Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is entered into as of the 27th day
of September, 2017 by and between Rite Aid Corporation, a Delaware corporation
(the “Company”) and Kermit Crawford (“Executive”).

 

WHEREAS, the Company desires to hire and employ Executive and Executive desires
to provide the Company with Executive’s services 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 2, 2017 (the “Effective Date”) and, unless earlier terminated pursuant
to Section 5 below, shall continue for a period ending on the date that is three
(3) years following the Effective 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 twenty (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 Executive 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, Executive shall
serve as the President & Chief Operating Officer and shall have such officer
level duties, responsibilities and authority as are customary for a President
and Chief Operating Officer and shall have such other officer level duties,
responsibilities and authorities as shall be assigned by the Company from time
to time consistent with such position.  Executive shall devote Executive’s full
working time, attention, knowledge and skills faithfully and to the best of
Executive’s 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.  Executive shall report to the
Company’s Chief Executive Officer.  Contemporaneously with termination of
Executive’s employment for any reason, Executive shall automatically resign from
all offices and positions Executive holds with the Company or any subsidiary
without any further action on the part of Executive or the Company.

 

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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 (in no event less than
one) 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 Executive’s personal investments and affairs,
provided that Executive’s activities pursuant to clauses (i), (ii) or (iii) do
not violate Sections 6 or 7 below or materially interfere with the proper
performance of Executive’s 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. 
Notwithstanding the foregoing, the Company acknowledges Executive currently
serves on the board of directors of two public companies.  Executive shall be
permitted to continue his service on both boards but shall work towards reducing
his service to one public company board.

 

3.                                      Compensation.

 

3.1                               Base Salary.  During the Term, as compensation
for Executive’s services hereunder, Executive shall receive a salary at no less
than the annualized rate of $1 Million Dollars ($1,000,000) per year (“Base
Salary” as may be increased 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 Company’s Board of Directors (the “Board”) or the
Compensation Committee of the Board (the “Compensation Committee”) from time to
time.  For the fiscal year ongoing as of the Effective Date (“FY 18”),
Executive’s annual bonus opportunity pursuant to such plan shall equal one
hundred seventy-five percent (175%) (the “Annual Target Bonus”) of the Base
Salary and for each subsequent year, equal to the bonus opportunity as
established by the Compensation Committee of the Board but no less than one
hundred seventy-five percent (175%) of the Base Salary.  For FY18 Executive will
receive an Annual Performance Bonus of no less than the pro-rata portion of an
Annual Target Bonus.  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.  Executive will be eligible to
participate during the Term in the Company’s Long Term Incentive Plan (“LTIP”). 
Executive’s long term incentive factor will be based upon four hundred twenty
five percent (425%) of Executive’s Base Salary.  Therefore, on each regular
grant date occurring during the Term, Executive will be granted awards under the
Company’s 2014 Omnibus Equity Plan or any successor plan thereto (the “Equity
Plan”), a copy of which Equity Plan has been filed as Exhibit 10.1 to the
Company’s current report on Form 8-K filed with the Securities and Exchange
Commission on June 23, 2014, pursuant to the LTIP valued at four hundred twenty
five percent (425%)

 

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of Base Salary calculated in a manner consistent with and containing the same
terms and conditions as other senior executives.

 

3.4                                                           Inducement
Awards.                             Executive to receive inducement awards to be
granted on the Effective Date of two million dollars ($2,000,000) of Restricted
Stock Units that vest 1/3 annually on the anniversary date of the grant over a
period of three years; one million (1,000,000) nonqualified stock options to
purchase shares of Rite Aid Corporation common stock with an exercise price
equal to the market price on the date of grant which vest ¼ annually on the
anniversary date of the grant over a period of four years; and one million
dollars ($1,000,000) payable net of tax withholding within the first week of the
Effective Date subject to pro-rata repayment to the Company by Executive, during
the thirty-six (36) month period of time beginning the Effective Date of this
Agreement, should Executive be terminated for Cause or should Executive resign
without Good Reason.

 

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, the Supplemental Executive Retirement Plan and
401(k) plans in which management employees 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.  During the Term, the Company shall
reimburse Executive for any expenses reasonably incurred by Executive in
furtherance of Executive’s 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 (the “Code”).  The provisions of
Section 14(b) shall apply to all reimbursements made under this Section 4.2.

 

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 $1,000.00 per
month.

 

4.5                               Annual Legal and Financial Planning
Allowance.  During the Term, the Company shall provide Executive with a legal
and financial planning allowance in the amount of $10,000.00.  During the first
year of the original Term, the Company shall provide Executive with a legal and
financial planning allowance of $20,000.00 to include legal services for review
of the initial employment agreement. The provisions of Section 14(b) shall apply
to any payments or reimbursements made under this Section 4.5.

 

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4.6                               Relocation.  Executive shall be eligible for a
payment of up to a maximum of ninety thousand dollars ($90,000.00), to assist
with relocation and living expenses.

 

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 or any
subsidiaries of 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. The provisions of Section 14(b) shall apply to any
payments or reimbursements made under this Section 4.7.

 

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 shall mean:  (i) Executive’s gross negligence or willful misconduct in
the performance of the duties or responsibilities of Executive’s 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 Executive’s duties; (iv) the
commission by Executive of an act of fraud or dishonesty toward the Company or
any subsidiary; (v) Executive’s willful misconduct or gross negligence which
damages or injures the Company or the Company’s reputation; (vi) Executive is
convicted of or pleads guilty to a misdemeanor involving moral turpitude or any
felony; or (vii) the use or imparting by Executive of any confidential or
proprietary information of the Company or any subsidiary.  Notwithstanding the
foregoing, with respect to (i) and (iii), no act or failure to act shall
constitute Cause unless Executive first receives written notice from the Company
detailing the specific conduct that constitutes Cause, and Executive is provided
thirty (3) days to cure the event or circumstances giving rise to Cause

 

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:

 

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(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 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)                                 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 a thirty (30) day 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) 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 (2) years following the date that the release of claims (referred to
below) becomes irrevocable (provided, if as of the date of termination the
release of claims could become irrevocable in either of two taxable years of
Executive, payments will not commence before the first day of the later such
taxable year), and (iii) with respect to health insurance coverage, the cost of
COBRA benefits (and equivalent benefits which shall be provided by the Company
following expiration of any COBRA continuation period) to

 

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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 non-performance based restricted stock
(“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.  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)                                   If a termination 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, to the extent not previously paid
(which shall be paid at the same time paid to other eligible participants in the
bonus plan but no later than 75 days following the end of the calendar year in
which the date of termination occurs) Executive’s Annual Target Bonus amount by
the fraction (x) the numerator of which is the number of days between the
beginning of the then current fiscal year of the Company and the date of
termination of employment and (y) the denominator of which is 365.  Executive
shall also receive any unpaid annual bonus earned for any completed fiscal year
preceding the date of termination.

 

(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 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 the Executive’s 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) and
(iii), (b) and (c) above, Executive must execute, not revoke, and abide by a
release (which shall be substantially in the form attached hereto as Appendix A)
of all other claims, cooperate with the Company in the event of litigation and
fully comply with Executive’s obligations under Sections 6 and 7 below.

 

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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 position as
a President and Chief Operating Officer of the Company 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; or

 

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

 

(d)                                 notification to Executive by the Company
that it has elected to terminate the Agreement at the expiration of the then
current Term;

 

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 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 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 three (3) month anniversary 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.  In the event
that Executive’s employment with the Company is terminated by reason of
Executive’s death or 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) continued health
insurance coverage for Executive and/or Executive’s immediate family, as
applicable, for a period of two (2) years following the date of termination of
employment.  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 days between the beginning
of the then current fiscal year of the Company and the date of termination of
employment and (y) the denominator of which is 365.  Executive or Executive’s
estate shall also be entitled to any unpaid annual bonus earned for any
completed fiscal year preceding the date of termination.

 

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(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.  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 (d).

 

“Total Disability” shall mean any physical or mental disability that has
prevented Executive from (a)(i) performing one or more of the essential
functions of Executive’s 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 and Sections 5
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.

 

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, would subject Executive to an excise tax under
Section 4999 of the 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

 

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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 affected 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.  For the avoidance of doubt, in
determining Executive’s potential exposure to the Excise Tax, the Company shall
retain a nationally recognized public accounting firm (or other professionals
agreed upon with Executive) to analyze and, if deemed appropriate by the
accounting firm, value Executive’s restrictive covenants to determine the
reasonable compensation Executive will receive for abiding by such restrictive
covenants.

 

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 Executive’s employment with the
Company, its subsidiaries, affiliates and strategic partners, Executive 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”).  For the avoidance of doubt, no information shall be deemed
“Confidential Information” to the extent: (i) Executive knew of such information
prior to the Effective Date; or (ii) such information is or becomes generally
known to the public or in the industry through no fault of Executive.  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 Executive’s
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

 

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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, 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.

 

7.                                      Noncompetition and Other Matters.

 

7.1                                Noncompetition.  During the Executive’s
employment with the Company or one of its subsidiaries and during the twelve
(12) month period following the termination of Executive’s employment (the
“Restricted Period”), Executive will not directly, or indirectly knowingly cause
any other person to, engage in Competition with the Company or any of its
subsidiaries in the restricted area (the “Restricted Area”).  “Competition”
shall mean engaging in any activity for a Competitor of the Company or any of
its subsidiaries, whether as a principal, agent, partner, officer, director,
employee, 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 individual or entity that competes
with one or more business units of the Company or its subsidiaries.  As of the
Effective 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 Catamaran Corp., as well
as health plans or insurers that provide PBM services that compete with the
Company’s PBM business.  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 shall include, but not be limited to, Walgreen’s Take Care Clinics,
CVS Health’s Minute Clinics and The Little Clinic.  During

 

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Executive’s employment by the Company or one of its subsidiaries and during the
Restricted Period, Executive will not directly, or indirectly knowingly cause
any other person to, 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 refers to those
states within the 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 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,

 

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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 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 Executive:

 

(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

 

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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 Executive from fulfilling the terms of employment and the
obligations of this Agreement;

 

(iii)          does not have in Executive’s 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 Executive
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 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 the Commonwealth of 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

 

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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.  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.

 

11.          Assignment.

 

Neither this Agreement, nor any of Executive’s rights or obligations hereunder,
may be assigned or otherwise subject to hypothecation by Executive. Subject to
the other terms of this Agreement, 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:

 

Kermit Crawford, at Executive’s last address shown on the payroll records of the
Company.

 

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 Executive be obligated to

 

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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 the Commonwealth of Pennsylvania and Executive consents to the
jurisdiction and venue of said courts in any action instituted by or on behalf
of the Company against Executive.

 

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.

 

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 Executive’s execution of this Agreement nor the full and complete
performance of Executive’s 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 Executive’s 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.

 

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

 

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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.

 

(a)           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 section 409A of
the Code (“409A”), and is (a) payable upon Executive’s termination; (b) at a
time when the 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.

 

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, Executive’s 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)
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).

 

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The Company shall pay to 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 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.

 

(b)           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 the
Executive’s taxable year in which the expense occurred.

 

THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK

 

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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:

Senior Vice President & General Counsel

 

 

 

 

EXECUTIVE

 

 

 

 

 

/s/ Kermit Crawford

 

Kermit Crawford

 

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