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Exhibit 10.2
DUANE
READE HOLDINGS, INC.
MANAGEMENT STOCK OPTION PLAN
NONQUALIFIED STOCK OPTION AGREEMENT
THIS STOCK
OPTION AGREEMENT (the " Agreement "), dated as of
April 2, 2008 (the " Grant
Date "), is made by and between Duane
Reade Holdings, Inc., a Delaware corporation (the "
Company "), and John A.
Lederer (the " Optionee
").
WHEREAS, the
Company adopted the Duane Reade Holdings, Inc. Management
Stock Option Plan, effective as of July 30, 2004 (the "
Plan "), pursuant to
which stock options may be granted to purchase Common Stock of the
Company; and
WHEREAS, the
Optionee and Duane Reade, Inc., a wholly owned subsidiary of
the Company (" DRI "), have entered into an employment agreement, dated as of
March 12, 2008 (as may be amended from time to time, the
" Employment Agreement
"), pursuant to which the Company has agreed to
grant the Optionee a Nonqualified Stock Option to purchase the
number of shares of the Common Stock provided for
herein.
NOW, THEREFORE,
in consideration of the recitals and the mutual agreements herein
contained, the parties hereto agree as follows:
1
Grant of Option .
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.1 The
Company hereby grants to the Optionee an option (the "
Option ") to purchase
165,000 shares of Common Stock of the Company (such shares, the
" Option Shares "), on the terms and conditions set forth in this Agreement and
as otherwise provided in the Plan. This Option is not intended to
be treated as an Incentive Stock Option, as such term is defined in
Section 422 of the Internal Revenue Code of 1986, as amended.
This grant is subject to the Optionee becoming a party to the
Stockholders Agreement (as defined in the Plan).
.2
Incorporation by Reference, Etc.
The provisions of the Plan
are hereby incorporated herein by reference. Except as otherwise
expressly set forth herein, this Agreement shall be construed in
accordance with the provisions of the Plan and any capitalized
terms not otherwise defined in this Agreement shall have the
meaning set forth in the Plan.
2
Terms and Conditions .
-
.1
Option Price . The price at which the Optionee shall
be entitled to purchase Option Shares upon the exercise of all or
any portion of this Option shall be $100.00 per Option Share (the
" Option Price ").
.2
Expiration Date . Except as otherwise provided herein,
the Option shall expire at 11:59 p.m. Eastern Standard Time on
the tenth anniversary of the Grant Date (the " Expiration Date ").
.3
Exercisability of Option.
-
.1
Service-Based Option . The Option shall become vested and
exercisable as to sixty percent (60%) of the shares subject thereto
(the " Service-Based Option
") in four equal installments on each of the first,
second, third and fourth anniversaries of the Grant Date (each such
anniversary hereafter referred to as a " Vesting Date "), such that one
hundred percent (100%) of the Service-Based Option shall be vested
and exercisable on the fourth anniversary of the Grant Date;
provided that, except
as otherwise provided in Sections 2(e) and 2(f) hereof, the
Optionee remains employed by the Company and its Affiliates on each
such Vesting Date.
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.2
Performance-Based Option . The Option as to forty percent (40%)
of the shares subject thereto (the " Performance-Based Option ")
shall not become
vested and exercisable until and
unless the conditions described in
Section 2(c)(ii)(A) or 2(c)(ii)(B), as applicable, have been
attained (each such condition, a " Performance Condition ") and,
except as otherwise provided in Section 2(e)(i) hereof,
subject to the Optionee's continued employment by the Company and
its Affiliates through the date the applicable Performance
Condition is attained:
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.A With
respect to fifty percent (50%) of the shares subject to the
Performance-Based Option, the Performance Condition shall be the
actual or deemed occurrence of a 1.5X Option Vesting
Event.
.B With
respect to one-hundred percent (100%) of the shares subject to the
Performance-Based Option, the Performance Condition shall be the
actual or deemed occurrence of a 2X Option Vesting
Event.
.C For
purposes of this Agreement, the following terms shall have the
following meanings:
-
"
1.5X OH Investor Group Equity Value
" shall mean (X) 1.5 times the OH Investor
Group Investment minus
(Y) the aggregate amount of cash and Fair
Market Value of Marketable Securities received by the OH Investor
Group in respect of the OH Investor Group Investment prior to or
coincident with the time of determination. For purposes of the
preceding sentence, (I) "Fair Market Value" shall have the
meaning set forth in clauses (i) and (ii) of
Section 2(p) of the Plan, without regard to whether the
subject securities are Stock, and (II) the Fair Market Value
of Marketable Securities shall be determined at the time of receipt
by the OH Investor Group or, if later, the time that securities
held by the OH Investor Group first become Marketable
Securities.
"
2X OH Investor Group Equity Value
" has the same meaning as 1.5X OH Investor Group
Equity Value, except that the number "1.5" each time it appears in
the definition of "1.5X OH Investor Group Equity Value" shall be
replaced with the number "2."
"
1.5X Option Vesting Event " shall mean the occurrence of any event ( e.g. , a leveraged
recapitalization in which the proceeds are paid out to the
Investors as dividends and/or redemptions) in which consideration
is paid to the OH Investor Group in respect of the OH Investor
Group Investment in the form of cash and/or Marketable Securities,
which results in cash and/or Marketable Securities being paid or
provided to the OH Investor Group of at least the 1.5X OH Investor
Group Equity Value. For purposes of the preceding sentence, an
"event" shall be deemed to have occurred at each time that
securities held by the OH Investor Group which are not Marketable
Securities first become Marketable Securities, and such securities
shall be deemed to have been "paid" to the OH Investor Group at
such time.
"
2X Option Vesting Event " has the same meaning as a 1.5X Option Vesting Event, except
that the term "1.5X OH Investor Group Equity Value" each time it
appears in the definition of "1.5X Option Vesting Event" shall be
replaced with "2X OH Investor Group Equity Value."
"
Marketable Securities "
shall mean equity securities which (i) are registered under
all applicable Federal and state securities laws, or as to which
the sale would be exempt from such registration, (ii) are
listed for trading on a national securities exchange or quoted on
an inter-dealer quotation system, (iii) are not subject to any
legal or contractual restriction as to sale and (iv) represent
less than 20% of the
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equity securities of
the same class which are listed for trading on a national
securities exchange or available for trading on an inter-dealer
quotation system.
"
OH Investor Group Investment
" means the aggregate investment by the OH Investor
Group in the common equity securities of the Company or any of its
subsidiaries on July 30, 2004 in the amount of
$239.5 million.
.4
Method of Exercise . The Option may be exercised only by
written notice, in a form to be provided by the Committee, and
delivered by the Optionee in person or sent by mail in accordance
with Section 4(a) hereof and, in either case, accompanied by
payment therefor. The Option Price shall be payable (i) in
cash and/or shares of Stock valued at the Fair Market Value at the
time the Option is exercised (including by means of attestation of
ownership of a sufficient number of shares of Stock in lieu of
actual delivery of such shares to the Company); provided , however , that such shares are not
subject to any pledge or other security interest and meet such
other requirements, if any, as the Committee may determine
necessary in order to avoid an additional accounting earnings
charge in respect of the Option, (ii) by means of a cashless
exercise whereby the number of shares of Common Stock of the
Company to be received by the Optionee shall equal the excess, if
any, of (A) the number of shares of Common Stock that would be
received by the Optionee upon such exercise had the Optionee paid
the Option Price in respect of the underlying shares in cash over
(B) a number of shares of Common Stock of the Company, the
aggregate Fair Market Value of which is equal to the aggregate
Option Price that would have been paid as determined pursuant to
the immediately preceding clause (A), (iii) in the
discretion of the Committee, either (A) in other property
having a fair market value on the date of exercise equal to the
Option Price or (B) if there shall be a public market for the
Stock, by delivering to the Committee a copy of irrevocable
instructions to a stockbroker to deliver promptly to the Company an
amount of loan proceeds, or proceeds of the sale of the Stock
subject to the Option, sufficient to pay the Option Price or
(iv) by such other method as the Committee may
allow.
.5
Termination of Employment . In the event that the Optionee ceases
to be employed by the Company and its Affiliates, the Service-Based
Option and the Performance-Based Option held by the Optionee (to
the extent then unexercised and outstanding) shall terminate as
follows:
-
.1
Without Cause or For Good Reason
. If the Company or its
Affiliates terminates the Optionee's employment without "
Cause " or the Optionee
resigns for " Good Reason
" (each as defined below), at any time prior to the
fourth anniversary of the Grant Date, then the Service-Based
Option, to the extent not previously vested, shall become
immediately vested and exercisable as to that number of shares
equal to (A) that number of shares corresponding to the
previously unvested portion of the Service-Based Option which would
have become vested and exercisable pursuant to Section 2(c)(i)
on the Vesting Date immediately following the date of such
termination of employment had the Optionee's employment by the
Company and its Affiliates not so terminated (such portion of the
Service-Based Option is hereafter referred to as the "
Next Tranche ")
multiplied by
(B) a fraction, the numerator which is twelve plus the number
of full months of service performed by the Optionee for the Company
and its Affiliates subsequent to the Vesting Date immediately
preceding the date of such termination and the denominator which is
twelve. To the extent vested and exercisable as of the date of such
termination (after taking into account the provisions of this
Section 2(e)(i)), the Service-Based Option and the
Performance-Based Option shall remain exercisable through the
earlier of (i) the first anniversary of such termination of
employment or (ii) the Expiration Date, and shall thereafter
terminate without further consideration to the Optionee. To the
extent not vested and exercisable (after taking into account the
provisions of this Section 2(e)(i)) as of the date of such
termination of employment, the Service-Based Option shall terminate
and expire on the date of such termination of employment without
further consideration to the Optionee. The portion of
Performance-Based Option as to which the Performance
Condition
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has not been attained
as of the date of such termination shall remain outstanding until
the six-month anniversary of such termination. To the extent that
the applicable Performance Condition has not been attained as of
such six-month anniversary, such portion of the Performance-Based
Option shall thereafter terminate and expire without further
consideration to the Optionee (except that if prior to such
six-month anniversary, a definitive agreement has been entered into
that, upon consummation of the transactions contemplated thereby,
would result in the satisfaction of the Performance Condition, in
which case the Performance-Based Option shall remain outstanding
until the transactions contemplated by such definitive agreement
are consummated or the definitive agreement has been terminated or
abandoned); provided that
, if none of Tyler Wolfram, Michael Green or Kevin
Mailender are actively employed by one of the OH Affiliates on the
date of Executive's termination of employment, the portion of
Performance-Based Option as to which the Performance Condition has
not been attained as of the date of such termination shall remain
outstanding until the twelve-month anniversary of such termination,
and to the extent that the applicable Performance Condition has not
been attained as of such twelve-month anniversary, shall thereafter
terminate and expire without further consideration to the Optionee
(except that if prior to such twelve-month anniversary, a
definitive agreement has been entered into that, upon consummation
of the transactions contemplated thereby, would result in the
satisfaction of the Performance Condition, in which case the
Performance-Based Option shall remain outstanding until the
transactions contemplated by such definitive agreement are
consummated or the definitive agreement has been terminated or
abandoned). For purposes of this Agreement, the terms "
Cause " and "
Good Reason " have the
meanings set forth in the Employment Agreement.
.2
For Cause . If the Optionee's employment is
terminated by the Company or its Affiliates for Cause, then any and
all of the Service-Based Option and Performance-Based Option
whether or not vested and exercisable at the time of the Optionee's
termination of employment shall immediately terminate and expire on
the date of such termination of employment, without further
consideration to the Optionee.
.3
Without Good Reason . If the Optionee terminates his
employment with the Company and its Affiliates without Good Reason,
then any portion of the Option which is not vested and exercisable
at the time of the Optionee's termination of employment shall
immediately terminate and expire on the date of such termination of
employment, without further consideration to the Optionee. Any
portion of the Option which is vested and exercisable as of the
date of such termination of employment shall remain exercisable
through the earlier of (i) ninety (90) days after such
termination of employment or (ii) the Expiration Date, and
shall thereafter terminate and expire without further consideration
to the Optionee.
.4
Death or Disability . If the Optionee's employment with the
Company and its Affiliates is terminated by reason of the
Optionee's death or " Disability " (as defined in the
Employment Agreement), then the Service-Based Option to the extent
not previously vested, shall become immediately vested and
exercisable as to that number of shares equal to the number of
shares of Common Stock underlying the Next Tranche equal to
(A) the total number of shares of Common Stock underlying the
Next Tranche multiplied
by (B) a fraction, the numerator which is the
number of full months of service performed by the Optionee for the
Company and its Affiliates subsequent to the Vesting Date
immediately preceding the date of such termination and the
denominator which is twelve. The Service-Based Option to the extent
not vested and exercisable as of the date of such termination
(after taking into account the provisions of this
Section 2(e)(iv)) shall terminate and expire on the date of
such termination without further consideration to the Optionee's
estate. The Service-Based Option and Performance-Based Option to
the extent vested and exercisable (after taking into
account
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the provisions of this
Section 2(e)(iv)) as of the date of such termination shall
remain exercisable through the earlier of (i) the first
anniversary of the date of such termination or (ii) the
Expiration Date, and shall thereafter terminate and expire without
further consideration to the Optionee. The portion of
Performance-Based Option as to which the Performance Condition has
not been attained as of the date of such termination shall remain
outstanding until
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