DEF 14A 1 tm217739-2_def14a.htm DEF 14A tm217739-2_def14a - none - 17.2032266s
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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Soliciting Material under §240.14a-12
RITE AID CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Rite Aid Corporation
30 Hunter Lane
Camp Hill, Pennsylvania 17011
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LETTER FROM OUR CHAIR
AND CHIEF EXECUTIVE OFFICER
DEAR FELLOW STOCKHOLDERS:
As we consider the past year, three words consistently rise to the top: Determination, progress and resilience.
We, and the entire Rite Aid Board of Directors, are immensely proud of the more than 50,000 associates that worked through pandemic-related challenges to keep their communities healthy and thriving. Our collective determination to help customers manage through the pandemic, while also transforming our organization, actually accelerated our work to be a demonstrably different company in just one year. Our associates have shown resilience in every aspect of our business, from pivoting daily on COVID-19 testing and vaccines to positioning new brands and merchandise, and keeping stores, distribution centers, mail order facilities and call centers open, all without missing a beat. This determination has been a differentiator for the organization. And so, in a year like no other, we have made significant progress in creating a whole new Rite Aid and setting the foundation for enhanced stockholder value.
We are also pleased to report on our progress aligned with our purpose. We demonstrated that we can deliver on our core mission of keeping our communities healthy and thriving, and at the same time position ourselves for a successful future. Despite the challenges posed by COVID-19, our teams are clear on what needs to be done in Fiscal Year 2022: win today and in the future by creating real health care value, improving consumer engagement, and transforming our work to improve financial performance.
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As we move into the second year of implementing our strategic plan, we are focused on:

Accelerating our RxEvolution plan:
Our initiatives are focused on three primary areas: 1) Managing Elixir client costs via seamless member engagement and better health outcomes; 2) Unlocking the value of our pharmacists; and 3) Transforming our retail and digital experience. We begin Fiscal Year 2022 with a newly branded and integrated pharmacy benefit manager (PBM) poised to expand its large and growing addressable market, a new retail brand, enhanced store footprint and merchandise assortment, more than 6,400 pharmacists who are whole health advisors serving their communities, and an incredible and energized team. More than ever, we are able to deliver on growth opportunities in retail and pharmacy service segments.

Defining Rite Aid as a health care company:
The pandemic validates our conviction that pharmacists are indeed the last mile connectors between the health care system and consumers. Although many may think of Rite Aid as a retailer, we are at our core a health care company, serving more than a million customers every day through our more than 2,500 retail stores, our pharmacy services call center, our mail order and specialty pharmacies, and through clinical and analytical services powered by our subsidiary, Health Dialog. Our personal connection to our customers through our trusted pharmacists is an important part of the future of health care in America. We are committed to fundamentally changing our role in health care and becoming the industry leader in whole health.

LETTER FROM OUR CHAIR AND CHIEF EXECUTIVE OFFICER

Becoming a more efficient operator:
In Fiscal Year 2021, we extended all but $91 million of our calendar 2023 bond maturities to calendar 2025 and 2026, and ended the year with $1.7 billion in liquidity, which gives us ample flexibility to execute our strategic initiatives. As we executed our strategic plan, we increased revenues in both the retail pharmacy and pharmacy services segment, and grew market share1 in both retail and pharmacy in a highly competitive environment. Additionally, the Company implemented LEAN initiatives both to reduce working capital tied to inventory and improve our retail pharmacists’ productivity. We also reduced back office costs through consolidating administrative functions in our retail and pharmacy services lines of business into a more efficient structure.

Enhancing our ESG practices:
We continue to make progress in our ESG efforts, including fleet fuel reduction, decreased energy usage, and our continued progress in eliminating chemicals of concern. In addition, we performed an enterprise climate risk assessment, responded to CDP’s climate change questionnaire, and invested in our associates through numerous program enhancements to keep them engaged. We are proud of the racial, ethnic, and gender diversity of our Board of Directors (88% of whom are racially diverse or female) and our executive leadership team (50% of whom are racially diverse or female), and are expanding our Diversity, Equity and Inclusion efforts in Fiscal Year 2022.
On behalf of the Board of Directors, we would like to invite you to attend our virtual 2021 Annual Meeting of Stockholders, where we plan to share with you the progress we are making toward our vision and strategy for the Company.
Instructions for joining the meeting are contained in the section of the Proxy Statement titled “Information About the Annual Meeting and Voting.”
We look forward to continuing our work with the outstanding Rite Aid team to support the needs of our customers and drive growth, improved performance, and stockholder value. Thank you for your investment in Rite Aid.
Sincerely, Sincerely,
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BRUCE G. BODAKEN
Chair of the Board
HEYWARD DONIGAN
President, Chief Executive Officer and Director
May 20, 2021
Refer to the section titled “Cautionary Statement Regarding Forward-Looking Statements” for a discussion of risks and uncertainties that could cause actual results to differ materially from those projected.
1
Growth in market share was measured by IRI, a leading provider of market data and analytics, in areas where Rite Aid operates and excludes tobacco, cigarettes, greeting cards, and online sales.

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Rite Aid Corporation
30 Hunter Lane
Camp Hill, Pennsylvania 17011
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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VIRTUAL MEETING
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July 7, 2021
11:30 a.m., Eastern
Daylight Time
www.virtualshareholdermeeting.com/RAD2021
Close of business on
May 10, 2021
AGENDA
Proposal
Board Recommendation
1
Election of nine directors to hold office until the 2022 Annual Meeting of Stockholders
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FOR all nominees
2
Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm
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FOR
3
Advisory vote to approve the compensation of our named executive officers
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FOR
4
Approval of the Rite Aid Corporation Amended and Restated 2020 Omnibus Equity Incentive Plan
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FOR
In addition, we will transact any business properly presented at the meeting, including any adjournment or postponement by or at the direction of the Board of Directors. For information regarding how to access the list of stockholders entitled to vote at the meeting, see “Information About the Annual Meeting and Voting—Is there a list of stockholders entitled to vote at the Annual Meeting?” in the Proxy Statement.
VOTING
Have your proxy card or voting instruction form in hand, with your individual control number, and follow the instructions.
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PHONE
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INTERNET
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MOBILE DEVICE
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MAIL
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VIRTUAL MEETING
Call
1-800-690-6903
(toll-free), 24/7
Visit
www.proxyvote.com,
24/7
Scan the
QR code
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Mark, sign and
date your proxy
card or voting
instruction form
and return it in
the postage-paid
envelope
During the virtual
meeting, go to
www.virtualshareholder
meeting.com/RAD2021
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
STOCKHOLDER MEETING TO BE HELD ON JULY 7, 2021
Your vote is important. Please read the Proxy Statement carefully and submit your vote as soon as possible. The Notice of Availability is being mailed and the proxy materials made available on or about May 20, 2021. The proxy statement and annual report, as well as the Company’s proxy card, are available at www.proxyvote.com.

 
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TABLE OF CONTENTS
1
Business Strategy and Performance in FY 2021
4
Stockholder Engagement Efforts
5
Board of Directors
6
Board and Governance Highlights
7
Executive Compensation Overview
8
Human Capital Management Efforts
8
Diversity, Equity and Inclusion Efforts
9
Environmental, Social & Governance Efforts
13 Director Nominees
18
Board Leadership Structure
18
Director Independence
19
Corporate Governance Practices
19
Board Oversight of Risk Management
21
Committees of the Board of Directors
22
23
23
24
24
24
Board Meeting Attendance
25
Director Nominations
25
Executive Sessions of Non-Management Directors
26
Communications with the Board of Directors
26
Environmental, Social & Governance Matters
27
Opioids and Our Communities
28
Corporate Governance Materials
28
Certain Relationships and Related Transactions
30
Directors’ Compensation
32
Auditor Fees
32
Audit Committee Report
35 Compensation Discussion and Analysis
63
Compensation Committee Report
Executive Compensation Tables
64
66
67
69
70
70
70
77
Pay Ratio Disclosure
92
Questions and Answers
99
Important Notice Regarding Delivery of Stockholder Documents
100
Stockholder Proposals for the 2022 Annual Meeting
101
Incorporation by Reference
102
Other Matters
102
Annual Report
103
Cautionary Statement Regarding Forward-Looking Statements
 

 
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PROXY STATEMENT SUMMARY
This Proxy Statement Summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information you should consider, so please read the entire Proxy Statement carefully before voting. References to “Rite Aid,” “Rite Aid Corporation,” the “Company,” “we,” “us,” or “our” in this proxy statement and the accompanying notice and letters to stockholders refer to Rite Aid Corporation and/or its affiliates. Rite Aid Corporation, a Delaware corporation, owns multiple subsidiary companies which operate Rite Aid stores and pharmacies and other affiliated companies. The term “affiliates” means direct and indirect subsidiaries of Rite Aid Corporation and partnerships and joint ventures in which such subsidiaries are partners. References herein to “associates” refer to employees of our affiliates.
This proxy statement is being furnished to you by the Board of Directors (the “Board” or “Board of Directors”) of Rite Aid Corporation to solicit your proxy to vote your shares at our 2021 Annual Meeting of Stockholders (the “Annual Meeting”). The Annual Meeting will be held on July 7, 2021 at 11:30 a.m., Eastern Daylight Time, by live audio webcast at www.virtualshareholdermeeting.com/RAD2021.
The following proposals will be on the agenda for the Annual Meeting:
Proposal
Board Recommendation
See Page
1
Election of nine directors to hold office until the 2022 Annual Meeting of Stockholder
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FOR all nominees
11
2
Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm
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FOR
32
3
Advisory vote to approve the compensation of our named executive officers
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FOR
34
4
Approval of the Rite Aid Corporation Amended and Restated 2020 Omnibus Equity Incentive Plan
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FOR
78
BUSINESS STRATEGY AND PERFORMANCE IN FY 2021
RxEvolution Strategy
Rite Aid’s RxEvolution strategy was originally announced on March 16, 2020. Rite Aid strives to fundamentally change our role in health care and become the industry leader in WHOLE HEALTH. Our goal is to engage customers to get beyond healthy and get thriving.
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Our strategy is composed of three main pillars:
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RITE AID CORPORATION   2021 Proxy Statement | 1

 
PROXY STATEMENT SUMMARY
Rite Aid seeks to deliver a fresh, differentiated experience across all channels by targeting our growth customer—women between the ages of 25 to 49 who take care of themselves, their children, aging parents, and even pets. During the past year, the Company has been building the foundation for an elevated customer experience. Rite Aid has been:

establishing supplier relationships focusing on enhancing our assortment of “on-trend” and better for you merchandising;

resetting over 75% of front-end sales categories according to our new merchandising standards;

delivering new and enhanced product training, tools, and work processes to all in-store associates;
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Customers are taking notice as the look and feel of our stores are refreshed, our merchandising mix evolves to an assortment that best supports whole health, and perhaps most importantly, our trusted neighborhood pharmacists are empowered and qualified to consult not simply on traditional medicines, but alternative remedies as well. We’re seeking to redefine an industry, and aspire to get each one of our customers to thrive.”
JIM PETERS, Chief Operating Officer

leveraging the LEAN methodology to free up pharmacists’ time to consult with our customers on their whole health;

modernizing our e-commerce infrastructure and online experience; and

physically refreshing the exterior of our fleet of stores.
This comprehensive approach is aimed at helping customers achieve a level of well-being that goes beyond traditional perceptions of healthy.
Elixir, our pharmacy benefits and services company (PBM), represents a significant growth opportunity for Rite Aid. In the past year, we have rebranded the business, built a stronger, integrated offering, and created operational alignment and synergies, positioning the organization for strong growth and improved profitability. We are establishing a clearly differentiated market leader through compelling health care services offerings and outstanding digital engagement, through the connection of over 2,500 Rite Aid retail stores, and over 60 Bartell Drugs retail stores, which Rite Aid acquired in Fiscal Year 2021. Elixir’s primary market differentiator is that it is the only payor-agnostic PBM with a retail pharmacy footprint and a health care analytics and engagement company, Health Dialog.
As a health care company with a retail footprint that operates in many communities throughout the country and engages over one million customers per day through our various lines of business, we believe we are uniquely positioned to continue making a meaningful difference in the lives of our customers, associates, and neighbors.
Keeping Our Communities Safe During the COVID-19 Pandemic
In the face of the unprecedented COVID-19 pandemic, Rite Aid has been on the front lines of health care delivery in many of the hardest-hit cities across America. Our response to this global crisis is closely tied to our corporate social responsibility efforts. We were proud to join the White House COVID-19 Response Working Group in March 2020 and help significantly expand the nation’s self-swab testing capacity. As of April 15, 2021, we had over 1,200 COVID-19 drive-thru testing locations where we offer free COVID-19 testing to anyone over age 4, regardless of symptomatic status.
In February 2021, Rite Aid joined the Federal Retail Pharmacy Program to provide coronavirus vaccines. At the outset, Rite Aid received federal allocations of the Pfizer and Moderna vaccines in seven jurisdictions. As of April 15, 2021, Rite Aid had administered approximately 2.5 million COVID-19 vaccines across 19 jurisdictions in nearly half of our stores and in nearly 700 clinics, including clinics for vulnerable or underserved populations.
Rite Aid also has undertaken efforts to educate our communities about COVID-19 testing, vaccine eligibility and availability, vaccine safety, and measures we take to keep our associates, customers, and communities safe through a COVID-19 information resource on our website, at www.riteaid.com/covid-19. Except as stated otherwise, information on our website is not considered part of this Proxy Statement.
 
2 | RITE AID CORPORATION   2021 Proxy Statement

 
PROXY STATEMENT SUMMARY
Rite Aid associates have been at the heart of our response to the pandemic, providing communities with the medications, essential supplies, and COVID-19 related information they need.
We have taken numerous steps to ensure that Rite Aid can continue providing these vital services, including:
Serving Associates By:

Implementing Hero Pay and Hero Bonus programs to show appreciation for the exceptional commitment of Rite Aid associates on the front lines.

Instituting a temporary administrative leave program for associates who are 65+, at increased risk for severe illness from COVID-19, or not comfortable coming to work.

Instituting a temporary Pandemic Pay program that ensures associates are compensated if diagnosed with the virus or quarantined because of exposure.

Implementing specific internal protocols to keep associates safe and ready to serve customers, including the installation of clear plastic barriers at pharmacy and front-end counters to provide additional protection.

Providing associates with disposable masks, cloth face coverings, gloves, and face shields to protect them while at work.
Serving Customers By:

Launching Rite Aid Virtual Care, telehealth powered by RediClinic to better serve patient needs.

Designating a senior shopping hour to limit exposure for older customers or those at increased risk for severe illness.

Establishing social distancing procedures that include marking floor areas in front of the pharmacy and front-end counters to show six feet of separation.

Waiving delivery fees for eligible prescriptions.

Following enhanced cleaning and sanitization protocols designed specifically to prevent the spread of a wide spectrum of viruses, including COVID-19 and influenza.

Making complimentary masks available to customers.

Making hand sanitizer and wipes available to customers and associates.
Keeping Our Communities Safe From Opioid Abuse
On September 30, 2019, the Company released a dedicated report describing the Company’s leadership approach to ensuring the appropriate governance and oversight of opioid dispensing, treatment assistance and disposal, which is available on our website at www.riteaid.com under the headings “Corporate—Governance—Our Policies—Board Report on Opioids Oversight.” The Board is committed to ensuring that the Company is developing solutions to curb prescription opioid abuse through the development and expansion of education, safe prescription drug disposal, and industry leading pharmacy safeguards.
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Improving the Health and Wellbeing of Our Communities
77,000+
Naloxone Rx
#3
Ranking
93,000
DisposeRx Packets
630+
Safe Disposal Kiosks
prescriptions dispensed to help address the opioid crisis
in large chain overall performance for Medication Therapy Management Services by OutcomesMTM
given out in Rite Aid stores
installed in law enforcement facilities in our communities through support of The Rite Aid Foundation
 
RITE AID CORPORATION   2021 Proxy Statement | 3

 
PROXY STATEMENT SUMMARY
Fiscal Year 2021 Performance and Operational Highlights2
$24.0B
Total Revenue
$437.7M
Adjusted EBITDA
$1.7B
Total Liquidity
9.6%
Total Revenue Growth
450K
Average Daily
Prescriptions
6,400
Pharmacists Serving
Our Communities
2,500
Retail Pharmacy Locations across 17 States
3.3M
Elixir Members
STOCKHOLDER ENGAGEMENT EFFORTS
We regularly seek the perspectives of our stockholders on issues important to them. Through our quarterly financial performance webcasts, analyst conferences, investor meetings and calls, we obtain, process and share stockholder feedback with our Board and committees. Our Compensation Committee considers investor perspectives when making decisions on executive compensation, and our Nominating and Governance Committee considers investor views regarding Board composition and corporate governance matters. Due to feedback we received in fiscal year 2021, we increased our efforts to engage with stockholders as follows:
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WHO WE CONTACTED
HOW WE ENGAGED
WHAT WE DISCUSSED
During fiscal year 2021 we reached out to holders representing over
50%
of our outstanding stock.
Holders representing over
25%
of our outstanding stock participated in meetings.
We also engaged with leading proxy advisors to discuss executive compensation matters.
We annually invite our largest
20+
stockholders
to individual meetings (or videoconferences) to discuss items of importance to them, such as executive compensation and Board and corporate governance matters.
The Chair of the Compensation Committee and senior management participated.

Executive Compensation design elements and alignment with stockholders

The importance of environmental, social and governance (ESG) initiatives, particularly related to carbon emissions reductions and renewable energy strategies

Issuing a climate related financial disclosure report using the Task Force on Climate-related Financial Disclosures (TCFD) framework

Board level oversight over ESG and energy and emissions reduction goals

Board level oversight of diversity, equity and inclusion (DEI) strategy

Strategy and efforts around hiring, training and retaining a diverse workforce
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OUR RESPONSES

Committed to more ESG transparency, including issuing a report in 2021 using TCFD standards, amended the Board’s nominating and governance committee charter to expand its oversight role to include ESG matters, created a cross-functional management steering committee on sustainability, and strengthened governance of climate risk through the Enterprise Risk Management program.

Demonstrated the commitment to DEI by amending our Board’s compensation committee charter to include oversight of diversity, equity, and inclusion matters, hired a Vice President of DEI to develop and execute our DEI strategy, issued a CEO statement of intolerance of discrimination and injustice, and supported the Rite Aid Foundation and other nonprofit organizations’ advocacy for racial equity, awareness, and progress in the United States.
2
As of February 27, 2021.
 
4 | RITE AID CORPORATION   2021 Proxy Statement

 
PROXY STATEMENT SUMMARY
BOARD OF DIRECTORS
Board Refreshment
We have added 7 new directors to our Board since 2018, all of whom are either women or racially or ethnically diverse.
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Board Attributes
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RITE AID CORPORATION   2021 Proxy Statement | 5

 
PROXY STATEMENT SUMMARY
Director Nominees
Committees
Director and Principal Occupation
Age
Director
Since
Independent
Audit
Compensation
Nominating and
Governance
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BRUCE G. BODAKEN
Former Chairman and Chief Executive
Officer, Blue Shield of California
69
2013;
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since
2018
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ELIZABETH “BUSY” BURR
President and Chief Commercial
Officer, Carrot Inc.
59
2019
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HEYWARD DONIGAN
President and Chief Executive Officer,
Rite Aid Corporation
60
2019
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BARI HARLAM
Co-Founder, Trouble LLC; and former
EVP, Chief Marketing Officer North
America, Hudson’s Bay Company
59
2020
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ROBERT E. KNOWLING, JR.
Chairman, Eagles Landing Partners
65
2018
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KEVIN E. LOFTON
Former Chief Executive Officer,
CommonSpirit Health
66
2013
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LOUIS P. MIRAMONTES
Former Managing Partner of the
San Francisco office and Senior Partner
for Latin America, KPMG LLP
66
2018
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ARUN NAYAR
Former Executive Vice President
and Chief Financial Officer,
Tyco International
70
2018
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KATE B. QUINN
Vice Chairman and Chief
Administrative Officer, U.S. Bancorp
56
2019
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Committee Chair
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Committee Member
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Chair of the Board
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Audit Committee Financial Expert
BOARD AND GOVERNANCE HIGHLIGHTS
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All Board members are independent except the President and Chief Executive Officer
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Diverse chairs for Audit, Compensation and Nominating and Governance Committees
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Independent Chair of the Board
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All directors elected annually
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Majority voting for directors in uncontested elections
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Proxy access provisions in bylaws
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Holders of 10% of outstanding stock may call a special meeting of stockholders
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Mandatory director retirement age of 72
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Meaningful stock ownership requirements for the Board and executive officers
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Anti-hedging and anti-pledging policy for the Board and all associates
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Annual evaluation of the Board and committees
 
6 | RITE AID CORPORATION   2021 Proxy Statement

 
PROXY STATEMENT SUMMARY
EXECUTIVE COMPENSATION OVERVIEW
Philosophy and Objectives
Our executive compensation program is based on a pay-for-performance philosophy and is designed to accomplish the following goals:
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[MISSING IMAGE: tm217739d1_ic-checkpn.jpg]WHAT WE DO
[MISSING IMAGE: tm217739d2_ic-xk.jpg]WHAT WE DON’T DO
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Conduct annual stockholder advisory vote on the compensation of our named executive officers
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Maintain dialogue with stockholders on various topics, including executive pay practices
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Retain an independent executive compensation consultant to the Compensation Committee
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Ensure that a significant portion of executive officer total target remuneration is at risk
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Provide annual and long-term incentive plans with performance targets aligned to business goals
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Require a designated level of stock ownership for all named executive officers
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Require equity awards to have a double trigger (qualifying termination of employment and change in control)
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Complete an annual incentive compensation risk assessment
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Maintain a formal clawback policy for executive officers
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Provide gross-up payments to cover personal income taxes or excise taxes related to executive severance benefits
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Permit executives to engage in hedging or pledging of Rite Aid securities
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Reward executives for imprudent, inappropriate, or unnecessary risk-taking
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Allow the repricing of equity awards without stockholder approval
 
RITE AID CORPORATION   2021 Proxy Statement | 7

 
PROXY STATEMENT SUMMARY
Total Target Compensation
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HUMAN CAPITAL MANAGEMENT EFFORTS
We are proud to employ over 50,000 associates across the United States, including Puerto Rico. Our associates are key to the success of our transformation as they are at the center of supporting the whole health of our customers and communities. We are optimizing our workforce through enhanced communication and engagement through the following measures:

annual and periodic pulse surveys in which more than 70% of our associates have participated;

increased personal and professional associate development opportunities, including training on leadership, safety, compliance, and other critical business skills;

discounted tuition and reimbursement programs for associates to pursue degrees at select colleges or universities;

certification as an Accredited Provider of Continuing Pharmacy Education, which allows us to offer courses that count toward the continuing education licensing requirements of our pharmacists;

offering an accredited pharmacy technician certification program;

compensation and benefit programs to support, recognize and reward performance of our associates (including annual bonuses, 401(k) plans, health care benefits, paid time off, life and disability coverage, merchandise discounts, and many other services and programs);

associate wellness programs and tools for whole health in areas such as mental health, disease management, and financial wellness; and

an associate recognition program that incorporates financial incentives to celebrate the achievements of our teams and create a community experience for our workforce.
DIVERSITY, EQUITY AND INCLUSION EFFORTS
Just as we are transforming our business, we are also transforming our approach to Diversity, Equity & Inclusion (DEI). We are being more intentional to ensure that we have not only a diverse workforce but an environment in which our talent can thrive. We are proud to be a part of diverse communities and to have a workforce that reflects the diversity of our customers and the communities in which we operate. As such, we believe that an inclusive and welcoming culture is essential, and our commitment to diversity comes from the top. We are proud to have a Board with 89% overall diversity, which is composed of 44% gender diversity and 44% ethnic/racial diversity.
We are focused on strengthening our DEI infrastructure, which includes the development of a DEI team (a Center of Excellence) and a DEI integrated strategy that will address talent processes such as talent acquisition, talent development and talent management. A key focus will be to develop solutions that seek to enhance the work environment so our associates can perform to their best potential and provide an optimum customer experience. Our experienced Vice President of Diversity, Equity & Inclusion focuses on developing and executing our DEI strategy.
As of December 31, 2020, 67% of associates self-reported as female. In addition, associates self-reported their race/ethnicity as: White 56%; Hispanic 15%; Black 13%; Asian 11%; and Other 5%.
 
8 | RITE AID CORPORATION   2021 Proxy Statement

 
PROXY STATEMENT SUMMARY
ENVIRONMENTAL, SOCIAL & GOVERNANCE EFFORTS
As discussed in more detail in the section on Corporate Governance and Board Matters below, Rite Aid is committed to integrating Environmental, Social, and Governance (ESG) initiatives into our operations, not only to create value for our stockholders, customers, and associates, but also because we are deeply invested in our communities, and our customers want to support a company that supports their safety and our environment.
In fiscal year 2021, we made a concerted effort to enhance our strategy and overall approach to sustainability. The strategy was influenced by reporting frameworks, conversations with stockholders, stakeholder expectations, and emerging trends. We identified several key areas of opportunity to expand our environmental, social and governance commitments, most notably around diversity, equity and inclusion, human capital management, climate change and board oversight of ESG matters.
We also recognize that climate risk is investment risk, and transparency regarding climate-related risks and opportunities is crucial to maintaining the trust of our stakeholders. This also allows our investors to better understand the implications of climate change on our business. In fiscal year 2021, we took a comprehensive look at how we understand and manage the risks and opportunities associated with climate change and began incorporating this into our long term strategy. Some of our fiscal year 2021 highlights include:
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Energy Management, Energy Production & Waste Reduction
[MISSING IMAGE: tm217739d1-icon_arrowdnpn.jpg] 63%
Waste Reduction
35%
Of Our Stores
50%
Renewable Power
50,000+
Tons
related to decreased pharmaceutical hazardous waste generation
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now have LED lighting,
8% year-over-year increase
provided at 49 California Rite Aid locations
of recyclable materials from our operating locations diverted from landfills last year
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GHG Emissions & Fuel Reduction
2,638
Metric Tons
300,000
Gallons
[MISSING IMAGE: tm217739d1-icon_arrowdnpn.jpg] 12%
Passenger Fleet
Reduction
62,000
Gallons
reduction in emissions last year by eliminating passenger fleet vehicles
of fuel saved by reducing passenger fleet vehicles
by eliminating passenger vehicles
of fuel saved last year, by implementing use of distribution software, resulting in 8.3% fewer miles driven
 
RITE AID CORPORATION   2021 Proxy Statement | 9

 
PROXY STATEMENT SUMMARY
Managing Chemicals of Concern
As we position Rite Aid as a whole health destination that elevates mind, body and spirit, one of our core tenets remains providing our customers with the best products, services and advice to meet their unique needs. Our customers want to feel confident about what is in the products they are using for themselves and their families.
In 2016, Rite Aid committed to eliminate eight chemicals of high concern (the “Evil 8”) from its private brand formulated products by 2020. In 2018, we adopted our Chemical Policy and corresponding restricted substance list (RSL), which outlines our commitment to the ongoing management of toxic chemicals and safety of the products on our shelves.
In 2021, Rite Aid was ranked 7th
out of 50 of the largest retailers
in North America for its
management of toxic chemicals
by the annual Who’s Minding
the Store? Retailer Report Card.
View the retailer report card at
retailerreportcard.com/grades
Website content is not incorporated into this proxy statement.
In 2020, our primary focus was to meet our goal of eliminating Evil 8 chemicals from the primary formulations of private brand products. As of March 2021, only 13 formulas (1% of our assortment) contained Evil 8 chemicals. We are actively transitioning out of or working with supplier partners to reformulate these last few items with safer alternatives.
We are proud of the progress we’ve made in reducing the presence of chemicals of concern, which is essential to the future success of our own brands. To that end, we’ve embarked on an ambitious, multi-year initiative to re-architect our own brands program where “clean ingredients” will not only be celebrated, but will be a core component of our positioning across brands and categories, including health, beauty, personal care, consumables, household and more.
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For more information, please see Rite Aid’s 2020 CSR Report at https://www.riteaid.com/content/dam/riteaid-web/corporate/rite-aid-corporate-social-responsibility-report-2020.pdf
Website content is not incorporated into this proxy statement.
 
10 | RITE AID CORPORATION   2021 Proxy Statement

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PROPOSAL 1—ELECTION OF DIRECTORS
Our By-Laws provide that the Board of Directors may be composed of up to 15 members, with the number to be fixed from time to time by the Board. The Board has fixed the number of directors at nine, and there are nine nominees for director at our Annual Meeting. All directors are elected annually.
The Board of Directors, based on the recommendation of the Nominating and Governance Committee, has nominated the following individuals to be elected directors at the Annual Meeting:

Bruce G. Bodaken

Bari Harlam

Louis P. Miramontes

Elizabeth “Busy” Burr

Robert E. Knowling, Jr.

Arun Nayar

Heyward Donigan

Kevin E. Lofton

Kate B. Quinn
Each of the nominees for director to be elected at the Annual Meeting currently serves as a director of the Company. Each director elected at the Annual Meeting will hold office until the 2022 Annual Meeting of Stockholders and will serve until his or her successor is duly elected and qualified.
If any nominee at the time of election cannot serve and as a consequence another nominee is designated, then the proxies or their substitutes will have the discretion and authority to vote for such other nominee in accordance with their judgment, or the Board may reduce the size of the Board.
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The Board of Directors unanimously recommends that you vote FOR the election of each of the nominees listed above.
The following table sets forth certain information as of May 20, 2021 with respect to our director nominees.
Name
Age
Position with Rite Aid
Year First
Became Director
Heyward Donigan
60
President, Chief Executive Officer and Director
2019
Bruce G. Bodaken
69
Chair
2013
Elizabeth “Busy” Burr
59
Director
2019
Bari Harlam
59
Director
2020
Robert E. Knowling, Jr.
65
Director
2018
Kevin E. Lofton
66
Director
2013
Louis P. Miramontes
66
Director
2018
Arun Nayar
70
Director
2018
Kate B. Quinn
56
Director
2019
Board Refreshment
The Board is committed to ensuring that it is composed of a highly capable and diverse group of directors who are well-equipped to oversee the success of the business and effectively represent the interests of stockholders. The Board has significantly accelerated its efforts to change the composition of the Board over the past three years. As a result, approximately forty-four percent of the director nominees are racially or ethnically diverse and approximately forty-four percent of the director nominees are women. In addition to enhancing the Board’s racial, ethnic and gender diversity, these changes bring a diversity of thought and experience to the Board. All of the nominees of the Board, other than Ms. Donigan, are independent directors.
 
RITE AID CORPORATION   2021 Proxy Statement | 11

PROPOSAL 1—ELECTION OF DIRECTORS
We have added 7 new directors to our Board since 2018, including one in 2020.
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Board Attributes
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In assessing Board composition and selecting and recruiting director candidates, the Board seeks to maintain an engaged, independent Board with broad experience and judgment that is committed to representing the long-term interests of our stockholders. The Nominating and Governance Committee considers a wide range of factors, including the size of the Board, the experience and expertise of existing Board members, other positions the director candidate has held or holds (including other board memberships), and the candidate’s independence. In addition, the Nominating and Governance Committee takes into account a candidate’s ability to contribute to the diversity of background and experience represented on the Board, and it reviews its effectiveness in balancing these considerations when assessing the composition of the Board.
 
12 | RITE AID CORPORATION   2021 Proxy Statement

PROPOSAL 1—ELECTION OF DIRECTORS
Board Skills and Experiences
The chart below summarizes the qualifications, attributes, skills and experiences for each of our director nominees. The fact that we do not list a particular experience or qualification for a director nominee does not mean that nominee does not possess that particular experience or qualification.
Skills and Experiences
Director
Board and
Corporate
Governance
Current or
Former CEO
Finance and
Accounting
Healthcare
Industry
Management
and
Business
Operations
Retail
Industry
Bruce G. Bodaken [MISSING IMAGE: tm217739d1_ic-stark.jpg]
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Elizabeth “Busy” Burr
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[MISSING IMAGE: tm217739d1_ic-checkpn.jpg]
[MISSING IMAGE: tm217739d1_ic-checkpn.jpg]
[MISSING IMAGE: tm217739d1_ic-checkpn.jpg]
[MISSING IMAGE: tm217739d1_ic-checkpn.jpg]
[MISSING IMAGE: tm217739d1_ic-checkpn.jpg]
Heyward Donigan
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[MISSING IMAGE: tm217739d1_ic-checkpn.jpg]
[MISSING IMAGE: tm217739d1_ic-checkpn.jpg]
[MISSING IMAGE: tm217739d1_ic-checkpn.jpg]
[MISSING IMAGE: tm217739d1_ic-checkpn.jpg]
Bari Harlam
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[MISSING IMAGE: tm217739d1_ic-checkpn.jpg]
Robert E. Knowling, Jr.
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[MISSING IMAGE: tm217739d1_ic-checkpn.jpg]
[MISSING IMAGE: tm217739d1_ic-checkpn.jpg]
Kevin E. Lofton
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[MISSING IMAGE: tm217739d1_ic-checkpn.jpg]
[MISSING IMAGE: tm217739d1_ic-checkpn.jpg]
[MISSING IMAGE: tm217739d1_ic-checkpn.jpg]
Louis P. Miramontes
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[MISSING IMAGE: tm217739d1_ic-checkpn.jpg]
[MISSING IMAGE: tm217739d1_ic-checkpn.jpg]
Arun Nayar
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[MISSING IMAGE: tm217739d1_ic-checkpn.jpg]
[MISSING IMAGE: tm217739d1_ic-checkpn.jpg]
Kate B. Quinn
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[MISSING IMAGE: tm217739d1_ic-checkpn.jpg]
[MISSING IMAGE: tm217739d1_ic-checkpn.jpg]
[MISSING IMAGE: tm217739d1_ic-checkpn.jpg]
Total of 9 Directors
9
5
3
5
9
4
100%
56%
33%
56%
100%
44%
Director Nominees
Following are the biographies for our director nominees, including information concerning the particular experience, qualifications, attributes, or skills that led the Nominating and Governance Committee and the Board to conclude that such person should serve on the Board:
BRUCE G. BODAKEN
Mr. Bodaken shares in-depth knowledge of the health insurance and managed care industries with the Board of Directors, serving in executive leadership positions for over 20 years.
Experience

Chairman and Chief Executive Officer of Blue Shield of California from 2000 through 2012.

President and Chief Operating Officer of Blue Shield of California from 1995 to 2000, and as Executive Vice President and Chief Operating Officer from 1994 to 1995.

Senior Vice President and Associate Chief Operating Officer of F.H.P., Inc., a managed care provider, from 1990 to 1994 and held various positions at F.H.P. from 1980 to 1990.

Visiting Lecturer at the University of California School of Public Health from 2013 to 2016 teaching graduate courses on health care reforms.

Visiting Scholar at the Brookings Institute from 2013 to 2015 focused on value-based care design.

Director and member of the compensation committee of iRhythm Technologies, Inc. and formerly a member of the board of directors of WageWorks, Inc.
[MISSING IMAGE: ph_brucebodaken-4c.jpg]
Age 69
Director since 2013
Chair since 2018
Committees

Executive (Chair)

Nominating and Governance
 
RITE AID CORPORATION   2021 Proxy Statement | 13

PROPOSAL 1—ELECTION OF DIRECTORS
ELIZABETH “BUSY” BURR
Ms. Burr brings to the Board of Directors extensive experience in the health industry, innovation, business strategy, and brand management.
Experience

President and Chief Commercial Officer at Carrot Inc., a digital health care company with solutions that combine behavioral science, clinical expertise, and proprietary technology, since 2019.

Chief Innovation Officer and Vice President of Healthcare Trend and Innovation at Humana from 2015 to 2018, where she led the design, build, and adoption of new product platforms in digital health, provider experience, and telemedicine. Founder of Humana’ Health Ventures, Humana’s strategic venture investing practice.

Former Managing Director of Citi Ventures, Citigroup’s global venture group, from 2011 – 2015. Prior to Citigroup, she spent seven years in investment banking at Morgan Stanley and Credit Suisse First Boston.

Former Vice President of Global Brand Management at Gap, Inc., where she was responsible for aligning the product, store, online, advertising, and merchandising efforts for the four Gap brands around the world.

Member of the boards of directors of Mr. Cooper Group Inc., a company that provides mortgage servicing, origination, and transaction-based services, and Satellite Healthcare, a nonprofit provider of kidney dialysis services.
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Age 59
Director since 2019
Committees

Audit
HEYWARD DONIGAN
Ms. Donigan brings to the Board strong senior executive experience, proven leadership capabilities, and a consistent track record of driving profitable growth, as well as broad health care knowledge and digital technology expertise.
Experience

President and Chief Executive Officer of the Company since February 2020 and Chief Executive Officer since August 2019.

President and Chief Executive Officer of Sapphire Digital, which designs and develops omni-channel platforms that help consumers choose their best fit health care providers, from 2015 to 2019. In that role, Ms. Donigan led Sapphire Digital’s strategy and operations to record growth and consumer engagement.

President and Chief Executive Officer of ValueOptions, Inc., then the nation’s largest independent behavioral health improvement company, from 2010 to 2015, where she drove innovation through disciplined execution and grew company revenues to over $1 billion.

Executive Vice President and Chief Marketing Officer at Premera Blue Cross, where she was responsible for driving profitable growth across the individual, small group, mid-market, and national account businesses and helped the company achieve record growth and profits.

Previously served as Senior Vice President of all operations at Cigna Healthcare and held executive roles at General Electric, Empire BCBS, and U.S. Healthcare.

In the last five years, served on the board of directors of Kindred Healthcare and NxStage Medical, Inc.
[MISSING IMAGE: ph_heywarddonigan-4c.jpg]
Age 60
Director since 2019
Committees

Executive
 
14 | RITE AID CORPORATION   2021 Proxy Statement

PROPOSAL 1—ELECTION OF DIRECTORS
BARI HARLAM
Ms. Harlam is a former C-suite business leader, marketer, educator, and author, and a pioneer in customer loyalty who provides the Board of Directors with her experience in digital marketing and data analytics.
Experience

Co-founder of Trouble LLC, a pro-social, experience brand.

Executive Vice President, Chief Marketing Officer North America at Hudson’s Bay Company from 2018 to 2020.

Executive Vice President, Membership, Marketing and Analytics at BJ’s Wholesale Club from 2012 to 2016.

Chief Marketing Officer at Swipely, now Upserve, from 2011 to 2012.

Senior Vice President, Member Engagement at CVS Health from 2000 to 2011.

Early in her career, was a Professor at Columbia University and the University of Rhode Island, and Adjunct Professor at the Wharton School, University of Pennsylvania.

Member of the Board of Directors of Eastern Bankshares, Inc., Mohawk Group and OneWater Marine Inc.
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Age 59
Director since 2020
Committees

Nominating and Governance
ROBERT E. KNOWLING, JR.
Mr. Knowling brings to the Board extensive experience in executive management and leadership roles, including experience leading companies through periods of high growth and organizational turnaround. In addition, his service on a number of other public company boards of directors enables Mr. Knowling to share insights with the Board regarding corporate governance best practices.
Experience

Chairman of Eagles Landing Partners, which specializes in helping senior management formulate strategy, lead organizational transformations, and re-engineer businesses, and also serves as an advisor-coach to chief executive officers.

Chief Executive Officer of Telwares, a provider of telecommunications expense management solutions, from 2005 to 2009.

Chief Executive Officer of the New York City Leadership Academy, an independent nonprofit corporation created by Chancellor Joel I. Klein and Mayor Michael R. Bloomberg that is chartered with developing the next generation of principals in the New York City public school system, from 2001 to 2005.

Chairman and Chief Executive Officer of SimDesk Technologies, a computer software company, from 2001 to 2003.

Previously was Chairman, President and Chief Executive Officer of Covad Communications, a Warburg Pincus private equity-backed start-up company.

Serves on the board of directors of Citrix, STRAND, and Stream Technologies. In the last five years, he served on the board of directors of Roper Technologies Inc. and Convergys.
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Age 65
Director since 2018
Committees

Compensation (Chair)
 
RITE AID CORPORATION   2021 Proxy Statement | 15

PROPOSAL 1—ELECTION OF DIRECTORS
KEVIN E. LOFTON
Mr. Lofton brings to the Board of Directors significant leadership experience in the health care industry, including serving as chief executive officer of health care systems and hospitals. He is recognized for his leadership promoting diversity and inclusion, in eliminating health disparities, and creating healthy communities.
Experience

Retired as Chief Executive Officer of Chicago-based CommonSpirit Health (“CSH”) in June 2020. CSH was formed in February 2019 following the merger between Catholic Health Initiatives (“CHI”) and Dignity Health. Mr. Lofton joined CHI in 1998 and served as Chief Executive Officer from 2003 through 2019.

Previously served as Chief Executive Officer of UAB Hospital and Howard University Hospital.

Lead Independent Director at Gilead Sciences, Inc. and a member of the board of directors of Medtronic. He previously served as chairman of the board of the American Hospital Association.
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Age 66
Director since 2013
Committees

Executive

Nominating and
Governance (Chair)
LOUIS P. MIRAMONTES
Mr. Miramontes brings to the Board of Directors extensive experience in accounting, financial reporting, and corporate governance. His experience as an audit partner provides useful insights into financial and regulatory matters relevant to the Company’s business.
Experience

Independent financial advisor since 2014.

Worked at KPMG LLP from 1976 to 2014, where he served as Managing Partner of the San Francisco office and Senior Partner for KPMG’s Latin American region. He served as an audit partner for public and private companies.

Lead Independent Director at Lithia Motors, Inc., one of the largest providers of personal transportation solutions in the U.S., and a member of the board of directors of Oportun Financial Corporation, a financial services company.
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Age 66
Director since 2018
Committees

Audit (Chair)

Compensation
 
16 | RITE AID CORPORATION   2021 Proxy Statement

PROPOSAL 1—ELECTION OF DIRECTORS
ARUN NAYAR
Mr. Nayar brings over 35 years of financial management experience to the Board of Directors. His experience as a chief financial officer provides useful insights into operational and financial metrics relevant to the Company’s business.
Experience

Retired in 2015 as executive vice President and Chief Financial Officer of Tyco International, a $10+ billion fire protection and security company, where he was responsible for managing the company’s financial risks and overseeing its global finance functions, including its tax, treasury, mergers and acquisitions, audit, and investor relations teams. Mr. Nayar joined Tyco as senior vice president and treasurer in 2008, and was also Chief Financial Officer of Tyco’s ADT Worldwide. From 2010 until 2012, Mr. Nayar was senior vice president, Financial Planning & Analysis, Investor Relations, and treasurer.

Previously was in leadership positions with PepsiCo, Inc., most recently as Chief Financial Officer of Global Operations and, before that, as vice president and assistant treasurer—Corporate Finance.

Senior Advisor to McKinsey & Company and a Senior Advisor to a private equity firm, BC Partners, from 2016 to 2020.

A member of the board of directors of Amcor Plc, a manufacturer of responsible packaging products, and GFL Environmental Inc., a leading North American environmental services company. He previously served on the board of TFI International.
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Age 70
Director since 2018
Committees

Audit

Executive
KATE B. QUINN
Ms. Quinn brings to the Board of Directors extensive experience in business strategy, marketing, customer experience, retail operations, and health benefits.
Experience

Vice Chair and Chief Administrative Officer of U.S. Bancorp since 2017, responsible for leading strategy, reputation and digital transformation, Ms. Quinn joined U.S. Bancorp in 2013 as executive vice president and Chief Strategy and Reputation Officer.

Former senior vice president and Chief Marketing Officer at Anthem, a health benefits company, where she directed the company’s marketing, customer communications, digital, customer experience, and retail strategies. She previously served as Anthem’s vice president of corporate marketing.

Earlier in her career, Ms. Quinn served as Chief Marketing and Strategy Officer at a division of The Hartford, following leadership roles in strategy and product development at CIGNA and PacifiCare Health Systems, respectively.

Member of the board of directors of Ontrak, Inc., an AI and technology-enabled health care company and member of the Board of Trustees of United Way U.S.A. and Fastbreak Foundation.
[MISSING IMAGE: ph_katherinequinn-4c.jpg]
Age 56
Director since 2019
Committees

Compensation

Nominating and Governance
 
RITE AID CORPORATION   2021 Proxy Statement | 17

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CORPORATE GOVERNANCE AND BOARD MATTERS
BOARD LEADERSHIP STRUCTURE
The Board has determined that Mr. Bodaken will continue to serve as Chair of the Board.
As Chair, Mr. Bodaken’s responsibilities include:

presiding at all meetings of the Board, including executive sessions of the non-management directors

the authority to call meetings of the Board and of the non-management directors

serving as liaison between the Chief Executive Officer and independent directors and facilitating communications between other members of the Board and the Chief Executive Officer (any director is free to communicate directly with the Chief Executive Officer; the Chair’s role is to attempt to improve such communications if they are not entirely satisfactory)

working with the Chief Executive Officer in the preparation of and approving Board meeting agendas and schedules, and the information to be provided to the Board

chairing the annual review of the performance of the Chief Executive Officer

otherwise consulting with the Chief Executive Officer on matters relating to corporate governance and Board performance, and

if requested by major stockholders, ensuring that he is available, when appropriate, for consultation and direct communication
Company By-Laws provide that the Chair of the Board must be a director who is independent under the NYSE listing standards and the Company’s Corporate Governance Guidelines. The Board believes that separation of the positions of Chair of the Board and Chief Executive Officer best serves the needs of the Company and its stockholders. The Board believes that Mr. Bodaken will continue to provide excellent independent leadership of the Board in his role as Chair.
DIRECTOR INDEPENDENCE
For a director to be considered independent under the NYSE corporate governance listing standards, the Board of Directors must determine that the director does not have any direct or indirect material relationship with the Company, including any of the relationships identified in the NYSE independence standards. The Board considers all relevant facts and circumstances in making its independence determinations.
As a result of this review, the Board affirmatively determined that the following directors, including each director serving on the Audit Committee, the Compensation Committee, and the Nominating and Governance Committee, satisfy the independence requirements of the NYSE listing standards:

Bruce G. Bodaken

Robert E. Knowling, Jr.

Arun Nayar

Elizabeth “Busy” Burr

Kevin E. Lofton

Kate B. Quinn

Bari Harlam

Louis P. Miramontes
The Board also previously determined that Marcy Syms, who served as a director until the 2020 annual meeting of stockholders, satisfied the independence requirements of the NYSE listing standards.
In addition, the Board determined that the members of the Audit Committee satisfy the additional independence requirements for audit committee members and that the members of the Compensation Committee satisfy the additional independence requirements for compensation committee members.
As an employee of the Company, Ms. Donigan is not an independent director.
 
18 | RITE AID CORPORATION   2021 Proxy Statement

CORPORATE GOVERNANCE AND BOARD MATTERS
There is no family relationship between any of the nominees and executive officers of Rite Aid.
CORPORATE GOVERNANCE PRACTICES
We recognize that good corporate governance is an important means of promoting the long-term interests of our stockholders, associates, customers, suppliers, and the community. The Board of Directors, including through the Nominating and Governance Committee, monitors corporate governance developments and proposed legislative, regulatory, and stock exchange corporate governance reforms.
Majority Voting Standard and Policy
Under the Company’s By-Laws, a nominee for director in uncontested elections of directors (as is the case for this Annual Meeting) will be elected to the Board if the votes cast “for” such nominee’s election exceed the votes cast “against” such nominee’s election. In contested elections, directors will be elected by a plurality of votes cast.
Under the Company’s Corporate Governance Guidelines, a director who fails to receive the required number of votes for reelection in accordance with the By-Laws will, within five days following certification of the stockholder vote, tender his or her written resignation to the Chair of the Board for consideration by the Board, subject to the procedures set forth in the guidelines.
Codes of Ethics
The Board has adopted a Code of Ethics that is applicable to our Chief Executive Officer and senior financial officers. The Board has also adopted a Code of Ethics and Business Conduct that applies to all of our officers, directors, and associates. Any amendment to either code or any waiver of either code for executive officers or directors will be disclosed promptly on our website at www.riteaid.com.
Anti-Hedging and Anti-Pledging Policies
The Company’s directors, officers and other associates are prohibited from engaging in hedging or monetization transactions, such as zero-cost collars, equity swaps, exchange funds and forward sale contracts, with respect to our securities. Because hedging transactions might allow a director, officer or other associate to continue to own our securities, whether obtained through our equity compensation plans or otherwise, without the full risks and rewards of ownership, such hedging transactions are prohibited. Directors, officers and other associates are also prohibited from holding in a margin account, or otherwise pledging, Company securities as collateral for a loan.
BOARD OVERSIGHT OF RISK MANAGEMENT
The Board of Directors, as a whole and through the various committees of the Board, oversees the Company’s management of risk, focusing primarily on five areas of risk:
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The Board considers and discusses risks in connection with operating, financial and strategic plans, specific approval matters, and special risk topics such as responses to the COVID-19 pandemic and prescription opioid abuse. The Board may delegate responsibility for oversight of selected risks to the appropriate Board committee as described below.
Management of the Company is responsible for developing and implementing the Company’s plans and processes for risk management. The Board believes that its leadership structure, described above, supports the risk oversight function of the Board. The Board of Directors, at least annually, reviews with management its
 
RITE AID CORPORATION   2021 Proxy Statement | 19

CORPORATE GOVERNANCE AND BOARD MATTERS
plans and processes for managing risk. The Board also receives periodic updates from the Company’s compliance and internal assurance services departments with regard to the overall effectiveness of the Company’s compliance and internal audit programs and significant areas of risk to the Company, focusing on the five primary areas of risk set forth above as well as other areas of risk identified from time to time by either the Board, a Board committee, or management.
The Board delegated to the Audit Committee oversight of the Company’s compliance program, and therefore the Committee has the primary oversight role with respect to many of the risks related to the opioid crisis. Through the Audit Committee, the Board is committed to ensuring that the Company is developing solutions to curb prescription opioid abuse through the development and expansion of education, safe prescription drug disposal and pharmacy safeguards.
The Board and the Audit Committee also receive periodic updates from the Company’s Chief Financial Officer, Chief Information Officer, or Chief Information Security Officer on cybersecurity matters, including information services security and security controls over credit card, customer, associate, and patient data. These updates also include information regarding the Rite Aid Information Security Program, managed by Rite Aid’s Chief Information Security Officer, which is designed to protect information and critical resources from a wide range of threats in order to ensure business continuity, minimize business risk, and maximize return on investments and business opportunities. The objective in the development and implementation of the Information Security Program is to create effective administrative, technical, and physical safeguards in order to protect the data of Rite Aid and its subsidiaries and the data of any customers and clients of these entities. In addition, the Audit Committee focuses on assessing and mitigating financial reporting risks, including risks related to internal control over financial reporting as well as legal and regulatory compliance, cyber risk and enterprise risk management.
The Compensation Committee considers risks relating to the Company’s compensation programs and policies, reviews all incentive plans relative to established criteria and conducts an assessment to ensure that none of our incentive plans encourage excessive risk-taking by our executives or associates. The Compensation Committee reviews the risk profile and the relationship between the Company’s compensation programs to the overall risk profile of the Company. Some of the features of our compensation incentive programs that limit risk include:

Delivery of compensation through an appropriate mix of base salary, short-term cash incentive awards, long-term awards, and benefits.

Use of a mix of long-term incentive vehicles that reward both stock price appreciation and financial operating performance and have different risk profiles.

Incorporation of measures in the performance awards to assess our ability to drive stock performance through profitability, leverage reduction and growth, and to compare our stock performance against the Russell 3000 Index (total stockholder return).

Meaningful stock ownership requirements for executives.
The Compensation Committee has considered the risks arising from the Company’s compensation policies and practices for its executives and associates and has concluded that the compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.
 
20 | RITE AID CORPORATION   2021 Proxy Statement

CORPORATE GOVERNANCE AND BOARD MATTERS
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has four standing committees:
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Current copies of the charters for each of these committees are available on our website at www.riteaid.com under the headings “Corporate—Governance—Corporate Governance Committees—Committee Charters.”
The current members of the committees are identified in the following table.
Committees
Director
Independent
Audit
Compensation
Executive
Nominating and
Governance
Bruce G. Bodaken [MISSING IMAGE: tm217739d1_ic-stark.jpg]
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Elizabeth “Busy” Burr
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Heyward Donigan
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Bari Harlam
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Robert E. Knowling, Jr.
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[MISSING IMAGE: tm217739d1_ic-committeepn.jpg]
Kevin E. Lofton
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Louis P. Miramontes
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Arun Nayar
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Kate B. Quinn
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Number of Meetings
in Fiscal 2021
6
6
0
2
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Committee Chair
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Committee Member
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Chair of the Board
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Audit Committee Financial Expert
 
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CORPORATE GOVERNANCE AND BOARD MATTERS
AUDIT COMMITTEE
Meetings in Fiscal 2021: 6
Members

Louis P. Miramontes, Chair

Elizabeth “Busy” Burr

Arun Nayar
Qualifications
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The Board has determined that each member of the Audit Committee is an independent director under the NYSE listing standards and satisfies the additional independence requirements for audit committee members. See the section entitled “Corporate Governance—Director Independence” above.
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The Board has determined that each of these individuals is also “financially literate” under the applicable NYSE listing standards.
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The Board has determined that each of Louis P. Miramontes and Arun Nayar qualifies as an “audit committee financial expert” as that term is defined under applicable SEC rules.
Principal Responsibilities
Charter
The functions of the Audit Committee include the following:

Appointing, compensating, and overseeing our independent registered public accounting firm (“independent auditors”);

Overseeing management’s fulfillment of its responsibilities for financial reporting and internal control over financial reporting;

Overseeing the activities of the Company’s internal audit function; and

Reviewing the Company’s cybersecurity, information security and technology risks
For additional information, see the Audit Committee’s charter on our website at www.riteaid.com, under the headings “Corporate—Governance—Our Policies—Corporate Governance Committees—Audit Committee Charter.”
Audit Committee Report
The Audit Committee Report is located in “Proposal 2—Ratification of the Appointment of Independent Registered Public Accounting Firm” under the caption “Audit Committee Report.”
 
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CORPORATE GOVERNANCE AND BOARD MATTERS
COMPENSATION COMMITTEE
Meetings in Fiscal 2021: 6
Members

Robert E. Knowling, Jr., Chair

Louis P. Miramontes

Kate B. Quinn
Qualifications
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The Board has determined that each member of the Compensation Committee is an independent director under the NYSE listing standards and satisfies the additional independence requirements for compensation committee members. See the section entitled “Corporate Governance—Director Independence” above.
Principal Responsibilities
The functions of the Compensation Committee include the following:

Administering Rite Aid’s equity incentive plans;

Reviewing and approving the base salaries of executive officers and reviewing and recommending to the Board the base salary of the CEO (along with other compensation elements as deemed necessary);

Reviewing and approving goals and objectives relevant to the incentive-based compensation of executive officers, evaluating the performance of executive officers, and determining and approving the incentive-based compensation of executive officers;

Setting corporate performance targets under all annual bonus and long-term incentive compensation plans and determining annually the individual bonus award opportunities for executive officers;

Reviewing and approving executive officers’ employment agreements and severance arrangements; and

Reviewing and making recommendations to the Board on employee engagement and diversity and inclusion initiatives, objectives and progress.
Independent Compensation Consultant
As provided in its charter, the Compensation Committee has the authority to engage an external compensation consultant and to determine the scope of any services provided. The Compensation Committee may terminate the engagement at any time. The external compensation consultant reports to the Compensation Committee Chair.
Charter
For additional information, see the Compensation Committee’s charter on our website at www.riteaid.com, under the headings “Corporate—Governance—Our Policies—Corporate Governance Committees—Compensation Committee Charter.”
Compensation Committee Report
The Compensation Committee Report is located at the end of the “Compensation Discussion and Analysis” under the caption “Compensation Committee Report.”
Compensation Committee Interlocks and Insider Participation
Robert E. Knowling, Jr. (Chair), Louis P. Miramontes, and Kate B. Quinn served on the Compensation Committee during fiscal year 2021. During fiscal year 2021, no member of the Compensation Committee was an employee, former employee, or executive officer of the Company, nor does any such member have any interlocking relationships as defined by applicable SEC rules.
 
RITE AID CORPORATION   2021 Proxy Statement | 23

CORPORATE GOVERNANCE AND BOARD MATTERS
NOMINATING AND GOVERNANCE COMMITTEE
Meetings in Fiscal 2021: 2
Members

Kevin E. Lofton, Chair

Bruce G. Bodaken

Bari Harlam

Kate B. Quinn
Qualifications
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The Board has determined that each member of the Nominating and Governance Committee is an independent director under the NYSE listing standards. See the section entitled “Corporate Governance—Director Independence” above.
Principal Responsibilities
The functions of the Nominating and Governance Committee include the following:

Identifying and recommending to the Board individuals qualified to serve as Rite Aid directors;

Recommending to the Board individual directors to serve on committees of the Board;

Advising the Board with respect to matters of Board composition and procedures;

Developing and recommending to the Board a set of corporate governance principles applicable to Rite Aid and overseeing corporate governance matters generally;

Overseeing the annual evaluation of the Board and management;

Reviewing and approving or ratifying related person transactions in which the Company is a participant; and

Overseeing the environmental, social and corporate governance policies, trends and activities of the Company.
Charter
For additional information, see the Nominating and Governance Committee’s charter on our website at www.riteaid.com, under the headings “Corporate—Governance—Our Policies—Corporate Governance Committees—Nominating and Governance Committee Charter.”
EXECUTIVE COMMITTEE
Meetings in 2021: 0
Members

Bruce G. Bodaken, Chair

Heyward Donigan

Kevin E. Lofton

Arun Nayar
Principal Responsibilities
Charter
The Executive Committee did not meet during fiscal year 2021.
The Executive Committee, except as limited by Delaware law, is empowered to exercise all of the powers of the Board of Directors.
For additional information, see the Executive Committee’s charter on our website at www.riteaid.com, under the headings “Corporate—Governance—Our Policies—Corporate Governance Committees—Executive Committee Charter.”
Board Committee Refreshment
The Nominating and Governance Committee considers the periodic rotation of Committee members and Committee Chairs to introduce fresh perspectives and to broaden and diversify the views and experience represented on the Committees. Through this periodic refreshment, the Nominating and Governance Committee considers, among other things, the benefits from continuity and depth of experience with the benefits of fresh perspectives and exposing our directors to different aspects of our business.
BOARD MEETING ATTENDANCE
The Board of Directors held 10 meetings during fiscal year 2021. Each director attended at least 75% of the aggregate number of meetings of the Board of Directors and meetings held by all committees on which such director served during the period for which such director served.
It is our policy that directors are invited and encouraged to attend the annual meeting of stockholders. All directors serving on the Board or nominated to serve on the Board at the time of the meeting attended the 2020 Annual Meeting of Stockholders.
 
24 | RITE AID CORPORATION   2021 Proxy Statement

CORPORATE GOVERNANCE AND BOARD MATTERS
DIRECTOR NOMINATIONS
The Nominating and Governance Committee identifies potential candidates by asking current directors and executive officers to notify the committee if they become aware of persons, meeting the criteria described below, who have had a change in circumstances that might make them available to serve on the Board—for example, retirement as a CEO or CFO of a public company or exiting government or military service. The Nominating and Governance Committee also, from time to time, may engage firms that specialize in identifying director candidates. Bari Harlam, who became an independent director in September 2020, was referred to the Nominating and Governance Committee by the director search firm Spencer Stuart.
The Nominating and Governance Committee will consider director candidates recommended by stockholders. In considering such recommendations, the Nominating and Governance Committee will take into consideration the needs of the Board and the qualifications of the candidate. The Nominating and Governance Committee may also take into consideration the number of shares held by the recommending stockholder and the length of time that such shares have been held. To have a candidate considered by the Nominating and Governance Committee, a stockholder must submit the recommendation in writing and must include the following information:

The name of the stockholder and evidence of the person’s ownership of Rite Aid stock, including the number of shares owned and the length of time of ownership; and

The name of the candidate, the candidate’s resume or a listing of his or her qualifications to be a Rite Aid director, and the person’s consent to be named as a director if selected by the Nominating and Governance Committee and nominated by the Board.
The stockholder recommendation and information described above must be sent to Rite Aid Corporation, 30 Hunter Lane, Camp Hill, Pennsylvania 17011, Attention: Corporate Secretary. The Nominating and Governance Committee will accept recommendations of director candidates throughout the year. Generally, in order for a recommended director candidate to be considered for nomination to stand for election at an upcoming annual meeting of stockholders, the recommendation must be received by the Secretary not fewer than 120 days prior to the anniversary date of Rite Aid’s most recent annual meeting of stockholders. In the event an annual meeting is held on a date that is not within 25 days of such anniversary date, recommendations will be considered by the Nominating and Governance Committee in due course.
The Nominating and Governance Committee may review publicly available information, conduct an interview and/or check references to assess the person’s accomplishments and qualifications in light of the needs of the Board and the accomplishments and qualifications of any other candidates that the committee might be considering. The committee’s evaluation process does not vary based on whether or not a candidate is recommended by a stockholder, although, as stated above, the Board may take into consideration the number of shares held by the recommending stockholder and the length of time that such shares have been held.
The Board seeks to maintain an engaged, independent Board with broad experience and judgment that is committed to representing the long-term interests of our stockholders. The Nominating and Governance Committee believes that the minimum qualifications for serving as a Rite Aid director are:

that a candidate demonstrates, by significant accomplishment in his or her field, an ability to make a meaningful contribution to the Board’s oversight of Rite Aid’s business and affairs, and

that a candidate has an impeccable record and reputation for honest and ethical conduct in his or her professional and personal activities.
In addition, the Nominating and Governance Committee examines a candidate’s specific experiences and skills, availability in light of other commitments, potential conflicts of interest, and independence from management and the Company. The Nominating and Governance Committee also takes into account a candidate’s ability to contribute to the diversity of background and experience represented by the Board. The Nominating and Governance Committee assesses its achievement of diversity through the review of Board composition as part of the Board’s annual self-assessment process.
EXECUTIVE SESSIONS OF NON-MANAGEMENT DIRECTORS
In order to promote discussion among the non-management directors, executive sessions (meetings of non-management directors without management present) are held regularly. Mr. Bodaken, our Chair of the Board, presides at our executive sessions.
 
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CORPORATE GOVERNANCE AND BOARD MATTERS
COMMUNICATIONS WITH THE BOARD OF DIRECTORS
The Board has established a process to receive communications from stockholders and other interested parties. Stockholders and other interested parties may contact any member (or all members) of the Board, any Board committee, or any chair of any such committee by mail. Correspondence should be addressed to the Board of Directors or any such individual directors, or committee of directors by either name or title.
All such correspondence should be sent to:
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Rite Aid Corporation
c/o Corporate Secretary
30 Hunter Lane
Harrisburg, Pennsylvania 17105
All communications received as set forth above will be opened by the Corporate Secretary for the purpose of determining whether the contents represent a legitimate communication to the directors. Such communications, other than business solicitations or advertisements, junk mail and mass mailings, new product suggestions, product complaints, product inquiries, resumes and other forms of job inquiries, spam, and surveys, will be distributed to the Board, the non-management directors, an individual director, or a committee of directors, as appropriate.
ENVIRONMENTAL, SOCIAL & GOVERNANCE MATTERS
Rite Aid is committed to embedding sustainability throughout our business and the communities we serve. We are dedicated to integrating Environmental, Social and Governance (ESG) initiatives into our operations, striving to create long term value and meet the growing expectations of all stakeholders.
In 2019, Rite Aid formed a Corporate Sustainability Committee, with representation from multiple functional leaders within the organization, which produces our annual ESG report each June and evaluates our current ESG initiatives, risks and opportunities on a regular basis.
In 2020, we made a concerted effort to further enhance our strategy and overall approach to sustainability. Our strategy was influenced by reporting frameworks, engagements with investors, stakeholder expectations and emerging trends. We identified several key areas of opportunity to expand our environmental, social and governance commitments, most notably around climate change, board oversight of ESG matters, and diversity, equity and inclusion (which is discussed in more detail in the “Diversity, Equity and Inclusion Efforts” section of the Proxy Statement Summary above).
We continue to make significant investments to improve energy efficiency and fleet fuel economy. In 2020, we capitalized on our commitment to greater transparency and accountability around climate risk by reporting to the CDP climate change questionnaire for the first time, where we scored a B-. We have developed a formal climate change strategy, focused on three pillars: reducing energy demand, transitioning to lower carbon energy sources, and integrating climate risk into our business process. We performed our first climate risk assessment to assess and prepare for both the physical threat of climate change and a global economy’s transition to net zero. We also have adopted the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and will publish our first report aligned to the TCFD’s recommendations this year.
Governance and board oversight is an essential part of managing our sustainability agenda and aligning with our broader vision and business strategy. Our Corporate Sustainability Committee met twice last year and provided updates to the Board and, going forward, will provide quarterly updates to the Nominating and Governance Committee. The Corporate Sustainability Committee will continue to stay engaged with both our executive leadership team and the Board as our program continues to progress.
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Further information about our commitment to sustainability is available on our website under the headings “Corporate—Corporate Social Responsibility.” Website content is not incorporated into this proxy statement.
 
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CORPORATE GOVERNANCE AND BOARD MATTERS
OPIOIDS AND OUR COMMUNITIES
At Rite Aid, we take our role as a community health care provider very seriously. In that regard, the Board, along with the Company’s senior management, recognizes and is deeply concerned about the impact of the current opioid crisis on families and communities. We believe it is important to go beyond simply complying with state and federal laws and regulations to also raise awareness about important issues of prescription drug safety and drug abuse prevention and advocating for increased access to education, treatment and proper medication disposal. We have dedicated extensive efforts to considering how best to manage risks relating to the opioid crisis and remain committed to continuing to evaluate our programs and policies and to strengthen our risk management. We are committed to working with our customers, community groups, law enforcement and federal and state agencies to help combat the opioid crisis that is impacting families and communities throughout the United States.
Strategy to Address Opioid Abuse and Misuse
Rite Aid’s comprehensive strategy to respond to and address prescription opioid and other drug abuse and misuse includes the following kinds of measures:
At Rite Aid pharmacies, we take the following measures:

We educate our patients by providing mandatory prescription counseling from a Rite Aid pharmacist to patients with new opioid prescriptions and to other patients with certain risk factors.

We make DisposeRx, an opioid disposal solution, available at all of Rite Aid’s pharmacies nationwide. Rite Aid provides DisposeRx packets to patients, free of charge, with new opioid prescriptions and to patients with chronic opioid prescriptions every six months.

We make naloxone, a medication that can be used to reverse the effects of an opioid overdose, available without a prescription at all of Rite Aid’s pharmacies nationwide. In 2019, all stores were listed on the naloxone locator tool in Google Maps.

We counsel patients in accordance with HHS Guide for Clinicians on the Appropriate Dosage Reduction or Discontinuation of Long-Term Opioid Analgesics issued in 2019.

We provide ongoing education and training to Rite Aid pharmacists, including with respect to risk factors for opioid abuse, how to identify symptoms of an overdose and what to do in the event of an overdose, available naloxone therapies and the proper administration of each, and recommendations for follow-up care.

We participate in prescription drug monitoring programs, requiring that all pharmacists are registered for the programs in their respective state(s) of practice.

Our pharmacists follow a “red flag” process when dispensing high-risk prescriptions.

We implemented NarxCare, a tool that helps our pharmacists make responsible dispensing decisions while mitigating possible controlled substance misuse or abuse, in states where Narxcare is available.

We provide resources on drug safety and disposal at www.riteaid.com/pharmacy/drug-information/medication-disposal-and-safety.

We continue our process to identify prescribers with questionable prescription writing practices and, when appropriate, proactively discontinue filling controlled substances for certain prescribers.

We support National Take-Back Days to encourage our patients to bring their unused or unwanted medications to designated sites sponsored by local law enforcement and the DEA for proper handling.

We partner with state agencies to participate in free Naloxone Distribution Day events to support local communities.

We provide Safe Medication Disposal units in 204 Rite Aid stores.
Through work at Elixir, we take the following measures:

The Elixir Clinical team developed a pain management solution that goes beyond industry guidelines. The solution helps individuals manage pain safely through communication, education and outreach. This multifaceted program actively engages the member and their care team to become an advocate for the member and effectuate positive therapy changes.

Each year, Elixir’s clinical safeguards help prevent unsafe use of opioid analgesics. In 2020, Elixir reduced the length of use for first-time opioid prescriptions by 95% through required clinical reviews and reduced the use of high-dose opioid therapies by 40%.

In 2020, Elixir representatives participated in a summit meeting with the Centers for Medicare & Medicaid Services, as well as the Office of Inspector General, to collaborate on identification of dangerous opioid trends.

Elixir follows the Centers for Disease Control and Prevention guidelines for prescribing opioids, including limiting acute opioid prescriptions to a seven-day supply, limiting the daily dosage of opioids dispensed based on the strength of the opioid, and requiring the use of immediate-release formulations of opioids before extended-release opioids are dispensed, for all plans that do not opt out.
 
RITE AID CORPORATION   2021 Proxy Statement | 27

CORPORATE GOVERNANCE AND BOARD MATTERS
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Further information about medication safety and disposal is available at www.riteaid.com/pharmacy/drug-information/medication-disposal-and-safety. Website content is not incorporated into this proxy statement. Our annual CSR Reports also discuss the Company’s continuing approach to opioids in our communities.
CORPORATE GOVERNANCE MATERIALS
Website Access to Corporate Governance Materials
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Our corporate governance information and materials are posted on our website at riteaid.com/corporate/governance. The information on our website is not, and shall not be deemed, a part of this proxy statement.

CORPORATE GOVERNANCE GUIDELINES

AUDIT COMMITTEE CHARTER

COMPENSATION COMMITTEE CHARTER

EXECUTIVE COMMITTEE
CHARTER

NOMINATING AND GOVERNANCE COMMITTEE CHARTER

CODE OF ETHICS FOR THE CEO AND SENIOR FINANCIAL OFFICERS

CODE OF ETHICS AND BUSINESS CONDUCT

STOCK OWNERSHIP
GUIDELINES

RELATED PERSON TRANSACTION POLICY

INSIDER TRADING
POLICY

CERTIFICATE OF
INCORPORATION

BY-LAWS OF RITE AID
CORPORATION

BOARD REPORT ON OPIOIDS OVERSIGHT

NYSE DOCUMENTS—ANNUAL CEO CERTIFICATION

NYSE DOCUMENTS—SECTION 303A WRITTEN AFFIRMATIONS OF COMPLIANCE
These documents are also available in print upon request, free of charge, by writing to:
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Rite Aid Corporation
Attention: Corporate Secretary
30 Hunter Lane
Camp Hill, Pennsylvania 17011
The Board regularly reviews corporate governance developments and will modify these materials and practices from time to time as warranted.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Review and Approval of Related Person Transactions
Under our written policy, the Nominating and Governance Committee is responsible for the review, approval, or ratification of “related person transactions” between the Company or its subsidiaries and related persons. Under SEC rules, a related person is, or any time since the beginning of the last fiscal year was, a director, an executive officer, a nominee for director, a more than 5% stockholder of the Company, or an immediate family member (as defined under applicable SEC rules) of any of the foregoing. A related person transaction is any transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which the Company or a subsidiary is a participant, the amount involved exceeds $120,000, and a related person had, has or will have a direct or indirect material interest.
Directors, executive officers and nominees must complete an annual questionnaire and disclose all potential related person transactions involving themselves and their immediate family members that are known to them.
 
28 | RITE AID CORPORATION   2021 Proxy Statement

CORPORATE GOVERNANCE AND BOARD MATTERS
Throughout the year, directors and executive officers must notify the Corporate Secretary and Chief Accounting Officer of any potential related person transactions as soon as they become aware of any such transaction. The Corporate Secretary and Chief Accounting Officer inform the Nominating and Governance Committee of any related person transaction of which they are aware. The Corporate Secretary and Chief Accounting Officer are responsible for conducting a preliminary analysis and review of potential related person transactions and presentation to the Nominating and Governance Committee for review, including provision of additional information to enable proper consideration by the Nominating and Governance Committee.
The Corporate Secretary and Chief Accounting Officer determine whether the proposed transaction should be submitted to the Nominating and Governance Committee for consideration at the next committee meeting or, if the Corporate Secretary and Chief Accounting Officer, in consultation with the Chief Executive Officer or Chief Financial Officer, determine that it is not practicable or desirable for the Company to wait until the next committee meeting, to the Chair of the Nominating and Governance Committee (who will possess delegated authority to act between committee meetings). As necessary, the Nominating and Governance Committee reviews approved related person transactions on a periodic basis throughout the duration of the transaction to ensure that the transactions remain in the best interests of the Company. The Nominating and Governance Committee may, in its discretion, engage outside counsel to review certain related person transactions. In addition, the Nominating and Governance Committee may request that the full Board of Directors consider the approval or ratification of related person transactions if the Nominating and Governance Committee deems it advisable.
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A copy of our full policy concerning transactions with related persons is available on the Governance section of our website at www.riteaid.com under the headings “Corporate—Governance—Our Policies—Related Person Transactions.” Website content is not incorporated into this proxy statement.
Related Person Transactions
The brother of the Company’s Executive Vice President, Chief Financial Officer, Matthew Schroeder, is a partner in the law firm of Littler Mendelson P.C. The Company paid the law firm approximately $476,000 in fiscal year 2021 for employment and labor legal services. These legal services are provided to Rite Aid on an arm’s length basis. Mr. Schroeder has never had any role or involvement in the supervision of these services provided to Rite Aid or in any decisions regarding the retention of Littler Mendelson. The Company’s relationship with Littler Mendelson pre-dates Mr. Schroeder becoming an executive officer of Rite Aid. The Nominating and Governance Committee has reviewed the Company’s ongoing relationship with Littler Mendelson to ensure that it remains in the best interests of the Company.
The sister of the Company’s Executive Vice President, Secretary and General Counsel, Paul Gilbert, is a partner in the law firm of Bradley Arant Boult Cummings LLP (“Bradley Arant”). The Company paid the law firm approximately $160,000 in fiscal year 2021 for certain opioid litigation-related matters. These legal services are provided to Rite Aid on an arm’s length basis. Mr. Gilbert has not had a role in the decision regarding the retention of Bradley Arant, which pre-dates Mr. Gilbert becoming an associate and executive officer of Rite Aid. The Nominating and Governance Committee has reviewed the Company’s ongoing relationship with Bradley Arant to ensure that it remains in the best interests of the Company.
 
RITE AID CORPORATION   2021 Proxy Statement | 29

CORPORATE GOVERNANCE AND BOARD MATTERS
DIRECTORS’ COMPENSATION
Non-Management Director Service
Annual Cash Retainer(1)
($)
Non-management director 100,000
Additional annual retainers, for service as:
Chair of the Board
100,000
Committee Chairs

Audit Committee
20,000

Compensation Committee
10,000

Nominating and Governance Committee
10,000
Audit Committee Member (other than the Chair)
10,000
(1)
Fees payable quarterly in arrears.
As shown, each non-management director receives an annual cash payment of $100,000, payable quarterly in arrears. In addition, (i) the Independent Chair of the Board receives an additional annual cash payment of $100,000; (ii) the Chair of the Audit Committee receives an additional annual cash payment of $20,000; (iii) the Chairs of the Compensation Committee and the Nominating and Governance Committee each receive an additional annual cash payment of $10,000; and (iv) each member of the Audit Committee (other than the Chair) receives an additional annual cash payment of $10,000. Non-management directors also receive an annual award of restricted stock units valued at $120,000 (with the number of shares subject to the grant calculated by dividing 120,000 by the closing price of our common stock on the date of grant, rounded to the nearest whole share).
The annual award of restricted stock units for fiscal year 2021 vested on the date of grant and the shares subject to the grant will become payable on a deferred basis upon the separation from service of the director.
A non-management director may also defer cash fees under the Rite Aid Corporation Director Deferred Compensation Plan established by the Company for compensation earned on or after April 1, 2020. Cash fees deferred are allocated to a bookkeeping account for the non-management director and notionally invested in accordance with the director’s election among a subset of investment funds available under the Company’s 401(k) savings plan. A non-management director’s deferral is paid on the director’s separation from service in a single lump sum. For fiscal year 2021, solely Ms. Harlam elected to participate in the Director Deferred Compensation Plan upon her appointment during our 2021 fiscal year, and except for fees in her initial month of service, 100% of Ms. Harlam’s cash fees were deferred until separation from service pursuant to the plan.
Directors who are officers and/or Rite Aid associates receive no separate compensation for service as directors or committee members. Directors are reimbursed for travel and lodging expenses associated with attending Board of Directors and Board committee meetings.
Non-management directors are subject to our Stock Ownership Guidelines discussed in the Compensation Discussion and Analysis under the caption “Director and Officer Stock Ownership Guidelines.”
 
30 | RITE AID CORPORATION   2021 Proxy Statement

CORPORATE GOVERNANCE AND BOARD MATTERS
DIRECTOR COMPENSATION TABLE FOR FISCAL YEAR 2021
The following Director Compensation Table sets forth fees, awards, and other compensation paid to or earned by our non-management directors who served during the fiscal year ended February 27, 2021:
Name
Fees Earned
or Paid in
Cash
($)
Stock
Awards
($)(1)(2)
Option
Awards
($)
Non-Equity
Incentive
Plan
Compensation
($)
Change In
Nonqualified
Deferred
Compensation
($)
All Other
Compensation
($)
Total
($)
Bruce G. Bodaken 200,000 120,008 320,008
Elizabeth “Busy” Burr 110,000 120,008 230,008
Bari Harlam(3) 58,132 119,164 177,296
Robert E. Knowling, Jr. 110,000 120,008 230,008
Kevin E. Lofton 110,000 120,008 230,008
Louis P. Miramontes 120,000 120,008 240,008
Arun Nayar 110,000 120,008 230,008
Kate B. Quinn 100,000 120,008 220,008
Marcy Syms(4) 50,000 50,000
(1)
Represents the grant date fair value of stock awards granted in fiscal year 2021 in accordance with Financial Accounting Standards Board (“FASB”) Topic 718. For information regarding the assumptions used in determining the fair value of an award, please refer to Note 18 to our financial statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended February 27, 2021, filed with the SEC on April 27, 2021. Delivery of the shares underlying the restricted stock unit awards are immediately vested upon grant; however, shares are held until the directors’ separation from service.
(2)
As of February 27, 2021, no unvested restricted stock unit awards and no stock option awards were held by any director.
(3)
Bari Harlam was appointed to the Board of Directors effective September 1, 2020.
(4)
Marcy Syms served as a member of the Board through July 8, 2020. Upon her separation from the Board, Ms. Syms became vested in 259 shares of our stock remaining from the grant of RSUs made on July 17, 2017.
 
RITE AID CORPORATION   2021 Proxy Statement | 31

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PROPOSAL 2—RATIFICATION OF THE
APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The accounting firm of Deloitte & Touche LLP (“Deloitte & Touche”) has been selected as the independent registered public accounting firm for the Company for the fiscal year ending February 26, 2022. Deloitte & Touche has audited the accounts and records of Rite Aid and its subsidiaries since 2000. Although the selection of accounting firms does not require ratification, the Board of Directors has directed that the appointment of Deloitte & Touche be submitted to the stockholders for ratification due to the significance of their appointment by the Company. If the stockholders do not ratify the appointment of Deloitte & Touche, the Audit Committee will consider the appointment of another independent registered public accounting firm. A representative of Deloitte & Touche will be present at the Annual Meeting, will have the opportunity to make a statement, and will be available to respond to appropriate questions.
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The Board of Directors unanimously recommends that you vote FOR the ratification of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for fiscal year 2022.
AUDITOR FEES
As outlined in the table below, we incurred the following fees, including expenses billed to the Company for the fiscal years ended February 27, 2021 and February 29, 2020 by our independent registered public accounting firm, Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu and their respective affiliates.
Year Ended
Fee Category
February 27, 2021
($ millions)
February 29, 2020
($ millions)
Audit fees(1) 2.4 2.3
Audit-related fees(2) 0.2 0.2
Tax fees(3)
All other fees
Total fees
2.6
2.5
(1)
Audit fees. Represents fees for audit of annual financial statements and reviews of interim financial statements, registration statement filings and comfort letters related to various refinancing activities.
(2)
Audit-related fees. Represents fees for acquisition-related due diligence procedures and audits of employee benefit plans’ financial statements.
(3)
Tax fees. Represents fees for tax compliance advice and planning.
AUDIT COMMITTEE REPORT
The Board of Directors has adopted a written charter of the Audit Committee which describes the role of the Audit Committee. The Audit Committee, among other things, appoints and engages our independent registered public accounting firm and oversees our financial reporting and internal control over financial reporting processes on behalf of the Board. Management has the primary responsibility for our financial statements, our accounting principles and our internal control over financial reporting. Our independent registered public accounting firm is responsible for auditing our financial statements and expressing an opinion as to their conformity with accounting principles generally accepted in the United States. Our independent registered public accounting firm also is responsible for expressing an opinion on the effectiveness of our internal control over financial reporting.
 
32 | RITE AID CORPORATION   2021 Proxy Statement

PROPOSAL 2—RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
In fulfilling its oversight responsibilities, the Audit Committee met six times during fiscal year 2021.
During those meetings, the Audit Committee:

Met with our internal auditors and independent registered public accounting firm, with and without management present, to discuss the overall scope and plans for their respective audits, the results of their examinations, their evaluations of our internal control over financial reporting and the overall quality of our financial reporting.

Reviewed and discussed with management and our independent registered public accounting firm, for their respective purposes, the audited financial statements included in our Annual Report on Form 10-K for fiscal year 2021. The discussions included the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements and the Annual Report on Form 10-K for fiscal year 2021.

Reviewed the unaudited interim financial statements and Forms 10-Q prepared each quarter by the Company.

Received management representations that the Company’s financial statements were prepared in accordance with accounting principles generally accepted in the United States of America.

Reviewed the Audit Committee charter.

Reviewed and discussed with our independent registered public accounting firm those matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the SEC.

Discussed with our independent registered public accounting firm matters relating to their independence and received the written disclosures and the letter from our independent registered public accounting firm required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the Audit Committee concerning independence. The Audit Committee has considered whether the level of non-audit related services provided by our independent registered public accounting firm is consistent with maintaining their independence.

Pre-approved audit, other audit-related, and tax services performed by our independent registered public accounting firm.
In addition to pre-approving the audit and other audit-related and tax services performed by our independent registered public accounting firm, the Audit Committee requests fee estimates associated with each proposed service. Providing a fee estimate for a service incorporates appropriate oversight and control of the independent registered public accounting firm relationship. On a quarterly basis, the Audit Committee reviews the status of services and fees incurred year-to-date against pre-approved services and fee estimates.
Based on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended February 27, 2021 for filing with the SEC.
THE AUDIT COMMITTEE
Louis P. Miramontes, Chair
Elizabeth Burr
Arun Nayar
 
RITE AID CORPORATION   2021 Proxy Statement | 33

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PROPOSAL 3—ADVISORY VOTE ON THE
COMPENSATION OF OUR NAMED EXECUTIVE
OFFICERS
In accordance with the requirements of Section 14A of the Exchange Act, stockholders have the opportunity to approve on an advisory, nonbinding basis the compensation of the named executive officers disclosed in this proxy statement. This is commonly referred to as a “say on pay” advisory vote. The Board of Directors recommends that you vote “FOR” this proposal.
As discussed in greater detail in the “Compensation Discussion and Analysis” ​(CD&A) section of this proxy statement, we pay compensation to attract, motivate, and retain the most talented and dedicated executives and to align the interests of our named executive officers, as designed, with the interests of our stockholders. The Company’s compensation programs are designed to:

reward our named executive officers for the achievement of annual and long-term strategic and operational goals and the achievement of increased total stockholder return, and

avoid the encouragement of unnecessary or excessive risk-taking.
The Company encourages stockholders to review the executive compensation disclosure in the CD&A and executive compensation tables in this proxy statement for complete details of its compensation program for its named executive officers and how the program is designed to achieve the Company’s compensation objectives.
We are asking our stockholders to indicate their support for the compensation of our named executive officers as described in this proxy statement. This vote is not intended to address any specific item of compensation; rather, the vote relates to the overall compensation of our named executive officers as described in this proxy statement.
The Board is presenting this proposal, which gives stockholders the opportunity to endorse or not endorse our executive pay program, on an advisory basis, by voting on the following resolution:
RESOLVED, that the stockholders of the Company approve, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed pursuant to Item 402 of Securities and Exchange Commission Regulation S-K, including the Compensation Discussion and Analysis, the compensation tables and narrative disclosures.”
Although the advisory vote is non-binding, the Board values the opinions of stockholders. The Compensation Committee will review the results of the vote and will consider stockholders’ concerns and take into account the outcome of the vote when considering future decisions concerning our executive compensation program.
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The Board of Directors unanimously recommends that you vote FOR the approval of the compensation of its named executive officers, as disclosed in this proxy statement.
 
34 | RITE AID CORPORATION   2021 Proxy Statement

 
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EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
CD&A Contents
36 Letter from the Chair of Our Compensation Committee
38
Introduction
38 Executive Summary
38
38
39
39
42
43
43
44
44
47 Objectives of Our Executive Compensation Program
47 Compensation Committee’s Processes
48
Peer Group and Competitive Pay
50 Components of Executive Compensation for Fiscal Year 2021
50
51
55
56
57
58
59
59
60 Post-Employment and Change in Control Benefits
60 Other Benefits
60 Deductibility Cap on Executive Compensation
61 Policy Regarding Recoupment of Certain Compensation (“Clawback”)
61 Prohibition on Margin Accounts and Hedging and Similar Transactions
61 Director and Officer Stock Ownership Guidelines
 
RITE AID CORPORATION   2021 Proxy Statement | 35

 
EXECUTIVE COMPENSATION
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Letter from the Chair of Our Compensation
Committee
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DEAR FELLOW STOCKHOLDERS:
On behalf of the Compensation Committee of the Board of Directors of Rite Aid, I would like to share with you the Committee’s perspective on our stockholder engagement efforts, our approach to executive compensation, recent developments impacting our business and our strategic transformation.
Compensation Program and Stockholder Outreach
We strive to create an appropriate compensation program to align senior leaders with the goal of creating value for our stockholders and other stakeholders by growing our Rite Aid, Elixir and Health Dialog customer base and by offering improved services, products and solutions. These past few years have been a journey, as we have reached out to our stockholders and other stakeholders to understand their perspectives on our pay programs, and we have utilized their feedback to further align our pay programs with the interests of our stockholders and other stakeholders.
We were disappointed with the low level of stockholder support for our say on pay resolution.
With respect to the low support for our executive pay, we received feedback that stockholders wanted to better understand the Company’s engagement with stockholders on compensation and other related matters. Through subsequent conversations with stockholders following the 2020 Annual Meeting, we came to understand that while stockholders generally agreed with the changes made to the Company’s compensation plan since the negative say on pay votes in 2018 and disappointing levels of stockholder support in 2019 and 2020, stockholders desired additional outreach from the Company. As a result, members of Rite Aid management, including our CEO, CFO, SVP of Investor Relations, and I reached out to stockholders representing over 50% of our outstanding stock to gather feedback. We engaged with stockholders who responded to our outreach and held virtual meetings to gather feedback on governance, executive pay, and our commitment to ESG and DEI. This outreach has become a standard practice now, and the Compensation Committee considers the feedback from these sessions in making executive compensation decisions.
Impact of the Pandemic on Business Results and Pay Decisions
The impact of the pandemic on the Company was both positive and negative. Initially, the pandemic gave the Company momentum as customers rushed to stores to buy products. However, the decline in acute prescriptions and, cough, cold and flu remedies, and additional operational costs due to the pandemic were a few of the challenges resulting in Rite Aid missing the minimum threshold Adjusted EBITDA for the purposes of funding all of the bonus plans (Corporate, Store, and Supply Chain). The Company, at the direction of the Compensation Committee, undertook a detailed analysis to determine the extent to which the pandemic impacted both its threshold and target Adjusted EBITDA. As with other organizations dealing with the financial consequences of the pandemic, we had a difficult dilemma regarding what to do in a year where the Rite Aid team worked tirelessly to develop strategies to support communities by ensuring necessary supplies were stocked, administering COVID-19 testing and providing COVID-19 vaccines. Even with some benefits from COVID-19, the overall negative financial impact of the pandemic resulted in the Company missing two of its three targets. The analysis clearly pointed out that the higher expenses and lower volumes were due to COVID-19 and caused the target miss.
We strongly believe that pay should align with performance, and this focus is reflected in our executive compensation program. The majority of our executive team’s pay is at-risk and is based on meeting performance
 
36 | RITE AID CORPORATION   2021 Proxy Statement

 
EXECUTIVE COMPENSATION
objectives aligned to our financial results and the Company’s strategy; however, it did not seem in alignment this year with the extremely unique circumstances surrounding the COVID-19 pandemic.
At the beginning of the pandemic, due to the unknown financial effects of the pandemic, the decision was made to give no base pay increases to our executives with the exception of Mr. Schroeder. Because Mr. Schroeder’s base pay fell below the median to the peer group, the Compensation Committee decided to not allow his base pay to fall farther behind.
Due to the dedication of the Company’s associates and extraordinary services to our communities during the pandemic, the Compensation Committee recommended to the Board of Directors that the Board exercise discretion to allow for a portion of the Company’s annual bonus plans to pay out to associates. The independent members of the Board, meeting in executive session without Ms. Donigan, accepted the Compensation Committee’s recommendation. No discretion was exercised for any additional performance-based plans (i.e., long-term incentive plans) and no additional perk or retention payments were made.
The decision to exercise discretion to pay annual bonuses was not taken lightly. Members of the Compensation Committee met with management and the Board of Directors on several occasions to discuss this situation and to ensure that the decision was in the best interests of Rite Aid and our stockholders.
Additional Stockholder Feedback
ESG and DEI transparency was a topic raised by several stockholders during our engagements. The Company is committed to increasing ESG and DEI disclosure and, in 2020, we published our second annual corporate social responsibility report, highlighting significant progress across ESG efforts, and demonstrating Rite Aid’s commitment to promoting whole health and better for you products to help our customers, associates and communities thrive.
In Closing
Over the last few years, Rite Aid put in place a new leadership team, including our new CEO, CFO, and COO, as well as a new Chief Pharmacy Officer, to promote a new vision for the Company. In fiscal year 2021, the new team began implementing our RxEvolution strategy to transform Rite Aid into the leading whole health destination that treats mind, body and spirit. To kick off the transformation, in November, 2020, the Company announced an integrated rebranding effort, including a new logo, refreshed digital experience, whole health merchandise, and a new Store-of-the-Future prototype piloting in select markets. This strategic transformation is aimed at growing our business and positioning the Company for our sustainable future.
Sincerely,
Robert E. Knowling, Jr.
Compensation Committee Chair
 
RITE AID CORPORATION   2021 Proxy Statement | 37

EXECUTIVE COMPENSATION
Introduction
We encourage you to read this Compensation Discussion and Analysis for a detailed discussion and analysis of our fiscal year 2021 executive compensation program for the individuals named below. We refer to these individuals throughout this Compensation Discussion and Analysis and the accompanying tables as our “Named Executive Officers” or “NEOs.”
Heyward Donigan
James J. Peters
Matthew Schroeder
President and Chief Executive Officer (“CEO”)
Chief Operating Officer (“COO”)
Executive Vice President, Chief Financial Officer (“CFO”)
Jocelyn Z. Konrad
Justin Mennen
Daniel Robson(1)
Executive Vice President, Chief Pharmacy Officer
Executive Vice President, Chief Information Officer (“CIO”)
Former President of Elixir
(1)
Mr. Robson ceased to be employed by us as of January 27, 2021.
Executive Summary
Our Company
Rite Aid Corporation is on the front lines of delivering health care services and retail products to more than 1 million customers daily. We provide an array of whole health products and services for the entire family through more than 2,500 retail pharmacy locations across 17 states and our pharmacists are uniquely positioned to engage with customers and improve their health outcomes. Through Elixir, we provide pharmacy benefits and services to approximately 3.3 million members nationwide.
Leadership Team Growth and RxEvolution Execution
Over the last two fiscal years, Rite Aid has made significant changes to its executive leadership team, bringing in senior leaders from across the health care and retail industries to build and drive the Company’s transformation plan, RxEvolution. In August 2020, Paul Gilbert joined the Company and its executive leadership team as General Counsel and Corporate Secretary. In addition to the evolution of the executive leadership team, the Company also added 13 new leaders to the Company’s senior leadership team, bringing in specific expertise in the areas of health care strategic initiatives, pharmacy benefits management, eCommerce, enterprise technology, retail operations, supply chain and investor relations.
Together, in the course of a year, this leadership team moved with urgency to execute the Company’s RxEvolution strategy and transform Rite Aid into the leading whole health destination that treats mind, body and spirit. In November 2020, the Company launched its integrated rebranding effort. The brand refresh includes a new logo and brand identity that is rolling out across the chain, a refreshed digital experience, whole health merchandise, and its new Store-of-the-Future prototype piloting in select markets. In addition, the Company rebranded its Pharmacy Services segment, Elixir, to signal the move to crafted Rx solutions for target customers. The Company also launched a new member portal for Elixir customers in January 2021, and integrated Elixir and Rite Aid to realize operational synergies and take advantage of complementary businesses. The battle against the COVID-19 pandemic validated the Company’s plans to elevate the role of pharmacists. These trusted and accessible health care experts have proven essential in our communities by administering COVID-19 tests and vaccines, while also supporting customers with whole health advice as certified integrated pharmacy specialists.
Rite Aid RxEvolution
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New logo
Enhanced digital experience
Whole health merchandise
New store prototype
 
38 | RITE AID CORPORATION   2021 Proxy Statement

EXECUTIVE COMPENSATION
Our Response to COVID-19
Our role as a health care provider was particularly important in addressing the impact of the COVID-19 global pandemic on our customers, employees, and communities where we do business. In response to the global pandemic, the Company took several steps to support the health and safety of our associates and communities, as executed by Rite Aid management including the Named Executive Officers:

Formed a COVID-19 Task Force of Company leaders to monitor and address the evolving COVID-19 pandemic and ensure the Company was investing in and implementing measures to maintain the safety of customers and associates.

As of April 15, 2021, operated over 1,200 COVID-19 testing sites through its partnership with the U.S. Department of Health and Human Services, enabling access for customers to receive a test at no cost.

As of April 15, 2021, administered 2.5 million COVID-19 vaccines across 19 jurisdictions in nearly half of our stores and over 700 clinics, including clinics for vulnerable or underserved populations.

Committed approximately $47.9 million in safety and associate pay measures, including but not limited to Hero Pay and Hero Bonuses, the temporary administrative leave program, the temporary Pandemic Pay program, enhanced cleaning and sanitization, provision of personal protective equipment, temporary enhancements in the associate discount, and provision of other pandemic-related supplies (such as touchless infrared thermometers and the installation of clear plastic barriers).
Stockholder Vote on Executive Compensation and Stockholder Engagement
The Board has resolved to hold an advisory say on pay vote every year in connection with our annual meeting of stockholders and consistent with the preference of our stockholders.
At our 2020 Annual Meeting, approximately 50.2% of shares voted in favor of the compensation of our NEOs. The Board and Compensation Committee were disappointed and concerned about this result. Rite Aid management and the Board immediately went to work to reach out to stockholders to learn more about their concerns. A team of members of management, including our CFO, SVP of Investor Relations and in several cases the CEO, as well as our Compensation Committee Chair, Robert E. Knowling, Jr., reached out to owners of 50% of our stock to gather feedback on our pay and governance policies and practices. Our meetings were conducted virtually through online video conferencing or teleconference due to COVID-19 pandemic restrictions. We met with stockholders representing over 25% of our outstanding stock to gather feedback on governance, executive pay, and our commitment to ESG and DEI. Also following the 2020 Annual Meeting, Rite Aid held an Investor Presentation in July 2020.
Based on the 2020 say on pay voting result and the feedback we received over the past couple of years from stockholders, the Company has modified its compensation programs to address common items of feedback that we have heard from certain stockholders to ensure a strong alignment with stockholder interests.
Actions taken include:

Significantly increased stockholder outreach;

Revised metrics in the annual incentive plan to add two additional metrics to Adjusted EBITDA;

Differentiated metrics between the annual incentive plan and the long-term incentive plan;

Sought additional perspectives related to executive compensation resulting in the selection of a new Compensation Committee consultant; and

Accelerated Diversity, Equality and Inclusion (DEI) by hiring a VP of Diversity, Equity & Inclusion and amending the Compensation Committee Charter to include oversight of diversity and inclusion initiatives.
 
RITE AID CORPORATION   2021 Proxy Statement | 39

EXECUTIVE COMPENSATION
The Compensation Committee will continue to review the results of future advisory say on pay votes and will consider stockholder concerns in future determinations regarding the compensation of our NEOs and governance practices.
What We Heard From Stockholders
Response to Stockholders
Lack of stockholder outreach Significantly increased stockholder outreach as noted above
Drive appropriate performance through the use of more than one performance metric in annual incentive plan
Added Free Cash Flow and Adjusted Pharmacy Script Comparable as annual performance metrics in addition to Adjusted EBITDA. Fiscal year 2021 metrics and weightings were:

60% Adjusted EBITDA

20% Free Cash Flow (new for fiscal year 2021)

20% Adjusted Pharmacy Script Comparable (new for fiscal year 2021)
Minimize overlapping annual incentive and long-term incentive metrics
Eliminated EBITDA from the long-term incentive plan and added revenue and cumulative scripts metrics in addition to the leverage ratio metric. Fiscal year 2021 long-term incentive plan metrics and weightings were:

50% Leverage Ratio (continued from fiscal year 2020)

25% Cumulative Revenue (new for fiscal year 2021)

25% Cumulative Scripts (new for fiscal year 2021)
Disclose long-term incentive metrics Enhanced disclosure of metrics, including results for completed periods
Ensure board level oversight of ESG strategy and enhance disclosure on current state and future plans to address ESG issues
Made an ongoing commitment to cleaner, less toxic ingredients in our products; investing in a product assortment that is consistent with our strategy of holistic health and wellness; and reducing our environmental footprint through renewable energy opportunities and waste reduction initiatives. Also took the following actions:

Adopted plan to issue TCFD report in 2021

Moved ESG oversight to the Nominating and Governance Committee

Created a cross-functional environmental sustainability steering committee that will meet regularly to execute and oversee implementation of climate strategy

Strengthened governance of climate risk as part of Enterprise Risk Management program
Ensure board level oversight of DEI strategy and disclose plans to address issues and enhance ongoing practices on DEI

Confirmed Compensation Committee to oversee DEI initiatives

CEO issued a public statement about the Company’s position on and intolerance of discrimination and racial injustice, which is posted on the front door of each store

Hired VP to develop and execute DEI strategy

Increased associate awareness and engagement around DEI
 
40 | RITE AID CORPORATION   2021 Proxy Statement

EXECUTIVE COMPENSATION
Future Stockholder Engagement Efforts
The Company intends to engage with stockholders in fiscal year 2022, as follows:
Year-Round Efforts

Solicit feedback and seek to understand investor perspectives on issues of importance to them

Hold quarterly earnings calls

Monitor investor relations website and other related correspondence

Attend analyst conferences and participate in meetings with current stockholders and potential investors
Late Spring / Early Summer Efforts

Distribute our annual report and proxy statement to our stockholders

Extend first biannual invitation to our largest stockholders (together constituting holders of 50% or more of our outstanding shares of common stock) to discuss matters to be voted on at our upcoming annual meeting of stockholders

Discuss with stockholders topics of interest such as company performance, executive compensation, governance, DEI and ESG
Late Summer / Early Fall Efforts

Evaluate results of stockholder voting including our annual say on pay proposal and proxy advisor recommendations to establish the priorities for our stockholder engagement and to ensure that any significant concerns are identified and addressed

Assess results and review recommendations based on the Company’s strategic priorities
Late Fall / Early Winter Efforts

Review stockholder and proxy advisory policy changes and recent feedback to identify common concerns and themes
Late Winter / Early Spring Efforts

Respond to stockholder feedback or concerns and evolving practices by modifying our programs or enhancing our disclosure as appropriate

Extend second biannual invitation to discuss current concerns with our largest stockholders (together constituting holders of 50% or more of our outstanding shares of common stock)
 
RITE AID CORPORATION   2021 Proxy Statement | 41

EXECUTIVE COMPENSATION
2021 Fiscal Year Key Business Highlights
In fiscal year 2021, Rite Aid made significant progress to position the Company for future growth. The management team developed a differentiated “go forward” strategy, its RxEvolution. The Company implemented LEAN initiatives to both reduce working capital tied to inventory and improve our retail pharmacists’ productivity. These efforts led to an approximately $180 million reduction in inventory, a 25% increase in front-end inventory turns and allowed our pharmacists to administer additional clinical services, COVID-19 testing and COVID-19 vaccines with minimal additional staffing. In addition, the Company enhanced its merchandise assortment with 75% of its categories being reset to new elevated merchandising standards which support whole health. The combination of these initiatives allowed the Company to achieve its highest-ever customer satisfaction score of 3.8 out of 5. Rite Aid strengthened its balance sheet by refinancing and extending a significant portion of debt, while also executing on a number of sale leaseback opportunities to generate cash and further its debt reduction initiatives. The Company also ended fiscal year 2021 with $1.7 billion in liquidity.
Below are the details related to key financial indicators used as performance measures in our incentive programs for fiscal year 2021:
Adjusted EBITDA:
Free Cash Flow:

Our Adjusted EBITDA from continuing operations for fiscal 2021 was $437.7 million or 1.8 percent of revenues, compared to $538.2 million or 2.5 percent of revenues for fiscal year 2020.

Front-end gross profit benefited from increased sales volume during the first quarter relating to the COVID-19 pandemic, partially offset by a nearly 37 percent decline in cough, cold and flu related categories during the fourth quarter.

The decrease in the Retail Pharmacy Segment Adjusted EBITDA was driven by higher SG&A expenses partially offset by increased Adjusted EBITDA gross profit. SG&A expenses were negatively impacted by incremental costs associated with the COVID-19 pandemic and the completion of services provided under the Transition Services Agreement with Walgreens.

Pharmacy gross profit benefited from an increase in maintenance prescription counts, partially offset by lower acute prescriptions resulting from the pandemic and continued reimbursement rate pressures.

The decrease in Adjusted EBITDA from continuing operations was due primarily to a decrease of $90.5 million in the Retail Pharmacy segment and a decrease of $10.0 million in the Pharmacy Services segment.

The improvement in Adjusted EBITDA gross profit relates to improvements in both pharmacy and front end.

The decrease in the Pharmacy Services Segment Adjusted EBITDA was due to increased drug costs within Medicare Part D, a decrease in gross profit within the segment’s small group business and SG&A spend related to an increase in Medicare Part D members.

Our Free Cash Flow for fiscal year 2021 was $393 million. Free Cash Flow was impacted by the reduction in adjusted EBITDA, which was offset by inventory reductions of $185 million driven by the reset of our merchandise assortment as part of our RxEvolution strategy.

In addition, capital expenditures were $232 million as we continued to invest in store renovations, prescription file buys and information technology initiatives.
Adjusted Script Comparable:

The number of prescriptions filled in same stores, adjusted to 30-day equivalents, increased 1.3 percent over the prior year driven by increases in maintenance prescriptions, supported by personalized Medication Therapy Management interventions and home deliveries. This was partially offset by a pandemic-influenced reduction in acute prescriptions of 9.0 percent.

Our fiscal year 2021 Adjusted Script Comparable was 1.66%, which was impacted by the deferral of elective procedures and related acute prescription volume decrease due to COVID-19.
See Appendix A for a reconciliation of our Adjusted EBITDA, which is a non-GAAP measure, to net income under GAAP.
 
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