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                                                                  EXHIBIT 10.18

                              EMPLOYMENT AGREEMENT


         THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of the
16th day of November, 2000 (the "Effective Date") by and between Rite Aid
Corporation, a Delaware corporation (the "Company"), and Elliot S. Gerson
("Executive").

         WHEREAS, Executive desires to provide the Company with his services and
the Company desires to employ Executive in the capacity of Senior Executive Vice
President and General Counsel 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 parties hereto, intending to be legally bound, agree as
follows:

1.       Term of Employment.

         The term of Executive's employment with the Company hereunder (the
"Term") pursuant to this Agreement shall commence on 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;
provided, however, that on each anniversary of the Effective Date occurring
prior to the termination of Executive's employment hereunder (each such date a
"Renewal Date"), an additional year shall be added to the Term, unless notice of
non-renewal has been delivered by one party to the other party at least 180 days
prior to such Renewal Date. For purposes of this Agreement, except as otherwise
provided herein, the phrases "year during the Term" or "during any year of the
Term" or similar language shall refer to each 12-month period commencing on the
Effective Date or applicable anniversaries thereof.

2.       Position And Duties.

         2.1 Position. During the Term, Executive shall be employed as Senior
Executive Vice President and General Counsel. 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.

         2.2 Duties. Subject to the supervision and control of the Senior
Executive Vice President and Chief Administrative Officer of the Company (or any
designee), to whom he shall report, Executive shall do and perform all services
and acts necessary or advisable to fulfill the duties and responsibilities of
his position as Senior Executive Vice President and General Counsel and shall
render such service on the terms set forth herein. In addition, Executive shall
have such other executive and managerial powers and duties with respect to the
Company and its subsidiaries, affiliates and strategic partners as may be
assigned to him by the Senior Executive Vice President and Chief Administrative
Officer of the Company or any designee. Except for sick leave, vacations (as
provided in Section 4.3 below), and excused leaves of absence, Executive shall,
throughout the Term, devote substantially all his working time, attention,
knowledge and skills faithfully and to the best of his ability, to the duties
and responsibilities of his position in furtherance of the business affairs and
activities of the Company and its subsidiaries, affiliates and strategic
partners. 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 senior executive officers of the Company.

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3.       Compensation.

         3.1 Base Salary. During the Term, as compensation for his services
hereunder, Executive shall receive a salary at the annualized rate of Five
Hundred Thousand Dollars ($500,000) per year ("Base Salary"), which shall be
paid in accordance with the Company's normal payroll practices and procedures,
less such deductions or offsets required by applicable law or otherwise
authorized by Executive.

         3.2 Annual Performance Bonus. Executive shall participate each fiscal
year during the Term in the Company's annual bonus plan as adopted and approved
by the Board or the Compensation Committee from time to time. Executive's annual
target bonus opportunity pursuant to such plan (the "Annual Target Bonus") shall
equal 50% of the Base Salary in effect for Executive at the beginning of such
fiscal year.

         3.3 Stock Awards.

             (a) Executive currently holds options (the "Options") to purchase
985,000 shares of the Company's common stock, par value $1.00 per share
("Company Stock"). These Options are non-qualified stock options with varying
exercise prices and are subject to the acceleration, exercise and termination
provisions set forth in Section 3.3(b) and Article 5 hereof and otherwise will
be evidenced by and subject to the terms of the Company's form of stock option
agreement for officers.

             (b) Upon the occurrence of a Change in Control of the Company prior
to the termination of Executive's employment with the Company, the Options or
any other option to purchase Common Sock then held by Executive shall
immediately vest and become exercisable in full and all remaining restrictions
on any restricted stock granted to executive shall immediately lapse. For
purposes of this Agreement "Change in Control" shall have the meaning set forth
in the attached Appendix A.

             It is understand and acknowledged by Executive that the securities
underlying the Options will not be subject to an effective registration
statement under the federal securities laws until some time 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 5.3 and 5.5, the
securities underlying the then vested and exercisable portion of the Options (or
any other option to purchase Company Stock then held by Executive) are not
subject to an effective registration statement, the 90-day periods in Section
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. The Company
further agrees that if, as of the date of Executive's voluntary termination of
employment other than for Good Reason, the securities underlying the then vested
and exercisable portion of the Options (or any other option to purchase Company
Stock then held by Executive) are not subject to an effective registration
statement, Executive will be permitted to exercise the Options and any other
option to purchase Common Stock then held by Executive, to the extent vested and
exercisable as of the date of such termination of employment, during the 30-day
period following the first date such securities become subject to an effective
registration statement.

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4.       Additional Benefits.

         4.1 Employee Benefits. During the Term, Executive shall be entitled to
participate in the employee benefit 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 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 $750.00 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 $5,000.

         4.6 Indemnification. The Company shall (a) indemnify and hold Executive
harmless, to the full extent permitted under applicable law, for, from and
against any and all losses, claims, costs, expenses, damages, liabilities or
actions (including security holder actions, in respect thereof) relating to or
arising out of Executive's employment with and service as an Officer of the
Company; 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. Following any termination of
Executive's employment or service with the Company, the Company shall cause any
Director and Officer liability insurance policies applicable to Executive prior
to such termination to remain in effect for six (6) years following the date of
termination of employment.

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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 his position with the Company
or any subsidiary, or failure to timely carry out any lawful directive of the
Senor Executive Vice President and Chief Administrative Officer or any designee;
(ii) Executive's misappropriation of any funds or property of the Company or any
subsidiary; (iii) the commission by Executive of an act of fraud or dishonesty
toward the Company or any subsidiary; or (iv) 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's 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 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.

             (b) Except as provided in Section 3.3(c), any portion of the
Options or any other then outstanding stock options that has not been exercised
prior to the date of termination shall immediately terminate as of such date,
and any portion of any Restated 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.

Any termination of Executive's employment by Executive voluntarily without Good
Reason shall be effective upon 30 days' notice to the Company.

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         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 times the sum of Executive's then Base
Salary plus Annual Target Bonus as of the date of termination of employment,
such amount payable in equal installments pursuant to the Company's standard
payroll procedures for management employees over a period of two years following
the date of termination of employment, and (iii) continued health insurance
coverage for Executive and his immediate family for a period of two years
following the date of termination of employment. In addition, if such
termination occurs following the start of the Company's fiscal year beginning on
or about March 2001, Executive shall also be entitled to receive a pro rata
annual bonus determined by multiplying Executive's then Annual Target Bonus by a
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.

             (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
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 90 days following
the date of termination of employment (or, if earlier, until the expiration of
the respective terms of the options), whereupon all such options shall
terminate. Any remaining portions of Executive's stock options that have not
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 5.65 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.

Any termination of employment pursuant to this Section 5.3 shall be effective
upon thirty (30) days notice thereof.

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

             (a) Any material adverse alteration in Executive's titles,
positions, status, duties, authorities, reporting relationship or
responsibilities with the Company or its subsidiaries from those specified in
this Agreement, as the same may be augmented from time to time;

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             (b) The assignment to Executive of any duties or responsibilities
materially inconsistent with Executive's status as Senior Executive Vice
President and General Counsel of the Company; or

             (c) Any other material breach of this Agreement by the Company,
including, without limitation, any decrease in Executive's then Base Salary or
Annual Target Bonus opportunity as set forth in Sections 3.1 and 3.2;

provided, however, that in each such case the Company shall have the right,
within ten (10) days after receipt of notice from Executive of the Company's
violation of any of the foregoing, to cure the event or circumstances giving
rise to such Good Reason, in the event of which cure such event or circumstances
shall be deemed not to 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
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 two
years 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
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 90 days following
the date of termination of employment (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 option that have not
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 in connection with
Executive's employment with the Company shall terminate effective as of the date
of such termination of employment.

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"Total Disability" shall mean any physical or mental disability that prevents
Executive from performing one or more of the essential functions of his position
for a period of not less than 90 days in any 12-month period and/or which is
expected to be of permanent duration.

         5.6 Survival. In the event of any termination of Executive's employment
for any reason, Executive and the Company nevertheless shall continue to be
bound by the terms and conditions set forth in Sections 5.8, 6 through 10 below,
which shall survive the expiration of the Term.

         5.7 Exercise Tax Gross-Up.

             (a) In the event that any payment or benefit received or to be
received by Executive pursuant to the Terms of this Agreement or any other plan,
arrangement or agreement of the Company (or any affiliate) (collectively, the
"Payments") would be equal to the Excise Tax (the "Excise Tax") imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), as
determined as provided below, the Company shall pay to Executive, at the time
specified in Section 5.7(b) below, an additional amount (the "Gross-Up Payment")
such that the net amount retained by Executive, after deduction of the Excise
Tax on payments and any federal, state and local income and employment or other
tax and the Excise Tax upon the Gross-Up Payment, and any interest, penalties or
additions to tax payable by the Company Executive with respect thereto, shall be
equal to the Total Payments. For purposes of determining whether any of the
Payments will be subject to the Excise Tax and the amounts of such Excise Tax,
(1) the total amount of the Payments shall be treated as "parachute payments"
within the meaning of section 280G(b)(2) of the Code, and all "excise parachute
payments" within the meaning of section 280G(b)(1) of the Code shall be treated
as subject to the Excise Tax, except to the extent that, in the opinion of tax
counsel ("Tax Counsel") reasonably acceptable to Executive and selected by the
accounting firm which was, immediately prior to the event giving rise to the
Payment, the Company's independent auditor (the "Auditor"), a Payment (in whole
or in part) does not constitute a "parachute payment" within the meaning of
section 280G(b)(2) of the Code, or such "excess parachute payments" (in whole or
in part) are not subject to the Excise Tax, (2) the amount of the Payments that
shall be treated as subject to the Excise Tax shall be equal to the lesser of
(A) the total amount of the Payments or (B) the amount of "excess parachute
payments" within the meaning of section 280G(b)(1) of the Code (after applying
clause (1) hereof), and (3) the value of any noncash benefits or any deferred
payment or benefit shall be determined by the Auditor in accordance with the
principles of sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, Executive shall be deemed to pay
federal income taxes at the highest marginal rates of federal income taxation
applicable to individuals in the calendar year in which the Gross-Up Payment is
to be made and state and local income taxes at the highest marginal rates of
taxation applicable to individuals as are in effect in the state and locality of
Executive's residence in the calendar year in which the Gross-Up Payment is to
be made, net of the maximum reduction in federal income taxes that can be
obtained from deduction of such state and local taxes, taking into account any
limitations applicable to individuals subject to federal income tax at the
highest marginal rates.

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             (b) The Gross-Up Payment provided for in Section 5.7(a) hereof
shall be made upon the earlier of (i) ten days following the date of termination
of Executive's employment or (ii) the imposition upon Executive or payment by
Executive of any Excise Tax.

             (c) If it is established pursuant to a final determination of a
court or an Internal Revenue Service proceeding that the Excise Tax is less than
the amount taken into account under Section 5.7(a) hereof, Executive shall repay
to the Company within thirty (30) days of Executive's receipt of notice of such
final determination the portion of the Gross-Up Payment attributable to such
reduction (plus the portion of the Gross-Up Payment attributable to the Excise
Tax and federal, state and local income tax imposed on the portion of the
Gross-Up Payment being repaid by Executive if and to the extent that such
repayment results in a reduction in Excise Tax and a dollar-for-dollar reduction
in Executive's taxable income and wages for the purpose of federal, state and
local income taxes) plus any interest received by Executive on the amount of
such repayment. If it is established pursuant to a final determination of a
court or an Internal Revenue Service preceding that the Excise Tax exceeds the
amount taken into account hereunder (including, without limitation, by reason of
any payment the existence or amount of which cannot be determined at the time of
the Gross-Up Payment), the Company shall make an additional Gross-Up Payment
pursuant to Section 5.7(a) in respect of such excess within thirty (30) days of
the Company's receipt of notice of such final determination or proceeding.
Executive and the Company shall each reasonably cooperate with the other in
connection with any administrative or judicial proceedings concerning the
existence or amount of liability for Excise Tax with respect to the Payments.

             (d) In the event of any change in, or further interpretation of,
sections 280G or 4999 of the Code and the regulations promulgated thereunder,
Executive shall be entitled, by written notice to the Company, to request an
opinion of Tax Counsel regarding the application of such change to any of the
foregoing, and the Company shall use its best efforts to cause such opinion to
be rendered as promptly as practicable. All fees and expense of the Auditor and
Tax Counsel incurred in connection with this Agreement shall be borne by 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 other than by
reason of death or total disability.

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, the markets for their products, key personnel, past, present or
future actual or threatened litigation, trade secrets, current and prospective
customer lists, operational methods, acquisition plans, prospects, plans for
future development and other business affairs and information about the Company
and its subsidiaries, affiliates and strategic partners not readily available to
the public (the "Confidential Information"). Executive further acknowledges that
the services to be performed under this Agreement are of a special, unique,
unusual, extraordinary and intellectual character. In recognition of the
foregoing, Executive covenants and agrees as follows:

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         6.1 No Disclosure or Use of Confidential Information. At no time shall
Executive ever divulge, disclose, or otherwise use any Confidential Information,
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.

         6.2 Return of Company Property, Record 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, 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.

7.       Noncompetition and Other Matters.

         7.1 Noncompetition. During the Term and, as applicable, for the
two-year period immediately following the date of termination of Executive's
employment either (x) by the Company for Cause or (y) by Executive other than
for Good Reason, 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 services to, any
Competing Business; or (iii) become interested in any Competing Business in any
capacity, including, without limitation, as an individual, partner, shareholder,
officer, director, principal, agent, trustee or consultant; 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 1% or more of any class of
securities of such entity and (ii) provide legal services as an independent
contractor. 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 drug stores.

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         7.2 Noninterference. During the Term and for the two-year period
immediately following the date of termination of Executive's employment at any
time and for any reason (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 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.

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 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.

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         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 reduce the duration or scope of such
provision, as the case may be (it being the intent of the parties that any such
reduction be limited to the minimum extent necessary to render such provision
enforceable), and, in its 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 breach 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 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.

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 words, trade secrets, or other proprietary rights);

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

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

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             (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 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 binding arbitration in Harrisburg, Pennsylvania according to the
National Employment Dispute Resolution Rules and procedures of the American
Arbitration Association. The parties agree that the parties shall each bear his
or its own attorney's fees and costs in connection with any such arbitration.
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 Employment 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.

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, 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
<PAGE>

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:  Chief Administrative Officer
                                  Fax: (717) 975-5905

              with a copy to:     Kaye, Scholer, Fierman, Hays & Handler, LLP
                                  1999 Avenue of the Stars, Suite 1600
                                  Los Angeles, California 90067
                                  Attention:  Andrew Ash, Esq.
                                  Fax: (310) 788-1200

              If to Executive:    Elliot S. Gerson
                                  538 Bridgeview Drive
                                  Lemoyne, Pennsylvania 17043
                                  Fax: 717-731-1438

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
Executive or others whether in respect of claims made under this Agreement or
otherwise. In no event shall Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts, benefits and other
compensation payable or otherwise provided to Executive under any of the
provisions of this Agreement, and such amounts shall not be reduced, regardless
of whether Executive obtains other employment.

         13.2 Governing Law. This Agreement 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.

                                       13
<PAGE>

         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
Executive and the Company and/or any subsidiary or affiliate, except for the
Deferred Compensation Agreement, dated November 15, 1999 between the Company and
Executive.

         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 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.

         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 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 Executive to anticipate, alienate, assign, sell,
transfer, pledge, encumber or charge the same shall be void. Payments hereunder
shall not be considered assets of Executive in the event of insolvency or
bankruptcy.

                                       14
<PAGE>

         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.

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

                                   RITE AID CORPORATION


                                   /s/ David R. Jessick
                                   ------------------------------------------


                                   By:               David R. Jessick
                                      ---------------------------------------

                                   Its: Sr. Exec. V.P. & Chief Admin. Officer
                                        -------------------------------------


                                   EXECUTIVE:

                                   /s/ Elliot Gerson
                                   ------------------------------------------



                                       15
<PAGE>
                                   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:

ARTICLE  1 any Person is or becomes the Beneficial Owner, directly or
         indirectly, of securities of the Company representing 25% or more of
         the combined voting power of the Company's then outstanding voting
         securities; or

ARTICLE  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

ARTICLE  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 60% 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 25%
         or more of the combined voting power of the Company's then outstanding
         voting securities; or

ARTICLE  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
         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.

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

<PAGE>

         "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.

                                       2