Exhibit 10.1

 

Execution Copy

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is entered into as of the 2nd day
of October, 2019 by and between Rite Aid Corporation, a Delaware corporation
(the “Company”) and James Peters (“Executive”).

 

WHEREAS, Executive desires to provide the Company with his services and the
Company desires to hire and employ Executive on the terms and subject to the
conditions set forth herein.

 

NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company and Executive (individually a “Party” and together the “Parties”),
intending to be legally bound, agree as follows:

 

1.                                      Term of Employment.

 

The term of Executive’s employment under this Agreement shall commence on
October 7, 2019 (the “Commencement Date”) and, unless earlier terminated
pursuant to Section 5 below, shall continue for a period ending on the date that
is two (2) years following the Commencement Date (the “Original Term of
Employment”).  The Original Term of Employment shall be automatically renewed
for successive one (1) year terms (the “Renewal Terms”) unless at least one
hundred eighty (180) days prior to the expiration of the Original Term of
Employment or any Renewal Term, either Party notifies the other Party in writing
that he or it is electing to terminate this Agreement at the expiration of the
then current term of employment.  “Term” shall mean the Original Term of
Employment and all Renewal Terms.

 

2.                                      Position and Duties.

 

2.1                               Generally.  During the Term, Executive shall
serve as Chief Operating Officer of the Company and shall have such duties,
responsibilities and authority as are customary for such position and as are set
forth on Appendix A and such other titles, duties, responsibilities and
authorities as shall be assigned by the Chief Executive Officer of the Company
(the “Chief Executive Officer”) from time to time consistent with such
position.  Except as permitted by Section 2.2 or otherwise approved by the Chief
Executive Officer, Executive shall devote his full working time, attention,
knowledge and skills faithfully and to the best of his ability, to the duties
and responsibilities assigned by the Chief Executive Officer in furtherance of
the business affairs and activities of the Company and its subsidiaries,
affiliates and strategic partners.  Executive shall report solely to the Chief
Executive Officer.  Executive shall perform his duties at a location mutually
agreed to by the Parties, except for such travel as the Parties mutually deem
is reasonably necessary in connection with the performance of his duties.  
Contemporaneously with the termination of Executive’s employment for any reason,
Executive shall automatically resign from all offices and positions he holds
with the Company or any subsidiary without any further action on the part of
Executive or the Company; provided, however, that Executive agrees to execute
any additional documents required or requested by the Company with respect to
such resignations.

 

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2.2                               Other Activities.  Anything herein to the
contrary notwithstanding, nothing in this Agreement shall preclude Executive
from engaging in the following activities:  (i) serving on the board of
directors of a reasonable number of trade associations and/or charitable
organizations, subject to the approval of the Chief Executive Officer which
shall not be unreasonably withheld, (ii) engaging in charitable activities and
community affairs, (iii) serving on no more than one (1) board of directors of a
public company, subject to the approval of the Chief Executive Officer which
shall not be unreasonably withheld, and (iv) managing his personal investments
and affairs, provided that Executive’s activities pursuant to clauses (i), (ii),
(iii) or (iv) do not violate Sections 6 or 7 below or materially interfere with
the proper performance of his duties and responsibilities under this Agreement. 
Executive shall at all times be subject to, observe and carry out such rules,
regulations, policies, directions, and restrictions as the Company may from time
to time establish for officers of the Company or employees generally.

 

3.                                      Compensation.

 

3.1                               Base Salary.  During the Term, as compensation
for his services hereunder, Executive shall receive a salary at the annualized
rate of Seven Hundred and Fifty Thousand Dollars ($750,000) per year, subject to
annual review for increase by the Board of Directors of the Company (the
“Board”) or its designee (“Base Salary” as may be adjusted from time to time,
subject to Section 5.4), which shall be paid in accordance with the Company’s
normal payroll practices and procedures, less such deductions or offsets
required by applicable law or otherwise authorized by Executive.

 

3.2                               Annual Performance Bonus.  Executive shall
participate each fiscal year during the Term in the Company’s annual bonus plan
as adopted and approved by the Board or the Compensation Committee of the Board
(the “Compensation Committee”) from time to time.  For the current fiscal year
(FY 2020), Executive’s annual target bonus opportunity pursuant to such plan
shall equal one hundred and twenty-five percent (125%) (the “Annual Target
Bonus”) of the Base Salary, subject to proration beginning with the fiscal
period in which the Commencement Date falls, determined by multiplying the
Annual Target Bonus by a fraction (x) the numerator of which is the number of
fiscal periods (months) in which Executive is employed during the 2020 fiscal
year, beginning with the month in which the Commencement Date occurs and (y) the
denominator of which is 12.  For subsequent fiscal years, the Annual Target
Bonus may be adjusted by the Compensation Committee (however, in no event shall
it be less than 125% of Base Salary).  Payment of any bonus earned shall be made
in accordance with the terms of the Company’s annual bonus plan as in effect for
the year for which the bonus is earned.

 

3.3                               Equity Awards.

 

(a)                                 Participation in the LTIP.  Executive will
be eligible to participate during the Term in the Company’s 2014 Omnibus Equity
Plan and any successor plan (the “LTIP”) beginning with the Company’s 2021
fiscal year.  Executive’s target long term incentive award under the LTIP will
be equal to two hundred fifty percent (250%) of Executive’s Base Salary.  The
terms and frequency of long-term incentive award issuances to Executive under
the LTIP, if any, shall be consistent with and no less favorable than the award
issuances to senior executives of the Company generally, which shall be in the
sole discretion of the Board.

 

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(b)                                 Inducement Award of Restricted Stock.  As an
inducement to commence employment with the Company, on the Commencement Date,
Executive will be granted a number of shares of restricted Company Common Stock,
par value $1.00 per share (“Company Stock”) (the “Restricted Stock”)  determined
by dividing $500,000 by the closing price of a share of Company Stock on the
Commencement Date.  The vesting restrictions on the Restricted Stock shall lapse
as to one-third (1/3) of the shares on each of the first three (3) anniversaries
from the Commencement Date, subject only to continued service on each applicable
vesting date, and the Restricted Stock shall otherwise be evidenced by an award
agreement and subject to the terms of the LTIP with the exception of any
performance criteria.

 

(c)                                  Inducement Award of Stock Options.  As an
inducement to commence employment with the Company, on the Commencement Date,
Executive will be granted a number of non-qualified stock options to purchase
shares of Company Stock (the “Stock Options”) valued at $500,000 in the
aggregate on the date of grant, determined by the Company utilizing the Black
Scholes option pricing model.  The Stock Options will have an exercise price
equal to the fair market value of a share of Company Stock on the date of grant
and shall vest and become exercisable as to one-third (1/3) of the Stock Options
on each of the first three (3) anniversaries from the Commencement Date, subject
only to continued service on each applicable vesting date, and shall otherwise
be evidenced by an award agreement and subject to the terms of the LTIP with the
exception of any performance criteria.

 

4.                                      Additional Benefits.

 

4.1                               Employee Benefits.  During the Term, Executive
shall be eligible to participate in the employee benefit plans (including, but
not limited to medical, dental and life insurance plans, short-term and
long-term disability coverage, and 401(k) plans) in which officers of the
Company are generally eligible to participate, subject to satisfaction of any
eligibility requirements and the other generally applicable terms of such
plans.  Nothing in this Agreement shall prevent the Company from amending or
terminating any employee benefit plans of the Company from time to time as the
Company deems appropriate.

 

4.2                               Expenses.  The Company shall reimburse
Executive for any expenses reasonably incurred by him during the Term (and at
any time during his employment thereafter), in furtherance of his duties
hereunder, including travel, meals and accommodations (but excluding relocation
expenses and commuting expenses), upon submission of vouchers or receipts and in
compliance with such rules and policies relating thereto as the Company may from
time to time adopt or as may be required in order to permit such payments to be
taken as proper deductions by the Company or any subsidiary under the Internal
Revenue Code of 1986, as amended, and the rules and regulations adopted pursuant
thereto now or hereafter in effect (the “Code”).

 

4.3                               Vacation.  Executive shall be entitled to
twenty (20) days of paid vacation during each year of the Term, subject to
applicable Company policies as in effect from time to time.

 

4.4                               Automobile Allowance.  During the Term, the
Company shall provide Executive with an automobile allowance of $1,000 per
month.

 

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4.5                               Annual Financial Planning Allowance.  During
the Term, the Company shall provide Executive with an annual executive planning
allowance in the amount of $5,000.  The provisions of Section 16.3 shall apply
to any payments or reimbursements made under this Section 4.5.

 

4.6                               Indemnification.  The Company shall
(a) indemnify and hold Executive harmless, to the full extent permitted under
applicable law, for, from and against any and all losses, claims, costs,
expenses, damages, liabilities or actions (including security holder actions, in
respect thereof) relating to or arising out of Executive’s employment with and
service as an officer of the Company during the Term and at all times
thereafter; and (b) pay all reasonable costs, expenses and attorney’s fees
incurred by Executive in connection with or relating to the defense of any such
loss, claim, cost, expense, damage, liability or action, subject to Executive’s
undertaking to repay in the event it is ultimately determined that Executive is
not entitled to be indemnified by the Company.  Executive shall at all relevant
times be covered as an insured under any director and officer liability
insurance that covers members of the Board.  Following termination of
Executive’s employment or service with the Company, the Company shall cause any
director and officer liability insurance policies applicable to Executive prior
to such termination of employment to remain in effect for six (6) years
following the date of termination of employment. The provisions of Section 16.3
shall apply to any payments or reimbursements made under this Section 4.6.

 

5.                                      Termination.

 

5.1                               Termination of Executive’s Employment by the
Company for Cause.

 

The Company may terminate Executive’s employment hereunder for Cause (as defined
below).  Such termination of employment shall be effected by written notice
thereof delivered by the Company to Executive, indicating in reasonable detail
the facts and circumstances alleged to provide a basis for such termination of
employment, and shall be effective as of the date of such notice in accordance
with Section 14 hereof.  “Cause,” as determined by the Company in commercially
reasonable good faith, shall mean:  (i) Executive’s willful failure to perform
the lawful duties or responsibilities of his position with the Company or any
subsidiary, or failure to timely carry out any lawful and reasonable directive
of the Chief Executive Officer or the Board; (ii) Executive’s misappropriation
of any funds or property of the Company or any subsidiary; (iii) the conduct by
Executive which is a material violation of this Agreement or a written Company
Policy or which materially interferes with Executive’s ability to perform his
duties; (iv) Executive’s engaging in conduct constituting, or which could
reasonably constitute, unlawful harassment or which gives rise to, or which
could reasonably give rise to, an actual or perceived conflict of interest;
(v) the commission by Executive of an act of fraud or dishonesty toward the
Company or any subsidiary with respect to any material matter; (vi) Executive’s
willful misconduct or gross negligence which demonstrably damages or injures the
Company or the Company’s reputation; (vii) Executive is convicted of or pleads
guilty to a felony; or (viii) the use or imparting by Executive of any
confidential or proprietary information of the Company or any subsidiary in
material violation of Section 6 below; provided, that, in the case of conduct
described in prong (i) or (iii) which, in the Company’s reasonable discretion,
is capable of being cured, Executive shall have seven (7) days following
Executive’s receipt of written notice from the Company in which to cure the
condition constituting Cause.

 

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5.2                               Compensation upon Termination by the Company
for Cause or by Executive without Good Reason.  Executive’s employment hereunder
may be terminated during the Term by the Company for Cause or by Executive
without Good Reason, provided that any termination of Executive’s employment by
Executive without Good Reason shall be effective upon a thirty (30) day notice
to the Company or such earlier date as the Company determines in its discretion
and designates in writing.  Without limiting Executive’s right to challenge the
Company’s assertion of Cause or the Company’s right to challenge Executive’s
assertion of Good Reason, a termination of Executive’s employment by the Company
for Cause or by Executive without Good Reason shall not constitute a breach of
this Agreement.  In the event of Executive’s termination of employment (i) by
the Company for Cause or (ii) by Executive without Good Reason:

 

(a)                                 Executive shall be entitled to receive
(i) all amounts of accrued but unpaid Base Salary through the effective date of
such termination of employment; (ii) reimbursement for reasonable and necessary
expenses incurred by Executive through the date of notice of such termination of
employment, to the extent otherwise provided under Section 4.2 above; and
(iii) all other vested payments and benefits to which Executive may otherwise be
entitled pursuant to the terms of the applicable benefit plan or arrangement
through the effective date of such termination of employment ((i), (ii) and
(iii), the (“Accrued Benefits”)).  All other rights of Executive (and, except as
provided in Section 5.6 below, all obligations of the Company) hereunder or
otherwise in connection with Executive’s employment with the Company shall
terminate effective as of the date of such termination of employment and
Executive shall not be entitled to any payments or benefits not specifically
described in this subsection (a) or (b) below.

 

(b)                                 Any portion of any restricted stock or any
other cash or equity-based incentive awards as to which the restrictions have
not lapsed or as to which any other conditions shall not have been satisfied
prior to the date of termination of employment shall be forfeited as of such
date and any portion of Executive’s stock options that have vested and become
exercisable prior to the date of termination of employment shall remain
exercisable for a period of ninety (90) days following the date of termination
of employment (or, such later date as may be permitted by the relevant stock
option or equity plan, or, if earlier, until the expiration of the respective
terms of the options), whereupon all such options shall terminate; provided,
however, in the event of termination of Executive’s employment by the Company
for Cause, any stock options that have not been exercised prior to the date of
termination of employment shall immediately terminate as of such date.

 

5.3                               Compensation upon Termination of Executive’s
Employment by the Company Other Than for Cause or by Executive for Good Reason. 
Executive’s employment hereunder may be terminated during the Term by the
Company other than for Cause or by Executive for Good Reason.  In the event that
Executive’s employment hereunder is terminated by the Company other than for
Cause or by Executive for Good Reason:

 

(a)                                 Executive shall be entitled to receive
(i) the Accrued Benefits, (ii) an amount equal to two times the sum of
Executive’s then Base Salary plus Annual Target Bonus as of the date of
termination of employment, such amount payable in equal installments pursuant to
the Company’s standard payroll procedures for management employees over a period
of two years commencing on the payroll payment date for the first full payroll
period following the date

 

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that the Release (as defined below) becomes irrevocable (provided, if as of the
date of termination of employment the Release could become irrevocable in either
of two taxable years of Executive, to the extent required to avoid the
imposition of taxes and penalties under Section 409A of the Code, payments will
not commence before the first day of the later such taxable year), and
(iii) with respect to group health plan coverage, a lump sum payment in an
amount equal to the cost for of continuation coverage pursuant to Section 4980B
of the Code (“COBRA”) for Executive and his dependents to the extent covered by
a Company group health plan as of the date of termination of employment for
eighteen months following termination of employment, paid within ten (10) days
folllowing the date that the Release becomes irrevocable.  Executive shall be
solely responsible for any taxes imposed on Executive arising from the Company’s
payment of COBRA amounts hereunder.

 

(b)                                 On the date that the Release becomes
irrevocable, (i) stock option awards held by Executive shall vest and become
immediately exercisable and (ii) restrictions with respect to any awards of
restricted stock shall lapse, in each case to the extent such options would
otherwise have become vested and exercisable or such restrictions would have
lapsed had Executive remained in the employ of the Company for a period of two
years following the date of termination of employment.  All other awards held by
Executive as of the date of termination of employment shall be treated in
accordance with the terms of such awards.  Such portion of Executive’s stock
options (together with any portion of Executive’s stock options that have vested
and become exercisable prior to the date of termination of employment) shall
remain exercisable for a period of ninety (90) days following the date of
termination of employment (or, such later date as may be permitted by the
relevant stock option or equity plan, or, if earlier, until the expiration of
the respective terms of the options), whereupon all such options shall
terminate.  Any remaining portion of Executive’s stock options that have not
vested (and do not vest by application of this Section 5.3(b)) as of the date of
termination of employment shall terminate as of such date; and all shares of
restricted stock as to which the restrictions shall not have lapsed based on the
application of this Section 5.3(b) shall be forfeited as of such date.  In the
event of a Change in Control (as defined in the LTIP) that occurs during the
Term, the provisions of section 14 of the LTIP are incorporated herein by
reference; provided, however, that, notwithstanding anything to the contrary
contained in such provisions, any performance-based equity award shall be
treated in accordance with the terms of the applicable award agreement, which
shall be no less favorable than those provided for other senior executives of
the Company generally.

 

(c)                                  If a termination of employment pursuant to
Section 5.3 of the Agreement occurs following the start of the Company’s fiscal
year, Executive shall also be entitled to receive, at the same time as is paid
to other eligible participants in the bonus plan, following determination by the
Compensation Committee (or the Board) of the Company’s performance under the
applicable annual performance goals for the fiscal year, a pro rata annual bonus
determined by multiplying the performance level achieved (relative to
Executive’s Annual Target Bonus amount) by the fraction (x) the numerator of
which is the number of fiscal periods (months) in which Executive is employed
during the fiscal year and (y) the denominator of which is 12.  Executive shall
also receive any unpaid annual bonus earned for any completed fiscal year
preceding the date of termination of employment.

 

(d)                                 All other rights of Executive (and, except
as provided in Section 5.6 below, all obligations of the Company) hereunder or
otherwise in connection with Executive’s

 

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employment with the Company shall terminate effective as of the date of such
termination of employment and Executive shall not be entitled to any payments or
benefits not specifically described in 5.3(a) through (c).

 

Any termination of employment pursuant to this Section 5.3 shall be effective
upon a thirty (30) day notice thereof or the Company may elect in its sole
discretion to reduce or eliminate the notice period and pay Executive his Base
Salary for some or all of the notice period in lieu of notice.  Without limiting
Executive’s right to challenge the Company’s assertion of Cause or the Company’s
right to challenge Executive’s assertion of Good Reason, a termination of
Executive’s employment by the Company other than for Cause or by Executive for
Good Reason shall not constitute a breach of this Agreement.  To be eligible for
the payment, benefits and equity rights described in Section 5.3(a)(ii)-(iii),
(b) and (c) above, Executive must (x) execute, within forty-five (45) days after
the date of termination of employment, not revoke, and abide by a release (which
shall be substantially in the form attached hereto as Appendix B) of all other
claims (the “Release”), (y) cooperate with the Company in the event of
litigation, and (z) fully comply with Executive’s obligations under Sections 6
and 7 below.

 

5.4                               Definition of Good Reason.  For purposes of
this Agreement, “Good Reason” shall mean the occurrence of any one of the
following:

 

(a)                                 the assignment to Executive of any duties or
responsibilities materially inconsistent with Executive’s status and positions
as Chief Operating Officer of the Company as set forth in Section 2.1 and
further on Appendix A, or any material adverse change in Executive’s title or
reporting relationships; or

 

(b)                                 any decrease in Executive’s then Base Salary
to which Executive has not agreed to in writing;

 

(c)                                  any requirement that Executive primarily
provide services in a location that is more than twenty five (25) miles from the
location mutually agreed upon by the Parties pursuant to Section 2.1; or

 

(d)                                 a material breach by the Company of this
Agreement;

 

provided, however, that Executive has provided written notice (which shall set
forth in reasonable detail the specific conduct of the Company that constitutes
Good Reason and the specific provisions of this Agreement on which Executive
relies) to the Company of the existence of any condition described in any one of
the subparagraphs (a), (b), (c) or (d) within thirty (30) days of Executive’s
knowledge of the initial existence of such condition, and the Company has not
cured the condition within thirty (30) days of the receipt of such notice.  Any
termination of employment by Executive for Good Reason pursuant to Section 5.3
must occur no later than the date that is the three (3) month anniversary of
Executive’s knowledge of the initial existence of the condition giving rise to
the termination right.

 

5.5                               Compensation upon Termination of Executive’s
Employment by Reason of Executive’s Death or Total Disability.  During the Term,
Executive’s employment hereunder shall terminate upon Executive’s death and may
be terminated by the Company on account of Executive’s Total Disability (as
defined below).  In the event that Executive’s employment with

 

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the Company is terminated by reason of Executive’s death or due to involuntary
termination of Executive’s employment by the Company on account of Executive’s
Total Disability (as defined below), subject to the requirements of applicable
law:

 

(a)                                 Executive or Executive’s estate, as the case
may be, shall be entitled to receive (i) the Accrued Benefits, (ii) any other
benefits payable under the then current disability and/or death benefit plans,
as applicable, in which Executive is a participant and (iii) with respect to
group health plan coverage, a lump sum payment in an amount equal to the cost of
continuation coverage pursuant to COBRA for Executive and his dependents to the
extent covered by a Company group health plan as of the date of termination of
employment, for a period of eighteen months following the date of termination of
employment.  Executive or Executive’s estate shall be solely responsible for any
taxes imposed on Executive arising from the Company’s payment of COBRA amounts
hereunder.  Executive or Executive’s estate shall also be entitled to receive,
at the same time as is paid to other eligible participants in the bonus plan,
following determination by the Compensation Committee (or the Board) of the
Company’s performance under the applicable annual performance goals for the
fiscal year, a pro rata annual bonus determined by multiplying the performance
level achieved (relative to Executive’s Annual Target Bonus amount) by the
fraction (x) the numerator of which is the number of fiscal periods (months) in
which Executive is employed during the fiscal year and (y) the denominator of
which is 12.  Executive or Executive’ estate shall also be entitled to any
unpaid annual bonus earned for any completed fiscal year preceding the date of
termination of employment.

 

(b)                                 (i) Stock option awards held by Executive
shall vest and become immediately exercisable and (ii) restrictions with respect
to any awards of restricted stock shall lapse, in each case to the extent such
options would otherwise have become vested and exercisable or such restrictions
would have lapsed had Executive remained in the employ of the Company for a
period of two years following the date of termination of employment pursuant to
this Section 5.5.  All other awards held by Executive as of the date of
termination of employment shall be treated in accordance with the terms of such
awards.  Such portion of Executive’s stock options (together with any portion of
Executive’s stock options that have vested and become exercisable prior to the
date of termination of employment) shall remain exercisable for a period of
ninety (90) days following the date of termination of employment (or, such later
date as may be permitted by the relevant stock option or equity plan, or, if
earlier, until the expiration of the respective terms of the options), whereupon
all such options shall terminate.  Any remaining portion of Executive’s stock
options that have not vested (and do not vest by application of this
Section 5.5(b)) as of the date of termination of employment shall terminate as
of such date; and all shares of restricted stock as to which the restrictions
shall not have lapsed based on the application of this Section 5.5(b) shall be
forfeited as of such date.

 

(c)                                  All other rights of Executive (and, except
as provided in Section 5.6 below, all obligations of the Company) hereunder or
otherwise in connection with Executive’s employment with the Company shall
terminate effective as of the date of such termination of employment and
Executive shall not be entitled to any payments or benefits not specifically
described in Section 5.5(a) through (c).

 

“Total Disability” shall mean any physical or mental disability that prevents
Executive from (a)(i) performing one or more of the essential functions of his
position for a period of not

 

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less than ninety (90) days in any twelve (12) month period and (ii) which is
expected to be of permanent or indeterminate duration but expected to last at
least twelve (12) continuous months or result in death of Executive as
determined (y) by a physician selected by the Company or its insurer or
(z) pursuant to the Company’s benefit programs; or (b) reporting to work for
ninety (90) or more consecutive business days or as a result of which Executive
is unable to engage in any substantial activity.

 

5.6                               Change in Control Best Payments
Determination.  Any other provision of this Agreement to the contrary
notwithstanding, if any portion of any payment or benefit under this Agreement
either individually or in conjunction with any payment or benefit under any
other plan, agreement or arrangement (all such payments and benefits, the “Total
Payments”) would constitute an “excess parachute payment” within the meaning of
Internal Revenue Code Section 280G, that is subject to the tax imposed by
Section 4999 of such Code, then the Total Payments to be made to Executive shall
be reduced, but only to the extent that Executive would retain a greater amount
on an after-tax basis than he would retain absent such reduction, such that the
value of the Total Payments that Executive is entitled to receive shall be $1
less than the maximum amount which the Employee may receive without becoming
subject to the excise tax under Section 4999 of the Code.  For purposes of this
Section 5.6, the determination of whichever amount is greater on an after-tax
basis shall be (i) based on maximum federal, state and local income and
employment tax rates and the tax that would be imposed on Executive pursuant to
Section 4999 and (ii) made at the Company’s expense by consultants selected by
the Company prior to the date of the change in control, which determination
shall be binding on both Executive and the Company.  Any such reduction as may
apply under this Section 5.6 shall be applied in the following order:
(i) payments that are payable in cash the full amount of which are treated as
parachute payments under Treasury Regulation Section 1.280G-1, Q&A 24(a) shall
be reduced (if necessary, to zero), with amounts that are payable last reduced
first; (ii) payments and benefits due in respect of any equity the full amount
of which are treated as parachute payments under Treasury Regulation
Section 1.280G-1, Q&A 24(a), with the highest values reduced first (as such
values are determined under Treasury Regulation Section 1.280G-1, Q&A 24), shall
next be reduced; (iii) payments that are payable in cash that are valued at less
than full value under Treasury Regulation Section 1.280G-1, Q&A 24, with amounts
that are payable last reduced first, shall next be reduced; (iv) payments and
benefits due in respect of any equity valued at less than full value under
Treasury Regulation Section 1.280G-1, Q&A 24, with the highest values reduced
first (as such values are determined under Treasury Regulation Section 1.280G-1,
Q&A 24), shall next be reduced; and (v) all other non-cash benefits not
otherwise described in clauses (ii) or (iv) shall be next reduced pro-rata.

 

5.7                               No Other Severance or Termination Benefits. 
Except as expressly set forth herein, Executive shall not be entitled to any
contractual severance or other benefits upon termination of employment with the
Company under any circumstances and for any or no reason, including, but not
limited to any severance pay under any Company severance plan, policy or
practice.

 

6.                                      Protection of Confidential Information.

 

Executive acknowledges that during the course of his employment with the
Company, its subsidiaries, affiliates and strategic partners, he will be exposed
to documents and other

 

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information regarding the confidential affairs of the Company, its subsidiaries,
affiliates and strategic partners, including without limitation, information
about their past, present and future financial condition, pricing strategy,
prices, suppliers, cost information, business and marketing plans, the markets
for their products, key personnel, past, present or future actual or threatened
litigation, trade secrets, and other intellectual property, current and
prospective customer lists, operational methods, acquisition plans, prospects,
plans for future development and other business affairs and information about
the Company and its subsidiaries, affiliates and strategic partners not readily
available to the public (the “Confidential Information”).  Executive further
acknowledges that the services to be performed under this Agreement are of a
special, unique, unusual, extraordinary and intellectual character.  In
recognition of the foregoing, Executive covenants and agrees as follows:

 

6.1                               No Disclosure or Use of Confidential
Information.  Subject to Section 6.3, below, at no time shall Executive ever
divulge, disclose, or otherwise use any Confidential Information (other than as
necessary to perform his duties under this Agreement and in furtherance of the
Company’s best interests), unless and until such information is readily
available in the public domain by reason other than Executive’s disclosure or
use thereof in violation of the first clause of this Section 6.1.  Executive
acknowledges that Company is the owner of, and that Executive has no rights to,
any trade secrets, patents, copyrights, trademarks, know-how or similar rights
of any type, including any modifications or improvements to any work or other
property developed, created or worked on by Executive during the Term of this
Agreement.

 

6.2                               Return of Company Property, Records and
Files.  Upon the termination of Executive’s employment at any time and for any
reason, or at any other time the Board may so direct, Executive shall promptly
deliver to the Company’s offices in Harrisburg, Pennsylvania all of the property
and equipment of the Company, its subsidiaries, affiliates and strategic
partners (including any cell phones, pagers, credit cards, personal
computers, etc.) and any and all documents, records, and files, including any
notes, memoranda, customer lists, reports or any and all other documents,
including any copies thereof, whether in hard copy form or on a computer disk or
hard drive, which relate to the Company, its subsidiaries, affiliates, strategic
partners, successors or assigns, and/or their respective past and present
officers, directors, employees or consultants (collectively, the “Company
Property, Records and Files”); it being expressly understood that, upon
termination of Executive’s employment at any time and for any reason, Executive
shall not be authorized to retain any of the Company Property, Records and
Files, any copies thereof or excerpts therefrom.  Executive further agrees that
Executive shall permanently delete any Company Property, Records and Files which
cannot be returned to the Company in their entirety (including any such Company
Property, Records or Files on a cloud storage system).

 

6.3                               Permitted Disclosures.   Pursuant to 18 U.S.C.
§ 1833(b), Executive understands that Executive will not be held criminally or
civilly liable under any Federal or State trade secret law for the disclosure of
a trade secret of the Company that (a) is made (i) in confidence to a Federal,
State, or local government official, either directly or indirectly, or to
Executive’s attorney and (ii) solely for the purpose of reporting or
investigating a suspected violation of law; or (b) is made in a complaint or
other document that is filed under seal in a lawsuit or other proceeding. 
Executive understands that if Executive files a lawsuit for retaliation by the

 

10

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Company for reporting a suspected violation of law, Executive may disclose the
trade secret to Executive’s attorney and use the trade secret information in the
court proceeding if Executive (x) files any document containing the trade secret
under seal, and (y) does not disclose the trade secret, except pursuant to court
order.  Nothing in this Agreement, or any other agreement that Executive has
with the Company, is intended to conflict with 18 U.S.C. § 1833(b) or create
liability for disclosures of trade secrets that are expressly allowed by such
section.  Further, nothing in this Agreement or any other agreement that
Executive has with the Company shall prohibit or restrict Executive from
(A) making any voluntary disclosure of information or documents concerning
possible violations of law to any governmental agency or legislative body, or
any self-regulatory organization, in each case, without advance notice to the
Company; or (B) responding to a valid subpoena, court order or similar legal
process; provided, however, that prior to making any such disclosure pursuant to
this Section 6.3(B), Executive shall provide the Company with written notice of
the subpoena, court order or similar legal process sufficiently in advance of
such disclosure to afford the Company a reasonable opportunity to challenge the
subpoena, court order or similar legal process.

 

7.                                      Noncompetition and Other Matters.

 

7.1                               Noncompetition.  During Executive’s employment
with the Company and during the twelve (12) month period following the
termination of Executive’s employment with the Company for any reason (the
“Restricted Period”), Executive will not, directly or indirectly, engage in
Competition with the Company or any of its subsidiaries in the Restricted Area
(as defined below).  “Competition” shall mean engaging in any activity for a
Competitor of the Company or any of its subsidiaries, with or without
compensation, whether as a principal, agent, partner, officer, director,
employee, advisor, independent contractor, investor, consultant or stockholder
(except as a less than five percent (5%) shareholder of a publicly traded
company) or otherwise.  A “Competitor” shall mean any person, corporation or
other entity and its parents, subsidiaries, affiliates and assigns,
(collectively, a “Person”) that engages, or is preparing to engage, in the same
or substantially similar business as one or more business units of the Company
or its subsidiaries.  As of the Commencement Date, it is understood that the
Company’s business units include:  (1) pharmacy benefits management (“PBM”),
including the administration of pharmacy benefits for businesses, government
agencies or health plans; mail order pharmacy; specialty pharmacy and Medicare
Part D services; (2) the sale of prescription drugs either at retail or over the
internet; and (3) retail health care (“RediClinic”).  It is understood and
agreed that PBM competitors include, but are not limited to, CVS Health, Express
Scripts and Optum, as well as health plans or insurers that provide PBM
services.  It is also understood and agreed that retail pharmacy competitors
include any individual or entity that sells or has imminent plans to sell
prescription drugs, including but not limited to, drugstore companies such as
Walgreens Boots Alliance and CVS Health; mass merchants such as Wal-Mart
Stores, Inc. and Target Corp.; and food/drug combinations such as Kroger Co.,
Albertsons LLC and Ahold USA.  It is understood and agreed that RediClinic
competitors include, but are not limited to, Walgreen’s Take Care Clinics, CVS
Health’s Minute Clinics and The Little Clinic. During Executive’s employment by
the Company or one of its subsidiaries and during the Restricted Period,
Executive will not directly or indirectly, engage in any activity that involves
providing audit review or other consulting or advisory services with respect to
any relationship between the Company and any third party.  The “Restricted Area”
means those states within the

 

11

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United States in which the Company, including its subsidiaries, conducts its
business, including the District of Columbia and Puerto Rico.

 

7.2                               Noninterference.  During the Restricted
Period, Executive shall not, directly or indirectly, solicit, induce, or attempt
to solicit or induce any officer, director, employee, agent or consultant of the
Company or any of its subsidiaries, affiliates, strategic partners, successors
or assigns to terminate his, her or its employment or other relationship with
the Company or its subsidiaries, affiliates, strategic partners, successors or
assigns for the purpose of associating with any Competitor of the Company or its
subsidiaries, affiliates, strategic partners, successors or assigns, or
otherwise encourage any such person or entity to leave or sever his, her or its
employment or other relationship with the Company or its subsidiaries,
affiliates, strategic partners, successors or assigns for any other reason.

 

7.3                               Nonsolicitation.  During the Restricted
Period, Executive shall not, directly or indirectly, solicit, induce, or attempt
to solicit or induce any customers, clients, vendors, suppliers or consultants
then under contract to the Company or its subsidiaries, affiliates, strategic
partners, successors or assigns, to terminate, limit or otherwise modify his,
her or its relationship with the Company or its subsidiaries, affiliates,
strategic partners, successors or assigns, for the purpose of associating with
any Competitor of the Company or its subsidiaries, affiliates, strategic
partners, successors or assigns, or otherwise encourage such customers, clients,
vendors, suppliers or consultants then under contract to terminate his, her or
its relationship with the Company or its subsidiaries, affiliates, strategic
partners, successors or assigns for any reason.  During the Restricted Period,
Executive shall not hire, either directly or through any employee, agent or
representative, any person known by Executive to be (or to have been) a field
and corporate management employee of the Company or any subsidiary or any such
person who was employed by the Company or any subsidiary within 180 days of such
hiring.

 

8.                                      Rights and Remedies upon Breach.  If
Executive breaches, or threatens to commit a breach of, any of the provisions of
Sections 6 or 7 above (the “Restrictive Covenants”), the Company and its
subsidiaries, affiliates, strategic partners, successors or assigns shall have
the following rights and remedies, each of which shall be independent of the
others and severally enforceable, and each of which shall be in addition to, and
not in lieu of, any other rights or remedies available to the Company or its
subsidiaries, affiliates, strategic partners, successors or assigns at law or in
equity:

 

8.1                               Specific Performance.  The right and remedy to
have the Restrictive Covenants specifically enforced by any court of competent
jurisdiction by injunctive decree or otherwise (without the necessity of posting
a bond), it being agreed that any breach or threatened breach of the Restrictive
Covenants would cause irreparable injury to the Company or its subsidiaries,
affiliates, strategic partners, successors or assigns and that money damages
would not provide an adequate remedy to the Company or its subsidiaries,
affiliates, strategic partners, successors or assigns.

 

8.2                               Accounting.  The right and remedy to require
Executive to account for and pay over to the Company or its subsidiaries,
affiliates, strategic partners, successors or assigns, as the case may be, all
compensation, profits, monies, accruals, increments or other benefits derived or

 

12

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received by Executive as a result of any transaction or activity constituting a
breach of any of the Restrictive Covenants.

 

8.3                               Cessation and Recoupment of Payments.  In the
event that Executive is receiving payments and benefits pursuant to Section 5.3,
above, the right and remedy to immediately cease making and providing Executive
any future payments and benefits (except for the Accrued Benefits) and be
promptly reimbursed by Executive for any payments and benefits (except for the
Accrued Benefits) paid or provided to Executive pursuant to Section 5.3 during
the period of such breach by Executive.

 

8.4                               Extension of Restriction in the Event of
Breach.  The right and remedy to extend the length of time of the Restricted
Period for a period of time equal to the period of time during which Executive
was or is in breach of such provision.

 

9.                                      Enforceability in Jurisdictions. 
Executive intends to and hereby confers jurisdiction to specifically enforce the
Restrictive Covenants by issuing an injunction in aid of arbitration upon the
courts of any jurisdiction within the Restricted Area.  If the courts of any one
or more of such jurisdictions hold the Restrictive Covenants unenforceable by
reason of the breadth of such scope or otherwise, it is the intention of
Executive that such determination not bar or in any way affect the right of the
Company or its subsidiaries, affiliates, strategic partners, successors or
assigns to the relief provided herein in the courts of any other jurisdiction
within the geographic scope of such covenants, as to breaches of such covenants
in such other respective jurisdictions, such covenants as they relate to each
jurisdiction being, for this purpose, severable into diverse and independent
covenants.

 

10.                               Reasonableness; Severability; Modification. 
Executive acknowledges and agrees that the Restrictive Covenants are reasonable
and necessary given Executive’s position of trust and confidence within the
Company and Executive’s significant access to confidential information. 
Executive further agrees that the Restrictive Covenants are valid in geographic
and temporal scope and in all other respects.  If any provision of the
Restrictive Covenants is held to be excessively broad as to duration, activity
or subject, it is the desire of the Company and Executive that such provisions
be construed by limiting and reducing them so as to be enforceable to the
maximum extent allowed by applicable law and then fully enforced as so
modified.  In the event that any one or more of the provisions shall be held to
be invalid, illegal or unenforceable, it is the desire of the Company and
Executive that the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.  any of the
Restrictive Covenants, or any part thereof, is invalid or unenforceable, the
remainder of the Restrictive Covenants shall not thereby be affected and shall
be given full force and effect without regard to the invalid portions.

 

11.                               No Violation of Third-Party Rights; Other
Representations.

 

(a)                                 Executive represents, warrants and covenants
that he:

 

(i)                                     will not, in the course of employment,
infringe upon or violate any proprietary rights of any third party (including,
without limitation, any third party confidential relationships, patents,
copyrights, mask works, trade secrets, or other

 

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proprietary rights);

 

(ii)                                  is not a party to any conflicting
agreements with third parties, which will prevent him from fulfilling the terms
of employment and the obligations of this Agreement;

 

(iii)                               does not have in his possession any
confidential or proprietary information or documents belonging to others and
will not disclose to the Company, use, or induce the Company to use, any
confidential or proprietary information or documents of others;

 

(iv)                              agrees to respect any and all valid
obligations which he may now have to prior employers or to others relating to
confidential information, inventions, discoveries or other intellectual property
which are the property of those prior employers or others, as the case may be;
and

 

(v)                                 is not currently a defendant in any pending
or threatened litigation or arbitration, or, to Executive’s knowledge, subject
to an investigation, including with any current or former employer or business
associate, in each case, regarding allegations relating to sexual or other types
of harassment or abusive behavior.

 

(b)                                 Executive has supplied to the Company a copy
of each written agreement with any of Executive’s prior employers, as well as
any other agreements to which Executive is subject, which includes any
obligation of confidentiality, assignment of intellectual property,
nonsolicitation or noncompetition.  Executive has listed each of such
agreements, if any, in Appendix C.

 

(c)                                  Executive agrees to indemnify and hold the
Company harmless from any loss, claim, damage, cost or expense of any kind
(including without limitation, reasonable attorney fees) to which the Company
may be subjected by virtue of a breach by Executive of the foregoing
representations, warranties, and covenants.

 

12.                               Arbitration.  Except as necessary for
Executive or the Company and its subsidiaries, affiliates, successors or assigns
or Executive to specifically enforce, or enjoin a breach of, this Agreement (to
the extent such remedies are otherwise available), including, without
limitation, pursuant to Section 8.1, above, the Parties agree that any and all
disputes that may arise in connection with, arising out of or relating to this
Agreement, or any dispute that relates in any way, in whole or in part, to
Executive’s employment with the Company or any subsidiary or affiliate, the
termination of that employment or any other dispute by and between the Parties
or their subsidiaries, affiliates, successors or assigns, shall be submitted to
final and binding arbitration in Harrisburg, Pennsylvania according to the
National Employment Dispute Resolution Rules and procedures of the American
Arbitration Association at the time in effect.  This arbitration obligation
extends, to the fullest extent permitted by law, to any and all claims that may
arise by and between the Parties or their subsidiaries, affiliates, strategic
partners, successors or assigns, and expressly extends to, without limitation,
claims or causes of action for wrongful employment termination, impairment of
ability to compete in the open labor market, breach of an express or implied
contract, breach of the covenant of good faith and fair dealing,

 

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breach of fiduciary duty, fraud, misrepresentation, defamation, slander,
infliction of emotional distress, disability, loss of future earnings, and
claims under the Pennsylvania Constitution, the United States Constitution, and
applicable state and federal fair employment laws, federal and state equal
employment opportunity laws, and federal and state labor statutes and
regulations, including, but not limited to, the Civil Rights Act of 1964, as
amended, the Fair Labor Standards Act, as amended, the Americans With
Disabilities Act of 1990, as amended, the Rehabilitation Act of 1973, as
amended, the Employee Retirement Income Security Act of 1974, as amended, the
Age Discrimination in Employment Act of 1967, as amended, and any other state or
federal law.  The Company shall pay all fees and expenses of the arbitrator
(other than a filing fee that Executive would have paid to commence litigation
in a state court located in Harrisburg, Pennsylvania, in the event that
Executive commences such arbitration hereunder).  Executive understands that by
entering into this Agreement, Executive is waiving Executive’s rights to have a
court determine Executive’s rights, including under federal, state or local
statutes prohibiting employment discrimination, including sexual harassment and
discrimination on the basis of age, race, color, religion, national origin,
disability, veteran status or any other factor prohibited by governing law. 
Executive further understands that there is no intent herein to interfere with
the Equal Employment Opportunity Commission’s right to enforce the laws it
oversees or your right to file an administrative charge of employment
discrimination or a similar state or local administrative agency.

 

13.                               Assignment.

 

(a)                                 Neither this Agreement, nor any of
Executive’s rights or obligations hereunder, may be assigned or otherwise
subject to hypothecation by Executive.  Any attempt by Executive to anticipate,
alienate, assign, sell, transfer, pledge, encumber or charge the same shall be
void.  In the event of Executive’s death, the Company shall pay to Executive’s
estate all unpaid amounts that were payable to Executive immediately prior to
his death.

 

(b)                                 The Company may freely assign its rights and
obligations hereunder, and Executive hereby consents to any such assignment, in
whole or in part, to any of the Company’s subsidiaries, affiliates, or parent
corporations. The Company shall assign this Agreement to any successor or assign
in connection with the sale of all or substantially all of the Company’s assets
or stock, or in connection with any merger in which the Company is not the
survivor, or any acquisition and/or reorganization involving the Company.

 

14.                               Notices.

 

All notices and other communications under this Agreement shall be in writing
and shall be: (i) in writing; (ii) delivered personally, by fax, by electronic
mail, by courier service, or by certified or registered mail, first class
postage prepaid and return receipt requested; (iv) deemed to have been received
on the date of delivery or, if sent by certified or registered mail, on the
third (3rd) business day after the mailing thereof, or if sent by fax,
twenty-four (24) hours after transmission of a fax; and (iv) addressed as
follows (or to such other address as the Party entitled to notice shall
hereafter designate in accordance with the terms hereof):

 

15

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If to the Company:

 

Rite Aid Corporation
30 Hunter Lane
Camp Hill, Pennsylvania 17011
Attention: General Counsel
Fax: (717) 760-7867
Email: jcomitale@riteaid.com

 

 

 

If to Executive:

 

James Peters, at the address noted on Appendix D.

 

Any Party may change such Party’s address for notices by notice duly given
pursuant hereto.

 

15.                               General.

 

15.1                        No Offset or Mitigation.  The Company’s obligation
to make the payments provided for in, and otherwise to perform its obligations
under this Agreement shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action that the Company may have
against Executive or others whether in respect of claims made under this
Agreement or otherwise.  In no event shall Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts,
benefits and other compensation payable or otherwise provided to Executive under
any of the provisions of this Agreement, and such amounts shall not be reduced,
regardless of whether Executive obtains other employment.

 

15.2                        Governing Law.  This Agreement is executed in
Pennsylvania and shall be governed by and construed and enforced in accordance
with the laws of the Commonwealth of Pennsylvania without giving effect to
conflicts of laws principles thereof which might refer such interpretations to
the laws of a different state or jurisdiction.

 

15.3                        Entire Agreement.  This Agreement sets forth the
entire understanding of the Parties relating to Executive’s employment with the
Company and cancels and supersedes all agreements, arrangements and
understandings relating thereto made prior to the date hereof, written or oral,
between Executive and the Company and/or any subsidiary or affiliate.

 

15.4                        Amendments; Waivers.  This Agreement may be amended,
modified, superseded, canceled, renewed or extended, and the terms or covenants
hereof may be waived, only by a written instrument executed by the Parties, or
in the case of a waiver, by the Party waiving compliance. The failure of any
Party at any time or times to require performance of any provision hereof shall
in no manner affect the right of such Party at a later time to enforce the
same.  No waiver by any Party of the breach of any term or covenant contained in
this Agreement, whether by conduct or otherwise, in any one or more instances,
shall be deemed to be, or construed as, a further or continuing waiver of any
such breach, or a waiver of the breach of any other term or covenant contained
in this Agreement.

 

15.5                        Conflict with Other Agreements.  Executive
represents and warrants that neither his execution of this Agreement nor the
full and complete performance of his obligations hereunder will violate or
conflict in any respect with any written or oral agreement or understanding with
any person or entity.

 

16

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15.6                        Successors and Assigns.  This Agreement shall inure
to the benefit of and shall be binding upon the Company (and its successors and
assigns) and Executive and his heirs, executors and personal representatives.

 

15.7                        Withholding.  Notwithstanding any other provision of
this Agreement, the Company may withhold from amounts payable under this
Agreement all federal, state, local, payroll and foreign taxes that are required
to be withheld by applicable laws or regulations.

 

15.8                        General Severability.  The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement.  If any
provision of this Agreement shall be held invalid or unenforceable in part, the
remaining portion of such provision, together with all other provisions of this
Agreement, shall remain valid and enforceable and continue in full force and
effect to the fullest extent consistent with law.

 

15.9                        Survival.  In the event of any termination of
Executive’s employment during the Term, or upon or after expiration of the Term,
Executive and the Company nevertheless shall continue to be bound by the terms
and conditions set forth in Section 4.6 and Sections 6 through 10 above, which
shall survive the expiration of the Term.

 

15.10                 Captions.  The section headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.

 

15.11                 Counterparts; Electronic Signatures.  This Agreement may
be executed by the Parties hereto in separate counterparts; each of which when
so executed and delivered shall be an original but all such counterparts
together shall constitute one and the same instrument.  Each party agrees that
electronic signatures, whether digital or encrypted, of either party to this
Agreement, are intended to authenticate this writing and to have the same force
and effect as manual signatures.

 

16.                               Compliance with Code Section 409A.

 

16.1                        Interpretation.  The intent of the Parties is that
payments and benefits under this Agreement comply with Section 409A of the Code
(“409A”), to the extent subject thereto, and accordingly, to the maximum extent
permitted, this Agreement shall be interpreted and administered to be in
compliance therewith.  Notwithstanding anything contained herein to the
contrary, Executive shall not be considered to have terminated employment with
the Company for purposes of any payments under this Agreement which are subject
to 409A until Executive has incurred a “separation from service” from the
Company within the meaning of 409A.

 

16.2                        Payment of Benefits.  To the extent necessary to
avoid adverse tax consequences, and except as described below, any payment to
which Executive becomes entitled under the Agreement, or any arrangement or plan
referenced in this Agreement, that constitutes “deferred compensation” under
409A, and is (a) payable upon Executive’s termination of employment; (b) at a
time when Executive is a “specified employee” as defined by 409A shall not be
made until the first payroll date after the earliest of:  (1) the expiration of
the six (6) month period (the “Deferral Period”) measured from the date of
Executive’s “separation from service” within the meaning of such term under
409A; or (2) the date of Executive’s death.

 

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On the first payroll date after the expiration of the Deferral Period, all
payments that would have been made during the Deferral Period (whether in a
single lump sum or in installments) shall be paid as a single lump sum to
Executive or, if applicable, his beneficiary.  This section shall not apply to
any payment which meets the short term deferral exception to 409A or constitutes
“separation pay” as described in Treasury Regulation Section 409A-1(b)(9) (in
general, payments (i) that are made on an involuntary separation from service
which (ii) do not exceed the lesser of two (2) times (x) Executive’s annualized
compensation for the taxable year preceding the year in which the separation
from service occurs or (y) the Code Section 401(a)(17) limit on compensation for
the year in which separation from service occurs and (iii) are paid in total by
the end of the second calendar year following the calendar year in which the
separation from service occurs).

 

The Company shall pay to Executive the Accrued Benefits, within ten (10) days
after the Date of Termination.  Notwithstanding the foregoing, if Executive is a
“specified employee”, as defined by 409A, and payment of the Accrued Benefits is
required to be delayed under 409A, the Company shall pay to Executive the
Accrued Benefits on the first payroll date after the six (6) month anniversary
of the Date of Termination.

 

For purposes of 409A, each payment and each installment described in this
Agreement shall be considered a separate payment from each other payment or
installment and to the extent required by 409A, a payment due upon termination
of employment will only be paid upon Executive’s separation from service within
the meaning of such term under 409A.

 

16.3                        Reimbursements.  To the extent required by 409A,
with regard to any provision that provides for the reimbursement of costs and
expenses, or for the provision of in-kind benefits:  (i) the right to such
reimbursement or in-kind benefit shall not be subject to liquidation or exchange
for another benefit; (ii) the amount of expenses or in-kind benefits available
or paid in one (1) year shall not affect the amount available or paid in any
subsequent year; and (iii) such payments shall be made on or before the last day
of Executive’s taxable year in which the expense occurred.

 

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IN WITNESS WHEREOF, Executive and the Company have executed this Agreement as of
the date first written above.

 

 

 

RITE AID CORPORATION

 

 

 

 

 

/s/ James J. Comitale

 

By: James J. Comitale

 

Its: EVP, General Counsel and Secretary

 

 

 

 

 

EXECUTIVE

 

 

 

 

 

/s/ James Peters

 

James Peters

 

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Appendix A to Employment Agreement

Functional Areas of Oversight and Responsibility

 

1.              Pharmacy, clinical and health strategy development and execution
including health plan and health system relationships;

2.              Pharmacy operations;

3.              Marketing and merchandising, including branding and e-Commerce;

4.              Corporate development; and

5.              Corporate communications and corporate marketing.

 

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Appendix B to Employment Agreement

Form of Severance Agreement and Release

 

This Agreement (this “Agreement”) confirms the terms of the separation of
employment of [NAME] (“you”) from Rite Aid Corporation (the “Company,” and
together with you, the “Parties”).  Capitalized terms not otherwise defined
herein will have the meanings attributed to them in your employment agreement
with the Company, effective as of [DATE] (the “Employment Agreement”).

 

1.                                      Separation Date. Your last day of
employment with the Company will be [DATE] (the “Separation Date”) and as of
such date you shall cease to be employed by the Company in any capacity and you
will automatically resign from all positions you then hold with the Company and
its subsidiaries, including as a member of the Board of Directors of the Company
or Board of Directors of any of the Company’s subsidiaries to the extent
applicable.  You agree to execute any additional documents required or requested
by the Company to effectuate your resignations from such positions.  You agree
that, following the Separation Date, you will not represent yourself to be
associated in any ongoing capacity with the Company or any of its subsidiaries
or affiliates.

 

2.                                      Accrued Benefits; Severance.

 

(a)                                 Whether or not this Agreement becomes
effective pursuant to its terms, the Company will pay you the amount of accrued
but unpaid base salary through the Separation Date and reimburse you for
reasonable expenses incurred by you in furtherance of your duties through the
date of notice of your termination of employment in accordance with Company
policies, less all applicable withholdings and deductions.(1)

 

(b)                                 Provided that this Agreement becomes
effective pursuant to its terms and you remain in compliance with this
Agreement, and with the Restrictive Covenants, at all times, the Company will
pay and provide you with the severance benefits, at the time and in the form,
set forth in Section 5.3 of the Employment Agreement, less all applicable
withholdings and deductions.

 

3.                                      Release.

 

(a)                                 You hereby release, discharge and forever
acquit the Company, and its affiliates and subsidiaries and each of their
respective past, present and future stockholders, members, partners,  directors,
managers, employees, agents, attorneys, heirs, legal representatives, and each
of the successors and assigns of the foregoing, in their personal and
representative capacities (individually, “Company Party,” and collectively, the
“Company Parties”), from liability for, and hereby waive, any and all claims,
charges, liabilities, causes of action, rights, complaints, sums of money,
suits, debts, covenants, contracts, agreements, promises, benefits, obligations,
damages, demands or liabilities of every nature, kind and

 

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(1)         In addition, the actual Release will include a specific list of
vested benefits under employee benefit plans to be excluded from the Release
requirement.

 

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description, in law, equity or otherwise, whether known or unknown, suspected or
unsuspected (collectively, “Claims”) which you or your heirs, executors,
administrators, spouse, relatives, successors or assigns ever had, now have or
may hereafter claim to have by reason of any matter, cause or thing whatsoever:
(i) arising from the beginning of time through the date upon which you sign this
Agreement including, but not limited to (A) any such Claims relating in any way
to your employment relationship with the Company or any other Company Parties,
and (B) any such Claims arising under any federal, state, local or foreign
statute or regulation, including, without limitation, the Age Discrimination in
Employment Act of 1967, as amended by the Older Workers Benefit Protection Act
(the “ADEA”), Title VII of the Civil Rights Act of 1964, the Americans with
Disabilities Act of 1990, the Employee Retirement Income Security Act of 1974,
the Pennsylvania Human Relations Act, the Pennsylvania Equal Pay Law and any
other federal, state, local or foreign law (statutory, regulatory or otherwise)
that may be legally waived and released; (ii) relating to wrongful employment
termination; or (iii) arising under or relating to any policy, agreement,
understanding or promise, written or oral, formal or informal, between the
Company or any of the other Company Parties and you, including, without
limitation, the Employment Agreement and any incentive compensation plan or
equity plan with any Company Party.  Notwithstanding the above, this release
does not extend to (I) claims for Accrued Benefits; (II) claims for worker’s
compensation benefits or for an occupational disease; (III) any whistleblower
claims arising under the Sarbanes-Oxley Act or Dodd-Frank Wall Street Reform and
Consumer Protection Act; (IV) claims to require the Company to honor its
commitments set forth in this Agreement; (V) claims to interpret or to determine
the scope, meaning or effect of this Agreement; (VII) claims for indemnification
and officers and directors liability insurance coverage under the Employment
Agreement, the Company’s charter, by-laws or applicable law, as applicable;
and/or (VIII) claims that cannot be waived as a matter of law pursuant to
federal, state, or local law (collectively, clauses (I) through (VIII) are the
“Excluded Claims”).

 

(b)                                 You further acknowledge and agree that,
except with respect to the Accrued Benefits, the Company Parties have fully
satisfied any and all obligations whatsoever owed to you arising out of your
employment with the Company or any other Company Party, and that no further
payments or benefits are owed to you by the Company or any other Company Party.

 

4.                                      Attorney Consultation; Voluntary
Agreement.

 

(a)                                 You acknowledge that (i) the Company has
advised you to consult with an attorney of your own choosing before signing this
Agreement, (ii) you have been given the opportunity to seek the advice of
counsel, (iii) you have carefully read and fully understand all of the
provisions of this Agreement, including the release in Section 3 (the
“Release”), (iv) the Release specifically applies to any rights or claims you
may have against the Company Parties pursuant to the ADEA, (v) you are entering
into this Agreement knowingly, freely and voluntarily in exchange for good and
valuable consideration to which you are not otherwise entitled and (vi) you have
the full power, capacity and authority to enter into this Agreement.

 

5.                                      Review and Revocation Period.

 

(a)                                 You have forty-five (45) days following your
receipt of this Agreement (the “Consideration Period”) to review its terms,
including the Release, and to reflect

 

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upon them and consider whether you want to sign it, although you may sign it
sooner; provided, however, that you may not sign this Agreement prior to the
Separation Date.  You acknowledge and agree that changes to this Agreement,
whether material or immaterial, do not restart the running of the Consideration
Period.  You understand and agree that you may consent to this Agreement,
including the Release, by signing and returning this Agreement within the
applicable time frame to General Counsel, Rite Aid Corporation, 30 Hunter Lane,
Camp Hill, PA 17011 or by e-mail at jcomitale@riteaid.com.

 

(b)                                 You may revoke your consent to the Release
within the seven day period beginning on the date you execute this Agreement
(such seven day period being referred to herein as the “Release Revocation
Period”).  To be effective, such revocation must be in writing signed by you and
delivered to the Company at the above address before 11:59 p.m., Eastern
Standard time, on the last day of the Release Revocation Period.

 

(c)                                  In the event of such revocation by you, the
Release shall be of no force or effect, and you will not have any rights and the
Company will not have any obligations under Section 2(b) of this Agreement. 
Provided that you do not revoke your consent to the Release within the Release
Revocation Period, the Release shall become effective on the eighth (8th)
calendar day after the date upon which you execute this Agreement (the “Release
Effective Date”).

 

6.                                      Restrictive Covenants.  You acknowledge
and agree that the Restrictive Covenants, and any other written restrictive
covenants and confidentiality agreements in effect with the Company, are
incorporated herein by reference and fully made a part hereof for all purposes
and remain in full force and effect.

 

7.                                      Cooperation.  You agree that, at
mutually agreeable times, you will meet with representatives of the Company, or
its respective parent or subsidiary company representatives and provide any
information you acquired during the course of your employment relating in any
way to any legal disputes involving the Company.  You further agree that you
will cooperate fully with the Company relating to any such litigation matter or
other legal proceeding in which you were involved or on which you have knowledge
by virtue of your employment with the Company, including any existing or future
litigation or other legal proceeding involving the Company, whether
administrative, civil or criminal in nature in which and to the extent the
Company deems your cooperation necessary.  You will be entitled to reimbursement
by the Company of reasonable costs and expenses incurred by you in connection
with complying with your obligations under this Section 7.

 

8.                                      Non-Disparagement. You agree that you
will not make any negative comments or disparaging remarks, in writing, orally
or electronically (“Disparaging Remarks”), about the Company or any of the other
Company Parties and their respective products and services.  The Company agrees
to instruct members of its senior management team not to, for as long as such
individuals remain affiliated with the Company, make any Disparaging Remarks
about you; provided, however, that nothing in this Section 8 shall prohibit you
from (a) making truthful and accurate statements or disclosures that are
required by applicable law or legal process; (b) making any voluntary disclosure
of information or documents concerning possible violations of law to any
governmental agency or legislative body, or any self-regulatory

 

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organization; or (c) exercising protected rights to the extent that such rights,
by law, cannot be waived by agreement.

 

9.                                      No Admission.  Nothing herein will be
deemed to constitute an admission of wrongdoing by you or any of the Company
Parties.  Neither this Agreement nor any of its terms may be used as an
admission or introduced as evidence as to any issue of law or fact in any
proceeding, suit or action, other than an action to enforce this Agreement.

 

10.                               Counterparts.  This Agreement may be executed
in counterparts, and each counterpart, when so executed and delivered, will be
deemed to be an original and both counterparts, taken together, will constitute
one and the same Agreement.  A faxed or .pdf-ed signature will operate the same
as an original signature.

 

11.                               Successors and Assigns.  This Agreement will
inure to the benefit of and be binding upon the Company and any successor
organization which shall succeed to the Company by acquisition, merger,
consolidation or operation of law, or by acquisition of assets of the Company
and any assigns.  You may not assign this Agreement, provided that in the event
of your death prior to receiving all of the payments provided by Section 2 of
this Agreement, any remaining payments will be made to your estate.

 

12.                               Severability; Blue-Penciling.  The provisions
of this Agreement are severable and the invalidity of any one or more provisions
will not affect the validity of any other provision.  In the event that a court
of competent jurisdiction shall determine that any provision of this Agreement
or the application thereof is unenforceable in whole or in part because of the
scope thereof, the Parties hereto agree that said court in making such
determination shall have the power to reduce the scope of such provision to the
extent necessary to make it enforceable, and that this Agreement in its reduced
form shall be valid and enforceable to the full extent permitted by law.

 

13.                               Governing Law.  This Agreement will be
governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania, without regard to any conflict of law principles thereof that
would give rise to the application of the laws of any other jurisdiction.

 

14.                               Entire Agreement/No Oral Modifications.  This
Agreement constitutes the entire agreement between you and any of the Company
Parties with respect to the subject matter hereof and supersedes all prior
discussions, negotiations, representations, arrangements or agreements relating
thereto, whether written or oral, including but not limited to the Employment
Agreement, provided, however, that Sections 6 and 7 of the Employment Agreement
shall remain in effect for the duration and on the terms set forth therein.  You
represent that in executing this Agreement, you have not relied on any
representation or statement not set forth herein.  No amendment or modification
of this Agreement shall be valid or binding on the Parties unless in writing and
signed by both Parties.

 

*        *        *

 

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IN WITNESS WHEREOF, the Parties have signed this Agreement as of the dates
indicated below.

 

 

Rite Aid Corporation

[Executive Name]

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

[Executive Name]

 

 

 

 

 

 

 

Title:

 

Date:

 

 

 

 

 

 

Date:

 

 

 

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Appendix C to Employment Agreement

Prior Employment Agreements

 

None.

 

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