Document:

Exhibit

Exhibit 4(b)
_____________________________________________________________________________________________
AEP TRANSMISSION COMPANY, LLC
TO
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.
AS TRUSTEE

SECOND SUPPLEMENTAL INDENTURE
DATED AS OF SEPTEMBER 28, 2017

$125,000,000 3.10% SENIOR NOTES, SERIES D DUE 2026
$500,000,000 3.75% SENIOR NOTES, SERIES H DUE 2047
_____________________________________________________________________________________________

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TABLE OF CONTENTS* 
	
				
	 
	 
	Page

	 
	 
	 

	ARTICLE I Additional Definitions
	2
	

	 
	 
	 

	 
	SECTION 1.01.   Definitions.
	2
	

	 
	 
	 

	ARTICLE II The New Series D Notes
	5
	

	 
	 
	 

	 
	SECTION 2.01.   Terms.
	5
	

	 
	SECTION 2.02.   Additional Interest.
	5
	

	 
	 
	 

	ARTICLE III The Series H Notes
	5
	

	 
	 
	 

	 
	SECTION 3.01.   Establishment.
	5
	

	 
	SECTION 3.02.   Aggregate Principal Amount.
	5
	

	 
	SECTION 3.03.   Maturity and Interest.
	5
	

	 
	SECTION 3.04.   Optional Redemption.
	6
	

	 
	SECTION 3.05.   Security Registrar.    
	7
	

	 
	SECTION 3.06.   Global Securities and Certificated Securities.
	7
	

	 
	SECTION 3.07.   Form of Securities.
	9
	

	 
	SECTION 3.08.   Transfer and Exchange.
	9
	

	 
	 
	 

	ARTICLE IV Covenants
	12
	

	 
	 
	 

	 
	SECTION 4.01.   Consolidated Priority Debt.
	12
	

	 
	SECTION 4.02.   Liens.
	12
	

	 
	SECTION 4.03.   Additional Information.
	12
	

	 
	 
	 

	ARTICLE V Miscellaneous Provisions
	 

	 
	 
	 

	 
	SECTION 5.01.   Recitals by Company.
	13
	

	 
	SECTION 5.02.   Ratification and Incorporation of Original Indenture.
	13
	

	 
	SECTION 5.03.   Executed in Counterparts.
	13
	

	 
	SECTION 5.04.   Legends.
	13
	

	 
	SECTION 5.05.   New York Law to Govern.    
	13
	

	 
	 
	 

	SIGNATURES
	14
	

	EXHIBIT A-1 Form of Series H Note
	15
	

	EXHIBIT B Form of Transfer Certificate
	30
	

                            
________________________

		
	*
	This Table of Contents does not constitute part of the Indenture or have any bearing upon the interpretation of any of its terms and provisions.

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THIS SECOND SUPPLEMENTAL INDENTURE is made as of the 28th day of September, 2017, between AEP TRANSMISSION COMPANY, LLC a limited liability company duly organized and existing under the laws of the state of Delaware (herein called the “Company”), having its principal office at 1 Riverside Plaza, Columbus, Ohio 43215 and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., a national banking association, duly organized and existing under the laws of the United States, having its designated corporate trust office at 2 North LaSalle Street, 7th Floor, Chicago, Illinois 60602, as Trustee (herein called the “Trustee”).
W I T N E S S E T H:
WHEREAS, the Company has heretofore entered into an Indenture, dated as of November 1, 2016 (the “Original Indenture”), with the Trustee;
WHEREAS, the Original Indenture is incorporated herein by this reference and the Original Indenture, as supplemented by the First Supplemental Indenture, dated as of November 21, 2016 (the “First Supplemental Indenture”) and this Second Supplemental Indenture, is herein called the “Indenture”;
WHEREAS, under the Original Indenture, a new series of unsecured notes (the “Senior Notes”) may at any time be established by the Board of Managers of the Company in accordance with the provisions of the Original Indenture and the terms of such series may be described by a supplemental indenture executed by the Company and the Trustee;
WHEREAS, the Company proposes to issue an additional $125,000,000 aggregate principal amount of 3.10% Senior Notes, Series D due 2026 (the “New Series D Notes”) (a reopening of the 3.10% Senior Notes, Series D due 2026 (the “Series D Notes”), $300,000,000 of which was issued on November 21, 2016 pursuant to the First Supplemental Indenture for a total aggregate principal amount of $425,000,000); 
WHEREAS, the Company proposes to create under the Indenture a series of Senior Notes to be designated the “3.75% Senior Notes, Series H due 2047” (the “Series H Notes”), the form and substance of the Series H Notes and the terms, provisions and conditions thereof to be set forth as provided in the Original Indenture and this Second Supplemental Indenture;
WHEREAS, the Company and the initial purchasers named therein have entered into that certain Registration Rights Agreement, dated September 28, 2017 (the “Registration Rights Agreement”), providing for (i) the issuance from time to time of Securities issued in exchange for, and in an aggregate principal amount equal to, the New Series D Notes and the Series H Notes (the “Exchange Notes”) containing terms substantially identical to, and evidencing the same indebtedness as, the New Series D Notes and the Series H Notes exchanged therefor (except that such Exchange Notes will be registered under the Securities Act and will not bear any legend to the contrary) and (ii) the payment of any additional amounts of interest that shall become payable in respect of the New Series D Notes and the Series H Notes pursuant to the Registration Rights Agreement as a result of the registration default as described in the Registration Rights Agreement (“Additional Interest”);

WHEREAS, additional Senior Notes of other series hereafter established, except as may be limited in the Original Indenture as at the time supplemented and modified, may be issued from time to time pursuant to the Indenture as at the time supplemented and modified; and
WHEREAS, all conditions necessary to authorize the execution and delivery of this Second Supplemental Indenture and to make it a valid and binding obligation of the Company have been done or performed.
NOW, THEREFORE, in consideration of the agreements and obligations set forth herein and for other good and valuable consideration, the sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
Additional Definitions

SECTION 1.01   Definitions.

The following defined terms used herein shall, unless the context otherwise requires, have the meanings specified below.  Capitalized terms used herein for which no definition is provided herein shall have the meanings set forth in the Original Indenture.
“Additional Interest” shall have the meaning assigned to it in the Registration Rights Agreement.
“Agent Member” shall have the meaning set forth in Section 3.06(a)(iv).
“Applicable Procedures” means, with respect to any transfer or transaction involving a Global Security or beneficial interest therein, the rules and procedures of the Depository for such Security, Euroclear and Clearstream, in each case to the extent applicable to such transaction and as in effect from time to time.
“Certificated Securities” shall have the meaning set forth in Section 3.06(b).
“Clearstream” means Clearstream Banking, société anonyme, or any successor securities clearing agency.
“Consolidated Priority Debt” means all Priority Debt of the Company and its subsidiaries determined on a consolidated basis eliminating inter-company items.
“Consolidated Tangible Net Assets” means the total of all assets (including revaluations thereof as a result of commercial appraisals, price level restatement or otherwise) appearing on the most recent quarterly or annual, as applicable, consolidated balance sheet of the Company and its consolidated subsidiaries, net of applicable reserves and deductions, but excluding goodwill, trade names, trademarks, patents, unamortized debt discount and all other like intangible assets (which term shall not be construed to include such revaluations), less the aggregate of the consolidated current liabilities of the Company and its consolidated subsidiaries appearing on such balance sheet.

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“Debt” means any indebtedness for borrowed money.
“DTC” means The Depository Trust Company, the initial Depository.
“Euroclear” means Euroclear Bank S.A./N.V., as operator of the Euroclear System or any successor securities clearing agency.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Exchange Offer Registration Statement” shall have the meaning assigned to it in the Registration Rights Agreement.
“Exchange Notes” shall have the meaning set forth in the Recitals.
“Global Notes” means, collectively, the Rule 144A Global Notes and Regulation S Global Notes.
“Global Securities” means global certificates representing the Series H Notes as described in Section 3.06.
“Holder” means a registered holder of a Note.
“Lien or Liens” means any mortgage, pledge, security interest, or other lien on any utility properties or tangible assets, including, without limitation, the capital stock or comparable equity interest of its subsidiaries, owned on the date hereof or hereafter acquired by the Company or its subsidiaries.
“Original Issue Date” means September 28, 2017.
“Permitted Liens” means:
		
	•
	Liens on property existing at the time of acquisition or construction of such property (or created within one year after completion of such acquisition or construction), whether by purchase, merger, construction or otherwise, or to secure the payment of all or any part of the purchase price or construction cost thereof, including the extension of any Liens to repairs, renewals, replacements, substitutions, betterments, additions, extensions and improvements then or thereafter made on the property subject thereto;

		
	•
	any extensions, renewals or replacements (or successive extensions, renewals or replacements), in whole or in part, of Liens permitted by the foregoing clauses;

		
	•
	the pledge of any bonds or other securities at any time issued under any of the Secured Debt permitted by the above clauses; and

		
	•
	the creation or existence of leases (operating or capital) made, or existing on property acquired, in the ordinary course of business.

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“Priority Debt” means, without duplication, any Debt of the Company’s subsidiaries; provided that there shall be excluded from any calculation of Priority Debt, (i) the Debt of any subsidiary owing to the Company or a subsidiary of the Company, and (ii) the Debt of any entity which becomes a subsidiary after the issuance of the Series H Notes and any extension, renewal or refunding thereof, provided that such Debt was not incurred in contemplation of such entity becoming a subsidiary.
“Registration Rights Agreement” means the Registration Rights Agreement, dated as of September 28, 2017 among the Company and the Initial Purchasers named therein, relating to the registration of the New Series D Notes and the Series H Notes under the Securities Act. 
“Regulation S” means Regulation S under the Securities Act and any successor regulation thereto.
“Regulation S Global Note” has the meaning set forth in Section 3.06(a)(ii).
“Rule 144” means Rule 144 under the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Securities and Exchange Commission.
“Rule 144A” means Rule 144A under the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Securities and Exchange Commission.
“Rule 144A Global Note” has the meaning set forth in Section 3.06(a)(i).
“Secured Debt” means any Debt of the Company or any of its subsidiaries secured by a Lien (other than a Permitted Lien).
“Securities Act” means the Securities Act of 1933, as amended from time to time, or any successor legislation.
“Securities Custodian” means the custodian with respect to a Global Security (as appointed by the Depository), or any successor Person thereto and shall initially be the Trustee.
“Stated Maturity” means December 1, 2047.
“Temporary Regulation S Global Notes” has the meaning set forth in Section 3.06(a)(ii).
“Transfer Restricted Security” shall have the meaning assigned to it in Section 6 the Registration Rights Agreement.

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ARTICLE II
The New Series D Notes

SECTION 2.01.   Terms.

Except for the issue date of September 28, 2017, the aggregate principal amount of original issue of $125,000,000, the initial Interest Payment Date of December 1, 2017, and as set forth in Section 2.02 below, the New Series D Notes will have the same ranking, interest rate, maturity and other terms as the Series D Notes as set forth in the First Supplemental Indenture.

SECTION 2.02.   Additional Interest.

Additional interest, if any, shall accrue on the Transfer Restricted Securities representing the New Series D Notes over and above the interest rate set forth in the First Supplemental Indenture in accordance with Section 6(a) of the Registration Rights Agreement.

ARTICLE III

The Series H Notes

SECTION 3.01.   Establishment.

The Series H Notes shall be designated as the Company’s “3.75% Senior Notes, Series H due 2047”.  The Series H Notes shall be treated for all purposes under the Indenture as a single class or series of senior notes.
SECTION 3.02.   Aggregate Principal Amount.

The Trustee shall authenticate and deliver Series H Notes for original issue on the Original Issue Date in the aggregate principal amount of $500,000,000 upon a Company Order for authentication and delivery thereof and satisfaction of Section 2.01 of the Original Indenture.  The aggregate principal amount of the Series H Notes shall be initially limited to $500,000,000 and shall be subject to Periodic Offerings pursuant to Article II of the Original Indenture.  The Series H Notes need not be issued at the same time and may be reopened at any time, without the consent of any Holder, for issuances of additional Series H Notes.  Any such additional Series H Notes will have the same ranking, interest rate, maturity and other terms as such series initially issued (except the issue date and issue price).  
SECTION 3.03.   Maturity and Interest.

(a)The Series H Notes shall mature on, and the date on which the principal of the Series H Notes shall be payable (unless earlier redeemed) shall be December 1, 2047;

(b)The interest rate at which the Series H Notes shall bear interest shall be 3.75% per annum; provided, however, that the Additional Interest shall accrue on the Series H Notes under certain circumstances as provided in clause (c) below; interest shall accrue from the date of authentication of the Series H Notes; the Interest Payment Dates on 

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which such interest will be payable shall be June 1 and December 1, and the Regular Record Date for the determination of Holders to whom interest is payable on any such Interest Payment Date shall be the May 15 or November 15 preceding the relevant Interest Payment Date; provided that the first Interest Payment Date shall be June 1, 2018 and interest payable on the Stated Maturity or any redemption date shall be paid to the Person to whom principal shall be paid; each payment of interest shall include interest accrued through the day before the Interest Payment Date;

(c)Additional Interest, if any, shall accrue on the Transfer Restricted Securities over and above the interest rate set forth herein in accordance with Section 6(a) of the Registration Rights Agreement.

SECTION 3.04.   Optional Redemption.

(d)At any time prior to June 1, 2047, the Series H Notes shall be redeemable at the option of the Company, in whole at any time or in part from time to time, upon not less than thirty but not more than sixty days’ previous notice given to the registered owners of the Series H Notes at a redemption price equal to the greater of (i) 100% of the principal amount of the Series H Notes being redeemed and (ii) the sum of the present values of the remaining scheduled payments of principal and interest on the Series H Notes being redeemed that would be due if such Series H Notes matured on June 1, 2047 (excluding the portion of any such interest accrued to the date of redemption) discounted (for purposes of determining present value) to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate (as defined below) plus 15 basis points, plus, accrued interest thereon to the date of redemption.

At any time on or after June 1, 2047, the Series H Notes shall be redeemable at the option of the Company, in whole or in part, at 100% of the principal amount of the Series H Notes being redeemed, plus accrued and unpaid interest thereon to but excluding the date of redemption.
“Comparable Treasury Issue,” means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term (“remaining life”) of the Series H Notes  (assuming the Series H Notes matured on June 1, 2047) that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining life of such series of the Series H Notes.
“Comparable Treasury Price,” means, with respect to any redemption date, (1) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest of such Reference Treasury Dealer Quotations, or (2) if the Company obtains fewer than four of such Reference Treasury Dealer Quotations, the average of all such quotations.
“Independent Investment Banker” means one of the Reference Treasury Dealers appointed by the Company and notified by the Company to the Trustee.

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“Reference Treasury Dealer” means a primary U.S. Government securities dealer or dealers selected by the Company and notified by the Company to the Trustee.
“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Company and notified to the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Company and the Trustee by such Reference Treasury Dealer at or before 3:30 p.m., New York City time, on the third Business Day preceding such redemption date.
“Treasury Rate” means, with respect to any redemption, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date.
SECTION 3.05.   Security Registrar.

The Security Register referred to in Section 2.05 of the Original Indenture shall, with respect to the Series H Notes, be kept at the office or agency that the Company may from time to time designate for such purpose (which shall initially be the Corporate Trust Office of the Trustee), and at such other place or places as the Company, with the approval of the Trustee, may hereafter designate.
SECTION 3.06.   Global Securities and Certificated Securities.

General.  The Series H Notes shall be issued only as registered Global Securities, without coupons, in denominations of $2,000 and any integral multiples of $1,000 in excess thereof. The Series H Notes initially will be represented by one or more Rule 144A Global Notes (as defined below) and Regulation S Global Notes (as defined below) (collectively, the “Global Notes”) registered in the name of The Depository Trust Company, as Depository or its nominee, or a successor depository or its nominee.
(a)Global Securities.

(i)Form of Restricted Global Notes.  The Series H Notes offered and sold in reliance on Rule 144A shall be initially represented by one or more Global Notes (the “Rule 144A Global Notes”) and will be deposited with the Trustee as custodian for the Depository and registered in the name of the Depository or its nominee. The Rule 144A Global Notes (and any notes issued in exchange for the Rule 144A Global Notes, other than Exchange Notes), including beneficial interests in the Rule 144A Global Notes, will be subject to certain restrictions on transfer set forth therein and in this Indenture.

(ii)Form of Regulation S Global Notes.  The Series H Notes offered and sold in reliance on Regulation S shall be initially represented by one or more temporary Global Notes (the “Temporary Regulation S Global Notes”) and will be deposited with the Trustee as custodian for the Depository and registered in the name of the Depository or its nominee. Following the Resale Restriction 

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Termination Date, beneficial interests in the Regulation S Temporary Global Note will be exchanged for beneficial interests in permanent Global Notes (the “Regulation S Permanent Global Notes” and, together with the Regulation S Temporary Global Notes, the “Regulation S Global Notes”). The Regulation S Global Notes (and any notes issued in exchange for the Regulation S Global Notes, other than Exchange Notes), including beneficial interests in the Regulation S Global Notes, will be subject to certain restrictions or transfer set forth therein and in this Second Supplemental Indenture. 

(iii)At any time and from time to time after the execution and delivery of this Second Supplemental Indenture, the Company may deliver Exchange Notes to be issued in exchange for any series of Rule 144A Global Notes and Regulation S Global Notes, executed by the Company for authentication, together with an Company Order for the authentication and delivery of such Exchange Notes, and the Trustee in accordance with such Company Order shall authenticate and deliver such Exchange Notes.

The Rule 144A Global Note, the Temporary Regulation S Global Note, the Regulation S Global Note are collectively referred to herein as “Global Securities”.  The aggregate principal amount of the Global Securities may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depository or its nominee as hereinafter provided.
(iv)Book-Entry Provisions.  This Section shall apply only to a Global Security deposited with or on behalf of the Depository.  The Company shall execute and the Trustee shall, in accordance with this Section 3.06(a)(iv), authenticate and deliver initially one or more Global Securities that (a) shall be registered in the name of the Depository for such Global Security or Global Securities or the nominee of such Depository and (b) shall be delivered by the Trustee to such Depository or pursuant to such Depository’s instructions or held by the Trustee as custodian for the Depository.

Members of, or participants in, the Depository (“Agent Members”) shall have no rights under this Indenture with respect to any Global Security held on their behalf by the Depository or by the Trustee as the custodian of the Depository or under such Global Security, and the Company, the Trustee and any agent of the Company or the Trustee shall be entitled to treat the Depository as the absolute owner of such Global Security for all purposes whatsoever.  Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and its Agent Members, the operation of customary practices of such Depository governing the exercise of the rights of a holder of a beneficial interest in any Global Security.
To the extent a notice or other communication to the beneficial owners of the Series H Notes is required under the Indenture, unless and until Certificated Securities 

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shall have been issued to such owners, the Trustee shall give all such notices and communications specified herein to be given to such owners to the Depository, and shall have no obligations to such owners.
(b)Certificated Securities.  Except as provided in this Section 3.06, owners of beneficial interests in Global Securities shall not be entitled to receive physical delivery of Certificated Securities (as defined below).

Global Securities representing the Series H Notes shall be exchangeable for certificated securities of such series, (“Certificated Securities)” if (i) the Depository (x) notifies the Company that it is unwilling or unable to continue as Depository for the Global Securities or (y) shall no longer be registered or in good standing under the Exchange Act, or other applicable statute or regulation, and a successor Depository for the Global Securities is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such condition.  Upon surrender to the Trustee of the typewritten certificate or certificates representing the Global Securities by the Depository, accompanied by registration instructions, the Trustee shall execute and authenticate the certificates in accordance with the instructions of the Depository.  Neither the Security Registrar nor the Trustee shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions.  Upon the issuance of Certificated Securities, the Trustee shall recognize the Holders of the Certificated Securities as Holders.  The Certificated Securities shall be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Company, as evidenced by the execution thereof by the Company, and shall bear the legend set forth on Exhibit A-1 hereto unless the Company informs the Trustee that such legend is no longer required.
SECTION 3.07.   Form of Securities.

The Global Securities and Certificated Securities shall be substantially in the form attached as Exhibit A-1 thereto.
SECTION 3.08.   Transfer and Exchange.

(a)General.  Subject to Section 3.01, transfers and exchanges of Securities and beneficial interests in a Global Security of the kinds specified in this Section 3.08 shall be made only in accordance with this Section 3.08.

(b)Transfer and Exchange of Global Securities.

(i)If, at any time, whether prior to or after the expiration of the holding period with respect to the Series H Notes set forth in Rule 144(d) under the Securities Act, an owner of a beneficial interest in a Rule 144A Global Note deposited with the Trustee, as custodian for the Depository, wishes to transfer its interest in such Rule 144A Global Note to a Person who is required or permitted to take delivery thereof in the form of an interest in a Regulation S Global Note, such owner shall, subject to the Applicable Procedures, exchange or cause the exchange of such interest for an equivalent beneficial interest in a Regulation S Global Note as provided in this Section 3.08(b)(i). Upon receipt by the Trustee of

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(1) written instructions given in accordance with the Applicable Procedures from an Agent Member directing the Trustee to credit or cause to be credited a beneficial interest in the Regulation S Global Note in an amount equal to the beneficial interest in the applicable Rule 144A Global Note to be exchanged, (2) a written order given in accordance with the Applicable Procedures containing information regarding the participant account of the Depository and the Euroclear or Clearstream account (if applicable) to be credited with such increase and (3) a certificate substantially in the form of Exhibit B hereto given by the owner of such beneficial interest, the Trustee, as Security Registrar, shall instruct the Depository to reduce or cause to be reduced the aggregate principal amount of the applicable Rule 144A Global Note and to increase or cause to be increased the aggregate principal amount of the applicable Regulation S Global Note by the principal amount of the beneficial interest in the Rule 144A Global Note to be exchanged, to credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Regulation S Global Note equal to the reduction in the aggregate principal amount of the applicable Rule 144A Global Note, and to debit, or cause to be debited, from the account of the Person making such exchange or transfer the beneficial interest in the Rule 144A Global Note that is being exchanged or transferred.

(ii)If, at any time prior to the expiration of one year from the date of the acquisition of the Securities from the Company, an owner of a beneficial interest in a Regulation S Global Note deposited with the Trustee as custodian for the Depository wishes to transfer its interest in such Regulation S Global Note to a Person who is required or permitted to take delivery thereof in the form of an interest in a Rule 144A Global Note, such owner shall, subject to the Applicable Procedures, exchange or cause the exchange of such interest for an equivalent beneficial interest in a Rule 144A Global Note, as provided in this Section 3.08(b)(ii). Upon receipt by the Trustee of (1) written instructions given in accordance with the Applicable Procedures from an Agent Member, directing the Trustee, as Security Registrar, to credit or cause to be credited a beneficial interest in the Rule 144A Global Note equal to the beneficial interest in the Regulation S Global Note to be exchanged; (2) a written order given in accordance with the Applicable Procedures containing information regarding the participant account of the Depository to be credited with such increase; and (3) a certificate substantially in the form of Exhibit B hereto given by the owner of such beneficial interest, the Trustee, as Security Registrar, shall instruct the Depository to reduce or cause to be reduced the aggregate principal amount of such Regulation S Global Note and to increase or cause to be increased the aggregate principal amount of the applicable Rule 144A Global Note by the principal amount of the beneficial interest in the Regulation S Global Note to be exchanged, and the Trustee, as Security Registrar, shall instruct the Depository, concurrently with such reduction, to credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the applicable Rule 144A Global Note equal to the reduction in the aggregate principal amount of such Regulations S Global Note and to debit or cause to be debited from the account of 

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the Person making such transfer the beneficial interest in the Regulation S Global Note that is being transferred.

(iii)Beneficial interests in a Rule 144A Global Note may be transferred to a Person who takes delivery in the form of an interest in such Rule 144A Global Note without any written certification from the transferor or the transferee, but the transferee will be deemed to make the representations set forth in Exhibit B hereto.

(iv)Beneficial interests in a Regulation S Global Note may be transferred to a Person who takes delivery in the form of an interest in such Regulation S Global Note without any written certification from the transferor or the transferee; provided, however, that prior to the expiration of the Restricted Period, transfers of beneficial interests in the Regulation S Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than a distributor (as defined in Regulation S under the Securities Act)).

(c)Transfer and Exchange of Global Securities and Certificated Securities.

(i)In the event that a Global Security is exchanged for a Certificated Security as provided in this Section 3.08(c), such Certificated Security may be exchanged or transferred for one another, subject to Section 2.05 of the Original Indenture, only in accordance with such procedures as are substantially consistent with the provisions of clauses (b)(i) and (ii) of this Section 3.08 and as may be from time to time reasonably adopted by the Company.

(ii)Upon receipt by the Trustee of a Certificated Security, duly endorsed or accompanied by appropriate instruments of transfer, the Trustee shall cancel such Certificated Security and cause, or direct the Securities Custodian to cause, in accordance with the standing instructions and procedures existing of the Depository and the Securities Custodian, the aggregate principal amount of Notes represented by the Rule 144A Global Note or Regulation S Global Note, as applicable, to be increased by the aggregate principal amount of the Certificated Security to be exchanged and shall credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Rule 144A Global Note or Regulation S Global Note, as applicable, equal to the principal amount of the Certificated Security so canceled.  If no Rule 144A Global Notes or Regulation S Global Notes, as applicable, are then outstanding, the Company shall issue and the Trustee shall authenticate, upon written order of the Company in the form of an Officers' Certificate, a new Rule 144A Global Note or Regulation S Global Note, as applicable, in the appropriate principal amount.

(d)Transfer Restricted Security.  Upon any sale or transfer of a Transfer Restricted Security (including any Transfer Restricted Security represented by a Global Security) pursuant to Rule 144 under the Securities Act or an effective registration statement under the Securities Act, which shall be certified to the Trustee and Security 

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Registrar in the form attached hereto as Exhibit B upon which each may conclusively rely:

(i)in the case of any Transfer Restricted Security represented by a Certificated Security, the Security Registrar shall permit the Holder thereof to exchange such Transfer Restricted Security for a Certificated Security that does not bear the Restricted Securities Legends set forth in Exhibits A-1 and A-2 hereto and rescind any restriction on the transfer of such Transfer Restricted Security; and

(ii)in the case of any Transfer Restricted Security represented by a Global Security, such Transfer Restricted Security shall not be required to bear the Restricted Securities Legends set forth in Exhibits A-1 and A-2 hereto if all other interests in such Global Note have been or are concurrently being sold or transferred pursuant to Rule 144 under the Securities Act or pursuant to an effective registration statement under the Securities Act.

ARTICLE IV
Covenants

SECTION 4.01.   Consolidated Priority Debt.

The Company covenants that so long as any of the Series H Notes are outstanding that it will not permit Consolidated Priority Debt to exceed 10% of Consolidated Tangible Net Assets for a period in excess of five consecutive business days.
SECTION 4.02.   Liens.

The Company covenants that for so long as any of the Series H Notes are outstanding that it will not create or suffer to exist or permit any of its subsidiaries to create or suffer to exist any Secured Debt, unless, at the same time, the Series H Notes that are outstanding are also secured by such Lien on an equal and ratable basis; provided, however, the foregoing does not limit:
(a)Permitted Liens; and 

(b)Any other Lien not covered in clause (a) as long as immediately after the creation of such Lien the aggregate principal amount of Secured Debt does not exceed 10% of Consolidated Tangible Net Assets.

SECTION 4.03.   Additional Information.

For so long as any Notes remain outstanding, the Company will furnish to prospective purchasers of the Series H Notes, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act for compliance with Rule 144A.

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ARTICLE V
Miscellaneous Provisions

SECTION 5.01.   Recitals by Company.

The recitals in this Second Supplemental Indenture are made by the Company only and not by the Trustee and the Trustee assumes no responsibility for their correctness. All of the provisions contained in the Original Indenture in respect of the rights, privileges, protections, indemnities, immunities, powers and duties of the Trustee shall be applicable in respect of the Series H Notes and of this Second Supplemental Indenture as fully and with like effect as if set forth herein in full. The Trustee makes no representations as to the validity or sufficiency of this Supplemental Indenture or of the Series H Notes.  The Trustee shall not be accountable for the use or application by the Company of Notes or the proceeds thereof.
SECTION 5.02.   Ratification and Incorporation of Original Indenture.

As supplemented hereby, the Original Indenture is in all respects ratified and confirmed, and the Original Indenture and this Second Supplemental Indenture shall be read, taken and construed as one and the same instrument.
SECTION 5.03.   Executed in Counterparts.

This Second Supplemental Indenture may be simultaneously executed in several counterparts, each of which shall be deemed to be an original, and such counterparts shall together constitute but one and the same instrument.
SECTION 5.04.   Legends.

Except as determined by the Company in accordance with applicable law, each Note shall bear the applicable legends relating to restrictions on transfer pursuant to the securities laws in substantially the form set forth on Exhibit A-1 hereto.
SECTION 5.05.   New York Law to Govern

This Second Supplemental Indenture will be governed by and construed in accordance with the laws of the State of New York, without regard to its conflict of laws provisions.

    

13

IN WITNESS WHEREOF, each party hereto has caused this instrument to be signed in its name and behalf by its duly authorized signatories, all as of the day and year first above written.
AEP TRANSMISSION COMPANY, LLC

By:  /s/ Lonni L. Dieck
Name:  Lonni L. Dieck
Title:    Treasurer    

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Trustee
By:  /s/ Valerie Boyd
Name:  Valerie Boyd
Title:  Vice President

14

EXHIBIT A-1
FORM OF SERIES H NOTE
[Rule 144A Global Security]
[Regulation S Global Security]
[Certificated Security]

[FORM OF FACE OF INITIAL SECURITY]
[Global Securities Legend]
THIS GLOBAL SECURITY IS HELD BY THE DEPOSITORY (AS DEFINED IN THE INDENTURE GOVERNING THIS SECURITY) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE REGISTRAR MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTIONS 2.04 AND 2.05 OF THE INDENTURE, (II) THIS GLOBAL SECURITY MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.05 OF THE INDENTURE AND (III) THIS GLOBAL SECURITY MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.08 OF THE INDENTURE. 
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN CERTIFICATED FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED  REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (“DTC”) TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

Ex. A-1- 1

Restricted Securities Legend]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION.  NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”)), OR (B) IT IS A NON-U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, PURSUANT TO RULE 904 OF REGULATION S, AND (2) AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE RESALE RESTRICTION TERMINATION DATE, ONLY (A) TO AEP TRANSMISSION COMPANY, LLC OR ANY OF ITS SUBSIDIARIES, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, PURSUANT TO RULE 904 OF REGULATION S, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN EACH CASE, THE SECURITIES LAWS OF ANY OTHER JURISDICTION, INCLUDING ANY STATE OF THE UNITED STATES, SUBJECT TO THE COMPANY’S AND THE TRUSTEE’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL SATISFACTORY TO EACH OF THEM AND/OR A CERTIFICATE OF TRANSFER OR EXCHANGE IN THE FORM PRESCRIBED IN THE INDENTURE.  THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
[ERISA Legend]
BY ITS ACQUISITION AND HOLDING OF THIS SECURITY THE HOLDER THEREOF WILL BE DEEMED TO HAVE REPRESENTED, WARRANTED AND AGREED THAT EITHER (I) IT IS NOT AND WILL NOT BE FOR SO LONG AS IT HOLDS ANY SECURITY (OR INTEREST IN A SECURITY) AN EMPLOYEE BENEFIT PLAN OR ARRANGEMENT SUBJECT TO THE FIDUCIARY RESPONSIBILITY REQUIREMENT OF TITLE I OF U.S. EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS 

Ex. A-1- 2

AMENDED (“ERISA”), A “PLAN” OR ARRANGEMENT SUBJECT TO SECTION 4975 OF THE U.S. INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF SUCH EMPLOYEE BENEFIT PLAN OR PLAN’S INVESTMENT IN THE ENTITY, OR A GOVERNMENTAL, NON-U.S., CHURCH OR OTHER PLAN WHICH IS SUBJECT TO ANY FEDERAL, STATE, LOCAL, NON-U.S. OR OTHER LAWS OR REGULATIONS THAT ARE SUBSTANTIALLY SIMILAR TO SUCH PROVISIONS OF ERISA OR THE CODE (“SIMILAR LAWS”), OR (II) THE PURCHASE, HOLDING AND DISPOSITION OF THIS SECURITY WILL NOT CONSTITUTE A NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE OR, IN THE CASE OF A GOVERNMENTAL, NON-U.S., CHURCH OR OTHER PLAN, A SIMILAR VIOLATION UNDER ANY APPLICABLE SIMILAR LAWS.
[Temporary Regulation S Global Security Legend]
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL SECURITY, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR A REGULATION S PERMANENT GLOBAL SECURITY, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN).  NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL SECURITY SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON.
[Certificated Securities Legend]
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE TRUSTEE AND SECURITY REGISTRAR SUCH CERTIFICATES AND OTHER INFORMATION AS THE TRUSTEE AND SECURITY REGISTRAR MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.

Ex. A-1- 3

AEP TRANSMISSION COMPANY, LLC
3.75% Senior Notes, Series H due 2047

CUSIP:  [#########/144A]                Original Issue Date:  September 28, 2017
  [#########/Reg. S]

ISIN:    [#########/144A]
[########/Reg. S]

Stated Maturity:    December 1, 2047        Interest Rate:    3.75%
Principal Amount:    $XXX,000,000
Redeemable:        Yes    X        No
In Whole:        Yes    X        No
In Part:            Yes    X        No

AEP TRANSMISSION COMPANY, LLC, a limited liability company duly organized and existing under the laws of the State of Delaware (herein referred to as the “Company”, which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to [________] or registered assigns, the principal sum of [___________] MILLION DOLLARS ($XXX,000,000) on the Stated Maturity specified above (or upon earlier redemption); and to pay interest on said Principal Amount from the Original Issue Date specified above or from the most recent interest payment date (each such date, an “Interest Payment Date”) to which interest has been paid or duly provided for, semi-annually in arrears on June 1 and December 1 in each year, commencing on June 1, 2018, at the Interest Rate per annum specified above, until the Principal Amount shall have been paid or duly provided for.  Interest shall be computed on the basis of a 360-day year of twelve 30-day months.
The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date, as provided in the Indenture, as hereinafter defined, shall be paid to the Person in whose name this Note (or one or more Predecessor Securities) shall have been registered at the close of business on the Regular Record Date with respect to such Interest Payment Date, which shall be the May 15 or November 15 (whether or not a Business Day), as the case may be, immediately preceding such Interest Payment Date, provided that interest payable on the Stated Maturity or any redemption date shall be paid to the Person to whom principal is paid.  Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and shall be paid as provided in said Indenture.
If any Interest Payment Date, any redemption date or Stated Maturity is not a Business Day, then payment of the amounts due on this Note on such date will be made on the next succeeding Business Day, and no interest shall accrue on such amounts for the period from and after such Interest Payment Date, redemption date or Stated Maturity, as the case may be, except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, with the same force and effect as if made on 

Ex. A-1- 1

such date.  The principal of (and premium, if any) and the interest on this Note shall be payable at the office or agency of the Company may from time to time designate for that purpose, in any coin or currency of the United States of America which at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest (other than interest payable on Stated Maturity or any redemption date) may be made at the option of the Company by check mailed to the registered Holder at such address as shall appear in the Security Register.
This Note is one of a duly authorized series of Senior Notes of the Company (herein sometimes referred to as the “Notes”), specified in the Indenture, all issued or to be issued in one or more series under and pursuant to an Indenture dated as of November 1, 2016 duly executed and delivered between the Company and The Bank of New York Mellon Trust Company, N.A., a national banking association, duly organized and existing under the laws of the United States, as Trustee (herein referred to as the “Trustee”) (such Indenture, as originally executed and delivered and as thereafter supplemented and amended being hereinafter referred to as the "Indenture"), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the holder of this Note. This Note is one of the series of Notes designated on the face hereof as 3.75% Senior Notes, Series H due 2047 initially issued in the aggregate principal amount of $500,000,000.
At any time prior to June 1, 2047, this Note shall be redeemable at the option of the Company, in whole at any time or in part, from time to time, upon not less than thirty but not more than sixty days’ previous notice given to the registered owners of this Note at a redemption price equal to the greater of (i) 100% of the principal amount of this Note being redeemed and (ii) the sum of the present values of the remaining scheduled payments of principal and interest on the this Note being redeemed that would be due if this Note matured on June 1, 2047 (excluding the portion of any such interest accrued to the date of redemption) discounted (for purposes of determining present value) to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate (as defined below) plus 15 basis points, plus, accrued interest thereon to the date of redemption.
At any time on or after June 1, 2047, this Note shall be redeemable at the option of the Company, in whole or in part, at 100% of the principal amount of this Note being redeemed, plus accrued and unpaid interest thereon to but excluding the date of redemption.  
“Comparable Treasury Issue,” means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term (“remaining life”) of this Note (assuming, for this purpose, that this Note matured on June 1, 2047) that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining life of this Note.
“Comparable Treasury Price,” means, with respect to any redemption date, (1) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest of such Reference Treasury Dealer 

Ex. A-1- 2

Quotations, or (2) if the Company obtains fewer than four of such Reference Treasury Dealer Quotations, the average of all such quotations.
“Independent Investment Banker” means one of the Reference Treasury Dealers appointed by the Company and notified by the Company to the Trustee.
“Reference Treasury Dealer” means a primary U.S. Government securities dealer or dealers selected by the Company and notified by the Company to the Trustee.
“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Company and notified to the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Company and the Trustee by such Reference Treasury Dealer at or before 3:30 p.m., New York City time, on the third Business Day preceding such redemption date.
“Treasury Rate” means, with respect to any redemption, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date.
The Company shall not be required to (i) issue, exchange or register the transfer of this Note during a period beginning at the opening of business 15 days before the day of the giving of a notice of redemption of less than all the outstanding Notes of this series and ending at the close of business on the day such notice is given, nor (ii) register the transfer of or exchange of any Notes of this series or portions thereof called for redemption. This Note is exchangeable for Notes in certificated registered form only under certain limited circumstances set forth in the Indenture.
In the event of redemption of this Note in part only, a new Note or Notes of this series, of like tenor, for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the surrender of this Note.
In case an Event of Default, as defined in the Indenture, shall have occurred and be continuing, the principal of all of the Notes may be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions for defeasance at any time of the entire indebtedness of this Note upon compliance by the Company with certain conditions set forth therein.  This Note will not have a sinking fund.
As described in the supplemental indenture relating to the Notes, so long as this Note is outstanding, the Company is subject to covenants described in Article IV of the Second Supplemental Indenture.

Ex. A-1- 3

The Indenture contains provisions permitting the Company and the Trustee, with the consent of the Holders of not less than a majority in aggregate principal amount of the Notes of each series affected at the time outstanding, as defined in the Indenture, to execute supplemental indentures for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders of the Notes; provided, however, that no such supplemental indenture shall (i) extend the fixed maturity of any Notes of any series, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, or reduce any premium payable upon the redemption thereof, or reduce the amount of the principal of a Note that would be due and payable upon a declaration of acceleration of the maturity thereof pursuant to the Indenture, without the consent of the Holder of each Note then outstanding and affected; (ii) reduce the aforesaid percentage of Notes, the Holders of which are required to consent to any such supplemental indenture, or reduce the percentage of Notes, the Holders of which are required to waive any default and its consequences, without the consent of the Holder of each Note then outstanding and affected thereby; or (iii) modify any provision of Section 6.01(c) of the Indenture (except to increase the percentage of principal amount of securities required to rescind and annul any declaration of amounts due and payable under the Notes), without the consent of the Holder of each Note then outstanding and affected thereby.  The Indenture also contains provisions permitting the Holders of a majority in aggregate principal amount of the Notes of all series at the time outstanding affected thereby, on behalf of the Holders of the Notes of such series, to waive any past default in the performance of any of the covenants contained in the Indenture, or established pursuant to the Indenture with respect to such series, and its consequences, except a default in the payment of the principal of or premium, if any, or interest on any of the Notes of such series.  Any such consent or waiver by the registered Holder of this Note (unless revoked as provided in the Indenture) shall be conclusive and binding upon such Holder and upon all future Holders and owners of this Note and of any Note issued in exchange herefor or in place hereof (whether by registration or transfer or otherwise), irrespective of whether or not any notation of such consent or waiver is made upon this Note.
No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and premium, if any, and interest on this Note at the time and place and at the rate and in the money herein prescribed.
As provided in the Indenture and subject to certain limitations therein set forth, this Note is transferable by the registered Holder hereof on the Security Register of the Company, upon surrender of this Note for registration of transfer at the office or agency of the Company as may be designated by the Company accompanied by a written instrument or instruments of transfer in form satisfactory to the Company or the Trustee duly executed by the registered Holder hereof or his or her attorney duly authorized in writing, and thereupon one or more new Notes of authorized denominations and for the same aggregate principal amount and series will be issued to the designated transferee or transferees.  No service charge will be made for any such transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in relation thereto.

Ex. A-1- 4

Prior to due presentment for registration of transfer of this Note, the Company, the Trustee, any paying agent and any Security Registrar may deem and treat the registered Holder hereof as the absolute owner hereof (whether or not this Note shall be overdue and notwithstanding any notice of ownership or writing hereon made by anyone other than the Note Registrar) for the purpose of receiving payment of or on account of the principal hereof and premium, if any, and interest due hereon and for all other purposes, and neither the Company nor the Trustee nor any paying agent nor any Security Registrar shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or the interest on this Note, or for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Indenture, against any incorporator, stockholder, officer or director, past, present or future, as such, of the Company or of any predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issuance hereof, expressly released waived and released.
The Notes of this series are issuable only in registered form without coupons in minimum denominations of $2,000 and any integral multiples of $1,000 in excess thereof. As provided in the Indenture and subject to certain limitations, Notes of this series are exchangeable for a like aggregate principal amount of Notes of this series of a different authorized denomination, as requested by the Holder surrendering the same.
All terms used in this Note which are defined in the Indenture shall have the meanings assigned to them in the Indenture.
This Note shall not be entitled to any benefit under the Indenture hereinafter referred to, be valid or become obligatory for any purpose until the Certificate of Authentication hereon shall have been signed by or on behalf of the Trustee.
This Note will be governed by and construed in accordance with the laws of the State of New York, without regard to its conflict of laws provisions. 

IN WITNESS WHEREOF, the Company has caused this Instrument to be executed.
AEP TRANSMISSION COMPANY, LLC

By:  ______________________________________

Ex. A-1- 5

CERTIFICATE OF AUTHENTICATION
This is one of the Notes referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK MELLON TRUST COMPANY, N. A.,
as Trustee 

Date:____________________                       By:  ____________________________________    
Authorized Signatory

 
    
    

Ex. A-1- 6

ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations:
	
			
	TEN COM-
	as tenants in common
	UNIF GIFT MIN ACT-_______ Custodian ________
                                          (Cust)             (Minor)

	TEN ENT-
	as tenants by the entireties
	

under Uniform Gifts to
Minors Act

_________________________
(State)

	JT TEN-
	As joint tenants with right of survivorship and not as tenants in common

	 
	 
	 

Additional abbreviations may also be used
though not on the above list.

FOR VALUE RECEIVED, the undersigned hereby sell(s) and transfer(s) unto ___________________ (please insert Social Security or other identifying number of assignee)
    
____________________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE OF ASSIGNEE
    
____________________________________________________________________________________________

____________________________________________________________________________________________    
the within Note and all rights thereunder, hereby irrevocably constituting and appointing
____________________________________________________________________________________________    
agent to transfer said Note on the books of the Company, with full power of substitution in the premises.

	
		
	Dated: ___________
	

	 
	 

	 
	NOTICE:  The signature to this assignment must correspond with the name as written upon the face of the within instrument in every particular without alteration or enlargement, or any change whatever.

	 
	 

Ex. A-1- 1

In connection with any transfer of the Note evidenced by this certificate, the undersigned confirms that such Note is being:
CHECK ONE BOX BELOW
	
			
	(1)
	□
	exchanged for the undersigned’s own account without transfer; or

	(2)
	□

	transferred to a person whom the undersigned reasonably believes to be a “qualified institutional buyer” as defined in Rule 144A under the Securities Act of 1933 who is purchasing this Note for such buyer’s own account or the account of a “qualified institutional buyer” in a transaction meeting the requirements of Rule 144A under the Securities Act of 1933 and any applicable securities laws of any state of the United States or any other jurisdiction; or

	(3)
	□

	exchanged or transferred pursuant to and in compliance with Rule 903 or 904 of Regulation S under the Securities Act of 1933; or

	(4)
	□

	transferred to the Company or an “affiliate” (as defined in Rule 144 under the Securities Act) of the Company; or; or

	(5)
	□

	transferred pursuant to another available exemption from the registration requirements of the Securities Act of 1933.

Unless one of the boxes is checked, the Trustee will refuse to register any of this Note evidenced by this certificate in the name of any person other than the registered Holder thereof; provided, however, that if box (3), (4) or (5) is checked, the Company may require, prior to registering any such transfer of this Note, such legal opinions, certifications and other information as the Company has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, such as the exemption provided by Rule 144 under such Act; provided, further, that if box (2) is checked, the transferee must also certify that it is a qualified institutional buyer as defined in Rule 144A.

________________________________________
Signature

________________________________________
SIGNATURE GUARANTEE
Date:___________________
Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Security Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Security Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

Ex. A-1- 2

TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned’s foregoing representations in order to claim the exemption from registration provided by Rule 144A.
________________________________________
SIGNATURE GUARANTEE
Date:___________________
Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Security Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Security Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

NOTICE:  To be executed by an executive officer.
 
 

Ex. A-1- 3

SCHEDULE A
The initial aggregate principal amount of the Note evidenced by the Certificate to which this Schedule is attached is $___________.  The notations on the following table evidence decreases and increases in the aggregate principal amount of the Note evidenced by such Certificate.
	
				
	Decrease in Principal Amount of the Note
	Increase in Principal Amount of the Note
	Principal Amount of the Note Remaining After Such Decrease or Increase
	Notation by
Security Registrar

	 
	 
	 
	 

	 
	 
	 
	 

	 
	 
	 
	 

	 
	 
	 
	 

	 
	 
	 
	 

	 
	 
	 
	 

Ex. A-1- 4

EXHIBIT B
FORM OF TRANSFER CERTIFICATE
In connection with any transfer of any of the Series H Notes evidenced by this certificate, the undersigned confirms that such Series H Notes are being:
CHECK ONE BOX BELOW
	
			
	(1)
	□
	exchanged for the undersigned’s own account without transfer; or

	(2)
	□

	transferred to a person whom the undersigned reasonably believes to be a “qualified institutional buyer” as defined in Rule 144A under the Securities Act of 1933 who is purchasing such Series H Notes for such buyer’s own account or the account of a “qualified institutional buyer” in a transaction meeting the requirements of Rule 144A under the Securities Act of 1933 and any applicable securities laws of any state of the United States or any other jurisdiction; or

	(3)
	□

	exchanged or transferred pursuant to and in compliance with Rule 903 or 904 of Regulation S under the Securities Act of 1933; or

	(4)
	□

	transferred to the Company or an “affiliate” (as defined in Rule 144 under the Securities Act) of the Company; or; or

	(5)
	□

	transferred pursuant to another available exemption from the registration requirements of the Securities Act of 1933.

Unless one of the boxes is checked, the Trustee will refuse to register any of the Series H  Notes evidenced by this certificate in the name of any person other than the registered Holder thereof; provided, however, that if box (3) or (4) is checked, the Company may require, prior to registering any such transfer of the Series H Notes, such legal opinions, certifications and other information as the Company has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, such as the exemption provided by Rule 144 under such Act; provided, further, that if box (2) is checked, the transferee must also certify that it is a qualified institutional buyer as defined in Rule 144A.

______________________________________________    
Signature
Date:_______________            __________________________________________
SIGNATURE GUARANTEE
Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Security Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Security Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

Ex. B- 1

TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Series H Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned’s foregoing representations in order to claim the exemption from registration provided by Rule 144A.

Date:_______________            __________________________________________
SIGNATURE GUARANTEE
Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Security Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Security Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

NOTICE:  To be executed by an executive officer.

Ex. B- 2Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is entered into as of the 27th day of September, 2017 by and between Rite Aid Corporation, a Delaware corporation (the “Company”) and Kermit Crawford (“Executive”).

 

WHEREAS, the Company desires to hire and employ Executive and Executive desires to provide the Company with Executive’s services 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 October 2, 2017 (the “Effective Date”) and, unless earlier terminated pursuant to Section 5 below, shall continue for a period ending on the date that is three (3) years following the Effective Date (the “Original Term of Employment”).  The Original Term of Employment shall be automatically renewed for successive one (1) year terms (the “Renewal Terms”) unless at least one hundred twenty (120) days prior to the expiration of the Original Term of Employment or any Renewal Term, either Party notifies the other Party in writing that Executive 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 phrases “year during the Term” or similar language shall refer to each twelve (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 the President & Chief Operating Officer and shall have such officer level duties, responsibilities and authority as are customary for a President and Chief Operating Officer and shall have such other officer level duties, responsibilities and authorities as shall be assigned by the Company from time to time consistent with such position.  Executive shall devote Executive’s full working time, attention, knowledge and skills faithfully and to the best of Executive’s 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.  Executive shall report to the Company’s Chief Executive Officer.  Contemporaneously with termination of Executive’s employment for any reason, Executive shall automatically resign from all offices and positions Executive holds with the Company or any subsidiary without any further action on the part of Executive or the Company.

 

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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 (in no event less than one) 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 Executive’s personal investments and affairs, provided that Executive’s activities pursuant to clauses (i), (ii) or (iii) do not violate Sections 6 or 7 below or materially interfere with the proper performance of Executive’s 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 or employees generally.  Notwithstanding the foregoing, the Company acknowledges Executive currently serves on the board of directors of two public companies.  Executive shall be permitted to continue his service on both boards but shall work towards reducing his service to one public company board.

 

3.                                      Compensation.

 

3.1                               Base Salary.  During the Term, as compensation for Executive’s services hereunder, Executive shall receive a salary at no less than the annualized rate of $1 Million Dollars ($1,000,000) per year (“Base Salary” as may be increased 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 Company’s Board of Directors (the “Board”) or the Compensation Committee of the Board (the “Compensation Committee”) from time to time.  For the fiscal year ongoing as of the Effective Date (“FY 18”), Executive’s annual bonus opportunity pursuant to such plan shall equal one hundred seventy-five percent (175%) (the “Annual Target Bonus”) of the Base Salary and for each subsequent year, equal to the bonus opportunity as established by the Compensation Committee of the Board but no less than one hundred seventy-five percent (175%) of the Base Salary.  For FY18 Executive will receive an Annual Performance Bonus of no less than the pro-rata portion of an Annual Target Bonus.  Payment of any bonus earned shall be made in accordance with the terms of the Company’s annual bonus plan as in effect for the year for which the bonus is earned.

 

3.3                               Equity Awards.  Executive will be eligible to participate during the Term in the Company’s Long Term Incentive Plan (“LTIP”).  Executive’s long term incentive factor will be based upon four hundred twenty five percent (425%) of Executive’s Base Salary.  Therefore, on each regular grant date occurring during the Term, Executive will be granted awards under the Company’s 2014 Omnibus Equity Plan or any successor plan thereto (the “Equity Plan”), a copy of which Equity Plan has been filed as Exhibit 10.1 to the Company’s current report on Form 8-K filed with the Securities and Exchange Commission on June 23, 2014, pursuant to the LTIP valued at four hundred twenty five percent (425%)

 

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of Base Salary calculated in a manner consistent with and containing the same terms and conditions as other senior executives.

 

3.4                                                           Inducement Awards.                             Executive to receive inducement awards to be granted on the Effective Date of two million dollars ($2,000,000) of Restricted Stock Units that vest 1/3 annually on the anniversary date of the grant over a period of three years; one million (1,000,000) nonqualified stock options to purchase shares of Rite Aid Corporation common stock with an exercise price equal to the market price on the date of grant which vest 1⁄4 annually on the anniversary date of the grant over a period of four years; and one million dollars ($1,000,000) payable net of tax withholding within the first week of the Effective Date subject to pro-rata repayment to the Company by Executive, during the thirty-six (36) month period of time beginning the Effective Date of this Agreement, should Executive be terminated for Cause or should Executive resign without Good Reason.

 

4.                                      Additional Benefits.

 

4.1                               Employee Benefits.  During the Term, Executive shall be eligible to participate in the employee benefit plans (including, but not limited to medical, dental and life insurance plans, short-term and long-term disability coverage, the Supplemental Executive Retirement Plan and 401(k) plans in which management employees of the Company are generally eligible to participate, subject to satisfaction of any eligibility requirements and the other generally applicable terms of such plans.  Nothing in this Agreement shall prevent the Company from amending or terminating any employee benefit plans of the Company from time to time as the Company deems appropriate.

 

4.2                               Expenses.  During the Term, the Company shall reimburse Executive for any expenses reasonably incurred by Executive in furtherance of Executive’s 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 (the “Code”).  The provisions of Section 14(b) shall apply to all reimbursements made under this Section 4.2.

 

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

 

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

 

4.5                               Annual Legal and Financial Planning Allowance.  During the Term, the Company shall provide Executive with a legal and financial planning allowance in the amount of $10,000.00.  During the first year of the original Term, the Company shall provide Executive with a legal and financial planning allowance of $20,000.00 to include legal services for review of the initial employment agreement. The provisions of Section 14(b) shall apply to any payments or reimbursements made under this Section 4.5.

 

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4.6                               Relocation.  Executive shall be eligible for a payment of up to a maximum of ninety thousand dollars ($90,000.00), to assist with relocation and living expenses.

 

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 or any subsidiaries of 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. The provisions of Section 14(b) shall apply to any payments or reimbursements made under this Section 4.7.

 

5.                                      Termination.

 

5.1                               Termination of Executive’s Employment by the Company for Cause.

 

The Company may terminate Executive’s employment hereunder for Cause (as defined below).  Such termination shall be effected by written notice thereof delivered by the Company to Executive, indicating in reasonable detail the facts and circumstances alleged to provide a basis for such termination, and shall be effective as of the date of such notice in accordance with Section 12 hereof.  “Cause shall mean:  (i) Executive’s gross negligence or willful misconduct in the performance of the duties or responsibilities of Executive’s position with the Company or any subsidiary, or failure to timely carry out any lawful directive of the Company; (ii) Executive’s misappropriation of any funds or property of the Company or any subsidiary; (iii) the conduct by Executive which is a material violation of this Agreement or Company Policy or which materially interferes with the Executive’s ability to perform Executive’s duties; (iv) the commission by Executive of an act of fraud or dishonesty toward the Company or any subsidiary; (v) Executive’s willful misconduct or gross negligence which damages or injures the Company or the Company’s reputation; (vi) Executive is convicted of or pleads guilty to a misdemeanor involving moral turpitude or any felony; or (vii) the use or imparting by Executive of any confidential or proprietary information of the Company or any subsidiary.  Notwithstanding the foregoing, with respect to (i) and (iii), no act or failure to act shall constitute Cause unless Executive first receives written notice from the Company detailing the specific conduct that constitutes Cause, and Executive is provided thirty (3) days to cure the event or circumstances giving rise to Cause

 

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:

 

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(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)                                 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 ninety (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 a thirty (30) day 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 (2) 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 (2) years following the date that the release of claims (referred to below) becomes irrevocable (provided, if as of the date of termination the release of claims could become irrevocable in either of two taxable years of Executive, payments will not commence before the first day of the later such taxable year), and (iii) with respect to health insurance coverage, the cost of COBRA benefits (and equivalent benefits which shall be provided by the Company following expiration of any COBRA continuation period) to

 

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Executive and his immediate family for a period of two (2) 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 non-performance based restricted stock (“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 (2) years following the date of termination.  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 ninety (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)                                   If a termination pursuant to Section 5.3 of the Agreement occurs following the start of the Company’s fiscal year, Executive shall also be entitled to receive, to the extent not previously paid (which shall be paid at the same time paid to other eligible participants in the bonus plan but no later than 75 days following the end of the calendar year in which the date of termination occurs) Executive’s Annual Target Bonus amount by the fraction (x) the numerator of which is the number of days between the beginning of the then current fiscal year of the Company and the date of termination of employment and (y) the denominator of which is 365.  Executive shall also receive any unpaid annual bonus earned for any completed fiscal year preceding the date of termination.

 

(d)                                  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 a thirty (30) day notice thereof or the Company may elect in its sole discretion to reduce or eliminate the notice period and pay the Executive’s 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) and (iii), (b) and (c) above, Executive must execute, not revoke, and abide by a release (which shall be substantially in the form attached hereto as Appendix A) of all other claims, cooperate with the Company in the event of litigation and fully comply with Executive’s obligations under Sections 6 and 7 below.

 

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

 

(a)                                the assignment to Executive of any duties or responsibilities materially inconsistent with Executive’s status and position as a President and Chief Operating Officer of the Company or any material adverse change in Executive’s title or reporting relationships; or

 

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

 

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

 

(d)                                 notification to Executive by the Company that it has elected to terminate the Agreement at the expiration of the then current Term;

 

provided, however, that the Executive has provided written notice (which shall set forth in reasonable detail the specific conduct of the Company that constitutes Good Reason and the specific provisions of this Agreement on which Executive relies) to the Company of the existence of any condition described in any one of the subparagraphs (a), (b), (c) or (d) within thirty (30) days of the initial existence of such condition, and the Company has not cured the condition within thirty (30) days of the receipt of such notice.  Any termination of employment by the Executive for Good Reason pursuant to Section 5.3 must occur no later than the date that is the three (3) month anniversary of the initial existence of the condition giving rise to the termination right.

 

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), subject to the requirements of applicable law:

 

(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 Executive’s immediate family, as applicable, for a period of two (2) years following the date of termination of employment.  Executive or Executive’s estate shall also be entitled to receive, at the same time as is paid to other eligible participants in the bonus plan, following determination by the Compensation Committee (or the Board) of the Company’s performance under the applicable annual performance goals for the fiscal year , a pro rata annual bonus determined by multiplying the performance level achieved (relative to Executive’s Annual Target Bonus amount) by the fraction (x) the numerator of which is the number of days between the beginning of the then current fiscal year of the Company and the date of termination of employment and (y) the denominator of which is 365.  Executive or Executive’s estate shall also be entitled to any unpaid annual bonus earned for any completed fiscal year preceding the date of termination.

 

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(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 (2) years following the date of termination.  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 ninety (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 (d).

 

“Total Disability” shall mean any physical or mental disability that has prevented Executive from (a)(i) performing one or more of the essential functions of Executive’s position for a period of not less than ninety (90) days in any twelve (12) month period and (ii) which is expected to be of permanent or indeterminate duration but expected to last at least twelve (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 ninety (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 and Sections 5 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                               Change in Control Best Payments Determination.  In the event the benefits described in Section 5.3(a) and (b) (the “Severance Benefits”) are payable to Executive in connection with a Change in Control and, if paid, would subject Executive to an excise tax under Section 4999 of the Code (the “Excise Tax”), then notwithstanding the provisions of Section 5.3(a) and (b), the Company shall reduce the Severance Benefits (the “Benefit Reduction”) under Section 5.3(a) and (b) by the amount necessary to result in the Executive not being subject to the Excise Tax if such reduction would result in the Executive’s “Net After Tax Amount” attributable to the Severance Benefits described in

 

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Section 5.3(a) and (b) being greater than it would be if no Benefit Reduction was effected.  For this purpose “Net After Tax Amount” shall mean the net amount of Severance Benefits Executive is entitled to receive under this Agreement after giving effect to all federal, state and local taxes which would be applicable to such payments, including, but not limited to, the Excise Tax.  The determination of whether any such Benefit Reduction shall be affected shall be made by a nationally recognized public accounting firm selected by the Company prior to the occurrence of the Change in Control and such determination shall be binding on both Executive and the Company.  For the avoidance of doubt, in determining Executive’s potential exposure to the Excise Tax, the Company shall retain a nationally recognized public accounting firm (or other professionals agreed upon with Executive) to analyze and, if deemed appropriate by the accounting firm, value Executive’s restrictive covenants to determine the reasonable compensation Executive will receive for abiding by such restrictive covenants.

 

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 Executive’s employment with the Company, its subsidiaries, affiliates and strategic partners, Executive 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”).  For the avoidance of doubt, no information shall be deemed “Confidential Information” to the extent: (i) Executive knew of such information prior to the Effective Date; or (ii) such information is or becomes generally known to the public or in the industry through no fault of Executive.  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 Executive’s 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

 

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that Executive has not 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 or one of its subsidiaries and during the twelve (12) month period following the termination of Executive’s employment (the “Restricted Period”), Executive will not directly, or indirectly knowingly cause any other person to, engage in Competition with the Company or any of its subsidiaries in the restricted area (the “Restricted Area”).  “Competition” shall mean engaging in any activity for a Competitor of the Company or any of its subsidiaries, whether as a principal, agent, partner, officer, director, employee, independent contractor, investor, consultant or stockholder (except as a less than five percent (5%) shareholder of a publicly traded company) or otherwise.  A “Competitor” shall mean any individual or entity that competes with one or more business units of the Company or its subsidiaries.  As of the Effective Date, it is understood that the Company’s business units include:  (1) pharmacy benefits management (“PBM”), including the administration of pharmacy benefits for businesses, government agencies or health plans; mail order pharmacy; specialty pharmacy and Medicare Part D services; (2) the sale of prescription drugs either at retail or over the internet; and (3) retail health care (“RediClinic”).  It is understood and agreed that PBM competitors include, but are not limited to, CVS Health, Express Scripts and Catamaran Corp., as well as health plans or insurers that provide PBM services that compete with the Company’s PBM business.  It is also understood and agreed that retail pharmacy competitors include any individual or entity that sells or has imminent plans to sell prescription drugs, including but not limited to, drugstore companies such as Walgreens Boots Alliance and CVS Health; mass merchants such as Wal-Mart Stores, Inc. and Target Corp.; and food/drug combinations such as Kroger Co., Albertsons LLC and Ahold USA.  It is understood and agreed that RediClinic competitors shall include, but not be limited to, Walgreen’s Take Care Clinics, CVS Health’s Minute Clinics and The Little Clinic.  During

 

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Executive’s employment by the Company or one of its subsidiaries and during the Restricted Period, Executive will not directly, or indirectly knowingly cause any other person to, engage in any activity that involves providing audit review or other consulting or advisory services with respect to any relationship between the Company and any third party.  The Restricted Area refers to those states within the United States in which the Company, including its subsidiaries, conducts its business, including the District of Columbia and Puerto Rico.

 

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,

 

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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 Executive:

 

(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

 

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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 Executive from fulfilling the terms of employment and the obligations of this Agreement;

 

(iii)          does not have in Executive’s 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 Executive may now have to prior employers or to others relating to confidential information, inventions, discoveries or other intellectual property which are the property of those prior employers or others, as the case may be.

 

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

 

10.          Arbitration.

 

Except as necessary for the Company and its subsidiaries, affiliates, strategic partners, successors or assigns or Executive to specifically enforce or enjoin a breach of this Agreement (to the extent such remedies are otherwise available), the parties agree that any and all disputes that may arise in connection with, arising out of or relating to this Agreement, or any dispute that relates in any way, in whole or in part, to Executive’s employment with the Company or any subsidiary, affiliate or strategic partner, the termination of that employment or any other dispute by and between the parties or their subsidiaries, affiliates, strategic partners, successors or assigns, shall be submitted to final and binding arbitration in the Commonwealth of 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

 

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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.  Executive further understands that there is no intent herein to interfere with the Equal Employment Opportunity Commission’s right to enforce the laws it oversees or your right to file an administrative charge of employment discrimination or a similar state or local administrative agency.

 

11.          Assignment.

 

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

 

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:
    	
 
    	
Kermit Crawford, at Executive’s last address shown   on the payroll records of the Company.
    

 

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

 

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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 the Commonwealth of Pennsylvania and Executive consents to the jurisdiction and venue of said courts in any action instituted by or on behalf of the Company against Executive.

 

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 Executive’s execution of this Agreement nor the full and complete performance of Executive’s 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 Executive’s 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

 

15

 

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.

 

14.          Compliance with Code Section 409A.

 

(a)           Payment of Benefits:  To the extent necessary to avoid adverse tax consequences, and except as described below, any payment to which Executive becomes entitled under the Agreement, or any arrangement or plan referenced in this Agreement, that constitutes “deferred compensation” under section 409A of the Code (“409A”), and is (a) payable upon Executive’s termination; (b) at a time when the Executive is a “specified employee” as defined by 409A shall not be made until the first payroll date after the earliest of:  (1) the expiration of the six (6) month period (the “Deferral Period”) measured from the date of Executive’s “separation from service” within the meaning of such term under 409A; or (2) the date of Executive’s death.

 

On the first payroll date after the expiration of the Deferral Period, all payments that would have been made during the Deferral Period (whether in a single lump sum or in installments) shall be paid as a single lump sum to Executive or, if applicable, Executive’s beneficiary.  This section shall not apply to any payment which meets the short term deferral exception to 409A or constitutes “separation pay” as described in Treasury Regulation Section 409A-1(b)(9) (in general, payments (i) that are made on an involuntary separation from service which (ii) do not exceed the lesser of two (2) times (x) the Executive’s annualized compensation for the taxable year preceding the year in which the separation from service occurs or (y) the Code Section 401(a)(17) limit on compensation for the year in which separation from service occurs and (iii) are paid in total by the end of the second calendar year following the calendar year in which the separation from service occurs).

 

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The Company shall pay to Executive the Accrued Benefits, within ten (10) days after the Date of Termination.  Notwithstanding the foregoing, if the Executive is a “specified employee”, as defined by 409A, and payment of the Accrued Benefits is required to be delayed under 409A, the Company shall pay to Executive the Accrued Benefits on the first payroll date after the six (6) month anniversary of the Date of Termination.

 

For purposes of 409A, each payment and each installment described in this Agreement shall be considered a separate payment from each other payment or installment and to the extent required by 409A, a payment due upon termination of employment will only be paid upon Executive’s separation from service within the meaning of such term under 409A.

 

(b)           Reimbursements:  To the extent required by 409A, with regard to any provision that provides for the reimbursement of costs and expenses, or for the provision of in-kind benefits:  (i) the right to such reimbursement or in-kind benefit shall not be subject to liquidation or exchange for another benefit; (ii) the amount of expenses or in-kind benefits available or paid in one (1) year shall not affect the amount available or paid in any subsequent year; and (iii) such payments shall be made on or before the last day of the Executive’s taxable year in which the expense occurred.

 

THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK

 

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

 

	
 
    	
RITE   AID CORPORATION
    
	
 
    	
 
    
	
 
    	
/s/   James J. Comitale
    
	
 
    	
By
    	
James   J. Comitale
    
	
 
    	
Its:
    	
Senior   Vice President & General Counsel
    
	
 
    	
 
    	
 
    
	
 
    	
EXECUTIVE
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Kermit Crawford
    
	
 
    	
Kermit   Crawford
    

 

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