Document:

Exhibit
10.2

 

EMPLOYMENT
AGREEMENT

 

THIS
EMPLOYMENT AGREEMENT (the “Agreement”) is entered into and
effective as of the 24th day of September, 2008 (the “Effective Date”) by and
between Rite Aid Corporation, a Delaware corporation (the “Company”) and John T.
Standley (the “Executive”).

 

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

 

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

 

1.             Term
of Employment.

 

The
term of Executive’s employment under this Agreement shall commence on the
Effective Date and, unless earlier terminated pursuant to Section 5 below,
shall continue for a period ending on the date that is two (2) years
following the Effective Date (the “Original Term of Employment”).  The Original Term of Employment shall be
automatically renewed for successive one year terms (the “Renewal Terms”)
unless at least 180 days prior to the expiration of the Original Term of
Employment or any Renewal Term, either Party notifies the other Party in
writing that he or it is electing to terminate this Agreement at the expiration
of the then current Term of employment “Term” shall mean the Original Term of
Employment and all Renewal Terms.  For
purposes of this Agreement, except as otherwise provided herein, the phrase “year
during the Term” or similar language shall refer to each 12 month period
commencing on the Effective Date or applicable anniversaries thereof.

 

2.             Position and
Duties.

 

2.1          Generally.  During the Term, Executive shall serve as
President and Chief Operating Officer of the Company and shall have the titles,
duties, responsibilities and authority as are customary for such positions and
such other titles, duties, responsibilities and authorities as shall be
assigned by the Company from time to time consistent with such positions.  Executive shall devote his full working time,
attention, knowledge and skills faithfully and to the best of his ability, to
the duties and responsibilities assigned by the Company in furtherance of the
business affairs and activities of the Company and its subsidiaries, affiliates
and strategic partners.  Executive shall
report solely to the Company’s Chief Executive Officer and/or Board of
Directors.  Following termination of
Executive’s employment for any reason, Executive shall immediately resign from
all offices and positions he holds with the Company or any subsidiary.

 

 

Other than necessary
travel in connection with the performance of his duties hereunder, the
Executive shall be based at the Company’s headquarters.

 

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

 

3.             Compensation.

 

3.1          Base Salary.  During the Term, as compensation for his
services hereunder, Executive shall receive a base salary at the annualized
rate of $900,000.00 per year (“Base Salary” as shall be reviewed annually for
possible increase), which shall be paid in accordance with the Company’s normal
payroll practices and procedures, less such deductions or offsets required by
applicable law or otherwise authorized by Executive.

 

3.2          Annual Performance
Bonus.  The Executive shall
participate each fiscal year during the Term in the Company’s annual bonus plan
as adopted and approved by the Board or the Compensation Committee from time to
time.  For the current fiscal year
(Fiscal Year 2009), Executive’s annual bonus opportunity pursuant to such plan
shall equal 125% (the “Annual Target Bonus”) of the annualized Base Salary
($900,000 per year for Fiscal Year 2009) even though the entire $900,000 Base
Salary for Fiscal Year 2009 will not be paid to Executive as a result of this
Agreement.  For subsequent fiscal years,
the Annual Target Bonus may be adjusted (however, in no event shall it be less
than 125%) and shall be based upon the Board approved plan for that year.

 

3.3          Equity Awards.

 

(a)           On the Effective Date,
the Executive will be granted an option (the “Option”) to purchase 3,500,000
shares of the Company’s Common Stock, par value $1.00 per share (“Company Stock”).  The Option shall:  (i) be a nonqualified stock option; (ii) have
an exercise price equal to the closing price of the Company Stock as reported
on the New York Stock Exchange (“NYSE “) on the date of grant; (iii) have
a term of ten (10) years following the date of grant; (iv) vest and
become exercisable as to one-fourth of the shares of the Company Stock subject
to the option on each of the first four (4) anniversaries from the date of
grant; (v) be subject to the acceleration exercise 

 

 

and termination
provisions set forth in Section 3.3(c) and Article 5 hereof; and
(vi) otherwise be evidenced by and subject to the terms of the Company’s
stock option and equity plans.

 

(b)           At the first regular
meeting of the Compensation Committee of the Board of Directors following the
Effective Date and subject to the approval of the Compensation Committee,
Executive will be recommended for participation in the Company’s Executive
Equity Plan (the “EEP”).  On a going
forward basis, the award will be based upon Executive’s annual Base Salary and
the stock closing price on the date of grant. 
For the current fiscal year (FY 2009) only, Executive’s participation in
the EEP will be on a prorated basis.

 

(c)           Upon the
occurrence of a Change in Control of the Company and prior to the termination
of Executive’s employment with the Company, the Options awarded pursuant to
subsection (a) above and any stock options awarded pursuant to the EEP in
subsection (b) above then held by Executive shall immediately vest and
become exercisable in full.  For purposes
of this Agreement “Change in Control” shall have the meaning set forth in the
attached Appendix A.

 

(d)           It is
understood and acknowledged by Executive that the securities underlying the
stock options and/or restricted stock that may be awarded to Executive from
time to time may not be subject to an effective registration statement under
the federal securities laws until some time after the Effective Date.  The Company agrees that if, as of the date of
termination of Executive’s employment under the circumstances described in
Sections 5.2 (except termination for Cause), 5.3 and 5.5, the securities
underlying the then vested and exercisable portion of any stock options are not
subject to an effective registration statement, the 90 day periods in Section 5.2
(except termination for Cause), 5.3 and 5.5, as applicable, will be deemed to
run from the first date such securities become subject to an effective
registration statement.

 

4.             Additional
Benefits.

 

4.1      Employee
Benefits.  During the Term,
Executive and, as to welfare plans the Executive’s eligible immediate family,
as the case may be, shall be entitled to participate in the employee benefit
plans (including, but not limited to medical, dental and life insurance plans,
short-term and long-term disability coverage, the Supplemental Executive
Retirement Plan (which shall be at the monthly contribution rate equal to 2% of
Executive’s Base Salary) and 401(k) plans) in which senior management
employees of the Company are generally eligible to participate, subject to any
eligibility requirements and the other generally applicable terms of such
plans.

 

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

 

 

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

 

4.3      Vacation.  Executive shall be entitled to four (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
Financial Planning Allowance. 
During each year of the Term, the Company shall provide Executive with
an executive planning allowance in the amount of up to $7,000.00.

 

4.6      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 or as an officer or director of an entity other than the
Company at the request 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 and enforcement of its rights hereunder.  Following termination of the Executive’s
employment or service with the Company, the Company shall cause any Director
and Officer liability insurance policies applicable to the Executive prior to
such termination to remain in effect for six (6) years following the date
of termination of employment.

 

5.             Termination.

 

5.1          Termination
of Executive’s Employment by the Company for Cause.  The Company may terminate Executive’s
employment hereunder for Cause (as defined below).  Such termination shall be effected by written
notice thereof delivered by the Company to Executive, indicating in reasonable
detail the facts and circumstances alleged to provide a basis for such
termination, and shall be effective as of the date of such notice in accordance
with Section 12 hereof. “Cause” as determined in reasonable good faith by
a resolution adopted by the affirmative vote of a majority of the Company’s
Board of Directors (after reasonable written notice to Executive setting forth
in reasonable detail the specific conduct of Executive upon which the Board relies
in reaching its determination, and a reasonable opportunity for Executive,
together with his counsel, to be heard before the Board prior to making such
determination) shall mean:  (i) Executive’s
gross negligence or willful misconduct in the performance of the duties or
responsibilities of his position with the Company or any subsidiary, or failure
to timely carry out any lawful and reasonable directive of the Chief Executive
Officer or Board of Directors; (ii) Executive’s intentional
misappropriation of any funds or property of the 

 

 

Company or any
subsidiary; (iii) the conduct by Executive which is a material violation
of this Agreement or written Company Policy which materially interferes with
the Executive’s ability to perform his duties; provided, however, that
Executive shall have the right, within thirty (30) days after receipt of
written notice (which shall set forth in reasonable detail the specific conduct
of Executive that constitutes Cause and the specific provision(s) of this
Agreement on which Company relies) from Company of the Executive’s violation of
this subsection, to cure the event or circumstances giving rise to such Cause
and in the event of which cure, such event or circumstances shall not constitute
Cause hereunder; (iv) the commission by Executive of an act of fraud,
misappropriation or embezzlement toward the Company or any subsidiary; (v) Executive’s
gross negligence or willful misconduct which damages or injures the Company or
the Company’s reputation; (vi) Executive is convicted of or pleads guilty
to a felony involving moral turpitude; or (vii) the use or imparting by
Executive of any confidential or proprietary information of the Company, or any
subsidiary in material violation of Section 6 below.

 

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

 

(a)           Executive shall be
entitled to receive within ten (10) business days of the date of
termination:  (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
such termination, to the extent otherwise provided under Section 4.2
above, and (iii) all other vested payments and benefits to which Executive
may otherwise be entitled pursuant to the terms of the applicable benefit plan
or arrangement through the effective date of such termination ((i), (ii) and
(iii), the (“Accrued Benefits”).  All
other rights of Executive (and, except as provided in Section 5.6 below,
all obligations of the Company) hereunder or otherwise in connection with
Executive’s employment with the Company shall terminate effective as of the
date of such termination of employment and Executive shall not be entitled to
any payments or benefits not specifically described in this subsection (a) or
(b) below.

 

(b)           Except as provided in Section 3.3(d),
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 thirty (30) days’ notice to the Company or such earlier date as
the Company determines in its discretion and designates in writing.  A termination of Executive’s employment by
the Company for Cause or by the Executive other than for Good Reason shall not
constitute a breach of this Agreement.

 

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

 

(a)            Executive shall be
entitled to receive:  (i) within ten
(10) business days of the date of termination 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 of termination of employment; and (iii) continued
health and medical insurance coverage (or reimbursement to Executive of the
cost of purchasing health and medical coverage substantially comparable in all
material respects to the coverage provided by the Company to the Executive,
excepting payments for such periods that the Company provides such coverage)
for Executive and his immediate family for a period of two years following the
date of termination of employment.  In
addition, if such termination occurs following the start of the Company’s
fiscal year, Executive shall also be entitled to receive (which shall be paid
at the same time paid to other eligible participants in the bonus plan and
following determination by the Board that the Company has achieved or exceeded
its annual performance targets for the fiscal year) a pro rata annual bonus
determined by multiplying Executive’s then Annual Target Bonus by a fraction (x) the
numerator of which is the number of days between the beginning of the then
current fiscal year of the Company and the date of termination of employment
and (y) the denominator of which is 365.

 

(b)           The Executive’s stock
option awards held by Executive shall vest and become immediately exercisable
and the restrictions with respect to any awards of restricted stock shall
lapse, in each case to the extent such options would otherwise have become
vested and exercisable (or such restrictions would have lapsed) had Executive
remained in the employ of the Company for a period of two years following the
date of termination.  Except as provided
in Section 3.3(d), such  portion of
Executive’s stock options (together with any portion of Executive’s stock
options that have vested and become exercisable prior to the date of
termination) shall remain exercisable for a period of 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 (or deemed to have
lapsed) as of the date of termination shall be forfeited as of such date.

 

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

 

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

 

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

 

(a)           any adverse alteration
in Executive’s titles, position, status, duties, authorities, reporting
relationship or responsibilities with the Company or its subsidiaries from
those specified in this Agreement;  or

 

(b)           any decrease in
Executive’s then Base Salary as set forth in Section 3.1 or Annual Target
Bonus in Section 3.2 to which Executive has not agreed in writing; or

 

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

 

(d)           failure to promptly
provide any material benefits hereunder;

 

provided, however, that
in each such case the Company shall have the right, within thirty (30) days
(fifteen (15) days for the payment of compensation under this Agreement) after
receipt of written notice (which shall set forth in reasonable detail the
specific conduct of Company that constitutes Good Reason and the specific
provision(s) of this Agreement on which Executive relies) from Executive
of the Company’s violation of any of the foregoing, to cure the event or
circumstances giving rise to such Good Reason and in the event of which cure,
such event or circumstances shall not constitute Good Reason hereunder.

 

 

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

 

(a)            Executive or Executive’s
estate, as the case may be, shall be entitled to receive:  (i) within ten (10) business days
of the date of termination the Accrued Benefits; (ii) promptly 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 and medical insurance coverage (or reimbursement to Executive of the
cost of purchasing health and medical coverage substantially comparable in all
material respects to the coverage provided by the Company to the Executive,
excepting payments for such periods that the Company provides such coverage )
for Executive and/or his immediate family, as applicable, for a period of two (2) years
following the date of termination of employment.  In addition, if such termination occurs
following the start of the Company’s fiscal year, Executive shall also be
entitled to receive (which shall be paid at the same time paid to other
eligible participants in the bonus plan and following determination by the
Board that the Company has achieved or exceeded its annual performance targets
for the fiscal year) a prorata annual bonus determined by multiplying Executive’s
then Annual Target Bonus by a fraction (x) the numerator of which is the
number of days between the beginning of the then current fiscal year of the
Company and the date of termination of employment and (y) the denominator
of which is 365.

 

(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.  Except as provided in Section 3.3(d) such
portion of Executive’s stock options (together with any portion of Executive’s
stock options that have vested and become exercisable prior to the date of
termination) shall remain exercisable for a period of 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
(c).

 

“Total Disability” shall
mean any physical or mental disability that prevents Executive from:  (a) (i) performing one or more of
the essential functions of his position for a period of not less than 150 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 4.6 above,
5.7 and 5.9 below and Sections 6 through 10 below, which shall survive the
expiration of the Term.

 

5.7          Excise Tax Gross-Up.

 

(a)           In the event that any
payment or benefit received or to be received by the Executive pursuant to the
terms of this Agreement or any other plan, arrangement or agreement of the
Company (or any affiliate) (collectively, the “Payments”) would be subject to
the Excise Tax (the “Excise Tax”) imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the “Code”), as determined as provided below,
the Company shall pay to the Executive, at the time specified in Section 5.7(b) below
an additional amount (the “Gross-Up Payment”) such that the net amount retained
by the Executive, after deduction of the Excise Tax on payments and any
federal, state and local income and employment or other tax and the Excise Tax
upon the Gross-Up Payment, and any interest, penalties or additions to tax
payable by the company, Executive with respect thereto, shall be equal to the
total Payments.  For purposes of
determining whether any of the Payments will be subject to the Excise Tax and
the amounts of such Excise Tax, (1) the total amount of the Payments shall be
treated as “parachute payments” within the meaning of section 280G(b)(2) of
the Code, and all “excise parachute payments” within the meaning of section
280G(b)(1) of the Code shall be treated as subject to the Excise Tax,
except to the extent that, in the opinion of tax counsel (“Tax Counsel”)
reasonably acceptable to Executive and selected by the Company, a Payment (in
whole or in part) does not constitute a “parachute payment” within the meaning
of section 280G(b)(2) of the Code, or such “excess parachute payments” (in
whole or in part) are not subject to the Excise Tax, (2) the amount of the
Payments that shall be treated as subject to the Excise Tax shall be equal to
the lesser of (A) the total amount of the Payments or (B) the amount
of “excess parachute payments” within the meaning of section 280G(b)(1) of
the Code (after applying clause (1) hereof), and (3) the value of any
noncash benefits or any deferred payment or benefit shall be determined by the
Tax Counsel in accordance with the principles of sections 280G(d)(3) and (4) of
the Code.  For purposes of determining
the amount of the Gross-Up Payment, the Executive shall be deemed to pay
federal income taxes at the highest marginal rates 

 

 

of federal income
taxation applicable to individuals in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at the highest marginal
rates of taxation applicable to individuals as are in effect in the state and
locality of the Executive’s residence in the calendar year in which the
Gross-Up Payment is to be made, net of the maximum reduction in federal income
taxes that can be obtained from deduction of such state and local taxes, taking
into account any limitations applicable to individuals subject to federal
income tax at the highest marginal rates.

 

(b)          The Gross-Up Payment
provided for in Section 5.7(a) hereof shall be made upon the earlier
of (i) thirty (30) days following the date of termination of Executive’s
employment or (ii) the imposition upon the Executive or payment by the
Executive of any Excise Tax.

 

(c)          If it is established
pursuant to a final determination of a court or an Internal Revenue Service
proceeding that the Excise Tax is less than the amount taken into account under
Section 5.7(a) hereof, the Executive shall repay to the Company
within thirty (30) days of the Executive’s receipt of notice of such final
determination the portion of the Gross-Up Payment attributable to such
reduction (plus the portion of the Gross-Up Payment attributable to the Excise
Tax and federal, state and local income tax imposed on the portion of the Gross-Up
Payment being repaid by the Executive if and to the extent that such repayment
results in a reduction in Excise Tax and a dollar for dollar reduction in the
Executive’s taxable income and wages for the purpose of federal, state and
local income taxes) plus any interest received by the Executive on the amount
of such repayment.  If it is established
pursuant to a final determination of a court or an Internal Revenue Service
proceeding that the Excise Tax exceeds the amount taken into account hereunder (including
without limitation by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment pursuant to Section 5.7(a) in
respect of such excess within thirty (30) days of the Company’s receipt of
notice of such final determination or proceeding.  The Executive and the Company shall each
reasonably cooperate with the other in connection with any administrative or
judicial proceedings concerning the existence or amount of liability for Excise
Tax with respect to the Payments.

 

(d)           In the event of any
change in, or further interpretation of, sections 280G or 4999 of the Code and
the regulations promulgated thereunder, the Executive shall be entitled, by
written notice to the Company, to request an opinion of Tax Counsel regarding
the application of such change to any of the foregoing, and the Company shall
use its best efforts to cause such opinion to be rendered as promptly as
practicable.  All fees and expenses of
the Tax Counsel incurred in connection with this Agreement shall be borne by
the Company.

 

5.8          No Other
Severance or Termination Benefits. 
Except as expressly set forth herein, Executive shall not be
entitled to damages or to any severance or other benefits upon termination of
employment with the Company under any circumstances

 

 

and for any or no reason,
including, but not limited to any severance pay under any Company severance
plan, policy or practice.

 

5.9          Section 409A. 
Notwithstanding anything in this Agreement to the contrary, to the
extent:  (a) that any payment to
which the Executive becomes entitled under this Agreement (including, without
limitation, any payments made pursuant to this Clause), or any agreement or
plan referenced herein, in connection with the Executive’s termination of
employment with the Company constitutes deferred compensation subject to Section 409A
of the Code; and (b) the Executive is deemed at the time of such
termination of employment to be a “specified employee” under Code Section 409A,
such payment shall not be made or commence until the earliest of:  (i) the expiration of the six (6) month
period measured from the date of the Executive’s “separation from service” (as
such term is at the time defined in Treasury Regulations under Code Section 409A)
with the Company; (ii) the date the Executive becomes “disabled” (as
defined in Code Section 409A); or (iii) the date of the Executive’s
death following such separation from service; provided, however, that such
deferral shall only be effected if and to the extent required to avoid adverse
tax treatment to the Executive, including, without limitation, those imposed
under Code Section 409A(a)(1)(B) in the absence of such deferral;
provided, however, that if the Company reasonably and in good faith determines,
based upon and in accordance with advice from its outside counsel or tax
advisors, that a deferral pursuant to this sentence is necessary, the Executive
agrees that the Company will not be liable to the Executive for any damages to
the Executive arising from such deferral of such payment.  Upon the expiration of the deferral period,
any payments that would have otherwise been made during that period (whether in
a single sum or in installments) shall be paid in a single cash lump sum
payment to the Executive (or his beneficiary, as applicable).  With regard to any provision that provides
for reimbursement of costs and expenses or of in-kind benefits, except as
permitted by Code Section 409A, (i) the right to reimbursement or
in-kind benefits shall not be subject to liquidation or exchange for another
benefit, (ii) the amount of expenses eligible for reimbursement or in-kind
benefits to be provided during any taxable year shall not affect the expenses
eligible for reimbursement or in-kind benefits to be provided in any other
taxable year, provided that the foregoing clause (ii) shall not be
violated with regard to expenses reimbursed under any arrangement covered by
Code Section 105(b) solely because such expenses are subject to a
limit related to the period the arrangement is in effect, and (iii) such
payments shall be made on or before the last day of the Executive’s taxable
year following the taxable year in which the expense occurred.  Each amount to be paid or benefit to be
provided to the Executive shall be construed as a “separate identified payment”
for purposes of Code Section 409A to the fullest extent permitted therein.

 

6.             Protection of Confidential
Information.

 

Executive acknowledges
that during the course of his employment with the Company, its subsidiaries,
affiliates and strategic partners, he will be exposed to documents and other
information regarding the confidential affairs of the Company, its
subsidiaries, affiliates and strategic partners, including without limitation,
information about their past, present and future financial condition, pricing
strategy, prices, suppliers, 

 

 

cost information,
business and marketing plans, the markets for their products, key personnel,
past, present or future actual or threatened litigation, trade secrets and
other intellectual property, current and prospective customer lists,
operational methods, acquisition plans, prospects, plans for future development
and other business affairs and information about the Company and its
subsidiaries, affiliates and strategic partners not readily available to the public
(the “Confidential Information”). 
Executive further acknowledges that the services to be performed under
this Agreement are of a special, unique, unusual, extraordinary and
intellectual character.  In recognition
of the foregoing, the Executive covenants and agrees as follows:

 

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

 

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

 

 

7.             Noncompetition and Other
Matters.

 

7.1          Noncompetition.  During the Executive’s employment with
the Company and for the one (1) year period immediately following the date
of termination of Executive’s employment (the “Restricted Period”) Executive
shall not, directly or indirectly, in any city, town, county, parish or other
municipality in any state of the United States (the names of each such city,
town, parish, or other municipality, including, without limitation, the name of
each county in the Commonwealth of Pennsylvania being expressly incorporated by
reference herein), or any other place in the world, where the Company, or its
subsidiaries, affiliates, strategic partners, successors, or assigns, engages
in the ownership, management and operation of retail drugstores (i) engage
in a Competing Business for Executive’s own account; (ii) enter the employ
of, or render any consulting or contracting services to, any Competing
Business; or (iii) become interested in or otherwise associated or
connected with any Competing Business in any capacity, including, without
limitation, as an individual, partner, shareholder, officer, director,
principal, agent, trustee, employee, contractor,  consultant
or management position with any entity providing consulting services to a
Competing Business; provided,  however, Executive may (i) own,
directly or indirectly, solely as a passive investment, securities of any
entity traded on any national securities exchange if Executive is not a
controlling person of, or a member of a group which controls such entity and
does not, directly or indirectly, own 3% or more of any class of securities of
such entity.  For purposes of this Section 7.1,
the phrase “Competing Business” shall mean any entity a majority of whose
business involves the ownership and operation of retail or internet based
drugstores.

 

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, provided, however, nothing herein shall prohibit any
advertisement or general hiring as a result thereof that is not specifically
targeted at such persons.

 

8.             Rights and
Remedies Upon Breach.

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Executive has supplied to
the Company a copy of each written agreement with any of Executive’s prior
employers, as well as any other agreements to which Executive is subject, which
includes any obligation of confidentiality, assignment of intellectual property,
nonsolicitation or noncompetition. 
Executive has listed each of such agreements in Appendix “B”.

 

Executive agrees to
indemnify and save harmless the Company from any loss, claim, damage, cost or
expense of any kind (including without limitation, reasonable 

 

 

attorney fees) to which
the Company may be subjected by virtue of a breach by Executive of the
foregoing representations, warranties, and covenants.

 

10.          Arbitration.

 

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

 

11.          Assignment.

 

Neither this Agreement,
nor any of Executive’s rights or obligations hereunder, may be assigned or otherwise
subject to hypothecation by Executive, other than by will or the laws of the
descent and distribution.  The Company
may assign its rights and obligations hereunder, and Executive hereby consents
to any such assignment, in whole or in part (i) to the Company’s parent
corporation; or (ii) to any other successor or assign in connection with
the sale of all or substantially all of the Company’s assets or stock or in
connection with any merger, acquisition and/or reorganization involving the
Company; provided, however, any such assignment will not diminish or waive any
of Executive’s 

 

 

rights hereunder,
including, without limitation, rights upon any Change in Control of the
Company.

 

12.         Notices.

 

All notices and other
communications under this Agreement shall be in writing and shall be given by
fax or first class mail, certified or registered with return receipt requested,
and shall be deemed to have been duly given three 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, PA 17011

Attention:  General Counsel

Fax:  (717) 760-7867

 

If to Executive:                      John T.
Standley

at the
most recent address on file at the Company’s payroll office

 

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 setoff, counterclaim, recoupment,
defense or other claim, right or action that the Company may have against the
Executive or others whether in respect of claims made under this Agreement or
otherwise.  In no event shall the
Executive be obligated to seek other employment or take any other action by way
of mitigation of the amounts, benefits and other compensation payable or
otherwise provided to the Executive under any of the provisions of this
Agreement, and such amounts shall not be reduced, regardless of whether the
Executive obtains other employment.

 

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

 

13.3       Entire Agreement.  This Agreement sets forth the entire
understanding of the parties relating to Executive’s employment with the
Company and cancels and 

 

 

supersedes all
agreements, arrangements and understandings relating thereto made prior to the
date hereof, written or oral, between the Executive and the Company and/or any
subsidiary or affiliate.

 

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

 

13.5        Conflict with Other
Agreements.  Executive represents
and warrants that neither his execution of this Agreement nor the full and
complete performance of his obligations hereunder will violate or conflict in
any respect with any written or oral agreement or understanding with any person
or entity.

 

13.6       Successors and Assigns.  This Agreement shall inure to the benefit
of and shall be binding upon the Company (and its successors and assigns) and
Executive and his heirs, executors and personal representatives.

 

13.7       Withholding.  Notwithstanding any other provision of
this Agreement, the Company may withhold from amounts payable under this
Agreement all federal, state, local and foreign taxes that are required to be
withheld by applicable laws or regulations.

 

13.8       Severability.  The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement. 
If any provision of this Agreement shall be held invalid or
unenforceable in part, the remaining portion of such provision, together with
all other provisions of this Agreement, shall remain valid and enforceable and
continue in full force and effect to  the fullest
extent consistent with law.

 

13.9        No Assignment.  The rights and benefits of the Executive
under this Agreement may not be anticipated, assigned, alienated or subject to
attachment, garnishment, levy, execution or other legal or equitable process
except as required by law.  Any attempt
by the Executive to anticipate, alienate, assign, sell, transfer, pledge,
encumber or charge the same shall be void. 
Payments hereunder shall not be considered assets of the Executive in
the event of insolvency or bankruptcy.

 

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

 

 

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

 

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

 

13.13     Legal  Fees  and  Expenses.  Promptly following the Effective Date, the
Company shall reimburse the Executive for legal fees and expenses incurred by
Executive in negotiation of this Agreement up to the maximum of $7,500.

 

 

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

 

	
   

  	
  RITE AID CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Robert B. Sari

  
	
   

  	
  Its:

  	
  Executive Vice
  President, General Counsel

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  John
  T. Standley

  

 

 

APPENDIX A

 

A “Change in Control of
the Company” shall be deemed to have occurred if, as the result of a single
transaction or a series of transactions, the event set forth in any one of the
following paragraphs shall have occurred:

 

(1) any
Person is or becomes the Beneficial Owner, directly or indirectly, of
securities of the Company representing 35% or more of the combined voting power
of the Company’s then outstanding voting securities; or

 

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

 

(3) there
is consummated a merger or consolidation of the Company or any direct or
indirect subsidiary of the Company with any other corporation, other than:  (i) a merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior to such merger or consolidation continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity or any parent thereof) at least 60% of the combined voting
power of the securities of the Company or such surviving entity or any parent
thereof outstanding immediately after such merger or consolidation or (ii) a
merger or consolidation effected to implement a recapitalization of the Company
(or similar transaction) in which no Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company representing 35% or more
of the combined voting power of the Company’s then outstanding voting
securities; or

 

(4) the
stockholders of the Company approve a plan of complete liquidation or
dissolution of the Company or an agreement for the sale or disposition  by the Company of all or substantially all of the Company’s
assets, other  than a sale or disposition by the
Company of all or substantially all of the Company’s assets to an entity, at
least 60% of the combined voting power of the voting securities of which are
owned by stockholders of the Company in substantially the same proportions as
their ownership of the Company immediately prior to such sale.

 

“Affiliate” shall  have the meaning set forth in Rule 12b-2 under Section 12
of the Exchange Act.

 

 

“Beneficial Owner” shall
have the meaning set forth in Rule 13d-3 under the Exchange Act, except
that a Person shall not be deemed to be the Beneficial Owner of any securities
which are properly filed on a Form 13G.

 

“Exchange Act” shall mean
the Securities Exchange Act of 1934, as amended from time to time.

 

“Person” shall have the
meaning given in Section 3(a)(9) of the Exchange Act, as modified and
used in Sections 13(d) and 14(d) thereof, except that such term shall
not include:  (i) the Company or any
of its subsidiaries; (ii) a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or any of its subsidiaries; (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities; or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company.

 

 

APPENDIX B

 

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

 

Employment
Agreement with Pathmark Stores, Inc. dated August 23, 2005

 

 

[APPENDIX
C]

 

	
  

  	
   

  	
  MAILING ADDRESS

  
	
   

  	
  P.O. Box
  3165

  
	
   

  	
  Harrisburg,
  PA 17105

  
	
   

  	
  

  GENERAL OFFICE

  
	
   

  	
  30
  Hunter Lane

  
	
   

  	
  Camp
  Hill, PA 17011

  
	
   

  	
  

  (717) 761-2633

  

 

Appendix C to Employment Agreement

 

Date

 

Name

Address

City,
St Zip

 

Re:          Severance Agreement and
General Release

 

Dear
Name:

 

We are
interested in resolving cooperatively your separation of employment with Rite
Aid Corporation (the Company), which will take place on (date), your Separation
Date.  Toward this end, we propose the
following Severance Agreement, which includes a General Release.

 

Whereas,
the Company has previously entered into an employment agreement with you, dated
(Date) (the Employment Agreement), which contains among other things, certain
provisions regarding severance compensation payable upon termination of your
employment with the Company under certain circumstances. Other than what is
expressly set forth herein, the terms and conditions of the Employment
Agreement shall remain in full force and effect.

 

The
terms and conditions set forth in Paragraph 1 below will apply regardless
of whether you decide to sign this Severance Agreement and General
Release.  However, you will not be
eligible to receive the payments and benefits set forth in Paragraph 2
below unless you sign and do not revoke this Severance Agreement and General
Release, within the time period specified below.  (Please see Paragraph 20 below for what
it means to revoke this Severance Agreement and General Release.)

 

You
may consider for forty-five (45) days whether you wish to sign this
Severance Agreement and General Release. 
Since this Severance Agreement and General Release (“Agreement”) is a
legal document, you are encouraged to review it with your attorney.

 

1.             General
Terms of Termination. As noted above, whether or not you sign this
Agreement:

 

(a)           Your last day of
employment is (date) which is your Separation Date.  You will be paid for all time worked up to
and including your termination.

 

(b)           You will be paid for
earned but unused vacation days and any properly documented reasonable expenses
incurred in connection with your employment through your Separation Date.

 

1

 

(c)           Except
as contemplated by the Employment Agreement, your eligibility to participate in
all other group benefits except Company sponsored health insurance including
medical, dental, vision and prescription as an employee of the Company will end
on your Separation Date.

 

(d)           You
are required to comply with Paragraphs 6 and 7 below.

 

2.             Separation
Payment.  Except with respect to the
Accrued Benefits as defined in the Employment Agreement, if you sign this
Agreement, agreeing to be bound by the General Release in Paragraph 3
below and the other terms and conditions of this Agreement described below, and
comply with the requirements of this Paragraph 2 (other than the Accrued
Benefits), you will receive the compensation and benefits as contemplated by
the Employment Agreement. You will not be eligible for the payment and benefits
described in Paragraph 2 unless:  (i) You
sign this Agreement no later than forty five (45) days after you receive it,
promptly return the Agreement to the Company after you sign it, and do not
timely revoke it in accordance with paragraph 20 below; (ii) you have
returned all Company property and documents in accordance with Paragraph 7
below.

 

3.             General
Release.

 

(a)           In
exchange for the consideration described
in Paragraph 2 and except as contemplated under Paragraph 4 below, you
release and forever discharge, to the maximum extent permitted by law, the
Company and each of the other “Releasees”
as defined below, from any and all claims, causes of action, complaints,
lawsuits or liabilities of any kind with respect to the Company (collectively “Claims”)
as described below which you, your heirs, agents, administrators or executors
have or may have against the Company, or any of the other Releasees.

 

(b)           By
agreeing to this General Release, you are waiving, to the maximum extent
permitted by law and other than as contemplated by Paragraph 4 below, any and
all Claims which you have or may have against the Company, or any of the other
Releasees arising out of or relating to any conduct, matter, event or omission
with respect to the Company existing or occurring before the Separation Date, including
but not limited to the following:

 

(i)            any Claims having
anything to do with your Employment Agreement or your employment with the
Company or any of the Releasees;

 

(ii)           any Claims having
anything to do with the termination of your employment with the Company or any
of the Releasees;

 

(iii)          any Claims for unpaid or
withheld wages, severance or retention payments, benefits, bonuses, commissions
and/or other compensation of any kind;

 

(iv)          any Claims for
reimbursement of expenses of any kind;

 

(v)           any Claims for
attorneys’ fees or costs;

 

(vi)          any Claims for any
breach under the Employee Retirement Income Security Act (“ERISA”);

 

(vii)         any Claims
of discrimination and/or harassment based on age, sex, race, religion, color,
creed, disability, handicap, citizenship, national origin, ancestry, sexual
orientation, or any other factor protected by Federal, State or Local law as
enacted or amended (such as the Age Discrimination in Employment Act,
29 U.S.C. §621 et. seq.; Title VII of the Civil 

 

2

 

Rights Act of 1964; the Americans with
Disabilities Act, the Equal Pay Act; Civil Rights of People with Disabilities
Act and Domestic Abuse Bias in Employment Law) and any Claims for retaliation
under any of the foregoing laws;

 

(viii)        any Claims regarding
leaves of absence including, but not limited to, any Claims under the Family
and Medical Leave Act;

 

(ix)           any Claims under the
National Labor Relations Act;

 

(x)            any Claims under the
Sarbanes-Oxley Act;

 

(xi)           any Claims under the
Worker Adjustment and Retraining Notification Act (“WARN”);

 

(xii)          any Claims for violation
of public policy;

 

(xiii)         any whistleblower or
retaliation Claims;

 

(xiv)         any Claims for emotional
distress or pain and suffering; and/or

 

(xv)          any other statutory,
regulatory, common law or other Claims of any kind, including, but not limited
to, Claims for breach of contract (other than as contemplated hereby), libel,
slander, fraud, wrongful discharge, promissory estoppel, equitable estoppel and
misrepresentation.

 

(c)           The term “Releasees” means: all and
singularly, Rite Aid Corporation, Rite Aid HDQTRS. Corp., as well as any of
their direct or indirect parent, subsidiary, related or affiliated
companies, and each of their past and present employees, officers, directors,
attorneys, owners, partners, insurers, benefit plan fiduciaries and agents, and
all of their respective predecessors, successors and assigns.

 

(d)           It
is important that you understand that this General Release includes all Claims
known or unknown by you, those that you may have already asserted or raised as
well as those that you have never asserted or raised.

 

4.             Non-Released
Claims.  Notwithstanding anything in
this Agreement to the contrary, the General Release in Paragraph 3 above does
not apply to:

 

(a)           Any
Claims for vested benefits under any retirement, 401(k), profit-sharing,
deferred compensation or stock option plan or other plan or arrangement;

 

(b)           Any
Claims to enforce the commitments set forth in this Agreement or the applicable
provisions of the Employment Agreement that survive termination of your
employment;

 

(c)           Any
Claims to interpret or to determine the scope, meaning or effect of this
Agreement or the applicable provisions of the Employment Agreement that survive
termination of your employment;

 

(d)           Any
Claims arising out of any conduct, matter, event or omission existing or
occurring after the Separation Date;

 

(e)           Any
Claim that can not be waived as a matter of law; or

 

3

 

(f)            Any
Claim arising under or otherwise having anything to do with Sections 5.3 or 5.6
of the Employment Agreement to survive termination of your employment
thereunder.

 

Further, the General
Release does not prevent you from contacting or filing a charge with any
federal, state or local government agency or commission.  However, the General Release does prevent
you, to the maximum extent permitted by law, from obtaining any monetary or
other personal relief for any of the Claims you have released in Paragraph 3.

 

5.             Adequacy
of Consideration.  You acknowledge
and agree that the consideration under Paragraph 2 above:

 

(a)           Constitutes
adequate consideration to support your General Release in Paragraph 3
above; and

 

(b)           Fully
compensates you for the Claims you are releasing.

 

For
purposes of this Agreement, “consideration” means something of value to which
you are not already entitled.

 

6.             Prohibition
on Your Using or Disclosing Certain Information. Regardless of whether you
sign this Agreement, to the extent provided in Section 6 of the Employment
Agreement, you are prohibited from using or disclosing confidential and/or
proprietary information which you acquired in the course of your employment
with the Company or its predecessors,  and which is
not generally known by or readily accessible to the public.

 

7.             Company
Property and Documents.  Regardless
of whether you sign this Agreement, and as a condition of receiving the payment
set forth in Paragraph 2 above, to the extent provided in Section 6
of the Employment Agreement you must return to the Company, retaining no
copies, all Company property, keys, documents (hard copy or electronic),
forms, correspondence, computer programs, memos, disks, DVDs and any other
Company property in your possession or control.

 

8.             Confidentiality
of this Agreement.  You and the
Company and its affiliates each agree that, at all times, the existence, terms
and conditions of this Agreement will be kept secret and confidential and will
not be disclosed voluntarily to any third party, except:  (i) to your spouse, if applicable, (ii) to
the extent required by law; (iii) in connection with any Claim to enforce,
interpret or determine the scope, meaning, or effect of the Agreement; or (iv) to
obtain confidential legal, tax or financial advice with respect thereto.

 

9.             Cooperation.  To the extent provided in Section 5.3 of
the Employment Agreement, you agree that, upon reasonable request, you will
meet with representatives of the Company, Rite
Aid HDQTRS. Corp., or their respective parent or subsidiary company
representatives and provide any information you acquired during the course of
your employment relating in any way to any disputes or other matters involving
the Company or any Releasee (as defined above). You further agree that you will
cooperate fully with the Company relating to any matter in which you were
involved or which you have knowledge by virtue of your employment with the
Company, including any existing or future litigation involving the Company,
whether administrative, civil or criminal in nature in which and to the extent
the Company deems your cooperation necessary.

 

10.           Non-Disparagement.  You and the Company agree that neither party
will make any negative comments or disparaging remarks, in writing, orally or
electronically, about the other party or any other Releasee (as defined above)
and their respective products and services. 
However, nothing in 

 

4

 

this Agreement is intended to or shall be
interpreted to restrict either party’s right and/or obligation:  (i) to testify truthfully in any forum;
or (ii) to contact, cooperate with or provide information to any
government agency or commission.

 

11.           Resignation
of Positions. In connection with the termination of your employment by the
Company, you hereby resign from all positions you may hold as an officer or
director of the Company and it subsidiaries and affiliates, and the Company
hereby accepts such resignations. You agree to execute all such instruments and
take all such other actions as the Company may reasonably deem necessary or
desirable to evidence or accomplish the foregoing in full.

 

12.           Governing
Law and Forum.  This Agreement shall
be governed by and construed in accordance with the laws of Pennsylvania, where
this Agreement is entered into, without giving effect to any conflict of law
provisions.  Any court action instituted
by you or on your behalf relating to in any way to this Agreement, or your
employment or termination of employment with the Company or any Releasee, shall
be filed exclusively in the Cumberland County Court of Common Pleas in the
Commonwealth of Pennsylvania or in the United States District Court for the
Middle District of Pennsylvania, and you consent to the jurisdiction and venue
of these courts.

 

13.           Statement
of Non-Admission.  Nothing in this
Agreement is intended as or shall be construed as an admission or concession of
liability or wrongdoing by you, the Company or any Releasee as defined
above.  Rather, the proposed Agreement is
being offered for the sole purpose of settling cooperatively and amicably any
and all possible disputes described in Paragraph 3.

 

14.           Interpretation
of Agreement.  Nothing in this
Agreement is intended to violate any law or shall be interpreted to violate any
law.  If any paragraph or part or subpart
of any paragraph in this Agreement or the application thereof is construed to
be overbroad and/or unenforceable, then the court making such determination
shall have the authority to narrow the paragraph or part or subpart of the
paragraph as necessary to make it enforceable and the paragraph or part or
subpart of the paragraph shall then be enforceable in its/their narrowed
form.  Moreover, each paragraph or part
or subpart of each paragraph in this Agreement is independent of and severable
(separate)  from each other.  In the event that any paragraph or part or
subpart of any paragraph in this Agreement is determined to be legally invalid
or unenforceable by a court and is not modified by a court to be enforceable, the
affected paragraph or part or subpart of such paragraph shall be stricken from
the Agreement, and the remaining paragraphs or parts or subparts of such
paragraphs of this Agreement shall remain in full, force and effect.

 

15.           Entire
Agreement.  This Agreement and the
applicable provisions of the Employment Agreement constitutes the entire
agreement between the parties and supersedes any and all prior representations,
agreements, written or oral, expressed or implied, by the Company or any
Releasee arising out of or relating in any way to your employment or the
termination of your employment with any Releasee. This Agreement may not be
modified or amended other than by an agreement in writing signed by you and
either the Vice President & Assistant General Counsel or the Senior
Director of Corporate Human Resources of Rite Aid HDQTRS. Corp.

 

16.           Acknowledgment.  You acknowledge and agree that, subsequent to
the termination of your employment, you shall not be eligible for any payments
from the Company or any of the Releasees or any benefits arising out of your
employment with any of the Releasees, except as expressly set forth in this
Agreement or the Employment Agreement.

 

17.           Headings.  The headings
contained in this Agreement are for convenience of reference only and are not
intended, and shall not be construed, to modify, define, limit, or expand the
intent of the 

 

5

 

parties as expressed in this
Agreement, and they shall not affect the meaning or interpretation of this
Agreement.

 

18.           Days.  All references to a number of days throughout
this Agreement refer to calendar days.

 

19.           Representations.  You agree and represent that:

 

(a)           You have read carefully
the terms of this Agreement, including the General Release;

 

(b)           You have had an
opportunity to and have been encouraged to review this Agreement, including the
General Release, with an attorney;

 

(c)           You understand the
meaning and effect of the terms of this Agreement, including the General
Release;

 

(d)           You were given
forty-five (45) days to determine whether you wished to sign this
Agreement, including the General Release;

 

(e)           Your decision to sign
this Agreement, including the General Release, is of your own free and
voluntary act without compulsion of any kind;

 

(f)            No promise or
inducement not expressed in this Agreement or the Employment Agreement has been
made to you; and

 

(g)           You have adequate
information to make a knowing and voluntary waiver.

 

20.           Revocation
Period.  If you sign this Agreement,
you will retain the right to revoke it for seven (7) days.  If you revoke this Agreement, you are
indicating that you have changed your mind and do not want to be legally bound
by this Agreement.  The Agreement shall
not be effective until after the Revocation Period has expired without your
having revoked it.  To revoke this
Agreement, you must send a certified letter to the following address:  Steven Chesney, Senior Director of Corporate
Human Resources, Rite Aid HDQTRS. Corp., 30 Hunter Lane, Camp Hill, PA
17011.  The letter must be post-marked
within seven (7) days of your execution of this Agreement.  If the seventh day is a Sunday or federal
holiday, then the letter must be post-marked on the following business
day.  If you revoke this Agreement on a
timely basis, you shall not be eligible for the consideration set forth in
Paragraph 2.

 

21.           Offer
Expiration Date.  As noted above, you
have forty-five (45) days to decide whether you wish to sign this
Agreement.  If you do not sign this
Agreement within 45 days of the date you receive it, then this offer is
withdrawn and you will not be eligible for the consideration set forth in
Paragraph 2 above.

 

If you
agree with the all of the terms of this Agreement, please sign below,
indicating that you understand, agree with and intend to be legally bound by
this Agreement, including the General Release, and return the signed Agreement
to Steven Chesney at the above address.

 

6

 

We
wish you the best in the future.

 

	
   

  	
   

  	
  Sincerely,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  UNDERSTOOD AND AGREED,

  	
   

  	
   

  
	
  INTENDING TO BE LEGALLY BOUND:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Witness

  	
   

  	
   

  

 

7Exhibit 10.3

 

EMPLOYMENT
AGREEMENT

 

THIS
EMPLOYMENT AGREEMENT (the “Agreement”) is entered into and
effective as of the 24th day of September, 2008 (the “Effective Date”) by and
between Rite Aid Corporation, a Delaware corporation (the “Company”) and Frank
Vitrano (the “Executive”).

 

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

 

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

 

1.             Term
of Employment.

 

The
term of Executive’s employment under this Agreement shall commence on the
Effective Date and, unless earlier terminated pursuant to Section 5 below,
shall continue for a period ending on the date that is two (2) years
following the Effective Date (the “Original Term of Employment”).  The Original Term of Employment shall be
automatically renewed for successive one year terms (the “Renewal Terms”)
unless at least 180 days prior to the expiration of the Original Term of
Employment or any Renewal Term, either Party notifies the other Party in
writing that he or it is electing to terminate this Agreement at the expiration
of the then current Term of employment “Term” shall mean the Original Term of
Employment and all Renewal Terms.  For
purposes of this Agreement, except as otherwise provided herein, the phrase “year
during the Term” or similar language shall refer to each 12 month period
commencing on the Effective Date or applicable anniversaries thereof.

 

2.             Position
and Duties.

 

2.1          Generally.  During the Term, Executive shall serve as
Senior Executive Vice President, Chief Administrative Officer and Chief
Financial Officer of the Company and shall have the titles, duties, responsibilities
and authority as are customary for such positions and such other titles,
duties, responsibilities and authorities as shall be assigned by the Company
from time to time consistent with such positions.  Executive shall devote his full working time,
attention, knowledge and skills faithfully and to the best of his ability, to
the duties and responsibilities assigned by the Company in furtherance of the
business affairs and activities of the Company and its subsidiaries, affiliates
and strategic partners.  Executive shall
report solely to the Company’s Chief Executive Officer and/or President and/or
Board of Directors.  Following
termination of Executive’s employment 

 

 

for any reason, Executive
shall immediately resign from all offices and positions he holds with the
Company or any subsidiary.

 

Other than necessary
travel in connection with the performance of his duties hereunder, the
Executive shall be based at the Company’s headquarters.

 

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

 

3.             Compensation.

 

3.1          Base
Salary.  During the Term, as
compensation for his services hereunder, Executive shall receive a base salary
at the annualized rate of $700,000.00 per year (“Base Salary” as shall be
reviewed annually for possible increase), which shall be paid in accordance
with the Company’s normal payroll practices and procedures, less such
deductions or offsets required by applicable law or otherwise authorized by
Executive.

 

3.2          Annual
Performance Bonus.  The Executive
shall participate each fiscal year during the Term in the Company’s annual
bonus plan as adopted and approved by the Board or the Compensation Committee
from time to time.  For the current
fiscal year (Fiscal Year 2009), Executive’s annual bonus opportunity pursuant
to such plan shall equal 110% (the “Annual Target Bonus”) of the annualized
Base Salary ($700,000 per year for Fiscal Year 2009) even though the entire
$700,000 Base Salary for Fiscal Year 2009 will not be paid to Executive as a
result of this Agreement.  For subsequent
fiscal years, the Annual Target Bonus may be adjusted (however, in no event
shall it be less than 110%) and shall be based upon the Board approved plan for
that year.

 

3.3          Equity
Awards.

 

(a)            On the Effective Date,
the Executive will be granted an option (the “Option”) to purchase 1,400,000
shares of the Company’s Common Stock, par value $1.00 per share (“Company Stock”).  The Option shall:  (i) be a nonqualified stock option; (ii) have
an exercise price equal to the closing price of the Company Stock as reported
on the New York Stock Exchange (“NYSE “) on the date of grant; (iii) have
a term of ten (10) years following the date of grant; (iv) vest and
become exercisable as to 

 

 

one-fourth of the shares
of the Company Stock subject to the option on each of the first four (4) anniversaries
from the date of grant; (v) be subject to the acceleration exercise and
termination provisions set forth in Section 3.3(c) and Article 5
hereof; and (vi) otherwise be evidenced by and subject to the terms of the
Company’s stock option and equity plans.

 

(b)            At the first regular
meeting of the Compensation Committee of the Board of Directors following the
Effective Date and subject to the approval of the Compensation Committee,
Executive will be recommended for participation in the Company’s Executive
Equity Plan (the “EEP”).  On a going
forward basis, the award will be based upon Executive’s annual Base Salary and
the stock closing price on the date of grant. 
For the current fiscal year (FY 2009) only, Executive’s participation in
the EEP will be on a prorated basis.

 

(c)            Upon the occurrence of
a Change in Control of the Company and prior to the termination of Executive’s
employment with the Company, the Options awarded pursuant to subsection (a) above
then held by Executive shall immediately vest and become exercisable in
full.  For purposes of this Agreement “Change
in Control” shall have the meaning set forth in the attached Appendix A.

 

(d)           It is understood and
acknowledged by Executive that the securities underlying the stock options
and/or restricted stock that may be awarded to Executive from time to time may
not be subject to an effective registration statement under the federal
securities laws until some time after the Effective Date.  The Company agrees that if, as of the date of
termination of Executive’s employment under the circumstances described in
Sections 5.2 (except termination for Cause), 5.3 and 5.5, the securities
underlying the then vested and exercisable portion of any stock options are not
subject to an effective registration statement, the ninety (90) day periods in Section 5.2
(except termination for Cause), 5.3 and 5.5, as applicable, will be deemed to
run from the first date such securities become subject to an effective
registration statement.

 

4.             Additional
Benefits.

 

4.1      Employee
Benefits.  During the Term,
Executive and, as to welfare plans the Executive’s eligible immediate family,
as the case may be, shall be entitled to participate in the employee benefit
plans (including, but not limited to medical, dental and life insurance plans,
short-term and long-term disability coverage, the Supplemental Executive
Retirement Plan (which shall be at the monthly contribution rate equal to 2% of
Executive’s Base Salary) and 401(k) plans) in which senior management
employees of the Company are generally eligible to participate, subject to any
eligibility requirements and the other generally applicable terms of such
plans.

 

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

 

 

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

 

4.3      Vacation.  Executive shall be entitled to four (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
Financial Planning Allowance. 
During each year of the Term, the Company shall provide Executive with
an executive planning allowance in the amount of up to $5,000.00.

 

4.6      Relocation
Benefits.  Subject to Executive
providing reasonable documentation to Company, the Company shall reimburse
Executive up to a total of $200,000 for transportation, commuting, lodging and
other relocation expenses (including but not limited to moving, house hunting
trips and other direct costs incurred in connection with Executive’s
relocation) incurred  by Executive
for a period of up to thirty-six (36) months from the Effective Date
(collectively, the “Relocation Benefits Payments”).  To the extent the Relocation
Benefits Payments are subject to federal, state or local income tax payments by
Executive, Company shall also pay to Executive an additional amount (the “Gross-Up
Payment”) such that the net amount retained by the Executive, after deduction
of the applicable federal, state and local income taxes upon the Gross-Up
Payment shall be equal to the total Relocation Benefits Payments.

 

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 or as an officer or director of an entity other than the
Company at the request 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 and enforcement of its rights hereunder.  Following termination of the Executive’s
employment or service with the Company, the Company shall cause any Director
and Officer liability insurance policies applicable to the Executive prior to
such termination to remain in effect for six (6) years following the date
of termination of employment.

 

5.             Termination.

 

5.1      Termination
of Executive’s Employment by the Company for Cause.  The Company may terminate Executive’s
employment hereunder for Cause (as defined 

 

 

below).  Such termination shall be effected by written
notice thereof delivered by the Company to Executive, indicating in reasonable
detail the facts and circumstances alleged to provide a basis for such
termination, and shall be effective as of the date of such notice in accordance
with Section 12 hereof.  “Cause” as
determined in reasonable good faith by a resolution adopted by the affirmative
vote of a majority of the Company’s Board of Directors (after reasonable
written notice to Executive setting forth in reasonable detail the specific
conduct of Executive upon which the Board relies in reaching its determination,
and a reasonable opportunity for Executive, together with his counsel, to be
heard before the Board prior to making such determination) shall mean:  (i) Executive’s gross negligence or
willful misconduct in the performance of the duties or responsibilities of his
position with the Company or any subsidiary, or failure to timely carry out any
lawful and reasonable directive of the Chief Executive Officer, President or
Board of Directors; (ii) Executive’s intentional misappropriation of any
funds or property of the Company or any subsidiary; (iii) the conduct by
Executive which is a material violation of this Agreement or  written Company Policy which materially interferes with the
Executive’s ability to perform his duties; provided, however, that Executive
shall have the right, within thirty (30) days after receipt of written notice
(which shall set forth in reasonable detail the specific conduct of Executive
that constitutes Cause and the specific provision(s) of this Agreement on
which Company relies) from Company of the Executive’s violation of this
subsection, to cure the event or circumstances giving rise to such Cause and in
the event of which cure, such event or circumstances shall not constitute Cause
hereunder; (iv) the commission by Executive of an act of fraud,
misappropriation or embezzlement toward the Company or any subsidiary; (v) Executive’s
gross negligence or willful misconduct which damages or injures the Company or
the Company’s reputation; (vi) Executive is convicted of or pleads guilty
to a felony involving moral turpitude; or (vii) the use or imparting by
Executive of any confidential or proprietary information of the Company, or any
subsidiary in material violation of Section 6 below.

 

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

 

(a)            Executive shall be
entitled to receive within ten (10) business days of the date of
termination:  (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
such termination, to the extent otherwise provided under Section 4.2
above; (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; and (iv) reimbursement
of Relocation Benefits Payments incurred prior to the date of termination ((i),
(ii), (iii) and (iv), the (“Accrued Benefits”).  All other rights of Executive (and, except as
provided in Section 5.6 below, all obligations of the Company) hereunder
or otherwise in connection with Executive’s employment with the Company shall
terminate effective as of the date of such termination of employment and
Executive shall not be 

 

 

entitled to any payments
or benefits not specifically described in this subsection (a) or (b) below.

 

(b)            Except as provided in Section 3.3(d),
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 thirty (30) days’ notice to the Company or such earlier date as
the Company determines in its discretion and designates in writing.  A termination of Executive’s employment by
the Company for Cause or by the Executive other than for Good Reason shall not
constitute a breach of this Agreement.

 

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

 

(a)            Executive shall be
entitled to receive:  (i) within ten
(10) business days of the date of termination the Accrued Benefits; (ii) an
amount equal to two times the sum of Executive’s then Base Salary plus Annual
Target Bonus as of the date of termination of employment, such amount payable
in equal installments pursuant to the Company’s standard payroll procedures for
management employees over a period of two (2) years following the date of
termination of employment; and (iii) continued health and medical
insurance coverage (or reimbursement to Executive of the cost of purchasing
health and medical coverage substantially comparable in all material respects
to the coverage provided by the Company to the Executive, excepting payments
for such periods that the Company provides such coverage) for Executive and his
immediate family for a period of two (2) years following the date of
termination of employment.  In addition,
if such termination occurs following the start of the Company’s fiscal year,
Executive shall also be entitled to receive (which shall be paid at the same
time paid to other eligible participants in the bonus plan and following
determination by the Board that the Company has achieved or exceeded its annual
performance targets for the fiscal year) a pro rata annual bonus determined by
multiplying Executive’s then Annual Target Bonus by a fraction (x) the
numerator of which is the number of days between the beginning of the then
current fiscal year of the Company and the date of termination of employment
and (y) the denominator of which is 365.

 

 

(b)           The Executive’s stock
option awards held by Executive shall vest and become immediately exercisable
and the restrictions with respect to any awards of restricted stock shall
lapse, in each case to the extent such options would otherwise have become
vested and exercisable (or such restrictions would have lapsed) had Executive
remained in the employ of the Company for a period of two years following the
date of termination.  Except as provided
in Section 3.3(d), such  portion of
Executive’s stock options (together with any portion of Executive’s stock
options that have vested and become exercisable prior to the date of
termination) shall remain exercisable for a period of 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
(or deemed to have lapsed) as of the date of termination shall be forfeited as
of such date.

 

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

 

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

 

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

 

(a)         any adverse alteration in
Executive’s titles, position, status, duties, authorities, reporting
relationship or responsibilities with the Company or its subsidiaries from
those specified in this Agreement; or

 

 

(b)            any decrease in Executive’s
then Base Salary as set forth in Section 3.1 or Annual Target Bonus in Section 3.2
to which Executive has not agreed in writing; or

 

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

 

(d)            failure to promptly
provide any material benefits hereunder;

 

provided, however, that
in each such case the Company shall have the right, within thirty (30) days
(fifteen (15) days for the payment of compensation under this Agreement) after
receipt of written notice (which shall set forth in reasonable detail the
specific conduct of Company that constitutes Good Reason and the specific
provision(s) of this Agreement on which Executive relies) from Executive
of the Company’s violation of any of the foregoing, to cure the event or
circumstances giving rise to such Good Reason and in the event of which cure,
such event or circumstances shall not constitute Good Reason hereunder.

 

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

 

(a)            Executive or Executive’s
estate, as the case may be, shall be entitled to receive:  (i) within ten (10) business days of
the date of termination the Accrued Benefits; (ii) promptly 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 and medical insurance coverage (or reimbursement to Executive of the
cost of purchasing health and medical coverage substantially comparable in all
material respects to the coverage provided by the Company to the Executive,
excepting payments for such periods that the Company provides such coverage)
for Executive and/or his immediate family, as applicable, for a period of two (2) years
following the date of termination of employment.  In addition, if such termination occurs
following the start of the Company’s fiscal year, Executive shall also be
entitled to receive (which shall be paid at the same time paid to other
eligible participants in the bonus plan and following determination by the
Board that the Company has achieved or exceeded its annual performance targets
for the fiscal year) a prorata annual bonus determined by multiplying Executive’s
then Annual Target Bonus by a fraction (x) the numerator of which is the
number of days between the beginning of the then current fiscal year of the
Company and the date of termination of employment and (y) the denominator
of which is 365.

 

(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.  

 

 

Except as provided in Section 3.3(d) such
portion of Executive’s stock options (together with any portion of Executive’s
stock options that have vested and become exercisable prior to the date of
termination) shall remain exercisable for a period of 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 (c).

 

“Total Disability” shall
mean any physical or mental disability that prevents Executive from:  (a) (i) performing one or more of
the essential functions of his position for a period of not less than 150 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 above,
5.7 and 5.9 below and Sections 6 through 10 below, which shall survive the
expiration of the Term..

 

5.7          Excise
Tax Gross-Up.

 

(a)            In the event that any
payment or benefit received or to be received by the Executive pursuant to the
terms of this Agreement or any other plan, arrangement or agreement of the
Company (or any affiliate) (collectively, the “Payments”) would be subject to
the Excise Tax (the “Excise Tax”) imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the “Code”), as determined as provided below,
the Company shall pay to the Executive, at the time specified in Section 5.7(b) below
an additional amount (the “Gross-Up Payment”) such that the net amount retained
by the Executive, after deduction of the Excise Tax on payments and any
federal, state and local income and employment or other tax and the Excise Tax
upon the Gross-Up Payment, and any interest, penalties or additions to tax
payable by the company Executive with respect thereto, shall be equal to the
total Payments.  For purposes of
determining whether any of the Payments will be subject to the Excise Tax and
the amounts of such Excise Tax, (1) the total amount of the Payments shall
be treated as “parachute 

 

 

payments” within the
meaning of section 280G(b)(2) of the Code, and all “excise parachute
payments” within the meaning of section 280G(b)(1) of the Code shall be
treated as subject to the Excise Tax, except to the extent that, in the opinion
of tax counsel (“Tax Counsel”) reasonably acceptable to Executive and selected
by the Company, a Payment (in whole or in part) does not constitute a “parachute
payment” within the meaning of section 280G(b)(2) of the Code, or such “excess
parachute payments” (in whole or in part) are not subject to the Excise Tax, (2) the
amount of the Payments that shall be treated as subject to the Excise Tax shall
be equal to the lesser of (A) the total amount of the Payments or (B) the
amount of “excess parachute payments” within the meaning of section 280G(b)(1) of
the Code (after applying clause (1) hereof), and (3) the value of any
noncash benefits or any deferred payment or benefit shall be determined by the
Tax Counsel in accordance with the principles of sections 280G(d)(3) and (4) of
the Code.  For purposes of determining the
amount of the Gross-Up Payment, the Executive shall be deemed to pay federal
income taxes at the highest marginal rates of federal income taxation
applicable to individuals in the calendar year in which the Gross-Up Payment is
to be made and state and local income taxes at the highest marginal rates of
taxation applicable to individuals as are in effect in the state and locality
of the Executive’s residence in the calendar year in which the Gross-Up Payment
is to be made, net of the maximum reduction in federal income taxes that can be
obtained from deduction of such state and local taxes, taking into account any
limitations applicable to individuals subject to federal income tax at the
highest marginal rates.

 

(b)            The Gross-Up Payment
provided for in Section 5.7(a) hereof shall be made upon the earlier
of (i) thirty (30) days following the date of termination of Executive’s
employment or (ii) the imposition upon the Executive or payment by the
Executive of any Excise Tax.

 

(c)            If it is established
pursuant to a final determination of a court or an Internal Revenue Service
proceeding that the Excise Tax is less than the amount taken into account under
Section 5.7(a) hereof, the Executive shall repay to the Company
within thirty (30) days of the Executive’s receipt of notice of such final
determination the portion of the Gross-Up Payment attributable to such
reduction (plus the portion of the Gross-Up Payment attributable to the Excise
Tax and federal, state and local income tax imposed on the portion of the
Gross-Up Payment being repaid by the Executive if and to the extent that such
repayment results in a reduction in Excise Tax and a dollar for dollar
reduction in the Executive’s taxable income and wages for the purpose of
federal, state and local income taxes) plus any interest received by the
Executive on the amount of such repayment. 
If it is established pursuant to a final determination of a court or an
Internal Revenue Service proceeding that the Excise Tax exceeds the amount
taken into account hereunder (including without limitation by reason of any
payment the existence or amount of which cannot be determined at the time of
the Gross-Up Payment), the Company shall make an additional Gross-Up Payment
pursuant to Section 5.7(a) in respect of such excess within thirty
(30) days of the Company’s receipt of notice of such final determination or
proceeding.  The Executive and the
Company shall each reasonably cooperate with the other in connection with any
administrative or judicial

 

 

proceedings concerning
the existence or amount of liability for Excise Tax with respect to the
Payments.

 

(d)           In the event of any
change in, or further interpretation of, sections 280G or 4999 of the Code and
the regulations promulgated thereunder, the Executive shall be entitled, by
written notice to the Company, to request an opinion of Tax Counsel regarding
the application of such change to any of the foregoing, and the Company shall
use its best efforts to cause such opinion to be rendered as promptly as
practicable.  All fees and expenses of
the Tax Counsel incurred in connection with this Agreement shall be borne by
the Company.

 

5.8           No Other Severance or
Termination Benefits.  Except
as expressly set forth herein, Executive shall not be entitled to damages or to
any severance or other benefits upon termination of employment with the Company
under any circumstances and for any or no reason, including, but not limited to
any severance pay under any Company severance plan, policy or practice.

 

5.9           Section 409A.  Notwithstanding anything in this Agreement to
the contrary, to the extent:  (a) that
any payment to which the Executive becomes entitled under this Agreement
(including, without limitation, any payments made pursuant to this Clause), or
any agreement or plan referenced herein, in connection with the Executive’s
termination of employment with the Company constitutes deferred compensation
subject to Section 409A of the Code; and (b) the Executive is deemed
at the time of such termination of employment to be a “specified employee”
under Code Section 409A, such payment shall not be made or commence until
the earliest of:  (i) the expiration
of the six (6) month period measured from the date of the Executive’s “separation
from service” (as such term is at the time defined in Treasury Regulations
under Code Section 409A) with the Company; (ii) the date the
Executive becomes “disabled” (as defined in Code Section 409A); or (iii) the
date of the Executive’s death following such separation from service; provided,
however, that such deferral shall only be effected if and to the extent
required to avoid adverse tax treatment to the Executive, including, without
limitation, those imposed under Code Section 409A(a)(1)(B) in the
absence of such deferral; provided, however, that if the Company reasonably and
in good faith determines, based upon and in accordance with advice from its
outside counsel or tax advisors, that a deferral pursuant to this sentence is
necessary, the Executive agrees that the Company will not be liable to the
Executive for any damages to the Executive arising from such deferral of such
payment.  Upon the expiration of the
deferral period, any payments that would have otherwise been made during that
period (whether in a single sum or in installments) shall be paid in a single
cash lump sum payment to the Executive (or his beneficiary, as
applicable).  With regard to any
provision that provides for reimbursement of costs and expenses or of in-kind
benefits, except as permitted by Code Section 409A, (i) the right to
reimbursement or in-kind benefits shall not be subject to liquidation or
exchange for another benefit, (ii) the amount of expenses eligible for
reimbursement or in-kind benefits to be provided during any taxable year shall
not affect the expenses eligible for reimbursement or in-kind benefits to be
provided in any other taxable year, provided that the foregoing clause (ii) shall
not be violated with regard to expenses reimbursed under 

 

 

any
arrangement covered by Code Section 105(b) solely because such
expenses are subject to a limit related to the period the arrangement is in
effect, and (iii) such payments shall be made on or before the last day of
the Executive’s taxable year following the taxable year in which the expense
occurred.  Each amount to be paid or
benefit to be provided to the Executive shall be construed as a “separate
identified payment” for purposes of Code Section 409A to the fullest
extent permitted therein.

 

6.             Protection of Confidential
Information.

 

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

 

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

 

6.2           Return of Company
Property, Records and Files.  Upon
the termination of Executive’s employment at any time and for any reason, or at
any other time the Board may so direct, Executive shall promptly deliver to the
Company’s offices in Harrisburg, Pennsylvania all of the property and equipment
of the Company, its subsidiaries, affiliates and strategic partners (including
any cell phones, pagers, credit cards, personal computers, etc.) and any and
all documents, records, and files, including any notes, memoranda, customer
lists, reports or any and all other documents, including any copies thereof,
whether in hard copy form or on a computer disk or hard drive, which relate to
the Company, its subsidiaries, affiliates, strategic partners, successors or
assigns, and/or their respective past and present officers, directors,
employees or consultants 

 

 

(collectively, the “Company
Property, Records and Files”); it being expressly understood that, upon
termination of Executive’s employment at any time and for any reason, Executive
shall not be authorized to retain any of the Company Property, Records and
Files, any copies thereof or excerpts therefrom.

 

7.             Noncompetition
and Other Matters.

 

7.1           Noncompetition.  During the Executive’s employment with
the Company and for the one (1) year period immediately following the date
of termination of Executive’s employment (the “Restricted Period”) Executive
shall not, directly or indirectly, in any city, town, county, parish or other
municipality in any state of the United States (the names of each such city,
town, parish, or other municipality, including, without limitation, the name of
each county in the Commonwealth of Pennsylvania being expressly incorporated by
reference herein), or any other place in the world, where the Company, or its
subsidiaries, affiliates, strategic partners, successors, or assigns, engages
in the ownership, management and operation of retail drugstores (i) engage
in a Competing Business for Executive’s own account; (ii) enter the employ
of, or render any consulting or contracting services to, any Competing
Business; or (iii) become interested in or otherwise associated or
connected with any Competing Business in any capacity, including, without
limitation, as an individual, partner, shareholder, officer, director,
principal, agent, trustee, employee, contractor,  consultant
or management position with any entity providing consulting services to a
Competing Business; provided, however, Executive may (i) own,
directly or indirectly, solely as a passive investment, securities of any
entity traded on any national securities exchange if Executive is not a
controlling person of, or a member of a group which controls such entity and
does not, directly or indirectly, own 3% or more of any class of securities of
such entity.  For purposes of this Section 7.1,
the phrase “Competing Business” shall mean any entity a majority of whose
business involves the ownership and operation of retail or internet based
drugstores.

 

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, provided, however, nothing
herein shall prohibit any advertisement or general hiring as a result thereof
that is not specifically targeted at such persons.

 

8.             Rights and
Remedies Upon Breach.

 

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

 

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

 

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

 

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

 

8.4          Modification by the
Court.  If any court determines
that any of the Restrictive Covenants, or any part thereof, is unenforceable
because of the duration or scope of such provision, such court shall have the
power (and is hereby instructed by the parties) to modify or reduce the
duration or scope of such provision, as the case may be 

 

 

(it being the
intent of the parties that any such modification or reduction be limited to the
minimum extent necessary to render such provision enforceable), and, in its
modified or reduced form, such provision shall then be enforceable.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

property, nonsolicitation
or noncompetition.  Executive has listed
each of such agreements in Appendix “B”.

 

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

 

10.          Arbitration.

 

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

 

11.           Assignment.

 

Neither this Agreement,
nor any of Executive’s rights or obligations hereunder, may be assigned or
otherwise subject to hypothecation by Executive, other than by will or the laws
of the descent and distribution.  The
Company may assign its rights and obligations hereunder, and Executive hereby
consents to any such assignment, in whole 

 

 

or in part:  (i) to the Company’s parent corporation;
or (ii) to any other successor or assign in connection with the sale of
all or substantially all of the Company’s assets or stock or in connection with
any merger, acquisition and/or reorganization involving the Company; provided,
however, any such assignment will not diminish or waive any of Executive’s
rights hereunder, including, without limitation, rights upon any Change in
Control of the Company.

 

12.           Notices.

 

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

 

	
  If to the Company:

  	
   

  	
  Rite Aid Corporation

  
	
   

  	
   

  	
  30 Hunter Lane

  
	
   

  	
   

  	
  Camp Hill, PA 17011

  
	
   

  	
   

  	
  Attention: General
  Counsel

  
	
   

  	
   

  	
  Fax: (717) 760-7867

  

 

	
  If to Executive:

  	
   

  	
  Frank Vitrano

  
	
   

  	
   

  	
  at the most recent
  address on file at the Company’s payroll office

  

 

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 setoff, counterclaim, recoupment,
defense or other claim, right or action that the Company may have against the
Executive or others whether in respect of claims made under this Agreement or
otherwise.  In no event shall the
Executive be obligated to seek other employment or take any other action by way
of mitigation of the amounts, benefits and other compensation payable or
otherwise provided to the Executive under any of the provisions of this
Agreement, and such amounts shall not be reduced, regardless of whether the
Executive obtains other employment.

 

13.2        Governing Law.  This Agreement is executed in Pennsylvania
and shall be governed by and construed and enforced in accordance with the laws
of the Commonwealth of Pennsylvania without giving effect to conflicts of laws
principles thereof which might refer such interpretations to the laws of a
different state or jurisdiction.  Any
court action instituted by Executive relating in any way to this 

 

 

Agreement shall be filed
exclusively in state or federal court in Harrisburg, Pennsylvania and Executive
consents to the jurisdiction and venue of said courts in any action instituted
by or on behalf of the Company against him.

 

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

 

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

 

13.5        Conflict with Other
Agreements.  Executive represents
and warrants that neither his execution of this Agreement nor the full and
complete performance of his obligations hereunder will violate or conflict in
any respect with any written or oral agreement or understanding with any person
or entity.

 

13.6        Successors and Assigns.  This Agreement shall inure to the benefit
of and shall be binding upon the Company (and its successors and assigns) and
Executive and his heirs, executors and personal representatives.

 

13.7        Withholding.  Notwithstanding any other provision of
this Agreement, the Company may withhold from amounts payable under this
Agreement all federal, state, local and foreign taxes that are required to be
withheld by applicable laws or regulations.

 

13.8        Severability.  The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement. 
If any provision of this Agreement shall be held invalid or unenforceable
in part, the remaining portion of such provision, together with all other
provisions of this Agreement, shall remain valid and enforceable and continue
in full force and effect to  the fullest
extent consistent with law.

 

13.9        No Assignment.  The rights and benefits of the Executive
under this Agreement may not be anticipated, assigned, alienated or subject to
attachment, garnishment, levy, execution or other legal or equitable process
except as required by law.  Any attempt
by the Executive to anticipate, alienate, assign, sell, transfer, pledge, 

 

 

encumber or charge the
same shall be void.  Payments hereunder
shall not be considered assets of the Executive in the event of insolvency or
bankruptcy.

 

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

 

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

 

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

 

13.13      Legal  Fees  and  Expenses.
Promptly following the Effective Date, the Company shall reimburse the
Executive for legal fees and expenses incurred by Executive in negotiation of
this Agreement up to the maximum of $7,500.

 

 

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

 

	
   

  	
  RITE AID CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  Robert B. Sari

  
	
   

  	
  Its:

  	
  Executive Vice
  President, General Counsel

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Frank
  Vitrano

  

 

 

APPENDIX A

 

A “Change in
Control of the Company” shall be deemed to have occurred if, as the result of a
single transaction or a series of transactions, the event set forth in any one
of the following paragraphs shall have occurred:

 

(1) any
Person is or becomes the Beneficial Owner, directly or indirectly, of
securities of the Company representing 35% or more of the combined voting power
of the Company’s then outstanding voting securities; or

 

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

 

(3) there
is consummated a merger or consolidation of the Company or any direct or
indirect subsidiary of the Company with any other corporation, other than:  (i) a merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior to such merger or consolidation continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity or any parent thereof) at least 60% of the combined voting
power of the securities of the Company or such surviving entity or any parent
thereof outstanding immediately after such merger or consolidation; or (ii) a
merger or consolidation effected to implement a recapitalization of the Company
(or similar transaction) in which no Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company representing 35% or more
of the combined voting power of the Company’s then outstanding voting
securities; or

 

(4) the
stockholders of the Company approve a plan of complete liquidation or
dissolution of the Company or an agreement for the sale or disposition  by the Company of all or substantially all of the Company’s
assets, other  than a sale or disposition by the
Company of all or substantially all of the Company’s assets to an entity, at
least 60% of the combined voting power of the voting securities of which are
owned by stockholders of the Company in substantially the same proportions as
their ownership of the Company immediately prior to such sale.

 

“Affiliate” shall  have the meaning set forth in Rule 12b-2 under Section 12
of the Exchange Act.

 

 

“Beneficial Owner” shall
have the meaning set forth in Rule 13d-3 under the Exchange Act, except
that a Person shall not be deemed to be the Beneficial Owner of any securities
which are properly filed on a Form 13G.

 

“Exchange Act” shall mean
the Securities Exchange Act of 1934, as amended from time to time.

 

“Person” shall have the
meaning given in Section 3(a)(9) of the Exchange Act, as modified and
used in Sections 13(d) and 14(d) thereof, except that such term shall
not include:  (i) the Company or any
of its subsidiaries; (ii) a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or any of its subsidiaries; (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities; or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company.

 

 

APPENDIX B

 

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

 

Amended
and Restated Employment Agreement dated November 20, 2002 with Pathmark
Stores, Inc. as further amended on December 22, 2005 and November 26,
2007.

 

 

[APPENDIX C]

 

	
  

  	
   

  	
  MAILING ADDRESS

  
	
   

  	
  P.O. Box
  3165

  
	
   

  	
  Harrisburg,
  PA 17105

  
	
   

  	
  

  GENERAL OFFICE

  
	
   

  	
  30
  Hunter Lane

  
	
   

  	
  Camp
  Hill, PA 17011

  
	
   

  	
  

  (717) 761-2633

  

 

Appendix C to Employment Agreement

 

Date

 

Name

Address

City,
St Zip

 

Re:          Severance Agreement and
General Release

 

Dear
Name:

 

We are
interested in resolving cooperatively your separation of employment with Rite
Aid Corporation (the Company), which will take place on (date), your Separation
Date.  Toward this end, we propose the
following Severance Agreement, which includes a General Release.

 

Whereas,
the Company has previously entered into an employment agreement with you, dated
(Date) (the Employment Agreement), which contains among other things, certain
provisions regarding severance compensation payable upon termination of your
employment with the Company under certain circumstances. Other than what is
expressly set forth herein, the terms and conditions of the Employment
Agreement shall remain in full force and effect.

 

The
terms and conditions set forth in Paragraph 1 below will apply regardless
of whether you decide to sign this Severance Agreement and General
Release.  However, you will not be
eligible to receive the payments and benefits set forth in Paragraph 2
below unless you sign and do not revoke this Severance Agreement and General
Release, within the time period specified below.  (Please see Paragraph 20 below for what
it means to revoke this Severance Agreement and General Release.)

 

You
may consider for forty-five (45) days whether you wish to sign this
Severance Agreement and General Release. 
Since this Severance Agreement and General Release (“Agreement”) is a
legal document, you are encouraged to review it with your attorney.

 

1.             General Terms of Termination. As
noted above, whether or not you sign this Agreement:

 

(a)           Your last day of
employment is (date) which is your Separation Date.  You will be paid for all time worked up to
and including your termination.

 

(b)           You will be paid for
earned but unused vacation days and any properly documented reasonable expenses
incurred in connection with your employment through your Separation Date.

 

1

 

(c)           Except as contemplated
by the Employment Agreement, your eligibility to participate in all other group
benefits except Company sponsored health insurance including medical, dental,
vision and prescription as an employee of the Company will end on your
Separation Date.

 

(d)           You are required to
comply with Paragraphs 6 and 7 below.

 

2.             Separation Payment.  Except with respect to the Accrued Benefits
as defined in the Employment Agreement, if you sign this Agreement, agreeing to
be bound by the General Release in Paragraph 3 below and the other terms
and conditions of this Agreement described below, and comply with the
requirements of this Paragraph 2 (other than the Accrued Benefits), you will
receive the compensation and benefits as contemplated by the Employment
Agreement. You will not be eligible for the payment and benefits described in
Paragraph 2 unless:  (i) You
sign this Agreement no later than forty five (45) days after you receive it,
promptly return the Agreement to the Company after you sign it, and do not
timely revoke it in accordance with paragraph 20 below; (ii) you have
returned all Company property and documents in accordance with Paragraph 7
below.

 

3.             General Release.

 

(a)           In exchange for the consideration described in
Paragraph 2 and except as contemplated under Paragraph 4 below, you
release and forever discharge, to the maximum extent permitted by law, the
Company and each of the other “Releasees”
as defined below, from any and all claims, causes of action, complaints,
lawsuits or liabilities of any kind with respect to the Company (collectively “Claims”)
as described below which you, your heirs, agents, administrators or executors
have or may have against the Company, or any of the other Releasees.

 

(b)           By agreeing to this
General Release, you are waiving, to the maximum extent permitted by law and
other than as contemplated by Paragraph 4 below, any and all Claims which you
have or may have against the Company, or any of the other Releasees arising out
of or relating to any conduct, matter, event or omission with respect to the
Company existing or occurring before the Separation Date, including but not
limited to the following:

 

(i)            any Claims having
anything to do with your Employment Agreement or your employment with the
Company or any of the Releasees;

 

(ii)           any Claims having
anything to do with the termination of your employment with the Company or any
of the Releasees;

 

(iii)          any Claims for unpaid or
withheld wages, severance or retention payments, benefits, bonuses, commissions
and/or other compensation of any kind;

 

(iv)          any Claims for
reimbursement of expenses of any kind;

 

(v)           any Claims for
attorneys’ fees or costs;

 

(vi)          any Claims for any
breach under the Employee Retirement Income Security Act (“ERISA”);

 

(vii)         any Claims
of discrimination and/or harassment based on age, sex, race, religion, color,
creed, disability, handicap, citizenship, national origin, ancestry, sexual
orientation, or any other factor protected by Federal, State or Local law as
enacted or amended (such as the Age Discrimination in Employment Act,
29 U.S.C. §621 et. seq.; Title VII of the Civil 

 

2

 

Rights Act of 1964; the Americans with Disabilities Act, the Equal Pay
Act; Civil Rights of People with Disabilities Act and Domestic Abuse Bias in
Employment Law) and any Claims for retaliation under any of the foregoing laws;

 

(viii)        any Claims regarding
leaves of absence including, but not limited to, any Claims under the Family
and Medical Leave Act;

 

(ix)           any Claims under the
National Labor Relations Act;

 

(x)            any Claims under the
Sarbanes-Oxley Act;

 

(xi)           any Claims under the
Worker Adjustment and Retraining Notification Act (“WARN”);

 

(xii)          any Claims for violation
of public policy;

 

(xiii)         any whistleblower or
retaliation Claims;

 

(xiv)        any Claims for emotional
distress or pain and suffering; and/or

 

(xv)         any other statutory,
regulatory, common law or other Claims of any kind, including, but not limited
to, Claims for breach of contract (other than as contemplated hereby), libel,
slander, fraud, wrongful discharge, promissory estoppel, equitable estoppel and
misrepresentation.

 

(c)           The term “Releasees” means: all and singularly, Rite Aid Corporation,
Rite Aid HDQTRS. Corp., as well as any of their direct or indirect parent,
subsidiary, related or affiliated companies, and each of their past and
present employees, officers, directors, attorneys, owners, partners, insurers,
benefit plan fiduciaries and agents, and all of their respective predecessors,
successors and assigns.

 

(d)           It is important that
you understand that this General Release includes all Claims known or unknown
by you, those that you may have already asserted or raised as well as those
that you have never asserted or raised.

 

4.             Non-Released Claims.  Notwithstanding anything in this Agreement to
the contrary, the General Release in Paragraph 3 above does not
apply to:

 

(a)           Any Claims for vested
benefits under any retirement, 401(k), profit-sharing, deferred compensation or
stock option plan or other plan or arrangement;

 

(b)           Any Claims to enforce
the commitments set forth in this Agreement or the applicable provisions of the
Employment Agreement that survive termination of your employment;

 

(c)           Any Claims to interpret
or to determine the scope, meaning or effect of this Agreement or the
applicable provisions of the Employment Agreement that survive termination of
your employment;

 

(d)           Any Claims arising out
of any conduct, matter, event or omission existing or occurring after the
Separation Date;

 

(e)           Any Claim that can not
be waived as a matter of law; or

 

3

 

(f)            Any Claim arising
under or otherwise having anything to do with Sections 5.3 or 5.6 of the
Employment Agreement to survive termination of your employment thereunder.

 

Further, the General
Release does not prevent you from contacting or filing a charge with any
federal, state or local government agency or commission.  However, the General Release does prevent
you, to the maximum extent permitted by law, from obtaining any monetary or
other personal relief for any of the Claims you have released in Paragraph 3.

 

5.             Adequacy of Consideration.  You acknowledge and agree that the
consideration under Paragraph 2 above:

 

(a)           Constitutes adequate
consideration to support your General Release in Paragraph 3 above; and

 

(b)           Fully compensates you
for the Claims you are releasing.

 

For
purposes of this Agreement, “consideration” means something of value to which
you are not already entitled.

 

6.             Prohibition on Your Using or Disclosing
Certain Information. Regardless of whether you sign this Agreement, to the
extent provided in Section 6 of the Employment Agreement, you are
prohibited from using or disclosing confidential and/or proprietary information
which you acquired in the course of your employment with the Company or its
predecessors,  and which is not generally known
by or readily accessible to the public.

 

7.             Company Property and Documents.  Regardless of whether you sign this
Agreement, and as a condition of receiving the payment set forth in
Paragraph 2 above, to the extent provided in Section 6 of the Employment
Agreement you must return to the Company, retaining no copies, all
Company property, keys, documents (hard copy or electronic), forms,
correspondence, computer programs, memos, disks, DVDs and any other Company
property in your possession or control.

 

8.             Confidentiality of this Agreement.  You and the Company and its affiliates each
agree that, at all times, the existence, terms and conditions of this Agreement
will be kept secret and confidential and will not be disclosed voluntarily to
any third party, except:  (i) to
your spouse, if applicable, (ii) to the extent required by law; (iii) in
connection with any Claim to enforce, interpret or determine the scope,
meaning, or effect of the Agreement; or (iv) to obtain confidential legal,
tax or financial advice with respect thereto.

 

9.             Cooperation.  To the extent provided in Section 5.3 of
the Employment Agreement, you agree that, upon reasonable request, you will
meet with representatives of the Company, Rite
Aid HDQTRS. Corp., or their respective parent or subsidiary company
representatives and provide any information you acquired during the course of
your employment relating in any way to any disputes or other matters involving
the Company or any Releasee (as defined above). You further agree that you will
cooperate fully with the Company relating to any matter in which you were
involved or which you have knowledge by virtue of your employment with the
Company, including any existing or future litigation involving the Company,
whether administrative, civil or criminal in nature in which and to the extent
the Company deems your cooperation necessary.

 

10.           Non-Disparagement.  You and the Company agree that neither party
will make any negative comments or disparaging remarks, in writing, orally or
electronically, about the other party or any other Releasee (as defined above)
and their respective products and services. 
However, nothing in 

 

4

 

this Agreement is intended to or shall be interpreted to restrict either
party’s right and/or obligation:  (i) to
testify truthfully in any forum; or (ii) to contact, cooperate with or
provide information to any government agency or commission.

 

11.           Resignation of Positions. In
connection with the termination of your employment by the Company, you hereby
resign from all positions you may hold as an officer or director of the Company
and it subsidiaries and affiliates, and the Company hereby accepts such
resignations. You agree to execute all such instruments and take all such other
actions as the Company may reasonably deem necessary or desirable to evidence
or accomplish the foregoing in full.

 

12.           Governing Law and Forum.  This Agreement shall be governed by and
construed in accordance with the laws of Pennsylvania, where this Agreement is
entered into, without giving effect to any conflict of law provisions.  Any court action instituted by you or on your
behalf relating to in any way to this Agreement, or your employment or termination
of employment with the Company or any Releasee, shall be filed exclusively in
the Cumberland County Court of Common Pleas in the Commonwealth of Pennsylvania
or in the United States District Court for the Middle District of Pennsylvania,
and you consent to the jurisdiction and venue of these courts.

 

13.           Statement of Non-Admission.  Nothing in this Agreement is intended as or
shall be construed as an admission or concession of liability or wrongdoing by
you, the Company or any Releasee as defined above.  Rather, the proposed Agreement is being
offered for the sole purpose of settling cooperatively and amicably any and all
possible disputes described in Paragraph 3.

 

14.           Interpretation of Agreement.  Nothing in this Agreement is intended to
violate any law or shall be interpreted to violate any law.  If any paragraph or part or subpart of any
paragraph in this Agreement or the application thereof is construed to be
overbroad and/or unenforceable, then the court making such determination shall
have the authority to narrow the paragraph or part or subpart of the paragraph
as necessary to make it enforceable and the paragraph or part or subpart of the
paragraph shall then be enforceable in its/their narrowed form.  Moreover, each paragraph or part or subpart of
each paragraph in this Agreement is independent of and severable (separate)  from each other.  In
the event that any paragraph or part or subpart of any paragraph in this
Agreement is determined to be legally invalid or unenforceable by a court and
is not modified by a court to be enforceable, the affected paragraph or part or
subpart of such paragraph shall be stricken from the Agreement, and the
remaining paragraphs or parts or subparts of such paragraphs of this Agreement
shall remain in full, force and effect.

 

15.           Entire Agreement.  This Agreement and the applicable provisions
of the Employment Agreement constitutes the entire agreement between the
parties and supersedes any and all prior representations, agreements, written
or oral, expressed or implied, by the Company or any Releasee arising out of or
relating in any way to your employment or the termination of your employment
with any Releasee. This Agreement may not be modified or amended other than by
an agreement in writing signed by you and either the Vice President &
Assistant General Counsel or the Senior Director of Corporate Human Resources
of Rite Aid HDQTRS. Corp.

 

16.           Acknowledgment.  You acknowledge and agree that, subsequent to
the termination of your employment, you shall not be eligible for any payments
from the Company or any of the Releasees or any benefits arising out of your
employment with any of the Releasees, except as expressly set forth in this
Agreement or the Employment Agreement.

 

17.           Headings.  The headings
contained in this Agreement are for convenience of reference only and are not
intended, and shall not be construed, to modify, define, limit, or expand the
intent of the 

 

5

 

parties as expressed in this Agreement, and
they shall not affect the meaning or interpretation of this Agreement.

 

18.           Days. 
All references to a number of days throughout this Agreement refer to
calendar days.

 

19.           Representations.  You agree and represent that:

 

(a)           You have read carefully
the terms of this Agreement, including the General Release;

 

(b)           You have had an
opportunity to and have been encouraged to review this Agreement, including the
General Release, with an attorney;

 

(c)           You understand the
meaning and effect of the terms of this Agreement, including the General
Release;

 

(d)           You were given
forty-five (45) days to determine whether you wished to sign this
Agreement, including the General Release;

 

(e)           Your decision to sign
this Agreement, including the General Release, is of your own free and
voluntary act without compulsion of any kind;

 

(f)            No promise or
inducement not expressed in this Agreement or the Employment Agreement has been
made to you; and

 

(g)           You have adequate
information to make a knowing and voluntary waiver.

 

20.           Revocation Period.  If you sign this Agreement, you will retain
the right to revoke it for seven (7) days.  If you revoke this Agreement, you are
indicating that you have changed your mind and do not want to be legally bound
by this Agreement.  The Agreement shall
not be effective until after the Revocation Period has expired without your
having revoked it.  To revoke this
Agreement, you must send a certified letter to the following address:  Steven Chesney, Senior Director of Corporate
Human Resources, Rite Aid HDQTRS. Corp., 30 Hunter Lane, Camp Hill, PA
17011.  The letter must be post-marked
within seven (7) days of your execution of this Agreement.  If the seventh day is a Sunday or federal
holiday, then the letter must be post-marked on the following business
day.  If you revoke this Agreement on a
timely basis, you shall not be eligible for the consideration set forth in
Paragraph 2.

 

21.           Offer Expiration Date.  As noted above, you have forty-five (45)
days to decide whether you wish to sign this Agreement.  If you do not sign this Agreement within 45 days
of the date you receive it, then this offer is withdrawn and you will not be
eligible for the consideration set forth in Paragraph 2 above.

 

If you
agree with the all of the terms of this Agreement, please sign below,
indicating that you understand, agree with and intend to be legally bound by
this Agreement, including the General Release, and return the signed Agreement
to Steven Chesney at the above address.

 

6

 

We
wish you the best in the future.

 

	
   

  	
   

  	
  Sincerely,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  UNDERSTOOD AND AGREED,

  	
   

  	
   

  
	
  INTENDING TO BE LEGALLY BOUND:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Witness

  	
   

  	
   

  

 

7

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