Document:

<PAGE>
                                                                    EXHIBIT 10.3

AS AMENDED THROUGH APRIL 4, 2001

                              RITE AID CORPORATION
                             2001 STOCK OPTION PLAN

                  1.       Purpose.
                           -------

                  The purposes of the 2001 Stock Option Plan of Rite Aid
Corporation, (the "Plan") are to afford an incentive to employees of Rite Aid
Corporation (the "Company") or any Subsidiary or Affiliate that now exists or
hereafter is organized or acquired, to continue as employees to increase their
efforts on behalf of the Company and to promote the success of the Company's
business. This Plan is designed to comply and conform with the exemption for
"broadly-based plans" as set forth in Section 312.03(a)(2) of the New York Stock
Exchange Listed Company Manual, as in effect as of the Effective Date, and shall
be interpreted accordingly.

                  2.       Definitions.
                           -----------

                           (a)  "Affiliate" shall have the meaning set forth in
Rule 12b-2 promulgated under Section 12 of the Exchange Act.

                           (b)  "Board" means the Board of Directors of the
Company.

                           (c) "Code" means the Internal Revenue Code of 1986,
as amended from time to time.

                           (d)  "Committee" means the Compensation Committee of
the Board which shall, subject to the unfettered right of the Board to act as
the Committee, administer the Plan.

                           (e)  "Company" means Rite Aid Corporation, a
corporation organized under the laws of the State of Delaware, or any successor
corporation.

                           (f)  "Effective Date" means February 13, 2001

                           (g)  "Employee" means an Employee of the Company or
any Subsidiary or Affiliate.

                           (h) "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended from time to time.

<PAGE>

                           (i)  "Fair Market Value" means the fair market value
of such Stock determined by such methods or procedures as shall be established
from time to time by the Committee. Unless otherwise determined by the Committee
in good faith, the per share Fair Market Value of Stock as of a particular date
shall mean (i) the closing price per share of Stock on such date on the national
securities exchange on which the Stock is principally traded, or (ii) if the
shares of Stock are then traded in an over-the-counter market, the average of
the closing bid and asked prices for the shares of Stock in such
over-the-counter market for the last preceding date on which there was a sale of
such Stock in such market, or (iii) if the shares of Stock are not then listed
on a national securities exchange or traded in an over-the-counter market, such
value as the Committee, in its sole discretion, shall determine.

                           (j)  "NQSO" means an Option that is designated as a
nonqualified stock option.

                           (k) "Option" means a right granted to an Employee
under Section 6, to purchase shares of Stock.

                           (l)  "Option Agreement" means any written agreement,
contract, or other instrument or document evidencing an Option.

                           (m) "Plan" means this Rite Aid Corporation 2001 Stock
Option Plan, as amended from time to time.

                           (n)   "Stock" means shares of common stock, par
value $1.00 per share, of the Company.

                           (o)  "Subsidiary" means any corporation in an
unbroken chain of corporations beginning with the Company if, at the time of
granting of an Option, each of the corporations (other than the last corporation
in the unbroken chain) owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in the
chain.

                  3.       Administration.
                           --------------

                  The Plan shall be administered by the Committee. The Committee
shall have the authority in its discretion, subject to and not inconsistent with
the express provisions of the Plan, to administer the Plan and to exercise all
the powers and authorities either specifically granted to it under the Plan or
necessary or advisable in the administration of the Plan, including, without
limitation, the authority to grant Options; to determine the persons to whom and
the time or times at which Options shall be granted;

                                       2
<PAGE>

to determine the number of shares of Stock to which an Option may relate and the
terms, conditions and restrictions relating to any Option; to determine whether,
to what extent, and under what circumstances an Option may be settled, canceled,
forfeited, exchanged, or surrendered; to make adjustments in the terms and
conditions applicable to Options; to designate Affiliates; to construe and
interpret the Plan; to prescribe, amend and rescind rules and regulations
relating to the Plan; to determine the terms and provisions of the Option
Agreements (which need not be identical for each Employee); and to make all
other determinations deemed necessary or advisable for the administration of the
Plan.

                  All determinations of the Committee shall be made by a
majority of its members either present in person or participating by conference
telephone at a meeting or by written consent. The Committee may delegate to one
or more of its members or to one or more agents such administrative duties as it
may deem advisable, and the Committee or any person to whom it has delegated
duties as aforesaid may employ one or more persons to render advice with respect
to any responsibility the Committee or such person may have under the Plan. All
decisions, determinations and interpretations of the Committee shall be final
and binding on all persons, including the Company, and any Subsidiary, Affiliate
or Employee (or any person claiming any rights under the Plan from or through
any Employee) and any stockholder.

                  No member of the Board or Committee shall be liable for any
action taken or determination made in good faith with respect to the Plan or any
Option granted hereunder.

                  4.       Eligibility.
                           -----------

                  Options may be granted only to Employees of the Company, or of
any of its Subsidiaries and Affiliates. In determining the persons to whom
Options shall be granted, the Committee shall take into account such factors as
the Committee shall deem relevant in connection with accomplishing the purposes
of the Plan.

                  5.       Stock Subject to the Plan.
                           -------------------------

                  The maximum number of shares of Stock reserved for the grant
of Options under the Plan shall be 20,000,000, subject to adjustment as provided
herein. Notwithstanding anything contained in the Plan to the contrary, at least
a majority of the shares subject to Options awarded under the Plan shall be
awarded to Employees of the Company who are neither "officers" (within the
meaning of Rule 16a-(f) promulgated under the Exchange Act) nor directors of the
Company. Such shares may, in whole or in part, be authorized but unissued shares
or shares that shall have been or may be reacquired by the Company in the open
market, in private transactions or otherwise. If any shares

                                       3
<PAGE>

subject to an Option are forfeited, canceled, exchanged or surrendered or if an
Option otherwise terminates or expires without a distribution of shares to the
Employee, the shares of stock with respect to such Option shall, to the extent
of any such forfeiture, cancellation, exchange, surrender, termination or
expiration, again be available for Options under the Plan.

                  In the event that the Committee shall determine that any
dividend or other distribution (whether in the form of cash, Stock, or other
property), recapitalization, Stock split, reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event, affects the Stock such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of any Employee to whom an Option has been granted under the Plan, then
the Committee shall make such equitable changes or adjustments as it deems
necessary or appropriate to any or all of (i) the number and kind of shares of
Stock or other property (including cash) that may thereafter be issued in
connection with Options, (ii) the number and kind of shares of Stock or other
property (including cash) issued or issuable in respect of outstanding Options
and (iii) the exercise price relating to any Option.

                  6.       Terms and Conditions of Options.
                           -------------------------------

                           (a)      The Committee is authorized to grant
Options to Employees, as deemed by the Committee to be consistent with the
purposes of the Plan. The Committee shall determine the terms and conditions of
such Options at the date of grant or thereafter. The Option Agreement evidencing
the grant of an Option under the Plan shall designate the Option as a
Nonqualified Stock Option.

                           (b)      The exercise price per share of Stock
purchasable under an Option shall be determined by the Committee; provided,
however, that the Option price shall not be less than the Fair Market Value on
the date of the grant. The exercise price for Stock subject to an Option may be
paid in cash or by an exchange of Stock previously owned by the Employee, or a
combination of both, in an amount having a combined value equal to such exercise
price. An Employee to whom an Option has been granted may also elect to pay all
or a portion of the aggregate exercise price by having shares of Stock with a
Fair Market Value on the date of exercise equal to the aggregate exercise price
withheld by the Company or sold by a broker-dealer.

                           (c)       Options shall be exercisable over the
exercise period (which shall not exceed ten years from the date of grant), at
such times and upon such conditions as the Committee may determine, as reflected
in the Option Agreement; provided that, the Committee shall have the authority
to accelerate the exercisability of any outstanding Option at such time and
under such circumstances, as it, in its sole

                                       4
<PAGE>

discretion, deems appropriate. An Option may be exercised to the extent of any
or all full shares of Stock as to which the Option has become exercisable, by
giving written notice of such exercise to the Committee or its designated agent.

                           (d)      Except as otherwise provided in this
subsection, an Option may not be exercised unless the Employee is then in the
employ of the Company or a Subsidiary or an Affiliate (or a company or a parent
or subsidiary company of such company issuing or assuming the Option in a
transaction to which Section 424(a) of the Code applies), and unless the
Employee has remained continuously so employed, or continuously maintained such
relationship, since the date of grant of the Option; provided that (1) an
employee whose employment terminates other than for cause shall be entitled to
exercise all Options which were vested at the date of termination of employment
until the earlier of the close of business on the date that is (a) 90 days from
the date of termination of employment or (b) 10 years from the date the Option
was granted, (2) an employee whose employment terminates by reason of death
shall be entitled to exercise all Options which were vested at the date of death
until the earlier of the close of business on the date that is (a) one year from
the date of death or (b) 10 years from the date the Option was granted and (3)
the Option Agreement may contain provisions extending the exercisability of
Options, in such events as the Committee may determine at the date of grant, or
thereafter, to a date not later than 10 years from the date the Option was
granted.

                           (e)      Options may be subject to such other
conditions including, but not limited to, restrictions on transferability of the
shares acquired upon exercise of such Options, as the Committee may prescribe in
its discretion or as may be required by applicable law.

                  7.       General Provisions.
                           ------------------

                           (a)  Nontransferability.  Unless otherwise provided
in an Option Agreement, Options shall not be transferable by an Employee except
by will or the laws of descent and distribution and shall be exercisable during
the lifetime of an Employee only by such Employee or his guardian or legal
representative.

                           (b)  No Right to Continued Employment.  Nothing in
the Plan or in any Option granted under the Plan or in any Option Agreement or
other agreement entered into pursuant hereto shall confer upon any Employee the
right to continue in the employ of the Company, any Subsidiary or any Affiliate
or to be entitled to any remuneration or benefits not set forth in the Plan or
such Option Agreement or other agreement or to interfere with or limit in any
way the right of the Company or any such Subsidiary or Affiliate to terminate
such Employee's employment.

                                       5
<PAGE>

                           (c)  Withholding and Other Taxes.  The Company or any
Subsidiary or Affiliate is authorized to withhold from any payment relating to
an Option under the Plan, amounts of withholding and other taxes due with
respect thereto, and to take such other action as the Committee may deem
advisable to enable the Company and Employee to satisfy obligations for the
payment of withholding taxes and other tax obligations relating to any Option.
This authority shall include authority to withhold or receive Stock or other
property and to make cash payments in respect thereof in satisfaction of an
Employee's tax obligations.

                           (d)  Amendment and Termination.  The Board may at any
time and from time to time alter, amend, suspend, or terminate the Plan in whole
or in part. Notwithstanding the foregoing, no amendment shall affect adversely
any of the rights of any Employee, without such Employee's consent, under any
Option theretofore granted under the Plan. Unless earlier terminated by the
Board pursuant to the provisions of the Plan, the Plan shall terminate on the
tenth anniversary of its Effective Date. No Options shall be granted under the
Plan after such termination date.

                           (e)  No Rights to Options; No Stockholder Rights.
No Employee shall have any claim to be granted any Option under the Plan, and
there is no obligation for uniformity of treatment of Employees. Except as
provided specifically herein, an Employee or a transferee of an Option shall
have no rights as a stockholder with respect to any shares covered by the Option
until the date of the issuance of a stock certificate to him for such shares.

                           (f)  No Fractional Shares.  No fractional shares of
Stock shall be issued or delivered pursuant to the Plan or any Option. The
Committee shall determine whether cash or other property shall be issued or paid
in lieu of such fractional shares or whether such fractional shares or any
rights thereto shall be forfeited or otherwise eliminated.

                           (g)  Regulations and Other Approvals.
                                -------------------------------

                                    (i)  The obligation of the Company to sell
or deliver Stock with respect to any Option granted under the Plan shall be
subject to all applicable laws, rules and regulations, including all applicable
federal and state securities laws, and the obtaining of all such approvals by
governmental agencies as may be deemed necessary or appropriate by the
Committee.

                                    (ii)  Each Option is subject to the
requirement that, if at any time the Committee determines, in its absolute
discretion, that the listing, registration or qualification of Stock issuable
pursuant to the Plan is required by any securities exchange

                                       6
<PAGE>

or under any state or federal law, or the consent or approval of any
governmental regulatory body is necessary or desirable as a condition of, or in
connection with, the grant of an Option or the issuance of Stock, no such Option
shall be granted or payment made or Stock issued, in whole or in part, unless
listing, registration, qualification, consent or approval has been effected or
obtained free of any conditions not acceptable to the Committee.

                                     (iii)  In the event that the disposition of
Common Stock acquired pursuant to the Plan is not covered by a then current
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), and is not otherwise exempt from such registration, such
Stock shall be restricted against transfer to the extent required by the
Securities Act or regulations thereunder, and the Committee may require an
Employee receiving Stock pursuant to the Plan, as a condition precedent to
receipt of such Stock, to represent to the Company in writing that the Stock
acquired by such Employee is acquired for investment only and not with a view to
distribution.

                                    (iv)  In the event that at the date a
vested Option is to expire, the disposition of Common Stock issuable upon
exercise of that Option is not covered by a then current registration statement
under the Securities Act, the expiration date of such Option shall be extended
to the close of business on that date which is the earlier of the close of
business on that date which is (1) 90 days after the date the disposition of
Common Stock issuable upon exercise of that Option is covered by a then current
registration statement under the Securities Act or (2) 10 years from the date
the Option was granted.

                           (h)  Governing Law.  The Plan and all determinations
made and actions taken pursuant hereto shall be governed by the laws of the
State of Delaware without giving effect to the conflict of laws principles
thereof.

                                       7<PAGE>

                                                                   EXHIBIT 10.9

                               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 Robert G. Miller
("Executive") is entered into as of the 7th day of May, 2001 (the "Effective
Date").

         WHEREAS, Executive and the Company have previously entered into that
certain Employment Agreement, dated as of December 5, 1999, as supplemented by
side letter dated April 5, 2000 between counsel (the "Employment Agreement");
and

         WHEREAS, the Company wishes to provide Executive additional bonus
compensation to further incentivize Executive to remain in the employment of the
Company;

         NOW, THEREFORE, in consideration of the mutual premises set forth
herein, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the Company and Executive hereby agree as
follows:

         1. Amendment to Employment Agreement. As of the Effective Date, the
Employment Agreement is hereby amended to incorporate by reference therein a new
Appendix B, which is attached hereto as Exhibit 1.

         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. Without limiting the generality of the foregoing,
the Additional Incentive Bonus payable to Executive as provided in Exhibit 1
shall not in any way limit and is not in derogation of the Company's obligations
to fully indemnify Executive for fees, costs and expenses and any other matters
(including the Kroger Suit referred to in Exhibit 1) pursuant to Section 3(f) of
the Employment Agreement. 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.

         3. Capitalized Terms. Capitalized terms used herein or in Exhibit 1 and
not otherwise defined shall have the respective meanings set forth in the
Employment Agreement.

         4. Fees and Expenses. Promptly following the execution and delivery of
this Amendment No. 1 by Executive, the Company shall reimburse Executive for
legal fees and expenses incurred by Executive in negotiating and entering into
this Amendment No. 1 (and incidental matters contemplated hereby).

                                       1

<PAGE>

         IN WITNESS WHEREOF, Executive has hereunto set Executive's hand and,
pursuant to due authorization, the Company has caused this Amendment No. 1 to be
executed in its name and on its behalf, all as of the date and year first above
written.

                                           RITE AID CORPORATION

                                           By   /s/ Elliot Gerson
                                              --------------------------------
                                           Its Senior Executive Vice President

                                            /s/ Robert G. Miller
                                           -----------------------------------
                                           Robert G. Miller

                                       2

<PAGE>
                                    Exhibit 1

                                   APPENDIX B

         1. Entitlement to Incentive Bonus. In addition to the bonus and other
compensation provided in the Employment Agreement, the Company shall pay
Executive an incentive bonus in the amount set forth in Section 2 below (the
"Additional Incentive Bonus") on or within 5 days after the date first described
below:

             (a) The Additional Incentive Bonus shall be paid on January 1,
2002, if Executive is either an employee or a member of the Board of Directors
of the Company on that date; or

             (b) The Additional Incentive Bonus shall be paid on the Date of
Termination under the Employment Agreement, if Executive's employment is
terminated, prior to, January 1, 2002 (i) by reason of Executive's death or
Disability, (ii) by the Company without Cause, or (iii) by Executive for Good
Reason; or

             (c) The Additional Incentive Bonus shall be paid on the Date of
Termination under the Employment Agreement, if Executive terminates his
employment for any reason (or the Company terminates Executive's employment for
any reason) prior to January 1, 2002 but such Date of Termination is
simultaneous with or after the occurrence of a Change in Control of the Company;
or

             (d) The Additional Incentive Bonus shall be paid on the date
Executive is neither an employee nor a member of the Board of Directors of the
Company (except that this clause (d) shall not apply if Executive is no longer a
member of the Board of Directors as a result of Executive's voluntary
resignation from the Board or the termination by the Company of his Board
service simultaneously with or following termination by the Company of his
employment for Cause) if such date is prior to January 1, 2002.

The date as of which Executive first becomes entitled to receive the Additional
Incentive Bonus is referred to as the "Bonus Payment Date." For purposes of this
Amendment No. 1, Executive shall be deemed to be an employee of the Company (and
accordingly his employment shall be deemed not to have terminated) unless and
until the Date of Termination has occurred. Notwithstanding anything to the
contrary herein, Executive shall not be entitled to receive any Additional
Incentive Bonus if the company properly terminates Executive's employment for
Cause and the actual Date of Termination is prior to January 1, 2002 and no
Change in Control of the Company has occurred on or prior to such Date of
Termination.

         2. Amount of Incentive Bonus. The amount of the Additional Incentive
Bonus shall be equal to the sum of(i) $5,022,658 (the "Base Amount"), plus (ii)
simple interest thereon at the rate of nine percent (9%) per annum from December
5, 1999 through the applicable Bonus Payment Date (such sum, the "Additional
Bonus Amount") subject to offset only in accordance with Section 3 below and
repayment only in accordance with Section 4 below.

         3. Reduction in the Amount of the Incentive Bonus. If, on or prior to
the Bonus Payment Date, there has occurred a final settlement and/or a binding,
nonappealable judgment by a court or other tribunal of competent jurisdiction
(in either case, a "Final Determination") of all claims (including all Related
Claims as defined below) in the lawsuit captioned Robert G. Miller v. The Kroger
Co. (U.S. District Court, District of Oregon No. CV 00-182 NA) including any
substitute or successor litigation thereto (collectively, the "Kroger Suit"),
then the Additional Bonus Amount payable to Executive shall be reduced (but not
below zero) by an amount equal to the excess, if any, of (i) the amount of any
consideration paid by The Kroger Co. to Executive, that is not subject to
forfeiture or offset, pursuant to such Final Determination (but excluding any
payment in respect of punitive damages or by way of penalty) less (ii) the sum,
without double counting, of (x) any consideration paid or payable by Executive

                                       3
<PAGE>

pursuant to or in connection with such Final Determination (and any
counterclaims or cross-claims ("Related Claims") arising from, related to or in
connection with the departure by Executive and/or any other employee from The
Kroger Co., their consideration of and conduct in relation to employment by the
Company and/or their, or anyone else's subsequent employment with the Company)
and (y) all unpaid amounts (including, in any event, attorneys' fees and costs
incurred by Executive in connection with the Kroger Litigation or Related Claims
that have not been paid by the Company) required to be indemnified by the
Company pursuant to Section 3(f) of the Employment Agreement (any such excess,
the "Net Recovery Amount"). It is understood that there shall be no reduction of
or offset to the Additional Incentive Bonus required to be paid by the Company
to Executive by virtue of any Net Recovery Amount unless Executive shall have
received the Net Recovery Amount prior to the Bonus Payment Date and a Final
Determination has resolved all Related Claims against Executive by or in the
right of The Kroger Co. and its affiliates.

         4. Reimbursement of Amounts by Executive. Subject to the limitations
set forth in Section 4(d), in the event the Company timely pays the full
Additional Incentive Bonus to Executive pursuant to Section 1(a) (A) on January
1, 2002 or within 5 days thereafter (in the ease of subsection (a) below) or (B)
prior to a Final Determination (in the Case of subsection (b) below), Executive
shall be required to reimburse the Company for the amounts set forth in
subsections (a) and (b) below (in the aggregate, the "Reimbursement
Obligation"), provided, that in no event shall the aggregate amount of the
Reimbursement Obligation exceed the amount of the Additional Incentive Bonus
actually paid by the Company to Executive, plus attorneys' fees, if any,
received by Executive pursuant to the Final Determination and already reimbursed
by the Company.

             (a) Proration of Incentive Bonus if Executive Terminates Employment
Without Good Reason or Company Terminates for Cause between January 1, 2002 and
December 5, 2002, Executive is not a Director and No Change in Control Has
Occurred. If (i) Executive's employment is terminated by Executive without Good
Reason or by the Company with Cause, (ii) the applicable Date of Termination is
after January 1, 2002 and before December 5, 2002, (iii) no Change in Control of
the Company has occurred prior to such Date of Termination (iv) Executive is not
a member of the Board of Directors of the Company by reason of his voluntary
resignation from the Board or the termination by the Company of his Board
service prior to December 5, 2002 simultaneously with or following termination
by the Company of his employment for Cause and (v) as provided above, the
Company timely paid the full Additional Incentive Bonus pursuant to Section 1(a)
on January 1, 2002, then the Additional Incentive Bonus to which Executive is
entitled (the "Pro Rated Bonus") shall be deemed retroactively prorated, such
that Executive shall be obligated to reimburse the Company for an amount equal
to the excess, if any, of (x) the amount of the Additional Incentive Bonus
actually paid to Executive over (y) the product of (A) the Additional Incentive
Bonus actually paid and (B) a fraction, the numerator of which is the number of
days between December 5, 1999 and the applicable Date of Termination (or, if
later, the date of termination, of Board service), and the denominator of which
is 1096, less any amount theretofore paid or payable by Executive to the Company
pursuant to Section 4(b).

             (b) Reimbursement if Executive Receives an Award in the Kroger
Litigation After Receipt of Additional Incentive Bonus. If the Final
Determination occurs after the Bonus Payment Date and, as provided above, the
Company timely paid the full Additional Incentive Bonus pursuant to Section 1(a)
on the Bonus Payment Date, Executive shall be obligated to reimburse the Company
for an amount equal to the Net Recovery Amount received by Executive (not to
exceed the Additional Bonus Amount theretofore actually paid by the Company to
Executive, less any amount theretofore paid or payable by Executive to the
Company pursuant to Section 4(a)), plus attorneys' fees, if any, received by
Executive pursuant to the Final Determination and already reimbursed by the
Company.

                                       4
<PAGE>

             (c) Reimbursement Obligation Deferred Until Executive Receives
Amounts in Excess of What Executive Is Entitled to Retain. Executive shall pay
the Company the amounts required under Section 4(a) or (b) within 15 days
following the date as to which any such Reimbursement Obligation arises,
provided, that any such payment obligation (or portion thereof) shall not arise
and shall be deferred until such time or times as Executive shall actually have
received payment from the Additional Incentive Bonus and any Net Recovery Amount
an amount that, in the aggregate, is in excess of the Pro Rated Bonus actually
paid (in the case of Section 4(a)) or the full Additional Bonus Amount (in the
case of Section 4(b)) and all legal fees then due in connection with the Kroger
Suit have been paid or reimbursed. Any excess recovery in the Kroger Suit beyond
the amount of the Reimbursement Obligation shall be retained by Executive.

             (d) Amounts Payable to the Company. Any amount payable by Executive
to the Company pursuant to this Section 4 shall be net of: (x) any tax detriment
of any nature whatsoever suffered by Executive with respect to receipt of the
Additional Incentive Bonus, or portion thereof, the payment of the Reimbursement
Obligation and/or the receipt of any funds giving rise to the Reimbursement
Obligation, including without limitation, the tax detriments set forth in
Schedule 1 attached hereto (it being the intent of the parties that Executive be
in the same net after-tax position as if Executive (i) could deduct one-hundred
percent (100%) of the amount reimbursed to the Company in the year such
reimbursement is made and (ii) was not subject to any withholding, employment or
other incremental taxes from having received an excess payment from the Company
or Kroger Co., as the case may be, that is thereafter paid to the Company) and
(y) without duplication of any amounts already deducted in the calculation, all
amounts then owed, or which Executive in his good faith believes are owed, by
the Company to Executive pursuant to Section 3(f) of the Employment Agreement.

         5. Amendment to Section 2(a) of Employment Agreement. The last line of
Section 2(a) of the Employment Agreement shall be amended to delete the words
"from the Board and." It is understood that Executive shall not be required to
resign from the Company's Board of Directors as a result of termination of his
employment prior to December 5, 2002 unless his employment simultaneously or
previously has been terminated by the Company for "Cause."

         6. Payments. All amounts payable by the Company to Executive pursuant
to this Amendment No. 1 (including without limitation any amounts due as a
result of the application of Section 5(e) of the Employment Agreement) shall, be
paid in a lump sum in cash, by wire transfer to an account designated by
Executive.

         7. Conduct of Kroger Litigation Settlement. The Company acknowledges
and agrees that Executive shall have the full right to conduct the litigation
with The Kroger Co. and its affiliates, including the defense of any
counterclaim arising in connection therewith, in such manner as Executive may
determine in his sole discretion. The Company further acknowledges and agrees
that Executive has and shall have no duty to the Company to enter into or
refrain from entering into any proposed settlement agreement, or to agree to or
reject any particular term or condition thereof, and that Executive may enter
into a settlement agreement with The Kroger Co. and its affiliates on terms and
conditions acceptable to the Executive, or reject any proposed settlement in his
sole discretion.

                                       5
<PAGE>

                                   Schedule I

                                 TAX DETRIMENTS

Detriments to be taken into account shall, include:

         (a) any decrease in personal itemized deductions resulting from an
increase in Executive's adjusted gross income ("AGI") (including the 7.5%
(medical), 2% (miscellaneous) and 3% (general) AGI adjustments);

         (b) Executive's portion of the increased Medicare premium resulting
from the receipt of the Additional Incentive Bonus and the Net Recovery Amount;
and

         (c) any increased alternative minimum tax ("AMT") resulting from the
treatment of state income taxes claimed as a deduction by Executive in respect
of the Additional Incentive Bonus and the Net Recovery Amount.

         (d) the amount of the Reimbursement Obligation disallowed as a
deduction or as a result of the 2% floor imposed on miscellaneous itemized
deductions in the year in which it is paid;

         (e) any increased AMT resulting from the treatment of the Reimbursement
Obligation for AMT purposes;

         (f) any detriment related to the time value of money determined on the
basis of an 8% annual discount rate resulting from a carryover or carry back, if
any, of any portion of such Reimbursement Obligation that is not currently
deductible in the year in which it is paid;

         (g) any detriment resulting from the application of any limitation
imposed upon the deductibility of the Reimbursement Obligation for state law
purposes in the year in which it is paid;

         (h) any detriment resulting from differences in tax brackets applied to
Executive's taxable income for the taxable year that the Additional Incentive
Bonus is received versus the tax brackets applied to Executive's taxable income
for the taxable year that the Reimbursement Obligation is claimed as a
deduction; and

         (i) any detriment resulting from a change in either Federal, state, or
local tax laws, including changes in the tax rates.

                                       6

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00026-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00026-of-00352.parquet"}]]