Exhibit 10.40

 

February 27, 2006

 

Mr. Robert Storch

1 Avenue at Port Imperial

Apt 1356

West New York, NJ 07093D

 

Dear Bob:

 

This letter will confirm our offer of employment to you by Duane Reade Inc. (the
“Company.”)

 

Your initial assignment will be as Vice President, Pharmacy and Business
Development, reporting directly to Mr. Jerry Ray, Senior Vice President/Pharmacy
Operations. You will be based at our headquarters office located at 440
9th Avenue, New York, NY. Your initial salary will be $300,000.00 annually
($11,538.47 bi-weekly). Future salary increases will be based on demonstrated
job performance in accordance with Company policy and practice.

 

The Company offers an executive benefit program in which you will be able to
participate, subject to the terms of eligibility for the individual benefit
plans. Those plans include a 401(k) program, major medical benefits, company
paid life insurance and other welfare benefit packages. You will receive
(4) weeks of paid vacation each calendar year subject to the restrictions of
your job requirements. Please be aware that Company’s vacation policy does not
allow carryover from year to year. Therefore, if the four weeks are not taken
they are forfeited each year.

 

As an executive of the Company, you will be eligible to participate in the
Company’s performance incentive plan at fifty percent (50%) of your salary as
follows: 50% of your annual salary will be paid upon achievement of the “minimum
target”, 100% of your annual salary will be paid upon achievement of the
“target” and 150% of your annual salary will be paid upon achievement of the
“maximum target”. The program targets are set by the compensation committee
annually and are typically based on the attainment of company performance
towards EBITDA targets and your individual performance toward goals mutually set
between you and your immediate manager. Actual incentive payments will be paid
yearly, usually at the end of the first quarter of each year, after Board
approval. As with other executive benefit programs, eligibility and
participation are subject to the specific provisions of the plan.

 

As an executive, you will be eligible to participate in the employee stock
option plan. Subject to the terms and conditions of that plan, you will receive
an initial grant as shares are made available. Under the current plan
provisions, the shares vest at a rate of twenty percent (20%) per year of
service with the Company. They will be 100% vested at the end of five (5) years
employment. Nothing in this provision shall act as a guarantee of any specific
value of the Company stock other than the value described in the stock plan
itself.

 

Your employment with the Company will be “at will,” meaning that either you or
the Company will be entitled to terminate your employment at any time and for
any reason, with or without cause. Except as set forth in the following
sentence, in the event the Company terminates your employment other than for
“cause,” you will be paid severance equal to one-year salary at your then
current salary payable in bi-weekly installments. For purposes of this Agreement
“cause” shall mean termination for: (1) a repeated refusal to company with a
lawful directive of the Chief Executive Officer, (2) serious misconduct,
dishonesty or disloyalty directly related to the performance of duties for the
Company, which results from a willful act or omission and which is materially
injurious to the operations, financial condition or business reputation of the
Company or any significant subsidiary thereof; (3) being convicted (or entering
into a plea bargain admitting criminal guilt) in any criminal proceeding that
may have an adverse impact on the Company’s reputation and standing in the
community; (4) willful and continued failure to substantially perform your
duties under this Agreement; or (5) any other material breach of this Agreement.
In the event of termination for cause, you will be entitled to any unpaid salary
through the date of termination, plus any earned and accrued unused vacation pay
or deferred compensation payments. You will not be entitled to any other
compensation from the Company, including, without limitations, severance pay.

 

You will be reimbursed for all normal business expenses in accordance to Company
policy.

 

This letter is intended to memorialize the offer of employment provided by the
Company and if these terms are acceptable, to create an at-will employment
relationship under these terms. Nothing in this letter is intended or shall have
the effect of modifying or amending the terms, conditions or requirements of any
benefit plan, retirement plan or welfare plan or

 

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arrangement offered by the Company. During your employment, you will remain
subject to, and be required to abide by, all terms, conditions and requirements
of the policies and practices dictated by the Company for executive employees.

 

 

 

Sincerely,

 

 

 

 

 

/s/ JERRY RAY

 

 

Jerry Ray

 

 

SVP/Pharmacy Operations

 

 

 

/s/ ROBERT STORCH 3/1/2006

 

 

 

CC:

 

Mr. Rick Dreiling — President/CEO

 

 

Mr. Jim Rizzo — Vice President/Human Resources

 

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