|
|
6/25/2022 |
|
|
26,733 |
|
|
213,329 |
|
|
|
|
|
|
|
|
|
|
6/24/2013 |
|
|
32,025 |
|
|
96,075 |
|
|
|
|
|
2.76 |
|
|
6/24/2023 |
|
|
26,733 |
|
|
213,329 |
|
|
|
|
|
|
|
|
|
|
6/23/2014 |
|
|
|
|
|
84,500 |
|
|
|
|
|
7.08 |
|
|
6/23/2024 |
|
|
25,000 |
|
|
199,500 |
|
|
35,000 |
|
|
247,800 |
|
- (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)
- Except
with respect to a portion of the stock options granted on June 27, 2011, these stock options will generally vest in equal installments on each
of the first four anniversaries of the grant date, based on continued employment. With respect to the restricted stock awards listed above, other than the restricted shares granted on June 27,
2011, listed below in footnote (4), one-third of the restricted shares will vest on each of the first three anniversaries of the grant date, based on continued employment.
- (3)
- Determined
with reference to $7.98, the closing price of a share of Rite Aid common stock on the last trading day before February 28, 2015.
- (4)
- A
portion of the June 27, 2011 grants to the Named Executive Officers of both stock options and restricted stock awards, in the amounts listed below,
will vest on the fourth anniversary of the grant date, based on continued employment.
|
|
|
|
|
|
|
|
Name
|
|
Stock
Options(#) |
|
Restricted
Stock
Awards(#) |
|
Mr. Standley |
|
|
1,180,793 |
|
|
608,108 |
|
Mr. Martindale |
|
|
437,331 |
|
|
225,225 |
|
Mr. Vitrano |
|
|
437,331 |
|
|
225,225 |
|
Mr. Strassler |
|
|
|
|
|
225,225 |
|
53
Table of Contents
OPTION EXERCISES AND STOCK VESTED TABLE FOR FISCAL YEAR 2015
The following table summarizes for each Named Executive Officer the stock option exercises and shares vested during fiscal year 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
Stock Awards |
|
Name
|
|
Number of Shares
Acquired on
Exercise (#) |
|
Value
Realized on
Exercise ($) |
|
Number of Shares
Acquired on
Vesting (#) |
|
Value
Realized on
Vesting ($) |
|
John T. Standley |
|
|
1,700,000 |
|
|
11,597,910 |
|
|
998,575 |
|
|
7,159,367 |
|
Kenneth A. Martindale |
|
|
1,043,400 |
|
|
7,090,112 |
|
|
407,798 |
|
|
2,923,099 |
|
Frank G. Vitrano |
|
|
2,984,106 |
|
|
20,817,070 |
|
|
407,864 |
|
|
2,923,563 |
|
Darren W. Karst |
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert K. Thompson |
|
|
|
|
|
|
|
|
62,534 |
|
|
447,741 |
|
Marc A. Strassler |
|
|
800,775 |
|
|
5,510,814 |
|
|
292,825 |
|
|
2,101,280 |
|
NONQUALIFIED DEFERRED COMPENSATION FOR FISCAL YEAR 2015
The following table sets forth the nonqualified deferred compensation activity for each Named Executive Officer during fiscal year
2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Executive
Contributions in
Last FY ($) |
|
Registrant
Contributions in
Last FY ($) |
|
Aggregate
Earnings in
Last FY ($) |
|
Aggregate
Withdrawals /
Forfeitures ($) |
|
Aggregate
Balance at Last
FYE ($) |
|
John T. Standley(1) |
|
|
|
|
|
266,000 |
|
|
167,586 |
|
|
|
|
|
2,223,734 |
|
Kenneth A. Martindale(1) |
|
|
|
|
|
216,000 |
|
|
58,990 |
|
|
|
|
|
1,472,451 |
|
Frank G. Vitrano(1) |
|
|
|
|
|
200,133 |
|
|
135,372 |
|
|
|
|
|
1,879,705 |
|
Darren W. Karst |
|
|
|
|
|
94,800 |
|
|
2,769 |
|
|
|
|
|
97,569 |
|
Robert K. Thompson(1) |
|
|
|
|
|
117,785 |
|
|
65,717 |
|
|
|
|
|
1,013,933 |
|
Marc A. Strassler(1) |
|
|
|
|
|
112,551 |
|
|
9,934 |
|
|
|
|
|
722,529 |
|
- (1)
- Amounts
shown relate to a defined contribution supplemental executive retirement plan covering the Named Executive Officers. Please refer to the
Compensation Discussion and Analysis under the caption "Post-Retirement Benefits" for a description of the material terms of this plan.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
As discussed above under the caption "Executive Employment Agreements," the Company has entered into employment agreements with each of
the Named Executive Officers. Upon written notice, the employment agreement of each of the Named Executive Officers is terminable by either Rite Aid or the individual officer seeking termination.
Pursuant
to his employment agreement with the Company, if Mr. Standley is terminated by the Company without "cause," if he terminates his employment for "good reason" (as such
terms are defined in his employment agreement) or if the Company provides a notice of nonrenewal at least 180 days prior to the expiration of his employment agreement, a "Company Nonrenewal,"
and such Company Nonrenewal occurs within six months of a change in control, then he will be entitled to receive:
-
- a severance amount equal to two times the sum of his annual base salary and target bonus (one times the sum in the case of a
Company Nonrenewal), a pro-rata bonus for the fiscal year of termination and any accrued but unpaid salary and benefits. The severance amount is payable in installments over the two-year period (one
year upon a Company Nonrenewal) following the termination;
54
Table of Contents
-
- continued health benefits for two years following the termination (one year in the case of a Company Nonrenewal); and
-
- all outstanding stock options will immediately vest and be exercisable, generally, for a period of one year following the termination
of employment and the restrictions on the restricted common stock will immediately lapse to the extent the options would have vested and restrictions would have lapsed had he remained employed by Rite
Aid for three years (one year in the case of a Company Nonrenewal) following the termination.
If
Rite Aid terminates Mr. Standley for "cause," or he terminates his employment without "good reason":
-
- Rite Aid shall pay Mr. Standley 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 will immediately
terminate (provided that if he terminates his 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 equity incentive award, as to which the restrictions have not lapsed or as to
which any other conditions were not satisfied prior to the date of termination will be forfeited.
If
Mr. Standley's employment is terminated as a result of his death or "disability" (as such term is defined in his employment agreement), he (or his estate, as the case may be)
will be entitled to receive all accrued but unpaid salary and benefits payable under death or disability benefit plans in which he participates, a pro-rata bonus (paid at the same time it is paid to
other eligible participants in the bonus plan and based on actual achievement of performance targets for the fiscal year), continued health insurance (or reimbursement for the cost of such benefits)
for two years for Mr. Standley and/or his immediate family, as applicable, vesting of all stock options and vesting of an amount of restricted stock that would have vested had he remained
employed for three years following the date of termination.
Pursuant
to their employment agreements with the Company, if any of Messrs. Martindale, Vitrano, Karst, Thompson, and Strassler is terminated by Rite Aid without "cause" or if
such officer's employment is terminated by the officer for "good reason" (as such terms are defined in the applicable employment agreement), then the officer will be entitled to
receive:
-
- a severance amount equal to two times the sum of the annual base salary and (other than Messrs. Thompson and Strassler) target
bonus, a pro-rata bonus for the fiscal year of termination and any accrued but unpaid salary and benefits. The severance amount is payable in installments over the two-year period following the
termination;
-
- 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 to the extent the options would have vested and restrictions would have lapsed, in each case, had
the officer remained employed by Rite Aid for two years following the termination.
If
Rite Aid terminates any of the Named Executive Officers for "cause," or if any of the Named Executive Officers terminates his employment without "good reason" (with the exception of
Mr. Standley, whose termination provisions are described above):
-
- Rite Aid shall pay the officer all accrued but unpaid salary and benefits;
55
Table of Contents
-
- any portion of any then-outstanding stock option grant that was not exercised prior to the date of termination will immediately
terminate (provided that if the officer terminates his 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 equity incentive award, as to which the restrictions have not lapsed or as to
which any other conditions were not satisfied prior to the date of termination will be forfeited.
If
the employment of any of the Named Executive Officers (other than Mr. Standley whose benefits upon such termination are described above) is terminated as a result of death or
"disability" (as such term is defined in each employment agreement), the officer will be entitled to receive all accrued but unpaid salary and benefits payable under death or disability benefit plans
in which the officer participates, continued health insurance (or reimbursement for the cost of such benefits) for two years for the officer and/or his immediate family, as applicable (other
than Messrs. Thompson and Strassler who will receive continued coverage for one year), vesting of all stock options and vesting of an amount of restricted stock that would have vested
had the officer remained employed for two years following the date of termination. Messrs. Martindale, Vitrano and Karst will also be entitled to receive a pro-rata bonus, based on
actual achievement of performance targets for the fiscal year, that is paid at the same time that it is paid to other eligible participants in the bonus plan.
Upon
the termination of employment of any of the Named Executive Officers, the officer would generally become entitled to receive a distribution of his vested account balance under the
nonqualified deferred compensation plans maintained by the Company. Pursuant to applicable tax regulations, any such distributions will generally be delayed for a period of six months following the
Named Executive Officer's separation from service. The account balance of each Named Executive Officer is shown in the "Nonqualified Deferred Compensation for Fiscal Year 2015" table above.
Under Employment Agreements. Under Mr. Standley's employment agreement, upon a change in control, all of his stock options awarded
pursuant to
his employment agreement and all stock options awarded pursuant to the Company's executive equity program then held by him shall immediately vest and be exercisable. Severance benefits would not be
triggered pursuant to a change in control unless it is followed by Mr. Standley's termination of employment under the circumstances described above. Similarly, severance benefits would not be
triggered pursuant to a change in control unless it is followed by either Mr. Martindale's, Mr. Vitrano's, Mr. Karst's, Mr. Thompson's or Mr. Strassler's termination
of employment, respectively, under the circumstances described above.
For
purposes of the employment agreements with the Named Executive Officers, where applicable, the term "change in control" generally means an acquisition of 35% (50% in the case of
Mr. Thompson) or more of the Company's combined voting power; the incumbent directors (generally including current directors and future directors whose election or nomination is approved by the
Board) ceasing to constitute a majority of the Board; the consummation of a merger or similar transaction, other than (i) such a transaction in which the voting securities outstanding
immediately prior to such transaction continue to represent at least 60% (50% in the case of Mr. Thompson) of the voting power of the
Company immediately after the transaction or (ii) a recapitalization or similar transaction in which no person becomes the beneficial owner of 35% or more of the Company's combined voting
power; or the stockholders approve a plan of complete liquidation or dissolution of the Company.
Each
of Messrs. Standley, Martindale, Vitrano and Strassler's employment agreement provides that the Named Executive Officer will receive an additional payment to reimburse the
officer for any excise taxes imposed pursuant to Section 4999 of the Code, together with reimbursement for any additional
56
Table of Contents
taxes
incurred by reason of such payments. Each of Mr. Thompson's and Mr. Karst's employment agreements provide that any portion of any payment that is subject to tax imposed by
Section 4999 of the Code will be reduced to the extent necessary so that Mr. Thompson or Mr. Karst would retain a greater amount on an after-tax basis than had the excise tax been
imposed on the unreduced amount of the payments.
Under Rite Aid's Equity Program. Pursuant to the terms of the Company's equity program, unless otherwise provided in a Named Executive
Officer's
employment agreement or individual award agreement, if outstanding equity awards are assumed or substituted in connection with a change in control, the change in control will not cause the vesting of
such awards to accelerate unless the change in control is followed by a qualifying termination of employment within the 24-month period following the change in control. All outstanding equity awards
granted pursuant to the Company's equity program that are not assumed or substituted in connection with a change in control will become fully vested and exercisable, free of applicable restrictions,
and all performance criteria will be deemed to have been achieved at target levels, upon the occurrence of the change in control.
For
purposes of Rite Aid's equity program, a "change in control" means, in general: (i) a person or entity acquires securities of Rite Aid representing 50% or more of the combined
voting power of Rite Aid; (ii) an unapproved change in the majority membership of the Board; (iii) consummation of a merger or consolidation of Rite Aid or any subsidiary of Rite Aid,
other than a merger or consolidation that results in the Rite Aid voting securities continuing to represent at least 60% of the combined voting power of the surviving entity or its parent, or a merger
or consolidation effected to implement a recapitalization or similar transaction involving Rite Aid in which no person or entity acquires at least 35% of the combined voting power of Rite Aid; or
(iv) stockholder approval of a plan of complete liquidation or dissolution of Rite Aid or the consummation of an agreement for the sale or disposition of all or substantially all of Rite Aid's
assets, other than a sale or disposition to an entity, at least 60% of the combined voting power of which is owned by Rite Aid stockholders in substantially the same proportions as their ownership of
Rite Aid immediately prior to such sale. For more information regarding the equity program, refer to the Compensation Discussion and Analysis under the caption "Long-Term Incentive Program."
Under Rite Aid's Supplemental Retirement Plan. The unvested account balance of the supplemental executive retirement plan in which the
Named
Executive Officers participate will vest upon a change in control of the Company as defined in the supplemental executive retirement plan, only if such Named Executive Officer is involuntarily
terminated without cause within 12 months of the change in control. For more information regarding the supplemental executive retirement plan, refer to the Compensation Discussion and Analysis under
the caption "Post-Retirement Benefits."
57
Table of Contents
Quantification of Payments Described. The termination and change in control payments that would have been made to the Named Executive
Officers had
their employment been terminated as of February 28, 2015 under the circumstances described in the tables below are quantified in the tables below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John T. Standley
|
|
Death ($) |
|
Disability ($) |
|
Termination
Without Cause
or Quit for
Good Reason
($)(a) |
|
Termination Without
Cause or Quit for Good
Reason Following a
Change in Control
($)(a) |
|
2 × Base Salary |
|
|
N/A |
|
|
N/A |
|
|
2,300,000 |
|
|
2,300,000 |
|
2 × Bonus |
|
|
N/A |
|
|
N/A |
|
|
4,600,000 |
|
|
4,600,000 |
|
Pro-Rated Incentive Bonus for Past Fiscal Year |
|
|
2,991,291 |
|
|
2,991,291 |
|
|
2,991,291 |
|
|
2,991,291 |
|
Benefits |
|
|
28,397 |
|
|
28,397 |
|
|
28,397 |
|
|
28,397 |
|
SERP Vesting |
|
|
668,955 |
|
|
668,955 |
|
|
668,955 |
|
|
668,955 |
|
Vesting of Equity(1) |
|
|
28,193,493 |
|
|
28,193,493 |
|
|
28,346,155 |
|
|
31,622,643 |
(2) |
280G Gross Up |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
|
|
- (a)
- As
discussed above, in the event of a Company Nonrenewal, Mr. Standley's termination payments are as follows: (i) severance is equal to 1x
base salary and bonus, plus a pro-rated incentive bonus; (ii) health benefits will continue for one year; (iii) the unvested account balance in his SERP will vest; and
(iv) options will vest and become exercisable and the restrictions with respect to awards of restricted stock will lapse to the extent such options would have become vested and exercisable or
such restrictions would have lapsed had Mr. Standley remained employed for one year. If a Company Nonrenewal occurs within six months of a change in control, the severance formula is the same
as termination by the Company without Cause or by Mr. Standley for Good Reason, as reflected in the table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth A. Martindale
|
|
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 |
|
|
1,800,000 |
|
|
1,800,000 |
|
2 × Bonus |
|
|
N/A |
|
|
N/A |
|
|
2,700,000 |
|
|
2,700,000 |
|
Pro-Rated Incentive Bonus for Past Fiscal Year |
|
|
1,583,050 |
|
|
1,583,050 |
|
|
1,583,050 |
|
|
1,583,050 |
|
Benefits |
|
|
11,265 |
|
|
11,265 |
|
|
11,265 |
|
|
11,265 |
|
SERP Vesting |
|
|
501,428 |
|
|
501,428 |
|
|
501,428 |
|
|
501,428 |
|
Vesting of Equity(1) |
|
|
12,008,981 |
|
|
12,008,981 |
|
|
12,008,981 |
|
|
14,791,843 |
(2) |
280G Gross Up |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
|
|
58
Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frank G. Vitrano
|
|
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 |
|
|
1,688,263 |
|
|
1,688,263 |
|
2 × Bonus |
|
|
N/A |
|
|
N/A |
|
|
2,110,328 |
|
|
2,110,328 |
|
Pro-Rated Incentive Bonus for Past Fiscal Year |
|
|
1,347,801 |
|
|
1,347,801 |
|
|
1,347,801 |
|
|
1,347,801 |
|
Benefits |
|
|
27,828 |
|
|
27,828 |
|
|
27,828 |
|
|
27,828 |
|
SERP Vesting |
|
|
530,978 |
|
|
530,978 |
|
|
530,978 |
|
|
530,978 |
|
Vesting of Equity(1) |
|
|
10,749,151 |
|
|
10,749,151 |
|
|
10,749,151 |
|
|
13,018,410 |
(2) |
280G Gross Up |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Darren W. Karst
|
|
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 |
|
|
1,580,000 |
|
|
1,580,000 |
|
2 × Bonus |
|
|
N/A |
|
|
N/A |
|
|
1,185,000 |
|
|
1,185,000 |
|
Pro-Rated Incentive Bonus for Past Fiscal Year |
|
|
275,775 |
|
|
275,775 |
|
|
275,775 |
|
|
275,775 |
|
Benefits |
|
|
19,347 |
|
|
19,347 |
|
|
19,347 |
|
|
19,347 |
|
SERP Vesting |
|
|
84,565 |
|
|
84,565 |
|
|
84,565 |
|
|
84,565 |
|
Vesting of Equity(1) |
|
|
2,142,439 |
|
|
2,142,439 |
|
|
2,142,439 |
|
|
3,790,573 |
(2) |
280G Gross Up |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert K. Thompson
|
|
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 |
|
|
1,000,640 |
|
|
1,000,640 |
|
2 × Bonus |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
Pro-Rated Incentive Bonus for Past Fiscal Year |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
Benefits |
|
|
13,282 |
|
|
13,282 |
|
|
26,564 |
|
|
26,564 |
|
SERP Vesting |
|
|
291,860 |
|
|
291,860 |
|
|
291,860 |
|
|
291,860 |
(2) |
Vesting of Equity(1) |
|
|
3,327,356 |
|
|
3,327,356 |
|
|
3,327,356 |
|
|
4,123,803 |
|
280G Gross Up |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
59
Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marc A. Strassler
|
|
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 |
|
|
955,062 |
|
|
955,062 |
|
2 × Bonus |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
Pro-Rated Incentive Bonus for Past Fiscal Year |
|
|
N/A |
|
|
N/A |
|
|
502,787 |
|
|
502,787 |
|
Benefits |
|
|
1,011 |
|
|
1,011 |
|
|
2,022 |
|
|
2,022 |
|
SERP Vesting |
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of Equity(1) |
|
|
4,024,003 |
|
|
4,024,003 |
|
|
4,024,003 |
|
|
4,719,396 |
(2) |
280G Gross-up |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
|
|
- (1)
- Includes
the value of equity awards and performance awards denominated in cash held by the officer that would become vested under the applicable
circumstances. The value of stock options shown is based on the excess of $7.98, the closing price of a share of Rite Aid common stock on the last trading day before February 28, 2015, 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 $7.98, the closing price of a share of Rite Aid common stock on the last trading day before February 28, 2015 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 ControlChange in Control
Arrangements" narrative.
AUDIT COMMITTEE REPORT
The Board of Directors has adopted a written charter of the Audit Committee which further describes the role of the Audit Committee.
The Audit Committee, among other things, appoints and engages our independent registered public accounting firm and oversees our financial reporting and internal control over financial reporting
processes on behalf of the Board. Management has the primary responsibility for our financial statements, our accounting principles and our internal control over financial reporting. Our independent
registered public accounting firm is responsible for auditing our financial statements and expressing an opinion as to their conformity with accounting principles generally accepted in the United
States. Our independent registered public accounting firm also is responsible for expressing an opinion on the effectiveness of our internal control over financial reporting.
In
fulfilling its oversight responsibilities, the Audit Committee met eight times during fiscal year 2015.
During
those meetings the Audit Committee:
-
- 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
60
Table of Contents
Report
on Form 10-K for fiscal year 2015. 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 2015.
-
- 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 communicated by the
standards of the Public Company Accounting Oversight Board ("PCAOB"), as well as critical accounting policies and practices, alternative accounting treatments, and other material written
communications between management and our independent registered public accounting firm, as required by Rule 2-07 of Regulation S-X under the Securities Exchange Act of 1934, as amended.
-
- Discussed with our independent registered public accounting firm the matters required to be discussed by Auditing Standard
No. 16, Communications with Audit Committees, issued by the PCAOB.
-
- 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.
In
addition to pre-approving the audit and other audit-related and tax services performed by our independent registered public accounting firm, the Audit Committee requests fee estimates
associated with each proposed service. Providing a fee estimate for a service incorporates appropriate oversight and control of the independent registered public accounting firm relationship. On a
quarterly basis, the Audit Committee reviews the status of services and fees incurred year-to-date against pre-approved services and fee estimates.
As
outlined in the table below, we incurred the following fees, including expenses billed to the Company for the fiscal years ended February 28, 2015 and March 1, 2014 by
our independent registered public accounting firm, Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates.
61
Table of Contents
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
Description of Fees
|
|
Feb. 28, 2015 |
|
Mar. 1, 2014 |
|
|
|
(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 |
|
$ |
2.1 |
|
Audit-Related Fees, acquisition due diligence procedures and audits of employee benefit plans' financial
statements |
|
$ |
0.9 |
|
$ |
0.1 |
|
Tax Fees, tax compliance advice and planning |
|
$ |
0.1 |
|
$ |
0.1 |
|
All Other Fees |
|
$ |
0.0 |
|
$ |
0.3 |
|
Total |
|
$ |
3.3 |
|
$ |
2.6 |
|
Based
on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in our Annual Report on
Form 10-K for the fiscal year ended February 28, 2015 for filing with the SEC.
David
R. Jessick, Chair
Kevin E. Lofton
Michael N. Regan
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of February 28, 2015, with respect to the compensation plans under which our common
stock may be issued:
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
39,795,636 |
|
$ |
2.07 |
|
|
66,288,352 |
(3) |
Equity compensation plans not approved by stockholders(1) |
|
|
1,872,265 |
|
$ |
2.64 |
|
|
|
|
Total(2) |
|
|
41,667,901 |
|
$ |
2.09 |
|
|
66,288,352 |
(3) |
- (1)
- These
plans include the Company's 1999 Plan, under which 10,000,000 shares of common stock are authorized for the grant of stock options at the discretion
of the Compensation Committee, and the 2001 Plan, under which 20,000,000 shares of common stock are authorized for the grant of stock options, also at the discretion of the Compensation Committee.
Both plans provide for the Compensation Committee to determine both when and in what manner options may be exercised; however, option terms may not extend for more than 10 years from the
applicable date of grant. The plans provide that stock options may only be granted with exercise prices that are not less than the fair market value of a share of common stock on the date of grant. No
securities remain available for future issuance under either the 1999 Plan or the 2001 Plan.
- (2)
- 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 outstanding was 1,013,350,077.
- (3)
- Of
the 66,288,352 shares remaining, there are 45,716,105 shares available for the grant of awards other than stock options or stock appreciation rights.
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Table of Contents
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires Rite Aid's executive officers, directors and persons who own more than 10% of Rite
Aid common stock to file reports of ownership and changes in ownership with the SEC and the NYSE. Such persons are required by SEC regulations to furnish Rite Aid with copies of all
Section 16(a) forms they file. Based solely on a review of the copies of such forms furnished to Rite Aid, we have determined that during fiscal year 2015, no persons subject to
Section 16(a) reporting submitted late filings except for Dedra N. Castle. In Ms. Castle's Form 3, which was timely filed, she erroneously stated that she owned no shares of
common stock when in fact she owned 100 shares. Ms. Castle also reported on Form 5 in April 2015 an open market purchase of common stock that should have been disclosed on a
Form 4 in December 2014.
63
Table of Contents
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of May 1, 2015 (except as otherwise noted), certain information concerning the beneficial
ownership of (a) each director and nominee for director, (b) each of our "Named Executive Officers" (as such term is defined in Item 402(a)(3) of Regulation S-K under the
Exchange Act), (c) each holder known to us to beneficially own more than 5% of our common stock and (d) all directors and executive officers as a group (based on 988,837,450 shares of
common stock outstanding as of May 1, 2015). Each of the persons named below has sole voting power and sole investment power with respect to the shares set forth opposite his or her name,
except as otherwise noted.
|
|
|
|
|
|
|
|
Beneficial Owners
|
|
Number of
Common Shares
Beneficially Owned(1) |
|
Percentage
of Class |
|
Named Executive Officers, Directors and Nominee for Director: |
|
|
|
|
|
|
|
Joseph B. Anderson, Jr. |
|
|
385,266 |
(2) |
|
* |
|
Bruce G. Bodaken |
|
|
44,838 |
(3) |
|
* |
|
David R. Jessick |
|
|
255,266 |
(4) |
|
* |
|
Darren W. Karst |
|
|
372,442 |
|
|
* |
|
Kevin E. Lofton |
|
|
25,552 |
(5) |
|
* |
|
Kenneth A. Martindale |
|
|
4,853,361 |
(6) |
|
* |
|
Myrtle S. Potter |
|
|
24,771 |
(7) |
|
* |
|
Michael N. Regan |
|
|
419,454 |
(8) |
|
* |
|
Frank A. Savage |
|
|
|
|
|
|
|
John T. Standley |
|
|
12,878,858 |
(9) |
|
1.32 |
% |
Marc A. Strassler |
|
|
783,503 |
(10) |
|
* |
|
Marcy Syms |
|
|
369,454 |
(11) |
|
* |
|
Robert K. Thompson |
|
|
1,078,860 |
(12) |
|
* |
|
Frank G. Vitrano |
|
|
2,235,701 |
(13) |
|
* |
|
All Executive Officers and Directors (17 persons) |
|
|
26,519,906 |
|
|
2.72 |
% |
5% Stockholders: |
|
|
|
|
|
|
|
The Vanguard Group |
|
|
63,562,153 |
(14) |
|
6.47 |
% |
100 Vanguard Blvd |
|
|
|
|
|
|
|
Malvern, PA 19355 |
|
|
|
|
|
|
|
T. Rowe Price Associates, Inc. |
|
|
110,158,352 |
(15) |
|
11.2 |
% |
100 E. Pratt Street |
|
|
|
|
|
|
|
Baltimore, MD 21202 |
|
|
|
|
|
|
|
- *
- 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 as of
June 30, 2015.
- (2)
- This
amount includes 50,000 shares which may be acquired within 60 days by exercising stock options and 295,266 restricted stock units that have
vested or will vest before June 30, 2015 at which time said units will be payable in shares of common stock when Mr. Anderson leaves the Board.
- (3)
- This
amount represents 28,125 restricted stock units that will vest before June 30, 2015 at which time said units will be payable in shares of common
stock when Mr. Bodaken leaves the Board.
- (4)
- This
amount includes 255,266 restricted stock units that have vested or will vest before June 30, 2015 at which time said units will be payable in
shares of common stock when Mr. Jessick leaves the Board.
64
Table of Contents
- (5)
- This
amount represents 8,839 restricted stock units that will vest before June 30, 2015 at which time said units will be payable in shares of common
stock when Mr. Lofton leaves the Board.
- (6)
- This
amount includes 3,551,861 shares which may be acquired within 60 days by exercising stock options.
- (7)
- This
amount represents 8,058 restricted stock units that will vest before June 30, 2015 at which time said units will be payable in shares of common
stock when Ms. Potter leaves the Board.
- (8)
- This
amount includes 100,000 shares which may be acquired within 60 days by exercising stock options and 279,454 restricted stock units that have
vested or will vest before June 30, 2015 at which time said units will be payable in shares of common stock when Mr. Regan leaves the Board.
- (9)
- This
amount includes 10,170,335 shares which may be acquired within 60 days by exercising stock options.
- (10)
- This
amount includes 214,100 shares which may be acquired within 60 days by exercising stock options.
- (11)
- This
amount includes 50,000 shares which may be acquired within 60 days by exercising stock options and 279,454 restricted stock units that have
vested or will vest before June 30, 2015 at which time said units will be payable in shares of common stock when Marcy Syms leaves the Board.
- (12)
- This
amount includes 861,536 shares which may be acquired within 60 days by exercising stock options.
- (13)
- This
amount includes 1,166,605 shares which may be acquired within 60 days by exercising stock options.
- (14)
- This
information is as of December 31, 2014 and based solely on a Schedule 13G filed by The Vanguard Group with the SEC on
February 10, 2015.
- (15)
- This
information is as of December 31, 2014 and based solely on a Schedule 13G filed by T. Rowe Price Associates, Inc. with the SEC on
February 11, 2015.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Review and Approval of Related Person Transactions
We have adopted a written policy concerning the review, approval or ratification of transactions with related persons. The Nominating
and Governance Committee is responsible for review, approval or ratification of "related person transactions" between the Company or its subsidiaries and related persons. Under SEC rules, a related
person is, or any time since the beginning of the last fiscal year was, a director, executive officer, nominee for director, an immediate family member (as defined under applicable SEC rules) of such
persons, or a 5% stockholder of the Company. A related person transaction is any transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in
which the Company or a subsidiary is a participant, the amount involved exceeds $120,000, and a related person had, has or will have a direct or indirect material interest.
Directors,
executive officers and nominees must complete an annual questionnaire and disclose all potential related person transactions involving themselves and their immediate family
members that are known to them. Throughout the year, directors and executive officers must notify the Corporate Secretary and Chief Accounting Officer of any potential related person transactions as
soon as they become aware of any such transaction. The Corporate Secretary and Chief Accounting Officer inform
65
Table of Contents
the
Nominating and Governance Committee of any related person transaction of which they are aware. The Corporate Secretary and Chief Accounting Officer are responsible for conducting a preliminary
analysis and review of potential related person transactions and presentation to the Nominating and Governance Committee for review including provision of additional information to enable proper
consideration by the Nominating and Governance Committee. As necessary, the Nominating and Governance Committee shall review approved related person transactions on a periodic basis throughout the
duration of the transaction to ensure that the transactions remain in the best interests of the Company. The Nominating and Governance Committee may, in its discretion, engage outside counsel to
review certain related person transactions. In addition, the Nominating and Governance Committee may request that the full Board of Directors consider the approval or ratification of related person
transactions if the Nominating and Governance Committee deems it advisable. A copy of our full policy concerning transactions with related persons is available on the Governance section of our website
at www.riteaid.com under the headings "Corporate InfoGovernanceRelated Person Transactions."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee currently consists of Marcy Syms (Chair), Bruce G. Bodaken and Michael N. Regan. During fiscal year 2015, no
member of the Compensation Committee was an employee or former employee or executive officer of the Company.
STOCKHOLDER PROPOSALS FOR
THE 2016 ANNUAL MEETING OF STOCKHOLDERS
Any stockholder desiring to present a proposal for inclusion in Rite Aid's proxy statement for the 2016 Annual Meeting of Stockholders
must deliver the proposal to the Secretary at the address below not later than January 16, 2016. Only those proposals that comply with the requirements of Rule 14a-8 under the Exchange
Act will be included in Rite Aid's proxy statement for the 2016 Annual Meeting. In order for proposals of stockholders made outside of Rule 14a-8 under the Exchange Act to be considered
"timely" within the meaning of Rule 14a-4(c) under the Exchange Act, such proposals must be received by the Secretary at the address below by March 27, 2016.
Stockholders
may present proposals that are proper subjects for consideration at an annual meeting, even if the proposal is not submitted by the deadline for inclusion in the proxy
statement. To do so, the stockholder must comply with the procedures specified in Rite Aid's By-Laws. The By-Laws, which are available upon request from the Secretary, require all stockholders who
intend to make proposals at an annual meeting of stockholders to submit their proposals to the Secretary not fewer than 90 and not more than 120 days before the anniversary date of the previous
year's annual meeting of stockholders. The By-Laws also provide that nominations for director may only be made by the Board of Directors (or an authorized Board committee) or, unless made under the
proxy access provisions of the By-Laws described below, by a stockholder of record entitled to vote who sends notice to the Secretary not fewer than 90 nor more than 120 days before the
anniversary date of the previous year's annual meeting of stockholders. Any such nomination by a stockholder must comply with the procedures specified in Rite Aid's By-Laws. To be eligible for
consideration at the 2016 Annual Meeting, proposals which have not been submitted by the deadline for inclusion in the proxy statement and any nominations for director other than those under the proxy
access provisions of the By-Laws must be received by the Secretary between February 26, 2016 and March 27, 2016. This advance notice period is intended to allow all stockholders an
opportunity to consider all business and nominees expected to be considered at the meeting.
In
addition, Rite Aid's By-Laws provide that, under certain circumstances, a stockholder or group of stockholders may include director candidates that they have nominated in our annual
meeting proxy materials. The proxy access provisions of the By-Laws provide, among other things, that a stockholder
66
Table of Contents
or
group of up to 20 stockholders seeking to include director candidates in our annual meeting proxy materials must own 3% or more of Rite Aid's outstanding common stock continuously for at least the
previous three years. The number of stockholder-nominated candidates appearing in any annual meeting proxy statement cannot exceed 20% of the number of directors then serving on the Board. If the 20%
calculation does not result in a whole number, the maximum number of stockholder nominees included in our proxy statement would be the closest whole number below 20%. If the number of
stockholder-nominated candidates exceeds 20%, each nominating stockholder or group of stockholders may select one nominee for inclusion in our proxy materials until the maximum number is reached. The
order of selection would be determined by the amount (largest to smallest) of shares of Rite Aid common stock held by each nominating stockholder or group of stockholders. The nominating stockholder
or group of stockholders also must deliver the information required by Rite Aid's By-Laws and comply with the procedures specified therein, and each nominee must meet the qualifications required by
the By-Laws. Requests to include stockholder-nominated candidates in our proxy materials for the 2016 Annual Meeting must be received by the Secretary no earlier than December 17, 2015 and no
later than January 16, 2016.
All
submissions to the Secretary should be made to:
Rite
Aid Corporation
30 Hunter Lane
Camp Hill, Pennsylvania 17011
Attention: Marc A. Strassler, Secretary
INCORPORATION BY REFERENCE
In accordance with SEC rules, notwithstanding anything to the contrary set forth in any of our previous or future filings under the
Securities Act of 1933, as amended, or the Exchange Act, that might incorporate this proxy statement or future filings made by Rite Aid under those statutes, the information included under the caption
"Compensation Committee Report" and those portions of the information included under the caption "Audit Committee Report" required by the SEC's rules to be included therein, shall not be deemed to be
"soliciting material" or "filed" with the SEC and shall not be deemed incorporated by reference into any of those prior filings or into any future filings made by Rite Aid under those statutes, except
to the extent we specifically incorporate these items by reference.
OTHER MATTERS
The Board of Directors knows of no other matters that have been submitted for consideration at the Annual Meeting other than those
referred to in this proxy statement and the possible submission of the Krol Proposals, discussed below, which are not included in this proxy statement, but may be presented by Steven Krol at the
Annual Meeting. If the Krol Proposals are presented at the Annual Meeting, the persons named on the enclosed proxy (the "proxy holders") will have discretionary authority pursuant to
Rule 14a-4(c) under the Exchange Act with respect to the Krol Proposals and intend to exercise such discretion to vote "AGAINST" the proposals. If any other matters come before stockholders at
the Annual Meeting, the proxy holders intend to vote the shares they represent in accordance with their best judgment.
Steven
Krol has advised the Company that he plans to present two proposals (the "Krol Proposals") at the Annual Meeting, the first requesting that the Board adopt a policy and amend the
By-Laws to provide for an independent Chairman and the second requesting that the Board adopt a policy and amend the By-Laws to limit the number of outside boards or associations on which a senior
executive may serve to one. The Krol Proposals were not submitted under Rule 14a-8 of the Exchange Act and Mr. Krol did not seek to have the Krol Proposals included in this proxy
statement. If presented at the Annual Meeting, the adoption of either of the Krol Proposals, like the other
67
Table of Contents
stockholder
proposals that are on the Company's agenda for the Annual Meeting, would require the approval of the affirmative vote of a majority of shares represented at the meeting and entitled to
vote.
IMPORTANT NOTICE REGARDING DELIVERY
OF STOCKHOLDER DOCUMENTS
The SEC has adopted rules that permit companies and intermediaries such as brokers to satisfy proxy material delivery requirements with
respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, which is referred to as "householding," potentially
provides extra convenience for stockholders and reduces printing and postage costs for companies.
Rite
Aid and some brokers utilize the householding process for proxy materials. In accordance with a notice sent to certain stockholders who share a single address, only one copy of this
proxy statement is being sent to that address, unless we received contrary instructions from any stockholder at that address. Stockholders who participate in householding will continue to receive
separate proxy cards. Householding will continue until you are notified otherwise or until one or more stockholders at your address revokes consent. If you revoke consent, you will be removed from the
householding program within 30 days of receipt of the revocation. If you hold your Rite Aid stock in "street name," additional information regarding householding of proxy materials should be
forwarded to you by your broker.
However,
if you wish to receive a separate copy of this proxy statement, we will promptly deliver one to you upon request. You can notify us by sending a written request to Rite Aid
Corporation, 30 Hunter Lane, Camp Hill, Pennsylvania 17011, Attention: Marc A. Strassler, Secretary, or by calling the Secretary at (717) 975-5833. In addition, if you would like to
receive separate proxy statements and annual reports of Rite Aid in the future, or if you are receiving multiple copies of annual reports and proxy statements at an address shared with another
stockholder and would like to participate in householding, please notify your broker if your shares are held in a brokerage account or us if you hold registered shares.
ANNUAL REPORT
A copy of Rite Aid's Annual Report on Form 10-K for fiscal year 2015 is being mailed together with this proxy statement to all
stockholders entitled to notice of and to vote at the Annual Meeting. A copy of our Annual Report, including the financial statements included therein, is also available
without charge by visiting the Company's website or upon written request to Rite Aid Corporation, 30 Hunter Lane, Camp Hill, Pennsylvania 17011, Attention: Marc A. Strassler,
Secretary.
68
|
Signature
[PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date KEEP THIS PORTION
FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY TO VOTE, MARK BLOCKS
BELOW IN BLUE OR BLACK INK AS FOLLOWS: 3. Approve, on an advisory basis, the
compensation of our named executive officers as presented in the proxy
statement. 2. Ratify the appointment of Deloitte & Touche LLP as our
independent registered public accounting firm. The Board of Directors
unanimously recommends that you vote AGAINST Proposals 4 and 5. The Board of
Directors unanimously recommends that you vote FOR Proposals 2 and 3. Please
indicate if you plan to attend this meeting. 5. Consider a stockholder
proposal, if properly presented at the Annual Meeting, relating to proxy
access. 4. Consider a stockholder proposal, if properly presented at the
Annual Meeting, relating to accelerated vesting of performance awards. THIS
PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. M93007-P66628 ! ! ! ! ! ! ! !
! ! ! ! ! ! ! ! ! ! ! ! ! ! RITE AID CORPORATION ATTN: BYRON PURCELL 30
HUNTER LANE CAMP HILL, PA 17011 VOTE BY INTERNET - www.proxyvote.com Use the
Internet to transmit your voting instructions and for electronic delivery of
information up until 11:59 P.M. Eastern Time, June 24, 2015. Have your proxy
card in hand when you access the web site and follow the instructions to
obtain your records and to create an electronic voting instruction form.
ElEcTRONIc DElIVERY OF FuTuRE PROXY MATERIAlS If you would like to reduce the
costs incurred by our company in mailing proxy materials, you can consent to
receiving all future proxy statements, proxy cards and annual reports
electronically via e-mail or the Internet. To sign up for electronic
delivery, please follow the instructions above to vote using the Internet
and, when prompted, indicate that you agree to receive or access proxy
materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use
any touch-tone telephone to transmit your voting instructions up until 11:59
P.M. Eastern Time, June 24, 2015. Have your proxy card in hand when you call
and then follow the instructions. VOTE BY MAIl Mark, sign and date your proxy
card and return it in the postage-paid envelope we have provided or return it
to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. You
can obtain directions to the Annual Meeting by contacting Rite Aid's Investor
Relations Department at (717) 975-3710. RITE AID cORPORATION 1. Election of
Directors Nominees: The Board of Directors unanimously recommends that you vote
FOR the following: For address changes and/or comments, please check this box
and write them on the back where indicated. Please sign exactly as your
name(s) appear(s) hereon. When signing as attorney, executor, administrator,
or other fiduciary, please give full title as such. Joint owners should each
sign personally. All holders must sign. If a corporation or partnership,
please sign in full corporate or partnership name by authorized officer. Yes
No ! ! ! ! ! ! ! ! ! ! ! ! ! ! For Against Abstain For Against Abstain 1a.
John T. Standley 1b. Joseph B. Anderson, Jr. 1c. Bruce G. Bodaken 1e. Kevin
E. Lofton 1d. David R. Jessick 1g. Michael N. Regan 1f. Myrtle S. Potter 1h.
Frank A. Savage 1i. Marcy Syms ! ! ! ! ! !
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M93008-P66628
Important Notice Regarding the Availability of Proxy Materials for the Annual
Meeting: The Notice and Proxy Statement and Form 10-K are available at
www.proxyvote.com. Address changes/comments:
_______________________________________________________________________________
________________________________________________________________________________________________________
(If you noted any Address Changes/Comments above, please mark corresponding
box on the reverse side.) continued and to be signed on reverse side RITE AID
cORPORATION Annual Meeting of Stockholders June 25, 2015 at 8:00 AM This
proxy is solicited by the Board of Directors The stockholder(s) hereby
appoint(s) John T. Standley, Marc A. Strassler, and Frank G. Vitrano, or any
of them, as proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and to vote, as designated on the reverse
side of this ballot, all of the shares of common stock of RITE AID
CORPORATION that the stockholder(s) is/are entitled to vote at the Annual Meeting
of Stockholders to be held at 8:00 AM, EDT on June 25, 2015 at the Clarion
Hotel, 148 Sheraton Drive, New Cumberland, PA 17070, and any adjournment or
postponement thereof. If applicable, the proxy shall also govern the voting
stock held for the account of the undersigned in the Company's Investment
Opportunity Plan, or any applicable employee benefit plan. The validity of
this proxy is governed by the laws of the State of Delaware. This proxy does
not revoke any prior powers of attorney except for prior proxies given in
connection with the Annual Meeting of Stockholders. THIS PROXY, WHEN PROPERlY
EXEcuTED, WIll BE VOTED AS SPEcIFIED, OR, IF NO SPEcIFIcATIONS ARE MADE, WIll
BE VOTED IN AccORDANcE WITH THE BOARD OF DIREcTORS' REcOMMENDATIONS. IF ANY OTHER
MATTER IS PROPERlY PRESENTED AT THE ANNuAl MEETING OF STOcKHOlDERS, THIS
PROXY WIll BE VOTED IN THE NAMED PROXIES' DIScRETION ON SucH MATTER. PlEASE
MARK, SIGN, DATE AND RETuRN THIS PROXY cARD PROMPTlY IN THE ENclOSED
POSTAGE-PAID ENVElOPE.
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