Exhibit 10.26


EMPLOYMENT
AGREEMENT


THIS
EMPLOYMENT AGREEMENT
(the “Agreement”) is entered into and effective as of the 20th day of August,
2007 (the “Effective Date”) by and between Rite Aid Corporation, a Delaware
corporation (the “Company”) and Robert J. Easley (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 180 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 Chief
Operating Officer 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 base salary at the annualized rate of
$750,000.00 per year (“Base Salary” as may be adjusted from time to time),
which shall be paid in accordance with the Company’s normal payroll practices
and procedures, less such deductions or offsets required by applicable law or
otherwise authorized by Executive.


3.2          Annual Performance Bonus.    The Executive shall participate each fiscal year
during the Term in the Company’s annual bonus plan as adopted and approved by
the Board 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 110% (the “Annual Target Bonus”)
of the Base Salary, which shall be prorated based on the Effective Date, with a
one time opportunity for fiscal year 2008 of an additional payment equal to 50%
of your individual (on plan) bonus target, which shall be prorated based on the
Effective Date, 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 (however, in no
event shall it be less than 110%) and shall be based upon the Board approved
plan for that year.


3.3          Equity Awards.


(a)           On the Effective Date,  the 
Executive will be granted an option (the “Option”) to purchase 300,000
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 SEEP will be on a prorated basis.


(c)   On the Effective Date, the  Executive will be granted 100,000 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 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 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
senior management employees of the Company are generally eligible to
participate, subject to any eligibility requirements and the other generally
applicable terms of such plans.


4.2            Expenses.     During the Term, the Company shall reimburse Executive
for any expenses reasonably incurred by him in furtherance of his duties
hereunder, including without limitation travel, meals and accommodations, upon
submission of vouchers or receipts and in compliance with such rules and
policies relating thereto as the


 

















Company may from time to
time adopt or as may be required in order to permit such payments to be taken
as proper deductions by the Company or any subsidiary under the Internal
Revenue Code of 1986, as amended, and the rules and regulations adopted
pursuant thereto now or hereafter in effect.


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


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


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


4.6            Relocation Expenses. 
Executive shall be entitled to benefits under the Company’s Executive
Level relocation policy as from time to time in effect. 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 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  written
Company Policy 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 the sum of
Executive’s then Base Salary plus Annual Target Bonus  as of the date of termination of employment,
such amount payable in equal installments pursuant to the Company’s standard
payroll procedures for management employees over a period of two years
following the date of termination of employment, and (iii) continued health
insurance coverage for Executive and his immediate family for a period of two years
following the date of termination of employment.


(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) any other
material breach by the Company of  this
Agreement


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


5.5          Compensation upon Termination of
Executive’s Employment by Reason of  Executive’s Death or Total
Disability.     In the event that Executive’s employment
with the Company is terminated by reason of Executive’s death or Total
Disability (as defined below):


(a)           Executive or Executive’s estate, as
the case may be, shall be entitled to receive (i) the Accrued Benefits, (ii)
any other benefits payable under the then current disability and/or death
benefit plans, as applicable, in which Executive is a participant and (iii)
continued health insurance coverage for Executive and/or his immediate family,
as applicable, for a period of two years following the date of termination of
employment.


(b)           All stock option awards held by
Executive shall vest and become immediately exercisable and the restrictions
with respect to any awards of Restricted Stock shall lapse, in each case to the
extent such options would otherwise have become vested and exercisable (or such
restrictions would have lapsed) had Executive remained in the employ of the
Company for a period of  two  years following the date of termination.
Except as provided in Section 3.3(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,
state and local income and employment or other tax and the Excise Tax upon the
Gross-Up Payment, and any interest, penalties or additions to tax payable by
the company Executive with respect thereto, shall be equal to the total
Payments. For purposes of determining whether any of the Payments will be
subject to the Excise Tax and the amounts of such Excise Tax, (1) the total
amount of the Payments shall be treated as “parachute payments” within the
meaning of section 280G(b)(2) of the Code, and all “excise parachute payments”
within the meaning of section 280G(b)(1) of the Code shall be treated as
subject to the Excise Tax, except to the extent that, in the opinion of tax
counsel (“Tax Counsel”) reasonably acceptable to Executive and selected by the
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)(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 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.


(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 “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 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 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, other than by will
or the laws of the descent and distribution. The Company may assign its rights
and obligations hereunder, and Executive 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; provided, however, any such assignment will not diminish
or waive any of Executive’s rights hereunder, including, without limitation,
rights upon any Change in Control of the Company.


12.           Notices.


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


	
  If to the Company:

  	
  Rite Aid Corporation

  
	
   

  	
  30 Hunter Lane

  
	
   

  	
  Camp Hill, Pennsylvania 17011

  
	
   

  	
  Attention: General Counsel

  
	
   

  	
  Fax: (717) 760-7867

  
	
   

  	
   

  
	
  If to Executive:

  	
  Robert J. Easley

  
	
   

  	
  603 E. Olmos

  
	
   

  	
  San Antonio, Texas 78212

  



 


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.


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.


 

















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


	
   

  	
   

  	
  RITE AID CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ TODD MCCARTY

  
	
   

  	
   

  	
  By: Todd McCarty

  
	
   

  	
   

  	
  Its: Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  EXECUTIVE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ ROBERT J. EASLEY

  
	
   

  	
   

  	
  Robert J. Easley