Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”) is entered into
as of the 23rd day of June, 2011 by and between Rite Aid Corporation, a Delaware
corporation (the “Company”) and Enio A. Montini, Jr. (the “Executive”).

 

WHEREAS, prior to April 21, 2011, Executive was employed by the Company as a
Senior Vice President;

 

WHEREAS, the Company desires to promote Executive to the position of Executive
Vice President 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 commenced on February
15, 2010 (“the Effective 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 Effective Date (the “Original Term of Employment”).  The
Original Term of Employment shall be automatically renewed for successive two
(2) year terms (the “Renewal Terms”) unless at least 120 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.  For purposes
of this Agreement, except as otherwise provided herein, the phrases “year during
the Term” or similar language shall refer to each twelve (12) month period
commencing on the Effective Date or applicable anniversaries thereof.

 

2.             Position And Duties.

 

2.1          Generally.  During the Term from and after April 21, 2011 (the
“Promotion Date”), Executive shall serve as an Executive Vice President of the
Company and shall have such officer level duties, responsibilities and authority
as shall be assigned by the Company from time to time.  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 Company
in furtherance of the business affairs and activities of the Company and its
subsidiaries, affiliates and strategic partners.  Following termination of
Executive’s employment for any reason, Executive shall immediately resign from
all offices and positions he holds with the Company or any subsidiary.

 

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2.2          Other Activities.  Anything herein to the contrary notwithstanding,
nothing in this Agreement shall preclude the Executive from engaging in the
following activities:  (i) serving on the board of directors of a reasonable
number of other corporations or the boards of a reasonable number of trade
associations and/or charitable organizations, subject to the Company’s approval,
which shall not be unreasonably withheld, (ii) engaging in charitable activities
and community affairs, and (iii) managing his personal investments and affairs,
provided that such activities 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.

 

3.             Compensation.

 

3.1          Base Salary.  During the Term beginning on the Promotion Date, as
compensation for his services hereunder, Executive shall receive a salary at the
annualized rate of Four Hundred Thousand Dollars ($400,000.00) per year (“Base
Salary” as may be adjusted from time to time), 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.  The Executive shall participate each
fiscal year during the Term in the Company’s annual bonus plan as adopted and
approved by the Board of Directors (the “Board”) or the Compensation Committee
of the Board (the “Compensation Committee”) from time to time.  For Fiscal Year
2012 (“FY 2012”), Executive’s annual bonus opportunity pursuant to such plan
shall equal sixty percent (60%) (the “Annual Target Bonus”) of the Base Salary. 
For subsequent fiscal years, the Annual Target Bonus may be adjusted and shall
be based upon the Board approved plan for that year.

 

3.3          Equity Awards.

 

(a)  On February 17, 2010, Executive was granted an option (the “Option”) to
purchase 250,000 shares of the Company’s Common Stock, par value $1.00 per share
(“Company Stock”).  The Option (i) is a nonqualified stock option, (ii) has an
exercise price equal to the closing price of the Company Stock as reported on
the New York Stock Exchange (“NYSE”) on the date of grant, (iii) has a term of
ten (10) years following the date of grant, (iv) vests and becomes exercisable
as to one-fourth (1/4) of the shares of the Company Stock subject to the option
on each of the first four (4) anniversaries from the date of grant, (v) is
subject to the acceleration exercise and termination provisions set forth in
Section 3.3(b) and Article 5 hereof and (vi) otherwise is evidenced by and
subject to the terms of the Company’s stock option and equity plans.

 

(b) Upon the occurrence of a Change in Control of the Company prior to the
termination of Executive’s employment with the Company, the Option awarded

 

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pursuant to subsection 3.3(a) above then held by Executive shall immediately
vest and become exercisable in full.  For purposes of this Agreement, “Change in
Control” shall have the meaning set forth in the attached Appendix A.

 

(c)  It is understood and acknowledged by Executive that the securities
underlying any stock options and the restricted stock awarded Executive may not
be subject to an effective registration statement under the federal securities
laws until sometime after the Effective Date.  The Company agrees that if, as of
the date of termination of Executive’s employment under the circumstances
described in Sections 5.2 (except termination for Cause), 5.3 and 5.5, the
securities underlying the then vested and exercisable portion of any stock
options are not subject to an effective registration statement, the ninety (90)
day periods in Section 5.2 (except termination for Cause), 5.3 and 5.5, as
applicable, will be deemed to run from the first date such securities become
subject to an effective registration statement.

 

4.             Additional Benefits.

 

4.1          Employee Benefits.  During the Term, Executive shall be entitled 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, the Supplemental Executive Retirement Plan and 401(k) plans) in which
management employees of the Company are generally eligible to participate,
subject to any eligibility requirements and the other generally applicable terms
of such plans.

 

4.2          Expenses.  During the Term, the Company shall reimburse Executive
for any expenses reasonably incurred by him in furtherance of his duties
hereunder, including without limitation travel, meals and accommodations, 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.

 

4.3          Vacation.  Executive shall be entitled to four (4) weeks paid
vacation during each year of the Term.

 

4.4          Automobile Allowance.  During the Term, the Company shall provide
Executive with an automobile allowance of One Thousand Dollars ($1,000.00) per
month.

 

4.5          Annual Financial Planning Allowance.  During each year of the Term,
the Company shall provide Executive with an executive planning allowance in the
amount of Five Thousand Dollars ($5,000.00).

 

4.6         Relocation Expenses.  Executive shall be entitled to benefits under
the Company’s Executive Level Relocation Policy as from time to time in effect.

 

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4.7          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 the Executive’s employment with and service as an Officer of the
Company; 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.  Following termination (except
for termination by the Company for Cause) of the Executive’s employment or
service with the Company, the Company shall cause any Director and Officer
liability insurance policies applicable to the Executive prior to such
termination to remain in effect for six (6) years following the date of
termination of employment.

 

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 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, and shall be
effective as of the date of such notice in accordance with Section 12 hereof. 
“Cause” as determined in reasonable good faith by a committee comprised of three
(3) senior officers (one of which shall be Executive’s supervisor) of the
Company or the Board of Directors shall mean:  (i) Executive’s gross negligence
or willful misconduct in the performance of the duties or responsibilities of
his position with the Company or any subsidiary, or failure to timely carry out
any lawful directive of the Company; (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 Company Policy or
which materially interferes with the Executive’s ability to perform his duties;
(iv) the commission by Executive of an act of fraud or dishonesty toward the
Company or any subsidiary; (v) Executive’s misconduct or negligence which
damages or injures the Company or the Company’s reputation; (vi) Executive is
convicted of or pleads to a felony involving moral turpitude; or (vii) the use
or imparting by Executive of any confidential or proprietary information of the
Company, or any subsidiary in violation of any confidentiality or proprietary
agreement to which Executive is a party.

 

5.2          Compensation upon Termination by the Company for Cause or by
Executive without Good Reason.  In the event of Executive’s termination of
employment (i) by the Company for Cause or (ii) by Executive voluntarily 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, (ii)
reimbursement for reasonable and necessary expenses incurred by Executive
through the date of notice of such termination, 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

 

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such termination ((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)           Except as provided in Section 3.3(c), any portion of any
restricted stock or any other equity 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 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 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 by the Company for Cause, any stock options that have
not been exercised prior to the date of termination shall immediately terminate
as of such date.

 

Any termination of Executive’s employment by Executive voluntarily without Good
Reason shall be effective upon thirty (30) days notice to the Company or such
earlier date as the Company determines in its discretion and designates in
writing.  A termination of Executive’s employment by the Company for Cause or by
the Executive other than for Good Reason shall not constitute a breach of this
Agreement.

 

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 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 (2) years of Executive’s then Base Salary 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 (2) years following the date of termination of employment,
and (iii) continued health insurance coverage for Executive and his immediate
family for a period of two (2) years following the date of termination of
employment.

 

(b)           The Executive’s stock option awards held by Executive shall vest
and become immediately exercisable and the 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 (2) years following the date of termination.  Except as provided in Section
3.3(c), such portion of Executive’s stock options (together with any portion of
Executive’s stock options that have vested and

 

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become exercisable prior to the date of termination) 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 (or deemed to have vested) as of
the date of termination shall terminate as of such date; and all shares of
restricted stock as to which the restrictions shall not have lapsed as of the
date of termination 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 5.3(a) through (c).

 

Any termination of employment pursuant to this Section 5.3 shall be effective
upon thirty (30) days notice thereof or the Company may elect in its sole
discretion to reduce or eliminate the notice period and pay the Executive his
Base Salary for some or all of the notice period in lieu of notice.  A
termination of Executive’s employment by the Company other than for Cause or by
the Executive for Good Reason shall not constitute a breach of this Agreement. 
To be eligible for the payment, benefits and stock rights described in Section
5.3(a)(ii)-(iii), (b) and (c) above, Executive must execute, not revoke and
abide by a release of all other claims, cooperate in the event of litigation and
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 as an officer of the Company; or

 

(b)           any decrease in Executive’s then Base Salary as set forth in
Section 3.1 to which Executive has not agreed in writing; or

 

(c)           a material breach by the Company of this Agreement

 

provided, however, that in each such case the Company shall have the right,
within thirty (30) days after receipt of written notice (which shall set forth
in reasonable detail the specific conduct of Company that constitutes Good
Reason and the specific provision(s) of this Agreement on which Executive
relies) from Executive of the Company’s violation of any of the foregoing, to
cure the event or circumstances giving rise to such Good Reason and in the event
of which cure, such event or circumstances shall not constitute Good Reason
hereunder.

 

5.5          Compensation upon Termination of Executive’s Employment by Reason
of Executive’s Death or Total Disability.  In the event that Executive’s

 

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employment with the Company is terminated by reason of Executive’s death or
Total Disability (as defined below):

 

(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) continued health insurance coverage
for Executive and/or his immediate family, as applicable, for a period of one
(1) year following the date of termination of employment.

 

(b)           All stock option awards held by Executive shall vest and become
immediately exercisable and the 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
(2) years following the date of termination.  Except as provided in Section
3.3(c) 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) 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 (or deemed to have vested) as of the date of termination shall
terminate as of such date; and all shares of restricted stock as to which the
restrictions shall not have lapsed as of the date of termination 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 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 the 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 unable to engage in
any substantial activity.

 

5.6          Survival.  In the event of any termination of Executive’s
employment, Executive and the Company nevertheless shall continue to be bound by
the terms and conditions set forth in Section 4.7 above and Sections 6 through
10 below, which shall survive the expiration of the Term; provided, however, the
indemnification obligations in Section 4.7 shall not survive expiration of the
Term in the event of termination of Executive’s employment by the Company for
Cause.

 

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5.7          Change in Control Best Payments Determination.  In the event the
benefits described in Section 5.3(a) and (b) (the “Severance Benefits”) are
payable to Executive in connection with a Change in Control and, if paid, could
subject Executive to an excise tax under Section 4999 of the Internal Revenue
Code (the “Excise Tax”), then notwithstanding the provisions of Section 5.3 (a)
and (b) the Company shall reduce the Severance Benefits (the “Benefit
Reduction”) under Section 5.3 (a) and (b) by the amount necessary to result in
the Executive not being subject to the Excise Tax if such reduction would result
in the Executive’s “Net After Tax Amount” attributable to the Severance Benefits
described in Section 5.3 (a) and (b) being greater than it would be if no
Benefit Reduction was effected.  For this purpose “Net After Tax Amount” shall
mean the net amount of Severance Benefits Executive is entitled to receive under
this Agreement after giving effect to all federal, state and local taxes which
would be applicable to such payments, including, but not limited to, the Excise
Tax.  The determination of whether any such Benefit Reduction shall be effected
shall be made by a nationally recognized public accounting firm selected by the
Company prior to the occurrence of the Change in Control and such determination
shall be binding on both Executive and the Company.

 

5.8          No Other Severance or Termination Benefits.  Except as expressly
set forth herein, Executive shall not be entitled to damages or to any 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 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, the Executive covenants and agrees
as follows:

 

6.1          No Disclosure or Use of Confidential Information.  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

 

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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 not 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, it 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.

 

7.             Noncompetition and Other Matters.

 

7.1          Noncompetition.  During the Executive’s employment with the Company
and for the one (1) year period immediately following the date of termination of
Executive’s employment (the “Restricted Period”), Executive shall not, directly
or indirectly, in any city, town, county, parish or other municipality in any
state of the United States (the names of each such city, town, parish, or other
municipality, including, without limitation, the name of each county in the
Commonwealth of Pennsylvania being expressly incorporated by reference herein),
or any other place in the world, where the Company, or its subsidiaries,
affiliates, strategic partners, successors, or assigns, engages in the
ownership, management and operation of retail drugstores (i) engage in a
Competing Business for Executive’s own account; (ii) enter the employ of, or
render any consulting or contracting services to, any Competing Business; or
(iii) become interested in or otherwise associated or connected with any
Competing Business in any capacity, including, without limitation, as an
individual, partner, shareholder, officer, director, principal, agent, trustee,
employee, contractor, consultant or management position with any entity
providing consulting services to a Competing Business; provided, however,
Executive may (i) own, directly or indirectly, solely as a passive investment,
securities of any entity traded on any national securities exchange if Executive
is not a controlling person of, or a member of a group which controls such
entity and does not, directly or indirectly, own one percent (1%) or more of any
class of securities of such entity.  For purposes of this Section 7.1, the
phrase “Competing Business” shall mean any entity a majority of whose business
involves the ownership and operation of retail or internet based drug stores.

 

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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          No Solicitation.  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 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, 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

 

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assigns, as the case may be, all compensation, profits, monies, accruals,
increments or other benefits derived or received by Executive as a result of any
transaction or activity constituting a breach of any of the Restrictive
Covenants.

 

8.3          Severability of Covenants.  Executive acknowledges and agrees that
the Restrictive Covenants are reasonable and valid in geographic and temporal
scope and in all other respects.  If any court determines that 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.

 

8.4          Modification by the Court.  If any court determines that any of the
Restrictive Covenants, or any part thereof, is unenforceable because of the
duration or scope of such provision, such court shall have the power (and is
hereby instructed by the parties) to modify or reduce the duration or scope of
such provision, as the case may be (it being the intent of the parties that any
such modification or reduction be limited to the minimum extent necessary to
render such provision enforceable), and, in its modified or reduced form, such
provision shall then be enforceable.

 

8.5          Enforceability in Jurisdictions.  Executive intends to and hereby
confers jurisdiction to enforce the Restrictive Covenants upon the courts of any
jurisdiction within the geographic scope of such covenants.  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.

 

8.6          Extension of Restriction in the Event of Breach.  In the event that
Executive breaches any of the provisions set forth in this Section 8, the length
of time of the Restricted Period shall be extended for a period of time equal to
the period of time during which Executive is in breach of such provision.

 

9.             No Violation of Third-Party Rights.  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 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;

 

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(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; and

 

(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.

 

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, non-solicitation or noncompetition. 
Executive has listed each of such agreements in Appendix “A”.

 

Executive agrees to indemnify and save harmless the Company 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.

 

10.           Arbitration.

 

Except as necessary for the Company and its subsidiaries, affiliates, strategic
partners, successors or assigns or Executive to specifically enforce or enjoin a
breach of this Agreement (to the extent such remedies are otherwise available),
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, affiliate or strategic partner, the termination of that employment
or any other dispute by and between the parties or their subsidiaries,
affiliates, strategic partners, 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 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 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, 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

 

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in Employment Act of 1967, as amended, and any other state or federal law. 
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.

 

11.           Assignment.

 

Neither this Agreement, nor any of Executive’s rights or obligations hereunder,
may be assigned or otherwise subject to hypothecation by Executive. The Company
may assign its rights and obligations hereunder, and hereby consents to any such
assignment, in whole or in part, (i) to any of the Company’s subsidiaries,
affiliates, or parent corporations; or (ii) to any other 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, acquisition and/or reorganization
involving the Company.

 

12.          Notices.

 

All notices and other communications under this Agreement shall be in writing
and shall be given by fax or first class mail, certified or registered with
return receipt requested, and shall be deemed to have been duly given three (3)
days after mailing or twenty-four (24) hours after transmission of a fax to the
respective persons named below:

 

If to the Company:

Rite Aid Corporation

 

30 Hunter Lane

 

Camp Hill, Pennsylvania 17011

 

Attention: General Counsel

 

Fax: (717) 760-7867

 

 

If to Executive:

Enio A. Montini, Jr.

 

1409 Summit Way

 

Mechanicsburg, Pennsylvania 17050

 

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

 

13.           General.

 

13.1        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 the
Executive or others whether in respect of claims made under this Agreement or
otherwise.  In no event shall the

 

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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 the Executive under any of the provisions of this
Agreement, and such amounts shall not be reduced, regardless of whether the
Executive obtains other employment.

 

13.2        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.  Any court action instituted by Executive
relating in any way to this Agreement shall be filed exclusively in state or
federal court in Harrisburg, Pennsylvania and Executive consents to the
jurisdiction and venue of said courts in any action instituted by or on behalf
of the Company against him.

 

13.3       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 the Executive and the
Company and/or any subsidiary or affiliate including that certain Employment
Agreement between the parties hereto entered into as of February 15, 2010 which
is hereby cancelled and is of no further force and effect.

 

13.4       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.

 

13.5        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.

 

13.6       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.

 

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

 

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13.8       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.

 

13.9        No Assignment.  The rights and benefits of the Executive under this
Agreement may not be anticipated, assigned, alienated or subject to attachment,
garnishment, levy, execution or other legal or equitable process except as
required by law.  Any attempt by the Executive to anticipate, alienate, assign,
sell, transfer, pledge, encumber or charge the same shall be void.  Payments
hereunder shall not be considered assets of the Executive in the event of
insolvency or bankruptcy.

 

13.10     Survival.  This Agreement shall survive the termination of Executive’s
employment and the expiration of the Term to the extent necessary to give effect
to its provisions.

 

13.11     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.

 

13.12     Counterparts.  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.

 

14.          Compliance with Code Section 409A.

 

Notwithstanding anything in this Employment Agreement to the contrary, effective
as of the later of the Effective Date or January 1, 2005 (the “409A Effective
Date”), the following provisions shall govern:  The provisions listed below are
intended to be compliant with Internal Revenue Code (“Code”) Section 409A and
the final regulations promulgated thereunder (“409A”) and shall be construed to
be so compliant.

 

(a)           Good Reason:  Any termination for ‘Good Reason’ shall comply with
the safe harbor definition of ‘good reason’ in 409A, including the condition
giving rise to such termination and the notice and cure period provided for in
409A.  Without limiting the generality of the foregoing, the following specific
provisions will be effective as of the 409A Effective Date:

 

(i)            The final paragraph of Section 5.4 of the Agreement shall be
modified to read as follows:

 

‘provided, however, that the 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

 

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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, or c
within thirty (30) days 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 the Executive for Good Reason
pursuant to Section 5.3 must occur no later than the date that is the second
anniversary of the initial existence of the condition giving rise to the
termination right.’

 

(b)           Payment of Benefits:  To the extent necessary to avoid adverse tax
consequences, and except as described below, any payment to which the 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 the Executive’s termination; (b) at a time when the Executive is a
“specified employee” as defined by 409A shall not be made until the earliest
of:  (1) the expiration of the six (6) month period (the “Deferral Period”)
measured from the date of the Executive’s ‘separation from service’ under 409A;
or (2) the date of the Executive’s death.

 

Upon 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 the Executive or, if
applicable, his beneficiary.  This section shall not apply to any payment which
constitutes “separation pay” as described in Internal Revenue Regulations
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)
the 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).

 

Without limiting the generality of the foregoing, the following specific
provisions will be effective as of the 409A Effective Date:

 

‘The Company shall pay to the Executive the Accrued Benefits, within ten (10)
days after the Date of Termination.  Notwithstanding the foregoing, if the
Executive is a ‘specified employee’, as defined in 409A, the Company shall pay
to the Executive the Accrued Benefits on the six (6) month anniversary of the
Date of Termination.

 

To the extent permissible by law, each payment and each installment described in
this Agreement shall be considered a separate payment from each other payment or
installment.’

 

(c)           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

 

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of in-kind benefits:  (1) the right to such reimbursement or in-kind benefit
shall not be subject to liquidation or exchange for another benefit; (2) 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 (3) such
payments shall be made on or before the last day of the Executive’s taxable year
in which the expense occurred.

 

Without limiting the generality of the foregoing, the following specific
provisions will be effective as of the 409A Effective Date:  Section 4.2 of the
Agreement shall be modified to insert the following sentence at the end
thereof:  ‘The provisions of Section 14(c) shall apply to all reimbursements
made under this Section 4.2.’

 

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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/ Marc A. Strassler

 

By:

Marc A. Strassler

 

Its:

Exec. Vice President, General Counsel and

 

 

Secretary

 

 

 

EXECUTIVE

 

 

 

 

 

/s/ Enio A. Montini, Jr.

 

Enio A. Montini, Jr.

 

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APPENDIX A

 

A “Change in Control of the Company” shall be deemed to have occurred if, as the
result of a single transaction or a series of transactions, the event set forth
in any one of the following paragraphs shall have occurred:

 

(1) any Person becomes the Beneficial Owner, directly or indirectly, of
securities of the Company representing fifty percent (50%) or more of the
combined voting power of the Company’s then outstanding voting securities after
the Effective Date; or

 

(2) Incumbent Directors cease at any time and for any reason to constitute a
majority of the number of directors then serving on the Board. “Incumbent
Directors” shall mean directors who either (A) are directors of the Company as
of the Effective Date or (B) are elected, or nominated for election, to the
Board with the affirmative votes of at least a majority of the Incumbent
Directors at the time of such election or nomination (but shall not include an
individual whose election or nomination is in connection with an actual or
threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors to the Board); or

 

(3) there is consummated a merger or consolidation of the Company or any direct
or indirect subsidiary of the Company with any other corporation, other than (i)
a merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior to such merger or consolidation continuing
to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof) at least fifty percent
(50%) of the combined voting power of the securities of the Company or such
surviving entity or any parent thereof outstanding immediately after such merger
or consolidation, or (ii) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no Person is
or becomes the Beneficial Owner, directly or indirectly, of securities of the
Company representing thirty-five percent (35%) or more of the combined voting
power of the Company’s then outstanding voting securities; or

 

(4) the stockholders of the Company approve a plan of complete liquidation or
dissolution of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company’s assets, other than a sale
or disposition by the Company of all or substantially all of the Company’s
assets to an entity, at least sixty percent (60%) of the combined voting power
of the voting securities of which are owned by stockholders of the Company in
substantially the same proportions as their ownership of the Company immediately
prior to such sale.

 

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“Affiliate” shall have the meaning set forth in Rule 12b-2 under Section 12 of
the Exchange Act.

 

“Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the
Exchange Act, except that a Person shall not be deemed to be the Beneficial
Owner of any securities which are properly filed on a Form 13G.

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from
time to time.

 

“Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as
modified and used in Sections 13(d) and 14(d) thereof, except that such term
shall not include (i) the Company or any of its subsidiaries, (ii) a trustee or
other fiduciary holding securities under an employee benefit plan of the Company
or any of its subsidiaries, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities or (iv) a corporation owned, directly
or indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company.

 

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