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 


 

















 


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