<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
RITE AID CORPORATION
- -----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
___________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
___________________________________________________________________________
3) Filing Party:
___________________________________________________________________________
4) Date Filed:
___________________________________________________________________________
<PAGE>
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[GRAPHIC OMITTED] RITE AID CORPORATION
P.O. BOX 3165
HARRISBURG, PENNSYLVANIA 17105
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The 1998 ANNUAL MEETING of the stockholders of Rite Aid Corporation will be
held at the Radisson Penn Harris Hotel and Convention Center, 1150 Camp Hill
Bypass, Camp Hill, Pennsylvania 17011, on June 24, 1998 at 10:00 a.m. for the
following purposes:
1. To elect three directors to hold office until the 2001 Annual Meeting of
Stockholders and until their respective successors are duly elected and
qualified.
2. To transact such other business as may properly come before the meeting.
The Board of Directors has fixed the close of business on May 4, 1998 as the
record date for the meeting. Only stockholders of record as of that date are
entitled to notice of and to vote at the meeting and any adjournment and
postponement thereof.
The accompanying form of proxy is solicited by the Board of Directors of the
Company. Reference is made to the attached Proxy Statement for further
information with respect to the business to be transacted at the meeting.
By order of the Board of Directors
Elliot S. Gerson,
Senior Vice President, General
Counsel and Secretary
Camp Hill, Pennsylvania
May 18, 1998
Please Complete and Return Your Signed Proxy Card
Please complete and promptly return your proxy in the envelope provided.
This will not prevent you from voting in person at the meeting. It will,
however, help to assure a quorum and to avoid added proxy solicitation
costs.
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<PAGE>
RITE AID CORPORATION PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
This proxy statement is being furnished in connection with the solicitation of
proxies by the Board of Directors of Rite Aid Corporation, a Delaware
corporation (the "Company"), for use at the Company's 1998 Annual Meeting of
Stockholders (the "Meeting") to be held at the Radisson Penn Harris Hotel and
Convention Center, 1150 Camp Hill Bypass, Camp Hill, Pennsylvania 17011, on
June 24, 1998 at 10:00 a.m., or any adjournment or postponement thereof, for
the purposes set forth in the foregoing notice. This proxy statement, the
foregoing notice and the enclosed proxy are being mailed to stockholders on or
about May 18, 1998. Only stockholders of record at the close of business on May
4, 1998 shall be entitled to notice of and to vote at the Meeting.
If the enclosed proxy is properly executed and returned prior to voting at the
Meeting, the shares represented thereby will be voted in accordance with the
instructions marked thereon. In the absence of instructions, the shares will be
voted FOR the nominees of the Board of Directors in the election of directors.
Management does not intend to bring any matter before the Meeting other than as
indicated in the notice and does not know of anyone else who intends to do so.
If any other matters properly come before the Meeting, however, the persons
named in the enclosed proxy, or their duly constituted substitutes acting at
the Meeting, will be deemed authorized to vote or otherwise act thereon in
accordance with their judgment on such matters.
Any proxy may be revoked at any time prior to its exercise by notifying the
Secretary in writing, by delivering a duly executed proxy bearing a later date
or by attending the Meeting and voting in person.
On May 4, 1998, the Company had outstanding and entitled to vote 258,310,018
shares of Common Stock. There must be present at the Meeting in person or by
proxy holders of 129,155,010 shares to constitute a quorum for the Meeting.
Proxies marked "Abstain" are included in determining a quorum, but broker
proxies which have not voted on a particular proposal are not included in
determining a quorum with respect to that proposal. Each holder of Common Stock
is entitled to one vote per share of Common Stock held of record by him or her
on the record date. There is no cumulative voting in the election of directors.
Directors will be elected by a plurality of votes cast. Abstentions will be
counted as present at the Meeting but, together with broker non-votes, will not
be treated as votes cast in the election of directors, and thus are not the
equivalent of votes cast against a nominee. Broker non-votes on any matter
other than the election of directors will not be counted as shares present at
the Meeting, nor will they affect the vote with respect to that matter.
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of May 4, 1998, certain information
concerning the beneficial shareholdings of each director, each nominee for
director, each executive officer named in the Summary Compensation Table
appearing elsewhere herein and by all directors and executive officers as a
group. Each of the persons named below has sole voting power and sole
investment power with respect to the shares set forth opposite his or her name,
except as otherwise noted. Except as set forth below, no person was known by
the Company to own beneficially more than five percent (5%) of the Company's
outstanding Common Stock.
<TABLE>
<CAPTION>
Number of
Common Shares
Beneficial Owners Beneficially Owned(1) Percent of Class
----------------- --------------------- ----------------
<S> <C> <C>
Alex Grass ....................................... 2,576,923(2) *
William J. Bratton ............................... 2,000 *
Franklin C. Brown ................................ 383,460(3) *
Leonard I. Green ................................. 1,002,000 *
Martin L. Grass .................................. 3,757,764(4) 1.4%
Nancy A. Lieberman ............................... 5,000 *
Philip Neivert ................................... 2,877,506(5) 1.1%
Leonard Stern .................................... 8,000 *
Preston Robert Tisch ............................. 8,000 *
Gerald Tsai, Jr. ................................. 6,000 *
Timothy J. Noonan ................................ 1,197,218 *
Frank M. Bergonzi ................................ 575,281 *
Beth J. Kaplan ................................... 291,097 *
Massachusetts Financial Services Company ......... 19,271,954(6) 7.5%
American Express Company ......................... 18,181,342(7) 7.0%
Putnam Investments, Inc. ......................... 18,017,600(8) 7.0%
FMR Corp. ........................................ 24,407,342(9) 9.4%
All executive officers and directors (24 persons) 13,453,984(2)(3)(4)(5) 5.1%
</TABLE>
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* Percentage less than 1% of class.
(1) Beneficial ownership has been determined in accordance with Rule 13d-3 of
the Securities Exchange Act of 1934, as amended.
(2) Includes 137,904 shares of Common Stock owned by the Grass Family
Foundation of which Mr. Grass is a director. Also includes 90,982 shares
of Common Stock held in
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trust for the benefit of Martin L. Grass and of which Mr. Alex Grass is a
trustee and 370,568 shares of Common Stock held in trust for the benefit of
Lois Grass and of which Mr. Alex Grass is an alternate trustee.
(3) Includes 383,360 shares owned by Mr. Brown's wife as to which Mr. Brown
disclaims any beneficial interest. All options and stock-based awards held
by Mr. Brown have been assigned to his children and he disclaims any
beneficial interest in those shares.
(4) Includes 370,568 shares held in trust for the benefit of Lois Grass of
which trust Mr. Grass is a co-trustee.
(5) Includes 1,440,000 shares held in trust as to which Mr. Neivert is both a
co-trustee and a co-beneficiary and 722,778 shares owned by Mr. Neivert's
wife. Mr. Neivert disclaims any beneficial interest in those shares owned
by his wife.
(6) Massachusetts Financial Services Company beneficially owns 19,271,954
shares, of which it has sole dispositive power over all of the shares and
sole voting power as to 18,914,754 of the shares. This information is
derived from a Schedule 13G filed by Massachusetts Financial Services
Company with the Securities and Exchange Commission.
(7) American Express Company, through its wholly owned subsidiary American
Express Financial Corporation, a registered investment advisor, is deemed
to beneficially own 18,181,342 shares, as to which it has shared
dispositive power over all of the shares and shared voting power as to
8,588,122 of the shares. This information is derived from a Schedule 13G
filed by American Express Company and American Express Financial
Corporation with the Securities and Exchange Commission.
(8) Putnam Investment Management, Inc. and The Putnam Advisory Company, Inc.,
both wholly owned registered investment advisers of Putnam Investments,
Inc., together beneficially own 18,017,600 shares, as to which Putnam
Investment Management, Inc. beneficially owns 15,480,400 shares and The
Putnam Advisory Company beneficially owns 2,537,200 shares. Both
subsidiaries have shared dispositive power over the shares each
beneficially owns as investment managers, but each of the mutual fund's
trustees have voting power over the shares held by each fund, and The
Putnam Advisory Company, Inc. has shared voting power over the shares held
by the institutional clients (740,200 shares). This information is derived
from a Schedule 13G filed with the Securities and Exchange Commission.
(9) FMR Corp., through its wholly-owned subsidiary, Fidelity Management &
Research Company, a registered investment advisor, and through its
wholly-owned subsidiary,
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Fidelity Management Trust Company, a bank, is deemed to beneficially own
24,407,342 shares, as to which it has sole dispositive power over all of
the shares and sole voting power as to 1,715,298 of the shares. This
information is derived from a Schedule 13G filed by FMR Corp. with the
Securities and Exchange Commission.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
During fiscal year 1998, the Company implemented a system to coordinate and
monitor compliance by its directors and executive officers with the reporting
requirements of Section 16(a) of the Securities Exchange Act of 1934, as
amended. During the fiscal year, directors and officers submitted late filings
under Section 16(a) as follows (the number in parentheses being the aggregate
number of transactions for each person named). With respect to option grants:
M. Grass, T. Noonan, F. Bergonzi, P. Markovitz, C. Kibler, K. Mann, R. Miller
and R. Souder (6) for 1994 through 1997; A. Grass (5) for 1993 through 1996; R.
Varmecky (2) for 1995 and 1996; and B. Kaplan, J. Speaker, K. Whiting (3) and
E. Gerson (2) for 1997. With respect to cashless exercise of options and
related sales of common stock: K. Mann, C. Kibler and R. Varmecky (1) for 1996;
J. Speaker (1) for 1997; P. Markovitz and R. Miller (1) for 1998; and with
respect to sales of common stock: A. Grass (4) for 1997. With respect to
securities owned at the time he became subject to the reporting requirements of
Section 16(a), E. Gerson and R. Varmecky. All of the directors and officers
have filed all reports not previously filed.
ELECTION OF DIRECTORS
The Company's By-Laws provide that the Board of Directors may be composed of up
to a maximum of fifteen members. Traditionally, the Board has operated with
fewer directors. The Board is divided into three classes serving staggered
three-year terms, the term of one class of directors to expire each year. The
three directors to be elected at this Meeting will hold office until 2001. The
remaining directors will be elected at the 1999 and 2000 Annual Meetings of
Stockholders. All of the nominees for director to be elected at this Meeting
currently serve as directors of the Company. Although there are fewer nominees
for election than the number allowed pursuant to the By-Laws of the Company,
proxies cannot be voted for a greater number of persons than the three nominees
named above. Management believes that all of its nominees are willing and able
to serve the Company as directors. If any nominee at the time of election is
unable or unwilling to serve or is otherwise unavailable for election, and as a
consequence thereof, other nominees are designated, the persons named in the
proxy or their substitutes will have the discretion and authority to vote or to
refrain from voting for other nominees in accordance with their judgment. The
Board of Directors does not have a nominating committee.
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<PAGE>
The following is a brief description of the nominees for election as directors
and of the other directors of the Company.
NOMINEES FOR DIRECTOR
TERM TO EXPIRE 2001
ALEX GRASS, Founder of the Company, has been Honorary Chairman of the Board of
Directors and Chairman of the Board's Executive Committee since March 4, 1995
when he retired as Chairman of the Board and Chief Executive Officer, positions
he held since the founding of the Company. He is also director of Hasbro, Inc.
Mr. Grass is the father of Martin Grass. Age 70.
PHILIP NEIVERT is a private investor whose operations are based in Rochester,
New York. Mr. Neivert has been a member of the Board of Directors of the
Company since 1969. Age 72.
GERALD TSAI, JR. is Chairman, President and Chief Executive Officer of Delta
Life Corporation, a position he has held since February 1993. He had been
Chairman of the Executive Committee of the Board of Directors of Primerica
Corporation (formerly American Can Company) from December 1988 until April
1991. For the years 1987 and 1988, Mr. Tsai had been Chairman and Chief
Executive Officer of Primerica. Prior thereto he had been Vice Chairman and
Chief Executive Officer. Mr. Tsai is also a director of Proffitt's Inc., Triarc
Companies, Sequa Corporation and Zenith National Insurance Corp., and a trustee
of Meditrust. Mr. Tsai has been a member of the Board of Directors of the
Company since 1987. Age 69.
DIRECTORS CONTINUING IN OFFICE
TERM TO EXPIRE 2000
WILLIAM J. BRATTON is and since January 1998 has been President and Chief
Operating Officer of Carco Group, Inc., St. James, New York. From April 1996
through 1997 he was Vice Chairman of First Security Services Corporation,
Boston, Massachusetts, and President of its subsidiary, First Security
Consulting, Inc., New York, New York. Prior thereto, he was Police Commissioner
of the City of New York from 1994 through April 1996, Police Commissioner of
the City of Boston from 1993 to 1994, and Superintendent and Chief of the
Boston Police Department from 1992 to 1993. Mr. Bratton is a Director of
Firearms Training Systems Company. Age 50.
FRANKLIN C. BROWN is Vice Chairman of the Company. Prior to his appointment as
Vice Chairman in July 1997, Mr. Brown served the Company as Executive Vice
President
5
<PAGE>
and Chief Legal Counsel since April 1993. Prior thereto, Mr. Brown served the
Company for 13 years as Senior Vice President and Chief Legal Counsel. Mr.
Brown has been a member of the Board of Directors of the Company since 1981.
Age 70.
MARTIN L. GRASS has been Chairman of the Board and Chief Executive Officer of
the Company 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 the
Company in various capacities since 1978. Mr. Grass has been a member of the
Board of Directors of the Company since 1982. He is the son of Alex Grass. Mr.
Grass is also a director of Tessco Technologies, Inc. and Mercantile Safe
Deposit & Trust Company. Age 44.
PRESTON ROBERT TISCH has been Co-Chairman and Co-Chief Executive Officer of
Loews Corporation since October 18, 1994. He was President and Co-Chief
Executive Officer of Loews Corporation from March 1988 to October 1994. In
addition, since March 1991 he has been Chairman of the Board of the N.Y.
Football GIANTS, Inc. From August 1986 to March 1988, he was Postmaster General
of the United States. Prior thereto, he had been President and Chief Operating
Officer of Loews Corporation. Mr. Tisch has been a member of the Board of
Directors of the Company since 1988. Mr. Tisch is also a director of Loews
Corporation, CNA Financial Corporation, Bulova Corporation and Hasbro, Inc. Age
72.
DIRECTORS CONTINUING IN OFFICE
TERM TO EXPIRE 1999
LEONARD I. GREEN is the founder and, for more than the past five years, has
been a general partner of Leonard I. Green & Associates, L.P., a private
merchant banking firm. He is a director of Carr Gottstein Foods Co., Horace
Mann Educators Corp. and various privately owned corporations. Mr. Green was
appointed to the Board of Directors in January 1997 and has been nominated for
a term expiring in 1999 pursuant to the terms of the Merger Agreement under
which Thrifty PayLess Holdings, Inc. was merged with and into the Company. Age
64.
TIMOTHY J. NOONAN was appointed a Director of the Company on March 4, 1995
concurrently with his election as President and Chief Operating Officer. Prior
to March 4, 1995, and for more than five years, Mr. Noonan was Executive Vice
President of the Company. Age 56.
NANCY A. LIEBERMAN has been a partner for more than five years in the law firm
of Skadden, Arps, Slate, Meagher & Flom, L.L.P., which from time to time has
provided legal services to the Company. Age 41.
6
<PAGE>
LEONARD STERN is Chairman of the Board of The Hartz Group, Inc. and affiliated
companies, a position he has held since 1979. Mr. Stern has been a member of
the Board of Directors of the Company since 1986. Age 60.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board's Audit Committee, which held two meetings during the last fiscal
year, oversees management's fulfillment of its financial reporting and
disclosure responsibilities and its maintenance of an appropriate internal
control system. It recommends appointment of the Company's independent public
accountants and oversees the activities of the Company's internal audit
function. To ensure independence, the independent public accountants and
internal auditors meet with the Audit Committee with and without the presence
of management representatives. Its current members are Leonard Stern
(Chairman), Preston Robert Tisch, Nancy A. Lieberman and William J. Bratton.
The Board's Compensation Committee met twice during the last fiscal year for
the purpose of evaluating key officers' salaries and bonuses. Members of the
Compensation Committee during the last fiscal year were Gerald Tsai, Jr.
(Chairman), Philip Neivert and Leonard I. Green. See "Report of the
Compensation Committee on Executive Compensation."
DIRECTORS' ATTENDANCE AT MEETINGS
The Board of Directors meets regularly four times each year. The Board also is
available for interim meetings. Each incumbent director of the Company attended
at least 75% of the meetings of the Board of Directors and meetings held by all
committees on which such director served.
DIRECTORS' FEES
In fiscal year 1998, each of the Company's non-employee directors was granted a
restricted stock award of 2,000 shares of Common Stock. The award lapses if the
director fails to complete the term for which he or she was elected for any
reason other than death or disability. Directors who are officers and full-time
employees of the Company receive no separate compensation for service as a
director or committee member. Board members are also reimbursed for travel and
lodging expenses associated with attending Board and Committee meetings. In
addition, Alex Grass, Honorary Chairman and a director of the Company, provided
consulting services to the Company during fiscal year 1998, for which he was
paid $400,000.
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<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table
The following table shows, for the fiscal years ended February 28, 1998, March
1, 1997 and March 2, 1996, the annual and long-term compensation paid or
accrued by the Company and its subsidiaries to the Company's Chief Executive
Officer and to the four most highly compensated executive officers whose total
annual salary and bonus exceeded $100,000 for fiscal year 1998.
Annual
Compensation
-------------------------------------------------
Other
Annual
Name and Compen-
Principal Fiscal sation
Position Year Salary($) Bonus($)(1) ($)(2)
- -------- -------- ------------- ------------- ---------
Martin L. Grass ........... 1998 $1,000,000 $898,000 --
Chairman and Chief 1997 $1,000,000 $900,000 --
Executive Officer 1996 $1,000,000 $600,000 --
Timothy J. Noonan ......... 1998 $ 700,000 $628,600 --
President and Chief 1997 $ 700,000 $630,000 --
Operating Officer 1996 $ 500,000 $300,000 --
Franklin C. Brown ......... 1998 $ 500,000 $336,825 --
Vice Chairman 1997 $ 500,000 $337,500 --
1996 $ 450,000 $243,000 --
Frank M. Bergonzi ......... 1998 $ 445,000 $299,774 --
Executive Vice 1997 $ 403,000 $266,625 --
President 1996 $ 345,000 $186,500 --
Beth J. Kaplan ............ 1998 $ 400,000 $269,460 --
Executive Vice 1997 $ 184,617 $202,500 --
President 1996 $ -- $ -- --
Long-Term
Compensation
---------------------------------------------------
All
Restricted Securities Other
Name and Stock Underlying LTP Compen-
Principal Awards Options/ Payouts sation
Position ($) SARs(#) ($)(3) ($)(4)
- --------- ------------ ------------ ------------- --------
Martin L. Grass ........... -- 0 $ 0 $2,000
Chairman and Chief -- 1,300,000 $ $0 $2,000
Executive Officer -- 400,000 $2,875,000 $2,000
Timothy J. Noonan ......... -- 0 $ 0 $2,000
President and Chief -- 725,000 $ 0 $2,000
Operating Officer -- 110,000 $1,150,000 $2,000
Franklin C. Brown ......... -- 0 $ 0 $2,000
Vice Chairman -- 370,000 $ 0 $2,000
-- 110,000 $1,437,500 $2,000
Frank M. Bergonzi ......... -- 0 $ 0 $2,000
Executive Vice -- 347,000 $ 0 $2,000
President -- 64,000 $ 718,750 $2,000
Beth J. Kaplan ............ -- 0 $ 0 $ 0
Executive Vice -- 339,000 $ 0 $ 0
President -- -- $ -- $ --
- --------------
(1) Represents annual performance bonuses determined by the Compensation
Committee of the Board of Directors under the Annual Performance-Based
Incentive Program. See "Report of the Compensation Committee on Executive
Compensation." Bonuses are paid in the fiscal year following the fiscal
year in which they are earned.
(2) Did not exceed, for each named officer, the lesser of $50,000 or ten
percent of such officer's total annual salary and bonus for such year.
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<PAGE>
(3) Represents cash payments made by the Company to the named persons in
respect of stock-based awards relating to the five year period which ended
in fiscal year 1996, which payments were calculated on the basis of the
appreciation in the market price of the Company's Common Stock over the
five year period.
(4) Represents amounts paid by the Company on behalf of the named persons in
connection with the Company's Profit Sharing Plan.
Stock Option Holdings
The following table sets forth certain information concerning unexercised stock
options held by the persons named in the Summary Compensation Table at the end
of fiscal year 1998. No stock options or stock options in tandem with stock
appreciation rights were granted to any of such persons during fiscal year
1998.
OPTION EXERCISES IN FISCAL 1998 AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Value of
Vested and Non-Vested Vested and Non-Vested
Options at Fiscal In The Money Options
Value Year End at Fiscal Year End ($)(3)
Shares Acquired Realized ---------------------- -----------------------------
Name (1) on Exercise $ (2) Vested / Non-Vested Vested / Non-Vested
-------- ---------------- ---------- ---------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
Martin L. Grass ........... -- -- 2,725,000 375,000 $53,655,625 $7,096,875
Timothy J. Noonan ......... -- -- 1,085,000 135,000 $19,964,398 $2,527,383
Franklin C. Brown ......... -- -- 752,500 112,500 $14,811,742 $2,120,977
Frank M. Bergonzi ......... -- -- 557,000 78,000 $10,468,588 $1,460,625
Beth J. Kaplan ............ -- -- 291,000 48,000 $ 4,501,313 $ 768,000
</TABLE>
- --------------
(1) See Summary Compensation Table for titles of the persons named above.
(2) Calculated by subtracting the exercise price from the fair market value of
the underlying shares on the exercise date. May be paid as appreciation
rights at the option of the Compensation Committee.
(3) Calculated by subtracting the exercise price from the market price at
February 28, 1998.
Long-Term Incentive Plan
The following table sets forth certain information concerning long-term
incentive awards made by the Company to the persons named in the Summary
Compensation Table above during fiscal year 1998.
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<PAGE>
<TABLE>
<CAPTION>
Performance or Estimated Future Payout Under
Number of Shares, Other Period Non-Stock Price-Based Plans (2)
Units or Other Until Maturation -----------------------------------
Name (1) Rights (#) (2) or Payout (2) Threshold Target Maximum
- -------- ------------------- ------------------ ----------- -------- ----------
<S> <C> <C> <C> <C> <C>
Martin L. Grass ........... 1,000,000 FY1999-2001 800,000 -- 1,000,000
Timothy J. Noonan ......... 600,000 FY1999-2001 480,000 -- 600,000
Franklin C. Brown ......... 300,000 FY1999-2001 240,000 -- 300,000
Frank M. Bergonzi ......... 300,000 FY1999-2001 240,000 -- 300,000
Beth J. Kaplan ............ 300,000 FY1999-2001 240,000 -- 300,000
</TABLE>
- --------------
(1) See Summary Compensation Table for titles of the persons named above.
(2) Represents the number of shares of the Company's Common Stock which will be
issued to the named person (or, at the discretion of the Board of
Directors, the equivalent value of such shares paid in cash) depending
upon the percentage increase in the earnings per share of the Company over
the measurement period calculated at 9% per annum for the Threshold Payout
and at 12% per annum for the Maximum Payout. The number of shares subject
to the award is subject to increase based upon increases during the
measuring period in the 30 day average closing price of the Company's
Common Stock on the New York Stock Exchange. The maximum increase is 100%
if the 30 day average reaches $49.50. To the extent earned, the award is
payable in six annual installments commencing in fiscal 2002 and ending in
2007 and except in the cases of death, disability and normal retirement,
payment of each installment is conditioned upon employment at the date of
payment.
Deferred Compensation Program
The Company has established a Deferred Compensation Program (the "Program") in
which employees of the Company with the position of Vice President or higher
are entitled to participate. Under the Program, eligible participants generally
are entitled, upon retirement at age 65 or upon death, to receive an annual
benefit payable over fifteen years, equal to a percentage (ranging from 40% to
60% depending upon the participant's position with the Company) of the average
of the three highest base annual salaries received by the participant during
the ten year period prior to the year in which the event giving rise to the
payment of deferred compensation occurs. The percentage of the average annual
compensation payable under the Program to each of the persons named in the
Summary Compensation Table above (which, for this purpose, includes annual
bonuses paid to such persons) is 60%.
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<PAGE>
RELATED PARTY TRANSACTIONS
The Company rents 74,200 square feet of storage space at a warehouse owned
by Realm R.R. Avenue Partnership, of which both Alex Grass and Martin L. Grass
are general partners. Annual rent paid to the Partnership by Rite Aid during
fiscal year 1998, which included a pro rata portion of common area charges,
real estate taxes and insurance, amounted to $245,262. The lease term expires
in June 1999.
On August 28, 1996, the Company loaned the principal sum of $1,900,000 to
Beth J. Kaplan, Executive Vice President -- Marketing. The loan, which bears
interest at the prime rate as established by Morgan Guaranty Bank, is payable
in full, together with all accrued interest, on August 14, 2000. The loan is
secured by a pledge of shares of the Company's Common Stock to which Ms. Kaplan
becomes entitled in connection with any Incentive Awards granted to her under
the Company's 1990 Omnibus Stock Incentive Plan. At February 28, 1998, the
principal amount outstanding, plus accrued interest, under the loan was
$2,138,797.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee"),
composed of outside directors of the Board of Directors of the Company, reviews
the performance of the Company's executive personnel and develops and makes
recommendations to the Board with respect to executive compensation policies.
The Compensation Committee is empowered by the Board to award to executive
officers appropriate bonuses, stock options, stock appreciation rights ("SARs")
and stock-based awards.
The Committee has access to independent compensation data and from time to
time engages outside compensation consultants.
The objectives of the Committee are to support the achievement of desired
Company performance, to provide compensation and benefits that will attract and
retain superior talent and reward performance and to fix a portion of
compensation to the outcome of corporation performance.
The executive compensation program is generally composed of base salary,
discretionary performance bonuses and long-term incentives in the form of stock
options, SARs, stock based awards and restricted stock warrants. The
compensation program also includes various benefits, including a deferred
compensation program described elsewhere herein, and health insurance plans and
programs and pension and profit sharing and retirement plans in which
substantially all of the Company's full time employees participate.
11
<PAGE>
Base salary for the Company's executive officers are competitively set
relative to salaries of officers of companies comparable in business and size
included in the Standard & Poor's Retail Stores Composite Index. In each
instance, base salary takes into account individual experience and performance
specific to the Company. The Committee generally attempts to provide
compensation approximating the median of comparable companies. Except for
increases associated with promotions or increased responsibility, increases in
base salaries for executive officers of the Company from year to year are
limited to adjustments to reflect increases in the rate of inflation.
The Committee is aware that the Internal Revenue Code of 1986 treats
certain elements of executive compensation in excess of $1 million a year as an
expense not deductible by the Company for federal income tax purposes. For the
fiscal year ended February 28, 1998, no executive officer's compensation
exceeded the cap on deductibility. To the extent compensation to an executive
officer exceeds the cap in the future, the Committee will consider the facts
and circumstances at that time to reach a determination regarding the impact of
the cap on such compensation.
The Committee is empowered to approve the payment of cash performance
bonuses to employees, including executive officers, of the Company. During
fiscal year 1995, the Committee established the Annual Performance-Based
Incentive Program (the "Annual Incentive Plan"). The purpose of the Annual
Incentive Plan is to provide an incentive for executives of the Company and to
reward them in relation to the degree to which specified earnings goals are
achieved, as measured by year to year growth and earnings per share. Each year,
the Committee determines a range of growth and earnings per share over the
previous year. Additionally, a targeted incentive as a percentage of salary is
determined each year by the Committee, ranging from a maximum of 50% for the
Chief Executive Officer to 15% depending on executive position. Depending upon
the actual worth and earnings per share during such year, participants are
entitled to a percentage, ranging from 0% to 200%, of the targeted incentive
award fixed by the Committee. For fiscal year 1998, the earnings goals as set
by the Committee were achieved and, consequently, certain bonuses were paid in
fiscal year 1999 to the executive officers who were participants in the Plan
during fiscal year 1998.
The Committee believes that employee equity ownership provides significant
additional motivation to executive officers to maximize value for the Company's
stockholders and, therefore, periodically grants stock options to the Company's
employees, including executive officers. Stock options are granted typically at
prevailing market price and, therefore, will only have value if the Company's
stock price increases over the exercise price. The Committee believes that the
grant of stock options and stock-based awards provides a long-term incentive to
such persons to contribute to the
12
<PAGE>
growth of the Company and establishes a direct link between compensation and
stockholder return, measured by the same index used by stockholders to measure
Company performance. The terms of options granted by the Board of Directors,
including vesting, exercisability and option term, are determined by the
Committee, based upon relative position and responsibilities of each executive
officer, historical and expected contributions of each officer of the Company,
previous option grants to executive officers and a review of competitive equity
compensation for executive officers of similar rank in companies that are
comparable to the Company's industry and size.
For information regarding these and other options held by the Company's
executive officers, reference is made to the tables set forth in the Proxy
Statement under the caption "Compensation of Executive Officers."
Compensation Committee
Gerald Tsai, Jr. (Chairman)
Philip Neivert
Leonard I. Green
13
<PAGE>
STOCK PERFORMANCE GRAPH
The graph below compares the yearly percentage change in the cumulative
total stockholder return on the Common Stock of the Company for the last five
fiscal years with the cumulative total return on the S&P 500 Index and the S&P
Retail Stores Composite Index over the same period (assuming the investment of
$100 in the Company's Common Stock and such indices on February 27, 1993 and
reinvestment of dividends).
The Company has elected to use the S&P Retail Stores Composite Index,
consisting of thirty-five companies including the six largest drugstore chains.
This allows comparison of the Company to the peer group of similar sized
companies used by the Compensation Committee in its evaluation and
determination of executive compensation.
$400.00 |-------------------------------------------------------|
| + |
| |
$350.00 |-------------------------------------------------------|
| |
| |
$300.00 |-------------------------------------------------------|
| |
D | # |
O $250.00 |-------------------------------------------------------|
L | + |
L | |
A $200.00 |-------------------------------------------#-----------|
R | o |
S | + |
$150.00 |---------------------------------#---------------------|
| + |
| # o |
$100.00 +--------------+o-------#---------o---------------------|
| o |
| |
$50.00 |-------------------------------------------------------|
| |
| |
$0.00 |--------------|--------|----------|---------|----------|
1993 1994 1995 1996 1997 1998
--------------------------------------------------------------------
1993 1994 1995 1996 1997 1998
--------------------------------------------------------------------
# S&P 500 $100.00 $108.29 $116.30 $156.63 $197.65 $266.83
--------------------------------------------------------------------
+ RITE AID $100.00 $100.18 $133.35 $174.06 $238.20 $371.67
--------------------------------------------------------------------
o S&P RETAIL $100.00 $100.29 $ 91.83 $101.45 $124.85 $190.99
--------------------------------------------------------------------
----------
* The Company's fiscal year ends on the Saturday closest to February
29 or March 1.
14
<PAGE>
PROPOSALS OF SECURITY HOLDERS
All proposals of any stockholder of the Company which the holder desires
be presented at the next Annual Meeting of Stockholders and be included in the
proxy statement and form of proxy prepared for that meeting must be received by
the Company at its principal executive offices no later than January 18, 1999.
All such proposals must be submitted in writing to the Secretary of the Company
at the address appearing on the notice accompanying this proxy statement.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP performed the customary auditing services for the
fiscal year ended February 28, 1998, and has been selected to perform these
services for the next fiscal year. A representative of KPMG Peat Marwick LLP is
expected to be present at the Meeting and will be available to respond to
questions from the floor and will be afforded an opportunity to make any
statement which he may deem appropriate.
SOLICITATION OF PROXIES
The cost of the solicitation of proxies will be borne by the Company. In
addition to the use of the mails, solicitations may be made by telephone and
personal interviews by officers, directors and regularly engaged employees of
the Company. It is not anticipated that anyone will be specifically engaged by
the Company or by any other person to solicit proxies. Brokerage houses,
custodians, nominees and fiduciaries will be requested to forward this proxy
statement to the beneficial owners of the stock held of record by such persons,
and the Company will reimburse them for their charges and expenses in this
connection.
ANNUAL REPORT ON FORM 10-K
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON SOLICITED BY THIS PROXY
STATEMENT, AT THE WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE COMPANY'S
ANNUAL REPORT ON FORM 10-K (INCLUDING THE FINANCIAL STATEMENTS AND THE
SCHEDULES THERETO) AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR ITS
MOST RECENT FISCAL YEAR. SUCH WRITTEN REQUESTS SHOULD BE DIRECTED TO RICHARD
VARMECKY, AT THE ADDRESS OF THE COMPANY APPEARING ON THE FIRST PAGE OF THIS
PROXY STATEMENT.
15
<PAGE>
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
<PAGE>
RITE AID CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
JUNE 24, 1998
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Martin Grass and Franklin
Brown or either one of them, as proxies, with full power of substitution, to
vote all shares of stock of Rite Aid Corporation (the "Company") which the
undersigned would be entitled to vote if personally present at the Annual
Meeting of stockholders of the Company to be held at the Radisson Penn Harris
Hotel & Convention Center, 1150 Camp Hill Bypass, Camp Hill, Pennsylvania, at
10:00 o'clock a.m., on June 24, 1998, or at any adjournments or postponements
thereof:
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
IN THE ENCLOSED POSTAGE PAID ENVELOPE.
(continued on reverse side)
<PAGE>
Rite Aid Corporation
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. / /
1. Election of Directors, For All
Alex Grass, Philip Neivert, Gerald Tsai, Jr. For Withheld Except
-------------------------------------------- / / / / / /
(Except nominee[s] written above.)
Signature of Stockholder:_____________________
______________________________________________
Dated:_________________________________ , 1998
NOTE: When signing as attorney-in-fact,
executor, administrator, trustee or guardian,
please add your title as such, and if signer is
a corporation, please sign with full corporate
name by duly authorized officer or officers and
affix the corporate seal. Where stock is issued
in the name of two or more persons, all such
persons should sign.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS SPECIFIED, OR IF NO
SPECIFICATIONS ARE MADE, WILL BE VOTED FOR THE ELECTION OF THE ABOVE NOMINEES
FOR DIRECTOR, AND THE NAMED PROXIES WILL USE THEIR DISCRETION TO VOTE ON ANY
OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF MEETING AND PROXY
STATEMENT FURNISHED HEREWITH, AND HEREBY CONFIRMS THAT THIS PROXY SHALL BE VALID
AND MAY BE VOTED WHETHER OR NOT THE STOCKHOLDER'S NAME IS SET FORTH BELOW OR A
SEAL IS AFFIXED OR THE DESCRIPTION, AUTHORITY OR CAPACITY OF THE PERSON SIGNING
IS GIVEN OR OTHER DEFECT OF SIGNATURE EXISTS.
