Exhibit 10.6


 


AMENDMENT NO. 3 TO


EMPLOYMENT AGREEMENT


 


THIS AMENDMENT NO. 3 TO EMPLOYMENT AGREEMENT, by and
between Rite Aid Corporation, a Delaware Corporation (the “Company”) and Mary
F. Sammons (“Executive”) is entered into as of the 30th 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 December 5,
1999, and subsequently amended on May 7, 2001 and September 30, 2003
(collectively, the “Employment 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
inconsistence 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 (the “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 Section 409A and the final regulations promulgated thereunder
(‘409A’) as in effect on the date hereof and shall be construed to be so
compliant.


 


(a)                                  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:


 


(i)                                     Section 5(a)(2) and
5(b)(2) of the Agreement shall be modified by adding the following to the
end of each 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 third anniversary of the Date of Termination occurs,
this coverage will be provided at the expense of the Executive (or her
beneficiaries or estate).  Executive (or
her 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; provided, however, if
the coverage is not available through the Company’s benefit plans, then
Executive shall purchase and pay the premium for medical coverage substantially
comparable in all material respects to the coverage provided by the Company
during the COBRA period.  The Company
shall, on the last day of each month, provide the Executive (or her
beneficiaries or estate) with a payment sufficient to place the Executive (or
her 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.’


 


(b)                                 Payment
of Benefits:  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 and; (b) at
a time when the Executive is a “specified employee” as defined by 409A shall
not be made if necessary to comply with the requirements of clause (a)(2)(B)(i) of
409A 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,


 


provided one or more exceptions to 409A that would
allow for an earlier payment is not available. 
The maximum payment allowable under all such exceptions combined will be
made on the date provided under the Agreement prior to this Amendment No. 3.


 


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 together with interest at the money market fund rate of the Company’s
investments from time to time to the Executive or, if applicable, his
beneficiary.


 


Without limiting the generality of the foregoing,
the following specific provisions will be effective as of January 1, 2005:


 


Section 5(d)(1) of the Agreement shall be
modified by adding the following to the end thereof:


 


‘The provisions of Section 14(b) will
apply to payments made under this Section 5(d)(1).  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 3(c) 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 3(c)’


 


(d)                                 Gross
Ups.  To the extent required by
409A, any ‘gross up’ payment shall be made no later than the
end of the Executive’s taxable year following the year in which the employee
remits the related taxes.


 


Without limiting the generality of the foregoing,
the following specific provisions will be effective as of January 1, 2005:


 


Section 5 shall be amended by adding the
following new Section 5(e)(v) immediately following Paragraph (iv) therof:


 

















 


‘(v)                             The provisions of Section 14(d) shall
apply to all payments made under this Section 5(e)’”


 


2.                                       Employment Agreement
to Remain in Effect.      Except as
modified by this Amendment No. 3, the Employment Agreement shall remain in
full force and effect in accordance with its terms. Except to the extent
explicitly required by 409A, nothing herein is intended to nor shall be
construed to reduce any material benefit of Executive under the Employment
Agreement or to require any repayment or reduction of any benefit provided to
Executive prior to the date hereof.   In the event of a conflict between the
provisions of this Amendment No. 3 and the Employment Agreement, this
Amendment No. 3 shall be controlling.


 


 


	
   

  	
  RITE AID CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert B. Sari

  
	
   

  	
   

  	
  Robert B. Sari

  
	
   

  	
   

  	
  Executive Vice President,

  
	
   

  	
   

  	
  General Counsel

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Mary F. Sammons

  
	
   

  	
   

  
	
   

  	
  /s/ Mary F. Sammons