REVCO D S INC, SC 14D1, 1995-12-04

REVCO D S INC
SC 14D1, 1995-12-04
DRUG STORES AND PROPRIETARY STORES

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
------------------------

REVCO D.S., INC.
(NAME OF SUBJECT COMPANY)
------------------------
RITE AID CORPORATION
OCEAN ACQUISITION CORPORATION
(BIDDERS)
------------------------

COMMON STOCK, PAR VALUE, $.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
------------------------

761339 10 0
(CUSIP NUMBER OF CLASS OF SECURITIES)
------------------------

FRANKLIN C. BROWN, ESQ.
EXECUTIVE VICE PRESIDENT AND CHIEF LEGAL COUNSEL
RITE AID CORPORATION
30 HUNTER LANE
CAMP HILL, PENNSYLVANIA 17011
TELEPHONE: (717) 761-2633

(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS)

With a copy to:
NANCY A. LIEBERMAN, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
TELEPHONE: (212) 735-3000
------------------------

CALCULATION OF FILING FEE

TRANSACTION VALUATION* AMOUNT OF FILING FEE**
<S> <C>
$966,482,907 $193,296.58
</TABLE>

* For purposes of calculating of the amount of the filing fee only. This amount
assumes the purchase of 35,144,833 shares of common stock, par value $.01 per
share, of Revco D.S., Inc. at $27.50 net per share in cash.

**The amount of the filing fee, calculated in accordance with Rule 0-11(d) of
the Securities Exchange Act of 1934, as amended, equals 1/50th of one percent
of the aggregate value of cash offered by Ocean Acquisition Corporation for
such number of shares.

/ /
Check box if any part of the fee is offset as provided Rule 0-11(a)(2) and
identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form or
schedule and the date of its filing.

<TABLE>
<S> <C> <C>
AMOUNT PREVIOUSLY PAID: NONE FILING PARTY: NOT APPLICABLE
FORM OR REGISTRATION NO.: NOT APPLICABLE DATE FILED: NOT APPLICABLE
</TABLE>

PAGE 1 OF [ ] PAGES
EXHIBIT INDEX IS LOCATED ON PAGE [ ]
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CUSIP NO. 761339 10 0 14D-1
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS

RITE AID CORPORATION (I.R.S. Identification Number 23-1614034)
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) / /
(b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS

BK, WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(e) OR 2(f) / /
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6 CITIZENSHIP OR PLACE OF ORGANIZATION

State of Delaware
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7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

See Section 11 of the Offer to Purchase
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8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES / /

N/A
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9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)

N/A
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10 TYPE OF REPORTING PERSON

CO
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CUSIP NO. 761339 10 0 14D-1
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS

OCEAN ACQUISITION CORPORATION (IRS Identification Number to be
applied for)
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) / /
(b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS

BK, AF
- --------------------------------------------------------------------------------

5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(e) OR 2(f) / /
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6 CITIZENSHIP OR PLACE OF ORGANIZATION

State of Delaware
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7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

See Section 11 of the Offer to Purchase
- --------------------------------------------------------------------------------

8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES / /
- --------------------------------------------------------------------------------

9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)

N/A
- --------------------------------------------------------------------------------

10 TYPE OF REPORTING PERSON

CO
- --------------------------------------------------------------------------------

<PAGE>

This Tender Offer Statement on Schedule 14D-1 relates to the offer by Ocean
Acquisition Corporation, a Delaware corporation (the 'Purchaser') and a wholly
owned subsidiary of Rite Aid Corporation, a Delaware corporation ('Parent'), to
purchase 35,144,833 shares of common stock, par value $.01 per share (the
'Shares'), of Revco D.S., Inc., a Delaware corporation (the 'Company'), or such
other number of Shares as equals 50.1% of the Shares outstanding on a fully
diluted basis as of the expiration of the Offer (as defined below) at a price of
$27.50 per Share, net to the seller in cash (such price, or such higher price
per Share as may be paid in the Offer, the 'Offer Price'), upon the terms and
subject to the conditions set forth in the Offer to Purchase and in the related
Letter of Transmittal (which, as amended from time to time, together constitute
the 'Offer'). This Schedule 14D-1 also constitutes the Statement on Schedule 13D
of the Purchaser and Parent with respect to certain Shares which they may be
deemed to beneficially own as a result of the Stock Option Agreement and
Stockholder Agreement, which are described in the Offer to Purchase and are
filed as Exhibits (c)(3) and (c)(2) hereto, respectively. The item numbers and
responses thereto below are in accordance with the requirements of Schedule
14D-1.

ITEM 1. SECURITY AND SUBJECT COMPANY.

(a) The name of the subject company is Revco D.S., Inc., a Delaware
corporation. The address of the Company's principal executive offices is 1925
Enterprise Parkway, Twinsburg, Ohio 44087.

(b) The information set forth in the 'INTRODUCTION' of the Offer to
Purchase is incorporated herein by reference.

(c) The information set forth in Section 6 ('THE TENDER OFFER--Price Range
of Shares; Dividends') of the Offer to Purchase is incorporated herein by
reference.

ITEM 2. IDENTITY AND BACKGROUND.

(a)-(d); (g) This Statement is being filed by the Purchaser and Parent. The
information set forth in the 'INTRODUCTION', in Section 8 ('THE TENDER
OFFER--Certain Information Concerning the Purchaser and Parent') and in Schedule
I ('Information Concerning the Directors and Executive Officers of Parent and
the Purchaser') of the Offer to Purchase is incorporated herein by reference.

(e)-(f) During the last five years, neither the Purchaser, Parent nor any
persons controlling the Purchaser, nor, to the best knowledge of the Purchaser
or Parent, any of the persons listed on Schedule I ('Information Concerning the
Directors and Executive Officers of Parent and the Purchaser') of the Offer to
Purchase (i) has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (ii) was a party to a civil proceeding of
a judicial or administrative body of competent jurisdiction as a result of which
any such person was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violation of such laws.

ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.

(a)-(b) The information set forth in the 'INTRODUCTION,' Section 8 ('THE
TENDER OFFER--Certain Information Concerning the Purchaser and Parent'), Section
10 ('THE TENDER OFFER--Background of the Offer; Contacts with the Company') and
Section 11 ('Purpose of the Offer; Plans for the Company; Merger Agreement;
Stockholder Agreement; Stock Option Agreement; Confidentiality Agreement') of
the Offer to Purchase is incorporated herein by reference.

ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.

(a)-(b) The information set forth in the 'INTRODUCTION' and Section 9 ('THE
TENDER OFFER--Source and Amount of Funds') of the Offer to Purchase is
incorporated herein by reference.

ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.

(a)-(e) The information set forth in the 'INTRODUCTION,' Section 10 ('THE
TENDER OFFER--Background of the Offer; Contacts with the Company'), and Section
11 ('THE TENDER OFFER--Purpose of the Offer; Plans for the Company; Merger
Agreement; Stockholder Agreement; Stock Option Agreement; Confidentiality
Agreement') of the Offer to Purchase is incorporated herein by reference.

<PAGE>
(f)-(g) The information set forth in the 'INTRODUCTION,' and Section 13
('THE TENDER OFFER--Effect of the Offer on the Market for the Shares; Exchange
Listing and Exchange Act Registration') of the Offer to Purchase is incorporated
herein by reference.

ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.

(a) The information set forth in Section 8 ('THE TENDER OFFER--Certain
Information Concerning the Purchaser and Parent') of the Offer to Purchase is
incorporated herein by reference.

(b) The information set forth in Section 8 ('THE TENDER OFFER--Certain
Information Concerning the Purchaser and Parent') of the Offer to Purchase is
incorporated herein by reference.

ITEM 7. CONTRACTS, ARRANGEMENTS; UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.

The information set forth in the 'INTRODUCTION,' Section 10 ('THE TENDER
OFFER--Background of the Offer; Contacts with the Company'), and Section 11
('THE TENDER OFFER--Purpose of the Offer; Plans for the Company; Merger
Agreement; Stockholder Agreement; Stock Option Agreement; Confidentiality
Agreement') of the Offer to Purchase is incorporated herein by reference.

ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.

The information set forth in the 'INTRODUCTION' and Section 16 ('THE TENDER

OFFER--Fees and Expenses') of the Offer to Purchase is incorporated herein by
reference.

ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.

The information set forth in Section 8 ('THE TENDER OFFER--Certain
Information Concerning the Purchaser and Parent') of the Offer to Purchase is
incorporated herein by reference.

ITEM 10. ADDITIONAL INFORMATION.

(a) The information set forth in the 'INTRODUCTION', Section 10
('Background of the Offer; Contacts with the Company') and Section 11 ('THE
TENDER OFFER--Purpose of the Offer and the Merger; Plans for the Company; Merger
Agreement; Stockholder Agreement; Stock Option Agreement; Confidentiality
Agreement') of the Offer to Purchase is incorporated herein by reference.

(b)-(c) The information set forth in the 'INTRODUCTION' and Section 15
('THE TENDER OFFER--Certain Legal Matters and Regulatory Approvals') of the
Offer to Purchase is incorporated herein by reference.

(d) The information set forth in Section 13 ('THE TENDER OFFER--Effect of
the Offer on the Market for the Shares; Exchange Listing and Exchange Act
Registration') of the Offer to Purchase is incorporated herein by reference.

(e) The information set forth in Section 15 ('THE TENDER OFFER--Certain
Legal Matters and Regulatory Approvals') of the Offer to Purchase is
incorporated herein by reference.

(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2),
respectively, is incorporated herein by reference.

ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.

(a)(1) Offer to Purchase dated December 4, 1995.

(a)(2) Letter of Transmittal.

(a)(3) Notice of Guaranteed Delivery.

(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.

(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.

(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.

(a)(7) Text of Press Release issued by Parent and the Company on November
30, 1995.

(a)(8) Form of Summary Advertisement dated December 4, 1995.

5
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(b)(1) Letter from J.P. Morgan Securities Inc. to Rite Aid Corporation,
dated November 16, 1995.

(b)(2) Letter from Morgan Guaranty Trust Company of New York and J.P.
Morgan Securities Inc. to Rite Aid Corporation, dated November 24,
1995.

(c)(1) Agreement and Plan of Merger, dated as of November 29, 1995, by and
among Parent, the Purchaser and the Company.

(c)(2) Stockholder Agreement, dated as of November 29, 1995, by and among
Parent, the Purchaser and Zell/Chilmark Fund, L.P.

(c)(3) Stock Option Agreement, dated as of November 29, 1995, by and among
Parent, the Purchaser and the Company.

(c)(4) Confidentiality Agreement, dated as of August 17, 1995, by and
between Parent and the Company.

(d) Not applicable.

(e) Not applicable.

(f) Not applicable.

(g) Complaint entitled Silvert v. Revco D.S., Inc. et al., filed in the
Chancery Court of the State of Delaware, New Castle County.

<PAGE>

SIGNATURES

After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.

Dated: December 4, 1995 RITE AID CORPORATION

By: /s/ MARTIN L. GRASS
Name: Martin L. Grass
Title: Chairman of the Board and
Chief Executive Officer

OCEAN ACQUISITION CORPORATION

By: /s/ MARTIN L. GRASS_______________
Name: Martin L. Grass
Title: President

<PAGE>
EXHIBIT INDEX

EXHIBIT PAGE
NUMBER NUMBER
- ---------- ------
(a)(1) -- Offer to Purchase dated December 4, 1995.
(a)(2) -- Letter of Transmittal.
(a)(3) -- Notice of Guaranteed Delivery.
(a)(4) -- Letter to Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
(a)(5) -- Letter to Clients for use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other
Nominees.
(a)(6) -- Guidelines for Certification of Taxpayer
Identification Number on Substitute
Form W-9.
(a)(7) -- Text of Press Release issued by Parent and the
Company on November 30, 1995.
(a)(8) -- Form of Summary Advertisement dated December 4,
1995.
(b)(1) -- Letter from J.P. Morgan Securities Inc. to Rite
Aid Corporation, dated November 16, 1995.
(b)(2) -- Letter from Morgan Guaranty Trust Company of New
York and J.P. Morgan Securities Inc. to Rite Aid
Corporation, dated November 24, 1995.
(c)(1) -- Agreement and Plan of Merger, dated as of November
29, 1995, by and among Parent, the Purchaser and
the Company.
(c)(2) -- Stockholder Agreement, dated as of November 29,
1995, by and among Parent, the Purchaser and
Zell/Chilmark Fund, L.P.
(c)(3) -- Stock Option Agreement, dated as of November 29,
1995, by and among Parent, the Purchaser and the
Company.
(c)(4) -- Confidentiality Agreement, dated as of August 17,
1995, by and between Parent and the Company.
(d) -- Not applicable.
(e) -- Not applicable.
(f) -- Not applicable.
(g) -- Complaint entitled Silvert v. Revco D.S., Inc. et
al., filed in the Chancery Court of the State of
Delaware, New Castle County.

<PAGE>
Offer to Purchase for Cash

35,144,833 Shares of Common Stock

of
REVCO D.S., INC.
at
$27.50 NET PER SHARE IN CASH
by
OCEAN ACQUISITION CORPORATION
a wholly owned subsidiary of
RITE AID CORPORATION

THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, JANUARY 2, 1996,
UNLESS THE OFFER IS EXTENDED.

THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, 35,144,833 SHARES, OR
SUCH OTHER NUMBER OF SHARES AS EQUALS 50.1% OF THE SHARES OUTSTANDING ON A FULLY
DILUTED BASIS AS OF THE EXPIRATION OF THE OFFER, BEING VALIDLY TENDERED AND NOT
WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER. THE OFFER IS ALSO SUBJECT TO
OTHER TERMS AND CONDITIONS. SEE SECTION 14.

RITE AID CORPORATION ('PARENT') AND OCEAN ACQUISITION CORPORATION (THE
'PURCHASER') HAVE ENTERED INTO (I) A STOCKHOLDER AGREEMENT WITH ZELL/CHILMARK
FUND, L.P., PURSUANT TO WHICH, AMONG OTHER THINGS, SUCH STOCKHOLDER HAS AGREED
TO (X) TENDER IN THE OFFER AND (Y) VOTE IN FAVOR OF THE MERGER (AS DEFINED
HEREIN), UPON THE TERMS AND SUBJECT TO THE CONDITIONS THEREOF, ALL SHARES OF
REVCO D.S., INC. (THE 'COMPANY') OWNED BY SUCH STOCKHOLDER, REPRESENTING
APPROXIMATELY 19.7% OF THE OUTSTANDING SHARES OF COMMON STOCK OF THE COMPANY,
AND (II) A STOCK OPTION AGREEMENT WITH THE COMPANY PURSUANT TO WHICH, AMONG
OTHER THINGS, THE COMPANY HAS GRANTED PARENT AN OPTION TO PURCHASE (THE 'STOCK
OPTION') UP TO 13,251,010 FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK OF
THE COMPANY, OR SUCH OTHER NUMBER OF SHARES OF COMMON STOCK OF THE COMPANY AS
EQUALS 19.9% OF THE COMPANY'S ISSUED AND OUTSTANDING COMMON STOCK AT THE TIME OF
THE EXERCISE OF THE STOCK OPTION.

THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY (WITH ONE DIRECTOR ABSENT
AND TWO DIRECTORS ABSTAINING) HAS DETERMINED THAT EACH OF THE OFFER AND THE
MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY
AND UNANIMOUSLY (WITH ONE DIRECTOR ABSENT AND TWO DIRECTORS ABSTAINING)
RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY WHO DESIRE TO RECEIVE CASH FOR THEIR
SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.

IMPORTANT

Any stockholder desiring to tender all or any portion of such stockholder's
shares of common stock, par value $.01 per share (the 'Common Stock' or the
'Shares'), of the Company should either (i) complete and sign the Letter of
Transmittal (or a facsimile thereof) in accordance with the instructions in the
Letter of Transmittal and mail or deliver it together with the certificate(s)
evidencing tendered Shares, and any other required documents, to the Depositary
or tender such Shares pursuant to the procedures for book-entry transfer set
forth in Section 3 or (ii) request such stockholder's broker, dealer, commercial
bank, trust company or other nominee to effect the transaction for such
stockholder. Any stockholder whose Shares are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee must contact
such broker, dealer, commercial bank, trust company or other nominee if such
stockholder desires to tender such Shares.

A stockholder who desires to tender Shares and whose certificates evidencing
such Shares are not immediately available, or who cannot comply with the
procedures for book-entry transfer on a timely basis, may tender such Shares by
following the procedures for guaranteed delivery set forth in Section 3.

Questions and requests for assistance may be directed to the Information
Agent at its address and telephone number set forth on the back cover of this
Offer to Purchase. Additional copies of the Offer to Purchase, the Letter of
Transmittal or other related tender offer materials may also be obtained from
the Information Agent or from brokers, dealers, commercial banks, or trust
companies.

------------------------

The Dealer Manager for the Offer is:

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

December 4, 1995

<PAGE>
TABLE OF CONTENTS

PAGE
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INTRODUCTION.............................................................. 1

THE TENDER OFFER.......................................................... 4

1. Terms of the Offer; Number of Shares and Proration; Expiration Date... 4

2. Acceptance for Payment and Payment for Shares......................... 6

3. Procedures for Tendering Shares....................................... 7

4. Withdrawal Rights..................................................... 9

5. Certain Federal Income Tax Consequences............................... 10

6. Price Range of Shares; Dividends...................................... 11

7. Certain Information Concerning the Company............................ 11

8. Certain Information Concerning the Purchaser and Parent............... 14

9. Source and Amount of Funds............................................ 16

10. Background of the Offer; Contacts with the Company.................... 17

11. Purpose of the Offer; Plans for the Company; Merger Agreement;
Stockholder Agreement; Stock Option Agreement; Confidentiality
Agreement........................................................... 21

12. Dividends and Distributions........................................... 38

13. Effect of the Offer on the Market for the Shares; Exchange Listing and
Exchange Act Registration........................................... 38

14. Conditions of the Offer............................................... 39

15. Certain Legal Matters and Regulatory Approvals........................ 41

16. Fees and Expenses..................................................... 43

17. Miscellaneous......................................................... 43

Schedule I--Information Concerning the Directors and Executive Officers of
Parent and the Purchaser................................................ I-1

Schedule II--Information Statement Pursuant to Section 14(f) of the
Securities Exchange Act of 1934 and Rule 14f-1 Thereunder............... II-1

<PAGE>
To the Holders of Common Stock of Revco D.S., Inc.:

INTRODUCTION

Ocean Acquisition Corporation, a Delaware corporation (the 'Purchaser') and
a wholly owned subsidiary of Rite Aid Corporation, a Delaware corporation
('Parent'), hereby offers to purchase 35,144,833 shares of common stock, par
value $.01 per share (the 'Common Stock' or the 'Shares'), of Revco D.S., Inc.,
a Delaware corporation (the 'Company'), or such other number of Shares as equals
50.1% of the Shares outstanding on a fully diluted basis as of the Expiration
Date (as defined below), at a price of $27.50 per Share, net to the seller in
cash (such price, or such higher price per Share as may be paid in the Offer,
the 'Offer Price'), upon the terms and subject to the conditions set forth in
this Offer to Purchase and in the related Letter of Transmittal (which, as
amended from time to time, together constitute the 'Offer').

Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes with respect to the purchase of Shares by the
Purchaser pursuant to the Offer. The Purchaser will pay all charges and expenses
of Donaldson, Lufkin & Jenrette Securities Corporation (the 'Dealer Manager' or
'DLJ') as Dealer Manager, Harris Trust Company of New York, as Depositary (the
'Depositary'), and MacKenzie Partners, Inc., as Information Agent (the
'Information Agent'), incurred in connection with the Offer. See Section 16.

THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, 35,144,833 SHARES, OR
SUCH OTHER NUMBER OF SHARES AS EQUALS 50.1% OF THE SHARES OUTSTANDING ON A FULLY
DILUTED BASIS AS OF THE EXPIRATION DATE (SUCH NUMBER OF SHARES BEING THE
'MINIMUM NUMBER'), BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE
EXPIRATION OF THE OFFER (THE 'MINIMUM CONDITION'). THE OFFER IS ALSO SUBJECT TO
OTHER TERMS AND CONDITIONS. SEE SECTION 14.

THE BOARD OF DIRECTORS OF THE COMPANY (THE 'COMPANY BOARD') UNANIMOUSLY
(WITH ONE DIRECTOR ABSENT AND TWO DIRECTORS ABSTAINING) HAS DETERMINED THAT EACH
OF THE OFFER AND THE MERGER (AS DEFINED BELOW) IS FAIR TO AND IN THE BEST
INTERESTS OF THE STOCKHOLDERS OF THE COMPANY AND UNANIMOUSLY (WITH ONE DIRECTOR
ABSENT AND TWO DIRECTORS ABSTAINING) RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY
WHO DESIRE TO RECEIVE CASH FOR THEIR SHARES ACCEPT THE OFFER AND TENDER THEIR
SHARES PURSUANT TO THE OFFER.

MORGAN STANLEY & CO. INCORPORATED ('MORGAN STANLEY') HAS DELIVERED TO THE
COMPANY BOARD ITS WRITTEN OPINION THAT THE CONSIDERATION TO BE RECEIVED BY THE
STOCKHOLDERS OF THE COMPANY PURSUANT TO THE OFFER AND THE MERGER, TAKEN
TOGETHER, IS FAIR FROM A FINANCIAL POINT OF VIEW TO SUCH HOLDERS. THE OPINION OF
MORGAN STANLEY, IS DESCRIBED IN AND IS ATTACHED TO THE COMPANY'S
SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 (THE 'SCHEDULE 14D-9'),
WHICH IS BEING MAILED TO STOCKHOLDERS HEREWITH. STOCKHOLDERS ARE URGED TO READ
THE FULL TEXT OF THAT OPINION.

The purpose of the Offer is for Parent, through the Purchaser, to acquire a
majority equity interest in the Company as the first step in the acquisition of
the entire equity interest in the Company. The Offer is being made pursuant to
an Agreement and Plan of Merger, dated as of November 29, 1995 (the 'Merger

Agreement'), by and among Parent, the Purchaser and the Company. The Merger
Agreement provides that, following the consummation of the Offer and the
satisfaction or the waiver of certain conditions, at the Effective Time (as
defined below), the Purchaser will be merged with and into the Company (the
'Merger') in accordance with the relevant provisions of the General Corporation
Law of the State of Delaware (the 'DGCL'). Following consummation of the Merger,
the Company will continue as the surviving corporation (the 'Surviving
Corporation') and will be a wholly owned subsidiary of Parent.

At the effective time of the Merger (the 'Effective Time'), each Share
issued and outstanding immediately prior to the Effective Time (other than
Shares owned by the Company as treasury stock and any Shares owned by Parent,
the Purchaser or any other direct or indirect wholly owned Subsidiary (as
defined below) of Parent and other than Dissenting Shares (as defined in Section
11 hereof)), shall by virtue of the Merger and without any action on the part of
the holder thereof be converted into either (i) the right to receive a number of
duly authorized, validly issued, fully paid and nonassessable shares of common
stock, par value $1.00 per share, of Parent (the 'Parent Common Stock'),
determined as set forth below; provided that Parent shall not issue more

1
<PAGE>
than 1.125 nor less than .91666 shares of Parent Common Stock per Share (the
'Exchange Ratio') or (ii) if the Alternative Consideration (as defined below) is
applicable, then the right to receive the Alternative Consideration, plus, in
each of clause (i) and (ii) above, any Additional Consideration (as defined
below).

The per share value of the Parent Common Stock which stockholders of the
Company would receive in the Merger will be determined during a randomly
selected fifteen-day pricing period (the 'Pricing Period') during the forty
trading days ending five days before the meeting of the stockholders of the
Company to consider the Merger. Stockholders of the Company would receive one
share of Parent Common Stock if the average market value per share of Parent
Common Stock during the Pricing Period is $27.50. If the average per share value
of Parent Common Stock determined during the Pricing Period is greater than
$27.50, stockholders of the Company will receive, for each Share, that amount of
Parent Common Stock having a value so determined of $27.50 plus 50% of such
increase in market value of Parent Common Stock over $27.50, provided that in no
event would Parent issue less than .91666 shares of Parent Common Stock for each
Share in the Merger. Similarly, if the average per share value of Parent Common
Stock determined during the Pricing Period is less than $27.50, stockholders of
the Company will receive, for each Share, that amount of Parent Common Stock
having a value so determined of $27.50 less 50% of such decrease in market value
of Parent Common Stock below $27.50, provided that in no event would Parent
issue more than 1.125 shares of Parent Common Stock for each Share in the
Merger. Alternatively, if the average per share value of the Parent Common Stock
determined during the Pricing Period is less than $27.50, Parent would have the
option of delivering, for each Share, one share of Parent Common Stock plus cash
in an amount equal to 50% of such decrease in market value of Parent Common
Stock below $27.50, provided that in no event would more than $2.75 per Share be
paid in cash.

In the event that the stockholders of Parent do not approve the issuance of

Parent Common Stock pursuant to the Merger at the Parent Special Meeting (as
defined below), but all conditions to the Merger are otherwise satisfied or
waived (if permissible), the Company, Parent and the Purchaser will nonetheless
consummate the Merger and each Share issued and outstanding immediately prior to
the Effective Time (other than Shares held in treasury and Shares owned by
Parent and its Subsidiaries and other than Dissenting Shares) will, at the
Effective Time, be converted into the right to receive a combination of (x)
shares of Parent Common Stock which will represent in the aggregate 19.9% of the
then outstanding shares of Parent Common Stock (which will be determined in a
manner consistent with the determination of the Exchange Ratio) and (y) cash
based on a pro rata portion of $27.50 (the 'Alternative Consideration'). See
Section 11.

In the event the Merger is not consummated prior to April 29, 1996, and the
Company has not materially breached the Merger Agreement (other than by acts
caused or permitted by Parent), then the stockholders of the Company will be
entitled to receive interest on the amount of the consideration that they
receive pursuant to the immediately preceding two paragraphs (such consideration
and interest thereon being referred to herein as the 'Merger Consideration'),
from April 29, 1996 until the earlier of the Effective Time or June 30, 1996,
calculated at an annual rate equal to the prime rate of interest (as announced
from time to time by Morgan Guaranty Trust Company of New York).

In the event Parent and/or the Purchaser, in violation of their obligations
under the Merger Agreement, fail or refuse to consummate the Merger on or prior
to June 30, 1996 and the Company has not materially breached the Merger
Agreement (other than by acts caused or permitted by Parent), then, in addition
to any rights or remedies that the Company and its stockholders otherwise have
in law or at equity as a result thereof, the stockholders of the Company will be
entitled to receive interest from June 30, 1996 on the amount of the Merger
Consideration not paid until such Merger Consideration is paid, calculated at
the annual rate of the higher of (i) the prime rate of interest (as announced
from time to time by Morgan Guaranty Trust Company of New York) plus 300 basis
points or (ii) the amount otherwise permitted by law. Any additional
consideration paid or payable pursuant to this paragraph or the immediately
preceding paragraph is referred to herein as 'Additional Consideration'.

THE MARKET VALUE OF THE PARENT COMMON STOCK DURING THE PRICING PERIOD AND
AFTER THE EFFECTIVE TIME WILL, AMONG OTHER THINGS, DEPEND UPON, AND IS EXPECTED
TO FLUCTUATE WITH, THE PERFORMANCE OF PARENT, CONDITIONS (ECONOMIC OR OTHERWISE)
AFFECTING THE RETAIL DRUGSTORE INDUSTRY, AND MARKET CONDITIONS AND OTHER FACTORS
THAT GENERALLY INFLUENCE PRICES OF SECURITIES. ACCORDINGLY, IT IS LIKELY THAT AT
OR AFTER THE

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EFFECTIVE TIME THE MARKET VALUE OF THE MERGER CONSIDERATION WILL BE LESS THAN OR
GREATER THAN THE OFFER PRICE.

The consummation of the Merger is subject to the satisfaction or waiver of
certain conditions, including, the approval and adoption of the Merger Agreement
by the requisite vote of the stockholders of the Company. See Section 11. Under
the DGCL, the approval of the Company Board and the affirmative vote of the
holders of a majority of the outstanding Shares is required to approve and adopt

the Merger Agreement and the transactions contemplated thereby, including the
Merger. The Company Board has unanimously (with one director absent and two
directors abstaining) approved and adopted the Merger Agreement and the
transactions contemplated thereby. ACCORDINGLY, IF THE MINIMUM CONDITION IS
SATISFIED, THE PURCHASER WILL HAVE SUFFICIENT VOTING POWER TO CAUSE THE APPROVAL
AND ADOPTION OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY
WITHOUT THE VOTE OF ANY OTHER STOCKHOLDER OF THE COMPANY.

Pursuant to the Merger Agreement, the Company has agreed to convene a
meeting of its stockholders (the 'Company Special Meeting') following the
consummation of the Offer and as soon as practicable after the registration
statement to be filed by Parent in connection with the registration of the
Parent Common Stock to be issued by Parent in the Merger (the 'Registration
Statement') is declared effective for the purpose of considering and taking
action on the Merger Agreement. Parent has agreed that it will vote, or cause to
be voted, all of the Shares then owned by it, the Purchaser or any of its other
Subsidiaries in favor of the approval of the Merger and adoption of the Merger
Agreement at the Company Special Meeting and accordingly approval of the Merger
Agreement will be assured.

Immediately after the execution of the Merger Agreement, Zell/Chilmark
Fund, L.P. (the 'Stockholder'), entered into a Stockholder Agreement, dated as
of November 29, 1995, with Parent and the Purchaser (the 'Stockholder
Agreement') pursuant to which the Stockholder, who has represented to Parent
that it owns 13,102,288 Shares, representing approximately 19.7% of all
outstanding Shares, has agreed, among other things, to (i) tender in the Offer
and (ii) vote in favor of the Merger, upon the terms and conditions thereof, all
Shares owned by the Stockholder. Accordingly, only an additional 22,042,545
Shares (or approximately 33.1% of the outstanding Shares) will be required to be
tendered to satisfy the Minimum Condition. See Section 11 for a more complete
description of the Stockholder Agreement.

Immediately after the execution of the Merger Agreement, the Company
entered into a Stock Option Agreement, dated as of November 29, 1995, with
Parent and the Purchaser (the 'Stock Option Agreement') pursuant to which the
Company has granted to Parent an unconditional, irrevocable option (the 'Stock
Option') to purchase up to 13,251,010 fully paid and nonassessable Shares at a
purchase price of $27.50 per Share, or such other number of Shares as equals
19.9% of the Company's issued and outstanding Shares at the time of exercise of
the Stock Option, exercisable upon the occurrence of certain events. See Section
11 for a more complete description of the Stock Option Agreement.

The Purchaser expressly reserves the right, in its sole discretion (but
subject to the terms of the Merger Agreement), at any time and from time to
time, to increase the number of Shares sought in the Offer, up to and including
all of the issued and outstanding Shares. If, prior to the Expiration Date, the
Purchaser should decide to change the number of Shares being sought, or to
change the form of consideration paid pursuant to the Offer, such change in the
number of Shares being sought or such change in the form of consideration being
offered will be applicable to all stockholders whose Shares are accepted for
payment pursuant to the Offer and, if at the time notice of any such change in
the number of Shares being sought or such change in the form of consideration
being offered is first published, sent or given to holders of such Shares, the
Offer is scheduled to expire at any time earlier than the period ending on the

tenth business day from and including the date that such notice is first so
published, sent or given, the Offer will be extended at least until the
expiration of such ten business day period. As used in this Offer to Purchase,
'business day' has the meaning set forth in Rule 14d-1 under the Exchange Act.

The Merger Agreement provides that promptly upon the acceptance for payment
of any Shares by Parent pursuant to the Offer, Parent will be entitled to
designate such number of directors, rounded up to the next whole number, on the
Company Board as is equal to the product of the total number of directors on
such Board (giving effect to the directors designated by Parent pursuant to this
sentence) multiplied by the percentage that the aggregate number of Shares
beneficially owned by the Purchaser, Parent and any of their affiliates bears to
the

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<PAGE>
total number of Shares then outstanding. The Merger Agreement further provides
that the Company, upon request of Parent, will use its best efforts promptly
either to increase the size of the Company Board or, at the Company's election,
secure the resignations of such number of its incumbent directors as is
necessary to enable Parent's designees to be so elected to the Company Board,
and will cause Parent's designees to be so elected.

The Company has informed the Purchaser that, as of November 29, 1995, there
were 66,587,990 Shares issued and outstanding, 700,000 Shares held in the
Company's treasury, 2,002,220 Shares reserved for issuance under the Company's
1993 Employee Stock Purchase Plan, 1,096,101 Shares reserved for issuance under
the Company's 401(K) Savings Plan, and 3,561,377 Shares reserved for issuance
upon exercise of the outstanding options granted under the Company's option
plans or rights granted under the 1992 Long-Term Incentive Compensation Plan, as
amended, and 1992 Non-Employee Directors' Stock Option Plan, as amended. As a
result, as of such date, the Minimum Condition would be satisfied if the
Purchaser acquired 35,144,833 Shares.

THIS OFFER TO PURCHASE IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF
OFFERS TO BUY ANY SECURITIES WHICH MAY BE ISSUED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE 'SECURITIES ACT'). THE ISSUANCE OF PARENT COMMON STOCK
WILL HAVE TO BE REGISTERED UNDER THE SECURITIES ACT, AND PARENT COMMON STOCK
WILL BE OFFERED ONLY BY MEANS OF A PROSPECTUS COMPLYING WITH THE REQUIREMENTS OF
THE SECURITIES ACT.

THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.

THE TENDER OFFER

1. TERMS OF THE OFFER; NUMBER OF SHARES AND PRORATION; EXPIRATION
DATE. Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any extension or
amendment), the Purchaser will accept for payment and pay for the Minimum Number
of Shares validly tendered prior to the Expiration Date (as defined below) and
not withdrawn in accordance with Section 4. The term 'Expiration Date' means
12:00 Midnight, New York City time, on Tuesday, January 2, 1996, unless and

until the Purchaser, in its sole discretion (but subject to the terms of the
Merger Agreement), shall have extended the period of time during which the Offer
is open, in which event the term 'Expiration Date' shall mean the latest time
and date at which the Offer, as so extended by the Purchaser, shall expire.

If more than 35,144,833 Shares are validly tendered and not withdrawn prior
to the Expiration Date, the Purchaser will, upon the terms and subject to the
conditions of the Offer, accept such Shares for payment on a pro rata basis,
with adjustments to avoid purchases of fractional Shares.

Because of the difficulty of determining the precise number of Shares
validly tendered and not withdrawn, if proration is required, the Purchaser
would not expect to announce the final proration factor until approximately six
New York Stock Exchange, Inc. ('NYSE') trading days after the Expiration Date.
Preliminary results of proration will be announced by press release as promptly
as practicable after the Expiration Date. Holders of Shares may obtain such
preliminary information from the Information Agent and may also be able to
obtain such preliminary information from their brokers. The Purchaser will not
pay for any Shares accepted for payment pursuant to the Offer until the final
proration factor is known.

The Offer is conditioned upon, among other things, satisfaction of the
Minimum Condition. If the Minimum Condition is not satisfied or any or all of
the other events set forth in Section 14 shall have occurred or shall be
determined by the Purchaser to have occurred prior to the Expiration Date, the
Purchaser reserves the right (but shall not be obligated) to (i) decline to
purchase any of the Shares tendered in the Offer and terminate the Offer, and
return all tendered Shares to the tendering stockholders, (ii) except for the
Minimum Condition, waive or amend any or all conditions to the Offer, to the
extent permitted by applicable law and the provisions of the Merger Agreement,
and, subject to complying with applicable rules and regulations of the
Securities and Exchange Commission (the 'Commission'), purchase all Shares
validly tendered, or (iii) extend the Offer and, subject to the right of
stockholders of the Company to withdraw Shares until the Expiration Date, retain
the Shares which have been tendered during the period or periods for which the
Offer is extended.

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<PAGE>
The Purchaser expressly reserves the right, in its sole discretion (but
subject to the terms of the Merger Agreement), at any time and from time to
time, to extend for any reason the period of time during which the Offer is
open, including the occurrence of any of the conditions specified in Section 14,
by giving oral or written notice of such extension to the Depositary. During any
such extension, all Shares previously tendered and not withdrawn will remain
subject to the Offer, subject to the rights of a tendering stockholder to
withdraw his Shares. See Section 4.

Subject to the applicable regulations of the Commission, the Purchaser also
expressly reserves the right, in its sole discretion (but subject to the terms
of the Merger Agreement), at any time and from time to time, (i) to delay
acceptance for payment of, or, regardless of whether such Shares were
theretofore accepted for payment, payment for, any Shares pending receipt of any
regulatory approval specified in Section 15 or in order to comply in whole or in

part with any other applicable law, (ii) to terminate the Offer and not accept
for payment any Shares if any of the conditions referred to in Section 14 has
not been satisfied or upon the occurrence of any of the events specified in
Section 14 and (iii) to waive any condition or otherwise amend the Offer in any
respect, by giving oral or written notice of such delay, termination, waiver or
amendment to the Depositary and by making a public announcement thereof.

The Merger Agreement provides that, without the written consent of the
Company, the Purchaser will not (i) amend or waive the Minimum Condition, (ii)
decrease the Offer Price, (iii) change the number of Shares sought to an amount
less than 50.1% of the outstanding Shares on a fully-diluted basis, (iv) change
the form of consideration to be paid pursuant to the Offer, (v) impose
conditions to the Offer in addition to those set forth in Section 14 or (vi)
amend any other term or condition of the Offer in any manner which is adverse to
the holders of Shares, except that if on the initial scheduled Expiration Date
(as it may be extended in accordance with the terms of the Merger Agreement),
all conditions to the Offer shall not have been satisfied or waived, the Offer
may be extended from time to time without the consent of the Company for such
period of time as is reasonably expected to be necessary to satisfy the
unsatisfied conditions. In addition, the Merger Agreement provides that without
the consent of the Company, the Offer Price may be increased and the Offer may
be extended to the extent required by law in connection with such an increase.

The Purchaser acknowledges that (i) Rule 14e-1(c) under the Exchange Act
requires the Purchaser to pay the consideration offered or return the Shares
tendered promptly after the termination or withdrawal of the Offer, and (ii) the
Purchaser may not delay acceptance for payment of, or payment for (except as
provided in clause (i) of the second preceding paragraph), any Shares upon the
occurrence of any of the conditions specified in Section 14 without extending
the period of time during which the Offer is open.

Any such extension, delay, termination, waiver or amendment will be
followed as promptly as practicable by public announcement thereof, with such
announcement in the case of an extension to be made no later than 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date. Subject to applicable law (including Rules 14d-4(c), 14d-6(d)
and 14e-1 under the Exchange Act, which require that material changes be
promptly disseminated to stockholders in a manner reasonably designed to inform
them of such changes) and without limiting the manner in which the Purchaser may
choose to make any public announcement, the Purchaser shall have no obligation
to publish, advertise or otherwise communicate any such public announcement
other than by issuing a press release to the Dow Jones News Service.

If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, the Purchaser will disseminate additional tender offer materials and
extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1
under the Exchange Act. The minimum period during which the Offer must remain
open following material changes in the terms of the Offer or information
concerning the Offer, other than a change in price or a change in percentage of
securities sought, will depend upon the facts and circumstances, including the
relative materiality of the terms or information. With respect to a change in
price or a change in percentage of securities sought (other than an increase in
the number of Shares sought not in excess of 2% of the outstanding Shares), a

minimum ten business day period is required to allow for adequate dissemination
to stockholders and investor response.

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<PAGE>
change the number of Shares being sought, or to change the form of consideration
paid pursuant to the Offer, such change in the number of Shares being sought or
such change in the form of consideration being offered will be applicable to all
stockholders whose Shares are accepted for payment pursuant to the Offer and, if
at the time notice of any such change in the number of Shares being sought or
such change in the form of consideration being offered is first published, sent
or given to holders of such Shares, the Offer is scheduled to expire at any time
earlier than the period ending on the tenth business day from and including the
date that such notice is first so published, sent or given, the Offer will be
extended at least until the expiration of such ten business day period.

The Company has provided the Purchaser with the Company's stockholder list
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the related Letter of Transmittal
will be mailed to record holders of Shares whose names appear on the Company's
stockholder list and will be furnished, for subsequent transmittal to beneficial
owners of Shares, to brokers, dealers, commercial banks, trust companies and
similar persons whose names, or the names of whose nominees, appear on the
stockholder list or, if applicable, who are listed as participants in a clearing
agency's security position listing.

2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and
subject to the conditions of the Offer (including, if the Offer is extended or
amended, the terms and conditions of any such extension or amendment), the
Purchaser will purchase, by accepting for payment, and will pay for the Minimum
Number of Shares validly tendered prior to the Expiration Date (and not properly
withdrawn in accordance with Section 4) promptly after the later to occur of (i)
the Expiration Date and (ii) the satisfaction or waiver of the conditions to the
Offer set forth in Section 14. Subject to applicable rules of the Commission and
the terms of the Merger Agreement, the Purchaser expressly reserves the right,
in its discretion, to delay acceptance for payment of, or payment for, Shares
pending receipt of any regulatory approvals specified in Section 15.
Notwithstanding the fact that the Purchaser has stated that it has reserved the
right to assert the occurrence of a condition following acceptance for payment
of Shares but prior to payment for Shares in order to delay payment or cancel
its obligation to pay for properly tendered Shares, the Purchaser understands
that all conditions of the Offer, other than receipt of necessary governmental
approvals, must be satisfied or waived prior to the acceptance of Shares for
payment. In addition, if, following acceptance of payment for Shares, the
Purchaser asserts such a governmental approval as a condition and does not
promptly pay for Shares tendered, the Purchaser will promptly return such
Shares.

In all cases, payment for Shares purchased pursuant to the Offer will be
made only after timely receipt by the Depositary of (i) the certificates
evidencing such Shares (the 'Share Certificates') or timely confirmation of a
book-entry transfer (a 'Book-Entry Confirmation') of such Shares, if such
procedure is available, into the Depositary's account at The Depository Trust
Company, the Midwest Securities Trust Company or the Philadelphia Depository
Trust Company (each a 'Book-Entry Transfer Facility' and, collectively, the
'Book-Entry Transfer Facilities') pursuant to the procedures set forth in
Section 3, (ii) the Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, with any required signature guarantees or an
Agent's Message (as defined below), and (iii) any other documents required under
the Letter of Transmittal.

The term 'Agent's Message' means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgement from the participant in such Book-Entry
Transfer Facility tendering the Shares, that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against the participant.

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<PAGE>
shall be satisfied, and tendering stockholders must thereafter look solely to
the Depositary for payment of amounts owed to them by reason of the acceptance
for payment of Shares pursuant to the Offer. The Purchaser will pay any stock
transfer taxes incident to the transfer to it of validly tendered Shares, except
as otherwise provided in Instruction 6 of the Letter of Transmittal, as well as
charges and expenses of the Depositary and the Information Agent.

If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer (including proration due to tenders of
Shares in excess of the Minimum Number of Shares), or if Share Certificates are
submitted evidencing more Shares than are tendered, Share Certificates
evidencing unpurchased Shares will be returned, without expense to the tendering
stockholder (or, in the case of Shares tendered by book-entry transfer into the
Depositary's account at a Book-Entry Transfer Facility pursuant to the procedure
set forth in Section 3, such Shares will be credited to an account maintained at
such Book-Entry Transfer Facility), as promptly as practicable following the
expiration or termination of the Offer.

If, prior to the Expiration Date, the Purchaser increases the consideration
to be paid per Share pursuant to the Offer, the Purchaser will pay such
increased consideration for all such Shares purchased pursuant to the Offer,
whether or not such Shares were tendered prior to such increase in
consideration.

The Purchaser reserves the right to transfer or assign, in whole at any
time, or in part from time to time, to one or more of its affiliates, the right
to purchase all or any portion of the Shares tendered pursuant to the Offer, but
any such transfer or assignment will not relieve the Purchaser of its
obligations under the Offer and will in no way prejudice the rights of tendering
stockholders to receive payment for Shares validly tendered and accepted for
payment pursuant to the Offer.

3. PROCEDURES FOR TENDERING SHARES.

Valid Tender of Shares. In order for Shares to be validly tendered
pursuant to the Offer, the Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, together with any required signature
guarantees and any other documents required by the Letter of Transmittal, must
be received by the Depositary at one of its addresses set forth on the back
cover of this Offer to Purchase and either (i) the Share Certificates evidencing
tendered Shares must be received by the Depositary at such address or such
Shares must be tendered pursuant to the procedure for book-entry transfer
described below and a Book-Entry Confirmation must be received by the
Depositary, in each case prior to the Expiration Date, or (ii) the tendering
stockholder must comply with the guaranteed delivery procedures described below.

THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.

Book-Entry Transfer. The Depositary will establish an account with respect
to the Shares at each Book-Entry Transfer Facility for purposes of the Offer
within two business days after the date of this Offer to Purchase, and any
financial institution that is a participant in any of the Book-Entry Transfer
Facilities' systems may make book-entry delivery of Shares by causing a
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account at a Book-Entry Transfer Facility in accordance with such Book-Entry
Transfer Facility's procedures for transfer. However, although delivery of
Shares may be effected through book-entry transfer at a Book-Entry Transfer
Facility, the Letter of Transmittal (or a facsimile thereof), properly completed
and duly executed, together with any required signature guarantees or an Agent's
Message in connection with a book-entry delivery of Shares, and any other
required documents, must, in any case, be transmitted to and received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase prior to the Expiration Date or the tendering stockholder must comply
with the guaranteed delivery procedures described below. DELIVERY OF DOCUMENTS
TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER

FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.

Signature Guarantees. Signatures on all Letters of Transmittal must be
guaranteed by a firm which is a bank, broker, dealer, credit union, savings
association or other entity that is a member in good standing of the Security
Transfer Agent's Medallion Program or the New York Stock Exchange Medallion
Signature Guarantee

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<PAGE>
Program (each, an 'Eligible Institution'), unless the Shares tendered thereby
are tendered (i) by a registered holder of Shares who has not completed either
the box entitled 'Special Delivery Instructions' or the box entitled 'Special
Payment Instructions' on the Letter of Transmittal, or (ii) for the account of
an Eligible Institution. If a Share Certificate is registered in the name of a
person other than the signer of the Letter of Transmittal, or if payment is to
be made, or a Share Certificate not accepted for payment or not tendered is to
be returned, to a person other than the registered holder(s), then the Share
Certificate must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name(s) of the registered holder(s) appear(s)
on the Share Certificate, with the signature(s) on such Share Certificate or
stock powers guaranteed by an Eligible Institution. See Instructions 1 and 5 of
the Letter of Transmittal.

Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Share Certificates are not immediately
available or such stockholder cannot deliver the Share Certificates and all
other required documents to the Depositary prior to the Expiration Date or the
procedure for book-entry transfer cannot be completed on a timely basis, such
Shares may nevertheless be tendered if all the following conditions are
satisfied:

(i) the tender is made by or through an Eligible Institution;

(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchaser herewith, is
received by the Depositary as provided below prior to the Expiration Date;
and

(iii) the Share Certificates for all tendered Shares, in proper form
for transfer, or a Book-Entry Confirmation, in each case together with a
properly completed and duly executed Letter of Transmittal (or manually
signed facsimile thereof) with any required signature guarantees and any
other documents required by such Letter of Transmittal, are received by the
Depositary within three NYSE trading days after the date of execution of
such Notice of Guaranteed Delivery.

The Notice of Guaranteed Delivery may be delivered by hand or mail or
transmitted by telegram or facsimile transmission to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in the
Notice of Guaranteed Delivery provided by the Purchaser herewith.

Notwithstanding any other provision hereof, payment for Shares purchased
pursuant to the Offer will, in all cases, be made only after timely receipt by

the Depositary of (i) the Share Certificates evidencing such Shares, or a
Book-Entry Confirmation of the delivery of such Shares, (ii) a properly
completed and duly executed Letter of Transmittal (or a facsimile thereof), (or
in the case of a book-entry transfer, an Agent's Message) and (iii) any other
documents required by the Letter of Transmittal.

Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tendered Shares will be determined by the Purchaser, in its sole discretion,
whose determination will be final and binding on all parties. The Purchaser
reserves the absolute right to reject any and all tenders of any Shares
determined by it not to be in proper form or if the acceptance for payment of,
or payment for, such Shares may, in the opinion of the Purchaser's counsel, be
unlawful. The Purchaser also reserves the absolute right, in its sole
discretion, to waive any condition of the Offer (subject to the Merger
Agreement) or any defect or irregularity in any tender of any Shares of any
particular stockholder, whether or not similar defects or irregularities are
waived in the case of other stockholders. No tender of Shares will be deemed to
have been validly made until all defects and irregularities have been cured or
waived.

The Purchaser's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the instructions thereto) will be final
and binding. None of Parent, the Purchaser, the Dealer Manager, the Depositary,
the Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in tenders or will incur any
liability for failure to give any such notification.

Appointment as Proxy. By executing a Letter of Transmittal as set forth
above, a tendering stockholder irrevocably appoints designees of the Purchaser
as such stockholder's proxies, each with full power of substitution, to the full
extent of such stockholder's rights with respect to the Shares tendered by such
stockholder and accepted for payment by the Purchaser (and with respect to any
and all non-cash dividends, distributions, rights, other Shares or other
securities issued or issuable and rights declared, paid or distributed in
respect of such

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Shares on or after November 29, 1995). All such proxies shall be considered
coupled with an interest in the tendered Shares. This appointment will be
effective if, when, and only to the extent that, the Purchaser accepts such
Shares for payment pursuant to the Offer. Upon such acceptance for payment, all
prior proxies given by such stockholder with respect to such Shares (and such
other Shares and securities) will, without further action, be revoked, and no
subsequent proxies may be given nor any subsequent written consent executed by
such stockholder (and, if given or executed, will not be deemed to be effective)
with respect thereto. The designees of the Purchaser will, with respect to the
Shares and other securities for which the appointment is effective, be empowered
to exercise all voting and other rights of such stockholder as they in their
sole discretion may deem proper at any annual or special meeting of the
stockholders of the Company or any adjournment or postponement thereof, by
written consent in lieu of any such meeting or otherwise, and the Purchaser
reserves the right to require that, in order for Shares or other securities to

be deemed validly tendered, immediately upon the Purchaser's acceptance for
payment of such Shares, the Purchaser must be able to exercise full voting
rights with respect to such Shares.

The Purchaser's acceptance for payment of Shares tendered pursuant to the
Offer will constitute a binding agreement between the tendering stockholder and
the Purchaser upon the terms and subject to the conditions of the Offer.

TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO PAYMENT TO
CERTAIN STOCKHOLDERS OF THE PURCHASE PRICE OF SHARES PURCHASED PURSUANT TO THE
OFFER, EACH SUCH STOCKHOLDER MUST PROVIDE THE DEPOSITARY WITH SUCH STOCKHOLDER'S
CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY THAT SUCH STOCKHOLDER IS NOT
SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE
FORM W-9 IN THE LETTER OF TRANSMITTAL. IF BACKUP WITHHOLDING APPLIES WITH
RESPECT TO A STOCKHOLDER, THE DEPOSITARY IS REQUIRED TO WITHHOLD 31% OF ANY
PAYMENTS MADE TO SUCH STOCKHOLDER. SEE INSTRUCTION 9 OF THE LETTER OF
TRANSMITTAL.

4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer are
irrevocable except that such Shares may be withdrawn at any time prior to the
Expiration Date and, unless theretofore accepted for payment by the Purchaser
pursuant to the Offer, may also be withdrawn at any time after Thursday,
February 1, 1996, or at such later time as may apply if the Offer is extended.

If the Purchaser extends the Offer, is delayed in its acceptance for
payment of Shares or is unable to accept Shares for payment pursuant to the
Offer for any reason, then, without prejudice to the Purchaser's rights under
the Offer, the Depositary may, nevertheless, on behalf of the Purchaser, retain
tendered Shares, and such Shares may not be withdrawn except to the extent that
tendering stockholders are entitled to withdrawal rights as described in this
Section 4. Any such delay will be by an extension of the Offer to the extent
required by law.

For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
such notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder of such Shares, if different from that of the person who
tendered such Shares. If Share Certificates evidencing Shares to be withdrawn
have been delivered or otherwise identified to the Depositary, then, prior to
the physical release of such Share Certificates, the serial numbers shown on
such Share Certificates must be submitted to the Depositary and the signature(s)
on the notice of withdrawal must be guaranteed by an Eligible Institution,
unless such Shares have been tendered for the account of an Eligible
Institution. If Shares have been tendered pursuant to the procedure for
book-entry transfer as set forth in Section 3, any notice of withdrawal must
also specify the name and number of the account at the Book-Entry Transfer
Facility to be credited with the withdrawn Shares.

All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding. None of Parent, the
Purchaser, the Dealer Manager, the Depositary, the Information Agent or any

other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification.

Any Shares properly withdrawn will thereafter be deemed to not have been
validly tendered for purposes of the Offer. However, withdrawn Shares may be
re-tendered at any time prior to the Expiration Date by following one of the
procedures described in Section 3.

9
<PAGE>
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The receipt of cash pursuant
to the Offer and the receipt of Parent Common Stock, cash, or a combination
thereof pursuant to the Merger will be taxable transactions for federal income
tax purposes and may be taxable for state, local, and foreign income and other
tax purposes as well. This will be the case whether a stockholder of the Company
sells Shares pursuant to the Offer, the Merger, or both.

A tendering stockholder whose Shares are accepted for sale pursuant to the
Offer generally will recognize gain or loss on the date the Offer is consummated
equal to the difference between the tax basis for the Shares accepted for
purchase and the amount of cash received in exchange therefor. A stockholder who
receives Parent Common Stock, cash, or a combination thereof in exchange for
Shares pursuant to the Merger will recognize gain or loss at the Effective Time
in an amount equal to the difference between (i) the sum of the amount of cash
(including any Additional Consideration) and the fair market value of the Parent
Common Stock, if any, received by the stockholder and (ii) such stockholders'
tax basis in the Shares surrendered. The fair market value of the Parent Common
Stock likely will equal the trading value per share of Parent Common Stock on
the date on which the Effective Time occurs.

Gain or loss will be calculated separately for each block of Shares (i.e.,
Shares purchased at the same time and price) surrendered by a stockholder. Such
gain or loss will be capital gain or loss if the Shares were capital assets in
the hands of the stockholder, and will be long-term capital gain or loss if, at
the time of the exchange, the Shares were held by the stockholder for more than
twelve months. Under present law, long-term capital gains are generally taxable
at a maximum rate of 28% for individuals and 35% for corporations. Legislation
is currently pending before Congress (the 'Pending Legislation') which would, if
enacted as proposed by a conference committee made up of members of the House of
Representatives and the Senate, generally reduce the capital gains effective tax
rates to approximately 20% for individuals and 28% for corporations. Under the
Pending Legislation, the new rates would apply retroactively to sales of capital
assets occurring on or after January 1, 1995. There can be no assurance that the
Pending Legislation will be enacted or, if enacted, that it will be enacted in
its present form or with the above effective date.

Real Estate Transfer Taxes. Some states and localities, including the
State of New York, impose taxes on certain transfers of controlling interests
(including transfers pursuant to transactions such as the Offer and the Merger)
in entities that own real property (including leasehold interests) located in
such states and localities ('Real Property Transfer Taxes'). Any tax returns in
respect of Real Property Transfer Taxes required to be filed in connection with
the Offer or the Merger will be filed by Parent or the Company on behalf of the

stockholders, and any Real Property Transfer Taxes required to be paid will be
paid by the Company or the Purchaser. Any such Real Property Transfer Taxes paid
generally are expected to be treated as a deemed distribution paid by the
Company to the stockholders that is taxable as a dividend. Any income taxes owed
on account of such deemed distribution will be the responsibility of the
Company's stockholders. Although there is no authority directly on point, any
such Real Property Transfer Taxes paid on behalf of a stockholder should result
in a corresponding increase of equal amount in the tax basis of each
stockholder's Shares and, accordingly, a decrease in the amount of gain
recognized in connection with the Offer or the Merger.

Exercise of Appraisal Rights. A stockholder who perfects such
stockholder's appraisal rights probably will recognize gain or loss at the
Effective Time (even if the fair value of the Shares has not yet been judicially
determined at such time), in an amount equal to the difference between (i) the
'amount realized' and (ii) the tax basis of such Shares. For this purpose,
although there is no authority directly on point, the amount realized generally
should equal the trading value per Share at the Effective Time. Ordinary
interest income (or capital loss, assuming the Shares were held as capital
assets) should be recognized by such stockholder at the time of actual receipt
of payment, to the extent that such payment exceeds (or is less than) the amount
realized at the Effective Time.

THE DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND
IS BASED ON EXISTING TAX LAWS AT THE DATE OF THIS OFFER, WHICH MAY DIFFER ON THE
DATE OF CONSUMMATION OF THE OFFER OR THE EFFECTIVE TIME.

FURTHER, THE DISCUSSION SET FORTH ABOVE MAY NOT APPLY TO PARTICULAR
CATEGORIES OF STOCKHOLDERS OF THE COMPANY, INCLUDING STOCKHOLDERS WHO ACQUIRED
SHARES PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS
COMPENSATION, INDIVIDUALS WHO ARE NOT CITIZENS OR RESIDENTS OF THE UNITED STATES
AND FOREIGN CORPORATIONS, OR ENTITIES THAT ARE OTHERWISE SUBJECT TO SPECIAL TAX
TREATMENT UNDER THE INTERNAL REVENUE CODE OF 1986, AS

<PAGE>
AMENDED (SUCH AS INSURANCE COMPANIES, TAX-EXEMPT ENTITIES AND REGULATED
INVESTMENT COMPANIES).

STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE
SPECIFIC TAX CONSEQUENCES TO THEM OF THE OFFER AND THE MERGER, INCLUDING THE
APPLICATION TO THEM AND POSSIBLE EFFECT UPON THEM OF ANY PENDING LEGISLATION,
THE ALTERNATIVE MINIMUM TAX, AND STATE, LOCAL AND FOREIGN TAX LAWS.

6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are listed and
principally traded on the NYSE and quoted under the symbol RXR. The following
table sets forth, for the quarters indicated, the high and low sales prices per
Share on the NYSE as reported by the Dow Jones News Service.

<TABLE>
<CAPTION>
QUARTER ENDED HIGH LOW
- -------------------------------------------------- ---- ----
<S> <C> <C>
FISCAL YEAR ENDED MAY 28, 1994:
Quarter Ended August 21...................... $12 5/8 $10
Quarter Ended November 11.................... 16 1/2 11 1/8
Quarter Ended February 5..................... 17 1/8 13 5/8
Quarter Ended May 28......................... 18 5/8 13 7/8

FISCAL YEAR ENDED JUNE 3, 1995:
Quarter Ended August 20...................... $19 $14 1/2
Quarter Ended November 12.................... 23 1/4 16 5/8
Quarter Ended February 4..................... 24 1/2 20
Quarter Ended June 3......................... 24 17 1/2

FISCAL YEAR ENDING JUNE 1, 1996:
Quarter Ended August 26...................... $25 3/8 $19 1/4
Quarter Ended November 18.................... 25 7/8 19 5/8
Third Quarter (through December 1, 1995)..... 28 24 5/8
</TABLE>

On November 29, 1995, the last full trading day prior to the public
announcement of the execution of the Merger Agreement, the reported closing
sales price of the Shares on the NYSE Composite Tape was $25 1/2 per Share and
the reported closing sales price of the shares of Parent Common Stock on the
NYSE Composite Tape was $28 5/8. On December 1, 1995, the last full trading day
prior to the date of this Offer to Purchase, the reported closing sales price of
the Shares on the NYSE Composite Tape was $27 3/4 per Share and the reported
closing sales price of the shares of Parent Common Stock on the NYSE Composite
Tape was $32 5/8. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR
THE SHARES AND THE SHARES OF PARENT COMMON STOCK.

The Company has not declared any cash dividends on the Shares since fiscal
year 1986.

7. CERTAIN INFORMATION CONCERNING THE COMPANY. Except as otherwise set
forth herein, the information concerning the Company contained in this Offer to
Purchase, including financial information, has been taken from or based upon

publicly available documents and records on file with the Commission and other
public sources. Neither Parent nor the Purchaser assumes any responsibility for
the accuracy or completeness of the information concerning the Company furnished
by the Company contained in such documents and records or for any failure by the
Company to disclose events which may have occurred or may affect the
significance or accuracy of any such information but which are unknown to Parent
or the Purchaser.

General. The Company is a Delaware corporation and its principal executive
offices are located at 1925 Enterprise Parkway, Twinsburg, Ohio 44087. The
telephone number of the Company at such offices is (216) 425-9811. The Company
is one of the largest retail drugstore chains in the United States. As of June
3, 1995, the Company operated 2,118 stores, averaging approximately 8,864 square
feet per store in size, in fourteen contiguous midwestern, eastern and
southeastern states, and employed over 32,000 employees. The Company's stores
are high-quality, health-oriented neighborhood pharmacies offering
pharmaceutical and related merchandise. The Company competes primarily on the
basis of convenient store locations, competitive pricing, and an orientation
toward its pharmacy operations designed to provide a high level of customer
service and product information. The stores typically feature prescription and
over-the-counter drugs, health and beauty aids, toiletries, vitamins, cosmetics
and sundries, and a broad line of consumer products.

<PAGE>
Financial Information. Set forth below is certain selected consolidated
financial information relating to the Company and its subsidiaries which has
been excerpted or derived from the financial statements contained in (i) the
Company's Annual Reports on Form 10-K for the fiscal years ended June 3, 1995,
as amended, and May 28, 1994 (the 'Company Forms 10-K') and (ii) the Company's
Quarterly Reports on Form 10-Q for the fiscal quarters ended August 26, 1995 and
August 20, 1994 (the 'Company Forms 10-Q'). More comprehensive financial
information is included in the Company Forms 10-K, the Company Forms 10-Q and
other documents filed by the Company with the Commission. The financial
information that follows is qualified in its entirety by reference to the
Company Forms 10-K, the Company Forms 10-Q and such other documents filed by the
Company with the Commission, including the financial statements and related
notes contained therein. The Company Forms 10-K, the Company Forms 10-Q and such
other documents filed by the Company with the Commission may be examined and
copies may be obtained from the offices of the Commission in the manner set
forth below.

REVCO D.S., INC.

SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED FISCAL YEAR ENDED
------------------------ --------------------------------
AUGUST 26, AUGUST 20, JUNE 3, MAY 28, MAY 29,
1995 1994 1995 1994 1993
---------- ---------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING STATEMENT DATA:
Net Sales............................... $1,076.7 $694.4 $4,431.9 $2,504.0 $2,242.1
Cost of Sales........................... 755.9 487.5 3,100.1 1,742.0 1,568.3
Operating Profit........................ 31.0 18.8 175.7 100.5 76.0
Income Before Income Taxes and
Extraordinary Items................... 16.2 11.4 120.5 77.2 35.0
Net Income Before Extraordinary Item.... 8.4 5.8 61.1 38.7 14.2
Extraordinary Item, Loss Related to
Early Retirement of Debt, Net of
Income Tax Benefit of $2.4 million.... -- (2.8) (2.8) -- --
Net Income.............................. 8.4 3.0 58.3 38.7 14.2

PER SHARE INFORMATION:
Net Income Per Share Before
Extraordinary Item.................... .13 .10 .95 .77 .35
Extraordinary Item...................... -- (.05) (.04) -- --
Net Income per Share.................... .13 .05 .91 .77 .35
</TABLE>

<TABLE>
<CAPTION>
AT AT AT AT
AUGUST 26, JUNE 3, MAY 28, MAY 29,
1995 1995 1994 1993
---------- ---------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Current Assets.......................... $1,157.1 $1,089.0 $584.5 $551.5
Property, Equipment and Leasehold
Improvements, Net..................... 294.3 278.8 115.6 109.9
Total Assets............................ 2,221.1 2,149.8 1,060.8 1,045.2
Current Liabilities..................... 625.4 689.5 340.6 329.5
Long-Term Debt.......................... 763.3 639.6 200.0 253.3
Long-Term Liabilities................... 47.9 47.6 -- --
Stockholders' Equity.................... 784.5 773.1 499.7 453.7
</TABLE>

12
<PAGE>
The Company is subject to the information and reporting requirements of the
Exchange Act and is required to file reports and other information with the
Commission relating to its business, financial condition and other matters.
Information, as of particular dates, concerning the Company's directors and
officers, their remuneration, stock options granted to them, the principal
holders of the Company's securities, any material interests of such persons in
transactions with the Company and other matters is required to be disclosed in
proxy statements distributed to the Company's stockholders and filed with the
Commission. These reports, proxy statements and other information should be
available for inspection at the public reference facilities of the Commission
located in Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
also should be available for inspection and copying at prescribed rates at the
following regional offices of the Commission: Seven World Trade Center, New
York, New York, 13th Floor, 10048; and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of this material may also be obtained by mail,
upon payment of the Commission's customary fees by writing to the Commission's
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. Reports,
proxy statements and other information concerning the Company should also be
available for inspection at the offices of the NYSE, 20 Broad Street, New York,
New York 10005.

Certain Projected Financial Information. In the course of its discussions
with Parent's financial advisor, DLJ, the Company, in November 1995, provided
DLJ with certain business and financial information which DLJ and the Company
believe was not publicly available. Such information included, among other
things, certain financial projections for fiscal 1996 through fiscal 1998
prepared by management of the Company as a long-range plan (the 'Projections').
The Projections do not take into account any of the potential effects of the
transactions contemplated by the Offer and the Merger.

Set forth below is a selected summary of the Projections.

<TABLE>
<CAPTION>
FISCAL 1996 FISCAL 1997 FISCAL 1998
----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Total Sales................... $ 5,221,616 $ 5,922,191 $ 6,792,000
Operating Profit.............. 206,802 230,887 252,212
Interest Expense, Net......... 62,853 58,500 54,500
Pretax Income................. 143,949 172,387 197,712
Income Tax Provision.......... 69,446 80,992 91,273
Net Income.................... 74,503 91,395 106,438
Net Income Per Share.......... 1.12 1.35 1.55
</TABLE>

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
FISCAL 1996 FISCAL 1996 FISCAL 1996 FISCAL 1996
----------- ----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total Current Assets............... $ 1,124,827 $ 1,253,414 $ 1,216,046 $ 1,187,602
Total Assets....................... 2,213,516 2,354,737 2,310,128 2,266,093
Total Current Liabilities.......... 722,459 793,636 766,105 693,891
Long-Term Debt..................... 659,248 719,548 677,848 666,148
Long Term Liabilities.............. 47,590 47,590 47,590 47,590
Total Common Stockholders'
Equity........................... 784,219 793,963 818,585 858,464
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
FISCAL
1996
--------------
(IN THOUSANDS)
<S> <C>
CASH FLOW STATEMENT DATA:
Opening Cash Balance......................... $ 3,360
EBITDA....................................... 322,242
Sub-Total Non Working Capital Items.......... (250,481)
Cash Flow Available for Working Capital...... 71,761
Sub-Total Net Inventory Change............... (30,034)
Sub-Total Other Working Capital Changes...... (40,715)
Total Working Capital Changes................ (70,749)
Cash Flow From Operations.................... 1,012
Cash Flow From Financing Activity............ (4,275)
Increase (Decrease) in Cash.................. (3,263)
Closing Cash Balance......................... 97
</TABLE>

THE PROJECTIONS WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR
COMPLIANCE WITH PUBLISHED GUIDELINES OF THE COMMISSION OR THE GUIDELINES
ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS. THE
PROJECTIONS ARE INCLUDED IN THIS OFFER TO PURCHASE ONLY BECAUSE SUCH INFORMATION
WAS PROVIDED TO DLJ. NONE OF PARENT, THE PURCHASER, DLJ OR ANY PARTY TO WHOM THE
PROJECTIONS WERE PROVIDED ASSUMES ANY RESPONSIBILITY FOR THE ACCURACY OF SUCH
INFORMATION. WHILE PRESENTED WITH NUMERICAL SPECIFICITY, THESE PROJECTIONS ARE
BASED UPON A VARIETY OF ASSUMPTIONS RELATING TO THE BUSINESS OF THE COMPANY
WHICH, THOUGH DLJ HAS BEEN ADVISED WERE CONSIDERED REASONABLE BY THE COMPANY AT
THE TIME THEY WERE FURNISHED TO DLJ, MAY NOT BE REALIZED AND ARE SUBJECT TO
SIGNIFICANT UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND THE
CONTROL OF THE COMPANY. THERE CAN BE NO ASSURANCE THAT THE PROJECTIONS WILL BE
REALIZED, AND ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE SHOWN. THE
PROJECTIONS HAVE NOT BEEN EXAMINED OR COMPILED BY THE COMPANY'S INDEPENDENT
PUBLIC ACCOUNTANTS. FOR THESE REASONS, AS WELL AS THE BASES ON WHICH SUCH
PROJECTIONS WERE COMPILED, THERE CAN BE NO ASSURANCE THAT SUCH PROJECTIONS WILL
BE REALIZED, OR THAT ACTUAL RESULTS WILL NOT BE HIGHER OR LOWER THAN THOSE
ESTIMATED. THE INCLUSION OF SUCH PROJECTIONS HEREIN SHOULD NOT BE REGARDED AS AN
INDICATION THAT PARENT, THE PURCHASER, DLJ OR ANY OTHER PARTY WHO RECEIVED SUCH
INFORMATION CONSIDERS IT AN ACCURATE PREDICTION OF FUTURE EVENTS.

8. CERTAIN INFORMATION CONCERNING THE PURCHASER AND PARENT.

The Purchaser. The Purchaser, a newly incorporated Delaware corporation,
has not conducted any business other than in connection with the Offer, the
Merger Agreement, the Stock Option Agreement and the Stockholder Agreement. All
of the issued and outstanding shares of capital stock of the Purchaser are
beneficially owned by Parent. The principal executive offices of the Purchaser
are located at 30 Hunter Lane, Camp Hill, Pennsylvania 17011. The telephone
number of the Purchaser at such offices is (717) 761-2633.

Parent. Parent is a Delaware corporation organized in 1968. The principal

executive offices of Parent are located at 30 Hunter Lane, Camp Hill,
Pennsylvania 17011. The telephone number of Parent at such offices is (717)
761-2633. Parent is one of the largest drugstore chains in the United States.
Parent operates over 2700 drugstores in 21 eastern states and the District of
Columbia. Pharmacy service forms the core of Parent's business, with
prescriptions accounting for 53.1% of drugstore sales in the year ended March 4,
1995.

Parent's drugstores cater to convenience, offering a full selection of
health and personal care products, seasonal merchandise and a large private
label product line. Express mail with complementary services and one-hour photo
departments have recently been added in select locations.

Parent also operates Eagle Managed Care Corporation, a wholly owned
subsidiary, which markets prescription plans and sells other managed health care
services to large employers and government-sponsored employee benefit programs.

<PAGE>
Financial Information. Set forth below are certain selected consolidated
financial data with respect to Parent and its subsidiaries for Parent's last
three fiscal years, excerpted or derived from audited financial statements
presented in Parent's 1995 Annual Report on Form 10-K for the fiscal year ended
March 4, 1995 (the 'Parent Form 10-K') and from the unaudited financial
statements contained in Parent's Quarterly Reports on Form 10-Q for the fiscal
quarters ended September 2, 1995 and August 27, 1994 (the 'Parent Forms 10-Q'),
in each case filed by Parent with the Commission. More comprehensive financial
information is included in the Parent Form 10-K and the Parent Forms 10-Q and
such other documents filed by Parent with the Commission. The financial
information summary set forth below is qualified in its entirety by reference to
the Parent Form 10-K, the Parent Forms 10-Q and such other documents which have
been filed with the Commission and all the financial information and related
notes contained therein. The Parent Form 10-K, the Parent Forms 10-Q and such
other documents filed by Parent with the Commission may be examined and copied
from the offices of the Commission in the manner set forth below.

RITE AID CORPORATION

SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED FISCAL YEAR ENDED
-------------------------- ------------------------------------------
SEPTEMBER 2, AUGUST 27, MARCH 4, FEBRUARY 26, FEBRUARY 27,
1995 1994 1995 1994 1993
------------ ---------- ---------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net Sales............................... $2,683,240 $2,086,274 $4,533,851 $4,058,711 $3,833,591
Income from Continuing Operations Before
Taxes................................. 113,410 100,170 231,464 45,670 200,569
Income (Loss) from Discontinued
Operations............................ -- -- -- (16,920) 8,646
Net Income.............................. 69,293 61,104 141,286 9,288 132,396

PER SHARE INFORMATION:
Continuing Operations................... .83 .72 1.67 .30 1.41
Discontinued Operations................. -- -- -- (.19) .10
Net Income per Share.................... .83 .72 1.67 .11 1.51
</TABLE>

<TABLE>
<CAPTION>
AT AT AT
SEPTEMBER 2, MARCH 4, FEBRUARY 26,
1995 1995 1994
------------ ---------- ------------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Current Assets.......................... $1,373,826 $1,373,220 $1,125,425
Property, Plant and Equipment, Net...... 841,146 778,479 638,694
Net Non-Current Assets of Discontinued
Operations............................ -- 40,743 77,784
Total Assets............................ 2,566,868 2,472,607 1,989,070
Current Liabilities..................... 475,531 577,225 362,209
Long-Term Debt, Less Current
Maturities............................ 967,808 805,984 613,418
Stockholders' Equity.................... 1,046,114 1,011,812 954,714
</TABLE>

Parent is subject to the information and reporting requirements of the
Exchange Act and is required to file reports and other information with the
Commission relating to its business, financial condition and other matters.
Information, as of particular dates, concerning Parent's directors and officers,
their remuneration, stock options granted to them, the principal holders of
Parent's securities, any material interests of such persons in transactions with
Parent and other matters is required to be disclosed in proxy statements
distributed to Parent's stockholders and filed with the Commission. These
reports, proxy statements and other information should be available for
inspection and copies may be obtained in the same manner as set forth for the
Company in Section 7. The Parent's Common Stock is listed on the NYSE and the
Pacific Stock Exchange (the 'PSE') and reports, proxy statements and other
information concerning Parent should also be available for inspection at the
offices of the NYSE, 20 Broad Street, New York, New York 10005; and the PSE, 301
Pine Street, San Francisco, California 94104.

The name, citizenship, business address, principal occupation or employment
and five-year employment history for each of the directors and executive
officers of the Purchaser and Parent are set forth in Schedule I hereto.

15
<PAGE>
Except as described in this Offer to Purchase, (i) none of the Purchaser,
Parent nor, to the best knowledge of the Purchaser and Parent, any of the
persons listed in Schedule I to this Offer to Purchase or any associate or
majority-owned subsidiary of the Purchaser, Parent or any of the persons so
listed beneficially owns or has any right to acquire, directly or indirectly,
any Shares and (ii) none of the Purchaser, Parent nor, to the best knowledge of
the Purchaser and Parent, any of the persons or entities referred to above nor
any director, executive officer or subsidiary of any of the foregoing has
effected any transaction in the Shares during the past 60 days.

Except as provided in the Merger Agreement, the Stockholder Agreement, the
Stock Option Agreement and as otherwise described in this Offer to Purchase,

none of the Purchaser, Parent nor, to the best knowledge of the Purchaser and
Parent, any of the persons listed in Schedule I to this Offer to Purchase, has
any contract, arrangement, understanding or relationship with any other person
with respect to any securities of the Company, including, but not limited to,
any contract, arrangement, understanding or relationship concerning the transfer
or voting of such securities, finder's fees, joint ventures, loan or option
arrangements, puts or calls, guarantees of loans, guarantees against loss,
guarantees of profits, division of profits or losses or the giving or
withholding of proxies. Except as set forth in this Offer to Purchase, since May
30, 1992, none of the Purchaser, Parent nor, to the best knowledge of the
Purchaser and Parent, any of the persons listed on Schedule I hereto, has had
any business relationship or transaction with the Company or any of its
executive officers, directors or affiliates that is required to be reported
under the rules and regulations of the Commission applicable to the Offer.
Except as set forth in this Offer to Purchase, since May 30, 1992, there have
been no contacts, negotiations or transactions between any of the Purchaser,
Parent, or any of their respective subsidiaries, or, to the best knowledge of
the Purchaser and Parent, any of the persons listed in Schedule I to this Offer
to Purchase, on the one hand, and the Company or its affiliates, on the other
hand, concerning a merger, consolidation or acquisition, tender offer or other
acquisition of securities, an election of directors or a sale or other transfer
of a material amount of assets.

9. SOURCE AND AMOUNT OF FUNDS. The Purchaser estimates that the total
amount of funds required to acquire the outstanding Shares pursuant to the
Offer, to refinance the Company's indebtedness and to pay related fees and
expenses will be approximately $2.5 billion. See Section 16.

Parent intends to obtain a portion of the funds through unsecured
borrowings from a syndicate of financial institutions (the 'Proposed Financing')
led by Morgan Guaranty Trust Company of New York ('Morgan Guaranty'). In
connection with the Proposed Financing, Morgan Guaranty and J.P. Morgan
Securities Inc. ('J.P. Morgan'), in a letter dated November 24, 1995 (the
'Commitment Letter'), have proposed a five year revolving credit facility of up
to $2.5 billion whereby Morgan Guaranty has individually committed to provide up
to $500 million of the Proposed Financing.

The Commitment Letter provides that a syndicate of lenders acceptable to
Parent and Morgan Guaranty (the 'Banks') will from time to time, prior to
December 2000, make loans ('Loans') to Parent in an aggregate amount not
exceeding $2.5 billion (the 'Commitment'): (i) to finance the acquisition of the
Company, (ii) to refinance certain existing Company bank debt, (iii) to
refinance existing Parent bank debt, (iv) to consummate the Debt Offers (as
defined below), (v) to refinance Parent's convertible debentures, and (vi) for
general corporate purposes. Loans will bear interest during any particular
interest period at the election of Parent, at (i) the Adjusted LIBOR, (ii) the
Adjusted CD Rate or (iii) the Base Rate, plus margins which vary from time to
time depending on Parent's then applicable long-term senior debt rating.
Alternatively, Loans may at the election of Parent bear interest at rates
determined through a competitive bid process, subject to the willingness of one
or more Banks to submit bids from time to time. Interest will be payable at the
end of each applicable interest period and, if earlier, quarterly. In addition
to such interest payments, Parent will be required to pay an ongoing facility
fee on the entire Commitment, the amount of which fee will vary from time to

time depending on Parent's then applicable long-term senior debt rating. Accrued
facility fees will be payable quarterly in arrears. The Commitment Letter
requires the aggregate Commitments to be reduced to $1.5 billion two years after
the consummation of the Offer. The Commitment Letter further provides for a
mandatory Commitment reduction of all net proceeds from debt issues with a
maturity greater than one year and all net proceeds from any equity issues until
such time as the aggregate Commitments have been reduced to $1.5 billion. This
description of the Commitment Letter is not intended to be a complete
description of the terms and conditions thereof and is qualified in its entirety
by reference to the full text thereof which is incorporated herein by reference
and copies of which have been filed as an exhibit to the Tender Offer Statement
on Schedule 14D-1 and Schedule 13D filed by Parent and the Purchaser with the
Commission in connection with the Offer (the 'Schedule 14D-1'). All

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capitalized terms which are used in this paragraph and not otherwise defined
shall have the meanings ascribed to them in the Commitment Letter. The
Commitment Letter may be examined, and copies may be obtained, as set forth in
Section 7 above.

In the event that stockholders of Parent do not approve the issuance of
Parent Common Stock pursuant to the Merger at the Parent Special Meeting, Parent
estimates that up to $3 billion (or an additional $500 million in excess of the
amount necessary if such stockholder approval is obtained in the Merger) will be
required to consummate such refinancing and to pay for the remaining Shares. In
this connection Parent has received a letter dated November 16, 1995 from J.P.
Morgan (the 'J.P. Morgan Letter') which states that, subject to the conditions
described therein, J.P. Morgan is 'highly confident' that in the event that the
stockholders of Parent do not approve the proposed issuance of Parent Common
Stock, an aggregate amount of up to $3 billion can be raised by Parent in the
syndicated bank market. This description of the J.P. Morgan Letter is not
intended to be a complete description of the terms and conditions thereof and is
qualified in its entirety by reference to the full text thereof which is
incorporated herein by reference and copies of which have been filed as an
exhibit to the Schedule 14D-1. The J.P. Morgan Letter may be examined, and
copies may be obtained, as set forth in Section 7 above.

No final decisions have been made concerning the method Parent will employ
to repay such indebtedness. Such decisions when made will be based on Parent's
review from time to time of the advisability of particular actions, as well as
on prevailing interest rates and financial and other economic conditions.

10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY. In the ordinary
course of Parent's long-term strategic review process, Parent routinely analyzes
potential acquisitions of various retail drugstore chains. On August 17, 1995,
Mr. Martin Grass, Chairman and Chief Executive Officer of Parent, spoke by
telephone with Mr. David Schulte, a general partner of the general partner of
the Stockholder and a member of the Company Board. In the conversation, Mr.
Grass told Mr. Schulte that Parent was possibly interested in purchasing the
Company in a merger transaction involving a combination of cash and stock. Mr.
Schulte told Mr. Grass that he would contact Mr. Dwayne Hoven, President and the
Chief Executive Officer of the Company, to ask him to send Mr. Grass a
Confidentiality Agreement. After execution of the Confidentiality Agreement, the

Company provided certain due diligence information requested by Parent.

On August 28, 1995, Mr. Grass, Mr. Franklin Brown, Executive Vice President
and Chief Legal Counsel of Parent, and Mr. Frank Bergonzi, Executive Vice
President and Chief Financial Officer of Parent, met in Chicago with Mr.
Schulte, Ms. Sheli Rosenberg, a member of the Company Board, Mr. Joel Friedland,
a general partner of Chilmark Partners, L.P., an affiliate of the Stockholder,
Mr. Hoven, and Mr. James Hagan, Executive Vice President and Chief Financial
Officer of the Company. A dinner meeting took place and issues such as the
possible price and synergies that would be created from a merger were discussed.
The parties ended the meeting without any definitive conclusions about a future
meeting.

On September 21, 1995, Mr. Grass and Mr. Brown were in Cleveland, Ohio, for
a meeting on another business matter with Mr. Hoven. After the meeting, Mr.
Grass met with Mr. Hoven for a brief period to discuss the possible acquisition
of the Company by Parent. At the meeting, Mr. Grass advised Mr. Hoven that if an
acceptable price could be negotiated, Mr. Grass believed that the transaction
would create the opportunity to build a more successful company than if either
company continued on a stand-alone basis.

On September 28, 1995, Mr. Grass spoke by telephone with Mr. Sam Zell, the
Co-Chairman of the Company, and discussed the terms and price range Mr. Grass
would offer for the Company.

On October 6, 1995, Mr. Hoven spoke with Mr. Grass by telephone and
discussed questions that Mr. Grass had about the due diligence review Parent was
conducting with respect to the Company.

During the week of October 9, 1995, Mr. Rod Dammeyer, a member of the
Company Board, called Mr. Grass and a meeting was arranged for October 31, 1995
in Chicago. At the October 31, 1995 meeting, Mr. Grass and Mr. Brown met with
Mr. Dammeyer and Ms. Rosenberg and established a preliminary basis for
continuing discussions to seek to reach an agreement concerning a transaction,
subject to mutual due diligence, receipt of fairness opinions and Board
approvals. Such officers of Parent and representatives of the Company and the
Stockholder determined to continue discussions on the basis of tentative terms
as follows: Parent would acquire a majority of the outstanding Shares at $27.50
per Share and the remaining Shares would be acquired for shares of Parent Common
Stock based on a target price of $27.50 for Parent Common Stock subject to
negotiating the terms of a 'collar' mechanism. In addition, the Stockholder
would enter into a Stockholder Agreement with Parent in which it would agree to
support

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the transaction. On November 1, 1995, Mr. Grass and Mr. Brown held a telephone
call with Mr. Dammeyer, Ms. Rosenberg, Mr. Schulte and Mr. Friedland to discuss
the collar. At the end of the conversation, the parties had tentatively agreed
upon the terms of a 20% 'collar' mechanism which would provide that stockholders
of the Company participate in 50% of any increase or decrease in the market
value of Parent Common Stock above or below $27.50 during an agreed upon pricing
period.

On November 3, 1995, counsel for Parent distributed a draft Merger
Agreement and Stockholder Agreement to the Company and its legal and financial
advisors.

On November 7, 1995, representatives of Parent and its legal advisors met
with representatives of the Company and its legal advisors to commence
negotiations with respect to the terms of the proposed Merger Agreement and
Stockholder Agreement. Such negotiations continued throughout such week.

On November 9, 1995, the Board of Directors of Parent held a meeting. At
such meeting, members of Parent's senior management, Parent's outside legal
advisors and DLJ made presentations to the Board regarding the proposed
acquisition of the Company. The Board of Directors analyzed and discussed the
proposed Merger Agreement, Offer, Merger and Stockholder Agreement and it was
the consensus of Parent's Board that senior management of Parent should continue
with the negotiations relating to the proposed transaction and report back to
the Board once such negotiations were completed.

During the week of November 13, 1995, members of senior management of
Parent and its legal advisors continued to negotiate the terms of the Merger
Agreement and Stockholder Agreement with representatives of the Company and the
Stockholder, including Mr. Dammeyer and Ms. Rosenberg, and their legal advisors.
During such negotiations, representatives of the Stockholder advised Parent that
the Stockholder would be willing to agree to tender its Shares in the Offer and
vote for the Merger but would not be willing to grant Parent an option to
purchase the Stockholder's Shares.

Parent then insisted upon, and negotiated with the Company to obtain, an
option to purchase 19.9% of the Company's outstanding Shares at a price of
$27.50 per Share. Representatives of the Company advised Parent that they would
be willing to recommend entering into such a Stock Option Agreement subject to
negotiation of satisfactory terms. The parties continued to negotiate various
modifications to the Merger Agreement, Stock Option Agreement and Stockholder
Agreement. Such negotiations continued through November 29, 1995.

On November 28, 1995, the Board of Directors of Parent held a special
meeting to review, with the advice and assistance of the Board's financial and
legal advisors, the proposed Merger Agreement, the Stock Option Agreement, the
Stockholder Agreement and the transactions contemplated thereby, including the
Offer and Merger. At such meeting, Parent's management and legal advisors made
presentations to the Board concerning the transaction and Parent's financial
advisor, DLJ, provided its opinion to the effect that the consideration to be
paid by Parent pursuant to the Merger Agreement, taken as a whole, is fair to
the stockholders of the Parent from a financial point of view. Following the
Board's review of the transaction, the Board, subject to the resolution of
remaining open issues, unanimously authorized and approved the proposed Merger
Agreement, Stock Option Agreement, Stockholder Agreement and the transactions
contemplated thereby, and authorized the execution and delivery of such
Agreements.

Also on November 28, 1995, the Company Board held a special meeting to
review, with the advice and assistance of the Company Board's financial and
legal advisors, the proposed Merger Agreement, Stock Option Agreement,
Stockholder Agreement and the transactions contemplated thereby, including the

Offer and Merger. At such meeting, the Company's management and financial and
legal advisors discussed the transaction with the Company Board and the
Company's financial advisor, Morgan Stanley, provided its written opinion to the
effect that the consideration to be received by the holders of Shares pursuant
to the Offer and the Merger, taken together, is fair from a financial point of
view to such holders. The opinion of Morgan Stanley is described in and is
attached to the Company's Schedule 14D-9. Stockholders are urged to read the
full text of that opinion. Following the Company Board's review of the
transaction, the Company Board, subject to the resolution of remaining open
issues, unanimously (with one director absent and two directors abstaining)
approved the proposed Merger Agreement, Stock Option Agreement and the
transactions contemplated thereby, authorized the execution and delivery of such
Agreements, determined that the Offer and the Merger are fair to and in the best
interests of the holders of Shares, recommended that stockholders of the Company
who desire to receive cash for their Shares accept the Offer and tender their
Shares pursuant to the Offer, and recommended that stockholders of

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the Company approve and adopt the Merger Agreement. The Board's approval of the
Merger Agreement, the Stock Option Agreement, the Stockholder Agreement and the
transactions contemplated thereby constituted approval for purposes of Section
203 of the DGCL such that the provisions of the statute are not applicable to
such Agreements or the transactions contemplated thereby.

Negotiations between members of senior management of Parent and its legal
advisors and representatives of the Company and their legal advisors to finalize
the remaining issues in the Merger Agreement continued through November 29,
1995. On the evening of November 29, 1995, following the resolution of such open
issues, Parent, the Purchaser and the Company executed and delivered the Merger
Agreement and the Stock Option Agreement; and Parent, the Purchaser and the
Stockholder executed and delivered the Stockholder Agreement.

On November 30, 1995, Parent and the Company issued the following joint
press release announcing the execution of the Merger Agreement, Stockholder
Agreement and Stock Option Agreement:

FOR IMMEDIATE RELEASE

RITE AID CORPORATION AND REVCO COMBINE TO CREATE
NATION'S LARGEST DRUGSTORE CHAIN

MERGER CREATES COMPANY WITH OVER $11 BILLION IN REVENUES

CASH TENDER SCHEDULED TO COMMENCE EARLY NEXT WEEK

------------------------

CAMP HILL, PA (November 30, 1995)--Rite Aid Corporation (RAD: NYSE,
PSE) and Revco D.S., Inc. (RXR: NYSE) today announced that they have
entered into a definitive merger agreement in which Rite Aid would acquire
Revco. The merger creates the nation's largest drugstore chain with
expected annualized revenues of over $11 billion and more than 4,500 stores
in 22 states and the District of Columbia. The transaction is expected to

be accretive to Rite Aid's earnings per share by the end of the first year
of operations following the merger.

Under the agreement, Rite Aid would purchase, in a first-step tender
offer, at least 50.1% of the outstanding shares of Revco on a fully-diluted
basis for $27.50 per share in cash and the remainder of the outstanding
shares would be converted into Rite Aid stock in a second-step merger. As
described below, the value of Rite Aid shares to be received for each Revco
share in the second-step merger will increase to the extent the average
value of Rite Aid stock is greater that $27.50 per share during a pricing
period and will decrease if the average value of Rite Aid stock is less
than $27.50 per share during such pricing period, but in no event will more
than 1.125 shares or less than .91666 shares of Rite Aid stock be issued
for each Revco share in the merger.

The tender offer is not conditioned on obtaining financing. The total
value of the merger is approximately $1.8 billion.

The merger, which was approved by each company's Board of Directors,
is expected to be completed in the first quarter of 1996. The tender offer
is scheduled to commence early next week.

Martin Grass, Chairman of the Board of Directors and Chief Executive
Officer of Rite Aid, said, 'The combination of these two great companies
will create the preeminent retail drugstore chain in the United States.
This transaction will nearly double our revenues and number of stores. Our
significant investment in technology and infrastructure coupled with our
innovative management changes have prepared us to seize the competitive
advantage this merger represents. We anticipate a quick and smooth
integration of the two companies.

'The merger will increase Rite Aid's competitive advantage in our
prescription benefits management subsidiary, Eagle Managed Care,' Mr. Grass
continued. 'The addition of Revco's mail order capacity, as well as the
increased number of outlets available in the combined entity, complements
and broadens Rite Aid's managed healthcare delivery system. This expanded
capacity is important leverage in attracting new contracts to the company.

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'We will be the best-positioned retail drugstore chain in the country
to compete with the three large vertically integrated pharmacy benefit
managers owned by the major pharmaceutical manufacturers. This combination
should allow Rite Aid to offer customers the most competitive pharmacy
prescription prices and services.'

D. Dwayne Hoven, President and Chief Executive Officer of Revco, said,
'In an environment of consolidation, Revco's Board of Directors felt that
this offer was fair and reasonable and in the best interest of our
stockholders. This offer is the culmination of one of the most remarkable
turnarounds in corporate history. We built a company with productive real
estate, clean inventories and great people. Revco people should not lose
sight of what they have accomplished.'

Rite Aid expects to achieve synergies of $156 million through
elimination of overlapping positions, streamlining distribution, reducing
redundant advertising, and enhanced purchasing power. As in past Rite Aid
mergers, Rite Aid will provide excellent severance packages, including
out-placement counseling, to all affected personnel. Following completion
of the merger, the Revco stores will operate under the Rite Aid banner. The
headquarters of Rite Aid will remain in Camp Hill, Pennsylvania.

Rite Aid indicated that it plans to take a pre-tax charge to earnings
of $163 million to cover the cost of integrating the two companies. Rite
Aid anticipates that only a small percentage of the combined company's
stores will be closed. A decision on which drugstores will be closed will
occur after the merger is completed.

The merger agreement provides for Ocean Acquisition Corporation, a
subsidiary of Rite Aid, to make a cash tender offer for at least 50.1% of
the outstanding shares of common stock of Revco on a fully diluted basis at
a price of $27.50 per share. The tender offer will be followed by a
second-step merger in which each share of Revco not acquired in the tender
offer will be converted into the right to receive Rite Aid common stock
and/or, under certain circumstances, cash.

The per share value of Rite Aid common stock which stockholders of
Revco would receive in the second-step merger will be determined during a
randomly selected fifteen-day pricing period during the forty trading days
ending five days before the meeting of stockholders of Revco to consider
the merger. Stockholders of Revco would receive one share of Rite Aid
common stock if the average market value of Rite Aid common stock during
the pricing period is $27.50.

If the average value of Rite Aid common stock is greater than $27.50
during the selected fifteen-day pricing period, stockholders of Revco will
receive, for each Revco share, Rite Aid common stock having a value of
$27.50 plus 50% of the increase in market value of Rite Aid common stock
over $27.50, provided that in no event would Rite Aid issue less than
.91666 shares of Rite Aid common stock for each Revco share in the merger.
Similarly, if the average value of Rite Aid common stock during the pricing
period is less than $27.50, stockholders of Revco will receive, for each
Revco share, Rite Aid common stock having a value of $27.50 less 50% of the
decrease in market value of Rite Aid common stock below $27.50, provided
that in no event would Rite Aid issue more than 1.125 shares of Rite Aid
common stock.

If the average value of Rite Aid common stock during the pricing
period is less than $27.50, Rite Aid would have the option of delivering,
for each Revco share, one share of Rite Aid common stock plus cash in an
amount equal to 50% of the decrease in market value of Rite Aid common
stock below $27.50, provided that in no event would more than $2.75 per
Revco share be paid in cash.

and shares of Rite Aid common stock (determined based on the formulas
described above) representing in the aggregate 19.9% of Rite Aid's
outstanding shares.

Rite Aid also stated that it has entered into a stockholder agreement
with Zell/Chilmark Fund L.P., the major stockholder of Revco, pursuant to
which Zell/Chilmark has agreed to tender its Revco shares (representing
approximately 19.7 % of Revco's outstanding shares) into Rite Aid's tender
offer and to vote in favor of the merger. Revco has granted Rite Aid an
option to purchase 19.9% of Revco's shares under certain circumstances at
$27.50 per share.

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The tender offer is conditioned on, among other things, the valid
tender of 50.1% of the outstanding Revco shares on a fully diluted basis
and the expiration or termination of any applicable waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

Donaldson, Lufkin & Jenrette Securities Corporation provided a
fairness opinion for Rite Aid. Morgan Stanley & Co. Incorporated provided a
fairness opinion for Revco.

Revco D.S., Inc., based in Twinsburg, Ohio, operates over 2,100 stores
in 14 Midwestern, Southeastern and Eastern states and has annual sales of
approximately $4.4 billion.

Rite Aid Corporation, based in Camp Hill, Pennsylvania, is the
nation's largest drugstore chain, with over 2,700 stores in 21 states and
the District of Columbia.

General information about Rite Aid including corporate background and
press releases is available, free of charge, through the company's
News-On-Demand fax service at 800-916-7788.

The Purchaser commenced the Offer on December 4, 1995.

11. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY; MERGER AGREEMENT;
STOCKHOLDER AGREEMENT; STOCK OPTION AGREEMENT; CONFIDENTIALITY AGREEMENT.

Purpose of the Offer. The purpose of the Offer is for Parent to acquire a
significant equity interest in the Company and acquire control of the Company
Board as a first step in acquiring the entire equity interest in the Company.
The purpose of the Merger is for Parent to acquire all Shares not purchased
pursuant to the Offer. Upon consummation of the Merger, the Company will become
a wholly owned subsidiary of Parent. The Offer is being made pursuant to the
Merger Agreement.

Upon consummation of the Merger, Parent intends to continue to review the
Company and its assets, businesses, operations, properties, policies, corporate
structure, capitalization and management and consider if any changes would be
desirable in light of the circumstances then existing. Upon consummation of the
Merger, Parent intends to review the business of the Company and identify
synergies and cost savings.

Parent regards the resulting consolidation of the Company and the Purchaser
as an opportunity to achieve certain cost savings and synergies. Based on a
preliminary review of the Company's business and operations, Parent currently
estimates that the Merger will result in approximately $156 million of
quantifiable annual cost savings including the improvement in gross margins
through enhanced purchasing power, closure of the Company's corporate
headquarters and overlapping distribution facilities, elimination of duplicative
overhead, elimination of redundant advertising expenditures, the consolidation
of data centers and improved communications systems and a working capital
benefit from the consolidation of warehouse inventories. THE FOREGOING ESTIMATES
OF COST SAVINGS AND SYNERGIES ARE INHERENTLY SUBJECT TO SIGNIFICANT
UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND THE CONTROL OF PARENT.
THERE CAN BE NO ASSURANCE THAT THEY WILL BE ACHIEVED AND ACTUAL SAVINGS AND
SYNERGIES MAY VARY MATERIALLY FROM THOSE ESTIMATED. THE INCLUSION OF SUCH
ESTIMATES HEREIN SHOULD NOT BE REGARDED AS AN INDICATION THAT PARENT, THE
PURCHASER OR ANY OTHER PARTY CONSIDERS SUCH ESTIMATES AN ACCURATE PREDICTION OF
FUTURE EVENTS.

Under the DGCL, the approval of the Company Board and the affirmative vote
of the holders of a majority of the outstanding Shares is required to approve
and adopt the Merger Agreement and the transactions contemplated thereby,
including the Merger. The Company Board has unanimously (with one director
absent and with two directors abstaining) approved and adopted the Merger
Agreement and the transactions contemplated thereby. Thus, the only remaining
required corporate action of the Company is the approval and adoption of the
Merger Agreement and the transactions contemplated thereby by the affirmative
vote of the holders of a majority of the Shares. ACCORDINGLY, IF THE MINIMUM
CONDITION IS SATISFIED, THE PURCHASER WILL HAVE SUFFICIENT VOTING POWER TO CAUSE
THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY WITHOUT THE AFFIRMATIVE VOTE OF ANY OTHER STOCKHOLDER OF
THE COMPANY.

In the Merger Agreement, the Company has agreed to convene a meeting of its
stockholders as promptly as practicable following the consummation of the Offer
for the purpose of considering and taking action on the Merger Agreement and the
transactions contemplated thereby. The Purchaser has agreed that all Shares
owned by it and its Subsidiaries will be voted in favor of the Merger Agreement
and the transactions contemplated thereby. As used in this Offer to Purchase,
the word 'Subsidiary' means, with respect to any party, any corporation or other
organization, whether incorporated or unincorporated, of which (i) such party or
any other Subsidiary of such party is

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<PAGE>
a general partner (excluding such partnerships where such party or any
Subsidiary of such party do not have a majority of the voting interest in such
partnership) or (ii) at least a majority of the securities or other interests
having by their terms ordinary voting power to elect a majority of the Board of
Directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by such party or by any one or more of its Subsidiaries, or by such party and
one or more of its Subsidiaries.

Plans for the Company. It is expected that, initially following the
Merger, the business and operations of the Company will, except as set forth in
this Offer to Purchase, be integrated into the operations of Parent as rapidly
as practicable following the Merger. Parent intends to close the Company's
corporate headquarters at 1925 Enterprise Parkway, Twinsburg, Ohio (the
'Headquarters') within twelve months following consummation of the Merger and to
integrate the Company's corporate headquarters operations into Parent's
operations. Parent also expects to take a pre-tax charge to earnings of $163
million to cover the cost of integrating the two companies. Parent anticipates
that only a small percentage of the combined stores of Parent and the Company
will be closed. A decision on which stores will be closed is not expected to be
made until after the consummation of the Merger. In addition, Parent will
continue to evaluate the business and operations of the Company during the
pendency of the Offer and after the consummation of the Offer and the Merger,
and subject to the terms of the Merger Agreement, will take such further actions
as it deems appropriate under the circumstances then existing.

MERGER AGREEMENT

The following is a summary of the material terms of the Merger Agreement.
This summary is not intended to be a complete description of the terms and
conditions thereof and is qualified in its entirety by reference to the full
text thereof, which is incorporated herein by reference and a copy of which has
been filed as an exhibit to the Schedule 14D-1. The Merger Agreement may be
examined, and copies may be obtained, as set forth in Section 7 above.
Capitalized terms not otherwise defined herein or in the following summary shall
have the meanings set forth in the Merger Agreement.

The Offer. The Merger Agreement provides that the Purchaser will commence
the Offer and that, upon the terms and subject to the prior satisfaction or
waiver of the conditions of the Offer, the Purchaser will purchase for cash not
less than 35,144,833 Shares and up to all of the issued and outstanding Shares
at a price of $27.50 per Share, net to the seller in cash, the exact number of
Shares within such range to be determined by Parent in its sole discretion. The
Merger Agreement provides that Parent may change the amount of Shares sought to
be purchased in the Offer within such range at any time prior to consummation of
the Offer, provided that Parent complies with the requirements of Rule 14e-1 of
the Exchange Act. The Offer is subject to the Minimum Condition and the other
conditions set forth in Section 14. The Purchaser shall, on the terms and
subject to the prior satisfaction or waiver of the conditions of the Offer,
accept for payment and pay for Shares tendered as soon as practicable after the
later of the satisfaction of the conditions set forth in Section 14 and the
expiration of the Offer; provided, however, that no such payment shall be made
until after any calculation of proration as required by applicable law. The
obligations of the Purchaser to commence the Offer and to accept for payment and
to pay for any Shares validly tendered on or prior to the expiration of the
Offer and not withdrawn is subject only to the conditions set forth in Section
14. The Merger Agreement provides that without the written consent of the
Company, the Purchaser shall not amend or waive the Minimum Condition, decrease
the Offer Price, change the number of Shares sought to an amount less than 50.1%
of the Shares outstanding on a fully-diluted basis, change the form of
consideration to be paid pursuant to the Offer or impose conditions to the Offer
in addition to those set forth in Section 14, or amend any other term or
condition of the Offer in any manner which is adverse to the holders of Shares;

provided, however, that if on the initial scheduled expiration date of the Offer
(as it may be extended in accordance with the terms thereof), all conditions to
the Offer shall not have been satisfied or waived, the Offer may be extended
from time to time without the consent of the Company for such period of time as
is reasonably expected to be necessary to satisfy the unsatisfied conditions. In
addition, the Offer Price may be increased and the Offer may be extended to the
extent required by law in connection with such increase in each case without the
consent of the Company.

The Merger. The Merger Agreement provides that, subject to the terms and
conditions thereof, and in accordance with the DGCL, at the Effective Time, the
Company and the Purchaser shall consummate the Merger pursuant to which (i) the
Purchaser shall be merged with and into the Company and the separate corporate
existence of the Purchaser shall thereupon cease, and (ii) the Company shall be
the Surviving Corporation and shall continue to be

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governed by the laws of the State of Delaware. Pursuant to the Merger, (x) the
Certificate of Incorporation of the Company, as in effect immediately prior to
the Effective Time, shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter amended as provided by law and such Certificate of
Incorporation, and (y) the By-laws of the Company, as in effect immediately
prior to the Effective Time, shall be the By-laws of the Surviving Corporation
until thereafter amended as provided by law, the Certificate of Incorporation of
the Surviving Corporation and such By-laws. The Merger shall have the effects
set forth in the DGCL.

Conversion of Shares. The Merger Agreement provides that each share of
Common Stock, par value $.01 per share, of the Purchaser issued and outstanding
immediately prior to the Effective Time without any other action by Parent, the
Purchaser or the Company, shall, at the Effective Time, be converted into and
become one fully paid and nonassessable share of common stock of the Surviving
Corporation.

Each Share issued and outstanding immediately prior to the Effective Time
(other than Shares owned by the Company as treasury stock and any Shares owned
by Parent, the Purchaser or any other direct or indirect wholly owned subsidiary
of Parent and other than Dissenting Shares, if any) shall, at the Effective
Time, by virtue of the Merger and without any action on the part of the holder
thereof, be converted into either (i) the right to receive a number of duly
authorized, validly issued, fully paid and nonassessable shares of Parent Common
Stock determined as set forth below; provided that Parent shall not issue more
than 1.125 nor less than .91666 shares of Parent Common Stock per Share (the
'Exchange Ratio'), or (ii) if the alternative consideration described below is
applicable, then the right to receive the Alternative Consideration (as defined
below), plus, in each of clause (i) and (ii) of this sentence, any Additional
Consideration (as defined below).

For purposes hereof, 'Average Parent Share Price' shall mean the average
closing price per share of Parent Common Stock on the NYSE as reported on the
NYSE Composite Tape for fifteen NYSE trading days selected by Parent and the
Company by lot from among the forty NYSE trading days ending on the fifth
trading day immediately preceding the Company Special Meeting. 'Transaction

Price' shall mean $27.50 per Share. The number of shares of Parent Common Stock
into which each Share shall be converted in the Merger shall be determined as
follows:

In the event the Average Parent Share Price equals the Transaction
Price, each Share shall be converted into one share of Parent Common Stock.

In the event that the Average Parent Share Price is greater than the
Transaction Price, each Share shall be converted into a number of shares of
Parent Common Stock (rounded to the nearest one one-hundred thousandth)
determined by the following formula:

Transaction Price plus .5 X (Average
Parent Share Price minus
Number of shares of Parent Common Stock = Transaction Price)
------------------------------------
Average Parent Share Price

In the event that the Average Parent Share Price is less than the
Transaction Price, each Share shall be converted, at the option of Parent,
into either:

(I) a number of shares of Parent Common Stock (rounded to the nearest
one one-hundred thousandth) determined by the following formula:

Transaction Price minus .5 X
(Transaction Price minus Average
Number of shares of Parent Common Stock = Parent Share Price)
--------------------------------
Average Parent Share Price

or (II) one share of Parent Common Stock plus the Cash Adjustment
Amount, without any interest thereon, where the Cash Adjustment Amount
(as defined in the Merger Agreement) is determined by the following
formula:

Cash Adjustment Amount = .5 X (Transaction Price minus
Average Parent Share Price);

provided however, in no event shall the Cash Adjustment Amount be greater than
$2.75 per Share.

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<PAGE>
All Shares that are owned by the Company as treasury stock and any Shares
owned by Parent, the Purchaser or any other direct or indirect wholly owned
Subsidiary of Parent shall, at the Effective Time, be cancelled and retired and
shall cease to exist and no Parent Common Stock or cash, if the Alternative
Consideration is applicable, shall be delivered in exchange therefor.

The Merger Agreement provides that, on and after the Effective Time,
holders of certificates which immediately prior to the Effective Time
represented outstanding Shares (the 'Certificates') shall cease to have any
rights as stockholders of the Company, except the right to receive the

consideration set forth therein (other than the Merger Consideration) for each
Share held by them or, if applicable, payments due to holders of Dissenting
Shares.

The Merger Agreement provides that in the event that the stockholders of
Parent do not approve the issuance of Parent Common Stock pursuant to the Merger
at the Parent Special Meeting (as defined below), but all conditions to the
Merger are otherwise satisfied or waived (if permissible), the Company, Parent
and the Purchaser shall nonetheless consummate the Merger and each Share issued
and outstanding immediately prior to the Effective Time (other than treasury
Shares and Shares owned by Parent and its Subsidiaries) will, at the Effective
Time, by virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive the following consideration (the
'Alternative Consideration') in a combination of shares of Parent Common Stock
and cash determined as follows:

The number of shares of Parent Common Stock into which each Share
shall be converted in the Merger (the 'Adjusted Exchange Ratio') shall
equal the Exchange Ratio determined pursuant to the applicable formula set
forth above (assuming no Cash Adjustment Amount is paid) multiplied by a
fraction (the 'Adjustment Fraction'), the numerator of which is the number
of shares of Parent Common Stock equal to 19.9% of the then outstanding
shares of Parent Common Stock and the denominator of which is (a) the
Exchange Ratio multiplied by (b) the aggregate number of outstanding Shares
(other than treasury Shares and Shares owned by Parent and its
Subsidiaries); and

The amount of cash (the 'Adjusted Alternative Cash Consideration')
into which each Share shall be converted in the Merger shall equal the
Transaction Price multiplied by (1 minus the Adjustment Fraction).

The Merger Agreement provides that in the event the Merger is not
consummated prior to April 29, 1996 and the Company shall not have materially
breached the Merger Agreement (other than by acts caused or permitted by
Parent), then the stockholders of the Company will be entitled to receive
interest on the amount of the Merger Consideration that they receive, from April
29, 1996 until the earlier of the Effective Time or June 30, 1996, calculated at
an annual rate equal to the prime rate of interest (as announced from time to
time by Morgan Guaranty Trust Company of New York). For purposes of calculating
the Merger Consideration, the Average Parent Share Price, if not otherwise
ascertainable in accordance with the terms of the Merger Agreement, shall be the
average price of Parent Common Stock based on the 15 highest closing prices of
Parent Common Stock since the consummation of the Offer until the earlier of
June 30, 1996 or the Effective Time.

In the event Parent and/or the Purchaser, in violation of their obligations
under the Merger Agreement, fails or refuses to consummate the Merger on or
prior to June 30, 1996 and the Company shall not have materially breached the
Merger Agreement (other than by acts caused or permitted by Parent), then, in
addition to any rights or remedies that the Company and its stockholders
otherwise have in law or at equity as a result thereof, the stockholders of the
Company will be entitled to receive interest from June 30, 1996 on the amount of
the Merger Consideration not paid until such Merger Consideration is paid,
calculated at the annual rate of the higher of (i) the prime rate of interest

(as announced from time to time by Morgan Guaranty Trust Company of New York)
plus 300 basis points or (ii) the amount otherwise permitted by law. For
purposes of calculating the Merger Consideration, the Average Parent Share
Price, if not otherwise ascertainable in accordance with the terms of the Merger
Agreement, shall be the average price of Parent Common Stock based on the 15
highest closing prices of Parent Common Stock since the consummation of the
Offer until such Merger Consideration is paid. Any additional consideration paid
or payable pursuant to this paragraph or the immediately preceding paragraph is
referred to herein as 'Additional Consideration.'

If Shares are purchased in the Offer, Parent and the Purchaser have
covenanted and agreed to consummate the Merger pursuant to the terms of the
Merger Agreement not later than June 30, 1996.

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<PAGE>
In lieu of any fractional share of Parent Common Stock, Parent shall pay to
each former stockholder of the Company who otherwise would be entitled to
receive a fractional share of Parent Common Stock an amount in cash determined
by multiplying (i) the Average Parent Share Price on the date on which the
Effective Time occurs by (ii) the fractional interest in a share of Parent
Common Stock to which such holder would otherwise be entitled.

Each share of Parent Common Stock issued to holders of Shares in the Merger
shall be issued together with one associated preferred stock purchase right (a
'Right') in accordance with the Shareholder Rights Agreement, dated as of April
5, 1989, between Parent and Harris Trust Company of New York (the 'Rights
Agreement').

Treatment of Stock Options. The Merger Agreement provides that, effective
as of the Effective Time, each option granted by the Company to purchase Shares
that is outstanding and unexercised immediately prior thereto (the 'Company
Stock Options'), will cease to represent a right to acquire Shares and will be
converted automatically into an option to purchase shares of Parent Common Stock
in an amount and at an exercise price determined as provided below (and
otherwise subject to the terms of the Company 1992 Long-Term Incentive
Compensation Plan, as amended and the Company 1992 Non-Employee Directors' Stock
Option Plan, as amended (together the 'Option Plans'), and the agreements
evidencing grants thereunder). The number of shares of Parent Common Stock
subject to, and the option price and terms and conditions of, the new option
shall be determined in a manner that preserves both (i) the aggregate gain (or
loss) on the Company Stock Option immediately prior to the Effective Time and
(ii) the ratio of the exercise price per share subject to the Company Stock
Option to the fair market value (determined immediately prior to the Effective
Time) per share subject to such option, provided that any fractional shares of
Parent Common Stock resulting from such determination will be rounded down to

the nearest share. The Merger Agreement also provides that, effective as of the
Effective Time, the Surviving Corporation will assume each Company Stock Option
agreement, each as amended, as provided therein. The adjustment provided herein
with respect to any Company Stock Options that are 'incentive stock options' (as
defined in Section 422 of the Code) shall be and is intended to be effected in a
manner that is consistent with Section 424(a) of the Code. The duration, vesting
and other terms of the new options will be the same as the Company Stock Options
that they replace, except that all references to the Company shall be deemed to
be references to Parent. In the event that a holder of a Company Stock Option is
terminated without Cause (as defined in the Merger Agreement) within 12 months
of the Effective Time, then such holder's new option will become 100%
exercisable as of such date of termination.

The Merger Agreement further provides that, notwithstanding the immediately
preceding paragraph, outstanding vested options under the 1992 Long Term
Incentive Plan ('LTIP') held by Covered Executives (as defined in the Merger
Agreement), including options that become vested in connection with a 'Change in
Control' under the terms of existing award agreements under the LTIP, will,
effective as of the Effective Time become exercisable under a cashless exercise
procedure made available by the Company (subject to applicable law and any
administrative procedures and policies deemed appropriate by the Company).
Individuals subject to Section 16 of the Exchange Act will be provided with a
cash compensation arrangement providing such individuals with the opportunity to
receive a cash payment approximating the benefits that would be deprived by
reason of Section 16 of the Exchange Act.

The Merger Agreement provides that, effective as of the Effective Time, the
Option Plans will terminate and the provisions in any other plan, program,
agreement or arrangement, providing for the issuance or grant of any other
interest in respect of the capital stock of the Company or any of its
Subsidiaries will be deleted. Furthermore, the Company will take all actions
necessary to ensure that following the Effective Time, no holder of Company
Stock Options or any participant in the Option Plans or any other plans,
programs, agreements or arrangements will have any right thereunder to acquire
any equity securities of the Company, the Surviving Corporation or any
subsidiary of either of the foregoing.

25
<PAGE>
Directors and Officers. Pursuant to the Merger Agreement, promptly upon
the acceptance for payment of any Shares by Parent or any of its Subsidiaries
pursuant to the Offer, Parent shall be entitled to designate such number of
directors, rounded up to the next whole number, on the Company Board as is equal
to the product of the total number of directors on such Board (giving effect to
the directors designated by Parent pursuant to this sentence) multiplied by the
percentage that the aggregate number of Shares beneficially owned by the
Purchaser, Parent and any of their affiliates bears to the total number of
Shares then outstanding. The Company shall, upon request of Parent, use its best
efforts promptly either to increase the size of its Board of Directors or, at
the Company's election, secure the resignations of such number of its incumbent
directors as is necessary to enable Parent's designees to be so elected to the
Company's Board, and shall cause Parent's designees to be so elected. At such
time, the Company shall also cause persons designated by Parent to constitute
the same percentage (rounded up to the next whole number) as is on the Company

Board of (i) each committee of the Company Board, (ii) each board of directors
(or similar body) of each Subsidiary of the Company and (iii) each committee (or
similar body) of each such board, in each case only to the extent permitted by
applicable law or the rules of any stock exchange on which the Shares are
listed. Notwithstanding the foregoing, until the Effective Time, each of Parent,
the Purchaser and the Company shall use its best efforts to retain as a member
of the Company's Board at least two directors who are directors of the Company
on the date of the Merger Agreement (the 'Continuing Directors'); provided, that
subsequent to the purchase of and payment for Shares pursuant to the Offer,
Parent shall always have its designees represent at least a majority of the
entire Board of Directors. In the event of a vacancy on the Company Board
resulting from the resignation or death of any Continuing Director, such vacancy
shall be filled by the remaining Continuing Directors, or if there are no
remaining Continuing Directors, by the designees of the Stockholder. The
Company's obligations pursuant to this paragraph are subject to Section 14(f) of
the Exchange Act and Rule 14f-1 promulgated thereunder.

Stockholders' Meetings. The Merger Agreement provides that in order to
consummate the Merger, the Company, acting through the Company Board, will, in
accordance with applicable law, duly call, give notice of, convene and hold the
Company Special Meeting, as soon as practicable after the Registration Statement
is declared effective, for the purpose of considering and taking action upon the
Merger Agreement. The Company shall include in the joint proxy
statement/prospectus forming a part of the Registration Statement (the 'Proxy
Statement/Prospectus') the recommendation of the Company Board that stockholders
of the Company vote in favor of the approval of the Merger and the adoption of
the Merger Agreement. The Merger Agreement provides that Parent will vote, or
cause to be voted, all of the Shares then owned by it, the Purchaser or any of
its other Subsidiaries, in favor of the approval of the Merger and adoption of
the Merger Agreement at the Company Special Meeting. Accordingly, if the Minimum
Condition is satisfied, the Purchaser will have sufficient voting power to cause
the approval and adoption of the Merger Agreement and the transactions
contemplated thereby without the vote of any other stockholder of the Company.

In order to consummate the Merger, Parent, acting through its Board of
Directors, shall, in accordance with applicable law, duly call, give notice of,
convene and hold a special meeting of its stockholders (the 'Parent Special
Meeting' and together with the Company Special Meeting, the 'Special Meetings'),
as soon as practicable after the Registration Statement is declared effective,
for the purpose of authorizing the issuance of shares of Parent Common Stock
pursuant to the Merger. Parent shall include in the Proxy Statement/Prospectus
the recommendation of the Board of Directors of Parent that stockholders of
Parent vote in favor of the issuance of shares of Parent Common Stock in the
Merger.

Interim Operations. In the Merger Agreement, the Company has covenanted
and agreed that: (i) except as expressly provided in the Merger Agreement, (ii)
during the period prior to the consummation of the Offer, except with the prior
written consent of Parent, (iii) during the period following the consummation of
the Offer and prior to the Effective Time, except with the authorization of the
Company Board, including the affirmative vote of a majority of the Continuing
Directors, and (iv) during the period following consummation of the Offer and
prior to the Effective Time, except for prepayments by Parent of indebtedness of
the Company and the advancement of funds by Parent to the Company on the terms

and conditions, and at the interest rate, and for the purposes for which
borrowing may be made, under the Company's existing credit facility: (a) the
business of the Company and its Subsidiaries shall be conducted only in the
ordinary course of business consistent with past practice and, to the extent
consistent therewith, each of the Company and its Subsidiaries will use its best
efforts to preserve its business organization intact and maintain its existing
relations with customers, suppliers,

26
<PAGE>
employees, creditors and business partners; (b) the Company will not, directly
or indirectly, split, combine or reclassify the outstanding Shares, or any
outstanding capital stock of any of the Subsidiaries of the Company; (c) neither
the Company nor any of its Subsidiaries will: (I) amend its certificate of
incorporation or by-laws or similar organizational documents; (II) declare, set
aside or pay any dividend or other distribution payable in cash, stock or
property with respect to its capital stock other than dividends paid by the
Company's Subsidiaries to the Company or its Subsidiaries; (III) issue, sell,
transfer, pledge, dispose of or encumber any additional shares of, or securities
convertible into or exchangeable for, or options, warrants, calls, commitments
or rights of any kind to acquire, any shares of capital stock of any class of
the Company or its Subsidiaries, other than issuances pursuant to exercise of
stock-based awards or options outstanding on the date thereof; (IV) transfer,
lease, license, sell, mortgage, pledge, dispose of, or encumber any material
assets other than (x) in the ordinary course of business consistent with past
practice or (y) pursuant to existing agreements previously disclosed by the
Company in writing to Parent and the Purchaser; or (V) redeem, purchase or
otherwise acquire directly or indirectly any of its capital stock; (d) neither
the Company nor any of its Subsidiaries shall: (I) except as otherwise provided
in the Merger Agreement, and except for normal, regularly scheduled increases
for nonofficer employees consistent with past practice or pursuant to the terms
of existing collective bargaining agreements, grant any increase in the
compensation payable or to become payable by the Company or any of its
Subsidiaries to any officer or employee (including through any new award made
under, or the exercise of any discretion under, any Benefit Plan); (II) adopt
any new, or amend or otherwise increase, or accelerate the payment or vesting of
the amounts payable or to become payable under any existing, bonus, incentive
compensation, deferred compensation, severance, profit sharing, stock option,
stock purchase, insurance, pension, retirement or other employee benefit plan
agreement or arrangement; (III) enter into any, or amend any existing,
employment or severance agreement with or, grant any severance or termination
pay to any officer, director, employee or consultant of the Company or any of
its Subsidiaries; or (IV) make any additional contributions to any grantor trust
created by the Company to provide funding for non-tax-qualified employee
benefits or compensation; or (V) provide any severance program to any Subsidiary
which does not have a severance program as of the date of the Merger Agreement;
(e) neither the Company nor any of its Subsidiaries shall modify, amend or
terminate any of the Company Agreements or waive, release or assign any material
rights or claims, except in the ordinary course of business consistent with past
practice; (f) neither the Company nor any of its Subsidiaries will permit any
material insurance policy naming it as a beneficiary or a loss payable payee to
be cancelled or terminated without notice to Parent, except in the ordinary
course of business consistent with past practice; (g) except as previously
disclosed by the Company in writing to Parent and the Purchaser, neither the

Company nor any of its Subsidiaries will: (I) incur or assume any debt except
for borrowings under existing credit facilities in the ordinary course
consistent with past practice; (II) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other person, except in the ordinary course of business
consistent with past practice; (III) make any loans, advances or capital
contributions to, or investments in, any other person (other than to wholly
owned Subsidiaries of the Company or customary loans or advances to employees in
accordance with past practice); or (IV) enter into any material commitment
(including, but not limited to, any leases, capital expenditure or purchase of
assets) other than purchases of inventory in the ordinary course of business
consistent with past practice; (h) neither the Company nor any of its
Subsidiaries shall change any of the accounting principles used by it unless
required by GAAP; (i) neither the Company nor any of its Subsidiaries shall pay,
discharge or satisfy any claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction of any such claims, liabilities or obligations, (I)
reflected or reserved against in the consolidated financial statements (or the
notes thereto) of the Company and its consolidated Subsidiaries, (II) incurred
in the ordinary course of business consistent with past practice or (III) which
are legally required to be paid, discharged or satisfied; (j) neither the
Company nor any of its Subsidiaries will adopt a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring, recapitalization
or other material reorganization of the Company or any of its Subsidiaries or
any agreement relating to a Takeover Proposal (as defined below) (other than the
Merger); (k) neither the Company nor any of its Subsidiaries will take, or agree
to commit to take, any action that would make any representation or warranty of
the Company contained in the Merger Agreement inaccurate in any respect at, or
as of any time prior to, the Effective Time; (l) neither the Company nor any of
its Subsidiaries will engage in any transaction with, or enter into any
agreement, arrangement, or understanding with, directly or indirectly, any of
the Company's affiliates, including, without limitation, any transactions,
agreements, arrangements or understandings with any affiliate or other Person
covered under Item 404 of Regulation S-K

27
<PAGE>
under the Securities Act that would be required to be disclosed under such Item
404, other than pursuant to such agreements, arrangements, or understandings
existing on the date of the Merger Agreement; (m) close, shut down, or otherwise
eliminate any of the Company's stores other than in the ordinary course of
business consistent with past practice; (n) change the name of or signage at any
of the Company's stores; (o) close, shut down, or otherwise eliminate any of the
Company's distribution centers; (p) move the location, close, shut down or
otherwise eliminate the Company's headquarters, or effect a general staff
reduction at such headquarters; (q) change or modify in any material respect the
Company's existing advertising program and policies; (r) except as previously
disclosed by the Company in writing to Parent and the Purchaser, enter into any
new lease (other than renewals of existing leases after consultation with
Parent) or purchase or acquire or enter into any agreement to purchase or
acquire any real estate; (s) neither the Company nor any of its Subsidiaries
will incur any liabilities or obligations of any nature, whether or not accrued,
contingent or otherwise, that have, or would be reasonably likely to have, a
material adverse effect on the Company and its Subsidiaries; and (t) neither the

Company nor any of its Subsidiaries will enter into an agreement, contract,
commitment or arrangement to do any of the foregoing, or to authorize,
recommend, propose or announce an intention to do any of the foregoing.

Treatment of Certain Indebtedness. The Merger Agreement provides that the
Company will cooperate with Parent, if Parent so requests, to effect a
defeasance of, and/or a repurchase by means of a debt tender offer (together
with a solicitation of consents to eliminate the restrictive covenants) of the
9 1/8% Senior Notes due 2000 issued by the Company and the 10 1/8% Senior Notes
due June 1, 2002 issued by Hook SupeRX, Inc. and guaranteed by the Company (the
'Debt Offers'), provided that any funds and all related out-of-pocket
transaction expenses necessary to effect any such defeasance or repurchase shall
be provided and borne by Parent, without any right of reimbursement. The Merger
Agreement also provides that the Company and Parent will cooperate to effect
such defeasance and/or repurchase in a manner which takes into account all
relevant tax, accounting, corporate, structural, contractual and similar issues.
Parent may commence the Debt Offers after the consummation of the Offer.

No Solicitation. Pursuant to the Merger Agreement, the Company (and its
Subsidiaries, and affiliates over which it exercises control) will not, and the
Company (and its Subsidiaries, and affiliates over which it exercises control)
will use their best efforts to ensure that their respective officers, directors,
employees, investment bankers, attorneys, accountants and other agents do not,
directly or indirectly: (i) initiate, solicit or encourage, or take any action
to facilitate the making of, any offer or proposal which constitutes or is
reasonably likely to lead to any Takeover Proposal (as defined below) of the
Company or any Subsidiary or an inquiry with respect thereto, or, (ii) in the
event of an unsolicited Takeover Proposal for the Company or any Subsidiary or
affiliate of the Company, engage in negotiations or discussions with, or provide
any information or data to, any corporation, partnership, person or other entity
or group (other than Parent, any of its affiliates or representatives) (each, a
'Person') relating to any Takeover Proposal, except in the case of clause (ii)
above to the extent that (x) the Takeover Proposal is a bona fide written
proposal submitted to the Company's Board of Directors and (y) the Company Board
determines, after having received the oral or written opinion of outside legal
counsel to the Company, that the failure to engage in such negotiations or
discussions or provide such information would result in a breach of the Board of
Directors' fiduciary duties under applicable law. The Company has agreed to
notify Parent and the Purchaser orally and in writing of any such offers,
proposals, inquiries or Takeover Proposals (including, without limitation, the
material terms and conditions thereof and the identity of the Person making it),
within 24 hours of the receipt thereof, and shall thereafter inform Parent on a
reasonable basis of the status and content of any discussions or negotiations
with such a third party, including any material changes to the terms and
conditions thereof. The Merger Agreement also provides that the Company shall,
and shall cause its Subsidiaries and affiliates over which it exercises control,
and will use best efforts to ensure their respective officers, directors,
employees, investment bankers, attorneys, accountants and other agents to
immediately cease and cause to be terminated all discussions and negotiations
that have taken place prior to the date of the Merger Agreement, if any, with
any parties conducted theretofore with respect to any Takeover Proposal relating
to the Company. The Merger Agreement provides that nothing contained in this
paragraph will prohibit the Company or the Company Board from taking and
disclosing to its stockholders a position with respect to a tender offer by a

third party pursuant to Rules 14d-9 and 14e-2(a) promulgated under the Exchange
Act or making such disclosure as may be required by applicable law.

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<PAGE>
As used in the Merger Agreement and herein, 'Takeover Proposal' when used
in connection with any Person shall mean any tender or exchange offer involving
the capital stock of such Person, any proposal for a merger, consolidation or
other business combination involving such Person or any Subsidiary of such
Person, any proposal or offer to acquire in any manner a substantial equity
interest in, or a substantial portion of the business or assets of, such Person
or any Subsidiary of such Person, any proposal or offer with respect to any
recapitalization or restructuring with respect to such Person or any Subsidiary
of such Person or any proposal or offer with respect to any other transaction
similar to any of the foregoing with respect to such Person or any Subsidiary of
such Person other than pursuant to the transactions to be effected pursuant to
the Merger Agreement.

Directors' and Officers' Insurance and Indemnification. In the Merger
Agreement, Parent agreed that at all times after the Effective Time, it will
cause the Surviving Corporation and its Subsidiaries to indemnify, each person
who is now, or has been at any time prior to the date of the Merger Agreement,
an employee, agent, director or officer of the Company or of any of the
Company's Subsidiaries, successors and assigns (individually an 'Indemnified
Party' and collectively the 'Indemnified Parties'), to the fullest extent
permitted by law, with respect to any claim, liability, loss, damage, judgment,
fine, penalty, amount paid in settlement or compromise, cost or expense,
including reasonable fees and expenses of legal counsel, (whenever asserted or
claimed) ('Indemnified Liability') based in whole or in part on, or arising in
whole or in part out of, any matter existing or occurring at or prior to the
Effective Time whether commenced, asserted or claimed before or after the
Effective Time, including liability arising under the Securities Act, the
Exchange Act or state law. The Merger Agreement provides that Parent will, and
will cause the Surviving Corporation to, maintain in effect for not less than
four years after the Effective Time the current policies of directors' and
officers' liability insurance maintained by the Company and its Subsidiaries on
the date of the Merger Agreement (provided that Parent may substitute therefor
policies having at least the same coverage and containing terms and conditions
which are no less advantageous to the persons currently covered by such policies
as insured) with respect to matters existing or occurring at or prior to the
Effective Time; provided, however, that if the aggregate annual premiums for
such insurance during such period shall exceed 200% of the per annum rate of the
aggregate premium currently paid by the Company and its Subsidiaries for such
insurance on the date of the Merger Agreement, then Parent will cause the
Surviving Corporation to, and the Surviving Corporation will, provide the
maximum coverage that will then be available at an annual premium equal to 200%
of such rate. The Merger Agreement provides that Parent shall pay all expenses
(including fees and expenses of counsel) that may be incurred by any Indemnified
Party in successfully enforcing the indemnity or other obligations under this
paragraph. The rights under this paragraph are in addition to rights that an
Indemnified Party may have under the Certificate of Incorporation, By-laws,
other similar organizational documents of the Company or any of its Subsidiaries
or the DGCL. The Merger Agreement also provides that the rights under this
paragraph shall survive consummation of the Merger and are expressly intended to

benefit each Indemnified Party. Parent will cause the Surviving Corporation and
any of its Subsidiaries (or their successors) to keep in effect the provisions
of its Certificate of Incorporation or By-laws or similar organizational
documents providing for indemnification to the fullest extent provided by law.

Employee Benefits and Employee Matters. Pursuant to the Merger Agreement,
Parent has agreed that, effective as of the Effective Time, the Company will
provide to employees of the Company certain payments and benefits, as described
below.

As soon as practicable following the earlier of (A) the Effective Time and
(B) the end of the Company's 1996 fiscal year, the Company will pay, pursuant to
the terms of the Company's Economic Value Added Incentive Plan (the 'EVA Plan')
as modified by the terms of the Merger Agreement, bonuses for fiscal year 1996,
calculated based on the Company's financial results as of February 10, 1996, and
annualized to equal a bonus for a 12-month period.

With respect to executives of the Company listed on a schedule to the
Merger Agreement ('Covered Executives'), effective as soon as practicable
following the Effective Time (or if later, the date of termination of employment
of the Covered Executive), the Company will pay to each Covered Executive
severance payments (the 'Severance Payments'), on a bi-weekly basis or at such
other intervals as are consistent with Parent's

29
<PAGE>
executive payroll practices, based on one of the two formulae set forth below,
pursuant to elections made by each Covered Executive prior to the Effective
Time:

(A) Severance Payments equal to, on an annualized basis, 'Base Pay'
(as defined below), continuing for a period of three years with respect to
Covered Executives who are listed as Group A Executives ('Group A
Executives') on a schedule to the Merger Agreement and for a period of 18
months with respect to Covered Executives listed as Group B Executives
('Group B Executives') on a schedule to the Merger Agreement. For purposes
of this provision, 'Base Pay' means the highest base pay paid to the
Covered Executive during any one of the 1994, 1995 or 1996 fiscal years,
provided that the base pay for the 1996 fiscal year will be calculated on
an annualized basis; or

(B) Severance Payments equal to, on an annualized basis, 'Base Plus
Bonus Pay' (as defined below), continuing for a period of two years with
respect to Group A Executives, and for a period of one year with respect to
Group B Executives. For purposes of this provision 'Base Plus Bonus Pay'
means Base Pay plus the amount that would have been paid to the executive
under the EVA Plan for fiscal year 1995 as the targeted bonus (the '1995
Target Bonus').

In lieu of the Severance Payments described in clauses (A) and (B) above,
Messrs. Hoven and James P. Mastrian will receive Severance Payments, continuing
for three years, equal to, on an annualized basis, Base Plus Bonus Pay.

The period during which a Covered Executive continues to receive Severance

Payments is hereinafter referred to as the 'Severance Period' for such Covered
Executive.

During the Severance Period, each Covered Executive will continue to
receive, at the Company's expense, continuation of benefits described in such
Covered Executive's employment agreement with the Company on terms at least as
favorable to the Covered Executive as is currently in effect, which benefits may
be provided under benefit plans and programs maintained by Parent; provided,
however, that to the extent any such Covered Executive receives comparable
benefits from, and at the expense of, a subsequent employer, such benefits from
the Company will cease.

Notwithstanding anything in the Merger Agreement to the contrary, the
Severance Payments described in clauses (A) or (B) above will be paid to a
Covered Executive only if such Covered Executive is actively employed by the
Company immediately prior to the Effective Time.

In the event that a Covered Executive that continues employment with the
Company following the Effective Time is terminated prior to the expiration of
the Severance Period that would have applied had such Covered Executive been
terminated effective as of the Effective Time, then such Covered Executive will
be entitled to receive the Severance Payments described above.

Each employee, other than any Covered Executive, of the Company who is
covered by the Company's severance pay plan as in effect on November 1, 1995
(each, a 'Severance-Eligible Employee') and who is employed by the Company
immediately prior to the Effective Time and terminated for other than 'Cause,'
as defined below, within 12 months following the Effective Time, will be
entitled to receive bi-weekly severance payments, consistent with Parent's
payroll practices, for a six-month period commencing on such Severance-Eligible
Employee's date of termination of employment, equal to, on an annualized basis,
such Severance-Eligible Employee's Base Pay; provided, however, that such
payments will be reduced (but not below zero), by the amount of compensation
such Severance-Eligible Employee receives from a subsequent employer to the
extent that such Severance-Eligible Employee is employed during such six-month
period.

For purposes of the Merger Agreement, 'Cause' will mean the conviction of
an employee or executive (as the case may be) for the commission of a felony,
including the entry of a guilty or nolo contendere plea, any willful, grossly
negligent or fraudulent action or inaction by an employee or executive, as the
case may be, or the employee's or executive's willful and continued failure to
substantially perform an employee's or executive's assigned duties.

Each Company employee who is (A) covered by the Company's Supplemental
Executive Retirement Plan ('SERP') and (B) actively employed by the Company, in
either case, immediately prior to the Effective Time (each, a 'SERP Executive')
will be eligible to receive benefits under the SERP based on the terms of the
SERP,

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as modified by the terms of the Merger Agreement. For each SERP Executive (i)
the amount of service taken into account for purposes of calculating benefits

and vesting under the SERP will be equal to the SERP Executive's service with
the Company prior to the Effective Time plus the Covered Executive's Severance
Period, if any, and (ii) compensation for each SERP Executive for purposes of
the SERP will include one-half of the 1995 Target Bonus for such SERP Executive.

With respect to the eight Executives listed on a schedule to the Merger
Agreement, the Company will provide such executives with a cash gross-up payment
to make such executives whole for the excise taxes imposed on all benefits and
other amounts paid or payable to such executive on account of the transactions
contemplated by the Merger Agreement as a result of the application of Sections
280G and 4999 of the Internal Revenue Code of 1986, as amended (the 'Code').
With respect to all other employees of the Company who are entitled to benefits
and other amounts paid or payable to such executive on account of the
transactions contemplated by the Merger Agreement as a result of the application
of Sections 280G and 4999 of the Code, the Company shall not be obligated to pay
or provide to any such employee any payments or benefits to the extent that such
payments or benefits would constitute a 'parachute payment' within the meaning
of Section 280G(b)(2)(A) of the Code.

The Company will amend the Company's Employee Stock Purchase Plan to
provide that the option period that is in effect as of November 29, 1995 will
cease as soon as practicable thereafter.

The Company will provide outplacement services from a recognized
outplacement provider selected by Parent to all employees of the Company as of
the Effective Time who were based in Twinsburg, Ohio as of the Effective Time,
and are terminated without Cause within one year of the Effective Time.

In addition, pursuant to the Merger Agreement, employees of the Company who
continue to be employed by the Company as of the Effective Time will receive
employee benefits comparable to those benefits provided to similarly situated
employees of Parent. In addition, with respect to medical benefits provided to
continuing employees as of the Effective Time, waiting periods and pre-existing
condition requirements under the plans covering the continuing employees will be
waived, and these employees will be given credit for any copayments and
deductibles actually paid by such employees under the Company's medical plans
during the calendar year in which the Closing occurs. Finally, service with the
Company will be recognized for purposes of eligibility under Parent's welfare
plans as well as for purposes of Parent's programs or policies for vacation pay
and sick pay.

Representations and Warranties. In the Merger Agreement, the Company has
made customary representations and warranties to Parent and the Purchaser with
respect to, among other things, its organization, capitalization, corporate
authorization, financial statements, public filings, employee benefit plans,
insurance, compliance with laws, transactions with affiliates, litigation,
absence of default, contracts, tax matters, labor matters, assets, real
property, environmental matters, consents and approvals, information in the
Proxy Statement/Prospectus, agreements with third party payors, vote required,
undisclosed liabilities and the absence of any material adverse change in the
Company since June 3, 1995.

In the Merger Agreement, Parent and the Purchaser have made customary
representations and warranties to the Company with respect to, among other

things, its organization, capitalization, corporate authorization, financial
statements, public filings, compliance with laws, litigation, absence of
default, tax matters, consents and approvals, compliance with laws, financing,
information in the Proxy Statement/Prospectus, opinion of financial advisors,
undisclosed liabilities and the absence of any material adverse change in the
Company since March 4, 1995.

Conditions to the Merger. The respective obligations of Parent and the
Purchaser, on the one hand, and the Company, on the other hand, to consummate
the Merger are subject to the satisfaction (or, if permissible, waiver by the
party for whose benefit such conditions exist) of the following conditions: (i)
the Merger Agreement shall have been adopted by stockholders of the Company in
accordance with the DGCL; (ii) no court, arbitrator or governmental body, agency
or official shall have issued any order, decree or ruling which remains in force
and there shall not be any statute, rule or regulation, restraining, enjoining
or prohibiting the consummation of the Merger; (iii) the Registration Statement
shall have become effective under the Securities Act and no stop order
suspending effectiveness of the Registration Statement shall have been issued
and no proceeding for that purpose

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shall have been initiated or threatened by the Commission; and (iv) Parent, the
Purchaser or their affiliates shall have purchased the Shares pursuant to the
Offer.

Termination; Fees. The Merger Agreement may be terminated and the Merger
contemplated therein may be abandoned at any time prior to the Effective Time,
whether before or after stockholder approval thereof, (a) by mutual consent of
the Board of Directors of Parent and the Company Board, (b) by either the Board
of Directors of Parent or the Company Board (i) if Parent or the Purchaser has
not purchased Shares in accordance with the terms of the Offer on or prior to
April 29, 1996; provided, however, that the right to terminate the Merger
Agreement shall not be available to any party whose failure to fulfill any
obligations under the Merger Agreement has been the cause of, or resulted in,
the failure to satisfy the conditions to the Offer; provided further, however,
that Parent shall not have the right to terminate the Merger Agreement under
this clause (i) if Parent or the Purchaser purchases any Shares in connection
with the Offer after April 29, 1996; or (ii) if any Governmental Entity (as
defined therein) shall have issued an order, decree or ruling or taken any other
action (which order, decree, ruling or other action the parties thereto shall
use their best efforts to lift), in each case permanently restraining, enjoining
or otherwise prohibiting the transactions contemplated by the Merger Agreement
and such order, decree, ruling or other action shall have become final and
non-appealable.

The Merger Agreement may be terminated by the Company Board: (i) if, prior
to the purchase of Shares pursuant to the Offer, the Company Board shall have
(A) withdrawn, or modified or changed in a manner adverse to Parent or the
Purchaser its approval or recommendation of the Offer, the Merger Agreement or
the Merger in order to approve and permit the Company to execute a definitive
agreement relating to a Takeover Proposal, and (B) determined, after having
received the oral or written opinion of outside independent legal counsel to the
Company, that the failure to take such action as set forth in the preceding

clause (A) would result in a breach of the Board of Directors' fiduciary duties
under applicable law; provided, however, that the Company shall have given
Parent and the Purchaser at least thirty-six hours advance actual notice of any
termination pursuant to this clause (i) and shall have made the payment referred
to in the second following paragraph; or (ii) if prior to the purchase of Shares
pursuant to the Offer, Parent or the Purchaser (x) breaches or fails in any
material respect to perform or comply with any of its material covenants and
agreements contained therein or (y) breaches its representations and warranties
in any material respect and such breach would have or would be reasonably likely
to have a material adverse effect on Parent and its Subsidiaries; provided,
however, that if any such breach is cured, the Company may not terminate the
Merger Agreement pursuant to this clause (ii); or (iii) if Parent or the
Purchaser shall have terminated the Offer, or the Offer shall have expired,
without Parent or the Purchaser, as the case may be, purchasing any Shares
pursuant thereto; provided that the Company may not terminate the Merger
Agreement pursuant to this clause (iii) if the Company is in material breach of
the Merger Agreement; or (iv) if, due to an occurrence that if occurring after
the commencement of the Offer would result in a failure to satisfy any of the
conditions set forth in Section 14 hereto, Parent, the Purchaser or any of their
affiliates shall have failed to commence the Offer on or prior to five business
days following the date of the initial public announcement of the Offer;
provided, that the Company may not terminate the Merger Agreement pursuant to
this clause (iv) if the Company is in material breach of the Merger Agreement.

The Merger Agreement may be terminated by the Board of Directors of Parent:
(i) if, due to an occurrence that if occurring after the commencement of the
Offer would result in a failure to satisfy any of the conditions set forth in
Section 14 hereto, Parent, the Purchaser or any of their affiliates shall have
failed to commence the Offer on or prior to five business days following the
date of the initial public announcement of the Offer; provided that Parent may
not terminate the Merger Agreement pursuant to this clause (i) if Parent or the
Purchaser is in material breach of the Merger Agreement; or (ii) if (A) prior to
the purchase of Shares pursuant to the Offer, the Company Board shall have
withdrawn, or modified or changed in a manner adverse to Parent or the Purchaser
its approval or recommendation of the Offer, the Merger Agreement or Merger or
shall have recommended a Takeover Proposal or other business combination, or the
Company shall have entered into an agreement in principle (or similar agreement)
or definitive agreement providing for a Takeover Proposal or other business
combination with a person or entity other than Parent, the Purchaser or their
Subsidiaries (or the Company Board resolves to do any of the foregoing), or (B)
prior to the consummation of the Offer, it shall have been publicly disclosed or
Parent or the Purchaser shall have learned that any person, entity or 'group'
(as that term is defined in Section 13(d)(3) of the Exchange Act) (an 'Acquiring
Person'), other than Parent, the Purchaser or the Stockholder, or Magten Asset
Management Corporation ('Magten') or FMR Corp. (including any of FMR

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Corp.'s affiliates) shall have acquired beneficial ownership (determined
pursuant to Rule 13d-3 promulgated under the Exchange Act) of more than 14.9% of
any class or series of capital stock of the Company (including the Shares),
through the acquisition of stock, the formation of a group or otherwise, or
shall have been granted any option, right or warrant, conditional or otherwise,
to acquire beneficial ownership of more than 14.9% of any class or series of

capital stock of the Company (including the Shares); or (iii) if Parent or the
Purchaser, as the case may be, shall have terminated the Offer, or the Offer
shall have expired without Parent or the Purchaser, as the case may be,
purchasing any Shares thereunder, provided that Parent may not terminate the
Merger Agreement pursuant to this clause (iii) if Parent or the Purchaser is in
material breach of the Merger Agreement.

If (w) the Company Board shall terminate the Merger Agreement pursuant to
clause (i) in the immediately second preceding paragraph hereof, (x) the Board
of Directors of Parent shall terminate the Merger Agreement pursuant to clause
(ii)(A) in the immediately preceding paragraph hereof, (y) the Board of
Directors of Parent shall terminate the Merger Agreement pursuant to clause
(ii)(B) in the immediately preceding paragraph hereof and within nine months of
such termination, an Acquiring Person shall acquire or beneficially own a
majority of the then outstanding Shares or shall have obtained representation on
the Company Board or shall enter into a definitive agreement with the Company
with respect to a Takeover Proposal or similar business combination, or (z) the
Board of Directors of Parent shall terminate the Merger Agreement pursuant to
clause (i) or clause (iii) of the immediately preceding paragraph, in each case
due to (I) a material breach of the representations and warranties of the
Company set forth in the Merger Agreement or (II) a material breach of, or
failure to perform or comply with, by the Company any material obligation,
covenant or agreement contained in the Merger Agreement, then in any such case
as described in clause (w), (x), (y) or (z) (each such case of termination being
referred to as a 'Trigger Event'), the Company shall pay to Parent (not later
than the date of termination of the Merger Agreement in the case of clauses (w),
(x) and (z) above) an amount equal to $45 million.

Termination of Existing Stockholder Agreements. Pursuant to the Merger
Agreement, the Company and the Stockholder entered into a Termination Agreement,
dated as of November 29, 1995, providing for the termination of (i) the
Stockholder Agreement, dated as of June 1, 1992, between the Stockholder and the
Company, and (ii) the Registration Rights Agreement, dated as of June 1, 1992
between the Stockholder and the Company. In addition, pursuant to the Merger
Agreement, the Company and Magten, as agent for and on behalf of individual
investment advisory clients, entered into a Termination Agreement, dated as of
November 29, 1995, providing for the termination of the Registration Rights
Agreement, dated as of January 20, 1993, between Magten and the Company.

STOCKHOLDER AGREEMENT

The following is a summary of the material terms of the Stockholder
Agreement. This summary is not intended to be a complete description of the
terms and conditions thereof and is qualified in its entirety by reference to
the full text thereof which is incorporated herein by reference and copies of
which have been filed as an exhibit to the Schedule 14D-1. The Stockholder
Agreement may be examined, and copies may be obtained, as set forth in Section 7
above. Capitalized terms not otherwise defined herein or in the following
summaries shall have the meanings set forth in the Stockholder Agreement.

Tender of Shares. Immediately after the execution of the Merger Agreement,
the Purchaser and the Stockholder entered into the Stockholder Agreement. Upon
the terms and subject to the conditions of such agreement, the Stockholder has
agreed to validly tender (or cause the record owner of such Shares to tender),

and not to withdraw, pursuant to and in accordance with the terms of the Offer,
not later than prior to the expiration of the Offer, 13,102,288 Shares (and
together with any Shares acquired by the Stockholder in any capacity after the
date thereof and prior to the termination of the Stockholder Agreement whether
upon the exercise of options, warrants or rights, the conversion or exchange of
convertible or exchangeable securities, or by means of purchase, dividend,
distribution, gift, bequest, inheritance or as a successor in interest in any
capacity or otherwise, the 'Stockholder Shares') Beneficially Owned by the
Stockholder, which Shares represent approximately 19.7% of the issued and
outstanding Shares. The Stockholder Agreement also provides that the transfer by
the Stockholder of the Stockholder Shares to the Purchaser in the Offer will
pass to and unconditionally vest in the Purchaser good and valid title to such
Shares.

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Voting of Company Common Stock. The Stockholder Agreement provides that
during the period commencing on the date of the Stockholder Agreement and
continuing until the first to occur of (i) the Effective Time or (ii)
termination of the Merger Agreement in accordance with its terms, at any meeting
(whether annual or special and whether or not an adjourned or postponed meeting)
of the Company's stockholders, however called, or in connection with any written
consent of the stockholders of the Company, the Stockholder will vote (or cause
to be voted) the Stockholder Shares held of record or Beneficially Owned by such
Stockholder (i) in favor of the Merger, the execution and delivery by the
Company of the Merger Agreement and the approval and adoption of the terms
thereof and each of the other actions contemplated by the Merger Agreement and
the Stockholder Agreement and any actions required in furtherance thereof; (ii)
against any action or agreement that would result in a breach in any respect of
any covenant, representation or warranty or any other obligation or agreement of
the Company under the Merger Agreement or the Stockholder Agreement; and (iii)
except as otherwise agreed to in writing in advance by Parent, against the
following actions (other than the Merger and the transactions contemplated by
the Stockholder Agreement and the Merger Agreement): (A) any extraordinary
corporate transaction, such as a merger, consolidation or other business
combination involving the Company or its subsidiaries; (B) any sale, lease or
transfer of a material amount of assets of the Company or its Subsidiaries, or a
reorganization, restructuring, recapitalization, special dividend, dissolution
or liquidation of the Company or its Subsidiaries; or (C) (1) any change in a
majority of the persons who constitute the Company Board; (2) any change in the
present capitalization of the Company including any proposal to sell a
substantial equity interest in the Company and its Subsidiaries; (3) any
amendment of the Company's Certificate of Incorporation or By-laws; (4) any
other change in the Company's corporate structure or business; or (5) any other
action which, in the case of each of the matters referred to in clauses (C)(1),
(2), (3) or (4), is intended, or could reasonably be expected, to impede,
interfere with, delay, postpone, or materially adversely affect the Offer, the
Merger and the transactions contemplated by the Stockholder Agreement and the
Merger Agreement. The Stockholder Agreement further provides that the
Stockholder will not enter into any agreement or understanding with any person
or entity the effect of which would be inconsistent or violative of the
provisions and agreements described in the above paragraph.

Stockholder Covenant. The Stockholder Agreement provides that, except as

contemplated by the Stockholder Agreement, the Stockholder shall not for a
period of six months following the termination of the Stockholder Agreement
(other than as a result of a breach by Parent or the Purchaser) enter into,
execute, or be a party to any agreement or understanding, written or otherwise,
with any Person whereby the Stockholder (i) grants or otherwise gives to such
Person an option or right to purchase or acquire any or all of the Stockholder
Shares other than sales made in open market transactions; (ii) agrees or
covenants to vote or to grant a proxy to vote any or all of the Stockholder
Shares held of record or Beneficially Owned by the Stockholder, at any meeting
(whether annual or special and whether or not an adjourned or postponed meeting)
of the holders of Shares, however called, or in connection with any written
consent of the holders of Shares; or (iii) agrees or covenants to tender any or
all of the Stockholder Shares held of record or Beneficially Owned by the
Stockholder into any tender offer or exchange offer relating to the Stockholder
Shares.

No Solicitation. The Stockholder Agreement provides that the Stockholder
will not, and will cause its affiliates and officers, directors, employees,
partners, investment bankers, attorneys, accountants and other agents and
representatives of the Stockholder and such affiliates (such affiliates,
officers, directors, employees, partners, investment bankers, attorneys,
accountants, agents and representatives of any Person are hereinafter
collectively referred to as the 'Representatives' of such Person) not to,
directly or indirectly (i) initiate, solicit or encourage, or take any action to
facilitate the making of, any offer or proposal which constitutes or is
reasonably likely to lead to any Takeover Proposal of the Company or any
affiliate or any inquiry with respect thereto, or (ii) in the event of an
unsolicited Takeover Proposal for the Company or any affiliate of the Company,
engage in negotiations or discussions with, or provide any information or data
to, any Person (other than Parent, any of its affiliates or representatives)
relating to any Takeover Proposal. Notwithstanding the restrictions set forth in
this paragraph, any person who is an officer or director of the Company may
exercise his fiduciary duties in his capacity as a director or officer of the
Company consistent with the terms of the Merger Agreement.

The Stockholder Agreement also provides that the Stockholder notify Parent
and the Purchaser orally and in writing of any such offers, proposals, or
inquiries relating to the purchase or acquisition by any Person of the
Stockholder Shares (including, without limitation, the terms and conditions
thereof and the identity of the Person

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making it), within 24 hours of the receipt thereof. The Stockholder has also
agreed to, and to cause its Representatives to, immediately cease and cause to
be terminated any and all existing activities, discussions or negotiations, if
any, with any parties conducted theretofore with respect to any Takeover
Proposal relating to the Company, other than discussions or negotiations with
Parent and its affiliates.

Distribution of Shares of Parent Common Stock. The Stockholder Agreement
provides that upon the consummation of the Merger, the Stockholder shall within
90 days thereafter either distribute the shares of Parent Common Stock to each
of the limited partners of Zell/Chilmark Fund, L.P. or sell or otherwise dispose

of such shares of Parent Common Stock, in each case in accordance with the
governing documents thereto and applicable law; provided that no such sale or
other disposition shall be made if immediately following such sale or other
disposition the acquiror of such Parent Common Stock, together with the
acquiror's affiliates and any members of a group of which the acquiror is a
party, would Beneficially Own in the aggregate 4.9% or more of the shares of
Parent Common Stock then outstanding.

Restriction on Transfer, Proxies and Non-Interference. The Stockholder
Agreement also provides that, except as otherwise provided in the Stockholder
Agreement, the Stockholder will not, directly or indirectly: (i) offer for sale,
sell, transfer, tender, pledge, encumber, assign or otherwise dispose of, or
enter into any contract, option or other arrangement or understanding with
respect to or consent to the offer for sale, sale, transfer, tender, pledge,
encumbrance, assignment or other disposition of, any or all of the Stockholder
Shares or any interest therein; (ii) grant any proxies or powers of attorney,
deposit the Stockholder Shares into a voting trust or enter into a voting
agreement with respect to the Stockholder Shares; or (iii) take any action that
would make any representation or warranty of the Stockholder contained in the
Stockholder Agreement untrue or incorrect or would result in a breach by the
Stockholder of its obligations under the Stockholder Agreement or a breach by
the Company of its obligations under the Merger Agreement.

Termination. Except as otherwise provided therein, the covenants and
agreements contained in the Stockholder Agreement with respect to the
Stockholder Shares shall terminate upon the earlier of (i) the consummation of
the Merger and (ii) the termination of the Merger Agreement in accordance with
its terms except, that the covenant and agreement set forth in the Stockholder
Covenant described in the fifth preceding paragraph shall survive for six months
after such termination (other than a termination as a result of a breach by
Parent or the Purchaser).

STOCK OPTION AGREEMENT

The following is a summary of the material terms of the Stock Option
Agreement. This summary is not intended to be a complete description of the
terms and conditions thereof and is qualified in its entirety by reference to
the full text thereof which is incorporated herein by reference and a copy of
which has been filed as an exhibit to the Schedule 14D-1. The Stock Option
Agreement may be examined, and copies may be obtained, as set forth in Section 7
above. Capitalized terms not otherwise defined herein or in the following
summary shall have the meanings set forth in the Stock Option Agreement.

Grant of Stock Option. The Stock Option Agreement provides for the grant
by the Company to Parent of an unconditional, irrevocable option (a 'Stock
Option') to purchase up to 13,251,010 fully paid and nonassessable Shares at a
purchase price of $27.50 per Share (the 'Purchase Price'), or such other number
of Shares as equals 19.9% of the Company's issued and outstanding Shares at the
time of exercise of the Stock Option; provided that in no event shall the number
of Shares for which the Stock Option is exercisable exceed 19.9% of the Shares
issued and outstanding at the time of exercise of the Stock Option (the 'Option
Shares').

Exercise of Stock Option. The Stock Option Agreement also provides that

upon (x) the occurrence of a Trigger Event, or (y) the occurrence of a tender or
exchange offer for some or all of the Shares or if a proposal for a Takeover
Proposal shall have been publicly proposed to be made or shall have been made by
another person or entity, the Stock Option shall become immediately exercisable,
in whole or in part, and remain exercisable in whole or in part until the later
of (i) the date which is six months after the date the Stock Option first became
exercisable and (ii) the fifth business day following expiration or termination
of any applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the 'HSR Act') (the 'Option Period').

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Sale of Option Shares. The Stock Option Agreement also provides that if,
at any time following the exercise of the Stock Option, Parent will either (i)
transfer, sell or otherwise dispose of any or all of the Option Shares,
including by means of tender or exchange of any or all of the Option Shares
pursuant to a tender or exchange offer involving the capital stock of the
Company, or (ii) convert such Option Shares into cash, capital stock, other
securities or any other consideration of any third party in a merger, any
recapitalization or restructuring or similar business combination transaction (a
'Business Combination Transaction'), Parent will pay to the Company within five
days the amount equal to the Profit (as defined below) Parent will receive, if
any, pursuant to such Disposition or Business Combination Transaction. 'Profit,'
for purposes of this paragraph, will equal (i) the product of (a) the number of
Option Shares Parent transfers, sells, tenders, exchanges or otherwise disposes
of pursuant to a Disposition or a Business Combination Transaction multiplied by
(b) the excess of the per Share consideration received by Parent pursuant to
such Disposition or Business Combination Transaction, valuing any non-cash
consideration at its fair market value on the date of such consummation (not
including any increase in such aggregate per Share consideration after the date
thereof), over the Purchase Price. For purposes hereof, the fair market value of
any non-cash consideration shall be the closing price or the last sale price,
or, in case no such sale takes place on the day of consummation of such Business
Combination Transaction, the average of the closing bid and asked prices, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the principal
national securities exchange on which such consideration is listed or admitted
to trading or, if such consideration is not listed or admitted to trading on any
national securities exchange, the last quoted price or, if not so quoted, the
average of the high bid and low asked prices in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System or such other system then in use, or, if not so determinable,
the fair value of such consideration on such date will be determined in good
faith by the Board of Directors of Parent.

Adjustment Upon Changes in Capitalization. The Stock Option Agreement
provides that in the event of any change in Shares by reason of stock dividends,
split-ups, recapitalizations, combinations, exchanges of shares or the like, the
type and number of Shares subject to the Stock Option and the Purchase Price
shall be appropriately adjusted and proper provision shall be made so that, in
the event that any additional Shares are issued or otherwise become outstanding
as a result of any such change after the date of the Stock Option Agreement
(other than pursuant to the Stock Option Agreement), the number of Shares
subject to the Stock Option shall be adjusted so that, after such issuance and

together with Shares previously issued pursuant to the exercise of the Stock
Option (as adjusted on account of any of the foregoing change in Shares), it
equals 19.9% of the number of Shares then issued and outstanding.

Termination. The Stock Option Agreement will terminate, except as
otherwise provided therein, upon the earlier of (i) the consummation of the
Merger and (ii) the expiration of the Option Period.

CONFIDENTIALITY AGREEMENT

The following is a summary of the material terms of the Confidentiality
Agreement, dated as of August 17, 1995, between Parent and the Company (the
'Confidentiality Agreement'). This summary is not intended to be a complete
description of the terms and conditions thereof and is qualified in its entirety
by reference to the full text thereof which is incorporated herein by reference
and a copy of which has been filed as an exhibit to the Schedule 14D-1. The
Confidentiality Agreement may be examined, and copies may be obtained, as set
forth in Section 7 above. Capitalized terms not otherwise defined herein or in
the following summary shall have the meanings set forth in the Confidentiality
Agreement.

Pursuant to the Confidentiality Agreement, Parent has agreed, among other
things, to keep confidential certain non-public confidential or proprietary
information of the Company furnished to Parent by or on behalf of the Company.
The Confidentiality Agreement provides that for a period of eighteen months from
the date of the Confidentiality Agreement, except with respect to a business
combination with the Company or as otherwise specifically authorized in writing
by the Company, neither Parent nor any of its directors, officers, employees,
agents, advisors (including, without limitation, financial advisors, counsel and
accountants), affiliates or controlling persons (collectively, the 'Parent
Representatives') will, propose or publicly announce or otherwise disclose an
intent to propose, or enter into or agree to enter into, singly or with any
other person or directly or indirectly, (i) any form of business combination,
acquisition or other transaction relating to the Company or any

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affiliate thereof, or (ii) any form of restructuring, recapitalization or
similar transaction with respect to the Company or any such affiliate, nor
except as aforesaid during such period will Parent or any such Representative as
a principal (1) acquire, or offer, propose or agree to acquire, by purchase or
otherwise, any securities of the Company, any direct or indirect options or
other rights to acquire any such securities ('Company Securities'), (2) make, or
in any way participate in, any solicitation of proxies with respect to any
Company Securities (including by the execution of action by written consent),
become a participant in any election contest with respect to the Company, seek
to influence any person with respect to any Company Securities or demand a copy
of the Company's list of its stockholders or other books and records relating to
holders of Company Securities, (3) participate in or encourage the formation of
any partnership, syndicate or other group which owns or seeks or offers to
acquire beneficial ownership of any Company Securities or which seeks to affect
control of the Company or for the purpose of circumventing any provision of the
Confidentiality Agreement or (4) otherwise act, alone or in concert with others
(including by providing financing for another person), to seek or to offer to

control or influence, in any manner, the management, the Company Board or
policies or operations of the Company.

The Merger Agreement provides that any provision in the Confidentiality
Agreement which in any manner limits, restricts or prohibits the voting or
acquisition of Shares by Parent or any of its affiliates or the representation
of Parent's designees on the Company Board or which in any manner would be
inconsistent with the Merger Agreement, the Stock Option Agreement or the
Stockholder Agreement or the transactions contemplated thereby terminated as of
the date of the Merger Agreement. The Merger Agreement further provides that the
Company will not take any action that would impede, bar, restrict or otherwise
interfere in any manner with Parent's rights under the Stockholder Agreement or
the Stock Option Agreement, including, without limitation, Parent's right to
exercise the Stock Option.

APPRAISAL RIGHTS

No appraisal rights are available in connection with the Offer. If only
shares of Parent Common Stock are issued in the Merger, then stockholders will
not have any appraisal rights. However, if the Merger is consummated and in the
event (i) the Alternative Consideration or any Additional Consideration
contemplated by the Merger Agreement is applicable or (ii) that Parent elects to
pay any Cash Adjustment Amount, stockholders of the Company may have certain
rights under the DGCL to dissent and demand appraisal of, and to receive payment
in cash of the fair value of, their Shares. Such rights to dissent, if the
statutory procedures are complied with, could lead to a judicial determination
of the fair value of the Shares (excluding any element of value arising from the
accomplishment or expectation of the Merger), required to be paid in cash to
such dissenting holders for their Shares. In addition, such dissenting
stockholders would be entitled to receive payment of a fair rate of interest
from the date of consummation of the Merger on the amount determined to be the
fair value of their Shares. In determining the fair value of the Shares, a
Delaware court would be required to take into account all relevant factors.
Accordingly, such determination could be based upon considerations other than,
or in addition to, the market value of the Shares, including, among other
things, asset values and earning capacity. In Weinberger v. UOP, Inc., the
Delaware Supreme Court stated, among other things, that 'proof of value by any
techniques or methods which are generally considered acceptable in the financial
community and otherwise admissible in court' should be considered in an
appraisal proceeding. Therefore, the value so determined in any appraisal
proceeding could be different from the price being paid in the Offer or the
value of the Merger Consideration.

In addition, several decisions by Delaware courts have held that, in
certain circumstances, a controlling stockholder of a company involved in a
merger has a fiduciary duty to other stockholders which requires that the merger
be fair to such other stockholders. In determining whether a merger is fair to
minority stockholders, Delaware courts have considered, among other things, the
type and amount of consideration to be received by the stockholders and whether
there was fair dealing among the parties. The Delaware Supreme Court stated in
Weinberger and Rabkin v. Phillip A. Hunt Chemical Corp. that although the remedy
ordinarily available to minority stockholders in a cash-out merger is the right
to appraisal described above, a damages remedy or injunctive relief may be
available if a merger is found to be the product of procedural unfairness,

including fraud, misrepresentation or other misconduct.

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Shares which immediately prior to the Effective Time are held by
stockholders who have properly exercised and perfected appraisal rights under
the DGCL (the 'Dissenting Shares'), shall not be converted into the right to
receive the Merger Consideration, but the holders of Dissenting Shares shall be
entitled to receive such consideration as shall be determined pursuant to the
DGCL; provided, however, that if any such holder shall have failed to perfect or
shall withdraw or lose his right to appraisal and payment under the DGCL, such
holder's Shares shall thereupon be deemed to have been converted as of the
Effective Time into the right to receive the Merger Consideration, and such
Shares shall no longer be Dissenting Shares.

Appraisal rights cannot be exercised at this time. Stockholders who will be
entitled to appraisal rights, if any, in connection with the Merger will receive
additional information concerning any available appraisal rights and the
procedures to be followed in connection therewith before such stockholders have
to take any action relating thereto.

Stockholders who sell Shares in the Offer will not be entitled to exercise
any appraisal rights with respect to Shares purchased but, rather, will receive
the Offer Price.

12. DIVIDENDS AND DISTRIBUTIONS. Except as expressly provided in the
Merger Agreement, the Company has agreed that neither it nor any of its
subsidiaries shall (i) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to its capital
stock other than dividends paid by the Company's Subsidiaries to the Company or
its Subsidiaries, (ii) issue, sell, transfer, pledge, dispose of or encumber any
additional shares of, or securities convertible into or exchangeable for, or
options, warrants, calls, commitments or rights of any kind to acquire, any
shares of capital stock of any class of the Company or its Subsidiaries, other
than issuances pursuant to exercise of stock-based awards or options outstanding
on the date of the Merger Agreement as disclosed in the Merger Agreement or
(iii) redeem, purchase or otherwise acquire directly or indirectly any of its
capital stock. See Section 6.

13. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; EXCHANGE LISTING AND
EXCHANGE ACT REGISTRATION. The purchase of Shares pursuant to the Offer will
reduce the number of Shares that might otherwise trade publicly and could reduce
the number of holders of Shares, which could adversely affect the liquidity and
market value of the remaining Shares held by the public.

If the Purchaser acquires a sufficient number of Shares pursuant to the
Offer, the Shares may no longer meet the requirements of the NYSE for continued
listing and may be delisted from the NYSE. The Purchaser intends to cause the
delisting of the Shares by the NYSE following consummation of the Merger.

According to the NYSE's published guidelines, the NYSE would consider
delisting the Shares if, among other things, the number of record holders of at
least 100 Shares should fall below 1,200, the number of publicly held Shares
(exclusive of holdings of officers, directors and their families and other

concentrated holdings of 10% or more ('NYSE Excluded Holdings')) should fall
below 600,000 or the aggregate market value of publicly held Shares (exclusive
of NYSE Excluded Holdings) should fall below $5,000,000. If, as a result of the
purchase of Shares pursuant to the Offer or otherwise, the Shares no longer meet
the requirements of the NYSE for continued listing and the listing of the Shares
is discontinued, the market for the Shares could be adversely affected.

If the NYSE were to delist the Shares, it is possible that the Shares would
continue to trade on another securities exchange or in the over-the-counter
market and that price or other quotations would be reported by such exchange or
through the National Association of Securities Dealers Automated Quotation
System ('NASDAQ') or other sources. The extent of the public market therefor and
the availability of such quotations would depend, however, upon such factors as
the number of stockholders and/or the aggregate market value of such securities
remaining at such time, the interest in maintaining a market in the Shares on
the part of securities firms, the possible termination of registration under the
Exchange Act as described below, and other factors. The Purchaser cannot predict
whether the reduction in the number of Shares that might otherwise trade
publicly would have an adverse or beneficial effect on the market price for or
marketability of the Shares or whether it would cause future market prices to be
greater or less than the Offer Price.

The Shares are currently 'margin securities', as such term is defined under
the rules of the Board of Governors of the Federal Reserve System (the 'Federal
Reserve Board'), which has the effect, among other things, of allowing brokers
to extend credit on the collateral of such securities. Depending upon factors
similar to

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those described above regarding listing and market quotations, following the
Offer it is possible that the Shares might no longer constitute 'margin
securities' for purposes of the margin regulations of the Federal Reserve Board,
in which event such Shares could no longer be used as collateral for loans made
by brokers.

The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application of the Company to the Commission
if the Shares are not listed on a national securities exchange and there are
fewer than 300 record holders of the Shares. The termination of registration of
the Shares under the Exchange Act would substantially reduce the information
required to be furnished by the Company to holders of Shares and to the
Commission and would make certain provisions of the Exchange Act, such as the
short-swing profit recovery provisions of Section 16(b), the requirement of
furnishing a proxy statement in connection with stockholders' meetings pursuant
to Section 14(a), and the requirements of Rule 13e-3 under the Exchange Act with
respect to 'going private' transactions, no longer applicable to the Shares. In
addition, 'affiliates' of the Company and persons holding 'restricted
securities' of the Company may be deprived of the ability to dispose of such
securities pursuant to Rule 144 promulgated under the Securities Act.

If registration of the Shares under the Exchange Act were terminated, the
Shares would no longer be 'margin securities' or be eligible for stock exchange
listing or NASDAQ reporting.

14. CONDITIONS OF THE OFFER. Notwithstanding any other provisions of the
Offer, and in addition to (and not in limitation of) the Purchaser's rights to
extend and amend the Offer at any time in its sole discretion (subject to the
provisions of the Merger Agreement), the Purchaser shall not be required to
accept for payment or, subject to any applicable rules and regulations of the
Commission, including Rule 14e-1(c) under the Exchange Act (relating to the
Purchaser's obligation to pay for or return tendered Shares promptly after
termination or withdrawal of the Offer), pay for, and may delay the acceptance
for payment of or, subject to the restriction referred to above, the payment
for, any tendered Shares, and may terminate the Offer as to any Shares not then
paid for, if (i) any applicable waiting period under the HSR Act has not expired
or terminated prior to the expiration of the Offer, (ii) the Minimum Condition
has not been satisfied, or (iii) at any time on or after November 17, 1995 and
prior to the acceptance for payment of any Shares, any of the following events
shall occur or shall be determined by the Purchaser to have occurred:

(a) there shall be instituted, pending or threatened any action or
proceeding by any government or governmental authority or agency, domestic
or foreign, (i) challenging or seeking to make illegal, to delay materially
or otherwise directly or indirectly to restrain or prohibit the making of
the Offer, the acceptance for payment of or payment for some of or all the
Shares by Parent or the Purchaser or the consummation by Parent or the
Purchaser of the Merger, seeking to obtain material damages relating to the
Merger Agreement, the Stockholder Agreement, the Stock Option Agreement or
any of the transactions contemplated thereby or otherwise seeking to
prohibit directly or indirectly the transactions contemplated by the Offer
or the Merger, or challenging or seeking to make illegal the transactions
contemplated by the Stockholder Agreement, Stock Option Agreement or
otherwise directly or indirectly to restrain, prohibit or delay the
transactions contemplated by the Stockholder Agreement or the Stock Option
Agreement, (ii) seeking to restrain, prohibit or delay Parent's, the
Purchaser's or any of their subsidiaries' ownership or operation of all or
any portion (other than an immaterial portion), of the business or assets
of the Company or its subsidiaries, or to compel Parent or any of its
subsidiaries to dispose of or hold separate all or any portion (other than
an immaterial portion) of the business or assets of the Company or Parent
or their respective subsidiaries, (iii) seeking to impose or confirm
material limitations on the ability of Parent, the Purchaser or any of
their subsidiaries or affiliates effectively to exercise full rights of
ownership of the Shares, including, without limitation, the right to vote
any Shares acquired or owned by Parent, the Purchaser or any of their
subsidiaries or affiliates on all matters properly presented to the
Company's stockholders, or (iv) seeking to require divestiture by Parent,
or the Purchaser or any of their subsidiaries of any Shares; or

(b) there shall be any action taken, or any statute, rule, regulation,
injunction, judgment, order or decree enacted, enforced, entered,
promulgated, issued or deemed applicable to the Offer or the Merger, by any
court, government or governmental authority or agency, domestic or foreign,
that, directly or indirectly, results in any of the consequences referred
to in clauses (i) through (iv) of paragraph (a) above; or

in, or limitation on the NYSE for a period in excess of three hours, (ii)
the declaration of a banking moratorium or any suspension of payments

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in respect of banks in the United States (whether or not mandatory), (iii)
the commencement of a war, armed hostilities or other international or
national calamity directly or indirectly involving the United States, (iv)
any limitation (whether or not mandatory) by any foreign or United States
governmental authority or agency on the extension of credit by banks or
other financial institutions, (v) any decline in either the Dow Jones
Industrial Average or the Standard & Poor's Index of 500 Industrial
Companies by an amount in excess of 20% measured from the close of business
on November 29, 1995 or (vi) in the case of any of the foregoing existing
at the time of the commencement of the Offer, a material acceleration or
worsening thereof; or

(d) the representations and warranties of the Company set forth in the
Merger Agreement shall not be true and correct in any material respect as
of the date of consummation of the Offer as though made on or as of such
date, except (i) for changes specifically permitted by the Merger Agreement
and (ii) those representations and warranties that address matters only as
of a particular date which are true and correct as of such date, or the
Company shall have breached or failed in any material respect to perform or
comply with any material obligation, agreement or covenant required by the
Merger Agreement to be performed or complied with by it; or

(e) the Merger Agreement shall have been terminated in accordance with
its terms; or

(f) any party to the Stockholder Agreement or the Stock Option
Agreement other than the Purchaser and Parent shall have breached or failed
to perform any of its agreements under such agreements or breached any of
its representations and warranties in such agreements or any such agreement
shall not be valid, binding and enforceable, except for such breaches or
failures or failures to be valid, binding and enforceable that do not
materially and adversely affect the benefits expected to be received by
Parent and the Purchaser under the Merger Agreement, the Stockholder
Agreement or the Stock Option Agreement; or

(g) (i) it shall have been publicly disclosed or Parent or the
Purchaser shall have otherwise learned that any person, entity or 'group'
(as defined in Section 13(d)(3) of the Exchange Act), other than
Zell/Chilmark Fund, L.P. or Magten or FMR Corp. (including any of FMR
Corp.'s affiliates), Parent or its affiliates or any group of which any of
them is a member, shall have acquired beneficial ownership (determined
pursuant to Rule 13d-3 promulgated under the Exchange Act) of more than
14.9% of any class or series of capital stock of the Company (including the
Shares), through the acquisition of stock, the formation of a group or
otherwise, or shall have been granted an option, right or warrant,
conditional or otherwise, to acquire beneficial ownership of more than
14.9% of any class or series of capital stock of the Company (including the
Shares); or (ii) any person, entity or group shall have entered into a
definitive agreement or agreement in principle with the Company with

respect to a merger, consolidation or other business combination with the
Company; or

(h) a tender or exchange offer for some or all of the Shares or
proposal for a Takeover Proposal shall have been publicly proposed to be
made or shall have been made by another person or entity; or

(i) the Company Board of Directors shall have withdrawn, or modified
or changed in a manner adverse to Parent or the Purchaser (including by
amendment of the Schedule 14D-9), its approval or recommendation of the
Offer, the Merger Agreement, or the Merger, or recommended another proposal
or offer, or shall have resolved to do any of the foregoing; or

(j) there shall have occurred any event, change or effect (including
the incurrence of any liability of any nature, whether or not accrued,
contingent or otherwise) which has individually or in the aggregate, a
material adverse effect on or with respect to the financial condition,
business, results of operations, assets, liabilities, properties or
prospects of the Company and its Subsidiaries;

which in the sole judgment of Parent or the Purchaser, in any such case, and
regardless of the circumstances (including any action or inaction by Parent or
the Purchaser giving rise to such condition) makes it inadvisable to proceed
with the Offer or with such acceptance for payment or payments.

The foregoing conditions are for the sole benefit of Parent and the
Purchaser and may be asserted by Parent or the Purchaser regardless of the
circumstances giving rise to any such condition or may be waived by Parent or
the Purchaser in whole or in part at any time and from time to time in their
sole discretion. The failure by Parent

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<PAGE>
or the Purchaser at any time to exercise any of the foregoing rights shall not
be deemed a waiver of any such right; the waiver of any such right with respect
to particular facts and other circumstances shall not be deemed a waiver with
respect to other facts and circumstances; and each such right shall be deemed an
ongoing right which may be asserted at any time and from time to time.

15. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS.

General. Except as otherwise disclosed herein, based upon its review of
publicly available information with respect to the Company and the review of
certain information furnished by the Company to Parent, neither the Purchaser
nor Parent is aware of (i) any license or regulatory permit that appears to be
material to the business of the Company and its Subsidiaries, taken as a whole,
that might be adversely affected by the acquisition of Shares by the Purchaser
pursuant to the Offer or the Merger or (ii) any approval or other action by any
governmental, administrative or regulatory agency or authority, domestic or
foreign, that would be required for the acquisition or ownership of Shares by
the Purchaser as contemplated herein. Should any such approval or other action
be required, the Purchaser currently contemplates that such approval or action
would be sought. The Company's pharmacists and pharmacy technicians are required
to be licensed by the appropriate state board of pharmacy. The Company's stores

and certain of the Company's distribution centers are also registered with the
Federal Drug Enforcement Administration. Many of the Company's stores sell
alcoholic beverages and are subject to various state and local licensing
requirements as a result. By virtue of these license and registration
requirements, the Company may be obligated to obtain certain governmental
consents and approvals in order to consummate the Merger. While the Purchaser
does not currently intend to delay the acceptance for payment of Shares tendered
pursuant to the Offer pending the outcome of any such matter, there can be no
assurance that any such approval or action, if needed, would be obtained or
would be obtained without substantial conditions or that adverse consequences
might not result to the business of the Company, the Purchaser or Parent or that
certain parts of the businesses of the Company, the Purchaser or Parent might
not have to be disposed of in the event that such approvals were not obtained or
any other actions were not taken. The Purchaser's obligation under the Offer to
accept for payment and pay for Shares is subject to certain conditions. See
Section 14.

Antitrust. Under the HSR Act and the rules that have been promulgated
thereunder by the Federal Trade Commission (the 'FTC'), certain acquisition
transactions may not be consummated unless certain information has been
furnished to the Antitrust Division of the Department of Justice (the 'Antitrust
Division') and the FTC and certain waiting period requirements have been
satisfied. The acquisition of Shares by Purchaser pursuant to the Offer is
subject to such requirements. See Section 2. Parent expects that on or about
December 7, 1995 it will file a Notification and Report Form with respect to the
Offer (the 'HSR Filing').

Under the provisions of the HSR Act applicable to the Offer, the purchase
of Shares under the Offer may not be consummated until the expiration of a
15-calendar day waiting period following the filing of the HSR Filing by Parent.
Such filing is expected to be made on or about December 7, 1995, and if such
filing is made on December 7, 1995 the waiting period with respect to the Offer
will expire at 11:59 p.m., New York City time, on December 22, 1995, unless
early termination of the waiting period is granted or Parent receives a request
for additional information or documentary material prior thereto. Pursuant to
the HSR Act, Parent is expected to request early termination of the waiting
period applicable to the Offer. There can be no assurances, however, that the
15-day waiting period under the HSR Act will be terminated early. If, within
such 15-day waiting period, either the Antitrust Division or the FTC requests
additional information or material from Parent concerning the Offer, the waiting
period will be extended and would expire at 11:59 p.m., New York City time, on
the tenth calendar day after the date of substantial compliance by Parent with
such request. Only one extension of the waiting period pursuant to a request for
additional information is authorized by the HSR Act. Thereafter, such waiting
period may be extended only by court order or with the consent of Parent. The
Purchaser will not accept for payment Shares tendered pursuant to the Offer
unless and until the waiting period requirements imposed by the HSR Act with
respect to the Offer have been satisfied. See Section 14.

The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the Purchaser's acquisition of Shares
pursuant to the Offer and the Merger. At any time before or after the
Purchaser's acquisition of Shares, either the Antitrust Division or the FTC
could take such action under the antitrust laws as it deems necessary or

desirable in the public interest, including seeking to enjoin the acquisition of
Shares pursuant to the Offer or otherwise or seeking divestiture of Shares
acquired by the Purchaser or

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divestiture of substantial assets of Parent or its subsidiaries. Private parties
and state attorneys general may also bring legal action under the antitrust laws
under certain circumstances. Based upon an examination of publicly available
information relating to the businesses in which Parent and the Company are
engaged, Parent and the Purchaser believe that the acquisition of Shares by the
Purchaser will not violate the antitrust laws. Nevertheless, there can be no
assurance that a challenge to the Offer or other acquisition of Shares by the
Purchaser on antitrust grounds will not be made, or if such a challenge is made,
of the result. See Section 14 for certain conditions to the Offer, including
conditions with respect to litigation and certain governmental actions.

State Takeover Laws. As a Delaware corporation, the Company is subject to
Section 203 ('Section 203') of the DGCL. Section 203 would prevent an
'Interested Stockholder' (generally defined as a person who owns or has the
right to acquire 15% or more of a corporation's voting stock, or an affiliate or
associate thereof) from engaging in a 'Business Combination' (defined to include
mergers and certain other transactions) with a Delaware corporation for a period
of three years following the time that such person became an Interested
Stockholder unless: (i) prior to such time, the board of directors of the
corporation approved the transaction which resulted in the Interested
Stockholder becoming an Interested Stockholder, (ii) upon consummation of the
transaction which resulted in the Interested Stockholder becoming an Interested
Stockholder, the Interested Stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time that the transaction commenced
(excluding stock held by directors who are also officers and by employee stock
ownership plans that do not allow plan participants to determine confidentially
whether to tender shares) or (iii) at or subsequent to such time, the Business
Combination is approved by the board of directors of the corporation and
authorized at a meeting of stockholders by the affirmative vote of the holders
of at least 66 2/3% of the outstanding voting stock of the corporation not owned
by the Interested Stockholder. In accordance with the provisions of Section 203,
the Company Board has approved the transactions contemplated by the Merger
Agreement, the Stockholder Agreement and the Stock Option Agreement, including
the Purchaser's acquisition of Shares pursuant to the Offer. Accordingly, the
transactions contemplated by the Merger Agreement, the Stockholder Agreement and
the Stock Option Agreement, including the Purchaser's acquisition of Shares
pursuant to the Offer, are exempt from the provisions of Section 203.

A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations which are incorporated, or have
substantial assets, stockholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects, in such states. In 1982, in Edgar v. MITE Corp., the Supreme
Court of the United States invalidated on constitutional grounds the Illinois
Business Takeover Statute, which, as a matter of state securities law, made
takeovers of corporations meeting certain requirements more difficult. However,
in 1987 in CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that
the State of Indiana may, as a matter of corporate law, and, in particular, with

respect to those aspects of corporate law concerning corporate governance,
constitutionally disqualify a potential acquiror from voting on the affairs of a
target corporation without the prior approval of the remaining stockholders. The
state law before the Supreme Court was by its terms applicable only to
corporations that had a substantial number of stockholders in the state and were
incorporated there.

The Company, directly or through subsidiaries, conducts business in a
number of states throughout the United States, some of which have enacted
takeover laws. The Purchaser does not know whether any of these laws will, by
their terms, apply to the Offer or the Merger and has not complied with any such
laws. Should any person seek to apply any state takeover law, the Purchaser will
take such action as then appears desirable, which may include challenging the
validity or applicability of any such statute in appropriate court proceedings.
In the event it is asserted that one or more state takeover laws is applicable
to the Offer or the Merger, and an appropriate court does not determine that it
is inapplicable or invalid as applied to the Offer, the Purchaser might be
required to file certain information with, or receive approvals from, the
relevant state authorities. In addition, if enjoined, the Purchaser might be
unable to accept for payment any Shares tendered pursuant to the Offer, or be
delayed in continuing or consummating the Offer and the Merger. In such case,
the Purchaser may not be obligated to accept for payment any Shares tendered.
See Section 14.

Certain Litigation. On November 30, 1995, a purported class action
entitled Silvert v. Revco D. S., Inc. et al. ('Silvert'), was filed in the Court
of Chancery of the State of Delaware, New Castle County, on behalf of the class
of all the Company's stockholders. The Silvert complaint named the Company, all
of the Company's directors and Parent as defendants. The Silvert complaint
alleges that the $27.50 per Share price offered by

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Parent in the Offer is insufficient and that the Offer is unfair to the
Company's stockholders and represents an attempt by the defendants to enrich
themselves at the expense of the plaintiff class. The plaintiff in the Silvert
action asserts that defendants violated their fiduciary duties to the Company's
stockholders by allegedly failing adequately to evaluate the Company as a
potential acquisiton candidate; to take adequate steps to enhance the Company's
value as an acquisition candidate; and to create an active and open auction for
the Company. The Silvert complaint further alleges that the Stock Option impedes
the maximization of Company stockholder value. The Silvert complaint seeks,
among other relief, a preliminary and permanent injunction barring defendants
from taking any steps to accomplish the proposed Merger at a price that is not
fair and equitable to the plaintiffs and enjoining any improper device or
transaction which will impede maximization of stockholder value. The Silvert
complaint also seeks unspecified damages for losses suffered and to be suffered
by the plaintiff class as a result of the acts alleged in the Silvert complaint.

16. FEES AND EXPENSES. Except as set forth below, neither Parent nor the
Purchaser will pay any fees or commissions to any broker, dealer or other person
for soliciting tenders of Shares pursuant to the Offer.

DLJ is acting as Dealer Manager in connection with the Offer and is acting

as financial advisor to Parent in connection with its acquisition of the
Company. Parent has agreed, as compensation for DLJ's services, (i) to pay DLJ a
fee of $1,550,000 at the time DLJ notifies the Board of Parent that it is
prepared to deliver an opinion as to the fairness of the consideration to be
paid by Parent in the Offer and the Merger and (ii) upon the request by DLJ from
time to time, to reimburse DLJ promptly for all out-of-pocket expenses
(including the reasonable fees and expenses of counsel) and to indemnify DLJ
against certain liabilities and expenses in connection with its engagement,
including certain liabilities under the federal securities laws. DLJ has
delivered to Parent an opinion to the effect that the consideration to be paid
by Parent pursuant to the Merger Agreement, taken as a whole, is fair to the
stockholders of Parent from a financial point of view. Accordingly, DLJ is
entitled to the foregoing fee. Information with respect to the fees payable by
the Company to Morgan Stanley, the Company's financial advisor, is set forth in
the Schedule 14D-9.

The Purchaser has retained MacKenzie Partners, Inc. to act as the
Information Agent in connection with the Offer. The Information Agent may
contact holders of Shares by mail, telephone, facsimile, telegraph and personal
interviews and may request brokers, dealers and other nominee stockholders to
forward materials relating to the Offer to beneficial owners of Shares. The
Information Agent will receive reasonable and customary compensation for its
services, will be reimbursed for certain reasonable out-of-pocket expenses and
may be indemnified against certain liabilities and expenses in connection
therewith, including certain liabilities under the federal securities laws.

In addition, Harris Trust Company of New York has been retained as the
Depositary. The Depositary has not been retained to make solicitations or
recommendations in its role as Depositary. The Depositary will receive
reasonable and customary compensation for its services in connection with the
Offer, will be reimbursed for certain reasonable out-of-pocket expenses and may
be indemnified against certain liabilities and expenses in connection therewith,
including certain liabilities under the federal securities laws. Brokers,
dealers, commercial banks and trust companies will be reimbursed by the
Purchaser for customary mailing and handling expenses incurred by them in
forwarding offering material to their customers.

17. MISCELLANEOUS. The Purchaser is not aware of any jurisdiction where
the making of the Offer is prohibited by any administrative or judicial action
pursuant to any valid state statute. If the Purchaser becomes aware of any valid
state statute prohibiting the making of the Offer or the acceptance of the
Shares pursuant thereto, the Purchaser will make a good faith effort to comply
with such state statute. If, after such good faith effort, the Purchaser cannot
comply with any such state statute, the Offer will not be made to (nor will
tenders be accepted from or on behalf of) the holders of Shares in such state.
In any jurisdiction where the securities, blue sky or other laws require the
Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be
made on behalf of the Purchaser by the Dealer Manager or by one or more
registered brokers or dealers which are licensed under the laws of such
jurisdiction.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PARENT OR THE PURCHASER NOT CONTAINED IN THIS OFFER
TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH

INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.

43
<PAGE>
Parent and the Purchaser have filed with the Commission the Schedule 14D-1,
together with exhibits, pursuant to Rule 14d-3 of the General Rules and
Regulations under the Exchange Act, furnishing certain additional information
with respect to the Offer, and may file amendments thereto. The Company has
filed with the Commission the Schedule 14D-9, together with exhibits, setting
forth the Company's recommendation of the Board of Directors with respect to the
Offer and such other information required to be disseminated to stockholders.
The Schedule 14D-1 and Schedule 14D-9 and any amendments thereto, including
exhibits, may be inspected at, and copies may be obtained from, the same places
and in the same manner as set forth in Section 7 (except that they will not be
available at the regional offices of the Commission).

OCEAN ACQUISITION CORPORATION

December 4, 1995

<PAGE>
SCHEDULE I
INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE
OFFICERS OF PARENT AND THE PURCHASER

1. Directors and Executive Officers of Parent. Set forth below is the name,
current business address, citizenship and the present principal occupation or
employment and material occupations, positions, offices or employments for the
past five years of each Director and executive officer of Parent. Unless
otherwise indicated, each person identified below is employed by Parent. The
principal address of Parent and, unless otherwise indicated below, the current
business address for each individual listed below is 30 Hunter Lane, Camp Hill,
PA 17011. Each such person is a citizen of the United States. Directors are
identified by an asterisk.

<TABLE>
<CAPTION>
NAME AND CURRENT PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- ------------------------- -----------------------------------------------------
<S> <C>
Alex Grass*.............. Founder of Parent, Honorary Chairman of the Board of
Parent and Chairman of the Board's Executive
Committee since March 4, 1995 when he retired as
Chairman of the Board and Chief Executive Officer of
Parent, positions he held since the founding of
Parent. Mr. Grass is also a director of Hasbro Inc.
He is the father of Martin Grass.

Martin L. Grass*......... Chairman of the Board and Chief Executive Officer of
Parent since March 4, 1995. Previously, Mr. Grass was
President and Chief Operating Officer since April
1989, had been Executive Vice President for three
years and prior thereto had served as Senior Vice
President. Mr. Grass has served with Parent in
various capacities since 1978. Mr. Grass has been a
member of the Board of Directors since 1982. Mr.
Grass is the son of Alex Grass.

Timothy J. Noonan*....... President and Chief Operating Officer of Parent since
March 4, 1995 when he was also appointed as a member
of the Board of Directors of Parent. Prior thereto,
and for more than five years, Mr. Noonan was
Executive Vice President of Parent.

Preston Robert Tisch* ... Co-Chairman and Co-Chief Executive Officer of Loews
Loews Corporation Corporation since March 1988. In addition, since
667 Madison Avenue March 1991, Mr. Tisch has been Chairman of the Board
New York, NY 10021 of the N.Y. Football GIANTS, Inc. From August 1986 to
March 1988, Mr. Tisch was Postmaster General of the
United States. Prior thereto, Mr. Tisch had been
President and Chief Operating Officer of Loews
Corporation. Mr. Tisch has been a member of the Board
of Directors of Parent since 1988. Mr. Tisch is also

a director of Loews Corporation, CNA Financial
Corporation, Bulova Watch Co., and Hasbro, Inc.

Franklin C. Brown*....... Executive Vice President and Chief Legal Counsel of
Parent. Prior to Mr. Brown's appointment as Executive
Vice President in April 1993, Mr. Brown served as
Senior Vice President and General Counsel of Parent.
Mr. Brown has been a member of the Board of Directors
of Parent since 1981.

Philip Neivert* ......... Private investor whose operations are based in
50 Whitestone Lane Rochester, New York. Mr. Neivert has been a member of
Rochester, NY 14618 the Board of Directors of Parent since 1969.

Gerald Tsai, Jr.* ....... Chairman, President and Chief Executive Officer of
Tsai Management, Inc. Delta Life Corporation, a position Mr. Tsai has held
20 Park Avenue since February 1993. Mr. Tsai had been Chairman of
Suite 3709 the Executive Committee of the Board of Directors of
New York, NY 10166 Primerica Corporation (formerly American Can Company)
from December 1988 until April 1991. Mr. Tsai has
been a member of the Board of Directors of Parent
since 1987. Mr. Tsai is also a director of NAC Re
Corporation, Sequa Corporation and Zenith National
Insurance Corp., and is a trustee of Meditrust.
</TABLE>
I-1
<PAGE>
<TABLE>
<CAPTION>
NAME AND CURRENT PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- ------------------------- -----------------------------------------------------
<S> <C>
Leonard Stern* .......... Chairman of the Board and Chief Executive Officer of
Hartz Group, Inc. The Hartz Group, Inc. and affiliated companies, since
667 Madison Avenue 1979. Mr. Stern has been a member of the Board of
24th Floor Directors of Parent since 1986.
New York, NY 10021

Henry Taub* ............. Honorary Chairman of the Board of Automatic Data
111 DeVriese Court Processing, Inc. since 1986. Mr. Taub has been a
Tenafly, NJ 07670 member of the Board of Directors of Parent since
1984. Mr. Taub is also a director of Hasbro, Inc.

Kevin J. Mann............ Executive Vice President Marketing of Parent since
March 4, 1995. Previously, Mr. Mann was the Senior
Vice President of Purchasing for Parent, a position
he held for more than five years.

Frank M. Bergonzi........ Executive Vice President and Chief Financial Officer
of Parent since March 4, 1995. Previously, Mr.
Bergonzi was Senior Vice President of Finance for
Parent, a position he held for more than five years.

Elliot S. Gerson......... Senior Vice President

Philip D. Markovitz...... Senior Vice President

Ronald A. Miller......... Senior Vice President

Robert R. Souder......... Senior Vice President

Joel F. Feldman.......... Senior Vice President

Dennis J. Bowman......... Senior Vice President

Wayne Gibson............. Senior Vice President

Charles R. Kibler........ Senior Vice President

Thomas R. Coogan......... Senior Vice President

Gerald P. Cardinale...... Vice President

Eric S. Elliott.......... Vice President

Mary A. Verbryke......... Vice President

W. Michael Knievel....... Vice President

James E. Krahulec........ Vice President

James O. Lott............ Vice President

Raymond B. McKeeby....... Vice President

Suzanne Mead............. Vice President

James M. Talton.......... Vice President

Michael F. Morris........ Vice President

Joseph S. Speaker........ Vice President

I. Lawrence Gelman....... Vice President and Secretary

Richard J. Varmecky...... Vice President and Treasurer
</TABLE>
I-2
<PAGE>
Each of the executive officers listed above has served Parent or its
subsidiaries in various executive capacities for the past five years, except for
the following individuals:

Mr. Gerson joined Parent as Senior Vice President in November 1995.
Prior thereto since May 1993, Mr. Gerson was a partner in the law firm of
Bolger Picker Hankin & Tannenbaum and prior thereto he was a partner of the
law firm of Wolf, Block, Schorr and Solis-Cohen.

Mr. Gibson joined Parent as Senior Vice President in June 1994. Prior
thereto Mr. Gibson was a partner and director of the Retail and
Distribution Practice Group in the Atlanta office of Deloitte & Touche for
more than five years.

Mr. Bowman has held his present position with Parent for two years.
Prior thereto Mr. Bowman was a Senior Information Technology Consultant
with McKinsey & Company.

Mr. Talton joined Parent on April 1, 1995 as Vice President of Human
Resources. For the year prior thereto, Mr. Talton was a Senior Vice
President for Executive Assets Company. Prior thereto Mr. Talton held the
position of Director of Employee and Labor Relations for PECO Energy
Company since 1989.

Mr. Varmecky was appointed Vice President and Treasurer of Parent in
July 1995. Previously, Mr. Varmecky held the positions of Assistant Vice
President and Corporate Controller of Parent for more than five years.

Ms. Verbryke was appointed Vice President of Category Management,
Purchasing of Parent in August 1995. Previously, Ms. Verbryke served as
Assistant Vice President of Category Management, Purchasing of Parent.

2. Directors and Executive Officers of the Purchaser. Set forth below is the
name and position of each director and officer of the Purchaser. The principal
occupation or employment and citizenship of each such person is set forth in
Part 1 of this Schedule I. Each person identified below is employed by the
Purchaser and has held such position since the formation of the Purchaser in
November 1995. The principal address of the Purchaser and the current business
address for each individual listed below is 30 Hunter Lane, Camp Hill, PA 17011.
Directors are identified by an asterisk.

<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- ------------------------- --------------------------------------------------
<S> <C>
Martin L. Grass*......... President
Franklin C. Brown*....... Secretary and Vice President
Frank M. Bergonzi*....... Treasurer and Vice President
Elliot S. Gerson......... Assistant Vice President and Assistant Secretary
</TABLE>
I-3

<PAGE>
SCHEDULE II
REVCO D.S., INC.
1925 ENTERPRISE PARKWAY
TWINSBURG, OHIO 44087

INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER

This Information Statement is being mailed on or about December 4, 1995, as
part of Parent's Tender Offer Statement on Schedule 14D-1 and Schedule 13D (the
'Schedule 14D-1') to holders of record of the Shares at the close of business on
or about November 30, 1995. You are receiving this Information Statement in
connection with the possible election of persons designated by Parent to a
majority of the seats on the Board of Directors of the Company (the 'Parent
Designees'). The Merger Agreement requires the Company to use its best efforts
to cause the Parent Designees to be elected to the Board of Directors of the
Company under the circumstances described therein. This Information Statement is
required by section 14(f) of the Securities Exchange Act of 1934, as amended,
(the 'Exchange Act') and Rule 14f-1 thereunder. See 'BOARD OF DIRECTORS AND
EXECUTIVE OFFICERS--Right to Designate Directors; Parent Designees.' You are
urged to read this Information Statement carefully. You are not, however,
required to take any action in connection with this Information Statement.

Pursuant to the Merger Agreement, the Purchaser commenced the Offer on
December 4, 1995. The Offer is scheduled to expire at 12:00 Midnight, New York
City time, on Tuesday, January 2, 1996, unless the Offer is extended.

The information contained in this Information Statement concerning the
Company has been furnished to Parent and the Purchaser by the Company, and
Parent assumes no responsibility for the accuracy or completeness of such
information. Capitalized terms used herein and not otherwise defined herein
shall have the meanings set forth in the Schedule 14D-1 and the Offer to
Purchase to which this Information Statement is attached.

BOARD OF DIRECTORS AND EXECUTIVE OFFICERS

GENERAL

As of November 29, 1995, the Company had a total of 67,287,990 Shares
issued and outstanding, including 700,000 Shares of treasury stock. The
Company's By-Laws provide that the business and affairs of the Company will be
managed by, or under the supervision of, the Board of Directors, and that the
Board of Directors may from time to time fix the number of Directors. The number
of Directors is currently twelve. During fiscal year 1995, the Board of
Directors held four meetings. All of the Directors, other than Mr. Samuel Zell,
attended at least 75% of the meetings of the Board and committees of which they
were members. Biographical information regarding each current Director is set
forth below. Each member of the Board of Directors will serve until his or her
successor is elected by the stockholders or until his or her earlier resignation
or removal. Except where indicated below, each member of the Board of Directors
has served since June 1, 1992.

RIGHT TO DESIGNATE DIRECTORS; PARENT DESIGNEES

Pursuant to the Merger Agreement, promptly upon the acceptance for payment
of any Shares by Parent or any of its Subsidiaries pursuant to the Offer, Parent
shall be entitled to designate such number of Directors, rounded up to the next
whole number, on the Board of Directors of the Company as is equal to the
product of the total number of Directors on such Board (giving effect to the
Directors designated by Parent pursuant to this sentence) multiplied by the
percentage that the aggregate number of Shares beneficially owned by the
Purchaser, Parent and any of their affiliates bears to the total number of
Shares then outstanding. The Company shall, upon request of Parent, use its best
efforts promptly either to increase the size of its Board of Directors or, at
the Company's election, secure the resignations of such number of its incumbent
Directors as is necessary to enable Parent's Designees to be so elected to the
Company's Board, and shall cause Parent's Designees to be so elected

II-1
<PAGE>
to the Company's Board, and shall cause Parent's Designees to be so elected. At
such time, the Company shall also cause persons designated by Parent to
constitute the same percentage (rounded up to the next whole number) as is on
the Company's Board of Directors of (i) each committee of the Company's Board of
Directors, (ii) each board of directors (or similar body) of each Subsidiary of
the Company and (iii) each committee (or similar body) of each such board, in
each case only to the extent permitted by applicable law or the rules of any
stock exchange on which the Shares are listed. Notwithstanding the foregoing,
until the Effective Time, Parent, the Purchaser and the Company shall use their
best efforts to retain as a member of the Company Board at least two Directors
who are Directors of the Company on the date the Merger Agreement is signed;
provided, that subsequent to the purchase of and payment for Shares pursuant to
the Offer, the Parent Designees shall always represent at least a majority of
the entire Board of Directors.

Parent has informed the Company that each of the Parent Designees listed
below has consented to act as a Director. It is expected that the Parent
Designees may assume office at any time following the purchase by the Purchaser
of a majority of the Shares pursuant to the Offer, which purchase cannot be
earlier than January 2, 1996, and that, upon assuming office, the Parent
Designees will thereafter constitute at least a majority of the Board of
Directors of the Company.

PARENT DESIGNEES

Parent may designate the following individuals to the Board of Directors of
the Company. Such individuals's name, age as of the date hereof, present
principal occupation or employment and five-year employment history are set
forth below.

Alex Grass

Mr. Grass, age 67, Founder of Parent, has been the Honorary Chairman of the
Board and Chairman of the Board's Executive Committee of Parent since March 4,
1995 when he retired as Chairman of the Board and Chief Executive Officer,
positions he held since the founding of Parent. Mr. Grass is also a director of

Hasbro Inc. He is the father of Martin Grass.

Martin Grass

Mr. Grass, age 41, has been Chairman of the Board and Chief Executive
Officer of Parent since March 4, 1995. Previously, Mr. Grass was President and
Chief Operating Officer since April 1989, had been Executive Vice President for
three years and, prior thereto, had served as Senior Vice President. He has
served with Parent in various capacities since 1978. He has been a Director of
Parent since 1982. He is the son of Alex Grass.

Franklin Brown

Mr. Brown, age 67, is Executive Vice President and Chief Legal Counsel of
Parent. Prior to his appointment as Executive Vice President in April 1993, Mr.
Brown served for 13 years as Senior Vice President and General Counsel of
Parent. Mr. Brown has been a Director of Parent since 1981.

Frank M. Bergonzi

Mr. Bergonzi, age 50, is Executive Vice President and Chief Financial
Officer of Parent since March 4, 1995. Prior thereto, Mr. Bergonzi served as
Senior Vice President of Parent.

Timothy J. Noonan

Mr. Noonan, age 53, is and has been a Director and President and Chief
Operating Officer of Parent since March 4, 1995. Prior thereto, Mr. Noonan was
Executive Vice President of Parent.

Elliot Gerson

Mr. Gerson, age 54, joined Parent as Senior Vice President in November
1995. Prior thereto since May 1993, Mr. Gerson was a partner in the law firm of
Bolger Picker Hankin & Tannenbaum and prior thereto he was a partner of the law
firm of Wolf, Block, Schorr and Solis-Cohen.

II-2
<PAGE>
Kevin J. Mann

Mr. Mann, age 41, is Executive Vice President Marketing of Parent since
1995. Prior thereto, Mr. Mann was Senior Vice President of Parent.

Thomas R. Coogan

Mr. Coogan, age 40, has been Senior Vice President of Planning of Parent
since July 1995. Prior thereto, Mr. Coogan was Vice President and Treasurer of
Parent.

BOARD OF DIRECTORS OF THE COMPANY

Carl A. Bellini

Mr. Bellini, age 61, was selected, effective August 1, 1994, by the Board
of Directors to become a member of the Board to fill a vacancy. Mr. Bellini was
elected Executive Vice President and Chief Operating Officer of the Company on
October 13, 1993. From August 18, 1992 to October 13, 1993, Mr. Bellini served
as Executive Vice President of Marketing and Stores of the Company. From
approximately December 1991 to April 1992, Mr. Bellini served as Acting Chief
Operating Officer of Standard Brands Paint Co., which filed a bankruptcy
proceeding in March 1992 and emerged from bankruptcy during 1993. From June 1989
until June 1991, Mr. Bellini served as President and Chief Operating Officer of
Erol's, Inc., a video and electronics chain based in Washington, D.C. From
December 1987 to June 1989, Mr. Bellini served as Executive Vice President of
Store Operations for the Company.

Livio M. Borghese

Mr. Borghese, age 56, is Chairman of Curtis Industries, Inc., a national
distributor of hardware products, chemicals and automotive replacement parts and
a manufacturer and distributor of security products. He was with Bear Stearns &
Co. from 1968 to 1988, ending as Senior Managing Director and Member of the
Executive Committee. Mr. Borghese was Chairman of International Corporate
Finance at Prudential-Bache Securities in 1989. He presently owns a company
engaged in international trading and investments and is a board member of OMI
Corp., the United Kingdom Corp. and Noel Group, Inc.

Rod F. Dammeyer

Mr. Dammeyer, age 55, is, and since 1985 has been, President and a director
of Itel Corporation ('Itel'), a holding and distribution company, and is, and
since 1993 has been, Chief Executive Officer of Itel. Mr. Dammeyer is also a
director of Great American Management and Investment Inc. (where he has also
served, since February 1994, as President and Chief Executive Officer), Capsure
Holdings Corp., ANTEC Corporation, Jacor Communications, Inc., Lukens Inc., The
Vigoro Corporation, Falcon Building Products, Inc., and a trustee of Van Kampen
Merritt closed-end mutual funds and Series Trust. Mr. Dammeyer is an indirect
limited partner of the general partner of Zell/Chilmark Fund, L.P.
('Zell/Chilmark'). Mr. Dammeyer was selected, effective December 15, 1992, by
the Board of Directors to become a member of the Board to fill a vacancy.

Talton R. Embry

Mr. Embry, age 48, is, and since 1978 has been, Managing Director and Chief
Investment Officer of Magten Asset Management Corporation ('Magten'), which he
established and which is an investment advisory firm. Mr. Embry is also a
director of Capsure Holdings Corp., Varco International Inc. ('Varco'), TSX
Corporation, Combined Broadcasting, Inc., BDK Holdings, Inc. and Thermodyne
Holdings Corp. Mr. Embry and Mr. Zell were elected on July 27, 1992, as
Co-Chairmen of the Board of Directors of the Company.

Ben Evans

Mr. Evans, age 66, was a partner of Ernst & Whinney, now Ernst & Young,
until his retirement in 1989. Mr. Evans was an audit partner supervising the
audits of companies in many diverse industries with heavy concentration in
apparel, retailing and commercial finance. From 1978 through 1989, Mr. Evans was

a member of Ernst & Whinney's corporate financial services group concentrating
on bankruptcy assignments generally on behalf of unsecured creditors committees,
with special emphasis in the apparel, retailing, food, drug and pharmaceutical
industries. Since 1989, Mr. Evans has been a consultant for the firm of Ernst &
Young in their

II-3
<PAGE>
corporate financial services group continuing work in the bankruptcy area. Mr.
Evans is also a director of Jamesway Corporation, Kash n' Karry Food Stores,
Inc. and Megafoods Stores, Inc.

John V. Guttag

Dr. Guttag, age 46, is Professor of Computer Science and Engineering at the
Massachusetts Institute of Technology ('MIT'). Since his arrival at MIT in 1979,
Dr. Guttag has headed the Laboratory for Computer Science's Systematic Program
Development Group and currently is Associate Department Head for Computer
Science of the Electrical Engineering and Computer Science Department. Dr.
Guttag is a member of the governing council of the School of Engineering and a
member of the Executive Committee of the Laboratory for Computer Science at MIT.
Dr. Guttag is also a director of the Computing Research Association. Dr. Guttag
was selected, effective March 23, 1994, by the Board of Directors to become a
member of the Board to fill a vacancy.

D. Dwayne Hoven

Mr. Hoven, age 54, was elected Chief Executive Officer of the Company
effective August 1993 and was elected President of the Company in July 1992.
From July 1992 to August 1993, Mr. Hoven served as Chief Operating Officer of
the Company. From December 1991 to July 1992, Mr. Hoven served as Executive Vice
President, Marketing and Stores of the Company. From June 1992 to July 1992, Mr.
Hoven served as a member of the interim office of the President of the Company.
From July 1989 to December 1991, Mr. Hoven served as Executive Vice President of
Stores of the Company. From January 1988 to June 1989, Mr. Hoven served as
Senior Vice President of Distribution of the Company. Mr. Hoven was the sole
shareholder, Chairman of the Board and Chief Executive Officer of Davis-Dyer
Supply Co., a wholesale distributor, from prior to June 1986 to December 1987.
Mr. Hoven is also a director of OfficeMax, Inc. Mr. Hoven was selected,
effective August 27, 1992, by the Board of Directors to become a member of the
Board to fill a vacancy.

Walter B. Reinhold

Mr. Reinhold, age 70, is Chairman of the Board of Varco, a company engaged
in the business of manufacturing oil and gas well drilling equipment and
machinery, drilling rig instrumentation and blow out prevention equipment. He
has been with Varco since 1949 and was Chief Executive Officer from 1979 to
April 1991, and prior thereto he served as Executive Vice President of Varco.
Mr. Reinhold is a standing member of the American Petroleum Institute, Stanford
Associates, and the Society of Petroleum Engineers. He is a director of the
Amdahl Corporation, the National Ocean Industries Association and the Petroleum
Equipment Suppliers Association and a trustee for the City of Hope.

Sheli Z. Rosenberg

Ms. Rosenberg, age 53, is, and since 1991 has been, a director of American
Classic Voyages Co. and Vice President and Assistant Secretary of American
Classic Voyages Co. since 1990 and 1991, respectively; is, and since 1980 has
been, a member of Rosenberg & Liebentritt, P.C.; is, and since 1984 has been, a
director of Great American Management and Investment, Inc., a diversified
company with interests in manufacturing, agricultural, chemicals and fertilizers
and financial services; is, and since 1985 has been, a director, Vice President
and General Counsel of Capsure Holdings Corp., a company engaged in the business
of specialty property and casualty insurance; is, and since 1994 has been,
President and Chief Executive Officer, and from 1980, a director and Executive
Vice President of Equity Financial and Management Company and Equity Group
Investments, Inc.; and is, and from January 1994 until March 1995, a director of
CFI Industries, Inc., a company engaged in the business of manufacturing
thermoformed plastic packaging. Ms. Rosenberg is also a director of Eagle
Industries, Inc., Anixter International Inc., Jacor Communications, Inc., Falcon
Building Products, Inc. and The Vigoro Corporation, and a trustee of Equity
Residential Properties Trust. Ms. Rosenberg has been Vice President of First
Capital Benefits Administrators, Inc. ('First Capital') since July 1987. First
Capital filed a petition under the federal bankruptcy laws on January 3, 1995.
Ms. Rosenberg is an indirect limited partner of the general partner of
Zell/Chilmark. Prior to October 4, 1991, Ms. Rosenberg was Vice President of
Madison Management Group, Inc., which filed a petition under Chapter 11 of the
Bankruptcy Code on November 8, 1991. Ms. Rosenberg was selected, effective March
23, 1994, by the Board of Directors to become a member of the Board to fill a
vacancy.

II-4
<PAGE>
David M. Schulte

Mr. Schulte, age 49, is, and since mid-1990 has been, one of two
individuals (the other being Mr. Zell) who act as general partners of the
general partner of Zell/Chilmark, a limited partnership with capital commitments
in excess of $1,000,000,000 formed to invest in and provide capital and
management support to companies that are engaged in or are the appropriate
subject of significant recapitalizations or corporate restructurings, both in
and out of the bankruptcy process. Since 1984, Mr. Schulte has been managing
general partner of Chilmark Partners, L.P., a merchant banking firm that has
specialized in providing corporate and investment banking advice to companies on
the restructuring of their business in conjunction with recapitalizations,
although he currently devotes all of his time to the affairs of Zell/Chilmark.
Mr. Schulte is also a director of Jacor Communications, Inc. (where he also
serves as Chairman of the Board), and Sealy Corporation.

Thomas O. Thorsen

Mr. Thorsen, age 64, has been a director of The Travelers Corporation, now
known as The Travelers Group ('Travelers'), a multiline insurance, financial and
health services institution, since 1987. Prior to his retirement in May 1992,
Mr. Thorsen was Vice Chairman of the Board of Travelers since 1990. He was Vice
Chairman and Chief Financial Officer from 1990 to 1991. Prior thereto, he was
Executive Vice President and Chief Financial Officer from 1984 to 1990. Before

joining Travelers, Mr. Thorsen served thirty-one years with General Electric
Company in various financial positions, including Senior Vice President and
Chief Financial Officer from 1980 to 1984. Mr. Thorsen is a director of Iowa
Select Farms, Inc. and a member of the advisory committee of Iowa Select Farms,
L.P., entities engaged in large scale hog production. He is also a director of
PGA Golf Properties, Inc., an affiliate of the PGA of America involved in the
development and ownership of golf facilities.

Samuel Zell

Mr. Zell, age 54, is, and since 1981 has been, Chairman of the Board of
Equity Financial and Management Company and, since 1986 has been Chairman of the
Board of Equity Group Investments, Inc., two privately owned affiliated
investment and management companies; is, and since mid-1990 has been, the other
individual (along with Mr. Schulte) who acts as a general partner of the general
partner of Zell/Chilmark; is, and since 1985 has been, Chairman of the Board of
Anixter International Inc., a company engaged in the distribution of wiring
systems products; is, and since 1983 had been, Chairman of the Board, and from
1990 through 1993 has been Chief Executive Officer and President, of Great
American Management and Investment, Inc., a diversified company with interests
in manufacturing, agricultural, chemicals and fertilizers and financial
services; from 1987 has served as Chairman of the Board and Chief Executive
Officer of Capsure Holdings Corp., a company engaged in the business of
specialty property and casualty insurance; is, and since 1993 has been Chairman
of the Board of Equity Residential Properties Trust, a self-administered,
self-managed equity real estate investment trust; and is Chairman of the Board
and Chief Executive Officer, and from 1993 to March 31, 1995 had served as
Co-Chairman of the Board, of Manufactured Home Communities, Inc., a
self-administered and self-managed equity real estate investment trust. Mr. Zell
is a member of the board of directors of American Classic Voyages Co. (where he
has served as Chairman of the Board since August 1993), Sealy Corporation, The
Vigoro Corporation, Quality Food Centers, Inc. and Falcon Building Products,
Inc., where he has served as Chairman of the Board since 1994. Prior to October
4, 1991, Mr. Zell was President of Madison Management Group, Inc., which filed a
petition under Chapter 11 of the Bankruptcy Code on November 8, 1991. Mr. Zell
and Mr. Embry were elected on July 27, 1992, as Co-Chairmen of the Board of
Directors of the Company.

COMMITTEES OF THE BOARD

The Company's By-Laws provide that the Board may designate one or more
committees to exercise certain powers and authority of the Board of Directors.
The Board of Directors committees are as follows: the Executive Committee, the
Audit Committee, the Human Resources Committee and the Pension
Administration/Investment Committee. Each committee consists of one or more of
the Directors of the Company, as determined by the Board.

Messrs. Embry (Chairman), Hoven and Zell have been appointed by the Board
of Directors to constitute the Executive Committee of the Board of Directors.
The Executive Committee is authorized to exercise all of the

II-5
<PAGE>
powers and authority of the Board of Directors, except to the extent restricted

by the General Corporation Law of the State of Delaware (the 'DGCL'). The
Executive Committee met once during the fiscal year 1995.

The Audit Committee, which met three times during the fiscal year 1995,
consists of Messrs. Evans, Guttag, Reinhold, Schulte and Thorsen (Chairman). The
Audit Committee's responsibilities include the following: (i) satisfying itself
that the Company's internal control system is effective and sufficient to
safeguard the assets of the Company and permit the issuance of reliable
financial reports for both internal and external purposes; (ii) reviewing the
Company's accounting principles and practices and approving changes that are
expected to have a significant impact on the Company's current or future
financial statements; (iii) satisfying itself that the Company's financial
statements present fairly the Company's financial condition and the results of
its operations; (iv) satisfying itself as to the adequacy of the Company's
financial statement disclosure; and (v) serving as an informed voice on the
Board of Directors in evaluating and supporting the financial, accounting and
internal audit functions of the Company.

The Human Resources Committee, which met twice during the fiscal year 1995,
consists of Messrs. Dammeyer, Embry (Chairman) and Evans and Ms. Rosenberg. The
Human Resources Committee's responsibilities include the following: (i)
reviewing and approving the Company's executive compensation structure and
overall benefits program; (ii) administering certain of the Company's benefit
plans; (iii) monitoring the performance and succession of senior management and
recommending improvements when and as necessary; and (iv) providing for orderly
continuity (including by recommending Director nominees to the full Board) of
membership on the Board of Directors and its Committees.

The Pension Administration/Investment Committee, which met once during the
fiscal year 1995, consists of Messrs. Borghese, Dammeyer (Chairman) and Schulte.
The Pension Administration/Investment Committee's responsibilities include the
following: (i) administering the Revco D.S., Inc. Retirement Income Plan and
Trust (the 'Retirement Plan'), as amended, in a nondiscriminatory manner for the
exclusive benefit of participants and their beneficiaries, as required by the
Retirement Plan documents and applicable law; and (ii) administering the 401(k)
Savings Plan of Revco D.S., Inc., as amended (the 'Pension Plan'), in a
nondiscriminatory manner for the exclusive purpose of providing benefits to the
members and their beneficiaries, in accordance with the Savings Plan documents
and applicable law.

COMPENSATION OF THE BOARD

Only Directors of the Company who are Company employees are eligible to
participate in the Company's profit sharing, management incentive or pension
plans, except that, under the Pension Plan, Directors who were covered by the
Pension Plan as Company employees with vested rights retain such vested rights.

Only Directors of the Company who are not Company employees are paid fees
or remuneration for services on the Board or on any committee of the Board. Such
fees consist of an annual stipend of $30,000 for each Director plus $1,000 for
each committee member, other than the committee chairman, or $1,250 for the
committee chairman, for each committee meeting attended on a date on which no
Board meeting is scheduled. The annual stipend is paid in equal quarterly
payments which are subject to a $1,000 reduction for each missed Board meeting.

Directors also receive payment of travel and lodging expenses in connection with
their attendance at Board and committee meetings.

Pursuant to the terms of the Company's 1992 Non-Employee Directors' Stock
Option Plan, as amended (the 'Directors' Plan'), current and future non-employee
Directors of the Company other than Messrs. Zell, Embry and Schulte are eligible
to receive grants of non-qualified stock options. The current non-employee
Directors eligible to receive stock options under the Directors' Plan are
Messrs. Borghese, Dammeyer, Evans, Guttag, Reinhold and Thorsen and Ms.
Rosenberg. On July 27, 1992, each of the Directors identified above (other than
Messrs. Dammeyer and Guttag and Ms. Rosenberg) as being eligible to receive
options under the Directors' Plan, as well as one former Director who was a
Director on July 27, 1992, was granted an option to purchase 10,000 Shares at
the fair market value on the date of grant. Mr. Dammeyer was granted, on
December 15, 1992, an option to purchase 10,000 Shares at the fair market value
on the date of grant. Mr. Guttag and Ms. Rosenberg were each granted, on March
21, 1994, an option to purchase 10,000 Shares at the fair market value on the
date of grant. On July 27, 1993, July 27, 1994 and July 27, 1995, each eligible
Director (other than Mr. Guttag and

II-6
<PAGE>
Ms. Rosenberg), and on March 21, 1995, each of Mr. Guttag and Ms. Rosenberg, was
granted an option to purchase 5,000 Shares at the fair market value on the date
of grant.

PROCEEDINGS RELATING TO DIRECTORS

On September 9, 1993, Mr. Embry and Magten, without admitting or denying
the allegations in a complaint by the Securities and Exchange Commission (the
'Commission'), consented to the entry of judgments enjoining them from violating
(and, in the case of Mr. Embry, aiding and abetting violations of) anti-fraud
and other provisions of the Exchange Act, the Investment Company Advisors Act of
1940, as amended, and the Investment Company Act of 1940, as amended. The
Commission's complaint alleged principally that Mr. Embry failed to advise
clients of certain personal trades relevant to clients' holdings, to obtain
certain consents required under applicable law in connection therewith and to
comply with certain reporting requirements. The complaint did not involve the
securities of the Company. As part of the settlement, Mr. Embry made a $1
million payment for the benefit of certain of Magten's clients.

During fiscal year 1994, Mr. Thorsen consented, without a hearing and
without admitting or denying the matters set forth therein, to the issuance of
an order of the Commission, and to the entry of the findings and imposition of
the remedial sanctions set forth therein. The matters covered by the order have
no relationship either to the Company or its securities.

EXECUTIVE OFFICERS OF THE COMPANY

Listed below are the names and ages of all executive officers of the
Company as of November 29, 1995. Each executive officer will serve until his
successor is selected by the Board of Directors or until his earlier resignation
or removal. There are no family relationships among these officers.

<TABLE>
<CAPTION>
NAME AND AGE POSITION
- ------------------------------- -----------------------------------------------
<S> <C>
D. Dwayne Hoven, 54............ President, Chief Executive Officer, and a
Director
Carl A. Bellini, 61............ Executive Vice President, Chief Operating
Officer, and a Director
James J. Hagan, 36............. Executive Vice President--Finance and Chief
Financial Officer
James P. Mastrian, 53.......... Executive Vice President of Marketing
Douglas W. Coffey, 54.......... Senior Vice President of Human Resources
Edwin R. Gropp, Jr., 48........ Senior Vice President of Information Systems
Clarence D. Nichols, 49........ Senior Vice President, Store Operations
Jack A. Staph, 50.............. Senior Vice President, Secretary and General
Counsel
Dante R. Barone, 52............ Vice President, Pharmacy Marketing
Charles W. Breckenridge, 53.... Vice President of Control Support Services
Brian P. Carney, 35............ Vice President and Controller
Ware H. Grove, 45.............. Vice President and Treasurer
Wilson A. Lester, 44........... Vice President, Distribution and Transportation
Richard M. Mergo, 50........... Vice President, Store Operations
Robert T. Raaf, 49............. Vice President of Taxes
Jay E. Ross, 43................ Vice President, Merchandising
Bruce E. Schwallie, 41......... Vice President, Marketing
Robert A. Tamplin, 48.......... Vice President, Store Operations
Robert I. Thompson, 42......... Vice President, Professional Operations
George T. Watt, 51............. Vice President, Managed Care
Hanley H. Wheeler, III, 37..... Vice President, Store Operations
Paul N. Harris, 37............. Assistant Secretary
Gregory G. Wilson, 47.......... Assistant Controller--Financial Planning
</TABLE>

II-7
<PAGE>
D. Dwayne Hoven was elected Chief Executive Officer of the Company
effective August 1993 and was elected President of the Company in July 1992.
From July 1992 to August 1993, Mr. Hoven served as Chief Operating Officer of
the Company. From December 1991 to July 1992, Mr. Hoven served as Executive Vice
President, Marketing and Stores of the Company. From June 1992 to July 1992, Mr.
Hoven served as a member of the interim office of the President of the Company.
From July 1989 to December 1991, Mr. Hoven served as Executive Vice President of
Stores of the Company. From January 1988 to June 1989, Mr. Hoven served as
Senior Vice President of Distribution for the Company. Mr. Hoven is also is a
director of Office Max, Inc. Mr. Hoven was the sole shareholder, Chairman of the
Board and Chief Executive Officer of Davis-Dyer Supply Co., a wholesale

distributor, from prior to June 1986 to December 1987. Mr. Hoven was selected,
effective August 27, 1992, by the Board of Directors to become a member of the
Board to fill a vacancy.

Carl A. Bellini was elected Executive Vice President and Chief Operating
Officer of the Company on October 13, 1993. From August 18, 1992 to October 13,
1993, Mr. Bellini served as Executive Vice President of Marketing and Stores of
the Company. From approximately December 1991 to April 1992, Mr. Bellini served
as Acting Chief Operating Officer of Standard Brands Paint Co., which filed a
bankruptcy proceeding in March 1992 and emerged from bankruptcy during 1993.
From June 1989 until June 1991, Mr. Bellini served as President and Chief
Operating Officer of Erol's, Inc., a video and electronics chain based in
Washington, D.C. From December 1987 to June 1989, Mr. Bellini served as
Executive Vice President of Store Operations of the Company. Mr. Bellini was
selected, effective August 1, 1994, by the Board of Directors to become a member
of the Board to fill a vacancy.

James J. Hagan was elected Executive Vice President--Finance and Chief
Financial Officer of the Company on August 8, 1995. From July 1993 to August
1995, Mr. Hagan served as Senior Vice President, Real Estate of the Company.
From September 1988 to July 1993, Mr. Hagan was Vice President and Treasurer of
the Company. From May 1987 to September 1988, Mr. Hagan was Assistant Treasurer
of the Company. From prior to June 1986 to May 1987, Mr. Hagan served as
Director, Treasury Services, of A&P.

James P. Mastrian was elected Executive Vice President of Marketing of the
Company in July 1994. From June 1992 to July 1994, Mr. Mastrian served as Senior
Vice President, Marketing of the Company. From September 1990 to June 1992, Mr.
Mastrian served as Vice President and General Manager, Marketing of the Company.
From March 1990 to September 1990, Mr. Mastrian served as Executive Vice
President of Milo Corp., a wholesaler and retailer of professional beauty and
barber products. From October 1989 to March 1990, Mr. Mastrian was President and
Chief Operating Officer of SuperX Drug Company of Arizona. From July 1987 to
October 1989, Mr. Mastrian was Senior Vice President, Merchandising and
Marketing of the Sherwin-Williams Company Paint Stores Group. Before July 1987,
Mr. Mastrian was employed by Gray Drug Fair, a division of Sherwin-Williams
Company, and served as President and General Manager of Gray Drug Fair from
prior to June 1986 to July 1987.

Douglas W. Coffey was elected Senior Vice President of Human Resources of
the Company in July 1993. For five years prior to July 1993, Mr. Coffey served
as Senior Vice President of Human Resources of Burdine's Department Stores, a
division of Federated Department Stores.

Edwin R. Gropp, Jr. was elected Senior Vice President, Information Systems
of the Company in July 1993. For more than five years prior to July 1993, Mr.
Gropp was employed most recently as Group Vice President of Management Services
of Ralphs Grocery Company, a grocery chain based in Compton, California.

Clarence D. Nichols was elected Senior Vice President, Store Operations, of
the Company in June 1992. From November 1987 to June 1992, Mr. Nichols served as
Regional Vice President for the Company's southern region. From August 1986 to
November 1987, Mr. Nichols served as a regional merchandise manager for the
Company.

Jack A. Staph has been the Company's Senior Vice President, Secretary and
General Counsel since December 1986 and served as a member of the interim office
of the President of the Company from June 1992 to July 1992. Mr. Staph had been
continuously employed as a member of the Company's in-house legal staff for more
than ten years prior to June 1986.

Dante R. Barone was elected Vice President, Pharmacy Marketing of the
Company in May 1989. From March 1988 to May 1989, Mr. Barone served as
divisional Vice President of Pharmacy Marketing of the

II-8
<PAGE>
Company. From prior to June 1986 to March 1988, Mr. Barone was a senior buyer
for Walgreen Drug Co., a drugstore chain with retail store locations throughout
the United States.

Charles W. Breckenridge was elected Vice President, Control Support
Services of the Company in June 1992. Mr. Breckenridge served as the Company's
director of internal audit from August 1989 to June 1992. From February 1986 to
August 1989, Mr. Breckenridge served as Director of Business Investigation
Services at the public accounting firm of Coopers & Lybrand.

Brian P. Carney was elected Vice President and Controller of the Company in
June 1992. From October 1989 to June 1992, Mr. Carney served as the Company's
director of general accounting. Prior to October 1989, Mr. Carney was a manager
with the public accounting firm of Arthur Andersen & Co. (now known as Arthur
Andersen LLP).

Ware H. Grove was elected Vice President and Treasurer of the Company in
August 1994. From March 1991 to July 1994, Mr. Grove was Vice President and
Treasurer of Computerland Corporation (renamed Vaastar in March 1994), a
distributor and reseller of personal computers and related services. Prior to
that, Mr. Grove served as Assistant to the President and Assistant Treasurer for
Manville Corporation, a manufacturer of building materials and paper products.

Wilson A. Lester was elected Vice President, Distribution and
Transportation of the Company in August 1995. From December 1993 to August 1995,
Mr. Lester served as senior vice president of logistics of Fabri-Centers, Inc.
From June 1990 to December 1993, Mr. Lester served as senior vice president of
distribution for Phar-Mor, Inc.

Richard M. Mergo was elected Vice President, Store Operations of the
Company in March 1995. Mr. Mergo served as a regional Vice President of the
Company from 1986 to March 1995.

Robert T. Raaf assumed duties as Vice President of Taxes of the Company in
July 1994. From July 1993 to July 1994, Mr. Raaf served as Vice President and
Treasurer of the Company. From September 1989 to July 1993, Mr. Raaf was Vice
President, Tax of the Company. For more than three years prior to September
1989, Mr. Raaf was a tax partner with Arthur Andersen & Co. (now known as Arthur
Andersen LLP).

Jay E. Ross was elected Vice President, Merchandising of the Company in

March 1995. Mr. Ross has been continuously employed by the Company since 1969,
most recently as director of merchandising.

Bruce E. Schwallie was elected Vice President, Marketing of the Company in
March 1995. From February 1991 until March 1995, Mr. Schwallie served in various
capacities within the Company's marketing department, most recently as
divisional merchandise manager. From September 1990 until January 1991, Mr.
Schwallie was employed by RDS Acquisition Corp. in Phoenix, Arizona, where he
served as director of merchandising.

Robert A. Tamplin was elected Vice President, Store Operations of the
Company in March 1995. Mr. Tamplin has been continuously employed by the Company
for more than 25 years, most recently as a regional Vice President.

Robert I. Thompson was elected Vice President, Professional Operations of
the Company in March 1995. Mr. Thompson has been continuously employed by the
Company since 1978, most recently as regional director of pharmacy operations.

George T. Watt was elected Vice President, Managed Care of the Company in
August 1995. Mr. Watt served as a Vice President of the Company from August 1994
until August 1995. From November 1986 until August 1994, Mr. Watt was employed
by Thrift Drug Corporation, where he served as Vice President of Sales and
Client Service for Thrift Drug's subsidiary, TDI Managed Care Services, Inc.

Hanley H. Wheeler, III was elected Vice President, Store Operations of the
Company in March 1995. Mr. Wheeler has been continuously employed by the Company
since 1981, most recently as regional director of operations.

Paul N. Harris was elected Assistant Secretary of the Company in July 1993.
From prior to May 1989 to July 1993, Mr. Harris served as Senior Counsel for the
Company.

Gregory G. Wilson was elected Assistant Controller-Financial Planning of
the Company in June 1992. From February 1988 to June 1992, Mr. Wilson served as
director of financial planning and analysis of the Company, and from prior to
June 1986 to February 1988, he served as director of investor relations of the
Company.

II-9

<PAGE>
SECURITY OWNERSHIP OF CERTAIN PERSONS

The following table sets forth information regarding the stock ownership as
of November 16, 1995 of all Directors of the Company, all Directors and officers
as a group, and all persons who are known by the Company to own beneficially
more than 5% of the Shares. Each holder of Shares is entitled to one vote for
each Share owned.

<TABLE>
<CAPTION>
NAME NUMBER OF SHARES PERCENTAGE
- ---------------------------------------- ---------------- ----------
<S> <C> <C>
FMR Corp. .............................. 9,450,822(1) 14.20%(1)
82 Devonshire Street
Boston, Massachusetts 02109

General Motors Investment............... 3,107,603(2) 4.70%(2)
Management Corporation
767 Fifth Avenue
New York, New York 10153

Magten Asset Management Corporation..... 6,928,300(3) 10.40%(3)
35 East 21st Street
New York, New York 10010

Zell/Chilmark Fund, L.P................. 13,102,288(4) 19.70%(4)
Two North Riverside Plaza,
Suite 1500
Chicago, Illinois 60606

Directors:
Carl A. Bellini....................... 136,086(5) * (5)
Livio M. Borghese..................... 21,199(6) * (6)
Rod F. Dammeyer....................... 22,025(7) * (7)
Talton R. Embry....................... 7,278,449(8) 10.93%(8)
Ben Evans............................. 32,624(9) * (9)
John V. Guttag........................ 15,521(10) * (10)
D. Dwayne Hoven....................... 325,214(11) * (11)
Walter B. Reinhold.................... 26,310(12) * (12)
Sheli Z. Rosenberg.................... 7,169(13) * (13)
David M. Schulte...................... 13,102,288(4) 19.70%(4)
Thomas O. Thorsen..................... 22,042(14) * (14)
Sam Zell.............................. 13,102,288(4) 19.70%(4)

Named Executive Officers:
D. Dwayne Hoven....................... 325,214(11) * (11)
Carl A. Bellini....................... 136,086(5) * (5)
Gregory K. Raven...................... 200,392(15) * (15)
Jack A. Staph......................... 104,906(16) * (16)
James P. Mastrian..................... 95,459(17) * (17)

All Directors and officers as a
group (34 individuals)................ 21,736,491(4)(5)(6)(7)(8) 32.64%(4)(5)(6)(7)(8)(9)(10)
(9)(10)(11)(12) (11)(12)(13)(14)(15)(16)
(13)(14)(15)(16) (17)(1)(18)(19)
(17)(18)(19)
</TABLE>
- ------------------
* Less than 1%

(1) Based on a Statement on Schedule 13G, dated February 13, 1995, filed by FMR
Corp., a corporation organized under the laws of the Commonwealth of
Massachusetts. In its filing, FMR Corp. states that: Fidelity Management &
Research Company, a wholly-owned subsidiary of FMR Corp. and an investment
adviser registered under Section 203 of the Investment Advisers Act of
1940, is the beneficial owner of

(Footnotes continued on next page)

II-10
<PAGE>
(Footnotes continued from previous page)
8,862,866 Shares as a result of acting as investment adviser to several
investment companies registered under Section 8 of the Investment Company
Act of 1940; Fidelity Management Trust Company, a wholly-owned subsidiary
of FMR Corp. and a bank as defined in Section 3(a)(6) of the Exchange Act,
is the beneficial owner of 563,422 Shares as a result of its serving as
investment manager of institutional accounts; and Fidelity International
Limited, a Bermudian joint stock company incorporated for an unlimited
duration by private act of the Bermuda legislature, is the beneficial owner
of 24,534 Shares.

(2) Based on a Statement on Schedule 13G, dated April 28, 1994, filed by
General Motors Investment Management Corporation ('GMIMCo'), a corporation
organized under the laws of the State of Delaware. In its filing, GMIMCo
states that it is registered as an investment adviser under the Investment
Advisers Act of 1940 and that its principal business is providing
investment advice and investment management services with respect to the
assets of certain employee benefit plans of General Motors Corporation
('GM') and its subsidiaries and with respect to the assets of certain
direct and indirect subsidiaries of GM and associated entities. GMIMCo also
states that it has the responsibility to select and terminate investment
managers with respect to such plans and, in this regard, three such
retained managers, one of whom is Magten, manage the Shares to which this
footnote relates on a discretionary basis (including with respect to voting
and investment power). GMIMCo states that, in view of its authority to
terminate such managers, the information in the Schedule 13G was provided.

(3) Magten has beneficial ownership of an aggregate 6,928,300 Shares.
Investment advisory clients of Magten beneficially own all of the Shares
shown as beneficially owned by Magten (collectively, the 'Investment
Advisory Shares'). Magten has shared dispositive power with respect to all
of the Shares beneficially owned by the clients, shared voting power with
respect to 5,009,209 of these Shares and no voting power with respect to
1,919,091 of these Shares. Magten may be deemed to be the beneficial owner

of the Investment Advisory Shares because Magten's investment advisory
contracts with its investment advisory clients grant it the power to vote
and dispose of such Shares. Magten has declared that pursuant to Rule 13d-4
promulgated under the Exchange Act, the filing by it of its Schedule 13D
shall not be construed as an admission that it is the beneficial owner of
those Shares.

(4) All of these Shares are owned by Zell/Chilmark. Zell/Chilmark is a Delaware
limited partnership. The general partner of Zell/Chilmark is ZC Limited
Partnership, an Illinois limited partnership whose sole business is to act
as general partner of and manage the investment of the capital of
Zell/Chilmark. The sole general partner of ZC Limited Partnership is ZC
Partnership, a Delaware general partnership, the sole partners of which are
ZC, Inc., an Illinois corporation wholly-owned and controlled by Mr. Zell,
and CZ Inc., a Delaware corporation wholly-owned and controlled by Mr.
Schulte. Mr. Zell and Mr. Schulte are Directors of the Company. Under the
regulations of the Commission, Mr. Zell and Mr. Schulte may be deemed to be
the beneficial owners of all of the Shares which are beneficially owned by
Zell/Chilmark. Mr. Zell and Mr. Schulte disclaim beneficial ownership of
the Shares beneficially owned by Zell/Chilmark.

(5) Consists of (i) 35,216 Shares held by Mr. Bellini individually; (ii) 1,305
Shares held by Mr. Bellini's son who resides with him; and (iii) 99,565
Shares subject to currently exercisable non-qualified stock options granted
pursuant to the Company's Long-Term Incentive Plan. Mr. Bellini disclaims
beneficial ownership of the Shares referred to in (ii) above.

(6) Consists of (i) 6,353 Shares held by Mr. Borghese individually; and (ii)
14,846 Shares subject to currently exercisable non-qualified stock options
granted pursuant to the Directors' Plan.

(7) Consists of (i) 22,025 Shares subject to currently exercisable
non-qualified stock options granted pursuant to the Directors' Plan.

(8) Mr. Embry, as sole stockholder and a Managing Director of Magten, may be
deemed to beneficially own all the Shares beneficially owned by Magten, as
described in footnote (3) above. In addition, Mr. Embry owns directly 1,413
Shares. Mr. Embry has sole voting and dispositive power with respect to the
1,413 Shares owned directly by him. Mr. Embry, as trustee of four pension
trusts for the benefit of current and former employees of Magten, including
himself (the 'Pension Trusts'), also has sole voting and dispositive power

(Footnotes continued on next page)

II-11
<PAGE>
(Footnotes continued from previous page)
with respect to 338,320 Shares owned by such trusts (collectively, the
'Pension Trust Shares'). Mr. Embry, as trustee for three trusts for members
of his family (the 'Family Trusts'), has sole voting and investment power
with respect to 8,061 Shares (collectively, the 'Family Trust Shares'). Mr.
Embry, as custodian for his son, has sole dispositive and voting power with
respect to 942 Shares, and may be deemed under Section 13(d) of the
Exchange Act to have beneficial ownership of 1,413 Shares owned by his

wife. The Shares described in footnote (3) above as beneficially owned by
Magten with respect to which Mr. Embry may be deemed a beneficial owner,
together with the additional Shares described in this footnote. (8) with
respect to which Mr. Embry may also be deemed a beneficial owner, aggregate
7,278,449 Shares. Mr. Embry has declared that pursuant to Rule 13d-4 the
filing by him of his Schedule 13D shall not be construed as an admission
that he is the beneficial owner of the Investment Advisory Shares, the
Pension Trust Shares (to the extent such Shares exceed his and his wife's
pro rata interest as beneficiaries of such trusts) or the Family Trust
Shares. Mr. Embry disclaims beneficial ownership of the Shares owned by his
wife.

(9) Consists of (i) 10,582 Shares held by Mr. Evans individually; and (ii)
22,042 Shares subject to currently exercisable non-qualified stock options
granted pursuant to the Directors' Plan.

(10) Consists of (i) 8,532 Shares held by Mr. Guttag individually; and (ii)
7,169 Shares subject to currently exercisable non-qualified stock options
granted pursuant to the Directors' Plan.

(11) Consists of (i) 38,218 Shares held jointly by Mr. Hoven and his wife, and
(ii) 286,996 Shares subject to currently exercisable non-qualified stock
options granted pursuant to the Company's Long-Term Incentive Plan.

(12) Consists of (i) 4,268 Shares held by Mr. Reinhold individually; and (ii)
22,042 Shares subject to currently exercisable non-qualified stock options
granted pursuant to the Directors' Plan.

(13) Consists of 7,169 Shares subject to currently exercisable non-qualified
stock options granted pursuant to the Directors' Plan.

(14) Consists of 22,042 Shares subject to currently exercisable non-qualified
stock options granted pursuant to the Directors' Plan.

(15) Consists of (i) 10,722 Shares held by Mr. Raven individually; (ii) 187,687
Shares subject to currently exercisable non-qualified stock options granted
pursuant to the Company's Long-Term Incentive Plan; and (iii) 1,983 Shares
held by Mr. Raven's wife. Mr. Raven disclaims beneficial ownership of the
Shares owned by his wife. On August 3, 1995, Mr. Raven announced his
resignation from his positions with the Company.

(16) Consists of (i) 10,512 Shares held by Mr. Staph individually; and (ii)
94,394 Shares subject to currently exercisable non-qualified stock options
granted pursuant to the Company's Long-Term Incentive Plan.

(17) Consists of (i) 8,884 Shares held by Mr. Mastrian individually; and (ii)
95,459 Shares subject to currently exercisable non-qualified stock options
granted pursuant to the Company's Long-Term Incentive Plan.

(18) Includes 1,141,992 Shares subject to currently exercisable non-qualified
stock options granted pursuant to the Directors' Plan and the Company's
Long-Term Incentive Plan.

(19) Does not include 1,406,538 Shares subject to non-qualified stock options

that will vest and become immediately exercisable pursuant to the
Directors' Plan and the Company's Long-Term Incentive Plan as a result of
the 'change of control' that will occur upon the acceptance for payment of
Shares by Parent or any of its Subsidiaries pursuant to the Offer.

II-12

<PAGE>
EXECUTIVE COMPENSATION

COMPENSATION AND OPTION TABLES

The following tables show information with respect to the annual
compensation for services in all capacities to the Company for the fiscal years
ended May 29, 1993, May 28, 1994 and June 3, 1995 of (i) the Chief Executive
Officer and (ii) those persons who were, at June 3, 1995, the other four most
highly compensated executive officers of the Company (the 'named executive
officers').

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------------------
AWARDS
ANNUAL COMPENSATION ---------------------- PAYMENTS
----------------------------------- SECURITIES -------------------
OTHER RESTRICTED UNDERLYING LONG-TERM ALL
ANNUAL STOCK OPTIONS INCENTIVE OTHER
NAME AND SALARY(5) BONUS(6) COMPENS. AWARD(S) GRANTED PAYMENTS COMPENS.
PRINCIPAL POSITION YEAR $ $ $ $ $ $ $
- ---------------------------- ---- --------- -------- -------- ---------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
D. Dwayne Hoven(1).......... 1995 $ 600,001 $877,548 (7) $0 336,009 $ 0 $277
President and Chief 1994 488,461 407,164 (7) 0 105,500 0 0
Executive Officer 1993 394,339 200,000 (7) 0 300,000 0 0

Carl A. Bellini(2).......... 1995 401,332 439,742 (7) 0 104,263 0 185
Executive Vice President 1994 342,594 227,180 (7) 0 45,000 0 0
and Chief Operating 1993 241,250 109,675 (7) 0 125,000 0 0
Officer

Gregory K. Raven(3)......... 1995 332,463 362,895 (7) 0 84,507 0 151
Executive Vice President- 1994 313,283 207,663 (7) 0 0 0 0
Finance and Chief 1993 296,702 127,459 (7) 0 250,000 0 0
Financial Officer

James P. Mastrian(4)........ 1995 285,865 313,254 (7) 0 71,536 0 132
Executive Vice President 1994 237,312 157,645 (7) 0 20,000 0 0
of Marketing 1993 220,272 94,276 (7) 0 100,000 0 0

Jack A. Staph............... 1995 242,208 231,919 (7) 0 41,814 0 109
Senior Vice President, 1994 225,241 149,304 (7) 0 0 0 0
Secretary and General 1993 217,192 91,855 (7) 0 125,000 0 0
Counsel
</TABLE>
- ------------------
(1) D. Dwayne Hoven was elected Chief Executive Officer of the Company effective
August 1993 and was elected President of the Company in July 1992. From
December 1991 to July 1992, Mr. Hoven served as Executive Vice President,

Marketing and Stores of the Company.

(2) Carl A. Bellini was elected Executive Vice President and Chief Operating
Officer on October 13, 1993. From August 1992 to October 1993, Mr. Bellini
served as Executive Vice President of Marketing and Stores of the Company.
From June 1992 to August 1992, Mr. Bellini was not an employee of the
Company.

(3) On August 3, 1995, Gregory K. Raven announced his resignation from his
positions with the Company.

(4) James P. Mastrian was elected Executive Vice President of Marketing of the
Company on July 26, 1994. From June 1992 to July 1994, Mr. Mastrian served
as Senior Vice President of Marketing of the Company.

(5) Salary information for fiscal year 1995 is based upon a fifty-three week
reporting period. Salary information for fiscal years 1994 and 1993 is based
upon fifty-two week reporting periods.

(6) Under the provisions of the EVA bonus plan (as defined below), certain
limitations exist regarding cash payout of the bonus earned. A portion of
the bonus earned is deferred until future years and is paid out in
accordance with plan provisions. Accordingly, not all of the bonus earned
was paid.

(7) Amounts are below the minimum amount required to be disclosed by applicable
Exchange Act rules.

II-13

<PAGE>
OPTIONS GRANTED IN FISCAL YEAR 1995
INDIVIDUAL GRANTS(1)

<TABLE>
<CAPTION>
% OF
TOTAL POTENTIAL REALIZABLE
OPTIONS VALUE OF ASSUMED
GRANTED ANNUAL RATES OF STOCK
TO PRICE APPRECIATION FOR
OPTIONS EMPLOYEES EXERCISE OF OPTION TERM (2)
GRANTED IN FISCAL BASE PRICES ----------------------
NAME $ YEAR ($/SH) EXPIRATION DATE 5% 10%
- ----------------------- ------- --------- ----------- ------------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Dwayne Hoven........... 300,000 20.2% $ 18.00 July 26, 2004 $2,529,900 $7,740,300
26,952(4) 1.8% 18.00 July 27, 2002 201,547 524,728
9,057(4) 0.6% 18.00 December 13, 2003 70,056 214,461

Carl A. Bellini........ 30,000 2.0% 19.00 September 20, 2004 267,090 817,020
60,000 4.0% 18.00 July 26, 2004 505,980 1,548,060
10,400(4) 0.7% 18.00 August 19, 2002 69,701 194,407
3,863(4) 0.3% 18.00 December 13, 2003 29,880 91,472

Gregory K. Raven(3).... 60,000 4.0% 18.00 July 26, 2004 505,980 1,548,060
2,455(4) 0.2% 18.00 July 27, 2002 21,098 50,536
22,052(4) 1.5% 18.00 July 27, 2002 164,905 429,330

James P. Mastrian...... 60,000 4.0% 18.00 July 26, 2004 505,980 1,548,060
9,801(4) 0.7% 18.00 July 27, 2002 73,292 190,816
1,735(4) 0.1% 18.00 January 3, 2004 13,420 41,083

Jack A. Staph.......... 30,000 2.0% 18.00 July 26, 2004 252,990 774,030
9,801(4) 0.7% 18.00 July 27, 2002 73,292 190,816
2,013(4) 0.1% 18.00 July 27, 2002 17,300 41,438
</TABLE>
- ------------------
(1) All options granted after July 27, 1993 are granted at the fair market value
of the Shares at the date of grant. On each anniversary of the date of
grant, the exercise price for each option granted increases annually by an
amount equal to 5% of the option price then in effect for all non-vested
options. Except for certain immediately vested options granted in July 1992,
options granted pursuant to the Company's Long-Term Incentive Plan vest as
follows: 20% on the first anniversary of the date of grant; 40% on the
second anniversary of the date of grant; 60% on the third anniversary of the
date of grant; 80% on the fourth anniversary of the date of grant and 100%
on the fifth anniversary of the date of grant. Options granted are for a
term of not more than ten years from the date of grant.

(2) The dollar amounts under these columns are the result of the calculations at
the 5% and 10% rates set by the Commission and, therefore, are not intended
to forecast possible future appreciation, if any, of the Company's stock
price. The dollar amounts assume that the exercise price increases by 5% per

year on all non-vested options. The Company did not use an alternative
formula for a grant date valuation, as the Company is not aware of any
formula which will determine with reasonable accuracy a present value based
on the future unknown or volatile factors.

(3) On August 3, 1995, Gregory K. Raven announced his resignation from his
positions with the Company.

(4) These options were granted pursuant to anti-dilution provisions of the
Company's Long-Term Incentive Plan as a result of a rights offering
consummated in fiscal 1995. These options vest in accordance with the terms
of the original option grant to which they pertain.

II-14

<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1995
AND 1995 FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS OF FISCAL FISCAL YEAR-END
ACQUIRED ON VALUES YEAR-END EXERCISABLE/ EXERCISABLE/
EXERCISE REMITTED UNEXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) ($)
- ----------------------- ----------- -------- ---------------------- -----------------------
<S> <C> <C> <C> <C>
D. Dwayne Hoven........ 0 $0 $143,695 $ 1,430,111
0 572,814 2,137,086

Carl A. Bellini........ 0 0 44,352 417,653
211,411 937,202

Gregory K. Raven(1).... 0 0 126,277 1,408,271
208,230 1,482,094

James P. Mastrian...... 0 0 48,268 506,232
143,268 742,353

Jack A. Staph.......... 0 0 66,434 747,152
95,880 660,987
</TABLE>
- ------------------
(1) On August 3, 1995, Gregory K. Raven announced his resignation from his
positions with the Company.

SUMMARY OF COMPENSATION PLANS

Described below are material employment and employee benefit agreements and
arrangements as they currently exist. Pursuant to the terms of the Merger
Agreement, certain terms and conditions of such agreements and arrangements will
be amended. A description of such amendments is set forth in Section 11 of the
Offer to Purchase under 'Merger Agreement--Employee Benefits and Employee
Matters.'

EXECUTIVE COMPENSATION PROGRAM

Base salary and bonus guidelines are set forth in the Company Executive
Compensation Program. The purpose of the Executive Compensation Program is to
establish and maintain a performance and achievement oriented environment
throughout the Company. The program emphasizes the development of the Company so
as to achieve and sustain above average growth in earnings with excellence in
management, retailing, pharmacy and customer service. With this emphasis in
mind, the program is designed so that executives may earn higher than average
total compensation (base salary plus bonus) for doing an above-average job.

Base Salary. The Company's overall salary structure is reviewed annually,

using outside executive compensation surveys of the retail industry in general
and chain drugstores in particular; to ensure that it remains competitive.
Positions are classified within the salary structure on the basis of assigned
responsibilities. The salary mid-point of a grade assigned to a position is the
salary level that approximates the Company's judgment, based on an evaluation of
the latest survey information available, as to appropriate compensation levels.
Where salary information is unavailable for a particular position, the salary
grade assigned is based on other positions having similar responsibilities
within the Company and in companies with comparable revenues.

Individual base salaries are reviewed at least annually; however, salaries
are not necessarily increased each year. Decisions relating to salary increases
are based upon guidelines furnished by senior management. Salary increases are
granted based on each executive's performance as well as his position in the
applicable salary range.

Bonus. On July 27, 1993 the Board of Directors implemented the Company's
revised bonus program. The objectives underlying the revised bonus program are
to (i) more closely link bonus awards to value added for the Company's
stockholders, and (ii) promote a culture of performance and ownership among the
Company's managers. The program involves sharing certain of the Company's
business risks with stockholders, but also provides access to the upside
potential associated with value creation. Accordingly, the program rewards long-
term enduring improvements in stockholder value. The program, as revised
effective with the 1995 fiscal year to ensure the existence of a direct link
between bonuses and total stockholder value, is described below. All

II-15
<PAGE>
executive officers and senior managers, and certain regional and district
managers are eligible to receive bonuses under the bonus program.

Awards under the bonus program are focused on the generation of improved
economic value added ('EVA'), which consists of net operating profit after
taxes, as reduced by a capital charge. EVA results from (i) enhanced business
efficiencies, (ii) profitable growth, and (iii) strategic expense reduction. For
the fiscal year ended June 3, 1995, EVA was $40.289 million and target EVA was
$20.379 million. At the beginning of each fiscal year, participants in the bonus
program are credited with a number of performance units equal to their target
bonus, which is a percentage (ranging from 15% to 60% for the Chief Executive
Officer) of their base compensation. At the end of the fiscal year the units
have a value based on the Company's EVA performance. If EVA improves
sufficiently (currently, EVA for a fiscal year must improve by $5 million from
the average of the previous year's actual EVA and the previous year's target
EVA), the units have a $1.00 value and the target award is earned.
Underperformance results in a less than $1.00 unit value while particularly
strong performance generates a greater than $1.00 value. The percentage increase
or decrease is determined by reference to an EVA target interval based on a
percentage of the Company's capital. More specifically, the excess or deficit of
actual EVA over target EVA is divided by the target interval to determine the
percentage value of a unit. Bonus awards flow through a 'bonus bank.' If the
bank balance is less than a specified percentage of the target award, the entire
balance is paid, however, when the bank balance exceeds the specified percentage
of the target award, only a portion of the excess is paid currently, and the

balance is deferred and ultimately paid only if EVA performance is sustained. At
the end of each three-year period, the expected EVA improvement target, as well
as the EVA target interval, is adjusted to equal a percentage of the Company's
ending capital at such time based on the average EVA improvement of certain
representative companies and the average standard deviation of EVA of these
companies. The amount of the bonus paid to the participants other than the Chief
Executive Officer is also subject to the participant's satisfaction of
individual performance objectives. The portion of the bonus based on
satisfaction of individual performance goals ranges from 25% to 75%. For the
plan year ended June 3, 1995, the Company exceeded target EVA with respect to
the named executive officers by 142.21%, resulting in a value per unit of $2.42.

LONG-TERM INCENTIVE PLAN

The Long-Term Incentive Plan was adopted by the Board of Directors on July
27, 1992 and approved by the Company's stockholders on October 14, 1992. There
are 6,520,000 Shares reserved for issuance under the Long-Term Incentive Plan;
as of November 16, 1995, 2,548,922 Shares remained available for grants under
the Long-Term Incentive Plan. The Long-Term Incentive Plan provides for the
grant of incentive and non-qualified stock options, reload options, stock
appreciation rights, restricted stock awards, stock bonus awards and performance
plan awards. The Committee administers the Long-Term Incentive Plan and has sole
discretion to determine those employees to whom awards will be granted, the
number of awards to be granted, the provisions applicable to each award and the
time periods during which the awards may be exercised. No awards may be granted
after July 27, 2002.

To date, long-term incentive awards granted under the Long-Term Incentive
Plan consist solely of non-qualified stock options. In order to enhance the link
to stockholder value and to create a strong performance requirement for options,
the options include a 5% cost of capital charge. Under this approach, the
exercise price of options granted under the Long-Term Incentive Plan increases
annually by 5% until the Shares subject to the option vest.

Awards made under the Long-Term Incentive Plan are intended to provide key
employees with additional incentives designed to enhance the profitable growth
of the Company as well as the value of the Shares. During the fiscal year ended
June 3, 1995, the Committee awarded non-qualified stock options to acquire
336,009 Shares, at a price per Share of $18, to the President and Chief
Executive Officer, and an aggregate of 302,120 Shares, at an average price per
share of $18.10, to the other named executive officers, for a total of 638,129
of the 1,485,239 options that were awarded under the Long-Term Incentive Plan
for the fiscal year ended June 3, 1995. These awards were made in recognition of
the Company's strong financial performance and commitment to excellence in the
conversion of stores acquired from Hook-SupeRx, Inc., and were based on a
multiple of competitive annual grants as observed in the marketplace for persons
in similar positions.

II-16
<PAGE>
With the exception of a total of 75,000 immediately vested grants (25,000
of which were awarded to the Chief Executive Officer, all of which have been
exercised) made on July 27, 1992 to the named executive officers, awards made
under the Long-Term Incentive Plan vest over a period of five years at a rate of

20% each year, thereby encouraging the retention of key employees who receive
awards. During the fiscal year ended June 3, 1995, the Committee adjusted the
number of options held by officers and key employees through the grant of fair
market value options pursuant to anti-dilution provisions of the Long-Term
Incentive Plan as a result of the completion during the fiscal year of a rights
offering.

EMPLOYMENT AGREEMENT WITH CERTAIN EXECUTIVES

The Company has entered into employment agreements (the 'Executive
Employment Agreements') with each of the named executive officers. Each of the
Executive Employment Agreements is effective until terminated by the Company or
the named executive officer, with or without cause. The Executive Employment
Agreements provide that, in the event of a termination for cause by the named
executive officer or a termination without cause by the Company, the Company
will have an obligation to continue benefits and to pay the terminated named
executive officer's salary for a period of 24 months.

DEFINED BENEFIT PLAN

The Pension Plan is a defined benefit pension plan generally covering
employees of the Company, other than those covered by collective bargaining
agreements that provide for pension benefits.

On reaching normal retirement at or after age 65, a participant is
generally entitled to receive a monthly retirement benefit for life. Alternative
actuarially equivalent forms of benefit payments are provided for in the Pension
Plan. Vesting under the Pension Plan occurs after five years of service (with no
vesting where less than five years of service has been completed).

The annual retirement benefit at the normal retirement age of at least 65
is equal to an amount which, when added to the participant's social security
benefit, is the product of the employee's average earnings for the last five
years of his service and the applicable percentage set forth in the table below.
If the employee has fewer than 30 years of credited service with the Company,
the benefit determined by this formula is reduced by a percentage determined
substantially by the ratio of the number of years of credited service to 30. A
participant who has attained age 55 and has completed five years of service may
elect early retirement with reduced monthly benefit payments.

The amounts shown in the following table are based on the pension being
paid during the lifetime of the retired employee only, including social security
benefits, and would be reduced for service of less than 30 years and on an
actuarially equivalent basis in the event of a survivor benefit or other
optional form of payment.

<TABLE>
<CAPTION>
RETIREMENT BENEFIT
FINAL AVERAGE (% OF FISCAL
MONTHLY PAY AVERAGE PAY)
- ------------------ ------------------
<S> <C>
$ 500............ 81%
1,000............ 73
1,500............ 65
2,000............ 60
2,500............ 56
3,000............ 54
3,500............ 52
4,000............ 51
4,500 or more.... 50
</TABLE>

II-17
<PAGE>
The following table sets forth the estimated annual benefits (including
social security) payable to a participant who qualifies for normal retirement in
1995 with the specified average earnings during the last five calendar years
prior to retirement and the specified years of credited service:

<TABLE>
<CAPTION>
AVERAGE ANNUAL EARNINGS YEARS OF CREDITED SERVICE
FOR FIVE-YEAR PERIOD ----------------------------------------------------------
PRECEDING RETIREMENT(1) 10 15 20 25 30 OR MORE
- ----------------------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
$125,000............... $ 30,426 $ 38,445 $ 46,464 $ 54,483 $ 62,500
150,000............... 34,592 44,694 54,796 64,898 75,000
175,000............... 38,758 50,943 63,128 75,313 87,500
200,000............... 42,926 57,195 71,464 85,733 100,000
225,000............... 47,092 63,444 79,796 96,148 112,500
250,000............... 51,258 69,693 88,128 106,563 125,000*
300,000............... 59,592 82,194 104,796 127,398* 150,000*
400,000............... 76,258 107,193 138,128* 169,063* 200,000*
450,000............... 84,592 119,694 154,795* 189,898* 225,000*
500,000............... 92,926 132,195* 171,463* 210,733* 250,000*
600,000............... 109,592 157,194* 204,796* 252,398* 300,000*
700,000............... 126,258* 182,193* 238,128* 294,063* 350,000*
</TABLE>
- ------------------
(1) For plan years beginning on or after January 1, 1989, the Internal Revenue
Code, as amended (the 'Code') limits the amount of compensation that can be

used for plan calculation purposes to $200,000 (indexed). For plan years
beginning on or after January 1, 1994, this limit is reduced to $150,000
(indexed).

* As required by the Code, plan payments may not provide annual benefits
exceeding a maximum amount, currently $120,000.

The years of credited service of those individuals named in the Summary
Compensation Table as of June 3, 1995, were: Mr. Hoven--6.9167; Mr.
Bellini--3.7500; Mr. Raven--7.5000; Mr. Staph--22.1667; and Mr.
Mastrian--4.2500. The amounts covered under the Pension Plan include salary and
bonus for each of the named executive officers in the Summary Compensation
Table.

OTHER INFORMATION

CERTAIN TRANSACTIONS WITH MANAGEMENT AND OTHERS

In July 1994, Zell/Chilmark acquired 3,181,838 Shares at a price of $14.00
per Share pursuant to the exercise of its rights in connection with a rights
offering (the '1994 Rights Offering') to the Company's stockholders of record as
of June 13, 1994 and pursuant to certain standby purchase arrangements. The
Company paid Zell/Chilmark a fee in the amount of $2,918,383 for acting as
standby purchaser in the 1994 Rights Offering. As of November 16, 1995,
Zell/Chilmark beneficially owned 19.70% of the outstanding Shares.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Section 16(a) of the Exchange Act requires the Company's executive officers
and Directors to file reports of ownership and changes in ownership with the
Commission and the NYSE. The Company believes that during the period from May
29, 1994 through June 3, 1995, its executive officers and Directors complied
with all applicable Section 16(a) filing requirements, except that one Director,
Rod Dammeyer, inadvertently filed one of his reports late. This conclusion is
based solely on a review of the copies of such forms furnished to the Company in
accordance with the Commission's regulations and certain written representations
received by the Company.

II-18

<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
signed, will be accepted. The Letter of Transmittal, certificates for the Shares
and any other required documents should be sent by each stockholder of the
Company or his broker, dealer, commercial bank, trust company or other nominee
to the Depositary as follows:

The Depositary for the Offer is:

HARRIS TRUST COMPANY OF NEW YORK

By Mail: By Overnight Courier: By Hand:
Wall Street Station 77 Water Street, Receive Window
P.O. Box 1023 4th Floor 77 Water Street,
New York, NY 10268-1023 New York, NY 10005 5th Floor
New York, NY 10005
By Facsimile:
(212) 701-7636
(212) 701-7640

Confirm by telephone:
(212) 701-7624

Any questions or requests for assistance or additional copies of the Offer
to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery or
other tender offer materials may be directed to the Information Agent at the
telephone number and address listed below. You may also contact your broker,
dealer, commercial bank or trust company or other nominee for assistance
concerning the Offer.

The Information Agent for the Offer is:

MACKENZIE PARTNERS, INC.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
Call Toll-Free (800) 322-2885

The Dealer Manager for the Offer is:

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
140 Broadway
New York, New York 10005
(310) 282-5065 (call collect)
or
Call Toll-Free (800) 237-5022

<PAGE>

LETTER OF TRANSMITTAL
To Tender Shares of Common Stock
of
REVCO D.S., INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED DECEMBER 4, 1995
BY
OCEAN ACQUISITION CORPORATION
a wholly owned subsidiary of
RITE AID CORPORATION

THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY,
JANUARY 2, 1996, UNLESS THE OFFER IS EXTENDED.

THE DEPOSITARY OF THE OFFER IS:
HARRIS TRUST COMPANY OF NEW YORK

By Hand: By Overnight Courier: By Mail:

Receive Window 77 Water Street, Wall Street Station
77 Water Street, 4th Floor P.O. Box 1023
5th Floor New York, NY 10005 New York, NY 10268-1023
New York, NY 10005

By Facsimile:
(212) 701-7636
(212) 701-7640
Confirm by telephone:
(212) 701-7624

------------------

DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS
LETTER OF TRANSMITTAL WHERE INDICATED BELOW AND COMPLETE THE SUBSTITUTE FORM W-9
PROVIDED BELOW.

THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.

This Letter of Transmittal is to be completed by stockholders of Revco
D.S., Inc., either if certificates evidencing Shares ('Share Certificates') are
to be forwarded herewith or if delivery of Shares is to be made by book-entry
transfer to the Depositary's account at The Depository Trust Company, the
Midwest Securities Trust Company or the Philadelphia Depository Trust Company
(each, a 'Book-Entry Transfer Facility' and collectively, the 'Book-Entry
Transfer Facilities') pursuant to the book-entry transfer procedure described in
'THE TENDER OFFER--Procedures for Tendering Shares' of the Offer to Purchase (as
defined below). DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN
ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT

CONSTITUTE DELIVERY TO THE DEPOSITARY.

Stockholders whose Share Certificates are not immediately available or who
cannot deliver their Share Certificates and all other documents required hereby
to the Depositary prior to the Expiration Date (as defined in 'THE TENDER
OFFER--Terms of the Offer; Number of Shares and Proration; Expiration Date' of
the Offer to Purchase) or who cannot complete the procedure for delivery by
book-entry transfer on a timely basis and who wish to tender their Shares must
do so pursuant to the guaranteed delivery procedures described in 'THE TENDER
OFFER--Procedures for Tendering Shares' of the Offer to Purchase. See
Instruction 2.

/ / CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND
COMPLETE THE FOLLOWING:

Name of Tendering Institution:
- ---------------------------------------------------------------------------

Check Box of Applicable Book-Entry Transfer Facility:

/ / The Depository Trust Company

/ / Midwest Securities Trust Company

/ / Philadelphia Depository Trust Company

Account Number ____________________ Transaction Code Number ____________________

<PAGE>

/ / CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:

Name(s) of Registered Holder(s): ___________________________________________
Window Ticket No. (if any): ________________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Name of Institution which Guaranteed Delivery: _____________________________
If Delivered by Book-Entry Transfer, Check Box of Book-Entry Transfer
Facility:

/ / The Depository Trust Company

/ / Midwest Securities Trust Company

/ / Philadelphia Depository Trust Company

Account Number_________________ Transaction Code Number_____________________

- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED

- --------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED
HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS SHARE CERTIFICATE(S) AND SHARE(S)
NAME(S) APPEAR(S) ON SHARE TENDERED (ATTACH ADDITIONAL LIST, IF
CERTIFICATE(S)) NECESSARY)
- --------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES
SHARE EVIDENCED BY NUMBER OF
CERTIFICATE SHARE SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
---------------------------------------

_______________________________________

TOTAL SHARES __________________________
- --------------------------------------------------------------------------------
* Need not be completed by stockholders delivering Shares by book-entry
transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced by
each Share Certificate delivered to the Depositary are being tendered
hereby. See Instruction 4.
- --------------------------------------------------------------------------------

NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE INSTRUCTIONS SET FORTH IN THIS
LETTER OF TRANSMITTAL CAREFULLY.

Ladies and Gentlemen:

The undersigned hereby tenders to Ocean Acquisition Corporation, a Delaware
corporation (the 'Purchaser') and a wholly owned subsidiary of Rite Aid
Corporation, a Delaware corporation ('Parent'), the above-described shares of
common stock, par value $.01 per share (the 'Common Stock' or the 'Shares'), of
Revco D.S., Inc., a Delaware corporation (the 'Company'), pursuant to the
Purchaser's offer to purchase 35,144,833 Shares, or such other number of Shares
as equals 50.1% of the Shares outstanding on a fully diluted basis as of the
Expiration Date, at a price of $27.50 per Share, net to the seller in cash (such
price, or such higher price per Share as may be paid in the Offer, the 'Offer
Price'), upon the terms and subject to the conditions set forth in the Offer to
Purchase, dated December 4, 1995 (the 'Offer to Purchase'), receipt of which is
hereby acknowledged, and in this Letter of Transmittal (which, as amended from
time to time, together constitute the 'Offer'). The undersigned understands that
the Purchaser reserves the right to transfer or assign, in whole at any time, or
in part from time to time, to one or more of its affiliates, the right to
purchase all or any portion of the Shares tendered pursuant to the Offer, but
any such transfer or assignment will not relieve the Purchaser of its

obligations under the Offer and will in no way prejudice the rights of tendering
stockholders to receive payment for Shares validly tendered and accepted for
payment pursuant to the Offer.

Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith, in accordance with the terms of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the undersigned hereby sells, assigns and transfers to, or upon the
order of, the Purchaser all right, title and interest in and to all the Shares
that are being tendered hereby (and with respect to any and all non-cash
dividends, distributions, rights, other Shares or other securities issued or
issuable and rights declared, paid or distributed in respect of such Shares on
or after November 29, 1995) (collectively, 'Distributions'), and irrevocably
appoints the Depositary the true and lawful agent and attorney-in-fact of the
undersigned with respect to such Shares and all Distributions, with full power
of substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to (i) deliver Share Certificates evidencing such
Shares and all Distributions, or transfer ownership of such Shares and all
Distributions on the account books maintained by a Book-Entry Transfer Facility,
together, in either case, with all accompanying evidence of transfer and
authenticity, to or upon the order of the Purchaser, (ii) present such Shares
and all Distributions for transfer on the books of the Company and (iii) receive
all benefits and otherwise exercise all rights of beneficial ownership of such
Shares and all Distributions, all in accordance with the terms of the Offer.

By executing this Letter of Transmittal, the undersigned irrevocably
appoints Martin L. Grass and Franklin C. Brown, designees of the Purchaser, as
proxies of the undersigned, each with full power of substitution, to the full
extent of the undersigned's rights with respect to the Shares tendered by the
undersigned and accepted for payment by the Purchaser (and with respect to any
and all Distributions). All such proxies shall be considered coupled with an
interest in the tendered Shares. This appointment will be effective if, when,
and only to the extent that, the Purchaser accepts such Shares for payment
pursuant to the Offer. Upon such acceptance for payment, all prior proxies given
by the undersigned with respect to such Shares (and such other Shares and
securities) will, without further action, be revoked, and no subsequent proxies
may be given nor any subsequent written consent executed by the undersigned
(and, if given or executed, will not be deemed to be effective) with respect
thereto. The designees of the Purchaser will, with respect to the Shares and
other securities for which the appointment is effective, be empowered to
exercise all voting and other rights of the undersigned as they in their sole
discretion may deem proper at any annual or special meeting of the stockholders
of the Company or any adjournment or postponement thereof, by written consent in
lieu of any such meeting or otherwise, and the Purchaser reserves the right to
require that, in order for Shares or other securities to be deemed validly
tendered, immediately upon the Purchaser's acceptance for payment of such
Shares, the Purchaser must be able to exercise full voting rights with respect
to such Shares.

<PAGE>

The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell assign and transfer the Shares tendered
hereby and all Distributions, that the undersigned own(s) the Shares tendered

hereby within the meaning of Rule 14e-4 promulgated under the Securities
Exchange Act of 1934, as amended (the 'Exchange Act'), that such tender of
shares complies with Rule 14e-4 under the Exchange Act, and that when such
Shares are accepted for payment by the Purchaser, the Purchaser will acquire
good, marketable and unencumbered title thereto and to all Distributions, free
and clear of all liens, restrictions, charges and encumbrances, and that none of
such Shares and Distributions will be subject to any adverse claim. The
undersigned, upon request, shall execute and deliver all additional documents
deemed by the Depositary or the Purchaser to be necessary or desirable to
complete the sale, assignment and transfer of the Shares tendered hereby and all
Distributions. In addition, the undersigned shall remit and transfer promptly to
the Depositary for the account of the Purchaser all Distributions in respect of
the Shares tendered hereby, accompanied by appropriate documentation of
transfer, and, pending such remittance and transfer of appropriate insurance
thereof, the Purchaser shall be entitled to all rights and privileges as owner
of each such Distribution and may withhold the entire purchase price of the
Shares tendered hereby or deduct from such purchase price, the amount or value
of each such Distribution as determined by the Purchaser in its sole discretion.

No authority herein conferred or agreed to be conferred shall be affected
by, and all such authority shall survive, the death or incapacity of the
undersigned. All obligations of the undersigned hereunder shall be binding upon
the heirs, personal representatives, successors and assigns of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.

The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in 'THE TENDER OFFER--Procedures for Tendering Shares'
of the Offer to Purchase and in the instructions hereto will constitute the
undersigned's acceptance of the terms and conditions of the Offer. The
Purchaser's acceptance for payment of Shares tendered pursuant to the Offer will
constitute a binding agreement between the undersigned and the Purchaser upon
the terms and subject to the conditions of the Offer. The undersigned recognizes
that under certain circumstances set forth in the Offer to Purchase, the
Purchaser may not be required to accept for payment any of the Shares tendered
hereby.

Unless otherwise indicated herein in the box entitled 'Special Payment
Instructions,' please issue the check for the purchase price of all Shares
purchased, and issue all Share Certificates evidencing Shares not purchased or
not tendered, in the name(s) of the registered holder(s) appearing above under
'Description of Shares Tendered.' Similarly, unless otherwise indicated in the
box entitled 'Special Delivery Instructions,' please mail the check for the
purchase price of all Shares purchased and all Share Certificates evidencing
Shares not tendered or not purchased (and accompanying documents, as
appropriate) to the address(es) of the registered holder(s) appearing above
under 'Description of Shares Tendered.' In the event that the boxes entitled
'Special Payment Instructions' and 'Special Delivery Instructions' are both
completed, please issue the check for the purchase price of all Shares purchased
and issue all Share Certificates evidencing Shares not purchased or not tendered
in the name(s) of, and mail such check and Share Certificates to, the person(s)
so indicated. Unless otherwise indicated herein in the box entitled 'Special
Payment Instructions,' please credit any Shares tendered hereby and delivered by
book-entry transfer, but which are not purchased, by crediting the account at
the Book-Entry Transfer facility designated above. The undersigned recognizes

that the Purchaser has no obligation, pursuant to the Special Payment
Instructions, to transfer any Shares from the name of the registered holder(s)
thereof if the Purchaser does not accept for payment any of the Shares tendered
hereby.

SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)

To be completed ONLY if the check for the purchase price of Shares
purchased or Share Certificates evidencing Shares not tendered or not purchased
are to be issued in the name of someone other than the undersigned, or if Shares
tendered hereby and delivered by book-entry transfer which are not purchased are
to be returned by credit to an account at one of the Book-Entry Transfer
Facilities other than that designated above.

Issue check and/or Share Certificate(s) to:

Name: __________________________________________________________________________
(PRINT PRINT)
Address: _______________________________________________________________________

________________________________________________________________________________
(ZIP CODE)

________________________________________________________________________________
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)

/ / Credit Shares delivered by book-entry transfer and not purchased to the
account set forth below:

Check appropriate box:
/ / The Depository Trust Company
/ / Midwest Securities Trust Company
/ / Philadelphia Depository Trust Company

Account Number _________________________________________________________________

SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)

To be completed ONLY if the check for the purchase price of Shares
purchased or Share Certificates evidencing Shares not tendered or not purchased
are to be mailed to someone other than the undersigned at an address other than
that shown under 'Description of Shares Tendered.'

Mail check and/or Share Certificate(s) to:

Name: __________________________________________________________________________
(PRINT PRINT)

Address: _______________________________________________________________________

________________________________________________________________________________
(ZIP CODE)

IMPORTANT
SHAREHOLDERS: SIGN HERE
(Please Complete Substitute Form W-9 on Reverse)

________________________________________________________________________________

________________________________________________________________________________
Signature(s) of Holder(s)

Dated: ____________________________________, 1995/6

(Must be signed by registered holder(s) exactly as name(s) appear(s) on
Share Certificate or on a security position listing or by person(s) authorized
to become registered holder(s) by certificates and documents transmitted
herewith. If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a fiduciary
or representative capacity, please provide the following information. See
Instruction 5.)

Name(s) ________________________________________________________________________

________________________________________________________________________________
(Please Print)

Capacity (full title) __________________________________________________________
(See Instruction 5)

Address ________________________________________________________________________

________________________________________________________________________________
(Zip Code)

Area Code and Telephone No. ____________________________________________________

Taxpayer Identification or Social Security No. _________________________________
(See Substitute Form W-9 on reverse side)

GUARANTEE OF SIGNATURE(S)
(If Required -- See Instructions 1 and 5)

Authorized Signature ___________________________________________________________

Name ___________________________________________________________________________
(Please Print)

Title __________________________________________________________________________

Name of Firm ___________________________________________________________________

Address ________________________________________________________________________

________________________________________________________________________________
(Include Zip Code)

Area Code and Telephone No. ____________________________________________________

Dated __________________________________________________________________, 1995/6

<PAGE>
INSTRUCTIONS

FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER

1. Signature Guarantees. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a firm which is a
bank, broker, dealer, credit union, savings association, or other entity that is
a member in good standing of the Securities Transfer Agent's Medallion Program
or the New York Stock Exchange Medallion Signature Guarantee Program (each, an
'Eligible Institution'), unless the Shares tendered hereby are tendered (i) by a
registered holder of Shares who has not completed either the box entitled
'Special Delivery Instructions' or the box entitled 'Special Payment
Instructions' on this Letter of Transmittal or (ii) for the account of an
Eligible Institution. See Instruction 5. If a Share Certificate is registered in
the name of a person other than the signer of this Letter of Transmittal, or if
payment is to be made, or a Share Certificate not accepted for payment or not
tendered is to be returned, to a person other than the registered holder(s),
then the Share Certificate must be endorsed or accompanied by appropriate stock
powers, in either case signed exactly as the name(s) of the registered holder(s)
appear(s) on the Share Certificate, with the signature(s) on such Share
Certificate or stock powers guaranteed by an Eligible Institution. See
Instruction 5.

2. Delivery of Letter of Transmittal and Share Certificates. This Letter
of Transmittal is to be used either if Share Certificates are to be forwarded
herewith or if Shares are to be delivered by book-entry transfer pursuant to the
procedure set forth in 'THE TENDER OFFER--Procedures for Tendering Shares' of
the Offer to Purchase. Share Certificates evidencing all tendered Shares, or
confirmation of a book-entry transfer of such Shares, if such procedure is
available, into the Depositary's account at one of the Book-Entry Transfer
Facilities pursuant to the procedures set forth in 'THE TENDER OFFER--Procedures
for Tendering Shares' of the Offer to Purchase, together with a properly
completed and duly executed Letter of Transmittal (or a facsimile thereof) with
any required signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message, as defined below) and any other documents required by this
Letter of Transmittal, must be received by the Depositary at one of its
addresses set forth on the reverse hereof prior to the Expiration Date (as
defined in 'THE TENDER OFFER--Terms of the Offer; Number of Shares and
Proration; Expiration Date' of the Offer to Purchase). If Share Certificates are
forwarded to the Depositary in multiple deliveries, a properly completed and
duly executed Letter of Transmittal must accompany each such delivery.
Stockholders whose Share Certificates are not immediately available, who cannot
deliver their Share Certificates and all other required documents to the
Depositary prior to the Expiration Date or who cannot complete the procedure for
delivery by book-entry transfer on a timely basis may tender their Shares
pursuant to the guaranteed delivery procedure described in 'THE TENDER
OFFER--Procedures for Tendering Shares' of the Offer to Purchase. Pursuant to
such procedure: (i) such tender must be made by or through an Eligible
Institution; (ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchaser herewith, must be
received by the Depositary prior to the Expiration Date; and (iii) the Share
Certificates for all tendered Shares, in proper form for transfer, or a Book
Entry Confirmation, in each case together with a properly completed and duly

executed Letter of Transmittal (or manually signed facsimile thereof) with any
required signature guarantees and any other documents required by this Letter of
Transmittal, must be received by the Depositary within three New York Stock
Exchange, Inc. trading days after the date of execution of the Notice of
Guaranteed Delivery, all as described in 'THE TENDER OFFER--Procedures for
Tendering Shares' of the Offer to Purchase. The term 'Agent's Message' means a
message, transmitted by a Book-Entry Transfer Facility to, and received by, the
Depositary and forming a part of a Book-Entry Confirmation, which states that
such Book-Entry Transfer Facility has received an express acknowledgment from
the participant in such Book-Entry Transfer Facility tendering the Shares, that
such participant has received and agrees to be bound by the terms of this Letter
of Transmittal and that the Purchaser may enforce such agreement against the
participant.

THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES
AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY
TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND
THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY.
IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.

No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. By execution of this Letter of Transmittal
(or a facsimile hereof), all tendering stockholders waive any right to receive
any notice of the acceptance of their Shares for payment.

3. Inadequate Space. If the space provided herein under 'Description of
Shares Tendered' is inadequate, the Share Certificate numbers, the number of
Shares evidenced by such Share Certificates and the number of Shares tendered
should be listed on a separate schedule and attached hereto.

<PAGE>

4. Partial Tenders. (Not applicable to stockholders who tender by
book-entry transfer.) If fewer than all the Shares evidenced by any Share
Certificate delivered to the Depositary herewith are to be tendered hereby, fill
in the number of Shares which are to be tendered in the box entitled 'Number of
Shares Tendered.' In such cases, new Share Certificate(s) evidencing the
remainder of the Shares that were evidenced by the Share Certificates delivered
to the Depositary herewith will be sent to the person(s) signing this Letter of
Transmittal, unless otherwise provided in the box entitled 'Special Delivery
Instructions,' as soon as practicable after the expiration or termination of the
Offer. All Shares evidenced by Share Certificates delivered to the Depositary
will be deemed to have been tendered unless otherwise indicated.

5. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the Share Certificates evidencing such Shares without alteration,
enlargement or any other change whatsoever.

If any Share tendered hereby is owned of record by two or more persons, all
such persons must sign this Letter of Transmittal.

If any of the Shares tendered hereby are registered in the names of
different holders, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of such
Shares.

If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of Share Certificates or separate stock
powers are required, unless payment is to be made to, or Share Certificates
evidencing Shares not tendered or not purchased are to be issued in the name of,
a person other than the registered holder(s), in which case, the Share
Certificate(s) evidencing the Shares tendered hereby must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered holder(s) appear(s) on such Share Certificate(s).
Signatures on such Share Certificate(s) and stock powers must be guaranteed by
an Eligible Institution.

If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the Share Certificate(s)
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on such Share Certificate(s). Signatures on such
Share Certificate(s) and stock powers must be guaranteed by an Eligible
Institution.

If this Letter of Transmittal or any Share Certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to the Purchaser of such person's authority so to act must be
submitted.

6. Stock Transfer Taxes. Except as otherwise provided in this Instruction
6, the Purchaser will pay all stock transfer taxes with respect to the sale and
transfer of any Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price of any Shares purchased is to be made to, or Share
Certificate(s) evidencing Shares not tendered or not purchased are to be issued
in the name of, a person other than the registered holder(s), the amount of any
stock transfer taxes (whether imposed on the registered holder(s), such other
person or otherwise) payable on account of the transfer to such other person
will be deducted from the purchase price of such Shares purchased, unless
evidence satisfactory to the Purchaser of the payment of such taxes, or
exemption therefrom, is submitted.

EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE SHARE CERTIFICATES EVIDENCING THE
SHARES TENDERED HEREBY.

7. Special Payment and Delivery Instructions. If a check for the purchase
price of any Shares tendered hereby is to be issued, or Share Certificate(s)
evidencing Shares not tendered or not purchased are to be issued, in the name of
a person other than the person(s) signing this Letter of Transmittal or if such
check or any such Share Certificate is to be sent to someone other than the
person(s) signing this Letter of Transmittal or to the person(s) signing this

Letter of Transmittal but at an address other than that shown in the box
entitled 'Description of Shares Tendered,' the appropriate boxes on this Letter
of Transmittal must be completed. Stockholders delivering Shares tendered hereby
by book-entry transfer may request that Shares not purchased be credited to such
account maintained at a Book-Entry Transfer Facility as such stockholder may
designate in the box entitled 'Special Payment Instructions' on the reverse
hereof. If no such instructions are given, all such Shares not purchased will be
returned by crediting the account at the Book-Entry Transfer Facility designated
on the reverse hereof as the account from which such Shares were delivered.

8. Requests for Assistance or Additional Copies. Requests for assistance
may be directed to the Information Agent or Dealer Manager at their respective
addresses or telephone numbers set forth below. Additional copies of the Offer
to Purchase, this Letter of Transmittal, the Notice of Guaranteed Delivery and
the Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 may be obtained from the Information Agent or the Dealer Manager or
from brokers, dealers, commercial banks or trust companies.

<PAGE>

9. Substitute Form W-9. Each tendering stockholder is required to provide
the Depositary with a correct Taxpayer Identification Number ('TIN') on the
Substitute Form W-9 which is provided under 'Important Tax Information' below,
and to certify, under penalties of perjury, that such number is correct and that
such stockholder is not subject to backup withholding of federal income tax. If
a tendering stockholder has been notified by the Internal Revenue Service that
such stockholder is subject to backup withholding, such stockholder must cross
out item (2) of the Certification box of the Substitute Form W-9, unless such
stockholder has since been notified by the Internal Revenue Service that such
stockholder is no longer subject to backup withholding. Failure to provide the
information on the Substitute Form W-9 may subject the tendering stockholder to
31% federal income tax withholding on the payment of the purchase price of all
Shares purchased from such stockholder. If the tendering stockholder has not
been issued a TIN and has applied for one or intends to apply for one in the
near future, such stockholder should write 'Applied For' in the space provided
for the TIN in Part I of the Substitute Form W-9, and sign and date the
Substitute Form W-9. If 'Applied For' is written in Part I and the Depositary is
not provided with a TIN within 60 days, the Depositary will withhold 31% on all
payments of the purchase price to such stockholder until a TIN is provided to
the Depositary.

10. Lost, Destroyed or Stolen Certificates. If any certificate(s)
representing Shares has been lost, destroyed or stolen, the stockholder should
promptly notify the Depositary. The stockholder will then be instructed as to
the steps that must be taken in order to replace the certificate(s). This Letter
of Transmittal and related documents cannot be processed until the procedures
for replacing lost or destroyed certificates have been followed.

IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE HEREOF), PROPERLY
COMPLETED AND DULY EXECUTED, WITH ANY REQUIRED SIGNATURE GUARANTEES, OR AN
AGENT'S MESSAGE (TOGETHER WITH SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY
TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR A PROPERLY COMPLETED AND DULY
EXECUTED NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY PRIOR
TO THE EXPIRATION DATE (AS DEFINED IN THE OFFER TO PURCHASE).

IMPORTANT TAX INFORMATION

Under the federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required by law to provide the Depositary (as payer)
with such stockholder's correct TIN on Substitute Form W-9 below. If such
stockholder is an individual, the TIN is such stockholder's social security
number. If the Depositary is not provided with the correct TIN, the stockholder
may be subject to a $50 penalty imposed by the Internal Revenue Service. In
addition, payments that are made to such stockholder with respect to Shares
purchased pursuant to the Offer may be subject to backup withholding of 31%.

Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, such individual must submit a statement, signed under penalties of
perjury, attesting to such individual's exempt status. Forms of such statements
can be obtained from the Depositary. See the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.

If backup withholding applies with respect to a stockholder, the Depositary
is required to withhold 31% of any payments made to such stockholder. Backup
withholding is not an additional tax. Rather, the tax liability of persons
subject to backup withholding will be reduced by the amount of tax withheld. If
withholding results in an overpayment of taxes, a refund may be obtained from
the Internal Revenue Service.

PURPOSE OF SUBSTITUTE FORM W-9

To prevent backup withholding on payments that are made to a stockholder
with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of such stockholder's correct TIN by
completing the form below certifying (a) that the TIN provided on Substitute
Form W-9 is correct (or that such stockholder is awaiting a TIN), and (b) that
(i) such stockholder has not been notified by the Internal Revenue Service that
such stockholder is subject to backup withholding as a result of a failure to
report all interest or dividends or (ii) the Internal Revenue Service has
notified such stockholder that such stockholder is no longer subject to backup
withholding.

WHAT NUMBER TO GIVE THE DEPOSITARY

The stockholder is required to give the Depositary the social security
number or employer identification number of the record holder of the Shares
tendered hereby. If the Shares are in more than one name or are not in the name
of the actual owner, consult the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional guidance on
which number to report. If the tendering stockholder has not been issued a TIN
and has applied for a number or intends to apply for a number in the near
future, the stockholder should write 'Applied For' in the space provided for the
TIN in Part I, and sign and date the Substitute Form W-9. If 'Applied For' is
written in Part I and the Depositary is not provided with a TIN within 60 days,
the Depositary will withhold 31% of all payments of the purchase price to such
stockholder until a TIN is provided to the Depositary.

<PAGE>

PAYER'S NAME: HARRIS TRUST COMPANY OF NEW YORK
- --------------------------------------------------------------------------------
SUBSTITUTE PART I--PLEASE PROVIDE
FORM W-9 YOUR TIN IN THE BOX AT ______________________
RIGHT AND CERTIFY BY Social Security Number
DEPARTMENT OF THE SIGNING AND DATING BELOW. OR
TREASURY
INTERNAL REVENUE SERVICE _______________________
Employee Identification
Number
(If awaiting TIN write
'Applied For')

Payer's Request for PART II--For Payee Exempt From Backup Withholding,
Taxpayer Identification see the enclosed Guidelines and complete as
Number (TIN) instructed herein.

CERTIFICATION--Under penalties of perjury, I certify that:

(1) The number shown in this form is my correct Taxpayer Identification Number
(or a Taxpayer Identification Number has not been issued to me and either
(a) I have mailed or delivered an application to receive a Taxpayer
Identification Number to the appropriate Internal Revenue Service ('IRS') or
Social Security Administration office or (b) I intend to mail or deliver an
application in the near future. I understand that if I do not provide a
Taxpayer Identification Number within sixty (60) days, 31% of all acceptable
payments made to me thereafter will be withheld until I provide a number),
and
(2) I am not subject to backup withholding either because I have not been
notified by the IRS that I am subject to backup withholding as a result of
failure to report all interest or dividends, or the IRS has notified me that
I am no longer subject to backup withholding.

CERTIFICATE INSTRUCTIONS--You must cross out item (2) above if you have been
notified by the IRS that you are subject to backup withholding because of under
reporting interest or dividends on your tax return. However, if after being
notified by the IRS that you were subject to backup withholding you received
another notification from the IRS that you are no longer subject to backup
withholding, do not cross out item (2). (Also see instructions in the enclosed
Guidelines.)

SIGNATURE _______________________________________ DATE _________________, 1995/6
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.

Questions and requests for assistance or additional copies of the Offer to
Purchase, Letter of Transmittal and other tender offer materials may be directed
to the Information Agent as set forth below:

The Information Agent for the Offer is:

MACKENZIE
PARTNERS, INC.

156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)

Call Toll-Free (800) 322-2885

The Dealer Manager for the Offer is:

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

140 Broadway
New York, New York 10005
(310) 282-5065 (call collect)

Call Toll-Free (800) 237-5022

<PAGE>

NOTICE OF GUARANTEED DELIVERY
for
Tender of Shares of Common Stock
of
REVCO D.S., INC.
to
OCEAN ACQUISITION CORPORATION
a wholly owned subsidiary of
RITE AID CORPORATION
(Not To Be Used For Signature Guarantees)

This Notice of Guaranteed Delivery, or one substantially in the form
hereof, must be used to accept the Offer (as defined below) if (i) certificates
('Share Certificates') evidencing shares of common stock, par value $.01 per
share (the 'Common Stock' or the 'Shares'), of Revco D.S., Inc., a Delaware
corporation (the 'Company'), are not immediately available, (ii) time will not
permit all required documents to reach Harris Trust Company of New York, as
Depositary (the 'Depositary'), prior to the Expiration Date (as defined in 'THE
TENDER OFFER--Terms of the Offer; Number of Shares and Proration; Expiration
Date' of the Offer to Purchase (as defined below)) or (iii) the procedure for
book-entry transfer cannot be completed on a timely basis. This Notice of
Guaranteed Delivery may be delivered by hand or transmitted by telegram,
facsimile transmission or mail to the Depositary. See 'THE TENDER
OFFER--Procedures for Tendering Shares' of the Offer to Purchase.

The Depositary for the Offer is:

HARRIS TRUST COMPANY OF NEW YORK

By Facsimile:
(212) 701-7636
(212) 701-7640

Confirm by telephone:
(212) 701-7624

DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.

This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an 'Eligible Institution'
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.

<PAGE>
Ladies and Gentlemen:

The undersigned hereby tenders to Ocean Acquisition Corporation, a Delaware
corporation (the 'Purchaser') and a wholly owned subsidiary of Rite Aid
Corporation, a Delaware corporation ('Parent'), upon the terms and subject to
the conditions set forth in the Offer to Purchase, dated December 4, 1995 (the
'Offer to Purchase'), and the related Letter of Transmittal (which, as amended
from time to time, together constitute the 'Offer'), receipt of each of which is
hereby acknowledged, the number of Shares specified below pursuant to the
guaranteed delivery procedures described in 'THE TENDER OFFER--Procedures for
Tendering Shares' of the Offer to Purchase.

Number of Shares: ____________________________ Name(s) of Record Holder(s):

Certificate Nos. (if available): _____________ _______________________________

______________________________________________ _______________________________
(Please Print)
Check ONE box if Shares will be tendered by
book-entry transfer: Address(es): __________________
/ / The Depository Trust Company ________________________________
/ / Midwest Securities Trust Company (Zip Code)
/ / Philadelphia Depository Trust Company Company Area Code and Tel. No.:
Account Number: ______________________________ ________________________________
Area Code and Tel. No.: ________
Dated: ______________________________ , 1995/6 Signature(s): __________________
________________________________

GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEES)

The undersigned, a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or correspondent in the United
States, hereby (a) represents that the tender of shares effected hereby complies
with Rule 14e-4 of the Securities Exchange Act of 1934, as amended, and (b)
guarantees delivery to the Depositary, at one of its addresses set forth above,
of certificates evidencing the Shares tendered hereby in proper form for
transfer, or confirmation of book-entry transfer of such Shares into the
Depositary's accounts at The Depository Trust Company, the Midwest Securities
Trust Company or the Philadelphia Depository Trust Company, in each case with
delivery of a properly completed and duly executed Letter of Transmittal (or a
facsimile thereof) with any required signature guarantees, or an Agent's Message
(as defined in 'THE TENDER OFFER--Acceptance for Payment and Payment for Shares'
of the Offer to Purchase), and any other documents required by the Letter of
Transmittal, within three New York Stock Exchange, Inc. trading days after the
date of execution of this Notice of Guaranteed Delivery.

The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and Share
Certificates to the Depositary within the time period shown herein. Failure to
do so could result in financial loss to such Eligible Institution.

Name of Firm: _________________________ ____________________________________
(Authorized Signature)

Address: ______________________________ Title: _____________________________

_______________________________________ Name: ______________________________
(Zip Code)
Area Code and Tel. No.: _______________ Date: _____________________, 1995/6

NOTE: DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE.
SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.

<PAGE>

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

140 Broadway
New York, New York 10005

Offer to Purchase for Cash

35,144,833 Shares of Common Stock

of
REVCO D.S., INC.
at
$27.50 NET PER SHARE IN CASH
by
OCEAN ACQUISITION CORPORATION
a wholly owned subsidiary of
RITE AID CORPORATION

THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY,
JANUARY 2, 1996, UNLESS THE OFFER IS EXTENDED.

December 4, 1995

To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:

We have been appointed by Ocean Acquisition Corporation, a Delaware
corporation (the 'Purchaser') and a wholly owned subsidiary of Rite Aid
Corporation, a Delaware corporation ('Parent'), to act as Dealer Manager in
connection with the Purchaser's offer to purchase 35,144,833 shares of common
stock, par value $.01 per share (the 'Common Stock' or the 'Shares'), of Revco
D.S., Inc., a Delaware corporation (the 'Company'), or such other number of
Shares as equals 50.1% of the Shares outstanding on a fully diluted basis as of
the Expiration Date (as defined in 'THE TENDER OFFER--Terms of the Offer; Number
of Shares and Proration; Expiration Date' of the Offer to Purchase (as defined
below)), at a price of $27.50 per Share, net to the seller in cash (such price,
or such higher price per Share as may be paid in the Offer, the 'Offer Price'),
upon the terms and subject to the conditions set forth in the Purchaser's Offer
to Purchase, dated December 4, 1995 (the 'Offer to Purchase'), and in the
related Letter of Transmittal (which, as amended from time to time, together
constitute the 'Offer') enclosed herewith.

THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, 35,144,833 SHARES, OR
SUCH OTHER NUMBER OF SHARES AS EQUALS 50.1% OF THE SHARES OUTSTANDING ON A FULLY
DILUTED BASIS AS OF THE EXPIRATION OF THE OFFER (SUCH NUMBER OF SHARES BEING THE
'MINIMUM NUMBER'), BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE
EXPIRATION OF THE OFFER (THE 'MINIMUM CONDITION'). THE OFFER IS ALSO SUBJECT TO
OTHER TERMS AND CONDITIONS. SEE 'THE TENDER OFFER--CONDITIONS OF THE OFFER' OF
THE OFFER TO PURCHASE.

<PAGE>
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, or who hold
Shares registered in their own names, we are enclosing the following documents:

1. Offer to Purchase, dated December 4, 1995;

2. Letter of Transmittal to be used by holders of Shares in accepting
the Offer and tendering Shares;

3. Notice of Guaranteed Delivery to be used to accept the Offer if the
certificates evidencing such Shares (the 'Share Certificates') are not
immediately available or time will not permit all required documents to
reach Harris Trust Company of New York (the 'Depositary') prior to the
Expiration Date or the procedure for book-entry transfer cannot be
completed on a timely basis;

4. A letter to stockholders of the Company from Mr. D. Dwayne Hoven,
President and Chief Executive Officer of the Company, together with a
Solicitation/Recommendation Statement on Schedule 14D-9 filed with the
Securities and Exchange Commission by the Company;

5. A letter which may be sent to your clients for whose accounts you
hold Shares registered in your name or in the name of your nominees, with
space provided for obtaining such clients' instructions with regard to the
Offer;

6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9; and

7. Return envelope addressed to the Depositary.

Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Purchaser will purchase, by accepting for payment, and will
pay for the Minimum Number of Shares validly tendered prior to the Expiration
Date (and not properly withdrawn in accordance with 'THE TENDER
OFFER--Withdrawal Rights' of the Offer to Purchase) promptly after the later to
occur of (i) the Expiration Date and (ii) the satisfaction or waiver of the
conditions set forth in 'THE TENDER OFFER--Conditions of the Offer' of the Offer
to Purchase. For purposes of the Offer, the Purchaser will be deemed to have
accepted for payment, and thereby purchased, tendered Shares if, as and when the
Purchaser gives oral or written notice to the Depositary of the Purchaser's
acceptance of such Shares for payment pursuant to the Offer. In all cases,
payment for Shares purchased pursuant to the Offer will be made only after
timely receipt by the Depositary of (i) the Share Certificates or timely
confirmation of a book-entry transfer of such Shares, if such procedure is
available, into the Depositary's account at The Depository Trust Company, the
Midwest Securities Trust Company or the Philadelphia Depository Trust Company
pursuant to the procedures set forth in 'THE TENDER OFFER--Procedures for
Tendering Shares' of the Offer to Purchase, (ii) the Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or an Agent's Message (as defined in 'THE TENDER
OFFER--Acceptance for Payment and Payment for Shares' of the Offer to Purchase)

and (iii) any other documents required by the Letter of Transmittal.

The Purchaser will not pay any fees or commissions to any broker or dealer
or any other person (other than the Dealer Manager as described in 'THE TENDER
OFFER--Fees and Expenses' of the Offer to Purchase) in connection with the
solicitation of tenders of Shares pursuant to the Offer. The Purchaser will,
however, upon request, reimburse you for customary mailing and handling expenses
incurred by you in forwarding the enclosed materials to your clients.

The Purchaser will pay any stock transfer taxes incident to the transfer to
it of validly tendered Shares, except as otherwise provided in Instruction 6 of
the Letter of Transmittal.

YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, JANUARY 2, 1996,
UNLESS THE OFFER IS EXTENDED.

In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal (or a facsimile thereof), with any required
signature guarantees and any other required documents, should be sent to

<PAGE>
the Depositary, and certificates evidencing the tendered Shares should be
delivered or such Shares should be tendered by book-entry transfer, all in
accordance with the Instructions set forth in the Letter of Transmittal and the
Offer to Purchase.

If holders of Shares wish to tender Shares, but it is impracticable for
them to forward their Share Certificates or other required documents prior to
the Expiration Date, a tender may be effected by following the guaranteed
delivery procedures specified under 'THE TENDER OFFER--Procedures for Tendering
Shares' of the Offer to Purchase.

Any inquiries you may have with respect to the Offer should be addressed to
the Information Agent at its address and telephone number set forth on the back
cover page of the Offer to Purchase.

Additional copies of the enclosed materials may be obtained by calling the
Information Agent, MacKenzie Partners, Inc., collect at (212) 929-5500 or
toll-free at (800) 322-2885, or from brokers, dealers, commercial banks or trust
companies.

Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
(310) 282-5065 (call collect)
or (800) 237-5022

NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON AS AN AGENT OF PARENT, THE PURCHASER, THE DEPOSITARY, THE
INFORMATION AGENT OR THE DEALER MANAGER, OR ANY AFFILIATE OF ANY OF THE

FOREGOING, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY
STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE
DOCUMENTS ENCLOSED AND THE STATEMENTS CONTAINED THEREIN.

<PAGE>
Offer to Purchase for Cash
35,144,833 Shares of Common Stock
of
REVCO D.S., INC.
at
$27.50 NET PER SHARE IN CASH
by
OCEAN ACQUISITION CORPORATION
a wholly owned subsidiary of
RITE AID CORPORATION

THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, JANUARY 2, 1996,
UNLESS THE OFFER IS EXTENDED.

December 4, 1995

To Our Clients:

Enclosed for your consideration is an Offer to Purchase, dated December 4,
1995 (the 'Offer to Purchase'), and the related Letter of Transmittal (which, as
amended from time to time, together constitute the 'Offer') in connection with
the Offer by Ocean Acquisition Corporation, a Delaware corporation (the
'Purchaser') and a wholly owned subsidiary of Rite Aid Corporation, a Delaware
corporation ('Parent'), to purchase 35,144,833 shares of common stock, par value
$.01 per share (the 'Common Stock' or the 'Shares'), of Revco D.S., Inc., a
Delaware corporation (the 'Company'), or such other number of Shares as equals
50.1% of the Shares outstanding as of the Expiration Date (as defined in 'THE
TENDER OFFER--Terms of the Offer; Number of Shares and Proration; Expiration
Date' of the Offer to Purchase), at a price of $27.50 per Share, net to the
seller in cash (such price, or such higher price per Share as may be paid in the
Offer, the 'Offer Price'), upon the terms and subject to the conditions set
forth in the Offer.

Stockholders whose certificates evidencing Shares ('Share Certificates')
are not immediately available or who cannot deliver their Share Certificates and
all other documents required by the Letter of Transmittal to the Depositary
prior to the Expiration Date or who cannot complete the procedure for delivery
by book-entry transfer to the Depositary's account at a Book-Entry Transfer
Facility (as defined in 'THE TENDER OFFER--Acceptance for Payment and Payment
for Shares' of the Offer to Purchase) on a timely basis and who wish to tender
their Shares must do so pursuant to the guaranteed delivery procedure described
in 'THE TENDER OFFER--Procedures for Tendering Shares' of the Offer to Purchase.
See Instruction 2 of the Letter of Transmittal. Delivery of documents to a
Book-Entry Transfer Facility in accordance with the Book-Entry Transfer
Facility's procedures does not constitute delivery to the Depositary.

THE MATERIAL IS BEING SENT TO YOU AS THE BENEFICIAL OWNER OF SHARES HELD BY
US FOR YOUR ACCOUNT BUT NOT REGISTERED IN YOUR NAME. WE ARE THE HOLDER OF RECORD
OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY
BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF
TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY
YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT.

We request instructions as to whether you wish to have us tender on your
behalf any or all of the Shares held by us for your account, upon the terms and
subject to the conditions set forth in the Offer.

Your attention is invited to the following:

1. The tender price is $27.50 per Share, net to the seller in cash.

<PAGE>
2. The Offer, proration period and withdrawal rights will expire at
12:00 Midnight, New York City time, on Tuesday, January 2, 1996, unless the
Offer is extended.

3. The Offer is being made for 35,144,833 Shares, or such other number
of Shares as equals 50.1% of the Shares outstanding on a fully diluted
basis as of the Expiration Date.

4. The Board of Directors of the Company unanimously (with one
director absent and two directors abstaining) has determined that each of
the Offer and the Merger (as defined in 'INTRODUCTION' of the Offer to
Purchase) is fair to, and in the best interests of the stockholders of the
Company and unanimously (with one director absent and two directors
abstaining) recommends that stockholders of the Company who desire to
receive cash for their Shares accept the Offer and tender their Shares
pursuant to the Offer.

5. The Offer is conditioned upon, among other things, 35,144,833
Shares, or such other number of Shares as equals 50.1% of the Shares
outstanding on a fully diluted basis as of the Expiration Date, being
validly tendered and not withdrawn prior to the expiration of the Offer.
The Offer is also subject to other terms and conditions. See 'THE TENDER
OFFER--Conditions of the Offer' of the Offer to Purchase.

6. Tendering stockholders will not be obligated to pay brokerage fees
or commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares by the
Purchaser pursuant to the Offer.

The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal and is being made to all holders of Shares. The Offer is not being
made to (nor will tenders be accepted from or on behalf of) holders of Shares in
any jurisdiction in which the making of the Offer or the acceptance thereof
would not be in compliance with the laws of such jurisdiction. In those
jurisdictions where securities, blue sky or other laws require the Offer to be
made by a licensed broker or dealer, the Offer shall be deemed to be made on
behalf of the Purchaser by the Dealer Manager or one or more registered brokers
or dealers licensed under the laws of such jurisdiction.

If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing and returning to us the instruction form contained
in this letter. An envelope in which to return your instructions to us is
enclosed. If you authorize the tender of your Shares, all such Shares will be
tendered unless otherwise specified on the instruction form set forth in this

letter. Your instructions should be forwarded to us in ample time to permit us
to submit a tender on your behalf prior to the expiration of the Offer.

<PAGE>
INSTRUCTIONS WITH RESPECT
TO THE OFFER TO PURCHASE FOR CASH
35,144,833 SHARES OF COMMON STOCK
OF REVCO D.S., INC.

The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase, dated December 4, 1995, and the related Letter of Transmittal
(which, as amended from time to time, together constitute the 'Offer'), in
connection with the Offer by Ocean Acquisition Corporation, a Delaware
corporation (the 'Purchaser') and a wholly owned subsidiary of Rite Aid
Corporation, a Delaware corporation ('Parent'), to purchase 35,144,833 shares of
common stock, par value $.01 per share (the 'Common Stock' or the 'Shares'), of
Revco D.S., Inc., a Delaware corporation (the 'Company'), or such other number
of Shares as equals 50.1% of the Shares outstanding on a fully diluted basis as
of the expiration of the Offer.

This will instruct you to tender to the Purchaser the number of Shares
indicated below (or, if no number is indicated below, all Shares) held by you
for the account of the undersigned, upon the terms and subject to the conditions
set forth in the Offer.

SIGN HERE
Number of Shares to be Tendered:

___________________________ Shares* ________________________________________

Account Number: __________________ ________________________________________
Signature(s)

________________________________________

Dated: , 1995/6 ________________________________________
Please type or print name(s)

________________________________________

________________________________________
Please type or print address(es) here

________________________________________
Area Code and Telephone Number

________________________________________
Taxpayer Identification or
Social Security Number(s)

- ------------------

* Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.

<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9

GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.

- --------------------------------------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- --------------------------------------------------------------------------------
1. An individual's account The individual

2. Two or more individuals The actual owner of the account or,
(joint account) if combined funds, any one of the
individuals(1)

3. Husband and wife The actual owner of the account or,
(joint account) if joint funds, either person(1)

4. Custodian account of a minor (Uniform The minor(2)
Gift to Minors Act)

5. Adult and minor The adult or, if the minor is the
(joint account) only contributor, the minor(1)

6. Account in the name of guardian or The ward, minor, or incompetent
committee for a designated ward, person(3)
minor, or incompetent person

7. a. The usual revocable savings trust The grantor-trustee(1)
account (grantor is also trustee)

b. So-called trust account that is The actual owner(1)
not a legal or valid trust under
State law

8. Sole proprietorship account The owner(4)
- --------------------------------------------------------------------------------
RO
- --------------------------------------------------------------------------------
GIVE THE EMPLOYER IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- --------------------------------------------------------------------------------
9. A valid trust, estate, or pension The legal entity (Do not furnish the
trust identifying number of the personal
representative or trustee unless the
legal entity itself is not
designated in the account title.)(5)

10. Corporate account The corporation

11. Religious, charitable, or educational The organization
organization account

12. Partnership account held in the name The partnership
of the business

13. Association, club, or other The organization
tax-exempt organization

14. A broker or registered nominee The broker or nominee

15. Account with the Department of The public entity
Agriculture in the name of a public
entity (such as a State or local
government, school district, or
prison) that receives agricultural
program payments
- --------------------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.

(2) Circle the minor's name and furnish the minor's social security number.

(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.

(4) Show the name of the owner.

(5) List first and circle the name of the legal trust, estate, or pension trust.

NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.

<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2

OBTAINING A NUMBER

If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.

PAYEES EXEMPT FROM BACKUP WITHHOLDING

Payees specifically exempted from backup withholding on ALL payments include the
following:

o A corporation.

o A financial institution.

o An organization exempt from tax under section 501(a), or an individual
retirement plan.

o The United States or any agency or instrumentality thereof.

o A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.

o A foreign government, a political subdivision of a foreign government, or any
agency or instrumentality thereof.

o An international organization or any agency, or instrumentality thereof.

o A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.

o A real estate investment trust.

o A common trust fund operated by a bank under section 584(a).

o An exempt charitable remainder trust, or a nonexempt trust described in
section 4947(a)(1).

o An entity registered at all times under the Investment Company Act of 1940.

o A foreign central bank of issue.

Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:

o Payments to nonresident aliens subject to withholding under section 1441.

o Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.

o Payments of patronage dividends where the amount received is not paid in
money.

o Payments made by certain foreign organizations.

o Payments made to a nominee.

Payments of interest not generally subject to backup withholding include the
following:

o Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid in
the course of the payer's trade or business and you have not provided your
correct taxpayer identification number to the payer.

o Payments of tax-exempt interest (including exempt-interest dividends under
section 852).

o Payments described in section 6049(b)(5) to non-resident aliens.

o Payments on tax-free covenant bonds under section 1451.

o Payments made by certain foreign organizations.

o Payments made to a nominee.

Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE 'EXEMPT' ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.

Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041(a),
6045, and 6050A.

PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1984, payers must generally
withhold 20% of taxable interest, dividend, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer. Certain
penalties may also apply.

PENALTIES

(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.

(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
under-payment attributable to that failure unless there is clear and convincing
evidence to the contrary.

(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.

(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.

FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.

[LOGO]
MAILING ADDRESS
P.O. Box 3165
Harrisburg, PA 17105
GENERAL OFFICE
30 Hunter Lane
PRESS RELEASE Camp Hill, PA 17011
For Further Information Contact:

CONTACTS: MEDIA: INVESTORS:

SUZANNE MEAD FRANK BERGONZI
VP Corporate Communications Executive VP and CFO
(717) 975-5887 (717) 975-5750

JOELE FRANK
Abernathy MacGregor Scanlon
(212) 371-5999

FOR IMMEDIATE RELEASE

RITE AID CORPORATION AND REVCO COMBINE TO CREATE
NATION'S LARGEST DRUGSTORE CHAIN

MERGER CREATES COMPANY WITH OVER $11 BILLION IN REVENUES

CASH TENDER SCHEDULED TO COMMENCE EARLY NEXT WEEK
------------------------

CAMP HILL, PA (November 30, 1995)--Rite Aid Corporation (RAD: NYSE, PSE)
and Revco D.S., Inc. (RXR: NYSE) today announced that they have entered into a
definitive merger agreement in which Rite Aid would acquire Revco. The merger
creates the nation's largest drugstore chain with expected annualized revenues
of over $11 billion and more than 4,500 stores in 22 states and the District of
Columbia. The transaction is expected to be accretive to Rite Aid's earnings per
share by the end of the first year of operations following the merger.

Under the agreement, Rite Aid would purchase, in a first-step tender offer,
at least 50.1% of the outstanding shares of Revco on a fully-diluted basis for
$27.50 per share in cash and the remainder of the outstanding shares would be
converted into Rite Aid stock in a second-step merger. As described below, the
value of Rite Aid shares to be received for each Revco share in the second-step
merger will increase to the extent the average value of Rite Aid stock is
greater that $27.50 per share during a pricing period and will decrease if the
average value of Rite Aid stock is less than $27.50 per share during such
pricing period, but in no event will more than 1.125 shares or less than .91666
shares of Rite Aid stock be issued for each Revco share in the merger.

The tender offer is not conditioned on obtaining financing. The total value
of the merger is approximately $1.8 billion.

The merger, which was approved by each company's Board of Directors, is
expected to be completed in the first quarter of 1996. The tender offer is

scheduled to commence early next week.

Martin Grass, Chairman of the Board of Directors and Chief Executive
Officer of Rite Aid, said, 'The combination of these two great companies will
create the preeminent retail drugstore chain in the United States. This
transaction will nearly double our revenues and number of stores. Our
significant investment in technology and infrastructure coupled with our
innovative management changes have prepared us to seize the competitive
advantage this merger represents. We anticipate a quick and smooth integration
of the two companies.

healthcare delivery system. This expanded capacity is important leverage in
attracting new contracts to the company.

'We will be the best-positioned retail drugstore chain in the country to
compete with the three large vertically integrated pharmacy benefit managers
owned by the major pharmaceutical manufacturers. This combination should allow
Rite Aid to offer customers the most competitive pharmacy prescription prices
and services.'

D. Dwayne Hoven, President and Chief Executive Officer of Revco, said, 'In
an environment of consolidation, Revco's Board of Directors felt that this offer
was fair and reasonable and in the best interest of our stockholders. This offer
is the culmination of one of the most remarkable turnarounds in corporate
history. We built a company with productive real estate, clean inventories and
great people. Revco people should not lose sight of what they have
accomplished.'

Rite Aid expects to achieve synergies of $156 million through elimination
of overlapping positions, streamlining distribution, reducing redundant
advertising, and enhanced purchasing power. As in past Rite Aid mergers, Rite
Aid will provide excellent severance packages, including out-placement
counseling, to all affected personnel. Following completion of the merger, the
Revco stores will operate under the Rite Aid banner. The headquarters of Rite
Aid will remain in Camp Hill, Pennsylvania.

Rite Aid indicated that it plans to take a pre-tax charge to earnings of
$163 million to cover the cost of integrating the two companies. Rite Aid
anticipates that only a small percentage of the combined company's stores will
be closed. A decision on which drugstores will be closed will occur after the
merger is completed.

The merger agreement provides for Ocean Acquisition Corporation, a
subsidiary of Rite Aid, to make a cash tender offer for at least 50.1% of the
outstanding shares of common stock of Revco on a fully diluted basis at a price
of $27.50 per share. The tender offer will be followed by a second-step merger
in which each share of Revco not acquired in the tender offer will be converted

into the right to receive Rite Aid common stock and/or, under certain
circumstances, cash.

The per share value of Rite Aid common stock which stockholders of Revco
would receive in the second-step merger will be determined during a randomly
selected fifteen-day pricing period during the forty trading days ending five
days before the meeting of stockholders of Revco to consider the merger.
Stockholders of Revco would receive one share of Rite Aid common stock if the
average market value of Rite Aid common stock during the pricing period is
$27.50.

If the average value of Rite Aid common stock is greater than $27.50 during
the selected fifteen-day pricing period, stockholders of Revco will receive, for
each Revco share, Rite Aid common stock having a value of $27.50 plus 50% of the
increase in market value of Rite Aid common stock over $27.50, provided that in
no event would Rite Aid issue less than .91666 shares of Rite Aid common stock
for each Revco share in the merger. Similarly, if the average value of Rite Aid
common stock during the pricing period is less than $27.50, stockholders of
Revco will receive, for each Revco share, Rite Aid common stock having a value
of $27.50 less 50% of the decrease in market value of Rite Aid common stock
below $27.50, provided that in no event would Rite Aid issue more than 1.125
shares of Rite Aid common stock.

If the average value of Rite Aid common stock during the pricing period is
less than $27.50, Rite Aid would have the option of delivering, for each Revco
share, one share of Rite Aid common stock plus cash in an amount equal to 50% of
the decrease in market value of Rite Aid common stock below $27.50, provided
that in no event would more than $2.75 per Revco share be paid in cash.

In the event that the stockholders of Rite Aid do not approve the issuance
of Rite Aid common stock pursuant to the merger, but all conditions to the
merger are otherwise satisfied or waived, each Revco share would be converted
into the right to receive a combination of cash and shares of Rite Aid common
stock (determined based on the formulas described above) representing in the
aggregate 19.9% of Rite Aid's outstanding shares.

Rite Aid also stated that it has entered into a stockholder agreement with
Zell/Chilmark Fund L.P., the major stockholder of Revco, pursuant to which
Zell/Chilmark has agreed to tender its Revco shares (representing approximately
19.7 % of Revco's outstanding shares) into Rite Aid's tender offer and to vote
in favor of the

merger. Revco has granted Rite Aid an option to purchase 19.9% of Revco's shares
under certain circumstances at $27.50 per share.

The tender offer is conditioned on, among other things, the valid tender of
50.1% of the outstanding Revco shares on a fully diluted basis and the
expiration or termination of any applicable waiting period under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976.

Donaldson, Lufkin & Jenrette Securities Corporation provided a fairness
opinion for Rite Aid. Morgan Stanley & Co. Incorporated provided a fairness

opinion for Revco.

Revco D.S., Inc., based in Twinsburg, Ohio, operates over 2,100 stores in
14 Midwestern, Southeastern and Eastern states and has annual sales of
approximately $4.4 billion.

Rite Aid Corporation, based in Camp Hill, Pennsylvania, is the nation's
largest drugstore chain, with over 2,700 stores in 21 states and the District of
Columbia.

General information about Rite Aid including corporate background and press
releases is available, free of charge, through the company's News-On-Demand fax
service at 800-916-7788.

Exhibit 99.(a)(8)

This announcement is neither an offer to purchase nor a solicitation of an
offer to sell Shares. The Offer is made solely by the Offer to Purchase dated
December 4, 1995 and the related Letter of Transmittal and is being made to
all holders of Shares. The Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Shares in any jurisdiction in which
the making of the Offer or the acceptance thereof would not be in compliance
with the laws of such jurisdiction. In those jurisdictions where securities,
blue sky or other laws require the Offer to be made by a licensed broker or
dealer, the Offer shall be deemed to be made on behalf of Ocean Acquisition
Corporation by Donaldson, Lufkin & Jenrette Securities Corporation (the
"Dealer Manager") or one or more registered brokers or dealers licensed under
the laws of such jurisdiction.

Notice of Offer to Purchase for Cash
35,144,833 Shares of Common Stock
of
Revco D.S., Inc.
at
$27.50 Net Per Share in Cash
by
Ocean Acquisition Corporation
a wholly owned subsidiary of
Rite Aid Corporation

Ocean Acquisition Corporation, a Delaware corporation (the
"Purchaser") and a wholly owned subsidiary of Rite Aid Corporation, a
Delaware corporation ("Parent"), hereby offers to purchase 35,144,833 shares
of common stock, par value $.01 per share ("Shares"), of Revco D.S., Inc., a
Delaware corporation (the "Company"), or such other number of Shares as
equals 50.1% of the Shares outstanding on a fully diluted basis as of the
expiration of the Offer (as defined below) at a price of $27.50 per Share,
net to the seller in cash (such price, or such higher price per Share as may
be paid in the Offer, the "Offer Price"), upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated December 4, 1995 (the
"Offer to Purchase"), and in the related Letter of Transmittal (which, as
amended from time to time, together constitute the "Offer").

THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, JANUARY 2, 1996, UNLESS THE OFFER
IS EXTENDED.

The Offer is conditioned upon, among other things, 35,144,833
Shares, or such other number of Shares as equals 50.1% of the Shares
outstanding on a fully diluted basis as of the expiration of the Offer (such
number of Shares being the "Minimum Number"), being validly tendered and not
withdrawn prior to the expiration of the Offer (the "Minimum Condition"). The
Offer is also subject to other terms and conditions.

Parent and the Purchaser have entered into (I) a Stockholder
Agreement with Zell/Chilmark Fund, L.P. pursuant to which, among other
things, such stockholder has agreed to (x) tender in the Offer, and (y) vote
in favor of the Merger (as defined below) upon the terms and subject to the

conditions thereof, all Shares owned by such stockholder, representing
approximately 19.7% of the outstanding Shares, and (II) a Stock Option
Agreement with the Company pursuant to which, among other things, the Company
has granted Parent an option (the "Option") to purchase up to 13,251,010
fully paid and nonassessable Shares, or such other number of Shares as equals
19.9% of the Company's issued and outstanding Shares at the time of the
exercise of the Option.

The Board of Directors of the Company (the "Company Board")
unanimously (with one director absent and two directors abstaining) has
determined that each of the Offer and the Merger is fair to, and in the best
interests of, the stockholders of the Company and unanimously (with one
director absent and two directors abstaining) recommends that stockholders of
the Company who desire to receive cash for their Shares accept the Offer and
tender their Shares pursuant to the Offer.

The consummation of the Merger is subject to the satisfaction or
waiver of certain conditions, including the approval and adoption of the
Merger Agreement (as defined below) by the requisite vote of the stockholders
of the Company. See Section 11 of the Offer to Purchase. Under the General
Corporation Law of the State of Delaware (the "DGCL"), the approval of the
Company Board and the affirmative vote of the holders of a majority of the
outstanding Shares is required to approve and adopt the Merger Agreement and
the transactions contemplated thereby, including the Merger. The Company
Board has unanimously (with one director absent and two directors abstaining)
approved and adopted the Merger Agreement and the transactions contemplated
thereby. Accordingly, if the Minimum Condition is satisfied, the Purchaser
will have sufficient voting power to cause the approval and adoption of the
Merger Agreement and the transactions contemplated thereby, without the vote
of any other stockholder.

The Offer is being made pursuant to an Agreement and Plan of
Merger, dated as of November 29, 1995 (the "Merger Agreement"), by and among
Parent, the Purchaser and the Company. The Merger Agreement provides that,
following the consummation of the Offer and the satisfaction or waiver of
certain conditions, at the effective time of the Merger (the "Effective
Time"), the Purchaser will be merged with and into the Company (the "Merger")
in accordance with the relevant provisions of the DGCL. Following the
consummation of the Merger, the Company will continue as the surviving
corporation and will be a wholly owned subsidiary of Parent. At the Effective
Time, each outstanding Share (other than Shares held in the treasury of the
Company or owned by Parent, the Purchaser or any other direct or indirect
wholly owned subsidiary of Parent and other than Shares held by stockholders
who have properly exercised and perfected any appraisal rights under the DGCL)
will be converted into either (i) the right to receive a number of duly
authorized, validly issued, fully paid and nonassessable shares of common
stock, par value $1.00 per share, of Parent (the "Parent Common Stock"),
determined as set forth below; provided that Parent shall not issue more than
1.125 nor less than .91666 shares of Parent Common Stock per Share (the
"Exchange Ratio") or (ii) if the Alternative Consideration (as described below)
is applicable, then the right to receive the Alternative Consideration.

The per share value of the Parent Common Stock which stockholders
of the Company would receive in the Merger will be determined during a

randomly selected fifteen-day pricing period (the "Pricing Period") during
the forty trading days ending five days before the meeting of the
stockholders of the Company to consider the Merger. Stockholders of the
Company would receive one share of Parent Common Stock if the average market
value per share of Parent Common Stock during the Pricing Period is $27.50.
If the average per share value of Parent Common Stock determined during the
Pricing Period is greater than $27.50, stockholders of the Company will
receive, for each Share, that amount of Parent Common Stock having a value of
$27.50 plus 50% of the increase in market value of Parent Common Stock over
$27.50, provided that in no event would Parent issue less than .91666 shares
of Parent Common Stock for each Share in the Merger. Similarly, if the
average per share value of Parent Common Stock determined during the Pricing
Period is less than $27.50, stockholders of the Company will receive, for
each Share, Parent Common Stock having a value of $27.50 less 50% of the
decrease in market value of Parent Common Stock below $27.50, provided that
in no event would Parent issue more than 1.125 shares of Parent Common Stock
for each Share in the Merger. Alternatively, if the average per share value
of the Parent Common Stock determined during the Pricing Period is less than
$27.50, Parent would have the option of delivering, for each Share, one share
of Parent Common Stock plus cash in an amount equal to 50% of the decrease in
market value of Parent Common Stock below $27.50, provided that in no event
would more than $2.75 per Share be paid in cash. In the event that the
stockholders of Parent do not approve the issuance of Parent Common Stock
pursuant to the Merger, but all conditions to the Merger are otherwise
satisfied or waived (if permissible), the Company, Parent and the Purchaser
will nonetheless consummate the Merger and each Share issued and outstanding
immediately prior to the Effective Time (other than Shares held in treasury
and Shares owned by Parent and its Subsidiaries and other than Shares held by
stockholders who have properly exercised and perfected appraisal rights under
the DGCL) will, at the Effective Time, be converted into the right to receive
a combination of (x) shares of Parent Common Stock which will represent in
the aggregate 19.9% of the then outstanding shares of Parent Common Stock
(which will be determined in a manner consistent with the determination of
the Exchange Ratio) and (y) cash based on a pro rata portion of $27.50 (the
"Alternative Consideration"). The Merger Agreement provides that in the event
the Merger is not consummated prior to certain dates, holders of Shares will
be entitled to receive interest on the consideration to be received in the
Merger calculated at rates agreed to between Parent and the Company.

The Purchaser expressly reserves the right, in its sole discretion
(but subject to the terms of the Merger Agreement), at any time or from time
to time to extend for any reason the period of time during which the Offer is
open, including the occurrence of any conditions specified in Section 14 of
the Offer to Purchase, by giving oral or written notice of such extension to
Harris Trust Company of New York (the "Depositary"). During any such
extension, all Shares previously tendered and not withdrawn will remain
subject to the Offer, subject to the rights of a tendering stockholder to
withdraw his Shares. Any such extension will be followed as promptly as
practicable by public announcement thereof, such announcement to be made no
later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled expiration date of the Offer. During any such extension,
all Shares previously tendered and not withdrawn will remain subject to the
Offer, subject to the rights of a tendering stockholder to withdraw such
stockholder's Shares.

Upon the terms and subject to the conditions of the Offer
(including, if the Offer is extended or amended, the terms and conditions of
any extension or amendment), the Purchaser will purchase by accepting for
payment and pay for the Minimum Number of Shares validly tendered prior to
the Expiration Date (as defined in the Offer to Purchase) and not withdrawn
in accordance with Section 4 of the Offer to Purchase promptly after the
later to occur of (i) the Expiration Date and (ii) the satisfaction or waiver
of the conditions to the Offer. If more than the Minimum Number of Shares are
validly tendered and not withdrawn prior to the Expiration Date, the
Purchaser will, upon the terms and subject to the conditions of the Offer,
accept such Shares for payment on a pro rata basis, with adjustments to avoid
purchases of fractional Shares. Because of the difficulty of determining the
precise number of Shares validly tendered and not withdrawn, if proration is
required, the Purchaser would not expect to announce the final proration
factor until approximately six New York Stock Exchange trading days after the
Expiration Date. Preliminary results of proration will be announced by press
release as promptly as practicable after the Expiration Date. Holders of
Shares may obtain such preliminary information from MacKenzie Partners, Inc.
(the "Information Agent"), and may also be able to obtain such preliminary
information from their brokers. The Purchaser will not pay for any Shares
accepted for payment pursuant to the Offer until the final proration factor is
known.

For purposes of the Offer, the Purchaser will be deemed to have
accepted for payment, and thereby purchased, Shares validly tendered and not
properly withdrawn if, as and when the Purchaser gives oral or written notice
to the Depositary of the Purchaser's acceptance of such Shares for payment
pursuant to the Offer. Payment for Shares accepted for payment pursuant to
the Offer will be made by deposit of the purchase price therefor with the
Depositary, which will act as agent for tendering stockholders for the
purpose of receiving payments from the Purchaser and transmitting such
payments to tendering stockholders whose Shares have been accepted for
payment. Under no circumstances will interest on the purchase price for
Shares be paid by the Purchaser, regardless of any delay in making such
payment. In all cases, payment for Shares tendered and accepted for payment
pursuant to the Offer will be made only after timely receipt by the
Depositary of (i) the certificates evidencing such Shares (the "Share
Certificates"), or timely confirmation of a book-entry transfer of such
Shares into the Depositary's account at one of the Book-Entry Transfer
Facilities (as defined in Section 2 of the Offer to Purchase) pursuant to the
procedures set forth in Section 3 of the Offer to Purchase, (ii) the Letter
of Transmittal (or a facsimile thereof), properly completed and duly executed,
with any required signature guarantees or an Agent's Message (as defined in
Section 2 of the Offer to purchase) and (iii) any other documents required by
the Letter of Transmittal.

Facility pursuant to the procedure set forth in Section 3 of the Offer to
Purchase, such Shares will be credited to an account maintained at such
Book-Entry Transfer Facility), as promptly as practicable following the
expiration or termination of the Offer.

Tenders of Shares made pursuant to the Offer are irrevocable except
that such Shares may be withdrawn at any time prior to Tuesday, January 2,
1996, and, unless theretofore accepted for payment by the Purchaser pursuant
to the Offer, may also be withdrawn at any time after Thursday, February 1,
1996, or at such later time as may apply if the Offer is extended. If the
Purchaser extends the Offer, is delayed in its acceptance for payment of
Shares or is unable to accept Shares for payment pursuant to the Offer for
any reason, then, without prejudice to the Purchaser's rights under the
Offer, the Depositary may, nevertheless, on behalf of the Purchaser, retain
tendered Shares, and such Shares may not be withdrawn except to the extent
that tendering stockholders are entitled to withdrawal rights as described in
Section 4 of the Offer to Purchase. Any such delay will be by an extension of
the Offer to the extent required by law. For a withdrawal to be effective, a
written, telegraphic or facsimile transmission notice of withdrawal must be
timely received by the Depositary at one of its addresses set forth on the back
cover of the Offer to Purchase. Any such notice of withdrawal must specify the
name of the person who tendered the Shares to be withdrawn, the number of
Shares to be withdrawn and the name of the registered holder of such Shares, if
different from that of the person who tendered such Shares.
If Share Certificates evidencing Shares to be withdrawn have been delivered
or otherwise identified to the Depositary, then, prior to the physical
release of such Share Certificates, the serial numbers shown on such Share
Certificates must be submitted to the Depositary and the signature(s) on the
notice of withdrawal must be guaranteed by an Eligible Institution (as
defined in Section 3 of the Offer to Purchase), unless such Shares have been
tendered for the account of an Eligible Institution. If Shares have been
tendered pursuant to the procedure for book-entry transfer as set forth in
Section 3 of the Offer to Purchase, any notice of withdrawal must also
specify the name and number of the account at the Book-Entry Transfer
Facility to be credited with the withdrawn Shares. All questions as to the
form and validity (including time of receipt) of notices of withdrawal will
be determined by the Purchaser, in its sole discretion, whose determination
will be final and binding.

The information required to be disclosed by Rule 14d-6(e)(1)(vii)
of the General Rules and Regulations under the Securities Exchange Act of
1934, as amended, is contained in the Offer to Purchase and is incorporated
herein by reference.

The Company has provided the Purchaser with the Company's
stockholder list and security position listings for the purpose of
disseminating the Offer to holders of Shares. The Offer to Purchase and the
related Letter of Transmittal will be mailed to record holders of Shares
whose names appear on the Company's stockholder list and will be furnished
for subsequent transmittal to beneficial owners of Shares, to brokers,
dealers, commercial banks, trust companies and similar persons whose names,
or the names of whose nominees, appear on the stockholder list or, if
applicable, who are listed as participants in a clearing agency's security
position listing.

The Offer to Purchase and the related Letter of Transmittal contain
important information which should be read carefully before any decision is
made with respect to the Offer.

Questions and requests for assistance or for additional copies of
the Offer to Purchase, the Letter of Transmittal or other tender offer
materials may be directed to the Information Agent at its address and
telephone number as set forth below, and copies will be furnished promptly at
the Purchaser's expense. No fees or commissions will be paid to brokers,
dealers or other persons (other than the Dealer Manager) for soliciting
tenders of Shares pursuant to the Offer.

The Information Agent for the Offer is:

MACKENZIE
PARTNERS, INC.

156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
Call Toll-Free (800) 322-2885

The Dealer Manager for the Offer is:

Donaldson, Lufkin & Jenrette
Securities Corporation
140 Broadway
New York, New York 10005
(310) 282-5065 (call collect)
or
Call Toll-Free (800) 237-5022

December 4, 1995

Exhibit 99.(b)(1)

November 16, 1995

Rite Aid Corporation
P.O. Box 3165
Harrisburg, PA 17105

Attention: Mr. Frank Bergonzi,
Executive Vice President-
Chief Financial Officer

Ladies and Gentlemen:

We understand that Rite Aid Corporation (the
"Borrower") intends to acquire certain assets (the "Transac-
tion") of Target (the "Seller"). A portion of the financing
for such acquisition would be effected by a syndicated loan
financing. You have requested J.P. Morgan Securities Inc.
("JPMSI"), to arrange financing in the syndicated bank
market the amount of $2,500,000,000 for the Borrower in
connection with the Transaction (the "Proposed Financing").

In response to your request in connection with
the Transaction, please be advised that we are highly confi-
dent that (a) the aggregate amount of the Proposed Financing
can be raised by the Borrower and (b) in the event that the
stockholders of the Borrower do not approve the proposed
issuance of additional common stock of the Borrower contem-
plated in the Transaction, an aggregate amount of up to
$3,000,000,000 can be raised by the Borrower in the syndi-
cated bank market. The foregoing is based upon our knowl-
edge and experience in the loan syndication market and
subject to the assumptions set forth below.

Our view is based on and subject to, among other
factors, (i) our consideration of the information the Bor-
rower has supplied to us to date (without any independent
investigation); (ii) the absence of adverse changes in the
relevant markets or in the regulatory environment that in
our judgment is likely to materially and adversely affect
the syndication of the Proposed Financing; it being under-
stood that there can be no assurance that such markets or
regulatory environment will not so change in the future;
(iii) our present understanding of the terms upon which the

Rite Aid Corporation
November 16, 1995
Page 2

Borrower intends to effect the Transaction; (iv) representa-
tions by the Borrower to us of its willingness to cooperate
with us in structuring an appropriate credit facility, in
particular if it should become necessary to raise
$3,000,000,000 in financing; (v) the absence of any domestic
or international event, act or occurrence which materially
disrupts the relevant markets; it being understood that
there can be no assurance that any such disruption will not
occur in the future; (vi) our current understanding of the
proposed capital structure of the Borrower after giving
effect to any financing referred to herein; (vii) the ab-
sence of material adverse changes in the financial condi-
tion, business, assets, results of operations, or prospects
of the Borrower or the Seller and (viii) any necessary
actions by or restrictions of federal, state, or other
governmental agencies or regulatory authorities in connec-
tion with the Transaction.

Please be advised that this letter is not a
commitment to obtain financing for the Transaction and
creates no obligation on our part in connection therewith.

This letter is intended solely for the use of
the Borrower and not any other person and may not be used or
relied upon by, or disclosed, referred to or communicated by
you (in whole or in part) to any third party for any purpose
whatsoever (except to your professional advisors, the Seller
and its professional advisors for their purposes in evaluat-
ing the Borrower's bid and as may otherwise be required by
law in the opinion of your counsel) except with our prior
written permission.

We look forward to working with you on this
transaction.

Sincerely,

J.P. MORGAN SECURITIES INC.

By: /s/ Stephen Kenneally
------------------------
Name: Stephen Kenneally
Title: Vice President

Exhibit 99.(b)(2)

November 24, 1995

Mr. Frank Bergonzi
Executive Vice President & CFO
Rite Aid Corporation
P.O. Box 3165
Harrisburg, PA 17105

Dear Mr. Bergonzi:

You have advised us that Rite Aid Corporation ("Rite
Aid" or the "Company") proposes to establish a syndicated credit
facility in an amount of approximately $2,500,000,000 of senior bank
financing for the purposes of: (i) the acquisition of Revco D.S.,
Inc. ("Revco"); (ii) the refinancing of certain existing debt of the
Company; and (iii) working capital and general corporate purposes.

In connection with this transaction, J.P. Morgan Securi-
ties Inc. ("JPMSI") and Morgan Guaranty Trust Company of New York
("Morgan") are pleased to propose a five-year revolving credit
facility of up to $2,500,000,000 (the "Revolver") based on the terms
and conditions described in the attached Summary of Terms and
Conditions (the "Term Sheet"). This letter and the attached Term
Sheet are also referred to as the Commitment Letter.

Morgan is pleased to commit to provide up to
$500,000,000 of the Credit Facility based on the attached Term Sheet.

Morgan's commitment of $500,000,000 is subject to (i)
acceptance by you, as set forth in the last paragraph, by 8:00 a.m.
(New York City Time), November 30, 1995; (ii) there not having
occurred any change in or disruption of the financial or banking
markets since the date hereof that would have an adverse effect on
the syndication of the Revolver; (iii) there not having occurred a
material adverse change in the business, condition (financial or
otherwise), operations, performance, properties or prospects of (A)
the Company or the Company and its Subsidiaries, taken as a whole or
(B) Revco, in each case since the date of the most recent audited
financial statements; (iv) there not having occurred any issuance or
syndication, attempt to issue or syndicate, announcement of the
issuance or syndication of, or engagement in discussions concerning
the syndication or issuance of, any debt facility or debt security
(including renewals of existing facilities) by the Company or its
affiliates, (v) the negotiation, execution and delivery of mutually
acceptable definitive loan documentation (to be prepared by Morgan's
counsel, Davis Polk & Wardwell) by January 31, 1996; and (vi) the
other conditions set forth in the attached Term Sheet.

Mr. Frank Bergonzi
November 24, 1995
Page 2

It is JPMSI's intention to syndicate the Revolver to a
group of financial institutions (the "Banks") acceptable to Morgan
and the Company. The Company will not withhold its approval of any
financial institution of recognized standing which customarily
participates in credit facilities of this nature. Rite Aid agrees
to provide such assistance in the syndication effort as may be
reasonably requested, including making members of management of the
Company and its subsidiaries available to meet with prospective
syndicate members, and assisting JPMSI in the preparation of the
financing memorandum. It is our expectation that the general
syndication will be launched as soon as possible after the date of
your acceptance of this commitment.

By signing below, Rite Aid acknowledges its obligation
to pay Morgan and JPMSI the fees set forth in the letter dated
November 24, 1995 (the "Fee Letter") among Rite Aid, Morgan and
JPMSI.

By signing below, Rite Aid represents and warrants that
all information that has been or will be provided to Morgan or JPMSI
is true in all material respects and does not contain any untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements therein not misleading
and, in the case of financial projections so provided, have been
prepared in good faith based on reasonable assumptions (it being
understood that such projections are subject to significant
uncertainties and contingencies, many of which are beyond the
Company's control, and that no assurance can be given that the
projections will be realized). You agree to supplement the
information and projections from time to time so that the represen-
tations and warranties contained in this paragraph remain correct.

In addition, by signing below, Rite Aid agrees to
indemnify and defend Morgan and JPMSI and each other Bank, their
respective affiliates and the directors, officers, agents, and
employees of the foregoing from, and hold each of them harmless
against, any and all losses, liabilities, claims, damages or
reasonable expenses arising out of or by reason of any investiga-
tion, litigation or other proceeding brought or threatened relating
to any loan made or proposed to be made in connection with the
matters herein referred to (including, but without limitation, any
use made or proposed to be made by Rite Aid or any of its affiliates
of the proceeds of such loans, but excluding any such losses,
liabilities, claims damages or expenses incurred by reason of the
gross negligence or willful misconduct of the indemnitee) including,
without limitation, amounts paid in settlement, court costs, and
reasonable fees and disbursements of counsel incurred in connection
with any such pending or threatened investigation, litigation or
other proceeding.

This letter is intended to be solely for the benefit of
the parties hereto and is not intended to confer, and shall not be
deemed to confer, any benefits upon, or create any rights in or in
favor of, any person other than the parties hereto, except as
provided in the immediately preceding paragraph.

Mr. Frank Bergonzi
November 24, 1995
Page 3

If you accept and agree to this proposal, please so
indicate by signing in the space provided below and returning a copy
of this letter to us. This offer will expire 8:00 a.m. (New York
City Time), November 30, 1995, if this letter and the Fee Letter
have not been accepted by you by that time.

Neither this letter nor its contents may be disclosed to
any person other than the officers and directors of Rite Aid and the
professional advisors to Rite Aid in connection with the proposed
acquisition unless either (i) this letter and the Fee Letter shall
have been accepted by Rite Aid as set forth in the preceding para-
graph prior to such disclosure or (ii) Morgan and JPMSI have
otherwise consented in writing. Any disclosure by Rite Aid not
permitted by the preceding sentence shall constitute the agreement
of Rite Aid to pay the commitment letter fee contemplated by the Fee
Letter.

Very truly yours,

MORGAN GUARANTY TRUST COMPANY J.P. MORGAN SECURITIES INC.
OF NEW YORK

By: /s/ James E. Condon By: /s/ Stephen J. Kenneally
---------------------- ---------------------------
Name: James E. Condon Name: Stephen J. Kenneally
Title: Vice President Title: Vice President

Accept and Agreed to this
29 day of November 1995

RITE AID CORPORATION

By: /s/Frank M. Bergonzi
---------------------------
Name: Frank M. Bergonzi
Title: Executive VP and CFO

Term Sheet
Borrower: Rite Aid Corporation ("Rite Aid").

Amount: $2,500,000,000.

Purpose: Finance the acquisition (the "Acquisition") of
Big Fish (the "Target"), refinance existing Target bank
debt, refinance existing Rite Aid bank debt, refinance
Target 9.125% and 10.125% senior notes, refinance Rite
Aid convertible debentures, and general corporate
purposes.

Agent: Morgan Guaranty Trust Company of New York ("Morgan").

Lenders: Syndicate of lenders acceptable to Rite Aid and Morgan
("the Banks").

Facility Description: Reducing revolving credit facility.

Final Maturity: December, 2000.

Amortization: The Facility shall reduce to $1,500,000,000 two years
after the date of consummation of the Tender Offer
referred to below (the "Tender Offer Closing Date").

Arranger: J.P. Morgan Securities Inc.

Availability: Drawings may be made at any time up to but excluding
the Final Maturity.

Mandatory Commitment
Reduction: All net proceeds from debt issues with a maturity
greater than one year and all net proceeds from any
equity issues until such time as the aggregate
commitments have been reduced to $1,500,000,000.

Borrowing Options: Adjusted LIBOR, Adjusted CD, Base Rate and Money
Market Bid.

LIBOR and CD will be adjusted for reserves and other
regulatory requirements, if any.

Base Rate means the higher of Morgan's prime rate or the
federal funds rate + 0.50%.

Money Market Option
Description: The Borrower may request the Agent to solicit
competitive bids from the Banks at a margin over LIBOR
or at an absolute rate. Each Bank will bid at its own
discretion for amounts up to the total amount of
commitments and the Borrower will be under no obligation
to accept any of the bids. Any Money Market advances
made by a Bank shall be deemed usage of the facility for
the purpose of fees and availability. However, each

Bank's advance shall not reduce such Bank's obligation
to lend its pro rata share of the remaining undrawn
commitment.

Bid Selection Mechanism: The Borrower will determine
the aggregate amount of bids, if any, it will accept.
Bids will be accepted in order of the lowest to the
highest rates ("Bid Rates"). If two or more Banks bid
at the same Bid Rate and the amount of such bids
accepted is less than the aggregate amount of such bids,
then the amount to be borrowed at such Bid Rate will be
allocated among such Banks in proportion to the amount
for which each Bank bid at such Bid Rate. If the bids
are either unacceptably high to the Borrower or are
insufficient in amount, the Borrower may cancel the
auction.

Pricing: Pricing on the commitments and loans will be at the
rates per annum, varying commensurate with credit
quality, set forth in the attached Pricing Grid. If S&P
and Moody's ratings are more than one notch different,
an average rating will apply.

Margins: See attached Pricing Grid.

Facility Fee: A per annum fee calculated on a 360 day
basis payable on each Bank's commitment
irrespective of usage, quarterly in
arrears and on termination of a Bank's
Commitment. See attached Pricing Grid.

Participation
Fee: An upfront participation fee determined
by each bank's commitment amount and
payable on each bank's aggregate commit-
ment.

Commitment Level Fee
---------------- ---
$500,000,000
$200,000,000 (to be determined)
$150,000,000
$100,000,000
$50,000,000 to $75,000,000

Pricing will be set at Level III until Rite Aid's senior
unsecured long-term debt ratings are affirmed by S&P and
Moody's. If

S&P or Moody's has not
affirmed Rite Aid's rating by June 30,
1996, pricing will be set at Level IV.

Reference Lenders: Morgan and two other banks
representative of the syndicate.

Interest Payments: At the end of each applicable Interest
Period or quarterly, if earlier.

Interest Periods: Syndicated Borrowing:
---------------------

Base Rate - 30 days.

Adjusted LIBOR Loans - 1, 2, 3, or 6
months.

Adjusted CD Loans - 30, 60, 90, or 180
days.

Non-Syndicated Borrowings:
--------------------------

Money Market LIBOR Loans - minimum 1
month.

Money Market Absolute Rate Loan - minimum
14 days.

Drawdowns: Minimum amounts of $10 million with
additional increments of $1 million.
Drawdowns are at the Borrower's option
with same day notice for Base Rate Loans,
one business day's notice for Money
Market Absolute Rate Loans, one business
day's notice for Adjusted CD Loans, three
business days' notice for Adjusted LIBOR
Loans, and five business days' notice for
Money Market LIBOR Loans.

Optional Prepayments: Base Rate Loans, Adjusted LIBOR, and
Adjusted CD may be prepaid at any time on
three business days' notice. Money Market
Loans may not be prepaid before the end
of an Interest Period.

Termination or Reduction
of Commitments: The Borrower may terminate unused
commitments in amounts of at least $25
million at any time on three business
days notice.

Representations and Warranties: With respect to the Borrower and its
Consolidated or Significant
Subsidiaries, as appropriate, including
but not limited to:

1. Corporate existence.

2. Corporate and governmental
authorization; no contravention;
binding effect.

3. Financial information.

4. No material adverse change.

5. Full disclosure.

6. No material litigation.

7. Compliance with laws, including ERISA.

8. Payment of taxes.

9. Existence, incorporation, etc. of
subsidiaries.

10. Environmental matters.

11. Accuracy of both the Borrower's and
the Target's representations and
warranties contained in the Merger
Agreement at signing and at date of
initial borrowing.

Conditions to Initial Borrowing: Conditions precedent to the initial
borrowing under the Facility will include
(without limitation):

1. The Borrower and the Target shall have
entered into a Merger Agreement in
form and substance satisfactory to the
Lenders providing for the Acquisition
to be effected by a cash tender offer
(the "Tender Offer") for 51% of the
Target's common stock and a subsequent
merger (the "Merger") in which common
stock of the Borrower will be issued
to the Target's stockholders.

2. Terms and conditions of the Tender

Offer shall be in form and substance
satisfactory to the Lenders
(including, without limitation,
conditions that (i) any "poison pill"
of the Target be redeemed or otherwise
rendered inapplicable to the Tender
Offer, (ii) Section 203 of the
Delaware General Corporation Law not
prevent the Merger from being
consummated within 180 days after the
Tender Offer Closing Date and (iii)
the Purchases shall own and control
the number of shares of the Target's
common stock as shall be necessary to
approve the Merger without the
affirmative vote or approval of any
other shareholders); the conditions to
the consummation of the Tender Offer
shall have been satisfied and shall
not have been waived (for which
purpose conditions must be fulfilled
to the satisfaction of the Lenders in
their reasonable determination); and
tendered shares shall have been
accepted for payment pursuant to the
Tender Offer in accordance with the
terms of the Tender Offer.

3. There shall have been accepted for
payment pursuant to the Tender Offer
sufficient shares of the Target for
the Borrower to be able to effect the
consummation of the Merger without the
affirmative vote of any other
shareholder(s) of the Target.

4. The Lenders' satisfaction that all
other necessary licenses, permits and
governmental and third-party filings,
consents and approvals for the
Acquisition and the Merger have been
obtained and remain in full force and
effect.

5. The Tender Offer and the financing
thereof shall be in compliance with
all laws and regulations (including,
without limitation, the margin
regulations).

6. Cancellation of the $250 million and
$350 million Credit Agreements dated

as of February 7, 1994.

Conditions to Each Borrowing: Customary in Credit Agreements of this
nature, including but not limited to:

1. Absence of Default.

2. Accuracy of representations and
warranties.

3. Negotiation and execution of
satisfactory closing documentation.

Covenants: Customary in Credit Agreements of this
nature, including but not limited to:

1. Information.

2. Payment of obligations.

3. Maintenance of property; insurance
coverage.

4. Conduct of business; maintenance of
existence.

5. Compliance with laws.

6. Inspection of property, books, and
records.

7. Restriction on debt of subsidiaries.

8. Restriction on sales with leases back.

9. Negative pledge (including subsidiary
stock and assets) with customary
exceptions and a basket of 5% of
consolidated net tangible assets.

10. Total borrowed funds shall not
exceed $3.0 billion before January 1,
1997.

11. EBIT plus Rent to Interest Expense
plus Rent

Fiscal Year Level
1996 1.65
1997 1.65

1998 1.75
1999 1.85
2000 1.85

12. Total Borrowed Funds, as a percent of
total capital

Fiscal year-end Level
1996 64%
1997 61%
1998 58%
1999 50%
2000 50%

13. Limitation on minority investments.

14. Consolidations, mergers and sale of
assets.

15. Use of proceeds.

Events of Default: Customary in Credit Agreements of this
nature, including but not limited to:

1. Failure to pay principal under the
Credit Agreement when due. Failure
to pay interest, fees or other
amounts within 5 days of when due.

2. Failure to meet covenants (with
grace periods, where appropriate).

3. Representations or warranties false
in any material respect when made.

4. Cross default to other debt of the
Borrower and its subsidiaries in
excess of $25 million (in aggregate)
which is triggered by (i) failure to
pay when due (including any
applicable grace period) or (ii) an
event which results in

acceleration of, or with the giving
of notice or lapse of time or both
would enable the holder to accelerate
the maturity of its debt.

5. Change of ownership or control.

6. Other usual defaults with respect to
the Borrower and Subsidiaries,

including but not limited to
insolvency, bankruptcy, ERISA, and
judgment defaults.
Increased Costs/
Change of Circumstances: The credit agreement will contain
customary provisions protecting the Banks
in the event of unavailability of
funding, illegality, increased costs and
funding losses (including funding losses
incurred as a result of prepayment of
Adjusted CD and Adjusted LIBOR loans).

Capital adequacy compensation will be
required only with respect to capital
requirements adopted after the date
hereof.

Indemnification: The Borrower will indemnify the Banks
against all losses, liabilities, claims,
damages, or expenses relating to their
loans, the Borrower's use of loan
proceeds or the commitments, including
but not limited to reasonable attorneys'
fees and settlement costs (except such as
result from the indemnitee's gross
negligence or willful misconduct).

Transfers and
Participations: Banks will have the right to transfer or
sell participations in their loans or
commitments with the transferability of
voting rights limited to changes in
principal, rate, fees and term.
Assignments will be allowed with the
consent of the Borrower, such consent not
to be unreasonably withheld. Assignment
to a Bank's affiliate or a Federal
Reserve Bank is allowed without the
consent of the Borrower.

Expenses: Borrower will pay all legal and other
reasonable out-of-pocket expenses of the
Agent related to this transaction and any
subsequent amendments or waivers,
including the reasonable fees and
expenses of Davis Polk & Wardwell,
special counsel to the Agent.

Governing Law: State of New York.

Rite Aid Corporation

Pricing Grid
(basis points per annum)

<TABLE>
<CAPTION>
Pricing Level Level I Level II Level III Level IV Level V

Basic for Pricing: If the Borrower's If the Borrower's If the If the If no other
senior unsecured senior unsecured Borrower's Borrower's level applies
long-term debt is long-term debt senior unsecured senior unsecured
rated A- or higher is rated BBB+ by long-term debt long-term debt
by S&P and A3 or S&P or Baa1 by is rated BBB by is rated BBB- by
higher by Moody's S&P or Baa2 by S&P or Baa3 by
Moody's Moody's Moody's
<S> <C> <C> <C> <C> <C>
Facility Fee 9.00 10.00 13.50 18.75 25.00

LIBOR Spread 18.50 27.50 29.00 31.25 45.00

CD Spread 31.00 40.00 41.50 43.75 57.50

"Used"Cost 27.50 37.50 42.50 50.00 70.00
</TABLE>

Notes:

1. Pricing will be set at Level III until Rite Aid's senior unsecured
long-term debt ratings are affirmed by S&P and Moody's.
2. If S&P or Moody's has not affirmed Rite Aid's rating by June 30, 1996,
pricing will be set at Level IV.
3. If S&P and Moody's ratings are more than one notch different,
an average rating will apply.

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

RITE AID CORPORATION

OCEAN ACQUISITION CORPORATION

AND

REVCO D.S., INC.

DATED AS OF

NOVEMBER 29, 1995

TABLE OF CONTENTS
Page

ARTICLE I THE OFFER AND MERGER . . . . . . . . . . . . 2
Section 1.1 The Offer . . . . . . . . . . . . . . . . . 2
Section 1.2 Company Actions . . . . . . . . . . . . . . 4
Section 1.3 The Merger. . . . . . . . . . . . . . . . . 7
Section 1.4 Effective Time . . . . . . . . . . . . . . . 8
Section 1.5 Closing . . . . . . . . . . . . . . . . . . 8
Section 1.6 Directors and Officers . . . . . . . . . . . 8
Section 1.7 Stockholders' Meetings . . . . . . . . . . . 10

ARTICLE II CONVERSION OF SHARES . . . . . . . . . . . . 11
Section 2.1 Conversion of Shares . . . . . . . . . . . . 11
Section 2.2 Alternative Consideration and Additional
Consideration . . . . . . . . . . . . . . . 13
Section 2.3 Issuance of Parent Common Stock or Payment of
Cash Consideration . . . . . . . . . . . . . 15
Section 2.4 Treatment of Stock Options . . . . . . . . . 18
Section 2.5 Stock Transfer Books . . . . . . . . . . . . 20
Section 2.6 Dissenting Shares . . . . . . . . . . . . . 20

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY 20
Section 3.1 Organization . . . . . . . . . . . . . . . . 20
Section 3.2 Capitalization . . . . . . . . . . . . . . . 22
Section 3.3 Corporate Authorization; Validity of
Agreement; Company Action . . . . . . . . . 24
Section 3.4 Consents and Approvals; No Violations . . . 25
Section 3.5 SEC Reports and Financial Statements . . . . 26
Section 3.6 Absence of Certain Changes . . . . . . . . . 27
Section 3.7 No Undisclosed Liabilities . . . . . . . . . 27
Section 3.8 Information in Proxy Statement/Prospectus. . 28
Section 3.9 Employee Benefit Plans; ERISA . . . . . . . 28
Section 3.10 Litigation . . . . . . . . . . . . . . . . . 32
Section 3.11 No Default. . . . . . . . . . . . . . . . . 32
Section 3.12 Taxes . . . . . . . . . . . . . . . . . . . 33
Section 3.13 Contracts . . . . . . . . . . . . . . . . . 35
Section 3.14 Assets; Real Property . . . . . . . . . . . 35
Section 3.15 Environmental Matters. . . . . . . . . . . . 36
Section 3.16 Reimbursement . . . . . . . . . . . . . . . 37
Section 3.17 Labor Relations . . . . . . . . . . . . . . 37
Section 3.18 Insurance . . . . . . . . . . . . . . . . . 37
Section 3.19 Transactions with Affiliates. . . . . . . . 38
Section 3.20 Compliance with Law . . . . . . . . . . . . 38
Section 3.21 Vote Required . . . . . . . . . . . . . . . 38

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND
SUB . . . . . . . . . . . . . . . . . . . . 38
Section 4.1 Organization . . . . . . . . . . . . . . . . 38
Section 4.2 Capitalization . . . . . . . . . . . . . . . 39
Section 4.3 Corporate Authorization; Validity of
Agreement; Necessary Action . . . . . . . . 40
Section 4.4 Consents and Approvals; No Violations . . . 41

Page

Section 4.5 SEC Reports and Financial Statements . . . . 42
Section 4.6 Absence of Certain Changes . . . . . . . . . 43
Section 4.7 No Undisclosed Liabilities. . . . . . . . . 43
Section 4.8 Information in Proxy Statement/Prospectus. . 43
Section 4.9 Litigation . . . . . . . . . . . . . . . . . 44
Section 4.10 Taxes. . . . . . . . . . . . . . . . . . . . 44
Section 4.11 Compliance with Law . . . . . . . . . . . . 46
Section 4.12 No Default . . . . . . . . . . . . . . . . . 46
Section 4.13 Financing. . . . . . . . . . . . . . . . . . 47
Section 4.14 Opinion of Financial Advisor. . . . . . . . 47

ARTICLE V COVENANTS . . . . . . . . . . . . . . . . . 47
Section 5.1 Interim Operations of the Company . . . . . 47
Section 5.2 Treatment of Certain Indebtedness . . . . . 51
Section 5.3 Access to Information . . . . . . . . . . . 52
Section 5.4 Consents and Approvals . . . . . . . . . . . 53
Section 5.5 Employee Benefits . . . . . . . . . . . . . 54
Section 5.6 No Solicitation . . . . . . . . . . . . . . 58
Section 5.7 Additional Agreements . . . . . . . . . . . 60
Section 5.8 Publicity . . . . . . . . . . . . . . . . . 60
Section 5.9 Notification of Certain Matters . . . . . . 60
Section 5.10 Directors' and Officers' Insurance and Indem-
nification . . . . . . . . . . . . . . . . . 61
Section 5.11 Rule 145 Affiliates . . . . . . . . . . . . 62
Section 5.12 Cooperation . . . . . . . . . . . . . . . . 62
Section 5.13 Proxy Statement/Prospectus . . . . . . . . . 63
Section 5.14 New York State Real Property Transfer and
Gains Taxes. . . . . . . . . . . . . . . . 64
Section 5.15 Confidentiality/Standstill Agreement. . . . 64
Section 5.16 Stock Exchange Listing. . . . . . . . . . . 64

ARTICLE VI CONDITIONS . . . . . . . . . . . . . . . . . 65
Section 6.1 Conditions to the Obligations of Each Party 65

ARTICLE VII TERMINATION . . . . . . . . . . . . . . . . 65
Section 7.1 Termination . . . . . . . . . . . . . . . . 65
Section 7.2 Effect of Termination . . . . . . . . . . . 68
Section 7.3 Termination Fee . . . . . . . . . . . . . . 69

ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . . . 69
Section 8.1 Fees and Expenses . . . . . . . . . . . . . 69
Section 8.2 Finders' Fees . . . . . . . . . . . . . . . 70
Section 8.3 Amendment and Modification. . . . . . . . . 70
Section 8.4 Nonsurvival of Representations and Warranties 70
Section 8.5 Notices . . . . . . . . . . . . . . . . . . 71
Section 8.6 Interpretation . . . . . . . . . . . . . . . 72
Section 8.7 Counterparts . . . . . . . . . . . . . . . . 72
Section 8.8 Entire Agreement; No Third Party Beneficia-
ries; Rights of Ownership . . . . . . . . . 72

Section 8.9 Severability . . . . . . . . . . . . . . . . 73
Section 8.10 Specific Performance. . . . . . . . . . . . 73

Page

Section 8.11 Governing Law. . . . . . . . . . . . . . . . 73
Section 8.12 Assignment . . . . . . . . . . . . . . . . . 73
Section 8.13 Joint and Several Liability . . . . . . . . 73

Exhibits
Annexes

iii

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER, dated as of November 29, 1995, by and
among Rite Aid Corporation, a Delaware corporation ("Parent"), Ocean Acquisition
Corporation, a Delaware corporation and a wholly owned subsidiary of Parent
("Sub"), and Revco D.S., Inc., a Delaware corporation (the "Company").

WHEREAS, the Boards of Directors of Parent, Sub and the Company have
approved, and deem it advisable and in the best interests of their respective
stockholders to consummate, the acquisition of the Company by Parent upon the
terms and subject to the conditions set forth herein;

WHEREAS, it is intended that the acquisition be accomplished by Sub
commencing a cash tender offer for Shares (as defined in Section 1.1) to be
followed by a merger of Sub with and into the Company (the "Merger"), with the
Company being the surviving corporation;

WHEREAS, as a condition and inducement to Parent and Sub entering into
this Agreement and incurring the obligations set forth herein, concurrently with
the execution and delivery of this Agreement, Parent is entering into a
Stockholder Agreement with Zell/Chilmark Fund, L.P. in the form of Exhibit A
hereto (the "Zell/Chilmark Stockholder Agreement"), pursuant to which, among
other things, such stockholder has agreed to vote the Shares then owned by such
stockholder in favor of the Merger provided for herein;

WHEREAS, as a condition and inducement to Parent and Sub entering into
this Agreement and incurring the obligations set forth herein, concurrently with
the execution and delivery of this Agreement, Parent and the Company are
entering into a Stock Option Agreement in the form of Exhibit B hereto (the
"Stock Option Agreement"), pursuant to which, among other things, the Company
has granted Parent the right to purchase Shares representing 19.9% of the
outstanding Shares at the date of exercise under certain circumstances;

WHEREAS, the Board of Directors of the Company has approved the
transactions contemplated by this Agreement, the Zell/Chilmark Stockholder
Agreement and the Stock Option Agreement in accordance with the provisions of
Section 203 of the Delaware General Corporation Law (the "DGCL") and has
resolved to recommend the acceptance

of the Offer (as defined in Section 1.1) and the approval of the Merger by the
holders of Shares; and

NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Zell/Chilmark Stockholder Agreement and the Stock Option Agreement, the
parties hereto agree as follows:

ARTICLE I

THE OFFER AND MERGER

Section 1.1 The Offer. (a) As promptly as practicable (but in no
event later than five business days after the public announcement of the

execution hereof), Sub shall commence (within the meaning of Rule 14d-2 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) an offer
(the "Offer") to purchase for cash not less than 35,144,833 shares and up to all
of the issued and outstanding common stock, par value $.01 per share (referred
to herein as either the "Shares" or "Company Common Stock"), of the Company at a
price of $27.50 per Share, net to the seller in cash (such price, or such higher
price per Share as may be paid in the Offer, being referred to herein as the
"Offer Price"), the exact number of Shares within such range to be determined by
Parent in its sole discretion, it being hereby agreed that Parent may change the
amount of Shares sought to be purchased in the Offer within such range at any
time prior to consummation of the Offer, provided that Parent complies with the
requirements of Rule 14e-1 of the Exchange Act. The Offer shall be subject to
there being validly tendered and not withdrawn prior to the expiration of the
Offer, at least 35,144,833 Shares or such other number of Shares as shall equal
50.1% of the Shares outstanding on a fully-diluted basis as of the expiration of
the Offer (the "Minimum Condition") and to the other conditions set forth in
Annex A hereto. Sub shall, on the terms and subject to the prior satisfaction
or waiver of the conditions of the Offer, accept for payment and pay for Shares
tendered as soon as practicable after the later of the satisfaction of the
conditions to the Offer and the expiration of the Offer; provided, however, that
no such payment shall be made until after any calculation of proration as
required by applicable

law. The obligations of Sub to commence the Offer and to accept for payment and
to pay for any Shares validly tendered on or prior to the expiration of the
Offer and not withdrawn shall be subject only to the conditions set forth in
Annex A hereto. The Offer shall be made by means of an offer to purchase (the
"Offer to Purchase") containing the terms set forth in this Agreement and the
conditions set forth in Annex A hereto. Without the written consent of the
Company, Sub shall not amend or waive the Minimum Condition, decrease the Offer
Price, change the number of Shares sought to an amount less than 50.1% of the
outstanding Shares on a fully-diluted basis, change the form of consideration to
be paid pursuant to the Offer or impose conditions to the Offer in addition to
those set forth in Annex A hereto, or amend any other term or condition of the
Offer in any manner which is adverse to the holders of Shares; provided,
however, that if on the initial scheduled expiration date of the Offer (as it
may be extended in accordance with the terms hereof), all conditions to the
Offer shall not have been satisfied or waived, the Offer may be extended from
time to time without the consent of the Company for such period of time as is
reasonably expected to be necessary to satisfy the unsatisfied conditions. In
addition, the Offer Price may be increased and the Offer may be extended to
the extent required by law in connection with such increase in each case without
the consent of the Company.

(b) Parent and Sub shall file with the United States Securities and
Exchange Commission (the "SEC") as soon as practicable on the date the Offer is
commenced, a Tender Offer Statement on Schedule 14D-1 with respect to the Offer
(together with all amendments and supplements thereto and including the exhibits
thereto, the "Schedule 14D-1") which will include, as exhibits, the Offer to
Purchase and a form of letter of transmittal and summary advertisement
(collectively, together with the Schedule 14D-1 and any amendments and supple-
ments thereto, the "Offer Documents"). Parent and Sub represent that the Offer

Documents will comply in all material respects with the provisions of applicable
federal securities laws and, on the date filed with the SEC and on the date
first published, sent or given to the Company's stockholders, will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the

circumstances under which they were made, not misleading, except that no
representation is made by Parent or Sub with respect to information supplied by
the Company in writing for inclusion in the Offer Documents. The information
supplied by the Company for inclusion in the Offer Documents will not, on the
date filed with the SEC and on the date first published, sent or given to the
Company's stockholders, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. Each of Parent and Sub further agrees to take all
steps necessary to cause the Offer Documents to be filed with the SEC and to be
disseminated to holders of Shares, in each case as and to the extent required
by applicable federal securities laws. Each of Parent and Sub, on the one hand,
and the Company, on the other hand, agrees promptly to correct any information
provided by it for use in the Offer Documents if and to the extent that it shall
have become false and misleading in any material respect, and Parent and Sub
further agree to take all steps necessary to cause the Offer Documents as so
corrected to be filed with the SEC and to be disseminated to holders of Shares,
in each case as and to the extent required by applicable federal securities
laws. The Company and its counsel shall be given the opportunity to review the
Schedule 14D-1 and the Offer Documents before they are filed with the SEC. In
addition, Parent and Sub agree to provide the Company and its counsel in writing
with any comments Parent, Sub or their counsel may receive from time to time
from the SEC or its staff with respect to the Offer Documents promptly after the
receipt of such comments. Parent and Sub will cooperate with the Company in re-
sponding to any comments received from the SEC with respect to the Offer and
amending the Offer in response to any such comments.

Section 1.2 Company Actions.

(a) The Company hereby approves of and consents to the Offer and
represents that the Board of Directors, at a meeting duly called and held, has
unanimously (with one director absent and two directors abstaining) (i)
determined that this Agreement and the transactions contemplated hereby,
including, without limitation, the Offer, the Merger, the Zell/Chilmark

Stockholder Agreement, the Stock Option Agreement and the transactions
contemplated thereby, are fair to and in the best interests of the holders of
Shares, (ii) approved this Agreement and the transactions contemplated hereby,
including, without limitation, the Offer and the Merger, and approved the
Zell/Chilmark Stockholder Agreement, the Stock Option Agreement and the
transactions contemplated thereby, such determination and approval constituting
approval thereof for purposes of Section 203 of the DGCL, and (iii) resolved
to recommend that the stockholders of the Company who desire to receive cash for

their Shares accept the Offer and tender their Shares thereunder to Sub and that
all stockholders of the Company approve and adopt this Agreement; provided,
however, that prior to the purchase by Sub of Shares pursuant to the Offer, the
Company may modify, withdraw or change such recommendation only to the extent
that the Board of Directors of the Company determines, after having received the
oral or written opinion of outside legal counsel to the Company, that the
failure to so withdraw, modify or change would result in a breach of the Board
of Directors' fiduciary duties under applicable laws.

(b) Concurrently with the commencement of the Offer, the Company
shall file with the SEC a Solicitation/Recommendation Statement on Schedule
14D-9 (together with all amendments and supplements thereto and including the
exhibits thereto, the "Schedule 14D-9") which shall contain the recommendation
referred to in clauses (i), (ii) and (iii) of Section 1.2(a) hereof; provided,
however, that the Company may modify, withdraw or change such recommendation
only to the extent that the Board of Directors of the Company determines, after
having received the oral or written opinion of outside legal counsel to the
Company, that the failure to so withdraw, modify or change would result in a
breach of the Board of Directors' fiduciary duties under applicable laws and any
such withdrawal, change or modification shall not constitute a breach of this
Agreement. The Company represents that the Schedule 14D-9 will comply in all
material respects with the provisions of applicable federal securities laws and,
on the date filed with the SEC and on the date first published, sent or given to
the Company's stockholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the

circumstances under which they were made, not misleading, except that no
representation is made by the Company with respect to information supplied by
Parent or Sub for inclusion in the Schedule 14D-9. The information supplied
by Parent and Sub for inclusion in the Schedule 14D-9 will not, on the date
filed with the SEC and on the date first published, sent or given to the
Company's stockholders, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The Company further agrees to take all steps
necessary to cause the Schedule 14D-9 to be filed with the SEC and to be
disseminated to holders of Shares, in each case as and to the extent required by
applicable federal securities laws. Each of the Company, on the one hand, and
Parent and Sub, on the other hand, agrees promptly to correct any information
provided by it for use in the Schedule 14D-9 if and to the extent that it shall
have become false and misleading in any material respect and the Company further
agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected
to be filed with the SEC and to be disseminated to holders of Shares, in each
case as and to the extent required by applicable federal securities laws.
Parent and its counsel shall be given the opportunity to review the Schedule
14D-9 before it is filed with the SEC. In addition, the Company agrees to
provide Parent, Sub and their counsel in writing with any comments the Company
or its counsel may receive from time to time from the SEC or its staff with
respect to the Schedule 14D-9 promptly after the receipt of such comments. The
Company will cooperate with Parent and Sub in responding to any comments
received from the SEC with respect to the Schedule 14D-9 and amending the

Schedule 14D-9 in response to any such comments.

(c) In connection with the Offer, if requested by Sub, the Company
will promptly furnish or cause to be furnished to Sub mailing labels, security
position listings and any available listing or computer file containing the
names and addresses of the record holders of the Shares as of a recent date, and
shall furnish Sub with such information and assistance as Sub or its agents may
reasonably request in communicating the Offer to the stockholders of the
Company. Except for such steps as are necessary to disseminate the Offer

Documents, Parent and Sub shall hold in confidence the information contained in
any of such labels and lists and the additional information referred to in the
preceding sentence, will use such information only in connection with the Offer,
and, if this Agreement is terminated, will upon request of the Company deliver
or cause to be delivered to the Company all copies of such information then in
its possession or the possession of its agents or representatives.

(d) The Board of Directors of the Company has received the written
opinion of Morgan Stanley & Co. Incorporated ("Company Financial Advisor"),
dated as of a date which is on or prior to the date of this Agreement, to the
effect that, as of such date, the consideration to be received by holders of
Shares (other than Sub and its affiliates) pursuant to the Offer and Merger,
taken together, is fair from a financial point of view to such holders (the
"Company Fairness Opinion"). The Company has delivered to Sub a copy of the
Company Fairness Opinion, together with Company Financial Advisor's autho-
rization to the inclusion of the Company Fairness Opinion in the Offer Documents
and the Proxy Statement/Prospectus (as defined in Section 1.7).

Section 1.3 The Merger. Subject to the terms and conditions of this
Agreement and in accordance with the DGCL at the Effective Time, the Company and
Sub shall consummate a merger (the "Merger") pursuant to which (i) Sub shall be
merged with and into the Company and the separate corporate existence of Sub
shall thereupon cease, and (ii) the Company shall be the successor or surviving
corporation in the Merger (the "Surviving Corporation") and shall continue to be
governed by the laws of the State of Delaware. Pursuant to the Merger, (x) the
Certificate of Incorporation of the Company, as in effect immediately prior to
the Effective Time, shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter amended as provided by law and such Certificate of
Incorporation, and (y) the Bylaws of the Company, as in effect immediately
prior to the Effective Time, shall be the By-laws of the Surviving Corporation
until thereafter amended as provided by law, the Certificate of Incorporation of
the Surviving Corporation and such By-laws. The Merger shall have the effects
set forth in the DGCL.

Section 1.4 Effective Time. (a) Parent, Sub and the Company will
cause a Certificate of Merger (the "Certificate of Merger") with respect to the
Merger to be executed and filed on the date of the Closing (as defined in
Section 1.5) (or on such other date as Parent and the Company may agree) with
the Secretary of State of the State of Delaware as provided in the DGCL. The
Merger shall become effective on the date on which the Certificate of Merger

has been duly filed with the Secretary of State or such time as is agreed upon
by the parties and specified in the Certificate of Merger, and such time is
hereinafter referred to as the "Effective Time".

(b) If Shares are purchased in the Offer, Parent and Sub covenant and
agree to consummate the Merger pursuant to the terms of this Agreement not later
than June 30, 1996.

Section 1.5 Closing. The closing of the Merger (the "Closing") will
take place at 10:00 a.m., New York City time, on a date to be specified by the
parties, which shall be no later than the third business day after satisfaction
or waiver of all of the conditions set forth in Article VII hereof (the "Closing
Date"), at the offices of Skadden, Arps, Slate, Meagher & Flom, 919 Third
Avenue, New York, New York, unless another time, date or place is agreed to in
writing by the parties hereto.

Section 1.6 Directors and Officers. (a) Promptly upon the
acceptance for payment of any Shares by Parent or any of its Subsidiaries (as
defined in Section 3.1 hereof) pursuant to the Offer, Parent shall be entitled
to designate such number of directors, rounded up to the next whole number, on
the Board of Directors of the Company as is equal to the product of the total
number of directors on such Board (giving effect to the directors designated by
Parent pursuant to this sentence) multiplied by the percentage that the
aggregate number of Shares beneficially owned by Sub, Parent and any of their
affiliates bears to the total number of shares of Company Common Stock then
outstanding. The Company shall, upon request of Parent, use its best efforts
promptly either to increase the size of its Board of Directors or, at the
Company's election, secure the resignations of such number of its incumbent
directors as is necessary to enable Parent's designees to be so elected to the
Company's Board, and shall cause Parent's designees to be

so elected. At such time, the Company shall also cause persons designated by
Parent to constitute the same percentage (rounded up to the next whole number)
as is on the Company's Board of Directors of (i) each committee of the Company's
Board of Directors, (ii) each board of directors (or similar body) of each
Subsidiary of the Company and (iii) each committee (or similar body) of each
such board, in each case only to the extent permitted by applicable law or the
rules of any stock exchange on which the Company Common Stock is listed.
Notwithstanding the foregoing, until the Effective Time, each of Parent, Sub
and the Company shall use its best efforts to retain as a member of the
Company's Board of Directors at least two directors who are directors of the
Company on the date hereof (the "Continuing Directors"); provided, that
subsequent to the purchase of and payment for Shares pursuant to the Offer,
Parent shall always have its designees represent at least a majority of the
entire Board of Directors. In the event of a vacancy on the Board of Directors
resulting from the resignation or death of any Continuing Director, such vacancy
shall be filled by the remaining Continuing Directors, or if there are no
remaining Continuing Directors by the designees of Zell/Chilmark Fund, L.P. The
Company's obligations under this Section 1.6(a) shall be subject to Section
14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. The Company
shall promptly take all actions required pursuant to such Section 14(f) and Rule
14f-1 in order to fulfill its obligations under this Section 1.6(a), including

mailing to stockholders the information required by such Section 14(f) and Rule
14f-1 as is necessary to enable Parent's designees to be elected to the
Company's Board of Directors. Parent or Sub will supply the Company any
information with respect to either of them and their nominees, officers,
directors and affiliates required by such Section 14(f) and Rule 14f-1. The
provisions of this Section 1.6(a) are in addition to and shall not limit any
rights which Sub, Parent or any of their affiliates may have as a holder or
beneficial owner of Shares as a matter of law with respect to the election of
directors or otherwise.

(b) From and after the time, if any, that Parent's designees
constitute a majority of the Company's Board of Directors and prior to the
Effective Time, (i) any material amendment of this Agreement, (ii) any termi-
nation of this Agreement by the Company, (iii) any exten-

sion of time for performance of any of the obligations of Parent or Sub
hereunder, (iv) any waiver of any condition or any of the Company's rights
hereunder, (v) any amendment or change to the Certificate of Incorporation or
Bylaws of the Company or any of its Subsidiaries, (vi) any amendment or change
to any Benefit Plan (as defined in Section 3.9(a)) or compensation policies or
severance obligations (including those agreements or obligations referenced in
Section 3.9 hereof or set forth in Schedule 3.9 of the Company Disclosure
Schedule) or (vii) any amendment or change to the policies of directors' and
officers' liability insurance maintained by the Company and its Subsidiaries on
the date hereof, may be effected only by the action of a majority of the Board
of Directors of the Company, which majority includes a majority of the
Continuing Directors; provided, that if there shall be no Continuing Directors,
actions may be effected by majority vote of the entire Board of Directors of the
Company. Any actions with respect to the enforcement of this Agreement by the
Company shall be effected only by the action of a majority of the Continuing
Directors.

(c) The directors and officers of Sub at the Effective Time shall,
from and after the Effective Time, be the initial directors and officers of the
Surviving Corporation until their successors shall have been duly elected or
appointed or qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Certificate of Incorporation and
By-laws.

Section 1.7 Stockholders' Meetings. (a) In order to consummate the
Merger, the Company, acting through its Board of Directors, shall, in accordance
with applicable law, duly call, give notice of, convene and hold a special
meeting of its stockholders (the "Company Special Meeting"), as soon as
practicable after the registration statement on Form S-4 (together with all
amendments, schedules, and exhibits thereto) to be filed by Parent in connection
with the registration of the Parent Common Stock to be issued by Parent in the
Merger (the "Registration Statement") is declared effective, for the purpose of
considering and taking action upon this Agreement. The Company shall include in
the joint proxy statement/prospectus forming a part of the Registration
Statement (the "Proxy Statement/Prospectus") the recommendation of the Board
of Directors of the Company that

stockholders of the Company vote in favor of the approval of the Merger and the
adoption of this Agreement. Parent agrees that it will vote, or cause to be
voted, all of the Shares then owned by it, Sub or any of its other Subsidiaries,
in favor of the approval of the Merger and adoption of the Merger Agreement at
the Company Special Meeting.

(b) In order to consummate the Merger, Parent, acting through its
Board of Directors, shall, in accordance with applicable law, duly call, give
notice of, convene and hold a special meeting of its stockholders (the "Parent
Special Meeting" and together with the Company Special Meeting, the "Special
Meetings"), as soon as practicable after the Registration Statement is de-
clared effective, for the purpose of authorizing the issuance of shares of
Parent Common Stock (as defined below) pursuant to the Merger. Parent shall
include in the Proxy Statement/Prospectus the recommendation of the Board of
Directors of Parent that stockholders of Parent vote in favor of the issuance of
shares of Parent common stock, par value $1.00 per share ("Parent Common
Stock"), in the Merger.

(c) Nothing in this Section 1.7 is intended to impair the fiduciary
duties of the Boards of Directors of the Company or Parent or, in the case of
the Board of Directors of the Company, to restrict its ability to exercise its
right of termination pursuant to Section 7.1(c)(1) of this Agreement.

ARTICLE II

CONVERSION OF SHARES

Section 2.1 Conversion of Shares. (a) Each share of Common Stock,
par value $.01 per share, of Sub issued and outstanding immediately prior to the
Effective Time, without any other action by Parent, Sub or the Company, shall,
at the Effective Time, be converted into and become one fully paid and
nonassessable share of common stock of the Surviving Corporation.

(b) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than Shares to be cancelled
pursuant to Section 2.1(d) hereof and other than Dissenting Shares

(as defined in Section 2.6), if any) shall, at the Effective Time, by virtue
of the Merger and without any action on the part of the holder thereof, be
converted into either (i) the right to receive a number of duly authorized,
validly issued, fully paid and nonassessable shares of Parent Common Stock
determined as set forth in clause (c) below; provided that Parent shall not
issue more than 1.12500 nor less than .91666 shares of Parent Common Stock per
Share (the "Exchange Ratio") or (ii) if the alternative consideration
contemplated by Section 2.2 hereof is applicable, then the right to receive the
Alternative Consideration (as defined in Section 2.2), plus, in each of clause
(i) and (ii) above, any Additional Consideration contemplated by Section 2.2
hereof.

average closing price per share of Parent Common Stock on the New York Stock
Exchange (the "NYSE") as reported on the NYSE Composite Tape for fifteen NYSE
trading days selected by Parent and the Company by lot from among the forty NYSE
trading days ending on the fifth trading day immediately preceding the Company
Special Meeting. "Transaction Price" shall mean $27.50 per Share. The number
of shares of Parent Common Stock into which each Share shall be converted in the
Merger shall be determined as follows:

1. In the event the Average Parent Share Price equals the
Transaction Price, each Share shall be converted into one share of Parent Common
Stock.

2. In the event that the Average Parent Share Price is greater than
the Transaction Price, each Share shall be converted into a number of shares of
Parent Common Stock (rounded to the nearest one one-hundred thousandth)
determined by the following formula:

Number of shares of Transaction Price plus .5 x (Average
Parent Common Stock = Parent Share Price minus Transaction Price)
---------------------------------------------
Average Parent Share Price

3. In the event that the Average Parent Share Price is less than the
Transaction Price, each Share shall be converted, at the option of Parent, into
either:

(I) a number of shares of Parent Common Stock (rounded to the nearest one
one-hundred thousandth) determined by the following formula:

Number of shares of Transaction Price minus .5 x (Transaction
Parent Common Stock = Price minus Average Parent Share Price)
-------------------------------------------
Average Parent Share Price

or (II) one share of Parent Common Stock plus the Cash
Adjustment Amount, without any interest thereon, where
the Cash Adjustment Amount is determined by the following
formula:

Cash Adjust- = .5 x (Transaction Price minus
ment Amount Average Parent Share Price);

provided, however, in no event shall the Cash Adjustment
Amount be greater than $2.75 per Share.

(d) All shares of Company Common Stock that are owned by the Company
as treasury stock and any shares of Company Common Stock owned by Parent, Sub or
any other direct or indirect wholly owned Subsidiary of Parent shall, at the
Effective Time, be cancelled and retired and shall cease to exist and no Parent
Common Stock or cash, if the alternative consideration contemplated by Section
2.2 hereof is applicable, shall be delivered in exchange therefor.

(e) On and after the Effective Time, holders of certificates which
immediately prior to the Effective Time represented outstanding Shares (the
"Certificates") shall cease to have any rights as stockholders of the Company,
except the right to receive the consideration set forth in this Article II
(other than the Additional Consideration provided by Section 2.2(c) hereof) (the
"Merger Consideration") for each Share held by them or, if applicable, payments
due to holders of Dissenting Shares (as defined in Section 2.6 hereof).

Section 2.2 Alternative Consideration and Additional Consideration.
(a) In the event that the stockholders of Parent shall not approve the issuance
of Parent Common Stock pursuant to the Merger at the Parent Special Meeting, but
all conditions to the Merger are otherwise satisfied or waived (if permissible),
the

Company, Parent and Sub shall nonetheless consummate the Merger and each share
of Company Common Stock issued and outstanding immediately prior to the
Effective Time (other than treasury Shares and Shares owned by Parent and its
Subsidiaries) shall, at the Effective Time, by virtue of the Merger and without
any action on the part of the holder hereof, be converted into the right to
receive the following consideration (the "Alternative Consideration") in a
combination of shares of Parent Common Stock and cash determined as follows:

1. The number of shares of Parent Common Stock into which each Share
shall be converted in the Merger (the "Adjusted Exchange Ratio") shall equal the
Exchange Ratio determined pursuant to Section 2.1(c) hereof (assuming no Cash
Adjustment Amount is paid) multiplied by a fraction (the "Adjustment Fraction"),
the numerator of which is the number of shares of Parent Common Stock equal to
19.9% of the then outstanding shares of Parent Common Stock and the denominator
of which is (a) the Exchange Ratio multiplied by (b) the aggregate number of
outstanding Shares (other than treasury Shares and Shares owned by Parent and
its Subsidiaries); and

2. The amount of cash (the "Adjusted Alternative Cash
Consideration") into which each Share shall be converted in the Merger shall
equal the Transaction Price multiplied by 1 minus the Adjustment Fraction.

(b) In the event the Merger is not consummated prior to April 29,
1996 and the Company shall not have materially breached this Agreement (other
than by acts caused or permitted by Parent), then the stockholders of the
Company shall be entitled to receive interest on the amount of the Merger
Consideration that they receive, from April 29, 1996 until the earlier of the
Effective Time or June 30, 1996, calculated at an annual rate equal to the prime
rate of interest (as announced from time to time by Morgan Guaranty Trust
Company of New York). For purposes of calculating the Merger Consideration,
the Average Parent Share Price, if not otherwise ascertainable in accordance
with the terms of this Agreement, shall be the average price of Parent Common
Stock based on the 15 highest closing prices of Parent Common Stock since the
consummation of the Offer until the earlier of June 30, 1996 or the Effective
Time.

(c) In the event Parent and/or Sub, in violation of their obligations
under this Agreement, fails or refuses to consummate the Merger on or prior to
June 30, 1996 and the Company shall not have materially breached this Agreement
(other than by acts caused or permitted by Parent), then, in addition to any
rights or remedies that the Company and its stockholders otherwise have in law
or at equity as a result thereof, the stockholders of the Company shall be
entitled to receive interest from June 30, 1996 on the amount of the Merger
Consideration not paid until such Merger Consideration is paid, calculated at
the annual rate of the higher of (i) the prime rate of interest (as announced
from time to time by Morgan Guaranty Trust Company of New York) plus 300 basis
points or (ii) the amount otherwise permitted by law. For purposes of
calculating the Merger Consideration, the Average Parent Share Price, if not
otherwise ascertainable in accordance with the terms of this Agreement, shall
be the average price of Parent Common Stock based on the 15 highest closing
prices of Parent Common Stock since the consummation of the Offer until such
Merger Consideration is paid. Any additional consideration paid or payable
pursuant to Section 2.2(b) or Section 2.2(c) is referred to herein as
"Additional Consideration".

Section 2.3 Issuance of Parent Common Stock or Payment of Cash
Consideration. (a) The manner in which each Share (other than Shares to be
cancelled as set forth in Section 2.1(d)) shall be converted into Parent Common
Stock or, if the Alternative Consideration contemplated by Section 2.2 hereof
is applicable, the right to receive the Alternative Consideration in the Merger
shall be as set forth in this Section 2.3.

(b) No certificates or scrip representing fractional shares of Parent
Common Stock shall be issued upon the surrender for exchange of Certificates
representing Shares, no dividend or distribution with respect to shares shall
be payable on or with respect to any fractional share and such fractional share
interests shall not entitle the owner thereof to vote or to any other rights of
a stockholder of Parent. In lieu of any such fractional share of Parent Common
Stock, Parent shall pay to each former stockholder of the Company who otherwise
would be entitled to receive a fractional share of Parent Common Stock an amount
in cash determined by

multiplying (i) the Average Parent Share Price on the date on which the
Effective Time occurs by (ii) the fractional interest in a share of Parent
Common Stock to which such holder would otherwise be entitled.

(c) Parent shall designate a bank or trust company to act as agent
for the holders of shares of Company Common Stock in connection with the Merger
(the "Exchange Agent") to receive the shares of Parent Common Stock and the Cash
Adjustment Amount, if any, or the Alternative Consideration, as the case may be,
and any Additional Consideration to which holders of shares of Company Common
Stock shall become entitled pursuant to this Article II.

(d) As soon as reasonably practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of a Certificate whose shares
were converted pursuant to this Article II into the right to receive the Merger
Consideration (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,

only upon delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as Parent may reasonably specify) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for the Merger Consideration and any Additional Consideration
contemplated by Section 2.2(c). Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal, duly executed,
the holder of such Certificate shall be entitled to receive in exchange
therefor the Merger Consideration and any Additional Consideration contemplated
by Section 2.2(c) for each share of Company Common Stock formerly represented by
such Certificate and the Certificate so surrendered shall forthwith be cancel-
led. If payment of the Merger Consideration and any Additional Consideration
contemplated by Section 2.2(c) is to be made to a person other than the person
in whose name the surrendered Certificate is registered, it shall be a condition
of payment that the Certificate so surrendered shall be properly endorsed or
shall be otherwise in proper form for transfer and that the person requesting
such payment shall have paid any transfer and other taxes required by reason of
the payment of the Merger Consideration and any Additional Consideration
contemplated by

Section 2.2(c) to a person other than the registered holder of the Certificate
surrendered or shall have established to the satisfaction of the Surviving
Corporation that such tax either has been paid or is not applicable.

(e) Immediately following the Effective Time, Parent shall deliver,
in trust, to the Exchange Agent, for the benefit of the holders of Shares, (i)
certificates representing an aggregate number of shares of Parent Common Stock
as nearly as practicable equal to the product of the Exchange Ratio and the
number of Shares to be converted into Parent Common Stock as determined by
this Article II plus, if applicable, the Cash Adjustment Amount multiplied by
the number of Shares to be converted into Parent Common Stock as determined by
this Article II or (ii) if the Alternative Consideration contemplated by Section
2.2 hereof is applicable, certificates representing an aggregate number of
shares of Parent Common Stock as nearly as practicable equal to the product of
the Adjusted Exchange Ratio and the number of Shares to be converted into Parent
Common Stock as determined by this Article II, plus an amount of cash equal to
the product of the Adjusted Alternative Cash Consideration and the number of
Shares to be converted into the Adjusted Alternative Cash Consideration pursuant
to this Article II. In addition, Parent shall deliver to the Exchange Agent
the aggregate amount of any Additional Consideration to be paid to holders of
Shares. As soon as practicable after the Effective Time, each holder of Shares
converted into Parent Common Stock (plus the Cash Adjustment Amount, if
applicable or any Additional Consideration, if applicable) or cash pursuant to
this Article II, upon surrender to the Exchange Agent of one or more
Certificates for such Shares for cancellation, shall be entitled to receive
either certificates representing the number of shares of Parent Common Stock
into which such Shares shall have been converted in the Merger (plus the Cash
Adjustment Amount, if applicable, or any Additional Consideration, if
applicable) or, in case the Alternative Consideration contemplated by Section
2.2 is applicable the cash (including any Additional Consideration, if
applicable) and certificates representing the number of shares of Parent Common
Stock into which such Shares shall have been converted in the Merger. No divi-

dends or distributions that have been declared will be paid to persons entitled
to receive certificates for

shares of Parent Common Stock until such persons surrender their Certificates
for Shares, at which time all such dividends shall be paid. In no event shall
the persons entitled to receive such dividends be entitled to receive interest
on such dividends. Notwithstanding the foregoing, neither the Exchange Agent
nor any party hereto shall be liable to a holder of Shares for any Parent Common
Stock, Alternative Consideration or dividends thereon delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.

(f) At any time following nine months after the Effective Time, the
Surviving Corporation shall be entitled to require the Exchange Agent to deliver
to it any shares of Parent Common Stock or funds (including any interest
received with respect thereto) which had been made available to the Exchange
Agent and which have not been disbursed to holders of Certificates, and there-
after such holders shall be entitled to look to the Surviving Corporation and
Parent (subject to abandoned property, escheat or other similar laws) only with
respect to the Merger Consideration payable or issuable upon due surrender of
their Certificates, without any interest thereon.

Section 2.4 Treatment of Stock Options. (a) Effective as of the
Effective Time, each option granted by the Company to purchase shares of Company
Common Stock that is outstanding and unexercised immediately prior thereto
(the "Company Stock Options"), shall cease to represent a right to acquire
shares of Company Common Stock and shall be converted automatically into an
option to purchase shares of Parent Common Stock in an amount and at an exercise
price determined as provided below (and otherwise subject to the terms of the
Company 1992 Long-Term Incentive Compensation Plan, as amended and the Company
1992 Non-Employee Directors' Stock Option Plan, as amended (together the "Option
Plans"), and the agreements evidencing grants thereunder). The number of shares
of Parent Common Stock subject to, and the option price and terms and conditions
of, the new option shall be determined in a manner that preserves both (i) the
aggregate gain (or loss) on the Company Stock Option immediately prior to the
Effective Time and (ii) the ratio of the exercise price per share subject to the
Company Stock Option to the fair market value (determined immediately prior to
the Effective Time) per share sub-

ject to such option, provided that any fractional shares of Parent Common Stock
resulting from such determination shall be rounded down to the nearest share.
Effective as of the Effective Time, the Surviving Corporation shall assume each
Company Stock Option agreement, each as amended, as provided herein. The
adjustment provided herein with respect to any Company Stock Options that are
"incentive stock options" (as defined in section 422 of the Code) shall be and
is intended to be effected in a manner that is consistent with section 424(a) of
the Code. The duration, vesting and other terms of the new options shall be the
same as the Company Stock Options that they replace, except that all references
to the Company shall be deemed to be references to Parent. In the event that a
holder of a Company Stock Option is terminated without Cause (as defined in
Section 5.5(a) of this Agreement) within 12 months of the Effective Time, then

such holder's new option shall become 100% exercisable as of such date of
termination.

(b) Notwithstanding Section 2.4(a) above, outstanding vested options
under the Long Term Incentive Plan (LTIP) held by Covered Executives (as defined
in Section 5.5(a) hereof), including options that become vested in connection
with a "Change in Control" under the terms of existing award agreements under
the LTIP, shall, effective as of the Effective Time become exercisable under a
cashless exercise procedure made available by the Company (subject to applicable
law and any administrative procedures and policies deemed appropriate by the
Company). Individuals subject to Section 16 of the Exchange Act shall be
provided with a cash compensation arrangement providing such individuals with
the opportunity to receive a cash payment approximating the benefits that would
be deprived by reason of Section 16 of the Exchange Act.

(c) Effective as of the Effective Time, the Options Plans shall
terminate and the provisions in any other plan, program, agreement or
arrangement, providing for the issuance or grant of any other interest in re-
spect of the capital stock of the Company or any of its Subsidiaries shall be
deleted. Furthermore, the Company shall take all actions necessary to ensure
that following the Effective Time, no holder of Company Stock Options or any
participant in the Option Plans or any other plans, programs, agreements or
arrangements shall have any right

thereunder to acquire any equity securities of the Company, the Surviving
Corporation or any subsidiary of either of the foregoing.

Section 2.5 Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of Shares on the records of the Company. If,
after the Effective Time, Certificates representing Shares are presented to
the Surviving Corporation, they shall be cancelled and exchanged for cash or
certificates representing Parent Common Stock pursuant to this Article II.

Section 2.6 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, in the event the Alternative Consideration or any
Additional Consideration contemplated by Section 2.2 hereof is applicable or in
the event that Parent elects to pay any Cash Adjustment Amount, Shares which
immediately prior to the Effective Time are held by stockholders who have
properly exercised and perfected appraisal rights under Section 262 of the DGCL
(the "Dissenting Shares"), shall not be converted into the right to receive the
Merger Consideration, but the holders of Dissenting Shares shall be entitled to
receive such consideration as shall be determined pursuant to Section 262 of the
DGCL; provided, however, that if any such holder shall have failed to perfect or
shall withdraw or lose his right to appraisal and payment under the DGCL, such
holder's Shares shall thereupon be deemed to have been converted as of the
Effective Time into the right to receive the Merger Consideration, without any
interest thereon, and such Shares shall no longer be Dissenting Shares.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to Parent and Sub as follows:

Section 3.1 Organization. Each of the Company and its Subsidiaries
is a corporation, partnership or other entity duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation
or organization, and has all requisite corporate

or other power and authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business as now being
conducted, except where the failure to be so organized, existing and in good
standing or to have such power, authority and governmental approvals would not
have a material adverse effect on the Company and its Subsidiaries taken as a
whole. Each of the Company and its Subsidiaries is duly qualified or licensed
to do business and in good standing in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except where the failure to be
so duly qualified or licensed and in good standing would not, in the aggre-
gate, have a material adverse effect on the Company and its Subsidiaries taken
as a whole. As used in this Agreement, the word "Subsidiary" means, with
respect to any party, any corporation or other organization, whether
incorporated or unincorporated, of which (i) such party or any other Subsidiary
of such party is a general partner (excluding such partnerships where such
party or any Subsidiary of such party do not have a majority of the voting
interest in such partnership) or (ii) at least a majority of the securities or
other interests having by their terms ordinary voting power to elect a majority
of the Board of Directors or others performing similar functions with respect to
such corporation or other organization is directly or indirectly owned or con-
trolled by such party or by any one or more of its Subsidiaries, or by such
party and one or more of its Subsidiaries. As used in this Agreement, any
reference to any event, change or effect having a material adverse effect on or
with respect to any entity (or group of entities taken as a whole) means such
event, change or effect, individually or in the aggregate with such other
events, changes, or effects, which is materially adverse to the financial
condition, business, results of operations, assets, liabilities, properties or
prospects of such entity. If "material adverse effect" is used with respect to
more than one entity, it shall mean such events, changes or effects with respect
to all such entities taken as a whole. Section 3.1 of the Disclosure Schedule
delivered by the Company to Parent on or prior to the date hereof (the "Company
Disclosure Schedule") sets forth a complete list of the Company's Subsidiaries.

Section 3.2 Capitalization. (a) The authorized capital stock of
the Company consists of 100,000,000 Shares and 25,000,000 shares of preferred
stock, par value $.01 per share (the "Preferred Stock"). As of the date hereof,
(i) 66,587,990 shares of Company Common Stock are issued and outstanding,
700,000 shares of Company Common Stock are held in the Company's treasury,
1,096,101 shares of Company Common Stock are reserved for issuance under the
Company's 401(k) Savings Plan, 2,002,220 shares of Company Common Stock are
reserved for issuance under the Company's 1993 Employee Stock Purchase Plan
and 3,561,377 shares of Company Common Stock are reserved for issuance pursuant

to options previously granted pursuant to the Company Stock Option Plans, (ii)
no shares of Preferred Stock are issued and outstanding, and (iii) no Shares or
shares of Preferred Stock are issued and held in the treasury of the Company.
All the outstanding shares of the Company's capital stock are, and all shares
which may be issued pursuant to the Company Stock Option Plans will be, when
issued in accordance with the respective terms thereof, duly authorized, validly
issued, fully paid and non-assessable. Except as disclosed in Section 3.2(a) of
the Company Disclosure Schedule, there are no bonds, debentures, notes or other
indebtedness having voting rights (or convertible into securities having such
rights) ("Voting Debt") of the Company or any of its Subsidiaries issued and
outstanding. Except as set forth above and except for the transactions
contemplated by this Agreement and the Stock Option Agreement, as of the date
hereof, (i) there are no shares of capital stock of the Company authorized,
issued or outstanding and (ii) there are no existing options, warrants, calls,
pre-emptive rights, subscriptions or other rights, convertible securities,
agreements, arrangements or commitments of any character, relating to the
issued or unissued capital stock of the Company or any of its Subsidiaries,
obligating the Company or any of its Subsidiaries to issue, transfer or sell or
cause to be issued, transferred or sold any shares of capital stock or Voting
Debt of, or other equity interest in, the Company or any of its Subsidiaries or
securities convertible into or exchangeable for such shares or equity
interests or obligations of the Company or any of its Subsidiaries to grant,
extend or enter into any such option, warrant, call, subscription or other
right, convertible security, agreement, arrangement or commitment. Except as
disclosed in

Section 3.2(a) of the Company Disclosure Schedule, there are no outstanding
contractual obligations of the Company or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any Shares or the capital stock of the Company or
any subsidiary or affiliate of the Company or to provide funds to make any
investment (in the form of a loan, capital contribution or otherwise) in any
Subsidiary or any other entity. Except as permitted by this Agreement,
following the Merger, neither the Company nor any of its Subsidiaries will have
any obligation to issue, transfer or sell any shares of its capital stock
pursuant to any employee benefit plan or otherwise.

(b) Except as disclosed in Section 3.2(b) of the Company Disclosure
Schedule, all of the outstanding shares of capital stock of each of the
Subsidiaries are beneficially owned by the Company, directly or indirectly,
and all such shares have been validly issued and are fully paid and
nonassessable and are owned by either the Company or one of its Subsidiaries
free and clear of all liens, charges, security interests, options, claims or
encumbrances of any nature whatsoever.

(c) Except for the Zell/Chilmark Stockholder Agreement, there are
no voting trusts or other agreements or understandings to which the Company or
any of its Subsidiaries is a party with respect to the voting of the capital
stock of the Company or any of the Subsidiaries. None of the Company or its
Subsidiaries is required to redeem, repurchase or otherwise acquire shares of
capital stock of the Company, or any of its Subsidiaries, respectively, as a
result of the transactions contemplated by this Agreement. The Company has
delivered to Parent a letter agreement which causes the termination, as of the

consummation of the Offer, of the Stockholder Agreement by and between
Zell/Chilmark and the Company dated as of June 1, 1992 the Registration Rights
Agreement by and between Zell/Chilmark Fund, L.P. and the Company dated as of
June 1, 1992 and the Registration Rights Agreement by and between Magten Asset
Management Corporation ("Magten") and the Company, dated as of January 20, 1993
(such agreements being referred to herein as the "Existing Company/Stockholder
Agreements").

(d) At the Effective Time, the number of shares of Company Common
Stock outstanding shall not exceed 73,247,688.

Section 3.3 Corporate Authorization; Validity of Agreement; Company
Action. (a) The Company has full corporate power and authority to execute and
deliver this Agreement and the Stock Option Agreement, and, subject to obtaining
any necessary approval of its stockholders as contemplated by Section 1.7(a)
hereof with respect to the Merger, to consummate the transactions contemplated
hereby and thereby. The execution, delivery and performance by the Company of
this Agreement and the Stock Option Agreement, and the consummation by it of the
transactions contemplated hereby and thereby, have been duly and validly
authorized by its Board of Directors and, except in the case of this Agreement
for obtaining the approval of its stockholders as contemplated by Section 1.7(a)
hereof with respect to the Merger, no other corporate action or proceedings on
the part of the Company is necessary to authorize the execution and delivery by
the Company of this Agreement and the Stock Option Agreement, and the
consummation by it of the transactions contemplated hereby and thereby. This
Agreement and the Stock Option Agreement has been duly executed and delivered by
the Company and, assuming this Agreement and the Stock Option Agreement
constitutes a valid and binding obligation of Parent and Sub, constitutes a
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except that (i) such enforcement may be subject to
applicable bankruptcy, insolvency or other similar laws, now or hereafter in
effect, affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.

(b) The Board of Directors of the Company has duly and validly
approved and taken all corporate action required to be taken by the Board of
Directors for the consummation of the transactions contemplated by this
Agreement (including, without limitation, the Offer, the acquisition of Shares
pursuant to the Offer and the Merger, the Stock Option Agreement, the
Zell/Chilmark Stockholder Agreement and the termination of the Existing
Company/Stockholder Agreements), including, but not limited to, all actions
necessary to render the provisions of Section 203 of the DGCL inapplicable to
such transactions.

Section 3.4 Consents and Approvals; No Violations. Except as
disclosed in Section 3.4 of the Company Disclosure Schedule, and except for all
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Exchange Act, the DGCL, the

Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and for the approval of this Agreement by the Company's stockholders and
the filing and recordation of the Certificate of Merger as required by the
DGCL, neither the execution, delivery or performance of this Agreement and the
Stock Option Agreement, nor the consummation by the Company of the transactions
contemplated hereby or thereby nor compliance by the Company with any of the
provisions hereof or thereof will (i) conflict with or result in any breach of
any provision of the certificate of incorporation or by-laws or similar
organizational documents of the Company or of any of its Subsidiaries, (ii)
require any filing with, or permit, authorization, consent or approval of, any
court, arbitral tribunal, administrative agency or commission or other
governmental or other regulatory authority or agency (a "Governmental Entity"),
except where the failure to obtain such permits, authorizations, consents or
approvals or to make such filings would not have a material adverse effect on
the Company and its Subsidiaries and would not, or would not be reasonably
likely to, materially impair the consummation of the Offer or the
Zell/Chilmark Stockholder Agreement or the Stock Option Agreement or the ability
of the Company to consummate the Merger or the other transactions contemplated
hereby or thereby, (iii) result in a violation or breach of, or constitute (with
or without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration) under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, guar-
antee, other evidence of indebtedness (collectively, the "Debt Instruments"),
lease, license, contract, agreement or other instrument or obligation to which
the Company or any of its Subsidiaries is a party or by which any of them or any
of their properties or assets may be bound and which either has a term of more
than one year or involves the payment or receipt of money in excess of $300,000
(a "Company Agreement") or (iv) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Company, any of its Subsidiaries
or any of their properties or assets, except in the case

of clause (iii) or (iv) for such violations, breaches or defaults which would
not, individually or in the aggregate, have a material adverse effect on the
Company and its Subsidiaries, and which would not, or would not be reasonably
likely to, materially impair the consummation of the Offer, the Stock Option
Agreement or the Zell/Chilmark Stockholder Agreement or the ability of the
Company to consummate the Merger or the other transactions contemplated hereby
or thereby.

Section 3.5 SEC Reports and Financial Statements. The Company has
filed with the SEC, and has heretofore made available to Parent true and
complete copies of, all forms, reports, schedules, statements and other
documents required to be filed by it and its Subsidiaries since May 30, 1992
under the Exchange Act or the Securities Act (as such documents have been
amended since the time of their filing, collectively, the "Company SEC
Documents"). As of their respective dates or, if amended, as of the date of the
last such amendment, the Company SEC Documents, including, without limitation,
any financial statements or schedules included therein (a) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading and (b) complied
in all material respects with the applicable requirements of the Exchange Act

and the Securities Act, as the case may be, and the applicable rules and
regulations of the SEC thereunder. Each of the consolidated financial state-
ments included in the Company SEC Documents have been prepared from, and are in
accordance with, the books and records of the Company and/or its consolidated
Subsidiaries, comply in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with United States generally
accepted accounting principles ("GAAP") applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
present in all material respects the consolidated financial position and the
consolidated results of operations and cash flows (and changes in financial
position, if any) of the Company and its consolidated Subsidiaries as at the
dates thereof or for the periods presented therein.

Section 3.6 Absence of Certain Changes. Except to the extent
disclosed in the Company SEC Documents filed prior to the date of this
Agreement or as otherwise disclosed to Parent in Section 3.6 of the Company
Disclosure Schedule, from June 3, 1995 through the date of this Agreement, the
Company and its Subsidiaries have conducted their respective businesses and
operations in the ordinary course of business consistent with past practice.
From June 3, 1995 through the date of this Agreement, there has not occurred (i)
any events, changes, or effects (including the incurrence of any liabilities of
any nature, whether or not accrued, contingent or otherwise) having or, which
would be reasonably likely to have, individually or in the aggregate, a
material adverse effect on the Company and its Subsidiaries; (ii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to the equity interests of the
Company or of any of its Subsidiaries, other than dividends paid by wholly owned
Subsidiaries; or (iii) any material change by the Company or any of its
Subsidiaries in accounting principles or methods, except insofar as may be
required by a change in GAAP. Except as set forth on Schedule 3.6 of the
Company Disclosure Schedule, from June 3, 1995 through the date of this
Agreement, neither the Company nor any of its Subsidiaries has taken any of the
actions prohibited by Section 5.1 hereof.

Section 3.7 No Undisclosed Liabilities. Except (a) to the extent
disclosed in the Company SEC Documents filed prior to the date of this Agreement
and (b) for liabilities and obligations incurred in the ordinary course of
business consistent with past practice, during the period from June 3, 1995
through the date of this Agreement, neither the Company nor any of its
Subsidiaries have incurred any liabilities or obligations of any nature,
whether or not accrued, contingent or otherwise, that have, or would be
reasonably likely to have, a material adverse effect on the Company and its
Subsidiaries or would be required to be reflected or reserved against on a
consolidated balance sheet of the Company and its Subsidiaries (including the
notes thereto) prepared in accordance with GAAP as applied in preparing the
June 3, 1995 consolidated balance sheet of the Company and its Subsidiaries.
Section 3.7 of the Company Disclosure Schedule sets forth each instrument
evidencing indebtedness of the Company and its Subsidiaries which

will accelerate or become due or payable, or result in a right of redemption or
repurchase on the part of the holder of such indebtedness, or with respect to
which any other payment or amount will become due or payable, in any such case
with or without due notice or lapse of time, as a result of this Agreement, the
Merger or the other transactions contemplated hereby.

Section 3.8 Information in Proxy Statement/Prospectus. The Proxy
Statement/Prospectus (or any amendment thereof or supplement thereto), at the
date mailed to the Company's stockholders, on the date filed with the SEC and at
the time of the Special Meetings, will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading, provided, however, that
no representation is made by the Company with respect to statements made therein
based on information supplied by Parent or Sub for inclusion in the Proxy
Statement/Prospectus. None of the information supplied by the Company for
inclusion or incorporation by reference in the Registration Statement will, at
the date it becomes effective and at the time of the Special Meetings contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. Subject to the proviso set forth in the second preceding sentence,
the Proxy Statement/Prospectus will comply in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder.

Section 3.9 Employee Benefit Plans; ERISA. (a) As of the date of
this Agreement, except as set forth in Section 3.9(a) of the Company Disclosure
Schedule: there are no material employee benefit plans, arrangements,
practices, contracts or agreements (including, without limitation, employment
agreements, change of control employment agreements and severance agreements,
incentive compensation, bonus, stock option, stock appreciation rights and
stock purchase plans) of any type (including but not limited to plans
described in section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), maintained by the Company,

any of its Subsidiaries or any trade or business, whether or not incorporated
(an "ERISA Affiliate"), that together with the Company would be deemed a
"controlled group" within the meaning of section 4001(a)(14) of ERISA, or with
respect to which the Company or any of its Subsidiaries has or may have a
liability, other than those listed on Section 3.9(a) of the Company Disclosure
Schedule (the "Benefit Plans"). Except as disclosed in Section 3.9(a) of
the Company Disclosure Schedule (or as otherwise permitted by this Agreement):
(1) neither the Company nor any ERISA Affiliate has any formal plan or
commitment, whether legally binding or not, to create any additional Benefit
Plan or modify or change any existing Benefit Plan that would affect any
employee or terminated employee of the Company or any ERISA Affiliate; and (2)
since September 31, 1995, there has been no change, amendment, modification to,
or adoption of, any Benefit Plan. Section 3.9(a) of the Company Disclosure
Schedule contains a list of each material employment, termination, severance,
incentive and deferred compensation agreement or arrangement that is a Benefit
Plan, and the date of execution of each such agreement or arrangement.

(b) Except as disclosed in Section 3.9(b) of the Company Disclosure
Schedule, under the applicable laws of all jurisdictions within the United
States of America and all foreign jurisdictions, with respect to any Benefit
Plan, there are no material amounts accrued but unpaid as of the most recent
balance sheet date that are not reflected on that balance sheet prepared in
accordance with GAAP.

(c) With respect to each Benefit Plan, except as disclosed on
Schedule 3.9(c) of the Company Disclosure Schedule and as would not have a
material adverse effect on the Company and its Subsidiaries: (i) if intended
to qualify under section 401(a), 401(k) or 403(a) of the Code, such plan so
qualifies, and its trust is exempt from taxation under section 501(a) of the
Code; (ii) such plan has been administered in accordance with its terms and
applicable law; (iii) no breaches of fiduciary duty have occurred; (iv) no
disputes are pending, or, to the knowledge of the Company, threatened; (v) no
prohibited transaction (within the meaning of Section 406 of ERISA) has
occurred; (vi) no lien imposed under the Code or ERISA exists or is likely to
exist; and (vii) all contributions and premiums due (including any extensions

for such contributions and premiums) have been made in full.

(d) Except as disclosed in Section 3.9(d) of the Company Disclosure
Schedule, none of the Benefit Plans has incurred any "accumulated funding
deficiency," as such term is defined in section 412 of the Code, whether or not
waived.

(e) Except as disclosed on Section 3.9(e) of the Company Disclosure
Schedule: (i) neither the Company nor any ERISA Affiliate has incurred any
liability under Title IV of ERISA since the effective date of ERISA that has
not been satisfied in full except as would not have or would not reasonably be
likely to have a material adverse effect on the Company and its Subsidiaries
(including sections 4063-4064 and 4069 of ERISA) and, to the knowledge of the
Company, no basis for any such liability exists; (ii) neither the Company nor
any ERISA Affiliate maintains (or contributes to), or has maintained (or has
contributed to) within the last six years, any employee benefit plan that is
subject to Title IV of ERISA; and (iii) there is no pending dispute between the
Company or any ERISA Affiliate concerning payment of contributions or payment of
withdrawal liability payments.

(f) With respect to each Benefit Plan that is a "welfare plan" (as
defined in section 3(1) of ERISA), except as specifically disclosed in Section
3.9(f) of the Company Disclosure Schedule, no such plan provides medical or
death benefits with respect to current or former employees of the Company or
any of its Subsidiaries beyond their termination of employment, other than on an
employee-pay-all basis, and each such welfare plan may be amended or terminated
by the Company or any of its Subsidiaries at any time with respect to such
former or current employees.

(g) With respect to each Benefit Plan that is intended to provide
special tax treatment to participants (including sections 79, 105, 106, 125, 127
and 129 of the Code), to the Company's knowledge, such Benefit Plan has
satisfied all of the material requirements for the receipt of such special tax

treatment since January 1, 1992.

(h) Except as specifically set forth in Section 3.9(h) of the Company
Disclosure Schedule, the consummation of the transactions contemplated by this
Agreement will not (i) entitle any individual to severance pay or any tax
"gross-up" payments with respect to the imposition of any tax pursuant to
Section 4999 of the Code or accelerate the time of payment or vesting, or in-
crease the amount, of compensation or benefits due to any individual with
respect to any Benefit Plan, or (ii) constitute or result in a prohibited
transaction under section 4975 of the Code or section 406 or 407 of ERISA with
respect to any Benefit Plan.

(i) Except as disclosed on Section 3.9(i) of the Company Disclosure
Schedule, neither the Company, any Benefits Affiliate nor any "administrator" as
that term is defined in section 3(16) of ERISA, has any liability with respect
to or connected with any Benefit Plan for excise taxes payable under the Code or
civil penalties payable under ERISA and, to the Company's knowledge, no basis
for any such liability exists.

(j) Except as disclosed on Schedule 3.9(j) of the Company Disclosure
Schedule, there is no Benefit Plan that is a "multiemployer plan," as such term
is defined in section 3(37) of ERISA, or which is covered by section 4063 or
4064 of ERISA.

(k) With respect to each Benefit Plan except Plans in which employees
of Parent or its Affiliates do not participate and except Multiemployer Plans
from which the Company has withdrawn, the Company has delivered or made
available to Parent accurate and complete (with de minimis omissions) copies
of all plan texts, summary plan descriptions, summaries of material
modifications, trust agreements and other related agreements including all
amendments to the foregoing; the two most recent annual reports; the most recent
annual and periodic accounting of plan assets; the most recent determination
letter received from the United States Internal Revenue Service (the "Service");
and the two most recent actuarial reports, to the extent any of the foregoing
may be applicable to a particular Benefit Plan.

(l) With respect to each Benefit Plan that is a "group health plan"
as such term is defined in section 5000(b) of the Code, except as specifically
set forth in Section 3.9(l) of the Company Disclosure Schedule, to the
Company's knowledge, each such Benefit Plan complies and has complied with the
requirements of Part 6 of Title I of ERISA and Sections 4980B and 5000 of the
Code except where the failure to so comply would not have a material adverse
effect on the Company and its Subsidiaries.

(m) There are no material plans, arrangements, practices, contracts
or agreements (including change of control agreements, severance agreements,
retirement agreements, stock option or purchase agreements, medical or death
benefit agreements) maintained by the Company or an ERISA Affiliate or with
respect to which the Company or any of its Subsidiaries has a material
liability to a director or former director (as a director) of the Company or an

ERISA Affiliate other than those listed on Section 3.9(m) of the Company
Disclosure Schedule or disclosed in the Company's most recent proxy statement
(the "Director Plans"). Neither the Company nor any ERISA Affiliate has any
formal plan or commitment, whether legally binding or not, to create any
Director Plan or modify or change any existing Director Plan that would affect
any director or former director of the Company or any ERISA Affiliate.

Section 3.10 Litigation. Except to the extent disclosed in the
Company SEC Documents filed prior to the date of this Agreement or on Section
3.10 of the Company Disclosure Schedule, there is no suit, claim, action,
proceeding or investigation pending or, to the best knowledge of the Company,
threatened against or affecting, the Company or any of its Subsidiaries which,
individually or in the aggregate, is reasonably likely to have a material
adverse effect on the Company and its Subsidiaries, or would, or would be
reasonably likely to, materially impair the consummation of the Offer or the
ability of the Company to consummate the Merger or the other transactions
contemplated hereby or thereby.

Section 3.11 No Default. The business of the Company and each of
its Subsidiaries is not being conducted in default or violation of any term,
condition or provision of (a) its respective certificate of incorpora-

tion or by-laws or similar organizational documents, (b) any Company Agreement
or (c) except as disclosed in Section 3.11 of the Company Disclosure Schedule,
any federal, state, local or foreign law, statute, regulation, rule,
ordinance, judgment, decree, order, writ, injunction, concession, grant,
franchise, permit or license or other governmental authorization or approval
applicable to the Company or any of its Subsidiaries, excluding from the
foregoing clauses (b) and (c), defaults or violations that would not have a
material adverse effect on the Company and its Subsidiaries or would not, or
would not be reasonably likely to, materially impair the consummation of the
Offer or the ability of the Company to consummate the Merger or the other
transactions contemplated hereby. No investigation or review by any
Governmental Entity with respect to the Company or any of its Subsidiaries is
pending or, to the best knowledge of the Company, threatened, nor to the best
knowledge of the Company, has any Governmental Entity indicated an intention to
conduct the same.

Section 3.12 Taxes. (a) As of the date of this Agreement, except as
set forth in Section 3.12 of the Company Disclosure Schedule:

(i) the Company and its Subsidiaries have (I) duly filed (or there
have been filed on their behalf) with the appropriate governmental authorities
all Tax Returns (as hereinafter defined) required to be filed by them and such
Tax Returns are true, correct and complete in all material respects, and (II)
duly paid in full or made provision in accordance with GAAP (or there has been
paid or provision has been made on their behalf) for the payment of all Taxes
(as hereinafter defined) for all periods ending through the date hereof;

(ii) the Company and its Subsidiaries have complied in all material
respects with all applicable laws, rules and regulations relating to the payment
and withholding of Taxes and have, within the time and the manner prescribed by

law, withheld and paid over to the proper governmental authorities all amounts
required to be so withheld and paid over under applicable laws;

(iii) no federal, state, local or foreign audits or other
administrative proceedings or

court proceedings are presently pending with regard to any Taxes or Tax Returns
of the Company or its Subsidiaries and neither the Company nor its
Subsidiaries has received a written notice of any pending audits or pro-
ceedings;

(iv) neither the Service nor any other taxing authority (whether
domestic or foreign) has asserted, or to the best knowledge of the Company, is
threatening to assert, against the Company or any of its Subsidiaries any
deficiency or claim for Taxes; and

(b) As of the date of this Agreement, except as set forth in Section
3.12 of the Company Disclosure Schedule:

(i) there are no material liens for Taxes upon any property or assets
of the Company or any Subsidiary thereof, except for liens for Taxes not yet due
and payable and liens for Taxes that are being contested in good faith by
appropriate proceedings;

(ii) neither the Company nor any of its Subsidiaries has agreed to or
is required to make any adjustment under Section 481(a) of the Code;

(iii) the federal income Tax Returns of the Company and its
Subsidiaries have been examined by the Service (or the applicable statutes of
limitation for the assessment of federal income Taxes for such periods have
expired) for all periods as set forth on Section 3.12 of the Company Disclosure
Schedule;

(iv) neither the Company nor any of its Subsidiaries is a party to
any material agreement providing for the allocation or sharing of Taxes; and

(v) neither the Company nor any of its Subsidiaries has, with regard
to any assets or property held or acquired by any of them, filed a consent to
the application of Section 341(f) of the Code, or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as
such term is defined in Section 341(f)(4) of the Code) owned by the Company or
any of its Subsidiaries.

(c) "Taxes" shall mean any and all taxes, charges, fees, levies or
other assessments, including, without limitation, income, gross receipts,
excise, real or personal property, sales, withholding, social security,
retirement, unemployment, occupation, use, service, service use, license, net
worth, payroll, franchise, transfer and recording taxes, fees and charges,
imposed by the Service or any taxing authority (whether domestic or foreign
including, without limitation, any state, county, local or foreign government or

any subdivision or taxing agency thereof (including a United States posses-
sion)), whether computed on a separate, consolidated, unitary, combined or any
other basis; and such term shall include any interest whether paid or received,
fines, penalties or additional amounts attributable to, or imposed upon, or with
respect to, any such taxes, charges, fees, levies or other assessments. "Tax
Return" shall mean any report, return, document, declaration or other
information or filing required to be supplied to any taxing authority or
jurisdiction (foreign or domestic) with respect to Taxes, including, without
limitation, information returns, any documents with respect to or accompanying
payments of estimated Taxes, or with respect to or accompanying requests for the
extension of time in which to file any such report, return, document,
declaration or other information.

Section 3.13 Contracts. Each Company Agreement is valid, binding
and enforceable and in full force and effect, except where failure to be valid,
binding and enforceable and in full force and effect would not have a material
adverse effect on the Company and its Subsidiaries, and there are no material
defaults thereunder by the Company or its Subsidiaries or, to the best knowledge
of the Company, by any other party thereto. Except as disclosed in Section 3.13
of the Company Disclosure Schedule, neither the Company nor any Subsidiary is a
party to any agreement that expressly limits the ability of the Company or any
Subsidiary or affiliate to compete in or conduct any line of business or compete
with any person or in any geographic area or during any period of time.

Section 3.14 Assets; Real Property. The assets, properties, rights
and contracts, including, without limitation (as applicable), title or
leaseholds thereto, of the Company and its Subsidiaries, taken as a

whole, are sufficient to permit the Company and its Subsidiaries to conduct
their business as currently being conducted with only such exceptions as are
immaterial to the Company and its Subsidiaries. All material real property
owned by the Company and its Subsidiaries (the "Real Property") is owned free
and clear of all liens, charges, security interests, options, claims, mortgages,
pledges, easements, rights-of-way or other encumbrances and restrictions of any
nature whatsoever, except as described in Section 3.14 of the Company
Disclosure Schedule or those that do not materially adversely interfere with
the use of such Real Property as currently used.

Section 3.15 Environmental Matters. Except as disclosed in Section
3.15 of the Company Disclosure Schedule, as of the date of this Agreement, the
Company is in material compliance with all applicable Environmental Laws and
there are no Environmental Liabilities and Costs of the Company and its
Subsidiaries that would have or are reasonably likely to have a material adverse
effect on the Company and its Subsidiaries.

For purposes of this Section 3.15, the following definitions shall
apply:

"Environmental Laws" means all applicable foreign, federal, state and
local laws, common law, regulations, rules and ordinances relating to pollution
or protection of health, safety or the environment.

"Environmental Liabilities and Costs" means all liabilities,
obligations, responsibilities, obligations to conduct cleanup, losses, damages,
deficiencies, punitive damages, consequential damages, treble damages, costs
and expenses (including, without limitation, all reasonable fees, disbursements
and expenses of counsel, expert and consulting fees and costs of investigations
and feasibility studies and responding to government requests for information or
documents), fines, penalties, restitution and monetary sanctions, interest,
direct or indirect, known or unknown, absolute or contingent, past, present or
future, resulting from any claim or demand, by any person or entity, whether
based in contract, tort, implied or express warranty, strict liability, joint
and several liability, criminal or civil statute, under any Environmental Law,
or arising from environmental, health or safety conditions, as a result of past
or present

ownership, leasing or operation of any properties, owned, leased or operated by
the Company or any of its Subsidiaries.

Section 3.16 Reimbursement. The Company or its Subsidiaries, as the
case may be, are parties to such agreements with third party payors, including
Medicaid, health maintenance organizations, preferred provider organizations,
insurance companies and other payment sources, which are necessary to conduct
their respective businesses as of the date of this Agreement and a true and
accurate list of all such agreements is set forth on Section 3.16 of the Company
Disclosure Schedule.

Section 3.17 Labor Relations. Except as set forth on Section 3.17 of
the Company Disclosure Schedule, there is no labor strike, slowdown or work
stoppage or lockout against the Company or any of its Subsidiaries, there is no
unfair labor practice charge or complaint against or pending before the National
Labor Relations Board (the "NLRB") which if decided adversely could have a
material adverse effect on the Company and its Subsidiaries, taken as a whole,
and there is no representation claim or petition pending before the NLRB and no
question concerning representation exists with respect to the employees of the
Company or its Subsidiaries.

Section 3.18 Insurance. As of the date hereof, the Company and
each of its Subsidiaries are insured by insurers, reasonably believed by the
Company to be of recognized financial responsibility and solvency, against such
losses and risks and in such amounts as are customary in the businesses in
which they are engaged. All material policies of insurance and fidelity or
surety bonds are in full force and effect. Descriptions of these plans and
related liability coverage have been previously provided to Parent. Section
3.18 of the Company Disclosure Schedule contains a listing of all open workers
compensation and general liability claims as of a recent date. These claims,
individually or in the aggregate, would not have a material adverse effect on
the Company and its Subsidiaries, taken as a whole. All necessary
notifications of claims have been made to insurance carriers other than those
which will not have a material adverse effect on the Company and its Subsidiar-
ies, taken as a whole.

Section 3.19 Transactions with Affiliates. Except to the extent
disclosed in the Company SEC Documents filed prior to the date of this
Agreement, from May 29, 1993 through the date of this Agreement there have been
no transactions, agreements, arrangements or understandings between the
Company or its Subsidiaries, on the one hand, and the Company's affiliates
(other than wholly-owned Subsidiaries of the Company) or other Persons, on the
other hand, that would be required to be disclosed under Item 404 of Regulation
S-K under the Securities Act.

Section 3.20 Compliance with Law. The Company and its
Subsidiaries have complied in all material respects with all laws, statutes,
regulations, rules, ordinances, and judgments, decrees, orders, writs and
injunctions, of any court or governmental entity relating to any of the
property owned, leased or used by them, or applicable to their business,
including, but not limited to, equal employment opportunity, discrimination,
occupational safety and health, environmental, interstate commerce, antitrust
laws, ERISA and laws relating to Taxes (as defined in Section 3.12). The
Company, with respect to each store location, has all permits and licenses
(including, without limitation, pharmaceutical and liquor licenses and permits)
necessary to carry on the business being conducted at each store location.

Section 3.21 Vote Required. The affirmative vote of the holders of
a majority of the outstanding shares of Company Common Stock are the only votes
of the holders of any class or series of the Company's capital stock necessary
to approve the Merger.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB

Parent and Sub represent and warrant to the Company as follows:

Section 4.1 Organization. Each of Parent and Sub is a corporation
duly organized, validly existing and in good standing under the laws of Delaware
and has all requisite corporate or other power and authority and all necessary
governmental approvals to own, lease and operate its properties and to carry
on its business as now

being conducted, except where the failure to be so organized, existing and in
good standing or to have such power, authority and governmental approvals would
not have a material adverse effect on Parent and its Subsidiaries. Parent and
each of its Subsidiaries is duly qualified or licensed to do business and in
good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except where the failure to be so duly
qualified or licensed and in good standing would not have a material adverse
effect on Parent and its Subsidiaries.

Section 4.2 Capitalization. (a) The authorized capital stock of
Parent consists of 240,000,000 shares of Parent Common Stock and (b) 20,000,000
preferred shares, par value $1.00 per share (the "Parent Preferred Stock").
As of the date hereof, (i) 83,758,467 shares of Parent Common Stock are issued

and outstanding, (ii) no shares of Parent Preferred Stock are issued and
outstanding, (iii) 6,532,169 shares of Parent Common Stock are issued and held
in the treasury of Parent, and (iv) 6,417,062 shares of Parent Common Stock are
reserved for issuance under Parent's 1990 Omnibus Stock Incentive Plan (the
"Parent Plan"). All of the outstanding shares of Parent's capital stock are,
and all shares which may be issued pursuant to the exercise of outstanding
options or pursuant to the Parent Plan will be, when issued in accordance with
the respective terms thereof, duly authorized, validly issued, fully paid and
non-assessable. Except for Parent's 6.75% Zero Coupon Convertible Subor-
dinated Notes due July 24, 2006, there are no bonds, debentures, notes or other
indebtedness having voting rights (or convertible into securities having such
rights) ("Parent Voting Debt") of Parent or any of its Subsidiaries issued and
outstanding. Except as set forth above, and except as set forth in Section 4.2
of the Disclosure Schedule delivered to the Company on or prior to the date
hereof (the "Parent Disclosure Schedule") and except for transactions
contemplated by this Agreement, as of the date hereof, (i) there are no shares
of capital stock of Parent authorized, issued or outstanding and (ii) there are
no existing options, warrants, calls, preemptive rights, subscriptions or
other rights, convertible securities, agreements, arrangements or commitments
of any character, relating to the issued or unissued capital stock of Parent or
any of its Subsidiaries,

obligating Parent or any of its Subsidiaries to issue, transfer or sell or cause
to be issued, transferred or sold any shares of capital stock or Parent Voting
Debt of, or other equity interest in, Parent or any of its Subsidiaries or
securities convertible into or exchangeable for such shares or equity
interests or obligations of Parent or any of its Subsidiaries to grant, extend
or enter into any such option, warrant, call, subscription or other right,
convertible security, agreement, arrangement or commitment. There are no
outstanding contractual obligations of Parent or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of Parent Common Stock or the
capital stock of Parent or any subsidiary or affiliate of Parent or to provide
funds to make any investment (in the form of a loan, capital contribution or
otherwise) in any Subsidiary or any other entity.

(b) There are no voting trusts or other agreements or understandings
to which Parent or any of its Subsidiaries is a party with respect to the voting
of the capital stock of Parent or its Subsidiaries. None of Parent or its
Subsidiaries is required to redeem, repurchase or otherwise acquire shares of
capital stock of Parent, or any of its Subsidiaries, respectively, as a result
of the transactions contemplated by this Agreement.

Section 4.3 Corporate Authorization; Validity of Agreement; Necessary
Action. Each of Parent and Sub has full corporate power and authority to
execute and deliver this Agreement, the Stock Option Agreement and the
Zell/Chilmark Stockholder Agreement and, subject in the case of this Agreement
to obtaining any necessary approval of Parent's stockholders as contemplated by
Section 1.7(b) hereof with respect to the Merger, to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance by Parent and Sub of this Agreement and the consummation by Parent
and Sub of the transactions contemplated hereby have been duly and validly
authorized by their respective Boards of Directors and by Sub's sole stockholder

and, except in the case of obtaining any necessary approval of Parent's
stockholders as contemplated by Section 1.7(b) hereof, no other corporate action
or proceedings on the part of Parent and Sub are necessary to authorize the
execution and delivery by Parent and Sub of this Agreement and the

consummation by Parent and Sub of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Parent and Sub, and, assuming
this Agreement constitutes valid and binding obligations of the Company,
constitutes valid and binding obligations of each of Parent and Sub, enforceable
against them in accordance with its terms, except that (i) such enforcement
may be subject to applicable bankruptcy, insolvency or other similar laws, now
or hereafter in effect, affecting creditors' rights generally, and (ii) the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought. The shares of Parent
Common Stock issued pursuant to the Merger, if any, will be duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights.

Section 4.4 Consents and Approvals; No Violations. Except for
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Exchange Act, the Securities
Act of 1933 (the "Securities Act"), the DGCL, the HSR Act, state blue sky laws
and any applicable state takeover laws and the approval by Parent's stockholders
of the issuance of Parent Common Stock in the Merger, neither the execution,
delivery or performance of this Agreement by Parent and Sub nor the consummation
by Parent and Sub of the transactions contemplated hereby nor compliance by
Parent and Sub with any of the provisions hereof will (i) conflict with or
result in any breach of any provision of the certificate of incorporation or
by-laws of Parent and Sub, (ii) require any filing with, or permit,
authorization, consent or approval of, any Governmental Entity (except where
the failure to obtain such permits, authorizations, consents or approvals or to
make such filings would not have a material adverse effect on Parent and its
Subsidiaries or would not, or would not be reasonably likely to, materially
impair the ability of Parent and Sub to consummate the Offer, the Merger or the
other transactions contemplated hereby or thereby), (iii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, guarantee, other

evidence of indebtedness, lease, license, contract, agreement or other
instrument or obligation to which Parent or any of its Subsidiaries is a party
or by which any of them or any of their properties or assets may be bound or
(iv) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Parent, any of its Subsidiaries or any of their properties or
assets, except in the case of clauses (iii) and (iv) for violations, breaches or
defaults which would not have a material adverse effect on Parent and its
Subsidiaries or would not, or would not be reasonably likely to, materially
impair or the ability of Parent or Sub to consummate the Offer, the Merger or

the other transactions contemplated hereby.

Section 4.5 SEC Reports and Financial Statements. Parent has filed
with the SEC, and has heretofore made available to the Company, true and
complete copies of, all forms, reports, schedules, statements and other
documents required to be filed by it and its Subsidiaries since February 27,
1993 under the Exchange Act or the Securities Act (as such documents have been
amended since the time of their filing, collectively, the "Parent SEC
Documents"). As of their respective dates or, if amended, as of the date of the
last such amendment, the Parent SEC Documents, including, without limi-
tation, any financial statements or schedules included therein (a) did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading and (b) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be, and
the applicable rules and regulations of the SEC thereunder. Each of the
consolidated financial statements included in the Parent SEC Documents have
been prepared from, and are in accordance with, the books and records of
Parent and/or its consolidated Subsidiaries, comply in all material respects
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with GAAP applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) and fairly present in all material
respects the consolidated financial position and the consolidated results of
operations and cash flows (and

changes in financial position, if any) of Parent and its consolidated
Subsidiaries as at the dates thereof or for the periods presented therein.

Section 4.6 Absence of Certain Changes. Except to the extent
disclosed in the Parent SEC Documents filed prior to the date of this
Agreement, from March 4, 1995 through the date of this Agreement, Parent and its
Subsidiaries have conducted their respective businesses in the ordinary course
of business consistent with past practice. From March 4, 1995 through the date
of this Agreement, there has not occurred (i) any events, changes, or effects
(including the incurrence of any liabilities of any nature, whether or not
accrued, contingent or otherwise) having or, which would be reasonably
likely to have, individually or in the aggregate, a material adverse effect on
Parent and its Subsidiaries; (ii) any declaration, setting aside or payment of
any dividend or other distribution (whether in cash, stock or property) with
respect to the equity interests of Parent or of any of its Subsidiaries other
than regular quarterly cash dividends or dividends paid by wholly owned
Subsidiaries; or (iii) any change by Parent or any of its Subsidiaries in
accounting principles or methods, except insofar as may be required by a change
in GAAP.

Section 4.7 No Undisclosed Liabilities. Except (a) to the extent
disclosed in the Parent SEC Documents filed prior to the date of this Agreement
and (b) for liabilities and obligations incurred in the ordinary course of
business consistent with past practice, during the period from March 4, 1995
through the date of this Agreement, neither Parent nor any of its Subsidiaries

have incurred any liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, that have, or would be reasonably likely to
have, a material adverse effect on Parent and its Subsidiaries or would be
required to be reflected or reserved against on a consolidated balance sheet of
Parent and its Subsidiaries (including the notes thereto) prepared in accordance
with GAAP as applied in preparing the March 4, 1995 consolidated balance sheet
of Parent and its Subsidiaries.

Section 4.8 Information in Proxy Statement/Prospectus. The
Registration Statement (or any amendment thereof or supplement thereto) will, at
the

date it is filed with the SEC and as of the date it becomes effective and the
Proxy Statement/Prospectus (or any amendment thereof or supplement thereto) at
the date mailed to Parent's stockholders and at the time of the Special
Meetings, will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading, provided, however, that no representation is made by
Parent or Sub with respect to statements made therein based on information
supplied by the Company for inclusion in the Registration Statement. None of
the information supplied by Parent or Sub for inclusion or incorporation by
reference in the Proxy Statement/Prospectus will, at the date mailed to
stockholders and at the time of the Special Meetings, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. Subject to the
proviso set forth in the second preceding sentence, the Registration Statement
will comply in all material respects with the provisions of the Securities Act
and Exchange Act, respectively, and the rules and regulations thereunder.

Section 4.9 Litigation. Except to the extent disclosed in the Parent
SEC Documents filed prior to the date of this Agreement, as of the date of this
Agreement, there is no suit, claim, action, proceeding or investigation
pending or, to the best knowledge of Parent, threatened against or affecting,
Parent or any of its Subsidiaries, which, individually or in the aggregate, is
reasonably likely to have a material adverse effect on Parent and its
Subsidiaries or would, or would be reasonably likely to, materially impair the
ability of Parent or Sub to consummate the Offer, the Merger or the other
transactions contemplated hereby.

Section 4.10 Taxes. (a) As of the date of this Agreement, except as
set forth in Section 4.10 of the Parent Disclosure Schedule:

(i) Parent and its Subsidiaries have (I) duly filed (or there have
been filed on their behalf) with the appropriate governmental authorities all
Tax Returns required to be filed by them and such Tax Returns

are true, correct and complete in all material respects, and (II) duly paid in
full or made provision in accordance with GAAP (or there has been paid or

provision has been made on their behalf) for the payment of all Taxes (as
hereinafter defined) for all periods ending through the date hereof;

(ii) Parent and its Subsidiaries have complied in all material
respects with all applicable laws, rules and regulations relating to the
payment and withholding of Taxes and have, within the time and the manner
prescribed by law, withheld and paid over to the proper governmental authorities
all amounts required to be so withheld and paid over under applicable laws;

(iii) no federal, state, local or foreign audits or other
administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Tax Returns of Parent or its Subsidiaries and neither
Parent nor its Subsidiaries has received a written notice of any pending audits
or proceedings; and

(iv) neither the Service nor any other taxing authority (whether
domestic or foreign) has asserted, or to the best knowledge of Parent, is
threatening to assert, against Parent or any of its Subsidiaries any
deficiency or claim for Taxes.

(b) As of the date of this Agreement, except as set forth in Section
4.10 of the Parent Disclosure Schedule:

(i) there are no material liens for Taxes upon any property or assets
of Parent or any Subsidiary thereof, except for liens for Taxes not yet due
and payable and liens for Taxes that are being contested in good faith by
appropriate proceedings;

(ii) neither Parent nor any of its Subsidiaries has agreed to or is
required to make any adjustment under Section 481(a) of the Code;

(iii) the federal income Tax Returns of Parent and its Subsidiaries
have been examined by the Service (or the applicable statutes of limitation for
the assessment of federal income Taxes for such periods have expired) for all
periods through and including March 2,

1991 for Parent and October 31, 1987 for Perry Drug Stores, Inc.;

(iv) neither Parent nor any of its Subsidiaries is a party to any
material agreement providing for the allocation or sharing of Taxes; and

(v) neither Parent nor any of its Subsidiaries has, with regard to
any assets or property held or acquired by any of them, filed a consent to the
application of Section 341(f) of the Code, or agreed to have Section 341(f)(2)
of the Code apply to any disposition of a subsection (f) asset (as such term
is defined in Section 341(f)(4) of the Code) owned by Parent or any of its
Subsidiaries.

Section 4.11 Compliance with Law. Parent and its Subsidiaries have
complied in all material respects with all laws, statutes, regulations, rules,
ordinances, and judgments, decrees, orders, writs and injunctions, of any court
or governmental entity relating to any of the property owned, leased or used by

them, or applicable to their business, including, but not limited to, equal
employment opportunity, discrimination, occupational safety and health,
environmental, interstate commerce, antitrust laws, ERISA and laws relating to
Taxes.

Section 4.12 No Default. The business of Parent and each of its
Subsidiaries is not being conducted in default or violation of any term,
condition or provision of (a) its respective certificate of incorporation or
by-laws or similar organizational documents, (b) any lease, license, contract,
agreement or other instrument or obligation to which Parent or any of its
Subsidiaries is a party or by which any of them or any of their properties or
assets may be bound and which either has a term of more than one year or
involves the payment or receipt of money in excess of $300,000 (a "Parent Agree-
ment") or (c) any federal, state, local or foreign law, statute, regulation,
rule, ordinance, judgment, decree, order, writ, injunction, concession, grant,
franchise, permit or license or other governmental authorization or approval
applicable to Parent or any of its Subsidiaries, excluding from the foregoing
clauses (b) and (c), defaults or violations that would not have a material
adverse effect on Parent and its Subsidiaries or would not, or would not be
reasonably likely to, materially

impair the consummation of the Offer or the ability of Parent or Sub to
consummate the Merger or the other transactions contemplated hereby. Except as
set forth on Schedule 4.12 of the Parent Disclosure Schedule, no investigation
or review by any Governmental Entity with respect to Parent or any of its
Subsidiaries is pending or, to the best knowledge of Parent or Sub, threatened,
nor to the best knowledge of Parent or Sub, has any Governmental Entity
indicated an intention to conduct the same.

Section 4.13 Financing. Either Parent or Sub has, or will have prior
to the consummation of the Offer, sufficient funds available to purchase the
Shares pursuant to the Offer.

Section 4.14 Opinion of Financial Advisor. Parent has received an
opinion from Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), dated
as of a date which is on or prior to the date of this Agreement to the effect
that, as of such date, the consideration to be paid by Parent in the Offer and
the Merger, taken together, is fair to Parent from a financial point of view
(the "Parent Fairness Opinion"). Parent has delivered to the Company a copy
of the Parent Fairness Opinion, together with DLJ's authorization to include
the Parent Fairness Opinion in the Offer Documents and the Proxy
Statement/Prospectus.

ARTICLE V

COVENANTS

Section 5.1 Interim Operations of the Company. The Company covenants
and agrees that, (i) except as expressly provided in this Agreement, and (ii)
during the period prior to the consummation of Offer, except with the prior
written consent of Parent, and (iii) during the period following the
consummation of the Offer and prior to the Effective Time, except with the

authorization of the Board of Directors of the Company, including the
affirmative vote of a majority of the Continuing Directors, and (iv) following
consummation of the Offer and prior to the Effective Time, except for
prepayments by Parent of indebtedness of the Company and the advancement of
funds by Parent to the Company on the terms and condi-

tions, and at the interest rate, and for the purposes for which borrowing may be
made, under the Company's existing credit facility:

(a) the business of the Company and its Subsidiaries shall be
conducted only in the ordinary course of business consistent with past practice
and, to the extent consistent therewith, each of the Company and its
Subsidiaries shall use its best efforts to preserve its business organization
intact and maintain its existing relations with customers, suppliers,
employees, creditors and business partners;

(b) the Company will not, directly or indirectly, split, combine or
reclassify the outstanding Company Common Stock, or any outstanding capital
stock of any of the Subsidiaries of the Company;

(c) neither the Company nor any of its Subsidiaries shall: (i) amend
its certificate of incorporation or by-laws or similar organizational
documents; (ii) declare, set aside or pay any dividend or other distribution
payable in cash, stock or property with respect to its capital stock other
than dividends paid by the Company's Subsidiaries to the Company or its Subsid-
iaries; (iii) issue, sell, transfer, pledge, dispose of or encumber any
additional shares of, or securities convertible into or exchangeable for, or
options, warrants, calls, commitments or rights of any kind to acquire, any
shares of capital stock of any class of the Company or its Subsidiaries, other
than issuances pursuant to exercise of stock-based awards or options out-
standing on the date hereof as disclosed in Section 3.2 or in Section 5.1(c) of
the Company Disclosure Schedule; (iv) transfer, lease, license, sell, mortgage,
pledge, dispose of, or encumber any material assets other than (a) in the
ordinary course of business consistent with past practice or (b) pursuant to
existing agreements disclosed in Section 5.1(c) of the Company Disclosure
Schedule; or (v) redeem, purchase or otherwise acquire directly or
indirectly any of its capital stock;

(d) except as disclosed in Section 5.1(d) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries shall: (i) except as
otherwise provided in this Agreement and except for normal, regularly
scheduled increases for non-officer employees

consistent with past practice or pursuant to the terms of existing collective
bargaining agreements, grant any increase in the compensation payable or to
become payable by the Company or any of its Subsidiaries to any officer or
employee (including through any new award made under, or the exercise of any
discretion under, any Benefit Plan (ii) adopt any new, or amend or otherwise
increase, or accelerate the payment or vesting of the amounts payable or to
become payable under any existing, bonus, incentive compensation, deferred

compensation, severance, profit sharing, stock option, stock purchase,
insurance, pension, retirement or other employee benefit plan agreement or
arrangement; (iii) enter into any, or amend any existing, employment or
severance agreement with or, grant any severance or termination pay to any
officer, director, employee or consultant of the Company or any of its
Subsidiaries; or (iv) make any additional contributions to any grantor trust
created by the Company to provide funding for non-tax-qualified employee
benefits or compensation; or (v) provide any severance program to any
Subsidiary which does not have a severance program as of the date of this
Agreement;

(e) neither the Company nor any of its Subsidiaries shall modify,
amend or terminate any of the Company Agreements or waive, release or assign any
material rights or claims, except in the ordinary course of business
consistent with past practice;

(f) neither the Company nor any of its Subsidiaries shall permit any
material insurance policy naming it as a beneficiary or a loss payable payee to
be cancelled or terminated without notice to Parent, except in the ordinary
course of business consistent with past practice;

(g) except as set forth in Section 5.1(g) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries shall: (i) incur or
assume any debt except for borrowings under existing credit facilities in the
ordinary course consistent with past practice; (ii) assume, guarantee, endorse
or otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person, except in the ordinary
course of business consistent with past practice; (iii) make any loans,
advances or capital contributions to, or investments in, any other

person (other than to wholly owned Subsidiaries of the Company or customary
loans or advances to employees in accordance with past practice); or (iv) enter
into any material commitment (including, but not limited to, any leases, capital
expenditure or purchase of assets) other than purchases of inventory in the
ordinary course of business consistent with past practice;

(h) neither the Company nor any of its Subsidiaries shall change any
of the accounting principles used by it unless required by GAAP;

(i) neither the Company nor any of its Subsidiaries shall pay,
discharge or satisfy any claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction of any such claims, liabilities or obligations, (x)
reflected or reserved against in the consolidated financial statements (or the
notes thereto) of the Company and its consolidated Subsidiaries, (y) incurred
in the ordinary course of business consistent with past practice or (z) which
are legally required to be paid, discharged or satisfied;

(j) neither the Company nor any of its Subsidiaries will adopt a plan
of complete or partial liquidation, dissolution, merger, consolidation, restruc-
turing, recapitalization or other material reorganization of the Company or any
of its Subsidiaries or any agreement relating to a Takeover Proposal (as

defined in Section 5.6) (other than the Merger);

(k) neither the Company nor any of its Subsidiaries will take, or
agree to commit to take, any action that would make any representation or
warranty of the Company contained herein inaccurate in any respect at, or as of
any time prior to, the Effective Time;

(l) neither the Company nor any of its Subsidiaries will engage in
any transaction with, or enter into any agreement, arrangement, or understanding
with, directly or indirectly, any of the Company's affiliates, including,
without limitation, any transactions, agreements, arrangements or understandings
with any affiliate or other Person covered under Item 404 of Regulation S-K
under the Securities Act that would be required to be disclosed under such Item
404, other than

pursuant to such agreements, arrangements, or understandings existing on the
date of this Agreement (which are set forth on Section 5.1(l) of the Company
Disclosure Schedule);

(m) close, shut down, or otherwise eliminate any of the Company's
stores other than in the ordinary course of business consistent with past
practice;

(n) change the name of or signage at any of the Company's stores;

(o) close, shut down, or otherwise eliminate any of the Company's
distribution centers;

(p) move the location, close, shut down or otherwise eliminate the
Company's headquarters, or effect a general staff reduction at such
headquarters;

(q) change or modify in any material respect the Company's existing
advertising program and policies;

(r) except as set forth in Section 5.1(r) of the Company Disclosure
Schedule, enter into any new lease (other than renewals of existing leases after
consultation with Parent) or purchase or acquire or enter into any agreement to
purchase or acquire any real estate;

(s) neither the Company nor any of its Subsidiaries will incur any
liabilities or obligations of any nature, whether or not accrued, contingent or
otherwise, that have, or would be reasonably likely to have, a material
adverse effect on the Company and its Subsidiaries; and

(t) neither the Company nor any of its Subsidiaries will enter into
an agreement, contract, commitment or arrangement to do any of the foregoing, or
to authorize, recommend, propose or announce an intention to do any of the
foregoing.

Section 5.2 Treatment of Certain Indebtedness. The Company will
cooperate with Parent, if Parent shall so request, to effect a defeasance of,

and/or a repurchase by means of a debt tender offer (together with a

solicitation of consents to eliminate the restrictive covenants) of, the 9 1/8%
Senior Notes due 2000 issued by the Company and the 10 1/8% Senior Notes due
June 1, 2002 issued by Hook SupeRx, Inc., provided that any funds and all
related out-of-pocket transaction expenses necessary to effect any such
defeasance or repurchase shall be provided and borne by Parent, without any
right of reimbursement. The Company and Parent will cooperate to effect such
defeasance and/or repurchase in a manner which takes into account all relevant
tax, accounting, corporate, structural, contractual and similar issues.

Section 5.3 Access to Information. (a) To the extent permitted by
applicable law, the Company shall (and shall cause each of its Subsidiaries to)
afford to the officers, employees, accountants, counsel, financing sources and
other representatives of Parent, access, during normal business hours, during
the period prior to the Effective Time, to all of its and its Subsidiaries'
properties, books, contracts, commitments and records (including any Tax Returns
or other Tax related information pertaining to the Company and its
Subsidiaries) and, during such period, the Company shall (and shall cause each
of its Subsidiaries to) furnish promptly to Parent (i) a copy of each report,
schedule, registration statement and other document filed or received by it
during such period pursuant to the requirements of federal securities laws and
(ii) all other information concerning its business, properties and personnel as
Parent may reasonably request (including any Tax Returns or other Tax related
information pertaining to the Company and its Subsidiaries). Parent will hold
any such information which is nonpublic in confidence in accordance with the
provisions of the existing confidentiality agreement between the Company and
Parent, dated August 17, 1995 (the "Confidentiality Agreement").

(b) To the extent permitted by applicable law, Parent shall (and
shall cause each of its Subsidiaries to) afford to the officers, employees,
accountants, counsel, financing sources and other representatives of the
Company, access, during normal business hours, during the period prior to the
Effective Time, to all of its and its Subsidiaries' properties, books,
contracts, commitments and records (including any Tax Returns or other Tax
related information pertaining to Parent and its Subsidiaries) and, during
such period, Parent shall (and shall

cause each of its Subsidiaries to) furnish promptly to the Company (a) a copy of
each report, schedule, registration statement and other document filed or
received by it during such period pursuant to the requirements of the federal
securities laws and (b) all other information as the Company may reasonably
request (including any Tax Returns or other Tax related information pertaining
to Parent and its Subsidiaries). The Company will hold any such information
which is nonpublic in confidence in accordance with the provisions of the
Confidentiality Agreement.

Section 5.4 Consents and Approvals. (a) The Company and Parent shall
take all reasonable actions necessary to file as soon as practicable
notifications under the HSR Act and to respond as promptly as practicable to

any inquiries received from the Federal Trade Commission and the Anti-trust
Division of the Department of Justice for additional information or
documentation and to respond as promptly as practicable to all inquiries and
requests received from any State Attorney General or other Governmental Entity
in connection with antitrust matters.

(b) Parent and the Company shall, and each shall cause each of its
Subsidiaries to, subject to the preceding subsection, (i) cooperate with one
another to prepare, as soon as practicable, all filings and other presentations
in connection with seeking any regulatory approval from a Governmental Entity,
exemption or other authorization necessary to consummate the transactions
contemplated by this Agreement, (ii) prosecute such filings and other
presentations with diligence, (iii) diligently oppose any objections to,
appeals from or petitions to reconsider or reopen any such approval by per-
sons not party to this Agreement, and (iv) take all such further action as in
Parent's and the Company's judgment reasonably may facilitate obtaining any
final order or orders approving such transactions consistent with this
Agreement.

(c) Each of the Company, Parent and Sub will take all reasonable
actions necessary to comply promptly with all legal requirements (which actions
shall include, without limitation, furnishing all information in connection with
approvals of or filings with any Governmental Entity, including, without
limitation, any

schedule, or reports required to be filed with the SEC), and will promptly
cooperate with and furnish information to each other in connection with any such
requirements imposed upon any of them or any of their Subsidiaries in connection
with this Agreement and the transactions contemplated hereby. Each of the
Company, Parent and Sub will, and will cause its Subsidiaries to, take all rea-
sonable actions necessary to obtain any consent, authorization, order or
approval of, or any exemption by, any Governmental Entity or other public or
private third party, required to be obtained or made by Parent, Sub, the Company
or any of their Subsidiaries in connection with the Offer, the Merger or the
taking of any action contemplated thereby or by this Agreement or the Stock-
holders Agreements.

Section 5.5 Employee Benefits. (a) Parent agrees to cause Surviving
Corporation and its Subsidiaries to provide to certain employees of the
Company payments and benefits, which are set forth in this Section 5.5(a) and
which shall be effected, by means of individual agreements, negotiated in good
faith by the parties hereto, reflecting the economic terms set forth in this
Section 5.5.

(i) EVA Plan Bonus

As soon as practicable following the earlier of (A) the Effective Time
and (B) the end of the Company's 1996 fiscal year, the Company shall pay,
pursuant to the terms of the Company's Economic Value Added Incentive Plan (the
"EVA Plan") as herein modified, bonuses for fiscal year 1996, calculated based
on the Company's financial results as of February 10, 1996, and annualized to
equal a bonus for a 12 month period.

(ii) Severance Pay

With respect to the executives of the Company listed on Schedule
5.5(a)(ii) attached hereto ("Covered Executives"), effective as soon as
practicable following the Effective Time (or if later, the date of termination
of employment of the Covered Executive), the Company shall pay to each Covered
Executive severance payments (the "Severance Payments"), on a bi-weekly basis or
at such other intervals as are consistent with Parent's executive payroll
practices, based on one of the two

formulae set forth below, pursuant to elections made by each Covered Executive
prior to the Effective Time:

(A) Severance Payments equal to, on an annualized basis, "Base Pay"
(as defined below), continuing for a period of three years with respect to
Covered Executives who are listed as Group A Executives ("Group A Executives")
on Schedule 5.5(a)(ii)(A) of the Company Disclosure Schedule and for a period
of 18 months with respect to Covered Executives listed as Group B Executives
("Group B Executives") on Schedule 5.5(a)(ii)(A) of the Company Disclosure
Schedule. For purposes of this Section 5.5(a), Base Pay shall mean the highest
base pay paid to the Covered Executive during any one of the 1994, 1995 or 1996
fiscal years, provided that the base pay for the 1996 fiscal year shall be
calculated on an annualized basis; or

(B) Severance Payments equal to, on an annualized basis, "Base Plus
Bonus Pay" (as defined below), continuing for a period of two years with respect
to Group A Executives, and for a period of one year with respect to Group B
Executives. For purposes of this Section 5.5(a), Base Plus Bonus Pay shall mean
Base Pay plus the amount that would have been paid to the executive under the
EVA Plan for fiscal year 1995 as the targeted bonus (the "1995 Target Bonus").

In lieu of the Severance Payments described in clauses (A) and (B)
above, Messrs. Hoven and Mastrian shall receive Severance Payments, continuing
for three years, equal to, on an annualized basis, Base Plus Bonus Pay.

The period during which a Covered Executive continues to receive
Severance Payments shall be referred to in this Section 5.5(a) as the "Severance
Period" for such Covered Executive.

During the Severance Period, each Covered Executive shall continue to
receive, at the Company's expense, continuation of benefits described in Section
6(a)(ii) of the Covered Executive's employment agreement with the Company on
terms at least as favorable to the Covered Executive as is currently in effect,
which bene-

fits may be provided by covering such Covered Executive under benefit plans and
programs maintained by Parent provided, further however, that to the extent any
such Covered Executive receives comparable benefits from, and at the expense of,
a subsequent employer, such benefits from the Company shall cease.

Notwithstanding anything in this Agreement to the contrary, the
Severance Payments described in clauses (A) or (B) above shall be paid to a
Covered Executive only if such Covered Executive is actively employed by the
Company immediately prior to the Effective Time.

In the event that a Covered Executive that continues employment with
the Company following the Effective Time is terminated prior to the expiration
of the Severance Period that would have applied had such Covered Executive been
terminated effective as of the Effective Time, then such Covered Executive shall
be entitled to receive the Severance Payments determined pursuant to this
Section 5.5(a).

Each employee, other than any Covered Executives, of the Company,
who is covered by the Company's severance pay plan as in effect on November 1,
1995 (each, a "Severance-Eligible Employee") and who is employed by the
Company immediately prior to the Effective Time and terminated for other than
"Cause," as defined below, within 12 months following the Effective Time, shall
be entitled to receive bi-weekly severance payments, consistent with Parent's
payroll practices, for a six-month period commencing on such Severance-Eligible
Employee's date of termination of employment, equal to, on an annualized basis,
such Severance-Eligible Employee's Base Pay; provided, however, that such
payments shall be reduced (but not below zero), by the amount of compensation
such Severance-Eligible Employee receives from a subsequent employer to the
extent that such SeveranceEligible Employee is employed during such six-month
period.

For purposes of this Agreement, "Cause" shall mean the conviction of
an employee or executive (as the case may be) for the commission of a felony,
including the entry of a guilty or nolo contendere plea, any willful, grossly
negligent or fraudulent action or inaction by an employee or executive, as the
case may be, or the

employee's or executive's willful and continued failure to substantially perform
an employee's or executive's assigned duties.

(iii) SERP Benefits

Each Company employee who is (A) covered by the Company's Supplemental
Executive Retirement Plan ("SERP") and (B) actively employed by the Company, in
either case, immediately prior to the Effective Time (each, a "SERP Executive")
shall be eligible to receive benefits under the SERP based on the terms of the
SERP, as modified herein. For each SERP Executive (i) the amount of service
taken into account for purposes of calculating benefits and vesting under the
SERP shall be equal to the SERP Executive's service with the Company prior to
the Effective Time plus the Covered Executive's Severance Period, if any, and
(ii) compensation for each SERP Executive for purposes of the SERP shall include
one-half of the 1995 Target Bonus for such SERP Executive.

(iv) Gross-Up; Cap

With respect to the eight Executives listed on Section 5.5(a)(iv) of

the Company Disclosure Schedule, the Company shall provide such executives with
a cash gross-up payment to make such executives whole for the excise taxes
imposed on all benefits and other amounts paid or payable to such executive on
account of the transactions contemplated by this Agreement as a result of the
application of sections 280G and 4999 of the Code. With respect to all other
employees of the Company who are entitled to benefits and other amounts paid or
payable to such executive on account of the transactions contemplated by this
Agreement as a result of the application of sections 280G and 4999 of the
Code, the Company shall not be obligated to pay or provide to any such employee
any payments or benefits to the extent that such payments or benefits would
constitute a "parachute payment" within the meaning of section 280G(b)(2)(A)
of the Code.

(v) ESPP

The Company shall amend the Company's Employee Stock Purchase Plan to
provide that the option period

that is in effect as of the date hereof shall cease as soon as practicable
following the date hereof.

(vi) Outplacement

The Company shall provide outplacement services from a recognized
outplacement provider selected by Parent to all employees of the Company as of
the Effective Time who were based in Twinsburg, Ohio as of the Effective Time,
and are terminated without Cause within one year of the Effective Time.

(b) Parent agrees to cause Surviving Corporation and its
Subsidiaries to provide to all active employees of the Company who continue to
be employed by the Company as of the Effective Time ("Continuing Employees")
employee benefits comparable to those benefits provided to similarly situated
employees of Parent (which benefits may be provided by covering Company
employees under benefit plans maintained by Parent for employees of Parent who
perform similar duties). In addition, with respect to medical benefits provided
to Continuing Employees as of the Effective Time, Parent agrees to cause
Surviving Corporation and its Subsidiaries to waive waiting periods and
pre-existing condition requirements under such plans, and to give Continuing
Employees credit for any copayments and deductibles actually paid by such
employees under the Company's medical plans during the calendar year in which
the Closing occurs. In addition, service with the Company shall be recognized
for purposes of eligibility under Parent welfare plans as well as for purposes
of Parent's programs or policies for vacation pay and sick pay.

Section 5.6 No Solicitation. (a) The Company (and its Subsidiaries,
and affiliates over which it exercises control) will not, and the Company (and
its Subsidiaries, and affiliates over which it exercises control) will use
their best efforts to ensure that their respective officers, directors,
employees, investment bankers, attorneys, accountants and other agents do not,
directly or indirectly: (i) initiate, solicit or encourage, or take any action
to facilitate the making of, any offer or proposal which constitutes or is
reasonably likely to lead to any Takeover Proposal (as defined below) of the

Company or any Subsidiary or an inquiry with respect thereto, or, (ii) in the
event of an unsolicited Takeover

Proposal for the Company or any Subsidiary or affiliate of the Company, engage
in negotiations or discussions with, or provide any information or data to, any
corporation, partnership, person or other entity or group (other than Parent,
any of its affiliates or representatives) (each, a "Person") relating to any
Takeover Proposal, except in the case of clause (ii) above to the extent that
(x) the Takeover Proposal is a bona fide written proposal submitted to the
Company's Board of Directors and (y) the Company's Board of Directors deter-
mines, after having received the oral or written opinion of outside legal
counsel to the Company, that the failure to engage in such negotiations or
discussions or provide such information would result in a breach of the Board of
Directors' fiduciary duties under applicable law. The Company shall notify
Parent and Sub orally and in writing of any such offers, proposals, inquiries or
Takeover Proposals (including, without limitation, the material terms and
conditions thereof and the identity of the Person making it), within 24 hours of
the receipt thereof, and shall thereafter inform Parent on a reasonable basis
of the status and content of any discussions or negotiations with such a third
party, including any material changes to the terms and conditions thereof. The
Company shall, and shall cause its Subsidiaries and affiliates over which it
exercises control, and will use best efforts to ensure their respective
officers, directors, employees, investment bankers, attorneys, accountants
and other agents to, immediately cease and cause to be terminated all
discussions and negotiations that have taken place prior to the date hereof, if
any, with any parties conducted heretofore with respect to any Takeover Proposal
relating to the Company. Nothing contained in this Section 5.6 shall prohibit
the Company or its Board of Directors from taking and disclosing to its
stockholders a position with respect to a tender offer by a third party
pursuant to Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act or
making such disclosure as may be required by applicable law.

(b) As used in this Agreement, "Takeover Proposal" when used in
connection with any Person shall mean any tender or exchange offer involving the
capital stock of such Person, any proposal for a merger, consolidation or
other business combination involving such Person or any Subsidiary of such
Person, any proposal or offer to acquire in any manner a substantial equity

interest in, or a substantial portion of the business or assets of, such Person
or any Subsidiary of such Person, any proposal or offer with respect to any
recapitalization or restructuring with respect to such Person or any
Subsidiary of such Person or any proposal or offer with respect to any other
transaction similar to any of the foregoing with respect to such Person or any
Subsidiary of such Person other than pursuant to the transactions to be effected
pursuant to this Agreement.

Section 5.7 Additional Agreements. Subject to the terms and
conditions herein provided (including, but not limited to, Section 5.4) each of
the parties hereto agrees to use its reasonable efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary, proper

or advisable, whether under applicable laws and regulations or otherwise, or to
remove any injunctions or other impediments or delays, legal or otherwise, to
consummate and make effective the Merger and the other transactions contemplated
by this Agreement. In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement,
the proper officers and directors of the Company and Parent shall use their
reasonable efforts to take, or cause to be taken, all such necessary actions.

Section 5.8 Publicity. So long as this Agreement is in effect,
neither the Company nor Parent nor affiliates which either of them control shall
issue or cause the publication of any press release or other public statement or
announcement with respect to this Agreement, the Stock Option Agreement or the
Zell/Chilmark Stockholder Agreement or the transactions contemplated hereby
or thereby without the prior consultation of the other party, except as may be
required by law or by obligations pursuant to any listing agreement with a
national securities exchange, provided that each party will use its best efforts
to consult with the other party prior to any such issuance.

Section 5.9 Notification of Certain Matters. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(a) the occurrence, or non-occurrence of any event the occurrence or
non-occurrence of which would cause any representation or warranty contained
in this Agreement to be

untrue or inaccurate in any material respect at or prior to the Effective Time
and (b) any material failure of the Company or Parent, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder; provided, however, that the delivery of any
notice pursuant to this Section 5.9 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.

Section 5.10 Directors' and Officers' Insurance and Indemnification.
Parent agrees that at all times after the Effective Time, it shall cause the
Surviving Corporation and its Subsidiaries to indemnify, each person who is
now, or has been at any time prior to the date hereof, an employee, agent,
director or officer of the Company or of any of the Company's Subsidiaries,
successors and assigns (individually an "Indemnified Party" and collectively the
"Indemnified Parties"), to the fullest extent permitted by law, with respect to
any claim, liability, loss, damage, judgment, fine, penalty, amount paid in
settlement or compromise, cost or expense, including reasonable fees and
expenses of legal counsel, (whenever asserted or claimed) ("Indemnified
Liability") based in whole or in part on, or arising in whole or in part out of,
any matter existing or occurring at or prior to the Effective Time whether
commenced, asserted or claimed before or after the Effective Time, including
liability arising under the Securities Act, the Exchange Act or state law.
Parent shall, and shall cause the Surviving Corporation to, maintain in effect
for not less than four years after the Effective Time the current policies of
directors' and officers' liability insurance maintained by the Company and its
Subsidiaries on the date hereof (provided that Parent may substitute therefor
policies having at least the same coverage and containing terms and conditions
which are no less advantageous to the persons currently covered by such policies
as insured) with respect to matters existing or occurring at or prior to the

Effective Time; provided, however, that if the aggregate annual premiums for
such insurance during such period shall exceed 200% of the per annum rate of the
aggregate premium currently paid by the Company and its Subsidiaries for such
insurance on the date of this Agreement, then Parent shall cause the Surviving
Corporation to, and the Surviving Corporation shall, provide the maximum
coverage that shall then be

available at an annual premium equal to 200% of such rate. Parent agrees to pay
all expenses (including fees and expenses of counsel) that may be incurred by
any Indemnified Party in successfully enforcing the indemnity or other
obligations under this Section 5.10. The rights under this Section 5.10 are in
addition to rights that an Indemnified Party may have under the Certificate of
Incorporation, By-laws, other similar organizational documents of the Company or
any of its Subsidiaries or the DGCL. The rights under this Section 5.10 shall
survive consummation of the Merger and are expressly intended to benefit each
Indemnified Party. Parent agrees to cause Surviving Corporation and any of its
Subsidiaries (or their successors) to keep in effect the provisions of its
Certificate of Incorporation or By-laws or similar organizational documents
providing for indemnification to the fullest extent provided by law.

Section 5.11 Rule 145 Affiliates. At least 40 days prior to the
Closing Date, the Company shall deliver to Parent a letter identifying, to the
best of the Company's knowledge, all persons who are, at the time of the
Company Special Meeting, deemed to be "affiliates" of the Company for purposes
of Rule 145 under the Securities Act ("Company Affiliates"). The Company shall
use its best efforts to cause each Person who is identified as a Company
Affiliate to deliver to Parent at least 30 days prior to the Closing Date an
agreement substantially in the form of Exhibit C to this Agreement.

Section 5.12 Cooperation. Parent and the Company shall together, or
pursuant to an allocation of responsibility to be agreed upon between them,
coordinate and cooperate (a) with respect to the timing of the Special Meetings,
(b) in determining whether any action by or in respect of, or filing with, any
Governmental Entity is required, or any actions, consents approvals or waivers
are required to be obtained from parties to any material contracts, in
connection with the consummation of the transactions contemplated by this
Agreement, (c) in seeking any such actions, consents, approvals or waivers or
making any such filings, furnishing information required in connection
therewith and timely seeking to obtain any such actions, consents approvals or
waivers. As soon as possible following the commencement of the Offer, the
Company shall cooperate with Parent in the preparation and filing of the Proxy
Statement/Prospectus

with the Commission, including, but not limited to providing legal, financial,
and accounting information concerning the Company and assisting in the
preparation of all financial and pro forma financial information required to
be included in such Proxy Statement/Prospectus. Subject to the terms and
conditions of this Agreement, Parent and the Company will each use its best
efforts to have the Registration Statement declared effective under the
Securities Act as promptly as practicable after the Registration Statement is

filed, and Parent and the Company shall, subject to applicable law, confer on a
regular and frequent basis with one or more representatives of one another to
report operational matters of significance to the Merger and the general status
of ongoing operations insofar as relevant to the Merger, provided that the
parties will not confer on any matter to the extent inconsistent with law.

Section 5.13. Proxy Statement/Prospectus. As soon as practicable
following the consummation of the Offer, Parent and the Company shall prepare
and file with the SEC the Proxy Statement/Prospectus and each shall use its best
efforts to have the Proxy Statement/Prospectus cleared by the SEC as promptly as
practicable. As soon as practicable following such clearance Parent shall
prepare and file with the SEC the Registration Statement, of which the Proxy
Statement/Prospectus will form a part, and shall use its best efforts to have
the Registration Statement declared effective by the SEC as promptly as
practicable thereafter. Parent and the Company shall cooperate with each other
in the preparation of the Proxy Statement/Prospectus, and each will provide to
the other promptly copies of all correspondence between it or any of its
representatives and the SEC. Each of the Company and Parent shall furnish all
information concerning it required to be included in the Registration Statement
and the Proxy Statement/Prospectus, and as promptly as practicable after the
effectiveness of the Registration Statement, the Proxy Statement/Prospectus will
be mailed to the stockholders of the Company and Parent. No amendment or
supplement to the Registration Statement or the Proxy Statement/Prospectus will
be made without the approval of each of the Company and Parent, which approval
will not be unreasonably withheld or delayed. Each of the Company and Parent
will advise the other promptly after it receives notice thereof, of the time
when the Registration Statement has become effective or any amend-

ment thereto or any supplement or amendment to the Proxy Statement/Prospectus
has been filed, or the issuance of any stop order, or the suspension of the
qualification of the Parent Common Stock to be issued in the Merger for offering
or sale in any jurisdiction, or of any request by the SEC or the NYSE for
amendment of the Registration Statement or the Proxy Statement/Prospectus.

Section 5.14 New York State Real Property Transfer and Gains Taxes.
Sub or the Surviving Corporation shall pay or cause to be paid any New York
State and New York City Real Property Transfer or Gains Taxes incurred in
connection with the Offer and the Merger.

Section 5.15 Confidentiality/Standstill Agreement. The parties
hereto agree that the Confidentiality Agreement shall be hereby amended to
provide that any provision therein which in any manner limits, restricts or
prohibits the voting or acquisition of Shares by Parent or any of its affiliates
or the representation of Parent's designees on the Company's Board of Directors
or which in any manner would be inconsistent with this Agreement or the
Zell/Chilmark Stockholder Agreement or the Stock Option Agreement or the
transactions contemplated hereby and thereby shall terminate as of the date
hereof. The Company agrees not to take any action that would impede, bar,
restrict or otherwise interfere in any manner with Parent's rights under the
Zell/Chilmark Stockholder Agreement or the Stock Option Agreement, including,
without limitation, Parent's right to exercise the option granted to Parent
pursuant to the Stock Option Agreement. The provisions of this Section 5.15

shall survive any termination of this Agreement.

Section 5.16 Stock Exchange Listing. The Parent shall use its best
efforts to list prior to the Effective Time on the New York Stock Exchange, Inc.
("NYSE") and the Pacific Stock Exchange, subject to official notice of issuance,
the shares of Parent Common Stock to be issued in the Merger.

ARTICLE VI

CONDITIONS

Section 6.1 Conditions to the Obligations of Each Party. The
obligations of the Company, on the one hand, and Parent and Sub, on the other
hand, to consummate the Merger are subject to the satisfaction (or, if
permissible, waiver by the party for whose benefit such conditions exist) of the
following conditions:

(a) this Agreement shall have been adopted by the stockholders of the
Company in accordance with the DGCL;

(b) no court, arbitrator or governmental body, agency or official
shall have issued any order, decree or ruling which remains in force and there
shall not be any statute, rule or regulation, restraining, enjoining or
prohibiting the consummation of the Merger;

(c) the Registration Statement shall have become effective under the
Securities Act and no stop order suspending effectiveness of the Registration
Statement shall have been issued and no proceeding for that purpose shall have
been initiated or threatened by the SEC; and

(d) Parent, Sub or their affiliates shall have purchased Shares
pursuant to the Offer.

ARTICLE VII

TERMINATION

Section 7.1 Termination. Anything herein or elsewhere to the
contrary notwithstanding, this Agreement may be terminated and the Merger
contemplated herein may be abandoned at any time prior to the Effective Time,
whether before or after stockholder approval hereof:

(a) By the mutual consent of the Board of Directors of Parent and the
Board of Directors of the Company.

(b) By either of the Board of Directors of the Company or the Board
of Directors of Parent:

(i) if Parent or Sub has not purchased Shares in accordance with

the terms of the Offer on or prior to April 29, 1996; provided, however, that
the right to terminate this Agreement under this Section 7.1(b)(i) shall not be
available to any party whose failure to fulfill any obligations under this
Agreement has been the cause of, or resulted in, the failure to satisfy the
conditions to the Offer; provided further, however, that Parent shall not have
the right to terminate this Agreement under this Section 7.1(b)(i) if Parent or
Sub purchases any Shares in connection with the Offer after April 29, 1996; or

(ii) if any Governmental Entity shall have issued an order, decree or
ruling or taken any other action (which order, decree, ruling or other action
the parties hereto shall use their best efforts to lift), in each case
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other action
shall have become final and non-appealable.

(i) if, prior to the purchase of Shares pursuant to the Offer, the
Board of Directors of the Company shall have (A) withdrawn, or modified or
changed in a manner adverse to Parent or Sub its approval or recommendation of
the Offer, this Agreement or the Merger in order to approve and permit the
Company to execute a definitive agreement relating to a Takeover Proposal, and
(B) determined, after having received the oral or written opinion of outside
independent legal counsel to the Company, that the failure to take such action
as set forth in the preceding clause (A) would result in a breach of the Board
of Directors' fiduciary duties under applicable law; provided, however, that
the Company shall have given Parent and Sub at least thirty-six hours advance
actual notice of any termination pursuant to this Section 7.1(c)(i) and shall
have

made the payment referred to in Section 7.3 hereof; or

(ii) if prior to the purchase of Shares pursuant to the Offer, Parent
or Sub (x) breaches or fails in any material respect to perform or comply with
any of its material covenants and agreements contained herein or (y) breaches
its representations and warranties in any material respect and such breach
would have or would be reasonably likely to have a material adverse effect on
Parent and its Subsidiaries; provided, however, that if any such breach is
cured, the Company may not terminate this Agreement pursuant to this Section
7.1(c)(ii); or

(iii) if Parent or Sub shall have terminated the Offer, or the Offer
shall have expired, without Parent or Sub, as the case may be, purchasing any
shares of Company Common Stock pursuant thereto; provided that the Company may
not terminate this Agreement pursuant to this Section 7.1(c)(iii) if the Company
is in material breach of this Agreement; or

(iv) if, due to an occurrence that if occurring after the
commencement of the Offer would result in a failure to satisfy any of the
conditions set forth in Annex A hereto, Parent, Sub or any of their affiliates
shall have failed to commence the Offer on or prior to five business days
following the date of the initial public announcement of the Offer; provided,

that the Company may not terminate this Agreement pursuant to this Section
7.1(c)(iv) if the Company is in material breach of this Agreement.

(d) By the Board of Directors of Parent:

(i) if, due to an occurrence that if occurring after the commencement
of the Offer would result in a failure to satisfy any of the conditions set
forth in Annex A hereto, Parent, Sub or any of their affiliates shall have
failed to commence the Offer on or prior to five business days following the
date of the initial public announcement of the Offer; provided that Parent may
not terminate this

Agreement pursuant to this Section 7.1(d)(i) if Parent or Sub is in material
breach of this Agreement; or

(ii) if (A) prior to the purchase of Shares pursuant to the Offer,
the Board of Directors of the Company shall have withdrawn, or modified or
changed in a manner adverse to Parent or Sub its approval or recommendation of
the Offer, this Agreement or Merger or shall have recommended a Takeover
Proposal or other business combination, or the Company shall have entered into
an agreement in principle (or similar agreement) or definitive agreement
providing for a Takeover Proposal or other business combination with a person or
entity other than Parent, Sub or their Subsidiaries (or the Board of Directors
of the Company resolves to do any of the foregoing), or (B) prior to the
consummation of the Offer, it shall have been publicly disclosed or Parent or
Sub shall have learned that any person, entity or "group" (as that term is
defined in Section 13(d)(3) of the Exchange Act) (an "Acquiring Person"),
other than Parent, Sub or Zell/Chilmark Fund, L.P. or Magten or FMR Corp.
(including any of FMR Corp.'s affiliates) shall have acquired beneficial
ownership (determined pursuant to Rule 13d-3 promulgated under the Exchange Act)
of more than 14.9% of any class or series of capital stock of the Company
(including the Shares), through the acquisition of stock, the formation of a
group or otherwise, or shall have been granted any option, right or warrant,
conditional or otherwise, to acquire beneficial ownership of more than 14.9% of
any class or series of capital stock of the Company (including the Shares); or

(iii) if Parent or Sub, as the case may be, shall have terminated the
Offer, or the Offer shall have expired without Parent or Sub, as the case may
be, purchasing any Shares thereunder, provided that Parent may not terminate
this Agreement pursuant to this Section 7.1(d)(iii) if Parent or Sub is in
material breach of this Agreement.

Section 7.2 Effect of Termination. In the event of the termination
of this Agreement as provided in Section 7.1, written notice thereof shall
forthwith be
68

given to the other party or parties specifying the provision hereof pursuant
to which such termination is made, and this Agreement shall forthwith become
null and void, and there shall be no liability on the part of Parent, Sub or the
Company except (A) for fraud or for material breach of this Agreement and (B) as
set forth in Sections 5.15, 7.3, 8.1 and 8.2 hereof.

Section 7.3 Termination Fee. If (w) the Board of Directors of the
Company shall terminate this Agreement pursuant to Section 7.1(c)(i) hereof,
(x) the Board of Directors of Parent shall terminate this Agreement pursuant to
Section 7.1(d)(ii)(A) hereof, (y) the Board of Directors of Parent shall
terminate this Agreement pursuant to Section 7.1(d)(ii)(B) and within nine
months of such termination, an Acquiring Person shall acquire or beneficially
own a majority of the then outstanding Shares or shall have obtained
representation on the Company's Board of Directors or shall enter into a defin-
itive agreement with the Company with respect to a Takeover Proposal or
similar business combination, or (z) the Board of Directors of Parent shall
terminate this Agreement pursuant to Section 7.1(d)(i) or Section 7.1(d)(iii)
hereof, in each case due to (I) a material breach of the representations and
warranties of the Company set forth in this Agreement or (II) a material breach
of, or failure to perform or comply with, by the Company any material
obligation, covenant or agreement contained in this Agreement, then in any such
case as described in clause (w), (x), (y) or (z) (each such case of termination
being referred to as a "Trigger Event"), the Company shall pay to Parent (not
later than the date of termination of this Agreement in the case of clauses (w),
(x) and (z) above) an amount equal to $45 million.

ARTICLE VIII

MISCELLANEOUS

Section 8.1 Fees and Expenses. Except as otherwise provided in
Section 7.3 hereof and except for expenses incurred in connection with printing
the Offer Documents, Schedule 14D-9, Proxy Statement/Prospectus and the
Registration Statement, as well as the filing fees relating thereto and relating
to the filing under the HSR Act, which costs shall be shared equally by Parent
and

the Company, all costs (other than the filing fee for registration of the Parent
Common Stock which will be paid by Parent) and expenses incurred in connection
with this Agreement and the consummation of the transactions contemplated hereby
and thereby shall be paid by the party incurring such expenses.

Section 8.2 Finders' Fees. (a) Except for Morgan Stanley & Co.
Incorporated, a copy of whose engagement agreement has been provided to Parent
and whose fees will be paid by the Company, there is no investment banker,
broker, finder or other intermediary which has been retained by or is authorized
to act on behalf of the Company or any of its Subsidiaries who might be entitled
to any fee or commission from the Company or any of its Subsidiaries upon
consummation of the transactions contemplated by this Agreement.

(b) Except for Donaldson, Lufkin & Jenrette Securities Corporation,
a copy of whose engagement agreement has been provided to the Company and whose
fees will be paid by Parent, there is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of Parent or any of its Subsidiaries who might be entitled to any fee or
commission from Parent or any of its Subsidiaries upon consummation of the
transactions contemplated by this Agreement.

Section 8.3 Amendment and Modification. Subject to applicable law,
this Agreement may be amended, modified and supplemented in any and all
respects, whether before or after any vote of the stockholders of the Company
contemplated hereby, by written agreement of the parties hereto, pursuant to
action taken by their respective Boards of Directors (which, in the case of
the Company, shall include the affirmative vote of a majority of the Continuing
Directors), at any time prior to the Closing Date with respect to any of the
terms contained herein; provided, however, that after the approval of this
Agreement by the stockholders of the Company, no such amendment, modification or
supplement shall reduce or change the consideration to be received by the
Company's stockholders in the Merger.

Section 8.4 Nonsurvival of Representations and Warranties. None of
the representations and warranties

in this Agreement or in any schedule, instrument or other document delivered
pursuant to this Agreement shall survive the Effective Time.

Section 8.5 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or sent by an overnight courier service, such as
FedEx, to the parties at the following addresses (or at such other address for a
party as shall be specified by like notice):

(a) if to Parent or Sub, to:
Rite Aid Corporation
30 Hunter Lane
Camp Hill, Pennsylvania 17011
Attention: Chief Executive Officer
Telephone No.: (717) 761-2633
Telecopy No.: (717) 975-5905

with a copy to:

Nancy A. Lieberman, Esq.
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Telephone No.: (212) 735-3000
Telecopy No.: (212) 735-2000

and

(b) if to the Company, to:

Revco D.S., Inc.
1925 Enterprise Parkway
Twinsburg, Ohio 44087
Attention: Chief Executive Officer
Telephone No.: (216) 425-9811
Telecopy No.: (216) 487-1679

with a copy to:

Michael K.L. Wager, Esq.
Benesch, Friedlander,
Coplan & Aronoff
2300 BP America Building
200 Public Square
Cleveland, Ohio 44114
Telephone No.: 216-363-4500
Telecopy No.: 216-363-4588

Section 8.6 Interpretation. When a reference is made in this
Agreement to Sections, such reference shall be to a Section of this Agreement
unless otherwise indicated. Whenever the words "include", "includes" or
"including" are used in this Agreement they shall be deemed to be followed by
the words "without limitation". The phrases "the date of this Agreement", "the
date hereof", and terms of similar import, unless the context otherwise
requires, shall be deemed to refer to November , 1995. As used in this
Agreement, the term "affiliate(s)" shall have the meaning set forth in Rule
l2b-2 of the Exchange Act.

Section 8.7 Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.

Section 8.8 Entire Agreement; No Third Party Beneficiaries; Rights of
Ownership. This Agreement, the Zell/Chilmark Stockholder Agreement, the Stock
Option Agreement and the Confidentiality Agreement, as modified hereby
(including the exhibits hereto and the documents and the instruments referred to
herein and therein): (a) constitute the entire agreement and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, and (b) except as provided in
Sections 5.5 and 5.10 with respect to the obligations of the Company or the
Surviving Corporation thereunder, are not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder.

Section 8.9 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.

Section 8.10 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall
be entitled to the remedy of specific performance of the terms hereof, in

addition to any other remedy at law or equity.

Section 8.11 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware without giving
effect to the principles of conflicts of law thereof.

Section 8.12 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that Sub may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to
Parent or to any direct or indirect wholly owned Subsidiary of Parent; provided,
however, that no such assignment shall relieve Parent from any of its
obligations hereunder. Subject to the preceding sentence, this Agreement will
be binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.

Section 8.13 Joint and Several Liability. Parent and Sub hereby
agree that they will be jointly and severally liable for all covenants,
agreements, obligations and representations and warranties made by either of
them in this Agreement.

IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized
as of the date first written above.

RITE AID CORPORATION

By: /s/ Martin L. Grass
----------------------------
Name: Martin L. Grass
Title: Chairman of the Board
and Chief Executive Officer

OCEAN ACQUISITION CORPORATION

By: /s/ Martin L. Grass
----------------------------
Name: Martin L. Grass
Title: President

REVCO D.S., INC.

By: /s/ D. Dwayne Hoven
-----------------------------
Name: D. Dwayne Hoven
Title: President and Chief
Executive Officer

ANNEX A

CONDITIONS TO THE TENDER OFFER

Notwithstanding any other provisions of the Offer, and in addition to
(and not in limitation of) Sub's rights to extend and amend the Offer at any
time in its sole discretion (subject to the provisions of the Merger Agreement),
Sub shall not be required to accept for payment or, subject to any applicable
rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to Sub's obligation to pay for or return tendered Shares promptly
after termination or withdrawal of the Offer), pay for, and may delay the
acceptance for payment of or, subject to the restriction referred to above, the
payment for, any tendered Shares, and may terminate the Offer as to any Shares
not then paid for, if (i) any applicable waiting period under the HSR Act has
not expired or terminated prior to the expiration of the Offer, (ii) the
Minimum Condition has not been satisfied, or (iii) at any time on or after
November 17, 1995 and prior to the acceptance for payment of any Shares, any of
the following events shall occur or shall be determined by Sub to have occurred:

A-1

prohibit or delay Parent's, Sub's or any of their subsidiaries' ownership or
operation of all or any portion (other than an immaterial portion) of the
business or assets of the Company or its subsidiaries, or to compel Parent or
any of its subsidiaries to dispose of or hold separate all or any portion (other
than an immaterial portion) of the business or assets of the Company or Parent
or their respective subsidiaries, (iii) seeking to impose or confirm material
limitations on the ability of Parent, Sub or any of their subsidiaries or
affiliates effectively to exercise full rights of ownership of the Shares,
including, without limitation, the right to vote any Shares acquired or owned by
Parent, Sub or any of their subsidiaries or affiliates on all matters properly
presented to the Company's stockholders, or (iv) seeking to require divestiture
by Parent, or Sub or any of their subsidiaries of any Shares; or

(b) there shall be any action taken, or any statute, rule,
regulation, injunction, judgment, order or decree enacted, enforced, entered,

promulgated, issued or deemed applicable to the Offer or the Merger, by any
court, government or governmental authority or agency, domestic or foreign,
that, directly or indirectly, results in any of the consequences referred to
in clauses (i) through (iv) of paragraph (a) above; or

(c) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on the New York Stock Exchange for a
period in excess of three hours, (ii) the declaration of a banking moratorium or
any suspension of payments in respect of banks in the United States (whether or
not mandatory), (iii) the commencement of a war, armed hostilities or other
international or national calamity directly or indirectly involving the United
States, (iv) any limitation (whether or not mandatory) by any foreign or
United States governmental authority or agency on the extension of credit by
banks or other financial institutions, (v) any decline in either the Dow Jones
Industrial Average or the Standard & Poor's Index of 500 Industrial Companies by
an amount in excess of 20% measured from the close of business on November 29,
1995, or (vi) in the case of any of the foregoing existing at the time of the
commencement of the Offer, a material acceleration or worsening thereof; or

A-2

(d) the representations and warranties of the Company set forth in
the Merger Agreement shall not be true and correct in any material respect as of
the date of consummation of the Offer as though made on or as of such date,
except (i) for changes specifically permitted by the Merger Agreement and (ii)
those representations and warranties that address matters only as of a particu-
lar date which are true and correct as of such date, or the Company shall have
breached or failed in any material respect to perform or comply with any
material obligation, agreement or covenant required by the Merger Agreement
to be performed or complied with by it; or

(e) the Merger Agreement shall have been terminated in accordance
with its terms; or

(f) any party to the Zell/Chilmark Stockholder Agreement or the Stock
Option Agreement other than Sub and Parent shall have breached or failed to
perform any of its agreements under such agreements or breached any of its
representations and warranties in such agreements or any such agreement shall
not be valid, binding and enforceable, except for such breaches or failures or
failures to be valid, binding and enforceable that do not materially and
adversely affect the benefits expected to be received by Parent and Sub under
the Merger Agreement, the Zell/Chilmark Stockholder Agreement or the Stock
Option Agreement; or

(g) (i) it shall have been publicly disclosed or Parent or Sub shall
have otherwise learned that any person, entity or "group" (as defined in Section
13(d)(3) of the Exchange Act), other than Zell/Chilmark Fund, L.P. or Magten
Asset Management Corporation, or FMR Corp. (including any of FMR Corp.'s
affiliates) Parent or its affiliates or any group of which any of them is a
member, shall have acquired beneficial ownership (determined pursuant to Rule
13d-3 promulgated under the Exchange Act) of more than 14.9% of any class or
series of capital stock of the Company (including the Shares), through the
acquisition of stock, the formation of a group or otherwise, or shall have
been granted an option, right or warrant, conditional or otherwise, to acquire

beneficial ownership of more than 14.9% of any class or series of capital stock
of the Company (including the Shares); or (ii) any person, entity or group shall
have entered into a definitive agreement or agreement in principle with the

A-3

Company with respect to a merger, consolidation or other business combination
with the Company; or

(h) a tender or exchange offer for some or all of the Shares or
proposal for a Takeover Proposal shall have been publicly proposed to be made or
shall have been made by another person or entity;

(i) the Board of Directors of the Company shall have withdrawn, or
modified or changed in a manner adverse to Parent or Sub (including by amendment
of the Schedule 14D-9), its approval or recommendation of the Offer, the Merger
Agreement, or the Merger, or recommended another proposal or offer, or shall
have resolved to do any of the foregoing; or

(j) there shall have occurred any event, change or effect (including
the incurrence of any liabilities of any nature, whether or not accrued,
contingent or otherwise) which has, individually or in the aggregate, a
material adverse effect (as defined in the Merger Agreement) on the Company and
its Subsidiaries;

which in the sole judgment of Parent or Sub, in any such case, and regardless of
the circumstances (including any action or inaction by Parent or Sub giving rise
to such condition) makes it inadvisable to proceed with the Offer or with such
acceptance for payment or payments.

The foregoing conditions are for the sole benefit of Parent and Sub
and may be asserted by Parent or Sub regardless of the circumstances giving rise
to any such condition or may be waived by Parent or Sub in whole or in part at
any time and from time to time in their sole discretion. The failure by Parent
or Sub at any time to exercise any of the foregoing rights shall not be deemed a
waiver of any such right; the waiver of any such right with respect to
particular facts and other circumstances shall not be deemed a waiver with
respect to other facts and circumstances; and each such right shall be deemed an
ongoing right which may be asserted at any time and from time to time.

A-4

EXHIBIT C

Form of Affiliate Agreement

Rite Aid Corporation
30 Hunter Lane
Camp Hill, PA 17011

Ladies and Gentlemen:

The undersigned is a holder of shares of Common Stock, par value $.01 per
share (the "Company Common Stock"), of Revco D.S., Inc., a Delaware corporation
(the "Company"). The undersigned may receive shares of Common Stock, par value
$1.00 per share (the "Parent Common Stock"), of Rite Aid Corporation, a
Delaware corporation ("Parent"), in connection with the merger of Ocean
Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary
of Parent ("Sub"), with and into the Company, with the Company continuing as
the surviving corporation (the "Merger").

The undersigned acknowledges that the undersigned may be deemed an
"affiliate" of the Company as the term "affiliate" is defined for purposes of
paragraphs (c) and (d) of Rule 145 ("Rule 145") of the rules and regulations
under the Securities Act of 1933, as amended (the "Act"). Execution of this
Agreement by the undersigned should not be construed as an admission of
"affiliate" status or as a waiver of any rights the undersigned may have to
object to any claim that the undersigned is such an affiliate on or after the
date of this Agreement.

If in fact the undersigned were an affiliate of the Company under the Act,
the undersigned's ability to sell, transfer or otherwise dispose of any Parent
Common Stock received by the undersigned in exchange for any shares of Company
Common Stock pursuant to the Merger may be restricted unless such transaction
is registered under the Act or an exemption from such registration is
available. The undersigned understands that such exemptions are limited and
the undersigned has obtained advice of counsel as to the nature and conditions
of such exemptions, including information with respect to the applicability to
the sale of such securities of Rules 144 and 145(d) promulgated under the Act.

A. The undersigned hereby represents to and covenants with Parent that
the undersigned will not sell, transfer or otherwise dispose of any Parent
Common Stock received by the undersigned in exchange for shares of Company
Common Stock pursuant to the Merger except (i) pursuant to an effective
registration statement under the Act, (ii) by a sale made in conformity with
the provisions of Rule 145 (and otherwise in accordance with Rule 144
under the Act if the undersigned is an affiliate of Parent and if so required at
the time) or (iii) in a transaction which, in the opinion of independent counsel
reasonably satisfactory to Parent or as described in a "no-action" or
interpretive letter from the Staff of the Securities and Exchange Commission
(the "Commission"), is not required to be registered under the Act.

B. The undersigned understands that Parent is under no obligation to
register the sale, transfer or other disposition of Parent Common Stock by the
undersigned or on behalf of the undersigned under the Act or, except as
provided in paragraph F.1 below, to take any other action necessary in order to
make compliance with an exemption from such registration available.

C. The undersigned also understands that stop transfer instructions will
be given to Parent's transfer agents with respect to the Parent Common Stock
issued to the undersigned and that there will be placed on the certificates
for the Parent Common Stock issued to the undersigned, or any substitutions
therefor, a legend stating in substance:

"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE
ISSUED IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE
SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE
TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT DATED NOVEMBER 29, 1995 BETWEEN THE REGISTERED
HOLDER HEREOF AND RITE AID CORPORATION, A COPY
OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL
OFFICES OF RITE AID CORPORATION."

D. The undersigned also understands that unless a sale or transfer is made
in conformity with the provisions of Rule 145, or pursuant to a registration
statement, Parent reserves the right to put the following legend on the
certificates issued to the undersigned's transferee:

"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
WERE ACQUIRED FROM A PERSON WHO RECEIVED SUCH SHARES
IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER
THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE
BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR
FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION
THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF
1933 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OF 1933."

E. In the event of a sale of Parent Common Stock pursuant to Rule 145, the
undersigned will supply Parent with evidence of compliance with such Rule, in
the form of customary seller's and broker's Rule 145 representation letters
or as Parent may otherwise reasonably request. The undersigned understands
that Parent may instruct its transfer agent to withhold the transfer of any
Parent Common Stock disposed of by the undersigned in a manner inconsistent
with this letter.

F. By Parent's acceptance of this Agreement, Parent hereby agrees with the
undersigned as follows:

1. For so long as to the extent necessary to permit the undersigned to
sell the Parent Common Stock pursuant to Rule 145 and, to the extent
applicable, Rule 144 under the Act, Parent shall (a) use its reasonable best
efforts to (i) file, on a timely basis, all reports and data required to be
filed with the Commission by it pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended (the "1934 Act") and (ii) furnish to the
undersigned upon request a written statement as to whether Parent has complied
with such reporting requirements during the 12 months preceding any proposed
sale of Parent Common Stock by the undersigned under Rule 145 and Rule 144.
Parent has filed all reports required to be filed with the Commission under
Section 13 of the 1934 Act during the preceding 12 months.

2. It is understood and agreed that the legends set forth in paragraph C
and D above shall be removed by delivery of substitute certificates without
such legend if such legend is not required for purposes of the Act or this
Agreement. It is understood and agreed that such legends and the stop orders
referred to above will be removed if (i) two years shall have elapsed from the
date the undersigned acquired Parent Common Stock re-

ceived in the Merger and the provisions of Rule 145(d)(2) are then available to
the undersigned, (ii) three years shall have elapsed from the date the
undersigned acquired the Parent Common Stock received in the Merger and the
provisions of Rule 145(d)(3) are then applicable to the undersigned, (iii) the
Parent has received either an opinion of counsel, which opinion and counsel
shall be reasonably satisfactory to Parent, or a "no action" letter obtained
from the staff of the Commission, to the effect that the Parent Common Stock
subject thereto may be transferred free of the restrictions imposed by Rule
144 or 145 under the Act, or (iv) in the event of a sale of Parent Common Stock
received by the undersigned in the Merger which has been registered under the
Act or made in conformity with the provisions of Rule 145; and, in the case of
(i) and (ii) above, Parent has received either an opinion of counsel, which
opinion and counsel shall be reasonably satisfactory to Parent, or a "no
action" letter obtained from the staff of the Commission, to the effect that
the restrictions imposed by Rule 145 under the Act no longer apply to the
undersigned.

The undersigned acknowledges that it has carefully reviewed this letter
and understands the requirements hereof and the limitations imposed upon the
distribution, sale, transfer or other disposition of Parent Common Stock
received by the undersigned in the Merger.

Very truly yours,

-------------------------
Name

Accepted this __ day of
_______________ 199_, by

RITE AID CORPORATION

By:
---------------------------
Name:
Title:

STOCKHOLDER AGREEMENT

AGREEMENT, dated as of November 29, 1995, by and among Rite Aid
Corporation, a Delaware corporation ("Parent"), Ocean Acquisition Corporation, a
Delaware corporation and a wholly owned subsidiary of Parent ("Sub"), and
Zell/Chilmark Fund, L.P., a Delaware limited partnership (referred to herein as
the "Stockholder").

W I T N E S S E T H:

WHEREAS, immediately prior to the execution of this Agreement, Parent,
Sub and Revco D.S., Inc., a Delaware corporation (the "Company"), have entered
into an Agreement and Plan of Merger (as such agreement may hereafter be amended
from time to time, the "Merger Agreement"), pursuant to which Sub will be merged
with and into the Company (the "Merger");

WHEREAS, in furtherance of the Merger, Parent and the Company desire
that as soon as practicable but in no event later than five business days) after
the execution of the Merger Agreement, Sub shall commence an offer (the
"Offer") to purchase for cash not less than 35,144,833 shares and up to all of
the issued and outstanding Company Common Stock (as defined in Section 1 hereof)
at a price of $27.50 per share of Company Common Stock; and

WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Parent has required that the Stockholder agree, and the Stockholder
has agreed, to enter into this Agreement;

NOW, THEREFORE, in consideration of the foregoing and the mutual
promises, representations, warranties, covenants and agreements contained
herein, the parties hereto, intending to be legally bound hereby, agree as
follows:

1. Certain Definitions. Capitalized terms used and not defined
herein have the respective meanings ascribed to them in the Merger Agreement.
For purposes of this Agreement:

(a) "Beneficially Own" or "Beneficial Ownership" with respect to
any securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), including pursuant to any agreement, arrangement
or understanding, whether or not in writing. Without duplicative counting of
the same securities by the same holder, securities Beneficially Owned by a
Person shall include securities Beneficially Owned by all other Persons with
whom such Person would constitute a "group" within the meaning of Section 13(d)
of the Exchange Act.

(b) "Company Common Stock" shall mean at any time the common stock,
$.01 par value, of the Company.

(c) "Person" shall mean an individual, corporation, partnership,
limited liability company, joint venture, association, trust, unincorporated
organization or other entity.

2. Tender of Shares.

(a) The Stockholder hereby agrees to validly tender (or cause the
record owner of such shares to tender), and not to withdraw, pursuant to and in
accordance with the terms of the Offer, not later than prior to the expiration
of the Offer pursuant to Section 1.1 of the Merger Agreement and Rule 14d-2
under the Exchange Act, 13,102,288 shares of Company Common Stock (the "Ex-
isting Shares" and together with any shares of Company Common Stock acquired by
the Stockholder in any capacity after the date hereof and prior to the
termination of this Agreement whether upon the exercise of options, warrants or
rights, the conversion or exchange of convertible or exchangeable securities,
or by means of purchase, dividend, distribution, gift, bequest, inheritance or
as a successor in interest in any capacity or otherwise, the "Shares")
Beneficially Owned by the Stockholder. The Stockholder hereby acknowledges
and agrees that Parent's and Sub's obligation to accept for payment and pay for
the Shares in the Offer, is subject to the

terms and conditions of the Offer. The parties agree that the Stockholder will,
for all Shares tendered by the Stockholder in the Offer and accepted for payment
and paid for by Sub, receive the same per share consideration paid to other
shareholders who have tendered into the Offer.

(b) The transfer by the Stockholder of the Shares to Sub in the Offer
shall pass to and unconditionally vest in Sub good and valid title to the
Shares, free and clear of all claims, liens, restrictions, security interests,
pledges, limitations and encumbrances whatsoever.

(c) The Stockholder hereby agrees to permit Parent and Sub to publish
and disclose in the Offer Documents and, if approval of the Company's
shareholders is required under applicable law, the Registration Statement and
the Proxy Statement/Prospectus (including all documents and schedules filed

with the SEC) its identity and ownership of Company Common Stock and the nature
of its commitments, arrangements and understandings under this Agreement.

3. Voting of Company Common Stock. The Stockholder hereby agrees
that during the period commencing on the date hereof and continuing until the
first to occur of (i) the Effective Time or (ii) termination of this Agreement
in accordance with its terms, at any meeting (whether annual or special and
whether or not an adjourned or postponed meeting) of the holders of Company
Common Stock, however called, or in connection with any written consent of the
holders of Company Common Stock, the Stockholder shall vote (or cause to be
voted) the Shares held of record or Beneficially Owned by the Stockholder (i)
in favor of the Merger, the execution and delivery by the Company of the Merger
Agreement and the approval and adoption of the terms thereof and each of the
other actions contemplated by the Merger Agreement and this Agreement and any
actions required in furtherance thereof and hereof; (ii) against any action or
agreement that would result in a breach in any respect of any covenant,
representation or warranty or any other obligation or agreement of the Company
under the Merger Agreement or this Agreement; and (iii) except as otherwise
agreed to in writing in advance by Parent, against the following actions (other
than the Merger and the

transactions contemplated by this Agreement and the Merger Agreement):
(A) any extraordinary corporate transaction, such as a merger, consolidation or
other business combination involving the Company or its Subsidiaries; (B) any
sale, lease or transfer of a material amount of assets of the Company or its
Subsidiaries, or a reorganization, restructuring, recapitalization, special
dividend, dissolution or liquidation of the Company or its Subsidiaries; or
(C)(1) any change in a majority of the persons who constitute the board of
directors of the Company; (2) any change in the present capitalization of the
Company including any proposal to sell a substantial equity interest in the
Company and its Subsidiaries; (3) any amendment of the Company's Certificate of
Incorporation or By-laws; (4) any other change in the Company's corporate
structure or business; or (5) any other action which, in the case of each of the
matters referred to in clauses (C)(1), (2), (3) or (4), is intended, or could
reasonably be expected, to impede, interfere with, delay, postpone, or
materially adversely affect the Offer, the Merger and the transactions
contemplated by this Agreement and the Merger Agreement. The Stockholder
shall not enter into any agreement or understanding with any person or entity
the effect of which would be inconsistent or violative of the provisions and
agreements contained in this Section 3.

4. Stockholder Covenant. Except as contemplated by this Agreement,
the Stockholder shall not for a period of six months following the termination
of this Agreement (other than as a result of a breach by Parent or Sub) enter
into, execute, or be a party to any agreement or understanding, written or
otherwise, with any Person whereby the Stockholder (i) grants or otherwise gives
to such Person an option or right to purchase or acquire any or all of the
Shares other than sales made in open market transactions; (ii) agrees or
covenants to vote or to grant a proxy to vote any or all of the Shares held of
record or Beneficially Owned by the Stockholder, at any meeting (whether annual
or special and whether or not an adjourned or postponed meeting) of the holders
of Company Common Stock, however called, or in connection with any written

consent of the holders of Company Common Stock; or (iii) agrees or covenants to
tender any or all of the Shares held of record or Beneficially Owned by the
Stockholder into any tender offer or exchange offer relating to the Company
Common Stock.

5. Covenants, Representations and Warranties of Stockholder. The
Stockholder hereby represents and warrants to, and agrees with, Parent and Sub
as follows:

(a) Ownership of Shares. The Stockholder is the record and
Beneficial Owner of the Existing Shares. On the date hereof, the Existing
Shares constitute all of the Shares owned of record or Beneficially Owned by the
Stockholder. The Stockholder has sole voting power and sole power to issue
instructions with respect to the matters set forth in Sections 2 and 3 hereof,
sole power of disposition, sole power of conversion, sole power to demand
appraisal rights and sole power to agree to all of the matters set forth in this
Agreement, in each case with respect to all of the Existing Shares with no limi-
tations, qualifications or restrictions on such rights, subject to applicable
securities laws and the terms of this Agreement.

(b) Corporate Authorization. This Agreement has been duly and
validly executed and delivered by the Stockholder and constitutes a valid and
binding agreement enforceable against the Stockholder in accordance with its
terms except to the extent (i) such enforcement may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors rights and (ii) the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.

to any third party right of termination, cancellation, material modification or
acceleration) under any of the terms, conditions or provisions of any note, loan
agreement, bond, mortgage, indenture, license, contract, commitment,
arrangement, understanding, agreement or other instrument or obligation of any
kind to which Stockholder is a party or by which the Stockholder or any of its
properties or assets may be bound, or (C) violate any order, writ, injunction,
decree, judgment, statute, rule or regulation applicable to the Stockholder or
any of its properties or assets.

(d) No Encumbrances. Except as applicable in connection with the
transactions contemplated by Sections 2, 3 and 4 hereof, the Shares and the
certificates representing such Shares are now, and at all times during the
term hereof, will be, held by the Stockholder, or by a nominee or custodian for
the benefit of such Stockholder, free and clear of all liens, claims, security
interests, proxies, voting trusts or agreements, understandings or arrangements
or any other encumbrances whatsoever, except for any such encumbrances or
proxies arising hereunder.

(e) No Finder's Fees. No broker, investment banker, financial
advisor or other person is entitled to any broker's, finder's, financial
adviser's or other similar fee or commission in connection with the transac-
tions contemplated hereby based upon arrangements made by or on behalf of the
Stockholder.

(f) No Solicitation. Stockholder shall not, and shall cause its
affiliates and officers, directors, employees, partners, investment bankers,
attorneys, accountants and other agents and representatives of Stockholder and
such affiliates (such affiliates, officers, directors, employees, partners
investment bankers, attorneys, accountants, agents and representatives of any
Person are hereinafter collectively referred to as the "Representatives" of such
Person) not to, directly or indirectly (i) initiate, solicit or encourage, or
take any action to facilitate the making of, any offer or proposal which
constitutes or is reasonably likely to lead to any Takeover Proposal (as defined
in the Merger Agreement) of the Company or any affiliate or any inquiry with
respect thereto, or (ii) in the event of an unsolicited Takeover Proposal for
the Company or any affiliate of the Company, engage in negotiations or
discussions

with, or provide any information or data to, any Person (other than Parent, any
of its affiliates or representatives) relating to any Takeover Proposal.
Stockholder shall notify Parent and Sub orally and in writing of any such
offers, proposals, or inquiries relating to the purchase or acquisition by any
Person of the Shares (including, without limitation, the terms and conditions
thereof and the identity of the Person making it), within 24 hours of the
receipt thereof. Stockholder shall, and shall cause its Representatives to,
immediately cease and cause to be terminated any and all existing activities,
discussions or negotiations, if any, with any parties conducted heretofore with
respect to any Takeover Proposal relating to the Company, other than
discussions or negotiations with Parent and its affiliates. Notwithstanding
the restrictions set forth in this Section 5(f), any Person who is an officer or
director of the Company may exercise his fiduciary duties in his capacity as a
director or officer of the Company consistent with the terms of the Merger
Agreement.

(g) Restriction on Transfer, Proxies and NonInterference. Except
as applicable in connection with the transactions contemplated by Sections 2 and
3 hereof, the Stockholder shall not, directly or indirectly: (i) offer for
sale, sell, transfer, tender, pledge, encumber, assign or otherwise dispose of,
or enter into any contract, option or other arrangement or understanding with
respect to or consent to the offer for sale, sale, transfer, tender, pledge,

encumbrance, assignment or other disposition of, any or all of the Shares or any
interest therein; (ii) except as contemplated by this Agreement, grant any
proxies or powers of attorney, deposit the Shares into a voting trust or enter
into a voting agreement with respect to the Shares; or (iii) take any action
that would make any representation or warranty of the Stockholder contained
herein untrue or incorrect or would result in a breach by the Stockholder of
their obligations under this Agreement or a breach by the Company of its
obligations under the Merger Agreement.

(h) Reliance by Parent. The Stockholder understands and acknowledges
that Parent is entering into, and causing Sub to enter into, the Merger
Agreement in reliance upon the Stockholder's execution and delivery of this
Agreement.

(i) Further Assurances. From time to time, at the other party's
request and without further consideration, each party hereto shall execute and
deliver such additional documents and take all such further lawful action as may
be necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this
Agreement.

(j) Distribution of Shares of Parent Common Stock. Upon the
consummation of the Merger, the Stockholder shall within 90 days thereafter
either distribute the shares of Parent Common Stock (as defined in the Merger
Agreement) to each of the limited partners of Zell/Chilmark Fund, L.P. or sell
or otherwise dispose of such shares of Parent Common Stock, in each case in
accordance with the governing documents thereto and applicable law; provided
that no such sale or other disposition shall be made if immediately following
such sale or other disposition the acquiror of such Parent Common Stock,
together with the acquiror's affiliates and any members of a group of which the
acquiror is a party, would Beneficially Own in the aggregate 4.9% or more of the
Parent Common Stock then outstanding.

6. Representations and Warranties of Parent and Sub. Parent and Sub
hereby represent and warrant to Stockholder as follows:

(a) Organization. Each of Parent and Sub is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, has all requisite corporate power or other power and authority to
execute and deliver this Agreement and perform their respective obligations
hereunder. The execution and delivery by Parent and Sub of this Agreement and
the performance by Parent and Sub of their respective obligations hereunder
have been duly and validly authorized by the Board of Directors of each of
Parent and Sub and no other corporate proceedings on the part of Parent or Sub
are necessary to authorize the execution, delivery or performance of this
Agreement or the consummation of the transactions contemplated hereby.

(b) Corporate Authorization. This Agreement has been duly and
validly executed and delivered by Parent and Sub and constitutes a valid and
binding agreement of each of Parent and Sub enforceable against each

of Parent and Sub in accordance with its terms except to the extent (i) such
enforcement may be limited by applicable bankruptcy, insolvency or similar
laws affecting creditors rights and (ii) the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding
therefor may be brought.

(c) No Conflicts. Except for filings, authorizations, consents and
approvals as may be required under the HSR Act, the Exchange Act and the
Securities Act (i) no filing with, and no permit, authorization, consent or
approval of, any state or federal public body or authority is necessary for the
execution of this Agreement by Parent or Sub and the consummation by Parent or
Sub of the transactions contemplated hereby and (ii) none of the execution and
delivery of this Agreement by Parent of Sub, the consummation by Parent or Sub
of the transactions contemplated hereby or compliance by Parent or Sub with any
of the provisions hereof shall (A) conflict with or result in any breach of
the certificate of incorporation or by-laws of Parent or Sub, (B) result in a
violation or breach of, or constitute (with or without notice or lapse of time
or both) a default (or give rise to any third party right of termination,
cancellation, material modification or acceleration) under any of the terms,
conditions or provisions of any note, loan agreement, bond, mortgage,
indenture, license, contract, commitment, arrangement, understanding,
agreement or other instrument or obligation of any kind to which Parent or Sub
is a party or by which Parent or Sub or any of their respective properties or
assets may be bound, or (C) violate any order, writ, injunction, decree,
judgment, statute, rule or regulation applicable to Parent or Sub or any of
their respective properties or assets.

(d) No Finder's Fee. Except for Donaldson, Lufkin & Jenrette
Securities Corporation, no broker, investment banker, financial adviser or other
person is entitled to any broker's, finder's, financial adviser's or other
similar fee or commission in connection with the transactions contemplated
hereby based upon arrangements made by or on behalf of Parent or Sub.

7. Stop Transfer; Legend.

(a) The Stockholder agrees with, and covenants to, Parent that the
Stockholder shall not request that the Company register the transfer (book-entry
or otherwise) of any certificate or uncertificated interest representing any
of the Shares, unless such transfer is made in compliance with this Agreement
(including the provisions of Section 2 hereof). In the event of a stock
dividend or distribution, or any change in the Company Common Stock by reason of
any stock dividend, split-up, recapitalization, combination, exchange of shares
or the like, the term "Shares" shall be deemed to refer to and include the
Shares as well as all such stock dividends and distributions and any shares into
which or for which any or all of the Shares may be changed or exchanged and
appropriate adjustments shall be made to the terms and provisions of this
Agreement.

(b) The Stockholder shall promptly after the date hereof surrender to
the Company all certificates representing the Shares, and the Company shall

place the following legend on such certificates:

"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
STOCKHOLDER AGREEMENT, DATED AS OF NOVEMBER 29, 1995 BY AND AMONG RITE AID
CORPORATION, OCEAN ACQUISITION CORPORATION AND ZELL/CHILMARK FUND, L.P. WHICH
AMONG OTHER THINGS RESTRICTS THE TRANSFER AND VOTING THEREOF."

8. Termination. Except as otherwise provided herein, the covenants
and agreements contained herein with respect to the Shares shall terminate upon
the earlier of (i) the consummation of the Merger and (ii) the termination of
the Merger Agreement in accordance with its terms except, that the covenant and
agreement set forth in Section 4 hereof shall survive for six months after such
termination (other than a termination as a result of a breach by Parent or Sub).

9. Confidentiality. The Stockholder recognizes that successful
consummation of the transactions contemplated by this Agreement may be dependent
upon confidentiality with respect to the matters referred to herein. In this
connection, pending public disclosure thereof, the Stockholder hereby agrees not
to disclose or

discuss such matters with anyone not a party to this Agreement (other than its
counsel and advisors, if any) without the prior written consent of Parent,
except for filings required pursuant to the Exchange Act and the rules and
regulations thereunder or disclosures its counsel advises are necessary in order
to fulfill its obligations imposed by law, in which event such Stockholder
shall give notice of such disclosure to Parent as promptly as practicable so as
to enable Parent to seek a protective order from a court of competent
jurisdiction with respect thereto.

10. Miscellaneous.

(a) Entire Agreement. This Agreement and the Merger Agreement
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersedes all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof.

(b) Binding Agreement. The Stockholder agrees that this Agreement
and the obligations hereunder shall attach to the Shares and shall be binding
upon any person or entity to which legal or Beneficial Ownership of such Shares
shall pass, whether by operation of law or otherwise, including, without
limitation, the Stockholder's heirs, distributees, guardians, administrators,
executors, legal representatives, or successors or other transferees (for
value or otherwise) and any other successors in interest. Notwithstanding any
transfer of Shares, the transferor shall remain liable for the performance of
all obligations under this Agreement of the transferor.

(c) Assignment. This Agreement shall not be assigned by operation of
law or otherwise without the prior written consent of the other party, provided
that Parent may assign, in its sole discretion, its rights and obligations
hereunder to any direct or indirect wholly owned subsidiary of Parent, but no
such assignment shall relieve Parent of its obligations hereunder if such
assignee does not perform such obligations.

(d) Amendments, Waivers, Etc. This Agreement may not be amended,
changed, supplemented, waived or otherwise modified or terminated, except upon
the execu-

tion and delivery of a written agreement executed by the parties hereto.

(e) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if given) by hand delivery or telecopy (with a
confirmation copy sent for next day delivery via courier service, such as
Federal Express), or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:

If to Stockholder:
Zell/Chilmark Fund, L.P.
Two North Riverside Plaza
Suite 1500
Chicago, Illinois 60606
Attention.: Sheli Z. Rosenberg
Telephone No.: (312) 984-9711
Telecopy No.: (312) 984-0317

copy to: Michael K.L. Wager, Esq.
Benesch, Friedlander,
Coplan & Aronoff
2300 BP America Building
200 Public Square
Cleveland, Ohio 44114
Telephone No.: (216) 363-4500
Telecopy No.: (216) 363-4588

If to Parent Rite Aid Corporation
or Sub: 30 Hunter Lane
Camp Hill, Pennsylvania 17011
Attention.: Chief Executive Officer
Telephone No.: (717) 761-2633
Telecopy No.: (717) 975-5905

copy to: Nancy A. Lieberman, Esq.
Skadden, Arps, Slate,
Meagher & Flom
919 Third Avenue
New York, New York 10022
Telephone No.: (212) 735-3000
Telecopy No.: (212) 735-2000

or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.

(f) Severability. Whenever possible, each provision or portion of
any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of
any provision of this Agreement is held to be invalid, illegal or unenforceable
in any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.

(g) Specific Performance. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.

(h) Remedies Cumulative. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise of any thereof
by any party shall not preclude the simultaneous or later exercise of any other
such right, power or remedy by such party.

(i) No Waiver. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by such
party of its right to exercise any such or other right, power or remedy or to
demand such compliance.

(j) No Third Party Beneficiaries. This Agreement is not intended
to be for the benefit of, and shall not be enforceable by, any person or entity
who or which is not a party hereto.

(k) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflicts of law thereof.

(l) Jurisdiction. Each party hereby irrevocably submits to the
exclusive jurisdiction of the Court of Chancery in the State of Delaware in any
action, suit or proceeding arising in connection with this Agreement, and agrees
that any such action, suit or proceeding shall be brought only in such court
(and waives any objection based on forum non conveniens or any other objection
to venue therein); provided, however, that such consent to jurisdiction is
solely for the purpose referred to in this paragraph (l) and shall not be deemed
to be a general submission to the jurisdiction of said Court or in the State
of Delaware other than for such purposes. Each party hereto hereby waives any

right to a trial by jury in connection with any such action, suit or proceeding.

(m) Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.

(n) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same Agreement.

IN WITNESS WHEREOF, Parent, Sub and the Stockholder have caused this
Agreement to be duly executed as of the day and year first above written.

RITE AID CORPORATION

By: /S/ Martin L. Grass
-----------------------------
Name: Martin L. Grass
Title: Chairman of the Board
and Chief Executive Officer

OCEAN ACQUISITION CORPORATION

By: /s/ Martin L. Grass
-----------------------------
Name: Martin L. Grass
Title: President

ZELL/CHILMARK FUND, L.P.

By: ZC Limited Partnership,
general partner

By: ZC Partnership,
general partner

By: CZ Inc., a partner

By:
------------------------------
Name: Sheli Z. Rosenberg
Title: Vice President

IN WITNESS WHEREOF, Parent, Sub and the Stockholder have caused this
Agreement to be duly executed as of the day and year first above written.

RITE AID CORPORATION

By:
-----------------------------
Name:
Title:

OCEAN ACQUISITION CORPORATION

By: /s/
-----------------------------
Name:
Title:

ZELL/CHILMARK FUND, L.P.

By: ZC Limited Partnership,
general partner

By: ZC Partnership,
general partner

By: ZC Inc., a partner

By: /s/ Sheli Z. Rosenberg
------------------------------
Name: Sheli Z. Rosenberg
Title: Vice President

STOCK OPTION AGREEMENT

AGREEMENT, dated as of November 29, 1995, by and among Rite Aid
Corporation, a Delaware corporation ("Parent"), Ocean Acquisition Corporation, a
Delaware corporation and a wholly owned subsidiary of Parent ("Sub"), and Revco
D.S., Inc., a Delaware corporation (the "Company").

W I T N E S S E T H:

WHEREAS, immediately prior to the execution of this Agreement, Parent,
Sub and the Company, have entered into an Agreement and Plan of Merger (as such
agreement may hereafter be amended from time to time, the "Merger Agreement"),
pursuant to which Sub will be merged with and into the Company (the "Merger");

WHEREAS, in furtherance of the Merger, Parent and the Company desire
that as soon as practicable (but in no event later than five business days)
after the execution of the Merger Agreement, Sub shall commence an offer (the
"Offer") to purchase for cash not less than 35,144,833 shares and up to all of
the issued and outstanding Company Common Stock (as defined in Section 1
hereof), or such greater number of shares as equals 50.1% of the shares
outstanding on a fully diluted basis as of the expiration of the Offer, at a
price of $27.50 per share of Company Common Stock; and

WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Parent and Sub have required that the Company agree, and the Company
has agreed, to enter into this Agreement;

1. Certain Definitions. Capitalized terms used and not defined
herein have the respective meanings ascribed to them in the Merger Agreement.
For purposes of this Agreement:

a. "Beneficially Own" or "Beneficial Ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), including pursuant to any agreement, arrangement
or understanding, whether or not in writing. Without duplicative counting of
the same securities by the same holder, securities Beneficially Owned by a
Person shall include securities Beneficially Owned by all other Persons with
whom such Person would constitute a "group" within the meaning of Section 13(d)
of the Exchange Act.

b. "Company Common Stock" shall mean at any time the common stock,
$.01 par value, of the Company.

c. "Person" shall mean an individual, corporation, limited
liability company, partnership, joint venture, association, trust,
unincorporated organization or other entity.

2. Grant of Stock Option. In order to induce Parent and Sub to enter
into the Merger Agreement, the Company hereby grants to Parent an unconditional,
irrevocable option (a "Stock Option") to purchase up to 13,251,010 fully
paid and nonassessable shares of Company Common Stock at a purchase price of
$27.50 per share (the "Purchase Price"), or such other number of shares of
Company Common Stock as equals 19.9% of the Company's issued and outstanding
shares of Company Common Stock at the time of exercise of the Stock Option;
provided that in no event shall the number of shares of Company Common Stock for
which the Stock Option is exercisable exceed 19.9% of the shares of Company
Common Stock issued and outstanding at the time of exercise of the Stock Option
(the "Option Shares"). The number of shares of Company Common Stock that may be
received upon the exercise of the Stock Option is subject to adjustments as
herein set forth.

3. Exercise of Stock Option. (a) Upon (x) the occurrence of a
Trigger Event (as defined in Section

7.3 of the Merger Agreement), or (y) the occurrence of the condition set forth
in clause (h) of Annex A to the Merger Agreement, the Stock Option shall become
immediately exercisable, in whole or in part, and remain exercisable in
whole or in part until the later of (i) the date which is six months after the
date the Stock Option first became exercisable and (ii) the fifth business day
following expiration or termination of any applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
(the "Option Period").

(b) In the event that Parent is entitled to and wishes to exercise
the Stock Option, Parent shall, during the Option Period, send a written notice
(the "Notice") to the Company identifying the place and date for the closing of
such purchase and the number of Option Shares to be purchased. Upon the giving

by Parent to the Company of the Notice and the tender of the aggregate Purchase
Price at the closing so specified, Parent shall be deemed to be the holder of
record of the shares of Company Common Stock issuable upon such exercise, not-
withstanding that the stock transfer books of the Company shall then be closed
or that certificates representing such shares of Company Common Stock shall not
then be actually delivered to Parent. The Company shall pay all expenses, and
any and all United States federal, state and local taxes and other charges that
may be payable in connection with the preparation, issue and delivery of stock
certificates under this Section 3 in the name of Parent or its assignee,
transferee or designee.

4. Sale of Option Shares. If, at any time following the exercise of
the Option, Parent shall either (i) transfer, sell or otherwise dispose of any
or all of the Option Shares, including, without limitation, by means of tender
or exchange of any or all of the Option Shares pursuant to a tender or exchange
offer involving the capital stock of the Company, or (ii) convert such Option
Shares into cash, capital stock, other securities or any other consideration of
any third party in a merger any recapitalization or restructuring or similar
business combination transaction (a "Business Combination Transaction"),
Parent shall pay to the Company within five days the amount equal to the Profit
(as defined below) Parent shall receive, if any, pursuant to such Disposition or
Business Combination Transaction. "Profit", for purposes

of this Agreement, shall equal (i) the product of (a) the number of Option
Shares Parent transfers, sells, tenders, exchanges or otherwise disposes of
pursuant to a Disposition or a Business Combination Transaction by (b) the
excess of the per Share consideration received by Parent pursuant to such
Disposition or Business Combination Transaction valuing any non-cash
consideration at its fair market value on the date of such consummation (not
including any increase in such aggregate per Share consideration after the
date thereof) over the Purchase Price. For purposes hereof, the fair market
value of any non-cash consideration shall be the closing price or the last sale
price, or, in case no such sale takes place on the day of consummation of such
Business Combination Transaction, the average of the closing bid and asked
prices, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on the
principal national securities exchange on which such consideration is listed or
admitted to trading or, if such consideration is not listed or admitted to
trading on any national securities exchange, the last quoted price or, if not
so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System or such other system then in use, or,
if not so determinable, the fair value of such consideration on such date
shall be determined in good faith by the Board of Directors of Parent.

5. Covenants, Representations and Warranties of the Company. The
Company hereby represents and warrants to, and agrees with, Parent and Sub as
follows:

a. Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
has all requisite corporate power or other power and authority to execute and

deliver this Agreement and perform its obligations hereunder. The execution
and delivery by the Company of this Agreement and the performance by the Company
of its obligations hereunder have been duly and validly authorized by the Board
of Directors of the Company and no other corporate proceedings on the part of
the Company are necessary to authorize the execution, delivery or performance of
this Agreement or the consummation of the transactions contemplated hereby.

b. Corporate Authorization. This Agreement has been duly and validly
executed and delivered by the Company and constitutes a valid and binding
agreement enforceable against the Company in accordance with its terms, except
that (i) such enforcement may be subject to applicable bankruptcy, insolvency or
other similar laws, now or hereafter in effect, affecting creditors' rights
generally, and (ii) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.

c. Authorized Stock. The Company has taken all necessary corporate
and other action to authorize, reserve and permit it to issue, and, at all times
from the date hereof until the obligation to deliver the Option Shares upon the
exercise of the Stock Option terminates, will have reserved for issuance, upon
exercise of the Stock Option, shares of Company Common Stock necessary for
Parent to exercise the Stock Option, and the Company will take all necessary
corporate action to (x) authorize and reserve for issuance all additional shares
of Company Common Stock or other securities which may be issued pursuant to
Section 7 upon exercise of the Stock Option and (y) protect the rights of Parent
against dilution. The shares of Company Common Stock to be issued upon due
exercise of the Stock Option, including all additional shares of Company Common
Stock or other securities which may be issuable pursuant to Section 7, upon
issuance pursuant hereto, shall be duly and validly issued, fully paid and
nonassessable, and shall be delivered free and clear of all liens, claims,
charges and encumbrances of any kind or nature whatsoever, including any
preemptive rights of any stockholder of the Company.

d. No Conflicts. Except for filings, authorizations, consents and
approvals as may be required under the HSR Act, the Exchange Act and the
Securities Act of 1933, as amended (the "Securities Act"), (i) no filing with,
and no permit, authorization, consent or approval of, any state or federal
public body or authority is necessary for the execution of this Agreement by
the Company and the consummation by the Company of the transactions contemplated
hereby and (ii) none of the execution and delivery of this Agreement by the
Company, the consummation by the Company of the transactions con-

templated hereby or compliance by the Company with any of the provisions hereof
shall (A) conflict with or result in any breach of any applicable organizational
documents applicable to the Company or any of its subsidiaries, (B) result in a
violation or breach of, or constitute (with or without notice or lapse of time
or both) a default (or give rise to any third party right of termination, can-
cellation, material modification or acceleration) under any of the terms,
conditions or provisions of any note, loan agreement, pledge, bond, mortgage,
indenture, license, contract, commitment, arrangement, understanding,

agreement or other instrument or obligation of any kind to which the Company or
any subsidiary is a party or by which the Company or any subsidiary or any of
their respective properties or assets may be bound, or (C) violate any order,
writ, injunction, decree, judgment, statute, rule or regulation applicable to
the Company or any of its subsidiaries or any of its properties or assets.

e. Reliance by Parent. The Company understands and acknowledges
that Parent is entering into, and causing Sub to enter into, the Merger
Agreement in reliance upon the Company's execution and delivery of this
Agreement.

f. Further Assurances. From time to time, at the other party's
request and without further consideration, each party hereto shall execute and
deliver such additional documents and take all such further lawful action as may
be necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this
Agreement.

g. Listing on New York Stock Exchange. Upon the exercise of the
Stock Option, the Company shall use its best efforts to promptly list on the New
York Stock Exchange, Inc. (the "NYSE"), subject to official notice of issuance,
the shares of Company Common Stock to be issued pursuant to this Agreement.

6. Representations and Warranties of Parent and Sub. Parent and Sub
hereby represent and warrant to the Company as follows:

a. Organization. Each of Parent and Sub is a corporation duly
organized, validly existing and in good

standing under the laws of the State of Delaware, has all requisite corporate
power or other power and authority to execute and deliver this Agreement and
perform their respective obligations hereunder. The execution and delivery by
Parent and Sub of this Agreement and the performance by Parent and Sub of their
respective obligations hereunder have been duly and validly authorized by the
Board of Directors of each of Parent and Sub and no other corporate proceedings
on the part of Parent or Sub are necessary to authorize the execution, delivery
or performance of this Agreement or the consummation of the transactions
contemplated hereby.

b. Corporate Authorization. This Agreement has been duly and validly
executed and delivered by Parent and Sub and constitutes a valid and binding
agreement of each of Parent and Sub enforceable against each of Parent and Sub
in accordance with its terms, except that (i) such enforcement may be subject to
applicable bankruptcy, insolvency or other similar laws, now or hereafter in
effect, affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.

c. No Conflicts. Except for filings, authorizations, consents and
approvals as may be required under the HSR Act, the Exchange Act and the
Securities Act (i) no filing with, and no permit, authorization, consent or

approval of, any state or federal public body or authority is necessary for the
execution of this Agreement by Parent or Sub and the consummation by Parent or
Sub of the transactions contemplated hereby and (ii) none of the execution and
delivery of this Agreement by Parent of Sub, the consummation by Parent or Sub
of the transactions contemplated hereby or compliance by Parent or Sub with any
of the provisions hereof shall (A) conflict with or result in any breach of
any applicable organizational documents applicable to Parent or Sub, (B) result
in a violation or breach of, or constitute (with or without notice or lapse of
time or both) a default (or give rise to any third party right of termination,
cancellation, material modification or acceleration) under any of the terms,
conditions or provisions of any note, loan agreement, bond, mortgage, indenture,
license,

contract, commitment, arrangement, understanding, agreement or other
instrument or obligation of any kind to which Parent or Sub is a party or by
which Parent or Sub or any of their respective properties or assets may be
bound, or (C) violate any order, writ, injunction, decree, judgment, statute,
rule or regulation applicable to Parent or Sub or any of their respective
properties or assets.

7. Adjustment Upon Changes in Capitalization. In the event of any
change in Company Common Stock by reason of stock dividends, split-ups,
recapitalizations, combinations, exchanges of shares or the like, the type and
number of shares of Company Common Stock subject to the Stock Option and the
Purchase Price shall be appropriately adjusted and proper provision shall be
made so that, in the event that any additional shares of Company Common Stock
are issued or otherwise become outstanding as a result of any such change after
the date of this Agreement (other than pursuant to this Agreement), the number
of shares of Company Common Stock subject to the Stock Option shall be adjusted
so that, after such issuance and together with shares of Company Common Stock
previously issued pursuant to the exercise of the Stock Option (as adjusted on
account of any of the foregoing change in Company Common Stock), it equals 19.9%
of the number of shares of Company Common Stock then issued and outstanding.
Nothing contained in this Section 7 shall be deemed to authorize the Company to
breach any provision of the Merger Agreement.

8. Registration Rights. The Company shall, if requested by Parent
at any time and from time to time within three years of the first exercise of
the Stock Option, promptly prepare, file and keep current a registration
statement under the Securities Act in order to permit the sale or other
disposition of the shares of Company Common Stock that have been acquired by or
are issuable to Parent upon exercise of the Stock Option in accordance with the
intended method of sale or other disposition stated by Parent, including a
"shelf" registration statement under Rule 415 of the Securities Act or any
successor provision, and the Company shall use its best efforts to qualify such
shares or other securities under any applicable state securities laws. Parent
shall provide all information reasonably requested by the Company for inclusion
in any registration statement to be

filed hereunder. The Company will use its best efforts to cause such

registration statement first to become effective and then to remain effective
for such period not in excess of 180 days from the day such registration
statement first becomes effective or such shorter time as may be reasonably
necessary to effect such sales or other dispositions. Parent shall have the
right to demand one such registration. The Company shall bear the costs of such
registration (including, but not limited to, the Company's attorneys' fees,
printing costs and filing fees, except for underwriting discounts or
commissions, brokers' fees and the fees and disbursements of Parent's counsel
related thereto). If requested by Parent, in connection with such registration,
the Company will become a party to any underwriting agreement relating to the
sale of such shares, but only to the extent of obligating itself in respect of
representations, warranties, indemnities, and other agreements customarily
included in such underwriting agreements. Upon receiving any request from the
Company or assignee thereof under this Section 8, the Company agrees to send a
copy thereof to Parent and to any assignee thereof known to the Company, in each
case by promptly mailing the same, postage prepaid, to the address of record of
the person entitled to receive such copies.

9. Termination. Except as otherwise provided herein, the covenants
and agreements contained herein with respect to the Option Shares shall
terminate upon the earlier of (i) the consummation of the Merger and (ii) the
expiration of the Option Period.

10. Miscellaneous.

a. Entire Agreement. Except as otherwise expressly provided
herein, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereto, written or oral. The
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors and
assigns, any rights, remedies, obligations or liabilities

under or by reason of this Agreement, except as expressly provided herein.

b. Assignment. This Agreement shall not be assigned by operation of
law or otherwise without the prior written consent of the other party, provided
that Parent may assign, in its sole discretion, its rights and obligations
hereunder to any direct or indirect wholly owned subsidiary of Parent, but no
such assignment shall relieve Parent of its obligations hereunder if such
assignee does not perform such obligations.

c. Amendments, Waivers, Etc. This Agreement may not be amended,
changed, supplemented, waived or otherwise modified or terminated, except upon
the execution and delivery of a written agreement executed by the parties
hereto.

d. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if given) by hand delivery or telecopy (with a

confirmation copy sent for next day delivery via courier service, such as
Federal Express), or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:

If to the Company: Revco D.S., Inc.
1925 Enterprise Parkway
Twinsburg, Ohio 44087
Attention.: Chief Executive Officer
Telephone No.: (216) 425-9811
Telecopy No.: (216) 487-1679

copy to: Michael K.L. Wager, Esq.
Benesch, Friedlander,
Coplan & Aronoff
2300 BP America Building
200 Public Square
Cleveland, Ohio 44114
Telephone No.: 216-363-4500
Telecopy No.: 216-363-4588

If to Parent Rite Aid Corporation
or Sub: 30 Hunter Lane
Camp Hill, Pennsylvania 17011
Attention.: Chief Executive Officer
Telephone No.: (717) 761-2633
Telecopy No.: (717) 975-5905

copy to: Nancy A. Lieberman, Esq.
Skadden, Arps, Slate,
Meagher & Flom
919 Third Avenue
New York, New York 10022
Telephone No.: (212) 735-3000
Telecopy No.: (212) 735-2000

or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.

e. Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of
any provision of this Agreement is held to be invalid, illegal or unenforceable
in any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.

f. Specific Performance. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.

g. Remedies Cumulative. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise of any thereof
by any party shall not preclude the simultaneous or later exercise of any other
such right, power or remedy by such party.

h. No Waiver. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the parties
at variance with the terms hereof, shall not constitute a waiver by such party
of its right to exercise any such or other right, power or remedy or to demand
such compliance.

i. No Third Party Beneficiaries. This Agreement is not intended to
be for the benefit of, and shall not be enforceable by, any person or entity who
or which is not a party hereto.

j. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflicts of law thereof.

k. Jurisdiction. Each party hereby irrevocably submits to the
exclusive jurisdiction of the Court of Chancery in the State of Delaware in any
action, suit or proceeding arising in connection with this Agreement, and agrees
that any such action, suit or proceeding shall be brought only in such court
(and waives any objection based on forum non conveniens or any other objection
to venue therein); provided, however, that such consent to jurisdiction is
solely for the purpose referred to in this paragraph (l) and shall not be deemed
to be a general submission to the jurisdiction of said Court or in the State
of Delaware other than for such purposes. Each party hereto hereby waives any
right to a trial by jury in connection with any such action, suit or proceeding.

l. Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.

m. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same Agreement.

IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be duly executed as of the day and year first above written.

RITE AID CORPORATION

By: /s/ Martin L. Grass
------------------------------
Name: Martin L. Grass
Title: Chairman of the Board
and Chief Executive Officer

OCEAN ACQUISITION CORPORATION

By: /s/ Martin L. Grass
------------------------------
Name: Martin L. Grass
Title: President

REVCO D.S., INC.

By:
------------------------------
Name: D. Dwayne Hoven
Title: President and Chief
Executive Officer

IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be duly executed as of the day and year first above written.

RITE AID CORPORATION

By: /s/
------------------------------
Name:
Title:

OCEAN ACQUISITION CORPORATION

By: /s/
------------------------------
Name:
Title:

REVCO D.S., INC.

By: /s/ D. Dwayne Hoven
------------------------------
Name: D. Dwayne Hoven
Title: President and Chief
Executive Officer

<PAGE>
REVCO D.S., INC.
1925 ENTERPRISE PARKWAY
TWINSBURG, OHIO 44087

August 17, 1995

Rite Aid Corporation
30 Hunter Lane
Camp Hill, PA 17011

Gentlemen:

In order to allow you to evaluate a business combination (the "Proposed
Transaction") with Revco D.S., Inc. (the "Company"), the Company will deliver to
you, as promptly as practicable after your execution and delivery to the Company
of this letter agreement, certain information about its operations and financial
condition. All information about the Company or the Proposed Transaction
furnished by the Company or any of its Representatives (as hereinafter defined)
to you or any of your Representatives after the date hereof is referred to
herein as "Proprietary Information." Proprietary Information does not include,
however, information which (a) is or becomes generally available to the public
other than as a result of a disclosure by you or any of your Representatives,
(b) was available to you or any of your Representatives on a non-confidential
basis prior to its disclosure to you or any of your Representatives by the
Company or any of its Representatives or (c) becomes available to you or any of
your Representatives on a non-confidential basis from a person (other than the
Company) who is not known by you to be bound by a confidentiality agreement with
the Company or to be otherwise prohibited from transmitting the information to
you.

As used in this letter agreement, the term "Representative" means, as
to any person, such person's affiliates and its and their respective directors,
officers, employees, agents, advisors (including, without limitation, financial
advisors, counsel and accountants) and controlling persons. As used in this
letter agreement, the term "person" shall be broadly interpreted to

<PAGE>
Rite Aid Corporation
August 17, 1995
Page 2

include, without limitation, any individual, corporation partnership, joint
venture or other entity.

Unless otherwise agreed to in writing by the Company, you agree (a) to
keep all Proprietary Information confidential, and not to disclose or reveal any
Proprietary Information to any person other than those of your Representatives
who are actively and directly participating in the evaluation of the Company
and the Proposed Transaction on your behalf and to insure that such persons
observe the terms of this letter agreement as if they were a party hereto in
your place, (b) not to disclose to any person (other than those of your

Representatives who are actively and directly participating in your evaluation
of the Company or the Proposed Transaction) any information about the Proposed
Transaction, or the terms and conditions of any other facts relating thereto,
including, without limitation, the fact that discussions are taking place with
respect thereto or the status thereof, or the fact that the Proprietary
Information has been made available to you or your Representatives and (c) to
return all Proprietary Information at the end of discussions concerning the
Proposed Transaction.

Notwithstanding anything to the contrary contained in this letter
agreement, in the event that you or any of your Representatives are requested
pursuant to, or required by, applicable law, regulation, legal process or
regulatory authority to disclose any Proprietary Information concerning the
Company or the Proposed Transaction, you agree that you will provide the Company
with prompt notice of such request or requirement in order to enable the Company
(i) to seek an appropriate protective order or other remedy, (ii) to consult
with you with respect to the Company's taking steps to resist or narrow the
scope of such request or legal process or (iii) to waive compliance, in whole or
in part, with the terms of this letter agreement. If, in such event, the
Company has not provided you with a protective order or other remedy or waiver
of the terms of this letter agreement in sufficient time for you or your
Representative to avoid unlawful non-disclosure of such Proprietary Information
or such other information, you or such Representative may

2
<PAGE>
Rite Aid Corporation
August 17, 1995
Page 3

disclose such Proprietary Information or such other information pursuant to such
law, regulation, or in such legal process, or to such regulatory authority, as
the case may be, without liability to the Company or any of its Representatives.

You agree that for a period of eighteen months commencing on the date
hereof, except with respect to the Proposed Transaction or as otherwise
specifically authorized in writing by the Company, neither you, nor any of your
Representatives as a principal, will propose or publicly announce or otherwise
disclose an intent to propose, or enter into or agree to enter into, singly or
with any other person or directly or indirectly, (i) any form of business
combination, acquisition or other transaction relating to the Company or any
affiliate thereof, or (ii) any form of restructuring, recapitalization or
similar transaction with respect to the Company or any such affiliate, nor
except as aforesaid during such period will you or any such Representative as a
principal (1) acquire, or offer, propose or agree to acquire, by purchase or
otherwise, any securities of the Company, any direct or indirect options or
other rights to acquire any such securities ("Company Securities"), (2) make, or
in any way participate in, any solicitation of proxies with respect to any
Company Securities (including by the execution of action by written consent),
become a participant in any election contest with respect to the Company, seek
to influence any person with respect to any Company Securities or demand a copy
of the Company's list of its stockholders or other books and records relating to
holders of Company Securities, (3) participate in or encourage the formation of
any partnership, syndicate or other group which owns or seeks or offers to

acquire beneficial ownership of any Company Securities or which seeks to affect
control of the Company or for the purpose of circumventing any provision of this
letter or (4) otherwise act, alone or in concert with others (including by
providing financing for another person), to seek or to offer to control or
influence, in any manner, the management, Board of Directors or policies or
operations of the Company.

3
<PAGE>
Rite Aid Corporation
August 17, 1995
Page 4

It is understood and agreed that, except as may be specifically set forth
hereafter in a definitive written agreement providing for the Proposed
Transaction, the Company will not be deemed to make or have made any
representation or warranty, express or implied, as to the accuracy or the
completeness of any Proprietary Information. The Company will have no liability
to you or your Representatives as a result of the use, whether or not
authorized, of any Proprietary Information by you or your Representatives.

No failure or delay by the Company in exercising any right, power or
privilege hereunder shall operate as a waiver hereof, nor shall any single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege hereunder. In the event that a breach of this Agreement by
you or any of your Representatives, you agree to indemnify the Company from any
costs and expenses, including reasonable expenses, it may incur in connection
with the enforcement of this letter agreement.

Further, you understand and agree that, without prejudice to any rights or
remedies otherwise available to the Company, the Company will be entitled to
equitable relief, including injunctive relief and/or specific performance, if
you or any of your Representatives breach any provision of this letter
agreement.

Your obligations under this Agreement shall terminate eighteen months
from the date of this letter agreement.

The interpretation and enforcement of this letter agreement shall be
governed by the laws of the State of Ohio, without reference to the conflict of
law principles thereof.

Any assignment of this letter agreement by either party without the prior
written consent of the other party shall be void.

4
<PAGE>
Rite Aid Corporation
August 17, 1995
Page 5

This letter agreement contains the entire agreement between the Company
and you concerning the confidentiality of the Proprietary Information and the
other matters addressed herein, and no modification of this letter agreement or

waiver of the terms and conditions hereof shall be binding upon the Company or
you, unless approved in writing by each of the Company and you. This letter
agreement shall be binding upon and shall inure to the benefit of each party
hereto.

Please confirm your agreement with the foregoing by executing and
returning to the undersigned the duplicative copy of this letter agreement
enclosed herewith.

Very truly yours,

REVCO D.S., INC.

By: /s/ D. Dwayne Hoven
---------------------------
D. Dwayne Hoven
President and Chief Executive
Officer

ACCEPTED, ACKNOWLEDGED AND AGREED TO
AS OF THE DATE FIRST ABOVE WRITTEN

RITE AID CORPORATION

BY: /s/ Franklin C. Brown
--------------------------

TITLE: Executive Vice President

<PAGE>
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

IN AND FOR NEW CASTLE COUNTY

- ---------------------------------------
EVELYN SILVERT,,
C.A. No. 14717
Plaintiff,

REVCO D.S. INC., CARL A. BELLINI,
LIVIO M. BORGHESE, ROD F. DAMMEYER,
TALTON R. EMBRY, BEN EVANS, JOHN V.
GUTTAG, D. DWAYNE HOVEN, WALTER B.
REINHOLD, SHELI Z. ROSENBERG, DAVID
M. SCHULTE, THOMAS O. THORSEN, SAM
ZELL and RITE AID CORP.,

Defendants.
- ---------------------------------------

CLASS ACTION COMPLAINT

Plaintiff, by her attorneys, alleges upon information
and belief, except with respect to her ownership of common
stock of Revco D.S. Inc. ("Revco") as follows:

PARTIES

1. Plaintiff is the owner of shares of defendant
Revco.
2. Revco D.S. Inc. is a Delaware corporation with
executive offices at 1925 Enterprise Parkway, Twinsburg, Ohio
44087-2271. Revco operates retail drug stores, typically
featuring prescription and over-the-counter drugs, health and

<PAGE>
beauty aids, toiletries, vitamins, tobacco products and
sundries. As of October 4, 1995, Revco had approximately
67,149,458 shares of common stock outstanding.
3. Defendant Carl A. Bellini is Executive Vice
President, Chief Operating Officer and a director of Revco.
4. Defendant Livio M. Borghese is a director of
Revco.
5. Defendant Rod F. Dammeyer is a director of
Revco.
6. Defendant Talton R. Embry is a director of
Revco.
7. Defendant Ben Evans is a director of Revco.
8. Defendant John V. Guttag is a director of

Revco.
9. Defendant D. Dwayne Hoven is Chief Executive
Officer, President and a director of Revco.
10. Defendant Walter B. Reinhold is a director of
Revco.
11. Defendant Sheli Z. Rosenberg is a director of
Revco.
12. Defendant David M. Schulte is a director of
Revco. Schulte is, and has since 1990, together with
defendant Sam Zell, acted as a general partner of affiliates of
Zell Chilmark Fund, L.P.

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13. Defendant Thomas O. Thorsen is a director of
Revco.
14. Defendant Sam Zell is a director of Revco.
Zell, individually and/or through Zell Chilmark Fund, L.P.,
owns and/or controls approximately 19.52% of Revco's common
stock. Revco pays certain fees to Zell Chilmark Fund, L.P.
and/or its affiliates.
15. The foregoing Directors of Revco (collectively
the "Director Defendants"), owe fiduciary duties to Revco and
its public shareholders.
16. Rite Aid Corp. ("Rite Aid") is a Delaware
corporation with executive offices at 30 Hunter Lane, Camp
Hill, Pennsylvania 17011-2404. Rite Aid operates retail drug
stores, discount automotive parts stores, discount book
stores, dry cleaning establishments, and specialized laboratories.
As of September 2, 1995, Rite Aid had approximately 85,750,467
shares of common stock outstanding. Rite Aid knowingly and
substantially participated in and is benefitting from breaches
of fiduciary duties alleged herein, and therefore is liable as an
aider and abettor thereof.

CLASS ACTION ALLEGATIONS

17. Plaintiff brings this action on her own behalf
and as a class action on behalf of all shareholders of

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defendant Revco (except defendants herein and any person,
firm, trust, corporation or other entity related to or
affiliated with any of the defendants) or their successors in
interest, who have been or will be adversely affected by the
conduct of defendants alleged herein.
18. This action is properly maintainable as a class
action for the following reasons:
(a) The class of shareholders for whose
benefit this action is brought is so numerous that joinder of
all class members is impracticable. As of October 4, 1995,
there were over 67 million shares of Revco common stock
outstanding owned by shareholders scattered throughout the

United States.
(b) There are questions of law and fact which
are common to members of the Class and which predominate over
any questions affecting any individual members. The common
questions include, inter alia, the following:
i. Whether one or more of the defendants has
engaged in a plan and scheme to entrench and/or enrich
themselves at the expense of defendant Revco's public
stockholders in the sale of Revco;
ii. Whether the Director Defendants have
engaged in a proper process to ensure maximization of Revco
shareholder value;

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iii. Whether the Director Defendants have
breached fiduciary duties owed by them to plaintiff and
members of the Class, and/or have aided and abetted in such
breaches, by virtue of their participation and/or acquiescence
and by their other conduct complained of herein;
iv. Whether the Director Defendants have
wrongfully failed adequately to seek a purchaser of Revco at
the highest available price and, instead, have agreed to allow
the valuable assets of Revco to be acquired by Rite Aid at an
unfair and inadequate price and without paying an appropriate
premium to Revco's public shareholders;
v. Whether the structure of Rite Aid's
acquisition of Revco is wrongfully coercive and/or will
wrongfully impede maximization of Revco shareholder value;
vi. Whether plaintiff and the other members of
the Class will be irreparably damaged by the conduct and
transactions complained of herein; and
vii. Whether defendants have breached or aided
and abetted the breaches of the fiduciary and other common law
duties owed by them to plaintiff and the other members of the
Class.
19. Plaintiff is committed to prosecuting this
action and has retained competent counsel experienced in
litigation of this nature. The claims of plaintiff are

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typical of the claims of the other members of the Class and
plaintiff has the same interest as the other members of the
Class. Accordingly, plaintiff is an adequate representative
of the Class and will fairly and adequately protect the
interests of the Class.
20. Defendants have acted or refused to act on
grounds generally applicable to the Class, thereby making
appropriate injunctive relief with respect to the Class as a
whole.
21. The prosecution of separate actions by individ-
ual members of the Class could create a risk of inconsistent
or varying adjudications with respect to individual members of

the Class which would establish incompatible standards of
conduct for defendants or adjudications with respect to
individual members of the Class which would as a practical
matter be dispositive of the interests of the other members
not parties to the adjudications.
22. Plaintiff anticipates that there will not be
any difficulty in the management of this litigation.
23. For the reasons stated herein, a class action
is superior to other available methods for the fair and
efficient adjudication of this action.

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SUBSTANTIVE ALLEGATIONS

24. On November 30, 1995, it was announced that
Revco and Rite Aid agreed for Rite Aid to acquire Revco (the
"Transaction"). Under the terms of the Transaction, Rite Aid
will commence a first-step cash tender offer at $27.50 cash
per Revco share for at least 50.1% of the Revco shares
outstanding, and the remaining shares of Revco will be
acquired by Rite Aid in a second-step merger in exchange for
Rite Aid stock.
25. However, reportedly the value of the Rite Aid
common stock that will be exchanged for the Revco shares in
the second-step merger will be determined from 15 random days
within the 40 day period leading up to the Revco shareholder
vote on the merger. If the average market value of Rite Aid
stock during the selected days is $27.50, the share exchange
will be one-for-one. If Rite Aid stock value is above or
below $27.50 per share, the amount paid to Revco shareholders
will be adjusted up or down but only to reflect 50% of the
divergence from the $27.50 price. Rite Aid will not issue
less than .91666 or more than 1.125 of its shares for each
Revco share. If the average value of Rite Aid stock is less
than $27.50, Rite Aid will have the additional option of
delivering one of its shares plus cash equal to 50% of the

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decrease in Rite Aid's share price. In no event will more
than $2.75 per Revco share be paid in cash. Further, if all
other conditions of the merger are satisfied, but Rite Aid
shareholders do not approve the issuance of Rite Aid stock
pursuant to the merger, each Revco share will be converted
into the right to receive a combination of cash and Rite Aid
common stock representing an aggregate of 19.9% of Rite Aid's
outstanding shares.
26. Moreover, further impeding maximization of
Revco shareholder value, the Director Defendants have agreed
to and Revco has granted Rite Aid an option to purchase 19.9%
of Revco's shares under certain circumstances for $27.50 per
share (the "Lock-Up").
27. On November 29, 1995, Revco's shares closed at

$25.50 per share. Thus, even the $27.50 per share tender
offer price represents less than an 8% premium over the
pre-announcement closing price of Revco.
28. Defendants, acting in concert, have violated
fiduciary duties owed to the public shareholders of Revco and
put certain of defendants' own personal interests and the
interests of defendant Rite Aid ahead of the interests of the
Revco public shareholders.
29. The Director Defendants apparently failed to
(1) undertake an adequate evaluation of Revco's worth as a

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potential merger/acquisition candidate; (2) take adequate
steps to enhance Revco's value and/or attractiveness as a
merger/acquisition candidate; or (3) effectively expose Revco
to the marketplace in an effort to create an active and open
auction for Revco. Instead, defendants have agreed to a sale
of Revco to Rite Aid pursuant to terms which will coerce Revco
shareholders to tender into the tender offer and impede
maximization of shareholder value through their conduct
including the Lock-Up.
30. While the Director Defendants should continue
to seek out other possible purchasers of the assets of Revco
or its stock in a manner designed to obtain the best transaction
reasonably available for Revco's shareholders, or seek to
enhance the value of Revco for all its current shareholders,
they have instead resolved wrongfully to allow Rite Aid to
obtain the valuable assets of Revco at an inadequate price
which disproportionately benefits Rite Aid, and have wrongfully
agreed to the Lock-Up further impeding maximization of
shareholder value.
31. These tactics pursued by the defendants are,
and will continue to be, wrongful, unfair and harmful to
Revco's public shareholders. These maneuvers by the defendants
will deny members of the Class an appropriate premium in
the sale of Revco and the opportunity to share appropriately

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in the true value of Revco's assets, future earnings and
businesses.
32. In contemplating, planning and/or effecting the
foregoing, defendants are not acting in good faith toward
plaintiff and the Class, and defendants have breached, and are
breaching, their fiduciary duties to plaintiff and the Class.
33. Because the Director Defendants (and those
acting in concert with them) dominate and control the business
and corporate affairs of Revco and because they are in possession
of private corporate information concerning Revco's businesses
and future prospects, there exists an imbalance and disparity
of knowledge and economic power between the defendants and
the public shareholders of Revco.
34. By reason of the foregoing acts, practices and

course of conduct, the Director Defendants have failed to
exercise loyalty, good faith and due care toward Revco and its
public shareholders.
35. As a result of the actions of the Defendants,
plaintiff and the Class have been and will be damaged and have
been and will be impeded from obtaining the highest value
available for their shares of Revco common stock.
36. Unless enjoined by this Court, the Director
Defendants will continue to breach fiduciary duties owed to

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plaintiff and the Class, all to the irreparable harm of the
Class.
37. Plaintiff has no adequate remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
A. Declaring that this action may be maintained as
a class action;
B. Declaring that the proposed Transaction is unfair,
unjust and inequitable to plaintiff and the other members of
the Class;
C. Enjoining preliminarily and permanently the defendants
from taking any steps necessary to accomplish or implement
the proposed Transaction that is not fair and equitable,
and enjoining any improper device or transaction which will
impede maximization of shareholder value;
D. Requiring defendants to compensate plaintiff and the
members of the Class for all losses and damages suffered and
to be suffered by them as a result of the acts and transactions
complained of herein, together with prejudgment and post-judgment
interest;
E. Awarding plaintiff the costs and disbursements of
this action, including reasonable attorneys', accountants',
and experts' fees; and

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F. Granting such other and further relief as may be
just and proper.

Dated: November 30, 1995 CHIMICLES, JACOBSEN & TIKELLIS

------------------------------
Pamela S. Tikellis
James C. Strum
Robert J. Kriner, Jr.
One Rodney Square
P.O. Box 1035
Wilmington, DE 19899
(302) 656-2500

Attorneys for Plaintiff

OF COUNSEL:

WOLF HALDENSTEIN ADLER
FREEMAN & HERZ, LLP
Jeffrey C. Smith, Esquire
270 Madison Avenue, 9th Floor
New York, New York 10016
(212) 545-4600

FARUQUI & FARUQUI, LLP
415 Madison Avenue
New York, New York 10017
(212) 986-1074