Merger Agreement	12 Months Ended
Mar. 03, 2018
Merger Agreement
Merger Agreement	3. Merger Agreement Agreement and Plan of Merger On February 18, 2018, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with Albertsons Companies, Inc. ("Albertsons"), Ranch Acquisition II LLC, a Delaware limited liability company and a wholly-owned direct subsidiary of Albertsons ("Merger Sub II"), and Ranch Acquisition Corp., a Delaware corporation and a wholly-owned direct subsidiary of Merger Sub II ("Merger Sub" and, together with Merger Sub II, the "Merger Subs"). Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, (i) Merger Sub will merge with and into the Company (the "Merger"), with the Company surviving the Merger as a wholly-owned direct subsidiary of Merger Sub II (the "Surviving Corporation"), and (ii) immediately following the Merger, the Surviving Corporation will merge with and into Merger Sub II (the "Subsequent Merger" and, together with the Merger, the "Mergers"), with Merger Sub II surviving the Subsequent Merger as a wholly-owned direct subsidiary of Albertsons (the "Surviving Company"). At the effective time of the Merger (the "Effective Time"), each share of Rite Aid common stock issued and outstanding immediately prior to the Effective Time (other than shares of Rite Aid common stock owned by Albertsons, Merger Sub or the Company (including treasury stock held by the Company), which will be cancelled) will be converted into the right to receive and become exchangeable for 0.1000 (the "Base Exchange Ratio") of a fully paid and nonassessable share of Albertsons common stock, par value $0.01 per share ("Albertsons Common Stock") (the "Base Consideration"), without interest, plus, at the election of the holder of Rite Aid common stock, either (i) an amount in cash equal to $0.1832 per share (the "Additional Cash Consideration" and, together with the Base Consideration, the "Cash Election Consideration"), without interest, or (ii) 0.0079 (the "Additional Stock Election Exchange Ratio" and, together with the Base Exchange Ratio, the "Stock Election Exchange Ratio") of a fully paid and nonassessable share of Albertsons Common Stock (the "Additional Stock Consideration" and, together with the Base Consideration, the "Stock Election Consideration"). Subject to the terms of the Merger Agreement, at the Effective Time, each option to purchase Rite Aid common stock granted under any Company stock plan that is outstanding and unexercised immediately prior to the Effective Time (each, a "Rite Aid Stock Option"), whether or not then vested or exercisable, will be assumed by Albertsons and will be converted into a stock option to acquire a number of shares of Albertsons Common Stock (an "Albertsons Stock Option"), on the same terms and conditions as were applicable to such Rite Aid Stock Option immediately prior to the Effective Time (but taking into account any changes thereto provided for in the Merger Agreement), equal to the product of (i) the number of shares of Rite Aid common stock subject to such Rite Aid Stock Option immediately prior to the Effective Time multiplied by (ii) the Base Exchange Ratio, with any fractional shares rounded down to the nearest whole number of shares after aggregating each individual holder's Rite Aid Stock Options with the same exercise price. The exercise price per share of Albertsons Common Stock subject to each such Albertsons Stock Option will be an amount (rounded up to the nearest whole cent) equal to the quotient of (A) the excess of (x) the per share exercise price of such Rite Aid Stock Option immediately prior to the Effective Time over (y) the Additional Cash Consideration divided by (B) the Base Exchange Ratio. Except as described below for a current or former non-employee director, consultant, employee or other service provider of the Company who is not a continuing employee or continuing service provider after the Effective Time (each, a "Former Service Provider"), subject to the terms of the Merger Agreement, at the Effective Time, each outstanding time- or performance-vesting restricted stock unit granted under any Company stock plan (each, a "Rite Aid RSU"), whether or not then vested, will be assumed by Albertsons and will be converted into a restricted stock unit award (an "Albertsons RSU"), on the same terms and conditions as were applicable to such Rite Aid RSU immediately prior to the Effective Time (including settlement in cash with respect to any Rite Aid RSU that by its terms provides for settlement in cash and settlement in Albertsons Common Stock with respect to any Rite Aid RSU that by its terms provides for settlement in Rite Aid common stock), relating to the number of shares of Albertsons Common Stock equal to the product of (i) the number of Rite Aid RSUs held by the holder thereof immediately prior to the Effective Time, assuming achievement of any applicable performance metrics at the target level of achievement, multiplied by (ii) the Stock Election Exchange Ratio, with any fractional shares rounded to the nearest whole number of shares. Except as described below for Former Service Providers, subject to the terms of the Merger Agreement, at the Effective Time, each outstanding restricted share award granted under any Company stock plan (each, a "Rite Aid RSA"), whether or not then vested, will be assumed by Albertsons and will be converted into a restricted share award (each, an "Albertsons RSA") on the same terms and conditions as were applicable to such Rite Aid RSA immediately prior to the Effective Time (but taking into account any changes thereto provided for in the Merger Agreement), relating to the number of shares of Albertsons Common Stock equal to the product of (i) the number of shares of Rite Aid common stock subject to such Rite Aid RSA multiplied by (ii) the Base Exchange Ratio, with any fractional shares rounded to the nearest whole number of shares, plus, a number of shares of Albertsons Common Stock or an amount in cash equal to the product of (X) the number of shares of Rite Aid common stock subject to such Rite Aid RSA immediately prior to the Effective Time multiplied by (Y) the Additional Stock Consideration or the Additional Cash Consideration, as elected by the holder of such Rite Aid RSA. Subject to the terms of the Merger Agreement, with respect to each Rite Aid RSA and Rite Aid RSU held by a Former Service Provider, (i) the vesting will be fully accelerated at the Effective Time (and all restrictions thereupon will lapse), and (ii) subject to deduction and withholding rights, in respect of such outstanding Rite Aid RSA or Rite Aid RSU, such Former Service Provider will be entitled to receive that number of whole shares of Albertsons Common Stock equal to the product of (A) the number of shares of Rite Aid common stock subject to such Rite Aid RSA or Rite Aid RSU immediately prior to the Effective Time (assuming achievement of any applicable performance metrics at the target level of achievement) multiplied by (B) the Base Exchange Ratio, with any fractional shares rounded to the nearest whole number of shares, plus, a number of shares of Albertsons Common Stock or an amount in cash equal to the product of (X) the number of shares of Rite Aid common stock subject to such Rite Aid RSA or Rite Aid RSU immediately prior to the Effective Time (assuming achievement of any applicable performance metrics at the target level of achievement) multiplied by (Y) the Additional Stock Consideration or the Additional Cash Consideration, as elected by the holder of such Rite Aid RSA and Rite Aid RSU, except, with respect to any Rite Aid RSU that by its terms provides for settlement in cash, the Former Service Provider will be entitled to receive the cash value of the number of whole shares of Albertsons Common Stock equal to the product of (A) the number of shares of Rite Aid common stock subject to such Rite Aid RSU immediately prior to the Effective Time (assuming achievement of any applicable performance metrics at the target level of achievement) multiplied by (B) the Base Exchange Ratio, with any fractional shares rounded to the nearest whole number of shares, plus, an amount in cash equal to the product of (X) the number of shares of Rite Aid common stock subject to such Rite Aid RSU immediately prior to the Effective Time (assuming achievement of any applicable performance metrics at the target level of achievement) multiplied by (Y) the Additional Cash Consideration (for the avoidance of doubt, the holder will not have the right to elect Additional Stock Consideration). Consummation of the Merger is subject to various closing conditions, including but not limited to (i) approval of the Merger Agreement by holders of a majority of the outstanding shares of our common stock entitled to vote on the Merger, (ii) the expiration or earlier termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") (which condition was satisfied on March 28, 2018), (iii) the absence of any law or order prohibiting the Merger, (iv) the absence of a material adverse effect on the Company and Albertsons, in each case, as defined in the Merger Agreement, (v) approval for listing, on the NYSE, of the shares of Albertsons Common Stock to be issued in the Merger and to be reserved for issuance in connection with the Merger, (vi) Albertsons's registration statement on Form S-4 shall have become effective under the Securities Act, and shall not be the subject of any stop order or proceedings seeking a stop order, (vii) approval of the Ohio Department of Insurance for the change of control of EIC, and (viii) Albertsons shall have delivered the Company a Lock-Up Agreement, No Action Agreement and Standstill Agreement, in each case, in the form agreed to by the parties to the Merger Agreement. The parties to the Merger Agreement have each made customary representations and warranties. The parties to the Merger Agreement have each agreed to various covenants and agreements, including, among others, (i) each party's agreement to conduct its business in the ordinary course consistent with past practice during the period between the execution of the Merger Agreement and the closing of the Merger, (ii) the Company's agreement to not solicit proposals relating to alternative transactions to the Merger or engage in discussions or negotiations with respect thereto, subject to certain exceptions, (iii) Albertsons's covenant to agree to the sale, divestiture or disposition of any assets of the Company that do not exceed $45 million in retail four-wall EBITDA if necessary or advisable in order to obtain antitrust approval of the Merger, and (iv) Albertsons's agreement to use reasonable best efforts to arrange and obtain the debt financing contemplated by the debt commitment letter executed in connection with the Merger Agreement, or such alternative financing as contemplated by the Merger Agreement. On February 18, 2018, in connection with the Merger Agreement, the Company entered into a standstill agreement (the "Standstill Agreement") with Albertsons and Cerberus, pursuant to which Cerberus has agreed not to: (i) purchase shares of Albertsons Common Stock or other securities issued by Albertsons, except Cerberus may acquire beneficial ownership of Albertsons Common Stock provided that such beneficial ownership does not result in ownership of 30% or more of the issued and outstanding shares of Albertsons Common Stock in the aggregate following such transaction, (ii) make any public statement or public disclosure regarding any intent, purpose, plan or proposal by Cerberus or any of its controlled affiliates to the composition of the Albertsons board of directors, any merger, consolidation or acquisition of Albertsons or its subsidiaries, (iii) engage in any solicitation of proxies or otherwise solicit the stockholders of Albertsons or (iv) enter into any agreements to make any investment with any person that engages or offers or proposes to engage in any of (i) through (iii) during the standstill period. The standstill period commences at the Effective Time and terminates upon the earliest to occur of (a) thirty days following the date that Cerberus does not have any of its designees on the Albertsons board of directors, (b) the date on which Cerberus no longer has the right to appoint (and has not appointed) at least one director to the Albertsons board of directors and (c) the date on which Albertsons materially breaches or takes any action challenging the validity or enforceability of the provisions of the merger agreement that grant Cerberus certain rights to appoint directors to the Albertsons board of directors. In addition, pursuant to the Standstill Agreement, from February 18, 2018 until the Effective Time, Cerberus has agreed not to acquire or agree to acquire beneficial ownership of any shares of Albertsons Common Stock, Rite Aid common stock or other securities or debt issued by Albertsons or Rite Aid that would result in beneficial ownership of 30% or more of the issued and outstanding shares of Albertsons Common Stock at the Effective Time (assuming for the purposes of such calculation that the Effective Time occurred immediately after such acquisition).

3. Merger Agreement

Agreement and Plan of Merger

On February 18, 2018, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with Albertsons Companies, Inc. ("Albertsons"), Ranch Acquisition II LLC, a Delaware limited liability company and a wholly-owned direct subsidiary of Albertsons ("Merger Sub II"), and Ranch Acquisition Corp., a Delaware corporation and a wholly-owned direct subsidiary of Merger Sub II ("Merger Sub" and, together with Merger Sub II, the "Merger Subs"). Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, (i) Merger Sub will merge with and into the Company (the "Merger"), with the Company surviving the Merger as a wholly-owned direct subsidiary of Merger Sub II (the "Surviving Corporation"), and (ii) immediately following the Merger, the Surviving Corporation will merge with and into Merger Sub II (the "Subsequent Merger" and, together with the Merger, the "Mergers"), with Merger Sub II surviving the Subsequent Merger as a wholly-owned direct subsidiary of Albertsons (the "Surviving Company").

At the effective time of the Merger (the "Effective Time"), each share of Rite Aid common stock issued and outstanding immediately prior to the Effective Time (other than shares of Rite Aid common stock owned by Albertsons, Merger Sub or the Company (including treasury stock held by the Company), which will be cancelled) will be converted into the right to receive and become exchangeable for 0.1000 (the "Base Exchange Ratio") of a fully paid and nonassessable share of Albertsons common stock, par value $0.01 per share ("Albertsons Common Stock") (the "Base Consideration"), without interest, plus, at the election of the holder of Rite Aid common stock, either (i) an amount in cash equal to $0.1832 per share (the "Additional Cash Consideration" and, together with the Base Consideration, the "Cash Election Consideration"), without interest, or (ii) 0.0079 (the "Additional Stock Election Exchange Ratio" and, together with the Base Exchange Ratio, the "Stock Election Exchange Ratio") of a fully paid and nonassessable share of Albertsons Common Stock (the "Additional Stock Consideration" and, together with the Base Consideration, the "Stock Election Consideration").

Subject to the terms of the Merger Agreement, at the Effective Time, each option to purchase Rite Aid common stock granted under any Company stock plan that is outstanding and unexercised immediately prior to the Effective Time (each, a "Rite Aid Stock Option"), whether or not then vested or exercisable, will be assumed by Albertsons and will be converted into a stock option to acquire a number of shares of Albertsons Common Stock (an "Albertsons Stock Option"), on the same terms and conditions as were applicable to such Rite Aid Stock Option immediately prior to the Effective Time (but taking into account any changes thereto provided for in the Merger Agreement), equal to the product of (i) the number of shares of Rite Aid common stock subject to such Rite Aid Stock Option immediately prior to the Effective Time multiplied by (ii) the Base Exchange Ratio, with any fractional shares rounded down to the nearest whole number of shares after aggregating each individual holder's Rite Aid Stock Options with the same exercise price. The exercise price per share of Albertsons Common Stock subject to each such Albertsons Stock Option will be an amount (rounded up to the nearest whole cent) equal to the quotient of (A) the excess of (x) the per share exercise price of such Rite Aid Stock Option immediately prior to the Effective Time over (y) the Additional Cash Consideration divided by (B) the Base Exchange Ratio.

Except as described below for a current or former non-employee director, consultant, employee or other service provider of the Company who is not a continuing employee or continuing service provider after the Effective Time (each, a "Former Service Provider"), subject to the terms of the Merger Agreement, at the Effective Time, each outstanding time- or performance-vesting restricted stock unit granted under any Company stock plan (each, a "Rite Aid RSU"), whether or not then vested, will be assumed by Albertsons and will be converted into a restricted stock unit award (an "Albertsons RSU"), on the same terms and conditions as were applicable to such Rite Aid RSU immediately prior to the Effective Time (including settlement in cash with respect to any Rite Aid RSU that by its terms provides for settlement in cash and settlement in Albertsons Common Stock with respect to any Rite Aid RSU that by its terms provides for settlement in Rite Aid common stock), relating to the number of shares of Albertsons Common Stock equal to the product of (i) the number of Rite Aid RSUs held by the holder thereof immediately prior to the Effective Time, assuming achievement of any applicable performance metrics at the target level of achievement, multiplied by (ii) the Stock Election Exchange Ratio, with any fractional shares rounded to the nearest whole number of shares.

Except as described below for Former Service Providers, subject to the terms of the Merger Agreement, at the Effective Time, each outstanding restricted share award granted under any Company stock plan (each, a "Rite Aid RSA"), whether or not then vested, will be assumed by Albertsons and will be converted into a restricted share award (each, an "Albertsons RSA") on the same terms and conditions as were applicable to such Rite Aid RSA immediately prior to the Effective Time (but taking into account any changes thereto provided for in the Merger Agreement), relating to the number of shares of Albertsons Common Stock equal to the product of (i) the number of shares of Rite Aid common stock subject to such Rite Aid RSA multiplied by (ii) the Base Exchange Ratio, with any fractional shares rounded to the nearest whole number of shares, plus, a number of shares of Albertsons Common Stock or an amount in cash equal to the product of (X) the number of shares of Rite Aid common stock subject to such Rite Aid RSA immediately prior to the Effective Time multiplied by (Y) the Additional Stock Consideration or the Additional Cash Consideration, as elected by the holder of such Rite Aid RSA.

Subject to the terms of the Merger Agreement, with respect to each Rite Aid RSA and Rite Aid RSU held by a Former Service Provider, (i) the vesting will be fully accelerated at the Effective Time (and all restrictions thereupon will lapse), and (ii) subject to deduction and withholding rights, in respect of such outstanding Rite Aid RSA or Rite Aid RSU, such Former Service Provider will be entitled to receive that number of whole shares of Albertsons Common Stock equal to the product of (A) the number of shares of Rite Aid common stock subject to such Rite Aid RSA or Rite Aid RSU immediately prior to the Effective Time (assuming achievement of any applicable performance metrics at the target level of achievement) multiplied by (B) the Base Exchange Ratio, with any fractional shares rounded to the nearest whole number of shares, plus, a number of shares of Albertsons Common Stock or an amount in cash equal to the product of (X) the number of shares of Rite Aid common stock subject to such Rite Aid RSA or Rite Aid RSU immediately prior to the Effective Time (assuming achievement of any applicable performance metrics at the target level of achievement) multiplied by (Y) the Additional Stock Consideration or the Additional Cash Consideration, as elected by the holder of such Rite Aid RSA and Rite Aid RSU, except, with respect to any Rite Aid RSU that by its terms provides for settlement in cash, the Former Service Provider will be entitled to receive the cash value of the number of whole shares of Albertsons Common Stock equal to the product of (A) the number of shares of Rite Aid common stock subject to such Rite Aid RSU immediately prior to the Effective Time (assuming achievement of any applicable performance metrics at the target level of achievement) multiplied by (B) the Base Exchange Ratio, with any fractional shares rounded to the nearest whole number of shares, plus, an amount in cash equal to the product of (X) the number of shares of Rite Aid common stock subject to such Rite Aid RSU immediately prior to the Effective Time (assuming achievement of any applicable performance metrics at the target level of achievement) multiplied by (Y) the Additional Cash Consideration (for the avoidance of doubt, the holder will not have the right to elect Additional Stock Consideration).

Consummation of the Merger is subject to various closing conditions, including but not limited to (i) approval of the Merger Agreement by holders of a majority of the outstanding shares of our common stock entitled to vote on the Merger, (ii) the expiration or earlier termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") (which condition was satisfied on March 28, 2018), (iii) the absence of any law or order prohibiting the Merger, (iv) the absence of a material adverse effect on the Company and Albertsons, in each case, as defined in the Merger Agreement, (v) approval for listing, on the NYSE, of the shares of Albertsons Common Stock to be issued in the Merger and to be reserved for issuance in connection with the Merger, (vi) Albertsons's registration statement on Form S-4 shall have become effective under the Securities Act, and shall not be the subject of any stop order or proceedings seeking a stop order, (vii) approval of the Ohio Department of Insurance for the change of control of EIC, and (viii) Albertsons shall have delivered the Company a Lock-Up Agreement, No Action Agreement and Standstill Agreement, in each case, in the form agreed to by the parties to the Merger Agreement.

The parties to the Merger Agreement have each made customary representations and warranties. The parties to the Merger Agreement have each agreed to various covenants and agreements, including, among others, (i) each party's agreement to conduct its business in the ordinary course consistent with past practice during the period between the execution of the Merger Agreement and the closing of the Merger, (ii) the Company's agreement to not solicit proposals relating to alternative transactions to the Merger or engage in discussions or negotiations with respect thereto, subject to certain exceptions, (iii) Albertsons's covenant to agree to the sale, divestiture or disposition of any assets of the Company that do not exceed $45 million in retail four-wall EBITDA if necessary or advisable in order to obtain antitrust approval of the Merger, and (iv) Albertsons's agreement to use reasonable best efforts to arrange and obtain the debt financing contemplated by the debt commitment letter executed in connection with the Merger Agreement, or such alternative financing as contemplated by the Merger Agreement.

On February 18, 2018, in connection with the Merger Agreement, the Company entered into a standstill agreement (the "Standstill Agreement") with Albertsons and Cerberus, pursuant to which Cerberus has agreed not to: (i) purchase shares of Albertsons Common Stock or other securities issued by Albertsons, except Cerberus may acquire beneficial ownership of Albertsons Common Stock provided that such beneficial ownership does not result in ownership of 30% or more of the issued and outstanding shares of Albertsons Common Stock in the aggregate following such transaction, (ii) make any public statement or public disclosure regarding any intent, purpose, plan or proposal by Cerberus or any of its controlled affiliates to the composition of the Albertsons board of directors, any merger, consolidation or acquisition of Albertsons or its subsidiaries, (iii) engage in any solicitation of proxies or otherwise solicit the stockholders of Albertsons or (iv) enter into any agreements to make any investment with any person that engages or offers or proposes to engage in any of (i) through (iii) during the standstill period. The standstill period commences at the Effective Time and terminates upon the earliest to occur of (a) thirty days following the date that Cerberus does not have any of its designees on the Albertsons board of directors, (b) the date on which Cerberus no longer has the right to appoint (and has not appointed) at least one director to the Albertsons board of directors and (c) the date on which Albertsons materially breaches or takes any action challenging the validity or enforceability of the provisions of the merger agreement that grant Cerberus certain rights to appoint directors to the Albertsons board of directors. In addition, pursuant to the Standstill Agreement, from February 18, 2018 until the Effective Time, Cerberus has agreed not to acquire or agree to acquire beneficial ownership of any shares of Albertsons Common Stock, Rite Aid common stock or other securities or debt issued by Albertsons or Rite Aid that would result in beneficial ownership of 30% or more of the issued and outstanding shares of Albertsons Common Stock at the Effective Time (assuming for the purposes of such calculation that the Effective Time occurred immediately after such acquisition).