Employment Agreement – Mary F. Sammons
Amendment No. 1 to Employment Agreement
Amendment No. 2 to Employment Agreement
Third Amendment to Employment Agreement
EMPLOYMENT AGREEMENT
 
           THIS AGREEMENT by and between Rite Aid Corporation, a Delaware
 corporation (the "Company"), and Mary F. Sammons (the "Executive"), is
 dated as of the 5th day of December, 1999 (the "Effective Date").
 
 
                            W I T N E S S E T H
 
           WHEREAS, the Company and the Executive have agreed that the
 employment of the Executive is essential to the successful implementation
 of the Company's long term business strategy; and
 
           WHEREAS, the Company wishes to provide for the employment by the
 Company of the Executive, and the Executive wishes to serve the Company, in
 the capacities and on the terms and conditions set forth in this Agreement;
 
           NOW, THEREFORE, it is hereby agreed as follows:
 
           1.  TERM.  Subject to earlier termination in accordance with the
 provisions of Section 4, the term of Executive's employment under this
 Agreement (the "Employment Period") shall commence as of the Effective Date
 and end on the third anniversary thereof, provided, however, that on each
 anniversary of the Effective Date (each such date, a "Renewal Date"), an
 additional year shall be added to the Employment Period, unless notice of
 non-renewal has been delivered by one party to the other party at least 180
 days prior to such Renewal Date.
 
           2.  POSITION AND DUTIES.  (a)  During the Employment Period, the
 Executive shall serve as the President and Chief Operating Officer of the
 Company, with such duties and responsibilities as are customarily assigned
 to such position, and such other duties and responsibilities appropriate to
 such office as may from time to time be assigned to her by the Company's
 Chief Executive Officer or the Board of Directors of the Company (the
 "Board").  Executive shall report solely to the Chief Executive Officer and
 the Board.  On the Effective Date, Executive shall be appointed as a member
 of the Board, to serve as a member of the class of directors with the
 second longest remaining term as of the Effective Date.  Subsequently,
 during the Employment Period, the Company shall cause the Executive to be
 included in the slate of persons nominated to serve as directors on the
 Board upon each expiration of Executive's term as a director of the Company
 and shall use its best efforts to have the Executive reelected to the
 Board.  Following termination of the Executive's employment for any reason,
 the Executive shall immediately resign from the Board and from all other
 offices and positions she holds with the Company.
 
           (b)  During the Employment Period, and excluding any periods of
 vacation and sick leave to which the Executive is entitled, the Executive
 shall devote substantially her full attention and time during business
 hours to the business and affairs of the Company and shall carry out such
 responsibilities faithfully and efficiently.  Notwithstanding the
 foregoing, to the extent consistent with the performance of her duties and
 responsibilities hereunder, the Executive may serve on corporate, industry,
 civic or charitable boards and committees and shall be permitted to make
 and manage her personal investments.
 
           (c)  Other than for necessary travel in connection with the
 performance of her duties hereunder, the Executive shall be based at the
 Company's headquarters in the Harrisburg, Pennsylvania area.  The Company
 shall reimburse the Executive for the following relocation expenses:  (i)
 the reasonable costs associated with the selling of the Executive's current
 primary residence; (ii) reasonable living expenses for a residence for
 Executive and her family in the Harrisburg, Pennsylvania area for a
 temporary period; (iii) a reasonable number of round trip visits between
 Harrisburg and the city in which the Executive's current residence is
 located, including reasonable costs for meals, lodging and transportation
 for the Executive and her family during such trips; and (iv) reasonable
 costs for moving Executive's household goods and cars to the Harrisburg,
 Pennsylvania area.  In addition, the Executive may participate in a
 relocation service program, and the Company shall share in the expenses of
 such program on terms which the parties shall mutually agree upon.  The
 reimbursement amount described herein shall be "grossed-up" to offset in
 full any net increase in Executive's federal, state and local income,
 employment and other taxes resulting therefrom (and from such gross-up).
 
           3.  COMPENSATION.  (a)  BASE SALARY.  During the Employment
 Period, the Company shall pay Executive an annual base salary ("Annual Base
 Salary") of not less than $750,000.  The Annual Base Salary shall be
 payable in accordance with the Company's regular payroll practice for its
 senior executives, as in effect from time to time (but in no event less
 frequently than monthly).  During the Employment Period, the Annual Base
 Salary shall be reviewed periodically by the Compensation Committee of the
 Board (the "Compensation Committee") for possible increase.  Any increase
 in the Annual Base Salary shall not limit or reduce any other obligation of
 the Company under this Agreement.  The Annual Base Salary shall not be
 reduced after any such increase, and the term "Annual Base Salary" shall
 thereafter refer to the Annual Base Salary as from time to time so
 increased.
 
           (b)  INCENTIVE COMPENSATION.   To compensate Executive for lost
 bonus opportunities with her prior employer for 1999, the Company shall pay
 to the Executive, on or about April 1, 2000, a guaranteed bonus in respect
 of calendar year 1999 in the amount of $200,000 (the "1999 Guaranteed
 Bonus").  Commencing with the Company's 2000 fiscal year, the Executive
 shall participate during the Employment Period in annual cash incentive
 compensation plans (each, an "Annual Bonus Plan"), as adopted and approved
 by the Board or the Compensation Committee from time to time, with targets
 based upon the Company's business plan developed by the Executive and the
 Board.  The Executive's annual target bonus opportunity pursuant to such
 plans (the "Annual Target Bonus") shall equal at least 75% of the Annual
 Base Salary in effect for the Executive at the beginning of such fiscal
 year.
 
           (c)  OTHER BENEFITS.  During the Employment Period, except as and
 to the extent otherwise provided herein, (1) the Executive shall be
 entitled to participate in all applicable fringe benefit and perquisite
 programs and savings and retirement plans (including non-qualified
 supplemental executive retirement plans), practices, policies and programs
 of the Company on the same basis as all other senior executives of the
 Company; and (2) the Executive and/or the Executive's eligible dependents,
 as the case may be, shall be eligible for participation in, and shall
 receive benefits under, all applicable welfare benefit plans, practices,
 policies and programs provided by the Company on the same basis and subject
 to the same terms and conditions, as all other senior executives of the
 Company.  Without limiting the generality of the foregoing, during the
 Employment Period the Company shall provide Executive with (i) an annual
 financial and tax planning allowance of $10,000; (ii) a car allowance of
 $1,000 per month; (iii) use of Company-owned aircraft for business travel;
 (iv) reimbursement for the annual dues at a country club of Executive's
 choice; and (v) subject to the immediately succeeding sentence, term life
 insurance covering the Executive's life and long term disability insurance,
 in each case in a face amount equal to $2,000,000.  The Executive agrees to
 cooperate with the Company in obtaining such life and disability insurance,
 including submitting to a physical examination if required to do so by the
 insurance carrier.  The beneficiary of each of the aforementioned policies
 shall be designated by the Executive and if not so designated shall be her
 estate.  The Company shall promptly reimburse Executive for (x) all
 necessary and reasonable business expenses, including first-class travel
 and hotel accommodations, incurred by the Executive in connection with the
 discharge of her duties hereunder, and (y) all reasonable costs and
 expenses incurred by Executive in the course of meeting with Company
 directors and officers, performing due diligence and with respect to all
 other matters undertaken in connection with the Company and/or its business
 prior to the Effective Date.  The Executive shall be entitled to five
 weeks' vacation per year in accordance with the Company's vacation policy
 for senior executives.
 
           (d)  DEFERRED COMPENSATION; SERVICE CREDIT.  As of the Effective
 Date, the Company shall establish a non-qualified deferred compensation
 plan (the "New Deferred Compensation Plan") for the benefit of the
 Executive.  As of the first day of each month during the Employment Period,
 the Company shall credit Executive's account under the New Deferred
 Compensation Plan with an amount equal to $15,000.  The Executive shall be
 fully vested at all times in her account balance under the New Deferred
 Compensation Plan.  Promptly following the Effective Date, the Company and
 Executive shall negotiate in good faith and agree upon the specific terms
 of the New Deferred Compensation Plan, including the applicable investment
 vehicle and terms and schedule of payments.  In addition, as of the
 Effective Date, the Executive and the Company shall enter into the
 customary deferred compensation agreement provided to senior executives by
 the Company and the Executive shall be deemed to have, as of the Effective
 Date, fifteen years of service with the Company for purposes of such
 agreement.  Such deferred compensation agreement shall provide benefits
 which are commensurate with Executive's position and consistent with the
 Company's past practice.
 
           (e)  EQUITY AWARDS.  As of the Effective Date, the Company shall
 grant to the Executive (i) an option (the "Option") to purchase 2,000,000
 shares of the Company's common stock, par value $1.00 per share ("Company
 Stock") and (ii) 200,000 shares of restricted Company Stock (the
 "Restricted Stock"), on the terms and conditions set forth in that certain
 Restricted Stock and Stock Option Award Agreement (the "Stock Agreement")
 attached hereto as Exhibit A and incorporated herein by this reference,
 subject in each case however to the acceleration and exercise provisions of
 Section 5 hereof and all other applicable provisions of this Agreement.  In
 the case of any conflict between the terms and conditions of this Agreement
 and the terms and conditions of the Stock Agreement, the terms and
 conditions of this Agreement shall govern.
 
           (f)  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) (i) related to or arising out of  the Executive's employment with
 and service as a director and an officer of the Company (including with
 respect to the appointment of officers and other employees) and (ii)
 related to or arising out of the termination of Executive's employment with
 her prior employer and any subsidiary or affiliate thereof, including
 without limitation claims in respect of amounts payable under any
 applicable agreement upon or otherwise in connection with such termination
 of employment and Executive's commencement of and continuing employment
 with the Company and the employment by the Company of any Covered Executive
 (as hereinafter defined); 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.  Following any 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 Termination
 Date.
 
           4.  TERMINATION OF EMPLOYMENT.  (a)  DEATH OR DISABILITY.  The
 Executive's employment shall terminate automatically upon the Executive's
 death during the Employment Period.  The Company shall be entitled to
 terminate the Executive's employment because of the Executive's Disability
 during the Employment Period.  "Disability" means that Executive has been
 unable, for six consecutive months, to perform the Executive's duties under
 this Agreement, as a result of physical or mental illness or injury.  The
 effective date of any termination of Executive's employment for Disability
 is referred to herein as the "Disability Effective Date."  A termination of
 the Executive's employment by the Company for Disability shall be
 communicated to the Executive by written notice, and shall be effective on
 the 30th day after receipt of such notice by the Executive, unless the
 Executive returns to full-time performance of the Executive's duties before
 the Disability Effective Date.  During any period prior to the Disability
 Effective Date during which Executive is absent from the full-time
 performance of her duties with the Company due to such physical or mental
 illness or injury, the Company shall continue to pay Executive her Annual
 Base Salary and Executive shall be entitled to receive any bonus payable
 under the terms of the applicable Annual Bonus Plan(s) in the ordinary
 course pursuant to the terms of such Annual Bonus Plan.
 
           (b)  TERMINATION BY THE COMPANY.  The Company may terminate the
 Executive's employment at any time during the Employment Period for Cause
 or without Cause.  "Cause" shall mean only an act of fraud, embezzlement or
 misappropriation by the Executive, in any such case intended by the
 Executive to result in substantial personal enrichment at the expense of
 the Company.  Notwithstanding the foregoing, Executive shall not be deemed
 to have been terminated for Cause unless and until there shall have been
 delivered to Executive a copy of a resolution duly adopted by the
 affirmative vote of not less than two-thirds of the non-employee members of
 the Board at a meeting of the Board called and held for such purpose (after
 reasonable written notice to Executive setting forth in reasonable detail
 the specific conduct of the Executive upon which the Board relies in
 reaching its determination, and an opportunity for Executive, together with
 her counsel, to be heard before the Board), finding that in the good faith
 opinion of the Board, Executive was guilty of the conduct set forth in the
 second sentence of this Section 4(b), and Executive shall be entitled to
 receive all compensation and benefits hereunder pending the delivery of
 such resolution.  The effective date of any termination for Cause shall be
 the date such resolution is delivered to Executive.
 
           (c)  GOOD  REASON.  (i)  The Executive may terminate employment
 for Good Reason or without Good Reason.  "Good Reason" shall mean the
 occurrence of any one of the following:
 
                A.   any (i) adverse alteration in Executive's titles,
      positions, status, duties, authorities, reporting relationships or
      responsibilities with the Company or its subsidiaries from those
      specified in this Agreement, as the same may be augmented from time to
      time (it being understood that, if the Company is no longer a public
      company, the failure of Executive to hold the position and duties
      under Section 2 with any ultimate corporate or other parent of the
      Company or any successor shall be deemed to constitute such Good
      Reason), (ii) assignment to Executive of any duties or
      responsibilities inconsistent with Executive's status as President and
      Chief Operating Officer of the Company or (iii) failure of Executive
      during the Employment Period to be nominated or re-elected to the
      Board or the removal of Executive from the office of President or
      Chief Operating Officer or the Board (other than in connection with
      the termination of Executive's employment hereunder);
 
                B.   any failure by the Company to comply with any provision
      of Section 3 of this Agreement;
 
                C.   any failure by the Company to comply with Section 2(c)
      of this Agreement;
 
                D.   any failure by the Company to comply with paragraph (b)
      of Section 11 of this Agreement;
 
                E.   delivery by the Company to the Executive of a notice of
      non-renewal of the Employment Period pursuant to Section 1 hereof; or
 
                F.   any other material breach of this Agreement by the
      Company; provided, however, that the Company shall have the right,
      within ten (10) days after receipt of notice from Executive of the
      Company's violation of any one of subparagraphs A, B or F, to cure in
      full the event or circumstances giving rise to such Good Reason, in
      the event of which cure such event or circumstances shall be deemed
      not to constitute Good Reason hereunder.
 
           In addition, any termination of employment by the Executive
 within the six month period commencing on the date of a Change in Control
 of the Company (as defined in the Stock Agreement) shall be treated as a
 termination of employment by the Executive for Good Reason.  A termination
 of employment by the Executive for Good Reason shall be effectuated by
 giving the Company written notice ("Notice of Termination for Good Reason")
 of the termination, setting forth in reasonable detail the specific conduct
 of the Company that constitutes Good Reason and the specific provision(s)
 of this Agreement on which the Executive relies, provided, that Executive's
 continued employment shall not be deemed to constitute consent to, or a
 waiver of rights with respect to, any act, omission or other grounds
 constituting Good Reason hereunder.  For clarity, it is understood that the
 requirement of setting forth such specific conduct and specific
 provisions(s) is intended (i) to permit the Company to make a reasonable
 evaluation of Executive's claim of termination for Good Reason and (ii) to
 permit the Company, where applicable, to cure such conduct, but not to
 require Executive to specify each act, omission or other grounds
 constituting Good Reason, there being no intention of the parties that
 failure to so specify will function as an estoppel with respect to any
 claim by Executive.  A termination of employment by the Executive for Good
 Reason shall be effective on the latest of (i) the fifth business day
 following the expiration of the Company's cure period described above, if
 applicable, (ii) the date specified by Executive in the Notice of
 Termination for Good Reason or (iii) 45 days following the date the Notice
 of Termination for Good Reason is delivered to the Company.
 
           (ii)  A termination of the Executive's employment by the
 Executive without Good Reason shall be effected by giving the Company at
 least 90 days' written notice of such termination, and shall be effective
 on the date specified by Executive in such notice, provided, however, that
 no such notice period shall be required with respect to any such
 termination as to which such written notice of termination is delivered to
 the Company following a Change in Control of the Company.
 
           (d)  DATE OF TERMINATION.  The "Date of Termination" means the
 date of the Executive's death, the Disability Effective Date, or the date
 on which the termination of the Executive's employment by the Company for
 Cause or without Cause or by the Executive for Good Reason or without Good
 Reason becomes effective, as the case may be.  On the Date of Termination,
 the Employment Period shall terminate.
 
           5.  OBLIGATIONS OF THE COMPANY UPON TERMINATION.  (a)  OTHER THAN
 FOR CAUSE OR DISABILITY, OR FOR GOOD REASON.  If, during the Employment
 Period, the Company terminates the Executive's employment for any reason
 other than Cause or Disability, or the Executive terminates her employment
 for Good Reason;
 
      (1) the Company shall pay to the Executive, not later than ten (10)
      days following the Date of Termination, (i) an amount equal to three
      times the sum of (x) the Executive's then current Annual Base Salary
      (without giving effect to any reductions thereof) plus (y) the
      Executive's then current Annual Target Bonus; (ii) (A) any accrued but
      unpaid amounts of the Executive's Annual Base Salary through the Date
      of Termination, (B) any bonus under any Annual Bonus Plan accrued but
      unpaid through the Date of Termination (including without limitation
      any such bonus payable on a date following the Date of Termination
      with respect to a fiscal year or other applicable measuring period
      completed prior to the Date of Termination), (C) any other
      compensation and benefits accrued (and, where applicable, vested)
      through the Date of Termination under the terms of the Company's
      compensation and benefit plans, programs or arrangements (including
      without limitation vacation benefits and the deferred compensation
      arrangements referenced in Section 3(d) hereof) as in effect
      immediately prior to the Date of Termination (or, if in any case
      providing a greater benefit to Executive, as in effect immediately
      prior to an event constituting Good Reason) and (D) any amounts of
      reimbursable business expenses incurred through the Date of
      Termination (all of the items in this clause (ii) are hereinafter
      referred to collectively as the "Accrued Benefits"); (iii) an amount
      equal to the product of (A) the maximum annual bonus that the
      Executive would have been eligible to earn under the Annual Bonus Plan
      for the bonus measurement period during which the Date of Termination
      occurs, and (B) a fraction, the numerator of which is the number of
      days from the first day of such period through the Date of Termination
      and the denominator of which is the total number of days in such
      measurement period, together with a similarly pro rated bonus with
      respect to any applicable long term incentive plan then in effect;
      (iv) an amount equal to the sum of the deferred compensation amounts
      which would otherwise have been credited to the Executive pursuant to
      the New Deferred Compensation Plan had Executive continued employment
      with the Company through the end of the then remaining Employment
      Period (measured as of the Date of Termination without regard to any
      subsequent renewals thereof), without reduction in any such case to a
      net or other present value; and (v) if not theretofore paid, the 1999
      Guaranteed Bonus;
 
      (2) medical coverage provided to the Executive immediately prior to
      the Date of Termination (or, at Executive's sole discretion, medical
      coverage provided to the Executive immediately prior to the occurrence
      of any event constituting Good Reason) shall continue to be provided
      by the Company to the Executive (and, if applicable, her spouse and
      dependents) for three years following the Date of Termination;
 
      (3) all of the Executive's then outstanding stock options shall vest
      and become fully exercisable as of the Date of Termination and (i) the
      Option shall remain fully vested and exercisable throughout the
      remainder of its ten-year term and (ii) any other outstanding options
      to acquire Company securities shall similarly remain exercisable for
      the remainder of their stated term, without regard to any early
      termination provisions or other terms and conditions otherwise
      applicable to such options; and
 
      (4) all remaining restrictions applicable to the Restricted Stock and
      any other restricted stock awards shall immediately lapse and any
      performance goals or other conditions applicable to any other equity
      incentive awards shall immediately be deemed to have been satisfied in
      full (with performance goals being deemed to have been satisfied at
      targeted levels).
 
           (b)  DEATH AND DISABILITY.  If the Executive's employment is
 terminated by reason of the Executive's death or Disability during the
 Employment Period;
 
       (1) the Company shall pay to the Executive or, in the case of the
      Executive's death, to the Executive's designated beneficiaries (or, if
      there is no such beneficiary, to the Executive's estate or legal
      representative), in a lump sum in cash within ten (10) days after the
      Date of Termination, the sum of the following amounts: (i) the Accrued
      Benefits; (ii) an amount equal to the product of (A) the maximum
      annual bonus that the Executive would have been eligible to earn under
      the Annual Bonus Plan for the bonus measurement period during which
      the Date of Termination occurs, and (B) a fraction, the numerator of
      which is the number of days from the first day of such period through
      the Date of Termination and the denominator of which is the total
      number of days in such measurement period, together with a similarly
      pro rated bonus with respect to any applicable long term incentive
      plan then in effect; and (iii) if not theretofore paid, the 1999
      Guaranteed Bonus;
 
      (2) medical coverage provided to the Executive immediately prior to
      the Date of Termination shall continue to be provided by the Company
      (i) in the event of Disability, to the Executive (and, if applicable,
      her spouse and dependents) or (ii) in the event of Executive's death,
      to her surviving spouse (and, if applicable, her dependents), for
      three years following the Date of Termination;
 
      (3) all of the Executive's then outstanding stock options shall vest
      and become fully exercisable as of the Date of Termination and (i) the
      Option shall remain fully vested and exercisable throughout the
      remainder of its ten-year term and (ii) any other outstanding options
      to acquire Company securities shall similarly remain exercisable for
      the remainder of their stated term, without regard to any early
      termination provisions or other terms and conditions otherwise
      applicable to such options; and
 
      (4) all remaining restrictions applicable to the Restricted Stock and
      any other restricted stock awards shall immediately lapse and any
      performance goals or other conditions applicable to any other equity
      incentive awards shall immediately be deemed to have been satisfied in
      full (with performance goals being deemed to have been satisfied at
      targeted levels).
 
           (c)  BY THE COMPANY FOR CAUSE.  If the Executive's employment is
 terminated by the Company for Cause during the Employment Period, (1) the
 Company shall pay to the Executive the Accrued Benefits within ten (10)
 days after the Date of Termination; (2) any portion of the Option or any
 other then outstanding stock option that has not been exercised prior to
 the Date of Termination shall immediately terminate; and (3) any portion of
 the Restricted Stock or any other restricted stock or 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 the Date of Termination.
 
           (d)   BY THE EXECUTIVE OTHER THAN FOR GOOD REASON.  If the
 Executive's employment is terminated by Executive (other than for Good
 Reason) during the Employment Period;
 
       (1) the Company shall pay to the Executive the Accrued Benefits,
      within ten (10) days after the Date of Termination;
 
      (2) any portion of the Option or any other then outstanding stock
      option that has not vested and become exercisable prior to the Date of
      Termination shall immediately terminate and any portion of the Option
      or any other then outstanding stock option that has vested and become
      exercisable prior to the Date of Termination shall remain vested and
      exercisable for a period of ninety (90) days following the Date of
      Termination, at the end of which period such portion of the option
      shall terminate, provided, however, that if the Date of Termination
      shall be on or after the third anniversary of the Effective Date, the
      entire Option shall remain vested and exercisable throughout the
      remainder of its ten-year term; and
 
      (3) the restrictions on the Restricted Stock shall continue to lapse
      in accordance with the terms of the Stock Agreement as if Executive's
      employment with the Company had continued uninterrupted until such
      restrictions had lapsed in full; provided, however, that in the event
      Executive's employment is terminated by Executive (other than for Good
      Reason) prior to the first anniversary of the Effective Date any
      portion of the Restricted Stock as to which the restrictions have not
      lapsed pursuant to the terms of the Stock Agreement prior to the Date
      of Termination shall be forfeited as of the Date of Termination.
 
           (e)  (i)  In the event that any payment or benefit received or to
 be received by the Executive pursuant to the terms of this agreement or of
 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(e)(ii)
 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 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 "excess 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 accounting firm
 which was, immediately prior to the event giving rise to the Payment, the
 Company's independent auditor (the "Auditor"), 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
 Auditor 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 the 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.
 
           (ii)  The Gross-Up Payments provided for in Section 5(e)(i)
 hereof shall be made upon the earlier of (i) ten days following the Date of
 Termination or (ii) the imposition upon the Executive or payment by the
 Executive of any Excise Tax.
 
           (iii)  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(e)(i) 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(e)(i) in respect of such excess within thirty (30) days of the Company's
 receipt of notice of such final determination or opinion.  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.
 
           (iv)  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 Auditor and Tax Counsel incurred in connection
 with this Agreement shall be borne by the Company.
 
           6.  NON-EXCLUSIVITY OF RIGHTS.  Nothing in this Agreement shall
 prevent or limit the Executive's continuing or future participation in any
 plan, program, policy or practice provided by the Company or any of its
 affiliated companies for which the Executive may qualify, nor shall
 anything in this Agreement limit or otherwise affect such rights as the
 Executive may have under any contract or agreement with the Company or any
 of its affiliated companies.
 
           7.  FULL SETTLEMENT.  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.  In no event shall any amounts,
 benefits or other compensation payable or otherwise provided to Executive
 hereunder be reduced in respect of, or the Company's obligations to
 Executive hereunder be affected by, or any other form of "clawback"
 provision apply to, the payment to Executive at any time of any amounts,
 benefits or other compensation in respect of her employment with any prior
 employer.
 
           8.  CONFIDENTIAL INFORMATION; COMPETITION; SOLICITATION.  During
 the Employment Period and for a period of three years following the
 applicable Date of Termination, the Executive shall hold in a fiduciary
 capacity for the benefit of the Company all secret or confidential
 information, knowledge or data relating to the Company or any of its
 affiliated companies and their respective businesses that the Executive
 obtains during the Executive's employment by the Company or any of its
 affiliated companies and that is not public knowledge (other than as a
 result of the Executive's violation of this Section 8) ("Confidential
 Information") and the Executive shall not communicate, divulge or
 disseminate Confidential Information at any time during such period to
 anyone other than the Company, appropriate Company personnel and those
 other persons designated by the Company,  except (i) with the prior written
 consent of the Company, (ii) as otherwise required by law or legal process,
 (iii) on behalf of the Company in the furtherance of its business or in the
 course of performing Executive's duties to the Company or (iv) in the
 course of any adversarial proceeding against the Company.  During the
 Employment Period (and if during the Employment Period (A) the Executive
 terminates her employment with the Company without Good Reason or (B) the
 Executive is terminated by the Company for Cause, then for one year after
 the Date of Termination), (i) the Executive shall not, without the written
 consent of the Board, directly or indirectly, knowingly engage or be
 interested in (as owner, partner, stockholder, employee, director, officer,
 agent, consultant or otherwise), with or without compensation, any
 Competitor of the Company, (ii) the Executive shall not, without the
 written consent of the Board, directly or indirectly solicit or recruit any
 person (other than persons employed in a clerical or other non-professional
 position) who is then employed by the Company or who was employed by the
 Company or any of its subsidiaries or affiliates at any time during the
 six-month period preceding the Date of Termination for the purpose of being
 employed by the Executive, by any entity or person on whose behalf the
 Executive is acting as an agent, representative or employee or by any
 Competitor of the Company and (iii) the Executive shall not, without the
 written consent of the Board, directly or indirectly, solicit, entice,
 persuade or induce any person or entity doing business with the Company and
 its subsidiaries and affiliates, to terminate such relationship or to
 refrain from extending or renewing the same.  For purposes of this Section
 8, the term "Competitor of the Company" shall mean any entity a majority of
 whose business involves the ownership and operation of retail drug stores,
 provided, however, that such term shall not include any entity a majority
 of whose business involves the business of the retail sale or wholesale
 distribution of food and related products (including, without limitation,
 health and beauty care and general merchandise products and all other
 products sold to the supermarket industry), regardless of whether such
 entity sells certain products of a type found in retail drug stores and
 regardless of whether one or more divisions or subsidiaries of such entity,
 standing alone, would otherwise be a Competitor of the Company.  Nothing
 herein, however, shall prohibit the Executive from acquiring or holding not
 more than five percent of any class of publicly traded securities of any
 such business; provided that such securities entitle the Executive to no
 more than five percent of the total outstanding votes entitled to be cast
 by security holders of such business in matters on which such security
 holders are entitled to vote.  In the event of a breach or any threatened
 breach of the Section 8, Executive agrees that, in addition to any other
 remedy available to the Company at law or in equity, the Company shall be
 entitled to injunctive relief in a court of appropriate jurisdiction to
 remedy any breach or prevent any threatened breach.  Executive further
 acknowledges that damages would be inadequate and insufficient to
 compensate the Company for any breach of this Section 8.
 
           9.  GROUP TERMINATION BY SENIOR EXECUTIVES.  As a material
 inducement to the Company's willingness to enter into this Agreement and
 the Stock Agreement, the Executive agrees that she will not deliver to the
 Company a notice of termination pursuant to Section 5(c)(ii) hereof within
 thirty days of the delivery of a similar notice by any of the persons
 listed on Exhibit B hereto (individually each a "Covered Executive" and
 collectively, the "Covered Executives") pursuant to the terms of such
 Covered Executive's employment agreement with the Company; provided,
 however, that the preceding clause shall be void and of no force and effect
 from and after the occurrence of a Change in Control of the Company.
 
           10.  DISPUTE RESOLUTION; ATTORNEYS' FEES.  All disputes arising
 under or related to the employment of the Executive by the Company or the
 provisions of this agreement shall be settled by arbitration under the
 rules of the American Arbitration Association then in effect, such
 arbitration to be held in Portland, Oregon, as the sole and exclusive
 remedy of either party and judgment on any arbitration award may be entered
 in any court of competent jurisdiction.  The Company agrees to reimburse
 all reasonable legal fees and other expenses incurred by the Executive in
 any such dispute if the Executive prevails as to one or more of the
 material issues in the dispute.  Promptly following the Effective Date, the
 Company shall reimburse the Executive for legal fees and expenses incurred
 by the Executive in negotiating and entering into this Agreement and the
 New Deferred Compensation Agreement and incidental matters contemplated
 hereby, up to a maximum of $17,500.
 
           The Company shall also promptly reimburse the Executive for legal
 fees, costs and expenses incurred in any dispute, arbitration or other
 litigation relating to or arising out of the termination of Executive's
 employment with her prior employer and any subsidiary or affiliate thereof,
 including without limitation claims in respect of amounts payable under any
 applicable agreement upon or otherwise in connection with such termination
 of employment and Executive's commencement of and continuing employment
 with the Company (including with respect to the appointment of officers and
 other employees) and the employment by the Company of any Covered
 Executive.
 
           11.  SUCCESSORS.   (a)  No rights or obligations of Executive
 under this Agreement may be assigned or transferred by Executive other than
 her rights to payments, benefits or other compensation hereunder, which
 (without the prior written consent of the Company) may be transferred only
 by will or the laws of descent and distribution or as otherwise provided in
 the Stock Agreement.  Upon Executive's death, this Agreement and all rights
 of Executive hereunder shall inure to the benefit of and be enforceable by
 Executive's beneficiary or beneficiaries, personal or legal
 representatives, or estate, to the extent any such person succeeds to
 Executive's interests under this Agreement.  Executive shall be entitled to
 select and change a beneficiary or beneficiaries to receive any payment,
 benefit or other compensation payable hereunder following Executive's death
 by giving the Company written notice thereof.  In the event of Executive's
 death or a judicial determination of her incompetence, reference in this
 Agreement to Executive shall be deemed, where appropriate, to refer to her
 beneficiary or beneficiaries, estate or other legal representative(s).
 
           (b)  No rights or obligations of the Company under this Agreement
 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 this Agreement 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 Agreement, 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(b) or which otherwise becomes bound by all the terms and
 provisions of this Agreement by operation of law or otherwise.
 
           12.  COMPANY REPRESENTATION.  The Company represents and warrants
 to the Executive that (i) it has all necessary corporate power and
 authority to execute and deliver this Agreement and to perform its
 obligations hereunder in full, (ii) the execution and delivery of this
 Agreement by the Company and the performance of its obligations hereunder
 have been duly and validly authorized by all necessary corporate action and
 (iii) no other corporate proceedings on the part of the Company (including
 on the part of the shareholders of the Company) are necessary to authorize
 this Agreement or perform such obligations.  This Agreement has been duly
 and validly executed and delivered by the Company and constitutes a legal,
 valid and binding obligation of the Company, enforceable against the
 Company in accordance with its terms.
 
           13.  MISCELLANEOUS.  (a)  This Agreement shall be governed by,
 and construed in accordance with, the laws of the Commonwealth of
 Pennsylvania, without reference to principles of conflict of laws.  The
 captions of this Agreement are not part of the provisions hereof and shall
 have no force or effect.  This Agreement may not be amended or modified
 except by a written agreement executed by the parties hereto or their
 respective successors and legal representatives.
 
           (b)  All notices and other communications under this Agreement
 shall be in writing and shall be given by hand delivery to the other party
 or by registered or certified mail, return receipt requested, postage
 prepaid, or by a nationally recognized overnight courier addressed as
 follows:
 
                     If to the Executive:
 
                     Mary F. Sammons
                     3508 S.W. Gale Avenue
                     Portland, Oregon  97201
 
                     If to the Company:
 
                     Rite Aid Corporation
                     30 Hunter Lane
                     Camp Hill, Pennsylvania 17011
                     Attention:  General Counsel
 
 or to such other address as either party furnishes to the other in writing
 in accordance with this paragraph (b) of Section 13.  Notices and
 communications shall be effective when actually received by the addressee.
 
           (c)  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.
 
           (d)  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.
 
           (e)  The Executive's or the Company's failure to insist upon
 strict compliance with any provisions of, or to assert, any right under,
 this Agreement (including, without limitation, the right of the Executive
 to terminate employment for Good Reason pursuant to paragraph (c) of
 Section 4 of this Agreement) shall not be deemed to be a waiver of such
 provision or right or of any other provision of or right under this
 Agreement.
 
           (f)  Except as provided in the Stock Agreement, 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.  Except as
 provided in the Stock Agreement, 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.
 
           (g)  This Agreement (together with the exhibits hereto) sets
 forth the entire agreement of the parties hereto in respect of the subject
 matter construed herein and supersedes all prior agreements, promises,
 covenants, arrangements, communications, representations or warranties,
 whether oral or written by any party or any officer or other representative
 of such party in respect of such subject matter.
 
           (h)  This Agreement may be executed in several counterparts, each
 of which shall be deemed an original, and said counterparts shall
 constitute but one and the same instrument.
 
           (i)  This Agreement shall survive the termination of the
 Employment Period and the termination of Executive's employment hereunder
 under any circumstances to the extent necessary to give effect to its
 provisions.
 
 
           IN WITNESS WHEREOF, the Executive has hereunto set the
 Executive's hand and, pursuant to due authorization, the Company has caused
 this Agreement to be executed in its name on its behalf, all as of the day
 and year first above written.
 
 
                                    RITE AID CORPORATION
 
 
                                    -----------------------------------
                                    By:  Leonard Green
                                         Title:  Chairman of the Board
 
 
                                    -----------------------------------
                                    Mary F. Sammons
 
 
 

 

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                               AMENDMENT NO. 1 TO
                              EMPLOYMENT AGREEMENT
                              --------------------
 
         THIS AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT, by and between Rite Aid
Corporation, a Delaware corporation (the "Company") and Mary Sammons
("Executive") is entered into as of the 7th day of May, 2001 (the "Effective
Date ).
 
         WHEREAS, Executive and the Company have previously entered into that
certain Employment Agreement, dated as of December 5, 1999, as supplemented by
side letter dated April 5, 2000 between counsel (the "Employment Agreement");
and
 
         WHEREAS, the Company wishes to provide Executive additional bonus
compensation to further incentivize Executive to remain in the employment of the
Company;
 
         NOW, THEREFORE, in consideration of the mutual premises set forth
herein, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the Company and Executive hereby agree as
follows:
 
         1. Amendment to Employment. As of the Effective Date, the Employment
Agreement is hereby amended to incorporate by reference therein a new Appendix
13, which is attached hereto as Exhibit 1.
 
         2. Employment Agreement to Remain in Effect. Except as modified by this
Amendment No. 1, the Employment Agreement shall remain in lull force and effect
in accordance with its terms. Without limiting the generality of the foregoing,
the Additional Incentive Bonus payable to Executive as provided in Exhibit 1
shall not in any way limit and is not in derogation of the Company's obligations
to fully indemnify Executive for fees, costs and expenses and any other matters
pursuant to Section 3(1) of the Employment Agreement. In the event of a conflict
between the provisions of flier Amendment No. 1 and the Employment Agreement,
this Amendment No. 1 shall be controlling.
 
         3. Capitalized Terms. Capitalized terms used herein or in Exhibit 1 and
not otherwise defined shall have the respective meanings set forth in the
Employment Agreement.
 
         4. Fees and Expenses. Promptly following the execution and delivery of
this Amendment No. 1 by Executive, the Company shall reimburse Executive for
legal fees and expenses incurred by Executive in negotiating and entering into
this Amendment No. 1 (and incidental matters contemplated hereby).
 
 
         IN WITNESS WHEREOF, Executive has hereunto set Executive's hand and,
pursuant to due authorization, the Company has caused this Amendment No, 1 to be
executed in its name and on its behalf all as of the date and year first above
written.
 
                                             RITE AID CORPORATION
 
 
                                             By: /s/ Elliot Gerson
                                                 -------------------------------
                                             Its Senior Executive Vice President
 
                                             /s/ Mary Sammon
                                             -----------------------------------
                                             Mary Sammons
 
 
 
                                                                       ---------
 
                                   APPENDIX B
 
 
         1. Entitlement to Incentive Bonus. In addition to the bonus and other
compensation provided in the Employment Agreement, the Company shall pay
Executive an incentive bonus in the amount set forth in Section 2 below (the
"Additional Incentive Bonus") on or within 5 days after the date first described
below:
 
            (a) The Additional Incentive Bonus shall be paid on January 1, 2002,
if Executive is an employee of the Company on that date; or
 
            (b) The Additional Incentive Bonus shall be paid on the Date of
Termination under the Employment Agreement, if Executive's employment is
terminated prior to January 1, 2002 (i) by reason of Executive's death or
Disability, (ii) by the Company without Cause, or (iii) by Executive for Good
Reason; or
 
            (c) The Additional Incentive Bonus shall be paid on the Date of
Termination under the Employment Agreement, if Executive terminates her
employment for any reason (or the Company terminates Executive's employment for
any reason) prior to January 1, 2002 but such Date of Termination is
simultaneous with or after the occurrence of a Change in Control of the Company;
or
 
The date as of which Executive first becomes entitled to receive the Additional
Incentive Bonus is referred to as the "Bonus Payment Date." For purposes of the
Amendment No. 1, Executive shall be deemed to be an employee of the Company (and
accordingly her employment shall be deemed not to have terminated) unless and
until the Date of Termination has occurred. Notwithstanding anything to the
contrary herein, Executive shall not be entitled to receive any Additional
Incentive Bonus if the Company properly terminates Executive's employment for
Cause and the actual Date of Termination is prior to January 1, 2002 and no
Change in Control of the Company has occurred on or prior to such Date of
Termination.
 
         2. Amount of Incentive Bonus. The amount of the Additional Incentive
Bonus shall be equal to the sum of (i) $1,624,000 (the "Base Amount"), plus (ii)
simple interest thereon at the rate of nine percent (9%) per annum from December
5, 1999 through the applicable Bonus Payment Date (such sum, the "Additional
Bonus Amount") subject to offset only in accordance with Section 3 below and
repayment only in accordance with Section 4 below.
 
 
         3. Reduction in the Amount of the Incentive Bonus. If, on or prior to
the Bonus Payment Date, there has occurred a final settlement and/or a binding,
nonappealable judgment by a court or other tribunal of competent jurisdiction
(in either case, a "Final Determination") of all claims which Executive has
arising out of or relating to Executive's Employment Protection Agreement, dated
September 22, 1998, Fred Meyer, Inc., a subsidiary of with The Kroger Co.
(collectively, the "Kroger Claim"), then the Additional Bonus Amount payable to
Executive shall be reduced (but not below zero) by an amount equal to the
excess, if any, of (i) the amount of any consideration paid by The Kroger Co. to
Executive, that is not subject to forfeiture or offset, pursuant to such Final
Determination (but excluding any payment in respect of punitive damages or by
way of penalty) less (ii) the sum, without double counting, of (x) any
consideration paid or payable by Executive pursuant to or in connection with
such Final Determination (and any counterclaims or cross-claims ("Related
Claims") arising from, related to or in connection with the departure by
Executive and/or any other employee from The Kroger Co., their consideration of
and conduct in relation to employment by the Company and/or their, or anyone
else s subsequent employment with the Company) and (y) all unpaid amounts
(including, in any event, attorneys fees and costs incurred by Executive in
connection with the Kroger Claims or Related Claims that have not been paid by
the Company) required to be indemnified by the Company pursuant to Section 3(f)
of the Employment Agreement (any such excess, the "Net Recovery Amount"). It is
understood that there shall be no reduction of or offset to the Additional
Incentive Bonus required to be paid by the Company to Executive by virtue of any
Net Recovery Amount unless Executive shall have received the Net Recovery Amount
prior to the Bonus Payment Date and a Final Determination has resolved all
Related Claims against Executive by or in the right of The Kroger Co. and its
affiliates,
 
         4. Reimbursement Amounts by Executive. Subject to the limitations set
forth in Section 4(d), in the event the Company timely pays the full Additional
Incentive Bonus to Executive pursuant to Section l(a) (A) on January 1, 2002 or
within 5 days thereafter (in the case of subsection (a) below) or (B) prior to a
Final Determination (in the case of subsection (b) below), Executive shall be
required to reimburse the Company for the amounts set forth in subsections (a)
and (b) below (in the aggregate, the "Reimbursement Obligation"), provided, that
in no event shall the aggregate amount of the Reimbursement Obligation exceed
the amount of the Additional Incentive Bonus actually paid by the Company to
Executive, plus attorneys' fees, if any, received by Executive pursuant to the
Final Determination and already reimbursed by the Company.
 
            (a) Reimbursement if Executive Receives an Award in the Kroger
Litigation After Receipt of Additional Incentive Bonus. If the Final
Determination occurs after the Bonus Payment Date and, as provided above, the
Company timely paid the full Additional Incentive Bonus pursuant to Section 1(a)
on the Bonus Payment Date, Executive shall be obligated to reimburse the Company
for an amount equal to the Net Recovery Amount received by Executive (not to
exceed the Additional Bonus Amount theretofore actually paid by the Company to
 
 
Executive, less any amount theretofore paid or payable by Executive to the
Company pursuant to Section 4(a)), plus attorneys fees, if any, received by
Executive pursuant to the Final Determination and already reimbursed by the
Company.
 
            (b) Reimbursement Obligation Deferred Until Executive Receives
Amounts in Excess of What Executive is Entitled to Retain. Executive shall pay
the Company the amounts required under Section 4(a) or (b) within 15 days
following the date as to which any such Reimbursement Obligation arises,
provided, that any such payment obligation (or portion thereof) shall not arise
and shall be deferred until such time or times as Executive shall actually have
received payment from the Additional Incentive Bonus and any Net Recovery Amount
an amount that, in the aggregate, is in excess of the full Additional Bonus
Amount and all legal fees then due in connection with the Kroger Claim have been
paid or reimbursed. Any excess recovery in the Kroger Claim beyond the amount of
the Reimbursement Obligation shall be retained by Executive.
 
            (c) Amounts Payable to the Company. Any amount payable by Executive
to the Company pursuant to this Section 4 shall be net of: (x) any tax detriment
of any nature whatsoever suffered by Executive with respect to receipt of the
Additional Incentive Bonus, or portion thereof, the payment of the Reimbursement
Obligation and/or the receipt of any funds giving rise to the Reimbursement
Obligation, including without limitation, the tax detriments set forth in
Schedule I attached hereto (it being the intent of the parties that Executive be
in the same net after-tax position as if Executive (i) could deduct one-hundred
percent (100%) of the amount reimbursed to the Company in the year such
reimbursement is made and (ii) was not subject to any withholding, employment or
other incremental taxes from having received an excess payment from the Company
or Kroger Co., as the case may be, that is thereafter paid to the Company) and
(y) without duplication of any amounts already deducted in the calculation, all
amounts then owed, or which Executive in her good faith believes are owed, by
the Company to Executive pursuant to Section 3(1) of the Employment Agreement.
 
         5. Amendment to Section 2(a) of Employment Agreement. The last line of
Section 2(a) of the Employment Agreement shall be amended to delete the words
"from the Board and." It is understood that Executive shall not be required to
resign from the Company s Board of Directors as a result of termination of her
employment prior to December 5, 2002 unless her employment simultaneously or
previously has been terminated by the Company for "Cause."
 
 
         6. Payments. All amounts payable by the Company to Executive pursuant
to this Amendment No. 1 (including without limitation any amounts due as a
result of the application of Section 5(e) of the Employment Agreement) shall be
paid in a lump sum in cash, by wire transfer to an account designated by
Executive.
 
         7. Conduct of Claim Against Kroger; Settlement. The Company
acknowledges and agrees that Executive shall have the full right to pursue her
claim against The Kroger Co. and its affiliates and to fully control any
litigation she institutes and the defense of any counterclaim arising in
connection therewith, in such manner as Executive may determine in her sole
discretion. The Company further acknowledges and agrees that Executive has and
shall have no duty to the Company to enter into or refrain from entering into
any proposed settlement agreement, or to agree to or reject any particular term
or condition thereof, and that Executive may enter into a settlement agreement
with The Kroger Co. and its affiliates on terms and conditions acceptable to the
Executive, or reject any proposed settlement in her sole discretion.
 
 
                                   Schedule 1
 
                                 TAX DETRIMENTS
                                 --------------
 
Detriments to be taken into account shall include:
 
            (a) any decrease in personal itemized deductions resulting from an
increase in Executive's adjusted gross income ("AGI") (including the 7.5%
(medical), 2% (miscellaneous) and 3% (general) AGI adjustments);
 
            (b) Executive's portion of the increased Medicare premium resulting
from the receipt of the Additional Incentive Bonus and the Net Recovery Amount;
and
 
            (c) any increased alternative minimum tax ("AMT") resulting from the
treatment of state income taxes claimed as a deduction by Executive in respect
of the Additional Incentive Bonus and the Net Recovery Amount;
 
            (d) the amount, of the Reimbursement Obligation disallowed as a
deduction or as a result of the 2% floor imposed on miscellaneous itemized
deductions in the year in which it is paid;
 
            (e) any increased AMT resulting from the treatment of the
Reimbursement Obligation for AMT purposes;
 
            (f) any detriment related to the time value of money determined on
the basis of an 8% annual discount rate resulting from a carryover or carryback,
if any, of any portion of such Reimbursement Obligation that is not currently
deductible in the year in which it is paid;
 
            (g) any detriment resulting from the application of any limitation
imposed upon the deductibility of the Reimbursement Obligation for state law
purposes in the year in which it is paid;
 
            (h) any detriment resulting from differences in tax brackets applied
to Executive's taxable income for the taxable year that the Additional Incentive
Bonus is received versus the tax brackets applied to Executive's taxable income
for the taxable year that the Reimbursement Obligation is claimed as a
deduction; and
 
            (i) any detriment resulting from a change in either Federal, state,
or local tax laws, including changes in the tax rates.
 
 

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AMENDMENT NO. 2 TO
EMPLOYMENT AGREEMENT

THIS AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT ("Amendment No. 2"), by and between Rite Aid Corporation, a Delaware Corporation (the "Company") and Mary Sammons ("Executive") is entered into this 30th day of September, 2003 (the "Effective Date").

WHEREAS, Executive and Company have previously entered into that certain Employment Agreement dated as of December 5, 1999, as supplemented by side letter dated April 5, 2000 between counsel and as amended by Amendment No. 1 dated May 7, 2001 (collectively, the "Employment Agreement"); and

WHEREAS, on June 25, 2003 Executive was promoted to the position of President and Chief Executive Officer and the parties desire to amend the Employment Agreement to reflect the change in Executive's position and duties, compensation and other benefits;

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and Executive hereby agree as follows:

1.    Position and Duties.    Any reference in the Employment Agreement to "President and Chief Operating Officer" shall be changed to "President and Chief Executive Officer". During the Employment Period, the Executive shall serve as President and Chief Executive Officer of the Company, with such duties and responsibilities as are customarily assigned to such position, and such other duties and responsibilities appropriate to such office as may from time to time be assigned to her by the Board of Directors of the Company ("Board"). Executive shall report directly to the Board.

2.    Incentive Compensation.    The Executive's Annual Target Bonus shall equal at least 100% of the Annual Base Salary in effect for the Executive at the beginning of such fiscal year.

3.    Other Benefits.    During the Employment Period, the Company shall provide Executive with use of Company-owned aircraft for business and personal travel and shall provide term life insurance covering the Executive's life and long term disability insurance, in each case in a face amount equal to $3,000,000.

4.    Obligations of the Company upon Termination.    Following any termination for any reason (other than Cause) of the Executive's employment with the Company, the Company shall make an annual payment to Executive following termination of employment and continuing for life (and the life of her spouse) equal to the cost to the Executive of purchasing medical coverage substantially comparable in all material respects to the coverage provided by the Company to its senior executives (and their spouses and dependents) immediately prior to such termination, excepting payments for such periods that the Company provides such coverage pursuant to Sections 5(a) or 5(b) of the Employment Agreement. If the Executive's employment is terminated by Executive (other than for Good Reason) during the Employment Period, the entire Option shall remain vested and exercisable throughout the remainder of its ten-year term and any other outstanding stock option that has vested and become exercisable prior to the Date of Termination shall remain vested and exercisable for a period of ninety (90) days following the Date of Termination, at the end of which period such option shall terminate; provided, however, if the Date of Termination occurs after Executive turns age 60, all vested stock options shall similarly remain exercisable for the remainder of their stated term, without regard to any early termination provisions or other terms and conditions otherwise applicable to such options.

5.    Capitalized Terms.    Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Employment Agreement.

6.    Employment Agreement to Remain in Effect.    Except as modified by this Amendment No. 2, the Employment Agreement shall remain in full force and effect in accordance with its terms. In the event of a conflict between the provisions of this Amendment No. 2 and the Employment Agreement, this Amendment No. 2 shall be controlling.

IN WITNESS WHEREOF, Executive has hereunto set Executive's hand and, pursuant to due authorization, the Company has caused this Amendment No. 2 to be executed in its name and on its behalf, all as of the date and year first above written.

RITE AID CORPORATION

By:   ______________________________
        Robert B. Sari
Its: Senior Vice President

 

________________________________
Mary Sammons

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Exhibit 10.6

 

AMENDMENT NO. 3 TO

EMPLOYMENT AGREEMENT

 

THIS AMENDMENT NO. 3 TO EMPLOYMENT AGREEMENT, by and between Rite Aid Corporation, a Delaware Corporation (the “Company”) and Mary F. Sammons (“Executive”) is entered into as of the 30th day of December, 2008.  The provisions of this Amendment shall be effective as of January 1, 2005 (the “Effective Date”).

 

WHEREAS, Executive and the Company previously entered into that certain employment agreement, dated as of December 5, 1999, and subsequently amended on May 7, 2001 and September 30, 2003 (collectively, the “Employment Agreement”); and

 

WHEREAS, the Company and the Executive now desire to amend the Employment Agreement to ensure compliance with Internal Revenue Code Section 409A and the final regulations promulgated thereunder;

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Executive hereby agree as follows:

 

1.                                       New Section 14.  Effective as of the Effective Date, the following new Section 14 shall be inserted into the Employment Agreement.  In the event of an inconsistence between this new Section 14 and the remaining provisions of the Employment Agreement, Section 14 shall govern.

 

14.                           COMPLIANCE WITH CODE SECTION 409A  Notwithstanding anything in this Employment Agreement (the “Agreement”) 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’) as in effect on the date hereof and shall be construed to be so compliant.

 

(a)                                  Medical Benefits:  The provision of medical benefits after separation from service shall be done in a manner to, to the extent possible, exempt such benefits from the application of 409A.  Without limiting the generality of the foregoing, the following specific provisions will be effective as of January 1, 2005:

 

(i)                                     Section 5(a)(2) and 5(b)(2) of the Agreement shall be modified by adding the following to the end of each thereof:

 


 

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 third anniversary of the Date of Termination occurs, this coverage will be provided at the expense of the Executive (or her beneficiaries or estate).  Executive (or her 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; provided, however, if the coverage is not available through the Company’s benefit plans, then Executive shall purchase and pay the premium for medical coverage substantially comparable in all material respects to the coverage provided by the Company during the COBRA period.  The Company shall, on the last day of each month, provide the Executive (or her beneficiaries or estate) with a payment sufficient to place the Executive (or her 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)                                 Payment of Benefits: 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 and; (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,

 

provided one or more exceptions to 409A that would allow for an earlier payment is not available.  The maximum payment allowable under all such exceptions combined will be made on the date provided under the Agreement prior to this Amendment No. 3.

 

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 together with interest at the money market fund rate of the Company’s investments from time to time to the Executive or, if applicable, his beneficiary.

 

Without limiting the generality of the foregoing, the following specific provisions will be effective as of January 1, 2005:

 

Section 5(d)(1) of the Agreement shall be modified by adding the following to the end thereof:

 

The provisions of Section 14(b) will apply to payments made under this Section 5(d)(1).  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’

 

(c)                                  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:

 

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

(2)                                  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

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

 

Without limiting the generality of the foregoing, the following specific provisions will be effective as of January 1, 2005:

 

Section 3(c) of the Agreement shall be modified to insert the following sentence at the end thereof:

 

The provisions of Section 14(c) shall apply to all reimbursements made under this Section 3(c)’

 

(d)                                 Gross Ups.  To the extent required by 409A, any ‘gross up’ payment shall be made no later than the end of the Executive’s taxable year following the year in which the employee remits the related taxes.

 

Without limiting the generality of the foregoing, the following specific provisions will be effective as of January 1, 2005:

 

Section 5 shall be amended by adding the following new Section 5(e)(v) immediately following Paragraph (iv) therof:

 


 

(v)                             The provisions of Section 14(d) shall apply to all payments made under this Section 5(e)’”

 

2.                                       Employment Agreement to Remain in Effect.      Except as modified by this Amendment No. 3, the Employment Agreement shall remain in full force and effect in accordance with its terms. Except to the extent explicitly required by 409A, nothing herein is intended to nor shall be construed to reduce any material benefit of Executive under the Employment Agreement or to require any repayment or reduction of any benefit provided to Executive prior to the date hereof.   In the event of a conflict between the provisions of this Amendment No. 3 and the Employment Agreement, this Amendment No. 3 shall be controlling.

 

 

 

RITE AID CORPORATION

 

 

 

 

 

By:

/s/ Robert B. Sari

 

 

Robert B. Sari

 

 

Executive Vice President,

 

 

General Counsel

 

 

 

 

 

Mary F. Sammons

 

 

 

/s/ Mary F. Sammons