Document:

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                                                                   Exhibit 10.21

                              RITE AID CORPORATION

                       SPECIAL DEFERRED COMPENSATION PLAN

                           Effective December 5, 1999

                                    Purpose
                                    -------

          The purpose of this Plan is to provide specified benefits to a select
group of management employees of Rite Aid Corporation, a Delaware corporation
(the "Company").  The Plan is being adopted pursuant to employment agreements
between the management employees and the Company entered into as of the date
hereof.  This Plan shall be unfunded for tax purposes and for purposes of Title
I of ERISA.

                                   ARTICLE 1
                                  Definitions
                                  -----------

          For purposes hereof, unless otherwise clearly apparent from the
context, the following phrases or terms shall have the following indicated
meanings:

1.1  "Account Balance" shall mean, with respect to a Participant, his or her
     Deferral Account. This balance shall be a bookkeeping entry only and shall
     be utilized solely as a device for the measurement and determination of the
     amounts to be paid to the Participant and his or her Beneficiaries pursuant
     to this Plan.  Each Participant shall at all times be fully vested in his
     or her account balance.

1.2  "Beneficiary" shall mean one or more persons, trusts, estates or other
     entities, designated in accordance with Article 6, that are entitled to
     receive benefits under this Plan upon the death of a Participant.

1.3  "Beneficiary Designation Form" shall mean the form established from time to
     time by the Committee that a Participant completes, signs and returns to
     the Committee to designate one or more Beneficiaries.

1.4  "Board" shall mean the board of directors of the Company.

1.5  "Claimant" shall have the meaning set forth in Section 10.1.

1.6  "Code" shall mean the Internal Revenue Code of 1986, as amended from time
     to time.

1.7  "Committee" shall mean the committee described in Article 8.

1.8  "Company" shall mean Rite Aid Corporation, a Delaware corporation.
<PAGE>

1.9  "Deferral Account" shall mean (i) the sum of all of a Participant's Monthly
     Deferral Amounts, plus (ii) additional amounts debited or credited in
     accordance with Section 3.1, less (iii) all distributions made to the
     Participant or his or her Beneficiary pursuant to this Plan that relate to
     his or her Deferral Account.  This account shall be a bookkeeping entry
     only and shall be utilized solely as a device for the measurement and
     determination of the amounts to be paid to the Participant pursuant to this
     Plan.

1.10 "Deferral Account relating to a Fiscal Year" shall mean (i) a Participant's
     aggregate Monthly Deferral Amounts relating to a fiscal year of the
     Company, plus (ii) additional amounts debited or credited with respect such
     amounts in accordance with Section 3.1, less (iii) any distributions
     relating thereto.

1.11 "Employment Agreement" shall mean, as applicable, that certain employment
     agreement, dated December 5, 1999, between each Participant and the
     Company, including all exhibits thereto, as the same may be amended from
     time to time.

1.12 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
     may be amended from time to time.

1.13 "Measurement Funds" shall mean the group of mutual fund subaccounts from
     time to time available under the Variable Annuity.

1.14 "Monthly Deferral Amount" shall mean the amount set forth in Section 2(d)
     of the applicable Employment Agreement, to be credited to the Deferral
     Account on the first day of each month during the Employment Period (as
     defined in the Employment Agreement).

1.15 "Participant" shall mean, as applicable, Robert G. Miller, Mary F. Sammons,
     David R. Jessick and John T. Standley.

1.16 "Plan" shall mean this Special Deferred Compensation Plan, which shall be
     evidenced by this instrument, as the same may be amended from time to time.

1.17 "Short-Term Payout" shall mean the payout set forth in Section 4.1.

1.18 "Termination of Employment" shall mean the ceasing of a Participant's
     employment with the Company, voluntarily or involuntarily, for any reason.

1.19 "Unforeseeable Financial Emergency" shall mean an unanticipated emergency
     that is caused by an event beyond the control of the Participant that would
     result in severe financial hardship to the Participant resulting from (i) a
     sudden and unexpected illness or accident of the Participant or a dependent
     of the Participant, (ii) a loss of the Participant's property due to
     casualty, or (iii) such other extraordinary and unforeseeable circumstances
     arising as a result of events beyond the control of the Participant, as
     determined in good faith by the Committee.
<PAGE>

1.20 "Variable Annuity" shall mean [           ].

                                   ARTICLE 2
                                 Participation
                                 -------------

2.1  Participation in the Plan.  Each Participant shall participate in the Plan
     -------------------------
     on the terms and conditions set forth herein and in the applicable
     Employment Agreement.  No other persons shall participate in the Plan.

2.2  Enrollment Requirements.  Each Participant shall complete, execute and
     -----------------------
     return to the Committee a Beneficiary Designation Form.  In addition, the
     Committee shall establish from time to time such other enrollment
     requirements as it reasonably determines are necessary for purposes of the
     Plan.

2.3  Commencement of Participation.  Each Participant shall commence
     -----------------------------
     participation in the Plan as of the date hereof.

                                   ARTICLE 3
                                   Crediting
                                   ---------

3.1  Crediting/Debiting of Account Balances.  Each Participant shall at all
     --------------------------------------
     times be fully vested in the value of his or her Account Balance.  In
     accordance with, and subject to, such reasonable rules and procedures as
     may from time to time be established by the Committee, amounts shall be
     credited to or debited from a Participant's Account Balance in accordance
     with the following rules:

     (a)  Measurement Funds.  Each Participant shall have the right, from time
          -----------------
          to time, to select those Measurement Funds in which his or her Account
          Balance shall be deemed to be invested, upon which to base a crediting
          rate for the purpose of crediting or debiting amounts to the
          Participant's Account Balance.  The Participant shall provide two
          business days' notice to the Company prior to making any change in the
          deemed investment of his or her Account Balance, but shall not in any
          event be permitted to make such changes to the extent the Company
          would not be able to make corresponding changes to its actual
          investment of funds, if any, under the Variable Annuity, it being
          understood that the Company shall be under no obligation to invest
          funds in the same manner as any Participant's deemed investment of his
          or her Account Balance.

     (b)  Crediting or Debiting Method.  A Participant's Account Balance shall
          ----------------------------
          be credited or debited on a daily basis, based on the performance of
          the selected Measurement Funds.  To the extent necessary to comply
          with applicable insurance laws, Monthly Deferral Amounts shall be
          deemed to be invested at a money market rate of return prior to the
          expiration of any applicable waiting period, and
<PAGE>

          shall be deemed invested in the applicable Measurement Funds from and
          after the expiration of such waiting period.

     (c)  No Actual Investment.  Notwithstanding any other provision of this
          --------------------
          Plan, the Measurement Funds are to be used for measurement purposes
          only, and the crediting or debiting of amounts to a Participant's
          Account Balance shall not be considered or construed in any manner as
                          ----- ---
          an actual investment of his or her Account Balance in any Measurement
          Fund.  In the event that the Company, in its own discretion, decides
          to invest funds in any Measurement Fund, no Participant shall have any
          rights in or to any such fund.  Without limiting the foregoing, a
          Participant's Account Balance shall at all times be a bookkeeping
          entry only and shall not represent any investment made on his or her
          behalf by the Company; the Participant shall at all times remain an
          unsecured creditor of the Company.

3.2  FICA and Other Taxes.  The Company shall withhold the Participant's share
     --------------------
     of FICA and other employment taxes relating to Monthly Deferral Amounts in
     such reasonable manner as the Company deems appropriate.

                                   ARTICLE 4
            Short-Term Payout; Unforeseeable Financial Emergencies;
            -------------------------------------------------------
                              Withdrawal Election
                              -------------------

4.1  Short-Term Payout.  A Participant may elect, prior to the start of each
     -----------------
     fiscal year of the Company, to receive a future "Short-Term Payout" from
     the Plan with respect to the Monthly Deferral Amounts credited with respect
     to such fiscal year.  The Short-Term Payout shall be a lump sum payment in
     an amount that is equal to that portion of the Deferral Account relating to
     such fiscal year.  Subject to the other terms and conditions of this Plan,
     each Short-Term Payout elected shall be paid at the time elected by the
     Participant at the time such election is made; provided however, that in no
     event shall a Short-Term Payout be paid to a Participant prior to the first
     day of the fiscal year that is three (3) years after the first day of the
     fiscal year as to which such election relates.  By way of example, if a
     Short-Term Payout is elected for amounts that are deferred in the fiscal
     year of the Company commencing in 2000, no Short-Term Payout can be paid
     prior to the first day of the Company's fiscal year commencing in 2003.

4.2  Withdrawal Payout/Suspensions for Unforeseeable Financial Emergencies.  If
     ---------------------------------------------------------------------
     the Participant experiences an Unforeseeable Financial Emergency, the
     Participant may petition the Committee to receive a partial or full payout
     of his or her Deferral Account. The amount of the payout shall not exceed
     the less of the Participant's Deferral Account, or the amount reasonably
     needed to satisfy the Unforeseeable Financial Emergency.  The Committee
     shall consider each such request in good faith.  If the petiton for a
     payout is approved, such payout shall be made as promptly as reasonably
     practicable, but in no event later than 10 bsiness days following the date
     of approval.
<PAGE>

4.3  Withdrawal Election.  A Participant (or Beneficiary, if applicable) may
     -------------------
     elect, at any time, to withdraw all of his or her Account Balance less a
     10% withdrawal penalty (the net amount shall be referred to as the
     "Withdrawal Amount").  This election can be made at any time, before or
     after Termination of Employment, and whether or not the Participant (or
     Beneficiary) is in the process of being paid pursuant to an installment
     schedule.  No partial withdrawsals shall be be allowed.  The Participant
     shall make this election by giving the Committee advance written notice of
     the election.  The penalty shall be equal to 10% of the Participant's
     Account Balance determined immediately prior to the withdrawal.  The
     Participant shall be paid the Withdrawal Amount in a lump sumw ithin 10
     busines days of his or her election.

                                   ARTICLE 5
                              Termination Benefit
                              -------------------

5.1  Termination Benefit.  Except as provided in Section 5.2, a Participant
     -------------------
     whose employment terminates for any reason and under any circumstances
     shall receive, as a Termination Benefit, his or her entire Account Balance
     (including without limitation any amount otherwise subject to a Short-Term
     Payout).

5.2  Installment Payments.  A Participant shall have the right from time to time
     --------------------
     to file an election with the Company providing for payment of his or her
     Account Balance in installments or otherwise at one or more times following
     his or her termination of employment.  No such election shall be valid
     unless made at least one year prior to the actual date of termination, and
     any election made during such one year period shall be ignored in favor of
     the most recent such election made at least one year prior to the actual
     date of termination.

                                   ARTICLE 6
                            Beneficiary Designation
                            -----------------------

6.1  Beneficiary.  Each Participant shall have the right at any time, to
     -----------
     designate his or her Beneficiary(ies) (both primary as well as contingent)
     to receive any benefits payable under the Plan to a beneficiary upon the
     death of a Participant.  The Beneficiary designated under this Plan may be
     the same as or different from the Beneficiary designation under any other
     plan of the Company in which the Participant participates.

6.2  Beneficiary Designation; Change; Spousal Consent.  A Participant shall
     ------------------------------------------------
     designate his or her Beneficiary by completing and signing the Beneficiary
     Designation Form, and returing it to the Committee or its designated agent.
     A Participant shall have the right to change a Beneficiary by completing,
     signing and otherwise complying with the terms of the Beneficiary
     Designation Form and the Committee's rules and procedures, as in effect
     from time to time.  If the Participant names someone other than his or her
     spouse as a Beneficiary, a spousal consent, in the form designated by the
     Committee, must be signed by that Participant's spouse and returned to the
     Committee.  Upon the acceptance by the Committee of a new Beneficiary
     Designated Form, all Beneficiary designations previously filed shall be
     canceled.  The Committee shall be entitled to rely on the last
<PAGE>

     Beneficiary Designation Form filed by the Participant and accepted by the
     Committee prior to his or her death.

6.3  Acknowledgement.  No designation or change in designation of a Beneficiary
     ---------------
     shall be effective until received, accepted and acknowledge in writing by
     the Committee or its designated agent.

6.4  No Beneficiary Designation.  If a Participant fails to designate a
     --------------------------
     Beneficiary as provided in Sections 6.1, 6.2 and 6.3 above, or if all
     designated Beneficiaries predeceased the Participant or die prior to the
     complete distribution of the Participant's benefits, then the Participant
     designated Beneficiary shall be deemed to be his or her surviving spouse.
     If the Participant has no surviving spouse, the benefits remaining under
     the Plan to be paid to a Beneficiary shall be payable to the executor or
     personal representative of the Participant's estate or otherwise as
     directed under any applicable living trust or similar instrument of the
     Participant.

6.5  Doubt as to Beneficiary.  If the Committee has any dout as to the proper
     -----------------------
     Beneficiary to receive payments pursuant to this Plan, the Committee shall
     have the right, exercisable in good faith, to cause the Company to withhold
     such payments until this matter is resolved to the Committee's
     satisifaction.

6.6  Discharge of Obligations.  The payment of benefits under the Plan to a
     ------------------------
     Beneficiary shall fully and completely discharge the Company and the
     Committee from all further obligations under this Plan with respect to the
     Participant.

                                   ARTICLE 7
                    Termination, Amendment or Modificiation
                    ---------------------------------------

7.1  Termiantion.  The Plan shall not be terminated with respect to any
     -----------
     Participant without the express written consent of such Participant.

7.2  Amendment.  The Plan shall not be amended or modified in whole or in part
     ---------
     with rspect to any Participant without the express writtenconsent of such
     Participant.

7.3  Effect of Payment.  The full payment of the applicalbe benefit under
     -----------------
     Articles 4 or 5 of the Plan shall completely discharge all obligations to a
     Participant and his or her designated Beneficiaries under this Plan.  Such
     payment shall not, however, be in discharge of any remaining deferred
     compensation obligations under the applicable Employment Agreement.

                                   ARTICLE 8
                                 Administration
                                 --------------

8.1  Committee Duties.  This Plan shall be administered by a Committee which
     ----------------
     shall consists of the Board, or such committee as the Board shall appoint.
     The Committee shall also have the discretion and authority in good faith to
     (i) make, amend, interpret, and enforce
<PAGE>

     all appropriate rules and regulations for the administration of this Plan
     and (ii) decide or resolve any and all questions including interpretations
     of this Plan, as may arise in connection with the Plan.

8.2  Agents.  In the administration of this Plan, the Committee may, from time
     ------
     to time, employ agents and delegate to them such administrative duties as
     it sees fit (including acting through a duly appointed representative) and
     may from time to time consult with counsel who may be counsel to the
     Company.

8.3  Indemnity of Committee.  The Company shall indemnify and hold harmless
     ----------------------
     themembers of the Committee against any and all claims, losses, damages,
     expenses or liabilities arising from any action or failure to act with
     respect to this Plan, except in the case of willful misconduct by the
     Committee or any of its members.

                                   ARTICLE 9
                         Other Benefits and Agreements
                         -----------------------------

9.1  Coordination with Other Benefits.  The benefits provided for a Participant
     --------------------------------
     and Participant's Beneficiary(ies) under the Plan are in addition to any
     other benefits available to such Participant under any other plan or
     program maintained by the Company.  The Plan shall supplement and shall not
     supersede, modify or amend any other such plan or program except as may
     otherwise be expressly provided.

                                   ARTICLE 10
                               Claims Procedures
                               -----------------

10.1 Presentation of Claim.  Any Participant or Beneficiary of a deceased
     ---------------------
     Participant (such Participant or Beneficiary being referred to below as a
     "Claimant") may deliver to the Committee a written claim for a
     determination with respect to the amounts distributable to such a Claimant
     from the Plan.

10.2 Notification of Decision.  The Committee shall consider a Claimant's claim
     ------------------------
     within a reasonable time, and shall notify the Claimant in writing:

     (a) that the Claimant's requested determination has been made, and that the
         claim has been allowed in full; or

     (b) that the Committee has reached a conclusion contrary, in whole or in
         part, to the Claimant's requested determiantion, and such notice must
         set forth in a manner calculated to be understood by the Claimant:

         (i)    the specific reason(s) for the denial of the claim, or any part
                of it;

         (ii)   specific refernce(s) to pertinent provisions of the Plan upon
                which such denial was based;
<PAGE>

         (iii)  a description of any additional material or information
                necessary for the Claimant to perfect the claim, and an
                explanation of why such material or information is necessary;
                and

         (iv)   an explanation of the claim review procedure set forth in
                Section 10.3 below.

10.3 Review of a Denied Claim.  Within 60 days after receiving a notice from the
     ------------------------
     Committee that a claim has been denied, in whole or in part, a Claimant (or
     the Claimant's duly authorized representative) may file with the Committee
     a written request for a review of the denial of the claim.  Thereafter, but
     not later than 30 days after the review procedure began, the Claimant (or
     the Claimant's duly authorized representative):

     (a) may review pertinent documents;

     (b) may submit written comments or other documents; and/or

     (c) may request a hearing, which the Committee, in its sole discretion, may
         grant.

10.4 Decision on Review.  The Committee shall render its decision on review
     ------------------
     promptly, and not later than 60 days after the filing of a written request
     for review of the denial, unless a hearing is held or other speical
     circumstances require additional time, in which case the Committee's
     decisions must be rendered within 120 days after such date.  Such decision
     must be written in a manner calculated to be understood by the Claimant,
     and it must contain:

     (a) specific reasons for the decision;

     (b) specific references) to the pertinent Plan provisions upon which the
         decision was based; and

     (c) such other matters as the Committee deems relevant.

10.5 Legal Action.  A Claimant's compliance with the foregoing provisions of
     -------------
     this Article 10 is a mandatory prerequisite to a Claimant's right to
     commence any legal action with respect to any claim for benefits under this
     Plan.  The resoluation of disputes and reimbursement of attorney's fees
     shall be in accordance with the terms of Section 10 of the Employment
     Agreement.

                                   ARTICLE 11
                                 Miscellaneous
                                 -------------

11.1 Unsecured General Creditor.  Participants and their Beneficiaries, heirs,
     --------------------------
     successors and assigns shall have no legal or equitable rights, interests
     or claims in any property or assets of the Company.  Any and allof the
     Company's assets shall be, and remain, the general,
<PAGE>

     unpledged unrestricted assets of the Company. The Company's obligation
     under the Plan shall be merely that of an unfunded and unsecured promise to
     pay money in the future.

11.2 Company's Liability.  The Company's liability for the payment of benefits
     -------------------
     shall be defined only by the Employment Agreement, the Plan and any
     elections made by the Participant pursuent to the Plan.  The Company shall
     have no obligation to a Participant under the Plan except as expressly
     provided in the Employment Agreement, the Plan and any such election.

11.3 Nonassignability.  Neither a Participant nor any other person shall have
     ----------------
     any right to commute, sell, assign, transfer, pledge, anticipate, mortgage
     or otherwise encumber, trnsfer, hypothecate, alienate or convey in advance
     of actual receipt, the amounts, if any, payable hereunder, or any part
     thereof, which are, and all rights to which are expressly declared to be,
     unassignable and non-transferable, except that the foregoing shall nto
     apply to any family support obligations set forth in a court order.  No
     part of the amounts payable shall, prior to actual payment, be subject to
     seizure, attachment, garnishmento r sequestration for the payment of any
     debts, judgments, alimony or separate maintenance owed by a Participant or
     any other person, nor be transferable by operation of law in the event of a
     Participant's or any other person's bankruptcy or insolvency.

11.4 Furnishing Information.  A Participant or his or her Beneficiary will
     ----------------------
     cooperate with the Committee by furnishing any and all information
     requested by the Committee and take such other actions as may reasonably be
     requested in order to facilitate the adminstration of the Plan and the
     payments of benefits hereunder, including but not limted to taking such
     physical examnations as the Committee may reasonably deem necessary.

11.5 Terms.  Whenever any words are used herein in the masculine, they shall be
     -----
     construed as though they were in the feminine in all cases where they would
     so apply; and whenever any words are used herein in the singular or in the
     plural, they shall be construed as though they were used in the plural or
     the singular, as the case may be, in al cass where they would so apply.

11.6 Captions.  The captions of the articles, sections and paragraphs of this
     --------
     Plan are for convenience only and shall not control or affect the meaning
     or construction of any of its provisions.

11.7 Governing Law.  Subject to ERISA, the provisions of this Plan shall be
     -------------
     construed and interpreted according to the internal laws of the State of
     Pennslvania without regard to its conflicts of laws principles.

11.8 Notice.  Any notice or filing required or permitted to be given to the
     ------
     Committee under this Plan shall be sufficient if in writing and hand-
     delivered, or sent by registerd or certified mail, to the address below:

          General Counsel
          Rite Aid Corporation
<PAGE>

          30 Hunter Lane
          Camp Hill, PA 17011

     Such notice shall be deemed given as of the date of delivery or, if
     deliverly is made by mail, as of the date shwon on the postmark on the
     receipt for registration or certification.

     Any notice or filing required or permitted to be given to a Participant
     under this Plan shall be sufficient if in writing and hand-delivered, or
     sent by mail, to the last known address of the Participant.

11.9    Successors. This Plan and all rights of each Participant hereunder shall
        ----------
        inure to the benefit of and be enforceable by the Participant's
        Beneficiary(ies), personal or legal representatives, or estate, to the
        extent any such person succeeds to the Participant's interests under
        this Plan. No rights or obligations of the Company under this Plan may
        be assigned or transferred except that the Company shall require any
        successor (whether direct or indirect, by purchase, merger,
        consolidation or otherwise) to all or substantailly all of the business
        and/or assets of the Company expressly to assume and agree to perform
        the Company's obligations under this Plan in the same manner and to the
        same extent that the Company would have been required to peform it if no
        such succession had taken place. As used in this Plan, the "Company"
        shall mean both the Comapny as defined above and any successor to its
        business and/or assets (by merger, purchase or otherwise) which executes
        and delivers the agreement provided for in this Section 11.9 or which
        otherwise becomes bound by all ther terms and provisions of this
        Agreement by operation of law or otherwise.

11.10   Spouse's Interest.  The interest in the benefits hereunder of a spouse
        -----------------
        of a Participant who has predeceased the Participant shall automatically
        pass to the Participant and shall not be transferable by such spouse in
        any manner, including but not limited to such spouse's will, nor shall
        such interest pass under the laws of intestate succession.

11.11   Validity; No Waiver  In case any provision of this Plan shall be
        -------------------
        illegal or invalid for any reasona, said illegality or invalidity shall
        not affect the remaining parts hereof, but this Plan shall be construed
        and enforced as if such illegal or invalid provision had never been
        inserted herein. The failure of the Company or any Participant to insist
        upon strict compliance with any provisions of, or to assert any right
        under, this Plan shall not be deemd to be a waiver of such provision or
        right of any other provisions of or right under this Plan.

11.12   Incompetent.  If the Committee determines in its discretion that a
        -----------
        benefit under this Plan is to be paid to a minor, a person declared
        incompetent or to a person incapable of handling the disposition of that
        person's property, the Committee may direct payment of such benefit to
        the guardian, legal representative or person having the care and custody
        of such minor, incompetent or incapable person. The Committee may
        require proof of minority, incompetency, incapacity or guardianship, as
        it may deem appropriate prior to distribution of the benefit. Any
        payment of a benefit shall be a payment for the account
<PAGE>

        of the Participant and the Participant's Beneficiary, as the case may
        be, and shall be complete discharge of any liability under the Planfor
        such payment amount.

11.3    Court Order. The Committee is authorized to make any payments directed
        -----------
        by court order in any action in which the Plan or the Committee has been
        named as a party.

11.4    Distribution in the Even of Taxtion.  If, for any reason, all or any
        -----------------------------------
        portion of a Participant's benefit under this Plan becomes taxable to
        the Participant prior to receipt, the Company shall promptly distribute
        to the Participant immediately available funds in an amount equal to the
        taxable portion of his or her benefit (which amount shall nto exceed the
        Participant's unpaid Account Balance under the Plan).

11.15   Taxes and Withholding.  The Company may withhold from any distribution
        ---------------------
        under this Plan any and all employment and income taxes that are
        required to be withheld under applicable law.

          IN WITNESS WHEREOF, the undersigned has executed this Plan document on
behalf of the Company as of December 5, 1999.

                                "Company"

                                RITE AID CORPORATION
                                a Delaware corporation

                                By: ____________________________________
                                Title: _________________________________<PAGE>
                                                                  Exhibit 10.42
NationsBank, N.A.

                                Promissory Note

Date April 30, 1999 [X] New  [  ] Renewal Amount $5,000,000.00 Maturity Date
April 1, 2000

Between:                                 and
================================================================================
Bank:                                  Borrowers:

NationsBank, N.A.                      Beth Kaplan
Banking Center:                        Bruce Sholk
Private Client Group                   General Delivery
101 South Tryon Street                 Stevenson, MD  21153
Plaza 7th Floor                        County of Baltimore
Charlotte, NC  28255

(Street address including county)    (Name and street address, including county)
================================================================================

FOR VALUE RECEIVED, the undersigned Borrower unconditionally (and jointly and
severally, if more than one) promises to pay to the order of Bank, its
successors and assigns, without setoff, at its offices indicated at the
beginning of this Note, or at such other place as may be designated by Bank, the
principal amount of FIVE MILLION and 00/100 Dollars ($5,000,000.00), or so much
thereof as may be advanced from time to time in immediately available funds,
together with interest computed daily on the outstanding principal balance
hereunder, at an annual interest rate, and in accordance with the payment
schedule, indicated below.  [This Note contains some provisions preceded by
boxes.  If a box is marked, the provision applies to this transaction; if it is
not marked, the provision does not apply to this transaction.]

RATE

[ ]  Prime Rate.  The Rate shall be the Prime Rate, plus one percent, per annum.
The "Prime Rate" is the fluctuating rate of interest established by Bank from
time to time, at its discretion, whether or not such rate shall be otherwise
published.  The Prime Rate is established by Bank as an index and may or may not
at any time be the best or lowest rate charged by Bank on any loan.

[ ]  Fixed Rate.  The Rate shall be fixed at _____ percent per annum.

[x]  Other.

          The rate shall be equal to the sum of (i) the rate of interest per
annum (rounded upward, if necessary, to the next higher 1/16th of one percent)
determined by Bank, in accordance with its customary general practice from time
to time, to be the rate equal to the London Interbank Offered Rate (expressed as
a percentage) for dollar deposits as would be quoted by Bank at 11:00 a.m.
London time, or as soon thereafter as practicable, on the second day on which
commercial banks are open for international business in London immediately
preceding the first day of such Interest Period, for a term comparable to such
Interest Period, as adjusted from time to time in Bank's sole discretion for
then applicable reserve requirements, deposit insurance
<PAGE>

assessment rates and other regulatory costs, and (ii) 2.0%. "Interest Period"
means (i) initially, the period commencing on the date the initial Loan
evidenced by this Note is made and ending on the first business day of the
immediately following calendar month, and (ii) thereafter, the period commencing
on the last business day of the immediately preceding Interest Period and ending
on the first business day of the immediately following calendar month, in each
case during which interest on the outstanding principal amount shall be
calculated by reference to the London Interbank Offered Rate, determined as of
the second day on which commercial banks are open for international business in
London before the commencement of that Interest Period; provided, however, that
any Interest Period which would otherwise extend beyond the Maturity Date shall
end on the Maturity Date.

Notwithstanding any provision of this Note, Bank does not intend to charge and
Borrower shall not be required to pay any amount of interest or other charges in
excess of the maximum permitted by the applicable law of the State of New York;
if any higher rate ceiling is lawful, then that higher rate ceiling shall apply.
Any payment in excess of such maximum shall be refunded to Borrower or credited
against principal, at the option of Bank.

ACCRUAL METHOD

Unless otherwise indicated, interest at the Rate set forth above will be
calculated by the 365/360 day method (a daily amount of interest is computed for
a hypothetical year of 360 days; that amount is multiplied by the actual number
of days for which any principal is outstanding hereunder).  If interest is not
to be computed using this method, the method shall be:

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

PAYMENT SCHEDULE

All payments received hereunder shall be applied first to the payment of any
expense or charges payable hereunder or under any other loan documents executed
in connection with this Note, then to interest due and payable, with the balance
applied to principal, or in such other order as Bank shall determine at its
option.

[ ]  Principal Plus Accrued Interest.  Principal shall be paid in consecutive
equal installments of $_______________, plus accrued interest, payable [
]monthly, [ ]quarterly or [ ] ______________, commencing on _______________,
19___ and continuing on the [ ] same day [ ] last day of each successive month,
quarter or other period (as applicable) thereafter, with a final payment of all
unpaid principal and accrued interest due on ___________________, 19___.

[ ]  Fixed Principal and Interest.  Principal and interest shall be paid in
consecutive equal installments of $_______________, payable [ ]monthly, [
]quarterly or [ ] ____________, commencing on _______________, 19___, and
continuing on the same day of each successive month, quarter or other period (as
applicable) thereafter, with a final payment of all unpaid principal and
interest due thereon on _______________, 19___.  If, on any payment date, the
accrued interest exceeds the interest portion of the installment amount set
forth above, the excess amount will be due with the next scheduled payment.

[X]  Single Principal Payment.  Principal shall be paid in full in a single
payment on April 1, 2000. Interest thereon shall be paid [ ] at maturity, or
else [X] monthly, [ ] quarterly or [ ] ______________, commencing on May 1,
1999, and continuing on the first day of each successive month, quarter or other
period (as applicable) thereafter, with a final payment of all unpaid interest
at the stated maturity of this Note.

                                      -2-
<PAGE>

[ ]  Other.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

REVOLVING FEATURE

[X]  Borrower may borrow, repay and reborrow hereunder at any time, up to a
maximum aggregate amount outstanding at any one time equal to the principal
amount of this Note, provided that Borrower (i) is not in default under any
                     --------
provision of this Note, any other document executed in connection with this
Note, or any other note or other loan documents now or hereafter executed in
connection with any other obligation of Borrower to Bank, (ii) the borrowings
hereunder do not exceed any borrowing base or other limitation on borrowings by
Borrower, and (iii) Borrower complies with the provisions of Paragraphs 4 and 5
of the Additional Terms and Conditions attached hereto and made a part hereof.
Bank shall incur no liability for its refusal to advance funds based upon its
determination that any conditions of such further advances have not been met.
Bank records of the amounts borrowed from time to time shall be conclusive proof
thereof.

[ ]  Uncommitted Facility.  Borrower acknowledges and agrees that
notwithstanding any provisions of this Note or any other documents executed in
connection with this Note, Bank has no obligation to make any advance, and that
all advances are at the sole discretion of Bank.

[ ]  Out-Of-Debt Period.  For a period of at least ___ consecutive days during
[_] each fiscal year [_] any consecutive 12-month period, Borrower shall fully
pay down the balance of this Note, so that no amount of principal or interest
and no other obligation under this Note remains outstanding.

AUTOMATIC PAYMENT

[ ]  Borrower has elected to authorize Bank to effect payment of sums due under
this Note by means of debiting Borrower's account number ____________.  This
authorization shall not affect the obligation of Borrower to pay such sums when
due, without notice, if there are insufficient funds in such account to make
such payment in full on the due date thereof, or if Bank fails to debit the
account.

Borrower represents to Bank that the proceeds of the Loans made hereunder are to
be used primarily for business, commercial or agricultural purposes.  Borrower
acknowledges having read and understood, and agrees to be bound by, all terms
and conditions of this Note, including the Additional Terms and Conditions
attached hereto and made a part hereof, and hereby executes this Note intending
to create an instrument executed under Seal.

                                      -3-
<PAGE>

FINAL AGREEMENT:  THIS WRITTEN PROMISSORY NOTE AND ANY OTHER RELATED LOAN
DOCUMENTS CONSTITUTE THE ENTIRE AND FINAL AGREEMENT BETWEEN THE PARTIES, AND
SUPERSEDE ALL PRIOR WRITTEN AGREEMENTS AND ALL PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES REGARDING ALL ISSUES ADDRESSED IN
THOSE LOAN DOCUMENTS.

Borrower                                 Corporate or Partnership Borrower

_______________________________(Seal)
_______________________________

                                         Corporate or Partnership Name
Beth Kaplan
-------------------------------

By: /s/ Beth Kaplan
    ___________________________(Seal)
Print Individual's Name

_______________________________(Seal)
_______________________________
                                         Print Name and Title
Bruce Sholk
-------------------------------

By: /s/ Bruce Sholk
-------------------------------
Print Individual's Name                  Attest (If Applicable)
                                         Corporate Seal

                                      -4-
<PAGE>

ADDITIONAL TERMS AND CONDITIONS

1. Waivers, Consents and Covenants.  Borrower, Rite Aid Corp. (the "Guarantor"),
any endorser, or guarantor hereof or any other party hereto (individually an
"Obligor" and collectively "Obligors") and each of them jointly and severally:
(a) waive presentment, demand, protest, notice of demand, notice of intent to
accelerate, notice of acceleration of maturity, notice of protest, notice of
nonpayment, notice of dishonor, and any other notice required to be given under
the law to any Obligor in connection with the delivery, acceptance, performance,
default or enforcement of this Note, any endorsement or guaranty of this Note,
the Guaranty (as defined in Section 4 hereof), the letter agreement dated the
date hereof, made by the Borrower and addressed to the Bank, any other documents
executed in connection with this Note, or any other note or other loan documents
now or hereafter executed in connection with any obligation of Borrower to Bank
(the "Loan Documents"); (b) consent to all delays, extensions, renewals or other
modifications of this Note or the Loan Documents, or waivers of any term hereof
or of the Loan Documents, or release or discharge by Bank of any of Obligors or
release, substitution or exchange of any security for the payment hereof, or the
failure to act on the part of Bank, or any indulgence shown by Bank from time to
time and in one or more instances (without notice to or further assent from any
of Obligors) and agree that no such action, failure to act or failure to
exercise any right or remedy by Bank shall in any way affect or impair the
obligations of any Obligors or be construed as a waiver by Bank of, or otherwise
affect, any of Bank's rights under this Note, under any endorsement or guaranty
of this Note or under any of the Loan Documents; and (c) agree to pay, on
demand, all costs and expenses of collection of this Note or of any endorsement
or guaranty hereof and/or the enforcement of Bank's rights with respect to, or
the administration, supervision, preservation, protection of, or realization
upon, any property securing payment hereof, including, without limitation,
reasonable attorney's fees, including fees related to any suit, mediation or
arbitration proceeding, out of court payment agreement, trial, appeal,
bankruptcy proceeding or other proceeding.

2. Prepayments.  Prepayments may be made in whole or in part at any time and
from time to time, provided that Bank shall have received notice at least two
business days prior to such prepayment.  All prepayments of principal shall be
applied in the inverse order of maturity, or in such other order as Bank shall
determine in its sole discretion.

3. Delinquency Charges. To the extent permitted by law, a delinquency charge may
be imposed in an amount not to exceed four percent (4%) of the unpaid portion of
any payment that is more than fifteen days late.  Unless the terms of this Note
call for repayment of the entire balance of this Note (both principal and
interest) in a single payment and not for installments of interest or principal
and interest, the 4% delinquency charge may be imposed not only with respect to
regular installments of principal or interest or principal and interest, but
also with respect to any other payment in default under this Note (other than a
previous delinquency charge), including without limitation, a single payment of
principal due at the maturity of this Note.  In the event any installment, or
portion thereof, is not paid in a timely manner, subsequent payments will be
applied first to the past due balance (which shall not include any previous
delinquency charges), specifically to the oldest maturing installment, and a
separate delinquency charge will be imposed for each payment that becomes due
until the default is cured.

4. Conditions to Initial Loan. The obligation of the Bank to make the initial
Loan hereunder shall be subject to the condition precedent that on or prior to
the date of such Loan: (a)  the Bank shall have received the following, each in
form and substance satisfactory to the Bank: (i) a guaranty made by the
Guarantor in favor of the Bank (the "Guaranty"), with respect to the obligations
of the Borrower under this Note, (ii) a copy of the resolutions adopted by the
Board of Directors of the Guarantor, certified as of the date of this Note by an
authorized officer thereof, authorizing (A) the transactions contemplated by the
Guaranty to which the Guarantor is a party, and

                                      -5-
<PAGE>

(B) the execution, delivery and performance by the Guarantor of the Guaranty and
the execution and delivery of the other documents to be delivered by the
Guarantor in connection herewith, (iii) a certificate of an authorized officer
of the Guarantor, certifying the names and true signatures of the officers of
the Guarantor authorized to sign the Guaranty to which the Guarantor is a party
and the other documents to be executed and delivered by the Guarantor in
connection herewith, together with evidence of the incumbency of such authorized
officer, and (iv) such agreements, instruments, approvals, opinions and other
documents as the Bank may reasonably request, (b) Bank shall have received the
closing fee (as described herein), and (c) all proceedings in connection with
the making of such Loan and the other transactions contemplated by this Note,
the other Loan Documents and all documents incidental thereto shall be
satisfactory to the Bank and its special counsel, and the Bank and such special
counsel shall have received all such information and such counterpart originals
or certified or other copies of such documents as the Bank or such special
counsel may reasonably request.

5. Conditions to All Loans. The obligation of the Bank to make any Loan
(including the initial Loan) shall be subject to the conditions precedent that
on the date of such Loan (a) the following statements shall be true, and the
acceptance of the proceeds of each Loan by any Borrower shall be deemed to be a
representation and warranty of each Borrower on the date of such Loan that:

               (i)    The representations and warranties made by Borrower to the
     Bank herein are correct on and as of the date of such Loan as though made
     on and as of such date;

               (ii)    No event has occurred and is continuing, or would result
     from such Loan, which constitutes an Event of Default (as defined in
     Paragraph 7 hereof) or would constitute an event of default but for the
     requirement that notice be given or time elapse or both; and

               (iii)   No material adverse change in the financial condition,
     assets or prospects of either Borrower shall have occurred and be
     continuing; and

     (b) the Bank shall have received such other approvals, opinions or
documents as the Bank may reasonably request; and

     (c) the making of such Loan shall not contravene any law, rule or
regulation applicable to the Borrowers or the Bank.

6. Closing Fee.  The Borrower agrees to pay to Bank a nonrefundable closing fee
equal to one-half of one percent of $4,650,000 ($23,250), payable on the date of
this Note.

7. Events of Default.  The following are events of default (each an "Event of
Default") hereunder:  (a) the failure to pay or perform any obligation,
liability or indebtedness of any Obligor to Bank, or to any affiliate of
NationsBank Corporation, whether under this Note or any other document executed
in connection with this Note or any Loan Document, as and when due (whether upon
demand, at maturity or by acceleration); (b) the failure to pay or perform any
other obligation, liability or indebtedness of any Obligor to any other party;
(c) the death of any Obligor (if an individual), (d) the commencement of a
proceeding against any Obligor for dissolution or liquidation, the voluntary or
involuntary termination or dissolution of any Obligor or the merger or
consolidation of any Obligor with or into another entity; (e) the insolvency of,
the business failure of, the appointment of a custodian, trustee, liquidator or
receiver for or for any of the property of, the assignment for the benefit of
creditors by, or the filing of a petition under bankruptcy, insolvency or
debtor's relief law or the filing of a petition for any adjustment of
indebtedness, composition or extension by or against any Obligor; (f) the
determination by Bank that any representation or warranty made to Bank by any
Obligor in this Note or any

                                      -6-
<PAGE>

Loan Document or otherwise is or was, when it was made, untrue or materially
misleading; (g) the failure of any Obligor to timely deliver such financial
statements, including tax returns, other statements of condition or other
information, as Bank shall request from time to time; (h) the entry of a
judgment against any Obligor which Bank deems to be of a material nature, in
Bank's sole discretion; (i) the seizure or forfeiture of, or the issuance of any
writ of possession, garnishment or attachment, or any turnover order for any
property of any Obligor; (j) the determination by Bank that it is insecure for
any reason; or (k) the determination by Bank that a material adverse change has
occurred in the financial condition of any Obligor.

8. Remedies upon Default.  Whenever there is an Event of Default under this Note
(a) the entire balance outstanding hereunder and all other obligations of any
Obligor to Bank (however acquired or evidenced) shall, at the option of Bank,
become immediately due and payable and any obligation of Bank to permit further
borrowing under this Note shall immediately cease and terminate, and/or (b) to
the extent permitted by law, the Rate of interest on the unpaid principal shall
be increased at Bank's discretion up to the maximum rate allowed by law, or if
none, 25% per annum (the "Default Rate"), and/or (c) the Bank may exercise any
or all of its rights and remedies under the other Loan Documents.  The
provisions herein for a Default Rate shall not be deemed to extend the time for
any payment hereunder or to constitute a "grace period" giving the Obligors a
right to cure any default.  At Bank's option, any accrued and unpaid interest,
fees or charges may, for purposes of computing and accruing interest on a daily
basis after the due date of the Note or any installment thereof, be deemed to be
a part of the principal balance, and interest shall accrue on a daily compounded
basis after such date at the rate provided in this Note until the entire
outstanding balance of principal and interest is paid in full.  Bank is hereby
authorized at any time to set off and charge against any deposit accounts of any
Obligor, as well as any money, instruments, securities, documents, chattel
paper, credits, claims, demands, income and any other property, rights and
interests of any Obligor which at any time shall come into the possession or
custody or under the control of Bank or any of its agents, affiliates or
correspondents, without notice or demand, any and all obligations due hereunder.
Additionally, Bank shall have all rights and remedies available under each of
the Loan Documents, as well as all rights and remedies available at law or in
equity.

9. Non-waiver.  The failure at any time of Bank to exercise any of its options
or any other rights hereunder shall not constitute a waiver thereof, nor shall
it be a bar to the exercise of any of its options or rights at a later date.
All rights and remedies of Bank shall be cumulative and may be pursued singly,
successively or together, at the option of Bank.  The acceptance by Bank of any
partial payment shall not constitute a waiver of any default or of any of Bank's
rights under this Note.  No waiver of any of its rights hereunder, and no
modification or amendment of this Note, shall be deemed to be made by Bank
unless the same shall be in writing, duly signed on behalf of Bank; and each
such waiver shall apply only with respect to the specific instance involved, and
shall in no way impair the rights of Bank or the obligations of Obligor to Bank
in any other respect at any other time.

10. Applicable Law, Venue and Jurisdiction.  This Note and the rights and
obligations of Borrower and Bank shall be governed by and interpreted in
accordance with the law of the State of New York.  In any litigation in
connection with or to enforce this Note or any endorsement or guaranty of this
Note or any Loan Documents, Obligors, and each of them, irrevocably consent to
and confer personal jurisdiction on the courts of the State of New York or the
United States located within the State of New York and expressly waive any
objections as to venue in any such courts.  Nothing contained herein shall,
however, prevent Bank from bringing any action or exercising any rights within
any other state or jurisdiction or from obtaining personal jurisdiction by any
other means available under applicable law.

11. Partial Invalidity.  The unenforceability or invalidity of any provision of
this Note shall not affect the enforceability or validity of any other provision
herein and the invalidity or unenforceability of any provision of

                                      -7-
<PAGE>

this Note or of the Loan Documents to any person or circumstance shall not
affect the enforceability or validity of such provision as it may apply to other
persons or circumstances.

12. ARBITRATION.  ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO
INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS
INSTRUMENT, AGREEMENT, DOCUMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR
DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL
BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION
ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND
PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR
ANY SUCCESSOR THEREOF (J.A.M.S.), AND THE "SPECIAL RULES" SET FORTH BELOW.  IN
THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL.  JUDGMENT UPON
ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION.  ANY
PARTY TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT MAY BRING AN ACTION, INCLUDING A
SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR
CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH
ACTION.

          A.  SPECIAL RULES.  THE ARBITRATION SHALL BE CONDUCTED IN THE COUNTY
              -------------
OF ANY BORROWER'S DOMICILE AT TIME OF THE EXECUTION OF THIS INSTRUMENT,
AGREEMENT OR DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN
ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE
ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE.  ALL
ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR
ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE
PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60
DAYS.

          B.  RESERVATION OF RIGHTS.  NOTHING IN THIS ARBITRATION PROVISION
              ---------------------
SHALL BE DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE
STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS INSTRUMENT,
AGREEMENT OR DOCUMENT; OR (II) BE A WAIVER BY THE BANK OF THE PROTECTION
AFFORDED TO IT BY 12 U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW;
OR (III) LIMIT THE RIGHT OF THE BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES
SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR
PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR
ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF
POSSESSION OR THE APPOINTMENT OF A RECEIVER.  THE BANK MAY EXERCISE SUCH SELF
HELP RIGHTS, FORECLOSURE UPON SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL OR
ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY ARBITRATION
PROCEEDING BROUGHT PURSUANT TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT.  NEITHER
THIS EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN
ACTION FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A
WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO
ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH
REMEDIES.

                                      -8-
<PAGE>

13. Binding Effect.  This Note shall be binding upon and inure to the benefit of
Borrower, Obligors and Bank and their respective successors, assigns, heirs and
personal representatives, provided, however, that no obligations of the Borrower
or the Obligors hereunder can be assigned without prior written consent of Bank.

14. Controlling Document.  To the extent that this Note conflicts with or is in
any way incompatible with any other Loan Document concerning this obligation,
the Note shall control over any other document, and if the Note does not address
an issue, then each other document shall control to the extent that it deals
most specifically with an issue.  Borrower confirms that the letter agreement
dated the date hereof, made by the Borrower in favor of the Bank, contains
certain representations, warranties and covenants, and that it shall constitute
an Event of Default hereunder if any representation or warranty made in such
letter agreement shall be false or misleading in any material respect, or if
Borrower fails to perform or observe any covenant, agreement or provision in
such letter agreement.

                                      -9-

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