Exhibit 10.4


 


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
Douglas E Donley (“Executive”) is entered into as of the 18th day of December,
2008.  The provisions of this Amendment
shall be effective as of January 1, 2005 (the “Effective Date”).


 


WHEREAS,
Executive and the Company previously entered into that certain employment
agreement, dated as of August 1, 2000 (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 January 1, 2005, 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 January 1,
2005:


 


(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 January 1,
2005:


 

















 


‘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 January 1,
2005:


 


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 January 1,
2005:


 


Section 5.3(a) and 5.5(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

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  DOUGLAS E. DONLEY

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Douglas E. Donley