Exhibit 10.1

 

EXECUTION VERSION

 

 

 

ASSET PURCHASE AGREEMENT

 

By and Among

 

WALGREENS BOOTS ALLIANCE, INC.,

 

WALGREEN CO.

 

and

 

RITE AID CORPORATION

 

Dated as of June 28, 2017

 

 

 

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TABLE OF CONTENTS

 

 

 

Page

 

 

 

RECITALS

 

1

 

 

 

ARTICLE I PURCHASE AND SALE

1

 

 

SECTION 1.1

Purchased Assets

1

SECTION 1.2

Excluded Assets

4

SECTION 1.3

Assumed Liabilities

6

SECTION 1.4

Excluded Liabilities

7

SECTION 1.5

Assignment of Contracts and Rights

9

SECTION 1.6

Liabilities at Acquired Stores and Non-Acquired Stores

9

 

 

 

ARTICLE II CLOSING MECHANICS

10

 

 

 

SECTION 2.1

Closing

10

SECTION 2.2

Purchase Price

12

SECTION 2.3

Deliveries by the Company

14

SECTION 2.4

Deliveries by Purchaser Sub

15

SECTION 2.5

Inventory Valuation

16

SECTION 2.6

Prorations

17

SECTION 2.7

Purchased Cash; Aggregate Inventory Amount Adjustment

19

 

 

 

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY

20

 

 

 

SECTION 3.1

Organization and Qualification

20

SECTION 3.2

Authority

20

SECTION 3.3

No Conflict; Required Filings and Consents

20

SECTION 3.4

Compliance with Laws; Permits; Investigations

21

SECTION 3.5

Financial Statements; Undisclosed Liabilities

22

SECTION 3.6

Absence of Certain Changes and Events

23

SECTION 3.7

Absence of Litigation

23

SECTION 3.8

Employee Benefit Plans

23

SECTION 3.9

Labor and Employment Matters

25

SECTION 3.10

Properties

26

SECTION 3.11

Tax Matters

26

SECTION 3.12

Sufficiency of Purchased Assets

27

SECTION 3.13

Environmental Matters

28

SECTION 3.14

Privacy and Data Security; Company Rx Data

28

SECTION 3.15

Brokers

29

SECTION 3.16

Compliance with Healthcare Legal Requirements

29

SECTION 3.17

Title to the Purchased Assets

32

SECTION 3.18

Inventory

32

SECTION 3.19

No Other Representations or Warranties

32

 

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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER SUB

33

 

 

 

SECTION 4.1

Organization

33

SECTION 4.2

Authority

33

SECTION 4.3

No Conflict; Required Filings and Consents

33

SECTION 4.4

Absence of Litigation

34

SECTION 4.5

Brokers

34

SECTION 4.6

Funding

35

SECTION 4.7

No Other Representations or Warranties

35

 

 

 

ARTICLE V CONDUCT OF BUSINESS PENDING THE SALE

35

 

 

 

SECTION 5.1

Conduct of Business of the Company Pending the Sale

35

SECTION 5.2

No Control of Company’s Business

38

 

 

 

ARTICLE VI ADDITIONAL AGREEMENTS

39

 

 

 

SECTION 6.1

Competing Transaction Proposals; Acquisition Proposals

39

SECTION 6.2

Further Action; Efforts

42

SECTION 6.3

Notification of Certain Matters

45

SECTION 6.4

Taxes

46

SECTION 6.5

Ancillary Agreements

47

SECTION 6.6

Access to Information and Employees and Cooperation; Confidentiality

47

SECTION 6.7

Publicity

50

SECTION 6.8

Use of Names

50

SECTION 6.9

Cooperation

50

SECTION 6.10

Non-Solicitation of Employees

51

SECTION 6.11

Destruction of Purchased Assets; Store Removal

52

SECTION 6.12

Restriction on Use of Customer Data; Protection of Goodwill

52

SECTION 6.13

Intercompany Leases

54

SECTION 6.14

Employee Matters

54

SECTION 6.15

Obligations Pertaining to Multiemployer Plans

59

SECTION 6.16

No Third Party Beneficiaries

61

SECTION 6.17

Waiver of Non-Compete Provisions

61

SECTION 6.18

Obligations of Purchaser Sub

61

SECTION 6.19

Financing Cooperation

61

SECTION 6.20

Commercial Assistance

63

SECTION 6.21

RediClinic

63

SECTION 6.22

Acquired Leases

63

SECTION 6.23

Duplicate IT System

64

SECTION 6.24

Wellness+ Tier Status

64

SECTION 6.25

1199SEIU Arbitration

64

SECTION 6.26

Insurance Coverage

64

SECTION 6.27

Restructuring

65

SECTION 6.28

Closed Stores

65

 

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SECTION 6.29

Termination Fee

65

 

 

 

ARTICLE VII CONDITIONS TO CLOSING

65

 

 

 

SECTION 7.1

Conditions to Obligations of Each Party to Complete the Sale

65

SECTION 7.2

Conditions to Obligations of Parent and Purchaser Sub

66

SECTION 7.3

Conditions to Obligations of the Company

67

 

 

 

ARTICLE VIII TERMINATION

68

 

 

 

SECTION 8.1

Termination

68

SECTION 8.2

Effect of Termination

69

SECTION 8.3

Expenses

70

 

 

 

ARTICLE IX INDEMNIFICATION

70

 

 

 

SECTION 9.1

Indemnification by the Company

70

SECTION 9.2

Indemnification by Parent

71

SECTION 9.3

Notification of Claims

71

SECTION 9.4

Exclusive Remedies

73

SECTION 9.5

Additional Indemnification Provisions

73

SECTION 9.6

Mitigation

73

SECTION 9.7

Third Party Remedies

74

SECTION 9.8

Limitation on Liability

74

 

 

 

ARTICLE X GENERAL PROVISIONS

74

 

 

 

SECTION 10.1

Survival of Representations, Warranties, Covenants and Agreements

74

SECTION 10.2

Modification or Amendment

75

SECTION 10.3

Waiver

75

SECTION 10.4

Notices

75

SECTION 10.5

Certain Definitions

77

SECTION 10.6

Severability

86

SECTION 10.7

Entire Agreement; Assignment

86

SECTION 10.8

Parties in Interest

86

SECTION 10.9

Governing Law

87

SECTION 10.10

Headings

87

SECTION 10.11

Counterparts

87

SECTION 10.12

Bulk Sales Laws

87

SECTION 10.13

Specific Performance

87

SECTION 10.14

Jurisdiction

88

SECTION 10.15

WAIVER OF JURY TRIAL

89

SECTION 10.16

No Recourse

89

SECTION 10.17

Interpretation

89

SECTION 10.18

Time is of the Essence

90

SECTION 10.19

Misdirected Funds

90

 

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EXHIBITS

 

Exhibit A                                             Inventory Procedures
Exhibit B                                             Transition Services
Agreement
Exhibit C                                             Bill of Sale — Closing
Exhibit D                                             Bill of Sale — Subsequent
Closings
Exhibit E                                              Transitional Trademark
License Agreement
Exhibit F                                               WBAD Term Sheet for
Supply Agreement
Exhibit G                                             Transaction Accounting
Principles

 

INDEX OF DEFINED TERMS

 

 

1199SEIU

7

 

Business Day

77

1199SEIU CBA

77

 

Business Employee

77

1199SEIU Liabilities

7

 

CBA

25

4204 Period

60

 

Census Start Date

54

Acquired Leases

26

 

Census Summary

54

Acquired Regional Office Closing

12

 

Choice Employee

48

Acquired Regional Offices

4

 

Closing

10

Acquired Store Approvals

11

 

Closing Date

10

Acquired Store Outside Date

11

 

Code

13

Acquired Store Scheduled Closing Date

11

 

Company

Preamble

Acquired Stores

77

 

Company 401(k) Plan

57

Acquisition Proposal

41

 

Company Board

1

Additional Inventory Audit

17

 

Company Credit Agreements

78

Affiliate

77

 

Company Disclosure Schedules

20

Aggregate Inventory Amount

77

 

Company Expenses

78

Agreement

Preamble

 

Company FSA

57

Allocation

13

 

Company Fundamental Representations

74

Alternative Acquisition Agreement

41

 

Company Indemnified Parties

71

Ancillary Agreements

77

 

Company Notice

41

Antitrust Approval

66

 

Company Owned Real Property

26

Antitrust Law

77

 

Company Payment Programs

30

Applicable Date

21

 

Company Regulatory Agreements

30

Apportioned Taxes

18

 

Company Rx Data

3

Assumed Contracts

4

 

Company’s Insurance Policies

64

Assumed Employee Liabilities

6

 

Competing Transaction Agreement

39

Assumed Liabilities

6

 

Competing Transaction Proposal

39

Assumed Pre-Closing Liabilities

7

 

Confidentiality Agreement

49

Bankruptcy and Equity Exception

20

 

Consents

42

Base Purchase Price

12

 

Continuation Period

55

Bill of Sale, Assignment and Assumption Agreement

47

 

Contract

78

Book to Physical Adjustment Ratio

77

 

control

78

 

 

 

Controlling Party

72

 

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Copyrights

78

 

Initial Allocation

12

Debt Financing

78

 

Intellectual Property

81

Developed Testing Procedures

64

 

Inventory

81

Distribution Center Closing

11

 

Inventory Amount

81

Distribution Center Closing Date

11

 

Inventory Audit

16

Distribution Center Inventory Amount

78

 

Inventory Procedures

17

Distribution Centers

79

 

Inventory Service

16

DOJ

43

 

Inventory Statement

17

Domain Names

79

 

Key Business Employee

81

Duplicate IT System

79

 

knowledge

81

Employee Census

54

 

Law

82

Employee Data Trigger Date

59

 

Leased Real Property

26

Employee Plans

23

 

Legal Restraints

66

Employment Start Date

55

 

Letter Agreement

49

End Date

68

 

Liabilities

82

Environmental Laws

28

 

License Approvals

21

Equity Financing

79

 

Lien Release Letter

62

ERISA

79

 

Liens

26

ERISA Affiliate

79

 

Losses

82

Exchange Act

21

 

Material Adverse Effect

82

Excluded Assets

4

 

Material Permits

22

Excluded Employee

79

 

Merger Agreement

65

Excluded Employee Severance

6

 

Multiemployer Plan

7

Excluded Liabilities

7

 

Non-Solicitation Period

39

Expense Reimbursement

70

 

Non-Union Employee Offer

55

Extrapolated Inventory Value

79

 

Notice Period

41

Financial Statements

22

 

Objection Notice

12

Financing Sources

79

 

Operational Duplicate IT System Certificate

83

Foreign National Employees

55

 

Parent

Preamble

FSA Balances

57

 

Parent Disclosure Schedule

33

FSA Participants

57

 

Parent Fundamental Representations

75

FTC

43

 

Parent Indemnified Parties

71

GAAP

79

 

Parties

Preamble

Government Program

80

 

Party

Preamble

Governmental Entity

80

 

Patents

83

Governmental Filings

80

 

Permits

22

Hazardous Materials

28

 

Permitted Liens

84

Healthcare Laws

80

 

Person

84

HIPAA

80

 

Pharmacy Approvals

84

HSR Act

21

 

Post-Closing Tax Period

18

HSR Filing

42

 

Pre-Closing Matters

64

Inactive Employee Transfer Date

55

 

Pre-Closing Tax Period

18

Inactive Employees

81

 

Privacy and Security Laws

29

Indemnified Party

71

 

Proceeding

84

Indemnifying Party

71

 

Prorated Charges

17

Independent Accounting Firm

81

 

 

 

 

 

 

 

 

 

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Purchase Price

12

 

Subsequent Closing Conditions

10

Purchased Assets

2

 

Subsequent Closing Date

11

Purchased Cash

3

 

subsidiary

85

Purchased Intellectual Property

4

 

Supply Agreement

47

Purchaser FSA

57

 

Swap Remedy

45

Purchaser Sub

Preamble

 

Tax Return

27

Purchaser Sub 401(k) Plan

57

 

Taxes

27

Qualifying Offer

56

 

Technology

85

Reported Inventory Value

84

 

Third Party Claim

71

Representative

84

 

Trademarks

85

Restricted Period

51

 

Transaction Accounting Principles

85

Retail Inventory Value

17

 

Transaction Agreements

85

Retail Pharmacy

84

 

Transaction Expenses

86

Retail-to-cost Conversion Ratio

85

 

Transfer Expenses

14

Retained Names and Marks

50

 

Transfer Taxes

13

Retention Program

58

 

Transferred Employee

55

Sampled Location Inventory Value

85

 

Transition Services Agreement

47

Sampled Locations

16

 

Transitional Trademark License Agreement

47

SEC

20

 

Union Employee Offer

56

SEC Reports

85

 

Union-Represented Business Employee

86

Second Request

43

 

WARN Act

25

Software

85

 

Willful Breach

86

Subsequent Closing

10

 

 

 

 

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ASSET PURCHASE AGREEMENT

 

This ASSET PURCHASE AGREEMENT, dated as of June 28, 2017 (this “Agreement”), is
entered into by and among Rite Aid Corporation, a Delaware corporation (the
“Company”), Walgreens Boots Alliance, Inc., a Delaware corporation (“Parent”),
and Walgreen Co., an Illinois corporation and a wholly owned direct subsidiary
of Parent (“Purchaser Sub” and, together with the Company and Parent, the
“Parties” and each, a “Party”).

 

RECITALS

 

WHEREAS, the Company wishes to sell, or to cause to be sold, to Purchaser Sub,
and Purchaser Sub wishes to purchase from the Company certain of the assets of
the Company and its Affiliates, all on the terms and subject to the conditions
set forth herein.  In addition, Purchaser Sub wishes to assume, and the Company
wishes to have Purchaser Sub assume, certain Liabilities of the Company and its
Affiliates, all on the terms and subject to the conditions set forth herein;

 

WHEREAS, the Company, Parent and Purchaser Sub desire to make certain
representations, warranties, covenants and agreements in connection with the
transactions contemplated herein;

 

WHEREAS, each of the boards of directors of the Company (the “Company Board”),
Parent and Purchaser Sub has (a) determined that this Agreement and the
transactions contemplated hereby are fair to, advisable and in the best
interests of the Company, Parent and Purchaser Sub, respectively, and their
respective stockholders and (b) approved this Agreement and the transactions
contemplated hereby, in each case on the terms and subject to the conditions set
forth in this Agreement and in accordance with the General Corporation Law of
the State of Delaware;

 

WHEREAS, (i) at or prior to the Closing, certain of the Parties shall enter into
the Transition Services Agreement, the Transitional Trademark License Agreement
and the Supply Agreement, each as defined herein, and (ii) at or prior to
Closing and each Subsequent Closing or Distribution Center Closing (as
applicable), the Company and Purchaser Sub shall enter into an applicable Bill
of Sale, Assignment and Assumption Agreement, as defined herein;

 

NOW, THEREFORE, in consideration of the premises, and of the mutual
representations, warranties, covenants and agreements contained herein, and
intending to be legally bound hereby, the Parties agree as follows:

 

ARTICLE I

 

PURCHASE AND SALE

 

SECTION 1.1                                             Purchased Assets.  Upon
the terms and subject to the conditions of this Agreement, on the Closing Date
(or the applicable Subsequent Closing Date or Distribution Center Closing Date),
the Company shall, and shall cause its Affiliates, to sell, transfer, assign,
convey and deliver to Purchaser Sub, and Purchaser Sub shall purchase from the
Company and, as applicable, its Affiliates, free and clear of all Liens (except
for Permitted Liens) all right, title

 

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and interest of the Company and its Affiliates, in, to and under all of the
assets, properties and rights owned, held or used by the Company and its
Affiliates, exclusively relating to or exclusively used in any Acquired Store or
Distribution Center, including the following assets to the extent exclusively
relating to any Acquired Store or Distribution Center (collectively, the
“Purchased Assets”):

 

(a)                                 all Inventory and supplies of the Company
and its Affiliates and the fixed assets and tangible property physically located
at the Acquired Stores and the Distribution Centers;

 

(b)                                 to the extent transferable, the Permits held
by the Company and its Affiliates;

 

(c)                                  the Company Owned Real Property together
with all buildings, structures, fixtures and improvements located thereon or
attached thereto and any easements, rights-of-way, and other appurtenants (and
all title documents, surveys, related construction plans and documents and
related real estate files with respect to the Company Owned Real Property);

 

(d)                                 the Acquired Leases, and all subleases,
licenses or concessions thereunder, including the right to all security
deposits, and other amounts and instruments deposited by, on behalf of, or for
the benefit of, the Company or its Affiliates thereunder with respect to which
the Company or any of its Affiliates is a party, and all Acquired Lease
documents, related construction plans and documents and related real estate
files;

 

(e)                                  the machinery, equipment, computer hardware
(other than pin pads, as set forth in Section 1.2(q)), office equipment,
vehicles, forklifts, trailers, tractors, furniture, shelving, safes (with
combinations and keys), and other personal property owned by the Company or any
of its subsidiaries, and all leases relating to the foregoing, in each case to
the extent exclusively related to an Acquired Store or Distribution Center;

 

(f)                                   all rights, claims or causes of action
against third parties relating to the assets, properties, business or operations
of the Acquired Stores, the Distribution Centers or other Purchased Assets or to
the Assumed Liabilities, arising out of events or transactions occurring, or
facts or circumstances existing, prior to, on, or after the Closing Date (or the
applicable Subsequent Closing Date or the Distribution Center Closing, as
applicable), in each case, if arising out of events or transactions occurring,
or facts or circumstances existing prior to the Closing Date, only to the extent
such rights, claims or causes of action relate to Assumed Liabilities;

 

(g)                                  to the extent permitted by Law, (i) all
books and records (including all data and other information stored on discs,
tapes or other media) of the Company or any of its subsidiaries relating to the
assets, properties, business and operations of the Acquired Stores and the
Distribution Centers (to the extent exclusively relating to the Acquired Stores
and the Distribution Centers) (but excluding (A) all personnel files other than
as set forth below, (B) all Tax Returns not relating solely to the Acquired
Stores and (C) historical financial information except to the extent exclusively
relating to the Acquired Stores), and (ii) any and all medical records, billing
records, prescriptions, prescription files and records, pharmacy customer lists,

 

2

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signature logs and patient profiles including refill status reports and
insurance coverages, co-pay and payment records (the information in this clause
(ii), collectively, “Company Rx Data”) relating to customers of the Acquired
Stores (which shall in any event include no less than twenty four (24) months
for any Company Rx Data relating to customers of the Acquired Stores maintained
electronically or in hard copy, or for such longer period of time to the extent
required by applicable Law and stored in the Duplicate IT System and
electronically available if not on the Duplicate IT System); provided, that the
Company shall be entitled to retain a copy of Company Rx Data and other data
relating to any customers of both Acquired Stores and stores to be retained by
the Company; provided, further, that, the “Purchased Assets” shall include, to
the extent available and permitted by law, personnel records of the Transferred
Employees as set forth on Section 1.1(g) of the Company Disclosure Schedules;
provided, further, however, that as a condition of transferring such records,
(x) Purchaser Sub shall acknowledge that the Company and its Affiliates make no
representations or warranties regarding the accuracy or completeness of such
records and agree that it shall base no employment decisions on the records
provided, (y) Parent and Purchaser Sub shall indemnify and hold the Company and
its Affiliates harmless with respect to any claim or loss related to Purchaser
Sub’s receipt or use of the records transferred in accordance herewith and
(z) following the Closing Date, to the extent permitted by Law, Purchaser Sub
shall provide copies of such transferred records to the Company at the Company’s
request due to any claim or threatened claim against the Company or its
Affiliates by a Transferred Employee;

 

(h)                                 any cash and cash equivalents in any
Acquired Stores (including in cash registers) as of the close of business on the
Business Day immediately preceding the Closing Date or the Subsequent Closing
Date for such Acquired Store, as applicable (the “Purchased Cash”);

 

(i)                                     all guarantees, warranties and
indemnities related to the ownership or operation of the Purchased Assets prior
to, on, or following the Closing (or the applicable Subsequent Closing or the
Distribution Center Closing, as applicable), in each case, if related to the
ownership or operation of the Purchased Assets prior to the Closing Date, only
to the extent such guarantees, warranties and indemnities relate to Assumed
Liabilities;

 

(j)                                    the exclusive right to use all telephone
numbers and facsimile numbers;

 

(k)                                 any cigarette, cigar, other tobacco,
alcohol, liquor or other similar Tax stamps (whether affixed to a product or
not) or rolls of such Tax stamps located in any Distribution Center;

 

(l)                                     to the extent transfer is not
contractually prohibited or prohibited by Law, the historical customer data
related to the Company’s Wellness+ program relating to customers of the Acquired
Stores (and to the extent transfer is contractually prohibited or prohibited by
Law, the Company shall provide Purchaser Sub access to such customer data to the
extent permitted by Law; provided, that to the extent such customer is also a
customer of a store to be retained by the Company, the Company may retain a copy
of such data);

 

(m)                             the Intellectual Property owned by the Company
and its Affiliates and exclusively related to any Acquired Store or Distribution
Center, including Intellectual Property

 

3

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set forth on Section 1.1(m) of the Company Disclosure Schedules (the “Purchased
Intellectual Property”);

 

(n)                                 the Contracts listed on Section 1.1(n) of
the Company Disclosure Schedules, which will be assumed by Purchaser Sub
(“Assumed Contracts”); and

 

(o)                                 all leases for the use and occupancy by the
regional, divisional or district offices set forth on Section 1.1(o) of the
Company Disclosure Schedules (collectively, the “Acquired Regional Offices”) and
all subleases, licenses or concessions thereunder, including the right to all
security deposits, and other amounts and instruments deposited by, on behalf of,
or for the benefit of, the Company or its Affiliates thereunder with respect to
which the Company or any of its Affiliates is a party, all related lease
documents, construction plans and documents and related real estate files, and
all supplies of the Company and its Affiliates and the fixed assets and tangible
property physically located thereon.

 

SECTION 1.2                                             Excluded Assets. 
Notwithstanding the provisions of Section 1.1, the Purchased Assets shall not
include any assets of the Company or any of its Affiliates other than the
Purchased Assets, including the following (collectively, the “Excluded Assets”):

 

(a)                                 all notes and accounts receivable generated;

 

(b)                                 any cash, bank deposits and cash equivalents
of the Company, other than the Purchased Cash;

 

(c)                                  all insurance policies;

 

(d)                                 all corporate minute books and stock
transfer books and the corporate seal of the Company or its Affiliates, other
than the books and records contemplated by Section 1.1(g);

 

(e)                                  all equity interests in any joint venture
or equity interests in any other Person held by the Company or any of its
Affiliates;

 

(f)                                   all assets arising out of or relating to
employee benefits or employee benefit or compensation plans, programs,
agreements or arrangements maintained or contributed to (or formerly maintained
or contributed to) by the Company or its Affiliates or with respect to which the
Company or any of its Affiliates has any Liability, except as expressly set
forth in Section 6.14(e) and Section 6.14(f);

 

(g)                                  the CBAs applicable to employees of the
Acquired Stores and Distribution Centers;

 

(h)                                 all personnel files and records, other than
those expressly included in the Purchased Assets;

 

(i)                                     all Tax assets of the Company and its
Affiliates (including any and all credits or deposits in respect of Taxes, net
operating loss carryforwards, and refunds of Taxes for which the Company is
liable pursuant to Section 2.2(d), Section 2.6(d) or Section 6.4 or

 

4

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otherwise with respect to any periods (or portions thereof) ending on or prior
to the Closing (or the applicable Subsequent Closing or Distribution Center
Closing)), other than as set forth in Section 1.1(k) above;

 

(j)                                    all Tax Returns and other Tax-related
documents or information of the Company or its Affiliates not relating to the
Acquired Stores;

 

(k)                                 any Contract to which the Company or any of
its Affiliates is a party other than the Assumed Contracts;

 

(l)                                     except for the Purchased Intellectual
Property, the Intellectual Property used or owned by the Company or any of its
Affiliates (including the name and mark “Rite Aid” or the “Rite Aid” logo, or
any name or mark comprised, including or derived from the foregoing or
confusingly similar thereto);

 

(m)                             the historical customer data related to the
Company’s Wellness+ program (except as set for in Section 1.1(l) above);

 

(n)                                 except for the Software, databases,
compilations and data, information technology systems, and technology expressly
included in the Purchased Assets (including the Purchased Intellectual
Property), all Software, databases, compilations and data, information
technology services, and technology owned or used by the Company or any of its
Affiliates, including the Software, databases, compilations and data,
information technology systems, and technology set forth on Section 1.2(n) of
the Company Disclosure Schedules;

 

(o)                                 any of the machinery, equipment, vehicles,
furniture and other personal property leased by the Company or any of its
Affiliates under a Contract;

 

(p)                                 any equity interests owned by the Company
and its Affiliates of the entity or entities that own any assets related to the
in-store clinics;

 

(q)                                 any pin pads and the encryption codes
related thereto;

 

(r)                                    all assets exclusively related to the
in-store clinics;

 

(s)                                   to the extent related to Excluded
Liabilities, all rights, claims or causes of action against third parties
relating to the assets, properties, business or operations of the Acquired
Stores, the Distribution Centers or other Purchased Assets or to the Assumed
Liabilities, arising out of events or transactions occurring, or facts or
circumstances existing, prior to or on the Closing Date (or the applicable
Subsequent Closing Date or the Distribution Center Closing, as applicable);

 

(t)                                    to the extent related to Excluded
Liabilities, all guarantees, warranties and indemnities related to the ownership
or operation of the Purchased Assets prior to or on the Closing (or the
applicable Subsequent Closing or the Distribution Center Closing, as
applicable); and

 

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(u)                                 the assets set forth on Section 1.2(u) of
the Company Disclosure Schedules.

 

SECTION 1.3                                             Assumed Liabilities.  On
the terms and subject to the conditions set forth in this Agreement, Purchaser
Sub hereby agrees, effective at the time of the Closing (or the applicable
Subsequent Closing or Distribution Center Closing), to assume, pay, discharge
and perform as required (i) any and all Liabilities of the Company and its
Affiliates to the extent exclusively relating to the Purchased Assets, whether
known or unknown, fixed or contingent, asserted or unasserted, and not satisfied
or extinguished, solely to the extent arising after the Closing Date (or the
applicable Subsequent Closing Date or Distribution Center Closing Date), as the
same shall exist on or after the Closing Date (or the applicable Subsequent
Closing Date or Distribution Center Closing Date), other than the Excluded
Liabilities, and (ii) the following liabilities (the “Assumed Liabilities”):

 

(a)                                 subject to Section 2.6(b), all Liabilities
of the Company or any of its Affiliates to be paid or performed after the
Closing (or the applicable Subsequent Closing or Distribution Center Closing)
under the Acquired Leases;

 

(b)                                 any obligations to (i) provide, at Parent’s
expense, tier customer discounts under the Wellness+ program to customers of an
Acquired Store who have achieved such tier status under the Wellness+ program
(regardless of when such customer earned such tier status) and (ii) permit
customers of an Acquired Store, at Parent’s expense, to accrue or redeem points
under the Company’s Wellness+ and Plenti programs from the Closing (or the
applicable Subsequent Closing) with respect to such Acquired Store, in the case
of clauses (i) and (ii), until such time that the exterior signage at such
Acquired Store has changed from “Rite Aid” to “Walgreens”;

 

(c)                                  all Transfer Taxes and all Liabilities in
respect of Taxes for which Purchaser Sub is liable pursuant to Section 2.2(d),
Section 2.6(d) or Section 6.4 and all Taxes attributable to the operation or
conduct of the Acquired Stores or any Distribution Center after the Closing (or
the applicable Subsequent Closing or Distribution Center Closing), as well as
any sales and use Taxes attributable to the operation or conduct of the Acquired
Stores or any Distribution Center after the Closing (or the applicable
Subsequent Closing or Distribution Center Closing);

 

(d)                                 any (i) Liabilities arising after the
Closing Date and relating to (A) the employment by Purchaser Sub or its
Affiliates or termination of employment by Purchaser Sub or its Affiliates of a
Transferred Employee after the Closing (or the applicable Subsequent Closing,
Distribution Center Closing or Inactive Employee Transfer Date) or (B) Purchaser
Sub’s failure to provide a Qualifying Offer, (ii) Liabilities expressly assumed
pursuant to Section 6.14 and Section 6.15 or (iii) severance payments that are
consistent with the terms set forth in Section 6.14(c) of the Company Disclosure
Schedules arising on the Closing Date and relating to the termination of
employment of each Excluded Employee by the Company on or immediately following
the Closing (or the applicable Subsequent Closing, Distribution Center Closing
or Inactive Employee Transfer Date) “Excluded Employee Severance”) (together
with the Liabilities in Section 1.3(e), the “Assumed Employee Liabilities”);

 

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(e)                                  all Liabilities related to or arising out
of any multiemployer plan (within the meaning of Section 3(37) of ERISA) subject
to a CBA applicable to Transferred Employees (a “Multiemployer Plan”) to which
the Company or any of the Company’s Affiliates contribute as of the Closing (or
the applicable Subsequent Closing or Distribution Center Closing) but only to
the extent expressly assumed under Section 6.15; and

 

(f)                                   any Liabilities (i) identified in
Section 3.13 of the Company Disclosure Schedules solely to the extent arising
from, related to, or resulting from the ownership or operation of the Purchased
Assets, (ii) arising out of the matters covered by the arbitration initiated by
1199SEIU United HealthCare Workers East (“1199SEIU”) by a “Notice of Intention
to Arbitrate” dated October 8, 2015, the unfair labor practice charges filed by
1199SEIU on August 23, 2016 (Charge No. 02-CA-182713) and on December 12, 2016
(Charge No. 02-CA-189661), the arbitration initiated by 1199SEIU by a demand
letter dated October 14, 2016 and the arbitration initiated by 1199SEIU by a
letter dated February 8, 2017 (the “1199SEIU Liabilities”) solely to the extent
relating to the Purchased Assets and (iii) arising from, related to, or
resulting from the ownership or operation of the Purchased Assets prior to the
Closing (or the applicable Subsequent Closing or Distribution Center Closing),
including under any Environmental Law or regarding any Hazardous Materials, but
with respect to this clause (iii), solely to the extent (A) relating to the
Purchased Assets and (B) not reserved for, or required by GAAP to be reserved
for, on the balance sheet of the Company as of the Closing, but, with respect to
clauses (i), (ii) and (iii) collectively, solely to the extent such Liabilities
in the aggregate, do not exceed $30 million, notwithstanding any other provision
in this Section 1.3 (the “Assumed Pre-Closing Liabilities”).

 

SECTION 1.4                                             Excluded Liabilities. 
Neither Parent nor Purchaser Sub is assuming or agreeing to pay, perform or
otherwise discharge any other Liability, whether absolute or contingent, choate
or inchoate, liquidated or unliquidated, or otherwise, other than solely with
respect to Purchaser Sub, the Assumed Liabilities and all such other Liabilities
of the Company and its Affiliates, including the following, shall be referred to
as “Excluded Liabilities”, and all Excluded Liabilities shall be retained by the
Company or the other Persons liable for such obligations:

 

(a)                                 any Liabilities in respect of Taxes for
which the Company or any of its Affiliates is liable pursuant to Section 2.2(d),
Section 2.6(d) or Section 6.4, any Liabilities of the Company or its Affiliates
for Taxes, and any Liabilities in respect of payments required to be made after
the Closing Date under any Tax sharing, Tax indemnity, Tax allocation or similar
contracts to which the Company, its Affiliates or any of the Purchased Assets
was obligated, or was a party, on or prior to Closing;

 

(b)                                 any Company Expenses other than payments
made in respect of the Retention Program in an amount not to exceed $25 million;

 

(c)                                  any indebtedness of the Company or its
Affiliates;

 

(d)                                 any Liabilities in respect of any Excluded
Assets and any Liabilities to the extent not relating to the Purchased Assets;

 

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(e)                                  all Liabilities pursuant to the WARN Act
arising prior to the Closing Date and all Liabilities (other than the Assumed
Employee Liabilities) relating to or arising out of any compensation, employee
benefits, accrued vacation or paid time off, deferred compensation, pension or
retirement plans, the CBAs or other programs, policies, procedures or other
arrangements of any type or description, including for this purpose any benefits
provided or available to current or former employees, dependents of employees or
former employees, independent contractors or any other person, which are
maintained or contributed to (or formerly maintained or contributed to) by the
Company or any Affiliate or former Affiliate of the Company, or to which the
Company or its Affiliates or former Affiliates has or formerly had any
obligation to contribute or provide benefits, however maintained, funded or
sponsored, whether or not legally binding or subject to ERISA, whether providing
individual or a group coverage, and whether written or unwritten, funded or
unfunded, insured or self-insured;

 

(f)                                   except for the Assumed Employee
Liabilities, any Liabilities relating to (i) any Transferred Employee to the
extent arising on or prior to the Closing (or the applicable Subsequent Closing,
Distribution Center Closing or Inactive Employee Transfer Date), (ii) current or
former employees of the Company or any of its Affiliates who are not Transferred
Employees or (iii) the incurrence or triggering of any withdrawal liability
under ERISA by the Company or any of its ERISA Affiliates (including any
contingent or secondary withdrawal liability) to any Multiemployer Plan (A) at
or prior to the Closing, other than any such liability caused by the failure of
Purchaser’s Sub to comply with its obligations under Section 6.15 and
(B) following the Closing, solely to the extent caused by the failure of the
Company or its Affiliates to comply with their obligations under Section 6.15;

 

(g)                                  any (i) Liabilities arising out of the
ownership or operation of the Purchased Assets prior to the Closing (or the
applicable Subsequent Closing or Distribution Center Closing) or any Proceeding
related to or arising out of any occurrence or event happening prior to the
Closing (or the applicable Subsequent Closing or Distribution Center Closing),
in each case other than to the extent included in the Assumed Pre-Closing
Liabilities, (ii) Liabilities arising under any Environmental Law or regarding
any Hazardous Materials to the extent arising from, related to, or resulting
from the ownership or operation of the Purchased Assets other than to the extent
(A) included in the Assumed Pre-Closing Liabilities or (B) arising from events
or conditions first occurring or existing after the Closing (or the applicable
Subsequent Closing or Distribution Center Closing), (iii) 1199SEIU Liabilities
other than to the extent included in the Assumed Pre-Closing Liabilities or
(iv) other than payments made in respect of the Retention Program in an amount
not to exceed $25 million, Liabilities arising from the conduct, whether before,
at or after the Closing, of the business of the Company other than the operation
of the Acquired Stores, Distribution Centers and the Purchased Assets;

 

(h)                                 any Liabilities related to the Company’s
Wellness+ and Plenti programs other than as set forth in Section 1.3(b) above;

 

(i)                                     any Liabilities of the Company for
intercompany loans or payables to any Affiliates of the Company (including any
payables and other liabilities or obligations of the Company or its Affiliates
with respect to the Acquired Stores owed to any other business unit of the
Company or any of the Company’s Affiliates); and

 

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(j)                                    any Liabilities of the Company reserved
for, or required by GAAP to be reserved for, on the balance sheet of the Company
as of the Closing, except to the extent specifically set forth in Section 1.3 of
this Agreement.

 

SECTION 1.5                                             Assignment of Contracts
and Rights.  Notwithstanding any other provision of this Agreement to the
contrary, this Agreement shall not constitute an agreement to assign or transfer
any Acquired Lease, Permit or any claim or right or any benefit arising
thereunder or resulting therefrom if an attempted assignment or transfer
thereof, without the consent of any applicable third party (including any
Governmental Entity), would constitute a breach or other contravention thereof,
a violation of Law or would in any way adversely affect the rights of Purchaser
Sub (as assignee of the Company) or the Company (as applicable).  Subject to
Section 6.2, the Company will use its commercially reasonable efforts to obtain
the consent of the other parties to any such Purchased Asset or any claim or
right or any benefit arising thereunder for the assignment thereof to Purchaser
Sub as Purchaser Sub may request; provided, that any costs and expenses arising
therefrom or in connection therewith should be borne by the Parties in
accordance with Section 2.2(e).  If, on the Closing Date (or the applicable
Subsequent Closing Date), any such consent is not obtained, or if an attempted
transfer or assignment thereof would be ineffective, a violation of Law or would
adversely affect the rights of Purchaser Sub (as assignee of the Company)
thereto or thereunder so that Purchaser Sub would not in fact receive all such
rights, the Company and Purchaser Sub will, subject to Section 6.2(a), cooperate
in a mutually agreeable arrangement under which Purchaser Sub would, in
compliance with Law, obtain the benefits and assume the obligations and bear the
economic burdens associated with the Purchased Asset, claim, right or benefit in
accordance with this Agreement, including subcontracting, sublicensing or
subleasing to Purchaser Sub, or under which the Company would enforce, for the
benefit of Purchaser Sub, and at the expense of Purchaser Sub, any and all of
its rights against a third party thereto (including any Governmental Entity)
associated with such Purchased Asset, claim, right or benefit, and the Company
would promptly pay to Purchaser Sub when received all monies received by them
under any Purchased Asset or any claim or right or any benefit arising
thereunder.  To the extent that (i) any Acquired Leases cannot be assigned or
transferred to Purchaser Sub as set forth in this Section 1.5 and (ii) Purchaser
Sub requests that the Company subleases such Acquired Leases to Purchaser Sub,
Purchaser Sub and the Company will enter into individual subleases for each of
such Acquired Leases (as opposed to a “master” sublease covering all such
Acquired Leases) on a fully net basis and on such terms as will generally confer
to Purchaser Sub all of the Company’s rights under such Acquired Lease.

 

SECTION 1.6                                             Liabilities at Acquired
Stores and Non-Acquired Stores.  To the extent that a Liability relates to
(x) an Assumed Liability, on the one hand, and (y) an Excluded Liability or the
Company’s retail stores that are not Acquired Stores and/or the Company’s
distribution centers that are not the Distribution Centers (or the Company’s
other assets and liabilities that do not constitute Purchased Assets or Assumed
Liabilities), on the other hand, the Parties shall cooperate in good faith to
agree upon the portion of such Liability, if any, that constitutes an Assumed
Liability pursuant to Section 1.3.

 

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ARTICLE II

 

CLOSING MECHANICS

 

SECTION 2.1                                             Closing.

 

(a)                                 The closing of the transactions contemplated
by this Agreement will take place in a series of separate closings, as set forth
in this Article II.  Subject to Section 2.1(b), Section 2.1(c) and
Section 2.1(d), on or prior to the fifth (5th) Business Day following the
satisfaction or waiver of the conditions set forth in Article VII (other than
such conditions which, by their nature, are to be satisfied at Closing), or on
such other date as the Company and Purchaser Sub may mutually agree in writing,
the sale and purchase of the Purchased Assets and the assumption of the Assumed
Liabilities contemplated by this Agreement with respect to which such conditions
have been satisfied or waived as of such date shall take place at an initial
closing (the “Closing”) that will be held at the offices of Simpson Thacher &
Bartlett LLP, 425 Lexington Avenue, New York, New York, at 9:00 a.m., New York
City time, or such other time, place and date as the Company and Purchaser Sub
may agree in writing or remotely via the exchange of executed documents or
closing deliverables (the date on which the Closing takes place being the
“Closing Date”).  The Acquired Stores to be transferred at the Closing are set
forth in Section 2.1(c) of the Company Disclosure Schedules.

 

(b)                                 Subject to Section 2.1(c) and
Section 2.1(d), Purchaser Sub and the Company will complete the transactions
contemplated by this Agreement and the purchase of any Purchased Assets and the
assumption of any Assumed Liabilities (other than the Purchased Assets and
Assumed Liabilities that were transferred on the Closing Date or any other
Subsequent Closing Date) (each, a “Subsequent Closing”) on the second Business
Day following (i) receipt by Purchaser Sub of a certificate of the Company
signed by a duly authorized representative of the Company, with respect to the
Acquired Stores to be transferred at such Subsequent Closing, certifying that
the representations and warranties contained in Section 3.17 are true and
correct in all respects as of such Subsequent Closing as if made on the
applicable Subsequent Closing Date, except for breaches or inaccuracies, as the
case may be, as to matters that, individually or in the aggregate, have not had
a Material Adverse Effect, (ii) the satisfaction or waiver of (A) the conditions
set forth in Section 7.2(b), Section 7.2(d) (solely with respect to the first
Subsequent Closing) and Section 7.3(b), (B) solely with respect to the Closing,
the condition that the Company shall have tested the Duplicate IT System with
respect to the Acquired Stores to be transferred at the Closing using the
Developed Testing Procedures, (C) solely with respect to the Closing and the
first Subsequent Closing, the condition that the Company shall have based upon
such test certified to Purchaser Sub as to the operational readiness of the
Duplicate IT System by having delivered to Purchaser Sub an Operational
Duplicate IT System Certificate, in each case applicable to the Acquired Stores
to be transferred at such Closing or such first Subsequent Closing, as
applicable and (D) solely with respect to the first Subsequent Closing, the
condition that Parent shall have had a reasonable opportunity to test the
operational readiness of the Duplicate IT System with respect to the Acquired
Stores transferred at the Closing using the Developed Testing Procedures and
shall have reasonably determined that the results of such test were consistent
with the Operational Duplicate IT System Certificate and (iii) the delivery to
Purchaser Sub of the Inventory Statement and the report specified in
Section 2.5(b) (the “Subsequent Closing Conditions”), pursuant to the terms and

 

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conditions of this Agreement.  The date on which a Subsequent Closing occurs is
hereinafter referred to as the “Subsequent Closing Date”; provided, however,
that the sale and purchase of the Distribution Centers (and the assets in the
Distribution Centers to the extent Purchased Assets) (the “Distribution Center
Closing”) shall occur on the last day of the Transition Period (as defined in
the Transition Service Agreement) or such earlier date as mutually agreed by the
Parties (such date, the “Distribution Center Closing Date”), subject to receipt
by Purchaser Sub of a certificate of the Company signed by a duly authorized
representative of the Company, with respect to the Distribution Centers (and the
Purchased Assets therein), certifying that the representations and warranties
contained in Section 3.17 are true and correct in all respects as of the
Distribution Center Closing as if made on the Distribution Center Closing Date,
except for breaches or inaccuracies, as the case may be, as to matters that,
individually or in the aggregate, have not had a Material Adverse Effect. 
Assuming the conditions applicable to the first Subsequent Closing described in
this Section 2.1(b) are satisfied, the first Subsequent Closing shall occur
within the later of the date that is (i) ninety (90) days of the date of this
Agreement and (ii) ten (10) days after the end of the calendar month in which
the Closing occurred.

 

(c)                                  Notwithstanding anything herein to the
contrary, with respect to any Acquired Store, (i) in no event shall the Parties
complete, or be obligated to complete, the Closing or a Subsequent Closing with
respect to such Acquired Store prior to the later of (A) the date set forth with
respect to such Acquired Store on Section 2.1(c) of the Company Disclosure
Schedules (the “Acquired Store Scheduled Closing Date”), (B) the Closing Date
and (C) the earlier of (x) the date on which all required Pharmacy Approvals
relating to such Acquired Store, if any, and all required consents under any
Acquired Lease relating to such Acquired Store, if any, (collectively, the
“Acquired Store Approvals”) have been obtained and (y) the date that is sixty
(60) days after the Acquired Store Scheduled Closing Date (the later of (A),
(B) and (C), the “Acquired Store Outside Date”), (ii) if any required Acquired
Store Approvals have not been obtained with respect to such Acquired Store as of
the applicable Acquired Store Outside Date and the Acquired Store Approvals
outstanding with respect to such Acquired Store include any required consents
under any Acquired Lease relating to such Acquired Store, then, at Parent’s
election, (A) such Acquired Stores and all of the related assets and Liabilities
shall be retained by the Company and the Purchase Price shall be reduced as set
forth on Section 2.2 of the Company Disclosure Schedules (and the amounts
payable pursuant to Section 2.7 shall be reduced accordingly) or (B) to the
extent mutually agreed among the Parties, such Acquired Store shall be replaced
with one or more other stores of the Company, and each such replacement store
shall thereafter be deemed an Acquired Store for purposes hereof and shall be
subject to an Acquired Store Scheduled Closing Date as the Parties shall
reasonably agree with respect to such replacement store and (iii) if the only
Acquired Store Approval outstanding with respect to such Acquired Store is a
Pharmacy Approval, then at the Company’s election, (A) Parent shall acquire the
prescription and customer records related to such Acquired Store consistent with
a “file buy” acquisition and all Inventory located at such Acquired Store and
shall assume all obligations under the Acquired Lease relating to such Acquired
Store, and Parent shall bear all costs and expenses (including severance, if
applicable) in connection with the shutdown of such Acquired Store (and, for the
avoidance of doubt, the Purchase Price shall not be reduced as a result thereof)
or (B) to the extent mutually agreed among the Parties, such Acquired Store
shall be replaced with one or more other stores of the Company, and each such
replacement store shall thereafter be deemed an Acquired Store for purposes
hereof and shall be subject to an Acquired

 

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Store Scheduled Closing Date as the Parties shall reasonably agree with respect
to such replacement store.

 

(d)                                 Notwithstanding anything herein to the
contrary, in no event shall the Parties complete a Subsequent Closing, except as
otherwise agreed upon by Purchaser Sub and the Company, with respect to less
than fifty (50) Acquired Stores (other than the final Subsequent Closing) or
more than seventy-five (75) Acquired Stores (it being acknowledged and agreed
that in the event that the Subsequent Closing Conditions have been satisfied or
waived with respect to less than fifty (50) Acquired Stores, the Parties shall
complete the Subsequent Closing with respect to such Acquired Stores on the
fifth (5th) Business Day following the satisfaction or waiver of the Subsequent
Closing Conditions with respect to fifty (50) or more Acquired Stores which have
not yet been conveyed to Purchaser Sub, or, in the case of the final Subsequent
Closing, any remaining Acquired Stores that have not previously been conveyed to
Purchaser Sub).

 

(e)                                  The transfer of the Acquired Regional
Offices (and the Purchased Assets located therein or exclusively related
thereto) (each an “Acquired Regional Office Closing”) shall take place on one or
more dates prior to the end of the Transition Services Period (as defined in the
Transition Services Agreement), as such date or dates shall be reasonably agreed
by the Parties, to the extent any lease for such Acquired Regional Office has
not expired (provided the Company will use commercially reasonable efforts to
renew) and, for the avoidance of doubt, no portion of the Purchase Price shall
be payable upon the transfer of the Acquired Regional Offices (and the Purchased
Assets located therein or exclusively related thereto).

 

SECTION 2.2                                             Purchase Price.

 

(a)                                 The aggregate “Purchase Price” for the
Purchased Assets shall be (i) an amount in cash equal to $5,175,000,000, as may
be reduced in accordance with Section 6.28 hereof (the “Base Purchase Price”)
plus (ii) the assumption of the Assumed Liabilities.  Section 2.2 of the Company
Disclosure Schedules shall set forth an allocation of the Base Purchase Price
among each of the Acquired Stores and collectively the Distribution Centers for
purposes of Section 2.1(b) and this Section 2.2(a).

 

(b)                                 As soon as reasonably practicable and in no
event later than ninety (90) days after the Closing Date, Parent shall provide
the Company with an allocation of the Purchase Price for federal income tax
purposes, including any Assumed Liabilities properly included therein among the
Purchased Assets and the agreements provided for herein, for federal, state and
local income tax purposes (the “Initial Allocation”).  Within thirty (30) days
of the receipt of the Initial Allocation, the Company shall deliver notice (the
“Objection Notice”) to Parent, setting forth in reasonable detail those items in
the Initial Allocation that the Company disputes, if any.  If prior to the
conclusion of such 30-day period, the Company notifies Parent that it will not
provide any Objection Notice or if the Company does not deliver an Objection
Notice within such thirty (30) day period, then Parent’s proposed Initial
Allocation shall be deemed final, conclusive and binding upon each of the
Parties.  Within fifteen (15) days of the Company’s delivery of the Objection
Notice, the Company and Parent shall attempt to resolve in good faith any
disputed items and failing such resolution, the unresolved disputed items shall
be referred for

 

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final binding resolution to the Independent Accounting Firm.  The costs, fees
and expenses of the Independent Accounting Firm shall be borne equally by
Purchaser Sub and the Company.  Such determination by the Independent Accounting
Firm shall be (i) in writing, (ii) furnished to Parent and the Company as soon
as practicable (and in no event later than thirty (30) days after the items in
dispute have been referred to the Independent Accounting Firm), (iii) made in
accordance with the principles set forth in this Section 2.2(b) and
(iv) non-appealable and incontestable by Parent and the Company.  As used
herein, the “Allocation” means the allocation of the Purchase Price, the Assumed
Liabilities and other related items among the Purchased Assets and the
agreements provided for herein as finally agreed between Parent and the Company
or ultimately determined by the Independent Accounting Firm, as applicable, in
accordance with this Section 2.2(b).  The Allocation shall be reasonable and
shall be prepared in accordance with Section 1060 of the Internal Revenue Code
of 1986, as amended (the “Code”) and the Treasury Regulations thereunder (and
any similar provision of state, local or foreign Law, as appropriate).  If the
Purchase Price is required to be adjusted after the Allocation is initially
determined, then appropriate adjustments shall be made to the Allocation to
reflect any such adjustments, in a manner consistent with the principles
utilized in the Allocation. Each of the Parties shall report the federal, state
and local income and other Tax consequences of the transactions contemplated
hereby in a manner consistent with the Allocation, including, if applicable, the
preparation and filing of Forms 8594 under Section 1060 of the Code (or any
successor form or successor provision of any future tax Law) with their
respective federal income Tax Returns for the taxable year which includes the
Closing Date, and none of the Parties will take any position inconsistent with
the Allocation on any Tax Return, before any Governmental Entity or in any
Proceeding, in each case unless otherwise required under applicable Law or
pursuant to a “determination” under Section 1313 of the Code (and any similar
provision of state, local or foreign Law, as appropriate).  Each of the Parties
shall notify the other if it receives notice that any Governmental Entity
proposes any allocation different than that set forth on the Allocation.

 

(c)                                  Each of Parent and Purchaser Sub shall be
entitled to deduct and withhold, or cause to be deducted and withheld, from the
consideration otherwise payable pursuant to this Agreement such amounts as it is
required to deduct and withhold with respect to the making of such payment under
U.S. federal tax Law or any other applicable state, local or foreign tax Law. 
To the extent that amounts are so withheld, such withheld amounts (i) shall be
promptly remitted by the applicable party to the applicable Governmental Entity
in accordance with applicable Law and (ii) shall be treated for all purposes of
this Agreement as having been paid to the party in respect of which such
deduction and withholding was made.

 

(d)                                 Any sales, use, gross-receipts, excise,
value-added, property, transfer, real estate or land transfer, documentary,
stamp, registration, recording, filing, goods and services or other similar
Taxes (excluding, for the avoidance of doubt, any capital gains or similar
taxes, which shall be borne solely by the Company) which may be payable by
reason of the sale of the Purchased Assets or the assumption of the Assumed
Liabilities under this Agreement or the transactions contemplated hereby
(“Transfer Taxes”) shall be borne by the Parties in accordance with
Section 2.2(e).  Each Party shall, at its own expense, timely file any Tax
Return or other document required to be filed with respect to such Transfer
Taxes, and the other Party shall join, and cause any of its applicable
Affiliates to join, in the execution of any such Tax Return if required by Law. 
If either Party is required by Law to file any such Tax Return, such Party shall

 

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notify the other Party of the amount of the Transfer Tax shown to be due on such
Tax Return and the other Party shall reimburse such Party for the amount, if
any, of such Transfer Tax to be borne by the other Party pursuant to
Section 2.2(e) by wire transfer of immediately available funds within ten
(10) Business Days of receipt of such notice to an account or accounts
designated by such Party.

 

(e)                                  Any (i) Transfer Taxes, (ii) costs or
expenses arising from or incurred by any Party in connection with the Company’s
efforts to obtain consents pursuant to the second sentence of Section 1.5 and
(iii) payments made by any Party in connection with any actions such Party takes
with respect to obtaining consents to assign the Acquired Leases in accordance
with Section 6.22 (collectively, the “Transfer Expenses”) shall be borne and
timely paid (i) by Parent up to an aggregate amount of such Transfer Expenses
not to exceed $10 million and (ii) with respect to any Transfer Expenses in
excess of such amount, equally by Parent and the Company.

 

SECTION 2.3                                             Deliveries by the
Company.

 

(a)                                 At the Closing, the Company shall deliver or
cause to be delivered to Purchaser Sub:

 

(i)                                     a certificate, dated as of the Closing
Date, executed by the Company confirming the satisfaction of the conditions
specified in Section 7.2(a) and Section 7.2(b);

 

(ii)                                  a certification of non-foreign status
reasonably acceptable to Parent, for purposes of Section 897 and 1445 of the
Code;

 

(iii)                               duly executed counterparts by the Company or
any Affiliate of the Company to each of the Ancillary Agreements applicable to
the Closing; and

 

(iv)                              an Operational Duplicate IT System
Certificate, executed by the Company, dated as of the Closing Date.

 

(b)                                 At each Subsequent Closing and at the
Distribution Center Closing, as applicable, the Company shall deliver or cause
to be delivered to Purchaser Sub:

 

(i)                                     the certificate described in
Section 2.1(b)(i), dated as of each Subsequent Closing Date or Distribution
Center Closing Date, as applicable, executed by the Company, each reference
therein to “Closing Date” shall be deemed to be such Subsequent Closing Date or
Distribution Center Closing Date, as applicable, solely with respect to the
Acquired Stores or Distribution Centers (and Purchased Assets related thereto)
to be transferred at such Subsequent Closing and the Distribution Center Closing
(as applicable);

 

(ii)                                  a certificate dated as of each Subsequent
Closing Date or Distribution Center Closing Date, as applicable, executed by the
Company regarding the accuracy of the matters set forth in Section 7.2(b) and,
solely with respect to the first Subsequent Closing, Section 7.2(d) and where,
for purposes of this Section 2.3(b)(ii),

 

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each reference therein to “Closing Date” in Section 7.2(b) and, solely with
respect to the first Subsequent Closing, Section 7.2(d), as applicable, shall be
deemed to be such Subsequent Closing Date or Distribution Center Closing Date,
as applicable, solely with respect to the Acquired Stores or Distribution
Centers (and Purchased Assets therein) to be transferred at such Subsequent
Closing and the Distribution Center Closing (as applicable);

 

(iii)                               solely with respect to the first Subsequent
Closing, the Operational Duplicate IT System Certificate, executed by the
Company, dated as of the first Subsequent Closing Date;

 

(iv)                              a certification of non-foreign status
reasonably acceptable to Parent, for purposes of Section 897 and 1445 of the
Code; and

 

(v)                                 duly executed counterparts by the Company or
any Affiliate of the Company to each of the Ancillary Agreements applicable to
such Subsequent Closing and the Distribution Center Closing.

 

SECTION 2.4                                             Deliveries by Purchaser
Sub.

 

(a)                                 At the Closing, Purchaser Sub shall deliver
to the Company:

 

(i)                                     an amount of cash equal to the portion
of the Purchase Price with respect to the Acquired Stores to be transferred at
Closing as contemplated by Section 2.2 of the Company Disclosure Schedules, by
wire transfer in immediately available funds, to an account or accounts as
directed by the Company (it being understood that the Company is receiving such
amount on behalf of and as agent for its Affiliates that are transferring
Acquired Stores at Closing);

 

(ii)                                  a receipt for the Purchased Assets
transferred at the Closing;

 

(iii)                               duly executed counterparts by Purchaser Sub
or any Affiliate of Purchaser Sub to each of the Ancillary Agreements applicable
to the Closing; and

 

(iv)                              a certificate, dated as of the Closing Date,
executed by Parent confirming the satisfaction of the conditions specified in
Section 7.3(a) and Section 7.3(b).

 

(b)                                 At each Subsequent Closing and the
Distribution Center Closing (except as set forth in clause (i)(B), below), as
applicable, Purchaser Sub shall deliver to the Company:

 

(i)                                     (A) an amount of cash equal to the
portion of the Purchase Price with respect to the Acquired Stores to be
transferred at such Subsequent Closing and the Distribution Centers (and the
Purchased Assets therein) to be transferred at the Distribution Center Closing
and the Purchase Price, if any, with respect to the Purchased Intellectual
Property and (B) an amount of cash equal to the portion of the Purchase Price
allocated to the value of the Distribution Centers (and the Purchased Assets
therein) excluding the value attributable to Inventory located at the
Distribution Center and,

 

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within 25 days after the Distribution Center Closing, an amount of cash equal to
the portion of the Purchase Price allocated to the Inventory located at the
Distribution Centers to be transferred at the Distribution Center Closing, in
each of cases (A) and (B), as contemplated by Section 2.2 of the Company
Disclosure Schedules, by wire transfer in immediately available funds, to an
account or accounts as directed by the Company (it being understood that the
Company is receiving such amount on behalf of and as agent for its Affiliates
that are transferring Acquired Stores at such Subsequent Closing and
Distribution Centers (and the Purchased Assets therein) at the Distribution
Center Closing);

 

(ii)                                  a certificate dated as of each Subsequent
Closing Date or Distribution Center Closing Date, as applicable, executed by
Purchaser Sub regarding the accuracy of the matters set forth in
Section 7.3(b) and where, for purposes of this Section 2.4(b)(ii), each
reference therein to “Closing Date” in Section 7.3(b) shall be deemed to be such
Subsequent Closing Date or Distribution Center Closing Date, as applicable,
solely with respect to the Acquired Stores or Distribution Centers (and
Purchased Assets related thereto) to be transferred at such Subsequent Closing
and the Distribution Center Closing (as applicable);

 

(iii)                               a receipt for the Purchased Assets
transferred at the applicable Subsequent Closing and Distribution Center
Closing; and

 

(iv)                              duly executed counterparts by Purchaser Sub or
any Affiliate of Purchaser Sub to each of the Ancillary Agreements applicable to
such Subsequent Closing and Distribution Center Closing.

 

SECTION 2.5                                             Inventory Valuation.

 

(a)                                 An Inventory Amount with respect to the
Closing, a Subsequent Closing or the Distribution Center Closing shall be
calculated as follows:

 

(i)                                     The parties shall commission WIS
International or another mutually acceptable inventory valuation firm (the
“Inventory Service”) to conduct a physical inventory (with a representative of
each of the Company and Purchaser Sub present thereat in order to observe such
Inventory Audit) at certain Acquired Stores to be inventoried at the Closing or
such Subsequent Closing (which shall be such Acquired Stores as are mutually
agreed in good faith by the Company and Purchaser Sub prior to the Closing Date
(or the applicable Subsequent Closing Date)) (such Acquired Stores so sampled
are collectively referred to as the “Sampled Locations”), as described herein
(each, an “Inventory Audit”).  The Inventory Service shall also conduct a
physical inventory (with a representative of each of the Company and Purchaser
Sub present thereat in order to observe such Inventory Audit) at each
Distribution Center prior to the Distribution Center Closing Date.  The
Inventory Audits shall be performed within the ten (10) days prior to the
Closing Date or applicable Subsequent Closing Date or Distribution Center
Closing Date.  The Inventory Audits will be performed as of the close of
business at each selected location on the date of its Inventory Audit.  In the
case of a 24-hour store, the Inventory Audit will be performed as of 11:59
p.m. store time.  The

 

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Inventory Audits will be performed in accordance with the inventory count and
valuation procedures set forth on Exhibit A attached hereto (the “Inventory
Procedures”).  The fees and expenses of the Inventory Service shall be borne
equally by Purchaser Sub and the Company.  The Inventory Service shall conduct a
physical inventory of at least 20% of the aggregate number of Acquired Stores
being transferred at the Closing and any applicable Subsequent Closing.

 

(ii)                                  The Inventory Service will calculate the
aggregate count of Inventory counted by it at each Sampled Location with respect
to the Closing or the applicable Subsequent Closing and applicable Inventory in
the Distribution Centers with respect to the Distribution Center Closing in
accordance with the Inventory Procedures (such count with respect to each
Sampled Location and the Distribution Centers, the “Retail Inventory Value”). 
If the Book to Physical Adjustment Ratio with respect to the Sampled Locations
with respect to the Closing or the applicable Subsequent Closing is greater than
or equal to 5% (based on a physical inventory valuation report), the Inventory
Service will conduct an Inventory Audit (an “Additional Inventory Audit”) of an
additional number of Acquired Stores selected by the Company and confirmed by
Purchaser Sub (each such additional Acquired Store thereafter deemed to be a
Sampled Location for purposes of this Section 2.5).  The Inventory Service shall
conduct an Additional Inventory Audit of that number of Acquired Stores being
transferred at the Closing and any applicable Subsequent Closing as may be
mutually agreed by Purchaser Sub and the Company.

 

(b)                                 At the conclusion of each Inventory Audit
and Additional Inventory Audit, (i) the Inventory Service shall provide each of
the Company, Purchaser Sub and Purchaser Sub’s financing sources with a physical
inventory valuation report in the form attached hereto as Section 2.5(b) of the
Company Disclosure Schedules setting forth the Inventory Amount with respect to
the Acquired Stores and Distribution Centers to be transferred as of the Closing
Date, applicable Subsequent Closing Date or Distribution Center Closing Date
(each, an “Inventory Statement”), which such report shall be signed by each of
Purchaser Sub and the Company and (ii) the Inventory Service shall provide each
of the Company and Purchaser Sub prior to each of the Closing, each Subsequent
Closing and to the extent applicable to the Inventory to be transferred thereat,
the Distribution Center Closing, a report as to the retail and cost value of the
applicable Inventory to be transferred as of such date (including in each case
shown by front end, pharmacy, cigarettes and liquor) and prescription volume, in
each case as of the most recent month ended prior to such date in form and
substance consistent with the Company’s past practice.

 

SECTION 2.6                                             Prorations.

 

(a)                                 As of the Closing Date, each Subsequent
Closing Date, the Distribution Center Closing Date and each Acquired Regional
Office Closing Date (as applicable), all items set forth on Section 2.6 of the
Company Disclosure Schedules, and all other items for which proration is
necessary, shall be prorated as of the Closing, such Subsequent Closing or
Distribution Center Closing (collectively, the “Prorated Charges”).  On a
monthly basis, the Company shall calculate the applicable Prorated Charges and
deliver a notice of payment due to the Buyer within fifteen (15) Business Days
of the end of each month with respect to the

 

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applicable Closing, Subsequent Closings and/or Distribution Center Closing that
occurred during such month.  Purchaser Sub shall pay to the Company the amount
set forth on such notice of payment within five (5) Business Days of receipt of
such notice of payment.  Whenever possible, such prorations shall be based on
actual, current payments by the Company or its Affiliates and to the extent such
actual amounts are not available, such prorations shall be estimated as of the
Closing, such Subsequent Closing and Distribution Center Closing (as applicable)
based on actual amounts for the most recent comparable billing period. When the
actual amounts become known, such prorations shall be recalculated by Purchaser
Sub and the Company, and Purchaser Sub or the Company, as the case may be,
promptly (but not later than ten (10) Business Days after notice of payment due)
shall make any additional payment or refund so that the correct prorated amount
is paid by each of Purchaser Sub and the Company.

 

(b)                                 Percentage rent payable under each Acquired
Lease and lease for each Acquired Regional Office, to the extent applicable,
shall be prorated at the end of the current lease year for each Acquired Lease
in accordance with the terms of the applicable Acquired Lease, and otherwise the
percentage rent payable, if any, shall be paid by Purchaser Sub when due and the
Company shall promptly reimburse Purchaser Sub a portion thereof determined by,
in the case of an Acquired Lease with respect to an Acquired Store, multiplying
(A) a fraction, the numerator of which is the amount of the Company’s or its
Affiliates’ gross annual sales at such Acquired Store from the first day of such
lease year to (and excluding) the Closing Date or the applicable Subsequent
Closing Date (as applicable), and the denominator of which is the sum of
Purchaser Sub’s and its Affiliates’ and the Company’s and its Affiliates’ gross
annual sales at such Acquired Store for the entire lease year, times (B) the
amount of percentage rent actually due under the Acquired Lease for such
Acquired Store. The Company, upon the request of Purchaser Sub, shall promptly
provide Purchaser Sub with such information as Purchaser Sub shall be required
to submit to landlords under the Acquired Leases in connection with the payment
of percentage rent with respect to the Acquired Stores.

 

(c)                                  Purchaser Sub and the Company shall
cooperate in good faith to resolve any dispute with respect to prorations.  In
the event Purchaser Sub and the Company are unable to resolve such dispute
within twenty (20) Business Days after the date such dispute arose, Purchaser
Sub and the Company shall submit the items remaining for resolution in writing,
together with such written evidence as Purchaser Sub or the Company may elect to
include, to an Independent Accounting Firm.  The Independent Accounting Firm
shall, within twenty (20) Business Days of such submission, resolve any
differences between Purchaser Sub and the Company and such resolution shall, in
the absence of manifest error, be final, binding and conclusive upon each of the
Parties.  The costs, fees and expenses of the Independent Accounting Firm shall
be borne equally by Purchaser Sub and the Company.

 

(d)                                 Notwithstanding anything to the contrary in
this Agreement, including this Section 2.6, all real property, personal property
and similar ad valorem Taxes, if any, levied with respect to the Purchased
Assets with respect to a taxable period beginning on or before the Closing Date
and ending after the Closing Date (collectively, the “Apportioned Taxes”) shall
be apportioned between the Company and Parent based on the number of days of
such taxable period before and including the Closing Date (such portion of such
taxable period, the “Pre-Closing Tax Period”) and the number of days of such
taxable period after the Closing Date (such portion of such taxable period, the
“Post-Closing Tax Period”). The Company shall be

 

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responsible for the proportionate amount of such Apportioned Taxes that is
attributable to the Pre-Closing Tax Period and such amount shall be an Excluded
Liability, and Parent and Purchaser Sub shall be responsible for the
proportionate amount of such Apportioned Taxes that is attributable to the
Post-Closing Tax Period and such amount shall be an Assumed Liability.  Any
Apportioned Taxes shall be timely paid, and all applicable Tax Returns shall be
timely filed, as provided by applicable Law.  The paying Party (including
through the use of any prepayment or credit or carryforward) shall be entitled
to reimbursement from the non-paying Party for the non-paying Party’s portion of
the Apportioned Taxes in accordance with this Section 2.6(d).  Upon payment (or
use of a prepayment or credit or carryforward) of any such Apportioned Taxes,
the paying Party shall present a statement to the non-paying Party setting forth
the amount of reimbursement to which the paying Party is entitled under this
Section 2.6(d), together with such supporting evidence as is reasonably
necessary to calculate the amount to be reimbursed.  The non-paying Party shall
make such reimbursement by wire transfer in immediately available funds within
ten (10) Business Days of receipt of such statement to an account designated by
the paying Party. The provisions of this Section 2.6(d) shall survive the
Closing Date until the expiration of the statute of limitations applicable to
any such Apportioned Tax.

 

SECTION 2.7                                             Purchased Cash;
Aggregate Inventory Amount Adjustment.

 

(a)                                 No later than three (3) Business Days
following the Closing Date, Purchaser Sub shall deliver to the Company an amount
of cash equal to the Purchased Cash with respect to the Acquired Stores
transferred on the Closing Date, with a receipt related thereto.  No later than
three (3) Business Days following each such Subsequent Closing Date, Purchaser
Sub shall deliver to the Company an amount of cash equal to the Purchased Cash
with respect to the Acquired Stores transferred on such Subsequent Closing,
together with a receipt related thereto.

 

(b)                                 No later than three (3) Business Days
following the final Subsequent Closing Date, either (i) Purchaser Sub shall
deliver to the Company an amount of cash equal to the amount, if any, by which
the Aggregate Inventory Amount is greater than $1,558,000,000 or (ii) the
Company shall deliver to Purchaser Sub an amount, if any, by which the Aggregate
Inventory Amount is less than $1,482,000,000.  Section 2.7(b) of the Company
Disclosure Schedules sets forth an illustrative example of the inventory
valuation process, for reference purposes only.

 

(c)                                  No later than three (3) Business Days
following the Distribution Center Closing Date, either (i) Purchaser Sub shall
deliver to the Company an amount of cash equal to amount, if any, by which the
Distribution Center Inventory Amount is greater than $155,000,000 or (ii) the
Company shall deliver to Purchaser Sub an amount, if any, by which the
Distribution Center Inventory Amount is less than $140,000,000.

 

(d)                                 Payments pursuant to this Section 2.7 and
Article IX shall be treated as adjustments to the Purchase Price for federal
income tax purposes, to the extent permitted by applicable Law.

 

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ARTICLE III

 

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company hereby represents and warrants to Parent and Purchaser Sub that,
except (i) as disclosed in the SEC Reports filed with, or furnished to, the U.S.
Securities and Exchange Commission (the “SEC”) on or after March 1, 2014 and
publicly available no less than one (1) Business Day prior to the date of this
Agreement (excluding any disclosures set forth therein under the heading “Risk
Factors” (other than factual information contained therein) or in any
“forward-looking statements” disclaimer or other section to the extent they are
similarly predictive or forward-looking in nature) or (ii) as set forth in the
corresponding sections or subsections of the disclosure schedules delivered to
Parent by the Company concurrently with entering into this Agreement (the
“Company Disclosure Schedules”), it being agreed that disclosure of any item in
any section or subsection of the Company Disclosure Schedules shall also be
deemed disclosure with respect to any other section or subsection of this
Agreement to which the relevance of such item is reasonably apparent on its
face:

 

SECTION 3.1                                             Organization and
Qualification.  The Company (i) is a legal entity duly organized, validly
existing and in good standing under the Laws of Delaware and has all requisite
corporate power and authority to own, lease and operate its properties and
assets and to carry on its business as presently conducted with respect to the
Purchased Assets and (ii) is qualified to do business and, to the extent such
concept is applicable, is in good standing as a foreign corporation or other
legal entity in each jurisdiction where the ownership, leasing or operation of
the Purchased Assets or present conduct of its business with respect to the
Purchased Assets requires such qualification.

 

SECTION 3.2                                             Authority.  The Company
has all requisite corporate power and authority, and has taken all corporate
action necessary, to execute and deliver the Transaction Agreements, to perform
its obligations thereunder and to complete the transactions contemplated by the
Transaction Agreements.  This Agreement has been, and upon execution and
delivery the Ancillary Agreements to which it is a party will be, duly and
validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Parent and Purchaser Sub, constitutes,
and upon execution and delivery the Ancillary Agreements will constitute, legal,
valid and binding obligations of the Company enforceable against the Company in
accordance with their terms, subject to the effects of applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
Laws, now or hereafter in effect, relating to or affecting creditors’ rights
generally and general equitable principles (whether considered in a proceeding
in equity or at law) (the “Bankruptcy and Equity Exception”).  The Company
Board, at a duly called and held meeting, has approved this Agreement.

 

SECTION 3.3                                             No Conflict; Required
Filings and Consents.

 

(a)                                 The execution, delivery and performance of
the Transaction Agreements by the Company do not, and the completion of the sale
of the Purchased Assets and the other transactions contemplated by the
Transaction Agreements will not, (i) conflict with or violate the Company’s
amended and restated certificate of incorporation, as amended, or the Company’s

 

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amended and restated bylaws, as amended, (ii) assuming that all consents,
approvals, authorizations and Permits contemplated by clauses (i) through (v) of
subsection (b) below have been obtained, and all filings and notifications
described in such clauses of subsection (b) below have been made and any waiting
periods thereunder have terminated or expired, conflict with or violate any Law
applicable to the Purchased Assets or (iii) result in any breach or violation of
or constitute a default (or an event, which, with notice or lapse of time or
both, would become a default) or result in the loss of a benefit to which the
Company or its subsidiaries are entitled with respect to the Purchased Assets,
give rise to any right of termination, cancellation, adverse amendment or
acceleration of, require notice or consent under, or result in the creation of a
Lien (except a Permitted Lien) on any of the Purchased Assets pursuant to any
Contract to which the Company or any of its subsidiaries is a party or by which
the Company or any of its subsidiaries (with respect to the Purchased Assets) or
by which any Purchased Asset is bound, except, in the case of clauses (ii) and
(iii), for any such conflict, violation, Lien, breach, default, loss, right,
requirement of notice or consent or other occurrence which would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

 

(b)                                 The execution, delivery and performance of
the Transaction Agreements by the Company and the completion of the sale of the
Purchased Assets and the other transactions contemplated by the Transaction
Agreements by the Company do not require any Governmental Filings, except for
(i) filings required under, and compliance with other applicable requirements
of, the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the
rules and regulations promulgated thereunder, and state securities, takeover and
“blue sky” laws; (ii) filings or notifications required under, and compliance
with other applicable requirements of, the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the “HSR Act”) (including the filing of a
“Notification and Report Form” by the Company under the HSR Act); (iii) filings
required under, and compliance with other applicable requirements of, the New
York Stock Exchange; (iv) the Governmental Filings described in
Section 3.3(b) of the Company Disclosure Schedules (collectively, the “License
Approvals”); and (v) any such Governmental Filings the failure of which to make
or obtain would not prevent or materially delay the consummation by the Company
of the transactions contemplated by, or the performance by the Company of any of
its material obligations under, the Transaction Agreements.  The execution and
delivery by the Company of the Transaction Agreements do not, and the
performance by the Company of, and the consummation by the Company of the
transactions contemplated by, the Transaction Agreements will not require the
vote or consent of the Company’s stockholders.

 

SECTION 3.4                                             Compliance with Laws;
Permits; Investigations.

 

(a)                                 Since February 28, 2016 (the “Applicable
Date”), the business of the Company and its subsidiaries with respect to the
Purchased Assets has been, and is being, conducted in compliance with all Laws
applicable to the conduct of business at the Acquired Stores and the
Distribution Centers by it or the Purchased Assets, except for such failures in
compliance that would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, and the Company and its subsidiaries
have not received any written notice or, to the Company’s knowledge, any other
communication of any non-compliance with any such Laws with respect to the
Purchased Assets, except for any such non-compliance that would not,
individually or in the aggregate, reasonably be expected to be material to the
Purchased Assets, taken as a whole.

 

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(b)                                 Each of the Company and its subsidiaries has
all governmental qualifications, registrations, filings, privileges, franchises,
licenses, permits, approvals or authorizations, including Pharmacy Approvals
that are necessary for, or primarily used in, or related to the ownership or
operation of business at the Acquired Stores or the Distribution Centers as
conducted on the date of this Agreement (“Permits”) necessary for it to own and
operate the Purchased Assets, as owned and operated as of the date hereof,
except where the failure to have such Permit would not, individually or in the
aggregate, reasonably be expected to be material to the Purchased Assets, taken
as a whole (collectively, “Material Permits”).  As of the date of this
Agreement, all such Permits are in full force and effect, except where the
failure to be in full force and effect would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.  As of the
date of this Agreement, there are no actions pending or, to the knowledge of the
Company, threatened in writing, that seek the revocation, cancellation or
adverse modification of any such Permit, except where such revocation,
cancellation or adverse modification would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.  Since that
date that is 24 months immediately preceding the date of this Agreement, neither
the Company nor any of the Company’s Affiliates (with respect to the Acquired
Stores or Distribution Centers) has received written notice of any Proceeding
relating to the revocation or modification of any of the Material Permits. No
outstanding material violations are or have been recorded in respect of any of
the Material Permits.

 

(c)                                  As of the date hereof, no investigation or
review by any Governmental Entity with respect to the Purchased Assets is
pending or, to the knowledge of the Company, threatened, except for such
investigations or reviews the outcome of which would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.  As of the
date hereof, neither the Company nor any of its subsidiaries has since the
Applicable Date been charged by any Governmental Entity with, or to the
knowledge of the Company, investigated for, a violation of any Antitrust Law
applicable to the Purchased Assets or entered any settlement, memorandum of
understanding or similar agreement with a Governmental Entity with respect to
the Purchased Assets in respect of a violation or alleged violation of any such
Antitrust Law, except, in each case, for any such violation that would not,
individually or in the aggregate, reasonably be expected to be material to the
Purchased Assets, taken as a whole.

 

SECTION 3.5                                             Financial Statements;
Undisclosed Liabilities.  Section 3.5 of the Company Disclosure Schedules sets
forth a statement of profits and losses with respect to each Acquired Store for
the twelve-month period ended April 29, 2017 (collectively, the “Financial
Statements”).  The Financial Statements collectively present fairly, in all
material respects, the results of operations of the applicable Acquired Store at
their respective dates and for the periods covered by such statements, which are
in conformity with the Transaction Accounting Principles, applied consistently,
and are consistent with the historical accounting principles, practices,
methodologies and policies of the Company or the Company’s applicable
Affiliates, subject to normal year-end adjustments.  The Financial Statements
have been derived from the financial books and records of the Company and the
Company’s applicable Affiliates.  Neither the Company nor any of the Company’s
Affiliates (with respect to the Acquired Stores or Distribution Centers) has
received any written notification from its independent accountants that the
Company or any of the Company’s Affiliates (with respect to the Acquired Stores
or Distribution Centers) has used any improper accounting practice that would
have the effect of

 

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not reflecting or incorrectly reflecting in the books and records of the
Company, any Affiliate of the Company (with respect to the Acquired Stores or
Distribution Centers) or any of their subsidiaries any material properties,
assets, liabilities, revenues, expenses, equity accounts or other accounts with
respect to the Acquired Stores, except as has not had, and would not reasonably
be expected to have, a Material Adverse Effect.

 

SECTION 3.6                                             Absence of Certain
Changes and Events.  Since March 4, 2017 through the date of this Agreement,
(a) the Company and its subsidiaries have conducted their business at the
Acquired Stores and Distribution Centers in all material respects in the
ordinary course consistent with past practice and has not taken any action that,
if such action occurred between the date hereof and the last Subsequent Closing
Date, without the consent of the Purchaser Sub, would constitute a breach of
clause (i), (ii), (iii), (viii), (ix), (xv) or (xvi) of Section 5.1 and
(b) there has not occurred any event that would materially impair or delay the
ability of the Company to complete the transactions contemplated by this
Agreement. Since March 4, 2017 through the date of this Agreement, there has not
occurred any event that has had, or would reasonably be expected to have, a
Material Adverse Effect.

 

SECTION 3.7                                             Absence of Litigation. 
As of the date hereof, there are no Proceedings pending or, to the knowledge of
the Company, threatened in writing against the Company or any of its
subsidiaries (with respect to or relating to the Acquired Stores, the
Distribution Centers or Purchased Assets), other than any such Proceeding that
would not, individually or in the aggregate, reasonably be expected to be
material to the Purchased Assets, taken as a whole.  As of the date hereof,
neither the Company nor any of its subsidiaries (with respect to the Purchased
Assets) nor any of the Purchased Assets is or are subject to any order, writ,
judgment, injunction, decree or regulatory restriction (other than those of
general application that apply to similarly situated companies or their
subsidiaries and are not disproportionately adverse to the Company and its
subsidiaries) except for those that would not, individually or in the aggregate,
reasonably be expected to be material to the Purchased Assets, taken as a whole.

 

SECTION 3.8                                             Employee Benefit Plans.

 

(a)                                 Section 3.8(a) of the Company Disclosure
Schedules sets forth a list of all  material employee benefit plans (within the
meaning of Section 3(3) of ERISA) and all material retirement, welfare benefit,
bonus, stock option, stock purchase, restricted stock, incentive, deferred
compensation, retiree health or life insurance, supplemental retirement,
severance or other benefit plans, programs or arrangements, that are maintained,
contributed to or sponsored by the Company or its respective Affiliates for the
benefit of any Business Employee, other than governmental plans and
Multiemployer Plans (the “Employee Plans”).  No Employee Plans are sponsored or
maintained by the Acquired Stores or the Distribution Centers, and neither the
Acquired Stores nor the Distribution Centers has any liability in respect of the
Employee Plans.  The Company has provided Purchaser Sub with true and correct
copies of all Employee Plans set forth on Section 3.8(a) of the Company
Disclosure Schedules.

 

(b)                                 No circumstance exists which would
reasonably be expected to result in a material Liability to the Purchaser Sub or
its Affiliates on or after the Closing Date under ERISA with respect to any
Business Employee, other than Liabilities assumed under Section 6.15, related to
or arising out of any Multiemployer Plan subject to a CBA applicable to any
Business

 

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Employee.  Section 3.8(b) of the Company Disclosure Schedules sets forth a list
of all Multiemployer Plans.  As of or prior to the date hereof, neither the
Company nor any of its ERISA Affiliates has incurred or triggered any withdrawal
liability (including any contingent or secondary withdrawal liability) within
the meaning of Section 4201 or 4204 of ERISA.  The Company and its Affiliates
have timely made all contributions required to be made by them to a
Multiemployer Plan under the terms of the Multiemployer Plan and/or the
applicable CBA.  For each Multiemployer Plan, the Company has made available to
the Purchaser Sub true and correct copies of all material correspondence for the
previous six (6) years from each such Multiemployer Plan, relating to its funded
status, relating to, or describing the existence of, any minimum funding
violation or application for waiver of a minimum funding violation, or
containing any reference to or description of any rehabilitation plan or default
plan adopted under applicable law, and with a copy of any letter received from
the administrator of the Multiemployer Plan setting forth the estimated
withdrawal liability which would be imposed by the Multiemployer Plan if the
Company or its ERISA Affiliate, as applicable, were to withdraw from the
Multiemployer Plan in a complete withdrawal.

 

(c)                                  Each Employee Plan that is intended to be
qualified under Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service that it is so qualified
(or an application for such a determination letter has been filed and is
pending), and, to the knowledge of the Company, no fact or event has occurred
since the date of such determination letter that would reasonably be expected to
adversely affect such qualification.

 

(d)                                 Each Employee Plan has been operated in all
material respects in accordance with its terms and the requirements of all
applicable Laws, other than noncompliance which would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(e)                                  There are no material controversies pending
or, to the knowledge of the Company, threatened in connection with any Employee
Plan that could reasonably be expected to have a Material Adverse Effect.

 

(f)                                   Neither the execution or delivery of this
Agreement nor the consummation of the transactions contemplated by this
Agreement could reasonably be expected to, either alone or in conjunction with
any other event (whether contingent or otherwise), (i) result in any payment or
benefit becoming due or payable, or required to be provided, to any Business
Employee, (ii) increase the amount or value of any benefit or compensation
otherwise payable or required to be provided to any Business Employee or
(iii) result in any amount failing to become deductible by reason of
Section 280G of the Code or subject to an excise tax under Section 4999 of the
Code  (without giving effect to any payments payable pursuant to arrangements
implemented by Purchaser or any of its Affiliates that are not otherwise
disclosed to the Company prior to the Closing Date).

 

(g)                                  This Section 3.8 constitutes the sole and
exclusive representations and warranties of the Company with respect to any
matters relating to employee benefits matters.

 

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SECTION 3.9                                             Labor and Employment
Matters.

 

(a)                                 Except as set forth on Section 3.9(a) of the
Company Disclosure Schedules, no union or other labor organization has been
recognized or certified as the representative of any Business Employee for
purposes of collective bargaining, and neither the Company nor any of its
Affiliates is a party to any collective bargaining agreement or any other
agreement currently in effect with any labor organization or other employee
representative body applicable to any Business Employee (each, a “CBA”), nor is
any such agreement being negotiated by the Company or any of its Affiliates
applicable to any Business Employee as of the date hereof.  The Company has
provided Purchaser Sub with true and correct copies of all CBAs set forth on
Section 3.9(a) of the Company Disclosure Schedules.

 

(b)                                 To the Company’s knowledge, as of the date
hereof, there is no union organizing activity ongoing among the Business
Employees, nor has any union or labor organization made any demand for
recognition with respect to any Business Employee.  As of the date hereof and
since the Applicable Date, there are and have been no strikes, work stoppages,
slowdowns, lockouts or similar labor disputes pending or, to the knowledge of
the Company, threatened in writing by, or on behalf of, any Business Employee,
in each case, that would be material to the Acquired Stores and the Distribution
Centers. Except as set forth on Section 3.9(b) of the Company Disclosure
Schedules, as of the date hereof, there are no grievances pending against the
Company or any of its Affiliates relating to the Business Employees, the
Acquired Stores or the Distribution Centers by or before any judicial,
administrative or arbitral tribunal, board, authority, agency, body, or court
arising out of labor and employment or relating to union recognition, accretion,
or card check/neutrality agreements between the Company and any union, except as
would not, individually or in the aggregate, reasonably be expected to be
material to the Acquired Stores and the Distribution Centers, taken as a whole.

 

(c)                                  Except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect, there are
no actions, charges, complaints, government investigations or other proceedings
by or on behalf of any Business Employee pending against the Company or any of
its Affiliates, by or before any judicial, administrative or arbitral tribunal,
board, authority, agency, body or court which arise out of labor or employment. 
With respect to the Business Employees, the Company and its Affiliates are and
have been in compliance, in all material respects, with all applicable Laws
regarding employment, labor and wage and hour matters, including the payment of
wages for all time worked, the payment of overtime, discrimination, sexual
harassment, civil rights, immigration, safety and health, workers’ compensation,
classification of employees and independent contractors, classification of
exempt and non-exempt status for overtime eligibility purposes, plant closing
and layoff or other notices, including under the Worker Adjustment and
Retraining Notification Act of 1988 and the regulations promulgated thereunder
(the “WARN Act”), or any similar state or local law, and the collection and
payment of withholding taxes, Social Security taxes and similar Taxes.

 

(d)                                 This Section 3.9 constitutes the sole and
exclusive representations and warranties of the Company with respect to any
matters relating to employment matters.

 

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SECTION 3.10                                      Properties.

 

(a)                                 Section 3.10(a) of the Company Disclosure
Schedules sets forth a true and complete list of each parcel of real property
owned by the Company or its Affiliates with respect to an Acquired Store or a
Distribution Center (collectively, the “Company Owned Real Property”) and the
record owner thereof.  The Company and its Affiliates have good, marketable and
valid fee simple title to all of the Company Owned Real Property, free and clear
of all liens, encumbrances, pledges, security interests, adverse claims,
mortgages, deeds of trust, hypothecations, charges or conditional sale or
similar restrictions (“Liens”), except in all cases for Permitted Liens.

 

(b)                                 Section 3.10(b) of the Company Disclosure
Schedules sets forth (i) a list of all leasehold interests with respect to the
Acquired Stores, the Distribution Centers and specified regional, divisional and
district offices relating to the Acquired Stores and Distribution Centers in all
real property (including with respect to any relocation site set forth on
Section 3.10(b) of the Company Disclosure Schedules, the “Leased Real Property”)
and (ii) a list of all leases, subleases, licenses and other agreements for the
use and occupancy by the Acquired Stores, the Distribution Centers and the
specified regional, divisional and district offices relating to the Acquired
Stores and Distribution Centers of the Leased Real Property (together with all
modifications, amendments and supplements thereto, collectively, the “Acquired
Leases”). The Company and its Affiliates have a valid leasehold interest in all
properties subject to an Acquired Lease, free and clear of all Liens except for
Permitted Liens.  Each Acquired Lease is a valid and binding obligation of the
Company or one of its Affiliates, as applicable, is in full force and effect and
is enforceable against such Person in all material respects, as applicable, and,
to the knowledge of the Company, against the other parties thereto, subject to
the effect of any applicable Laws relating to bankruptcy, reorganization,
insolvency, moratorium, fraudulent conveyance or preferential transfers, or
other similar Laws relating to or affecting creditors’ rights generally now or
hereafter in effect and subject, as to enforceability, to any effect of general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).

 

(c)                                  Except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect, (i) as of
the date hereof, neither the Company nor any subsidiary (with respect to the
Purchased Assets) has received any written notice of any condemnation,
requisition or taking by a Governmental Entity with respect to Company Owned
Real Property or Leased Real Property nor, to the knowledge of the Company, has
any such condemnation been threatened in writing, (ii) there are no unexpired
option agreements, rights of first refusal or similar rights with respect to the
Company Owned Real Property, and (iii) none of the Company nor any of its
subsidiaries (with respect to the Purchased Assets) is in default or breach of
any Acquired Lease, and, to the knowledge of the Company, no event has occurred
which, with notice, lapse of time or both, would constitute a default or breach
of any Acquired Lease by any of the Company or its subsidiaries (with respect to
the Purchased Assets).

 

SECTION 3.11                                      Tax Matters.

 

(a)                                 All income and other material Tax Returns
required to have been filed with respect to the Purchased Assets have been
prepared in good faith and duly and timely filed

 

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(taking into account any extension of time within which to file) and such Tax
Returns are complete and accurate in all material respects. All material Taxes
with respect to the Purchased Assets have been duly and timely paid except with
respect to matters contested in good faith by appropriate proceedings and for
which adequate reserves have been provided in accordance with GAAP.  No waiver
of any statute of limitations, extension, or comparable consent regarding the
application of the statute of limitations with respect to any Taxes or Tax
Returns related to the Purchased Assets that would reasonably be expected to
affect Parent after the Closing is outstanding, nor is there pending any request
for such a waiver, extension, or comparable consent.

 

(b)                                 There are no pending material Tax audits,
examinations, investigations or other proceedings with respect to the Purchased
Assets, and no such audits, investigations or proceedings with respect to the
Purchased Assets have been threatened in writing.

 

(c)                                  There are no Liens for Taxes on any of the
Purchased Assets, other than for Taxes that are not yet due and payable and
Permitted Liens.

 

(d)                                 All material Taxes required to be withheld,
collected or deposited by the Company with respect to the Purchased Assets have
been timely withheld, collected or deposited as the case may be, and to the
extent required, have been paid to the relevant Tax authority.

 

(e)                                  The representations and warranties
contained in this Section 3.11 are the only representations and warranties being
made with respect to Taxes.

 

(f)                                   For purposes of this Agreement:

 

(i)                                     “Taxes” means all federal, state, local
and foreign income, profits, franchise, gross receipts, customs duty, capital
stock, severance, stamp, payroll, sales, ad valorem, employment, unemployment,
disability, use, property, withholding, transfer, excise, license, production,
value added, alternative or add on minimum, occupancy and other taxes, customs,
duties, governmental fees, escheats, or assessments or charges of a similar
nature imposed by any Governmental Entity, including, as a result of being, or
having been, a member of an affiliated, consolidated, combined or unitary group,
together with all interest, penalties and additions imposed with respect to such
amounts and any interest in respect of such penalties and additions; and

 

(ii)                                  “Tax Return” means all returns and reports
or similar statements (including elections, declarations, disclosures,
schedules, claim for refund, amended returns, estimates and information returns
and any attached schedules) filed, or required to be filed, with respect to any
Tax.

 

SECTION 3.12                                      Sufficiency of Purchased
Assets. Except as set forth on Section 3.12 of the Company Disclosure Schedules,
except for the Excluded Assets and except as is not material and adverse to the
Purchased Assets, the Assumed Liabilities and to the business and operations at
the Acquired Stores (taken as a whole), the Purchased Assets and the Transferred
Employees, when taken together with the rights of the Company under the
Transition Services Agreement constitute all of the material rights, property
and assets and employees necessary to conduct such

 

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business in substantially the same manner as currently conducted, except with
respect to any Permits that are prohibited by Contract or applicable Law from
being transferred.

 

SECTION 3.13                                      Environmental Matters.

 

(a)                                 Except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect, in each
case with respect to the Purchased Assets,   (i) neither the Company nor any of
its subsidiaries is in violation of, has since the Applicable Date violated any,
or, to the knowledge of the Company, has incurred any liability under any
Environmental Law, (ii) the Company and its subsidiaries have all Permits
required under any applicable Environmental Laws and are in compliance with the
requirements of such Permits and, to the knowledge of the Company, there is no
reasonable basis for any revocation, non-renewal or adverse modification of any
such Permits, (iii) as of the date hereof, there are no pending or, to the
knowledge of the Company, threatened Proceedings relating to any Environmental
Law or Hazardous Materials against the Company or any of its subsidiaries,
(iv) to the knowledge of the Company, there are no events or circumstances,
including contamination, at any of the Company Owned Real Property or the real
property subject to the Acquired Leases or any other property for which the
Company is, or is reasonably expected to be, liable or has been alleged to be
liable, caused by the Company or any of its subsidiaries or otherwise, that
would reasonably be expected to result in liability of, or form the basis of an
order for cleanup or remediation, or of a Proceeding by any private party or
Governmental Entity, against or affecting, the Company or any of its
subsidiaries relating to Hazardous Materials or any Environmental Laws, (v) the
Company has made available all environmental assessments, reports and studies
(or accurate and complete summaries thereof) on all matters and (vi) except as
set forth on Section 3.13 of the Company Disclosure Schedules, there has been no
environmental investigation, study, audit, test, review or other analysis
conducted within the past three (3) years that documents conditions giving rise
to any Liability or Loss in connection with the Purchased Assets.

 

(b)                                 For purposes of this Agreement, the
following terms shall have the meanings assigned below:

 

“Environmental Laws” means Laws relating to the protection of the environment or
natural resources, or to human exposure to Hazardous Materials, the release or
threatened release of Hazardous Materials, or to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of,
Hazardous Materials.

 

“Hazardous Materials” means any substance regulated as a hazardous substance,
hazardous waste, toxic substance, pollutant, contaminant or words of similar
import under any Law relating to the protection of the environment, including
petroleum or petroleum products.

 

(c)                                  This Section 3.13 constitutes the sole and
exclusive representations and warranties of the Company with respect to any
environmental matters.

 

SECTION 3.14                                      Privacy and Data Security;
Company Rx Data.  As of the date hereof, the collection, use, transfer, import,
export, storage, disposal and disclosure by the Company of personally
identifiable customer information, or other information relating to Persons
protected

 

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by Law, has not violated any applicable Law or any contractual obligation of the
Company or the Company’s Affiliates (with respect to the Purchased Assets)
relating to the collection, use, privacy, security or protection of such
information (collectively, “Privacy and Security Laws”), except as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.  Without limiting the generality of the foregoing, the Company
is in compliance with the privacy and security provisions of the Health
Insurance Portability and Accountability Act of 1996, as amended by the Health
Information Technology for Economic and Clinical Health Act of 2009 with respect
to the Purchased Assets, except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.  The Company has
created and maintained written policies and procedures reasonably designed to
protect the privacy and security of all customer information and to comply with
all Privacy and Security Laws, and has implemented an information security
program that includes commercially reasonable security procedures, including
physical and electronic safeguards, to protect all customer information stored
or transmitted by the Company in electronic form with respect to the Purchased
Assets, in each case except as would not reasonably be expected to have a
Material Adverse Effect. Since, to the Company’s knowledge as of the date
hereof, the Applicable Date, there have been no security breaches relating to,
or violations of any privacy policy or security policy of the Company or the
Company’s Affiliates regarding, or any unauthorized access to or disclosure of,
any data or information stored, transmitted or otherwise used by the Company (in
each case, with respect to the Acquired Stores or the Distribution Centers),
except as would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.  Since the Applicable Date, the Company and its
subsidiaries have maintained Company Rx Data in all material respects in the
ordinary course of business consistent with past practice.

 

SECTION 3.15                                      Brokers.  No broker, finder or
investment banker (other than Citigroup Global Markets Inc. is entitled to any
brokerage, finder’s or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by and
on behalf of the Company, any of its subsidiaries or any of their respective
officers, directors or employees.

 

SECTION 3.16                                      Compliance with Healthcare
Legal Requirements.

 

(a)                                 Except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect, the Company
and each of its Affiliates is conducting and has conducted the business and
operations in respect of or related to the Purchased Assets in compliance with,
and neither the Company nor any of its Affiliates, nor, to the knowledge of the
Company, any of their respective officers, directors or employees, has engaged
in any activities that would constitute a violation of any Healthcare Laws in
respect of or related to the Purchased Assets.

 

(b)                                 Other than as would not, individually and in
the aggregate, reasonably be expected to have a Material Adverse Effect, (i) as
of the date hereof, neither the Company nor any of its Affiliates has received
any written notice, citation, suspension, revocation or communication from any
Governmental Entity alleging noncompliance with any Healthcare Laws in respect
of or related to the Purchased Assets; (ii) as of the date hereof, the Company
is not in receipt of any civil, criminal or administrative subpoena, request for
information, action,

 

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suit, complaint, notice, letter, hearing, or investigation related to
noncompliance with any Healthcare Laws in respect of or related to the Purchased
Assets pending against the Company or any of its Affiliates; (iii) as of the
date hereof, there has not been any violation of any Healthcare Laws in respect
of or related to the Purchased Assets by the Company or any of its Affiliates in
its submissions or reports to any Governmental Entity that would reasonably be
expected to require corrective action or self-reporting; (iv) to the knowledge
of the Company, no Business Employee has been (A) suspended, debarred or
excluded from participation in Medicare, Medicaid or any other federal or state
healthcare program or is subject to an action or investigation that is
reasonably likely to result in such a suspension, debarment or exclusion nor is
any such suspension, debarment or exclusion threatened or pending, (B) assessed
a civil money penalty under Section 1128A of the Social Security Act or any
regulations promulgated thereunder, (C) convicted of any criminal offense
relating to the delivery of any item or service under a federal health care
program relating to the unlawful manufacture, distribution, prescription, or
dispensing of a prescription drug or a controlled substance or (D) listed on the
General Services Administration Excluded Parties List System; (v) neither the
Company nor any of its Affiliates (A) is party to or subject to any corporate
integrity agreement, deferred prosecution agreement, consent order, consent
decree or other settlement agreement with any Governmental Entity relating to
any alleged violation of Healthcare Laws in respect of or related to the
Purchased Assets, (B) since March 1, 2014, has adopted any board resolutions at
the request of any Governmental Entity, in each case relating to Healthcare Laws
or restricting the conduct of its business or that impacts upon the management
or operation of its business in any material adverse manner (collectively,
“Company Regulatory Agreements”) or (C) since March 1, 2014, has received
written notice from any Governmental Entity that such Governmental Entity is
considering issuing or requesting or investigating the possible issuance or
request for any Company Regulatory Agreement, in each case, in respect of or
relating to the Purchased Assets; and (vi) all reports, documents, applications,
and notices required to be filed, maintained or furnished to any Governmental
Entity or any private or government payment program, in each case in respect of
or related to the Purchased Assets, have been so filed, maintained or furnished
and all such reports, documents, applications and notices were true, complete
and correct in all material respects on the date filed (or were corrected or
supplemented by a subsequent filing).

 

(c)                                  Each Acquired Store meets all of the
applicable requirements of participation, coverage, and enrollment for, and
where applicable, is subject to valid supplier or participation agreements
related to all government and private payment programs in which that Acquired
Store participates (“Company Payment Programs”), except as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.   As of the date hereof, to the knowledge of the Company, there
is no pending or threatened investigation or civil or administrative proceeding
relating to the participation by any Acquired Store in any Company Payment
Program, except as would not reasonably be expected to be material to the
Acquired Stores taken as a whole.  Neither the Company nor any of its Affiliates
has received any written notices of any action pending by any Company Payment
Program, to revoke, limit or terminate the participation for cause of any
Acquired Store in any Company Payment Program, except as would not reasonably be
expected to be material to the Acquired Stores, taken as a whole.  To the
knowledge of the Company, no event has occurred which, with the giving of
notice, the passage of time, or both, would constitute grounds for termination
or reduction for cause in the participation of any Acquired Store in (i) any
government Company Payment Program or (ii) any other Company Payment Program,
except as would not, individually or in the aggregate,

 

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reasonably be expected to have a Material Adverse Effect.  Except as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, all supplier or participation agreements necessary for
participation in the Company Payment Programs by any Acquired Store to which the
Company or any of its Affiliates is a party constitute valid and binding
obligations, enforceable against the Company or such Affiliate in accordance
with their respective terms and, to the knowledge of the Company, are in full
force and effect, and neither the Company nor any of its Affiliates has received
written notice of default of any material provision under any Company Payment
Program under which any Acquired Store participates and the Company and its
Affiliates and, to the knowledge of the Company, the other parties thereto are
not in default of any material provision thereunder.

 

(d)                                 To the knowledge of the Company, each
Business Employee providing services to patients is duly licensed, certified,
registered and qualified as required by applicable Law, except as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. To the knowledge of the Company, no (i) suspension,
cancellation, revocation, withdrawal, modification, restriction, probation or
non-renewal of any such employee license or qualification is pending or
threatened as of the date hereof, (ii) event has occurred and no circumstance
exists that would reasonably be expected to result in the suspension,
cancellation, revocation, withdrawal, modification, restriction, probation or
non-renewal of any such employee license, certification, registration or
qualification, and (iii) Business Employee is not in compliance with the terms
of any such employee license or qualification, except in each case as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.  As of the date hereof, to the knowledge of the Company, there
are no inquiries, investigations or monitoring of activities, in each case for
cause, pending relating to any Business Employee license or qualification,
except for routine audits or reviews and except as would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(e)                                  To the knowledge of the Company, no Person
(terminated employee, contractor or otherwise) has raised allegations relative
to the Purchased Assets that could reasonably be expected to give rise to a
claim under the Federal False Claims Act (31 U.S.C. §§ 3729-3733) with respect
to the Purchased Assets, including allegations of non-compliance with any state
or federal anti-kickback, beneficiary inducement, physician self-referral or
billing or coding requirements.

 

(f)                                   Except as would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect, as of
the date hereof, there are no pending or, to the knowledge of the Company,
threatened, appeals, adjustments, challenges, investigations, litigation,
audits, or written notices of intent to audit with respect to reports or
billings, or claims for refunds, recoupments, overpayments, discounts or
adjustments, in each case relating to any Purchased Asset, and any alleged
violation of Healthcare Laws, other than such routine audits or reviews as would
be expected in the ordinary course of the Company’s business.  The Company and
each of its Affiliates have implemented a corporate compliance program with
respect to the Purchased Assets in compliance with the guidelines for healthcare
organizations published by the Office of Inspector General of the U.S.
Department of Health and Human Services.

 

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(g)                                  To the knowledge of the Company, as of the
date hereof, the Company has received no formal notification directly from a
Governmental Entity that it or any of its subsidiaries is (A) the subject or
target of a criminal investigation related to Healthcare Laws or (B) indicted in
any criminal proceeding related to Healthcare Laws, in each case of clause
(A) and (B), with respect to or relating to the Acquired Stores or the Purchased
Assets.

 

SECTION 3.17                                      Title to the Purchased
Assets.  The Company and its Affiliates, together, own or, in the case of the
Acquired Leases, have valid leasehold interests in all of the tangible personal
property included in the Purchased Assets and good, valid and marketable title
to, or a valid leasehold interest in, or a valid license to use, all of the
tangible personal property included in the Purchased Assets, in each case free
and clear of all Liens, other than Permitted Liens.

 

SECTION 3.18                                      Inventory.  The Inventory is
of a quantity (including seasonal variations), quality and mix consistent with
past practices and at levels historically maintained by the Company and
necessary for the continued operation of the Acquired Stores as conducted on the
date hereof and as of the Closing (or the applicable Subsequent Closing or
Distribution Center Closing), in each case in all material respects.  Since the
Applicable Date, the Inventory has been maintained in the ordinary course of
business consistent with past practice.  All such Inventory is owned free and
clear of all Liens other than Permitted Liens and Liens described on
Section 3.18 of the Company Disclosure Schedules.  Substantially all of the
Inventory to be transferred at Closing, each Subsequent Closing and the
Distribution Center Closing will consist of, items of a quality usable or
saleable in the ordinary course of business consistent with past practice and
are and will be in quantities substantially sufficient for the normal operation
of the Acquired Stores in accordance with past practice.

 

SECTION 3.19                                      No Other Representations or
Warranties.  Except for the representations and warranties contained in
Article IV or in any certificate delivered by Parent or Purchaser Sub to the
Company (and notwithstanding the delivery or disclosure to the Company or its
Representatives of any documentation, projections, estimates, budgets or other
information), the Company acknowledges that (x) none of Parent, the subsidiaries
of Parent (including Purchaser Sub) or any other Person on behalf of Parent
makes, or has made, any representation or warranty relating to itself or its
business or otherwise in connection with this Agreement or the transactions
contemplated by this Agreement and the Company is not relying on any
representation or warranty of any Person except for those expressly set forth in
this Agreement and (y) no person has been authorized by Parent or Purchaser Sub
or any other Person on behalf of Parent or Purchaser Sub to make any
representation or warranty relating to itself or its business or otherwise in
connection with this Agreement, and if made, such representation or warranty
shall not be relied upon by the Company as having been authorized by Parent or
Purchaser Sub.

 

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ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES OF
PARENT AND PURCHASER SUB

 

Each of Parent and Purchaser Sub hereby represents and warrants to the Company
that, except as set forth in the corresponding sections or subsections of the
disclosure schedules delivered to the Company by Parent and Purchaser Sub
concurrently with entering into this Agreement (the “Parent Disclosure
Schedule”), it being agreed that disclosure of any item in any section or
subsection of the Parent Disclosure Schedules shall also be deemed disclosure
with respect to any other section or subsection of this Agreement to which the
relevance of such item is reasonably apparent on its face:

 

SECTION 4.1                                             Organization.  Each of
Parent and Purchaser Sub (i) is a legal entity duly organized, validly existing
and, to the extent such concept is applicable, in good standing under the Laws
of its respective jurisdiction of organization and has all requisite corporate
or similar power and authority to own, lease and operate its properties and
assets and to carry on its business as presently conducted and (ii) is qualified
to do business and, to the extent such concept is applicable, is in good
standing as a foreign corporation or other legal entity in each jurisdiction
where the ownership, leasing or operation of its assets or properties or present
conduct of its business requires such qualification, except, in each case of
clauses (i) and (ii), in the case of subsidiaries of Parent or Purchaser Sub,
where the failure to be so qualified or, to the extent such concept is
applicable, in good standing, or to have such power or authority, would not,
individually or in the aggregate, reasonably be expected to prevent, materially
delay or materially impair the ability of Parent or Purchaser Sub to perform its
obligations under the Transaction Agreements or complete the other transactions
contemplated by the Transaction Agreements.

 

SECTION 4.2                                             Authority.  Each of
Parent and Purchaser Sub has all requisite corporate power and authority, and
has taken all corporate or other action necessary, to execute and deliver the
Transaction Agreements, to perform its obligations thereunder and to complete
the transactions contemplated hereby.  This Agreement has been duly and validly
executed and delivered by each of Parent and Purchaser Sub and, assuming the due
authorization, execution and delivery hereof by the Company, constitutes a
legal, valid and binding obligation of Parent and Purchaser Sub enforceable
against each of Parent and Purchaser Sub in accordance with its terms, subject
to the Bankruptcy and Equity Exception.

 

SECTION 4.3                                             No Conflict; Required
Filings and Consents.

 

(a)                                 The execution, delivery and performance of
the Transaction Agreements by Parent and Purchaser Sub do not, and the
completion of the transactions contemplated hereby will not (i) conflict with or
violate the certificate of incorporation or bylaws of Parent or Purchaser Sub,
(ii) assuming that all consents, approvals, authorizations and Permits
contemplated by clauses (i) through (v) of subsection (b) below have been
obtained, and all filings and notifications described in such clauses of
subsection (b) below have been made and any waiting periods thereunder have
terminated or expired, conflict with or violate any Law applicable to Parent,
Purchaser Sub or any of their or their respective subsidiaries’ assets or

 

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properties or (iii) result in any breach or violation of or constitute a default
(or an event, which with notice or lapse of time or both, would become a
default) or result in the loss of a benefit to which Parent, Purchaser Sub or
any of their respective subsidiaries are entitled under, give rise to any right
of termination, cancellation, adverse amendment or acceleration of, require
notice or consent under, or result in the creation of a Lien (except a Permitted
Lien) on any of the material assets or properties of Parent, Purchaser Sub or
any of their respective subsidiaries pursuant to, any Contract to which Parent
or Purchaser Sub, or any of their subsidiaries is a party or by which Parent or
Purchaser Sub or any of their subsidiaries or its or their respective assets or
properties are bound, except, in the case of clauses (ii) and (iii), for any
such conflict, violation, Lien, breach, default, loss, right, requirement of
notice or consent or other occurrence which would not prevent, materially delay
or materially impair the ability of Parent or Purchaser Sub to perform its
obligations under the Transaction Agreements or complete the transactions
contemplated by the Transaction Agreements.

 

(b)                                 The execution, delivery and performance of
the Transaction Agreements by each of Parent and Purchaser Sub and the
completion of the transactions contemplated hereby by each of Parent and
Purchaser Sub do not require any Governmental Filings by Parent or Purchaser
Sub, except for (i) filings required under, and compliance with other applicable
requirements of, the Exchange Act and the rules and regulations promulgated
thereunder, and state securities, takeover and “blue sky” laws, (ii) filings or
notifications required under, and compliance with other applicable requirements
of, the HSR Act (including the filing of a “Notification and Report Form” by
Parent and Purchaser Sub under the HSR Act), (iii) filings required under, and
compliance with other applicable requirements of, the NASDAQ Stock Market,
(iv) the License Approvals and (v) any such Governmental Filings the failure of
which to make or obtain would not prevent or materially delay Parent or
Purchaser Sub from performing its obligations under the Transaction Agreements
or completing the other transactions contemplated by the Transaction Agreements.

 

SECTION 4.4                                             Absence of Litigation. 
As of the date hereof, there are no Proceedings pending or, to the knowledge of
Parent, threatened in writing against Parent or Purchaser Sub or any of their
respective subsidiaries, other than any such Proceeding that would not,
individually or in the aggregate with other such Proceedings, reasonably be
expected to prevent, materially delay or materially impair the ability of Parent
or Purchaser Sub to perform its obligations under this Agreement or complete the
other transactions contemplated by this Agreement.  As of the date hereof,
neither Parent nor any of its subsidiaries nor any of their respective material
assets or properties is or are subject to any order, writ, judgment, injunction,
decree or regulatory restriction (other than those of general application that
apply to similarly situated companies or their subsidiaries and are not
disproportionately adverse to Parent and its subsidiaries), except for those
that would not reasonably be expected to prevent, materially delay or materially
impair the ability of Parent or Purchaser Sub to perform its obligations under
this Agreement or complete the other transactions contemplated by this
Agreement.

 

SECTION 4.5                                             Brokers.  No broker,
finder or investment banker is entitled to any brokerage, finder’s or other fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by and on behalf of Parent or Purchaser Sub for
which the Company could have any liability in a circumstance where the
transactions contemplated by this Agreement are not completed.

 

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SECTION 4.6                                             Funding.  As of the date
hereof, Parent has sufficient funds to pay the Purchase Price payable pursuant
to this Agreement, and as of each of the Closing Date, each Subsequent Closing
Date and the Distribution Center Closing Date, Parent will cause Purchaser Sub
to have sufficient funds (in cash or pursuant to available inter-company
facilities) to pay the portion of the Purchase Price payable pursuant to this
Agreement at such date and, in each case, to perform and discharge all of its
other obligations hereunder, on the terms and conditions provided in or
contemplated by this Agreement.

 

SECTION 4.7                                             No Other Representations
or Warranties.  Except for the representations and warranties contained in
Article III or in any certificate delivered by the Company to Parent or
Purchaser Sub (and notwithstanding the delivery or disclosure to Parent or its
Representatives of any documentation, projections, estimates, budgets or other
information), each of Parent and Purchaser Sub acknowledges that (x) none of the
Company, the Company subsidiaries or any other Person on behalf of the Company
makes, or has made, any representation or warranty relating to itself or its
business or otherwise, in connection with this Agreement or the transactions
contemplated by this Agreement, and Parent and Purchaser Sub are not relying on
any representation or warranty of any Person except for those expressly set
forth in this Agreement, (y) no person has been authorized by the Company, the
Company subsidiaries or any other Person on behalf of the Company to make any
representation or warranty relating to itself or its business or otherwise in
connection with this Agreement, and if made, such representation or warranty
shall not be relied upon by Parent or Purchaser Sub as having been authorized by
such entity, and (z) any estimate, projection, prediction, data, financial
information, memorandum, presentation or any other materials or information
provided or addressed to Parent, Purchaser Sub or any of their Representatives,
including any materials or information made available to Parent and/or its
Representatives in connection with presentations by the Company’s management,
are not and shall not be deemed to be or include representations or warranties.
Each of Parent and Purchaser Sub acknowledges that it has conducted, to its
satisfaction, its own independent investigation of the condition, operations and
business of the Company and in making its determination to proceed with the
transactions contemplated by this Agreement, each of Parent and Purchaser Sub
has relied solely on the results of its own independent investigation and the
terms of this Agreement and has not relied, directly or indirectly, on any
materials or information made available to Parent and/or its Representatives by
or on behalf of the Company. Each of Parent and Purchaser Sub acknowledges and
agrees that, except as expressly set forth in this Agreement, Purchaser Sub
shall acquire the Purchased Assets and the Assumed Liabilities without any
representation or warranty, express or implied, as to merchantability,
satisfactory quality or fitness for any particular purpose, in “as is” condition
and on a “where is” basis.

 

ARTICLE V

 

CONDUCT OF BUSINESS PENDING THE SALE

 

SECTION 5.1                                             Conduct of Business of
the Company Pending the Sale.  From the date of this Agreement until the earlier
of the Closing (or, with respect to Purchased Assets to be transferred at a
Subsequent Closing, such Subsequent Closing or, to the extent related to the
Distribution Centers, the Distribution Center Closing) and the termination of
this Agreement in accordance with Article VIII, except (i) as expressly
contemplated or permitted by this

 

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Agreement, (ii) as set forth in Section 5.1 of the Company Disclosure Schedules,
(iii) as required by applicable Laws, or (iv) as consented to by Parent in
writing (such consent not to be unreasonably withheld, conditioned or delayed),
the Company shall, and shall cause its subsidiaries, subject to the exceptions
in the restrictions set forth below, to (a) conduct its business at the Acquired
Stores and the Distribution Centers in the ordinary course of business
consistent with past practice (including regular repair and maintenance
efforts), (b) use its commercially reasonable efforts to preserve intact its
business organization and to preserve the current significant business
relationships with Business Employees, suppliers and customers of the Acquired
Stores and (c) not:

 

(i)                                     except in the ordinary course of
business consistent with past practice, grant any Lien (other than a Permitted
Lien) on any Purchased Asset (whether tangible or intangible);

 

(ii)                                  with respect to the Acquired Stores or the
Distribution Centers, incur any debt, issue any debt securities or assume,
grant, guarantee or endorse, or otherwise as an accommodation become responsible
for, the obligations of any Person, or make any loans or advances (other than in
the ordinary course of business consistent with past practice), in each case
that would result in Liens on the Purchased Assets (other than Permitted Liens)
that would not be released as of or prior to the Closing, Subsequent Closing or
Distribution Center Closing, as applicable;

 

(iii)                               close any Acquired Store or sell, transfer,
lease, sublease, license or sublicense (except for non-exclusive licenses
granted in the ordinary course of business) or otherwise dispose of any of the
Purchased Assets, other than sales of Inventory in the ordinary course of
business consistent with past practice and obsolete or excess equipment sold or
disposed of in the ordinary course of business consistent with past practice;

 

(iv)                              enter into any Contract for the sale of
Company Owned Real Property;

 

(v)                                 (i) enter into, amend, renew (other than in
accordance with its terms) or modify any Acquired Lease or Contract that would
be an Acquired Lease if in effect on the date of this Agreement (other than any
amendment, renewal or modification that does not change the economic terms of
such Acquired Lease or such Contract in a way detrimental to the Company or
Purchaser Sub) or (ii) consent to the termination of (other than a termination
in accordance with its terms) any Acquired Lease or Contract permitted under
this Section 5.1 to be entered into on or following the date hereof that would
be an Acquired Lease if in effect on the date of this Agreement; provided,
however, that the Company shall notify Purchaser Sub in writing in advance of
the occurrence of any of the foregoing; provided, further, that notwithstanding
anything to the contrary in this paragraph, the Company shall exercise any
existing optional extensions for and/or renew (in accordance with the applicable
time periods) (or, in the case of Acquired Stores subject to month-to-month
lease arrangements, use commercially reasonable efforts to continue those
arrangements for) those Acquired Leases listed in Section 5.1(v) of the Company
Disclosure Schedules, and any costs or expenses incurred

 

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by the Company in connection with such efforts (but, for the avoidance of doubt,
excluding any rent payments under such leases prior to the applicable Closing or
Subsequent Closing for such Acquired Store) shall be borne by Parent;

 

(vi)                              manage or maintain the levels and selections
of Inventory, operating hours, staffing levels, or merchandise mix, with respect
to the Acquired Stores in a manner other than in the ordinary course of business
consistent with past practice;

 

(vii)                           (A) grant any increase, or announce any
increase, in the wages, salaries, compensation, bonuses, incentives, pension or
other benefits payable to any Business Employee, including any increase or
change pursuant to any Employee Plan, except (i) amendments to Employee Plans
covering Business Employees and other employees of the Company and its
Affiliates (so long as the number of such other employees in any such Employee
Plan is not de minimis) that affect all participants generally as opposed to
solely affecting the Business Employees, (ii) in the ordinary course of business
consistent with past practice or (iii) as required by Law or the terms of any
Employee Plan or any Contract as in effect on the date hereof; provided, that
any increase or change pursuant taken pursuant to clauses (i) or (ii) shall not
increase the cost to Purchaser Sub of providing compensation and benefits to
Transferred Employees pursuant to Section 6.14(c) by more than three percent
(3%); (B) intentionally, materially and adversely alter the working conditions,
staffing levels and training of employees at the Acquired Stores or the
Distribution Centers; (C) with respect to the Acquired Stores or the
Distribution Centers, fail to use commercially reasonable efforts to retain
employees and replace employees when vacancies occur in the ordinary course of
business, consistent with past practice; (D) hire, promote or transfer the
employment of any person who is not a Business Employee so as such person
becomes a Business Employee (except in the ordinary course of business);
(E) except as required by any CBA under which the Company or its subsidiaries
operates, transfer the employment of any Business Employee outside of the
Acquired Stores and Distribution Centers (except as a result of such Business
Employee applying, and being selected in a competitive process not targeted at
such Business Employee, for a position within the Company or its Affiliates  at
a location that is at least 50 miles from such Business Employee’s primary work
location prior to such transfer); or (F) terminate the employment of any
Business Employee (other than in the ordinary course of business) or any Key
Business Employee (other than for cause);

 

(viii)                        terminate, waive, modify or fail to renew any
existing Pharmacy Approval or other Material Permit, except in the ordinary
course of business;

 

(ix)                              acquire, by merger or consolidation with, or
by purchase of all or a substantial portion of the assets or equity of, or by
any other manner, any business or entity which would constitute a Purchased
Asset or Assumed Liability;

 

(x)                                 waive any claim or compromise, settle or
agree to settle any Proceeding related to the Acquired Stores or the
Distribution Centers that would result in an admission of liability or remedies
or payment obligations that would be binding on

 

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Parent or Purchaser Sub following the Closing, Subsequent Closing or
Distribution Center Closing, as applicable;

 

(xi)                              make or change any material Tax election with
respect to the Purchased Assets, change an annual accounting period or consent
to any extension or waiver of the limitation period applicable to any Tax claim
or assessment relating to the Purchased Assets if such election, change or
consent would reasonably be expected to have any material adverse Tax effect on
Parent, Purchaser Sub or any Affiliate thereof with respect to the Purchased
Assets after the Closing or any Subsequent Closing, as applicable;

 

(xii)                           display any signs or conduct any advertising
(e.g., direct mailing, point-of-purchase coupons) that indicates that the
Company or any of the Company’s Affiliates is moving its operations at any of
the Acquired Stores to another location or indicating that such Acquired Store
will close;

 

(xiii)                        conduct any “going out of business,” “close-out,”
“liquidation,” or similar sales or promotions at or relating to any Acquired
Store;

 

(xiv)                       voluntarily recognize any union or other labor
organization as the representative of any of the Business Employees or
voluntarily enter into any new or amended collective bargaining agreement or
other agreement with any labor organization or other representative with respect
to the Acquired Stores or Distribution Centers;

 

(xv)                          not modify privacy or security policies or
operations in any manner that would reasonably be expected to materially weaken
or impair the protection or security of networks, systems, or data, in each case
related to the Purchased Assets;

 

(xvi)                       conduct any facility closure or mass layoffs 
involving the Acquired Stores or the Distribution Centers which triggers the
application of the WARN Act or any similar state or local law requiring advance
notice of such action and/or payments to affected employees; or

 

(xvii)                    enter into any commitment with respect to any of the
foregoing actions described in Section 5.1(i) through Section 5.1(xvi).

 

SECTION 5.2                                             No Control of Company’s
Business.  Nothing in Section 5.1 shall be deemed to limit the transfer of
Excluded Assets prior to the Closing (or, with respect to the Acquired Stores to
be transferred at a Subsequent Closing, such Subsequent Closing and to the
extent related to the portion of the Distribution Centers related to the
Purchased Assets, the Distribution Center Closing) or the conduct by the Company
of its other businesses to the extent unrelated to the Acquired Stores or the
Distribution Centers. Nothing contained in this Agreement shall give Parent or
Purchaser Sub, directly or indirectly, the right to control or direct the
Company’s or its subsidiaries’ operations prior to the Closing.  Prior to the
Closing, the Company shall have the right to exercise, consistent with the terms
and conditions of this Agreement, complete unilateral control and supervision
over its and its subsidiaries’ business and operations.

 

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ARTICLE VI

 

ADDITIONAL AGREEMENTS

 

SECTION 6.1                                             Competing Transaction
Proposals; Acquisition Proposals.

 

(a)                                 Competing Transaction Proposals.

 

(i)                                     The Company shall not, and shall cause
its subsidiaries and its and its subsidiaries’ Representatives not to, directly
or indirectly, (i) initiate, solicit, knowingly encourage, knowingly induce or
knowingly facilitate (including by providing non-public information relating to
the Company and its subsidiaries) the making of any Competing Transaction
Proposal or any inquiry, offer or proposal that would reasonably be expected to
lead to a Competing Transaction Proposal; (ii) engage or otherwise participate
in any negotiations or discussions concerning, or provide access to its
properties, books and records or any confidential or nonpublic information or
data to, any Person in connection with, relating to or for the purpose of
encouraging or facilitating a Competing Transaction Proposal or any inquiry,
offer or proposal that would reasonably be expected to lead to a Competing
Transaction Proposal; (iii) approve, endorse or recommend, or propose publicly
to approve, endorse or recommend, any Competing Transaction Proposal; or
(iv) execute or enter into any letter of intent, agreement in principle, merger
agreement, acquisition agreement or other similar written or oral agreement
relating to any Competing Transaction Proposal (each, a “Competing Transaction
Agreement”), and the Company shall not resolve or agree to do any of the
foregoing.  Without limiting the foregoing, it is agreed that any violation of
any of the restrictions set forth in the preceding sentence by any
Representatives of the Company or any of its subsidiaries shall be a breach of
this Section 6.1 by the Company.

 

(ii)                                  For purposes of this Agreement, “Competing
Transaction Proposal” means any proposal or offer from any Person or group of
Persons (other than Parent) relating to any business combination, sale
transaction or similar transaction that involves the sale or disposition,
directly or indirectly, of the Purchased Assets or any material portion thereof
(whether by merger, consolidation, dissolution, liquidation, recapitalization,
reorganization, share exchange, business combination, purchase or other similar
transaction); provided, however, that any transaction in which any remaining
obligations of the Company under this Agreement, the Transition Services
Agreement and the Transitional Trademark License Agreement will be assumed
(including by operation of Law, if applicable) shall not be considered a
Competing Transaction Proposal.

 

(b)                                 Acquisition Proposals.

 

(i)                                     From the date hereof until the sixty
(60) day anniversary of the date hereof (the “Non-Solicitation Period”), the
Company shall not, and shall cause its subsidiaries and its and its
subsidiaries’ Representatives not to, directly or indirectly, (i) initiate,
solicit, knowingly encourage, knowingly induce or knowingly facilitate
(including by providing non-public information relating to the Company and its

 

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subsidiaries) the making of any Acquisition Proposal or any inquiry, offer or
proposal that would reasonably be expected to lead to an Acquisition Proposal or
(ii) engage or otherwise participate in any negotiations or discussions (other
than, in response to a bona fide Acquisition Proposal or other inquiry, offer or
proposal after the date hereof that was not initiated, solicited, encouraged or
facilitated in, and did not otherwise result from a, material violation of this
Section 6.1(b), contacting such Person and its advisors for the purpose of
clarifying the material terms of any such Acquisition Proposal or inquiry, offer
or proposal and the likelihood and timing of consummation thereof) concerning,
or provide access to its properties, books and records or any confidential or
nonpublic information or data to, any Person in connection with, relating to or
for the purpose of encouraging or facilitating an Acquisition Proposal or any
inquiry, offer or proposal that would reasonably be expected to lead to an
Acquisition Proposal, and the Company shall not resolve or agree to do any of
the foregoing.  Without limiting the foregoing, it is agreed that any violation
of any of the restrictions set forth in the preceding sentence by any
Representatives of the Company or any of its subsidiaries shall be a breach of
this Section 6.1(b) by the Company.

 

(ii)                                  Notwithstanding anything to the contrary
in this Agreement, nothing contained herein shall prevent the Company or the
Company Board from (1) taking and disclosing to its stockholders a position
contemplated by Rule 14d-9 and Rule 14e-2(a) promulgated under the Exchange Act
(or any similar communication to stockholders in connection with the making or
amendment of a tender offer or exchange offer, in each case, to the extent
legally required) or from making any other disclosure to stockholders,
(2) providing access to its properties, books and records and providing any
confidential or non-public information or data (A) during the Non-Solicitation
Period, in response to a request therefor by a Person or group who has made a
bona fide Acquisition Proposal after the date hereof and was not initiated,
solicited, encouraged or facilitated in, and did not otherwise result from a,
material violation of this Section 6.1(b), or (B) following the Non-Solicitation
Period, without limitation or (3) engaging in any negotiations or discussions
with any Person and its Representatives (A) during the Non-Solicitation Period,
who has made a bona fide Acquisition Proposal after the date hereof and was not
initiated, solicited, encouraged or facilitated in, and did not otherwise result
from a, material violation of this Section 6.1(b) or (B) following the
Non-Solicitation Period, without limitation, if, in the case of each of (1),
(2) or (3), during the Non-Solicitation Period, the Company Board shall have
determined in good faith, after consultation with its outside legal counsel,
that the failure to take such action or make such disclosure would be reasonably
likely to be inconsistent with the Company Board’s fiduciary duties under
applicable Law or following the Non-Solicitation Period, without limitation.

 

(iii)                               Notwithstanding anything in this Agreement
to the contrary, if, at any time during the Non-Solicitation Period the Company
Board determines in good faith, after consultation with its outside legal
counsel, in response to a bona fide Acquisition Proposal that was made after the
date hereof and was not initiated, solicited, encouraged or facilitated in, and
did not otherwise result from a, material violation of this Section 6.1(b), that
the failure to take such action would be reasonably likely to be inconsistent
with the Company Board’s fiduciary duties under applicable Law, the

 

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Company or the Company Board may (and may resolve or agree to) enter into a
definitive merger agreement, acquisition agreement or other similar written
agreement relating to any Acquisition Proposal (an “Alternative Acquisition
Agreement”), subject to clauses (iv) and (v) below.

 

(iv)                              During the Non-Solicitation Period, the terms
of any Alternative Acquisition Agreement, and following the Non-Solicitation
Period until the end of the Transition Period (as defined in the Transition
Services Agreement), any definitive agreement relating to an Acquisition
Proposal, in each case shall provide that the Person or group making such
Acquisition Proposal shall, upon consummation of such agreement, assume
(including by operation of Law, if applicable) any remaining obligations of the
Company under this Agreement, the Transition Services Agreement and the
Transitional Trademark License Agreement.

 

(v)                                 The Company will not be entitled to enter
into an Alternative Acquisition Agreement or a definitive agreement relating to
an Acquisition Proposal, in each case prior to the Closing unless the Company
delivers to Parent a written notice (a “Company Notice”), advising Parent that
the Company Board proposes to take such action and containing the material terms
and conditions of the Acquisition Proposal that are reasonably relevant to
Parent (including the identity of the party making such Acquisition Proposal and
copies of the portions of any written proposals or offers, including proposed
agreements that are reasonably relevant to Parent) during the period starting on
the fifth (5th) Business Day prior to, and ending on the first (1st) Business
Day following the execution of any such Alternative Acquisition Agreement or
definitive agreement relating to an Acquisition Proposal, as applicable (the
“Notice Period”).

 

(vi)                              The Company agrees to notify Parent promptly
if it determines during the Notice Period not to enter into the Alternative
Acquisition Agreement referred to in the Company Notice.  Any amendment to the
financial terms or any other material amendment to the terms and conditions of a
proposed Alternative Acquisition Agreement that are reasonably relevant to
Parent will be deemed to be a new proposal or proposed Alternative Acquisition
Agreement for purposes of this Section 6.1(b) requiring a new Company Notice and
an additional Notice Period; provided, however, that such additional Notice
Period shall expire at 11:59 p.m., New York City time, on the second (2nd)
Business Day immediately following the day on which the Company delivers such
new Company Notice (it being understood and agreed that in no event shall any
such additional two (2) Business Day Notice Period be deemed to shorten the
initial Notice Period).

 

(vii)                           For purposes of this Agreement, “Acquisition
Proposal” means any proposal or offer (including a tender offer or exchange
offer) from any Person or group of Persons (other than Parent or Merger Sub)
relating to (A) any merger, consolidation, dissolution, liquidation,
recapitalization, reorganization, share exchange, business combination,
purchase, or similar transaction with respect to the Company or (B) any direct
or indirect acquisition or purchase, in one transaction or a series of related
transactions, of assets (including equity securities of any subsidiary of the
Company) or businesses that constitute all or substantially all of the
consolidated revenues, net income

 

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or assets of the Company and its subsidiaries, taken as a whole, after taking
into account the effect of the transactions contemplated by this Agreement, or
fifty percent (50%) or more of the total voting power of the equity securities
of the Company.

 

SECTION 6.2                                             Further Action; Efforts.

 

(a)                                 Subject to the terms and conditions of this
Agreement, including Section 6.2(d) and Section 6.2(e), each party shall use its
reasonable best efforts to take, or cause to be taken, and to assist and
cooperate with the other parties in taking or causing to be taken, all actions
and to use its reasonable best efforts to do, or cause to be done, all things
reasonably necessary, proper or advisable under this Agreement and applicable
Law to complete and make effective the sale of the Purchased Assets and the
other transactions contemplated by this Agreement in the most expeditious manner
practicable.  Without limiting the foregoing sentence, each party agrees to
(i) (A) within five (5) Business Days after the date of this Agreement (unless a
later time is mutually agreed between the Parties), make appropriate filings of
“Notification and Report Forms” pursuant to the HSR Act (the “HSR Filing”),
(B) as promptly as practicable after the date of this Agreement (unless a later
time is mutually agreed between the Parties), make appropriate filings with
appropriate insurance Governmental Entities and (C) as promptly as practicable
and advisable, after the date of this Agreement, make appropriate filings under
any Healthcare Law that are necessary or advisable in connection with the
completion of the transactions contemplated by this Agreement; and (ii) as
promptly as practicable and advisable, after the date of this Agreement, prepare
and submit all other filings, notifications, information updates and other
presentations required by or in connection with seeking, and obtain, all
consents, approvals, clearances, expirations or terminations of waiting periods,
non-actions, waivers, exemptions, Permits, orders, change of ownership approvals
or other authorizations (“Consents”) from any Governmental Entity or other third
party, in each case that are necessary or advisable in connection with the
completion of the transactions contemplated by this Agreement (including
Pharmacy Approvals), and to assist and cooperate with the other party in
connection with the foregoing; provided, that the Company shall have no
obligation to pay any fee to any third party for the purpose of obtaining any
such Consent, or pay any costs and expenses of any third party resulting from
the process of obtaining such Consent.  Each of Parent and the Company shall use
its commercially reasonable efforts to give all notices to, and obtain all
consents from, all landlords party to the Acquired Leases, and the Parties shall
bear the costs of any payments made to landlords party to the Acquired Leases in
accordance with Section 2.2(e).  Upon request from the Company, Parent agrees to
provide a guarantee of Purchaser Sub’s obligations under any or all of the
Acquired Leases in form and substance reasonably satisfactory to the landlord
party to such Acquired Lease and the Company.  Parent and Purchaser Sub shall
collectively be solely responsible for all filing fees and other costs
associated with such requests and applications, including attorney fees and
other costs incurred by Parent and Purchaser Sub in connection with the
preparation of such requests and applications.  The Company shall not, and shall
not permit any of its subsidiaries to, engage in, publicly propose or enter into
any transaction that would reasonably be expected to (x) result in any material
delay in the obtaining or materially increase the risk of not obtaining any
required Consent from any Governmental Entity with respect to the transactions
contemplated by this Agreement or (y) materially increase the risk of any
Governmental Entity entering a Legal Restraint prohibiting or materially
delaying the completion of the transactions contemplated by this Agreement;
provided, that nothing in this Agreement shall limit the ability of the Company
or its Affiliates or

 

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subsidiaries to (i) engage in (A) “buy and operate” acquisitions involving
acquisitions of ten (10) or fewer Retail Pharmacies in one transaction or a
series of related transactions, or (B) “file buy” acquisitions, in the case of
clauses (A) and (B), in the ordinary course of business consistent with past
practice and after obtaining advice from the Company’s outside antitrust
counsel, who shall have previously consulted with Parent’s outside antitrust
counsel, that any such acquisition would not have the impact described in
clauses (x) or (y) above, (ii) engage in or enter into any agreement providing
for any acquisition (whether by merger, consolidation, business combination or
otherwise) of the assets or equity interests of any Person that does not engage
in commerce or affect commerce in the U.S. or (iii) engage in, consummate or
enter into an Alternative Acquisition Proposal, or following the
Non-Solicitation Period, engage in, enter into or consummate a definitive
agreement relating to an Acquisition Proposal, in each case, in accordance with
Section 6.1. Parent shall not, and shall not permit any of its subsidiaries to,
engage in or enter into any acquisition (whether by merger, consolidation,
business combination or otherwise) of the assets or equity interests of any
Person involving the acquisition of Retail Pharmacies in the U.S., provided,
that nothing in this Agreement shall limit the ability of Parent or its
Affiliates or subsidiaries to (i) engage in (A) “buy and operate” acquisitions
involving acquisitions of ten (10) or fewer Retail Pharmacies in one transaction
or a series of related transactions, or (B) “file buy” acquisitions, in the case
of clauses (A) and (B), in the ordinary course of business consistent with past
practice and after obtaining advice from Parent’s outside antitrust counsel, who
shall have previously consulted with the Company’s antitrust counsel, that any
such acquisition would not have the impact described in clauses (x) or (y) in
the preceding sentence, (ii) engage in or enter into any agreement providing for
any acquisition (whether by merger, consolidation, business combination or
otherwise) of the assets or equity interests of any Person that does not engage
in commerce or affect commerce in the U.S. or (iii) engage in, consummate or
enter into any agreement providing for any of the transactions set forth on
Section 6.2(a) of the Parent Disclosure Schedules.

 

(b)                                 Subject to Section 6.2(d) and
Section 6.2(e), each of Parent, on the one hand, and the Company, on the other
hand, shall in connection with the reasonable best efforts referenced in
Section 6.2(a) and Section 6.2(c), as applicable, (i) cooperate in all respects
with each other and their respective Representatives in connection with any
filing or submission and in connection with any Proceeding by or before a
Governmental Entity, including any Proceeding initiated by a private party;
(ii) promptly inform the other party and/or its counsel, and provide copies, of
any substantive communication received by such party from, or given by such
party to, the Federal Trade Commission (the “FTC”), the Antitrust Division of
the Department of Justice (the “DOJ”) or any other Governmental Entity or such
private party, in each case regarding any such filing, submission, Proceeding or
the transactions contemplated hereby; (iii) comply, as early as practicable,
with any request for information, documents or other materials received by such
Party or any of its subsidiaries from the FTC, the DOJ or any such other
Governmental Entity, and without limiting the foregoing, to the extent there is
a Request for Additional Information from the FTC or DOJ (a “Second Request”)
following the HSR Filing, the parties shall certify substantial compliance with
the Second Request no later than sixty (60) days following receipt of the Second
Request; (iv) not directly or indirectly extend any waiting period under the HSR
Act or agree to any timing agreement with the FTC, DOJ or any other Governmental
Entity, in each case except with the prior written consent of the other Party
(such consent not to be unreasonably withheld, conditioned or delayed);
(v) permit the other party and/or its counsel to review and discuss reasonably
in advance, and consider in

 

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good faith the views of the other party and/or its counsel in connection with,
any proposed substantive communication to be given by it to the DOJ, the FTC or
any such other Governmental Entity or, in connection with any Proceeding by such
private party, any other person; and (vi) to the extent not prohibited by the
DOJ, the FTC or such other Governmental Entity, give the other party and/or its
counsel reasonable advance notice of any in-person meeting, and any conference
call that is initiated by such Party or scheduled in advance, with such
Governmental Entity or such private party and not participate independently
therein without first giving the other party and/or its counsel reasonable
opportunity to attend and participate therein or, in the event such other party
and/or its counsel does not attend or participate therein, consulting with such
other party and/or its counsel reasonably in advance and considering in good
faith the views of such other party and/or its counsel in connection therewith. 
Parent and the Company may, as each deems advisable and necessary, reasonably
designate any competitively sensitive material provided to the other under this
Section 6.2(b) as “Antitrust Counsel Only Material.”  Such materials and the
information contained therein shall be given only to the outside antitrust
counsel (or previously agreed outside consultant, as applicable) of the
recipient and shall not be disclosed by such outside counsel (or previously
agreed outside consultant, as applicable) to employees, officers or directors of
the recipient unless express permission is obtained in advance from the source
of the materials (Parent or the Company, as the case may be) or its legal
counsel.  Materials provided by a Party to the other Party pursuant to this
Section 6.2(b) may be redacted (x) to remove references concerning the valuation
of Parent, the Company or any of their respective subsidiaries, (y) as necessary
to comply with contractual arrangements and (z) as necessary to address
privilege or confidentiality concerns.

 

(c)                                  Subject to Section 6.2(d) and
Section 6.2(e), in the event that any Proceeding is commenced or threatened by a
Governmental Entity or other Person challenging the transactions contemplated by
this Agreement under Antitrust Law, each of Parent and the Company shall
cooperate in all material respects with each other in connection therewith and
use its respective reasonable best efforts in the most expeditious manner
practicable to (i) contest, resist, oppose and resolve any such Proceeding; and
(ii) avoid the entry of or have vacated, lifted, reversed or overturned any
Legal Restraint that would reasonably be expected to prevent, make illegal,
prohibit, restrain, enjoin, materially delay or materially impair completion of
the transactions contemplated by this Agreement.  To the extent necessary to
obtain the requisite Consents of Governmental Entities under Section 6.2(a) or
take the other actions contemplated under this Section 6.2(c) sufficiently in
advance of the End Date (taking into account any extension) to permit the
completion of the transactions contemplated by this Agreement by the End Date
(taking into account any extension), the Company shall commence to take the
actions contemplated under this Section 6.2(c) no later than four (4) months
after the date of this Agreement.

 

(d)                                 Notwithstanding anything in this Agreement
to the contrary, nothing in this Agreement shall require Parent or any of its
Affiliates to, (A) (1) sell, lease, license, transfer, dispose of, divest or
otherwise encumber, or hold separate pending any such action, or (2) proffer,
propose, negotiate, substitute, offer to effect or consent, commit or agree to
any sale, lease, licensing, transfer, disposal, divestiture, or other
encumbrance of, or hold separate, in each case before or after the Closing, the
Purchased Assets or the assets, licenses, properties, businesses and interests
of Parent and any of its Affiliates or (B) take or agree to take any other
action, and agree or consent to any limitations or restrictions on freedom of
actions with respect

 

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to, or its ability to own, control, retain or make changes in, the Purchased
Assets or the assets, licenses, properties, businesses and interests of Parent
or its Affiliates; provided, that in each case to the extent necessary in order
to obtain the requisite Consents of Governmental Entities, Parent and the
Company shall, and shall cause their respective subsidiaries to, in the most
expeditious manner practicable, agree to replace up to 150 stores included
within the Acquired Stores with other stores of the Company, which stores are
mutually agreed upon in good faith by the Company and Parent, and each such
replacement store shall thereafter be deemed an Acquired Store for purposes
hereof and shall be subject to an Acquired Store Scheduled Closing Date as the
Parties shall reasonably agree with respect to such replacement store (the “Swap
Remedy”), and to the extent such stores are not replaced, to exclude up to 150
stores from the Acquired Stores (and the Purchase Price shall be reduced as set
forth on Section 2.2 of the Company Disclosure Schedules (and the amounts
payable pursuant to Section 2.7 shall be reduced accordingly)) and provided,
further, in the event that, if following Parent and the Company first attempting
to utilize the Swap Remedy, it is necessary for the Company to retain certain
Acquired Stores (not to exceed an amount of stores equal to 150 minus the number
of stores that were replaced in the Swap Remedy) in order for the Parties to
obtain any required Consent from any Governmental Entity with respect to the
transactions contemplated by this Agreement, Parent, in consultation with the
Company, shall, sufficiently in advance of the End Date to permit the completion
of the transactions contemplated by this Agreement by the End Date, and no later
than within four (4) months from the date of this Agreement, designate such
Acquired Stores, and such designated Acquired Stores and all of the related
assets shall be retained by the Company and the Purchase Price shall be reduced
as set forth on Section 2.2 of the Company Disclosure Schedules (and the amounts
payable pursuant to Section 2.7 shall be reduced accordingly).

 

(e)                                  Notwithstanding anything in this Agreement
to the contrary, with respect to the matters covered in this Section 6.2, it is
agreed that Parent and the Company shall jointly make all strategic decisions
and jointly participate in all discussions, negotiations and other proceedings,
and jointly coordinate all activities with respect to any requests that may be
made by, or any actions, consents, undertakings, approvals, or waivers that may
be sought by or from, any Governmental Entity, including determining the
strategy for contesting, litigating or otherwise responding to objections to, or
Proceedings challenging, the completion of the transactions contemplated by this
Agreement.  Each of the Company and Parent shall not, and shall not permit any
of their respective Representatives to, make any offer, acceptance or counter
offer to or otherwise engage in negotiations or discussions with any
Governmental Entity with respect to any proposed settlement, consent decree,
commitment or remedy or, in the event of litigation, discovery, admissibility of
evidence, timing or scheduling, except as specifically requested by or agreed
with such other Party.

 

(f)                                   Each of Parent and the Company shall
provide commercially reasonable cooperation and assistance to Parent and its
Affiliates and Representatives with Parent’s timely preparation and submission
of any request or application for any consent or approval required of Parent,
including the Pharmacy Approvals and any consent or approval with respect to any
Government Program.

 

SECTION 6.3                                             Notification of Certain
Matters.  The Company and Parent shall each give prompt notice to the other
Party of (a) any written notice or other written communication

 

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received from any Governmental Entity in connection with the transactions
contemplated hereby or from any other Person, in each case alleging that the
consent of such Person is or may be required in connection with the transactions
contemplated by this Agreement, and (b) any Proceedings commenced or, to the
Company’s or Parent’s knowledge, respectively, threatened, which relate to the
transactions contemplated hereby, in each case of clauses (a) and (b) other than
with respect to Antitrust Laws, which are the subject of Section 6.2; provided,
however, that the delivery of any notice pursuant to this Section 6.3 shall not
(i) affect the representations, warranties, covenants or agreements of the
Parties or the conditions to the obligations of the Parties under this Agreement
or (ii) limit the remedies available to the Party receiving such notification.

 

SECTION 6.4                                             Taxes.

 

(a)                                 Liability for Taxes.  The Company shall be
liable for and shall pay all Taxes imposed with respect to the conduct of the
business of the Acquired Stores or the ownership or use of the Purchased Assets
at or prior to the Closing (or each Subsequent Closing or Distribution Center
Closing, as applicable); provided, however, that the Company shall not be liable
for or pay Transfer Taxes described in Section 2.2(d) for which Parent is
responsible.  Parent shall be liable for and shall pay all Taxes imposed with
respect to the conduct of the business of the Acquired Stores or the ownership
or use of the Purchased Assets after the Closing (or each Subsequent Closing
Date or Distribution Center Closing, as applicable). Notwithstanding anything to
the contrary in this Section 6.4, the provisions of Section 2.6 (Prorations)
shall control with respect to the Tax matters addressed therein.

 

(b)                                 The Company, on the one hand, or Parent, on
the other hand, as the case may be, shall indemnify and provide reimbursement
for any Tax paid by one party all or a portion of which is the responsibility of
the other party in accordance with the terms of this Section 6.4.  Within a
reasonable time prior to the payment of any such Tax, the party paying such Tax
shall give notice to the other party of the Tax payable and the portion which is
the liability of each party, although failure to do so will not relieve the
other party from its liability hereunder.

 

(c)                                  Parent shall promptly notify the Company in
writing upon receipt by Parent or any of its Affiliates of notice of any pending
or threatened federal, state, local or foreign Tax audits, examinations or
assessments which may materially affect the amount of any Tax which is, in whole
or in part, an Excluded Liability; provided, however, that the failure to
promptly give such notice to the Company shall not affect the rights of Parent
or any of its Affiliates to indemnification hereunder except to the extent the
Company has been materially prejudiced as a result of such failure.  The Company
shall have the sole right to control any Tax audit or administrative or court
proceeding relating to any Tax which is wholly an Excluded Liability and is not
reasonably expected to result in any liability of Parent or any Affiliate for
which Parent or such Affiliate would not be fully indemnified pursuant to this
Agreement, and to employ counsel of its choice at its expense; provided, that
the Company shall not settle any such audit or proceeding without the prior
written consent of Parent, which consent shall not be unreasonably withheld,
conditioned or delayed.  With respect to any other such audit or proceeding in
respect of Taxes which are, in whole or in part, an Excluded Liability, neither
Parent nor any of its Affiliates shall settle such audit or proceeding without
the prior written

 

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consent of the Company, which consent shall not be unreasonably withheld,
conditioned or delayed.

 

(d)                                 Subject to Section 6.6(d) of this Agreement,
after the Closing Date, each of the Company and Parent shall use reasonable
efforts to (and shall use reasonable efforts to cause their respective
Affiliates to): (i) assist the other party in preparing any Tax Returns in
respect of the business conducted at the Acquired Stores or the Purchased Assets
which such other party is responsible for preparing and filing; (ii) cooperate
fully in preparing for any audits of, or disputes with taxing authorities
regarding, any Tax Returns in respect of the Acquired Stores or the Purchased
Assets; (iii) make available to the other party and to any taxing authority as
reasonably requested all information, records, and documents relating to Taxes
in respect of the Acquired Stores or the Purchased Assets; (iv) provide timely
notice to the other party in writing of any pending or threatened Tax audits or
assessments relating to Taxes in respect of the Acquired Stores or the Purchased
Assets for taxable periods for which the other party may have a liability under
this Section 6.4; and (v) furnish the other party with copies of all
correspondence received from any taxing authority in connection with any Tax
audit or information request with respect to any such taxable period.

 

(e)                                  The provisions of this Section 6.4 shall
survive until sixty (60) days after the expiration of the applicable statute of
limitations. To the extent that the procedures described in Section 9.3 conflict
with this Section 6.4, this Section 6.4 shall control.

 

SECTION 6.5                                             Ancillary Agreements.

 

(a)                                 At or prior to the Closing, Parent,
Purchaser Sub and the Company shall execute and deliver the Transition Services
Agreement substantially in the form attached as Exhibit B (the “Transition
Services Agreement”).

 

(b)                                 At or prior to Closing and each Subsequent
Closing or Distribution Center Closing (as applicable), the Company and
Purchaser Sub shall execute and deliver an executed bill of sale, assignment,
transfer, conveyance and assumption in respect of the Purchased Assets and
Assumed Liabilities as is necessary to effect the transactions contemplated by
the Transaction Agreements substantially in the form attached as Exhibit C or
Exhibit D as applicable (the “Bill of Sale, Assignment and Assumption
Agreement”).

 

(c)                                  At or prior to the Closing, the Company and
Purchaser Sub shall execute and deliver the Transitional Trademark License
Agreement substantially in the form attached as Exhibit E (the “Transitional
Trademark License Agreement”).

 

(d)                                 At or prior to the Closing, Parent and the
Company shall execute and deliver the WBAD Supply Agreement on terms
substantially consistent with the terms set forth in Exhibit F (the “Supply
Agreement”).

 

SECTION 6.6                                             Access to Information
and Employees and Cooperation; Confidentiality.

 

(a)                                 From the date of this Agreement until the
Closing (or with respect to clauses (i) (solely with respect to personnel files)
and (ii), from the applicable Employee Data

 

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Trigger Date) (and, with respect to the Acquired Stores to be transferred at
each Subsequent Closing, each Subsequent Closing and the Distribution Centers to
be transferred at the Distribution Center Closing, the Distribution Center
Closing), upon reasonable prior written notice, and except as determined in good
faith to be appropriate to ensure compliance with any applicable Laws and
subject to any applicable privileges (including the attorney-client privilege)
and contractual confidentiality obligations (provided such good faith
determination is made after the Company shall have used commercially reasonable
efforts to make appropriate substitute arrangements under circumstances in which
the restrictions of this clause would apply), the Company shall, and shall use
reasonable best efforts to cause its Affiliates and Representatives to
(i) afford the Representatives of Parent reasonable access, during normal
business hours, to the offices, properties, books and records (including the
personnel files, training and compliance records, and Form I-9s of the
Transferred Employees) of the Acquired Stores, subject to written consent to the
extent required by applicable Law; (ii) afford the Representatives of Parent
reasonable access to each employee who is a retail operations or pharmacy field
regional leader or a field regional support member, serving in a function
related to asset protection, human resources or administration in one or more
regions, with respect to whom Acquired Stores comprise 50% or more of the total
stores assigned to such leader or team member, and any other Company employee
mutually agreed between the Company and Purchaser Sub, for purposes of
interviewing such employees for open regional leader positions or other open
area positions with Purchaser Sub (each such person, a “Choice Employee”);
(iii) furnish to the Representatives of Parent such additional financial and
operating data and other information regarding the Acquired Stores as Parent may
from time to time reasonably request (provided, however, no carve-out financial
statements shall be required to be prepared); and (iv) make available to the
Representatives of Parent and its Affiliates, during normal business hours,
those employees of the Company and its Affiliates whose assistance, expertise,
testimony, notes and recollections or presence may be reasonably necessary to
assist Parent, its Affiliates or its or their respective Representatives in
connection with its reasonable inquiries, including the presence of such persons
as witnesses in hearings or trials for such purposes; provided, however, that
such investigation shall not unreasonably interfere with any of the businesses
or operations of the Company or any of its Affiliates; provided, further, that
the auditors and accountants of the Company or any of its Affiliates shall not
be obliged to make any work papers available to any Person unless and until such
Person has signed a customary agreement relating to such access to work papers
in form and substance reasonably acceptable to such auditors or accountants.  If
so requested by the Company, Parent shall enter into a customary joint defense
agreement with the Company with respect to any information to be provided to
Parent pursuant to this Section 6.6(a).

 

(b)                                 From and after the Closing Date, in
connection with any reasonable business purpose, including the preparation of
any financial statements or Tax Returns, any audit or other examination by any
taxing authority, any judicial or administrative proceedings relating to Taxes,
claims relating to Assumed Liabilities or Excluded Liabilities, financial
statements, or the determination of any matter relating to the rights or
obligations of the Parties or any of their respective Affiliates under any of
the Transaction Agreements, upon reasonable prior written notice, and except as
determined in good faith to be necessary to (i) ensure compliance with any
applicable Law, (ii) preserve any applicable privilege (including the
attorney-client privilege), or (iii) comply with any contractual confidentiality
obligations, each Party shall, and shall use reasonable best efforts to cause
its Affiliates and its Representatives to, (A) afford the

 

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Representatives of the other Party and its Affiliates reasonable assistance and
reasonable access, during normal business hours, to the offices, properties,
books and records of such Party and its Affiliates in respect of the Acquired
Stores and the Purchased Assets (and related Liabilities), (B) retain and
furnish to the Representatives of the other Party and its Affiliates such
additional financial and other information regarding the Acquired Stores and the
Purchased Assets (and related Liabilities) as such Party or its Representatives
may from time to time reasonably request and abide by all record retention
agreements entered into with any taxing authority with respect thereto, (C) make
available to the Representatives of the other Party and its Affiliates, during
normal business hours, those employees of such Party and its Affiliates whose
assistance, expertise, testimony, notes and recollections or presence may be
reasonably necessary to assist the other Party, its Affiliates or its or their
respective Representatives in connection with its reasonable inquiries,
including the presence of such persons as witnesses in hearings or trials for
such purposes and (D) in the case of the Company, give to the Representatives of
Parent and its Affiliates reasonable written notice prior to transferring,
destroying or discarding any books and records regarding the Acquired Stores and
the Purchased Assets (and related Liabilities) if such transferring, destroying
or discarding is not in compliance with the Company’s record retention policy
and, if requested and permissible by Law, allow Parent and its Affiliates to
take possession of such books and records; provided, however, that such
investigation shall not unreasonably interfere with the business or operations
of such Party or any of its Affiliates; provided, further, that the auditors and
accountants of each Party or its Affiliates shall not be obligated to make any
work papers available to any Person except in accordance with such auditors’ and
accountants’ normal disclosure procedures and then only after such Person has
signed a customary agreement relating to such access to work papers in form and
substance reasonably acceptable to such auditors or accountants.  If so
requested by either Party, the other Party or one of its Affiliates shall enter
into a customary joint defense agreement with such Party and its Affiliates with
respect to any information to be provided to such Party pursuant to this
Section 6.6(b).

 

(c)                                  Notwithstanding anything in this Agreement
to the contrary, no Party hereto shall be required, prior to the Closing, to
disclose, or cause the disclosure of, to any other Party or its Affiliates or
its or their Representatives (or provide access to any offices, properties,
books or records of such Party or any of their Affiliates that could result in
the disclosure to such persons or others of) any confidential information
relating to trade secrets, proprietary know-how, processes or patent, trademark,
trade name, service mark or copyright applications or product development, or
pricing and marketing plans, nor shall any Party be required to permit or cause
others to permit any other Party or its Affiliates or Representatives to have
access to or to copy or remove from the offices or properties of such Party or
any of its Affiliates any documents, drawings or other materials that might
reveal any such confidential information. With respect to the access granted
pursuant to this Section 6.6, each of Parent and Purchaser Sub will, and will
cause their respective Representatives to, comply with the terms and conditions
of (i) that certain letter agreement, dated March 3, 2015, by and between the
Company and Parent, as amended on May 17, 2017 (the “Confidentiality
Agreement”), which Confidentiality Agreement shall remain in full force and
effect in accordance with its terms and (ii) the Letter Agreement, dated May 19,
2017 (the “Letter Agreement”), by and between the Company and Parent.

 

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(d)                                 Notwithstanding anything to the contrary in
this Agreement, the Company shall have no obligation to provide any access to
information contained in any Tax Returns or records that does not relate
directly to the Purchased Assets, the Company shall be entitled to redact any
information contained in any such Tax Returns or records as the Company
determines necessary in good faith, and in no event shall the Company be
obligated to provide Parent or Purchaser Sub with access to any unitary,
consolidated, or other similar Tax Returns.

 

SECTION 6.7                                             Publicity.  Following
the execution of this Agreement, each of Parent and the Company shall issue an
initial press release regarding the transactions contemplated by this Agreement,
in each case subject to the other Party’s prior consent (such consent not to be
unreasonably withheld, conditioned or delayed), and thereafter neither the
Company nor Parent shall issue any press releases or otherwise make public
announcements with respect to the transactions contemplated by this Agreement
without the other Party’s prior consent (such consent not to be unreasonably
withheld, conditioned or delayed) in each case except as such release or
announcement may be required by Law or by the rules or regulations of any United
States securities exchange to which the relevant Party is subject, in which case
such Party shall use its reasonable best efforts to consult with the other Party
in advance of such release or announcement.  Notwithstanding anything to the
contrary contained in this Agreement, the restrictions in this Section 6.7 shall
not apply to any communication made by any Party in connection with any
Proceeding in which the Parties are adverse to each other.

 

SECTION 6.8                                             Use of Names.  Except as
expressly set forth in the Transitional Trademark License Agreement or
Section 1.1 (with respect to Trademarks, if any, included in the Purchased
Intellectual Property), the Company is not conveying ownership rights or
granting Purchaser Sub or Parent or their respective Affiliates a license to use
any of the tradenames, service marks or trademarks of the Company or any
Affiliate of the Company (collectively, the “Retained Names and Marks”) and,
after the Closing, Purchaser Sub, Parent and their respective Affiliates shall
not use in any manner the names or marks of the Company or any Affiliate of the
Company or any word, name or mark that is similar in sound or appearance to such
names or marks, except (i) the Intellectual Property set forth on
Section 1.1(m) of the Company Disclosure Schedules or as otherwise provided in
this Section 6.8 or (ii) as would constitute nominative fair use or otherwise be
permitted under applicable Law in the absence of the transactions contemplated
hereby.

 

SECTION 6.9                                             Cooperation.

 

(a)                                 Except as permitted by Article VIII, each of
the Company and Parent shall (i) execute and deliver, or shall cause to be
executed and delivered, such documents and other papers and shall take, or shall
cause to be taken, such further actions as may be reasonably required to carry
out the provisions of the Transaction Agreements and give effect to the
transactions contemplated by the Transaction Agreements and (ii) without
limiting the foregoing, use its commercially reasonable efforts to cause all of
the conditions to the obligations of the other Parties to consummate the
transactions contemplated by this Agreement to be met as promptly as
practicable; provided, however, that nothing in this Section 6.9(a) shall
require the Company or any of its Affiliates, on the one hand, or Parent or any
of its Affiliates, on the other hand, to pay money to, commence or participate
in any Proceeding with respect to, or offer or grant any accommodation
(financial or otherwise) to, any third Person.

 

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(b)                                 Each of the Company and Parent shall keep
each other reasonably apprised of the status of the matters relating to the
completion of the transactions contemplated by the Transaction Agreements,
including with respect to the negotiations relating to the satisfaction of the
conditions set forth in Article VII.  From time to time following the Closing,
the Company and Parent shall, and shall cause their respective Affiliates to,
execute, acknowledge and deliver all reasonable further conveyances, notices,
assumptions, releases and acquittances and such instruments, and shall take such
reasonable actions as may be necessary or appropriate to make effective the
transactions contemplated hereby as may be reasonably requested by the other
party.  Without limiting the generality of the foregoing, (i) if at any time
within five (5) years after the Closing (or Subsequent Closing or Distribution
Center Closing), Parent, on the one hand, or the Company, on the other hand,
discovers that any Purchased Asset or Assumed Liability was not included in the
Purchased Assets or Assumed Liabilities assigned to Parent at such time, then,
the Company will use reasonable best efforts to promptly procure the transfer of
the relevant Purchased Assets or Assumed Liabilities to Parent or Purchaser Sub
or an Affiliate of Purchaser Sub nominated by Purchaser Sub or (ii) if at any
time within five (5) years after the Closing, the Company, on the one hand, or
Parent, on the other hand, discovers that any Excluded Asset or Excluded
Liability is held by Parent, Purchaser Sub or an Affiliate of Purchaser Sub,
then, Parent will use reasonable best efforts to promptly procure the transfer
of the relevant Excluded Assets or Excluded Liabilities to the Company or an
Affiliate of the Company nominated by the Company; provided, that in the case of
clause (i), neither the Company or any of its Affiliates or, in the case of
clause (ii), neither Parent or any of its Affiliates, shall be required to
commence any litigation or offer or pay any money or otherwise grant any
accommodation (financial or otherwise) to any third party; provided, further,
that any transfer of Purchased Assets, Assumed Liabilities, Excluded Assets or
Excluded Liabilities pursuant to this Section 6.9 shall not result in any
adjustment to the Purchase Price.

 

SECTION 6.10                                      Non-Solicitation of
Employees.  During the period beginning as of the Closing Date and ending on the
date that is two (2) years from the Closing Date (the “Restricted Period”),
(i) the Company shall not, and shall cause its Affiliates not to, directly or
indirectly, solicit, or otherwise attempt to induce any Transferred Employee to
terminate his or her employment with Purchaser Sub or any of its Affiliates nor
induce any employees of the Company or the Company’s Affiliates who are offered
employment by Purchaser Sub or Parent pursuant to Section 6.14(a) to reject that
offer, and (ii) Parent and Purchaser Sub shall not, and shall cause their
respective Affiliates not to, directly or indirectly, solicit, or otherwise
attempt to induce any employee of the Company who is not a Transferred Employee
to terminate his or her employment with the Company or any of its Affiliates;
provided, however, that nothing in this Section 6.10 shall prohibit the Company,
Parent, Purchaser Sub or any of their respective Affiliates from taking the
following actions:

 

(a)                                 advertising for employees in newspapers,
trade publications, or other media, or engaging recruiters to conduct general
employee search activities, in either case not targeted specifically at
Transferred Employees or employees of the Company who are not Transferred
Employees, as applicable; or

 

(b)                                 hiring or communicating with any Transferred
Employee or employee of the Company who is not a Transferred Employee, as
applicable, who applies for employment with the Company or any of its
Affiliates, whether or not such employee was involuntarily

 

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terminated, so long as such employee was not solicited by the other Party or any
of its Affiliates in violation of this Section 6.10.

 

SECTION 6.11                                      Destruction of Purchased
Assets; Store Removal.  Notwithstanding any other provision herein, if any of
the Acquired Stores and/or Distribution Centers is rendered unsaleable or
unusable due to acts of God, including earthquakes, fire, hurricanes, tornadoes,
floods, tsunami, or other natural disasters or any other types of damage, at the
Company’s option, the Company may, on or before the Closing Date, Subsequent
Closing Date or Distribution Center Closing Date applicable to such Acquired
Store or Distribution Center (and in any case within thirty (30) days of such
act of God), restore such Acquired Stores and/or such Distribution Centers to
usable or salable condition substantially equivalent to the condition of such
Acquired Store or such Distribution Centers immediately prior to such act of God
(at the Company’s cost). If the Company restores such Acquired Store or
Distribution Center, then such Acquired Stores and/or such Distribution Center
shall be sold to Parent in accordance with and subject to the terms of this
Agreement. If the Company does not restore such Acquired Store or Distribution
Center, then at  Parent’s option, (i) such Acquired Stores and/or Distribution
Centers and all of the related assets shall be retained by the Company and the
Purchase Price shall be reduced as set forth on Section 2.2 of the Company
Disclosure Schedules (and the amounts payable pursuant to Section 2.7 shall be
reduced accordingly) or (ii) such Acquired Stores and/or such Distribution
Centers shall be sold to Purchaser Sub and the Parties shall negotiate in good
faith with respect to a reduction to the Purchase Price taking into account the
allocation of the Purchase Price attributed to such Acquired Stores and/or
Distribution Centers as set forth on Section 2.2 of the Company Disclosure
Schedules.  In the event Parent elects clause (i) with respect to an Acquired
Store or Distribution Center, the term “Acquired Stores” shall be deemed to be
modified to exclude any such store or the term “Distribution Centers” shall be
deemed to be modified to exclude any such Distribution Center, as applicable,
“Purchased Assets” shall be deemed to be modified to exclude any facility that
was to be “Purchased Assets” because such facility was an Acquired Store or a
Distribution Center and “Assumed Liabilities” shall be deemed to be modified to
exclude any Liabilities that were to be “Assumed Liabilities” because such
facility was an Acquired Store or a Distribution Center.  In the event that the
Company and Parent mutually agree that the Company shall not sell, transfer,
assign, convey or deliver to Purchaser Sub one or more Acquired Stores, the
Parties shall negotiate in good faith to amend the terms of this Agreement and
any other Transaction Agreement as necessary to appropriately reflect the terms
of such arrangement, and “Purchased Assets” shall be deemed to be modified to
exclude any facility that was to be “Purchased Assets” because such facility was
an Acquired Store, and “Assumed Liabilities” shall be deemed to be modified to
exclude any Liabilities that were to be “Assumed Liabilities” because such
facility was an Acquired Store.

 

SECTION 6.12                                      Restriction on Use of Customer
Data; Protection of Goodwill.

 

(a)                                 During the Restricted Period, the Company
shall not, and shall not permit any of its Affiliates to, directly or
indirectly, use Company Rx Data that is, or any other information or data that
is, in each case related to the Acquired Stores and regarding the applicable
client’s or customer’s behavior in an Acquired Store and acquired from or
through its acquisition hereunder, to specifically solicit any client or
customer of any of the Acquired Stores, in a manner intended to cause an adverse
effect to the relationship between such Acquired Store and such client or
customer, or to divert such client’s or customer’s business from any of the

 

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Acquired Stores.  In addition, during the Restricted Period, the Company shall
not, and shall not permit any of its Affiliates to, directly or indirectly,
solicit any supplier or licensor of any of the Acquired Stores to terminate or
adversely modify the relationship between Parent and such supplier or licensor.

 

(b)                                 During the Restricted Period, Parent and
Purchaser Sub shall not, and shall not permit any of their Affiliates to,
directly or indirectly, use Company Rx Data that is, or any other information or
data that is, in each case related to the Company’s retail stores that are not
Acquired Stores and regarding the applicable client’s or customer’s behavior in
a retail store of the Company that is not an Acquired Store and acquired from or
through Parent and Purchaser Sub’s acquisition of Acquired Stores hereunder, to
specifically solicit any client or customer of any of the Company’s retail
stores that are not Acquired Stores, in a manner intended to cause an adverse
effect to the relationship between such retail stores of the Company that are
not Acquired Store and such client or customer, or to divert such client’s or
customer’s business from any of the Company’s retail stores that are not
Acquired Stores.  In addition, during the Restricted Period, Parent and
Purchaser Sub shall not, and shall not permit any of their Affiliates to,
directly or indirectly, solicit any supplier or licensor of any of the Company’s
retail stores that are not Acquired Stores to terminate or adversely modify the
relationship between the Company and such supplier or licensor.

 

(c)                                  To protect the goodwill associated with the
Purchased Assets to be acquired by Parent and Purchaser Sub pursuant to this
Agreement and to ensure an orderly transition of the Purchased Assets to Parent
and Purchaser Sub, during the Restricted Period, the Company shall not, and
shall not permit any of its Affiliates to, directly or indirectly, lease,
acquire or operate a retail pharmacy within five (5) miles of any Acquired
Store; provided, that notwithstanding the foregoing, nothing herein shall
prevent the Company or any of its Affiliates from continuing to lease, own or
operate a retail pharmacy that is (i) owned, leased or operated by the Company
or any of its Affiliates as of the date of this Agreement and not an Acquired
Store, (ii) owned, leased or operated by the Company or any of its Affiliates as
a result of the acquisition of the Company by any Person or group of Persons
(other than Parent) after the date of this Agreement not in violation of
Section 6.1 or the acquisition by the Company of any Person or the assets of any
Person after the date of this Agreement not in violation of Section 6.2(a);
provided, that in each case such retail pharmacy is not operated under the
Retained Names and Marks and is owned, leased or operated by such Person as of
the date of such acquisition, (iii) relocated by the Company or its Affiliates
after the date of this Agreement to a location within five (5) miles of the
location thereof as of the date of this Agreement or (iv) set forth on
Section 6.12(c) of the Company Disclosure Schedules.

 

(d)                                 The Parties acknowledge that a breach or
threatened breach of this Section 6.12 would give rise to irreparable harm to
the other Parties hereto, for which monetary damages would not be an adequate
remedy, and hereby agree that in the event of a breach or a threatened breach by
a Party of any such obligations, the other Parties shall, in addition to any and
all other rights and remedies that may be available to such other Parties in
respect of such breach, be entitled to equitable relief, including a temporary
restraining order, an injunction, specific performance and any other relief that
may be available from a court of competent jurisdiction (without any requirement
to post bond).

 

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SECTION 6.13                                      Intercompany Leases.  On the
Closing Date or the applicable Subsequent Closing Date, the Company shall
deliver the Purchased Assets free and clear of any lease or sublease agreements
between any Affiliates of the Company, except for RediClinic in-store clinics as
set forth in Section 6.21.

 

SECTION 6.14                                      Employee Matters.

 

(a)                                 Purchaser Sub shall make an offer of
employment or communicate to each Business Employee its transfer of employment
to Purchaser Sub, in either case, in a manner reasonably determined by Purchaser
Sub, and the Company shall, upon request, use commercially reasonable efforts to
assist Purchaser Sub in preparing and delivering the applicable offer or
communication.  Such offer of employment or communication of transfer of
employment shall be provided to each Business Employee (as listed on an employee
census (the “Employee Census”)) at least five (5) Business Days prior to the
Closing Date, Subsequent Closing Date or Distribution Center Closing Date, as
applicable; provided, that in each case, any offer or transfer of employment
with respect to a Business Employee is subject to the condition that such
Business Employee is employed by the Company or an Affiliate of the Company on
the Closing Date, Subsequent Closing Date or Distribution Center Closing Date,
as applicable, and employment for such Business Employee shall begin on the
first Business Day following such date (the “Census Start Date”); provided,
further, that with respect to any Inactive Employee, any offer of employment or
communication of transfer of employment shall be made with a commencement date
of the date that such employee actively returns to work in accordance with the
applicable leave policy within twelve (12) months of the Closing Date,
Subsequent Closing Date or Distribution Center Closing Date, as applicable, and
if such Inactive Employee does not so return within twelve (12) months, then the
offer or communication of transfer shall expire or become invalid, as
applicable, unless required by Law to remain open for a longer period; provided,
further, that the Employee Census shall state each Business Employee’s name,
title, current service credit with the Company and its Affiliates,
classification, salary or pay rate, short-term and long-term bonus eligibility,
status with respect to whether he or she is currently an Inactive Employee (and
the reason such Business Employee is in Inactive Employee status) and each
Employee Plan for which such Business Employee is then eligible.  Each offer of
employment or transfer of employment shall be for a substantially comparable
position held by such Business Employee (subject to the requirements of any
applicable collective bargaining agreement), and at the same location(s) at
which such Business Employee worked while employed with the Company or an
Affiliate of the Company.  Notwithstanding the foregoing, Parent and Purchaser
Sub shall indemnify and hold the Company harmless with respect to any Losses
related to any claim or threatened claim by or on behalf of any Excluded
Employees arising out of Purchaser or Purchaser Sub’s failure to offer
employment to or hire any such Excluded Employee or any claim for Excluded
Employee Severance; provided that, for the avoidance of doubt, Parent and
Purchaser Sub shall not indemnify and hold the Company harmless with respect to
any Losses related to a claim for compensation or benefits arising under any
compensation or benefit plan, agreement or arrangement maintained by the Company
or its Affiliates, other than Excluded Employee Severance. The Company shall
deliver a census summary (which shall comply with Section 6.14(a) of the Company
Disclosure Schedules) (the “Census Summary”) on or prior to date of this
Agreement, which Census Summary shall be as of a date not more than ten
(10) days prior to the date of this Agreement. The Employee Census shall first
be delivered to Purchaser Sub on the applicable Employee Data Trigger Date and
shall

 

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be updated by the Company no earlier than three (3) weeks prior to the Census
Start Date for any Business Employee and with respect to any Business Employee
added to the Employee Census pursuant to such an update, Purchaser Sub shall
make an offer of employment or communicate a transfer of employment as soon as
practicable thereafter but no later than the Census Start Date.

 

(b)                                 Purchaser Sub and its Affiliates shall use
reasonable efforts to transfer the work visa of Transferred Employees and, as
applicable, shall employ those Transferred Employees who are foreign nationals
working in the United States in non-immigrant status and those Transferred
Employees for whom there are pending or approved I-140 immigrant petitions as of
the Closing Date (collectively, the “Foreign National Employees”), under terms
and conditions such that Purchaser Sub and its Affiliates, as applicable,
qualify as a “successor employer” under applicable United States immigration
laws effective as of the Closing Date, including, but not limited to, 8 U.S.C. §
1184(c)(10).  Purchaser Sub and its Affiliates agree to assume all
immigration-related liabilities and responsibilities with respect to such
Foreign National Employees that arise following the Closing.  The Company shall
provide to Purchaser Sub a schedule of Foreign National Employees and applicable
information for Purchaser Sub and its Affiliates to comply with its
responsibilities pursuant to this Section 6.14(b) on the applicable Employee
Data Trigger Date; provided, that from the date of this Agreement until the
Closing, the Company, Purchaser Sub and their Affiliates shall cooperate to
effect the actions set forth in this Section 6.14(b).

 

(c)                                  Each Business Employee that accepts an
offer of employment from Purchaser Sub or whose employment is transferred
effective at his or her Census Start Date or, with respect to an Inactive
Employee, upon commencement of employment on the terms set forth in
Section 6.14(a) (the “Inactive Employee Transfer Date”) (collectively referred
to hereinafter as the “Employment Start Date”) shall be referred to as a
“Transferred Employee”.  The employment by Purchaser Sub of a Transferred
Employee shall be on an employment “at-will” basis (except as required under any
collective bargaining agreement).  For a period beginning on the first
Subsequent Closing Date and ending on the twelve (12) month anniversary of the
first Subsequent Closing Date (the “Continuation Period”), Purchaser Sub shall
provide, or shall cause its Affiliates to provide, to each Transferred Employee
that is a non-Union-Represented Business Employee (solely during any period a
Transferred Employee is employed by Purchaser Sub during such twelve (12) month
period), (A) an annual base salary or wage rate and target annual incentive
opportunities that are no less favorable in the aggregate than those provided by
the Company or one of its Affiliates immediately prior to the Employment Start
Date and (B) employee benefits that are substantially comparable in the
aggregate to those that were provided to such Transferred Employee immediately
prior to the Employment Start Date (taking into account only the employee
benefits listed under the “Pension Plans,” “401(k) Plans” and  “Health and
Welfare and Other Plans” headings of Section 3.8(a) of the Company Disclosure
Schedules), taking into account prior service with the Company or its Affiliates
and to Purchaser Sub’s right to change employee contribution rates in the
ordinary course of business consistent with coverage cost changes as a result of
contract cost negotiation with vendors  (which changes apply to employees of
Purchase Sub and its Affiliates other than the Transferred Employees) (a
“Non-Union Employee Offer”).  With respect to each Transferred Employee that is
a Union-Represented Business Employee, for a period beginning on the first
Subsequent Closing Date and ending on the twelve (12) month anniversary of the
first Subsequent Closing Date, Purchaser Sub shall provide, or shall cause its
Affiliates to provide, compensation and

 

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employee benefits in accordance with the terms of the applicable collective
bargaining agreement in effect as of the first Subsequent Closing Date;
provided, that as of the effective date of a successor collective bargaining
agreement applicable to such Transferred Employee, Purchaser Sub shall instead
provide, or cause its Affiliates to provide, compensation and employee benefits
in accordance with the terms of such applicable successor collective bargaining
agreement (a “Union Employee Offer, and each Union Employee Offer and Non-Union
Employee Offer, together with the requirements set forth in Section 6.14(a), a
“Qualifying Offer”).  Notwithstanding anything in this Agreement to the
contrary, nothing in this Section 6.14 shall be construed as requiring Purchaser
Sub or its Affiliates to (x) provide benefits under a defined benefit pension
plan or (y) provide any specified level of compensation or benefits to a
Transferred Employee following the Continuation Period, regardless of whether
the Employment Start Date occurs on or after the Closing Date.  Except for
Excluded Employee Severance, the Company shall be responsible for (and Purchaser
Sub shall have no responsibility) to pay any severance pay or benefits claimed
to be owed to its employees as a result of the transactions that are the subject
of the Transaction Agreements; provided, that Purchaser Sub has offered
employment to, or transferred the employment of, Business Employees in
accordance with this Section 6.14. Without limiting the generality of the
foregoing, during the Continuation Period, Purchaser Sub shall provide, or shall
cause its Affiliates to provide, severance payments and benefits to each
Transferred Employee whose employment is terminated during such period that are
no less favorable than those severance and benefits set forth in
Section 6.14(c) of the Company Disclosure Schedules.

 

(d)                                 Subject, and in addition, to the
requirements imposed by applicable Law, from and after the Employment Start
Date, each Transferred Employee shall be eligible to participate in the plans or
programs maintained, sponsored, adopted or contributed to by Purchaser Sub or
its Affiliates that provide medical, dental, vision care, life insurance,
disability, vacation, tuition reimbursement, qualified transportation fringe
benefits and other welfare benefits, as applicable, on substantially the same
basis as similarly situated employees of Purchaser Sub and its Affiliates. 
Subject, and in addition, to the requirements imposed by applicable Law, and
except to the extent necessary to avoid duplication of benefits, for purposes of
determining eligibility to participate, vesting, accrual of and entitlement to
benefits (but not for accrual of or entitlement to pension benefits,
post-employment or retiree welfare benefits, special or early retirement
programs or window separation program), service with the Company or its
Affiliates (or predecessor employers to the extent the Company provides or has
recognized past service credit) shall be treated as service with Purchaser Sub. 
Purchaser Sub shall, or shall cause its Affiliates to: (i) waive any limitation
on health and welfare coverage of such Transferred Employees due to pre-existing
conditions, waiting periods, active employment requirements, and requirements to
show evidence of good health under any applicable health and welfare plan of
Purchaser Sub or any of its Affiliates to the extent such Transferred Employees
were covered under a similar benefit plan of the Company or any of its
Affiliates and (ii) credit each such Transferred Employee with all deductible
payments, co-payments and co-insurance paid by such employee under any medical
plan of the Company or any of its Affiliates prior to the Employment Start Date
during the plan year in which the Employment Start Date occurs for the purpose
of determining the extent to which any such employee has satisfied any
applicable deductible and whether such employee has reached the out-of-pocket
maximum under any benefit plan of Purchaser Sub or any of its Affiliate for such
year.

 

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(e)                                  Effective as of the last day of the month
in which an Employment Start Date occurs, a Transferred Employee shall no longer
be eligible to contribute to any Employee Plan that is a flexible spending
account plan except as otherwise provided by and in accordance with the
Consolidated Omnibus Budget Reconciliation Act of 1986 (“COBRA”) (such accounts,
“Company FSA” and such participants in the Company FSA, “FSA Participants”). 
Effective as of the Closing Date, Purchaser Sub or one of its Affiliates shall
maintain a flexible spending account plan (the “Purchaser FSA”) that shall
(i) permit participation as of the first day of the month immediately following
an Employment Start Date for FSA Participants commencing employment with
Purchaser Sub or its Affiliates on such date and (ii) accept for reimbursement
any claims related to the Company FSA plan year in which the Employment Start
Date occurs and eligible for reimbursement on the basis of participant elections
initially made under the Company FSA, to the extent such claims have not been
previously reimbursed by the Company or its Affiliates.  The salary reduction
election of an FSA Participant under the Company FSA will be continued by the
Purchaser FSA for the remainder of the Purchaser FSA plan year following an
Employment Start Date (subject to limitations under applicable Law).  The
Company shall provide to Purchaser Sub as soon as administratively feasible
following a Closing Date, Subsequent Closing Date or Distribution Center Closing
Date, as applicable, a schedule setting forth the relevant FSA Participants and
the amount each FSA Participant has elected to contribute to the Company FSA for
the current Company FSA plan year and the amount reimbursed by the Company FSA
to the FSA Participant (or eligible dependent) (the “FSA Balances”).  To the
extent the FSA Balances in the aggregate are positive, the Company shall make a
payment to Purchaser Sub equal to the aggregate FSA Balances by the thirtieth
(30th) Business Day following the Closing Date, Subsequent Closing Date or
Distribution Center Closing Date, as applicable. To the extent the FSA Balances
in the aggregate are negative, Buyer shall make a payment to the Company equal
to the aggregate negative FSA Balances by the thirtieth (30th) Business Day
following the Closing Date, Subsequent Closing Date or Distribution Center
Closing Date, as applicable.  Notwithstanding the foregoing, the Company and
Purchaser Sub agree to make reasonable adjustments to the terms of this
Section 6.14(e) as necessary to account for the difference in plan year end
dates of the Company FSA and Purchaser FSA.  Notwithstanding the foregoing, no
Transferred Employee who elects COBRA continuation coverage with respect to such
person’s flexible spending account under the Company FSA shall be considered an
FSA Participant, and any such person’s flexible spending account balance shall
not be an FSA Balance.

 

(f)                                   Purchaser Sub shall permit each
Transferred Employee participating in the Employee Plan that is a defined
contribution plan with a qualified cash or deferred arrangement within the
meaning of Section 401(k) of the Code (the “Company 401(k) Plan”) to effect, and
Purchaser Sub agrees to cause its (or its Affiliate’s) defined contribution plan
that includes a qualified cash or deferred arrangement within the meaning of
Section 401(k) of the Code (the “Purchaser Sub 401(k) Plan”) to accept, in
accordance with requirements of Law, a “direct rollover” (within the meaning of
Section 401(a)(31) of the Code, including plan loans) of his or her account
balances (including earnings thereon through the date of transfer and any
promissory note evidencing an outstanding loan but excluding any loans in
default) under the Company 401(k) Plan if such rollover to the Purchaser Sub
401(k) Plan is elected in accordance with applicable Law by such Transferred
Employee.

 

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(g)                                  For purposes of payroll taxes with respect
to Transferred Employees, the Company and Purchaser Sub, and their respective
Affiliates, shall use commercially reasonable efforts to treat the transaction
contemplated herein as a transaction described in Treasury Regulation Sections
31.3121(a)(1)-1(b)(2), and the Parties further agree to implement this treatment
by utilizing solely Section 4 of Revenue Procedure 2004-53, STANDARD PROCEDURE
FOR PREDECESSORS AND SUCCESSORS.

 

(h)                                 Purchaser Sub and its Affiliates shall be
responsible for compliance with the WARN Act with respect to any Transferred
Employee terminated after the Closing Date or terminated due to Purchaser Sub’s
failure to provide a Qualifying Offer.

 

(i)                                     As soon as administratively practicable
following each Employment Start Date, and except as prohibited by applicable Law
or the terms of any applicable collective bargaining agreement, the Company
shall, or shall cause its Subsidiaries to, pay all amounts in respect of each
Transferred Employee’s accrued wages, including vacation and paid time off
balances.

 

(j)                                    Purchaser Sub acknowledges its bargaining
obligations with any labor organization or other employee representative body
applicable to any Business Employee.  Neither the Purchaser Sub nor any of its
Affiliates shall assume any CBA, except that Purchaser Sub or one of its
Affiliates shall assume the continuing obligations under the last, best and
final offer to 1199SEIU, implemented by the Company as of September 11, 2016 and
execute the “Assumption Agreement” in the form annexed to the 1199SEIU CBA with
respect to the applicable Acquired Stores on or prior to the applicable
Subsequent Closing Dates, and otherwise comply with applicable Law with respect
to its obligations to 1199SEIU.

 

(k)                                 In respect of each of the Transferred
Employees, the Company hereby agrees, for themselves and on behalf of each of
their respective Affiliates, to waive and forever discharge any non-compete
obligation or restriction that would limit such Transferred Employee’s ability
to perform services to Purchaser Sub or its Affiliates.

 

(l)                                     The Company may, in its discretion,
establish a cash-based retention program to incentivize continued performance
among those Company employees who are providing services to Purchaser Sub
following the Closing in accordance with the Transition Services Agreement, the
terms of which are set forth on Section 10.5(hhh) of the Company Disclosure
Schedules (the “Retention Program”).  Participants shall be selected at the sole
discretion of the Company.  Purchaser Sub agrees to reimburse, promptly,
following notice of payment made, which notices may be delivered over time as
retention payments are made, the Company in an amount up to $25 million in the
aggregate in respect of amounts that become payable under the Retention Program;
provided, that if the Closing does not occur, then Purchaser Sub shall not be
liable for any amounts that may become payable under the Retention Program,
except as provided in Section 8.2(b).

 

(m)                             The Company, Purchaser Sub and their respective
affiliates shall reasonably cooperate in communications with Business Employees
with respect to employment and employment benefit matters in connection with the
transactions contemplated by this Agreement. As reasonably requested by the
Purchaser Sub, the Company shall permit the

 

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Purchaser Sub to conduct interviews, meetings, information sessions and
presentations with Business Employees and to distribute transitional information
and communications relating to employment and employment benefit matters to
Business Employees.  Purchaser Sub shall keep the Company reasonably informed as
to the status of any interviews, meetings or offers of employment contemplated
by Section 6.6(a)(ii) and this Section 6.14(m). Following the date of this
Agreement, the Company, Purchaser Sub and their respective affiliates shall
reasonably cooperate to determine the list of Excluded Employees.

 

(n)                                 For purposes of this Agreement, the
“Employee Data Trigger Date” means with respect to Business Employees being
transferred (i) at the Closing, the earlier of the date of receipt of Antitrust
Approval and the date that is at least ten (10) Business Days prior to the
Closing Date, (ii) at the first Subsequent Closing, the earlier of the date of
receipt of Antitrust Approval and the date that is no later than thirty (30)
Business Days prior to the first Subsequent Closing Date and (iii) after the
first Subsequent Closing, the date that is no later than the date of receipt of
Antitrust Approval.

 

SECTION 6.15                                      Obligations Pertaining to
Multiemployer Plans.  The Company and Purchaser Sub intend that no complete or
partial withdrawal of the Company and its Affiliates under Section 4203 or 4205
of ERISA from any Multiemployer Plan shall occur because of the consummation of
Purchaser Sub’s acquisition of the Acquired Stores contemplated by this
Agreement, by reason of compliance with all of the applicable requirements of
Section 4204 of ERISA.  Purchaser Sub and the Company agree to comply with the
provisions of Section 4204 of ERISA as follows:

 

(a)                                 To the extent needed to comply with
Section 4204(a)(1)(A) of ERISA, Purchaser Sub shall assume the obligation to
contribute to any Multiemployer Plan with respect to the Acquired Stores for
substantially the same number of contribution base units (as defined in
Section 4001(a)(11) of ERISA) for which the Company and its Affiliates had an
obligation to contribute to such Multiemployer Plan in respect of the Acquired
Stores.

 

(b)                                 Unless an exemption or variance applies,
Purchaser Sub shall, at Purchaser Sub’s sole cost and expense, provide to the
Multiemployer Plan for the first plan year beginning after the Closing Date
(and/or each Subsequent Closing Date), and for each of the four (4) plan years
thereafter, a bond or escrow (or letter of credit or other security that is
acceptable to the Multiemployer Plan) that complies with
Section 4204(a)(1)(B) of ERISA, in an amount equal to one hundred percent (100%)
of the greater of:

 

(i)                                     the average annual contribution that the
Company and its Affiliates were required to make with respect to the Acquired
Stores to the applicable Multiemployer Plan for the three (3) plan years
preceding the plan year in which the Closing Date (and/or each Subsequent
Closing Date) occurs, or

 

(ii)                                  the annual contribution that the Company
and its Affiliates were required to make with respect to the Acquired Stores to
the applicable Multiemployer Plan for the last plan year completed before the
plan year in which the Closing Date (and/or each Subsequent Closing Date)
occurs.

 

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The Company shall cooperate with Purchaser Sub in connection with any request by
Purchaser Sub for any exemptions or variances from the bonding requirements
under Section 4204(a)(1)(B) of ERISA, including, upon request, timely sharing
such information as may be necessary to determine whether and/or demonstrate
that there is a basis for applying for an exemption or variance from the bonding
or escrow requirements and/or timely and jointly with Purchaser Sub notifying
the Multiemployer Plan in writing, as contemplated by Pension Benefit Guaranty
Corporation Regulation Section 4204.11, of their intention that the transactions
contemplated hereby be covered by Section 4204 of ERISA.  Any such bond or
escrow (or letter of credit or other security) shall provide that it shall be
paid to the applicable Multiemployer Plan if Purchaser Sub withdraws from such
Multiemployer Plan, or fails to make a contribution to such Multiemployer Plan
when due, at any time during the five (5) full plan years beginning after the
Closing Date (and/or each Subsequent Closing Date) (the “4204 Period”).

 

(c)                                  If Purchaser Sub withdraws from any
Multiemployer Plan in a complete withdrawal, or there occurs a partial
withdrawal with respect to the Acquired Stores, during the 4204 Period, the
(i) Purchaser Sub and its Affiliates shall pay the amount of any such withdrawal
liability and (ii) Company shall, to the extent required by Section 4204 of
ERISA, be secondarily liable for any withdrawal Liability it would have had to
any such Multiemployer Plan with respect to the Acquired Stores, but for this
Agreement, if and to the extent the Liability of Purchaser Sub with respect to
any such Multiemployer Plan is not paid.  Purchaser Sub agrees to use
commercially reasonable efforts to provide the Company with reasonable advance
notice of any action or event which would reasonably be expected to result in
the imposition of such withdrawal Liability, and Purchaser Sub shall promptly
furnish the Company with a copy of any notice of withdrawal Liability Purchaser
Sub or its Affiliates may receive with respect to the Multiemployer Plan,
together with all pertinent details.  In the event that any such withdrawal
Liability shall be assessed against Purchaser Sub or its Affiliates, Purchaser
Sub further agrees to provide the Company with reasonable advance notice of any
intention on the part of Purchaser Sub or such Affiliate not to make full
payment of any withdrawal Liability when the same shall become due and payable.

 

(d)                                 Notwithstanding any other provisions of this
Section, Section 4204 of ERISA or anything else contained in this Agreement to
the contrary, it is expressly agreed that if the Company incurs (i) any
secondary withdrawal Liability under the preceding subsection (c) or
(ii) Liability solely as a result of the Purchaser Sub’s failure to comply with
its obligations under this Agreement relating to Section 4204(a)(2) of ERISA,
Parent and Purchaser Sub shall indemnify and hold the Company harmless from any
and all losses incurred by the Company by reason of such Liability; provided,
however, that the Parties agree that Purchaser Sub shall not be deemed to have
failed to have complied with the terms of Section 4204(a)(1)(A) of ERISA,
relating to the requirement to contribute for substantially the same number of
contribution base units, for purposes of this Section 6.15(d) where it
contributes to any Multiemployer Plan with respect to any Acquired Store for
substantially the same number of contribution base units for which the Company
and its Affiliates had an obligation to contribute to any such Acquired Store
for a period of six (6) months beginning on the Closing Date. The Company shall
provide Parent and Purchaser Sub with reasonable advance notice of any action or
event which would reasonably be expected to require the Company to provide a
bond or amount in escrow by operation of Section 4204(a)(3) of ERISA.

 

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SECTION 6.16                                      No Third Party Beneficiaries. 
Nothing in this Article VI, express or implied, is intended to confer on any
person other than the Parties or their respective successors or assigns any
rights, remedies, obligations or liabilities under or by reason of this
Article VI and no Transferred Employee or current or former employee of the
Company, or any beneficiary or dependent thereof, or any other person not a
party to this Agreement shall be entitled to assert any claim hereunder. 
Nothing in this Article VI is intended to be, shall constitute or shall be
construed as an amendment or modification to any Employee Plans or any other
employee benefit plans or arrangements of the Company, Purchaser Sub or any of
their respective Affiliates or in any way limit the right of the Company,
Purchaser Sub or any of their respective Affiliates to amend, modify or
terminate any of their respective employee benefit plans or arrangements. 
Notwithstanding any provision herein to the contrary, neither Purchaser Sub nor
any of its Affiliates shall be obligated to continue to employ any Business
Employee or Union-Represented Business Employee for any specific period of time
following the Employment Start Date, subject to applicable requirements of Laws
or the terms of any applicable collective bargaining agreement.

 

SECTION 6.17                                      Waiver of Non-Compete
Provisions.  In respect of each of the Transferred Employees, the Company hereby
agrees, for itself and on behalf of its Affiliates, to waive and forever
discharge any non-compete obligation or restriction in connection with such
Transferred Employee’s acceptance of an offer of employment from Parent or any
of Parent’s Affiliates.

 

SECTION 6.18                                      Obligations of Purchaser Sub. 
Parent guarantees the due, prompt and faithful payment, performance and
discharge by Purchaser Sub of, and the compliance by Purchaser Sub with, all of
the covenants, agreements, obligations and undertakings of Purchaser Sub under
this Agreement in accordance with the terms of this Agreement, and covenants and
agrees to take all actions necessary or advisable to ensure such payment,
performance and discharge by Purchaser Sub hereunder.

 

SECTION 6.19                                      Financing Cooperation.

 

(a)                                 Prior to the final Subsequent Closing, the
Company shall, and shall cause its subsidiaries and its and their respective
Representatives to, use its and their respective commercially reasonable efforts
to provide such customary cooperation as may be reasonably requested by Parent
or Purchaser Sub in connection with any Equity Financing, any Debt Financing and
any SEC filings related to any Debt Financing to be made by Parent for the
purpose of financing the Purchased Assets.  Notwithstanding the foregoing,
nothing herein shall require such cooperation to the extent it would
(i) unreasonably disrupt the ordinary conduct of the business or operations of
the Company or its subsidiaries, (ii) require the Company or its subsidiaries to
agree to pay any fees, reimburse any expenses or otherwise incur any actual or
potential liability or give any indemnities unless Parent reimburses or is
required to reimburse or indemnify the Company or its subsidiaries pursuant to
this Agreement or otherwise agrees to do so pursuant to agreements reasonably
satisfactory to the Company, (iii) require the Company or its subsidiaries to
take any action that would reasonably be expected, in the reasonable judgment of
the Company after consultation with its legal counsel, to conflict with, or
result in any violation or breach of, any applicable (A) laws or orders,
(B) obligations of confidentiality (not created in contemplation hereof) binding
on the Company or its subsidiaries (provided that in the

 

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event that the Company or its subsidiaries do not provide information in
reliance on the exclusion in this clause (B), the Company and its subsidiaries
shall provide notice to Parent promptly that such information is being withheld
(but solely if providing such notice would not violate such obligation of
confidentiality)), (C) organizational documents, or (D) Contract to which the
Company or any of its subsidiaries is a party, (iv) require the Company or its
subsidiaries to (A) pass resolutions or consents, approve or authorize the
execution of, or execute any document, agreement, certificate or instrument or
take any other corporate action with respect to any Equity Financing or Debt
Financing that is not contingent on the Closing or that would be effective prior
to the Closing Date or (B) provide or cause its legal counsel to provide any
legal opinions or deliver any comfort letters,  (v) cause any condition to
Closing set forth in Article VII to fail to be satisfied or otherwise cause any
breach of this Agreement, (vi) require the Company to prepare separate financial
statements for any of its subsidiaries or financial statements pursuant to
Rules 3-10 (other than assisting with the preparation of a footnote in Parent’s
financial statements to the extent relating to the Purchased Assets) or 3-16 of
Regulation S-X or (vii) require the Company or any subsidiary thereof to incur
additional indebtedness (including guarantees).  Parent acknowledges and agrees
that any access or information contemplated to be provided by the Company or any
of its subsidiaries pursuant to this Section 6.19 shall, to the extent such
information constitutes material non-public information of the Company, only be
provided to other Persons, including any Financing Sources, if such other Person
affirmatively agrees to maintain the confidentiality of such information
pursuant to a customary confidentiality agreement and to comply with all federal
and state securities laws and regulations applicable to such information.

 

(b)                                 On or prior to the Closing Date and each
Subsequent Closing Date, the Company shall deliver to Parent a lien release
letter from the agent under each Company Credit Agreement with respect to each
Company Credit Agreement (each, a “Lien Release Letter” and collectively, the
“Lien Release Letters”) which Lien Release Letters shall provide that all Liens
securing each such Company Credit Agreement relating to the Purchased Assets to
be transferred on the Closing Date or such Subsequent Closing Date, as
applicable, shall be automatically released and terminated upon the consummation
of the sale of such Purchased Assets to be so transferred on the applicable date
in accordance with the terms hereof from time to time without further action by
any person (it being understood and agreed that (i) none of the Lien Release
Letters or any such amendments or filings will impair or otherwise impact Liens
on any assets other than the Purchased Assets subject to such sale on the
applicable date, (ii) no Lien Release Letter shall be required with respect to
such sale if any of the Company Credit Agreements has been terminated prior to
such sale (to the extent such termination results in a release of all Liens
securing such Company Credit Agreement) and (iii) the Company shall use
commercially reasonable efforts to (x) include in each such Lien Release Letter
express authorizations by the relevant agent for the Company or it designee
(including, without limitation, Parent and its subsidiaries) to file applicable
UCC-3 amendments and other lien release filings and (y) if such authorization is
received, at the request of Parent, file such UCC-3 amendments and other lien
release filings in consultation with Parent).

 

(c)                                  Parent shall, promptly upon written request
by the Company, reimburse the Company for all reasonable and documented
out-of-pocket costs, fees and expenses (including attorneys’ fees and expenses)
to the extent such costs, fees and expenses are incurred by the Company, its
subsidiaries or their respective Representatives in connection with any such

 

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party complying with the obligations under this Section 6.19, and Parent shall
indemnify and hold harmless the Company, its subsidiaries and their respective
Representatives from and against any and all losses, damages, claims, interest,
awards, judgments, penalties, costs or expenses suffered or incurred by them to
the extent such losses, damages, claims, interest, awards, judgments, penalties,
costs or expenses arose out of the actions taken by the Company, its
subsidiaries or their respective Representatives pursuant to this Section 6.19
(other than information provided by the Company, its subsidiaries or
Representatives in writing for express use therein), except in the event such
losses, damages, claims, interest, awards, judgments, penalties, costs or
expenses are determined by a final non-appealable judgment of a court of
competent jurisdiction to have arisen out of or resulted from the gross
negligence or willful misconduct of the Company, any of its subsidiaries or any
of their respective Representatives.

 

SECTION 6.20                                      Commercial Assistance.  After
the date hereof until the expiration of the term of the Transition Services
Agreement, the Company shall, and shall cause the Company’s Affiliates to,
provide to Purchaser Sub, and shall use commercially reasonable efforts to cause
its and their respective representatives to provide to Purchaser Sub, all
commercially reasonable cooperation and assistance reasonably requested by
Purchaser Sub in connection with Purchaser Sub’s negotiation and execution of
the license agreements set forth on Section 6.20 of the Company Disclosure
Schedules and the negotiation and execution of license agreements for the
third-party software and information technology systems set forth on
Section 1.2(n) of the Company Disclosure Schedules, and agrees not to enforce
any exclusivity covenants with respect to the proposed counterparties to such
agreements.

 

SECTION 6.21                                      RediClinic.  With respect to
any RediClinic in-store clinics that are located in an Acquired Store as of the
date of this Agreement, at Parent’s election, (i) the Company shall use
reasonable best efforts to, promptly following Parent’s request, cause such
clinic to be closed and the space occupied by such clinic to be vacated and made
available for other use, and upon consultation with Parent, cause such space to
be utilized for other reasonable use consistent with the ordinary course of the
Company’s business or (ii) the Company shall use reasonable best efforts to
continue to operate such clinic during the applicable transition period pursuant
to the Transition Services Agreement with respect to such Acquired Store, or
such portion thereof as Parent may request. All costs and expenses incurred by
the Company in connection with the actions contemplated by clause (i) of the
previous sentence shall be borne by the Company, including costs and expenses
relating to equipment removal, employee severance, and any consent or
termination payments or penalties, provided that Parent shall bear any costs and
expenses relating to re-merchandizing the space occupied by such clinics and
signage changes. The Company shall not open or permit to be opened any
RediClinic in-store clinics in any Acquired Store that is not located in such
Acquired Store as of the date of this Agreement, unless the process to open such
clinic has begun prior to the date hereof.

 

SECTION 6.22                                      Acquired Leases.  At Closing,
Parent shall reimburse the Company for any cash or other collateral posted by
the Company or its Affiliates resulting from renewing, extending, amending or
supplementing any Acquired Lease for any period after the Closing, and each
Party shall reimburse the other Party in accordance with Section 2.2(e) for any
payments by a Party in connection with any actions such Party takes with respect
to obtaining any consents to assign the Acquired Leases. Parent shall guarantee
any Acquired Lease as required pursuant to Section 6.2(a) hereof.

 

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SECTION 6.23                                      Duplicate IT System.  The
Company shall use commercially reasonable efforts to complete the development
and establishment of the Duplicate IT System and use commercially reasonable
efforts to cause the Duplicate IT System to be operational in a manner
consistent with the operation of the Company’s comparable information technology
system consistent with past practice, in each case subject to the exceptions set
forth on Section 6.23 of the Company Disclosure Schedules, as soon as reasonably
practicable after the date hereof.  Representatives of the Company shall test
the Duplicate IT System prior to the Closing Date utilizing customary testing
procedures, which procedures shall be presented to Purchaser Sub in writing  as
 soon  as  reasonably practicable after the date hereof  (the “Developed Testing
Procedures”).   The Company shall provide representatives of Purchaser Sub a
reasonable opportunity to be present during such testing and to see the results
of such testing.

 

SECTION 6.24                                      Wellness+ Tier Status.  Parent
and Purchaser Sub shall maintain the “tier status” of all participants in the
Wellness+ program in all Acquired Stores from the Closing or Subsequent Closing,
as applicable, until the time that such Acquired Store transitions off the “Rite
Aid” banner and onto the “Walgreens” banner.

 

SECTION 6.25                                      1199SEIU Arbitration. 
Following the Closing Date, notwithstanding anything in Section 9.3 to the
contrary, Parent shall have the right (but not the obligation) to assume the
defense and control of the Company’s outstanding arbitration initiated by
1199SEIU by a demand letter dated October 14, 2016 and, in the event that Parent
assumes the defense and control of such arbitration, it shall allow the Company
a reasonable opportunity to participate in the defense of such arbitration with
its own counsel and at its own expense; provided, further, that notwithstanding
the foregoing, Parent shall only be entitled to direct the defense for so long
as Parent conducts the defense in an active and diligent manner. If Parent
elects to control the defense of such arbitration, Parent shall select counsel,
contractors and consultants of recognized standing and competence after
consultation with the Company and shall take all steps reasonably necessary in
the defense or settlement of such arbitration. The Company shall, and shall
cause its Affiliates and Representatives to, cooperate reasonably with Parent in
the defense of such arbitration. Parent shall be authorized to consent to a
compromise or settlement of such arbitration in full; provided, however, that,
unless such compromise or settlement provides for no relief other than the
payment of monetary damages by Parent or its Affiliates in an amount not to
exceed the amount set forth on Section 6.25 of the Company Disclosure Schedules
and makes no admission, Parent shall give the Company advance notice of any
proposed compromise or settlement and in no event shall Parent compromise or
settle such arbitration without the prior written consent of the Company.

 

SECTION 6.26                                      Insurance Coverage.  To the
extent that (i) any insurance policies issued for the benefit of the Company or
its Affiliates (the “Company’s Insurance Policies”) cover any Loss, Liability,
claim, damage or expense relating to the Purchased Assets and relating to or
arising out of occurrences on or prior to the Closing (or such Subsequent
Closing or the Distribution Center Closing, as applicable) (“Pre-Closing
Matters”) and (ii) the Company’s Insurance Policies continue after the Closing
(or such Subsequent Closing or the Distribution Center Closing, as applicable)
to permit claims to be made thereunder with respect to Pre-Closing Matters, the
Company shall cooperate and cause its Affiliates to cooperate with Parent in
submitting claims with respect to Pre-Closing Matters on behalf of Parent under
the Company’s Insurance Policies; provided, that if such a claim in respect of a
Pre-Closing Matter is rejected

 

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under the Company’s Insurance Policies, at the reasonable request and sole cost
of Parent, the Company shall use commercially reasonable efforts to commence
litigation to enforce such claim and that Parent shall reimburse, indemnify and
hold the Company harmless from all liabilities, costs and expenses actually
incurred by the Company or its Subsidiaries as a result of such claims made
under the Company’s Insurance Policies and provided, further, that Parent shall
not make any such claims if, and to the extent that, such claims are covered by
insurance policies held by Parent or its Affiliates. The Company shall, with
respect to any claim arising from an Assumed Liability that is covered or
potentially covered the Company’s Insurance Policies, (i) report such claim to
the appropriate insurer as promptly as practicable after such claim is reported
to the Company, and (ii) instruct that any proceeds of such insurance policy are
paid directly to Parent, the attorneys handling the defense of such claim
and/or, where applicable, to the claimant as a result of any judgment or
settlement, rather than to the Company or its Affiliates; provided, that Parent
shall notify the Company promptly of any such claim or potential claim and shall
reasonably cooperate in the investigation and pursuit of any such claim or
potential claim. The Company shall not release, commute, buy-back, or otherwise
eliminate the coverage available to any of the Purchased Assets under any
occurrence based policy with respect to Pre-Closing Matters.

 

SECTION 6.27                                      Restructuring.  Prior to the
Closing, the Company shall (i) realign the Acquired Stores to districts to be
provided by the Purchaser and (ii) assign district leadership teams to positions
as directed by the Purchaser, which could be a special assignment designation,
provided that Purchaser shall conduct all employee interviews and make all
Purchaser district leadership team selections.

 

SECTION 6.28                                      Closed Stores. The Acquired
Stores set forth on Section 5.1(iii) of the Company Disclosure Schedules may, at
Seller’s election, be closed down prior to the Closing. If any such Acquired
Store is closed, the Purchase Price shall be reduced as set forth on Section 2.2
of the Company Disclosure Schedules (and the amounts payable pursuant to
Section 2.7 shall be reduced accordingly).

 

SECTION 6.29                                      Termination Fee.  In
accordance with Section 8.2(b)(iv) of the Agreement and Plan of Merger, dated as
of October 17, 2015, by and among the Company, Parent and Victoria Merger
Sub, Inc., as amended by Amendment No. 1 thereto, dated as of January 29, 2017
(the “Merger Agreement”), Parent shall pay the Company a termination fee in the
amount of $325 million within two (2) Business Days from the date of this
Agreement.

 

ARTICLE VII

 

CONDITIONS TO CLOSING

 

SECTION 7.1                                             Conditions to
Obligations of Each Party to Complete the Sale.  The respective obligations of
each Party to complete the sale of the Purchased Assets and the other
transactions contemplated by this Agreement shall be subject to the satisfaction
(or, to the extent permitted by applicable Law, waiver by the Company and
Parent) at or prior to the Closing of the following conditions:

 

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(a)                                 No Legal Restraints.  No Law or injunction
(whether temporary, preliminary or permanent) shall have been enacted, entered,
promulgated or enforced by any Governmental Entity of competent jurisdiction
(collectively, the “Legal Restraints”) that prevents, makes illegal, prohibits,
restrains or enjoins the sale of the Purchased Assets or the other transactions
contemplated by this Agreement; and

 

(b)                                 Antitrust Consents.  The waiting period (and
any extension thereof) applicable to the sale of the Purchased Assets and the
other transactions contemplated by this Agreement under the HSR Act shall have
expired or been earlier terminated (the “Antitrust Approval”).

 

SECTION 7.2                                             Conditions to
Obligations of Parent and Purchaser Sub.  The obligations of Parent and
Purchaser Sub to complete the sale of the Purchased Assets and the other
transactions contemplated by this Agreement shall be further subject to the
satisfaction (or, to the extent permitted by applicable Law, waiver by Parent)
at or prior to the Closing of the following conditions:

 

(a)                                 Representations and Warranties.  (i) The
representations and warranties of the Company set forth in the first sentence of
Section 3.1 (Organization and Qualification), Section 3.2 (Authority),
Section 3.6 (Absence of Certain Changes and Events) and Section 3.15 (Brokers)
shall be true and correct as of the date of this Agreement and as of the Closing
Date as though made on and as of such date and time (except to the extent that
any such representation and warranty expressly speaks as of an earlier date, in
which case such representation and warranty shall be true and correct as of such
earlier date), and (ii) the representations and warranties of the Company set
forth in this Agreement (other than those identified in clause (i)) shall be
true and correct as of the date of this Agreement and as of the Closing Date as
though made on and as of such date and time (except to the extent that any such
representation and warranty expressly speaks as of an earlier date, in which
case such representation and warranty shall be true and correct as of such
earlier date); provided, however, that notwithstanding anything herein to the
contrary, the condition set forth in this Section 7.2(a)(ii) shall be deemed to
have been satisfied unless the failure of such representations and warranties of
the Company to be so true and correct (without giving effect to any “Material
Adverse Effect,” “materiality” or similar qualifications contained therein) has
had or would, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect;

 

(b)                                 Performance of Obligations of the Company. 
The Company shall have performed in all material respects each of the
obligations, and complied in all material respects with each of the agreements
and covenants, required to be performed by, or complied with by, it under this
Agreement at or prior to the Closing;

 

(c)                                  Certificate.  Parent shall have received a
certificate of the Chief Executive Officer or the Chief Financial Officer of the
Company, certifying that the conditions set forth in Section 7.2(a),
Section 7.2(b) and Section 7.2(d) have been satisfied;

 

(d)                                 No Material Adverse Effect.  Since the date
of this Agreement, there shall not have occurred a Material Adverse Effect;

 

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(e)                                  Duplicate IT System.  Solely with respect
to the obligations of Parent and Purchaser Sub to complete the Closing, the
Company shall have (i) tested the Duplicate IT System with respect to the
Acquired Stores to be transferred at the Closing using the Developed Testing
Procedures and (ii) based upon such test certified to Purchaser Sub as to the
operational readiness of the Duplicate IT System by having delivered to
Purchaser Sub an Operational Duplicate IT System Certificate and solely with
respect to the obligations of Parent and Purchaser Sub to complete the first
Subsequent Closing, Parent shall have had a reasonable opportunity to test the
operational readiness of the Duplicate IT System with respect to the Acquired
Stores transferred at the Closing using the Developed Testing Procedures and
shall have reasonably determined that the results of such test were consistent
with the Operational Duplicate IT System Certificate;

 

(f)                                   Third Party Consents. The consents set
forth on Section 7.2(f) of the Company Disclosure Schedules shall have been
obtained; and

 

(g)                                  Ancillary Agreements.  The Company shall
have executed and delivered to Parent all of the Ancillary Agreements to be
executed and delivered by the Company at Closing.

 

SECTION 7.3                                             Conditions to
Obligations of the Company.  The obligation of the Company to complete the sale
of the Purchased Assets and the other transactions contemplated by this
Agreement shall be further subject to the satisfaction (or, to the extent
permitted by applicable Law, waiver by the Company) at or prior to the Closing
of the following conditions:

 

(a)                                 Representations and Warranties.  (i) The
representations and warranties of Parent and Purchaser Sub set forth in the
first sentence of Section 4.1 (Organization) and Section 4.2 (Authority) shall
be true and correct as of the date of this Agreement and as of the Closing Date
as though made on and as of such date and time (except to the extent that any
such representation and warranty expressly speaks as of an earlier date, in
which case such representation and warranty shall be true and correct as of such
earlier date), and (ii) the representations and warranties of Parent and
Purchaser Sub set forth in this Agreement (other than those identified in clause
(i)) shall be true and correct, in each case as of the date of this Agreement
and as of the Closing Date as though made on and as of such date (except to the
extent that any such representation or warranty expressly speaks as of an
earlier date, in which case such representation and warranty shall be true and
correct as of such earlier date); provided, however, that notwithstanding
anything herein to the contrary, the condition set forth in this
Section 7.3(a)(ii) shall be deemed to have been satisfied unless the failure of
any such representations and warranties to be true and correct would not,
individually or in the aggregate, reasonably be expected to prevent, materially
impair or have a material adverse effect on the ability of Parent or Purchaser
Sub to complete the transactions contemplated by this Agreement;

 

(b)                                 Performance of Obligations of Parent and
Purchaser Sub.  Each of Parent and Purchaser Sub shall have performed in all
material respects each of the obligations, and complied in all material respects
with each of the agreements and covenants, required to be performed by, or
complied with by, it under this Agreement at or prior to the Closing;

 

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(c)                                  Parent shall have paid the $325 million fee
to the Company in accordance with Section 8.2(b)(iv) of the Merger Agreement;
and

 

(d)                                 Certificate.  The Company shall have
received a certificate of the Chief Executive Officer or the Chief Financial
Officer of Parent, certifying that the conditions set forth in
Section 7.3(a) and Section 7.3(b) have been satisfied.

 

(e)                                  Ancillary Agreements.  Parent and Purchaser
Sub shall have executed and delivered to the Company all of the Ancillary
Agreements to be executed and delivered by Parent and Purchaser Sub at Closing.

 

ARTICLE VIII

 

TERMINATION

 

SECTION 8.1                                             Termination.  This
Agreement may be terminated and the sale of the Purchased Assets and the other
transactions contemplated by this Agreement may be abandoned at any time prior
to the Closing:

 

(a)                                 by mutual written consent of Parent and the
Company;

 

(b)                                 by Parent or the Company if any court of
competent jurisdiction or other Governmental Entity shall have issued a Legal
Restraint that prevents, makes illegal, prohibits, restrains or enjoins the
completion of the sale of the Purchased Assets and the other transactions
contemplated by this Agreement and such Legal Restraint is or shall have become
final and nonappealable; provided, that the right to terminate this Agreement
pursuant to this Section 8.1(b) shall not be available to a Party whose breach
of this Agreement was the primary cause of, or primarily resulted in, the
issuance of such Legal Restraint;

 

(c)                                  by either Parent or the Company if the
Closing shall not have occurred on or before the date that is six (6) months
from the date of this Agreement (the “End Date”); provided, that the right to
terminate this Agreement pursuant to this Section 8.1(c) shall not be available
to a Party whose breach of this Agreement was the primary cause of, or primarily
resulted in, the failure of the Closing to occur on or before the End Date;
provided, further, that if on the End Date all of the conditions set forth in
Section 7.1, Section 7.2 and Section 7.3 have been satisfied (or, with respect
to the conditions that by their terms must be satisfied at the Closing, would
have been so satisfied if the Closing would have occurred) or remain capable of
being satisfied but any of the conditions set forth in Section 7.1(a) (but only
if the Legal Restraint causing such condition not to be satisfied is issued
under or pursuant to any Antitrust Law) and/or Section 7.1(b) has not been
satisfied, then (x) in the event that any Governmental Entity brings an action
seeking to preliminarily enjoin the transactions contemplated by this Agreement,
then the End Date will automatically be extended until ten (10) Business Days
after the date on which a decision is rendered by such U.S. Federal District
Court on whether to issue a preliminary injunction of any transaction
contemplated by this Agreement, provided that each Party shall have complied in
all material respects with its obligations to make the HSR Filing and to certify
substantial compliance with any Second Request, as applicable, in accordance
with the terms of Section 6.2 hereof, and provided, further, that the pendency
of any administrative

 

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litigation that may be pending under Part 3 of the FTC’s rules of practice to
challenge the transactions contemplated by this Agreement shall not be relevant
or considered for purposes of this Section 8.1(c) and (y) Parent and the Company
may mutually agree to extend the End Date to a date to be determined at such
time (in the case of any such extension pursuant to clause (x) or (y), the End
Date shall be deemed for all purpose to be such later date);

 

(d)                                 by written notice of the Company if there
shall have been a breach of any (i) representation or warranty or (ii) covenant
or agreement on the part of Parent or Purchaser Sub contained in this Agreement,
or any such representation or warranty shall have become inaccurate, such that
the conditions set forth in Section 7.3(a) or Section 7.3(b) would not be
satisfied, and such breach or inaccuracy has not been cured within thirty (30)
days after the receipt of notice thereof or such breach or inaccuracy is not
reasonably capable of being cured within such period; provided, that the Company
shall not have the right to terminate this Agreement pursuant to this
Section 8.1(d) if the Company is then in material breach of any of its covenants
or agreements contained in this Agreement;

 

(e)                                  by written notice of Parent if there shall
have been a breach of any (i) representation or warranty or (ii) covenant or
agreement on the part of the Company contained in this Agreement, or any such
representation or warranty shall have become inaccurate, such that the
conditions set forth in Section 7.2(a) or Section 7.2(b) would not be satisfied,
and such breach or inaccuracy has not been cured within thirty (30) days after
the receipt of notice thereof or such breach or inaccuracy is not reasonably
capable of being cured within such period; provided, that Parent shall not have
the right to terminate this Agreement pursuant to this Section 8.1(e) if Parent
or Purchaser Sub is then in material breach of any of its covenants or
agreements contained in this Agreement; or

 

(f)                                   by written notice of Parent (i) within
five (5) Business Days following the delivery of a Company Notice pursuant to
Section 6.1 (which notice by Parent may, at Parent’s election, be contingent
upon the execution by the Company of the Alternative Acquisition Agreement
referenced in the applicable Company Notice within a specified period of time)
or (ii) if the Company fails to deliver a Company Notice pursuant to
Section 6.1, within five (5) Business Days following the execution by the
Company of an Alternative Acquisition Agreement.

 

SECTION 8.2                                             Effect of Termination.

 

(a)                                 In the event of the termination of this
Agreement pursuant to Section 8.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of any Party hereto,
except as provided in Section 6.6(c), Section 6.7, this Section 8.2, Section 8.3
and Article X, which shall survive such termination; provided, however, that
nothing herein shall relieve any Party hereto of any liability for damages
resulting from a Willful Breach prior to such termination by any Party hereto
(which the Parties acknowledge and agree shall be determined by a court of
competent jurisdiction in accordance with Section 10.14 applying the governing
Law in accordance with Section 10.9), in which case the aggrieved Party shall be
entitled to all rights and remedies available at law or equity.  Notwithstanding
anything contained in this Agreement to the contrary, Parent expressly
acknowledges and agrees that Parent’s and Purchaser Sub’s obligations hereunder
are not conditioned in any manner upon

 

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Parent or Purchaser Sub obtaining any financing.  The failure, for any reason,
of Parent or Purchaser Sub to complete the transactions contemplated by this
Agreement on the date that the Closing is required to occur pursuant to
Section 2.1 hereof shall constitute a Willful Breach of this Agreement by Parent
and Purchaser Sub.  The Parties acknowledge and agree that (i) nothing in this
Section 8.2 shall be deemed to affect their right to specific performance under
Section 10.13 and (ii) no termination of this Agreement shall affect the
obligations of the Parties contained in the Confidentiality Agreement and Letter
Agreement.

 

(b)                                 In the event that this Agreement is
terminated by Parent or the Company, as applicable, pursuant to
(x) Section 8.1(b) and the applicable Legal Restraint giving rise to such
termination right is issued under or pursuant to any Antitrust Law,
(y) Section 8.1(c), and, in either case of clause (x) or (y), on the termination
date the only conditions to closing set forth in Section 7.1 or Section 7.2 that
have not been satisfied (other than those conditions that by their nature are to
be satisfied at the Closing, which conditions would be capable of being
satisfied at the Closing if the Closing Date were on the termination date) are
the conditions set forth in Section 7.1(a) (but only if the applicable Legal
Restraint causing such condition not to be satisfied is issued under or pursuant
to any Antitrust Law) and/or Section 7.1(b), then the Company shall promptly
provide to Parent a statement of its Transaction Expenses, including copies of
invoices from third party advisors in respect of such Transaction Expenses, and
Parent shall pay, or cause to be paid, the amount of the Company’s Transaction
Expenses, up to a maximum amount of $25 million (the “Expense Reimbursement”), 
to the Company (or its designee) by wire transfer of immediately available funds
to the account designated by the Company, as promptly as reasonably practicable
following receipt of such statement (and, in any event, within three
(3) Business Days).

 

(c)                                  Each of the Company, Parent and Purchaser
Sub acknowledges that the agreements contained in this Section 8.2 are an
integral part of the transactions contemplated by this Agreement and that,
without these agreements, the Parties would not enter into this Agreement. 
Accordingly, if Parent fails to promptly pay, or cause to be paid, any amount
due pursuant to this Section 8.2, and the Company commences a Proceeding that
results in a judgment against Parent for the amount set forth in this
Section 8.2 or a portion thereof, Parent shall pay, or cause to be paid, to the
Company all fees, costs and expenses of enforcement (including attorney’s fees
as well as expenses incurred in connection with any such action), together with
interest on such amount or such portion thereof at the prime lending rate as
published in the Wall Street Journal, in effect on the date such payment is
required to be made.

 

SECTION 8.3                                             Expenses.  Each Party
shall bear its own expenses in connection with this Agreement and the
transactions contemplated hereby, except as provided in Section 2.2(e) and
Section 8.2.

 

ARTICLE IX

 

INDEMNIFICATION

 

SECTION 9.1                                             Indemnification by the
Company. From and after the Closing (with respect to the Acquired Stores to be
transferred on the Closing Date) and each Subsequent Closing (with respect to
the Acquired Stores to be transferred on such Subsequent Closing Date),

 

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and subject to Section 9.3, Section 9.5, Section 9.6, Section 9.7, Section 9.8
and Section 10.1, the Company shall indemnify, defend and hold harmless Parent,
Purchaser Sub and their respective Affiliates and Representatives (collectively,
the “Parent Indemnified Parties”) against, and reimburse any Parent Indemnified
Party for, all Losses that such Parent Indemnified Party may suffer or incur, or
become subject to, as a result of (i) any breach of any warranty or the
inaccuracy of any representation contained in the Company Fundamental
Representations as of the date such representation or warranty was made or as if
such representation or warranty was made on and as of the Closing Date, any
Subsequent Closing Date or the Distribution Center Closing Date (except that for
representations and warranties that expressly relate to a specified date, the
inaccuracy in or breach of such representation or warranty will be determined
with reference to such specified date), (ii) the matters set forth in
Section 2.2(e) and Section 6.4 with respect to which the Company may be
obligated to provide indemnification thereunder or (iii) any Excluded Liability.

 

SECTION 9.2                                             Indemnification by
Parent. From and after the Closing (with respect to the Acquired Stores to be
transferred on the Closing Date) and each Subsequent Closing (with respect to
the Acquired Stores to be transferred on such Subsequent Closing Date), and
subject to Section 9.3, Section 9.5, Section 9.6, Section 9.8 and Section 10.1,
Parent shall indemnify, defend and hold harmless the Company and its Affiliates
(collectively, the “Company Indemnified Parties”) against, and reimburse any
Company Indemnified Party for, all Losses that such Company Indemnified Party
may suffer or incur, or become subject to, as a result of (i) any breach of any
warranty or the inaccuracy of any representation contained in the Parent
Fundamental Representations as of the date such representation or warranty was
made or as if such representation or warranty was made on and as of the Closing
Date, any Subsequent Closing Date or the Distribution Center Closing Date
(except that for representations and warranties that expressly relate to a
specified date, the inaccuracy in or breach of such representation or warranty
will be determined with reference to such specified date), (ii) any Assumed
Liability or (iii) the matters set forth in Section 2.2(e), Section 6.4,
Section 6.14 and Section 6.15 with respect to which Parent may be obligated to
provide indemnification thereunder.

 

SECTION 9.3                                             Notification of Claims.

 

(a)                                 A Person that may be entitled to be
indemnified under this Article IX (the “Indemnified Party”) shall promptly
notify the party or parties liable for such indemnification (the “Indemnifying
Party”) in writing of any pending or threatened claim, demand or circumstance
that the Indemnified Party has determined has given or would reasonably be
expected to give rise to a right of indemnification under this Agreement
(including a pending or threatened claim or demand asserted by a third party
against the Indemnified Party, such claim being a “Third Party Claim”),
describing in reasonable detail the facts and circumstances with respect to the
subject matter of such claim, demand or circumstance; provided, however, that
the failure to provide such notice shall not release the Indemnifying Party from
any of its obligations under this Article IX except to the extent the
Indemnifying Party is prejudiced by such failure.

 

(b)                                 Upon receipt of a notice of a claim for
indemnity from an Indemnified Party pursuant to Section 9.3(a), with respect to
any Third Party Claim, the Indemnifying Party shall have the right (but not the
obligation) to assume the defense and control of any Third Party

 

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Claim and, in the event that the Indemnifying Party assumes the defense and
control of such claim, it shall allow the Indemnified Party a reasonable
opportunity to participate in the defense of such Third Party Claim with its own
counsel and at its own expense; provided, further, that notwithstanding the
foregoing, the Indemnifying Party shall only be entitled to direct the defense
(i) for so long as the Indemnifying Party conducts the defense in an active and
diligent manner, (ii) if the Third Party Claim is not in respect of any matter
involving potential criminal liability and does not seek as a remedy the
imposition of an equitable remedy that, if granted, would be binding upon the
Indemnified Party or any of its Affiliates, (iii) if the Indemnified Party does
not have available to it one or more defenses or counterclaims that are
inconsistent with one or more defenses or counterclaims that may be alleged by
the Indemnifying Party and (iv) with respect to any matter if the Indemnified
Party shall not have been advised by outside counsel that there would be an
actual conflict of interest between the Indemnifying Party and the Indemnified
Party with respect to such matter.  The party that shall control the defense of
any such Third Party Claim (the “Controlling Party”) shall select counsel,
contractors and consultants of recognized standing and competence after
consultation with the other party and shall take all steps reasonably necessary
in the defense or settlement of such Third Party Claim; provided, further, that
(without limiting the Indemnified Party’s ability to assume control of the
defense of such Third Party Claim at the Indemnifying Party’s expense pursuant
to the proviso of the immediately preceding sentence) the Indemnified Party
shall have the right to employ counsel to represent it, at the Indemnifying
Party’s expense, if either (A) the Indemnified Party has available to it one or
more defenses or counterclaims that are inconsistent with one or more defenses
or counterclaims that may be alleged by the Indemnifying Party or (B) there is a
conflict of interest between the Indemnifying Party and the Indemnified Party.

 

(c)                                  The Company or Parent, as the case may be,
shall, and shall cause each of its Affiliates and Representatives to, cooperate
fully with the Controlling Party in the defense of any Third Party Claim.  The
Indemnifying Party shall be authorized to consent to a settlement of, or the
entry of any judgment arising from, any Third Party Claim, without the consent
of any Indemnified Party; provided, however, that the Indemnifying Party shall
give the Indemnified Party advance notice of any proposed compromise or
settlement and in no event shall the Indemnifying Party compromise or settle any
Third Party Claim without the prior written consent of the Indemnified Party,
which consent shall not be unreasonably withheld, unless such compromise or
settlement unless such compromise or settlement (i) provides for no relief other
than the payment of monetary damages borne solely by the Indemnifying Party,
(ii) does not include any admission of wrongdoing or violation of Law on the
part of the Indemnified Party or its Affiliates and (iii) includes, as a
condition of any settlement or other resolution, a complete release of any
Indemnified Party potentially affected by such Third Party Claim.

 

(d)                                 If any Indemnifying Party receives a notice
of a claim for indemnity from an Indemnified Party pursuant to
Section 9.3(a) that does not involve a Third Party Claim, the Indemnifying Party
shall notify the Indemnified Party within thirty (30) days following its receipt
of such notice if the Indemnifying Party disputes its liability to the
Indemnified Party under this Article IX.  If the Indemnifying Party does not so
notify the Indemnified Party, the claim specified by the Indemnified Party in
such notice shall be conclusively deemed to be a Liability of the Indemnifying
Party under this Article IX, and the Indemnifying Party shall pay the amount of
such Liability to the Indemnified Party on demand or, in the case of any notice
in which the amount of the claim (or any portion of the claim) is estimated, on
such later date when

 

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the amount of such claim (or such portion of such claim) becomes finally
determined.  If the Indemnifying Party has timely disputed its liability with
respect to such claim as provided above, the Indemnifying Party and the
Indemnified Party shall resolve such dispute in accordance with Section 10.9 and
Section 10.14.

 

SECTION 9.4                                             Exclusive Remedies.  No
Person who is not a Party to this Agreement or the Ancillary Agreements,
including any past, present or future director, officer, employee, incorporator,
member, partner, manager, stockholder, Affiliate, agent, attorney or
representative of, and any financial advisor or lender to, any Party hereto or
any director, officer, employee, incorporator, member, partner, manager,
stockholder, Affiliate, agent, attorney or representative of, and any financial
advisor or lender to, any of the foregoing shall have any liability (whether in
contract or in tort, in law or in equity, or granted by statute) for any claims,
Liabilities or causes of action arising under, out of, in connection with, or
related in any manner to this Agreement or the Ancillary Agreements or based on,
in respect of, or by reason of this Agreement or the Ancillary Agreements or its
or their negotiation, execution, performance, or breach; and, to the maximum
extent permitted by law, each Party hereto hereby waives and releases all such
claims, Liabilities and causes of action against any such Persons.

 

SECTION 9.5                                             Additional
Indemnification Provisions.

 

(a)                                 The Indemnifying Parties waive all rights of
subrogation with respect to any indemnification payments made by them and shall
not be entitled to any rights of subrogation with respect to claims of the
Indemnified Party with respect to such Losses and with respect to the claim
giving rise to such Losses.

 

(b)                                 Parent and the Company agree that, for
purposes of computing the amount of any indemnification payment under this
Article IX, any such indemnification payment shall be treated as an adjustment
to the Purchase Price for all Tax purposes, to the extent permitted by
applicable Law.

 

(c)                                  All Losses for which any Indemnified Party
would otherwise be entitled to indemnification under this Article IX shall be
reduced by the amount of any Tax benefits actually realized (determined on a
with-and-without basis) by the Indemnified Party in the taxable year in which
such indemnification payment is made in respect of any Losses incurred by such
Indemnified Party.  In the event that any such Tax benefits are realized by an
Indemnified Party subsequent to receipt by such Indemnified Party of any
indemnification payment hereunder in respect of the claims to which such Tax
benefits relate, appropriate refunds shall be made promptly by the relevant
Indemnified Parties of all or the relevant portion of such indemnification
payment

 

(d)                                 With respect to each indemnification
obligation contained in this Article IX all Losses shall be net of any
third-party insurance proceeds that have been recovered or are recoverable by
the Indemnified Party in connection with the facts giving rise to the right of
indemnification.

 

SECTION 9.6                                             Mitigation.  Each of the
Parties shall, and shall cause its applicable Affiliates and Representatives to,
take all reasonable steps to mitigate their respective Losses

 

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upon and after becoming aware of any event or condition that would reasonably be
expected to give rise to any Losses that are indemnifiable hereunder.

 

SECTION 9.7                     Third Party Remedies.  If any Parent Indemnified
Party is at any time entitled (whether by reason of a contractual right, a right
to take or bring a Proceeding, availability of insurance or a right to require a
payment discount or otherwise) to recover from another Person any amount in
respect of any matter giving rise to a Loss (whether before or after the Company
has made a payment to an Parent Indemnified Party hereunder and in respect
thereof), Parent shall (and shall cause its applicable Affiliate to)
(i) promptly notify the Company and provide such information as the Company may
require relating to such right of recovery and the steps taken or to be taken by
Parent in connection therewith, (ii) if so required by the Company (subject to
Parent being indemnified to its reasonable satisfaction by the Company against
all reasonable out-of-pocket costs and expenses incurred by Parent in respect
thereof) and before being entitled to recover any amount from the Company under
this Agreement, first take all steps (whether by making a claim against its
insurers, commencement of a Proceeding or otherwise) as the Company may
reasonably require to pursue such recovery and (iii) keep the Company fully
informed of the progress of any action taken in respect thereof.  Thereafter,
any claim against the Company shall be limited (in addition to the limitations
on the liability of the Company referred to in this Agreement) to the amount by
which the Losses suffered by Parent Indemnified Party exceed the amounts so
recovered by Parent Indemnified Party or any Affiliate of Parent.  If Parent
Indemnified Parties recover any amounts in respect of Losses from any third
party at any time after the Company has paid all or a portion of such Losses to
Parent Indemnified Parties pursuant to the provisions of this Article IX, Parent
shall, or shall cause such Parent Indemnified Parties to, promptly (and in any
event within two (2) Business Days of receipt) pay over to the Company the
amount so received (to the extent previously paid by the Company).

 

SECTION 9.8                     Limitation on Liability.  Except to the extent
awarded to any third party in connection with a Third Party Claim, in no event
shall any Party have any liability to the other (including under this
Article IX), whether in contract, tort or otherwise, for any (i) punitive,
exemplary, incidental, special, treble, consequential or indirect damages or
(ii) the loss of anticipated or future business or profits, income or revenue,
loss of reputation, opportunity cost damages or diminution in value (and, in
particular, no “multiple of profits” or “multiple of cash flow” or similar
valuation methodology shall be used in calculating the amount of any liability
hereunder), in either case whether or not the possibility of such damages has
been disclosed to any Party in advance or could have been reasonably foreseen.

 

ARTICLE X

 

GENERAL PROVISIONS

 

SECTION 10.1              Survival of Representations, Warranties, Covenants and
Agreements.  None of the representations, warranties, covenants and agreements
in this Agreement or in any instrument delivered pursuant to this Agreement,
including any rights arising out of any breach of such representations,
warranties, covenants and agreements, shall survive the Closing, except for
(a) representations and warranties made in Section 3.1, Section 3.2,
Section 3.15 and Section 3.17 (the “Company Fundamental Representations”) and in
Section 4.1 and Section 4.2 (the

 

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“Parent Fundamental Representations”), which shall survive until the expiration
of the statute of limitations applicable to the matters related thereto,
(b) those covenants and agreements contained herein that by their terms apply or
are to be performed in whole or in part after such date or after the termination
of this Agreement (in the event of a termination of this Agreement pursuant to
its terms), which shall survive in accordance with their respective terms, and
(c) those contained in Article IX and this Article X.  For the avoidance of
doubt, except as expressly set forth in Article IX, Parent and Purchaser Sub
shall have no right to (and Parent and Purchaser Sub agree not to) seek
indemnification or make any claim or bring any Proceeding with respect to any
breach of representations, warranties, covenants or agreements contained herein.

 

SECTION 10.2              Modification or Amendment.  Subject to the provisions
of applicable Law, at any time prior to the Closing, the Parties (by action of
their respective boards of directors) may modify, amend or supplement this
Agreement only by written agreement, executed and delivered by duly authorized
officers of the respective Parties; provided, however, that notwithstanding
anything to the contrary contained herein, this Section 10.2, Section 10.8,
Section 10.14, Section 10.15 and Section 10.16, shall not be amended, modified,
supplemented or waived, and no consent shall be given thereunder, in each case
in any manner that is materially adverse to the interests of the Financing
Sources without their prior written consent.  No consent from any Indemnified
Party under Article IX (other than the Parties) shall be required in order to
amend this Agreement.

 

SECTION 10.3              Waiver.  At any time prior to the Closing, any Party
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other Parties, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and, (c) subject to the requirements of applicable Law, waive
compliance with any of the agreements or conditions contained herein.  Any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed by the Party or Parties to be bound thereby and specifically referencing
this Agreement.  The failure of any Party to assert any rights or remedies shall
not constitute a waiver of such rights or remedies.

 

SECTION 10.4              Notices.  All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given by
delivery in person, by facsimile or by email, by registered or certified mail
(with postage prepaid, return receipt requested) or by a nationally recognized
courier service (with signed confirmation of receipt) to the respective Parties
at the following addresses (or at such other address for a Party as shall be
specified by like notice):

 

(a)                                 if to the Company:

 

Rite Aid Corporation

30 Hunter Lane

Camp Hill, PA 17011

Attention:

James J. Comitale

Facsimile:

(717) 760-7867

Email:

jcomitale@riteaid.com

 

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with an additional copy (which shall not constitute notice) to:

 

Skadden, Arps, Slate, Meagher & Flom LLP

4 Times Square

New York, NY 10036

Attention:

Paul T. Schnell

 

Marie L. Gibson

Facsimile:

(212) 735-2000

Email:

paul.schnell@skadden.com

 

marie.gibson@skadden.com

 

(b)                                 if to Parent or Purchaser Sub:

 

Walgreens Boots Alliance, Inc.

108 Wilmot Road

Deerfield, IL 60015

Attention:

Marco Pagni

Facsimile:

(847) 315-8570

Email:

marco.pagni@wba.com

 

 

with an additional copy (which shall not constitute notice) to:

 

Simpson Thacher & Bartlett LLP

425 Lexington Avenue

New York, NY 10017

Attention:

Mario A. Ponce

Facsimile:

(212) 455-2502

Email:

mponce@stblaw.com

 

and

 

Simpson Thacher & Bartlett LLP

600 Travis Street, Suite 5400

Houston, TX 77002

Attention:

Christopher R. May

Facsimile:

(713) 821-5602

Email:

cmay@stblaw.com

 

Any such notification shall be deemed delivered (i) upon receipt, if delivered
personally, (ii) on the next Business Day, if sent by nationally recognized
courier service for next Business Day delivery, or (iii) the Business Day
received, if sent by facsimile, email or any other permitted method (provided,
that any notice received by facsimile transmission, email or otherwise at the
addressee’s location on any non-Business Day or any Business Day after 5:00
p.m. (addressee’s local time) shall be deemed to have been received at 9:00
a.m. (addressee’s local time) on the next Business Day).

 

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SECTION 10.5              Certain Definitions.  For purposes of this Agreement,
the term:

 

(a)                                 “1199SEIU CBA” means the Memorandum of
Agreement, by and among Rite Aid of New York, Inc., Rite Aid of New
Jersey, Inc., Eckerd Corporation, Genovese Drug Stores, Inc., Thrift Drug, Inc.
and 1199SEIU, dated October 30, 2009 to April 18, 2015, extended by the
Extension Agreement, by and between Rite Aid of New York, Inc. and 1199SEIU,
dated May 5, 2015 and amended by the Memorandum of Agreement, by and between
Rite Aid of New York, Inc. and 1199SEIU, dated September 11, 2016, and any
additional extensions, amendments or other agreements modifying or relating
thereto;

 

(b)                                 “Acquired Stores” means the stores located
at the Leased Real Property and Company Owned Real Property;

 

(c)                                  “Affiliate” means, with respect to any
Person, any other Person directly or indirectly controlling, controlled by or
under common control with such Person;

 

(d)                                 “Aggregate Inventory Amount” means the sum
of the Inventory Amount as determined with respect to the Acquired Stores to be
transferred at the Closing plus the Inventory Amount as determined with respect
to the Acquired Stores to be transferred at each Subsequent Closing;

 

(e)                                  “Ancillary Agreements” means the Bill of
Sale, Assignment and Assumption Agreement, the Transition Services Agreement,
the Transitional Trademark License Agreement and the Supply Agreement;

 

(f)                                   “Antitrust Law” means the Sherman
Antitrust Act of 1890, the Clayton Antitrust Act of 1914, the HSR Act, the
Federal Trade Commission Act of 1914 and all other Laws that are designed or
intended to prohibit, restrict or regulate actions having the purpose or effect
of monopolization or restraint of trade or lessening of competition through
merger or acquisition;

 

(g)                                  “Book to Physical Adjustment Ratio” means
the Inventory Amount with respect to the Sampled Locations with respect to the
Closing or the applicable Subsequent Closing, divided by the aggregate Reported
Inventory Value with respect to such Sampled Locations;

 

(h)                                 “Business Day” means any day other than a
Saturday or Sunday or a day on which banks are required or authorized to close
in the United States in the City of New York, New York;

 

(i)                                     “Business Employee” means any employee
of the Company or its subsidiaries, other than an Excluded Employee, who
(i) provides services exclusively related to the Acquired Stores or the
Distribution Centers, including those employed at a regional or district office
of the Company or its subsidiaries, (ii) is a retail operations or pharmacy
field district leader or a field district support team member, serving in a
function related to asset protection, human resources or administration in one
or more districts, with respect to whom Acquired Stores comprise 35% or more of
the total stores assigned to such leader or team member, (iii) is a floater
pharmacist across one or more districts, with respect to whom Acquired

 

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Stores comprise 50% of more of the total stores assigned to such floater
pharmacist, or (iv) is a Choice Employee who Purchaser Sub determines, in its
sole discretion, to make an offer of employment;

 

(j)                                    “Company Credit Agreements” means,
collectively, (i) the Amended and Restated Credit Agreement, dated as of
June 27, 2001, as amended and restated as of January 13, 2015, among the
Company, the lenders from time to time party thereto and Citicorp North
America, Inc., as administrative agent and collateral agent, (ii) the Credit
Agreement, dated as of February 21, 2013, among the Company, the lenders from
time to time party thereto and Citicorp North America, Inc., as administrative
agent and collateral agent and (iii) the Credit Agreement, dated as of June 21,
2013, among the Company, the lenders from time to time party thereto and
Citicorp North America, Inc., as administrative agent and collateral agent, in
each case, as amended, restated, amended and restated, supplemented or otherwise
modified from time to time;

 

(k)                                 “Company Expenses” means any expenses, costs
or fees incurred by the Company in connection with the transactions contemplated
by this Agreement, including (i) any amount owed to legal counsel, accountants,
brokers, financial advisors and any other agents, advisors, consultants and
experts employed or engaged by the Company, (ii) broker fees, if any, and
(iii) change in control payments, bonus payments, retention bonuses or similar
payment made or required to be made to any current or former stockholder,
officer, director or employee of the Company (either because of the transactions
contemplated by this Agreement alone or in connection with any other event), in
each case other than any expenses, costs or fees paid to the Company for
transition services rendered pursuant to the Transition Services Agreement;

 

(l)                                     “Contract” means any legally binding
note, bond, mortgage, indenture, contract, agreement, lease, license, Permit or
other instrument, obligation or arrangement;

 

(m)                             “control” (including the terms “controlling”,
“controlled”, “controlled by” and “under common control with”) means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a Person, whether through the ownership
of voting securities, by contract or otherwise;

 

(n)                                 “Copyrights” means United States and
non-U.S. copyrightable works and copyrights in works of authorship of any type,
including mask works, registrations and applications for registration thereof
throughout the world; all rights therein provided by international treaties and
conventions, all moral and common law rights thereto; and all other rights
associated therewith, whether registered or unregistered;

 

(o)                                 “Debt Financing” means the proceeds of any
debt financing intended to be used by Parent to pay all or a portion of the
Purchase Price payable pursuant to this Agreement as of any date;

 

(p)                                 “Distribution Center Inventory Amount” means
(x) the Retail Inventory Value of the Inventory at the Distribution Centers to
be transferred at the Distribution Center Closing less any Inventory thereat
that is damaged, obsolete or unsalable as determined in a

 

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manner consistent with the Company’s historical valuation practices multiplied
by (y) the acquisition cost per unit, as reflected in the books and records of
the Company;

 

(q)                                 “Distribution Centers” means the Company’s
distribution centers located at (i) 500 Forbes Road, Dayville, CT, (ii) 8 Queen
Anne Court, Langhorne, PA, (iii) 1 Geoffrey Drive, Fairless Hills, PA,
(iv) Geoffrey Road & Kresge Road, Fairless Hills, PA, (v) 349 Lake Road,
Dayville, CT and (vi) Flatwood Road & Bryant Road, Spartanburg, SC;

 

(r)                                    “Domain Names” means URL addresses,
domain names, Internet addresses, social media accounts and registrations
pertaining thereto;

 

(s)                                   “Duplicate IT System” means a separate
logical partition (LPAR) within the Company’s mainframe that stores a duplicate
copy of the Company’s prescription dispensing system as of Closing, which is
commonly referred to as “NextGen”;

 

(t)                                    “Equity Financing” means the issuance and
sale by Parent of Parent Shares in an underwritten offering or a private
placement, excluding the issuance of equity interests upon the exercise of
employee and director stock options, to the extent the net cash proceeds thereof
reduce, or are intended to reduce, the amount of the Debt Financing;

 

(u)                                 “ERISA” means the Employee Retirement Income
Security Act of 1974, as amended;

 

(v)                                 “ERISA Affiliate” means any trade or
business, whether or not incorporated, that together with the Company would be
deemed to be a single employer for purposes of Section 4001 of ERISA or Sections
414(b), (c), (m), (n) or (o) of the Code;

 

(w)                               “Excluded Employee” means any employee of the
Company or its subsidiaries who was previously employed by Purchaser Sub or its
affiliates and is ineligible for rehire by Purchaser Sub or its affiliates based
on his or her termination code;

 

(x)                                 “Extrapolated Inventory Value” means, with
respect to the Acquired Stores to be transferred at the Closing or a Subsequent
Closing (other than the Sampled Locations), the Reported Inventory Value for
such Acquired Stores (other than the Sampled Locations) multiplied by the Book
to Physical Adjustment Ratio;

 

(y)                                 “Financing Sources” means any entities that
have committed to provide or otherwise entered into agreements to provide the
Debt Financing, including the banks party to any credit agreements or other
related definitive agreements executed in connection therewith relating thereto,
and the Affiliates and controlling persons of the foregoing, and their
respective successors and assigns, but in any event excluding Parent and its
Affiliates;

 

(z)                                  “GAAP” means the U.S. generally accepted
accounting principles set forth in the authoritative literature codified in the
Financial Accounting Standards Board Accounting Standards Codification, in each
case, as of the time of the relevant financial statements referred to herein;

 

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(aa)                          “Government Program” means any state program for
medical assistance administered under Title XIX of the Social Security Act,
including managed Medicaid programs and programs operated pursuant to a waiver
and other healthcare programs administered or funded by a Governmental Entity or
contractor thereof;

 

(bb)                          “Governmental Entity” means any governmental,
administrative, judicial or regulatory (including any stock exchange or other
self-regulatory organization) authority, agency, commission, court, body, entity
or authority, whether supranational, foreign or domestic, of one or more
countries, nations, republics, federations or similar entities or any states,
counties, parishes or municipalities, jurisdictions or other political
subdivisions thereof;

 

(cc)                            “Governmental Filings” mean any consents,
approvals, authorizations or Permits of, actions by, filings with or
notifications to any Governmental Entity;

 

(dd)                          “Healthcare Laws” means any Law relating to the
provision, administration, advertising, promotion, and/or payment for healthcare
products or services, including, to the extent applicable: (i) any state
licensure, credentialing, or certification requirement, including those limiting
the scope of activities of persons acting without such license, credential or
certification, (ii) any billing, coding, coverage, compliance, documentation,
reporting or reimbursement Law applicable to the services provided by the
Company or any of its subsidiaries, (iii) state and federal Laws governing the
operation and administration of Medicare Parts A, B, C and D, Medicaid, Medicaid
managed care, TRICARE, the Federal Employee Health Benefits Program and any
other government-funded health care programs, (iv) any Law imposed on the claims
made or promotional or marketing efforts undertaken by Company or any of its
subsidiaries with respect to prescription drugs or controlled substances, (v) 42
U.S.C. § 1320a-7(b), 42 C.F.R. § 1001.952, commonly referred to as the “Federal
Anti-Kickback Statute,” or any state anti-kickback prohibition, (vi) 42 U.S.C. §
1320a-7a(a)(5), 42 C.F.R. § 1003.101, commonly referred to as the “Beneficiary
Inducement Law,” (vii) the HIPAA all-plan health care fraud prohibition,
(viii) any Law governing the use, disclosure, privacy or security of personal or
health information, including the Health Insurance Portability and
Accountability Act of 1996, as amended by the Health Information Technology for
Economic and Clinical Health Act, and the regulations promulgated pursuant
thereto and any state privacy laws (“HIPAA”), (ix) 42 U.S.C. § 1395nn, 42 C.F.R.
§ 411.351 et seq., commonly referred to as the “Stark Law,” or any state law
affecting self-referrals, (x) 31 U.S.C. §§ 3729 et seq., commonly referred to as
the “False Claims Act”, or any state law false claims prohibition, (xi) 42
U.S.C. §§ 1320a-7, 7a and 7b, commonly referred to as the “Federal Fraud
Statutes,” (xii) 31 U.S.C. § 3801 et seq., commonly referred to as the “Federal
Program Fraud Civil Remedies Act,” and 18 U.S.C. § 1347, commonly referred to as
the “Federal Health Care Fraud Law,” (xiii) any state law provisions prohibiting
insurance fraud, (xiv) any other federal or state Law relating to health care
fraud and abuse, (xv) any Laws of the U.S. Food and Drug Administration,
(xvi) all Laws administered by the Drug Enforcement Administration including 21
U.S.C. § 801 et. seq., commonly referred to as the “Controlled Substances Act”
and any similar state Laws governing the prescribing or dispensing of controlled
substances, (xvii) all Laws restricting the corporate practice of medicine or
fee splitting by licensed healthcare professionals, (xviii) the Affordable Care
Act, (xix) Laws relating to the practice of pharmacy, the operation of
pharmacies, the wholesale distribution, dispensing, labeling, packaging,
repackaging, advertising, adulteration or compounding of drug products or
controlled substances, (xx) Laws

 

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relating to the provision of pharmacy benefit management, utilization review and
healthcare discount card programs and services and (xxi) any and all binding
rules, regulations or guidance implementing or issued pursuant to any of the
above;

 

(ee)                            “Inactive Employees” means those Business
Employees who, as of the Closing Date, are not actively at work including by
reason of long-term disability, short-term disability or other continuous
absence;

 

(ff)                              “Independent Accounting Firm” means KPMG;

 

(gg)                            “Intellectual Property” means all worldwide
intellectual and industrial property and proprietary rights of any kind,
including all rights in (i) Patents, (ii) Copyrights and copyrighted works
(including Software), (iii) Trademarks, service marks, corporate, business and
d/b/a names, logos, trade dress, Domain Names, social media identifiers and
other indicators of source or origin and all associated goodwill, (iv) trade
secrets, know-how, methods, processes and confidential information in any form
or media, (v) Technology and (vi) registrations, applications, renewals,
provisionals, continuations, continuations-in-part, divisionals, re-issues,
re-examinations and foreign counterparts of any of the foregoing;

 

(hh)                          “Inventory” means all inventories owned by the
Company, including (i) all pharmaceutical and non-pharmaceutical inventories for
resale at the Acquired Stores, (ii) all other pharmaceutical and
non-pharmaceutical inventories for resale owned by the Company or in transit
with respect to the Acquired Stores, (iii) all pharmaceutical and
non-pharmaceutical inventories held at the Distribution Centers, (iv) all of the
raw materials, work-in-process and packaging items and similar items with
respect to the Acquired Stores and the Distribution Centers in connection with
pharmaceutical and non-pharmaceutical inventories for resale, (v) all will-call
inventory (i.e., pharmaceutical inventory that is filled but not yet physically
picked up by the patient as of the time of the Inventory Audit) and (vi) all Tax
stamps associated with any of the foregoing (whether affixed to a product or
not) that are described in Section 1.1(k), including, in each case of the
foregoing clauses (i) through (vi), private-label inventory and including
containers, labels and packaging items;

 

(ii)                                  “Inventory Amount” means the aggregate
amount of Sampled Location Inventory Value for all Sampled Locations to be
transferred at the Closing or applicable Subsequent Closing plus the
Extrapolated Inventory Value for all Acquired Stores to be transferred at the
Closing or a Subsequent Closing (other than the Sampled Locations);

 

(jj)                                “Key Business Employee” means any Business
Employee who is employed by the Company as a District Manager, Pharmacy District
Manager, Human Resources District Manager, or Accounts Payable District Manager;

 

(kk)                          “knowledge”, “known” or any similar phrase
(i) with respect to the Company means the actual knowledge, after reasonable
inquiry, of any of the individuals listed in Section 10.5(kk) of the Company
Disclosure Schedules and (ii) with respect to Parent or Purchaser Sub means the
actual knowledge, after reasonable inquiry, of any of the individuals listed in
Section 10.5(kk) of the Parent Disclosure Schedule;

 

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(ll)                                  “Law” means any federal, state, local,
municipal, foreign, multi-national or other law, statute, constitution,
principle of common law, ordinance, code, decree, order, directive, judgment,
rule, regulation, ruling or requirement of any Governmental Entity and any order
or decision of an applicable arbitrator or arbitration panel, including any
Antitrust Law and any Healthcare Law;

 

(mm)                  “Liabilities” means any debt, liability, claim, demand,
expense, commitment or obligation (whether direct or indirect, absolute or
contingent, accrued or unaccrued, liquidated or unliquidated, or due or to
become due) of every kind and description and including all costs and expenses
related thereto;

 

(nn)                          “Losses” means all losses, damages, costs,
expenses, Liabilities of any kind (including any Proceeding brought by any
Governmental Entity or Person and including reasonable attorneys’ fees);
provided, that except to the extent awarded to a third party in connection with
a Third Party Claim, Losses shall not include (i) punitive, exemplary,
incidental, special, treble, consequential or indirect damages or (ii) the loss
of anticipated or future business or profits, income or revenue, loss of
reputation, opportunity cost damages or diminution in value (and, in particular,
no “multiple of profits” or “multiple of cash flow” or similar valuation
methodology shall be used in calculating the amount of any Losses);

 

(oo)                          “Material Adverse Effect” means any event,
development, circumstance, change, effect, condition or occurrence that,
individually or in the aggregate, with all other events, developments,
circumstances, changes, effects, conditions or occurrences, (A) has, or would
reasonably be expected to have, a material adverse effect on or with respect to
the business, assets, liabilities or results of operations of the Acquired
Stores and the Distribution Centers, taken as a whole, or (B) prevents,
materially delays or materially impairs the ability of the Company to complete
the transactions contemplated by this Agreement; provided, however, that in the
case of clause (A), any event, development, circumstance, change, effect,
condition or occurrence to the extent arising out of or resulting from any of
the following after the date hereof shall not be deemed, either alone or in
combination, to constitute or be taken into account in determining whether there
has been, a Material Adverse Effect: (i) any change or development generally
affecting the economy or the financial, debt, capital, credit or securities
markets in the United States or elsewhere in the world, including as a result of
changes or developments in prevailing interest or exchange rates or the
disruption of any securities markets, (ii) national or international political
or social conditions, (iii) the execution and delivery of this Agreement or the
public announcement or pendency of the transactions contemplated hereby,
including the impact thereof on relationships, contractual or otherwise, with
customers, suppliers, distributors, or employees of the Acquired Stores or the
Distribution Centers, (iv) any change in any applicable Laws or applicable
accounting regulations or principles, including GAAP, or interpretations
thereof, (v) any hurricane, tornado, earthquake, flood, tsunami or other natural
disaster or outbreak or escalation of hostilities or war (whether or not
declared), military actions or any act of sabotage, terrorism or other
international or national emergency, or other force majeure event or natural
disaster or act of God or other comparable events, (vi) any change in the price
or trading volume of the common stock, par value $1.00 per share, of the Company
or the credit rating of the Company, in and of itself, (vii) any failure by the
Company to meet (x) any published analyst estimates, expectations, projections
or forecasts of the Company’s revenue, earnings, cash flow, cash positions or
other financial performance or results of operations for any

 

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period or (y) its internal or published projections, budgets, plans, forecasts,
guidance, estimates, milestones of its revenues, earnings or other financial
performance or results of operations, in and of itself, (viii) any change or
development in the industries in which the Company and its subsidiaries operate,
(ix) the identity of Parent or its subsidiaries, (x) any communication by Parent
or its subsidiaries regarding the plans or intentions of Parent with respect to
the conduct of the business of the Acquired Stores or the Distribution Centers
after the Closing, (xi) any action taken by the Company, or which the Company
causes to be taken by any of its subsidiaries, in each case which is expressly
required or permitted by this Agreement (other than pursuant to clause (a) of
Section 5.1) or at Parent’s express written request, (xii) any change in
pharmacy reimbursement rates or (xiii) the termination of one of the series of
contracts listed on Section 10.5(oo) of the Company Disclosure Schedules, except
(A) to the extent (and only to the extent) any such event, development,
circumstance, change, effect, condition or occurrence described in clauses (i),
(ii), (iv), (v) or (viii) is disproportionately adverse to the business, assets,
liabilities or results of operations of Acquired Stores and the Distribution
Centers, taken as a whole, as compared to other participants in the industries
in which the Company and its subsidiaries operate and (B) that clauses (vi) and
(vii) shall not prevent or otherwise affect a determination that any events,
developments, circumstances, changes, effects, conditions or occurrences
underlying such changes or failures constitute or contribute to a Material
Adverse Effect; provided, further, that the exceptions in clause (iii) above
shall not apply with respect to references to Material Adverse Effect in those
portions of the representations and warranties contained in Section 3.3(a) (and
in Section 7.2(a) and Section 8.1(e) to the extent related to such portions of
such representation) to the extent the purposes of such representations and
warranties is to address the consequences resulting from the execution, delivery
and performance of this Agreement by the Company or the completion of the sale
of the Purchased Assets and the other transactions contemplated by this
Agreement, provided, further, that the exception in clause (xiii) above shall
not apply if more than one of the series of contracts listed on Section 10.5(oo)
of the Company Disclosure Schedules is terminated;

 

(pp)                          “Operational Duplicate IT System Certificate”
means a certificate from the Company to Purchaser Sub certifying that the
Company has tested the operational readiness of the Duplicate IT System with
respect to the Acquired Stores to be transferred at the Closing or the
applicable Subsequent Closing, as the case may be, using the Developed Testing
Procedures and the results of such test were that: (i) the configuration of the
LPAR and related network infrastructure within the Company’s mainframe was
complete, (ii) the prescription dispensing system of the Company as of Closing
commonly referred to as the “NextGen” application had been installed on the
LPAR, (iii) the migration of the Company Rx Data with respect to the applicable
Acquired Stores was tested and validated as ready for use within the Duplicate
IT System, (iv) the security controls and monitoring for Duplicate IT System
were validated as effective within customary industry standards and (v) system
integration and user acceptance testing were complete, in the case of each of
clauses (i) through (v), subject to the exceptions set forth on Section 6.23 of
the Company Disclosure Schedules;

 

(qq)                          “Patents” means United States and non-U.S.
patents, patent applications (including provisional patent applications) and
statutory invention registrations, continuation applications of all types,
including reissues, divisionals, continuations, continuations-in-part, renewals,
extensions and reexaminations thereof, all inventions disclosed therein and
improvements thereto, and all rights therein provided by international treaties
and conventions;

 

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(rr)           “Permitted Liens” means (A) statutory liens securing payments not
yet due or delinquent or that are being contested in good faith, (B) (i) such
minor title defects or irregularities of title, non-monetary Liens, charges,
easements, rights of way, covenants and other restrictions or encumbrances and
(ii) such matters which would be shown by a current title report or other
similar report and any condition or other matter, if any, that may be shown or
disclosed by a current and accurate survey or physical inspection, as do not, in
each case, materially affect the use, occupancy or marketability of the
properties or assets subject thereto or affected thereby or otherwise materially
impair business operations at such properties, (C) encumbrances for current
Taxes or other governmental charges not yet due or delinquent, or for Taxes that
are being contested in good faith by appropriate proceedings, (D) pledges or
deposits made in the ordinary course of business to secure obligations under
workers’ compensation, unemployment insurance, social security, retirement and
similar Laws or similar legislation or to secure public or statutory
obligations, (E) mechanics’, carriers’, workmen’s, repairmen’s or other like
encumbrances arising or incurred in the ordinary course of business for amounts
not yet past due or that are being contested in good faith by appropriate
proceedings, (F) liens, mortgages or deeds of trust, security interests or other
encumbrances on title related to indebtedness of the Company or its subsidiaries
(provided that such liens on the Purchased Assets will be subject to the
Company’s obligations under Section 6.19(b)), and (G) non-exclusive licenses of
Intellectual Property granted in the ordinary course of business;

 

(ss)          “Person” means an individual, corporation (including
not-for-profit), Governmental Entity, general or limited partnership, limited
liability company, joint venture, estate, trust, association, organization,
unincorporated organization or other entity of any kind or nature including any
“group” (as such term is defined in Section 13(d)(3) of the Exchange Act);

 

(tt)           “Pharmacy Approvals” means any consents, waivers, permits or
other approvals to be obtained from applicable Food and Drug Administration,
Drug Enforcement Agency, Medicare/Medicaid, state boards of pharmacy and
governmental controlled substances, durable medical equipment, third party
administrator and liquor authorities;

 

(uu)         “Proceeding” means any claim, action, suit, arbitration,
proceeding, investigation, mediation, consent decree, audit or inquiry, whether
civil, criminal, administrative or investigative and whether formal or informal;

 

(vv)         “Reported Inventory Value” means the value of the Company’s
reported gross general ledger balance of inventory with respect to an Acquired
Store (calculated in accordance with the Transaction Accounting Principles) less
applicable recorded general ledger shrink reserves, in each case as of the date
of the applicable Inventory Audit;

 

(ww)       “Representative” of a Person means the directors, officers,
employees, advisors, agents, attorneys, consultants, accountants, investment
bankers or other representatives of such Person;

 

(xx)         “Retail Pharmacy” means with respect to any Person or business, any
Person who does or will, any Person who does or will manage or operate any
business that does or will, or any business that does or will, dispense
prescriptions, other than by mail order or

 

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through a centrally fulfilled closed door specialty pharmacy and other than any
Person or business that does not engage in commerce or affect commerce in the
U.S.

 

(yy)         “Retail-to-cost Conversion Ratio” means the Company’s
“Retail-to-cost” conversion ratio with respect to an Acquired Store (which
represents the ratio of cost to retail selling price of the inventory on-hand
within such Acquired Store) as shown in the general ledger of the Company;

 

(zz)         “Sampled Location Inventory Value” means, with respect to a Sampled
Location, the Retail Inventory Value with respect to such Sampled Location
multiplied by the Retail-to-cost Conversion Ratio;

 

(aaa)      “SEC Reports” means all material forms, reports, statements,
certifications and other documents (including all exhibits and other information
incorporated therein, amendments and supplements thereto) in each case filed or
furnished with the SEC by the Company;

 

(bbb)      “Software” means any computer program, operating system, applications
system, firmware or code, including all object code, source code, data files,
rules, data collections, diagrams, protocols, specifications, interfaces,
definitions or methodology related to same in any form or media;

 

(ccc)       “subsidiary” or “subsidiaries” means, with respect to any Person,
any other Person of which such first Person (either alone or through or together
with any of its other subsidiaries), owns, directly or indirectly, (A) an amount
of the voting interests sufficient to appoint or elect a majority of the board
of directors or other persons performing similar functions or (B) if there are
no such voting interests, a majority of the equity interests therein;

 

(ddd)      “Technology” means, collectively, all designs, formulas, algorithms,
procedures, techniques, ideas, know-how, programs, models, routines, databases,
tools, inventions, creations, improvements, works of authorship, and all
recordings, graphs, drawings, reports, analyses, other writings, and any other
embodiment of the above, in any form, whether or not specifically listed herein,
all of which derive value, monetary or otherwise, from being maintained in
confidence;

 

(eee)       “Trademarks” means United States and non-U.S. trademarks, service
marks, trade dress, logos, trade names, corporate names, brand names, product
names, slogans, moral rights, designs and other indicia of source or origin and
general intangibles of like nature, whether registered or unregistered,
including the goodwill of the business symbolized thereby or associated
therewith, all common law rights thereto, registrations, pending registrations
and applications for registration thereof throughout the world, all rights
therein provided by international treaties and conventions, and all other rights
associated therewith;

 

(fff)        “Transaction Accounting Principles” means the principles as set
forth on Exhibit G;

 

(ggg)       “Transaction Agreements” means this Agreement and each of the
Ancillary Agreements;

 

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(hhh)      “Transaction Expenses” means the retention payments to employees of
the Company or its Affiliates set forth on Section 10.5(hhh) of the Company
Disclosure Schedules;

 

(iii)          “Union-Represented Business Employee” means any Business Employee
who is covered by a CBA; and

 

(jjj)         “Willful Breach” means a material breach of, or failure to perform
any of the covenants or other agreements contained in, this Agreement, that is a
consequence of an act or failure to act by the breaching or non-performing Party
with actual knowledge, or knowledge that a Person acting reasonably under the
circumstances should have, that such Party’s act or failure to act would, or
would be reasonably expected to, result in or constitute a breach of or failure
of performance under this Agreement.

 

SECTION 10.6             Severability.  If any term or other provision of this
Agreement is found by a court of competent jurisdiction to be invalid, illegal
or incapable of being enforced by any rule of Law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any Party.  Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the Parties shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the Parties as closely as
possible in a mutually acceptable manner to the end that the transactions
contemplated hereby are completed as originally contemplated to the fullest
extent possible.

 

SECTION 10.7             Entire Agreement; Assignment.  This Agreement
(including the Exhibits hereto and the Company Disclosure Schedules and the
Parent Disclosure Schedule), the Confidentiality Agreement and the Letter
Agreement constitute the entire agreement among the Parties with respect to the
subject matter hereof and supersede all prior and contemporaneous agreements and
undertakings, both written and oral, among the Parties, or any of them, with
respect to the subject matter hereof and thereof.  This Agreement shall not be
assigned by operation of law or otherwise without the prior written consent of
each of the other Parties, and any assignment without such consent shall be null
and void; provided, that (x) Parent and/or Purchaser Sub may assign their
respective rights to acquire any of the Purchased Assets to any wholly-owned,
domestic subsidiary or Affiliate of Parent, in Parent’s sole discretion (it
being acknowledged and agreed that no such assignment shall (i) relieve Parent
of any of its obligations hereunder, (ii) materially delay or impede the
consummation of the transactions contemplated hereby or (iii) increase the
amount of any unreimbursed Taxes or other costs that may be imposed on the
Company or any of its Affiliates); and (y) Parent may (in connection with any
Debt Financing) collaterally assign and transfer to the applicable Financing
Sources, for the benefit of the secured parties under such Debt Financing, this
Agreement and any Ancillary Agreement (including all rights, remedies, powers
and authority of Parent under this Agreement and any Ancillary Agreement).

 

SECTION 10.8             Parties in Interest.  This Agreement shall be binding
upon and inure solely to the benefit of each Party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
Person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.  The representations and warranties in this

 

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Agreement are the product of negotiations among the Parties and are for the sole
benefit of the Parties.  Any inaccuracies in such representations and warranties
are subject to waiver by the Parties in accordance with Section 10.3 without
notice or liability to any other Person.  In some instances, the representations
and warranties in this Agreement may represent an allocation among the Parties
of risks associated with particular matters regardless of the knowledge of any
of the Parties.  Consequently, Persons other than the Parties may not rely upon
the representations and warranties in this Agreement as characterizations of
actual facts or circumstances as of the date of this Agreement or as of any
other date.  Notwithstanding the foregoing, (x) the Company Indemnified Parties
and Parent Indemnified Parties are express third party beneficiaries of, and
shall be entitled to rely on and enforce, Article IX.

 

SECTION 10.9             Governing Law.  This Agreement, and any Proceeding in
any way arising out of or relating to this Agreement, the negotiation, execution
or performance of this Agreement, the transactions contemplated hereby or
thereby or the legal relationship of the Parties hereto or thereto (whether at
law or in equity, and whether in contract or in tort or otherwise), shall be
governed by, and construed in accordance with, the laws of the State of Delaware
(without giving effect to choice of law principles thereof).

 

SECTION 10.10          Headings.  The descriptive headings contained in this
Agreement and the table of contents hereof are included for convenience of
reference only and shall not affect in any way the meaning or interpretation of
this Agreement.

 

SECTION 10.11          Counterparts.  This Agreement may be executed and
delivered (including by facsimile transmission, email in “portable documentation
format” (“.pdf”) form, or other electronic transmission) in one or more
counterparts, and by the different Parties in separate counterparts, each of
which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.

 

SECTION 10.12          Bulk Sales Laws.  Parent and the Company each hereby
waive compliance by the Company and its Affiliates with the provisions of the
“bulk sales”, “bulk transfer” or similar Laws of any state or any jurisdiction
outside the United States that may otherwise be applicable with respect to the
sale of any of the Purchased Assets.

 

SECTION 10.13          Specific Performance.  The Parties agree that irreparable
damage for which monetary damages, even if available, may not be an adequate
remedy would occur in the event that the Parties do not perform the provisions
of this Agreement (including failing to take such actions as are required of it
hereunder in order to complete the transactions contemplated by this Agreement)
in accordance with its specified terms or otherwise breach such provisions.  The
Parties acknowledge and agree that the Parties shall be entitled to an
injunction, specific performance and other equitable relief to prevent breaches
or threatened breaches of this Agreement and to enforce specifically the terms
and provisions hereof, this being in addition to any other remedy to which they
are entitled at law or in equity.  Each of the Parties agrees that prior to the
valid termination of this Agreement in accordance with Article VIII, it will not
oppose the granting of an injunction, specific performance and other equitable
relief as provided herein on the basis that (x) either Party has an adequate
remedy at law or (y) an award of specific performance is not an appropriate
remedy for any reason at law or equity.  Any Party seeking an injunction or
injunctions to prevent breaches or threatened breaches of this Agreement and to

 

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enforce specifically the terms and provisions of this Agreement shall not be
required to provide, furnish or post any bond or other security in connection
with any such order or injunction and each Party hereby irrevocably waives any
right it may have to require the provision, furnishing or posting of any such
bond or other security.

 

SECTION 10.14          Jurisdiction.  Each of the Parties irrevocably
(a) consents to submit itself to the exclusive jurisdiction of the Delaware
Court of Chancery and any state appellate court therefrom within the State of
Delaware (unless the Delaware Court of Chancery shall decline to accept
jurisdiction over a particular matter, in which case, in any Delaware state or
federal court within the State of Delaware), in connection with any matter based
upon or arising out of this Agreement or any of the transactions contemplated by
this Agreement or the actions of Parent, Purchaser Sub or the Company in the
negotiation, administration, performance and enforcement hereof and thereof,
(b) agrees that it will not attempt to deny or defeat such personal jurisdiction
by motion or other request for leave from any such court, (c) agrees that it
will not bring any action relating to this Agreement or any of the transactions
contemplated by this Agreement in any court other than the courts of the State
of Delaware, as described above, and (d) consents to service being made through
the notice procedures set forth in Section 10.4.  Each of the Company, Parent
and Purchaser Sub hereby agrees that service of any process, summons, notice or
document by U.S. registered mail to the respective addresses set forth in
Section 10.4 shall be effective service of process for any suit or proceeding in
connection with this Agreement or the transactions contemplated hereby.  Each
Party hereto hereby irrevocably waives, and agrees not to assert, by way of
motion, as a defense, counterclaim or otherwise, in any Proceeding with respect
to this Agreement, any claim that it is not personally subject to the
jurisdiction of the above-named courts for any reason other than the failure to
serve process in accordance with this Section 10.14, that it or its property is
exempt or immune from jurisdiction of any such court or from any legal process
commenced in such courts (whether through service of notice, attachment prior to
judgment, attachment in aid of execution of judgment, execution of judgment or
otherwise), and to the fullest extent permitted by applicable Law, that the
Proceeding in any such court is brought in an inconvenient forum, that the venue
of such Proceeding is improper or that this Agreement, or the subject matter
hereof or thereof, may not be enforced in or by such courts and further
irrevocably waives, to the fullest extent permitted by applicable Law, the
benefit of any defense that would hinder, fetter or delay the levy, execution or
collection of any amount to which the Party is entitled pursuant to the final
judgment of any court having jurisdiction.  Each Party agrees that a final
judgment in any such Proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by Law, a
certified copy of which shall be conclusive evidence of the fact and amount of
such judgment.  Without in any way limiting other provisions relating to the
Financing Sources and notwithstanding anything herein to the contrary, the
Company agrees that it will not bring or support or permit any of its controlled
Affiliates to bring or support any action, cause of action, claim or third party
claim of any kind or description, whether in Law or in equity, whether in
contract or in tort or otherwise, against the Financing Sources in any way
relating to this Agreement or any of the transactions contemplated by this
Agreement, including any dispute arising out of or relating in any way to the
Debt Financing or the performance thereof, in any forum other than the Supreme
Court of the State of New York, County of New York, or, if under applicable Law
jurisdiction is vested in the federal courts, the U.S. District Court for the
Southern District of New York (and the appellate courts thereof) and each party

 

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hereto further agrees that the adjudication of any such action, claim or
third-party claim shall be governed by and in accordance with the laws of the
State of New York.

 

SECTION 10.15          WAIVER OF JURY TRIAL.  EACH OF PARENT, PURCHASER SUB AND
THE COMPANY HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT
(INCLUDING THOSE CONTEMPLATED BY THE LAST SENTENCE OF SECTION 10.14) OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THE ACTIONS OF PARENT OR THE COMPANY IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF OR THEREOF.

 

SECTION 10.16          No Recourse.  This Agreement may only be enforced by a
Party against, and any claims or causes of action that may be based upon, arise
out of or relate to this Agreement, or the negotiation, execution or performance
of this Agreement, may only be made by a Party, against another Party and no
past, present or future director, officer, employee, incorporator, member,
partner, stockholder, Affiliate, agent, attorney or representative of any Party
shall have any liability to any Party for any obligations or Liabilities of a
Party under this Agreement or the Ancillary Agreements of or for any claim
(whether in tort, contract or otherwise) based on, in respect of, or by reason
of, the transactions contemplated hereby and thereby.  No Financing Source shall
have any liability or obligation to the Company with respect to this Agreement
or with respect to any claim or cause of action that may arise out of or relate
to this Agreement, or the negotiation, execution or performance of this
Agreement.  Without limiting the rights of any Party against another Party
hereunder, in no event shall any Party or any of its Affiliates, and each Party
agrees not to and to cause its Affiliates not to, seek to enforce this Agreement
against, make any claims for breach against, or seek to recover monetary damages
from, any Affiliate or stockholder of another Party, or any director, officer or
employee of another Party or of any Affiliates of another Party.

 

SECTION 10.17          Interpretation.  When reference is made in this Agreement
to a Section, such reference shall be to a Section of this Agreement unless
otherwise indicated.  Whenever the words “include,” “includes” or “including”
are used in this Agreement, they shall be deemed to be followed by the words
“without limitation.”  The words “hereof,” “herein,” “hereby,” “hereunder” and
“hereinafter” and words of similar import, when used in this Agreement, shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement, unless the context otherwise requires.  The word “or” shall not be
exclusive.  References to “dollars” or “$” are to United States of America
dollars.  Any capitalized terms used in any schedule or exhibit but not
otherwise defined therein shall have the meaning given to them as set forth in
this Agreement.  Any reference in this Agreement to gender shall include all
genders and the neuter.  This Agreement shall be construed without regard to any
presumption or rule requiring construction or interpretation against the Party
drafting or causing any instrument to be drafted.  Any agreement, instrument,
statute, rule or regulation defined or referred to herein means such agreement,
instrument, statute, rule or regulation as from time to time amended, modified
or supplemented, including (in the case of agreements or instruments) by waiver
of consent and (in the case of statutes, rules or regulations) by succession or
comparable successor statutes and references to all attachments thereto and
instruments incorporated therein; provided,

 

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that for purposes of any representations and warranties contained in this
Agreement that are made as of a specific date or dates, references to any
statute, rule or regulation shall be deemed to refer to such statute, rule or
regulation, as amended (and, in the case of statutes, any rules and regulations
promulgated under such statutes), in each case, as of such date.  Neither the
specification of any dollar amount in any representation or warranty contained
in this Agreement nor the inclusion of any specific item in any schedule is
intended to imply that such amount, or higher or lower amounts, or the item so
included or other items, are or are not material, and no Party shall use the
fact of setting forth of any such amount or the inclusion of any such item in
any dispute or controversy between the Parties as to whether any obligation,
item or matter not described herein or included in any schedule is or is not
material for purposes of this Agreement.  Neither the specification of any item
or matter in any representation or warranty contained in this Agreement nor the
inclusion of any specific item in schedule is intended to imply that such item
or matter, or other items or matters, are or are not in the ordinary course of
business, and no Party shall use the fact of the setting forth or the inclusion
of any specific item or matter in any dispute or controversy between the Parties
as to whether any obligation, item or matter not described herein or included in
any schedule is or is not in the ordinary course of business for purposes of
this Agreement.

 

SECTION 10.18          Time is of the Essence.  With respect to all dates and
time periods set forth or referred to in this Agreement, time is of the essence.

 

SECTION 10.19          Misdirected Funds.  If, after the Closing Date, the
Company shall receive any remittance from any account debtors with respect to
any notes or accounts receivable exclusively relating to the Purchased Assets
that have been conveyed to Parent or Purchaser Sub at the time of such receipt
(including payment from Medicare and Medicaid programs), the Company, as soon as
reasonably practicable, shall endorse such remittance to the order of Parent and
forward it to Parent promptly following receipt thereof.  If, after the Closing
Date, Parent or Purchaser Sub shall receive any remittance from or on behalf of
any account debtor with respect to any notes or accounts receivable, which such
receivable constitutes an Excluded Asset, Parent or Purchaser Sub shall, as soon
as reasonably practicable, endorse such remittance to the order of the Company
and forward it to the Company promptly following receipt thereof.

 

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IN WITNESS WHEREOF, Parent, Purchaser Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.

 

 

COMPANY:

 

Rite Aid Corporation

 

 

 

 

 

By:

/s/ James J. Comitale

 

 

Name: James J. Comitale

 

 

Title: Senior Vice President, General Counsel

 

 

 

 

 

 

 

PARENT:

 

Walgreens Boots Alliance, Inc.

 

 

 

 

 

 

By:

/s/ Marco Pagni

 

 

Name:

Marco Pagni

 

 

Title:

Global Chief Administrative Officer and General Counsel

 

 

 

 

 

PURCHASER SUB:

 

Walgreen Co.

 

 

 

 

 

 

By:

/s/ Mark E. Vainisi

 

 

Name: Mark E. Vainisi

 

 

Title: SVP, M&A - WBA

 

[Signature Page to Asset Purchase Agreement]

 

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