Document:

Exhibit
10.6

 

RITE AID CORPORATION

 

SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN

 

Effective April 13,
2010

 

 

Table of Contents

 

	
  Purpose

  	
   

  	
  1

  
	
  ARTICLE 1 Definitions

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 2 Eligibility and Participation

  	
   

  	
  3

  
	
  2.1

  	
  Eligibility for
  Participation

  	
   

  	
  3

  
	
  2.2

  	
  Selection for
  Participation in the Plan

  	
   

  	
  3

  
	
  2.3

  	
  Enrollment Requirements

  	
   

  	
  3

  
	
  2.4

  	
  Termination of
  Participation

  	
   

  	
  3

  
	
  2.5

  	
  Waiver of Other
  Nonqualified Deferred Compensation Benefits

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 3 Crediting

  	
   

  	
  3

  
	
  3.1

  	
  Crediting of Account
  Balances

  	
   

  	
  3

  
	
  3.2

  	
  FICA and Other Taxes

  	
   

  	
  5

  
	
  3.3

  	
  Establishment of Trust

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 4 Unforeseeable Financial Emergencies; Withdrawal
  Election

  	
   

  	
  5

  
	
  4.1

  	
  Withdrawal
  Payout/Suspensions for Unforeseeable Financial Emergency

  	
   

  	
  5

  
	
  4.2

  	
  Withdrawal Election

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 5 Plan Benefit

  	
   

  	
  5

  
	
  5.1

  	
  Payment of Plan Benefit

  	
   

  	
  5

  
	
  5.2

  	
  Installment Payments

  	
   

  	
  6

  
	
  5.3

  	
  Vesting

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 6 Beneficiary Designation

  	
   

  	
  6

  
	
  6.1

  	
  Beneficiary

  	
   

  	
  6

  
	
  6.2

  	
  Beneficiary
  Designation; Change

  	
   

  	
  6

  
	
  6.3

  	
  Acknowledgment

  	
   

  	
  7

  
	
  6.4

  	
  No Beneficiary
  Designation

  	
   

  	
  7

  
	
  6.5

  	
  Doubt as to Beneficiary

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 7 Termination, Amendment or Modification

  	
   

  	
  11

  
	
  7.1

  	
  Termination

  	
   

  	
  11

  
	
  7.2

  	
  Amendment

  	
   

  	
  7

  
	
  7.3

  	
  Effect of Payment

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 8 Administration

  	
   

  	
  7

  
	
  8.1

  	
  Committee Duties

  	
   

  	
  7

  
	
  8.2

  	
  Agents

  	
   

  	
  7

  
	
  8.3

  	
  Indemnification of
  Committee

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 9 Other Benefits and Agreements

  	
   

  	
  12

  
	
  9.1

  	
  Coordination with Other
  Benefits

  	
   

  	
  12

  

 

 

	
  ARTICLE 10 Claims Procedures

  	
   

  	
  8

  
	
  10.1

  	
  Presentation of Claim

  	
   

  	
  8

  
	
  10.2

  	
  Notification of
  Decision

  	
   

  	
  8

  
	
  10.3

  	
  Review of a Denied
  Claim

  	
   

  	
  8

  
	
  10.4

  	
  Decision on Review

  	
   

  	
  9

  
	
  10.5

  	
  Legal Action

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 11 Miscellaneous

  	
   

  	
  9

  
	
  11.1

  	
  Unsecured General
  Creditor

  	
   

  	
  9

  
	
  11.2

  	
  Company’s Liability

  	
   

  	
  9

  
	
  11.3

  	
  Nonassignability

  	
   

  	
  9

  
	
  11.4

  	
  Furnishing Information

  	
   

  	
  10

  
	
  11.5

  	
  Terms

  	
   

  	
  10

  
	
  11.6

  	
  Captions

  	
   

  	
  10

  
	
  11.7

  	
  Governing Law

  	
   

  	
  10

  
	
  11.8

  	
  Notice

  	
   

  	
  10

  
	
  11.9

  	
  Successors

  	
   

  	
  10

  
	
  11.10

  	
  Spouse’s Interest

  	
   

  	
  11

  
	
  11.11

  	
  Validity; No Waiver

  	
   

  	
  11

  
	
  11.12

  	
  Incompetent

  	
   

  	
  11

  
	
  11.13

  	
  Court Order

  	
   

  	
  11

  
	
  11.14

  	
  Distribution in the
  Event of Taxation

  	
   

  	
  11

  
	
  11.15

  	
  Taxes and Withholding

  	
   

  	
  11

  
	
  ARTICLE 12 Compliance with Code
  Section 409A

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  APPENDIX A

  	
   

  	
   

  

 

 

RITE AID CORPORATION

 

SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN

 

Amended and Restated
Effective April 13, 2010

 

Purpose

 

The purpose of this Plan is to provide specified
benefits to a select group of management employees of Rite Aid Corporation, a
Delaware corporation (the “Company”). This Plan shall be unfunded for tax
purposes and for purposes of Title I of ERISA.

 

ARTICLE 1

Definitions

 

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

 

1.1           “Account Balance” shall mean the credit
balance at the time of determination of a Participant’s Deferral Account.  This balance shall be a bookkeeping entry
only and shall be utilized solely as a device for the measurement and
determination of the amounts to be paid to the Participant and his or her
Beneficiaries pursuant to this Plan.

 

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

 

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

 

1.4           “Board” shall mean the board of directors
of the Company, and “Chairman” shall mean the Chairman of the Board.

 

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

 

1.6           “Code” shall mean the Internal Revenue
Code of 1986, as amended.

 

1.7           “Committee” shall mean the committee
described in Article 8.

 

1.8           “Company” shall mean Rite Aid
Corporation, a Delaware corporation.

 

1.9           “Deferral Account” shall mean (i) the
sum of all of a Participant’s Monthly Deferral Amounts, plus (ii) additional
amounts debited or credited in accordance with Section 3.1, less (iii) all
distributions made to the Participant or his or her Beneficiary pursuant to
this Plan.  A separate Deferral Account
shall be maintained for each Participant. 
This account 

 

 

shall be a
bookkeeping entry only and shall be utilized solely as a device for the
measurement and determination of the amounts to be paid to the Participant
pursuant to this Plan.

 

1.10         “Deferral Account Relating to a Plan Year”
shall mean (i) a Participant’s aggregate Monthly Deferral Amounts relating
to a calendar year (or portion thereof) during which this Plan is in effect,
plus (ii) additional amounts debited or credited with respect such amounts
in accordance with Section 3.1, less (iii) any distributions relating
thereto.

 

1.11         “ERISA” shall mean the Employee
Retirement Income Security Act of 1974, as amended.

 

1.12         “Measurement Funds” shall mean that group
of mutual funds or other investment categories, which the Company shall
prescribe in writing by notice given to the Participants.

 

1.13         “Monthly Deferral Amount” shall mean the
amount to be credited to the Deferral Account of a Participant, as provided in Article 3
hereof.

 

1.14         “Normal Retirement Date” shall mean the
later of a Participant’s attainment of age sixty (60) or completion of five (5) full
calendar years of service with the Company, commencing with the year beginning January 1,
2001.

 

1.15         “Participant” shall mean an eligible
executive employee of the Company who is selected to participate in this Plan,
as provided in Article 2 hereof.

 

1.16         “Plan” shall mean this Supplemental
Executive Retirement Plan, which shall be evidenced by this instrument, as the
same may be amended from time to time.

 

1.17         “Termination of Employment” shall mean
the ceasing of a Participant’s employment with the Company, voluntarily or
involuntarily, for any reason.

 

1.18         “Unforeseeable Financial Emergency”
shall, for any benefit which accrued and was fully vested prior to January 1,
2005, mean an unanticipated emergency that is caused by an event beyond the
control of the Participant that would result in severe financial hardship to
the Participant resulting from (i) a sudden and unexpected illness or
accident of the Participant or a dependent of the Participant, (ii) a loss
of the Participant’s property due to casualty, or (iii) such other
extraordinary and unforeseeable circumstances arising as a result of events
beyond the control of the Participant, as determined in good faith by the
Committee.

 

Effective January 1, 2005, solely for benefits
which accrue or vest on or after such date, “Unforeseeable Financial Emergency”
shall mean severe financial hardship to the Participant resulting from an
illness or accident of the participant, the Participant’s spouse, or dependent
of the Participant (as specified in Section 409A), loss of the Participant’s
property due to casualty, or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the
Participant.

 

1.19 “Specified Employee” means, for any year in which
the stock of the Company is tradeable on an established securities market, any
employee who meets the requirements of Internal Revenue Code Section 416(i)(1)(A)(i),
(ii), or (iii) (applied in accordance with the 

 

 

Regulations thereunder, but without regard to Internal
Revenue Code Section 416(i)(5)) at any time during the 12 month period
ending on the last occurring December 31st.

 

ARTICLE 2

Eligibility and
Participation

 

2.1           Eligibility for Participation. 
Executive employees of the Company (which, for this purpose, shall
include subsidiaries of the Company) who have attained the position of vice
president or who have attained an executive position more senior than that of
vice president shall be eligible to participate in the Plan.

 

2.2           Selection for Participation in the Plan. 
From time-to-time, the Chairman, or such senior management employee(s) designated
by the Chairman, may select those individuals who are to participate in the
Plan from among those employees eligible for participation as provided in Section 2.1.  The initial Participants in the Plan shall be
so selected prior to, and shall commence participation in the Plan as of, the
effective date hereof.  Employees
subsequently selected shall commence participation as of the first day of the
calendar year following the year of their selection or at such earlier date as
the Chairman or his designee may determine.

 

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

 

2.4           Termination of Participation. 
A Participant shall cease to be a Participant in the Plan upon the later
of:  (a)  the earliest of (i) his
ceasing to be employed by the Company in an eligible position, whether
voluntarily or involuntarily, for any reason whatsoever including, without
limiting the generality of the foregoing, death or disability; (ii) a
determination by the Chairman that the Participant shall no longer be eligible
to participate in the Plan; or (iii) the termination of the Plan, or (b) upon
receipt of the full distribution of his vested Account Balance.

 

2.5           Waiver of other Nonqualified Deferred
Compensation Benefits.  It shall be a pre-condition to
participation in this Plan that a Participant waive any rights he may have or
to which he might otherwise become entitled to receive any other nonqualified
retirement or deferred compensation benefit from the Company, whether by way of
or pursuant to any other plan, program, employment agreement or other
arrangement.  Such waiver shall be
effectuated in such manner and with such forms as the Committee shall prescribe
for this purpose.  Notwithstanding the
foregoing, the waiver requirement shall not apply with respect to the Key
Employees’ Deferred Compensation Plan.

 

ARTICLE 3

Crediting

 

3.1           Crediting of Account Balances. 
In accordance with and subject to such reasonable rules and
procedures as may from time to time be established by the Committee, amounts
shall be credited to or debited from a Participant’s Account Balance in
accordance with the following rules:

 

 

(a)                                  Crediting of Monthly Deferral Amount. 
For each month during which he remains a Participant hereunder, a
Participant’s Deferral Account shall be credited as of the first day of said
month with the Participant’s Monthly Deferral Amount.  Except as provided hereinafter, the Monthly
Deferral Amount shall equal two percent (2%) of the Participant’s annual base
compensation from the Company (excluding bonuses) as determined by the
Committee.  Notwithstanding the
foregoing, the Monthly Deferral Amount of a Participant for any month prior to May 1,
2004 shall not exceed seven thousand dollars ($7,000).  The Monthly Deferral Amount of a Participant
For any month beginning on or after May 1, 2004, but prior to April 13,
2010 shall not exceed fifteen thousand dollars ($15,000).  The Monthly Deferral Amount of a Participant
beginning on or after April 14, 2010 shall not be subject to a maximum
amount.

 

(b)                                 Measurement Funds. 
Each Participant shall have the right, from time to time, to select
those Measurement Funds in which his or her Account Balance shall be deemed to
be invested, upon which to base a crediting rate for the purpose of crediting
or debiting amounts to the Participant’s Account Balance.  The Participant shall provide at least five (5) business
days’ notice to the Company prior to making any change in the deemed investment
of his or her Account Balance, but shall not in any event be permitted to make
such changes to the extent the Company would not be able to make corresponding
changes to its actual investment of funds, if any, it being understood that the
Company shall be under no obligation to invest any of its funds in the same
manner as any Participant’s deemed investment of his or her Account Balance.

 

(c)                                  Crediting or Debiting Method. 
A Participant’s Account Balance shall be credited or debited on a daily
basis, based on the performance of the selected Measurement Funds.  To the extent necessary to comply with
applicable insurance laws, a monthly Deferral Amount shall be deemed invested
at a money market rate of return prior to the expiration of any applicable
waiting period, and shall be deemed invested in the applicable Measurement
Funds from and after the expiration of such waiting period.

 

(d)                                 No Actual Investment. 
Notwithstanding any other provision of this Plan, the Measurement Funds
are to be used for measurement purposes only, and the crediting or debiting of
amounts to a Participant’s Account Balance shall not be considered or construed
in any manner as an actual investment of his or her Account Balance in any
Measurement Fund.  In the event that the
Company, in its own discretion, decides to invest funds in any Measurement Fund
and/or through investments held under the Trust described in Section 3.3
hereof, no Participant shall have any rights in or to any such Fund or such
investments.  Without limiting the
foregoing, a Participant’s Account Balance shall at all times be a bookkeeping
entry only and shall not represent any investment made on his or her behalf by

 

 

the Company; the Participant shall at all times remain an unsecured
creditor of the Company.

 

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

 

3.3           Establishment of Trust. 
In connection with the adoption of this Plan, Company has established a
Trust pursuant to a Trust Agreement of even date herewith (the “Trust”).  The Company intends to make contributions to
said Trust to assist the Company in discharging its obligations hereunder to
the Participants or their beneficiaries and, in the event of a “Change in
Control of the Company”, as that term is defined in Appendix A hereto, the
Company shall, on the Change in Control date, contribute to the Trust the
amount needed to cause the Trust to have assets equal to the “Plan Benefits”
(as defined in Article 5) of all of the Participants.  Notwithstanding the foregoing, the funding
described in the preceding sentence shall not occur as a result of a
substantial downturn in the Company’s financial status

 

ARTICLE 4

 Unforeseeable Financial Emergencies;

Withdrawal Election

 

4.1           Withdrawal Payout/Suspensions for
Unforeseeable Financial Emergencies.  If the
Participant experiences an Unforeseeable Financial Emergency, the Participant
may petition the Committee to receive a partial or full payout of the vested
portion of his or her Deferral Account. 
The amount of the payout shall not exceed the lesser of the Participant’s
vested Deferral Account or the amount reasonably needed to satisfy the
Unforeseeable Financial Emergency.  The
Committee shall consider each such request in good faith.  If the petition for a payout is approved,
such payout shall be made as promptly as reasonably practicable.

 

In addition, effective for benefits that accrued and
were fully vested on or after January 1, 2005, any distribution on account
of an Unforeseeable Financial Emergency shall comply with the relevant
provisions of Internal Revenue code Section 409A, together with the final
regulations and interpretations promulgated thereunder.  Without limiting the generality of the
foregoing, any such distribution shall be limited to an amount that shall not
exceed the amounts necessary to satisfy the emergency plus amounts necessary to
pay taxes reasonably anticipated as a result of the distribution, after taking
into account the extent to which hardship is or may be relieved through
reimbursement or compensation by insurance or otherwise or by liquidation of
the Participant’s assets (to the extent the liquidation of the assets would not
itself cause severe financial hardship).

 

4.2           Withdrawal Election. 
A Participant (or Beneficiary, if applicable) may elect to withdraw the
entire vested portion of his or her Account Balance or, if the payment of Plan
Benefits has already commenced, the amount of his remaining unpaid Plan
Benefits, in either case less a 10% withdrawal penalty (the net amount shall be
referred to as the “Withdrawal Amount”). 
No partial withdrawals shall be allowed. 
The Participant shall make this election by giving the Committee advance
written notice of the election.  The
penalty shall be equal to 10% of the Participant’s Account Balance determined
immediately prior to the withdrawal.  The

 

 

Participant shall be paid the Withdrawal Amount in a
lump sum as promptly as reasonably practicable following receipt by the
Committee of the notice of the Withdrawal Election.  A Participant who receives a Withdrawal
Amount shall thereupon cease to be a Participant and shall not again be
eligible to be a Participant in this Plan. 
Notwithstanding the foregoing, this section shall solely be effective
for benefits which accrued and were fully vested prior to January 1, 2005,
and shall not be effective for any benefits which accrued or vested on or after
such date.

 

ARTICLE 5

Plan Benefit

 

5.1           Payment of Plan Benefit. 
Except as provided in Section 5.2, a Participant who attains his
Normal Retirement Date or whose employment terminates for any reason and under
any circumstances shall thereupon be entitled to receive, as a benefit
hereunder (the “Plan Benefit”), his entire vested Account Balance determined as
of the date the Participant terminates employment with the Company.  The Plan Benefit shall be payable to the
Participant within sixty (60) days following his termination of employment.

 

5.2                                 Installment Payments(a)    
For benefits which accrued and were fully vested prior to January 1,
2005, notwithstanding the provisions of Section 5.1, a Participant shall
have the right to file an election with the Company providing for payment of
his Account Balance in five (5), ten (10), or fifteen (15) consecutive annual
installments commencing with his entitlement to begin receiving his Plan
Benefit.  Each such installment shall
include interest on the unpaid balance from the date on which the Participant
becomes entitled to receive his Plan Benefit at the prime rate of interest, as
published in the “Money Rates” Section of The Wall Street Journal.  The prime rate of interest shall be on or as
of the business date closest to December 1st of each year and the prime rate as so
determined shall be applied with respect to the calendar year following the December 1st date of
determination.  The prime rate initially
employed shall be that as of the December 1st preceding the commencement of the payment of
installments to the participant.  The
amount of each installment payment shall be redetermined on the first day of
the month coincident with or next following the anniversary of the date of
termination each year, based upon the prime rate of interest determined as
aforesaid, the remaining Account Balance, and the remaining number of payment
periods.  No such election shall be valid
unless made at least one year prior to the actual date of termination, any
election made during such one year period shall be ignored in favor of the most
recent such election made at least one year prior to the actual date of
termination and, in default of any such installment election, the Plan Benefit
shall be paid in a single lump sum payment. 
If the Plan Benefit of a Participant or his Beneficiary does not exceed
Fifty Thousand Dollars ($50,000), it shall be paid in a single lump sum, any
election by the Participant to the contrary notwithstanding.  To the extent permissible by law, each
payment and each installment described in this Section 5.2 shall be
considered a separate payment from each other payment or installment.

 

 

(b)                                 For benefits which accrue or vest on or
after January 1, 2005, notwithstanding the provisions of Section 5.1
(or the preceding Section 5.2(a)), a Participant shall have the right to
file an election with the Company providing for payment of his Account Balance
in five (5), ten (10), or fifteen (15) consecutive annual installments
commencing with his entitlement to begin receiving his Plan Benefit.  Each such installment shall include interest
on the unpaid balance from the date on which the Participant becomes entitled
to receive his Plan Benefit at the prime rate of interest, as published in the “Money
Rates” Section of The Wall Street Journal. 
The prime rate of interest shall be on or as of the business date
closest to December 1st of each year and the prime rate as so
determined shall be applied with respect to the calendar year following the December 1st date of
determination.  The prime rate initially
employed shall be that as of the December 1st preceding the commencement of the payment of
installments to the participant.  The
amount of each installment payment shall be redetermined on the first day of
the month coincident with or next following the anniversary of the date of
termination each year, based upon the prime rate of interest determined as
aforesaid, the remaining Account Balance, and the remaining number of payment
periods.  No such election shall be valid
unless made at or prior to the end of the year prior to the year in which the
deferrals are made, any election made after such date shall be ignored in favor
of the most recent such election made at least one year prior to the actual
date of deferral and, in default of any such installment election, the Plan
Benefit shall be paid in a single lump sum payment.  If the Plan Benefit of a Participant or his
Beneficiary does not exceed the limitation for the year of distribution set
forth in Internal Revenue Code Section 402(g) ($15,500 for 2008), it
shall be paid in a single lump sum, any election by the Participant to the
contrary notwithstanding.

 

If the Plan Administrator
so permits, any distribution election made pursuant to the preceding paragraph
may be modified by the Participant so long as the following requirements are
met:

 

(1) any such
modification is made at least one year before the distribution is to be made
under the existing election; and

(2) the modification
defers the payment of benefits for at least five years from the date on which
the payment would have begun under the original election.

 

Notwithstanding the preceding paragraph, on or prior
to December 31, 2008, each Participant shall be entitled to change
elections previously made for his or her annual account in years 2005, 2006,
2007 and 2008, so long as such elections do not defer receipt of any portion of
his Account

 

 

Balance which would otherwise have been received in
the year in which the election is made, or accelerate receipt of any portion of
his Account Balance into the year in which the election is made.

 

5.3                                 Vesting(a)       A
Participant’s entitlement to receive his Deferral Account Relating to any
particular Plan Year as a Plan Benefit hereunder shall vest at the rate of
twenty percent (20%) per year for each full or partial calendar year of
participation in the Plan beginning with the effective date of the Plan.  Notwithstanding the foregoing, a Participant’s
right to receive his entire Account Balance shall be fully vested upon his
death, termination of employment due to total disability (as determined by the
Committee), attainment of Normal Retirement Date, termination of the Plan, or a
“Change in Control of the Company,” as defined in Appendix A hereto  provided, effective September 20,
2006, that any amounts credited to a Participant’s Account Balance in respect
of periods after the date of such Change in Control of the Company shall vest
in accordance with the terms of the Plan and shall not be affected by the
occurrence of such Change in Control of the Company.

 

Notwithstanding anything herein to the contrary, effective August 1,
2005, the Senior Vice President of Human Resources, (or his or her designee)
may, following a reasonable good faith determination, designate one or more
executives who continue to be employed by the Company but who cease to be a
Participant because they cease to be employed in an eligible position as
described in Section 2.4, to continue to be treated as a Participant under
Section 5.3 solely for the purpose of determining their vested interest in
the balance (including amounts credited or debited thereafter under Section 3.1(b))
of his or her Deferral Account on the date he or she ceased to be a Participant
(“Vesting Participant”) until the earlier of (i) their termination of
employment with the Company for any reason, or (ii) a determination in
reasonable good faith by the Senior Vice President of Human Resources (or his
or her designee) that the designated executive shall no longer be a Participant
in the Plan for purposes of Section 5.3. A Vesting Participant’s Deferral
Account shall not be eligible to be credited with the monthly Deferral Amount
effective on the date he or she ceases to be employed in an eligible position
as described in Section 2.4.

 

Effective December 19, 2007, notwithstanding anything in this Plan
to the contrary, a Participant’s right to receive his entire Account Balance
shall be fully vested upon his death, termination of employment due to total
disability (as determined by the Committee), attainment of Normal Retirement
Date, termination of the Plan, or upon involuntary termination of employment
with the Company, other than for “Cause” (as defined in

 

 

subsection 5.3(b)), within twelve months following a “Change in Control
of the Company,” as defined in Appendix A hereto.

 

(b)                                 Notwithstanding anything herein to the
contrary, effective August 1, 2005, if a Participant’s employment is
terminated for “Cause,” the Participant shall (i) not be entitled to any
portion of his or her Deferral Account; (ii) forfeit the portion of his or
her Deferral Account which as of the date of his or her termination of
employment for Cause has not been paid; and (iii) be obligated to repay to
the Company, the amount if any, of his or her Deferral Account previously paid
to him or her. For purposes of this Subsection 5.3(b) “Cause” as
determined in reasonable good faith by the Senior Vice President of Human
Resources (or his or her designee) or the Board of Directors shall mean (i) the
Participant’s gross negligence or willful misconduct in the performance of the
duties or responsibilities of his or her position with the Company or any
subsidiary, (ii) misappropriation of any funds or property of the Company
or any subsidiary; (iii) conduct by the Participant which is a material
violation of Company policy or any agreement between the Company and the
Participant or which materially interferes with the Participant’s ability to
perform his or her duties; (iv) the commission by Participant of an act of
fraud or dishonesty toward the Company or any subsidiary; (v) Participant’s
misconduct or negligence which damages or injures the Company or the Company’s
reputation; (vi) the Participant is convicted of or pleads to a felony
involving moral turpitude; or (vii) the use or imparting by the
Participant of any confidential or proprietary information of the Company, or
any subsidiary in violation of any confidentiality or proprietary agreement to
which the Participant is a party.

 

ARTICLE 6

Beneficiary Designation

 

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

 

6.2           Beneficiary Designation; Change. 
A Participant shall designate his or her Beneficiary by completing and
signing the Beneficiary Designation Form, and returning it to the Committee or
its designated agent.  A Participant
shall have the right to change a Beneficiary by completing, signing and
otherwise complying with the terms of the Beneficiary Designation Form and
the Committee’s rules and procedures, as in effect from time to time. Upon
the acceptance by the Committee of a new Beneficiary Designation Form, all
Beneficiary designations previously filed shall be canceled.  The Committee shall be entitled to rely on
the last Beneficiary Designation Form filed by the Participant and
accepted by the Committee prior to his or her death.

 

 

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

 

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

 

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

 

 

ARTICLE 7

Termination, Amendment or
Modification

 

7.1           Termination. The Company reserves the right to
terminate the Plan at any time.  Upon
termination of the Plan, each Participant’s balance shall be fully vested and,
to the extent permissible by Internal Revenue Code Section 409A, paid to
him or her according to the provisions of Article 5 of this Plan. Any such
termination and the attendant payment of benefits shall comply with the
provisions of Internal Revenue Code Section 409A, and the final
regulations thereunder including, but not limited to, the requirement that all
similar plans of the Company be terminated.

 

7.2           Amendment. The Company may amend the Plan from time-to-time,
but no amendment shall adversely affect the rights which a Participant shall
have accrued hereunder at the time of the amendment without the express written
consent of such Participant.

 

7.3           Effect of Payment. 
The full payment of the applicable Plan Benefit under Articles 4, 5
and/or 6 of the Plan, whether directly by the Company and/or through the Trust
described in Section 3.3, shall completely discharge all obligations to a
Participant and his or her designated Beneficiaries under this Plan.

 

ARTICLE 8

Administration

 

8.1           Committee Duties. 
This Plan shall be administered by a Committee which shall consist of
the Board, or such committee as the Board shall appoint.  The Committee shall also have the discretion
and authority in good faith to (i) make, amend, interpret, and enforce all
appropriate rules and regulations for the administration of this Plan and (ii) decide
or resolve any and all questions including interpretations of this Plan, as may
arise in connection with the Plan.

 

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

 

 

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

 

ARTICLE 9

Other Benefits and
Agreements

 

9.1           Coordination with Other Benefits. 
Except as otherwise provided in Section 2.5, the benefits provided
for a Participant and such Participant’s Beneficiary under the Plan are in
addition to any other benefits available to such Participant under any other
plan or program maintained by the Company.

 

ARTICLE 10

Claims Procedures

 

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

 

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

 

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

 

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

 

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

 

(ii)                                  specific reference(s) to pertinent
provisions of the Plan upon which such denial was based;

 

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

 

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

 

10.3         Review of a Denied Claim. 
Within 60 days after receiving a notice from the Committee that a claim
has been denied, in whole or in part, a Claimant (or the Claimant’s duly
authorized representative) may file with the Committee a written request for a
review of the

 

 

denial of the claim.  Thereafter,
but not later than 30 days after the review procedure began, the Claimant (or
the Claimant’s duly authorized representative):

 

(a)                                  may review pertinent documents;

 

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

 

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

 

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

 

(a)                                  specific reasons for the decision;

 

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

 

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

 

10.5         Legal Action. 
A Claimant’s compliance with the foregoing provisions of this Article 10
is a mandatory prerequisite to a Claimant’s right to commence any legal action
with respect to any claim for benefits under this Plan.

 

ARTICLE 11

Miscellaneous

 

11.1         Unsecured General Creditor. 
Participants and their Beneficiaries, heirs, successors and assigns
shall have no legal or equitable rights, interests or claims in any property or
assets of the Company.  Any and all of
the Company’s assets shall be, and remain, the general, unpledged unrestricted
assets of the Company.  The Company’s
obligation under the Plan shall be merely that of an unfunded and unsecured
promise to pay money in the future.

 

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

 

11.3         Nonassignability. 
Neither a Participant nor any other person shall have any right to
commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise
encumber, transfer, hypothecate, alienate or convey in advance of actual
receipt, the amounts, if any, payable hereunder, or any part thereof, which
are, and all rights to which are expressly declared to be, nonassignable and
non-transferable, except that the foregoing shall not apply to any family
support obligations set forth in a court order. 
No part of the amounts payable shall, prior to actual payment, be
subject to seizure, attachment, garnishment or sequestration for the payment

 

 

of any debts, judgments, alimony or separate maintenance owed by a
Participant or any other person, nor be transferable by operation of law in the
event of a Participant’s or any other person’s bankruptcy or insolvency.

 

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

 

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

 

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

 

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

 

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

 

General Counsel

Rite Aid Corporation

30 Hunter Lane

Camp Hill, PA  17011

 

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

 

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

 

11.9         Successors.  This Plan and
all rights of each Participant hereunder shall inure to the benefit of and be
enforceable by the Participant’s Beneficiary, personal or legal
representatives, or estate, to the extent any such person succeeds to the
Participant’s interests under this Plan. 
No rights or obligations of the Company under this Plan may be assigned
or transferred except that the Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company expressly to assume
and agree to perform the Company’s obligations under this Plan in the same
manner and to the same extent that the Company would have been

 

 

required to perform it if no such succession had taken place.  As used in this Plan, the “Company” shall mean
both the Company as defined above and any successor to its business and/or
assets (by merger, purchase or otherwise) which executes and delivers the
agreement provided for in this Section 11.9 or which otherwise becomes
bound by all the terms and provisions of this Agreement by operation of law or
otherwise.

 

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

 

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

 

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

 

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

 

11.14       Distribution
in the Event of Taxation.  If; for any reason, all or any
portion of a Participant’s benefit under this Plan becomes taxable to the
Participant prior to receipt, the Company shall promptly distribute to the
Participant immediately available funds in an amount equal to the taxable
portion of his or her benefit (which amount shall not exceed the Participant’s
unpaid Account Balance under the Plan).

 

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

 

 

ARTICLE 12

COMPLIANCE WITH CODE SECTION 409A

 

12.1         General

 

Notwithstanding anything
in this Plan to the contrary, effective as of January 1, 2005, the
following provisions shall govern:  The
provisions listed below are intended to be compliant with Internal Revenue Code
Section 409A and the final regulations promulgated thereunder (‘409A’) and
shall be construed to be so compliant. 
The provisions of this Article 12 shall apply only to benefits
accrued after January 1, 2005 or which did not vest until after December 31,
2004.

 

12.2                           Payment of
Benefits

 

No Participant shall have
the opportunity to accelerate or further defer payment amounts except as
permitted by 409A.  Any payment to which
the Participant becomes entitled under the Agreement, or any arrangement or plan
referenced in this Agreement, that constitutes “deferred compensation” under
409A, and is (i) payable upon the Participant’s termination; (ii) at
a time when the Participant is a “specified employee” as defined by 409A shall
not be made until the earliest of:

 

(a)                                  the expiration of the six month period
(the “Deferral Period”) measured from the date of the Participant’s ‘separation
from service’ under 409A;

(b)                                 the date the Participant becomes “disabled”
under 409A; or

(c)                                  the date of the Participant’s death.

 

Upon the expiration of
the Deferral Period, all payments that would have been made during the Deferral
Period (whether in a single lump sum or in installments) shall be paid as a
single lump sum to the Executive or, if applicable, his beneficiary.

 

IN WITNESS WHEREOF, the undersigned has executed this restated Plan
document on behalf of the Company this 13th day of April, 2010, the restated Plan to
become effective as of April 13, 2010.

 

	
   

  	
  RITE AID CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Marc A. Strassler

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Executive Vice President & General Counsel

  

 

 

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 l2b-2 under Section 12
of the Exchange Act.

 

“Beneficial Owner” shall have the meaning set forth in Rule l3d-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.Exhibit 10.7

 

AMENDED
AND RESTATED EMPLOYMENT AGREEMENT

 

THIS
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”) was entered into and effective as
of the 24th day of September, 2008 (the “Effective Date”), and amended as of
the 21st day of January, 2010 (the “Amendment 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  (the “Original
Term of Employment”) ending on the date that is three (3) years following June 24,
2010 (the “Implementation Date”).  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 (a “Nonrenewal
Notice”).  “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 the Implementation Date (upon the
occurrence of such date) or the 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, commencing on the
Implementation Date, shall also serve as Chief Executive Officer 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 so 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
Board of Directors and, commencing on (i) the Amendment Date, all
employees of the Company (with the exception of the Senior 

 

 

Vice President of
Corporate Communications) shall report directly or indirectly to Executive; and
(ii) the Implementation Date, all employees of the Company shall report
directly or indirectly to Executive. 
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 and, commencing on
the Implementation Date, $1,000,000 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 Fiscal
Year 2009, Executive’s annual bonus opportunity pursuant to such plan shall
equal 125% and, commencing on the Implementation Date, 200% (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 commencing on the Implementation Date 200%) and shall be based upon the Board
approved plan for that year.

 

3.3          Equity Awards.

 

(a)           On the Effective Date the Executive was granted an
option (the “Original Option”) to purchase 3,500,000 shares of the Company’s
Common Stock, par value $1.00 per share (“Company Stock”) and on the Amendment
Date the Executive was granted an option to 

 

2

 

purchase 2,555,000 shares
of Company Stock (the “Amendment Option” and, collectively with the Original
Option, the “Options”).  The Options are:
(i) a nonqualified stock option; (ii) have an exercise price equal to(x) 
$0.96 for the Original Option and (y) $1.52 for the Amendment Option,
respectively; (iii) have a term of ten (10) years following the date
of such grant; (iv) vest and become exercisable as to one-fourth of the
shares of the Company Stock subject to the applicable Option on each of the
first four (4) anniversaries from the date of such 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)           Executive will participate 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 Fiscal Year 2009 only, Executive’s participation in the EEP will be
on a prorated basis.  Executive’s long
term incentive plan target under the EEP shall be set at 200% of Base Salary.

 

(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 or one year periods, as applicable, 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.

 

3

 

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 and tax services allowance
in the amount of up to $7,000.00 and, commencing on the Implementation Date, in
the amount of up to $10,000.

 

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 

 

4

 

responsibilities of his position with the Company or
any subsidiary, or failure to timely carry out any lawful and reasonable
directive of the 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 (collectively (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 

 

5

 

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 (such termination to include if the Company provides Executive a
Nonrenewal Notice, a “Company Nonrenewal”) or by Executive for Good
Reason.  In the event that Executive’s
employment hereunder is terminated by the Company other than for Cause (such
termination to include a Company Nonrenewal) 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 (one (1) times in the case of a Company
Nonrenewal and two (2) times in the case of a Company Nonrenewal within
six (6) months of a Change in Control) 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
(one (1) year in the case of a Company Nonrenewal and two years in the
case of a Nonrenewal within six (6) months of a Change in Control)
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 (one (1) year
in the case of a Company Nonrenewal and two years in the case of a Nonrenewal
within six (6) months of a Change in Control) 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 three (3) years (one (1) year in the case of
a Company Nonrenewal and three (3) years in the case of a Company
Nonrenewal within six (6) months of a Change in Control) 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 one (1) year
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 

 

6

 

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;

 

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

 

(e)            the failure of Executive to be promoted
to Chief Executive Officer of the Company on or prior to the Implementation
Date;

 

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 

 

7

 

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 three (3) 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 one (1) year
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 

 

8

 

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 

 

9

 

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 

 

10

 

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 

 

11

 

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.

 

12

 

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

 

13

 

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

 

14

 

(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.

 

15

 

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 

 

16

 

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.

 

17

 

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 the amendment to this Agreement up to the maximum
of $7,500.

 

18

 

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

 

	
   

  	
  RITE AID CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Marc A. Strassler

  
	
   

  	
   

  
	
   

  	
  By: Marc A. Strassler

  
	
   

  	
  Its: Executive Vice
  President, General Counsel

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ John T.
  Standley

  
	
   

  	
  John
  T. Standley

  

 

19

 

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.

 

20

 

“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.

 

21

 

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”.

 

NONE

 

22

 

APPENDIX C

 

(Form of
Release)

 

23

 

	
  

  	
  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

 

APPENDIX D

 

(Listing of
Permitted Activities)

 

Board of Governors of Children’s Miracle Network

 

24

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