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                                                                          EX 4.5

                              EMPLOYMENT AGREEMENT

                  THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as
of the 28th day of January, 2000 (the "Effective Date") by and between Rite Aid
Corporation, a Delaware corporation (the "Company"), and Don P. Davis (the
"Executive").

                  WHEREAS, Executive desires to provide the Company with his
services and the Company desires to employ Executive in the capacity of Senior
Vice President and Chief Information Officer 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") 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 three (3) 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 nonrenewal has been
delivered by one party to the other party at least 180 days prior to such
Renewal Date. For purposes of this Agreement, 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 Vice President and Chief Information Officer of the Company. 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
Chief Administrative Officer of the Company, 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 Vice President and Chief
Information Officer and shall render such services 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 Chief Administrative
Officer. 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 Board of Directors of the Company (the
"Board') or the Chief Executive Officer of 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
Four Hundred Thousand Dollars ($400,000) 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. During the Term the Base Salary shall be
reviewed periodically by the Compensation Committee of the Board for possible
increase. Any increase in the Base Salary shall not limit or reduce any other
obligation of the Company under this Agreement. The Base Salary shall not be
reduced after any such increase, and the term "Base Salary" shall thereafter
refer to the Base Salary as from time to time so increased.

                  3.2 Guaranteed Bonus. Executive shall be entitled to receive a
guaranteed bonus (the "Guaranteed Bonus") in the amount of $25,000 payable on
April 1, 2000, provided Executive is employed with the Company hereunder on that
date.

                  3.3 Performance Bonus. Commencing with the Company's fiscal
year beginning on or about February 27, 2000, the Executive shall participate
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. The Executive's
annual target bonus opportunity pursuant to such plans (the "Annual Target
Bonus") shall equal 50% of the Base Salary in effect for the Executive at the
beginning of each such fiscal year.

                  3.4 Stock Awards.

                      (a) Subject to the commencement of Executive's employment
hereunder, the Compensation Committee of the Board has approved the grant to
Executive of an option (the "Option" ) to purchase 350,000 shares of the
Company's common stock, par value $ 1.00 per share ("Company Stock"). The Option
shall (i) be a non-qualified stock option, (ii) have an exercise price equal to
the closing price of the Company Stock as reported on the New York Stock
Exchange on the Effective Date, (iii) have a term of ten (10) years following
the Effective Date, (iv) vest and become exercisable as to one-third of the
shares of Company Stock subject to the Option on each of the first three
anniversaries of the Effective Date, (v) be subject to the acceleration,
exercise and termination provisions set forth in Section 3.4(c) and Article 5
hereof and (vi) otherwise be evidenced by and subject to the terms of the
Company's form of stock option agreement for officers.

                      (b) Subject to the commencement of Executive's employment
hereunder, the Compensation Committee of the Board has approved the grant to
Executive of 50,000 shares of restricted Company Stock (the "Restricted Stock").
Subject to (i) the acceleration and forfeiture provisions set forth in Section
3.4(c) and Article 5 hereof and (ii) the terms of the Company's form of
restricted stock agreement for officers, the restrictions applicable to the
Restricted Stock shall lapse as to one-third of such shares on each of the first
three anniversaries of the Effective Date.

                      (c) Upon the occurrence of a Change in Control of the
Company prior to the termination of Executive's employment with the Company, the
Option shall immediately vest and become exercisable in full, and all remaining
restrictions on the Restricted Stock shall immediately lapse. For purposes of
this Agreement "Change in Control" shall have the meaning set forth in the
attached Appendix A.


                                        2


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                      (d) It is understood and acknowledged by Executive that
the securities underlying the Option 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
Option (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
Sections 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 Option (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 Option, 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.

     4.           Additional Benefits.

                  4.1 Employee Benefits. During the Term, Executive shall be
entitled to participate in the employee benefit plans in which executive
officers 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 per month.

                  4.5 Annual Financial Planning Allowance. During each year of
the Term, the Company shall provide Executive with a financial planning
allowance in the amount of $5,000.

                  4.6 Relocation Expenses.

                      (a) The Company shall reimburse Executive for his
reasonable expenses incurred in moving his household goods and cars from the
Charlotte, North Carolina area to the Harrisburg, Pennsylvania area, in
accordance with the Company's moving expense policies applicable to executive
officers generally.

                      (b) The Company shall reimburse Executive for any loss
incurred upon sale of his principal Charlotte residence (measured as the excess,
if any, of (i) the sum of (A) the sale price plus (B) a standard real estate
commission, over (ii) the original purchase price of the residence), such amount
to be "grossed up" to offset in full any net increase in executive's federal,
state and local income, employment and other taxes resulting therefrom (and from
such gross-up); provided that the aggregate




                                        3

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amount payable pursuant to this Section 4.6(b), including any such gross-up,
shall not exceed $ 100,000. Executive agrees that he shall use his best efforts
to sell such residence at its fair market value.

                      (c) The Company shall reimburse Executive for his
reasonable living expenses for a temporary residence in the Harrisburg area
until the date of relocation.

                      (d) The Company shall reimburse Executive for the
reasonable costs of round trip air travel between Harrisburg and Charlotte for
each weekend during the period from the Effective Date through the earlier of
his relocation date or August 3 1, 2000. The Company shall also reimburse
Executive for a reasonable number of roundtrip visits between Charlotte and the
Harrisburg area by his immediate family members prior to the relocation date,
including reasonable costs for meals, lodging and transportation during such
trips.

                  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) related 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. Following any termination of
the Executive's employment or service with the Company, the Company shall cause
any director and officer liability insurance policies applicable to the
Executive prior to such termination to remain in effect for six (6) years
following the date of termination of employment.

     5.           Termination.

                  5.1 Termination of Executive's Employment by the Company for
Cause. The Company may terminate Executive's employment hereunder for Cause (as
defined below). Such termination shall be effected by written notice thereof
delivered by the Company to Executive, indicating in reasonable detail the facts
and circumstances alleged to provide a basis for such termination, and shall be
effective as of the date of such notice in accordance with Section 13 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
Board, the Chief Executive Officer or Chief Administrative Officer; (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 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


                                        4




<PAGE>

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 3.4(d), any portion of
the Option or any other then outstanding stock option that has not been
exercised prior to the date of termination shall immediately terminate as of
such date, and any portion of the Restricted Stock or any other restricted stock
or 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 Cause shall be effective upon 30 days' notice to the
Company.

                  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) any previously unpaid Guaranteed Bonus, (iii) 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, (iv) an amount equal to two
times the sum of Executive's 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 executive officers over a
period of two years following the date of termination of employment, and (v)
continued health insurance coverage for Executive and his immediate family 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
3.4(d), 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 portion 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 5.6 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.

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


                                        5

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

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

                      (c) any other material breach of this Agreement by the
Company, including without limitation any decrease in Executive's Base Salary or
Annual Target Bonus opportunity as set forth in Sections 3.1 and 3.3;

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 previously
unpaid Guaranteed Annual Bonus, (iii) any other benefits payable under the then
current disability and/or death benefit plans, as applicable, in which Executive
is a participant and (iv) 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
3.4(d), 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 portion 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 5.6 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.

                  "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.



                                        6


<PAGE>

                  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 6 through 11
below, which shall survive the expiration of the Term.

                  5.7 Excise Tax Gross-Up.

                      (a) In the event that any payment or benefit received or
to be received by the Executive pursuant to the terms of this Agreement or of
any other plan, arrangement or agreement of the Company (or any affiliate)
(collectively, the "Payments") would be subject 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 the
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 the 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 Executive with
respect thereto, shall be equal to the total Payments. For purposes of
determining whether any of the Payments will be sub subject to the Excise Tax
and the amounts of such Excise Tax, (1) the total amount of the Payments shall
be treated as 64 parachute payments" within the meaning of section 280G(b)(2) of
the Code, and all "excess 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 cc 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, the 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 the 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.

                      (b) The Gross-Up Payments 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 the Executive
or payment by the 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
d= the amount taken into account under Section 5.7(a) hereof, the Executive
shall repay to the Company within thirty (30) days of the 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 the Executive if and to
the extent that such repayment results in a reduction in Excise Tax and a
dollar-for-dollar reduction in the Executive's taxable income and wages for the
purpose of federal, state and local income taxes) plus any




                                        7


<PAGE>

interest received by the Executive on the amount of such repayment. If it is
established pursuant to a final determination of a court or an Internal Revenue
Service proceeding 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 opinion. The 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, the 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
expenses 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
under any circumstances and for any or no reason.

     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, 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, 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, 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



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<PAGE>

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 State 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 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 I% or more of any class of securities of such
entity. For purposes of this Section 7.1, the phrase "Competing Business" shall
mean any entity a majority of whose business involves the ownership and
operation of retail drug stores.

                  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





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<PAGE>


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.

                  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 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.

     9.           Assignment of Intellectual Property Rights

                  9.1 Definition of "Intellectual Property." As used herein, the
term "Intellectual Property" shall mean all inventions, discoveries, processes,
literary, dramatic, musical and other artistic or creative materials, and all
other intellectual property of any nature and in any media, including
works-in-progress, whether or not subject to patent, trademark, tradename,
copyright, trade secret, or mask work protection, and whether or not reduced to
practice, which are made, created, authored, conceived, or reduced to practice
by Executive, either alone or jointly with others, during the period of
employment with the Company which (A) relate to the actual or anticipated
business or activities of the Company or any subsidiary, affiliate or strategic
partner, (B) result from or is suggested by work performed by Executive




                                       10

<PAGE>

for the Company or any subsidiary, affiliate or strategic partner (whether or
not made or conceived during normal working hours or on the premises of the
Company or such subsidiary, affiliate or strategic partner) or (C) which result,
to any extent, from use of the premises or property of the Company or any
subsidiary, affiliate or strategic partner.

                  9.2 Work for Hire. Executive expressly acknowledges that all
copyrightable aspects of the Intellectual Property are to be considered "works
made for hire" within the meaning of the Copyright Act of 1976, as amended (the
"Act"), and that the Company is to be the "author" within the meaning of such
Act for all purposes. All such copyrightable works, as well as all copies of
such works in whatever medium fixed or embodied, shall be owned exclusively by
the Company as of its creation, and Executive hereby expressly disclaims any and
all interest in any of such copyrightable works.

                  9.3 Assignment. Executive acknowledges and agrees that all
Intellectual Property constitutes trade secrets of the Company and shall be the
sole property of the Company or any other entity designated by the Company. In
the event that title to any or all of the Intellectual Property, or any part or
element thereof, may not, by operation of law, vest in the Company, or such
Intellectual Property may be found as a matter of law not to be "works made for
hire" within the meaning of the Act, Executive hereby conveys and irrevocably
assigns to the Company, without further consideration, all his right, title and
interest, throughout the universe and in perpetuity, in all Intellectual
Property and all copies thereof, in whatever medium fixed or embodied, and in
all written records, graphics, diagrams, notes, or reports relating thereto in
Executive's possession or under his control, including, with respect to any of
the foregoing, all rights of copyright, patent, trademark, trade secret, mask
work, and any and all other proprietary rights therein, the right to modify and
create derivative works, the right to invoke the benefit of any priority under
any international convention, and all rights to register and renew same.

                  9.4 Proprietary Notices; No Filings; Waiver of Moral Rights.
Executive acknowledges that all Intellectual Property shall, at the sole option
of the Company, bear the Company's patent, copyright, trademark, trade secret,
and mask work notices. Executive agrees not to file any patent, copyright, or
trademark applications relating to any Intellectual Property, except with prior
written consent of an authorized representative of the Company (other than
Executive). Executive hereby expressly disclaims any and all interest in any
Intellectual Property and waives any right of droit morale or similar rights,
such as rights of integrity or the right to be attributed as the creator of the
Intellectual Property.

                  9.5 Further Assurances. Executive agrees to assist the
Company, or any party designated by the Company, promptly on the Company's
request, whether before or after the termination of employment, however such
termination may occur, in perfecting, registering, maintaining, and enforcing,
in any jurisdiction, the Company's rights in the Intellectual Property by
performing all acts and executing all documents and instruments deemed necessary
or convenient by the Company, including, by way of illustration and not
limitation:

                      (a) Executing assignments, applications, and other
documents and instruments in connection with (i) obtaining patents, copyrights,
trademarks, mask works, or other proprietary protections for the Intellectual
Property and (ii) confirming the assignment to the Company of all right, title,
and interest in the Intellectual Property or otherwise establishing the
Company's exclusive ownership rights therein.

                      (b) Cooperating in the prosecution of patent, copyright,
trademark and mask work applications, as well as in the enforcement of the
Company's rights in the Intellectual Property,



                                       11

<PAGE>

including, but not limited to, testifying in court or before any patent,
copyright, trademark or mask work registry office or any other administrative
body.

                  Executive shall be reimbursed for all out-of-pocket costs
incurred in connection with the foregoing, if such assistance is requested by
the Company after the termination of Executive's employment. In addition, to the
extent that, after the termination of employment for whatever reason,
Executive's technical expertise shall be required in connection with the
fulfillment of the aforementioned obligations, the Company shall compensate
Executive at a reasonable rate for the time actually spent by Executive at the
Company's request rendering such assistance.

                  9.6 Power of Attorney. Executive hereby irrevocably appoints
the Company to be his Attorney-In-Fact to execute any document and to take any
action in his name and on his behalf and to generally use his name for the
purpose of giving to the Company the full benefit of the assignment provisions
set forth above.

                  9.7 Disclosure of Intellectual Property. Executive shall make
full and prompt disclosure to the Company of all Intellectual Property subject
to assignment to the Company, and all information relating thereto in
Executive's possession or under his control as to possible applications and use
thereof.

                  9.8 Limited Exception. The Company hereby notifies Executive
that the provisions of this Section 9 do not apply to any Intellectual Property
for which no equipment, supplies, facilities or trade secret information of the
Company was used and which was developed entirely on the Executive's own time,
unless (i) such Intellectual Property relates to the business of the Company or
to the Company's actual or demonstrably anticipated research or development, or
(ii) such Intellectual Property results from any work performed by the Executive
for the Company.

     10.          No Violation of Third-Party Rights. Executive represents,
warrants and covenants that he:

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

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

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

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



                                       12



<PAGE>

                  Executive has supplied to the Company a copy of each written
agreement to which Executive is subject which includes any obligation of
confidentiality, assignment of intellectual property or non-competition.

                  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.

     11.          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 attorneys' 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 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.

     12.          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.

     13.          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





                                       13

<PAGE>

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

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:           Don P. Davis
                           (at the most recent address in the Company's records)

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

     14.          General.

                  14.1 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 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.

                  14.2 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State 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.

                  14.3 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.

                  14.4 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.






                                       14
<PAGE>

                  14.5 No 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.

                  14.6 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.

                  14.7 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.

                  14.8 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.

                  14.9 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.

                  14.10 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.

                  14.11 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. 14.12 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



                                                     ___________________________
                                                     By:________________________
                                                     Its:_______________________




                                                     EXECUTIVE



                                                     ___________________________




                                       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:

                  (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

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

                  (3) there is consummated a merger or consolidation of the
         Company or any direct or indirect subsidiary of the Company with any
         other corporation, other than (i) a merger or consolidation which would
         result in the voting securities of the Company outstanding immediately
         prior to such merger or consolidation continuing to represent (either
         by remaining outstanding or by being converted into voting securities
         of the surviving entity or any parent thereof) at least 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

                  (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.

                  "Beneficial Owner" shall have the meaning set forth in Rule
l3d-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.







                                       16
<PAGE>

                  "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.






                                       17