Exhibit 10.45


 





 


John A. Lederer

Chairman and Chief Executive Officer


 


January 9,
2009


 


Phillip
A. Bradley

897 Inman Village Parkway

Atlanta, GA 30307


 


Dear
Phil:


 


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


 


Terms of Employment. Your initial
assignment will be as Senior Vice President, General Counsel and Secretary,
reporting directly to Mr. John A. Lederer, Chairman and Chief Executive
Officer.  In such position, you will have
such authorities, responsibilities and duties customarily exercised by a person
holding that position, including, without limitation, responsibility for the
complete legal and compliance function, including all aspects of such. You will
be based at our headquarters office located at 440 Ninth Avenue, New York, NY.


 


Subject to the terms and conditions of this offer
letter, this Agreement shall be effective for a term commencing on January 1,
2009 (the “Effective Date”) and shall continue until terminated by either you
or the Company in accordance with the provisions of this offer letter.  (With respect to any services you perform for
the Company prior to the Effective Date, your law firm will be compensated
pursuant to the engagement letter between McKenna Long & Aldridge LLP
and Duane Reade.)


 


Your initial salary will be at an annual rate of
$400,000.00, to be paid in bi-weekly installments of $15,384.62, subject to
annual review by Mr. Lederer. 
Future salary increases will be at the discretion of the Company and
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
and disability programs and other welfare benefit packages.  You will receive four (4) weeks of paid
vacation each calendar year subject to restrictions of your job
requirements.  Please be aware that
Company’s vacation policy does not allow carryover of vacation from year to
year.  Therefore, if the four weeks are
not taken they are forfeited each year.


 


Executive Offices:   440 9th Avenue, New York, NY 10001

Telephone 212-273-5704       FAX:  917-351-0392


 

















 


As a senior executive of the Company, you will be
eligible to participate in the Company’s performance incentive plan and will
have the opportunity to receive an annual cash bonus pursuant to the terms of
that plan of between fifty percent (50%) and one hundred and fifty percent
(150%) of your annual salary rate, determined as follows:  50% of your annual salary will be paid upon
achievement of the “threshold target,” 100% of your annual salary will be paid
upon achievement of the “target,” 150% of your annual salary will be paid upon
achievement of the “maximum target” and no bonus will be paid if the “threshold
target” is not achieved.  The amount of
your bonus will be determined based on a straight-line interpolation for
achievement between the “threshold target” and “maximum target”.  The plan targets are set by the Company’s
Board of Directors and compensation committee annually and are typically based
on the attainment of Company performance towards EBITDA targets and your
individual performance towards goals mutually set between you and the Chief
Executive Officer.  It is anticipated
that with respect to the Company, the “threshold target” will require
achievement of 95% of the annual EBITDA targets, the “target” will require
achievement of 100% of the annual EBITDA targets, and the “maximum target” will
require achievement of 105% of the annual EBITDA targets.  Subject to your continued employment with the
Company, you will be entitled to receive a guaranteed minimum bonus with
respect to the twelve (12) month period following the Effective Date equal to
your base salary.  Actual incentive
payments will be paid yearly on the same date that the Company makes such
payments to other members of its senior management, usually at the end of the
first quarter of (but not later than December 31 of) the year immediately
following the year for which the bonus is payable, after Board approval and,
subject to your continued employment with the Company on each such date and
having not given or received a notice of termination before the close of the
fiscal year in respect of which the annual bonus is to be paid (provided that
in respect of the bonus payable for the 2009 calendar year you need only to
have continued employment through December 31, 2009 and not have been
terminated for “cause” prior to the payment date), except as otherwise provided
below if the Company terminates your employment other than for “cause,” or you
terminate your employment for “good reason”. 
As with other executive benefits programs, eligibility and participation
are subject to the specific provisions of the plan.


 


As an executive, you will be eligible to participate
in the Company’s 2004 Management Stock Option Plan.  Subject to the terms and conditions of that
plan, on the Effective Date you will receive an initial grant of options to
acquire twenty thousand (20,000) shares of Company stock at an exercise price
of one hundred dollars ($100.00 per share) (the “Options”).  Subject to your continued employment, 60% of
the Options (the “Service Options”) will vest at a rate of twenty-five percent
(25%) per year of service with the Company, such that those Options will be
100% vested at the end of four (4) years employment.  The remaining 40% of the Options (the “Performance
Options”) will vest at a rate of twenty-five percent (25%) per year of service
with the Company, subject to both your continued employment and the achievement
of annual EBITDA targets by the Company. 
Notwithstanding the preceding sentence, if any portion of the Options
fail to vest because the annual EBITDA targets are not attained for a given
fiscal year, such portion of the Options may still subsequently vest and become
exercisable if the Company achieves the cumulative EBITDA targets set with
respect to a later fiscal year.  The
grant of the Options is conditioned upon and subject to you becoming a party to
the Company’s Stockholders Agreement. 
The Options will, in accordance with the terms of the Plan pursuant to
which such Options are issued, be subject to such standard equitable
adjustments as the Company deems 


 


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necessary or appropriate to prevent substantial
enlargement or dilution of your rights in the event of certain corporate
transactions and extraordinary events, including a grant of extraordinary
dividends.  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. 
In connection with an initial public offering of the Company stock, the
Company reserves the right to convert the Options into options to purchase
equity securities of an entity other than the Company, if such entity will
become the public company, and such equitable adjustments will be made to the
terms and conditions of your Options as the Company deems necessary or
appropriate.


 


Subject to your continued employment with the Company
through the consummation of a change in control, the Service Options will vest
as necessary to enable you to exercise your rights pursuant to a ‘Tag-Along
Sale’ and to satisfy the Company’s rights with respect to a ‘Drag-Along Sale’
(in each case, pursuant to the Company’s Stockholders Agreement).  All unvested Performance Options will vest
upon a change in control of the Company if, and only if, such change in control
yields for the Company’s controlling stockholder and its affiliates a certain
minimum cash-on-cash return on the investment in the Company made by Company’s
controlling stockholder and its affiliates, provided you are employed by the
Company on the date that such change in control is consummated.


 


As a senior executive of the Company, you will be
required to enter into a restrictive covenants agreement which will include,
without limitation: (i) an ongoing covenant not to disclose confidential
information of the Company or any of its subsidiaries, (ii) an ongoing
covenant not to make disparaging statements of any kind or in any form about
the Company or any of its subsidiaries, (iii) a covenant not to solicit
any employees or customers of the Company or any of its subsidiaries during the
Employment Term and for a period of twenty four (24) months following
termination of your employment, and (iv) a covenant not to compete,
directly or indirectly, with the Company or any of its subsidiaries, including,
without limitation, by providing services of any kind in any capacity for any
company engaged in a business similar to that of the Company in, or within a
one hundred (100) mile radius of, the New York City metro vicinity and in any
other geographic area in which the Company then has plans to expand (it being
understood that this will not prohibit your providing services solely as
outside legal counsel to any such company, subject to compliance with the
foregoing confidentiality covenant, so long as you are not involved, directly
or indirectly, in any capacity, in connection with any litigation or other
matter involving or affecting the Company or any of its subsidiaries), during
the Employment Term and for a period of twelve (12) months following
termination of your employment.  You
acknowledge and agree that the Company will be entitled to preliminary and
permanent injunctive relief (without the necessity of proving actual damages)
as well as an equitable accounting of all earnings, profits and other benefits
arising from any violation by you of these restrictive covenants, in addition
to any other legal or equitable rights or remedies to which the Company may be
entitled.


 


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 or no reason, with or without cause.  In the event the Company terminates your
employment other than for “cause,” or you terminate your employment for “good
reason”, (a)  you will be paid severance equal to either:


 


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(i)                                     your
2009 base salary payable in bi-weekly installments and your bonus for 2009 on
the date it would otherwise be paid should such termination occur prior to the
first anniversary of the Effective Date; or


 


(ii)                                  one
year of your base salary determined using your then-current salary rate in
effect at the time of your termination, payable in bi-weekly installments
should such termination occur on or after the first anniversary of the
Effective Date;


 


and (b) you and your eligible dependents will
receive continued participation during the one-year period following
termination of employment in the health insurance benefits of the Company that
are provided from time to time to employees of the Company during such period
at the same cost to you as that charged to other active employees of the
Company; provided, that the Company’s obligation to provide health
insurance benefits will cease with respect to such benefits at the time you
become eligible for such benefits from another employer.


 


The Company’s payment of this severance will be
subject to both your execution (within 30 days following termination of
employment) of a general release of claims against the Company and its
subsidiaries in a form to be provided by the Company and your continuing
compliance with all restrictive covenants to which you are subject under this
offer letter, the restrictive covenants agreement, or otherwise.  For purposes of this Agreement “cause” shall
mean termination for:  (1) a failure
to follow lawful instructions of the Chief Executive Officer (other than any
such failure resulting from death or incapacity due to physical or mental
illness), provided, however, that following a change in control of the Company
(as defined for purposes of the Options), any such failure will serve as the
basis for a termination for Cause only if it is willful, (2) serious
misconduct, dishonesty or disloyalty which results from a willful act or
omission and which is materially injurious (or if public could be materially
injurious) to the reputation or financial interests of the Company, including
without limitation, sexual or racial harassment of any employee of the Company,
any of its subsidiaries or of any person engaged in business with the Company
or any of its subsidiaries; (3) being convicted of (or entering into a
plea bargain admitting criminal guilt to) any felony; (4) willful and
continued failure to substantially perform your duties under this Agreement; (5) commission
of any act of fraud or embezzlement against the Company or any subsidiary
thereof; (6) material breach of any covenant or Company policy regarding
the protection of the Company’s business interests, including, without
limitation, policies addressing confidentiality and non-competition; or (7) a
material breach of this Agreement.  In
the event of termination of your employment for any reason, with or without
cause, you will be entitled to any earned but unpaid salary through the date of
termination, plus any earned and accrued unused vacation pay, any accrued but
unpaid business expenses, and any other vested and accrued compensation and
benefits payable in accordance with the applicable Company policy or plan.  If your employment is terminated by the
Company for cause, or you terminate your employment other than for good reason,
you will not be entitled to any other compensation from the Company, including,
without limitation, severance pay, and any unpaid bonus (guaranteed or
otherwise) together with all of your outstanding vested and unvested Options
will be immediately forfeited (except you shall remain entitled to any unpaid
bonus in respect of the 2009 calendar year if you have continued employment through
December 31, 2009 and not have been terminated for “cause” prior to the
payment date).


 


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For purposes of this Agreement, “good reason”
shall mean (in the absence of your written consent) the occurrence of any of
the following events or circumstances:


 


(i)                                     the assignment to
you of any duties materially and adversely inconsistent with your position as
Senior Vice President, General Counsel and Secretary, excluding for this purpose an isolated, insubstantial and inadvertent
action not taken in bad faith and that is remedied by the Company within the
time period set forth below after receipt of notice thereof given by you;


 


(ii)                                  any intentional material breach by the
Company of this Agreement, other than an isolated, insubstantial and
inadvertent breach not occurring in bad faith and that is remedied by the
Company within the time period set forth below after receipt of notice thereof
given by you; or


 


(iii)                               the
Company’s requiring you to be based primarily at a location more than 50 miles
from the Company’s headquarters office;


 


provided,
however, that any event described in clause (i), (ii) or (iii) shall
not constitute good reason unless you have given the Company prior written
notice of such event and the Company has not cured such event (if capable of
cure) within (30) days following receipt of such notice.


 


You will be reimbursed for all normal business
expenses in accordance with Company policy. 
You will be reimbursed for relocation expenses in accordance with
Company policy, determined by reference to what is usual and customary for an
individual holding your position; and you shall be paid (to offset the cost of
your temporarily maintaining dual residences) an amount of $5,000 per month for
a period of up to twelve (12) months from the Effective Date (provided that to
the extent you are residing in a residence provided by the Company, you will
reimburse the Company for the cost of such housing, up to the amount of the
monthly allowance).  For the avoidance of
doubt, none of the payments referenced in this paragraph or elsewhere in this
letter will be grossed up for tax.


 


Representations and
Warranties.  You represent and warrant to the
Company that you are not a party to or bound by any enforceable agreement,
covenant or other obligation with any other person or entity which would
restrict or otherwise interfere with your ability to commence employment with
the Company and perform your duties hereunder. 
You further represent and warrant that you will not disclose or use in
connection with your employment with the Company any information or trade
secrets which constitute ‘confidential information’ or ‘proprietary information’
(or any similar term) as defined in any agreement, covenant or other obligation
that you are a party to or bound by with any other person or entity, including,
without limitation, your previous employers, to the extent, if any, that you are in possession of such information.


 


Miscellaneous. This offer letter
will be governed by, and interpreted in accordance with, the laws of the state
of New York, without regard to the conflict of law provisions of any
jurisdiction which would cause the application of any law other than that of
the state of New York.  Any controversy
or claim arising out of or relating to this offer letter (other than with 


 


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respect to any restrictive covenants to which you are
subject), or the breach thereof, will be settled by arbitration administered by
one arbitrator of the American Arbitration Association in accordance with its
Commercial Arbitration Rules then in effect.  Unless otherwise awarded by the arbitrator,
each party will be responsible for its own fees and expenses.


 


It is the intention of the
parties that the severance payments and benefits are not construed as “deferred
compensation” (as defined under Section 409A of the Internal Revenue Code
of 1986, as amended (“Section 409A”)) and that the restrictions and
possible delays in payment that could be imposed under Section 409A should
not apply.  However, notwithstanding the
foregoing, if the Company reasonably concludes that it is reasonably necessary
to avoid additional or accelerated taxation pursuant to Section 409A in
respect of the severance payments and benefits to which you may become entitled
hereunder, then you shall not receive such payments or benefits until the first
regular payroll date which occurs at least six months following the date of
your termination of employment, at which time you shall receive a single lump
sum payment for all amounts that would have been payable in respect of the
period preceding such date but for the delay imposed on account of Section 409A,
and the remainder of such payments shall thereafter be paid in equal installments
on the original schedule.  In furtherance
of the intent of this paragraph, each severance payment or installment shall be
treated as a separate payment in order to maximize the application of payments
during the “short term deferral period” under Section 409A.  Any payment or benefit due upon a termination
of your employment that represents a “deferral of compensation” within the
meaning of Section 409A shall commence to be paid or provided to you 31
days following a “separation from service” as defined in Treas. Reg. §
1.409A-1(h), unless earlier commencement is otherwise permitted by Section 409A.  Notwithstanding anything to the contrary in
Agreement, any payment or benefit under this Agreement or otherwise that is
exempt from Section 409A pursuant to Treas. Reg. § 1.409A-1(b)(9)(v)(A) or
(C) (relating to certain reimbursements and in-kind benefits) shall be
paid or provided to you only to the extent that the expenses are not incurred,
or the benefits are not provided, beyond the last day of the second calendar
year following  the calendar year in
which your “separation from service” occurs; and provided further that such
expenses are reimbursed no later than the last day of the third calendar year
following the calendar year in which your “separation from service”
occurs.  To the extent any indemnification payment, expense reimbursement,
or the provision of any in-kind benefit is determined to be subject to Section 409A
(and not exempt pursuant to the prior sentence or otherwise), the amount of any
such indemnification payment or expenses eligible for reimbursement, or the
provision of any in-kind benefit, in one calendar year shall not affect the
indemnification payment or provision of in-kind benefits or expenses eligible
for reimbursement in any other calendar year (except for any life-time or other
aggregate limitation applicable to medical expenses), and in no event shall any
indemnification payment or expenses be reimbursed after the last day of the
calendar year following the calendar year in which you incurred such
indemnification payment or expenses, and in no event shall any right to
indemnification payment or reimbursement or the provision of any in-kind
benefit be subject to liquidation or exchange for another benefit


 


This offer 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 until such time as
a mutually agreeable definitive employment agreement is entered into by you and
the Company reflecting the terms of this offer letter and other customary
terms.  


 


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Nothing in this offer 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 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.


 


We all look forward to
you joining our team in the near future. 
Please do not hesitate to call me if you have any questions.


 


	
   

  	
   

  	
  Sincerely,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ JOHN A. LEDERER

  
	
   

  	
   

  	
  John A. Lederer

  
	
   

  	
   

  	
  Chairman and Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ PHILLIP A. BRADLEY

  	
   

  	
   

  
	
  Phillip A. Bradley/Date

  	
   

  	
   

  
	
   

  
	
  CC:

  	
  Mr. John
  Henry—SVP/CFO

  
				



 


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