Exhibit 10.3


 


AMENDMENT NO. 1 TO


EMPLOYMENT AGREEMENT


 


THIS AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT, by and
between Rite Aid Corporation, a Delaware Corporation (the “Company”) and Brian
Fiala (“Executive”) is entered into as of the 18th day of December, 2008.  The provisions of this Amendment shall be
effective as of June 26, 2007 (the “Effective Date”).


 


WHEREAS, Executive and the Company previously
entered into that certain employment agreement, dated as of June 26, 2007
(the “Employment Agreement” or “Agreement”); and


 


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


 


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


 


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


 


“14.         COMPLIANCE WITH CODE SECTION 409A  Notwithstanding anything in this Employment
Agreement to the contrary, effective as of Effective Date, the following
provisions shall govern:  The provisions
listed below are intended to be compliant with Internal Revenue Code (“Code”) Section 409A
and the final regulations promulgated thereunder (‘409A’) and shall be construed
to be so compliant.


 


(a)                                  Good
Reason: Any termination for ‘Good Reason’ shall comply with the safe harbor
definition of ‘good reason’ in 409A, including the condition giving rise to
such termination and the notice and cure period provided for in 409A.  Without limiting the generality of the
foregoing, the following specific provisions will be effective as of the
Effective Date:


 


(i)                                     The final
paragraph of Section 5.4 of the Agreement shall be modified to read as
follows:


 


‘provided, however that the Executive has provided written
notice (which shall set forth in reasonable detail the 


 

















 


specific conduct of the Company that constitutes
Good Reason and the specific provisions of this Agreement on which Executive
relies) to the Company of the existence of any condition described in any one
of subparagraphs a, b, or c within 30 days of the initial existence of such
condition, and the Company has not cured the condition within 30 days of the
receipt of such notice.  Any termination
of employment by the Executive for Good Reason pursuant to Section 5.3
must occur no later than the date that is the second anniversary of the initial
existence of the condition giving rise to the termination right.’


 


(b)                                 Payment
of Benefits:  To the extent
necessary to avoid adverse tax consequences, and except as described below, any
payment to which the Executive becomes entitled under the Agreement, or any
arrangement or plan referenced in this Agreement, that constitutes “deferred
compensation” under 409A, and is (a) payable upon the Executive’s
termination; (b) at a time when the Executive is a “specified employee” as
defined by 409A shall not be made until the earliest of:


 


(1)                                  the expiration
of the six month period (the “Deferral Period”) measured from the date of the
Executive’s ‘separation from service’ under 409A; or


(2)                                  the date of the
Executive’s death.


 


Upon the expiration of the Deferral Period, all
payments that would have been made during the Deferral Period (whether in a
single lump sum or in installments) shall be paid as a single lump sum to the
Executive or, if applicable, his beneficiary. 
This section shall not apply to any payment which constitutes “separation
pay” as described in Internal Revenue Regulations Section 409A-1(b)(9) (in
general, payments (i) that are made on an involuntary separation from
service which (ii) do not exceed the lesser of two times (x) the
Executive’s annualized compensation for the taxable year preceding the year in
which the separation from service occurs or (y) the Code Section 401(a)(17)
limit on compensation for the year in which separation from service occurs and (iii) are
paid in total by the end of the second calendar year following the calendar
year in which the separation from service occurs.)


 


Without limiting the generality of the foregoing,
the following specific provisions will be effective as of the Effective Date:


 


‘The Company shall pay to the Executive the Accrued
Benefits within ten (10) days after the Date of Termination.


 

















 


Notwithstanding the foregoing, if the Executive is a
‘specified employee’, as defined in 409A, the Company shall pay to the
Executive the Accrued Benefits on the six (6) month anniversary of the
Date of Termination.


 


To the extent permissible by law, each payment and
each installment described in this Agreement shall be considered a separate
payment from each other payment or installment’


 


(c)                                  Reimbursements:  To the extent required by 409A, with regard
to any provision that provides for the reimbursement of costs and expenses, or
for the provision of in-kind benefits:


 


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


(2)           The
amount of expenses or in kind benefits available or paid in one year shall not
affect the amount available or paid in any subsequent year; and


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


 


Without limiting the generality of the foregoing,
the following specific provisions will be effective as of the Effective Date:


 


Section 4.2 of the Agreement shall be modified
to insert the following sentence at the end thereof:


 


‘The provisions of Section 14(c) shall
apply to all reimbursements made under this Section 4.2.’


 


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


 


Section 5.3(a) 
of the Agreement shall be modified by adding the following to the end thereof:


 


‘For any period during which the Executive would be
entitled to continuation coverage through the application of Internal Revenue
Code Section 4980B (‘COBRA’), this coverage shall be provided at the
expense of the Company.  For any period
after the expiration of the period required by COBRA, but prior to the end of
the month in which the second anniversary of the Date of Termination occurs,
this


 

















 


coverage will be provided at the expense of the
Executive (or his beneficiaries or estate). 
Executive (or his beneficiaries or estate) shall remit payment by check
to the Company in the amount of the then current amount used to calculate
premiums for participants entitled to receive continuation coverage under
COBRA.  The Company shall, on the last
day of each month, provide the Executive (or his beneficiaries or estate) with
a payment sufficient to place the Executive (or his beneficiaries or estate) in
the same economic position had such individuals or entity not been required to
pay the premium described in the preceding sentence.’”


 


2.             Employment Agreement to Remain
in Effect.            Except
as modified by this Amendment No. 1, the Employment Agreement shall remain
in full force and effect in accordance with its terms.  In the event of a conflict between the
provisions of this Amendment No. 1 and the Employment Agreement, this
Amendment No. 1 shall be controlling.


 


 


	
   

  	
  RITE AID CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert B. Sari

  
	
   

  	
  Its:

  	
  Executive Vice President, General Counsel

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BRIAN FIALA

  
	
   

  	
   

  
	
   

  	
  /s/ Brian Fiala