Document:

Exhibit 10.8

 

EMPLOYMENT AGREEMENT

 

THIS
EMPLOYMENT AGREEMENT (the “Agreement”)
is entered into as of the 9th day of March, 2009 (the “Effective Date”) by and
between Rite Aid Corporation, a Delaware corporation (the “Company”) and Marc
A. Strassler (the “Executive”).

 

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

 

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

 

1.                                      Term Of Employment.

 

The term of Executive’s employment under this Agreement shall commence
on the Effective Date and, unless earlier terminated pursuant to Section 5
below, shall continue for a period ending on the date that is two (2) years following
the Effective Date (the “Original Term of Employment”).  The Original Term of Employment shall be
automatically renewed for successive one-year terms (the “Renewal Terms”)
unless at least 120 days prior to the expiration of the Original Term of
Employment or any Renewal Term, either Party notifies the other Party in
writing that he or it is electing to terminate this Agreement at the expiration
of the then current Term of Employment . 
“Term” shall mean the Original Term of Employment and all Renewal
Terms.  For purposes of this Agreement,
except as otherwise provided herein, the phrase “year during the Term” or
similar language shall refer to each 12-month period commencing on the
Effective Date or applicable anniversaries thereof.

 

2.                                      Position And Duties.

 

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

 

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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, (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
salary at the annualized rate of Four Hundred Ten Thousand Dollars
($410,000.00) per year (“Base Salary” as may be adjusted from time to time
pursuant to this Agreement), which shall be paid in accordance with the Company’s
normal payroll practices and procedures, less such deductions or offsets
required by applicable law or otherwise authorized by Executive.

 

3.2                               Annual
Performance Bonus.  The
Executive shall participate each fiscal year during the Term in the Company’s
annual bonus plan as adopted and approved by the Board or the Compensation
Committee from time to time.  For the
first fiscal year (Fiscal Year 2010), Executive’s annual bonus opportunity
pursuant to such plan shall equal 60% (the “Annual Target Bonus”) of the Base
Salary, which shall be prorated based upon the Effective Date.  For subsequent fiscal years, the Annual
Target Bonus may be adjusted (including eliminated or reduced, with such
elimination and/or reductions to the same extent that annual bonus
opportunities for similarly situated senior management employees are also
eliminated or reduced, as the case may be) and shall be based upon the Board
approved annual bonus plan for that year.

 

3.3                               Equity
Awards.

 

(a)                                  At the first regular meeting of the Compensation
Committee of the Board of Directors following the Effective Date, Executive
will be granted an option (the “Option”) to purchase 750,000 shares (which
shall be proportionally adjusted to give effect to any reverse stock split or
other change in capitalization) of the Company’s Common Stock, par value $1.00
per share (“Company Stock”).  The Option
shall (i) be a non-qualified stock option, (ii) have an exercise
price equal to the closing price of the Company Stock as reported on the New
York Stock Exchange (“NYSE “) on the date of grant, (iii) have a term of
ten (10) years following the date of grant, (iv) vest and become
exercisable as to one-fourth of the shares of the Company Stock subject to the
option on each of the 

 

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

 

(b)                                 At the first meeting of the Compensation Committee
of the Board of Directors following the Effective Date that grants under the
equity incentive program are made and subject to the approval of the
Compensation Committee, Executive will be recommended for participation in the
Company’s Executive Equity Plan (the “EEP”). 
For the first fiscal year (FY 2010) only, Executive’s participation in
the EEP will be on a prorated basis.

 

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

 

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

 

4.                                      Additional Benefits.

 

4.1                                     Employee Benefits.  During the Term, Executive 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
provide for benefits, to the extent provided, at the level as other similarly
situated participants) and 401(k) plans) in which senior management employees
of the Company are generally eligible to participate, subject to any
eligibility requirements and the other generally applicable terms of such
plans.

 

4.2                                     Expenses. 
During the Term, the
Company shall reimburse Executive for any expenses reasonably incurred by him
in furtherance of his duties hereunder, including without limitation travel, meals
and accommodations, upon submission of vouchers or receipts and in compliance
with such rules and policies relating thereto as the Company may from time
to time adopt or as may be required in order to permit such payments to be
taken as proper deductions by the Company or any subsidiary under the Internal
Revenue Code of 1986, as amended, and the rules and regulations adopted
pursuant thereto now or 

 

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hereafter in effect. The provisions of Section 14.2
shall apply to all reimbursements made under this Section 4.2 to the
extent Section 14.2 applies.

 

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 per
month.

 

4.5                                     Annual Financial Planning
Allowance. 
During each year of the Term, the Company shall provide Executive with
an executive planning allowance in the amount of $3,000.

 

4.6                                     Relocation Expenses. 
Subject to Executive providing reasonable documentation to Company, the
Company shall reimburse Executive up to a total of $135,000 for transportation,
commuting, lodging and other relocation expenses (including but not limited to
moving, house hunting trips and other direct costs incurred in connection with
Executive’s relocation) incurred  by Executive
for a period of up to twenty-four (24) months from the Effective Date
(collectively, the “Relocation Benefits Payments”).  To the extent the Relocation
Benefits Payments are subject to federal, state or local income tax payments by
Executive, Company shall also pay to Executive an additional amount (the “Gross-Up
Payment”) such that the net amount retained by the Executive, after deduction
of the applicable federal, state and local income taxes on the Relocation
Benefits Payments and the applicable federal, state and local income taxes upon
the Gross-Up Payment shall be equal to the total Relocation Benefits Payments.

 

4.7                                     Indemnification. 
The Company shall (a) indemnify
and hold Executive harmless, to the full extent permitted under applicable law,
for, from and against any and all losses, claims, costs, expenses, damages,
liabilities or actions (including security holder actions, in respect thereof)
relating to or arising out of the Executive’s employment with and service as an
officer of the Company or as an officer or director of an entity other than the
Company at the request of the Company and enforcement of its rights hereunder;
and (b) pay all reasonable costs, expenses and attorney’s fees incurred by
Executive in connection with or relating to the defense of any such loss,
claim, cost, expense, damage, liability or action, subject to Executive’s
undertaking to repay in the event it is ultimately determined that Executive is
not entitled to be indemnified by the Company. 
Following termination 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 

 

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Company to Executive, indicating in
reasonable detail the facts and circumstances alleged to provide a basis for
such termination, and shall be effective as of the date of such notice in
accordance with Section 12 hereof. “Cause” as determined in reasonable
good faith by a committee comprised of three senior officers (one of which
shall be Executive’s supervisor and, if Executive’s supervisor is not the
Company’s Chief Executive Officer or Chief Operating Officer, the Company’s
Chief Executive Officer or Chief Operating Officer)  of the Company or the Board of Directors shall
mean: (i) Executive’s gross negligence or willful misconduct in the
performance of the duties or responsibilities of his position with the Company
or any subsidiary, or failure to timely carry out any lawful and reasonable
directive of the Company; (ii) Executive’s misappropriation of any funds
or property of the Company or any subsidiary; (iii) the conduct by
Executive which is a material violation of this Agreement or Company Policy or
which materially interferes with the Executive’s ability to perform his duties,
provided, however that the Company has provided written notice (which shall set
forth in reasonable detail the specific conduct of the Executive that
constitutes Cause and the specific provisions of this Agreement on which the
Company relies) to the Executive of the existence of any condition described in
this subsection (iii) within 30 days of the date that the Executive’s
supervisor has actual knowledge of the initial existence of such condition, and
the Executive has not cured the condition within 30 days of the receipt of such
notice.  Any termination of employment by
the Company for Cause pursuant to this Section 5.1 must occur no later
than the date that is the second anniversary of the Company’s actual knowledge
of the initial existence of the condition giving rise to the termination right;
(iv) the commission by Executive of an act of fraud or dishonesty toward
the Company or any subsidiary; (v) Executive’s gross negligence or willful
misconduct which damages or injures the Company or the Company’s reputation; (vi) Executive
is convicted of or pleads guilty to a felony involving moral turpitude; or (vii) the
use or imparting by Executive of any confidential or proprietary information of
the Company, or any subsidiary in material violation of Section 6 below.

 

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

 

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

 

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(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 90 days following the date of termination of
employment (or, such later date as may be permitted by the relevant stock
option or equity plan, or, if earlier, until the expiration of the respective
terms of the options), whereupon all such options shall terminate; provided,
however, in the event of termination of Executive by the Company for Cause, any
stock options that have not been exercised prior to the date of termination
shall immediately terminate as of such date.

 

Any
termination of Executive’s employment by Executive voluntarily without Good
Reason shall be effective upon 30 days’ notice to the Company or such earlier
date as the Company determines in its discretion and designates in writing, it
being agreed that the Company may reduce or eliminate the notice period and pay
the Executive his Base Salary, pro rated as applicable, for the number of days
in the shortened notice period; provided, however, if the Company elects to
eliminate the notice period, then in such event there shall be no additional
payment to Executive. A termination of Executive’s employment by the Company
for Cause or by the Executive other than for Good Reason shall not constitute a
breach of this Agreement.

 

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

 

(a)                                  Executive shall be entitled to receive (i) within
ten (10) business days of the date of termination the Accrued Benefits, (ii) an
amount equal to two times Executive’s then Base Salary as of the date of
termination of employment, such amount payable in equal installments pursuant
to the Company’s standard payroll procedures for management employees over a
period of two years following the date of termination of employment, and (iii) continued
health insurance coverage for Executive and his immediate family for a period
of two years following the date of termination of employment.  In addition, if such termination occurs
following the start of the Company’s fiscal year, Executive shall also be
entitled to receive to the extent not
previously paid (which shall be paid at the same time paid to other
eligible participants in the bonus plan and following determination by the
Board of Directors that the Company has achieved or exceeded its annual
performance targets for the fiscal year) a pro rata annual bonus equal to the
product of (A) the maximum annual bonus (based upon Executive’s applicable
Annual Target Bonus) that Executive would have earned (based upon actual
results and had Executive remained employed) for all bonus measurement periods
during or prior to the date Executive’s employment termination occurs, and (B) 
a fraction, (x) the numerator of which is (1) the number of days
between the beginning of the then current fiscal year of the Company and the
date of termination of employment for any applicable partial fiscal year or (2) for any applicable 

 

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completed fiscal year, 365, and (y) the denominator of which is 365.  For any period during which the Executive
would be entitled to continuation coverage through the application of Internal
Revenue Code Section 4980B (“COBRA”), this coverage shall be provided at
the expense of the Company.  For any
period after the expiration of the period required by COBRA, but prior to the
end of the month in which the second anniversary of the Date of Termination
occurs, this coverage will be provided at the expense of the Executive (or his
beneficiaries or estate).  Executive (or his
beneficiaries or estate) shall remit payment by check to the Company in the
amount of the then current amount used to calculate premiums for participants
entitled to receive continuation coverage under COBRA.  The Company shall, on the last day of each
month, provide the Executive (or his beneficiaries or estate) with a payment
sufficient to place the Executive (or his beneficiaries or estate) in the same
economic position had such individuals or entity not been required to pay the
premium described in the preceding sentence.

 

(b)                                 The Executive’s stock option awards held by
Executive shall vest and become immediately exercisable and the restrictions
with respect to any awards of restricted stock shall lapse, in each case to the
extent such options would otherwise have become vested and exercisable (or such
restrictions would have lapsed) had Executive remained in the employ of the
Company for a period of two years following the date of termination. Except as
provided in Section 3.3(d), such  portion of
Executive’s stock options (together with any portion of Executive’s stock
options that have vested and become exercisable prior to the date of
termination) shall remain exercisable for a period of 90 days following the
date of termination of employment (or, such later date as may be permitted by
the relevant stock option or equity plan, or, if earlier, until the expiration
of the respective terms of the options), whereupon all such options shall
terminate. Any remaining portion of Executive’s stock options that have not
vested (or deemed to have vested) as of the date of termination shall terminate
as of such date; and all shares of restricted stock as to which the
restrictions shall not have lapsed (or deemed to have lapsed) as of the date of
termination shall be forfeited as of such date.

 

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

 

Any
termination of employment pursuant to this Section 5.3 shall be effective
upon thirty (30) days notice thereof or the Company may elect in its sole
discretion to reduce or eliminate the notice period and pay the Executive his
Base Salary, prorated as applicable for the number of days in the shortened
notice period; provided, however if the Company elects to eliminate the notice
period, then in such event there shall be no additional payment to Executive .
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 

 

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other
claims, reasonably cooperate (subject to reimbursement by the 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)                                  the assignment to Executive of any responsibilities
materially inconsistent with Executive’s status as General Counsel of the
Company; or

 

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

 

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

 

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

 

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

 

(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 insurance coverage for Executive and/or his immediate family, as
applicable, for a period of one year following the date of termination of
employment.

 

(b)                                All stock option awards held by Executive shall
vest and become immediately exercisable and the restrictions with respect to
any awards of restricted stock shall lapse, in each case to the extent such
options would otherwise have become vested and exercisable (or such
restrictions would have lapsed) had Executive remained in the employ of the
Company for a period of two years following the date of termination. Except as
provided in Section 3.3(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 90 days following 

 

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the date
of termination of employment (or, such later date as may be permitted by the
relevant stock option or equity plan, or, if earlier, until the expiration of
the respective terms of the options), whereupon all such options shall
terminate.  Any remaining portion of
Executive’s stock options that have not vested (or deemed to have vested) as of
the date of termination shall terminate as of such date; and all shares of
restricted stock as to which the restrictions shall not have lapsed as of the
date of termination shall be forfeited as of such date.

 

(c)                                  All other rights of Executive (and, except
as provided in Section 5.6 below, all obligations of the Company)
hereunder or otherwise in connection with Executive’s employment with the
Company shall terminate effective as of the date of such termination of
employment and Executive shall not be entitled to any payments or benefits not
specifically described in Section 5.5(a) through (c).

 

“Total
Disability” shall mean any physical or mental disability that prevents
Executive from: (a)(1)  performing one or more of the essential functions
of his position for a period of not less than 90 business days in any 12-month
period and (ii)  which is expected to be of permanent or indeterminate
duration but expected to last at least 12 continuous months or result in death
of the Executive as determined (y) by a physician selected by the Company
or its insurer or (z) pursuant to the Company’s benefit programs; or (b)  reporting
to work for 90 or more consecutive business days or unable to engage in any
substantial activity.

 

5.6                               Survival. 
In the event of any termination
of Executive’s employment , Executive and the Company nevertheless shall
continue to be bound by the terms and conditions set forth in Section 4.7
above and Sections 6 through 10 below, which shall survive the expiration of
the Term.

 

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 

 

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

 

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

 

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

 

(d)                                  In the event of any change in, or further
interpretation of, sections 280G or 4999 of the Code and the regulations promulgated
thereunder, the Executive shall 

 

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be
entitled, by written notice to the Company, to request an opinion of Tax
Counsel regarding the application of such change to any of the foregoing, and
the Company shall use its best efforts to cause such opinion to be rendered as
promptly as practicable. All fees and expenses of the Tax Counsel incurred in
connection with this Agreement shall be borne by the Company.

 

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

 

6.                                      Protection of Confidential
Information.

 

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

 

6.1                               No
Disclosure or Use of Confidential Information. 
At no time shall Executive ever
divulge, disclose, or otherwise use any Confidential Information (other than as
necessary to perform his duties under this Agreement and in furtherance of the
Company’s best interests 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, 

 

11

 

etc.) and
any and all documents, records, and files, including any notes, memoranda,
customer lists, reports or any and all other documents, including any copies
thereof, whether in hard copy form or on a computer disk or hard drive, which
relate to the Company, its subsidiaries, affiliates, strategic partners,
successors or assigns, and/or their respective past and present officers,
directors, employees or consultants (collectively, the “Company Property,
Records and Files”); it being expressly understood that, upon termination of
Executive’s employment at any time and for any reason, Executive shall not be
authorized to retain any of the Company Property, Records and Files, any copies
thereof or excerpts therefrom.

 

7.                                        Noncompetition and Other Matters.

 

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

 

7.2                                Noninterference.  During the
Restricted Period , Executive shall not, directly or indirectly, solicit,
induce, or attempt to solicit or induce any officer, director, employee, agent
or consultant of the Company or any of its subsidiaries, affiliates, strategic
partners, successors or assigns to terminate his, her or its employment or
other relationship with the Company or its subsidiaries, affiliates, strategic
partners, successors or assigns for the purpose of associating with any
competitor of the Company or its subsidiaries, affiliates, strategic partners,
successors or assigns, or otherwise encourage any such person or entity to
leave or sever his, her or its employment or other relationship with the
Company or its subsidiaries, affiliates, strategic partners, successors or
assigns for any other reason.

 

12

 

7.3                                Nonsolicitation. 
During the Restricted Period,
Executive shall not, directly or indirectly, solicit, induce, or attempt to
solicit or induce any customers, clients, vendors, suppliers or consultants
then under contract to the Company or its subsidiaries, affiliates, strategic
partners, successors or assigns, to terminate, limit or otherwise modify his,
her or its relationship with the Company or its subsidiaries, affiliates,
strategic partners, successors or assigns, for the purpose of associating with
any competitor of the Company or its subsidiaries, affiliates, strategic
partners, successors or assigns, or otherwise encourage such customers,
clients, vendors, suppliers or consultants then under contract to terminate
his, her or its relationship with the Company or its subsidiaries, affiliates,
strategic partners, successors or assigns for any reason. During the Restricted
Period, Executive shall not hire, either directly or through any employee,
agent or representative, any field and corporate management employee of the
Company or any subsidiary or any such person who was employed by the Company or
any subsidiary within 180 days of such hiring.

 

8.                                        Rights and Remedies upon Breach.

 

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

 

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

 

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

 

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

 

13

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

14

 

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

 

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

 

10.                               Arbitration.

 

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

 

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 (3) days
after mailing or twenty-four (24) hours after transmission of a fax to the
respective persons named below:

 

	
  If to
  the Company:

  	
  Rite
  Aid Corporation

  
	
   

  	
  30
  Hunter Lane

  
	
   

  	
  Camp
  Hill, Pennsylvania 17011

  
	
   

  	
  Attention:
  SVP, Human Resources

  
	
   

  	
  Fax:
  (717) 731-3860

  
	
   

  	
   

  
	
  If to
  Executive:

  	
  Marc A.
  Strassler

  
	
   

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

 

16

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

17

 

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

 

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

 

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

 

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

 

14.                               Compliance with Code Section 409A. Notwithstanding anything in this Agreement to the
contrary, the following provisions shall govern which are intended to be
compliant with Internal Revenue Code (“Code”) Section 409A and the final
regulations promulgated thereunder (‘409A’) and shall be construed to be so
compliant.

 

14.1                        Payment of Benefits:  To the extent
necessary to avoid adverse tax consequences, and except as described below, any
payment to which the Executive becomes entitled under the Agreement, or any
arrangement or plan referenced in this Agreement, that constitutes “deferred
compensation” under 409A, and is (a) payable upon the Executive’s
termination; (b) at a time when the Executive is a “specified employee” as
defined by 409A shall not be made if necessary to comply with the requirements
of clause (a)(2(B)(i) of 409A until the earliest of: (1)    the expiration of the six month period (the “Deferral
Period”) measured from the date of the Executive’s ‘separation from service’
under 409A; or (2)  the
date of the Executive’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.  This section shall not
apply to any payment which constitutes “separation pay” as described in
Internal Revenue Regulations Section 409A-1(b)(9) (in general, payments (i) that
are made on an involuntary separation from service which (ii) do not
exceed the lesser of two times (x) the Executive’s annualized compensation
for the taxable year preceding the year in which the separation from service
occurs or (y) the Code Section 401(a)(17) limit on compensation for
the year in which separation from service occurs and (iii) are paid in
total by the end of the second calendar year following the calendar year in
which the separation from service occurs.)

 

18

 

Without
limiting the generality of the foregoing, the Company shall pay to the
Executive the Accrued Benefits, within ten (10) days after the Date of
Termination.  Notwithstanding the
foregoing, if the Executive is a ‘specified employee’, as defined in 409A, the
Company shall pay to the Executive the Accrued Benefits on the six (6) month
anniversary of the Date of Termination.

 

To the
extent permissible by law, each payment and each installment described in this
Agreement shall be considered a separate payment from each other payment or
installment’

 

14.2                  Reimbursements:  To the
extent required by 409A, with regard to any provision that provides for the
reimbursement of costs and expenses, or for the provision of in-kind benefits:

 

(i)                                     The right to such reimbursement or in-kind benefit
shall not be subject to liquidation or exchange for another benefit;

 

(ii)                                  The amount of expenses or in kind benefits
available or paid in one year shall not affect the amount available or paid in
any subsequent year; and

 

(iii)                               Such payments shall be made on or before the last
day of the Executive’s taxable year in which the expense occurred.

 

19

 

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

 

	
   

  	
  RITE
  AID CORPORATION

  
	
   

  	
   

  
	
   

  	
  /s/ Steve
  Parsons

  
	
   

  	
   

  
	
   

  	
  By:
  Steve Parsons

  
	
   

  	
  Its:  Senior Vice President, Human Resources

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Marc A.
  Strassler

  
	
   

  	
   

  
	
   

  	
  Marc A.
  Strassler

  

 

20

 

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.

 

21

 

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

 

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

 

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

 

22Exhibit 10.30

 

Portions
of this exhibit have been omitted pursuant to a request for confidential
treatment filed with the Securities Exchange Commission. The omissions have
been indicated by “[***Redacted***],” and the omitted text has been
filed separately with the Securities and Exchange Commission.

 

THIRD AMENDMENT TO SUPPLY AGREEMENT

 

This Third Amendment to the Supply Agreement (the “Third
Amendment”) is entered into the 1st day of February, 2009, by and between Rite
Aid Corporation (“Rite Aid”) and McKesson Corporation (“McKesson”).

 

INTRODUCTION

 

Pursuant to the terms of the Supply Agreement dated December 22,
2003 (the “Rite Aid Agreement”) as amended by the First Amendment to the Supply
Agreement dated December 8, 2007 (the “First Amendment”) and the Second
Amendment to the Supply Agreement dated November 7, 2008 (the “Second
Amendment”) (collectively referred to herein as the “Agreement”), McKesson and
Rite Aid entered into an agreement to establish a program for McKesson’s supply
of pharmaceutical and OTC products to Rite Aid.

 

AGREEMENT

 

For good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, McKesson and Rite Aid hereby agree
as follows:

 

1.             Effective as of the first
day of the first full month following the Third Amendment Effective Date (as
defined herein), the DSD cost of goods matrix set forth in Section 3.2 of
the Agreement is hereby deleted in its entirety and replaced with the
following:

 

DSD Cost of Goods Matrix

 

Chain-Wide Average Product Purchases

Per Location/Month (less Returns)

 

	
  From

  	
   

  	
  To

  	
   

  	
  Rx

  	
   

  	
  OTC

  	
   

  	
  Rite Aid

  Contract Items

  	
   

  	
  Schedule II

  Narcotics

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***Redacted***]

  

 

2.             Section 3.11 of the
Agreement is hereby deleted in its entirety.

 

3.             This Third Amendment shall
become effective on February 1, 2009 (“Third Amendment Effective Date”).

 

4.             Except as amended above, the
Agreement remains unchanged and in full force and effect. Capitalized terms
used in this Third Amendment and not otherwise defined herein shall have the
meaning given to them in the Agreement.

 

5.             This Third Amendment may be
executed in counterparts, each of which shall constitute an original.

 

 

6.             This Third Amendment,
together with the Rite Aid Agreement, the First Amendment and the Second
Amendment, embodies the entire agreement between the parties with regard to the
subject matter hereof and supersedes all prior agreements understanding and
representations with the exception of any promissory note, security agreement
or other credit or financial related document(s) executed by or between
Rite Aid and McKesson.

 

IN WITNESS WHEREOF the parties have caused this
Third Amendment to be duly executed as of the date and year written below and
the persons signing warrant that they are duly authorized to sign for and on
behalf of the respective parties. This Third Amendment shall be deemed accepted
by McKesson only upon execution by a duly authorized representative of
McKesson.

 

 

	
  RITE
  AID CORPORATION

  	
   

  	
  MCKESSON
  CORPORATION

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Robert B Sari

  	
   

  	
  By:

  	
  /s/
  Paul C. Julian

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
  Robert
  B. Sari

  	
   

  	
  Name:

  	
  Paul
  C. Julian

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  Exec.
  Vice Pres. and Gen. Counsel

  	
   

  	
  Title:

  	
  Executive
  Vice President, Group President

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
  January 6,
  2009

  	
   

  	
  Date:

  	
  2/1/09

  

 

2

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