Exhibit 10.1


EMPLOYMENT
AGREEMENT


THIS
EMPLOYMENT AGREEMENT (the “Agreement”) is entered into as of the 26th day of June, 2007 (the “Effective Date”) by and between Rite Aid Corporation, a Delaware
corporation (the “Company”) and Brian Fiala (the “Executive”).


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


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


1.                              Term Of Employment.


The term of
Executive’s employment under this Agreement shall commence on the Effective
Date and, unless earlier terminated pursuant to Section 5 below, shall
continue for a period ending on the date that is two (2) years following the
Effective Date (the “Original Term of Employment”). The Original Term of
Employment shall be automatically renewed for successive one-year terms (the “Renewal
Terms”) unless at least 120 days prior to
the expiration of the Original Term of Employment or any Renewal Term,
either Party notifies the other Party in writing that he or it is electing to
terminate this Agreement at the expiration of the then current Term of
Employment. “Term” shall mean the Original Term of Employment and all Renewal
Terms. For purposes of this Agreement, except as otherwise provided herein, the
phrase “year during 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             Generally.   During
the Term, Executive shall serve as an officer of the Company and shall have such officer level duties, responsibilities and
authority as shall be assigned by the Company from time to time. Executive
shall devote his full working time, attention, knowledge and skills faithfully
and to the best of his ability, to the duties and responsibilities assigned by the Company in
furtherance of the business affairs and activities
of the Company and its subsidiaries, affiliates and strategic partners.
Following termination of Executive’s employment for any reason, Executive shall
immediately resign from all offices and positions he holds with the Company or
any subsidiary.


2.2        Other Activities.   Anything herein to the
contrary notwithstanding, nothing in this
Agreement shall preclude the Executive from engaging in the following activities: (i) serving on the board of directors of a reasonable
number of other corporations or
the boards of a reasonable number of trade associations and/or charitable
organizations, subject to the Company’s approval, which shall not be
unreasonably withheld, (ii) engaging in charitable activities and
community affairs, and (iii) managing
his personal investments and affairs, provided that such activities do not
violate Sections 6 or 7 below or materially
interfere with the proper performance of his duties and responsibilities under this
Agreement. Executive shall at all times be subject to, observe and carry out
such rules, regulations, policies, directions, and restrictions as the Company
may from time to time establish for officers of the Company.


3.                              Compensation.


3.1             Base
Salary.   During the Term, as compensation for his
services hereunder, Executive shall receive a salary at the annualized rate of
Four Hundred Forty Thousand Dollars
($440,000.00) per year (“Base Salary” as may be adjusted from time to time),
which shall be paid in accordance with the Company’s 



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normal
payroll practices and procedures, less such deductions or offsets
required by applicable law or otherwise authorized by Executive.


3.2        Annual
Performance Bonus.   The Executive shall participate
each fiscal year during the Term in the Company’s annual bonus plan as adopted
and approved by the Board or the Compensation Committee from time to time. For
the current fiscal year (Fiscal Year 2008), Executive’s annual bonus
opportunity pursuant to such plan shall equal 60% (the “Annual Target Bonus”)
of the Base Salary, with a one time opportunity for fiscal year 2008 of an
additional payment equal to 50% of your individual (on plan) bonus target
provided the Company achieves 100% of more of the Adjusted EBITDA target for
fiscal year 2008, and if inclusive in such results are costs savings of at
least $155 million related to the recent acquisition of the Brooks and Eckerd
drugstore chains. For subsequent fiscal years, the Annual Target Bonus may be
adjusted and shall be based upon the Board approved plan for that year.


3.3                       Equity Awards.


(a)        At the
first regular meeting of the Board of Directors following the Effective Date
and subject to the approval by the Compensation Committee of the Board,
Executive will be granted an option (the “Option”) to purchase 200,000 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 (“NYSE”) on the
date of grant, (iii) have a term of ten (10) years following the
date of grant, (iv) vest and become exercisable as to one-fourth of the
shares of the Company Stock subject to the option on each of the first four (4) anniversaries
from the date of grant, (v) be subject to the acceleration exercise and
termination provisions set forth in Section 3.3(d) and Article 5
hereof and (vi) otherwise be evidenced by and subject to the terms of the
Company’s stock option and equity plans.


(b)        At the first regular meeting of the Board of Directors
following the Effective Date and subject to the approval by the Compensation
Committee of the Board, Executive will be recommended for participation in the
Company’s Senior Executive Equity Plan (the “SEEP”). The award will be based
upon Executive’s annual Base Salary and the
stock closing price on the date of grant. For the current fiscal year (FY 2008)
only, Executive’s participation in the SERP will be on a prorated basis.


(c)              At the first regular meeting of the Board of
Directors following the Effective Date and subject to the approval by the
Compensation Committee of the Board, Executive will be granted 50,000 shares of
restricted Company Stock (the “Restricted Stock”).
Subject to (i) acceleration and forfeiture provisions set forth in Section 3.3(d) and
Article 5 hereof and (ii) the terms of the Company’s stock
option and equity plans, the restrictions applicable to the Restricted Stock
shall lapse as to one-third of such shares on each of the first three
anniversaries from the date of grant.


(d)        Upon the occurrence of a Change in Control of the
Company following the first anniversary of the Effective Date and prior to the
termination of Executive’s employment with the Company, the Options awarded
pursuant to subsection (a) above then held by Executive shall immediately
vest and become exercisable in full and all remaining restrictions on any
Restricted Stock granted to Executive pursuant to subsection (c) above
shall immediately lapse. For purposes of this Agreement “Change in Control”
shall have the meaning set forth in the attached Appendix A.


(e)        It is understood and acknowledged by Executive that
the securities underlying the Options and the Restricted Stock may 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 



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of the date of termination
of Executive’s employment under the circumstances described in Sections 5.2
(except termination for Cause), 5.3 and
5.5, the securities underlying the then vested and exercisable portion of the
Options are not subject to an effective registration statement, the 90-day
periods in Section 5.2 (except termination for Cause), 5.3 and 5.5,
as applicable, will be deemed to run from the
first date such securities become subject to an effective registration
statement.


4.                              Additional Benefits.


4.1        Employee Benefits.   During the Term,
Executive shall be entitled to participate in the employee benefit plans
(including, but not limited to medical, dental and life insurance plans,
short-term and long-term disability coverage, the Supplemental Executive
Retirement Plan and 401(k) plans) in which management employees of the
Company are generally eligible to participate, subject to any eligibility
requirements and the other generally applicable terms of such plans.


4.2        Expenses.   During the Term, the
Company shall reimburse Executive for any expenses reasonably incurred by him
in furtherance of his duties hereunder, including without limitation travel, meals and accommodations, upon submission of
vouchers or receipts and in compliance with such rules and policies
relating thereto as the Company may from time to time adopt or as may be required in
order to permit such payments to be taken as proper deductions by the Company or any
subsidiary under the Internal Revenue Code of 1986, as amended, and the rules and
regulations adopted pursuant thereto now or hereafter in effect.


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


4.4        Automobile
Allowance.   During the Term, the Company shall
provide Executive with an automobile allowance of $1,000_ 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 $3,000.


4.6        Relocation
Expenses.   Executive shall be entitled to benefits
under the Company’s Executive Level
relocation policy as from time to time in effect. Executive will have up
to twelve (12) months from his employment date to utilize this benefit.


4.7        Indemnification.   The
Company shall (a) indemnify and hold Executive harmless, to the full
extent permitted under applicable law, for, from and against any and all
losses, claims, costs, expenses, damages, liabilities or actions (including
security holder actions, in respect thereof) relating to or arising out of the
Executive’s employment with and service as an Officer of the Company; and (b) pay
all reasonable costs, expenses and attorney’s fees incurred by Executive in
connection with or relating to the defense of any such loss, claim, cost,
expense, damage, liability or action, subject to Executive’s undertaking to
repay in the event it is ultimately determined that Executive is not entitled
to be indemnified by the Company. Following termination (except for termination
by the Company for Cause) of the Executive’s employment or service with the
Company, the Company shall cause any Director and Officer liability insurance
policies applicable to the Executive prior to such termination to remain in
effect for six (6) years following the date of termination of employment.


5.                              Termination.


5.1        Termination of
Executive’s Employment by the Company
for Cause.   The
Company may terminate Executive’s employment hereunder for Cause (as defined
below). Such termination shall be effected by written notice thereof delivered
by the Company to Executive, indicating in
reasonable detail the facts and circumstances alleged to provide a basis
for such termination, and shall be effective as of the date of such notice in accordance with Section 12 hereof. “Cause”
as determined in reasonable good faith 



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by a
committee comprised of three senior officers (one of which shall be
Executive’s supervisor) of the Company or the Board of Directors shall mean: (i) Executive’s
gross negligence or willful misconduct in
the performance of the duties or responsibilities of his position with the Company or any subsidiary,
or failure to timely carry out any lawful directive
of the Company; (ii) Executive’s misappropriation of any funds or property
of the Company or any subsidiary; (iii) the conduct by Executive which is a material
violation of this Agreement or Company Policy or which materially
interferes with the Executive’s ability to perform his duties; (iv) the
commission by Executive of an act of fraud or dishonesty toward the Company or
any subsidiary; (v) Executive’s misconduct or negligence which damages or
injures the Company or the Company’s reputation; (vi) Executive is convicted of or pleads to a felony
involving moral turpitude; or (vii) the use or imparting by
Executive of any confidential or proprietary information of the Company, or any
subsidiary in violation of any confidentiality or proprietary agreement to
which Executive is a party.


5.2        Compensation upon Termination by the Company for Cause or by Executive
without Good Reason.   In the event of
Executive’s termination of employment (i) by
the Company for Cause or (ii) by Executive voluntarily without Good Reason:


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


(b)        Except as provided in Section 3.3(e), any portion
of any Restricted Stock or any other equity incentive awards as to which the
restrictions have not lapsed or as to which any other conditions shall not have
been satisfied prior to the date of termination shall be forfeited as of such
date and any portion of Executive’s stock options that have vested and become
exercisable prior to the date of termination shall remain exercisable for a
period of 90 days following the date of termination of employment (or, such
later date as may be permitted by the relevant stock option or equity plan, or,
if earlier, until the expiration of the respective terms of the options), whereupon
all such options shall terminate; provided,
however, in the event of termination of Executive by the Company for
Cause, any stock options that have not been exercised prior to the date of
termination shall immediately terminate as of such date.


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


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


(a)        Executive shall be entitled to receive (i) the
Accrued Benefits, (ii) an amount equal to two times Executive’s then Base
Salary as of the date of termination of employment,
such amount payable in equal installments pursuant to the Company’s standard
payroll procedures for 



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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.


(b)        The Executive’s stock option awards held by Executive
shall vest and become immediately exercisable and the restrictions with respect
to any awards of restricted stock shall lapse, in each case to the extent such
options would otherwise have become vested and exercisable (or such
restrictions would have lapsed) had Executive remained in the employ of the
Company for a period of two years following the date of termination. Except as provided in Section 3.3(e), 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, such later date as may be permitted by
the relevant stock option or equity plan, or, if earlier, until the expiration
of the respective terms of the options), whereupon all such options shall
terminate. Any remaining portion of Executive’s stock options that have not
vested (or deemed to have vested) as of the date of termination shall terminate
as of such date; and all shares of Restricted Stock as to which the
restrictions shall not have lapsed as of the date of termination shall be
forfeited as of such date.


(c)              All other rights of Executive (and, except as
provided in Section 5.6 below, all obligations of the Company) hereunder
or otherwise in connection with Executive’s
employment with the Company shall terminate effective as of the date of such
termination of employment and Executive shall not be entitled to any payments
or benefits not specifically described in 5.3(a) through (c).


Any termination of
employment pursuant to this Section 5.3 shall be effective upon thirty
(30) days notice thereof or the Company may elect in its sole discretion to
reduce or eliminate the notice period and pay the Executive his base salary for
some or all of the notice period in lieu of notice. A termination of
Executive’s employment by the Company other than for Cause or by the Executive for Good
Reason shall not constitute a breach of this Agreement. To be eligible for the payment, benefits and stock
rights described in Section 5.3(a)(ii)-(iii), (b) and (c) above, Executive must execute, not revoke and
abide by a release of all other
claims, cooperate in the event of litigation and fully comply with Executive’s
obligations under Sections 6 and 7 below.


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


(a)              the assignment to Executive of any duties or
responsibilities materially inconsistent with Executive’s status as an officer
of the Company; or


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


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


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



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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 one year following the date of termination of
employment.


(b)             All stock option awards held by Executive shall
vest and become immediately exercisable and
the restrictions with respect to any awards of Restricted Stock shall
lapse, in each case to the extent such options would otherwise have become
vested and exercisable (or such restrictions would have lapsed) had Executive
remained in the employ of the Company for a period of two years following the
date of termination. Except as provided in Section 3.3(e) 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, such
later date as may be permitted by the relevant stock option or equity
plan, or, if earlier, until the expiration of the respective terms of the
options), whereupon all such options shall terminate. Any remaining portion of Executive’s stock options that have not vested
(or deemed to have vested) as of the date of termination shall terminate as of
such date; and all shares of Restricted Stock as to which the restrictions
shall not have lapsed as of the date of termination shall be forfeited as of such date.


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


“Total
Disability” shall mean any physical or mental disability that prevents
Executive from: (a)(1) 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 (ii) which is expected to be
of permanent or indeterminate duration but
expected to last at least 12 continuous months or result in death of the
Executive as determined (y) by a physician selected by the Company or
its insurer or (z) pursuant to the Company’s benefit programs; or (b) reporting
to work for 90 or more consecutive business days or unable to engage in any
substantial activity.


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


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 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 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, 



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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)(l) 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 Company, 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)(l) 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 Tax Counsel 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 Payment provided for in Section 5.7(a) hereof
shall be made upon the earlier of (i) thirty (30) 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 than 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 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 proceeding.
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.



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(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 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, including, but not limited to
any severance pay under any Company severance plan, policy or practice.


6.                              Protection of Confidential Information.


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


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


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


7.                              Noncompetition and Other Matters.


7.1             Noncompetition.   During
the Executive’s employment with the Company and for the two-year period
immediately following the date of termination of Executive’s employment (the 



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


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


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


8.                              Rights and Remedies upon Breach.


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


8.1             Specific
Performance.   The right and remedy to have the
Restrictive Covenants specifically enforced by any court of competent
jurisdiction by injunctive decree or
otherwise, it being agreed that any breach or threatened breach of the
Restrictive Covenants would cause irreparable injury to the Company or
its subsidiaries, affiliates, strategic partners, successors or assigns and
that money damages would not 



 9
 









provide an adequate remedy
to the Company or its subsidiaries, affiliates, strategic partners, successors
or assigns.


8.2        Accounting.   The
right and remedy to require Executive to account for and pay over to the Company or its subsidiaries, affiliates, strategic
partners, successors or assigns, as the case may be, all compensation,
profits, monies, accruals, increments or other benefits derived or received by
Executive as a result of any transaction or activity constituting a breach of
any of the Restrictive Covenants.


8.3        Severability
of Covenants.   Executive acknowledges and agrees
that the Restrictive Covenants are reasonable and valid in geographic and
temporal scope and in all other respects. If any court determines that any of the Restrictive
Covenants, or any part thereof, is invalid or unenforceable, the remainder of
the Restrictive Covenants shall not thereby be affected and shall be given full force
and effect without regard to the invalid portions.


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


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


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


9.                              No Violation
of Third-Party Rights.   Executive represents, warrants and
covenants that 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.


Executive has supplied to the Company a copy of each
written agreement with any of Executive’s prior employers, as well as any other
agreements to which Executive is subject, which includes any 



 10
 









obligation of
confidentiality, assignment of intellectual property, nonsolicitation or
non-competition. Executive has listed each of such agreements in Appendix “B”.


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


10.                       Arbitration.


Except as necessary
for the Company and its subsidiaries, affiliates, strategic partners,
successors or assigns or Executive to specifically enforce or enjoin a breach
of this Agreement (to the extent such
remedies are otherwise available), the parties agree that any and all
disputes that may arise in connection with, arising out of or relating to this
Agreement, or any dispute that relates in any way, in whole or in part, to
Executive’s employment with the Company or any subsidiary, affiliate or
strategic partner, the termination of that employment or any other dispute by
and between the parties or their subsidiaries, affiliates, strategic partners,
successors or assigns, shall be submitted to final and binding arbitration in Harrisburg, Pennsylvania according to the
National Employment Dispute Resolution Rules and procedures of the
American Arbitration Association at the time in effect. This arbitration
obligation extends to any and all claims that may arise by and between the
parties or their subsidiaries, affiliates, strategic partners, successors or
assigns, and expressly extends to, without limitation, claims or causes of
action for wrongful termination, impairment
of ability to compete in the open labor market, breach of an express or
implied contract, breach of the covenant of good faith and fair dealing, breach
of fiduciary duty, fraud, misrepresentation, defamation, slander, infliction of
emotional distress, disability, loss of future earnings, and claims under the
Pennsylvania Constitution, the United States Constitution, and applicable state
and federal fair employment laws, federal
and state equal employment opportunity laws, and federal and state labor
statutes and regulations, including, but not limited to, the Civil Rights Act
of 1964, as amended, the Fair Labor
Standards Act, as amended, the Americans With Disabilities Act of 1990, as
amended, the Rehabilitation Act of 1973, as amended, the Employee Retirement
Income Security Act of 1974, as amended, the Age Discrimination in
Employment Act of 1967, as amended, and any other state or federal law.
Executive understands that by entering into this Agreement, Executive is
waiving Executive’s rights to have a court
determine Executive’s rights, including under federal, state or local statutes prohibiting
employment discrimination, including sexual harassment and discrimination on
the basis of age, race, color, religion, national origin, disability, veteran
status or any other factor prohibited by governing law.


11.                       Assignment.


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



 11
 









12.                       Notices.


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


	
  If to the Company:

  	
  Rite Aid Corporation

  
	
   

  	
  30 Hunter Lane

  
	
   

  	
  Camp Hill, Pennsylvania
  17011

  
	
   

  	
  Attention: General Counsel

  
	
   

  	
  Fax: (717) 760-7867

  
	
  If to Executive:

  	
  Brian Fiala

  
	
   

  	
  1109 Legacy Lane

  
	
   

  	
  West Chester, Pennsylvania 19382

  



 


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


13.                       General.


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


13.2          Governing
Law.   This Agreement is executed in Pennsylvania and
shall be governed by and construed and enforced in accordance with the laws of
the Commonwealth of Pennsylvania without giving effect to conflicts of laws
principles thereof which might refer
such interpretations to the laws of a different state or jurisdiction. Any
court action instituted by Executive relating in any way to this Agreement shall be filed exclusively in state or
federal court in Harrisburg, Pennsylvania and Executive consents to the
jurisdiction and venue of said courts in any action instituted by or on
behalf of the Company against him.


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


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



 12
 









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 the Executive under
this Agreement may not be anticipated,
assigned, alienated or subject to attachment, garnishment, levy, execution or other legal or equitable process except
as required by law. Any attempt by
the Executive to anticipate, alienate, assign, sell, transfer, pledge, encumber
or charge the same shall be void. Payments hereunder shall not be considered assets
of the Executive in the event of insolvency or bankruptcy.


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


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


13.12   Counterparts.   This Agreement may be executed by the parties
hereto in separate counterparts; each of which when so executed and
delivered shall be an original but all such counterparts together shall
constitute one and the same instrument.



 13
 









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




	
  

  	
  RITE
  AID CORPORATION

  
	
   

  	
  

  
	
   

  	
  By:

  	
  Todd McCarty

  
	
   

  	
  Its:

  	
  Senior Vice President Human
  Resources

  
	
   

  	
  EXECUTIVE

  
	
   

  	
  

  
	
   

  	
  Brian Fiala

  






 



 14















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 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.



 15















APPENDIX B


The following is a list of all written agreements with
any of Executive’s prior employers, as well
as any other agreements to which Executive is subject, which includes any
obligation of confidentiality, assignment of intellectual property, nonsolicitation
or non-competition. If none, type “None”.


Nonsolicitation agreement—Expires July 2008



 16